From Mish Shedlock:

“Look at it this way: If we take all of the cuts the Ryan has proposed and all of the cuts the administration has proposed, we are still not there. However, if we add them together, then kill the department of energy and the department of education, and cut still more from the defense budget, we might have a solid chance at balancing the budget in 10-12 years. In other words we need more defense cuts + some of Rand Paul’s ideas + some of Paul Ryan’s ideas + some of Obama’s ideas.”

I’ve been thinking exactly the same thing.
That’s what it’s going to take.

(Wonkish) And as long as we kill the department of education it’s worth it to me. But afterward, we should hang the boomers by the millions for their ignorance and stupidity. (I’m a Jones Generation, along with Gates and Jobs, not a Boomer.)

From a Comment on Cafe Hayek: “Marxists must define poverty as a relative phenomenon. Otherwise, they couldn’t in good conscience be marxists.”

Or perhaps, better said, they wouldn’t have a semi-rational reason to justify class envy, and therefore attempt to obtain unearned social status through political power rather than through market service of others.

The left’s desire is not to end poverty, it is instead, the desire to alter one’s natural, biologically and environmentally determined social status either by gaining access to unearned income or by gaining status through access to political power.

And social status is not irrelevant. Social status is important. It’s a cognitive necessity. It tells us who to imitate.

To be happy, people desire access to new stimuli – ‘relishes’ as Aristotle put it, or ‘new experiences’ as we put it today.

People prefer working on optimistic ends. They prefer to work successfully to accumulate new stimuli, rather than at planning to prevent negative stimuli, or at planning to conserve resources so that they can preserve the current stimuli.

And they enjoy operating at the maximun that their abilities allow while still succeeding in their plans. The human mind craves something to do. It just wants to do something it can succeed at doing.

Throughout history, any number of people have tried to take ownership of the term ‘happiness’ and to define it according to their preferences. Usually, someone picks a point on the temporal spectrum and claims that ‘true happiness’ comes from either pleasure, freedom from stress, or a life that is retrospectively well lived.

Temporal priority is an important attribute of happiness, because Time Bias (Time Preference) or the tendency for people to pursue outcomes of shorter or longer distance in the future is correlative with social status. These terms below use the temporal spectrum to accommodate the most common priorities.

‘Pleasure’ is not the same as happiness. Pleasure is a positive emotional reaction to stimuli. To some degree it is a response to ‘learning’. It is evolution’s way of training us to want more of a good thing. And evolution has given us the ability to experience and to understand happiness.

‘Prospective Happiness’ is the presence of opportunity for obtaining stimuli, obtaining social status, obtaining group membership, obtaining mates, and then learning to be successful at obtaining what one desires through the execution of one’s plans.

‘Retrospective Happiness’ is the absence of stress, the presence of comforts, welcoming membership in a group, the security of the familiar, and the knowledge that one’s plans and actions, no matter how small, will achieve or have achieved, frequently lead to successful ends.

Happiness is both a reward for our anticipation of the opportunity for stimulation, and our reward for the exercise of good judgement in obtaining that stimuli. The priority that each of us give to these different properties of Prospective and Retrospective Happiness are different, and dependent upon a combination of our abilities and skill at forecasting, planning, succeeding, obtaining group membership, and avoiding stress.

We would all be happier amidst the plenty in the Garden of Eden wherein our basic wants and needs were fully and freely satisfied, and there was little else to do but enjoy one another’s company. At least, we would, until our biological Alphas decided that hoarding the best resources and controlling access to mates was more entertaining than communalism.

But in our real world, we are somewhat challenged in achieving happiness because of the unresolveable conundrum of living not in the garden of eden – which is a place of plenty – but in a universe of scarcity. And having to transform the scarce resources of the real world into increasingly complex products and services through a division of labor and knowledge in which many hands may indeed make light work, but which, because of the many hands, requires cooperation among people of different ages and abilities and interests to make that work light. To coordinate people within such a complex system, we must rely upon the information provided by an uncaring and anonymous pricing system rather than our natural empathy, observable interactions, personal commitments and habituated relationships that constitute the much more limited information system inherited from our tribal biology.

And it is the conflict between our a) tribal instincts and sentiments, the need for belonging to a group, the status signals that come from that membership, and b) the anonymity and confusion that come from our dependence upon the pricing system, that make our prosperity and freedom from the vicissitudes of nature possible. This conflict appears to be an unresolvable conflict that satisfies our pleasures, but limits our happiness. Never in history have so many people had it so well, but claimed so little happiness – except perhaps since the first invasion of north america by modern man.

But it need not be an unresolvable conflict if we separate thinking and acting locally as if we are in a tribe governed by our instincts, from thinking and acting socially and politically as if we are in a market, governed by prices.

Unless we understand that difference, happiness will be elusive. You cannot be happy if want the impossible. That runs contrary to our biological want to have our plans succeed rather than fail.

Felix Salmon writes:

… it’s maybe no coincidence that the Russian clients of Goldman Sachs who are falling over each other to bid ever-higher prices for Facebook shares are much the same people as the Russians paying $100 million for trophy Picassos, or Los Altos mansions.

The theory here is that Goldman Sachs, SecondMarket and the like have identified a group of buyers who are willing and able to pay through the nose for assets which are rare and special and which few other people can have. So long as companies like Facebook and Zynga meet those criteria, the winners in any auction for their shares are likely to be cursed — or, to put it another way, the final auction price is likely to significantly overvalue the company.

Looked at in this way, the market in private equity is less an opportunity for plutocrats to get excess returns, and more an opportunity for intermediaries to extract large profits by selling them overpriced equity in overhyped tech stocks.

That’s true. And you’re right that it’s not an advantage for plutocrats to have access to shares that common investors dont. But, that rather pejorative language is not the way to look at it. Instead, business men are finding a product that has extra-monetary value to investors and charging them for it. Or, more simply, Social status is a ‘good’ that people will pay for.

If I have a Ferrari, two Porsche’s an a Jaguar, and my wife has a gucci purse and a hanoverian horse, the fact is that cars, purses, and horses are not scarce. So social status is what we pay for.

Why is it that shares of stock in companies should be regulated such that people cannot buy status in companies the way that they buy status in products?

And in a market economy, paying for social status is about the only way of achieving social status.

There is nothing fraudulent about selling social status.

There are plenty of ways to lose money.

There are plenty of ways to spend money getting something that you want.

Marxist doctrine states that steps are required to create the utopian communist society. The eventual result of marxism’s destruction of the system of property was for the purpose of creating an anarchic society where everyone had what they wanted, and wanted nothing more – the fixed-pie fantasy. The state was only necessary as a first step in order to make it possible to get to that utopia. Socialism was simply the first step in reaching the marxian utopian dream of the non-propertarian, anarchic, left libertarian society. Socialism means ‘state ownership of the means of production’. Communism means that there is no property whatsoever or the need for it. Communism was the next evolutionary step after Socialism. People tend to treat communism and socialism as synonyms but they are not. They are a sequential strategy for achieving the marxist utopian society.

Once you understand how ridiculously impossible communism is, you can also understand how ridiculously impossible anarcho capitalist libertarianism is. Socialism is impossible because of the problem of knowledge (distributed and fragmentary), prices (provide the information system), and incentives (encourage people to produce). Communism is impossible because humans never cease to want new stimulation and because we are unequal, and our reproductive strategy insures rotation such that we shall never be equal. So effectively, communism is impossible because populations need property in order to produce prosperity. Anarcho capitalism is impossible because of the problem of creating and maintaining complex forms of property. Men will no more stop seeking better mates and more stimuli, than they will stop seeking to benefit by fraud theft and violence. We need political institutions to channel men’s actions into market activity rather than hedonism or predation. We need very few of those institutions. and the fewer the better. But we need them.

If you think communism is impossible, then logically anarcho capitalism is impossible. They both depend on a belief in the nature of man that is counter to self-reflection, observation and history.

Newsweek did another poll that purports to measure our cultural ignorance.

How Dumb Are We?
NEWSWEEK gave 1,000 Americans the U.S. Citizenship Test–38 percent failed. The country’s future is imperiled by our ignorance.

Which brings to mind a chain of reasoning:

1) To increase productivity and therefore decrease prices, we must all participate in a division of knowledge and labor.
2) As productivity in the division of labor increases, the total stock of human knowledge increases.
3) As the stock of human knowledge increases, each of our shares of that knowledge decreases.
4) As our individual shares of that knowledge decrease, our knowledge consists largely of those things that we can act upon given the resources at our disposal.

In other words, people aren’t so much ignorant as they are knowledgeable about what actually matters. They may not have room for the irrelevant.

The general perception, and the presupposition of the boomer-era article’s sentiments, is that political knowledge is valuable. And it implies that we can possess the knowledge needed to understand the issues that our government must manage given it’s current constitution. And it further implies that political freedom is a ‘good’ – when, it’s evident from the record of history that personal freedom is absolutely a good, but political freedom is simply a necessary evil in order to prevent the government from forming a predatory bureaucracy, and treating the population as it’s property. So people only need the minimum knowledge of government needed to preserve their personal freedom.

People aren’t ignorant. They’re too ignorant of political knowledge and economic principles to make political and policy decisions. And that’s not surprising because political decisions are of necessity made in ignorance. And decisions are made in ignorance either out of political necessity or political contrivance. They must be. Because we do not possess sufficient knowledge or DATA in government to make any other form of decision OTHER than decisions of political necessity and political contrivance.

Politics has become ridiculous and irrational because at the scale of our empire, the data no longer exists with which to make rational arguments in real time. The political structure cannot operate without data. And so, like the chinese, we have devolved into sentimental moral arguments rather than practical, political and economic arguments — the furtive gestures and spittled pontification of silly Keynesian probabilists to the contrary.

So it’s good that people are ignorant of it. There is no value in the study of falsehoods.

Maybe Americans are wiser than we think after all.

(Copied here for documentation purposes.)

Over on The World Bank OTAVIANO CANUTO solves for happiness by actively working against it.

We economists tend to see well-being, and poverty in particular, as a matter of finances and income. But fortunately, at least in the Bank, we have come a long way from that simplistic view. Reducing poverty is not only about increasing productivity and income. It is about enabling people to have a broad sense of well-being and opportunities to express and make choices about their lives.

But, the road to economic Hades is paved with good intentions:

A) Happiness comes from having choices. Choices come from having the resources to make choices. The resources to make choices come from marginally competitive production. What we usually celebrate, and should logically celebrate, is our success in having obtained the ability to have choices by our efforts at production, and therefore to spend some of our gains on social goods, such as redistribution, celebrations, and creating works of art that commemorate our success.

B) Many things that make us happy are actually not good for us. They are just familiar, easy, or provide pleasant stimulus. Foods, Drugs, Mystical Religion. Many things that are desirable are economically dangerous over the long term. The certainty of empire, the sentiment of egalitarianism, fiat money, free trade, and the state itself are all things that help make us happy in some way – but they have consequences that may not.

C) In history, the transformation of the political dialog from utilitarian and empirical management, to moral arguments in Western Christendom, in Confucian China, in Muslim Afro-Asia, resulted, in each case, with the stagnation, decline, and poverty of the civilization. The existing arguments for the fall of civilizations, Diamond’s theories included, are false. Civilizations decline because their calculative and cooperative institutions fall under the pressure of overpopulation. In other words, as they got larger, they did not expand property rights, develop new forms of money, and accounting, and courts to assist in conflict resolution that resulted in a pricing system that incorporated long term forecasting based on the knowledge of individuals who were planning for the future because they were incentivized to maintain their productive assets.

D) Cultural memes and their historical narratives, in many cultures, are often destructive. The Asian principle of ‘Face’, the Steppe’s tribal brotherhood, Islam’s concept of dignity and the “Tolerance” of Christendom can both be considered virtues, but are extremely destructive concepts because they are means avoidance of conflict resolution, each of which has it’s own economically hazardous side effects, and therefore a near infinite discount on happiness. Plane crashes and nuclear disasters are the result of Face saving. Inability to form political institutions the result of tribal brotherhood. The inability to form a competitive middle class the result of dignity – unearned social status. Repeated economic failure of political and economic systems due to excess unearned immigration, inclusion, and redistribution.

E) Most of are architectural works, across all cultures, are the result of achieving empires by way of military conquest. That is the purpose of architecture, and its symbolism. Most of our literature, is the literature of rebellion – an appeal by the losing side for political inclusion as in Dante, or a sentimental appeal for redistribution. Most of our political rhetoric from the false democratic propaganda of Athens to the post-war self destructive nihilism of europe is simply false under critical analysis.

If you want to be a priest, join a church. If you want to move people run for office. If you want to celebrate, join a club. If you want to be a scientist, and to better mankind, stick with pragmatic improvement of the material well being of individuals by consciously upgrading their cooperative institutions so that they are ‘calculable’ and rational rather than political and sentimental. In other words, don’t make the problem worse by celebrating the ends, rather than the means.

The happiness of man has been achieved by increases in the institutional ability for people to break up the world into little objects and apply increasingly fragmentary knowledge to the satisfaction of the wants of others outside of his or her social circle, and independent of his or her cultural memes, by using the information provided by the pricing system, and by the predictability created by institutional protections for his or her risk taking.

Sentimental talk in economics and in politics is destructive and always has been. It is evidence of the failure of the political system utilized by the group making the statements. People on the ascent make arguments to productive group action – they ask us to pay opportunity costs for a collective end, for the purpose of increasing potential productive security.

By contrast, all moral arguments are by definition false. And that’s the reality of it. Our job is to be the one academic discipline, and the one social science, that isn’t solving for the satisfaction of humanity’s tribal sentiments despite their natural conflict with a division of knowledge and labor and the pricing system, but that solves for the truth of what makes people actually happy by giving them choices.

Humans want a discount. Always. So when you’re trying to determine if your arguing for conviction or convenience, make sure you’re not just looking for the discount that comes from embracing convenience. If you want to celebrate. Celebrate both the means – institutions of calculation and cooperation, and their happy ends.

(Now that I’ve been a wet blanket I’m going to go celebrate the day with family.)

Regarding Philosophy, Religion, and Government:

a) A Philosophy is a set of related ideas for the purpose of allowing humans to take actions that accomplish ends in the face of necessary uncertainty about the future.
b) A Religion is a habituated philosophical framework, for political purposes, using pedagogy for indoctrination, and which relies ostensibly upon voluntary participation, but because of habituation by the individual and within the environment, is largely involuntary.
c) A Government is an institutionalized philosophical framework using forcible coercion, and therefore relies upon involuntary participation.

What separates a philosophy, from a religion, from a government, is the formality of the institutions, where the increasing formality of the institutions eliminate human choice. What starts as a personal conceptual framework, becomes a framework that a group teaches to others, becomes formal institutions that compel others to adhere to the principles of the philosophy. It is an arbitrary

Everything, every idea, has to come from somewhere. Humans may have natural sentiments. But ideas are something that they come by.

Military, Political, judicial and pedagogical (religious) institutions do not require belief or consent. They compel adherence by the application of force, or, by near universal habituation, deprivation of opportunity for non-conformers. Philosophy alone allows voluntary adherence to Military, Policial, Judicial, Pedagogical as well as Moral, Ethical and Mannerism frameworks. But let’s look at the problem of choosing philosophy a bit…

If there is anyone who is willing to debate me on the limitations of Rand, I’ll take the bet. Even if you bring Peikoff to the table. Yet, despite those limitations, I can defend her propositions against all classical arguments. However, the one I cannot defend it against, is the idea that it is in the interest of the common man, to adopt a political philosophy that is not in his or her individual, temporal, interest. We have but one life, and it consists of limited time. And the proletariat therefore, has a shorter term time horizon than the upper classes.

So, Marxism is in the poor’s interest. Democratic socialism is in the working and lower middle class interest. Libertarianism is in the upper middle class interest. And classical liberalism is in the upper class interest. To argue that Rand is anything other than a class philosophy, is to argue that men are equal. Since men are not equal in ability, health, age, knowledge, experience, skill, resources, and relationships — then any philosophy that attempts to be universal to man is by definition a religion. That’s the provence of religion: universal application. Even if some adhere to tenets out of mysticism, some out of allegory, and some out of rational moral analysis, the tenets are the same. That’s the elegance of a religion, and the cultural principles of cooperation that religious idea sets contain.

Unfortunately religions rely on mysticism in order to capture the attention of the poor and ignorant proletariat. The secular religion does not. It simply attempts to buy their conformity with services, consumer goods and redistribution. It is cheaper to rely upon mysticism. More expensive to rely on redistribution. And it appears to be more economically productive to rely on redistribution. The question is only how to achieve the redistribution, and the limits of it.

Rand, like Marx, Trotsky, Mises and Rothbard, (and Simmel) is simply trying to apply Jewish diasporic religious sentiments to political philosophy. An attempt, that despite the obvious evidence that jewish philosophy is the result of either an arrested or failed civilization. A failed civilization wherein the members of the faith are either unwilling or unable to pay the social sacrifices necessary to hold land. And, having held land, created create the institutions of land holding, and then, by consequence, the institutions of property and built capital needed for an advanced society consisting of a division of labor wherein the natural inequality of humans is expressed by their unequal rewards from participating in the market.

All humans seek to JUSTIFY their SENTIMENTS. An act which is anything but scientific. And an act which is arguably religious – it seeks justification rather than exposition.

A political philosophy that requires unanimity of belief, that does not have cooperative institutions, even private institutions as Hoppe recommends, is to argue that men will adopt a philosophy that is in the interest of other men, particularly those in a competing social class, and is against their interests economically, and socially (status being the human political economy), is not scientific. It is not scientific Because it is COUNTER TO OBSERVATION AND COUNTER TO REASON.

Social status is the native human accounting system. We need no devices to sense it. We must rely upon social status so that human animals can know who to imitate, and learn from and associate with in order to best achieve their potential, and the group’s potential. People form groups: Race, Religion, Language, Nation, Class, Generation and Skill Set or career, then hierarchy within that career, are the broadest and most common. Social cues intra-group are lower cost than social cues extra-group. Therefore people specialize in intra-group social cues. This is why individuals in small homogenous single-city-state societies are more egalitarian than in empires. Empires may be able to dictate terms of commerce and issue inflationary currency, but why they are socially tumultuous if the groups can use the political system rather than the market to compete with other groups.

As Randianism (and Galmbosianism) is counter to reason, because it requires unanimity of belief, despite not being the interest of the working or judicial classes, then it is unscientific. If it requires unanimity of belief then it is by definition a religion. Because it is the belief in the impossible and irrational.

It has replaced superstitious belief in god, with a superstitious belief in the behavior of man.

The market economy is superior because the pricing system is the most effective way of informing people as to the behavior that they must exhibit in order to create a low cost high production society where even the poor have more than our ancestors ever dreamed of. However, the market requires institutions and a minimal private government, which we consider a network of contractual agreements. And if individuals simply REFRAIN from theft, fraud, and violence, then they are in effect, shareholders in that society and due profits on their contributions to it. As such, some minimal distribution from the results of the market are due those minority shareholders. The argument that they pay no costs, and make no contribution to the market is false. Since inaction, even the inaction of refraining from theft, fraud, and violence, is a form of action. To say otherwise is to say only money is action.

Having created, by accident, the empire, and having done so for the purpose of exporting our market system, and its trade routes, we are stuck with the very real consequences of creating power vacuums if we withdraw our military power, and create opportunity for the greater cost of NOT acting as we are acting.

We have, after all, made a nice profit out of bringing the Hindu and Sinic cultures into the modern era. We have, and continue, to make a profit bringing the Islamic cultures into the modern era – by exporting debt (that we may questionably have to pay for) rather than by collecting tariffs or taxes for having done so. These efforts have been made under the rubric of political democracy for the purpose of popular opinion, but are actually for the institutional purpose of creating an economically incentivized and politically enfranchised middle class that is invested in perpetuating the world market system.

I do not think that there is disagreement among political economists that we would be better off without having to support the empire. But when faced with the very real, and very negative impact that a withdrawal would have on the average (pampered) american, and on the average (schumpeterian) public intellectual, practical heads prevail.

As I understand it, the general thinking among the strategic thinkers (those who study military, political, and economic relationships, rather than just political, financial and social relationships) is that if we bear the burden long enough, the world will evolve into a sufficiently middle class economy (a synonym for democratic) that the purpose of the empire will decline at a rate equal to the relative importance of the american economy, allowing us to withdraw without creating shocks to the international system.

A failure to understand military history is what separates ideological political economy from practicable political economy. Property rights are indeed the basis for prosperity. However, property rights are an institution that is created by the application of organized institutional violence.

This fact is usually lost of ideological libertarians.

The term “Structural unemployment” has a technical definition and a colloquial definition. And authors frequently criticize the colloquial as not matching the technical, rather than the premise put forth by the colloquial. However, the colloquial definition is correct. That is, that there are people trained and experienced in skills that will not return to the economy, and that there are few if any sectors of expansion available to absorb them in any potential recovery, and if unemployed long term, they may be permanently ostracized from the work force. As an aside, it is unlikely that the USA will return to a consumer-debt economy. We will not be ABLE to. Not unless we play tariff and protectionist games, and deprive other geographies of their ability to arbitrage prices.

The high current level of liquidity is limited to the financial sector, and even there, to a narrow band of the financial sector. There are no savings going on anywhere, and instead there is debt reduction going on everywhere.. The country is operating at higher efficiency out of fear and necessity — a combination which cannot persist indefinitely.

So, the colloquial concept of Structural Unemployment is accurate in it’s usage.