Radical Agenda S06E009 - Economemetics

Radical Agenda S06E009 – Economemetics

Here at the Radical Agenda, we’ve come to understand, quite by the hard way, the concept of scarcity. Whatever discomfort this accompanies, we consider ourselves fortunate for the lessons such experience teaches a man.

A bit of formal study doesn’t hurt, either. One thing I do miss about libertarianism was the centrality economics played in the more coherent circles of this otherwise often frivolous social movement. They didn’t always do economics well, but at least they put forth the effort.

You can’t learn all there is to know about Human Action by reading the Ludwig von Mises book of that title, but a man will be better off for having read it nonetheless, and many libertarians, including your humble correspondent, did do just that. In prison, I read it again, along with a book by the same author titled “The Theory of Money and Credit”. I also took in “The Road to Serfdom” by F.A. Hayek, and became a devoted reader of the Wall Street Journal.

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While valuable in gaining perspective, one cannot stress enough the inadequacy of such orthodox classical economic doctrines. They suffer, first and foremost, from a categorical error. They attempt to isolate the “economy” from other spheres of human endeavor. This apriorism reaches ostensibly logical conclusions which nonetheless do not correspond to reality, and therefore find little practical application in politics.

It’s been too long since I’ve reviewed the works of Karl Marx, but I did have the opportunity to read some Lenin while I was in prison. His 1899 book “The Development of Capitalism in Russia” was of particular interest. Thinking about what it described in the time it was published, the hell that befell that beautiful country made a great deal more sense, however senseless it may appear today, given the benefit of hindsight.

What he and Marx called “Capitalism” was not so much a critique of free markets or a government economic program, but rather an understandable fear that had gripped the people as technological developments rapidly upended all that they had become familiar with over the course of many generations. That kind of disruption doesn’t just change one’s levels of comfort and consumption, it completely upends family life, and you can hardly be surprised by such a revolution taking on a martial character at some point in the process. That vicious people take advantage of the chaos and make matters worse is, no more surprising than any given sunset.

On my shelf right now is “The General Theory of Employment, Interest and Money” by John Maynard Keynes, which I had begun to read just before my release from prison. I’ve had to prioritize other things as of late, but the need to get this title under my belt burns urgently in my mental to do list. From what I know of its contents, which is substantial, giving my reading about Keynesianism elsewhere, I don’t expect it will teach me much about economics, but it surely contains valuable political information, given the pervasiveness of Keynes’s theories in the upper echelons of modern central planning circles.

The Alt Right, by contrast, largely abandoned economics as such. More concerned, quite prudently, with immigration, and the genetic integrity of the societal organism, a collective decision was made to worry about marginal tax rates after a series of metaphorical bullet wounds had been tended to.

A sensible triage indeed, but not without consequence in an environment where such wounds are so frequently inflicted. If one must choose between oxygen and food, this is a rather simple decision at first glance, but of course, you must eat, eventually.

Leftists, be they nominal Democrats or portraying themselves as devotees of Adolf hitler, are never slow to take advantage of a situation. The decision to sideline economics within the Alt Right, consequently, became a decidedly one sided affair. Those of us who understood the subject, and who approached it coherently, dutifully kept our mouths shut while silly ideas about income guarantees and nationalizing everything from health care to widgets became commonplace, and to this I attribute no shortage of blame for the movement’s increasingly undeniable failure.

The pathologies from which these ideas stem manifest in other categories of action, most notably, political strategy. This observation prompted me to go on a bit of a Telegram rant yesterday, and this in turn prompted today’s subject matter.

I’ll quote here at length one of these posts;

Describing a problem, and proposing a solution, are entirely different categories of action.

The fact that one sees a problem with a particular course of action, does not invalidate that course. All other courses of action will likewise be open to criticism,

The prudent man’s task is to weigh the risks and benefits of any course, commit, act, re-evaluate, revise, and repeat, in perpetuity, until death. Perhaps beyond, it is not for me to say.

The most abundantly clear fact of your present existence is that you have no good options. There is no safe choice. There is no cost free unalloyed good.

As a consequence of this, all of your choices necessarily involve perils and compromises.

If you try to pursue a wholly uncompromising political radicalism, you will either realize as you traverse this path that what you are doing is dogmatic nonsense, and abandon it, or you will dwell in an ideological dreamworld and be fortunate to accomplish nothing. Less fortunate people who pursue this course will end up dead.

If you try to avoid all risk, then you will either acquiesce to anything and have no political purpose, or you will be deterred by all obstacles and your otherwise intact political purpose will meet an identical outcome.

The most basic understanding of economics will render the above obvious. Everything involving human action involves a constant weighing of costs and benefits, which are subject to an infinite variety of entirely subjective value judgements.

While dogmatic devotion to “free markets” is no less misguided than any other fanatically narrow vision, one of the biggest problems facing the White Nationalist movement is that they have permitted the abandonment of economics as such. Which is to say, the ideas that pass for economics in these circles, often have nothing to do with economics. They are just silly fictions about perpetual guaranteed abundance at the expense of a 40 hour workweek, and careful assignment of authority to the sufficiently dogmatic among us.

You don’t have to agree with Ludwig von Mises to understand that this is nonsense.

State run health care, income guarantees, family subsidies, we might determine that whatever these forfeit in overall economic efficiency is a worthwhile tradeoff, given a particular set of circumstances. But anybody who suggests these are just obvious things we should and would be doing if not for <insert target of attack here>, is not talking about economics. They are pedaling incoherent rhetorical nonsense for political purposes.

Whether we’re talking political strategy or economic policy, it’s the same phenomenon. it is not a question of if you will take risks, or if you will incur costs, or if you will make compromises. It is only a question of which costs you will incur, which perils you will endure, and which compromises you will make, and what the likelihood will be, of reaping what potential rewards, as a consequence of those investments.

The debate that subsequently ensued in the comments only further reinforced my point.

fAs a pointed example, user responded;

Libertarianism is gay.

The very small inefficiency price to pay for government health care is worth compared to the hell scape of the libertarian option.

To which I replied;

This is exactly what I’m talking about. This is not the output of economic thought.

The problem with the government monopolizing a service isn’t the cost of the service. The problem is figuring out what the service costs.

Prices are formed by negotiations among competitors in a given market. The government is not capable of determining this by the whims of the legislature.

If the government monopolizes health care, are all the doctors now government employees? Is the chemical company that makes Viagra and pool cleaning chemicals on the same compound now government property? If the chemical manufacturer needs to purchase raw materials from a farm, does the farm now belong to the government? Will all the schools that train chemists and doctors now become government schools?

If all the doctors now work for the government, who will determine their salaries? Will they have a pay scale similar to that of IRS paper pushers?

Will the government take over all of health care, including breast implants? Will the government cover dental?

Presumably, the government system would endeavor to at least cover the most vital services…

If there are elements of the healthcare industry which pay better than those the government does cover, and all the most capable doctors flood into those industries, what will become of our most vital healthcare needs?

This is what happens when you consider things in economic terms, instead of axiomatic ideological rhetoric.

One of the most predictable phenomena on Right wing Telegram conversations has become that in any conversation, somebody will invoke the National Justice Party in a promotional manner. Identify this for what it is, namely spam, and you can expect to be hounded as an enemy of the movement. But it does occasionally provide opportunity for response, if not dialogue.

One user responds;

Former Ron Paul Libertarian turned Jack-Booted National Socialist here…

I have totally turned a corner am All-In on National Justice Party Platform Position #19:

“Health care is a right. Health care must be removed from the control of for-profit hospitals and insurance companies and made a public service for all people. Preventative care will be emphasized and physical fitness will be promoted.”

I responded,

OK. Great. I don’t suppose there’s anything in there about how they intend to calculate prices when they wave their fuckin magic wand, is there?

Again, not often much opportunity for dialogue with people who are spamming a political website, so there wasn’t any answer to this question, but that in itself is a source of information for those who care to pay attention.

This was still not fully understood though, so another user stated;

But the problems always lead back to jews, technology has advanced so much that most “healthcare” should be dirt cheap…look at saline or gauze production as an example, this stuff costs pennies to produce but costs more now than it ever did..whatever problems we have cannot be solved until we remove the juden, kebab, negro and mongrel…the rest is just speculative meandering

This gave me the opportunity to further illustrate what has been called the socialist calculation problem;

If the true price of heart surgery was 2 tenths of a cent, how the hell would the regulators know this, once the service was monopolized? If they have no competitors, and the buyers have no alternatives, or more to the point, if the buyer and the seller are the same entity, price formation is impossible.

The idea that things are important, and therefore should be controlled by government, is hardly the conclusion one would come to as a consequence of day to day experience, much less coherent education.

Sure, there are problems we can attribute to the people governing, or to influences upon the government. But there are actual limits on what the government is capable of doing, as a consequence of its peculiar features.

This is at the heart of what fails the economic sniff test when you examine many political ideas that parade as economic policies.

Just before the show, Hadding emailed me. His website, by the way, is National-Socialist-Worldview.com. He said to me

The established Republican cant about “less government” is detrimental in every way. It makes no sense either for winning elections (outside of the South) or for governing.

OK. Cool. You win. I’m not arguing for less government. I’m not arguing for conservatism. I’m not even arguing for fiscal discipline. Let’s set all the moral arguments about so called “property rights” aside and just do everything our capacities permit to obtain political power and wield it to the benefit of our people. Let’s spend all the money. Let’s raise taxes. Let’s provide services. Let’s make outrageous promises to obtain political power, and try to do everything we can to fulfill them so we can maintain that power.

But let’s make sure we understand what we’re doing, so we don’t wreck the country in the process.

It’s not a question of spending the money. It’s a question of whether or not instituting the policy is actually possible, and to determine this you have to contemplate how resources are allocated. It is fine to look at current prices and project those into the future and say that it is worth the expenditure. Let’s just accept this as true, because, maybe it is, but even if it weren’t, that’s not the point.

The point is, as soon as the government institutes the policy, all your projections are going to completely alter the market, and as a consequence, your projections are going to go out the window like a conservative’s campaign promise.

I don’t know about you, but I pay attention to prices when I shop. It’s taking some adjusting since I’ve gotten out of prison, but before I got arrested, I knew what all the stuff I kept in my kitchen on a routine basis, costed at the nearest four or five stores. I knew what their regular sales were, and I made it part of my weekly routine to get the weekly sales fliers.

I would regularly stop into TJ Max, to see what deals there were on clothes. When I travel to an unfamiliar area, I have to see if they’ve got a Marshalls.

When I shop on eBay, I make my search criteria as narrow as possible, and I sort my search results according to price + shipping low to high.

I’m a very cost efficient shopper, and I’m far from the only person to do this. There are things that I want to do that I value more highly than lazily buying the first thing that I see on the shelf, and I allocate my resources according to my own hierarchy of values, with prices as one of the most vital signals in that allocation. Even if you’re not so discriminating as I, you do this too, to some extent.

That behavior, which marketing professionals are keenly attuned to, forms prices in the marketplace. If they raise their prices beyond a certain point, people go elsewhere for that product. If they raise prices beyond another, higher point, people will go elsewhere for all of their products. Conversely, it may go without saying, that if they sell something too cheaply, they will simply multiply losses until they go out of business.

Notice the parties involved in this process. Buyers and sellers. Unspoken here, but hopefully obvious, are the actual producers. Farmers, factories, this sort of thing. But for our purposes right now, let’s just consider them sellers too, and say that their buyers are the people who sell to you. Buyers and sellers, once again. There are laborers, and employers, or, more accurately, people who sell labor, and people who buy it.

Each buyer is looking for the lowest price, and each seller the highest, and in that competition for resources, prices are formed, and resources are allocated according thereto.

So you want to have socialized medicine. Fine. For the sake of argument, let’s just call health care a human right. I’m not endorsing this, but let’s just accept it as the premise of our argument. You say, other countries do it, why can’t we? Alright, sensible idea. No objection.

But what happens when the government monopolizes the health care industry? There are no longer buyers and sellers. The buyer is the seller. Anybody who tries to compete with the government gets thrown in jail. Anybody who tries to tries to hire someone outside of the government system, let’s just say they pay a fine.

These are the peculiar features of the State. It imposes forces on the market which you or I would be killed or imprisoned for trying to impose, with such tremendous certainty that nobody even considers it.

As a thought exercise, let us say that the government would monopolize the grocery stores. All the rest of the market would continue to operate as closely to normal as possible. The farmers would continue to own their farms, but the government would be the sole buyer. The people would have to pay for their own groceries from the money they earned, or, let us go further and say there is a basic income guarantee or a negative income tax or some kind of food related dispensation by the State.  In any case, the people have their resources, and they allocate them as they see fit, within the government grocery stores.

There are surely going to be some problems with this, but at least prices are conceivable. The government is a buyer in relation to the farmers, and seller, in relation to the citizenry. The government buys and sells, albeit lacking competitors.

Supposing the government does not claim the power to expropriate from the food producers their products by force, the government still must deal with these producers according to prices. The producer must calculate the costs of production, pad this with what he deems a profit worthy of his efforts, and offer this for sale to the government. If the government refuses to pay, he goes out of business, but prices are still conceivable because it’s likely some number of producers are still going to be able to sell their products at a price that, fair or not, at least compensates them for their production costs, because the government is going to be disinclined to put all of the food producers out of business, and there is a minimum cost of production beneath which no producer can go.

The people, they have nowhere else to go for their food than the government grocery store. The government has tremendous control over prices, but this control is not omnipotent. The people must eat, but they need not eat anything in particular. If the government charges too much for beef, the people may buy chicken, as the most simple example. If beef sales plummet, the bureaucrats who run the store, may be given instructions to approximate the behavior of a market actor, and respond to this price pressure by lowering the price. Or, maybe the government wants to reduce beef consumption, and considers this drop in beef purchases to be the desired outcome of a policy decision.

Say the government wants to encourage the consumption of vegetables. The government could buy the vegetables at a given price from the producers, and sell it at a lower price, financing the loss by some combination of taxes and profits from the sale of other groceries. Maybe the government raises the price of cookies by 25%, and uses this revenue to subsidize vegetable consumption. Now we have a policy that discourages the consumption of cookies while promoting the consumption of vegetables.

But we still have prices. It’s not ancapistan, but you can imagine this pattern continuing without anybody starving to death.

Now let’s say that the government declares food a human right. This makes enough sense, after all. How can one have a human right to all the miracles of modern science, but not 2,000 calories a day? So, the government now declares that food is free, and the government is the only supplier of food.

Now there are no prices, so far as the citizenry is concerned. They go into the store, and they take whatever they want. Kinda like some Democrat cities right now, only it’s formally legalized.

On the upside, some people may very well improve their diets. They could fill up their carts with the highest quality cuts of meat and the most nutritious vegetables. They would only discriminate according to what they deemed would benefit their diet. Price would no longer be an object.

Others, on the downside, may prefer beer and cookies to sirloin and asparagus. Assuming the government is covering healthcare at this point, there are some downsides to this, but let’s set that aside for now. Maybe the government bans cookies and beer. Let’s pretend there’s no problems with that, and keep going.

The bigger problem would be the distortion of demand. In this environment, few people would acquire ground chuck, when sirloin, porterhouse, and ribeye can be carried out at identical costs, namely, zero.

When each cow slaughtered is slaughtered for only the finest cuts, and the remainder can only be put toward the feeding of pets or some industrial process, what do you imagine that does to the demand for beef? What does it do to the production costs, when to feed the population, many times more cows must be slaughtered?

One supposes there must be a limit on how much free sirloin the people would consume, but there must also be some limit on how much can be produced, and I suppose we can only guess at which limit we would first encounter, but in a complex society with hundreds of millions of people, we must imagine that demand would at some point outstrip supply without a price mechanism to regulate it, unless the government stepped in with more forceful means, such as quotas.

And of course, such means were implemented in places such as the Soviet Union, and other communist countries. Perhaps it is foolish to assume that it is universally preferable that America not meet the same fate as the USSR, but this would certainly be my preference.

When the price of beef skyrockets, supposing the government is still willing to pay it, will anyone bother to raise chickens? Or goats? If the government will run the printing presses day and night to pay beef producers, for what reason would anyone continue to raise other livestock?

What would this do to the production price of eggs? What would this do to the price of all things derived from eggs?

I am not saying these questions do not have answers, in fact, they most certainly do. Given limitless cognitive capacity, we might even be able to project them. With advancements in artificial intelligence, perhaps someday we might even be able to calculate them sensibly.

I am only telling you that these questions are not asked by people who advocate the nationalization of industries. They tend to view these things, if we attribute to them charitable motives, as simple moral claims. But this is not an accurate portrayal of how an economy functions. What they are discussing is something completely different from economics. They have abandoned economic thought, as I stated in my quoted Telegram post, and I hope the listener is now satisfied that this is obvious.

And of course, we must, if we think this through all the way, dispense with the idea that the government is going to refrain from using its coercive powers in its role as buyer from producers. At some point, the pressures to nationalize production would necessarily follow. We’re talking about socialism, after all, and while the definition of this term is so fluid as to render it conversationally useless, one definition of that term is “State ownership of the means of production”. Read anything about the Soviet Union and you will hear the horror stories about the collectivization of farms, the “liquidation” of the kulaks as a class, and the terrible intraethnic violence that this entailed.

Prices folks, not costs, prices. I’ll happily pay the costs of living in a better society, but if you make prices impossible, you can’t print enough money to solve that problem…

Old cliche’s about “knowing the value of a dollar” are becoming decidedly antiquated, sadly.

As inflation causes the dollar to rapidly loses its value, prices don’t simply go up in uniformity, a la theories about the so called “price level”. Rather, price relations between various goods and services lose their coherence. One drops, another skyrockets. One goes up 250%, another 25%. Another reduces the contents of a package by 10%, and increases its sticker price by 12%.  Another now tastes different as a result of cost cutting in the manufacturing process, though its sticker price remains the same. Another product disappears from the shelves entirely. The store brand product you used to think was such a great deal because it was identical to the high end product at a fraction of the price? It’s made by an entirely different company now, and scarcely resembles the product you were once so fond of, despite the price and package being identical.

You go to the grocery store, and forget the increased costs you have to pay for the items in your basket. That almost pales in comparison to the time you spend trying to navigate this chaos, and the frustration of trying to move around other people in the place, hopelessly caught up in the same confusion.

Ah ha, but don’t you worry, friend. The Federal Reserve, they’re going to “fix” this. Hahaha… Yeah…

You see, inflation is what happens when too many dollars, or, more generally, monetary units, chase too few goods and services. So, the Federal Reserve, clever guys that they are, have a remedy for this. They just raise interest rates, and in this way, syphon dollars out of the economy. This “fixes” the problem by making people have fewer dollars, which puts downward pressure on prices, causing them to fall, or at least, cease to rise so rapidly, when those people who have fewer dollars, can no longer afford to purchase those expensive products. This “demand destruction” impacts the supply/demand ratio, you see, and thus they get to claim that they have “solved” the problem of inflation.

Of course, you, as the individual economic actor, know better.

As I mentioned earlier, forget the price level. If everything goes up in price 10%, including your wages, who cares? The price level borders on irrelevant. Savers may understandably beg to differ,  but they’re a rare breed these days in political terms, and folks with stocks and other non-cash assets hardly mind seeing their portfolios go up like a hockey stick, generally speaking.

The disorder is the problem. It rewires everything. And when the Federal Reserve tries to placate the anxieties of people who happen to be holding a great many dollars – namely, foreign central banks – they start that process all over again. Unless you’ve got a billion in cash somewhere, deflation does not tend to improve your life anymore than inflation does.

And of course, nominal incomes, which is to say, the number of monetary units a person reliably accrues, be though they may, a decidedly poorer measure of economic wellbeing than so called “real wages”, the amount of value an income of any measurement represents, hold such an outsized psychological importance, that as prices begin to fall, and wages, being themselves the price of labor, fall with them, the political consequences of this can hardly be overstated. The elected branches, recognizing this, intervene to stop the falling wages. In this, they act at cross purposes with the central bank, and the central bank, exerts greater force to compensate.

All of this perpetuates the disorder, creates uncertainty in the market, discourages investment, and ultimately, family formation. These diminish the future prospects of the nation. It creates the kind of chaos that allowed Lenin to come to power in Russia.

Moreover, they damage the credibility of the governing authorities. Why did this happen in the first place? The people ask. Well, because they debauched the currency, of course. Recognizing that will cause a man, or for that matter, a child, to think about what the currency is.

There’s a quote commonly attributed to Henry Ford which says;

It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.

There’s some question as to whether he actually said this, but it captures the idea quite well. Somewhat less colorfully, we know he did write in his 1922 book “My Life and Work”;

The people are naturally conservative. They are more conservative than the financiers. Those who believe that the people are so easily led that they would permit the printing presses to run off money like milk tickets do not understand them. It is the innate conservation of the people that has kept our money good in spite of the fantastic tricks which financiers play-and which they cover up with high technical terms. The people are on the side of sound money. They are so unalterably on the side of sound money that it is a serious question how they would regard the system under which they live, if they once knew what the initiated can do with it.

The point being, people won’t ultimately put up with this nonsense forever. They can tolerate a loss, but not constant chaos. Prices are signals. They don’t simply alter one’s standard of living, they tell a person about their environment no differently than sight, smell, taste, and touch. Like all other information, these signals are subject to a degree of manipulation, but as the saying goes, you can fool some of the people all of the time, and all of the people some of the time, but you cannot fool all of the people all of the time.

Test the limits of their patience, and eventually, you will find them.



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