Economics (6) Good Capitalism & Bad

Good reasonning requires precise language. While capitalism seems (to me) to have been what has enabled almost all advancement by humans around the world, I still hear people attack it as if it were their bane. People learn much of their vocabulary by observing uses by other people, which works imperfectly. Thus, many expect that capitalism is about everything that goes wrong instead of it being about everything (both good and bad). (This kind of confusion occurs with great regularity: “socialism” is where government controls the means of production, regardless of the political ideology; this feature is almost as prevalent as capitalism: I have never met a person who has dealt with any government that was not in some way socialist.)

I offer here a attempt to clear up some of the confusion by suggesting that capitalism can be practiced in either of two forms: “proper capitalism” (good) and “criminal capitalism”. This dichotomy is not as clean and absolute as I would like. I offer here some common examples of criminal capitalism:

  • when your gangsters show up and force people to work in your factory or mine
  • when you load a contract with fine print that significantly affects the exchange
  • when you lie about significant aspects of the deal, like who owns what you are selling or what attributes the product actually has
  • when you use insider information to disadvantage your trading partners
  • when you loot and pollute the environment, aka. the commons that is really owned by all of society

I suggest a simple litmus test for proper capitalism: you must be able to envision how every participant in your deal(s) can profit, that is, the value realised by the participant at the completion of the deal is seen by the participant as greater than it was at the beginning. Fools will deny that this is possible because they believe that life is a zero-sum game. But capitalism has generated great wealth for all of society by exploiting the win-win scenarios.

The primary mechanism by which capitalism generates wealth is the “free market” where the defining freedom is the freedom to decline (to not participate, to walk away). In a free market, people participate only if they see a profit for themselves. A properly regulated free market, with support from the legal system, generates so much wealth over time for all the participants (and, oddly enough, even the onlookers) as to affect the courses of nations.

Stories (2) Mistborn

I intend to write mostly about the better stories that I have experienced.  Rarely do I reread any book, only very recently doing it.  This book is not an exception, to either of these patterns.

Mistborn is high fantasy.  We enjoyed the book and are likely to read the sequels.  The characters are very well formed, such that we could regularly anticipate possible actions or speech from them, even though the plot kept us from knowing which of the possibilities would manifest, or when.

Not only did the people in this story have well developed character, so too did the whole world.  While we did not get to see all of the world nor even the boundaries, what we did see was consistent with itself, with its surroundings, and with its history (its motivations).  This is one of very few stories that attempts to regularize the system of magic that is central to the action of the story, and it works quite well.

Not only were the people in the story well formed, they had natures that we could relate to.  Most of the action plays out as we expect it would in the real world, excepting for the effects of magic.  The dance of suppressed peoples, with seething frustration and generations of conditioning, as they dabble in resistance and are seduced into committing to rebellion with all its accompanying costs, aligns well, but not too perfectly, with how real world histories played out.

Frustration grew in me, due to the ways that the people in the story refused to accept a small (in the scheme of things) distraction that would have significantly improved the likelihood of their longterm success.  Yet, that focus on the short-term direct approach resulted in the telling of a crisp story.

The morals embedded in the story (as well as any other subtext) were sufficiently subtle to not leave us crying about a story highjacked.  Indeed, there were messages about religious scams and corruption of government, just not with too fine a point.

Economics (5) Scaling

The earlier discussion of investment gave investment the definition of “doing work, expending time and effort, before it (the product) is needed”. I think of this as “baseline investment”, providing the minimum profit at the minimum risk.

Scaling involves investing time and other resources beyond the minimum.  A scaled operation is only profittable in one of two ways.  The simplest way is to produce a product or products that will be used or consumed before they go bad, a period called the “shelf life” of the product.  The other way is to count on trading away the product(s) within the(ir) respective shelf life(s).  Both ways become profittable when scaling causes the cost per unit of product to go down, which it will if there are overhead costs which increase less than proportionately to the increased quantity of product(s).  Those overhead costs are sometimes referred to as “non-recurring engineering costs”, or even as “setup costs”.

A very simple example is preparing a field to grow a crop.  The total investment is the sum of two parts: the setup of the plow and the trip to the field plus the work per area affected (width of plow effect by length of plow track).  Increasing the size of the field increases the cost of plowing in proportion to the additional area, but the overhead of preparing to plow increases trivially up to the point where the field is too big to plow in one session.  Thus, a farmer might reasonably increase the size of his field from the minimum needed to satisfy the household requirements, up to the maximum area that can be done without having to add additional days.

This boundary in the problem space is affected by the configuration of the plow, by the number of animals to pull the plow, by the number of workers on the farm, and by other factors.  Increasing the field size should result in an increase in the crop yield and the surplus can be traded.  Trading a crop surplus for tools to scale operations counts as investing.  Farm productivity (product produced per resources consumed) has increased for most of the last several millennia, with obvious acceleration for much of the past several centuries, as profits have been “plowed back into the operations”, buying or building improved tools and methods.

There is amusement to be gotten by recognizing that this concept of scaling can be applied to itself, scaling of scaling.  Once you realize that some productive activity already being done can be scaled to some profit, it is a short leap to seeing how much it can be scaled, that is, scaling up the scaling operation.  In the simple example above, this might look like analyzing how big a field can be made productive, how much can tools reduce the unit costs, how much surplus product can be traded, how much of the trading process can be replicated or expanded (scaling that process), etc.

Establishing patterns of trading surpluses together with scaling of scaling can lead to the discovery of specialization.  This is the abandonment of less productive activities to others and replacing those products (that you no longer make) through trade.  The evolution of specialization is not only possible, but progresses with relative rapidity because almost every incremental refinement of the process is more efficient, more productive than the previously accepted practices.

Politics (5) Machiavelli Ideals

A reliable source suggested I check out a thread of postings on web site by an author and scholar, starting with this on Ex Urbe.  As was predicted I was strongly ambivalent about it.  The series presents a view of Machiavelli as a person worthy of study, with sizable portion of praise.

Long ago, I abandonned any view of Machiavelli as real person.  I now see him as an ideal.  And I an easy enraged by people quoting “the end justifies the means”.  Most who use that line appear to have not the slightest inkling of what it means.  Maybe, the translator responsible for English version of his masterpiece distorted it, but I equate that phrase with the Biblical admonishment “You will know them by the fruits of their labours”.

As I understand it (and preach it), your objective in any course of action cannot of itself provide any moral justification for your actions.  As a learned, rational person (as might have learned from the master Machiavelli), you are to look to the historical record for an outcome or outcomes that match your objective.  If such an outcome exists, then clearly you are to use one or other of the methods that produced the desired outcome.  Absent that outcome being actually achieved at some point in history, then look to the outcomes that resulted from each method you consider to know which to avoid more strongly.  You have no justification for expecting a result that never happenned from the application of any method.

The ideal Machiavelli was a champion of empiricism.  We study the master in his ideal form that we may become more like that ideal.  The evidence of history is always more compelling than any model derived from it.  Models (mathematical, algorithmic, narrative, analogue, etc.) that do not match historic outcomes are trash, while the great ones go beyond matching to accurately predicting outcomes.  Such models are the sources of human power.

 

Politics (4) Political Correctness

In the lead-up to the climax of the 2016 US general election (for the president et al.), I heard far too much about the issue of ‘political correctness’ (PC) and especially how it would no longer be needed if the right man won.  I have calmed down enough to be able express the absurdity of such claims.

The need for and practice of political correctness has been with us since before the recording of history.  It springs up as one of two possible methods for avoiding the rathe-full expressions coming from a community one is stuck in.  Communities do not tolerate the intolerable, regardless of it being innate (like hair color — try being a “ginger”) or being a mutable behavior.  The offending person must hide the offense.  In the case of immutable characteristics (such as skin color), the only recourse is to avoid being noticed (even to the extent of exile).  Beliefs and other behaviors, can be hidden by diligently guarding against words or actions that reveal what the community will not tolerate.  Or the person can effect a change of personality to not speak or act in a manner that offends.

Persons with intelligence and persons with education have a tiny advantage vis-à-vis the average person, and in modern societies the accumulation of these advantages result in such persons influencing the societal norms.  For example, science has produced overwhelming evidence that homosexuality is innate and not a “matter of choice”; thus, we are abandonning the practice of punishing homosexuality, as it serves no benefit to either the individuals or the community.  Science has contributed to better understanding of not just economics, human development, education, and law enforcement, every aspect of society, with commensurate reformulation of norms and practices.

Those persons who have loudly resumed offending decent people because they imagined that their candidate would ‘reset’ the societal norms, merely show how little they understand of reality.  While a significant leader can have much more influence than the average person, the weight of public opinion exceeds that of any individual.

Moreover, there are two basic patterns of response to authorities.  Some people accept truth as it comes from authoritative sources (authority begets truth), others of us judge the merits of the source by the truths it presents (truth begets authority).  We in the second group are slow to accept new leaders, and equally slow to accept change that is not supported by long collected truth.  Thus the swings affecting PC are not symmetric.  Tough!

Economics (4) Money

Money has been in use for thousands of years. A large majority of humans seem to be able to function with it. In the realm of psychology, it is referred to as a “secondary reinforcement”, and studies have shown that other animals, especially other apes, can deal with it. Despite all that, I am left with the view that few people actually understand what money is or why it functions as it does. A simple litmus test is to ask “is money a thing of value (worth)?”. True understanding shows that money is not inherently valuable.

The adoption of money, that is to say its use in commerce, did not spread quickly, nor was its evolution without rude surprises for its adherents. As I said earlier, the true need was for some improvement in efficiency and reliability in balancing exchanges of surpluses, or rather tracking the outstanding debts that arose from inequalities in those exchanges. The essential properties needed were as follows:

  • Scaleability — able to represent amounts of value owed from small to large
  • Granularity — able to represent amounts to arbitrary precision
  • Stability — able to retain its identity (the amount owed) over a sufficiently long time
  • Recognizability — able to not only be recognized by party to whom the debt was owed, but also by the party who owed that debt

An extra bonus for any system that permits such accounting to service exchanges between every pair of parties with surpluses to exchange.  This extension would impact all of the essential properties.  Getting such a system accepted by a sufficient portion of the population requires a long period of acclimation, with the system needing to evolve over generations of players.

Initially, a party learning to use money is unwilling to accept a lessor item in exchange.  Thus, the initial design of money must preserve the illusion that the tokens of money actually embody the worth imagined.  Numerous extreme events have shown over and over again that no material can have sufficient value to impart to the tokens the needed value without the value of the material being largely due to its role in producing those tokens (coins).  In the more general case, any commodity backing a currency is more valuable as the backing than it can possibly be in all other roles combined.  Yet, the illusion, or rather the delusion, of pieces of money having inherent value seems to be a requirement of the initial bootstrapping of monetary systems.

A functioning system of money permits exchanges of surpluses to be distributed over

  • multiple parties
  • multiple locations
  • multiple times

The system rewards its participants by

  • vastly increasing the opportunity to trade away a surplus before it loses its value
  • vastly increasing the opportunity to correct shortfalls in needed products
  • better matching
  • allowing much greater amounts of specialization
  • facilitating opportunities for diverse investing
  • reducing waste or loss via missed opportunities

Those rewards together with the enhanced efficiencies over the long term outweigh the increased risks from counterfeit currency, theft (it too benefits from the efficiency), or simple loss of tokens.

Modern currency is a fiat currency; it has value only in that the powers-that-be dictate that it has value. It seems to be a house of cards, but it cannot fall down because the agencies responsible adjust the supply to match the demand of a vibrant economy (parties cannot shift their trading patterns even as fast as the agencies can withdraw or redeem the currency). We have become dependent on patterns and practices made possible by fiat currency coming-into or going-out-of existence as is needed.

Even more strange is the discovery that money is not a thing, but rather a property of things. We have learned this at a gut or reflex level; we count up our assets by adding together cash, bank accounts, houses, corporate shares, insurance policies, etc; we trade with coins, paper bills, checks, credit cards, eftpos cards, stamps, coupons, etc. Credit cards actually work the reverse of most money systems, they create currency on demand and collapse it on payment — retailers can trade on payments before the customer has actually parted with with the assets.

Meta Thinking (5) Game Theory

Game theory is an area of mathematics, where patterns and models from entertainment (games), warfare, politics, economics, and probably other disciplines, were found to be common when stripped of distracting and irrelevant details; this is just as mathematics was formed by so stripping applications from numbers and geometry.  Just as an Unrestricted Analyst (UA) would master arithmetic, algebra, geometry, and calculus, so a UA should have some game theory in the tool box.

An informal introduction to game theory can spring out of comparing varying games of entertainment, as such games are already abstract models of problems from other disciplines.  One might readily jump to the study of probability and statistics (probStat) on exposure to only one variety of game.  To analyze the nature of a difference between two varieties of say either poker or bridge or pinocle, one needs to further abstract things to collect the differences into a unifying category.

Game theory is rather unique.  The models of games depend on mainstream mathematics, possibly with probStat and formal logic, but game theory also depends on models of players, complete with formulations of goals and “victory conditions” (how an analyst evaluates outcomes).  With models of players comes a dependency on information theory, for players in games differ extremely from the actors in chemistry, physics, electronics, cosmology, etc.  Players have intentionality, they do not do things just because they are allowed to; players analyze their situations and act in ways they expect will bring them closer to their goal(s).

Essential to analyzing a player is determining what information the player has, especially how the player views the nature of the game and its goals.

I find from the study of game theory that much benefit (and simplification of analyses) seems to come from dividing into two categories all games and all players.  Games are either zero-sum or they are not; players have goals that are self-centric or other-centric.  Most games we are aware of (ie. entertainment) are zero-sum to a greater or lessor extent, where zero-sum refers to the net impact on some resource by the actions of players; the net impact is zero in that every gain by one player is counterbalanced by a loss to some other player.  Very little of life is really zero-sum!

A player with self-centric goals is generally unconcerned by the actions of other players and victory is to end with more than some arbitrary amount (on some scale in the game).  [In real life, a self-centric goal might look like accomplishing more than one’s parents did.]  A player with other-centric goals is chiefly concerned with accomplishing more than the other players.  [In real life, a player with other-centric goals will generally welcome a loss if it is accompanied by greater losses to the other players; a player with such an other-centric perspective will commonly see situations as zero-sum when they are not.]

 

Politics (3) Colorado Cash

It does really seem that Marijuana is a gateway drug, although not in the sense that that claim was initially made.  In fact, as far as self-medication and recreational pharmaceuticals trends and causalities are concerned, it seems that cannabis in all its forms is as much of a gateway to other substances as is bubble gum.  The serious abuse gateways seem to be tobacco and alcohol.

My current claim about the gateway-ness of cannabis is more of a claim about behaviour patterns, especially as influenced by ill-considerred laws.  This was blatantly true back in the ’60s and ’70s, as so many of my cohorts mistakenly assumed that government lies (and make no mistake there — they were lies) about substance abuse were uniform.  To correct for the gross misinformation, we took to wearing buttons that said “Speed Kills” so that we were all warned that amphetamines were really and truly dangerous.  This warning also helped to establish a framework that substances being abused coverred a wide spectrum — experience with one was not a reliable indicator of how another might affect users.

Since cannabis was illegal, to get some one had to trade with people who might also traffic in other dangerous substances.  Thus marijuana openned the traffic gateway to other substances.

Today, the US federal government continues to force cannabis to maintain its role as a traffic gateway to illegal businesses even though it is legal to grow, trade, and consume in Colorado.

I suggest that it is time for Colorado to double down on its innovative policies.  I propose the formation of the Money Transfer Agency (MTA) of the State of Colorado.  The MTA would be in many ways like a bank, while being different enough to operate outside the federal banking laws.  It would operate like this:

  • Every account of the MTA must be owned by a single legal entity (person or corporation) established in the state, and have one or more registerred controllers who must have had a background check done.
  • Any entity (with or without an account) may deposit any amount of cash to any account.
  • An account controller may electronically effect transfer of funds to any other account.
  • An account controller may personally withdraw cash from the account.
  • The MTA may use money held in trust to acquire any sufficiently liquid bonds or notes issued by governments or their agencies within the state.

This arrangement would permit the following:

  • Cannabis consumers can open accounts, and make regular deposits.
  • Consumers can transfer money to retailers.
  • Retailers can transfer money to satisfy tax and regulatory demands at any level within the state.
  • Retailers, growers, and processors can transfer money to their respective suppliers.
  • Brokers can set up operations to receive money transfers, make cash withdrawals, and make payments to entities outside the state.

Such a system would simultaneously enhance growth of legitimate businesses while reducing exposure to both theft of the money and illegal transfers of product out of state.

CompSci (1) Pascal

This is my first rant about Computer Science topics because the programming language Pascal (by Niklaus Wirth) so offends me.  I had been misinformed about its origins and had thought it not only a bad language but that its faults were totally unjustified.  It seems that Niklaus started earlier than I had realised and could not have learned better from other efforts.  Thus, Pascal is simply an example of how good intentions can yield poor results.

Here is a list of some of what I see as the failings, or negative teaching impacts, of the design decisions made:

  • Pascal implementations were able to be made cheap (as in what it is worth) by specifying a one pass compiler.  The compiler could not know (or even guess) what the type signature of a function was until it saw the declaration or definition.  Thus, generations of programmer learned to write their programs upside down, defining a function before using it.  Had the language simply required a declaration before the definition, there would have been no reward for upside down programs.
  • The language provided for functions but not subroutines; the distinction being that functions were precluded from having an internal state that might affect the result returned.  Real computing needs, unequivocally, subroutines.  The trick to making a subroutine in Pascal is to have it depend on a variable that is outside the scope of the function.  Students working with Pascal learn quickly to make all such stateful variables global, as the uses of such subroutines depend on them being in a scope higher than all uses.  In the C programming language, such variables are declared in the routine, with the property “static”, and are thus hidden from all other code.
  • Even as stateful variables were mistreated in functions, they were mishandled by the compiler.  Generations of students learned to write active code to initalise the stateful variables.  In the C programming language, such initialization is handled at compile and link-edit (“ld”) time.
  • In the design of Pascal, clarity of intent was often sacrificed on the altar of programming purity.  The earliest high level languages had found it very useful to be able to combine multiple tests of conditions into one statement, and Pascal followed suit.  However, the rules for combining those tests were the exact opposite of what users really wanted.  A very common combined test would abort a program run when the tests were to check that an index was high enough, that that same index was low enough, and that the member of an array at that index had a specific value.  The user wanted to not check the member of the array if the index was out of bounds, but all parts of the combination had to be calculated.  In the C programming language, such combinations were specified to be checked in order and the checking is to “short circuit” (skip the remaining tests) as soon as the result is sufficiently constrained (using logic identities like “true OR anything is true” and “false AND anything is false”).
  • Pascal was supposed to protect programmers from bad practices, and to prevent programmers from circumventing the protections in it.  This objective had far reaching impacts.  In order to satisfy that requirement, the compiler needed to know all the intended linkages between every fragment of code that was to be combined into the final program.  The two most common responses by implementors and users were to either require all the sources be available to compile any one fragment, or to require that there be only one complete file.  Thus, a generation of students learned to build programs as one file.  This made Pascal like BASIC, in that both were toys, unsuitable for large serious projects, as neither had standard mechanisms for partitioning up a large program.

Stories (1) O Jerusalem

I was going to call this thread “Books” but I realised it was really about the telling of stories.  I was going to start the thread as I have started my other threads, by anticipating where I was going to go with my rants and setting up the appropriate background.  This thread will be different.

I admit to being a very slow reader, and one who spent much of his reading budget on non-fiction; I allowed video to be my primary medium for fiction.  My family reads together and discusses stories; this has boosted my intake of fiction.

We read The Beekeeper’s Apprentice  by Laurie R. King (LRK) and liked it somewhat.  I had not read any of the Sherlock Holmes stories, but had gotten quite a few stories via movies.  After reading this one together, I went off to read some of canon from Sir Arthur Conan Doyle (SACD).  I found this latter day extension (fan fic) to be a slight improvement on the original.  This is damningly faint praise, for the hundred years between the two sets seems inadequately expressed as improvement.  The canon (that I have so far read) is not up to modern standards, yet for each predecessor to show the way to SACD there have been many hundreds for LRK to look to — and her work does not show that much improvement.

Nonetheless, we followed the first in the Mary Russell series with the 5th, O Jerusalem, which interestingly is set in the middle of the first.  In many ways, this installment is an improvement on that first one, specifically in the story continuity, the character development, and pacing.  Yet overall, the product was lacking.

I found myself a little distracted in the middle of the story by what I saw as mistakes in her representations of some weapons.  I expect that it would bother few readers.  What was ruinous to the story, so much so that I fault the editors for having allowed it, is the complete inadequacy of the final chapter.  The plot is resolved by a cheap trick played out so as to violate the nature of the characters, without providing a justification (the villain’s purpose), followed by a complete lapse of reason (and corresponding incongruity of personality) by all the major characters in the closing scenes.  It is as if LRK was tired of the story and ended it as quickly as possible; a miserable ending to an otherwise fine bit of story telling.

We will probably read more from LRK, even more in the Mary Russell series, but we are left unassured that those stories will all be worth the time.

The publishing industry has changed so much.  So few authors can earn a living from their books.  Given this constraint, we have to ask what is the author’s motivation if not to tell a well crafted story.