Galt's Cradle

TLDR Musical version:

Just got back from Going Galt for a week. You know, all that snarky snark about how glibertarians who threaten to Go Galt should go ahead already – about how no one will miss them – about how they are being such whiny-ass titty-babies what with the complaining about being saddled with the lowest marginal tax rates in modern history. Well it’s all valid – but there’s another point I want to look at.

First let’s assume the crazy fantasy world of these Randian übermenschen IS REAL. That they are all super-producers with crazy productivities the likes of which us mere leeching mortals cannae ken. Let’s assume that they are some sort of platonic ideal of the Alpha Wolf Executive workaholic putting in their 110% throughout their sixty hour weeks and fully deserving of their massively inflated salaries. Yes, I realize that we are now discussing Mary Sue slash fanfic hypothetical universes, but bear with me.

What are they really “threatening” to do? Cut back on the overtime. Go down to a fifty hour work week and maybe actually take some of their vacation time. To spend with their families. Getting to know the wife and kids better. Really? That’s a threat?

I just spent the last seven days in the company of my wife and five month old daughter, and let me tell you this – loved every minute of it. I’m having difficulty conceptualizing why this would be a bad thing. By all means, all of you ultra-achieving wünderkind who are shocked, SHOCKED I SAY, at the mere thought of a millionaire’s tax bracket or an increase in the top marginal tax rate – take the time off. Find out the colour of your spouse’s eyes. Marvel at how much bigger your kids are already. Try and move past all the things you missed in your childen’s childhoods by NOT MISSING ANY MORE OF THEM.

Really.  Honestly and truly.  All you libertarians out there who are thinking about Going Galt - please do.  And I don't mean that in a snarky don't-let-the-door-hit-you kind of way, but if you really are one of these overworked super-achievers who spend all of their time and energy on work - then take the break.  Have a nice dinner with the spousal unit, play some catch with the tykes, call your moms, do some of those things that there is never time to do.  You don't even have to thank teh socialests for incentivizing it by threatening higher tax rates - just go and be a human being instead of a fountain of GDP for a change.



Glad I finally got that long post up. Time was running short as I will be offline for teh next week or so. Not that you'd notice based on my output here, but if anyone at teh Mothership's wondering why I'm being so quiet - I'm in your mom's bedroom at an undisclosed location.


Windows Vista*

*About teh post title - I was going to title this post Broken Windows Vista, but then realized that was redundant.

Before going forward, just want to shoutout the Graeber Invention of Money post again. His highlighting the fact that one of the foundational ideas about economics is totally bogus is pretty awesome. Also too, teh interview wherein we learn that teh symbol of teh Liberty Fund is an excellent example of how money, debt and credit pre-existed barter and was probably a result of government regulations and trial lawyer type compensation processes.

Also too, a disclaimer. This post is Part 2 – and if you had a problem with Part 1 then you should probably give this one a bye. This post is going to be speculation about the reasons and related bits associated with the mistakes I pointed out in the previous post.

One final bit of preamble.
TLDR version: FYIGM is actually a generous interpretation.

So anyways, there’s a bunch of different things you can read into the broken windows fallacy. Firstly, you’ll notice that there is a premium of sorts for wealth on hand as opposed to earned money. The owner of the broken window is worse off because they had to spend cash that they had – but the window repairman is not better off because he exchanged his labours for the replacement cost of the window. Now if you stipulate that the opportunity cost to the repairman is zero – IOW he doesn’t have to cancel other window replacement jobs or postpone window replacement training or skip that year’s window replacement trade show (GlazeCon 1849 – the cosplay is practically pornographic) – then the window repair is pure windfall profit for him. So what difference is there in the value between the window owner’s six francs or the window repairer’s six francs? Obv. none.

Not so obv. This misconception – that available cash is worth more than earned cash – has been carried through to this very day. For instance, the capital gains tax rate is lower than income tax rate. If you accept the conservative/libertarian never before observed Laffer curve concept that the higher the taxes the greater the disincentive to produce – the result is that it is somehow less harmful to directly “disincentivize” producers than it is to “disincentivize” investment. Apparently the ideas surrounding “supply-side” economics does not extend to the market for labour.

The other big problem I had with Bastiat was the labelling of things as useless. He doesn’t accept the idea that the window repairman’s exercising of his trade has value in and of itself. That since the net wealth of the village is unchanged, the window repairman’s efforts are cancelled out and somehow “useless.” It is as if he could not see the value of maintaining skill and expertise in local industries. The type of attitude that would denounce tariffs of all types and push for widespread free trade.

Actually, it’s worse than that. Because the things he rails against have as their intended purpose things which are clearly indicated. In the case of tariffs, it’s protecting local industry – in the case of “make work” programs it is keeping people employable and engaged in society – in the case of the assorted social programs that are always at risk of funding cuts it is the provision of those social services. Those things all have value, but Bastiat as well as modern day conservatives claim that they don’t. Usually based on this dollar value taxes-are-evil approach.

This ties into the glibertarian “why can’t we let charities do that” thing which I’ve railed against elsewhere. Perhaps another post.

Lastly but not leastly, the whole broken windows fallacy thing gives us a new and more complete definition of modern conservatism than Galbraith’s. Observe that in the broken window story, society is no worse off for having lost the window. Overall wealth is unchanged because an otherwise idle labourer has the opportunity to produce a replacement. But the window owner is definitely worse off. And this is the parable that Bastiat uses in order to advocate for policy decisions that affect all of society – including the window repair d00d. That’s conservatism in a wingnutshell – this idea benefits me personally therefore it should be the way it is for everyone.

This not only covers the greedy position conservatives have about government providing only the services they want and need and nothing else, all the while complaining about having to pay for any of it. It also applies to social conservatives and their insatiable need to prevent anyone else from having a good time. Their religion has forced them to suffer a joyless existence made bearable only by the future promise of eternal happiness and communion with the most powerful being in the universe. And if that’s good enough for them,,,

It’s not that conservatives lack empathy, it’s that their empathy only works backwards. It’s not that they can’t imagine themselves in position of someone less fortunate or successful – it’s that when they do so they project so much of their own experiences that they actually become offended. Because they achieved whatever level of success and comfort they have, everyone should be able to as well. That for conservatives, imagining what it is like to be in someone else’s shoes really means wondering why being insulted that people have the audacity to not do exactly as they do all the time.

And so the way they understand the world is through that lens. Their metaphors and analogies are all of the Me First variety. Tax cuts are good because they want to pay less in taxes (even if those tax cuts don’t target them but only benefit the uber-rich, because they may be uber-rich some day). Cutting social safety net programs is okay because they don’t use them. Something about your mother. Hence government budgets are like family budgets meaning the anti-Keynesian belt tightening austerity during recessions and crazy deficits during market booms. Hence “if you have nothing to hide,,,” since of course everything they do is by definition societally accepted if not revered. Hence all sorts of authoritarian abuses because there would never be a reason to racially profile them.

And finally I started Part 1 by mentioning that I was going to be very critical of Claude Frédéric Bastiat, but that we should bear in mind that his time was a very different one. While it was the Age of Enlightenment, enlightenment is a process whereby one starts of unenlightened. That his writings show the twisted thoughts of a selfish sociopath with no empathy for his fellow man, he was probably still pretty progressive for his time. However, the folks that buy into his century and a half old worldview - they don't have the same excuse.


You're Not Supposed To See Teh Window

This one's way way TL - and Confession Time: I'm already working on Part 2.

TLDR version: Shorter Bastiat

So, a bit of a while ago I got engaged in a bit of a flame war at Crooked Timber. About broken windows. It's gotten me thinking and reading and although I really don't have anything new to add to what I said at CT, I think it might make sense to put it all down in a single post. Well, at least it will make moar sense to me - which is what this blog is here for anyways.

First the beackground - the broken window fallacy. From Claude Frédéric Bastiat's essay That Which is Seen, and That Which is Not Seen. I'm going to be pretty harsh on pauvre Bastiat - so I want to caveat up front. Dude is from early 19th century France. Those were different times, Revolutionarily different. Please bear that in mind.

Here's the story: There's this shopkeeper, let's call her Alice. Alice's son, Alison, breaks one of the shop's windows. Alice hires a glazier, Bob, to repair the window. The price is six francs (for context, the franc at the time was a physical standard amount of gold. ~0.29 g. Meaning six francs is approximately a fifth of a troy ounce or about $350). Bob fixes the window, collects his three and a half benjamins and in rubs his hands in glee.

So, from an economics perspective, what's happened? Well, Bob did six francs of work that he otherwise would not have done. And that's it. The broken window is repaired and thus the community as a whole is no better or worse off. Six francs has been redistributed from Alice to Bob and Alison is probs in big trouble with his mom (whom I totally did).

But no. Here's where Bastiat comes in and says, oho - while the overall wealth of the community appears to be unchanged, you are not factoring in what is unseen. Which apparently is Alice's spending six francs on new shoes (ladies and their obsession with buying shoes - amirite!). Charlie, who is teh village cobbler, is now out the six francs that he would have been plus had Alice not had to shell out all them phat francs to Bob.

Which is, of course, bullshit. The way I phrased it in teh original dust-up was And Bob wears no shoes?

Money is money, francs are francs. Cold hard cash is teh most frungible of assets - even moar so than diamonds, or so my fence tells me. Does it matter if teh six francs are spent by Alice or spent by Bob? No, it does not (although this misconception is an interesting one to unpack as well - possibly in a later post). So Bastiat's poor unseen Charlie is getting his six francs after all, or maybe not Charlie since it's only teh chicks with teh thing about shoes. Let's say that Bob blows the cash on a used computer from some guy named Dave. Bastiat's "not seen" Charlie is exactly balanced out by Dave whom Bastiat doesn't seem to see.

There was a big discussion about hoarding. Various people maintained that teh broken window fallacy does not require Bob to be a hoarder. This is untrue. The conclusion of the Broken Windows section:
The reader must take care to remember that there are not two persons only, but three concerned in the little scene which I have submitted to his attention. One of them, James B.Alice, represents the consumer, reduced, by an act of destruction, to one enjoyment instead of two. Another under the title of the glazierBob, shows us the producer, whose trade is encouraged by the accident. The third is the shoemakerCharlie (or some other tradesman but def not that Dave guy), whose labour suffers proportionably by the same cause. It is this third person who is always kept in the shade, and who, personating that which is not seen, is a necessary element of the problem. It is he who shows us how absurd it is to think we see a profit in an act of destruction.
Clearly for the little parable to have any meaning, only money spent by Alice counts. Bastiat has raised teh unseen potential use by Alice of the cost of the window - but studiously ignores teh possibility of increased spending by Bob due to his coming into new money. Furthermore, the cash spent by Alice is cash that she had on hand - and in the story, Bob is otherwise unemployed. Which of the two is more likely to hoard cash? Later in that same essay, Bastiat waxes poetical on teh virtue of hoarding - so there's also that.

Anyways, teh whole point of teh parable apparently, is to show that Bastiat is a huge hypocrite. The parable is a very special form of special pleading where he invents an entire extra set of rules, which don't actually change the outcome unless they are selectively applied. It's like playing a baseball game and being told that reaching third base now also counts as a run. And then being told that this special rule only applies in the bottom half of the inning. Without tilting teh playing field entirely in his favour, teh best Bastiat actually manages to prove is that in a system with excess capacity/high unemployment - the useless destruction of things causes no net loss to society. Because there is available unused capacity to replace them.

But wait, what about that bit about redistribution? At the very least doesn't Bastiat have an argument from moral grounds about how even if you pay Paul, robbing Peter is still Dentistry? Well, yes and no. In the original story, teh window is broken by accident by Alison. Or maybe not accident but possibly as revenge for being given a girl's name. Or maybe while he was practicing in order to succesfully punch a shark in teh face. Whatever Alison's motives, there appears to be no lesson in morals available. Next Bastiat proposes that Bob hires a bunch of thugs to go break windows for teh sake of drumming up business. Well, that certainly seems immoral. So it appears that the issue of the moral rightness with respect to redistribution hinges upon context. Meaning that teh parable is a pretty weak one in terms of being some sort of archetype to base analogies on.

But base analogies Bastiat does. Many of them. He projects the lessons of this story, lessons which only follow if you are willfully ignorant of teh inherent contradictions, to a host of other things.

And each time the formulation of teh analogy goes - Alice is teh consumer or teh taxpayer or teh polity at large. Alice is kinda like Christine O'Donnell, she's you. Bob is any public spending be it a standing army, spending on the arts, trade restrictions and tariffs, just about everything. Charlie is everything good and proper. All that we want out of society. Everything that is right and just. Bastiat doesn't recognize Dave, probs because he's on vacation in Europa (not Europe, since that's where Bastiat iswas). And Alison and teh broken window? Everything Bastiat hates - taxes, regulations, prepared mustard instead of Dijon, teh foul mouthed Poet-Engineer from Canada that's schtupping his mom, teh noise that kids these days call music. Basically, any and everything he doesn't like.

So, you're Alice. Alison, who I suppose is no longer your son but rather some sort of OMG! SOSHULASM! inflicted upon you. You are at some sort of loss due to teh effects of SOSHULASM. Bastiat's true nemesis, whom he calls Monsieur Industriel (firstname Strawman) says to not worry since teh loss is totes balanced out because teh funds go to Bob who provides you with something in exchange. i.e. Despite being out your precious tax monies, here's a functioning civil society for your troubles. But Bastiat says - oho, that's all well and good, but what of poor Charlie! You kept Charlie out of teh picture! Therefore it is a net loss to society. Not just to Alice but to society as a whole.

It ain't. It never is in any of the comparisons he makes. Because all of the balances revolve around what Alice is out compared to what she would have had in an otherwise perfect world and none of them consider Bob at all. Not only that, he is saying that this analysis is the basis on which policy decisions which affect all of scoiety, Bob and vacationing Dave included. And since you're Alice - it's like some form of meta ur-pandering. So credit for that, Bastiat was already trying to buy your vote in teh earliest days of modern democracy.

Here's teh kicker. That's not teh worst error Bastiat makes. There is another "not seen" thing which Bastiat completely igmores. The breaking of the window itself. He calls it the useless destruction of things, but "useless" - as in without any value whatsoever - that's a hard bar to meet.

The lost window may have been previously faulty in some way. Somehow inapprorpiate for teh application. Knowledge which was not available when teh window was first installed means that teh new window has teh potential to be better than teh old one. Perhaps a window is a bad example of these things - but teh point was to set up a basis for analogies. There are all sorts of things that one wishes they could change after they were installed. Bastiat also offhandedly cites the example of a fire burning down Paris. Well that is a bit extreme and teh cultural loss is immeasurable, but on a smaller scale, a single house burning down provides teh opportunity to rebuild it, this time meeting standards for electical wiring. A moar recent example is teh LulzSec hacking of PSN. Destroyed Sony's entire security system (twice). Compromised tens of thousands of credit card numbers. Doesn't that count as "useless destruction"? Well no. Sony's "security" was godawfully bad. There is definite value - especially to Sony - in knowing that their security seriously needed beefing up. It would be like if Alice's window popped itself open while no one was looking and started throwing shit out into teh streets. Breaking teh window was a good thing. Breaking Sony's "security" was also a good thing. Because it was done for teh lulz and not to bone thousands of people whose only mistake was to think Sony would be able to keep their credit card info safe. People whom Sony had already put at risk for that very boning.

On an even moar obvious basis - technology doesn't stand still. Again, teh window ain't teh best example since window technology is already pretty mature - but say one of your buddies, for example Alison, finally manages to break your Nokia 5110 (probs with a sledgehammer). ALISON HAS DONE YOU A FAVOUR. You should be thanking her.

Bastiat is not only unconcerned with what happens to teh money after Alice spends it - he is concerned only with money. In the original story, Bob is an unemployed skilled worker. The longer he is unemployed, the rustier he gets and teh moar out of touch with current industry practices he is. The opportunity to exercise his trade has value to society in and of itself. And in teh current context of the long term unemployment epidemic in the US - it's not a small point (although I concede that it's not something that 19th century frenchmen should have been able to predict).

That's the real unseen that Bastiat glazes over. In the example of tariffs and what he calls "restrictions", Bastiat assigns a value of nurturing local homegrown industry at zero. According to Bastiat, there is apparently no value in having domestic sources of goods when they can be procured on teh global market. Kinda funny considering the state of international relations in Europe during his time. I mean, Prussia made such fine weaponry, why bother with a domestic arms industry when you can just purchase said items from your neighbour?

The usual bugaboo that is raised as teh broken window is make-work programs. Why implement make-work programs when you could just lower taxes and BOOM MAGIC FAIRY JOB CREATION? Not to be too asshole-ish about it, but it's right there in teh name. To Make Work. Making work isn't a by-product of Make Work programs. As I mentioned previously, long-term unemployment - not good for society. The whole idea is to keep teh long term unemployed from slipping into teh long term unemployable. But that's something Bastiat doesn't see. Because he got his job at 17 through nepotism and then inherited a fat ass estate at 25 making him fabulously wealthy and never needing to do sweet fuck all except complain about taxes for teh rest of his natural life.