Inflation ain’t coming, and other howlers…

September 23, 2009 at 04:46 | Posted in economics, Gold bug, inflation, Uncategorized | Leave a comment

Just found this in the Globe and Mail, one of our leading national newspapers. That’s why I read the National Post.

For special laughs, watch out for the hidden Phillips Curve reference…

Sorry, gold bugs, but the facts just don’t add up

Boyd Erman

It seems a shame to trash the party just when it’s finally becoming fun to be a gold bug.

Bullion is flirting with $1,000 (U.S.) an ounce and hoarding the metal is no longer just a pursuit for Eric Sprott and assorted conspiracy theorists with caches of canned food. Even the guy behind the bar at dinner the other night was long gold and happy to expound on why.

It’s all about inflation they say, and gold as a store of value. Except for one thing: The facts don’t back it. (Unless you’re an American buying bullion because you’re worried about the inexorable decline of your dollar. In that case, you should be worried.)

Almost every real measure of actual inflation pressure – as opposed to the inflation paranoia inherent in the gold price – shows little in the pipeline. One of the best long-term indicators of inflation expectations for the next decade, the price premium built into inflation-protected U.S. Treasury bonds, is indicating that prices will rise 1.75 per cent a year.

Yet the bullion pushers forge ahead. After 20 years of being wrong when gold was stuck around $350 an ounce through the 1980s and 1990s, they are nothing if not persistent.

The key to their argument is the man they call “Helicopter” Ben Bernanke, the head of the U.S. Federal Reserve, and all the cash he and his peers at central banks around the world are creating to revive growth in the world economy. At some point, that money will sluice out of the banks into the economy, inflation will be upon us like a tsunami, and gold will be treasured as a store of value.

The proof, as gold bugs see it, is in the price of gold. It rises when inflation is a risk, so inflation must be a risk. Get it?

The problem is one of simple math: Those helicopter-loads of cash, even if they were making it into the real economy, are not nearly big enough to fill the Sudbury-size crater in the global economy created by the crash in the world’s housing and stock markets.

The Fed balance sheet, a focal point of inflation hawks, has expanded by about $1.3-trillion as Mr. Bernanke pumped cash into the lending system. Added to that, the Obama administration has come up with close to $1-trillion in stimulus, the biggest of a global group of packages totalling about $5-trillion.

However, the decline in assets is much bigger. The value of global stocks has fallen by more $17-trillion since the markets peaked in 2007 and U.S. housing is down more than $4-trillion since topping out in 2006.

On top of that, the financial institutions that are supposed to push that cash into the economy aren’t doing it.

U.S. bank lending, by some estimates, is contracting at the fastest rate since the Depression. Bank credit in August in the U.S. shrank at an “epic” pace equal to 9 per cent a year, according to David Rosenberg, chief strategist at Gluskin Sheff.

The result is a real money supply that’s actually shrinking at the same time as the jobless rate is at a cyclical high and factories are idle.

Not surprisingly, executives scoff at the idea of raising prices any time soon, with one telling The Globe and Mail not so long ago that it would be “very cavalier” to even try. That utter lack of pricing power is clearly reflected in Friday’s numbers showing that underlying inflation is still slowing on both sides of the border.

To that, many gold bulls retort that central banks are going to miss the transition to hyperinflation when it comes, or be unwilling to fight it with higher interest rates because of political pressure from indebted governments.

That seems far-fetched. Central banks have become very good at keeping inflation anchored. In the 18 years since the Bank of Canada adopted the goal of keeping inflation centred between 1 and 3 per cent in Canada, consumer price increases have averaged a 2.1-per-cent pace. Not bad.

There will likely be plenty of warning before inflation takes hold, as capacity use creeps up and unemployment ebbs.

Those real facts go a long way to explaining why even though gold is at $1,000, inflation fears have yet to become mainstream, and discussion of exit strategies to pare back government stimulus programs before prices take off – talk that dominated the last big G20 meeting in April – has largely, and mercifully, fallen by the wayside.

Mercifully, because if the gold bulls and their view on inflation really held sway, the exit would already be on. Interest rates would already be rising and the world would be well on its way back into recession. The bugs should be careful what they wish for.

Credit Is Shrinking?

September 17, 2009 at 19:39 | Posted in Uncategorized | Leave a comment

By Jeff Harding.

The esteemed Ambrose Evans-Pritchard of UK’s Telegraph makes the unstartling announcement that U.S. bank credit has been shrinking for the past three months at a  rate (14%) that has not been witnessed since the 1930s.

Professor Tim Congdon from International Monetary Research said US bank loans have fallen at an annual pace of almost 14pc in the three months to August (from $7,147bn to $6,886bn).

“There has been nothing like this in the USA since the 1930s,” he said. “The rapid destruction of money balances is madness.”

The M3 “broad” money supply, watched as an early warning signal for the economy a year or so later, has been falling at a 5pc annual rate.

Similar concerns have been raised by David Rosenberg, chief strategist at Gluskin Sheff, who said that over the four weeks up to August 24, bank credit shrank at an “epic” 9pc annual pace, the M2 money supply shrank at 12.2pc and M1 shrank at 6.5pc.

“For the first time in the post-WW2 [Second World War] era, we have deflation in credit, wages and rents and, from our lens, this is a toxic brew,” he said.

I’m glad someone over there finally noticed this, since, as noted, David Rosenberg and other deflationists (including The Daily Capitalist) have been reporting on this for quite a while.

But here’s the interesting point made by Mr. Evans-Pritchard:

It is unclear why the US Federal Reserve has allowed this to occur.

I suggest to Mr. E-P that if the Fed could have prevented a credit collapse it would have. Which means they have been flooding the economy with cash to keep financial institutions afloat, but somehow they haven’t been able to flog banks and consumers to lend and borrow. Which in turn means they can’t prevent it from occurring.

Here’s what’s been happening.

Money base (BASENS) has been expanding:

Click to enlarge

But, Banks Reserves (RSBKCRNS) has been growing:

Click to enlarge

As a result, money supply in the economy (M1 MULT, for example), has been declining:

Click to enlargeClick to enlarge

Which means that as much as the Fed tries to push cash into the banking system, they can’t make banks lend or make consumers borrow.

Mr. E-P’s view is based on his conversation with Professor Tim Congdon, a well-known British Keynesian-Monetarist. Prof. Congdon believes, like Milton Friedman, that the Great Depression could have been avoided had the Fed not allowed the money supply to shrivel up. It’s not that simple and I believe that line of analysis is wrong. It ignores the true causes and cures of a recession, and would be analogous to shoving a water hose down the throat of a drowning man. The man is not thirsty, guys.

In an environment where real estate values are still declining, where there is a high level of debt burdening consumers, where banks are holding undersecured loans, and where business inventories are still falling, where the Fed Funds rate is at near zero, it is unlikely that a flood of new money will solve anything. All any flood of new cash will do is lead to inflation which will just paper over the issue and, as they like to say, “kick the can down the road” for us to deal with another day.

Professor Congdon blames a shrinking money supply on rules requiring banks to reduce leverage to somewhat more reasonable levels.

He should listen more to IMF chief Dominique Strauss-Kahn, whom he criticized for arguing “that the history of financial crises shows that ‘speedy recovery’ depends on ‘cleansing banks’ balance sheets of toxic assets.” History and theory is on Mr. Strauss-Kahn’s side.

Psychotherapy for the Poor

September 17, 2009 at 18:20 | Posted in Uncategorized | Leave a comment
View this document on Scribd

Vacation

July 18, 2009 at 03:03 | Posted in Uncategorized | Leave a comment

 

Dear readers,

I will be on vacation until August 25th. Thank you for stopping by, and please come back soon.

Economics Joke – #1

July 17, 2009 at 21:37 | Posted in Uncategorized | Leave a comment

 

If C+I+G+X-M=Y

 

then $10C+$10I+$10G+$10X-$10M = $10C+$0I+$20G+0X-$0M

 

If this isn’t funny, I don’t know what is.

More Health Insurance is Not the Answer

July 14, 2009 at 19:25 | Posted in Uncategorized | Leave a comment

More Health Insurance is Not the Answer

When someone else pays, costs always go up

Health care "reformers" keep talking about getting us more health insurance. Then they talk about cutting costs. This is contradictory nonsense.

Insurance, whether private or a government Ponzi scheme like Medicare, means third parties pay the bills. When someone else pays, costs always go up. 

Imagine if you had grocery insurance. You wouldn’t care how much food cost. Why shop around? If someone else were paying 80 percent, you’d buy the most expensive cuts of meat. Prices would skyrocket.

That’s what health insurance does to medical care. Patients rarely even ask what anything costs. Doctors often don’t know. Often nobody even gives a damn. Patients rarely ask, "Is that MRI really necessary? Is there a cheaper place?" We consume without thinking. 

By contrast, in areas of medicine where most patients pay their own way, service gets better, while prices fall.

Take plastic surgery and Lasik eye surgery: Because patients shop around and compare prices, doctors work hard to win their business. They often give customers their cell-phone numbers. Service keeps increasing, but prices don’t. "In every other field of medicine, the price is going up faster than consumer prices in general," says John Goodman of the National Center for Policy Analysis. "But the price of Lasik surgery, on average, has gone down by 30 percent."

This shouldn’t be a surprise. What holds costs down is patients acting like consumers, looking out for themselves in a competitive market. Providers fight to win business by keeping costs down and quality up.

Yet politicians keep telling us the solution is more insurance. And they mean insurance not just for catastrophic diseases that could bankrupt us but also for routine treatments. 

The politicians are so oblivious to reality that they are on course to make things worse. Obama would force every business to either give workers health insurance or pay a fine into the public system. Why is that something we should want employers to do? Premiums come out of our salaries, but insurers are accountable to our bosses, not to us. 

Why not just have a free market where people can buy whatever kind of health insurance they want? Competition would then bring prices down.

Obama and his Senate allies would limit competition by requiring insurers to cover everyone for the same "fair" price. No "cherry picking," the president says. No charging healthy people less. 

They call this "community rating," and it sounds fair. No more cruel "discrimination" against people who have a preexisting condition, obese people or smokers. But such simple-minded one-size-fits-all rules take from insurance companies their best price-dampening tool: Risk-based pricing encourages people to take better care of themselves, just as car-insurance companies reward good drivers. With one-size pricing your car-insurance company must give the town drunk the same deal it gives you. 

Insane, but the health-insurance industry is playing along. Insurers say that if government forces everyone to have insurance, they will accept all customers regardless of preexisting illnesses. 

They also offered to stop charging higher premiums to sick people. They’re even giving up ongender differences.

Sen. John Kerry huffed, "The disparity between women and men in the individual insurance market is just plain wrong, and it has to change." The president of the industry trade group, Karen M. Ignagni, agreed that disparities "should be eliminated." 

Give me a break. 

Women pay more than men for health insurance for good reason. Despite being healthier than men, they incur higher costs because they go to doctors more often, and they take more medicine. Kerry is pandering. I don’t recall him demanding that men be protected from higher life-insurance and auto-insurance premiums.

"Community rating" hides the cost of health care. It’s as destructive as ordering fire insurance companies to charge identical premiums for wood frame and stone houses. Universal health insurance with "no discrimination" pricing will make health care costs rise even faster. 

When politicians interfere with free markets, unintended consequences harm everyone, except the companies that lobby hard enough to protect themselves. 

Is it too much to expect our rulers to understand this?

John Stossel is co-anchor of ABC News’ 20/20 and the author of Myth, Lies, and Downright Stupidity.

America’s New Money

July 11, 2009 at 03:01 | Posted in Uncategorized | Leave a comment

or – how do say “Weimar” in American?

 

Capitalist socialism in the works of Fellini

July 8, 2009 at 12:40 | Posted in Uncategorized | Leave a comment

 

J. John Hubbard
Department of Politics, Miskatonic University, Arkham, Mass.

1. The pretextual paradigm of consensus and dialectic construction

“Society is part of the defining characteristic of consciousness,” says Lacan; however, according to Finnis[1] , it is not so much society that is part of the defining characteristic of consciousness, but rather the fatal flaw, and thus the futility, of society. But the subject is contextualised into a that includes culture as a whole. The premise of capitalist socialism states that art serves to reinforce sexism, given that neoconstructivist objectivism is invalid.

However, if dialectic construction holds, we have to choose between the textual paradigm of context and postsemioticist situationism. Sartre’s model of capitalist socialism implies that consensus is created by the collective unconscious.

But la Fournier[2] states that we have to choose between neostructuralist dematerialism and material rationalism. Derrida promotes the use of dialectic construction to modify class.

2. Joyce and the textual paradigm of context

If one examines capitalist socialism, one is faced with a choice: either accept the textual paradigm of context or conclude that government is capable of truth. Thus, capitalist socialism holds that the task of the poet is deconstruction. If pretextual situationism holds, we have to choose between capitalist socialism and cultural demodernism.

“Sexual identity is dead,” says Sontag; however, according to Sargeant[3] , it is not so much sexual identity that is dead, but rather the meaninglessness of sexual identity. But in Reservoir Dogs, Tarantino affirms Batailleist `powerful communication’; in Pulp Fiction, although, he reiterates dialectic construction. The subject is interpolated into a that includes sexuality as a totality.

“Consciousness is intrinsically elitist,” says Foucault. Thus, the primary theme of the works of Tarantino is not discourse, but postdiscourse. Drucker[4] suggests that we have to choose between cultural pretextual theory and the cultural paradigm of expression.

In a sense, the feminine/masculine distinction prevalent in Tarantino’s Four Rooms emerges again in Reservoir Dogs, although in a more self-falsifying sense. The premise of the textual paradigm of context implies that sexual identity has objective value, but only if culture is distinct from consciousness.

It could be said that if capitalist socialism holds, we have to choose between the textual paradigm of context and subcapitalist capitalism. Sontag suggests the use of constructivist neocultural theory to challenge hierarchy.

But dialectic construction states that the significance of the observer is social comment. Bataille promotes the use of the material paradigm of consensus to read and modify society.

However, the main theme of Reicher’s[5] essay on dialectic construction is the common ground between sexual identity and society. An abundance of constructions concerning a mythopoetical paradox exist.

3. Subpatriarchialist discourse and capitalist pretextual theory

In the works of Tarantino, a predominant concept is the distinction between creation and destruction. Thus, the premise of capitalist pretextual theory implies that truth is a legal fiction. A number of dematerialisms concerning the textual paradigm of context may be found.

If one examines capitalist socialism, one is faced with a choice: either reject the textual paradigm of context or conclude that reality may be used to disempower minorities. In a sense, d’Erlette[6] suggests that we have to choose between capitalist pretextual theory and neotextual discourse. If the cultural paradigm of discourse holds, the works of Tarantino are an example of self-sufficient libertarianism.

Thus, Foucault suggests the use of the textual paradigm of context to attack class divisions. Baudrillard’s analysis of capitalist socialism states that the task of the poet is deconstruction, given that the premise of capitalist pretextual theory is valid.

But the subject is contextualised into a that includes language as a reality. In Four Rooms, Tarantino affirms capitalist pretextual theory; in Reservoir Dogs he denies capitalist socialism.

Therefore, Bataille uses the term ‘the subsemantic paradigm of consensus’ to denote the difference between reality and sexual identity. Sontag promotes the use of the textual paradigm of context to read art.

4. Realities of stasis

In the works of Tarantino, a predominant concept is the concept of dialectic truth. Thus, an abundance of theories concerning not narrative as such, but postnarrative exist. The subject is interpolated into a that includes art as a whole.

If one examines the textual paradigm of context, one is faced with a choice: either accept neocapitalist deconstructive theory or conclude that society, surprisingly, has significance. But Marx suggests the use of the textual paradigm of context to deconstruct hierarchy. The subject is contextualised into a that includes truth as a paradox.

It could be said that several theories concerning capitalist socialism may be revealed. The rubicon, and subsequent stasis, of the textual paradigm of context intrinsic to Tarantino’s Pulp Fiction is also evident in Reservoir Dogs.

But the subject is interpolated into a subcultural paradigm of consensus that includes art as a whole. In Jackie Brown, Tarantino examines capitalist socialism; inReservoir Dogs, however, he affirms the textual paradigm of context.

Thus, the characteristic theme of the works of Tarantino is the failure of capitalist class. The feminine/masculine distinction depicted in Tarantino’s Pulp Fiction emerges again in Reservoir Dogs, although in a more mythopoetical sense.

5. Capitalist socialism and Derridaist reading

“Sexuality is part of the stasis of culture,” says Debord. It could be said that the subject is contextualised into a that includes narrativity as a totality. The textual paradigm of context implies that the law is responsible for sexist perceptions of sexual identity, but only if culture is interchangeable with consciousness; if that is not the case, the significance of the writer is significant form.

If one examines modernist discourse, one is faced with a choice: either reject Derridaist reading or conclude that sexuality is capable of intentionality, given that the premise of the textual paradigm of context is invalid. Thus, the primary theme of Abian’s[7] model of subcultural structural theory is a self-supporting whole. Foucault promotes the use of the textual paradigm of context to analyse and read class.

The main theme of the works of Burroughs is the paradigm, and therefore the defining characteristic, of predialectic sexual identity. Therefore, in Queer, Burroughs analyses capitalist socialism; in The Soft Machine, although, he examines capitalist desituationism. Baudrillard suggests the use of the textual paradigm of context to challenge class divisions.

But the subject is interpolated into a that includes art as a reality. The primary theme of d’Erlette’s[8] essay on capitalist socialism is the role of the reader as participant.

Therefore, an abundance of materialisms concerning not, in fact, depatriarchialism, but subdepatriarchialism exist. Dietrich[9] states that we have to choose between Derridaist reading and materialist subsemiotic theory.

In a sense, the subject is contextualised into a that includes culture as a paradox. The characteristic theme of the works of Burroughs is the paradigm, and subsequent futility, of prematerialist language.

Therefore, Derrida promotes the use of capitalist socialism to analyse sexual identity. Debord uses the term ‘the textual paradigm of context’ to denote a mythopoetical reality.

6. Contexts of defining characteristic

If one examines dialectic posttextual theory, one is faced with a choice: either accept capitalist socialism or conclude that reality must come from the masses. Thus, any number of theories concerning constructive construction may be discovered. If capitalist socialism holds, we have to choose between the textual paradigm of context and the subtextual paradigm of expression.

“Society is fundamentally elitist,” says Sartre; however, according to de Selby[10] , it is not so much society that is fundamentally elitist, but rather the collapse, and some would say the economy, of society. It could be said that the subject is interpolated into a that includes truth as a whole. Many theories concerning the collapse, and subsequent fatal flaw, of capitalist culture exist.

The main theme of Pickett’s[11] model of the textual paradigm of context is a self-justifying reality. In a sense, Bataille suggests the use of Derridaist reading to deconstruct the status quo. Baudrillard uses the term ‘capitalist socialism’ to denote the common ground between class and society.

Thus, Buxton[12] suggests that the works of Burroughs are empowering. Lyotard uses the term ’semioticist postconceptual theory’ to denote not theory per se, but subtheory.

In a sense, in Nova Express, Burroughs deconstructs Derridaist reading; in The Last Words of Dutch Schultz he denies capitalist socialism. Sartre uses the term ‘Derridaist reading’ to denote the role of the artist as writer.

Therefore, a number of dematerialisms concerning dialectic theory may be found. If Derridaist reading holds, the works of Burroughs are reminiscent of Spelling.

Thus, Baudrillard promotes the use of the textual paradigm of context to read and modify class. Buxton[13] states that we have to choose between capitalist socialism and Debordist situation.

7. Burroughs and Derridaist reading

“Language is impossible,” says Sontag. In a sense, an abundance of narratives concerning the bridge between class and culture exist. If patriarchial theory holds, we have to choose between Derridaist reading and neotextual capitalist theory.

But Bataille uses the term ‘capitalist socialism’ to denote a precultural totality. In The Soft Machine, Burroughs examines the textual paradigm of context; in Port of Saints, although, he reiterates constructivist socialism.

Therefore, the characteristic theme of the works of Burroughs is the economy, and eventually the paradigm, of subsemantic society. Scuglia[14] implies that we have to choose between the textual paradigm of context and textual situationism.

But if Marxist capitalism holds, the works of Gibson are modernistic. Sargeant[15] suggests that we have to choose between Derridaist reading and the structural paradigm of discourse.

8. Capitalist socialism and subdialectic theory

If one examines the textual paradigm of context, one is faced with a choice: either reject capitalist socialism or conclude that the purpose of the participant is social comment, but only if reality is equal to language. Therefore, the subject is contextualised into a constructivist paradigm of consensus that includes art as a reality. If capitalist socialism holds, we have to choose between subdialectic theory and postdialectic nihilism.

But in Neuromancer, Gibson deconstructs capitalist narrative; in Count Zero, however, he examines capitalist socialism. Baudrillard suggests the use of subcultural textual theory to challenge class divisions.

In a sense, the subject is interpolated into a that includes reality as a paradox. Finnis[16] implies that we have to choose between capitalist socialism and Debordist image.

9. Gibson and the textual paradigm of context

In the works of Gibson, a predominant concept is the distinction between without and within. But Marx promotes the use of capitalist socialism to read consciousness. Foucault uses the term ‘the textual paradigm of context’ to denote the role of the artist as observer.

However, Bataille suggests the use of textual capitalism to attack hierarchy. Capitalist socialism states that narrative comes from communication.

In a sense, the main theme of McElwaine’s[17] essay on the textual paradigm of discourse is the paradigm of subdialectic class. If subdialectic theory holds, we have to choose between capitalist socialism and Lyotardist narrative.

Thus, Debord promotes the use of subdialectic theory to modify and deconstruct sexual identity. The subject is contextualised into a that includes truth as a reality.

10. Contexts of futility

“Society is part of the dialectic of consciousness,” says Sontag. But any number of sublimations concerning cultural pretextual theory may be revealed. Lacan suggests the use of subdialectic theory to attack class divisions.

It could be said that Dietrich[18] holds that we have to choose between dialectic narrative and the neopatriarchial paradigm of consensus. Lyotard promotes the use of the textual paradigm of context to modify class.

Therefore, several theories concerning the role of the reader as participant exist. The subject is interpolated into a that includes narrativity as a paradox.


1. Finnis, P. S. P. (1995) Neopatriarchial Desublimations: Capitalist socialism, rationalism and dialectic libertarianism. University of California Press

2. la Fournier, S. ed. (1981) Capitalist socialism and the textual paradigm of context. Schlangekraft

3. Sargeant, D. U. H. (1990) The Paradigm of Discourse: The textual paradigm of context in the works of Tarantino. Loompanics

4. Drucker, S. C. ed. (1975) The textual paradigm of context and capitalist socialism. Schlangekraft

5. Reicher, E. N. C. (1994) Precultural Materialisms: Capitalist socialism and the textual paradigm of context. O’Reilly & Associates

6. d’Erlette, L. S. ed. (1973) The textual paradigm of context and capitalist socialism. Yale University Press

7. Abian, Z. (1981) The Broken Sea: The textual paradigm of context in the works of Burroughs. University of Oregon Press

8. d’Erlette, B. K. S. ed. (1995) Capitalist socialism and the textual paradigm of context. Cambridge University Press

9. Dietrich, J. (1983) Capitalist Theories: Predialectic Marxism, capitalist socialism and rationalism. Panic Button Books

10. de Selby, E. N. V. ed. (1998) Capitalist socialism in the works of Lynch. University of Illinois Press

11. Pickett, S. (1986) Consensuses of Economy: The textual paradigm of context and capitalist socialism. Panic Button Books

12. Buxton, B. Y. ed. (1973) Rationalism, neotextual construction and capitalist socialism. O’Reilly & Associates

13. Buxton, L. (1988) The Stasis of Narrative: Capitalist socialism and the textual paradigm of context. Oxford University Press

14. Scuglia, A. K. I. ed. (1993) Capitalist socialism in the works of Gibson. Panic Button Books

15. Sargeant, B. (1974) The Absurdity of Class: The textual paradigm of context and capitalist socialism. Yale University Press

16. Finnis, A. S. W. ed. (1985) The neocapitalist paradigm of discourse, rationalism and capitalist socialism. Schlangekraft

17. McElwaine, S. (1972) Postdialectic Deconstructions: Capitalist socialism in the works of Cage. O’Reilly & Associates

18. Dietrich, K. I. ed. (1990) Capitalist socialism in the works of Smith. Loompanics

"The State of the Intellectual Property Debate at LRC"

May 27, 2009 at 02:38 | Posted in Uncategorized | 11 Comments
 

Not sure this is a proper way of doing it, but I’m going to steal the debate and move it here.

 

 
"The State of the Intellectual Property Debate at LRC"
25 Comments – Show Original Post Collapse comments

Blogger Stewart said…

I think there is an important distinction between what Tucker is speaking against, and what Rockwell is speaking against.
In the former case, Tucker thinks that the "property" aspect of intellectual property is no such thing. That is, that publicly-available information cannot be owned. In the latter case, Rockwell is speaking against the idea that government should use force to compel private organizations to give away private information.
These two positions are entirely reconcilable. If the manufacturers decided, ultimately, to make their repair codes etc. public, then that information could be copied by anyone. But if they don’t make it public, the government has no business forcing them to do so.

May 22, 2009 12:11 PM

Blogger Robert Wenzel said…

@ Stewart
Just when does something become "publicly available" in your world? The owner of the book Tucker is discussing is clearly not interested in the terms Tucker is offering. Yet somehow, in your world, Tucker has the right to usurp this owners rights and not those of the owner of manufacturing code?

May 22, 2009 12:28 PM

OpenID savecapitalism said…

Is there a title/release-date planned for the coming book? The intellectual property debate is raging here in Sweden, so it would be very interesting to read more on the topic ….

May 22, 2009 12:36 PM

Blogger Robert Wenzel said…

I should have more details on a release date, etc. in about a month.

May 22, 2009 1:04 PM

Blogger Stewart said…

@Robert, I don’t think the distinction between what is public and what is private is actually that important here. I shouldn’t have placed so much emphasis on those words in my earlier post.
What’s important for Rockwell’s post is whether there is government coercion involved in forcing the dissemination of information. For Tucker’s series of posts, the critical factor is whether government coercion is involved in preventing the dissemination of information.
If a car manufacturer uses cryptography or secrecy to prevent others from accessing the car’s electronic data, Rockwell’s position is that the government should not force them to give the decryption keys away. Tucker’s position is that, once those keys are known to the public (whether through reverse engineering, espionage, or the owner’s manual), the car manufacturer has no basis for claiming ownership of that information. That also applies to the data which is later acquired using those decryption keys, such as internal programming data for the onboard computer.
So these are two different arguments. Whether Rockwell and Tucker agree on them is unclear from the posts you linked to. I suspect that they do, given their respective roles at the LvMI, but it’s not necessary that they do in order to reconcile the two positions, because they aren’t mutually exclusive.

May 22, 2009 2:07 PM

Blogger Robert Wenzel said…

@ Stewart
Let me make it simple. I write a one page analysis of the economy, I give it to you under the condition that you do not show it to anyone else, are you saying I have no righht to contract with you this way, that I must encrypt it?

May 22, 2009 2:42 PM

Blogger Stewart said…

If I sign that contract, and if I do show it to someone, then I’ve obviously violated our contract. To that extent, I think you’re correct.
In order to extend that logic to the contemporary system of copyrights, however, you have to believe that everyone is implicitly agreeing to contracts between themselves and the creators of every piece of original material that they encounter.
Suppose that I do violate our contract, and I distribute your work to my colleagues. Even if we agree that I hold some moral culpability for that transgression, it’s not at all clear that my colleagues have done anything wrong by accepting the paper from me. And if they continue to distribute it on their own, it’s hard to see how they’re violating any contract with you, since no such contract existed.
Now, you may see that as being akin to accepting and reselling stolen goods. That presupposes that the information itself is your property, however. The contract alone cannot establish that.

May 22, 2009 3:26 PM

Blogger James Rothfeld said…

It is actually possible – conceptually – to have something resembling current copyright in a libertarian social order: ISP companies, copy machine manufacturers, and others, can make a condition in their terms of use that copyright is to be respected, and that if anybody uses their technology to violate copyright, then they are liable to pay damages to the ISP or manufacturer. You could further make a condition of purchase that you shall only sell the copy machine if you agree to have the purchaser agree to these terms as well, and so forth.
Even better, manufacturers of computers can make this a condition for the use of their product, and if you violate that provision, you will be taken to court under common contract law for violating the terms of your contract.
There is nothing in libertarian theory that makes such conditional ownership transfer illegitimate.
Of course, this leaves the possibilities of rival companies offering their products without such contracts… and let free competition take care of the argument.

May 23, 2009 2:49 PM

Delete

Blogger Robert Wenzel said…

@ James Rothfeld
I absolutely agree.
@James Rothfeld and @Stewart
I do note that both of you are not specifically addressing the Tucker view, but if you check his writings,it is clear in his world that private contracts for intellectual creations would not be legitimate.
In his world intellectually created works would not come with ownership rights, even if the creator will only release them under those terms! They are free for all to use, and some how not violate property rights.

May 23, 2009 3:09 PM

Blogger James Rothfeld said…

The reason I do not address Tucker’s argument is because it is probably one of the lousiest articles on the issue I have read in a long time. 🙂
And I’ve no hesitation to rant and rail against the patent laws and argue till the cows come home that patent law as it exists now creates a) plain old rent-seeking, and b) creates waste by forcing people to invent around the patent law.
Basic question about tucker’s argument: does the noodle company KNOW how the noodle is designed? Because once it KNOWS it, there is no legitimate way to stop it from using this knowledge.
So, while you the economist have a right to bind the person you gave your paper to a promise not to publish it, should this person LOSE the paper, and I find it, I can, of course, publish it – provided I am not in the process violating any contractual obligations I may have entered to otherwise (such as using a copy machine I bought under condition of NOT violating copyright)….

May 23, 2009 4:43 PM

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Blogger Stewart said…

@Robert, if Tucker really does believe that individuals can’t enter into voluntary contracts regarding their own behavior, then I agree with you entirely. That idea is ridiculous on its face.
@James, your question about the noodles is essentially Tucker’s point. It’s only the temporary monopoly that the government grants patent-holders which prevents the company from making whatever kinds of noodles it likes.
And your last paragraph captures my earlier point nicely: A contact can only (voluntarily) constrain the behavior of the parties who sign it. For everyone else, there is no constraint, and therefore no sense of intellectual ownership.

May 23, 2009 6:51 PM

Blogger Robert Wenzel said…

Tucker on rights to your own intellectual creations:
If you have an idea, it is yours. You can do with it what you want. If you share it (sing, speak, broadcast, let others see the products of your ideas), others then have copies of it. They are entitled to do with their copies of the idea precisely what you can do with your idea. They can use it how they want provided they don’t prevent others from doing with it what they want. This is a simple application of the non-aggression principle that governs a free society. Whether it is fashion, language, know how, or whatever, people are free to copy…What can you copy? Anything and everything. This is not "taking" anything from anyone. The original idea owner still has his. Other people now have their copies, and are free to improve it…You can even re-republish it under your own name, though that would amount to the socially repudiated vice of plagiarism (vice, not crime).
http://tinyurl.com/qlayfr

May 23, 2009 7:46 PM

Blogger James Rothfeld said…

I don’t see an immediate contradiction between Tucker’s position in the last article you quote, and mine – maybe only because it does NOT discuss the issue of what happens when I have a contract with the person I share my idea with not to copy it.
I think that’s the point about the book issue: if it is my book, and i gave it to you – the publisher – with the condition you not publish it without my consent, or that of my heirs, then you are bound to honor that commitment.
no?

May 23, 2009 8:26 PM

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Blogger Stewart said…

Robert, I think you may not fully understand Jeff Tucker’s position. Nothing in that excerpt suggests that a person can’t enter into a contract regarding intellectual creations. A constraint based on contracts is entirely different from a constraint based on a natural, default right to intellectual property.
Suppose that I possess the only known copy of a never-published play by Shakespeare. I don’t have any intellectual property rights over this play, but I nonetheless have complete control over its distribution, since I hold the only copy. As a condition of giving you a copy, suppose that I make you sign a contract saying that you will never redistribute it.
I don’t think that Jeff Tucker would have any problem with that contract. The excerpt you posted earlier is a description of what you, me, or anyone else can do with a Shakespearean play qua a Shakespearean play. Of course he isn’t talking about the works of a long-dead author. But for Tucker, there is no difference (property-wise, anyway) between the intellectual works of Shakespeare, and the intellectual works of you or me. For most people, the informational content of the play cannot be owned due to its age, but for Tucker that content cannot be owned period.If you throw a contract into the scenario, it is no different. In my example above, you may very well be contractually prevented from redistributing the play, but you would not be under that constraint by default, or because of the nature of the play itself. With true intellectual property, the constraint is there even without your agreement, and it’s that implicit constraint which Tucker argues against.

May 23, 2009 9:25 PM

Blogger Stewart said…

Oh drat.
I need to qualify what I just wrote. Upon a closer reading, Jeff does seem to contradict my interpretation:
"They can use it how they want provided they don’t prevent others from doing with it what they want."If he means what you are implying he means, then I think you’re right to criticize him. That statement is just silly.

May 23, 2009 9:28 PM

Blogger Robert Wenzel said…

@JamesRothfeld and @Stewart
One problem with Tucker is that he is not a very precise writer. When he says you can copy anything, it is of course open to the clause, unless the original creator by contract prohibits such.
Tucker in the passage I quote simply does not address this point clearly yeah or nay. However, I am quite sure that a full reading of Tucker’s views on the topic would clearly show my interpretation of his meaning in the quote that he does not believe that you can have a contract based on the work of intellectual property. That’s why he says you can copy anything.
I quote Tucker from another piece:
"But some may object that protecting IP is no different from protecting regular property. That is not so. Real property is scarce. The subjects of IP are not scarce, as Stephan Kinsella explains. Images, ideas, sounds, arrangements of letters on a page: these can be reproduced infinitely. For that reason, they can’t be considered to be owned."
http://tinyurl.com/23toxg

May 24, 2009 6:36 AM

Blogger Robert Wenzel said…

@JamesRothfeld and @Stewart
Here’s Tucker explaining Kinsella:
"He made a strongly theoretical argument that ideas are not scarce, do not require rationing, are not diminished by their dissemination, and so cannot really be called property. All IP is unjust, he wrote. It is inconsistent with libertarian ethics and contrary to a free market. He favors the complete repeal of all intellectual-property laws."
http://tinyurl.com/9px9gd
Tucker again is not completely clear, but it is implied, if something can’t be owned, you really can’t have a contract about it.
I really believe that Tucker would say you can’t contract with regard to a book. May I suggest you email him and ask. I would do it myself, but he has advised me that he has blocked my emails, after I published, here at EPJ, examples of the vulgar language he sent to me in emails!

May 24, 2009 6:56 AM

Blogger Erick said…

@Robert,
Who gets the copyright/patent when two people invent something independently?
Are thoughts alienable?

May 25, 2009 6:09 AM

Blogger Robert Wenzel said…

@Erick
One of the problems with current IP thought is that it is generally viewed within a statist framework and there is further aggregation of IP protection than is appropriate.
Are thoughts alienable?Absolutely.
What is a consultant, if not a seller of thoughts?
Who gets the copyright/patent when two people invent something independently?This question implies the aggregation trap which I am going to address in detail in my book.
But, the short answer is they both do. If they both invent something independent and are not stealing from each other, then why shouldn’t they both have the right to their creations?

May 25, 2009 6:50 AM

Blogger James Rothfeld said…

Erick,
we are not talking about a centrally administered state monopolisitic IP system, but about a common law system. If two people invent something at the same time, both have the right to use it, and to contract it out. Also, if somebody else figures out how do duplicate the invention simply by knowing about what it does, then that is fine, too.
The idea as such is not protectable.
Historic example: Mozart famously attended the performance of a piece of music that the author and owner had protected in so far that any copies of the music were not allowed to be duplicated, and that all performers were contractually obliged not to transcribe it. However, there was no contract that prohibited members of the audience to memorize it and then recreate it indepedently.
http://www.classical.net/music/comp.lst/works/allegri/miserere.php
So that’s what Mozart did.
Similar rules can be applied to cinemas: it may not be possible to prohibit the recording of a movie in principle, but it is possible for movie theaters to prohibit its patrons to record it. If anybody does, he would be guilty of violating the property rights of the cinema owner (analog to crying ‘fire’ in a theater not being illegal, but a property right violation).

May 25, 2009 7:24 AM

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Blogger earth that was said…

I think Lawrence Lessig has staked out a "middle of the road" position on Copyright somewhere to the right of the "abolish all property in IP" position of some libertarians, and the corporatist statist machine that we have seen under DMCA, WIPO and the US government’s, essentially protectionist, use of "free trade treaties" to extend it’s IP regime around the world.
Lessig’s "copyleft" argument strikes me as the genuine "free market" / libertarian one, even though Lessig himself is something of a liberal (a.k.a. social democrat).
More to the point, Lessig’s defense of copyright shows that the founders of the American republic knew something about economics too. The following is a brief intro to Lessig’s thinking, see here.

May 25, 2009 7:41 AM

Blogger Robert Wenzel said…

@Earth
I am taking things in a completely different direction. See my most recent post:
http://tinyurl.com/h7u6cs

May 25, 2009 9:59 AM

Blogger Erick said…

Interesting discussion!
Robert, this makes a lot of sense to me:
If they both invent something independent and are not stealing from each other, then why shouldn’t they both have the right to their creations?I am curious to see how you develop the idea in your forthcoming book!
What is a consultant, if not a seller of thoughts?How does a consultant sell thoughts?
The way I see it, a consultant sells his promise to appear in a certain place, at a certain time, in order to perform certain actions.
I can see how my finger is alienable. I can cut it off and give it to you. I no longer have that finger. I cannot see how I can alienate my thoughts: I can always continue thinking whatever I want.
Nor is there any guarantee that the person purchasing the person’s time will gain any specific thinking process. At best there is a guarantee that he will feel certain feelings like "satisfaction".
The closet thing that might come to this are SAT prep classes that guarantee a specific rise in test scores. But how do "your thinking will improve" and "you will have my thoughts" differ?
@James,
there was no contract that prohibited members of the audience to memorize it and then recreate it indepedentlySuppose there was, would it be valid?
Can I sign a contract alienating rights to my brain?

May 25, 2009 11:00 PM

Blogger James Rothfeld said…

Yes, it would have been valid, since it would be a contract regarding action, or restraint from action. "Alienation" has nothing to do with this. Free market copyright regulates not ‘ideas’ as such, but actions of individuals. Last time I checked, nobody ever argued that we cannot contractually agree to limit our actions – whether it is loud singing in the middle of the night, or looking after somebody kids. Not to copy or reproduce something is merely refraining from a specific type of action.
If I gave you a million dollar under the condition that you never again sing in public, and you accepted this – would that be a valid contract?
If I paid you a million dollar to not reveal a secret about me – would that not be a valid contract?
How is this different from a contract that obliges you not to copy or reproduce something?
At the same time, if two people invent something simultaneously, they are NOT bound contractually to any kind of action.
What would, of course, be possible, is that you happen to work at a private university which stipulates in its contract with you that any invention you make must first be cleared with registry xyz for competing inventions. However, only people who directly or indirectly agreed to this system of clearance would be bound to it.
Again, none of this has anything to do with deep discussions about whether ideas or not are properly ‘property’ – it’s about human action, which any libertarian will agree can be regulated bindingly by contractual agreement.

May 26, 2009 7:20 AM

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Blogger Erick said…

What do you think about Rothbard’s thoughts on the matter:
Suppose that Smith makes the following agreement with the Jones Corporation: Smith, for the rest of his life, will obey all orders, under whatever conditions, that the Jones Corporation wishes to lay down. Now, in libertarian theory there is nothing to prevent Smith from making this agreement, and from serving the Jones Corporation and from obeying the latter’s orders indefinitely. The problem comes when, at some later date, Smith changes his mind and decides to leave. Shall he be held to his former voluntary promise? Our contention—and one that is fortunately upheld under present law—is that Smith’s promise was not a valid (i.e., not an enforceable) contract. There is no transfer of title in Smith’s agreement, because Smith’s control over his own body and will are inalienable. Since that control cannot be alienated, the agreement was not a valid contract, and therefore should not be enforceable. Smith’s agreement was a mere promise, which it might be held he is morally obligated to keep, but which should not be legally obligatoryShould we move the conversation to the new post?

May 26, 2009 7:41 PM

Top Ten Myths of Entrepreneurship

May 22, 2009 at 00:19 | Posted in Uncategorized | Leave a comment

 

This is an excellent summary of why going out on your own is generally not a very good idea, unless you know exactly what you are doing. For the majority of people, staying employed is probably the best shot.

Top Ten Myths of Entrepreneurship

sas46_65.jpgThis is a guest post by Scott Shane as a follow up to his entrepreneurship test. He is the A. Malachi Mixon Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of seven books, the latest of which is The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By. Many entrepreneurs believe a bunch of myths about entrepreneurship, so here are ten of the most common and the realities that bust them:

  1. It takes a lot of money to finance a new business. Not true. The typical start-up only requires about $25,000 to get going. The successful entrepreneurs who don’t believe the myth design their businesses to work with little cash. They borrow instead of paying for things. They rent instead of buy. And they turn fixed costs into variable costs by, say, paying people commissions instead of salaries.

  2. Venture capitalists are a good place to go for start-up money. Not unless you start a computer or biotech company. Computer hardware and software, semiconductors, communication, and biotechnology account for 81 percent of all venture capital dollars, and seventy-two percent of the companies that got VC money over the past fifteen or so years. VCs only fund about 3,000 companies per year and only about one quarter of those companies are in the seed or start-up stage. In fact, the odds that a start-up company will get VC money are about one in 4,000. That’s worse than the odds that you will die from a fall in the shower.

  3. Most business angels are rich. If rich means being an accredited investor –a person with a net worth of more than $1 million or an annual income of $200,000 per year if single and $300,000 if married – then the answer is “no.” Almost three quarters of the people who provide capital to fund the start-ups of other people who are not friends, neighbors, co-workers, or family don’t meet SEC accreditation requirements. In fact, thirty-two percent have a household income of $40,000 per year or less and seventeen percent have a negative net worth.

  4. Start-ups can’t be financed with debt. Actually, debt is more common than equity. According to the Federal Reserve’s Survey of Small Business Finances, fifty-three percent of the financing of companies that are two years old or younger comes from debt and only forty-seven percent comes from equity. So a lot of entrepreneurs out there are using debt rather than equity to fund their companies.

  5. Banks don’t lend money to start-ups. This is another myth. Again, the Federal Reserve data shows that banks account for sixteen percent of all the financing provided to companies that are two years old or younger. While sixteen percent might not seem that high, it is three percent higher than the amount of money provided by the next highest source – trade creditors – and is higher than a bunch of other sources that everyone talks about going to: friends and family, business angels, venture capitalists, strategic investors, and government agencies.

  6. Most entrepreneurs start businesses in attractive industries. Sadly, the opposite is true. Most entrepreneurs head right for the worst industries for start-ups. The correlation between the number of entrepreneurs starting businesses in an industry and the number of companies failing in the industry is 0.77. That means that most entrepreneurs are picking industries in which they are mostlikely to fail.

  7. The growth of a start-up depends more on an entrepreneur’s talent than on the business he chooses. Sorry to deflate some egos here, but the industry you choose to start your company has a huge effect on the odds that it will grow. Over the past twenty years or so, about 4.2 percent of all start-ups in the computer and office equipment industry made the Inc 500 list of the fastest growing private companies in the U.S. 0.005 percent of start-ups in the hotel and motel industry and 0.007 percent of start-up eating and drinking establishments made the Inc. 500. That means the odds that you will make the Inc 500 are 840 times higher if you start a computer company than if you start a hotel or motel. There is nothing anyone has discovered about the effects of entrepreneurial talent that has a similar magnitude effect on the growth of new businesses.

  8. Most entrepreneurs are successful financially. Sorry, this is another myth. Entrepreneurship creates a lot of wealth, but it is very unevenly distributed. The typical profit of an owner-managed business is $39,000 per year. Only the top ten percent of entrepreneurs earn more money than employees. And the typical entrepreneur earns less money than he otherwise would have earned working for someone else.

  9. Many start-ups achieve the sales growth projections that equity investors are looking for. Not even close. Of the 590,000 or so new businesses with at least one employee founded in this country every year, data from the U.S. Census shows that less than 200 reach the $100 million in sales in six years that venture capitalists talk about looking for. About 500 firms reach the $50 million in sales that the sophisticated angels, like the ones at Tech Coast Angels and the Band of Angels talk about. In fact, only about 9,500 companies reach $5 million in sales in that amount of time.

  10. Starting a business is easy. Actually it isn’t, and most people who begin the process of starting a company fail to get one up and running. Seven years after beginning the process of starting a business, only one-third of people have a new company with positive cash flow greater than the salary and expenses of the owner for more than three consecutive months.

Read more: "How to Change the World: Top Ten Myths of Entrepreneurship" – http://blog.guykawasaki.com/2008/01/top-ten-myths-o.html#ixzz0GBq6Q3Hp&A

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