tag:blogger.com,1999:blog-44656483156111085742024-02-18T22:05:55.885-08:00Threading the PearlsContemplations from somewhere under the Big Sky.Unknownnoreply@blogger.comBlogger61125tag:blogger.com,1999:blog-4465648315611108574.post-80766240370715441732019-11-26T08:35:00.001-08:002019-11-26T08:36:54.332-08:00Explaing the Basics of Finding a Job to Economists<div dir="ltr" style="text-align: left;" trbidi="on">
[Author's note: this is a comment on an article that ran on FiveThirtyEight five years ago (how the time flies!). I just found the draft laying around in the back-end of this here blog and thought "yeah, might as well post it." Better late than never, and anyway, I don't think mainstream economists have gotten any smarter in the intervening half decade.] <br />
<br />
A website ostensibly aimed at intelligent people ran this article the other day, entitled <a href="https://fivethirtyeight.com/features/out-of-work-out-of-luck/" target="_blank">Out of Work, Out of Luck.</a><br />
<br />
As Bill Black says, it's impossible to compete with unintentional self-parody:<br />
<blockquote>
Economists aren’t sure why being out of work for more than six months makes finding a new job so much harder.</blockquote>
Really? How about this: 'cause having a big gap in your employment history looks shitty on your resume. Who are these "economists" and what planet do they come from? And when is the last time they actually had to participate in our earthly labor market?<br />
<blockquote>
Once they cross the six-month threshold, their odds of finding a job drop off dramatically.</blockquote>
Know why? The "economists" probably can't figure it out but the obvious reason is that employers (like everyone else) uses rules of thumb. Unemployed for a couple of months is one thing, but once the magic half-year mark is crossed that gap suddenly raises red flags. I would guess that employers, like economists, have an unconscious cut-off for acceptable absence from employment at six months. Just a guess.<br />
<blockquote>
In the present, it means the long-term unemployed are, for all practical purposes, no longer part of the job market; most of them aren’t going to find jobs even if the economy improves. That means there’s less “slack” in the job market — a concept my colleague Andrew Flowers explained in more detail on Wednesday — than we might otherwise think.4 It looks like the Federal Reserve has reached the same conclusion: The Fed has been pulling back on its efforts to stimulate the economy, despite continued high unemployment and low inflation, suggesting it thinks the long-term unemployed are gone for good.5</blockquote>
<blockquote>
[snip]</blockquote>
<blockquote>
“The lesson I take away,” Krueger said in an interview this week, “is try to prevent the short-term unemployed from becoming long-term unemployed.”</blockquote>
How about this for a lesson: we need to come up with something effective to help the long-term unemployed, especially since there are likely to be ever more of them/us in the future...maybe a bailout or access to the Fed's discount window. Re-defining the structural unemployment rate upwards is obviously not a solution.<br />
<br />
And apparently we define slack in the labor market not as the number of people who want a job, but the number of people we can reasonably expect to get hired. Hmmm...dubious. I think slack is everyone who wants employment but can't find it. A Job Guarantee program would address this, but the Fed only creates unlimited funds for banks, not the unemployed.</div>
Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-4465648315611108574.post-32052578809078661212019-11-26T08:27:00.000-08:002019-11-26T08:27:43.758-08:00The Paradox of Profit Pt. 3<div dir="ltr" style="text-align: left;" trbidi="on">
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<div class="gtxt_body" style="font-family: inherit; margin-bottom: 0.5em; text-align: left;">
<span class="Apple-style-span" style="background-color: white;"><i>Industry is carried on for the sake <span class="gstxt_hlt" style="font-family: inherit;">of business, </span>and not conversely; and the<span class="gtxt_body" style="font-family: inherit;"> progress and activity <span class="gstxt_hlt" style="font-family: inherit;">of </span>industry are conditioned by the outlook <span class="gstxt_hlt" style="font-family: inherit;">of </span>the market, which means the presumptive chance <span class="gstxt_hlt" style="font-family: inherit;">of business </span>profits...</span>[The] consequences for the<span class="Apple-style-span" style="text-indent: 13px;"> </span><span class="gstxt_hlt" style="font-family: inherit; text-indent: 13px;">theory of business </span><span class="Apple-style-span" style="text-indent: 13px;">make it necessary to keep the nature</span><span class="Apple-style-span" style="text-indent: 13px;"> </span><span class="gstxt_hlt" style="font-family: inherit; text-indent: 13px;">of </span><span class="Apple-style-span" style="text-indent: 13px;">this connection between</span><span class="Apple-style-span" style="text-indent: 13px;"> </span><span class="gstxt_hlt" style="font-family: inherit; text-indent: 13px;">business </span><span class="Apple-style-span" style="text-indent: 13px;">and industry in mind. The adjustments</span><span class="Apple-style-span" style="text-indent: 13px;"> </span><span class="gstxt_hlt" style="font-family: inherit; text-indent: 13px;">of </span><span class="Apple-style-span" style="text-indent: 13px;">industry take place through the mediation</span><span class="Apple-style-span" style="text-indent: 13px;"> </span><span class="gstxt_hlt" style="font-family: inherit; text-indent: 13px;">of </span><span class="Apple-style-span" style="text-indent: 13px;">pecuniary transactions, and these transactions take place at the hands</span><span class="Apple-style-span" style="text-indent: 13px;"> </span><span class="gstxt_hlt" style="font-family: inherit; text-indent: 13px;">of </span><span class="Apple-style-span" style="text-indent: 13px;">the</span><span class="Apple-style-span" style="text-indent: 13px;"> </span><span class="gstxt_hlt" style="font-family: inherit; text-indent: 13px;">business </span><span class="Apple-style-span" style="text-indent: 13px;">men and are carried on by them for</span><span class="Apple-style-span" style="text-indent: 13px;"> </span><span class="gstxt_hlt" style="font-family: inherit; text-indent: 13px;">business </span><span class="Apple-style-span" style="text-indent: 13px;">ends, not for industrial ends in the narrower meaning</span><span class="Apple-style-span" style="text-indent: 13px;"> </span><span class="gstxt_hlt" style="font-family: inherit; text-indent: 13px;">of </span><span class="Apple-style-span" style="text-indent: 13px;">the phrase.</span></i></span></div>
</div>
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<div class="gtxt_body">
<div class="gtxt_body" style="font-family: inherit; margin-bottom: 0.5em; text-align: left;">
<i><span class="Apple-style-span" style="background-color: white;">The economic welfare <span class="gstxt_hlt" style="font-family: inherit;">of </span>the community at large is best served by a facile and uninterrupted interplay <span class="gstxt_hlt" style="font-family: inherit;">of </span>the various processes which make up the industrial system at large; but the pecuniary interests </span><span class="gstxt_hlt" style="background-color: white; font-family: inherit;">of </span><span class="Apple-style-span" style="background-color: white;">the </span><span class="gstxt_hlt" style="background-color: white; font-family: inherit;">business </span><span class="Apple-style-span" style="background-color: white;">men in whose hands lies the discretion in the matter are not necessarily best served by an unbroken maintenance </span><span class="gstxt_hlt" style="background-color: white; font-family: inherit;">of </span><span class="Apple-style-span" style="background-color: white;">the industrial balance. Especially is this true as regards those greater </span><span class="gstxt_hlt" style="background-color: white; font-family: inherit;">business </span><span class="Apple-style-span" style="background-color: white;">men whose interests are very extensive... Gain may come to them from a given disturbance </span><span class="gstxt_hlt" style="background-color: white; font-family: inherit;">of </span><span class="Apple-style-span" style="background-color: white;">the system whether the disturbance makes for heightened facility or for widespread hardship, very much as a speculator in grain futures may be either a bull or a bear. To the </span><span class="gstxt_hlt" style="background-color: white; font-family: inherit;">business </span><span class="Apple-style-span" style="background-color: white;">man who aims at a differential gain arising out </span><span class="gstxt_hlt" style="background-color: white; font-family: inherit;">of...</span><span class="Apple-style-span" style="background-color: white;">disturbances </span><span class="gstxt_hlt" style="background-color: white; font-family: inherit;">of </span><span class="Apple-style-span" style="background-color: white;">the industrial system, it is not a material question whether his operations have an immediate furthering or hindering effect upon the system at large. The end is pecuniary gain, the means is disturbance </span><span class="gstxt_hlt" style="background-color: white; font-family: inherit;">of </span><span class="Apple-style-span" style="background-color: white;">the industrial system... so far as touches his transactions in this field it is, by and large, a matter </span><span class="gstxt_hlt" style="background-color: white; font-family: inherit;">of </span><span class="Apple-style-span" style="background-color: white;">indifference to him whether his traffic affects the system advantageously or disastrously. His gains (or losses) are related to the magnitude </span><span class="gstxt_hlt" style="background-color: white; font-family: inherit;">of </span><span class="Apple-style-span" style="background-color: white;">the disturbances that take place, rather than to their bearing upon the welfare </span><span class="gstxt_hlt" style="background-color: white; font-family: inherit;">of </span><span class="Apple-style-span" style="background-color: white;">the community.</span></i></div>
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<div class="gtxt_body" style="font-family: inherit; margin-bottom: 0.5em; text-align: left;">
<span class="Apple-style-span" style="background-color: white;"><i>The outcome <span class="gstxt_hlt" style="font-family: inherit;">of </span>this management <span class="gstxt_hlt" style="font-family: inherit;">of </span>industrial affairs through pecuniary transactions, therefore, has been to dissociate the interests <span class="gstxt_hlt" style="font-family: inherit;">of </span>those men who exercise the discretion from the interests <span class="gstxt_hlt" style="font-family: inherit;">of </span>the community...Broadly, this class <span class="gstxt_hlt" style="font-family: inherit;">of business </span>men have an interest in making the disturbances <span class="gstxt_hlt" style="font-family: inherit;">of </span>the system large and frequent, since it is in the conjunctures <span class="gstxt_hlt" style="font-family: inherit;">of </span>change that their gain emerges.</i></span></div>
<div class="gtxt_body" style="font-family: inherit; margin-bottom: 0.5em; text-align: left;">
~Thorstein Veblen, from <u>Theory of Business Enterprise</u></div>
</div>
</div>
</div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-4465648315611108574.post-37938472148444344662015-05-06T07:22:00.004-07:002015-05-06T07:23:15.558-07:00Economics is a Mankini<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
To steal a line I heard somewhere recently (don't quite remember where): economic theory is like a mankini: it shows you everything <i>except</i> what you actually want to see. A case in point comes from commenter MikeNY at the Naked Capitalism blog {waves}:<br />
<blockquote>
In theory, all else being equal, I can’t argue with the efficiency of comparative advantage (i.e., that the sum of output should be higher).</blockquote>
An analysis of this one sentence can reveal a lot of what's wrong with economic theory.
1) "all else being equal"--of course, all else is never equal in the real world. In the real world you have things like environmental damage (from intensive industries and long supply-chains), over-dependence on single industries (aka Banana Republics) and national security/sovereignty to worry about (import dependence limits political independence).<br />
<br />
2) "efficiency"--economists define efficiency in a way that is far different than the normal understanding of the word, and rather naive from a purely technical standpoint. To wit, there is no place for ideas of sustainability in the economic usage of efficiency. Anything that increases the monetary value of the goods produced (amt. of goods X price of goods) is considered efficient, and therefore good, even if the method of increasing the value of goods is itself destructive and unsustainable. It would be like a driving instructor saying that anything that makes the car go faster is "efficient" (i.e. good), without consideration for things like sharp corners or pedestrians.<br />
<br />
On the technical side, highway designers discovered long ago that a road operating at "maximum efficiency"--i.e. moving the greatest amount of cars/minute--was also extremely likely to experience a catastrophic breakdown (traffic jam) because when the highway is packed with traffic, just one person making a mistake can cause a huge pile up and completely stop traffic. If, OTOH, a road is functioning below it's max. capacity, someone can drive into the median divider and everyone else can just...go around. So "efficiency" actually turns out to be inefficient, in the real world. It all works great, until it doesn't work at all. This is a fundamental finding of complexity science, imho, and is widely applicable<br />
<br />
3) "the sum of the output should be higher"--again, maximizing the value of Number of Goods (sold) X Price of Goods is not anything we should necessarily be concerned with. Numbers like GDP and trade volumes are nothing but proxies for what we are actually concerned with--which I would sum up as quality of life--but they are horrible proxies. It's like trying to gauge your health by looking at how much you're spending on health care (more money spent on health care means more health, no?) instead of looking at what you're resting heart-rate is or calculating your BMI.<br />
<br />
And that's before we even get to the question of distribution that MikeNY rightfully highlights in the next sentence of his comment.<br />
<br />
These same logical inanities pop up again and again in mainstream economic theory...which, btw, is not even worthy of the name "theory," <a href="http://thehappyscientist.com/science-experiment/gravity-theory-or-law/" target="_blank">scientifically speaking</a>. "To become a scientific theory, an idea must be thoroughly tested, and must be an accurate and predictive description of the natural world."</div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-4465648315611108574.post-61870563306005250322014-11-23T07:08:00.001-08:002014-11-23T07:14:36.684-08:00You're Doing it Wrong: Politics As If Democracy Mattered<div dir="ltr" style="text-align: left;" trbidi="on">
<style type="text/css">P { margin-bottom: 0.08in; }A:link { }</style>
<br />
<div style="text-align: justify;">
<b>Framework for a Grassroots, Transparent, Mobile Web-Based Politics </b></div>
<br />
<blockquote class="tr_bq">
<div style="text-align: left;">
“<i>...the Left
needs to stop being a religion and become a tool in the hands of the
people.</i>”
</div>
<div style="margin-bottom: 0in; margin-left: 0.49in;">
~<a href="http://left-flank.org/2014/11/14/understanding-podemos-23-radical-populism/">Iglesias,
Podemos Party</a></div>
</blockquote>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
Politics in this country, as in most
others, is a complete clusterf**k. Despite the passionately
contested battles between our legacy parties for political dominance
every few years—and the venomous and vile attack ads that
inevitably accompany them—most people I know, regardless of their
political affiliation, don't seem to feel that they have much affect
on national, or even state politics. There is an odd paradox between
the heated pronouncements of our politicians, on the one side, and
the icy disconnection most people feel toward electoral politics, on
the other. The reaction of most folks to even their own party's
candidate in any given election is more often than not a disaffected
and noncommittal shrug. As we say on the interwebs, “meh.”</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
Inevitably, if the person is interested
in politics at all—and most people are, at least a little
bit—they'll give you the old saw about the lesser-of-two-evils.
The “<i>he's a bastard, but he's our bastard</i>” mentality.
This is actually a politically sophisticated view of things, in that
it at least has the honesty to admit openly what our political system
has become: evil...with bastards running the show.
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
The cynicism with which most people now
greet campaign promises, knowing that all are inevitably negotiable
and prone to change (depending on factors usually involving money
and/or matters of personal convenience) just goes to show the utter
lack of legitimacy our current political class has acquired in the
eyes of most. Our elections have become essentially debates over
<i>which of the liars is going to lie the least</i> about what's
really going on — <i>which corrupt official is the going to leave
the most behind</i> when he or she is done looting the country and
selling off the best parts to their friends?
</div>
<div style="margin-bottom: 0in;">
Given that this is the case, it's
hardly surprising that the outcomes for most of us have been so bad. [1]<br />
</div>
<div style="margin-bottom: 0in;">
The point, however, isn't to belabor
the brokenness and backwardness of the political system as it now
exists—or to bemoan the perverse policies (and bailouts) this
brokenness has led to—but rather to present another option for how
we might organize ourselves politically that avoids entirely this
whole morass of big money, special interests, and lesser-of-two-evils
defeatism. The idea I would like to suggest we try is a simple
one—one that should be familiar, at least in principle, to all
Americans—it's called “democracy.” Perhaps you've heard of
it...</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
Imagine a political party with no
national platform—a party where local rank-and-file members select
candidates from among themselves, and dictate the policies those
candidates will support. [2] Imagine a political party whose
candidates are transparent; one that guarantees every member an equal
voice in shaping the actual policy proposals—and the votes—of
their representatives. Imagine a political party whose focus is on
empowering the rank-and-file members, instead of the charismatic
con-artists we call politicians. Imagine a political party that runs
on direct democracy, from bottom to top: open, transparent and
accountable.
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
That, dear friends, is what I am
suggesting.
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
Just a few years ago, this idea might
not have been thinkable, but widespread adoption of mobile
technology, even among people with lower incomes, makes creating a
truly grassroots driven political party—without the need for big
money or expensive political consultants—a real possibility.
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
First I'll describe the basic ideas
behind this new structure, and then we'll get to the technological
implementation.
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
In our party, the platforms of the
local candidates will be decided by the members through face-to-face
and on-line dialogue and discussion, and on-line voting. If someone
has a policy proposal, they submit it for discussion, debate, and
amendment; if the proposal gathers a preponderance of support from
the members, it becomes a local policy position.
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
Candidates are nominated by the members
in their district and have the obligation to submit and vote on
legislation only in line with the positions of the local party
chapter, once they are elected. In office, the job of the
representative is to present and explain legislation up for vote to
the members, and, in cases where the proper vote is not clear from
the local positions, to have the local party vote on which way the
representative should cast their vote in the legislature. Our party
will not only allow, but encourage real-time interaction and
meaningful participation from the members in the daily work of
legislating. This will give members the chance to actually effect
the votes of their representatives in a meaningful and transparent
way.
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
The candidates in our party will be
<i>contractually obligated</i> to represent only the preferences of
their constituencies, regardless of their personal opinions or
interests. Any candidate failing to do so will be recalled at the
soonest possible time. In this way of doing politics, the political
candidate is not the leader of the party, but merely the spokesperson
for her or his constituents.
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
Compare that to both Democratic and
Republican representatives, who spend most of their time on Capitol
Hill schmoozing with lobbyists and dialing-for-dollars to fund their
next campaign, when they'll do their darndest to convince enough
voters that <i>they</i> are the lesser evil and to put them back in
power for another term...which they plan to spend schmoozing with
lobbyists and dailing-for-dollars.</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
There are two essential ingredients
necessary for this plan to work: 1) the dissaffection of enough
people with the maneuverings and continual disappointments of both
major political parties, and their willingness to join a party that
offers first and foremost, a direct voice in the political process,
and; 2) the willingness of these people to put in the energy and
effort to get as many people involved as possible. For reasons I'll
explain a little later, the more people involved in the project,
whatever their political views, the more successful this project—this
party—will be.
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
Also, we'll need an app...maybe two.
More in a little while.</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
To be continued....<br />
<br />
[1] Full-time jobs are still below their pre-crisis peak, some six
years after the crash; overall job numbers have caught up to and
surpassed previous peaks only thanks to the BLS's habit of counting
anyone working <i>at least one hour</i> of paid work per week as
“employed.” <br />
<br />
[2] Rather than the other way around,
which is how we do things currently: i.e. the <i>candidate</i>
<i>selects</i> the rank-and-file (D or R) and <i>dictates</i>
the policies to support <i>to them.</i></div>
</div>
Unknownnoreply@blogger.com2tag:blogger.com,1999:blog-4465648315611108574.post-25004740676552285682014-10-07T08:02:00.003-07:002014-10-07T08:05:24.358-07:00The Unquiet Conscience of a Master/Slave<div dir="ltr" style="text-align: left;" trbidi="on">
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One of capitalism's greatest coups and
most resounding victories has been the successful combination of both
the master and slave mentalities within nearly every individual among
the working classes of the population. Under the current capitalist
system, each person has become their own master—has become their
own slave.</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
Under the old system, the slave was
made to work so that the master might have material abundance. The
master had ample time to enjoy this abundance, since s/he did not
have to spend her/his time working—that was the slaves' job. From
the capitalist perspective, this type of system presents a problem in
that the amount of goods the master and his/her household can consume
is relatively limited, even in the most opulent cases. Additionally,
resources devoted to the maintenance of slaves are unavailable for
use by the capitalist.
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
Were there more masters to purchase
goods from the capitalist, the slave system would not present such a
problem—but more masters would also require more slaves to serve
them which would, in turn, reduce the amount of resources available
to the capitalist and impede his/her ability to take advantage of
this larger market of masters. What to do?</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
The Capitalist system has solved this
problem quite elegantly, by replacing the external, interpersonal
master/slave division with an internal, intra-personal one. This has
had the result of increasing the number masters, who can purchase the
output of the capitalist process, without increasing the number of
slaves needed to sustain them, thus leaving resources plentiful and
inexpensive for capitalist exploitation.</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
While this solution has proven quite
useful for the capitalists, the effects on the working classes have
been less salubrious. Whereas, in the former system the master had
ample time to enjoy the material abundance provided by his/her
slaves, the new master/slave hybrid does not have the same luxury.
Being also his/her own slave, this new type of person is expected to
both work like a slave and to have material abundance, like a master.
The abundance is in vain, however, as being also a slave, he/she
lacks adequate time with which to enjoy the abundance that slavery
produces.</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
The result for the working-class
master/slave is an unquiet conscience. Whereas a mere slave knew
better than to seek fulfillment in material possessions, the
master/slave hybrid is imbued with no such wisdom. S/he has adopted
the value system of the master and so seeks fulfillment in material
wealth, but is unable to enjoy it due to the constant lashing of the
slave aspect of the self—to drive it to work harder to provide more
wealth for the master aspect. This disjointed self of the modern
working-class human, enmeshed in capitalist society, far from
representing an overcoming of the previous slave-based economy, is
rather the pinnacle of its ascendancy.</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
Under the old system, the slaves would
sometimes rebel against their masters, turning against their
overseers and disrupting the entire system of wealth extraction. The
new system is superior in this regard—at least from the point of
view of the capitalists—in that revolt against one's own self is
infinitely more difficult than rebellion against an external
authority. Thus, disruptions are kept to a minimum in the new system
of slavery, where every man is his own servant, every woman her own
oppressor. </div>
<div style="margin-bottom: 0in;">
<iframe allowfullscreen="" frameborder="0" height="384" src="//www.youtube.com/embed/FQTOwL1NKlc" width="512"></iframe>
</div>
<div style="margin-bottom: 0in;">
<br /></div>
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Unknownnoreply@blogger.com2tag:blogger.com,1999:blog-4465648315611108574.post-67411165262684602922014-06-23T21:49:00.001-07:002014-06-23T21:49:27.012-07:00Stuff of Memory<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgiwdNvUeYYV06KW4vKNdlO36vcvaJVH9Vh-KknVRHuCYX8Ha9pRRzjqr9VHRXvalGffoqc0BTAR5eCCmE3kHrhyphenhyphenEiUJSM_orGulwoSWqNiSBQhUTWm4JJttDBQsgwg2ojSHe3JpnAekKBY/s1600/Paul_C%C3%A9zanne,_Pyramid_of_Skulls,_c._1901.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgiwdNvUeYYV06KW4vKNdlO36vcvaJVH9Vh-KknVRHuCYX8Ha9pRRzjqr9VHRXvalGffoqc0BTAR5eCCmE3kHrhyphenhyphenEiUJSM_orGulwoSWqNiSBQhUTWm4JJttDBQsgwg2ojSHe3JpnAekKBY/s1600/Paul_C%C3%A9zanne,_Pyramid_of_Skulls,_c._1901.jpg" height="319" width="400" /></a></div>
<br />
<div style="text-align: left;">
Each of us, </div>
<div style="text-align: left;">
<br /></div>
<div style="text-align: left;">
eventually</div>
<div style="text-align: left;">
<br /></div>
<div style="text-align: left;">
will be nothing more</div>
<div style="text-align: left;">
than memories.</div>
<div style="text-align: left;">
<br /></div>
<div style="text-align: left;">
The Earth will reclaim</div>
<div style="text-align: left;">
our material bits</div>
<div style="text-align: left;">
<br /></div>
<div style="text-align: left;">
and our immaterial bits will return</div>
<div style="text-align: left;">
to wherever it was they came from--before</div>
<div style="text-align: left;">
<br /></div>
<div style="text-align: left;">
they were us.</div>
<div style="text-align: left;">
Before they were the stuff </div>
<div style="text-align: left;">
<br /></div>
<div style="text-align: left;">
of memory. </div>
</div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-4465648315611108574.post-4633442414016276082014-05-22T08:06:00.000-07:002014-05-22T08:06:27.713-07:00Leadership Good, Leaders Bad<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhSdQ0voWrh1gNC45wwQtU2lrMxCf8jYqt6ct-Fcnk0KwPo6Wa8vHiJDE2kiACsRKQKBej5JklCYPc5naatCMn8EuL_zEHj5_7Y9d9hG_mow7W8aajPG4__aD-t4AIky9n3zBT5rDKLWlTA/s1600/kids+in+a+circle.jpeg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt="" border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhSdQ0voWrh1gNC45wwQtU2lrMxCf8jYqt6ct-Fcnk0KwPo6Wa8vHiJDE2kiACsRKQKBej5JklCYPc5naatCMn8EuL_zEHj5_7Y9d9hG_mow7W8aajPG4__aD-t4AIky9n3zBT5rDKLWlTA/s1600/kids+in+a+circle.jpeg" height="239" title="The proper way to arrange a classroom" width="320" /></a></div>
<br />
<br />
Leadership is good. Leaders are bad. Cultivate leadership. Do not seek to become a leader.<br />
<br />
A leader is someone who thinks they are in a position to make decisions on behalf of a group. Leadership is the quality of knowing how to help a group make a decision.<br />
<br />
If a group has many leaders, they will accomplish nothing. Each will want to make decisions for the group as a whole, and thus the whole group will be divided and diffuse and never carry out any of the decisions made.<br />
<br />
If a group has many who display leadership, then the group will accomplish much. They will find making decisions easy; they will move as one unit, one force. They will discover their collective will and carry out their collective decisions.<br />
<br />
Leadership is effective, leaders are a hindrance. Cultivate leadership, and do not seek to become a leader.</div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-4465648315611108574.post-35277378086126101052014-05-04T07:53:00.001-07:002014-05-04T08:30:04.318-07:00Rebuilding Economics From the Ground Up (or "This Town Needs and Enema!")<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiQRzrSFUs4jUxehSlau5_Ik99926KpTAXPoux1ugc9rc1IHOhI_LDU9VsDoKE7D1c4wu96bCFQU9oU6ttvZBCg-E5lfb3VKrXtJ6f3nlKZKKoWsYAuNzHBgIBssYY8D-I_8fyF6la5-tB3/s1600/joker-jack-nicholson.jpeg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiQRzrSFUs4jUxehSlau5_Ik99926KpTAXPoux1ugc9rc1IHOhI_LDU9VsDoKE7D1c4wu96bCFQU9oU6ttvZBCg-E5lfb3VKrXtJ6f3nlKZKKoWsYAuNzHBgIBssYY8D-I_8fyF6la5-tB3/s1600/joker-jack-nicholson.jpeg" /></a></div>
<br />
<br />
The links page of the wonderful <a href="http://www.nakedcapitalism.com/2014/05/links-5413-2.html" target="_blank">Naked Capitalism</a> site today, included this one from VoxEU:<br />
<br />
<a href="http://www.voxeu.org/article/mainstream-economics-curriculum-needs-overhaul" target="_blank">The mainstream economics curriculum needs an overhaul</a><br />
<br />
Yves Smith, as she is prone to do, added her own pointed commentary on the piece: <i>"How about “mainstream economics needs an overhaul”?"</i><br />
<br />
To which I say, indeed. And more than an overhaul even--this rig is due for an entire rebuild, from the ground up. Here's what I mean by that:<br />
<br />
I just finished reading a wonderful little book, Michael Lebowitz's <a href="http://monthlyreview.org/press/books/pb1455/" target="_blank"><i>Build it Now! Socialism for the Twenty-First Century</i></a>. Highly recommended. Lebowitz's main contention is that the problem with capitalism--and I would say also with economics--is that is concerned <b>solely with the creation of more capital</b>. Socialism, on the other hand, is concerned with<b> ensuring that each individual is allowed the possibility of fulfilling their highest potential.</b> Capitalism, as well as mainstream economics, is concerned exclusively with the<b> production of financial wealth</b> (I might add "and material goods" to that sentence, except that material goods are only considered "good" if they can be turned into financial wealth, else they are seen as waste or loss). Socialism, by contrast, is concerned with the <b>development of human potential</b>.<br />
<br />
<b>Number and money, on the one hand; human development on the other.</b> Unless and until our economy is based around the latter, we will continue to suffer, as a species. Unless and until economics as a discipline places human development and the study of how best to achieve it <i>at the heart of its enterprise</i>, our thinking about <i>life</i> will continue to suffer (and the whole planet along with us).<br />
<br />
Predictably, and sadly, the suggestions being put forth for changing the mainstream economics curriculum, as presented in the Vox EU article by Diane Coyle, the "Managing Director of Enlightenment Economics" (a job title that should, perhaps, give us pause) include only the following:<br />
<br />
<ul>
<li>Emphasising dynamics, instability, institutions, and environmental questions; and</li>
<li>Integrating new results and empirical evidence.</li>
</ul>
<ul style="text-align: left;">
<li>More exposure to economic history and the history of thought;</li>
<li>More practical hands-on experience with data;</li>
<li>Better teaching of communication skills; and</li>
<li>Some exposure to new developments in economic research. </li>
</ul>
<ul style="text-align: left;">
<li>Some economic history, which could be integrated into existing courses, especially macroeconomics;</li>
<li>An introduction to other disciplinary approaches;</li>
<li>Possibly ‘tasters’ of the frontiers of academic economic research with potential policy application, such as behavioural economics, institutional economics, and post-crisis developments in financial economics;</li>
<li>Awareness of some of the methodological debates in economics;</li>
</ul>
<br />
I will leave it to you, dear reader, to guess what "some" and "more" will entail in practice ("More economic history,"..."some methodological issues"), but notice that all of the proposals stay firmly within the framework of measuring (and therefore judging) all parts of our economy on the basis of the same things that the mainstream currently judges them on: namely, GDP, unemployment statistics, interest rates, inflation/deflation, spending and investment...i.e. numbers and money.<br />
<br />
A new economics, if anyone is interested in such, must start from the premise that <b>our economic system exists to promote the fulfilment of human potential--to ensure each has the opportunity to develop to their highest possibilities, however they happen to define them.</b> Numbers and money are means to an end--possible tools that we can use to better accomplish our goal of human development--but once they become seen as the ends in themselves, our thinking veers wildly off track. The results of such thinking we see around us everyday, in the homeless and jobless, the stressed and unhealthy, as well as in those with wealth who still manage to suffer, despite having "made it."<br />
<br />
Lebowitz's book is definitely worth the read, and much cheaper--and more to the point--than a lot of other econ texts currently available. Read it, share it, talk about it, and above all <b>build it</b>. We need to rebuild economics from the ground up, and this is one place (maybe <i>the</i> one place) to start.</div>
Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-4465648315611108574.post-42566789207223284172014-03-15T09:14:00.001-07:002014-03-15T14:37:30.884-07:00(Mis)Understanding Buddhism and Poverty<div dir="ltr" style="text-align: left;" trbidi="on">
The UC Berkeley News Center has an article up now on the university's new course on "Buddhist Economics." While I welcome any addition to the economics course curriculum that addresses the intersection of economics and ethics, I think the limitation of the course to Buddhism is somewhat faddish and needlessly limiting.<br />
<br />
That aside, I also found some curious sentiments being expressed by the course's instructor, one Claire Brown. Professor Brown has apparently been studying Buddhism (whatever we take that to mean) for six years. Despite the fact that Prof. Brown is teaching a course on Buddhism and Economics, she does not seem to have actually understood the issues that arise. Perhaps it is a defect of the journalism and Brown's views have been somehow misrepresented, but I find this unlikely since the views that Brown appears to hold are quite common among Western Buddhists (and liberals generally).<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg70lcUr2VldZUJbYwusySbNbbjRdSBgJ4iPgCIbZBWqTG6ZbXCwYWPDNR1iHSWq0vwl8i3vzHGgIpbiQDzW90QZkQ9RU0Yz58g3wypEAFULRGu_BTIIyy42M8cJXb-9pPDJCq9vzApNjP0/s1600/zen+meditating.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg70lcUr2VldZUJbYwusySbNbbjRdSBgJ4iPgCIbZBWqTG6ZbXCwYWPDNR1iHSWq0vwl8i3vzHGgIpbiQDzW90QZkQ9RU0Yz58g3wypEAFULRGu_BTIIyy42M8cJXb-9pPDJCq9vzApNjP0/s1600/zen+meditating.gif" height="241" width="320" /></a></div>
<br />
Take this quote that appears directly after the <b>Don't Spend, Be Happy</b> subhead which lays out a number of cogent (and potent) questions that Buddhist thought poses for economic theory and practice:<br />
<blockquote class="tr_bq">
“In the traditional economic model, it makes sense to go shopping if you
are feeling pain, because buying things makes you feel better,” Brown
wrote in her class syllabus. “Yet, we know from experience that
consuming more does not relieve pain. What if we lived in a society that
did not put consumption at its center? What if we follow instead the
Buddhist mandate to minimize suffering, and are driven by compassion
rather than desire?”</blockquote>
This is a hopeful start; Prof. Brown is, in my opinion, asking the right questions here. But a throw-away line that ends the article makes me think that she might not have figured out what the solutions to these questions might look like.<br />
<br />
<section class="comment-content comment"><blockquote>
Brown assured her students that Buddhist economics
wouldn’t require a vow of poverty. “Buddha tried to live in poverty for
seven years,” but “it didn’t work,” she said.</blockquote>
Uh…actually the historical Buddha tried <i>extreme asceticism </i>and wrote <b>that</b>
off as a blind alley. Asceticism: as in bodily mortification, extended
fasting, etc. After Buddha gave up that route (still a popular one on
the Indian sub-continent, btw) and adopted the “middle-path,” he and his
disciples still spent time every day <b>begging for alms:</b> even in ancient India, that was a sure sign of <i>poverty</i>.<br />
<br />
Here’s the thing: if you consume only that which you actually <b>need</b>, restrain yourself from activities that harm other life, and devote your life to easing the suffering of others, you will <b>necessarily</b>
be considered poor. You will have given your excess wealth away to
those poorer than you, your dwelling will be simple, your lifestyle
spare. Not because you’re an ascetic, but because you have your
priorities in line.<br />
<br />
Buddhism is appealing to Americans largely, I think, because it
doesn’t seem to demand any material sacrifice on the practitioner’s
part. Americans like Buddhism because they’ve (mis)interpreted its
message to be <i>it’s ok to have lots of stuff, just so long as you aren’t attached to it.</i> <br />
<br />
For instance, there is a Marriott Hotel heiress living not 50 miles from me
that has gained the title of “Lama Tsomo,” despite being a
multi-billionaire (I’m looking at you, Linda). Supposedly, she’s
trying to become a bodhisattva, whose mission on earth is to end the
suffering of all sentient beings. Apparently, however, no one has hipped
her to the fact that her 4.1 billion dollars could ease a whole lot of
suffering, if only she could find the strength to let it go. But no, she
prefers to <i>teach meditation </i>classes since, you know, all suffering is psychological and you just need to be detached and whatnot. Convenient, that.<br />
<br />
Western Buddhism’s focus on personal non-attachment and psychological
‘growth’ all too often turns into a “blame the victim” mindset. <b><i>What’s
that you say? You’ve just been laid-off from your job and diagnosed with
cancer? You don’t know where your next meal is coming from and you
can’t afford to see a doctor? You should try meditation and detachment:
nothing is good or bad but thinking makes it so. Your suffering is all
in your mind! Don't blame the government or their corporate overlords for your misery, it's just your karma, embrace it</i></b>…..which is way easier than actually trying to help someone improve their
situation. Also it makes you feel superior, since you’re so much more
wiser than those suffering sots.<br />
<br />
The problem, of course, isn’t with Buddhism, but rather with academics like Brown who try to sugar-coat it for Western consumption, although I assume they do this unwittingly.<br />
<br />
The deal with any religion is this: if you take it seriously as the most
important thing in your life, you won’t worry about material
possessions and you won’t need to take a vow of poverty. <b>Prioritizing
your spiritual development will make it easy to not notice, or care, if
you become officially poor. As material wealth is not your goal, so too
its absence will not be defeat<i>.</i></b> But Buddhists like Brown think that you can
have your cake and eat it too: the material wealth as well as the
(mostly BS) non-attachment to it.<br />
<br />
The facts of the matter are that <b>if you are not attached to wealth,
wealth will not attach itself to you. If you prioritize your spiritual
development, this will not cause you consternation.</b><br />
</section><br />
<br /></div>
Unknownnoreply@blogger.com2tag:blogger.com,1999:blog-4465648315611108574.post-27314797448794551782014-02-22T08:18:00.001-08:002014-02-22T08:18:18.906-08:00De-Coding Economic Propaganda <div dir="ltr" style="text-align: left;" trbidi="on">
Raising the minimum wage is in the news again, and with it, lots of economists disagreeing about what the effects will be. For every study showing a minor <b>negative</b> effect on employment, another is presented another showing a minor <b>positive</b> effect. Into the fray has stepped the Employment Policies Institute (EPI) with <a href="http://www.minimumwage.com/" target="_blank">a dedicated website</a> devoted to educating people about the horror that raising the minimum wage will apparently be.<br />
<br />
The top of the website displays a picture of Bill Gates with the caption "why isn't the President listening to this guy?"--not a good start. Reading further, it only gets worse:<br />
<br />
<blockquote>
Employees that earn the minimum wage tend to be young, and work in businesses that keep a few cents of each sales dollar after expenses. When the minimum wage goes up, these employers are forced to either pass costs on to consumers in the form of higher prices, or cut costs elsewhere–leading to less full-service and more customer self-service. As a result, fewer hours and jobs are available for less-skilled and less-experienced employees.</blockquote>
Many businesses that pay at or near minimum wage do, actually, have decent profit margins and claiming that increasing wages "forces" businesses to pass on the costs to consumers or reduce staffing is simply ridiculous. A business could also reduce pay-levels of upper management, decrease dividend payouts, stop <a href="http://247wallst.com/investing/2013/08/05/ten-companies-buying-back-huge-amounts-of-their-own-stock/" target="_blank">buying back their own stock</a>, etc. The framing also seems worded to encourage the reader to think of a small business, when in fact<a href="https://www.census.gov/econ/smallbus.html" target="_blank"> most people work</a> for <a href="http://www.usatoday.com/story/money/business/2013/08/22/ten-largest-employers/2680249/" target="_blank">large corporations</a>, who are sitting on <a href="http://online.wsj.com/news/articles/SB10001424052748704312104575298652567988246" target="_blank">mountains of cash</a> right now, btw.<br />
<blockquote>
Minimum wage increases do not help reduce poverty. Award winning research looked at states that raised their minimum wage between 2003 and 2007 and found no evidence to suggest these higher minimum wages reduced poverty rates. While the few employees who earn a wage increase might benefit from a wage hike, those that lose their job are noticeably worse off.</blockquote>
Notice that it is not mentioned <i>which</i> award this research won or who was giving it out. And then, of course, winning an award (even a prestigious one that you would feel comfortable mentioning by name) doesn't guarantee the accuracy of your work. Barack O'bomba, for example, received a Nobel Peace Prize...so I think you see my point.<br />
<br />
And as Prof. Sprigs discusses at 6:58 in the video below, studies of the effects of minimum wage have by-and-large either shown no effect or little effect on employment; sometimes that minor effect is positive and sometimes it's negative. Often, it is statistically insignificant. Which is what you would expect when looking for the effect of a single variable in a complex, densely inter-twingled system like our economy. <br />
<blockquote>
Employees who start at the minimum wage aren’t stuck there. Research found that the majority of employees who start at the minimum wage, move to a higher wage in their first year on the job.</blockquote>
Again, they don't say specifically what research they are referring to, nor do they provide a link to it so that a reader can consider it on its own merits. It's also worth keeping in mind that most economic "research" was calling for smooth sailing into the indefinite future...right up until the entire financial system imploded. One should always take economic research with a grain of salt--numbers are easy to manipulate, and perfectly legitimate mathematical operations can provide you with totally illegitimate conclusions. The numbers, as my old college adviser used to say, never speak for themselves.<br />
<br />
Also, having extensive experience in the low-wage sector, I can give you a little hint for understanding that last claim about most workers moving to a higher wage within a year. Some years back I got a job as a nursing-home housekeeper. Starting wage--$7.25/hr. My raise after six months of, by all accounts, stellar job performance--$0.10/hr. <br />
<br />
Just an educated guess here, but I bet the research this website is referring to would claim that my extra dime per hour was "moving to a higher wage."<br />
<br />
Here is a much more realistic discussion of the likely effects of raising the minimum wage: <br />
<br />
<iframe allowfullscreen="" frameborder="0" height="315" src="//www.youtube.com/embed/8Ew_9liDjlk" width="560"></iframe></div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-4465648315611108574.post-62089507744482305542014-02-14T10:35:00.001-08:002014-02-14T10:35:27.585-08:00A simple model of monetary stimulus<div dir="ltr" style="text-align: left;" trbidi="on">
<style type="text/css">P { margin-bottom: 0.08in; }</style>
<br />
<div style="margin-bottom: 0in;">
When the Federal Reserve decides that
it wants to increase the amount of currency in circulation, in order
to stimulate the economy, its method of accomplishing this is to buy
securities from its “primary dealer” banks (normally US Treasury
bonds, and recently MBS or mortgage-backed securities). This has the
effect of increasing the cash reserves of those banks, who are
expected to then lend it out into the economy. In short, whenever
new currency is created, it is first used to purchase assets from a
private bank, which will then, it is hoped, lend it out into the
economy for productive purposes.</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
This method of economic
stimulus, however, has the paradoxical and quite harmful effect of
concentrating wealth in the financial sector while depriving the real
economy (i.e. the people and businesses that actually make things) of
income. The simple reason for this is that all loans made by a bank
must be repaid <i>with interest</i>. To the extent that a loan is
not entirely repaid, there will generally be a forfeiture of property
to the bank to cover their financial losses. In spite of the
occasional bad loan, <b>the net effect of adding currency to the economy
through interest-bearing loans is to transfer financial assets from
real-economy actors to financial-sector actors.</b> A simple model will
make plain why this is the case.</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
Imagine that we have an economy
composed of three sectors: the productive sector (real economy), the
financial sector (banks), and the government sector. We can imagine
the productive sector as itself composed of households and
businesses, with currency circulating continually between the two:
households buy goods and services from businesses who, in turn, pay
wages back to households.
</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
Now, let us suppose that the productive
sector of the economy has a monthly GDP of $1000. This means that
every month, businesses pay households $1000 in wages which
households then spend at businesses, providing the businesses with
the revenue to pay out in wages at the beginning of the next monthly
cycle. For simplicity, we assume that households spend all of their
income every month and that businesses use all revenue for wages. Essentially,
in our model businesses and households are simply passing $1000 back
and forth between themselves.</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
Now let's suppose that the population
of our economy grows and additional households are created. In the
absence of any action from the government (which is the only sector
that can add additional currency to the productive sector), the
income per household in the productive sector must necessarily
decline. If we previously had 10 households receiving $100 a piece
per month, and now we have 11 households, each household will now
only receive $90.90 per month. If the government desires to maintain
wage levels at $100 per month, it will need to add an additional $100
to the amount of currency currently circulating in the productive
sector.</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
In order to do this, the government
gives $100 to the financial sector to lend into the economy.
Assuming the bank lends the entire amount into the economy, in the
month that the government increases the amount of currency, the GDP of
the economy will increase by $100 to $1100 (as households borrow and spend the $100 into circulation), providing enough currency
for each household to once again receive $100 per month. However, his return
to normalcy is short-lived.</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
Assuming that all loans get repaid,
with interest at the beginning of the next monthly cycle, during the
next month the GDP of our little economy will have to decrease by
$110 (assuming 10% monthly interest, for ease of calculation), in
order to repay the $100 principal plus $10 in interest. This means
that at the start of the following cycle, the amount of currency will
be once again too low to allow incomes to remain at $100 per month.
Only now, the situation will be worse than before the government's
“monetary stimulus,” since the economy's real GDP will have gone
from $1000 to $1100<b> to $990</b>, giving an average household salary of
$90—90 cents less than before the currency increase. The apparent surge in economic activity and household prosperity is followed quickly by decline for households and businesses alike.</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
Now, the only way for the household
sector to maintain it's level of income and consumption is to once
again borrow from the financial sector. Only now, instead of
borrowing $100, households must borrow $110 in total from the
financial sector to maintain their income levels (which, remember,
are determined by levels of spending; businesses can't pay wages to
households until households first buy from them). This, of course,
only further worsens the problem as $121 must now be repaid to the
financial sector at the beginning of the following cycle, leaving
only enough money left in the real economy to provide households with
a $79.90 monthly average salary.
</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
It should be easy enough to understand
why it is that an economic stimulus program that depends on private
banks lending new currency into the real economy at interest is a
self-defeating and perverse policy choice (unless, of course, one
happens to work in the financial sector). The only way to add wealth
to the household sector through lending would be to offer the loans
at a<b> negative interest rate</b>: that is, loan $100 and only require $90
back. In the above example the government would give the financial
sector $1000 to loan into the economy at a negative 10% interest
rate, leaving an extra $100 in the economy after the loans had been
repaid.
</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
If the goal of monetary stimulus is to
increase the average household wage, negative interest loans make far
more sense than positive interest loans. <b>Positive interest loans, in
fact, make no sense at all.</b></div>
</div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-4465648315611108574.post-4225491549665810962014-02-07T10:51:00.001-08:002014-02-07T10:51:26.286-08:00A brief history of social uplift in Montana...<div dir="ltr" style="text-align: left;" trbidi="on">
<blockquote>
<em>The first successful uplift movement in Montana was
conceived and accomplished by the Vigilantes. Crude in plan and rude in
perfomance, there was an uprising which destroyed the last doubt in
lawless minds with respect to the efficiency of government “of the
people, by the people, for the people”. It demonstrated that absence of
law afforded no excuse for crime and gave security to life and property
without increase of taxation. In some of the valleys where the
Vigilantes rode, less than half a century ago, land now has a market
value of as much as one thousand dollars per acre for orchard home uses,
but the most profitable crop which ever hung from Montana trees was in
the gruesome forms of dead outlaws. Then and there was implanted a
respect for the penalties of wrong-doing and a regard for the rights of
others which has endured against the insidious influence of wholesale
corruption and the most subtle encroachments upon the powers of
government, to the present time. It is today more dangerous in the state
of Montana to steal a horse than to loot a bank or to bribe a
legislative majority, chiefly because the Vigilantes failed to furnish a
precedent in justice for bank-looting and legislative corruption as
they did for horse thieving; while later administrators of justice, in
the approved manner of courts, have regarded precedent and form and
ceremony above the purpose of the law and the effect of justice.</em></blockquote>
<em>
</em><em></em><br />
~Jere C. Murphy; <strong>The Comical History of Montana: A Serious Story for Free People</strong> (1912)</div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-4465648315611108574.post-79255141997670891882014-02-01T12:11:00.000-08:002014-02-01T12:11:08.779-08:00The History of Absentee Bosses in Montana<div dir="ltr" style="text-align: left;" trbidi="on">
I’ve been reading <strong>A Comical History of Montana: A Serious Story for Free People</strong>,
by Jere C. Murphy (pub. 1912). Here is what Murphy had to say about the
situation in Montana at that time, after describing how all of the
mines, reduction works, public utilities, courts and politicians of “the
Treasure State” were brought under monopoly control:<br />
<blockquote>
All this by the power of lawless corporate combination
and the thimble-rigging of high finance, exercised by absentee bosses
who have gained possession of this inestimable wealth and control of
these stupendous influences without honest investment, honest purpose,
or honest accounting whatsoever.<br />
<blockquote>
Who are these absentee bosses?<br />
The constitute a small group among the conspicuous confidence operators of Wall Street.<br />
How did they get this enormous wealth and these tremendous powers?<br />
They bought some of it from the owners of the property and some of it
from law-makers and other officials employed by the public.<br />
Where did they get the money?<br />
That, also, they got from the public.<br />
What did the public get?<br />
The public got watered stock in a generously assorted variety of mining, smelting, water power and public utility companies.<br />
Do the operators pay dividends on these watered stocks?<br />
Only when it suits their convenience and promotes their efforts to unload more watered stocks.</blockquote>
</blockquote>
The more things change... <br />
</div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-4465648315611108574.post-39774337656886988742013-11-02T07:42:00.003-07:002013-11-02T07:50:44.840-07:00Cooperatives Counteract Contemporary Caste System.<div dir="ltr" style="text-align: left;" trbidi="on">
<style type="text/css">P.sdfootnote { margin-left: 0.24in; text-indent: -0.24in; margin-bottom: 0in; font-size: 10pt; }P { margin-bottom: 0.08in; }A:link { }A.sdfootnoteanc { font-size: 57%; }</style>
<br />
<div style="margin-bottom: 0in;">
The Western democratic-capitalist
system that is now extending its reach to every corner of the globe
is often presented, by its apologists, as a humanitarian advance over
earlier social systems<a class="sdfootnoteanc" href="http://www.blogger.com/blogger.g?blogID=4465648315611108574#sdfootnote1sym" name="sdfootnote1anc"><sup>1</sup></a>.
Unlike, for instance, the Hindu caste system or the European feudal
system, democratic-capitalism allows for the social mobility of
individuals. The (at least theoretic) ability of people to effect
their own social status is claimed to be a major advance in equality
over earlier systems of hereditary status determination.</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
However, our democratic-capitalist
system has more in common with the systems that it has replaced than
its proponents would like to admit. Let us take the Hindu caste
system as an example and see if we can't tease out some of these deep
similarities.</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
Traditionally, Hindu society was
divided into four castes<a class="sdfootnoteanc" href="http://www.blogger.com/blogger.g?blogID=4465648315611108574#sdfootnote2sym" name="sdfootnote2anc"><sup>2</sup></a>,
each with a particular role to fill in society. These castes are:</div>
<ul>
<li><div style="margin-bottom: 0in;">
Brahmin—the priestly caste,
responsible for performing religious rituals and perpetuating
religious thought.</div>
</li>
<li><div style="margin-bottom: 0in;">
Kshatriya—the warrior and kingly
caste, responsible for all military matters and for the
administration/rule of society.</div>
</li>
<li><div style="margin-bottom: 0in;">
Vaishya—originally farmers and
cattle-raisers, but now normally associated with trade and
money-lending</div>
</li>
<li><div style="margin-bottom: 0in;">
Shudra—the working class; their
traditional duty is described as serving the other three castes.</div>
</li>
</ul>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
In our contemporary
democratic-capitalist system, we also have brahmins and kshatriyas,
vaishyas and shudras. The names have changed but much else has
remained the same. Our contemporary brahmins are the academics and
lawyers, those who are given the task of abstract thought and of
aligning human action with abstract principle (concepts of “justice”
and “equality” having taken the place of “divine will” and
statutory law replacing ritual and doctrinal texts). Our kshatriyas
are the political class: elected politicians and appointed
administrators of the civil service. Vaishyas have been replaced by
businessmen and women, bankers and financiers. And our equivalent of
the shudra caste, of course, is the working class; which is to say,
<i>most of us</i><span style="font-style: normal;">.</span></div>
<div style="font-style: normal; margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
<span style="font-style: normal;">Just
as in the old Hindu caste system, our present social system
prescribes and proscribes particular types of behavior for each class
of people. While the rules regarding what types of activity are
permitted to each social class are not made as explicit in our system
as they were in the old caste system, they are, nonetheless, there<a class="sdfootnoteanc" href="http://www.blogger.com/blogger.g?blogID=4465648315611108574#sdfootnote3sym" name="sdfootnote3anc"><sup>3</sup></a>.
</span>
</div>
<div style="font-style: normal; margin-bottom: 0in;">
<br /></div>
<div style="font-style: normal; margin-bottom: 0in;">
Specifically, only
the top three groups are allowed to think. The bottom group, the
workers, are not permitted to think but only to act. Of course, this
proscription on thought is rarely spelled out so bluntly, but that is
message that is given over and over again by the media and society in
general: only the thinking of “experts” holds any weight.
</div>
<div style="font-style: normal; margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
<span style="font-style: normal;">Working
class people are not expected to have their own thoughts about
philosophic or academic topics; if anything, they are expected to
parrot the pronouncements of respectable academics and professional
intellectuals. In order for a person's intellectual pursuits and
conclusions to be taken seriously, they must have a string of fancy
letters behind their name. The plumber or baker who holds forth on
intellectual topics is roundly ignored, if not laughed out of the
room. Legitimacy is reserved for those of the intellectual, academic
class.</span></div>
<div style="font-style: normal; margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
Working class people are also not
expected to have political ideas...unless, of course, they coincide
with the reigning ideology of respectable politicians<a class="sdfootnoteanc" href="http://www.blogger.com/blogger.g?blogID=4465648315611108574#sdfootnote4sym" name="sdfootnote4anc"><sup>4</sup></a>.
And working class people are definitely not encouraged to have ideas
about how to run a business or a bank. Only the managers and owners
of business enterprises are considered to be up to that task.</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
This is why the co-op movement,
therefore, poses an existential threat to the current system on
multiple levels. The co-op movement undermines academic economics by
placing cooperation instead competition at the heart of it's economic
model. It undermines the political class by expanding democracy and
democratic practice to everyday life, instead of confining it to
biannual elections, as the politicians would have us do (if people
experience real democracy at work, they might start demanding it in
other areas too!). And the co-op movement directly undermines
businesspeople by implementing alternative management and ownership
arrangements that eliminate the need for outside owners, investors
and managers.
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
The co-operative movement is the
working class daring to think for itself, and that thought has the
potential to upset many powerful vested interests. We shouldn't be
surprised, then, when the powers-that-be push back against this
dangerous idea. Witness the hamstringing of health insurance
co-operatives by Obamacare (as detailed in a recent Washington Post
article <a href="http://www.washingtonpost.com/politics/health-co-ops-created-to-foster-competition-and-lower-insurance-costs-are-facing-danger/2013/10/22/e1c961fe-3809-11e3-ae46-e4248e75c8ea_story.html">here</a>)
as well as the current push in Congress to revoke credit unions'
tax-exempt status. When those at the bottom of society's hierarchy
begin to encroach on what have been the sole prerogatives of those
further up the ladder, those at the top can be expected to do
whatever they can to stop that encroachment.
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
Despite their best efforts, however,
the encroachment shall continue.
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div align="CENTER" style="margin-bottom: 0in;">
~~~</div>
<div style="margin-bottom: 0in;">
There is one other caste that we must
not forget to mention: the Dalits, or 'untouchables<a class="sdfootnoteanc" href="http://www.blogger.com/blogger.g?blogID=4465648315611108574#sdfootnote5sym" name="sdfootnote5anc"><sup>5</sup></a>.”
In India, until recently, these people were utterly shunned,
confined to live in slums and to perform only the most dirty and
demeaning work.
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
Our Dalits, our 'untouchables', are the
homeless. The homeless also are not allowed to think, to theorize,
to organize. They are there to remind us shudras that there is
always another rung further down the ladder that we could be pushed
to. They are there to make us grateful for our place in the scheme
of things, lowly though it may be. But just as the existence of an
'untouchable' caste is the shame of the Hindu caste system, and
evidence of its corruption and moral vacuity, so the existence of
homeless women and men, homeless children and homeless families is
the proof that our system is similarly corrupted and morally vacuous.</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="font-style: normal; margin-bottom: 0in;">
The caste system in
Hinduism has been officially abandoned, although it maintains its
hold on many minds. Similarly, our current democratic capitalist
system must also ultimately be abandoned. Abandoned for what? For a
society that places democracy and cooperation at the center of its
ideology and its daily life, instead of wealth accumulation and
competition.<br />
<br />
<iframe width="480" height="360" src="//www.youtube.com/embed/u-xWWFNJFJQ?rel=0" frameborder="0" allowfullscreen></iframe>
<iframe width="480" height="360" src="//www.youtube.com/embed/KB2_3vd2tHE?rel=0" frameborder="0" allowfullscreen></iframe>
</div>
<div id="sdfootnote1">
<div style="margin-bottom: 0in;">
<span style="font-size: x-small;"><a class="sdfootnotesym" href="http://www.blogger.com/blogger.g?blogID=4465648315611108574#sdfootnote1anc" name="sdfootnote1sym">1</a>.
It might well be argued that our current social system is neither
democratic nor, strictly speaking, capitalist. However, lacking
better terminology I will refer in this essay to our present social
system by the misnomer favored by its proponents. </span>
</div>
</div>
<div id="sdfootnote2">
<div class="sdfootnote" style="margin-left: 0in; text-indent: 0in;">
<span style="font-size: x-small;"><a class="sdfootnotesym" href="http://www.blogger.com/blogger.g?blogID=4465648315611108574#sdfootnote2anc" name="sdfootnote2sym">2</a>.
There is much debate about how the caste system actually functioned
at various times and places on the Indian subcontinent. Here I
present an admittedly simplified version. A summary of the debate
can be found <a href="https://en.wikipedia.org/wiki/Caste_system_in_India">here</a>.</span></div>
</div>
<div id="sdfootnote3">
<div class="sdfootnote" style="margin-left: 0in; text-indent: 0in;">
<span style="font-size: x-small;"><a class="sdfootnotesym" href="http://www.blogger.com/blogger.g?blogID=4465648315611108574#sdfootnote3anc" name="sdfootnote3sym">3</a>.
<span style="font-style: normal;">That the pre- and proscriptions
for each class are not made explicit in our society only makes them
more pernicious, as they are harder to identify and therefore to
resist.</span></span></div>
</div>
<div id="sdfootnote4">
<div class="sdfootnote" style="margin-left: 0in; text-indent: 0in;">
<span style="font-size: x-small;"><a class="sdfootnotesym" href="http://www.blogger.com/blogger.g?blogID=4465648315611108574#sdfootnote4anc" name="sdfootnote4sym">4</a>.
Practically an oxymoron these days, it seems like.</span></div>
</div>
<div id="sdfootnote5">
<div class="sdfootnote" style="margin-left: 0in; text-align: left; text-indent: 0in;">
<span style="font-size: small;"><a class="sdfootnotesym" href="http://www.blogger.com/blogger.g?blogID=4465648315611108574#sdfootnote5anc" name="sdfootnote5sym">5</a>.
<span style="font-size: x-small;">Historically, the Dalits are a
late addition to the caste system and are not mentioned in the
classical texts.</span></span></div>
</div>
</div>
Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-4465648315611108574.post-4125073811449518432013-09-26T09:44:00.005-07:002013-09-26T09:45:30.516-07:00Problems with Business Ethics Discourse<div dir="ltr" style="text-align: left;" trbidi="on">
I just had my attention drawn to this recent paper by Michael Luca and Georios Zervas, of Harvard B-school and Boston U, respectively, about review fraud on Yelp.com. The conclusions of the authors are rather curious to me and appear to display a deep misunderstanding of ethics and what exactly they are.<br />
<br />
<a href="http://people.hbs.edu/mluca/FakeItTillYouMakeIt.pdf">Fake It Till You Make It: Reputation, Competition and Yelp Review Fraud</a>
<br />
<blockquote>
Conclusion: </blockquote>
<blockquote>
As crowdsourced information becomes increasingly prevalent, so do incentives for businesses to game the system. In this paper, we have empirically analyzed review fraud on the popular review website Yelp - both documenting the problem and investigating the conditions under which it is most likely to occur. We show that the problem is widespread - nearly one out of fi ve reviews marked as fake, by Yelp's algorithm. These reviews tend to be more extreme than other reviews, and are written by reviewers with less established reputations. </blockquote>
<blockquote>
<b>Our findings suggest that unethical decision making is a function of incentives, rather than of unethical businesses.</b> Organizations are more likely to game the system when they are facing increased competition and when they have poor or less established reputations. For managers, policymakers, and even end-users investigating review fraud, this sheds light on the situations where reviews are most likely to be fraudulent. More generally, this casts light on the economic incentives that lead organizations to violate ethical norms. [emphasis added]</blockquote>
I find the first sentence of their concluding paragraph extremely problematic. First off, what could possibly be meant by "unethical businesses"? A business is a legal structure, a set of relations, i.e. an abstract entity. A business does not make decisions, actual flesh-and-blood people do. An owner or manager makes a decision "on behalf" of the business, but it is still the owner or manager who has made the decision and who is ethically culpable for it. Confusing agency in this way is indicative of the sloppy use of language and poor philosophic reasoning in economics generally.<br />
<br />
Secondly, the existence of incentives to engage in unethical actions does nothing to remove ethical culpability from the agent who engages in those actions. Sure, a restaurateur facing stiff competition has an incentive to leave negative reviews for his competitors, but he also has an incentive to fire bomb their establishments. In neither case does the existence of incentives mitigate the unethical nature of the act.
If ethics is to mean anything, it must mean acting on the basis of something other than individual incentives (whether financial, social, etc.).<br />
<br />
All businesses have an incentive to game the system in whatever way they can (in this case, leaving fake reviews on Yelp), but only some of them actually do it. The people who choose not to game the system, despite the presence of incentives to do so, are the ones we call "ethical". A person who chooses to game the system and violate the trust of others because of those incentives is someone we call "unethical."<br />
<br />
No wonder the state of "business ethics" is in such a shambles: the "experts" don't even know what ethics means.</div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-4465648315611108574.post-42434336471018287112013-07-22T11:25:00.003-07:002013-07-22T11:31:15.621-07:00NSA 2053<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="margin-bottom: 0in; text-align: left;">
<style type="text/css">P { margin-bottom: 0.08in; }</style>[<i>I don't usually write fiction, but the recent revelations of Ed Snowden and others about the massive surveillance apparatus of the National Security Agency, sparked an idea for this dystopian short-story. The scenario I present below is, perhaps, one response to those who do not think that a blanket spying program poses any problems.</i>]<br />
<br />
<br />
“<span style="font-size: small;">Send the
young man in.”</span>
</div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
<span style="font-size: small;">The General's
voice was gruff but warm, his tone cheerful. He always looked
forward to these initial meetings, they were a bit like first dates.
But whereas his actual first dates had almost universally ended in
uncomfortable silence and thinly veiled rejection, these political
'first dates' never failed to reach a happy conclusion. He had yet
to suffer rejection in his official capacity. </span>
</div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
<span style="font-size: small;">The man who was
shown into the office was tall and text-book handsome. He had a
strong jaw, a full head of chestnut brown hair and intensely blue
eyes. He strode into the General's office confidently, as if he
owned not only the office but the whole building. His face bore
unmistakable signs of irritation. The General smiled and motioned
for the man to sit down.</span></div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
“<span style="font-size: small;">Please Mr.
President, have a seat.”</span></div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
<span style="font-size: small;">The President
did not have a seat. He glared at the General in silence for a few
moments and then erupted.</span></div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
“<span style="font-size: small;">You better
have a damn good reason for this Mitchell! I've got a million things
to do at the moment and I don't have time to be taking bullshit
social calls! Unless you want to start a war this evening, I can't
imagine what on earth couldn't wait until after the fucking
inaugural.” </span>
</div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
<span style="font-size: small;">The
newly-elected President of the United States had been shuffled out of
a celebratory ball by two severe looking NSA agents half an hour
before. They were grim and persistent and they arrived right in the
middle of a solo by the President's favorite jazz clarinetist, which
added considerably to his irritation.</span></div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
“<span style="font-size: small;">General
Mitchell needs to see you immediately, sir.”</span></div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
“<span style="font-size: small;">What about?
Can't it wait?” </span>
</div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
“<span style="font-size: small;">I'm not at
liberty to say what about, sir. The General needs to see you now.
We've been sent to bring you to his office.”</span></div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
<span style="font-size: small;">The President
thought he detected the hint of a threat in the agent's tone and he
didn't like it one bit. He scowled at both of the agents but neither
registered a reaction. They just gazed back at him with dead eyes
and repeated their command.</span></div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
“<span style="font-size: small;">We need to
go now, Mr. President.”</span></div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
<span style="font-size: small;">He scowled at
them for a few more seconds and thought about getting their names for
future retribution, but decided it wasn't worth the trouble.</span></div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
“<span style="font-size: small;">Alright.
Fuck. Jerry, tell the boys we're moving out.” </span>
</div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
<span style="font-size: small;">The Secret
Service agent standing nearest to the President nodded. “Yes,
sir.”</span></div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
<span style="font-size: small;">The General's
office was spacious but spartan. No art hung on the walls. No
plants or furniture interrupted the vast expanse of black marble tile
that covered the floor, save for the General's desk and two leather
chairs that sat facing it. The General was now gesturing to one of
those chairs with an outstretched hand, a used car salesman's smile
frozen on his face. </span>
</div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
“<span style="font-size: small;">Please, Mr.
President, have a seat. I assure you this will only take a moment.”</span></div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
<span style="font-size: small;">The General had
been expecting a fiery response from the President: it was the
response he always got at the start of these meetings. Anger and
indignation was what he expected when he had given the order for the
President to be brought to his office; indeed, it was what he had
hoped to elicit with his exquisitely bad timing. He was not
disappointed. </span>
</div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
“<span style="font-size: small;">Please, sir,
sit down and let me explain.”</span></div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
<span style="font-size: small;">The President
glared at the General a few moments longer and then finally took a
seat. </span>
</div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
“<span style="font-size: small;">Make it
snappy.”</span></div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
<span style="font-size: small;">The General
took a moment to consider the man sitting across from him, the man
who many were already referring to as “the most powerful man on
Earth” and “the leader of the free world.” He chuckled
silently to himself, savoring the irony of those phrases.</span></div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
“<span style="font-size: small;">Some things
have come to our attention at the NSA, Mr. President, some rather
disturbing things.” </span>
</div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
“<span style="font-size: small;">What kind of
things? What are you talking about? I don't have time for this
bullshit.”</span></div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
“<span style="font-size: small;">Well, Mr.
President, it has come to our attention that in 2022, a Ms. Jenny
Butler received a pregnancy termination at the Port View Medical
Center of Grand Rapids, Michigan. Does that ring any bells for you
Mr. President?”</span></div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
<span style="font-size: small;">The President
said nothing. A man who had been radiating confidence and power just
a few minutes before now sat stunned, his mouth slightly agape as the
implications of the General's words slowly sunk into his brain.</span></div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
“<span style="font-size: small;">You were
married at that time, were you not, Mr. President? Quite
unfortunate. There is also the matter of your brother, Michael.”</span></div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="margin-bottom: 0in;">
<span style="font-size: small;">The President
just stared at the General, still in shock. Vaguely connected
thoughts ran wildly about the inside his skull like squirrels on
methamphetamine. <i>Jenny...the abortion...so long ago...if Cindy
knew...if the press knew...Michael?...</i></span></div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
“<span style="font-size: small;">He
would appear to have a predilection for three-way intercourse.
Watching videos of others, I mean, not participating himself. Still,
it would be an uncomfortable thing to have to explain to his
congregation, don't you agree? I'm not a church-going man myself,
but I've heard that they tend to frown on that sort of thing,
especially among the leadership.”</span></div>
<div align="LEFT" style="margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
<span style="font-size: small;">The
President started to regain his composure. He hadn't risen to the
height he had by allowing himself to be intimidated. <i>Ok</i>, he
thought, <i>they've got some dirt. It isn't the end of the world</i></span></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
“<span style="font-size: small;">So
what do you want from me?”</span></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
“<span style="font-size: small;">Oh,”
the General grinned cheerily, “we'll let you know.” </span>
</div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
“<span style="font-size: small;">And
am I to understand that you've been spying on me for my entire
political career, that you know all my deep dark secrets? Is that
what this is about?”</span></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
“<span style="font-size: small;">No,
no, of course not! Don't be ridiculous. No one has been spying on
you for all those years. You're beginning to sound paranoid, Mr.
President.”</span></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
<span style="font-size: small;">The
General's good-natured smile had remained unchanged throughout their
conversation, but now it broadened slightly and took on an additional
air of sadistic pleasure.</span></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
“<span style="font-size: small;">No,
this is just what the boys have dug up in the last few hours. I'm
sure you have plenty of deep dark secrets that we haven't found out
about yet.”</span></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
<span style="font-size: small;">The
leader of the free world and commander-in-chief of the US military
seemed to physically shrink in his chair. In the space of a few
minutes he had gone from a self-righteous, self-assured world leader,
to a beaten, battered dog. He felt like his guts had been ripped
out. He felt like there was a noose around his neck.</span></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
<span style="font-size: small;">He
stood up slowly and turned to leave without a word. Just as he
reached the door of the cavernous office, the General called out.</span></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
“<span style="font-size: small;">Oh,
Mr. President...”</span></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
<span style="font-size: small;">The
President turned, too traumatized already to fear anything else the
General might have to say.</span></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
“<span style="font-size: small;">What?”</span></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
“<span style="font-size: small;">The
Air Force drone bases in Afghanistan, the ones you promised to shut
down during your campaign...that's not going to work.”</span></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
<span style="font-size: small;">The
President stared at the General in silence, then opened the door to
leave. The General's cheery, gruff voice followed him out of the
office.</span></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
<br /></div>
<div align="LEFT" style="font-style: normal; margin-bottom: 0in;">
“<span style="font-size: small;">National
Security, sir, I'm sure you understand.”</span></div>
</div>
Unknownnoreply@blogger.com4tag:blogger.com,1999:blog-4465648315611108574.post-81057059637185939022013-04-22T10:48:00.001-07:002013-04-22T10:48:43.293-07:00The Labor Market As Ultimatum Game<div dir="ltr" style="text-align: left;" trbidi="on">
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<u><b>Introduction:
Labor Market as Ultimatum Game</b></u></div>
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<br />
</div>
<div style="margin-bottom: 0in;">
In the standard neo-classical economics
that I was taught in college, labor contracts are assumed to be
negotiated between parties who have an equal ability to refuse the
terms of any proposed contract and walk away from the agreement.
Each party to the contract is also assumed to have the same amount of
information available to them; for instance, the working conditions
and the amount of surplus created by the production process. It
follows from these assumptions that each party to the labor contract
(i.e. the worker and the employer) will only agree to contracts which
provide each with the value of their contribution to the production
process. So long as there is competition among both employers and
employees, capitalists will not be able to exploit workers (by paying
them less than they are worth) and workers will not be able to
exploit capitalists (by demanding more than they contribute).
</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
Of course, this description of the
labor market sounds patently absurd to anyone who has spent time
toiling in the low-wage sectors of our economy. The statement that
both parties to a labor contract have an equal ability to walk away
from the agreement recently elicited a well deserved guffaw from one
of my friends.
</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
An alternative model of the labor
market is offered by scholars such as Prof. Ellen Dannin<a class="sdfootnoteanc" href="http://www.blogger.com/blogger.g?blogID=4465648315611108574#sdfootnote1sym" name="sdfootnote1anc"><sup>1</sup></a>,
who describe at-will employment as a “dictator game<a class="sdfootnoteanc" href="http://www.blogger.com/blogger.g?blogID=4465648315611108574#sdfootnote2sym" name="sdfootnote2anc"><sup>2</sup></a>”
in which the employer tells the worker the terms of the agreement and
the worker has no choice but to accept<a class="sdfootnoteanc" href="http://www.blogger.com/blogger.g?blogID=4465648315611108574#sdfootnote3sym" name="sdfootnote3anc"><sup>3</sup></a>.
While Dannin's description is closer to lived reality for most of
us, it too, like the neo-classical description above, fails to
capture the nuanced real-life interaction of employers and their
employees (at least, to this humble observer).
</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
A better description can be had, I
think, by conceptualizing the labor market as a variety of ultimatum
game<a class="sdfootnoteanc" href="http://www.blogger.com/blogger.g?blogID=4465648315611108574#sdfootnote4sym" name="sdfootnote4anc"><sup>4</sup></a>.
In a standard ultimatum game, two players are given the task of
dividing a sum of money between them. The first player (the
'proposer') makes an offer to the second player (50/50, 60/40, 99/1,
etc) and the second player decides whether to accept or reject that
offer. If the second player accepts the offer both keep the amounts
agreed upon, but if the second player rejects the offer neither
receives anything. Usually, the game is only played once by any test
subject or pair of subjects and both players know what the stakes are
(that is, they know what the total amount being divided is). The
ultimatum game bears many resemblances to my experience working in
low-wage sectors (janitorial, retail sales, food service); however,
there are a number of tweaks that could be made to the standard
ultimatum game that would make it much more closely resemble what
people like myself face when we go out to look for a job.</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
First, and most obviously, the
ultimatum game is only played one time by any given individual in an
experiment, while employment negotiations are (for most of us) a
'repeated game.' Not only do workers seek employment at multiple
establishments and employers interview multiple job candidates, but
the 'ultimatum game' continues even after employment as workers and
employers negotiate for adjustments of wages, benefits and working
conditions/requirements. Besides being a repeated game, labor
contract negotiations also have distinct 'informational asymmetries.'
Workers and employers do not have the same amount of information
regarding what the actual value of the product or service that the
worker will be making or providing is; nor do they have equal
information regarding the relative share of revenue that labor is
responsible for creating. Workers and employers bargain for shares
of revenue created by the productive process, but only the employer
knows what that revenue actually is. Contrariwise, employers have no
way of knowing for sure ex ante what the individual characteristics
of an employee are, and therefore what their productivity will
actually turn out to be.
</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
Another difference between the actual
labor market and the standard ultimatum game experiment is that
players in the ultimatum game do not suffer any personal economic
consequences if the game ends in refusal, both players simply walk
away in the same economic position that they were before. No one had
gained, but neither has anyone lost. In the real world, on the other
hand, people seeking employment are often in no position to refuse
any offer, however small. This is why my friend laughed at the
notion that workers and employers are on equal footing in negotiating
labor agreements and why Prof. Dannin has characterized the at-will
labor market as a dictator game. Different individual workers will
have differing degrees of ability to refuse low proposals, based on
things like their accumulated savings, strength of social and
familial 'safety nets,' relative slack or tightness in the labor
market, and their individual psychologies. Because these factors
(and many others) are unique to each individual 'player' in the labor
market ultimatum game, generalizations about workers abilities to
refuse proposals must be made with a great deal of caution. My
preference is to assume some sort of distribution of player's ability
to reject low offers, random or otherwise. I have tried to
encapsulate these realities into two concepts which I will explain in
more detail later: ability to refuse (ATR) and economic effects of
refusal (EER).
</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
So, we might conceptualize the labor
market (or at least large portions of it) as a modified ultimatum
game; one in which players repeat the game indefinitely with multiple
other players in an environment of informational asymmetry, and in
which players experience differing consequences as a result of games
that end in refusal. It is on this basic conceptual framework that I
will build in what is to follow.</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
<u><b>Differential Ability to Refuse</b></u></div>
<div style="font-weight: normal; margin-bottom: 0in; text-decoration: none;">
<br />
</div>
<div style="font-weight: normal; margin-bottom: 0in; text-decoration: none;">
We start with the last difference between the standard ultimatum game
and real life that I mentioned above, i.e. that in the ultimatum game
neither party suffers economic consequences for a refusal to accept
the offer. The worst-case scenario for either player is that they
leave the experiment in exactly the same economic condition as when
they entered it. In real life, on the other hand, the refusal to
accept an offer of employment can have very real economic
consequences for the players involved. Failing to reach an
acceptable arrangement with another party in the labor market <i>can</i>
lead players to lose not only money, but homes, families and
self-respect as well.
</div>
<div style="font-weight: normal; margin-bottom: 0in; text-decoration: none;">
<br />
</div>
<div style="font-weight: normal; margin-bottom: 0in; text-decoration: none;">
I say “can” because the degree to which failing to accept an
offer (or failing to make an acceptable offer) will effect a
particular player is dependent on all sorts of things, many of which
are not susceptible to economic analysis, even of the rather “soft”
variety I am attempting here. We can, however, sketch the broad
outlines of what conditions, at least here in the United States, we
might expect to diminish or enhance a person's ability to refuse any
given offer (hereinafter, ATR). Strictly speaking, only workers
should have an ATR, since they are the ones who accept or refuse the
labor contract offered by the employer. However, we might also speak
of the employer's ATR as their ability to refuse to increase their
offers as a result of not finding any takers at their current offer
level. ATR then, for both employers and workers represents their
ability to wait for a better deal to come along.</div>
<div style="font-weight: normal; margin-bottom: 0in; text-decoration: none;">
<br />
</div>
<div style="margin-bottom: 0in;">
<span style="text-decoration: none;"><span style="font-weight: normal;">Many
different variables, so to speak, go into an individual's ATR. The
one that we will be most concerned with here is the economic effects
on an individual of refusal to accept an offer or to make an
acceptable offer (hereinafter EER, economic effects of refusal). By
economic effects, I mean real effects on an individual's standard of
living and their ability to maintain that standard into the
foreseeable future. While we would expect an individual's EER to
have a relatively strong negative correlation to an individual's ATR,
even extremely high EERs can be overridden by other constituents of a
person's ATR. As a dramatic example, I offer the experience of my
homeless friend Dave (known to the transient community in Missoula,
MT as “Crazy Dave”). Dave used to work as a cook at a local
restaurant. The sheer quantity of food wasted by the establishment
became increasingly troubling to him until one day he decided that he
would rather live off the incredible waste of our society than
continue to contribute to it. He walked off the job and never looked
back (although he has done a fair bit of work since then, just not
paid work). For Dave, the economic effects of his refusal to accept
</span></span><i><span style="text-decoration: none;"><span style="font-weight: normal;">any</span></span></i><span style="text-decoration: none;"><span style="font-weight: normal;">
wage offered, dramatic as they were, were far outweighed by the
negative psychological effects that he experienced as a result of
acceptance. Most of us, however, do not posses David's ethical
rectitude, and so our ATR will likely largely reflect our EER. </span></span>
</div>
<div style="font-weight: normal; margin-bottom: 0in; text-decoration: none;">
<br />
</div>
<div style="font-weight: normal; margin-bottom: 0in; text-decoration: none;">
As a general proposition, we might expect workers to have higher EERs
than employers, and low-wage workers have higher EERs than high-wage
workers. Labor market conditions will also differentially effect
players' EERs. A tight labor market (low unemployment) will tend
decrease EERs for workers, since the odds of finding another
at-least-as-good offer in a relatively short period of time will be
high. Coversely, tight labor markets will tend to increase EERs for
employers, since it will be relatively harder for them to find
additional players to make their offer to. However, this will only
be true for some employers, i.e. those that require a continual
stream of revenue to maintain their standard of living. Employers
with large personal fortunes may have an EER of zero, regardless of
labor market conditions; the same is true for wealthy workers.
Accumulated savings and assets are what largely determine a players'
EER, since they are what must substitute for an income or profit
stream in the absence of achieving a 'successful' ultimatum game
outcome (which is why we would expect EERs to be highest for poor
workers and lowest for rich employers).
</div>
<div style="font-weight: normal; margin-bottom: 0in; text-decoration: none;">
<br />
</div>
<div style="font-weight: normal; margin-bottom: 0in; text-decoration: none;">
One last thing that seems pertinent to this analysis is that workers
and employers face different 'transaction costs' in finding opponents
(or, perhaps, partners) with whom to repeat the labor market
ultimatum game. While workers generally must seek out potential
employers, employers can generally wait for potential employees to
come to them. For many low-wage employers, even the simple expedient
of a classified ad is unnecessary as unemployed workers will
regularly present themselves for consideration whether the business
is advertising a vacancy or not. The result is that these kinds of
transaction costs will tend to lower the ATRs of workers more than of
employers.
</div>
<div style="font-weight: normal; margin-bottom: 0in; text-decoration: none;">
<br />
</div>
<div style="font-weight: normal; margin-bottom: 0in; text-decoration: none;">
Having a high EER means having a low ATR, and having a low ATR means
that you will accept pretty much any offer that is made to you. If
your bank account is flirting with zero and rent is due in a week,
you are much more likely to accept wages and conditions that, in
other circumstances, you would not even consider. In the labor
market ultimatum game then, having a low ATR means being ripe for
exploitation. For all of the reasons stated above, it seems
reasonable to assume that, on the whole, a worker will have a lower
ATR than an employer in any given iteration of the labor market
ultimatum game.</div>
<div style="font-weight: normal; margin-bottom: 0in; text-decoration: none;">
<br />
</div>
<div style="font-weight: normal; margin-bottom: 0in; text-decoration: none;">
<br />
</div>
<div style="margin-bottom: 0in;">
<u><b>Informational Asymmetries</b></u></div>
<div style="font-weight: normal; margin-bottom: 0in; text-decoration: none;">
<br />
</div>
<div style="font-weight: normal; margin-bottom: 0in; text-decoration: none;">
In the standard version of the ultimatum game, both players are aware
of the full amount being divided. This informational symmetry has
obvious implications for the outcome of the game. If I am in the
position of player two, i.e. I have to decide whether to accept or
reject the offer, and I know that the ten dollars being offered to me
is only 10% of the total amount at stake, I may reject the offer to
punish my opponent/partner for their unfairness. However, if I am
offered the ten dollars without knowing the full amount in play, i.e.
without knowing whether my opponent/partner was given $20 or $1000 to
divide, I will be more likely to accept it, since I cannot judge the
“fairness” of the deal.</div>
<div style="font-weight: normal; margin-bottom: 0in; text-decoration: none;">
<br />
</div>
<div style="font-weight: normal; margin-bottom: 0in; text-decoration: none;">
In the labor market ultimatum game, the total amount to be divided
between the employer and the employee is any revenue left over after
all of the non-labor operating expenses (inventory, rent, power,
licensing, etc.) have been covered. In general, employees and
potential employees can have only a weak grasp of what the total
amount in play actually is. Because the firm's accounting is not
usually made available to employees either before or after being
hired, employees are placed at a necessary disadvantage in wage
negotiation ultimatum games. Employers will always be able to claim
that “we can't afford” increases in wages or benefits and
employees will not be in a position to verify, much less gainsay,
these claims. The workplace taboo against employees discussing their
relative wage levels creates further informational asymmetries, as
only employers know what the total wage bill for the firm is, while
employees are left to speculate. In the absence of this taboo,
workers might be able to piece together some idea of the company's
overall accounting, but in it's presence this is almost impossible<a class="sdfootnoteanc" href="http://www.blogger.com/blogger.g?blogID=4465648315611108574#sdfootnote5sym" name="sdfootnote5anc"><sup>5</sup></a>.
</div>
<div style="font-weight: normal; margin-bottom: 0in; text-decoration: none;">
<br />
</div>
<div style="font-weight: normal; margin-bottom: 0in; text-decoration: none;">
The asymmetries also flow in the other direction, so to speak,
although to an apparently lesser degree. Employers, as noted above,
have no way of knowing <i>ex ante </i><span style="font-style: normal;">whether
a worker will be more or less efficient than average. Having been on
a couple of hiring committees in my day, I know from experience: the
description of goods given in a job interview does not necessarily
have anything to do with the actual goods that will eventually be
delivered. </span>
</div>
<div style="font-weight: normal; margin-bottom: 0in; text-decoration: none;">
<br />
</div>
<div style="font-weight: normal; margin-bottom: 0in; text-decoration: none;">
<span style="font-style: normal;">However, employers can mitigate this
problem, especially in low-wage jobs, through routinization and
automation; something the fast-food industry seems to have refined to
an exact science. Employers can also monitor the productivity of the
worker after hiring, which will be discussed below. </span>
</div>
<div style="font-weight: normal; margin-bottom: 0in; text-decoration: none;">
<br />
</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
<u><b><span style="font-style: normal;">Looking
for a Job/Employee as Repeated Ultimatum Game</span></b></u></div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
<span style="font-style: normal;"><span style="text-decoration: none;"><span style="font-weight: normal;">As
I said before, unlike the usual ultimatum game experiment, players in
the labor market ultimatum game play repeatedly, both with different
partners, while in the search mode, and with the same partner, after
hiring has occurred. The manner in which this repetition is
performed differs for employers and employees. While employees tend
to entertain employment offers sequentially (one at a time),
employers generally make their offers in batches, interviewing many
candidates for a position and selecting from a group of interested
individuals. This makes “comparison shopping” easier for
employers than for employees and thus serves as another advantage for
employers (although this might not be the case in a tight labor
market).</span></span></span></div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
<span style="font-style: normal;"><span style="text-decoration: none;"><span style="font-weight: normal;">Another
disadvantage faced by employees is that difficulty in comparing
different wage and benefit packages (if one is lucky enough to have
multiple options). Suppose a worker is offered three jobs: one with
a relatively high wage but no health benefits and inconvenient hours,
a second with some health benefits but a lower wage, and a third with
an even lower wage but full health coverage and convenient hours.
How is the worker to estimate the relative values of the different
health plans, or determine how to weigh wages and benefits against
being available for family members, friends and children? It becomes
a matter of trying to compare apples with oranges, bananas and
pomegranates.</span></span></span></div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
<span style="font-style: normal;"><span style="text-decoration: none;"><span style="font-weight: normal;">Employers,
however, do not face this conundrum, since they are the ones
structuring the offers. If an employer cannot find any takers for a
given wage and benefit package, they can simply increase the wage by
a given amount and try another iteration. Once again, we find that
informational asymmetries inherent in the structure of the game tend
to favor employers over employees.</span></span></span></div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
<span style="font-style: normal;"><u><b>Repeating
the Game After Acceptance</b></u></span></div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
In a sense, the labor market ultimatum
game is continually repeated even after employer and employee have
reached a mutually acceptable division of revenue. This is true
because the effective offer from the employer goes down if pay-raises
do not keep pace with inflation, work requirements are increased <i>ex
post</i>, or rises in productivity are not reflected in wage and
benefit gains. Here a<span style="font-style: normal;"><span style="text-decoration: none;"><span style="font-weight: normal;">gain
we have informational asymmetries that favor the employer, since
workers do not have direct knowledge of the revenue created or their
overall contribution to it.</span></span></span></div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
Conversely, an employer's effective
offer goes up if pay increases outstrip inflation, if workers
successfully “slack off,” or if workers can bargain for a greater
percentage of revenue (through unions, exploiting the value of their
personal experience to the firm, etc.).<span style="font-style: normal;"><span style="text-decoration: none;"><span style="font-weight: normal;">
In general though, it would seem that employers will be able to
get a better idea of a worker's productivity than the worker
him/herself, and thus ensure that the employee's remuneration never
exceeds their contribution to the value of the finished product or
service. Workers, however, have no direct way of observing their own
contribution to said value and thus no easy way of knowing what
percentage of the value they create that they are receiving. </span></span></span>
</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
<u><b><span style="font-style: normal;">Conclusion</span></b></u></div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
<span style="font-style: normal;"><span style="text-decoration: none;"><span style="font-weight: normal;">The
labor market can be conceived of as a modified, repeated ultimatum
game between employers and employees. Most the of the divergences
between the real-life labor market and the idealized experiment,
serve to advantage employers and disadvantage employees. As a
result, in the labor market ultimatum game it's easier to get away
with under-paying than it is to get away with under-working. </span></span></span>
</div>
<div id="sdfootnote1">
<div class="sdfootnote">
<br /></div>
<div class="sdfootnote">
<a class="sdfootnotesym" href="http://www.blogger.com/blogger.g?blogID=4465648315611108574#sdfootnote1anc" name="sdfootnote1sym">1</a>Professor
of Law, Wayne State University Law School</div>
</div>
<div id="sdfootnote2">
<div class="sdfootnote">
<a class="sdfootnotesym" href="http://www.blogger.com/blogger.g?blogID=4465648315611108574#sdfootnote2anc" name="sdfootnote2sym">2</a>https://en.wikipedia.org/wiki/Dictator_game</div>
</div>
<div id="sdfootnote3">
<div class="sdfootnote">
<a class="sdfootnotesym" href="http://www.blogger.com/blogger.g?blogID=4465648315611108574#sdfootnote3anc" name="sdfootnote3sym">3</a>https://papers.ssrn.com/sol3/papers.cfm?abstract_id=524382</div>
</div>
<div id="sdfootnote4">
<div class="sdfootnote">
<a class="sdfootnotesym" href="http://www.blogger.com/blogger.g?blogID=4465648315611108574#sdfootnote4anc" name="sdfootnote4sym">4</a>https://en.wikipedia.org/wiki/Ultimatum_game</div>
</div>
<div id="sdfootnote5">
<div class="sdfootnote">
<a class="sdfootnotesym" href="http://www.blogger.com/blogger.g?blogID=4465648315611108574#sdfootnote5anc" name="sdfootnote5sym">5</a>Some
of these asymmetries, of course, can be addressed through union
tactics in workplaces where workers are organized. Trade union
representation, however, seems to be decidedly on the decline and,
at any rate, cannot ameliorate all of the asymmetries and
disadvantages that workers face under the current, capitalist
arrangement.</div>
</div>
</div>
Unknownnoreply@blogger.com3tag:blogger.com,1999:blog-4465648315611108574.post-61875149396410183442013-02-19T15:21:00.001-08:002013-02-19T15:24:19.243-08:00The Problem of Perspective<div dir="ltr" style="text-align: left;" trbidi="on">
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If you ever happen to find yourself on
the campus of Montana Tech, in Butte, and your eyes happen to wander
to the east, your gaze will be greeted by a stunning scenic display.
Historic gallows frames from the old mining days dot the foreground,
while the hillside behind them appears as artistic horizontal bands
of orange, red, yellow, and brown. I know of at least one artist who
made that hillside the subject of a rather pretty series of oil
paintings.
</div>
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<br /></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjPGAZ5Cpj3qeq72aMA9D1bfkbR3UgQRsXq8r2ndYAzRGm-HlWNlmqKX0kkl7Vtl78Dc1pyvtlcKwEYUfXWG9iq2Hja7_l4AdM8g4OqsBbEYlijWRDwsFN4-CFmw2aGw7FOJ26QhcSdU-8Y/s1600-r/Berkeley+Pit.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="202" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjPGAZ5Cpj3qeq72aMA9D1bfkbR3UgQRsXq8r2ndYAzRGm-HlWNlmqKX0kkl7Vtl78Dc1pyvtlcKwEYUfXWG9iq2Hja7_l4AdM8g4OqsBbEYlijWRDwsFN4-CFmw2aGw7FOJ26QhcSdU-8Y/s320-r/Berkeley+Pit.jpg" width="320" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
</div>
<div style="margin-bottom: 0in;">
That hillside, of course, is the
Berkley Pit: America's biggest superfund site and once known as “the
richest hill on earth.” Those beautiful bands of color are the end
result of environmental pillaging on an almost unimaginable scale;
the lovely hues that paint the terraced hillside come from over a
century of mining waste and pollution. The richest hill on earth has
become its foulest pit, but from a distance it looks sorta pretty.
If you get a little closer, down inside of it, say, the view isn't
nearly so pleasant.
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
This is by way of making a point about
perspective, description and knowledge. The perspective from which
one views the world has necessary consequences on one's description
of the world. One's description of the world dictates which facts
about the world one can become aware of, and which facts one cannot
(because they fall outside of one's description). Any economist
necessarily views the economy from a particular perch within the
economic system which s/he is describing. The location of this perch
is an over-determining factor in the economist's economic thinking
and outlook. It largely determines which phenomena they see as
problematic and which as salutary, which problems they consider
relatively minor, to be safely ignored, and which need immediate
addressing.
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
Most of those whose occupations consist
of describing the economy and its functioning occupy perches that
are, at the very least, situated well within the top half of the
income distribution. Even relatively low-paid adjunct professors, if
not especially affluent, are at least part of the white-collar,
professional world. This uniformity of perspective has important
effects on economic theory and knowledge. It is as if economists
were trying to describe the Berkley Pit, but never venturing any
closer to it than the Montana Tech campus. This is not to imply that
there is nothing important that one might discover from that
perspective, but rather to point out that many important aspects of
reality are simply not accessible from that vantage point.
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
In the same way, economists whose
entire experience of the labor market consists of holding one or
another academic post, can hardly be expected to have much to
contribute to discussions about the low-wage service sector. From
behind a desk in the ivory tower the psychological suffering faced by
“the working poor” on a daily basis probably doesn't seem like
such a big deal. For a tenured academic, it might be difficult to
understand the psychic toll that a lifetime of having little-to-no
control over one's work takes on a person. There is knowledge about
the workings of our economy, vital, relevant knowledge, that is
simply “invisible” to most economists because they've only seen
the view from the hilltop, not from the valley.
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
In order to overcome this blindness,
economists need to learn to listen to people who occupy other perches
in our economy, especially perches below their own. We would have
very different economic policy prescriptions if economists spent less
time in the tower and more time in the street, examining those things
which aren't visible from the faculty lounge.</div>
</div>
Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-4465648315611108574.post-1330057363568028742013-01-25T14:46:00.000-08:002013-01-25T15:16:29.006-08:00A Mobius Model of Reality<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj5AhZ_kTqQwcOro6JDS2DLspot7c8Rryys7oPwdfWJDU9renNrvjcc5WNcOVVrS5J-LfGDTuG_0kj2J2UMNcvcZ99_-qkNZtXCPab55eI4biERIBtnRkosoaSgQFLPKTH39i_fHQCREDBo/s1600/Mobius_Strip.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj5AhZ_kTqQwcOro6JDS2DLspot7c8Rryys7oPwdfWJDU9renNrvjcc5WNcOVVrS5J-LfGDTuG_0kj2J2UMNcvcZ99_-qkNZtXCPab55eI4biERIBtnRkosoaSgQFLPKTH39i_fHQCREDBo/s320/Mobius_Strip.jpg" width="261" /></a></div>
The sciences, both physical and social, attempt to understand reality by first breaking it into parts, and then studying each part, each aspect, individually. This is the method of analysis. There is much to be gained from this method of enquiry and understanding, as the current state of our technology readily attests to. This method, however, also has its limitations and its built-in blind-spots. It can lead us to conclusions about the nature of reality which are incorrect, despite their being based on apparently logical foundations.<br />
<br />
Imagine that two people, Mike and Maya, are confronted by a very large mobius strip. It's so large, in fact, that they can't even see the whole thing from where they're standing. <br />
<br />
<blockquote>
Mike says to Maya, "Weird. I wonder what that thing is?"<br />
<br />
Maya responds, "You know, it kind of looks like a big mobius strip to me."<br />
<br />
Mike: Mobius strip, what's that?<br />
<br />
Maya: It's something I heard about once. It's a form that only has one side and one edge.<br />
<br />
Mike: What?!? That's ridiculous! How is that even possible?<br />
<br />
Maya: I don't really understand the details, but I'm pretty sure it is possible and that this is one of them, just a really big one.<br />
<br />
Mike: Well, how about we test out this little hypothesis of yours? Obviously this thing is too big to consider all at once, but we can cut sections out of it and examine them. If we look at a bunch of sections, we should be able to get an idea about the whole thing, right?<br />
<br />
Maya: I don't know if that will work or not.<br />
<br />
Mike: Why not?<br />
<br />
Maya: I can't really say for sure, it just doesn't feel right to me.<br />
<br />
Mike: Whatevs. If you don't have any other suggestions, I'm going to start studying this thing one section at a time. We'll see how many sides this "mobius strip" really has.<br />
<br />
[Mike pulls a pair of scissors out of his pocket and begins cut sections out of the strip]<br />
<br />
Maya: Why do you have a pair of scissors in your pocket?<br />
<br />
Mike: Because this is a hypothetical situation. Are you gonna help me or not?<br />
<br />
Maya: I think I'll let you handle this one.<br />
<br />
Mike: Fine. [begins to examine the pieces of strip he's cut out]<br />
<br />
Mike: Maya, come here and look at this. I've got all these pieces here and every single one of them has two sides and four edges. How is it possible to take a bunch of two-sided things, put them together, and come out with a one-sided thing?<br />
<br />
Maya: I don't know how, but I still think it only has one side.<br />
<br />
Mike: Think whatever you want. I've studied the matter and I can tell you, every piece of this thing has two sides, therefore the whole thing must also have two sides. I don't know what a "one-sided form" even means. Sounds like superstition to me.</blockquote>
The problem here is obvious. The only way to directly verify that a mobius strip has only one side and one edge is to trace along its entire length, but in our hypothetical situation that is not possible. So Mike tries to test Maya's claim through analysis, i.e. by breaking the whole down into its constituent parts. But while this might be a good way to understand a car engine, say, it is not a valid way to understand a mobius strip (or at least not a valid way to answer the question of how many sides it has). <b>The act of analysis itself ensures that the incorrect conclusion will be reached.</b><br />
<br />
The whole must be understood in terms of the whole, not in terms of the individual parts. Inasmuch as the sciences claim to provide a comprehensive worldview, a perspective on the whole of reality (or at least to be working in that direction), their methodologies will ultimately, necessarily, lead them astray.<br />
<br />
Someone may say to them, "Life and death are one," and they will respond, "Nonsense! Life is one thing and death merely the absence of life. Your statement is meaningless and you are obviously a superstitious bumpkin!" Another person may say, "There is no difference between rich and poor," and they will say, "Ridiculous! The rich live in palaces and buy yachts for their yachts, while the poor must scramble and scrape just to pay the rent. You have no idea what you're talking about."<br />
<br />
But they are trying to understand the whole through analysis of the parts. The knowledge that they have gained by analysis is valid and true, but there also exist truths that cannot be had through analysis. Denial of those truths is known as "scientism": the superstitious belief that the whole of reality can be understood through scientific analysis. </div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-4465648315611108574.post-28892177193261248502013-01-23T09:49:00.000-08:002013-01-23T09:49:32.060-08:00Like Paint...<div dir="ltr" style="text-align: left;" trbidi="on">
<div dir="ltr" style="text-align: left;" trbidi="on">
Commenter hermanas left this little gem in the comments section of this morning's post on Yves Smith's Naked Capitalism blog:<br />
<br />
<blockquote>
<cite>
Like paint, ideology conceals a multitude of sins. Including criminal intent.</cite></blockquote>
</div>
<br />
So of course, being a painter <b>and</b> an inveterate purveyor of metaphor, I couldn't help but flesh this thought out. Here's my response:<br />
<br />
<blockquote>
Society, then, is like a wall, “sins” are like imperfections on the
wall, and ideology is the paint that supposedly covers up those “sins.”<br />
<br />
But as any (good) painter can tell you, a coat of paint doesn’t
actually hide imperfections. In fact, it can make them more apparent.
If you really want a beautiful wall, you have to spend a bunch of time <i>scraping off all the imperfections</i>
first. Good painters spend more time scraping and sanding than
actually painting. Only lazy painters neglect the tedious task of
preparing the surface and just slap a coat of paint on it.<br />
<br />
So, for purposes of the metaphor, if we want to end up with a
“beautiful” society, we need to first spend a lot of time scraping away
imperfections, i.e. removing all the crime and corruption, the systemic
fraud, the captured regulators, etc. Only <b>after</b> we’ve done all that can we justifiably cover the whole thing with our preferred color, i.e. ideology. <br />
<br />
But if we get lazy and just throw the ideology on without first
concerning ourselves with the pre-existing flaws in society, we just end
up highlighting the flaws and actually making them worse. So if we try
to throw our “efficient markets” ideology on top of a system rife with
informational asymmetry and manipulation, we only end up worsening those
problems.<br />
<br />
Like paint before it’s been applied, ideologies are pure. The world,
OTOH, like all surfaces, is full imperfections, contradictions and
paradox. Different ideologies are like different colors of paint, each
pure, each unique, and each <i>just as valid</i> as any other. The
problem arises when, mesmerized by the beauty of our preferred ideology,
entranced by its pure, perfect hue, we become over-anxious and try to
apply it to society before society has been adequately “cleaned up.” The
results are predictable. If you stand back a bit and squint your eyes
it looks OK. But if you put your glasses on and stand a little closer
it just looks like absolute crap. <br />
<br />
All of our arguing over ideologies amounts to this: screaming at one
another over which color of paint is better (which is ridiculous, since
this is essentially a matter of <i>taste</i>), without first having
addressed ourselves to scraping, sanding and stripping all the dirt and
grime and detritus off the wall we intend to paint. Regardless of who
wins the “color war,” the end result is going to be a shoddy looking
piece of work.</blockquote>
</div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-4465648315611108574.post-8295355632205818182013-01-19T11:26:00.000-08:002013-01-19T11:26:34.189-08:00<div dir="ltr" style="text-align: left;" trbidi="on">
<a href="http://neweconomicsinstitute.org/publications/local-stock-exchanges-next-wave-community-economy-building">Here's what I'm reading today:</a><br />
<br />
<blockquote><strong>IV. The Vision of Local Stock Exchanges</strong><br />
<br />
Throughout most of this country’s history, securities were issued by
local companies based in specific states, were traded on stock exchanges
within each state, and were regulated by each state. Some state
exchanges were efficient, honest, and successful, while others were
sloppy, corrupt, and uneconomic. After the Great Depression hit,
Congress stepped in to place the entire industry under national
supervision. Mindful of the principles of federalism, it established a
two-tiered regulatory regime—a national system, overseen by the
Securities and Exchange Commission (SEC), for the creation and trading
of stocks across the country, and state systems, overseen primarily by
state regulators, for the creation and trading of local stock within a
given state.<br />
<br />
For a number of understandable reasons the state systems largely fell
into desuetude. The priority of most companies selling stock was to get
as much capital as possible from as many investors as possible,
irrespective of where they lived. Creating stocks tradable on national
secondary markets offered greater demand for the stock, greater
liquidity (that is, the ability to have ready cash to buy and sell the
stock), and greater opportunities for profit from the secondary trading
of the securities. But the <em>possibility</em>of local stocks and local exchanges has been, and remains, firmly embedded in U.S. law. It’s a sleeping giant.<br />
<br />
Every now and then a story comes along that reminds us of the
existence of the state systems. For example, when Ben & Jerry’s
first issued public stock, it was basically a statewide offering. You
had to be a Vermont resident to buy or sell the securities. Subsequent
stock issues by Ben & Jerry’s, however, were conventional national
offerings. Gradually the company lost its tether to Vermont and
ultimately was purchased by Unilever in a hostile takeover.<br />
<br />
The prevailing view is that it’s difficult and expensive to do any of
the five essential pieces of successful state stock exchanges—to create
local stock, to sell it initially, to evaluate it, to trade it, and to
assemble it into diversified portfolios. It’s worth mentioning that
historically these same tasks confronted investors interested in larger
companies. But throughout the nineteenth and twentieth centuries new
financial intermediaries emerged, making it possible to restructure
companies so that they had tradable stock shares, to evaluate the worth
of shares, and to exchange shares on various public stock markets. My
point here is that we already know how to do these tasks pretty well.
Now we need to apply our know-how to the local companies.
<br />
~Michael H. Shuman, from <a href="http://neweconomicsinstitute.org/publications/local-stock-exchanges-next-wave-community-economy-building"><i>Local Stock Exchanges: The Next Wave of Community Economy Building</i></a></div></blockquote>
I like this idea, although I would prefer local bond exchanges, rather than stock exchanges, since I think stocks are ultimately a rent extracting device. A system like this could be used to create a funding mechanism for worker-owned co-ops, which is one of my pet causes, and it could also conceivably be combined with an alternative, local currency to create a truly local economic system! Exciting...
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-4465648315611108574.post-60795170796056686732013-01-08T00:57:00.000-08:002013-01-08T00:58:41.103-08:00Alternative Theology, Lesson One<div dir="ltr" style="text-align: left;" trbidi="on">
<h2 style="text-align: left;">
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Orthodoxymoronic Position</h2>
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<br /></div>
<h3 style="margin-bottom: 0in; text-align: left;">
First Assumption: nothing comes from
nothing.</h3>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
This is a denial of the concept of
creation <i>ex nihlo</i><span style="font-style: normal;">. The
natural extension of this concept is that anything currently existing
has necessarily existed in a previous time period. Things change
form, change state, rearrange themselves in multiple ways, but in
some sense the same “things” exist now as existed at the
beginning of the universe. Anything that exists or comes into
existence has necessarily been created from some thing or things that
already exist, and so even the Big Bang, the supposed beginning of
our universe, must have originated in some thing which had existence
prior to it. That infinitesimal point-particle that exploded into
what we now know as our universe did not come from nothing; it was
not created </span><i>ex nihlo</i><span style="font-style: normal;">.
Nothing comes from nothing*. </span>
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
<span style="font-style: normal;">Physicists
cannot look back further in time than the Big Bang, they cannot see
what may have come before it, since the very fabric of time itself is
wrapped up in that tiny particle. But just because the mathematics
that physicists use to look back in time breaks down at the moment of
explosion, it does not follow that there is nothing beyond that
moment to see, nor that other methods of looking might not yield more
satisfying results.</span></div>
<div style="margin-bottom: 0in;">
<br /></div>
<h3 style="margin-bottom: 0in; text-align: left;">
<span style="font-style: normal;">First
Conclusion: we have always existed and will always exist.</span></h3>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
<span style="font-style: normal;">Nothing
comes from nothing, and we did not come from nothing either. </span>
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
<span style="font-style: normal;">It
happens every so often that water falls, of its own accord, from the
sky. Of course, the water doesn't just come from nowhere, it comes
from clouds which are composed of water vapor. And that water vapor
just didn't happen either, it came from evaporation off of lakes and
oceans. And those lakes and oceans didn't come from nothing, they
are created and maintained by rivers and streams which, of course,
get their water from the rain, which every so often falls from the
sky. </span>
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
<span style="font-style: normal;">In all
of this, the water molecules themselves remain ever the same and
always exactly what they are. In certain states they are perceptible
to our senses and useful for our purposes, while in other states they
are imperceptible and therefore useless to us. Nonetheless, they
remain forever themselves, unchanging. </span>
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
<span style="font-style: normal;">In the
same way we ourselves change state and move from imperceptibility to
perceptibility and back again, perhaps more than once, but we
ourselves never change. Being and non-being are themselves two
different states through which we, and everything else, moves. Any
thing, any entity, may exist in the state of potential (non-being) or
the state of actuality (being). The entity itself remains unchanged
regardless of it present state. The unenlightened on these matters
view birth as a beginning and death as an end, but this view, as we
have seen, violates the First Assumption. Nothing comes from nothing.</span></div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
<span style="font-style: normal;">*It
may be objected that the discovery of “quantum foam,” i.e. of
particles popping into and out of existence on the quantum level,
proves the reality of creation </span><i>ex nihlo.</i><span style="font-style: normal;">
The Orthodoxymoronic view, however, holds that these particles are,
in fact, not popping into and out of existence but rather moving back
and forth between our dimension and one abutting or overlapping it.
Regardless, even if the particles are popping into and out of
existence, existence itself is merely one form of being, as is
explained below.</span></div>
</div>
Unknownnoreply@blogger.com3tag:blogger.com,1999:blog-4465648315611108574.post-83462345684217431862012-12-12T09:37:00.002-08:002012-12-12T09:37:49.367-08:00DOJ Declares HSBC Too Big To Prosecute<div dir="ltr" style="text-align: left;" trbidi="on">
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2012 may well be remembered in times
to come as the year of the financial scandals. Not that scandals in
the finance industry are anything new, but this year seems to have
seen a greater number of scandals, and of larger scope, than anything
that has come before. It is now clear that fraud and manipulation
are widespread in the finance industry, even more so than many
cynics, myself included, had previously believed.
</div>
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<br /></div>
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In what may be the biggest financial
scandal of the year, the United States Department of Justice (DOJ)
announced that it would not be indicting HSBC (one of the world's
largest banks) on money laundering charges, despite having amassed
mountains of evidence showing that HSBC has assisted Mexican drug
cartels and others to launder over $60 trillion. Instead, HSBC
announced last Tuesday that they had agreed to pay $1.92 billion to
settle the allegations. The reason that the DOJ gave for not
bringing criminal charges is that a successful prosecution might
bring down the bank entirely and destabalize the global financial
system.
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<br /></div>
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You're already familiar with Too Big
To Fail...now meet Too Big To Prosecute.
</div>
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<br /></div>
<div style="margin-bottom: 0in;">
The fine is being portrayed by the
mainstream press as a win for prosecutors, since $2 billion sounds
like a lot of money to most people. But when one recalls that HSBC
likely laundered something in excess of $60 trillion, and that 1
trillion is equal to 1,000 billion, the fine actually seems
ridiculously small.
</div>
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<br /></div>
<div style="margin-bottom: 0in;">
Let's knock off a few zeros and put
this in terms we can all understand: 60 trillion is 60,000 billion,
so HSBC laundered $60,000 and got fined $2. All of a sudden those 2
billion dollars don't seem like such a big deal. The question one is
led to ask is, <i>did HSBC make more than 2 billion dollars for
laundering 60,000 billion?</i><span style="font-style: normal;"> The
obvious answer would be “yes,” since 2 billion is only .003%
of 60 trillion. Even if HSBC was only charging the Mexican drug
lords 1% to launder their loot, they still would have made $600
billion. </span>
</div>
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<br /></div>
<div style="margin-bottom: 0in;">
<span style="font-style: normal;">What
this means is that the biggest banks no longer need fear prosecution,
even for laundering gargantuan piles of cash on behalf of drug lords,
terrorist-funders and embargoed states (HSBC was doing illegal
business with both Iran and Cuba). The fines they are likely to pay
if they get caught can be written off as merely a “cost of doing
business,” and a vanishingly small cost at that. The “Too Big To
Fail” banks and financial institutions are now, officially, above
the law. </span>
</div>
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<br /></div>
<div style="margin-bottom: 0in;">
<span style="font-style: normal;">What
is even more disturbing than the money laundering itself, is the
DOJ's reasoning for its refusal to bring criminal charges. Their
concern, in part, is that a guilty verdict or plea in such a case
would disallow pension funds from investing in HSBC. You read that
correctly, the Department of Justice is refusing to bring indictments
for criminal acts committed because doing so would hinder the
criminals from having access to your retirement savings. DOJ is now
in the somewhat awkward position of fining HSBC for criminal money
laundering, while at the same time trying to maintain that HSBC was
not engaged in criminal money laundering, since if they were, your
pension fund would have to take its business elsewhere, which the DOJ
apparently thinks we need to avoid. Welcome to Wonderland, folks; we
are definitely through the looking glass, here. </span>
</div>
<div style="margin-bottom: 0in;">
<span style="font-style: normal;"> </span>
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
<span style="font-style: normal;">But
what if the Department of Justice has a point? What if being too
harsh on HSBC and its executives really would destabilize the global
economy and lead to another 2008-type crisis? Shouldn't we avoid
that at all costs?</span></div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
<span style="font-style: normal;">There
are a number of problems with this line of thinking. The first is
the assumption that criminal prosecution of individuals within HSBC
will necessarily lead to the total collapse of the bank. HSBC is a
massive, highly profitable bank, with a value of $174.38 billion and
a profit margin of 27%, according to the New York Times Dealbook.
Even without pension fund investors HSBC might still be able to make
money, if on a considerably smaller scale. </span>
</div>
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<br /></div>
<div style="margin-bottom: 0in;">
<span style="font-style: normal;">But
even if the withdrawal of pension funds led to the bank's collapse,
there is no reason to think that HSBC couldn't be wound down in a
relatively orderly manner. Iceland did just this, when it let its
biggest banks fail during the financial crisis of 2008, paid off
depositors using the banks' assets and made investors take a
haircut. As a result, Iceland has been quicker than other European
countries to recover from the Global Financial Crisis and, unlike the
U.S., now has a banking system cleansed of frauds and criminals.
Iceland's example puts the lie to the “Too Big To Fail” meme,
proving that letting big banks collapse when they engage in unsound,
fraudulent behavior, is a real possibility. </span>
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
<span style="font-style: normal;">The
actual reason that banks in the U.S. and elsewhere get bailed out,
and that they only pay a .003% fine when they get caught breaking
the law, has more to do with their large contributions to political
campaigns and parties, than it does with their importance to our
economic system. In fact, and not at all surprisingly, allowing
criminality at our largest financial institutions to go virtually
unpunished is an extremely bad thing for our economy. </span>
</div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
<span style="font-style: normal;">The
economy as a whole, and the financial industry in particular, runs on
trust. When frauds and criminals are given a free hand to do
whatever they like with little-to-no chance of meaningful
prosecution, trust becomes a non-existant commodity in the market
place and the system grinds to a halt. This is what happened in 2008
during the credit-crisis. Banks refused to lend to each other, none
trusting that the others were reporting their financial positions
correctly, no one being sure who was actually solvent and who was one
step away from bankruptcy. Everyone knew that fraud was widespread,
since everyone was engaging in it on a systematic basis, and
therefore no one trusted anyone else. As it turns out, individual
greed is not enough to make a market function: trust is also
required.</span></div>
<div style="margin-bottom: 0in;">
<br /></div>
<div style="margin-bottom: 0in;">
<span style="font-style: normal;">And
where does that trust come from? It comes from knowing that those
who would cheat and defraud are being hunted by authorities, that
they are being punished and eliminated from the marketplace. But now
the authorities in charge of prosecuting the bad guys have come out
and stated openly that they do not intend to prosecute the crimes of
the largest players, that they will be given free reign to do
whatever they like, whether it's knowingly selling pension funds
lemon MBS (mortgage-backed securities) or laundering money for the
Sinaloa cartel. Even a cynic like me has to shake his head in
disbelief. </span>
</div>
</div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-4465648315611108574.post-37647954552177418592012-11-05T06:18:00.000-08:002012-11-05T06:18:43.830-08:00Action and Inaction<div dir="ltr" style="text-align: left;" trbidi="on">
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In the Bhagavad Gita, Krishna tells
Arjuna that, “the wise man sees action in inaction, and inaction in
action.” Sometimes, the most powerful action you can perform, is
to perform no action at all.
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<br />
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I was in the sixth grade in Livingston,
Montana. Due to inclement weather, our class was having recess
indoors, in the gymnasium that doubled as our lunch room, and I was
sitting cross-legged on the floor, in a circle with perhaps a dozen
other boys. Sitting next to me was a boy who's name I've since
forgotten, but who's well-earned reputation as a bully I can still
recall. We sat around, bragging about imagined exploits and
generally lying to one another as young boys are wont to do, when the
bully next to me suddenly turned to the boy sitting on his other side
and viciously pinched the inside of his thigh, twisting the flesh
until the boy squealed like a frightened piglet. A hardy laugh was
had by all...well, all except the victim.</div>
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<br />
</div>
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When I had seen what happened to that
other boy, I had known immediately what would be coming next. I
knew, as certainly as I knew that the sun would go down that evening
and come up again the next morning, that the bully's next move would
be to repeat his pinching and twisting procedure on another victim;
and I knew that I would be that victim. But as I realized this I
also made a decision: I would not try to stop him from torturing me
but neither would I respond to it. I would let him pinch, but I
would not squeal. I steeled my pre-teen nerves.</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
And sure enough, the young bully turned
to me like clockwork and, with an demented grin, pinched my thigh and
twisted hard. It hurt, sure, but I just looked at him placidly,
trying my best to remain totally expressionless. His grin at once
vanished, replaced by a look of confusion. Maintaining his grip on
my thigh-flesh he asked in a tone of near wonder, “doesn't it
hurt?”</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
“A little.” was my nonchalant
reply. My voice didn't even waver. The bully released his grip, and
I could sense that he was a little bit scared now, despite the fact
that I was a scrawny kid who had never hurt anybody and didn't intend
to. But my unexpected reaction, or rather lack of reaction, had
thrown him out of his accustomed role of victimizer by making him
apparently powerless over one who would normally be playing the role
of victim. In this unaccustomed circumstance, he did not know what
to do or what to expect next, and uncertainty, as I learned, is ever
the traveling partner and boon companion of fear; and it must be
said, I never got any more trouble from that boy.</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
Krishna tells Arjuna that, “the wise
man sees action in inaction, and inaction in action.” The modern
world is a very hectic place, everywhere people scurry from one
occupation to the next, one task to the next, one hobby to the next;
seeking ever higher levels of productivity, efficiency, luxury,
bliss. The modern world is very busy, full of action, and yet there
is nothing, really, going on. The forces that drive individuals and
society as a whole today are no different than those forces and
desires that drove the conquests of the Romans or the slaveholders of
the old South. There is much apparent action in the modern world,
but it is nothing more than a repetition of what has already been;
now dressed up in hip modern fashion and sporting an electronica
soundtrack, but only original on the surface, being, at heart, the
same as what has come before. Hollywood is an almost pure
manifestation of this principle, with their endless sequels that
simply repeat the same simple plotlines in endless variation. Yes,
we have progressed from Saw I to Saw VII, but has anything really
changed?</div>
<div style="margin-bottom: 0in;">
<br />
</div>
<div style="margin-bottom: 0in;">
On the other hand, an introverted stoic
or contemplative mystic may seem, to the outside world, to be
supremely inactive. There can hardly be conceived anything less
active than Zen meditation, for instance, which is described by Zen
students as “just sitting.” And yet, if through this process of
just sitting, a person comes to a clearer understanding of the
reality in which they find themselves entangled, if they find some
peace or contentment that is both beyond and yet embracing of their
everyday reality, then true and profound action has indeed occurred.
</div>
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<br />
</div>
<div style="margin-bottom: 0in;">
And also, there is this: that true
action is impossible while one is in the process of reacting. Before
one can truly act, that is to say, before one can act with free will,
before one can be said to have willfully and intentionally initiated
some action, one must first keep oneself from reacting, since
reacting is only the repetition of already existing conditioning, of
old modes of behavior.
</div>
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<br />
</div>
<div style="margin-bottom: 0in;">
If I call you a “d-bag a-hole” and
you punch me in the face you have not truly acted, only reacted to my
insult. It would be just as possible to assign the volition for the
punch to me myself as it would be to you, since I was the one who
initiated the sequence of events which unfolded mechanically once my
insult had been uttered. Of course, it may be the case that I called
you a “d-bag a-hole” not as an act of my own volition, but only
as a reaction to some other event, say being intoxicated with
alcohol. In fact, this is the case for most of us, most of the time.
We are rarely, if ever, acting with true volition, with truly
thoughtful intention, because before we have a chance to collect our
thoughts we have already reacted in our accustomed way. When one
becomes aware of this, the whole concourse of everyday life can seem
nothing but reactions to reactions to reactions, with nary a truly
intentional act to be found. It is for this reason also that we are
told, “the wise see action in inaction and inaction in action.”
The first, essential step to true action is the control of one's
conditioned reactions, and so inaction is, in this sense, the
necessary prerequisite to action.</div>
</div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-4465648315611108574.post-66158778193879749562012-02-01T08:01:00.001-08:002012-02-01T08:29:04.072-08:00The Honey Deniers<div dir="ltr" style="text-align: left;" trbidi="on"><br />
<div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;">There was once a country wherein the only foods consumed were meat and potatoes. These were seasoned with salt and pepper and the potatoes were often livened up with slabs of butter, but the people of the country were totally ignorant of all other fair. "Meat and potatoes everyday," they would say to each other, "you can't get much better than that."</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;"><br />
</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;">One day, a young man of that country came down with a nasty case of the wanderlust and he decided to take a sack of potatoes and few tins of jerky and see what was happening on the other side of the wilderness. He walked for a couple of days and then he walked for a couple days more. He was beginning to worry that his jerky and potatoes might run out and leave him food-less in the wilderness, when at last he sighted a village in the distance. The people of the village welcomed the traveler and one of them invited him to her family's house for supper.</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;"><br />
</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;">The young man sat down for supper in a strange land and found before him the usual meat and potatoes. But after the meal the host emerged with something he had never seen before, something they called "dessert." It was sliced bread smothered in honey. </div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;"><br />
</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;">"What is it?" the young man asked his hosts.</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;"><br />
</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;">"It's good," they replied, "just try some."</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;"><br />
</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;">He took a bite and was almost overcome by a sensation that he had never known before: sweetness!</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;"><br />
</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;">"Wow," he said, "you have to tell me where you get this."</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;"><br />
</div><div align="CENTER" style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in;">~ ~ ~</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;"><br />
</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;">A few weeks later the young wanderer returned to his home country. He tried to explain to his friends and family about honey and sweetness, but it was hopeless.</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;"><br />
</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;">"It's like there's this thing that happens on your tongue," he said, "this different kind of flavor, and then it fills your whole head and then everywhere."</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;"><br />
</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;">"Is it like butter?" his brother asked.</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;"><br />
</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;">"No, it's not like butter," he replied, exasperated, "it doesn't come from cows at all."</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;"><br />
</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;">"Then where does it come from?"</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;"><br />
</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;">When word got around about where this supposedly wonderful food came from, people began to laugh. They said all that traveling around in the wilderness had made the young man crazy, and the "honey" he was always on about was just a product of his fevered imagination.</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;"><br />
</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;">"Come on now," they would chide him, "you want us to believe that the best food in the world is <i>bee shit</i>?!?"</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;"><br />
</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;">"Show us some," they would taunt, but he had eaten all he had during his journey home. People began to snicker at him everywhere he went. It became unbearable.</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;"><br />
</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;">Finally, the young man decided to prove himself once and for all. There was a beehive in the branches of a tree on the edge of the city, and the young man announced that he was going there to bring back some honey. Unfortunately, he had failed to learn the process used in the neighboring country to obtain the honeycomb from the beehive, but had instead spent all his time eating as much honey as he could. Consequently, he returned from his mission empty-handed and covered in welts. People really got a kick out of that. Some people said it was sad and showed how dangerous mental illness could be; but mostly, they just laughed.</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;"><br />
</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;">After the swelling had gone down, the young man decided to return to the country of honey. He gathered another sack of potatoes and a few more tins of jerky and prepared to leave. A few other young men overheard his plans and asked if they could accompany him, not because they believed him about the honey but just out of boredom. So it was that four young men set off into the wilderness from the country of meat and potatoes, and none of them ever returned. The people of the country took this to be evidence of honey's non-existence and proof of the dangers of travel.</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;"><br />
</div><div align="CENTER" style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in;">~ ~ ~</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;"><br />
</div><div style="background-color: rgba(255, 255, 255, 0.917969); color: #222222; font-family: arial, sans-serif; font-size: 13px; margin-bottom: 0in; text-align: -webkit-auto;">Years later a man from the country of the honey-eaters happened to pass through the country of meat and potatoes. As he conversed with some of the locals, he realized they were innocent of the joys of honey and decided to enlighten them. He offered to introduce them to a delicious new food if only they would show him where to find a beehive. When the people heard what he had in mind, they all began to laugh and mock him. "You can keep your bee shit, Stranger," they said, "we'll stick with our meat and potatoes." Bewildered and somewhat appalled, the man proceeded on his way. Honey was never heard of in that country again. </div></div>Unknownnoreply@blogger.com0