My interest in economics began in 1977 when I was crossing the bridge from Hong Kong to China at Lo Wu in Shenzhen. Before that, the topic bored me. Back in the bad old days of hardline communism, the Hong Kong trains stopped at the border, we got off the Hong Kong trains, walked across the bridge into China, and got on a Chinese train. I was bewildered as to how Hong Kong, with no resources, except people (and "overpopulation" at that) was a first world territory, and the Peoples Republic of China, with the exact same people and limitless resources, was distressingly poor. As I reflected on this, the only difference could be the ideas behind the actions that gave the results. Clearly these were the same people on both sides of the border. It was ideology that made the difference, in essence economic ideology.
So free markets vs. communism. What little economics courses I had in college mentioned capitalism (defined as keynesianism) vs. communism, and no wonder I was bored. Pretension vs utopianism. But Hong Kong was defined as a free market, which was not on the radar in academia. Since I was in Hong Kong, I could see how a free (well, freer) market worked. Little in the way of government. Almost no one pays taxes. Everyone who wants to work can. Charities abundantly supplied. Freedom to come and go. Goods and services abundant, diverse and affordable. Private companies issue the currency! Cosmopolitan with apparently no ethnic strife. Private security well armed on the streets (shotguns everywhere to dissuade the snatch-n-run thieves). Transport cheap and plentiful (and even trains and later subways privately owned). Whole districts where no even the cops would go. Security probably the best in the world. Wow. Unimaginable to me.
This being the 70's and Milton Friedman a contributor to Newsweek magazine, I could read about libertarians (he wasn't really one) and the great work of monetarists in Chile. As the devil emerged in the details, the "Reagan revolution" began and supply side economics and trickle down theory was popular. Gosh, a system that optimizes government receipts. Why would we want that?
As I travel along these theoretical lines, I keep checking against Hong Kong as a test, and I also start to learn more about the history of Hong Kong, and begin to understand that Hong Kong and USA were started at the same time by the same people. The USA version of freedom "evolved" over time to what I grew up in. Hong Kong remained true to its roots. Hong Kong was what USA should have stayed.
In the 80's I took a sabbatical form work and studied what I had observed the ten years working in importing. At some point I read an article on school vouchers which included this comment.
Furthermore, there is no need for "vouchers" for particular goods or services: for education vouchers, food stamps, housing vouchers, television vouchers, or what have you. By far the best "voucher," and the only voucher needed, is the dollar bill that you earn honestly, and don't grab from others, even if they are merely taxpayers.
Do you recall ever having that experience when reading and your mouth drops openly stupidly, your brow furrows, and you start breathing through your mouth? A great truth, a most obvious truth, dawns on you? Your mind is kicked back to neanderthal, as you realize just how stupid you can be? You make the effort to assent to a new level of awareness, and all that will require.
The writer of that quote was one Murray Rothbard, and through his writings I was turned onto the Austrian school of economics.
I had been debating how vouchers can be "done right" when the truth is we need no vouchers at all! This fit in well with Hong Kong, where education was plenty and "free" like anywhere else, but parents forked over money to make merely good become first rate.
I began to study the free markets as much as I could, getting sidetracked in German Historical School and following the lessons of Jude Wanniski, a supply-sider. His unique position had to do with gold as the "north star" of navigation in the economy. The idea is you set the price of gold (bout $350 at that time) and inflate or deflate the money supply depending on the signal you get from the price of gold rising or falling.
Back when email was first emerging in the late 80's, it was possible to email such eminent people, and get a reply. Since people only got a few emails a week at first, they took the opportunity to practice. I argued what I was learning from my studies of austrian school economics with one of the most advanced proponents of modern state economics. He used one of my questions in his newsletter to stage a lesson, and we were able to argue extensively. His patience gave me the opportunity to test Austrian economics against a first rate modern economic thinker.
Wanniski yielded to austrian thought over and over, except for their views on gold as money and is use and purpose. Our arguments got to a dead end point, and that was over the need for government. In our last exchange, he had said ultimately we need a government to arrange the reconstruction bonds necessary in the event of a huge disaster (since they control the financial system.) I replied since bonds are voluntary, why could not the Red Cross simply offer the bonds? He did not reply. He died the day Hurricane Katrina wiped out New Orleans, so he did not live to witness how government is helpless in a disaster, and private initiative gets the work done.
For ten years I tried to get to the Mises University, a week long seminar in Auburn Alabama where Austrian economics is laid out in toto. Finally in 2002 I made it, and by then I was there as a faculty observer, not as an student, since I was teaching as an adjunct at SFSU by then. I highly recommend the experience if you can get a week off for that.
AS I study more, see more, do more I realize more and more that so much of what we "know" is mere social conditioning. That I would not question vouchers per se was a matter of my being completely indoctrinated in a social system that expects the state to be prime in all matters. Austrian economics are outsiders, and it takes outsiders to point out the obvious. To "get" Rothbard you have to realize that you are a person as opposed to a "citizen."
I no longer see economics as science, but back where it started, a subset of ethics, which is a subset of philosophy. Economics can be considered a science in the old sense of arts and sciences, where philosophy was considered one of the hard sciences. But this is a muddle: Economics was carved out of a subset of philosophy. Philosophy is a hard science when it relies on logic, experimentation, rigor and the scientific method. But post-war, hard science meant mathematical formulae. So economists began tarting up philosophy with whimsical, tendentious or just stupid mathematical formulas, and in so doing reduced their field to a soft science at best. So the Austrians, who use no mathematical models, are actually the scientists, and those modern economists who do use them are charlatans.
So safer to go back a couple hundred years and consider economics under the field of philosophy, under ethics. Economics is the study of man's relationship to man.
Saturday, May 14, 2011
My Economics Journey
Friday, May 13, 2011
Relentless Lawlessness
The Indiana Supreme Court ruled recently that police can enter any home at any time for any reason, even unlawfully, and cannot be lawfully resisted. Ignoring the fact that this wholesale acceptance of police misconduct is violence, the Supreme Court said the reason is to reduce violence.
Your remedy is the court system after the fact. A common police saying is "you can beat the rap but you cannot beat the ride..." meaning your false arrest will be vacated but the process of booking, fingerprinting, jailing, court appearance, hiring a lawyer and so on will happen no mater what. Indecency is expanding faster than anyone can manage to resist in USA.
The judges flatter themselves when they imagine the process is a minor inconvenience.
People feel safe because there is no Adolf Hitler on the horizon. But the question is not is so-and-so any different than Adolf Hitler, the question is are the American people any different than the German people.
Spiers vs North
Man, if I ever get a chance to get one up on Dr. Gary North, I'll take it!
Even Google Can Go Down
Google Blogger was down for about 24 hours or more, which is just a reminder... back it all up and do not put all of your eggs in one basket...
On Salespeople
In theology, angels are messengers. In the free markets, salespeople are angels, those who bring messages back and forth, and provide the kind of revelations for those who are fully engaged, people the Pope and the bible call little lower than gods.
100% commission means 100% of your income is from commissions on sales. No "base-plus" or any sort of guarantee. 100% commission sales people are probably the only pure free-market players in the market. If they do not sell, they do not eat.
Salespeople with bad reputations, say used car dealers...or hey, any car dealer... are not 100% commission, and work in a field that is probably the second most regulated and subsidized in USA, thus particularly obnoxious.
Nonetheless, one of the best books on sales is by an auto salesman, America's #1 in fact, Joe Girard.
100% commission salespeople are paid by us, the proprietors of the businesses, but they work for the customer, as it should be. (Ever feel a car salesman was working for you?) Real salespeople never take advantage of the customers, always speak plainly to their vendors (us) and generally can direct product into their clients stores.
Census after census, the highest paid profession in USA, per capita, is 100% commission salespeople. That sounds about right. You find the best by asking your customers to refer you to the best.
Service and Quality
After demonstrating a start-up business cannot compete on price, I ask the question, is there another basis upon which we can compete... pretty quickly people throw out "service" or "quality" or "niche."
Drucker points out service and quality are not competitive items, they are standard items. Walmart has a quality and service level. Neiman Marrcus has a quality and service level. Evey customer knows what that is. One cannot be in teh business and lower either, or you will drive your customers away. One cannot offer higher than what your customers expect, or you will drive yourself out of business for the hit to the profit margin. The trick is not to compete on quality or service, but to learn exactly what those are in the industry you propose to enter, and adapt exactly that. In my face to face seminars I show how to learn what it is for your industry at 2:30, and week five in my online seminars.
Now, it may happen, as Drucker mentions in one of his books and I refer to in mine HOW SMALL BUSINESS TRADES WORLDWIDE, where the problem experienced is in fact quality, the problem to be solved. Drucker, and I citing him, refer to the pet anesthetics salesman, whose customers regretted they could not get human-grade (quality) aestethics for animal operations. In this case the salesman solved the problem and did quite well.
Another instance is where the service is in fact the problem, experienced by the market. In a present class, a fellow describes how during the rainy season his product cannot be had for love nor money. Here the problem is in fact service, and opens an opportunity to get started, but here again, it has to start with a problem YOU experience. Passion, to suffer.
Drucker also carefully points out, once introduced, innovations become standards. So very good, you get human grade aenesthetics into the veterinaries, and products available during the rainy season, but the moment you do, so will all of your competitors, since once, introduced, it becomes the standard. Where does thta leave you? Back to competing on design. It may very well give you an entree into a market, and much goodwill, even make you legendary, but to thrive you must immediately develop new products thereafter.
Wednesday, May 11, 2011
The Magic of "only .06%"
Regarding that tax on pensions, retirements, etc being introduced in Ireland, At the 1982 ILWU master contract negotiations, the strike issue was unfunded pension liability. A new term to me, I had to bone up. Man was that an eye-opener. If the average Irish pension is only funded at 50% (I am being generous) and the govt is taken .06, well, they are really taking 1.2% of the value. In 4 years this will be an almost 5% clip.
What is happening in Ireland has been discussed in USA for a while. There is a technique in government policy making called "policy laundering." You have a bad idea, get some place overseas to institute it, and then say, "See, the Irish are doing it, so should we!"
In less than 100 years of freedom from foreign tyranny, the Irish have forgotten what it was like.
North On Escape to Anarchy
John Rawls is a heavy hitter in political thought, with his theme of "original position."
As a thought experiment, the original position is a hypothetical position designed accurately to reflect what principles of justice would be manifest in a society premised on free and fair cooperation between citizens, including respect for liberty, and an interest in reciprocity.[1][2] (wikipedia)
Better than original position, we should work from reality, let's call it the Katrina-time. At Katrina, government ran away, but barred the Red Cross from helping out, the weak were executed, and Blackwater (now Xe) thugs terrorized citizens. It doesn't get more original than that.
Anthony bird-dogs an article by Gary North on Sean Penn, who is leading an escape from chaos to anarchy. I can't reproduce it, but here is the article North based his essay on...
It's got a good video too...
Tuesday, May 10, 2011
Hanford Still Down? Weird.
monitor out of service.
No data today."
It's Only Temporary
And just .06 of a percent.... it will NEVER go higher and it will be gone in 4 years... and it will NEVER come to USA...
If you own property, or have a pension or retirement savings or plan... or earn a paycheck... you are a sitting duck...
Self-employment is your only possible defense...
Money
Quick question---money as a medium of exchange and a store of value: could that be a different way of saying "exchange demand" and "reserve demand?"
Hi John,
I'm glad you agree that it mightn't be possible to manufacture anything, and you might have to set your sights lower in order to get started. I think it's important to emphasize to bear this in mind in relation to what products to research and pursue.
Something in your new book interests me:'As a buyer for an import company many years ago, my job was to find intriguing items overseas and ask the supplier what the minimum order was.. [later] modify the product so that it would sell even more'
I saw your video on plan B, although I don't think you're pursuing this one? As there are steel knives already in the USA, although they are very niche, your plan would be to market it more effectively to a wider audience? A lot of importers seem to have started with a new product but there are also many like (as you mention) Hadad the Henna dealer.
Another interesting thing from the book was that you mentioned your job as a buyer was to source items abroad and then sell them in trade shows around the US. I didn't think there was any selling involved in this- are we still required to be present at trade shows, or have you changed strategy with using sales reps?
Monday, May 9, 2011
Picking Winners and Losers
Here is a must read from Mish Shedlock... I remember when Boeing HQ left Seattle for Chicago... The governor, County Executive and city mayor all claimed to be blindsided by the fait accompli. Of course they were, and Boeing had zero reason to consult with government at any level on their decision. Boeing's economists and lobbyists are far superior, if not paid as well, as government lobbyists and economists. Boeing knew Washington State government did not have another dime of subsidies, transfers or whatever else to offer Boeing, Boeing got everything possible, so Boeing split. And took some manufacturing with it to other states.
Big govt and big business bring tremendous dislocation to markets, and inability to calculate costs.
Three More Safety Valves
1. Home rule laws. Towns can overthrow all county state and fed laws. Here they do so with raw milk. You can tell when you cross the border into Louisiana, the freeway has potholes. Louisiana goes its own way on so many items that they are denied fed funds for roads. Going your own way has consequences, but it can be done.
2. Private Attorneys General. In the 19th century most of the criminal prosecutions were pursued by private individuals in courts. With the growth of the state, this important function was taken over by Government, and became politicized. There are also qui tam cases to this day. Someone misbehaving in a way that harms the entire community, but the govt not doing anything about it? Handle it yourself! Environmental problems, police brutality, gang activity, securities fraud... bring a properly formatted case to the judge, and you to can be a prosecutor. (Although a state prosecutor may step in at the last minute for the glory.) Usually, you (the affected parties) can get 25% of any damages, and he govt gets 75%. It is not a class action suit, but it must be for a group against some malefactors.
3. Citizen Arrest and Bounty Hunters. So now you have a criminal case, and warrants, but what if the cops won't help you go round up the bad guys. Citizens can make arrests in USA, and pursuant to a bond violation, bounty hunters can make re-arrests. I've made a half dozen arrests myself in my crime fighting days, and my insurance carrier includes "false arrest" insurance on me. What? Are they worried I'll screw it up? There are enough of us who love confrontation to keep the malefactor in line, without police. We are called, dads, brothers, uncles, friends...
Update, 4.
Who protects our shipping. Private companies. http://constitution.org/mil/lmr/marque_it.htm
Free Market Violence
At a party the other day an erstwhile conservative candidate for office was questioning me on anarchy, and of course threw out the "big question," how about police and border defense, if no government. I pointed the "police experiment" has been going on for maybe a 150 years, and so far has not worked out. And the founding fathers assumed no standing military, and had none, but nonetheless when oppressed farmers got their guns and whipped the UK, the most powerful military in the world at the time.
But now is different! No, the Vietnamese farmers, when oppressed, got their guns and beat the most powerful military, the USA. The Afghanis did it to USSR, and are doing it to USA. (They had help when they beat USSR..! so did USA when we beat the UK, and so do the Afghanis now... it does not change it can be done, in fact it is the way it goes.)
What did we do before we had police? Well, we did not have drug laws, which is what keeps most law enforcement occupied. We did not have government controlling so much, so free markets ruled. We had courts, but they were mandatory, and very many people did not want, both sides, to submit to a court. So we had dueling. Vice President Aaron Burr shot and killed the very evil Alexander Hamilton.
But we cannot have dueling! Why would it be any of your business? But it is barbaric! Isn't 30% of black males at sometime jailed barbaric? But they break the law! They break specially targeted drug laws, and being convicted is no indication of being guilty, in USA, as DNA evidence keeps showing.
But what about drug dealers in the neighborhood? A throwback to much older times, the USPO simply stops delivering mail to that street when a dog bites a mail carrier. People on that street must go to the post office to pick up their mail until the dog is gone. No cops, no dog catchers, no storming a family home by swat teams who "fear for their lives" just old-fashioned shunning. The same system the old-fashioned Amish use when someone misbehaves.
The great thing about shunning as a policing mechanism is the entire community is involved, and everyone freely votes their own conscience: was what he did so bad that I should not even give him a ham sandwich, or not. Usually, the punishment fits the crime: you are shunned by the amount of people who view this about right. There is always some consequence, as in the punishment tends to fit the crime. You have to go and explain yourself to people if you want "back in." If no one will even give you a ham sandwich, you better repent or move on.
The entire diamond trade is policed through shunning, and in general is the large part of decency and standards setting.
No cops, no jails, no trials, just free market non violent community based policing. But what about the homicidal maniac? Scare any man, even an Amish, and contrary to all philosophy and religion, he just might instinctively lash out and sink a pitch fork in your chest. And then he'll run the risk of ever getting a ham sandwich or not. Call it free market violence.
Back when there were no cops to protect mail carriers (we had mail carriers long before cops) the post office came up with a way to deal with dog bites... shun the neighborhood, the neighborhood will sort out the bad dog. The post office still does this. In this report on nothing new, what is new is the slant on the article which makes the USPO the bad guys.
The US Govt tasked the CIA long ago with infiltrating media to promote government policies. One carrer made by the CIA was Gloria Steinem of Ms. Magazine. She claims never to have never been asked to inform on progressives, but as one fellow pointed out, the CIA knew the never had to ask.
You do not have to tell what Sean Hannity or Rush Limbaugh what to say, they will say it anyway. You simply give them 600 stations and pay for it with "Go Army" ads and they will say what they would say anyway.
In his book laying out Wurlitzer, Hugh Wilford comes away with a generl approval but a conclusion Wurlitzer ended. I sincerely doubt it, after watching First Things magazine going from questioning the legitimacy of the US Supreme court to featuring articles by Victor David Hansen.
When I see such a coordinated assault by main stream media on government workers and unions, it is clear the game is up. 70% of the firefighters in USA are volunteer. Overnight the Samurai were dismissed in Japan. The process of eliminating government overbloating has started. First win the hearts and minds of the people. The divide and conquer (first nail the teachers, then the cops).
I was speaking to a retired firefighter the other day who say in 1964 when he applied there were 3 applications for 7 positions. Last week there were 500 applications for one position.
What is gone is an America when we did not need cops, and an America that was free of senseless interference so there were better things to do than become cops, or firefighters, or whatever. Getting back there will take far more than firing people. We have to cut back on senseless interference too.
But as soon as the modern state defined itself as a monopoly on violence within a given territory, the state became illegitimate, and anarchy became imperative. No one should have a monopoly on anything, if so, we have no free market. USA cannot have a free market as long as the government has a monopoly on violence.
Sunday, May 8, 2011
How Are We Better Off?
“Bin Laden was not a Muslim leader; he was a mass murderer of Muslims,” Mr. Obama said. “Indeed, Al Qaeda has slaughtered scores of Muslims in many countries, including our own. So his demise should be welcomed by all who believe in peace and human dignity.”
OBL was the FBI's #1 most wanted for a decade, but he was not wanted by the FBI for the 9-11 attacks. In USA we believe people are innocent until proven guilty. Bonnie and Clyde were blamed for so many bank robberies (some on the same day same hour a thousand miles apart), that they began taking credit themselves for all of them. Police keep some aspect of a major crime secret (the caliber of the murder weapon, etc) because so many people call in to "confess" they need a way to sort out the nutjobs from people who actually know something.
There is not a single point of this "we got Osama" story that rings true. The sad thing is it is plausibly all made up, that our government has so little credibility. What might have been better to capture him and take him alive.
Or better yet, a decade ago, provided evidence of his criminals actions, the Taliban, who always wanted to be our friends, would have turned Osama over to us. We answered with bombs.
The most likely story is Osama died a decade ago, and Benazir Bhutto was dead a few months after mentioning that.
One of the most common efforts in government is to solve problems that do not exist. Assassinating a dead man is likely to be 100% successful, and you can hen made all sorts of grand pronouncements, and then also crack down on internal problems. Like TSA is trying to take over Amtrak, and Amtrak is having none of it. But now that killing Osama is "likely to bring new terrorist activity" TSA is making another run at Amtrak. And we have a treasure trove of intel of what al qaeda is up to... so now when our government has some new silly way to walk, or whatever they demand, we are supposed to go along.
Our government is busy deciding where to cut back. The WACO disaster began with an effort to keep the ATF budget from being cut back. Agencies will begin fighting each other for a place at the trough.
Why does nothing reported about this event sound true?