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20130929 America 3.0

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This is a kind of book I am quite interested in – ideas about where we are now, how we got here, and what we could expect in the future based on whom we are.

So the first thing first – the future is bright. At least we have reasons to think that it is bright. These reasons are based on our history, especially on our traditional family way of life. Here is an interesting point that I did not think about before. The American nuclear family that authors trace back in history to typical family type of Germanic tribes is exceptional if compared with other family types usual among other peoples and that is where American exceptionalism is coming from.

The core difference is position and freedom of individual within the family structure, which in America’s case is nuclear with very week connections to extended family, tribe, and location. Americans setup up their family as man + women + children and that’s it. Parents, cousins, matriarchs, and patriarchs are out of picture. Parents interact with the world the best they can, obtaining resources and providing children with opportunity to grow, but as soon as children become adults they are supposed to get out and start their own nuclear family more often then not in some distant location. Children are not supposed to count on inheritance because the parent’s wealth belongs to parents and could be used as they wish with no consideration for children. By the same pattern children do not have to provide for parents at their old age – parent’s savings should take care about that. Certainly in reality parents leave inheritance to children and children take care about old parents, but point is that American culture unlike other cultures does not demand and/or force it. So the family life is basic training for Americans in individualism and self-reliance, which they are famous for. This is also an all-important conditioning for rejection of big government as substitute for family where father/government knows best just because such family is not an American family. Therefore, based on the deeply entrenched cultural feature of Americans the current period of big government sickness is expected to pass with relatively small changes, while opening new venue for flourishing of American culture.

Bennet and Lotus review in details how American family culture was formed and changed based on Germanic roots, through English inheritance, and consequently multiple influences of immigrants from all over the world who brought in some of their specifics. Nevertheless over time all immigrants accept American culture and become as exceptional as all other regular Americans.

In addition to family authors propose tree steps model of American development naming based, as it is usual now, on designation of software generations:
America 1.0 – original America of small farmers, manufacturers, and traders at the North in constant conflict with slave owning budding aristocratic society of the South. The conflict was resolved in Civil war with the North winning and then moving for full development of relatively free farmers agricultural republic and South losing war, but winning afterward low intensity war of rebellion and attrition, establishing segregation as substitute for slavery, and, as result, economically stagnating for the next century.

America 2.0 came to the life after version 1.0 ran out its course with end of frontier, disappearance of freely available land, and expansion of cities and industries populated by mass influx of new immigrants. The 2.0 versions did not come to life easy. It was born in long industrial wars with real shootings from 1870s through the New Deal in 1930s. This version was a combination of highly regulated welfare state with big government and massive limitations on individual freedom. For a while it brought in prosperity, which was based to the significant extent on the fact that all other industrial world was busy destroying itself in two world wars working out outdated notion of prosperity based on acquiring territory and slaves through conquest.

America 3.0 is being born now and it is America of free and independent individuals whose prosperity based not on land and agriculture, but on creating sophisticated services for each other and exchanging them on highly computerized and interconnected virtual market. The old material staff like manufacturing and agriculture would be brought to insignificance by such technological development as robots, 3d manufacturing, and such. Here I somewhat disagree, even if my opinion used to be very similar. I just do not see enough demand for services of other people especially when information by nature has unlimited simultaneous use by infinite number of individuals and consequently impossible to control. My current opinion is that universal property would have much better chance to do the trick, but this is a different story.

Authors claim and I tend to agree that we are now going through dying pains of America 2.0 and birth labor of America 3.0 which will be much more true to individualistic nature of America with social settlement between beneficiaries and supporters of America 2.0 somewhat dividing country with beneficiaries of America 3.0. They see such settlement in form of decreasing power of federal government and increasing power of the states, which will attract people with different preferences. Some states will be strong welfare states with big state government while others will be small government individualistic states. I am not sure that it could happen because welfare state is by its nature is an arrangement in which parasitic part of population such as bureaucrats, politicians, poor, and others who do not produce anything that other people need, live at the expense of people who are working hard and create marketable goods and services. It would be kind of difficult to maintain welfare state if productive individuals can easily move to another state and could not be robbed. We seems to have a good historical example of this in Berlin Wall.

Nobody really knows what will happen, but I agree with authors that it will be long and difficult, but peaceful process.

20130921 Law, Legislation and Liberty Volume 2

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In volume two Hayek analyses somewhat contradictory relationship between human notions of justice and overall culture developed over millions of years when people lived in small bands of basically tribal society versus demands and notions of justice that makes market possible and efficient.

7. General Welfare and Particular purposes
This part is dedicated to analysis of abstract rules compliance which creates opportunity for functioning market. Probably the most important conclusion that somehow escapes many philosophers of “progress” is that future is unknown and therefore even notion of progress when somebody knows that some end is inevitable in the future is invalid. The best we can do is just complying with time tested abstract rules. I am not necessarily agreed with this idea of compliance. I absolutely agreed that future is unknown and that “progress” as in “progressives” is purely junk thinking. But I believe that present is known and if the present provides clear and obvious evidence that time tested abstract rules are not effective any more, then compliance maybe unreasonable and rules should be changed

8. The Quest for Justice
Here presented the idea that Justice is pretty much negative that is absence of injustice. The following very interesting discussion about Justice vs. Law vs. morals vs. nature vs. sovereignty is very interesting. I am fully in agreement with this notion of justice.

9. “Social” or Distributive Justice
This is detailed discussion of “Social justice” as equality of result assured by government intervention into all areas of human life. Hayek dedicated lots of space to this discussion and it is probably good decision because it became so popular in his time and still remains popular. I think that this notion of social/distributive justice is so logically absurd that the only reasonable explanation of its popularity is that it is a great tool for people not happy with current resources allocation to unite around common objective of violent resource redistribution to them. Leaving alone moral side of it, it is just simply counterproductive when resource transfer comes down to the robbery by government of individuals who produced these resources. The outcome proved beyond any reasonable doubt by all history of XX century is always the same – productive individuals stop producing and amount of resources greatly diminished in direct proportion to severity of robbery. For example in Russia and China robbery by communist governments was absolute and immediate consequence was starvation in places that did not know problems with food for centuries before communists implemented social justice. The robbery in Western Social democratic countries was relatively benign leaving productive individuals with some incentive to remain productive even if it was significantly diminished. As result they wind up with significantly diminished amounts of resources available as result of decrease in economic growth.

10. Market Order
Probably nobody is as good as Hayek in describing market order and logic of its superiority over any other system of organization of human activities. I think that the most important take out from this chapter would be this:
• “A Free society is a pluralistic society without a common hierarchy of ends
• “Specific commands / interference in market order create disorder and can never be just”
• “The good Society is one in which the chances of anyone selected at random are likely to be as great as possible”

11. Discipline of Abstract Rules and the Emotions of the Tribal Society
Here Hayek provides a detailed analysis of reasons for people moving back away from superior market order to organizational thinking of Tribal society and consequently to the royal screw-up of their lives. I am not completely agreed with his analysis, but I do not think that it is that relevant. The humanity always acts in the trial and errors mode and errors of “Social justice” / Progressivism, and Communism/Socialism present themselves in form of decreasing quality of life for vast majority of people. Eventually these junk ideas will go away with the wind. Too bad for many people it spoils the only life they have.

20130915 Law, Legislation and Liberty Volume 1

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As usual Hayek tackled one of the most important areas of human life / action and came up with very interesting insights:

1. Reason and Evolution
The main point is the collision of two views of the world – evolutionary view, which holds that law is and organic part of human society and developed through method of trial and error with the level of complexity just not comprehensible for human being; and Cartesian view coming from tradition of René Descartes which holds that law comes from human reasoning by some legendary law giver and not only easily comprehensible by human beings, but is subject to legislative change as it deem fitted by current generation of philosophers/Legislator/kings .
When I was a young member of Soviet Society, O would wholeheartedly supported Cartesian view that was fitting so much to communist ideal of changing world. Now quite a few years older and a lot wiser based on my experiences I have little doubt in validity of evolutionary view. The way I see it now – any change should be treated as necessary fix when something is not working anymore. It is not that any change should be small, but rather it should be proportional to changed environment and should not be taken easily. In short the imperative should be to minimize possible damage. The results of Cartesian view with logic of doing change fast and on mass scale was widely used in country of my birth and it has millions and millions of graves and destroyed society to show for it.

2. Cosmos and Taxis
These two notions are linked to concept of order which is defined by Hayek as “A state of affairs in which a multiplicity of elements of various kinds are so related to each other that we may learn from our acquaintance with some spatial or temporal part of the whole to form correct expectations concerning the rest, or at least expectations which have a good chance of proving correct”.
From here comes notion of TAXIS as made order and KOSMOS as grown self-organized order taken from Classical Greek. The very important inference from this is that spontaneous / self-organized order (KOSMOS) comes from compliance with certain rules of conduct developed over the long time in evolutionary process even if these rules are vague and does not make a lot of sense to individual. The TAXIS on other hand is man made rules of organization created by organizational leaders any way they wish.

3. Principles and Expediency
This is another point of Hayek’s multidimensional view – Principled approach to decision-making based on inviolable principles whether individual understands them or not versus Expediency approach when decision-making based on what individual believes is the most effective way to achieve objective.
I think it could be illustrated by contrast of use of one of Ten Commandments “You shell not kill” with communist / national-socialist approach – “Let’s kill these people Kulaks/Jews because they seems to be an obstacle to achieving our objectives.” I completely agree with Hayek on this point:” Freedom can be preserved only by following principles and is destroyed by following expediency”

4. The Changing Concept of Law
Hayek contrasts concept of Law as old self-organizing system developed by society with Legislation as part articulation, part codification of existing Law and part current rules of game defined by Legislature. He brings a very interesting definition of Common Law given by eighteenth century judge Lord Mansfield –who stressed, “ Common law does not consist of particular cases, but of general principles, which are illustrated by particular cases”.

5. Nomos: The Law of Liberty
Here Hayek uses is another Greek notion for customs and habits to discuss role of judge as interpreter of existing Law for a special cases before him. In this case the aim of jurisdiction is the maintenance of and ongoing order of actions. In this case judge should act under constrain of two notions: values and facts to decide which expectations of outcome should be met and which should not. In this view the law is process of discovery of what are relevant norms and how they apply in particular case.

6. Thesis: The Law of Legislation
In this case the law is not a discovery process, but rather manufacturing process. The Legislature manufactures rules of conduct with little if any regard to previously existing norms. Hayek reviews various areas of legislative activities demonstrating that in this case law become just a tool for rulers to control individuals first in foremost in the interest of people who are in control of government, whatever they interests are.

20130907 Financial crisis and Free Market Cure

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John Allison is the former CEO of BB&T – the 10th largest financial services holding company so unlike vast majority of analysts writing books about financial crisis he really knows what he is talking about and has success of his company as unimpeachable prove of it. BB&T went through financial crises without one single quarterly loss despite its core business being real estate related. So here is what he had to say:

1. Government policy is the primary cause of the financial crisis because American system is not free market system, but rather mixed economy with government dominance in financial industry.
I am fully agreed with this statement, but I would also add that American economy had never been fully free market system. However up to the beginning of XX century it was relatively close to the free market mainly because of availability of new land and weakness of government that lacked standing army and was divided into multiple entities (states) making it difficult to properly organize mass robbery of population by bureaucrats and politicians (BUPs). During XX century American BUPs managed to obtain permanent Army, consolidate power at the federal level and bring economic development to near standstill.

2. Government policy created a bubble in residential real estate
I do not believe I met anybody disagreeing with this statement, so it could be considered trivial, unless vast majority of people were ignoring logical conclusions from this fact – need to remove government from economy in order to prevent similar bubbles

3. Top Wall street financial institutions contributed to crises by using Government provided incentives to generate profit without regards to negative consequences and were proved to be correct in their reckless disregard to economic consequences by government bailouts
This fact as the previous is generally accepted, but then fully ignored by mainstream

4. Government Actions since the start of crisis while helping in the short term will result in reduced standard of living on the long run
My attitude to this is more expansive – any government actions are always conducted in interests of BUPs and since BUPs are a mainly parasitic element of society, they always decrease standard of living on the long run

5. The deeper causes of America’s economic problems are philosophical, not economic
I would only added that philosophy is not a stand-alone product of human intellect. It is developed by individuals based on their perception of reality and directed at providing survival and promotion of values of these individuals. Current philosophical crisis is result of failure of socialist ideas, which in the absence of viable alternative for significant part of population just mutated from erroneously thought as productive form of government property over means of production into ideas of government controlled distribution and rules of game imposed on production. I think that this mutated socialist idea is as flowed as idea of government control over means of production and will be as destructive as original one.

6. If direction is not changed soon, the United States will be in serious financial trouble in 20 to 25 year
I think that it will come quite a bit earlier. My guess is 10 – 15 years.

Allison’s solution is:
Let markets correct errors by allowing big financial companies fail and recessions run their course and bring supply and demand in sync by eliminating ineffective businesses. Avoid Keynesian solution since demand does not create supply, but rather supply creates demand

I think that all discussion about supply side versus demand side (Keynesian) economy is misguided and most resembles discussion of what comes first – chicken or egg. It is all about incentives that people have or do not have to be productive. I fully support free market because it provides such incentives giving capable people only one option for prosperity – do something that other people need, while demand economy of Keynes does not. Keynesian demand side economy creates incentive for capable people to get as close to control of wealth allocation as possible and allocate it to themselves. This leaves productive work to people who failed to get close to government redistribution levers. The result is completely logical – the more capable people move away from producing goods and services where they get robbed of fruits of their labor into the ranks of BUPs to do redistribution where they get rewarded with the fruits of other people’s labor, the less goods and services are available overall. Large-scale experiment to test this notion was conducted in former Soviet Union, which successfully proved this logical inference leaving Soviet Union in dustbin of history.

In the last few chapters John Allison provides quite a few well thought through solutions in area of government economic and financial policies. Unfortunately they all are unrealistic because they do not provide direction how to change attitude of bureaucrats and politicians (BUPs), low marketability people and all other people who are grew to be dependent on government so they would support market oriented reforms. Without such change of attitude reforms are impossible.

20130830 Doing Nothing?

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The name of this book is an interesting case of misstatement. It is not really about people doing nothing. It rather about people doing something that is not a business or in other words something that nobody wants to pay for and the struggle of two forces in American culture. One force originally represented by Ben Franklin was all about doing something that other people need and would by, that is business. Another force originally represented by Samuel Johnson was all about doing something that nobody needs and/or would buy. Interestingly enough both cases actually involved doing not just something, but a lot. The difference was that in case of “doing nothing” it was anything that one can imagine from writing poetry to growing trees and working very hard in hippy community just for food.

The book contains reports about fates of a long line of individuals who did nothing while managing to leave a significant literature and legends. The list includes quite a few famous American writers throughout history and to this extent it is not that interesting. It is kind of trivial that until big government started robbing regular people on behalf of these geniuses transferring loot to them in form of grants and tenured professorships, they had pretty rough time making living. Much more interesting, at least for me, is detour into life of regular people and their work ethics which was in constant competition with their doing nothing ethics. The review of slow implementation of notions of work day and work week and fight between labor sellers and buyers for extraction of time/value is really interesting and provide quite a bit of non-trivial information.

In short this review of alternative to business strife for self-fulfillment is interesting because it provides some insights into diversity of American culture and uncovers quite exciting potential of this culture to support coming gigantic and dramatic change in paradigm of use of human efforts which quite obviously comes with approaching full automation of all routing jobs. It would be interesting to see how “Doing Nothing” will be converted into extended “Pursuit of Happiness”