Roc: An Opening

Due west of the Etherian Mountains, in the southern regions of the Kingdom of Teresco, there was an area known as the High Tops. This was a wild place – even by the standards of that desolate, spell-ridden kingdom – and uninhabited save for a few goats and the relics of forgotten religion. Broad, semi-circular valleys cut the land, separating the hills that stood like great rising fists of stone. These valleys were riddled with fast streams and their edges draped with many tiny spumes of waterfall. Bracken grew thick in the valleys and heather grew fast against the stone.

It was early spring, and the wind channeled down the valleys buffeted the ears as if in malice. Again, as if in recompense for this ill-treatment, the wind also brought with it the delicate scents of heather, and the pleasing songs of dactyls and curlew. What the landscape of the High Tops took in hostility, it repaid in beauty.

In one particular valley, far overhead, there soared a bird, in appearance much like that of an eagle, though decidedly larger. The creature bore the brown feathers and yellow crown of the Mesperiman roc. Its breed were named for the angel Mesperimus who – it was said – had once come down from heaven to strike the Giants Etherium into stone. The Giants Etherium were – again, it was said – titanic monsters had made it their sport to roll great boulders out across the Kingdoms of Men. They had done so in the spirit of fun, and had kept tally of the destruction each had wrought upon mankind. It was said that the broad valleys of the High Tops, curved like the lower part of the letter U, were channels carved by these boulders as they rolled towards the towns and cities of that antique age.

The punishment the angel Mespirimus inflicted upon the giants was to transform them into rock, whilst retaining their capacity for thought and feeling. So that they were doomed to weather away, dying slowly over thousands of years. The glassy orbs that the giants had cast out across the Kingdoms of Men were shattered into crystals that had then sunk beneath the earth. This was rumored to be the source of Teresco’s uncommon mineral wealth, and – the crystals naturally being of a thaumaturgic nature – explained both the number and uncommon power of its magical practitioners.

And so stood the Etherian Mountains, out to the east, casting their rapidly diminishing shadows across the Tops. It was early morning, and the sun now shone down the valley, having arisen over the Etherian Mountains a mere hour ago. Great prisms of light lanced down through the morning mists, abolishing them like the Angel Mesperimus was said to have abolished the Giants Etherium.

The bird whose namesake had thwarted the giants now scanned the valley for the very small things it sought to eat. It knew, in a dim and birdlike manner, that it ought to be heading west with all speed, but it still needed sustenance. Its gaze detected movement, on one of the paths running alongside the valley.

What the roc saw there it judged too dangerous to be worth attacking, so it ignored it. The bird was only a juvenile, and had many decades yet to go before it grew to its full size. There would be easier prey elsewhere in the valley.

Whilst we may concur in some respects with the roc’s judgment, we shall not ignore what it saw, for what it saw was a young woman, marching up the side of the valley. We shall not ignore her because she is the subject of our story, and this seems as good a time as any to begin it.

Form and function in writing

Wittgenstein once wrote that “my difficulty is only an – enormous – difficulty of expression.” I took that quote from his Wikiquote page, and I can’t really look at it without wanting to re-write it as “my only difficulty is an – enormous – difficulty of expression”; that I find it so difficult to avoid such an edit* is one of the many problems I encounter when attempting to write, of which more below. My own problem, however, could be more accurately expressed as “an enormous difficulty of knowledge, understanding, focus, and expression”; after all, I am no Wittgenstein.

What I find most challenging about writing is that it isn’t any one singular cognitive process. It consists of several intertwining processes. You’ve got to know the idea you want to express; you have to understand the idea you want to express; you have to appreciate which elements of the idea are useful and relevant, and which are not; and finally you’ve got to be able to express the idea clearly and elegantly.

Each of these is a distinct type of cognitive activity. Knowing which specific point one wishes to get across is often surprisingly difficult. When writing I often encounter a sort of factorial explosion of ideas – like the polar opposite of writer’s block – in which one thought leads to another thought which leads to another two or three thoughts.

I have only so much RAM in my head. Shortly after beginning writing I often find myself overwhelmed with possibility. I would like to hold a single idea in my head at a time; I picture it floating with crystalline distinction within my Cartesian theatre, without any connections or linkages with anything else; but it seems almost impossible to do this. The crystal grows and mutates and draws in other ideas and concepts and I am left with a head encrusted with nonsense.

Understanding presents another – separate – problem. Oftentimes the reason I am compelled to write in the first place is that I do not yet fully understand an idea, concept, or theory; and so I write long, rambling essays in which I come to no solid conclusions and which express nothing but my own ignorance.

Focus. There isn’t really much to say about this that isn’t already demonstrated by the present document. I find it difficult to focus. This is as true in writing as it is in my wider life; in fact, I find it almost impossible to focus on any one task for more than ten minutes or so. I don’t know if this is an intrinsic element of my personality or simply a consequence of living in a distracted age, but there it is.

The final aspect of writing that I find problematic is that of performance. As Richard Lanham argues in Analyzing Prose, all writing is necessarily performative; you can’t help but strike a pose, even if it is one of “objectivity” or “transparency.” There is a gap – a fascinating gap – between ideas and language and the particular symbolic systems we use to express ideas. Words are distinct from ideas, and arranging words in a pleasing order is a different task to developing pleasing ideas. In my first paragraph I couldn’t help but re-write the original Wittgenstein quotation into what I consider a more pleasing form, whilst retaining the same meaning as the original. But does it really have the same meaning? By placing “difficulty” before “only” in the original Wikiquoted form the emphasis is placed on the difficulty itself, whereas in my altered version placing the “only” before the first “difficulty” deflates the first half of the sentence and places the emphasis on the “difficulty of expression”. This makes it more quotable. Or perhaps not.

*Apparently the quotation was taken from his journal entry, which may well have been in German, in which case reforming the particular arrangement of the sentence might be entirely legitimate as a direct translation of the original text – I don’t know)

Positive money

A non-profit group called ‘Positive Money’ has created a series of videos describing how money works in the real world. These videos explain how, contrary to the process described in many economic textbooks, most of the money in the economy is created by private banks, and that the central bank is not in control of the money supply. Furthermore they argue that banks are not limited by reserve requirements, and do not need to possess central bank money before they can make loans, nor is the amount of money private banks can create constrained by the total amount of central bank money. The videos are well-executed, and their view is backed up by an impressive roster of people who ought to know, including Mervyn King, former governor of the Bank of England, and various other good-bodies and fair-fellows of the economics profession. This Positive Money group also have a book out, which I have added to the towering virtual stack that is my Amazon wishlist.

Banks have a license to create money

The take away from the videos is that in the real world banks do not lend pre-existing money, but simply create money when they make credit available to their customers. Because the money in your current account is strongly backed by the government through the Financial Services Compensation Scheme, which guarantees all deposits up to £80,000, most of this ‘credit’ created by banks bears as little credit risk as central bank base money, or physical cash money; which is to say, it bears no credit risk. In essence, private banks have a license to create money. This is an important and worthwhile point that needs to be more widely understood (especially by economists, and most especially by those economists who write mainstream economics textbooks).

However I have a few minor quibbles with the arguments presented in the videos. Here follows the first quibble.

Bankers are not the only people in the economy

In this video it is claimed at 0:39 that the shrinkage in the money supply causes the economy to slow down. This is confusing to me because I do not see how the sequence of events would necessarily be from banks choosing to shrink the money supply, to a recession occurring. It seems to me that an equally valid flow of causation would be as follows: consumers choose to spend less, meaning that consumers borrow less, meaning the amount of bank credit/money falls, as people pay down their existing debts. This could happen regardless of what the bankers themselves choose to do. The bankers are not the only agents in the economy, but the videos present a model in which it is the bankers – and only the bankers – that decide what the level of the money supply will be.

This brings me on to my second quibble. In this video it is claimed at 13:20  that “the money supply of the nation depends on the mood-swings of banks and the senior bankers that run them, this is surely an insane way to run and economy”.

It is true that bankers’ moods influence the economy, but it is not clear to me that this is the only problem, precisely because – again – bankers are not the only agents in the economy. As is often the case, the great Daniel Davies says it far more concisely than I can:

Keynes The Master did not fuck up by not including a separate banking industry in his model; the investment decisions and motivations of the bankers in deciding whether or not to provide finance to the rest of the economy are exactly the same as those of industrial capitalists and are equally adequately described by Chapter 15. Bankers make their decisions based on whether loans will succeed or fail, which depends on their assessment of demand in the economy, and the model closes.

So the question is: did the recession begin because banks no longer wanted to lend, or did the recession begin because people no longer wanted to spend? And is our continuing economic weakness a result of unwillingness of bankers to lend, or is it a result of business managers’ unwillingness to invest? These are empirical questions and – as Davies points out – at this level of abstraction it doesn’t really make any difference. Somewhere there is a group of homo-sapiens making decisions about the future, and it doesn’t matter if those homo-sapiens are in a bank credit department or in a company head office.

On Positive Money’s substantive proposals

Positive Money have a bunch of substantive proposals that they outline here. I am not yet in a position to comment on these, but it looks like they might be a stalking horse for green social democracy, of which I am of course entirely in favour; but it seems to me that if you want social democracy, then you might as well do social democracy, instead of footling around with the banking system. I may be completely wrong here, of course.

In summary: contra Positive Money, the problem isn’t that bankers have too much power, but rather that anyone tasked with the business of making investment decisions in an uncertain world will be subject to severe swings in outlook, due to the irreducibly chaotic and non-ergodic nature of the real economic world. This problem runs far deeper than banking, and might run deeper than our particular brand of industrial capitalism itself; it could well be a property of any industrial economy run by agents that resemble human beings.

Iain M. Banks and Quentin Tarantino

There are many similarities between the late Iain M. Banks and Quentin Tarantino. Here are some of them:

  • Both excel at the low-level technicalities of their respective art forms. Banks writes excellent and inventive prose, and Tarantino creates excellent and inventive scenes.
  • Both write clever, naturalistic dialogue.
  • Both have a taste for macabre and disturbing violence.
  • Both juxtapose this violence with a strong sense of ‘normality.’ Note the ‘party’ scenes in various Culture novels, and the conversation between Vincent and Jules.
  • Both often choose to tell stories in a series of out-of-sequence vignettes.
  • Both enjoy over-the-top action and gore.

I have no wider point to make, I was just struck by the parallels.

 

God, I miss Iain Banks.

Politics is shit

Politics is shit.

 

When human beings live together they generate conflict, and politics is the resolution of conflict. Just as conflict needs to be resolved, so shit needs to be shovelled. Shovelling shit is necessary whenever a sufficiently large number of human beings live together. You need – somehow – to deal with all the shit. Similarly, when a large number of human beings live together you need – somehow – to deal with all the politics.

I am glad that we live in a civilization where politics is (for the most part) performed indoors sitting down, rather than out on the streets. I am thankful to those who spend their time engaging in the business of politics, although I wouldn’t necessarily want to spend time in their company. I am the privileged beneficiary of many centuries of development in the science and art of politics. If politics is badly executed, it can lead to large numbers of people dying horribly. All these things can also be said of the noble art of waste management.

I do not like politics. On a personal level, I do not enjoy or relish conflict. So from my point of view, the whole business of politics is something I would like to see dealt with as efficiently and quickly as possible, with minimal harm and minimal spillover.

This attitude colours my entire perception of political debate. I see ‘politics’ as an unpleasant necessity, rather than a hobby. Politicians desire to wield power over other people, and even if that power is directed to good and useful ends, there remains the uncomfortable fact that politicians still desire to wield power. That’s why they’re politicians. Yes, they might be doing it for what they consider to be good reasons, but they’re still seeking to wield power. In this respect, politics is unlike shovelling shit, because some people enjoy it.

The fact that some people enjoy politics for its own sake – the fact that some people enjoy conflict – is a problem. Perhaps its one of those deep and ineradicable problems of human nature. Or perhaps a better world is possible. The victory condition of human civilization must be to have as few people shovelling shit as possible. Civilization advances by increasing the number of operations we can perform without thinking about them, as someone said. So how do we go about reducing the need for politics? How do we reduce conflict?

Or: how do we reduce the causes of conflict? Right now, as far as I can tell, the only thing we know of that actually reduces conflict is technological progress. Technological progress has the potential to make everyone richer, and – ceteris paribus – richer people are less likely to get so angry and wound up that they end up attacking each other.

This is not to say that technological progress is necessarily going to solve all our problems. Technology is the harnessing of scientific knowledge to human purpose, and human purposes can be good and bad. But technology gives us room to manoeuvre. Better ways of shovelling shit ultimately mean longer lifespans and less human misery. As does better politics.

In conclusion, I see the humanity’s victory condition as being a reduction in the need for politics, and a reduction in the need for conflict. This observation is neither original nor helpful, but I like to keep things simple. Politics then, is only worth engaging in to reduce the need for politics. Insofar as blogging is political, it should be undertaken with the long run desire to render it unnecessary.

Some thoughts on Charles E. Lindblom’s “The Market System”

The Market System: What It Is, How It Works, and What to Make of It is a very good book. Go read it, and enjoy. Lindblom is the epitome of scholarly good faith and rhetorical balance. He presents a fair and intellectually rigorous analysis of just what it is we speak of when we speak of ‘the market’ or, as he calls it, ‘the market system.’ Care is taken to distinguish capitalism from the market system, and to discuss allocative efficiency as something distinct from dynamic efficiency. Lindblom recognises that the market system is a fragile instrument, which cannot work in isolation from a set of other institutions and norms of ethical practice.

This is not intended as a complete review or, God forbid, a precis of the book. It is my understanding that The Market System is by way of being a precis of Lindblom’s life work, and as such the book is as informationally dense as one would expect. It is fairly abstract and theoretical, which I appreciate*, but utterly readable and compelling. There are a few points which I feel need to be highlighted, as they are many important insights I would like to be able to refer back to at a later date. I am going to list some of these insights here, with a short comment:

Markets are about co-ordination.

Society is based on co-ordination. People behave in ways that enable them to achieve common and personal ends. Lindblom distinguishes between two types of co-ordination. One is co-ordination to curb violence inflicted by one person against another. The other, more ambitious form of co-ordination involves people helping each other to accomplish goals.

Co-ordination can be achieved in a number of different ways. One way is tyrannical, that is, it consist of one person telling other people what to do. Another way of achieving co-ordination is democratic, whereby people collectively decide what to do, and which among them shall do it.

Lindblom argues that the market system is ‘a method of social co-ordination by mutual adjustment among participants rather than by a central co-ordinator.’ The market is just one form of social co-ordination, and is not the only form of social co-ordination that takes place without a central co-ordinator. One example Lindblom gives of non-market, co-ordinator-less social co-ordination** is that of people walking down the street without bumping into each other. We observe where other people are heading, we make eye-contact, and adjust our own heading to those of other people, who in turn adjust their heading… und so weiter.

The nature of efficiency

Lindblom defines efficiency as “the ratio of valued output to valued input’. He then presents the argument for ‘efficiency prices’, which was the part of the book I was least happy with. ‘Efficiency prices’ are ratios between different commodities and services determined by good old-fashioned supply and demand, with all the limitations and abstractions of such arguments. I’m not going to discuss it much further here, but I will note that Lindblom is alive to the problems of the ‘efficiency prices’ argument as he presented it. Some of these problems include:

  1. Real market systems contain monopolies that limit the extent to which real market systems can approximate efficiency prices.
  2. Some goods and services are, by their very nature, not amenable to being traded in market systems.
  3. Spillovers, also known as externalities.

Allocative efficiency versus dynamic efficiency.

One way in which markets are about competition lies in their role in dynamic efficiency. This is in contrast with allocative efficiency, which entails that a given set of resources are distributed in a fashion that leads to an outcome superior to the initial condition. Allocative efficiency is about co-ordination.

But Dynamic efficiency, whereby agents change what they supply to the market in response to changes in market demand, is, arguably, about competition. Because it is through competition that those agents that attempt to provide one service at too high a cost are ‘forced out’ and therefore required to provide some other service. The distinction here between co-operation and competition becomes blurred, and might ultimately come down to a matter of nuance and personal values. For example, is it ‘efficient’ if a worker is replaced by a machine that does the worker’s job for less money? Maybe, maybe not, it all depends.

Think social, not economic.

The market system is not something that exists independently of society. The market is one element of the vast and interlocking set of systems that human beings have developed to solve problems of social co-ordination and co-operation. Although we are used to thinking of ‘the economy’ as a separate entity from (say) ‘the Church’ or ‘the state’, all of these institutions impinge on each other in countless different ways. Moreover the way they impinge on each other has changed over time, and this has changed how the market system itself is thought of and (as a consequence) how the market system works.

Islands of hierarchy in a sea of markets.

Lindblom distinguishes between market systems and command systems. He also notes that a great deal of economic activity actually takes place in hierarchical command systems, rather than purely through markets. Corporations exist, and their internal operation is guided through a more-or-less centralised command and control system. Command systems and market systems are two different solutions to problems of co-ordination, and each has their own pros and cons.

Market outcomes are not fair

Because prior determinations (e.g. inherited property, IQ, talent) are randomly allocated, there is no inherent justice in the market system. Market outcomes are as just as the prior determinations that go into them. Because the prior determinations are random at best, or the result of a long history of coercion and violence at worst, then market outcomes are not just.

Elites and mass

Lindblom distinguishes between ‘elites’ and ‘mass’ in both the governmental and market domains. He highlights how the elites – the ruling classes – of both the public and private sector, have successfully obfuscated and manipulated the public, who are rendered ignorant by a constant barrage of advertising and propaganda.

 

This latter point is crucially important. I don’t know if there ever was a golden age of enlightened public discourse, but it is clear to me that the ‘mass’ of the developed world has become more inert and ignorant*** even as it has lost the ability to act as a countermanding power to the interests of elites, whether they be market or governmental. I don’t know what to do about this.

 

 

* I dislike the habit some writers have of peppering their books with Illustrative Anecdotes (Malcolm Gladwell, I’m looking at you Ketchup Boy). Examples are fine, but I’d rather have them presented within a framework of rigorous theoretical argument. Lindblom strikes exactly the right pedagogical pose, at least as far as I’m concerned, but I realise that this fairly abstract approach might not be to everyone’s taste.

** Jesus Christ that’s an ugly sentence. Writing is really difficult.

*** So this is a point that’s been on my mind for some time now. I really, really don’t want to be one of those guys that sits at his computer bewailing how ignorant and stupid everyone else is and how all the bad things in the world are because everyone else is so ignorant and stupid, not least because I recognise that I’m pretty ignorant and stupid myself. Yet here we are.

For the love of god: why?

Oscar Wilde once wrote:

Most people are other people. Their thoughts are someone else’s opinions, their lives a mimicry, their passions a quotation.

I gave up blogging two years ago, largely due to a lack of anything interesting to say. I found that the substantive part of anything I wrote was simply an imitation of an argument I had read elsewhere. Why bother reinventing the wheel? Why bother simply re-writing what someone else had already written?

The majority of online writing mostly seems to consist of emotivism: simply stating your moral beliefs within the context of whatever current event has been spurted across the outer surface of a newspaper. This is self-indulgent, tribalistic, and also horribly dull. Which is not to say that this kind of blogging is without value. Political movements are tribes, and tribes need cohesion, and one way of achieving cohesion is to regularly and frequently restate the central tenets of your movement. But I am not a very good cheerleader.

On the other hand, the other kind of blogging – the kind of blogging I actually admire – is deeply technical, wonkish, and generally above my pay grade. I am not an economist or a political philosopher or a statistician.

So why blog at all? I think for two reasons:

  1. It helps you learn. Unlearning Economics claims he/she writes partly with the intention of being “taken down”, and so educate him/herself. There is a lot of stuff I feel I need to know more about, and this project might form a useful adjunct to my self-education.
  2. Because writing a blog is the bare minimum of what might generously be described as “political activism” that one can get away with without actually having to step outdoors. It might not be as impressive as shutting down central London for a weekend but, speaking personally, blogs have had a far greater impact on my beliefs than have protesters. Perhaps I will change some minds.

So the primary purpose of this blog is to enable me to learn, and its secondary purpose is to make statements I believe are true, important and which I believe can be justified. Some of these statements will be ‘political’ in nature and others will not. Anyway, stay tuned.

Markets are not the same thing as capitalism

Many left wingers are, broadly speaking, against markets. This is unfortunate, because markets are powerful tools for solving particular problems of collective action. Markets can enable diverse agents to engage in cooperation, on a more-or-less equal basis, in a fashion that leads to every participant agent being better off than they would be in the absence of the market.

So why are left-wingers so suspicious of markets? After all, as Chris Dillow argues, markets encourage many of the behaviours and outlooks that left wingers eulogise; individual freedom, consideration for the needs of others, and co-operation in pursuit of general prosperity. So it is perhaps surprising that there is so much hostility to market solutions on the left.

I suspect that the reason for this is that right-wingers have successfully elided capitalism and markets in popular debate on the subject, with the result that many left-wingers believe arguing against the iniquities of capitalism requires that they also argue against the use of markets. This view is reinforced by the historical observation that the rise of the ‘market system’ occurred alongside the rise of capitalism.

But it is important to note that capitalism and markets are not the same thing, nor is one a necessary condition for the other. Capitalism is a social system in which the means of production are privately owned, and in which those means of production grow and accumulate over time. Markets are a social technology whereby individual agents aggregate knowledge and so optimise the allocation of a given set of resources. The knowledge they aggregate consists of information about their abilities and resources, and information about their desires and needs.

It is possible for a social system to be capitalistic and simultaneously lack free markets. The ‘market’ for oil in the US at the beginning of the twentieth century was such a social system. The means of production were owned by one company, which largely dictated the price of oil. Similarly it is possible for markets to exist in social systems that are not capitalistic, for example one can conceive of a social system consisting of worker-owned cooperatives which interact with each other through market interactions.

So markets are distinct from capitalism. Capitalism is a social system with characteristics that many find iniquitous. Markets are a tool – a very powerful tool – for resource allocation, and like all powerful tools they need careful monitoring, maintenance, and oversight for them to work properly. Furthermore it is important to use the right tools for the job, and to recognise those problems for which markets are not a suitable solution.