"Our policy is directed not against any country or doctrine but against hunger, poverty, desperation and chaos.", George Marshall, 1947 June 4, quoted by Ronald Reagan at the Brandenburg Gate, 1987 June 12.
- Updated 2018 December 27 -
Nature rewards organized cooperation and intelligent allocation of resources. So does warfare. These are the causal roots of civilization.
Capital is (1) a persistent resource that (2) allows you to produce or maintain more value with the same mount of time/labor, or the same amount of value with less time/labor.
Think of how much food 1 farmer grows with ancient stone tools vs. a modern combine.
Both the stone tools and the combine are capital, but the combine is a far more powerful piece of capital.
Preserved knowledge is also a form of capital. Think of the economic cost of building a radio or manufacturing penicillin, given the knowledge people have accumulated over the centuries, vs. if you had to start from scratch knowing nothing about science except that such devices and chemicals were possible.
Because of the technological complexity involved in producing more powerful capital, it takes the organized cooperation of many people to create everything that sustains and advances humanity's conditions of living. How many people did it take to design, build, deliver, and fuel the farmer's combine? To design and build and operate the factory that build the combine and the refinery that made the fuel? To design and build and operate the railways and roads and ships and that carried everything everywhere?
Because capital allows the production of more value with the same amount of labor/time, wealth naturally tends to concentrate with the owners of capital.
The farmer who farms with a combine probably makes more money from growing more food, than the one farming with ancient stone tools.
"It takes money to make money."
Correctly recognized at least as far back as Marx. Ricardo's observation of how wealth funnels to owners of land and other scarce resources is similar.
This line of thought assumes however that capital is wisely employed to produce value. It is economically possible, although foolish, for example for the farmer to set his combine on fire instead of farming with it, and go back to to farming with stone tools. Or, he could compassionately give away his combine to the village sloth who will allow it to rust and beg for food as the farmer toils away with stone tools. Or, he and his farmer neighbor could mount big guns on their combines and go to war, leaving both combines in flames and both farmers dead or disabled, and their widows to farm with stone tools.
In the real world is it not always as easy as in these idealized examples, to tell whether resources are wisely employed. Arguably the War on Drugs is an economically destructive policy, like setting the combine on fire, but plenty of people still disagree. The cultivation of mathematics and science throughout the ages, and the construction of electrical power and telecommunications networks in the 20th Century, are probably examples of better judgment.
The investment of resources into things that create value value and happiness for people, instead of destroying it, is vital to the success or failure of a society.
See also The Broken Window Fallacy (Wikipedia). The needless repaving of low-traffic, low-speed residential streets that seems to frequently occur in some of the more dysfunctional jurisdictions in America is a similar sort of waste. Even sadder when also you see major infrastructural bridges sitting covered in rust only a few miles away.
(speculative) An additional problem with wealth concentration is the possibility of misallocation. When there are fewer significant holders of capital, there are fewer people in a position to make decisions about the allocation of resources. These individuals may not have the necessary talent, access to the information, or other qualities necessary to make the best choice on how to use capital. This becomes especially pronounced if capital is allowed to accumulate in dynastic families or an aristocracy.
Additionally, economic decision-makers in a concentrated economic system become risk averse, interested primarily in maintaining their economic or social position. Because wealth is already concentrated, holders of econoomic power have less of an incentive to take on risk and deploy resources in a way that maximizes growth.
Wherefore all policy must be set with this in mind.
Given the foregoing observations on how economics follows from the law of nature it is no surprise that people behave economically: they wouldn't be here if they didn't.
Even with all their flaws, dysfunctions, and malfunctions, in the laboratory of the real world market economics has survived, outperformed, and sprung back up like weeds in the barren cracks and dark shadows of, the rigid central planning of oppressive government regimes attempting to control individual behavior. Maybe this is because market economics both distirbutres throughout the economy the enormous "computational complexity" of all the planning and decision making, and moves the decision making closer to the relevant information by putting control over individual behavior with the individual. Regardless of the reasons, the lesson of history so far is still that the invisible hand beats the iron fist. See also, the connections between liberty and economics Reagan draws in his Brandenburg Gate Speech. See also, the epic fail known as the War on Drugs, which ironically Reagan did not see as violating the same precepts he recognized as correct. We are all blind in our own ways.
See the Wikipedia article on the Tyranny of Small Decisions
A specific case is artificially low interest rates causing underproductive allocation of capital. A project only needs to make more than its cost of capital to be profitable. So if a project that only makes 1% can be financed at .5% then somebody will probably take it. However because of thermodynamics this will in general involve irreversible commitment or use of some physical capital in the real world, which cannot be un-done if a better project comes along.
The overpopulation of the Earth, and the production of increasingly powerful technologies, requires humanity to cooperate in ways where heretofore it competed.
Throughout history both the struggle for survival against nature and the competition among tribes and nations has made humans increasingly efficient at exploiting the Earth to build weapons and infrastructure. Until now this has been a competitive advantage deciding the survival of civilizations, and it has not been necessary for the survival of the species for humanity as a whole to cooperate rather than compete.
However the logical end result of ever-increasingly powerful technologies and ravenous exploitation of the Earth is a destroyed ecosystem and an extinct species.
These ecological challenges require humanity to adapt in a way that it has never had to before, and its ability to meet that challenge will be key to the success or failure of the species from here forward.
As of 2017 February 18, the 3 warmest years on record, in order, are 2016, 2015, 2014. 4 of the 5 warmest years on record are since 2013. 11 of the 12 warmest are since 2000. See NOAA State of the Climate.
Long-lived pollutants may be an even greater threat to life on earth than climate change. Humans have created radioactive isotopes that never existed in nature, some of which will decay for billions of years, about the practical life of the solar system. Humans have also created many Persistent Organic Pollutants which are resistant to breaking down in the ecosystem and therefore continue to do harm for long periods of time.
There is a qualitative difference in ecological harm between releasing carbon that the Earth can reabsorb in its natural cycle, vs. creating persistent organic pollutants or radioactive isotopes that never existed in nature and will outlive the solar system.
Nature starts fires with volcanoes and lightning and reabsorbs the carbon with plants. The damage humans are doing with carbon is because of the enormous scale of their activity.
Although we don't know exactly what the number is, the Earth has some finite carrying capacity, a maximum amount of life the ecosystem can support. Because of their success as a species the humans have reproduced rampantly enough to call that limit into relevance.
It is imperative humans find ways to control population growth consistent with freedom and human rights. Some countries already have their population growth under control, but some don't.
Not only have humans almost destroyed themselves with nuclear weapons both intentionally (Cuban missile crisis, world quite possibly saved by Soviet Navy officer Vasili Arkhipov), and accidentally (a long list of events, including a famous one in which Soviet Lt. Col. Stanislav Petrov judged instrument readings showing incoming nuclear missiles to be erroneous and thereby averted orders to retaliate) - technologies meant to be peaceful have brought about some of the worst disasters in human history (Chernobyl, Fukushima).
The warnings of great thinkers like Stephen Hawking that powerful technologies like artificial intelligence, could have large, unknown, and possibly adverse consequences, are not to be taken lightly. Moreover the historical record of technologies malfunctioning or being vulnerable to unforseen circumstances or intentional attack (whether a nuclear reactor or a computer program) demonstrates that even peaceful technologies can be sources of risk - so with sufficiently powerful technologies, existential risk.
The lesson here is that humans have to cooperatively contain and control their technology, else one day there will be no humans - whether by armed conflict or just by accident.
Taxes affect behavior by shifting incentives: they raise the costs or reduce the revenues involved in doing something.
The income tax discourages the creation of value by reducing the reward involved in it, and is agnostic to the means of creating the value, and therefore agnostic to the amount of ecological harm done in creating the value.
We should not want to discourage creation of value, and policy should not ignore ecological harm.
The income tax is a system of incentives aiming for minimum value creation and maximum ecological harm.
For these reasons the income tax is an abomination.
Taxing pollution and ecological harm does not discourage creation of value, but does incentivize means of creating value that minimize ecological cost. The result is maximal economic value with minimal ecological harm.
Moreover because any economic process is going to produce some kind of waste - this is ultimately true because of thermodynamics - there is no concern about an inadequate base for taxation. Indeed because of this thermodynamic reality the base of taxation would be at least as great as when taxing income, just that the tax would fall on the harmful side of the activity not the helpful side. Processes that destroy instead of create value (think of a business constantly losing money and selling more shares and reverse-splitting its stock to keep the price above $1 or $.01) are still taxed when ecological harm is taxed, but when only income is taxed they are not taxed because there are no profits.
The Death Tax is the only tax you never have to pay!
Moreover because inheritance is only a transfer of wealth with no newly created value, the death tax does not punish the creation of value like the income tax in general does.
While it is in the first place questionable policy to intentionally and artificially sustain any thing, living or not, that does more harm than good to the ecosystem in total, nonetheless to the extent people might object that the taxation of pollution and "entropy increase" (connotational not rigorously mathematical meaning of "entropy increase" here) is a regressive tax - true but irrelevant, on the basis that any portion of the total tax receipts could be distributed arbitrarily to offset any inability to "pay one's fair share".
In other words, picturing/analogizing the policies and incentives and receipts and costs in terms of graphs, taxing created value vs. ecological harm differs fundamentally in the "shape of their curves" whereas redistributing a "translational" $X of wealth per person who cannot "make their board" leaves the "shape" of the taxation system's "curve" unchanged while only linearly shifting the "break-even point of zero profit-or-loss".
The rise of the U.S. economy from the nation's inception through World War II is well known in history. Less well known, is that all the while, America was raking in tariff revenues from international trade, see Wikipedia article compiling historical U.S. tariff data. Anyone thinking you can't protect and grow your industrial economy with reasonable tariffs, and still have healthy international trade fostering globalization and peace, is stuck in a false dilemma.
Of the three policy tools only tariffs are a source of revenue for the government. Tax incentives deprive the government of needed revenue. Weak currency reduces folk's power to by strategically valuable assets in the world markets.
Literacy is essential to a society both economically and culturally.
Economically it is impossible to construct or utilize any but the most rudimentary physical capital without literacy, both to learn the knowledge acquired in previous generations and in the design, construction, and use of capital by augmenting a humans' "working memory" with extra and more permanent storage (imagine a computer with 640 kilobytes of RAM and no hard drive, vs lots of RAM and a big hard drive).
Just as literacy connects people with all humanity's previously acquired scientific knowledge, likewise it connects people with all history's lessons about how people should or shouldn't treat each other and their ecosystem and about what makes societies succeed and fail.
Without literacy humanity is stuck in "Groundhog's Day", having to re-learn the same shit and make the same mistakes every generation. With literacy we can lessen the Groundhog's Day effect at least some.
Soros observed (citation needed, maybe Soros on Soros) that cultural belief systems affect a culture's ability to adapt, develop technologies, etc.
For example consider Europe during the Dark Ages, when intolerance of any new thought because of a culture focused on religion, stymied technological innovation. Possibly cultures with social and belief systems centered around tradition and religion are less adaptive vs. those centered around e.g. science and commerce.
You can't sail ass-end-first into every storm and expect to keep the ship afloat.
In the Obama era this was about whether people should just be given what they "deserve" or are "entitled to" like money grows on trees, or whether as a society we would think about how much value has to be produced how and by who in our short human lives, before proceeding to spend it all and more.
In the Trump era many have articulated articulated this issue as the question of whether as a society we will have "fact-based governance" or whether we are in a "post-fact" era.
In every administration of my lifetime, the economy has almost always been doing "great", even as debt-to-GDP, trade deficits, percent of adult children living with parents, and other measures of economic reality, mostly worsened. This is without even trying to account in the economic numbers for ecological costs of pollution, depletion of resources, etc.
See also Michael Hayden's insightful recognition in this CBS Face the Nation interview that America has declined into "making decisions based not on facts and data but on emotion, preference, grievance, loyalty, tribalism."
From the economic discussion it should be clear that a civilization will not long survive untethered from fact: the laws of nature do not stop operating just because foolish nations or proud men choose to ignore them.
The responsibility to ensure rational governance begins with the people: in a free society the quality of thinking, or lack of it, in the elected leadership will only mirror that or the public. So long as the public's thinking is shallow, emotional, impulsive, uninquiring, unskeptical, and prejudiced by preexisting worldviews, freedom in the world and (given the circumstances) even the future existence of humanity are in great peril.
Separation of church and state is also essential to fact-based governance. When everyone has their own personal religious views, and in general none can be proved or disproved by experiment, setting policy on religious bases contravenes the societal precepts that (1) we are all "created equal"; and (2) we ought to set policy according to what we have learned from experience and experiment and thinking rationally with the brains GOD gave us. Religiously motivated policy arbitrarily imposes the thinking of some upon all, and in many or most cases also makes for maladaptive policy premised in traditional views instead of the results of experience.
Soros (citation needed - might have been Soros on Soros, interviews, lectures?) may have been the first to recognize this idea, in the context of people believing in flawed economic ideas and therefore also believing that the results they were experiencing were the best possible under the circumstances, when instead with more aware and enlightened policy standards of living would be much higher and levels of misery much lower. More recently Jamie Dimon implied flawed and backwards policies (which society apparently believes in, since they are law) are responsible for meager economic growth which could be much better, see quote reprinted here.By analogy when people thought the Earth was flat they were scared to sail around it, not just because of the dangers intrinsic to sailing but also because they feared they might sail off the edge into some existential abyss. Magellan could not make sailing inherently safe, but by demonstrating in experience what many had already begun to conclude through reasoning, he at least removed the fear of the existential abyss and opened the world to navigation and ultimately improved standards of living.
"We must, indeed, all hang together or, most assuredly, we shall all hang separately." -Ben Franklin
"Ask not what your country can do for you, but what you can do for your country" -JFK
Examples: Marijuana policy in Netherlands since the 1970s and in the U.S. since the 1990s. It is not a matter of philisophical or theoretical debate whether it is necessary to rigorously enforce every letter of every last law in order to have a healthy and prosperous civilization operating in general under the rule of law; it is an observable reality that draconian enforcement of every law is unnecessary.
Topic page: Elements of Leadership
In his Brandenburg Gate speech Ron Reagan spoke of "the practical importance of liberty".
Reagan was an ebullient, idealistic, intrepid blunderbuss of optimism. Some of his policies were as spacey as Star Wars, but culturally he got America believing in itself again after a demoralizing experience in Vietnam. What kind of message did it send to everyone from the American worker to the Soviet leadership, when after being shot in the lung and having every right to step down from office, he got back up on the podium and spoke to the world believing balls to bones in one of the greatest truths about the way societies succeed and fail?Freedom will win in the world because freedom makes societies healthy and successful and oppression destroys them from the inside out.
Reagan saw the pattern in the contrast between the prosperity in the relatively free West and the dysfunction in countries that were stifling free press and speech and commerce. But the pattern is so comprehensive and powerful that it is evident in many more and different examples, ironically some of them Reagan might have hated to admit.
Denver, Portland, and Seattle have shown recently, and Netherlands has shown since the 1970s, that the sky does not fall if you let people smoke weed, you will rake in tax money hand over fist, save a ton more money not persecuting and prosecuting and incarcerating people, keep big money out of the hands of organized crime, and everyone will keep coming to work and doing their jobs every day.
Anyone who has seen the situation on both sides of the pond will say that prostitutes in Netherlands or Germany are safer and less miserable than the ones in Chicago or New York. Where it is legal it is the world's oldest profession; where it is illegal it clogs courts and jails with nonviolent people just mostly trying to ease their own suffering in their respective situations, and exposes peaceful and otherwise law-abiding sex workers to enormously increased risk of violence and abuse.
And by foisting upon people the risk of suffering in failing health and disability at the end of life, instead of allowing assisted suicide or euthanasia to anyone who wants it to ensure they don't suffer, society only incentivizes people who are "on the fence" to kill themselves while they still have control of what death will involve. Many or most of us know at least one person who killed themselves, and are now no longer here to help us. Probably fewer of us understand all the reasons why they did what they did. But society's blind and irrational approach to the inevitability of death that comes for us all, gave them an important, rational, and meaningful risk management reason to die, that they never should have had - instead of tilting the incentives toward seeing one more day. I wonder how many good minds and hands we would still have with us if the law was not so stupid about this.
In almost every case, example after example, the pattern is that freedom works to strengthen societies and oppression works to destroy them.
If people can't tell the authorities what is wrong with a policy, the authorities will probably keep doing the wrong thing.
If people are underinformed or misinformed, their advice will be useless or misguided.
In either of these situations there will be few minds running the society instead of many.
No surprise that the societies that suppress freedom of information the most, also tend to be among the most dysfunctional and miserable, and the societies where people are free to collect information and criticize policies and leadership and protest for reform, lead the world.
Because of its role in setting policy, freedom of information is also one of those freedoms that is foundational to all the others.
See subsection in Economics about mostly free markets. Maybe the complexity of central planning scales faster/worse than linear with the size of the society?
"Power corrupts" - and also by its nature power is leverage with which to get more power. A well-designed political system is a stabilizer against the natural trap for the people in power to fall into, a vicious cycle of doing all kinds of evil and stamping out liberty in order to keep power and cover up their misdeeds.
See discussion in Economics sections above.
See discussions in Economics sections above.
Alexander Hamilton wisely recognized that tariffs could "grow" factories and industrial power in a land where there was little, by vitiating the cost advantage the already-developed factories in England had. Today others wisely recognize tariffs can preserve and cultivate industrial power in developed democracies by vitiating the cost advantage of tyrannical or low-wage nations.
The Court is unable to act as an effective check on abuses by the other two branches, when the other two branches decide who is on the Court. The other two branches are unlikely to put people on the Court who will restrict their power.
U.S. history has seen an unchecked, almost monotonic increase in federal power to the point where it is now "constitutional" for the federal government regulate individual behavior choices far attenuated from Washington. It is inconceivable that, for example, whether someone dying of cancer grows a pot plant and smokes a joint in the quiet of their home, should somehow be a matter of federal concern or "interstate commerce". Historically FDR's Court Packing Scheme is direct evidence that the Constitution does not adequately protect the Court from undue influence from the other two branches.
Such as the recently televised (link/citation needed) experiment with Ranked-Choice voting in Maine.
How many people are murdered in connection with the manufacture and distribution of alcoholic drinks in the U.S. today, compared to in Al Capone's day?
Movie analogy: The scene from the classic movie "The Good, The Bad, and The Ugly", where the armies move on after Blondie nad Tuco dynamite the bridge they were fighting over.
Varying concentration of "heroin", e.g. exceedingly strong opioids being sold as heroin in U.S., contributing to overdose rate.
Sign on coffee shop wall in Amsterdam once, about white heroin being sold as cocaine.
Copyright 2018 Michael Redman.
IN GOD WE TRVST.