WordPress is giving me 40 days to tell them my cell phone number or else they won’t let me write new articles. No way, Jose, am I giving them that info.
But it’s OK. Over 300 articles is a nice body of work. And I have run out of steam.
So time to sum up.
Most popular article: By far, the one explaining how to fix a java problem in Windows.
Most Important Contribution: Solving Zeno’s Paradox. So much confusion until I cleared it all up. Even Bertrand Russell was confused.
Most controversial: The bitcoin series, where I prove that Bitcoin is doomed to fail. Devil’s Advocate is telling me bitcoin has risen to an all time high, but that’s a short term thing. It will go to zero within 20 years, as all fake monies have. The key theoretical insight is that it will never, ever, be used as money, which, of course, is proving true. Nobody actually buys anything with bitcoins. They merely hoard them, hoping its price will go up. [Note: I had a first draft of this paragraph up earlier that Pete Surda pointed out was unclear. See comments.]
Which means, of course, that it is inherently a scam and a mania. Imagine a thing whose only use is sitting on it, hoping to sell someday to a bigger fool who can only sit on it, hoping to sell some day to a bigger fool, and so on forever. It cannot last.
As for all the wonderful ideas people have for using bitcoins to transport or store information or whatever nonsense they are telling you about, that is talking about the technology, not ownership of the bitcoin. It’s like someone telling you how wonderful television is, then trying to sell you one piece of airwave for a thousand dollars. What can you do with ownership of an airwave?
Thing I was in over my head: Mises’s calculation problem. I still cannot say I have 100% clarity on it. One person asked me why, in theory, a computer cannot do what an entrepreneur does. The entrepreneur must have some kind of thinking process going on. Why, in theory, can’t a computer be taught to do the same thing? I do not know.
What I should be doing now: Politically, supporting President Trump in every way possible. He is our guy, our hero, and by “our” I mean anyone who is not a parasite on innocent people, like Hillary and Obama and their ilk.
I’d love the chance to sit down with him and teach him some Austrian Economics, because he is making and going to make some big mistakes, all because of ignorance of AE. Of course, it doesn’t have to be me. I’m slowly forgetting the details of AE, as my interests move on. Ron [not Rand] Paul would be ideal.
So good bye folks, it was fun. The deadline is April 17, 2017, at which point wordpress will turn off the lights.
Thank you for reading and commenting.
Devil’s Advocate: Seen the last of him, hahahahaha.
That’s what people are saying at reddit.com/r/the_Donald .
Now don’t get me wrong, I’m pleased with Trump, both by the fact that he kept Hillary out and by the good things he has been doing.
But anyone can make a mistake, and Donald supporters saying a tariff on Mexican imports is the same thing as Mexico paying for the wall is a huge factual error.
An American guy goes into a store and wants to buy some Mexican jumping beans.
“Why are they $1.20 today when yesterday they were only a dollar?”
“Because Mexico has to pay for the wall.”
“Wait a minute. I’m paying that extra 20 cents, not Mexico. So it’s me paying for the wall.”
Thus, a tariff on Mexican imports is obviously not “Mexico paying for the wall”.
But what about the other way around? What if we charge an extra twenty percent on everything we sell Mexico? Then for sure it’s the Mexicans paying for it, right?
No. Because the US govt is not able to reach into a Mexican’s pocket and collect money from him. So it’s the American exporter who will pay that 20%.
Devil’s Advocate: But Dave, the exporter will collect that straight from the Mexican pocket by charging the Mexican an extra 20%. So it is Mexico paying for the wall.
Smiling Dave: Well, yes, if the exporter can actually sell the same amount of stuff as before we taxed him. But there is a huge Wall standing in his way, called the
Laws of Supply and Demand. Everyone has felt this law in his everyday life. When video games cost $20 you will buy, say, five of them. When they cost $100, you will buy less than five.
DA: But Dave, even in your example, the money is the same. In each case, you buy $100 worth of stuff.
SD: Ahh, but the devil is in the details. If the exporter was selling 5 American video games at $20 each, his net income is $100, because he keeps all the profits. But if he sells one at $100, of which he keeps only $20, because there is an export tax of $80, his net income is $20. So that tax, even though the Mexicans are paying it, is making the American producer lose 80% of his income. He will go bankrupt. That’s not our goal. We are shooting ourselves in the foot.
DA: Dave, we aren’t going to charge an 80% tax, only a 20% tax.
SD: Do the math. The principle is the same. A higher price means less sales. But a higher price does not mean higher profits per item for the exporter, because any extra money goes to the US govt, not to him. Meaning you are decreasing his income.
DA: Meaning he is paying for the wall, and may well go bankrupt.
SD: You got it.
DA: So how will we make Mexicans pay for the wall?
SD: I don’t know. But one thing is absolutely certain, by simple arithmetic. Any tariff or tax on anything, whether we buy it from Mexico or sell it to Mexico, means we are paying for it, not them.
The confusion about the regression theorem multiplies. Once again, that hoary chestnut, that the reg. thm. only applies to a barter economy, is getting popular.
Time for Smiling Dave to clear things up. We begin by quoting Mises, then, since it is written in very stilted English, to translate it.
In Human Action, Mises begins his study of the regression theorem by noting that “…the extent of that part of the demand for a medium of exchange which is displayed on account of its service as a medium of exchange depends on its value in exchange.”
Let’s translate this into simple language to make sure we know what it’s saying.
“…the extent of that part of the demand for a medium of exchange which is displayed on account of its service as a medium of exchange…”
Translation: Why does Smith want and accept a dollar, or a bitcoin, or any other unit of any kind of money, as worth a pound of apples?”
“…depends on its value in exchange.”
Translation: Because plenty of other people also want the dollar or the bitcoin in their pockets, and also accept it as worth a pound of apples.
He writes that this simple statement led people to reject the whole Austrian analysis of money.
Devil’s Advocate: And how right they were. Supposedly Smith only accepts it as money because Jones and Butler and Yeats, and thousands of other people do. But the same is true of Jones. He only accepts it because a thousand other people do. Same with every single one of those thousands. Each one accepts it only because everyone else does.
And of course, that can’t be. You have to start somewhere. When the world was created, nobody accepted anything as money, obviously. So let’s say that on January first, nobody accepts a silver coin as money. Why does Smith wake up on January second and agree to accept a silver coin as money from now on, when nobody else does? For him to accept it, you need thousand of other people to accept it. Otherwise he won’t be able to buy the many things he needs with silver coins. [Alternately, why do thousands of people wake up on January second and all decide to accept the silver coin as money?]
SD: Yes, that’s an excellent question. And that question has to be answered whether Smith is living in a barter economy or a money economy [meaning where people are using gold, say, and he suddenly accepts silver as money, too]. Why should he accept silver coins, or bitcoins, or any new candidate for money, that nobody else does?
Bottom line, the regression theorem’s question has to be answered in every economy, barter or money. How wrong it is to say that the reg. thm. only applies to a barter economy.
Praxeology and Psychology.
Some have argued that that there is no need at all to answer the above question. That we are barking up the wrong tree. Here is the gist of their argument:
We have left the field of praxeology [=economics] and have entered into psychology when we talk about why Smith will accept bitcoins, or anything else, as money. That is a question for psychology, not economics. People are funny. They do things for subjective [= often stupid] reasons, often egged on by wild, irrational, psychological impulses. It is not our task to delve into their minds, but to study their actions.
Thus, these people claim that asking why people accept or reject a bitcoin as money is not our job. Leave it to the shrinks. We are economists, and have a different job to do, namely, serious economics. Just for fun, let’s call the assumption that we need not understand why people choose the means they do the Shrink Hypothesis.
DA: You make it sound like they are wrong.
SD: Indeed they are. That whole argument confuses means and ends. The ends a man chooses are subjective, yes. Why he chooses them is not part of economics, that’s correct. But the study of the means he chooses to achieve his goals is the very heart of economics, and is not something to be left to the shrinks. As Mises writes in Human Action, “It [=praxeology] is a science of the means to be applied for the attainment of ends chosen…”
DA: So the shrinks study why people choose certain goals, and economists study why, given a goal, they choose certain means to achieve that goal.
DA: But Dave, maybe the Shrink Hypothesis is right. Maybe economics studies the means people use, but does not study why they use them.
SD: That cannot be so. To prove this, lets look at the laws of supply and demand. Every economist agrees that the higher the price of a product, the more people will be willing to supply the product, and the less they will be willing to buy the product.
Now for a thought experiment. Let’s assume that one day all mankind decides they want to buy high and sell low, always. The higher the price of anything, the more people start buying it. And this happens for everything, universally contradicting the laws of supply and demand. And that happens from today until the end of time, for all goods and services. When asked, they will all say that their goals remain the same as they ever were. Since this is a thought experiment, let’s add that we know they are telling the truth.
DA: But that implies they have all decided that wasting money is a means to get rich. They have sized upon a new means.
SD: Would such a reality contradict all we know about the laws of supply and demand?
DA: Yes it would. It is exactly the opposite of what all the textbooks say.
SD: Would it behoove us as economists to try and figure out why they seized on this new means of doing things?
DA: It absolutely would. If we want to get to the bottom of things, and understand why reality contradicts our laws of economics, we certainly do.
SD: Not if you agree with the Shrink Hypothesis. Then you have to say that who cares why people have suddenly chosen a mad means of doing things. Economics has been proven wrong by the new reality, and that’s that.
DA: What would you say, Dave?
SD: I’d say that what is really going on is that the thought experiment has a missing piece. If the experiment wants to say people have chosen a new means, then it has to say why they have chosen that means. Because economics always has to know why a particular means was chosen. That’s what economics is, knowing all you can about the means.
DA: But the proposer of the thought experiment would be hard put to answer why everyone suddenly decided losing money is the best way to make money.
SD: Exactly. Thus, we have refuted the thought experiment, but the Shrink Hypothesis has to accept it. And it has no way of claiming our thought experiment is implausible. Remember, the Shrink Hypothesis considers all possible choices of means as equally valid, and thus equally likely, at least in theory. They see nothing odd about all mankind getting up one day and accepting bitcoin, or anything else, as money. Remember, people are funny.
DA: But wait a minute. Your argument assumes that bitcoin is a means. Is money a means or an end?
SD: Marx wrote that to a small group of people money is an end in itself. But surely even he was only talking about money that can be used to buy things. Even Marx would never claim that some capitalist runs his business solely for the purpose of accumulating Monopoly money. Come to think of it, he writes that they pursue “exchange value”, proving my point.
So that to almost everyone alive, money is a means of achieving their ends. You work to make money so you can buy stuff. You don’t work to make money because it looks pretty. You might buy a painting because it is pretty, because having a pretty painting is a goal you might have. But nobody has a goal of having pretty money. Money to people is a means. That’s why it’s called a “medium” of exchange. “Medium” means “means”. Money is a means, not an end. This cannot be emphasized enough.
Thus, Mises’s classic, The Theory of Money and Credit, is not a psychology book. It doesn’t say people are funny. It discusses which money people will choose as the preferred means of buying things they want, and which money will be outright rejected as a means of getting what they want.
DA: So an economist should indeed study if and why people will accept or reject bitcoins.
One Guy Does Not Solve the Problem.
DA: Moving on, some people are saying, yet again, that to be a medium of exchange all you need is one person using the bitcoin once to buy a pizza, and then the bitcoin is forever enshrined as a medium of exchange, from that moment to all eternity. Thus, all your arguments on this blog that bitcoin isn’t a medium of exchange are refuted by simple reality. A single slice of pizza, digested long ago, shows how wrong it is to claim bitcoin is not a medium of exchange.
SD: The fact that one guy bought a slice of pizza for ten thousand bitcoins five years ago doesn’t answer the question raised by the regression theorem. Say Mr Geek accepted those 10,000 bitcoins and gave a slice of pizza for them. Smith will still not say, nor will anyone else, “OK, you want to pay me in bitcoins instead of dollars? Sure.”
DA: Why not?
SD: Because once Smith accepts those bitcoins, he has to pay his rent and his phone bill and electric bill somehow. And he has to go shopping for food and clothing. And pay all kinds of people for all kinds of things, none of whom will take his bitcoins in payment. And he knows this. That slice of pizza did not change reality. Everyone he knows, except maybe for Mr Geek, wants to be paid in dollars, not bitcoin. And everyone they know wants the same thing.
Nor does Microsoft.
DA: But Dave, look at all the big box companies like Microsoft that accept payment in bitcoin nowadays. They consider it money.
SD: Oh no, they don’t. They won’t touch bitcoin with a ten foot pole. It never enters their wallets for a second. What happens is, there is a middle man, a bitcoin company, that accepts the bitcoins from the buyer, charges Microsoft a fee, and gives Microsoft cash dollars.
DA: And that middle man? What does he do with the money?
SD: He holds onto it, gambling that it will go up in price. Or else he sells it to other gamblers.
What is the Answer to Those Questions? How does a new Money Take Flight?
It’s in Human Action, or read Bitcoin Takes a Beating for a popular exposition.
The freeware program Chess Hero is lots of fun. You do, however, need to feed it pgn files, and some of those files return an error message when you try to load them in Chess Hero, even though they work fine in Arena and other programs.
Here’s how to fix them. Open the pgn file in a standard text editor. My current favorite is Ever Edit but any one will do.
Once you have opened the pgn file, open up the Find button in your text editor. Often its icon is a magnifying glass, or binoculars. Get to the Find and Replace area and type the following into the boxes:
In the Find box, type in: [FEN
In the Replace box, type in: [SetUp “1”] [FEN
Then hit the Replace All button.
What you are really doing is adding the phrase [SetUp “1”] before every game in the pgn file. My guess is that Chess Hero insists on having that written in for some reason.
Here’s a quote:
9.7.1 Tag: SetUp
This tag takes an integer that denotes the “set-up” status of the game. A value of “0” indicates that the game has started from the usual initial array. A value of “1” indicates that the game started from a set-up position; this position is given in the “FEN” tag pair. This tag must appear for a game starting with a set-up position. If it appears with a tag value of “1”, a FEN tag pair must also appear.
It may not work every time, but it works often.
Download Fritz 5.32 from here [careful, it may take you away from this page. Make sure to come back, y’hear]: http://www.top-5000.nl/dl.htm?file=dl/fritz532.zip Yes, it seems to be freeware now.
Hit the New button to create a new empty pgn file, lets call it good.pgn
Hit the Database button and load that pesky pgn that Chess Hero refuses. Fritz will list all the games in the pesky file. Use the Shift button on your keyboard to select them all. Now hit the copy button and when asked where to save, tell it to save to good.pgn, that empty pgn file you just made.
Voila! Good.pgn will have all the games in the pesky one, and it will work in Chess Hero.
If you have 15 minutes to invest in learning what happened, have a look at this:
Ultra short summary: Putting aside the twin towers themselves, there was a third building, 47 stories high, called Building 7, that also imploded on 9/11 [in seven seconds]. No plane hit that building, everyone agrees. So why did it collapse?
NIST, the agency paid 16 million dollars by the US Govt to find out what happened on 9/11, says the building collapsed because of fire, caused by burning office furniture.
Over 2,500 architects and engineers beg to disagree, and in fact have an online petition going round to investigate the whole ugly business independently.
The video shows many buildings collapsing in the exact same manner the twin towers and Building 7 did. It happens routinely all around the world. It’s called “planned demolition.” It takes many months to prepare, and it involves putting explosives inside the building and blowing it up. Experts who saw the 9/11 videos say that what happened, the flattening like a pancake, the incredible speed of the collapse, could only happen if there was a planned demolition, planned months in advance.
No fire could ever do it. Modern buildings have caught fire, at much hotter heat, and they did not collapse. It’s like saying Hiroshima happened because somebody lit a match. Plenty of clips showing those fires, too.
I am totally convinced. These are not kooks by any definition, but serious people, such as the manager of Underwriter Laboratories, technical experts with degrees, mechanical engineers, structural engineers, high rise architects, materials scientists, chemists, metallurgists, physicists, explosive experts, demolitions experts, fire protection experts, winners of science medals in their fields, and on and on.
There are many more suspicious happenings that the video points out. Have a watch.
Oddly enough, Mainstream Economics hasn’t learned much in the last hundred years, and still makes most of these ancient blunders.
Source for this article:
Mises and Austrian Economics Murray N Rothbard.mp3
and Mises and Austrian Economics Murray N Rothbard_2.pdf [full of typos, sadly]
In other words, I’m summarizing Rothbard. I’m not sure when he made the presentation. He mentions computers and calculators being cheap, and the Communist countries still being Communist, so that may give some clue. The format will be as follows. I’ll name the fallacy, then quote Rothbard about it in italic font, then mention what little I know about it. Without further ado, the big 16.
1. Too much aggregate, too little individual.
…all the other schools of economics…deal with aggregates, groups, classes, wholes of one
sort or another, without focusing on the individual first and building up
Smiling Dave: Yep, this one is still with us.
Devil’s Advocate: But Dave, you don’t explain why it’s wrong.
SD: That’s beyond the scope of the article, which is very long already. Just going to list the blunders, not refute them.
2. Consumer prices are determined by cost of production [when the truth is vice versa].
…value, economic value, price, was determined by the cost of production…
SD: I’m told this is no longer believed by the mainstream.
3. Labor Theory of Value.
…the cost of production is embodied in some fashion in the product, and specifically by the quantity of labor hours embodied in it.
SD: In another mp3 in the series, his listeners tell Rothbard that no professional economists, not even Marxist economists, believe in that anymore. But among sociologists, fiction writers, and the like, people who are Marxists but have not actually studied any economics, the Labor Theory of Value is alive and kicking.
4. False Dichotomy of Exchange Value and Use Value.
…value in use and value in exchange, … and we have to deal with exchange value, and forget about use value. You see right away this sets up the conditions for a whole bunch of left wing thought in the late 19th, early 20th century. It’s still going, I suppose,…production for use and production for profit. It immediately sets that up somehow as a big distinction.
SD: I’m told that the mainstream no longer thinks like that.
5. Preoccupation With Numbers.
…science meant measurement in those days for these people. And so therefore, how do you measure value, how do you measure changes? He’s looking for some hard quantity…
SD: Oh, yes, worse than ever.
6. Distribution Theory.
...they had a separate thing called distribution, theory…trying to figure out—this is Ricardo particularly—who decides how much of the national output goes to wages, how much goes to profits, how much goes to landlords?
SD: I’m told this one is dead.
7. Class Conflict.
…a class struggle between these three mighty groups, [land, labor, and capital]. In other words, the good is produced somewhere, first they produce it, then they fight for who gets the different shares of income.
SD: Most people still believe this. I’m told that mainstream econ does not.
8. Iron Law of Wages.
…wages are determined by the iron law of wages, the Malthusian iron
law, down at the subsistence level…Everybody gets the lowest possible wages…
SD: Mainstream econ doesn’t believe this anymore, I’m told.
9. Landlords are Parasites Who Deserve to Be Paid Zero Rent.
…evil, unproductive landlords, getting an increasing share
of the national product…
SD: I think this is still believed by laymen, and I think by Keynes as well [he wanted euthanasia of someone or other]. Mainstream, I’m told, is silent about this, so it seems they no longer agree with it.
10. Focus on Equilibrium.
…focused totally on nonexistent, unreal,long-run
equilibrium. This is done right now by modern microeconomics, and
macroeconomics, for that matter…In long-run equilibrium you
don’t have to forecast anything; nothing ever changes.
SD: I’m told that this is still around.
11. Forgot about the Entrepreneur.
…they don’t talk about entrepreneurs because entrepreneurs deal with change and uncertainty. You make a profit if you can forecast better than the next guy. You make losses if you can’t forecast. In long-run equilibrium you don’t have to forecast anything; nothing ever changes…So the entrepreneur then becomes a pain in the neck. It’s messing up your neat mathematical system.
SD: Still going strong.
12. Perfect Knowledge.
Since nothing ever changes, everybody has perfect knowledge, as they
call it, perfect knowledge, everybody’s in perfect competition, there’s no
uncertainty, no risk, no profits, there are no losses.
SD: Rational Expectations Theory and Efficient Market Hypothesis seem to indicate this is still around.
13. Micro and Macro Never Meet.
…separate, divide totally the macro from the micro sphere.
We’re all familiar with that, those of us who take current economics…
Micro, you learn about supply and demand or whatever,
and then suddenly you leap into macro and nobody talks about supply and demand, they all talk about growth curves and velocity and all that, totally different.
…It’s like two hermetically sealed spheres.
There’s the microsphere where things are going on, it’s fairly
understandable, supply and demand, prices and all that. Then there’s
the macro sphere, totally cut off from the micro, where you have
money and prices bouncing up and down, with no relationship between the two.
SD: Alive and kicking.
14. Don’t Understand Interest.
…the poor anti-usury people could never
figure out… what their justification for interest
is, interest on a pure loan. They could understand about risk, they
understood about uncertainty and all that; they just didn’t understand
about, why should people be able to charge three percent or eight
percent or whatever on a pure loan.
SD: Keynes believed this. The mainstream still doesn’t understand interest, though they may think it’s OK to charge it.
15. Capital is a Homogeneous Lump.
We have capital, not as a homogeneous lump, which modern economics still tends to say, just add more capital, as if it’s somehow a blob out there.
Capital is a latticework, it’s a network, a structure which all has to fit in
together. And by the way, only the free market can fit it in. Only
entrepreneurs, the profit and loss test, profit and loss, incentive, and
free price system can do the fitting.
SD: Still around, I’m told. How else can you put Capital into an equation?
16. It Takes Time to Make Stuff, and Some Things Need More Time than Others..
…modern economics still has not learned, capital takes time, production
takes time. Capital is a time structure.
Some goods are very close to consumers, like producing Wonder Bread,
where the retailer is very close to the consumer.
On the other hand, machinery, the iron ore that goes into making the
machinery that produces Wonder Bread is way up the structure, takes
a lot of time to get to the earlier phase of production or a higher order
of production. So we have then production taking time.
SD: I’m told they don’t get this yet.
So there you have it. Mainstrean Economics gets 9 out of 16 wrong. Their grade on a test of basic economic knowledge, provable from first principles and obvious to common sense as well, that has been around for well over a hundred years, is 43%.
[Thanks to the members of the libertyhq forum for their info on what’s being taught today in the schools. All errors are mine].
From the intro to an advanced math book:
5. The book contains an abundance of homework problems. They are not
graded by level of difficulty since life does not present problems that way.
Devil’s Advocate: What’s not to like, Dave? He’s right, isn’t he? Life does not present problems that way.
SD: He’s right if we are talking about homework that prepares one for life.
But there is another kind of homework, namely,
homework that aids in mastering the material.
And new material is best mastered by going from the easier to the harder.
First we learn to crawl, etc.
DA: I’m glad you pointed this out. My one year old son had started to crawl all over the house. I was having none of that. I took the little fellow out into the street, with traffic constantly streaming by, and forced him to stand. He started crying.
“Son”, I told him, “I can’t let you crawl freely in a protected environment. Life is not like that. Get up and walk, son, and watch out for those cars.”
SD: And what happened?
DA: He failed his math course.