Home » Uncategorized

Category Archives: Uncategorized

Mexico Paying for the Wall Through Tariffs? Big Factual Boo Boo.

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 Regression Theorem in Regress.

Barter Economies.

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.

SD: Yep.

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.

SD: Absolutement.

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.


Smiling Dave Learns About 9/11.

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.

16 Classical Economic Mistakes That AE Fixed Up.

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
from there.
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].

About homework.

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.

If you dislike the new Firefox.

There’s Palemoon, which is not bad, but it is incompatible with many great addons.

So here’s my suggestion. Get Comodo Ice Dragon Browser, portable version preferably.

Get the add on Remove It Permanently [RIP]. You won’t need the bloated Adblock if you have this one.

Other addons that I use, listed in no particular order.

Tab Mix Plus.

X-notifier to check your emails. [And mail.com for hassle free, more or less, email provider].

Grab My Books, to turn web pages into epubs.

Ghostery. Maybe with RIP you don’t need this. Dunno.

Download Them All.

Clear Fields.

BlockSite Plus. Maybe with RIP you don’t need this. Dunno.

Flash Video Downloader.

Redirect Bypasser.

Smart Video for Youtube.

Reddit Enhancement Suite.

Switch Private Browsing.

Twitter Disconnect. Maybe with Ghostery and/or RIP you don’t need this. Dunno.

Windows Programs I like:


Sumatra pdf.


Chess hero.



Quite RSS


Revo Uninstaller

Duplicate Cleaner Free

Advanced Renamer

Peer Block

All are available as portable but for Chess Hero.



On Religion.

Devil’s Advocate: Having a unique perspective on all this, as should be obvious from my very name, allow me to inject my two cents.

People come down here all the time. It gets quite crowded, and the waiting line to boiled in the fiery flames is very long. So we all have plenty of time to while away, and we talk very freely. Here are the various religious positions people tell me they have.

The Scared in a Scary World Guy: I can’t handle it anymore. I’m about to lose my mind. I can only keep on going if I can assume there is Someone more powerful than me out there to help me out. Naturally, I’ll seize on any scrap of anything to bolster my need.

The Mellow Atheist: I see no evidence for any spiritual forces, and I feel no inner need for them to be any. So let’s leave it at that.

The Varieties of Religious Experience Guy: I never gave it much thought, until one day I was dying in a hospital bed. Suddenly I looked down and saw myself. An out of body experience. Then a very warm, friendly, masculine voice told me, “God here.”
“Nice to meet You, Sir. Am I dead?”
“No, you still have a minor role to play in the world.”
“Then what am I doing here floating above my physical body?”
“It’s a way of giving you some rest. You’ll be back inside soon.”

Smiling Dave: Why was he down there with you, Devil?

DA: Nobody’s perfect. BTW, what’s your take, Dave?

SD: I’m a very, very, very, very, mild case of V. of Rel. Exp Guy. But I’ve spoken to a solid V.O.R.E.G., and, given my pre-existing mild case, I was open enough to be totally convinced by his story.

DA: But what about all the unanswered devastating questions that Science Guy and Bitter Atheist Guy keep asking?

SD: I don’t know the answers.

DA: How does God expect people to even believe He exists, given that He almost never shows Himself like He did to your friend, when all the q’s about Him remain unanswered?

SD: I can only assume that’s the way He wants it. And I think it follows that the assumption that we are all going to join you down there, Devil, unless we believe in Him, are incorrect. He seems too nice a guy to screw all humanity like that.

DA: So the default position should be agnosticism, or maybe even atheism, unless He takes us personally by the hand? Why did He set things up like that?

SD: He baffles me sometimes. In fact, most of the time.

DA: What about Jones here, who is open minded and wants to investigate? Is Jones to just twiddle his thumbs until God shows up in his living room?

SD: Some people say He can be found if one looks with all ones heart and all ones soul.

DA: What does that even mean? How do you play hide and seek with an Invisible Being?

SD: Some say Jones should be alert. Be on the lookout for instances of Happy Coincidence. Others say to open mindedly think about Nature and the Universe. They claim that this whole theory of evolution thing is full of obvious gaping holes.

DA: What about the Great Teachings that have been handed down by the various religions?

SD: You think I’m here to give all the answers?

%d bloggers like this: