March 22, 2010

I can’t find a single news story mentioning the (at least one) upside-down US flag in the immigration rally yesterday.

However, if you go to Google News and type "Tea Party" the first suggested search is "Tea Party Racist."

Half Sigma and “value transference”

March 22, 2010

Half Sigma has been posting a lot on value transference, see here, here, here and here.

I’m going to explain why his posts are confused. I would like to start out by saying that I like Half Sigma and his blog a lot. It hurts me to see him posting so much on this topic without having a better understanding of "libertarian economics." I hate to be critical of him, but his thinking on the issue is a bit muddled.

1. HS’s definition of value transference

Ok, let’s see what he means by "value transference." Here are some select quotes from his posts and my summary of his major points:

Some of my blog readers suffer from rigid thinking. They tend to be of a libertarian economic bent and wrongly believe that any voluntary commercial transaction is a fair transaction in which the party receiving the money has created exactly as much value as the amount of money received.

In another post:

. . . he’s bought into the right-wing-libertarian-economist idea that everyone makes exactly what they are worth because the free market is just so perfect.

Here’s a specific example:

What about the story of the stucco guy whose income dropped from $500,000 to $70,000 after competitors entered his market? How is it that the guy was creating $500,000 of value per year (VPY) before there was competition, but only $70,000 VPY afterwards? My answer, of course, is that he was creating $70,000 VPY the whole time, but because barriers to entry prevented competition, he was also transferring hundreds of thousands of dollar of VPY from others to himself.

In other posts, he equates "value transference" with fraud. He states that the amount of "value" in the world is fixed. He equates value with status and says that the quantity of status in the world is fixed: "If I take some action that increases my own status, this status increase can only happen because I simultaneously, by an imperceptible amount, lower everyone else’s status."

He goes on to try to distinguish between "perception value" and "value":

If a big corporation spends a billion dollars to increase the perception of value of its brand, the corporation has also, by a small amount, decreased the perception of value in all other brands.

He ends by circling back in a manner that makes his whole argument seem tautological:

. . . we reach the shocking conclusion that the mere act of value creation also results in value transference.

This is all over the place. I’m not even sure I can specifically tell you want value transference is based on these posts. Some of the statements I am tempted to agree with. For example, I agree that value creation leads to value transference (as defined in the tautological statement quoted above), but I don’t agree that it’s possible to distinguish between "perception value" and any kind of true value (is this like the One True God? – I’ll use "One True Value" to signify the "real value" that HS seems to be chasing after).

Anyway, I’ll try to distill his statements into a few points that we can analyze:

a) "libertarian economics" – which he wants to criticize – is founded on the belief that transactions "create" an exact, measurable amount of value.
b) the "One True Value" is only possible in a market that is in perfect competition.
c) people can perceive things to be worth more than their One True Value.
d) value transferred above and beyond the One True Value leads to an increase in status and the amount of status in the world is fixed.

I think these points should get us started. At the end, we can return to the example.

2. Libertarian economics and value

Libertarian economics is Austrian Economics. Let’s dig in to the Austrian theory of value.

In Austrian Economics, value is a subjective phenomenon. Go to page 61 of the pdf for to dive right into Rothbard’s explanation (it’s free).

In sum, Rothbard states that value is ordinal. Thus, each person has a rank-ordered list of things that they value. Let’s say the economy has three goods: Fish, Wheat and Sheep. My values might be 1) fish; 2) sheep and 3) wheat. Your values might be 1) sheep; 2) fish; 3) wheat. The ordering reflects our preferences, no some actual level of valuation in terms of some hypothetical unit of value. All this says is that I prefer fish to sheep and sheep to wheat and fish to wheat. We know nothing about how much I prefer fish to sheep.

If a transaction between you and me takes place, then we can make some conclusions. Assume that you give me a fish in exchange for a sheep. We now know that I value a fish more than a sheep and that you value a sheep more than a fish. We do not know that the value of sheep = the value of sheep. In fact, per Rothbard, we can say specifically that this is not the case. If their values were equal, why would we bother trading? We wouldn’t.

To conclude, we see that value is subjective. In order for a transaction to take place, each party must be transferring value to himself. I value a fish more and you value a sheep more. Both of us have increased our value. If we didn’t both believe we were increasing our value, we wouldn’t trade.

3. HS’s points

Let’s return to the points:

a) "libertarian economics" – which he wants to criticize – is founded on the belief that transactions "create" an exact, measurable amount of value.

Actually this criticism is the criticism made of other economic systems by libertarian economics. Libertarian economics specifically denies that transactions create exact amounts of value or measurable amounts of value. HS’s criticism is valid only for non-libertarian economics, like neoclassical economics. Rothbard has already done lots of good work expanding on the same criticism, it’s old and it’s free on the internet.

b) the "One True Value" is only possible in a market that is in perfect competition.

Following the libertarian theory of value, we see that there is no such thing as the "One True Value" (or perfect competition). Value is purely subjective. We can never claim that someone has engaged in value transference, unless we define "value transference" in a tautological manner. We’ve seen that, per libertarian economics, both parties to a transaction transfer value to themselves since unequal valuations are necessary for a transaction to take place. If valuations were not unequal, the parties wouldn’t have transacted.

c) people can perceive things to be worth more than their One True Value.

Again, there is no difference between "perception value" and the One True Value. Value is perception. It is only because of differences in value (i.e. in perceptions of value) that transactions take place. As we have shown, if our valuations are equal, we wouldn’t trade.

d) value transferred above and beyond the One True Value leads to an increase in status and the amount of status in the world is fixed.

We have shown that there can be no value transferred beyond some imaginary True Value. Both parties are "richer" after a transaction (that is, both believe themselves to have increased their value). Thus both would, per this one of HS’s definitions of status, have higher levels of status and therefore, the amount of status in the world cannot be fixed.

4. HS’s example

In HS’s stucco guy example, a stucco guy’s income falls from $500,000 to $70,000 after competitors entered his market. HS claims that at $500,000 the stucco guy was transferring value to himself and only adding $70,000 of value. Let’s clarify this example and see where HS goes wrong.

Assume that the economy consists of a stucco guy and three other guys that want a stucco job. We know that demand curves slope downward – that is as the price of stucco jobs increases, fewer people will demand stucco jobs. Let’s assume that if the stucco guy charges $600,000 for a job, no one takes it. If he charges $500,000 for a job, one guy takes it. If he charges $70,000 for a job, two guys take it. And finally, if he charges $20,000 for a job, three guys take it.

This is how a demand curve works and we see immediately that there is no "One True Value" of a stucco job. In all cases, money is only changed for a stucco job if the customers prefer the stucco job to the amount of cash that the stucco guy charges and if the stucco guy prefers the amount of cash to the act of doing the stucco job.

5. Conclusion

Hopefully this post has helped clarify what libertarian economics has to say about value. HS makes some points that begin down the road to Rothbard. For example criticizes the calculation of GDP. Rothbard demolishes the calculations of GDP and inflation. But, instead of following Rothbard, HS turns the other direction and seeks some One True Value.

HS argues for progressive taxation based on his theory of value:

By imposing higher taxes on the person who created lots of value, we take away the value transference component of the act of value creation and redistribute it to the people from whom the value was transferred.

(Let’s set aside the absurdity of suggesting that government is capable of transferring value back to the people "from whom it was transferred." I can’t imagine that HS actually believes that this is what government will do. Government is run by people. If government employees or politicians are sitting on "value" why would they give it away?)

As we’ve seen, both parties to a transaction have transferred value to themselves and we cannot measure who has transferred more in reference to some True Value. It’s therefore absurd to try to tax away perceived gains in value.

Libertarian theory of value leads to the conclusion that government intervention in the economy is necessarily harmful to increases in value (quoting Wikipedia on the subjective theory of value):

If it is true that the economic value of things cannot be ascertained without subjecting a particular good to individual value judgments in a market, then governments may have difficulty justifying, to economists, setting the prices of goods and services for society. This is also a technical problem for governments wishing to implement a planned economy. Those who espouse the subjective theory of value tend to advocate that individuals should be allowed to choose for themselves what price they are willing to pay for, or part with, any given good or service. They tend to maintain that forcible interference by the state in the process of individuals arriving at a mutual value judgment when making a trade is irrational, unworkable, and/or immoral.

Health care

March 22, 2010

Ulysses is sad. Even Roissy – er, Citizen Renegade – seems a bit sad. Professor Boudreaux wants to vomit. The Paulistas are getting fired up. Alternative Right thinks we’re going to be exterminated. Vox thinks we’re the third world. Heck, even Jim Cramer is turning bearish. Health care stocks are set to open higher as they prepare to reap the rewards that the Democrats have sewn – no doubt campaign contributions will follow (they have to come up with something to replace the contributions they’ve lost now that Fannie and Freddie are no more). Mr Lyles says:

Progressivism, with its short-term rewards and long-term consequences, is an ideology that is difficult to beat back at the ballot box. America is home to the Western world’s only effective anti-progressive movement. And it is currently in retreat.

I say it’s time to celebrate. The chances of a true election just skyrocketed. Ferdinand may be on the same page – though he still seems sad about it. The ugly mask on the American system of government is slipping. No one can seriously assert that we live in a democracy (even the mainstream, ever-moderate pundits). Even a fool then understands that the next question is: what form of government do we live under? The answer can’t remain obscure much longer and no one but the bureaucrats like the answer.

Random thought

March 22, 2010

As HBDers, should we trumpet the fact that US may not make it two years with a black President without losing it’s AAA debt rating?

Hoste sounding Moldbuggian

March 21, 2010


Sometimes I understand why people believe in international conspiracies. Why can’t one first world nations tell the UN bureaucrats to go to hell? . . .

Today, every nation in the world has to some extent accepted the morality of 1960s American radicals.

I think he answers his owns question when he notes that the whole world follows 1960s US morality. The US took over the world.

Immigration rally

March 21, 2010

This immigration rally went by my house (technically, it went by on the next block). I don’t know how many people it was, but it is a lot. Probably 60% of the flags were US flags. Most of the rest were Mexican or El Salvadorian. In the 20 minutes in which I was walking by the marchers, I only saw two upside-down American flags. Apparently those people really want their countrymen to be allowed into the US, which they hate. Go figure.

I heard one local black guy say, "I heard it’s more than 50,000 people. Shit, it’s a million-man march."

I also heard one perfectly SWPL white person – in my neighborhood in which Obama probably took 95% of the vote – say, "I bet half of them are illegal, that is bullshit."

My wife thinks the timing of the rally was dumb, given the health care situation and the continued high level of unemployment. I think the timing makes a lot of sense. The Democrats have to be pretty unhappy with the American people right now, given the high level of opposition to the health care proposal. What better time to ask the Democrats to elect a new people?

How’s the end of colonialism working out?

March 20, 2010

If this doesn’t say failure, what would?

Two Moldbug posts in two days

March 20, 2010

And they’re both on history. And he’s in rare form:

Yes. FDR (like Lincoln) was a dictator. He governed America more or less personally by decree. Obviously, many people worked for USG in FDR’s time; but, as with a normal corporate CEO, none could flout his will and survive professionally. FDR was not quite in charge of the courts; Lincoln could disregard the judicial process, but FDR couldn’t. However, these exceptions should be seen as minor details in an overall pattern of general personal government.

Those who hanker for a New Deal 2.0 should remember that FDR invoked a permanent state of emergency in 1933, just like Hitler. And just like Hitler, he ruled for life. For the next 12 years, he and his minions governed America by whim, like Dick Cheney cubed. It’s true that FDR found himself constrained by the Supreme Court. It’s not (entirely) true that when he fought the Court, he lost. And there was certainly no one else in America who could contend with him! . . .

FDR could not, it’s true, order someone arrested or shot for no reason at all. At least, not so far as I know. We still have a lot to learn about this era. FDR did not have the powers of Lincoln, who could have anyone arrested, and did – but not shot. Lincoln was no Lenin or Hitler. For the purpose of managing the normal operations of government, however, FDR, Lincoln, Lenin, Hitler, Henry VIII, Cromwell and Napoleon exercised more or less the same level of authority: personal sovereignty.

Random thought

March 19, 2010

If they’re going to allow gay people to get married, they should make it as much like straight marriage as possible.

So, for example, if two men want to get married, they should have to flip a coin between themselves. The winner would get most of their collective assets (and all of their children), if they get divorced. Also, in the event of divorce, the loser would have to make monthly payments to the winner.

Want to guess what would happen to the rate of gay marriage?

If conservatives really want to stop gay marriage, all they have to do is make it as much like straight marriage as possible.

Scholars discover that patronage is patronage

March 19, 2010

Let’s see what happens when the veil is removed from your eyes and you are allowed to see things clearly for what they are. To do this, let’s compare an historical event to a modern event.

Here’s the historical event, quoting Wikipedia, "From [the years] 47 to 44 [BC] [Caesar] made plans for the distribution of land to about 15,000 of his veterans."

Here’s the modern event, quoting from here, "If you work at a large company, and especially if you manage other people, chances are you’ve gone through diversity training. The vast majority of the Fortune 500 and, by some estimates, the majority of American employers offer diversity training programs for their employees. Many make such training mandatory. The amount of money spent on it in the United States runs into the billions."

Every historian and every educated person reads of the historical event and understands completely what is happening. Caesar is distributing lands to his soldiers so that Caesar’s power will be back by the army. Caesar has used land distribution to ensure and enhance his power. Any idiot can see this.

When we look at the modern event, most historians will suggest that diversity training has sprung up to educate people about racial injustice or to promote a more accepting workplace or some other liberal platitudes. Come up with your own.

No doubt, Caesar would also have been able to come up with plenty of reasons why distributing land to the soldiers was good for society. Some of Caesar’s justifications might have been true, nevertheless the primary purpose of the land grants was to enhance Caesar’s powers.

If we view the modern event in a legitimately historical perspective, we see that diversity education is just a way for politicians and large corporations to buy cover from race-hustlers. If you have diversity training, you get Jesse Jackson off your back. You spend money on some black causes, you hire some black people, you bore your employees and, in exchange, you don’t get sued. And, when anyone asks, you spout nonsense about educating your workforce on inequalities, etc.

Now, let’s say an ancient academic had decided to do a study to see if Caesar’s made-up justifications were working. For example, our historical academic might have decided to do a study to see if land grants had made soldiers better family man and increased the Roman food supply. Ancients didn’t do this, because they weren’t this stupid. Land grants didn’t do that stuff because they were not intended to do that stuff. They did, however, solidify Caesar’s power.

Modern academics, however are that stupid. So, when they studied the effects of diversity training, guess what they found. They were shocked, shocked to find "no empirical support for the idea that diversity training programs change attitudes or behavior." But, dear reader, it gets worse, they also found "that, on the question of changing behavior, there were few trustworthy studies – and decidedly mixed results among those." Just so we’re clear, additional findings include "that the best diversity training programs make little difference in who gets hired and promoted, and many programs actually decrease the number of women and minorities in management." Though, if you have a big enough department of diversity, Jesse Jackson will stay off your back. Surely, this result is unrelated to the findings.

See the world for what it is and marvel at the fact that Caesar had an army to ensure that people would spread his propaganda, while today’s "historians" do it without coercion.