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Citizen’s Dividend

September 11, 2018

In a capitalistic society, there are two sources of income – capital and labor. Capital represents all of the past investments of society, including intellectual property, machinery, buildings, rents on land, etc. Marx worried that a small group of people would accumulate a large percentage of capital and be able to get rich off the dividends. His disciples’ solution was to eliminate private property, nationalize all businesses, and put the ownership of all assets in the hands of a centralized government. This approach has not had a good track record over the last century and is excessive relative to the scale of the problem. Communism is a bad solution to the problem of concentration of wealth, but that doesn’t mean it’s not a legitimate problem and we should try to find a solution that doesn’t result in the total destruction of the productive power of the economy.

Support for capitalism is dependent on the perception that capitalism is providing benefits for the masses. For most of the last century, this was fine since wages were growing, inequality was mild, and economic growth was rapid. However, median wages have been comparatively stagnant since the 1970s, and despite overall gains, there have been massive problems with the housing, college education, child care, and health care sectors which have eroded them substantially. Socialism is more popular than ever, and not without good reason.

Sovereign wealth fund (SWF) is the term for government run investment funds. In order to build widespread support for capitalism, I would propose to use a SWF to pay an annual dividend to every citizen based on how well capital returns have been for the economy as a whole. The Citizen’s Dividend would be paid on the returns to a index fund style SWF which invested proportionally in all publicly traded domestic firms. The shares owned by the SWF would be non-voting and would not be strategically bought and sold in an attempt to increase returns. They would be entirely passive and uniform across the whole economy (ideally). In practice, it might be tempting for politicians to funnel money to their supporters or for pet causes. I would hope the political risk from losing money on such ventures and the appearance of corruption would dissuade such tactics, but it would be naive to assume they’d never happen.

You could use the fund for the Citizen’s Dividend to supplant Social Security to some degree since there would be an allocated fund of investments for each citizen which could be liquidated when that citizen turns 65 and converted into an annuity, or simply turned over to the SSA.

Ballparking
Let’s say 4 million Americans per year turn 18.
$100,000 would be 400 billion per year. Social Security spends $800 billion per year.

If Half of Profits are Reinvested
There are 47 years between 18 and 60. IF you assume average capital returns of 6%, and reinvest half of all profits, that would increase the initial investment by a factor of 4. (1.03%^47 = 4.012) So, an initial investment of $100,000 would increase to $400,000 million by age 65.

An 18 year old would be getting about $3000 per year ($100,000 x 0.03), but by the time they were 65, they’d be getting a dividend of $12,000 per year. Would you want to stabilize it? Does it make sense to pay people more toward the end of their lives? The whole point is for it to grow as the economy grew and to demonstrate that to the masses, so perhaps yes to both of those questions.

Assuming a present value factor of 11 for an immediate annuity at age 65, that buys you a monthly annuity of $3,000, which is far more generous than current SSA payments. $36,000 per year isn’t luxury living, but it’s livable, especially if that’s in addition to someone’s own savings, home equity, and/or private pension.

If Profits are not Reinvested
You’d still start with $100,000 per person, but it would stay at $100,000 for their entire life. Instead of the dividend being $3,000 per year at first, it would be double that, but then the fund would never grow unless maybe people were allowed to pay into it of their own accord. When they retired, it would only buy an annuity of $750 per month, which is not at all enough to live on. I think that some profits would have to be reinvested, but that reinvestment level would have to be rather low.

Pros:
– Insulate people from technology shocks
– Political Buy in for trade deals, improvements in technology, and laws which favor capital
– Introduce people without capital to the boons of capitalism
– A more transparent and efficient way to save for retirement instead of Social Security
– Increases capital investment rate

Cons:
– Extremely expensive – $400 billion is nothing to scoff at.
– Income would be far more unstable than a UBI. If you did a UBI, it would have to be much smaller since the Citizens’ Dividend would use up a lot of tax revenue.
– Low stock market returns might sour people over time
– Capital allocation would be very tempting for politicians to pick winners/allocate cheap capital to political allies
– It would amplify the business cycle. In good years, people would try to spend a lot more money as they spent their dividend.

Further reading:
Social Wealth Fund, by Matt Bruenig
View story at Medium.com
A SWF could be the next big idea

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Controlling Democracy

May 17, 2018

Governance is the task of organizing violence. Capacity for violence, properly channeled, can be a force for good: crime prevention, public goods, property rights, coordination points, defense against outsiders, resolution of grievances, etc., however it is a dangerous tool.

People don’t generally resort to violence unless they don’t have another option. In a democracy, if people people get what they want, and a public vote lets everyone know what everyone else wants, people in the minority know that they won’t be able to get their way through other means either. Popularity is a proxy for a measure of violence capacity and legitimacy.

Depending on how steep the hierarchy is, you wind up in very different looking societies. At one extreme, you have a flat anarchistic government, and at the other a dictatorship with very few people in the “selectorate“. Large selectorates tend to spend more money on public goods and less on private benefits for their members. The logic is that when the governing class (“the winning coalition”) is tiny, it is better to buy them palaces and fancy cars, but when it is most of the population, you need to get stuff like roads and quality governance to stay in power.

“There‚Äôs a big dilemma in the design of political institutions. Should we be ruled by the few or the many? What this amounts to is the choice between being ruled by the smart but selfish or dumb but nice. When only a small number of people hold power, they tend to use this power for their own ends at the expense of everyone else. If a king holds all the power, his decisions matter. He will likely use that power in a smart way, but smart for himself, rather than smart for everybody. Suppose instead we give everyone power. In doing so, we largely remove the incentive and ability for people to use power in self-serving ways at the expense of everyone else. But, at the same time, we remove the incentive for people to use power wisely. Since individual votes count for so little, individual voters have no incentive to become well-informed or to process information with any degree of care. Democracy incentivizes voters to be dumb.”
– Jason Brennan

It sounds like a choice, but it’s not really. There are many tasks required of governments that are simply impossible to vote on. You need experts. The more complex a society is, the more the experts are unaccountable because the voters simply don’t know enough to evaluate whether or not their interests are being served. It’s the Hayekian problem of local knowledge. The populist option is not really there, in the sense of letting the common man actually govern. They have neither the time, the knowledge, nor the inclination.

People might not know the mechanism by which they’ve been screwed, but they know when they’ve been screwed. People know a recession when they see one, they know when jobs evaporate, they know hyperinflation, they know injustice. They can also see the reactions of politicians, and maybe not the exact effectiveness, but at least the tone. The Clinton/Bush ruling class in America has been pretty lackadaisical about the economy and it’s really started to cause rifts in America’s social fabric.

People might not have any control over the kitchen, but if they don’t like the pie, or the size of the slice they get, they can always throw the pie out the window. America’s political stability is remarkably high. Democracy provides legitimacy, removes bad leaders with a minimum of fuss, helps avoid extremely bad policies, promotes more popular cultural policies, and the large selectorate means more public goods compared to transfers of private goods to cronies.

World of Warplanes Tech Trees as of 2.0.3.3

January 30, 2018

USA Tech Tree

Keepers: P-36, P-38F, P-51D, F-94D, PF-86A, XF-90

USSR/Russian Tech Tree

Keepers: Yak-7, Yak-15, Yak-30, IL-20, IL-40

German Tech Tree

Keepers: Fw-189 Eule, Bf 110 B, Fw-190 A-5, Me 410, Me 262, Me 262 HG III

Japanese Tech Tree

Keepers: Ki-84, A6M5

United Kingdom Tech Tree

Keepers: Hurricane I, Spitfire IX, Beaufighter

Favorite Tanks for World of Tanks

December 31, 2017

Lights: Luchs, Chaffee, Type 64, T71, WZ 132, AMX 13 90, T100 LT

Mediums: T-28 F30, T-34, Cromwell, T20, T-54 mod 1, Object 430 Version 2, Bat Chat 25t

Heavies: TOG II*, T29, Conqueror, T110E5

TDs: Hetzer, Hellcat, E25, Skorpion G, Object 263

Arty: Object 261

Silencing Popularity

October 10, 2017

There’s an article in the Atlantic about a poll done by Cato and YouGov. They list the popularity of censoring speakers at colleges on various topics. What surprises me is that among the category of “expressing unpopular opinions”, the least popular thing was:
“A speaker who says the Holocaust did not occur (57 percent)”

And the most were:
“A person who says all illegal immigrants should be deported (41 percent)” and
“A speaker who says men on average are better at math than women (40 percent)”

The least popular is, in my mind, both completely crazy and a great litmus test to see if the speaker is utterly evil. I would not silence such a person, but I would not go to their speaking event either unless it were to challenge them. The other end of the spectrum though is only 17 percentage points away. That means that statistically, only 17% of people statistically (I get that they are not the same people question to question), want to silence Holocaust deniers, but don’t want to silence speakers who say that men are better at math. The opinion that illegal immigrants should be deported, an idea our current president won by campaigning on, has a whopping 41% of respondents saying speakers should be silenced.

It’s just very surprising to me just how little the rate changes between expressing things that are true (men are better at math), things that are popular enough to win presidential elections on (deport illegals), and anti-Semitic nonsense. I wonder what the numbers would be for silencing speakers who say that puppies are fluffy and cute? Maybe 35% if this is anything to go on.

Galacticraft Best Simple Oxygen Setup

October 6, 2017

A lot of other guides have big complicated setups. But what if you don’t want to spend a ton of resources on a huge base? Well my friend, you’re in luck because the set up above is as simple as you can make it.

What you’ll need:
1 Advanced solar array
4 aluminum wires
2 oxygen pipes
1 energy storage module
1 oxygen compressor
1 oxygen collector
80 dirt
80 seeds
1 bucket of water

Other useful base building materials:
4 stacks(256) of cobblestone or stone
64 glowstone torches
2 stacks (128) of glass for your roof so the plants and solar panels can get light.

Build a 9×9 crop field with water in the center.
Put an oxygen collector on the edge.
Arrange the rest of the machines as shown in the picture above.

You’ll want to use heavy oxygen tanks and have a spare one for the moon since the nights are really long. If you can fill up the storage unit before nightfall, you should have enough oxygen to last the night.

In the picture above, I’m using a glass ceiling to get light while protecting my base from monsters. You can also use a coal generator instead of solar, but remember to bring a lot of coal if you do.

Ending Inflation?

July 7, 2017

A response to: http://www.libertylawsite.org/2017/06/26/ending-the-feds-permanent-inflation-policy/

The Federal Reserve Board seeks to maintain an inflation rate around two percent per year. While this rate might sound low for older types who remember double-digit inflation rates in the late 70s and early 80s, and a rate of 5.4 percent as recently as 1990, why tolerate, let alone seek to sustain, any inflation at all? Why not seek to establish zero inflation and stable prices? After all, even an inflation rate of only two percent a year means nominal prices still double every 36 years.

36 years is a long time. Longer than I’ve been alive, and certainly long enough for people to adjust. Furthermore, since quality adjusting prices is more difficult the longer the time horizon, it could easily be the case that the true inflation over the decades has been substantially lower than what’s measured. Many goods have gotten better over time (electronics, cars, toys) so if you simply compare the price, you’re overestimating inflation. I doubt very many people would want 1980 prices if it meant they could only buy goods with 1980’s quality as well.

The problem of the zero lower bound is overblown. The main cause is the unwillingness on the part of the Fed to target levels rather than rates, do catch up inflation, and communicate their intentions in a language other than short term interest rates. The idea that the Fed could purchase every asset on planet Earth with newly printed dollars and not have inflation budge is frankly absurd, but also depressingly common among macroeconomic commentators.

“…there exists a sizeable contingent of macroeconomists skeptical of the efficacy of interest rate manipulation as a means of responding to recessions”

Yes, but no serious economist doesn’t believe that the Fed can’t influence inflation. Even if the main reason for the business cycle is “real” or supply side factors, there are demand based recessions, such as the one in 2008 and 1930 that even the most die hard RBC advocate must admit weren’t totally caused by technology shocks. When prices drop by 5% suddenly, you’re going to have some fallout. Prices (especially wages) and debt contracts are sticky and sudden changes have real microeconomic impacts.

“the trick with that is preventing people from holding cash when interest rates go below zero. So how to do that?”

All of the solutions in the article seem a bit extreme. If the Fed simply targeted the price level instead of the inflation rate, any drop in prices would be matched by an increase in prices later, so there would be no need to do anything crazy in the short run. Instead, we get a Fed that pursues rate targeting and treats the 2% target as a ceiling instead. It’s really no wonder that when we get 2% deflation for a year (2008), the economy takes a long time to recover from the shock. It’s not about the particular target! It’s about stability. People can adjust to 0% inflation – that’s fine. People can adjust to 2,3, 4, or 5% inflation – all those are fine as well. What matters is that when mistakes are made, they are fixed. The Fed’s mistakes in 2008 were never fixed, they were just left until the market sorted itself out and readjusted its expectations.

The economy is fine now. Yellen has pretty much targeted 1% inflation and unemployment is low and stable. I have no complaints anymore about the macroeconomy. There’s a reason (besides laziness) I haven’t written much about it – things are good and it looks like they’ll keep on being good. Ultimately, if you want to lower the measured inflation rate target to 0%, I think that would be ok, but do it slowly and give people time to adjust to it. Also, there is no need to do anything radical like abolish currency or do negative interest rates on savings accounts or anything like that. Plain old monetary policy is just fine.