Skip to content

If by Socialism

January 16, 2019

My friends, I had not intended to discuss this controversial subject at this particular time. However, I want you to know that I do not shun controversy. On the contrary, I will take a stand on any issue at any time, regardless of how fraught with controversy it might be. You have asked me how I feel about socialism. All right, here is how I feel about socialism:

If when you say socialism you mean totalitarian dictatorship, crushing all individuality, the abolition of property, the utter destruction of civil society, the elimination of the freedom to pursue happiness, creating misery and poverty, yea, literally taking the bread from the mouths of little children; if you mean the evil ideology that topples the Christian man and woman from the pinnacle of righteous, gracious living into the bottomless pit of degradation, and despair, and shame and helplessness, and hopelessness, then certainly I am against it.

But, if when you say socialism you mean providing for those less fortunate, creating public works which support civilization, of creating uniform rules to reign in companies acting against common interests; if you mean taking a fair share of someone’s earnings to support a society which allows them to work peacefully with others in a productive way; if you mean that policy of using our treasuries to provide tender care for our little crippled children, our blind, our deaf, our disabled, our pitiful aged and infirm; to build highways and hospitals and schools, then certainly I am for it.

This is my stand. I will not retreat from it. I will not compromise.


Keto Curry Cauliflower Recipe

December 6, 2018

This is a pretty easy (altho not fast) recipe that can be easily scaled up and is very healthy.

2 tablespoons lard or vegetable oil
1 large onion
2 bell peppers (or equivalent volume of something spicier – I prefer 3 jalapenos and 1 bell pepper)
1 head of cauliflower
1 cup of sour cream
2 cups of shredded cheese
1 tablespoon curry powder
1 tablespoon of garlic salt. Adjust depending on how salty you like food.
Hot sauce to taste

1. Put grease in the pan and heat on medium.
2. Chop onion and add to the pan.
3. Chop peppers and add to the pan 5 minutes after the onions.
4. Trim leaves/stem off of the cauliflower and steam it in a large pot until soft. Usually takes 12-15 minutes.
5. Drain water from pot and put cauliflower in a bowl and mash.
6 Add spices, sour cream, and cheese and mix.
7. Once the onions have cooked for 30 minutes and the peppers for 25 minutes, mix them into the cauliflower. The onions should be translucent and somewhat soft but not caramelized, and the peppers should no longer be crispy.

Add peas, lentils, beans, tofu, or meat.

Slavery and Development

October 12, 2018

One of the core ideas in economics is the difference between zero sum and positive sum transactions. Because of a belief in zero sum, some of the stranger arguments I’ve seen on the left is the belief that slavery was actually good for the South, since obviously it was bad for the slaves themselves. It’s similar to the “Dependency Theory” of the early post-war period where since colonies were screwed over by Europeans, therefore Europeans must have been made much better off. Nope. Sometimes things are bad for nearly everyone involved. Slavery is certainly one of those things.

For the slave-owners themselves, slavery was awesome – free labor plus you can abuse them as much as you like without repercussions. But for literally everyone else in the society, including future generations, it was a horrible deal.

1.) Farms exhibit inverse productivity in relation to size. That is, the larger the farm, the less productive it is. This result has occurred across many societies, from Africa, to Europe, to Asia. Plantations were less productive than sharecropping.

2.) Slavery inhibited the development of human capital – slaves were not allowed to read or write, nor to learn any sorts of advanced skills. Economies are reliant on skilled workers and thus slavery handicapped the most important aspect of any economy.

3.) Slaves had a principle/agent problem. The incentive they had to work was not wages, but instead to avoid being beaten or killed. Therefore they didn’t work as hard as free laborers and slave owners had to spend a lot of money keeping them in line.

4.) The institutions of the South and slave holding areas worldwide were extractive and underdeveloped relative to those of areas without slavery. The best distribution of wealth and political power for economic development is that with a large middle class. Slavery created an aristocracy and a large mass of slaves and extremely poor disenfranchised whites who did not own slaves. This inequality is corrosive to democratic institutions and discourages innovation and entrepreneurial activity.

5.) As an empirical fact, slave owning areas were far poorer than non-slave areas, even if you exclude the slaves themselves from the calculation, which makes it massively worse. The welfare loss to the slaves cannot be overstated (to put it in a very euphemistic way).

6.) Cotton was a highly profitable natural resource export and thus acted like a natural resource curse. Resources flowed into exploiting the resource and thus did not get spread out into diverse productive enterprises. Why develop industry or infrastructure when you can just farm cotton?

Anyone arguing that slavery was good for the Southern economy has a high burden of proof, since such a conclusion flies in the face of previous empirical work and economic theory.

Addendum: There is a situation where slavery can improve the economy (if you ignore the slave’s welfare) – A production technology with a very high mortality rate. Non-slaves won’t volunteer for a suicide job, but you can force slaves to do it. Pre-modern mining was often like this, like the Roman mines in Spain or the silver mines of Bolivia. I would guess that there were safer methods of mining, but the costs exceeded the costs of replacing slaves. I don’t think this example is relevant to the modern world.

Market Monetarists Won a Long Time Ago

October 9, 2018

I was extremely active in the macroeconomics blogging community from about 2009 to 2014 or so, and while I haven’t been too active for the past few years, I have been checking in on things from time to time. The macroeconomy has been doing great since the crash, even if the Fed did not try to do any catch up growth, but the remarkable thing about the recovery (now a boom, I think it’s safe to say) is its stability.

Just look at that! Barely a budge! When you compare it to a 4% NGDP target, there is just about as much area above the curve as below it.

For the next graph, I took GDP from 4/1/2009 to 4/1/2018 and compared it to a flat 4% growth over that period, then I subtracted the difference between the two and took the natural log of the result (to minimize the exponential growth aspect of GDP).

Here’s the same data, but without the natural log and instead expressed as a % deviation from GDP:

If anything, NGDP at the start of Trump’s presidency was a bit too low relative to a 4% NGDP target. I cannot believe this level of consistency would be attained randomly. Rather, the Fed was convinced to pursue an NGDP target as early as 1/1/2009 and has maintained a consistent target ever since then. The result has been the most stable macroeconomy in U.S. history as well as very low unemployment. Not only can market monetarists claim victory at the Fed, I think we can claim victory for our ideas in terms of successful real-world policy performance.

The only other period with NGDP stability comparable to today is the 1990s, but at about 5% NGDP growth:

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.

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.

– 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

– 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
A SWF could be the next big idea

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

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