Book: Goddess of the Market

Last week, Jon Stewart interviewed Jennifer Burns, author of a new biography of Ayn Rand, Goddess of the Market: Ayn Rand and the American Right. Burns was reasonable, but made a few incorrect statements: Ayn Rand a "conservative"? [15:50] whose life mission was to defend the right? Actually, AR stressed that she was not a conservative, e.g. she couldn't stand Reagan, and The Fountainhead was not about political philosophy at all, but about the psychology and ethics of spiritual independence. Still, not a hint of the childish insulting tone from either Burns or Stewart that I was expecting (such as Colbert displayed about AR earlier this year). In fact, both of them seem genuinely impressed with AR. So thumbs up to Stewart for intellectual honesty here.



Today, Burns has an article on www.foreignpolicy.com, Howard Roark in New Delhi. This is an interesting description of the popularity of AR in India. But this time Burns labels AR with "libertarianism." Actually, AR stressed that she was not a libertarian, calling libertarianism "a mockery of philosophy and ideology" which often plagiarizes her without credit.

So, Burns seems to be generally intellectually honest from what I've seen so far, and may intend to be objective about AR's political thought -- but she doesn't or can't distinguish between the Objectivist political philosophy and two movements that are profoundly incompatible with Objectivism, as has been described many times by many people, including AR.

Movie: The White Rose

Last night I watched the subtitled movie "Sophie Scholl: The Last Days" about the young and courageous members of the secret resistance group in 1942-3 Germany, The White Rose. The group members, mostly students at the university of Munich, distributed thousands of leaflets denouncing the Nazi programme of war and murder. A few days after they were caught, the leaders (including Sophie Scholl, who was 21) were guillotined; many others were imprisoned. As a movie I don't recommend it, it is very depressing, one is better off to just read about The White Rose on the Internet (the Wikipedia article seems to give a decent overview). But the story depicts, negatively, the grand power of intellectual activism: besides brute force, irrationality has no defense against voices of reason. It may be a fictitious line, but in the movie Hans defiantly tells the judge that he and Hitler must be afraid of -- and thus morally inferior to -- the members of The White Rose, otherwise there wouldn't even be a trial.

From The White Rose leaflet #3:

[W]hy do you allow these men who are in power to rob you step by step, openly and in secret, of one domain of your rights after another, until one day nothing, nothing at all will be left but a mechanised state system presided over by criminals and drunks? Is your spirit already so crushed by abuse that you forget it is your right - or rather, your moral duty - to eliminate this system?

Ghate on political philosophy

On Constitution Day 2009, Dr. Ghate of ARI/ARC clarifies the meaning of checks and balances in the Constitution, the Founding Fathers, Locke, Rousseau, Hobbes, their notions of man in a "state of nature", Adam Smith, Ayn Rand, and the morality of selfishness as supporting the objectivity of liberty ... in 8 minutes.

The political philosophy question

Commerce or coercion, price tags or guns -- which are compatible with morality, i.e., every individual's rational pursuit of his or her own happiness?

Donahue with ITOE

Donahue holding the little book which revolutionizes epistemology, from his first interview of Ayn Rand here.

Le Guin on growing up

You thought, as a boy, that a mage is one who can do anything. So I thought, once. So did we all. And the truth is that as a man's real power grows and his knowledge widens, ever the way he can follow grows narrower: until at last he chooses nothing, but does only and wholly what he must do....

- A Wizard of Earthsea, Ursula Le Guin

Mish versus Schiff

This is my take on Mish's post explaining that Peter Schiff was wrong (Schiff is a highly visible analyst who predicted the housing bust and recession):

Schiff ruined his own credibility. Even if he's pro-laissez faire, he's not a philosopher: foremost he's supposedly an expert on this economy, but he was dead wrong on the most fundamental economic trend last year which followed the housing bust: global deflation. He will get called out on this because he can be. It is far better the calling out be done by someone who deserves an audience for being right (Mish), than by the "MSM" defenders of statism. (Statism is what nurtures the mass corruption we suffer from among both politicians and their corporate clients, by the way. And if you don't mind a foul-mouthed, emotionalist tirade, this video -- not to be played at work or around children or nuns -- expresses something of the proper attitude towards the powers that be.)

I see nothing personal in the Schiff piece, I judge it to be objective and just. Mish laid out the facts which make the case that he's the real thing, he's what Schiff was supposed to be, both as investment advisor and as outspoken expert on our economic-political reality. Good for him, I hope he gets a lot more readers and customers. I think the post and the attention it gets can only be good for the cause of laissez faire.

Economics and the absurd

Mish Shedlock is the only applied economist or market analyst I listen too. I wish I'd found his blog years ago when he was predicting this recession. Mish is always fact-based and level-headed, he seems to be extremely careful to differentiate between what he knows is probable and what he doesn't know. No crazy predictions, just a few very good ones, based on both fundamentals and technicals. He works 14 hours every day.

He is an analyst at Sitka Pacific, with two hedge funds which make money even today:



Mish may be at his best when concisely showing that the Keynesians and Monetarists -- Krugman, Paulson, Bernanke, Greenspan, Friedman, etc., etc. -- are flat out fools, that 8th graders could know better just by using common sense. Mish is a fan of the Austrian school. He likes to quote von Mises:

There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved.

Here's the best place to start with Mish. If one spends an hour reading this and following some of the links to his other posts, it can be very educational.

Those with [Fiscal Insanity Virus] are trapped in academic wonderland with no ability to see anything from a real world logical perspective. Instead they rely on formulas that imply free lunch theories and/or perpetual motion.

Mish's predictions now are for housing to tank to at least 2012, the S&P to hit 600 or possibly 450 in 2009, and unemployment likely to go over 11% (from the 7.2% reported today). Among bears, these numbers are said to be too optimistic, especially that last. He is most "famous" right now for being one of the first to figure out that deflation has arrived. (He notes that deflation is a good thing; inflation was the problem. Most economists and all governments want to inflate some more, right about now.)

Here's today's update, where he notes that unemployment is really 13.5% -- not the more presentable 7.2% that is making headlines:

There is no official definition of depression. Here is mine: When the U-6 unemployment rate rises above 12.5 in conjunction with a stock market that is down close to 50%, the CPI is negative, and nominal wages are stagnant, it's an economic depression. We are in one.
...
The Fed is desperately trying to get you to borrow. I am suggesting you cut all unnecessary spending cold turkey. We cannot spend ourselves to prosperity. It is simply impossible. Job losses are going to mount, few jobs are safe and the best thing to do is to be mentally prepared to be working fewer hours.

My response to all of this mess is: how absurd!

It is absurd that 99% of economists did not see this coming, could not explain what anyone was doing wrong to cause a recession, cannot explain it now, and are recommending exactly the worst government actions possible.

It is absurd that Greenspan, who actually understood economics once upon a time -- thanks to Ayn Rand -- was the latest and greatest cause of this mess.

It is absurd that there is such a thing as "fractional reserve banking." It is absurd that many Objectivists either don't know what it is or think it could be okay in a capitalist system. It took me two months to figure it out -- I'm very slow -- but make no mistake: FRB is fraud. When a bank cannot pay back its "on demand" deposits on demand, the deposit notes it issued are fraudulent. How hard is that to understand? It would not even matter if there existed (as there can't; ask Iceland) some magical guarantee that depositors would never demand their money at the same time, FRB is legalized counterfeiting all of the time. How much counterfeiting? Try 1000% -- since 10-1 ratios are the norm at American banks. And that is inflation, massive inflation. Inflation causes price bubbles. And bubbles pop when reality crashes the party, sending prices back in line with actual wealth.

It is absurd that popular Objectivist blogs haven't been all over this for years, that there seems to be little sense of how bad the economy is going to get still, and that it hasn't been common knowledge among Objectivists since at least 2005 that housing was going to crash. Sadly I read about Objectivists who bought a house in the last two years, apparently thinking the worst was over.

It's absurd that I haven't seen a single comment by another Objectivist (I mean a real Objectivist, not some libertarian dork) on Mish's posts.

It's absurd that Atlas Shrugged has been out for over 50 years and this is still happening.

But my first point is the most important. How can the entire profession of economics be such a colossal failure? How can the very professionals tasked with understanding the economy be its worst enemy? We can blame politicians, Wall Street, sub-prime flippers, and "bankstas" all we want, but the bottom line is that none of this would have been possible if the economists hadn't been on board, i.e., if the vast majority of professional economists weren't incompetent or corrupt or both. (Most are both: not only do they not understand that a country can't consume its way to prosperity, they are collectivist statists anyway.)

Of course the blame goes back one more step -- to the philosophers and other intellectuals who allow and make possible such irrational economics. Why is your IRA or 401K a bad dream? Because philosophy PhD's couldn't care less about reality.

And with that final insight, I realize none of this is really absurd; it is ugly but it makes sense: social collapse is the only thing that can follow -- sooner or later -- the intellectual collapse of the 19th and 20th centuries, which was fueled by the philosophical collapse that began, ironically, in the Enlightenment, by the arch-enemy of reason: Kant -- and the monster he unleashed on Germany and the world: Hegel.

I end with a quote:

Inflation is a man-made scourge, made possible by the fact that most men do not understand it. It is a crime committed on so large a scale that its size is its protection: the integrating capacity of the victims' minds breaks down before the magnitude -- and the seeming complexity -- of the crime, which permits it to be committed openly, in public. For centuries, inflation has been wrecking one country after another, yet men learn nothing, offer no resistance, and perish -- not like animals driven to a slaughter, but worse: like animals stampeding in search of a butcher.

Ayn Rand, "Egalitarianism and Inflation", 1974, in Philosophy: Who Needs It

Where blame is due

Blaming the crisis on anyone other than the government -- and its supporters -- is a big mistake. Investors, speculators, financiers, businessmen, house-flippers, real estate agents, banks, bad credit house-buyers, money managers, ratings agencies -- they are all proximate causes. Their failure to avoid risk on the present, catastrophic scale would not have been possible without specific policies of our governmental institutions, and primarily the central bank. In fact, the functioning of the central bank -- its very existence and the lack of a gold standard -- must lead to excessive, underestimated risk-taking and widespread malinvestment. This is explained simply and clearly in a book by Murray Rothbard (1.5MB PDF).

There is no need to look for the devil(s) in the details. The fundamental cause of the latest boom and bust is clear, and this path was generally predicted by many -- because decades of money and credit inflation ineluctably lead to deflationary meltdown.

As Amit Ghate explains:

When the free market functions--and failure is allowed--people become viscerally aware of risk, with the result that they voluntarily assume less of it.

Conversely, when the government tries to "manage" the economy--when the consequences of risky behavior are shifted from self-interested actors to taxpayers, as was done by the creation of the Fed and its various insurance programs, or when weak financial firms are propped up rather than being allowed to fail--people take on risks they would not otherwise. Banks are less careful, depositors no longer evaluate their institutions, and risks are concealed and amplified until they become catastrophic.

To put it negatively, don't blame speculation as such:

Speculators and short-sellers don't create facts, they seek to identify and respond to them; and in the process they help adjust prices to economic conditions and establish smooth and liquid markets. As a result--instead of being scapegoated and banished--they should be respected and welcomed for the productive role they play in our markets.

Doom and gloom

What they don't know -- and neither does this country -- is that the United States is broke.

- Ayn Rand, 1974

It being Halloween, it's fitting to note that our economy is undead, a zombie moving on inertia from a life-force that is long gone. Despite a sucker's rally on Wall Street, I'm expecting stocks will go much lower within a year (as this thing gets properly priced in), and we'll see 10% or more unemployment in 2010. In the next few years, boomers who are retired or about to retire will tragically see that half of their life-savings has been wiped out, not to return in their lifetime; many homeowners who lose their jobs will quickly find themselves insolvent; and a growing wave of government entities of every kind and level will follow the dismal lead of Vallejo, California and go broke. There is not going to be another bubble to end the recession this time: deflation will be here for years, as the grim race plays out between the desperate quest for savings and the slaughterhouse of unemployment. The numbers of people and businesses and governments filing for bankruptcy in the next five years is going to be awesome and depressing. The cause of all of this, decades of federal economic policies and ad hoc measures of money and credit inflation, have zero chance of changing for the better; instead, we are already seeing these statist tendencies surging in both scope and depth. Meanwhile, the popular hatred of capitalism seems to be total now (if the chatter out of Republican candidates is any measure) -- but it, too, will grow as the financial pain reverberates, with capitalism taking the blame as it always has. At the same time, things have never looked so bright for the political aspirations of the Dark Ages-worshiping environmentalists; and when the economic meltdown evolves into a spiritual crisis, their unwitting friends, the Dark Ages-worshiping religionists, will be ready to lead. The only thing that seems to be missing from this perfect storm is a world war.

Given this setup, it will be miraculous if political crises do not erupt and alter our political reality quickly and catastrophically. How far off can Directive 10-289 be?

I am forced to the conclusion that we are witnessing the bitter end of the remnants of the American Enlightenment; and fascism -- in which every major enterprise is fundamentally controlled by the government -- will be here within a few years, perhaps a decade.

For America, I see only one hope: fully fund the Free Books to Teachers Campaign. Freedom will not survive the loss of Ayn Rand's influence. It never could have.

The intellectual betrayal of an age

Seen in a blog comment:

There once was an Alan Greenspan

Who sat at the feet of Miss Rand
Her ideas seemed fine
For just the right time
But till then honest banking be damned

Greenspan's intellectual betrayal -- of individual rights, of capitalism, and of Ayn Rand -- is of epic scope, even if this doesn't turn into Great Depression 2 (or something worse). He thought he could manage world markets better than they could manage themselves. He sought to personally maximize our wealth more practically than by the gold standard he had praised in his youth. He didn't want to destroy -- he wanted to control.

But his control proved maximally destructive.

The epitaph of Greenspan's life will be that after learning of the logical necessity for free minds and free markets from the greatest genius since Aristotle, he then chose a career in economic coercion which ultimately brought financial calamity crashing down around six billion people.

He now says: "I still do not fully understand what happened."

I wonder if rather he understands too well: that this is the finale of decades of cheating on the principles he had once known in order to get away with a life of power-lust.

Peikoff 10/20/2008

On the election:

I have this podcast to discuss ideas, not to choose among the lowest sub-humans.

The second answer in this podcast gives crystal-clear statements on the non-rights of fetuses before birth. The issue: biological dependence. I agree. And notice he does not mention the fact that fetuses have not yet started to exercise their rational faculty, which I've seen a few Objectivists make a big deal about, but I think it's irrelevant.

Genus

A few weeks ago I started introducing the concept of "genus" to Elias. After only one or two examples ("animals" and "furniture"), he got it, to my amazement. Next he was telling me that the genus of his Legos is "toys."

The other night I was reading to both of the kids and brought up another example. That's when the smallest boo-boo decided that "genus" sounds like "penis." Things don't always go as planned with children, do they?

My purpose is to teach the methodology of figuring out explicit definitions. I can't think of any good reason we don't learn to habitually define our concepts from a very young age, though I'm sure many non-Objectivist parents would cringe (or scowl) at the thought. Part of Ayn Rand's genius must have been that she grasped the value of this, and did it, from a very young age.

Pragmatism and Disaster: Read the headlines

From an upcoming article by Dr. Tara Smith entitled The Menace of Pragmatism:

[O]f course truth exists, says [William James], but truth is not a stagnant property. Rather, an idea becomes true—“truth happens to an idea.” Truth “lives on a credit system” in his view; what a truth has going for it is that people treat it in a certain way. The true is the “expedient,” “any idea upon which we can ride.” Any idea is true so long as it is “profitable.”

And yesterday, in an analysis, by James V. DeLong, of the current financial crisis and the pending government bail-out:

[T]here are fewer villains in this tale than the news and the political campaigns would lead one to believe. Three basically good things - the securitization of consumer credit, the extension of credit down the economic ladder, and the invention of derivatives - have combined, and the resulting mix turned out to be explosive. Well, live and learn, and do better next time. But first, ensure there is a next time.

This author doesn't seem bothered by the absurdity of his own analysis, that three "basically good things" somehow led to a global economic disaster. Why? Essentially he's claiming that the world is so complex (which means: unknowable) that we just have to "live and learn." This is the philosophy of pragmatism. Accordingly, it was not absolutely right or wrong for the government to have coerced the marketplace (via Fannie Mae and the like) so that billions of dollars were invested in high-risk mortgages which have failed spectacularly. And it is not absolutely right or wrong for the government, next, to confiscate a nearly unimaginable amount of wealth from taxpayers in order to bail out the investors (which means: to pretend we still have that cake we just ate). Instead, we just need to try things, solve problems as they pop-up, and keep moving ahead as best we can.

Notice the contrast between how "reasonable" this way of thinking is supposed to be with its actual, catastrophic results.

Pragmatism is the flawed thinking method (while altruism is the content) behind the housing boom, the subsequent bust, and the Marxist-Keyensian solution in the works. Pragmatism is a fundamental part of our culture, but is so unreasonable it can only lead us from one disaster to the next. As Dr. Smith says:

While pragmatism presents itself as a tool of reason and enjoys the image of mature moderation, of common sense and practical “realism,” in truth, it is anything but realistic or practical. Pragmatism has become a highly corrosive force in people’s thinking. And insofar as it is thinking that drives actions—the actions of individuals and correlatively, the course of history—as long as a person or a nation is infected by a warped philosophical approach, genuine progress will be impossible.

On Abortion

The fundamental fact relevant to the legality of abortion is that an embryo or fetus is a dependent part or outgrowth of a woman's body, and thus hers to keep or destroy. Since it is only potentially an independent individual, an embryo or fetus has no individual rights, including no legal claim upon the sustenance it needs from the mother's body. A baby obtains individual rights only upon individuation, i.e., when he or she is born.

Because an embryo or fetus is an extension of a woman's body, the decision to give birth or to abort is profoundly personal. The choice confronting a pregnant woman is between two intense and potentially dangerous medical events, as well as between two starkly different versions of the rest of her life, both emotionally and financially. For her, the stakes could not be higher.

In light of this, I disagree with the criticism that "abortion-rights advocates keep hiding behind the phrase 'a woman's right to choose.'" Rather, by focusing on the issues of personal choice and whose-body-is-it-anyway, abortion-rights advocates are identifying the central fact that a woman's body and life are indubitably her own to do with as she pleases. The advocates have, in effect, correctly based their position upon the fact that a pregnant woman's choice is metaphysically personal -- and as such there can be no legal basis to question it, least of all on behalf of the potential future person of the embryo or fetus.

For these same reasons, I am repulsed at the spectacle of Objectivists who think it is their place to publicly comment on the morality of a specific woman's choice to give birth or to have an abortion. It does not actually matter what statements a woman has made to the media, or whether or not her child is expected to have a health problem: outsiders are simply not privy to the personal values and private reasons by which she made her decision, and publicly speculating about them is irresponsible and rude.

I'm out

The god-awful Charlie Gibson interview of Sarah Palin has disabused me of any notion that there is anyone or anything worth voting for anymore. That such conceited ignorance (figure that one out) and unblinking spinelessness could create, not just a tenable candidate for VP, but an instantaneous national celebrity, says all I need to know about the hopelessness of our culture. Obama and Palin are two halves of a very bad joke, and our lives are the butt.

As I watch these creatures spit up word salads designed to appeal to everyone except themselves, I don't think about them -- they don't actually exist in the way that matters; I think about Roark and how absurd the rest of the world is compared to an individual with a soul, that is, with an absolute love of his own life.

Study Groups for Objectivists

SGO, open to all Objectivists, has completed its first study group, covering chapter 5 of Introduction to Objectivist Epistemology. It was a great success with six contributing members, and I gained clarity on some points in the chapter.

I developed the SGO software from scratch using C# and db4o. I like to have complete ownership of an implementation like this, because it lets me experiment with improved architectural elements -- such as using an object database (db4o) rather than a relational database, and trying my hand at Domain Driven Design.

Two study groups are slated for the rest of this year. I'll be moderating one covering the first half of Ayn Rand's lecture and essay, "The Objectivist Ethics."

Here's my final post in the study group we just completed:

The challenge question I assigned myself a few weeks ago was this: Most people would think that knowing a word's definition is more than you need to know to understand a word, i.e., that one doesn't need to be able to formally define "justice" in order to understand what it is. How do we know that this is wrong?

One theme of chapter 5 is that knowledge is contextual: every element of one's knowledge is built upon and supported by other elements of one's knowledge, all the way down to one's actual perceptual experiences. Chapter 3 showed one way in which knowledge is contextual: conceptual hierarchy. For example, the concept "furniture" cannot be grasped before grasping concepts such as "table" and "chair" -- because tables and chairs are not similar enough in immediate perception to warrant "furniture" as a first-level concept; but "table" and "chair" as concepts are similar with regard to the more abstract distinguishing characteristic of "furniture": tables and chairs can support the human body and/or other objects. So, "table" and "chair" (or similar) are part of the cognitive context which is necessary to grasp "furniture". See 3.12 (chapter 3, paragraph 12).

The principle that knowledge is contextual has much broader application than just conceptual hierarchy. She gives an example at 3.13: "habitation" is not a unit of "furniture", but it is part of the necessary context for grasping "furniture" as an adult.

How is the contextual knowledge which supports a concept specified? By defining its units. A definition makes explicit the concepts and relationships one must grasp to distinguish a concept's units. When there is some question as to exactly what the essential characteristic of a concept is, and one just "kinda" feels what he or she means by a word, the concept is not actually retained because it has become unhinged from those other pieces of knowledge needed to identify its units.

Given the nature of concepts, no concept can exist on its own in one's mind, it must be properly related to the rest of one's knowledge -- which means in practice that it must be immediately definable. Otherwise it is at most an approximation of knowledge.

Simply put

ARI has many good articles on environmentalism, of course, but I especially like the way this one clearly identifies the gulf between what most reasonable people think it is and what environmentalism actually is.

It is simply not true that environmentalism values human well being. It demands sacrifices, not for the sake of any human good, but for the sake of leaving nature untouched.

Pretty simple, when you put it that way.

Outlining versus thinking

I'm not sure this is relevant to Toiler's psycho-epistemological comment about "the danger of ordered lists," but I've found that standard outlines are not as brain-friendly as we are led to believe in middle school. Structured data, such as a detailed outline with points and sub-points and sub-sub-points, actually has high impedance relative to humans and is very hard to cognize. It's just not the way we think. Such mechanical structure is useful for organizing data for reference, but not for working out or capturing a line of reasoning.

What does our thinking really "look like"? Like ordinary language. (What a coincidence!)

So if I were to write a book, I wouldn't expect to create any detailed outlines -- ultimately because I would expect my target audience to be people, not computers.

Individual variation

I was talking to a friend about how individual variation is generally a good thing for everyone (versus the view that there's a narrow set of characteristics that is ideal for humans). A new data point today: the world's tallest man was the only one with arms long enough to pull plastic out of some dolphins' stomachs.