Friday, July 23, 2010

Another parallel between IP and EM spectrum rights

I constantly bring up the EM spectrum in discussions of IP, and for good reason. It's quite difficult to justify rights in one but not the other, leading some people to unpalatable conclusions. Heck, even Stephan Kinsella, the big anti-IP poomba, isn't sure whether there should be rights to radio waves.

But recently, I've found yet another parallel. Consider the case of someone who, like in lots of instructive thought experiments, wants to block the propagation of radio waves from a nearby tower so that people can't receive them (well, extract information from them, but you get the point).

There's a device that lets you block EM waves, known as a Faraday cage. I didn't know how they work before, but it turns out that, by being made of conducting material, their electrons realign so as to produce the *opposite* field from the one around it (which superposes over it and cancels it out).

See where this is going? To protect your right to to transmit information via EM waves, you need to be able to prevent others from ... er ... instantiating the same pattern! Now, where else have people asserted that kind of right?

(By the way, first post ever from my first smartphone, the wonderful Samsung Moment. And no, unlike when Tyler Cowen promotes a product, I didn't get it for free or otherwise get paid to say that. No, the links weren't added from the Moment.)

Wednesday, July 14, 2010

Sumner Severally Suprises Silas

(The title was going to be "Sumner Surprises Me Again", but I wanted it to be an alliteration.)

Once again, I let loose with another complaint about mainstream monetary economics, and once again Scott Sumner casually agrees that there's a dilemma.

I say,

... considering that dinosaur banks can borrow at 0% by only putting up toxic MBSes as collateral, ...

Why can’t *I* get secured loans from the Fed at 0%? Why should big banks have all the fun?

And Sumner replies

Silas, Good question.

Then, I get keyboard crease marks in my forehead.

Sunday, July 11, 2010

Setting monetary stimulus straight

In light of my recent link to Gennady Stolyarov's post about the gloomy future of the economy (especially for young people), I thought it would be a good idea to put it against the backdrop of mainstream economics and the "experts'" solutions.

A characteristic post is this one by the relatively libertarian Scott Sumner. Like pretty much every day, his idea is for the Federal Reserve to do a "monetary stimulus" by injecting money into the economy to prop up nominal GDP. (Yes, nominal GDP -- you know, the one that doesn't mean anything until you adjust it to real GDP and even then commits you to a easily-abused framework.) This, it would do by various mechanisms, all of which aim to "get banks lending". Stop paying interest on reserves, buy more of banks' (junky) securities, rapidly debase the currency ("quantitative easing") so they have to loan or else hold worthless cash, etc.

In frustration at such a stupid policy, I made this sarcastic comment on that post:

Yes, the economy will definitely collapse if the Fed doesn’t print up more money to make shoddy loans for purchases people don’t want, and it’s a shame that folks at the Fed are stopping Bernanke from such a wise action.

And to my utter surprise, Sumner replied:

Silas. I agree. :-)

Note: the smiley was in recognition of my sarcasm, not to indicate he's changed his mind.

So, Sumner realizes exactly what he's asking for, and still thinks it's a good idea. But since it apparently isn't obvious to everyone what's wrong with such a policy, I thought I'd spell it out clearly for once:

Banks aren't lending (in sufficient numbers). Mainstream economists want to prod them into lending. But why won't they lend in the first place? Because they don't expect the future loan payments to justify the loan. Now, when you grip them so tightly that they have to, for some reason or another, make these loans, have you changed the factors causing banks to believe loans won't be paid? No, you haven't. So, the loans will just throw money after wasteful projects, destroying output and making everyone poorer.

Note: even if you -- quite reasonably -- care about unemployed workers, and you dismiss this concern about wastefulness on the grounds that, "hey, at least it will lift off the joblessness albatross for so many families", that still wouldn't make such policies a good idea. The wastefulness means that reality will eventually rear its head and force these projects to be abandoned. Then, all the new skills workers could have developed while working on sustainable projects that satisfy actual demand, instead don't get developed, and whatever they did do has just retooled them for a useless activity, leaving them even worse off. Doesn't sound too compassionate to me ...

But let's say I'm wrong about that. Let's put aside, for the moment, our skepticism about economists' claims that the same policy that forces banks to lend, also causes these loans to work out and get repaid, making them not such stupid loans to begin with. Even then, you're still causing inefficient activities to happen that cause workers and investors to dig themselves deeper on unsustainable activities.

Looking back, one has to wonder how economists ever came to the consensus that making ultra-underpriced loans to clumsy, inflexible banks could ever possibly be a good idea. My suspicion is that it is a kind of Goodhart phenomenon: at the time these economic models were created, the metrics economists cared about did serve as good proxies for general economic health. But as they were targeted by policy, they lost their value as indicators.

Furthermore, economists failed to continually ground their concept of a "good economy" in what is meant by the term in common parlance. They don't keep checking back to see whether their policies would mean that people get the best combination of work, leisure, and consumption (all broadly defined). No: if an improvement doesn't show up as a cash exchange, it doesn't matter. If people aren't spending enough, then obviously that's hurting the economy and they should spend more.

You would almost think the economy is some god that demands sacrifices, given the way economists talk, rather than a characterization of our collective ability to satisfy wants.

So please, understand my anger when I read about how young people have all of their options cut off by the earlier generation, how they can't save or invest because of how much will be taken to make up for the failures of poorly run enterprises, how genuinely productive ventures are quashed by an outdated mentality of how the world should work ... and then Scott Sumner swings in to tell us that the best way to improve "the economy" is with ridiculously underpriced loans from newly-printed money to aging, inefficient companies that just wasted trillions of dollars destroying our productive capacity.

Advice for economists: Ask whether, not why.

-Don't ask, "What can we do to increase aggregate demand?"
Ask, "Why should we increase aggregate demand?"

-Don't ask, "What can we do to keep people from saving so much?"
Ask, "Why does 'the economy' so crucially depend on people not saving, and why do I care about the health of the 'economy' in that sense?"

-Don't ask, "What can we do to get (traditionally measured) output back up?"
Ask, "Why is it necessary for that measure of output to go up? Would it be so terrible for people to produce less, if that's what they really want, based on honest assessments of the future?"

Get the picture?

Saturday, July 10, 2010

Setting the future economy straight

Gennady Stolyarov II does it much better than I can in a guest post on Bob Murphy's blog.

My summary: young people are f'ed. New and existing laws, along with entrenched norms, make it effectively impossible for them to succeed through standard education and career paths. Success has become decoupled from merit, and the upcoming generation will be barred from home-ownership, even if they're responsible. A constellation of irresponsible financial policies by the government shifts most of the cost of government to these young people through ever-growing inflation, taxes, and one-size-fits-all laws. The only answer is for the new generation to break from traditional norms and bypass the standard dinosaur institutions, using new technologies -- mainly the internet -- to meet their economic needs, without the waste and inefficiency that has crept into the system over time.

Lots of thoughts I've had, but put together with rigor I have yet to match on the issue.

Wednesday, July 7, 2010

Why would a Serious Thinker(tm) fear my comments?

Gene Callahan now has the cute slogan on his blog: "Silas-free for over eight twelve days":

I had submitted thoughtful criticisms to his blog more recently than that, alerting him of errors he's making, and of phenomena he might not be aware of. (Example saved from before then.) So why would this Serious Thinker feel the need to reject, on sight, my comments from appearing, and then advertise it?

A self-serving reason I might give is "Well, Callahan actually not a very good thinker and only gets validation from a clique that already agrees with him, so he can't bear to see remarks that might cause him to question his worldview." But I'm far too biased to make such a judgment.

Instead I invite readers to judge for themselves how Deep and Serious a thinker Callahan is by looking at the link above. He uses the example of a monk who can't explain why a prohibition on touching women exists as a characteristic example of how some things can only be learned from experience.

(It looks to me like maybe Callahan just isn't very good at explaining, and doesn't have much of an incentive to change that. After all, that would undermine his worldview that requires knowledge to be mostly inarticulable, not to mention the aura of unquestionable expertise he tries to maintain.)

As you might expect, he justifies the Silas-free-ness by reference to the "many sites I've been banned from" for my unhelpful comments. True -- I have been banned from many sites for that reason -- it's just that they've all been controlled by him! Information cascade, anyone?