31 October 2011

Scott Adams on the Flat Tax

There’s a lot to comment on here:
I think most people like the idea of a simpler tax code. No argument there. But I've never met a person who would volunteer to pay higher taxes in exchange for simplicity.
I don’t know if most would actually pay higher taxes.  Sure, direct taxes might increase for some, but a flat tax would really cut down on indirect taxes.  If everyone paid a flat 15% income tax, I don’t think most people would see their tax payments rise because everyone already pays a base level 9% income tax (in the form of Social Security and Medicare payroll taxes), not to mention plenty of indirect taxes.  So, while nominal net income might decrease, the purchasing power of that income would increase, assuming the money supply would remain stable (note: inflation is considered, for purposes of this post, an indirect tax).
The flat tax idea is a brilliant bit of psychological class warfare. At least I hope that's what it is. I'd hate to think the people in the highest tax brackets, i.e. my peeps, are as dumb as the people they hope to screw with promises of unicorns and flat taxes.
The flat tax seems brilliant, but most of the supporters of either a flat tax or FairTax are decidedly upper-middle class, and they know that they will be better off.  The lower-class people I know don’t seem at all sold on the idea of increased rates, so maybe the flat tax isn’t as brilliant as is supposed.
The flat tax diversion is a deliciously cynical way to maintain the status quo while appearing to be in favor of change.  The diversion works because the middle class has been duped by the media into thinking high income people pay a lower tax rate than the general public, so maybe a flat tax will set things right. That's the power of anecdotes. If you hear a few stories about Warren Buffett paying a lower tax rate than his secretary, you assume your dentist is beating the system too. He probably isn't.
I don’t personally know of any middle class people who think that high income people pay lower rates.  I’ll chalk Adams’ analysis up to self-selection bias.  Also, Chuck proved that Buffet wasn’t paying a lower rate than his secretary.
Another brilliant aspect of the flat tax argument is that it's simple to explain, and our brains are wired to perceive simple solutions as better than complicated ones. In reality, the simplest solution is usually the one that comes from someone who is either trying to screw you or who isn't capable of understanding the full situation.
Actually, the simplest solutions are the best.  However, that doesn’t mean that everyone will benefit from changing to a simpler solution.  For example, in the case of a Flat Tax, lots of lawyers and lobbyists would be out work.  And possibly several bureaucrats.

Furthermore, I don’t see how it’s “screwing over” people to make them pay for the benefits they receive from the government.
The flat tax diversion is weasel-clever because it shines a light on the absurd "fairness" argument coming from the folks who want to raise taxes on the rich. Fairness is an illusion our parents taught us as kids to make us stop fighting with our siblings over the appropriate division of candy. Fairness isn't an objective quality of the real world. The reality is that the rich willingly pay higher taxes for the same reason that the British monarchy willingly converted from a dictator model to a symbolic role: If you want to avoid being beheaded, sometimes you need to be flexible.
If I could ban one word from the common vernacular, it would be “fairness.”  It doesn’t exist, and never has.  Plus, no two people and ever agree on what it means, at least in terms of practical application.  Justice is a much better concept, and more objective in application, though not perfectly so.
Personally, I'm quite comfortable paying taxes at the highest rate. It's like paying protection money to the Mafia, and I mean that in the best possible way. High taxes reduce the odds that jealous mobs will kill me for succeeding in my chosen field. Oh, and my taxes are also helping fund national defense, education, social program, and other good stuff. That's a win-win. But please don't insult me with arguments of fairness. Save the fairy tales for your kids.
I’d rather get rid of the mafia, personally.  I suppose that buying protection is the next-best solution.  However, never underestimate mankind’s propensity for killing the goose that lays the golden eggs.
I know some of you will leave comments about your own fairy tales of Laffer Curve economics, in which lower tax rates stimulate the economy and fill the treasury with free money. And then someone will point out that economic growth in the Unites States has often coincided with higher tax rates. Can we agree that the Laffer Curve has been debunked everywhere but on Fox News?
While I’m not one who has studied the Laffer curve with any degree of depth, I always thought the it existed to show a) that tax revenue is $0 and rates of 0% and 100% and that b) the rate optimal for maximizing revenue was somewhere between 0% and 100%.  That’s all I use it for.

And I’m not sure how federal tax revenue equates to economic growth, except by definition per the widely used Samuelsonian macroeconomic metrics like GDP.  Also, lower tax rates don’t stimulate the economy per se; they simply don’t disincentivize certain market behaviors.

Thoughts On Ron Paul’s Budget Proposal

First, a summary from the WSJ:

GOP presidential candidate Rep. Ron Paul will unveil his economic plan Monday afternoon, calling for a lower corporate tax rate, cutting spending by $1 trillion during his first year in office and eliminating five cabinet-level agencies, including the Education Department, according to excerpts released to Washington Wire…
But Mr. Paul does get specific when he calls for a 10% reduction in the federal work force, while pledging to limit his presidential salary to $39,336, which his campaign says is “approximately equal to the median personal income of the American worker.”  The current pay rate for commander in chief is $400,000 a year.
The Paul  plan would also lower the corporate tax rate to 15% from 35%, though it is silent on personal income tax rates, which Mr. Paul would like to abolish. The congressman would end taxes on personal savings and extend “all Bush tax cuts.”
He would also allow U.S. firms to repatriate capital without additional taxes. Some lawmakers have recently proposed such legislation as a way to spur job growth. Its critics argue that a tax holiday for companies with money abroad has not historically led to domestic investment.
But the plan, at its heart, is libertarian. While promising to cut $1 trillion in spending during his first year, Mr. Paul would eliminate the Departments of Education, Commerce, Energy, Interior and Housing and Urban Development. When former Massachusetts Gov. MItt Romney unveiled his economic plan last month, he said he would submit legislation to reduce nonsecurity, discretionary spending by $20 billion.
Mr. Paul would also push for the repeal of the new health-care law, last year’s Wall Street regulations law and the Sarbanes-Oxley Act, the 2002 corporate governance law passed in response to a number of corporate scandals, including Enron.

I think this is a good start to addressing the problem.  I also think this is the most serious proposal from any of the current candidates, Democrat and republican alike.

Some may call for incremental changes.  We’re past that point.  We’re going to face an economic collapse.  There’s no sense in strengthening federal power when this happens.  And there is no point in continuing the policies that led to this problem.

Ultimately, Paul’s plan is the best out there, though it could certainly be improved upon.  My proposal would be to cut all unconstitutional spending.  I think that would solve a lot of problems in fell swoop.

29 October 2011

Time and Money

I meant to make this into an insightful post, but I can never quite manage to say what I want to say.  Anyhow, here’s a Freakonomics article how some Chinese people find work waiting in line for others.  Here’s a blog post on how health care is rationed in Sweden.  What do these two articles have in common?  Both show how time is easily converted into money.

The lesson to take away from this is that markets always exist, even when the government attempts to get rid of them.  In Sweden, people paid for medical services in time instead of money.  The same was true in the USSR, where grocery shopping consisted more of waiting in line and less of spending money.  This is because, as the article on China shows, time and money are easily converted to one another.  If you cannot spend money, the next best thing to do is spend time.  This also happened in Canada, where, if memory serves me correct, some provinces had waiting lists of over ten months for maternity beds.

Anyway, it looks like this proves the old maxim is correct:  Time is money.

28 October 2011

American Patriotism

Doug Giles, on OWS:
Unlike the patriotic Tea Party movement where Old Glory flies proudly and participants sing patriotic songs with vigor and recite the Pledge of Allegiance with thunderous respect, the exact opposite goes on at the OWS Teat Parties.
They hate America. You won’t see them pledging allegiance to this country. If you don’t believe me, google [sic] Occupy Wall Street and check out the images and videos this cabal has spawned and tell me these winners love this land. I’m waiting…
If the OWSers were as socialistic as Giles attempts to paint them later in his article, you would think they would be more inclined to recite the pledge of allegiance, since the pledge of allegiance was written by a socialist Baptist writer of Youth’s Companion for the express purpose of selling advertisement space to a manufacturer of American Flags (hence the phrase “I pledge allegiance to the flag of the United States of America…”).  Incidentally, the pledge of allegiance was not written until 1892, which means that none of the Founding Fathers recited a pledge of allegiance.  Thus, if Giles is to be believed, the OWSers, by their non-reciting of the pledge of allegiance, have more in common with the Founding Fathers than the Tea Partiers do by their recital of the pledge of allegiance.

But beyond that, Giles is somewhat mistaken in thinking that the United States are a country.  They are not.  They are a union, at least per the Constitution.  This is a crucial distinction, for calling the United States a country is like calling the EU a country.

Quite simply, the United States are* a union of sovereign states.  Each state is its own entity, and can do as it pleases, presumably with the consent of the governed.  Furthermore, states can enter and leave the union at will,** which means that national sovereignty, as it exists, is not equivalent to federal sovereignty but rather state sovereignty.  Of course, this meaning is somewhat obscured by the current misuse of the words “state” and “country,” but one need only look at a dictionary to see that “state” generally means a sovereign nation.  And one need only read the constitution to see that the founders recognized state sovereignty.

Additionally, the federal government was only organized to give special advantages from a collective of the states that the states could not attain on their own.  This originally meant that the states would have access to a larger armed force and a larger diplomatic corps.  There were other advantages besides, but most are concerned with the advantages of an economic union.  The states were never considered to be subsidiaries of the federal government.  Instead, the states were considered to have equal status with the federal government, as evidenced by the number of times various states rejected Supreme Court decisions opinions.

Therefore, it is safe to conclude that loving this country, as a form of patriotism, is nothing more than continuing the fraud that the United States of America is a sovereign country.  It is a union, to be entered and left freely by the states, and no one is therefore beholden to it, and no one therefore owes it allegiance.  It is also safe to conclude, in closing, that American patriotism is an oxymoron.

* Although it is probably more correct to say that the united States were a union a union of sovereign states.

**  Or could before Adams and Lincoln each took massive dumps on the constitution.

Cocky/Funny

Game, fundamentally, is more than a way of seducing a girl; it’s a social tool.  This simple observation was reaffirmed for me today while I was out shopping.

I was inadvertently roped into an impromptu shopping outing (don’t ask), and I had little desire to go into women’s clothing stores.  So, while my companions browsed through their various stores of choice, I wandered into a couple of other shops I found more interesting.

One of these shops was Dollar Tree.  For those unfamiliar with this chain, Dollar Tree is a store that sells a wide variety of goods for the price of one dollar.  Nothing costs more than one dollar, and very few things cost less.  I found several interesting items worth purchasing (most notably an air horn), and so I made my way to the checkout line, which was being worked by a woman.

The woman ahead of me in line was older, and quite clumsy.  While checking out, she inadvertently elbowed me, an apologized right away.  I said nothing.  I’m pretty longsuffering, and it doesn’t bother me much when someone accidentally inconveniences me in a minor way.  However, I don’t want to be a pushover, so I also don’t go out of my way to give off the impression that it’s okay to inconvenience me.

Anyhow, this woman, as she was gathering her bags, stepped on me.  Again she apologized, and said “I guess I’m just trying to get you.”  I paused, as is my wont, and then said in my typical deadpan manner “well, you’re not the first woman to say that to me today.”  She laughed, as did the cashier and the three other women in line behind me.  One of the women in line behind me said something to the effect that she could see how lots of women would want to get me, and all the other women occurred with her.

The moral of this story is that Game is not only a social tool at its core, but that it rarely needs to consist of anything more than confidence and a sense of humor.  Those two things in tandem are often enough to make social interactions go much more smoothly.  Therefore, go forth in confidence and good humor.

26 October 2011

Goodbye Iraq

Jonah Goldberg, on the withdrawal of troops from Iraq:

I'm solidly in the camp that sees this as a strategic blunder. Iraqi democracy is fragile and Iran's desire to undermine it is strong. Also, announcing our withdrawal is a weird way to respond to a foiled Iranian plot to commit an act of war in the U.S. capital. Obviously, I hope I'm wrong and President Obama's not frittering away our enormous sacrifices in Iraq out of domestic political concerns and diplomatic ineptitude.

First, in regards to the fragility of democracy in Iraq, there isn’t much that can be done to help this.  Yes, we could stay there and help, but that has the potential for turning into an indefinite occupation.  And the history of democracy in Iraq isn’t exactly promising toward long-term success (Saddam Hussein was democratically elected, after all).  Thus, focusing on ensuring the success of democracy in Iraq seems not only expensive, but fruitless in the long run.

Second, in regards to Iran, it seems like it’s time to give peace a chance.  Or at least noninterventionism.

Maybe Iran doesn’t like watching the US interfere in Middle Eastern affairs, and maybe they will thus be less inclined to start a war with us.

Also, if Iran wants to go to war with Iraq but has a strong inclination to attack America, maybe the best thing to do would be withdrawing from Iraq and letting Iran be distracted go to war with Iraq. At the risk of sounding like a heartless American, if the Iranians are going to kill anyone, it’s better for Americans if the Iranians are killing Iraqis instead of Americans.

Finally, in regards to “frittering away” our sacrifices in Iraq, I would simply like to point out that we can’t afford to keep making those sacrifices.  America is broke, and needs to make radical budget cuts.  Nation-building is a luxury for successful empires; it is not a necessity for dying empires like America.  (also, remember the old adage that “sunk costs are sunk costs”).  We’ve already spent the money in Iraq; we won’t be recouping it anytime soon.  The proper framework for analyzing whether to stay in Iraq should be predicated on current and future costs and outcomes, not past ones.

At any rate, it’s nice to see that America is finally leaving Iraq.  Hopefully Obama will take use this as an opportunity to make some necessary cuts to military spending, and strengthen his resolve to quit minding the affairs of other nations.  We aren’t the world’s policemen, after all.

Book Review


Like A Financial Analysis of al-Qaeda in Iraq, this book is rather technical and highly academic in approach.  Unsurprisingly, it is a rather boring read for the most part.  Furthermore, the book isn’t particularly insightful.

There were some who apparently claimed, presumably around the time this book was written, that capitalism was responsible for causing and perpetuating apartheid and racial division.  Williams seeks to correct this misconception, and does so quite adequately by pointing out how it was government legislation that created, enabled, and perpetuated apartheid and the corresponding racism.

Williams' arguments are not unique or original, in a sense, because racial biases can, and have been, easily corrected on the free market by the “inferior” race offering lower prices for their labor.  The reason this didn’t happen in South Africa was because the government forbade competition, or elsewise severely hindered it.

Williams' book, then, is useful primarily as an academic resource.  It is not easy or enjoyable to read, part of which is due to the structure of the book.  For me, it only reinforced my beliefs in the general equitability of the market.  I imagine that the same will be true for those who are inclined to read this.  My recommendation is to only read this book if you are doing research on South Africa or apartheid.

Karl Denninger v. Ron Paul

Karl Denninger makes a proposal:

The Federal Reserve Act of 1913, as amended, explicitly states that one of the goals of monetary policy is Stable Prices (and the word "Stable" is defined in Websters as "unchanging.")
The original Coinage Act (of 1792) provided that the penalty for intentional debasement of the currency was death.
It's time to bring that law back onto the books and start enforcing it; the gallows can be erected right in front of the Wall Street "bull" or in front of the Washington Monument - pick one.

Karl is correct in noting that the Fed has failed in its legally required duties, and should thus be prosecuted.  Karl has also taken Ron Paul to task for calling for the abolition of the Fed since the Fed is technically under the purview of the House, and should thus be prosecuted at the behest of the House.  The problems with Karl’s analysis are twofold.

First, Ron Paul is one representative among hundreds.  Even if he called for prosecuting the Fed and enforcing the laws that bind it, he would still have needed over two hundred representatives to agree with him.  Given that Ron is one of a very small number of politicians with his head not buried in the sand, it seems unlikely that calling for enforcing the laws regulating the Fed was going to gain traction.  As such, one could argue that Paul was acting pragmatically by not fighting this particular losing battle.*

Second, if the laws governing the Fed are going to be disregarded by those in charge of enforcing them, then it is better to simply end the Fed instead of trying to manage it.  The experiment with letting the government manage the money supply has thus proven to be an unmitigated disaster.  This is due, in part, to congress’s unwillingness to enforce the law.  If this trend continues, then it would seem more prudent, in the long term, to stop waiting for congress to get its act together and simply dispense with the system altogether.

This is where Ron Paul displays more foresight than Denninger.  Ron Paul is basically conceding that the Fed cannot be regulated like it should, and so the only way to prevent it from debasing the currency is to simply get rid of it altogether.  Denninger seems to think that it is likely that congress will grow a spine in the next couple of years; Ron Paul is looking beyond that and asking why worry about relying on politicians when we could simply abolish the problem altogether.

Anyhow, this is convoluted way of saying that both Denninger and Paul are right in diagnosing the problem with currency debasement.  Their solutions differ because the two men have differing opinions on the nature of government.  Paul thinks that politicians are unlikely to enforce the laws on the books.  I’m inclined to agree with him, which is why I would argue for ending the Fed.  However, I’m not going to complain if politicians want to start prosecuting Fed officials.

* Of course, one could also argue that it’s hypocritical to pose as an ideologically consistent politician if one is actually going to act like a pragmatist.

25 October 2011

Reality Shining Through

BofA is apparently forecasting another downgrade:

The United States will likely suffer the loss of its triple-A credit rating from another major rating agency by the end of this year due to concerns over the deficit, Bank of America Merrill Lynch forecasts.
The trigger would be a likely failure by Congress to agree on a credible long-term plan to cut the U.S. deficit, the bank said in a research note published on Friday.
A second downgrade -- either from Moody's or Fitch -- would follow Standard & Poor's downgrade in August on concerns about the government's budget deficit and rising debt burden. A second loss of the country's top credit rating would be an additional blow to the sluggish U.S. economy, Merrill said.

I wholly welcome this development for two reasons.

First, the downgrade might help politicians and voters wake up to the fundamental economic reality America faces.  I don’t think the odds of this occurring in a timely manner are very good, but there having a ratings agency speak some semblance of the truth about the federal fiscal situation is certainly going to improve the odds.

Second, there is plenty of entertainment to be found in watching politicians and talking heads explain why a downgrade is just, well, wrong.  The nihilist in me enjoys watching the world burn.  The cynic in me enjoys watching the people who are burning explain how fire is a figment of our imagination.  So, if nothing else, the inevitable downgrade at least promises to be entertaining.  And, these days, you can’t ask for much more than that.

23 October 2011

9-9-9

A serious critique of Cain’s tax proposal comes to light:

Under Herman Cain's 9-9-9 tax reform plan, 84% of U.S. households would pay more than they do under current tax policies, according to a report released Tuesday by a nonpartisan research group.

First off, there’s a word missing here.  It would be more accurate to say that more households would pay more direct taxes under Cain’s plan.  People already pay plenty of indirect taxes now; Cain’s plan would simply make people face their costs head-on.  Also, this plan appears to eliminate one-time taxes like the estate tax, which is a good thing.

Second, it’s a good idea for more people to foot more of the tax bill.  One way to increase government accountability is to make sure everyone has skin in the game.  Fiscal prudence will become more of a national concern if most citizens’ tax bills go up.
Under the current system, most of the lowest income households end up owing no federal income tax. That's because their incomes are so low that they're exempt, or because their tax liability is canceled out by the standard deduction and tax breaks, such as the Earned Income Tax Credit.
The Cain plan doesn't exempt very low incomes from taxation. And while it would eliminate the payroll tax, which is the heaviest tax for low-income families, that tax relief would be offset for many by the elimination of the EITC and other tax breaks they qualify for now.

From what I gather, the lowest earners wouldn’t pay that much more.  Employee-side payroll contributions are already 7.6% of income; bumping it up to 9% is not going to be that huge a difference.  Actually, factoring in employer-side matching for Medicare withholdings, employee withholdings are already effectively at a 9% income tax.  Thus, the only poor see their tax burden increase is by the elimination of tax credits.  I don’t have enough information at this time to determine how much of an increase the lowest quartile of income-earners would see their tax burden rise by.  However, since the lowest quartile of earners take a decent amount of government benefits, I don’t really have a problem with the government charging for them.

But the majority of the highest income households would get a tax cut. For instance, 95% of those with more than $1 million in income would receive an average tax cut of $487,300.

These people would then spend their newfound riches more efficiently than the government, which is a plus in my book.  At any rate, I don’t get caught up in this class warfare because I just don’t care.  I don’t think the wealthy are inherently more or less deserving of their wealth than others.
Under Cain, capital gains -- a notable source of income for the wealthiest Americans -- would be tax-free. He would also preserve the charitable deduction. And taxing all non-capital gains income at 9% would amount to a considerable break from today's top rate of 35%.

At the very least, the tax code should not disincentivize investing, since investing is a key to wealth and economic growth.  Better yet, the tax code should encourage people to invest and save (if I recall correctly, the capital gains tax applies to savings where the interest earned exceeds $50).

Cain’s plan has been criticized by those on the left, who say it would hurt the poor, and those on the right, who worry a new national sales tax is an invitation for the government to raise taxes over time.

I’m not a fan of wealth redistribution, so I view taxes as payment for services.  If poor people want the government to do something for them, they should pay for it.  And since the government does many things for poor people, poor people should rightly expect to either a) actually pay something or b) pay a closer approximation to the cost of the benefits they receive.

As for conservatives, I share their concerns about new taxes.  If you give the government an inch, it will take that as a sign to increase taxes.  I would suggest that the introduction of a new type of tax (e.g. consumption tax) be accompanied by the elimination of a tax of similar scope and coverage (in terms of revenue).  While simplification is good, I don’t think Cain’s proposal simplifies things enough.  Also, I don’t think that his proposal is going to survive once the class warfare aspects of politicking start up in earnest during the upcoming election cycle.

UPDATE: I made a mistake in saying that interest earned was subject to the capital gains tax.  As such, disregard my commentary related to that. (HT: Matt)

22 October 2011

Buying Respect


I don't think for a minute that working for a private or a public institution fundamentally changes people's basic humanity. But the incentives in a private system nevertheless encourage them to show more of their human side. That is because they see the clients they have to deal with as valued customers: their job, their income, would not exist if those customers were not satisfied. And they know from their own experience that the way a service is delivered – the cheeriness, the human engagement, the concern – are as much a part of a customer's satisfaction as getting the service itself. By contrast, the incentive structure in too many public services induces staff to regard customers as a necessary inconvenience. Shouldn't we prefer a system that positively encourages and brings out people's humanity, rather than one that discourages and so obviously represses it?

I remember a left-leaning classmate of mine once complaining that it was a pity how people would only act decently towards others if doing so was profitable.  I was shocked by this, since my reaction was to be impressed that you could actually buy others’ concern for you.  Human decency is rare and apparently unnatural, so we should be thankful that there are ways to acquire it, even if those ways aren’t ideal or on our terms.  It’s much better, in my opinion, to pay someone to care about you than to demand that they care for you for altruistic reasons.

Anyhow, this just goes to show you that it is more efficient to exploit human nature than to try to change it.

The Paradox of Accounting Value

The Adam Smith Institute has a post praising mark-to-market accounting, named thusly because assets are marked at their market value during the closing period (usually monthly or quarterly).  While I think that mark-to-market accounting is a good idea, it’s helpful to take a step back and understand consider why accountants might be reluctant to accept this.

Accountants, in a sense, are historians, insofar as their job is to provide an accurate and objective record of the financial transactions of a firm or an individual that occur in a specific time frame.  As such, accountants are very concerned with minimizing subjectivity when it comes to reporting the financial state of a firm.  Of course, some subjectivity is inherent in this endeavor (e.g. choosing the method by which one depreciates capital assets).  Still, subjectivity is to be minimized as much as possible.

Therefore, it should not be surprising that accountants prefer a system wherein asset valuation is determined by the last recorded market transaction regarding the aforementioned asset, otherwise known as a transaction or sale.  When a firm sells or buys an asset, it provides an objective measure of value, otherwise known as a price.  And since the accountant functions as an historian, in a sense, the accountant can say that a given asset was valued at x at a given point in time.  Now, it may be the case that said asset may no longer be valued as such now, but it was the case the aforementioned asset was valued at x at a given point in time, as evidenced by the exchange.

Ironically, this focus on objectivity presents a paradox at this point in time.  Many assets, particularly houses owned by banks due to foreclosure, are overvalued, but no one knows by how much said assets are overvalued.  The last known price almost certainly places too high a value on said assets.  The paradox is thus:  the current methods of valuation require a tradeoff between accuracy and objectivity.

The mark-to-market method of valuation would provide a more accurate estimate of asset value than last known price in many cases, but this is nothing more than an educated guess.  And educated guesses are not easily defended, especially when later proven wrong.  However, any attempt at objective valuation is likely to be wildly wrong, especially now that the housing bubble has popped.  So, accountants are stuck in the unenviable position of choosing between objectivity and accuracy.

16 October 2011

Sounds Good To Me

The OWSers finally have a good idea:

The social uprising — called "Bank Transfer Day" — encourages bank customers to take their cash out of big banks and put it in smaller banks and credit unions instead. The movement is ostensibly in response to aggressive fees institutions are rolling out to recover profits lost from new financial regulations, notably Bank of America's (BAC - News) decision to stick debit card users with a $5 monthly fee and Wells Fargo's (WFC - News) $3 test of the same.

Of course, one need not be a pot-smoking leftist to think that putting one’s money in a bank that doesn’t charge you usage fees is a good idea.  And one need not view opening up a checking account with a cheaper bank as a way to show solidarity or prove one’s radicalism.  Going to a cheaper bank is simply good business.

At any rate, if you’re going to bank, you may as well bank with an institution that hasn’t perpetrated massive fraud against its customers or the American people.  To that end, I also recommend putting your money in a credit union; I’m very happy with mine.  I haven’t gotten ripped off, and no one who works at my credit union has been arrested on fraud charges, nor is anyone calling for such a thing.

Better yet, transferring your money from one of the big banks to a local bank or credit union strikes me as a way to a) end the “too big to fail” nonsense once and for all and b) strike back at the criminals running the major banks.  In the case of the former, taking your money elsewhere means that any future bailouts will ostensibly be used for fat cat traders who didn’t have enough foresight to cover their risks, since the “little people” with bank accounts will be elsewhere.  In regards to the latter, it will considerably harder for the major banks to turn a non-fraudulent profit if they have no customers.

I’m with the OWSers on this.

15 October 2011

Lessons From The Amish


It occurred to me that one could view the Amish as a working example of a form of anarchy. It is a very strange form, since the rules that the Amish are under are considerably more constraining—including rules on what styles of clothing they can wear, rules against owning automobiles or flying on airplanes, and much else—than the rules the rest of us are under. But those rules are all voluntarily accepted, and the system that generates them may reasonably be viewed as a competitive system of private law.
To expand on that, for readers not familiar with the Amish. The only level of Amish "government" with any authority is the congregation, typically made up of about thirty to forty households. Its authority is over individuals who, as adults, have chosen to swear to accept its rules. The only punishment it can impose is shunning—the refusal of members of the congregation to associate in various ways with a member who has been excommunicated. Members, including excommunicated members, are free to resign from their congregation and join any other congregation that will accept them, or drop out of the Amish sect entirely.

There are a couple of conclusions to be drawn from this.

1.  This is how the church should operate.  While Christians are not expected to rebel against the state (per Romans 14), it does not follow that the Christian need to go to the state to solve any of his problems with his brethren.  I’ve posted on this before in regards to marriage (look under the heading “Righting the Ship”), so I’ll be brief here.

I Cor. 6 makes it that the church not only can serve as a replacement for the legal system, but that it must, at least in some cases.  I do not think that it is a stretch to say that the church can act as a complete substitute for the legal system, at least for its members.  This seems to be the practice with the Amish.  As such, the church should make a point of resolving any and all problems its members have with each other, instead of allowing them or expecting them to go to the authorities.  This model can work, per the Amish, although I would say that its ability to work is largely contingent on the shared religious beliefs of the members of the church.

Note that this model does not apply to members interacting with non-members.  This would mean that the state would more than likely be necessary for redressing the crimes irreligious people practice against religious people.  Also, the proper application of this model would require a form of religious isolationism, wherein members would be expected to isolate themselves from the world as much as possible.  This will likely be a sticking point for those who believe they have a responsibility to proselytize others.

2.  There is likely a genetic component to functional anarchism.  The Amish are largely composed of white Europeans that come from a very small number of countries (mostly Switzerland and Germany by my reckoning).  In fact, they seem to call from a relatively small number of families.  It seems that the Amish, also called Mennonites, have a genetic predisposition to maintain their familial culture. Obviously, genetics cannot account for everything, but I bet it plays a significant role.  It is nearly impossible to find non-white Amish, and very difficult to find non-European white Amish.  While this is not conclusive proof, it does suggest that genetics may play a role in supporting the Amish’s functional anarchism.

If it is, in fact, the case that functional anarchist societies are dependent to some extent on genetics, then one can reasonably conclude that there will be some people who will be genetically predisposed towards statism and against anarchy. This further suggests that certain people/cultures that will have tendencies towards anarchism and that certain people/cultures will have tendencies toward statism.

3.  A functional anarchist society is inherently opposed to intentional multiculturalism.  Since the closest modern working example of a functional anarchist society is a relatively homogeneous group, I think that one can safely conclude that anarchy is definitely at odds with multiculturalism, especially if anarchy is to survive.  There are plenty of statists in this world, and the only way to prevent them from ruining an anarchist society would be to exclude them from participating in said anarchist society.  Therefore, if libertarians think that an anarchist society would promote heterogeneity, they are going to be in for a rude surprise.

4.  Anarchist societies will likely be more segregated and less libertine than most libertarians think.  Part of what has enabled the Amish to exist as a distinct society for so long has to undoubtedly be the social pressure to conform to Amish beliefs.  I imagine the same pressure of social conformity will be present in every other functional anarchist society, since people like to surround themselves with like-minded people.  Furthermore, conformity exists as a signal for trust, which is a crucial good in a society where no one has coercive power to enforce contracts and smooth over market interactions.

5.  Anarchist societies will likely be less progressive, in a technological sense.  When one thinks about the inventions that personify the modern world, one usually thinks of things like the electrical power grid and computers.  Interestingly, both these things enjoyed a good deal of government subsidy that enabled them to become so ubiquitous.  The TVA, for example, was put in charge of building up power lines in rural areas.  Also, the modern computer enjoyed quite a bit of development from the defense department in WWII.  These two marvels of the modern world owe some of their success to the state.  (Incidentally, modern video games exist, in part, because the army needed an expensive way to train soldiers.)

This is not to suggest that the state would have been necessary for accomplishing either the mass production of the computer or the universal distribution of electricity.  However, the government does deserve credit for speeding up the mass acceptance and usage of these things.  Governments tend to be progressive since those who are attracted to ruling others usually have a tendency to make an ideal society.  Thus, the government has a tendency to speed up the timetable for modernization.

In contrast, anarchist societies are considerably more likely to be conservative than statist societies, and anarchist societies will be less-inclined toward progress.  Anarchist societies will be hesitant to try put new things, in part because new things are a departure from tradition (and keep in mind that anarchism promotes a rather homogeneous culture, which inclines itself nicely to following tradition).  This is not an inherently good or bad thing.  It simply is.

Thus, in summation, libertarians who think that society is going to magically progress if only the state got out of the way are going to need to readjust their expectations.  Not everyone wants to get rid of the state, and not everyone can live peaceably without it.  And of those who can live peaceably in a stateless society, many will be very conservative and traditionalist, which is not very conducive to a market-based utopia of free love and drugs.  It’s not even necessarily conducive to rapid technological improvement.

It’s Not That Simple

Even though I’m a libertarian, and as such am generally fond of my fellow libertarians, there are times when they say things that are hilariously funny.  Like this:

The fix for these huge tasks is surprisingly simple: to abolish government, all of its ordinary employees must be motivated to quit their jobs, and to prevent resurrection all its clients and beneficiaries must be shown they can do better without it, and one program will suffice for both these vital tasks: universal re-education.
As de la Bo√ętie said, the one thing indispensable to government is support; and now that it can print its own money that doesn't mean financial support, it means labor. Take away its employees, and it is totally helpless; in fact it ceases to exist, for it consists of nobody else. That's the sine qua non of abolition; while there are soldiers willing to do grunt work for this monstrous Mafia, it will get by; when they are no longer willing, it will evaporate. That single change will do the whole job.
When everyone has come to learn the real nature of government and of individual liberty, the motivation to work for it will evaporate and the habit of begging it for goodies will disappear; self-reliance will be understood and a restored sense of morality and self-interest will cause employees to find honest work instead. It is quite easy to test this: assuming you, gentle Reader, are already convinced of the destructive and evil nature of government, would you work for it? – would you demand of it handouts, knowing how much wealthier you can become by honest trading in a free market? Of course not. So all that's needed is to bring everyone else to the same level of understanding that you have now.

Look, government evil is so commonplace that it’s a joke.  Government evil is accepted as a fact of life.  People already know what the government is really like, at heart.  Not everyone may be aware of the scope of government evil, but pretty much everyone is familiar with how petty, tyrannical, sordid, and evil the government can be.

Conservatives and liberals are both staunch statists.  They may disagree on the role of the state, but both sides generally support and defend the existence of the state.  And, more importantly, both sides spend a lot of their political energy complaining about the state.  It’s their favorite sport.  I’m almost beginning to think that the only reason liberals and conservatives support the state is so they can always be guaranteed to have something to complain about.

At any rate, though, the continuous complaining of both liberals and conservatives about the evil of the government reveals that they know, at a visceral level, just how evil the government is.  So there’s no need of convincing them of reality.

The problem that liberals and conservatives have is that they always wish to reform the government to make it less evil, or even good.  The problem is not that they can’t see evil.  The problem is that they wish it can be reformed.  And this sort of willful ignorance can’t be educated away.

Is It Shallow to Dress Well?


Since Roissy runs a Game blog, he concentrates on dress within the context of pickup situations or explicitly social environments. Obviously, appropriate dress varies from place to place and with regards to an individual's intentions, e.g. impressing a boss vs. hanging out with friends. Clothes no doubt matter. We live in a shallow world. Or perhaps, more directly, we are a shallow species often content to judge individuals merely on the physical, a trait rationally derived from our evolutionary past. So dress does impact basically all aspects of life, cultural, social, professional, and sexual. It's an important way that we relay information about ourselves; though clothes do not make the man, an aphorism implying that facial features and body type can only be obscured so much. [Emphasis added.]

This is a rather incorrect way of looking at things.  Shallowness is not simply an evolutionary trait; it is an economic reality.  Humans are finite beings with limited amounts of resources, including the most precious one of all:  time.

Clothes, among other things, serve as an indicator of status, in addition to serving as protection from the elements.  This is one reason why dress is so important.  Humans know that how you dress conveys a relatively large amount of information in a relatively short amount of time.  Wearing designer label clothes is used to indicate wealth.  Dressing like a gangbanger is done to indicate gang membership.  Dressing in sweats shows the prioritization of comfort over status.  Etc.

Though you can occasionally reach the wrong conclusion by judging on dress alone, you will be right often enough to make such methods of judgment valuable.  And while it may be desirable that you use more than dress to make judgments of others, reality is such that this ideal is highly impractical, if not downright impossible.

Thus, as Roissy observed in the original post, clothes do, in fact, matter.  In fact, they may matter more than Roissy originally concedes.*  How you dress is a way to tell others about yourself without requiring them to invest a large amount of resources in acquiring that information.  Thus, it is generally a good idea for you to dress your best.

* Although the context of Roissy’s original post is centered on Game, not general social settings.

13 October 2011

Fat Taxes


Things are never so simple, of course. The tax has already been received by many Danish firms as a 'bureaucratic nightmare', piling on additional costs to firms in an already tough period. Once more, any tax such as this is going to be inherently regressive; those least able to afford any price increases will be hit the hardest. But what does it matter? The French 'fat tax' is expected to raise an estimated €120,000,000 p.a.. A nice little earner.

Fat taxes are politically convenient in countries where obesity is a sizeable problem.  There is presumably plenty of revenue to be had because fat people aren’t going to change their eating habits overnight, nor are they the type to be particularly cost-conscious, in terms of both direct and indirect costs. 
Furthermore, defending fatties is political suicide for most, since fat people are generally reviled.  Thus, a fat tax is politically brilliant because it will raise revenue easily and enjoy widespread support (or, at the least, it won’t face much political opposition).
Most are in agreement that obesity is a society-wide problem. The more rotund we become, the more our healthcare costs increase. So what's the solution? Surely not pricing poor people out of the market for fatty foods. We must seek a solution other than 'more taxes' – the default position of any government. Perhaps our BMIs could be helped by making it easier for people to help out at sport clubs without undergoing a raft of CRB checks, or by reforming our health system which currently permits the cost of atrocious health habits to be picked up by someone else.
Sadly the precedent has already been set. When we already allow the government to dictate what we may and may not consume in the form of innumerable drugs, letting them control what we eat is a logical advancement. And it will all be done for our 'own good'. 

Actually, once you expect the government to provide free universal health care for every citizen (and all non-citizen residents), the natural consequence is for the government to enact some sort of cost-cutting measure, like rationing or queuing.  Alternatively, the government can enact a tax on unhealthy things in order to make providing health more reasonable.  If fat people ignore the increased prices, the government will at least have enough money to defray future health care costs that inevitably arise as a result of unhealthy diet.  Alternatively, if fat people decide to respond to the tax rationally, then the government will have to pay less for health care later on, thus negating the effect of less-than-projected revenue.

In many ways, a fat tax mimics the natural workings of the free market.  If there were no governmental guarantees of health care, people would more inclined to take care of themselves and eat properly.  Thus, the fat tax serves as a replacement market mechanism.

Now, this is not to say that I support a fat tax.  I simply view it as the rational response to the current conditions in Europe, with regards to how health care is provided over there.  Personally, I think the best solution would be to have the government completely deregulate and desubsidize the entire health industry, and get out of providing and paying for health care in its entirety.  But if the government is going to be involved in health care, it is going to have to find a way to manage costs.  That much is certain.

Playing Both Sides


The United States on Tuesday accused Iranian officials of plotting to murder Saudi Arabia’s ambassador to the United States in a bizarre scheme involving an Iranian-American used-car salesman who believed he was hiring assassins from a Mexican drug cartel for $1.5 million.
The alleged plot also included plans to pay the cartel, Los Zetas, to bomb the Israeli Embassy in Washington and the Saudi and Israeli Embassies in Argentina, according to a law enforcement official.
The plotters also discussed a side deal between the Quds Force, part of Iran’s Islamic Revolutionary Guards Corps, and Los Zetas to funnel tons of opium from the Middle East to Mexico, the official said. The plans never progressed, though, because the two suspects — the Iranian-American and an Iranian Quds Force officer — unwittingly were dealing with an informant for the Drug Enforcement Administration, officials said.

I think that America would be much safer if federal agencies weren’t simultaneously supporting and stopping terrorist plots.

Look, I know that plenty of people desire to destroy America.  And maybe the government should pay a little bit more attention to people who talk about wanting to blow up innocent citizens and whatnot.  But if these sorts of people don’t have any means or opportunities to show their hatred of America, why, then, should the government provide them with such?

It’s not inherently dangerous for people to have hatred for others.  Having ulterior motives is not sufficient for causing violence.  One must not only have a motive, but both means and opportunity as well.  And in this case, the federal government is deliberately seeking out those with terroristic motives and providing them with the means and opportunities to actually commit acts of terrorism.

While federal agents claim that they have these sort of situations under control, and are only doing this to put dangerous people behind bars, it seems that this practice of providing domestic wannabe terrorists with the ability to actually act on their impulses could have potentially negative side effects, like an actual terrorist attack.  Government agencies aren’t perfect, and it would only take one misstep to let a fully funded terrorist commit an act of terrorism at the implicit behest of the government.

As such, I would feel much safer if the government got out of the terrorist business.

This Does Not Bode Well

As can be easily seen from this chart (source), the money stock as measured by the Federal Reserve has grown by approximately 6.67% in the last five months!  Since real GDP is projected to grow by only 1% (and will likely be revised downwards ex post), this means prices are going to rise fairly dramatically in a short period of time.  And just in time for the holidays!
Anyway, there are a couple of ways this will play out, at least in the short-term.  Either consumers will face higher prices or manufacturers, suppliers, and/or retailers will face lower profit margins (or some combo of these possibilities).  I doubt that retail prices will rise much in the short term because most people can’t afford price hikes in lieu of relatively stagnant income over the past year.  Instead, I think businesses will eat the increased costs in the short term, most likely through the holidays and the post-holidays stock liquidations.
After the new year begins, though, I think prices will begin to rise.  And when that happens, it won’t be pretty.  Thanks, Bernanke!

10 October 2011

Birthday Game

Athol Kay once noted that celebrating birthdays is a rather beta sort of thing (which is essential in long-term relationships).  I imagine that, for the most part, the same is true of celebrating major holidays, like Christmas and Valentine’s Day.  You follow rituals that are generally stupid and get her gifts and do something “nice” just to show to her that you care, etc.

Anyway, I’m not overly fond of the beta frame inherent in birthday and holiday celebrations, so I spent some time thinking of a way to celebrate important days (defined here as her birthday, your anniversary, Valentine’s Day, and possibly Christmas, because all four of these days generally require the giving of gifts to one’s special someone).  It took me a while to come up with something, and I finally had a chance to test it last week.  The results were great.

Obviously, celebrating (in this case) a birthday is an inherently beta thing to do because the frame is generally that the one being celebrated is very important and worthy of celebration.  Again, this is very beta.  The goal is to celebrate her birthday from an alpha frame.  (Note:  This post primarily applies to men who are in a long-term relationship with women who are loyal to them.)

To this end, I’ve found that celebrating your girl’s birthday in an alpha matter is simply a matter of creating the right frame, which only requires a little money and a little creativity.  You will need:  a cell phone, five to seven cheap gifts, some paper and a pen, a card, a couple of hours to plan and implement, dinner or lunch plans, and a modified versions of Simon Says Game.

The first step is to go to Hallmark or some gift shop like that and sweet talk a cashier into helping you select gifts for your special someone.  You will need a general idea of what your target likes, but it’s helpful to have a cashier or sales associate help you because they will generally have a better sense of what’s cute than you will, and they will also know where all the discounted stuff is.  Simply tell them your plan, and that you need help selecting a couple of cute gifts for your special someone.  (Bonus:  Leave your number with the cutest cashier and tell her to call you if she thinks of anything else, if you’re not currently married and looking to upgrade.)  You should be able to get five to seven gifts for around twenty dollars, in my experience.

Since the game is basically a cross between Simon Says and a treasure hunt, you will want to take some time to find some hiding places for the gifts.  Garages, attics, and basements are all good hiding places.  Also, think of hiding some gifts on the top of shelves or cabinets, under beds, or at the back of deep cupboards.  You need to make the gifts difficult, but not impossible, to find.  Remember where you hide them, because you will be telling her where to find them later.  In fact, it may be best to write a script of how the treasure hunt is going to play out.  (Bonus:  I also made finding some of the gifts multi-part steps by sending her to find a note, which then told her to look for the gift.  Notes can be taped underneath drawers or on the back of cupboard doors in lesser-used rooms.)

The next step is texting her on her birthday.  Start by texting her something like “Simon says happy birthday.  Text me back to start the game.”  This should pique her interest rather quickly.  When she texts you back remind her of the rules of the game, and then give her the first command.  She should tell you when she finds the gift, which is your cue to giver another command.  Or you can wait to tell her later.  You can be direct or indirect about where to find things.  I avoided riddles because they are difficult to write in a way where the solution is neither obvious nor impossible.  In any event, you can take as long as you want in giving her clues, and you can be as vague as you want about the clues.  I only had seven things for her to find (six gifts and a card) and was fairly direct about the clues, but it still took about an hour and a half to play. (Bonus:  send her a text that leaves off “Simon says” and directs her to a card that says something along the lines of “silly girl, I didn’t say ‘Simon Says.’”)

The last clue should be her birthday card. I hid it under her bed, and she ended up tearing the bed apart to find it.  You should leave one last command tucked away in that card (write it on a 3x5 card) that tells her to get dressed in something nice/pretty/sexy depending on your plans.  Do not tell her why.

The last step is to pick her up and say “Simon says get in the car.”  Then take her out to eat somewhere.  Do not tell her where you’re going or what you’re doing.  Also, order for her.  I ended up taking her to a Cuban restaurant and ordering a Cubano for her, then taking her to one of the nicer parks in the city for a picnic.  Always have plan, but don’t feel compelled to tell her what it is.  It’s always fun to keep her in suspense, and it will help to establish that you’re the one in control.

While this plan doesn’t change the fact that celebrating her birthday is still a rather beta trait, it does strongly mitigate it.  By being the one with a plan that she follows on your terms, you establish and reinforce a rather powerful frame.  Thus, birthday game takes the best part of beta traits (comfort-building, bonding) and pairs it with some very powerful alpha traits (leadership, DHV), which makes it very powerful.  Because it takes time and planning, you don’t want to run this on anyone save for those women who merit your loyalty by having already demonstrated loyalty to you.

Incidentally, this game can be customized to a whole host of scenarios.  In addition to wives and long-time girlfriends, you can run modified versions of this on mothers, sisters, and daughters.  It simply takes a little more creativity to pull it off, but it can be done.  You can also lean more to the treasure hunt side of things, if you prefer, by leaving more clues at the house instead of texting them, or you can lean toward the Simon Says side of things by issuing other commands (think: sexting [for sake of clarity, this is not appropriate for your mom, sister, or daughter.  Ever.]).

My day followed that model somewhat closely.  I started texting her around eleven AM.  She found the last gift around half past noon.  I picked her up and took her to the aforementioned Cuban restaurant, and then to a park where we had a picnic because the weather was really beautiful.  I brought chips, drinks, and cupcakes in a picnic basket, as well as a quilt to sit upon.  The total cost of the gifts, including the card, was under $18.00.  The total cost of lunch for the two of us was just under $12.00.  Gas probably cost around $6.00.  All told, this was a rather inexpensive way to celebrate her birthday, and very memorable to boot.  It took around three and a half hours to play the game and go to lunch, but because this was spread out over three locations, this felt like it took closer to six hours.

In all, this is a very fun and easy way to celebrate your girl’s birthday, and has a bonus of being done from an alpha frame.  She’ll have fun, you’ll have fun, and you won’t go broke.  Best of all, the memories of this will stay with her pretty much forever.

GreyMail: Is It immoral to Play the Stock Market?

The other day, my brother emailed me to ask if it was wrong to play the stock market.  Since I was going to take the time to write him, I thought I’d share my response on my blog.

In the first place, it’s important to note that the stock market is inherently neutral, morally.  By this I mean that the stock market, as a non-human entity, cannot go to heaven or hell and, as such, cannot be inherently moral or immoral by its own state of nature.

In the second place, it’s important to note the sources of immorality within the stock market.  Karl Denninger has documented massive amounts of fraud among traders, particularly among firms that engage in automated trades.  Furthermore, many companies traded on the stock exchange engage in illegal and immoral business practices.  Many trades are based on fraud (think of businesses that lie about their balance sheets and income statements).  Also, many people engaging stock trades are highly immoral.

Does this then mean that one can never trade stocks?  Of course not.  If it were immoral to trade with those who are immoral, then no one could buy groceries or clothes, or engage in any kind of trade.  And it is not inherently immoral to be the victim of fraud (though it is foolish).  Interacting with those who are immoral does not cause their immorality to transfer to you by the merits of trade.

However, those who are immoral can end up having an influence simply by the virtue of your continued interaction with them.  This does not mean that the venue of your interaction is immoral.  Rather, your decision to allow those who are immoral to drag you down to their level is immoral, and it is you who will bear the guilt and blame for that decision, not the stock market.

It is worth noting, though, that if playing the stock market troubles your conscience then you should refrain from playing the stock market (cf. Romans 14).  And it is also worth noting that there are many major players in the stock market who are simply looking for a sucker of which to take advantage, and that the government has often turned a blind eye to the fraud that usually accompanies this.  As such, though it is perfectly moral to play the market, it is at this point in time quite foolish to do so.

Athol Kay Gets Robbed

Athol Kay posted about how he “lost” $300k in royalties due to having the PDF version of his book pirated and, being both unduly concerned with other people’s business and interested in IP, I thought I would comment on this.  As readers know, I’ve written quite a bit about IP already, believing it to be nothing more than a legal abstraction that exists to give certain people unmerited monopoly powers, hence the reason for my licensing terms.

Anyway, Athol Kay starts his post by saying that he expected his book to be stolen, but that he expected foreign sales of his eBook to counteract the loss of sales due to theft.  Anyone familiar with torrent sites knows that this expectation is highly unrealistic, and Athol quickly came to the same conclusion, figuring that he is only getting paid for 5% of the digital copies of his book that exist.  It’s probably less than 2%, I would guess, because not everyone who downloads a torrent stays continues seeding it, and those who download my seed it on different sites or share directly.  From his estimates, Athol has figured that he’s been deprived of roughly $300k in royalties.

Unfortunately, his estimate is completely wrong.  There is no way that he would even recoup one percent of the book’s sales from piracy because his book is priced too high.  This is the same problem music artists face.  They offer one product (a song) at one price regardless of customer, but much of their product is pirated because their price is higher than most people are willing to pay.

This is, of course, very basic economics.  In economics, there is a concept known as a demand curve, which represents the relationship between price and demand.  In general, there is an inverse relationship between price and demand, which means that as price decreases, the quantity demanded increases.  In general, then, more people demand a product at a lower price than at a higher price.  Athol’s strategy for his eBook, then, should have been to drop the price of his book incrementally over time (by, say, fifty cents every other week, which effectively means that people would exchange time for money).  Alternatively, he could have instituted a variable-pricing model (basically, pay-what-you-want with a price floor of, say, one dollar).  This would have more than likely ensured higher overall sales, as there would undoubtedly be people who would be willing to pay for the book, but only if the price were somewhere below ten dollars.

But that aside, the fact that it’s being pirated would suggest that most people who download the book don’t value the information to be anywhere near ten dollars.  (Bear in mind that value is subjective.)  Information is not costless, although the internet makes it very cheap, so the fact that it’s being downloaded so widely suggests that most people don’t place more than a rather small amount of value on it.  As such, it’s unlikely that they would be pay more than a dime or so to download the book.  As such, these sales are foregone, and never existed in the first place, for the most part.

Now, it’s not very smart of him to take down the PDF of the book because doing so will not eliminate the illegal copies from being transferred.  His costs are sunk and cannot be recuperated.  The PDF will not be going anywhere, and since all the capital costs have been incurred there’s no point in foregoing additional profit.  At this point, the wiser thing would be a price reduction.

In the future, though, it would probably be wise to avoid releasing a PDF of whatever books he releases.  Though a Kindle version is hardly more secure than a PDF, in terms of susceptibility to piracy, it is slightly more difficult to pirate, and that’s enough to effect demand for pirated versions.  However, it will still likely be widely pirated, and some sales will be foregone as a result.

Now, if I can give some completely unsolicited advice, it would be this:  Athol Kay needs to adopt a rock star mentality.  Rock stars, at least the wise ones, realize that giving away music for free is a very good business plan.  Sometimes free music means radio plays, sometimes it means free downloads, sometimes it means free streaming.  The foregone sales are made up by merch sales and tours, which are now more profitable because of the increased exposure.

For Athol Kay, his blog serves as free music, enticing people to buy more.  However, he should view digital books in a similar manner and either giver them away , sell them at low prices (I would suggest under five dollars, but that’s just me), or couple them with a tip jar.  The paperback and/or presumable hardcover should be thought of as merchandise.  He should also consider finding a way to brand some other merch, like t-shirts (or, better yet, a ladies lingerie line) and mugs and other trinkets.

He should also, once doing so becomes feasible, consider doing weekend marriage seminars.  Again, the music industry provides a perfect model for this.  Like an up-and-coming band, he would start by doing regional shows, then, as he breaks onto the national stage, he could do national tours.  I assume that this isn’t particularly appealing to him seeing as how he’s happily married and has a family, but this is nonetheless one way to monetize his blog.

I do want Athol Kay to succeed in his endeavors.  He is, along with a handful of other bloggers, one of my primary influences.  But he needs to understand that piracy is here to stay, and it’s going to get worse for him as he becomes more successful.  Though his gut reaction is to fight piracy, doing so is futile and often counterproductive. What he needs to do, then, is find a way to make piracy work for him.

PS:  I searched The Pirate Bay for both “married man sex life” and “athol kay” and did not get any hits.  I view TPB as the gold standard for piracy prolificacy, so I suspect that his book is not as widely pirated as he thinks.  Still, even if it were, he would not be foregoing much revenue, practically speaking.

06 October 2011

“Too Hard”

I wonder if there is any way to get Americans to shed their lazy mindset:

Another Times article published this week, however, challenges the idea of “perfect substitutes” advanced by the NBER study and paints an alternate picture of the economic reasoning behind Alabama’s legislation. John Harold, a Colorado farmer profiled by the Times, tried to hire some unemployed Americans to work on his ranch and paid them a wage of $10.50 an hour, like the migrant workers he usually employs from the federal H-2A program (Colorado’s regular minimum wage is $7.36). The American workers quit, citing the labor as too hard – something that didn’t happen with the Mexican laborers Harold traditionally used. [Emphasis added.]

I’m sure there are plenty of socio-cultural reasons why Americans view this sort of manual labor as too tedious for them.  Americans are, by and large, a rather soft people, at least these days.  Personally, I blame video games for a good part of this* (all of the psychological rewards of work with none of the sweat!).

But, I’m guessing that the social safety net plays a role in this as well.  How many people would quit their jobs at the ranch if they knew that there was no guarantee of money if they quit (i.e. no welfare)?  I’m guessing that number would be a little bit lower.  It’s easy to quit because the work’s too demanding when you can live off of welfare until you find an opening at Target.  It’s not so easy when quitting means that you lose your house and go hungry.

Since it’s hard to tell how big a role state and federal social safety net programs have played in all this, it’s correspondingly difficult to figure how much blame the respective governments bear for this current mindset.  At any rate, though, I think it’s safe to say that the government has certainly been complicit in sowing the seeds to America’s destruction.

* I kid, I kid.