Showing posts from 2008

Svoboda in orožje

(Prvotno objavljeno kot odziv na zabaven video na Libertarcu .) Nekateri zagovarjajo splošno pravico do nošnje orožja s hipotezo, da bi bilo okolje, v katerem so vsi oboroženi, veliko vljudnejše in posledično manj nevarno. Levitt in Dubner v knjigi Freakonomics pravita, da dokazov za to hipotezo primanjkuje, oziroma da dokazno gradivo, ki je na voljo, kaže prej v nasprotno smer. Če se gremo te "pravice" do skrajnosti, razmislimo o tem, zakaj ne bi dovolili kar vsakemu imeti najmočnejšega vojaškega razstreliva. Mogoče celo kake male atomske bombe. Ali kemičnega orožja. Konec koncev vse take stvari lahko pridejo kdaj prav tudi civilno. Če si lahko privoščiš malo atomsko bombo, potem si lahko verjetno privoščiš tudi kakšno malo goro. In če hočeš to goro zravnati, ker bi rad imel na njenem mestu golf igrišče, bi ti prišla ena mala atomska bomba čisto prav. Kajne? Potencial civilne uporabe je torej razviden. Da ne smemo imeti atomskih bomb, je kršenje človekovih pravic! Podo

Newcomb's problem

I just recently read again Eliezer's article about Newcomb's problem . To summarize the "problem": It's Christmas, and a superintelligent being called Omega from another dimension comes to your living room and leaves you 2 boxes. The boxes are rigged as follows: Box A is transparent and contains $1,000. Box B is opaque and contains either $1,000,000 or nothing. You can take either both boxes or only box B. Omega has filled box B with a million dollars if, and only if, it has predicted that you will take only box B. If Omega predicts that you will take both boxes, then box B contains nothing. Omega is not present when you make your decision. It has already left, and will not return to you again. However, Omega is superintelligent. It has been observed delivering boxes like this before, and has never been observed to predict incorrectly. People who take only box B always get $1,000,000, and people who take both boxes always find box B empty, netting them $1,000. S

Chinese dishonesty

Freakonomics publishes a Q&A with Leslie Chang , author of a recent book Factory Girls , a closeup of the lives of workers in China. I found the following a fascinating part of the dialog: Q. You followed students for a semester at a school that teaches factory girls how to become “white-collar” workers. A major part of the curriculum teaches students how to lie effectively. How do the concepts and values being taught in these classes affect the manufacturing economy that these women make up? A. A major part of the curriculum involved how to lie your way through job interviews into an office position. This ultra-pragmatism is pervasive in Chinese society today; people are less concerned with abstract notions of right and wrong than with getting things done. In economic terms, this fosters a business climate in which companies copy each others’ products, steal employees and business plans, and compete ruthlessly over tiny profit margins. But with little trust or sense of long-te

Tao te ching

One of my favorite wisdoms: A man is born gentle and flexible. At his death he is hard and stiff. Green plants are tender and filled with sap. At their death they are withered and dry. So it is that the stiff and unbending is the disciple of death. The gentle and yielding is the disciple of life. Thus an army without flexibility never wins a battle. A tree that is unbending is easily broken. The hard and strong will fall. The soft and flexible will overcome. Since translations from Chinese vary widely, I took some liberty with the translation to reflect the proper meaning as I perceive it. Specifically, I replaced "weak" with "flexible". Other translations use "lithe", or "supple", which are less clumsy, but would not be as easily understood by my non-English friends. Just to be sure, Tao te ching also contains a lot of crap, otherwise.


Have you noticed that the lyrics to Shania Twain's Ka-Ching! now have a whole different feel? They suddenly sound so... appropriate, and prophetic. :-) We've created us a credit card mess We spend the money that we don't possess Our religion is to go and blow it all So it's shoppin' every Sunday at the mall [...] When you're broke go and get a loan Take out another mortgage on your home Consolidate so you can afford To go and spend some more when you get bored [...] All we ever want is more A lot more than we had before So take me to the nearest store Can you hear it ring It makes you wanna sing You'll live like a king With lots of money and things Ka-ching!

The ineffectiveness of economic stimulus

A number of venerable economists believe in the Keynesian governmental economic stimulus concept, in which big government spending is supposed to boost a flagging economy. To summarize roughly: when everyone across the board starts saving too much, this causes a fall in consumption, which causes a fall in production, which causes a fall in investment, which causes a fall in economic growth, all of which generally harms human well-being. Many economists believe that, when this happens, the cure is for the government to print money and spend it. This ought to have a multiplier effect on the economy: for every newly created dollar the government thus spends, the recipient might save 20 cents, but spend 80 cents. The next person down the line might do the same, saving 16 cents and spending 64 cents, and so on until, ultimately, each $1 thus created ought to result in $5 of trickle-down spending. Venerable economists think that this ought to boost the economy and get the GDP right back

The falsity of formally proven software

Eric Drexler falls into the hole of "imagine we can prove programs correct" : Why does this matter to us ordinary mortals? Because proof methods can be applied to digital systems, and in particular, will be able to verify the correctness (with respect to a formal specification ) of compilers [pdf], microprocessor designs [pdf] (at the digital-abstraction level), and operating system microkernels [...] If this doesn’t seem important, it may be because we’re so accustomed to living with systems that have built on foundations made of mud, and thinking about a future likewise based on mud. All of us have difficulty imagining what could be developed in a world where computers didn’t crash, were guaranteed to be immune from virus attack, and could safely download code written by the devil himself, and where crucial pieces of software could be guaranteed to not leak data. The bolding is mine. Eric Drexler is missing that, if you have a formal specification for a program, then you h

Thanksgiving prayer

Eliezer Yudkowsky : And as she said this, it reminded me of how wrong it is to give gratitude to God for blessings that actually come from our fellow human beings putting in a great deal of work. So I at once put my hands together and said, "Dear Global Economy, we thank thee for thy economies of scale, thy professional specialization, and thy international networks of trade under Ricardo's Law of Comparative Advantage, without which we would all starve to death while trying to assemble the ingredients for such a dinner as this. Amen."

Somali pirates capture huge oil tanker

Amazing. How long can this go on? The longer that shipping companies and their countries continue to allow ships being held hostage, the better equipped and organized the pirates will get; the longer their range will be; the more ships and the more valuable ships they will hijack; the higher ransoms they'll demand; and the more difficult they will be to eventually eradicate. These trends are already underway : The location of the latest attack, far out to sea, suggested that the pirates may be expanding their range in an effort to avoid the multinational naval patrols now plying the Gulf of Aden and the Arabian Sea. “I’m stunned by the range of it,” said Adm. Mike Mullen, the chairman of the Joint Chiefs of Staff, at a news conference in Washington. The ship’s distance from the coast was “the longest distance I’ve seen for any of these incidents,” he said. The vessel was headed for the United States via the Cape of Good Hope when it was seized, Reuters reported. [...] Only

Skilled, unskilled, unaware

A 1999 paper by Kruger and Dunning, Unskilled and unaware of it , has recently been receiving attention. In summary, they tested people on a few tasks while measuring their self-assessments, and found that the worst performers consistently rated themselves above average in the tested tasks. They attributed this effect to a deficiency of metacognitive skill in the worst performers, a conclusion that found resonance with many readers - including me at the time. But Robin Hanson points to Burson, Larrick and Klayman's 2006 paper which reinterprets Kruger and Dunning's work. They argue that the issue at work is not a metacognitive deficiency, but effectively that people tend to estimate their absolute performance in a task (how well they'll do on an objective performance metric), and do not compensate for that the task is either easy or difficult for everyone. Estimating absolute performance requires awareness of oneself and the task, whereas estimating relative performance

The clever rebooting by Windows Update

If I ever meet the guy who cleverly decided that, after automatically installing an update, Windows should reboot unless you explicitly postpone, even if you're doing other things on the computer, and cannot see the damn Postpone window - well, if I ever run into that fellow... I'm going to kick him in the balls, and I'm going to keep kicking until my foot hurts. Several times now, me and my wife have played games, and it has happened that Windows helpfully went and rebooted itself while playing . This is because no one clicked the Postpone button, you see, and if no one clicked that button, then obviously no one cares. The fact that no one sees the Postpone dialog because a game is running full screen, well, apparently that didn't enter anyone's equation. The manager responsible for this feature, please present yourself to Frigate Bay so I can kick you in the balls. Bring spare balls. I'll kick you once for each time this has happened. Yes. I know I can sw

"The case for forward-looking protectionism"

The Financial Times Economists' Forum published this bone-headed article by Ha-Joon Chang , a South Korean now at University of Cambridge, who studied under Robert Rowthorn, "a leading British Marxist economist". Among other things, Ha-Joon Chang calls for the U.S. both to employ some protectionist policies, as well as to encourage developing countries to make use of them to develop their fledgling industries; as if their own protectionism isn't part and parcel of what's been obstructing progress for developing countries in the first place. He also makes a pointless appeal to Alexander Hamilton, citing the weighty argument that he appears on the $10 bill (so his policies must have been good). Here's my response (currently awaiting moderation on FT): Trade barriers imposed by developing nations necessarily: (1) Help only those infant industries whose consumers are predominantly local. (2) Harm those same local consumers by restricting their access to more

They can't even cut the power right in St. Kitts

I wrote last month about how there was a fire in the St. Kitts power station that damaged two of the largest generators and cut the generating capacity in half. Thus began a period of power outages which started daily and prolonged (8-12 hours, depending on the part of the island) and which has recently improved to 2-6 hours per day or so, at least where we live (Frigate Bay). Of course, the day after the fire, officials were predicting how this load shedding would be necessary for about two weeks, but everyone who is familiar with how things work here knows that two weeks doesn't really mean two weeks. It means two months, or two years, or however long it takes. Whatever. Recently, they started cutting power to our area more frequently again. But there is an additional problem: instead of cutting power outright, as they should be doing, the voltage first drops, then rises again, then drops further, then rises. It takes about a minute, maybe two, for the power to really go. Mean

A question for Ron Paul (on Freakonomics)

Freakonomics has published the first part of Ron Paul's answers to their readers' questions. The guy strikes me as probably the most reasonable, clear-headed politician I've encountered. He seems almost like a Warren Buffett of politics, except that in politics, dishonesty is what's rewarded, so Ron Paul isn't doing very well. (He's doing well with about 10% of people who actually have a clue, but that will never include most voters . I wonder how many supporters he has in Detroit .) That having been said, though, I sincerely hope (but do not really expect) that - at least in the second part - he might get around to answering my question . Essentially, what I'm wondering about is this: Q: Do you believe that it is possible to make positive incremental changes to our monetary policy, entitlements, taxes, etc. within the system, or is it just a matter of waiting for failure and then coming in with a solution? A: Yes, I do believe we can make successful

The Bomb prevented a yet greater tragedy

Not to advocate the triggering of mass annihilation in anger, but it looks like the bombs that exploded over Japan in WWII - and caused it to surrender - might have saved more than they destroyed. By Joseph Coates in a comment to Hiroshima: The lost photographs : The use of atomic weapons for the first time on Earth by the U.S. against the Japanese Empire and its civilian cities has always been a frustrating horror for me. I am alive because of it. My father was an 18 year old kid (on a "great adventure") and unaware of the potential fate that would await him as he sailed with thousands of other soldiers in late October on a troop ship steaming across the South Pacific to invade Japan in Operation Olympic for "X-Day", as it was called. Instead of probably being wounded or more likely killed while landing on the heavily defended mountains and beaches of Ōsumi Province or Satsuma on the island of Kyūshū in a massive invasion that was to make D-Day look like a skirm

The economics of religion

I think a great issue to pursue, for a person of the kind that might have written Freakonomics, would be the economics of religion. We know that many religious leaders do not actually believe what they preach, but they preach what’s going to be well received by their audience. In this sense, religions are a bit like mainstream media. We don’t hear about “Oprah’s Mystery Man” because Murdoch thinks that everyone should know, we hear about it because they think it drives ratings. In a similar parallel, it would be interesting to investigate how much religious policies are ratings-driven. How well would a Pope be received if he told everyone “I reconsidered, it is okay to use condoms”? Or if he said that “a regulated market in human organs would be okay”? Already, the Catholic Church is more tolerant and more science-friendly in its views than many Christians in the U.S. If the purpose of a religion is to maximize its number of followers, what happens if a religious leader endorses vi

The Pope doesn't want you to be able to sell your kidney

The Pope - all-knowing and all-wise, and as his followers expect from him, the authority on all topics remotely having to do with ethics - spoke about organ donation: "Any logic of buying and selling of organs, or the adoption of discriminatory or utilitarian criteria ... is morally unacceptable," he stressed. To translate: the Pope would rather see a million people die, than have another million people voluntarily sell their spare kidney. Because, you see, not being able to sell your kidney is much more important than saving a million people from dying. According to the Pope, apparently, selling your kidney is an abomination. But a million people dying, prevented by people like the Pope from getting the kidneys that they desperately need, that's just "unfortunate". Death, you see, is the natural course of things. You must accept it. If your kidneys are about to fail, surely God sees fit that you die now. It is God's will. Could it be God's will th

A single, controlling majority shareholder in finance

Tim Bray publishes his opinions on what the coming changes in financial sector regulation should be like. Some make sense, but I don't agree with all of them. I think a big part of the problem is the agency conflict of interest, and the ineffectiveness of shareholder democracy. This is not such a big deal when a company in the "real" economy goes astray. In that case, shareholders suffer, and there are some externalities, but they are limited. The problem is greater, though, when any of the cornerstone companies of finance go astray. Perhaps it would not be a bad idea to require that finance businesses must have a single, controlling majority shareholder. This would limit their size, which helps in the sense that too big to fail is too big to exist , and it would provide for better corporate oversight, as a single, controlling majority shareholder is more likely to steer the company on the right path than an ineffective democracy of smaller shareholders which manag

The state of Cuba

My friend Maša has recently visited Cuba. Here is my translation of part of her blog post where she describes some of her impressions: The first surprises began soon after landing. When one drives onto Autopisto Nacional - the only and the largest highway on the island - one begins to seriously question how many accidents they have. The road has enooormous holes and if you don't know the road, it can probably straight out destroy your tires rather than just puncture them. Left and right there's no safety fence, there's no centerline, no roadsigns or signposts, while on the road there are ox wagons, groups of cyclists training, cyclists and roadside vendors selling various things, trying to attract a driver's attention. Despite all of the above, we did not see a single accident in three weeks, and we traveled almost 2000 km. [ denis: Cuba apparently had 1,000 fatalities in 2001 and about 172,500 cars in 1998 , for about 0.5% fatalities per year per car. The U.S. has

Democracy may be beneficial economically after all

Elias Papaioannou and Gregorios Siourounis: Cross-country comparisons have produced little evidence that democracy improves economic growth. This column summarises research using within-country comparisons over time to show that democratising countries realise higher long-run growth after the volatile transition period. Democracy’s value may lie in its dynamic aspects. [...] While there is significant heterogeneity across countries (Persson and Tabellini, 2007), our results suggest that, if anything, the average effect of successful democratic transitions on growth is positive. Our “within” evidence shows that the experience of the past four decades suggests that even moderate political reforms can also bring sizable economic gains. Most importantly, our dynamic analysis suggests that growth is usually volatile and negative during the transition period. Yet after the consolidation of democracy, growth stabilises at a higher rate. This J-shaped pattern accords with F.A. Hayek’s (1960)

Pensions and fertility

An interesting article by Francesco Billari and Vincenzo Galasso describes their research into fertility of those Italians who were affected by reduced pensions, compared to those who were not. Their data shows that fertility increased by 13% even after controlling for factors such as age. If children are seen as investment goods (might help you in old age) as well as consumption goods (can be a source of satisfaction), then their findings indicate that the investment view can dominate: apparently, couples tend to have more children when the adequacy of their pensions is in question. This points out a useful policy for countries that have low fertility combined with an aging population: reduce the expectation of pension benefits immediately for people young enough to have more kids as a result. This helps make the long-run pension budget viable both by reducing the expected outlays (less benefits) and by increasing the expected income (more workers in the future). Such a reduction w

The demerits of DST

Stephen J. Dubner opened a debate on Freakonomics with an article about DST . Whatever the ostensible benefits of DST, they are overwhelmed by the hassle of hundreds of millions of people who have to adapt, many of whom have serious problems with it - e.g. parents with children. Furthermore, the silly time changes affect not only the communities who adopt them, but also communities that do not: businesses in Arizona shift schedules because of DST elsewhere, viewers in non-DST communities shift their sleep patterns because their favorite shows come on later, etc. DST is a preposterous charade in an attempt to pursue minuscule or illusory savings. It is not only social engineering on a grand scale, it is useless feel-good social engineering on a grand scale. I know how difficult it is to adapt systems to different DST rules. That's why I think the U.S. politicians who voted to change the DST schedule recently, instead of abolishing it altogether, should be sent to a no-happy plac

The monkeys came to power

Foreign media refer to Slovenia as having performed a good transition from a centrally planned single-party state to a modern market democracy. But for all the praise it receives, Slovenia is populated disproportionately by leftist zealots who, after four years of centrist government by Janez Janša, recently won major elections. Letting no time go to waste, they are already coming up with stunts like these. Borut Pahor - president of the Social Democrats, the party that got the most votes - promised today that the coming government would focus on "economic democracy", by which he apparently means a combination of employee shareholdership, employee participation in management, and employee participation in profits. The way I understand it, the newly elected leftists plan to make these things into law. If you speak Slovenian, read Marko's excellent article on how silly the idea is of legally mandating employee participation in profits. Giving employees profit shares is

Iceland's mistake

Willem Buiter and Anne Sibert publish this brief but insightful article summarizing their findings when Icelanders asked them to look at their banking sector in early 2008: The collapse of Iceland’s banks: The predictable end of a non-viable business model Briefly, they state that Iceland's problem was being (1) a small country, with (2) a large, internationally exposed banking sector, having (3) their own currency, and (4) limited ability to provide their banks with backup financing in difficult times, relative to their banks' obligations. Even if their banks were solvent and profitable, which they very well might have been, they were prone to collapse during a liquidity crisis, because they did not have a large enough economy to back them. Buiter and Sibert suggest that Switzerland, Denmark, Sweden, and even perhaps the UK may be in a similar predicament.

Ben and Ryan translate rap

For your indulgence : I am in fact orating with little or no prior preparation, an act commonly referred to as freestyling. Once again, and I think this bears repeating, I would like to restate my claim that I am in fact much stronger and have endured a larger number of hardships than you; hardships which have left me with an aggressive behavior and an imposing demeanor which, I believe, frightens you. Thanks to Freakonomics .

Ideological reporting in Slovenia

There's an old joke that, in one of its incarnations, goes like this. During the Cold War, the Soviets and the Americans decided to arrange a good-will running competition between the two presidents. The day of the competition arrived, and Reagan, being in better shape, outran Gorbachev. The next day, American newspapers proudly reported: "Reagan first, Gorbachev last!" On the other hand, the Soviet newspapers reported: "In yesterday's presidents' running competition, Gorbachev finished an excellent second, while Reagan was second-to-last." Slovenia used to be part of Yugoslavia - not as bad as the Soviet Union, but still a decidedly socialist state. In its heyday, socialist Yugoslavia featured such boons as a single type of jeans (why would you need more than one type of jeans?); a single type of toothpaste; stores that were predominantly empty; essential goods that were sometimes available, and sometimes were not; for aspiring drivers, waiting lists

Harlem voters make an educated choice

Now, I think McCain is a sleazebag - which is not to say that Obama is a good choice - but this is great . Transcript: Stern: ... and, most people said - Barack Obama. So what he said is, do you support Obama's views, but he attributed all of McCain's views to Obama. And it didn't sway anyone. Quivers: But it didn't cause people to even flinch - Stern: No. This is crazy. Listen to this. Interviewer: Some people speculate that blacks are voting for Obama strictly because he's black and not because of his policies. So we took McCain's policies and pretended they were Obama's. This is what they had to say. Interviewer: For the election, Obama or McCain? Person A: I like Obama. Interviewer: Now, what don't you like about McCain? Person A: McCain seems to not really know what he's doing right now. Interviewer: Are you more for Obama's policy because he's pro-life, or because he thinks our troops should stay in Iraq and finish this war?

Subprime mortgage vs. loan sharks

At the end of an otherwise fine article comparing loan sharking to subprime lending, Mark Gimein makes a doo-doo. The core of Mark's article explains how loan sharking is not as profitable as you might think. Advance America charges $17.50 as its fee on a two-week $100 advance. If that were an annual interest rate, it would be 450+%. However, a huge proportion of borrowers default on their loans: the defaults work out to $49 per customer, while the average loan is $366. Advance America loses most of its fees to those who fail to repay their advances. Then, Mark Gimein waltzes off into fantasy world and makes the following conclusion: We've yet to see what lesson lenders draw from the subprime debacle. One possibility is that they will conclude that they need to stay away from any but the safest borrowers at all costs-that seems to be the direction they're heading in. And it's likely to be bad news for the economy. That'll mean less credit for those at the bottom

Detroit houses for sale: prices from $9,000

Yup. The median property in Detroit sells for $9,250 . Here's just one listing (they're easy to find) for a 3-bedroom house, 1 bathroom, built 1941. Price: $14,900. Dang. We spend more each year on groceries. Apparently, this is what happens in places where supply exceeds demand. Why does no one want to live in Detroit? Do a search on its demographics...

South Africa sees the light on HIV

After years of HIV denial, in various assorted forms: prime minister Thabo Mbeki and his hosting of alternative AIDS conferences; governing party chief Jacob Zuma and his condomless rape of a woman he knew had AIDS, which small fact he didn't consider a problem because he showered afterwards; health minister Tshabalala-Msimang and her advocacy that AIDS patients should simply get better by eating onions and beetrot; after all that, South Africa now surprises the world with a new health minister who takes HIV seriously and calls for efforts against it. Congratulations, South Africa. Way to go. This all took place after Thabo Mbeki resigned: Malegapuru Makgoba, vice-chancellor and principal of the University of KwaZulu-Natal, said that for the first time in years, South African academics were free to "state that HIV causes Aids without getting threats". "It is a liberating experience," he said at the conference. "You don't know how long we suffered i

Too big to exist #2

Here you go , exactly what I've been saying : “Prior to Lehman, there was an almost unshakable faith that the senior creditors and counterparties of large, systemically important financial institutions would not face the risk of outright default,” notes Neil McLeish, analyst at Morgan Stanley. “This confidence was built up ever since the failure of Continental Illinois (at the time the seventh largest US bank) in 1984, a failure in which bondholders were [fully paid out].” [...] This would seem to put the complaints about Fannie Mae and Freddie Mac, and their implicit government guarantees, in proper context. Everyone, or at least the big guys, was behaving as if there was no chance that the government would allow them to fail. The rules will have to be torn up and rewritten after this is all over and done with. As things stand, there are plenty of too-big-to-fail institutions remaining. They must either be reduced in size to the extent that the government's promise to let

James Bond at work

Two interesting tricks that the British used successfully against the IRA: Having lost many troops and civilians to bombings, the Brits decided they needed to determine who was making the bombs and where they were being manufactured. One bright fellow recommended they operate a laundry and when asked "what the hell he was talking about," he explained the plan and it was incorporated -- to much success. The plan was simple: Build a laundry and staff it with locals and a few of their own. The laundry would then send out "color coded" special discount tickets, to the effect of "get two loads for the price of one," etc. The color coding was matched to specific streets and thus when someone brought in their laundry, it was easy to determine the general location from which a city map was coded. While the laundry was indeed being washed, pressed and dry cleaned, it had one additional cycle -- every garment, sheet, glove, pair of pants, was first sent through

Feldstein's loan proposal: Similarities to my call for a decentralized money supply

Steven Levitt summarizes on Freakonomics the following proposal by Martin Feldstein: Writing in The Wall Street Journal, highly respected economist Martin Feldstein proposes that the government provide low-interest loans to consumers in return for mortgage debt. These government loans would not be secured by the borrower’s home. The loan would need to be paid back even if the home goes into foreclosure and would not be eligible for relief in bankruptcy. The narrower focus of Martin's idea notwithstanding, notice the similarities to the decentralized money supply I recently proposed. I wrote recently how a true solution to the smaller and bigger banking crises we experience every decade requires us to turn the economy on its head. We need to keep the good parts of the economy which drive our progress: most importantly, capitalism and a limited role of the state. However, we need to replace the parts that are dysfunctional: banks and the monetary supply, which facilitate bubbl

Another year, more St. Kitts power outages

Last year, I noted that there was no power for 2 consecutive days during our first month of living on St. Kitts. The ostensible reason given was that the government-run electricity company was installing a new power generator to prevent load shedding (i.e. outages) in the future. Similar prolonged outages repeated a few times in subsequent months, but after that the situation stabilized. We have had fairly decent power supply over the course of 2008. That was until October. On October 1st, we noticed one or more outages, which preceded a fire in the power plant on the morning of October 2nd. This fire brought 50% of the generating capacity offline, and we noticed this as frequent and repeated outages on October 2nd and 3rd. As of today, October 4th, electricity is being shut off at different parts of the island at largely unpredictable times and for largely unpredictable durations. Our area was without power for ten hours, from 08:30 to 18:30 today. It all looks like this is going

A decentralized money supply: Solving the scarcity of money

A major problem with all currencies we've had so far is that varying amounts of currency are available in different parts of an economy. This leads to sharp depressions in the prices of products and services in parts of the economy which are transactionally far from the sources of money, and sharp price increases in other parts of the economy which are close to the sources of money. There is no greater fundamental cause for this than simply that there's more money near the source, than there is farther away from it. These leads to injustice as parts of the economy that are transactionally far from the money sources struggle along with the paltry amount of currency that they can get, while people who are closer to the money sources can effectively exploit the rest of the economy, since they live in an environment where money is abundant. The cure for this is to decentralize the supply of currency, and the most effective way to decentralize is to let every person be their own ba

Cochrane on Why the bailout would be a disaster

This, I think, is a thoughtful rebuke of the Treasury-proposed bailout . This is the first time that I've read an economist weigh in on the topic, and my thoughts were, yes, that makes sense. On Freakonomics .

The harm of banks: Economic booms and busts

I have argued recently that banks cause economic harm for a few reasons. One of those reasons is that the banks' varying lending moods cause expansion and contraction of the effective money supply. This leads to economic booms driven by malinvestment, as people compete to spend easy credit, followed by economic busts driven by a widespread realization of investment mistakes. A counter-argument that I've seen more than once is such as made by this correspondent: I disagree with the underlying premise that volatility is a bad thing and that the goal of "architecting" a financial system is to smooth-out the ups and downs. I have no problem with volatility. There's no law of nature or moral principle that states that the optimal state of the world is an even keel with minimal volatility. The purpose of my proposal to phase out fractional reserve banking altogether is not to do away with volatility for the sake of itself. Rather, it is to remove the systemic harms an

Banks and libertarianism

I would argue the following. If banks have negative economic externalities, such as causing boom and bust cycles, and such as causing large-scale economic disruption when failing; then you cannot consistently believe in libertarian principles, while also being in favor of banks. I have described previously how banks are inherently volatile and prone to collapse based on rumors alone - unless their depositors are insured with a system, such as the Federal Reserve, which can print money freely. On the other hand, if banks and bank-like institutions are protected like this, then they require regulation to avoid moral hazard leading to exploitation of the money printing facility. The stability of banks thus inherently goes hand in hand, not only with big government, but big government with the ability to print money freely. I suppose that, to libertarians, this should be anathema. There is no greater power in the world than to have hundreds of millions rely on your currency, while y

Monetary supply: The role of borrowing in economic growth

Note: This article is concerned with a less important issue than my previous post. The question of monetary supply becomes simple if we first recognize the fundamental issue of whether, in the first place, we need banks. In my previous article, Without banks: A proposal for a prosperous and stable economy , I discussed the role of banks in the money supply. I described how an economy with institutions that lend long and borrow short is inherently volatile and exposed to risk. I proposed that this volatility and risk could be avoided by phasing out the institutions that lend long and borrow short - eventually banning this business model altogether; requiring that all loans be covered by credit explicitly provided for the duration of the loan. Towards the end of that article, I added a monetary proposal: shifting to a fixed, or predictable, volume of currency. Central banks, with their ability to print limitless amount of money, currently exist for two purposes. One purpose is reaso