You Can’t Fool Economics — And She IS A “Mother”- A Blast From the Past Post April 2012

You Can’t Fool Economics — And She IS A “Mother”- A Blast From the Past Post April 2012

Pardon me, if this post seems to go near politics.  I don’t mean it, except that it’s impossible to talk economics without talking politics – or at least implying them.  It’s also impossible to build believable worlds without being aware of the basic facts of economics (which is why so many of the acclaimed science fiction books get thrown against the wall repeatedly and at least two have gotten tossed in the trash can with the requisite “pfui”.)  Bad economics – or what I would call economics dreams – are at the basis of most bad policy and coincidentally at the basis of most personal and business economic woes.

First of all, in the interest of full disclosure, I failed economics in ninth grade.  Oh, okay, not failed – I never failed a course – but I had a c which to my family was the moral equivalent of failing.  (Actually it was the moral equivalent of grand larceny.  I got told if I was going to be a c student and squander my parents’ resources, I’d have to move out and work for a living.  To be honest this was only because they’d graduated from threatening to send me to reform school.)  However I want to point out it’s a good thing I almost failed that economics class, because it wasn’t economics – it was a Marxist fairytale, complete with a finite economic pie and making business decisions on the basis of what was fair.  (I’d like to say it made no impression on me, but in fact that c was for giving battle to the teacher on every single beachhead from “mixed economy” being the best to the concept of social justice.  Never mind.  He was also a LITTLE man, and I liked to stand and watch his bald spot as I argued.  Yes, it IS somewhat of a miracle I lived to be here.  I attribute it to the fact that, abstracting the enhancements, I fought like Athena. 😉 )

Second, let’s establish economics is a science.  What this means is that it studies naturally occurring forces and tries to discern their principles.  It is actually a hard science, though no one treats like that.  It would occur to no one to legislate the law of gravity, but people seem to think that it’s perfectly all right to legislate minimum wage or – still in Europe – price points.  It works about as well as legislating the law of gravity of course.

But Sarah, you say, economics is not at all the same thing as the law of gravity.  It affects individual humans.  Your writing is devoted to the notion that humans are individuals and you can neither control their behavior completely nor change them into what you’d like them to be.

Right you are.  But while humans in the individual are indeed unfathomable, the rules by which humans enter into voluntary exchanges of value aren’t.  And those are the rules of economics.

Here it is, in short, everything you need to unlock the wonderful world of economics: Everything has a cost.  Everything has a value.  These are rarely the same.  The cost is what the object, good or service took to produce: human labor, usage of natural resources, negative impact on the other things that could have been done with those.  The law of cost can be translated to There Ain’t No Such Thing As A Free Lunch.  Everything has a value too.  The value of something is what someone is willing to pay for it.

The essential revolutionary nature of Marxism was confusing cost and value and saying that something had the same value as its cost.  It doesn’t work.  Why doesn’t it work?  Because I can spend ten years building a miniature castle out of dog turds, but it’s unlikely anyone will pay me ten years worth of writing money for it.  (Unless they’re mental patients, but do you know how hard it is to find a moneyed mental patient.)

These inflexible laws of economics apply to everything, including jobs (we don’t have an illegal immigration problem, we have a legislated minimum wage problem* and an onerous paperwork boondoggle problem.  This makes it impossible for many marginal businesses and services to run, which means they HAVE to hire illegal immigrants – no paperwork, no deductions, pay them what their labor is worth to you – or die.  When faced with death, both people and businesses resort to the black market.  And no, you don’t want me to describe each of these steps.  But for the record, as a barely making it writer, I COULD hire an assistant.  Hiring an assistant would probably double my production, which means it’s worth the risk of paying 5k a year for a part time worker.  What I can’t afford is to pay this person’s social security and to do all the paperwork.  And if you just said “Good, then you can’t afford to hire someone!” you must think nothing is better than something.  I live in a college town, where five thousand could make a marked difference in some student lifestyle and debt, and oh, yeah, this way they’re just accumulating debt, and they’re also not getting social security.)

They also apply to artistic endeavors.  They even apply to your hobbies.  For instance, I’ve mentioned I have a basement full of half-started money making endeavors.  A lot of them fall under the “Hobby” category.  I grew up with a mother who sewed, so I learned to sew as soon as I was old enough to hold a needle – and this summer I need to teach the boys to do it.  Their emergency patches on pants when out of the house are… argh – the same way my sons learned to sling story as soon as they could talk.  When I was first married, I did a lot of clothing-sewing and I sewed my first maternity wardrobe, from scratch.  (This for two reasons – first, because I had a TON of free fabric and vintage buttons from Dan’s grandmother.  Second, because we were broke.  Oh, yeah, and third, because I could style them as I wanted to, which ended up sort of like the twenties meets fairyland.  Unfortunately we accidentally donated the box, in the very mixed up move.)  I enjoy sewing.  This opens up a whole series of projects, like sewing cloth dragons, which I tried to do for sale way back.  So, why don’t I do it?  Simple.  Because writing right now has the potential to pay me more.  So the negative-value applies to my hobbies.  I write, I read, and I do art (which serves often to fix up a story.  Feeds from the same impulse.)  If tomorrow clothing went through the roof (don’t discount it, look at North Korea) it might be worth my time to make the family clothing, again.

And right now you’re saying “So, cost and price.  You think all the complex transactions of the world hinge on this?”  Yep.  Same way that most of the world’s biological complexity hinges on the fact that one atom of oxygen binds with two atoms of hydrogen.  Yes, things can get incredibly complex down the line – or up the line – but if you pull back the curtain, moving the levers will be those same two little men, cost and price.

“But Sarah, what about social justice?”  What about it?  What about the Easter Bunny, while we’re at it?

Yeah, you can pout, but there ain’t no such creature as social justice.  Justice is always individual.  You can’t apply justice to an entire group (and if you bring up Nazi soldiers, or even brownshirts, a) you’re violating Goodwin’s and b) we can’t be friends anymore.  Think of the worst people you can – say the students who engaged enthusiastically in China’s cultural revolution.  Then read some bios.  Some were fully-cognizant evil doers.  BUT a good number were also duped, confused or scared.  Even in that extreme you can’t judge collective.)  Mostly social justice screams are the equivalent of “It isn’t fair.”  Economics isn’t fair or not fair.  It just is.  Attempts to change it are like attempts to change hydrogen and oxygen bonds.  At best unavailing, at worst harmful.  At their very worst they result in things like WWII and North Korea.

There is also individual justice, of course.  I’m not going to deny some businesses exploit their workers or their suppliers (at a bar, sometime, I’ll tell you about the last ten years of my life.)  On the other hand, the thing is, if people are truly exploiting others, they’re already abusing economics, and there’s usually an extra-economic reason things got that bad.  (And in most cases the others can move to another job or another industry.  Yeah, I chose not to.)  Usually things get that bad because of attempts to influence economics to be more “just” or “fair” (which almost always results in misery for all) or alternatively because politicians like to get rich too.

This means in most cases individual justice has about as much to do with economics as a gnu has to do with extra solar physics.  Yes, you can strenuously work to find a connection, but your attempt will only distort reality.  So, if you want to work for justice do, one on one and on your own time – heaven knows I try – but leave economics and trying to regulate economic laws alone, okay?

So, what does this have to do with our life?  And with writing in particular?

Well, lately I’ve been open-mouth astonished by the number of established writers throwing fits that the new model of publishing doesn’t allow them to make the money they were used to.  I confess right now I couldn’t live from indie alone, but at least I understand the solution is not to throw fits and demand fairness and certainly not to try to regulate ebook price, by legal or extra legal means.  I’m not making as much as I’d like from Indie, because I only have short stories out under my own press.  I must finish novels for it.  Right now I’m writing them for Baen and a couple other presses, which pays me money up front.  Yeah, it over all probably pays me less, but I get the money this year when I’m about to have two kids in college.  It is what it is, fairness has nothing to do with it.  Once this crunch is past, I’ll write for myself, (and always for Baen, lest you fear) and I think I’ll do okay.  Oh, it will require two-three years ramp up and a lot of work, which I’d prefer not to do, when I should be “established” – life is a b*tch all over, isn’t it?  (Shrug.)

The other thing getting under my skin is this jobs fund or whachmacallit.  People are supposed to contribute five dollars and then they use this to give loans to small business startups.  (Rolls eyes.)  This intruded on my consciousness twice yesterday.  First, because the newly-rented (I’m betting I’ll get more done.  It’s why I’ll be unavailable during the day.  Office-ish is out of bounds right now, and my production plummeted, so this is worth it at least to try) office doesn’t yet have a coffee maker, but is a block from Starbucks (yes, I know, but it was time-saving) and second because I happened to sit with husband through The Voice (okay, I was reading a mystery.  But we could cuddle.)

I might be wronging the jobs fund, but I don’t think I am.  It seems like one of those things people do with other people’s money, which means it will make bad economic decisions.  Look, for instance, suppose I ask for contributions to a fund and from that fund I’m going to give advances to a hundred indie writers.  At best – supposing I screen – I’m going to screen those books according to MY tastes, which are not necessarily the PUBLIC tastes.  Will it result in bestsellers?  Uh… Only by accident.  Because you see, if all the hundred books fail, it means nothing to me.  So my guess is that this is what the jobs fund will do.  New businesses, even funded by people with a vested interest, fail by the score.  With this… I’d guess there will be no survivors and the money will be squandered.  But hey, donors get to feel good.

And this brings me to the book business as I’ve known it.  Dave at Mad Genius Club in comments mentioned something about most publishers/editors being no more evil than anyone else.  This is absolutely true.  BUT they were put in a situation that encourages and fosters evil, because the economics of publishing are screwy.  They’re screwy for several reasons, one of them the fiction that there is no money in books (go look at the publishing houses offices.  Those weren’t bought with bottle tops); the other is that it is something people do “for the love.”  People do a lot of things for the love, but even sex has a cost, even if it doesn’t have a price.

HOWEVER the capstone of screwing up publishing was the ability to play with other people’s (most the company and its many, anonymous investors) money AND to divorce results from actions.

Over the last thirty years, increasingly, publishing houses have discovered that they could exert control over what got shelved, which means what got seen, which means what got sold.  At the same time, they held on full throttle to the convenient fiction that EVERY failure of every book is because it is a bad book, and therefore the author’s fault.  (This wouldn’t stand logical analysis, because, how are you going to sell a million books, if no one knows your book exists – and yes, their answer is that the author should publicize it… because the author has a publicity department, of course.)  This fuzzy uncoupling of cost and price allowed the publishers/editors/whoever to choose books that pushed their world view and to feel virtuous about it.  Part of the reason Baen is different, is that it is a family business and it still needed to mind the bottom line.  So they took care what they bought was likely to sell.

And that’s also an illustration, btw, of “economics always wins.”  The publishers thought they could control both supply and demand, and therefore totally defeat the market.  (They probably took the same economics class I took in ninth grade.  The teacher would have adored that idea.)

Instead, as always when the market is regulated in a way that violates economic laws, it is flowing around them and finding another pathway.  You can see this with illegal immigration, with illegal narcotics sales, with illegal toilet sales (with the larger tank), with the black market that appears around every regulated good or service.  And you are seeing it in publishing with the ebook revolution.  It is entirely possible ebooks would have gone nowhere, if traditional publishing still had a functioning market that minded supply AND demand.  But it didn’t.

Like everyone else who thinks they can abolish economic laws, they are finding economic laws abolish them.

* I am not proposing that people should starve if they have no economic value.  I’m proposing that’s what charity is for.  Confusing charity and economics only leads to everyone needing charity because the economy – or a part of it – collapses.  Is this ideal?  Isn’t it demeaning for people to get charity?  (Rolls eyes.)  What about economics says it has to be ideal?  We’d probably all do better at slightly less than 1g, particularly as we age.  Does that mean we should legislate gravity?  Because it works about as well.  “Whaaa! Unfair!” is a preschooler’s cry, not an economic argument.

199 responses to “You Can’t Fool Economics — And She IS A “Mother”- A Blast From the Past Post April 2012

  1. Hiring an assistant would probably double my production, which means it’s worth the risk of paying 5k a year for a part time worker. What I can’t afford is to pay this person’s social security and to do all the paperwork.

    All that time you would spend on paper work is time not spent writing product to sell.

    Meanwhile, because of the various government mandates that make it impossible for you to afford to hire your postulated college student what happens to him? Instead of gaining the work experience as a personal assistant, his choices are go into debt, or take a job in the food service industry. Which would do you think would be better to have on a resume?

    (um? Have you checked what the present rules are on apprenticeships?)

    • Have you looked into hiring one via an agency or a remote one in India/East Asia (see Tim Feriss’s 4 Hour Work Week for the later).

      • Independent contractors. Basically you say “I need ‘X.’ ” Contractor says “I can make ‘X’ happen for ‘Y’ dollars.” You pay Y. Contractor does ‘X.’ Contractor then pays self employment tax (quarterly, sorta like payroll tax on yourself), income and medicare taxes all from the total, Y, that he gets.

        It’s up to the contractor to make sure his bid is enough to cover his expenses. Materials can be negotiated, either as part of ‘Y’ or provided by the client. A contractor is *not* subject to minimum wage laws when working like this, so he can run at a loss (making less than zero dollars, after incorporating his expenses), then deduct that loss from his gross income.

        A good contractor can be better than an employee- he has a very immediate interest in finishing a job as soon as possible (no hourly wage, generally it’s pay on completion in my experience), and even more to do a *good* job (no one hires him if his last job went poorly- he can even be sued for breach of contract).

        You need a business license and usually a contractor’s license (check state requirements). That’s part of the cost. You’ll also need your TIN, 1099s from anyone who paid you, and some other things (local guidelines).

        I’m surprised this isn’t done more often, really. It’s a bit of risk, but it’s paying work and the paperwork you have to deal with isn’t too horrible. Or if it is, and if you’re good enough, you can hire the work done by a good accountant. *grin*

        • The current administration is engaging in ad hoc “reinterpretations” of a wide variety of labor regulation. These are being done without notice and with no period for comment, in disregard of the Administrative Procedure Act,.

          The Administration Is Ruling by Decree
          By Iain Murray — January 21, 2016
          Yesterday, the Department of Labor unexpectedly issued a new rule (which it called an interpretation) that will upend thousands of businesses’ established practices. It did so with no notice, and no comment by affected businesses is either sought or allowed. Effectively, the administration is now ruling by decree.

          The “administrator’s interpretation” is about an obscure categorization of employment called “joint employer.” Such a situation arises when two or more employers are jointly responsible and liable for a worker’s employment conditions. Over the past 40 years or so, new business practices have arisen whereby firms contract out or franchise parts of their business. The Department of Labor (and the National Labor Relations Board) have allowed this, treating the businesses as separate and the employees as having one employer. That is all changing very quickly.

          Under the new interpretation, thousands of businesses will now be found responsible for the working conditions of employees of other firms they do business with. They will be liable for breaches of the Fair Labor Standards Act. For example, if you contract out a service to a staffing company and that company is found to be not paying enough overtime, your business will be liable for that as well.

          Read the whole @#!$ thing. Until 20 January 2017 undertake any hiring at your own risk.

          • Shades of FDR. “Economics and industrial realities” has *got* to be better defined, because that’s horse squeeze as written, and it’ll take (as the secondary article mentioned) a bunch of court cases and people’s livelihoods upended to define it. It certainly sounds like some progressive’s wet dream.

            As it’s been up till now, contracting law has been pretty clear- if the contractor controls the “how” and the client the “what,” it’s been unambiguous. Now they want to drag *unions* into little one-person shops? Am I or my prospective two employees going to have to “organize,” start collecting union dues, and invite some schmoe to represent us against us?

            Hopefully it won’t last. If it does, this could be the straw that breaks the camel’s back.

        • And in order to prevent this from happening, the IRS tries as hard as it can to classify people as employees rather than contractors. Do a web search on “irs contractor vs employee checklist” and take a spin through all of the wonderful requirements…

          • Mmmf. I hope my not-employer was careful about that (probably — they are pretty competent) because while I actually think being one of their full-time employees would also be a good option (and I’ve been offered it), I really like contracting for them. Should maybe look into additional places, though. Eggs, baskets, etc.

    • Interns.
      Paid only in work experience, no money changes hands. Still needs a clear contract about what OJT is being provided, and how much (to avoid the latent delicate flower who later claims you should have spent 4x as much time teaching it everything they need to know to be a “success”.)
      Granted, a hassle – and only more productive than doing for yourself after they’ve been with you awhile – but potentially useful.

  2. Christopher M. Chupik

    “Yeah, you can pout, but there ain’t no such creature as social justice.”

    But there are Social Justice Warriors, alas.

  3. ” Same way that most of the world’s biological complexity hinges on the fact that one atom of carbon binds with two atoms of hydrogen.”

    Er, one atom of carbon binds with FOUR atoms of hydrogen. One atom of OXYGEN binds with two atoms of hydrogen. Either one could be considered the basis for biological complexity.

    Sorry to be pedantic, but my inner 10th grader, who’s still in Mrs. Wickham’s chemistry class, couldn’t let that one go by.

  4. Yes, it IS somewhat of a miracle I lived to be here. I attribute it to the fact that, abstracting the enhancements, I fought like Athena.

    You flashed your boobs at him????

  5. Instead, as always when the market is regulated in a way that violates economic laws, it is flowing around them and finding another pathway.

    Note how similar this is to the Internet itself, which, in the words of one expositor, “regards censorship as damage and routes around it.” There should be no mystery as to why the Internet has brought about the greatest explosion in storytelling and publishing since Gutenberg. It was inherent in the fundamental properties of the medium.

    • Well said, for what after all is censorship other than damage to the free flow of information. And the original intent for DARPAnet was as I recall the ability to reliably transmit military communications over damaged systems.

      • And the Internet treats censorship as damage and routes around it. 😉

      • I thought DARPA developed it to ensure the transmission of porn between bomb shelters in a post nuclear war environment. Everything else was just icing.

      • Patrick Chester

        It was so the Vault experiments could be monitored effectively despite widespread damage to comm networks. 😉

        (Okay, so Fallout 4 sucked me in and keeps dragging me back.)

        • There was an episode of “The Librarians” which dealt with the technicians in an experimental weapons facility playing video games on their government computers, and what happened when a computer glitch occurred. Highly recommended episode, if only for the awesome Ezekiel Jones whumpage.

      • And the problems with attempting to override economics most basic laws are those of information distortion, or worse. Money is not merely a symbolic replacement for barter, but a signalling system. The “invisible hand” is a feedback loop.

    • Yet another Copybook Heading!

  6. What this means is that it studies naturally occurring forces and tries to discern their principles. It is actually a hard science, though no one treats like that.

    I’m going to have to disagree. As someone whose job is to quantify the economy in mathematical models economics fails a key test to be a science: it’s principles (laws) can not be quantified permanently. Whereas the gravitational force between two bodies is the product of their masses and the gravitational constant divided by the square of their distance of separation there is no similar law anywhere in economics. I cannot boil supply and demand curves down to a pair of equations whose various variables and coefficients can be found experimentally and the later determined to some degree of precision.

    This, in fact, is the crucial point of the problem of knowledge and the failure of planned economies. If economics was a hard science we could begin to develop such laws and just as physics and chemistry provide us equations to describe processes that can be used to design things (thus giving us engineering) we could design economies that met design objects. The history of the 20th and 21st centuries (and earlier ones for that matter) shows the folly of that.

    Economics is closer to symbolic logic in that it provides a series of principles that says what is doable but not exact descriptions of how things work.

    • Supply and demand curves are true for a snapshot in time. The problem is the zillions of interconnections to other supply and demand curves that constantly tweak the ones you are currently working on. Then there is the time displacement. Economics looks simple on the surface but complexity increases as you look deeper, just like microbiology.

      Then there are the political hacks who use plausible sounding economic mumbo jumbo to push a narrative. An econ professor I was talking to at a party, defined Economics as the science of lying with math.

      • The curious task of economics is to demonstrate to men how little they understand about what they imagine they can design.

        F.A. Hayek,

        No one says that about mechanical engineering (essentially applied physics). Instead we herald physics as giving us deeper knowledge of what we can design and how to design it better.

      • Economics is fractal!

    • Reality Observer

      Agree. And disagree. Economics is not a science that is (currently) reducible to practice.

      The law of gravity is probably not a good example, as it is not a problem of statistics. The laws of gases is a better one.

      We understand the statistics of gases – whatever the individual motions of the molecules are, we can confidently predict that a large number of them, at a specific temperature in a specific volume, will have a specific pressure.

      The number of things that affect economics are far vaster than just two independent variables; that is one problem.

      The other problem is that, since we can “fiddle” with (most of) those independent variables, which we really don’t know the exact effect of, we do so “fiddle” (and we also don’t know which ones are truly independent – there are many intermediate variables before we can find the final “solution”). So ferreting out any but the most basic principles is virtually impossible, as we never, ever, see an economy in it’s “natural” state.

      This said, there are still a few relations between “fiddling” and “effect” that we can make a rough prediction for. Look at the effects of Saudi oil production, for example.

      (There is another reason I like the laws of gases better as a simplified example – the fact that they have, like economics, discontinuous functions involved. Add enough molecules, or temperature, to a gas and you eventually hit a point where it undergoes a chemical change, or even fusion of the nuclei – and suddenly it changes behavior to a totally different relation between the variables. Same thing in the other direction; the gas will condense, or freeze, creating a discontinuity in the pressure curve. Economics appears to act the same way.)

      • Random thought, but it seems that our understanding of economics is almost the opposite of our understanding of gravity.

        With gravity, we can predict pretty much 100% what’s going to happen, but we have no idea why. (Or, rather, we have two mutually exclusive theories about why and haven’t made much progress towards choosing between them).

        With economics, we understand the whys pretty well (supply/demand, cost/value), but even with that understanding, we can’t predict the whats, and those who try only create misery.

        • With economics, we understand the whys pretty well (supply/demand, cost/value), but even with that understanding, we can’t predict the whats, and those who try only create misery.

          Thank you, a much pithier explaination (then again, I’m wordy).

      • This said, there are still a few relations between “fiddling” and “effect” that we can make a rough prediction for. Look at the effects of Saudi oil production, for example.

        As I said, my job is mathematically modeling the economy. I even gave a list of resources to start doing it at home in a comment on the last post. I am aware of the applicability of mathematics to economics and especially finance.

        However, that does not make economics a hard science or even a potentially hard science anymore than understanding the applicability of the golden mean to composition in the visual arts makes painting a potentially hard science.

        Can we quantify work ethic independently? We know that at some point incentives will cause a person to choose not to work because that to be gained via welfare is more valuable than positive economic activity. What that point is varies from person to person and even its statistical measure changes in a culture over time. Let’s call the factor that changes to move that point work ethic. How do you quantify that? What is the statistical rule we are looking for?

        I agree that the ideal gas law is a better comparison than gravity because , like Asimov’s psychohistory (which inspired a certain Noble Prize winning blowhard economist), we are dealing with large bodies of people.

        However, a true hard science of economics would provide us with a mathematical rule to sort work ethic and design a system to only allow through positive work ethic individuals. We could create a work ethic Maxwell’s Demon. I contend that is impossible because the underlying issues include non-quantifiable values regardless of our knowledge. At this point, I admit, we’re boarding on free-will vs. meat machine type questions but it is precisely that question that is at the heart of making economics a hard science.

        That the same crowd who embraces meat puppethood embraces economics as a hard science usable to order a society should tell us something.

        • With physics one deals with the universe as it is. Economics is harder because somebody is always inventing some new gizmo or process that throws everything out of balance.

        • I would personally consider economics to be a (potential) hard science, but only in the same way that meteorology is a hard science. Meteorologists use Doppler radar, statistical models, computer models, satellites, and weather stations, all to predict the weather…that’s *maybe* somewhat accurate five days out, and somewhat wishful thinking ten days out.

          Sure, the principles that dictate how weather swirls around our planet might be simple, and we can easily bring to bear the latest in gee-whiz gadgetry on the problem of predicting these swirls, but because these principles have a certain non-linear dynamic to them (causing small changes to have unexpected results), the weather is diabotically difficult to predict!

          And so it is with economics: the laws are simple, but when they involve 7 billion people interacting together, *and* interacting to the weather as well…it’s hard to see how anyone can have a meaningful chance of predictably controlling the beast. Particularly since *their “control”* is yet *another* dynamic that is going to stir up the pot.

          Incidentally, this is one major reason why I don’t pay climate change alarmists much heed: they are trying to insist that we can control a non-linear, chaotic system (climate, which is just weather in aggregate) by changing another non-linear chaotic system (the global economy). I simply cannot see how you can do that with any meaningful reliability….

        • Reality Observer

          I would note that Isaac, at least in the beginning, was not brash enough to think that psychohistory could possibly be applied to only a few billion “particles.” Although he was still far, far away from even one mole’s worth.

          And I agree that many of the independent variables are non-quantifiable for anyone short of an Arisian.

          • But he contradicted his own rules by applying it not only to a population that was being observed but that knew it would get an explanation of why the did what they did after it happened and didn’t act intentionally to let the Seldon plan force them to act.

            By the end of the first book you were flying that recovered Imperial Cruiser from the third story through the plot holes.

            • Paul (Drak Bibliophile) Howard

              Of course, there was also the Second Foundation “pulling strings” to make things go according to plan. (I’m ignoring what Asimov did to a certain Robot).

          • His first story also predates chaos theory by a good 20 years. You have to use the industrial strength disbelief suspenders you break out when they start talking about the jungles of Venus.

            • [T]he industrial strength disbelief suspenders

              Those would be the Stipulators? As in “stipulate this and see how it holds up”? Those can carry a pretty impressive plot but try to load Asimovian, much less Marxian, level plots on them and eventually they’ll bog down then snap back and hit you in the but.

      • Egad, an economic Bose-Einstein condensate…
        Uh.. maybe I best go lie down now.

      • Hmm… Would this mean that if we raise the temperature around certain gas-filled entities *cough*GRRM*cough*Scalzi*cough*, they will dissipate and vanish?

      • The ideal gas law is actually a really good example as it doesn’t work if you only have ~6 billion molecules of some gas. That might be the problem with Economics, too small of a sample size. Once we can start talking about a Mole of people we might be able to come up with some functioning laws.

        • Reality Observer

          OK, this is from Reddit, so TWAGOS. The estimated population of his “Galactic Empire” was one quintillion, or 10 ^ 18. (I assume that they are using the US definition, not the British one.)

          A mole, on the other hand, is (roughly) 6 x 10 ^ 23.

          Five orders is still quite a stretch (even assuming the interactions between two human “particles” are as simple as those between two gas particles – pardon me while I boggle at the hubris…).

          Of course, later on he tried to show psychohistory being developed on the basis of observing the Trantor population of 4 x 10 ^ 10. (Boggling again, excuse me…)

          • You’ve got two ways of modeling behavior in a gas. If you only have a few (depending on computing power you can add “hundred” or “thousand” here) molecules, you can calculate their behavior numerically. If you have billions of billions of molecules, you can use statistical techniques like the ideal gas law. Right now billions are too few to use statistical techniques, but too many to calculate in a reasonable timeframe. But it’s not inconceivable that computing power hundreds of years into the future would be up to the task.

        • Free-range Oyster

          I can entertain the idea of needing a larger sample to be useful. There’s also the issue of creating properly controlled but ethical experiments. I’m not sure that’s feasible.

        • Problem is, a mole of people occupy a space with too much surface area to be (economic metaphor for) adiabatic.

    • The “gravitational force between two bodies is the product of their masses and the gravitational constant divided by the square of their distance of separation” is only true at certain levels of magnitude. At subatomic levels there are significant other forces in play, some of which we’ve yet to quantify. Study quantum physics a little and you get a grasp of how much of what we thought we understood is simply illusion caused by scaling. Unlike the Strong Force and the Weak Force, gravity appears to be cumulative (at least through the first four dimensions; if you get up to the nth dimension it may prove illusory.)

      Once you get into subatomic physics you discover that it is closer to symbolic logic in that it provides a series of principles that says what is doable but not exact descriptions of how things work.

    • economics deals with ordinal values not cardinal.

    • On the Calibrated Scale of Science Hardness (CSSH), where Physics is brick and $NOUN Studies is pool full of hot air, economics ranks somewhere around gouda.

  7. I can spend ten years building a miniature castle out of dog turds, but it’s unlikely anyone will pay me ten years worth of writing money for it.

    You hadn’t been following the follies of National Arts Council grants when you wrote this, had you? I’m surprised; Chris Ofili had been smeared all over the news by then.

    • Two words: Piss Christ.

      Then the NYT got Serrano to write an article about how horrible flushing the Koran at Gitmo was.

      Then again, AP won’t print Charlie Hebdo cartoons but will sell you a print of that “art” by Serrano.

      • Those opposed to Serrano will organize a protest and pray for your soul.

        Those opposed to the Charlie Hebdo cartoons prefer a more vigorous method of artistic criticism…

        • I suspect we are rapidly approaching a time when the first will morph into the second in significant numbers. Incentives will eventually trump religious teachings for a critical mass.

        • As Glenn Reynolds has often pointed out, they have NO IDEA what is going to result from the incentive structure they’ve been diligently setting up.

          • The frightening thing is they don’t. That kind of obviousness in nominal adults who do have real adult responsibilities is one of the most frightening things I know.

            • The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it.

              He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder.

              ― Adam Smith

            • I remember a discussion where one person did not believe that a post-scarcity society would mean everyone plays nicely together, and another accused her of being anti-empirical dogmatists.

              A third party did point out that the first one was not the she would accuse of being anti-empirical.

              • In a post-scarcity society some things would still be unequally distributed. Status, for one. Attention must be paid.

                Put another way, in a post-scarcity society any rules may exist because a true post-scarcity society is a Utopian dream unattainable by mortals.

                It is a fantasy land and magical thinking rules.

                • The reality is compared to nearly the entire scope of human history and certainly compared to the entire scope of human existance (and they are not the same, damnit, history means something more specific than how long people were around) we live in a post scarcity society.

                  Any society where food is abundant enough and work easy enough that it requires mental and physical effort to not be obese is a post-scarcity society.

                  • You miss the point — while material goods may not be scarce, some goods (such as status) will always be scarce.

                    Your definition of post-scarcity society is too constrained. Certes, we enjoy a life well above subsistence, and almost all the world could do so as well if their governing institutions would stop effing things up. But as the arguments over Obamacare show, some things will forever be scarce in relationship to the demand for them, because that demand approaches infinite.

                    But I don’t come here to discuss religion.

                    • Oh, I understand what the geek rapture singularity types mean by post-scarcity.

                      My point is genuine post-scarcity, represented by human needs, is already here. If this isn’t a post-scarcity society then such a thing is not possible because people will always want more.

                      Also, I wish more people would even, for just 30 seconds (and I don’t mean ATH types…I suspect we all do), consider the fact that any real world post-scarcity society is already here and we’re living it. Maybe if we did we’d be in less of a hurry to f*ck it up fighting over the luxuries we have (and, yes, modern medicine is a luxury…the greatest luxury created by the mind of man).

                    • By defining genuine post-scarcity as represented by human needs you have to consider the full spectrum of those needs.

                      e.g., Status is a human need. For some people, that need can only be satisfied by having more. Others,

                      all they want is everything. Satisfying that desire remains a human need.

                    • Oh, and relating to goods such as status, YouTube fame and Tumblr virtue signalling are also luxury items. Most people playing status games today would be scared sh*tless by pre-scarcity status games where status = having enough food to eat and getting to mate.

                    • I hadn’t realized you were constraining your definition of post-scarcity to exclude “luxury” goods; I would have thought that luxury is a basic human need. Given the role of status in most human interactions, such as attracting a “high value” mate, I hardly think it can be waved off as a luxury.

                      As Mary observes, what once were luxuries now are needs. Truly, you need to be more precise about your definitions; loose expression is a luxury occluding your argument.

                      The reason a true post-scarcity society cannot be is that some people will always be like the lass singing the song above; they will forever need more.

                    • Luxuries are not needs. That people deem them so is the problem, but it’s not true. To qualify as a need, you must REQUIRE it.

                      Status can not be a need because by definition, most of us don’t have it. It doesn’t kill us.

                    • You have inserted a restriction not in the original terms. “Scarcity” has not been agreed to as only those things which individuals need, nor has “post-scarcity” society been limited to only the absence of things which people require for survival.

                      Fiddling the terms of a discussion is a foul.

                  • You can’t run a homeless shelter without providing luxuries that kings and queens and emperors of a few centuries ago went without — that is, you are required by law to have them.

                • Yes, a completely and permanently post-scarcity society is unattainable, but in theory, there’s an approach to it that would have some nice properties, and would probably endure for a while. SF writer James Hogan mentioned the possibility briefly in his novel Mirror Maze. He called it the “fusion economy.”

                  Controllable, Earth-surface fusion might not be achievable, but if it were, it would also enable something the alchemists sought: the transmutation of the elements. Combined with the advancing field of nanotechnology, that would greatly increase the supplies of all the raw materials required for everything men fabricate. As fusion would also allow the production of exotic conditions wherein the synthesis of unusual molecules becomes possible, the result could be quite pleasant indeed.

                  Now, as I’m always telling people, the most important word in any sentence in which it occurs is if. So this possible future isn’t something to bet the mortgage money on. Besides, as the great, recently deceased philosopher of the diamond Lawrence Peter “Yogi” Berra has told us, only in theory is their no difference between theory and practice.

              • I’m not sure post-scarcity would be a good thing. When we have tried it with other life forms it did not turn out well. Check out John B. Calhoun and his experiments with mice and rat utopias.

                • Technically still not post scarcity as they fought over something (space if I remember correctly).

                • And I remember reading about the conditions in mouse society that lead to the beautiful ones and thought, “that frightening sounds like the upper middle class now”.

                • Mouse utopia?


                  • Depends on the mouse…might be Mouse distopia.

                    I remember when EuroDisney opened and a comedian suggested that getting the French employees (as it was in France) to be Disney World polite probably required training at Mouschwitz.

                • Weirdly, those were rigged. I came across an article explaining how. they were rigged to scare us of overpopulation. And we’ve already proven when life is secure we DON’T reproduce. which is normal for scavengers.

                  • Not all humans are naturally scavengers; that’s mostly just the SJWs and Proglodytes. (Not entirely congruent sets.)

                    • RES, I’ve got a couple hyenas and three buzzards, and a dung beetle, who are taking exception to being considered akin to Proglodytes.

      • scott2harrison

        I was so disapointed when it turned out that they had not flushed the Koran. I was going to file a FOIA request for the make and model of the toilet. No more clogged toilets from the never to be sufficiently cursed EPA crap rules.

        • It would have been a military grade toilet and not permitted for civilian use.

          • scott2harrison

            I would have no problem with going black market to buy an assault toilet.

            • Assault toilet paper can be bought? I thought you had to buy the regular kind and make it yourself.

            • There’s no such thing as an “assault toilet”. Just because it has a bayonet lug doesn’t mean it’s any different from any other toilet.

              I expect better from people on this site.

              you can have my toilet when you pry it off of my cold, dead backside

              • This here is your fully-motorized, armor-clad combat assault ter-let. Properly maintained it will protect you in all exigencies up to and including a small scale newclear attack. It is designed to accommodate all personal ter-let needs in any terrain or weather conditions. This unit is a single-person operated ter-let developed to enable its operator to maintain a state of combat readiness for up to six weeks. Do not confuse this with the amphibious, fully-motorized, armor-clad combat assault ter-let, which is not capable of handling comparable loads.

                • You almost had me going there… but then I realized you didn’t give the toilet’s nomenclature. And “Ma Deuce” is already taken.

                • *Gets popcorn, waits for the Naming of the Parts* Go on, Unka RES! I love your war stories!

                  And I also adore how the Huns can go from Adam Smith to assault toilets with complete nonchalance. 😀

                  • Reality Observer

                    Thread drifting is an art, requiring innate talent and a great deal of experience.

                    Please do not confuse this with the same term in motor sports. It is FAR more dangerous…

              • True, the bayonet lug by itself doesn’t make it an assault toilet – but how about the pistol grip and high-capacity magazine, huh? Huuuuuuh?!

          • Certainly wasn’t the toilets on board ship. Those things wouldn’t even handle a pair of skivvies.

        • And I want one of the black market big tank toilets; who’s hiding them?

  8. Reblogged this on The Arts Mechanical and commented:
    You can’t fool mother economics. reality is a bitch.

  9. Definitional issue: Just as too many confuse cost and price, so also do too many confuse equality of outcome with equality of opportunity or equality of application of law, as a definition of fairness.

    • I know that is the standard observation but more and more I cynically believe that people use “equality of opportunity” as cover for “I feel I deserve better than you”.

      • I believe in equality of opportunity. That said, equal results will never happen because of diversity. But you get people who claim all the diverse people in the world are exactly the same. Diversity of people is a given. You know smart/stupid, hard working/lazy, stuff like that. What you look like doesn’t really matter. Cultures on the other hand are good indicators of success.

        • Equality of opportunity is a chimera, because people are not all the same and it is always possible to debate details of influence of their differences. Equality of outcome is similarly chimerical as true equality of outcome would mandate equality of inputs, which can never happen because people are not all the same and it is always possible to debate details of influence of their differences.

          I may try much harder than an other person to throw a basketball into a net from half court, but what ultimately matters is which of us can do it consistently, not how much effort we each put into the task.

          • I have worked my ass off over the years to give my daughter opportunities that I didn’t have–and that children whose parents did not do the same won’t have.

            And I make no apologies for that.

            Orlogg dictates wyrd.

          • That’s why “equality of opportunity”, given the source from which that phrase comes, implies “under the law”. Granted, even under the Founders’ hope of equal application and enforcement of the law, there will always be individual differences of interpretation of law, so the ideal is an approximation. If you’re willing to accept approximations that lie within a reasonably small set of variances, though, I wouldn’t call it necessarily a chimera.

        • > diverse

          “That word… I do not think it means what you think it means.”

  10. In SJW news, Heeeeeeeere’s MILO!:
    Sure it’s off topic, but it’s a MACROaggression.

  11. I think that much of the problem with economics as a hard science is due to the fact that while a determination of cost is fairly straightforward, value is by its nature both transitory and subjective.
    True, care must be taken to include both obvious and hidden components of cost, but that’s simply done by the application of detail work and a bit of honest assessment.
    Value, on the other hand, can change from moment to moment. Just ask those who invested heavily in Dutch tulip bulbs once upon a time, or for that matter American stock holders just this past week.
    The creator of a product must not only establish the cost to them of that product, but also assign it a value which ideally will be higher than the cost, though not always so. For example, a business will sell product below its cost simply to clear inventory. (either for tax purposes or because of the ongoing cost of storage) And of course unless there is a buyer who agrees on the sale value of the product, there is no market and business grinds to a halt. And if external forces such as government regulation or the economy force the producer to sell below cost then it becomes a one time windfall for the buyer, but also guarantees that no more of that product will be produced.

    • A good comment which points out the fundamental semantic problems of such discussion. For example, “cost” is not a static concept; as Uncle Lar points out, goods in inventory carry ongoing and increasing cost — not just storage and taxes but also, as frozen capital, the opportunity costs of foregoing other investments.

      Similarly, “value” is highly subjective and is (above all else) not a simple sum of inputs. The value to Little Jonny of Toy A may vary in direct proportion to the degree of pleasure Little Jimmy takes in having that toy (as any monitor of two or more children has surely had opportunity to perceive.) On the second point, consider a golden horseshoe has (for hoof wear) a value less than the time and materials invested in its production. But as an objet d’art its value may be far higher —

      — as demonstrated in this song.

      • It’s where the labor theory of value goes astray. An excellent baker can take some flour and other ingredients, and in a few hours whip up some delightfully airy croissants and cake to die for. A not so good baker can, in those same few hours with the same ingredients, turn out some barely edible lumps of cooked flour. They’ve both worked equally hard, put in the same amount of labor, but only one is going to be able to sell his products at a profit. The produce of the excellent baker has greater value.

        • Precisely why there is always a net outward flow of people with talent from socialist hellholes to places that honor and respect exceptional ability, and provide a somewhat free market for them to exercise that ability for their own and society’s benefit.
          Unfortunately, there does not seem to be any concurrent flow of socialist idiots from free markets in to said hellholes to fill the gaps left. I’d be more than willing to chip in on a cheap ticket for any number of such.

          • Anonymous Coward

            Step up and get yer free, pre-paid Cuban vacation right here . Visit tropical climes, meet the friendly natives, and STAY there !

    • scott2harrison

      More importantly, the value of an object is less to the seller than the sale price, and is greater to the buyer than the sale price. Thus with every sale the total value in the universe rises. This is what drives trade and is why trade is a positive sum game.

      • scott2harrison

        It is possible that the greatest error of socialism is in regarding trade as a zero sum game where there are winners and losers rather than a positive sum game where everyone wins.

    • There’s actually a method if stock investing called “value investing” which involves using the difference between the selling price and the underlying actual (intrinsic) value of a stock, in terms of what price and income could be gotten from buying the entire company and operating it over a period of time, and then comparing the estimated income from that to the estimated income of a different, safer investment, usually a 10 year T Bill or similar. A lot of people conflate price with value, which is why you see the financial journalists talk about “overvalued” or “undervalued” stock.

      The PRICE of Dutch tulip bulbs fluctuated, but the intrinsic value never really did.

  12. I had a modest comment I was going to make here but then decided, nah.

  13. You wrote:

    The other thing getting under my skin is this jobs fund or whachmacallit. People are supposed to contribute five dollars and then they use this to give loans to small business startups.

    I don’t know how this particular fund is managed, but I’m giving serious thought to buying shares in
    Wanting to lower my interest rate on a credit card, I am borrowing some $13.5K from them, which I am scheduled to pay off in three years (and hope to pay off in one).
    Lending Club obtains money from investors and loans it out to borrowers at rates anywhere from 6% to 36%, give or take. The average return to investors is about 8%. So a $25 share will pay me some $2 per year, once I start buying them.
    The point here is, money handed to Lending Club is invested, not given, and investors have some expectation of a return on investment. That means the people at Lending Club have to do at least some minimal screening of borrowers. (Their website says they use “state of the art” methods.)
    So if small business startups want to borrow my money through Lending Club to get off the ground, that’s fine with me. It won’t do any worse than the personal loan to a friend who has quit making good faith payments, claiming extreme poverty.

  14. Over the years, I’ve noticed three cases where people regularly have the wrong model model (all covered individually in comments above).

    The first is the “pie” thing. (Does the slogan “grow the pie” challenge that error, or reinforce it? I can’t tell…)

    The second is “intrinsic value”. As a child, I remember being taken by surprise by the bit of Heinlein dialogue (Starship Troopers?) saying something like “the intrinsic value of everything is zero… for any valuation you have to answer the question ‘valuable to whom?'”

    The third relates to scarcity and abundance. From Sowell’s “Basic Economics”:

    The wide range of goods and services available to us vastly exceeds what past generations and past centuries had to offer. But every era has always been an era of scarcity.

    What does “scarce” mean? It means that what everybody wants adds up to more than there is.

    Do people get the underlying model for economics wrong in ways that don’t involve one of these three errors?

    • I just finished Basic Economics, and strongly recommend it. Good read, designed for the layperson.

      Economics is the study of the use of scarce resources which have alternative uses.

      And then, to your and Sarah’s point, this:

      > Free-market prices are not mere arbitrary obstacles to getting what people want. Price are symptoms of an underlying reality that is not nearly as susceptible to political manipulation as the prices are. Prices are like thermometer readings—and a patient with a fever is not going to be helped by plunging the thermometer into ice water to lower the reading. On the contrary, if we were to take the new readings seriously and imagine that the patient’s Fever was over, the dangers would be even greater, now that the underlying reality was being ignored.

  15. To expand upon Heinlein’s kitchen example from “Starship Troopers”, let’s theorize an episode of the cooking show “Chopped”. For the competitors, let’s have a dorm rat, a stay at home mom, a restaurateur, and one of the Iron Chefs. In this case, the opportunity is the same- all have to make do with the same ingredients, and all have access to the same pantry. All are under the same time constraints, so the amount of labor is the same. However, the end results will be very, very different.

    • Odds are, I’d go for the stay at home mom’s cooking. Really fancy stuff ends up not sitting well in my stomach. But, YMMV.

  16. “Second, let’s establish economics is a science. What this means is that it studies naturally occurring forces and tries to discern their principles.”

    The late lamented Soviet Union found that out, and the PSC is getting schooled right now.

  17. I stand tall in the darkest hour of night and declare the sun shall never shine again, and I revel in my station as dark hour follows dark. I rejoice in the security of my declaration, none can prove me wrong as yet another dark hour descends.

    I am unassailable — until the breaking of the dawn.

    • Eamon J. Cole

      *sigh* WP, you syphilitic whore…

      Tap reply in an email, append your comment hopefully below expecting a dia in your logue — have it disappear for ten minutes. And then up it shows dangling with abandon all by its unappended loney-some.

      Ach, leave it stand to confuse passer-by in future days.

      I’m taking my bourbon buzz to bed.