Capitalist Culture

Instead of vilifying him for being an idiot, we should be praising Michael Moore for being a millionaire.

 The Invention of Enterprise: Entrepreneurship from Ancient Mesopotamia to Modern Times (Princeton University Press, 2010) is an anthology that gives an high level view of the broad history of trade and commerce.  (My full review published by Libertarian Papers here.)  In separate chapters, David Landes and Michael Hudson identify the difference between creative and corrosive capitalism. The latter dominates in societies that deny the former.  The editors generally point out that in any society, some people will take the best advantage of whatever modes are offered for personal advancement.

In Rome, glory came from looting provinces.  Making money was not honorable.  So the wealthy left the management of their businesses to their freemen and slaves.  In America today, we allow both the marketing of technology and gaining government subsidies.  It is not just that both are legal, but that culturally, we do not distinguish between them.  Instead of vilifying him for being an idiot, we should be praising Michael Moore for being a millionaire.  He should get a hero's medal for selling large volumes of what people want to buy voluntarily.  

Instead of praising clever children who memorize the Presidents in order, we should be teaching them that "LinkedIn started out in the living room of co-founder Reid Hoffman in the fall of 2002. The five original founders were Reid Hoffman, Allen Blue, Jean-Luc Vaillant, Eric Ly, and Konstantin Guericke." (Company "About" here. )  I am not sure how to commemorate the chic restaurants in Rep. Nancy Pelosi's district that won exemptions to opt out of Obamacare.  The avoidance of regulation should not be taken lightly. 

BOURGEOIS VIRTUE

Deirdre McCloskey developed her theories on "Bourgeois Virtue" over the past two decades.  She now has two books out, with a third on the way.  She investigates the topic from many standpoints.  Generally, she finds that the things we are taught to dislike about being middle class include the social graces that benefit and profit us all. 

A potent source of bourgeois virtue and a check on bourgeois vice is the premium that a bourgeois society puts on discourse. The bourgeois must talk. The aristocrat gives a speech, the peasant tells a tale. But the bourgeois must in the bulk of his transactions talk to an equal. It is wrong to imagine, as modern economics does, that the market is a field of silence. "I will buy with you, sell with you, talk with you, walk with you, and so following. . . . What news on the Rialto?"
For one thing, talk defines business reputation, as at the Iowa City cocktail party. A market economy looks forward and therefore depends on trust. The persuasive talk that establishes trust is necessary for doing much business.  "Bourgeois Virtue" by Deirdre McCloskey, American Scholar vol. 63, no. 2, Spring 1994, page 249,  here.

Today we have social media. Corporations hire people or not, and fire them, based on what is revealed on Facebook and Twitter.  Reputational gossip has become all the more intense.  In a global culture, other people in other places grew up with different expectations entirely.  Rather than forcing conformity and avoiding risk, hiring managers who want their firms to profit should have the mechanisms in place analogous to those engaged by entrepreneurs. 
Market theorist Henry Girard Manne suggests that insider trading is one of those. 

In the anthology cited above, the chapter on the Middle East by Timur Kuran pointed to a biography of a Cairo merchant.  Making Big Money in 1600: The Life and Times of Isma'il Ibn Taqiyya by Nellie Hanna is a detailed account of one merchant in one place.  It so happened that he had his choice of courts, four of them, from different schools of law, in which he could register contracts.  Abu Taqiyya flexibly extended his trade network by crafting the clauses in his agreements.  Benjamin Franklin would have called it "prudence."

A MAN'S HOME IS HIS MARKET

We see the "castle" as a paradigm, not just because we are at war with our neighbors - Hobbes' war of all against all being the reason for government. For us, the home is primary protection against the elements. In a society of open courtyards, verandas (a Hindi word, likely borrowed from Portuguese), decks, roofs with hanging gardens, patios, arcades and colonades, concepts of safety, security, and ultimately, property rights, must have other paradigms. As he became wealthy, Isma'il Abu Taqiyya extended and expanded his personal space until his large home dominated his street.  He shared that street with a partner who made the same arrangements. They also did this with their warehouses (wikalat), which served as storage, emporia, and guest lodgings.  Public life was gradually excluded from private contexts as the visitor moved inward from the business into the home.

The piazza is a public space, but among urban Americans in the 19th century, it came to be a somewhat pretentious word for the front porch.  For Americans, the front porch became the margin between the public street and the privacy of the interior home.  Adults could sit and rock while children played games.  Friends and neighbors could stroll pass and bid hello and good day.  An industry arose to create special furniture for this special space.  Europeans assigned to work in Detroit visit  Ann Arbor because our restaurants extend to the street, using the sidewalks for table spaces.  The margins between public and private spaces are blurred.  It would be difficult to discuss anything illegal or immoral in such a context.  Business and social life become transparent when conducted on the street.  In such a context, you grant privacy by minding your own business.

Therefore, rather than the castle which holds against the storm, a commercial society of productive traders, offering values in voluntary exchange, is better served by a theoretical model of ready communication.  Jane Jacobs made the same point in Systems of Survival.  It is the Trader's Ethic to be open and available to deals with strangers.  Thus, capitalism is inherently globalist and democratic. 

ALSO ON NECESSARY FACTS
A Man's Home is His Market
Thank-you Notes
City Air Makes You Free
Knowledge Maps

Copy Rights and Wrongs

The Google Books Settlement Agreement and the conflicts that caused it touched on only some of the problems of intellectual property and rights to it.  The settlement was rejected by US Appeals Court Judge Denny Chin (summary here from Columbia U's Copyright Project and full text PDF of ruling from The Public Index).

Much is wrong with all of the argumentation from all parties.  The simplest fact is that Google provided a service to store library books and make them available to patrons via Inter Library Loan.  At root, it is no different than a climate-controlled building for storage, library cards for access, and padded envelopes for mailing - with one exception: the process creates another copy ...  many other copies... as many copies as anyone could want.  In fact, I made two copies of Judge Chin's ruling and put them in different directories, one in the "NecessaryFacts" directory for these posts; and the other under "CJ Others" for any future academic criminal justice discussion of copyright laws and violations. 

Michael Crichton was not alone in seeing this coming.  Back in 1983, in his book Electronic Life, he said that the inherent copyablity of electronic media removes it from all of our previous expectations of property.  He recommended that artists forego the concept of royalties.  Just get your money up front and move on to the next project.  While he did have a lot of those projects, I do not doubt that he cashed the royalty checks all along the way for each of them.  Back then, I cited Crichton's thesis in articles that I wrote touting a world of "softlife" reproducing itself without copyrights.  Of course, when Defense Computing magazine took an article that I wrote about Soviet computer technology, claiming that the lack of a copyright statement made it anyone's property, I called them up and talked them out of a hundred bucks.  Self-interest and hypocrisy can be so hard to tell apart.

So, too, with this problem.

Among the facets are so-called "orphan works" for which the copyright holder is lost, perhaps dead, generally hard to find in any event.  If not for Google, they would remain orphans.  Now that they are rescued, reproduced, archived, indexed, and available to the world, they have new value.  When the authors themselves are not clamoring for cash - a rare event or these would not be orphan works - then non-self-interested others hypocritically want someone else (anyone else not making a profit- but not they themselves investing their own resources) to do this for free, track down the authors, and force an arbitrarily fair amount of money on them. 

I find works of mine out on the Internet and usually I do not care, as long as the presentation looks nice and serves a moral purpose.  I already got paid what I asked for.  (There is a parable in the New Testament about that. See Matthew 20:2.)  Once - as in the case of Defense Computing - I found the Frances Lehman-Loeb Art Center of Vassar College presenting an article that I wrote on the definition of "coin."  I pointed out the plagiarism and offered to write them a new one at a fair price.  They took the page down and never replied to my offer.  (The offender was an undergraduate history major volunteering at the museum.) 

An artifact speaks of its maker.  Artifacts are semata: bearers of meaning.  Thus, you can attach property - without "mixing your labor" - simply by putting your sign to it.  That, in fact, is the basis not only for marking cattle, but, in our time, for creating money, even Federal Reserve Notes, which have no intrinsic value but have value entirely through meaning (symbol).

Symbols are not objective.  They depend on cultural context.  When the culture changes, the meanings change.  We no longer live in a time when the production of books is a barrier to the transmission of ideas.  Books always were sold for the printing, the paper, the binding, and not for the value of the ideas inside.  Evangelists give away the Word of God.  Even the Ayn Rand Institute gives away Atlas Shrugged to high schoolers who enter their essay contests.

Among the tangled roots is the fact that we get our ideas of property from a long history with land.  Exclusivity is based on a physical law: two objects cannot be in the same place at the same time.  Rivalry is based on the fact that the same object cannot be in two places at the same time.  But now they can.  Unlike a plot of land, two people can access the same copy of a work of art at the same time without being in the same place. To each, their view is personal and private.  Even only a few years ago, cassette tape machines had two different functions for PLAY and RECORD. Now they are the same function. 

The physics and metaphysics of land do not apply to cyberspace.  The court should have removed itself as lacking competent jurisdiction.  The institution best suited to bringing spontaeous order is the market.  The libraries owned the books.  Google owned the means of preserving them while maintaining public access. 

When these books were printed, our technologies were not contemplated.  It should remain there.  Times change. 

 Copyrights were invented as monopolies in 17th century England.  The first law was passed in 1709 (Queen Anne's Law of 1710).  Sooner or later, implants or something will give us all personal permanent memory.  Where will the law be then?  You will never forget a book you read and you will be able to recite it perfectly.  Musical performances and plays may also become self-replicating memes.  Sculpture will probably prove resistant to copying, though we do have 3D Modeling now. 

Locksporting

Opening locks without keys is one of the challenges historically associated with computer hacking, like gaming and Chinese food, chronicled in Steven Levy's classic, Hackers: Heroes of the Computer Revolution (Anchor Doubleday, 1984;O'Reilley 2010;  but available all over the Internet as a PDF).  So, it is fitting that at the SUMIT_2010 Conference (Security @ the University of Michigan IT, October 7, 2010), Deviant Ollam of The Core Group was again a guest speaker.  Sandwiched between techies Whitfield Diffie and Christopher Hoff, and government agents Melissa Hathaway and Marcus J. Ranum, Deviant Ollum was a hit with the crowd.  After his talk, outside the auditorium, he set up a corral of tables with locks and tools for people to play with; and he answered questions for about an hour.

His on-stage demonstration was fascinating, compelling, shocking, and revealing.  We throw shackles on our cages of servers, buying them at hardware stores and big box stores, and never considering how vulnerable they leave us.  It is pretty easy for someone to let themself into your racks, insert or copy what they want and then leave without a trace.  Or almost without a trace.  Deviant Ollam's presentation included forensics, showing the evidence of tampering.  But you have to know what you are looking for and looking at.

"Physical security is an oft-overlooked component of data and system security in the technology world. While frequently forgotten, it is no less critical than timely patches, appropriate password policies, and proper user permissions. You can have the most hardened servers and network but that doesn’t make the slightest difference if someone can gain direct access to your network equipment and server racks."  - Deviant Ollam, The CORE Group. "The Four Types of Lock: Physical Security is Data Security."

Shortly after that October 7, 2010, conference, I got interested in the problem of archiving and reporting on modern paper money (here on Necessary Facts).  I made a presentation about that at ArbSec, a local Ann Arbor computer security group that grew out of the DefCon734 chapter here.  Via ArbSec, I met A2 Locksporting, the lockpicking club.  Attending club meetings once a month, I learned how to pick a lock. 

Numismatists study all forms of money.
The threat of counterfeiting led governments to make their notes more secure.
It also led the USA government in Washington to install software,
firmware, and hardware on all personal computer scanners.
If you scan a current-issue Federal Reserve Note, they will know about it.
The EURion Project here on NecessaryFacts.

I also learned how to take a lock apart and put it back together, how to match a lock to its key, and other techniques.  It so happened that because of the Levy book - which I read when it came out, having hacked my first password in 1977 - I always kept keys. I have lots of them.  They can be useful.  You can make a lock "bump" with a old key.  An old key can be recut.  It might work on its own: locks are disappointingly generic.  If you only care about keeping out honest people, you can save money, time and grief, by paying attention to the codes on the locks, buying four or five identical ones at the same time. 

If you browse for lockpicking tools, you will find many sellers.  The Ann Arbor Locksporting Club seems to like Lockpicker's Mall. I like their website. From 2004-2010, I reviewed websites for the American Numismatic Association and I learned to look for reliable information, free articles, and open and honest statement of who owns the site and the company and where to find them in real life.  They meet those requirements. 

Core of Lock disassembled.

ALSO ON NECESSARY FACTS

BSides 2013 Austin

Hacking

John Kemeny Knew: We Shall Have Computed

BASIC: Turing's Truth

LASCON 2014

Cities

 It is an easy claim commonly found in school books that cities evolved from agrarian communities that themselves were formed when pastoralists pursuing herds narrowed their ranges, domesticated animals and plants, and settled down.  In truth, cities evolved from the camps of successful hunter/gatherers who met to exchange their supluses.  Jane Jacobs suggested this in The Economy of Cities.  Her theory was validated by the excavations at Çatal Höyük in Turkey.   

First, Jacobs was an urbanist.  An immigrant from Scanton, Pennsylvania, to New York City and an activist in Brooklyn, she fought against the so-called "urban renewal" of the 1960s; and she was largely successfully at least in forestalling what was really urban removal.   She advocated for old mixed-use buildings in diversified neighborhoods, which was the opposite of intentions from planners such as Robert Moses who intended large new single-use structures for uniform neighborhoods. 

Also, Jacobs was self-educated.  Working as a secretary and freelance reporter, she attended on her own Columbia University's open college or extension school (now the School of General Studies).  She studied what interested her, and at one point was almost forced into a degree program which she successfully resisted.

Her other books include: 

• The Death and Life of Great American Cities, New York: Random House, 1961.
• Cities and the Wealth of Nations, New York: Random House, 1984.
• Systems of Survival: A Dialogue on the Moral Foundations of Commerce and Politics, New York: Random House, 1992. 

 Her theories on the transition from the Neolithic to the Bronze Age were validated after the excavations at Çatal Höyük were resumed.  She suggested that the first commonly accepted trade commodity was not wheat - and certainly not useless silver or gold - but obsidian.  Obsidian for points (arrowheads; spear tips) was broadly desirable by hunters.  However,

CSI: FLINT 2011 - Who Guards the Guardians?

On May 6, I presented two classes to middle schoolers participating in "Super Science Friday" at the University of Michigan Flint campus. In all about 500 pupils attended two each of 25 different sessions.  Some were laboratory demonstrations, others were hands-on engagements.  Topics included website design, trauma response, the chemistry of cooking, music, and termites.  My session was titled "Who Guards the Guardians" and explained misconduct and fraud in science as it applies to junk science in the courtroom and misconduct in police laboratories. 

To support the discussion, I created a blog, here.

Reflections on Atlas Shrugged Part 1

I saw it the moment it opened, 12:10 PM, Friday, April 15. The work was credible. I found it impossible to imagine seeing the movie without having read the book. So, for me, it was a matter of my own visualizations versus their realizations.   Overall, the movie is everything I wanted and a bit less.  This is true, also, of  Pride and Prejudice or the Star Trek franchise.  Atlas Shrugged is primarily for fans.  

[Note: These comments are based on earlier posts to Rebirth of Reason and Objectivist Living discussion boards.  They are edited and amended for this presentation.]

The film has been compared to My Big Fat Greek Wedding which had near-zero traffic at first but which stayed in theaters for a year, building a following.  Atlas can go to dollar cinemas at the malls for months to come.  Producers of the 1939 Wizard of Oz were reluctant to take on a story that was not popular and which failed as a film in 1910.  I hope that we don't have to wait 30 years for the next attempt. 

I felt that Graham Beckel as Ellis Wyatt did the most credible job of projecting the character. Taylor Schilling delivered her lines well, but she has not deeply felt what it is like to grow up around trains, major in engineering, and all the rest. Her acting, like all of their acting, was competent acting. But Beckel really looked and felt like an oil man from Colorado  (In the book, Wyatt is a young genius, and Beckel is not young, but that is a quibble.)  Grant Bowler did not feel like a man who bought his first steel mill at 25, after being hungry on the streets at 12. The exchange of the bracelet could have been done closer to the book.  The ride along the John Galt Line could have been shot from the nose of the cab.   But it was not my movie to make.  I appreciate the work of those who did, the producers, director, and actors.  I was happy to see Armin Shimerman as Dr. Potter.  Shimerman played the Ferengi, Quark, on the Star Trek: Deep Space Nine series.  (Quark runs a bar; and the Ferengi are consumate traders.)  At a Trekker con, I asked him if he had read any Ayn Rand.  He said that he read The Fountainhead and would be revisiting Rand to add depth to his character.

On the Objectivist Living discussion board, Kat, on 15 April 2011 - 10:05 PM, said:The Owen Kellogg scene was almost comical because the guy was such a dweeb you would think Dagny would be firing him rather than giving him a promotion.

I replied:  I liked that. I understood it, to the core. In a rational world where people who are motivated by the ideas portrayed in Rand's work, who do you think would be in charge? Our world is a collectivist tribalist remnant which is only now discovering individualism. Even the LP convention organizes people alphabetically by state. Is that individualist thinking?  Dagny would see the brilliant mind. When she said that she was "grooming him for management" what do you think she meant? He just needs a couple of classes or seminars in public speaking and project management. It is in our world of the collectivist corporation and the altruist state that the Owen Kelloggs of the world do not find leadership within complex organizations.

The theme of "the mind on strike" is deeper as every social structure knows social loafing.  We call them "slackers" because when not pulling their own weight, it is their segment of the line that hangs loose. The demise of General Motors, Chrysler, and Bear Stearns was due as much to internal expropriation of talent and "sanction of the victim" operations as anything the government did -- after all, every firm suffers government intervention in some way, though, granted that software development is not the same as investment banking and heavy industry.  But, that, too, points to the deeper theme: common wage employees who see themselves as sole entrepreneurs offering their best effort for the the highest rewards were not welcome in the corporations that failed.  Long ago, they were attracted to other kinds of work, other employers, as other workers were drawn to the failing corporations for non-objective motives. 


Even though Atlas Shrugged is a philosophical detective story about the theft and recovery of genius, this is primarily a political movie, as many people read  Atlas as a political novel.  However, the book's three parts were named for metaphysical axioms.  Dialog and narrative integrate epistemology with ethics all through the book. 


Ultimately, while the conflict between government and business is obvious, deeper is the nature of those in any social context who carry the project on their shoulders despite the loafers.  ("Social loafing" is a known fact.  In economics it more formally labeled the "problem of the free rider" or defined by various "externalities."   The counter presentation is the "tragedy of the commons."  Tragic though it be, no one suggests doing away with the commons.)  That applies to the people within a corporation - or within a government agency: police and military face the problem of "goldbricks."  In the book,  it always comes back to metaphysics and epistemology.  The movie does not hinge on those conflicts.

It could.  In a different day, a different Atlas could be an explicitly philosophical movie, derived from metaphysics and epistemology, in which the political conflicts are seen as expressions of deeper motives.

 It could be told from the point of view of John, Frisco, and Ragnar at Patrick Henry University with Profs. Akston and Stadler and follow forward from there, peaking at the 20th Century Motors, bringing Galt to the Taggart Transcontinental, Ragnar at sea, and Frisco a playboy, ending with Dagny's decision to create The John Galt Line.  "Let him come and claim it," she says.  "He will," Francisco replies.  End Part I.  The central "action" would be arguments among the boys and Akston on the proper course of action, on their isolation from Stadler over the State Science Institute.  You might think that a movie cannot be carried by dialog, but what makes Pride and Prejudice, a perennial favorite?  It is the only movie I have watched three incarnations of -- and not a gun, bomb, or starship...

A psychological Atlas could portray the disintegration of James Taggart, from "Don't bother me!" to his realization at the State Science lab machine that he wants to die.  That would be the dark shadow that illuminates Hank Rearden's self-discovery -- a story that could play out in a laissez faire utopia.   Rearden's conflict is really within himself and reflected in his relations with his family, hallmarked by his wife.  The government was largely irrelevant there, but the theme was the same and the action followed the same path: he quit working for his family; he also quit working for the government.  And, as for the mind not working, his was not properly engaged on the problem of Dagny Taggart.  Until Francisco d'Anconia gave him a kick start, Rearden's thinking about romance was not actually thinking at all. 

If you search YouTube for fan-made Atlas Shrugged trailers, you will find several efforts.  This is one of the best by high schoolers:

We will see other complete productions of Atlas Shrugged, created with animation software that allows the director to choose from the full range of Hollywood greats.

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Firefly: Fact and Value Aboard "Serenity"
That Goddam Ayn Rand Book
Valentine's Day: Love and Money

The CSI Effect

Jurors with less education demand scientific evidence.  Educated jurors trust the prosecutor.

History can be funny.  Typically, progress comes from ferment.  People in cities interact in multipicative modes.  Entrepreneurs, artists, and scientists attract others of their kind.   Alternately, the peripheries bring new ideas to the centers.  Eastern Michigan University is a midrange midwest state school, located in Ypsilanti, in the shadow of its neighbor in Ann Arbor.  Unlike the U of M, EMU prides itself on teaching, not research.  Generally, the graduate students do not teach classes: they are GAs, clerical assistants, not TAs.  Classes are taught by the professors whose names appear in the course schedules.  Originally the Michigan Normal College, its motto is "Education first."  It is from EMU that Gregg Barak, Young S. Kim, and Donald E. Shelton published their paradigmatic research into juror attitudes.  "The CSI effect" did not originate with them, but they have produced the most rigorous statistical studies of it. 

Gregg Barak describes himself as a "dialectician."  He can argue any side of any topic equally well.  Among his many focus studies is the relationship between crime and the mass media reporting of it.  Young S. Kim specializes in research methods. Donald E. Shelton serves as the Chief Judge of both the Circuit and Probate Courts in Washtenaw County.  So far, they have co-authored three papers investigating and explaining the "CSI Effect."  

• "Examining the 'CSI-effect' in the cases of circumstantial evidence and eyewitness testimony: Multivariate and path analyses," by Young S. Kim,  Gregg Barak, Donald E. Shelton; Journal of Criminal Justice 37 (2009) 452–460.
• "A Study of Juror Expectations and Demands Concerning Scientific Evidence: Does a 'CSI Effect' Exist?" by Donald E. Shelton, Young S. Kim, Gregg Barak, Vanderbilt Journal of Entertainment and Technology Law Vol 9 No 2; 367.
• "An Indirect-Effects Model of Mediated Adjudication: The CSI Myth, the Tech Effect, and Metropolitan Jurors' Expectations for Scientific Evidence." by  Donald E. Shelton, Young S. Kim, and Gregg Barak, Vanderbilt Journal of Entertainment and Technology Law Vol 12 No 1. (Fall 2009)

They found that less educated jurors demand scientific evidence, whereas jurors with more education accept the prosecutor's statements prima facie.  More deeply, they theorize not a specific "effect" attributed to a widely popular franchise of television shows, but rather a general "tech effect."  They attribute that to the pervasive facts that reveal widespread ownership of iPods, laptops, and other devices among even the poorest and least educated members of jury pools.  

Karl Marx and the Dustbin of History

Like the death of Mark Twain, the imminent passing of capitalism has been predicted (or reported) for 150 years. 

Plotting the past and future of humanity is an old hobby.  In the Dialog "Cratylus", Plato recounts the story from Hesiod (Work and Days) that once, there was a Golden Age but continuous devolution has brought us to the Fifth Age, the Age of Iron, the age of war and injustice.  This, of course echoes the Eden Myth, that once upon a time, we lived in a paradise, but by our errors, we lost it.  Christianity promises a return to Paradise in the Afterlife for God’s “chosen” who find Salvation through His Son.  Karl Marx and Friedrich Engels secularized the myth by wrapping it in economics.  Marx’s theories are well-known.  His influence is undeniable.  However, Marx relied on the works of others to develop and validate his theories.  Some of the source material was in error.  Those who followed Marx –especially Marxists – accepted his assumptions without reconsideration. 

• Marx did not question the labor theory of value.  But if labor alone gives value, we could get rich by digging holes and filling them up.  The most careful workmanship invested in the most beautiful and useful object is wasted if no one else wants it.   Modes of television were invented in the 1890s.  The first personal computer was the IBM 5100 from 1975, a solution looking for a problem.  Labor does not give value.  Value is perceived by the buyer.
• It is famous that Marx predicted his proletarian uprisings in England or Germany and that the first so-called “communist” or socialist nation was an agricultural hinterland. 
• When Marx predicted that the workers would obtain the modes of production, he was not thinking of employee stock option plans or employees forcing leveraged buy-outs of their operating divisions from the parent corporation.
•  Marx complained that capitalism destroyed the natural state of women for motherhood and homemaking.
•  Relying heavily on English history, Marx pinpointed the closing of common lands and the mass migration of former serfs into the cities to become proletarians.  But that, too, happened in Rome.  Moreover, Roman expansion, especially into Gaul, but also elsewhere, was specifically the founding of new towns surrounded by new farms – a process exhibited by the archaic (pre-classical) Greeks who colonized Middle Earth from the Crimea to Spain.  
• Marx thought that gold was the highest form of commodity money and that money originated as commodity exchange in indirect barter.  This view is shared by capitalist (libertarian) economists today based on its being accepted by the Austrian School of Carl Menger and Ludwig von Mises.  The historical record does not support it.  
• Marx’s theory of dialectic evolution is unvalidated (and in fact disproved) against the historical record of places not known to him, such as China, Mesoamerica, and Sub-Saharan Africa. 

Largely today, in American university classes in economics, Marx is relegated the margins of first year textbooks. The new center is held by Milton Friedman and the monetists.  Diametrically opposite Marx but also in the margins are the radical Austrians, such as Ludwig von Mises who advocate laissez-faire (which Friedman did not).   

In sociology, Marx still holds sway.  Criticisms from the left come from postmodernists who claim that there is no reality and even if there were you could not know it.  (Physicist Alan Sokol who exposed and discredited that "fashionable nonsense" is a Marxist.) There is no "right wing" - no school of individualism - in sociology, or at least, they are few and far between.  Organizations and Markets is a blog from sociologists who are influenced by the Austrian school of economics.  The four professors - Nicolai J. Foss, Peter G. Klein, Richard N. Langlois, and Lasse B. Lien - span two continents. 

ALSO ON NECESSARY FACTS
Debt: the Seed of Civilization
Venture Capital
Money as Living History
Workers Paradise Promised an End to Money

City Air Makes You Free

Atlas Shrugged: Opening Show





When Did "the Great Depression" Begin?

No mythology faces as many problems as the folktale of The Great Depression. The Austrian economist, Ludwig von Mises, pointed out in Human Action that capitalists and socialists usually agree on the raw data, but then disagree on what the facts mean. In 1929, the New York Stock Exchange recorded dramatic price collapses on October 24 ("Black Thursday") and October 29 ("Black Tuesday"). What is missing is a connection between the NYSE of October 1929 and the banks of Detroit in February 1933. It was there, in Detroit, on February 14, 1933, 40 months later, and 600 miles away, that the bank failures of the Great Depression began.

To be sure, bank failures were common in the years before 1929-1933 – and so were bank openings. From 1884 to 1921, the number of banks had sextupled from 5000 to 30,000. Not only were these generally small banks – some capitalized near the minimum $25,000 – but after 1921, the new operations were often branches. The federal Comptroller of the Currency had opened the door to allow city banks to compete in towns and villages. From that point, bank failures increased, as is to be expected from increased competition. In January 1933, it seemed that the summer of 1931 had been the lowest point possible and that a recovery was unfolding. 

Depression-Era scrip issued by the City of Detroit
against property taxes due



            Speaking to a United Press reporter in Dearborn, on February 1, 1933, Henry Ford called the period 1923-1929 “the real depression.” At that time, two holding companies dominated finance in Detroit. One was the Detroit Bankers Company Group. The other was the Union Guardian Group, colloquially called “The Ford Group.” When the Union Guardian Group experienced pressure from withdrawals, it turned to the federal government for a loan. However, the Reconstruction Finance Corporation required that the Fords subordinate $7 million that the banks owed to them, which Henry Ford refused to do. President Herbert Hoover set up a meeting with Ford, Arthur Ballantine (Under Secretary of Treasury) and Roy D. Chapin (Secretary of Commerce). Chapin was a former Olds executive and co-founder of the Hudson Motor Car Company. He appealed to Ford as a fellow manufacturer. Ford replied that Hudson stock was traded on the NYSE, which Ford’s was not, and that a washout of the banking industry seemed inevitable. Chapin replied that if people do not have money to buy cars, Ford was in for hard times himself. Ford said that he felt young enough to start over from scratch. Ford said that everyone else ought to be prepared to get up a little earlier and work a little harder. He also said that he would withdraw his $25 million from the banks in the morning. He did not get to do that.

The next morning, February 14, 1933, Michigan’s governor, William Comstock, declared a banking holiday. The proclamation had been signed at 1:00 AM, published, and delivered to bankers when they arrived for the start of the business day. Two weeks later, outgoing President Hoover hesitated to declare a national bank holiday, so the newly-inaugurated President Roosevelt did just that. On March 21, 1933, the Michigan Legislature passed the McNitt-Green bill, granting the governor “dictatorial powers” over banks. Unlike Hitler, Mussolini, and Stalin – to whom he was favorably compared by newspapers in those troubled times – Gov. Comstock had modest goals and eventually declined further powers to control the insurance industry as well.

Anti-Trust

The evils of anti-trust are well-known.  

Anti-trust laws assume that there is a fixed inventory of extant goods and services, that all the widgets and gadgets are like mountains and rivers: they always existed and always will be here. In fact, these are in constant flux, coming into and going out of favor with changing perceptions of utility: 78 RPM records and 5.25-inch floppy disks, just for two. As Larry the Liquidator said, the surest way to go broke is to win an ever larger share of a dying market.

The other expression of that instance is the goods and services that come into existence from invention and entrepreneurship. What did not exist at all suddenly must be regulated, controlled, distributed, monitored and mandated.

The recent prosecutions of LCD display makers is a case in point. A hundred years ago, this was cholesterol from carrot juice. A generation ago, it was a fancy, an applied lab experiment. A decade ago, it was an emerging market. Now, for people to agree among themselves on production and distribution is a crime.

“TAIWAN HANNSTAR EXECUTIVE INDICTED FOR ROLE IN LCD PRICE-FIXING CONSPIRACY” at
http://www.justice.gov/atr/public/press_releases/2011/266070.htm
Goto the site and browse all the press releases back to June 2010.

January 13, 2011
TAIWAN HANNSTAR EXECUTIVE INDICTED FOR ROLE IN LCD PRICE-FIXING CONSPIRACY
Twenty-Two Executives Charged to Date in Global Price-Fixing Scheme
WASHINGTON — A federal grand jury in San Francisco returned an indictment against the current president of HannStar Display Corporation for his participation in a global conspiracy to fix prices of thin-film transistor liquid crystal display (TFT-LCD) panels, the Department of Justice announced today.
The indictment, filed today in U.S. District Court in San Francisco, charges that Ding Hui Joe, aka David Joe, conspired with others to suppress and eliminate competition by fixing the prices of TFT-LCD panels. Joe, a resident of Taiwan, is charged with participating in the conspiracy from on or about Sept. 14, 2001, until on or about Jan. 31, 2006.
TFT-LCD panels are used in computer monitors and notebooks, televisions, mobile phones and other electronic devices. By the end of the conspiracy period, the worldwide market for TFT-LCD panels was valued at $70 billion. Companies directly affected by the LCD price-fixing conspiracy are some of the largest computer and television manufacturers in the world, including Apple, Dell and Hewlett Packard.  

See these related prosecutions.
On the DoJ webpages you can search for the defendants or for TFT-LCD to find the full set of prosecutions and plea agreements.

http://www.justice.gov/atr/public/press_releases/2010/260175.htm
http://www.justice.gov/atr/public/press_releases/2010/264069.htmhttp://www.justice.gov/atr/public/press_releases/2011/266070.htm

http://nobelprize.org/educational/physics/liquid_crystals/history/
In the 1960s, a French theoretical physicist, Pierre-Gilles de Gennes, who had been working with magnetism and superconductivity, turned his interest to liquid crystals and soon found fascinating analogies between liquid crystals and superconductors as well as magnetic materials. His work was rewarded with the Nobel Prize in Physics 1991. The modern development of liquid crystal science has since been deeply influenced by the work of Pierre-Gilles de Gennes.

http://en.wikipedia.org/wiki/Liquid_crystal_display
Liquid Gold: The Story of Liquid Crystal Displays and the Creation of an Industry, Joseph A. Castellano, 2005 World Scientific Publishing Co. Pte. Ltd., ISBN 981-238-956-3.

Contemporary Reports: Panic or Puffery?

It is possible that the “Panic of 1857” is another anti-capitalist delusion?

 

Historians are trained in school to give precedence to first-hand accounts from newspapers, journals, and diaries.  However, even these must be evaluated against an objective standard.  Narratives depend on perspectives.

The anti-capitalists believe that fluctuations in prices, supplies, and demands are examples of the failure of society based on personal enterprise. The socialists claim that their government planned centralized economies would eliminate ups and downs, booms and busts, gluts and famines. History proved them half right.

We know about the "Panic of 1857" from history books that looked to sensational news stories about frenzied mobs of otherwise honest and intelligent folk hopelessly demanding the return of their hard-earned money from inept bankers forced to close their doors. The truth may be different – certainly more complicated – than this. The 1907 History of the United States by James Ford Rhodes gives the Panic of 1857 one line, never calling it by name. To Rhodes, the importance of the financial event was only that it temporarily drove “bleeding Kansas” from public attention. John Fiske’s History of the United States published in several editions by Houghton Mifflin from 1894 to 1907 says nothing about the Panic of 1857, mentioning instead the Dredd Scott Decision. However, Fiske does cover the Panics of 1837 and 1873. William Graham Sumner’s History of American Currency, published in 1874, does tell the story – including the loss of the S. S. Central America – but Sumner puts the word “panic” in quotes. Perhaps that is where it belongs.

Certainly, the Chemical Bank of New York, in its self-published history of 1913 is rightfully proud of its directors for having carefully managed the assets of depositors and thereby surviving whatever actually happened in the autumn in 1857.

We expect news to be objective, distinct from editorial comment. That was possible only after the estate of Joseph Pulitzer endowed an award fund to the Columbia School of Journalism in 1912. In the spirit of Pulitzer’s better side, the Pulitzer Prize Committee itself admits: “He crusaded against public and private corruption, filled the news columns with a spate of sensationalized features, made the first extensive use of illustrations, and staged news stunts. … Pulitzer was drawn into a bitter circulation battle with William Randolph Hearst's Journal in which there were no apparent restraints on sensationalism or fabrication of news.”


While it may well be true that "panic" was in the streets of New York City in the autum of 1857, the fact may be that this was a temporary, local event.  Bank failures - such as they were - were caused as much by the law as by economic reality.  State law demanded that banks make good on withdrawals by the end of the business day.  No other business was so constrained.  If a druggist or livery owed you money, you would wait, like any other creditor until cash came in and you got yours.  Not so with banks.  So, fear of default may well have been real for a few days.  How long that lasted and how far it spread is not well recorded.

Mere Gold is Not Enough: Hayek's "Denationalisation"

F. A. Hayek's Denationalisation of Money (1978) made a case for an open market in money, without legal tender laws, and without a government monopoly in currency.  

Hayek's thesis is two-fold.  First, that a competitive market in money will create currencies that are desirable for their enduring value.  Good money drives bad money from an open market.  Second, more broadly, until we have that happy day, we really cannot say what forms and formats will be acceptable or popular.

Breaking with tradition, Hayek stated that being limited to gold ("the wobbly anchor") is contrary to a truly free market.  Liberated from state control, there is no limit to the forms that money can take.  Hayek even suggested that a truly free market might see stable paper money backed by nothing but the credit of the issuer.  Paper money from one bank might promise payment in the paper of other banks.  Still other possibilities exist. 

It is easy see that if a bank issued too many notes then it would soon be redeeming them as a result of financial reporting. That is history.  For Hayek the more interesting problem was what to do when the market value of a bank's paper exceeds its issue price.

 "... but it could preserve this business only if it did in fact promptly buy at the current rate any of its notes offered to it.  So long as it succeeded in maintaining the real value of its notes, it would never be called upon to buy back more than a fraction of the outstanding circulation.  Probably no would doubt that an art dealer who owns the plates of the engravings of a famous artist could, so long as his works remained in fashion, maintain the market value of these engravings by judiciously selling and buying, even though he could never buy up all the existing prints." (Page 49)

This little book is dense with worthy ideas such as that. Most economists express three uses for money. Hayek defined four: cash purchases; reserves for future purchases; standard of deferred payment; unit of account.

F. A. Hayek apparently had little or no experience with numismatics.  Many of his theoretical claims are supported by facts known to those of us who study the art and science of the forms and uses of money. Other of his theoretical assertions are denied by the facts of history. And to be fair, numismatists, schooled in economics by publicly-funded (or aristocratic) institutions, also err when narrating the history of money.  The idea that coins were invented by merchants to make bullion more convenient for retail trade is the best example of such error.  Charles Seltman, the British numismatist who promoted that silly idea via the Encyclopedia Britannica, never worked behind a retail sales counter.   Similarly,  for all their theoretical knowledge Hayek and the other Austrians had no experience as merchants.

 Hayek says that it is unfortunate that there existed no complete history of the experience of government monopoly on money.  However, he does cite Murray N. Rothbard's monograph, What Has Government Done to Our Money (1963, 1974).  That work is little more than a sketch.  Like Hayek, Rothbard had little involvement with the artifacts.  Rothbard relied on "The Use of Private Tokens for Money in the United States," by B. W. Barnard from The Quarterly Journal of Economics, Vol. 31, No. 4 (Aug., 1917).  That academic paper reported all known issues without regard to their actual use.  Today, Bar Cents and Immune Columbia are regarded as rare and likely saw little use in their time.  Nova Constellatio tokens really did circulate.  In short, Rothbard's data was flawed because he gave weight to an academic paper instead of going to numismatists.  Any active collector of American money could have shown him (and Hayek), the material evidence they sought to support their theories.

"The early Middle Ages may have been a period of deflation that contributed to the economic decline of the whole of Europe. ... But where, as in Northern Italy, trade revived early, we find at once all the little princes vying with one another in diminishing the coin - a process which in spite of some unsuccessful attempts of private merchants to provide a better medium of exchange, lasted throughout the following centuries until Italy came to be described as the worst money and the best writers on money." (page 34)

Yet this complaint - common among historians and cited by gold bugs - ignores one of the arguments for gold-based money: with the quantity fixed by nature, each new invention, import, or innovation caused the existing money to increase in value: hard money is worth ever more over time.  That was the case in the Middle Ages as expanding trade brought more products to market.  It is also true that warlords and generals debased their coins, a common cheat in both Roman and modern times, as well.  But that negative motivation was only part of the story.  Absent new discoveries such as the mines of Joachimstal and the looting of the Americas, deflation is a beneficial consequence of hard money.   Moreover, some strong currencies, such as the English sterling penny and the Venetian gold ducat, enjoyed international reputations.  That meant, however, that they left one place and went to another.  For a local ruler to keep his coins in his realm, the issues had to be useful only locally, otherwise the locale would quickly enjoy an influx of imported goods and a loss of currency.

One solution to that is a token currency. The strength of a monetary medium, itself durable and cheap, but also a token for precious metals that do not pass hand to hand was explored by Neil Carothers in Fractional Money (New York, J. Wiley & Sons, 1930), a book that grew out of his doctoral dissertation some years earlier.  Again this data is a century old.  We know these facts; and they support Hayek's theories.

We can see an analogy to Hayek's laissez faire banking via the stock market.  Common stock certificates are a form of money; and historically their format resembled  bank drafts, being only much larger in size.  Stock certificates were issued, endorsed, transferred, and cancelled.  With or without a declared par value their worth fluctuated on the open market.

Knowing Hayek's theory you are perfectly free to use whatever moneys you prefer.  If you live in the USA, you will find Federal Reserve Notes most liquid.  But all manner of moneys are in circulation here and now, if you only know where to look for them.

ALSO ON NECESSARY FACTS

Numismatics Informs Economics

Debt: the Seed of Civilization

Numismatics: the Standard of Proof in Economics
Objectivism and the Gold Standard
Money as a Crusoe Concept
Electronic Money: Coins without Realms

The Sociology of Freedom

Freedom (or the lack of it) does not come to each of us evenly and all at once.  This is explained in Harry Browne's classic, How I Found Freedom in an Unfree World.  That book is a nicely crafted restatement of a libertarian theory earlier expressed by Skye d'Aureous and Natalee Hall in "What if They Gave a Millennium and Nobody Came?"  (Libertarian Connection #13, reprinted in the 1981 Loompanics Main Catalog and in Loompanics Greatest Hits, 1984). 
          Harry Browne examined 14 common Traps that we allow ourselves to fall into, from family to job, to taxation, and including "Burning Issues" and "Rights."  Browne advocated a rational (logical and dispassionate) examination of each limitation on your own freedom.  You must recognize that for each gain, you must pay a price, in order to reap the reward. 
        Skye d'Aureous and Natalee Hall were at once broader and more concise. "An overall decrease in freedom for the general population does not mean an overall decrease in freedom for you, unless your actions are necessarily the same as the general population."  ...  "You will not suddenly become 100% free." They made 15 other points to elucidate the same principles. 
       In fact, these truths coincide with known perspectives from sociology.  Sociology looks at the variability in human cultural experiences and posits axioms of subjectivism.  C. Wright Mills coined the phrase "sociological imagination" which has taken on wider meanings than he intended.  Sociological imagination is the ability to see beyond your own social context to understand that of other people.  The Thomas Theorem says, "If men define situations as real, they are real in their consequences."   Those perspectives support the suggestions of Browne and others that you do not need to become enmeshed in the social world you happen to inhabit.  In fact, we all inhabit many such spheres of life simultaneously. 
     In particular, it is a general prediction that anyone who calls themself a Republican, libertarian, or Objectivist probably has set aside some savings in gold and silver coins that protect those savings against the ravages of inflation.  Wider still, Browne would point out that a job with a fixed salary gives you less freedom to adjust your wages.  Moreover, some would also suggest that actually working for the government might be one way to stay ahead of inflation by participating in its cause.  On the other hand, even the best-paid government employee, a GS-15 (depending in the locale), will top out at about $100,000 to $120,000 per year, confortable, but not wealthy -- and certainly not capable of going to $250,000. 
     Among the wealthiest suburbs in America, measured by household income, are four around Washington DC (Forbes here).  If you want the flexibility of private employment tied to government spending, work for a think tank or a lobbyist.  Of course, for you that might be like being paid to go to prison.  Money isn't everything.  
       Therefore, Browne generally recommends being self-employed at whatever you do best, or at least working at a regular day job that rewards you for your efforts, such as sales.  Of course, that may not be for you.  Your happiness may depend on other choices you make -- and you will pay different prices for different kinds of freedom.  But that freedom is out there.
      What people believe to be true is true in its consequences. This is also dramatized in Atlas Shrugged as industrialist Hank Rearden's legal problems with the Washington planners only reflect his personal life. Even his surrender of Rearden Metal to preserve Dagny Taggart's reputation was a result of that.  If you find yourself trapped by circumstances, then you need to create your own social reality.