Simplest argument for central banks to target money income

The economic school that Lars Christensen named market monetarism, and whose blogging doyen is Scott Sumner, argues that monetary policy should be based on targeting NGDP (nominal GDP, GDP in money terms).

It is based on the equation MV = Py (= NGDP):

Money supply x Velocity  = Price level x output.

Nick Rowe has advanced three clever arguments for monetary policy targeting NGDP here.

The simplest argument I can think of for NGDP targeting is that people have expectations about their future income and the future (average swap) value of money. The worst thing one can do, for the level of economic activity, is to make people nervous about their future income but confident in the future value of money. For then they will hold onto their money, depressing the level of economic activity. Which then reinforces poor income-expectations, and so the pattern continues. (The higher the level of current indebtedness, so the higher existing claims on people’s income, the more this will be so.)

Thus monetary policy that provides an anchor for income expectations (by targeting NGDP) both avoids that danger and still provides some anchor for price expectations, since they will be bounded by the income expectations. (Given that prices will rise by no more than the gap between income and output.)

Conversely, providing an anchor only for price expectations provides no anchor for income expectations and runs the risk of exacerbating any fall in transactions as money supply, and so income, follows output down. Hence inflation targeting is inferior to income targeting.

Or, to put it another way, what matters to people is not merely prices, but prices x transactions (i.e. income). The purpose of money is to facilitate transactions. If you worry only about the (average swap) value of money you can end up frustrating the use of money to facilitate transactions. And a monetary policy that frustrates the use of money to facilitate transactions is not doing its proper job; worse, it can thereby cause considerable social harm by driving down the level of economic activity.

ADDENDA  Inflation expectations in the US are very low.

Taxation is not (necessarily) theft

This is based on a comment I made here. (It is a little bit of a work in progress, as I have updated it over the course of the day.)


That taxation is coercion does not mean that taxation is theft.  Taxes as a compulsory levy to enjoy more expansive use of one's property rights does not make much sense as a notion of theft if it leaves people better off. In other words, if it enhances one enjoyment of various rights, it is hardly a violation of them. Taxation is then part of a compulsory exchange (taxes for services, notably protection) rather than merely a taking. All those folk who are not anarcho-capitalists subscribe to some version of this view.

Of course, it is possible for taxation to be theft, if it is merely for the gain of a ruler and his or her agents without any commensurate benefits. But, while that may be true in part (and historically almost always was, in part), it is almost never true in whole because it is in the interests of a ruler to provide certain protections in order to both gain more revenue and enjoy more benefits from existing revenue. And the longer the time horizon of the ruler, the more true that tends to be. (Which is a benefit for hereditary rule over more uncertain forms of autocracy.)

Whenever there is collective action, there is politics in the weak sense. If one or more agents habitually defer to another, you have domination. But rulership proper rests on the existence of the compulsory exchange of taxation. If it is not an exchange, if it is merely a taking, then it is banditry; but see previous comments about ruler incentives. After all, the perception of some compensating benefit reduces enforcement costs.

Of course taxes can fund violation of rights. And interest politics is about makimising the returns of the compulsory exchange for you or some group you belong to. While normative politics is about maxismising the overall net benefits from the compulsory exchange. But if you do not understand that taxes are usually part of an exchange, for entirely rational reasons, however compulsory, you do not understand the nature of taxes.

We are stuck with the paradox of politics: we need the state to protect us against social predators but the state itself is the most dangerous of social predators. This is a paradox that can never be resolved (for reasons which I discuss here), only managed more or less well.

About infrastructure

This is based on a comment I made here.


Infrastructure (roads, power, water, rail, ports, airports) is typically a network good or a hub for networks. As such they provide benefits that are not necessarily captured by the network provider. Hence, private providers are likely to underprovide infrastructure. Indeed, infrastructure provision was a major feature of government expenditure up to around the middle of the C20th.

A notable long-term trend in public policy is that the state was better at infrastructure when it was not trying to do quite so much. The problem is, at least in part, that, with the huge expansion in government income support from the 1960s on, infrastructure is also competing with welfare, education, health and related spending much more than it used to.

Another wrinkle is that the rise of permit raj's in land use in the second half of the C20th undermine a fundamental incentive to publicly provide infrastructure. Much of the point of the state providing infrastructure is that (unlike the private sector) it can gain revenue from increased land value and production: it can tax the positive externalities infrastructure provides. Unfortunately, a much cheaper and easier way to generate increased land tax, etc revenue is simply to engage in land rationing (Krugman's Zoned Zone) and reap higher land/property/capital taxes. (And, not coincidentally, makes developers a great source of political donations.) This both raises the cost of infrastructure (by driving up land prices) and lowers the incentive to provide it.

Add in "infrastructure is evil" environmentalism, which turns NIMBY (not in my backyard) into BANANA (build absolutely nothing anywhere near anyone) and you have factors undermining infrastructure provision that are at least as important as any push for privatisation.

On which point, there is a long history of infrastructure provision wavering back and forth between public and private provision, depending on which set of policy pathologies have been most saliently problematic in the preceding period. Many countries have gone through a period when public provision/production pathologies were most salient, hence the swing to private provision, including of infrastructure.

About Austrian economics

I find Steve Horwitz, along with George Selgin (prominent advocate of free banking and supporter of a productivity norm [pdf] for monetary policy), the most accessible of contemporary Austrian school economists as they are both clear writers who seek to engage with those who are not of their school and are refreshingly free of the nastiness that so many Austrian school commentators seem prone to. (Little, if any, of what I have to say in the following applies to Selgin and some applies to general tendencies in Austrian commentary rather than Horwitz.)*

 Horwitz has written a very useful paper on Hayek and Keynes’ different understanding of capital. Points that strike me reading the paper, and particularly Horwitz’s presentation of the Hayekian/Austrian concept of capital, include: (1) The Austrian view of capital is over-impressed by differentiation, as when Horwitz writes:

What is central for the Austrian theory is that capital is not homogenous; capital goods are not perfect substitutes for one another. Any given good can only serve in a limited number of production plans, and it is not possible to create any given production plan out of any capital goods. Goods are not infinitely substitutable, and not all goods have the requisite complementarity necessary to be part of any particular production plan. This emphasis on the “heterogeneity” of capital distinguishes Austrian capital theory from many of its predecessors, especially those, most obviously Knight's “Crusonia plant” or Solows “shmoo,” that viewed capital as a homogenous fund of resources from which equally useful “ladles” could be applied to any production process

Yes, once resources are allocated to specific capital, they are difficult to shift to other uses. Nevertheless, the ongoing process of allocating resources to creating capital is important in its own right. Capital is not homogeneous (neither is labour; something which seems to figure rather less in Austrian analysis) but there is enough flow of resources in an economy that heterogeneity is not all there is to grapple with.

 (2) Thus, there is, in the Austrian approach, a somewhat “frozen” view of capital: that it can be difficult to reallocate, does not make it impossible. As Horwitz notes later in the paper, the loss of value in capital no longer allocated to its original use measures how difficult but not impossible it is. Conversely, heterogeneity of labour would suggest that labour markets also have adjustment delays and constraints, which sits rather poorly with Austrian confidence in fully flexible wages if there were no regulatory interventions.

 (3) At the same time, there is a perfectionist view of markets, that there is a “correct” arrangement of capital. As when Horwitz writes:

... the capital structure and the process of monetary calculation that drives it is the fundamental coordinating process of the market economy. Fitting those pieces together as correctly as possible, in response to knowledge and incentives produced by the pleasurable and unpleasureable beeps of profit and loss, is what ensures ongoing economic coordination and growth.

Yes, profit and loss direct resources to more valuable uses, but the notion of a single “correct” outcome glides over a whole lot of issues about incentives, constraints, information flows, etc. Yes, the “pieces” have to fit together, but they are constantly being created and replaced, with a fair bit of “good enough” going on because of various constraints, varied incentives, information asymmetries, etc.

 (4) The emphasis on the role of money in economic calculation is somewhat one-sided, as when Horwitz writes:

What guides this process of plan formation, deconstruction, and reconstruction is monetary calculation. In a market economy where capital goods have money prices, those prices enable entrepreneurs to prospectively formulate budgets and retrospectively calculate profits and losses. Budgets based on those prices are what enable entrepreneurs to decide which capital goods will effectively serve as complements in an integrated production plan. After that plan has been executed, profits and losses signal owners of capital whether or not the plan was successful, which enables them to decide whether the uses of capital were, in fact, sufficiently complementary to continue. If not, then the money prices of other capital goods provide the information necessary to engage in another round of calculation and budgeting to see what sorts of capital goods might serve as substitutes for pieces of the failed plan.

Yes, the various “swap values” of money (for goods and services) matter, but what entrepreneurs are really interested in is expected income; that is, price x transactions. It is not that there is no concept of demand/expected income in the Austrian analysis, it is that, at crucial points in the argument, price is emphasized to the extent that transaction levels, and so income expectations, disappear from view. (David Beckworth has a nice post connecting collapsing transaction levels, and so income expectations, as reported by business survey respondents, with the economic downturn in the US; or, to put it another way, it’s the level of transactions,... .) Price is not a perfectly flexible lever; particularly given the different time scales between stages of production, to use Austrian language, and constraints in labour markets.

 (5) Following on from (4), the fundamental role of money in an economy is to facilitate transactions, including across time. The typical Austrian emphasis on money-for-calculation, and presumption of state monopolies as over-suppliers of money, leads to an obsession with inflation and the risk of hyperinflation. (Hence my comment that an internet Austrian is someone who has predicted 10 of the last 0 bouts of hyperinflation.) As a matter of historical fact, deflation (and unexpected disinflation) can be much more destructive of economic activity than inflation. Both inflation and deflation interfere with money as a means of economic calculation, but deflation (and unexpected disinflation) also drives down income/economic activity, which makes is much more destructive. But the Austrian view of business cycles is so focused on finding reasons for busts in the previous booms (those money over-supplying central banks) that it, in effect, blames the effects of deflation on previous inflation. Yet inflation and deflation are equally monetary phenomena, one is not causally dominant over the other. 


[Read the rest at Skepticlawyer or at Critical Thinking Applied.]

Suffer the little children: the burden of culture

A description of what confronted a Commonwealth officer in the Northern Territory during the Pacific War (1941-5), when thousands of service personnel passed through the Northern Territory:

… once you introduced a European or Asian father any child of that liaison had any rights as an Aboriginal extinguished at birth. They were not classed as Aboriginal people by the Aborigines …
… the Aboriginal midwives were well aware of the problems that could exist through a woman have a half cast[e] child and in this respect particularly in the Centre where Aboriginal children were born over a hole in the ground where a fire had been lit and when the child was born green leaves were thrown on the first so the child was smoked at birth. Also if the child was of light colour the Aboriginal midwives just grabbed a handful of ashes out of the fire and placed it over the nose and mouth of the child so that the child didn’t live. The child was then taken away from the camp area and buried 99% of the time under a small ant hill. This was just levered up with a yam stick and the body placed underneath and then put back in place and the area swept so that no one could tell where it was or anything else.

The author apparently made two attempts to give evidence to Sir Ronald Wilson’s Bring Them Home enquiry, and was both times refused. (Like the report’s use of the word ‘genocide’, Sir Ronald later publicly admitted that was a mistake.)

While the narrative of celebrity achievement is a universal exception, as an Older and Wiser friend of mine has pointed out, there are two permitted narratives about indigenous Australians among what Judith Brett calls ‘the moral middle class’: victims or Noble Savages. Which narrative does the above fit? And if neither, why is there anything morally righteous about writing those nameless, culturally euthanized children out of history?

Fetishising indigenous cultures is not remotely the same as understanding them. And, without understanding, what is moral judgement worth? Indeed, what is moral about wilful blindness?

Forager constraints

Hunter-gatherer desert cultures have to deal with an enormously constricting environment. There has to be a brutal pragmatism about such cultures if those who live according to their precepts are going to survive from generation to generation; let alone for thousands, indeed tens of thousands, of years.

Hunter-gatherer—that is foraging—cultures have to control fertility: a control which has to all the more strict the more constraining the surrounding environment is. Children are burdens, having to be carried and fed, to be taken on with due care.
A process whereby young girls are married to older men, and their widows are married to young men, transfers knowledge between the generations, commits the younger to support the older, and keeps fertility rates down. It is functional in an environment where not being functional means starvation.

Strictly controlling who can marry whom provides genetic protection, embeds children in a protective network and binds folk together in known patterns. Cultural selection when the non-functional means starvation selects brutally for what works.

Mixed parentage children had no place and no place means an unsupportable burden. The rules that led to the above behaviour make perfect sense under the constraints of desert foraging. Twins, for example, would be culled for the same reason.

Of course, even in the 1940s, those constraints no longer operated. But the culture had not yet shifted. It did later; once non-Aboriginal partners were seen as not-forbidden, instead of not-permitted, mixed-parentage children became much more acceptable.

The culture fetish

But this is where the fetishing of culture comes in. Cultural practices and outlooks that make perfect sense under the constraints of desert foraging make none at all in a society of industrial (or even post-industrial) prosperity. If the welfare of indigenous Australians is the measure, then their cultures must change. If fetishising them as noble savages with morally pristine cultures is what folk are about, then dysfunction is an embarrassing reality which indigenous Australians-as-victims can be invoked to hide from.

[Read the rest at Skepticlawyer.]

An ambiguity in production functions

I had never given much thought to production functions, a standard way for economists to formalise thinking about production, until a rather frustrating discussion with commenter Martin on Scott Sumner's Money Illusion blog provoked me into thinking about them a bit more and I came to realise there is an ambiguity in production functions. Or, at least, an easy way to be misled about them.

The standard production function is the Cobb-Douglas production function:



Where

▪ Y = total production (the monetary value of all goods produced in a year)
▪ L = labor input
▪ K = capital input
▪ A = total factor productivity
α and β are the output elasticities of labor and capital, respectively: values that are constants determined by available technology.

The ambiguity is what do we mean by input? It is easy to think of the input as, for example, machinery (capital) and workers (labour). But that is not true. You can have all the machinery and workers you like, but if they are not actually doing anything, there is no production.

The inputs are the using of the machinery and the labour: the capital and labour services. Measuring total amounts of capital and labour available may tell us something about total production capacity, but they do not tell us anything about actual production. The function itself is about use, not capacity.

And the using of the capital and labour involves all sorts of extra complexities. How efficiently are they being used? How well allocated are they? What incentives to use them efficiently are operating? What information flows are operating? What risks are being generated? How are they being managed? Yes, total factor productivity (A) (aka the Solow residual) is part of the function but, as Wikipedia correctly says, the Solow residual “is a question rather than an answer”.

In running a firm, having the capital and labour is merely the first step. The difficult bits are in directing and managing their effective use. Which is then an iterative process, as capacity is accumulated or dispensed with according to what comes out of said use. Nor, as Yoram Barzel points out, can the boundaries of a firm be captured by a production function. Firms engage in all sorts of activities that are not merely applying labour to capital for some specific output.

One cannot produce something from nothing; but merely having something, merely having capital and labour, does not tell us what is produced, how well and to what value. Hence the failure of “just add capacity” (typically capital) analyses of, and policies for, economic growth.

Production functions are not independent of institutional frameworks, they are deeply and profoundly embedded in them. But if one is misled into thinking production functions are about capacity, rather than use of such capacity, it is easy to be misled about that.

Suffer the little children: the burden of God

Just when I thought I had a full grasp of the moral depravity that is suicide bombing, another level of horror is revealed. Al Qaeda’s preferred target group for recruiting suicide bomber is—orphans.

As one Pakistani political activist writes:

We have observed that most of the suicides bombers are orphans who are less than 17 years old. These vulnerable children are being used as the main tool for terrorism.

Meanwhile, the Iraqi Interior Ministry has announced that:

Al-Qaeda has over the past two years used 24 children to carry out suicide bombings in Iraq, the director of military operations for the Interior Ministry, Abdelaziz Mohammed Jasim, told pan-Arab daily al-Sharq al-Awsat.

In Somalia, a 13 year old orphan reports on how he was recruited to be a suicide bomber.

Adoption vacuum
Sharia increases the opportunity for jihadis to recruit orphans because it has usually been interpreted to bar adoptions (though a form of guardianship, or khalat, is permitted). Without adoption as an alternative in most Muslim countries, there is a larger pool of vulnerable recruitment targets in orphanages for al Qaeda and its ilk to recruit as self-activating bombs.

It is not surprising that Sharia should be resistant to adoption. Sharia arose in a society where lineage was crucial: the role of daughters was to breed sons for the lineage (hence the propensity for cousin marriage, so they “breed in”). If there is no living parent, a child’s status as “asset” for the lineage is much weakened. And permitting adoption would open up the risk that they become “assets” to another lineage. (As ever, Philip Carl Salzman’s analysis is a necessary starting point for understanding the social dynamics of Islam’s home region.)

There is a push to re-interpret Sharia to permit adoption, part of the general tension between Islam and modernity which has done so much to shape the contemporary jihadi outlook. (Which is not to say that jihadis are merely some modern phenomenon; it has been a recurring feature of Islam that it produces violent “purification” movements—after all, what was the Prophet himself after he took over Medina if not the leader of a violent religious purification movement?)

Use of orphans as a potential political asset is not unique to al-Qaeda. It was widely rumoured that the Romanian Ceaușescu tyranny sought to recruit orphans as loyal secret police operatives. Though not strictly orphans, the Kim dynasty that owns North Korea uses its illegitimate progeny in a similar fashion.

To use orphans as suicidal military assets is, however, rather more distinctively a jihadi activity. Iran used children en masse during its war with Iraq (which makes the regime’s current public angst about plummeting fertility grimly ironic). Child fighters have been a feature in Africa’s horrors and the Tamil Tigers used both child fighters and suicide bombers. But to specifically target orphans for recruitment—indeed, as your preferred source of suicide-bombers—seems a new, vile twist.

But we come back to the point about lineage. Orphans are cut off from family: this makes them both more vulnerable to recruitment and means they come with fewer entanglements. Being no lineage’s “asset”, their loss has fewer social resonances.

Loving death
Of course, part of the horror of using orphans is precisely their vulnerability. The Somali lad telling of how his jihadi recruiter/mentor offered him purpose and love missing from his life is repellent reading. The horror from so using children comes from the violation of innocence and the sense of life thrown away so early. But that assumes one loves and reveres life. This is not a feature of the jihadis.

[Read the rest at Skepticlawyer or at Critical Thinking Applied.]

Trust, network and framings

Scott Sumner and Noah Smith have been having an argument about China and culture. Scott's original post was here, Noah replied, Scott replied to that. This is a comment I posted on both blogs.


My general working principle is that culture-as-explanation is the last refuge of the analytically bereft.

The success of the overseas Chinese in SE Asia can largely be explained by trust and networks. (Think Jews in the diamond trade.) You get linked dialect or even common-ancestral-village networks where reputation information flows very speedily. In a situation where the default attitude of rulers to commerce was to fleece it, and the general environment was low trust, networks of trust extending across rulerships had strong advantages. Their success was also more acceptable because it was not threatening to local rulers (Chinese could not aspire to political office).

One sign of this is that the overseas Chinese are not nearly as economically important in high trust societies. The overseas Chinese do fine in Australia, but not extraordinary in the way they do in SE Asia.

(Michael Backman wrote a report for DFAT's East Asia Analytical Unit years ago Overseas Chinese Business Networks in Asia which covered this.)

Chinese culture has been agrarian, with cities and commerce for a long time. The necessary framings are built into people's outlooks.

Which is the point where I will concede culture matters. Folk coming from a hunter-gatherer culture lack the relevant framings and have real difficulties adjusting to modern commercial-industrial life.

Deepak Lal's division of culture into its material and cosmological aspects (pdf) (short summary here) captures this element (and why language groups can seem to matter: they come with attached framings).

What you call 'culture' I tag as trust, networks, and framings. More analytically tractable.

We love Joss Whedon

Because of this.

There is also Buffy, Angel, Firefly and Serenity. (Dollhouse, not so much.)

I have a particular soft spot for Serenity. Not merely because it is a fine SF film, but because it such a fine anti-utopian film. Mal's speech [spoiler alert] is a great moment:

Somebody has to speak for these people.
As sure as I know anything, I know this. They will try again. Maybe on another world, maybe on this very ground swept clean. A year from now, ten, they will swing back to the belief that they can make people better. And I do not hold to that.

In one of the special features in the Australian release of the DVD, Joss Whedon says of the film that it explores:

where the Utopian vision stops. Because whenever you create some kind of Utopia you find something ugly working underneath it.

Utopianism is always evil, because it is always a war against people as they are in the name of people as they should allegedly be; it is alway an assault on the core of being human. The utopian aim justifies utter unscrupulousness (because the goal is so wonderful and noble that any means are justified), utter arrogance (because the anointed just know how things should be while any resistance just proves how benighted and inadequate such folk are) and complete control (since otherwise how is one going to be able to remake folk who, as inferior versions who fail to realise their own inferiority, obviously shouldn't get a say). It is hardly surprising that the utopian urge has left nothing but misery and disaster in its wake.

Joss's anti-utopian realism creates a coherent moral structure for the plot of Serenity, with all those themes working out and driving the story. That actions have consequences, that the dark in the human soul is real, are two guiding principles of his art. (Hence his anti-utopianism.) But he also creates vivid characters, great stories and sparkling dialogue.

Joss is even great in what he inspires, as in the classic Buffy versus Edward. (Because real vampires don't sparkle: yes, that was completely gratuitous Spike action. Here's more, from the classic Once More With Feeling, the Buffy-the-Musical episode. I am also fond of the Angel puppet episode Smile Time. Which gives us yet more gratuitous Spike action. Because we love Joss because he is willing to go there, and pull it off.)

But we come back to where we came in, loving Joss Whedon because of this.

[Cross-posted at Skepticlawyer.]

Not a free speech issue

If a private publication sacks a writer because they do not wish to be associated with his declared opinions, this is not a free speech issue. It is a branding issue, it is an employment issue, but it is not a free speech issue.

This is particularly true of a publication that is explicitly ideological in its role. (Using ‘ideological’ in its most general sense of having an explicit normative view of the world.)

The publication in question is the National Review, the premier magazine of American conservatism founded by the doyen of postwar conservative movement writers and activists William F. Buckley Jnr.

The author who was sacked was expatriate British journalist and writer John Derbyshire. He was sacked for this article in Taki’s Magazine.

If Derbyshire were to be prosecuted for publishing the article, that would indeed be a free speech issue. But National Review deciding that it does not wish to be associated with particular opinions, that is a matter of branding, of ideological identity, not free speech (as is, for example, being claimed here).

Colour awkward
The politics of race are endlessly fraught in the US and deciding that American conservatives are ipso facto racist is a common conceit among American liberals (using 'liberal' in its peculiar American usage) and folk further left. (That sometimes reaches the level of deciding that conservative support for black figures, such as Condi Rice, Justice Thomas or Herman Cain, is itself a manifestation of racism.) Without getting into the history of American conservatism and race, there are certainly historical reasons why the National Review might have some sensitivity on such matters.

There are also generational shifts. Younger conservative activists are post-civil rights folk. They accept civil rights as a positive feature of American history and a usually very against revisiting opposition to civil rights: young conservtive bloggers actively campaigned against Senate Majority leader Trent Lott after his implicit endorsement of Strom Thurmond’s opposition to civil rights, which led to Sen. Lott’s resignation as Senate Majority Leader.

Either way, the National Review’s decision makes perfect sense. Particularly when leading the ideological assault on a serving black President.

Probability wrong
So, what’s wrong with Derbyshire’s article?

A pretty standard thing: a statistical tendency is not a defining characteristic. It is perfectly true that the homicide rate among black Americans is much higher than it is among other Americans. This is primarily a problem for other black Americans.

It is true that more American whites are murdered by blacks than blacks are murdered by whites. But if a minority group has a much higher homicide rate than a much larger group, it is to be expected that more members of the majority will be murdered by members of the minority than vice versa.

So, Derbyshire has a point then? No, Derbyshire is a statistical illiterate. The chances of any particular black person being a perpetrator of homicide is extremely low. A propensity to violence is not a defining, or even a likely, characteristic of any given black person; particularly a black person who is not young and male. But even a young male black is far more likely to be no risk than high risk. (Their high incarceration rate has everything to do with the insane war on drugs—the systematic, and grievously failed, attempt to deny people dominion over their own bodies—very little to do with any tendency to violence.) Indeed, young black males are far more likely to be the victim of homicide than a perpetrator any white person is.

Even if one accepts a genetic explanation for higher rates of hyper-aggressiveness in African and African-migrant populations, it is still not a likely characteristic of any given African or person of African descent. (Yes, I know we are all ultimately of African descent; I mean descended from folk who were not part of the prehistoric out-of-Africa diasporas.) It is Derbyshire citing averages, when the issue is likelihoods, that demonstrates his statistical malfeasance.

Focusing on someone’s blackness is not focusing on a risky characteristic. It is actually very bad advice to give a young person.

Which is another reason for National Review to sack Derbyshire.

[Cross-posted at Skepticlawyer and at Critical Thinking Applied.]

Conan: a lament

I wanted to like the latest Conan film. I loved Robert Howard's original stories, I enjoyed the Milius-Schwarzenegger film. Watching Jason Momoa with his shirt off beating up bad guys was something I wanted to do.

But the actual film was a serious disappointment. Rewatching it recently (yes, I bought the DVD -- it has Jason Momoa with shirt off, even gratutious butt shot), I tried to work out what went wrong. The actors are fine, the production values are fine, the action sequences work.

The problem is the writing. It is utterly pedestrian. There are no memorable lines. The 1982 film had a series of memorable dialogue sequences:
Crom is your God ...
... This you can trust ...
... What is best in life? ...
... There comes a time when the gold loses its lustre, when jewels no longer glitter ...
... I am the wellspring from which you flow ...
... Flesh is strong ...

By comparison, I live, I love, I slay and I am content is the best the latest version can manage. There is also no humour. Pedestrian, monotonal writing creates a story you just don't care about much. No matter how energetic the hero, winsome the heroine, disturbing the witch-daughter or ruthless the villain--a villain that has neither mystery nor pathos. He loves his dead wife, but this is just a floating fact, with no emotional engagement. There is nothing remotely emotionally challenging or engaging about the villain, so you just don't care.

This is not Stephen Lang's fault, it is the material he has to work with. What makes Magneto such a great villain is you get where he is coming from, and it has emotional resonance. Lord Blackwood has mystery and menace. Loki is coping with one damn thing after another (and an insufferable bigger brother). (And he's Loki, he just has to go there.) Thulsa Doom had grandeur and manipulative emotional depravity.

Stephen Lang's Khalar Zym is given so little emotional resonance to work with, I had to look up the name of his character. If the villain is an emotional dead zone, so is the film.

In welcome contrast, John Carter of Mars is a wonderful action romp; an excellent adaptation of Edgar Rice Burroughs's original Mars books. The one significant change is, where in the original books John Carter falls asleep on Earth and wakes up on Mars, and this is never explained, the film not only provides an explanation but turns it into a major plot feature. And we get Mark Strong as a villain, always a plus.

I gather the critics have not been kind: but they generally don't get genre anyway. John Carter is a film worth seeing on the big screen.

ADDENDA: Conan was a financial flop at the box office. John Carter is doing significantly better at the box office.

Prince of Persia did much, much better at the box office than Conan: how John Carter ends up is not yet clear, though IMDB users rated John Carter the better film than Prince of Persia.

Blatant internet plug

My brother's wife sells t-shirts made from hemp and organic cotton. I can testify that they are very comfortable.

She also makes great kimchi, but only for family and invited guests :)

The more things change ...

Theodore Roosevelt would not have been terribly surprised at how the "Arab Spring" is turning out, particularly in Egypt. (Tunisia is a bit more promising.) After a post-Presidential visit to Cairo and Khartoum, he wrote to longtime friend and correspondent Sir George Otto Trevelyan:

Perhaps what the French are now doing in Algiers, what the English are now doing in Egypt and the Sudan, will in the end result in failure, and the culture they have planted wither away, just as the Græco-Roman culture which flourished in the same lands-a couple of thousand years ago afterwards vanished.

And further:

The real strength of the Nationalist movement in Egypt, however, lay not with these Levantines of the café but with the mass of practically unchanged bigoted Moslems to whom the movement meant driving out the foreigner, plundering and slaying the local Christian, and a return to all the violence and corruption which festered under the old-style Moslem rule, whether Asiatic or African.

Between Nasser's destruction of the commercial middle class; the grinding, corrupt authoritarianism the continued under his successors Sadat and Mubarak and the Islamist surge, the burden of history is great in Egypt, and in the region generally.

Just how much the economic life of the region is distorted by its corrupt, authoritarian politics is nicely set out in this paper (pdf) by a couple of Arab economists. A weak and dependent commerce makes it even harder for the politics of the region to escape from the "mosque or military" as the only bases for organised political power.

Moral mascots and moral adults

Thomas Sowell uses the term ‘moral mascots’ to refer to groups that progressivist opinion focuses on at any particular time as especially worthy of moral concern. A feature of such status as moral mascots is that such moral mascots are often, particularly if they are not Westerners, not treated as moral adults. That is, they are not held up by progressivist opinion to the same moral standards as others (particularly Westerners) and bad behaviour is often regarded indulgently, sometimes astonishingly so. Such attenuation of moral responsibility typically extends to causality, to an attenuation of their status as moral agents. That is, they are typically seen as passive recipients of causal forces, or as reacting to causal processes initiated by others: they are much less likely to be seen as initiators of causal processes.

A bifurcated mindset
One sees this a lot in progressivist treatment of Muslims. One is, for example, permitted to criticise organised Christianity, Christian doctrines and beliefs and Christians as much as one wants. One can also do so without any reference to similar issues with any other religion. Christians are also expected to show forbearance when crosses or bibles are destroyed. In other words, Christians, particularly Western Christians, are treated as full moral agents; as moral adults to be held responsible for their actions.

The reverse does not apply. To criticise Islam is likely to be commit “Islamophobia” and to engage in “essentialism” and, if one does not acknowledge equivalent Christian sins, is a clear sign of prejudice and ignorance. In this mindset, Muslims are simply not treated a moral adults and full moral agents in the way Christians are.

In this mindset, when a solitary fanatic of dubious mental status murders lots of people and publishes a manifesto, the actions of that solitary individual are held to taint everyone who holds overlapping views. Yet no amount of mass murder by Muslims, for openly stated-to-be-Muslim reasons, taints any part of Islam. Westerners have moral agency (indeed, in this occasion, hugely inflated moral agency); Muslim moral agency, by contrast, is massively attenuated.

Similarly, the notion that Christians be held to follow Christian doctrine as a mark of cultural “authenticity”, that Christian sensibilities have to be carefully respected, is not a mark of progressivist behaviour. Christians are moral adults who can make their own choices and are expected to put up with criticism. By contrast, Muslim beliefs (no matter how misogynist) are treated as marks of cultural authenticity and are expected to be deferred to. Muslims are not moral adults; they are moral children to be cosseted.

If Qurans are accidently burned by US forces, that is patently offensive. If Muslims riot in response, it is an understandable rage. An “understandable” rage no Christian would be excused for indulging in. Again, the mindset treats Christians as moral adults and Muslims as moral infants.

If things are too embarrassing, they are either passed over in silence or moved on from as soon as possible. The deliberate destruction of Benghazi war graves was clearly unprovoked, bigoted vandalism that, alas, has canonical support in the life of Muhammad. But anyone who raises this latter history as problematic is engaged in very “poor form”. The status of Muslims as moral mascots needs to be protected.

There are few areas where this denial of moral adulthood and agency to Muslims is more rife than in commentary on the Arab-Israel dispute. Arab states trapping Palestinians in eternal (as long as Israel exists) status as refugees by denying them citizenship or residency is simply ignored. They are not moral adults, they are not held responsible. Only Westerners (specifically Israelis) can provide solutions, because they are the only moral adults and so accrue all responsibility and blame.

Palestinian politics driving Palestinian Christians away, thereby making it absolutely explicit that nothing beyond oppression and exile is being offered to Israeli Jews and Christians if they are no longer defended by the IDF, is also passed over in silence. The Palestinians are not moral adults, they are not responsible for contributing to any solution; that is the business of the moral adults, the Israelis.

And so it goes on.

Destructive thinking
This is, of course, a highly destructive mindset. Not only is it destructive to elementary understanding by systematically closing one’s eyes to inconvenient parts of reality, thereby fulfilling Matt Ridley’s definition of political correctness (that ‘ought’ implies ‘is’). It also undermines things getting better by implicitly or explicitly excusing destructive behaviour and attitudes. Why move on from the politics of narcissistic adolescent rage if such politics is pandered to? If such politics “works”, at least in the sense of overt attention and sympathy?

One insidious result of this sort of outlook is the way antipathy gets transferred onto any group whose experience undermines moral mascot status. This obviously happens with Israelis, but can also happen to Jews generally: former and aspiring Lord Mayor of London Ken Livingstone might well be a manifestation of this: what might be called anti-anti-semitism. Just as, in a former age, many folk on the left were anti-anti-communist because being reminded of the record of revolutionary socialism was so annoyingly awkward. And got in the way of the only truly "serious" moral business: critiquing Western capitalism.

If one stops seeing the world as divided into moral adults and infantilised moral mascots but instead sees it as divided into patterns which work and those which do not, then one can focus on spreading what works. But if the moral mascots are forever held to be dependent on the moral agency of others, then their chances of achieving patterns-that-work are greatly reduced.

Making victims
So, the moral mascots themselves can end up being victims of this mindset. Sometimes in a quite direct fashion. Failing to see Muslims are moral adults leads one to overlook (or, worse, excuse) the vicious and murderous campaign by radical Islamists to narrow what is allowed to be publicly expressed. A campaign that is killing, or otherwise blighting the lives, of precisely the most liberal and open-minded Muslims. A campaign that, completely un-coincidentally, marches along with the campaign to bring back the burqa and the niqab; those public manifestations and statements of female subordination.

This latter campaign of restriction of women's public presentation extends to violence against women, to murder and assault, to force them to accept such subordinating control: even to the extent of Jewish children becoming terrorist murder victims.

How much it is about controlling women was displayed when the Saudi religious police literally beat back girls trying to escape unveiled from a burning school, fifteen girls burnt to death: the sheer controlling misogyny involved is stunning. For the reality is, permitting the burqa and the niqab ends up exposing Muslim women who do not wish to accept such to greater pressure, to making them targets to whatever level of violence, abuse or other pressure can be got away with. And because the burqa and the niqab are viewed as indicating subordination to the will of Allah, and the sovereignty of Allah is unlimited, it also makes non-Muslim women targets.

The burqa and the niqab are not simply clothing choices, they are not even merely religious statements. They come with a cruel, vicious, brutal and controlling context.

Infantilizing of Muslims, refusal to accept moral adulthood, also occurs in some Muslim commentary, as in arguments that women have to be restricted in order to not inflame men. Tariq Ramadan can be relied upon to infantilise in a more subtle way, ripping the Toulouse terrorist from any Islamic context and putting the blame on the failure of France to integrate its migrants. There are many ways alienation can be manifested (and there are serious integration problems, France being a typical EU country in the policy weapons it wields against its own young folk, a policy repression that falls particularly strongly on migrant youth). But the Toulouse terrorist chose the jihadi route; as so many young Muslims do in so many countries. There was nothing specifically French in what he did, there was much that was specifically Islamist.

Conspicuous compassion
Infantilising one’s moral mascots may provide a convenient framing for playing the game of conspicuous compassion, for moral-concern-as-status-display, but it is a world away from actually improving the situation of the people one has framed as lacking full moral agency and responsibility. Adolescence is a way-station in life, not a worthy destination. Adolescents whine, adults achieve. Without a grounded-in-reality sense of what achievement is, and how it happens, nothing gets better. But trapping people in a bad situation, sabotaging the mindset that makes escape possible, leaves them as moral mascots indefinitely—and maybe that is the point.


[Cross-posted at Critical Thinking Applied.]

Defined out

Theologian John Millibank has published on the ABC website an essay against normalising homosexuality. It does so by defining homosexual people out of the properly human and the properly social.

Airbrushing history
He starts with the arguments that define homosexual couples out of marriage; that marriage is ‘by definition’ heterosexual. As Millibank puts it:

For centuries - indeed, for millennia - they argue, marriage has been understood as a conjugal relation between men and women linked to the natural bearing of children. Thus there is something monstrous about the state even claiming to have the power by law to change the definition of a natural and cultural reality which has historically preceded the existence of the state itself.

This a very common claim—one made, for example, by Catholic advocate Austen Ivereigh in his recent piece against permitting same-sex marriage:

marriage is a conjugal relationship of a man and a woman apt for the begetting of children who are raised by their natural parents; that this arrangement is both unique and uniquely beneficial to society and to children; and that there is something inappropriate about the state even claiming to have the power by law to redefine it.

But the state redefining marriage is precisely what the Christians did when they captured state power. Marriage is only ‘by definition’ heterosexual because the power of various states have been wielded to make it so. Millibank’s claim that:

But [homosexuality] has never previously been linked to marriage - apart from parodic instances (as in ancient Rome) or marginal situations where for various reasons (including those of transgender) a male or female marital role is "performed" by someone not of that gender

is flatly wrong. Both Roman law and Amerindian social practice, for example, recognised same-sex marriages. The Sifra, one of the oldest rabbinical texts, complained that pagans let men marry men and women marry women. Even the Kama Sutra mentions same-sex marriage.

When anthropologists tried to find some defining element of marriage, the only thing they could find was that it created in-laws. The “by definition” argument merely celebrates the success of past brutalities and restrictions; it is historical and anthropological ignorance passing itself off as metaphysical understanding.

As Skepticlawyer has noted, much of conservative Christian frustration comes from finding arguments they thought settled in the C4th, C5th or whatever century being re-opened, and them losing. Pretending the original argument never occurred is a air-brushing of history worthy of Stalinism, if it did not speak to the sheer ignorance of many such advocates: their metaphysical confidence blinds them to the complexities of reality and the truth of the historical and anthropological record.

One of which complexities is that the Latin Church was pushed into taking over marriage law (basically, to provide the landowning and inheriting elite with a common and clear set of rules for which children counted as legitimate). Marriage did not become a sacrament until the C11th, one that did not even need a priest to be present until the Council of Trent. (Somewhat earlier in English law: the provision was a product of the Reformation and concern to ensure the right priest was involved.)

Marriage has always been an evolving institution, even in Christian theology (there was considerable debate, for example, on whether consummation was necessary for marriage). The way the metaphysical certainty that Millibank invokes contradicts the complexities of biology, society and history is deeply revealing of its profound inadequacy as any path to truth or moral understanding.

Millibank writes of the antiquity of religion, ritual and kinship connections. But, when he does, Millibank implies that it was all enduringly heterosexual. This is more nonsense airbrushing of history. One of the deep divisions between monotheist and polytheist-animist visions is precisely that monotheism typically takes a narrowly procreative view of sex and polytheist-animist traditions typically do not—the latter being much more accurately based on the complexity of sexual expression in the natural world. Philo of Alexandria was, for example, outraged at pagan celebration of gender diversity.

This monotheist procreative obsession (one that does not express biological reality but, on the contrary, ignores or dismisses vast swathes of it) shows up in Millibank’s rejection of artificial insemination and surrogate motherhood. As if the miracle of birth is somehow lessened if we do not get the mechanics correct. There are genuine complexities involved in sperm donation and artificial insemination, but they are hardly insoluble and are certainly much less important than expanding the number of people able to choose to be parents and the number of loved and wanted children.

Those threatening queers
Defining the prior existence of same-sex marriage (and religious expression) out of the historical and anthropological record is merely the start, however. The next layer is to turn granting equal rights to homosexuals as an attack on heterosexuals. Millibank claims:

a supposed "extension" of marriage to gay people in fact removes the right to marry from heterosexual people.
This can seem like a perversely contorted claim, but its logic is quite straightforward: the intended change in the definition of marriage would mean that marriage as traditionally defined no longer exists. Thus heterosexual people would no longer have the right to enter into an institution understood to be only possible for heterosexuals, as doubly recognising both the unique social significance of male/female relationship and the importance of the conjugal act which leads naturally to the procreation of children who are then reared by their biological parents.
In effect, if marriage is now understood as a lifelong sexual contract between any two adult human persons with no specification of gender, then the allowance of gay marriage renders all marriages "gay marriages."

How does one, in a civilization based on a presumption of universal morality, justify denying rights to a minority? Claim that to do so is somehow profoundly threatening to the majority (or, at least, the traditionally dominant group). This is precisely the claim made by bigots down the ages—against giving equal rights to Jews, to women, to blacks …

Here we see an enduring and key element in bigotry: the insult of equality. Since being a heterosexual person in a heterosexual marriage is so much better than anything any homosexual or homosexual couple can be, to treat them as equals is an insult that strips heterosexuals of their rightful status. Again, a standard claim of bigotry down the ages—that it is outrageous to treat Jews as if they are the equal of Christians, women as if they are the equal of men, blacks as if they are the equal of whites, and so on. The targets and justifications shift (though the latter more superficially than substantively). The underlying patterns endure.

And decent people are, of course, entitled to be defended from such an insult. From the precious whatevers such outrageous equating strips from them.

Equal protection of the law does mean that heterosexuals will have to share the institution of marriage with homosexuals-as-homosexuals (rather than as folk desperately trying to hide from their sexuality): how appalling for them. Just as whites had to use the same facilities as blacks, men had to cope with women getting the vote and running for office, Christians had to deal with Jews have the same standing in law as them.

Status anxiety
Yes, an utterly unearned status of claim of superiority is taken away when equal protection of the law is applied. That does, indeed, follow: it is a consequence of equal protection of the law. Indeed, that is one of its major virtues, the stripping away of social subordinations and exclusions; the spreading of respect by the law, of dignity under the law.

[Read the rest at Skepticlawyer]

American political labels

This was based on a comment I made here.


American political labels are so amusing. 'Liberal' means politically cross-dressing social democrat. 'Conservative' usually incorporates large slabs of classical liberalism. 'Libertarian' means classical liberal with the complexity button turned off. While being Republican or Democrat means you get to accuse your opponents of "not getting" the American Revolution, and both be correct.

Meanwhile, 'right wing' and 'left wing' mean less and less the further we get away from the cycle of politics originating in the French Revolution (which was always problematic in transferring to the Anglosphere anyway). After all, Edmund Burke was a liberal (a very prudential liberal, but a liberal nonetheless; he was a Whig, not a Tory, and he and Adam Smith basically agreed on matters economic: so if Smith was a liberal, so was Burke).

The uses of grievance

The creation of Israel created two sets of refugees, one folk constantly talk about and one folk almost never talk about.

The one folk constantly talk about are the Palestinians. The one folk people almost never talk about are Jewish refugees from Arab lands. Both refugee flows were of similar size, but have had very different outcomes.

The Jewish refugees from Arab lands fled to Israel and the West, where they were accepted as citizens and have become part of the fabric of their new societies. Their acceptance and integration has been so successful, that they have effectively vanished from historical consciousness. Which has the effect of absolving Arab countries from any blame and Israel (and the West) from any credit.

Conversely, with the limited exception of Jordan, no Arab country has been willing to accept Palestinians as residents or citizens (via). They have no identity except as refugees; as people with a traumatic past but no future and so an endlessly empty present. They remain sticks to beat Israel with, the only sense in which their Arab “brothers” value them at all. The only future they are permitted to conceive is one where Israel is destroyed; that is the only way they are permitted to stop being refugees.

Indeed, their status as refugees is hereditary. Provided you have an ancestor who was resident within the 1948 boundaries of Israel for two or more years and then fled, you are a Palestinian refugee (according to the UN definition). Apparently, this status as a refugee is eternal, existing as long as Israel does.

So, this is next thing the vanishing of Jewish refugees from historical consciousness does: it absolves Arabs of any responsibility. Only Israel has responsibility.

The boxing of Palestinians into the status of permanent refugees is a wonderfully effective use of—indeed, insistence upon—grievance. One the international community is prepared (at least formally) to endlessly pander to.

There is a third thing the vanishing of Jewish refugees from historical consciousness does: it strips the context away from the plight of Christians in the Middle East. For, just as Arab nationalism drove the Jews away, defining them as “not Arabs”, so the rise of Islamic radicalism is driving the Christians away (via), defining them as drastically inferior to Muslims, as alien to Muslim society. Christians have dropped from 20% of the population of Muslims lands a century ago to 5% now. This process of driving the Christians away is occurring with particular intensity within Palestinian lands. In the West Bank and Gaza, they have dropped from 15% of the population to 2% in much shorter period.

The only Middle Eastern country in which Christians are flourishing is, of course, Israel where their proportion of the population has increased dramatically.

The Arab and Muslim Middle East has shown itself, over decades, to be hostile to minorities. As soon as they gained a measure of power, the Palestinians have shown themselves particularly so. Their sense of grievance is profoundly narcissistic. It is all about them; any sense of empathy for others (even for fellow Palestinians who fail to be Muslim) is patently impotent.

This is yet another reason why the One State “solution” to Israel-Palestine is such an obvious nonsense. What makes the situation of the Jews and Christians of Israel different from the (mostly absent) Jews and (increasingly vanishing) Christians of the rest of the Middle East is the Israeli Defence Force (IDF). The Jews and Christians of Israel can defend themselves in a way that Jews and Christians in the rest of the Middle East could or cannot. Take the IDF away, and they immediately become as vulnerable as the Jews and Christians have proved to be in the rest of the Middle East.

What the treatment of Jews and Christians in the Middle East—particularly in the Palestinian lands—shows is that the powerholders and their supporters in these countries have absolutely no interest in conciliating the Jews and Christians of Israel. They literally have nothing to offer them except oppression and exile. They make the case for preserving Israel and the IDF absolutely clear.

To truly understand the contemporary Middle East, you have to understand the story of the Jewish refugees from Arab lands. Once you do, the argument for preserving Israel and the IDF becomes overwhelming.

ADDENDA: Just to make my point, the Grand Mufti of Saudi Arabia has called for all churches in the Middle East Arabian peninsula to be destroyed.

Money is a transaction good, so expectations rule

(This is an attempt to talk about money somewhat philosophically and avoiding economic jargon while grappling with what monetary policy should be. It is the product of much reading of Scott Sumner, Nick Rowe, Lars Christensen, Marcus Nunes, David Beckworth and other market monetarist bloggers as well as David Glasner.)


Money is a transaction good; the only point in holding pure money is to engage in transactions: i.e. its expected swap value(s) in exchange is its only value.* (By ‘pure money’ I mean money that has no significant value except as a transaction good: paper fiat money for example.) So, use of money is driven by expectations. People take your money because they expect to use it in future transactions. You offer money in transactions because of that expectation. (And, if one money is refused, folk shift, if they can, to another that is accepted.)

There is a range of transactions over which money works as a transaction good. A particular money will only work within a subset of such transactions. For example, local taxes are usually only payable in local money. Indeed, by accepting payment of taxes in its money, a rulership can set a guaranteed range of transactions for its money. In effect, an anchor for its money: but an anchor that determines neither the range of transactions that money is used for nor its value in transactions—i.e. its (other) swap values. The ability to create such a guaranteed range of transactions for its money no doubt explains the origins of coins-as-money, but it determines neither a money’s (other) swap value(s) nor the extent of the range of transactions a particular money was or is used for. (As anyone who has had experiences such as of paying for goods in US$ in Red Square can attest.)

Anything that is used in a transaction purely for its swap value is being used as a medium of exchange. That does not, however, make it money. It is only money if it is also embodies the unit of account. Something that is used as a medium of exchange and embodies the unit of account is a medium of account and so money: something used to both quantify and pay exchange obligations.

(Money is also a store of value, but that is the least distinctive thing about it; many things are stores of value. Its role as a store of value comes from its swap value, which takes us back to it being a medium of account. Yes, we use it because of expectations about its future ability to operate as a medium of account, but that is what is distinctive about it, not being a store of value.)

The subset of transactions for which a particular money can be used will overlap with that for other moneys. The wider the expected range of transactions for which a particular money can be used, the more preferred it is likely to be: preferences which will affect the swap values of that money (either for other moneys or for goods and services).

Shifts in the quantity of money in use, and of the range of transactions over which it is used, will determine its swap values. Note that both of these are driven by expectations. Expectations will affect the gap between what quantity of a money exists and what quantity of that money is in use for transactions: that gap being the demand to hold money (what economists call ‘money demand’). Expectations will also affect the range of transactions over which a money is used: whether by affecting the level of transactions or shifting transactions to another money or to non-use of money. (A commodity money will also have the possibility of shifts to or from non-monetary uses of the commodity.)

Since (pure) money is a transaction good whose (only significant) value is its swap values, expectations about its future swap values affect whether people use it in current transactions or keep it for future use. Ironically, if the demand to hold money increases more than its supply, so it is used less for transactions, then its swap value(s) is likely to rise, increasing the incentive to hold money (particularly if its swap value[s] are expected to continue to rise). If that increases the demand to hold money without a matching increase in its supply, that will further reduce its current transaction use, creating a downward spiral in transactions (to the extent that other moneys do not make up the gap) and so in income (since, in an exchange economy, income is someone else’s spending).**

The less downwardly flexible (“sticky”) prices are, the more the drop in spending (and so income) will lead to drop in output. (Since the less prices adjust to the fall in spending, the more output will.) Conversely, if spending increases, the less upwardly flexible (i.e. constrained) output is, the more any increased spending will register in higher prices.

About credit
Given its swap value(s), money can be used for credit, for loans. In order to make offering money for credit worthwhile, lenders need to be covered for risk: the risk of downward change in swap value(s); the risk of debtor default; and the base risks in not having use of the money for the time of the loan (the time-cost of credit or what is called ‘the risk-free cost of capital’).

If institutions that receive deposits operate on less than a 100% reserve, and so make loans using deposits received, they can then apparently expand the quantity of money (since money which is credited on deposit is also being loaned out). More precisely, it is expanding the use of money (since some of the money credited on deposit is not remaining idle but its being loaned out and used in transactions[: in other words, they are acting as financial intemediaries {pdf}]). This expanded use will affect the range of transactions and how much money is being used in such. It also creates a potential instability, because of the possibility of runs on deposit institutions as people seek to withdraw deposits, some of which has been loaned out, and so is not available for withdrawal.

Clearly, interest rates are not the price of money, they are the price of credit—which includes expectations about the future swap value(s) of money. The nominal price of money is one, it being the medium of account. The price of money in terms of goods and services or other moneys is its swap value(s): the latter being its exchange rates. (Various indices, such as the CPI, aggregate and average movements in swap values for goods and services.) So, interest rates incorporate expectations about the future price(s) of money.

As interest rates are not the price of money, but incorporate expectations about the future price(s) of money, they tend to be inverse indicators of the tightness of money. (‘Tightness’ meaning the extent to which the money supply is sufficient to cover money demand without restricting its use in transactions). If the money supply is not sufficient to cover money demand without leading to its withdrawal from transactions, that will tend put upward pressure on the swap value(s) of money, so creating lower expected risk of loss of swap value(s) and so lower interest rates.

Conversely, if the money supply is more than adequate to cover money demand (and its current level of use in transactions), leading to its expanded use in transactions, that will tend to put downward pressure on the swap value(s) of money, so creating greater expected risk of loss of swap value(s) and so higher interest rates. To put it another way, tight money tends to lead to lower prices and so lower interest rates; loose money tends to lead to higher prices and so higher interest rates.

Since expectations about the future swap value(s) of money are not the only element in interest rates, interest rates are not, however, pure indicators of the tightness or otherwise of money. Which also creates problems in seeing interest rates as “the” indicator of monetary policy.

About capital and assets
Since capital is the produced means of production, it represents resources withheld from present consumption for future (productive) use. The cost of deferring resource use incorporates the risk of failure (such as misallocation or accident), the risk of adverse shifts in the value of the resources used and the base risk in not having immediate access to the resources. Which replicates the elements in interest rates. Capital is often bought via credit, but opportunity cost is enough to make interest rates the cost of capital, given these are all alternate uses of money not used for consumption. Asset prices are inter-connected, because the same deferral considerations operate across all of them, creating a continuum of opportunity costs according to level of expected risk.

This again points to the limitations of interest rates as the central transmission mechanism in monetary policy. If there was no credit, there would still be money and questions for monetary policy. Even with the existence of credit, interest rates are not magically different and separate from other asset prices.

So, the trick with monetary policy is to ensure money supply covers money demand without significantly affecting the transaction use of money. If money supply is insufficient to do so, it will generate downward pressure on spending, and so income, as money is withdrawn from use in transactions. The stickier prices and wages are, the more such fall in spending will lead to a fall in output. If money is in significant excess of money demand (and current use in transactions), it will generate upward pressure on spending which, if output cannot respond sufficiently, will generate upward pressure on prices.

Monopoly provider
Which generates two basic questions: first, should there be a monopoly provider of money? If yes, what should its policy be?

The argument against a monopoly provider is the claim that an open market in money supply will ensure balancing of money supply and demand, as competing suppliers of money will respond to shifts in money demand. This a straightforward competitive-market-is-preferable-to-monopoly argument: though that non-commodity money is a good not constrained by the cost of production provides some interesting complexities in considering an open market in money.

The argument that central banks provide greater stability as monopoly providers than would an open market in money is not a strong one, given that central banks caused the Great Depression, the inflation of the 1970s, the Japanese stagnation, the Great Recession and the Eurozone crisis.

The most obvious appeal of a monopoly provider is the power it provides the ruler; though this is somewhat ameliorated in a world of floating exchange rates. For many, this power is precisely why they are against a monopoly provider of money.

An argument for a monopoly provider is simplicity: it means there is only one (local) money to recognise and assess. This is a weak argument; people cope with assessing different brands in markets all the time. Indeed, in countries where the local currency is weak, people often show great ability to distinguish between moneys in trade.

Another argument for a monopoly provider is externalities. Money is a form of network good, in that the more people who are willing to use a money, the greater its utility. Since the state is both the dominant transactor and gains (via taxes) benefits from transactions, it has the greatest interest and capacity to manage the local money supply. In particular, its taxing power allows it to recover benefits in use of money by third parties that a private issuer of money would not. Indeed, since the state is the dominant user of local money—due to its ability to insist that its taxes and expenditure be paid in a particular money or moneys—it might be better for the state to cover the risks involved in its ability to set a dominant local money.

The preceding is a derivation of arguments for government provision of infrastructure: hardly surprising as infrastructure is typically a network good with significant externalities

Of course, whether the state should be both regulator and provider (given the inherent conflict of interest in being both regulator and regulated) is a question in itself, but the insignificance of the cost of production of non-commodity money removes one of the basic arguments against public provision. Also, the evidence on the outcomes of public provision versus strongly regulated private provision is highly equivocal.

I am agnostic on the question of whether or not there should be a monopoly provider of local money. It is not, however, presently within the realm of practical policy to abolish the various state monopolies over local money.

What policy?
Assuming we have a monopoly provider of local money (aka a central bank), what should be its monetary policy? Presumably we wish neither to strangle transactions for want of money nor flood them with an excess of it. Either way, we don’t want to “surprise” people. Forward-looking agents can manage better if expectations about swap values have some explicit anchor so that they can contract with greater confidence. Sudden shifts in swap values will lead to mismatches between contracts and prices, with potentially unfortunate effects on the level of transactions. Such massive information failure is to be avoided.

An explicit target also allows expectations to do much of the work of monetary policy through the Chuck Norris effect. An explicit target further makes a central bank more accountable (not an attractive quality to central bankers but very much so for the rest of us), and more likely to maintain consistency of policy under stress (which is good or bad depending on the range of circumstances in which the specific policy target is appropriate).

So, an explicit target is (generally) good. But do we target swap value(s) or transactions? If we target transactions, then we are targeting the function of money (to facilitate transactions). We are explicitly aiming to balance money demand and supply to facilitate transactions, accepting whatever shifts in the swap value(s) of money are necessary to do that.

If we are targeting swap value(s), then we are targeting the price(s) of money, operating as if either it is more important than balancing money supply and demand or if stabilising price(s) is the same as balancing money supply and demand. The price/swap value being either for local goods and services or its exchange rate for other moneys: for you have to pick one, you cannot do both. If you target the exchange rate, you import your average change in local swap values (aka inflation) via the set exchange rate; if you target the average change in swap value of your money for local goods and services (aka inflation), then your exchange rate(s) reflects differences between local and trading partner inflation rates.

Either way, you run the risk of sacrificing transactions in order to achieve your target: for you are targeting the average swap value of money, not the level of transactions (or income, remembering that spending=income in an exchange economy). For the policy is not directly matching money supply and demand, it is targeting price. If we target the swap value(s) of money (i.e. inflation), changes in money supply will tend to mirror changes in output, running the risk of exacerbating negative shocks rather than ameliorating them. A danger likely to be worse the more prices are “sticky” and the more people have pre-existing obligations (notably debt). (The current woes of the Eurozone are playing out this scenario; with the most inflexible and debt-ridden economies suffering worst.)

It is possible to target swap value(s) in a way that effectively means targeting income: set an inflation target that is an average over the business cycle. This means that, if output falls, money supply expands to compensate and, if output surges, money supply tightens to compensate. The effect is to stabilise aggregate income. It is clearly superior to just targeting swap values, as it compensates for economic shocks rather than (at least sometimes) exacerbating them.

Concluding
In summary, money is a medium of account whose function is to facilitate transactions. Its use is dominated by expectations, so managing expectations is central to monetary policy—hence the virtue of an explicit target. It not only minimises the risk of serious information failure but allows expectations to do much of the work (the Chuck Norris effect).

Targeting swap values treat money’s role as a unit of account as dominant: as a means of calculating and quantifying obligations rather than the ability to meet them. Policy that stabilises aggregate income, by contrast, focuses on the full role of money as a medium of account used in obligations across time. Whether it is targeting an average inflation rate over the business cycle or targeting aggregate income (aka Nominal GDP or NGDP), it is the superior policy to having a fixed inflation target.

*A way to put this in economic terms is that money does not appear in any production or utility function. (From here [pdf] [via].)

** A nice expression of this in price terms is in this post.

Cruelty then brutality

By deeming sex is only legitimate if it is procreative, natural law theory imprisons sexuality and erotic love within procreation-as-conception. It does so, however, selectively; the aged and the infertile are let in, even though they cannot be procreative. So, sex is only legitimate if it is procreative in form, even if it is not at all in substance.

But why? Because to not to do so would be too big an ask. Telling sterile or post-menopausal married couples they could not have sex is a prohibition that is never likely to be accepted, even though it is a perfectly logical inference from defining sex by its procreative function (understood purely in terms of conception). Indeed, if conception-as-procreation defines sex, the only truly logical position is that of Clement of Alexandria—the only permitted sexual acts are those specifically intended to conceive.

But, of course, sex has many functions beyond procreation: such as catharsis, expressing intimacy, pleasure. Biologists identify a range of functions sex has in nature: functions that can, and are, fulfilled by sex acts that are not procreative in form. (As famously displayed by our closest animal relatives.) So, the natural law position becomes: it is fine for sex to perform those functions provided it remains imprisoned within the procreative form. The far more complex reality of sex in nature does not count.

But that gives the game away. That sex has other functions than procreation-as-conception is admitted by letting in the aged and infertile (not to mention permitting sex when the woman is not fertile); that sex is not purely procreative is accepted. The point of the procreative form is to conceive. So, whatever form can fulfil those other functions of sex—which have been accepted to be legitimate—must be fine too.

Unless, that is, procreation-as-conception somehow defines the proper form of sex in a way that no other function of sex does. The natural law answer is to claim that sex is essentially procreative, because it would not exist without procreation, so the procreative form does define sex in a way no other function does.

Well yes, the original function of sex was to conceive new life. That is why sex evolved. But that does not, in itself, preclude sentient beings finding other, perfectly legitimate, functions to sex. Evolution works by finding new ways of doing things and new things to do. We would not, for example, have hands if that was not so. Form and function are interactive; there is not some static once-only creation that irrevocably ties form and function together.

Fearful imprisonment
Moreover, non-procreative acts can serve procreation, for procreation extends well beyond the act of conception. A subordinate male providing sexual pleasure to a dominant male can re-direct the latter’s aggression, increasing the former’s chance of procreating. Male masturbation can clear out old sperm, making fertilisation more likely. Female masturbation can encourage ovulation. Male-bonding swans can steal eggs and raise the cygnets, prompting the female swan from which the egg(s) were stolen to lay more. The intimacy of sex can bind a couple together.

So, even just in terms of procreation, sex can serve way beyond conception; indeed, quite indirectly. Consider the ways procreative possibilities can be increased through expanding the capacity to support children. The existence of a minority erotically directed towards their own sex can provide people directed to passing on an enriching the binding knowledge and culture of a group, thereby strengthening it. An intensely pleasurable activity can provoke development of communications, even tool use; expanding procreative possibilities. Sex can build coalitions, it can reward efforts: both of which are part of its functions in nature. The structure and patterns of reality are far more complex than simple equating of penile-vaginal sex as the only way sex can support procreation presumes.

Hence, given these complex possibilities, nature is so prolix in its sexual expressions, constantly exploring possibilities. There is far more to procreation than merely getting someone pregnant, or even giving birth: and the more complex an organism, the more that is so. Hence a same-sex couple can serve procreation, by investing time, effort and love in raising children.

The notion that the procreative origins of sex require it to remain imprisoned in a single form is not an expression of reality, it is a profound denial of it. It is using the conclusion (sex must be procreative in form) to set the ambit of its premises (only aspects of sex in nature that allows, or mimics, the possibility of conception counts as evidence: anything else is perversity). A conclusion that itself has been shifted from sex-only-for-conception in order to deal (however inadequately) with the far more complex reality of sex. Imprisoning sex within this ludicrously narrow understanding of procreation is not a seeing into the heart of sex, of eros; it is fearfully hiding from its complexity, and its power.

If form does not even define procreative functions of sex, then there is no reason to think that forms of sex which perform its other functions are not also legitimate. Especially as human life exists well beyond procreating: as does the moral realm.

Irretrievably cruel
But much worse is involved than a denial of reality in so simplistically equating sexual form with sex-as-conception (albeit revealingly inconsistently). In so denying reality, profound cruelty, leading naturally to brutality, is engaged in. Imprisoning sex (however inconsistently) within conception (or, rather, the form-with-which-conception-would-be-possible-if-both-were-currently-fertile) does not protect, support or expand the moral realm; it deforms, restricts and subverts it.

For, let us be clear. Given the reality of human sexual diversity, given that people do not choose their sexuality, there is no form of preaching against homosexuality that does not involve profound and insidious cruelty. Cruelty in alienating people from their own nature; cruelty in alienating parents from their children; cruelty in isolating and denigrating vulnerable individuals. For few are more vulnerable than queer teenagers and young adults, growing up as solitary individuals in families and social milieus overwhelmingly straight.

We know that people do not choose their own sexuality; not merely from introspection (tell us all about the moment when you chose to be heterosexual?) but because, in all the vast array of human songs, poems, stories, narrative, films etc about love, lust and romance there is none about choosing to fancy men or women (or both), because no one has that moment. To say people should not be homosexual is exactly like saying people should not be black: it is to demand that they change a characteristic that is not subject to choice. (After all, being black in the US, for example, means lower life and income expectancy; so there are reasons to “choose” not to be black.) The theory that people “choose” to be homosexual is just a way of hiding one’s cruelty from oneself, of absolving God from cruelty, and making it easier to engage in denigration and hatred.

And to say, if they cannot be other than homosexual, people should not act upon it, is also profoundly cruel, for it requires them to be at war with their own sexual nature; to live lives either of profound constraint, crippling their possibilities, or of profound deceit. It is also to denigrate them, to dismiss their nature as deformed; to dismiss their hopes for love and intimate pleasure; to deny them standing about the most intimate aspects of their natures.

A writer whose juvenile novels include various queer characters has told of how, when she talks at schools, teenagers come up behind her and, talking quietly over her shoulder, speak of how grateful they are for being able to read of folk like them. It is so hard to convey the profound loneliness, even despair, that can come from being not as folk assume; particularly for someone who is struggling with the onrush of sexuality (let alone the “wrong” sexuality).

The proscription of homosexuality is such an insidious and vicious cruelty. There is no “morality” in it. Particularly as people who advocate its proscription so wilfully block any consideration of awkward contrary facts, any genuine empathy for others.

Indeed, the proscription is a form of moral psychopathy because of its denial of empathy. A denial that is patent in the more rabid rantings against human sexual diversity, against the “evil” of homosexuality, but also exists in the condescending “treat them with charity/hate the sin, love the sinner”. The latter is moral condescension of a particularly sickening kind—“you’re not a proper version of the human, so we are going to pity you: please be grateful for our magnanimous forbearance”. Denial of equal protection of the law is pretty much a give-away for the underlying contempt, the morally stunting denial of common humanity.

Precisely because proscription of homosexuality cannot do other than begin with cruelty and denigration, it is so easy for preaching against homosexuality to lead directly to hatred and intense brutality, as the historical record attests. The evil consequences of proscribing homosexuality are vastly greater than letting people be themselves.

But such massive imbalance is inherent in moral exclusion. By letting a ludicrously narrow focus on the mechanics of conception override the constrained respect for others that is at the heart of morality, people are stripped of moral standing and moral protections without them having transgressed in the slightest against the moral protections of others. If you place people outside the boundaries of the moral, and moral protections, of course hatred and brutality will follow. But that hatred and brutality is then rendered morally invisible; for the suffering of the morally excluded is itself excluded from moral consideration. Worse, such suffering becomes “their” fault for being the sort of person who is morally excluded.

The conservative burden
Because enforcement of this cruel and vicious religious taboo, this unilateral overriding of moral protections, is traditional, it provides a particular problem for conservatives. The conservative concern for order and stability has always been deeply intertwined with notions of hierarchy: hence conservatives are perennial opponents of attempts to escape social subordination and exclusion. Social subordination or exclusion often justified by some claims about the “natural” order: an order invariably imposed forcefully. As, for example, same-sex marriage rights (which existed under Roman law and Amerindian social practice) were stripped from people via the imposition of monotheist taboos about sex and gender.

In fact, there was never anything “natural” about such subordinations and exclusions (of women, of Jews, of slaves …). They were merely “accepted background constraints”. Not the same thing at all. But a mode of argument that, as natural law theory does, allows the conclusion to set the ambit of its premises—so permitting the dismissal of inconvenient facts as perversity—is as useful in service of social hierarchy as it is for supporting religious doctrine.

There is no form of prescription of homosexuality that is not grounded in cruelty and denigration. Hence hate and brutality come so easily to it. It does not represent the preservation of morality, but the stunting and subversion of it: and there is no fixing that, except by abandoning parading the exclusory religious taboo against homosexuality as morality. For moral is precisely what it is not, as the historical record so amply attests: by their fruits shall ye know them (and their ideas).

[Cross-posted at Critical Thinking Applied.]