agrippa1

Great example of the anti-conceptual mentality. Here's the "money" quote from Ms. Brady (following her quote of DeSantis): The rest of the "critique" pretty much falls in line with this sloppy reasoning.

I read this letter not as a (flawed) statement of philosophy, but as the lesson learned by a non-Objectivist, discovering the fallacies of the altruist ideology. His gift to charities is a valid and explicit declaration that charity is proper only as a volitional individual action, and not as a forced, collective action. His discovery that duty is false concept underlines the difference between what duty is, i.e., a one-way commitment to the collective; vs. what he expected it to be, i.e., one half of a voluntary exchange to mutual benefit. Mr. DeSantis has discovered, by direct observation of concretes, key principles of economics and politics that most of us learn only by the hard work of conceptual abstraction, or by exposition from a great mind (e.g., Rand). Editors at the NYT probably can't recognize the conceptual content of this letter. They probably saw it simply as an indictment of a big business owner, and stopped thinking once they reached that comfortable notion. (Edit underlined)

Miss Rand addresses the essential issue here:

You're joking. (?)

You're saying here that demand for labor doesn't affect its price. (In bold are the premises behind that assertion. While these premises may hold true under certain circumstances, where a high barrier to entry exists, as in oil; they can almost certainly not exist in gold production, which has a great many individual producers.) In any case, my original point, which I believe we can probably agree on (given the right assumptions), is that the price of gold and its cost of production are interrelated, assuming higher prices make expanded production profitable. In commodities whose production depends on purification from natural ores, it is almost certainly the case that supply of profitable lower-grade ores increases at a greater than linear rate as a function of market price. If we can agree that that is the case, then the conclusion I draw is that the relative price of gold (and the value of a gold-backed currency) is self regulating such that deflation, i.e., lower gold-based-price levels, drives up the production of gold to inflate the money supply to counteract the lag in gold wrt economic production.

I think that's wrong. The value of labor has everything to do with the profitability of that which is being produced. The price of labor is based on the value of that labor to the producer and the value of the wage to the worker. Somewhere between those two points, the exchange of labor for wage is made to the benefit of both. That point is the price at which the supply of labor is equal to the demand for labor. Since all industries compete with wage levels for available labor, and since all industries attract or repel productive investment based on their profitability, the price of labor in any one industry indirectly reflects the profitability of that industry (in the long run), and thus (in combination with all other costs of production) the price of the thing being produced. If the going price of the skill sets required to produce gold result in an inordinate profitability, investments will be attracted into gold production until that inequality is leveled out. While it's true that barriers to entry, such as access to raw materials and ownership of intellectual property, can lead to inordinate profitability of some producers, to say that the "value of labor has no relevance to that which is being produced" is incorrect.

You're right. It's not just the price of labor, I was being overly simplistic in my response. My use of labor in the original post was for illustration purposes only - what I said was: "Gold is usable as money because its production has a cost, relative to all other goods." Now I'm not as sure... Your point about different marginal costs of production is a good one. I questioned when I read it, that it applied to gold as much as it does to oil. Since gold is considered a good backer of money, I would have thought that gold production was more widely distributed than oil, so that no one producer could have a disproportionate influence on production - which would destabilize the supply and reduce the value of gold as a trusted store of wealth. Turns out gold production is far more concentrated than oil. Whereas 50% and 75% of oil production are concentrated in 7% and 25%, respectively, of geographic area (measured by nation), and in 7 and 15 nations, respectively; the same percentages of gold production are found in only 3.25% and 12%, respectively, of geographic area, and in 3 and 7 nations, respectively. (extracted from oil, gold, area stats for all nations - land areas are measured by nation, and based on highest national ratios of production to area. Number of nations are based on highest national production, without regard to area). So gold is roughly twice as geographically and politically concentrated as oil, which means it's more susceptible to market manipulations by a small cartel of producers than even oil is. That being the case, I'm wondering now if the uneven distribution of gold production would be a serious technical barrier to the adoption of a gold standard.

*** Mod's note: Split from a previous topic. - sN *** I think what I said was: "If it takes an unskilled laborer 100 hours to dig up and refine an ounce of gold, then he has established the price of labor." Which is to say that the price of gold establishes the value of labor in that endeavor, not the other way around. So what I'm "spouting" is not the labor theory of value, but the value theory of labor, if there is such a thing. If you spend 100 hours making mud pie, and you get paid nothing for it, you have established the value of your labor at zero. Being a rational person (I'll go out on that limb for you), you would likely rather spend your time on some other effort that places the value of your labor at something a little more livable. Yes, he could just decide to just about anything... Again, I'm assuming a rational person, who will lower his price to increase sales and maximize his profits. I'm also assuming a free market where he's not the only person in *all* the world able to produce it at that cost, in which case competition will drive prices down to the point where profits are in equilibrium with other profit opportunities. I think I said that it did not have intrinsic value... "Gold does not have intrinsic value, except in the recognition of its cost of production, in congress with the other attributes that make it useful as money." Which means that the "other attributes" which make gold commonly valuable, limited (not determined) by the cost of production, give the value of gold. I disagree that gold (qua money) does not have intrinsic value. While I understand what you're saying philosophically, if gold is used as a means of exchange, then it has as much value as the most valuable thing (to you) that you can buy with it. True, it does not have a specific, intrinsic value, but it does hold value intrinsically as a means of exchange.

Two things: 1: Gold is usable as money because its production has a cost, relative to all other goods. If it takes an unskilled laborer 100 hours to dig up and refine an ounce of gold, then he has established the price of labor, in terms of gold, and thus anchored all of an economy's goods to that amount of labor and that amount of gold. If a more skilled person is able to produce it more cheaply, by virtue of the value of his time in other activities, then that person will establish the price of gold in the market, and anchor all other goods to an hour of his time. In a steady-state economy, the production of gold is just one of innumerable possible jobs a person might have. It will gain or lose participants based on the relative value received for time spent. If the price of gold (in terms of other goods) falls, fewer people will produce gold, supply will fall (assuming consumption of gold for other purposes) and the price of gold will return to its equilibrium value. A new find of gold has only temporary inflationary effects on the money supply, because the increase in supply will immediately reduce the price of gold, depressing the production of gold by other producers, until the new find has been mined to the point of marginal profitability. At that point, the cost of producing gold returns to its pre-find level, as does its price. Thus the value of gold self-regulates to the price of production of all other goods. A new gold producing technology, on the other hand, like the cyanide process of the late 1800's results in a less-expensive method of producing gold from lower grade ores, and results in an expansion of gold production and a decrease in the price of gold to a level commensurate with the time cost of production. In a gold-backed economy, that results in a transient spike of inflation, a step-up in price levels. 2: Paper money that is backed by gold, is ultimately backed by the cost of production of gold. Gold does not have intrinsic value, except in the recognition of its cost of production, in congress with the other attributes that make it useful as money. In accordance with Gresham's law, other goods can be used to back the value of gold-backed money, as long as their market value (in gold) is greater than the amount of money they back. Therefore, a $100,000 home can back $80,000 in money at a bank, without devaluing gold-backed currency. Because the $80,000 in deposits represents $100,000 in unconsumed goods, and since consequently, the wealth value of that home is held exclusively as backing for paper money from the lending bank (until the mortgage is paid off), there is no inflation of currency based on that loan. If the value of the home falls below the nominal value of the loan, then the bank is no longer backing the deposited money with assets of an equal or greater value, as is implied by their contract, and they have at that point breached their contract with depositors. Whether this is "fraud" is the subject of this discussion, if I understand correctly. If the bank conveys to its depositor the impression that their deposits are backed by money, rather than money & loans, then they have committed "fraud in which the deception causes the other party to misunderstand the nature of the transaction in which he or she is engaging esp. with regard to the contents of an instrument (as a contract or promissory note)." (fraud in the factum, Merriam-Webster's Dictionary of Law, © 1996 Merriam-Webster, Inc.) This definition of fraud does not require the bank to knowingly or intentionally cause or risk a loan default, only that it misrepresents the actual (v. the promised) terms of the deposit. I believe you have to separate the way in which FRB is practiced today (which clearly involves some elements of fraud), from the way in which FRB could be practiced morally, that is, in which there is a full understanding of the terms of deposit, including the risk of loss of value in the case of loan defaults, and a breaking of the link between deposited money and actual backing money (such as the "shares" mechanism).

This: http://opinionator.blogs.nytimes.com/2009/...it/?ref=opinion was posted yesterday in the NYT opinion section. I found the posts at the bottom very educational as practice straw-men for defending Rand's philosophy.

This statement leads me to believe that you have not consulted an attorney. However, you are looking for advice on the most important issue in your life (?) from a web forum of complete strangers whose qualifications and motives you can't possibly surmise. (ok, that's harsh, but you get where I'm going) Your case looks pretty weak. But maybe this will help: http://www.lawyers.com/Family-Law/Oregon/P.../law-firms.html A good attorney will quickly evaluate your ability to make a case for emancipation. Do yourself a favor, and take his/her advice. (If you can't afford to consult a lawyer, you're probably not ready to be out on your own.)

If you focus in on where the fraud is in my example, it is not just in the government assuming the risk of loans, it is in any action that seeks to hide the true risk of deposits. The government gets away with it because it's difficult for people to reach a conceptual understanding of how inflation is theft. (I hate to admit, I had to read Egalitarianism and Inflation about five times before I started really getting it). Banks do the same thing, but they operate through the technique of hope, that is, they don't plan on being able to recover from a bankrupting wave of defaults and runs, they simply hope for the best. By telling customers that their deposits are actually dollar deposits, rather than shares of outstanding loans plus cash on hand, they are implying something which just isn't so. Even as a run ensues, they cling to hope, paying out full value to the first withdrawing depositors, until they run out of money and go bankrupt. The rest of the depositors are stuck, either selling their accounts to other banks for less than their dollar value, or waiting for a liquidation process that will also pay them less than the nominal value. The first waves of withdrawers pull out more than their share of what the loans are worth, and in this manner also, the bank defrauds many customers, to the benefit of the few early, lucky ones. A bank can take many actions to reduce the risk of defaulting loans, such as large down payments (reduce the loan amt far below the collateral value), high interest rates (front load payments to quickly reduce exposure to below the minimum expected value of the collateral), credit checks (to filter out high default risks), and avoiding mark-to-market (weigh historical value of collateral rather than present value, to filter out bubbles).* If a bank insists on telling customers that their deposits are actually dollar-valued, rather than conditional on the performance of loans, then there is some fraud involved. The inherent fraudulancy or non-fraudulancy of FRB depends entirely on how well the banks communicate the risk that some of your deposits may be lost in a wave of defaults, and on how well they safeguard against bank-runners extracting more than their current share of (devalued) deposits. *[aside: I don't think I need to note that the government, through CRA, FNMA and FHLC, mandated that none of these risk-reduction actions need be taken by lenders. If there's any one who doubts that CRA was the culprit in the credit meltdown, just ask yourself how any lender could compete in such an environment without suspending the same measures. The lowest price asked in a market is the market price; a price above the market price will yield no buyers. That's why Fan & Fred could control the price of the market with only a 30% market share.]

Okay, here's one. Farmer Jim applies for a $90 loan to buy a goat from trader Joe, and is turned down. He goes to his local AGORN chapter and accuses the bank of refusing his loan because of the color of his skin (he's sort of a bluish purple). AGORN activists walks in on a bank board meeting and demands justice, accompanied by an FHA inspector looking for GRA violations. A representative from Grannie Mae assures the bank that if they give a 0%-down Option ARM to farmer Jim, they'll purchase the loan and assume the risk. They package the loan up in an MBS and offer it on Wall Street, implicitly guaranteeing it against default to allow it to sell with a lower effective interest rate than demanded by the risk. Unintentionally, they offer a better return than zero-risk, while implying zero risk. Investors from Wall Street fall all over themselves trying to buy the MBS because it represents the best risk-adjusted return available. Farmer Jim buys the goat from Trader Joe for $90, which Joe deposits in the bank. (bank has $190 in deposits, $100 in cash) Farmer Jim, it turns out, has a low credit rating for a reason. He was hoping to flip this goat, but when he finds out he owes more than his goat is worth, he mails a jingle gram to his bank and walks. The bank can only get $45 for the goat, so the gov't steps in, sells the goat for $45 to Trader Joe (who withdraws the money from the bank) prints 45 $1 bills to cover the difference and bails $90 to the bank, which becomes solvent again. The bank now has $145 in cash on hand, and $145 in deposits. Money has been inflated by 45%, but there's been no increase in real wealth. So you still have $100 in the bank, but it's only worth $68.97 in "old" dollar value. The government has stolen $31.03 in old dollar value from you. Trader Joe still has his original goat, but now has $45 in the bank, which in "old dollars" is worth... $31.03. That's why FRB with government guarantees is fraudulent and immoral.

You forgot the again.

Limited to its proper role, it can determine whether an action is legal or illegal, and enforce the appropriate sanction for an illegal action. In that context, David Odden is right, contracts which engage the government in respect of your legal rights could be sold. No other entity could provide such service. Could the government therefore properly refuse to consider debts payable in other than government issued legal tender? If so, would it be proper to include such a fee in the use of legal tender for exchange? In other words, could the gov't enforce an exchange (sales) tax on currency transactions? That's the current situation, I know, but - as long as other means of exchange, not covered by gov't jurisdiction, were allowed - would it be consistent with a fully-free government?

What I mean is that the people can be subsumed into a concept "member of that group" where several people are subsumed by the concept of a singular person with the defining characteristic of all the people in that group, or, they can be "subsumed" into the group, with only one member, the group. "Society" is an example of a single member concept. "Man" is an example of a multi-member concept. Both concepts can be formed from the same group of people. But they are fundamentally different, because a specific member of the concept "man" has characteristics, but the single member of the concept "society" does not have any characteristics, other than the single one of being identified as "men." Other group examples: "the medical profession," "the government," "The working (or middle, or upper, or lower) class," as opposed to "doctors," "public servants," "workers." (Note: I'm not suggesting that these concepts are valid. Only that they lead to an inability to bring the abstract back down to the concrete.)

I think she mis-speaks when she says, "... it combines art with a utilitarian purpose and does not re-create reality, but creates a structure ..." Architecture is utilitarian, but as she says, it combines art, that is, it does re-create reality according to the values of the architect, but within the constraints of physics, and the functional requirements of the structure. Obvious examples are Wright's "Falling Water" and the Johnson Soap building, clearly abstract recreations of nature, and a blurring of the lines between sculpture and building design. If I remember correctly, Rand goes to some length in The Fountainhead describing how many aspects of traditional architecture recreate earlier architectural forms, which originally recreated natural forms. Websites are also utilitarian, and, like architecture, they can combine art with function, and so could be considered art. (I don't think Rand intended to argue that the "architecture" of tract housing represents a form of art) I guess it would have to be a value judgment, whether a particular website "is" art.

I'd appreciate a point to the literature if this is answered there. My observation is that there are two ways of forming a concept when faced with a group of people (though I guess you could generalize this to entities). Concept formation involves differentiating an entity or group of entities, and integrating them into a new concept which subsumes those entities. (If I understand correctly) When people see a group of individuals they follow one of two paths in their concept-formation: The first differentiates the individuals in that group, integrates them into a new concept that captures the recognized essentials of the individuals, and grasps a concept that subsumes multiple entities. The second differentiates the group of individuals from other individuals and integrates them into a group, an abstract concept that subsumes a single entity, the group. The results of these two paths are so similar, that some may have a hard time recognizing the practical difference, but I believe there is a fundamental problem with the second concept formation - that it is an abstract concept, not connected to any single concrete, but instead to the group, that is, to itself. The problem is manifested clearly when we look at all men, and either conceptualize "man," a single entity subsuming every individual, or "mankind" (or "society", but I thought I'd give Armstrong a plug), also a single entity, but subsuming only itself, with no conceptual connection to any individual which it comprises. This false concept-formation seems to me a likely culprit in many of the false concepts that permeate the collectivist mindset. I remember Rand calling attention to the mistake of, for instance, studying a hospital without considering individual patients and doctors, but that was in a political context. I don't remember her addressing this in epistemological terms.

What do you think the question was?

I don't disagree that contributing will return value, I just don't know that people will be willing to contribute indefinitely if they are not assured - at some level - that they will receive like value in return, rather than, say, spending their money on other, more personally effective crime prevention measures. On my first point, I think it's fair to say that people in general are more likely to take risks when young, how about that? That doesn't take directly away from the assertion that older people would contribute, it simply draws a distinction between the contribution of young men in times of crisis and that of old men in times of peace. That is, my argument isn't that young military volunteerism detracts from the argument to financial volunteerism, only that it doesn't necessarily support it. Bill Gates is a one-off phenomenon, but if you're expecting to fund government primarily through the contributions of people who have so much money they won't miss a large chunk of it, so be it, but understand that then you have established a government which is dependent on a very small minority for its livelihood, and that there are hazards involved in such an arrangement. On your second point, I would point to the events of September through present to argue that the government is capable of stoking thunderbolts out of clear blue skies and thus pushing through virtually instant measures in response. My head is spinning from all that's coming from the Obama administration the past few days, from throttling the rich with $1T in new taxes, to re-banning so-called assault rifles, to cramming $800B (stimulus), $350B (bank bailout), $410B (spending) down our throats in quick succession (pretty soon, it adds up to real money). Granted, the storm has been looming for years, but you couldn't tell that from the blue-sky rhetoric coming from both parties, up until the point where they decided to raise the alarm. (but I digress)

Second point first. If you are implying that bonds would be paid back with funds from the lottery, then your argument for bonds devolves into an argument for lotteries. Fine. So let's limit this to lotteries, and why they imply force. For the government to run a successful lottery, they must compete with private lottery firms. In order to do that, they must be as or more efficient than private lottery firms, or the private firms will drive their profits down to the point that government makes no money on the lottery, and goes out of business. Replace "lottery" with any other business in the above argument and you have exactly the same principles at work. Why does the government use lotteries, rather than, say, bottle brush manufacturing to make money? Because they control the operation of lotteries - by force. If you don't believe that, try running your own lottery and see how long it takes them to come with guns pointed to take and put you in a cage. If government did not use force to limit access to the lottery business, the profit margin of running a lottery would drop precipitously, so that, even if the gov't could compete with private entities, the funding available would be far, far less than what is currently realized. If you don't believe that, look at the programmed payoffs for lotteries and calculate the odds of actually winning. For instance, in California, the starting payout for megamillions is $12 million, but that's the unamortized total of 20 future payments. The actual current value is closer to $7 million, but that's before an apx 40% tax cut which brings the actual winnings down to about $4 million. The odds of winning are 1 in 175 million. That's a heck of a vigorish (97.7%), and it will plummet as soon as there's competition (by comparison, race tracks, which have significant operating expenses, have a top vig of 17%, a probability of 1 in 10 pays back an average of $8.30 per dollar) (fine print: that's a shorthand analysis, doesn't account for other ways of winning, nor for the parimutuel mechanism that kicks in when bets exceed the base jackpot, but the general idea holds true) So the only way for a gov't to effectively run on funding from lotteries is by establishing a coercive monopoly of same. That holds true for any business venture the gov't might enter to raise funds. If you argue that most people would play the gov't rather than private lottery because it's "for a good cause," I'd answer that that's equivalent to playing the private lotteries, and just donating the extra money to the government. There's no way around the principle of voluntary contributions as the sole option for force-free government funding.

Again, the lottery idea is flawed because it implies the use of force, and bonds are money borrowed by the government - to be repaid, how? I take Jake Ellison's point about the history of volunteerism in the United States. However, applying the example of military volunteerism to voluntary funding of the government has two weak points that I see: First, it ignores that most military volunteers are young, and presumably still idealistic, with not much to lose, while the wealthy are overwhelmingly older citizens with diminishing earning potential, and so are averse to unnecessary spending. Second, wars are periods of intense fear and risk, and instill in all a feeling that drastic action must be taken. Year to year running of a free society does not entail the same level of urgency. One risk that results from this recognition is that government might find the need to create urgent conditions in order to extract the desired amount of contributions from the citizenry. (Sound familiar?) I would restate that to say "the government has to protect everyone from the initiation of force." The value given is protection to citizens, the means to that end is law-enforcement on criminals. If your contribution is only accepted when the total of all contributions meets the requirements for an effective law enforcement service, then you are assured an expected value for your contributed value, that is, both you and your fellow citizens realize a profit from the transaction. I believe that's an important principle of voluntary funding: The value realized by your fellow citizens from individual contributions must be greater (in aggregate or on average) than the value they give up to include the individual in the service, and the value you realize from the service must be greater than the value of your contribution.

There are now! :

Are you saying that the system of laws has been implemented? Or that it exists as a proposed system? Also, what evidence can you point to? I don't know off hand of any system of government that existed on voluntary contributions. ------ On further thought, a conditional request for contribution might work. This would be a budget provided to each individual for consideration. The individual would give what he thought was appropriate for the value received, and only if the budget goal was reached by total contributions would he send his check in to the government. This would guarantee that a person received value for value, and would provide incentive for contributions as the total pledged neared the goal amount. Over-contribution would result in down-scaling each person's contribution proportionately (or some other mechanism) This scheme would be self-stabilizing as it would guarantee value back exceeding value given (subject to the person's ability to judge the value of the proposed budget item),and it would incentivize legislators to propose only services whose value exceeded costs, on a societal and individual level. This concept could be tried as a pilot, even under our current system, and expanded. If so, the extent of its adoption would serve as a measure of the freedom of a society.

Thanks, you've helped reveal the contradiction here. I assert that the only means of voluntary funding is the explicit exchange of value for value. This is true for the market and it is true for the government (so my assertion goes). The problem with government funding is with those services whose value can not be objectively determined (because values are different for every individual), but which nevertheless benefit all individuals. The free market price mechanism does not measure the value of an item, it simply measures the point at which the number of items desired at or above a certain price point equals the number of items willingly offered at or below that same price point. Those who would pay more benefit, as do those who would ask less, from the equilibrium price. The reason I point this obvious fact out is that those who are willing to pay more than the equilibrium price do not; they pay exactly the market price, i.e., the lowest price at which they can receive the good purchased. This is a fundamental principle of capitalist economics and it flies directly in the face of the concept of voluntary government funding. The problem with insurance fees of any kind is twofold: First, it assumes that the government is capable of providing the most efficient service in any given example, otherwise the efficacy would depend on the government preventing, by force (i.e., law), any other entity from providing that service. Second, those services provided for the "common good" (the most obvious, and perhaps only, example being national defense) must be covered by profits from the sale of other "value for value" services, such as insurance, courts, etc. This requires that the price charged for these services must be higher than what an equally efficient private provider could charge, so the first assumption above is necessarily invalid (barring some change in typical gov't efficiency). So, unless you entail force in the selling of insurance and other services, you can't fully fund all of gov't's requirements. Since you can't initiate force, that means you must rely on the donations voluntary contributions of the citizenry for the funding of a fully free government. Now, perhaps you will find that enough recipients of government services value those services higher than the cost of their share of those services, and are willing to contribute a corresponding amount, but perhaps you won't. Perhaps you will find that is the case one year, but not the next. Or with one party (or preferably, person) in control of the government but not with another. (not sure that last point is valid in a "fully free" society, but you get the point). The problem for "common good" services is that, unless enough other people also contribute to the service, your contribution will fall far short of the amount necessary to return to you a commensurate value. You are left to hope that enough others also value that service as much or greater than you do. Necessarily, there will be some who receive more value than they contribute, and some who receive less value. Those who receive less value than they contribute will be obligated by selfishness, to reduce their contributions the following year to the value received, thus reducing the total contribution and adding to their own number. Only in a case where the ratio of value to price is so great that all contributors receive greater value than their contributions, can the system be stable. Unless someone can show that to be true in a viable, stable scenario, the successful implementation is an open question, and is rightfully confined to the sphere of theoretical political philosophy. The fundamental problem here is that the philosophy of law, from an Objectivist standpoint, covers what a government can, should, must or cannot do, not what the citizenry must or should do, outside of the codified definition of "initiation of force." You cannot plan a fully free society and include in that planning the required will and actions of the citizenry, whether as a whole or as individuals. on edit: The "out" for an Objectivist, "fully-free" society, is to not depend on voluntary funding, but on consensual funding, that is funding obligated, by consent, from each citizen in return for citizenship in that society (and benefit from the services of that government). This is a contractual payment agreement, rather than a "voluntary" (in the sense of being voluntary each time it is given). Objectivist philosophy does not eschew consensual contracts between citizenry and government, it is, in fact the basis of the Objectivist principle that laws, enforcement, justice and defense are properly provided by the government. It is what separates us from the anarchists. (not the only thing)