Monthly Archives: September 2015

Zombieland

There is a type of parasite known as “zombie” parasites. They alter the brain chemistry of their host and cause them to engage in behavior that they would normally never undertake. Naturally these behaviors benefit the parasite at the expense of the host. For example the Nematomorph hairworm targets grasshoppers and will compel them to dive directly into bodies of water – an apparent suicide. To someone unaware of the parasitical influence this behavior would be truly baffling. Humankind will also engage in similarly baffling behavior due to the influence of its parasite: the state. Likewise, to those unaware of the state’s infection of society, human behavior can be sometimes baffling. For example, just this week there was much moral outrage over the revelation that a Martin Shkreli (owner of Turing Pharmaceuticals) purchased the rights to manufacturer the drug pyrimethamine (brand name Daraprim) and promptly raised the price from $13.50 to $750 per pill. How can this be?! This is horrible; obviously this is an example of “market failure” that must be remedied by state intervention to ensure such greedy bastards can’t get away with such imprudent behavior. Oh, there is greed in play here, but it is not entirely of Shkreli’s doing, he has a good friend helping him out: the state. Acting like a zombie parasite injecting poison into its victim’s brain, the state distorts natural market incentives to such a degree that we are left with nothing but head-scratching outcomes such as this.

The first clue that the state is involved in this mess was the phrase “bought the rights” peppered throughout every new report on this matter. How does one buy the right to make something? Any reasonably competent organic chemist could look at the structure of that drug and figure out how to make it.* What is preventing someone from doing that and eschewing the need to buy the “rights” to make it? The state. Acting under the auspices of the patent office and the FDA the state creates an artificial monopoly barrier for the production of goods as well as their importation into this country. In essence the state acts as the hired goons of Company A that holds a patent or a licenses to produce Drug B. If anyone else tries to produce or import Drug B, those hired goons will take them down. Don’t believe me? Here are the facts: The FDA bans the importation of this drug (for example, a company in India currently makes it for 10¢ a pill) – so Shkreli is safe from that sort of competition. And because he has bought the “right” to make it in the US, that means no one else can make it unless they go through an onerous and expensive FDA approval process. And he didn’t just buy the rights for a song, no, he spent $55 million to acquire those “rights.” So from a strictly economic standpoint the price increase makes sense. The value of a capital acquisition is driven by the price its products can command on the market. Clearly under a monopoly situation (only made possible by the state) it can command a very high price indeed. Absent such monopoly rights, the recipe for the production of that drug would have had some value but certainly no where near $55 million worth.

When the pundits and critics blame the “free” market for this sort of ridiculous outcome I am left to ponder what an odd definition they must have for the word “free”. Does “free” mean to be influenced and controlled by an implicitly violent cartel of bureaucrats that restricts, regulates, licenses, subsidizes, and outlaws in favor of the few at the expense of the many? If so, then I’d like less freedom please. Like the unfortunate grasshopper most of society is willfully ignorant of the parasitical influence in our midst and so, like the grasshopper, we blindly leap into the abyss.

* please see this page for a discussion of the inevitable “but without IP no one will innovate” objection

Aborting Jobs

There is a problem with education in this country. It isn’t the usual suspects of cost, class size, teacher workloads, mediocre test scores, or Common Core. No, the problem goes much deeper and is reflective of a societal change in attitude concerning the purpose of education: learning. We have allowed ourselves to misapprehend the structure of the thing (education) for the thing itself (learning). When we think “education” we think nice and tidy classes, desks, lectures, tests – a regimen. We don’t think unplanned conversations, spontaneous readings, curiosity driven experimentation. Learning is the random walk of the ant who never knows what he’ll discover. Education is the regimented march of the military battalion. We have become so accustomed to the structure of the former that we fear anything that differs (homeschooling, un-schooling, etc). If we want worker bee drones to work in our factories then perhaps regimented education is the best approach. But if we want free minds to push the boundaries of human knowledge then it is learning, and not education, that we should encourage.

Learning flourishes where the individual is not prohibited from following their passion and curiosity. Today an ever-growing plethora of rules and regulations smother the spark of curiosity that would otherwise ignite a passion for learning. This process has been slowly accelerating over the past few decades. I’ve seen this change in my own lifetime. My science fair project in high school utilized (expired) human blood as part of the experimental procedure. Today the hysteria over “blood born pathogens” would make such a project either impossible or a regulatory nightmare. Fear is what drives all these ridiculous restrictions. In recent days fear has once again struck, this time to new heights of stupidity. The recent arrest of Ahmed Mohamed at his school for making a homemade digital clock (that some mistook for a Hollywood-esque bomb) is symptomatic of this anti-learning pro-education-only-as-we-define-it mentality. After it became abundantly clear the device in question was not a “bomb” the entire matter should have been dropped perhaps only to be reflected upon years later as a humorous anecdote. But that is not what happened. Despite it being a mere clock, Ahmed was still handcuffed, arrested, and hauled off to jail. Although the charges were eventually dropped the school has still suspended him, for what it is unclear. Some have claimed this is evidence of an anti-Muslim attitude in this country, unfortunately I think it is indicative of something far worse: anti-intellectualism. Those that do things we don’t understand are scary and must be stopped. Time to start passing laws to restrict access to electronic parts – that will keep us safe.

This fear driven anti-intellectualism has already infected the natural sciences at the K-12 level. Some wonder why science is on the decline in this country, but when it comes to the venerable science fair a mountain of regulations scares off all but the most persistent or well-connected students interested in chemistry or biology. Both of my sons have gone through the science fair process and the message was loud and clear: unless you enjoy filling out forms and getting multiple approvals, choose a topic in an area other than biology or chemistry. Science in this country is dying a slow death of attrition. With each new generation there is yet another layer of regulation winnowing away those that pursue that path until one day I suspect one will need a law degree before they can even consider a science career.

I will offer up one more personal example. When my father was a teenager he actually made nitroglycerin. Why? He was fascinated by chemistry and wanted to see if he could do it (he discreetly detonated it in his backyard when done, much to the chagrin of my grandmother!) My point is that today if he could even manage to get his hands on the starting materials he’d be branded a domestic terrorist and thrown in jail. But because he was fortunate enough to live in a time when society was not so fearful and uptight, he took that passion for chemistry and turned it into a career that eventually gave rise to one of the few remaining US manufacturers with worldwide sales. People ask “where are all the jobs going?” – they aren’t going anywhere, they are being aborted before they ever even had a chance. Every rule and regulation or absurd response smothers a student’s curiosity and quenches the possibility of future companies and jobs. As with cancer, it is the damage we do not see that is far more insidious.

Tiger by the Tail

With the ongoing debate about the “Iran Deal” and whether or not it is “good” or “bad” no one has thought to ask why should there be a “deal” at all. Think about it – wherefrom does the United States, or any other country, assert the right to dictate to other nations what they may or may not do within their own borders? Do you think our government or citizenry would stand for one second if say France, Brazil, and Argentina got together and told the US government it must immediately cease all production of nuclear weapons and dispose of those that it had? The idea is laughable and yet that is exactly what our government, in league with other countries, is dictating to the Iranian government. Now make no mistake, I’m no apologist for the Iranian government. All governments are so bad the only way to rank them is from least bad to worst. But, if we are to accept the narrative of the statists, namely that the people’s of each country have the right to elect their own government (and yes, Iran is a republic with elections) and be ruled by them without external influence, then certainly the hubris of demanding that the people of Iran beg for permission to behave as other countries is evidence of rank hypocrisy.

Nobody asks why are trying to prevent Iran from building a nuclear weapon. To answer that we must ask why do we think they would behave any differently than other bomb-holding nations. The simplistic answer is, “they hate us” or “they hate Israel”. But why? People don’t just start hating other people for no reason whatsoever. Some might say it is their religion that drives them to hate us. But if so, then it seems quite odd none of these feeling manifested themselves prior to 1953. What’s so special about that year? Well it is the year the UK and US governments orchestrated a coup of the democratically elected Prime Minster of Iran, Mosaddegh, and the installation of our puppet dictator the Shah. Perhaps living 25 years under the Shahs’ brutal regime tended to foster a bit of resentment among the populace. Perhaps US aid to our good friend Saddam Hussein and Iraq in its war against Iran in the 1980’s made them somewhat skeptical of the neutrality of the US. That’s not to say that if Iran did acquire a bomb and used it that it would be justified, but it would at least be understandable in the same sense we can understand why a battered wife, after enduring years of abuse, would buy a gun and kill her husband. As our fictional friend Commander William Adama once said, “Sooner or later, the day comes when you can’t hide from the things that you’ve done anymore.”

Like a parent who abused their children when they were young and helpless, there comes a day when those children grow up ready to strike back. This deal is an attempt to forestall that inevitable day of reckoning a bit longer. We have been propagandized to fear that day will be marked with a mushroom cloud. But the ruling class knows that won’t happen, they are far more concerned that if Iran acquires nuclear capability then their power and influence will be reduced and they will have no choice but to treat Iran as an equal (or at least no longer meddle with them). North Korea has a far more evil government than Iran and yet we hear nothing in regards to “regime change”. It couldn’t be because North Korea has a nuclear weapon could it? Just as a gun on the hip commanded respect in the old west, so today does a nuke in ones arsenal grant one the right to be left alone. The idea that Iran would nuke Israel is laughable. Israel has its own nukes and would instantly respond in kind. But even more so, the geography of it makes no sense. It would be like New Jersey nuking Long Island and expecting Delaware, Rhode Island and Connecticut to not get upset by having a nuke dropped in their backyard.

Iran is like a mistreated tiger that we have firmly grasped by the tail. We know if we let go we may very well get bit, or worse. But that cannot go on forever. Someday we must let go. Perhaps if we do so voluntarily by lifting all sanctions and extending a hand of respect and friendship we can show we are serious about making amends for the past misdeeds of our government. That will not only pave the path toward real peace but will disarm the arguments of those in the Iranian government who, like our own chicken hawk Neocons, are saber rattling, using our bellicose behavior as proof of their need to strike against us. Remember, the Japanese didn’t just wake up one day and decide to bomb Pearl Harbor; the US had a years long Naval blockade – economic sanctions – on Japan. Actions have consequences. Some say to have peace you must prepare for war, but sometimes preparing for war sends the signal that there can be no peace.

Living Under the Mirage of Law

Respect for “the law” held by liberals and conservatives alike is entirely a consequence of their own personal stance on its validity. For example, the Supreme Court found in Citizens United that free speech protection does indeed extend to corporations, but since that didn’t sit to well with liberals (who are eager to selectively muzzle corporations they disagree with) they applaud any attempt to undermine that decision. The second amendment guarantees a right to individual gun ownership, but again liberals will hardly shed a tear when local officials defy that right with onerous restrictions. Likewise, Roe v. Wade and Obamacare are settled constitutional law (according to the Supreme Court) and yet conservatives will do whatever they can to subvert the spirit and intent of these laws. With conservatives the cognitive dissonance of unconditionally supporting cops (even when throwing grenades into a baby’s crib) but opposing taxes creates unexpected results. Last year Eric Garner chose to ignore New York’s laws regarding selling untaxed cigarettes and paid the ultimate price for his impertinent obstinacy in not bending to the will of the state (death by cop). And what did the putatively tax-averse conservative do? Rather than commending his act of tax-rebellion, they hid behind a wall of cowardice in proclaiming, “well, the law is the law and it must be followed.” I guess they’re only opposed to onerous taxes that affect them.

Religious conservatives are now all too happy to do a full 180 on the principal of “follow the law” and heap accolades upon someone who defies the law – because they happen to agree with her. Kim Davis, clerk of the court for Rowan County Kentucky, is being held up as a noble heroine for her staunch refusal to issue marriage licenses to gay couples. There aren’t many things one can be sure of in life but of this I am most certain: had the court ruled the other way and we now had a clerk issuing marriage licenses to gay couples in defiance of that decision, conservatives would be quite vocal on the sanctity of the “rule of law” and that officials have a solemn duty to carry out the law despite their own personal misgivings.

At one time the Fugitive Slave Act, Jim Crow, and Japanese internment were law but I dare say you’d be hard pressed to find anyone today who would view people that ignored those laws as being guilty of anything other than heroism. So where does this leave us? If sometimes it really is ok to ignore the law and sometimes it (supposedly) isn’t, then perhaps the problem is not with a societal lack of unwavering respect for “the law” but rather with the laws themselves. This lack of solidarity over what constitutes valid law is merely a reflection of the fact that society is composed of individuals who don’t all agree on everything. That is ok. I have some shocking news: it is possible for people to live together and not be forced to live the exact same way.

Laws of nature cannot be broken; laws of man can. By labeling the latter with the same appellation as the former, society deludes itself into believing the two are equivalent in their capacity to govern human behavior. Man’s laws are that fiction that implies human behavior can be constrained by mere ink. And if ink alone doesn’t work then we now have our excuse to “enforce” its edicts by any means necessary. Law is not protection from aggression but rather an excuse to engage in it – “look, he broke the law, go get him!” Laws against murder, rape, or theft are not what potentially protect us from such acts, rather feedback does. That is to say, contained within the act itself is the basic natural right to reciprocally respond to it (the right of self-defense). The real and certain potential for instantaneous reciprocity is the actual deterrent that keeps criminals at bay, not mere laws.

Rules (laws) are acceptable if one has affirmatively consented to them (and consent does not mean merely being born within invisible walls), but without consent mere ink can not convey the right to aggress against others because they choose not to follow particular rules concerning taxation, social behavior, or other non-aggressive behavior.

There is nothing mistaken in thinking this law or that law is unjust and should be ignored; all non-property rights violation laws are but mere opinion enforced with guns. The real crime here is engaging in the hypocrisy of believing we must live under a rule of law while simultaneously ignoring the laws you don’t like. Don’t be a hypocrite; admit that forcing others to live according to your beliefs is dishonorable and in that moment you will have earned the right to live unmolested by the beliefs of others. If you espouse aggression against others, then don’t come crying when others aggress against you.

Paddling in Circles

One of the more frustrating “Trumpisms” is his idea that in order for American to “win,” US exports must exceed US imports. He sees the entire country as just one big corporation whose sole purpose is to make a “profit” by exporting more than it imports (that is, sells goods at a greater value than what it paid for them). This simplistic viewpoint is deeply flawed. It presumes trade is a zero-sum game where one side always “wins” and the other side “loses” in the exchange. Indeed this mindset would mean every time we buy groceries the store has “won” and we have “lost.” Trade is always a win-win game; both parties have gained more than they gave up, otherwise they would not have made the exchange.

Viewing trade at a macro-level is myopic at best (as it ignores the underlying individual decisions being made by billions of people) but in order to make a point we will proceed with that fiction. That point is this: a trade surplus or deficit can never exist. Although that may sound shocking at first it really shouldn’t when you consider the nature of any trade. If I buy a candy bar, I hand the clerk a few dollars. Does the store now have a trade surplus with respect to me? Do I have a trade deficit with respect to the store? Of course not. The store traded away a candy bar and traded in money. I did the exact reverse. So when we consider China and US trade we see that China sends us a whole host of goods and we send them green paper rectangles. Now, ignoring the fact that Federal Reserve is constantly swelling the money supply for its friends on Wall Street, we’ll assume that the supply of US currency is constant. Given that assumption we must ask: how did we acquire those pieces of paper to give to China? We got them by producing goods and services for someone else. So if we send $x to China for $x worth of goods A that means we had to first produce $x worth of goods B. China didn’t want goods B, they wanted the money. That is the nature of indirect exchange and is why money is an emergent property of trade (it solves the double coincident of wants problem).

Ok, but some will say that’s all fine and good, but the problem we have is that the total export of goods to all countries is less than total imports of goods from all countries. So even though the US may have a trade surplus with respect to US dollars, we have a deficit with respect to goods. That is true. But it doesn’t it matter, or rather it shouldn’t matter. The only reason this is viewed as a problem is because of the artificial attempts to solve it actually make the problem worse. In order to explain the problem we must once again assume that the quantity of money is constant. In that case, as more goods come into the US and more money flows out of the US there will be fewer and fewer dollars remaining in the US. This is called deflation (a contract of the quantity of money). This is natural and does not cause depressions or any other nonsense like that (no matter what your 4th grade teacher told you). Under deflation money is in high demand (because there isn’t a lot of it), which means the money price of goods decline (in order to get that scarce money, people will trade more and more goods for it – hence prices fall). So if prices of goods made in the US fall, what do you think that would do in terms of making American goods more competitive to overseas buyers with fistfuls of dollars? That’s right, they’ll start buying all those cheap US goods which will naturally swing the trade pendulum the other way, with more goods leaving the US than coming in and likewise more money coming in than leaving.

That this does not occur presently is a testament to how much the Federal Reserve and US monetary policy has distorted these natural incentives. The Federal Reserve short circuits this natural feedback system and inflates the money supply. This very temporarily makes US goods cheaper overseas (buy devaluing the exchange rate of the US dollar relative to other currencies that are inflating less rapidly), but (a) it doesn’t last long because other countries quickly adjust their inflation to counterbalance the effect and (b) it has the deleterious side effect of making US goods MORE expensive for US buyers (that’s what inflation does, it increases the money price of goods). So, under the natural system of deflation ALL prices fall which benefits both domestic and international trade. However under the artificial Fed induced inflation system we have domestic prices rise while relative prices for international buyers fall for a short period but then quickly also rise resulting in market disruptions and distortions. Using money creation to solve trade problems is like rowing a boat with one paddle forward and the other paddle backwards.

If we want to “fix” trade we need to examine the current incentives created by the distortions into the market introduced by Fed monetary policy. Only then will we see we need to do less, not more, to “fix” the situation.