Apple’s Letter to the Public About Compromising Their Security   Leave a comment

February 16, 2016 A Message to Our Customers

The United States government has demanded that Apple take an unprecedented step which threatens the security of our customers. We oppose this order, which has implications far beyond the legal case at hand.

This moment calls for public discussion, and we want our customers and people around the country to understand what is at stake.
The Need for Encryption

Smartphones, led by iPhone, have become an essential part of our lives. People use them to store an incredible amount of personal information, from our private conversations to our photos, our music, our notes, our calendars and contacts, our financial information and health data, even where we have been and where we are going.

All that information needs to be protected from hackers and criminals who want to access it, steal it, and use it without our knowledge or permission. Customers expect Apple and other technology companies to do everything in our power to protect their personal information, and at Apple we are deeply committed to safeguarding their data.

Compromising the security of our personal information can ultimately put our personal safety at risk. That is why encryption has become so important to all of us.

For many years, we have used encryption to protect our customers’ personal data because we believe it’s the only way to keep their information safe. We have even put that data out of our own reach, because we believe the contents of your iPhone are none of our business.
The San Bernardino Case

We were shocked and outraged by the deadly act of terrorism in San Bernardino last December. We mourn the loss of life and want justice for all those whose lives were affected. The FBI asked us for help in the days following the attack, and we have worked hard to support the government’s efforts to solve this horrible crime. We have no sympathy for terrorists.

When the FBI has requested data that’s in our possession, we have provided it. Apple complies with valid subpoenas and search warrants, as we have in the San Bernardino case. We have also made Apple engineers available to advise the FBI, and we’ve offered our best ideas on a number of investigative options at their disposal.

We have great respect for the professionals at the FBI, and we believe their intentions are good. Up to this point, we have done everything that is both within our power and within the law to help them. But now the U.S. government has asked us for something we simply do not have, and something we consider too dangerous to create. They have asked us to build a backdoor to the iPhone.

Specifically, the FBI wants us to make a new version of the iPhone operating system, circumventing several important security features, and install it on an iPhone recovered during the investigation. In the wrong hands, this software — which does not exist today — would have the potential to unlock any iPhone in someone’s physical possession.

The FBI may use different words to describe this tool, but make no mistake: Building a version of iOS that bypasses security in this way would undeniably create a backdoor. And while the government may argue that its use would be limited to this case, there is no way to guarantee such control.
The Threat to Data Security

Some would argue that building a backdoor for just one iPhone is a simple, clean-cut solution. But it ignores both the basics of digital security and the significance of what the government is demanding in this case.

In today’s digital world, the “key” to an encrypted system is a piece of information that unlocks the data, and it is only as secure as the protections around it. Once the information is known, or a way to bypass the code is revealed, the encryption can be defeated by anyone with that knowledge.

The government suggests this tool could only be used once, on one phone. But that’s simply not true. Once created, the technique could be used over and over again, on any number of devices. In the physical world, it would be the equivalent of a master key, capable of opening hundreds of millions of locks — from restaurants and banks to stores and homes. No reasonable person would find that acceptable.

The government is asking Apple to hack our own users and undermine decades of security advancements that protect our customers — including tens of millions of American citizens — from sophisticated hackers and cybercriminals. The same engineers who built strong encryption into the iPhone to protect our users would, ironically, be ordered to weaken those protections and make our users less safe.

We can find no precedent for an American company being forced to expose its customers to a greater risk of attack. For years, cryptologists and national security experts have been warning against weakening encryption. Doing so would hurt only the well-meaning and law-abiding citizens who rely on companies like Apple to protect their data. Criminals and bad actors will still encrypt, using tools that are readily available to them.
A Dangerous Precedent

Rather than asking for legislative action through Congress, the FBI is proposing an unprecedented use of the All Writs Act of 1789 to justify an expansion of its authority.

The government would have us remove security features and add new capabilities to the operating system, allowing a passcode to be input electronically. This would make it easier to unlock an iPhone by “brute force,” trying thousands or millions of combinations with the speed of a modern computer.

The implications of the government’s demands are chilling. If the government can use the All Writs Act to make it easier to unlock your iPhone, it would have the power to reach into anyone’s device to capture their data. The government could extend this breach of privacy and demand that Apple build surveillance software to intercept your messages, access your health records or financial data, track your location, or even access your phone’s microphone or camera without your knowledge.

Opposing this order is not something we take lightly. We feel we must speak up in the face of what we see as an overreach by the U.S. government.

We are challenging the FBI’s demands with the deepest respect for American democracy and a love of our country. We believe it would be in the best interest of everyone to step back and consider the implications.

While we believe the FBI’s intentions are good, it would be wrong for the government to force us to build a backdoor into our products. And ultimately, we fear that this demand would undermine the very freedoms and liberty our government is meant to protect.

Tim Cook

Posted February 17, 2016 by xyquarx in Uncategorized

Timeline: The 2008 Financial Crisis, Bailouts, and Repayment   Leave a comment

August 2007: Countrywide Financial, one of the least responsible lenders in the country, runs into financial trouble and is rescued by being acquired by Bank of America, which was completed in January 2008. This move was very unfortunate for Bank of America.

November 2007: Charles Prince, CEO of Citigroup, resigns in disgrace after very poor performance of Citi due to excessive exposure to poorly performing subprime loans. He is replaced by Vikram Pandit.

March 2008: Bear Stearns fails and is rescued by JP Morgan Chase with help from the government.

Sept 14, 2008: Merrill Lynch, an investment bank failing due to excessive exposure to subprime loans, agrees to be acquired by Bank of America, a transaction which was completed in January 2009.

Sept 2008: Lehman Brothers is on the verge of bankruptcy. Over the preceding months, several other banks had considered rescuing / acquiring it, but all backed after a closer look, seeing just how bad Lehman’s assets were. The Fed and Treasury try desperately to save it, but they don’t have the legal authority to outright bail it out, and on Sept 15, 2008, Lehman declares bankruptcy.

Late September 2008: After the failure of Lehman, financial panic freezes credit markets. Hank Paulson (Secretary of the Treasury) and Ben Bernanke (Fed Chairman) approach congress asking for permission to use $700-800 billion to bail out the banks. The first question they were asked is “Can’t this wait until after the election?” (the election was scheduled for the beginning of November). Bernanke stresses that credit markets are frozen, banks aren’t lending to each other, let alone anybody else, and normal companies cannot get the routine loans they need to stay in business.

September 29 2008: The House of Representatives rejects the bailout; stock markets crash.

Oct 1, 2008: The Senate passes an amended bailout proposal and the House passes it too on October 3. President Bush immediately signs it into law.

An important feature of the bailouts is that all banks have to be bailed out, whether they need it or not, and whether their management wants it or not. Otherwise those banks that get bailed out could be stigmatized and experience runs. Banks that refuse to take the money are threatened by the government with dire regulatory harassment unless they relent, so that all the banks eventually agree to take the money.

The banks are prohibited from paying back the bailout money until the government gives them permission, and they are prohibited from issuing their employees large bonuses until they pay back the bailout money. Somehow AIG (not a bank) finds a loophole in this and issues large bonuses in spite of still owing a very large amount of TARP money.

In January of 2009, Vikram Pandit, the new CEO of Citi, announces that he will take $1 / year in total compensation until Citi is profitable again. Citi is in extremely bad shape at that time, which was not Pandit’s doing.

In the spring of 2009, the government conducts accounting “stress tests” to see if the banks can weather another storm. Those who pass the stress tests are to be permitted to pay back the bailout money, which most of the big banks do in early June 2009. Citigroup is still in bad shape, and Bank of America also is not fit to repay, mostly due to its unfortunate acquisition of other, far less healthy, banks. Many small banks are struggling and will remain unable to repay the bailout money for years, even until 2016.

The repayment of the TARP money by most of the big banks in June of 2009 gets almost no media attention, being probably the most under covered event of the 21st century.

Later in 2009, the banks that had repaid their TARP money issue bonuses to their employees. It should be noted that under normal conditions, a banker’s bonus is a large part of their routine pay, so not issuing bonuses would be effectively a large pay cut. The public, believing that the TARP money has not been repaid and not understanding the normal nature of bankers’ pay, is enraged.

In September of 2009, “Capitalism: A Love Story”, a Michael Moore movie about the financial crisis, hits the theaters. In it, Michael Moore makes a big act of driving an armored truck around Manhattan to all the big banks demanding that they repay the TARP money. Bankers, knowing that anything intelligent that they say to him will wind up on the cutting room floor, refuse to interview him, and he never gets past the security guards. Whether we should believe that nobody ever told Moore that those banks had already repaid the money is left to the reader.

2011: Ron Paul and Bernie Sanders (a strange pair of bedfellows if ever I saw one) get legislation through congress dictating that the Fed is to be audited. The audit reveals that many short-term secret loans were made by the Fed during the crisis. In early 2009, these loans totaled $1.2 trillion, which was the peak outstanding. This was almost entirely paid back by January of 2010.

Bernie Sanders, on his website, to this date, claims that his Fed audit revealed that $16 trillion in secret loans had happened and makes it sound like none of it has been paid back. To turn $1.2 trillion into $16 trillion, some accounting tricks are done. If I borrow $100 from you Thursday to be paid back in a week, and the next Thursday take out another $100, one-week loan to finance paying the first back, and then repeat the process every week for a year at which point I pay it off, Bernie Sanders’ accounting would call that 52 * $100 == $5200 in loans. But it’s paid back at the end of the year, and it was never more than $100. It was effectively a $100 loan for one year.


Above: the total outstanding debt of the allegedly $16 trillion (actual peak of $1.2 trillion) in loans exposed by the Fed audit.

Most news sources, like Sanders, report the loans as $16 trillion, and insinuate that none of it has been repaid.

2016: All the big banks and AIG have repaid their TARP money long ago.  Some small banks still have yet to pay back.  GM and Chrysler still owe bailout money.

Posted January 18, 2016 by xyquarx in Uncategorized

Movie Review: The Big Short   Leave a comment

The movie, I felt, was very different from the book, especially the last few minutes of the movie. While the book stressed stupidity and insanity, the movie stressed criminality.

First, prior to the movie, there was some discussion of whether there have been any nationwide crashes in real estate prices since the depression.  I remembered looking at the nationwide Case-Schiller index of home prices, and prior to 2006, we do not see a decrease:

Unfortunately, the Case-Shiller index only goes as far back as 1987, so we don’t have any data prior to that.  The smoothness of the curve, however, is remarkable.  It is easy to see how people as late as 2005 an observer could think that the trend was a very reliable up, up, up.

I don’t think there had been a nationwide drop in real estate prices since the great depression, there had been drops within local markets when local industries got into trouble.  This is why taking a bunch of A and AA bonds from different localities, and bundling them together into a CDO could lead to the CDO legitimately having a better rating than the individual bonds it contained.  A diverse portfolio is less risky than a concentrated portfolio.  The movie basically says this is fraudulent, like using old fish to make a stew so the customers won’t notice that it’s not fresh.  I think the movie was wrong.

At one point, someone sells something for more than it was worth, and someone in the movie said something to the effect that that was criminal.  No, it’s not criminal to sell something for more than it’s worth if you don’t lie in the process.  There’s no law against charging whatever the market will bear.

The movie said that the banks were bailed out and used the bailout money to pay big bonuses.  That’s true of AIG, but not of most of the banks.  Most of the banks paid their bailout money back to the government, with a profit, as soon as they were permitted to, in June of 2009.  One bank that didn’t (because they were in worse shape than the other banks) was Citi, whose CEO, Vikram Pandit, took $1 a year in total compensation until the organization resumed profitability.  This is especially interesting as it was Pandit’s predecessor, not Pandit himself, who made a mess of things at Citi.  AIG did eventually pack back the bailout money.
The repayment of the bailout money was one of the events least-covered by the media, relative to its importance, of the 21st century.  Most Americans just think the banks kept the money and that was the end of it.

Near the end of the movie, someone says the bankers knew they would be bailed out.  I don’t recall that from the book, and it’s inconsistent with most of the movie, which shows the bankers not being aware that a crisis was looming at all.

Many people feel the banks did not suffer at all due to the meltdown.  That’s not accurate, the shareholders  of the badly-managed banks lost most of their investment.  Note that a lot of the management of the banks get paid in stock options, so they lost a lot too.  Here are some plots of stock prices of the various financial organizations: Bailout Statistics

Posted January 3, 2016 by xyquarx in Uncategorized

Saving Lives Doesn’t Always Carry the Debate   Leave a comment

A couple of Muslims recently perpetrated a mass shooting in San Bernadino, California, that looks to have been inspired by Islamic State.  14 people were killed and many more injured.  The first thing one must realize is that this was a “media event” — it is not something that is happening on a wide scale, mass shootings of all kinds are so rare that it is exceedingly unlikely to die from one.  Note that homicide is the 27th most likely cause of death in the United States, with about 0.6% of total deaths, and mass shootings are a very tiny fraction of homicides.

But there were several responses as to how we are to deal with this “threat”:

  1. Enact gun control.
  2. Reduce or block Muslim immigration.
  3. Increase government surveillance of civilians.

1 and 3 both have constitutional problems — the 2nd amendment of the Bill of Rights, as currently interpreted by the courts, entitles citizens to own guns, and the 4th amendment forbids excessive searches without a warrant.  It should be noted that both of these rights are among the most weakly enforced rights in the constitution.  There is no constitutional problem with 2, as someone who wants to immigrate has no rights under the constitution and can legally be refused entry for any reason or no reason.

I will posit here that all 3 of these measures could save lives.  But there are people, myself included, who are vehemently opposed to at least one of them, regardless of how many lives would be saved.

Gun Control

Michael Shermer, a public intellectual who has frequently debated in favor of gun control, says he observes that the gun enthusiasts debating against him, when cornered and confronted with the reality that gun control would save lives, don’t care.  They feel that the right of citizens to arm themselves is a sacred, fundamental, and important right that should not be abridged, regardless of the cost in lives.

Gun enthusiasts often argue that had there not been gun control in Nazi Germany, the Jews could have resisted violently rather than passively being rounded up and marched into the gas chambers.  They also argue that mass shootings would be less deadly had there been more “good guys” carrying concealed guns on the scene, but this is a fairly ridiculous argument and I don’t believe it’s their prime motivation.  Most of their ideology is bound in the idea that an armed populace is an important check on government tyranny.

Reducing Muslim Immigration

We have had about 3,000 deaths from Islamic terrorism in the US over the last 20 years.  With about 4 million Muslims in the country, that boils down to about one American civilian death, per year, for every 25,000 Muslims in the country.  Most of those deaths were in 9/11, but there is no reason to believe that an attack on that scale could not happen again.  It’s harder to hijack a plane than it was before 9/11, but there are many ways to kill large numbers of people, all that is required is a bit of imagination.  If anything, the threat is elevated since before 9/11, since ISIS is more adept than Al-Qaeda was at radicalizing westerners on the Internet.

But again, the people who advocate for immigration don’t care about the loss of life.  Many people object to the idea of a religious litmus test on immigration, because it is inconsistent with our desire to be a secular, diverse society with freedom of religion.  Many people also, for reasons I don’t understand, believe that it is somehow vital to just take large numbers of immigrants, as an end in itself.

Increased Government Surveillance

Whistle blower Edward Snowden revealed that the extent to which the American government is spying on its citizens goes far beyond the level that most people perceived to be going on.  There have been some half-hearted efforts by politicians to reign this in.  Some Internet companies have responded by encrypting their customers’ email in such a way that it is technically impossible for the Internet company to decrypt the email, even if they are faced with a court order.  Some politicians have been trying to make this practice illegal.

It is clear that giving the government the right to read all of everybody’s email will help them thwart terrorists and save lives.  But those who object to such spying don’t care about the lives saved.  The potential for abuse here is huge, and inevitable.  Possibly the government can misuse it to spy on political enemies, rogue employees of the government could track people they know for their own purposes that have nothing to do with thwarting terrorism, and people could be blackmailed by the government or by rogue government employees.  Those who object to surveillance believe that privacy is a sacred, fundamental human right that should be respected.


Posted December 23, 2015 by xyquarx in Uncategorized

Canada’s Illegal Immigration Problem   Leave a comment

The Manitoba Herald

The flood of American liberals sneaking across the border into Canada has intensified in the past week, sparking calls for increased patrols to stop the illegal immigration.  The recent actions of the Tea Party and the fact that the Republicans won the Senate are prompting an exodus among left-leaning citizens who fear they’ll soon be required to hunt, pray, and to agree with Bill O’Reilly and Glenn Beck.

Canadian border farmers say it’s not uncommon to see dozens of sociology professors, animal-rights activists and Unitarians crossing their fields at night. “I went out to milk the cows the other day, and there was a Hollywood producer huddled in the barn,” said Southern Manitoba farmer Red Greenfield, whose acreage borders North Dakota .  “The producer was cold, exhausted and hungry. He asked me if I could spare a latte and some free-range chicken.  When I said I didn’t have any, he left before I even got a chance to show him my screenplay, eh?”

In an effort to stop the illegal aliens, Greenfield erected higher fences, but the liberals scaled them.  He then installed loudspeakers that blared Rush Limbaugh across the fields. “Not real effective,” he said.  “The liberals still got through and Rush annoyed the cows so much that they wouldn’t give any milk.”

Officials are particularly concerned about smugglers who meet liberals near the Canadian border, pack them into Volvo station wagons, and drive them across the border where they are simply left to fend for themselves.  “A lot of these people are not prepared for our rugged conditions,” an Ontario border patrolman said. “I found one carload without a single bottle of imported drinking water.  They did have a nice little Napa Valley cabernet, though.”  When liberals are caught, they’re sent back across the border, often wailing loudly that they fear retribution from conservatives.  Rumors have been circulating about plans being made to build re-education camps where liberals will be forced to drink domestic beer and watch NASCAR races.

In recent days, liberals have turned to ingenious ways of crossing the border.  Some have been disguised as senior citizens taking a bus trip to buy cheap Canadian prescription drugs.   After catching a half- dozen young vegans in powdered wig disguises, Canadian immigration authorities began stopping buses and quizzing the supposed senior-citizens about Perry Como and Rosemary Clooney to prove that they were alive in the ’50s.  “If they can’t identify the accordion player on The Lawrence Welk Show, we become very suspicious about their age,” an official said.

Canadian citizens have complained that the illegal immigrants are creating an organic-broccoli shortage and are renting all the Michael Moore movies.  “I really feel sorry for American liberals, but the Canadian economy just can’t support them,” an Ottawa resident said. “How many art-history majors does one country need?”

In an effort to ease tensions between the United States and Canada, Vice President Biden met with the Canadian ambassador and pledged that the administration would take steps to reassure liberals.  A source close to President Obama said, “We’re going to have some Paul McCartney and Peter, Paul & Mary concerts.  And we might even put some endangered species on postage stamps.  The President is determined to reach out,” he said.”

from a forwarded email

Posted November 22, 2014 by xyquarx in Uncategorized

On Citizens United   Leave a comment

A lot of noise is being made about the influence of money on American politics.  The Democrats, in particular, are complaining.  Recently, the Supreme Court of the United States decided that corporations have the same rights as people, and therefore have the right to free speech.

But the question is: why does it cost so much money to inform voters prior to elections?  Information is cheaper than it ever has been.  Certainly, if each voter were to spend 2 hours googling the candidates before each election, any 30 second TV ads they saw would have little influence on them.  It’s not very expensive for a candidate to put together a website outlining their political positions, and there are also websites like “Vote-USA” where candidates can register their positions.

But the problem is, most voters don’t go to such websites, or do any homework before an election.  That’s the real problem.  While information is cheaper than it ever has been, attention is expensive, and always has been.  To get the average voter to watch a 30 second commercial, you have to put it in the middle of an entertaining program.  And to create that entertaining TV show means hiring famous actors and having expensive props and sets.  And for all that money, you get 30 seconds of halfhearted attention.

So money influences elections.

Steps could be taken to make it easier for voters to do their homework.  When I lived in California, every voter there got a printed magazine listing all candidates for all offices they would be voting on, with a statement by each candidate and a rebuttal by their opponent.  Now that I’m in New York, we don’t have anything like that and I still haven’t figured out how to find even the names of all the candidates I will be voting on, just so I can google them.  There are services like “VOTE-USA” that provide a website that will show you SOME of the candidates, but no one, like local judges, below state assembly offices.

So if New York did what California does (with an opt-out of the printed version so people could just access it all on the web to save trees), things would be tremendously improved.

Is Money Speech?

Suppose I want to influence a presidential election.  I live in New York, which is 99% guaranteed to vote Democratic, so knocking on doors to influence voters in New York will have no influence on the national election.  But suppose I drive to Pennsylvania, a swing state, to knock on doors for a weekend and talk to people about how to vote.  Is that constitutionally guaranteed speech?  Nearly everyone would agree that it is.

But there would be expenses.  Gasoline to get there and back, hotel bills.  But I think everybody would agree that even though I spent this money on expressing my opinions, that’s all guaranteed speech.

Then suppose I can’t make it to Pennsylvania myself because I have a tough job where I work 7 days a week.  But I have a lot of money because I work so hard, and my friend Charlie, who shares my opinions, is unemployed.  What if I lend him my car and let him stay in my hunting lodge while he’s in Pennsylvania, and use my Exxon credit card for gas.  Is that “buying votes” or is that “constitutionally guaranteed speech”?  What if I don’t own a car or a hunting lodge, but just give him money to rent a car and stay in hotels?

Suppose I buy air time for a profit-making weekly TV show about politics, that’s is supposed to be a comedy like “The Daily Show”.  And in this show I incessantly express political opinions.  But the show isn’t as successful as “The Daily Show”, the ratings are poor, and the endeavor loses money.  But I keep subsiding the show anyway, because I like the opinions that are being expressed.  Is that “buying votes”, “constitutionally guaranteed speech”, or just “an unsuccessful business that I’m trying to turn around”?

What if I have as much money as Rupert Murdoch, and buy newspapers and radio & TV stations, and make it clear to my employees that a certain political slant is expected of them — am I a “news organization”, or am I “buying votes”?

The line between money and speech is so blurry, and the importance of free speech so vital to society’s health, that I feel that in “Citizen’s United”, the Supreme Court of the United States made the right decision — money is speech, and any attempt to regulate money spent on speech is in dire risk of endangering free expression.

Are Corporations People?

Corporations aren’t exactly like people.  Corporations can’t collect social security when they’re 65 years old, and people can’t be broken into pieces in antitrust lawsuits.  Many other differences exist.

But if a government tells a corporation they cannot speak, they are telling the stockholders and employees of that corporation they cannot speak, and those are people.  So a corporation (or a union) has, through its membership, the right to free speech.

Free speech carries with it responsibilities.  You cannot defraud, you cannot slander or libel, you cannot violate copyrights.  All these limitations apply equally to people and corporations.  As far as free speech goes, corporations and unions should have the same rights as people.

Posted September 14, 2014 by xyquarx in Uncategorized

Two Systems   Leave a comment

We have two main systems for making collective decisions in our society: the free market, and the political system.  There is also the court system, but that is really subordinated to the political system.

In the free market, individuals make their own decisions, and enter into voluntary contracts with other individuals.  Individuals can also voluntarily band together into organizations, and organizations can make contracts with individuals or with other organizations.

In the political system, in our case a democracy, all the adults in the society band together and make collective decisions for the whole society.

Each of the two systems has its own sense of justice, and these two senses of justice conflict very deeply.  The free market is based on the idea of individual rights, but those rights do not include food, clothing, shelter, or medical care.  The political system, unless encumbered by a constitution, has no regard for individual rights.

The free market rewards people according to how much they have contributed to production, and if you can’t contribute much, you’re powerless and will receive almost nothing.

The political system rewards people according to how popular they are with those in power, and if you’re opposed to those in political power in a system without a constitution, you will fare very poorly indeed.  For example, I had a friend who was a South Vietnamese soldier in the Vietnam war.  After his side lost, the side that won put him in a “re-education” camp.  They generally didn’t give the prisoners enough food to survive.  He was awfully small, and he felt his proudest achievement in his life was that, unlike others, he was able to survive on the meager rations provided.

An extreme communist claims that the free market is completely pernicious, and that the political system should do 100% of the decision making in the society.  An extreme libertarian claims that the political system, government, is completely pernicious, and that the free market should do 100% of the decision making in the society.

Leftists tend to be obsessed with equality — such instincts are probably a throwback to pre-agricultural times, when humans were organized in small, leaderless, egalitarian tribes.  Such groups cannot hold together when they grow to more than about 150 people.  These instincts had to be suppressed in order for humans to organize themselves into larger groups with leaders.

Libertarian thinking has come to dominate a lot of the American Republican party.  Democrats are much more moderate than communists.  But generally Democrats tend to see government regulation of the marketplace as a panacea, while Republicans view it as the root of all evil.  It could have been predicted in 2006 that, if a financial catastrophe occurred, the Democrats would blame it on too little government regulation while the Republicans would blame it on too much government interference, and that’s how it played out.

It should be noted that both systems are vulnerable to stupidity.  With either decision making system, if most of the actors are behaving stupidly, there will be bad outcomes.  However, with the free market, if most of the actors are behaving stupidly, an individual who shuns the stupidity has some possibility of avoiding the bad outcome for themselves, to some extent.  With a democratic government, on the other hand, if most of the voters are voting stupidly, everybody will unavoidably suffer the bad outcome and can do nothing to save themselves.

In the free market, since everybody is making their own decisions, there is some possibility of the smartest people serving as role models for others, with a general improvement of outcomes as a result.  Unfortunately, the society can stratify, such that the people who are doing badly don’t come into much social contact with the people who are doing well, and the better habits fail to rub off on them.  Charles Murray, in his book “Coming Apart”, demonstrates that, in the US, many upper-class whites have no idea how trashy lower-class whites have become over the last 50 years.

There are many tasks society faces, and I feel that each of the two systems is the best suited for some of the tasks.  National defense and enforcement of laws & contracts are definitely best left to government.  Most production of material goods, including food, shelter, and clothing, is definitely best left to the free market.  The free market by definition does very little for the poor, and one thing we try to achieve with government is to place a floor under how badly off a person can become, achieved through redistribution.

Establishing that floor is difficult, because some people, such as alcoholics, drug addicts and otherwise really irresponsible people, are awfully hard to help.  Furthermore, the safety net in and of itself can encourage dysfunctional behavior — in the early sixties, for example, we had 5% births out of wedlock, then we established more generous welfare for single moms, and as a result we now have 40% births out of wedlock.

Communists have a very good understanding of politics, but a very poor understanding of economics.  They succeeded in acquiring power in many countries, and when they did, they maintained an absolute monopoly on power in those countries for a long time, in spite of the fact that they generally couldn’t run the economy worth beans. Their problems dealing with economic realities stem from two things: ignorance, but also, to the extent that they do understand free market economic principles, they find them morally repugnant.

Libertarians have a pretty good understanding of economics, but a poor understanding of politics.  As a result they rarely acquire much political power.  The US in the last 6 years has more libertarian thinking in its government than we may have seen at any point in any government in the history of the world.  But they’re very destructive, uncompromising and non-pragmatic, and it remains to be seen whether they will ever be able to acquire the executive branch, and whether it will be a total disaster if they do.

Posted March 17, 2014 by xyquarx in Uncategorized