Arnold Kling  

Madoff as Metaphor

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Paul Krugman writes,


How different, really, is Mr. Madoff's tale from the story of the investment industry as a whole?

Meanwhile, I've been thinking that Madoff is a perfect analogy for the public sector. The government gives people money, which it expects to obtain by taking the money from people in the future. Even the Center on Budget Policy and Priorities, not known as a right-wing organization, sees the U.S. fiscal stance as unsustainable (pointer from Ezra Klein via Tyler Cowen)--in other words, a Ponzi scheme.

Frankly, until Krugman made it, the analogy between Madoff and generic investment banking had not occurred to me. Perhaps it has some merit. But the analogy between Madoff and government seems perfect, and my guess it has never occurred to Krugman. It shows how our biases affect our thinking.


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The author at Economics Unbound in a related article titled Is Social Security a Ponzi Scheme? writes:
    (This is the first in a series on technology and the crisis) In the aftermath of the Madoff implosion, quite a few people have pointed out the parallels between a Ponzi scheme and Social Security. Arnold Kling, whom I respect,... [Tracked on December 28, 2008 10:12 AM]
COMMENTS (62 to date)
Eric writes:

Social Security, medicare, medicaid, city pensions... All ponzi schemes that face certain disaster, but it's so far in the future no one cares.

Troy Camplin writes:

It occurred to me a long time ago that Social Security was a Ponzi scheme -- though I only blogged about it yesterday.

stephen writes:

madoff is what, two, maybe three standard deviations from the mean as a financial industry actor? an outlier at any rate, as pure as they come. by definition that makes him "different". frankly, thats why this story is not all that interesting.

out there, somewhere, there is a Washington Journal commentor calling krugman to ask for his analogy back.

Mason writes:

Amen Eric.

If anyone thinks $50 billion is a big ponzi scheme tell them to check out social security it's be going on for 71 years and has paid out over $8.9 trillion.

http://www.ssa.gov/history/hfaq.html

Matt writes:

confirmation bias?

Mason writes:

Perhaps, but please tell me why, because I'm feeling depressed after finding out that $8.9 trillion doesn't adjust for inflation.

Also that entire column of Krugman's was fear mongering. It's not the the investment bankers fault credit rating companies and lenders both made mistakes. Mortgage backed securities are generally a safe investment, and if originated and rated properly everything would have worked out well for the investors and their brokers. In other words we've already identified that problem, why drag others into it? I could just a easily and just as uselessly blame Wall Street journalist for the countries woes.

His only good point, although it's not new, is that there is a problem with giving bonuses on a more regular basis that the investment horizon.

Gary Rogers writes:

Eric writes "it's so far in the future no one cares" and that sums up the popular attitude toward ponzi schemes and economic bubbles in one sentence. That is, until the bubble bursts and what seemed to be so good turns out to be nothing. Then everyone tries to find a way to go back to the way things were but realize that you cannot recreate something out of nothing. It is far wiser to build wealth on substance.

What our government is doing is criminal.

von Pepe writes:

I suppose the difference in the private versus public ponzi schemes is the two things happened to Madoff at the end.

First, he was calling around desperately for new money to prop-up his fund whilst the governemnt just takes more by threatening the taxpayer with jail. If Madoff could of forced his current investors and new investors to pony-up he would still be in business.

Secondly, Madoff was arrested and the governemnt just keeps chugging along.

Greg writes:

It applies in both cases, but more so to the investment industry. Bubbles are all predicated on "greater fool" and "musical chairs" thinking (hat tip to Chuck Prince, Citigroup genius, for the latter). If the banks and mortgage originators didn't essentially think there were still suckers out there to exploit, the crisis would never have been nearly as bad. Of course, other parts of the same banks were dumb enough to be the suckers. Oops.

The same is technically true of entitlement programs, but primarily because of demographic changes and healthcare cost increases. In a static situation, it's just a transfer tax. Given that it's not static, we're going to have to have some pretty fat benefit cuts at some point. Not quite the same as a Ponzi scheme.

John writes:

The difference between a public and a private Ponzi scheme is that the government has a monopoly on the legitimate use of force. It can thus force new investors to enter the scheme. If the growth in the labor force and labor productivity were consistent with the obligations of the public scheme (i.e. Social Security), it could continue. They are not expected to be consistent in the US in the rather near future.

The managers of a public Ponzi scheme may compel people to participate but their power is not unlimited. They are constrained by several factors. High payroll taxes affect other social goals; supporting the system with high marginal rates calls into question the "social insurance" justification for the scheme. Yet the real problem in the US is a demographic shift. There will not be enough "investors" in the future to force to participate in the scheme. Interestingly, the scheme itself may have caused (or contributed to) the demographic change that may destabilize the scheme. Children traditionally have served as a revenue stream for their parents. Once the public scheme provided that income (for a time), parent may have chosen to have fewer children thereby bringing about a crisis for the public Ponzi scheme.

Steve Roth writes:

CBPP sez: "Eliminating that gap would require the equivalent of an immediate and permanent 24 percent increase in tax revenues"

That would put our tax burden at about 34% of GDP.

Which is at the low end of what every other prosperous country taxes. The EU15 averages 40%, and ranges from 32% (Ireland) to 50% (Sweden).

And they've been growing at the same rate as we have for decades.

If we'd been responsible and paid for our (necessary level of) government for the last 28 years, we could probably tax less in the future. But we have to pay back all that money that was borrowed to buy votes for Republicans via irresponsible tax cuts.

hacs writes:

I disagree of that rhetorical parallelism that disguises the subtle line separating immoral, irrational foolishness from immoral, rational illicitness.

After all, almost everyone into Mardoff scam had had almost sure about the impossibility of such performance without some kind of "special" arrangement (inside information, for example).

Gary Rogers writes:

Can the government's ability to force participation replace confidence? Normally ponzi schemes are based on hidden information and confidence. Participants don't know that the money is not there and are confident that the payoff will delivered as promised, so everything is good. Once the confidence breaks down, the fact that there is no money causes the scheme to fall apart.

I think that in the case of SS, forced participation will cause the program to muddle on paying what it can in spite of dissappointed participants. But what about government bonds? The government cannot force people to loan it money? Isn't this also a Ponzi scheme, where we continue to borrow money to pay off earlier bond holders? Everyone expects to be paid back with interest, but that money has to come from new and increasing debt. What happens if there is a loss of confidence in lending money to the U.S. Government?

So, is loss of confidence likely to happen soon? Is it happening already and part of the instability our economy is going through? Is it safe to add another trillion dollars to the debt in an attempt to buy our way out of trouble? If $1 trillion is safe, is $2 trillion acceptable risk? $100 trillion? The trouble with Ponzi schemes is that they are good to be in when they are growing, but it is impossible to predict the crash.

Hal writes:

I think the comments are right, the US Gov. has several ponzi schemes going at once and they are probably share funds on a continual basis. It's a huge monopoly as pointed out.

To me what has been a curious study of peoples reactions is how the market went at the announcement of the whole thing early in the week. The markets are primarily driven lately by emotion and the reaction was highly emotional with people jumping out of hedge funds some more because I think of distrust. I follow the precious metals with the real time tracker ExactPrice and it looked to me like a good number of investors were jumping into gold and silver. Particularly gold as I think people see it as having real value. You can't trust people right now to manage you money because they all are being tarred with fraud. And the government is printing paper left and right trying to bailout the crooks. Probably more a covering of their rears with our money then anything else.

LOL, what the government might should do is put Madoff in charge of the Treasury. If anyone has shown he can run a ponzi scheme well, it's him.

Barkley Rosser writes:

Eric, Troy, Mason, and the Rest Of You Who Claim Social Security Is A Ponzi Scheme,

Sorry, but no. You are wrong. The government can tax future citizens. Ponzi and Madoff could not necessarily get anyone else to continue to put fresh money in. For that matter, in the classic Ponzi scheme, most people put money in once, and to get theirs back, completely new people must keep being recruited who are being lied to about what is going on. Social Security receives regular taxes from people through their working lives, and then pays back depending on how long they live, their status, and so forth, all very openly and publicly. Quite different.

Let us further distinguish Social Security from the rest of the government, which, hack cough, is not a Ponzi scheme either, although plenty of libertarians would like to say it is. Social Security is currently running a $200 billion surplus. Now, pretty much all of you have heard this drumbeat generated by people who want to privatize it (including some who are now calling for payroll tax cuts, which would undermine its solvency, which they supposedly believe is totally disastrous) that it will be in deficit in 2017 (meaning it is the only part of the federal government running a surplus now), and will go "bankrupt" in 2041, or thereabouts.

First, in a majority of years in the past decade the system has done better than the never publicized "low cost scenario." What one hears in the media all the time is the "mid-range scenario." Under the low cost scenario, the system never even goes into a deficit, never, much less goes "bankrupt." It continues to take in revenues from fica taxes that exceed its outflow in every year forever, continuing to lend money to the rest of the federal government forever, piling up those government bonds. This is a Ponzi scheme? Sorry, but no.

Now, I grant this year it will not do as well as the low cost scenario, and certainly not next year either. But even if it eventually goes "bankrupt," say in 2041 as the mid-range scenario says, well, it does not shut down shop and stop paying anybody anything as Charles Ponzi's original scheme did or as Madoff's has now. No, payments would be reduced to a level supportable by the still existing inflow of fica tax revenues. If the mid-range scenario holds, then those payments would drop to about 71% of what people would be receiving then. However, that level would be about 160% in real terms compared to what current recipients get. So, this "bankruptcy" would mean that recipients would be stuck getting "only" about 120% or so in real terms compared to what recipients today are getting. Again, not a Ponzi scheme, although very few are aware of these facts.

Regarding the rest of the government, sure, national debt is paid off by "rolling it over," that is issuing new debt to pay off old debt. If one wants to call that a Ponzi scheme, fine, but as long as the government can pay the interest on the debt easily, it can roll it over easily. This is not like Ponzi who did not have a regular and publicly known source of income, but had to get fresh money out of fresh suckers who did not know what was going on. There are also obvious public measures of the ability of the government to pay, such as the interest to tax revenues and interest to GDP ratios. Those have been lower, but also higher. They are probably going to go up, but things can be adjusted down the road.

After all, the federal government did run an overall budget surplus, not just on social security, in the late 1990s. This followed a tax increase that was not supported by a single Republican in Congress, who loudly forecast that tax increase would trigger a recession. As it is, we had a boom that led to a stock market bubble in high tech stocks. Eeeek!

In any case, all of you should get real. This talk of the government, or social security, as a Ponzi scheme, is just silly.

Adam writes:
For that matter, in the classic Ponzi scheme, most people put money in once, and to get theirs back, completely new people must keep being recruited who are being lied to about what is going on. Social Security receives regular taxes from people through their working lives, and then pays back depending on how long they live, their status, and so forth, all very openly and publicly. Quite different.

So, based on what you said I only see two differences. First, that people pay into it over time and not just once. That's not really a difference, since there's nothing preventing a Ponzi scheme from running that way. Second is that it's done openly. The reason it can be done openly is that it's not optional, traditional Ponzi schemes must rely on trickery because of their voluntary nature. Besides, most people have no idea how it works. They think their money is going into a fund ala a 401k. If everyone really knew how it worked, there'd be much less support for it.

But these differences are irrelevant, it's the similarities that are important. Ponzi schemes promise more money returned than money put in and in the end fail because they don't generate any new wealth and eventually output exceeds input. This is exactly what will happen with Social Security as the population ages. And it will happen much sooner since the the money that was set aside has been taken for use elsewhere.

That's the similarity with a Ponzi scheme that matters, not the technicalities you mentioned.

von Pepe writes:

"For that matter, in the classic Ponzi scheme, most people put money in once, and to get theirs back..."

You are wrong. Most people get their return (and the returns are large) and roll it back in multiple times. In Ponzi's scheme (the original) I believe people originally recieved 100% after three months and, of course, re-upped for a few more rounds.

I am sure many of Madoff's victims made multiple contributions and rolled a substantial amount of their "gains".

Barkley Rosserr writes:

Adam,

Well, clearly you have not studied the matter very carefully. Go look at Bruce Webb's website, or for that matter, the Social Security Administration annual reports, and I mean their details, not their introductions and summaries, which are based on their mid-range forecasts, which have not been near correct for a majority of years in the past decade.

So, putting money in a 401K is better than having a tax-based flow of future income to cover your outflow? What has just been happening to all those wonderful 401K's lately? Frankly, having a tax-based flow of future revenue looks a lot more solid.

I suggest you read my post carefully again before you repeat your statements that social security will in the end fail" (whenver the end is), or "much sooner." If what has gone on in a majority of years in the past decade holds for most of the future (won't this year or next), then it does not matter what form those assets are held as or what the lending to the federal government has been used for. The fund will simply continue to run a surplus, taking in more in revenue each year than it puts out as expenditure. No, not even close to a Ponzi scheme.

So, the only worry you have about social security is that some idiot will cut the payroll tax, thereby reducing its solvency, or start allowing people to not pay in so that money can be put into government/private accounts, as Bush appeared to be trying to do in 2005..

Randy writes:

Barkley Rosser,

Not sure if you're being serious or not - but I'll comment anyway...

You're absolutely correct that the purpose of the Social Security program is to generate a revenue stream, and that we can count on the government to do what it can to maintain that revenue stream, but you are incorrect that it is not, in essence, a ponzi scheme. To maintain the revenue stream over time, either the number of contributers must increase, the amounts paid by contributers must increase, or the amounts paid out in benefits must decline. Its still a ponzi scheme - its just a slow ponzi scheme (though perhaps reaching its apex much sooner than many imagine).

Joe Marier writes:

Social Security's not a Ponzi scheme. You can't cash out.

frankcross writes:

It's not a Ponzi scheme, because it's fully disclosed and adopted democratically. If an association chooses to adopt a system like Social Security, that's not a Ponzi scheme. A Ponzi scheme involves tricking people. This is a democratic choice.

chucho writes:

Barkley and others are right, it is wrong to call Social Security a Ponzi Scheme--to do so is far too flattering.

I haven't read of many Ponzi schemes that were compulsory and may have led to fines/jail time if choosing not to "invest". Frankly, I don't remember "choosing" Social Security when I filled out my W-4 at all. I think it's pretty obvious that if people were given this "democratic" choice, at least 95% would opt-out.

Also, unlike Social Security, Ponzi schemes don't usually pay out to those who pay nothing or very little into the pool. Of course the schemers themselves take a cut, but Congress has that covered.

I'm sure Chuck Ponzi would have appreciated these "upgrades" added by Uncle Sam to his basic idea. But in general I think it's safe to say that he would have been offended to be associated with a fraud of such massive proportions.

Bob Knaus writes:

What Barkley said.

Another misconception needing correction... yes, it is true that federal taxes as % of GDP have been pretty steady at 20% since WWII. This gets graphed on the WSJ editorial page on a fairly regular basis. And yes, this is about half European rates.

What this ignores is our tiered tax system with federal/state/local taxing authorities. State & local tax burdens are roughly equal to the federal burder.

This makes our tax rate comparable to the folks on the other side of the pond, whose structures tend to be more unitary.

I think ours is better, since it puts half the taxing authority at a level much closer to the voter. As it stands, US citizens have chosen similar tax rates to Europeans, but with somewhat different priorities.

Gu Si Fang writes:

Barkley Rosser is right : Social Security and Public Debt are different from a Ponzi scheme in that they can be sustained much much longer - thanks to coercive taxation. But this comparison is really in favor of Madoff's scheme. At least, he did not have the power to coerce his customers. He could just lie to them and at some point he will end up behind bars. When some reluctant "customers" of Social Security refuse to pay, it is they who go to jail.

El Presidente writes:

Are you people serious?

Government transfer payments are not Ponzi schemes. If that requires any more explanation, then you really don't know what you're talking about or you really don't care about being truthful in your discourse.

Either way, it's not a discussion that needs to go any further.

I'll be among the first to admit that government spending must have diminishing marginal returns, just as any other sort of spending. But that does not make government a Ponzi scheme. it just makes us foolish if we are so incapable of getting along with one another that we necessitate the imposition of government at inefficient levels in order to sort things out. If we choose to be responsible we won't need to have as much regulation. Complaining about the regulation is at least as childish as the behavior which demands it.

As for Krugman's criticism, ponder this:

If there are constraints that limit average annual growth rates, and there must be or we would have come further sooner, then there is an upper threshold to the average level of profit that may be sustainably required and/or payed. If that is so, it is quite likely that an atmosphere of heightened profit expectations persuades us to engage in agreements that don't have a snowball's chance in hell of actually being honored. This can be exacerbated by just a few companies lying about their profitability. Other investors will want a piece of the premium action and other companies competing for capital will be pressured to fold or find a way to claim similar profitability. The simple fact is, nobody wants to say, "That's more than I can promise." Nobody wants to lose or be forced to find a new niche. So, many of us promise more until too many of us can no longer deliver.

I don't know if that makes the entire financial services industry a Ponzi scheme, since that would require knowledge and intent (perhaps a tall order for some of its participants). But, I do think it should change our perspective on the value that can be added to our economy by that industry. It is not a cure-all for what ails us. Nothing is. We should seek balance. After all, why do we need any particular level of output to be content? It's like we're chasing the dragon, pursuing Giffen goods.

The President remarked that Wall Street got a little drunk and needed to sober up; a metaphor with which he is familiar. In my opinion, Wall Street didn't get drunk, it became profit-aholic. Black coffee and fried food won't get us back on track. Neither will rehab. This will require a sponsor and several years of regular enforced accountability. And, if we really want to fix the problem, we're going to have to figure out what sort of inadequacy led to the behavior in the first place, then do something about it.

Troy Camplin writes:

Chuco's right. I was just hired at a community college and I was given the choice of Social Security and a teacher's retirement where I get to choose how the money's invested. Given the option to opt out, I did.

And you people can nitpick the minor details about the social security scam all you want, but its basic structure is that of a Ponzi scheme. Except, because you don't have a choice, but are forced under threat of violence, it's actually worse. The bottom line is that most of the same people who rightly condemn those who run Ponzi schemes, engage in racketeering, and run protection rackets, and then turn around and blame it on "free markets" are the same people who support the government doing exactly the same things. If we had true equal protection under the law, the government could not do anything it did not allow the public to do.

Leif writes:

In terms of semantics, yes SS is a Ponzi scheme, as it has virtually the same structure (it relies on future inputs to pay out current ones without a mechanism for generating new resources - yes, yes and yes). How people happen to commit to it - either by deception or force - really doesn't factor into the definition. Whether or not you think that theres something in our collective behavior that necessitates its existence is another issue.

El Presidente writes:

If somebody collects money from some and gives it to others while promising negative returns to the participant in favor of positive returns to the final recipient, we don't call that a Ponzi scheme. We call it a charity. The difference is the individual expectation of return, not the mechanism of distribution or the accounting outcome. Even charity would have diminishing marginal returns to a whole economy if we carried it to an extreme. We never call it a Ponzi scheme though, do we? That's why describing Social Security, welfare, and other government transfer payments as a Ponzi scheme is incorrect at best, and more frequently a dishonest and ideologically motivated perversion of language. Have a little intellectual integrity, folks. That's all I want for Christmas.

If we are so bent out of shape about downward redistribution that we'll lie about what it is and how it happens in order to prove how evil it is, why are we willfully ignorant of it when it flows the other way? Would recognition create a crisis of conscience? Perhaps the principles this post's criticisms are drawn from are not being universally applied by the critics. It seems that while physicists are searching for a theory of everything, economists are searching for a theory of less-than-everything, and decidedly so.

jorod writes:

I feel the same way about Mr. Potter in It's a Wonderful Life. Mr. Potter represents the government by concealing evil deeds and then blaming them on hard working people. Barney Frank and Co. for sure.

The Cupboard Is Bare writes:

"In a forceful condemnation of the SEC staff, Cox said there had been credible and specific allegations regarding Madoff's financial wrongdoing going back to at least 1999."

http://www.foxnews.com/politics/2008/12/16/sec-ignored-madoff-fraud-warnings-faces-grilling/

I think it's pretty amazing that none of this information leaked back to Madoff's clients.

Randy writes:

El Presidente,

"We call it a charity."

The political class calls it charity. Many of the rest of us call it theft. But hey, make it voluntary and we'll all be on the same page.

El Presidente writes:

Randy,

The political class calls it charity. Many of the rest of us call it theft. But hey, make it voluntary and we'll all be on the same page.

I wasn't equating taxation with charitable giving. I was highlighting the fact that the difference between charity and a Ponzi scheme is the expectation of individual return. This is also a difference between taxation and Ponzi schemes. Nobody has any illusion that their taxes are, de jure, supposed to be returned to them in any particular measure.

Obviously taxes are compulsory, which makes them different than charity. But theft? Come on. I suppose folks in your camp would only be happy if they were a law unto themselves, as every law is an imposition on the individual, whether it requires payment of taxes or not. In that way, every law can be said to deprive somebody of what they would otherwise have had. I don't suppose you are advocating the abolition of all laws because they compel obedience, and thus implicit sacrifice, are you? If not, which laws and why?

Randy writes:

El Presidente,

"I don't suppose you are advocating the abolition of all laws..."

All laws? No. But neither do I support the idea that whatever the political class decides is what I have to believe and accept.

"If not, which laws and why?"

I think a good start would be to make Social Security and Medicare voluntary. Why? Because I do not accept the right of the political class to subordinate my life to its ideology.

El Presidente writes:

Randy,

If you allow for the necessity of some laws, and you disdain subordination of your life to the ideology of others, then who should make laws and who should enforce them?

Randy writes:

El Presidente,

It isn't up to me. The laws are made by the political class to advance its own interests. That's the way it always has been and the way it always will be. I (and others) are becoming more subversive because over the last century or so the American political class has become steadily more controlling, manipulative, and greedy.

El Presidente writes:

Randy,

I didn't ask how it is, always has been, or always will be. I asked how it should be. So, since we've already established that you believe there should be some laws, who should make them, and who should enforce them?

This is a pretty straightforward question. I wonder why you choose not to answer as directly.

Randy writes:

El Presidente,

You think my answer isn't straight forward. I think its very straight forward. But then, I'm not a member of the political class. I don't think that running other people's lives is any of my business. Okay, you all run the show. If that makes you feel noble... hey, whatever... you all won't survive long without folks like me taking care of business. And I'll be glad to let you know when you've overstepped your bounds.

Adam writes:
Nobody has any illusion that their taxes are, de jure, supposed to be returned to them in any particular measure.

Really? I just got my statement from the SSA detailing what my benefits will be when I retire. I would say that the overwhelming majority is under exactly that illusion.

According to my statement, if I retire at 67 I'll be getting back about 18% of my total contribution per year. This means I break even at age 73. At age 80 I've got back 242%, at 90 429% and at age 100 615%. If I died right now, the death benefits for my family would dwarf this.

That additional money isn't being created, like most investments, instead it's transferred from new contributors, who are themselves being promised more money out than they put in. There are a number of features of Ponzi schemes, but the single more important one applies here. People get out more than they put in, with that additional money coming only from new contributors. You many not think this is enough to qualify it as a Ponzi scheme, but it's undeniable that they share this feature.

El Presidente writes:

Randy,

And I'll be glad to let you know when you've overstepped your bounds.

And how would you know when I've done that? Do you have some basis for determining what I should or should not do?

El Presidente writes:

People get out more than they put in, with that additional money coming only from new contributors. You many not think this is enough to qualify it as a Ponzi scheme, but it's undeniable that they share this feature.

With SS, some people get less than they put in, don't they? It's not just a matter of paying out current liabilities with current revenues. It is also a matter of structuring receipts and benefits so that some pay more and get less while others pay less and get more. It is a system of transfer payments meant to redistribute income. Not a Ponzi scheme. Let's be precise, shall we?

Adam writes:
With SS, some people get less than they put in, don't they?

Yes, some will get less, mostly because they die early. But everyone is promised that if they live long enough they will get more than they put in.

Randy writes:

El Presidente,

"Do you have some basis for determining..."

You mean, do I have a sense of justice? Certainly. For example, when you try to tell me I have to fight a war with people I don't know, or that I have to assume responsibility for people I don't know, I'm not going to like it.

El Presidente writes:

You mean, do I have a sense of justice?

Not exactly, but that's a good place to deliberate from.

So, if a moral agent knows what is wrong, thus what people ought not to do, but only a moral authority knows what is right, thus what people ought to do, then are you saying you are a moral agent or a moral authority?

For example, when you try to tell me I have to fight a war with people I don't know, or that I have to assume responsibility for people I don't know, I'm not going to like it.

This would suggest that you can identify unpleasant things, things which might be wrong in some way. But, it does not suggest that you can articulate what is right. Can you do that as well? If yes, then perhaps you are a moral authority. If no, then perhaps you are a moral agent. Do you suppose you are either? If so, which one?

Randy writes:

El Presidente,

Moral agent. Moral authority. Both concepts are propaganda of the political class, ala Aquinas and Hegel. Nietzsche's concept of the will seems more accurate to me. The political class acts in accordance with its will and I act in accordance with mine. There is conflict. Of course there is conflict. The universal, the thing in itself, society, the one, is a myth.

El Presidente writes:

Randy,

Moral agent. Moral authority. Both concepts are propaganda of the political class, ala Aquinas and Hegel.

Are you familiar with the formal logical fallacy of argumentum ad hominem; more specifically argumentum ad personam?

Nietzsche's concept of the will seems more accurate to me.

Ironic, since Nietzsche disputes the existence of agency, thus preference must be meaningless if it is the result of forces over which you are permitted no control.

The universal, the thing in itself, society, the one, is a myth.

Or an agreement. But, of course, that would require agency. It's too bad you seem to claim you don't have that capacity. I certainly won't be doing business with you, since you cannot possibly hold yourself accountable for your actions and thus must be implicitly untrustworthy. You see, it is not that you are declaring the concept of a whole society to be imaginary or invalid, but that you must also be requiring that the smallest unit of society, the interpersonal relationship (e.g. a contract), to be invalid. If Nietzsche is right, it exists or it does not and can be no more than happenstance.

If we lack agency, I can't imagine why you would support or oppose any laws. They would have no effect, and neither would your support or opposition. So, which is it: agent, or not? Your words betray a supposition of agency, because you seem to indicate that your preferences matter, at least to you. Otherwise, why would you have them, express them, protect them, argue for them? Why would you bother to tell me when I have overstepped my bounds, and why would you be "glad" to do so?

Randy writes:

El Presidente,

Ad hominem

Aquinas is categorized as a scholastic and Hegel was viewed by his peers as a suckup to Frederick William III. That is, they were both propagandists for the political class of their times. And their ideas of a universal goal for human life is just plain made up. They can't prove it, so they just assert it and press on.

"Nietzsche disputes the existence of agency"

I guess you could say that. He says that the existance of the will does not necessarily prove the existance of an I. Personally, I don't see much point in that. The will does exist, and pragmatically it has value to believe that I control it.

"...the smallest unit of society, the interpersonal relationship..."

It is society that does not exist. Society is just a categorization - a mental construct - an idea. It is widely used because it has value to the propagandists for the political class - the idealogues. The individual, the interpersonal relationship, and the contract do exist.

"So, which is it: agent, or not?"

I don't accept your premise. I am a human being - not an element of society for the political class to manipulate and utilize as they see fit.

"Why would you bother to tell me when I have overstepped my bounds..."

A conflict of wills. If the political class will heed the warning, and show some willingness to back down, then there will be no need to escalate.

Randy writes:

El Presidente,

Well, it seems I've triggered some sort of spam filter... damn, and just when this was getting good :)

Till next time, then. Happy Holidays.

El Presidente writes:

Randy,

Till next time, then. Happy Holidays.

Happy Holidays.

El Presidente writes:

Randy,

The will does exist, and pragmatically it has value to believe that I control it.

I am a human being - not an element of society for the political class to manipulate and utilize as they see fit.

If the political class will heed the warning, and show some willingness to back down, then there will be no need to escalate.

So:
1. You have a will;
2. You control it;
3. Nobody else is permitted to or capable of controlling it; and
4. Every other human being has a will which they similarly control.

Is that a fair and accurate distillation of your sentiments?

Randy writes:

El Presidente,

1. Yes.
2. I see no value in believing otherwise.
3. There are conditions under which even the strongest will can be forced to submit - slavery, torture, force of arms, etc. There are also those who choose to abandon their will to others in hope of receiving in return something that they value more (security, belonging, eternal life, etc.).
4. Similar as stated above, yes. I am not aware of any evidence to the contrary.

El Presidente writes:

Randy,

The act of abandoning one's will is consistent with the concept of agency. It would be voluntary and would require continuous assent or the will would revert to its previous path. So, per #3, this leaves only the exception of duress. What sort of duress should be blamed for the existence of our social contract (the Constitution), its amendments, or the policies enacted with the powers granted in it? By what means were/are we forced to submit? How are you supposing we have become helpless to change laws through democratic process? How is it that we are being deceived with Social Security?

And if you could answer this question without the phrase "political class", I think I'll understand your sentiments much better. Maybe we could ascribe these conditions to the transportation class, or the janitorial class, or the retail class, or the transient class, or the economic class. Maybe we could just focus on the forces, circumstances, and incentives that shape the information on which we base our decisions.

Randy writes:

El Presidents,

"What sort of duress should be blamed for the existence of our social contract (the Constitution), its amendments, or the policies enacted with the powers granted in it?"

The Constitution is not a contract. It was a piece of propaganda designed to convince the population of the former crown colonies that the new revolutionary political class was legitimate.

"By what means were/are we forced to submit?"

Are you serious? By force of arms of course.

"How are you supposing we have become helpless to change laws through democratic process?"

First, there is no we. The idea of society is propaganda of the political class. The productive class pays and the political class collects, because the political class controls the so-called "democratic process". There is no such thing as "the rule of law". This is simply shorthand for the rule of those who make the laws.

"How is it that we are being deceived with Social Security?"

I suppose that some are still deceived, but many of us are well aware that Social Security and other such programs are simply sources of revenue for the political class that we are forced to contribute to.

"...if you could answer this question without the phrase "political class"

Sorry, but as long as the political class sees fit to use the categorization "society" I will see fit to use the categorization "political class". And my categorization is more objective. It is time consuming but not impossible to determine who is paying the rent and who is collecting, while just saying that we're all part of some mystical meta-community is pure fantasy.

El Presidente writes:

Randy,

First, there is no we. The idea of society is propaganda of the political class. The productive class pays and the political class collects, because the political class controls the so-called "democratic process".

So, being part of one group is bad logic, but being divided between two groups is good logic? Why two groups? Why not three, four five, . . . ? Is it because two is a convenient number for dividing people between right and wrong, good and bad?

If there is no We The People, there is no We The Productive Class.

In any given election, how many votes do you get?

How many votes do I get?

How many votes does Arnold get?

Which of us a part of the political class?

Randy writes:

El Presidente,

Is it because two is a convenient number for dividing people between right and wrong, good and bad?

Yes. My objective is a categorization that makes sense. I find no value in distinguishing between working class and capitalist class, between Democrats and Republicans, between left and right, or in any concept of a meta-community such as society, the nation, human kind, etc. But dividing the population into those who pay rent and those who collect rent, a productive class and a political class, that has meaning.

"If there is no We The People, there is no We The Productive Class."

Of course there is a productive class. There would be no one for the political class to collect rent from if there weren't. The idea of "We the People", on the other hand, is blatant propaganda. If the political class truly worked for me, then I'd be collecting rent instead of paying it.

Voting

Irrelevant as long as I'm not allowed to vote to end the collection of rent. If they can force me to pay rent at their discretion then there isn't much they can't do at their discretion. The only reason they don't make us all slaves or serfs outright is that slaves or serfs don't produce as much revenue.

El Presidente writes:

Irrelevant as long as I'm not allowed to vote to end the collection of rent.

For what purpose should government collect taxes, and what would you call that if not collecting rent?

You do have the right to vote on anything you can get on a ballot. But, that aside, I want to be very clear. I am not asking for the myriad of things you might oppose. I am asking for at least one thing you would support taxation to pay for, supposing you had the opportunity to vote on it directly. If you cannot give me at least one thing, I think it's safe to conclude you do not believe government should have the power of taxation, period. If government could not tax, that is, impose restrictions (indirect taxation) and collect duties (direct taxation), then what would we have government for? How would it accomplish anything?

Seems to me like you are veering toward anarchy. I just want to know if that's where you're going with this, because I will not follow you there.

Randy writes:

El Presidente,

"For what purpose should government collect taxes, and what would you call that if not collecting rent?"

Collecting taxes is always collecting rent. If the government were to offer services for sale and allow competition then we would find out who is willing to pay for what and we would be able to place a value on the services. Until then, the assumption has to be that funds collected by force have no value and are simply rent.

"...one thing you would support taxation to pay for..."

Nothing. There are many things that I can see would have value to some and which they would probably be willing to purchase from the government. But there is not a single service that I would choose to purchase from the government. Their priorities are vastly different than mine.

"If you cannot give me at least one thing, I think it's safe to conclude you do not believe government should have the power of taxation, period."

Should has nothing to do with it. The political class has the power to collect rent and they do. That fact is no reason to honor them. Obey, perhaps - most of the time - but not honor.

"...then what would we have government for? How would it accomplish anything?"

The political class serves its own purposes, not mine. Like I said, they have other priorities. What they "accomplish" is mostly none of my business, though much of it does disgust me.

Anarchy

It seems to me that the political class is anarchy. The order I see in the world is all in the cooperative arrangements of the family and the productive class.

El Presidente writes:

Randy,

There are many things that I can see would have value to some and which they would probably be willing to purchase from the government. But there is not a single service that I would choose to purchase from the government. Their priorities are vastly different than mine.

Who pays for the military?

Who pays for infrastructure?

Who pays for environmental protection?

Who pays for judicial process to enforce your rights?

Would they get these things from some other place? And at what cost to everyone else?

Randy writes:

El Presidente,

Who pays for the military? People who expect to profit from the wars.

Who pays for infrastructure? People who expect to profit from the infrastructure.

Who pays for environmental protection? People who expect to profit from the cleanup.

Who pays for judicial process to enforce your rights? People who expect to profit from the protection. I would like to hire someone to protect me from the political class. They are the only people who ever steal from me. And by the way, what good are "rights" when they can steal my means of survival?

Would they get these things from some other place? Of course. Competition is a good thing. It lowers prices.

And at what cost to everyone else? If they can't afford something on their own, then they can pitch in. Social Security, for example, wouldn't have to have to be mandatory to be successful. Its only mandatory because its purpose is to generate maximum revenue for the political class.

El Presidente writes:

Randy,

Mercenaries and pirates

Sequestration in ghettos, and restriction of movement. No public right-of-way means tolls to traverse private property -> higher cost of transportation.

Some harm is irreparable and all is inherently unproductive. If our production function included the productivity of land we might notice. Tragedy of the commons. A lawsuit can't replace a liver.

Liberty and justice for . . . those who can afford it.

Relying on benefactors and philanthropists contributing alms to finance the retirement of others.

Doesn't sound like a place where I'd want to live. How about you?

Randy writes:

El Presidente,

"Liberty and justice for . . . those who can afford it....Doesn't sound like a place where I'd want to live. How about you?"

I suppose it depends on whether one is a member of the political class or of the productive class.

The political class brags incessantly about how great "their" "society" is. For them I suppose it is great. They're not paying. Truly, it must be nice.

For the productive class, those of us who are paying, it comes down to cost benefit analysis.

The political class claims that the services they "offer" have infinite value - and thus they claim a right to confiscate an infinite percentage of what the productive class earns. The productive class, in its darker moments, doubts that the services of the political class have any value at all.

I say that the political class, if it had an ounce of integrity, would put the value of their services to the test. That is, they would make their services voluntary and see who is willing to pay (a good start would be Social Security and Medicare). And if they are unwilling to do so, then it is obvious that they are the rulers and we are the ruled - and that all the rest is propaganda.

Randy writes:

P.S. El Presidente,

Just read Marx. I began reading hyper-critically, but about half way through Capital, it ocurred to me that Marx and I are pretty much on the same page. Replace Marx's Working class with my Productive class - replace his Capital class with my Political class - and we are both seeing the same thing - one class exploiting the other. Even more, Marx clearly understood the idea of a Political class, spending hundreds of pages describing the legal structure that supported the exploitation. Not a big fan of the methods proposed in the Manifesto - not sure how the hell he made that leap - but he and I are quite close on the basic problem.

C. Chen writes:

What causing the failure in Madoff's scheme is that he did not institute a distribution lockout until the participation reach a certain far-away time-limit.

He did not learn from the Social Security Administration.

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