Mises on Value

An inveterate fallacy asserted that things and services exchanged are of equal value. Value was considered as objective, as an intrinsic quality inherent in things and not merely as the expression of various people’s eagerness to acquire them. People, it was assumed, first established the magnitude of value proper to goods and services by an act of measurement and then proceeded to barter them against quantities of goods and services of the same amount of value. This fallacy frustrated Aristotle’s approach to economic problems and, for almost two thousand years, the reasoning of all those for whom Aristotle’s opinions were authoritative. It seriously vitiated the marvelous achievements of the classical economists and rendered the writings of their epigones, especially those of Marx and the Marxian school, entirely futile. The basis of modern economics is the congition that is precisely the disparity in the value attached to the objects exchanged that results in their being exchanged. People buy and sell only because they appraise the things given up less than those received. Thus the notion of a measurement of value is vain. An act of exchange neither preceded nor accompanied by any process which could be called a measuring of value. An individual may attach the same value to two things; but then no exchange can result. But if there is a diversity in valuation, all that can be asserted with regard to it is that one a is valued higher, that it is preferred to one b. Values and valuations are intensive quantities and not extensive quantities. They are not susceptible to mental grasp by the application of cardinal numbers.

….

There is no method available to construct a unit of value. Let us remember that two units of a homogeneous supply are necessarily valued differently. The value attached to the nth unit is lower than that attached to the (n – 1)th unit.

In the market society there are money prices. Economic calculation is calculation in terms of money prices. The various quantities of goods and services enter into this calculation with the amount of money for which they are bought and sold on the market or for which they could prospectively be bought and sold. It is a fictitious assumption that an isolated self-sufficient individual or the general manager of a socialist system, i.e., a system in which there is no market for means of production, could calculate. There is no way which could lead one from the money computation of a market economy to any kind of computation in a nonmarket system.

Human Action, P. 205f

Mises on Meliorism and Democracy

All these hopes were founded on the firm conviction, proper to the age, that the masses are both morally good and reasonable. The upper strata, the privileged aristocrats living on the fat of the land, were thought depraved. The common people, especially the peasants and the workers, were glorified in a romantic mood as noble and unerring in their judgment. Thus the philosophers were confident that democracy, government by the people, would bring about social perfection.

This prejudice was the fateful error of the humanitarians, the philosophers, and the liberals. Men are not infallible; they err very often. It is not true that the masses are always right and know the means for attaining the ends aimed at. “Belief in the common man” is no better founded than was belief in the supernatural gifts of kings, priests, and noblemen. Democracy guarantees a system of government in accordance with the wishes and plans of the majority. But it cannot prevent majorities from falling victim to erroneous ideas and from adopting inappropriate policies which not only fail to realize the ends aimed at but result in disaster. Majorities too may err and destroy our civilization. The good cause will not triumph merely on account of its reasonableness and expediency. Only if men are such that they will finally espouse policies reasonable and likely to attain the ultimate ends aimed at, will civilization improve and society and state render men more satisfied, although not happy in a metaphysical sense. Whether or not this condition is given, only the unknown future can reveal.

Human Action, p. 193

meliorism – the belief that the world can be made better by human effort

Human Action, by Ludwig von Mises, Part II

On critics of Ricardo’s law of comparative cost (or the law of association)

They prefer to resort to those methods of utility analysis which they consider a means for making value calculations in terms of utility. It will be shown in the further progress of our investigation that these attempts to eliminate monetary terms from economics calculation are delusive. Their fundamental assumptions are untenable and contradictory and all formulas derived from them are vicious. No method of economic calculation is possible other than one based on money prices as determined by the market. – Page 162

For libertarian idealists and anarcho-anythings

It is illusory to maintain that individuals in renouncing the alleged blessings of a fabulous state of nature and entering into society have foregone some advantages and have a fair claim to be indemnified for what they have lost. The idea that anybody would have fared better under an asocial state of mankind and is wronged by the very existence of society is absurd. – Page 165

For agrarians

The natural condition of man is extreme poverty and insecurity. It is romantic nonsense to lament the passing of the happy days of primitive barbarism. In a state of savagery the complainants would either not have reached the age of manhood, or if they had, they would have lacked the opportunities and amenities provided by civilization. Jean Jacques Rousseau and Frederick Engels, if they had lived in the primitive state which they describe with nostalgic yearning, would not have enjoyed the leisure required for their studies and for the writing of their books. – Page 165

I’d just like to note that in part I disagree with the above statement. The difference between making a living with one’s hands (I’m not talking about typing) and one’s mind must have some material implication.

Fun with math, facts out of context, and the Chevy Volt

CNN Money: Chevy Volt to get 230 mpg rating

When gasoline is providing the power, the Volt might get as much as 50 mpg.

So what’s the lower bound at wide open throttle on a hill in Seattle?

So let’s say the car is driven 50 miles in a day.

OK

For the first 40 miles, no gas is used and during the last 10 miles, 0.2 gallons are used. That’s the equivalent of 250 miles per gallon.

Well obviously it didn’t use any fuel on the first 40 miles. I don’t need you to tell me that dividing a bigger number by a fraction will result in a larger number. Here’s some more fun mpg maths:

But, if the driver continues on to 80 miles, total fuel economy would drop to about 100 mpg. And if the driver goes 300 miles, the fuel economy would be just 62.5 mpg.

So, given these average miles per gallon when we assume no gallons are consumed in the first 40 miles, here’s a list of the marginal mileage:

0.2 gallons per 10 miles when driven 50 miles (50 mpg)
0.8 gallons per 30 miles when driven 80 miles (37.5 mpg)
4.8 gallons per 260 miles when driven 300 miles (54.2 mpg ?)

The company said it estimates it will need 8 kilowatt hours for the recharge necessary to travel 40 miles. That should cost a total of about 40 cents at off-peak electricity rates in Detroit, Henderson said. National figures from the Department of Energy suggest most consumers would pay more than that, probably around 88 cents per recharge.

One might ask, will off-peak rates remain constant?

Suppose average Joe, drives 12,000 or 15,000 miles per year.

(This may be a high or low estimate for Volt buyers. USA Today reported on a study of 359,309 vehicles over a two-year period by Quality Planning showing that hybrid owners “drove an average of 10,500 miles a year when not commuting“. It is possible that Volt buyers may alter their driving habits because of the high mpg ratings.)

Let’s say Joe always uses the battery and never needs the generator. Joe recharges his car 300 or 375 (more than once a day, oy!) times a year, pulling down 8 kWh from the grid each time. Sales estimates, courtesy of Wikipedia, are 10,000 units in year 1 and 60,000 units in year 2.

In year 1, Joe and his Volt-driving buddies are pulling down between 27 and 30 gWh from the grid, additional electrical demand previously met by a different infrastructure. Now in year 2, there are 70,000 units in operation pulling down between 168 and 210 gWh hours from the grid at night. According to the CIA World Factbook, US electrical consumption was 3,892,000 gWh in 2007. So by the second year with nothing but Chevy Volts driving at current yearly averages, Joe and his friends have increased the demand for electricity by around 0.005%, less than a one-hundredth of a percent. It would take between 13 and 16 million Volt drivers to increase electrical demand by 1%. Is it enough to affect “off-peak” electricity prices – I can’t say, but there are the numbers.

The part where I calculate true mpg on those first 40 miles

I tried for the life of me to find a simple ComEd rate sheet, but the only one I came across was almost 400 pages. Glancing at my latest electricity bill, I’m paying $0.12257 per kWh. If 8 kWh get me 40 miles, that’s $0.981 per 40 miles, or $0.0245 per mile. My S2000 gets 23.5 mpg city and Shell Premium Unleaded is about $2.999/gallon, so I’d use 1.70 gallons per 40 miles at a total cost of $5.09 – or about $0.127 per mile. That’s about 5.18 times more efficient than my car, giving the Volt an equivalent 122 mpg over the first 40 miles. Not bad, but it’s still apples to oranges when you consider vehicle cost, performance, driving habits, etc.

Concluding remarks

Henderson conceded the cost of building a Volt will be expensive, about $40,000 per vehicle. But he said the vehicle will qualify for a $7,500 tax credit, which will reduce the vehicle cost by that amount for consumers.

How valuable that tax credit is depends on your income level, but it’s clear that you are trading higher operating costs for a higher up-front cost. This is not a new concept, and is essential to capitalism. (See former note about self checkout registers replacing grocery store clerks.) Assuming all of that higher initial cost can’t be remedied through volume and other cost savings, the difference in cost between the Volt and any other ‘comparable’ vehicle would need to be allocated over the total mileage you expect to drive. Those sorts of calculations are usually too individual and subjective for me to attempt it here; however, I did that very thing when I bought my first car.

Is America, a Cowardly Nation?

Through a fundamental discomfort with certain kinds of inequality within our society, we created the economic realities that made international labor arbitrage a necessary factor of production of many if not most goods enjoyed in American households. Illegal immigrants are simply another component of this labor arbitrage; filling the void for local, low-cost labor – often in industries where government intervention has created the need for it. (They work on our subsidized farms, and beside unionized labor in construction, etc.)

There are transaction, transportation, and other costs associated with this worldsourcing, which increases the overall price level. The terrible irony is that it is now virtually impossible to be truly poor, and live in America. Take this excerpt from the Wikipedia article

Poverty in the United States:

A typical American categorized as poor has good condition housing. Most have at least two rooms per person and more space than middle-class people in Paris, London, Vienna, Athens, and other cities throughout Europe. Over three quarters have a car and a third of poor Americans have two cars. Poor Americans have air conditioning, a refrigerator, a stove, a clothes washer and dryer, and a microwave oven, two color televisions, cable or satellite TV reception, a VCR or DVD player, and a stereo. Most poor Americans report zero financial or material problems.

Two categories of people would otherwise be employed locally with this arbitraged labor: those with fewer gifts/abilities, and those born to a low station. However, we are uncomfortable with members of these sets living among us (although Democrats sometimes assert that Republicans, without access to education and living in lower cost areas of the country compose most of the first category). The concept that through public education we pay enough to eliminate or reduce the probability of inequality brought about by birth to a low station holds enough weight to support the endurance of that institution. The reality is that many people know it doesn’t, but while still trapped by that hope, instead argue for greater funding and perhaps changing the rules. Again, the affect is an increase in labor cost, outsourcing, and the general price level.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. – Declaration of Independence

A friend recently posted this humorous article from NY Magazine, What the Hotness of Your Waitress Says About the Economy. In summary, attractiveness has elastic demand, and duration a recession, those possessing attractive qualities must meet other demands, such as waiting tables. But there is another economic metric, ‘What the Whiteness of Your Fast Food Worker Says About the Economy’. Based on my observations, white people who formerly might have had other job prospects have settled for lower wages working at jobs formerly filled by immigrant workers. Perhaps some of you have had similar observations?

I suggest that America is a cowardly nation because we lack the courage to both accept and endure the unpleasant truths about society, ability, station, and equality. The most explicit form of this cowardice exists in minimum wage laws, which are simply (legal) labor price floors – through these we increase the market for illegal workers, while tacitly acknowledging the high level of general prices. The irony here is that the largest employers often have greater access to capital, and are able to replace higher cost labor with capital. As an example, consider grocery store checkouts – as many as four self-service checkout stations are now monitored by one employee where the previous standard was one or two employees per register (one to work the register, and one to bag groceries).

Finally, I’d like to be clear to avoid potential offense or misdirection. I’m not contending that education is irrelevant, that immigration is bad, or that people can and should improve themselves unaided. The material implication I’m making is that the prevailing theology has been insufficient to accept a broad enough understanding of God’s sovereignty that would allow us to accept certain inequalities and simultaneously work to change them.

Henry Hazlitt, sticking it to Keynes, 1959 style

I’m only 24 pages in to Hazlitt’s book, The Failure of the “New Economics”: An Analysis of Keynesian Fallacies, and already I’ve come across some juicy quotes criticizing price levels and macro-economics.

In the same way, “the general levelof wages,” like “the general level of prices” (both of which concepts are central to Keynes’s thought), has no existence in reality. It is a statistician’s construct, a mathematical average which has a limited value in simplifying certain problems. But it simplifies away some of the chief dynamic problems in economics. –p.24

The word “level” can give rise to an additional false assumption–that prices and wagse rise or fall evenly or uniformly. It is precisely their failure to do so that creates most of the problems of inflation or deflation. It is also the failure of specific prices or wages to rise or fall as much as the average that permits the continuous structural changes in production and in the labor force necessary for contrinuous economic efficiency and progress.  –p.25

Keynes is constantly falling into this fallacy of averages or aggregates. His “aggregate” or “macro-economics” is not a step in advance; it is a retrograde step which conceals real relationships and real causation and leads him to erect an elaborate structure of fictitious and relationships and fictitious causation. –p.28

Breast Cancer is Overrated

Gender cancer is a hot topic these days with Ms. Komen getting her name and ‘trademark’ pink ribbon on everything including my breakfast cereal box (I like dehydrated strawberries) .

Particular cancers may need increased awareness for many reasons. Let’s start with some simple, factual, medical ways of comparing cancers:

• Most commonly diagnosed cancer
• Leading cause of cancer death

According to the CDC’s website, in 2004, breast cancer was the “most commonly diagnosed” cancer among women, with an incidence of 117.7 per 100,000 persons (same rate used elsewhere). It is not the leading cause of cancer death among women (24.4). The leading cause of cancer death for both men and women is lung cancer, but Americans aren’t putting gray, ashy ribbons on their cars for chain-smoking, blue-collar workers. They’ve morally abdicated any claim to empathy.

Prostate cancer wins 1st place in the competition for most diagnosed cancer (145.3), surpassing breast cancer by 23.4%. Prostate cancer edges out breast cancer by 4.1% in terms of cancer deaths. Cancers that affect both genders affect men more grievously than do gender-specific cancers. Lung cancer causes 71.9% more cancer deaths in men than in women; and colo-rectal cancer causes 42.1% more cancer deaths.

This leaves us with only two reasonable conclusions for why breast cancer gets so much attention. (1) Everybody loves breasts (2) Feminism/misandry.

Hayek: Planning and Democracy

From The Road to Serfdom by FA Hayek, Chapter 5. Planning and Democracy

We can rely on voluntary agreement to guide the action of the state only so long as it is confined to sphere where agreement exists. – p.68

Democratic government has worked successfully where, and so long as, the functions of government were, by a widely accepted creed, restricted to fields where agreement among a majority could be achieved by free discussion and it is the great merit of the liberal creed that it reduced the range of subjects on which agreement was necessary to one on which it was likely to exist in a society of free men. – p.77

The fashionable concentration on democracy as the main value threatened is not without danger. It is largely responsible for the misleading and unfounded belief that, so long as the ultimate source of power is the will of the majority, the power cannot be arbitrary. The false assurance which many people derive from this belief is an important cause of the general unawareness of the dangers which we face. There is no justification for the belief that, so long as power is conferred by democratic procedure, it cannot be arbitrary; the contrast suggested by this statement is altogether false: it is not the source but the limitation of power which prevents it from being arbitrary. Democratic control may prevent power from becoming arbitrary, but it does not do so by its mere existence. If democracy resolves on a task which necessarily involves the use of power which cannot be guided by fixed rules, it must become arbitary power. – p.79

Nothing new under the sun

I was listening to Girl Talk Radio this evening, and heard “The Crew” by Fdel. I noticed a sample that I instantly recognized from Fatboy Slim’s song “Gangster Tripping” (It’s at about 1′40″ in to the song, and probably elsewhere – sort of sounds like a nasal robot saying ‘wah-wah’, but in a higher pitch). I recognize samples all the time, like “Record Creakin” by DJ Venom containing a sample from Eminem’s “Under the Influence” (at 2′09″).

Movies reuse music samples too – in Over The Hedge, you can hear the Millennium Falcon’s hyperdrive engine failing after the Depelter Turbo fires near the end of the film. In Wall•E, when the cute robot fully recharges, the sound of a Mac booting up plays. My friend and I laughed out loud in the theater at this point – but we laughed alone. I assert it’s because most people didn’t appreciate that Steve Jobs (Apple’s current CEO) bought Pixar (then The Graphics Group) from George Lucas at a critical time and probably saving it from obscurity, while Steve’s other minor business endeavor produced computers that use the chime at boot up.

Even documentaries are not above the practice. The BBC’s recent attempt to capitalize on “Planet Earth”, called “Earth: The Biography”, shamelessly reuses a stock audio clip of wind whistling over and over and over again. The narrator’s accent is also repugnant.

Help Desk Hero

Now that “Guitar Hero” has made “* hero” ubiquitous (in the same manner as the iMac:i*), I’d like to suggest a new role playing game:

In HDH, players would buy products that fail in unique and frustrating ways. Through playing the game, you would go through the process of finding technical support — resulting in either a free, partially free, or repair at cost. Players would begin with a few basic abilities, with different durations and cool downs. Over time, players improve on their abilities such as reaching an actual human customer service agent, or reducing the time it takes to troubleshoot and define the nature of your product’s failure. Ideally suited to the RPG genre, it relies on chance and the passing of time. Sample beginning abilities:

• find receipt
• check warranty card
• find serial number
• find support telephone number

‘Find receipt’ might take anywhere between five minutes and several hours -forcing the player to use their follow up ability, ‘clean apartment’, or ‘file old receipts’. There are so many possible outcomes, and players would juggle simultaneously failing products – HDH is bound to provide hours of entertainment. The best part is, the game draws from players’ real life technical support experiences.

Potential Game Scenarios

• You reach a live customer service agent whose English you understand – but they dislike your tone of voice and hang up – forcing you to call back until you get a different agent or the hours of business force you do give up seeking technical support on that particular product for the day.
• You randomly have to choose between calling technical support and searching Google/Internet forums for people with a similar issue. Initially, searching forums would promise faster results, but eventually you realize you can’t define the problem well enough and are forced to the manufacturer’s website to find the support telephone number.

I was ‘inspired’ to invent this game because I often seem to have the worst luck with failing consumer products. My first 80GB PS3 came with a graphical glitch that was not well documented (on the Internet) and took hours of troubleshooting to determine that the problem was with the console and not its environment. Today, my Xbox 360 sported a single, flashing red light and displayed “E 76″ on-screen. I did my due-diligence and thought for sure that a console manufactured in February 2008 made it past the absurd quality issues with earlier production runs. I spent 27 minutes on the phone with an Indian gentleman, who insisted upon using my first name frequently. He was polite and asked/said everything a good help desk person should say, although I had to focus a little harder than usual to understand his English. I was especially appreciative when he gave what sounded like a legitimate, non-western name.

Perhaps what I resent the most is when plebian consumers are forced to deal with the manufacturer’s help desks – even when we pay a brick-and-mortar premium. Gamestop is under a quarter mile from my apartment, why can’t Microsoft just contract with them to process RMAs? I want a new one now, not a month from now. I kept it in a well-ventilated area, it’s not my fault the goddamn thing died. A free month of Xbox Live Gold does not make up for lost time playing single-player games.