Greg Loutsenko

Occupy Wall Street

2011-11-13T12:01:00.000Z

Russ Roberts

2011-03-10T22:54:00.010Z

I have recently read a report on the banking crisis (“gambling with other people’s money” henceforth referred to as GWOPM) written by Russ Roberts of George Mason University. The report clearly was not aimed at the academic community. However I still found the report lacking in precision of formulation of arguments. I also found that there was not enough evidence provided to back up the arguments made.

I am sympathetic to Russ Roberts’ motivation. Russ Roberts is a classical liberal and I share many political views with him. I think Russ and I would agree that in order to promote classical liberalism we must have good arguments for it. I think that this entails that any argument we make for classical liberalism must pass the most stringent tests available. Russ Roberts has a PhD and is a professor of economics so some may say that I am out of my league to argument with him. But this is not about a conflict between me and Russ Roberts, but rather a conflict of ideas (ideas of how to best express an understanding of the banking crisis). Because this is a battle of ideas it makes no difference who is presenting them. Ideas fight in an intellectual dimension and we are all just observers.

I think that GWOPM has many flaws. I think that overall GWOPM thus does not serve the classical liberal cause very well. Firstly I will outline on what basis I made this judgement. Then I will show some evidence to support my judgement.

Any theory is either disproved or reinforced with close scrutiny. Scrutinising of a theory is done in two ways.

Firstly the theory must be checked to be logically valid and verifiable. A theory is valid if the theory’s conclusion logically follows from the theory’s premises. A theory is verifiability only if it can be falsified. This means that the premises or the conclusion of the theory is measurable or quantifiable. This implies that theory must be formulated in a very precise way so as to be able to quantify varies effects and their causes. Otherwise it would be impossible to judge its logical validity or its verifiability.

The second way a theory can be scrutinised is to actually measure the premises and the conclusion in the real world. A theory can be logically valid and verifiable but disproved by real life data.

A theory can never be positively said to have been proven by real life observation (see D avid Hume’s problem of induction and Karl Popper’s Conjectures and Refutations). It may be only falsified or not falsified. However once a theory has withstood many tests against real world observations it is deemed to be the closest to truth that there is, unless a later theory or observation disproves it.

The basic hypothesis of GWOPM is that the banking crisis was caused by:

1) Moral hazard hypothesis: a long history of the US government bailing out financial firms. This lead to banks being more relaxed about risk taking. This made the banks sure that if their risky actions caused loss the government will bail them out.

2) Market distortions hypothesis: US government’s push to make poor people buy houses which they could not afford.

Russ Roberts provides a very journalistic formulation of the moral hazard hypothesis in the context of the banking crisis. Not a single mathematical model from information economics is mentioned. Only a superficial description of the link between government bailing out financial firms and banks becoming greater risk takers is given. This means that the moral hazard hypothesis is not testable against data because there is nothing to test. Whatever data which is then provided cannot falsify the hypothesis.

For example, Russ Roberts goes on to describe bail outs in 1980s and 1990s, again in a journalistic way. But how much influence, if at all, did this have on the behaviours of the banks? Russ Roberts thinks that it played a great influence. It may have, but it may not have. Maybe the bankers of 2000s paid no attention to what happened in 1980s because the whole of the executive branch had changed from Ronald Reagan to George W Bush and George W Bush had no incentive to follow the example of Ronald Reagan’s administration.

The market distortion hypothesis on the surface seems to be better presented. However it still suffers from the same problems as the moral hazard hypothesis. Although the links between varies financial institutions like the banks, the home buyers, mortgage companies and Freddie and Fanny are described more fully the links are still not quantified. Thus the very complicated interactions between all of these economic agents are not obvious and not testable. For example, I think that in the last 30 years there has been a cultural change from high saving and low consumption to low saving and high consumption. I think that this cultural change was not brought about by government action but rather by change in technology. Technology has created cheap consumer goods which are constantly improving in performance but are cheap . So consumers now buy a good for only a year or two before disposing of that good and getting a newer version. I think that this fundamental change in culture has played just as bigger role in the economic crisis as did government action. However without a precise formulation and defining how to test this hypothesis I face the same problem as Russ Roberts. My hypothesis may be true, after all electronics nowadays do become obsolete in 24 months, but someone could just as easy say that I am not right, and no one can determine the who is right.

Economists use methods of econometrics to test their models. Econometrics is still a very young sub-field and thus a lot of econometric findings could be argued to be false. However econometrics is the best method we have of testing our conjectures (outside of game theory which can be easily tested in a lab with real people playing games). Russ Roberts did not do any econometric testing. what this means is that GWOPM is at best only a guess.

The economy is a complex system. Most interactions are non-linear. One event causes many effects which in turn have other effects and feedback loops. This complexity is very hard to model and impossible to understand fully unless it is expressed in a very rigorous way, i.e. mathematically. Although Russ Roberts highlighted a few possible causes of the banking crisis he certainly has not proved his hypothesis. GWOPM is an interesting journalistic piece. It may serve as a starting point for a proper study of the banking crisis. However GWOPM is not a definitive account of the banking crisis. I think a much more precise and thus more compelling argument could have been made but was not.

We are still left with the question "do markets , especially capital markets, naturally spin out of control and crash, or are they naturally stable and any instability is caused by government interventions?". Russ Roberts and I think that markets work others do no, but the question is still to answered.

Illogical but Reasonable Limits to Freedom

2010-04-25T13:49:00.002+01:00

Classical liberals, like me, always say that fundamentally one is free to do anything one wishes as long as one does not coerce others against their will. This very simple approach leads to everyone being better off through mutually beneficial trade (I sell you an apple for £1 because I value £1 more than the apple, and you buy the apple because you value the apple more than £1, hence both of us gain in value).

However this kind of freedom could result in situations which most people would regard as unreasonable. An example is production and sale of nuclear weapons. But banning production and sale of nuclear weapons results in breaking the classical liberal fundamental principle which undermines the coherence of classical liberalism.

Firstly let me outline different but related ideas: Sorites paradox and slippery slope fallacy. I will then use to show exactly how the classical liberal thinking may be faulty in terms of informal logic.

In Sorites paradox, one begins with a heap of sand and one continuously removes grains of sand until one is left with just one particle of sand. The paradox: at what time did the heap stop being a heap?

The slippery slope fallacy can be illustrated with the following scenario: a tree in a forest falls. The probability it makes another tree fall is 0.9. The probability that 3 trees end up falling is 0.9*0.9*0.9=0.729. The probability of more trees falling approaches 0 as one calculates the probability of more and more trees fall.

Now here is the puzzle:
In a liberal and open society law is such that one is free to do whatever one wishes as long as it does not impose on others. Clearly this means that one may make and sell firearms (single particle of sand). What about other weapons? Can one make and sell large nuclear weapons (the heap of sand)? Clearly any reasonable social order would curtail the freedom of individuals to produce and sell such weapons because the risk of use of such weapons is just too devastating. This reasonable step has just broken our liberal principle of freedom to allow anyone to do anything one wishes as long as it does not harm others. What about small nuclear weapons? These ought to be reasonably banned too. What about biological or chemical weapons? As we move down the scale of lethality at some point society must stop banning weapons in order to allow the freedom of the individual of having and trading a firearm, which reasonably ought to be allowed for self-defence. But this sudden break in what is considered too lethal and ok is arbitrary, just like when a heap of sand stops being a heap and becomes just a number of particles of sand. For me it is unreasonable for people own fully automatic assault rifles but pump action shotguns are ok, while for others it is very unreasonable for people to own pump action shotguns while very reasonable for people to own assault rifles. An open liberal society thus must either ban all weapons or not ban any weapons to stick to the coherence of the principle that law is not arbitrary.

Some problems arise from such a scenario. Firstly, if an open and liberal society wishes to avoid arbitrary power of the administrator, it must allow all weapons to be made and freely traded or none at all. Clearly both of these are undesirable to the classical liberal. What is the objective test the society use to define weapons which cannot be made and traded?

Secondly we assumed that there is a slippery slope which inevitably will lead to all forms of weapons being banned if society bans just nuclear weapons. However as we have seen with the trees in a forest example, this could be a fallacy in itself as the individual events in the chain are discrete and may break the chain that leads to the supposedly inevitable event of all weapons being banned. The slippery slope argument which is often used by classical liberals may be a fallacy if the events in the chain are not clearly illustrated and proved to be likely. Although history often demonstrates that slippery slope to an illiberal outcome often occurs, we cannot place our faith fully into the idea that it will occur again if a piece of legislation which is illiberal, is passed. By arguing that since other slippery slopes have occurred in the past, they will happen again we are also hitting upon the David Hume’s problem of induction (just because something often happened in the past does not guarantee it will occur again in the future). So by using the slippery slope argument the classical liberal runs the risk of two logical fallacies: the fallacy of slippery slope and the problem of induction.

Clearly there is some thinking to be done by classical liberals. Specifically there appears to be some very reasonable but nonetheless arbitrary limits to freedom and classical liberal argument against certain legislation may be unfounded in logic (but not in history).

Writing and Speaking

2010-03-10T21:56:00.001Z

There exists a difference between spoken and written forms of a language. Everyone knows that there is a difference but no one can pinpoint what the exact difference is. Experts of language are even more confused and divided on this topic than a layman. This is because in truth, the differences are not clear cut. Both mediums share the same underlying grammar of the language and can be used to fulfil the same functions. In a modern society, speaking and writing have been used to do different things. This is where the difference comes from. That is why writing is not speech and speech not writing. Thus, one cannot say that writing is more than speech or judge one medium by its closeness to the other.

One should note that both mediums can be used interchangeably. Hansel and Gretel can be read out loud and a linguistics lecture can be written down. The difference between the two mediums thus lies in style, function and appropriateness to the context rather than the fact that speech is spoken and writing involves putting pen to paper.

It is important to note that both mediums have great variety within themselves as well as between each other. For example, the language in a copy of Hansel and Gretel is about as different from a note on a fridge door as a conversation at a train station. Hence, one cannot think of the differences between written and spoken language as being static. The differences ought to be thought of as a continuum. This leads implies that some written texts may resemble some spoken texts.

The most common type of speech is an everyday conversation, be it on the telephone, over lunch or on the bus. Speech is used in these situations because of its inherent strengths. Speech can be produced very quickly with rapid adjustments and corrections being made. Most importantly, in conversations, timely response is needed and thus speech is the ideal medium. This responsiveness includes adding new points, restating or exemplifying the previous point, adding qualifications and incorporation of others’ ideas into one’s own discourse. Speech is usually, if not always, accompanied by other forms of communication. These include hand gestures, intonation, pausing, loudness and facial expressions and body gestures. This allows speech to carry more information than if only words were used. Writing typically does not contain these features due to the limitations of writing technology as well as to the very use of writing. Writing tends to be detached from its immediate context as it does not need to be linked to the surroundings of the reader. For example, writing does not require an equivalent of hand gestures, or intonation or any other particular link to the immediate environment of the reader.

That is not to say that writing cannot record these features of language. An example of this is the use of punctuation. Western languages use exclamation marks, question marks and quotation marks as well as other punctuation marks to achieve a sense of intonation and possibly an indication of the writer’s emotions. Still, a usual written texts’ detachment from the context enables the meaning to be conveyed without punctuation. The style of an actual written text makes it so that the reader able to understand the meaning without needing other clues, like and gestures, for meaning.

As human society evolved over the years, writing has become a way of recording ever increasing abstract ideas, notions. Writing gained the ability to pass information to people across both physical distances and time. This has pushed writing further away from speech. Transformation of human society from nomadic hunter-gather to a settled, agricultural society brought the need for recording of information about trade, law and religious rituals. Over time the subject matter of writing has become more abstract. People began to use written text for education and discussion. It became a convention to think of written text as something to be criticised and evaluated.

Today when people think of writing they tend to think of school essays and journalistic articles. These uses of language have a different requirement from speech. These examples of writing require abstraction and generalisation of ideas and events. More precisely, because more time is afforded to the writer than the speaker, by the reader or listener respectively, written text tends to be more packed with information per clause. More nouns, adjectives and relative clauses tend to be used in order to achieve higher rate of information transfer through written text. The written text will usually be read over and over again thus clarity is a requirement. Although speech can be just as clear if not more than writing, because written text can be redrafted, they tend to be clearer and easier to understand. Of course it is common to find incomprehensible written texts (e.g. tax laws). This may be due to the individual writer than the nature of the written text. For example, a very well read university professor may write a text which to him seems perfectly clear while an uneducated youth may look upon the text as if it was written in another language. Indeed to him, the vocabulary, as well as complexity of the issue will be a foreign language even if the fundamental grammar is familiar.

Writing has rarely been speech written down. In the past writing has been used primarily for valued information like religious texts, contracts, treaties and scientific research. The meaning conveyed in written form thus tends to differ from the meaning conveyed through speech.

Although the very nature of the written versus spoken language may be different, the differences may also arise from the fact that each person is different. Socio-economic status, age, life experiences and sex all will affect both the written texts and speech produced. As mentioned before, the differences, being a continuum rather than discrete and clearly defined, means that there will be a great amount of overlapping of written text and spoken text. A written theatrical play may be very close to an everyday conversation while a university lecture may be very close to a textbook. This implies that differences between the two mediums are inherently dependent on circumstances. To put it simply “it all depends”.

In recent years, with the advent of the telephone, radio, television and most importantly digital telecommunication such as mobile phone text messaging and internet based instant messaging (IM), the distinction between writing and speaking is blurring more and more. A typical IM conversation would actually be just like a spoken conversation. The written IM conversation is speeded up with the dropping of double letters and vowels, shortening of words, use of emoticons and, in the latest IM software, even sound and pictures.

There has always been a feedback effect between writing and speaking. In the past the direction of influence was usually the written to the spoken medium because writing has higher social status and thus people want to be as eloquent in their speech as they are, ideally, in the written medium. Today this effect is getting reversed with writing becoming more like speaking since text is becoming more contextualised. It is now more important to interact with the immediate environment and the reader of the text. Of course written and spoken forms of a language will never fully merge because there will always be a need for written accounts, for example, scientific exploration and journalistic prose.

In conclusion writing is more than speech written down; it is something different. That something tends to be abstract and detached because the function of writing is different from that of speech. In the same way speech is not something read out loud. Speech is used for a different function. It is used to interact with the environment and the audience. As Aristotle said “ach kind of rhetoric has its own appropriate style. The style of written prose is not that of spoken oratory”. Time and progress of course has a way of debunking even the smartest of philosophers, and it seems that the very functions of spoken and written language are changing to make the distinction between writing and speaking blurred if not nonexistent.

Natural Law

2010-02-14T14:45:00.001Z

Many would say that there is no natural law. I think this is the wrong way of thinking about the topic.

Man’s nature is constant: he has unlimited needs and wants. Man’s environment on the other hand presents him with limited resources to fulfil his needs and wants. This reality is the basis of principles of natural law. The constant reality of unlimited wants, limited resources necessarily leads to evolution of certain principles which govern behaviour of men and how they interact with others. The evolution of these principles is lead by emotion, logic, and trial and error. These principles are natural because they arise from the very nature of man and the reality of man’s environment.

What would these principles be? To answer this question we need to look at man’s nature. These natural principles facilitate fulfilling as many wants and needs in the environment of limited resources. But what are these wants and needs? Man has certain qualities which were shaped by biological evolution. These natural qualities are fundamentally: emotions, ways of thinking and physical abilities to change the environment. All of mankind shares these qualities. It is undeniable that a man would feel violated when these natural qualities are denied to him by others. This is the natural basis of protection of the individual from others.

The beginning of the individual is his body. But with his body he can labour and produce things for himself. He can interact with others. Through these actions the individual can end up violating other individuals. Only time can define where one individual ends and another begins. The definition of what an individual is cannot be done all at once. People learn, invent and change their environment. The rules governing man’s behaviour and interactions with others will thus necessarily change over time. However, the fundamental principle of protecting the individual from violation will not change because the fundamentals of man will not change.

Nature exists. From nature arises the need for protection of individual. The principles of this protection forms what is sometimes called natural law.

Hayek vs. Keynes Rap

2010-01-30T12:51:00.002Z

A great rap video from Russ Roberts at Cafe Hayek. The song explores the differences between Hayek and Keynes. Of course I am with Hayek.

Charitable Giving in a Classical Liberal State

2009-10-13T22:26:00.002+01:00

In a free and open society one cannot escape profiting from others’ misfortunes when one gives to charity. This may be thought to be immoral especially if the charitable act is obviously motivated by self advancement. Yet others may say that charity is immoral because it somehow denies self-interest, which they deem to be the foundation of a free and open society. Both opinions may have grim implications.

By a free and open society I mean a liberal society with a liberal state. A liberal state is where the community recognised the natural trait of man that he does not like to be told what to do by others. Man is left alone to be guided by his own wit and feelings as long as this does not interfere with others’ freedom to do the same. This means that in this state one is reasonably protected from coercion of others. There is a place for a central government but its major functions are limited to protecting the personal private sphere of individuals from coercion and reducing transaction costs. Reducing transaction costs means reducing cost of trade. This may mean reducing cost of risk of trade by enforcing contracts, or creating standards like a measurement system. The society in such a state still looks after the needy by mandatory contributions from the rest. So there is some coercion and personal private sphere of individuals do overlap. But such provisions are only the minimum which ensures that coercion is minimised. This prevents extreme hardship of fellow man and also protects the general society from acts of desperation (e.g. food riots etc.).

In such liberal state one may not be forced to contribute to help the needy beyond stopping starvation. This means that if one does contribute to charity it is more likely to be a show of genuine, and more importantly voluntary, compassion.

At this point it may be said that because the individual is left to be guided by his own wit and feelings he most logically is actually guided by self-interest. This is because this is most likely to ensure the individual’s survival. However such thinking forgets that the individual is still a human. He is not just interested in his material well being. It is natural for men to derive pleasure from helping fellow man. Denying people from giving charity for the reason that it is against their own interest is thus contradictory. In a free and open society people will always do what is in their self interest, but that may also be interest of others. But charitable contributions may also benefit individuals in a more direct way.

A voluntary contribution to charity in a liberal state will obviously improve one's standing in the community. This is because the gift to the needy will be more likely to be a genuine show of compassion and mercy if one does not obviously boast about it. Naturally man values those who are willing to help him and ask for nothing back in return. However the receiver of charity may be less impressed by the gift if he found out that the charitable contribution was made for selfish reasons, like trying to improve his standing in a community which values selflessness. At the very least if one gives to charity only to improve his standing it is no longer compassion. At worst one may say that one is in fact is profiting from someone else’s misfortune. Profiting from someone else’s misfortune is in fact deemed unethical for selfish reasons. People generally would like to be treated by others as they would reasonably treat others. Thus a person in need would expect help instead of someone profiting by others by his position. This is why people think profiting from other’s misfortune is so unfavourable. Not because it hurts anyone but because if they themselves were in a position of need they would like to have had help instead of no particular gain for themselves while someone else was gaining something. One may characterise it as envy of someone else’s profit.

It must be noted that this is all somewhat of an oversimplification. People would be able to, to a large degree, judge when charity is genuine and when not. Certainly people would be able to tell if someone was boastful of his actions. Cultural norms will also have influence on when someone ought to help someone and when not.

Thus profiting from someone’s misfortune is not necessarily ‘bad’, at least from a materialistic point of view. It does not hurt the giver or the receiver but benefits both. The giver profits from his increased standing in the community. The receiver’s position is obviously helped out because of the hand out. This kind of an improvement where both parties benefit while no one is made worse off is called Pareto-improvement. However there is still the question of ethics. If one does not realise that demanding the stopping of profiting from someone else’s misfortune is in fact selfish one may still feel obligated to try to stop it. One may then argue that the state should concern itself to make the situation more ethical.

One possibility is banning all charitable giving. This would be impossible to enforce. People would still find a way to give to others. More importantly a ban on charity would be unnatural as it interferes with a basic natural trait of man to show compassion and mercy, whether for selfish reasons or not. This solution seems to be even more unethical (whatever that means) than the unethical situation it is trying to resolve.

A more reasonable solution may lie in making all charitable giving secret. This would mean that the giver no longer has the incentive of raising his own standing in the community. This would make it appear that some of the selfishness has been gotten rid of. Of course the giver may will still profit because he is fulfilling his own desires to give. So he is still ripping some profit. However if the incentive of raising one’s of standing is lost many people would stop contributing to charity and many needy would be worse off. It is also somewhat questionable if forcing people to make their contributions secret is in itself all that ethical. This is because this measure restricts people’s freedom (of basically boasting) while it does not stop any imposition on others’ personal private sphere which is the only excuse for restrictions of individuals in a liberal state and society. This solution may end up hurting the poor and the needy for the benefit of allowing a few moralists to sleep easier which seems a poor trade off.

Another possibility may be to allow the state to take from the well off and give to the poor like Robin Hood did. But forcing people to give in such a way is hardly ethical and constitutes robbery. This solution looses all traits of compassion and mercy and imposes on the natural freedom to choose not to give. This solution seems to be most unethical. From a materialistic point of view it does benefit the poor the most because the state can rob the rich to a very large extent and make the poor as rich as it pleases.

A theoretical solution may be to stop people from thinking selfishly or to make people stop regarding mercy and compassion as a virtue. This would require a vast social engineering project which of course would impose on individuals’ natural make up. This would be tyranny.

It seems that there are no ethical solutions to the unethical situation where one profits from another’s misfortune but falsely calls it compassion. All the solutions seem to be even more unethical. It seems that the best thing to do is simply let people be people and let them make their own judgment what is ethical and unethical, what they should do and not do.

On Writing

2009-05-15T16:02:00.005+01:00

Ideas are the most powerfully creations of men. Ideas send men to the deepest oceans, the highest mountains and inspire infinite other feats. But ideas come from the mind. No one can look into another man’s mind. The only way for an idea to have any influence on anything apart from its creator is for this idea to be communicated to others. A man can tell and show another his ideas. But what exactly one says is usually forgotten, even by the speaker, in a blink of an eye. Speech is not a good way of communicating ideas over vast distances of continents and the even bigger distances of time. To make others know one’s ideas hundreds of centuries after one’s death and in yet undiscovered lands one must write them down.

Writing is an immense challenge. Ideas in a piece of writing may be referring to realities of the writer’s World which are totally alien to the reader. Competency of a writer thus must be judged on whether the reader understands what the writer is trying to say. The most general rule of writing thus must be to make the written text independent of any circumstances and conditions which are particular to the writer. In other words, written work has to be timeless.

This is not denying that some writing may have the purpose of only informing someone who is well aware of the situation and is in close proximity. An SMS text message to a friend saying “I’ll be late” does not require any explanation of why or how or anything else. But this particular area of writing is not concerned with communicating sophisticated ideas. The area of writing we are concerned with is the communication of complex thoughts which inevitably requires the quality of timelessness.

In my experience the method of making a piece of writing timeless can be broken down into 4 parts 3 of which are interrelated:

1) Contents – knowledge of the subject matter
2) Structure of the text
3) Language of the text
4) Peer review – get someone else to read it

The writer must fully know what he is writing about. He must be intimately familiar with all the exceptions, counter arguments and all other aspects of an idea down to the most trivial. If the writer doesn’t have this knowledge then the last three parts of good writing outlined above are useless. This is because the last three parts deal with sculpting knowledge into something other can understand with the use of writing. If the knowledge is not there in the first place, there is nothing to sculpt.

The second part of making a piece of writing good is structure. The writer must have a general plan of his work before he writes the first word. Just like a war leader does not launch an attack without clear understanding of his objectives and the ways of achieving them a writer does not start spewing out sentences in the hope that someone will understand him. A writer must have a plan of how he will lead the reader through to the conclusions the writer wants the reader to have. The actual plan will always be inseparably from the subject matter. No two plans will be identical and in some cases may be utterly different. But in general all good plans of texts will lead the reader to what the writer wants them to be lead to. One of my professors once used an analogy I thought illustrates this concept of structure perfectly. He said that one should make points of explanation in one’s essay seem like links in a strong and heavy chain instead of fragile glass beads on a thin string.

The writer is now ready to write. The writer must not lose track of the fact that he is trying to convey ideas. This means that the language he uses to express these ideas should not hinder the reader from understanding them. Rhetorical garnish can easily obscure the ideas which are being expressed and end up misleading the reader. To avoid this writer must stick to a minimalistic approach. The language used by the writer should be neutral. It should not have a meaning in itself. The meaning is in the content of the text and not in the language used. He must cut out everything that can be cut out. The writer must be on a constant hunt for smaller and simpler words and sentences. This may mean spending hours puzzling over each sentence and trying numerous combinations but it is well worth the effort. However, this zeal to cut may lead the writer to cutting out most of the meaning too. To combat this tendency the writer should keep the text concise but not at the expense of clarity, and keep the text clear but not at the expense of conciseness.

After these efforts the writer may feel that his text is as good as it can be. This may be true but he cannot be a fair judge to this. He must submit his text to review of others. The more people read the text the more mistakes may be pointed out that the writer, who is after all only human, may have missed. Another point is that the writer is ultimately writing for others to read so he needs to make sure that others understand his text.

At the end, only time can say whether a text is well written and achieves the aims of the writer but the guidelines outlined certainly will increase the chances of success of the writer.

On the Virtues of Gay Marriage

2009-05-03T12:45:00.007+01:00

We do not treat people equally because all are equal. We treat people equally because all are different. These differences make everyone so valuable. One cannot exactly know how a person thinks or what experiences he has had thus one will never predict what kind of contribution that person can make to society.

In order to allow a person the maximum scope within which he is able to exploit his knowledge, talents and ambitions, and thus contribute something, law treats everyone the same so everyone has a level playing field. Arbitrary rules which elevate some while dragging other down are avoided. Discrimination and privileges are frowned upon. However this does not mean in any way that one must automatically like other people. Not liking someone is subjective and arbitrary. It dictates how one treats others in private personal relationships but it should not prevent one from recognising a person’s contributions.

In modern society there are few areas of life where illiberal discrimination still exists. Slavery has been abolished, women have been set free and given the vote, and justice no longer recognises a colour of a man, at least not in Europe and not in theory in USA. Since enlightenment we have been free to think. But even though most battles have been won by liberalism the war is not over. Probably the last area where prejudice and lack of respect for freedom of men still exist is in sexual orientation. Gay marriage is an example of a much wider fight for freedom of people to love who they truly love and not be coerced to betray their real feelings. It is also a fight for those feelings to be tolerated and accepted as just as valid as feelings of other people. Many argue against gay marriage because they do not want this tolerance to be allowed. Liberty, as it turns out, has enemies of all political creeds. Lets examine of the main arguments against gay marriage and by extension against gay rights.

Marriage, in a strictly utilitarian sense, is the commitment of two people to a lasting relationship and a signal to the rest of the world, predominantly to the state, to treat the pair as a unit. This manifests itself mostly in taxation, housing rights and other administrative policies.

As it stands right now marriage mostly remains a privilege of the heterosexual. The majority discriminates against the minority of homosexuals in dictating that they are not allowed to be recognised as married. But this fails to recognise the possible contributions same sex couples can make to our society. This discrimination is also silly, entirely arbitrary and dangerous.

In order to avoid sounding religious and dogmatic some may argue along the utilitarian path and say that the original point of marriage was to provide more stable conditions in which to raise children. This pre-dates all religious thought by the virtue of happening at the dawn of humanity, before superstition and other cognitive side effects created the idea of God. The argument says that same sex couples are incapable of having children so there is no point in gay couples having marriages. It is true that same sex couples cannot reproduce. Same sex couples can however adopt (another topic of gay rights movement) and provide a loving and carrying home just as often as heterosexual couples, as proven by research. Does this not mean that providing same sex couples an opportunity to marry will result on average in even better home for their adopted children? Don’t gay marriages encourage same sex couples to adopt unwanted children and provide them with a loving home and thus benefiting society? It seems that from a utilitarian point of view same sex couples provide a net benefit, especially to orphans.

One must recognise that extending the definition of marriage to same sex couples does not in any way damage the marriage between heterosexual couples. How can it? homosexual couples are not going to climb through the window at night and steal heterosexual couples' marriage certificate. Does extending the definition of marriage result in heterosexual couples losing their love or affect their marriage? Obviously not. Imagine a situation in a heterosexual relationship where one partner, lets say the husband, tell his wife “honey, same sex marriage now is allowed, I don’t think I love you anymore. We have to split up.” Of course this is ridiculous. Discriminating against same sex couples on these grounds is not rational. It is a whim, a silly opinion, it is arbitrary.

Saying that we ought to have discrimination in one arbitrary area of life and have equality in all other areas of life may result in loss of all equality. If we can arbitrarily discriminate in one area of life, why not two areas? How about three? How about all of them? This is what arbitrariness is. The slippery slope to loss of equality before the law is thus established.

It seems to me that by following the liberal principle of equality before the law and thus extending definition of marriage to same sex couples will result in more equality before the law and a clear benefit to society. It will not result in anything catastrophic. How can recognising love and commitment between two people be a bad thing? One is perfectly entitled to dislike the gays, but why try to coerce them, or prevent them from doing good for the rest?

Women and Men in the Army

2009-04-18T11:16:00.001+01:00

The British Army tests the physical ability of its soldiers differently depending on soldier’s sex. This is both arbitrary and dangerous. It certainly goes against any feminist view that men and women ought to be treated equally.

The reason for this discrimination is the clear difference between physical ability and the capacity to improve this ability of an average man and average woman. It is thought that physical tests may be made fairer by setting the standard to be achieved by women lower than the standard to be achieved by men. This seemingly creates relatively the same difficulty level. This method tests for relatively the same level of effort from the test subjects at the expense of testing absolute physical ability. For example it is thought that if an average woman can run slower than an average man she has to put in more effort than the man to achieve the man’s ability to run. But if the required standard for the woman is lowered by the difference between average man and average woman, the female test subject will be tested for the same amount of effort. The woman no longer has to achieve same absolute level of fitness, but only a relative level of fitness.

This is entirely arbitrary. There are women who are taller than certain men. This gives a certain advantage to the taller women in relative tests. The taller women need to show less effort than the shorter man to pass the tests. But the tests look for a certain level of effort as explained earlier. This implies that one should take the height of test subjects into account and also discriminate by height. However this creates problems. All individuals are different in most aspects. To truly create a fair test that tests the effort of an individual one must create a different test specifically tailored for everyone. This is impossible. It is entirely impractical. The main reason however is that effort is not really quantifiable and thus subjective rather than objective. One cannot measure the absolute level of effort or the relative effort in relation to other test subjects. Thus it seems that to try to test effort will always remain arbitrary, a matter of an opinion not based on any fact. This is not fair to all involved because in the pursuit of trying to test everyone to the same standard of effort all end up being tested to different, somewhat random, standards. The only way to test objectively is to hold everyone to the same easily measurable standard and thus test everyone in the same test with the same requirements for passing the test. This of course will test the absolute level of fitness not the effort someone puts into their fitness training or the effort put in on the day of the tests. But this is better.

The nature of the job of a soldier stays the same irrespective of the sex. All rifles, grenades and ammunition weigh the same. When a female soldier picks up a rifle that rifle does not readjust its mass accordingly. The nature of war dictates that absolutes like the absolute ability to carry a weight or run or fight determines the winner or loser. By testing sexes differently the British Army denies this nature. Different pass criteria in physical tests seem to imply that the enemy will fight female soldiers differently from men. This is self evidently not true.

I do recognise that in certain situations a female soldier is required. An example of this may be to help another female rape victim, who clearly will be feeling particularly uncomfortable around male soldiers. Another example is that in certain cultures women were brought up not to interact with males and thus will be only willing to communicate with female soldiers. My argument does not concern these responsibilities however. I am only talking about pure combat troops.

To really be fair and not arbitrary the British Army should have equal test for everyone. This will also help to test for the absolute readiness of a soldier to fight. An enemy soldier will try his best to kill British soldiers all the same irrespective of sex of that British soldier. The army should not think in terms of women or men. It ought to think in terms of soldiers. If that soldier passes the single absolute physical test the soldier is fit for duty, if not than soldier is not fit for duty. Of course this will result is less women passing physical tests and thus having less women on the battlefield fighting. But this is irrelevant, whoever can do the fighting better should do the fighting. This may be a woman or a man if she or achieved certain levels of ability.

Civil Unions instead of Gay Marriage

2009-04-09T15:02:00.004+01:00

One may think that civil unions for the gays are marriage in all but name. The gays have equal rights. But if they have equal rights in all but name, why not name these rights that which they are, i.e. marriage?! The reason if course is that they do not enjoy equal rights.

They also do not enjoy equal consideration by the majority of people. The recent California ballot initiative, Proportion 8, to define marriage as between man and woman and to limit marriage to such an arrangement has shown this. The initiative was passed by the majority. The majority of people do not like gays (mostly derived from the bible and other religious intolerances and nonsense not from some fact). This fight the gays are fighting is not about marriage, it is about much wider want of being accepting as equals. If gays were equal to other people in the eyes of the public there would be no arguments about them being able to have equal rights, like a right to marry.

One can only treat everyone equally by applying the same standards and rules to everyone. When one singles out a group or individuals and applies different rules and standards one is discriminating, one is not treating that group equally. Some would argue that it is possible to treat the gays equally yet somehow keep them separate. They propose to keep marriage for normal heterosexuals and civil unions for the gays but to have the civil unions grant the gays the same rights as marriage grants to heterosexuals. This would be exactly the same as the racist Jim Crow laws that kept the blacks separate but equal. Since the gays have done nothing wrong except to be born the way they are, singling them out and preventing them from doing something is treating them not equally. Preventing someone from causing damage or injury is justifiable. But what are the gays being prevented from doing exactly? They are prevented from expressing love and commitment to that love and to have this recognised by society. It seems strange to deny people to do this.

Second Amendment and Liberal Democracy

2009-04-09T14:00:00.002+01:00

The 2nd amendment of U.S. constitution seems to allow Americans gun ownership. Some argue that 2nd amendment is necessary because it is a safeguard against government tyranny. This argument strikes me as false.

It seems to me that a government that cannot steer itself towards liberty through the use of checks and balances but instead has to be coerced by its gun-touting-populous away from tyrannical rule is not worth having. The argument for gun access to safeguard liberal democracy is an argument against liberal democracy.

Liberal democracy’s nature is self-sustaining, through peaceful measures and voluntary agreement of all. Faults of government are exposed by the free press, by other branches of government and punished by an independent judiciary where appropriate. The system has accountability and oversight. To say that liberal democracy can only be sustained by an armed and angry mob is to deny this nature of liberal democracy. But this nature is undeniable. Liberal democratic process is flourishing in many places around the World where gun ownership is curtailed or even banned. Example of UK comes to mind.

The argument for ownership of guns to protect liberal democracy thus flows from faulty premises, namely that liberal democracy is sustainable only through gun-touting-mob. A separation of arguments for gun ownership and maintenance of liberal democracy is called for.

Kremlin's power

2009-02-23T15:35:00.002Z

All power in Russia is concentrated in Kremlin. Duma (the parliament) acts like a rubber stamp because it is controlled by the Kremlin’s party. The regional governors are appointed by Kremlin. There exists a thin but very powerful and rich layer of military, intelligence and mafia types which is well connected with the Kremlin. This is the layer controls most business and has involvement with almost all national activities. However this layer in no way opposes the Kremlin but is fully subservient. Corruption allows this layer some independence in its activities.

This form of government can be seen as nonhereditary monarchy with all nepotism and cronyism which monarchy implies. Ironically this is exactly what Perestroika wanted to get rid of and the communist revolution before that. It seems that no matter what the common Russian people do, they end up with the same government but under a different political banner. From the Czar to the General Secretary of the Party to the President, all men who rule Russia have ruled it using the same methods. Namely using absolute or near absolute authority to suppress any opposition to achieving goals, which of course are chosen by them alone.

This happens because there are no checks and balances on power in Russia. In other countries long histories of institutional development produced very robust mechanisms to spread power around and to add accountability to every institution. When someone gets into power they are not really in power. They are simply in charge of one of the institutions. Rules and good ethic is enforced by other institutions. There is no free reign. In Russia the opposite is true. Whoever has the power has freedom to do whatever he pleases.

This is somewhat of a medieval way of governing. In the long term it is nowhere as productive or kind to its citizens as a system with more accountability.

This reason for this state of affairs seems to be that Enlightenment never took root in Russia. In other countries ideas of Enlightenment grew into liberalism and democracy. This was accomplished by gradual change rather than revolution. It is impossible to come to conclusive understanding why Enlightenment never took root. But what is true is that Russia needs to start to develop these institutions as soon as possible for its own sake and for the sake of the World. Unfortunately there is no reason why this should happen now or in anytime in the future.

Death Penalty

2009-02-20T12:53:00.002Z

Death penalty rests on three arguments:

1) Retributive justice or eye for an eye
2) It is cheaper to execute someone than keep him alive indefinitely
3) It is a deterrent for criminals

The first point is subjective and the last two can be objective. The first point relies on jurisprudence and philosophy. As such there is no clearly correct position. Every side has got rational arguments for their position. The supporters argue that the punishment ought to fit the crime, for murder this means death. Others say that two wrongs do not make a right, or that an eye for an eye will make the whole world blind. It may be argued that matters of personal preference should not enter rational analysis. As David Hume said the question of what ought to happen cannot be derived from what is factual (Hume's guillotine). Thus the arguments of personal preference of what ought to be a proper ethical position on the death penalty are all in doubt since they cannot be backed up by facts.

It is true that is much cheaper to kill someone and be done with it rather than having to pay for food and accommodation for indefinite amount of time. However our system of justice relies having extremely strong argument for someone’s guilt in order to avoid punishing the innocent. Standards for proving someone to be guilty and fit for capital punishment are very high and actually impose a cost far higher than of keeping someone locked up for life. On a cost-benefit analysis one may not argue that the death penalty is the cheaper argument. One may argue this only when the system of justice is not so fussy about proving someone innocent, but is far less desirable for our society.

It seems to be logical to think that the death penalty is a deterrent for murder. But then people rarely commit murder thinking they will get caught. Most simply fail to account for the risk of the death penalty. Since each murder case is unique with many unique causes, it is statistically hard to analyse the effect of the death penalty on the murder rate. Some econometric analysis shows a negative correlation between murder rate and the use of the death penalty others show the opposite. Same say that whenever death penalty has been suspended the murder rate stayed about the same but others would argue that other circumstantial socio-economic factors played a part in keeping the murder rate down.

All arguments for the death penalty are dubious. Unfortunately most counterarguments are somewhat dubious too. The question returns to jurisprudence and choosing the lesser of two evils on subjective grounds. I think the strongest argument remains that innocent people have been killed in the name of justice. Clearly the system has been shown to be fallible. Thus to avoid killing the innocent death penalty ought not be used at all. Lifelong imprisonment allows new evidence to come forward and a chance to redeem oneself. This is why the civilised countries do not have the death penalty.

A question of Belief

2009-02-01T00:56:00.002Z

I once spoke to a friend who was in TA with me. She was an atheist and declared herself to be such on the officer application form. During the interview she was asked how she could maintain religious soldiers’ morale and spiritual well. She could not answer this question.

This question is a perfectly reasonable question to ask. A soldier’s fighting spirit is one of the most important resources an army has. Most people on seeing the horrors of war will start to question their beliefs and in the process forget their training and orders.

On reflection my answer will avoid the prickly issue of theism versus atheism. I would tell the soldier that God does not come into consideration. The British Army’s goal is to safeguard UK and do things for the greater good. The army does not carry out God’s will but the will of the British people which are represented by the government. That is the reason why we fight. Those are good enough reasons to fight irrespective of God’s existence or will.

Tolerance

2009-02-01T00:50:00.000Z

I find faults and imperfections in a blink of an eye and point them out just as quickly. I am full of prejudges. I forget or am too weak to admit that I am fallible. Many others do the same. Tolerance and respect for others based on a sense of self-fallibility is fundamental to learning and thus improvement of one’s condition.

The learning I am talking about is not the initial study of the one’s contemporary knowledge but comes later in life, well after the initial education is over. This is when one’s knowledge, which was taught as truth, are challenged and proved wrong. Only tolerance and willingness to re-examine one’s understanding will allow one to gain the benefits of new thinking and doing of things.

Thus to listen and accept new thinking which is not one’s own but which is better than before is a strength. This is what men must learn when they are still children. They must learn to judge new ideas based purely on their merit and not be afraid of changing their minds. Only then can one really stay on the road to truth and not be pulled aside and remain behind, held back by outdated thinking.

While many fail to tolerate differing opinion others may blindly idealise certain people too much. This causes the exact same problem as does a lack of tolerance. Ideas and new discoveries are not judged based on their merit but by who proposes them. Someone who idealises someone else will just as easily be convinced of a bad idea as would someone reject a good idea for the lack of tolerance of the new. This means that one must consider all people, including oneself, fallible. Education of children must thus also teach to question and judge people and their ideas fairly based on rational thinking.

Compassion

2009-02-01T00:46:00.002Z

Once one accepts evolution as fact one is forced to recognise that feelings of composition are biological and a product of development of our own society. This is not necessarily a cause to reject compassion on the grounds that it is something imposed upon one by circumstances of birth and education. In any case, one is deluding oneself if one thinks that one can rise above emotions of pity and pathos. One is a human, an ape, an animal. A struggle to escape this fact will not get you far. Examining one’s character and behaviour on a deeply intellectual level will not allow one to escape one’s instincts.

We are bound by our anatomy and education our society has evolved and implemented onto us. This is not necessarily a prison. It is just a set of breaks which do not let us run too quickly. It is probably for the best. The faster one runs the more likely one will fall. Every time humans chose to dramatically cut ties to the past and build a new society it all came tumbling down. Communism and Nazism is an example of this.

When thinking about compassion and other emotions which might be thought of as irrelevant one must come to terms that this is part of our makeup. We are what we are. We can only build upon and change what we have very slowly. Hence one must accept compassion. One must allow oneself to feel it for others, and to let others feel it for oneself, even when it seems weak or unnecessary.

Holy Ethics

2008-12-25T11:03:00.004Z

Many claim that even if God did not exist, religion still teaches us morals. Some would say that the proof of existence of God and his wisdom is that he gave us the meanings of right and wrong. One way or the other this is a misunderstanding of the history of man.

Start from evolution being a proved scientific fact. Palaeontology, cell biology, geology all say that beyond reasonable doubt, evolution was the process by which life has come to be the way it is today. Before we evolved into what we are now, we existed as apes. At this stage we exhibited what may be said to be ethics. We protected the young, cared for the old and injured, helped each other and disliked and punished anyone who did not. To modern man these actions would undoubtedly seem virtuous.

Were these in any way morals? I think for it to be called such, these actions would have to, at least sometimes, go against individual's true self interest, to be selfless. So did these actions go against anyone's true self interest? Not really. These actions helped the individual to interact with others and ultimately served the individual. For example, man’s evolutionary grandparents protected the young because 'workers' and hunters were needed for the group. The group served the individual, for example sharing of the kills and provision of care if the individual was injured. So the young were protected for the good of the group which in turn was for the good of the individual. So these actions are based on selfish reciprocity. These actions were a function of evolution, adaptations to working in a group. Through varies evolutionary methods of mutation and sexual selection nature taught apes to work in a social group. This tribal behaviour gave the apes a greater chance of survival. In order to take full advantage of the group apes learned to be ‘moral’.

Fast forward to the dawn of modern man. Without questioning the very existence of God, everyone would agree that at that point in time the rational fear of the dark, snakes and the like, devolved into irrational phobias and superstition. This lead to the very early pagan religions. It would seem obvious to say the mentioned biologically controlled ‘ethics’ got mixed up in sun worshiping and the early debates about the nature of existence.

Fast forward again to the modern, more sophisticated religions. By studying the history of these religions one can see that vast quantities of material for the Holy Scriptures were borrowed from earlier times. Man’s understanding and thinking grew in complexity and simple truths became clouded in layer upon layer of abstraction, ignorance and the politics and power games of the rich and powerful. For example, questioning the authority of establishment of varies religions was deemed a sin and immoral.

Many would say that actually God himself was writing texts through people’s hands. He is the one who gave us rules and laws and morals through Holy Scriptures. It may be true that he was working through people in some way but these Holy Scriptures did not give us our morals. The idea that morals came about only through Scriptures is very convenient for the religions. It gave them the licence to make up their own ethics, their own right and wrong. The establishment used this authority to grab more power and guarantee itself long term survival. However, the idea that morals come from holy texts ignores the facts.

One cannot argue with that fact that the modern morals of man existed before they were “outlined by God”. If one does argue this point, one implies that modern morals did not exist before God wrote them down. We have already seen that this is not true. Morals existed before even writing itself did, because without them early society would not have functioned, humanity would not have survived. Look for example at the Ten Commandments. Is it really true to say that murder was exceptable, that property rights did not exist and perjury was unpunished? Of course not. The ancient Egyptians were doing just fine with their almost identical laws as was the proto-Persian as well as every other early civilisation.

It is true that modern law is based partly on religious rules. In UK at least some very early laws were based on the Bible and other church writings and opinions. But the Bible itself is based on earlier biological necessities of living in a group. I think it very important to wrestle back ethics from the authority of the religious types. The pious have all too often bent and twisted ideas of right and wrong into something very ugly. Torture during the Spanish Inquisition and flying aeroplanes into skyscrapers being some examples.

This leads one to the conclusion that there is no absolute right and wrong. All of ethics become relative. This does not mean that one is allowed to do whatever one wants. Man lives within society. This form of living is far more beneficial to an individual than living outside of society. There must be rules governing the behaviour of men to safeguard freedom of one from another’s force. One is thus free to experiment, explore, create and then trade or give away fruits’ of one’s labour. This allows everyone to benefit from individuals while also protecting them. Thus law is artificial in the sense that it not created by God but it is not arbitrary in its prescription of ethics since they come from the necessities of a functioning society. The development of ethics and law must be based solely on reason.

Ethics come from responsibility to others which is ultimately based on self interest developed by evolution. The Bible simply copied this reality and injected it with a requirement for slavish and unquestioning devotion to the clergy which was used to control the peasantry and enrich the church.

Organised Religion

2008-11-29T18:10:00.002Z

There are a lot of people in this World who hold a deep faith of one kind or another. Christians, Jews, Hindus and others all know that their religion is a presentation of absolute truth.

How do these people know that they are right in their belief? The simple answer is that someone, the leadership of an organised religion, has told them so and then forbade anyone to question the presented view. Anyone who does is a heretic. The heads of varies religions validate their commands through an interpretation of one or more holy scriptures or even going as far as saying that omnipotent power is working through them. This system is deeply flawed.

Firstly the scriptures themselves were written at different times in different political, economic and social situations and thus for different reasons. The authors without a doubt came from different backgrounds and had very different writing styles. The bible is a good example of this. The bible consists of texts written thousands of years apart and brought together under instruction of a Roman emperor whose primary concern was to standardise the new state religion. It is thus improper to take the bible as is or to say that it is a coherent text. The Christian church gets around this by saying that God was working through the various writers and editors of the bible. how convenient?!

Second problem is that the various interpretations of holy texts themselves are greatly influenced by the interpreters’ context, political needs and background. For instance, most if not all religious rituals and traditions are either inventions or interpretations of earlier, in many cases earlier religions', ceremonies. Various ideas and beliefs, wholly invented, but said to be based on holy scriptures are taken as infallible. The Pope, for example. The whole church dogma becomes obviously illogical and irrational for the true believers because the church becomes disconnected from the original prophet or holy event and slowly creates its own, more self beneficial, set of rules and beliefs. Organised religions obscure this progression with a combination of indoctrination, lying, covering up and whitewashing the past.

Thus what often results in all organised religion is manipulation of people or simply lying to the worshipers for the benefit and enrichment of the establishment and bureaucracy of the religious order or its allies. The fundamental problem is that faith requires blind obedience, this is obviously leads to bad outcomes. If religious people really want to get closer to whoever they want to get closer to then they must learn to be more inquisitive and critical of their churches' leaders. Of course all of this reasoning is only true if God or whoever is not actually working through the various leaders. Looks like the faithful have some thinking to do.

Overreaction on Obama

2008-11-07T16:41:00.004Z

I must confess that I never got why Obama is thought be some kind of a prophet. I never thought that his personal story or his black skin really mattered a whole lot. It may be a great progress in terms of civil rights for minorities but the much bigger problems of recession, massive deficit, two wars and other problems will not be solved by his past or his ethnic background. What will end up solving those problems is good and thoroughly thought out policy.

When one looks at Obama’s manifesto one quickly realises that he is not a revolutionary many hold him to be. He is mildly centre-left with some bad protectionist overtones, not very different from a typical democrat really. I think he will pick a cabinet composed of ministers with broad range of experience, knowledge and political outlook. This will help him to develop well thought out policy. Although I worried that the lack of a check from the Congress, which is now entirely controlled by the Democratic Party, will not help to guide Obama in the right direction.

Ultimately devil is in the detail. Big sweeping speeches may make a great difference during a World War but during the everyday it is the detail of analysis and solution of a problem that makes the difference. It remains to be seen whether Obama will be a good president but I suspect he will be far from the worst.

In defence of capitalism

2008-11-01T14:15:00.002Z

The recent financial crisis has made many people question capitalism. Before doing so one must consider some important points. Firstly what capitalism is and how exactly it works and secondly how beneficial it is.

At the heart of capitalism there is the free market, and the heart of the free market is the price mechanism. Through this mechanism efficient use of limited resources is achieved. After all the free market is nothing but a tool through which a society can distribute limited resources between unlimited wants of all the people. However for this efficient allocation to happen the market has to be competitive. This means that there must be many buyers and sellers, there must be good information available for all, and entry and exit to the market for producers must be easy and quick.

Perfectly competition unfortunately does not exist. However the closer we get to it the better are the results. We have seen countless times, where competition is applied the outcomes are beneficial, be it in the car market or food market. As we open our borders to free trade we get more choice and lower prices, improving the living conditions for the vast majority.

The recent credit crisis is not a demonstration of the free market failing. Businesses still are selfish entities hunting for profit. The only way they can make profit is through providing cheaper and better goods and services than their competitors. Prices still work as an allocation tool, if a good is scares it is more expensive and thus people think twice before buying that good, only people who really need that good will buy it. This system is still more efficient and produces vastly better results than some form of public ownership and central planning.

Krugman on US pensions

2008-07-09T18:14:00.002+01:00

Sometimes when I post a comment on Krugman’s blog it does not get added to the comment section. I think maybe sometimes I come up with a worthy counter argument which he may not like.

This time round he posted a comment about what McCain’s adviser said about the US pension system (Social Security). I think Paul Krugman is missing some explanation about the pension system, so I will fill the gap.

The pension system in USA is unfunded and benefits defined. Unfunded means that the next generation pays for the current generation. Benefits defined means that the amount of benefit in real terms is fixed so the contributions have to be manipulated to make sure the benefit payment is of wanted amount.

The current US system is a legacy from Second World War when people wanted to give something back to the people who fought the War.

This is a self sustaining system IF and ONLY if the next generation is the same size or bigger in terms of number of people. If its not and the number of people in every generation is decreasing then the amount the paying-generation has to pay will be ever increasing provided its benefits are defined (fixed) in real terms. This means some time in the future pension payments will rise and rise until one has no disposable income left.

The good thing for Americans is that their population is growing and not ageing, unlike Italy's, Germany's or Japan's. So it is just about self-sustaining.

From a neo-liberal prospective, what one should have is that one pays for what one wants to get when one retires. This is so there is a proper incentive system for people to save as much as possible for their own retirement. What McCain's advisers want is a funded system where one saves one's own pension. At least a hybrid, UK-style where there is a funded and unfunded elements.

This is not a bad idea, why should the younger generation pay for the previous?! Some may argue that the conversion from unfunded to funded is impossible but this not true as Chile did it quite effectively in the 1990s.

Its quite strange that Paul Krugman, an economist, failed to pick up on the McCain to neo-liberal link to McCain's economic advisers wanting a funded system.

The economics of pension systems are complex but centre around having a funded versus unfunded system and whether to define contributions or benefit payment. As always a good place to start is Wikipedia.

does second year economics stack up against reality?

2008-05-20T15:55:00.009+01:00

It has always seemed to me that the monetary system of a country is very complex and probably unexplainable by most people. It thus was rather shocking to me to discover the IS/LM model during my economics degree.

The monetary component of the IS/LM is very simple (well, not really, but the way I explain it, it is). It says that there is a nominal money supply which is, more or less, controlled by the central bank. This is closely related to the real money stock if inflation is predictable and low. There is a money demand which is of course determined by the general public. The equilibrium of this market is where the supply and the demand are the same. The cost of money (the price) is the interest payment on bonds (an alternative to money) which the consumer looses by holding money instead of bonds. At equilibrium there is a prevailing interest rate. If the real money stock expands there is now more money available at every interest rate and hence people hold more money. The bond market adjusts to this by lowering the interest rate (the exact interaction is irrelevant because the result is still the same). You can see this in a diagram form below.

I decided to see if this matches the movement of the real life data. I decided to look USA because the Fed (the American central bank) recently had a large cut in interest rates over a short period (just at the end of 2007 and start of 2008) as can be seen in below diagram (Effective Federal Fund Rate). Federal Fund Rate (FFR) is a similar in its function to the interest rate described above, in the monetary component of the IS/LM model.

So, to cut the FFR as was done by the Fed, the above model says that one should see a noticeable increase in the nominal money stock, from January 2008 onwards. The below graphs show what happened to the amount of cash and coins (M0) and M1 (M0 plus money in quick access deposit account, and checkable accounts). As one can see there was indeed an increase in money stock starting from January.

This point to that the monetary component of the IS/LM being a good approximation of reality. However one can be seen from the graphs that there are considerable movements of M0 and M1 not particularly related to the FFR. Clearly the IS/LM still remains very simple and fails to explain everything.

Data sources:

1)M0 data - Fed
2)M1 data - Fed
3)FFR - Federal Reserve Bank of St Louis

Price gouging

2008-05-20T15:14:00.002+01:00

As a student of economics it is interesting to hear about price gouging. Price gouging is loosely defined as firms asking for a price far higher than the perceived ‘fair price’. A recent example of this is here. Basically the consumer thinks that the prevailing price is too high.

Two points of this idea strikes me as odd. Firstly the actual fair price is some what arbitrary. It seems to me that logically, a fair price will always be below the prevailing price. For example, say an apple costs £1. Surely a consumer can say that this price is too high. A price of 50 pence is fairer. Then at that price of 50 pence, a price of 20 pence seems fairer. If one follows this trail one ends up at the conclusion that the fairest price of them all is exactly £0.

Even if the consumer thinks about the cost of growing apples, than he will come to the conclusion that the fairest price is that which exactly matches the cost of the apple. Thus the grower gets no profit and only just covers his cost.

This brings me on to the second issue. Under a normal market competition, where producers are allowed to enter the market freely, the above outcome (of the actual price becoming equal to cost) can actually happen. If the above apple producer is selling at £1 but the cost per apple is only 50 pence than I can guarantee that an intrepid farmer will enter the market, under cut the original grower in terms of price and take most of the profit for himself as people will now buy his, slightly cheaper apples. If there is no collusion, the prices will fall to match the cost and then the producers will get their costs down to get some profit. All this is just basic competition. What prompted this race to the bottom in terms of prices was that the original grower was making large profits and the fact that collusion was not possible. It was a signal for others to see if they can try and earn some of that profit for themselves.

However, if that original farmer’s profit is taken away with a tax, or as some have suggested, the price simply be set by law to be lower, that signal for other producers to enter the market will disappear. The market is distorted. Competition no longer exists and prices do not race to the bottom and there is no competitive pressure to cut costs to make a bit more profit.

When oil firms are making massive profits, they ought not to be taxed or price of petrol fixed at a lower level. What should happen is there should be encouragement for firms with alternative sources of cheaper energy to enter the market for fuel.

Price gouging is nothing more than the market working. When one starts to distort the market, inefficiency results which will lead to generally higher prices and less competition which will inevitable lead to the consumer being worse off. What people should be asking is not how can we stop firms from making profit, but how can we make entry into the market easier and how can we create more competition.

Was it right to bring up Lewinsky with Chelsea Clinton?

2008-03-30T17:05:00.003+01:00

Recently Chelsea Clinton was asked whether she thought that Hillary Clinton’s credibility was damaged by the Lewinsky affair. Chelsea replied that it was none of anyone’s business.

In my opinion the question was legitimate. At least if the question being asked was:

Do you think that Hillary Clinton showed weakness during Monica Lewinsky affair by staying with Bill Clinton and not responding to it in anyway?

I think this is a genuine question and ought to be asked. Although to me it is a non-issue (marital situation of the President have little bearing on their fiscal policy for example) for some it is a serious concern. For some the President is more than just managerial figure who is there to make the schools work and decrease unemployment. To some the president is a leader who must have integrity and strength of character in order to be able to demand people’s respect and more importantly trust.

Chelsea Clinton missed a golden opportunity to profit from a bad situation by talking about how Hillary Clinton showed strength sacrifice in order to keep the family together. After all Americans love ‘family values’.

Thus if Chelsea Clinton was out their campaigning for Hillary Clinton she should have been able to handle this question in a much more productive manner.

David Cameron as Data

2008-03-29T21:33:00.001Z

I have always been a big fan of Star Trek. Just now I realised that David Cameron, of the British Conservative Party, looks very similar (at least in my eyes) to Lieutenant commander Data, of Starfleet. Of course the comparison works best with the older Brent Spiner, the actor who plays Data, when he has more lines and slightly fuller face.

Its a shame that Data does not exist in real life. I think he would have made a good Prime Minister.

The surge, is it really working?

2008-03-21T15:31:00.000Z

I hear quite a bit of right-wing commentators and pundits on US TV talking about how the surge is working and how the "war" (which should be identified as an occupation, but most Americans could not bare to think of themselves in such a manner) will soon be "won".

Its interesting to note what exactly is going on in Iraq. Most of the bloodshed occurs in Baghdad and the areas immediately surrounding it. The primary reason for this is that it’s the largest, most important and the most mixed city. For the last 5 years shia and sunny gangs have been fighting each other for street control. Criminal gangs and insurgence have been adding to the misery as well.

General Petraeus and his surge came in at an interesting time. Most of the neighborhoods a year ago were already homogenised and clear sectarian lines drawn. A great deal of people who could have been killed are already dead or long ago left the area for safer places. What the general did was simply to solidify this system by erecting walls, creating gated suburbs where only its residents were allowed, and allowing the gangs some autonomy in operation as long as they stayed in their own territory and more or less behaved. Overall he partitioned the only mixed area of Iraq. This may have negative effects in the future.

When the surge begins to be scaled back the gates will be opened and the violence will continue. The only way to stop this happening is to move ahead on political front and get the government and the economy moving again. Unfortunately this has not happened. The law governing division of profits from the oil has not be put in place. the police and the army are incredibly sectarian, Iraq's infrastructure remains shattered (electricity is available only few hours a day for example) and most people are too scared to go to the shops or to open up a business. Schools, the future of Iraq, remain in a terrible, almost "African" state. Worse Iraq is slowly but surely sliding into cleptocracy and cronyism.

So when I hear someone say "the surge is working, we are winning" I always tend to think of that someone as totally ignorant or simply as lying. Iraq is in much worse shape than most are lead to believe. A fall in violence masks much bigger problems ahead.

Watch this space.

Peacekeeping

2008-02-06T14:00:00.000Z

As part of my Officer training I get to do a great deal of simulated exercises of platoon attacks. One of these exercises involved a scenario where I was ordered to take a trench held by rebels. We were there to provide peacekeeping. The rebels were basically poorly armed and quite demoralised civilians with shotguns and no other supplies.

My plan to tackle this led me to want to first negotiate with the rebels. Make them understand that for them it will be much better if they lay their arms down and go home. They will not be killed, which they would for sure if I assaulted their position (since I had access to artillery, anti-tank weapons and machine guns). If they gave up peacefully it would also mean that I did not put my men and equipment at risk. To paraphrase Sun Tzu, the highest form of military excellence is winning a conflict while leaving everything intact and everyone alive.

I got more or less laughed at by the instructors. It seemed quite strange that they would do that. Surely winning the hearts and minds through showing mercy and fairness is the key in a peacekeeping operation or the kind of conflicts the British Army is involved in now.

An illustrative example of this is the Second World War. During the later stages the Germans army personal were desperately trying to fight their way to the Western front. This is because on the Eastern front the Red Army showed no mercy. Their goal was total destruction of all Nazi equipment and men. The Americans and the British were not like that though, so they found it much easier to take German position because the Germans knew that they were save as POWs.

British Army instructors need to rethink their understanding of modern warfare.

Why we should not torture

2007-12-15T19:07:00.001Z

Many people abhor the idea that torture is in anyway a bad thing and would happily preach that we, as a society, have a right, indeed a duty, to torture any enemy of the state for information and punishment. I would like to spend some time attacking this conviction.

Support for torture can be attacked on three basic grounds, purely legal, practical and moral. We respect laws because they protect us against chaos or tyranny. If we break laws when it suits us we will end with no laws and we will be back to beginnings of humanity, living according to the will of the strongest bully. According to all international laws, from Geneva Conventions (Common Article 3), to UN Convention against Torture and International Convention on Civil and Political Rights, torture is banned under all circumstances. UK and all EU nations (both of which I am a citizen of) have interpreted these international conventions into their domestic laws as have most other countries. Indeed English common law has banned all forms of torture for half a millennium prior to this plethora of conventions and treaties. One of the Law Lords, Lord Hoffman, recently said "English common law has regarded torture and its fruits with abhorrence for 500 years". One must remember that "under any circumstances" provision of these treaties describes wars, big wars, wars such as the two World Wars. So to say that the current threat from Islamic extremists is in anyway greater than the threat from a World War and thus current times demand the use of torture is simply nonsense. We, as a society, have faced far greater threats and judge that even in those, much darker, situations, torture was still unjustified and unwanted.

There is a case to be made by the proponents of torture, under the practical argument. Torture does sometimes yield some important information. Guy Fawkes, for example, gave the names of his co-conspirators. However, most of the time torture does not provide any valuable information. Any rational person will say anything to end severe pain, be it truth or a lie. If the victim of torture has a choice between a lie and telling the truth to the torturer, why not lie?! This line of thought robustly disarms the 'ticking-bomb scenario'. If one is a terrorist who planted a bomb in some city, why tell the tortures where it is? Why not send them to the wrong part of the city looking for the bomb, save oneself the painful experience of torture and still accomplish one's deadly mission?!

Still one may argue that torture ought to be used in some rare cases, where there simply is no alternative. Such arguments were used to justify torture in French Algeria in the 1950s, and in Israel in the 1980s. This led to a slippery slope to systematic torture used on all prisoners and the escalation of the actual torture techniques. Torture became so rampant that the Israeli Supreme Court ruled in 1999 that all forms of torture are to be banned, under any circumstances, without exception. History makes it clear, without a clear ban on all torture, torture will simply be used more and more until it becomes a method of choice under all circumstances.

This leads onto the final pillar of my argument. Fundamentally, torture is a punishment of someone who usually has not been found guilty. It is also discriminatory because today's victims of torture (at least in Europe, if torture was allowed here, and in USA whose current administration currently seems to tacitly support torture) will predominantly be a male in his 20s, 2nd or third generation immigrant from an Arab country and Muslim. In UK in the recent past they have been Northern Irish.

Ultimately the 'war on terror' is the war on an idea that terror and violence can achieve a political goal or at least that such methods are justified. Thus this war begins and ends in the hearts and minds of people, all people, including people on 'our' side. If we use torture we are not only like 'them' but we become the actual enemy we are fighting. Torture at the end of the day does more harm than good. It encourages people to adopt terrorist tactics. For example, how many Palestinians were convinced that Israel was evil and must be destroyed after they heard the horrors of torture committed by Israeli security forces on captured Palestinian militants?! We must not hand another propaganda victory to the terrorists as we have done with Guantanamo Bay and Abu Ghraib. We must not harm our main weapon in the fight, our moral position. Torture is more damaging to us in the long term than to our enemies. The vast majority of people are against all torture, and for good reason.

Torture

2007-12-08T12:37:00.000Z

I hear lots of people, particularly on the right of the political spectrum, arguing that torture is permissible as long as it is not too harsh and brings results. I always want to ask them, how would they feel if "the other side" used the same "interrogation" techniques on our soldiers? Would they agree with that? Or would they just label it as barbaric and inhumane. I always wonder how they can exalt profiting from someone's suffering while also preaching Christian values and compassion. Quite hypocritical i think.

As someone who actually serves in the British Army and who can potentially get captured I hope I can rely on the fact that British Army does not torture. When it comes down to it, that fact may be the only defence I would have against the enemy torturing me.