Sunday, December 31, 2017

Bitcoin is bullshit, Part IX: Bitcoin and the collective action problem

When I left off with Part VIII, I pointed out that the only people who derive "instrumental" rather than "expressive" benefits from conducting their transactions in bitcoin are crooks.  I have been distracted by other topics for a while, but in the meantime, this was passed along to me:  hate groups now rely on bitcoin as fundraising sources.  Gee, who could have seen that coming?

Anyway, there are important implications for the point that there are few instrumental benefits to switching to bitcoin.  At its core, as I keep pointing out, the argument that bitcoin-bugs use when they claim that bitcoin is the currency of the future is a combination of two factors:

1)  It is secret

2)  It is not controlled by any government

Point 1 is only an instrumental benefit to crooks (and hate groups!), and point 2... has nothing to do with any individual economic actor!  As I have written in several posts in this series, there are economic benefits to fiat currency, and bitcoin is only slightly less stupid than the gold standard in terms of macroeconomics, but think about this:  does the fact that bitcoin is not a fiat currency provide me with any additional instrumental benefit for conducting transactions in it, rather than dollars?  No.

So, what are bitcoin-bugs saying when they make some variation of point 2?  They are basically stating a libertarian preference.  Stuff is cooler when governments are uninvolved.  Intrinsically.  There is more to this statement, then, than an expressive benefit that they, personally, receive from conducting transactions in a currency not controlled by their government.  They are stating that society, generally, would be better off without fiat currency because government-controlled currency is just bad.

They are simply stating libertarianism as principle.

Suppose we accept that everything would be better off with a switch away from fiat currency.  Clearly, I don't, but what if we did?  As I have written throughout the series, the government can keep a lid on bitcoin by simply refusing to accept tax payments in bitcoin, but in the fever-dreams of bitcoin enthusiasts, if everyone used bitcoin, it would be hard for the government to adhere to that policy.  So, for the sake of argument, what if bitcoin-bugs were right about down-being-up, and up-being-down?  What if fiat currency really were bad?

Would that mean everyone switches to bitcoin because it is intrinsically better?

No.  That's where bitcoin-bugs get into trouble confusing individual and collective incentives.

Mancur Olson, The Logic of Collective Action.  Suppose there is some collective benefit, and everyone needs to contribute a little bit for it to be provided, but no individual's contribution to it is big enough to have an effect on its likelihood of being provided, or the quality of the good that will be provided.  The solution?  Even if you want the good provided, don't contribute.  It is irrational to contribute.  This is "the collective action problem."  It is a variation of a standard problem in economics:  everyone behaving in a way that is individually rational leads to everyone getting screwed.  Everyone wants the good to be provided, but no one has any individual incentive to contribute, so it doesn't get provided because everyone "free-rides."

Let's apply this here.  Suppose I give bitcoin-bugs their notion that a non-fiat currency is better.  They're full of shit on this, but let's say I give them this, for the sake of argument.  OK, let's pretend we'd be better off, as a society, with... fuck, I hate typing this... bitcoin than with dollars.  {There isn't enough coffee in the world to wash out the foul taste of typing that.  It was almost like complimenting Trump!}.  Problem.  Mancur Fucking Olson.  Who, as individuals, has any positive incentive to switch to bitcoin?  The transition doesn't happen unless individuals decide to use bitcoin rather than dollars.

There's no getting away from that.  I get paid in dollars.  So do you (if you are reading this in the US, and employed).  Conducting any transaction in bitcoin requires switching to bitcoin.  That's a messy process, even if the price of bitcoin were to stabilize.  The business that accepts bitcoin then has to switch some of that bitcoin back to dollars to pay their taxes, and pay transaction costs to do so.  So... what was gained by switching to bitcoin, and then back to dollars?  Instrumentally?  Not a single, fucking thing.

Even if we accept the premise that society would be better off with a switch away from fiat currency (and I clearly don't!), unless individuals receive instrumental benefits from non-fiat currency, that switch doesn't occur because of the collective action problem.  Whatever switch bitcoin-bugs think is going to happen, on the basis of libertarian principles, can't happen because nobody has any individual incentives to approach their economic transactions that way.

Employers need to keep records in a certain way based on taxes, etc., and they will continue to have money coming in with dollars.  Their preference is to keep paying you in dollars because of their incentive structure.  Why, then, would you convert to bitcoin when you can maintain FDIC protection, stores are accepting dollars, and it is easier to avoid any conversions and transaction fees that go along with currency conversions?  And as long as people are doing that, why would stores require bitcoin, thereby forcing you to switch away from what is now easiest?

Conducting your economic activity in bitcoin is harder than conducting your economic activity in dollars, and it is intrinsically riskier.  That is partially a result of the volatility of bitcoin itself, and partially a result of not having FDIC insurance.  Why would you expect individuals to make their economic transactions harder and riskier?  For no reason?

I don't.  That's part of why I don't see bitcoin becoming a prominent currency in consumer markets.

Understanding what continues to happen with bitcoin, then, requires understanding instrumental benefits, because as currency, {say it with me...} bitcoin is bullshit.  Yes, I still have more to write, depending on what else gets in the way, as stuff tends to do.

I'm still a political scientist, I think...

Sunday music: If you don't love bluegrass, you hate America

More album picks for 2017.  This one comes with a big caveat:  I still haven't picked up the Tony Rice/David Grisman album that just came out.  Likelihood of that album being a "best of 2017?"  Very high.  Billy Strings is also getting a lot of buzz in the bluegrass community, and I've been meaning to get his new album.  Still, there are two obvious picks for me.

First, here's "Over the Divide," from Bela {I can't get the accent to appear over the "e"} Fleck & Abigail Washburn's second album together, Echo in the Valley.

Next, another obvious pick.  My favorite singer, Tim O'Brien, with the title cut from Where the River Meets the Road.

Saturday, December 30, 2017

Trump, Mueller and fairness

Of course, I can't resist commenting on Trump's "prediction" of "fairness" from Robert Mueller's investigation.

Donald Trump, in case you haven't noticed, is obsessed with "fairness," and there is a high degree of consistency in how he assesses fairness.  That which is positive toward Trump is fair, and that which is negative toward Trump is unfair.  This extends to Trump's allies and enemies.  Negative toward Trump's enemies is fair, and positive toward his allies is fair.  How does Trump determine whether or not someone is his ally?  Positivity toward Trump, of course.  There is mathematical consistency to how Trump assesses fairness, and you can predict with perfect certainty whether or not Trump will declare a process fair by tracing out positivity or negativity toward Trump or his close allies.

There is an important concept underlying this, which I use to teach about the media:  the distinction between neutrality and unbiasedness.  Neutrality means not picking a side.  Unbiasedness means telling the objective truth.  They aren't the same thing.  They overlap only in the circumstance when the two parties are mirror images, equally guilty of all political crimes.  When they aren't, journalists have a problem, and I've written about that.  What do you do if, for example, one candidate asserts that climate change is a Chinese hoax, perpetrated to undercut US economic competitiveness, and then lies on the debate stage and says that he never said any such thing?  What if that same candidate claims that his primary opponent's father was part of the plot to kill JFK?  What if that same candidate rose to political fame spouting insane, racist lies that the then-sitting president was an illegal immigrant, even though that lie had been debunked over, and over, and over again?  In other words, what do you do if one candidate lies on a scale unprecedented in political history?  Neutrality would require journalists to pretend that neither candidate is more dishonest than the other, and the truth is not known.  Unbiasedness would require pointing out that the fuckin' liar is the most despicable fuckin' liar in political history.  By so much that the scale has been broken and we have been desensitized to how much he lies about everything.

Did you even remember that he said Ted Cruz's father killed Kennedy, or did that just fade into the background of all the other insane lies he tells?

Anyway, neutrality versus unbiasedness.  What does it mean to treat everyone equally?  Does it mean giving everyone equally positive and negative coverage?  That would mean papering over the extent to which the fuckin' liar lies.  Would it mean giving everyone the same level of scrutiny?  That would mean just calling out the lies and letting the chips fall where they may.

That brings us to "fairness."  Lesson to students:  Never start a paper with "Webster's dictionary defines __ as..."  As Comic Book Guy might say, worst opening ever.  Still, fairness actually refers to equal treatment and/or objectivity.  They're not quite the same things.  Context matters for interpreting words in this messy language.  After all, when Trump uses the word, "fairness," it just means positivity toward Trump.  But, it is worth examining how he got there.

Remember that Trump has a massive-yet-fragile ego.  He believes himself to be a god-who-walks-the-earth, and the greatest human being ever, or rather, superior to all humans.  That is why every word out of his mouth is either bragging about himself, or insulting someone else because they don't like him.  How did he get that way?  It is hard to say how early this began, but everything about how his life unfolded has reinforced this.  He was born a rich white guy, with everything handed to him.  Remember that as a businessman, he's basically a failure.  He inherited a shitload of money from his father, and if you took that money, and put it in a passively managed S&P index fund, his total wealth now only exceeds that by a bit, but that's after some interesting stuff.  He lost a lot of money in real estate, and even casinos, because he doesn't know what the fuck he's doing.  He's an idiot.  But, he made it back by going on tv and playing the role of the genius businessman.  Trump is to business as professional wrestlers are to martial arts-- he's great at bragging about how great he is at it, and that's it.  Beyond that, he's scarily stupid, but privileged enough to have been born a very rich, white dude unburdened by conscience.  How many of such people in this country wind up not rich?  Not very many...

And he doesn't tolerate criticism.  So, as soon as it was feasible, he began surrounding himself with sycophants, and purging his inner circle of anyone who ever criticized him for anything.  For the last half a century, he hasn't let anyone near him who calls him on his shit.  He has surrounded himself with people who tell him how great he is.

For half a century.

Is it any wonder that Trump believes himself to be a living god, lashes out at any criticism, and that he can't stop bragging for five fucking seconds?

And if he really believes that, let's return to the concept of fairness.  If you believe yourself to be a living god, as Trump does, then anything short of praise is less than you deserve, and therefore... unfair.  All criticism is... unfair, because you are a living god.

There are a lot of things that should worry us about a president who cannot take any criticism.  Nobody enjoys being criticized, but if you cannot accept criticism, you cannot learn or improve, and Trump, over the course of his public life, has gotten worse, and worse.  Why?  Because not only can he not take criticism, his raging egotism and insecurity cause him to respond to all criticism in the worst ways possible.  His repeated references to "fairness" are probably sincere.  He truly believes that any criticism of him is unfair because he believes himself to be so perfect as to be beyond any criticism.

That's... not good.

Saturday music: If you don't love country, you hate 'mer'ca

Let's keep going with a 2017 album pick list.  Unlike with jazz, I think the best country really is being made today.  Yes, my love of country music is authentic and unironic.  Picking a single album for 2017... too hard.  Hell, Chris Stapleton put out two albums!  So, here's just a bunch of great stuff.

Malcolm Holcombe's "Good Ole Days," a bluegrass-tinged cut from Pretty Little Troubles.

Jason Isbell.  "White Man's World," from The Nashville Sound.  If I really had to pick one album, this would probably be it.

David Rawlings, "Cumberland Gap," from Poor David's Almanack.  Then again, maybe this one.

Sarah Shook & The Disarmers, "Heal Me," from Sidelong.  Or... this...

And, finally, Chris Stapleton put out two volumes of From a Room.  Both are amazing, and you should get both.  Here's "Broken Halos," from Volume 1.  Yeah, I could pick either of these for country album of the year.

What a year for country music.  I say this completely without irony.  For all my 'mer'ca snideness, country music can be great, when done properly.  Just listen to all of this!

Friday, December 29, 2017

Friday music: If you don't love jazz, you hate America

End of the year.  I suppose I'll do some year-end album picks.  Strangely enough, people actually click on these music posts, although less than the substantive posts.  Maybe it is for more than the references embedded in the selections.

For all of my jazz snobbery, picking best-of-year albums in the genre is somewhat difficult for me.  In my opinion, the genre sort of peaked in the 1950s and 1960s.  John Coltrane, Miles Davis, Charles Mingus, Roland Kirk... I could go on for a long time, but that period is just hard to beat.

Still, there is good jazz being made today.  Just, not as much of it.  I'll recommend Bill Frisell & Thomas Morgan's Small Town, as with just about any Bill Frisell album.  Chris Thile and Brad Mehldau put out an interesting duet album.  I'll listen to nearly anything Thile does, being one of the shining lights in bluegrass, although Mehldau isn't usually one of my favorites.  Still, an interesting album.

For an album pick for the year, though, I'll go with a tribute to the late, great John Abercrombie, who died in 2017.  He was one of my favorite jazz guitarists, and while Up and Coming was not his greatest album (I'd go with either Gateway or Characters), Abercrombie was always good.  Here's "Flipside."

Tenured Drexel professor pressured to resign for being an asshole

George Ciccariello-Maher, a now-former Associate Professor of Politics & Global Studies at Drexel University (that's a tenured position), has resigned.  He was pressured to resign, basically because he's an asshole.  Here's the Inside Higher Ed story.

Um... tenured professor, forced to resign for being an asshole?  That can happen?!  Well, fuck!

Ciccariello-Maher is a different kind of asshole from yours truly, but it should go without saying that I find even the concept of this disturbing on several levels.  He first stirred up trouble with a tweet (there's your first sign of trouble right there) joking about wanting "white genocide."

You may notice from the picture that, um... dude's white.  He had to have been joking.  There's a line from Frank Zappa's Trouble Every Day.  It goes:  "I'm not black, but there's a whole lot of times I wish I could say I'm not white."  This was back around some race riots.  Ciccariello-Maher was trying, and failing to do the Zappa thing.

Still, don't fuckin' type that.  As a fellow asshole and sufferer of foot-in-mouth disease, I have some sympathy for Ciccariello-Maher.  Depending on when you read this blog, you might get a harsher joke or two than later readers.  If I am in a particularly caustic mood while typing, I may type something that is brutal even for me.  And then take it down because... that was going too far, even for me.  There would be no point in just another bland, dry, dull political science blog, so I make this my own, but there is such a thing as going too far.

Calling for "white genocide..." sorry, Georgie, but that's going too far.  If even I can tell that it's going too far, it's going too far.

Ciccariello-Maher is a lefty provocateur.  He is very far left, and very provocative.  I've looked through the tweets that have gotten everyone's hackles up, and I get what he meant to say, and why people got upset.  My politics are kind of weird, or rather, very weird, but I do make an active effort to look at things from the perspective of anyone making a good faith effort.  I don't really see a point in getting into any more specific conflicts, except to point out the disturbing fact that a tenured professor has been pressured to resign.

But I will rant about twitter, because fuck twitter.  Making a joke about "white genocide" is pretty fuckin' stupid and dangerous.  You know what might help?  Aside from not doing it?  Having more than 140 characters.  And 280 still ain't enough.

There's an old adage that if you have to explain a joke, it isn't funny.  And, the white genocide joke needed explanation.  Therefore, it wasn't funny.  However, a long-form essay on genocide and reversal of skin color could at least have made it more clear what his intentions were.  (Try Book 3 of NK Jemisin's Broken Earth trilogy!)

Would that have prevented a backlash?  Perhaps not.  Ciccariello-Maher makes a lot of comments that seem precision-guided at peoples' raw nerves, like one about being made nauseous at deference to soldiers.  I don't know if there is any way to say all of those things without causing a backlash.

That leads to another disturbing element here.

ACADEMIC FREEDOM!  The rallying cry of the scholar.  We have tenure so that we can say what we think is important to say without fear of punishment.

Or, not.

Drexel University did not fire George Ciccariello-Maher, though.  Tenure worked, in that sense.  He resigned amid a public backlash, death threats, etc.  Universities, though, do not exist in isolation, and professors-- some of us, anyway-- are human beings.  Protests and public pressure can work.  In this case, public pressure brought by, in some cases, white supremacists.  There is a list floating around, that attempts to target professors with left-wing biases.  I'm not going to give you a title or link to it.  Please don't search for it.  Don't give those fuckers any publicity, or clicks.

Regardless, I hold free speech as a vital principle.  Not just a legal technicality, but a principle.  It is one of the few policy positions I will take publicly.  Even in academia, we are not as protected as we should be.

Back in August, an executive at Google wrote a memo dealing with sexism, and got fired.  I posted this.  I asked readers to think about what would happen if someone got fired for writing a bunch of lefty stuff.


Thursday, December 28, 2017

Of course Roy Moore won't go away

Virginia's House of Delegates has to deal with a real election challenge right now.  The Alabama special election for Jeff Sessions's Senate seat has to deal with... Roy Moore, because of course Roy Moore won't go away.

Think back to November, 2016.

Breathe.  Breathe.

Anyway, remember how Trump wasn't going to concede if he lost?  The polls all had him losing, and he refused to say that he would accept a loss.  He said that he would accept the results, "if I win."  Why?  Voter fraud, of course.

Everybody needs a villain to explain when they lose.  The left has several villains, but their favorite is MONEY!!!  MORE EXCLAMATION POINTS!!!  'Cuz money is EEEEEVIL!  For the right, voter fraud.  If the left loses, it's because of money.  If the right loses, it's because of voter fraud.  You see, if everything were on the up-and-up, my side would never lose!  While the political science research on the effects of money never backs up the hyperbolic contentions of the left, I suppose money at least exists...

The irony is that if voter fraud did exist, it would lead to a candidate underperforming on election day.  Trump overperformed compared to the polls.  The polls underestimated his support.  That's the opposite of what we would expect if voter fraud were a thing.  That hasn't stopped him from telling batshit crazy lies about "voter fraud" because he needs to tell everyone he "won the popular vote," for the sake of his own massive-yet-fragile ego, though, so the batshit crazy lies continue.  However, those lies aren't dramatically different from the lies his party has been telling about non-existent voter fraud for years.  Those same lies led to George W. Bush purging US Attorneys who didn't prosecute non-existent voter fraud!  If you want the real research on "voter fraud" and how common it is, Justin Levitt at Loyola Law has tracked every single accusation.  It just ain't there.

But Roy Moore is really just the reductio ad absurdum of Donald Trump.  I was going to write, "logical conclusion of," but there is nothing logical about Moore.  And Trump is already absurd, but...  Never mind.  Anyway, Roy underperformed on election day.  If voter fraud were a thing, at least the numbers were in the direction that one would have expected.  Was it voter fraud?  No.  Roy Moore is just an idiot, grasping at straws, and he's probably dumb enough to believe all of the "voter fraud" nonsense that his party has been peddling for years.

However, the fact that he is making the voter fraud argument puts is party, once again, in a difficult position.  Why aren't they backing him up?  Really, we know the answer.  They want him to shut up and go away, but he won't do that.  He's just doing what Trump might have done in November, 2016 anyway had he lost!  The party wants to dissociate itself from Moore, but they're hoping he just goes away on his own.  That isn't likely to happen.

Pursuant that, I have a "modest proposal."

Prior to Alabama's special election, Senator Richard Shelby indicated that he couldn't vote for Roy Moore, and he claimed that he cast a write-in vote for a Republican.  A write-in vote for a Republican was an abstention.  There were a surprisingly high number of functional abstentions in that election.  Those functional abstainers were cowards.

This country uses a plurality rule electoral system.  Whoever gets the most votes wins.  That creates  a strong tendency towards two parties.  We call this "Duverger's law," after Maurice Duverger, the political scientist who first elaborated on the principle.  That, rather than any bullshit conspiracy about money or the media or collusion, is why we have two parties.  If you don't vote for the Democrat or the Republican, you are abstaining.  You want to abstain?  Fine.  Just be clear on what you are doing.  Richard Shelby, and everyone else who cast write-in votes in that special election abstained, just like everyone who stayed home.  Shelby decided that a child molester was only precisely as bad as a Democrat, making him indifferent between the two choices, and Moore won't go away because his party is still wishy-washy on this.

Roy Moore is a child molester.  The lowest of the low.  The bottom rung of carbon-based life.  He is necrotizing fasciitis on the body politic.  Despite that, I can understand the impulse of the social conservative to vote for him, and I wrote about that.  Policy versus character.  We can even elaborate on the political science models of that dilemma, building "valence" into spatial models.  Anyone who truly cared about character, though, needed to vote for Doug Jones, though, not abstain.

Here, then, is a perhaps-not-so-modest proposal.  We can call this "The Roy Moore Pledge."

I pledge that whenever my party nominates a child molester, rapist, or comparable individual, and that individual refuses to withdraw from the race, I will vote for the candidate of the opposing party.

None of this abstention crap.  No write-ins.  No weaselly bullshit.  Either you care about character, integrity, and not molesting children, or you don't.  No, Senator Shelby, you didn't show integrity.  You are a weasel.  Can you make this pledge?  As I wrote in my earlier post, it's actually a really hard pledge to make.

But, if people aren't willing to make it, that helps explain why Roy Moore won't go away.

Wednesday, December 27, 2017

The Virginia craziness continues: Competitive elections are no way to run a democracy

Last week, I wrote a fun, little post about what happened with the Virginia House of Delegates.  Short version:  control of the chamber was to be decided by one seat, which was a tie, to be decided by the drawing of straws.  The race has taken another turn.  Straight into the courthouse!

Part of what was fun about the drawing of straws was that it gave me an opportunity to talk about my first book, in that earlier post.  Now, I get to talk about something else about which I have actually published.  (I only rant about bitcoin in my spare time).  Take a look at this ballot image.

For whom did this person vote:  Simonds, or Yancey?  This is actually the central legal question right now.  The drawing of lots has been postponed because of it.  The GOP argues that this voter meant to vote for Yancey.  You see, the rest of the ballot had votes for GOP candidates.  The Democrats are arguing the voter meant to vote for Simonds.  See that line through Simonds's filled-in bubble?  That's an extra mark.  That's extra effort.  So, that's a vote for Simonds.

What do I think?  I think this is what we call, in technical terms, an "over-vote."  When a voter marks too many names for one office, that is an over-vote, as opposed to an "under-vote," which is when a voter fails to mark a name for an office (or at least, fails to make a sufficient mark for a vote to be counted).  Some under-votes are intentional, and some are unintentional.  Unintentional under-votes are the result of screwed up voting systems.  Punchcard voting systems sucked because they led to high rates of unintentional under-voting (if you failed to punch out the chad entirely, the vote wouldn't be counted-- hanging chads!).  Over-voting is almost always unintentional.  The voter screws up, tries to correct it, and leaves a messed-up ballot.  One of the advantages of electronic systems is that they don't permit this.  With a paper ballot containing an over-vote, though, figuring out the voter's intent isn't always easy.  Did the voter make that line in an attempt to say, "YES, I'M VOTING FOR SIMONDS!," or as an effort to cross out that accidentally filled-in bubble, or as a slip of the hand, or...  We don't know.

And, since we have a secret ballot, we can't ask this person.  I bet whoever it is has seen this ballot on the news by now and is embarrassed as hell.  And maybe kind of frustrated.

Whoever this is, though, screwed up.  Control of the Virginia House of Delegates may get flipped because some voter couldn't fill in bubbles properly.

Yay, Democracy!

Or, rather, yay democracy, when elections are competitive.

You see, this kind of shit doesn't matter when elections aren't competitive.  The Simonds versus Yancey contest is a marginal election, being decided by the drawing of lots, or maybe not, depending on what happens in the courts, and the House of Delegates is itself so close that the chamber may be decided by a drawing of lots, or maybe not, and all of this depends on a court's interpretation of one person who couldn't fill in bubbles as instructed.

People screw up.  Everyone screws up once in a while.  The closer elections are, though, the more susceptible outcomes are to being flipped by this kind of stupid shit.  Do you want elections being flipped by this kind of stupid shit?  Do you think that the proper way to determine control of a legislative body is by having a court try to interpret that ridiculous ballot image above and then order the drawing of lots?


Then you don't like competitive elections any more than I do.

Oh, and...

Right here...

Tuesday, December 26, 2017

Bitcoin is bullshit, Part VIII: Expressive versus instrumental benefits for using a currency

I guess I'll just pick up where I left off yesterday with Part VII.  In Part VII, I addressed the distinction between collective and individual benefits for a shift to a bitcoin-based economy.  As pretty much any serious examination of economics will show, there are important benefits for fiat currency, controlled by governments, to the degree possible around optimum currency areas.  That means... not bitcoin.  What about individuals, though?

Way back in Part IV, I addressed the question of the kind of person buying or using bitcoin now, given the existence of transaction costs for bitcoin-based economic activity:  techno-libertarians, hipsters, crooks and speculators.  It is time to elaborate on that with the why.  Why aren't I going in a proper order?  Because I'm just rambling over my morning coffee.

In rational choice theory, we distinguish between two types of benefits individuals can receive from their decisions:  expressive benefits and instrumental benefits.  An instrumental benefit gives you a direct, tangible payoff, like money.  An expressive benefit just means that the act of doing something makes you feel good because the act of doing it... expresses something that you want to express.

The distinction is most clear in voting.  Consider the choice between voting for a major party candidate whom you don't really like, but who is better than the other major party candidate, and voting for a third party candidate, whom you like, but who has no chance of winning.  (Oh, and all you Jill Stein-dupes?  Did'ya notice that she's being investigated?  What did you expect from a "Doctor" who is also an anti-vaxxer?)  The instrumental choice is to vote for the major party candidate because that promotes an outcome you want.  The expressive choice is to vote for the anti-vaxxer Russian stooge like a fuckin' moron.  Oops!  Did I say that?  Anyway, the point is that expressive benefits are those that don't give you anything tangible, unlike instrumental benefits.

As I wrote in Part III, the fact that stable governments will never let you pay your taxes in bitcoin means that bitcoin transactions will always involve transaction costs, so unless there is an instrumental benefit to counterbalance that transaction cost, bitcoin will only ever be appealing at an individual level to those who derive expressive benefits from its use (e.g. techno-libertarians and hipsters).  So, can there be instrumental benefits to the use of bitcoin?

Well, there's secrecy.  That's an instrumental benefit for crooks.  What are you willing to do to keep your financial transactions hidden?  Oh, and by the way, keep in mind that if the financial world is hidden from the government, its ability to collect tax revenue collapses, government collapses, and welcome to failed-state territory!

What else can you do with bitcoin that you can't do with dollars?  Um...  Well, you can buy something, and then watch as the currency changes value such that you should have waited three seconds and saved a shitload of money, but that's kind of a bad thing, but there I go with my math again...

Other than that, bitcoin can be transferred electronically faster than dollars.  Has that ever mattered to you?  It hasn't ever mattered to me, and it hasn't ever mattered to the vast majority of people.

There is a hidden, little secret, though.  When you buy stuff on-line, you use a credit card.  The credit card company gets a piece of the action.  You don't see that, but the merchant pays a fee.  They'd kind of like to stop paying those fees, and with something like bitcoin, they wouldn't have to because it's a direct transfer.  So, hey, what if we got rid of dollars and credit card companies and all that, and you just paid merchants directly on-line with bitcoin!

Many problems here.

1)  The merchants still need to offer the credit card option because plenty of people will want it, and won't buy without it.

2)  In fact, given debt levels, and peoples' inability to pay cash, they need it, so whether the credit card pays the merchant in bitcoin or dollars, the credit card companies still need to be involved because of consumers' behavior.

3)  The credit card companies offer plenty of other services, including consumer protection, merchant protection, loyalty rewards, and other stuff to earn that slice of the action.

If you have been screwed over by a credit card company, then you have some reason to hate them, but economically, they exist for a reason, and changing the currency in which they conduct their business doesn't do anything.  They still exist for a reason, still get a piece of the action, and still keep that cut.  So, the dream of merchants just taking payment in bitcoin so that the credit card companies don't skim 2% of the top in their transaction fees?  No.  Ain't happenin'.  Consumers won't let it.

So, I'm left with the question:  what is the instrumental benefit of using bitcoin rather than dollars?  There isn't one, at the individual level, unless you are a crook.  The benefit of using bitcoin rather than dollars, at the individual level, is entirely expressive.  It is therefore limited to those who are the type to derive expressive benefits from using bitcoin.

That's kind of a problem for the future of bitcoin, as we'll see in Part IX, because bitcoin is bullshit.

Tuesday music: If you only listen to American music, you just suck

Stumped for a theme today.  Here's a concert from a Czech bluegrass band called, "Druha Trava."

Monday, December 25, 2017

Bitcoin is bullshit, Part VII: On government-controlled currencies

Well, damn.  There... doesn't seem to be much political news this morning.  I guess I'll write another bitcoin post.

When I left off with Part VI, I explained that while the hypothetical world of a uniformly bitcoin-based economy would, in fact, eliminate the transaction costs of international trade, the rather serious cost would be the macroeconomic cost of a country's inability to respond to recessions through currency devaluation, relative to other currencies around the world.

Built into that is one of the central tensions of economics, and social science more broadly, and it is a tension with which bitcoin advocates can never really grapple:  individual versus collective incentives.  This is going to be the theme for the next few posts in the series.  (It will take a few posts to get through this.)

The arguments that bitcoin-bugs usually use for the future inevitability of bitcoin generally go something like this:  bitcoin is awesome because of X, therefore bitcoin is the currency of the future.

Whether or not this syllogism works at all depends on whether X is an argument about individual benefits for using bitcoin, or collective benefits.

Is there really a collective benefit to using bitcoin?  It would eliminate transaction costs in international trade.  That's actually an individual benefit for anyone engaged in international trade if everyone has already switched over (that part is critical), but there is a collective benefit to easing international trade, so there's one.  Is there any other collective benefit?

Bitcoin-bugs take it as a matter of faith that a currency not controlled by the government is intrinsically better, even though, well... fuckin' Greece!  Beyond that, though, as I have written in a bunch of posts in this series, you kind of want a government-backed currency.  Monetary and fiscal policy work.

When the government knows what it is doing.

So, this is where we get into the standard horror stories that gold-bugs, bitcoin-bugs and other pseudo-intellectual, knee-jerk libertarians use to reject the concept of fiat currency.  Stuff can go wrong with fiat currency if the government does something extremely stupid.

Let's remember that Greece is off the table since Greece didn't control its own currency.  Perhaps, though, you are thinking of Zimbabwe?  Maybe Germany, post-WWI and the hyperinflation that played a role in the rise of the Nazis?  Print too much money and you devalue currency too much.  The result is a disaster.  So, don't give the government that option.  Prevent the worst-case scenario.

Um... first, let's think about the precursors to those events, but that aside, do y'all have any case from the modern, developed world in which anyone has done that?  No?  Why not?

'Cuz we've learned that lesson.  The Federal Reserve Board in the US has a "dual-mandate," meaning that it is supposed to manage both inflation and the unemployment rate, based on the idea that there is a tradeoff between the two.  (Sorry, Milton Friedman...).  They do this by raising and lowering interest rates in order to keep inflation in check.  What inflation rate are they targeting?  The "NAIRU."  It comes with a cool-looking jacket.  It stands for "non-accelerating inflation rate of unemployment."  Basically, an inflation rate of around 2%.  The last time we were significantly above that?  Early 80's, and everyone freaked the fuck out.  The Fed jacked up interest rates, brought on a recession, brought down inflation, and inflation has been fine since.  We freak the fuck out at inflation rates of 10%.

We are not going to print excessive amounts of money and bring on Nazi-inspiring hyperinflation.  This is not a serious argument.  We aren't even going to let inflation get to 10%.  5% and the Fed will jack up those interest rates because of a collective freakout.  This is not a serious argument.

Beyond that, the arguments for a non-government-backed currency tend to be that it is "unregulated" and secret.  Yes, bitcoin transactions are easy to hide.  More on that later, but "unregulated..."  What does this mean?

Money isn't regulated or unregulated.  Transactions are regulated or unregulated.  Part of what this kind of statement means is that the supply of bitcoin isn't regulated, and as I wrote in Part V, that's actually a big problem with bitcoin in macroeconomic terms, but mostly what this kind of statement reveals is that commitment to bitcoin is based, not in any coherent economic theory, but in ideology.

That, more than anything else, is why bitcoin is bullshit.  Libertarians are supposed to understand market principles, but a bunch of these people have latched onto the concept of a currency based, not on market principles, but on an ideology that would cause them to sacrifice market efficiency and macroeconomic outcomes for the sake of an ideological statement.  Milton Friedman is rolling over in his grave.

My money is better than your money 'cuz it's cooler!  Yeah, it's inefficient, but fuck you, it's cooler!

So, collective benefits for a shift to bitcoin?  Nope.  Not seein' it.  Yet, within the arguments that bitcoin-bugs use is generally a tension between individual and collective incentives, and that's where I'm going with Part VIII.  The collective action problem.  Stay tuned, because bitcoin is still bullshit.

Bah, Humbug

Because I hate all good things.  Watch, and let your eyes burn!

Monday morning blues: If you don't love blues, you hate America

So I guess the traditional misanthropic gift would be a lump of coal, right?  It's Monday.  Nothing special today.  Here's Damon Fowler's cover of "I'm Just An Old Chunk Of Coal," from Sugar Shack.

Sunday, December 24, 2017

Cornel West and Ta-Nehisi Coates on race in America, via N.K. Jemisin

I'm going to do something different this morning, because why not?  Cornel West and Ta-Nehisi Coates are arguing about race in America, and the proper way to address it.  Short version:  West is basically a communist, tear-the-whole-system-down type.  He "smeared" Coates by calling him a "neoliberal," insufficiently critical of Obama, although Coates was himself a figure of controversy for arguing vociferously for "reparations"-- the idea that essentially everyone who is white owes the descendants of slavery money for the legacy of slavery, Jim Crow, etc.

How radical is radical enough?  That is the nature of their dispute.  I wrote a long series of posts last summer bemoaning the death of classical conservatism from Burke through Oakeshott, and, um... I'm white as whiteness is currently defined, although the changes over time in that definition demonstrate the stupidity of racism better than anything else I can write.  What do I have to say about racism, then?

Instead of reading Coates or West, read Nora K. Jemisin.  (Her name is written as "N.K. Jemisin" on her books because women have a long tradition of doing that in genre literature.  Sexism.  The audience for genre stuff is mostly male, and the double-initial thing disguises the author's gender.  D.C. Fontana wrote a lot of the original Star Trek episodes, and she had to disguise that her first name was Dorothy.  Same thing.)  In case you hadn't noticed, I'm a big fan of sci-fi.  Some of the references are more buried than others (title of the blog!!!), but I like the genre, and few are better than Jemisin.  Her Broken Earth trilogy is about to be turned into a tv series, supposedly, and the first two books have already won Hugo awards.  Yeah, she's good.

I'll try not to spoil anything that won't be obvious, but if you plan to read or watch, and don't like spoilers, don't read this post.

The basic set-up is a seismically unstable world, periodically plagued by a "fifth season."  Some super-volcano goes off somewhere, releases a bunch of ash and toxic gasses, blocks out the sun for a few years, and life gets really hard for a while.  There are people called "orogenes," who have the power to control seismic activity.  They also redirect heat and kinetic energy.  If they don't have full control of their powers, they accidentally kill lots of people, either by causing seismic events, or just redirecting heat away from places and freezing everything.  Non-orogenes ("stills," as orogenes call them) are scared shitless of orogenes, and refer to orogenes as "roggas."  In Jemisin's world, this is basically the n-word.  Orogenes are either killed when discovered, or sent off to The Fulcrum, and controlled as slaves with varying degrees of privilege and status.  Their breeding is controlled, the slave-masters (Guardians) are creepy-as-fuck, and stepping out of line leads to even worse horrors.

The first book starts with a character named Alabaster-- the most powerful orogene in the world-- creating a seismic event of world-destroying scale.  The main character, Essun, has tried to go along with the system, first within The Fulcrum, then just by hiding in a small "comm," but Alabaster always tried to show her how wrong she was to do so.  Within The Fulcrum, Alabaster was a "10-ringer," meaning that he could do things nobody else could do.  As such, he was given status and privilege, but still controlled as a slave, and he refused to see himself as anything other than that.  As long as The Fulcrum existed, and as long as the system that created The Fulcrum existed, he was basically just a slave, regardless of how well-kept.  Tearing everything down, then, was a price he was willing to pay for... reasons.

Essun never wanted to be a revolutionary.  She just wanted to be safe and content.  The system of The Fulcrum and the world around it never let her be, though.  As a character, then, when she lashed out, it was less directed than Alabaster.  (And wow, does she lash out!)

The supercontinent-- The Stillness (note both the irony and the commonality with the name for non-orogenes)-- was perpetually in this state of conflict.  The precursors to the orogenes were subject to the same basic conditions in one of the "deadcivs," and they basically destroyed the world in their revolution.  Whether it gained them a measure of freedom or not...

Within The Stillness, orogenes face the Burkean question.  How bad does the system have to be before tearing it down and facing the consequences becomes worth it?  For Edmund Burke... never.  He was a rich white dude, so, of course.  Alabaster, Essun, (Hoa...!), they have to ask a more careful question.  How bad is the system now (or then!), and what would replace it?  The system they faced was pretty fuckin' bad.  It was slavery.  Straight-up.  Lynch-mobs, controlled breeding, broken families, the illusion of freedom and status creating conflict among the slaves...  What comes after, though?  The warlords and fiefdoms that preceded the Sanzed Empire, we never see, but even the Sanzed Empire is awful, and that is the result of... an earlier revolution.  What Alabaster does?  He brings down a bad system, but holy shit he kills a lot of people.  I'm not going to spoil the ending, but that alone has to raise some questions.

And now we circle back to Coates and West.  West wants to tear the whole system down.  The idea that calling Coates a "neoliberal" is some kind of slur... basically, West is taking the position that he is Alabaster, and Coates is Essun back at the Fulcrum, when she went by "Syenite," and was just trying to keep her head down and not cause trouble.  Either you want to tear the whole system down, or you are complicit.

Neoliberalism.  This is a weakly-defined term, and West isn't an economist, so I'm not entirely sure what West thinks it means, but West is kind of a Marxist, and Coates isn't.  West wrote a book called, The Ethical Dimensions of Marxist Thought.

It was published after communism fell.


This is not to say I am the biggest fan of Coates, but I'm not going to get into that.  If you read this blog, though, you could already figure out what I would say about the Marxist revolutionary.

That is separate from the very real question of how to deal with racism.  Racism is very real.  The legacy of slavery and Jim Crow are very real.  This stuff is knowable and measurable.  Is the better response to tear the system down and try to build some sort of Marxist system, or to try to combat racism within the existing system?  Answering that question requires thinking about what happens, post-revolution.  That's the Burkean question.

And... we actually know what happens, post-Marxist revolution, and it ain't pretty.

We also know, though, what life is for African-Americans in the current system, and for the most part, that ain't pretty either.

Revolution itself has costs, though, and Cornel West doesn't think about those costs.  Alabaster did, and was willing to pay them because of the nature of the system he faced.  This is the nature of revolution.  What happens next?

Marx called for violent revolution.  He was an idiotic fuckin' psychopath.  Read what he wrote sometime.  He wasn't a high-minded idealist.  He was a bloodthirsty nutjob.  West doesn't call for violent revolution.  I have never heard him call for violence at all.  He calls everyone, "brother."  He seems like a nice guy, to me.  I'd love to talk about Jemisin with him, and I can pretty much guarantee he's read the trilogy and has way deeper thoughts on it than I do.

What happens after you overthrow the system, though?  Is there a right way to do it?  Does the existence of bigotry mean that we are doomed anyway?

A panel discussion between Coates, West and Nora K. Jemisin... I'd pay money to listen to that.  I'd kind of want Coates and West to shut up and listen to Jemisin, though.  She's way more interesting and nuanced in her thoughts.

Sunday music: If you don't love bluegrass, you hate America

The album version of this one isn't on youtube, so here's a live version.  Live is better anyway, right?  This is from Experienced.  Larry Keel, "The Warrior."

Saturday, December 23, 2017

Brief sidenote: Bitcoin increases rapidly in price again, demonstrating that it is still bullshit

Just a quick sidenote, since I did a non-bitcoin post today.  After losing 1/3 of its value in a day or so last week, the price of bitcoin is way up again, trading above $15,000.

Remember that a rapid increase in the price of bitcoin demonstrates that it is bullshit.  Unlike stocks or other commodities, bitcoin can only have value as currency, and a currency is only useful if its value is stable.  Any movement, down or up, is lack of stability.  If the price of bitcoin goes up, that means that anyone who owns bitcoin is stupid to spend it, which makes it useless as currency, and since it has no use or value in any other terms (unlike stocks or commodities), that makes it useless period.  That's right: rapid upward movement in the price of bitcoin demonstrates its stupidity.

Stable store of value.  Learn it.  Know it.  Live it.

For elaboration, see Part I of "Bitcoin is bullshit."

The tax cut and presidential accomplishments

One of the more interesting little tidbits floating around in the news yesterday was that Trump wanted to do a press conference to bask in praise over the passage of the tax cut because of course.  Trump needs constant praise.  We know this about him.  His advisors, though, quashed the idea because Trump can't handle questions, particularly if they turn towards Russia.  Even on taxes, though, he doesn't know jack shit about what's in the deal because he doesn't know anything about anything.

And that brings me to today's post.  Presidential accomplishments.  As we close out the year, what has Trump, as President, accomplished?  He hasn't blown up the planet.  This is a good thing, and I say in all seriousness that this wasn't a sure thing.  I'm not being facetious.  For Trump, this is an accomplishment, in the same way that it is an accomplishment when I get through an entire lecture without making a joke so calloused and tasteless that it would get me fired if I didn't have tenure.  The point is that it should be a low bar, but Trump is just such a nincompoop that getting over that bar, for him, that's an accomplishment.  And we should be grateful for it.

In policy-terms, though, Trump really hasn't done anything difficult.  The appointment of Neil Plagiarist Gorsuch?  Mitch McConnell did some despicable shit, back when Obama was President.  He blockaded Scalia's seat to prevent a Democrat from appointing a replacement.  That wasn't Trump, that was McConnell.  Gorsuch himself is a)  a fucking plagiarist piece of fucking shit, and b) a name handed to Trump by the Federalist Society, so he is neither a good pick by any intellectual standard, nor could any credit be given to Trump for whatever intellectual merit Gorsuch has.

Other than that, Trump has issued executive orders, which are... not accomplishments.  He has faced the embarrassment of having some critical ones blocked by the courts, and the ones that haven't been are not difficult to issue.

Trump has touted the number of bills signed into law, but in political science, we don't look at raw numbers.  Why not?  Because a lot of those bills are just petty, little nothing bills.  When we study lawmaking, we use methods like David Mayhew's from Divided We Govern.  Mayhew was interested in the difference between productivity in unified versus divided government, so he used a count of significant pieces of legislation.

By that measure, there hasn't been much productivity.  That's why the tax bill is so important.  It's really the only truly important piece of legislation Congress has passed since Trump's inauguration.

And it is really, really, really important.

So, Trump wanted to bask in the glory of massive praise for Trump's greatness.  Obviously, he is the greatest great thing that ever grated on us.  Aren't you grateful?

Which brings me to the issue of how much credit (blame) Trump deserves for this law.  Yes, law now.  We're not going to do that shitty thing that Republicans did with Obamacare where they kept calling it a "bill" after it was passed into law.

For most of it, he deserves nothing.  When the GOP gets control, they cut taxes.  Period.  When George W. Bush had unified control, they used budget reconciliation to cut taxes.  George H.W. Bush didn't have either chamber of Congress.  No tax cuts.  Reagan had the Senate, and a bunch of conservative, Southern Democrats.  Tax cuts.  And that's basically the start of the modern GOP.  Going back before Reagan, you have such a fundamentally different party in economic terms that the comparison doesn't work.

Let's put this another way.  In social science, we use "the counterfactual," as in, counter to fact.  What if the world were otherwise?  What if the GOP had nominated and elected a candidate whose wits were virgin, as in, not completely fucked?  Was there a single GOP candidate in that field who, as president, would have failed to pass a tax cut?  Can we even imagine a Republican president with this Congress who would have failed to pass a tax cut?

No.  That's the point.

Then, let's look at Trump's specific actions, legislatively.  What... did Trump do to help Ryan and McConnell pass this thing?



He... well... he... uh...  there was that...

Yeah.  He didn't do jack fucking shit.  Who did all of the hard work here?  Mitch McConnell.  You want to know who gets the credit here?  Give it to Mitch McConnell.  Paul Ryan had the marginally difficult task of managing the House Freedom Caucus, which is difficult on anything except cutting taxes, but give them a tax cut and they're happy, little campers.  Short version:  Speaker of the House is a powerful position, and while Paul Ryan isn't nearly as smart as Mitch McConnell, the power given to the Speaker compensates for his comparative lack of intelligence.  Combine that with the House Freedom Caucus's willingness to shut the fuck up and take their tax cuts, and Paul Ryan had a much easier task.

The hard job fell to Mitch McConnell.  The Senate Majority Leader doesn't have as much power as the Speaker, and McConnell could only lose two votes.  Much of what McConnell had to do was just ignore and pacify the "Drama Club," as I call them (conservative whiners like Ron Johnson and Rand Paul, who just like to posture), but some of what he had to do was hard.  Figure out how to either manage or work around Corker, McCain's fickleness, the manipulable stupidity of Susan Collins, the bribable weirdness of Lisa Murkowski, and McConnell just didn't have much room to spare.

McConnell is to professional ethics as Donald Trump is to sexual consent.  He will violate every rule, brag about his ability to get away with it, and then turn around and get indignant about others when they cross some line that he obliterated.  McConnell insisted that there be no open hearings, no open debate or amendment process, no serious study of the policies under consideration, and simply worked tirelessly to secure each individual vote in backroom deals.

In the first round, he couldn't get Corker, but he didn't need Corker.  Fine.  Corker eventually conceded anyway, like the hypocritical, standard-issue Republican I asserted him to be from the beginning anyway.  Flake was full of shit, and when McConnell understood that he could get Flake for a bullshit promise on DACA, nothing else was necessary.  He gave Flake nothing.  McCain was wishy-washy, but even if he voted with Corker, it wasn't going to matter because... he pulled the wool completely over Susan Collins's eyes.  After all of her posturing about the individual health insurance markets and Trump's sabotage, and voting against "skinny repeal," McConnell promised her movement of Alexander-Murray (the bipartisan plan to restore the cost-sharing subsidies that Trump cut off in a temper tantrum) after the tax bill passed.  And, since Collins is... not the sharpest knife in the drawer, she took the deal.  Knowing that the individual markets, sans individual mandate and sans cost-sharing subsidies, are in real danger, she took the deal.

Alexander-Murray ain't goin' nowhere.  Susan Collins got conned.  How much of this is that Mitch McConnell is a master con artist, and how much of it is Susan Collins's gullibility?  I don't know.  I've never really had any true respect for "moderates."  That's just something pundits love to praise.  Anyway, that's McConnell, not Trump.  McConnell got her.

Murkowski?  Way smarter than Collins.  She got something out of the deal.  She got a provision that opened up drilling in ANWR.  If you are reading a weirdo political science professor's blog, you probably don't think that's a good thing, but she wanted it.  And she got it.  That's a little thing called, "negotiation."  She got something.  Could she have gotten it anyway?  Maybe.  Possibly.  Probably.  Then again, it has been a long, hard slog, so the point is that there was something in the deal for her.

Collins?  Nope.  She got a promise that won't be fulfilled.

Now, Collins has been going around telling people that anyone who criticizes her for her vote, or who challenges her for taking a bad deal on these terms is being sexist.

Um... no.  You don't get to pull that shit.  Notice:  two women.  Collins and Murkowski.  I am praising the negotiation skills of one, and ripping on the negotiation skills of the other.  Both are women.  What's the difference?  Murkowski got something.  Collins didn't.  Both are women.  I look at results.  Quit your bullshit whining about victimhood, Susan.  Murkowski is smarter.  She played her hand.

Notice, too, how hard I have been on Corker and McCain.  And the Drama Club.

No, Susan, this isn't sexism.  Alexander-Murray isn't going anywhere, and you got conned.

What should she have done?  If she had been serious about this, she should have demanded the passage of Alexander-Murray before they passed the tax deal.  And, if McConnell had said they can't work that fast, well... look at how fast they passed the tax deal!

McConnell knew just how to manipulate her.

Wait a minute.  Wasn't I supposed to be writing about Trump?  Um... you see my point.  Trump had nothing to do with any of this.  This was Mitch McConnell.  Mitch McConnell is damned good at his job.  There are a bunch of ultra-conservative idiots who want McConnell removed, and try to position themselves as purer-than-thou by taking positions against him, but... the stupidity of that beggars belief.  McConnell is the only one in the GOP right now with a strategic brain.  (They ran Boehner out town on a rail.)

There is, however, one point on which Trump may deserve some "credit" (blame):  the inclusion of the individual mandate repeal.  After the failure of "skinny repeal," Trump kept pushing for this.  One of the things we know from research on the presidency is that presidents are good at one thing: putting an issue on the legislative agenda.  Trump wanted this, and as I wrote as soon as the idea of including the provision in the bill popped up within the Senate, it became a done-deal.  This is tremendously stupid policy, but you actually can give Trump some credit-blame for that.

And yet, the press conference idea had to be scrapped.  Why?  Because Trump loses his shit if he isn't being constantly praised and can't answer basic policy questions, so it would have been a disaster.

So... Year 1 is nearly over.  The world hasn't blown up.  Yay (?)

Saturday music: If you don't love country, you hate 'mer'ca

Malcolm Holcombe, "Trail O' Money," from Down The River.  It is listed here as "Trail Of Money," but on the cd liner notes, it is "Trail O' Money."  Why?  Uh...

Yes, I own cds.  Also, get off my lawn.  Vinyl is too hipster, even for me.

Friday, December 22, 2017

Friday music: If you don't love jazz, you hate America

I apologize for... that thing in this morning's post.  Here's a guy I regularly showcase in the Friday music series, Charlie Hunter, with "Drop a Dime," from Mistico.

Bitcoin is bullshit, Part VI: Bitcoin and international trade

It's the perfect day to pick up the "Bitcoin is bullshit" series again.  The tax deal is done, Congress just barely avoids a shutdown again (more on that later), and we've got stupid bitcoin news!

In case you didn't catch this tidbit, Long Island Iced Tea Corp. got a 289% spike in their price shares.  Why?  They did a pointless, stupid rebranding.  They used the word, "blockchain," in their name.  Those of us who remember the dot-com bubble remember those companies that did nothing and had no business plan, but added ".com" to their names, or some other such nonsense, and venture capitalists threw money at them.  This is how you know there's a bubble.

Aaaand, right on cue, we get a drop of over 20% in bitcoin trading value in 24 hours.  Yes, that's bitcoin, inflating!  So, all that nonsense about how bitcoin is a solution to inflation because governments don't control it and they can't print money?  Yeah.  Not so much.

And that's sort of where I left off with Part V and the relationship between bitcoin and gold.  Neither is a "solution" to inflation.  Bitcoin just inflated, tremendously, in 24 hours.  It lost 20% of its value in a fucking day!  That sounds like a shitty fuckin' currency to me!  Does that mean the bubble has popped?  I don't know.  It really could deflate again (meaning, have the value go up-- I'm using currency terminology here).  If you buy some bitcoin now, there's a chance you could make a shitload of dollars.  Bitcoin is nuts.  It's also bullshit.

I was going somewhere else at the end of Part V, though.  In Parts I through IV, I was arguing that bitcoin is bullshit by ignoring the common arguments used by bitcoin enthusiasts.  I started addressing the arguments of bitcoin advocates in Part V.  In Part V, I argued that the fact that no government "controls" bitcoin is quite bad, from a macroeconomic perspective, not good.  Fiat currency solves a basic problem in economics.  Now, international trade.

This one is tricky.  Remember transaction costs?  Parts III and IV were all about transaction costs-- extra money you have to pay, beyond the cost of what you are buying, just to conduct the transaction itself.  The problem with bitcoin is that since no government accepts tax payments in bitcoin, any legal transaction requires everyone switching some currency back and forth to pay their taxes.  Therefore, bitcoin is intrinsically inefficient.

But, what if everyone around the world did switch to bitcoin.  No more transaction costs for international trade.

That's... um... true.


Yeah.  That's true.

You're waiting for me to call bullshit on this, aren't you?

Nope.  This is true.  There are just some big buts.  Do you like big buts?  Don't lie.  (I truly hate myself for writing that, and I deserve every bit of shit that Matt Jarvis is going to give me for it.  Lay on, MacDuff.)  First... ain't gonna happen, for the reason I already pointed out.  You have to have that worldwide transition, which can't happen because no functioning government will let people pay their taxes with bitcoin (see Part II), and that makes transactions in bitcoin within countries intrinsically inefficient.

Without a worldwide transition to bitcoin, conducting international transactions in bitcoin just means a different set of transaction costs because everyone still has to switch currencies on each end.  You've just traded one set of transaction costs for another.

Next, though, there is an even bigger cost.  Remember Greece?  Yes, we're back to Greece.  After their economy collapsed, they had few options.  One of the things that normally happens to a country with a shitty economy is that its currency trades at a lower value, relative to the rest of the world.  If, say, the peso weakens relative to the dollar because of a recession in Mexico, we buy more Mexican goods because we can get them more cheaply.  That helps the Mexican economy recover without the Mexican government having to do much of anything.  (And we get cheap stuff, which is good for consumers here, so fuck you, you idiot monetarists!)  They don't have to adjust their monetary or fiscal policy.  If their currency just trades on the international market, it happens by market forces.

This isn't without cost for Mexico.  The cost is that Mexicans can't buy as many American goods, because the peso doesn't get as much from the US.  However, it is a hell of a lot easier than some of the other methods of economic recovery, in some ways.

Idiot monetarists who can't think beyond chest-thumping don't like the idea of this kind of thing because of the terminology applied:  "devaluing" your currency.  Your currency gets "weaker."  Weakness is bad!  Actually, no, a weaker currency can help your country recover from a recession.  Then, the pendulum swings back when countries' economic performances change.  There is a delicate balance between domestic economic forces and currency exchange rates because one country's ability to buy from another depends on its domestic economy, and that affects the exchange rate, which affects trade, which is a component of Gross National Product, which... you get the point, hopefully.

When Greece's economy collapsed, though, they couldn't recover in this manner.  Their currency couldn't devalue relative to Germany's, thereby encouraging Germany to buy more Greek goods, allowing Greece to recover without the government expenditures that they couldn't afford.  Why not?

Because Greece and Germany were on the same fucking currency.

They were both on the euro.  Greece's adoption of the euro meant that their currency couldn't devalue unless the euro devalued, and it couldn't devalue relative to any country within the euro zone.  So, Greece couldn't have the exchange rate encourage other countries to buy their exports.  If they could, that would have allowed exports to give them a recovery option other than the government expenditures that they couldn't afford because the government had no money and couldn't borrow because... they weren't on their own fucking currency.

Do you see what happens, Larry?

So, here's what happens if everyone is on the same currency.  Transaction costs for international trade go away.  True.  But, countries lose the ability to recover from recessions through currency devaluation.  Greece's trap becomes an even bigger problem, compounded again by the inability of the country to manage monetary or fiscal policy because they don't control their own currency.

There's a whole subfield in economics about this.  "Optimum currency area."  Which regions should share the same currency?  Greece and Germany shouldn't be on the same currency, if you go by economics alone.  Greece needed to be able to devalue their currency to respond to their crisis, but they couldn't.

There is a big debate about the euro itself.  In economic terms, the euro zone doesn't quite work.  It puts countries on the same currency when they shouldn't be.  Politically, it may serve a purpose, but economically, it's a canine that has had unnatural acts performed on it.

And that's just most of a continent.

So, what if we all just moved to bitcoin?  Would bitcoin handle this any better?  Mathematically, it can't.  The more you expand the area using the same currency, the more you multiply the problems.

Bitcoin isn't magic, and it doesn't magically solve economic problems.  No, bitcoin is just bullshit.

What is going on with bitcoin now, and where does it go from here?  I've got plenty more to write.  Holidays and all, I may be filling time with more bitcoin rants, although politics may also intrude.

I guess I am supposedly a political scientist, right?

Thursday, December 21, 2017

The irrationality of voting and the Virginia House of Delegates

My students often get some variation of the following aphorism from me:  Your probability of determining the outcome of an election is lower than the probability of being killed in a car accident on the way to the polling place.  So, it is irrational to vote.  Don't vote, you sap!

In fact, according to the CDC, about 90 people die every day from vehicular accidents, so that comparison is basically just unfair.  Sometimes, then, I pick weirder ways to die, like lightning strikes.  Here's a NOAA paper from earlier this year by John Jensenius on death by lightening strikes, showing 352 people over the 10-year period from 2006 through 2016.

The total number of people who have individually swung a presidential election over that period?  Zero.  You can make a case, if you go back to 2000, that five people did it:  the five-to-four ruling in Bush v. Gore, but even that is wrong because if the Florida recount had been conducted under the procedure Gore was requesting, Bush still probably would have won.  (Bush did not legitimately win-- the butterfly ballot in Palm Beach County gave him the election.  There were other requests Gore could have made, but Gore's specific request in that case was for a specific recount in three counties under a specific standard, and... I'm getting off-topic here.)

Senate elections?  House elections?  One vote doesn't really swing these things.  You really are more likely to be killed trying to get to the polling station than you are to swing a national election.

Then, there's local stuff.  Smaller electorates.  Here's how the probabilities work, in short.  The reason you aren't going to be "pivotal," in voting jargon, is that it only happens when everybody else is within exactly one vote of each other.  In the US Supreme Court, one Justice is often pivotal.  Rulings can easily be five-four.  Why?  There aren't many of them.  In the Senate, it happens, but not as often.  There are 100 of 'em.  With the filibuster pivot (such as it remains), getting to 60 matters.  Splits of 60-40 happen.  When they do, everyone who is on the 60 side is casting a "pivotal" vote.  If they either flipped, or didn't show up, the outcome would be different.

In the House of Representatives, it isn't as common.  When the House is fully-seated, there are 435 members.  That means someone is "pivotal" when the chamber is split 218-217.  That happens, but not very often, and not as often as the 60-40 splits in the Senate, and nowhere near as often as 5-4 SCOTUS rulings.

The more people there are, the less likely there is to be a divide close enough for one person to be pivotal.

And when you aren't pivotal, you don't matter.  Deal with it.  There are just over 326,469,000, according to the Census estimates as of this morning.  You are one person, and you don't fucking matter.  Get over yourself, you precious, little snowflake.

I don't matter either.  I'm just some asshole, ranting over my morning coffee.

Coffee.  Coffee matters.

Anyway, the larger the voting body, the lower the probability of a split close enough for you to be "pivotal," and once that body gets large enough, you are more likely to die on the way to the polling place than cast a pivotal vote.

So, hey, do you pay attention to state or local elections?

(Admission:  I pay... rather less attention than I should.)

Do you... vote in state and local elections?  There is an interesting phenomenon that we call "ballot roll-off."  Even the people who do vote sometimes just vote for the top-of-the-ticket races, like the presidential race, and leave the ballot blank for the state and local stuff.  And, when there isn't a presidential election, turnout is way lower.

The irony here is that this messes with the rationality/irrationality of voting.  It means you get much smaller voting groups, and the probability of being pivotal goes up.  It is still absurdly low, but you aren't quite in lightening strike territory anymore, and the absurdity of the jokes I can make goes down.

Which brings me to Virginia's lower state house.  The race in one district-- Yancey versus Simonds-- is tied at 11, 608 votes after the latest recount!  And, to make this shit even crazier, if Simonds wins, that brings the chamber to a tie, and the Democrats get effective control of the whole legislature!  Holy fucking shit!

What happens now?  They actually, truly, draw lots!  This election will actually be decided by random fucking chance!  Don't you fucking competitive elections goo-goo morons love that?!  This won't be decided by the merits of the candidates, their platforms, voter deliberation, or any of that stupid, fucking nonsense, nor will control of the House of Delegates.  No, something far more important for democracy will determine everything.  Random fucking chance!

Behold!  Democracy!  The true arbiter of all that is good and holy!  Random fucking chance!

Yes, I am making fun of this stupid, fucking process.  Why?  Because I wrote a whole book about the stupidity of having this kind of thing be decided by random chance rather than actual deliberative processes.  Are you comfortable with control of a legislature being decided by random chance?  No?  Then fuck competitive elections.  Welcome to the dark side, right along with me and my occasional co-author, Tom Brunell (Trump's possible pick to head the Census!).

Anyway, let's go through pivotality here.  They're going to draw lots.  Someone will lose, and that party will lose control of the chamber.  The 11,608 people who voted for the candidate who drew the short straw will have voted pointlessly because the outcome would have been the same regardless of whether or not they voted.  The 11,608 people who voted for the candidate who drew the long straw will have determined control, not just of that seat, but of the chamber!  That's actually 11,608 pivotal voters!

That's a fuckload, right?  Yes, but over how many contests, in how many years?  Numerators and denominators.  If you want to know your probability of being in this situation, you need a denominator too.  We've been running elections in this country for a couple of centuries now, and the thing about random fucking chance is that if you do things often enough, weird shit happens.

Like now!  Holy shit, right?!

Remember, though, what I call "the paradox of news."  This is news because it is so weird and new and different.

Remember, too, that this is what happens at the state and local level, where turnout is way lower!  11,608.  That's an order of magnitude lower than competitive elections at the level of a US House election, to say nothing of a presidential election.  And people ignore this shit!  State politics matter!

[Cough, cough... me reminding myself to pay attention to this shit...]

And there's something else going on here.  Back when James Comey was handing the 2016 election to Donny-boy, I wrote a lot about the "minimax regret rule."  It goes as follows.  You make choices, not to maximize your expected utility, but to minimize the maximum regret you might feel.

There were people in that Virginia district who didn't vote.  Some of them thought the way that I tell my students to think.  Don't vote.  It won't affect the outcome.  It is irrational to vote because you are more likely to be killed on the way to the polling place than you are to cast a pivotal vote.

And mathematically, that is true!  The math on that is still right.  Deal with it.

But, so, Candidate A wins the drawing of straws.  Think about how fucking shitty a citizen who would have voted for Candidate B will feel after that drawing of straws, having decided not to vote based on the calculation of expected utility.

Pretty fucking shitty, right?  Not only would that voter have swung the district, that voter would have swung the whole fucking legislature.

That's a metric fuckton of regret right there.  If you want to minimize your maximum amount of regret, you vote!  It is, technically, irrational to vote because you really are more likely to be killed on the way to the polling place than you are to cast a pivotal vote.  Those CDC statistics are right, as is my math.  (OK, it isn't my math-- I stole these analogies from people who have been making these jokes for so long that I don't even know where they originated anymore.)

The minimax regret rule is not true rationality, but some people are going to be feeling it real soon.

Does anyone else feel like there's an infinite improbability drive operating in America right now?  It would explain so much.

Just sayin'...

Wednesday, December 20, 2017

Elizabeth MacDonough, Senate parliamentarian and creature of nightmares

Ted:  Tell me a story, Papa Mitch!  I was good today!

Mitch:  Yes, you were, Teddy.  You flagellated yourself well, like a proper homeschooled boy.  So, I'll tell you a story.

Ted:  Yay!

Mitch:  Once there was a good boy named Teddy.

Ted:  I like this story!

Mitch:  Don't interrupt, Teddy!  I have the floor and I haven't yielded!

Ted:  It was a point of order.

Mitch:  That discussion can be tabled for later.  Teddy was a good, little boy most of the time, but sometimes he did bad things, like try to read Dr. Seuss out loud for 24 hours straight, for no reason at all, so even children in his own playgroup didn't like him.  And do you know what happens to bad little boys, Teddy?

Ted:  ...

Mitch:  I yield the floor for a question.

Ted:  What...  happens?

Mitch:  There is a rule, Teddy.  The... {whispered} Byrd rule.  Some rules, are more important than others.  And none, Teddy, none, are more important than the {whispered} Byrd rule.  And when bad little boys break the Byrd rule...  Well, Teddy, there is... something.  It hides in your closet.  And sometimes under your bed.  In the darkness.  Just out of view.  When you think you see something out of the corner of your eye, and turn your head, and it isn't there, it was really there.  It was her.  When think you hear a noise, but can't find the source, it was her.

[Ted cowers under his blanket.  Mitch glowers and grins.]

Mitch, whispering:  And, when your cat, Ayn, jumps at nothing and runs away for no apparent reason, Ayn knows there's something there.  Ayn can see and hear...

[Ted shakes with terror.  Mitch leans in for effect.]


Ted:  NO!

Mitch:  That's right, Ted.  When bad, little boys violate the Byrd rule by inserting provisions into budget reconciliation bills that aren't strictly budgetary by involving policy issues, like homeschooling... ELIZABETH MACDONOUGH COMES TO GET THEM IN THE NIGHT!

[Ted wets his bed and shits himself.  Fortunately, he sleeps on plastic because he's a little chickenshit who does this frequently.  Mitch calls in the illegal immigrant nanny to clean things up, because of course.]

Really, the House probably doesn't mind voting again.  MacDonough ruled a provision of the tax deal out of compliance with the Byrd rule after the House already voted, so the House has to vote on a version stripped of that provision.  Fine.  Republicans love voting for tax cuts.  Maybe Elizabeth MacDonough gave them an early Christmas present.  Regardless, I do so enjoy writing about her.  As a quantitative, statistician/game theorist-type in my real work, interviews aren't really on my research agenda, but maybe someday I'll meet her.  I wonder how I'd look her in the eye after writing the kinds of things I write.  As I've said before, I don't have a clue what kind of person she is.  These posts just amuse me, and it has simply become kind of a thing for this blog, like the "If you don't love __, you hate America" music posts.  Anyway, none of this matters.  It's just a technical glitch.  I just couldn't help myself this morning.  I'll get back to more substantive posts tomorrow.

Tuesday, December 19, 2017

Bob Corker, self-enrichment and the Republican tax bill

When Bob Corker announced his flip-flop on the Republican tax plan, I included some Corker trash-talk in my round-up of lessons learned on the tax deal.  Mostly, I simply reverted to my oft-stated claim that there is no such thing as a Republican deficit-hawk.  When Corker voted against the Senate bill in the first round, I thought I might have been wrong, and that a Republican had actually decided to start caring about the deficit, but as of last weekend, nope.  Never mind.  Corker has decided that he just wants some tax cuts, like every other Republican.

However, in that post, I puzzled over what Corker was really doing in the bizarre sequence.  He didn't have anything to fear from a primary challenge since he isn't running for reelection.  His vote won't be pivotal.  He has already alienated the whole party.  I just didn't see what was going on with him.  The discussion right now is about how much Corker will benefit, personally, from new provisions for pass-through real estate businesses.  Basically, you own a bunch of property, and make money off of that, the new version of the bill gives you a shitload of money that the original Senate version didn't.  It is probably there for Donny-boy, but Corker also gets a lot of money in the deal.  And, suddenly, he's a yes vote.

This is a hard thing to evaluate.  Is that why Corker changed?  I have a somewhat difficult time seeing anything else, but as a general rule, I get very skeptical of this style of argument.  Here's the thing, though.  You run through the list of every change to the bill that has been made in the House-Senate conference, and this is the only one anyone has been able to find that makes sense, as far as I have read.

So, that's it, right?

Unless his initial vote was just bullshit posturing.  The problem is always the question of what you don't see.  Like I said, I have a "somewhat" difficult time...  Corker is retiring, but what's he doing next?  He's basically a party guy.  He was never a rabble-rouser.  He is exactly the kind of guy who usually winds up on K-street, in think tanks, giving speeches, or something like that.  But, the conservative side of things... they really don't like apostasy.  Particularly on tax cuts.

Corker took a lot of shit for that no vote.  There were, undoubtedly, unpleasant conversations behind closed doors.  As in, vote yes or we won't hire you.

Now, that's still a personal benefit!  A different kind, but similar in principle.  It still means we have to think about the kinds of things we don't observe, though, and it isn't necessarily a change to the bill that changed Corker.

There's also the possibility that he just had so many people pressuring him that he... crumbled.

I'm going to say it, because I've said it before, and it bears repeating.  Republicans are weaklings.  Remember how Ted Cruz, Marco Rubio, Lindsey Graham, and all of those others were treated by Donald Trump?  Trump called Cruz's wife ugly and accused his father of being involved in the fucking Kennedy assassination!  And yet, they were all brought to heel.  Why?  Because Republicans, at their core, are weaklings.  They love to talk tough.  They idolize tough guys because that's what they want to be, but they got nothin'.  This is really what the "authoritarian personality" is about.  Why do authoritarians love tough-talking psychopaths?  Because they are cowards, and they think that a tough-talking in-group psychopath will protect them from the scary out-group.  Theodor Adorno et al., 1950.  Still relevant.

Maybe there is nothing more complicated than Corker just... crumbling.  Like Ted Cruz, Marco Rubio, Lindsey Graham, and everyone else who can't take the horrific torture of a Trump tweet.

Hey!  I've got an idea!  "EXTREME enhanced interrogation."  Instead of waterboarding, sleep deprivation, feeding tubes and other war crimes for which we prosecute others, let's just have Trump send mean tweets about whomever we arrest under suspicion of terrorist activities!  It's enough to break congressional Republicans.

So, maybe it is nothing more complicated than Republicans telling him, "hey, you're a Republican.  This is a tax cut.  Get back in line!"  And Corker got back in line, like a good, "liddle," Republican.

Is Corker flipping because of how he will benefit, personally?  Maybe!  I don't know.  It is plausible, but I can think of other explanations, and Being Bob Corker sounds like a crappy movie.

One might want such considerations gone from politics, but that's a pipe dream.  There are laws about conflicts of interest, but enforcing them is hard.  Ideally, wouldn't we kind of want everyone in Congress to put their assets in a blind trust, the way every ethics lawyer in the country said that Trump should have done?  Well, yes, but even there, you've got problems.  Remember, this is about real estate.  Are you never allowed to buy real estate?

How about, say, art?  Let's say Members of Congress had to put their "assets" in blind trusts.  Could they buy art, as art enthusiasts?  Could they then turn around and sell a piece of art if they decided they didn't like it that much?  You see where I'm going, and you see the enforceability problem.  True, there isn't a lot of regulation of the art market, but once you have buying and selling, you have assets moving around, and then you have interaction with people who have money at stake in other areas of the economy, and there's your conflict of interest.  If I'm buying and selling art to you, and you have an interest in a policy, then I have an interest in that policy.

At the end of the day, conflicts of interest are just really hard to avoid in government, and they don't generally concern me all that much.  I am less concerned with why officials make decisions than I am with what decisions they make, and with the visibility of the decisions they make.

Corker, though, creates a problem.  Retiring legislators, like term-limited legislators, can't be punished for doing vile shit.  Term limits are among the dumbest reforms you can impose because they take away the necessary check on legislators' behavior.

Public officials are employees.  Voters are their employers.  How does this work?  Employers need a credible threat to fire employees who fuck up, shirk, cheat, steal, etc.  Employees who do their jobs should be retained.  Deterministically.  Employees who don't should be fired.  Deterministically.  There is no room for coin tosses, or any of that stupid shit that might create an analog to a competitive election.  And if you tell an employee, "you're fired, but stick around for two more weeks," and expect any work to get done, you're a fucking idiot.  That's term limits.  And a retiring employee... expect a little slacking off at best.  Corker is retiring.  Why would anyone expect him to behave decently?

Hey!  I wrote a book about this!

(The new book has a listing on Amazon, but isn't available yet... We're trying to speed up production, but we'll see.)