Here's the thing-- the bitcoiners and such have a nonexistent grasp of the concept of distortions and what they mean (and of economics in general, but that's another story).
For one thing, their concept of distortions really just means absence of government interventions (but only those that they don't like). So protecting property rights-- good. Protecting intellectual property rights-- good. Pricing externalities? No way, can't do that, distortion (even though failure to price externalities is a textbook example of a market distortion).
They also have no grasp of what stable prices come from. After all, market prices are the intersection of three variables-- aggregate supply, aggregate demand, and the money supply. But aggregate supply and aggregate demand fluctuate wildly. So the money supply is itself a variable. Every year, people enter and exit the labor force. Those in the labor force become more or less (but usually more) productive. Sometimes there are big shocks that impact aggregate supply or aggregate demand-- financial crises, pandemics, wars, but also new technologies, baby booms, investment booms, etc. So if you have the same money supply as the economy grows, you get deflation. And, while lower prices sound great, in fact, you just choke off credit and cause devastating depressions.
But then the question becomes how you determine the money supply. Even economically illiterate libertarians sometimes seem to grasp that a fixed money supply is bad (though at other times, they think that a cap is a good thing). But then they veer to nonsense like "our money supply should be determined by how many pretty yellow rocks we dig out of the ground, or how much energy we can expend to unlock lines of code." Fortunately, economists generally recognize that the money supply should generally be set at the level where aggregate supply and aggregate demand intersect such that prices rise, but at a low and predictably steady rate. That requires expert intervention. Those experts have mostly done a pretty good job at it, and prices since World War II have generally been far more stable than they were before that, despite the economy becoming much more complex and interconnected than it ever was before. But libertarians are ideologically committed to human intervention being some kind of unique evil or something, so they make up incoherent plots that end with lots of greater fool schemes getting launched across the economy and wasting a bunch of collective resources moving real money around to chase the possibility that some doofus will pay more for their fake money (in dollars or Euros, of course) than they paid for it.
Human-made systems work best when they imitate how nature regulates.
Regulation should be optimized. Too much regulation leads to non-responsive and non-optimal operation. Too little regulation leads to instability.
Markets are human-made systems. They are not nature. There is no basis for assuming that they are unique to all other human-made systems and don’t need regulation. Moreover, it is true that under-regulation of markets has led to instability. Unstable markets lead to big winners and more losers.
It should be obvious that people poised to be winners will object to more regulation, but society needs to decide what they want to optimize and work towards understanding how to optimize it in markets. Keynesian economics tries to do this. If further updates should be made, then make them.
My position is that markets should be designed so that winners are possible, the mean is acceptable, and the floor is not too harsh.
I too used to be an Austrian libertarian. I was an avid Lew Rockwell reader and supported Ron Pauls presidential campaign. But the 2008 financial crisis made me rethink my assumptions. The Austrians were screaming loudly, endlessly that the government’s response of printing money was the exact opposite of what they should do. They promised high inflation and no economic recovery.
But they were wrong! Empirically, factually wrong. Inflation didnt materialize (at least not 2009-2019) and the economy recovered. So I started to rethink my assumptions.
When Rockwell and other so called paleo libertarians came out in support of Trump, that was the last straw. Trump’s two biggest issues, to the extent he has any beyond self aggrandizement, are closed borders and high tariffs. This is the precise opposite position of any conceivable definition of libertarianism, which of course supports free markets, including labor markets.
You are becoming an angry man, Mr B! and rightly so. A few basic thoughts:
(1) Moral values, a major part of philosophy, are absent or distorted.
(2) Economics is an important, but in practice imprecise, discipline.
(3) Austrian economics has some useful concepts (supply & demand for money), but libertarians who advocate unmitigated market forces cause damage: in particular the absence of care for the disadvantaged (a moral view) and denial of any need for ‘distribution’.
(4) Over recent decades the top 1% have obtained a far greater share of wealth. That is not an unqualified criticism but a fact to be considered. The human costs - harm to self, family, community & society - have risen; & economic policy is not the only cause: the immoral policies of the extreme social engineers have devastated our sense of what it is to be human.
(5) Government & Central Bank intervention can be benevolent or malevolent in consequences, and it is not always simple to draw the line. It is reasonable to say that the 2008 GFC risked collapse & a depression; but that unnaturally low interest rates unfairly transferred wealth to asset holders.
So what now? At least until the next presidential election (3 years!) little will change. I have never understood the US system of presidential - political - appointment of Supreme Court judges, so little hope there. The ‘media’ are partisan and shout their own views, damning ‘the other’.
This leaves the hope for benevolent but firm discourse by people, without gratuitous condemnation or coarseness. Clearly and consistently raising the important but overlooked view. Application of the cardinal virtues (Faith, Hope & Charity) with patience in belief that, in time, the contemporary aberrations will become a horrible part of history. Exactly what ‘The Circus’ seeks to do.
You are correct that the only way we can change course and right the Ship of State, as Stephen Strum points out, is to take matters into our own hands.
* The "Fourth Branch" of the mainstream media has capitulated, the rest of the institutions are mostly bending the knee. No one from the traditional leadership class is going to save us. Even so, there is much hope to be felt in the wins by Democratic candidates so far (especially since many of them seem to be American-style Progressives, which everyone else in the world calls "Center-Left").
* I am worried about the use of surveillance tech being used to eventually just round up anyone who participates in marches or blockades of ICE thugs, but we also have many tech-savvy people (such as Liz the Developer) who can teach us how to counter the Surveillance State.
* I want to write, "at some point in time, we will have to be brave and stick our necks out." The truth is, that point in time is now, but I don't have a plan to protect my family if the bad guys come after me, so the most I can do right now is type online.
Well said. I have 2 advantages over you: my age, and living in England. Despite that, I am concerned for my grandchildren - go for work requiring special skill, be it plumbing or electrics, or in a niche professional area, where AI will not replace you.
England is far from perfect: a government acting like a frightened rabbit, high tax & spend, and within people a pervasive ill defined fear. It is not for an Englishman to criticize your president, but his foreign policy is worrying (give away Ukraine to Russia) as his unpredictable temperament. HMG here proposes abolition of most jury trial, while your Supreme Court seems (to an outsider) to be inherently politically biased. We must continue to cultivate our own gardens; and keep speaking out.
“Monetary purity over pluralism. The entire framework depends on there being one true form of money, and everything else is corruption. This isn’t a pragmatic claim about efficiency—it’s a metaphysical claim about order.”
I see. It’s evident in the writings and actions of the Silicon Valley tech-authoritarians. They’re all a bit spectrum-y, and contemptuous of anything tainted by the humanities. Their brains operate in ones and zeros. I know your essay was not about them, but I’ve known what they are for some time, and reading you helps me understand some of the why’s.
Not so simple. Money printing during the Great Recession and Pandemic caused asset prices to explode, leaving the rich richer and the poor less able to afford basic assets like a house. The financial system was saved. Inequality is made worse than in the Gilded Age. At the other extreme, the greatest equality of wealth during the same 150 years occurred in 1937, when some people were still camped out in Central Park. Right-wing economists have no heart, and left-wing economists have no brain. A perfect currency is one backed by land in a Commons Trust available to the highest bidder in a continuous auction, with rents divided equally among all. Check out LandBasedCapitalism.org.
I love it when people use "Dunnings-Kreuger Effect" pejoratively, and then proceed to show how they suffer from Dunnings-Kreuger Effect.
If the author has points to make with this essay, I hope this is just a first draft, because it is disjointed, jumps around like a Gish Gallop and spends more time gossiping about people he hates than talking about the topics in the subtitle.
"Because calling something a distortion presupposes there’s a morally correct, undistorted state—and that state is defined by their preferred metaphysical story about markets, time, and virtue." That may be true for the people whom the author dislikes, but flooding the economy with fiat money does, in fact, change the value of the money. By value I mean what you can buy for one dollar. Printing more money is precisely inflationary. Poor people whose only store of wealth is the account balance in their bank accounts suffer more from inflation than do those who hold assets that increase in relative value as the money supply increases. Economic policy, which is normative, has real life cause and effect trade-offs. If the author and Bernanke are happy to drop money out of helicopters, then they have a preferred metaphysical story about how they want to keep the economy moving. And they prefer their story over the fact that the money in the hands of the poor will be worth less - meaning it will buy less food and medicine and rent and gas - than that money would buy if they had used another method.
Since economics is a social science and since economic policy is only normative, then every person's opinion, no matter how well- or ill-informed it is, is based on "preferred metaphysical story about markets, time, and virtue." Labeling someone else's preferred story (even that of a past self, who is just a stand-in for those who still believe those things today) as suffering from Dunnings-Kreuger just shows that the labeler suffers from D-K, unless they have a rational explanation as to why their preferred story is the objectively correct one.
This is one topic.
Then the author goes on a long rant about Austrian economics and how he's one of the former true believers. I can trump the author, because not only was I an Austrian, I was a student of the Chicago School. Milton was my man, and "Free to Choose" was my bible. I even ran for a state legislative seat as a Libertarian.
What changed my mind? The fact that people who chanted "individual liberty and personal responsibility" seemed to always want others to take personal responsibility while they just focused on their own individual liberty. The reality is that the more personal responsibility one takes in helping others protect their liberty, the more liberty we all have together.
That's another topic.
Then the author moves on to what he labels as "bitcoin culture," where he gossips about people he doesn't like. As with most people who are mad at bitcoin, he's not really mad at bitcoin, he's mad at people who use bitcoin to do the evil they were going to do anyway. I have made a lot of money trading bitcoin - not because of any inherent properties of bitcoin, but because FOMO markets have certain characteristics that one can learn to take advantage of. When anyone brings up bitcoin, the first thing I ask them is if they have read the Bitcoin and Etherium whitepapers. If not, then I let them know they will lose all of their money trying to chase gains in cryptos. Anyone who talks about cryptos without showing evidence of understanding the foundations of how cryptos work is displaying their own Dunnings-Kreuger Effect.
That's yet another topic.
Yes, the author wrote "On bitcoin culture, intellectual fraudulence and social responsibility" in the subtitle, and yes, he touched very briefly on each of these, displaying his preferred metaphysical story about each of these. But he wrote the essay in a way that implies that he is the only one who is morally non-distorted on these topics, continued to imply that, while he used to suffer from Dunnings-Kreuger, he s free from that now, and concluded in a way that implies there is nothing more to be said about these topics.
I am showing my own D-K about the author, it's true, because I have not read all of his other essays to learn if this is his normal way of wagging his finger, or if this is one of his poorer quality works. I am acting as if by knowing this one thing - this essay - I know everything about this author.
To make this essay more intellectually honest, the author should change the subtitle to, "An introduction to bitcoin culture, intellectual fraudulence and social responsibility." He should conclude by acknowledging that each paragraph could be the thesis of one or more essays on those topics.
For example, an essay about the Dunnings-Kreuger Effect would explain about how D-K is a normal human condition because we are limited in what we can know but are often required by objective reality to act immediately on that limited information.
An essay on Libertarianism would point out that providing a medical care system that helps women to take personal responsibility for their reproductive health increases their individual liberty, for example.
An essay about bitcoin would include discussion about how crypto currencies are used in places where the money supply has been flooded by the government with worthless notes and inflation is in double-digit percentages, because the cryptos hold their relative value and are accepted by merchants, while the local fiat is treated as toilet paper.
And, and essay about inflation itself would show how monetary policy almost always helps the rich at the expense of the poor in the longer run, while fiscal policy can be more precise.
Sure, I could write these essays myself, but all of these ideas are being addressed by people with less Dunnings-Kreuger than myself or the author of this essay. And, the author invites comments, and these are my comments.
I would expect NOT to see this kind of reply to a reader's comment. Interactions between the person writing a commentary and anyone that replies positively, or negatively, should at least have substance in that dialogue, rather than a demeaning response like "Are you OK?" All of us, Brock not excluded, are here to share information and hopefully grow in understanding.
The D-K effect or Dunning-Kruger Effect is pervasive in all things human. God only knows some of the bullshit I have heard at international conferences spoken by purported experts. The D-K effect is a form of cognitive bias. I had a heavy exposure to this yesterday in discussing with a patient with presumed prostate cancer that his strategy was helter-skelter and not based on almost 45 years of experience. He argued that I did not appreciate his strategy. I think outlined 10 issues that he did not understand and cost him wasted time, side effects, and misdirection.
In politics, it is clear that Trump's decision-making provides great examples of the D-K effect. People with little expertise or ability should not assume they have superior expertise or ability, as Trump does routinely. The D-K effect in Trump cost 400,000 Americans their lives due to Trump's blatant ignorance about COVID-19. Trump did not have enough knowledge to know he didn't have enough knowlege. Basically, an old adage speaks about the D-K effect:
He who knows not
And knows not that he knows not
Is a Fool
Shun him
I do not know shit about bitcoin. I had difficulty understanding what Mike was trying to get at in his commentary about bitcoin.
What I do know is that Trump is hell-bent on destroying the US as we have known it. Reading different substacks, and listening to different news channels while averaging 2 books read per week, I have come to the conclusion that all of this is for nothing unless Trump is removed from office before there is no fixing the blatant pathology in America today. All the rest is blowing off steam and doesn't serve to get the Ship of State back on course. Right now, we are headed for our ship to run aground.
We would not be having this discussion about bitcoin if Trump were not POTUS. The voting public in America fucked up badly. It may cost us our survival in another world war. Our focus should be on anything we can do to get Trump out of the Oval Office so that the destruction he will lead us to never occurs. How do we do that, is the burning question.
Good. I too am OK, looking at things people have written, and responding with my thoughts when, as one of the other commentors in this thread noted, it is thought-provoking.
Noticed that I should have sent the text through Word, rather than just using Notepad, as I made a repeated error typing "Dunnings-Kreuger" rather than Dunning-Kruger, even though it was right in front of me. I didn't even spell it like Freddy "Krueger." "Kreuger" is entirely my own invention.
I have taken macro and micro econ classes, finance classes, earned a Series 6 and 63, and my finances are such that I have multiple streams of income and plenty of savings.
As I mentioned up-thread, I'm always happy to learn more from the experts, so if there is something that I am missing, please let me know.
I can’t be more specific. You’re so far from a functional understanding of economics that you need to go back to the basics. If you don’t have any inkling what I’m talking about, it’s because deliberately don’t want to understand.
Ah, the Western Standard. A catchment basin for raving ideological dilettantes from all over, that rises, zombie-like, from the crypts of commercial failure, again and again... and again.
As ever, thought provoking. I was raised in a multiply fractured intercontinental open marriage wealthy class whose parents were born into Southern poverty but both married ‘up’. So, I knew Marxian philosophy not through reading him, that came in my 30s, but through experiencing first hand the physical and emotional violence inherent in any class based system. I have never been able to fit into any class. My unconscious learned cultural behaviours giving me away as a traitor to all of them: too rich or too poor, or too… whatever is the latest scapegoat.
After reading this I am interested in why you were interested in the economic theories you write about, but how they emotionally reinforced, or not, your childhood cultural class identity.
"This is what I mean about normative embeddings having consequences. The supposedly neutral economic analysis—the concern about “market distortions”—isn’t actually separable from a whole constellation of political and moral commitments."
Killer essay here Mike. Although partially I'm able to wrap my head around it, it really raises my sense of awareness about how to think of this subject. I keep thinking about an uber driver we had in london who was literally all cult in on bitcoin and was preaching enthusiastically about the bitcoin standard. He was that exact person you describe toward the end of this.
After I got out of the car I went, whoa, what the fuck just happened? There's a whole other world out there.
I've long thought that Marxists and Libertarians make equal, but opposite mistakes about human nature. Marxists believe everyone will perform their best absent incentives, Libertarians believe people will behave their best absent restraint. We know both to be wrong. Therefore, intervention - distortion, if you will - is required to nudge systems towards some defined or acceptable equilibrium, whether monetary, moral or otherwise.
That's what I take from this essay. Thanks for giving me something to think about.
"I've long thought that Marxists and Libertarians make equal, but opposite mistakes about human nature." Nice ... I have been saying the same but I dont hear it often enough. For one, both marxism and libertarianism really only work assuming an ideal human that does not exist. Next, one side is blind to the abuse of government power and the other side is blind to the abuse of corporate power. I had a longer list somewhere ... one tries to disembed economic activity from social relationships, the other does the opposite ("heute backt das Kollektiv Erdbeerkuchen") ... one emphasises liberty the other equality (even though both are pillars of our enlightenment values) ... could be extend the list ...
This is from a series of posts I did over 14 days back in 2018 (a response to people telling me to stop complaining and start proposing):
Day 5
We should recognize that neither free markets, nor government are the panacea nor evil that some make them out to be. Both have their place and their drawbacks, with each serving as another important check and balance in our system of self-governance. Free markets naturally resist the imposition of an overbearing government that would limit human endeavor and ingenuity, while government restrains the worst in human nature that often manifests itself in the exploitation of free markets for personal gain at the expense of workers, customers and society.
Here's the thing-- the bitcoiners and such have a nonexistent grasp of the concept of distortions and what they mean (and of economics in general, but that's another story).
For one thing, their concept of distortions really just means absence of government interventions (but only those that they don't like). So protecting property rights-- good. Protecting intellectual property rights-- good. Pricing externalities? No way, can't do that, distortion (even though failure to price externalities is a textbook example of a market distortion).
They also have no grasp of what stable prices come from. After all, market prices are the intersection of three variables-- aggregate supply, aggregate demand, and the money supply. But aggregate supply and aggregate demand fluctuate wildly. So the money supply is itself a variable. Every year, people enter and exit the labor force. Those in the labor force become more or less (but usually more) productive. Sometimes there are big shocks that impact aggregate supply or aggregate demand-- financial crises, pandemics, wars, but also new technologies, baby booms, investment booms, etc. So if you have the same money supply as the economy grows, you get deflation. And, while lower prices sound great, in fact, you just choke off credit and cause devastating depressions.
But then the question becomes how you determine the money supply. Even economically illiterate libertarians sometimes seem to grasp that a fixed money supply is bad (though at other times, they think that a cap is a good thing). But then they veer to nonsense like "our money supply should be determined by how many pretty yellow rocks we dig out of the ground, or how much energy we can expend to unlock lines of code." Fortunately, economists generally recognize that the money supply should generally be set at the level where aggregate supply and aggregate demand intersect such that prices rise, but at a low and predictably steady rate. That requires expert intervention. Those experts have mostly done a pretty good job at it, and prices since World War II have generally been far more stable than they were before that, despite the economy becoming much more complex and interconnected than it ever was before. But libertarians are ideologically committed to human intervention being some kind of unique evil or something, so they make up incoherent plots that end with lots of greater fool schemes getting launched across the economy and wasting a bunch of collective resources moving real money around to chase the possibility that some doofus will pay more for their fake money (in dollars or Euros, of course) than they paid for it.
Regulation is feedback control.
Everything in nature is regulated.
Human-made systems work best when they imitate how nature regulates.
Regulation should be optimized. Too much regulation leads to non-responsive and non-optimal operation. Too little regulation leads to instability.
Markets are human-made systems. They are not nature. There is no basis for assuming that they are unique to all other human-made systems and don’t need regulation. Moreover, it is true that under-regulation of markets has led to instability. Unstable markets lead to big winners and more losers.
It should be obvious that people poised to be winners will object to more regulation, but society needs to decide what they want to optimize and work towards understanding how to optimize it in markets. Keynesian economics tries to do this. If further updates should be made, then make them.
My position is that markets should be designed so that winners are possible, the mean is acceptable, and the floor is not too harsh.
I too used to be an Austrian libertarian. I was an avid Lew Rockwell reader and supported Ron Pauls presidential campaign. But the 2008 financial crisis made me rethink my assumptions. The Austrians were screaming loudly, endlessly that the government’s response of printing money was the exact opposite of what they should do. They promised high inflation and no economic recovery.
But they were wrong! Empirically, factually wrong. Inflation didnt materialize (at least not 2009-2019) and the economy recovered. So I started to rethink my assumptions.
When Rockwell and other so called paleo libertarians came out in support of Trump, that was the last straw. Trump’s two biggest issues, to the extent he has any beyond self aggrandizement, are closed borders and high tariffs. This is the precise opposite position of any conceivable definition of libertarianism, which of course supports free markets, including labor markets.
Excellent essay. Had no idea you ever wrote for that rag though.
Ah yes, market distortions, the same nonsense that Robert Bork peddled half a century ago to defang antitrust law.
EDIT: https://www.thebignewsletter.com/p/did-google-facebook-and-amazon-endorse
Ah yes The Bitcoin Standard written by the author who frequently appeared on the fine outlet RT. Nice scathing takedown.
You are becoming an angry man, Mr B! and rightly so. A few basic thoughts:
(1) Moral values, a major part of philosophy, are absent or distorted.
(2) Economics is an important, but in practice imprecise, discipline.
(3) Austrian economics has some useful concepts (supply & demand for money), but libertarians who advocate unmitigated market forces cause damage: in particular the absence of care for the disadvantaged (a moral view) and denial of any need for ‘distribution’.
(4) Over recent decades the top 1% have obtained a far greater share of wealth. That is not an unqualified criticism but a fact to be considered. The human costs - harm to self, family, community & society - have risen; & economic policy is not the only cause: the immoral policies of the extreme social engineers have devastated our sense of what it is to be human.
(5) Government & Central Bank intervention can be benevolent or malevolent in consequences, and it is not always simple to draw the line. It is reasonable to say that the 2008 GFC risked collapse & a depression; but that unnaturally low interest rates unfairly transferred wealth to asset holders.
So what now? At least until the next presidential election (3 years!) little will change. I have never understood the US system of presidential - political - appointment of Supreme Court judges, so little hope there. The ‘media’ are partisan and shout their own views, damning ‘the other’.
This leaves the hope for benevolent but firm discourse by people, without gratuitous condemnation or coarseness. Clearly and consistently raising the important but overlooked view. Application of the cardinal virtues (Faith, Hope & Charity) with patience in belief that, in time, the contemporary aberrations will become a horrible part of history. Exactly what ‘The Circus’ seeks to do.
I certainly was not angry while writing this.
You are correct that the only way we can change course and right the Ship of State, as Stephen Strum points out, is to take matters into our own hands.
* The "Fourth Branch" of the mainstream media has capitulated, the rest of the institutions are mostly bending the knee. No one from the traditional leadership class is going to save us. Even so, there is much hope to be felt in the wins by Democratic candidates so far (especially since many of them seem to be American-style Progressives, which everyone else in the world calls "Center-Left").
* I am worried about the use of surveillance tech being used to eventually just round up anyone who participates in marches or blockades of ICE thugs, but we also have many tech-savvy people (such as Liz the Developer) who can teach us how to counter the Surveillance State.
* I want to write, "at some point in time, we will have to be brave and stick our necks out." The truth is, that point in time is now, but I don't have a plan to protect my family if the bad guys come after me, so the most I can do right now is type online.
Well said. I have 2 advantages over you: my age, and living in England. Despite that, I am concerned for my grandchildren - go for work requiring special skill, be it plumbing or electrics, or in a niche professional area, where AI will not replace you.
England is far from perfect: a government acting like a frightened rabbit, high tax & spend, and within people a pervasive ill defined fear. It is not for an Englishman to criticize your president, but his foreign policy is worrying (give away Ukraine to Russia) as his unpredictable temperament. HMG here proposes abolition of most jury trial, while your Supreme Court seems (to an outsider) to be inherently politically biased. We must continue to cultivate our own gardens; and keep speaking out.
“Monetary purity over pluralism. The entire framework depends on there being one true form of money, and everything else is corruption. This isn’t a pragmatic claim about efficiency—it’s a metaphysical claim about order.”
I see. It’s evident in the writings and actions of the Silicon Valley tech-authoritarians. They’re all a bit spectrum-y, and contemptuous of anything tainted by the humanities. Their brains operate in ones and zeros. I know your essay was not about them, but I’ve known what they are for some time, and reading you helps me understand some of the why’s.
Not so simple. Money printing during the Great Recession and Pandemic caused asset prices to explode, leaving the rich richer and the poor less able to afford basic assets like a house. The financial system was saved. Inequality is made worse than in the Gilded Age. At the other extreme, the greatest equality of wealth during the same 150 years occurred in 1937, when some people were still camped out in Central Park. Right-wing economists have no heart, and left-wing economists have no brain. A perfect currency is one backed by land in a Commons Trust available to the highest bidder in a continuous auction, with rents divided equally among all. Check out LandBasedCapitalism.org.
I love it when people use "Dunnings-Kreuger Effect" pejoratively, and then proceed to show how they suffer from Dunnings-Kreuger Effect.
If the author has points to make with this essay, I hope this is just a first draft, because it is disjointed, jumps around like a Gish Gallop and spends more time gossiping about people he hates than talking about the topics in the subtitle.
"Because calling something a distortion presupposes there’s a morally correct, undistorted state—and that state is defined by their preferred metaphysical story about markets, time, and virtue." That may be true for the people whom the author dislikes, but flooding the economy with fiat money does, in fact, change the value of the money. By value I mean what you can buy for one dollar. Printing more money is precisely inflationary. Poor people whose only store of wealth is the account balance in their bank accounts suffer more from inflation than do those who hold assets that increase in relative value as the money supply increases. Economic policy, which is normative, has real life cause and effect trade-offs. If the author and Bernanke are happy to drop money out of helicopters, then they have a preferred metaphysical story about how they want to keep the economy moving. And they prefer their story over the fact that the money in the hands of the poor will be worth less - meaning it will buy less food and medicine and rent and gas - than that money would buy if they had used another method.
Since economics is a social science and since economic policy is only normative, then every person's opinion, no matter how well- or ill-informed it is, is based on "preferred metaphysical story about markets, time, and virtue." Labeling someone else's preferred story (even that of a past self, who is just a stand-in for those who still believe those things today) as suffering from Dunnings-Kreuger just shows that the labeler suffers from D-K, unless they have a rational explanation as to why their preferred story is the objectively correct one.
This is one topic.
Then the author goes on a long rant about Austrian economics and how he's one of the former true believers. I can trump the author, because not only was I an Austrian, I was a student of the Chicago School. Milton was my man, and "Free to Choose" was my bible. I even ran for a state legislative seat as a Libertarian.
What changed my mind? The fact that people who chanted "individual liberty and personal responsibility" seemed to always want others to take personal responsibility while they just focused on their own individual liberty. The reality is that the more personal responsibility one takes in helping others protect their liberty, the more liberty we all have together.
That's another topic.
Then the author moves on to what he labels as "bitcoin culture," where he gossips about people he doesn't like. As with most people who are mad at bitcoin, he's not really mad at bitcoin, he's mad at people who use bitcoin to do the evil they were going to do anyway. I have made a lot of money trading bitcoin - not because of any inherent properties of bitcoin, but because FOMO markets have certain characteristics that one can learn to take advantage of. When anyone brings up bitcoin, the first thing I ask them is if they have read the Bitcoin and Etherium whitepapers. If not, then I let them know they will lose all of their money trying to chase gains in cryptos. Anyone who talks about cryptos without showing evidence of understanding the foundations of how cryptos work is displaying their own Dunnings-Kreuger Effect.
That's yet another topic.
Yes, the author wrote "On bitcoin culture, intellectual fraudulence and social responsibility" in the subtitle, and yes, he touched very briefly on each of these, displaying his preferred metaphysical story about each of these. But he wrote the essay in a way that implies that he is the only one who is morally non-distorted on these topics, continued to imply that, while he used to suffer from Dunnings-Kreuger, he s free from that now, and concluded in a way that implies there is nothing more to be said about these topics.
I am showing my own D-K about the author, it's true, because I have not read all of his other essays to learn if this is his normal way of wagging his finger, or if this is one of his poorer quality works. I am acting as if by knowing this one thing - this essay - I know everything about this author.
To make this essay more intellectually honest, the author should change the subtitle to, "An introduction to bitcoin culture, intellectual fraudulence and social responsibility." He should conclude by acknowledging that each paragraph could be the thesis of one or more essays on those topics.
For example, an essay about the Dunnings-Kreuger Effect would explain about how D-K is a normal human condition because we are limited in what we can know but are often required by objective reality to act immediately on that limited information.
An essay on Libertarianism would point out that providing a medical care system that helps women to take personal responsibility for their reproductive health increases their individual liberty, for example.
An essay about bitcoin would include discussion about how crypto currencies are used in places where the money supply has been flooded by the government with worthless notes and inflation is in double-digit percentages, because the cryptos hold their relative value and are accepted by merchants, while the local fiat is treated as toilet paper.
And, and essay about inflation itself would show how monetary policy almost always helps the rich at the expense of the poor in the longer run, while fiscal policy can be more precise.
Sure, I could write these essays myself, but all of these ideas are being addressed by people with less Dunnings-Kreuger than myself or the author of this essay. And, the author invites comments, and these are my comments.
Are you okay?
Sure, are you?
Quite, actually. Just having my coffee and catching up on emails.
I would expect NOT to see this kind of reply to a reader's comment. Interactions between the person writing a commentary and anyone that replies positively, or negatively, should at least have substance in that dialogue, rather than a demeaning response like "Are you OK?" All of us, Brock not excluded, are here to share information and hopefully grow in understanding.
The D-K effect or Dunning-Kruger Effect is pervasive in all things human. God only knows some of the bullshit I have heard at international conferences spoken by purported experts. The D-K effect is a form of cognitive bias. I had a heavy exposure to this yesterday in discussing with a patient with presumed prostate cancer that his strategy was helter-skelter and not based on almost 45 years of experience. He argued that I did not appreciate his strategy. I think outlined 10 issues that he did not understand and cost him wasted time, side effects, and misdirection.
In politics, it is clear that Trump's decision-making provides great examples of the D-K effect. People with little expertise or ability should not assume they have superior expertise or ability, as Trump does routinely. The D-K effect in Trump cost 400,000 Americans their lives due to Trump's blatant ignorance about COVID-19. Trump did not have enough knowledge to know he didn't have enough knowlege. Basically, an old adage speaks about the D-K effect:
He who knows not
And knows not that he knows not
Is a Fool
Shun him
I do not know shit about bitcoin. I had difficulty understanding what Mike was trying to get at in his commentary about bitcoin.
What I do know is that Trump is hell-bent on destroying the US as we have known it. Reading different substacks, and listening to different news channels while averaging 2 books read per week, I have come to the conclusion that all of this is for nothing unless Trump is removed from office before there is no fixing the blatant pathology in America today. All the rest is blowing off steam and doesn't serve to get the Ship of State back on course. Right now, we are headed for our ship to run aground.
We would not be having this discussion about bitcoin if Trump were not POTUS. The voting public in America fucked up badly. It may cost us our survival in another world war. Our focus should be on anything we can do to get Trump out of the Oval Office so that the destruction he will lead us to never occurs. How do we do that, is the burning question.
Was Socrates the only person who didn't suffer from D-K?
Ah, but he did ... suffer from D-K.
Nearly everyone hates to be shown that they are not as smart as they think they are.
Me? I know that I know nothing. The only way I can check my ideas is by getting them out there and testing them against reality.
Are YOU OK?
Good. I too am OK, looking at things people have written, and responding with my thoughts when, as one of the other commentors in this thread noted, it is thought-provoking.
Noticed that I should have sent the text through Word, rather than just using Notepad, as I made a repeated error typing "Dunnings-Kreuger" rather than Dunning-Kruger, even though it was right in front of me. I didn't even spell it like Freddy "Krueger." "Kreuger" is entirely my own invention.
You should probably go read “economics for dummies” before you ever write anything about economics again.
Well, you're the expert, so enlighten me.
Let me know when you’ve read the book and we can discuss it, but I think after you read it you’ll know why you’re wrong about so much.
You have to be more specific.
I have taken macro and micro econ classes, finance classes, earned a Series 6 and 63, and my finances are such that I have multiple streams of income and plenty of savings.
As I mentioned up-thread, I'm always happy to learn more from the experts, so if there is something that I am missing, please let me know.
I can’t be more specific. You’re so far from a functional understanding of economics that you need to go back to the basics. If you don’t have any inkling what I’m talking about, it’s because deliberately don’t want to understand.
"You’re so far from a functional understanding of economics that you need to go back to the basics. "
My net worth is over $1.5 million.
I make $100,000 every year through investments, trading and business.
Your statement is false.
Ah, the Western Standard. A catchment basin for raving ideological dilettantes from all over, that rises, zombie-like, from the crypts of commercial failure, again and again... and again.
Perhaps this, too, is due to market distortion.
As ever, thought provoking. I was raised in a multiply fractured intercontinental open marriage wealthy class whose parents were born into Southern poverty but both married ‘up’. So, I knew Marxian philosophy not through reading him, that came in my 30s, but through experiencing first hand the physical and emotional violence inherent in any class based system. I have never been able to fit into any class. My unconscious learned cultural behaviours giving me away as a traitor to all of them: too rich or too poor, or too… whatever is the latest scapegoat.
After reading this I am interested in why you were interested in the economic theories you write about, but how they emotionally reinforced, or not, your childhood cultural class identity.
Western Standard ? Ohh... the shame....
"This is what I mean about normative embeddings having consequences. The supposedly neutral economic analysis—the concern about “market distortions”—isn’t actually separable from a whole constellation of political and moral commitments."
Another example is GDP.
Killer essay here Mike. Although partially I'm able to wrap my head around it, it really raises my sense of awareness about how to think of this subject. I keep thinking about an uber driver we had in london who was literally all cult in on bitcoin and was preaching enthusiastically about the bitcoin standard. He was that exact person you describe toward the end of this.
After I got out of the car I went, whoa, what the fuck just happened? There's a whole other world out there.
I've long thought that Marxists and Libertarians make equal, but opposite mistakes about human nature. Marxists believe everyone will perform their best absent incentives, Libertarians believe people will behave their best absent restraint. We know both to be wrong. Therefore, intervention - distortion, if you will - is required to nudge systems towards some defined or acceptable equilibrium, whether monetary, moral or otherwise.
That's what I take from this essay. Thanks for giving me something to think about.
"I've long thought that Marxists and Libertarians make equal, but opposite mistakes about human nature." Nice ... I have been saying the same but I dont hear it often enough. For one, both marxism and libertarianism really only work assuming an ideal human that does not exist. Next, one side is blind to the abuse of government power and the other side is blind to the abuse of corporate power. I had a longer list somewhere ... one tries to disembed economic activity from social relationships, the other does the opposite ("heute backt das Kollektiv Erdbeerkuchen") ... one emphasises liberty the other equality (even though both are pillars of our enlightenment values) ... could be extend the list ...
This is from a series of posts I did over 14 days back in 2018 (a response to people telling me to stop complaining and start proposing):
Day 5
We should recognize that neither free markets, nor government are the panacea nor evil that some make them out to be. Both have their place and their drawbacks, with each serving as another important check and balance in our system of self-governance. Free markets naturally resist the imposition of an overbearing government that would limit human endeavor and ingenuity, while government restrains the worst in human nature that often manifests itself in the exploitation of free markets for personal gain at the expense of workers, customers and society.
https://open.substack.com/pub/paulszydlowski/p/my-14-day-affirmative-challenge-18-04-25?r=1ea9qb&selection=9c41e14c-ab72-46b9-9dc1-93f23be38b5b&utm_campaign=post-share-selection&utm_medium=web&aspectRatio=instagram&textColor=%23ffffff&bgImage=true