Tuesday, May 31, 2016

Grey Goo Already Happened

Except it was green. Evolution is smarter than you. If it were possible to convert Earth to self-replicator mass due solely to self-replication, it would have already been converted to biomass.
The two companies could get into a stable loop and end up tiling the universe with steel and mining-robots without caring whether anybody else wanted either. Obviously the real economy is a zillion times more complex than that, and I’m nowhere near the level of understanding I would need to say if there’s any chance that an entire self-sustaining economy worth of things could produce a loop like that. But I guess you only need one.
You have self-replication. You have the second law of thermodynamics. Hence, this economy has evolution. Meaning even if it does have the potential to tile Earth in mining and steel-smelting, it will evolve a smelter/miner predator which will halt the process. 

More generally, doing stuff costs energy. If it were possible to tile the Earth with something, it would have happened. And it did: moist carbonic photosynthesis has tiled the Earth. It mostly wasn't that bad. Indeed oxygen (or an equivalent) is a necessary prerequisite for brains to evolve.

A steel/miner loop, or indeed any such loop, competes with this already-existing tiling for energy. It starves to death unless the steel/mining loop somehow maintains positive EROEI the entire way. The moist carbon is already evolving to eat plastics. It probably won't evolve to eat steel, though, because steel weathers too fast - that is, the air eats it before it's around long enough for bacteria genomes to notice it.

Speaking of evolution, if we add a 'mine coal' step, we're going to find that the steel forging has no particular use to the coal miner. Even if that is a stable loop, it won't tile Earth, it will tile the coal deposits, the way undersea volcanic vent life works. Only it will die when the coal runs out and then be dead.

Notably, moist carbonic life doesn't truly self-replicate. Almost all such life depends on an environment of other life forms. Only the system as a whole self-replicates. Even a perfectly isolated self-replicator, by itself on a lifeless planet, would likely evolve to specialize and thus lose its independence.

Sunday, May 29, 2016

Some Irrationality is Disguised Rationality

A large chunk of opinions that appear to be logic-resistant are in fact the camouflage to real opinions that aren't stated. Logic relevant to the stated opinion will not be relevant to the real opinion - at best, it causes the camouflage to shift.

E.g. Zootopia. (Via.) Proggies genuinely believe that the facts about IQ will cause riots. Proggies genuinely believe that if one race is materially differs from another, it is sociologically inevitable for the higher status race to enslave the lower.

When an proggie denies the laws of biomechanics, they are actually trying to deny riots and apartheid. No amount of arguments about Nobel prizes by skin colour or Raven's matrices is going to change their mind, because they don't address the proggie's actual issue. They may themselves be unaware of their real issue, and thus unable to articulate it. It will show up to them as an intuitive sense of 'no, that's wrong,' as indeed it is, and will appear externally as the leopard spots smearing themselves around.

I find the idea of the riots historically absurd. The slavery less so, but I note that the majority certainly would vote against it, and in such a climate it shouldn't be hard to find some kind of alternative.

When they're not straight-up lying, that is. Naturally it is impossible to convince a liar of the truth, as they already believe it. These may be the self-serving kind or the noble lie kind. The noble lie kind is aware of how stupid they sound if they say, "Our society can't withstand this science," and try to come up with something respectable to say instead. (Unfortunately for them, they make movies and tell us anyway.)

Naturally, this flaw is hardly limited to progressives, any more than it's impossible for Asiatics to commit crime. It's simply more common in proggies because they have more beliefs they can't cop to.

Wednesday, May 25, 2016

Basic Income Impossibility Theorem

Assume everyone needs $100 a month for room and board. 
Assume a free universal basic income of $100 is implemented.

On the margin, someone will stop working. There will be less wealth. With less stuff bidding for a fixed dollar amount, the price of money will fall. Inflation occurs. Room and board now cost at least $101, and unemployed UBI recipients are now either getting evicted or starving. Notably this only occurs if UBI is national. Having a limited test run won't shift the inflation needle beyond the noise.

Right, so let's start a little higher, yeah? Start at $120. On the margin, someone will stop working. This will cause inflation. Meaning $120 will only buy, say, $115 worth of stuff. This widens the indifference margin between working and not-working, so someone else will stop working. This will cause inflation. Which will widen the not-working margin. Und so weiter.

(Indeed subsequent rounds of inflation are all but guaranteed to be higher, as a roughly equal mass of stuff is being removed from a smaller pie.)

I've mentioned serfdom before. If the guaranteed income came with some kind of cost, being universal only in availability rather than in concrete application, the damage would in all likelihood be negligible.

Friday, May 13, 2016

Effects of Price Fixing on Labour

Not controversial: price controls are bad.
Minimum wages are price controls on labour. Price controls prevent markets from clearing.

The labour market in particular needs to clear. Labour is literally the only input that every business needs, so labour mispricing affects the entire economy.
Precisely because labour is so critical, the price floor isn't quite as destructive of jobs as it should be. Replacing labour isn't as easy as switching from black pepper to red pepper. However, there's a flip side: in the long term the floor is even more destructive.

When labour supply grows and labour price should fall, the wage-floored economy generally has no spare capacity of inputs it can swap for labour, having already used them up.

Immediately, extra supply a free market could absorb instead goes into unemployment. 
Further, the price of labour does not fall, causing the wage-floor price derangement to propagate all the way up the labour price schedule. All labour is now overpriced, leading to a shortage. More intuitively, the number of jobs bidding for labour drops, causing unemployment across the wage spectrum.

Because there's a shortage of jobs, there's a shortage of wealth creation. Wealth per capita drops, and the price of money drops - we see inflation.

Because poverty is on the rise, politicians promise to fix it by increasing the minimum wage. Because labour is relatively slow to adapt to market conditions, this seems to work for a moment, but in the long term the cycle repeats until we reach full communism except there's no factories, no jobs, and everyone who doesn't physically hold a farm starves to death.

Wednesday, May 11, 2016

Monetary Supply Fundamentals

Macroeconomics can't be done by official economists because it's too easy, not too hard. It's high school at the hardest, meaning can't impress your smart friends with it. I'm about to go from spherical-cow game theory to the business cycle in a couple pages, skipping only the justification of prices(supply, demand). Compare going from quantum chromodynamics to how your liver works - could easily take a million pages.

I welcome corrections, either below or here.
 Inflation is decrease of the price of money.
Deflation is increase in the price of money.

Fundamentally, inflation is caused by decreasing demand for a currency, or increasing supply.
Deflation, by increasing demand or decreasing supply.

The price of future money is always discounted. This discount is usually called 'interest,' but this is misleading. The market interest rate has three non-price factors, the combined effects of future time orientation, future instability, the net expected inflation/deflation rate. Finally, interest includes the supply/demand balance, and therefore price balance, of present money versus future money.

(It's counter-intuitive to think of demand for money in terms of goods rather than the other way around, but doing so has no economic flaws.) 

The market is not clairvoyant. The supply of money it sees is whatever demands goods, not any sort of total supply, meaning savings and debt affect the apparent supply. Saving more money sequesters it, causing deflation. (Essentially, saving creates a velocity discrepancy.) Lending out more money increases the apparent supply, thus causing inflation in addition to altering the present/future supply/demand balance.

Average velocity does not affect the price of money. While greater velocity increases the supply the market sees, it simultaneously increases the demand the market sees. The absolute velocity, $/second, being neutral to supply and demand is the reason any amount of money is enough to run any economy, subject only to being sufficiently divisible. In addition, the relative velocity, %/second, is neutral.

As I understand it, under fractional reserve, consumer banks can deposit physical bank notes at their federal account, and lend out ten times that amount to consumers. Further, they can lend out ~90% of anything deposited with them. Since the amount they poof into existence will get eventually get deposited at a bank in most cases, the math works out such that they can lend out roughly 100 times whatever they deposit with the Fed. (Capital requirements are a different way to the same goal.)

Having written the above, aside from the risk of bank runs, I now realize this has already caused any damage it can. Essentially, the banks own a hundred times as much cash as they 'really' own. While this was doubtless a huge boon to banks at the expense of everyone else, it was a windfall and is now over.

In combination with this, the government frequently backs various securities with the printing press, which the market knows enough to treat as money - however, the market learns about the inflation non-instantly, thus producing an exploitable inflation gradient.

Under non-fixed interest rates, the feedback is negative. Agents know net interest = gross interest - inflation. Inflation caused by increased loaning is countered by lowering interest rates discouraging loans. Inflation caused by decreased saving is countered by the inflation itself filing away loan profit margins. Deflation caused by increased saving is countered by increasing interest rates encouraging loans. Deflation caused by decreased loaning is countered by the deflation itself discouraging loan buyers.

There's a buffering effect from this that absorbs shocks in supplies of goods to a degree. The price of money and level of deflation ends up relatively stable.

Fixed interest rates lead to gluts and shortages, much as any fixed price, to the extent the price differs from the market price. This is annoying, but rarely dangerous.

The dangerous issue arises with artificially low interest rates. It is possible to destroy wealth but make money. If inflation is 20%, and interest rates are 5%, then it is possible to spend the loan on materials that can be sold for 110% of their price, and make enough money to cover the loan and profit. Normally this cash return wouldn't be enough to pay for a full set of new materials, but the revenue demonstration can back a larger loan, and the cycle repeats.

A little over 600 words and we reach the Austrian business cycle. Below-market interest rates destroy wealth until there is no more free-floating wealth to destroy, whereupon even the pretense of production shuts down.

Once the businesses stop existing and thus demanding loans, the money supply contracts, causing deflation. This causation is reversed by official economists, who believe deflation causes economic contraction. They say it's from increased saving, which is plausible, and even true - the banks are saving their 100x poof money. However, it's not by choice, it's from debtors defaulting faster than the banks can find new debtors. Noting the exact same vicious effect happens in hard-money regimes with fixed interest prices.

A shock is easily defined - it's an event that takes the market far from equilibrium. During a banking shock, the amount of goods being made becomes disjunct with wages, causing poverty and oversupplies. Many employees paying money to nondestructive firms lose their jobs, cutting the artery, and the market cannot adjust as quickly as the cuts. Without these oversupplies it's likely the deflation shock would be even more shocking.

Deflation increases the net interest rate, leading to positive feedback. As debts are not rolled over to re-lent out, fewer can afford loans, meaning the money supply contracts further. Normally this would be countered by lowering interest rates, but as the rates are fixed, they can fall neither as fast nor as hard as they need to.

However, even unfixing the interest rates cannot completely solve the problem, as it was caused in the first place by interest rates being too low. Crashes caused by Fed mismanagement cannot be fixed without severe pain, as they require interest rates to go up, to fix the problem, but also to go down, to avoid catastrophic fiscal shocks. Have to shoot yourself in the foot, but you get to pick left foot or right. (Or, past coercion usually can't be resolved without future coercion.)

In practice, we see the Fed reliably chooses to lower interest rates, causing another round of business investment in wealth-destroying activities. In the short term, money is delivered to productive individuals, who can support productive businesses, while in the long term the economy becomes even heavier with parasitic seedcorn-eating businesses. Official economics cannot distinguish between malinvestment causing malproduction, and real wealth increases, because their job is to justify whatever the Fed wanted to do anyway, meaning it's their job to not understand reality.

Freeing interest rates would, in the short term, cause tremendous hardship as technical debt is repaid. In the long term it would prevent economy-wide recessions from occurring, barring innovation in ways to bugger the price system. Sector-specific recessions would still occur, as unexpected drops in necessary production necessarily occur, which in retrospect reveals recent investment as malinvestment.