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Saturday, December 15, 2007

Reader Mail #20 - Lies My Economist Told Me

A lot of people say they like my "Reader Mail" posts. Surprisingly, except for Reader Mail #1, none of them made my "Best of FSK" list. If you Google search "federal reserve sucks", I'm near the top of the results now! For awhile, I was on the 3rd page or worse. It would be really neat if I could make the 1st page for "Federal Reserve", but that probably is too hard. As more people link to my blog, I notice that my PageRank is increasing.

Other blogs don't highlight reader comments enough. I see lots of interesting discussions buried in the comments section on many blogs. Now that I read blogs through the RSS feed via Google Reader, I don't revisit blogs for the comments.

Adding my favorite bits from other blogs is a nice addition. I don't get enough comments for a full post anyway.

A lot of people have been citing these cartoons. Does the Supreme Leader of Humanity have competition now? Unfortunately, being "Leader of the Free Humans" is a pretty lonely job. You can be a "leader" in the persuasion sense without being a "leader" in the "Do what I say or die!" sense.

I heard that there was a recent shooting in an Omaha mall. Naturally, the police didn't arrive until after many people had died. The problem, which mainstream media sources never mention, is that all the other people in the mall were unarmed. If some of the mall's shoppers were armed, perhaps they could have stopped the gunman before more people were killed. As usual, such a story is falsely advertised as evidence for MORE gun control, when the real answer is that less gun control is needed.

Another problem is that, statistically, your odds of being shot randomly by gunfire are remote, compared to other causes of death. Such stories are hyped unnecessarily, compared to the actual real risk such incidents pose to a typical person.

A mall is private property. The mall owners should decide for themselves whether they want to allow shoppers to carry guns or not.

Also, if the police fail to protect you, they have NO LIABILITY. Technically, all the people shot in that incident should have a valid claim against the police for failing to protect them. Free market police *WOULD* be subject to a claim if someone under their protection is injured.

In a free market police system, suppose someone was carrying a gun and stopped the gunman, saving several people from being shot. In that case, the police agency responsible for protecting the people in the mall would directly pay the hero for his efforts. After all, he saved them from a huge injury claim! Under the current system, a non-policeman who stops a crime receives no financial reward.

I read another story about a shooting in a church where a security guard was able to stop the gunman before he hurt too many people.

The Google blog search widget wasn't functioning properly, so I removed it. A direct "" search in Google was providing better search results.

I asked if I should change Blogger templates, and the vote was 1-0 saying "You don't need to change." Only Zhwazi responded. I conclude that my current Blogger template is fine.

I read another "anarchist" blog where someone said their biggest pet peeve was that some people write "state" and other people write "State". Calling the "state" as "State" is attaching too much legitimacy to the "state". (I've been inconsistent in my usage.)

If you're an anarchist and your BIGGEST problem is whether or not people capitalize the word "state", then either you're totally clueless or I want to move to the stable stateless society you're living in.

Deal or no Deal is an interesting game show. I like the "risk management" aspects of the game. Do you hold out for your full expected value, or take a deal for less than the average of the remaining cases? Since you only get to play the game once, and the stakes are substantial, it makes sense to do the variance-minimizing move.

On two recent episodes, the game actually had some STRATEGY.

In one game, a woman was offered the opportunity to play while her husband played secretly offstage. They were not allowed to communicate during the game, although the host did show the woman partway through that her husband was doing well. The woman was told, before the game, that at the end she would have the opportunity to accept her game's outcome or her husband's outcome.

With 5 cases remaining, the woman had one big-valued ($500,000?) case remaining and 4 small ones. She accepted a deal for around $50k. She then swapped for her opponent's outcome, winning around $70k. This move was INCREDIBLY SUBOPTIMAL. If she was planning to take her husband's case, she should have KEPT PLAYING. She could have opened another case, and if she opened the $500k case she could have just taken her husband's result anyway.

What is the correct strategy in such a game? You should play very aggressively. The husband playing in secret should hold out for an offer over 80% of the average of his remaining cases. Since your expectation before the start of the game is around $130k, the woman should have kept playing until she had an offer over $200k. It's hard to figure the optimal stopping point.

They also offered a game where 3 people played, but only the HIGHEST winner got to keep the money they won, in addition to the money won by the other 2 players. Each player played their game without knowing the outcome of the other games. Your expectation before the start of the game is around $130k, so you probably should hold out for an offer over $250k-$300k. It's hard to figure the optimal stopping point, but you need to play VERY AGGRESSIVELY. The actual result was that all 3 players did poorly.

I've been reading about "online reputation economies". It seems like so much nonsense to me.

In a really free market, there IS a way to measure "how much useful work someone has performed". It's called SOUND MONEY!

They also say "How do you coordinate the needs of producers and consumers in an online 'volunteer' economy?" There's already such a mechanism. It's called the FREE MARKET.

Google Analytics and their "what keywords people search for" feature is very interesting. Sometimes, they search keywords lead to post topics. Someone was searching my blog for "carry trade", and I realized I probably should do a post on that.

Also, Google Analytics tells me that some people are sharing my blog on LiveJournal now. Some people say "promote your blog on multiple social networking sites". I don't need to do that if other people are! Besides, I think I should keep my efforts concentrated in one place. Organic growth is working out well for me, so I should focus on writing good posts.

From now on, whenever someone asks me who I'm going to vote for, I'm going to respond "It doesn't matter. The government isn't going to be around much longer anyway."

I'm not interested in reporting on individual Federal Reserve interest rate moves. What most people fail to realize is that, due to the Compound Interest Paradox, the Federal Reserve has NO CHOICE but to cut interest rates. Otherwise, there would be a hyperdeflationary crash of the dollar.

The recent rate cut IS inflationary. However, inflation is NEEDED to keep the monetary system afloat.

The Federal Reserve is doing the best they can, given the constraint of a corrupt monetary system. It would be better of members of the Federal Reserve could publicly state the flaws in the US monetary system. All the people who work for the Federal Reserve are puppets for the international banking cartel. They aren't going to wreck their gravy train.

I liked this post on the Picket Line, not just because it links back to my blog.

Here’s another data point for the debate over why people irrationally (from a purely economic point of view) pay their taxes:

[W]e use a computational modeling approach to examine the long-standing social issue of tax compliance. Specifically, we design an agent-based model — the Networked Agent–Based Compliance Model (NACSM) — where taxpayers not only exist within localized social networks, but also possess heterogeneous characteristics such as perceptions about the likelihood of audit and apprehension. When making compliance decisions, agents in our model factor in their neighbors’ compliance strategy payoffs. We find that for a given enforcement regime, a world with limited knowledge of neighbor payoffs appears to lead to higher levels of aggregate compliance than when agents are aware of neighbor strategy payoffs and factor these into their individual compliance decisions.

The problem is that people don't have private networks for aggregating and sharing information. What is the true risk of tax resistance? The blogger at the Picket Line is only one data point, and he's using a particularly stupid strategy; he's resisting taxes on income the IRS ALREADY KNOWS ABOUT. People are forced to rely on mainstream information/brainwashing sources when analyzing the risks of tax resistance.

The presence of a monopolistic government and monopolistic media destroyed all the individual-to-individual information networks. The Internet is helping with that.

When people are denied access to reliable information sources, how can they effectively make decisions? When I suggest tax resistance to people, their gut reaction is "That's too risky!", but the actual real risk is incredibly hard to determine. Would-be tax resisters need to aggregate and share information.

I liked this post on Scholars and Rogues.

Attorney General and Patriot Act enthusiast

The law is not about forgiveness. It is often about vengeance, often about revenge.

This is one of the problems with most religions. Most religions says that "Sinners must be punished." and "People are intrinsically evil." God punishes sinners. The State punishes criminals. Sinners are people who don't follow God's arbitrary rules. Criminals are people who don't follow the State's arbitrary rules.

In the eyes of most people, God and the State are the same. The idea of a monotheistic vengeful god became popular the same time the monopolistic vengeful state become powerful.

People say "We need the State because we need to take revenge on criminals." A true justice system would be about restoring equity, instead of punishing criminals. A lot of behaviors are falsely classified as crimes, because of the attitude "people must be punished".

I liked this post on Rad Geek, about anarchists supporting Ron Paul.

Regarding Roe vs. Wade, an true anarchist's attitude is "Who cares what the Supreme Court does?" An anarchist assigns no legitimacy to either the Supreme Court or the US Constitution.

As a model for government, a Constitution is a failed model. The US Constitution did not prevent the current corrupt system from arising.

An anarchist does not care about immigration. An anarchist says that all governments are illegitimate. Therefore, all national borders are arbitrary and meaningless.

However, Ron Paul is SO MUCH BETTER than all the other candidates, you can't help mentioning him.

The important point to remember about Ron Paul is that he's a strict Constitutionalist. He says "The US Constitution should be followed". That is still a far cry from the anarchist attitude "The US Constitution is illegitimate." However, a government that strictly followed the Constitution would be preferable to the current government.

Ron Paul may act to distract people from the true anarchist/agorist argument. On the other hand, if Ron Paul fails to be elected, a lot of his supporters may be converted to anarchism or agorism.

There's another point that's frequently missed. A lot of people say Ron Paul is the "last chance". The different aspect between now and 4-8 years ago is *NOT* Ron Paul himself. The factor that's making a difference is the Internet. The Internet isn't going away, even though there are a lot of people who would like to kill or cripple it.

There was an interesting post on the Ron Paul Forum. It said that a politician NEEDS to be corrupt in order to have a chance of being elected, or even surviving for long after being elected. If a politician is too honest, he will shake things up too much, and will find himself assassinated. At a local level, this process is so efficient that only corrupt politicians have a chance of moving up the chain to national office.

I liked this post on the St. George blog.

[Lou Dobbs is a douchebag.]

He asks a rhetorical question: “Doesn’t anyone deserve a government that works?”

What would “a government that works” look like?

I know exactly what "a government that works" looks like! It's the NULL government!

Someone on has been discussing my post on Real GDP Has Been Decreasing Since 1990. This link set a new single-day visits record for my blog! I had 272 Absolute Unique Visitors. I wonder if this is a temporary traffic spike or will it lead to a permanent increase in my regular readership?

He did a calculation I omitted in my post.

So, I decided to look at M3-adjusted GDP from January 1980 to January 2005. Without adjusting for population growth, M3-adjusted GDP in 2005 was only only 88% of what it was in 1980 -- per capita GDP in 2005 was only 73% of what it was in 1980. The Federal Government used to hide behind the CPI to fool Americans, but no longer -- with the monthly CPI increase at its highest level since Nixon was in office. As people become inflation-conscious again like they were in the 1970s, the Ron Paul Revolution will accelerate.

The CPI *STILL* understates the true inflation rate. The government is still hiding behind the biased CPI. If the biased CPI is growing larger, then the true inflation rate must be even higher.

I didn't bother with the M3-adjusted GDP statistic, because the M2-adjusted GDP statistic was sufficiently depressing. His calculation looks correct, although I didn't doublecheck it.

You also could calculate a gold-adjusted GDP, using the price of gold as your inflation index instead of M2 or M3. That's not as reliable a signal, because central banks have been manipulating the gold price downward by selling/leasing their gold. Still, if look at just the last 5 years, that's a depressing indicator.

I was thinking of offering to submit some articles to other sites. The Compound Interest Paradox is definitely on-topic for lewrockwell's website. I've moved past "Restore the Republic!" and now my attitude is "Who needs government?" Other sites could just repost what I already wrote or I could write an updated version of the article, if someone is interested.

I asked the author of that post, and he said that only Austrian Economics and red market Libertarian content is welcome on The mention on was a nice source of traffic, but since they still are saying "There should be a government.", they are part of the problem and not part of the solution.

Here's another interesting inflation statistic. The Model T sold for $440 in 1915, when the US was still on a gold standard at $20/ounce. That's 22 ounces of gold. The current price of gold is around $800/ounce. 22 ounces of gold is worth $17,600 right now. That's approximately the price of a new car. The price of a car, quoted in gold, has not changed since the Model T. Modern cars do offer extra features, but the real money price is unchanged.

According to Google Analytics, this post led to a bunch of visits from Washington D.C. Surprisingly, almost nobody from Washington D.C. has visited my blog. Someone from the US Bureau of Economic Analysis was visiting my blog due to the mention. I wonder if they were surprised to discover that the US economy is shrinking instead of growing!

Someone said:

If everyone is enslaved, then the current economic and political system is fair.

What right does everyone else have to enslave me, just so that they won't mind being enslaved themselves?

That person also said:

If everyone is enslaved, what right do you have to try and free them?

Unfortunately, I can't become free myself without also freeing everyone else. Monopolistic government policemen and government courts pose too big a threat.

Do I have the right to free them? Is a mindless zombie qualified to make decisions for themselves? That's like saying "Does a parent have the right to make sure their children don't run into traffic?"

I don't understand how someone who fully understands the corrupt nature of the current economic and political system could advocate for continuing it, unless they were one of the beneficiaries of the current corrupt system.

Daniel D'Amico says by E-Mail:

I would like to be included in next months Anarchist Carnival.

Here is my post:

It's a *MARKET* Anarchist Carnival. Technically, that doesn't have anything to do with market anarchism, but neither did any of the other submissions.

The tasering of a student at a Florida John Kerry speech is old news. That specific post didn't have any information I haven't read about in MANY other locations already.

Police are overly taser-happy nowadays. The solution, from a market anarchist perspective, is that police SHOULD BE SUBJECT TO MARKET COMPETITION. Why should the government get an absolutely unaccountable monopoly?

If you have a link that you think is interesting, you can E-Mail me or leave a comment. However, you really should do better than that post if you want me to be interested.

On Reader Mail #19, Francois Tremblay says:

Sure, you don't believe me, but can you prove me wrong? ;)

As for Zhwazi's comment, to be honest with you, I think it's absurd that you're both enamoured with the communist LTV. I understand that the mudpie argument is fundamentally invalid, but it doesn't make LTV any more credible.

Even more disturbing, I sometimes wonder if I've been appointed as the Supreme Leader of Humanity (in the lead persuasively sense, not in the lead violently sense). You can't even convince *ME* if I'm the Supreme Leader of Humanity or not.

There's the Supreme Overlord of Humanity, who has managed to enslave the entire world under a corrupt monetary system and political system. The Supreme Overlord of Humanity needed to enslave everyone in order to free them. My job is to describe how the new economic and political system is going to work, and help people experiment and get started. I don't have to get involved with messy details like bribing Congressmen and the President and making sure the politically connected people who figure out the scam get assassinated.

You disprove your claim to be the Supreme Leader of Humanity in the next sentence, where you describe the Labor Theory of Value as a communist idea. You are wrong. "The Labor Theory of Value is false" is a communist idea! The Labor Theory of Value fails to hold in the US economy, because the USA is a communist dictatorship.

In a *FREE* market, there's a natural arbitrage process that insures a worker's salary is close the actual value of his labor. If a worker is overpaid, he starts facing competition. If a worker is underpaid, he can profitably start a competing business with his employer.

Here's a general rule that never fails. If mainstream economists loudly and uniformly announce that a theory is false, that means it is actually true. I have yet to find a counter-example to this rule. Examples if favor of this rule are:
  • The Labor Theory of Value. Mainstream economists say it is false. I say it is true in a FREE market, false in the current communist economy.
  • The Compound Interest Paradox. Mainstream economists say there's not such thing, most notably Edward Flaherty the troll. Whenever people ask questions confused about the Federal Reserve, they are usually quoting Edward Flaherty.
  • Mainstream economists say history has discredited a gold standard. The gold standard really failed due to government violence and government distortions of the market. In an anarchist economy, money *MUST* be backed by something tangible. Gold and silver are what the free market selected as money before the government was powerful enough to force everyone to use unbacked fiat money.
  • The USA has a free market. The reality is that the USA is a communist dictatorship.
  • Mainstream economists say that the Federal Reserve plays a vital role in managing the economy. I say that the Federal Reserve plays a vital role in enslaving everyone.
  • Economists say that income taxes are a good idea. I say that income taxes force everyone to use worthless Federal Reserve Points as money. Income taxes convert everyone into government slaves.
  • Mainstream economists say that government is necessary. I say "Who needs a government?"
  • Mainstream economists say the "Real Bills Doctrine" is false. After careful consideration, I think the "Real Bills Doctrine" is true. The Real Bills Doctrine only applies to an economy under a gold standard. The Real Bills Doctrine says that short-term time-deposit loans backed by tangible assets are not inflationary. I think this is obvious, because if a time-deposit loan is sound, it is not inflationary. As long as paper promises for gold are easily convertible to gold, they are not inflationary.
That's my challenge. Find ONE STATEMENT that mainstream economists uniformly and loudly say is false, AND they're right. Obviously false statements don't qualify, because mainstream economists aren't loud about those ideas. For example, "The government should not fix the price of oil" is considered obviously false (correctly) by most mainstream economists. Red market economists don't spend much effort denouncing this theory.

On OPEC Currency Advice, redpillguy says:

The books "A Century of War", "Tragedy and Hope", and "The Naked Capitalist", explain that the oil supply is controlled by the "Seven Sisters" (world oil cartel) and not OPEC. Therefore they don't have the power to choose to price oil in ounces of gold/silver.

Obviously, the Supreme Leader of Humanity controls the OPEC member countries as well as every other country. I wrote that post under the assumption that OPEC member countries were sovereign countries acting in their rational self-interest. I agree that's a false assumption.

Any sovereign individual or country should ALWAYS quote prices in gold or silver. Even if you use unbacked fiat paper, if you IMMEDIATELY trade that paper for tangible assets, you don't lose ground to inflation.

On The Labor Theory of Theft, David_Z trolls:

The Labor Theory of Value says that labor is paid an amount proportional to the actual value of their work. If a job is difficult, it will be paid more than a job that is not difficult.

The LTV proposes that only labor can impute value to an output. From which LTV deduces that "more difficult" ought to equal "more valuable." Because both "difficult" and "valuable" are subjective, the argument is demonstrably false.

If you disagree with my definition of the Labor Theory of Value, there's no point in debating. I've seen different definitions in different sources, so I picked the definition that is the most sensible.

There is a way to measure "more difficult" and "more valuable". It's called price. In a free market, a natural arbitrage process implies that more difficult jobs get paid more. This does not happen in the USA right now, because the USA is not a free market.

For example, a cook in a restaurant produces actual real value, but is not well paid. A lawyer produces nothing of actual value, but is extremely well paid.

I strongly disagree with the assertion that the lawyer produces nothing of actual value. Lawyers produce a service. Just like a bus driver produces a service. Or a waitress. Or a security guard.

I think that there are many strong points in this post, (e.g., competition and the risk-free rate of return, plentiful capital, etc.) but I'm afraid your characterization of the LTV is mistaken.

I characterize your response as a troll. Are you a lawyer? Your blogger profile self-identifies yourself as an economist. I'm afraid that almost all the economics you've been taught is a lie and you aren't going to be able to overcome your brainwashing. It's easier for you to say "The Labor Theory of Value is false" than "The economics I've been taught is a bunch of lies". If you're a professional economist, that means that your primary source of income is a red market subsidy. That means "NO THINKING FOR YOU!"

The *ONLY* demand for a lawyer's services is created by government violence. Government violence guarantees that lawyers are highly paid, by declaring "practicing law without a license" to be a crime. That doesn't sound like a free market to me! Government violence guarantees a demand for lawyers' services, because the procedural rules in a court are so complicated that it's impractical to represent yourself sui juris. I can't boycott government courts, because government policemen have a monopoly enforcing their verdicts.

In a stateless society, with a fair justice system, you would not need to spend $50k-$200k on a lawyer in order to get a fair verdict in a trial. The concept of "adversarial justice" is flawed and defective. *ALL* the participants in a trial should have as their goal "achieve a fair outcome". The idea of "screw over the opposition at all costs" is a defective legal concept.

The "useful service" that lawyers provide is that they help people avoid being the victim of government violence. That's like saying a mafia member who sells "protection" is providing a "useful service". If you buy the mafia's service, your legs won't get broken! That's how useful lawyers are.

The other examples you cite (bus driver, security guard) *DO* provide a valuable service. They don't get paid as much as lawyers, because the demand for their services aren't backed by government violence. Can I hire a private security guard that promises to protect me from government violence? Not yet, but such a service may be coming soon!

On Some Jokes, gilliganscorner says:

When I was a boy I was told that anyone could be President. I'm beginning to believe it.

- Clarence Darrow

That's not true. Not everyone's chance of being President is the same. In fact, I would say that your chance of being elected President is the same as Ron Paul's chance: zero.

A more accurate statement is "Anyone who's easily manipulated into making the 'right' sort of decisions can become President."

Redpillguy says by E-Mail:

This guy tries to debunk the "Debt Virus" using false logic - I believe he was being clueless, not evil:

And I replied to his post in the comments section, at 9:21 AM.

It's hard to distinguish between clueless and evil. A troll is a troll is a troll.

He didn't make any false counter-arguments that we haven't discussed already. Did he succeed in convincing you that the Compound Interest Paradox isn't real? The best way to convince someone is to work out an example of the debt-based monetary system in action, like I already did for you.

The problem is: if you look at the balance sheet of a single bank, you don't see the Paradox. If you construct an example where you look at the books of society as a whole, the Paradox is obvious. The economic system doesn't completely collapse because banks keep issuing new loans to insure that interest on the old loans can be paid. That doesn't mean the Paradox doesn't exist or isn't a problem.

I'm working on an updated version of my Compound Interest Paradox post. I'm going to try and publish it on the 1 year anniversary of the original.

The only interesting bit of information in that post was that the author of the original "Debt Virus" book went to jail for failing to pay taxes. I didn't know that. Anyone who fully understands the structural flaw in the US monetary system and taxation system cannot support paying income taxes.

I have a better question for you. Why are you wasting your time reading a blog where the author is a fool?

Here's another page that "debunks" it:
and its home page

You may want to address the above site in a post....

I've seen that website before. It has some good stuff on it. The part where they say "There's no Compound Interest Paradox" is obviously wrong, but there are other bits worth reading.

And here's an interesting page:
and home:

She's still barking up the wrong tree. My attitude is no longer "restore the republic" or "restore the US Constitution". My attitude now is "Who needs a government?" Anyone who says "There should be a monopolistic government." is part of the problem and not part of the solution.

I think I've seen each of those websites before. None of them were sufficiently interesting to attract my attention.

You really need to find better websites to visit. Look at my "Google Reader Shared Items" for an indication of blogs I think are interesting.

A lot of people just cite false mainstream economics sources rather than thinking for themselves. I'm not really interested in wasting my time reading stuff written by fools. If they made a false counter-argument that I haven't already addressed, or needs to be discussed again, I'll do it.

And here's a good one from kitco:

I wasn't particularly impressed by that article. If someone says "The US economy, as it currently exists, is doomed!", my response is "Tell me something I didn't already know."

I'm starting to get pretty good at, within the first few moments of reading an article, telling if "This is worth reading." or "This is nonsense." I look at the quality of the logic of their writing and that's a good indication. This is a useful skill, because I've noticed that "worth reading" and "credentials" are uncorrelated.

On the Ron Paul Forum, someone asked by private message:

I too work in the IT industry as a jack of all trades, mostly centered in enterprise management and monitoring w/ a healthy dose of scripting type work. I mention this as I find a great deal of people that I associate w/ in my political viewpoints online come from a similar background.

People working in computer programming or engineering need to have a "figure things out for yourself" attitude. If you didn't have such an attitude, you wouldn't be any good at it. For most other careers, you're just following orders.

It is a contradiction. A certain number of independent thinkers are needed to keep the wheels of the economy moving. The politicians, bankers, and lawyers would have no power at all if they weren't able to control the productive workers. It's hard to say "think for yourself while programming" but "don't think for yourself about politics". The difference is that the Internet is making it easier for people to share information. Pre-Internet, the independent thinkers were mostly kept isolated from one another. Their only information source would be biased TV and newspapers.

The scientists, engineers, and productive workers are making a mistake by letting politicians, bankers, and lawyers continue to control the world. Why should we let them steal our work and do bad things with it? We should know better, so we're ultimately responsible for all the bad things that happen.

Why would you think agorism has a non-zero chance of success?

By avoiding taxes and government regulations, you're increasing your personal wealth. Agorism is the only resistance strategy where you hurt the bad guys *AND* show a profit at the same time! Government places huge restrictions on productive people in the form of taxes and regulations. If you can avoid these costs, your personal profit and wealth increases dramatically.

Once you get an agorist community started, growth is exponential.

The most productive workers have the most to gain by switching to an underground agorist economy.

By E-Mail, someone says:

Here's a simple example showing the LTV is bogus.

Imagine that you buy a piece a real estate to build a house on. According to LTV, the price you pay is supposed to be a summation of all human effort put into it in the past. Now suppose you drill a well on the property. The well discovers:

1) a sinkhole which makes the property unbuildable


2) gold-bearing rock

According to LTV's prediction, the value of the property should rise by the addition of the human effort of the well-driller, regardless of what the well discovers. In the real world, people respond as if the value has gone down with the sinkhole, and up with the gold. Since LTV doesn't predict how humans act, it fails as an economic theory.

You are using a different definition of the Labor Theory of Value than I am using. My definition was "Labor is paid an amount proportional to the actual real value of their work. More difficult jobs get paid more." When I talk about the Labor Theory of Value, I mean the definition I gave, not a definition listed elsewhere. I saw different definitions from different sources, so I picked the definition that made the most sense to me.

Your argument is like saying "Your definition of circle is wrong, because everyone knows a circle has 4 sides." If you mean "square" when you say "circle", we're talking a different language and there's no point communicating.

I didn't say anything about land prices. In the case of a sinkhole, whoever bought the land should have bought insurance or surveyed it first. In the case of a gold mine, whoever sold the land should have prospected for gold first.

If people who act like fools lose money, that doesn't discredit the Labor Theory of Value. In fact, fools losing money is an argument IN FAVOR of the Labor Theory of Value. Your example isn't evidence AGAINST the Labor Theory of Value; it's an argument in FAVOR of the Labor Theory of Value.

My version of the Labor Theory of Value doesn't directly address land prices. Back when the US had frontier, the price of land would equal the labor value of clearing and claiming unowned land. From that point, land prices should rise over time since the amount of land is fixed. Landowners should receive approximately the same rate of return as other capital holders.

For example, if you were using land for farming, the price of the crop should equal the price of the labor spent farming, plus a suitable return on invested capital for the farm owner.

If a farm owner wanted to figure out how much his farmland is worth, he can figure the value of his farmland backwards from observed food prices and labor prices. If the risk-free return is 2%, then the farm owner should expect a return of slightly more than 2% on his farm investment. In a free market, there would be no zoning restrictions against the farmer reusing his land for other purposes.

The Labor Theory of Value fails to predict how people act because the State is interfering with how people interact. A corrupt monetary system disrupts the price signals that people otherwise would use to communicate with each other about what work needs to be done. Government regulation of industries prevents people from responding to price signals. I can't say "Lawyers are overpaid; I'll go work as a lawyer." Government violence prevents me from responding to that price signal.

There's a lot of hate for the Labor Theory of Value out there. I must have touched on another mass brainwashing issue. I've received more "troll-type" responses to that post than any other. The Labor Theory of Value is *NOT* a Communist idea. The Labor Theory of Value is a free market idea!


Zhwazi said...

I pissed off Francois a few months ago and he's still holding a grudge against me. He's a bit of an ass to me and anyone that he thinks I'd consider an ally or friend or who calls themselves an agorist. Just ignore him. David Z is, as you might have guessed, a friend of Francois.

Francois Tremblay said...

Fine then, I am open to refutation. Link me up to an entry you like about LTV that explains why it is right, and I will read it (preferably not by zhwazi, but if I must, I'll read his stuff too).

redpillguy said...

Your statement "if mainstream economists repeatedly and unanimously bleat a statement, it must be false", reminds me of this article:

Every time The Economist disparages gold, the price goes up.

Too funny. I'm waiting for their next article that says so.

Francois Tremblay said...

I am NOT speaking to you, I am speaking to FSK. He will decide whether he wants to reply or not, not you.

FSK said...

OK, that's enough bickering.

I already gave a post on "The Labor Theory of Theft" a few days ago.

I'll give my full response in my next "Reader Mail" post.

David_Z said...

FSK - I've no idea why you jumped to the conclusion that I'm trolling your site. I apologize if I've in any way offended you, because it was truly not my intention.

I understand that you've a definition for LTV which is not consistent with the established definition. That's all I meant to say in my comment. As for the adversarial nature of your reply, I'm disappointed. I read your blog regularly, have probably commented here several times, and have hosted you twice in a Market Anarchist Blog Carnival (e.g., #7). I would not have thought a modicum of respect would be too much to ask of you.

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