One of the largest sectors of our economy is this thing we call Wall Street or the Stock Market. Most people don't know a great deal about it, except that that's where something called "high finance" is and that's where people go to get rich. What we think happens there is a thing called "investment."
We are wrong.
Investment is Spending.
From an economic perspective, investment (the kind that drives our economy) is spending money on a needed good or service. If the value of what you get exceeds what you paid for it, that's a "good investment" or, in layman's terms, a "good deal" or even a "steal." (indeed, the difference in value implies a market failure ultimately comparable to fraud.) If the value of what you get is exceeded by what you paid for it, you've been "taken for a ride," or perhaps you're just "a moron." It's a bad investment.
But with the money you paid for the good or service, the person who provides it is able to provide more of it, thus you have invested in his business.
Stocks are Money.
Stocks don't work like that. Stocks are a kind of loan, used to create (conceptually short-term) capital for business investment. As with virtually any modern loan, the owner of a stock collects a kind of interest called a dividend, and (conceptually at least) stands to recover the whole value of the loan (and in the best case, far more.) Far from investing, he has created a source of virtually free money.
The guy who sold the stock (borrowed the money) hopefully does invest it, buying the goods and services he needs to buy goods and services. If not, the value of the stock will collapse, and its owner will be unable to recover the money he paid for it. Think of the dot com bubble.
But these situations are uncommon enough that the present value of a person's stocks is included along with his bank balances and other salable assets when computing or estimating his Net Worth. Bill Gates, for example, owns a lot of loans. That's what makes him rich, thus those loans are money, as much so as the green-tinted picture of George Washington you've got in your wallet. (And if you don't have a dollar bill in your wallet, may His Noodly Appendage preserve you.)
Stockpiling Money is Saving.
Normally when you accumulate wealth, we call it saving. Putting money in a bank, for example, isn't investing. Economists are only different in that they call an accumulation of money saving in all cases. This is hardly surprising since, for their purposes, buying a stock is really no different than making a deposit at your local credit union. Just as in that case, you collect interest and expect to recover the full value you paid for the stocks. If you don't, you were "taken for a ride." Or are just "a moron."
Top income earners save more.
And here's where we get to the point where there's any disagreement between economists or political parties. As it happens, people who make more money on average spend more of it. That's because having money doesn't create proportional demand in the economic sense. Human wants may be unlimited, but how many cars do you really need? And thus how many will you really consume? After my fifth car, I'd start to be a lot less interested in them, and it turns out that humans generally agree with me.
Low income earners spend huge portions of their income -- sometimes several times their take-home pay -- chiefly because the basic expenses of life cannot be dispensed with. You can't live without food, you need a place to live, etc. etc. etc. Through loans, the young (more than the genuinely poor) are able to get what they need in exchange for the promise that they will pay it back at some later date.
Give a bum a fiver, and he'll spend it.
Now, think of all the affluent people you know or have heard of. How many have a bank account? A 401K? Mutal funds or CDs? Thousands or millions or billions of dollars in the stock market?
How many of them spend as large a part of their take-home pay on cheddar cheese (for example) as you do?
People with more money save more of it. This much is obvious if you think about it, but apparently the first guy to really think about it was John Maynard Keynes, whose Consumption Function underlies the modern economic understanding of the Great Depression.
Saving is (sometimes) bad.
A certain amount of saving is good. Savings allow people to buy what they need even when they can't afford it without going into debt, and on a macroeconomic level can help to smooth out the rough spots in the Business Cycle.
But there's a trade-off. Money that's saved isn't being invested immediately, and so the demand backing the market's supply is reduced. That in turn limits the overall supply in a market and the really bad news is that people are less eager to spend (tend to save rather than investing) when money is tight.
And what all that means is that a temporary fluctuation can send an economy into a virtually uncontrollable tailspin, like the Great Depression.
Welfare is (mostly) good.
And what that means in turn is that giving or returning money to the people who still have it is the least effective way of actively stimulating an economy. Far more effective than any tax cut ever is the simple concept of Unemployment Insurance. When workers are out of work, the government gives them money to keep them going (investing) until they can find work. This, along with other welfare policies, provides an automatic stimulus effect that helps to stop something like the Great Depression from happening again.
So safety nets for citizens are also a safety net for the economy.
Stock trading is fraud.
One does not get rich, in this economy or any other, through hard work. After all, humans are (no matter what you may have been told) largely interchangeable. There are occasional differences in the market value of people's labor, but those differences are in fact relatively minor and often temporary. The exceptions are people with rare characteristics that give them a uniquely valuable talent. I like to refer to these (such as champion athletes) as "circus freaks." But even these don't get into the real top registers of practical wealth by work alone.
The only way, in any economy, to get truly rich is by taking money from the people around you through unequal exchanges of value. There are essentially three ways to create such unequal exchanges: fraud, market distortions, and coercion.
While coercion is a real going concern in the modern world, governments do much to mitigate its use (which is either illegal or should be) by private citizens. Those who do strike it rich through successful use of coercion are generally regarded as (highly successful) criminals. They usually are not billionaires.
Market distortions can make a working man or a businessman rich, and are perhaps the real bread and butter of a businessman's trade. Nevertheless, they tend to be mercurial, and it's a rare person who's reached billionaire status through business acumen alone.
True rich people get rich and stay rich in the stock market, selling their loans to others for more than they're worth and buying loans from others at less than they're worth. It should go without saying that nothing of value is created in this process. It merely allows one person who is shrewder or luckier to pick the pocket of his fellows. This is some people's entire job or career, and yet we do not regard these people as deviants or criminals.
One of the oddest ideas of America's economic right-wing (the so-called supply siders) is the notion that by reducing tax rates, the government can increase tax revenues. On the surface, this seems plainly bonkers. It's such a deranged notion that iconic one-term Republican President George Bush called it "voodoo economics," insinuating in his fashion that there was no reason to expect it to work. So why is this crazy idea so widely accepted and preached?
It turns out it's based (with a few problematic twists and turns) on a fairly sober economic theory. This original idea is called the Laffer Curve, pictured below:
Famously making his calculations on the back of a diner napkin, economist Arthur Laffer (most significantly a Reagan economic advisor) sketched out his curve (representing tax revenues) on the basis of three notions:
1) If the tax rate is 0%, no one pays taxes. Or rather everyone does, but 0% of anything is nothing.
2) If the tax rate is 100%, no one pays taxes. Because presumably they would rather set fire to anyone attempting to collect taxes at that rate.
3) There is some point between 0% and 100% (he called it t*%) at which tax revenues are optimized -- extraction is perfectly balanced with disincentivization and the government is getting as much money out of the economy as it possibly can.
The only one of these notions that's even remotely controversial is the second, and the controversy is so mild as to be entirely negligible.
Laffer made three crucial mistakes in the construction of his curve:
1) He assumed there was only one optimum position.
2) He drew the curve as a parabola.
3) He tried to explain the curve to a bunch of simpletons.
There's no reason to suppose that the curve would have the gentle regularity of a parabola, nor to suppose that only one optimum taxation point exists. There's certainly no reason to suppose that t* would lie precisely in the middle between 0% and 100%. But the mistake made by the simpletons is far more grave. They accepted the notion that the current tax rate was well to the right of t*. History has shown that it was not.
Now some of you have been following me thus far, you know these "voodoo economics" were a cornerstone of Reagan's campaign in 1980 and that he slashed the top marginal rate by a full 20% in 1981. You may even have been taught that this action was responsible for the economic recovery of the 1980s.
You have been mislead.
So what did happen when Reagan cut taxes in 1981? Tax revenues dropped, the economy hit the second dip of a double-dip recession, and Ronald Reagan never cut taxes again, aggressively raising them throughout the remainder of his career. The economy didn't recover until his second term in 1986, and probably through no fault of his.
Nevertheless, "tax cuts increase revenues/help the economy" is firmly cemented in the deranged psyche of the American right, when that's not even what Laffer said in the first place.
He said that, under certain conditions (which, for the record, have never been shown to exist in the "western" world) it was possible to increase tax revenues by cutting tax rates.
I loved Mass Effect. And when I say I loved it I mean that the second I picked it up I played it with a fervor and intensity I have rarely bestowed upon any game. I interrupted what was to be a long chain of accomplishment-completing Dragon Age: Origins playthroughs for what I thought would be a short break and haven't picked DA:O (which I am also quite fond of) since.
Mass Effect had everything I had long been missing in my games: Spaceships, Guns, Swashbuckling Adventure, Hot Blue Alien Chicks, and all wrapped in a compelling Bioware story somehow set in a Space Opera world somehow as deadly as it was silly. Even the morality system was....different. And that in a good way. I had been hesitant to pick up Mass Effect on release, convinced (and frequently vindicated in my belief that) the Shooter and RPG game genres were too diverse to be successfully merged. What someone forgot to tell me is that for all they talked about it, Bioware didn't even try.
Mass Effect is a shooter, full stop. It has some elements typical of RPGs, but it doesn't let them get in the way of just blastin' stuff. It is, in short, Bioware's idea of a shooter. And it's immensely fun. Note however that I still want an RPG with spaceships.
Don't get me wrong, Mass Effect had its flaws: cumbersome inventory system, minimalistic level design (only the mission worlds and the citadel have any real depth and even they're missing something,) and numerous typical Bioware RPG flaws that just carried on over. But it was the most fun I'd had in years.
So I picked up Mass Effect 2. And to clarify, I loved it. Better than Mass Effect in many ways.
But Mass Effect 2 had its issues.
The most painful moment of my ME2 experience was when I imported my old save, watched an interminable and largely uninteresting cut-scene that managed to simultaneously show and trivialize the death of the ship I had grown to love, and found that none of my lovingly collected and selected hardware had carried over. Though I had to some extent expected it, I was the wrong kind of sad when Maggie Shepard died without a face in the armor she had discarded less than ten minutes into the first ME planetary excursion.
And then of course her arch-nemesis Cerberus resurrected her at immense cost. But what do you expect? This is a universe where there is an entire species of asexual blue-skinned aliens (Not to mention, as of ME2, apparently every other sapient species in the galaxy) somehow manage not only just to have breasts with nipples about where humans normally expect them but to be totally sexually compatible with humanity. And then I'm railroaded into working with a shockingly well-funded terrorist organization. For the good of humanity. To say this plot made somewhat less sense than ME's is roughly like saying that stars are somewhat larger than planets -- generally something of an understatement.
But okay, the new ship's nice, even if they did insult the old one by naming it after her. And Miranda's kinda pretty I guess (she doesn't like girls, but what are you gonna do?) and after a bit of tinkering, I got the new armor looking okay, and I'm good to go.
But I have some problems:
1) Why are my bullets so slow? In ME they were fast projectiles, generally hitting exactly what I aimed at exactly when I pulled the trigger. In ME2, I can actually see them flying at the target, where they often miss because the enemy has moved.
2) Where is the Mako?! I loved the Mako. Sure, its controls were a bit wonky and the planets a bit bland and empty, but it was fun to drive and fun to fight with.
3) Why am I suddenly in charge of scanning planets? Don't I have people for that?! In ME, I pressed a button and presto! Scanning done. Expanding a single button-push into a tedious mini-game is a bad idea.
4) I thought Joker was still the pilot. Why am I now flying the ship? And why is it now a little cartoon ship that has its own weird physics? Back in ME, I just clicked on where I wanted to go and we just went there. Vastly preferable.
5) Tiered character advancement is kinda neat, but options now seem sparse and meticulous planning necessary to get the most out of a relatively few character points.
6) Thermal Clips?! If the opening cutscene was the most painful experience in ME2, these were the most baffling. In ME1 we kept our guns cool and firing without these confusing doodads, and we generally brought as much of whatever we needed to the mission with us, rather than relying on the enemy to drop it.
7) Wherever Bioware had two choices on how to simplify a game mechanic they picked the wrong one. Morality and Persuasion (Charm/Intimidate) were both good concepts, but linking them into a kind of feedback loop was bad. So Bioware kept the feedback loop and lost the skills. Electronics and Decryption were good concepts, but their associated minigames were annoying. So Bioware dumped both and brought in different minigames instead. So every Soldier is now an expert hacker.
8) Ammo Powers. It's either ammo (in which case anyone can use it) or it's a power (in which case it's not ammo.) It's not both. Soldiers can have real skills/powers. "I know how to use freeze ammo" is the lamest superpower ever.
9) We've gotten rid of the need to accumulate loot, so why is my campaign for the salvation of the galaxy still basically funded by petty larceny and theft?
10) Almost no variety in equipment. There are like three guns (at best) of any one type, and only two or three types of armor for each location. DLCs make things worse, not better, generally offering a piece of equipment (with free irritating Illusive Man E-Mail) you start the game with and would be stupid not to always use. Also, Shep has apparently forgotten to take off her helmet.
11) The suicide mission wasn't anything of the sort. Everyone (including me) lived. And I wasn't even trying. It took me some serious Internet searching to figure out how to screw it up.
But so, it was a fun movie even if it had no lesbian love interest and wasn't much of a game. So I go poking around on line to find something to get excited about concerning the sequel.
And that's where I find out how ME2 got the way it was.
I have to say, folks, did we play completely different games? Yes, skills effected accuracy in ME, but Shep was still a badass at Level 1. I never had any trouble hitting things. Your shooter skillz are teh lame.
And I *loved* the Mako. Not saying ME2's level design wasn't better off without it, but I sure did miss it.
One of the problems in American politics today is that a lot of people are advocates for what they think is the free market. They've been taught that creating one will build an economy that requires no management, and simply works on its own, instantly producing (through the action of something called the Invisible Hand) the best solutions to every possible problem. Don't laugh. This is serious economic theory and it's something a large number of fairly serious academics (to say nothing of lunatic radicals) actually believe. And it's actually true. The problem is that most people advocating for free markets are speaking a language they don't understand. They know what the effects of a Free Market are, but they don't know what a Free Market is.
Free Beer
The fundamental thing that's confusing is the word "free." This has several meanings, the most important of which are what the free software community refer to as "free as in freedom" and "free as in free beer." The first is the human right of reasonably unencumbered agency or action, liberty in other words. The other is exactly what it says on the tin: Getting things without paying for them. Americans are very fond of both usages, but the first is more popular in American politics. Unfortunately, as it happens, the "Free" in "Free Market" is a kind of Free Beer.
A Free Market is one in which three conditions exist:
-There is no cost to enter the market.
-There is no cost to exit the market.
-There is no cost to continue in the market.
This creates a condition that economists fancifully term "perfect competition." It's called this because there is no longer any tactical aspect to the market. No means now exist to drive a competitor from the market. The only things that matter to profitability are the popularity (not to say quality) of a product and the efficiency with which it can be produced.
All the World's a Stage
Of course, as it would happen, we need one more thing to summon the Invisible Hand and imbue it with its mystical agency. That thing is called a "microeconomic actor" and it's a truly bizarre critter. It's a very simplified economic model of a human being, and as soon as I describe it for you, you should immediately spot the problems with it.
A microeconomic actor is a being who:
-Always acts with enlightened self-interest
-Has resources
Now the problem, for the 30% of the class that missed it, is that humans are neither enlightened nor self-interested enough to fit the bill. As a matter of fact, humans are stupid, gullible, and altruistic. Only the last is seen as a virtue, and the first two are an absolute disaster when set loose in the Free Market. As it happens, not all humans have resources either, but that's mostly their problem, except for the altruism thing.
There is No Such Thing as a Free Lunch
Of course, laying aside the inadequacies of humans for a moment, we still have to deal with the problem of where Free Beer comes from. You may have heard that nothing in life is free. It's true, and the Laws of Thermodynamics demand that it be so. This is obviously going to be a problem of implementation for our Free Market. Fortunately we have something that is an outside actor as far as our economic system is concerned. We call that thing a "Government."
Governments can cause economies to reach a reasonable approximation of perfect competition (let's call it "good competition") by simply thwacking any entity that gets large enough. It turns out governments are good at this, since their only tool (which they exist to create and protect a monopoly on) is coercion. Because no entities are large, none have the leverage necessary to dominate a market and drive away competitors. Of course, that still leaves significant problems with entry and exit costs*. Governments can limit these to varying degrees by providiing to entities looking to enter or exit the market with grants, loans, and subsidies to limit their costs. The funds for these of course must be provided through various acts of thuggery and extortion, which governments happen to be good at. These of course need to be as market-neutral as possible. This gives us what I'll call "better competition," but do note that it's still not perfect.
If governments do none of these things, far from "unshackling" the Invisible Hand, they have all but cut it off.
Chasing Unicorns
So now we have Better Competition, but we still don't have any source of microeconomic actors. Fortunately, through the magic of government intervention, we can create a better approximation of one than your garden-variety human. If microeconomic actors are unicorns, these are more like horses, so through the powers of analogy and bad punnery, I hereby pronounce them (since I am unaware of a term for them) microequinomic actors. Humans are stupid, but they can learn. To serve this end, governments must provide for the education of people it wants to be active in markets (read: everybody.) You could call this practice "compulsory universal education" if you like. Punishing stupidity and dishonesty (while rewarding intelligence and honesty) further help to curb the effects of these human failings. Altruism's effects can be curbed by providing those without it with additional resources to account for it.
To the extent that governments fail to protect humans from their fundamental failings, the Invisible Hand is shackled to the very limited abilities of those who are active in markets.
It should go without saying that the funding for these actions must necessarily be provided through acts of market-neutral thuggery and extortion.
Free Markets vs. Freedom
By now we've got a lot of thuggery and extortion going on, and you might rightly feel somewhat disquiet about it if you come from the nation whose unofficial motto was and is "Don't tread on me." Unfortunately, perfect freedom is as unachievable in fact as free beer. You may already be aware that individual rights can conflict, but there is a further problem that no one is truly free if there are things he must do or that he cannot do.
Shackles are affixed to our agency through the very bodies we inhabit. We must eat to live, at the very least, and our bodies can break down and become diseased, leaving us in a pitiful state which is a mockery of freedom. We have further shackles in our minds, a common morality that tells us we must sacrifice for others, if only our spouses, our spawn, or our friends.
Wealth grants us power to overcome the weaknesses of flesh and discharge the duties we impose upon ourselves, but the only ways of creating wealth require shackles and the best ways of creating wealth need government interference.
So in the end, we find that freedom isn't free (and not in the way you thought, either,) and that the people who want to create a free market are in reality doing their level best to destroy the best approximation of one our deeply flawed system of government (created and enacted by stupid, gullible, altruistic humans) has been able to create.
*If you were wondering, starvation is an exit cost.
I wasn't thinking clearly over the summer and my SAP appeal is late and may not be approved because I forgot to ask my doctor to write me a note when I went in to see him earlier this month.
So that sucks.
I've been getting more and more emotional for a while now, I was in an apparently moderation-worthy dust-up on classicbattletech (and have voluntarily exiled myself from the site until the matter is resolved, either by a reversal of the Official Warning or by a year going by to clear it,) and I've just been getting surlier and surlier since. I can feel myself slipping into a debilitating depression and the thing is that I have no real way to stop myself when something like this happens.
So it's going to suck to be me, or to be around me, for a while.
I apologise in advance for anything I'm going to say and in retrospect for anything I've already said because I just hate myself and the world right now.
