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Postmodernism Corrupts Everything

According to Encyclopaedia Britannica:

“Postmodernism, … a late 20th-century movement characterized by broad skepticism, subjectivism, or relativism; a general suspicion of reason; and an acute sensitivity to the role of ideology in asserting and maintaining political and economic power.”

Its roots go back long before the late 20th century phenomenon. Consider quantum physics. The Copenhagen interpretation (developed in the 1920’s) holds that, “physical systems generally do not have definite properties prior to being measured.” The most infamous and absurd example of this is Schrodinger’s Cat: it is neither alive nor dead until a human consciousness observes the radiation detector. This is obviously “broad skepticism and subjectivism”. And a general suspicion of reason (perhaps less obvious).

Next, consider the historical revisionism of Howard Zinn. His People’s History of the United States began with the belief that there is something wrong with America, going back to prior to its Founding. His scholarship was shoddy, but that is rather the point. He puts the history profession at the service of the Marxist class warfare narrative. History can jettison the fact of what happened, in service to socialist political ends.

Zinn’s effort bore its ultimate fruit in the New York Times so called 1619 Project, which–with rotten scholarship–asserts that slavery is essential to capitalism. Yeah, and war is peace and ignorance is bliss, too.

What other field comes to mind, at the mention of disregarding the facts in service to the goal of political power?

“Each of us has to decide what the right balance is between being effective and being honest,” said global warming activist Stephen Schneider

Yes, I am aware of the supposed nuance of his comments and his stance. But no amount of nuance can defend the false alternative of effectiveness vs. honesty. And no one would dare defend this view (or claim nuance), if not for the pervasive poison of postmodernism.

Postmodernism has also had its impact on the law. In the 17th century, John Locke and others were developing the idea that law does not simply mean whatever the government forces you to do.  Locke said that people have rights such as their life, liberty, and property. Law is supposed to be written to protect these rights, not to give a veneer of respectability to the so called “divine right of kings”, otherwise known as Might Makes Right.

But starting in the late 19th century, this understanding was abandoned. The Sherman Antitrust Act stands as an awful example of a postmodern approach to law. Loosely worded, it makes a crime out of restraint of trade. A proper law written to protect individual rights must be clear, so that everyone can know in advance what is legal and what is illegal. A postmodern law is not intended to protect rights, but to give the government the power to violate someone’s rights.

Unfortunately, the trend accelerated after 1890. People (and the Supreme Court, see the opinions written by Justice Oliver Wendell Holmes) moved away from the principle that the government has enumerated powers, and the concept of individual rights. The Constitution, they said, was a “living, breathing” document. In other words, it means precisely what they want it to mean, subject to change based on convenience.

Today, virtually every productive enterprise is subject to regulation. This means, in practice, that a government agency writes, judges, and enforces a set of broad but not clear laws. Businesses are under a presumption of guilt, and have the burden of proof to show that they are innocent.

Next, let’s look at money. The postmodernists attempt to get away with adulterating and perverting money, to the point where people are forced to use debt as if it were money. This is no random economists’ confusion. It’s done in service to the leviathan state. In the words of Benito Mussolini, “Everything within the state, nothing outside the state, nothing against the state.”

Today, the government has seemingly unlimited capacity to dole out free goodies. The cargo cult of so called “Modern Monetary Theory” pugnaciously asserts that the limit is only when the “bathroom sink overflows”—i.e. when they create too much of this debt-money. So far in response to the coronavirus, the government has bestowed on us $2.8 trillion of loot. This was on top of a baseline budget deficit of $1.7 trillion in the 12 months ending March 21. The US government will likely run a deficit over $6 trillion.

There is a limit to this. There is a point in any postmodernist deviation from reality, when the consequences hit at high velocity. It’s just that the US government’s capacity to consume our accumulated capital is higher than anyone thought.

And this brings us to epidemiology. What had been an obscure field that studies disease vectors, how now catapulted onto center stage with its call to lockdown the people and shutdown the economy.  So far, in America, over 33 million people have filed for unemployment. And that understates the reality because state unemployment offices are unable to keep up, because some companies keep making payroll out of accumulated capital, because of the 2-month payroll subsidy in the so called CARES Act, etc, and because the self-employed and business owners are generally not eligible to collect an unemployment check.

This stupefying ruin occurred because postmodern epidemiology attempted to find the “balance is between being effective and being honest”. Professor Neil Ferguson published his projections of mass death, based on a pathetic buggy computer model. And, because an early paper claimed that the virus can be transmitted by asymptomatic people. This claim was based on a since-retracted story of a Chinese woman in Germany. She did indeed transmit the virus to a German colleague, but it turns out that she had symptoms. They just did not bother to call her to ask, before going to print with a story that fueled the momentum to lockdown everyone worldwide. They were highly “effective”, if not balanced with honesty.

The government laid waste to the economy and people’s lives because postmodern lawmaking puts the power to lockdown 300 million innocent Americans into the hands of the governors (and postmodern ethics sets up the false alternative of saving lives vs. the economy), who listen to postmodern epidemiologists who rely on postmodern software.

Unfortunately, the people will respond with even more “broad skepticism, subjectivism, or relativism.” All scientists will be lumped together, under a “a general suspicion of reason.” If a proper scientist develops something real (e.g. a vaccine for COVID-19), millions will not avail themselves of it, out of belief in conspiracy theories. This trend, of skepticism towards science as such, began with the postmodern global warming scare (which also featured bogus computer code that the developer refused to publish so the scientific community could review it).

Staggering Job Losses

So far, about 20% of the people who had jobs 6 weeks ago, are unemployed. This is in addition to the 96,000,000 who had no job even before the lockdown, but who aren’t counted as being in the workforce.

And the reality is worse than even this, for three reasons. One, unemployment offices are not able to keep up. More people are being added to the rolls who already lost their jobs.

Two, government at all levels has not begun laying off yet (if they ever will). So these people were laid off almost entirely from the productive sector.

Three, many businesses are still paying salaries hoping for a quick resolution. But every day, they drop, depleted of capital. No one knows how many there are, or how many workers still receive paychecks from such businesses.

This is really bad. Really really bad. Worse than 1930’s bad. And it comes at a time of record high leverage. Deleveraging has hardly even begun.

How Wide is the Margin?

Economics discusses the margin, and the concept of marginal all the time. For example, the marginal worker is the one who loses his job, at a downtick in revenue.

Well, since the government response to the virus, over 26,000,000 people have lost their job.

It is not just one worker who occupied the role of marginal worker. It was over 26M workers (and counting).

The concept of margin also implies the concept of width: how wide is the margin? All those included within this finite space are at risk of loss of their job, business, etc.

And due to a number of factors, including decades of falling interest and margins, with rising net present value of all liabilities including debt and wages, the margin has grown quite wide indeed. And of course a months-long shutdown widens the margin much more than a week-long shutdown.

Perhaps 30% of the US economy (we shall see how big it is) was included in this wide margin. The fallout will be felt for many decades.

When Government Has All the Powers

I wrote only one paper that was rejected by Professor Antal Fekete. It was nominally about duration mismatch. He asked me to write it as a guide for a course at his New Austrian School of Economics in 2012.

I argued that when banks borrow short to lend long, they harm themselves and their clients. This is in accord with what Fekete taught. However, I made an additional point with which he did not agree. I said that government should not have the power to ban everything that every special science lobbied to prohibit.

Today, the special science most in the public spotlight is epidemiology. Like in economics, controversy sometimes splits epidemiology on certain issues. That does not prevent it from calling for bans on behaviors that epidemiologists don’t like, including those related to the spread of contagious disease.

Little did I know, back in 2012, that this side point to my paper would become so important. Based on the work of certain epidemiologists, the government has shut down our economy.

Unfortunately, the government has taken for itself and the people have willingly given it, a terrible power. Government can now ban all the things. In 2012, I was focused on a potential ban of a banking practice. But I argued that a government which has the power to ban one thing, in fact, has the power to ban all the things. If you doubt me, just ask those who sell food in restaurants, clothing in clothing-only stores, haircuts in salons, and much more.

Today, every practitioner of every special science has taken note.

Whatever the threat of coronavirus may be, history surely teaches us of the dire threat of a government with unlimited power. A government with unlimited power is a totalitarian government. Whatever your view of coronavirus, I hope we can at least agree that government must be limited.

I have never asked anyone to call their legislators or governors, but now I implore you to call and ask them to honor the limits placed on government power by some wise men in 1776.

Flattening the Curve is Central Planning

It may be getting lost in the noise now, but there was a principle behind locking down most of the people (except those deemed “essential”). It was not to “fight” the coronavirus. The locker-downers conceded that everyone will be exposed to this virus sooner or later, anyways. They just wanted to *slow* the spread of the virus.

Got that? We are laying off millions (or tens of millions) of people, ruining hundreds of thousands of businesses, wiping out trillions in capital, impoverishing the people. Not to stop the virus. Just to SLOW it.

And why is slowing it so important that we cause this much harm to so many people? It is important, we are told, because the hospitals have too few beds. Worse, they are inflexible and unable to expand capacity due to shortages of everything from doctors to ventilators.

This harm is inflicted to manage demand at hospitals.

The reason why the health care industry is so brittle is the countless regulations that require permitting, licensure, Certificates of Need, armies of bureaucrats that can approval of anything. Such as the manufacturing of masks. It would not be exaggerating by much to say that everything which isn’t mandatory is prohibited.

In other words, the central planners have managed the supply at hospitals. And now their managed supply is insufficient, so they seek to manage the demand. Your job, your life savings, your business, your dreams and goals–are just collateral damage.

Flattening the Economy Because, Virus

I write this on March 18, now having watched a 180-degree reversal of how we think about contagious disease. Formerly, we would put sick people in quarantine and respect the right of healthy people to go about their lives. Today (March 18, 2020), we are now on the brink of martial law. In our zeal to fight the corona virus, we are shutting down travel, public gatherings, restaurants, etc.
This is what a mass panic looks like.
Not to mention it is already wreaking massive economic damage. The economy was already faltering. The false boom stimulated by a decade of monetary meth was likely turning to bust, even before the virus. And then the government began to shut down whole industries: air travel, hotels, sports, bars, restaurants, etc. And likely more to come.
I write extensively at Monetary Metals about the risk of debt defaults cascading like Dominoes, so I will not further address that here. I will only say that whole industries are laying off (with much more to come) whole workforces in one giant dump. That is a lot of people who will suddenly experience hardship, not to mention stop spending on everything from clothes to computers, phones to tunes (never mind restaurants and bars, they wouldn’t be allowed even if they still had their paychecks). As always in a downturn, mainstream financial and economic analysis is useless. I think right now, they are predicting “slower growth.” Yeah, and if you slam the brakes in your car, it is “slower acceleration,” too.
Any why this draconian response? There is now a new technical expression, among the newly-minted tens of millions of experts who inhabit social media platforms. They seek to “flatten the curve.” That is, they say, it is inevitable that this virus will sweep the population. But if we can just slow its progress, then our health care system will be able to respond, there will be enough beds, ventilators, and health care professionals to care for the case load. If we allow it to progress at full speed, then the hospitals will be overwhelmed, and America will look like Cuba.
If you think that the govt must outlaw public gatherings, close the restaurants, and shut down half the economy … to “flatten the curve” … then you–yes YOU–are attempting to be a central planner.
In capitalism, people and industries are resilient. The reason is simple. They are free to act on their reason, and to seek a profit.
In socialism and central planning, there is no resiliency. The people starve if the crop yield is below quota, they drown if the tide rises, they suffer in darkness if an oil shipment is delayed. The reason is simple. They are not allowed to act, but must wait for orders from a central planner. And Mises proved that socialist planning is impossible, even if the planner is a wise, honest, caring genius. 
If it is indeed true that American hospitals are soon to be overwhelmed by virus patients then this is not a recommendation for more central planning, enforced by redirecting scant law enforcement resources to enforcing martial law.
It is a damning indictment of just how socialist–and hence sclerotic, rigid, and brittle–our health care industry has been forced to become under the degree of socialized medicine we already have. We are not fully socialist yet. Hence we are not Cuba yet.
I fear the kind of government that can shut down public gatherings and centrally plan healthcare and everything else. I fear it much more than a virus.

The CEO Pay Ratio

A popular metric is to compare CEO pay to the pay of the lowest-skilled–and hence lowest-paid–worker in the company. If the CEO makes $15,000,000 and a burger-flipper makes $15,000 then the CEO is making 1,000 times more.

This provides fuel for policy debate. As I often say, socialism is not about economics. There is no economics of socialism. It is nothing more than institutionalized envy. And the pay ratio of 1,000 appeals only to envy. It is offered without context, as none is deemed necessary. The very fact that he is paid so much more is taken as proof of … well it’s outrageous.

Something must be done!

Or so the Left argues. Get him because he’s rich. Impose a pay restriction on all companies, or at least all public companies. Tax the #$&%! out of him. Give all workers a so called guaranteed basic income (so called because socialism never delivers on its promises).

Libertarians are correct to note that if a wage is set in a free market, there is no fairer mechanism. And besides, it’s the company’s money to spend as it chooses. No good can come out of Washington meddling. They also point out that the CEO produces more value than the burger flipper, and his job is harder and more stressful.

This is true, but the very notion of a ratio of one person’s pay to another’s is meaningless. It tells us exactly nothing, while tantalizing us that it tells us something important.

I propose a different metric. A ratio of a worker’s pay to the value he produces. For example, suppose the gross profits (ex. cost of meat and ingredients) generated by the burger flipper’s work is $15 per hour. His pay is $7.50. Therefore this is a 2:1 ratio. He is paid half the value he creates.

Now consider his manager. The manager supervises 10 workers. Assuming all have equal productivity, the total gross value of these workers is $150. If the manager is paid $15, then this same ratio moves up quite a lot. It is 10:1.

Finally, let’s go all the way up to the CEO. If the firm’s gross profit is $15,000,000,000, then this ratio is 1000:1.

As we move up in the value chain, it is harder to measure the gross value contributed by each worker. For example, with the CEO, is the gross value simply gross profit? Or are we trying to look at just the difference he makes compared to his predecessor?

However, it should be clear that as you go up in value and salary, the ratio of value created to salary also goes up. That is, higher-value workers are paid less as a percentage of the value they create. Isn’t that a different view from the common envy view?

I am not sure what to call it. It may even exist, though I have not come across it. I am mulling “gross value capture ratio of wages”.