Practice Good Theory

Private debt is often a bigger problem than government debt, in a mixed economy. Governments encourage private borrowing, and force some citizens to underwrite the losses of others. The great recession is essentially a tale of private debt gone wild. Greenspan's folly: After the dot.com bust, Americans did not tighten their belts for long. Look at the first chart. After dropping slightly for two years (2003-04), debt payments rose as a percent of disposable income. This was Alan Greenspan's "clever plan" (TM) to get out of the recession: " borrow against your house ". A  different (private) response: Then came the housing bust of the "great recession". Bernanke would have liked to repeat the Greenspan "solution", but this time, Americans were more scared. They have been repairing their balance sheets (see 2008 and beyond). Flat levels of liability:  Meanwhile, the total   level (nominal) of household liabilities has flatte...

In a previous post I predicted Social Security will be around for a long while. Briefly, if you are between 30 and 50 you will likely receive social security, but you will receive less than promised if you're in the upper-middle income range. (If you're 20 or so, I have no prediction to make. I wouldn't rely on it. Still, by the time you're 30, you you can re-evaluate the situation.) The math of Social Security does not add up, but each time it has faced a crisis, the tax-rate has been raised. The Wiki has a table showing how it crept up, along with a list of changes, showing how "benefits" were cut, particularly at the higher end. Even among "conservatives", only about 10% think social security should be phased out. Therefore, the program will stay. About 30% of voters, across the political spectrum, think benefits should be reduced, while the majority (60%) want the program kept as is. This means raising taxes is the most viable political s...

"Tax break" is a fuzzy term, with no objective definition. Personal tax example: My taxable wages already exclude some actual wages: my deposits to a "Health care Flex account"; the amount I put into my company's 401-K savings plan; the money my company pays directly to a health-insurance company on my behalf. The government is saying that if I spend my money a certain way, they will tax me less. Already, on the top line of my tax form, I've got three "tax breaks". Continuing on, interest from municipal bonds is exempt from federal income tax. My dividends are taxed a bit lower. My investment income is broken into two parts: short-term gains and long-term gains, and I get a "tax-break" on the long-term gains. The interest I pay on my mortgage and on student loans gets  me a deduction. Supporting a child gets me another deduction. My charitable donations earn me a deduction. Once again, the government is encouraging me to spend in certai...

Rand says that ideas are not innate. Even the broad axioms like "existence exists" that everyone takes for granted have to be gleaned from experience. This is contrary to epistemology that says that certain fundamental axioms are known a priori (e.g. see Ludwig von Mises). However, Rand was not unique in rejecting innate ideas. John Locke (Book 1 of " An Essay Concerning Human Understanding ") argues against the notion of innate propositions. His opponents consider notions like "What is is" (similar to "existence exists") as being innate in the human mind. Locke sets out to refute this view. Broad "speculative propositions" about existence, non-contradiction and identity are not innate, but must be discovered by man, through the use of reason. Moreover, other knowledge is not derived are a deductive conclusion from these broad propositions. Reason is the faculty to discover all knowledge: Having addressed "speculative...

Feb 2014 report:  "Good news" - U.S. total employment is only a few months away from reaching its peak (2007-08). The total number of people employed fell off by about 6 million people, and has now risen over 5 million from the bottom. The "bad news" is: the working-age population grew by about 12 million in the meanwhile; and employment is only just getting back to the pre-12 million level. Participation rate:  Oddly, of those 12 million, 10 million say they aren't looking for work! The "participation rate" has plunged. Today, anyone listening to business news knows that is one reason the unemployment rate has improved; i.e. fewer people have been looking for jobs. Not Early Retirement: The other day, a talking head on TV said that people are taking early retirement. Sounds plausible, but it shows ignorance. Here are two charts for U.S. men aged 55-64 The mid 1990s, saw a reversal of a long-term down-trend. Instead, more men in this age grou...

“... You cannot resist an idea whose time has come. ”(Victor Hugo).  Actions flow from ideas. That's why  tyrants imprison intellectuals.That's why the Stasi monitored and controlled the spread of ideas. (Movie to see: " The Lives of Others ") Religious view of History: The ancients thought God was the prime-mover of history. It was the  unfolding of His plan. For polytheists, history might be a story played out between different Gods. Man could have a role: a King or a people could make God happy or angry, driving historical reward or punishment. God might give you a promised land, or send a plague. Religious guru Pat Robertson still thinks God rewards and punishes America from time to time! Deterministic views:  Secular historians are split. Some people see little pattern and lots of accidents, while others try to integrate history more broadly, seeing either nature or man as the driver. Jared Diamond argues that geography and the availability of domesticabl...

Two laws that disagree: The U.S. government budget has a deficit. This deficit adds to the debt. By approving the budget, Congress implicitly approves an increase in debt. However, the U.S. also has a debt-ceiling. Debt cannot go beyond this without Congressional approval, even if Congress has already approved a budget that pushes the debt higher. Why have two laws that can conflict? Secretary Lew says this does not make sense; but, he's wrong. The budget is only an approximate forecast, and that's all it can be. A budget might set some tax at 33% of income, but how much taxable income will people have? If it is less than forecast, the tax inflows will be less than forecast, and the deficit will be higher. Personal budget ceilings: Analogously, I might plan on buying ice-cream for the kids once a month, but the number of kids at practice varies. Across all sorts of expenditures, in some months I might blow my budget. So, I might have a second control: e.g. I will not le...