With a post on Boing Boing this morning and a decent amount of chatter on Twitter, BitCoin appears to have hit the Internet mainstream. CNN will probably run a story in a week, although they'll be hard-pressed to make it seem any sillier than it already is, because BitCoin is the seasteading of economics: a bizarre scheme created by technolibertarians to address a problem nobody needed solving with a solution that nobody will ever find practical.
The site went down when the first flurry of links hit (a tremendously comforting state of affairs for an entirely-digital currency, I have to say), but here's the gist of BitCoin: it's a monetary system where you earn money by letting your computer "solve" large, complicated mathematical problems. The exact difficulty of these problems is adjusted by a peer-to-peer network to keep the rate of money generation at a planned level. Once created, each "coin" is a cryptographically-signed hash that can be passed from one person to another using a form of public key encryption. The theoretical advantages of this whole scheme are that:
If these seem like they hit the all the standard talking points for crazy people who read Cryptonomicon and thought it was non-fiction, you're not far off. Avery Pennarun's explanation of its flaws has caught a lot of attention (as well as a lot of derision from the pro-BitCoin crowd, although I have yet to see anyone rebut it with anything more convincing than "nuh-uh!").
I'm not an economist, but I play one on the Internet. And from my point of view, the biggest strike against this, or any other alternative currency, is simply that it'll never get more of an audience than conspiracy theorists and utopians. Normal people won't use BitCoin because you can't buy lunch with it. Businesses won't use it because normal people don't use it. And banks won't use it because they already have a perfectly usable system of moving money around electronically, and because they have no incentives to switch unless businesses and normal people demand it, which they won't. Much of the argument for BitCoin seems to be "well, good, we didn't want banks or banking to exist anyway." At that point, the only reasonable response is to back away slowly toward the nearest exit.
Despite the fact that it's completely bonkers, I feel like it's a bit of a shame that BitCoin's so obviously useless. Not because we need a global, untraceable currency that eliminates useful governmental controls on the market, but because our current options for spending money online are so limited. If you pay for something over the Internet, chances are that your transaction went through one of the big credit card companies--they've become the de facto standard platform for remote purchases. That's a huge cash cow, built on a framework with little transparency or real competition. As we move more and more of our economy online, their dominance is basically a license for a small number of corporations to print money.
But mostly BitCoin just leaves me melancholy. It's a dream by and for people who have missed the real lesson of Internet commerce, which is that it succeeded not because it was independent of the real world economy, but precisely because the two could be linked. Sites like eBay and Amazon were revolutionary because they were built on the same basic mechanisms as regular commercial networks: reputation, reviews, consumer feedback... and of course, plain old dollars. BitCoin (much like seasteading) tries to reduce the messy, human parts of economics to a set of sterile game mechanics. That's not even really libertarianism--it's nihilism, masquerading as a political philosophy.
I'm no great fan of money for its own sake, and I think we could stand to tweak our economic systems a bit, but the concept isn't broken in and of itself. If I thought BitCoin had a chance, I'd probably be worried. But despite its extreme principles, it still has to compete in the same marketplace of ideas as everything else--and I'm pretty sure nobody's buying what they're selling.
As Congress considers spending $700 billion to bail out irresponsible (and often fraudulent) lenders, I'd just like to draw people's attention to the Columbia Journalism Review's lengthy essay on the topic, which performs two roles: it's perfectly readable, and it gets to the heart of the systematic corruption and neglect behind the crisis.
Conventional wisdom says that the mortgage crisis is a hard story to cover, since it's based in a lot of esoteric debt-trading transactions. But as the CJR points out, that's a clear case of not seeing the forest for the trees. At the most basic level, this is not a complicated narrative: due to a lack of regulation, investment firms created pressure for lenders to take advantage of homebuyers by extending them loans that they couldn't hope to repay. It's a classic American story of big businesses screwing over the little guy. That it has largely been presented as some kind of vast, nebulous market failure reflects, I think, an incredulity of the press to believe that the situation could actually be that corrupt. One would hope that it's finally becoming clear.
or: They Teach the Children of California
It was annoying, but not dramatically so, when Brad Delong decided to deride a perhaps-misguided professor who, teaching a class on globalization, urged his students to consider the abusive practices that might have produced the goods they buy:
Yet he keeps buying them anyway because he has "a mortgage and child-care expenses." A stupid little Nietzschean wannabe who eagerly indulges in what he believes to be grave moral turpitude in order to save a few bucks.
It is probably very nice to live comfortably, as DeLong does, where the greatest consumer dilemma on the horizon is whether or not to buy a new iPhone. Many people, however, are not in a situation where they can afford to choose between their morals and their checkbook. Even considering that the "stupid little Nietzschean wannabe" is probably misinformed about the degree to which child and slave labor are employed, the invective still seems a little harsh and out of place.
But his insistence a few days earlier that "if you do not feel the force of [Milton Friedman's] grand argument, you need to think again" is somewhat more galling, particularly given the quotation he provides from Friedman himself:
The United States today is more than 50% socialist in terms of the fraction of our resources that are controlled by the govern ment. Fortunately, socialism is so inefficient that it does not control 50% of our lives.... The really fascinating thing is that our private sector has been so effective, so efficient, that it has been able to produce a standard of life that is the envy of the rest of the world on the basis of less than half the resources available to all of us.
As far as I have ever been able to tell, Friedman's "grand argument" has always basically amounted to sheltered, fanatical free-market boosterism. If all it takes to have a grand argument is to equate some kind of ideological principle directly to vaguely-defined terms like "freedom," then we can all have equally grand arguments, I suspect. And ponies. Speaking personally, I get better grand arguments out of cereal boxes.
But perhaps what has annoyed me most was the post which started it all, DeLong's glowing recommendation of a hit-piece on University of Chicago employees who had the temerity to object to the formation of a Milton Friedman Institute. It's a chunk of writing that, I kid you not, relies on deriding the term "global south" and accusing the writers of attending "fashionable lefty cocktail parties in Venezuela"--in other words, why do these filthy commies hate freedom? And then it tries to claim that China (!) is a fine example of Friedman's free market principles at work.
It's increasingly clear that the quality of my feedreader will be dramatically improved by removing Brad DeLong, and adding in his place Daniel Davies at Crooked Timber, who writes:
China has done very well out of managed opening of its markets and out of introducing capitalism into its domestic economy, but it hasn't followed anything like the kind of policy agenda that's described by neoliberalism, and it's still a very unfree society in political terms. [...] If Cochrane [the original author] is representative of the University of Chicago economics faculty (he says that he's speaking purely for himself, but he seems to have gathered widespread endorsement), and we're to take seriously the idea that the recent history of China is something that the proposed Milton Friedman Institute will be endorsing, analyzing, etc, then that's quite a radical reassessment of the fundamental political basis of Chicago libertarianism.Indeed. I worry about the school of economic thought that insists on opening markets at the expense of anything and everything else. It seems to me like the kind of thing that can come only from an ivory tower--and reminds us that ivory is a bone often forcibly harvested from its former owners.
... I've no idea why so many people are calling it a 'fantastic polemic' -- you could click randomly on a list of right wing blogs and have at least a 50% chance of finding a better cliche-ridden philippic against those terrible left-wing academicessess. I suspect it's the Milton Friedman Reality Distortion Field Generator, the same strange psychophysical device that makes people believe that Friedman was a principled opponent of the PATRIOT Act and never really knew what Pinochet was planning when he recommended that trade union rights should be removed. The MFRDFG is powered by fifty per cent fear of being redbaited and fifty per cent disdain for dirty fucking hippies, and I'd regard it as a harmless intellectual defence mechanism if it didn't generate industrial pollution in the form of toxic criticisms of JK Galbraith and/or Paul Sweezy.
This is not a post about how the Bank makes my taxes a mess, and hence I won't be getting my stimulus check until late. Because I am not the kind of person who would complain about such a thing.
A few weeks ago, my friend Chris P. put up a link on his Facebook feed about a friend's stimulus check. It's on howispentmystimulus.com, a site that I had no idea existed, and which I find slightly melancholy. The writer had traded in his stimulus for silver coins from the Federal Mint, as a protest against printing more money as a fix for the economic downturn. I'm not sure I applaud the exact sentiment, but I do find the protest appealing.
It's important to remember, and I think many people are unaware of this, but a stimulus check is not a gift. It's a loan, one that will have to be repaid at some point. It may be repaid by a future generation, and not by us, but the debt is still there. In many ways, it's a bet: the government wagers that by paying us money now, we will be in good economic shape later when the bill comes due. I am not an economist (I only play one on TV), but the wisdom of this policy is not immediately obvious to me. My check will go into savings, personally. I'm lucky that I can afford to do that.
It is interesting to watch the reactions on How I Spent My Stimulus. There are two basic trends that I've noticed. One side is composed of people who are struggling--they're spending the checks on medical expenses, or on home loans, or to pay off their debts. The other trend are people who use the stimulus to buy firearms. Large, shiny, high-caliber firearms.
This country really does scare me sometimes.
If you have ever wanted to see the evil, exploitative face of the overclass, look no further than this article on Costco:
"They could probably get more money for a lot of items they sell," said Ed Weller, a retailing analyst at ThinkEquity.
IF shareholders mind Mr. Sinegal's philosophy, it is not obvious: Costco's stock price has risen more than 10 percent in the last 12 months, while Wal-Mart's has slipped 5 percent. Costco shares sell for almost 23 times expected earnings; at Wal-Mart the multiple is about 19. Mr. Dreher said Costco's share price was so high because so many people love the company. "It's a cult stock," he said.
Emme Kozloff, an analyst at Sanford C. Bernstein & Company, faulted Mr. Sinegal as being too generous to employees, noting that when analysts complained that Costco's workers were paying just 4 percent toward their health costs, he raised that percentage only to 8 percent, when the retail average is 25 percent.
"He has been too benevolent," she said. "He's right that a happy employee is a productive long-term employee, but he could force employees to pick up a little more of the burden."
Mr. Sinegal says he pays attention to analysts' advice because it enforces a healthy discipline, but he has largely shunned Wall Street pressure to be less generous to his workers.
"When Jim talks to us about setting wages and benefits, he doesn't want us to be better than everyone else, he wants us to be demonstrably better," said John Matthews, Costco's senior vice president for human resources."
This is a company that makes money hand over fist. They have a steady-growth stock. They give consumers a good value. The CEO makes only about $500K per year (which is, believe it or not, frugal). In other words, everyone's happy. And the response from the analysts is to ask why he can't squeeze his workers harder.
In the 1800's, these guys would have been asking if it's not possible to beat the slaves just a bit more.
Awful. What an awful, awful book. It's obtuse, condescending, and redundant. Barber should be ashamed of himself.
The basic argument behind Consumed is that markets have spun out of control, and at this point have begun to shape the culture itself by creating false "needs" for which more products can be sold. In doing so, says Barber, the market both seeks to "empower" children into good little consumers, but also hopes to retard the emotional growth of adults in order to keep them impressionable and easy to manipulate.
Now, I am always up for a good critique of market capitalism. But Barber's stiff, ultradeclarative prose rubs the wrong way, not to mention his inability to define what this "infantilization" actually means in anything more than the most vague or hysterical terms:
Peanut butter without jelly! Rock without rhythm! Color without texture! One might as well declaim any of those three as any of Barber's ranting, or for any amount of evidence that he provides to back up his points. Most of it is anecdotal, and most of it in support of what seem to be a curmudgeonly set of dislikes: Barber apparently doesn't much care for birth control, video games, or most of Hollywood's output. He blames David Hume, of all people, for unleashing hedonism on the world. For someone who claims to be concerned about children, he doesn't seem to like the young very much. In one bizarre passage, he even takes potshots at the childless as being childish, of all things.
Damned if you do, and all that. The book's ability to claim support for its thesis despite all common sense to the contrary is practically Freudian in its magnitude--but perhaps a better comparison is to Tom Friedman, whose market philosophy Barber may abhor but whose writing bears a similar tendency for the pedantic and sloganeering (the word "puerile" is massively overused, ironically, as though Barber is a precocious five-year-old who recently learned it).
But of course, there's no chance that he could fill 350 pages with statistics about how many people search for "Britney Spears" online. So the book devotes a chapter to the mythical "precapitalists" that paved the way for monopolists like Bill Gates or John Rockefeller, then spends the best part of 200 pages rehashing better anti-globalization works like Naomi Klein's No Logo. The themes of infantilization largely disappear from this part of the book, since Barber can't find an easy way to bring them back in.
The entire book is exhaustively footnoted--but then, so is Ann Coulter's trash. Just because something has a citation, it doesn't mean that it was well-researched, and in this case it may mean the opposite. I think it's more than a little ridiculous to claim that John Perry Barlow or William Gibson had anything to do with the rise of Bill Gates, for example, and the footnote on World of Warcraft is clearly referring to another game entirely. That kind of geeky, pop-culture error would feel less striking if it didn't make up a significant part of Barber's argument against pop culture.
And at the end, what are the solutions to this problem that we are assured will soon destroy our perfect capitalism? Why, such bold steps as: ...a boycott. Or "cultural creolization," what most of us probably term cross-pollinization. Even better, let's form "global citizenry." After so much ado, such weaksauce solutions and bargain-basement utopianism are worse than nothing. It's insulting. There's an attempt to appeal to the plight of the developing country--but since Barber argues in another part of the book that the poor have been excluded from this entire system of manufactured desire, it's unconvincing at best.
It's a shame that the argument is so mangled and the results so scattershot, since there's a valid critique to be made of global free market boosterism. Every now and then, Barber stumbles over an interesting point, but he's mostly just casting about. Reform needs to start somewhere, but it's certainly not going to start here.
Mark Thoma at Economist's View recommends (with good reason) this article (warning: PDF) on the unspoken biases of undergraduate economics. Christopher Hayes, the author, notes that the concepts of free markets and market efficiency remain unchallenged in basic economic classes, while complications like externalities and irrational behavior--you know, the considerations of real people--are reserved for the advanced and graduate-level students.
This explains a lot of extreme free-trade rhetoric from amateur pundits. It also undermines the charge of left-wing indoctrination centered on universities.