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Weekend Economists Celebrate Harry Potter's 35th Birthday July 31st, 2015

Yes, the Boy Who Lived (Twice) is now a sober 35 years old. He and his wife, the former Ginevra Weasley, have two sons and a daughter all attending Hogwarts, or soon to be. Harry and his school chums have revolutionized the Wizard government, and it's all beer and skittles.

Too bad for the Muggles, who are drowning in financial parasitism, debt slavery, and warmongering, that the magical folk among us are sworn to secrecy and non-intervention in our internal affairs.

Still, we must carry on regardless, as the Blue Moon shines on this special day for Wizard folk...


Weekend Economists Study How to Get Lucky July 24-26, 2015

Our text today is How To Get Lucky by Max Gunther, published in 1986 by Stein & Day, Inc.

I recently stumbled somehow on this little gem of a practical book on preparation for whatever Life hands you...one could say, I got lucky! The author, Max Gunther, (1927 – 1998) was an Anglo-American journalist and writer. He was the author of 26 books, including his investment best-seller, The Zurich Axioms.

Born in England, Gunther moved to the United States at age of 11 after his father, Franz Heinrich (Frank Henry) became the manager of the New York branch of a leading Swiss bank, Schweizerischer Bankverein (Swiss Bank Corporation or SBC). In 1998, the bank was merged with Union Bank of Switzerland to form UBS, the second largest wealth management organisation in the world and the second largest bank in Europe. Gunther's book, The Zurich Axioms is largely based on his father's trading advice.

Gunther graduated from Princeton University in 1949 and served in the United States Army from 1950 to 1951.

He worked at Business Week magazine from 1951 to 1955 and during the following two years he was the contributing editor for Time Magazine. He also contributed to Playboy, True, Reader's Digest, TV Guide, McCall's, and Saturday Evening Post.

He lived most of his adult live in Ridgefield, Connecticut.

Selected Bibliography

    The Weekenders (1964)
    The Split-Level Trap (1964)
    Wall Street and Witchcraft (1971)
    The Very, Very Rich and How They Got That Way (1973)
    Instant Millionaires: The Secrets of Overnight Success (1973)
    Writing and Selling a Nonfiction Book (1973)
    Virility 8: A Celebration of the American Male (1975)
    "The Lucky Factor" Harriman House ISBN 9781906659950 (1977)
    The Zurich Axioms ISBN 9781906659943 (1985 1st print)
    How to Get Lucky: 13 Techniques for Discovering and Taking Advantage of Life's Good Breaks (1986)
    D. B. Cooper: What Really Happened (1986)
    Doom Wind (1987)
    Confessions of a P.R. Man (1989)

He wrote other books as well...a survey of Amazon's website turns up Kindle editions as well as used copies of many his oeuvre for sale. I have yet to plunge into that briar patch, but I hope to collect a few. I suppose it's too much to ask that somebody put them back in print...


BIL Diagnosed with Panceratic Cancer--Help!

They live 800 miles away, and I am oldest member of family left (it's been a year of losses).

What can I do to help sister and her husband? She has MS to cope with, besides.

Any suggestions appreciated.

Genes influence academic ability across all subjects, latest study shows

You may feel you are just not a maths person, or that you have a special gift for languages, but scientists have shown that the genes influencing numerical skills are the same ones that determine abilities in reading, arts and humanities. The study suggests that if you have an academic Achilles heel, environmental factors such as a teaching are more likely to be to blame. The findings add to growing evidence that school performance has a large heritable component, with around 60% of the differences in pupil’s GCSE results being explained by genetic factors.

Although scientists are yet to pinpoint specific genes, the latest work, published in the journal Scientific Reports, suggests that the same ones are involved across subjects.

Robert Plomin, a professor of genetics at King’s College London and the study’s senior author, said: “We found that academic achievement in English, mathematics, science, humanities, second languages and art were all affected by the same genes. People may think that they’re good at one subject and bad at another, but in reality most people are strikingly consistent.”

In the future, if specific genes were identified, nursery children could be screened to help target those who are likely to require more help learning basic skills such as reading and arithmetic, Plomin added. The researchers analysed genetic data and GCSE scores from 12,500 twins, about half of whom were identical. Results in all subjects, including maths, science, art and humanities, were highly heritable, with genes explaining a bigger proportion of the differences between children (54-65%) than environmental factors, such as school and family combined (14-21%), which were shared by the twins.

MORE AT: http://www.theguardian.com/science/2015/jul/23/genes-influence-academic-ability-across-all-subjects-latest-study-shows

Happy 314th Birthday to Detroit, My Native Land!

You don't look a year over 100.

Inside ‘Liberland,’ the Place of No Taxes Where Crowdfunding Rules

Liberland, or the Free Republic of Liberland to give it its full title, is a would-be sovereign state founded April 13 by Vit Jedlicka and two fellow libertarians. Its total area of approximately seven square kilometers would make it the third smallest sovereign state in the world, after the Vatican and Monaco.

Where is Liberland?

It's sandwiched between Croatia and Serbia on the western bank of the Danube River. On some maps, this area is referred to as “Gornja Siga.”

So isn’t it part of Croatia or Serbia?

Not according to the founders. When the former Yugoslavia was split into new countries this small patch of land was forgotten about. Neither Croatia nor Serbia claimed it, making it a “terra nullius” or no man’s land.

What is a micronation anyway?

A micronation is an entity that claims to be an independent nation, but is not officially recognized by world governments or major international organizations. Micronations are different from other kinds of social communes because they make a formal claim of sovereignty over a physical territory.

Who is in charge?

The current president is Eurosceptic politician Jedlicka, 31, a member of the Czech Republic's Conservative Party of Free Citizens. Despite abstaining from Liberland’s first presidential election, he was still elected by the two other founding members, one of whom is his girlfriend, and now the country’s first lady.

Why was Liberland founded?

According to the founders the objective is to build a country where honest people can prosper with minimal interference from a centralized government. “We need more countries like Hong Kong, Singapore and Monaco, especially in Europe,” Jedlicka says. “We really needed another tax heaven, not tax haven.”

So there won’t be any taxes?

All taxes will be voluntary, and the nation’s services - such as power, healthcare and waste disposal - will be run either by private enterprises or through crowdfunding campaigns.


What is Liberland hoping to achieve?

Quite simply to have Liberland recognized by already-established nations as a sovereign state, paving the way for what the founders are calling a “European Singapore.” To do this Jedlicka is appointing ambassadors from Liberland to countries all over the globe to drum up support for the idea.

Has it actually established embassies in other nations?

According to Jedlicka, Liberland has established embassies in several countries including the U.S., the U.K., France and the Czech Republic. He plans to open embassies in “a hundred more countries by the end of the year."

Is it even legal?

Liberland is attempting to use the homestead principle, which states that unclaimed and undeveloped land can be legally claimed by any group willing to develop it. But some legal experts have stated that even though the land may appear unclaimed, it is most probably already part of Serbia.

Is anyone actually living in Liberland?

Not yet. Croatian border police are arresting anyone who sets foot in Liberland. However, this has not deterred members of the Liberland Settlers Association, which attempts to reach it on a daily basis and often clashes with local police in the process.

What is the Liberland Settlement Association?

The Liberland Settlement Association (LSA) is an NGO based in Serbia, funded by the Liberland Settlement Corp. It is made up primarily of volunteers who attempt to maintain an active presence on Liberland to help it become a recognized country.

So what is the Liberland Settlement Corp.?

According to CEO Niklas Nikolassen, the Liberland Settlement Corp. (LSC) “is a group of liberty-minded investors who are funding the LSA.” The corporation, based in Switzerland, has a claim on 80,000 square meters of Liberland and is hoping that the actions of the LSA will help Liberland achieve recognition as a sovereign state and thus make the land valuable.

How many people will be able to live there if it’s recognized?

Liberland has already received almost 400,000 applications for citizenship, however only around 45,000 of these are considered to be serious. According to Jedlicka there will probably be a total of 30,000-40,000 Liberlandians, not all of whom will actually live in Liberland.

How are you supposed to run a country through crowd funding?

Liberland's government says it has already raised over $45,000 through crowdfunding on it's website, where they take donations in both regular currency and Bitcoin. This has paid for government offices in Praque and Serbia, a personal assistant for the president and his recent trips to the G-7 in Germany and Freedom Fest in the U.S.


How Empires End By Jeff Thomas


“Experience hath shewn, that even under the best forms of government those entrusted with power have, in time, and by slow operations, perverted it into tyranny.” – Thomas Jefferson

The very same events occur, falling like dominoes, more or less in order, in any empire, in any age:

  1. The reach of government leaders habitually exceeds their grasp.

  2. Dramatic expansion (generally through warfare) is undertaken without a clear plan as to how that expansion is to be financed.

  3. The population is overtaxed as the bills for expansion become due, without consideration as to whether the population can afford increased taxation.

  4. Heavy taxation causes investment by the private sector to diminish, and the economy begins to decline.

  5. Costs of goods rise, without wages keeping pace.

  6. Tax revenue declines as the economy declines (due to excessive taxation). Taxes are increased again, in order to top up government revenues.

  7. In spite of all the above, government leaders personally hoard as much as they can, further limiting the circulation of wealth in the business community.

  8. Governments issue bonds and otherwise borrow to continue expansion, with no plan as to repayment.

  9. Dramatic authoritarian control is instituted to assure that the public continues to comply with demands, even if those demands cannot be met by the public.

  10. Economic and social collapse occurs, often marked by unrest and riots, the collapse of the economy, and the exit of those who are productive.

  11. In this final period, the empire turns on itself, treating its people as the enemy.

...Once an empire has reached stage eight above, it never reverses. It is a “dead empire walking” and only awaits the painful playing-out of the final three stages. At that point, it is foolhardy in the extreme to remain and “wait it out” in the hope that the decline will somehow reverse. At that point, the wiser choice might be to follow the cue of the Chinese, the Romans, and others, who instead chose to quietly exit for greener pastures elsewhere...


Chemists Invent New Letters for Nature’s Genetic Alphabet


...Nearly 30 years ago, Benner sketched out better versions of both DNA and its chemical cousin RNA, adding new letters and other additions that would expand their repertoire of chemical feats. He wondered why these improvements haven’t occurred in living creatures. Nature has written the entire language of life using just four chemical letters: G, C, A and T. Did our genetic code settle on these four nucleotides for a reason? Or was this system one of many possibilities, selected by simple chance? Perhaps expanding the code could make it better.

Benner’s early attempts at synthesizing new chemical letters failed. But with each false start, his team learned more about what makes a good nucleotide and gained a better understanding of the precise molecular details that make DNA and RNA work. The researchers’ efforts progressed slowly, as they had to design new tools to manipulate the extended alphabet they were building. “We have had to re-create, for our artificially designed DNA, all of the molecular biology that evolution took 4 billion years to create for natural DNA,” Benner said.

Now, after decades of work, Benner’s team has synthesized artificially enhanced DNA that functions much like ordinary DNA, if not better. In two papers published in the Journal of the American Chemical Society last month, the researchers have shown that two synthetic nucleotides called P and Z fit seamlessly into DNA’s helical structure, maintaining the natural shape of DNA. Moreover, DNA sequences incorporating these letters can evolve just like traditional DNA, a first for an expanded genetic alphabet...

Weekend Economists All Shook Up July 17-19, 2015

Well, that was a week that was!

Sorry of the late thread, I worked over to make up for skipping Wednesday. It's hot, it's humid, it's Art Fair. They moved Art Fair up a week, but the typical Art Fair weather moved up a week, too. They really ought to schedule it for March. Maybe we'd have a Spring, then.

In honor of the madness, we will feature pop music that refers to changing times and unexpected surprises and so forth. This should give our audiophiles great scope to pull stuff out of the back of the closet to delight, amaze and confuse us...

as compared to recent events, which were prone to baffle, enrage and alarm.

Greece occupies everyone's minds, with China looming behind like a nightmare. Mosquitoes are eating us alive. Puts a lie to Gershwin...

Understanding Organizational Stupidity By Dmitry Orlov FROM SEPTEMBER


Is it morning in America again, or is the bubble that is the American economy about to pop (again), this time perhaps tipping it into full-blown collapse in five stages with symphonic accompaniment and fireworks? A country blowing itself up is quite a sight to behold, and it makes us wonder about lots of things. For instance, it makes us wonder whether the people who are doing the blowing up happen to be criminals. (Sure, they may be in a manner of speaking—as a moral judgment passed on the powerful by the powerless—but since none of them are likely to see the inside of a jail cell or even a courtroom any time soon, the point is moot. Let's be sure to hunt them down once they try to run and hide, though.) But at a much more basic and fundamental level, a better question to ask is this one:

“Why are we being so fucking stupid?”

What do I mean when I use the term “fucking stupid”? I do not mean it as a term of abuse but as a precise, if unflattering, diagnosis. Here is as good a definition as any, excerpted from American Eulogy by Jim Quinn:

If you had told someone on September 10, 2001 that ten years later America would be running $1.5 trillion annual deficits, fighting two wars of choice in countries that despise our presence, and had not only not addressed the $100trillion of unfunded welfare liabilities but added billions more with Medicare D and Obamacare, they would have thought you were a crazy doomster predicting the end of the world. They would have put you away in a padded cell if you had further predicted that politicians would cut taxes three separate times, that the Wall Street banks that leveraged themselves 40 to 1 and destroyed the financial system would be handed $2 trillion of taxpayer funds so they could pay themselves multi-million dollar bonuses, and that the Federal Reserve would triple its balance sheet to $2.45 trillion by running its printing presses at hyper-speed and handing the money to those same Wall Street Mega-Banks.

Well, the evidence is in, and that crazy doomster in his padded cell has turned out to be amazingly prescient, so perhaps we should listen to him. And what would that crazy doomster have to say now? I would venture to guess that it would be something along these lines:

There is no reason to think that those who failed to take corrective action up until now, but remain in control, will ever do so. But it should be perfectly obvious that this situation cannot continue ad infinitum. And, as a matter of general principle, things that can't go on forever—don't.

Back to the question of stupidity: Why are we (as a country) being so fucking stupid? This question has puzzled me for some time. It appears that the problem of stupidity is quite pervasive: look at any large human organization, and you will find that it is ruled by stupidity. I was not the first to stumble across the conjecture that the intelligence of a hierarchically organized group of people is inversely proportional to its size, but so far the mechanism that makes it so has eluded me. Clearly, there is something amiss with hierarchically organized groups, something that causes all of them to eventually collapse, but what exactly is it? To try to get at this question, last year I spent quite a while researching anarchy, and wrote a series of articles on it. I discovered that vast hierarchies do not occur in nature, which is anarchic and self-organizing, with no chains of command and no entities in supreme command. I discovered that anarchic organizations can go on forever while hierarchical ones inevitably end in collapse. I examined some of the recent breakthroughs in complexity theory, which uncovered the laws governing the different scaling factors in natural (anarchically organized, efficient, stable) systems and unnatural (hierarchically organized, inefficient, collapse-prone) ones.

But nowhere did I find a principled, rigorous explanation for the fatal flaw embedded in the very nature of hierarchical systems. I did have a very strong hunch, though, backed by much anecdotal evidence, that it comes down to stupidity. In anarchic societies whose members cooperate freely, intelligence is additive; in hierarchical organizations structured around a chain of command, intelligence is subtractive. The lowest grunts or peons are expected to carry out orders unquestioningly. Their critical faculties are 100% impaired; if not, they are subjected to disciplinary action. The supreme chief executive officer may be of moderately impaired intelligence, since it is indicative of a significant character flaw to want such a job in the first place. (Kurt Vonnegut put it best: “Only nut cases want to be president.”) But beyond that, the supreme leader must act in such a way as to keep the grunts and peons in line, resulting in further intellectual impairment, which is compounded across all of the intervening ranks, with each link in the chain of command contributing a bit of its own stupidity to the organizational stupidity stack.

I never ascended the ranks of middle management, probably due to my tendency to speak out at meetings and throw around terms such as “nonsensical,” “idiotic,” “brainless,” “self-defeating” and “fucking stupid.” If shushed up by superiors, I would resort to cracking jokes, which were funny and even harder to ignore. Neither my critical faculties, nor my sense of humor, are easily repressed. I was thrown at a lot of special projects where the upside of being able to think independently was not negated by the downside of being unwilling to follow (stupid) orders. To me hierarchy = stupidity in an apparent, palpable way. But in explaining to others why this must be so, I had so far been unable to go beyond speaking in generalities and telling stories.

And so I was happy when I recently came across an article which goes beyond such “hand-waving analysis” and answers this question with some precision. Mats Alvesson and André Spicer, writing in Journal of Management Studies (49 November 2012) present “A Stupidity-Based Theory of Organizations” in which they define a key term: functional stupidity. It is functional in that it is required in order for hierarchically structured organizations to avoid disintegration or, at the very least, to function without a great deal of internal friction. It is stupid in that it is a form intellectual impairment: “Functional stupidity refers to an absence of reflexivity, a refusal to use intellectual capacities in other than myopic ways, and avoidance of justifications.” Alvesson and Spicer go on to define the various “...forms of stupidity management that repress or marginalize doubt and block communicative action” and to diagram the information flows which are instrumental to generating and maintaining sufficient levels stupidity within organizations. What follows is my summary of their theory. Before I start, I would like to mention that although the authors' analysis is limited in scope to corporate entities, I believe that it extends quite naturally to other hierarchically organized bureaucratic systems, such as governments.

Alvesson and Spicer use as their jumping-off point the major leitmotif of contemporary management theory, which is that “smartness,” variously defined as “knowledge, information, competence, wisdom, resources, capabilities, talent, and learning” has emerged as the main business asset and the key to competitiveness—a shift seen as inevitable as industrial economies go from being resource-based to being knowledge-based. By the way, this is a questionable assumption; do you know how many millions of tons of hydrocarbons went into making the smartphone? But this leitmotif is pervasive, and exemplified by management guru quips such as “creativity creates its own prerogative.” The authors point out that there is also a vast body of research on the irrationality of organizations and the limits to organizational intelligence stemming from “unconscious elements, group-think, and rigid adherence to wishful thinking.” There is also no shortage of research into organizational ignorance which explores the mechanisms behind “bounded-rationality, skilled incompetence, garbage-can decision making, foolishness, mindlessness, and (denied) ignorance.” But what they are getting at is qualitatively different from such run-of-the-mill stupidity. Functional stupidity is neither delusional nor irrational nor ignorant: organizations restrict smartness in rational and informed ways which serve explicit organizational interests. It is, if you will, a sort of “enlightened stupidity”:

Functional stupidity is organizationally-supported lack of reflexivity, substantive reasoning, and justification. It entails a refusal to use intellectual resources outside a narrow and “safe” terrain. It can provide a sense of certainty that allows organizations to function smoothly. This can save the organization and its members from the frictions provoked by doubt and reflection. Functional stupidity contributes to maintaining and strengthening organizational order. It can also motivate people, help them to cultivate their careers, and subordinate them to socially acceptable forms of management and leadership. Such positive outcomes can further reinforce functional stupidity.

The terms I italicized are important, so let's define each one:

  • Reflexivity refers to the ability and willingness to question rules, routines and norms rather than follow them unquestioningly. Is your corporation acting morally? Well it doesn't matter, because “what is right in the corporation is what the guy above you wants from you.” The effects of this attitude tend to get amplified as information travels (or, in this case, fails to travel) down the chain of command: your immediate superior might be a corrupt bastard, but your supreme leader cannot possibly be a war criminal.

  • Justification refers to the ability and willingness to offer reasons and explanations for one's own actions, and to assess the sincerity, legitimacy, and truthfulness of reasons and explanations offered by others. In an open society that has freedom of expression, we justify our actions in order to gain the cooperation of others, while in organizational settings we can simply issue orders, and the only justification ever needed is “because the boss-man said so.”

  • Substantive reasoning refers to the ability and willingness to go beyond the “small set of concerns that are defined by a specific organizational, professional, or work logic.” For example, economists tend to compress a wide range of phenomena into a few numbers, not bothering to think what these numbers actually represent. Organizational and professional settings discourage people from straying from the confines of their specializations and job descriptions, in essence reducing their cognitive abilities to those of idiot-savants.

    Functional stupidity can arise spontaneously, because there are many subjective factors which motivate people within organizations to narrow their thinking to the point of achieving it. A certain amount of closed-mindedness can be helpful in furthering your career. It helps you present yourself as a reliable organizational person—one who would never even question the validity of the organizational or occupational paradigm, never mind stray from it. At the other extreme, your refusal to stray beyond a narrow focus may be prompted by feelings of anxiety, insecurity, and fear of jeopardizing your position. And while, just as you would expect, functional stupidity produces negative outcomes for the organization as a whole, it provides for smooth social functioning within the organization itself by suppressing dangerous or uncomfortable questions and by avoiding the awkwardness of calling into question the judgment of your superiors.

    But such subjective factors are dwarfed by certain stupidity-generating features of organizations. At their highest level, organizations tend to focus on purely symbolic issues such as “strong corporate cultures and identities, corporate branding, and charismatic leadership.” Corporate (and other) leaders try to project an identical internal and external image of the organization, which may have little to do with reality. This is only possible through stupidity management—the process by which “various actors (including managers and senior executives as well as external figures such as consultants, business gurus, and marketers) exercise power to block communication. The result is that adherence to managerial edicts is encouraged, and criticism or reflection on them is discouraged.”

    As the people within the organization internalize this message, they begin to engage in stupidity self-management: they cut short their internal conversations, refusing to ask themselves troubling questions, and focusing instead on a positive, coherent view of their environment and their role within it. But stupidity self-management can also fail when the mismatch between the message and reality becomes too difficult to ignore, ruining morale. The suppressed reality (“The king is naked!”) can spread as a whisper, resulting in passive-aggressive behavior and deliberate foot-dragging all the way to sabotage, defections and resignations.

    The functions of stupidity management are to project an image, to encourage stupidity self-management in defense of that image, and to block communication whenever anyone lapses into reflexivity or substantive reasoning, or demands justification. Communication is blocked through the exercise of managerial power. The authors discuss four major ways in which managers routinely exercise their power in defense of functional stupidity: direct suppression, setting the agenda, ideological manipulation, and fetishizing leadership. Of these, direct suppression is by far the simplest: the manager signals to the subordinate that further discussion will not be appreciated, threatening or carrying out disciplinary action if the signaling doesn't work. Setting the agenda is a more subtle technique; for instance, a typical ploy is to require that all criticisms be accompanied by “constructive suggestions,” placing beyond the pale all problems that do not have immediate solutions (which are the vast majority). Ideological manipulation is more subtle yet; one common technique is to emphasize action, at the expense of deliberation, as expressed by the corporate cliché “stop thinking about it and start doing it!” Finally, fetishizing leadership involves splitting each group into leaders and followers, where the leaders seek to make their mark, whatever it takes, and to get promoted quickly. To do so successfully, they must suppress the critical faculties of those around them, compelling them to act as obedient followers.

    Functional stupidity is self-reinforcing. Stupidity self-management, reinforced using the four managerial techniques listed above, produces a fragile, blinkered sort of certainty. By refusing to look in certain directions, people are able to pretend that what is there does not exist. But reality tends to intrude on their field of perception sooner or later, and then the reaction is to retreat into functional stupidity even further: those who can ignore reality the longest are rewarded and promoted, setting an example for others.

    But the spell can also be broken when the artificial reality bubble protected by the imaginary film of functional stupidity is punctured by a particularly contradictory outcome. For an individual, the prospect of unemployment or the end to one's career can produce such a sudden realization: “How could I have been so stupid?” Similarly, entire organizations can be shaken out of their stupor by a painful fiasco that subjects them to a barrage of public criticism. Public hearings in which industry leaders are forced to appear before government committees and answer uncomfortable questions can sometimes serve as stupidity-busting events. A particularly daunting challenge is to pop the functional stupidity bubble of an entire nation, since there is no public forum at which objective outsiders can force national leaders to take part in a substantive discussion. Bearing witness to the fast-approaching end of the nation as a going concern may be of help here. How could we have been so fucking stupid? Well, now you know.

    Dmitry Orlov is a Russian-American engineer and a writer on subjects related to "potential economic, ecological and political decline and collapse in the United States," something he has called “permanent crisis”. http://cluborlov.blogspot.com



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