I converted my blog from WordPress.com to a self hosted site. The new url is http://thinkingmachineblog.net. I have migrated all of the posts to the new site and am in the process of doing the same for the blogroll.
With self hosting, I am able to embed videos and use MathJax to render LaTex in posts.
I kept the theme and am attempting to keep the layout unchanged. If there is anything you notice as missing, please let me know (see the About page for contact information).
From the “Preface to the English Edition” of “The Theory of Money and Credit” by Ludwig von Mises:
“All proposals that aim to do away with the consequences of perverse economic and financial policy, merely by reforming the monetary and banking system, are fundamentally misconceived. Money is nothing but a medium of exchange and it completely fulfills its function when the exchange of goods and services is carried on more easily with its help than would be possible by means of barter. Attempts to carry out economic reforms from the monetary side can never amount to anything but an artificial stimulation of economic activity by an expansion of the circulation, and this, as must constantly be emphasized, must necessarily lead to crisis and depression. Recurring economic crises are nothing but the consequence of attempts, despite all the teachings of experience and all the warnings of the economists, to stimulate economic activity by means of additional credit.“
On the free market, the price of a particular economic good is set by the subjective valuations of the marginal (least eager) buyer and the marginal (least eager) seller. The market price will be a price that is low enough such that the least eager buyer values the good more than he values the money surrendered and is high enough such that the least eager seller values the money received more than the good surrendered.
If an outside force violently intervenes in the market to establish a maximum price that is higher than the market price what must occur? The person who was previously the marginal buyer is now an enthusiastic buyer as he can obtain the good at a lower price than he was previously willing to pay. Price suppression must result in evermore people willing to purchase the good. In other words, demand will increase. If the maximum price is introduced suddenly, there cannot be an immediate increase in supply, thus demand and supply are no longer in balance, the market ceases to function. Then how will goods be distributed? Some form of rationing must emerge. It can be implemented by the sellers or by the agency that imposed the price ceiling. Either way will leave some people dissatisfied regardless of their willingness to pay.
Now let us consider what happens if the supply of a good suddenly decreases and the free market is permitted to operate. As in the situation described above when a maximum price has been imposed, we are in a situation in which demand is greater than supply. On the free market, this is a clear indication that the market price is too low and thus prices should rise. To what extent? They should rise to the height at which our original situation has been reestablished, namely that at which the marginal buyer and marginal seller agree to an exchange. Here, there is no arbitrary or enforced rationing system to distribute the given good. If prices are permitted to move freely, the market discovery process must move in a direction such that the market clears. Unlike in the case with rationing, a buyer who is ready to pay any price is always satisfied.
The great tragedy of our times, is that such basic lessons are apparently unknown to either the public or government officials.
Hurricane Sandy unveiled two of the most preposterous economic fallacies: the broken window fallacy and the belief of the efficacy of price controls and rationing. Despite unassailable theoretical arguments as well as repeated empirical evidence against such fallacies, they never seem to die.
I added a new novel, Wyst: Alastor 1716 by Jack Vance, to the Libertarian Fiction page.
Andy Duncan of The God That Failed blog recently posted a link to an interview that he did with Professor Jorg Guido Hülsmann. Hülsmann is an Austrian School economics professor at the University of Angers in France and a Senior Fellow of the Ludwig von Mises Institute. This podcast is a must listen for all those interested in Austrian economics. The highlights are:
- The importance of von Mises pioneering work, The Theory of Money and Credit, in synthesizing monetary theory with subjective valuation.
- Comments about an upcoming book, to be published late this year, he is editing to celebrate the 100th anniversary of the publication of The Theory of Money and Credit.
- Comments about another book he is authoring about the social consequences of inflation. This will be published in German next year. He is actively seeking someone to sponsor a translation into English.
- Fascinating views on the endgame of the current worldwide monetary debasement.
- His opinions about why Germany will not abandon the Euro.
I also highly recommend Hülsmann’s book The Ethics of Money Production, which had a profound influence on my views of fractional reserve banking.
Brian Wang of Next Big Future blog posted links and a video about robot agriculture. Current advanced tractors posses a surprising amount of automation. The difference between current robotics in agriculture and what is being advocated here is the suggestion of using swarms of small autonomous robots. While I am an enthusiastic proponent of robotics, this idea strikes me as overly ambitious and it misses a simpler solution.
Let us consider the real world environment that would be encountered by an agricultural robot. Light conditions change constantly. Vision systems will have to deal with rain, fog, and dust. Assessing the health and growth state of plants is an extremely difficult problem for a computer. Human farmers use judgement, based on years of observations, to accomplish this task. Machine learning algorithms can certainly do this, assuming that the data is relatively clean and non-noisy. However, due to the conditions cited above, the input data will be ambiguous and messy. While I have no doubt that eventually robots will become the norm for farm labor, current technology is not up to the task.
A simpler solution is to use telepresence robotics. The main reason for using robots to replace human labor in agriculture is that such labor is physically onerous and monotonous. However, as described above, it does require some human judgement and decision making. A telepresence robot would allow the operator to use his knowledge and judgement, while being in a physically comfortable location and allowing the robot to perform the actual labor. The operator would essentially be playing a video game. An outstanding example of telepresence robotics is the da Vinci surgical robotic system. The technology currently exists to build precision telepresence robots for agriculture.
I should note that robots for indoor hydroponic farms are currently in use. Since this is a controlled environment, an automated assembly line is being used. Given limits of current robotics technology, this is a better solution than autonomous robots.
I recently received notice from Peter Schiff’s Euro Pacific Bank about a new product launch: a 100% reserve silver bank account with an associated debit card. In a previous post, Business Idea: A Gold/Silver 100% Reserve Bank, I noted that Euro Pacific had created a 100% reserve gold bank account with a debit card. Now, we have a choice of precious metals to preserve our savings from the relentless debasement of paper currency.
The physical silver is held in pool allocated storage at the Perth Mint in Australia.
Unfortunately, as with the gold account, the new silver account is not open to US citizens.
I have requested more information and will post it if Euro Pacific permits.
Note the name on the card. (^_^)