Monday, September 29, 2008

The 33% Rule Part 1: Basic principles of economics

The current bad state of our financial system is a symptom of a massive disconnect with reality. In this article I would like to clarify the problem and propose the solution. Before I present the solution, I will clearly identify the principles involved with a simple rule called "The 33% rule".

Figure 1 shows a healthy economy where three producer/consumers (P/C) are participating as traders in a division of labor economy. The amount of value each individual consumes is dependent on how much value he can produce.

Observe what happens when one individual stops producing in Figure 2: the economy loses 33% of it's produced value. Now demand for the value produced increases and along with prices. This simple case demonstrates how a pure consumer (C) erodes the benefits of living in a society. Also, observe that C can only survive second-hand by the value produced and given away by a P/C.

Now let us examine the nature of production to identify why it works this way. Causality dictates that before a value may be consumed it has to be produced by someone. This fact makes it impossible to consume more than is produced. Any attempt to do so is an attempt to reverse the law of causality and will fail. Stated formally, the 33% rule is: A fictional economy of three participants is 100% efficient if all three are both producers and consumers. If one individual stops producing and turns into a pure consumer then the economy loses 33% of it's value.

Figure 3 models what is happening today in the United States and likely every other economy around the world. Each P/C produces more than he consumes which creates a surplus of value produced. The higher the surplus created by the P/C the more value produced is given to the Cs.

We must understand why P/Cs are giving value to Cs. In a free society this transfer is called charity and is left to the discretion of the P/C. Charity is both good and proper as long as all parties are participating by voluntary choice. If the number of Cs grows beyond the ability of the P/C to help then the P/C has the choice to stop giving value away which forces the Cs to either live by their own ability, exist second -hand off of another P/C, or die.

If this seems harsh then consider the the alternative depicted in figure 4. Without any P/Cs the Cs must either become a P/C or die. In part 2 I will expand on figures 2 and 3 and identify where the United States lies, how we arrived at that point, and what we need to do.

Friday, September 26, 2008

How to Identify the True Motivations of a Universal Healthcare Advocate

The problem of "universal healthcare" is not complicated when it is fully understood. Most of the complexities arise when politicians and political action groups try to figure out the best way to force me to pay for it. The only ethical way to provide "universal healthcare" is to privately fund it with the donations of those individuals who support such a cause. Anyone who wants to contribute can and will, and those that don't will not be forced to. To illustrate, the next time you are confronted with someone supporting universal healthcare, I suggest the following propositions:

  1. If they can afford it challenge them to take out a classified ad in a local newspaper offering to partially or fully fund someone else's healthcare coverage.
  2. If they cannot afford healthcare coverage themselves then challenge them to take out a classified ad in a local newspaper to appeal to a universal healthcare to advocate sponsor them.
This way, universal healthcare supporters can act immediately and contribute directly to their cause. By acting directly on the problem all roadblocks disappear. Nobody can oppose such action because everyone involved is participating by voluntary choice. There will be no debate as to the effectiveness of such action - results will be immediate and self-evident. There will be no challenges to the efficiency of such action - no overhead is necessary to pay a few extra bills for your sponsored healthcare recipients. If the would-be advocate of universal healthcare rejects items #1 or #2 then you have identified their true motivation: to loot the best in society for the sake of the worst under the disguise of charity.

Friday, September 19, 2008

On Judging Character

The following are questions I came up with a few weeks ago when I was invited to a Barack Obama campaign house meeting. My intent was challenge the local Obama campaign organizers to see how well they knew their candidate and themselves. The questions are:

  1. Identify the proper role of government.
  2. What standard(s) do you use to differentiate good from evil?
  3. How do you know the answers to #1 and #2?
  4. If a reasonable person disagreed with your answers to questions 1-3, how would you convince them that your position is correct?

The questions are designed to reveal an individual's character and validate it for consistency. They are asked in order from most abstract to most specific and are conceptually hierarchical - in other words 1 is based on 2, 2 is based on 3, and so on. The purpose of the ordering is to prevent the subject from thinking through an inconsistent viewpoint on the spot (remember my goal is to reveal the subject's character to the questioner, not for the subject to discover it for the first time). The questions correspond to the subject's views on the four major branches of philosophy: politics, ethics, epistemology, and metaphysics.

Most individuals have political opinions and can state them easily in conscious terms. Question 1 is a benchmark that is used as a consistency check for the remaining questions. Question 2 uncovers the ethical standard or standards the subject accepts as true which can be use to validate their position on the proper role of government. Question 3 is intended to identify the subject's method of knowledge, this can also be used to validate the consistency of the previously stated ethical and political positions.

Question 4 will determine if the subject can link their beliefs back to perceptual reality (which is the only way to convince a reasonable person who disagrees). Up until this point the subject may find comfort in the realm of arbitrary opinion, but linking his or her views to reality is impossible unless the views are true in metaphysical reality; therefore, question 4 validates whether or not the subject's views are correct and proper.