Tuesday, March 03, 2009

The value definition problem

"What is a cynic? A man who knows the price of everything and the value of nothing."
Oscar Wilde, Lady Windermere's Fan, 1892, Act III
Irish dramatist, novelist, & poet (1854 - 1900)

We have had, in this fine Nation of ours, the belief that how much one makes defines who they are... what they are. From that comes class warfare of the Marxian mode so that the idea of equality is twisted into some scheme to uplift the poor, and destroy the rich so that all have exact equality of outcome. No matter how good you are in life, all get equally rewarded, so that the indigent who has chosen to not better themselves are equal to those who work hard to bring up a family and they are equal to the super-rich who must be brought down. Sadly, when that happens we are all equally impoverished in an attempt to place a price on a human life and make all outcomes the same. That is so simplistic a concept that it is insidious in its tendrils that reach out to those who would re-make the world to be 'fair' in mortal reward. Between the thrifty and the spendthrift there would be no difference as the thrifty would be belittled to pay the spendthrift and the spendthrift, lacking ways to control their spending, would squander such 'generosity'. It is self-defining: for a spendthrift to spend is definitional, and only if they made amends to change their ways to pure thrift would such an exchange have some overall good to society. When that intention and carry-through is lacking, then taking from those who prepare and lead good lives to those who squander their lives is rewarding bad behavior and that is decaying to the overall sense of society holding a value of thrift high and important to individuals.

Is it sad to see those who have lost all they had to poor economic times?

Of course it is!

Is the remedy to destroy the capital held by the rich so as to move it to these poor a productive one?

No, it isn't, as this only gives payment to those who cannot put it to the larger use of creating places of value so that longer term employment can be had. In a system of capital held in private hands, one based on the concept of property ownership that is the underlying basis for all liberty and freedom, to take from the rich may have a 'feel good' and 'get them' momentary thrill, but the effects of taking millions of dollars and dividing it amongst tens of millions of individuals winds up with pennies in their pockets and no accumulated wealth to rebuild industry. To 'attack the rich' one must attack one's own ability to own anything, to have anything, and entrust that fundamental part of liberty to the State. Any State that can do that is no longer one that enshrines the liberal values of the rights of man as an individual, those self-evident truths we all know and experience, but is, instead, one that now looks to take away rights, liberty and freedom and control society.

This passage was written in 1776 before the Declaration of independence, at sums up what these differences are:

Some writers have so confounded society with government,
as to leave little or no distinction between them
whereas they are not only different, but have different origins.
Society is produced by our wants, and government by our wickedness;
the former promotes our POSITIVELY by uniting our affections,
the latter NEGATIVELY by restraining our vices. The one
encourages intercourse, the other creates distinctions.
The first a patron, the last a punisher.

Thomas Paine, Common Sense (via the Gutenberg Project), bolding is mine, unless otherwise noted.

When we see wickedness on 'Wall Street' or amongst 'investment bankers' or 'hedge fund traders' we must ask: what is this class of wickedness? Are these done by people who skirt our laws, meant to restrain their abuse of society? And are these laws ones that actually have been put in place with that as a goal?

Unfortunately, those who wish to demonize these mavens of capitalism forget that the actions of our government play a role, and ever increasing role, in making financial decisions. With the Community Reinvestment Act and its follow-ons in the 1990's, the rules over thrifty behavior were altered by government to promote a social good. Those who were ill-equipped to own homes were 'empowered' to get loans with little to no money down at ever expanding interest rates. Even worse the 'social activists' or 'community activists' then staged protests against banks that would not lend to those who could not lead a thrifty life to actually sustain a loan. The result of this is two fold:

1) A distortion of social values by government. These are not the first such times that government has stepped into society to do this, and the installation of race and ethnic based quotas in government contracting and enforcing such on government outlays to States and private institutions, put in place a system where the distinctions between individuals (race, ethnicity, etc.) are more important than being a citizen and treated fairly under the law. The law, itself, now favored biased outcomes to try and do a 'social good' that was mandated from government. Equal protection under the law does not require a quota system, but an enforcement of fair and equal standards applied to all citizens.

Going a step further to reward another set of people via a quota system and mandating fiscally unsound practices to back them using the authority of government with willing coercive pressure from an aggrieved set of 'activists' gives a fatal twist to this as all private property is derived from our ability, as individuals creating private institutions, to judge for ourselves what is sound or unsound in the fiscal realm. This has happened before in the US system, when the National Bank was chartered as a government institution to leverage government power in the financial markets. The results were, sadly, completely knowable and provided a litany of payoffs, kick-backs, and ill-made investments to reward those given the privilege of working on behalf of society. While that institution was a monopoly, it must be understood that when government steps into the financial system it is a monopoly on limited power expanding that power so as to distort the markets and society.

It is one thing to promulgate sound financial reasoning and requiring all to adhere to it in lending of funds from the federal government. It is quite another to extend that power beyond that limited government input to the entirety of the system, save as an enforcement of contract law to commonly adhered to standards. This leads to point two.

2) The devaluation of the contract as a concept. When government steps in to 'regulate' an industry and starts writing mandatory parts of contracts, the good judgement of individuals and institutions is over-ruled by government. When this is done to eliminate bias in contracts based on race or ethnicity it is an enforcement of equal protection under the law for all citizens: items coming to an open market must be available to all citizens in such a market. In doing that our private excesses and personal biases are removed when we interact with society as a whole. With that said, private institutions and individuals must be allowed to discriminate: government cannot change the hearts of men nor woo them to be their better selves, as its role is punishment. This is particularly true in financial areas where the public open market must have standards for the holding and transfer of goods so that value is maintained in those goods and price does not get a negative impact in such transfers.

That is a fine line for any government to toe, and has been traditionally left to society and the States to work on so that there would be a diversity of ways promulgated to find the best way forward for having broadened open markets and less discrimination, while still holding to increased value for those things we need in this mortal realm. All of this is done under the sovereignty of the Nation backing contract law: the basis for our work is within the framework of those organs of society we call government and it is the organ to ensure that the laws are enforced. There is a vast difference between equal protection under the law and government enforced bias by creating law to punish those who do not enforce that bias. The 'social good' of trying to engineer society comes at the cost of losing decision making to the State and giving up the realm of personal bias as a liberty. With the organs of society known as government being populated by individuals who, themselves, are human and biased, we then get discrimination by them on how these laws will be enforced. Bad enough when the goal is equal protection, but, some how, when the goal is to change society, government becomes omni-competent and unbiased in the eyes of those looking to promulgate such a 'social good'.

The confluence of these two are predictable once the financial system falls into disarray: expand the role of government and re-write contracts made between consenting adults and private institutions that broke NO law and CONTINUE to break no law. When writing my fictional works, one of the things I bring up is just how much of our lives are run by contracts: a home mortgage has a contract, we contract for energy for our homes, we contract out to companies willing to extend credit to us to pay back to them, we purchase all goods under contracts, any clothing bought from another individual is done under contract. Many are unwritten, such as the daily exchange of money for goods, but even that has 'In God We Trust' and indicators to put forward that the full faith and backing of the US government stands behind the exchange of money for goods. Pay by credit card and the contract is written with your signature attached to it.

Our Constitution is a social contract between all members of society under it that we get by common agreement and outlay of the basis for it. We the People state that in the Preamable which is the contractual agreement amongst all individuals to have a society and common organs we call National government. Like any good contract it states who those are that are taking part in it right up front: first paragraph, only sentence. It is an untitled document as the form of contracts is being defined within it: it is a Constitution to outlay those common powers we have as a Nation and how they are to be utilized. While we would retain many of the Common Law contractual concepts, others would be changed by this document, and equal protection under the law would be a part of that so that States could not discriminate against citizens of other States in contracts. Private property is upheld, the power of government to seize it limited and citizens holding property have their property protected from government power by this common contract we make to form the basis of all later contracts.

You sign on to this public contract when you become a citizen of the Nation. As under the Law of Nations, minors are protected from government, not given full rights as they are not competent as adults are to handle their emotions, values and money, and generally allowed to figure out just what sort of citizen they are. At majority you can make an active decision to become a citizen of another Nation, and prudence and good foresight for the best in society is to allow this and to, likewise, accept those that are willing to learn our laws and ways to become citizens and integrate with our society. That is part of being We the People: society, itself, changes and adapts to new ideas, new citizens and changing technology, but holds that society must be whole via social intercourse and equal protection under the law.

The price we pay is the surrender of some few negative liberties to this organ of society known as government so that those who seek to abuse society, undermine society and threaten society and the Nation can be addressed. In this schema of outlook, those who are in a minority seeking to change government to favor them are the ones crossing society and equal protection. When government changes its stance to 'enforce good' it not 'restrict evil' it moves from the realm of necessary evil to pure evil: it takes away from society the right and liberty to have freedom of expression, activity and commerce and forces, in its place, the punisher to dictate to the individual what is the right way to act, speak and, ultimately, think. Thus the end of 'social activism' is to have society dictated to by government, and to change the system to benefit the few.

For all the money poured into these 'good causes' against poverty, to provide health care and to 'insure' that retirees have money in their retirement, what have we gained?

First in a system that rewards those who work hard, are thrifty and have good insight into how to run their lives, we have disparity of outcome. There will always be a bottom 50% and bottom 10% and upper 1% as this is dictated to by mathematics. Should we get rid of mathematics in analysis? In this Nation the bottom 10% have more in the way of luxuries, durable goods, housing and medical care than has been available to any preceding generation prior to this and far superior to how the upper 10% lived just a mere 50 years ago. Indeed, after the 1970 census the number of homes with indoor plumbing had grown so high over the decades that it was dropped from the census. Likewise the growth in the purchasing of cars, televisions, refrigerators and washing machines had grown so as to obviate needing to chart them. The penetration of telephones had reached all but the remotest areas of the Nation. The basis for good public health was put down in the sewer systems, water treatment plants and maintenance of highways, all of which had no equal in the turn of the century from the 19th to the 20th. In the last 40 years the problem of the poor went from hunger to obesity for the first time, ever, in human history.

And yet, if one listens to the grievance mongers and 'social activists' this is still abject poverty. In fact the disparity of the type of goods available between the fabulously wealthy and the poor is only in degree, not in kind: a beat up old rust bucket car still provides transportation that is little different from a sports car, especially on clogged roads during a traffic jam. A computer used, today, in any realm, is so far better than what computers were 30 years ago that we forget that your average iPhone or Blackberry has more computing and connectivity power than all the Generals of World War II had *combined*. And people complain if a rich individual wants a gold plated one? Good and healthful food is now so abundant that it is a choice to eat junk food, and many do just that, much to the detriment of their health. Yet a rich person can also be a 'junk food junkie' and forego caviar, salmon steaks and a salad of field greens with a side of wild rice. Nutritionally a decently made home meal might actually be superior to the fine one served to delicate palates, and yet that is not something we enshrine in society.

No matter how much value is given to the lives of the poor, the grievance class exploiting the differences will always point to the differences in price and complain. That class of complainers, seen on any news program about any thing that goes on in the country, has actually gotten its wish in another area, and we all pay for that deeply.

This second area is health care, and it was once something that only the rich could afford insurance for it and everyone else paid out of pocket. The value of good health had a direct cost, then, with no intermediaries. This changed during World War II as, to meet labor demand, this once lofty 'perk' was given a tax shelter by government to bring back those who had retired under social security to the work force.... amazing that we forget this, ever so conveniently, isn't it? Health insurance is paying out for insurance via contract on the expectation you WILL get sick and need it and the insurer providing coverage on the expectation you WON'T get sick and not need it. That is what insurance is all about: you are paying out based on the perception of future need of services that are rare, or upon payback in expectation of something with a low probability of happening actually happening.

The reason why this was a 'perk' is blindingly obvious: the rich can afford it, take better care of themselves, live longer lives and need LESS health care. That is a 'no shit Sherlock' conclusion, that we all avoid because it is painful to admit that those who have wealth gain some benefits from it, in times past, that were not available to the common man. That has changed since the 1970 census and drastically in the last decade: with the promulgation of media and expertise to help individuals understand themselves, plus advances in public health, we continue with the increasing rate of life span increase that started far before the 19th century. People who live longer and healthier lives then have the concentration of care needed at the end of their lives. Having one's life end, until we somehow find away around that minor problem, is a known quantity, expected and should be planned for. Yet this is the area where, normally, health insurance would be withdrawn as you become a very poor risk at old age. So, unless you had a contract signed on that requires you to do the termination, you could find yourself without coverage when you need it most. Unless you took some time to foresee this inevitable event called 'old age' and 'death' and took out catastrophic coverage when you were younger, when it was cheap and affordable.

A second area of coverage this system does not do well with is chronic diseases. Normally, you died of them at a younger age. Take a look at the echelon survival statistics for diabetes, say, and you see an average loss of life span against the population as a whole, of 30%. Chronic diseases that require maintenance on a daily basis requires, also, individuals take up their own health provisioning. For many of the treatments the cost of a 'co-pay' is now that of the medication itself over the counter. Thus the problem is with complications due to self-managed care and the system of 'health insurance' picks that up, which lessens the burden on those taking care of themselves to do a good job. Indeed, it is an easy trap to fall into, and I will, personally, attest to that. Only when I came down with a second chronic disorder did I need to address the first into good management. The flip side of cheap medication on the one now has a flip side on medications where government has taken a strong role in 'oversight': huge costs of medications that have some minor recreational value now restrict production of those medications so that all those suffering from them will now pay an extremely higher cost for those medications. Paying for a mere week of medication for my second condition would pay for more than a months worth of testing supplies and medication with applicators for my first condition. And yet both have medications that are off patent, known, and have industrial backing for production. The 'social engineering' of the 'drug war' has the side effect of grotesquely changing the price of drugs that have a fixed value for those in need of them.

By providing 'health insurance' we take the onus of having to take care of oneself from the individual, and then put it on the practitioner who must ensure that any condition is ruled out before diagnosing a condition that really only needs a single test or two at the most. The bureaucratic and legal overhead to practitioners is then added to the system in the form of added tests that aren't needed, added legal overhead for joining up with a 'group' that may over-rule sound physician treatment or put in a bureaucratic means to change your health care from good sense methods to ones mandated by the company (or in some instances now State government), and require non-productive staff to track all of this. On top of this are added the legal costs of having medical malpractice insurance in an over-litigious society that has decided that anything abnormal in life now needs to go to court, with 'abnormal' being anything a given individual doesn't like. A few doctors are chucking this set-up, entirely, and offering a contract for non-lawsuit based medicine where you, the receiver of medical care, agrees not to sue the physician under contract: if you break the contract, the counter-suit will be swift and furious no matter how grievous the wrong as you agreed, as an adult, to such care. The return on that is lower cost care, lower overhead care and more time with your practitioner. I have witnessed doctors raising their non-insured patient cost higher every year, beyond the rate of inflation, as insurance companies pay out less per year to doctors under such 'managed' systems.

Another effect in this is the subsidy effect, in which a commodity is used uneconomically as its value to price ratio does not change to reflect increasing price cost for limited availability. Iran and China do that with gasoline to the point where, while gasoline is always one price, their governments get hammered when the commodity cost rises and the people get hammered when the commodity cost falls. When government steps in to subsidize prices of things with a set value, market economics get put aside so that a given value with a set price hurts the overall society through over-use. In medicine this is taking any minor ill to a doctor, thus using up the limited time resource of that doctor and the system for every minor ill that comes in. When that has a low set-cost or 'co-pay' the value of the doctor's time is minimized and devalued as it has a set cost. Self-care that would happen with a non-fixed cost system goes to the wayside, so that every negative activity in one's life that would make one sicker is now subsidized by government, and we have little expectation of people to know themselves well enough to actually understand their health. Combined these things raise the overall cost of the system, burden the system and then put an inordinate emphasis on the last decade of life where the accumulated poor health choices that have been subsidized previously now have an extreme effect on the use of health care. The most expensive and valuable care cannot be provided to everyone, and pushing more people into such a system guarantees that the individual will no longer be the one deciding if they will get such care, but it will be put into a system where the time to get even minimal care is increased no end.

Yet this is pushed as a 'good thing' by those who do not want to understand the cost of subsidies and the 'tragedy of the commons' as something valuable to everyone gets devalued when no one pays the true cost for its value. To pay for this we ask those with the least need of such care, the young and healthy, to pay out their earnings which are generally lower than that of more veteran workers, to carry this burden so that those reaching old age can have months more of mobility without pain and have the very best of scarce care while burdening the entire system with the cost of that care. Mind you, these are the same people who should have been investing for such contingencies earlier in life, but that burden is removed from you if you have 'health insurance' with guaranteed care.

(On a personal note, I have this nasty suspicion that the price point determination for diabetic supplies is now set by the minimum payout of health insurance groups, and thus fixed by that price point: it has no relationship to actual cost of production which, with new industrial effects, should be damned cheap. Additionally the cost of my 'requires federal oversight' medication would also drop drastically if it were taken off that list and standard industrial processes allowed to take hold and we did not have a puritanical outlook towards even minor recreational medications. Yet we pay far more of a cost in dollar terms for alcohol and fuel drug cartels with the harshest restrictions on those medications that are widely known to be a problem. Government is damned poor at discriminating between minor and major problems, and so the cost of the major ones are now inflicted on the minor ones.)

The cost of growing old is known and expected, and yet we now wish to burden the least able to pay with the costs of those who should have provided for themselves while younger. And not doing so now has NO consequences to those making such decisions and HIGH consequences to those ending up paying for them. You could change this into a payment for set service that can be accumulated system, but that would require the removal of government from the system entirely and setting up a common trading market for this commodity known as 'health care' and putting individuals in charge of their own lives. But that requires letting individuals recognize their future cost needs and paying for them, and we are now adverse to letting people exercise liberty in that way. That has ramifications built upon previous work by those seeking to inject government into another area of social concern.

This third area is social security. Social security was set with a cut-off date that was the average life expectancy of the individuals involved... in 1938. That has remained fixed, with minor adjustments that do not track demographics of old age, and the payout, per year, guaranteed by the amount you have worked in time. Or so the theory goes, at least. With other provisions for poverty, being the widow of a worker, and other such benefits, there is no expectation that social security will NOT pay out once you go beyond the benefit ratio of years worked. We continue to provide that payout, just for social security, not based on means but on ever expanding life expectancy. We did not set the age of payout and retirement to be the mean life expectancy of the population, as a whole, once the system was put in place. As I have pointed out previously, we ignored the demographic trends of public health and put in place a system that will bankrupt us as we now have people living far longer than ever before in human history as a standard or mean, not an outlier or rare individual. We have moved from 31% of one's life not spent at work (growing up and retired) in the mid-1930's (where average life expectancy didn't give you much, if any retirement) to 45% now spent not at work with ALL of that change, 14% coming AFTER one retires.

What happened when government stepped in to 'help' medical care in that extra 14% that is not covered by working? The results of that are obvious in a subsidized system of guaranteed payout. The better question is: What would have happened without this government intervention?

People would have worked longer.

Strange as it may seem, when you see retirees working 'part-time' at WalMart, you are seeing one of the most productive workers on the planet put into a menial position to make ends meet or occupy their time. The heavy earning years are when a worker is most skilled, has the most experience and applies that to their job for the highest reward. As a society we have decided to do without that knowledge, background, skill set and capability and deprive ourselves of it via the retirement system shifting the burden from those who should be earning more to those earning far less. People working until just before they die? That is what was expected before government intervened, and that placed NO high cost on medical care or 'retirement' as, to retire, you needed to either provide for yourself via asset accumulation or have an agreement via contract with your employer on a pension. And the pension system, also stuck in the mid-1930's now suffers the exact, same ills as the public social security system, thus increasing the likelihood of *both* failing and leaving older Americans without *any* coverage that can be afforded because we told them that they didn't need to look after their own interests.

That is a paternalistic Nannystate at its worst: demeaning the value of one's life to a mere price, and not asking individuals to invest in their older years via prudent acquisition of funds and assets so as to cover them in an event that has been happening since the beginning of life on Earth: old age and death.

And we dare to complain about such high costs when our government is attempting to surpass King Canute who only wanted to stop the tide?

This system of government intervention is beyond repair, beyond amending, beyond revision, and beyond saving.

Soon the goodies will run out, and we will be faced with generations of lies to promulgate this system for sweet election victories in the short term and long term harm to society and the very concept of liberty and freedom in the long term.

Such a wholesale change against this system could be done at the ballot box, but the ongoing disenfranchisement of people by 'activists' dividing this Nation against itself leads to the very kind of thing that those activists always wanted: Revolution.

Save that it will be against them as the entrenched power elite.

What we see today is the spending of our economy for those priceless things we should have been doing for ourselves.

Activists always know the price of things, but have no idea what their value is.

Liberty and freedom do have a cost, but when you fix a price to them they are devalued... and regaining their value always has the highest cost of all.

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