I've been taking another run at Subjective Probability: The Real Thing (2004) by Richard C. Jeffrey. I'd started reading it a while back, but got distracted. Anyway, Jeffrey was an important subjectivist — someone who argued that probability is a measure of belief, and that any degree of belief that does not violate certain rationality constraints is permitted. (As I have noted earlier, the subjectivism here is in the assignment of quantities not specifically required by objective criteria. The subjectivists believe either that quantity by reason must be assigned, albeït often arbitrarily, or that Ockham's Razor is not a binding constraint.) And the posthumous Subjective Probability was his final statement.

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At some point, I encountered the following entry in the index:

Nozick, Robert, 119, 123

which entry was almost immediately annoying. Page 119 is in the References section, and indeed has the references for Nozick, but that's a pretty punk thing to drop in an index. Even more punk would be an index entry that refers to itself; and, indeed, page 123 is in the index, and it is on that page that one finds Nozick, Robert, 119, 123.

Well, actually, I'd forgot something about this book, which is probably an artefact of its being posthumous: Most or all of the index entries are off by ten pages, such that one ought to translate Nozick, Robert, 119, 123 to Nozick, Robert, 109, 113. And, yes, there are references to Nozick on those pages (which are part of a discussion of Newcomb's Problem and of related puzzles). It was just chance-coïncidence that ten pages later one found the listings in the references and in the index.

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In decision theory, there are propositions call independence axiomata. The first such proposition to be explicitly advanced for discussion (in an article by Paul Anthony Samuelson) is the Strong Independence Axiom, the gist of which is that the value of a reälized outcome is independent of the probability that it had before it was reälized. Say that we had a lottery of possible outcomes X₁, X₂,… X_n, each X_i having associated probability p_i. If we assert that the expected value of this lottery were

Σ[p_i · u(X_i)]

where u( ) is some utility function, then (amongst other things) we've accepted an independence proposition. Otherwise, we may have to assert something such as that the expect value were

Σ[p_i · u(X_i,p_i)]

to account for such things as people taking an unlikely million dollars to be somehow better than a likely million dollars.

Anyway, there's another proposition which to most of us doesn't look like the Strong Independence Axiom, and yet is pretty much the same thing, the Sure Thing Principle, which is associated with Leonard Jimmie Savage (an important subjectivist, whom I much admire, and with whom I markèdly disagree). Formally, it's thus:

{[(A ∧ B) pref C] ∧ [(A ∧ ¬B) pref C]} ⇒ (A pref C)

Less formally,

If the combination of A and B is preferred to C, and the combination of A without B is preferred to C, then A is just plain preferred to C, regardless of B.

Savage gives us the example of a businessman trying to decide whether to buy a piece of property with an election coming-up. He thinks-through whether he would be better off with the property if a Democrat is elected, and decides that he would prefer that he had bought the property in that case. He thinks-through whether he would be better off with the property if a Republican is elected, and decides that he would prefer that he had bought the property in that case. So he buys the property. This seems very reasonable.

But there is a famous class of counter-examples, presented by Jeffrey in the form of the case of the Marlboro Man. The hypothetical Marlboro Man is trying to decide whether to smoke. He considers that, if he should live a long life, he would wish at its end that he had enjoyed the pleasure of smoking. He considers that, if he should live a short life, he would wish at its end that he had enjoyed the pleasure of smoking. So he smokes. That doesn't seem nearly so reasonable.

There is an underlying difference between our two examples. The businessman would not normally expect his choice to affect the outcome of the election; the Marlboro Man ought to expect his choice to affect the length of his life. Jeffrey asserts that Savage only meant the Sure Thing Principle to hold in cases where the probability of B were independent of A.

But what makes the discussion poignant is this: Jeffrey, dying of surfeit of Pall Malls, wrote this book as his last, and passed-away from lung cancer on 9 November 2002.

A minor prediction: Over the next few weeks, news stories about the economy are going to make increasing reference to Joseph Alois Schumpeter.

Schumpeter was an economist from the Austrian School. His theory of the business cycle was, however, distinct from that which has come to be seen as the Austrian School theory of business cycles (which theory I will not labor here). Schumpeter believed that economic crises were processes of creative destruction, whereby economies restructured in consequences of accepting pent-up innovations (typically technological) incompatible with the existing order, but ultimately beneficial.

Unless this theory is in some way trivialized, it does not explain the present crisis; but I none-the-less expect various journalists and alleged economists to pitch exactly the idea that it does. And I would actually not be surprised for the economy to emerge significantly restructured, but that would be more a matter of a sort of economic gerrymandering by the Democratic Party, taking advantage of the crisis.

As most or all of you have read or heard by now, the economic news for the the last quarter of 2008 was quite bad

and the news from the stock market has grown worse

Now the New York Times frets

Of course, if they believed the naïve Keynesian rhetoric that has come back into political fashion, then the claim would be that Obama's aggressive spending plans were insufficiently ambitious.

I'm wondering whether it's merely the so-far unpassed budget that is under threat. As I noted earlier, the stimulus bill is an enormous blow to the economy, and was passed only as a result of some combination of willful blindness, knavish exploitation of a crisis in which politicians did not actually believe, and desire to worsen things on the expectation that even greater expansion of state power could be achieved. In the case of all three of these motivations, one could expect some politicians to now regret what they have done in passing the bill; what seemed like a bearable amount of plunder may now seem like a grave miscalculation. I don't think that it's politically possible that the legislature would overtly repeal the stimulus bill, let alone that the Obama Administration would openly reverse itself. But subsequent legislation might implicitly pare some of the programmes, and a formula might even be found for the Administration to suspend some programmes without legislative action.

Of course, the Administration and the Democrats in Congress know that, if they repealed a significant share of the stimulus bill even obliquely, then their opponents would pounce on how this repeal demonstrated that it were not a stimulus bill. So those who supported the bill may have a tiger by the tail.

There is a myth (demonstrated to be false by economist Ronald Harry Coase about 50 years ago) that, before the state stepped-in to regulate radio transmissions, there was simply chaos, as one would-be broadcaster tried to over-power the signal of another.

Actually, what happened was that broadcasters who wanted to work in the same frequency ranges and in the same geographical regions as each other went to court, and the courts began to apply the principles of homesteading to broadcasting. The main questions, as with the use of land, was of who was there first. Basically simple (though there certainly could be nuances).

Now, I would acknowledge the point, made by Donald Clayton Hubin and others, that allowing someone to own the use of one part of the electromagnetic spectrum doesn't seem different a priori from allowing them to own any other, and the intuitions of many of us would be immediately alarmed at the idea that someone should own, say, red in the Columbus PMSA. But we are alarmed in the context of there already being meaningful use of red by everybody; given that use of red, we could conceptualize the existence of a sort of easement actually giving us each a right to its continued use. On the other hand, prior to the development of radio, people did not so much use those parts of the electromagnetic spectrum as accidentally generate such electromagnetic radiation. For important parts of the spectrum, that remains the case. And, in-so-far as such accidental generation may be long-standing and so forth, one could believe that there was an easement allowing such continued accidents, but otherwise impute a property right to broadcasters in the same ranges as the accidents.

There's also a bit of apparent oddness in the fact that broadcasting amounts to vibrating the surrounding area; this seems a use of the properties in the surrounding area. But, while it's certainly a use, we have to be careful about the issue of whether it is a use of the property of others. We tend to equate property with the object against which a property claim is made. For example, we would normally simply say that Thomas's house is Thomas's property; we would even normally continue to say this if Thomas rented the house to Richard. But the notion of property rights as distinct from use rights is incoherent, and the rental agreement transfers some of Thomas's property rights to Richard, even if only rights specific to a defined interval. So, backing-up, we need to at least ask whether the property rights of those otherwise owning physical things in the area surrounding a broadcaster included exclusive rights to vibrate those things, or at least exclusive rights to vibrate them other than in the aforementioned accidental manner.

The reason that the airwaves were declared to be public was not because there was no coherent model of private property in the use of the electromagnetic spectrum, and the declaration certainly wasn't to end chaos.

(Nor was it because there is some sort of natural monopoly in broadcasting. Consider how few daily newspapers the typical city now has, as opposed to how many radio and television stations it has.)

The nationalization of radio broadcasting was to introduce censorship. People were broadcasting opinions that the state and its clients didn't want broadcast, such as attacks on the medical profession. Freedom of speech was the chaos that was stopped.

This brings me to the Fairness Doctrine, which was introduced in 1949 and prevailed until late-mid 1987. The doctrine ostensibly required broadcasters to present opposing views on important and controversial matters, in a fair and balanced manner.

Even if it had done this much, it would have been a gross violation of freedom of expression, much like forceably demanding that any of you reading this entry both speak-out on important and controversial issues and that you always defend, as strongly as practicable, views that you oppose. Operationally, you couldn't be a spokesperson for your own views so much as a reporter of what views were had.

But, in practice, the Fairness Doctrine was part of a system of disguising gross biases as balance. For example, the gentlemen's agreement (sans gentlemen) between the prevailing political left and political right has been that only both sides are represented, not the views of those who do not fit on whatever might be the left-right spectrum of the day, the Fairness Doctrine abetted the impression that no one (or no one who mattered) could have such views. Beyond this, the politicial left, for most of this period, was largely successful both in disguising their own views as neutral, and (when unable to do that) in selecting poor representatives of the political right to present opposing views; thus not even both sides were given the same opportunity to be heard.

The Doctrine fell because of pressure from those who opposed censorship in principle and from those who were given the short end of the stick (the political right) or given pretty much no end of the stick (everyone not on the left-right spectrum).

Once the Doctrine fell, the political right developed a sort of counter-weight to the main-stream media. Against CBS, ABC, NBC, PBS, and NPR, the right threw-up first a network of AM radio stations and then Fox Television. In terms of combined listenership and viewership, these countervailing broadcasters don't match the old main-stream, but it upsets the political left that there should be grossly biased broadcasting, when the gross bias isn't their own. And, in spite of their continued dominance in the more important medium of broadcast television, it hugely disturbs the political left that the right-wing has a larger presence in AM radio.

Parts of the left persuaded themselves that the right-wing dominated talk radio because powerful corporations were willing to sacrifice direct profitability in order to mold public opinion in favor of the political right, and therefore presented only personalities such as Rush Limbaugh, rather than what would be popular progressive (social democratic) personalities. Hence, Air America Media. But, in operation, Air America has not been profitable; it has been a meaner, dumber NPR, dependent upon subsidies.

So there has been increased interest on the part of the left-wing in a revived Fairness Doctrine. And even trial balloons about somehow applying it to the Internet. Therefore, I am pleased and relieved that the Obama Administration has declared that it does not support a revival of the Doctrine. I would really like to believe that this decision is based on a respect for freedom of speech, but the plain fact is that the present SCotUS has a majority bloc that could be expected to reject a Fairness Doctrine as unconstitutional, and the Court could well continue to have such a majority for at least the next eight years. (Justices Kennedy and Scalia are each about sixteen years younger than Justice Stevens.) But if just one member of that bloc were to leave the court then the Obama Administration would be faced with a new calculation.

A while back, I got an offer from Washington Mutual Savings Bank; if I started a free checking account with them, with a deposit of $100 or more, then after a few weeks they would add $75 to that. I decided to take advantage of that offer, and deposited exactly $100. I have kept my prior checking account, and left the WaMu account dormant.

Perhaps I should have waited. Yester-day (after the original offer expired), I received a similar offer from them, only now the supplement would be $100. Having taken advantage of the old offer, I'm blocked from exploiting the new offer.

As the Woman of Interest notes, this increase to $100 is suggestive of desperation.

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Last night, in CVS/pharmacy, I saw multi-packs of sparkling water on sale — regularly $3.99, now $3.97. That's a discount of just barely more than ½%.

In an entry on 27 February of last year, I wrote

The Woman of Interest alerted me to the fact that the USPS will be increasing its rates again in May. A one-ounce, first-class stamp will cost another US$0.01.

The problem here is that the Postal Service long-ago passed the point where each increase in price caused a drop in total revenues, as people began switching first to facsimile machines and, more recently, to e.mail. And officials report their expenses as continuing to climb, which shows that they're not paring dis·economies of scale. Basically, officials increase the price per letter in an attempt to off-set the cost per letter which increases as the number of letters decreases because of past price increases. It’s a death-spiral. This morning, she informs me that the rate will be increased by US$0.02 this coming May.

Calvin Woodward, at the AP, calls this an overstatement:

Most economists, almost unanimously, recognize that even if philosophically you're wary of government intervening in the economy, when you have the kind of problem you have right now … government is an important element of introducing some additional demand into the economy.

but it goes well beyond mere overstatement. It's an gross lie.

It's bad enough when people use consensus to argue for a proposition that ought instead to be tested by logic applied to brute fact. But this business of using counterfeit consensus is just actively vile.

Any time that the state spends money, there is some cost to the economy.

The state can tax, in which case the cost is obvious. But I put obvious in quotation marks here, because people don't seem to think past the fact that money is taken, without much thinking that the value of money per se is its purchasing power.

The state can print money, issuing new currency to fund its expenditures. The cost here comes because

where M is the total supply of money in an economy system, ν is the average frequency with which a unit of currency changes hands in the system, q is vector of the quantities of goods and services purchased in the system per unit time, and p is the corresponding vector of prices. If M is increased, and there isn't some off-setting increase in the elements of q, or a drop in ν, then elements of p must increase. If prices go up, then the purchasing power of the unit of currency goes down. Ceteris paribus, when the state issues new currency, the value of the holdings of currency that people already had is decreased. (There are some other, potentially far more costly effects than the direct loss of purchasing power, but I don't want this entry to mushroom into some huge treatise.)

In many modern states, printing money is made to look like borrowing, whereïn the ostensible borrowing is from a central bank, a special creature of the state, which prints money and uses this to make the loan to the state.

But the state may also more genuinely borrow money (especially when officials of the central bank think this better than printing more) in the financial markets. In this case, borrowing by the state shifts out the demand curve for loanable funds. Unless the supply curve for loanable funds were perfectly elastic, so that any amount of funds would be made available by lenders at the prevailing price — the rate of interest — that price will go up.

When people lose purchasing power to taxation or to an over-all increase in prices, they reduce purchases of goods and of services, and they save less, so that funds for investment are decreased, and hence investment is decreased. When the price of borrowing is increased, people borrow less for consumer purchases and less for investment. So whenever the state spends, no matter whether it taxes, inflates, or borrows, that spending takes a piece of the economy. Whether there is a net cost turns upon whether the activity funded by state spending is somehow more productive than the private activity that it has crowded-out.

As I have explained, state allocation of resources can be more productive only if private provision is hampered by transactions costs, and the effects of those transactions costs are greater than the combined effects of state transactions costs (red tape and all that) and the loss of economic coördination which results from substituting guess-work for market prices.

Okay, so this gets me to these stimulus bills in the United States legislature. Various numbers are associated with various versions, but the bill that left the House of Representatives was for about 800 billion dollars. And various commentators, both conservatives at institutions such as the Wall Street Journal and social democrats (liberals) at institutions such as NPR, have noted that only about one-eighth of the projects in that bill could be reasonably claimed to be stimulus, with the rest just being pork-barrel projects. Regardless of whether we buy-into the Keynesian hopes for about $100,000,000,000, the loss to the economy associated with about $700,000,000,000 in pork will be vastly greater.

It was claimed that a stimulus bill was necessary because the economy is tanking. The word depression is being bandied-about. And, yet, a majority in Congress and the President are pushing what will plainly be a massive hit on the economy.

To explain the behavior of these parties, we could offer various hypotheses. Many politicians are simply great fools; some politicians might believe that we are indeed on the cusp of an economic disaster, but be so greedy for the political gains associated with these projects that they just won't allow themselves to think. Other politicians might not believe the talk of economic crisis, but be knaves who participate in it, creäting a smokescreen behind which to seek much the same gains as are the fools. Finally, some of these politicians might both genuinely believe that the economic crisis is quite dire, and recognize that a stimulus like those proposed will be greatly damaging, but expect that the effects of the bill can be blamed on other things, especially upon what remains of the market economy, so that those effects become an excuse for even greater expansion of state power.

With regard to one particular politician, the President, I don't at all think that he's so great a fool as to misunderstand what a stimulus bill that is about 7/8 pork would do. He knows that he's pushing a hit on the economy. I don't know whether he is amongst the knaves who don't really believe that the economic situation is all that dire, or amongst those who want to engineer a greater crisis in order to have a greater excuse to technocratically restructure the economy. But when the President speaks of recovery as taking years rather than months, I worry that he is not merely lowering expectations to reduce future criticism, but revealing more ambitious plans.

Here's an example of a wretched journalistic practice:

One should not begin with a news story with a lie, and then correct it. The head-line here doesn't refer to a post-war record. A head-line is often the only part of the story read, and almost always the first part of the story read. So people with no sense of history — because their educators in the school system and in the main-stream media don't impart one to them — are filled with anxiety and rage. The emotional effect lingers even after the correction is given, and some never get the correction.

The economic news has been bad, but it simply doesn't compare to that of the Great Depression — which itself shouldn't be seen as necessarily our worse down-turn. (Those who uncritically presume that it was should look into the Depression of 1837.)

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One should, BTW, be careful to distinguish amongst different statistics:

• the number of jobs lost,
• the unemployment rate,
• the employment rate,
• changes in these rates.

Note that the article acknowledges that the unemployment rate is not at a post-war high; it has, rather, climbed faster than at any time previous in the post-war period. The unemployment rate itself was worse at the end of the kinder, gentler Administration of GHW Bush.

Second, when there is job creätion as well as job loss, people may lose jobs but spend relatively little time unemployed. (Being dismissed from a job is still a stressful experience for most people, but not necessarily equivalent to being materially impoverished.)

Finally, the unemployment rate is not simply the complement of the employment rate. The unemployment rate, which tries to measure the number people who are seeking employment and unable to find it, is a fairly junky statistic. On the one hand, it doesn't count people who would choose to work if the were offered a job, but who have just given-up hope of finding one; and it doesn't count people who are under-employed, wanting full-time jobs but only able to secure part-time employment. On the other hand, it does count people who aren't sincerely seeking employment, but are going through the motions of seeking a job so that they can continue to collect benefits from programmes that require them to seek employment. The employment rate is simply the percentage of people of working age who have jobs. It has problems — including that it counts under-employed people — but it's less junky that the unemployment rate.

I received this offer by e.mail yester-day: Every little bit helps, as I s'pose.