Sunday, August 21, 2016

Bitcoin's Price is Antifragile to Hacking

I got into a little discussion in this post by Fred Wilson about the Bitfinex hack after a comment from blockchain expert William Mougayar about how bitcoin exchanges need to have deposit insurance. It makes sense on paper, but the truth is that with deposit insurance the best you're getting is a forced liquidation of your cyrpto assets should a hack occur.

In the comments I pointed to Coinbase as they hold 20% of the active bitcoin in circulation and questioned what would happen to the price should those coin disappear overnight. He didn't have a good answer for me, but I suggested a lower end of $100,000. Interestingly, in the previously linked post from Qntra they actually did a similar calculation a full year and a half ago and came to a similar conclusion. Their numbers were 100,000 BTC (Bitfinex was 119,756 BTC) and when they put that on the Bitstamp order book the price was $99,999 and that only got ~12,500 BTC in return.

All of this is to say that when bitcoins get stolen, the price goes up. The price is antifragile to hacking.

Sunday, August 7, 2016

Intellectual Ghettoization and the Rise of Trump

Another interesting term mentioned in the podcast discussed in my last post is the idea of intellectual ghettoization. Intellectual ghettoization is the separation of people by ideas, and as in life where separate but equal is not always equal, so to in the world of ideas is this the case. If news sources were categorized by their normative value based on truth and usefulness, many would not make the cut, but this does not stop millions of people every day from getting their news from these sources.

The only way the rise of Trump makes sense is in the context of intellectual ghettoization. How can someone be so hateful and untruthful and yet still manage to win the Republican nomination? Start by telling people what they wish were true, stir some passion by tapping into their biases and bigotry, and as long as you're using a communication channel that will not contradict your story

Trump's voter base is not fact checking. They don't care if he's right because they want him to be right. It makes them feel good believing that he's right, and they feel like this is their only chance to "take back their country."

For months now on his show Bill Maher has asked anyone he can "how do we stop Trump?" It's a very good question, because when people silo themselves from outside information sources that contradict their beliefs, they are unreachable by facts. I definitely don't have a solution, and nothing I can think of could be enacted over a time frame that is short enough to impact this election. It may turn out that Trump doesn't need stopping because his opinions are minority opinions, but that is to be determined.

For a project that has a longer time horizon, we could ask the same question about global jihad. These terror attacks are getting more and more frequent, Safety from these attacks can only be achieved by winning minds, as this seems to be an antifragile problem that gets worse as we try to attack it with force.

What we need is a war of ideas. This war must encompass not just islamism but all religious beliefs and in fact the very foundation in the idea of "faith." The baby and the bathwater all need to go out the window, and we need to start to come to terms with the fact that life goes around only once so that we can begin to make more practical choices about how to keep our species around and thriving.

Monday, July 25, 2016

Bitcoin is a Complementary Cognitive Artifact

I listened to a fascinating Sam Harris podcast recently that I would highly recommend to anyone. It is a discussion with David Krakauer of the Santa Fe Institute about a wide variety of topics related to information and intelligence. One of these topics is the idea of a complementary cognitive artifact

Cognitive Artifacts
Technology is a very broad term that we use to describe everything from the first hand axes built by homo habilis to open skulls to the most sophisticated computers. The knowledge of how to build this technology gets passed through culture and language, literally manipulating the brain of the person receiving this knowledge and giving the recipient the ability to use that technology in his own life. This knowledge is a cognitive artifact of that culture that in some cases has survived thousands or tens of thousands of years.

There are two broad categories of cognitive artifacts, competitive and complementary. A competitive cognitive artifact is something that replaces the human function in the brain altogether and generally does it much better, like a calculator or a car or a chess computer. When you use these types of cultural artifacts to replace your brain function, that function atrophies.

A complementary cognitive artifact does the opposite, using it expands your brains capacity. Take the abacus vs. the calculator. Using an abacus actually makes you better at calculations, not worse. Expert abacus users can run large calculations in their head because they have the machinery assimilated into their visual cortex. A map is another complementary cognitive artifact, as you can use a map to understand a landscape and even use your knowledge of maps to acquire knowledge of other things; e.g. a graph of revenue vs time makes use of the Cartesian plane.

Another example mentioned tangentially though not discussed at large is mneumonics, Memorizing things is actually very easy if you know how to do it, though it is not taught in school. There are memory competitions all over the world where people use techniques discussed in Moonwalking with Einstein, a book worth reading if you ever plan on memorizing anything in the future.

Bitcoin as a Complementary Cognitive Artifact
The Bitcoin code has a number of different concepts in it that represent complementary cognitive artifacts. Of course it is built on top of previously created artifacts like proof of work, elliptic curve cryptography, merkle trees, game theory, etc. There were also a few created by Satoshi that have since been used elsewhere, the most well known of which is blockchain.

The truth is that we are really just getting started with blockchain. Soon enough blockchain will be incorporated into the data structure everywhere that information is shared between entities that would prefer not to have to trust each other.

The Future of Human Organization
Another item mentioned on the podcast was government structure and how it will necessarily change as a result of modern technology. This is another area that I wish would have been discussed further but too much to discuss!

Krakauer said that the kinds of social networks that we lived in during the development of the nation state are fundamentally different from the types of networks that we have now through technology. I would have been very interested to hear his thoughts on how to do it better.

Sunday, July 10, 2016

Bitcoin and the Future of the World

This blog was started as a way of putting together an internally consistent, secular philosophy of ethics with an eye toward how to build a social structure that upholds these secular values. The primary social structure discussed to this point was a hierarchical government structure, but a lot has changed since this blog's inception.

At the forefront of these changes is Bitcoin. Many have heard of Bitcoin in passing, but only the indoctrinated actually understand how it works, why that is interesting, and how that is valuable. I'm not going to spend too much time talking about how it works because you can read that anywhere, but there are a few key things that Bitcoin does that make it the first step toward the future of government. A future where all is governed by a decentralized code base that people opt into in the same way that you subscribe to Spotify, one that hires people to do things that they are good at and pays them as individuals, all without any agent anywhere in a position of power to take resources. This is the future of companies, the future of cities, the future of countries.

Bitcoin and Why It's Valuable
First and foremost, Bitcoin is a decentralized public ledger of transactions moving small "b" bitcoin (coin for clarity going forward) from one address to another. The code is open source and being run all over the world. The ledger gets updated every ~10 minutes by a "miner" who wins a calculation lottery, collecting all of the transactions it can fit into the "block" since the previous block, preferring blocks with the highest coin per byte ratio.

In addition to the transaction value of coin flow, you have room to include other data into Bitcoin transactions as long as you can pay the fee to get your transaction into the block. What this means is that you can create a scripting language in the transaction and post it publicly and immutably to the blockchain where it will be forever.

The soon-to-be legal inheritance
Imagine that you are the favorite son of a billionaire, and he's on his death bed, you're there by his side taking care of him. His will is drawn up and all of the assets are distributed, but he appreciates your care so he calls you to his side one day to tell you he has a special gift. He has an industrial grow house of marijuana and wants to give it to you. Of course he can't leave it in the will because it is illegal, but he wants to protect you in case it becomes legal someday and his other sons want a piece. So you draw up a contract, you both sign it, and rather than having it legally notarized, you decide you are going to hash the digital file and post the hash to the Bitcoin blockchain. There are services that will do this for you very cheaply, and if you have the know-how you can do it for yourself for mere cents of coin for the transaction fee.

So you've been running this grow house for a couple of years, supplying your heir and heiress friends with the best bud out there. All of the sudden, weed is legal in your state and you want to go big with this thing. You incorporate and get your ducks in a row, now your siblings are coming for your weed farm saying they own an equal share. They take you to court and you show the contract, but the siblings say it's fake. Signature analysis confirms your dad signed it but it's not 100% reliable.

All of the sudden you bring out the Bitcoin transaction. The hash matches the contract. The PGP signature on the contract is a known signature of your father. The court rules that the farm is yours and every Bitcoin transaction is officially legally admissible, every contract notarized on the Bitcoin blockchain legally binding.

Bitcoin is digital land
People like to call coin digital gold because it has a strong store of value property to it with the total supply being controlled by the mining process and a cap of 21,000,000 coin at the end of mining in 2140 or so.

For my money, the better analogy is digital land, Each coin is a 1/21m plot of the Bitcoin blockchain that you can build whatever you want into (a contract notarization in the above thought experiment). Each of these plots can be broken into as many sub plots as the transaction fees will allow, and in the future the limit to this will be 10^8 pieces. Right now it costs 0.0001 coin to send such a transaction and in the future it will be more like 0.0000001 to send such a transaction, with that value being worth maybe $10 in today's dollars. That would be roughly $1.67 million in today's dollars per coin and maybe $35-36 Trillion total market cap.

Darwin Money and the Death of Finance
Where will $35T come from? It will come from USD, GBP, EUR, gold, stocks, real estate. Bitcoin has a survival advantage that will cause it to become the world reserve currency and the default store of value for the majority of the world's wealth. This advantage is that it is decentralized and open source. No longer does China have to trust USD, or any country trust the printing presses of any other country, there is an impartial public option.

The world of finance exists because of inflationary money. If you have savings, you cannot hold it and watch it grow because your money is devalued by the printing press and treasury issuance. Those in power would call this a "feature" of the economy, it stimulates the economy by forcing people to spend. But what it really does is cause the poor to get poorer as their cost of living goes up.

Think of the implications if you could park your wealth in a deflationary asset and watch it grow over time. All of the wealth that would be moved out of the stock market, treasury bonds, real estate, every investment vehicle out there. Maybe a small portion of that money stays in and some of the banks survive, but most of it comes out, because parking your money in the S&P 500 is no longer the best way to protect it.

An "Uber" for Everything
The sharing economy is here, with AirBnB and Uber paving the way. All these services do is match private citizens who provide a service with private citizens who need that service and keep a ledger of trust. In the future, all of these services will be open source decentralized, out-competing the Ubers of the world by saving on fees. Government is just a set of services at the end of the day.

The future of government is decentralized code that triages tasks and wages in a way that runs a functioning society transparently and free from corruption.  All government functions will be carried out by people hired ad-hoc by these services based on reputation and availability

Decentralized is the Ultimate Economies of Scale
In a previous post I talked about the move toward centralization as the natural progression as our communication and transportation improve, because this allows for a increased economies of scale that benefits everyone. On the surface, it may seem like this move toward decentralization will fly in the face of that rule, but in fact it's quite the opposite. Centralizing control on decentralized code actually comes with it massive economies of scale, while also preserving personal freedom that allows us to continue our lives as we see fit.

Decentralization was barely conceivable when I wrote that first post, because no one had done it successfully (or at least, I didn't know about it at the time). Now that it can be done, it will be done, it's just a matter of when.

Saturday, April 14, 2012

Ancestral Health Update: Jack Kruse, Melissa McKewen, Richard Nikoley; Plus an Aside about Ray Peat

The online ancestral health community, a.k.a. the "paleosphere" has been quite heated lately. The issue? Jack Kruse and Melissa of Hunt, Gather, Love. Melissa lead the charge agaist Jack and has been backed by some of the most credible names around including Kurt Harris and Emily Deans. I don't have much to add to the discussion, but I would like to state my opinion.* 

I don't read Jack's blog regularly because, quite frankly, he is a low carb hack; and for that reason alone I assume that he is probably full of shit on most things, and anyone who looks at him as anything more than a fringe lunatic is fooling himself. But assuming that you are rational, you can still learn from the risky behavior of lunatics, and it is my current opinion that Richard is right that you can get away with training much colder than Ray Cronise recommends. The fact that Richard has done it for years and Tim Ferriss apparently does with some regularity is enough for me to feel safe trying it, though I will have to start very slow as I have serious Raynaud's that I'm up against. But eventually, I would like to get to 40 degrees or even polar bear swims, acknowledging that it is going to probably take me putting on 30 pounds of lean mass to be able to get away with something like that. We're talking big picture here, afterall, I do have 60 years to plan before I should expect to even think about dying of natural causes. John Durant hasn't come out with his opinion, but he does polar bear swims so I think we know where his head is at on that. 

So to recap, Jack Kruse, still a hack, but he's probably onto something with cold hormesis training. My armchair hypothesis is that cold hormesis training will turn out to be somewhat necessary for many, including myself, to obtain optimal health. I think that this is especially true for people of European descent, but applies for all humans as well.

So now I would like to loop in Ray Peat, fructose, and that hullabaloo, because there's been some drama on that subject as well beween Danny Roddy and Kurt Harris. To me Ray Peat seems fringe and everything that Kurt said makes me question him, but the one thing that I am leaning toward him being right about is that the thyroid is where it all starts, and that his recommendations actually work in fixing thyroid issues. So if you need to go on a thyroid protocol, you cannot deny that he has the answer in the real world. This is why I decided to pay Danny for coaching; I wanted to understand his interpretation of Ray's writing, since I have read him for a long time and know he's a reasonable guy. More than anything, I wanted a new dietary toy to play with and see if I get results. $95 one time isn't money; I raise $95 with 72o just to with the bonus.

My armchair theory about thyroid is that it is the first thing that breaks in disease, especially autoimmune disease. I think that there is probably a relationship between thyroid function and androgen profile, as well as thyroid function and gut health/permeability. I think that Dr. Harris' characterization of autoimmunity as an overactive immune system is wrong. The immune system is doing what it's supposed to do, attacking foreign proteins in the bloodstream. But the reason that these proteins are getting into the bloodstream in the first place might be related to thyroid. That is why body temperature is the canary in the coalmine.

To bring back cold hormesis: in order to keep warm, the body upregulates thyroid function, so I think that it is quite possible that cold hormesis could train the hypothalamus to kick up thyroid a notch, and then feeding it correctly (Ray Peat) gives it the nutritional support it needs to get there. I think thyroid dysfunction also disturbs sleep, but it is possible that the cause and effect is wrong there i.e. sleep causes thyroid dysfunction, in which case it would really just be about getting more darkness every night, at least 10 hours of pitch black most of the time. Keep in mind that Tim used cold hormesis as a sleep hacking technique. Or maybe it's a positive feedback loop that needs to be unwound on both fronts simultaneously.

Look, fructose is not toxic. Sorry, paleo, you're just wrong about this. There is a level where it can become problematic; everything operates on a J-Curve; but it's a lot higher than anyone in the paleosphere believes. For me that limit happens right around 1 pint of Haagen-Dazs ice cream plus roughly two quarts of Tropicana Original orange juice in the span of about 1-2 hours (that's a lot and pretty hard to do, though some soda consumption can approach those levels in some people). Stephan has it right in saying that the only issue with sugar is its high reward value. And for those keeping track, it is high reward because it was rare in the environment prior to agriculture, but when it was around, it was in fruit, which is very tasty and good for you. 

I can't believe that fucking hack Robert Lustig got a 60 minutes special. If someone is thin, you may or may not be able to trust his judgment when it comes to what to eat, but if he is fat, you absolutely cannot trust his judgment. If he is fat, he doesn't know how to fix himself, so why should any of us trust what he has to say about nutrition? It's a mean thing to say, but it has to be said by someone.


*I've done a 7+ hour each way road trip with Melissa when I went to the deer hunting class with her (big shout out to the Eating Paleo in NYC meetup Group). Needless to say, I rather like her. I generally trust her judgment in situations where I have yet to form my own opinion

Sunday, October 23, 2011

Dexter and the Juxtaposition of Atheism and Religion as Good and Evil Respectively

I recently came across this article about the tipping point for ideas. If you get 10% of the population to become a true believer in any idea, that idea will shortly represent the majority opinion. To me, what this means is that at least 40% of people don't think for themselves, though the number is likely more on the order of 60-70%. In any case, regardless of whether these numbers are right, the idea that a minority of true believers can easily overtake the majority opinion makes for an interesting discussion.

Dexter MorganImage via Wikipedia
If you don't watch Dexter, you are seriously missing out. It is the best show on television right now, and this season of Dexter might be the best yet. Dexter is about a serial killer who was identified as such by his cop father at a very early age. His dad Harry raised Dexter to become a vigilante serial killer, and taught him how to get away with it. Anyway, what's interesting about this season is that as Dexter brings his son Harrison up in the world, he has to make a decision about whether he wants to bring him up religious or not. Dexter pretty quickly rejects this notion, and this rejection is now being thoroughly reinforced throughout the season as one of the main plot lines involves a Bible thumping serial killer.

The show is having a good versus evil battle where the atheist is the "good guy" and the religious zealot is the "bad guy." Even more interesting, they're both serial killers. And yet, we all root for Dexter, and are on firm moral footing in doing so. A recent episode of  House had an interesting plotline as well, in this case it was self-interest versus altruism, with the altruist being painted as the bad guy (and eventually admitting that she was acting out of self-interest anyway). Add to that the fact that ancestral health is becoming mainstream with the Living Like a Caveman series and you have a trifecta of change coming down the pipeline. This change really cannot come soon enough, so all involved in the above examples must be praised. 

We have officially reached the "tipping point" of "true believers" in the scientific method. In this case though, it's not about being a "believer" so much as it is about being vocal and unapologetic about our ideas. In other words, skeptics have started puffing their chests a little more in an attempt to put an end to this idiocracy that we have evolved into. Now that skepticism is becoming a part of pop-culture, it will not be long before we see science as the majority opinion in all realms, the culmination of which will be an overtly atheist president and a repeal of many subsidies, including agricultural subsidies. 
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Sunday, September 11, 2011

When Great Ideas Go Astray

Sustainable farming is an interesting economic discussion topic. On the one hand, it ties in with the environmental movement, which is an externalities and large government movement. On the other hand, you have government intervening in a free market in the form of agricultural subsidies, which is interesting to small government, free-market economics supporters. The result is an issue that should be perfect for unifying the fiscally liberal and fiscally conservative to make a massive change. Yet it's not. In fact, it's not even talked about.

We can spend months arguing over whether or not to cut the ~$100 million we spend on the National Endowment for the Arts, but the ~$20 billion on agricultural subsidies, those aren't interesting to politicians. There are numerous reasons why; campaign contributions from corporate farms and the short term increase in food prices that would result being the biggest two; but at the end of the day those of us who consider ourselves to be in that movement need to take some responsibility for our failure as well. We parade out hippies, vegans and Al Gore as our ambassadors.

Joel Salatin of Polyface Farms has the potential to be a better ambassador. Polyface Farms is firmly in the sustainable agriculture camp, but he's got that southwest rancher personality to him, so he also appeals to the crowd that liked Bush Jr. as well. Robb Wolf recently put up a series of videos from an interview with Joel for the blog that I definitely recommend checking out. However, one of them in particular, linked here, got me a little riled. In this particular video, Joel brags about his 10 values, which include that he will not service anywhere outside of a four hour radius of the farm, does not advertise his farm, and does not have sales targets.

On the surface, this may seem commendable to some. As a farm grows bigger and services a larger area, one loses "connectedness" to the source of his food, which Joel deems as a cause of unsustainable food practices. I refuse to concede this point, however. Sustainability has nothing to do with farm size. In fact, there will always be economies of scale as a farm gets larger, whether a farm chooses to produce its food sustainably or not. Taking advantage of these economies of scale has the potential to make the high quality, sustainably grown meat more cost competitive, increasing the amount of it that people will opt to consume over factory farmed meat, and thus decreasing the environmental footprint of meat production overall. That's the beauty of capitalism, when you align the economic incentives (growing your farm to increase profits) with the environmental incentives (getting people to choose grass fed meat over grain fed meat), everybody wins.

Let's take this thing to its logical conclusion for a second. Imagine that the world becomes aware of the health problems caused by eating grains, and as a result, there are protests and riots and class action law suits against the US government, the summation of which cause a removal of all agricultural subsidies. Along with this, we see a massive increase in demand for the foods that are actually healthy, and we have to start thinking about growing this stuff on a mass scale. If we are not equipped with the processes, the equipment, the experienced people who have scaled this type of business before, we will not be ready on the supply side.

Take it out even further; we've figured the logistics of growing this stuff sustainably, but now it's 100 years later, the average life expectancy is over 90, and there are 20-30 billion people in the world. We have a real overpopulation problem that needs to be addressed. But do we have the political theory there to deal with it? Have we invested enough money in space travel and biosphere research to start expanding to other planets? Or build self sustaining satellite planets? Or are we instead going to go to war, like we have throughout history? Because that's the result of running out of resources, empires and wars. We need to start having these debates, to start working on solving these problems.

Rather than take a leadership role in this battle by beginning to tackle some of these questions, Joel has instead chosen to put a cap on his business. To sacrifice his personal gain for the sake of the common good. The rub of course, is that he's not sacrificing his personal gain for the sake of spending time with his family, or choosing to stay out of the limelight. No, according to his statements in the video, he is making these choices because they are  In the paradigm of a morality of altruism, this is the virtuous choice. But this is why altruism is a false sense of virtue. Scaling his business up, Joel could not only begin to start solving these problems, but in the process he could help publicize the sustainability aspect, and to some extent even begin to publicize the ancestral health movement, contributing to the saving of millions of lives in the process. Instead, he chooses to be "good."

Joel Salatin is a good man, but he has an opportunity to step up and become a great man. A man who effects change on the world. Instead he chooses mediocrity. Good enough. The choice is his, and his alone, but there is a right reason and a wrong reason to make that choice, and his reason is not a respectable one. There will always be a premium on achievement in a capitalist society because of what achievement represents with regard to technological progress. It's time to acknowledge the source of this progress: productive men creating value and being rewarded in kind for this value creation.

Monday, September 5, 2011

Comments From @EricSchmidt During His Dreamforce Keynote

Sorry for the missed blog post last week. I was out at Dreamforce in San Fransisco for work. At Dreamforce, the final keynote address featured Marc Benioff (Chairman and CEO of Salesforce) and Eric Schmidt (Executive Chairman of Google), having a conversation on the past, the future, and everything in between. In the above video, start at minute 41 and 30 seconds. Marc asks Eric a question about how to fix America. I have been planning a blog post on how to fix America (which is different from defining a moral government in the theoretical sense) for a while, but I am still stuck on the issue of fixing campaign finance, and until I figure this out, I'm going to have to hold off. However, there are a number of other areas that are fully baked, and some of them relate to Eric's comments on the subject. This blog post is a response to those comments, and as such makes much more sense having heard those comments specifically. Please take a few minutes to check those out before reading any further.

"You need to focus on getting a better educated workforce." The primary means by which the species homo sapiens sapiens has survived over the last 200,000+ years is our intellect; our ability to look at the past as a means of modeling the world and using these models in predicting the future. An enormous part of this is obviously looking at the past part; and this is where "knowledge" comes in. We, as humans, leverage knowledge as a means of innovation; it is much easier to make new discoveries when you know the current state of science than it is to make new discoveries in the absence of that knowledge. As such, knowledge, and obviously education (which is the means by which we acquire knowledge), is the primarily means by which we are able to move up in the world. This is completely in line with my discussion of a social safety net, and a public option in education being a part of that, so no need to go any further on that train of thought. Still, it's worth mentioning, as is any agreement in principle by any highly intelligent individual. We all, at the end of the day, use our own mind as a means of evaluating the merit of the statements of others, but as I mentioned in my first ever post on this blog, that does not mean that we do not consider agreement from people who we consider to have intelligent, well formulated opinions, as supportive of our views.

Still, I wouldn't be writing this blog post if there wasn't disagreement. If you start where I suggested that you do, you will have to watch for a while; until about minute 57 and 50 seconds; until you get to the statement that is the foundation of the rest of this post. Right around there, Eric implicates healthcare, specifically, as the primary causal factor of our economic troubles. People getting sick --> government paying for keeping them alive --> government being expensive --> taxes being inflated --> people and businesses that would have, under other conditions, invested in their own growth (resulting in jobs and GDP), instead choosing to save their money. The problem, of course, is that Eric missed an important factor in this chain of events. The simple fact that our lack of health in this country, and as a result the high cost of healthcare, is a result of our food policies. To many, it may have seemed completely bizarre for a blog on philosophy and political theory to discuss nutrition; particularly as its second post; but Eric's keynote serves as a perfect segue into the discussion of why political theory and nutrition need to be so tightly linked in our current day and age; why fixing food policy will necessarily cause the cascade of events that will result in our economy once again being great.

In his discussion, Eric labels healthcare as the fundamental economic sink in our economy. By no means does he call for a removal of medicare, but he does state that the current state of healthcare in this country is completely unsustainable; that it is the primary causal factor in our deficit, and by extension our debt, as well as most other economic issues in our country. I, personally, would put our foreign policy (and by extension our military budget) into this group, but let's stay on point for the moment. We as a country are sick. Rare is the 30+ year old individual who is not sick; whether it be allergies, extra body fatmass, inflamed skin, acne, diabetes, cavities, thyroid disorders, autoimmunity, elevated lipids, etc.; and this is not "normal" from the perspective of evolution. These diseases that we experience are not as result of our increased life expectancy, nor are they as a result of hormones in meat, chemicals in the air, or radio waves hitting our bodies every second of the day. They are as a result of our idiotic, evolutionarily inappropriate lifestyle choices, particularly around nutrition, sunlight and sleep. These choices, which I have already labeled as idiotic, are in large part a result of the fact that the foods that are bad for us are artificially cheap.

My larger point is the following: compared to our national deficit, the 20 billion that we spend on subsidizing agriculture is small. However, when you factor in the fact that it is the cause of our health problems, and thus our healthcare spending problems as a whole, the subsidization of agriculture is much more significant. Eric has his facts right, but like Gary Taubes and his carbohydrate-insulin hypothesis, the effect that he is observing occurs downstream of another event. In Gary's case, this effect is the elevation of fasting insulin, which occurs downstream of leptin signalling as interpreted in the hypothalamus (it is shocking to me that someone as intelligent as Gary cannot recognize this from the literature; it is the brain driving the increase in appetite and fatmass, the observed effects of insulin clearly occur downstream of this). In the case of Eric Schmidt, it is the agricultural subsidies driving our healthcare problems.

It's not surprising that someone like Eric, who has a day job that involves dramatically changing the world on a daily basis, would not have tried paleo. So let this post serve as a direct call to action to Eric to give it a shot. Try a paleo 2.0 type diet for 30 days. He's definitely got some pudge on there, so I feel pretty confident asserting that 30 days will be enough time to see a dramatic benefit. The fact that the neolithic agents of disease and hyperrewarding foods are driving our sickness in the first place necessitates this outcome.That's the difference between causes and symptoms. In a self correcting system; a classification that definitely applies to the human body; Under normal circumstances (the standard american diet) the repair mechanism is mostly just a Sisyphean task. However, if one removes the antagonizing factor, the system should be able to start to make serious headway in repairing the damage until it reverts back to baseline.

While this in no way can definitively prove anything from a scientific perspective, there are times when effect is so dramatic that it is completely impossible to ignore the uncontrolled intervention as the cause. As I stated above, I feel confident that there will be an effect of an impossible to ignore magnitude; if you recall the example of my dad, he lost four pounds a week for about 5 weeks and had his cholesterol completely normalize over that time after having had it be high for years; that's the type of dramatic change that we are talking about. No other mechanism of action is claiming those numbers, even for its long tail. To me this has always seemed bizarre, and has served as evidence that we probably didn't have it right in the past because of my "self-correcting system" heuristic above. Now we do, which is why I am convinced that we have it right this time, at least in a black box sense (we can reliably predict effects from causes, but don't necessarily have all of the mechanisms fully baked yet).

Convincing someone as influential as Eric Schmidt (which, again, is what I expect would happen after even just a 30 day intervention), someone who has the president's ear, can go a long way to getting us back on the right track as a country. To bring things back full circle:

  1. Healthcare costs are the primary cause of our economic troubles (Eric's original statement)
  2. The high cost of healthcare is as a result of almost everyone over the age of 30 being sick in some way as defined above, and many under the age of 30 as well.
  3. Agricultural subsidies make the most unhealthy foods, the neolithic agents of disease, artificially cheap
  4. As a result of these foods being artificially cheap, they get consumed in larger amounts than they otherwise would, particularly by the bottom half of the income distribution, who cannot afford healthcare (microeconomics 101)
  5. Since these are the foods that are making us sick, increased intake of these foods results in increased illness
  6. Therefore, agricultural subsidies are the cause of our economic troubles, and
  7. Removing agricultural subsidies (the causal factor in a self-correcting system) will cause a cascade of events resulting in healthcare costs coming down, and the economic issues being alleviated.

Sunday, August 21, 2011

Designing A Moral Government, Part 4 - Taxation

Taxation is important. The American Revolution was fought over tax issues; in particular, that they were being taxed without having representation in Parliament.  I agree with the sentiment, both that taxes are necessary, and that it is immoral to tax someone if he has no say in whether a particular tax should exist or whether a service that a tax pays for should exist. So let's talk about taxes. What is are the characteristics of a moral tax code?

The Morality of Taxation
Let's ask first whether it is moral to tax. Anthony, over at the Dream Lounge, has on many occasions written that an income tax is a violation of man's right to life; that by virtue of government forcing one to pay taxes by threat of violence, government is subjecting man to coercive force. It's an interesting premise, because on the surface it seems pretty logical. Choice is the means by which we preserve our life, so restrictions on choice are bad since we take life as our standard of value; a premise that I have put forth in this post. In the case of taxation, forcing someone to pay tax by threat to life is an example of a restriction on choice. Makes sense, no?

Here's the problem with that logic: one exercised his right to choose when he chose to live in a particular country. His living in that country is a tacit acceptance of a contract with his government. Violating that contract is a threat of force against that government; in the case of taxation, not paying taxes is stealing. One had passively agreed to the terms of the law by residing in the country, and then he consciously disobeyed the law. To be more specific, the contract he violated states that he gets protected by his government's army and police force, gets to drive on public roads, an option for free schooling, etc; but in return he must adhere to these rules, one of which includes paying taxes. Not holding up his end of the contract is a form of stealing his government's services. The only time that force can be used is as a defense against the initiation of force by another party. Stealing is an initiation of force, so his government is free to respond with force in the form of bringing him to jail at gunpoint.

Creating A Moral Tax
Hopefully the above point is clear and agreeable. If not, feel free to comment, but for the purpose of the rest of this post, we are going to accept that taxation is moral. Of course, whether taxation is moral is a different question from whether taxation on income is moral. We'll get there. But let's first talk a little about the process of creating a moral tax.

Taxation Axiom #1: First you justify the expense, then you come up with the money. If there were no market failures, there would be no need for government. Since there are market failures created as a result of life being of infinite value, government needs to be as big as is required to smooth out these failures. Government seeks to maximize GDP, which means keeping as much money in the pockets of individuals as possible while maintaining efficient markets. This means that government cannot tax first and figure out how to spend money later. It must identify the market failure, come up with a solution, and only then should it figure out how to pay for the agreed upon solution.

Taxation Axiom #2: The most effective tax is one that varies as a positive function of the market inefficiency. For example, you tax alcohol in a way that causes the revenues from alcohol use to pay for mitigation of the externalities (like accidents as a result of drunk driving) associated with alcohol use. The idea being that if some independent factor causes an increased incidence of the behavior (drinking), then the revenues should increase with that increase in behavior such that they cover the cost of regulation incurred by government.

Taxation Axiom #3: Tax policy during times of fiscal deficit require different policy from times of budgeting balance. In times of budget balance/surplus, the singular purpose of government is to maximize long term GDP. There are times when taking on debt is necessary to this end, and in such times, there may be occasions when the long term maximization of GDP requires a short term decrease. These are the times of budget deficit.

Applied Taxation Theory
Taxation is simple enough when the budget is in balance or surplus. You tax in order to cover the expenses of government, and leave the rest of the money in the market. If this were actually followed, there would never be a situation during which we would find a deficit that continuously grows every year with no specific long term GDP purpose.

As it stands in the United States, though, we have dug ourselves quite a hole. We spent and still spend money that we do not have, and don't really have a plan to fix it any time soon. I've heard various figures quoted with regards to how big the national debt will get before we again balance the budget at our current spending levels, but they are all upwards of four times the current national debt.

The question of spending is not particularly relevant to this post, but suffice it to say that there are some easy ways to stop spending so freaking much, like ending our wars, legalizing drugs and prostitution, getting rid of all agricultural and energy subsidies across the board. The question of revenue is relevant though. One party in particular has taken the idea that taxes should never be raised to the point of it being a religious idea. The reason for the confusion is simple; there is no understanding of the "why" in the conversation. Since government is supposed to be long term GDP maximizing, there are times when it may be advantageous for a government to be temporarily profit maximizing. This then becomes a rational discussion, specifically "what does the Laffer Curve look like" and where do we currently lie on it? That, my friends, is a debate for economists to discuss, not politicians.

Sunday, August 14, 2011

Designing A Moral Government, Part 3 - Local vs. Central

When the United States was founded, the word "state" had a very different meaning. Unlike today, where a state is closer to a subsection of a country than a country in and of itself, back then, an independent entity is exactly what it was. So the United States of America was actually more like what the Euro Zone is today than its own modern incarnation.

At the time, there was a massive debate between Alexander Hamilton and Thomas Jefferson about the topic of localization versus centralization of government. Hamilton favored centralization, while Jefferson, who was from Virginia, feared northerners controlling him since the lifestyles were so very different, and as such favored localization. The compromise that they came to was nothing short of genius, in my opinion. That said, it was designed for a specific world as a result of specific circumstances, and our world is very clearly orders of magnitude different from the world for which it was designed.

Let's take a step back for a second and talk about the advantages of each. Since the role of government; as a monopoly on force; is to maximize market efficiency, centralization makes sense in many ways. There are economies of scale associated with more centralized governments, so market inefficiencies that are universal across the country will be better served in general to be regulated at the federal level. It is efficient to have a universal currency, a drivers license that works in every state, large social safety net initiatives being managed at a federal level, etc. That said, there are issues with centralization, which is where localization has its role. Large governing bodies can take a while to get things done. There is bureaucracy to deal with, a lack of focus, and at times an inability to understand how local culture effects a particular situation.

These pros and cons will always be around, but as the world changes, so too does the weight of each. In 1776 when the Declaration of Independence was signed, getting from Boston to Richmond was not an eight hour drive or a one hour plane ride. We couldn't call someone on a cell phone and have a real time conversation, or video chat in real time over Skype. Clearly in such a world, localization is of the utmost importance in most aspects of life. The primary reason for the uniting of the states was the economies of scale associated with a federal army, but in few other things would it be advantageous. However, since this question is so dependent on transportation and communication, as these improve, government needs to change, with the trend moving toward more centralization to continue to take advantage of economies of scale.

Just 100 years after the signing of the Declaration, the world was much different. Telegraph communication could get a message across the country at the speed of electricity, the invention of the steam engine allowed for trains and ships that could carry massive loads across great distances quickly. With the effective size of the world dramatically diminished, is it any wonder that we would want to correct for this change with the biggest expansion of federal powers ever, the 14th amendment?

This question of federal versus states rights comes up all the time in modern day politics, and certainly much more than it should. The intent of the debate was the one discussed earlier, but a strict reading of the text as opposed to the intent of the text results in trying to frame modern issues with an 18th century mindset, which is akin to ignoring 200 years of technological development;. to ignore that I can access just about any information I could ever ask for from a 5oz device in my pocket; to ignore that I can buy a plane ticket in New York from a laptop in my bed at noon and be partying in Miami by six. Imagine a world in which we have an elaborate transportation system built on teleportation technology, where one could get from New York to Dubai in less than half a second. In that world, how does the question of localization versus centralization of government change? How does the definition of a "country" change?

Politicians (or at least their campaign managers) are not stupid. Disingenuous, yes. Stupid, no. When a political figure attempts to make an argument for a particular law or right to be relegated to the state, the vast majority of the time this is his way of finding a loophole in the law, rather than standing up for what he actually believes in and outright saying that this right should be allowed. Politicians are too afraid of the "do-gooders" who take altruism and self sacrifice as their standard of value to ever say this outright. Of course, if the question is actually about states rights, then the debate is very different. It's numbers, it's intellectual. How effective is regulating X at the state level versus at the federal level, based on the evidence? How cost-efficient is regulating X at the state level versus at the federal level, based on the evidence? Agreement on the facts results in agreement on the policy.

And that's the point. That is why we desperately need a rational basis amendment in this country. Our country was founded on a morality of indivualism; on a morality based on the inalienable rights of "life, liberty and the pursuit of happiness" (might remind you of something). That's why this blog exists. So the adults can talk. This blog exists to reframe the debate in terms of reason. Disagree with me if you choose, but disagree with me on the facts in the context of an intellectual debate. The constitution is a living document, the legal code is a living document. It is outlets like this where we can discuss what the laws should be, not what they are or how difficult it would be to modify them.