At last, an update!

My apologies for the long absence, but the winds of change have arrived! The Overwatch blog is being shuttered in favor of my new blog under the moniker The Psykonomist .

Catching up on reading

Sorry for the continuing dearth of updates, but my internet connection has continued to have technical difficulties and the ISP is not forthcoming with assistance as quickly as I would like.

Anyway, I have been using the opportunity to catch up on some reading. Currently I am reading

Churchill, Hitler, and the Unnecessary War

I highly recommend this book for another perspective on WWI and WWII, one based on the opinions of the people involved, and not the whitewashed PR version in your Western Civ books.

The Problem of Price Calculation

Price Calculation is a crucial aspect of economics, yet one that is commonly overlooked or misunderstood. This article from Mises.org attempts to quickly and concisely explain the process in easily understandable terms.

How Prices Are Determined

June UVM Article: Illusions and Cost

This article appeared in UVM  for the month of June. Late pushing it over to here. New August article is up on UVM. Check it out!

Illusions and Cost: A look at the Western State Security Apparatus

by Overwatch

   In my last article, I attempted to explain time preferences and to a lesser degree, opportunity cost. As a refresher, opportunity cost is whatever you give up to make the choices that you make. As an example: If you decide to go to a movie instead of going out to eat, your opportunity cost is going out to eat. Opportunity cost applies to both time and money. I want to use this economic principle and address one of the most basic functions of coercive government: The Justice System, to include but not limited to police, courts, prisons, executive administration, etc.

    Even the minarchist accepts the need for government to provide these functions, and the legitimacy thereof. To talk disparagingly of policemen, courts, or anything else related to law creation/enforcement/punishment, is to be eyed as a "criminal sympathizer", or possibly a criminal in fact. Why would any "law abiding citizen" have a problem with the boys in blue or the venerable judges? I will attempt to address two objective reasons here: Illusions and Cost.

  It is no secret that the domestic security apparatus in the United States is larger than ever. Police departments are purchasing drones and tanks, the Border Patrol has checkpoints all along the border, the TSA inspects everyone boarding a plane, security camera networks abound in midscale and large cities. This apparatus is not free, but the gross expense is justified in the name of "safety". But does the apparatus actually provide safety? If so, safety for and from what?

  Let's start with police. The most iconic of all local state functionaries, the propaganda says that cops do the dirty work in the streets of Everytown, USA so that we may sleep safe in our beds. Is this true? Let's take a closer look.

  First, we must identify the threat. In this sense, the threats to the individual are murder, rape, theft, and assault. How do police protect you from these attacks? The Supreme Court has specifically ruled that the police are under no obligation to protect you (Castle Rock vs. Gonzales). So what are we paying them for? Glorified cleanup crews, in the case of legitimate crimes. Theft in many cases isn't even followed up on, and the number of violent crimes against the average citizen are startlingly small in a statistical sense.

  Police do have their hands full though. With what? The War on Drugs, and crimes against the state. In other words, victimless crimes. Drug laws, speed limits, licenses and regulatory fee enforcement. Are you any safer when there is a drug bust? Potentially, but why was there a "Drug operation" of "thugs" operating to begin with? The consequences of arbitrary state laws. Do you feel any safer when you see the patrol car hiding behind some bushes next to the highway? Of course not.

  This does not even begin to cover the cost of prisons, not only monetarily, but on the fabric of society itself. By treating people who commit victimless "crimes" as criminals, the incentive to not participate in actual criminal activity is eroded, families are fractured, and resentment against "society" grows.

  So we spend billions on police and prisons, who not only are under no obligation to keep us safe, but actively work to make our lives hell if we so much as step outside of ever shifting, arbitrary lines. This is certainly not freedom, and we receive only the illusion of security in the tradeoff. What is a voluntary alternative approach?

  Let's say 5% of everything you make goes to pay for the law enforcement apparatus. If you make the national average of $41,000 per year, $2,000 goes to this cause. What could you otherwise do with those earnings to actually provide a measure of safety for yourself and/or those around you, without the added assault on your freedom?

  Maybe you and your neighbors could pool this saved money and hire an actual night watchman. Maybe you could purchase a firearm and requisite training/accessories. Maybe you could install your own security system. Also, the money and effects thereof would accumulate over time. So this year you purchase the firearm and open and insurance policy against loss by theft/murder/assault. Next year you purchase the security system. The following year you hire a security firm. If the security firm fails to protect you and/or your property, they may be fired, unlike the police, giving them an actual incentive to perform their job. Over time you may be able to boast quite the comprehensive personal safety system.

  Let us say that even with all these different steps, a crime is committed. Let's say that someone manages to steal something from your property. Insurance covers the loss, and may or may not review crime statistics in your area to see if rates may need to rise (just as car insurance does in areas prone to carjacking). Your loss is mitigated and you may move on. Why are you concerned about the thief "getting away with it"? If the population has taken general measures of protection and defense, and he continues to attempt to steal, he cannot be eternally "lucky". If he is, it's no worse than the police taking your case and tossing it into the back of a filing cabinet. If, in a popular argument, the thief is stealing because there is no "social safety net" and he is trying to eat, even more reason to let it go.

  Let us say something worse occurs, such as murder. In general, the same thing applies. Insurance against murder protects the financial situation of the family, and if you had already taken precautions for physical security, nothing the police could/would have done would have changed the outcome. So now we are left with the problem of "justice".  What is the objective difference between the investigation/court/prison process and either "vigilantism" or doing nothing? Certainly little difference from the position of the person assaulted and/or the bereaved family. Conversely, the cost for the former process only adds insult to injury. The total number of homicides in the US in 2007 was 18,361. The conviction rate was only 61% in 2007. So we are willing to spend billions of dollars a year, to ensure that 11,200 people in a country of over 300 million are "put in a timeout" (which costs even more). This doesn't even go into how many of the homicides were related to the "War on Drugs". Also, we have no way of knowing if those 18,361 people may have been able to protect themselves had it not been for the cost and existence of the law enforcement apparatus. It certainly doesn't matter to them after the fact that the boys in blue show up with the chalk.

  Contrary to popular belief, the state and it's law enforcement apparatus creates criminals, it does not protect the population from them. Of course, the smarter criminals find ways to work from inside the state instead of against it. Think about that the next time you see a smiling politician, a police cruiser, or a stern military officer.

Federal Housing Finance Authority Awakening from stupor?

Chicago Tribune: FHFA concern over eminent domain plans in Chicago, San Bernardino, etc.

A short while ago I brought to your attention the plans that San Bernardino was considering to [aid] underwater home owners in it's tax base. Apparently they weren't the only municipality considering such action, and apparently a government oversight committee just might actually be doing it's job for once, raising basically the same concerns I raised.

The idea, pitched by Mortgage Resolution Partners, a San Francisco firm, has received national attention, and several local governments, including Chicago, have voiced interest in it. It also has ignited an outcry among critics, including the Securities Industry and Financial Markets Association, that say such a program is potentially unconstitutional and will harm the market for private mortgage-backed securities.

The FHFA said it is concerned that using eminent domain to write down the value of mortgages "represents a cost ultimately borne by taxpayers." The plan, as now floated, would not affect mortgages held by Fannie Mae and Freddie Mac, but the FHFA said it could "have a chilling effect on the extension of credit to borrowers seeking to become homeowners and on investors that support the housing market."

Of course the supporters of the move claim the only losers will be "the banks", which if it were true might be a good thing. Why weren't people concerned about "the banks" losing when they had actually lost and were on Capitol Hill with their hand out?

An explanation of Subjective Value and Marginal Utility vs the Labor Theory of Value

An lengthy (yet much less so than reading through whole sections of Austrian books) explanation of value and utility.

The Role of Value in Human Action

Separately I apologize for the dearth of updates. I expect the frequency to begin to increase next week.

Yes, who is the US to do so?

Reuters Blog: You f***ing Americans, who are you to tell us we're not going to deal with the Iranians?

The blog post is there to read, and includes links to the actual complaint and a Business Insider piece.

"Motivated by greed, SCB acted for at least ten years without any regard for the legal, reputational, and national security consequences of its flagrantly deceptive actions," the New York Department of Financial Services says.

Basically for over a decade, the SCB hid thousands of transactions involving Iran. Why did it hide them? Because it knew that these voluntary transactions were under fire from the state. It's a UK bank, providing services for Iran. So yes, the question is "Who ARE the Americans to tell them who they can't do business with?"Good for SCB, if only all banks had a similar moral compass.