Multiple models

A great quote in this comment:

The better way to think about this is using Charles Munger’s idea of using mental models to increase worldly wisdom.

Let me quote a little at length:

What is elementary, worldly wisdom? Well, the first rule is that you can’t really know anything if you just remember isolated facts and try and bang ’em back. If the facts don’t hang together on a latticework of theory, you don’t have them in a usable form.

You’ve got to have models in your head. And you’ve got to array your experience—both vicarious and direct—on this latticework of models. You may have noticed students who just try to remember and pound back what is remembered. Well, they fail in school and in life. You’ve got to hang experience on a latticework of models in your head.

What are the models? Well, the first rule is that you’ve got to have multiple models—because if you just have one or two that you’re using, the nature of human psychology is such that you’ll torture reality so that it fits your models, or at least you’ll think it does. You become the equivalent of a chiropractor who, of course, is the great boob in medicine.

It’s like the old saying, “To the man with only a hammer, every problem looks like a nail.” And of course, that’s the way the chiropractor goes about practicing medicine. But that’s a perfectly disastrous way to think and a perfectly disastrous way to operate in the world. So you’ve got to have multiple models.

And the models have to come from multiple disciplines—because all the wisdom of the world is not to be found in one little academic department. That’s why poetry professors, by and large, are so unwise in a worldly sense. They don’t have enough models in their heads. So you’ve got to have models across a fair array of disciplines. ”

‘Capitalists’ as defined by Marx

A great comment on the Slate Star Codex post Basic Income, Not Basic Jobs: Against Hijacking Utopia about what Marx (supposedly) meant by the term ‘capitalist’:

Vol 1, ch. 4 of “Capital” has an explicit definition of what Marx meant by “capitalist.”

The simple circulation of commodities – selling in order to buy – is a means of carrying out a purpose unconnected with circulation, namely, the appropriation of use-values, the satisfaction of wants. The circulation of money as capital [buying in order to sell, or M–>C–>M’] is, on the contrary, an end in itself, for the expansion of value takes place only within this constantly renewed movement…As the conscious representative of this movement, the possessor of money becomes a capitalist. His person, or rather his pocket, is the point from which the money starts and to which it returns. The expansion of value, which is the objective basis or main-spring of the circulation M-C-M, becomes his subjective aim, and it is only in so far as the appropriation of ever more and more wealth in the abstract becomes the sole motive of his operations, that he functions as a capitalist, that is, as capital personified and endowed with consciousness and a will. Use-values must therefore never be looked upon as the real aim of the capitalist; neither must the profit on any single transaction. The restless never-ending process of profit-making alone is what he aims at. This boundless greed after riches, this passionate chase after exchange-value, is common to the capitalist and the miser; but while the miser is merely a capitalist gone mad, the capitalist is a rational miser. The never-ending augmentation of exchange-value, which the miser strives after, by seeking to save his money from circulation, is attained by the more acute capitalist, by constantly throwing it afresh into circulation.

[My bolding and bracketed editorial comments.]

My interpretation:

  1. Marx is constructing a very abstract and pure definition of a capitalist that few concrete human beings could live up to. That’s Marx’s method. He sets up the abstract, ideal forms first, and then evaluates the extent to which messy concrete reality measures up to these ideal forms, and he discovers what sorts of qualifications and complications he needs to introduce to make these ideal forms more representative of empirical reality.

Most modern Americans are probably used to the opposite process of observing many concrete examples and using induction to form abstract principles that connect and explain those messy concrete examples. The way modern Americans think, their mental flow chart would look like:

  1. Identify which people are colloquially called “capitalists” (i.e. take the received social definition of these people as a given).
  2. Identify which characteristics these people share.
  3. Use these shared characteristics to generalize about which properties of capitalists and capitalism are incidental and variable, and which properties of capitalists and capitalism are abstractly essential and consistent.

Marx worked in the opposite direction, from the abstract to the concrete. Marx does not take received social definitions of people, things, or systems as a given or as necessarily illuminating or accurate. It is these very understandings that Marx wants to interrogate, based on his default suspicion that these understandings are conveniently molded by pre-existing material interests.

When Marx says, “Use-values must therefore never be looked upon as the real aim of the capitalist…The restless never-ending process of profit-making alone is what he aims at.” Marx is not claiming anything about the motives of any real, concrete human beings. If you assume that Marx is, then it becomes very easy to misread Marx as someone making moral complaints about “greedy capitalists being too greedy,” which verges on anti-Semitism by pinning the problem on the subjective intentions of a group of people rather than the structural constraints of capital, under which even the capitalists must work and which the capitalists must serve and personify if they want capital to reward them. Capital, that algorithm that optimizes for the endless increase of exchange-value in the abstract, is what is in control, not any flesh-and-blood people.

Marx is unconcerned here about helping people to identify who is a capitalist and who is not. He’s not looking to help people win the blame game or the victim/oppressor Olympics. None of that idpol crap. Marx here is specifying his definition, his ideal form of a capitalist in order to understand which factors about capitalism are essential, unchanging, unchangeable, and fundamental…so much so that he basically rules out the possibility that any real human being would perfectly fit this definition of a capitalist. After all, even the most thrifty, penny-pinching capitalist probably buys and consumes some use-values for him/herself from time to time that are not strictly necessary for either his/her own maintenance or the expansion of the exchange-value under his/her own control. Insofar as they buy in order to consume use-values for themselves, they are not a capitalist. Likewise, insofar as they do not buy anything at all, but rather just hoard their exchange-value as misers, they are not capitalists in this case either, regardless of how much exchange-value they might be hoarding. So, neither Smaug nor lottery winners who piddle away their winnings on the consumption of use-values are capitalists. A capitalist is simply someone who uses a given sum of money M to obtain more money M’.

Elsewhere, as marxbro has helpfully pointed out, Marx further distinguishes between three sub-types of capitalist: money/finance capitalists, whose circuit of capital looks like M–>M’, merchant capitalists whose circuit of capital looks like M–>C–>M’, and industrial capitalists, whose circuit of capital looks like M–>C–>P–>C’–>M’.

Industrial capitalists are important because they supervise the creation of surplus value, whereas on their own finance capitalists and merchant capitalists merely re-arrange value. Holding M constant in aggregate, a finance capitalist can only achieve M–>M’ if the debtor or someone else loses M. The same with the merchant capitalist. For every person buying low and selling high, there must be a counterpart buying high and someone selling low. Whereas industrial capitalists, in production, supervise the creation of new M (concretely so in the case of gold mining capitalists) or supervise the creation of new value that is exchangeable for M.

This is very insightful, particularly the distinction between how Marx and “most modern Americans” construct categories. Some other thoughts follow.

To the degree that the above is accurate, both for describing Marx’s thinking but also of the thinking of other, e.g. contemporary, Marxists, it makes the conceptual edifice more ‘vulnerable’. For one, if ‘capitalist’ is really as abstract as described then it becomes much less obvious how much the rest of Marx’s, or other Marxists’, analysis applies to real people. Besides the likely poor fit between the abstract definition and the psychology, sociology, politics, etc. of real people, Marx doesn’t address (in the above at least) how Capitalism avoids ‘wireheading’, e.g. hyperinflation; it’s not clear how hyperinflation isn’t the purest form of the “endless increase of exchange-value” especially given how the purest capitalists are those “whose circuit of capital looks like M–>M’”, i.e. those that seek to increase their capital using only their existing capital.

For the notion of ‘Capital’ as “that algorithm that optimizes for the endless increase of exchange-value in the abstract”, the first thing that came to my mind was life itself, i.e. ‘the endless reproduction of information in the abstract’.

I personally find economics interesting because The Economy is so riotously complicated but still patterned and structured. There really do seem to be some simple rules that are often or mostly true. But I don’t think of it as an engineering puzzle to be solved, in its entirety, i.e. for the entire universe of people, forever. I always think of Marx tho as wanting exactly that.

The abstract model described in the comment seems to me to be ‘not even wrong’. Consider the idea of “money/finance capitalists, whose circuit of capital looks like M–>M’”. The first problem is that a “M->M circuit of capital” is impossible because all of the possible mechanisms by which this might work inevitably depend on the ongoing activity, or the existing products of activity, that is not purely monetary/financial. I now have an even stronger suspicion that Marx really did think of banking/finance as ‘merely re-arranging value’, whereas it’s pretty clear that they are engaging in something truly important and significant even, or especially, if they’re doing it badly ― they’re judging and choosing among competing uses of their money/capital. But if everything is material and your universe contains no information, then you’d probably consider this extraneous and thus parasitic. Even merchants provide value in more ways than ‘just’ re-arranging existing value in space and time. Something as seemingly trivial as the design of a store can provide value to the store’s customers and employees. I’d also think, given the disastrous history of command economies, that ‘just re-arraning existing value in space and time’ is itself NOT a trivial problem to solve!

“A Bad Party”

What we have, folks, is a bad party. One where every new arrival makes things worse for the people who were already there.

Go to any planning meeting in an American suburb and you’ll hear plenty of talk about “protecting neighborhoods,” but from what? From the side effects of new residential construction. That’s how bad our bad party has gotten. The conversation we’re having about growth, at least where I live, is literally about protecting neighborhoods from other neighborhoods.

If your frame of mind says development is something with only downside and no upside for its neighbors—if it’s something you feel you need to be protected from—then anything that might make development easier feels like the government selling out the public interest.

And it doesn’t help when what we’re arguing about are tweaks to a broken system, too impenetrable for most people to understand.


Literally dirty money

This is a great comment:

I have a theory that many people dislike markets because they have a disgust association with them, as in Jonathan Haidt’s theories about the disgust mechanism and sanctity/degradation related moral reasoning.

Because money (as in currency) changes hands frequently it would have been associated with disease transmission. In fact, the Black Death spread along trade routes in Europe. It was likely very common for trade and contact with markets to spread disease throughout human history. Thus we get phrases like “filthy lucre” and children are taught not to put that penny in their mouth because you don’t know where it’s been. And we end up with a deep-seated belief that there is something unclean about money and trade.

Meanwhile sharing exposes other people to your germs, but you don’t get exposed to theirs. So sharing is pure, but trade is impure. Gift giving is sanctified, but buying and selling is degrading.

You see this pop up all the time when you listen to leftists talk about “commodification” (probably not an accident that the word commode is in there). It’s common to hear leftists make the philosophical complaint that “reducing” relationships to market transactions degrades them. That relationships unmediated by money are better. That offering or demanding money in exchange for something that should be freely given is degrading. I could go on and on about this.

The commenter doesn’t seem to be correct about the etymology of ‘commodity’ tho.

Happy Capital Day!

Economists usually call the value we get from education and training “human capital”, and the value we get from maintaining our health “health capital”. Most of the wages workers get actually compensate them for investing in these sorts of capital, rather than the choice to work now instead of having fun. So most of the value we get from “work” comes from capital, not labor. Take that, Labor Day. ?