14 Comments

Great article, thanks, and Kets de Vries a great voice. Sadly, stubbornness persists and despite the failure of Trussonomics plenty of free market fundamentalists still adhere to tax cuts = growth and weak institutions or ‘light touch’ = growth.

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Yes, it's always surprising to see how many people still listen to the folks at the Institute for Economic Affairs and go to Liz Truss' talks.

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Let me share something I found in the GURWINDER substack blog:

"Herostratic Fame:

Many people would rather be hated than unknown. In Ancient Greece, Herostratus burned down the Temple of Artemis purely so he’d be remembered. Now we have “nuisance influencers” who stream themselves committing crimes and harassing people purely for clout." I think the same it's true for terrorism.

"Benford's Law of Controversy:

Folks who know a lot about any subject tend to be humbled by the weight of what they come to realize they don’t know, and consequently, are less likely—in general—to speak in absolutes about those topics.

People who are fueled by passion, on the other hand, are understandably more likely to see those who come to different conclusions than they have as being stupid or evil, not just ignorant, which can leading to a type of Othering that disincentivizes productive discussion.

Which is also somewhat understandable: why would you try to have a serious debate with someone who is too dumb to think at your level, or who is actually evil in some fundamental way?

Benford’s Law of Controversy, then—despite not being a true law in any sense of the word—can be useful as a reminder that, often, if not always, the most passionate, inflammatory, emotion-driven topics are the least-productive, and fueled by the least-informed. And we, ourselves, almost certainly contribute to these same sorts of conflicts, even when we deeply feel that we are both well-informed and correct in our assertions." The next point is correlated:

"Nutpicking:

Online political debate mainly involves cherry-picking the most outlandish members of the enemy side and presenting them as indicative in order to make the entire side look crazy.

The culture war is essentially just each side sneering at the other side's lunatics."

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Interesting. I didn't know Gurwinder. Just signed up to check if I like it.

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Everyone thinks they have a corner on what is "smart" or "right" beyond a reasonable doubt. You buttress the institutions (educational and otherwise) as that's your corner. A plumber will think that institutions are a lesser evil to ward off chaos, and that the politicians and institutionalists are self aggrandizing, narcissistic fools that don't produce anything, but who else would want their jobs? The current way of life is based on modern plumbing (among other things), and would fall apart without it. There's always someone scrambling onto the pedestal to declaim their rightness. The people I tend to listen to and respect are those able to produce or fix something. Yes, I have a degree and am able to navigate the modern bureaucratic state, but that doesn't mean I believe in it. It's a necessary evil to make order out of chaos.

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As you might have guessed, I would challenge that, respectfully. I agree with you that every one is in a corner and has a belief system that informs their decision. I am firmly in the camp of scientific enquiry and empirical data. This can be a fault because as Einstein already knew "not everything that can be counted, counts.".

Yet, when it comes to your plumber example, I would argue that everybody is entitled to their pinion, but not to their own facts. And while plumbers are arguably important members of society, as are nurses, teachers, etc, while bankers are mostly expendable (emphasis on mostly), I argue that there is overwhelming evidence that institutions matter - a lot.

Try shutting down the banking system and see what happens (oh wait, we did that in 2008 for a couple of days after Lehman collapsed).

Try shutting down the legal system or defunding the police and the military and see what happens. Try deregulating markets or limit government to a skeleton body and see what happens (here is a hint: https://www.forbes.com/sites/petergreene/2022/05/17/in-new-hampshire-libertarians-budget-cuts-and-a-small-town-battle-to-save-public-education/).

This is why I think libertarianism is such a dangerous ideology. It undermines the very social fabric that holds our societies together.

So, to conclude, yes, people who produce stuff and fix things are vital parts of our society, but so are lawyers, bankers and, yes, government administrators, tax collectors and government regulators. Try living in a society without them and things would become a cesspit almost as fast as a world without plumbers.

And I say all this while being mad at lawyers, bankers and government administrators just as much as the next person. But we have to realise that just because people don't produce something tangible, their work is just as important for society.

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"Try living in a society without them and things would become a cesspit almost as fast as a world without plumbers." That's a great line! Thank you for your thoughtful response.

I was chatting with my wife (a teacher) today about our discussion, and the landscape became a little clearer for me. I'll leave the analysis of the NH budget cut to education to her, as it's her area of expertise. You are right. There is value in jobs that don't produce a physical product. There is value in structure and institutions to organize society. Ironically, my day job is just that. When my daughters ask me what I did at work today, I'll respond that I talked on the phone and worked on the computer.

What's the primary difference between a tradesman building a house, and a government bureaucrat crafting regulation? Only one of them is in the business of building a utopian world, and then enforcing that vision on other people. The lust for power, and the high that comes from the execution of that power over others is the most powerful force in humanity. It is a constant struggle to regulate oneself away from that rush, and only exert influence and power for good (who defines the good?). The human way is to constantly justify the ever greater exertion of power. We are infinitely elastic in our ability to justify actions that bring us pleasure, and the exertion of power over others is the most enduring pleasure. (See Carl Schmitt's writings)

Shifting gears, rational versus visceral. Rationally, you are correct that institutions and governments (can they really be separated?) are the skeleton on which our communal societies rest. In order to take advantage of specialization and economies of scale (among other things) to lift a people out of poverty and create great works, we need institutions and norms to regulate our interactions. We need a way of communicating and relating that we all understand and are comfortable with. The financial dimension of this concept is that we need a currency with an agreed value to move us away from a local barter system. Thus your enumeration of various institutions and their critical importance as the buttresses of our society. Rationally, institutions are good.

Then there's the visceral. When the utopian paradise being constructed by the denizens of our institutions and governments is combined with the rush of enforcing this vision on a populace that does not share those values, the reaction is a visceral rage.

Rational versus visceral. As with everything human, balance we must. This is the way.

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100% agree 👍

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Assume you are not saying "Conspiracies don't exist". Nor that incentives cannot combine to produce coordinated action which closely resembles conspiratorial activity - as some imho naive people claim in respect of the latest plandemic. If you are suggesting "All conspiracy theories are bunk", Adam Smith and I politely disagree

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Correct. Conspiracies exist. Just look at the Watergate affair. And I completely agree with you that individual action based on incentives can lead to collective action that looks like a conspiracy. What I mean with conspiracy theories are the nutcase examples like flat earthers, vaccines being used to put nanochips designed by Bill Gates into our bodes, etc.

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Absolutely love your blog and your book, 7 Mistakes Every Investor Makes, is a **MUST READ** for professional and retail investors alike. I read you as well since some of your takes challenge my own belief systems. Your work is something that I look forward to reading every day.

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You are bloated with your own self importance. Give it a rest.

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This January 5 post may be Joachim's best yet! And certainly one of his most important for promoting a better future for all of us. On top of that, it's humorous. Perhaps if more people follow the advice here - use satire to counter irrational beliefs - we'll all laugh and enjoy life a bit more.

Finally, I'd point out that irrational beliefs help keep us (mostly) rational investors in business. Thank goodness for "stupidity!"

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all efficient economic growth comes from investment

all economically efficient investment comes from market signals

this investment comes from risk capital by those with savings who can afford to take risk

tax cuts keep more potential risk capital in private hands where it can respond to market signals

tax revenue is used for capital allocation based on political, not market signals

Thus tax revenue is mis-allocated at best, wasted at worst which slows economic growth

that's why central planning doesn't work well

in summary , economics is not science, but is the following truth

freedom leads to economic growth , no exceptions

abridging freedom curtails growth

taxation, while arguably socially necessary reduces growth

lower taxation increases economic growth

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