Money Wisdom #27

"In a chapter entitled 'Who owns the Money?', Oresme lectured the Prince that, although it was his duty to put his stamp on money, he did so on behalf of the community,and he could claim neither lordship nor ownership of it. For money was a 'balancing instrument' invented by the community to facilitate the exchange of their natural wealth, and was therefore the community's common property. The central point of this treatise was that money was the possession of the community, naturally directed toward the common good, and therefore properly ordered and controlled by community decision."

Joel Kaye Economy and Nature in the Fourteenth Century p.155 (1998) 

My Day with Friedrich

Yesterday I watched this video of a speech Hayek gave in 1983. It's a bit dry. It's also a little hard to hear what Hayek is saying at times. But the content is worth the effort of concentration.

(There's also this audio of a similar speech he gave to 33rd Meeting of Nobel Laureates at Lindau also in 1983)

Of Hayek's later work my focus has always fallen on 'The Denationalisation of Money'. That was a controversial work which made people question whether he'd lost his marbles. I thought (and think now) that the ideas are exciting.

But this speech has to do with his last book (which I've not read) called The Fatal Conceit. Its anti-socialism theme didn't really press my buttons, but had I known that there was such an emphasis the 'pre-history' of economy I'd have been much more interested.

Hayek tackles the problem of Lamarckian inheritance - the idea that an organism can pass on characteristics that it acquired during its lifetime to its offspring. He suggests an idea of cultural or group inheritance. He also points out that despite the claims of biologists some mechanism like this must exist - after all, modern humans have only been 'modern' for 50 000 years. (Its worth noting that the denial of Lamarkianism is specific to C20th Western science - it was not the case on the other side of the iron curtain). There are a couple of other fellows that believed that organisms can pass on acquired characteristics - Darwin and Freud. Indeed, Freud's work has been 'rubbished' by science (in part) because his theory of civilisation relies on such a mechanism.

I also caught this short interview with Hayek about Freud.

I think Hayek misunderstands Freud. You'll see this in under a minute. He claims that Freud disregards the fact the civilisation is based on repression. That's simply wrong. Freud claimed that the repression of instinct was what civilisation was built on. See Totem and Taboo, Civilisation and its Discontents, Moses & Monotheism etc. Freud certainly claims that this repression creates a tension. And that tension is what Psychoanalysis seeks to resolve. But resolving tension in an individual is not disregarding its role in the development of civilisation.

It's a shame that Hayek didn't get Freud. I see so much common ground. More so now that I've heard Hayek talk about his ideas of how economy developed.

My key point of discord with Hayek (and Freud) is over Money. (Marx too). But whenever I revisit Hayek's thoughts I'm always impressed with how coherent his explanation of economics is. Basically, (I think) he's right about how markets and prices work, and crucially about the distorting effect governments can have. I like the fact that he's humbled by the magic of spontaneous order. Politicians might claim they're doing a good thing when spend taxes on this or that project, but when you closely examine it you realise that they 'can't' know they're doing a good thing. That in itself though, is academic rather than a political point.

A recent debate from the LSE brings this issue to the fore. Hayek Vs Keynes.

Intellectually, I'm on Hayek's side. But you can sense Lord Skidelsky's frustration (Hayek is on home ground at the LSE) . It can be summed up in the most well known of Keynes' quotes 'In the long run we're all dead'. Even if I ignore the intellectual argument that Keynes' side makes, it's much tougher to ignore the moral one. If people are starving today, they need food now. Being convinced of a policy that will provide for them in the long run, is no good for them.

That doesn't make Hayek wrong. Nor does it make his ideas any less moral. And neither does it make Keynes right. That should be plain from that classic problem of Keynesian theory - that six men digging a hole, and another six filling it in, results in economic growth. It might do - we just don't know. But our common sense tells us it won't. (The Keynesian hole digging thing is discussed in the debate). What we do know is that the taxes use to pay men for digging have been raised on pain of imprisonment. There are plenty of moral arguments in favour of taxes, but it'd be tricky to make one that says governments can raise taxes to spend on men digging holes then filling them in. So as such, a moral argument for tax is arbitrarily contingent.

Anyway, its an old debate - one as old as political economy itself. And if we didn't have this dilemma what on earth would we all talk about, and what would be the point of politicians?

As an aside, I think I've mentioned elsewhere that Skidelsky is the only economic historian whom I've seen mention Keynes and Freud in the same sentence. He scores points with me for that.

And I also side with the Keynesians on something else; Hayek's conservatism (with a small 'c'). I accept that his ideas predicate a conservatism based largely on the spontaneous, complex and unknowable nature of our economic and social systems. But let's be honest, if Keynes & Hayek held a party on the same night, I'd be firing up the Austin 7 and heading up the A10 to Cambridge. Having conservatism underscore one's moral and intellectual being, is a sure way to miss out on a lot of fun. And more importantly, when its backed with political will, it denies others the possibility of living full and satisfying lives. This is something that I think Freud understood, and Hayek didn't.

Hayek is guilty himself of what he accuses Freud. His intellectual project has political impact. When conservatism meets politics its effects can be disastrous for some individuals. Sure, he could argue that the proper expression of his libertarianism would - in the long run - protect the rights of the discontents, but the intellectual power he gives to conservatism is perverted by politics and used as a weapon to alienate and scapegoat those who want to live differently. We need difference in order to evolve; sameness is stasis.

What I hope is that Hayek's ideas are appreciated (regardless of one's politics). Economic ideas always seem to be distilled into charts, graphs, and numbers. They don't need to be, and in fact all that is just a distraction, the wizard's curtain. Hayek creates a coherent line of argument in works like The Road to Serfdom (although I prefer The Constitution of Liberty). The interrelationship of economic and individual freedom is something of which we all have experience. Hayek helps us to make some sense of it and to extend it. This helps us formulate principles around which economic judgements can be made. I recommend Karl Polanyi's 'The Great Transformation' to give a bit of Yang to Hayek's Yin. The books were written at roughly the same time.

I enjoyed my day revisiting the old chap. And I learnt something new. Not bad considering he's been dead 20 years (he died on 23rd March  - Discordians take note!)

Money Wisdom #26

"The fact that socialism is the logical result of rationalism does not prove that socialism is right, but rather that rationalism is wrong"

F. A. Hayek On Social Evolution and the Origins of Tradition 

(A paper presented at George Mason University, 22nd November 1983)

Marx - The Spectre

A physicist, a chemist and an economist are stranded on a desert island. Hungry, they are walking along the beach when they notice a can of soup that has washed ashore.

The Physicist grabs the can and says 'I'm going to find a rock and smash it open'.

'No!' says the Chemist. 'Let's make a fire and we'll explode the can'.

'Don't be silly,' says the Economist, 'Let's just assume a can opener'.

The joke comes from a fascinating talk on Marx from John Lanchester (novelist, journalist and contributing editor to the London Review of Books) . He makes a great point about economists (he cites Paul Krugman) who say a particular model shows us something. Models, of course, don't show us anything. They might suggest interesting or helpful things, but they don't show us anything.

Worth remembering that. (I'm thinking particularly of Modern Monetary Theorists, here)

Marx didn't create models..... 'he was looking deep into the heart of reality and discerning its fundamental truth' (as John Lancaster puts it).

During the talk Mr Lanchester utters the immortal words 'What is Money?' Marx, of course, did try to answer this question. Look at The Power of Money for example. It's nice to hear the question. Who knows one day an economist might ask it.

Check out the podcast on the London Review of Books Website together with his 6k word essay (which forms the core of the talk).

This bit resonated with me;

'it looks very much as if Marx’s omission of the word ‘capitalism’, because he foresaw no alternative within the existing social order, was an instance of his crystal ball functioning with particularly high resolution.'

And also this, the closing statement;

As Marx wrote, towards the end of the first volume of Capital, ‘man is distinguished from all other animals by the limitless and flexible nature of his needs.’ Limitless needs we see all around us and they’ve brought us to where we are, but we’re going to have to work on the flexible part.

Much of my own thought and reading for the past year has been around the relationship of Money to this human/animal boundary, the role of Money in the development of abstract thought etc.

I've studied some Marx in the past. I think I need to revisit him and pay particular attention to his philosophical writings. I'm halfway through reading Joel Kaye's Economy and Nature in the Fourteenth Century. The relationship between thought and money is on my mind and I think Marx may provide some illumination on what is a very difficult thing on which to get any perspective. I seem to be at the dark edge of the subjective and the objective.

I'd recommend this talk to anyone, though. Whether you have an intellectual interest or not, and whatever your political persuasion. Like all these powerful ghosts from the past - I'm thinking of Freud in particular - Marx can be very misunderstood. Mr Lanchester helps you hear the resonance of Marx's ideas, whilst underscoring them, quietly and modestly, with his own misgivings.

Zen and the Art of Motorcycle Maintenance - A Review (of sorts)

Read it.

Trite, I know. And I'm sure its been done a million times.... so this is not a 'proper' review I'm posting on Amazon. I just want to put down a few of my thoughts around the reading of the book.

I'd heard of it before, but the first time it was suggested to me that I'd like this book was in the early 90s. I was into juggling at the time, and amongst my juggling friends this book was well regarded. It was the Zen thing. There's book called the Zen of Juggling I remember from the time; anything 'Zenny' was big back then. That actually put me off reading ZenMM. Also I hadn't enjoyed what I'd read on Eastern Philosophy - all those 'the sound of one hand clapping' phrases had the flavour of wisdom but no meat.

I think what hooked me back up with ZenMM was noticing the subtitle - 'An Inquiry into Values'. Amazon must have suggested it in one of their many emails based on the keyword 'value', and were pushing the release of the 25th anniversary edition of the book. With my interest in Money, obviously any inquiry into Values was going to float my intellectual boat.

I'm very happy to have had such a delayed appreciation of ZenMM. I really don't think I could have read it at a better time. There was so much in it that related to my understanding of Money... I felt at points I could have swapped for Pirsig's 'Quality' for my 'Money' and it wouldn't change the meaning one bit (Pirsig does the same thing with the ancient Tao Te Ching of Lao Tzu texts substituting 'Tao' for 'Quality'). I finished the book at work. I was sitting through the third repetition of a talk on 'Avoiding Dog Bites at work' (I'm a delivery driver), whilst reading the climactic part where Pheadrus takes on the Chairman in an intellectual battle. The line is :

"When a shepherd goes to kill a wolf, and takes his dog to see the sport, he should take care to avoid mistakes. The dog has certain relationships to the wolf the shepherd may have forgotten" (p.175)

Such little sychronicities and coincidences don't seem to bear retelling too well, but I experienced them throughout the reading of the book.

So it left me breathless. Full of ideas. And thinking I must pick up Jung again soon.

I will read Pirsig's other book Lila. But in good time.

Monkey Business

I can feel my frustration rising when I read genetic and evolutionary explanations of economic behaviour. Then when the debate around them quickly descends into a fight between left & right (or more specifically in this case between MMTers & Austrians) I despair. Look here for a recent example.


Here's the story we're told;

Homo Sapiens have been around for 200 000 years. For most of this time we were hunter-gatherers. Then about 10 000 years ago we started farming. Now we have the internet.

The earliest timings have been established by our understandings of DNA and maths. The Homo genus itself separated from Chimps 5 million years ago, Gorillas 10 million years ago, and Orangutans 14 million years ago. All of this happened by a process of random genetic mutations in combination with natural selection. And roughly speaking we share 99% of our genes with Chimps, 98% with Gorillas, and 97% with Orangutans.

Furthermore, about 50 000 years ago Homo Sapiens somehow become super-monkeys. The other types of Homo eventually disappeared and we were set on a course to micro-blogging modernity.


The debate is whether we became super-monkeys as a result of nature or nurture or some happy coincidence between them. So white-coated scientists prod monkeys and professors speculate on the musings of geologists and climatologists as a story is created about this gene predisposing us to that behaviour in a particular environment.

Don't get me wrong, it's much better to create this story than to just say God done it.

But it's still frustrating.

That's because even when a story of human development can be told that is very convincing and widely accepted - and you may well feel that such a story is told today - the explanation will be split asunder the instant it comes into contact with the social sciences. We may desire monism, but we experience dualism.

So back to where I started. Rather than bringing us together, the story of human development creates a chasm and upon each side a tower of knowledge is constructed. Those in the tower on the right believe that the story told confirms the idea that humans are basically self-interested, those in the tower on the left believe it confirms the idea that humans are basically altruistic. Each side has the strength of consistency, but neither can claim truth while the other exists separately from them. So they throw stones.

We like to look for things that make us different to Chimps and other animals. We think this 'difference' is what makes us Human. Perhaps it's this need for difference that underlies the dualism we experience. I think we'd be better to focus on how the things Chimps do - like fighting and fucking - resonate in the things we do.

I also think that which ever side of the theoretical chasm you're on, you should stop throwing stones and wake up to the idea of ambivalence. Wake up to the knowledge you have of yourself - that central to your nature is your Mind's ability to love and hate something at the same time. It might just be that we can be rational & self-interested AND irrational & altruistic. And if you find this level of self-realisation tricky, read Freud* !


I let someone else make the connection to Money.

"Loving and fighting are the oldest, most exciting (and usually separate) of man’s activities, so that it is perfectly natural to find that payments associated with both are among the earliest forms of money. "

Glyn Davies A History of Money (1994 : p25)

*Civilisation & Its Discontents would be a good starting point.

The Zen of Poker - Faith and Hope

I wish I could figure out how to win at online poker. There's a pattern that's been repeating itself. I put some money on. Sometimes I lose it quickly. But more often than not I win. Great! I turn $30 into $200 (with a mix of HU, Cash, SNG). Then of course, I lose it all. I console myself by noting that along the way I have a few stabs at winning big in tourneys. Its like a mini trade cycle - boom & bust - all of its own.

I wonder whether the losses are inevitable. It makes sense that for every winning streak there must be a losing streak. This is obvious when you play Heads-Up (against just one opponent). Poker pros like to refer to the role of luck in poker as 'variance'. Just like bankers like to refer to gambling as 'investment'. Dress it up how you like, essentially we're all dealing with the same thing.

When you get a run of bad luck its easy to go on tilt. Then you start to make bad decisions that amplify the bad luck you are experiencing. Two things keep you going; faith and hope. Faith in the karmic nature of the universe, or if you prefer, in randomness; the cards you're dealt, and those that appear on the flop are not influenced by anything - over time luck will balance out. And Hope that next time the universe will align, and your AA will hold against your opponents 83 offsuit (AA lost for me every time, in my latest losing streak, including to 83o).

Or you may see things the other way round. You may have Faith in your abilities as a superior poker player and Hope that over time results will adjust to variance.

Whichever way you experience Faith and Hope you'll have picked up that there is some dissonance between them. Something contradictory. I'd like to know the nature of that contradiction. I think it would help with my poker and with life generally.

This is where my thoughts are.

In the abstract Faith does not require Hope. Although in the real world Faith attracts the faithful through the offer of Hope. Faith can use Hope as a means.

The nature of Hope is amoral. I appreciate that Hope is generally seen as a good thing. But of course people are seduced by Hope into doing very bad things. People sometimes wrongly refer to this as false Hope. There is no such thing. The opposite of Hope is Despair. False Hope is actually real Hope that turns out badly.

Now this wouldn't qualify as a poker post unless I went through at least one hand.

This is how I went out of last night's big $22. There were 6456 entrants. This was hand 178. There were (from memory) about 1200 remaining with the 810 getting paid.

I can remember Short-Stacked Shamus talking about the difference between two types of poker - cash & tournament - over on his blog. He made the point that even the very best tournament poker players lose many many more times than they win. To be successful you have to be able to cope mentally with losing pretty consistently. I expect that Faith and Hope come in handy. Although when those chips flew across the screen to my opponent last night, they were the last things on my mind.

I'm tempted to write more exploring how Faith & Hope are related to Money. Max Weber obviously had a thing or two to say about Faith & Money. And no doubt there'll be some white coated scientist busily searching for an optimism/pessimism gene & correlating its presence with wealth. I think though, that poker (and other games & sports) can give you a insight into these things that maybe scientific research can't. And poker is particularly interesting in this respect because it directly involves pricing (determining the correct level of bet) and and of course it revolves around Money.

But I'll leave that for another time. Meanwhile, this little mantra has popped into my head time and time again since I first read it a few weeks ago. They are very wise words. Words which are sending me back to do some more poker study before I 'invest' any more in the game.

"Never hope harder than you work." Rita Mae Brown

Let Your Freak Flag Fly - Money and Morals

This morning I've read the Goldman Sachs resignation letter published in the New York Times and an interview on the excellent Banking Blog in the Guardian about right and wrong becoming blurry.

On reflection two things spring to mind.

Firstly Shawcross's biography of Murdoch. I no longer have the book but I remember the opening prologue. Murdoch is waiting to find out if a tiny loan (of $10 million) is going to be rolled over. It was (from memory) the late 80's and his company was potentially in trouble because of his investment in the Sky satellite. Although apparently insignificant, if the loan was not rolled over, a payment could not be made and Murdoch feared a chain reaction that could bring down his company and potentially send the world economy into a nose dive. You may think that this is just Shawcross stroking Murdoch's ego, or Rupert's ego running away with itself. But that's not the point. Situations do occur where tycoons, captains of industry, central bankers believe that the outcome of decisions will huge consequences. What should their moral compass be in such circumstances. Should they be willing to lie? To cheat? To break the law? To be unethical? To go against their conscience?

And secondly a scene from the tv drama 24 series 2. There's a trailer of it here. The relevant bit is near the end. Jack says "If you don't tell me where the bomb is, those men are going to kill your son." And then when the terrorist refuses, "I despise you for making me do this". It very effectively sets up a moral dilemma in a dramatic fashion. Is Jack courageously doing the right thing even though its morally abhorrent? (I won't spoil it for you by revealing what actually happens just in case you've not seen it).

The point I want to make about moral choices and banks is this - Money seems to have the ability to make us postpone and ameliorate moral choices. Everything becomes a compromise, and money provides the excuse and the reason. We can't afford to buy free range eggs, so we buy battery eggs. We have a pension which we know the nasty investment banks using to ruthlessly exploit people & nature in return for profit, so we give £2 a month to save the children. But moral choice cannot be postponed or ameliorated indefinitely. You know how karma works. You know what happens when you repress stuff. Sometime, somewhere those choices, that decision will pop up with bigger and badder consequences. What you hope is that you don't have to make it.

We invented corporations precisely for this reason. They absolve us of individual culpability. We facilitate this by making ourselves morally submissive to the corporate body. The profit motivated corporate body is itself submissive to money. They adopt money's amoral nature. And, in turn, so do we. A banal but vicious circle. Two things to remember. Profit seeking corporations rule the world. And. We created them to take the blame.

Money is mysterious. And so is its relationship to mind. Its amazing how something apparently amoral can pop up along with maybe sex & death as one of those things that can get our brow furrowed in moral confusion.

I've sometimes wondered why as a man in the second half of my forties I still have long hair. People think I'm a biker or musician. And I'm not. It's probably cost me a fortune.

However, I think Dave Crosby might have the answer. It's a moral choice I've made.

I almost cut my hair
'Twas just the other day
It was gettin' kind of long
I could-a said, it was in my way
But I didn't and I wonder why
I want to let me freak flag fly
And I feel like I owe it to someone


Almost Cut My Hair - CSN live version

Underneath Economics - Freud, Keynes, Hayek

I've spent a few hours this morning over at the Social Democracy in the C21st blog mostly reading this post and this post on Praxeology; a system of thought that underlies one particular understanding of economics.

I generally find philosophy texts hard going. Particularly now, as it's a long time since I've studied any philosophy and I have forgotten the language. Although saying that, I am currently reading Zen and the Art of Motorcycle Maintenance which is the apparently the most widely read philosophy book. In it Pirsig refers to philosophy as the high ground of knowledge. I did enjoy my time studying the Philosophy of Science - in part that was due to the structure of the course. I was studying Economic History but, because the course was also a requirement for MSc & PHD students, I ended up studying alongside Physicists, Chemists etc from Imperial College instead of just the normal Economics students. It was clear that we all thought very differently about things.

Anyway, I wanted to talk about briefly in this post about Freud. The author of the Social Democracy blog (a very fine blog to which I'm a regular visitor) the mysterious Lord Keynes is dismissive of Freud - in fact Freud is used as a measure of nonsense. Here's what he says:

If Hayek were alive today and gave us an honest answer to this, he would have to class such vulgar Misesian praxeologists as talking nonsense on a par with Marxism and Freudian psychology.

Elsewhere there is also another reference to Hayek who mentions Freud's Life and Death instinct as causing him annoyance when used as an explanation for..... well, everything.

So given that one of my intellectual heroes, Freud, is being attacked I thought I best write a quick post to explain why I think Freud is a good 'un. Before I do I should say that another of my intellectual heroes is Hayek; creating something of an existential crisis for me :)  I'm not going to harp on about Praxeology which will no doubt be a blessed relief to you, dear reader. For what its worth I agree with Lord Keynes that it is flawed. Assuming all human action is purposeful is a silly start for any attempt at understanding. You might as well assume rational self interest ! oh hang on...

You see. You only need to scratch a little beneath the surface of economic thought to realise that you need to have some conception of mind. And that's why I'm standing up for Sigmund. I worry that people have this image of Freud and psychoanalysis as some kind of medico-mystical pseudo-science steeped in C19th prejudices. It's a view of Freud I've some across time and time again. And as far as much of psychoanalysis goes, I'd probably have to agree. But, and here's the thing, the intellectual landscape that Freud eventually arrived at provides (imo) a brilliant, insightful and wonderful conception of mind.

Here's what Freud means to me.

He describes the structure (or architecture) of the mind. [Id, Ego, Superego.]

He describes the nature of relations between Ego and Object as ambivalent. [Co-Existence of Contradiction]

And he describes the fundamental forces of nature which act through the structure and upon the relations. [Life & Death Instinct, Eros & Thanatos. Attraction & Repulsion.]

Yes, he said different things across his lifetime. He also didn't come to his conclusions by mixing chemicals in a jar or measuring correlations between events. But what he suggests about us tallies with my experience of life more than another other attempt to explain our psychology. 

It's this ~base~ Freud that appeals to me. I don't need Neurosis & Psychosis, Repression, or even Concious and Unconscious. 

To bring this back to economics... You'll know that one of the 'real' Keynes' buddies was James Strachey (I say buddy with a knowing wink!). Strachey, a psychoanalyst himself, was most famous for translating Freud's work into English. His and Freud's work sit on my bookshelf today. I've only ever heard Robert Skidelsky refer to Keynes & Freud in the same breath - oh no, wait there is something in John Smithin's 'What is Money' on this too*. But this lack of exploration of the overlap between Keynes & Freud strikes me as odd. I would have thought that if we believed we could understand mind, then we'd understand money**. Or vice versa. It would seem rather strange to imagine some world where we know everything about the human condition and nature and yet still struggled with money. And we are still struggling, aren't we? We haven't reached the 'End of History'.

My own peculiar understanding of Money - and consequentially that subset of Money known as Economics (I'm teasing) - owes much to Freud. Nothing to do with money's anal erotic nature or anything similarly steeped in the more complexity of the application of psychoanalytical thought, it's just because its a simple set of ideas that seem to tally with the way I experience the world. Praxeology - and Homo Economicus more generally - maybe simple ideas but they do not describe our experience of being. That has much more to do with loving & fighting than rational self-interest.

So please, don't think that all that Freud suggested was that you fancied your Mum and wanted to kill your Dad. He went on a weird journey for sure. And he changed his mind about things. But his description of the mind isn't nonsense. Hayek may have thought it was nonsense (although as the faux Lord Keynes hints, he'd have been too polite and respectful to have said so plainly), Keynes (the real one) didn't.

*a brief search has revealed this paper too The End of (Economic) History by Jean-Paul Fitoussi.

** there is of course the very trendy behavioural economics - not my cup of tea, I'm afraid. 

Money Wisdom #25

"Logic presumes a separation of subject from object; therefore logic is not final wisdom."

Robert Pirsig Zen And The Art Of Motorcycle Maintenance  ([1974], 1999) p.133