Money Wisdom #45

"If you don't think that a monkey knows a good banana from a bad banana, then you are in complete denial. Yes, our system of valuation may be more complex, but it is still the same thing.... our valuation is no different from a river choosing a path down to the ocean. It is all basically the same thing."

Mark Metaphysics of Quality Forum (Descriptions of Quality Thread 10/07/2012)

Money Wisdom #44

"Let us not measure our sorrow by their worth, for then it will have no end."

Michael Bloomberg (Mayor of New York City) 10th Anniversary Speech for 9/11 (11/09/2011)

Money Wisdom #43

"The entire economic debate of C20th in 140 characters. Keynes said what's good, is right. Hayek said what's right, is good. We can't decide."

Jonathan Harris* Tweet 220654419728007169 (5/7/2012)

*You could justifiably claim that putting my own tweets in Money Wisdom is arrogance beyond belief. I have little defence other than (a) I was proud of this one (b) it really is exactly 140 characters which I took as a good omen (c) it's true (d) I wrote out straight, no machinations (e) this is the first tweet I've included in Money Wisdom and its nice to have a first (f) I'm the editor. Problem? Start your own Blog. x

Insane Prices, Crazy Money - Part One

Introduction

A while ago, as I was driving, something came on the radio that grabbed my attention.

A self-obsessed musician being interviewed by a sycophantic journalist forced me to hit the re-tune button in annoyance. I picked up a commercial radio station. I usually avoid them because of the adverts. But I left it on, preferring soporific music to inane conversation. Of course, very soon the calm cab of my van was disrupted by a shouting salesman. "It's summer madness here. And we'd have to be mad to offer these insane prices".

I should say, it's not actually adverts per se that I don't like. I have fondness for overly-enthusiastic infomercials and the silliness of shopping channels. I'm just not keen on radio adverts. I think it has to do with the intimacy of the medium. But this advert set me thinking. In fact, it set off a train of thought that's lasted several weeks. I want to elucidate that train of thought in a few posts.

Insane Prices

There's something uniquely powerful about saying a price is insane. It's a strong marketing message. I had a search around Youtube to find a good example for you. This is the sort of thing I mean. A classic from the masters of hyperbolic adverts, the Americans. Look out for the Lord Sugar hand gestures. They must be a prerequisite for selling electrical goods.




You'd think with my love of Money & Freud, the siren call of price, value and insanity would have drawn me to the Insane Price adverts long ago. But without my recent reading of Pirsig's ZenMM and Lila I think I would have remained deaf to them.

So what are these Insane Price ads actually saying? And what do they mean?

Firstly, they refer to their prices as insane, just like Crazy Eddie* above. But of course, a price can't be sane or insane itself. It's a number not a mind. What they actually mean is that their offer of goods at these prices is the action of an insane mind.

Secondly, and following on from the first point, the idea of value is implicit. We have to compare the price of the goods to the value of the goods to be able make a judgement about the sanity or insanity of the person offering the prices. Insane Price adverts imply that if the value of the goods exceeds the price, then the seller is insane**.

There can be other ubiquitous marketing messages in Insane Price adverts. There's the strong call to action. The emphasis on the uniqueness of the opportunity. And maybe others besides. But there is also a vital message without which Insane Price adverts just wouldn't work. A subtext that's built into the fabric of the format itself. It says simply 'We're kidding'. Taken literally, Insane Price adverts ask us to take advantage of someone who's insane. That's of course morally abhorrent. But because the message is relayed through the medium of paid advertising we know not to take it at face value. It's a neat little trick that makes us complicit with the advertiser. In Crazy Eddie's advert this subtext is amplified through a comical mania which reassures us that Eddie's not really mad, he just gives great discounts.

What I want to know is what happens if we do take Insane Price adverts at face value?

Let's start by putting the message of Insane Price adverts into a formal statement to give ourselves something to work with; The Insane Price Axioms. This will throw up all kinds of questions, but let's trust in Crazy Eddie for the moment and stay true to his message. What the adverts claim is that the offer of a good or service for a price that is lower than the value of that good or service is insane. Therefore the offer of a good or service for a price that is equal to, or greater than, the value of the good or service is sane. In other words;

Value being greater than price is logically equivalent to insanity.
V > P :⇔ ✘

Value being less than or equal to price is logically equivalent to sanity.
V ≤ P :⇔ ✔

There's something personal I have invested in this inquiry. The mismatch between price and value and the relationship of that mismatch to insanity is something that my annual money burning touches on. Burning a £20 note - your own £20 note! - brings a certain clarity to your understanding of price and value. At least, that's the way I see it.

Others think I'm mad. In fact, the wilful destruction of one's property is seen as a sign of insanity. I get away without a straight jacket simply because of the magnitude of my burning. Set against my earnings, £20 is just not significant enough to cause real concern. It's interesting though, and a bit scary, to realise that it is only the quantity of currency that stands between my freedom and my being certified.

In the Metaphysics of Quality (MOQ) - as I understand it - insanity is about valuing intellectual patterns that are generally rejected. Thinking about insanity like this makes it clear that our judgement is a social one. There's no litmus test for your sanity. There maybe some unfortunate biological or neurological event underlying your condition, or there may not. It's not the chemical imbalance that puts you in a straight jacket, it's declaring yourself Jesus Christ incarnate or burning your own money.

Pirsig puts it like this:

"No scientific instrument can be produced in court to show who is insane and who is sane. There's nothing about insanity that conforms to any scientific law of the universe. The scientific laws of the universe were invented by sanity. There's no way by which sanity, using the instruments of its own creation, can measure that which is outside of itself and its creations. Insanity isn't an 'object' of observation. It's an alteration of observation itself. There's no such thing as a 'disease' of patterns of intellect. There's only heresy. And that's what insanity really is." (Lila p.356)

Of course those who deal with mental health patients may find these ideas about insanity just so much philosophical hot air. That's fair enough. My brother is a psychiatrist, my wife a care manager on a dementia ward. Demanding and challenging work. I'm aware that the practical realities of insanity need a social response. But I also remember how upset my wife was to witness the administration of Electroconvulsive therapy as a student nurse. I know it's serious. There are good people doing bad things to mad people, and there are mad people doing bad things to good people.

I'm not suggesting that we use Crazy Eddie's Insane Price Axioms to create a methodology of psychiatric assessment. It's more the other way round. I want to see if the Insane Price Axioms can reveal something about price and value. That in turn might help me with something that's been bugging me since I was a child; what is Money?

I hope you'll put your white jacket on and join me for the next few posts.

When I was a child
I caught a fleeting glimpse
Out of the corner of my eye

I turned to look but it was gone
I cannot put my finger on it now
The child is grown
The dream is gone
I... Have become comfortably numb

Roger Waters, Dave Gilmore Comfortably Numb (1979)

* The guy in the advert is not really crazy, or Eddie. He's an actor called Jerry Carroll. The real Crazy Eddie - as in the proprietor of the Crazy Eddie Stores - was Eddie Antar. He was convicted of fraud in 1997, fined $150 million, and has creditors seeking to recover a further $1 billion from him and his family. The originator of the Insane Price adverts (on TV) is regarded as Madman Eddie Muntz (short video bio, wiki). I expect though that Insane Prices stretch as far back a commerce itself.

** Conversely, and as we'll come to later, talking about Crazy Money is usually a phrase used by a buyer rather than a seller which implies that the price asked for the goods, greatly exceeds their value.

Writing, Radio & Rows

A quick catch up post.

Crazy Money
If you follow my tweets you'll know I've become absorbed into a post called 'Crazy Money'. It started out as a quirky little idea that I hoped would allow me to explore a couple of things about Money. Two weeks and 8K words later and I'm still not near finishing. I also had it in mind to try and make it vaguely readable. Unlike my 'ramble' posts - like this one - that just get typed and published.

So, still not seeing any light at the end of the tunnel, I've decided to split the post up. Part one to a computer screen near you shortly. I just hope (a) I can keep on track with it, and (b) when and if a light does appear it's not an oncoming train. The problem with writing about money is its a very big subject. Every time you have something definite to say about it, you think, and then you find that the exact opposite is also true. Read Simmel, or Seaford and you'll see what I mean.

Zen and the Art of Motorcycle Maintenance
This week has of course been significant because of the first dramatisation of Zen and the Art of Motorcycle Maintenance broadcast on BBC Radio4. Really, if you've not listened to it, please stop reading my nonsense and head over here. It disappears this coming Saturday 30th June 2012, so you haven't got long. I know nothing about radio dramatisations, I just know that some of my favourite passages are featured. And I think the dramatisation manages to communicate the idea of Quality as the source of all things very well. (Of course it does so by reading Pirsig's words, but choosing which words to read and how to read them is an art in itself)

Hopefully, I can be more successful at showing how my conception of Money, and the MOQ fit together in my Crazy Money series.

Krugman, Coyle and Portes
Little spats like this need an immediate response. So I'm a bit late in the day. But if you missed it basically it was a discussion around the relative success of Micro Vs Macro Economics. Diane Coyle's post here, Jonathan Portes response here, Krugman weighs in here.

As far as I'm concerned there's not much to choose between micro and macro. The kindest thing I can say about micro is that it's consistent. The kindest thing I can say about macro is that tries hard. Neither of them goes anywhere near THE question (if you've not been paying attention THE question is 'What is Money?'). I think the macro debates are more easily sustained because of their political dimension. Usually they go like this:

The more populist ones say:
"Spend/Save* (delete as appropriate) to grow".

The more hardcore ones say:
"Keynes/Hayek* (delete as appropriate) said this, then, and meant A."
Someone disagrees. "Keynes/Hayek said something else, at a later time, and meant B."
Then they call each other stupid.

I don't read any micro stuff, but I guess they're debates would go like this:
"Your maths is wrong.
Oh, sorry."

It's not often you see a row between micro and macro. Diane Coyle was brave to have a go at the Emperors of economics. The last word in the row went to the Galactic Emperor himself, The Krugman who (blessed are we who hear his words) told us "these have been glory days for standard macroeconomics, which has done amazingly well under crisis conditions". I have it on good authority that he had no clothes on when he said it.

A Few Words on Lila by Robert Pirsig

[ >> SPOILER ALERT <<]

[ If you haven't read Lila, or ZenMM, then don't bother with this post. Really. Just go read ZenMM, then Lila. I don't want to spoil your enjoyment of Lila. And while its only a small spoiler, it refers to something right at the end of the book. This will effect the build of tension for you. ]

There's a review here that sums up well the criticisms I have of Lila the novel. But as the reviewer points out, what we have here with Lila and ZenMM is not just two (hugely successful) novels, we have a philosophy.

To be clear on this, we don't have philosophology - the analysis of philosophy. We have the real thing. A new explanation of reality.

How to relate to this?

Well, you can do as the reviewer (Russ Allberry) does in the link above. You can coherently and cogently criticise Pirsig's arguments. You can conclude - as Russ does - that the Metaphysics of Quality (MOQ) is thought provoking rather than enlightening. Doing so seems entirely reasonable. And it feels safe.

But this isn't how I relate to Pirsig's philosophy. What I know about it is this. That when I look back, these two books create a dividing line in my life. That may sound overly dramatic. I don't want to give you the impression that reading them guarantees some sort of epiphany. But for me, Pirsig's MOQ is a big brother to my own thoughts about Money. My thoughts aren't reasonable or safe. They are, in the words of my LSE Philosophy Professor, 'plainly crazy'. Well, Mr Professor, my big brother has something to say about that.

So I feel emboldened and invigorated. I have much more to read about the MOQ, of course. And I wouldn't like those who have read Lila to think that I agree with everything Pirsig says. I viewed his application of MOQ to culture primarily as a way of furthering the explanation of MOQ itself, rather than a hard, fast and final explanation of our entire history - if indeed, there can ever be such a thing.

There is so much good stuff. So many connections and so much harmony. I could talk about MOQ's relation to the Theory of Formative Causation (Morphic Field Theory). Or how it seems to chime with Freud's story of civilisation. But I'll limit myself to one small thing in this post. Its going to take a little setting up. There's a scene very near the end that really brings to the fore the resonances I perceive between Pirsig's MOQ and my Money. It's going to take a little setting up.


Firstly, my Money.

It's really hard for me to define what I mean by Money. I've tried. The closest I can get to it is saying in essence 'its closer to gravity than it is to anything else' (that's what my LSE Professor thought was crazy). But let's just take a leaf out of ZenMM and - like Pirsig says of Quality - let's just say Money is undefinable. So instead, let's consider money - in other words, currency - something that seems related to, but separate from, Money. Economonoligists often use the terms interchangeability, but clearly there's a difference. Currencies are a subset of Money*.

Now I have a very broad view about what a currency can be. Generally Anthropologists and Economists set up some sort of definition around its functions. But in the real world, a currency can be anything. I've argued the same for commodity. They're both terms that refer to an aspect of our relationship to something. Whereas in everyday life we think they refer to the thing, itself. In fact, saying thing, isn't actually accurate either. Most currency exists in the abstract, as symbols. And in the form of derivatives, so do many commodities. So rather than thing, what we should say is that a currency (or commodity) refers to our relationship to value. After all, it is this value that makes the symbol a currency and the thing a commodity.  Of course, economonologists would say here that what it actually has is exchange value. (That's where I'd refer them the MOQ and say that they don't have the value, the value has them!)

Anyway, where I wanted to get to with this was to say that I believe that totems were the first currency. (That's a Freudian totem - as in a spiritual representation, usually in the form of an animal, of a group of related people). Odd as this may seem, it's not actually too outlandish (its a conclusion that arises naturally from my understanding of the origins of money [currency] to which I give exposition in my as yet unpublished Owning and Owing essay). My version maybe extreme but there are theories on the origin of money that put forward the idea that money has something to do with the ritualistic sacrifice of oxon and the spits on which meat was distributed, or tokens that were used in temples presumably in recognition of a tribute.

Where this led me to, was to consider that religious artefacts - religious relics in particular - were actually currencies. Obviously not widely circulating currencies (although they did circulate despite strict laws against their sale and purchase), but they undoubtedly acted very successfully as stores of wealth, of value. In fact, in the case of Christ's crown of thorns perhaps the most valuable single item that has ever existed in human history (Louis IX paid over about half of France's annual income for it in 1238).

I think it's our arbitrary definitions of currency - defining it around this or that particular set of functions (see here my recent review of Seaford's Money and the Early Greek Mind) - that prevent us from giving a good answer to the real question, What is Money?


Anyway, the long and the short of it is that a religious icon is a form of money. It's currency.

(Interestingly, this might suggest that the coin in your pocket is a religious icon.)

> > > HERE'S THE SPOILER< < <

Secondly, Lila's Doll.

Phaedrus had anchored his boat in a bay. He was concerned about Lila's mental health. Events had conspired to put Lila in the cabin of his boat, hugging a doll that she'd pulled from the river. Lila's real child had died and she was treating the doll as if it was actually her baby, wrapping it in a shirt she had bought for Phaedrus. He was considering what he was going to do about this and how he could help Lila when an old friend of hers, Rigel, who he knew, arrived in his own boat and anchored alongside Phaedrus's boat. After a brief discussion Lila chose to go with Rigel, leaving Phaedrus alone. Lila left her doll on Phaedrus's boat. He wonders what to do with it.



And finally, the passage.


"He [Phaedrus] slipped the shirt over the doll's head. It came down way over the over the doll's feet like a nightshirt. That looked better. He buttoned the collar around its neck. Something about this doll was giving it all kinds of Quality the manufacturer had never built into it. Lila had overlaid a whole set of value patterns on top of it and those values were still clinging to it. It was almost like some religious idol. 


He set it on the edge of the pilot berth, and went back and sat down and stared at it for a while. It looked better with the shirt on. 


An idol, that's what this doll was. It was a genuine religious idol of an abandoned religion of one. It had all those formidable characteristics that idols always have. That's what spooked him. Once they've been ritualized and adored, these idols change in value. You can no more throw them away casually than you can throw an old church statue on a dump." (p.434) (My bold)


As I say this passage really resonated for me. For those of you that have read Lila, I would just say that I think Pirsig is wrong about it being a religion of one. Phaedrus's actions in respect of the doll would allow Lila to believe her reality was shared. It was a genuine religious idol of an abandoned religion of two (at least from Lila's perspective).

Perhaps I'm getting into this too deeply :-)


And having written this out, I'm now not too sure that I've managed to make good music out the resonances I perceive between Pirsig's MOQ and my Money. But its early days.




* The good folks over at Metacurrency don't see it this way. Although they do argue for a very broad definition of currency.

Money Wisdom #42

"What the Metaphysics of Quality adds to [William] James's pragmatism and his radical empiricism is the idea that the primary reality from which subjects and objects spring is value. By doing so it seems unite pragmatism and radical empiricism into a single fabric. Value, the primary test of truth, is also the primary empirical experience. The Metaphysics of Quality says pure experience is value. Experience which is not valued is not experienced. The two are the same. This is where value fits. Value is not at the tail end of a series of superficial scientific deductions that puts it somewhere in a mysterious undetermined location in the cortex of the brain. Value is at the very front of the empirical procession."

Robert Pirsig Lila 2006 (1991) p.395

Krugmania

I've been getting hot under the collar lately.

People got excited about Krugman's newsnight appearance. Fair enough. He's the Boss of economic commentators. But an economics discussion that folk were still tweeting about a week after it happened? Something is going on here. It's Krugmania.

Oh, if only politicians would listen to His wisdom. His modest ways, his stumbling speech. We trust him instinctively. He's John Peel's american cousin who got hooked on Keynes rather than the Cocteau Twins. He's a force for good against the evil of the right-wing, rent-seeking, profit obsessed, monied, warmongering, child-molesting, hamster-stamping, racist elite that conspire to make each of our lives miserable. Imagine if He was President of the World. Justice, peace and prosperity would be upon us and poverty would be history.

In case you're the one person who hasn't seen it, here's it is.



At 1:24 Jeremy makes me cringe. "I don't know why you're shaking your head." He says to Andrea Leadsom. "This is a Nobel prize winning economist!". Even John Moulton prostrates himself before the wisdom of the Krugman.

[Oh, by the way, the argument they're having is as follows. Krugman says the government should spend money to get out of recession, Moulton and Leadsom say they shouldn't.]

Anyway, I need to calm down.

And I need to say this plainly. It's not Krugman I'm annoyed with. It's You!

Have you ever seen the Life of Brian? Well, Krugman is Brian, a very naughty boy. And you lot are what propel him to the status of Messiah. Not helped of course by the twelve inch cock of a Nobel Prize that throbs in his pants. He doesn't have to get it out and slap it in our faces, he doesn't even have to allude to it. Just knowing it's there is more than enough. If you look closely enough at the video you'll see Paxman salivating at the thought of it. A man with a twelve inch cock. On My Show !

Let's forget the fact that Hayek and Friedman have got one too (a Nobel Prize that is - I'll let go of the cock metaphor now). Let's ignore the fact that they'd be saying something very different to Krugman. But please, please, let us remember Hayek's warning about the idea of a Nobel Prize in Economics*. Don't worry, no quote. Hayek's a dry old stick and doesn't deliver the snappiest of phrases. Just the title of his Prize Lecture - 'The Pretence of Knowledge'.

You can't blame Krugman for any of this. What's he to do? Refuse his Nobel Prize? Say no to the Newsnight interview because the debate won't be scientifically rigorous? He's doing his job, and doing it well. I like the cut of the man's jib. I was a bit disappointed with his response post newsnight. He claimed that his opponents in the arguments over austerity were just following a 'small government' (i.e. libertarian) agenda. I'm not saying he's right or wrong about it. There just seems little point in debating these things if you're only going to end up calling into question your opponent's motivations.

But then it's hard for Krugman. As the Blessed One, everyone wants to take a crack at him. There was a big row recently (less noticed by the mainstream media) between him and Steve Keen (who comes from a very different place to Moulton and Leadsom). Any Messiah is going to have his share of disaffected followers. If you're a wannabe messiah pitting yourself against the Blessed One is a great play. There's even an economic theory for it - it explains why the best place to set up a new shoe shop is next to an existing shoe shop. I've forgotten what its called and I don't want reminding, OK?

Of course sometimes things don't work out well for Messiahs. Especially when they claim they really are the son of God. Krugman has avoided this. In fact, when I first came across Krugman's writing as an undergraduate it was, in a sense, his humility that impressed me. He kept things simple. He wrote, as much as possible, in plain English. Said what he thought. You only have to read a few Economics blogs, a couple of newspaper articles to realise how easy most economists find it to speak in tongues. Those that don't succumb to this temptation should be cherished. Cherished, but not worshipped.

At the heart of all this there's a moral question. I think people fall in love with Krugman - I think there's Krugmania - because they like the answer he gives to that moral question. Some people are starving. "Then feed them", says Krugman. "We can grow more grain". What casts doubt in the mind of the farmers is that next year the harvest may fail, and their families may starve. If I were Krugman I'd be tempted to lead a quiet life, like most of the other Nobel Prize winning economists. I suspect that it's his believe in the rightness of his arguments and, even more so, in the righteousness of his answer to that moral question that drives him. But these are not exceptional characteristics.

No, as I said. The problem doesn't lie with Krugman, it lies with You. Or rather, it lies with Us. There's something in our social patterns that leads us to create the Messiahs. And usually it's around Money. Since civilisation began Money has remained an unresolvable puzzle - a paradox. So we look to prophets to guide us through it to the promised land - to the place where there is no longer distance between desire and satisfaction. But they're leading us blindly. And they'll have to take the blame when we get fed up of walking. Then we'll find a new Messiah.

"..money seems to be the most frequent and convenient axis on which millenarian movements turn."

Kenelm Burridge New Heaven, New Earth (1969) p.146

Can I suggest something then? Rather than Krugmania. Rather than elect Krugman as President of the World - or indeed a logical conclusion of the fetishism of the Nobel Prize would be to suggest that the Swedish Academy Of Sciences actually take over the global economy, after all they award the prizes. Rather than being propelled to walk on blindly by our belief in the possibility of economic paradise born of a technical expertise in the study of economics. Can we instead just stop a moment, and all think a little more deeply about money? After all, it seems quite important.

We could start for example by demanding that anyone who claims to be an economist tweet in 140 characters or less what they think money is (well, actually 127 characters or less once you includes the #whatismoney hashtag). It'd be lovely if other experts on Money - the ones that use it everyday (that is, all of us) - did the same. But economists particularly should be made to do it as an initiation into the Econ Tribe. Nail their colours to the mast, so to speak.

To start the ball rolling here's mine. 

"Money is to price, as gravity is to weight. #whatismoney"

I was going to go for something like, "Money is both the fundamental element and product of social reality. #whatismoney". But that's hardly plain speaking, is it? Neither would be saying that "Money is a commodity used to facilitate exchange", or "Money is a social relation expressed through exchange". I mean, tweet what you like, obviously, but I'm just trying to point out that explaining what you think money is, is no use if its meaning is buried too deeply.

Saying it simply is much more of a challenge. That would make a good Krugmantra.

One last thing. Don't start your tweet "Money is just...". If there's one thing we all know, it's that Money ain't just anything.

*The Nobel Prize in Economics was established in 1968 by the Swedish Central Bank. The other Nobel Prizes, like the one Einstein won, have been awarded since 1901.

Money Wisdom #41

"Many... philosophers... stayed out of politics, but nobody can stay out of the economy"

Richard Seaford Money and the Early Greek Mind 2004 p.184

Money Wisdom #40

" The law of gravity, for example, is perhaps the most ruthlessly static pattern of order in the universe. So, correspondingly, there is no single living thing that does not thumb its nose at that law day in and day out. One could almost define life as the organized disobedience of the law of gravity. One could show that the degree to which an organism disobeys this law is a measure of its degree of evolution. Thus, while the simple protozoa just barely get around on their cilia, earthworms manage to control their distance and direction, birds fly into the sky, and man goes all the way to the moon."

Robert Pirsig Lila 2006 (1991) p.155