"Most people are in arrested development and cannot use logic." Jacob.
"Competition and capitalism are hated to-day because of their tendency to destroy poverty and privilege." William Hutt
"America is unique in that our economy is totally dependent on global charity." Peter Schiff

Friday, July 20, 2012

Bob Dylan's Gates of Eden.

No economics in this article. Smiling Dave is a well rounded guy. He likes poetry. He likes hot dogs. So here are SD's thoughts on the song Gates of Eden, by Dylan. Warning: Not for the faint of heart. Dylan in his depressed moods can really paint a black picture of life.

I like Bob Dylan. I read a bit about this song on the internet, on Wikipedia and on songmeanings.net. So here's my take on it, enlightened by the above sources.
Oh, and here are the lyrics: http://www.lyricinterpretations.com/Bob-Dylan/Gates-of-Eden. Read them first, then come back here.

The general theme of the song is that life sucks, and then you die. To understand what he means by the Gates of Eden, think about Santa Claus. I think all adults have stopped believing in Santa Claus at some point in their lives. So if someone tells you "Only Santa Claus can get you that", he of course means, "You can't have it, sucker." Same thing with Gates of Eden. There is no Eden, implies Dylan by his tone of voice when mentioning it. And when he ends each stanza with "The things you want are only inside the Gates of Eden", he means forget about ever having them.

But there is an added twist to it. When you tell an adult "Go ask Santa Claus for that", you are talking to someone who already knows there is no Santa Claus, and has gotten over the pain of that discovery. But Dylan is doing three things when he says that something is only inside the Gates of Eden.

First, he tells us that, in his opinion, there is no Eden, no Paradise, no magic place either in this life or the next, where everyone lives happily ever after. And his cynical tone of voice, filled with emotion, tells us that this revelation is still fresh with him, and still hurts.

Second he tells us in each stanza that some important thing we are struggling to realize in our lives, be it discovering the truth or achieving some economic utopia or satisfying love, has no hope of being fulfilled. There is no afterlife, and there is no hope of making this life significantly better, either. Life sucks, and then you die.

Thirdly, he wraps this dual message up in the pleasant little postscript that you are a fool for ever imagining otherwise. Go ask Santa Claus for it, you fool who believes in Santa Claus.

The song, stanza by stanza, mocks every important quest people may have in their lives. Fugeddaboutit.   

I want to elaborate on one valuable that he mentions, love. Here are the lines:

At dawn my lover comes to me
And tells me of her dreams
With no attempts to shovel the glimpse
Into the ditch of what each one means.

He has a lover, they share a bed, they are close enough to tell each other their dreams at the romantic break of dawn. What could possibly be wrong with this picture?

My personal take is that nothing is wrong, if you know that love won't solve all your problems. Life goes on, with all it's occasional suckiness, yes, but it is made more pleasant by having a loving relationship. But let's see what Dylan has to say.

He says that each dream has a meaning. And he calls that meaning a ditch.  I think he is saying here that a dream is the tip of an iceberg. Beneath the dream lies its meaning, a vast world as deep as the dreamer's very personality, very soul. He calls it a ditch as opposed to, say, a deep well, because this is a cynical black song, so everything has to have a black description. It's not a well, it's a ditch.

His lover makes no attempts to fill the ditch, meaning to understand her deeper self, the self not satisfied with watching Gossip Girl and chewing bubble gum. She had a glimpse of her depths when she had her dream, but the shallow girl just let it slide, and did not take advantage of the opportunity to plumb her depths and find out about herself and share this discovery with her lover.

That's the problem with love. It can only go so deep. The girl in Bob's bed didn't even try, but even if she did it wouldn't have changed much. Ultimately we are individuals, and we cannot share our deepest selves with anyone. That's just the way it is, and it hurts.

Ouch. Bob has cast his magic spell, and writing this has put me in a black mood. OK, guys, let's all snap out of it. Bob only showed us one side of the picture. Life doesn't totally suck.


Sunday, July 8, 2012

Bitcoin and Intrinsic Value.

Someone at the Mises Forum asked me to explain about intrinsic value, and how it applies to bitcoin. Without further ado:

To sum up what is happening with intrinsic value. It is one of those phrases whose meaning changes depending on the context.

1. When Austrians say nothing has intrinsic value, that all value is subjective, they are speaking in a certain context. The discussion there centers about the question, why does bread cost a dollar a pound? What makes it worth exactly a dollar?

The old way of thinking was that there was some mystical entity hidden in the loaf of bread that made it worth a dollar. That's what they meant when they were discussing the intrinsic value of a loaf of bread. There were those who thought that the mystical entity inside the bread is "cost of production". Others thought that the mystical entity is "amount of socially necessary labor put into the loaf".

The Austrian conclusion is that there is no mystical entity, no intrinsic value. The price, the value, of the bread comes from something outside the bread, mainly, from the potential customer who is willing to pay a dollar for it. In other words, its value is subjective, not intrinsic.

That is one context in which intrinsic value is used, and in that context, there is no such thing as intrinsic value.

2. The other context in which the phrase is used is when discussing the value of money. In the article in my blog, Bitcoin Takes a Beating, I quote and explain Mises at length on this subject. Mises analyzed the value of money, say of a gold coin, as being made up of two elements.

The first value comes from answering the question, "What could Robinson Crusoe do with it?" Crusoe had nobody on his island to buy from or sell to, so the gold coin had no use as money. But it did have some use. He could use it for jewelry, if he was vain. He could use it as a component of his computer chips, or whatever.

OK, now Crusoe comes off the island back to civilization. He finds that everything has a price pretty much as he valued things on the island, except for one thing. His gold coin, he finds, is worth much more than he thought. "Why are people setting such a high value on something of so limited a use?" he wonders. Then he finds out that gold is the coin of the realm. Aha, that explains it. It has a use in civilization it never had on the island. You can easily buy stuff with it, anything from everyone. That is a useful feature, that increases the usefulness, and thus the price, of gold.

So those are the two sources of value that money has. Mises gave those values clumsy names, industrial value for the first, and exchange value for the second. As time went on, people [including Mises himself and other respected Austrians, as I have quoted at length somewhere in these forums] instinctively starting calling that first value, that Robinson Crusoe had for it when alone on the island, its "intrinsic value".

Now one can readily understand why someone who wrote in the forum that bitcoin has "intrinsic value, as money", was being quite amusing, like a clown falling off a bicycle. Intrinsic value is what it has on the island, and there it has no use as money.

[Note that in this context, intrinsic value is also subjective, because the two concepts are not contradictory.  Whereas in the first context a subjective value and an intrinsic value cannot be the same. If you grasp these last statements, you now understand the two meanings of intrinsic value.]

Mises' Regression Theorem states and proves that a money cannot have that second value, what Crusoe saw off the island back in civilization, unless it first has intrinsic value, meaning that Crusoe had a use for it on the island. In the article Bitcoin Takes a Beating, I explain his reasoning at length.

Since bitcoin is totally useless on the island, obviously, then by the Regression Theorem it will remain useless off the island. The bitcoin crowd howls at this obvious statement, trying to find some flaw. The most common thing they try is saying that we see it has some value, just go to mtgox.com. So Mises must be wrong.

The second thing they try is to say that bitcoin has some magical property that excludes it from the Regression Theorem, which was only talking about non magical objects. I've addressed both these arguments many times.