Grandfather Marcus

Speaking of footnotes and grandfathers, I also came across this paragraph and footnote in the book I'm editing:

The report [on Mises's heavily-accented English and subdued teaching style] highlights one of the reasons why he did not produce any outstanding students during his years in Geneva. An even more important reason was the typical mindset of the students at the Institute, who were eager to obtain employment in an international organization -- that is, in a government organization. It is safe to assume that such students were not especially receptive to Mises's message. His two best-known students from these years became experts in the economics of war: Stefan Possony and Edmund Silberner.[1]

---

[1] Haberler later singled out J. Marcus Fleming and Alexandre Kafka. See Gottfried von Haberler, "Mises's Private Seminar" in "Erinnerungen an das Mises-Privatseminar, Wirtschaftspolitische Blätter, vol. 28, no. 4 (1981), p. 123.

[links and emphasis added]

J. Marcus Fleming was my Scottish granddad. For some non-obvious reasons, he is the Marcus in BK Marcus. I have very fond memories of him. He died in 1976.

After Geneva and London, he worked for the evil International Monetary Fund in Washington, DC, and was the Fleming in the Nobel Prize-winning "Fleming-Mundell Model" which you can read about here (in PDF format).

Granddad was the "Establishment Keynesian" I refer to in the About Me of this blog.

He was certainly one of those students in Geneva "who were eager to obtain employment in an international organization -- that is, in a government organization." It's safe to assume that he was "not especially receptive to Mises's message."

But still, that's only 2 degrees of separation -- and through family!

When I reported this to my mother, she told me that Haberler and granddad were friends and that she'd had dinner with Haberler when she was a girl.

And yet she'd never heard of Mises before I discovered Austrian economics...

Grandfather Willcke

I came across a footnote that said Mises's first paid editorial for the New York Times had the curious title "Grandfather Willcke" -- and said nothing more about it.

I searched NYTimes.com for anything by Mises and didn't find it. But if you search for that title, it's right there.

Here's the story.

(In the spring of 1942, Mises published 3 more editorials, which dealt with the logistical problems of Germany's war effort. In 1943, he published the last 4 editorials, which dealt primarily with problems of postwar reconstruction, especially monetary problems. The Mises Institute has copies of the payslips.)

happy (one-twenty-)fourth

Four years and six score ago today, Ludwig Heinrich Edler von Mises was the first in his family to be born a nobleman.

For Mises's 124th birthday, my beloved missus gave me this T-shirt. Ain't she great?

Today also turns out to be our 4th wedding anniversary.

Wikipedia is growing on me.

First anarcho-capitalism and now Miles Davis?

Today's featured article

Miles Davis was one of the most influential and innovative musicians of the twentieth century. Davis was a jazz trumpeter, bandleader, and composer. Davis was at the forefront of almost every major development of jazz after the Second World War. He played on some of the important early bebop records, the first cool jazz records were recorded under his name, he was largely responsible for the development of modal jazz, and jazz fusion arose from Davis's bands of the late sixties and early seventies and the musicians who worked with him. Davis was in a line of jazz trumpeters that started with Buddy Bolden and ran through Joe "King" Oliver, Louis Armstrong, Roy Eldridge, and Dizzy Gillespie. Many of the major figures in postwar jazz played in one of Davis's groups at some point in their career. Some authorities consider Davis to have been the first person really to understand the difference between live and recorded music.

househusband updates

Now that I'm a big celebrity, I feel a certain responsibility to my fans, especially those of you who follow my endorsements, recipes, and general advice.

househusband update #1: cleaning toilets

In my second LRC article "House Husbandry" I wrote the following:

My favorite cleaning products:

1. Swiffer Duster

2. Swiffer WetJet

3. Clorox ToiletWand -- "No more dirty brush!"

They store easily, work extremely well, and I take satisfaction in throwing away the dirty end afterward.

I must withdraw my endorsement of the Clorox TioletWand^®. While it's definitely better than the traditional toilet brush, I didn't like the fact that I had to throw away the dirty end -- I'd rather just flush it.

Scrubbing Bubbles^® to the rescue!

Now take a moment to remove the preceding images from your mind before I move onto ...


househusband update #2: wrapped chicken

One of our favorite home-cooked meals this past year has been stuffed chicken breast. I brine the breasts, butterfly-cut them before they're fully thawed, stuff with baby spinach, mozzarella, and prosciutto, wrap in butcher's string, and bake.

Three problems:

1. I overbrine;
2. butterflying and tying are kind of a pain in the ass;
3. untying is yet more hassle and also quite messy.

The solution to problem #1 is to let the chicken breasts thaw in cooking wine instead of home-made brine. In Pennsylvania you have to buy wine at a state store. Fascisti. Cooking wine you can buy in any supermarket or grocers. To keep you away from the temptation to drink the cooking wine, it turns out that they salt the hell out of it. It's important to keep this in mind if you're ever stuck with only cooking wine -- tone down any other salt there might be in your recipe! I prefer to cook with real wine, but it occurred to me that salty cooking wine might be just the thing to soak the chicken in before baking.

(By the way, I've been buying chicken breasts about the size of my hand, but recently I found a different brand that must use the Dolly Parton of poultry! Bigger breasts turn out to make moister and more delicious meals.)

The solution to problems #2 and #3 is to wrap the prosciutto around the chicken rather than vice versa. I end up using twice as much spinach and twice as much prosciutto, and I can pin the whole thing down with toothpicks rather than tying it up with butcher's string. The toothpicks come out easily when the whole thing is baked, and the prosciutto is nice and crispy. Much easier to make, and more delicious.

Gregory's Law

"As an online discussion commences, the probability of someone invoking 'Godwin's Law' approaches certainty. Whoever invokes this ludicrous 'law' must concede his error in doing so, forfeit the argument, and walk away in shameful defeat."

-- Anthony Gregory, "Against Godwin's Law", LRC blog

---

Followup from IM:

Anthony Gregory (12:54:05 PM): There have been times, however, that I didn't invoke Hitler since I thought it would be an ineffective tactic, even though it was a logically sound point to make.

bkmarcus (12:54:12 PM): I'm going to end up quoting you on my blog so much that people will think I'm applying for a job or something.

You wanna talk about tragedy?

(Click to Enlarge)

peace AND prosperity, you pinko morons!

I wish I had Lew Rockwell's patience:

I was invited to speak at a peace march and rally in Birmingham, Alabama, sponsored by the Alabama Peace and Justice Coalition, and gladly accepted the offer to speak against the war in Iraq.

Yes, as you might guess, the program was dominated by leftists who rightly oppose the war but want big government to run the economy. I accepted for the same reason I would accept an engagement to speak against taxes even if sponsored by a right-wing group that also favored the war and militarism.

"My Speech at the Antiwar Rally"

I'm not sure how well I could handle doing either one. He goes on:

Those who want free markets domestically typically want central planning and socialism when it comes to war and peace, while those who see the merit of diplomacy and minding one's own business in foreign policy can't reconcile themselves to capitalism as the only economic system that lets people alone to live happy, prosperous lives.

After the Cold War, Lew Rockwell (and Murray Rothbard) showed a willingness to "cozy up to the Right" that still makes me uncomfortable. I find it difficult to go back and read some of their stuff from the early- and mid-1990s. I'm a lot more tolerant toward social conservatism than I used to be, but I'm definitely a paleoliberal (by the way, here is how the word is pronounced) not a paleoconservative, nor even a paleolibertarian -- even though all 3 share a rejection of both the welfare state and the warfare state. Some questions are really just about nuance, reflex, and aesthetic, and some questions go beyond the legitimacy of coercive government.

But here we are, a decade later, and Lew Rockwell seems to have no problem forming strategic alliances with the enemies of prosperity and freedom, so long as they fight the evils of the warfare state. I see the power in that, but I don't think I'd have the decency to contemplate diplomacy:

There are two potential failings in such a venue: kowtowing to the audience or, the opposite error, ungraciously rubbing their noses in their inconsistencies.

Yeah, see? I'd definitely have wanted to do me some serious nose-rubbing.

Lew Rockwell is a better man than I am. He found the perfect wedge:

By what ethical standard should we judge the state?

[read more]

circularity and regression

The conversation with my Lovecraftian friend continues:

Another question. Why does gold have the value it does?

So what does it mean for something to have value? I try to address that in the Gilligan article and more specifically here:

http://www.bkmarcus.com/blog/2005/06/value.html

Gold has exchange value because people want it, and people want it for all the reasons it made such a good money: (1) its stable supply makes it a convenient store of wealth (i.e., hedge, in an inflationary context); (2) it's fungible, which means, for example, that a half an ounce of gold has approximately half the exchange value of an ounce of gold; (3) it's scarce enough that a little bit of weight represents a lot of wealth, compared to other metals (see comment on silver and platinum above); it's marketable and easily liquidated, meaning that people will acquire it from you readily.

I'm still not sure I understand "value", though. To me, value means that some item is good for some use. Gold's value, as you've described it, seems somewhat circular to me.

Excellent. You've identified the circularity paradox of monetary theory. I currently work for the Ludwig von Mises Institute as a "publications assistant". Ludwig von Mises was the man who solved the circularity paradox with his regression theorem.

I have a different concise definition of value than you do: an item has value if you are willing to take action to acquire it. I prefer this for two reasons: (1) it makes explicit the fact that value comes from the subjective preferences of the evaluator and not from any inherent characteristic of the object, and (2) economists distinguish between use value and exchange value, and I think my definition covers both.

When you say "To me, value means that some item is good for some use," you are defining use value. (Although you have to have a very open understanding of use: I use a piece of music to give myself pleasure or elicit a particular mood; the addict uses heroin to get high; etc.)

Brief digression: Among goods with use value, we need to distinguish between consumer goods, where the use is a direct satisfaction, and capital goods, where the use is the creation of other goods. Some capital goods help produce consumer goods and some capital goods produce other capital goods. Think of the ladder I use to pick the apple I want to eat, and then think of the hammer and nails that I use to build the ladder. Then think of the machine someone used to produce those nails, and on and on. This is called the structure of capital. Thus endeth the brief digression.

Some things are valued not for any direct use, but because we predict that someone else will exchange the goods we want for it. For instance, I see something on ebay that has been mislabeled or misidentified and I suspect I can get Jack [a collector and auction maven the Lovecraftian and I have in common] to pay me twice what I bid for it. That thing has exchange value for me because it has use value for Jack. (It might also have exchange value for Jack, but let's keep it simple.)

Different things can have use- or exchange value depending on the evaluator.

Money, uniquely, has only exchange value. This is what appears circular: money is valuable because other people value it, but other people value it because it has exchange value.

Mises broke the circle by introducing time into the description. I value a dollar today because I expect its exchange value tomorrow to be close to its exchange value yesterday. Its exchange value yesterday was based on its exchange value the day before. No circularity.

But then we have a new problem: infinite regress. Almost as bad as circularity.

No, said Mises. The exchange value of money originally arose out of the use value of a bartered commodity. In my "Pocket Tanks and value theory" post, I link to a famous article on the use of cigarettes as money in POW camps. This is a good microcosmic demonstration of how a commodity becomes money. All the prisoners get identical care packages from the Red Cross. I like the canned pineapple, but not the canned peas. You hate the sweet syrup that the pineapple comes in so we trade. This sort of thing goes on throughout the camp. I don't smoke so I'm willing to trade away my monthly carton of cigarettes from the Red Cross. I quickly notice that it's much easier to trade cigarettes than it is to trade the canned peas. Eventually everyone notices this. Cigarettes are the most marketable commodity in the POW camp. At this point, I'm less anxious to trade away my cigarettes because even though I don't smoke (i.e., they have no use value to me), I know that they are easy to trade for the things I want (i.e., they have exchange value). Smokers start smoking less because the cigarettes now have an additional use as money. Notice that the cigarettes had to start with a use value in this scenario, and that their exchange value is originally based on their use value. But over time, their exchange value goes up -- not because of an increase in their use value, but because of an increase in their exchange value. Sounds circular, but remember the regression theorem: today's exchange value is based on yesterday's exchange value ... back through time until we can link it to original use value.

(You might find it interesting to see how many of my 4 criteria for money apply to cigarettes in the POW context.)

So gold is so well known for its exchange value -- and has been for centuries and millennia -- that we forget it also has use value as a soft metal, especially for decorative purposes.

I hope I've explained the demand for gold. And I hope my previous email explained the relevance of the supply of gold. The combination of a relatively stable supply and a relatively stable demand are what make gold a good hedge. They're also what made and would make gold such a good money, but I've tried not to focus too much on that question here.

failsafe investing via "Mr B"

You guys remember "Mr B" of the Free State Project -- the one who asked my opinion of Liberty Dollars?

Having read my recent post on gold and hedging, he wanted to introduce us (that's me and you, dear readers) to Harry Browne's "Fail Safe Investing":

Hello again, Mr. Marcus!

Thanks for the reference to the humorous propaganda contest! To the "Dunce" example I would add "affect/effect".

I also enjoyed your "Why hedge?" article. I hadn't seen the split before of one month's expenses in checking, two in savings, and three in CDs. I have been pretty poor with my money up until now, and I am trying to change that. I don't know if you have heard of Harry Browne's Permanent Portfolio idea, but that is what I am now working on. I will also try to build up in separate cash reserves that 1,2,3 breakdown you mentioned.

[... Are you familiar with Harry Browne's "Fail Safe Investing"? ...]

Basically, Mr. Browne says there are 4 basic states to the economy: prosperity, inflation, recession or tight money, and deflation. He splits his portfolio 4 ways amongst stocks, bonds, cash, and gold. The stocks he recommends are just mutual funds that track the SP500 index. His bonds are U.S. bonds, but those with political issues with that can go for corporate bonds (just watch them more closely). Cash for him is short-term treasury notes, but again because of the political issues I would probably prefer CDs or some other private instrument. And gold is gold. His system is intended to hedge against each of the four states of the economy, not just inflation. He said in one of his investment shows that he hasn't found anything that prospers as much in a recession/tight-money situation, but that state is usually self-limiting. You either return to prosperity when people get used to the new prices, or you go to full inflation or deflation. Whichever way things go, one of the 4 investments can then pick up the slack.

Because one of the investments usually increases more than the other three decrease for a given economy change, the overall value tends to stay the same or increase. Over the last 20 years or so, the system has only lost value 4 times, with the worst drop being about 6%. The overall value has actually gained around 9-10%.

I really liked this book. Your readers can order the pdf file online for less than $10 at http://www.libertyfree.com/FailSafe/FSI-Home.htm.

His investment show archives can be found at http://www.harrybrowne.org/Archives-investment.htm. The interlude music is nice, too!

Take care!

"Mr. B"

Rothbard's 101

This one's my baby. My brain child. I conceived it. I nurtured it from a pup. I can't take responsibility for Chad's beautiful visual design, or for the genius of Rothbard's teaching, but it's mine anyway. I couldn't be more proud:

Murray Rothbard's writing always displayed the clarity of a first-rate mind, but it is listening to him teach that reveals the humor, the wit, the sheer fun of experiencing his genius.

Murray N. Rothbard: Economics 101 collects onto one MP3CD (advanced CD players and personal computers) ten hours of lectures and speeches from the early 1970s to the early 1990s.

He is speaking in a small classroom setting, explaining economics from the ground up and systematically in the manner of a classic 101 course on the topic -- but with a revolutionary approach. Free-wheeling, generously pepperred with anecdotes, packed with humor (and the man's own infectious laughter), Murray Rothbard's lectures on free-market economics range from the most basic foundation of supply and demand to the complexities of fractional reserve banking and the business cycle.

Along the way, you will learn what money is and what it is not, where interest and profit come from and what role they play in the conservation of natural resources, what determines labor wages, what happens when wages are set artificially through the intervention of the state, and what role labor unions play in the welfare of those inside and outside the union.

The first seven lectures have been organized so that each one builds on the others, culminating in a two-hour explanation of banking. Lecture eight is a whirlwind summary of Misesian economics -- "Mises in One Lesson" -- and the last track of the disc is an inspiring speech, given shortly after the fall of the Soviet Union, on the future of Austrian economics.

After listening to these ten hours of audio, you will know more real economics than most econ majors.

the F-word

I believe that men and women enjoy the same natural rights. If this is all you mean by feminism, then count me among the feminists. But that is not how I know anyone to actually use the word -- even when they claim that that's all they mean by it.

As far as I can tell, feminism is a form of socialist class conflict theory where class is replaced with sex, sex is different from gender, and gender is culturally constructed. It is in this way that I consider myself anti-feminist.

I love Wendy McElroy and I love her iFeminist stuff. I appreciate her distinction between individualist feminism and gender feminism (which Mises called liberal feminism and socialist feminism, respectively). But outside the libertarian movement, I've only ever heard the F-word used to refer to what McElroy calls gender feminism.

paleoliberalism

Anthony Gregory posted to a discussion group recently on the differences between neolibertarianism, paleolibertarianism, paleoconservatism, and the "new" kid on the block (who is, in fact, centuries old): paleoliberalism.

I quote him here with his permission:

[...] Let me clarify for everyone what I mean by "paleoliberal."

I am a classic, old liberal, not in the Rooseveltian sense, but further back. I am a liberal the way FDR's arguably misnamed Old Right opponents were liberals, the way Patrick Henry and Thomas Paine were liberals, and the way that everyone who is a libertarian is a liberal.

I like the term "paleoliberal" because it puts "paleoconservatism" in some context. Paleoconservatives, though they have some libertarian leanings here and there, are not nearly as clearly libertarian as a paleoliberal would be, since conservatives in the old days were never as libertarian as the classical liberals were.

The paleoliberal tradition is one of individual liberty, free markets, freedom from state persecution and privilege, cultural tolerance, private property, freedom of association, and peace. This is my political program, my ideology summed up in bullet points, my agenda.

Now, to answer [the question of] whether I am a "paleolibertarian," which I imagine was not only based on a misreading of what I wrote, but on a general perception of my politics, probably at least in part due to my writing for LRC. My answer? No, not really. I am just a libertarian. However, I do have some paleolibertarian sympathies, insofar as:

• I believe the paleolibertarian emphasis on a foreign policy of nonintervention and peace and free trade with all nations is absolutely the correct libertarian position, and the most practical, moral and respectful policy as it concerns the lives and freedoms of Americans and foreigners; and I consider the neolibertarian position on foreign policy to be absolutely wrong, dangerous, statist and evil.
• I believe strongly in political decentralization, unlike the neolibertarians. I do not think the central state is the proper protector of our rights against local governments. I am as much a fan of the Tenth Amendment, from a structural viewpoint, as the rest of the Bill of Rights. It is here that I disagree with many libertarians with whom I otherwise have nearly no other arguments.
• I happen to agree with paleolibertarians on the incredible importance of issues like central banking and Civil Rights egalitarianism, both of which have done more to expand and empower government in the 20th century than perhaps any policy other than war.
• I am a fan of the historical tradition of revision, and consider it important to understand the workings of the state, its interest groups, and its collusive ties with the quasi-private sector. I think there's more to being an effective libertarian proselytizer than being a "fiscal conservative" and "social liberal." I have a fondness for American history that most paleolibertarians seem to share and that many libertarians seem to care little about.
• I believe more in advancing libertarianism through a long term approach of educating people of ideas, rather than of trying to trick the public into voting for a constitutionalist, or working within the system in hopes that the politicos will throw us a voucher bone or meager tax cut. I do not think our winning strategy will mainly be electoral.
• I am very interested in economics, take a hardcore Austrian approach to almost all economic issues, and don't think economic freedom means increasing government spending but diverting some of it to "free-market" reform gimmicks. I don't worship big business, knowing that a lot of it relies on corporatism and soft fascism and not free markets.
• I do not believe, like many neolibertarians appear to, that being a libertarian is all about being a hedonist, being pro-prostitution or pro-Howard Stern, or hating religion. This is not to say I am opposed to people who like orgies, whores, and athiesm living their lives as they see fit. I am tremendously socially tolerant, but do not think that libertarianism is a lifestyle attitude. I think it is a political and ethical philosophy concerned with force and especially political force.
• I am not as "PC" as the neolibertarians on a whole range of distracting issues in the "culture war." Nor am I really a [social conservative] on any of this. I am agnostic, ambivalent or simply apathetic on such ridiculous questions as whether there should be prayer in those concentration camps known as public schools. I do not particularly consider it more a threat to my liberty to have my money stolen to "teach" about the Bible in public schools than when it's stolen to teach Keynesian economics and promulgate dangerous mythology about Lincoln, the New Deal, etc. Theocracy isn't the problem. The problem is the state. For questions of whether you should be able to walk nude on public property, I revert to my decentralism. What might make some sense for Berkeley, where I live, might not make sense for Red-State America.
• Unlike many neolibertarians, I am skeptical, rather than always optimistic, about cultural change.

Now, some ways in which I am not particularly paleolibertarian, many of which relate more to personal opinion than political conviction:

• I am pro-open borders as a matter of policy, and pro-immigration as an economic and cultural consideration, and, in general, pro-immigrant as well.
• I am much more culturally liberal in my personal views than many paleolibertarians, though they are not uniform in this.
• I am, unlike some (but again not all) paleolibertarians, firmly against state laws restricting abortion, and indeed think women who have abortions should not be disrespected and slighted. I consider abortion very wrong, more so than most neolibertarians, probably. But I also have a sense of tolerance for those who do it. (Once again, many paleolibertarians actually do look at this the same way, but some don't.)
• I am not particularly sold on the particular religious views of many paleolibertarians. I do have a sense of spirituality, though, that might irk the more Randian types.
• I am not all that into hierarchy. There are many ways in which I am indeed a "left-libertarian" in that I think free markets would liberate workers and allow them to have much more control over the means of production, and that a libertarian society would probably have more praiseworthy decadence (to paraphrase the title of Jeff's terrific book) than the paleolibertarians might want to expect or celebrate if it came to be. I don't have quite the enthusiasm for the more peaceful big businesses and Red-State lifestyles that some of the paleolibertarians do. I am not too incredibly "pro-Wal-Mart." Or "pro-SUV." Or "anti-vegan." I am, unlike the neo- and paleolibertarians, a conscientious objector on most culture war issues. So while I disagree with many on the radical left that the nuclear family must be abolished, I also disagree with many on the right that it's the only way to go.
• Unlike many paleolibertarians, I am skeptical, rather than always pessimistic, about cultural change.
• I really enjoy living in Berkeley, CA, and wish that more people in our society were a lot more permissive and open towards certain "alternative lifestyles" (as well as truly tolerant of those who wanted to hold high their banners of tradition).

As you can see, I am simply a classical paleoliberal, a libertarian. Since the neolibertarians are far less libertarian than the paleolibertarians, I might be a lot more politically at home with the latter. But that's not my fault. If the neolibertarians had opposed this monstrous war from the beginning, my perceived paleolibertarianism might not be as stark.

---

bk note #1: As far as I know, the term 'paleoliberal' was coined by Ludwig von Mises at a time when the American Right was embracing the term 'conservative' (which had perviously been a smear term from the Left) and the Mont Pelerin Society was embracing neoliberalism -- a policy position that explicitly rejected "laissez faire" and allowed far more power for the State than had been acceptable to the Manchestermen of classical liberalism.

bk note #2: I am the proud holder of the domain name paleoliberal.com. The first time I use the word in this blog is here.

bk note #3: My favorite line from Gregory's post is "I am, unlike the neo- and paleolibertarians, a conscientious objector on most culture war issues."

bk note #4: My favorite single word in Gregory's post is 'agnostic' as in "I am agnostic, ambivalent or simply apathetic on such ridiculous questions as whether there should be prayer in those concentration camps known as public schools. I do not particularly consider it more a threat to my liberty to have my money stolen to "teach" about the Bible in public schools than when it's stolen to teach Keynesian economics and promulgate dangerous mythology about Lincoln, the New Deal, etc. Theocracy isn't the problem. The problem is the state." [link added]

bk note #5: I find a real connection between Gregory's list post and my blog post on liberal anarchism.

alright already

The latest from Worth1000.com:




I specifically remember being taught the word 'alright' in 6th grade -- taught that 'all right' was when everything was correct and 'alright' was an alternative version of OK, used to mean moderately good.

According to the dictionary that comes with OS X:

al·right (ôlrIt) variant spelling of all right .

USAGE The merging of all and right to form the one-word spelling alright is first recorded toward the end of the 19th century (unlike other similar merged spellings such as altogether and already, which date from much earlier). There is no logical reason for insisting that all right be two words when other single-word forms such as altogether have long been accepted. Nevertheless, although found widely, alright remains nonstandard.

And according to dictionary.com:

Usage Note: Despite the appearance of the form alright in works of such well-known writers as Langston Hughes and James Joyce, the single word spelling has never been accepted as standard. This is peculiar, since similar fusions such as already and altogether have never raised any objections. The difference may lie in the fact that already and altogether became single words back in the Middle Ages, whereas alright has only been around for a little more than a century and was called out by language critics as a misspelling. Consequently, one who uses alright, especially in formal writing, runs the risk that readers may view it as an error or as the willful breaking of convention.

why hedge?

I only had a few friends at [the last megacorporation I worked for], mostly the ones who didn't quite fit in.

One of them is a big fan of H.P. Lovecraft, who I only really know of because of Robert Anton Wilson. When I was going through the PBF archives, I found this strip and thought of my Lovecraftian former colleague:


(Click to Enlarge)

The resulting exchange was quite the nonsequitur:

---

Subject: Re: Enter a New World

I have another question for you. I recall some time ago you mentioned to me the importance of gold as part of a financial portfolio.

OK, I'll start with the most practical stuff and work toward the more general.

You should have somewhere between 10-20% of your portfolio in hedge funds. A hedge is when you "invest" in something not because you expect its value to go up, but when you expect its value to stay stable as the value of money falls. The hedge is against inflation.

(What most people mean by "inflation" is prices going up, but price inflation is actually the effect and monetary inflation the cause: monetary inflation means the government is creating more dollars out of thin air -- either by printing them or through fractional reserve banking, which I won't go into here. As the supply of a thing goes up, all else equal, its value goes down. This is as true of the supply of money as it is of anything else. What it means for the value of a dollar to go down is that you can buy less stuff with it.)

Can you please go over the basics for me once again,

There are different things you can invest in as hedges, but precious metals are the standards.

The 3 most commonly traded precious metals are silver, gold, platinum. Silver and gold used to be money. What constitutes money is a fascinating question that too few people understand. It's what I wrote my Gilligan's Island article about last year:

http://www.mises.org/story/1595

The advantage of silver over gold is that silver is easier to acquire for fewer dollars. This is also its disadvantage, because bigger investments of dollars requires more storage space for more silver. Gold gives you more bang for your buck. Platinum gives even more of a dollar-bang, but its supply is less stable, because it's been mined only more recently in history and new supplies are always being found. What makes the price of gold and silver relatively "stable" (another term to discuss) is that the increases and decreases in supply are miniscule compared to the current supply we have from centuries (or millennia) of mining.

and recommend some reputable dealers?

I started buying gold at about $330/ounce at the Jefferson Coin Shop in Charlottesville. I bought one coin. I paid sales tax on it.

I didn't decide to move any substantial money into gold until the price was up to around $375/ounce. At that point, I ordered from a website that was then called www.CheaperGold.com but is now called www.APMEX.com (American Precious Metal EXchange). I did it in 2 purchases, because I was very nervous about moving that amount of money. I also confirmed the existence of the company with their local bank and with the Better Business Bureau in their area. By the time my first box of gold showed up, the price had climbed closer to $400/ounce, and I was now confident in buying my second batch from them. At this point, I might use Burt Blumert instead -- http://www.lewrockwell.com/blumert/burt-gold.html -- but that's because I know people who know him, and I like the idea of supporting his business. When I originally chose CheaperGold.com, it was because they were true to their name, based on a bunch of comparison shopping I did online.

Oh, another thing: the first batch of gold I ordered were 1-ounce krugerrands (South African government) because they were the lowest over spot. A gold coin sells for the current spot price of gold, plus a certain premium. The premiums vary not only by dealer, but by type of coin. The spot price you can look up at either of the above websites, or here: http://www.kitco.com/

The problem with krugerrands is that they don't sell as easily in the US as they do elsewhere. So I save on the purchase end, but might have a slightly harder time liquidating them in the future. The second batch were American Eagles (US government). The American Eagle 1-ounce gold coin is the easiest to liquidate later, which means you pay a higher premium when you purchase.

One last bit of practical advice. I think big gold investments can only be made a handful of times for people like us. Either when we're converting past savings or investment, or when we have a rare windfall. But you can spend $10/week on silver coins and do better than you would putting $10/week into a savings account. I recommend the habit, although I haven't practiced it up here in Pennsylvania, as I don't have a convenient coin store. It was easy in Charlottesville. (In fact, forget about $10/week. Just buy a one-ounce silver dollar each week; that way you can watch the dollar-price rise as the value of the dollar falls.)

Mark Thornton has a very nice, short article on the "traditional investment strategy" here:

http://www.lewrockwell.com/thornton/thornton12.html

The summary is this: you should have enough money for a month's worth of expenses in your checking account, two months worth in a savings account, and three months worth in a CD. In other words, you should have 6 months of emergency liquidity before you worry about investments. Only at that point does it become relevant how much of your portfolio is in real estate, stocks, bonds, or a gold hedge. I wish I'd had that advice long ago. I was one of the idiots who put his windfalls into the stock market.

Another question. Why does gold have the value it does?

So what does it mean for something to have value? I try to address that in the Gilligan article and more specifically here:

http://www.bkmarcus.com/blog/2005/06/value.html

Gold has exchange value because people want it, and people want it for all the reasons it made such a good money:

1. its stable supply makes it a convenient store of wealth (i.e., hedge, in an inflationary context);
2. it's fungible, which means, for example, that a half an ounce of gold has approximately half the exchange value of an ounce of gold;
3. it's scarce enough that a little bit of weight represents a lot of wealth, compared to other metals (see comment on silver and platinum above);
4. it's marketable and easily liquidated, meaning that people will acquire it from you readily.

But let me reiterate: it's not an investment in the traditional sense. You don't invest in gold because you expect it to become more valuable. You invest in gold because you expect it to hold its value.

What it means for the value of an ounce of gold to remain stable is not that its dollar price remains stable, but that you can buy more or less the same amount of stuff with it. The price of a nice suit in Renaissance England was about an ounce of gold. The price of a nice suit in the year 1900, was about $20 -- when the legal definition of a dollar was 1/20 ounce of gold. Today, an ounce of gold is over $450. Have you checked the price of a nice suite lately?

The context for all this is the constantly falling value of the dollar. What cost $1 a hundred years ago would cost over $20 now. That is not a natural or inevitable process. What cost $1 in 1805 would cost 60¢ in 1905! What's the difference? In the 19th century, the money was gold. The money supply was stable compared to the growing number of goods and services against which money could be exchanged. In the 20th century, governments got rid of the gold standard and created central banks to inflate the supply of paper money. This benefits politicians and bankers but is devastating to the rest of us.

(You can google "inflation calculator" to find the tools for these calculations.)

I beg you to read this very small, very readable book:



It's $5, or you can read an electronic copy here:

http://www.mises.org/money.asp

I'd be happy to discuss this on the phone if you'd like.

laissez faire,
bk
http://bkmarcus.com/blog/

---

Update:

As of today (Thursday, September 22nd) the Mises Store no longer carries the old $5 version of What Has Government Done to Our Money. The new version is a combination of that book and "The Case for the 100 Percent Gold Dollar":

PBF

Because I suspect that the overlap in readership between my blog and ChoicyWhiteBoy.com is minimal, I think I'll share his latest discovery here:


















(Click any image to enlarge.)

bloody mary shrimp

I was bragging to Anthony Gregory about the delicious excellence of last night's fish soup, crediting the flavorful catfish.

Mr. Gregory said he loves Catfish Po'Boy. I looked over the recipe and decided that my beloved missus would never eat it.

I've cooked for myself for a quarter century now, but until a couple of years ago, it was all bachelor food: cooking to feed my bachelor self and occasionally my bachelor friends. Women have never been impressed by any of it -- except for my omelets. First of all, bachelor food tends to all be the same color: sort of brownish red. This is because single men tend to focus on flavor and not presentation or variety ... or nutrition. Secondly, if God didn't want us to (deep) fry our food, then why did He make it taste so damn good that way? Women do not accept this logic.

These thoughts reminded me of my first transitional step between bachelor cook and the kind of househusband cook who now knows to serve everything on a bed of baby spinach:

Bloody Mary Shrimp (& Shells)
I suppose you could use a bloody mary mix, but why would you want to?

Here's a decent recipe at About.com. I use V8 instead of tomato juice: 8 ounces. Tablespoon of Tabasco, tablespoon of Worcestershire, tablespoon of lemon juice, jigger of vodka. Easy as anything. Make 2 bloody marys, one for the recipe and one for the cook.

Stir fry some fresh shrimp in a wok, add the bloody mary, stir until it thickens, serve over pasta shells. Awfully darn good for so little work.

nudge your co-workers

Forwarded from my mom:

---

Update #1, for those who can't read the fuzzy image:

Worker dead at desk for five days.

From the New York Times: Bosses of a publishing firm are trying to work out why no one noticed that one of their employees had been sitting dead at his desk for five days before anyone asked if he was feeling okay. George Turklebaum, 51, who had been employed as a proof-reader at a New York firm for 30 years, had a heart attack in the open-plan office he shared with 23 other workers.

He quietly passed away on Monday, but nobody noticed until Saturday morning when an office cleaner asked why he was working during the weekend.

His boss, Elliot Wachiaski, said: "George was always the first guy in each morning and the last to leave at night, so no one found it unusual that he was in the same position all that time and didn't say anything. He was always absorbed in his work and kept much to himself."

A post mortem examination revealed that he had been dead for five days after suffering a coronary. George was proofreading manuscripts of medical textbooks when he died.

You may want to give your co-workers a nudge occasionally. The moral of the story: Don't work too hard. Nobody notices anyway.

Update #2: It is, of course, an old hoax:

snopes.com/horrors/gruesome/fivedays.htm

Update #3 for the Illuminated: notice the use of the number 23 ...

slow cooking

We bought a cut of beef recently that I didn't like the first bite of and stopped eating after the second bite. It tasted stringy, like stew beef. So instead of feeding it to the cats or the trash can, I threw it in the dutch oven with some pork and a can of Coke and slow-cooked it for the next day or two.

I'm sure I don't need to start with Coke, but it's either tradition or habit at this point.

I added a chopped red onion and a can of tomato paste, plus a bunch of balsamic vinegar and hot pepper -- black and red. Got an unbelievably good (and quite spicy) barbecue out of what had been a very disappointing meal.

At this point, I like serving barbecue with egg noodles. I love egg noodles and have loved them since I was a kid, but because I only ever had them with cafeteria food, I seem to have decided that they were white-trash food and I don't think I'd had them for about 20 years. Glad to have rediscovered them. I've embraced my inner white-trashiness. (A certain Misesian expressed a certain amount of shock when he learned that I enjoy handguns and drive a big pickup truck.)

While I'm thinking about cooking, let me again recommend everything from A Taste of Thai. Tonight's dinner will be a slow-cooked (for a day and a half, so far) soupe thaï de poissons. I forgot to use celery -- maybe for the next batch. This time I'm experimenting (successfully, it seems) with 2 bunches of green onions. I find that ginger and green onions go well together. I also used an unbelievable amount of fresh ginger. Love me some fresh ginger -- in almost anything. Oh, and I forgot to mention the unbelievable amount of garlic I also used.

FEE Today

Today I'm just going to post the entire "In brief" mailing from the Foundation for Economic Education:

Guns Seized in New Orleans
9/9/05
"Local police officers began confiscating weapons from civilians in preparation for a forced evacuation of the last holdouts still living here, as President Bush steeled the nation for the grisly scenes of recovering the dead that will unfold in coming days." (New York Times, Friday)

Individuals rights are the first thing to go.

FEE Timely Classic
"Rights Without Exceptions" by Jeff Snyder

FEMA Riddled with Patronage
9/9/05
"Five of eight top Federal Emergency Management Agency officials came to their posts with virtually no experience in handling disasters and now lead an agency whose ranks of seasoned crisis managers have thinned dramatically since the Sept. 11, 2001, attacks." (Washington Post, Friday)

To the victor go the spoils.

FEE Timely Classic
"An Aristocracy of Pull?" by Thomas M. Wilson

President Signs Hurricane-Aid Bill
9/9/05
"President Bush vowed to stand by evacuees displaced by Hurricane Katrina "for the long haul" and warned lawmakers, who have already poured more than $62 billion into the devastated Gulf Coast, that they'll need to spend even more." (Yahoo News, Friday)

Constitution? What Constitution?

FEE Timely Classic
"Saying No to Federal Disaster Relief" by William B. Irvine

wiki-what-now?

After watching a 2nd-season episode of Millenium tonight with the missus, I headed over to Wikipedia to look up The Book of Revelation. I was surprised to find this on the front page, listed as ...

Today's featured article

Anarcho-capitalism is a philosophy based on the idea of individual sovereignty (or "self-ownership"), an unlimited right to private property, and a prohibition against initiatory coercion and fraud, with contracts between sovereign individuals being the basis of law. From this is derived a rejection of the state (an entity claiming a territorial monopoly on the use of force) and the embrace of absolute laissez-faire capitalism. Anarcho-capitalists would protect individual liberty and property by replacing a government monopoly that is involuntarily funded through taxation, with private and competing businesses. The philosophy embraces stateless capitalism as one of its foundational principles. The first well-known version of anarcho-capitalism to identify itself with this term was developed by Austrian School economists and libertarians Murray Rothbard and Walter Block in the mid-20th century as an attempted synthesis of Austrian School economics, classical liberalism, and 19th-century American individualist anarchism. While Rothbard bases his philosophy on natural law, others, such as David Friedman take a pragmatic consequentialist approach by arguing that anarcho-capitalism should be implemented on the basis that such a system would have superior consequences than other alternatives.

NYU quotes

Here are some more quotations that Bettina Bien Greaves recorded in Mises's NYU seminar:

Mises's extemporaneous remarks were often vivid, colorful and succinct. Here are a few gems selected from my years of seminar notes:

• You say the secret is in selling something above cost. But the situation is really very different. The problem is to produce something for which consumers are willing to pay above cost.
• Education can only hand down what was present in the old generation. The innovator cannot be educated. There is no school for the inventor.
• Prices are like the snows of last winter. They come, but at the moment we catch them, they are already something of the past.
• Concerning statistical averages which conceal the truly significant factors: If a man has one leg on an iceberg and the other in a fire, the average is then all right.
• Ideas are called "imported and alien" when one doesn't like them. It is exactly the opposite with wine.
• Beginning with Omar Khayyam, wine has been advertised by the poets. Were the poets in the pay of the "Whiskey Trust"? Why not say that the desire for cleanliness is the result of the "Soap Trust" and its advertising?
• Concerning the idea of nationality: St. Francis of Assisi and Casanova were both Italians. But what did they have in common? Only the fact that they both used the same language, though for very different purposes!
• Why should the members of Congress be so nasty as to fix a minimum wage lower than their own?

Taken from "Mises's New York University Seminar (1948-1969)," by Bettina Bien Greaves, The Libertarian Review, September 1981.

measuring love

"What do people mean," Mises asked, "when they speak of measuring 'economic growth'? People would think it foolish to try to 'measure' love. But when they try to measure economic conditions they are in effect trying to measure 'love,' the 'love' or preferences people have for certain conditions and certain changes. The idea of economic measurement denies the distinction between human action and what takes place in the physical world outside of man."

-- Bettina Bien Greaves, "Mises's New York University Seminar (1948-1969)" The Libertarian Review, September 1981.

Rest In Peace, Little Buddy!

how to make classical music sexy

Sometimes I'll get hit with an intense desire to hear a particular piece of music. Even with a 30-something gigabyte MP3 library, and even having ripped all of my CDs at one point or another, it turns out I don't always have easy access to the music I already own.

My introduction to Richard Wagner (pronounced Ree'khard Vog'ner) was in the movie Excalibur (1981). I asked my dad what that unbelievable music was. A mix of Wagner, he said.

So tonight I'm editing and I come across the name Wagner -- referring to Adolf Wagner the Austrian economist, not Richard Wagner the composer -- and suddenly I need to hear Siegfried's Funeral March from Götterdämmerung and the prelude to Tristan und Isolde -- they must have been combined or played very close together in the soundtrack to Excalibur because I have a hard time separating them.

I can't find what I need in my iTunes library, and I can't find what I need at the iTunes store, but I do come across this ingenius bit of marketing:

Kirzner

I can imagine it might seem strange to talk about Rabbi Kirzner and an
artillery video game in the same blog. A casual reader might just see it as the kind of eclecticism that's bound to happen on a personal blog (rather than on a topic-specific or an organizational blog).

It's true that there's no real connection between the occasional recipes, comic-strip out-takes, personal ponderings, and the general themes of this blog, but in the case of Israel Kirzner and Pocket Tanks, there's actually a strong connection.

As far as I know, Professor Kirzner doesn't emphasize the ordinality-versus-cardinality dispute between Austrians and the mainstream, but he's famous for his emphasis on imperfect knowledge and entrepreneurship in opposition to the perfect competition nonsense of mainstream textbooks and anti-trust regulators.

Here's a sample of his January, 2000 article in The Freeman, The Law of Supply and Demand:

Israel Kirzner is a professor of economics at New York University and author of The Meaning of Market Process. This is the first in a series of articles laying out some foundational elements of modern Austrian economics.

The theory of supply and demand is recognized almost universally as the first step toward understanding how market prices are determined and the way in which these prices help shape production and consumption decisions-the decisions that make up not only the skeleton, but also the flesh and blood of the economic system. Austrian economics thoroughly agrees with this. However, when we dig just a little below the surface of the "law" of supply and demand, we encounter difficulties that have, directly or indirectly, led Austrians to explain the determination of prices differently from how it is often, at least implicitly, presented. I will try to explain the sense in which Austrians are unhappy with the textbook presentations of supply and demand -- and are yet fully in agreement with the general emphasis on supply and demand as being the key to economic understanding.

The Basic Proposition

The basic insight underlying the law of supply and demand is that at any given moment a price that is "too high" will leave disappointed would-be sellers with unsold goods, while a price that is "too low" will leave disappointed would-be buyers without the goods they wish to buy. There exists a "right" price, at which all those who wish to buy can find sellers willing to sell and all those who wish to sell can find buyers willing to buy. This "right" price is therefore often called the "market-clearing price."

Supply-and-demand theory revolves around the proposition that a free, competitive market does in fact successfully generate a powerful tendency toward the market-clearing price. This proposition is often seen as the most important implication of (and premise for) Adam Smith's famed invisible hand. Without any conscious managing control, a market spontaneously generates a tendency toward the dovetailing of independently made decisions of buyers and sellers to ensure that each of their decisions fits with the decisions made by the other market participants.

[...]

The Role of Knowledge

The mainstream textbook approach to this proposition is, in one way or another, explicitly or implicitly, based on the assumption of perfect knowledge. The Austrian approach does not make the perfect-knowledge assumption the foundation for this proposition; quite the contrary, Austrians base the proposition squarely on the insight that its validity proceeds from market processes set in motion by the inevitable imperfections in knowledge, which characterize human interaction in society.

[...]

[read more]

See also:

2. "Entrepreneurial Discovery and the Law of Supply and Demand" - February 2000
3. "The Irresistible Force of Market Competition" - March 2000
4. "Toward an Austrian Critique of Governmental Economic Policy" - April 2000

labor & schooling

Quakers claim to disregard holidays. All days are equally holy according to the Religious Society of Friends.

(By the way, if you like economics and are Quakerly inclined, check out The Quaker Economist. The man who started the newsletter was a Keynesian-turned-Hayekian (and someone who (it turns out) worked under my Keynesian granddad at the IMF), and the original name of the newsletter was "The Classical Liberal Quaker" if I recall. Good start. I don't know the guy who's running the show now.)

Anyway, having been raised and schooled by Quakers, I never got a Labor Day off. Not one. And now that my wife is working at a college founded by Quakers, she knows the glories of working Labor Day. And even if either of us were used to having Labor Day off, we'd still associate it with returning to school.

So instead of writing about the L-word (this time I mean 'labor' and not 'liberal' or 'libertarian'), or about the Labor Theory of Value or the interests of labor versus the interests of Big Labor (kind of like the distinction between the interests of business and the interests of Big Business!), I've decided instead to write about schooling. And about deschooling. Or rather, I've decided to repost another BlackCrayon book review (1st, 2nd , 3rd), this time on the growing movement, Left and Right, against schooling:

It is not in any institution's interest to promote independence from that institution.

What do we want our children to learn? What are schools teaching them instead?

Editor Matt Hern has gathered a diverse collection of short, very readable essays on educational alternatives to schooling.

Authors include anarchist-, deschooling-, and unschooling icons, Leo Tolstoy, Ivan Illich and John Holt, as well as the more recent analysis of Grace Llewellyn, author of The Teenage Liberation Handbook, and of retired, award-winning public school teacher, John Taylor Gatto, author of Dumbing us Down and many other essays against compulsory schooling.

By far, the most recently-informed and most damning chapter on compulsory schooling, is Gatto's essay, "The Public School Nightmare: Why fix a system designed to destroy individual thought?".

bkMarcus

Seriously, if you don't know John Taylor Gatto, you really should.

And if you don't know this essay, you really should:

The Public School Nightmare:

Why fix a system designed to destroy individual thought?

by John Taylor Gatto

I want you to consider the frightening possibility that we are spending far too much money on schooling, not too little. I want you to consider that we have too many people employed in interfering with the way children grow up -- and that all this money and all these people, all the time we take out of children's lives and away from their homes and families and neighbourhoods and private explorations -- gets in the way of education.

That seems radical, I know. Surely in modern technological society it is the quantity of schooling and the amount of money you spend on it that buys value. And yet last year in St. Louis, I heard a vice-president of IBM tell an audience of people assembled to redesign the process of teacher certification that in his opinion this country became computer-literate by self-teaching, not through any action of schools. He said 45 million people were comfortable with computers who had learned through dozens of non-systematic strategies, none of them very formal; if schools had pre-empted the right to teach computer use we would be in a horrible mess right now instead of leading the world in this literacy. Now think about Sweden, a beautiful, healthy, prosperous and up-to-date country with a spectacular reputation for quality in everything it produces. It makes sense to think their schools must have something to do with that.

Then what do you make of the fact that you can't go to school in Sweden until you are 7 years old? The reason the unsentimental Swedes have wiped out what would be first and seconds grades here is that they don't want to pay the large social bill that quickly comes due when boys and girls are ripped away from their best teachers at home too early.

It just isn't worth the price, say the Swedes, to provide jobs for teachers and therapists if the result is sick, incomplete kids who can't be put back together again very easily. The entire Swedish school sequence isn't 12 years, either -- it's nine. Less schooling, not more. The direct savings of such a step in the US would be $75-100 billion, a lot of unforeclosed home mortgages, a lot of time freed up with which to seek an education.

Who was it that decided to force your attention onto Japan instead of Sweden? Japan with its long school year and state compulsion, instead of Sweden with its short school year, short school sequence, and free choice where your kid is schooled? Who decided you should know about Japan and not Hong Kong, an Asian neighbour with a short school year that outperforms Japan across the board in math and science? Whose interests are served by hiding that from you?

One of the principal reasons we got into the mess we're in is that we allowed schooling to become a very profitable monopoly, guaranteed its customers by the police power of the state. Systematic schooling attracts increased investment only when it does poorly, and since there are no penalties at all for such performance, the temptation not to do well is overwhelming. That's because school staffs, both line and management, are involved in a guild system; in that ancient form of association no single member is allowed to outperform any other member, is allowed to advertise or is allowed to introduce new technology or improvise without the advance consent of the guild. Violation of these precepts is severely sanctioned -- as Marva Collins, Jaime Escalante and a large number of once-brilliant teachers found out.

The guild reality cannot be broken without returning primary decision-making to parents, letting them buy what they want to buy in schooling, and encouraging the entrepreneurial reality that existed until 1852. That is why I urge any business to think twice before entering a cooperative relationship with the schools we currently have. Cooperating with these places will only make them worse.

The structure of American schooling, 20th century style, began in 1806 when Napoleon's amateur soldiers beat the professional soldiers of Prussia at the battle of Jena. When your business is selling soldiers, losing a battle like that is serious. Almost immediately afterwards a German philosopher named Fichte delivered his famous "Address to the German Nation" which became one of the most influential documents in modern history. In effect he told the Prussian people that the party was over, that the nation would have to shape up through a new Utopian institution of forced schooling in which everyone would learn to take orders.

So the world got compulsion schooling at the end of a state bayonet for the first time in human history; modern forced schooling started in Prussia in 1819 with a clear vision of what centralized schools could deliver:

1. Obedient soldiers to the army;
2. Obedient workers to the mines;
3. Well subordinated civil servants to government;
4. Well subordinated clerks to industry
5. Citizens who thought alike about major issues.

Schools should create an artificial national consensus on matters that had been worked out in advance by leading German families and the head of institutions. Schools should create unity among all the German states, eventually unifying them into Greater Prussia.

Prussian industry boomed from the beginning. She was successful in warfare and her reputation in international affairs was very high. Twenty-six years after this form of schooling began, the King of Prussia was invited to North America to determine the boundary between the United States and Canada. Thirty-three years after that fateful invention of the central school institution, as the behest of Horace Mann and many other leading citizens, we borrowed the style of Prussian schooling as our own.

You need to know this because over the first 50 years of our school institution Prussian purpose -- which was to create a form of state socialism -- gradually forced out traditional American purpose, which in most minds was to prepare the individual to be self-reliant.

In Prussia the purpose of the Volksshule, which educated 92 percent of the children, was not intellectual development at all, but socialization in obedience and subordination. Thinking was left to the Real Schulen, in which 8 percent of the kids participated. But for the great mass, intellectual development was regarded with managerial horror, as something that caused armies to lose battles.

Prussia concocted a method based on complex fragmentations to ensure that its school products would fit the grand social design. Some of this method involved dividing whole ideas into school subjects, each further divisible, some of it involved short periods punctuated by a horn so that self-motivation in study would be muted by ceaseless interruptions.

There were many more techniques of training, but all were built around the premise that isolation from first-hand information, and fragmentation of the abstract information presented by teachers, would result in obedient and subordinate graduates, properly respectful of arbitrary orders. "Lesser" men would be unable to interfere with policy makers because, while they could still complain, they could not manage sustained or comprehensive thought. Well-schooled children cannot think critically, cannot argue effectively.

One of the most interesting by-products of Prussian schooling turned out to be the two most devastating wars of modern history. Erich Maria Ramarque, in his classic "All Quiet on the Wester Front" tells us that the First World War was caused by the tricks of schoolmasters, and the famous Protestant theologian Dietrich Bonhoeffer said that the Second World War was the inevitable product of good schooling.

It's important to underline that Bonhoeffer meant that literally, not metaphorically -- schooling after the Prussian fashion removes the ability of the mind to think for itself. It teaches people to wait for a teacher to tell them what to do and if what they have done is good or bad. Prussian teaching paralyses the moral will as well as the intellect. It's true that sometimes well-schooled students sound smart, because they memorize many opinions of great thinkers, but they actually are badly damaged because their own ability to think is left rudimentary and undeveloped.

We got from the United States to Prussia and back because a small number of very passionate ideological leaders visited Prussia in the first half of the 19th century, and fell in love with the order, obedience and efficiency of its system and relentlessly proselytized for a translation of Prussian vision onto these shores. If Prussia's ultimate goal was the unification of Germany, our major goal, so these men thought, was the unification of hordes of immigrant Catholics into a national consensus based on a northern European cultural model. To do that children would have to be removed from their parents and from inappropriate cultural influence.

In this fashion, compulsion schooling, a bad idea that had been around at least since Plato's "Republic", a bad idea that New England had tried to enforce in 1650 without any success, was finally rammed through the Massach