We could fund Social Security with the output gap

Via the Economic Policy Institute

This was going to be part of a larger post, but I think it's so striking that it deserves a post of its own.

Very briefly, the estimated output gap in the U.S. economy in 2013 was $868 billion. According to the Congressional Budget Office, Social Security outlays that year were $808 billion.

In other words, we could pay in full for our single largest federal program, and have billions of dollars left over, with all the wealth we're not generating because we can't get our economy running properly.

That's something to keep in mind the next time you hear someone going on about how extravagant and unsustainable our retirement programs are.

Last month, I wrote a post called "Every year, we waste Spain." I should probably title this one, "Last year, we failed to produce Turkey." (Its nominal GDP in 2013 was $821 billion.)

Egemenlik, kayıtsız 
şartsız Milletindir. 

Oh, Lorde

Am I the only fencer who, however briefly, saw the title of "Foil," Weird Al's parody of Lorde's "Royals," and thought he'd written a song about our sport? Well, probably yes. It's a wonderful parody as usual, but if only Al had skipped down in his Mirriam-Webster from definition 3 to definition 5. Then we'd have had ... well ...

... maybe something like this:

 

On re-reading the Euthyphro

Socrates: No sock-puppet, he

I have long considered the Euthyphro dilemma - posed by Socrates in Plato's dialogue of that name - one of the peak moments in Western thought, one of the best insights anyone has ever had about anything. What with one thing and another, it's been on my mind lately (it's been on Jay-Z's mind, too, apparently) so I thought I should reread the dialogue, for the first time in forever.

It's short - 15 pages in the Hamilton-Cairns edition - and pretty amusing. The famous bit leaps out at you the way such things always do (like "nasty, brutish and short" in Hobbes, the one quoted sentence in a roughly 600-page book).

But so do other elements. In particular, I was struck by poor Euthyphro, who gets increasingly frustrated as Socrates punctures one definition of piety or holiness after another. In a lot of dialogues, including more than a few of Plato's, there's a "sock-puppet" feel, but the Euthyphro reads like a well-made play, with both characters allowed free rein to be themselves and react naturally, like real people.

Toward the end, Socrates asks Euthyphro to explain the fruits of piety: Farmers produce food, generals produce victory in war, so what is produced by propitiating the gods? By this time, Euthyphro knows that anything he says will be shot down; he answers with this cri de couer (my bold):

"Just a little while ago I told you, Socrates, that the task is not a light one, to learn precisely how all these matters stand. I will, however, simply tell you this. If anyone knows how to say and do things pleasing to the gods in prayer and sacrifice, that is holiness, and such behavior saves the family in private life together with the common interests of the state. To do the opposite of things pleasing to the gods is impious, and this it is that upsets all and ruins everything." 

Take that, Richard Dawkins! Seriously, though, doesn't that 2,400-year-old outburst sound eerily contemporary? Sure, you have to change "gods" to God and make a few other adjustments to the rhetoric, but isn't that the emotional heart of it? With God, all things are possible; Without God, all goes to rack and ruin.

I think many people deeply believe that. And considered, not as a metaphysical assertion, but a psychological one, I would be hesitant to say it's entirely false. (As would Jay-Z.)

Curiously, editor Edith Hamilton (the front half of Hamilton-Cairns) is somewhat dismissive of the Euthyphro. In her prefatory note, she writes:

[The dialogue] is chiefly an attempt to define piety, and comes to nothing, but in the course of it Socrates makes a distinction fundamental in reasoning and often disregarded, that the good is not good because the gods approve it, but the gods approve it because it is good. 

The real interest of the dialogue, however, is the picture of Socrates just before his trial. 

I beg to differ. The reason we still look to Socrates to this day is because he freely and happily died in service of the right to pose goofy yet unsettling philosophical questions like the Euthyphro dilemma. So how can the very kind of question he died for not be "the real interest of the dialogue"?* Plato wrote a dialogue, not an Attic personality puff piece. He didn't have to stick the dilemma in there. That he did strongly suggests he thought it was crucial and essential and worth thinking about. You can't just flick it away like soot off a marble bust.

Sheesh.
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*Not to mention that Hamilton completely begs the question of how accurate Plato's fictionalized account is. That "picture of Socrates" may have as much connection to a real person as Dickens' picture of Sydney Carton.

Paperbug

Fight the powers that be.

Over at The Automatic Earth, a blogger named Raul Ilargi Meijer has a piece titled "The Future of Banking Is Pay Cash Only," in which he riffs off a Wall Street Journal column (Note: paywall) by Morgan Stanley CEO James Gorman. 

Mostly, Meijer grumbles about big banks' ever-growing clout and about Gorman's warped vision of our Brave New Banking World. And fair enough, banks are too powerful and Gorman's vision is warped. But at the end, Meijer says this: 

If and or when all our financial transactions are electronic – excuse me, digital - they’re all traceable too. Is that what we want? For many of us, I’m sure, it’s not. Which means that at some point someone will be smart and driven enough to start a “campaign” calling upon people everywhere to pay cash as much as they can. Most stores still accept cash, though perhaps not in all aisles. Dollars and euros and zloty’s and what not are still legal tender. There are plenty businesses, second hand cars etc., that accept only cash.

We find it comfy and easy to pay with plastic. But the more we do that, the more the power and wealth of the Mr. Gorman’s of this world increases. Literally at our cost, don’t forget that. And the power of the NSA and related global “services” increases at the same time, they can trace our whereabouts and purchases. 

In a certain limited way, I suppose the suggestion makes sense. There's a reason most dope dealers don't take Visa. But seriously, do you really think bankers gain an edge when they discover you paid $26.99 for a pair of pants at JC Penny? Of course not. They couldn't care less. Rather, banks' power comes from defining what $26.99 is. How much purchasing power it represents, and how that compares to its value yesterday and tomorrow, how many yen or dinar it buys. That's what gives them their mojo.  

Decades before bonus points, APRs and minimum monthly payments, J.P. Morgan had no difficulty turning a big chunk of the U.S. economy into a wholly owned subsidiary of Wall Street. Looking at the other end of the power spectrum, ordinary Germans in the 1920s and ordinary Zimbabweans in the 1980s had abundant opportunity to strike a blow against The Man by paying cash. From what I can tell, it didn't help.

Money, as the best Onion article ever points out, is just a symbolic, mutually shared illusion. It does not matter whether that illusion is embodied in shiny pieces of stamped metal, pieces of paper with dead presidents on them, or bits and bytes on a hard drive somewhere. What matters is who sets the rules for the illusion, who decides on interest rates, lending standards, bank capitalization, money supply and so on. 

I can sort of understand why someone might think gold is the "really real" money - it's shiny and heavy and looks valuable and all - but c'mon, cash? Meijer is arguing that the use of fiat paper returns power to the people. That's like saying you're president because you own a flag.