Tuesday, October 20, 2015

Libertarianism is not about hatred of welfare state

As a man was passing the elephants, he suddenly stopped, confused by the fact that these huge creatures were being held by only a small rope tied to their front leg. No chains, no cages. It was obvious that the elephants could, at anytime, break away from their bonds but for some reason, they did not.

He saw a trainer nearby and asked why these animals just stood there and made no attempt to get away. “Well,” trainer said, “when they are very young and much smaller we use the same size rope to tie them and, at that age, it’s enough to hold them. As they grow up, they are conditioned to believe they cannot break away. They believe the rope can still hold them, so they never try to break free.”

Libertarian are easily trapped into negative feeling against welfare state. This is a mistake : you don't need a state permission for having a libertarian life.

Being libertarian means you understand that giving your freedom away is always a choice even for the slave. As such, you redeem it back, learn to protect it against those who wants to reclaim it, then educate your peers about your experiences.

Most will defend their imaginary rope as dearly as their life, being libertarian means you should respect the decision. Being libertarian also mean accepting people to be free from giving their own freedom away.

Be open, when they will change their mind, show them there is no rope at their feet.

Monday, June 15, 2015

Murray Rothbard

I started reading Murray Rothbard with a certain defiance. I knew some of his conclusions falls largely outside the range of "acceptable opinions by respectable people".

I started with Anatomy of The State, which seemed to me more like a bragging against the state than a really thoughtful masterpiece. But I gave it another try with For a New liberty then Man, Economy and the State, where he exposes his arguments more deeply.

Murray is the most coherent and logical author I ever read. As a book of math, you need to get full concentration on every of his premises then follow the reasoning to reach his conclusions that might sound very radical. (but which are never violent)
Then an unbelievable thing happens : You will very likely agree with all his premises, but will also disagree with his conclusions, but by trying to retrace the path of reasoning he took, you won't find any flaw, no incoherence in his mind and in his book.

Then you'll think about it as night, trying to come up with some counter argument. You won't find. Then you will try to challenge people on his ideas on internet forums about economy / politics / philosophy, and you will find no logical argument that bring down the edifice.

You will then give up and accept his conclusions.

Often, by discussing with people, you will see the incoherences in their thoughts about economic and politic. Then you'll start to bring Rothbardian arguments to the discussion (without even mentioning him), following the same steps you read before. The person will magically change his mind, as you did before.

His premises are few and easy to relate to, but if you accept them, then you will discover a lot of the intellectual incoherences in your own world view. The only way to resolve the incoherences it to find the flaws in Rothbard's reasoning or to change your mind... a brain does not support incoherence.

Wednesday, April 1, 2015

Rationality, Game Theory and Statism

There is too much misconception about rationality.

People argues whether human are rational or not, and those who does not think so tends to point out impulsive human action that contribute to goes against their own interest.
One of those arguments is summarized by the irrationality principle of capital flow analysis.
They list several sources of irrationality:

  • Imperfect Knowledge
  • Conflicting Interests
  • Manipulative Aims
  • False Information
  • Custom and Long-Held Belief
But rationality among players in game theory is an axiom.
It follows that game theory can't be used for people holding the irrational principle as granted.

However, all those "source of irrationality" can be explained by using the game theory axiom of rationality, which permit us to use a powerful mathematical framework to model capital flow analysis, without dismissing such model.

First let's take an example of the prisoner dilemna game.
In a nutshell, two players are in prison for collaborating on a murder and have the following choice : 

Now, let's say that you are Prisoner A.
Let's say you know B betrays you, you have two choices : betray or cooperate. In the first case you serve 2 years, and the second case 3 years. So your best choice is to betray.

Let's say you know B did not betray you, you have two choice : betray or cooperate. In the first case you are free, and the second case 1 year. So your best choice is to betray.

So two rational prisoner A and B will choose to betray in all cases, this is called the nash equilibrium of the game.

What if, in real life, you observe prisoner A and B to not betray, should you conclude they are irrational ?
Since you can't conclude that, given the rationality axiom of game theory, such behavior seems to render game theory useless at explaining human behavior.
But maybe the problem is not the irrationality of A, but your assumptions. If A and B are part of the mafia, betraying means that they will loose a hand. Knowing that, you would say that they acted rationally. But in this case, they are not playing a prisoner's dilemna as specified by the game theory. In mathematical terminology, you guessed wrong their payoff function.
Some people argues that in game theory's real prisoner's dilemna, each player would betray even if the best social response would be to collaborate. (in other words, if each player collaborate, there is no other outcome which would not hurt at least one of them)
Thus the statist argument that something like the mafia or government should enforce them to cooperate. This is missing the fact that it just change the payoff function (change the game), but do not solve the prisoner's dilemna. With external force, the best selfish response would be to collaborate.

So back to our question : Does a rational person would play the best social response in prisoner's dilemna (both collaborate), without the use of external force ? (which would change the game)
The response is yes.
Imagine that A and B are part of a gang which does not promote violence, and no additional consequence are taken for betrayal. Members ends up very often in prison, repeatedly, as part of their business.
Now here is this rule in the gang that everybody knows: "If you have betrayed someone, other members will betray you forever. Otherwise, they will collaborate".
In game theory terminology, they are playing a repeated game infinitely.
As an observer, you are seeing that one of this gang member is collaborating and thus think he is irrational. But again, you are wrong.
From the point of view of the gang member, he is playing a repeated game. If he expects to go 10 times in prison, then betraying for his first time, it will assure him a total 18 years in prison.
If he collaborates, he will go only 10 years in prison in his lifetime.

You can reject the irrationality principle of capital flow analysis, and replace it with the rationality principle of game theory and thus inherit its tools.
Then consider the old "sources of irrationality" enumerated earlier as variables which just change the rule of the game players are participating by changing their payoff functions. In doing that, you can leverage the game theory framework.

When you observe someone acting irrationally, do not dismiss game theory for explaining the behavior, you just guessed wrong the game he is playing.
As Francisco in Atlas Shrugged would say : 

Whenever you think that you are facing a contradiction, check your premises. You will find that one of them is wrong.

Friday, February 13, 2015

Human Nature, Religion and Economics

Christianity/Judeo religions have spread a dangerous morality, that, believer or not, most of westerners grew with.

The deep belief that human nature is not perfect, living in sins. And that for protecting against such imperfection, something bigger than a mere human has to restrain its nature.
Such sins are identified by the moral code of the religion.
The implementation details of this morality takes different forms. God, kings, governments, society or experts, pick your choice.

But if you take time to understand why an individual is doing an harmful action, you start seeing a repeatable pattern : he acted because of economic incentives to do it.

Very few people are born mentally ill, most of them are acting rationally according to their own incentives.
Economic incentives of humans do not limit to money and material abundance (external incentives), but also and mainly to their moral code (internal incentives). When one acts against his own moral code, a penalty is paid. The price of such penalty is known as guilt. Guilt is the name of the incoherence between one's moral code and actions.
The process of the redemption of guilt, called purification in religion, takes different forms depending the moral code. It goes from sacrifice, through slavery or plain monetary payment (donation and charity), to prayer.

The problem with westerners is that the Christian morality is still present unconsciously in the minds of people, but since people are not recognizing as such, they can't ask redemption of their guilt. Which ultimately manifest itself in form of neurosis, depression, aggressiveness, self-hatred, lack of confidence and other mental illness.

I have traveled to muslim countries and noticed that practicer had a better peace of mind with the world and themselves. Practicing religion is liberating.

However, in sect and religions, priests can only live on the guilt of its practicer, selling their redemption services at the high price. (be it charity, prestige, or real payment)
There is an underlying economic incentive for religion to make believers guilty for the sake of the priests.
Priests being the one helping to interpret the message of god, it is in their power and interest to spark the sentiment of guilt to their believers.

The Buddhist approach is different. Buddhism never consider anything as bad and good.
Because the moral code of Buddhism is the individual is responsible to find its own.
Buddhist do not blame humans, they see guilt as an incoherence between one's action with his moral code. Redemption is fixed by analyzing what provoked such disruption, making the individual either refine his moral code either correct the incentive that provoked the guilt.
 By this process of self improvement, we discover that it is in our own interest to work in the interest of the community. With individualism and self improvement, compassion is reached, through the realization that the most economical way of functioning in human society is by creating value for others.
Guilt is a tool of self improvement.

In Christian/Judeo religion you heal your guilt by practicing.
In Buddhism you heal guilt by either fixing the internal incentives (moral code), or fixing the external incentives.
Buddhists shift the responsibility of healthiness on the shoulder of the individual.
Even if guilt is provoked by external incentives, it is the individual's mission to understand the cause of the external incentives and either refine his moral code, or change the root cause. In this way future guilt is prevented, and current one is healed.

The concept of Good and Bad have only a meaning in a christian/judeo mindset that separate hell from heaven, according if you act according to the moral code of the religion.

As a Buddhist, someone violating your moral code only means that he has a different moral code or different external incentives. In summary, Buddhists starts from the postulate that human nature is not bad but act rationally against inside incentives  and outside ones.
Guilt should be a temporary state fixed by conscious effort of self improvement.

Economics do not limit to the study of external incentives, but of internal ones.
Micro economics is the study of individual behaviors, so the moral code can't be ignored. No individual is irrational, any irrationality is just a mistake on the evaluation of the individual's morality.
Macro economics is more predictable since internal incentives can be considered constant on a large group of people.
Macro economics can make appear human nature as immoral, because it really is. When you average all those diverse morality, you end up seeing that humans, as an aggregate, only act accordingly to external economic stimulus. However this is not the case of individuals.

A popular myth is thinking that it is possible to fix the immoral aspect of human nature in macro economics by right external stimulus medicated by government, and let micro economics left to the free market.

However, we have seen that external stimulus affect decisions at the individual level.

Let's take a typical example of when the Swiss National Bank (SNB) removed the peg between euro and swiss franc (chf), this can be considered a "macro economic move".
The consequence is that the president of an export company has seen overnight his company from being profitable, to being in deficit. Overnight, employees will be fired, contracts will be ruptured, promises will be broken.
It is easy to put the blame on the free market for the consequences and blames capitalist greeds.
This is putting the blame on the moral code of people (internal incentives) instead of the external incentives.

The goal of such blame is mostly to justify the moral duty of government of taking control of the micro economics realms. Which is no different of abolishing private property, freedom of collaboration between people, and spreading a unique moral code.

Macro and micro economics can't be decoupled. Since one affect the other, giving the power over macro economics will inevitably slip into the abolition of private property. There is no compromise, only evolution to such state. The only way out is a real crisis where people can't get anymore what they have supposed as given, and start valuating private property again. (either by revolution or via the black market)
There is no alternatives.

Thursday, December 4, 2014

The Attacker Mindset

Being a software developer, and specially focused in Bitcoin, made me take a specific mindset when I tackle any problem and need to evaluate any solution.

I evaluate a solution always from an attacker mindset.
An attacker is defined by "any person wanting to hijack a system for his own profit and by making a victim".
A hacker is not always an attacker, a hacker can hijack a system without any victim.

One thing is certain : an aggregate of person tends to act rationally, in other words a group as a whole, wants to profit from any system.
One particular person, for ethical purpose, or for lack of skill, might no want to hijack a system.
But as time pass, the skill required to exploit any system goes down, and a group, having so diverse code of values, will tend to hijack the system for profit.

The goal of game theory is not to prevent a system from being hijacked. The goal is to make hijacking at worst self destructive, and at best, improving the system.

This particular mindset sticks with me outside of software development.
It is my guiding rod for expressing opinions any law.
I always ask myself : how someone can benefit from such law and make a victim ?

Any flaw will tend to be exploited and morally accepted with time.

When discovered by legislators, such flaws is "fixed" with some duck tape a.k.a a new law, that will necessarily also have flaws, and so on...
The only way to fix a law, or feature of a software, is not to fix the hole, but to modify this law, eventually removing it, so there is no benefit to exploit a flaw.

The more you evaluate any law from an attacker perspective, the more you tend to be libertarian.
By reading "For a new liberty" of Murray Rothbard, I've seen the only system which can't be exploited by an attacker without acting for his self destruction.

Sunday, November 23, 2014

The Killer App : Why it can't apply to Bitcoin

Too much ink is wasted trying to convince average Joe from using Bitcoin. I stopped trying to convince my friends.

"Average Joe likes Mobile Killer App, so that's how we should appeal him to use Bitcoin"

A clever propaganda to make developers waste their time for free on consumer products that would never take off but sold through the middle man.

The problem is that to appreciate Bitcoin, you need new eyes, you have to erase deep and false beliefs you held from school's days, you need to understand how the money system works, you need to understand the technology to see what kind of new opportunities it opens.
Having new eyes takes education, time and sincere curiosity, which, by definition average Joe has not. Average Joe prefers playing angry bird, taking selfies on facebook, and having a safe 40h/week job.

Normal is getting dressed in clothes that you buy for work and driving through traffic in a car that you are still paying for - in order to get to the job you need to pay for the clothes and the car and the house you leave vacant all day so you can afford to live in it. Ellen Goodman

I suspect that it will always stay like that for a long time, I don't believe in global enlightenment.
So, if we can't convince average Joe for using Bitcoin, how can it succeed ?

The first thing is that when someone deeply cares about why Bitcoin is catching up, he starts a journey to educate himself. Satoshi, through Bitcoin, educated way more people about money than any university could do. However, I think that such natural curiosity does not exist for the Average Joe.

The second point is that there is a deep entrenched rule in human behavior, and also in Average Joe : Everyone wants to maximize their profit if it is not at the cost of others.
Money is like water, it flows where there is the least resistance. That is, where the gain are the highest. Competition lower the resistance by lowering prices.

Entrepreneurs that first saw the least resistance path, are building a road that more and more people will notice and take for purely economic gain.
As time pass, more people notice, the path becomes more and more entrenched, until even Average Joe see it.
Thanks to the Network Effect, every individual going into the Bitcoin path, increase the value of Bitcoin for everybody.

No amount of propaganda can stop this movement. When someone see profit to be done, he does not become easily fooled.

The only thing that banks and gov can do to slow down Bitcoin, is making the life of entrepreneur harder, by licensing activities, and making it hard to open a bank account. (which they are doing right now)

Bitcoin is a programmable money that attract unlimited opportunities for entrepreneur, and thus competition that will lower the cost in lots of traditional industries.
The first that will get the profit is the entrepreneur, as the price of services goes down, this will bubble up to Average Joe that will not ignore anymore.

Bitcoin is a revolution, not an evolution. It is a change of paradigm that requires education, and profit is the carrot for education. This carrot will eventually come to Joe. No need wasting time convincing him. Better spending time creating services that make it economically profitable to use Bitcoin.

Monday, October 20, 2014

The Price of Knowlegde in an Untrusted World

Before Edward Snowden revelations, most companies did not care to trust a high profile company with its own data. Trust was based on company's brand popularity. The price of Knowledge was low, since customers had virtually no concern about the information they gave to their service providers.

But Snowden teached us a very important lesson. That popularity of an online service was the main reason why a service should NOT be trusted, because most likely NSA was using every kind of hack possible to spy everyone at the price customer's privacy and security.

This event, even if rarely spoke by the general public, shifted the mind of businesses depending on cloud services and privacy for their operations. This event had a direct impact on the economic activity of cloud provider such as Microsoft, Apple, Google, Facebook, the breach of trust is not free for these companies.

Cloud providers tried to regain trust by encrypting data by default (https), even with the FBI whining about it. This might appease a little bit general consumers, but not the security expert, nor companies depending on them, encrypting the transfer means that data is always stored clearly into datacenters.

Snowden shifted the world from a trust model to a trustless model.
In other words, the price of knowledge for a service is no longer a function of the popularity of its brand. This mean that whatever the service, the more it needs to know, the highest the perceived price of the service will be.

The shift had a tremendous positive impact on what we call "Zero Knowledge" services, which are cloud services which does not need to know your data to provide their services.

The ironical thing is that "Zero Knowledge" is not only needed to protect customers from their service provider.
It is needed to protect service providers against hacker and their own government as well.

Remember when megaupload has been seized and destoyed ? The reason was that megaupload stored the data of its customer in clear, thus "knowing" the illicit data, which permitted a warrant against them.

Kim Dotcom counter attacked with Mega one year later, for the anniversary of megaupload's destruction. Mega can't be seized, because he does not know the data of the user, it is a "Zero Knowledge" service.
This was not done to protect customer, but to protect Kim Dotcom to have his company robbed again by his own government. Such company is more afraid by their own government than hackers, it bears the scares of a previous defeat.

The breach of trust impacted dropbox in favor of its zero knowledge counterpart SpiderOak.
It impacted our wire transfers, which break trading privacy, in favor of its zero knowledge counterpart Bitcoin.

Now, the price of knowedge is part of the price of any service company, it is no longer negligible.
Sadly enough, most company are forced by law to know about you, which is, from the economic point of view equivalent to a government price control.
This, in turn, gives advantage to peer to peer decentralized services, which are not subject to any regulation since it is not oversight by any company.

Knowledge is like a real currency whose price have gone dramatically up since the revelations.
The market shifted as a natural consequence from trusted company to zero knowledge services and peer to peer systems.
The biggest loosers of this story are companies that paid such high price to earn trust that is now worth nothing.
The biggest winners are the ones that don't need to know about you.