"Left" in the Dark

According to reactionary philosophy, the left is always in the dark. It does not understand that capitalists are not selfish, they are self-interested. It is a qualitative distinction that determines the quantity of economic value added.

Operating with a philosophy of self-utility--which is our natural condition--produces a standard of living that, without a proper, objective understanding, is easily taken for granted.

A rising standard of living, and expectations, tends to make us "intellectually lazy." It is easy to mistake the utility of self-interest for selfishness, expecting unlimited supply, and low prices, from limited resources. Capitalism, we should all understand, organizes labor and capital to prevent shortages.

Without allowing capitalism to freely organize unregulated (the theory of efficient markets that repealed Glass-Steagill, for example) we experience the vice (the angst) of selfishness instead of the virtue (the productive incentive) of self-interest...we're left in the dark.

When capitalism merges and acquires (consolidates industries and markets) to build economies of scale, it is actively organizing to improve productive efficiency, which is in everyone's self-interest. Capitalism does not selfishly steal value form labor in the form of "productivity gains" (unemployment), but instead cures shortages through "pricing power" (inflation).

Analytically, however, looking at the equation used to derive value from the capital, we see that labor not only pays rent to occupy space in the marketplace (paying the highest possible prices at the lowest possible labor cost) but pays to rent back the value consolidated, which forms the capital and creates wealth, supposedly, in their self-interest. (Keep in mind that self-interest is a confirmable hypothesis. It can be measured and the means can be thrown out if the ends do not measure up. Consolidation, understand, reduces the probability of revolutionizing the means. If the means of power is so big and overpowering that it takes a catastrophic event to revolve it, which is the gamma-risk proportion I talk about on this website, the means and ends are conserved not by verification, but by validation of arguments that proceed from principles such as "the masses are incapable of self-governance." At the same time, however, aristocrats that maintain this argument also say everyone is self-determined, which is both inductively and deductively contradictory, and the contradiction is explained away as being a paradox. Eventually, the contradictions become so obvious that the maintenance of power has fascist tendencies, validating the means of power to control civil disorder--a self-fulfilled prophecy referred to as an organizational tautology.) By accumulating risk through consolidation of industry and markets, capital formation is falsely attributed to the invisible hand, and the value of labor is "left" in the dark.

The populist sentiments of labor are attributed by reactionaries to be selfishness. The unemployed are identified as "looters" and "slackers," and while liberals are more sympathetic, the sympathy is as much a sense of noble obligation (an aristocratic identity) than altruism, foolishly mistaking their selflessness (the virtues of hope and charity without really sacrificing anything, but with the hope of supporting the virtue of acting, and reacting, in self-interest) as being risk-averse when it is really risk-prone.

Distribution of the risk selfishly occurs in the dark (to the exclusion of the vast majority of market participants) in order to predictably derive and accumulate value in a space occupied by the top one percent of income class. When this value integrates at the top, rather than deconsolidated for its prudent regulation at the bottom with a government that governs least, a liquidity crisis always occurs to distribute the accumulated value. The distribution occurs in the form of increased debt-to-equity (deflationary risk and fiscal crises) like we have now with a government that governs the most.

(Since we let the corporate get so big and consolidated that it occupies government space--which has the effect of fully consolidated power, with more government, not less--we may as well use it to deconsolidate the risk with public-private partnerships. See, for example, "Operationalizing the Risk Proportion" by Griffith, as well as other articles by Griffith that discuss convergence theory on this website. There is also an exceptionally good book recently published by Jeremy Rifkin called, "The Third Industrial Revolution."

Rifkin presents economic modeling that describes and explains what deconsolidation looks like. It is the kind of practical modeling presented on this site, recognizing that the tendency for big government should be used to reorganize and deconsolidate the risk as the public and private dimensions of power continuously converge to network the externalities. He describes an historical pattern of "lateral expansion" that this site, for example, refers to as pluralistic tendencies that naturally act to deconsolidate the risk proportion--what we tend to mistakenly refer to, and manage, as added risk when it accumulates.

It is important to remember that risk is not added or reduced, it is an accumulative or distributive value that depends on organizational design and technology. Rifkin's book presents a detailed description of what a convergent, more distributive, and mutually beneficial risk-value looks like in practical application.)

The distribution of value reduces to whether there is a deflationary or disinflationary distribution of the risk proportion (both are discussed on this web site along with the concept of retributive value). The more of a free market there is--the more labor shares in profits--the more disinflationary the economy tends to be because there is more supply always being innovatively added to meet the demand (and thus make a profit). Conversely, the more consolidated industry and markets become to avoid risk and reduce labor costs (and thus make a profit), the less demand there is, and falling demand results in a declining rate of profit, which is deflationary.

While both result in a declining rate of profit, deflation is a crisis proportion, disinflation is not.

The more labor is paid the less the marginal profit, and that, according to capitalism, is a moral hazard because it reduces the reserve. We foolishly end up consuming the capital from which employment (the wages and salaries that demand consumption) are paid. This, you see, is not a paradox, it is a contradiction, as Marx pointed out, and so we ignore it as crazy, ideological rhetoric that advocates against the philosophy of selfishness that capitalism mistakes, unparadoxically, for self-interest.

(Although the value held in reserve, or "surplus value," accounts for the inequitable income distribution we have now, the reaction by liberals is to expand the money supply with fiscal stimulus, and conservatives with fiscal austerity. Neo-classically, understand, expansion of the money supply--inflation--is inevitable. Without it, capitalism dies as a means of producing value because, due to a declining rate of profit that can only be resisted by adding to the supply of money while, at the same time, exacting labor savings to increase the margin--unemployment, "the capital" is then, by every empirical measure, neither capable of controlling inflation or unemployment. Capitalism becomes an easily recognizable liability. Instead of adding value, it is always adding quantum complexity, which needs elite management to accumulate and distribute "the risk" that "conserves" the reward accumulated over time.)

In order to control the accumulated error (the systemic risk) of consolidated labor (and notice how the risk factor--consolidation--is mutual), labor must be cleverly managed and directed to accept the necessary loss.

At the expense of economic expansion, labor is positioned to take the loss necessary to expand the marginal profit. (This is what economy-of-scale, too-big-to-fail banks, like Bank of America and Goldman Sachs, are in business to do, and other businesses organized too-big-to-fail benefit with a high margin of profit that distributes to shareholders at the expense of labor. Much of the expense occurs, keep in mind, as a late-order effect, the Great Recession being the latest example, which is then argued to be "the invisible hand" and not an expropriation by deliberate design. This does not mean that the invisible hand is a non-entity. If you operate a small business, not only are you subjected to alpha risk, but the gamma-risk dimension that operates to take your profit, and add it to the too-big-to-fail marginal profit, through rising inflation and unemployment.) Instead of productivity, capitalism, contrary to its advocacy (like we have now), is paradoxically prone to producing and managing the risk of loss (risk-value) by intelligent design.

Rather than reducing angst (remembering that risk cannot be reduced--it is fully assumed--but angst can be by, for example, deconsolidating, or spreading, the risk), risk is accumulated and distributed according to income class. The result is a class of anxious risk takers (small businesses and labor) being dependent on (subjects of) the risk makers (the so-called job creators) who admit they are not in business to create jobs (like small businesses do to make a profit), but to manage risk to expand the marginal profit.

Since the best way to expand the marginal profit is to organizationally consolidate the risk into a too-big-to-fail (high anxiety) proportion (the detriment that paradoxically plagues us in our self-interest), and since the marginal profit (capital gained for investment) is what expands the economy, government policies and programs that ensure healthy marginal profits ensure maximum supply. (Value is not added by adding supply, however, but by adding value--risk-value--to the supply, which adds to the marginal profit at the expense of consumer demand, which is deflationary.)

Consequentially (remembering that we are not in business to create jobs, but to make profits), always adding value to the supply side (measured by expansion of the profit margin) adds jobs. Employment is added as a late-order effect (a marginal product), efficiently determined to be at the highest possible rate the free market (the invisible hand) can create on demand (at the lowest possible cost).

(The Commodity Futures Trade Modernization Act, for example, is supposed to expand the marginal profit, which supposedly adds supply. It's no coincidence, however, that commodity prices have spiked since its enactment, and while persistent headline inflation is being attributed to worldwide shortages and rising demand, these fundamental factors did not present as the high prices we have now until commodity futures were, by act of congress, "modernized."

Although the futures markets were reformed as a "supply-side" measure--allowing your savings to be invested in futures--supply is not what is being added. Risk-value is being added to the supply to derive capital gains on demand, which is taxed at the lowest possible rate because, supposedly, it expands the marginal product--economic growth that drives the demand--at the lowest possible cost.)

As a function of the marginal product (the volume, economy-of-scale discount Wal-Mart provides, for example, at the lowest possible labor cost), employment is subjected to the marginal profit. It is dependent on capital to provide the value necessary to self-determine, which according to reactionaries functions to avoid "the peril of equality"--the lack of productive incentive and creative ambition--relying on government is sure to cause.

Labor is subordinate. Its value is controlled on both sides of the equation: what it is paid to produce, and what it pays to consume it; and because maximizing the margin derives from controlling costs while increasing pricing power, it is no wonder that consolidation of industry and markets typically results in both inflation (despite the volume discount) and unemployment (despite the value added at the margin).

(It is important to understand that the detriment consumed--inflation and unemployment--is transformed into gamma risk, which is described and explained on this website. Keep in mind that the gamma is, paradoxically, both good and bad. While it measures the quantum detriment consumed, it also measures the fully assumed risk of loss that capitalism manages as a liability. That liability is an asset, nevertheless, in which fully obtains the intelligent measures necessary to avoid the crisis proportion the gamma always attains.

The gamma--the quantum risk being consumed on command rather than "on demand" like in a free market--indicates the need to deconsolidate the risk so that it occupies space in the alpha dimension where "the risk" is mutually beneficial and unavoidable. Alpha risk is a liability that capitalism is designed to resist because it affects "pricing power," which is the ability to command the marginal profit that in a free market measures the consent--the marginal, unconsolidated risk--of consumers "on demand" in their self-interest.

Consent means that the detriment is mutually beneficial--it provides strength, virtue, to the entire system without risking the natural intelligence, the hedonic calculus, of the self. This, you see, is where capitalism relies on philosophy--the right ideology--to deduce an objective, moral identity. It can't focus on policies by induction because they are always being disconfirmed. Instead, it focuses on unempirical measures that avoid the virtue, the empirical truth, of a popular consent.

The marginal profit capitalism argues is necessary to stay in business is really a philosophy of selfishness that, paradoxically, is described as moral intelligence; and if you don't think that gangster capitalists are not operating with the highest degree of moral intelligence, then you must be a socialist--a communist who believes in the destruction...the darkness...of freedom and self-determination. Advocating that markets need to be deconsolidated to ensure freedom and self-determination, which sacrifices the marginal profit to popular consent and turns the governors into the governed, is counter-revolutionary.

Paradoxically, suggesting that we ensure a free market in priority--by making sure the risk is deconsolidated so that no single party, or collusion of parties, can "make the market" to detrimentally gain and control more capital than anyone else--is considered by conservatives, both on the left and the right, to traduce the Constitutional right to life, liberty and the pursuit of happiness.

Understanding the paradox is to realize that a philosophy of risk is in technical operation. Specifically, a philosophy of selfishness is technically posed as the productive utility of self-interest.

Since philosophy, in the age of science, keep in mind, is largely confined to lawyers tricks, its technical use is easily limited to successful exculpation of value derived from detrimental risk. As Loyd Blankfein testified on Capitol Hill, for example, detriment is technically a public good--a quantum value that derives productive incentive, and adds value, from self-interest.

All manner of legal chicanery is utilized to exculpate the value of the risk-detriment. The risk-assessment is technically not a function of philosophical analysis until it is adjudicated for compensatory damages, and the retributive value is then typically limited to a civil liability that the corporate body absorbs as a cost of doing business.

Philosophy of risk is technically critical for assessing criminal liability as well. Although it is more rare, due to limited liability of the corporate body, which cannot be assessed with intent because it is really, technically, not a person, a criminal intent is perceived, and a retributive, gamma-risk valuation accumulates, nevertheless. Organized consolidation of power into the corporate body is not criminal, you see, it is, technically, thrifty.

By technically reducing the risk-assessment to a philosophical analysis--with the truth, or objective reality, contained in the paradox--the risk is never actually assumed, but attributed. Late-order effects, like unemployment, for example, have the attribution of a "lagging indicator."

Unemployment, rather than being an intentionally detrimental effect of organized consolidation, is really a natural consequence of free-market competition. In late order, markets are made more efficient, making labor more competitive and thus more productive, which adds supply, reduces shortages, and keeps the peace. Consolidation of wealth and power is, you see, not selfish, it is, paradoxically, thrifty and avoids the peril of equality by ensuring dependence on capital, which in-vests, or encourages, economic productivity over political patronage.)

The paradox of thrift (the accumulation of capital gains that according to capitalists must, by its virtue, go untaxed to ensure its fullest investment value), remember, is supposed to expand the pie. If that were true, however, we would not be struggling to break out of a world-wide recessionary trend. We should be in a state of high GDP and full employment--we should be blow'n the doors off!

Instead, capitalism prefers to derive value in dark markets (markets closed but to a small, technical elite). While this is exactly what a free market is not, ironically, the darkness technically begins with Federal Reserve "swap lines" empowered by its Open Market Committee.

The "swap" effectively controls the policy space necessary to determine the "direction" of the risk.

Currently, in the form of "innovative" financial instruments, risk is being technically directed by the Euronext and the Boerst--two SIFI's that dominate the derivatives market. DOJ has approved merger of these two institutions, and if approved by European regulators will effectively consolidate the capacity to direct and derive the risk with an economy-of-scale efficiency.

Since the larger scale effectively demutualizes risk that otherwise occupies the space of a free and open marketplace, we can fully expect risk to gain an even more catastrophic proportion. Its value is held in reserve and traded in the name of controlling, or directing it in a too-big-to-fail proportion.

As we know, this oversized, economy-of-scale, consolidated proportion is prone to failure, and as we know, this failure results in big capital gains in the form of "credit-default swaps." These "swaps," you see, derive from vesting the reward with the probability of default, which means it is not a probability at all (except that it largely occurs in the dark where your seeing it is highly improbable). It is not a gamble, or an act of God, but a sure thing, and the crisis that quite naturally results provides the need for even more consolidation to protect us all, indivisibly, from the consolidated risk proportion.

Risk is being perpetually derived from itself. It is not being added! This is important because it means we cannot solve the problem by merely subtracting it, like when we increase reserve requirements, since it has not been added! No, risk is organized to rhythmically recycle--what analysts refer to as technical indicators--and "make" it appear ontologically derivative. When hedge-fund managers say they are "making markets" to increase liquidity, they are not adding risk-taking productivity but selfishly protecting themselves, hedging against the probability of default in the making.

Increasing reserves does not reduce the marginal risk because the too-big-to-fail proportion is not only conserved, it is added by requiring more capital than 99 percent of consumers can ever have to demand, and prudently regulate it.

Increasing the capital required to cover potential losses does not in-vest the capital, it keeps it in reserve, which increases the probability of default. Risk is being tautologically re-vested (held in reserve) in the name of capital formation, optimal liquidity, and the investment that provides the incentive to take risk, from which derives our productive capacity.

Productive capacity, you see, according to capitalists, derives from capital, not labor, and the less value imparted to labor the more capital there is to be consumed (the philosophy we popularly know as Reagaomics, or trickle-down economics). As we come to know again and again, however, this is a self-consuming philosophy of the risk. Instead of reward being derived from the risk taken (the capitalist being subjected to the prudent regulator), risk is derived from taking the reward (the prudent regulator--the consumer--being subjected to the capitalist).

Remember, by "making" the market and "taking" the reward, risk is not being added. Risk is being derived, organized, and positioned to predictably occupy space over time. Since this occupation occurs over time in a cyclical proportion, rather than all at once, which would make it look tyrannical, the variable frequency makes the value--the income--it yields look legitimately earned (and according to de Tocqueville, avoids "the peril of equality"). The capitalist, rather than having taken advantage of market participants by subjecting them to detriment has, instead, predicted the probable, naturally ontological and randomly stochastic occurrence of the risk. Thus the reward is not taken, it is earned--derived from technical means of superior intellect.

Capitalists use their intellect, guided by the laws of nature, to turn what is a fully assumed risk of loss into capital, which is then invested to hedge the risk. Successful capitalists do not expect people who are intellectually slow or lazy to understand how this works or how it is serves their self-interest. We should trust that capitalism always does the right thing because it uses nature--our natural, selfish instinct--to derive capital. Doing it any other way is to deny our very nature (we suffer the loss of our true, objective identity, or as Ayn described it, "A is not A"), and that isn't very smart.

Deriving risk from the reward (being prone to crises) may not seem too bright, but it requires the special understanding that Ivy-League MBA's have the capacity--the ambition--to acquire. It takes a special breed to understand that the detriment we must experience (the austerity that provides tax cuts for the rich) is (as Ayn Rand, for example, explains it) our natural condition.

Nature, you see, is complex. Just consider what looks like a lot of incomprehensible scribbling to mathematically describe quantum mechanics, for example, and the minds that technically understand our natural condition as a set of infinite probabilities of unknown quantity have been hired by Wall Street to build a reality that derives, quite naturally, from its philosophy. So, we have the derivatives market, built and managed by the best and the brightest--those with the capacity to understand the secrets, the complex reality, of nature.

Since the derivatives market is so complex that only the gods can understand it, it is hard to see how it can be regarded as free and open. By definition it's not. So, what's it for?

Remember, "In God We Trust." It is our motto, stamped on our currency. If "We" the little people do not understand it--if we cannot participate--it is because we are not capable...we do not have the secret knowledge to see in the dark. We trust in the gods to guide us (direct us) through the dark ontology that is "the risk of loss fully assumed" in a world of infinite probability. So, to protect us from "the risk" (a quantum we have come to know by ensuring its probability), it is directed to derive from the reward, which seems kind of unnatural, paradoxically, doesn't it?

As discussed in previous articles, keeping labor and consumer value integral provides for quick and sure accountability, which, by the way, reduces the need--the demand--for government (and the need for a small, technical elite operating in the dark).

By swapping integral and derivative values, neo-classical, "consumer" theory largely consumes the savings labor has for investment. Consumption of that economic value, you see, is the class warfare--turning equity into debt--that conservatives politically react to as a moral hazard.

Using consumer theory (reacting to prevent a moral hazard that is an integral part of capitalism) falsely attributes the detriment of minimizing labor value (demand reduction that is classic "overproduction") to "the paradox of thrift." The fully assumed integral, but highly divisible, risk of loss in the alpha dimension (the moral hazard) is consolidated into a gamma-risk proportion (a derived, highly indivisible, risk in the political dimension). In other words, you can be stuck with the risk without sharing in the reward.

In the gamma dimension, the risk-reward is not mutual--it is not alpha, which is a moral hazard in the strictest sense because the prudent regulator cannot, then, sanction with the reward and modify bad behavior. Currently, for example, populist sentiment is frustrated with the inability to sanction because the integral value required is being held in reserve with businesses that are too big to fail and a government authority largely operating to protect that trust.

Operating with the theory that value must be held in reserve (consolidated) to prevent general crises (rather than deconsolidated) predicts the crises to be prevented.

The reserve requirement represents a missing modifier (the quantum "risk" with alpha quality) that has reached a critical, gamma-risk proportion. This unavoidable (fully assumed), quantum value, that serves to modify behavior by anticipating future value and the ability to control it (angst), re-presents in a proportion that is uncontrollably catastrophic as long as it is required to be held in reserve.

Instead of being required to deconsolidate, the risk is consolidated into government authority where, unlike a free market, it is managed separately from the reward. This effectively de-mutualizes risk so it can be "consumed" to fit a governing philosophy. ("Paradoxically," you see, while this philosophy posits that reward derives from the risk taken, it is a natural philosophy that assumes loss no matter what, it's just a matter of determining who legitimately takes it, thus delimiting the moral measure from which behavior modification derives.)

Capitalism successfully avoids the alpha risk (behavior modification from the bottom up) by consolidating industry and markets, which is supported with a technical philosophy like trickle-down economics and the so-called "moral hazard" of taxing the job creators. By not reducing labor value to its derivative consumption, however, the paradox of thrift "naturally" resolves. Capital formation will occur not by swapping risk-value in the dark to cause, or derive, deprivation, but freely and openly with the full faith and credit (the positive, providential support) of the sovereign power (We the People who govern by the light of day, not in the dark).