Mental Mistakes
If you were going to take things to the flea market to sell, what would you take? Most people clean out the garage. They find things they already own that have lost value. Others buy things cheap and hope to sell them higher. Some bring new things into existence: they make items to sell. In a good flea market you can find original pottery, painting, glasswork, jewelry, and a host of other productions. Whatever value they have is new: it was created by the artisan. It is value that never existed before.
Those are the three things you can trade in a market: things you find, things you buy, and things you make. What's interesting to note is that the value of what you make is not the only new value you bring to market. The other two categories also bring new value, and some of that value is created by the market itself.
When you look around the house for things to sell, you are doing in principle what a miner does: you are looking for potential. When you make the effort to collect things and transport them to the market, you are doing what the miner does who finds iron ore in the ground and makes the effort of digging it up and selling it. That effort creates value by bringing something to market which would not otherwise be there. Then the market adds more value by making it possible to discover by trading how much value has been created.
When you buy things cheap and sell them higher, you do in principle what the merchant does: you make values available. The value you create is the value of convenience, of having those things available at that place and time. The market then adds the value of discovering how much that convenience is worth.
When you make things to sell, you are engaging in the most basic and universal function of the market: bringing value into existence by means of reason. If you buy iron ore and make steel, the value brought into existence comes straight from your mind. No matter how much physical effort it takes to refine the ore and make the steel, the essential effort is mental. The process cannot be done any old way. It must be done exactly the right way, as determined by your reason. It is your reason that brings the value into existence. It is your reason that creates wealth.
It seems so obvious. Why is it everywhere denied?
Let's ask someone who is mentally passive to go through the analysis of the flea market. Let's ask a zero. "If you sell at the flea market what do you sell?"
"Well, just stuff."
To sort out what stuff would take mental effort, which the passive zero does not consider worthwhile. If we ask the zero if he is aware that taking things to sell at the flea market creates value, he will snicker. In his mind is a picture of old clothes that people buy for spare change. He could reflect on the value of convenience created for those people, but that would take mental effort. Instead, he just sticks with the image of people paying good money for junk. The zero is aware of what he gets out of it, but not what others might get out of it. His notion of trade is getting the better of people.
When this mentally passive zero hears that economics is a "zero-sum game," it sounds right. If there's a plus here, there must be a minus there, so the sum is zero. The zero's idea of getting things is not making things but taking things. That's because he has not developed his thinking past the childhood stage. He does not feel self-sufficient. It seems right that if he gets better off, it must be at somebody's expense. Of course, this means that the world as a whole is no better off now that it was in the Stone Age, but the absurdity goes unnoticed.
The passive zero has missed the very fundamental of staying alive: production, the creation of value. His thinking is stuck in some garden of Eden where food grows on trees and shelter is not needed. If he thinks of building a house, he thinks of wood, which comes from trees, which are just there. The house seems taken from the forest. He does not see the wood as harvested from the forest, but as stolen from the forest. It does not occur to him that the forest was planted for the express purpose of building houses in the future. He does not think of the forest as planted, nor of the house as created.
Strangely, the zero does think of a wheat field as planted, and of bread as created from wheat. The difference is that the wheat grows in a time frame his mind can grasp without effort, but the trees do not.
This illustrates the most embarrassing result of mental passivity: credulity. If I can word a lie in a way that sounds right to a passive mind, the lie will be believed, because it will not be analyzed. A passive mind substitutes guesswork for analysis, and pays the price. If I say, "Rich men get their wealth at the expense of the poor," it sounds right, because passive minds do not get richer, and often get poorer. Of course, I am really saying that wealth comes from those who, by definition, have none. But the absurdity goes unnoticed.
The theory behind mental passivity is that the human mind does not work by methods, but by magic. Since we do not know how to explain the fact of consciousness in material terms, we jump to the absurd conclusion that consciousness has no identity and no rules of operation. We think of the mind not as the focus of consciousness, but as the focus of supernatural forces. We feel at the mercy of contending demons. Of course, we are really saying that there is no essential difference between being asleep and being awake, but the absurdity goes unnoticed.
If I think of my mind as operating on its own without direction by me, then I will think of it as obeying the zero-sum rule. Getting this thing right will be balanced off by getting that thing wrong. Pluses and minuses will add up to zero. Since my method is making guesses, being right is a hope rather than a fact. I will get things right that I can copy from others who got them right. And I will get new things wrong.
If what I think of as reason does nothing for me, then the idea that values brought to market are created by reason will seem nonsensical. For me, values will not be made, but just obtained. My assumption will be that if the law allowed it, everybody would just steal everything. Of course, I am calling crime the basis of production, but the absurdity will go unnoticed.
A passive mind does not dive down to fundamentals and ask what values are and what is the basic method of creating them. It would need to dive even deeper and ask what life is.
If life is self-generated action, then what is effort? Effort is self-directed action. It is life viewed from the standpoint of consciousness. When I consciously perform a self-generated action, I call it an effort. If I take the willful action of reasoning, that effort is called free will. I can focus, or not. I can be mentally active, or mentally passive. My purpose in exercising my free will is to stay alive. I want to produce what is needed to sustain my life. I choose not to live as a pet, at the expense of others, so I actively look for methods to improve my reasoning and increase my production.
When I identify things that improve my life, as compared to the standard of a reasonable human life, I call those things values. If I am better at producing a particular value than others, who are better at producing another value, then reason tells us to produce more of our special values than we need, and trade the surplus. Then we all have what we need with less work. That is what the market does for us. It makes trading possible, so that even if I am only good at one thing, I can reap the benefits of being good at everything.
Because of this division of labor, made possible by the market, everyone can live as if they had learned how to do everything, even though they may have only learned how to do one thing. If they don't bother to focus even on one thing, then their position in life is the zero, living off the wealth created by others in the market.
The zero-sum theory is widespread because it is the theory of the zeros, who are widespread. The theory saps our understanding like the zeros sap our wealth. It uses slogans instead of analysis, like the zeros use demands instead of production. It holds that wealth production is automatic, and the problem is distribution. Of course, this means that passing things around is as good as making them, but the absurdity goes unnoticed.
The usefulness of the zero-sum theory is the usefulness of the zeros: they show what happens in the absence of reason. If you watch a random rabble fighting over something tossed into the crowd, you see the origin of the zero-sum theory, and also the zero method of survival. It is a theory of bare survival. If we started with that as the zero point, we could ask: "Now, what needs be done to make bare survival into a reasonable human life?"
First, we would need to change the crowd into a society. That is, we would need to establish a basis for the crowd to cooperate rather than fight. Since the basic human alternative is life or death, we would have to start there. Is cooperation to be on the basis of life, or on the basis of death? If death, then our society will be short lived and avoided by survivors. If life, then we have established a basic right: the right to life.
Since life requires producing values and using them, the right to life will include the right to property. Having established cooperation, we must establish ownership. Once we have, by using reason, decided that life will be respected, and ownership of property will be respected, then whoever wants to can establish a market.
The requirements for a market are the same as the requirements for a society: reason and rights. When the market breaks down, it means the society is breaking down. Market failure is the failure of society.
If the market is a process of discovering value by trading, are we always happy with the discovery? People whose thinking is subjective are never happy. If I am sure that shoppers will clamor for my new toy, I may make a lot, and set the price high. If my conviction came from objective investigation, then if I am wrong, the market has given me the value of finding out that my methods need refinement. But if my conviction came from a subjective guess, then if my toys don't sell, I blame the market. It failed to do what I wanted. Instead of making me rich, it made me poor. I call the market unfair, the playing field uneven, the competition cut-throat, and reason a fraud.
In other words, I want to kill the messenger. By going into the market, I discovered the actual worth of my efforts. If I think objectively, I value this information. If I think subjectively, I compare the information to what I want, and call it wrong. I demand a should committee to fix the market, to level the playing field, to regulate competition, and to substitute force for reason.
Reason wants accurate information to form accurate conclusions. Subjectivity starts with a desired conclusion, and wants only what will justify it. To get accurate information, reason wants to leave the market free to operate. Objective traders do not want to regulate the market, because they want the market to regulate them.
When subjectivists succeed in regulating the market, what is the result? Does the market now provide more accurate information, or just more acceptable information? Clearly, you could not call the information more accurate unless you already knew it. If you distort the market so that prices come out the way you want, what good is that? Why not just decree the price you want, and save the trouble of pretending to have a market?
The reason that even dictators pretend to have markets is free will. They want to fool traders into thinking that the prices they set are real prices discovered by real trading. It is not prices they want to control, but actions. As soon as traders catch on that prices are not real, they will want to know what the real prices are. An underground market will spring up, illegal and free. Without real prices, trade is a sham, so a rigged market is not a market.
One help to understanding the chaotic conditions of our time is to notice that subjective thinkers continually set up phony markets, rigged to "discover" desired prices. Then passive non-thinkers are suckered in for a period of investing in the wrong things at the wrong time. After some phony growth, things go wrong, and everybody loses money.
It is called "The Business Cycle."
To see the phoniness of the "business cycle," ask how it happens that in a huge country with millions of markets pricing billions of items, trade suddenly falters everywhere at once. An answer was given by the Chairman of the Federal Reserve System, which is a should committee of central bankers. He stated that his aim in regulating the market was "price stability." Businessmen are to plan on the assumption that prices will stay stable, whether they actually do or not. Presumably this does not include the electronics market, where prices fall consistently.
A businessman whose mind is active rather than passive offered this tip on judging the real future: "Watch the price of gold." That is, watch a market still free enough to give information.
When subjectivists say that the market is cruel and heartless, they mean that the market is truthful. When the market discovers what value to assign all things offered for trade, it performs a service that has made a modern laborer richer than an ancient monarch. It performs this service by using money. To further explore the mental mistakes of passivity and subjective thought, we can watch what they do to money.
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