Houdiniomics: The New Era of Government Magic

by Peter Krieg
by Peter

"How pale is the art of sorcerers, witches, and conjurors when compared with that of the government’s Treasury Department!"

~ Ludwig von Mises, The Theory of Money and Credit

With the Great Bailout of October 2008 the US and Europe are leading the world into a new era of political economy. Its motto is: "Decree it and it will happen!" This magical slogan in the great tradition of "abracadabra" is the secret behind the idea that with a simple strike of the pen governments can and therefore should control just about everything from the economy to the climate, from energy to law, from people’s health to their consciousness and thoughts. Since this modern political pseudoscience owes much to the great American magician Harry Houdini (1884–1926), I suggest calling it "Houdiniomics."

Houdini, who died on Halloween 82 years ago, chose his artist name in honor of his French colleague and predecessor Robert-Houdin and earned fame as a magician, escapologist and stunt performer. Magic, the art of creating illusions of impossible or supernatural feats that defy the natural laws of physics as well as common logic has, of course, a longstanding tradition in all performing arts including politics.

Since the 19^th century it also found its way into the social sciences under labels like "scientism," "positivism" and "progressism," claiming that human society can be shaped at will in order to achieve impossible feats as long as it is guided by the right ideological politics instead of proven laws and universal values. In the wake of this doctrine the world has witnessed a good handful of astute politicians applying this new discipline with varying ideologies, all sailing under the banner of "progress" and consequently defying just about every law of economics, every traditional value of ethics, public moral and decency, breaking every written and unwritten rule and trampling on every human right imaginable. The result was truly amazing: Within just half a century millions were killed on global battlefields, an equal amount was wiped out by starvation, other millions were incinerated indiscriminately with atomic bombs and other weapons of mass destruction or outright exterminated with industrial efficiency in gas chambers, torture dungeons and killing fields. The total number of victims of this progressive 20th century is estimated at 200 Million!

One would assume that after such carnage as a result of progressive ideological politics, societies would ruefully return to ways more respectful of proven laws and universal values. But not so. Politics in the industrial democracies of the West, even after the bankruptcy of socialism, arguably the most progressive ideological camp, continues on the same road towards what politicians of all parties still consider progress. Consequently we can see Houdiniomics at work today in just about every area of society. It is not at all restricted to politicians, but has become the argumentational basis of many scientists, intellectuals, journalists, artists and philosophers. Houdiniomics is not associated to one particular political color any more. It has been adopted by progressives of the left as well as by conservatives of the right, as recent developments clearly demonstrate. Houdiniomics has become the political science of politics in general.

In the age of classical liberalism, politics was not exempt from grounding arguments and actions in universally acknowledged axiomatic values. These values, namely free will, self-ownership and property, equality and respect for life, truth and justice are absolute and, while not always practiced, were at least recognized norms in every society ("civilized" or not) since eternal times. They are translated through customs, religions and traditions into natural laws and basic rules of conduct, outlawing, e.g. to injure, murder, steal, lie or cheat. By doing so, they at least implicitly assign freedom of action and personal responsibility for this action to the individual. They form an axiomatic ethical framework that enables every individual to generate his own ethical orientation. They are the "Golden Rule" that says: "Don’t do to others what you don’t want them to do to you."

If there is "progress" to be observed in history at all, it applies to the degree of individual freedom and the observation of these universal values. A more general recognition of these values results in improved self- orientation of individuals and consequently in broader social cohesion, more stable institutions, more civilized conduct, deeper cooperation and increased wealth. Empathy, respect, tolerance, and peace are qualities we tend to find in individuals and societies that explicitly uphold these first principles. But since this type of progress is not a result of any "laws of history" but rather of specific cultural and social developments, ideas and discourses, it is always in danger of relapse and repeatedly did so.

The libertarian philosophy respects and conserves universal values as axiomatic first principles in the line of "natural laws" and explicitly recognizes and upholds the right of every individual to exercise these principles in full freedom and responsibility. Voluntary cooperation and division of labor in free markets are seen as the basis of social cohesion. Libertarians entrust the development and enforcement of rules and laws rather to institutions of the civil society than to the state as an organization of coercion and power. The means have to incorporate the ends in this political philosophy, which consequently follows a non-interventionist, "orderly anarchistic" tendency.

Libertarians do not cling to the forms of traditions, customs or laws, but try to identify and conserve the universal principles they represent. Universal values often get buried and suffocated under ritual and tradition, which then degenerate into mechanisms for maintaining an oppressive status quo that has long forgotten, perverted and abandoned its initial values. Many classical liberals have turned conservatives today in confusing form with content, turning conservatism into a force of protecting repressive customs, discriminatory traditions and illegitimate privilege. They see libertarian anarchism not as a source of sustainable order, but as a danger to the established powers. To defend those, they do not hesitate to turn to the progressive political toolbox.

Progressive philosophy believes in the superior power of social design. Since Plato’s Republic, it assumes that societies cannot improve rapidly enough through voluntary human coordination and free discourse, but should be centrally shaped, improved and imposed following ideological doctrines independent of universal values. In fact, if universal values stand in the way of the progressive design of the day, they should be discarded.

The progressive idea of progress is to positively define an ideal condition or society (often justified by assumed "laws of history") where some selective -mostly egalitarian- values are to be concretized, and then to enforce this utopia through coercive re-distribution, control and oversight by a powerful state apparatus. The ends justify the means in this philosophy, which has an inbuilt interventionist and statist tendency. The progressive mind is continuously developing new concepts, projects and plans for a better world, a more just, more equal, more energy conserving, more friendly, more caring, more ecological, more vegetarian, more moral, more solidary or plainly more "conscious" society. It claims to be "liberal" for proclaiming liberation from universal values. But the progressive mind harbors a deeply ingrained illiberal distrust in the abilities of the individual to make the right decisions for and by him which at the same time benefit society through voluntary cooperation. This negative anthropology towards the individual coupled with a strong belief in coercive collective solutions under the guidance of a self-proclaimed elite is a consistent strain among progressives of any brand and leads to their love affair with the state as the great provider, regulator, enforcer and decider.

The houdiniomic approach of progressism manifests itself in the belief that human culture and society can be shaped, designed and engineered independently of its underlying universal principles. These principles are not considered absolute constituents of social cohesion, they are not upheld as the social "laws of gravity," but are entirely plastic material in the hands of social engineers.

One of the first achievements of modern political Houdiniomics was the magic feat of the elimination of money as the world has known and understood it for thousands of year. Money spontaneously emerged as a medium of exchange when people began to cooperate by dividing labor. Money could originally be anything that people put enough trust in. In small societies this trust could be based on the stability of social relations upheld through ancient customs in small, homogenous groups. As cooperation and division of labor grew, involving more and more strangers with different customs and traditions, a common medium emerged that was held in equally high esteem by most societies: gold. Money now was liberated from local customs because it was nearly universally valued on its own. From then on, even today, gold remains the standard that all currencies eventually are measured by.

This had great impact on trade and commerce, but also limited the sovereignty of governments, who quickly took over the monopoly of issuing and controlling money. Money represents and is tied to real goods and real savings of people. As a medium of exchange it serves its function independently of its volume, size or mass. Expanding it does not expand the total value of the money stock, but rather reduces the purchasing power of each unit. This is why money backed 100% by gold was essentially stable over very long periods of time.

In the system of "Fractional Reserve Banking" under the direction of a government-controlled central bank, money is whatever the government decides. Money is no longer covered by gold, but can be created "out of thin air" by government fiat and decree. In this houdiniomic financial system, money and credit are not part of a free market of necessarily responsible banks, lenders and borrowers, but are centrally planned by central banks. As in every economic area, central planning of money not only lacks but actively prevents information about true supply and demand for money and credit which a free market provides in the form of price signals. On the other hand, the price of credit (interest rate) set by the central bank still transmits a signal to the markets. But since credit prices in central banking are not the result of market mechanisms, but are set politically, they inevitably give false signals to the markets: low interest rates suggesting a high savings rate encourage long term investments in capital goods. But if these low interest rates were artificially decreed by the central bank without being backed by the respective savings, and if real savings are replaced by printing and pumping of fresh money, much of these investments will prove to be malinvestments, eventually forcing corrections by the market in the form of inflation, bankruptcies and recession.

The current financial system with its fiat money is a veritable example of applied Houdiniomics. But in contrast to the magic theatre, where at the end of the show the curtain hides the mirrors and mechanisms before the lights go on, and audiences can end their suspension of disbelief in full comfort, life outside the theater lacks the equivalent of the curtain. There are plenty of smoke and mirrors, but when the miracles fail, the illusions become obvious and the ancillary devices are embarrassingly exposed.

No science is complete without certain ancillary devices helping it along. For Houdiniomics, the main ancillary device is Euphemistics, the science (and art) of giving unpleasant things a new, more pleasant name. One will find Houdiniomics always closely associated with Euphemistics as both depend and build on each other. The Great Bailout of 2008 is a good and recent example: its obvious purpose is to bail out privileged investors and failing banks and most of all, to rescue the politically convenient fractional-reserve banking system. Such a plan is hardly popular among ordinary citizens, who eventually have to foot the bill by way of inflation, prolonged recession, higher taxes, less jobs and reduced income. So it was officially renamed a "rescue plan" – not of the privileged investors, banks and the financial manipulation system as a whole, but of "the ordinary citizen" as politicians are busy to explain through the ever-obliging media.

Another recent example is "compliance markets," usually describing the coercive artificial "trading" of industrial emission rights on pseudo-exchange markets. The term "compliance market" is a typical contradictio in adjectum: markets by their very definition are institutions of voluntary exchange where buyers and sellers reach uncoerced agreements on the valuation of goods, and exchange them based on voluntary contracts. Whenever force and coercion is introduced into a market, it seizes to be a true market and consequently its prices will not reflect the true valuations and the free will of the participants any longer.

The second ancillary device of Houdiniomics is Metaphorics, the art of using metaphors to first explain and then to prove a theory. Metaphors are extremely helpful for applying knowledge about one area to a completely different one, when the abstract relational patterns of both are recognized to be similar. In this case the metaphor serves as a qualitative model. But while using a metaphor as an explanatory device can be very helpful, it can never be used to prove anything. Scientists have a habit of setting up and then falling into this logical trap. Metaphorics becomes especially misleading when we "reify" relations into things and qualities into quantities. "Just," e.g., is a quality, an abstract value characterizing a relation like a voluntary exchange. "Social Justice," however, is treated as a quantitative "thing" that can be concretely measured and managed. Value describes a preference that can mathematically only be expressed as an ordinal number (1., 2., 3. ...) representing ranks of priorities in a specific situation. Mathematics and computers, however, cannot calculate with qualities and ordinal numbers. Only a quantity can be mathematically expressed as a cardinal number and integrated into a computer model. The resulting simulations thus are principally unable to model or even predict individual action or social systems.

The metaphorical error of "artificial intelligence," where the human brain was first used as a metaphor ("electronic brain") for the computer, followed by the reversal of the metaphor, where the computer became the metaphor and then even a model for the brain, led to the reification of the human mind and consequently to the erroneous but widespread reliance on computer models. Computers principally cannot model human creativity or the complexity of human action that emerges from it. Intelligence is not about the quantitative number of calculations and decisions a human can make per second vs. a computer, but the quality of human ingenuity, creativity and intentionality.

A similar metaphoric fallacy is at the root of the current climate debate: to describe our warm planet, the metaphor of the greenhouse is used, although according to physics the warming mechanisms of the atmosphere have nothing at all in common with air in a greenhouse warmed by preventing air circulation and exchange. The metaphor is plainly wrong in this context. Yet a giant global system of indoctrination, intervention and taxation is being built on it, headed by politicians, scientists and activists, all under the magical spell of quantitative computer models. In true houdinistic tradition, the laws of physics become irrelevant: we find scientists embracing a CO₂ theory based on the physics of the perpetuum mobile, and engineers promoting the most inefficient energy conversion technologies (like photovoltaic and wind energy) as an imminent and efficient energy solution, although in the foreseeable future they can only be made "competitive" in markets by heavy direct government subsidies, government enforced regulations and price fixing.

But why is Houdiniomics so attractive and so persistent, in spite of consistent debunking and continuous failure to achieve its feats? Houdiniomics suggests that we can sustainably "liberate" ourselves from absolute constraints – whether physical, social, cultural or biological. Through technology we could indeed overcome many limits and restrictions that seemed quite absolute to our ancestors. It was therefore no accident that the industrial revolution was accompanied by philosophical and social movements that applied the engineering approach to the totality of human existence. Social engineering was to leapfrog the long and tedious process of philosophical, economic and social enquiry and discourse. The ancient idea of universal values was discarded as old-fashioned and obsolete.

The progressive idea has always been especially attractive to a few who consider themselves as intellectual vanguards of society and thus as destined leaders of others. Through some magic they claim privileged access to reality and to superior information and thus feel uniquely qualified to evaluate and decide what is good for the rest of mankind and what is not. Since they have absolutely no doubts about the correctness and general benefit of their ideas and judgments, they tend to condone and endorse coercion in realizing and enforcing their plans on others. They are – at least in their own minds and in the minds of their followers – the great Houdinis of their day, shaping and reshaping society with their magic wand of governmental power and decree…

It seems that once again we are falling under the spell of a new generation of political Houdinis promising extraordinary feats through magic new deals. Short of controlling gravity they declare to eradicate poverty by decree, manage the world’s climate, provide us with cheap renewable energy and a new compliance-market economy planned and coordinated by the wisdom of bureaucrats armed with infallible computer models…

Students and practitioners of Houdiniomics could learn from Harry Houdini to his very end: he died of a burst appendix after ignoring the symptoms and refusing professional treatment: a radical, yet minor operation. Consequently, it took one punch to kill him.

October 28, 2008

Peter Krieg