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18 Jul 15:19

An Interview with F.A. Hayek: Economics, Politics, & Freedom

by F.A. Hayek

Late last fall the Nobel committee awarded one of the two 1974 Nobel Prizes in Economic Science to Friedrich A. von Hayek. Unfortunately, the publicity in the liberal press concerning the simultaneous Nobel award to socialist Gunnar Myrdal tended to obscure recognition of the significance of the award to Hayek. For those in the know, however, the award was a long-overdue acknowledgement of the achievements of the man who is, in Murray Rothbard’s words, "the world’s most eminent free market economist and advocate of the free society. ''

Hayek was born in Austria in 1899. At the University of Vienna he received doctorates in both law and political science, and soon became the first director of the Austrian Institute of Economic Research. It was during those years (the 1920's) that Hayek developed the "Austrian" theory of the business cycle, building on work by Ludwig von Mises Using this theory, Hayek and Mises predicted the crash of 1929 and the subsequent Great Depression. The business cycle theory was formally set forth in Hayek's Prices and Production (1931) and Monetary Theory and the Trade Cycle (1933).

From 1931 through 1949 Hayek represented the classical liberal (free market) viewpoint as professor at the London School of Economics. While there he wrote The Road to Serfdom (7944), probably his most famous book. This brilliant, popularly-written study shows how central planning leads to totalitarian control; its logical arguments and empirical evidence impressed even John Maynard Keynes, who wrote of the book, "'Morally and philosophically, I find myself in agreement with virtually the whole of it, and not only in agreement, but deeply moved by it.”

In 1950 Hayek accepted a position as Professor of Social and Moral Sciences at the University of Chicago. During this period he produced such major works as The Counter-Revolution of Science and The Constitution of Liberty, and edited Capitalism and the Historians. Although he returned to Europe in the 1960s to teach economics at the Albert-Ludwigs-Universitat of Freiburg, he remains Professor Emeritus at Chicago and a Fellow of the British Academy. He is currently Visiting Professor of Economics at the University of Salzburg. At age 75 Hayek is still actively thinking and writing. In 1973 the first volume of his major three-volume treatise on the free society, Law, Legislation, and Liberty, was published.

(Volume I covers "Rules and Order,"and drafts of Volume II, "The Mirage of Social Justice," and Ill, "The Political Order of a Free Society,"are already in existence.) Among Hayek's other works are Individualism and Economic Order, John Stuart Mill and Harriet Taylor, The Pure Theory of Capital, The Sensory Order, and Studies in Philosophy, Politics, and Economics.

In addition to his teaching and writings, one of Hayek's other main contributions to the cause of liberty was the creation, after World War II of the Mont Pelerin Society. This international organization consists of scholars in all the humane studies who are dedicated to the principles of political and economic freedom. Its primary purpose is to keep such people in touch with one another for mutual interchange of ideas, via meetings and exchange of papers.

Last summer Senior Editor Tibor Machan visited Hayek at his home in Salzburg, Austria. Their conversation ranged over a variety of subjects, from epistemology to political philosophy to psychology, focusing especially on Hayek's ideas of a natural evolution towards a free society, in the absence of government action to prevent it, and his concept of the 'Spontaneous order" produced by the market, in contrast to centrally planned order.

REASON is proud to present the highlights of this conversation, to give our readers a better appreciation of one of the intellectual giants of our time.

REASON: Dr. Hayek, your book, The Road to Serfdom predicted serious problems for England and America should these follow the policies of welfare statism–how do you see it now?

HAYEK: Well, now, I don't think I have anything to retract. Perhaps I did see the danger nearer, but it is a common experience that these tendencies take a long time to work themselves out; on the whole, though, the world is following the path I was afraid it would. In a way the thing has become more serious just now because we are now being driven into a planned society by inflation.

REASON: Do you see any serious differences between movement toward what might be called a Marxist socialist society and toward a non-Marxist socialist society in the West?

HAYEK: The use of "Marxist" in this connection is rather misleading because Marx never really had a program for the future socialist society. Most people who follow his philosophy have committed themselves to a centrally planned system and have started out with a radical reorganization of society. But basically I don't think there is much difference between the traditional continental socialism and what you call Marxist socialism. Except of course that in recent times the Western socialists have discovered that many of the aims of socialism can be achieved by distributing income via taxation and have therefore shelved a great deal of their programs of socialization or nationalization. To that extent there is a difference.

REASON: Do you find the totalitarian or repressive aspects of the communist bloc or socialist societies an integral part of socialism, or can socialism emerge and sustain itself with reasonable success without these measures?

HAYEK: It could maintain itself but it's not likely to escape that development because I'm sure a totalitarian socialism is incompatible with a really democratic system. Once you have abandoned democracy, any authoritarian government in power will be driven, just to maintain itself, to take all kinds of repressive measures, even if it doesn't intend to do so from the beginning.

REASON: Would you say, then, that a traditional relatively open society such as Austria will experience this kind of repression in the future if it continues with its socialistic economic policy?

HAYEK: If it carried its socialistic economic policy very much further! But I don't think this is very likely; Austria will not adopt a policy of socialization of industries. 1 think the Austrian way is much the same as the Swedish and the Norwegian. These do not rely so much on the direct control of industry but on the redistribution of income by taxation and similar means. That need not degenerate into a completely authoritarian system. The danger always exists because such a process can be run efficiently only within an authoritarian system.

REASON: Would you say that, in this connection, Ludwig von Mises' analysis to the effect that a mixed economy must degenerate into a fully planned economy is not entirely correct?

HAYEK: Mises was a little careless in the use of the term "must." What he meant to say is that if these aims are persistently pursued, it would necessarily have that consequence. If you argued with him he would not have denied that of course it is possible to avoid this if you do not consistently pursue the ends.

REASON: Do you think in general Professor von Mises' analysis of the impossibility of economic calculation under the principles of a planned economy has been borne out in practice?

HAYEK: Yes. Very definitely, yes.

REASON: Do such places as the communist countries rely very heavily on the free world's economies to rationally allocate their resources, to calculate prices, and so forth?

HAYEK: They rely on the free world very largely for technological knowledge. Because for their allocation they cannot, and they haven’t solved the problem in the least, and the actual waste of resources due to lack of rational calculation is enormous.

REASON: Between the conditions in Austria and Hungary there is an enormous difference in workmanship, the quality of housing, of roads, of manufacture. Budapest is an extremely dirty and neglected place, although it has the potential of being an incredibly beautiful city. From your knowledge, is this a function of politics, or is it more a function of general culture and the non-political aspects of the country?

HAYEK: I’m convinced it‘s entirely a function of the economic system and I’ve been confirmed on this. At a time when it was still easily possible to move from West Berlin into East Berlin, we would have the evidence of the difference between the two sides of the border, sometimes on the two sides of the same street.

REASON: Let me turn now to another issue–the organization that you’ve been involved with, and you were the founder of–the Mont Pelerin Society. Do you find it an effective organization for the purpose for which it was designed?

HAYEK: For the purpose that it was designed for, very much. But many people believe it was intended as a propaganda society, which it never was. It was intended to provide for its members an opportunity to clear their own minds on problems they haven’t themselves intensively studied. Each of us is a specialist and we want to be able to talk to specialists in the related subjects who are approaching the problems frorn the same general point of view. It has been a discussion society and not a propaganda society and as such I think it has been extraordinarily beneficial. Considering what I myself have learned in the discussions with my fellow members I must be most grateful for the opportunities it has given me.

REASON: In recent meetings, it has been observed that there has been a mixture of so–called purists and not-so-purists concerning a commitment to the principles of the free market. Would you agree with this observation?

HAYEK: Of course, it has shades of difference, and probably even extreme wings, and perhaps we have even made one or two mistakes in electing particular people. But on the whole, there is fair unanimity on the basic philosophy. Most disagreements are legitimate and occur on points where one can differ on what way exactly to draw the line.

REASON: Do you yourself believe the organization should get larger? That is, does it aim for large membership or is it pretty much a given number with a very restricted and limited membership?

HAYEK: That’s a very serious dilemma and I don‘t quite know what the answer is. It did owe its effectiveness mainly to the fact that it was small. It now mainly serves the interests of people from overseas countries who have little opportunity to discuss their problems with people of similar convictions. And there are so many people who would benefit from being admitted into the discussion that expansion is very difficult to resist. At the same time, the expansion of the society has made it a much less interesting place than it used to be when it was small.

REASON: Concerning your own development, it’s been quite evident that in recent years you’ve dealt more and more with philosophy, law, even sociology instead of technical economics. What are the reasons for this change of your focus of attention?

HAYEK: The main reason is that I’ve come to the conclusion that the actual differences on solution of practical problems are much less due to differences in technical economics than in basic philosophy. In fact, even with people with whom I agree on technical economics I find that I often disagree on practical issues of policy. So the issues need to be considered at different levels.

REASON: As you know there is in America a small faction of Austrian economists who do disagree with most other economists on technical issues. Do you think the Austrian approach in economics will be renewed?

HAYEK: One would have to define “Austrian” in a very wide sense to regard that as a possibility: But in a way when people defend microeconomics against macroeconomics, this could be called Austrian economics. In this wide sense, revival or renewal of the influence of the quasi-Austrian school would be very desirable and I hope will be forthcoming. In the narrow sense, the specific Austrian tradition has on the whole merged with the Laussanne and the Cambridge tradition to become part of what is called neoclassical economics. What we can hope for is just that this neoclassical tradition again becomes influential, not its specific Austrian branch which constitutes a particular phase in the neoclassical development.

REASON: I am curious what you might think about something Milton Friedman told us in a recent interview. Dr. Friedman maintains that economics is as much a science as any other, even hard or natural science. Would you comment?

HAYEK: I agree with him to some extent. I shall qualify this by pointing out that as the degree of complexity of the phenomena increases, what science can do is more and more limited. In economics, and the social sciences generally, you deal with a field where on the one hand we cannot apply the method of physics and the mechanical sciences because the number of determining factors is too large, and on the other hand the numbers are not yet large enough to rely on statistics and probabilities. The intermediate field, between where we can master all the individual events and where we can deal with the probabilities of large numbers, is a field where the capacity to predict is necessarily limited. This is not because our theories are inadequate but because it becomes practically impossible to ascertain all the factual data which would have to be introduced into the theory to arrive at specific predictions. That's one reason I was led to the study of the problems of scientific methods and philosophy generally. I have done an essay on the theory of complex phenomenon which deals with that very problem. But it would not be possible to treat these issues here, of course.

REASON: That's true, but I would like to take up one point. Your answer has the underlying premise that the difference is only one of complexity and not one of type. There is now a resurgence of an argument to the effect that when we reach the social sciences we have a type difference of the sort that renders science itself inadequate or inapplicable in this area. Perhaps the subject matter of economics is such that by its very nature it defies treatment scientifically. Have you come across this type of view?

HAYEK: Yes, of course. But it's an exceedingly confused discussion which is going on about this problem. It depends on what is meant by a type difference. I would admit and even emphasize that the nature of observation is different when we deal with human action from what it is when dealing with phenomena not human. We constantly interpret what constitutes human action on the basis of our knowledge of how the human mind works, which makes our whole perception of man acting different in character from our perception of physical events. In that sense the data from which we have to start in the social sciences are different from the data from which we start in the physical sciences. But the next step becomes the same. Once we have assembled the data, I don't think the construction of theories is essentially different from the physical sciences. It's a point on which I am now almost entirely accepting the recent argument of Karl Popper. I agree entirely with him particularly since he has taught me that what earlier physical scientists claimed to be their method really was in fact not what they did.

REASON: It has been held that Popper is more relativistic than even he admits. That is, he is charged with holding that scientific theories have philosophical presuppositions built into them and that the emerging scientific conclusions have a "coloration" that is more philosophical than scientific. At least there are passages in Popper where he is very close to Thomas Kuhn. I was wondering whether you go so far as to say that the sciences, especially the social sciences, are so philosophically tainted that eventually we may have to give them all up in favor of a newer perspective once the dominant philosophical theories change?

HAYEK: Not at all, but there is a conclusion that I would draw. I think it is quite possible that we may recognize that the utility and power of the social sciences is more limited than we had thought. But they would still remain the best we have. I don‘t think it means we can abandon them for something else. We haven’t got anything else.

REASON: Would you contend that when a social scientist, say the best there can be right now, maintains that something is a fact of human life, of human social life, that there is an objective status to this fact, independent of our present point of view, our beliefs, about ourselves? Are there such facts that could have an integrity for all time?

HAYEK: I am sure there are some facts in this sense which must tie facts for all human beings with whom we can communicate, whose structure of mind is sufficiently similar to our own so that some intercommunication is possible. It may well be that there are other things which appear as facts or are only that subjectively, for a more limited circle who have more in common than merely that minimum which is required in order to be able to communicate at all. And it may well be that there are certain things which are facts only to people who make very specific presuppositions which you can actually point out. But there is an irreducible basis of facts which must be facts for all the people with whom we can communicate at all. This seems to be certain.

REASON: There are a number of philosophical inquiries in the 20th Century for which this topic is central. Post-Kantian philosophy has been tremendously concerned with this issue. One of the major influences in America has been Ludwig Wittgenstein who of course himself is an Austrian. Have you had any thoughtl on Wittgenstein, to whom there are some references in your book?

HAYEK: You probably know that Wittgenstein was a distant cousin of mine. I never knew him well, but probably knew him over a longer period than any other person now living. He was ten years my senior.  My earliest recollection of him was in 1917 and I had since seen him off and on on various occasions and have read his two main works very closely. All the other material which has been published from his manuscripts I haven’t. I don‘t think, frankly, that Wittgenstein’s work is very relevant to the social sciences. I’m not even sure whether the work produced during a certain phase of his life is anything as important as his present disciples make out. They’re very suggestive, deal with interesting problems, but I at least didn‘t derive much benefit from studying them.

REASON: I would like to ask you about your critique of rationalism. In your critique you seem to have opted for a Humian alternative, rather than an Aristotelian version of reason. Is this because of Hume’s politics or is it much more fundamental?

HAYEK: I think the basic thing is Hume’s general interpretation of society and human life. Hume has come closer to a critique of rationalism than any other author I knew. Again and again I‘ve found in Hume statements of ideas which I had already independently arrived at. I am impressed especially with Hume‘s account of the formation of social institutions of all kinds.

REASON: I was wondering whether in your interpretation of Hume‘s critique of rationalism you find it necessary to then take up his own analysis of human knowledge? Don’t you find yourself in the grips of radical empiricism and skepticism?

HAYEK: No. I think one can readily start with Hume and accept in the purely epistemological side the Kantian developments based on it. On the issue of the theory of knowledge, I am probably a Kantian more than anything else.

REASON: You would not believe that ultimately Kant‘s analysis still leads to a kind of subjectivism that is philosophically unacceptable? I realize these are complex issues. Since you have entered into philosophy very vigorously, our readers might be interested in how you would treat these more general problems.

HAYEK: I haven’t really formed fully developed views so as to articulate them. I have impressions on these issues but nothing I could readily state.

REASON: I should explain what brings on the worry about Kant. He turns out extremely formalistic, for instance, in his view of logic. Reality sort of "drops out" as inaccessible to human understanding. A variety of skepticism is left which, in the political realm, can undermine the self-confidence of the individual to deal with problems. It can lead to a call for collective undertakings and the entrusting of authority to some "important figure" as opposed to leaving the individual autonomous in a society. That's a large jump, but it should explain the worry.

HAYEK: Yes. I agree. It can do so and has done so in some instances. After all the later German idealists have become victims of exactly that, but I don't think that was a necessary development.

REASON: I would like to turn now to a particular issue of your own thought which has emerged in several contexts. Based on your essay "Not of Human Design but of Human Action," do you think the ideal of spontaneous order can be applied to all types of social problems?

HAYEK: It depends on what is meant here. Of course not all kinds of social phenomena are of spontaneous growth. A great many are deliberate constructions. All I would claim is that society rests to a large extent on structures which have not been deliberately designed, but which have grown up spontaneously, yet are indispensable for civilization, and on which much of our deliberate constructing rests or which is presupposed by what we deliberately do.

REASON: There appears to be a normative point to your analysis here, not just a historical one, to the effect that the spontaneous development of solutions to problems is a better, more successful, and more natural one to human life than those planned deliberately, in the organizational/collectivist sense. Is this on the right track?

HAYEK: I wouldn't deny that I believe it very often is true. Not always. To give you the most obvious example, I am still convinced that natural language as we use it contains a great many features which are most important to enable us to think and to communicate and which an artificial language would never contain. I mean by the difference, that as a result of long development there has been embodied in it more experience than any single man possesses and therefore could put into his constructions.

REASON: One of the questions that arises in connection with your idea of the spontaneous order, is whether diseconomies (as they are called) concerning pollution or land use could be left to that type of handling alone or do they require some more deliberate state action?

HAYEK: Oh, a very great many of them will require deliberate state action–you know after all this is a problem which has concerned economists for a long time. It has now been discovered by the public but this whole question takes one back to the old Cambridge tradition of Pigou and his successors who for fifty years have been dealing with exactly this problem. It's a question to what extent we can make the market system take account of these effects and to what extent this is impossible and we have therefore to find some substitute for it. It's still very largely an open question which probably has to be decided case by case–for which there's no general answer.

REASON: You wouldn't think, then, that those who maintain that everything from education to the roads and parks and even ocean beds can be handled in terms of the private property market system have really gotten a full case for their own conclusions?

HAYEK: I think they have made a very good case that we ought to leave the possibility open that the market may find solutions–I mean government should never claim a monopoly for this sort of thing because it may always be possible that somebody else may find a better method, but you can't be certain.

REASON: I see. Let me turn now for a moment to another issue in your own thinking–Professor Ronald Hamowy published an article in Il Politico some years ago in which he maintained that your idea that the rule of law implies only formal commitments, only formal procedural commitments, is not quite accurate and that these are not sufficient to retain what is necessary for a free society. In your book you touched on this criticism briefly. Could you elaborate it? Does your concept of the rule of law now admit of greater substantive implication?

HAYEK: Well I think Hamowy was right to the extent that my definition of the rule of law which would secure freedom was too wide. It's not sufficient that government coercion is limited to the enforcement of general rules because that might well include such things as control of religious beliefs and the like, but now I think the definition has to be extended. Government coercion is to be confined to the rules with a regard to conduct towards other persons. And in that form–that revised form–I think it would sustain my original position.

REASON: I would like to ask you about your evolutionary view of law. One of the things that you mention that does not seem to fit in that analysis, is for instance, murder. It seems to have been considered to be wrong in all forms of societies known to us. Do you think that there are any other limits on this evolutionary analysis of law? Are there some things that seem to transcend evolution, that are required in all human society?

HAYEK: I think a certain degree of truthfulness probably is also universally required and probably no society could function unless it could up to a certain point assume that people are truthful. But in most instances, even that of murder, I‘m not at all convinced that it is really universal.

REASON: As you conceive it, the evolution of society could not come to socialism. But isn’t the present state of affairs the product of evolution?

HAYEK: This can happen only when you regard the action of an authority which prevents evolution, and places its deliberate creations in its place, as part of the evolutionary process. I mean that evolution may create a situation in which selective evolution in a sense becomes impossible. I wouldn’t deny it.

REASON: The whole idea of evolution in human affairs (where deliberate planning is almost definitionally part of the human way) is somewhat paradoxical. It gives the impression of abandoning the very thing that is most human. Have you found this sort of criticism leveled at your views before?

HAYEK: Yes. But I don‘t fully understand what they really mean. What I object to essentially is the prevention of trying other ways than those which the majority regards as correct. So long as such alternatives can be tried, what I call the evolutionary process is still working. The way to stop it is to prevent people from trying alternatives. In all instances I mentioned before the government claims a monopoly on particular activities which are to be done in the government way only. Take one clear instance: education. If education is completely regulated by government you have excluded a great deal of the evolution of educational development and exploration. If government provides education and at the same time makes it impossible for people to get a different one, particularly if under the Friedman system of vouchers it can be had at no greater cost, then the evolutionary mechanism is preserved. So if the government makes a mistake it will be corrected by the alternatives which are still available.

REASON: You know there have been criticisms of the free society with the idea that it allows for degeneration just as much as development. Would you say that a free system would necessarily lead to the evolution that you are talking about? ,

HAYEK: In the free society, it would always be only part of the society which would degenerate. Maybe a very large part. But there would always be a nucleus available for a different development.

REASON: What are your views on anarchism in general–as an alternative to what many people have considered to be the dismal attempts to make political solutions apply to human affairs?

HAYEK: In the strict sense of anarchism, it is, in my opinion, wholly impossible to civilization. It is unduly optimistic as regards the intelligence it would require for people to sustain it. There‘s the kind of anarchism where if people were not compelled they would do all of the right things on their own. That I regard as factually unwarranted and highly unlikely. If it were possible, it would be a very desirable state. But that’s not the consistent type of anarchism, the one which believes that even if the instincts of the people were not good, somehow it would be desirable that the strong should subdue the weak. With that type of anarchism I find it very difficult to sympathize. I firmly believe, as I said before, that this sort of anarchism would not produce anything called civilization.

REASON: An area which has interested me enormously is the connection between ethics and the free society. Some who have sympathized with the classical liberal political philosophy have found it morally bankrupt. Such ideas as virtues, as norms, what an individual’s life should be as a human being, ideals in general have not gotten their due regard within the classical liberal, philosophical, political framework. How would you meet this kind of a challenge or criticism? It’s recently been voiced by Professor Irving Kristol at the Mont Pelerin Society last year where he challenged the classical liberal tradition. And people of the Straussian school of classical philosophy, Platonists and Aristotelians, although in enormous sympathy with the ideals of political liberty, have maintained that classical liberalism did not provide it with a sound enough moral foundation.

HAYEK: But why do they take it for granted that the political doctrine must include the view of what the individual shall believe on general moral issues? Isn't it enough that the political system makes it possible for the individual to have these ideas? It's not every political system which does. I think political philosophy is merely concerned with a framework within which certain developments are possible and it's not the task of political philosophy to prescribe to the individual the ideals he ought to hold.

REASON: I suppose the difficulty with that answer is that, be it as it may, the political philosopher still must answer the question: What is right for man in society?

HAYEK: Yes.

REASON: To be able to answer to that question doesn't he also need some knowledge of the answer to the question what is right for man in general, as a human being, independent of whether he's in society or living his private life? If he does not know the answer to the more general ethical question, how is he going to ground his answer to the political question?

HAYEK: Well, isn't the idea that society or the political area is bound to ethics, a view of what is right for man, almost incompatible with the idea that a man ought to have freedom to decide on what he regards as right?

REASON: 1 don't think that's the case because from the fact that you know what is right for man, it does not follow that you must make him do it. Those are two different issues–the justification for the answer to what is right, is one thing and the justification for action, I will make him do what is right, is another. So I don't think that that's an adequate response to that challenge.

HAYEK: But if you don't affirm the second question, but only the first, I don't see why it should be necessary for political philosophy to have any view at all about what is right for man–unless the political system does something about it, it needn't concern itself with what is right for man.

REASON: I don't know how to pursue this without getting into some of the difficult details. This issue has been a serious concern to a number of people who have tried to defend a free society–they have generally believed that the socialists, the collectivists, have taken over what the Christians used to have a monopoly upon, namely a concern for the moral welfare of the people. It's a "spiritual" concern, which has of course enormous political implications, but it is nevertheless a concern that they think is necessary. It seems that philosophers, thinkers in general, who propound a world view, must have some answer to those questions, and unless they do, they haven't earned their position as contenders.

HAYEK: I wouldn't deny that the moral philosopher must have such views, but that doesn't mean that there must be a unitary view on that subject for a society or that institution must be based on a particular moral view about what is right. In fact that the ideal society should presuppose a common view about what is right and the freedom for each to form his own view on the subject do seem to me to be in conflict.

REASON: I think that there is no conflict between those two, because I can have the view that you ought to do X and yet I can also have the view that you ought to be free to discover what you ought to do. Those two propositions are not logically incompatible. One can be for the freedom of the individual and still maintain that one knows what that individual ought to do.

HAYEK: Yes. That leads to a very difficult problem if one pursues it.

REASON: In general do you find that your ideas and the framework you embrace both politically and economically find a greater receptivity in America than in contemporary Europe?

HAYEK: It's difficult to say. Everywhere it's a question of very small numbers. I have very little knowledge about recent developments in the States–on the whole my impression is, but I may be mistaken, that there are more young people in England taking interest than either in America or on the European continent. But it may just be that they have gathered together and I meet them as a group when I go there, while in the States, Germany and Europe, it's only in Germany and no other country of the continent, where it plays any role. Those interested are still mostly isolated individuals who don't have much contact among themselves.

REASON: Is there any development of the libertarian philosophy in Italy and France and Switzerland?

HAYEK: I know very little about the Latin speaking countries. In Italy and France I don't think there is. There may be a little in Switzerland, but all I hear from are two groups in Germany–in Freiburg and Cologne–where a few like minded people have found together.

REASON: REASON magazine itself now has a circulation of about 12,000 people in the States and in about fifteen other countries there are trickles of a few people around. We have always been wondering just what is happening in Austria itself since it gave rise to some of the major figures in libertarian study.

HAYEK: Yes. But that tradition in Austria has been torn during the war and Nazi years. Only in Germany is there an independent tradition which started in Freiburg with Eucken and is still effective. But in the other Continental countries I just have no knowledge of any development of any significance.

REASON: Do you find that your work is known, for instance, in Salzburg and students seek you out?

HAYEK: It wasn't when I arrived. And even now there is not a great deal of interest outside of the few who have come to my classes.

REASON: You still seem to prefer it in Europe–am I correct about that? Do you prefer living here? You've been in Freiburg and you've been in Salzburg for several years!

HAYEK: That is very largely for purely practical reasons. I think if I were completely free to choose I would live in England in spite of present political differences.

REASON: In general, I am curious as to how you see the prospects of liberty in our times or in the future?

HAYEK: What I expect is that inflation will drive all the Western countries into a planned economy via price controls. Nobody will dare to stop inflation in an ordinary manner because as things are at present, to discontinue inflation will inevitably cause extensive unemployment. So assuming inflation stops it will quickly be resumed. People will find they can't live with constantly rising prices and will try to control it by price controls and that of course is the end of the market system and the end of the free political order. So I think it will be via the attempt to regress the effects of a continued inflation that the free market and free institutions will disappear. It may still take ten years, but it doesn't matter much for me because in ten years I hope I shall be dead.

REASON: It matters a lot for me and for most of our readers, I can tell you. Is it likely that in America there would develop social revolution as a result of all this? I don't think that all the various factions of the American society can be brought together into a submissive totalitarian hold that would be required for a massive social planning. Do you find that to be a reasonable idea?

HAYEK: Yes. But what will happen I cannot really imagine because it will be constant pulling one way and pulling the other for the reason that inflation will be regarded as intolerable. The only way really to stop it will produce unemployment which would be regarded as equally intolerable and people will resort to price controls without knowing that this leads into worse matters. When they recognize it they will scrap the price controls and we'll again be at the beginning of the same affair. I don't know how many times we can go through the same cycle and certainly it will mean an increasing disappointment with governments. The governments will be unable to give the people what they clamor for and it will certainly be a time of constant political disruptions. My wish is that people would have courage to face a period of substantial though not necessarily very prolonged unemployment, with all provisions for the unemployed, and restore the price mechanism. But I think the chance that this will happen which to me seems to be the only way out for free system, is very small indeed.

REASON: That's what I'm afraid of. But it's not going to be the first time that people have chosen a pathvery different from freedom. Dr. Hayek, thank you very much for allowing us to visit and talk to you. We wish you good health and thank you again.

18 Jul 14:52

Why Superman and Wyatt Earp Left Kansas But Still Loved the Place

by Nick Gillespie

In the hit movie Man of Steel, Superman, the last son of the planet Krypton, tells a U.S. Army general who questions his love of his adopted country, “I grew up in Kansas - you can’t get more American than that.”

And in many ways, you can’t get more Kansas than Dodge City, the legendary Wild West town whose main street is named after its most famous resident, Wyatt Earp.

Robert Rebein’s “personal history of Dodge City,” Dragging Wyatt Earp explores the deep history of the place (the Spanish conquistador Coronado scoured the area in the 1540s looking for the Seven Cities of Gold and George Custer got his first taste of defeat in the Indian wars in the 1860s while leading cavalry stationed in nearby Ft. Riley). But Rebein also evocatively reconstructs what it was like growing up in Dodge in the 1970s and ‘80s as the farming and ranching economy soured. The result is a riveting meditation not just on the Old West versus the New West but on how to treat the past with reverence while refusing to become trapped by it. For most of us, that’s easier said than done – and in the case of Dodge City, Kansas and many other isolated small towns still built on a 19th-century agricultural platform, it’s especially difficult.

But not impossible. By the start of the 2000s, writes Rebein, “Dodge City was again an open town....The population had grown by a third, most of it made up of young men come north from Texas and Mexico to work in the newly built [beef-]packing plants. Like the cowboys of old, they are mercurial and often well armed. Roughly a million cattle a year are slaughtered at Dodge City. The Roundup Rodeo, which headlines the annual Dodge City Days celebration has grown from a small, local affair to one of the richest on the Professional Rodeo Cowboys Association circuit. It is as if the Old West, that brief period in the town’s storied past, has returned, big as life in the [21st century].”

The author of Hicks, Tribes, & Dirty Realists: American Fiction after Postmodernism (2001), Rebein is professor of English and creative writing at Indiana University-Purdue University at Indianapolis (IUPUI). This interview was conducted by Nick Gillespie and took place over e-mail.

Reason: Dragging Wyatt Earp is, as you note in your subtitle, "a personal history of Dodge City," a town that exists only in myth for most Americans. This is the town where the Earp brothers and Bat Masterson earned their stripes as peacekeepers and Gunsmoke existed for 20 years. Dodge City's entire appeal is grounded in its Wild West past. Yet you write, "A New West has come to Old Dodge City. I think with a laugh, Am I the only one who likes this one better?" Explain briefly the main difference you see between the Old and the New West, the old and the new Dodge City.

Robert Rebein: In the Old West, pretty much everyone, Indians aside, was from somewhere else—the Midwest, the East, a South ravaged by the Civil War, and so on. It was a place where people went to seek a second or third chance at life. In the New West, it’s different. You still have the newcomers, and they are still chasing that same old dream of a second or third chance, but you’ve also got this layer of people who were born and raised in the region and who think of themselves as “natives,” which is a curious term when you think about it in the context of the region’s history. 

When I write that “a New West has come to Old Dodge City,” I am referring to this most recent wave of newcomers, most of whom are from Mexico and other parts of Central America, and the ways these newcomers are replicating patterns established in the Old West, where the whole idea was to get somewhere first and then make money off the people who came later. You know, Levi Strauss selling jeans to miners during the Gold Rush. Something very similar is happening in Dodge City even today. The people selling stuff to newly arrived immigrants today are the immigrants from 10 to 15 years ago, who have moved out of the beef-packing plants and have opened bars, restaurants, used car lots, and so on. I’m intrigued by this. I think it’s interesting and ironic on all sorts of levels.

Of course, in the Old West, the cowboy was revered and mythologized (even as he was relieved of his wages by gamblers and prostitutes), while the Mexican beef-plant worker is largely invisible, especially to those who live outside the region.

Reason: Among its several meanings, your book’s title evokes the pastime of bored teenagers with nothing to do but to drive up and down a town's main drag in cars or bikes (Wyatt Earp Boulevard in this case). This is reminiscent of scenes from movies and novels such as American Graffiti, Dazed and Confused, and The Last Picture Show. Now that small towns are connected to everywhere else via the Internet and cable TV and home entertainment, does that sort of public boredom exist anymore? Your account of the late 1970s and 1980s may have been the last moment before the great cosmopolitanizing (for lack of a better word) of the country.

Rebein: I think if you asked the teenagers of Dodge City if they were bored, their immediate answer would be, "Hell, yes, we're bored!" However, boredom takes different forms these days. One of the things I’ve come to realize by going places and reading from the book is that the 1950s and 1960s really were the Golden Age of "dragging Earp." In many ways, the version my classmates and I took part in during the 1980s was a weak imitation of a ritual that even then was passing away, and for the most part kids today don't "drag Earp" the way we did. On prom night, maybe, but not three nights a week all summer long the way we did.

But they’re still small-town kids at the end of the day, and their boredom still manifests itself in small-town, as opposed to suburban or big-city, ways. Dragging a keg out to a dried-up lake. Driving two hours each way to watch a football game. Working a couple of different part-time jobs during the summer because “there’s nothing better to do.” 

I’m someone who loves the Internet, and I’m on it all the time whenever I’m in Dodge City visiting, but I would challenge the idea that it has somehow connected Dodge City to places like New York or Miami. I’d say the connection is theoretical, at best. It’s one thing to watch shows set in a big city, it’s another thing entirely to actually visit these places or, better yet, work up the nerve to move there. I say this even though leaving is something most Dodge City teens are still raised up to do. We have a saying there. You’ve got two choices: Grow roots or grow wings. Mostly Dodge City is in the wings-growing business.

Reason: You write that Dodge City has always been about commerce. Cattle and crops in the old days, as well as human flesh and booze. Spaniards wandering the area looking for gold. Farming, ranching—typically done under less than ideal circumstances. Talk a little bit about how the economic basis of the city—and of Kansas—informs the character of the place. And how (or whether) changes to the economy have changed that character.

Rebein: It’s funny. When most people think of Kansas, they think of it as being a middling place—middle America, salt of the earth, that sort of thing. But in reality it’s a land of extremes. Drought, 50 mile-an-hour winds, 117 degrees in July, 20 below zero in January, etc. That’s the reality of the place. It’s true that in between these extremes, you will encounter some spectacular weather—pure, bracing air, abundant sunshine. George Custer got a whiff of that and fell in love, but later he encountered the extremes as well.

I mention all this because in a place like southwestern Kansas, the weather is a big part of the economic equation. If it doesn’t rain, which is most of the time, nothing grows. If nothing grows, there’s no cheap grain to feed cattle, and the price of beef skyrockets. Maybe that’s good for ranchers in the short term, but it’s bad for them in the long term. It rains again, and everyone plants a ton of grain, and prices fall, and you’ve got the opposite problem.

All this has a long, long history. What’s changed recently is that you’ve got all of this new technology coming in that has created a mini-energy boom. Massive wind farms, new ways of getting at the oil and natural gas, and so on. These things are changing the economic situation at the edges, but not in the middle. In the middle, it’s still the same old rain dance.

Reason: Your memoir eschews trauma for depictions of work. Your old man was a farmer and a rancher and an auto-shop guy. Your mother worked outside the home despite having seven boys to feed, clothe, and look after. How does your family's experience with long hours as a given reflect the values of the West? Or does it not really reflect anything larger than your family's values?

Rebein: When I started writing the book, I asked myself, “Can you have a memoir about a happy childhood?” As you suggest, a lot of memoirs catalogue trauma, and even those that don’t deal in trauma sensationalize divorce, drug and alcohol abuse, mental illness, and so on. I’m not saying that the authors of these “misery memoirs” are lying about their experiences, because for the most part I don't think they are. A lot of these childhoods really were terrible, and so when the authors who lived those lives sit down to write, that’s what they’ve got to deal with. That’s their material. 

But in my case it’s different. I recognized early on that my childhood, when I looked back on it, offered a whole different menu of themes. My parents have been married for more than a half-century. For the most part, they’ve lived very intense, fulfilling lives. As a child, I got to be part of this big family in which independence was stressed and everyone worked and when we sat down at the dinner table everyone got to talk. There was none of this “Shut up and eat your food.” 

It was fun. One of my brothers would tell a story about some movie he had just seen, and the rest of us would asked him questions about it, and that would lead to another brother telling a story about something that had happened to him that day and how he had responded, and then my parents would jump in and ask, in an almost detached, theoretical way, why he had responded that way and not this way. The basic idea we operated by was that the world was an interesting place and people were absolute freaks, you never knew what they might do, and to fail to note all this and learn from it was to fail to live your life to the fullest.

Of course, it wasn’t always easy. I remember times when my dad had millions out at the bank in loans and the weather was not cooperating and it looked like we might lose it all. As a very young kid, I got to see firsthand how he responded to that. I got to watch him and ask, “What’s he gonna do now? Is he gonna crack? Are we gonna make it through this rough patch?” I still think about those times. I still remember the things we did, things that were said. I remember once, a terrible situation, wheat harvest going badly, equipment broken down, storm rolling in. I was maybe 12 years old, beside myself with worry, and I asked my dad, “What are we gonna do?” And he just turned to me and gave me this weirdly calm look, almost laughing, and says, “We’re gonna try, that’s what. And if that doesn’t work, we’re gonna try harder. We’re gonna get up earlier and go to bed later.”  And when he sees that I'm not buying any of this he just shrugs and gives me this crazy one-liner that I will never forget. “There are very few problems in this life,” he says, “that cannot be fixed by getting up earlier in the morning.”

Now, you and I know that that’s bullshit on some level. If you’ve got paranoid schizophrenia, getting up earlier in the morning is not going to help you. Having said that, there’s no denying that having been exposed as a child to that attitude is a very powerful thing. One of the things I wanted to do in writing the book was to honor that kind of upbringing in an honest way, full of realism and devoid of nostalgia and sentimentality.

Was my childhood unique that way? I don’t think so. I think a lot of people, particularly in places like Dodge City, experience these things.

Reason: Kansas is routinely ranked as one of the best places to start a business. In 2012, it ranked 15th in CNBC's list of business-friendly places and 13th on Forbes' similar list. It's affordable, has generally low taxes, good schools, and the like. Yet it ranks in the bottom half of the states for population growth. You yourself have moved out of the place and betray no strong interest in moving back. What explains the state's inability to draw and keep people?

Rebein: If you want to understand Kansas you need to read a book by Timothy Eagan called The Worst Hard Time. It’s about the Dust Bowl, and much of the book takes place in Kansas during a time when the state was cycling out of one of its recurrent boom phases and headed for the disaster of the 1930s. 

The key to the book is dramatic irony. We all know what’s going to happen, but the people being depicted in the book do not. They’re getting rich on wheat, and then the price falls, and so what do they do? Plant more wheat. And then the price falls even farther, so they plant still more wheat. It’s a basic human response, but it’s chilling to follow when you know what’s coming. Then the rain stops and the wind starts blowing, and there’s nothing at all covering the ground, not a tree or a blade of grass, and it all starts blowing away. The people go broke. They pack up and leave. Towns that ballooned from 50 people to 5,000 in a decade witness the opposite trend, and most of those towns have not recovered even to this day. For town after town, the absolute zenith of population growth was 1929 or 1930.

There’s a lingering memory of all that, even today. While bigger towns like Overland Park, Wichita, and Lawrence, as well as the beefpacking towns farther west like Liberal, Garden City, and Dodge City, are thriving, the old farm-based towns have never matched what they were in 1929 or 1930, and the smart money says they never will.

I think a couple of lessons have come out of all this. The first lesson is that Kansas as a place is never going to be Texas or Colorado or Ohio. It’s too dry, too far from everything else, and the businesses that do best there—farming, ranching, energy exploration and production—do not require a lot of people. The other lesson is that if you do want to draw people and businesses to the state, you better try. You better understand that the lingering image of your state is a mix of the Dust Bowl, Superman, and The Wizard of Oz. If you want businesses to buy into you despite all that, you better put your best foot forward.

Reason: Fewer and fewer Americans are engaged in the actual cultivation and production of our food, whether vegetable or animal. According to the Farm Bureau, farm and ranch families comprise just 2 percent of U.S. households and only about 15 percent of the workforce is involved in growing, processing, or selling food. Is it a problem that we've moved away from direct involvement in the creating of the stuff we eat? Or, given the ardor required, is it cause for celebration?

Rebein: You won’t find much nostalgia for the “good old days” of farming and ranching in places like Dodge City. That’s more of a Midwest phenomenon. Take my father. He inherited half of 160 acres, including the house he grew up in. By the time he was [in his mid-40s], he had run that up to more than 4,000 acres. The man had seven sons, but he didn’t think any of us should be farmers. Why?  Because it was hard, for one. But also I think he understood that we needed to find our own way in life, just as he had had to find his way. He didn’t like the idea of giving us that life or laying it all out before us. As a result, he’s the last of a breed—at least in our family.

Still, I think there’s a loss of sorts here. I’m not very interested in politics. What interests me is experience. And what I do find a little disturbing about America today is the way that so many people are so ignorant about really basic experiences like growing crops or slaughtering animals for food or fixing a car. 

However, this lack of experience does not equate to a lack of opinions. In one of the essays in my book, “Feedlot Cowboy,” I spend a day in a big commercial feedyard where cattle are being fattened for slaughter. A feedlot is a really interesting place full of all kinds of interesting detail. To understand what’s going on there, you really do have to go there and experience it for yourself. Now that’s not something most people would want to do, and I understand that. What I don’t understand is how someone who has not done that can have so many opinions about things like animal welfare or environmental issues or illegal immigration from Mexico. All of those things are in play in a feedlot in ways that are not predictable or immediately apparent, but because of the way we live now, most people will never get that. They'll still have their opinions about it all, of course, but those opinions will be based, at best, on arguments, not experience.

Reason: You end your book with an account of a trip to the Boot Hill Casino and Resort, a low-stakes gambling operation that seeks to trade on your hometown's storied past. It's a ridiculous place in most ways, though you treat the trip with a mixture of warm feelings and get-a-load-of-this disbelief. Is the casino a metaphor for a town, a state—a country?—whose primary sense of identity comes from the past and that seems incapable of moving fully into the future?

Rebein: The term is “Old West tourism,” and it’s been a part of Dodge City’s economic playbook almost from the beginning. It’s hilarious to witness, but it's also a smart move in many ways. 

If you look at a map, you’ll see that Dodge City is nowhere near a big city or an Interstate highway. To visit the place at all requires a decision of greater magnitude than a decision to visit, say, Chicago. If you’re a business person, you ask yourself, “Why would anyone drive more than a hundred miles come here?” and the answer that comes to you is almost always some version of “To relive the legend of the West.” Given that reality, your next question will always be, “How can we get these people to (a) stay awhile, and (b) spend the maximum amount of money before they leave?” Gambling is a great answer to both of those questions, so it’s not surprising the town has decided to go in that direction.

What is surprising is the other moves the town has made. For example, inviting a semi-pro hockey team to play its home games in the town's newly built Special Event Center. Hockey? In Dodge City?  It’s a little crazy, when you think about it, but I guess there are limits to how far you can go with all the Old West stuff. At the end of the day, if you build a sports arena you’ve got to have a team, and if the only team going is a hockey team, I guess that’s what you’re going to have. 

But you know, it’s things like that that keep the place fresh for me. Dodge City is very aware of its Old West past, but it’s got a present to worry about as well, and I kind of like that in seeking that present Dodge City is still capable of a surprise or two.

18 Jul 12:41

19 Notable Quotes from the Book “Hedge Fund Market Wizards”

by Ivanhoff


1. As long as no one cares about it, there is no trend. Would you be short Nasdaq in 1999? You can’t be short just because you think fundamentally something is overpriced.

2. All markets look liquid during the bubble (massive uptrend), but it’s the liquidity after the bubble ends that matters.

3. Markets tend to overdiscount the uncertainty related to identified risks. Conversely, markets tend to underdiscount risks that have not yet been expressly identified. Whenever the market is pointing at something and saying this is a risk to be concerned about, in my experience, most of the time, the risk ends up being not as bad as the market anticipated.

4. The low-quality names tend to outperform early in the cycle, and the high-quality names tend to outperform toward the end of the cycle.

5. Traders focus almost entirely on where to enter a trade. In reality, the entry size is often more important than the entry price because if the size is too large, a trader will be more likely to exit a good trade on a meaningless adverse price move. The larger the position, the greater the danger that trading decisions will be driven by fear rather than by judgment and experience.

6. Virtually all traders experience periods when they are out of sync with the markets. When you are in a losing streak, you can’t turn the situation around by trying harder. When trading is going badly, Clark’s advice is to get out of everything and take a holiday. Liquidating positions will allow you to regain objectivity.

7. Staring at the screen all day is counterproductive. He believes that watching every tick will lead to both selling good positions prematurely and overtrading. He advises traders to find something else (preferably productive) to occupy part of their time to avoid the pitfalls of watching the market too closely.

8. When markets are trending up strongly, and there is bad news, the bad news counts for nothing. But if there is a break that reminds people what it is like to lose money in equities, then suddenly the buying is not mindless anymore. People start looking at the fundamentals, and in this case I knew the fundamentals were very ugly indeed.

9. Buying low-beta stocks is a common mistake investors make. Why would you ever want to own boring stocks? If the market goes down 40 percent for macro reasons, they’ll go down 20 percent. Wouldn’t you just rather own cash? And if the market goes up 50 percent, the boring stocks will go up only 10 percent. You have negatively asymmetric returns.

10. If a stock is extremely oversold—say, the RSI is at a three-year low—it will get me to take a closer look at it.8 Normally, if a stock is that brutalized, it means that whatever is killing it is probably already in the price. RSI doesn’t work as an overbought indicator because stocks can remain overbought for a very long time. But a stock being extremely oversold is usually an acute phenomenon that lasts for only a few weeks.

11. If you don’t understand why you are in a trade, you won’t understand when it is the right time to sell, which means you will only sell when the price action scares you. Most of the time when price action scares you, it is a buying opportunity, not a sell indicator.

12. Normally, I let winners run and cut losers. In 2009, however, as a result of the posttraumatic effects of going through the September 2008 to February 2009 period—talking to clients who are going out of business and seeing 50 percent of your fund redeemed is all very wearing—I got into the habit of snatching quick 10 to 15 percent profits in individual positions. Most of these positions then went up another 35 to 40 percent. I consider my pattern of taking quick profits in 2009 a dreadful error that I think came about because I had lost a degree of confidence due to experiencing my first down year in 2008.
13. As an equity trader, I learned the short-selling lessons relatively early. There is no high for a concept stock. It is always better to be long before they have already moved a lot than to try to figure out where to go short.

14. Do you know what happens in a bull market? Prices open up lower and then go up for the rest of the day. In a bear market, they open up higher and go down for the rest of the day. When you get to the end of a bull market, prices start opening up higher. Prices behave that way because in the first half hour it is only the fools that are trading [pause] or people who are very smart.
15. Now that you have switched from net long to net short, what would get you long again? – Buying. If all of a sudden stocks stopped going down on bad news that would be a positive sign.

16. Lots of companies screen as being “cheap.” I think that it’s easy to avoid value traps. The trick is to stay away from companies that can’t grow their cash flow and increase intrinsic value…As Buffett says, “Time is the enemy of the poor business and the friend of the great business.”

17. If I wrote a book about a strategy that worked every month, or even every year, everyone would start using it, and it would stop working. Value investing doesn’t always work. The market doesn’t always agree with you. Over time, value is roughly the way the market prices stocks, but over the short term, which sometimes can be as long as two or three years, there are periods when it doesn’t work. And that is a very good thing. The fact that our value approach doesn’t work over periods of time is precisely the reason why it continues to work over the long term.

18. The institutionalization of the market has shortened time horizons—it has reduced the window of time managers have to outperform. Most managers can’t wait for two years for an investment to work. They have to perform now. Their institutional and individual clients appear to demand it through their money flows.

19. The single best-performing mutual fund for the entire decade was up 18 percent a year, on average, during a period when the market was flat, yet the average investor in that fund lost 8 percent. That is because every time the fund did well, people piled in, and every time it underperformed, people redeemed.

Source: Schwager, Jack D. (2012-04-25). Hedge Fund Market Wizards. John Wiley and Sons. Kindle Edition.

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10 Jul 15:04

How Free Games Take Your Money

by janegalt

For a while, I played Cityville.  Then I realized that I did not actually enjoy playing Cityville enough to pay money to do so.  And it was costing a fair amount of money–probably $10 a month.  I pay less for magazine subscriptions that I enjoy much more.

June Thomas recently wrote about her addiction to Candy Crush, which leads you down the primrose path until–wham!–you need to pay them to play.  Well, technically, you don’t have to–you could just wait a whole half hour to try again.  But we’re not a waiting culture.  Thomas has paid and paid.  Like many of Candy Crush’s other customers.

In the last 10 days, I’ve spent $21, repeatedly drained my phone battery, and blown a deadline for the first time in years—all so I could play a game for which I have absolutely no aptitude. I’ve been tapping away at Candy Crush Saga on the subway (like half of New York), in front of the television, and, yes, in the bathroom for countless hours, and despite all that expense and devotion, I’m stuck at Level 38. There are more than 350 levels. My Slate colleague Rachael Larimore, a mother of three and the most sensible person I know, has reached Level 125. I’m 10 times more irresponsible than Rachael, but about three times less successful at a dumb phone game. That’s just not right.

I’m not alone in my addiction. About 45 million people play Candy Crush on Facebook each month, making it the most popular game on the site. It’s the most downloaded mobile gameon both Android and Apple devices, and it’s the top-grossing mobile app. Think Gaming estimates that Candy Crush brings in around $633,000 a day—more than $230 million a yearfor King, its British creator.

GamaSutra lays out the various tricks that game authors use to get you to pay for what is a nominally free game:

A game of skill is one where your ability to make sound decisions primarily determines your success. A money game is one where your ability to spend money is the primary determinant of your success. Consumers far prefer skill games to money games, for obvious reasons. A key skill in deploying a coercive monetization model is to disguise your money game as a skill game.

King.com’s Candy Crush Saga is designed masterfully in this regard. Early game play maps can be completed by almost anyone without spending money, and they slowly increase in difficulty. This presents a challenge to the skills of the player, making them feel good when they advance due to their abilities. Once the consumer has been marked as a spender (more on this later) the game difficulty ramps up massively, shifting the game from a skill game to a money game as progression becomes more dependent on the use of premium boosts than on player skills.

If the shift from skill game to money game is done in a subtle enough manner, the brain of the consumer has a hard time realizing that the rules of the game have changed. If done artfully, the consumer will increasingly spend under the assumption that they are still playing a skill game and “just need a bit of help”. This ends up also being a form of discriminatory pricing as the costs just keep going up until the consumer realizes they are playing a money game.

There’s more–much more–and you should read it all.  Free game manufacturers are getting very, very skilled at separating you from huge wads of cash in small, painless doses.  I’d been wondering how the manufacturers of a free game could afford to make television commercials for it.  Now I know.

And hey, more power to them–it seems basically harmless, since I’m not aware of many cases of people going broke on their Candy Crush Saga addictions.  But I still don’t like it, because I know that I am all too susceptible to the temptation to spend on “a little help”.  I only play games I’ve paid for now.  Oh, I’m fine with a game that gives me a free trial, and oftentimes I end up buying.  For example, after enjoying the teaser, I’ve spent tens of dollars on Magic the Gathering’s iPad game and expansion packs (and no, I don’t want to hear the nerd jokes, thankyouverymuch).  But I knew going in what I would be paying for–the game, not the help I need to play it through.   When a game starts asking me to pay them money to get help finishing a level, I exit immediately.  I know where this goes.

And I wonder if eventually, everyone else will too.  People may eventually grow wary of the “free game”, the way they did of the “free vacations” to time share resorts.   Psychological trickery only gets you so far when people watch their bank balances draining every month.

Update:  On Twitter, Daniel Walters suggests that given the collapse of Zynga’s revenue, the backlash may already be starting.  Good point, though Candy Crush saga appears to be counterevidence.  The takeaway may be that the methods for getting you to pay will become less transparent and more devious until people give up on free altogether.


10 Jul 14:39

DIY Instructions to Modify a Nerf Gun Into an Intimidating Automatic Sentry Firearm

by Liz Klimas

Taking an intimidating looking but relatively innocent Nerf gun — it uses foam darts for ammo after all — a DIY hacker has modified it with electronics into an automatic weapon.

Starting with a Nerf Vulcan, the woman with the username BrittLiv on Instructables, who admits to be “obsessed with Nerf guns,” ups the plastic gun’s game by outfitting it with a system that turns it into a sentry gun.

nerf sentry gun

(Photo: Instructables/BrittLiv)

What started off looking like a yellow and orange toy that retails for about $55 on Amazon, turned into a black firearm that tracks and shoots.

nerf sentry gun

(Photo: Instructables/BrittLiv)

nerf sentry gun

(Photo: Instructables/BrittLiv)

Using instructions from Rudolf Labs for the sentry system electronics, BrittLiv put a webcam on the gun with a computer to monitor the video feed. Motors allow the gun to aim and fire the trigger.

“It’s nearly impossible to escape it,” BrittLiv said in her video.

As an added twist, she even made sure the system was able to determine if a target might be wearing a shirt with an Instructables robot logo. If they were, they wouldn’t trigger a shot by the gun.

nerf sentry gun

(Photo: Instructables/BrittLiv)

“My main aim was for it to look awesome; which was difficult to achieve removing the front part of the gun,” she wrote. “But I managed to accomplish this without removing the barrel, and I’m really happy with how it turned out!”

Check out BrittLiv’s video showing the gun in action:

“It is really fun to see how these plastic guns turn grown men into small boys,” BrittLiv wrote of Nerf guns.

See more detailed instructions on BrittLiv’s Instructables page.

(H/T: Kotaku)

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10 Jul 14:17

QE Big Time Swing System Posts A Strong 1st Half for 2013

by noreply@blogger.com (Rob Hanna)
I’ve updated the Quantifiable Edges Big Time Swing System overview page with results through June 30. There have been no trades since then. The system only averages about 1 trade per month, so I typically update the results bi-annually. The QE Big Time Swing System has been on a roll in 2013.  It has had 6 trades, one of which was a carry-over from near the end of 2012.  Five of these trades have been to the long side, and one short.  All of them posted gains.  The signals produced a net return of 10.84% for SPY (including dividends, commissions of $0.01/share, and an assumed interest rate on cash of 0.1%).  The system also continues to make new equity highs.

The Big Time Swing System provides easy to follow mechanical rules. The standard parameters are not optimized and have performed quite well (they are the ones used for all performance metrics). There are only about 11 trades per year averaging 7 trading days per trade. All entries and exits are either at the open or the close. And to be sure you have everything set up properly traders may follow the private purchasers-only blog that tracks all SPY signals and possible entry/exit levels. This service is free for 12 months from the date of purchase.

For system developers looking for a system that they can use as a base to build their own system from, the Big Time Swing is an attractive option. It is all open-coded and comes complete with a substantial amount of background historical research. And since it is only in the market about ¼ of the time, it can easily be combined with other systems to provide greater efficiency of capital. Once you’re ready to try and improve the system yourself you can also refer to the system manual or the August 2010 purchaser-only webinar – both of which discuss numerous ideas for customization.

For more information and to see the updated overview sheet, click here.

If you’d like additional information about the system, or have questions, you may email BigTimeSwing @ Quantifiable Edges.com (no spaces).

10 Jul 14:12

Replace Your Afternoon Coffee with These Fast Short Squeeze Ideas

by chessNwine

pictures_of_the_day_17

Here are today’s results of my “High Beta Short Squeeze Plays” custom made screen inside The PPT. BYD looks strong if it can clear $12, especially. The screen isolates stocks which are heavily-shorted and tend to move fast in either direction, which means you want to be on the ride side of the trade make sure momentum is in your favor.

Members of The PPT and 12631 can click here to view and save this screen.

Please click on image to enlarge.

2013-07-08_1419

 

10 Jul 12:54

DoubleLine Webcast On "The End Of QE As We Know It" With Bond Rout Update

by Tyler Durden

Jeff Gundlach may not be present at today's DoubleLine live webcast titled ominously enough "The End of QE as We Know It", which will be led by the firm's Jeffrey Sherman, but the firm is sure to provide some guidance on how the recent bond rout has impacted bond funds, and what the future of risk duration is in a time when Bernanke seems hell bent on pushing everyone out of bonds and into stocks.

Listen to the webcast below:

 

Associated DoubleLine slideshow:

    


10 Jul 12:52

The Shipping Man

by noreply@blogger.com (Saj Karsan)
Value investor Monish Pabrai recommends The Shipping Man, for those looking to learn about the shipping industry. It's a novel, unlike the vast majority of the books profiled on this site, about a...

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03 Jul 15:47

Kyle Bass: China Could See ‘Full-Scale Recession’, Property and Asset Collapse Next Year

by Joe Koster
nathan.greenwald

interesting