From the “Preface to the English Edition” of “The Theory of Money and Credit” by Ludwig von Mises: “All proposals that aim to do away with the consequences of perverse economic and financial policy, merely by reforming the monetary and banking system, are fundamentally misconceived. Money is nothing but a medium of exchange and it completely fulfills its function when the exchange of goods and services is carried on more easily with its help than would be possible by means of barter. Attempts to carry out economic reforms from the monetary side can never amount to anything but an artificial stimulation of economic activity by an expansion of the circulation, and this, as must constantly be emphasized, must necessarily lead to crisis and depression. Recurring economic crises are nothing but the consequence of attempts, despite all the teachings of experience and all the warnings of the economists, to stimulate economic activity by means of additional credit.

Mathematicians of the day.

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How A New President Could Reduce The Poverty Rate By 90% In A First Term by Francis Melton

Melton has written a series of articles detailing how the official poverty stats in the US are misleading due to faulty methodology and failure to include significant sources of income. In “How A New President Could Reduce The Poverty Rate By 90% In A First Term“, Melton summarizes his results.

Here’s how: by simply directing the Census Bureau to produce an honest measure of poverty, as opposed to the obviously fake and deceptive measures that they currently produce.

In September the Census Bureau came out with its annual report on Income and Poverty in the United States, covering 2014.  The so-called “official poverty rate” was reported as 14.8%, allegedly representing some 46.7 million people living “below the poverty line.”  The 14.8% rate actually was an increase from 2013’s 14.5%, although the Report admits that the increase was not “statistically significant.”

Still, with a trillion dollars or so of spending on anti-poverty programs at federal, state and local levels each year, and with an economic recovery (however feeble) now in its 6th year, how could the rate and number of people in poverty not be going down, and dramatically so? Instead, the number of people reported to be in poverty has increased since 2007 from about 37 million to 2014’s 47 million, and the reported rate has increased over that period from about 12.5% to 2014’s 14.8%.  On a longer time scale, the failure of poverty to yield to the extraordinary measures to end it is striking: a Census Bureau chart reproduced here shows that going all the way back to 1966 the official poverty rate started just above its most recent level and has never achieved any kind of downward breakthrough; the lowest recorded level was 11.1% in 1974.

The only way this is possible is that the government’s “poverty rate” long since ceased to be a bona fide measure of physical deprivation, and instead became part of the ongoing efforts of the bureaucracy to grow the government in general and the anti-poverty programs in particular.  The bureaucrats well know that the best tool to advocate for more anti-poverty spending is a continued high poverty rate, while any dramatic decline in measured poverty would cause many to conclude that the poverty problem had been largely solved and the enormous funding could be cut.  And thus, as more and more anti-poverty programs and spending have been added to the system, definitions have been contrived to exclude the spending from the measure of “poverty,” and surveys have been constructed to get answers that obviously omit large amounts of income and benefits received.

In an April 2, 2015 article in the New York Review of Books titled “The War on Poverty: Was It Lost?” Christopher Jencks of Harvard made what he called a “first approximation” of what would happen to the official poverty rate if just three adjustments were made: (1) counting in-kind benefits like housing and food assistance that currently are not counted, (2) counting the EITC, that currently is not counted, and (3) using the Commerce Department’s Personal Consumption Expenditure (PCE) index, rather than the CPI, to measure inflation since 1964.  In round numbers, USDA’s nutritional programs distribute about $110 billion per year; HUD’s budget is about $50 billion per year (which way understates the aggregate value of housing assistance); and the EITC distributes about $61 billion per year.  Jencks concludes that counting housing and food assistance benefits would reduce the official poverty rate by 3.0%; that counting the EITC would reduce the rate by another 3.0%; and that making the inflation adjustment would reduce the rate by 3.7%.  Thus, making those three adjustments would reduce the poverty rate by almost 10%, to about 5%.  Jencks does not give details of his methodology, and his estimate for the reduction from counting the vast housing and nutrition programs seems ridiculously small to me.  But let’s accept it as a first step.

The entire article can be read here.

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Fun With Math: How To Make A Divergent Infinite Series Converge by Kevin Knudson

Fun With Math: How To Make A Divergent Infinite Series Converge” is an interesting article about how to make the harmonic series converge by systematically discarding terms. Shockingly, the article appeared in Forbes.

I was having dinner with a visiting colleague this week when talk turned to what we were teaching this term. He mentioned the part of calculus dealing with infinite series (the bane of many students) and how really he just mentally compares everything with the harmonic series: 1 + (1/2) + (1/3) + (1/4) + … This series diverges; that is, the sum is infinite (contrast this with the convergent series (1/2) + (1/4) + (1/8) + … = 1). I then casually mentioned that if you take the harmonic series and throw out the terms whose denominators contain a 9 then the resulting series converges.

“I don’t believe that. How can that be true?”

That was my first reaction to hearing this fact, too, because we get so used to the idea that the harmonic series diverges that we can’t believe that throwing out a few terms, even infinitely many, will make a difference. And, there’s nothing special about 9; you can toss out terms containing any particular digit. In fact, you can pick any finite string of digits, toss out the terms containing those, and the result converges. With that set-up, let’s talk about what all this means and how we can prove it.

The entire article can be read here.

H/T Geek Press.

In the article, the author provides a proof of the divergence of the harmonic series. I showed a much simpler proof using the Cauchy Condensation Test.

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A Weekly Dose of Hazlitt: How Many Jobless?

How Many Jobless?” is the title of Henry Hazlitt’s Newsweek column from May 5, 1958. This is an excellent discussion of how the difficulties of determining unemployment data. The idea that anyone knows the percentage of those who are unemployed to a tenth of a percent is absurd.

When, in the 1930s, some economists began seriously
discussing just what is statistical “unemployment,” old
Hugh Johnson retorted in one of his angriest columns:
“Ask the man who’s out of a job!” But the problem does
not yield to mere invective. You can find lots of people
in Miami or Las Vegas who have no particular job
but are not worried. Millions of women and children
are without jobs. In fact, the population of the United
States is about 173 million, and as there are only some
62 million employed, there must be today not merely 5
million, but 111 million “unemployed.”

For the statisticians, however, the “unemployed”
consist only of those in the “labor force” who are not
employed. Just how is the line drawn between the 67.5
million who are counted as part of the labor force and
the 105.5 million who are not?

Here is how the U.S. Bureau of the Census describes
how it decides: “Monthly estimates of the population of
working age [14 years and over] showing the total number
employed, the total unemployed, and the number
not in the labor force are obtained from a scientifically
selected sample of about 35,000 interviewed households
in 330 areas throughout the country.” So the estimate of
unemployed is in large part based on a sample of only
one in every 1,400 households in the country.

Shifting ‘Labor Force’

The bureau goes on: “The unemployed total includes all
jobless who were looking for work.” How is the number
of such persons estimated? From replies to the interviews.
What constitutes realistically looking for work?
The interviewers must rely in large part upon the realism
of the replies. The labor force is not even a constant
percentage of the total (“noninstitutional”) population.
In July of last year it was 60.6 percent; but in December
only 58.1 percent.

Some paradoxical results emerge. The last monthly
report, for example, opened as follows: “Employment
rose by 300,000 between February and March . . . while
unemployment was unchanged.” How is that? The layman
would naturally expect that if employment rose
300,000 in March unemployment would drop that
much. The statisticians’ answer is that the “labor force”
increased by that much.

The “labor force” increases partly by census estimates
of the population reaching working age, etc., but
also partly by changes in people’s decisions. Suppose a
man has a good job, with a wife at home and a son and
daughter in college. He loses his job, whereupon not
only he, but his wife, his son, and his daughter start
looking for work. Because one person has lost his job,
four persons are now “unemployed.” So “unemployment”
goes up faster than employment goes down. There were
1.4 million more persons employed this March than in
1954; yet 1.6 million more were unemployed.

Defining Unemployment

Let’s turn now to the Department of Labor: “Effective
January 1957, persons on layoff with definite instructions
to return to work within 30 days of layoff and
persons waiting to start new wage and salary jobs
within the following 30 days are classified as unemployed.
Such persons had previously been classified
as employed. . . . The combined total of the groups
changing classification has averaged about 200,000 to
300,000 a month in recent years.” So the “unemployed”
have increased some 300,000 since the end of 1956 simply
by a change of definition!

Among the conclusions to be drawn from all this
are: (1) The government figures of unemployed are
merely estimates, subject to error. (2) Statistical unemployment
of several millions, or 3 or 4 percent, may exist
even when there is a definite “labor shortage.” (3) Not
every “unemployed” person is necessarily in distress. (4)
The existence of some statistical or “frictional” unemployment
is not necessarily an evil. There are always
some people who prefer to be temporarily unemployed
rather than accept or keep a job or wage that does not
suit them. In a free economy, 100 percent “full employment”
is never realized. But in such an economy there
is always a tendency toward full employment, if prices
and wages are flexible, without the need for perpetual

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The Tom Woods Show: Episode 544 – Where Do Liberal and Conservative Skepticism of Liberty Come From?

Some libertarians describe themselves as “fiscally conservative and socially liberal.” This is a completely wrongheaded way to think about libertarianism. In today’s episode, author Tom Mullen discusses what precisely it is that both groups get wrong that leads them off the liberty path. We are not a combination of the two, but something entirely distinct.

Click here for the show notes page for additional information.

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Improving Decision Trees Using Tsallis Entropy

The construction of efficient and effective decision trees remains a key topic in machine learning because of their simplicity and flexibility. A lot of heuristic algorithms have been proposed to construct near-optimal decision trees. Most of them, however, are greedy algorithms which have the drawback of obtaining only local optimums. Besides, common split criteria, e.g. Shannon entropy, Gain Ratio and Gini index, are also not flexible due to lack of adjustable parameters on data sets. To address the above issues, we propose a series of novel methods using Tsallis entropy in this paper. Firstly, a Tsallis Entropy Criterion (TEC) algorithm is proposed to unify Shannon entropy, Gain Ratio and Gini index, which generalizes the split criteria of decision trees. Secondly, we propose a Tsallis Entropy Information Metric (TEIM) algorithm for efficient construction of decision trees. The TEIM algorithm takes advantages of the adaptability of Tsallis conditional entropy and the reducing greediness ability of two-stage approach. Experimental results on UCI data sets indicate that the TEC algorithm achieves statistically significant improvement over the classical algorithms, and that the TEIM algorithm yields significantly better decision trees in both classification accuracy and tree complexity.

The entire paper can be read here.

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The Department of Agriculture Is a Welfare Scam by Dan Mitchell

I may have to change my mind. When asked a few years ago to pick which department in Washington most deserved to be eliminated, I chose the Department of Housing and Urban Development.

And HUD unquestionably is a cesspool of waste, so it certainly should be shuttered.

But the more I read about the bizarre handouts and subsidies showered on big agribusiness producers by the Department of Agriculture, the more I think there’s a very compelling argument that it should be at top of my list.

Indeed, these giveaways are so disgusting and corrupt that not only should the department be abolished, but the headquarters should be razed and then the ground should be covered by a foot of salt to make sure nothing ever springs back to life.

That’s a bit of hyperbole, I realize, but you’ll hopefully feel the same way after today. That’s because we’re going to look at a few examples of the bad results caused by government intervention.

To get an idea of the Soviet-style nonsense of American agricultural programs, a Reuters report on the peanut programs reveals how subsidies and intervention are bad news for taxpayers and consumers. Here’s the big picture.

A mountain of peanuts is piling up in the U.S. south, threatening to hand American taxpayers a near $2-billion bailout bill over the next three years, and leaving the government with a big chunk of the crop on its books. …experts say it is the unintended consequence of recent changes in farm policies that create incentives for farmers to keep adding to excess supply.

And here’s a description of the perverse and contradictory interventions that have been created in Washington.

First, the U.S. Department of Agriculture (USDA) is paying farmers most of the difference between the “reference price” of $535 per ton (26.75 cents per lb) and market prices, now below $400 per ton. A Nov. 18 report to Congress estimates such payments this year for peanuts exceed those for corn and soybeans by more than $100 per acre. Secondly, government loan guarantees mean once prices fall below levels used to value their crops as collateral, farmers have an incentive to default on the loans and hand over the peanuts to the USDA rather than sell them to make the payments.

Gee, what a nice scam. Uncle Sam tells these farmers welfare recipients that they can take out loans and then not pay back the money if peanut prices aren’t at some arbitrary level decided by the commissars politicians and bureaucrats in Washington.

In other words, assuming the peanut lobbyists have cleverly worked the system (and unfortunately they have), it’s a license to steal money from the general population by over-producing peanuts. And we’re talking a lot of peanuts.

Through forfeitures, the USDA amassed 145,000 tons of peanuts from last year’s crop, its largest stockpile in at least nine years, according to data compiled by Reuters. …That stockpile is enough to satisfy the average annual consumption of over 20 million Americans – more than the population of Florida – and puts the administration in a bind. …As peanut carryover inventories are forecast to hit a record of 1.4 million tons by end-July 2016 and as loans begin to come due next summer, farmers are expected to fork over more peanuts to the USDA.

Moreover, because the perverse interaction of the various handouts, there’s no solution (other than…gasp!…allowing a free market to operate).

Storing the peanuts in shellers’ and growers’ warehouses comes at a cost. Selling them could depress the market further and in turn would add to the price subsidy bill.

The rest of the article can be read here.

What is so pathetic about this is that such problems have been the norm since the beginning of US government intervention in agriculture. Hazlitt noted this numerous times in his Newsweek columns that ran for decades. I would also note that every few years there is a drive to “reform” federal farm programs, yet in the end, little changes and the hapless 98% of US taxpayers who are not involved in agriculture are always the losers.

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The Phony War on ISIS by Justin Raimondo

Raimondo wrote a good article about how the main players in Syria all have multiple and conflicting goals. The entire article is worth reading so I will only provide the money quote:

The West’s war on ISIS is completely phony. Our efforts, and those of our ally, Turkey, aim at overthrowing Syria strongman Bashar al-Assad – a goal we share with ISIS as well as our subsidized “moderate” rebel sock puppets. With Russia’s entry into the fight, the phoniness of the anti-ISIS campaign is underscored: Washington is clearly much more interested in countering the Russians than in undermining ISIS.

The “war on terrorism” was never about stopping terrorism: it was always about securing US global hegemony and crushing dissent on the home front. The Syrian civil war has proved that beyond the shadow of a doubt.

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