In 1971, the economist Stafford Beer brought the cybernetic revolution to Chile. His key perception was that economic decisions needed not only accurate, but timely information. So he set up a computer network and data analysis systems to empower the government's ministries without overloading them with irrelevant data.
In advanced economies, it's important for companies, banks and individuals to receive such information, too.
But nearly 40 years later, the USA needs to re-learn the lesson. The Federal Reserve ceased reporting M3 money supply data in 2006; accurate assessment of inflation is complicated by "hedonic adjustment" and periodic (and tendentious?) alteration of the types of item included in price surveys; the Bureau of Labor Statistics seasonally adjusts unemployment figures so that an increase can sometimes appear to be a decrease; nobody (not even the lenders) yet knows the full figures on bad loans and "Tier 3 assets"; it is not even clear how we should assess a nation's wealth (GDP per capita seems a misleading measure).
How can you navigate without up-to-date information? Even in the nineteenth century, Mississippi river pilots had to keep track of the river's changes, or risk getting stranded on new sandbars. And as John Mauldin reports, party political manoeuvering is stymying two appointments to the Federal Reserve's Board, at a time when the Fed most needs to concentrate on resolving the unfolding complex financial crisis.
Even given the right data, decision-making has become tougher. Increasing global interconnection and wealth transfer between nations means that normal cycles may be broken by epochal linear developments, so the past is now a very unsafe guide to the future.
We need clarity, direction and vision.
4 comments:
Stafford Beer - so old hat that I had to read him as an undergraduate.
Probably only because he was a leftie and so were most university teachers. But I love his use of cartoons and how apposite is the one at the bottom left of this post:
http://theylaughedatnoah.blogspot.com/2007/11/can-freedom-be-designed.html
... and how relevant are his ideas to the modern micro-managing State.
Wish I'd read the books I had to read.
Wish I'd bought lots of gold and sold up everything like you said S.
I feared I had gone too far but it looks as if not nearly far enough.
You're too kind,I was probably only right by accident. But like you, I'm into finance with feeling, and it seems as if that's about the only way to do it, since the facts are so elusive.
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