Friday, November 26, 2010
Thursday, November 25, 2010
Using our brains
It is common wisdom that the Soviet Union and associated states collapsed because of the failures of centralized planning. Then why do we allow and encourage the same kinds of structures in large corporations and government in the West?
The ostensible reason given is easy to defend: large entities can be much more efficient. As a secondary reason (not usually stated), large entities also mean a concentration of power and wealth.
The problem with efficiency is that it comes at a price. This is not only the loss of jobs and transfer of wealth, but more disturbingly the catastrophic nature of any breakdown. We saw it in 2003 with the power grid in the US, in 2008 with the collapse of the banking system, and in new cars, which are much more reliable and efficient than those from the 1970’s, but harder and more expensive to repair.
The key to preventing or mitigating future disasters in finance, oil, energy and water appears to be the opposite of our past practices. Rather than make everything bigger, we should take a hint from the designers of the World Wide Web, and decentralize as much as possible. This will take planning and cooperation, and a thought process unlike anything since World War II. Just consider: how many large purchases for homes, business or government consider the long-term costs of maintenance?
The ostensible reason given is easy to defend: large entities can be much more efficient. As a secondary reason (not usually stated), large entities also mean a concentration of power and wealth.
The problem with efficiency is that it comes at a price. This is not only the loss of jobs and transfer of wealth, but more disturbingly the catastrophic nature of any breakdown. We saw it in 2003 with the power grid in the US, in 2008 with the collapse of the banking system, and in new cars, which are much more reliable and efficient than those from the 1970’s, but harder and more expensive to repair.
The key to preventing or mitigating future disasters in finance, oil, energy and water appears to be the opposite of our past practices. Rather than make everything bigger, we should take a hint from the designers of the World Wide Web, and decentralize as much as possible. This will take planning and cooperation, and a thought process unlike anything since World War II. Just consider: how many large purchases for homes, business or government consider the long-term costs of maintenance?
Wednesday, November 24, 2010
Doing the same idiot thing ...
What makes the scientific community different from most groups of humans is the willingness of the group (but not necessarily individual scientists) to let go of emotionally-satisfying hypotheses when they are not supported by the data.
By contrast, consider education and government.
For at least two decades, we have been warned by business and government leaders that we need more graduates in the technical fields, just to sustain our infrastructure. Even in these tough economic times, the graduates in Engineering, Mathematics and Geology are finding good jobs. These disciplines require a great deal of Mathematics training to succeed, and our Education College experts hold to the philosophy that the key to that teaching is pedagogy. To that end, they have tried to make it easier to learn, to reduce the speed at which the students learn the material, or to dispense with material altogether. These huge experiments have not made a significant difference in the graduation rates in these subjects.
To my experimental mind, this suggests that the difference is one of innate ability, which is anathema to the John Dewey philosophy of education as a social equalizer. Instead, we just try to pump even more money into failing ideas.
In the case of government, we can look at tax policies. Since the 1950’s, the tax burden has shifted from corporations to individual taxpayers. Within that latter group, the past 30 years have seen a shift, where the lowest 50% or so pay very little in taxes, and the marginal tax rates for the wealthy have gone steadily down. All of these changes were supposed to make our economy strong, and have utterly failed. Yet, what is the current mantra? Cut taxes for business and keep the tax cuts for the wealthy (including preferential rates on capital gains and no estate tax).
While I can readily understand that the rich and powerful would have this view, what is it that makes middle-income and poor Americans support this idea?
By contrast, consider education and government.
For at least two decades, we have been warned by business and government leaders that we need more graduates in the technical fields, just to sustain our infrastructure. Even in these tough economic times, the graduates in Engineering, Mathematics and Geology are finding good jobs. These disciplines require a great deal of Mathematics training to succeed, and our Education College experts hold to the philosophy that the key to that teaching is pedagogy. To that end, they have tried to make it easier to learn, to reduce the speed at which the students learn the material, or to dispense with material altogether. These huge experiments have not made a significant difference in the graduation rates in these subjects.
To my experimental mind, this suggests that the difference is one of innate ability, which is anathema to the John Dewey philosophy of education as a social equalizer. Instead, we just try to pump even more money into failing ideas.
In the case of government, we can look at tax policies. Since the 1950’s, the tax burden has shifted from corporations to individual taxpayers. Within that latter group, the past 30 years have seen a shift, where the lowest 50% or so pay very little in taxes, and the marginal tax rates for the wealthy have gone steadily down. All of these changes were supposed to make our economy strong, and have utterly failed. Yet, what is the current mantra? Cut taxes for business and keep the tax cuts for the wealthy (including preferential rates on capital gains and no estate tax).
While I can readily understand that the rich and powerful would have this view, what is it that makes middle-income and poor Americans support this idea?
Tuesday, November 23, 2010
A snapshot of the Irish disaster
In their third-quarter survey of credit default swaps (insurance against debt default), CMA Datavision rate Venezuela the riskiest country by far (see first graph); but currently (Tuesday, 23 November 2010 16:30 BST) the sub-investment grade of Allied irish Banks (AIB) is much, much worse (second graph).
Some might say that supporters of the Euro currency system are throwing good money after bad. It is not a good thing to let the markets sense an emotional attachment to a position, and the bond traders may find a way to exploit this weakness, just as George Soros did when the UK attempted to preserve its link to the Exchange Rate Mechanism. The crisis of "Black Monday" (16 September 1992) merely made Soros a billion dollars and cost the UK Treasury £3 billion sterling.
DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.
Some might say that supporters of the Euro currency system are throwing good money after bad. It is not a good thing to let the markets sense an emotional attachment to a position, and the bond traders may find a way to exploit this weakness, just as George Soros did when the UK attempted to preserve its link to the Exchange Rate Mechanism. The crisis of "Black Monday" (16 September 1992) merely made Soros a billion dollars and cost the UK Treasury £3 billion sterling.DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.
Inequality, housing costs and resetting the economy
Previously published on the Broad Oak Blog:
____________________________________
Charles High Smith posts (as many times before) on the widening inequality of income and asset ownership in the USA. This time he uses it to explain the apparent recovery from recession: "The top 5% of Americans by income are responsible for 37% of all consumer spending-- about the same as the entire bottom 80% by income (39.5%)."
Among the useful links at the bottom of his post is one to an earlier article of his entitled "Why We Keep Getting Poorer: High-Cost Housing." Back in April, I took a graph (below, with some style additions by me) from Calculated Risk to illustrate that point.
It seems to me that if the USA (and the UK, and Europe generally) wants to get competitive with the Far East, our wages will have to drop. But they can't until our debts are reduced.
____________________________________
Charles High Smith posts (as many times before) on the widening inequality of income and asset ownership in the USA. This time he uses it to explain the apparent recovery from recession: "The top 5% of Americans by income are responsible for 37% of all consumer spending-- about the same as the entire bottom 80% by income (39.5%)."
Among the useful links at the bottom of his post is one to an earlier article of his entitled "Why We Keep Getting Poorer: High-Cost Housing." Back in April, I took a graph (below, with some style additions by me) from Calculated Risk to illustrate that point.
(adapted graph from Calculated Risk) - click on image to enlarge
It seems to me that if the USA (and the UK, and Europe generally) wants to get competitive with the Far East, our wages will have to drop. But they can't until our debts are reduced.
Debt default, or debt forgiveness, may be the only way out.
DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.Inequality, housing costs and resetting the economy
Charles High Smith posts (as many times before) on the widening inequality of income and asset ownership in the USA. This time he uses it to explain the apparent recovery from recession: "The top 5% of Americans by income are responsible for 37% of all consumer spending-- about the same as the entire bottom 80% by income (39.5%)."
Among the useful links at the bottom of his post is one to an earlier article of his entitled "Why We Keep Getting Poorer: High-Cost Housing." Back in April, I took a graph (below, with some style additions by me) from Calculated Risk to illustrate that point.
It seems to me that if the USA (and the UK, and Europe generally) wants to get competitive with the Far East, our wages will have to drop. But they can't until our debts are reduced.
Among the useful links at the bottom of his post is one to an earlier article of his entitled "Why We Keep Getting Poorer: High-Cost Housing." Back in April, I took a graph (below, with some style additions by me) from Calculated Risk to illustrate that point.
(adapted graph from Calculated Risk) - click on image to enlarge
It seems to me that if the USA (and the UK, and Europe generally) wants to get competitive with the Far East, our wages will have to drop. But they can't until our debts are reduced.
Debt default, or debt forgiveness, may be the only way out.
DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.
Subscribe to:
Posts (Atom)