I actually wanted to write something about economics as I read this great article today about industries that don’t see much productivity improvement over time and how that affects us currently.  Check it out.

Instead I will write about married life.  I have been married a little over a month; she lived with me for 3 or 4 months before we got married.

So how is it? Similar to how it was before, except a little better…that’s my answer.

People say shit changes after you get married.  I’m sure it does.  I change even if everything else stays the same, and it never does.  I haven’t been married long, so I guess you can check back in a few years and see if I still think its the “same but better”.

The main advantage is Companionship:  I’m a loner by nature, and can’t say I ever much felt lonely when I was un-married.  HOWEVER, sometimes you don’t notice something until its gone.  If I enjoy the companionship now, that must mean in some sense I was missing it before, even if I didn’t know it.

The main disadvantage is always having to play well with others (ie. your wife).  This can also be translated to:  lack of alone time.  If I am in a bad mood I inevitably take it out on her…not actively, just by way of the fact that I am ill and she happens to be there.  In turn, she is sometimes ill and, due to proximity, she takes it out on me.  So….in marriage you will always increase the amount of time you have to deal with ill moods by a large amount…double.  You deal with yours (1X), and you deal with hers (2X).  That’s unavoidable.  (She is getting the bum deal here.  I’m ill a lot.  She isn’t.)

There are also a couple of  neutrals to marriage:

Anxiety:

This is like the companionship thing…I never noticed the anxiety until the anxiety was gone.  When you are single you are always looking; you just don’t notice it.  It creates a mild, constant anxiety.  You need to be a little better at your job, have a little better car, be a little funnier than you are….all in service of the fact that you may meet a girl/woman whose standards you have to live up to.  You need to (and want to) be ready for this awesome chick who you are going to marry.  That’s stressful (even though I never realized it).

On the flip side, you have a new stress:  making sure you and your wife (and possibly kids) don’t end up living in the streets.  That’s self-explanatory, and stressful.

Help:

With two people, there should always be someone around to help out….so you shouldn’t have to do as much, and if you do you can always get help.  That’s crap.  Its true that you have help….but you also have MUCH more to do (marriage creates more work than it gets rid of).  Good thing someone else is around….I need the help.

In the end, I think marriage makes you a better friend, family member, employee….a better person.  You SHOULD have to deal with someone else all the time; otherwise you are too self-absorbed.

I’ve heard this before; I guess its just coming up more now as the jobs situation gets worse.

The private sector had 107 million jobs in 1999, and that’s about the number it has currently….a decade later.  There was an artificial bump before Y2K as companies hired a bunch of folks and bought a bunch of new computer equipment in anticipation that there would be some technical apocalypse, but still…10 years on and there is no net job creation.

That’s tough for the common man to swallow; after all GDP has increase from 9 trillion in 1999 to about 14 trillion today.  Are you telling me there those extra 5 trillion dollars created no net jobs?

Also, population has continued to increase from 279 million in 1999, to 304 million today.  So there are more people chasing the same number of jobs, while national income (GDP) went from 9 to 14 trillion dollars.

Where did the 5 trillion dollars go?

Here are two facts you can take with you (unfortunately not to the bank):

1) Trickled-down economics is shite:  It doesn’t trickle down.  A rising tide doesn’t lift all boats; it drowns those without boats.  Income inequality is the worst its been since WWII; Reagan, Bush I, and Bush II are responsible for most of that.  If you think income inequality doesn’t matter, then ok.  But it causes crime and ill-health.  That will eventually effect you; I don’t care how hard you try to sequester yourself away from the poor (which are increasingly the middle class).

2) What’s good for Wall Street is not good for Main Street. And its corollary:  What’s good for US companies is not good for the US. In the past, this was true.  Where did the 5 trillion dollars go? It went to China and India via US companies.  In fact, I wouldn’t even call them US companies anymore.  They are global; they are not beholden to any government.  If a government upsets them they could always pack up and ship operations (i.e. jobs) elsewhere and still sell their goods/services in the country.

Maybe that isn’t where all (or even the majority) of the 5 trillion dollars went; however, a large number of the missing jobs are not missing…..they are simply relocated.  My company, for instance, has not closed up shop in the US.  We still have operations here; its just that we are adding jobs 4 to 1 overseas.  They used to all be here.  So growth is still good…just not growth in the US; however, since it is a US company their corporate income/consumption still counts towards GDP.

I’m not happy about this; however, I sometimes feel like it is a snowball gathering steam down the mountain.  I guess the only practical advice I have to give about the future of the US economy (and thus YOUR livelihood) is:  Be conservative.  We will be the first generation to have a lower standard of living than our parents; accept it.  Our children will increasingly compete for jobs against people continents away who need to make less than we do to survive.  Its hard to win in that equation.

I have one suggestion that is practical and will help immediately:  Stop the wars.

I lived in the Middle East; they hate foreign occupation.  They hate it.  I mean HATE.  Its their hang-up.  The more we intervene, the most terrorists we create.  For those who say, “We aren’t occupying; we’re liberating/helping”….I will say it is simply a matter of perspective, and theirs is the only one that matters.

Stop the wars, and spend the money at home.  We are losing to a phantom enemy that we create more of the harder we try to root them out.

People and their values.  Anyway, 1st up today is:

Energy Efficiency

It’s a red herring.  ENERGY EFFICIENCY WILL NOT AFFECT GLOBAL WARMING.  It will make it worse.

Econ 101:  If you make something more efficient people will use it MORE, not less.  Take the cotton gin….before it was invented, we separated the seeds from the cotton by hand…it took a long time, and it sucked.  “The growth of cotton production, enabled by Eli Whitney’s cotton gin, expanded by the bale from 750,000 in 1830 to 2.85 million bales in 1850.  As a result of the ability to produce cotton faster, the South became even more dependent on plantations and slavery making it the largest area of the economy in the South.”  Get it?  Efficiency caused its use to explode!

Take the Printing Press.  Before books were made by hand, and only a few could read.  Then making books became faster and more efficient, and as a result there are so many books now people would laugh to think they were once scarce.  Getting better at making books simply means there will be more of them.

Take planes, trains, automobiles….whatever.  It doesn’t matter.  It will work the same.

Efficiency causes people to use something MORE, not less.  I fail to see how more efficient cars (or light bulbs or whatever) will change anything. It will not save energy.  In aggregate, it will use more energy (even if each individual unit uses less).

If you want people to use less energy we need to become less efficient at making it.  You could attempt to impose huge taxes to dissuade use, but people would create a gray/black market.  It wouldn’t make a difference in the end.

In short, there is pretty much nothing except population control or space ships (population control vis a vis leaving the planet) that will change what we’re doing.

As technology progresses forward we MUST use more energy.  There must be throughput.  It doesn’t go backwards.

Corporate Person-hood:

In court, Corporations often try to claim the same rights as we do.  They want free speech; they want to contribute openly to political campaigns; they do enjoy the right to contracts, to declare bankruptcy; they sue people/parties.  They behave in many ways like people, and when it suits them they claim any and all the rights entitled to people.

Here is the rub though:  Corporations aren’t people.  Primarily, corporations can’t die, and they can shift their definition of “person”.  You can put a person in jail.  You can punish them.  You can’t rightly punish an amorphous concept.  Arthur Anderson consulting just became Accenture.  Kill one, and it just shifts to something else.  No person enjoys shape-shifting immortality.

People are moral.  All of them are, even if their morality is not one we agree with.  Maybe better said, people HAVE morals.  Corporations do not…and they behave accordingly.

So what does this have to do with me?

Accountability:  I am thinking of a systemic solution, a single switch, to stop the seemingly runaway power of corporations:  make ONE person accountable.  Abolish the ability for the CEO and Board of Directors to hide behind corporate person-hood.  Make the CEO accountable.

Abolish corporate-person-hood…just one person at the top.  If you think the company has gotten too big for you personally to take responsibility for…then you need to spin-off a business. Sweat-shops….ONE person is responsible for that.  A corporation is not “following labor arbitrage to the lowest cost provider because “the market” (another non-human entity) demands it”….ONE person is supporting children working for nothing to make stuff we throw away after a few uses.  It affects that person’s morality.  It is the responsibility of that person.

Talk about a Renaissance of values: The only person it would make sense to hire in that case (when the actions of those you hire affect YOU personally)…..would be someone of impeccable values.

For instance, take the current banking crisis.  Tons of individual PEOPLE are underwater on their homes…they owe more than it is worth…yet they keep paying….because they have VALUES.  They made a promise to pay and they feel bad about not paying; they are affected by the guilt.

Corporations are NOT affected by any guilt or any morality.  They are also “underwater” on the derivatives of the homes…and yet they feel no compunction to pay.  They simply walk away, because they don’t care…in fact, they can’t care.  Not only that but they realize they’ll get more by lobbying Congress to get US, the people, to bail them out.  Why?  Because they can.

That kind of thinking, where you do something just because you can….is the same thinking sociopaths use. It is dangerous.

And yet these entities, who cannot feel, and for whose leaders we do not vote….rule most of our days.  We endure because they enable us a decent life (which I agree is the case); however, that does not change the fact that corporations enjoy near absolute authority:  They tell us how to dress, where to show up, what to say, what to do for most of our waking hours……is that not pretty much slavery?

The saving grace is that we can largely choose our job, which allows us to choose our slavery….a decent proposition I  think (I really do)….just align yourself with a corporation that largely shares your values……..Oops:  Corporations don’t have values.

Then again, most people don’t either when faced with survival.  Oh well.

Artificial Intelligence:

I had big hopes for this, in the sense that surely we need to be smarter than we are now…even if the robots take over?  Right?  Also, I thought it wasn’t that far away; I mean we can process the shit out of some shit with computers.  It won’t be long before we can simulate the processing of the human brain.

A few thoughts…..if we ever COULD simulate the processing of the human brain, how much energy would it take at this point?  Shit…my computer (one computer) requires a up-voltage converter, and runs so hot that it needs a heat sink to avoid melting the metal.

My brain runs at 98.6 degrees.  And it doesn’t require an up-converter at all.  I can shove a few beers and a slice of bread into it and it will run all day.  Imagine if you could shove a few leaves and a cup of water into your computer, and that was it?  That’s nuts!!!  The brain is, simply put, so far beyond anything we have now that its a joke.  Show me a computer that runs on beer and a plate of rice!?!?!!  Our brains are so energy efficient it is SICK.

Next:  Free Will

Isn’t that the issue?  Computers (despite their poor efficiency) can already process more than we can in most situations (though they aren’t as flexible).  But they can’t DECIDE to process something.  If they could I might simply stay at home and let my computer be curious about the data that I work with for a living.

So what is free will?  And why can’t processing devices (computers) that are already “smarter” than we are in some situations simply decide to do something?

Proposition:  The brain is a pattern recognition machine.  At its simplest, the brain stores information and turns it into patterns.  I didn’t invent this idea (see TED.com).  You have to take this one on belief somewhat.

Another Proposition:  The brain is leaky.  Computers work with 1s and 0s….and that is hard to do.  The smaller the circuits, the more the circuits leak…and 1s bleed into 0s.  The way you separate the feedback from the signal is to turn up the volume (energy throughput)…..so the smaller the processing circuits get, for the most part the larger we must turn up the energy to separate the signal from the noise.  This is true (no belief required).  The brain doesn’t work like that…it simply leaks, and trades accuracy for speed and efficiency….and the brain has trouble telling the noise from the signal.

WE ARE THE NOISE.

That is why there is no artificial intelligence, no free will in machines.  They don’t have enough noise;  they are TOO accurate.

Imagine a brain that is programmed to see patterns.  It sees lots of them, because the world is largely patterned (follows trends).  Because it errs though, it also sees trends where there aren’t any (optical illusions are an example).  It is well documented that the brain sees patterns where they don’t exist, it “fills in the blanks” where our sensory input doesn’t match previous patterns we’ve seen.

But there is one source of random noise that is always present….it is the leak in our brain circuits…the trade off between efficiency and accuracy.  From the day we are born the brain tries to process the ghost in our machine (the leak in our signal, which is completely random).  Because it is so good at seeing patterns…it invents a pattern….WE ARE THE PATTERN.…completely unique, un-reproducible, always shifting with new input (which produces new randomness, which causes us to shift more…but on the whole the brain creates a way to interpret that randomness, and refines that interpretation with time).  We tell ourselves to do different things in different situations (or the same situation) because it is somewhat random.  Free will is that randomness. We…are the randomness.

Anyway, that is my theory, and that is why there is no free will in computers, nor is there any “artificial intelligence” upcoming in computers:  they work too well.

To sum up:

While there is no apparent theme in my three topics…..the theme is that it pays to think about the things that go on around us.  If you take at face value all the information we’re fed…..you’re the same as dumb.

Basic assumptions are rarely questioned.  One has to be pretty astute to even understand what the basic assumptions behind something are.  If you don’t know; you can’t question.  Even if you do, you have to be inclined to care.

I’d like to question two basic assumptions today:

Assumption 1: Kids should go to college:

I disagree.  Some kids should go to college (by college, I mean a 4 year degree).  For most it is a gigantic waste of time/money and they should stop being misled into attempting it.

So which kids should go?  Speaking practically, the ones that should go are the ones that are currently getting something out of it, as in the ones, at a minimum, who are graduating (never mind whether the degree is useful).

If you are in the bottom half of your high school class…don’t go to college.  About two thirds of you never graduate.   70% of high school graduates now go to college.  Those numbers don’t add up.  Why go?  It leaves you in debt, and out of the workforce (a year of good work experience is worth far more than 1 year of random classes).  It is a waste of time.

With our battery of endless aptitude tests and 12 years of high school grades, we know with a high degree of accuracy which students will do well in college.  Quit misleading the others into thinking it is worth their time to go.  It is dishonest if high school kids aren’t told that college isn’t always a good idea.  It is simply avoiding reality.

That being said, people should always be able to bet on themselves.  If you want to go to college anyway, and beat the odds….please do.  Life is full of people beating the odds; however, make no mistake:   the reason we like those stories so much, and why they stick in our mind, is because they are exceptional, because they are out of the ordinary.  We all want to believe we can beat the odds; it makes us feel good.

However…..We can’t all be above average.  That is a fact.  We are not all future managers, CEOs, sports stars, rappers, singers, etc.  Those at the top of their profession are compulsively dedicated and often very talented.  Most of us are just not willing to work that hard and often don’t have the natural talent; accept it.  Also, from a statistical point of view, we just can’t all be at the top of the pyramid.  It is numerically impossible.

I’m not going to post here (lack of time) on what we do about it…the fact that inequality of all kinds simply exists, and it must exist, whether it is politically correct to say so.  I’ll simply say that if you want to be above average, you need to be aware enough of your position to realize that you can only be so because others are below average (you depend on them).  Be thankful they exist, and treat them well; tomorrow you may be one of them.

UPDATE 6/10/2010:  Someone else (NY Times) had the same idea I did.

Assumption 2:  Economic growth is good:

On average the US economy grows about 3% a year.  That seems good, right?

Yeah, its good in many ways.  Would 6% growth be better?  Sure.

No one really questions whether growth is good.  “A rising tide lifts all boats” right?  Uh…maybe.  Or a rising tide sinks those without boats.

Anyway, I’m not even going to broach that subject here.  Let’s take a step back…even further…way further…to the concept of 3% growth itself.  Is it even possible to grow at 3% forever?

No.

People are quite poor at understanding exponential growth.  We tend to conceptualize growth as linear; its a good rule of thumb that applies in most situations.

Does 3% growth look like this?

No.  That’s linear.

Here is 3% growth in a series of 150.  Think of it as a series of 150 years (but it is simply units, could be days, or miles, or whatever).

That’s a neat upward curve. Perhaps we think it would be good to grow like that?  The fact is that we do grow like that for the most part.

Here is 3% growth in a series of 350.

Here is where we start to see the issue.  It plods along at almost nothing for majority of the series and then towards the very end, it shoots off the chart (no pun intended).

That’s not sustainable.  All systems like this eventually collapse. A good analogy is bacterial growth.  It looks like this as well, and then, when it is about to shoot off the chart and grow out of the petri dish…it exhausts its food in a fit of growth, and the colony dies….quite quickly.

Growth requires input….we are growing something (the economy), and we need raw materials to make that happen.  Those raw materials MUST eventually deplete, as does the food in the petri dish.

Even if you give the bacteria more food or a bigger petri dish, it doesn’t matter.  The growth curve will eventually catch you.  You won’t be able to shovel in inputs faster than the growth.

I’m not being all environmental. I’m saying it is simply impossible, under any set of circumstances, to maintain 3% growth indefinitely.  We need to accept that reality and plan for it.

Speaking of reality:  The concept isn’t “Save the Planet”.  Trust me; the planet isn’t going anywhere.  We’re not even trying to save life on this planet.  Life is pretty resilient; it survives.  “Save the Planet for Humans” is a more accurate.  I guess that doesn’t fit as well on a bumper sticker?

If we are to believe science, we are an accident of the cosmos, which is itself an accident.  That’s a pretty big happenstance.

If we are to believe religion, the entire cosmos exists so that we can pass a few years on a lonely planet in a common galaxy in an unimaginably large universe….trying to prove that we believe that some guy who lived only 2,000 years ago was at the same time human and the son of a supreme being.

Neither is particularly plausible; though one improves our life, while the other causes as many problems as it solves.

“Why did you do all this for me?” he asked. “I don’t deserve it. I’ve never done anything for you.”  “You have been my friend,” replied Charlotte. “That in itself is a tremendous thing. I wove my webs for you because I liked you. After all, what’s a life, anyway? We’re born, we live a little while, we die… By helping you, perhaps I was trying to lift up my life a trifle. Heavens knows anyone’s life can stand a little of that.”  — Charlotte’s Web

We’re born, we live a little while, we die.

If you never read anything else, but understood that…I think it would be enough.  Children’s books are funny like that.

As we get older, we always think we understand things better than we did before, and we do….for what it is worth.  And I think it is worth not much.

When I was younger I enjoyed my lack of understanding, and I never could’ve born the weight of my life now (not that it is that bad).  Youth is good.

I am older and though youth leaves me, my ability to deal with my current life is a great skill.  Age is good.

So there.

“I returned, and saw under the sun, that the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favor to men of skill; but time and chance happens to them all.”  — Ecclesiastes 9:11

I have come to an agreement with life that allows me to bear it:

Life promises me nothing. My very best efforts may well lead to failure.  I could betray my family, my friends could hate me, my marriage could fail, I could beat small, cute animals….there is always some set of circumstance that will make you do what you didn’t think you would.  Judge if you’d like; today it is someone else, tomorrow it is you.  “….time and chance happens to them all”

Should I complain that my parents don’t like each other, that I don’t get along with my dad, that I work most weekends, that I have a freak injury that keeps me from playing a sport that is one of my sole stress releases, that my best friends all live relatively far away, that my mother complains to me about her crappy life, my sister (bless her heart) borders on histrionic, the family I’m marrying into has its own set of problems (which I now inherit), that my dog is dead (long live the Wizard!), my grandparents don’t even know who I am anymore, and I spend most of my free time attempting to learn about home repair so I can avoid paying some high school drop out more money per hour than I make with an MBA?

No.  I shouldn’t.  I am fucking thankful.

Why?

We’re born, we live a little while, we die.

Time and chance happens to them all.

We, my friends, are the winners (believe it or not).  The loser are all dead.  Be thankful.

I have some things to share with the 7 or so people who might read my website:

Why I am apolitical:

I’ve always stated that I am apolitical, neither democrat, nor republican, nor centrist, nor libertarian.  But I have strong ideas about politics and the role government can have in our lives…very strong ideas.

So as I watch the bailout of the financial system and the endless debate on healthcare reform everyone agrees in theory needs to happen…..I ask myself:  Why am I  not more political?  Here is why: because there is no substantive difference between the democrats and republicans.

We think of them at opposite ends of the ideological spectrum, but they are not.  They argue loudly about small difference they make seem big while rarely addressing anything substantive.

I’ll use the example of the financial system bailout:  Both the republicans and democrats wanted to bailout the financial sector; they just argued about the amount (both amounts being very large) and how to spend the money.  The Republicans started the bailout and then the Democrats inherited it, and continued the same basic policy.  Neither party addressed why it happened in the first place; no one (except maybe Ron Paul) wanted to discuss the structural issues of a monetary system based on debt and a fiat money controlled by unelected officials making decisions behind closed doors (the Fed).  Neither party has addressed the “too big to fail” issue (not only that, but the big financial companies have used the bailout money to buy up the smaller companies that failed during the crisis; they’ve actually become bigger).

Here is another example:  9/11.  Both parties wanted retribution.  No party was brave enough to say:  ” 2993 died today in a terrorist attack.  6,744 people die a day on average everyday, so to put that in perspective, America is not under attack.  This was high profile and a great tragedy, but to upend our way of life, to start long costly (very costly) wars on foreign soil with unclear means of success in which more men and women will certainly die…..to restrict and lose, in the name of increased security, the very freedoms and civil liberties we would claim to go to war to protect…..this is not acceptable.  If this is our response to terrorism, then certainly we have already lost.”

This brings me to my next point.

Why Republicans want healthcare reform to fail:

I do not think the Republican’s opposition to healthcare reform is 100% genuine and in the interest of their constituents (even if you include the healthcare companies as their constituents). Republicans want healthcare reform to fail because if the Democrats pass the reform the people want, the Republicans may not see the inside of the White House or a majority in Congress for a generation.

The point, is that neither party has a genuine interest in doing what is best for us….they have an interest in getting re-elected.  They pass laws based on that and little else.  Democracy works because the two can definitely overlap; if you pass laws people want, you get re-elected…..but their are other ways to go about it as well:  money can also get you re-elected (so pander to companies); being less-bad than the alternative can also get you re-elected (just bash the other party and say great things about yourself).  In short, there are alternative ways to get re-elected.

This brings me to my next point.

Why I want to go back to school:

I’ve been kicking around the idea of going back to school to get a PhD in Economics.  In the long term, its a good life to be a college professor, and in the short term it would allow me to follow these ideas to their natural conclusion.

Incentives.

People are neither good nor bad; they act, en masse, according to the situation in which they find themselves.  Modify the incentives and you modify behavior.

I would like to study some form of behavioral economics that would allow me to construct a system of incentives to help people avoid all these situations.

The economic system in which we operate works together with government/law to create the set of incentives that control our lives.  I would like to draw lines in the sand, to establish some facts and some subtlety:

The free-market can fail to reach optimal outcomes. We must accept that these textbook perfect market conditions don’t exist in the real world, and even if they did they would still produce monopolies, corruption, inequality, price fixing, etc.

Economy doesn’t exist w/o government….therefore government has a role to play…not as a spender of money, but as a regulator, a system-maker.  We need to accept that the invisible hand of capitalism produces anxiety, inequality and pits us all against ourselves.  This produces crime, mistrust and ill-health.  We don’t want to live in a country like that.

GDP is a horrible measure; lets replace it:  It promotes over-consumption, doesn’t differentiate between types of spending, and you can’t subtract from it.  Here is an example:  The US has the largest economy in the world with a GDP of 12 trillion (per year).  I can turn the tiny nation of Uruguay (or any country for that matter) into the largest economy in the world:  Let them borrow 13 trillion dollars from someone and spend it all on rat poison next year.  They will be horribly in debt and have a country full of rat poison…..but they will have a 13 trillion dollar GDP.  You might be thinking “that’s not how it works, surely!?!?!”…..but oddly enough, it is.

Monetary policy is the basis of our society, because money controls/influences most of our actions.  Fiat money created by debt is the structural issue that has caused our current crisis, and yet few seem to understand that (so no one addresses it).  Money systems fail (and empires fail with them).  To create a lasting society, you have to create a lasting money.  Our current system is unsustainable; it allows the government to confiscate our wealth through inflation.  Taxes are cheap in comparison.

I would like to clarify these ideas, to write my own Das Kapital; furthermore to elaborate it using agent-based computer modeling so that it isn’t all theory, you could potentially model changes to law/monetary policy to see the potential effect.  It would be akin to what weather forecasters use; imprecise, but better than nothing.

What do you think?  Quit my job and go back to school or continue as is?

Obi Wan said he felt a great disturbance in the force when Alderaan was destroyed by the Death Star.  He was right; however, he was also a movie character and a Jedi bad-ass.  Real people can’t sense stuff like that, but they do occasionally get a feeling they haven’t felt in years, like Vader did when Obi Wan was on the Death Star.

I have wondered often what makes someone old; why do people grow up?  They obviously age physically, but what happens that makes them think about things as an adult.  There are advantages to being an adult, and some to being an eternal adolescent as well.

Today I was transported backwards about 15 years for a few minutes.

I sat there for a second and went…..”wow, so this is what it feels like to be young”.  Young is full of anxiety and anticipation.  It is uncertain.

Adulthood is more self-assured, less explosive, wiser.  I think wisdom is often just the realization that everything is dependent on time; the answer today is not always the answer tomorrow….and yet we must still have answers.

Adulthood is repetitive.  Youth hasn’t had time to be yet.

Youth creates your pains.  Adulthood is learning to live with them.

Youth dreams and dreams are quick.  Adults do things, and that takes a lot longer.

Youth is subsidized by adults.  Youth is not-sustainable for this reason.  Adults realize that nothing gets done unless they do it.  Youths are mistaken in the amount of effort it takes to make life happen.

Youth is beautiful and beauty is very powerful.  Adulthood realizes beauty is persuasive, but not always useful.

Youth burns.  Adults realize nothing burns completely.  Be careful what you burn.

Youth lives in a world of ideas, since they have little yet of life to fill their heads.  Adults live in a more concrete world, as reality tends to swamp idealism as the years stack up.

Adulthood is overly cautious.  Youth is rash as it doesn’t yet realize how fragile and precious life is.

____________________________________

The point is that today I felt young again for a second as something old was made current and I was transported backwards in time.  What an odd feeling…like it was happening to another person.

My distant past (before Atlanta and grad school, those years when I traveled, and before)……is so far removed from my present life that I remember it like a movie.  That person I was no longer exists.  But he did for a few minutes today.

I can’t say much was better about the former Elliott, except that he was younger, better looking, more full of himself, and had more hair….I guess not everything is better now 😉

I pride myself for being a hack, weekend economist.  I admit it isn’t going to make me rich, but it is interesting.

It is easy, at first pass, to answer the “why did we bailout the financial sector” question.  The answer is because they are rich and have powerful lobbyists, and there is intuitively some truth to the claim that without a finance sector to grease the wheels of the economy, that it would grind to a halt.  So whether or not the companies are to blame for their own mess; we need them, so we have to save them….I guess.

But why do we need them?  Why, if too much credit got us into this mess in the first place, was there a deafening cry from Washington to get credit flowing again.  How could the disease be the cure? (BTW:  that was the premise of the bailout:  We want this bailout money to go towards lending.  Lending had stopped because risk couldn’t be accurately gauged.)

The question then becomes, “Why do we need lending?”  What is so important about the ability to keep credit flowing that we literally cannot do without it, even for a little bit, while the financial sector shakes out and healthier companies (those without exposure to bad debt) take the place place of the old financial sector?  How long could that take?  A year?

Why the cry from Washington of “We must act NOW,” as in RIGHT now.  They passed the TARP bill almost immediately with no rules attached, and started handing out money willy-nilly….compare that with healthcare: In healthcare there is a near endless debate over a change everyone agrees in theory needs to happen (overhaul of costly system) and for which there is a moral imperative (richest country in the world with 47 million uninsured citizens)….then TARP:  No debate, no moral imperative, very costly, no oversight/enforcement, benefits only a few.  How did that happen?

I think I figured it out, and I figured out a few other things in the process:

Money is debt.  That is why we need debt.  Without it there is no money….literally.  95% of all money in circulation is debt.  If all that debt were paid off……..there would be almost no money, and thus no economy.

The government doesn’t create money in our monetary system.  The banks do. They do so through loans.  To simply a bit, when you take out a loan, that is new money.  It isn’t taken from another person’s deposit and given to you.  The money didn’t exist before.  When the bank credits your account for the amount of the loan the money comes from nowhere…it is created with a digital keystroke. Money can be thought of as a series of IOUs (debt), which, if they are all paid back….equals zero.

(This answers the question as to why banks are so profitable.  They don’t actually need any money.  They give you money they just created from thin air, and then you have to put up the house/car/etc for collateral (which you may end up losing to them) and pay them back interest.  Interest on what? They didn’t risk anything…..they didn’t actually put up any money on their side.  They don’t stand to lose much, since they can buy insurance on loan failures and they get the collateral if you don’t pay.)

So back to the bailout:  Why must the debt keep flowing?  Why MUST banks lend or the economy comes to a screeching halt?

Two reasons:

1) Loans are always being paid back (which destroys money; money lent is money created, money paid back to the banks is money destroyed), so for the money supply to continue to increase, there must always be more loans going out than there are payments coming back in.  If loans don’t go out, the money supply contracts and deflation occurs. Deflation is a hard loop to get out of, and is definitely bad for the economy.

2) If I borrow a dollar from you and then you borrow a dollar from me and we later pay each other back, then all is good.  But what if we decide to charge interest (which banks do)?  There is only two dollars in our economy…the money simply doesn’t exist.  One of us has to go bankrupt because we won’t be able to pay.  The only way to pay is to borrow money from a third party (or borrow more your original lender).  This is how our economy works.  You always borrow the principal of the loan, but you must pay back principal plus interest.  Where does the interest come from? We borrow it (because that is pretty much the only way to create money).  Individuals may be debt free; that is true…but the system as a whole must always borrow an escalating amount because the system must always pay back principal plus interest on the original principal or people (the system) goes bankrupt. That is what we are seeing now.

And that is why lending must happen.  That is why we saved the financial sector.  Debt is money.  Without the debt/credit/banks….there is no money and no economy.

I think if everyone were a little more educated on how our money system works this would be a better country to live in.  All that shit they do in Washington is just smokescreens and old, self important white men thinking they know something.

“Permit me to issue and control the money of the nation and I care not who makes its laws.” — Mayer Amsched Rothchild

“If the American people ever allow the banks to control issuance of their currency, first by inflation and then by deflation, the banks and corporations that grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers occupied.” — Thomas Jefferson

Sometimes I think so.  It can’t be true though.  IQs are going up (Flynn Effect).  I do think people are uniformed, but certainly people have always been uninformed.  With the Internet providing more information that we can ever possibly wade though, and college attendance at an all time high, there is no excuse for being uniformed…moreso I believe that since all that information wasn’t even available in the past that people are actually more informed now that ever.

So…people are smarter and more informed than ever.  Why are they such idiots?

Hmm….well, maybe they are informed, but informed of the wrong information (which makes them seem dumb)?  That is a hard hypothesis for me to get my head around since if I were also misinformed then me commenting on other people’s misinformedness would be making the problem worse.

I know people are misinformed (including myself); however I know that; so not being an idiot might simply be knowing that you don’t know.  A healthy skepticism (even of yourself) is not exactly inspiring, but it is a useful bullshit detector.

I think people are apathetic.  They may be relatively well informed and intelligent; they just don’t give a fuck.  Republicans or Democrats?  Why does it matter since they both pander, lie, and misrepresent?  Fox or MSNBC?  Doesn’t matter.  They both spin. 

You just give up maybe.  After all, you still have to get out of bed in the morning…focus on what you can control.

Anyway, my bullshit detector is stuck permanently on, so here you go:

Health Care:

Lots of debate these days about this. 

Spin: “National Health Insurance will ration my care.  There will be long lines.  I’ll die on a government list waiting for my surgery.” 

Fact:  Yes.  Your health care will be rationed.  HOWEVER, IT IS ALREADY RATIONED….by money.  The rationing goes like this:  If you have money, you get care.  If you don’t have money, you don’t die on a government list waiting for treatment, you die at home unable to even see a doctor.

Why must health care be rationed?  You can’t provide unlimited use of something and expect that it won’t eventually consume all resources.  Everything is rationed in some way; most things are rationed by money (others by law, etc).

So does that mean you will not receive some services that you want, or if you do, then you may have to wait?  Yes.  That is what it means; however, bear in mind that this is ALREADY the case.  Public health care just changes the means of rationing.  Besides, as shown below with life expectancy, rationing doesn’t seem to change health outcomes.

Why not let money continue to ration?  I guess that is fine, except that our current course is unsustainable (costs too much), and what happens when you don’t have the money/lose your insurance (Medical bills prompt more than 60 percent of U.S. bankruptcies.)?  Are you willing to risk that?  US insurance is tied to jobs, and people change jobs a lot more than they used to…you will get caught in between at some point and find out that private health insurance is unaffordable (the same private insurance industry that says there is no need for reform). 

Spin:  We have the best health care in the world.

Fact:  People with money have the best health care money can buy.   On average we do not have the best health care in the world. 

In fact, we are 50th in the world in life expectancy.  Most/All the countries in front of us have some sort of government supported health care and so must also ration care in some form.  Despite that (or perhaps because of it), they are in better health than us.  Additionally, Cuba is 55th…with a life expectancy pretty much the same as ours (78 years).

Why is life expectancy an important metric?  Easy:  Shouldn’t all health care improve health?  Isn’t the ultimate reason for being healthy to stay alive?  You can argue about quality; however, quantity (life expectancy) is a good overall measure, and we are losing to other countries with socialized medicine.

Spin:  The Free Market will save us.  The answer to all economic questions is capitalism.

Fact:  I can’t even begin to tell you how fed up I am with the free market religion. 

Let’s talk about the free market incentives for the health care gatekeepers:  Insurance companies.  Ultimately, whether you get health care or not (at least in the US) is about whether or not you have insurance.  Try paying cash.  You’ll go bankrupt.  (The reason for this is beyond the scope of this article.)

Here is how the free market is supposed to work (I’m self-selecting an example that shows free market incentives in a positive light):  Mitsushiba (or any company) makes a TV.  It is the best TV, but it is expensive.  You don’t even really need a TV though; it is elective.  You can do without.  Still, Mitsushita is proud to offer an awesome TV at a good price, and they make a profit.  They make the profit by selling you what you want (the ability to watch TV) for a price you are willing to accept (after all, there are other TVs and in the end you didn’t HAVE to buy a TV at all). 

Now let’s examine the incentives of the health insurance industry:  HealthCon (or any company) sells health insurance.  It is expensive, and you HAVE to buy it (unlike a TV).  There are a few other alternatives (a handful of major players nationally), but their prices are all similar (expensive), so it doesn’t much matter which one you go with.  They make a profit as well, but not by providing you with the service you want (health care) in exchange for the money you provide.  They make a profit ONLY if they deny you the service you have paid for.  Let me repeat that:  Health insurance companies only make a profit if they don’t provide health care (the very thing they are supposed to be in business for).

In short, to argue that the free market can save health care is simply….misinformed.

Spin:  We need a limited public health option, if any.  Any public option that competes openly with the private health insurance industry will eventually lead to nationalized medicine.  (I’ve heard this poppycock many times as an argument against the public option.)

Fact:  Left unencumbered, the public option would indeed compete with private health insurance.  Why is that an issue?  Isn’t competition good?  The only scenario under which a public option competing with private health insurance would lead to nationalized medicine is if private health insurance couldn’t compete (ie.  people CHOOSE to go with the public option because it was cheaper or better). 

By arguing for a restricted public option, private insurers are basically saying “We couldn’t compete with an open public option.  It would drive us out of business.  We couldn’t make a profit.”  Really?  I thought anything government-run was inefficient and wasteful and private industry would always beat it.  I guess big business is all for competition, as long as it doesn’t compete with them.

Also, there is no competition presently.  Health insurance is an oligopoly…not much different in effect than an monopoly.

Spin:  Governments are inefficient.  They make a mess of any market they enter.  Private industry is superior.

Fact:  Let’s go one by one:  “Governments are inefficient.”  I agree they often are in practice, but that needn’t always be the case.  If you look at admin costs as a percentage of health care expenditures for other countries; theirs comes in below the US’s private industry number.  Also, it is a little two-faced for the health care industry to argue that governments are inefficent; private industry’s inefficiency (bulging costs) is how we got in this mess in the first place. 

“Government makes a mess of any market they enter”:  Again, no.  Think of the FLSA (Fair Labor Standards Act).  People (of any age) worked all day long in terrible conditions before the government stepped in to regulate.  Governments do make messes…..but so does private industry (think financial meltdown); again, it is two-faced to say governments mess up markets when the private industry also messes up markets even without government intervention…..which then requires large government bailouts on the taxpayer dollar.

“Private industry is superior”:  Taking my two examples above of  TVs and Health Insurance, Private industry is good at providing TVs (when that set of incentives is in place), but bad at providing healthcare (the incentives are wrong).

Spin:  Public health care costs too much.

Fact: Uhh…

Public health care will cost too much?  Seriously, it ALREADY costs too much.  That’s why we’re having this conversation in the first place.  If that isn’t the pot calling the kettle black.

We already pay for it; we just don’t get anything out.  If you mean public health care as it is in European countries, then it will cost LESS than it currently does.  The reason we will never see that is that any system we put in place now will have to pander to the current system, so we’ll end up with some messy compromise. 

Alternative Energy:

Alternative energy is important.  Oil is not sustainable (nor are humans).  We must make changes; however, some I think aren’t so well thought out.

Spin:  Biofuels are the future!

Fact:  If you mean turning corn, grass, or basically anything organically grown into fuel….its a terrible idea.  Food prices will rise worldwide as that land is used to produce fuel instead of food.  Those billions of people worldwide who barely have enough to eat care far more about corn or rice than they do about whether we can drive our Priuses around using biofuels.  You can’t eat a Prius.  You can quote me on that.

Spin:  Batteries dude!  

Fact:  Batteries are not power, they store of power.  I’m not arguing against more efficient batteries; I’m just saying batteries are not a substitute for oil….they are a complement.  Oil produces electicity, which is stored in batteries. 

To that end, oil itself can be thought of as a battery.  It is storing power in the form of hydrocarbon bonds that we release to do work (eg. make energy, run cars, etc).

The difference is that nature, in the form of oil, has already gathered the energy, already stored it in a fairly stable form.  In the case of batteries, we still need to provide the energy as input. 

Again, batteries are not an alternative energy; they are an alternative store of energy.

Myth:  Solar energy is the future!  Nuclear power is the future!

Fact:  Solar energy is the future!  All life on earth is powered directly by the sun (plants) or indirectly by consuming things that are powered by the sun.  Nuclear energy is the future!  If all things on earth are powered by the sun…..what is the sun powered by?  Nuclear energy. 

Bottom Line, we should take note:  Nature has a way of pointing out the most efficient mechanisms for things (except the wheel….how did it not invent the wheel?).

The Cost of Doing Nothing:

Spin:  “It would’ve been worse if we had done nothing.”  “We must act now; the cost of doing nothing is too great.”

Fact:  I hear this all the time in the media, in politics, in business.  Is the cost of doing nothing greater than the cost of acting now?  The answer is easy:  Impossible to say.  Untenable.

We hear the cost of doing nothing argument currently about health care; we also heard it with the financial crisis.

People use the phrase as a way to promote expediency.  “We must act now…or else!”  Or else what?

The suggestion (or whatever we must act now on) may or may not have merit, but often it is simply impossible to prove what would’ve happened otherwise.  What was the true opportunity cost that decision?  We don’t know in most cases.  You can search for analogies in the real world to try and see, but it is easy to argue those away.

In the end, the “cost of doing nothing” argument is a complete waste of breath.  It doesn’t signify anything.  It is unsupportable and does not promote dialogue.  If you must do something then the merits stand on their own, not as an alternative to “or else”.

I’d never heard that term before a few weeks ago, but I get the concept.

Sometimes jobs are not outsourced or offshored…they simply disappear and no one gets them…or at least that is the concept.

As I think about machines taking blue collar jobs, and computers taking increasingly white collar jobs….it is only a matter of time until no one’s job is safe.

The economic concept there is that the increasing technology is a good thing:  We don’t want people farming with oxen and mules.  We’d all be starving to death…not enough food to go around.

We also like the automation of more complex work.  We complain when someone’s job is replaced by an Excel macro, but was the work really that worthwhile anyway?

Also, I worked on one of those big enterprise platforms for years (like the ones that handle stock trades, account balances, cut paychecks, etc).  Trust me, without stuff like that our society wouldn’t exist.  If the virtual paper pushed by those systems became real paper that someone had to process….every single person in the US would be employed as a paper pusher.  That’s no life.

We need those things; every job that is “lost” makes our society better.

So what’s the issue?

Well, two things:

First, the easy one:  Offshoring is great because we save money by allowing Indians to program our software and China to manufacture our goods.  We spend that money elsewhere, hopefully in some productive pursuits in addition to enjoying a higher standard of living…and we’re a little better off on average.

Now it gets more conceptual:  China is learning to manufacture.  India is learning to program.  What are we learning?

The concept is that China manufactures cheap, basic goods, and India programs low level software…but where do you learn how to manufacture complex goods and high level software……you start with the cheap and low level.  We are exporting our expertise to them, and not replacing it here.

The second point is a bit further out:  Goods get cheaper as we get better at making them…and we are definitely getting better.  Economics also says that as the marginal cost of making one more item drops to zero, the cost can also drop to zero.

Will we ever get to zero?  Will things ever cost nothing (or close to it)?

It isn’t a dumb question.  We live like kings if you compare us to someone  200, 300, 1000 years ago.  The cost of stuff IS dropping…just not quite to zero, and we think up new crap to get, so we end up on the hedonic treadmill.

I used to think that would last forever, but I am not so certain anymore.  I’ve seen some real big ideas come out of bio-tech, alternative energy, nano-technology, artificial intelligence, etc.  If even a few of those hit……we’re in for a ride.

Let the price of energy drop to near zero and watch the price of all other goods drop dramatically.

Let bio-tech add 50 good, productive years to everyone’s life and watch the most productive of us invent/outsource/unsource things we never dreamed of.

The biggest (probably most far off) bets are in nano-tech and artificial intelligence.  Imagine a nano-tech printer that can “print” anything you can draw up (there is already work being done with these kind of general purpose printers).  Now imagine you didn’t even have to draw it up…you ask your artificial intelligence to think of something for you.

Some of this isn’t so far fetched.  The printer idea will come in some form.  So will AI to rival human intelligence.  There are already self-improving algorithms that you can give a problem to and generation over generation (all on a computer) it (being the algorithm) will get better at the task…in essence evolving.

When this hits the price of goods will fall to near zero, and basically humans will be worthless, vis a vis the Matrix and Terminator.

Anyone that thinks I am advocating that we attempt to  re-cork the bottle and protect jobs here at home or become subsistence farming Luddites misunderstands.  I am simply playing out scenarios.  Protectionism wouldn’t work anyway.  Societies rise and fall.  The US is on the downslope.  Nothing will change that.  As for humans being useful, frankly I don’t think it matters.  Just as societies rise and fall, so do species.  Perhaps it is time to give something else a chance.

Ok, I’m off to bed.