Monday, July 22, 2013

Killer Points In This Little Essay About Currency Operations

Commentary by Roger Erickson

Demand Leakages: The 800lb Economist in the Room

Especially the last paragraph.

Pity it will be neither widely read nor widely understood by Joe & Jane Sixpack, who want results, not explanations. Until currency operations are discussed as widely as any other mundane operations - and show up in Scientific American or National Geographic -  we'll likely continue to ignore, and put up with, the consequences.

Yes, most people will never even want to have to know how currency operations work, but that holds for basic operations in all other disciplines as well. The ongoing failure of economics and banking operations is an economic engineering issue within that particular engineering profession, and it represents a failure of epic proportions.

If physical engineers were letting real bridges collapse as often as fiscal/monetary engineers let Main Street economic bridges collapse ... they'd all lose their professional licenses within a week. In addition, engineering schools would lose their accreditation. Heads would have rolled long ago, and people would be in jail.

Which brings up a simple point. Why isn't every economist, banker and investment banker required to get a license to operate, just like physical engineers?

And why aren't more people like Larry Summers already debarred, banned from practicing on us, or in jail? Any credible answers? And, why is Harvard Economics still accredited, and it's faculty still being paid, not jailed, for malpractice?

The supposed field of economics reminds me of the general pitfalls of "Assigning models (preconceptions) a higher priority than observations" - Chuck Spinney. That's not what occurs in real sciences or real engineering fields. What's that say about economics? Not much, except that it's not an operational science. It seems to be more of an academic fantasy land, and shouldn't be allowed anywhere near any policy office anywhere whatsoever.

And yes, many people have been saying exactly that, for decades on end, even centuries. So why are so few listening to that simple message? Is there a criminal lobby protecting the economics discipline from reality? Or are getting exactly what we deserve for our sloppy approach to self-governance? Both, always. That's reality. Only two questions matter.

1) What are YOU going to do about it?

2) What are WE going to do about it?

Until we get serious about doing something, in local & then global steps, everything else is just data not yet applied to changing context.



12 comments:

Bob said...

The prevalence of PHd's suggest that economists are academics. Politicians are the professionals, usually lawyers and millionaires, with the odd engineer thrown in for variety.

Tom Hickey said...

Here's the breakdown by occupation of the 113th Congress. See pp 2-4

Bob said...

• 21 Members of the House and 1 Senator have no educational degree beyond a high school diploma

So there is hope for working class schmucks!

A search for 'lobbyist' in the document did not return results.

Roger Erickson said...

"Politicians are the professionals"

? Clowns are considered professionals too, you know. That's no reason to entrust them with national policy.

Bob said...

With some professions, it pays to misbehave or engage in mischief. The harm done by economic stagnation is not readily apparent, unlike a bridge collapse.

Roger Erickson said...

@Bob,

Yes, systemic frictions can look like local gain ... but ONLY if local/global feedback is unbalanced.

It's always a connectivity issue. Crime tracks regulation which tracks social instrumentation.

This ain't rocket science, but it's only solved if people are motivated to tune whole systems, not just the parts in isolation.

Tom Hickey said...

only solved if people are motivated to tune whole systems, not just the parts in isolation

Exactly and it's why the global economic system is badly broken, to the degree of creating social, political and economic dysfunction.

Bob said...
This comment has been removed by the author.
Bob said...

How do you motivate people to tune in? Mainstream media reports that the US is in a recovery...

Roger Erickson said...

"How do you motivate people to tune in? Mainstream media reports that the US is in a recovery..."

More communication converging to what little matters. That takes practice.

Basically, talk to everyone even more, but about NET OUTCOMES. That's how discussions and systems evolve. Networks evolve by running iterative feedback through the network. Human networks do that via iterative discussion?

Any other suggestions?

Roger Erickson said...

historical example

"the benefits to employees would far outweigh the disadvantages to employers"

http://www.adirondackalmanack.com/2013/07/lyon-mountain-and-ausable-forks-company-towns.html?

i.e., net improvement; not a difficult calculation to make, if adequately discussed

Bob said...

Marxists would argue that this historical example failed to see the 'big picture'.

They might ask:
What would be the effect of abolishing the wage contract in favour of mandatory profit sharing?

And continue the discussion from there.