How useful is GDP as a policy metric? Not very. Even the most rudimentary analysis shows that reliance upon GDP as a metric is embarrassingly naive.
In fact, even the simplest thoughts constantly remind us of the utter failure of the economics field to stay relevant to national demands, let alone national options. Let's try some added perspective. Look at our situation this way.
The culture of a nation-state is an organism, as alive as any one of it's citizens.
How do nation-states survive? By the agility of their national behavior, of course.
Given of course, that the agility of other nations changes, how do we keep the Adaptive Rate of our nation chugging along, within striking distance of the leaders in this endless marathon of human evolution?
Oh, maybe by not running the country into a ditch, or ruining our national "legs," "lungs" or "blood supply?" Perhaps by keeping all components well fed and operating to capability? And finally, by maintaining a Group Intelligence able to master all obstacles in what is not only a marathon race among diverse cultures, but a metaphorical combination of cultural marathon steeple-chase, decathlon and triathlon ... all rolled into one, and more?
The culture of a nation-state is an organism, as alive as any one of it's citizens.
How do nation-states survive? By the agility of their national behavior, of course.
Given of course, that the agility of other nations changes, how do we keep the Adaptive Rate of our nation chugging along, within striking distance of the leaders in this endless marathon of human evolution?
Oh, maybe by not running the country into a ditch, or ruining our national "legs," "lungs" or "blood supply?" Perhaps by keeping all components well fed and operating to capability? And finally, by maintaining a Group Intelligence able to master all obstacles in what is not only a marathon race among diverse cultures, but a metaphorical combination of cultural marathon steeple-chase, decathlon and triathlon ... all rolled into one, and more?
In simple terms, having a brain is an integral part of being aware of our own Force Readiness. Forget just readiness of subdivisions of our nation. Is our entire democracy ready to handle any situation that might occur? The ability to be mobile is useless without a method for navigating. Without navigation, even the best vehicle in a race can be simply run into a tree, or driven off the course, or set afire by carelessly idiotic behavior of the occupants. Group Intelligence Readiness is the most important part of Force Readiness, but we don't treat it that way.
Why do such simple things even need to be said? Because the average economist - and to be fair, citizen - behaves as though blissfully unaware of such common sense.
Let's skip straight to the point. Why do we in the USA build everything EXCEPT Group Intelligence? As a dynamic asset, shouldn't Group Intelligence be a far more valuable metric to manage than a crude, static asset like GDP?
What provides Group Intelligence, and how do we wield it? How could we measure and manage it?
Just as personal intelligence depends on the connectivity between the neurons in your brain, and how much you exercise those connections, Group Intelligence is held in the body of civil discourse which an electorate maintains. If we don't actively assess the outcomes of public discourse, how do we know if we as a nation are getting smarter ... or dumber?
None of us is as smart as all of us, but ONLY if all of us are periodically in discourse with all of us, despite relaxing into periods of brittle efficiency, tuned to a static, unchanging context. As soon as context inevitably changes, those nations able to generate the most public discourse, soonest, will always generate more succeed. Generating that kind of public discourse doesn't happen by theory alone. Like any other behavior, personal or group, effective Public Discourse requires prior training, and active practice, and actual maintenance. Do we even have any methods for achieving and assessing and then maintaining group public discourse - GPD?
Lest you presume that "everyone knows this," here's an example of how pervasively this simple concept is neglected among all professionals, in all fields, NO MATTER HOW MUCH EDUCATION HAS OCCURRED! Here's a paraphrased correspondence with a colleague currently attending a highly specialized research conference, and depressed by the experience.
So how would YOU propose managing our Group Public Discourse - GPD? Why can't we both have MORE of our Group Intelligence, and use it too? Continuously?
Lest you presume that "everyone knows this," here's an example of how pervasively this simple concept is neglected among all professionals, in all fields, NO MATTER HOW MUCH EDUCATION HAS OCCURRED! Here's a paraphrased correspondence with a colleague currently attending a highly specialized research conference, and depressed by the experience.
Research PhD: I am attending a conference in Vancouver (Keystone symposium on cytokines, inflammation, and immunity). Am depressed beyond belief. These people need to be chained to the wall and forced to reconsider Situational Awareness until they regain their senses. It kills me not seeing clearly what can be done practically about this sad state of civic affairs. I wonder how much a human community is different from a flock of parrots sitting and chattering on a large tree.
Me: So you're saying that they're savants about methods but blind to context and purpose?
Research PhD: Exactly. To an astonishing extent.
Me: That's a product of our prior education & training? We're all paid to DO stuff that's impressive locally, but irrelevant systemically. Isn't that a sign of a system that's outgrown it's assessment systems? If you think it through, that, eventually, always implies that we're too complacent to set national goals big enough to challenge our national capabilities? Assessment methods track goals, and our progress towards them. Without goals, feedback & assessment methods, we sit around posturing and nitpicking, letting our group agility go to pot.
Research PhD: It's also a product of our biology.
Me: Yet our innate biology is never a LIMITING factor. It got us this far. We're simply not leveraging it right now.
Look at it this way. Exploratory personal/cultural BEHAVIOR gives us ample degrees of freedom to find indirect paths around our biological leanings or biases. That's what we do. Our limiting biological features nevertheless allow the greater degrees of freedom that our cultural features allow, which we have certainly not yet tapped out, or even fully explored. "We" are far more than the sum of our parts ... IF we practice and tune our interactions.
Individual or component traits do NOT dictate everything about group behavior or group outcomes. [Even though most orthodox economists stupidly presume that they do.]
Unfortunately, those internal biases allow us to KEEP trying to follow obsolete habits.
In practice, however, there is no behavior in the real world that is not molded as a dynamic balance between conflicting, group influences.
So why don't our cultural practices ALWAYS overcome our initial bias to individual perspective, and thereby maintain enough Group Situational Awareness & willpower to KEEP outmaneuvering the sum of our always obsolete, individual habits? Simply a lack of practice at tuning our teamwork to be more than the sum of our individuals?
It's always a balance between complacency and motivation? Aka, ultimately, between loyalty to our grandparents & their culture (old personal/cultural habits) and loyalty to our grandkids' & their culture (emerging personal/cultural habits)? (Remember, Thoreau pointed out that our hoarded possessions - including our group habits - eventually possess us, as surely as it's shell limits a snail. Unless, of course, we actively navigate our own rate of change, by constantly selecting what patterns of individual and group habits to cull vs acquire & use).
Our biology actually protects us there. Simply asynchronizing our life cycles helps ensure that there is always a mix of all ages present at all times. Further, we generate diversity by default. Our biology leaves us with the simple part. Generate more cultural diversity too, and then select from it. What could be more simple?
I'm more worried about our lack of public discourse, which leaves our Group Intelligence unpracticed, and hence clumsy & in poor shape. We have more than enough diversity. We're simply not putting in the practice at rigorously selecting from it.
So how would YOU propose managing our Group Public Discourse - GPD? Why can't we both have MORE of our Group Intelligence, and use it too? Continuously?
12 comments:
For me GDP is just a measure of how quickly new spending dissipates to saving.
Even so, GDP numbed are skewed by the useless (parasitic…worse than useless) transactions generated by the financial-services industry.
Paul,
How would you suggest we make and "manage" investments in Democracy?
"Whosoever desires constant success must change his conduct with the times." - Niccolo Machiavelli
Ya think? Weepin' agile on an obstacle course!
why is this novel for anyone past Kindergarten?
our school system is a near total flop;
we teach people all kinds of stuff ... but also to NEVER use it, under threat of punishment!
(or worse, failure)
"Paul,
How would you suggest we make and "manage" investments in Democracy?"
Roger this question is way above my pay grade...I focus on what is possible or not mathematically and then try to see what that means wrt the system as a whole.
Of course, now that you've asked I will probably end up thinking about it.
I think to start the question must be stated as some list of problems to solve that would improve the distributional aspects of the system...it's obviously unstable when distribution is disproportionate.
"I think to start the question must be stated as some list of problems to solve that would improve the distributional aspects of the system...it's obviously unstable when distribution is disproportionate."
Distribution of the surplus is what macro aka political economy is all about. Different approaches determine different economic schools of thought.
See Matias Vernengo, The meaning of heterodox economics, and why it matters (May 18, 2011).
Paul,
My first response is to start thinking about how to alter citizen training so that they start off realizing the importance of adequately sharing resources.
There's no reason kids coming out of 8th grade couldn't be steeped in reality. What do you wish YOU would have learned by age 14?
Pass-through economies are the historical norm in 200K years of human family, band & tribal culture. It's only with recent institutionalization of capital-looting, and the resulting tremendous surpluses, that gross maldistribution has replaced pass-through. (6000 yrs or less)
Too many citizens feel personally insulated from their nation's fortunes. That's not historically normal - given our time span of 200K years.
So we've ended up with a society equivalent to an Army where the Generals hoard all the weapons, while still thinking that they have a functioning army to protect them. It's irrational precisely because of the lack of feedback.
We'll survive ourselves only if we alter our education and training habits?
"Distribution of the surplus is what macro aka political economy is all about." - Tom
Yes, and this is where the problem with mainstream macro lies…If they really do believe up is down, then the maldistribution is not on purpose…either way, stupid or evil, maldistribution over our entire lifetimes has been the norm, and getting progressively worse…as if we have always been "out of money".
"There's no reason kids coming out of 8th grade couldn't be steeped in reality. What do you wish YOU would have learned by age 14" - Roger
Ironically, I knew everything I needed to know to understand MMT macro when I was 14…but someone would have had to point it out to me first…at that age most of us aren't confident enough to believe our own instincts.
The way things are now, it appears that only about 1% of the population both believes in their own instincts and have learned the skills necessary (critical thinking) to figure things out for themselves.
I think this requires a combination of skepticism and curiosity…things that could keep you out of the "game" if you don't "play ball" like "they" want you to.
I sent an earlier e-mail from Roger to an extreme right-wing buddy, my best friend from high school…
"“I was part of that strange race of people aptly described as spending their lives doing things they detest, to make money they don’t want, to buy things they don’t need, to impress people they don’t like.” ― Emile Gauvreau
He couldn't comprehend why someone would "make money they don't want".
His brain is terminally atrophied…but he's happy I suppose.
"How would you suggest we make and "manage" investments in Democracy?"
Regardless whether it is a capitalist or communist system, best democratic policy solving outcome is to allocate investment in such a way as to maximize net profit, or surplus if you will.
The wage bill, which I guess could be translated into the Keynesian notion of aggregate demand, needs to not only sustain the productive working population at current levels of consumption, including necessary overhead items like education, healthcare, public services and leisure activities, but to upgrade it over time as productivity rises.
Meanwhile, capital investment in plant, machinery, equipment and technology (i.e. constant capital) needs to take an even larger share of the economic pie on an ongoing basis in order to assure that labor productivity continues to rise.
Finally, the combination of these two economic categories must be arranged in the appropriate ratios to guarantee that net profit as capitalists call it, or social surplus as the Marxists call it continues to rise relative to consumption plus investment.
Right, the question is how to treat the factors of production, land, labor and capital. Land (material resources) is, of course, primitive. Earth was here first and ecology is arguably the most important consideration since creaturely existence depends directly on it. Second is labor. Economics doesn't begin until after the hunter-gatherer stage that humans share with other animals. All production involves labor and land (natural resources). What humans add is technological innovation that enables the production of a surplus over subsistence, with then allows for division of labor and specialization. Capital is a relative late comer on the scene in human development, which enabled humans to pass from the agricultural period to the industrial (analogue) period and then to the knowledge (digital) period.
We are not doing so well that the problem is over-supply together with maldistribution, with negative externalities of human and environmental degradation. Those problems can be traced to how we treat capital (financial and real assets) relative to land (ecology) and labor (people).
This is supposed to be necessary (TINA) owing to the need for continued innovation, which supposedly requires personal motivation for entrepreneurship based on unlimited reward, as well as efficiency of capital, which is assumed to be the primary economic factor that therefore dominates the other factors, which only serve it.
Is that the only model (TINA) or even the optimal model for a life-support system for humanity on planet earth?
Rombach said: "best democratic policy solving outcome is to allocate investment in such a way as to maximize net profit"
Rom,
That's only 1 of two, necessary but not sufficient steps.
No amount of net profit helps if not optimally distributed.
Start with the example of Generals hoarding all the military weapons, while millions of soldiers have none. No matter how many weapons, mal-distributed, do they still have a functioning army?
Roger - Read paragraphs 2, 3 & 4 over again.
I did, the 1st time. And now again.
Can't you just say "adequate distribution" as a key part of Aggregate Demand?
Try handing out your paragraphs 2,3 & 4 in a WalMart.
We need to drill down to what little is sufficient for all to grasp, not how much distracts & confuses.
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