Friday, May 23, 2014

MacroEconomics Is Driving Decline In Policy Agility ... Largely Because It Is Still Rife With Illogical Fallacies Of Scale?

(Commentary posted by Roger Erickson)



A culture that no longer listens to the pain of its distributed aggregate .... can not stand.

Bill Mitchell's long review of most documents related to the evolution of the euro currency - and ECB policy - is truly astonishing reading. Most people even vaguely aware of context agree that euro-currency policy has been an unmitigated, self-imposed disaster for citizens of Europe, but the details of how it occurred are fully known to few.

Bill's exhaustive review of those widely distributed details is a lesson in humility, for it clearly shows that none of us is as smart as all of us, and that there is no apparent limit to the idiocy produced by small operators, committees or whole agencies when they are allowed to become isolated from aggregate feedback.

It can be difficult to quickly orient citizens to the magnitude of this catastrophe and its pathetically mundane origins, but I'll try.

The whole story of euro-policy reminds me of the rare cases of humans where those parts of their sensory systems which mediate pain signals become entirely dysfunctional, and they consequently suffer total loss of all pain feedback.

 At first blush, feeling no pain may sound enticing (or even briefly feel that way). Closer review, however, reveals the condition to be a total catastrophe for the "macro" physiology. Without the distributed feedback - minute to minute - of signals across the pain spectrum, from minor to major, every distributed malady goes undetected and uncorrected, and the consequences therefore rapidly compound. Stubbed toes and burned fingers pile up in alarming frequency, strained ligaments, bone bruises and even minor issues such as sun burn fail to trigger the most rudimentary cautions and timely, corrective actions. Then it gets worse. Rapidly! Without the ability to sense distributed pain, much of seemingly rote, programmed reflex & habit has to be left to conscious planning, which never keeps up. Historically, people with this thankfully rare malady usually suffer much and die very young, from their compounding injuries and infections.

Perhaps readers can grasp the analogy to a culture which allows its distributed feedback mechanisms to decline, and thus lets its policy agility also lag. Minus the ability to keep track of the economic pain of all citizens in real-time, cultural devastation can rapidly compound, while the isolated "Central Planners" go blithely on with their "let them eat cake" policy processes.

We know how loss of sensory feedback can occur in physiologies, but how do seemingly increasingly intelligent human aggregates allow cultural feedback to decline so catastrophically? That is one of the themes exposed in Bill Mitchell's latest review installment, where he returns to the - unfortunately quite common - phenomenal examples of a particular bit of illogic known as the Fallacy of Composition. That is itself an unfortunate name, given for the thinking process of the author expressing the illogic. Fallacy of Scale seems much more appropriate, since it refers to the impact on the recipients.

In a cultural fallacy of scale, individuals naturally START OUT thinking mostly of what works locally for them, and they then - IF NOT TAUGHT BETTER - tend to initially presume that what works for them individually works for everyone, no matter how many people accumulate in a growing aggregate. That's how aggregates with flawed educational practices may quickly accumulate illogical oddities such as excessive Libertarianism, or the classic example of sports. "If I stand up at a sport stadium, I'll get a better view. THEREFORE, if we all stand up, we'll ALL get better views." And all this despite truly phenomenal advances in nearly every single, isolated specialty!

In the case of macro-economic policy, Bill Mitchell uncovers repeated examples of idiotic policy errors directly exhibiting the Fallacy of Scale. We already know that perseverance of that fallacy directly correlates with lagging feedback, isolation and/or outright Control Fraud. Of course, those conditions all feed upon themselves, in a maladaptive example of autocatalysis known as Gresham's Dynamic.

The question is what to do about all this cultural and policy pathology, which has persisted for 80 years DESPITE being graphically exposed and thoroughly documented in the 1930s. At least a few lessons seem clear. First, never assume that YOUR feedback isn't necessary for preservation of functional democracy. Second, never send ONLY politicians and lobbyists-for-the-1% to a democracy fight. Those two messages embody the same concept. A house that no longer listens to the pain of its distributed occupants .... can not stand.

One remedy? Always change horses in the middle of a bad dream.*

*Note that that does NOT mean simply switching endlessly between two, equally unresponsive horses. It's past time for "neither of the former," but rather many new, unencumbered faces.









10 comments:

googleheim said...

In the days of Reagan we would say "Let them eat Jelly beans..."

From Jello Biafra proprietor of the Dead Kennedies

Ralph Musgrave said...

A problem with the "lack of pain feedback caused the problem" theory is that there was no pain for the first ten years or so of the Euro: it all seemed to be going well. Or have I missed something?

Roger Erickson said...

Maybe this sentence, Ralph.

"At first blush, feeling no pain may sound enticing."

I'll leave it to you to imagine that a cultural blush involving hundreds of millions may easily last 10 years, before the equally distributed dull surprise starts to set in.

Roger Erickson said...

The various experiments in scalable democracy, like Greek states, the Roman republic, and the Magna Carta began the process of transitioning from tribal-meritocracy to nation-state democracy, largely by saving fumbling social components from their leadership institutions.

1776 certainly continued that. Then a number of mini-crises, right up to 1933, proved the value of saving leading institutions (and disciplines, and social classes) "from themselves."

The uncertainty over the current escapades in Ukraine should put the final nail in that coffin, if enough people read enough diverse descriptions of the events.

Now we're in the curious position of having to save ourselves from our Nobel Prize winners, while in the process saving them & their institutions & disciplines from themselves.

It's rather a case of needing to change the bath water while the baby continues to soil it - all while patiently BUT FIRMLY encouraging the baby too, as it continues to TRY to mature?

It's only a question of whether or not we're still inside one of our self-modeled coffins, when we put the final nail in?

Roger Erickson said...

The most momentum for change in euro (or US) politics seems to be the rise of the newly significant UKIP party in Britain.

In the USA it does seem that we need some kind of methods to foster faster turn over of our political traditions, & parties.

Our initial model of checks-&-balances between federated states didn't even anticipate the formation of nation-wide political parties, and hence failed to consider checks-&-balances on political parties themselves.

Now we're in the curious position where most think that party affiliation is more traditional than even the Constitution itself.

What do we do about that? We need suggested methods, not just desired outcomes.

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

The French national front and Irish sinn fein advocate leaving the euro.

ukips favours mega austerity on steroids.

Roger Erickson said...

WillORNG,
Do the French NF & Irish SF say what they'd do AFTER leaving the euro?

Seems like things always have to get worse before they can get better.

WillORNG said...

Good point.

The only thing worse than non monetary sovereignty is having it but not using it to Max public purpose for the many in the one and only human race.

Roger Erickson said...

Better name yet:

Fallacies of situational perspective
(or scale, or composition: choose yer poison)