1) From the private sector: We don’t need stimulus we need credit. Banks simply wont lend. While the process of correcting bank balance sheets is underway, that same process must occur in small and medium sized business before any turnaround can occur. In my largest company’s case, our banks have been failing gradually, and we have been cost cutting, not because of decline in profitability, but because of decline in borrowing capacity, and an inability to find new banks willing to lend. About 20% of the work force was affected. In the other company I own, we are experiencing similar problems. 2) We need an area of growth that creates opportunity, and we need it in an area where we can CREATE DEMAND by innovating (taking risks by trial and error). Demand is not simply naturally derived from abstract confidence, it is created by investment, risk, promotion, advertising, and sales. People consume according to stimuli and status attainment. But they have to be aware of opportunities for stimuli and status attainment. And we must constantly develop new products to inspire them to work, risk, borrow and spend. The government is not stimulating anything that will help us CREATE demand. For example, building power plants, or a new power grid, which reduce costs and allow us to compete by discounted power cost rather than discounted labor cost. It is creating further expenditure requiring infrastructure. This is of course, a temporary fix, that is a long term drain on the economy. Instead, stimulate the creation of opportunities. Or at least, understand that there are a minimum of three classes 1) banking and finance, 2) entrepreneurs, engineers and scientists, and 3) clerks, laborers and craftspeople, and that stimulus generally helps the first and the last, but the middle is where the job creation comes from. And fundamentally, the entrepreneur cannot borrow today. Entrepreneurs, while often called capitalists are rarely possessed of a lot of capital. They are possessed of the ability to unite capital, knowledge and resources (including labor) in pursuit of opportunity for mutual gain. 3) Fixing the problem of an incalculable economy (loss of consumer confidence because of decrease in anticipated opportunities, and therefore disincentive to risk money and credit) is repaired most easily by having the government fund banks to buy back depreciation in home prices, and refinance those new homes, preserving the equity of the homeowner. THis would return to government (the treasury) the accountability for their actions in flooding the economy with unproductive credit, and the resulting distortionary prices.. This one policy enactment (which a number of us tried to promote in the spring of 08) would have the most efficient and quickest effect on changing consumer confidence because it can occur fast enough that the stickiness of wages and prices can correct. Countering uncertainty requires acting on debt reduction (home balance sheets) faster than the contracts (wages and prices) can be renegotiated in the private sector, which is a collection of promises and agreements and habits between individuals. Of course, the old argument is this: everyone wants to use stimulus to build roads because they require unskilled labor, and therefore have an immediate effect on the least flexible people in the economy. But these roads have to be maintained perpetually, and high cost, and generally are not. When, planes on the other hand cause the opposite reaction. Then the question becomes, not just one of redistribution, or debt, but urgency, and motivating all of the productive classes of finance, entrepreneurship and labor, to work together. Not focusing on just one or another, but all three. This is one of the other failures of the bias that comes from overemphasis of monetary policy: forgetting that we have to move all three classes of people in order to stimulate the economy.
Theme: Incentives
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Response To Economists View: One Way To Look At The Bush Years
RE: “One way to look at the Bush years is that job growth was lousy so the Fed (and the government policies) subsidized construction jobs by creating a housing bubble. That jobs program abruptly ended. It is now time for a new jobs program. For the longer run, it is time for a different labor policy that will create many more jobs.”
It’s not just a way to look at it, it’s what happened. They wanted to create this ownership society as a means of countering the growth of urbanized socialism, and the diminishment of freedom, and competitive prosperity. This is the most important dimension of the multi-dimensional philosophy that they have been following. (We tend to classify them as having a simplistic philosophy but it is not so. It is not useful to underestimate the thought of your competitors.) The rest of it is essentially a universalist christian concept for the material benefit of mankind, (going back to Alexander) that promotes democracy as a means of exporting control over world resources in order to keep prices low, and maintain military and political power. The problem is for their philosophy, that in the end, society has become urbanized, and large and dense. And the epistemology of urbanites is very different from the epistemology of farmers. There is more similarity between the evolutionary tendencies of urbanites and slavery economies, than the evolutionary tendencies of farmers, for precisely these epistemological reasons. THis difference has been understood for a long time, and written about extensively. However, our current status of behavioral economics has not reached a sufficient state of maturity to connect this set of tendencies, with density of population, and availability of opportunity cost at the expense of perceptibility of causality. Furthermore, our calculative institutions (accounting and taxation) as they are currently practiced, effectively launder causality from our information systems, and require us to rely on the farmer vs urbanite dichotomy as a religious or political difference, or ‘taste’, or even as a strategy of class warfare,versus relying upon factual information that allows us to analyze our behavior and make judgments about it. Fortunately we know how to fix these issues, so that the epistemological clarity of farming (visibly of cause and effect) is available to the urbanite. Unfortunately, we have a form of government that distracts us from solving this problem by individual profiteering on the resolution of conflicts between groups and classes. Our biological sensitivity to fairness, which compels us to work hard, and endure costs, in order to punish those who steal from us, or treat us unfairly, seeks to commit violence, control, or punishment between groups in order to feel fairness has been satisfied. However, this masks the underlying problem as one of solving the underlying problem as one of extending human senses, perception, and comparitive and calculative ability such that we can make decisions for collective benefit. There is an argument that such accountability, which would come from epistemological clarity, would still be avoided by the peasantry, because of necessity we much manage consumption through the pricing system. However, redistribution can mollify discontent as it has in much of europe, assuming that there is anything to redistribute, because the population provides competitive value in contrast to other competing groups. I have a more benign view, which is that if a sufficient number of people can understand that this is a problem of providing information, on the scale that was provided by double entry accounting, and the inventory process facilitating taxation, and the standardization of currency, a small number of simple policies can be enacted that will provide us with the information we need, and therefore will allow us to cooperate, profit, and redistribute without the necessity of relying upon democratic negotiation for the purposes of resolving disputes between classes. Capitalism is with us forever as a set of institutions, precisely because humans cannot, in real time, process complexity of information without those institutions. Redistribution is likewise with us forever, since there is a difference between the necessity of incentive and the necessity of calculative power, and the preference for fairness. Likewise, social and economic classes are with us forever, because people requires status differences in order to pursue the mating ritual, and will create them faster than such differences will be redistributed, just as they will create black markets to circumvent anti-capitalist activity. But capitalism and socialism as biases, are only necessary as biases, because we cannot calculate, measure, and compare, the complexity of society in which we live. It may seem simplistic that society can be better managed by implementing changes in accounting, taxes, banking, credit, and the scope of lawmaking, but our society is changing BECAUSE of changes in these things. Instead, these institutions are what made our complex society possible, and our social systems, because they require decision and legislation rather than simply relying on evolution of business practices, simply evolves much more slowly. If we simply correct this problem, we can get away from class warfare, and into cooperating between classes for mutual gain. In other words, we are trying to build a science of economics on testing assumptions because we lack data needed to actually understand causality. We will have a much easier time if we have the data, and we have the technology, in both accounting and record keeping, to maintain causality in our data. Truth=Causality
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Credit Funded Jobs Programs
Another response from “A Shaky Start” on Economists View
RE: “One way to look at the Bush years is that job growth was lousy so the Fed (and the government policies) subsidized construction jobs by creating a housing bubble. That jobs program abruptly ended. It is now time for a new jobs program. For the longer run, it is time for a different labor policy that will create many more jobs.”
It’s not just a way to look at it, it’s what happened. THey wanted to create this ownership society as a means of countering the growth of urbanized socialism, and the diminishment of freedom, and competitive prosperity. This is the most important dimension of the multi-dimensional philosophy that they have been following. (We tend to classify them as having a simplistic philosophy but it is not so. It is not useful to underestimate the thought of your competitors.) The rest of it is essentially a universalist christian concept for the material benefit of mankind, (going back to Alexander) that promotes democracy as a means of exporting control over world resources in order to keep prices low, and maintain military and political power. The problem is for their philosophy, that in the end, society has become urbanized, and large and dense. And the epistemology of urbanites is very different from the epistemology of farmers. There is more similarity between the evolutionary tendencies of urbanites and slavery economies, than the evolutionary tendencies of farmers, for precisely these epistemological reasons. THis difference has been understood for a long time, and written about extensively. However, our current status of behavioral economics has not reached a sufficient state of maturity to connect this set of tendencies, with density of population, and availability of opportunity cost at the expense of perceptibility of causality. Furthermore, our calculative institutions (accounting and taxation) as they are currently practiced, effectively launder causality from our information systems, and require us to rely on the farmer vs urbanite dichotomy as a religious or political difference, or ‘taste’, or even as a strategy of class warfare,versus relying upon factual information that allows us to analyze our behavior and make judgments about it. Fortunately we know how to fix these issues, so that the epistemological clarity of farming (visibly of cause and effect) is available to the urbanite. Unfortunately, we have a form of government that distracts us from solving this problem by individual profiteering on the resolution of conflicts between groups and classes. Our biological sensitivity to fairness, which compels us to work hard, and endure costs, in order to punish those who steal from us, or treat us unfairly, seeks to commit violence, control, or punishment between groups in order to feel fairness has been satisfied. However, this masks the underlying problem as one of solving the underlying problem as one of extending human senses, perception, and comparitive and calculative ability such that we can make decisions for collective benefit. There is an argument that such accountability, which would come from epistemological clarity, would still be avoided by the peasantry, because of necessity we much manage consumption through the pricing system. However, redistribution can mollify discontent as it has in much of europe, assuming that there is anything to redistribute, because the population provides competitive value in contrast to other competing groups. I have a more benign view, which is that if a sufficient number of people can understand that this is a problem of providing information, on the scale that was provided by double entry accounting, and the inventory process facilitating taxation, and the standardization of currency, a small number of simple policies can be enacted that will provide us with the information we need, and therefore will allow us to cooperate, profit, and redistribute without the necessity of relying upon democratic negotiation for the purposes of resolving disputes between classes. Capitalism is with us forever as a set of institutions, precisely because humans cannot, in real time, process complexity of information without those institutions. Redistribution is likewise with us forever, since there is a difference between the necessity of incentive and the necessity of calculative power, and the preference for fairness. Likewise, social and economic classes are with us forever, because people requires status differences in order to pursue the mating ritual, and will create them faster than such differences will be redistributed, just as they will create black markets to circumvent anti-capitalist activity. But capitalism and socialism as biases, are only necessary as biases, because we cannot calculate, measure, and compare, the complexity of society in which we live. It may seem simplistic that society can be better managed by implementing changes in accounting, taxes, banking, credit, and the scope of lawmaking, but our society is changing BECAUSE of changes in these things. Instead, these institutions are what made our complex society possible, and our social systems, because they require decision and legislation rather than simply relying on evolution of business practices, simply evolves much more slowly. If we simply correct this problem, we can get away from class warfare, and into cooperating between classes for mutual gain. In other words, we are trying to build a science of economics on testing assumptions because we lack data needed to actually understand causality. We will have a much easier time if we have the data, and we have the technology, in both accounting and record keeping, to maintain causality in our data. Truth=Causality
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An Environmental Software Company?
In May, one of my business partners asked me to rescue a bit of software development that was a joint venture between a prominent politician’s environmental activism foundation, a very large software company, and one of our smaller businesses. It took me until July to weed through two years of chaos and deception to understand that we were losing millions on the effort, that neither customer was being honest with us, or even with each other, and that the entire effort was a financial and political catastrophe. Besides that the software was unusable. Not for want of technical talent. It’s was because the politicians mistakenly believed that they could be product managers – skills that are incompatible. I’ve spent the late spring and most of the summer building a new business and attempting to right the many wrongs done by these people, to our company and others, in particular, to a global organization named ICLEI, which consists of local governments working to reduce greenhouse gas emissions. Now, I am not a climate activist, and I’m actually a skeptic. It’s not that I don’t want to reduce emissions. I do. But the reason I got involved was because I simply cannot morally tolerate myself, my business partners, and some very good, and hard working environmental activists, who are simply trying to make the world into a better place, get walked on by denizens of the evil empire whose only real purpose seems to be giving capitalism a bad name, while in the mean time, harming their company’s brand, and all for personal ambitions. So, my work on Capitalism 3.0 has been delayed because I’ve had to launch a new business, and right what I feel are injustices by doing so. It seems that it’s acceptable to the Green movement to have a skeptical capitalist involved as long as he’s on their side. A marriage of convenience so to speak. All I know is that I haven’t met anyone involved in the climate issue that isn’t a good person. And I can’t say that for the people who caused me to get involved by their errant and greedy behavior – masked as activism. I find them insufferable. So those political activists both left and right, who look at me askance when I tell them I am a major stockholder in a Green business, should understand that you have your religions and I have mine: I don’t like to see people abused, and especially under the cloak of public service.