Looking at the future of Capitalism through Newton’s Glasses

karl marxby motograf

The Vanishing Middle Class (Or Patrick Deneen vs. Capitalism)
[Via Big Think]

There’s a new columnist out there writing for The American Conservative.  You may or may not regard him as conservative.  Patrick Deneen reflects on a semi-depressing book written by my favorite (because most honest) libertarian writer—Tyler Cowen.  Cowen says the good news is that they’ll be more rich people than ever, and that the keys to wealth will be analytic precision and being comfortable with (because highly competent in) the use of high technology. That will be a genuinely cognitive elite; a meritocracy of brains and training, if not of virtue. Meanwhile, the lower part of our middle class and below will continue to sink into underclass lives of permanent underemployment.

[More]

So even libertarian, Tea Party fellow travelers think that capitalism will continue to divide society between those with riches and thos without. That the middle class will simply disappear.

Seems to me that this was the point of Karl Marx’s work – what happens to ‘fix’ this drive of capitalism?

And here we have the same problem Marx revealed – extrapolating current trends against human society is a fool’s errand. They are looking at Einstein’s World with Newton’s Glasses.

I think there are several things these guys may not be seeing.

Capitalism as we know it is changing rapidly. First. technology and robotics is driving the incremental costs for many things closer to zero. Robots work 24/7. The exponential economy is producing more things for less capital all the time.

Second, there will be plenty of young people to revolt against this two party idiocracy these Marxist libertarians describe.The world is aging because people are living longer. But the number of those that will not be happy being a downtrodden proletariat  are still very large.

The millennial generation is about the same size as the baby booker generation. The boomers gave us the 60s, when they were members of a wealthy generation. What will a similar number of young do when poverty is all they see?

Third, capitalism is a wonderful process for more equitably distributing scarce resources. But what happens when there is an abundance of riches? We may well be on the cusp of huge levels of power, natural resources, food, etc.. 

What happens to the idea of an economy when the cost to make things is close to zero and the abundance of resources is great? What happens when a single asteroid has more gold and platinum on it than has been mined in the history of humanity?

For what purpose is the outrageous accumulation of wealth when this happens?

I think we are going to make a shift to a whole new economy, as different from capitalism as it is from feudalism? The very idea of money could be altered. Perhaps everyone gets a life stipend, just as those living in Alaska get a stipend. If one wants more, one can do so. Because many people are not lazy and want to do something, especially for other humans.

We will also have a new frontier – space – that will distort this entire picture. A revolution is going on and too many are still trying to use Newtonian mechanics to understand what Einstein described.

Looking at Einstein’s World with Newtonian Glasses – a Message to My Mom

 
My mother sent me this link to a Paul Krugman column.  This is the lightly edited result.
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Well, he does have a column to write. And he may be correct in some ways even though he does not know it. Like the 5 blind men and the elephant, he is trying to describe something his background gives him no real insight into. It is also why the DOJ is going after Apple – they can not see what is really going on.
 
They touch the elephant’s tail and say “Oh, the elephant is just like a snake.”
 
He is not the only one. It reminds me of the sorts of scientific explanations dealing with new data being generated at the turn of the 20th Century. A lot of data was being found that was not easily explained by classic Newtonian mechanics, People kept trying to find ways to make them fit into what had been current knowledge but more and more new facts simply seemed strange.
 
The Einstein proposed his special and general theories of relativity, explaining the data. It was a scientific revolution that broke apart the old views.
 
We are in the same process here, although at a much greater social level – with possible dislocations not even seen in the Industrial Revolution.

 
And that is a problem of most economists today. They look at ‘Einstein’s’ world with Newtonian glasses. History does not help much, prior knowledge is problematic and today really is different. We are going though a step change to something unprecedented. It is like an economist steeped in the mercantilism of the East India company trying to describe Ford.
 
I am not enough of a theorist to formulate what is coming. I do not know just what it will be but it will be something neither Krugman or any other mainstream economist is describing.
 
As an example, he compares GM – an Industrial Age company – with Apple  – an Information Age one.
 
He, and most economists, are comparing Apples to Oranges (pun intended). First, Apple is not using monopoly rents – the idea that most of their money comes from investments rather than sales to customers. It has no monopoly in any sense. What it does have, if anything, is monopsony rents. It is not dictating terms to is customers but to its suppliers. There has never been a company quite like this before.
 
Capitalism is all about efficiently dispersing  scarce resources. Competiton is supposed to keep companies from acquiring huge amounts of cash. Competition is supposed to push companies to invest any cash (or at least most of it) back into the company or give it to the shareholders.

But Apple is doing something other that abusing a monopoly position – which is seen economically by forcing consumers to pay more than they should.
 
Apple is restraining competition by making sure none of its competitors can get the components to make a smartphone for the same cost as Apple. Any smartphone competitors tried to make when the iPhone first came out would have cost them hundreds of dollars more just to get the parts and make the device. It is not a fluke that the only competitor – Samsung – makes its own parts.

Apple was able to use incentives to get first dibs on new technology, they loaned companies money for expansion with the proviso that Apple got access at reduced rates, they gave suppliers long term deals that could not be really refused. And these deals priced Apple’s competitors out of the marketplace.
 
All economists see is unprecedented huge piles of cash without really understanding it. It goes against anyone’s (conservative, liberal and in between) understanding. It is partly why Wall Street can not value Apple because it represents something they simply cannot explain. 
 
What he, and other economists, see is that if capitalism was working like it should then competition would force Apple to lower its prices which would reduce this huge pile of cash. The only way, to them, that Apple could ever get such a pile is due to its ‘gouging’ of the customer because there is no competition. There would be an equilibrium reached with many competitors and lower costs.
 
What they fail to see is that Apple has used its monopsony position to create things that are already at a lower cost  that their competitors cannot meet. When Jobs said Apple was 5 years ahead of everyone else, it reflected the fact that it would take at least 5 years for the component prices to drop far enough for their competitors to get the same deal.

Only competitors that could supply themselves (like Samsung) could sell an equivalent device for a similar price and make much profit. For example, Amazon sells the Kindle at or below cost, hoping to make up for the loss by selling content.
 
That is what innovating does (and something Tim Cook was responsible for). 
 
One of the key aspects of what we are entering is the opposite of dealing with scarce resources. We are actually entering an age of abundance and will need new economies to deal with that. Peter Diamandis wrote a great book called Abundance that I recommend reading.
 
What happens, for example, when asteroid mining provides more gold and platinum than mankind has mined in its history; when its cost drops to almost zero? What happens when cheap solar power comes in such abundance that energy is essentially free? What happens when robots can make almost anything for no added cost; when 3-D printers can replicate almost any sort of food or internal organ?
 
What sort of economy will it be when almost anything that can be made or used costs next to nothing but few people have a full time job? It is an Age of Abundance but how will people pay for it? How will a post-scarcity economy actually work?
 
Free market capitalism will not work as easily here because it was not really designed to; it was designed for scarcity, not abundance. The economic dislocations are already being seen – productivity and profits keep going up but little of it is making in into the hands of the population. Productivity doubles about every 36 years. If median income had kept track with productivity since the early 80s, the median income would be over $90,000 today rather than about $40,000.
 
Most economists see what we are going through as more of a technical problem – if only we make a few tweaks by retraining, the dislocation can be fixed. Some economists (and I) see it as something fundamental – many jobs are gone for good because there is a fundamental shift in the economy, just as was seen in moving from agrarian societies to industrial ones. 
 
What jobs left will either require just a few people with very specialized skills or are the things still too expensive for robots but so cheap that humans cannot make a living. In time, even those will go.
 
From this graph we can see that the current job recovery is not only slower this time. Recoveries have gotten slower with every recession since the 80s. The next one could be permanent. (All the graphs are from the excellent blog, Calculated Risk)

recessions

And what the above graph shows is only getting back to the same number of employed as we did in 2008. But every month there are about 150,000 NEW people added to the economy. These are not reflected in this graph. 
 
Here is something that shows this – a look at the employment levels to the size of the population aged 25-54. Look at the red curve: the employment-population ratio, This includes increasing population into employment statistics.

employment ratio
 
What you see is that even though that jobs are coming back, they are not keeping pace with the growing population. No recession produced such a huge drop. Up until 2000, every other recession was overcome in less than 2 years. But the peak in the late 90s has never been reached since. The ratio has pretty much been flat since 2009. Something never seen before. 

It has never been flat for this many years. The economy, at least for workers, is just treating water.
 
Or look at this one examining people working part-time because they have to rather than because they want to.

part time emplyment
 
Levels never before seen. 8,000,000 people who would like to work full time but aren’t.
 
Or this one looking at the number who are unemployed for more than 26 weeks.

23 week unemployment
 
4,500,000 who cannot find a job. Unprecedented.
 
12,500,000 people who are not being fully used by our current economy, even as the companies make record setting profits. There is a disconnect there which is what Krugman is trying to explain. But, I feel, using the wrong theoretical framework to do it.
 
He is using Industrial Age theories to state that the increase in profits without labor being helped must be a result of monopolies. That is the only explanation they have.
 
But this is really a one time shift to something else. The companies continue to make profits because they use technology to produce as much as they used to but with fewer people. Technology costs less as time goes on, making their profits grow, even as they first move people to part time employment and then no employment at all.
 
As this continues we will eventually hit a point where it all collapses, where people are not making enough to pay for the things being made.
 
I wish I was enough of an economist to fully describe and document what I see. And to come up with a theory to help see what it all means. 
 
One possibility we also see from a similar time in history, when the specialized and highly paid skills of look operators was displaced by the automated look in the early Industrial Age. However it is not an economic example but a sociological one.
 
The workers rioted, burned down property and killed capitalist. The Luddites were eventually stomped down but only by sheer numbers of the military (more of the British Army was involved in putting down the Luddites than were engaged with Napoleon). The government responded in totalitarian ways, such as mass show trials to intimidate the population.
 
What happens when 20,000,000 people rise up? That is my worst fear.
 
I have written about another possibility, based on some economics. Maybe Plenitude will actually happen. Maybe we will all receive a Basic Income. Maybe the whole idea of wages (which really only appeared with the Industrial Age) will disappear.
 
How to frame an economy that provides people with a living wage when there are not jobs that can support that living? Who will buy the things being made when few have a living wage job? 
 
I do not know how we get there but George Jetson showed one possibility – he had a middle class lifestyle only working 1 hour a week pushing a button.
 
Pilot studies looking at Basic Income Grants – where every adult receives a set amount of money (much like how Alaskans receive a fixed amount from the state) – have shown not only drops in poverty but also INCREASES in economic activity. People do not just sit around and do nothing. Many people leverage the grant into innovative approaches to have more money. It appears that when people’s basic needs are taken care of, a lagr fraction do some risky, innovative things that end up helping everyone.
 
We may see a post-scarcity economy sooner than we think. It will be better than the alternative.
 
 

Why science teaching may not work – Another message to my Mom

asteroid by Howard Dickins

My mother sent me a link to begin a discussion on science education, and why it is so poor. I offered my theory on why it is so hard to teach people science. Here it is, lightly edited.


One of the ideas I have started examining is the well-documented Fast and Slow thinking researched by Daniel Kahneman. (I’ve written about this several times on my blog. He has written about the paucity of real science in psychological research.).

We use rules of thumb and other fast heuristics much of the time. These also use very little energy (actual calories). We evolved to use this as a major way of dealing with the world. 

We can use much slower forms of thinking to careful evaluate something but this comes at a cost (time and actual calories).

Most adults spend most of their time thinking Fast. That is why denialism is so hard to change and why Cargo Cult World are created. It is very hard for most people to simply drop what they ‘know’ is right. How would they deal with a world where fast thinking did not work? Easier to keep believing the incorrect  results of fast thinking than to tear down an entire world view.

Most spend very little time in slow thinking. Some are different. Some revel in slow thinking (our family has a plethora of such people.) And scientists are trained to think Slow.
 
But only a few have the time and energy to spend so much time thinking Slow.
 
This is probably why so few adults really like science in detail. Often science provides very little that can be converted to quick thinking. People need simple things that can be examined with Fast thinking. science often does just the opposite, because the real world is complex and cannot often be reduced to simply stories.
 
And our media are designed to provide information to support Fast thinking, seldom Slow thinking.
 
“Cholesterol is bad for you” is an example. It is replaced with “Cholesterol is good for you” in a week.  
 
Fast is black and white – run from that lion or that root is deadly. Nice, simple narrative. It is Kipling’s Just-So stories. Slow is in the gray. It is a much more complex story. It is quantum mechanics. It is Schrodinger’s cat. It is probability not surety.
 
Adults simply do not live with much Slow thinking. The best speakers of science (Feynman, Sagan, etc.) have been able to describe science accurately by using simple narratives and metaphors.
 
For kids growing up, they are doing a lot of Fast thinking but also a lot of thinking amenable to Slow. Because they have not learned very much, they spend much of their time in what we would call slow thinking, forging the underlying basis for their adult fast thinking.
 
They are trying to put together usable Fast thinking by building a core of Slow thinking. For them, there is really little difference.
 
They want to know why in ways that facilitate quick thinking.
 
Thus, it is not surprising to me that when they hit puberty, where they first begin creating adult style social networks,  they also take on more adult modes of thinking, which is quick.
 
Science and its need for Slow, energy-driven thinking falls by the wayside as they use quick thinking to derive “Jane is a slut” or “Tommy is a nerd”. Teenagers are actually almost all about Fast thinking.
 
It is easy to engage kids. You cannot engage adults the same way. You have to give adults narratives that can be initially examined by Fast thinking. If done right, the story will create some dissonance between what they ‘know’ from Fast thinking and what they can learn through Slow.
 
Some people will simply retreat into a Cargo Cult World when this dissonance happens, especially if the narrative is a negative, fear-driven one. Others will engage their Slow thinking, leading to a greater discussion and some possible recalibration of their Fast.
 
Because we also evolved the ability to change Fast thinking narratives when we had to. Because the world changes and, while Fast thinking works most of the time, it can fail catastrophically is not modified as circumstances change.
 
That is why I am working on a positive, engaging narrative, a modern just-so story, to help those who will not retreat.
 
I’m going to have a crowd-funding project expanding on “The Asteroid that Saved Mankind.” I’ll write up a a short, easy to follow story, a foundational article to provide all the facts and then a short-form video making it a nice visual story.
 

 

A new letter to my Mom on the Permian Triassic extinction event

NewImageby jurvetson

My mother asked me more about the Permian-Triassic extinction event. She wanted me to write some more about it. Here it what I wrote back, with some small editing choices. I purposely did little new reading – I’m writing my Mom after all – so it is very informal and I might have gotten some details wrong. Let me know if I did.

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First

We are not at the end of our time on Earth because we will kill it. We are at the end of our time on Earth because we will save it and in the process leave it behind.

Now,

Once upon a time, over 250 million years ago, the Great Dying occurred. Those of us with a more syntactical mind call it the Permian-Triassic extinction event.

The Permian-Triassic extinction event happened something like 250 million years ago. It is not the one that killed the dinosaurs. That one was not nearly as bad as this one.

The Permian-Triassic was the greatest extinction event for both land and marine animals. It completely remade the entire world. It killed off most of the marine life because up to that point, the most common form of sea life was sessile – stuck in one place like coral or barnacles. So when the sea heated up, they could not move. The main ones that survived were small fish that were able to move to cooler waters up North or South.

Land animals generally were already mobile. In addition, the position of the continents were actually one great continent called Pangaea. This allowed land animals to easily move North and South. Many died off but enough survived.

Plants did not fair well. Many died off also. In fact, so few plants were left that this period has few coal deposits. Simply not enough plants to create them. So, naturally, herbivores were decimated, leaving little for the carnivores to eat.

Another thing that makes it hard to tell just what went on with land animals is that there are very few fossils from land animals from this period. Fossilization requires water – which is why we have marine fossils. No water, no fossils. Insect fossils do not reappear after this event for 15 million years!! Insects survive everything. 

The wikipedia article provides a lot of detail. 96% of all marine species and about 68% of the genera. Perhaps 70% of land animals died.

Part of the problem with describing the ’cause’ of this event is that there has not been a definitive single source, like an asteroid. It looks like a lot of things combined. What is apparent is that global temperatures rose tremendously.

There is some evidence of an asteroid strike. There were huge volcanic explosions. These have happened before without mass extinctions like this. But it also appears that the volcanic eruptions might have gone through large coal deposits,setting them on fire and releasing large amounts of CO2 into the air (something we are doing right now). This may have set off a cascade of events, including the release of large methane deposits (a more potent greenhouse gas than CO2) from the water and permafrost (something that is happening right now).

And it now appears that these events all happened in a very short time, geologically speaking. Less than a few 100,000 years. So, one possibility is that a large piece of rock hit the Earth, causing the sort of ecological damage seen in other extinction events. This one punched a hole in the Earth that released large amounts of magma. Again, something that might have happened before.

Unluckily for life on Earth, though, this time the volcanoes that erupted hit large deposits of coal – sequestered carbon – releasing huge amounts of CO2 into the atmosphere. The Sun’s energy then started a greenhouse effect.

The air got warmer. The seas got hotter. The higher levels of CO2 that became dissolved in the water made it acidic. These hot, acidic waters resulted in lower oxygen levels and the deal of marine animals. The warm air temperatures killed land plants, then herbivores then carnivores.

And new feedback loops were created that sustained these high temperatures. For millions of years.

The cascade of these climate changes resulted in a new temperature regime – one that sustained much higher global temperatures. So it was not just the immediate extinction event that might have been triggered by the volcanoes through coal. The new climate cycle supported higher temperature. Fewer plants/animals meant less carbon was removed from the air and thus the higher levels stayed keeping the temperature high.And know this, most of the CO2 that is removed by the carbon cycle comes from marine life. Plankton use the co2 then drop to the bottom of the ocean, effectively removing the CO2 from the air.

No plankton and there will be little change to a high CO2 atmosphere.

That is what this paper showed. For 5 million years AFTER the extinction event, the waters remained very hot, keeping marine life from recovering. For every other extinction event in the Earth’s history life had well recovered 5 million years afterwards. But not this one.

Life on Earth has tremendous effects on the planet and its climate. It helps maintain the conditions for life. Pretty nice. 

But the events of the Permian-Triassic extinction event altered the planet’s climate, decimating all life. It took millions of years for life to recover enough to again control the climate and make it more amenable to life.

That is why this event – the Permian/Triassic extinction event – is the most worrisome. It is the one most likely caused by global climate changes, resulting in a much warmer world. It took the world, and its life, much longer to recover from this sort of global catastrophe than dealing with an asteroid collision.

Now think about this.

The Sun radiates much more energy now than it did back then. So, the same amount of global warming can be accomplished with much less greenhouse gas released to the atmosphere.

Instead of volcanoes burning coal deposits, we are doing the same. Not only is CO2 building up, but sequestered methane deposits are beginning to enter the atmosphere also.

We can fix this. We have the technology. But we do not know just how much time we have. Once the climate has flipped to a new regime, it is much, much harder to flip it back.

We are already seeing some of this – fossil fuel use is down in the US. We are burning methane rather than letting it be released.The Navy is working on creating fuel from seawater for perhaps $3-6 a gallon. We are not only using more and more green energy, we are on the cusp of utilizing huge amounts of solar energy from space-based solar. We can build these from the mining operations produced by companies like Planetary Resources. A single asteroid could do it all – for a total of $2.6 billion over a ten year period. $250 million a year could get us very close to what we need.

With increased access to energy, we can begin operations that sequester CO2, reversing our own production of it.

The very things that excite almost most of us regardless of political stripe – exploration of space – are the very things that can help save us.We already are moving in this direction but it is slow because the powerful do not want to easily give up their power – economic or otherwise.

We could be on our way for accomplishing this in less than a decade. It would only take things like doubling NASA’s budget – which would add 0.5% (0.5%!!!). How about taking just a little from defense in order to defend the world.

Economic pressures will eventually get us where we need to be. But we do not know just how much time we have so the sooner the better. I think that market incentives are better than market disincentives. So perhaps some government support of these technologies – to help them develop until they can effectively complete – might help. we are doing that with the support of the Navy project. Let’s do some more.

We can fix this. we have the tools. I said it once and I’ll say it again “Anyone whos says it is hopeless is a godforsaken quitter.

50 years ago, in a speech at Rice University, President Kennedy stated, “We choose to go to the moon. We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too.”

Willing to accept, unwilling to postpone and one we intend to win. Here is what I wrote and I still think it holds:

We must be very different Americans today than were there 48 years ago. Too many leaders make a call to inaction. Today many, even if they recognize the problems, simply say there is nothing we can do. We also have many who want to wait and rest and look behind them, refusing to come up with any plan to move forward except to say “It’s too hard”, “It’ll cost to much” or “No.”

Resting, waiting or looking behind us is a path to decay and loss of relevance. Not to mention a world substantially different than the one we currently inhabit.

These problems will have to be dealt with eventually and no amount of resting, waiting or looking behind us will change that. Americans used to believe that difficult problems could be and had to be solved, no matter the cost.

Not so much anymore. There are many Americans trying to solve these problems and perhaps they may still succeed. But their success will be hampered every step of the way by powerful interests that want to rest, wait and look back.

Which side are you on – finding solutions or quitting?

Our political leaders and the corporate elite won’t do this. They are too entrenched in power to make this leap that will solve the problem. They want to keep us divided, at each others throats, in order to keep their power.

We, the American people, need to do this. We need to shrug off the feeling of powerlessness that have cloaked us in. We need to find common cause to embrace our neighbor, not fall victim to the divisive rhetoric created to remove our power.

We can all come together on something we intuitively love – space, since as Bertrand Russell said, we are all astronauts – that also holds out the promise of reversing so much of the damage we have done.

And by solving the problems of climate change, we will find ourselves on a new path, one where we then have the ability to easily travel between planets, opening up a time of abundance never seen on Earth. Room to grow, room to explore, room to begin a new age.

The same things that will save the planet will also send mankind out into the solar system. We will have come full circle. The space program produced the computer revolution that produced the Information age that created the tools that will put us all into space.

It will happen anyway. Why not work to make it happen sooner?

For my mother on Thanksgiving

I really enjoyed this presentation because at its heart it is about the meal with family, not the bird. Don’t worry about how the bird comes out. That is what gravy, cranberries, stuffing and wine are there for.

Turkey is not meant to stand on its own at any dinner. It is meant to support and enhance the taste of everything else.

My memories about my mother and the bird do not stem from the manner she cooked them in. It was usually about the timing so that everything came out at the right time – after the Dallas game. How she cooked the bird seldom impinged on my consciuousness.

My Mom always had a great Thanksgiving dinner but I really never remember the bird itself. It was her Waldorf salad – sometimes with oranges added, I think –  giblet gravy, the smell of sweet potato pie (that I never ate but was a favorite of my father), mashed potatoes, crescent rolls, cranberry sauce – first just the jellied kind but advancing to the whole berry as I matured – and the dressing – which changed greatly over the years as she experimented but which never failed to be my favorite. And sometimes we might have kernels of corn or green beans but to my mind they simply added color

I would simply pile my plate high with turkey, mashed potatoes, dressing, with gravy on each of them. A huge amount of cranberry sauce and a couple of rolls on the side. Each bite would have a bit of turkey, potato and gravy. Or turkey, dressing and cranberry.

After finishing one plate where I politely ate a bit of everything laid out – except the sweet potato pie which I simply have never been ale to swallow. The small bit I might put on the plate always sat alone when I went back for seconds – I return to get more of my favorites.

Turkey, cranberry sauce, gravy  and dressing. The magic four that I live for.

Hot turkey sandwiches were my reward for the next few days.

I am lucky that my own family does appreciate much of the same – although I am the only one who eats dark meat. We have some different opinions on what type of bird to get and how big but we all agree that turkey, cranberries, gravy and dressing make the meal.

Thanks Mom for providing so many great Thanksgiving memories.

Message to my Mom IV

caesarfrom Wikipedia

It has been a while but I thought I’d bring up an excerpt from this email to my Mom from last Fall. It fits with my mention of the accretion of power by the Unitary Executive.

I was writing my mother about the Citizens United case, the corruption of our government by corporate money and gave her a thumbnail view of Roman history – particularly the fall of the Republic. I may have some details worng – I was working from memory on much of it – put it is correct in its focus – the corruption of power in Rome by money made it easy for the legislative side to give more power to a Unitary Executive.

Here is the relevant part (with some small editing):

What I would like is a constitutional amendment to create a Plural Executive, along the lines of what Texas has. The Executive branch has aggregated way too much power over the last 30 years.

You know, the Roman Republic used a plural executive, electing two consuls every year to run the government.

This worked well until the First Triumvirate came into existence which eventually resulted in the end of the Roman Republic. The First Triumvirate was made of 3 men – Pompey and Julius Caesar, the greatest military minds of the time and Crassus, the richest man who ever existed in Roman History if not all history. (He made much of his fortune because he ran the only fire brigade in Rome. When a home would catch on fire, he would negotiate a fee to put it out. If it ended up burning to the ground, he bought it for cheap.) His wealth has been estimated at $2 trillion – the richest man in the world today has about $50 billion. His wealth was equal to the entire Roman treasury at the time. Think about someone whose wealth was equal to the entire US budget.

There was tremendous turmoil during that time, with slave revolts and populist revolts. There was an attempt by the farmers to kill Senators, which resulted in a lot of clamping down on rights. This is when Spartacus ran amok throughout the peninsula, scaring the Romans probably every bit as much as we were scared by 9/11, maybe more because the guys who wanted to slit every Roman throats were actually a large army in the heart of the country. IN addition to his wealth, Crassus gained a lot of political power by defeating Spartacus – using decimation of his own troops for motivation and crucifixion of the slaves as example. Other generals had failed so Crassus was viewed as the one who saved Rome)

So, the richest guy in the world got together with two of the greatest generals ever (who also happened to be quite wealthy)  and formed a secret group – the First Triumvirate –  to control the government in 59 BC. They decided who would be consul (the executive branch  of the Republic, who got the plumb jobs, etc. And made it happen. Using money and influence, they corrupted members of the Senate, who went about removing rivals of the Triumvirate, often by violent means (two of the greatest speakers in Roman history, Cicero and Cato, were politically destroyed at this time because of their opposition), while the trio enjoyed aggregating more money and power as consuls, often together.

Crassus died in 53 BC and within 4 years, Julius Caesar had crossed the Rubicon, Pompey was killed and Caesar was in complete control being declared dictator for life and effectively ending the independence of the Roman Senate. The Roman Republic would effectively end 5 years later in 44 BC with Caesar’s assassination.

A weak and corrupt Legislative branch allowed money to corrupt it, resulting in the emergence of strongmen with money to destroy the Republic. The huge fortune of one man was able to do this (although the huge wealth of the other two can not be discounted).

Not a happy story but one I think about a lot these days.  From the time when Spartacus scared the Romans spitless to the consolidation of power by the wealthy trio was about 10 years. The end of the Republic was about 15 years after that. Twenty five years from the catalyzing incident that drove the Romans to look to strong Executive powers for protection to the end of the Senate and a Unitary Executive with complete legislative powers – an emperor. The end happened very quickly after the corruption of government began.

Our Founding Fathers knew this and  did everything they could to limit the power of the Executive branch. But they did not come up with a good way to prohibit the corrupting influence of large amounts of money, especially on Congress.

Until we figure out a way to deal with that, we will never by truly functional, no  matter who is in charge. And we will be in terrible danger of completely losing our Republic.

At one time, I had hoped Obama might be able to repair some of this damage. In fact, I think he really tried to allow Congress to do its job of legislating and just focus on carrying out the will of Congress. BUt things are so broken that we can not actually function without a strong Executive spending most of his time telling Congress what to do.

We have to fix things but the efforts that are taking place are, to my mind, actually more conducive to strengthening the Executive rather than weakening. Nothing is being  done to reform Congress and especially the corrupting influence of unlimited amounts of money from corporations. It may well be that history records the Citizen United decision as one the most corrupt decisions of a corrupt age.

Video of Gulf of Mexico rigs

gulf of mexico wells from The Swordpress

While working on my latest Message to my Mother, I ran across this website which had done some wonderful graphic analysis of the number of oil rigs in the Gulf of Mexico. Using data from the government, he put together a video looking that the location, depth and time for currently active rigs in the Gulf. That is , rigs that are currently installed and have not been removed or abandoned.

And these are only the ones in American waters.

He was able to do this using publicly available data. A nice example of how an ‘amateur’ can create something of real beauty and usefulness. Open access to data makes this possible.

Human interactions with data produces information, whose transformation creates knowledge which permits an action to be taken.

Message to my Mom III

My mother sent me a link to an article in the Chronicle entitles Shallow water, deep anxiety . It discussed the de facto moratorium on new drilling in the Gulf even by shallow platforms, Lots of new paperwork was preventing rig operators from starting new wells in the Gulf. Lots of ‘this government delay is costing me money” sorts of quotes. It was written to really support the idea that the government is purposefully preventing any new oil rigs from being built, presumably for some nefarious reason.

I did a little checking and believe I have an explanation that is not nearly as nefarious and one which the actual data, rather than anecdotes, seems to support. Here is my reply to my mother, with some editing to make it a little more coherent.


Well, I call confirmation bias ;-) The article appears to presents facts in a misleading way to keep angry those that already are. Here is an alternative view that I got from reading his article and doing a little research.

The article buries the lede in a big way – the new regulations apply to ALL rigs, new and existing. [That is how I read the new rules. Existing wells have to supply an Application for Permit to Modify (APM). Maybe someone who is a real expert can help me. The fact remains that a lot of APMs have to be dealt with. RBG]

“Officials with the Bureau of Ocean Energy Management say they have issued many permits for work on existing shallow-water wells since April. They deny any effort to stall the approval of permits for new wells under drilling rules, called notices to lessees, issued in June.”

Catch that – existing wells.

The agency – BOEMRE, a brand new one by the way as the MMS is no longer – has to approve all of them. There are 45 new ones, from the article and almost 4000 active ones, which many if not all have to send in new forms (mostly one called NTL-05 which certifies the blowout preventer or NTL-06, which deals with blowout scenarios):


oil rigs gulf from NOAA

So, a new agency, whose rules did not even exist until the middle of June, has to deal with the approval of thousands of new forms. If there are 4000 existing wells and 45 new ones then one out a hundred of those forms will be for new wells. 99 out of a hundred will be for existing wells. And the author spends his time on the 1, not the 99.

Finally according to the agency’s website, – which is updated every business day – only 4 new shallow well requests have been pending since June 8 and one has been approved. So where are the other 40? The agency has approved 68 modified permits in shallow water since June 8 with only 3 pending.

The narrative of the article feels a little biased to me. I see no evidence of stalling or slowing down the approval process to prevent new wells.

I would call this another misleading MSM article. It presents information in a misleading way to keep people angry who already are angry, not to inform them.


I am not 100% sure just how many wells have to get new permits but it seems to me that the number is substantially greater than the number of new rigs. It makes sense that the agency is swamped with a lot of new permits that have to be examined. But there does not seem to be a huge number pending permits for shallow wells backed up in the system.
That is the real question I have. Why have so few new well permits even been submitted? The agency’s data does not show a backlog of submitted forms. The article implies it is the agency that is slowing stuff down but how can the agency approve permits that have not even been submitted?
I understand how government bureaucracy can slow stuff down. But in this case there was a horrible accident that killed 11 people, injured 17 and spilled a huge amount of oil into the Gulf doing billions in damage. A little bit of caution should be called for. Asking news wells to get the BOP certified and to provide a realistic scenario of how they would deal with a catastrophic failure seems like a reasonable thing to ask.

Messages to my mother II

My Mom and I have some great email discussions – which are at least coherent. Our phone conversations usually operate on a wavelength of shared communication that render them virtually impossible for others to follow or understand. In person it is usually even worse for bystanders. One of the many reasons I love discussing things with her – she understands me, even when she disagrees with me.

She usually throws out some great remark that sends me out to the web in order to refute it (always the most fun for me) or admit she was right (always the most fun for her).

My mother and I had another nice email dialogue about my previous post today dealing withPhoenix, mistruths and Cargo Cult Worlds. I’ve edited my reply for clarity and hope you like it.

My Mom explained that what she was more focussed on was the real problem of women being abducted off the street, raped and then dumped. That may not show up in any statistics, particularly in Phoenix, but is still kidnapping.

I replied:


That is exactly what I am talking about. People have taken a narrative – girls getting kidnapped off the streets of Phoenix and America – that is horrible and needs to be addressed. But the statement that is used use to support this narrative – Phoenix is the kidnapping capital of America – is not based on any facts. It is not based on anything that exists in the real world. It is completely made up.

Thus the Cargo Cult World. One where people try to create a reality, a narrative, based on facts that are not real. And, it should be obvious that constructing a Cargo Cult World is not only seen in one political party or one economic class. I think it comes from an attempt to understand something quite complex by applying simplifications and metaphors that just do not work. Much as the Pacific Islanders did not understand the principles and facts behind air flight but thought that building replicas of planes would recreate the reality they saw during World War 2.

Humans are exceptionally good at recognizing patterns and at constructing fairly complex metaphors in order to survive. I personally think that this ability is one of the things that has made us such a potent species. But sometimes the metaphors get scrambled, the narrative describes a false reality. That seems to happen when societies are undergoing some fundamental changes such as from agrarian to industrial. We have a ton of actually stories that reflect this, from The Jungle to The Grapes of Wrath to Cry the Beloved Country. Each describes creating a new societal narrative as the old one crumbles away, and the social strife that destruction entails.

Humans and societies produce narratives to help their members understand the world and how to react to it. But when things are changing, when new narratives may need to be produced, well these are the most dangerous times. That is when Cargo Cult Worlds come into existence for many people, where false narratives are used to create only a simulacrum of reality.

I just do not understand how anyone can honestly create an argument using untruths and falsehoods, especially one dealing with such a potent horror as kidnapping and raping girls. Wouldn’t the best solutions in the real world involve using real facts, not lies? Why not create a narrative based on facts? That is actually quite easy.

Why not just say that many vulnerable women in the undocumented population are being kidnapped and raped and we need to discuss ways to stop it? How does continuing to discuss a false narrative help solve that problem?


My mother and I have had some great back and forth on this. One upshot is that she does not like the term narrative as, to her, it implies a story which is obviously made up and not true. But any really good fictional story is true. It may be based on events that have not occurred but it describes something about ourselves that touches truth or requires us to examine our own truths.

I’m using it more in the psychological, cognitive sense as the stories and metaphors we create to deal with the world, to make sense of the reality we experience. They are our best attempts to say something true, even as the best made-up stories try to say something true.

Even made-up stuff can be useful if leads to truthful revelations. But basing stories and narratives on lies can never lead to truth in a deeper sense.

Humans create rules of thumb and heuristics to deal with the world. They are usually in the form of pithy sayings, stories and narratives. Good ones allow us not only cope but make very fast decisions based on ‘common sense’ because they do a good job describing the real world.

However, narratives based on lies will result in ‘common sense’ solutions that are not based on reality and will likely lead to poor results. It will lead to a Cargo Cult World which only mimics reality.

If my rule of thumb is that all felines are docile, loving and playful creatures that would never hurt me, then I am in trouble if I approach a cat with an arched back, fur on end and snarling. I am even more in trouble if I approach a wild tiger for the first time.

Doing our best to make sure that the personal narratives that we use to support our view of the world are based on truthful data and not lies will be necessary if we hope to solve the tremendously complex problems that the real world is now throwing at us.

Because those problems are much more complex than what to do when a tiger crosses our path.

Messages to my mother Ia

I had a couple of followups to my message to my mom about deflation, since it seems to be on a lot of people’s mind. I sent these on to her also, so I’ll include them as an addendum to the previous post.


http://www.kansascity.com/2010/07/26/2109337/optimistic-consumers-can-save.html

Has some numbers. Same upshot as me – only by boosting consumer confidence. This can really only be done by getting the people with jobs to spend money now. Which means they need to have jobs and feel comfortable that they will have one in the future.

Also, here is a great Forbes article about deflation that just came out:

http://blogs.forbes.com/investor/2010/07/27/deflation-dissected/

He backs me up about the deflationary aspects of reducing government spending. The worst thing the government could do during deflation is to stop spending.

Lacy Hunt, in another article, talked about what we might do. He said we need a technological breakthrough. We broke the Deflation after the Civil War by a tremendous number of such (railroads, McCormick reapers, etc., telegraph). New technology might work if it can create jobs.

But normal companies just do not create enough jobs in deflationary periods.

Oh and he mentions something I am also coming around to. Just as the Republicans and Conservative Democrats are pushing cutting spending, which would be suicide during deflationary times, liberal Democrats want to allow the Bush tax cuts to go away. During normal times, I would be for this. Just as I would be for more responsible spending. You worry about debt during good times. Which is what we did in the 90s. The best economic times of the last 30 years. We actually had no deficit spending and reduced our government’s debt.

But during a deflation, any sort of tax raise of almost any kind will make things worse (see what I mean about solving deflation. Too much debt may be a problem but raising taxes or reducing spending will actually have no positive effect in deflationary times and would most likely be harmful.) So keeping the Bush tax cuts around for a while longer would be fine, as long as we do not also try to reduce spending.

The only thing worthwhile the government can do during deflation is to spend money creating jobs, not to simply stimulate the economy indirectly (as the guy said in the first article – the multiplier effect of a normal economy does not hold during deflation). They need to do anything to boost consumer confidence in order to break the deflationary cycle. Having a job is task number 1.

The party that solely focusses on jobs programs will be on the right track. But it will require some real education of the population. And it may require about faces of politicians (such as spending for NASA, etc.) which is never very likely.

I am not really very hopeful that we will actually do the right thing until after it is too late to prevent.These changes may not happen at all until our policies provoke real deflation. That is, America is much better dealing with emergencies after they have happened. There is still too much political capital on both sides to ignore the deflation warnings and keep pushing their current views, views from either party that will only make things worse.

That is why Krugman, and others, pushed so much last year for the stimulus program to not only be bigger but to really only focus on jobs, not lowering taxes. He may turn out to be very prescient but no one in politics really listened to him. The Dems used the money for Keynesian type stimulus and the Republicans got their tax cuts, and the final package was too small to stop what might be coming.

I’ve been hoping so much for the last year that Krugman was wrong, that he was a doomsayer and it would be okay. I have become more and more convinced that the political policies of both parties will drive us directly into the arms of deflation.

The key is doing anything and everything to create jobs directly, not relying on the invisible hand to do it. That will only happen when we return to economically normal times.


I also found a couple of recent articles – all from this week – that discuss deflation, stimulus and/or unemployment. Seems that it is on everyone’s minds.

Paul Krugman Permanently High Unemployment

Brad deLong David Altig Says That Our Cyclical Unemployment Has Started to Turn Structural

Mark Thoma The Cost of Convenient Optimism

NYT In Study, 2 Economists Say Intervention Helped Avert a 2nd Depression (without the stimulus, we would already be in a deflationary spiral)

Messages to my mother I

My mother is a disruptive innovator, like me. She has a wide range of connections across many communities, is not afraid of new things – she has had a Mac for over 20 years, makes her opinion known – thus the disruptive, and loves letting other people know about new information she gets.

So she sends me links to interesting stuff she reads all the time. Oh and we tend to vote for different political parties, so our world views are different but, as any creative person knows, you learn the most from people who see the world differently.

Anyway, I end up writing these long emails back to her. They often have a reasonable amount of research in them. So I thought I’d kill a couple of birds with one stone and repurpose them for my blog, removing all the personal stuff like endearments. I’ll do some editing and mash together several emails if there is a thread.

Here we go.


She sent me this article from the Houston Chronicle. I replied:

He is talking about deflation.

A subject very dear to my heart (so sorry of I get a little didactic) and one that I’ve written about this many times over the last decade: https://amanwithaphd.wordpress.com/2008/11/21/scary-graph/

https://amanwithaphd.wordpress.com/2003/06/24/wed-25-jun-2003-033038-gmt/ (from Robert Reich)

https://amanwithaphd.wordpress.com/2002/08/21/thu-22-aug-2002-004006-gmt/ (from 2002)

Deflation sounds great (prices dropping) but is horrible. People do not have jobs so there is reduced spending. There is little economic action because no one is spending. Since money is worth more in the future than now, no one (either consumers or companies) spends anything.

My take home – the government needs to spend money not for Keynsian reasons (nothing they do, whether it is stimulus or lowering taxes will work while some things can be detrimental) but to keep people employed. They are the employer of last resort. If the jobless level comes down, people will be ready to spend money. They will have more money to spend. Only if they feel confident to spend money will we be able to live through the deflationary cycle. So, do whatever is necessary to directly create jobs, to keep people employed, even if they have to create new public works programs to do it.

And continue doing that until we get out of the deflationary spiral (at which point, we should no longer need the support of the government to create jobs).

The columnist is being a little misleading, making it sound like Keynsian economics – which states that the government can stimulate the economy by lowering interest rates (monetary policy) or by stimulus (fiscal policy) – does not work at all and that we have been lied to for decades. Not true. What the economist talks about is a very specific type of economy – deflation (and realize that during deflation, supply side economics will not work either. It is the demand side that is the problem).

If we are entering a deflationary period, we are in trouble because NOTHING we know to do will change the economy except time, which is what the economist said in other articles. Not cutting taxes. Not cutting the deficit. No sending stimulus checks to people. No one really knows what to do except wait for people to start buying again. What needs to happen during deflation is that the debt needs to be reduced but it can not be because the economy is not producing enough revenue. (By the way, the same thing happens with companies. They lower the price of goods in order to raise revenues to pay off debt. But revenues do not increase so they lower things more. And so on. Why it is called deflation.)

During deflationary periods, neither monetary nor fiscal policies will be effective. In fact, nothing the government nor corporations can do will be effective at changing things unless they change people’s perceptions. The only known solution is time, time for people to start spending again.

Deflation is the thing I fear most because we have no known way to deal with it. Cutting taxes will not fix it and raising government spending will not fix it. There is no policy that either party can do at the government level to solve the problem.

And there is little corporations can do to fix it either. We know this because Japan has been dealing with deflation for almost 20 years. They have tried everything, both tax cutting and government spending. Nada.

During a deflationary period, debt, which can be great during inflation, is now bad. Anyone holding any debt at all can be in trouble. The problem is that to pay down debt requites greater revenues, which are not forthcoming, for the government or for companies.

It is not that Keynesian economics does not or has not worked in the past. It has done wonderfully during normal, inflationary, or depression eras. It will not help much during deflationary times. During deflation, money gets more valuable as time goes on (opposite of inflation). So, no one with money spends any of it because it will be worth more later. Anyone holding debt (bonds at first but eventually stocks) will be in trouble. That is one reason why Getty made out like a bandit. During the deflation of the early 30s, he had cash when no one else did.

Apple is in great shape because of their huge amount of cash. Everyone else is toast. If deflation hits, time to stuff the mattresses. Even gold will not be useful.

Deflation is the worst possible thing. And no one wants to really face it. Everyone hopes it will not materialize.Both political parties are sticking their fingers in their ears and shouting “LA.LA.LA!” So the Democrats pray that Keynsian economics will work and the Republicans still pray that reducing taxes/debt will work. They both may be whistling in the dark here. Neither policy will have any effect.

Krugman has been worried about this for quite some time. Interesting to see other economists feel similarly. The only thing that has ever gotten an economy out of deflation is time.

Why? Because it really gets down to human emotions. People really do not care as much about inflation or deflation as long as they have jobs. Deflation only gets broken when people feel comfortable enough to spend money again. And that only happens when they have jobs with an income that supports them. Get them jobs and we

So remember that while government spending can not alter the deflationary spiral, it can provide a buffer for people living in those times. This is, for me, a key reason for government spending. Not for some Keynsian or ivory tower reason. It will keep people employed while we wait this out. The government is the employer of last resort. Lowering taxes in a deflationary period will not accomplish this. Because the money returned will not be spent. It will be socked away because in deflation, money is worth more next year than today. It will not create jobs.

Many major programs of the New Deal were not really implemented simply because of the macroeconomic effects. They were to provide jobs directly. I may not like the war in Afghanistan but it is keeping a lot of people employed.  I’d prefer the government spend the money on developing green energy than war – technological breakthroughs that create new industries provide new jobs – but the thing is to keep people employed. For example, in a normal economy, it would be worth letting the private sector deal with a space program but now the NASA needs to make sure all those jobs are still around.

We can deal with deflation if people are working, just as we dealt with inflation. Without jobs, there is no good news for either political party.

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