… and amid growing concern in Europe that austerity aimed at cutting ballooning deficits may also be choking growth.A dozen European Union leaders, including British Prime Minister David Cameron and Italian Premier Mario Monti, called Monday for an open-markets strategy to stimulate growth and jolt the region out of its economic doldrums.“We meet in Brussels at a perilous moment for economies across Europe,” the leaders said. “Growth has stalled. Unemployment is rising. Citizens and businesses are facing their toughest conditions for years. ”
The letter urges European nations to deregulate their service, research and energy sectors, forge trade ties with growing markets including China, Russia and South America — and even contemplate a free trade agreement with the United States.
“Implicit guarantees to always rescue banks, which distort the single market, should be reduced,” the letter said. “Banks, not taxpayers, should be responsible for bearing the costs of the risks they take.”
20.06 Jeremy Warner [financial editor] writes that the US has proved that the brutality of hire and fire really does work:It is a simple fact of life that business is more prone to hire if it is allowed to fire. The major risk to business investment, which is that of an ongoing workforce liability, is thereby removed.Vince Cable’s proposed shake-up of employment law is in truth of much more importance to the future of the UK economy than faffing around either with credit easing or squandering £12bn on a temporary tax cut. It’s vitally important that the task is not ducked.
22.02 Here we go. Eurozone ministers agree on ways to cut Greek debt to 123/124pc of GDP by 2020, aiming to go close to 120pc. Eurozone in talks with representatives of private sector about finding further debt relief. Issue of ECB forgoing profits on its holdings of Greek bonds remains a sticking point.
What’s a person to do? or ‘Motivated avoidance’
Individuals are often confronted with information that they do not know how to comprehend or evaluate, even though this information can be of critical importance to the self (or society as a whole). In the case of energy, nearly 40% of respondents in a Public Agenda (2009) survey could not identify a fossil fuel. Nearly one third could not identify a renewable energy source and incorrectly believed that solar energy contributes to global warming. This lack of knowledge should be of concern to these individuals, as 89% of respondents worry about increasing fuel costs, and 71% worry about global warming.
The economy serves as another example.
Approximately half of surveyed adults did not know what an increase in gross domestic product meant and thought that “money holds its value well in times of inflation” (National Council on Economic Education, 2005). Worse still, in a national survey of American adults, 54% of respondents did not know what a subprime mortgage was (Center for Economic and Entrepreneurial Literacy, 2009), despite the fact that the subprime mortgage crisis was a significant contributor to the economic recession that began in 2008, and almost certainly affected some substantial portion of those surveyed. In short, it is apparent that a solid grasp of the basics (let alone the complexities) of these domains elude many people, and there appears to be a discrepancy between how much people know about social issues and their importance and relevance to one’s day-to-day life.
Given the psychological discomfort associated with epistemic uncertainty, one appealing way to deal with the anxiety of being unable to comprehend or manage information is to simply outsource personal responsibility to supposed qualified others. This strategy may, at times, be considerably more appealing than seeking
out knowledge and information for oneself, which assumes that people have the time and ability to sieve through challenging, and potentially threatening, information. The amount of information available to us to sort, comprehend, and assimilate has substantially increased due to technological advances, all of which compete for our time and attention. As a result, trade-offs have been made over time whereby society’s members have forfeited a certain amount of autonomy to have these burdens placed onto systems of power composed of knowledgeable others. Society has prescribed that, for example, our health is managed by health professionals, our buildings by engineers and contractors, and, relevant to the present research, our social and economic security is managed by the government. Indeed, survey data show that 88% of adult respondents thought it was very important for politicians to have a good understanding of economics,
only are people motivated to avoid social issues when they feel issues are complex—thus maintaining their present level of unfamiliarity— but this effect appears strongest for those issues believed to be most urgent and serious. It is at times when change is most needed, therefore, that people may become the most likely to
defend the status quo and agents of sociopolitical systems. As such, the present studies suggest that rather than ensuring those in charge are maximally qualified to be in charge, and rather than remaining especially attuned to any limitations of the system, the psychological processes that are instigated when issues are seen as both severe and complex may limit any criticism of the current system and its decision-making process. And, perhaps even more critically, they may also prevent the types of behaviors, such as information gathering, that are necessary to efficacious social action (Attari et al., 2010; Larrick & Soll, 2008).
italics are mine
By: Daniel Becker
In answer to the generic question regarding President Obama’s actions regarding the debt ceiling, I am re-posting this from 2/25/09. In comments of the original I stated that cutting the deficit by 1/2 seemed to “optimistic” for me.
Ok, here are my basic issues with the substance of President Obama’s speech. First, may I remind everyone
that as of 11/08 I declared my divorce successful. Has it become my mission accomplish moment?
I heard this:
“And we will expand our commitment to charter schools. but as a father when I say that responsibility for our children’s education must begin at home.”
And thought: 2 tier education system/vouchers, no thank you. Education begins at home when home means one parent has the time to spend at home oppose to both working.
I heard this:
“And we must also begin a conversation on how to do the same for Social Security, while creating tax-free universal savings accounts for all Americans.”
And thought: Are you freak’n kidding me! In this time of financial collapse we’re still going to talk about turning an insurance for the masses against the follies of finance into some form to include finance? The entire reason we want to create jobs is because we have suddenly realized that the vast, vast majority do not earn their money from money. Tax free? Has he not heard of 401K, IRA and all it’s versions, HSA, higher education accounts? Italy?
I heard this:
“Yesterday, I held a fiscal summit where I pledged to cut the deficit in half by the end of my first term in office.”
And thought: Yeah, how’d that work for the last administration who made such a declaration? Did he have to say “in half”? Has his advisors not taught him about the blip during the FDR recovery? Only one way I can think of doing this: Raise taxes where the money is and whack the defense budget in half and I mean take a swipe at all moneys related to security. Are we really $1 trillion dollars worth of paranoid?
With thanks to Felix Salmon for arranging the invitation.
There’s an episode of House where he has to get rid of one of the people for his new team. By the end of the episode, the sharpest person in the group has said everything that we would have expected to hear from House—and is therefore summarily dismissed, since hearing one’s own opinions being spoken by someone else is less useful than being challenged.
I had a similar feeling with George Soros’s conversation last Wednesday morning with Chrystia Freeland, sponsored by Reuters and held in the NASDAQ building that, er, graces Times Square. So what follows isn’t everything Soros said so much as what he said that either (1) you wouldn’t already know from reading this blog or Paul Krugman or (2) added details or touched on an interesting issue.
UPDATE: Krugman finds another similarity between himself and Mr. Soros.
The Recent Crisis and Its Causes
Soros declares that there was twenty-five to thirty (25-30) years of a “Super Bubble,” which has now burst. It seems from the discussion that Soros believes the SuperBubble was worldwide. Recovery is being hindered by some policies—Germany’s talk about austerity was especially mentioned—by Soros sees strong hope in the Trade Shift that has accompanied the crisis. He noted that the “global economy is a lot better than the US economy,” and that he expects to see it continue growing even if the U.S. (or Europe, due to the German leadership, or even both) fall into a :double-dip.” (In this he is arguably more of an optimist than many.)
Key to this shift has been the growth of bilateral relationships. He noted obliquely that these developed in part because many governments—most especially the Chinese, who have been “the great beneficiary of globalization”—do not want to change their capital controls, but sees them as facilitating the new paradigm. He expects that the next move will be that Hong Kong (with the HKD remaining independent of the RMB) will become as London did in the 1960s and 1970s, the intermediary of choice for the growing market (now China, then Europe).
There is a strong need to increase Chinese domestic demand, which he rightly expects is being partially facilitated by the recent wage increases. While there is a need to shift from the previous US-Chinese symbiotic relationship (essentially, bonds for exports), Mr. Soros is “not sure there will be” further advancement in that relationship without greater domestic Chinese consumption. He declared that the Chinese economy has become “the motor” of the world economy, but also noted that it is a smaller motor, so the world economy is not moving so fast.
In that context, he was asked by a gentleman from Fidelity Capital if it is time to move from the USD to a “basket” as the World Reserve Currency. (As regular readers know, this is an issue near and dear to my heart.) Stating the obvious, Soros noted that having “a more neutral currency” (which may not be an exact quote) would be helpful in correcting the imbalances, which are largely due to the dollar being the International Reserve Currency. He agreed that a basket Reserve Currency would improve the market. (I—and I suspect David Beckworth—might agree that it would provide for easier remedies, but I’m not convinced it would provide for a better market, since arbitrage opportunities and issues of asymmetric information would be more likely to skew outcomes.)
Soros is very sympathetic to the Chinese people themselves. He notes that they work hard but that their labor is harnessed to an undervalued currency to the benefit of the State. He described the Chinese mercantile system as being “State Capitalism,” which he calls a “very powerful” model, while also noting that it is not so good as the previous “International Capitalism.” Since he noted that “International Capitalism”; is synonymous with “the Washington Consensus,” this leaves him having damned China with very faint praise. (Though, in fairness, he is even more negative about Russia, which he described to Jim Holt as an example of unsuccessful State Capitalism, whose success or failure is primarily driven by the price of oil. He also sees a real possibility of China developing into an Open Society—another point on which he is rather an optimist.)
Where he is not positive about China is its Real Estate market, which is skewed in part due to the political structure. The Chinese version of mercantilism allows government officials to own three (3) properties, which has been a very good way for those workers to get rich through selling and “trading up.” The primary solution to this bubble, he believes, would be initiating a property tax, which would produce a carrying cost on properties and therefore mitigate the speculative aspects of the bubble. (Soros essentially notes that, as with the United States, labor is overtaxed and capital undertaxed in China. Since China has excess productive labor, the benefits flow to the state. Implicitly, the U.S.’s excess produced the differential model discussed above, which worked well for both parties for some fifteen (15) years.)
But all is not bread and roses in Soros’s view of China. An Indian journalist sitting next to me asked the obvious question: Has being a democratic country “hamstrung” India as compared to China? Soros came back to his key theme of the need for growth in Chinese domestic demand, noting that the Indian economy is more stable precisely because there is now domestic growth—growth that will be facilitated in China only as that State evolves both politically and economically. He noted that the Chinese people, to date, have been willing to accept limits on their individual freedom for its benefit in growth, but he does not see other countries being willing to accept such limits on their own freedom to support China’s growth. If I ever had any doubt that Soros is a more devoted Popperian than I, it was eliminated in that moment.
Other Powers, and Some That Might Be
Soros spoke positively of Turkey (Dani Rodrik may have a counterpoint), negatively of Germany (from a policy perspective; when asked by a reporter from Crain’s what we will look back on and see as stupid, he replied that “fiscal rectitude, from a timing point of view, is wrong.”), and generally positively of the Euro, declaring in response to a question about Ireland and Greece that “If anybody would leave [the Eurozone] it would be Germany.”
His key point about the Euro is one that is often found in the literature of financial crises, including the previous Great Depression: there is a European Central Bank, but there is not a central Treasury. But this appears to be de facto being remedied by the Solvency Crisis, with “back-up funds” being developed and used. Soros noted a key distinction that is often missed in discussions: there was not a crisis of the EUR, but rather a European banking crisis, which was exacerbated by policy disagreements between France and Germany. (Germany won, though his view of whether this victory will be relatively Pyrrhic is left as an exercise.)
Again, he looks to the Chinese as an indicator, who started putting their money—you know, that 4 Trillion RMB stimulus and the revenues that have followed it—into the EUR as soon as it reached around 1.20. The Chinese bought the EUR, the Chinese bought Spanish bonds, the Chinese stabilized the market. The Chinese did something no one else can do for them—bought another currency on the open market.
And this is the key to understanding Soros’s attitude toward Japan. You think this is easy, realism? The Japanese are correct to worry about their currency, Soros notes, because, while the RMB is the strongest currency in the world, you cannot own it because of capital controls that the Chinese government maintains because they do not want to have both rising wages and an appreciating currency in their export-based economy. Accordingly, per Soros, any appreciation of the RMB “has to be done in an orderly manner.” In the meantime, the Japanese did the only thing they could.
Mr. Soros was by no means a fan of the Obama Administration. Echoing Glenn Greenwald, he notes that the Obama Administration should have corrected the excesses, the abuse of power, of the Bush Administration. Despite this (and what follows), Soros believes Obama “may well be elected to a second term.”
As a matter of handling the banks through the crisis, Mr. Soros noted that the Administration should have injected Equity into the banks, but notes that he believes the Obama team found this politically unacceptable. The result is that the government effectively nationalized the banks’s liabilities and “allowed” them to “earn their way out of that hole,” through practices such as increasing consumer credit card rates.
(My memory of the events is somewhat different, since part of what the Fed received for its TARP funds were warrants on those banks—warrants that have subsequently been sold and counted as if the revenue against the original loans to make them appear more “profitable” in the eyes of several bloggers and financial journalists [including, for instance, Robert]. But certainly there was no AIG-like structure imposed, no U.S. equivalent of Northern Rock, no matter how much saner than would have been.)
To no one’s great surprise, Mr. Soros does not believe that Mr. Obama is “anti-business.”
The biggest fault he found with the Administration’s approach to the crisis is that they depended on the “confidence multiplier” to make recession shallower and shorter than it otherwise would have been. The problem with a confidence multiplier is, of course, that when the results do not match the expectations, the “multiplier” becomes a disappointment, and therefore a drag on expectations going forward. Mr. Soros described this as what happened.
If this scenario is true, then the decision not to ask initially for a $1.2T stimulus, with a chance to end up with a better mix and higher absolute amount of actual stimulus funding, will go down as the tombstone for the Administration, not “just” a spanner in the possible continuation of the Administration’s economic team (h/t Mark Thoma on Twitter). But, hey, the recession has been over for more than a year, so things are getting better, with the upcoming elections more resembling the signpost of 1982 than 1932. At least in some timestream.
This one was pulled all over the place, so it should come as no surprise. Gold is, per Mr. Soros, the only active “bull market” right now. He is also not optimistic about the ending of that market. Gold is “the ultimate bubble”—may be going higher, but is certainly not safe and is not going to be forever.
Mr. Soros admits a similar attitude toward oil, but at least there the commodity has intrinsic value. As Vincent Fernando, CFA, notes, owning something other than gold at least gives you the possibility of “productive assets.”
I’ve left out a few things, including the roundelay that resulted when one journalist attempted to discuss Mr. Soros’s firm’s holdings in a company he said he didn’t the firm owns. But in general the feeling one gets when presented by Mr. Soros the person is that he is an optimist, perhaps incurably so. Things are rough, and they will probably continue to be rough for a while, but in the longer term, things are getting better for all.
I’m guessing he won’t be speaking at The March to Keep Fear Alive. But Mr. Colbert—let alone his predecessor at the Washington Monument—would do well to book him as a guest.
The 1920s Depression: Glenn Beck, Thomas Woods, and "Benefits" of Cutting Taxes to Combat a Recession, Part 2
1. lefties talk up how the New Deal (big gubmint, tax hikes) saved the economy from the Great Depression but it didn’t
2. there is a conspiracy of silence about the recovery from the 1920s Depression because it shows that if the government does nothing (with the possible exception of cutting taxes), the economy will roar, as it did throughout the 1920s
Last week I put up a graph showing the marginal tax rates and the recessions from 1920 to 1940. The graph of the data doesn’t quite mesh with the words that Woods chooses to use. What we see is that while Republican administrations were happily cutting marginal tax rates in the 1920s, the economy kept going into recession after recession culminating with Great Depression. In fact, between the end of the 1920s Depression and the start of the Great Depression (not including either one), the economy was in recession 30% of the time. Conversely, once the New Deal started and the Big One ended in ’33, there was only a single recession before WW2 started.
Today we’re gonna do something different. We’re going to look at economic growth and see how well that meshes with Woods’ storyline. Now, the problem is… where do we find data? After all, the Naitonal Income and Product Accounts tables were not being calculated back in the ’20s. But… Woods quotes a number or two on GNP, which he gets from Smiley on GNP. Smiley, in turn, pulls his GNP data from the Historical Statistics of the United States. I’m always leery of using pre-1929 national accounts data from the HSUS since its made up of interpolations, but I guess its as good a source for that data as one is likely to find. Either way, they’re clearly good enough for Woods, so I cannot imagine he would object to us poking around.
Anyway, I had to enter the data by hand, and I’m using a mini-mini laptop right now, so hopefully I didn’t screw up anything, but here’s what real GNP per capita in 1958 dollars (I’m not changing the HSUS data at all…. I want to make sure Woods would approve) looks like:
Sorry about the step figure look, but I wanted to get the recessions (the gray bars) as accurate as possible… and while that data is monthly, real GNP per capita from the HSUS is yearly. Now, Woods’ focus is on the recoveries… but the the graph doesn’t exactly scream at you that the Mucho Tax Cuts and Deregulation Roaring ’20s massacred the Drab Socialist New Deal period. As a result, he adds a lot of verbage which I do encourage you to read. I prefer to take a different approach, though. I created the graph below, which I think is pretty self-explanatory.
So there it is. All of Woods’ verbiage boils down to this… relative to the New Deal policy he excoriates, his example of success is a time of slower growth, more time spent in recession, and it all culminates in what may be the worst economic situation this country has ever faced.
Now, you may be thinking… Woods doesn’t realize that the policy he is promoting produced worse results than the one he is attacking. But I disagree. I believe he knows what the data shows. I provided a few examples last week where Woods seemed to me, at least, to be very misleading. One technique for doing that which I pointed out last week was to cite someone else when passing off incorrect data, but not to point out that the data was wrong. That allows Woods not to outright lie, but it does lead readers to believe something which is not true. Here’s another example… Woods states:
Instead of “fiscal stimulus,” Harding cut the government’s budget nearly in half between 1920 and 1922. The rest of Harding’s approach was equally laissez-faire. Tax rates were slashed for all income groups. The national debt was reduced by one-third. The Federal Reserve’s activity, moreover, was hardly noticeable. As one economic historian puts it, “Despite the severity of the contraction, the Fed did not move to use its powers to turn the money supply around and fight the contraction.”
Now, Woods is very carefully not stating himself that the Fed did nothing. He himself states that the Fed’s actions were hardly noticeable. That may be… I have no way to measure that with the poor data that is available to us now. But Woods goes farther. He tells us that an economic historian has stated that “the Fed did not move to use its powers to turn the money supply around and fight the contraction.” Which is stronger than hardly noticeable. Does Woods agree with this statement? Well, he doesn’t quite say so. But what he never writes is this – “well, this dude says the Fed did nothing, but he is wrong.” And by not doing that, by telling us what some historian said but not indicating we should not believe that historian, Woods is, in effect, endorsing that economic historian’s statement. And by now, after two posts, you should realize that I’m only bringing this up because the Fed actually did something.
As we can see on page 440 of this document from the FRASER collection at the Federal Reserve of St Louis, back in that era, there could be different rates at different Federal Reserve Banks. And just about all the big ones had rate cuts in 1921 before the end of the recession. Take the New York branch, the most important one. The rate was 7% at the start of the year, was cut to 6.5% in May, cut again to 6% in June, and cut again to 5.5% in July, the month the recession ended. One can argue that the Fed moved a little late – which would make “hardly noticeable” potentially true, but it certainly makes “the Fed did not move” BS. This is just one of several examples where, in my opinion, Woods is careful not to lie by commission. But readers will read it and conclude something that is untrue.
So there it is. After two posts, I conclude:
1, the Roaring 20s prior to the start of the Great Depression were a period of deregulation, many tax cuts, and many recessions with very short lived recoveries. The culmination of the Roaring 20s was a great economic disaster, perhaps the worst in American history. None of this applies to the New Deal Era prior to the start of World War 2.
2. Over the length of the Roaring 20s “recovery” and the New Deal recovery, growth was quite a bit faster during the New Deal years.
3. Woods writes carefully and precisely enough that it is hard to conclude that he does not realize 1 and 2.
4. Knowing what Woods appears to know, and knowing that economic policy has tremendous consequences on people’s lives, Woods is nevertheless willing to promote policies that did much more poorly than he implies and to attack policies that did much better than those he promotes
5. Glen Beck is either in on the con or he’s being had.
The following are two videos, first by Simon Johnson, second by Elizabeth Warren, from the full presentation (see here).
I have not read the full report or watched all the event, but thought these would be of interest.
by divorced one like Bush
Well, here is what I’m doing to support the US of A’s economy. It’s a lesson in the real model of economics. It is a scaled version of the concept of stimulus. I even did it by using financing just to make the model as close to real as possible. (OK, I had to finance it but…I used my credit union.) Yes, I’m driving up the debt, but I’m creating jobs and I’m build wealth.
I purchased locally to assure my bank supplied money (debt) is multiplied as much as possible. When this garage is done, I will have created over a dozen or more jobs directly and who knows how many as the debt money goes from the first exchange of hands (me to who ever) to the second exchange (whoever to whoever’s whoever). Notice, that this is all happening via a producer economy not a financial economy. Any rescuing of banks is taking place by moving money into the hands of people first.
I’m even adapting to these hard economic times. I’m looking else where to earn a living. Actually, I’m looking to reduce my expenses by improving the effectiveness of my time. The practice (yes, health care has taken a hit) and the flower shop are slow so I will be honing my mechanic skills and fixing my vehicles my self.
Alas, there is a down side. The wealthy rent collector will no longer be collecting the rent.
Divorced one like Bush wants to know how accurate the polling was that came up with a consensous that the GDP rose 3.5% in the third quarter. I did my own poll last night at band practice and 100% of the self employed band members (only one for an employer and that’s the public school system) said they did not see it in their business.
I think this GDP rise, “we’re out of the recession” was just more of the inside the beltway pundit MSM happy talk. How else can you explain a 200 point rise in the Dow?
I took another poll today. It’s of retail. It’s a poll of 1, but I think it’s significant. The results are good. Retail sales were up 5.3% for the 3rd quarter over the same time last year. WOW! I think I’ll buy stock in this company. Here’s how it broke out:
July up 19.4%,
August down 14.2%,
September up 12.2%.
Six out of the last nine months were negative as compared to last year.
Here’s how the money flowed:
Account sales down 11.8%,
American Express up 78.4%,
Cash down 3.2%,
Discover down 39%,
Visa/Master Card up 24.6%.
Here’s the Advanced Retail Sale report from October 14, 2009
The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for September, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $344.7 billion, a decrease of 1.5 percent (±0.5%) from the previous month and 5.7 percent (±0.7%) below September 2008. Total sales for the July through September 2009 period were down 6.6 percent (±0.3%) from the same period a year ago. The July to August 2009 percent change was revised from +2.7 percent (±0.5%) to +2.2 percent (±0.2%).
Retail trade sales were down 1.7 percent (±0.7%) from August 2009 and 6.4 percent (±0.7%) below last year. Gasoline stations sales were down 25.3 percent (±1.3%) from September 2008 and building material and garden equipment and supplies dealers were down 13.0 percent (±2.0%) from last year.
And the Dow came back to reality today. At least for the moment.
by divorced one like Bush
While your reading this, think about the physics concept of two things occupying the same time and space. Think about the similar idea that light is both a wave and a particle. Think about the message we have been told that many very bright people (like physicist) went to Wall Street.
During my lunch break I was watching C-span, the Senate. My Senator, Mr. Whitehouse was speaking on the need to move on the extension for unemployment insurance. Two comments were made. First, that 7000 people per day are falling off the unemployment rolls since October eighth.
Seven thousand people per day! Got to wonder how many of these have no health insurance and thus will become a member of the forty four thousand group that dies because of no health insurance.
This brings up the second comment Senator Whitehouse made as a means of putting a face, a person, people into the economic equations. There is a woman, a mother of 2 children in their early teens who has been unemployed for 13 months. She is recovering from a heart attack.
Now, you do not have to take my word for this, but it is rather well understood that stress is a cause of heart disease, though stress is not selective. It can cause havoc with just about any system of the body and it usually effects more than just one simply do to the fact that our body’s systems do not function in isolation to all the others.
So just what do you think is going to happen to this mother and her family if she falls off the unemployment rolls? Does she no longer cost our society? For those who argue that people think the public option or the real solution, a single payer system means “free”, I ask: Do you theorize that this mother and her family will no longer be an effect on your personal income when her unemployment stops and thus their life is free to you?
Do you/we understand that this woman is the realization of two things occupying the same space and time, yet appearing as two different entities in the “science” of economics? This woman and her family will not be free to us! This woman will cost us regardless. It is not, I am sure, this woman or I who thinks her life should be free (as in no money needed). It’s only those who think this woman costing them is an inefficiency who think her life should be free. They mistake the loss of risk do to the accumulation of money as free from cost.
We all cost each other in some way. Our goal should be to make efficient, every one in our economic system. We should, at this time after having so many experiences with recessions/depressions, understand that the only true efficiency of an economic system is the efficiency of people’s lives. The only way to efficiency is to reduce risk collectively. But, instead we are still chasing the efficiency of money as in not having the health care cost bust a budget (but Ok’ing the war) or equating unemployment as costing us while we bail out Wall Street.
With all the bright people we are told that went from physics/mathematics to Wall Street, people who understand the ability for something to appear the same, yet different, that one thing can occupy two places at once yet have two things occupy the same space and time, how can they/we not understand that an economy is not and can not be discussed, manipulated or changed without a basic acceptance that it is one living and breathing, energy producing and expending entity? It’s efficiency, as in the conservation of energy law is found in people, not money. An economy’s efficiency is calculated by the accumulated reduction of risk, not increase in money. Counting, manipulating, playing with the money is like playing with the energy and ignoring the matter.
This woman Senator Whitehouse talked about and her situation is the phenomenon realized of the Theory of Everything which Einstein went to his death trying to solve . Einstein was working in the wrong science. Had he been in economics he would have succeed in proving this Theory I believe. But, if not him, then certainly John Nash should be able to recognize such. It is his theory that takes into consideration everyone’s decisions. We’re talking integration. Systems. Ecosystems, physiologic systems, physics, economic systems all described in mathematics. Math, the thing those people on Wall Street and the Chicago School (or is it the lake school?)are suppose to actually understand.
For our mother in this story who has heart disease, the real cure is not going to be found in health care. For her, solving the health care insurance problem is only a stop gap measure which does not maximize the efficiency of her life such that her cost to us is as close to free as it can be. To accomplish such, she needs money in hand. Only money in hand can allow her the ability to make the type of decisions that will reduce her risk and thus cost to us. Simultaneously, solving just the money in hand will not solve her health issues. She is one entity in different economic time/space. We can accept such or, we can keep ignoring the realm in which the solution to the Theory of Everything is found and keep treating economics as physics: A science with a mathematical dichotomy between the small and large.