Posted tagged ‘Complex Systems’

Coronavirus Consequences: Intended And Unintended

April 8, 2020

 

Consequences Just Ahead Green Road Sign with Dramatic Storm Clouds and Sky.

HOW DO EXPERTS VIEW THE WORLD

The lens through which experts see a problem is important in understanding why they make the decisions they do. Engineers, chemists, immunologists, economists, lawyers, psychiatrists, social workers, farmers, politicians, and bureaucrats could look at the same thing and see it differently.

 

IMMUNOLOGIST

The head of the White House Coronavirus Task Force, Dr. Fauci, is the director of the National Institute of Allergy and Infectious Diseases. He sees our current crisis through the lens of being an immunologist. The end he seeks is the eradicate the Coronavirus. He chooses means that he believes will bring about the end he seeks.

What he doesn’t see are the consequences produced, outside of eradicating the Coronavirus, by the means he has chosen.

 

ECONOMICS

Economics isn’t really about finances, making money, business, profit etc. Economic principles are in play in situations that have nothing to do with money and finances.

Economic principles apply to everything in life. Medics on the battlefield perform triage on the wounded soldiers. They are deciding how to allocate their scarce medical resources, including their time, to the most productive use. Some soldiers have a chance to survive if they get immediate care. Some have wounds that can be addressed quickly and fixed later. Some can’t be saved. Triage is how these doctors make these trade offs. If they spend all their time on a soldier that can’t be saved, others will die who could have been saved and some may lose limbs that wouldn’t have.

Each of us has a limited number of hours (24 ) in a day. And we have an unlimited number of ends to choose from. We choose certain ends and also choose the amount of time we are going to allocate to each.

Good economists see the world differently. They do not see one size fits all solutions in a world of scarce means and unlimited ends. They don’t see a decision as a choice between either A or Z . They see decisions as trade offs between A and Z.

 

THAT WHICH IS SEEN AND THAT WHICH IS NOT SEEN

Frederic Bastiat was an economist in France during the mid 1800’s. His essay, That Which Is Seen and That Which Is Not Seen, starts like this: “In the economy, an act, a habit, an institution, a law, gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause – it is seen. The others unfold in succession – they are not seen: it is well for us if they are foreseen. Between a good economist and a bad economist this constitutes the whole difference……the bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come, at the risk of a small present evil.”

I’m not picking on Dr. Fauci. Every profession, by the very fact of being specialized, has built in blind spots weather it is politicians, bureaucrats, engineers, lawyers, psychiatrists or social workers.

We have to understand this reality and do a better job of looking at the trade offs instead of the one size fits all solution. The financial cost, the psychological cost and the high cost of agreement, have to be seen and considered in every decision.

I know our politicians and bureaucrats are not weighing all the costs of the decisions they have been made concerning the Coronavirus crisis. And the reason is they see the crisis not as a problem to be “solved”, but as a chance to increase government power, and shrink the rights of the individual. Because “You Never Let A Serious Crisis Go To Waste.”

 

ARTICLES

Complex Systems Collide, Markets Crash, by James Rickards, at dailyreckoning.com.    Excerpt from the article:

“Complexity theory has four main pillars. The first is the diversity of actors. You’ve got to account for all of the actors in the marketplace. When you consider the size of global markets, that number is obviously vast.”

“The second pillar is interconnectedness. Today’s world is massively interconnected through the internet, through social media and other forms of communications technology.”

“The third pillar of complexity theory is interaction. Markets interact on a massive scale. Trillions of dollars of financial transactions occur every single day.”

“The fourth pillar, and this is the hardest for people to understand, is adaptive behavior. Adaptive behavior just means that your behavior affects my behavior and my behavior affects yours. That in turn affects someone else’s behavior, and so on.”

“Understanding the four main pillars of complexity gives you a window into the inner workings of markets in a way the Fed’s antiquated equilibrium models can’t. They let you see the world with better eyes.”

“People assume that if you had perfect knowledge of the economy, which nobody does, that you could conceivably plan an economy. You’d have all the information you needed to determine what should be produced and in what number.”

“But complexity theory says that even if you had that perfect knowledge, you still couldn’t predict financial and economic events. They can come seemingly out of nowhere.”

“I make the point that a snowflake can cause an avalanche. But of course not every snowflake does. Most snowflakes fall harmlessly, except that they make the ultimate avalanche worse because they’re building up the snowpack. And when one of them hits the wrong way, it could spin out of control.”

 

The Costs Are Mounting In This Government-Imposed Economic Collapse, by William Anderson, at mises.org.   Excerpt from the article:

“What we are seeing is how many people want governments to respond to a situation characterized by uncertainty. In such circumstances, they demand “solutions” that only can make things worse, and there is no better way to make the masses vulnerable to disease than to impoverish them. Furthermore, theNew York Times and the American Conservative’s one-two punch demanding total subjectivity to the whims of government makes it very difficult for there to be even a smidgen of rational discussion as to what is taking place no matter what one’s ideological stance might be.”

“First, instead of assuming that regulators really intended to minimize costs but somehow proceeded to make crazy mistakes, I began to assume that they were not trying to minimize costs at all……… They were trying to minimize their costs, just as most sensible people do.”

“Politicians are rationally risk averse, and when they shift the costs of their decisions upon the people they ostensibly wish to protect, they are not acting out of character, either of themselves or of the political system. That they wreck the livelihoods of millions of people in the process is of no concern to them and their adoring media. Instead, blame the capitalists.

 

“If Getting Us Into $6 Trillion More Debt Doesn’t Matter, Then Why Not $350 Trillion?” at zerohedge.com.         Excerpt from the article:

“… in case anyone still hasn’t figured it out, the whole “republican, democrat” split of the population in two rival camps is nothing more than theater meant to distract while those in control loot not only the here and now, but also rob the future generations blind. Because the sad truth is that behind the fake veneer of either progressive ideals of conservative values, politicians on both sides have one simple directive: to perpetuate the broken status quo for as long as humanly possible, and get as rich as possible in the process.”

 

“A Multitrillion Dollar Helicopter credit Drop”: How The Fed Turned $450 Billion Into $4.5 Trillion, at zerohedge.com.   This stimulus bill allows The Fed to print $4 trillion dollars. The bill also allows The Fed to bailout anything or anyone it wants. It also allows it to do it secretly.  Why can’t I get a $1 million dollar bailout? I’m a great guy! And I’m great at keeping secrets!

 

Corona Cash Grab: Pelosi, US Agencies Compile Lists For Phase 4 Stimulus, at zerohedge.com.    At what point will this massive amount of debt become too heavy for the real economy to prop up. These geniuses think printing money and going into debt have no consequences. Economic reality will eventually win. And It will be ugly.

 

Michigan Democrat Governor Begs Feds For Hydroxychloroquine Just Days After Threatening Doctors For Prescribing It, at zerohedge.com.  This shows what a B.S. game politics is.  I will play politics until I need something to save my a$$.

 

Stimulus Package Projected To Save The Lives Of At Least 85,000 Government Programs, at babylonbee.com.   The Bee is great. This headline is funny because it is true.

 

The Things You CANNOT Say About Coronavirus, by James Corbett, at guardian.org.  If I don’t buy in 100% to what the “Experts” say about the Coronavirus, everyone acts as if I have committed a mortal sin against humanity. Most people will cave when it looks like the crowd is against them. I’m not most people.

 

How Governments Are Deploying Big Data To Enforce Covid-19 Quarantines, at zerohedge.com. And this article:  Kansas Using Residents’ Cell-Phone Location Data To Fight Pandemic, by Tobias Hoonhout, at nationalreview.com. These articles give us insight into how tyrannical politicians can be in the name of doing good. This is surveillance without a warrant. This is essentially what the FBI got the FISA court to do to Trump.

Garcetti To Non-Complying Businesses: ‘We Will Shut You Down, at laist.com.   Where do these governors get the power to confiscate a businesses property. In reality this is what they are doing with these shut down rules. Do these rules have the force of law behind them or are these Governors using intimidation to get people to do what they want?

$350k Bond For Man Charged In ‘We Don’t Give A F*** Caronavirus’ Video, at fox19.com.    $350,000 bond for a second degree misdemeanor?  Seriously?  Here is what the Prosecutor said: “Millions of Ohioans are following Governor Mike DeWine’s social distancing order. It’s not a suggestion, it’s the law,” Hamilton County Prosecutor Joe Deters said in a tweet over the weekend. “Gathering in big groups is dangerous, especially to our police when they have to intervene. It’s real simple: stay at home or expect to be prosecuted.”

This is all about intimidating people to do something that is an order (Suggestion) and not a law. These are the very real unintended consequences of Government is doing. This guy committed a mortal sin against the powers that be.

 

From Denmark, A Clever Way To Stop Panic-Buying And Hoarding, by Mark J. Perry, at carpediemblog.   This is how you ration scarce resources. Raise the price. But this is really thinking outside the box. One bottle of hand sanitizer $5.73,  2 bottles $143 each. This should be the pricing system for toilet paper and paper towels.

 

UK Drug Dealer: People Are “Panic-Buying Cocaine And Weed To Cope With Covid-19 Lockdown, at zerohedge.com.    In the UK people are panic buying cocaine and marijuana. A dealer said: “…the price of cocaine is set to surge because there are no new shipments coming in from abroad for at least six weeks……When the stock begins to run low, people higher up the chain will charge more or cut the cocaine and decrease its quality.”   Economic principles are always in play. Even in the black market. The price will go up to ration the scarcity, or they will cut the quality to extend the supply.

Must Reads For The Week 4/21/18

April 22, 2018

GOVERNMENT CENTRAL PLANNING DESTROYS COMPLEX SYSTEMS

Why Systems Fail, by Charles Hugh Smith, at oftwominds.    Excerpt from the article: 1) “Systems are accretions of structures and modifications laid down over time. Each layer adds complexity which is viewed at the time as a solution.”

“This benefits insiders, as their job security arises from the need to manage the added complexity. The new layer may also benefit an outside constituency that quickly becomes dependent on the new layer for income.”

“In short order, insiders and outsiders alike habituate to the higher complexity…….. Few people can visualize alternatives, and any alternative that reduces the budget, payroll or power…..is rejected as “unworkable.”

“In this set of incentives, the “solution” is always: we need more money. But increasing the budget can’t fix what’s broken….. As a result, new layers rarely replaces previous layers; the system becomes more and more inefficient and costly as every new layer must find workarounds and kludgy fixes to function with the legacy layers.

2) “The organization is incapable of instituting deep reforms due to organizational sclerosis…… The structure itself has lost the feedback loops and accountability needed to radically restructure a failing organization.”

These dynamics can manifest in both private-sector corporations and public-sector agencies….All of this contrasts with self-organizing networks which lack the hierarchy necessary for sclerosis, self-serving insiders and fatally blinded management. Since “this is the way the system works,” we have a hard time imagining how public agencies and corporations might be obsoleted by self-organizing, opt-in transparent rules-based networks.”

“Since failing systems are incapable of structural reform, collapse is the only way forward. Unfortunately collapse doesn’t guarantee success; if the rot is deep enough, the wherewithal to assemble a new more sustainable system may be lacking.”

EXAMPLES

Kentucky Teachers Want A Taxpayer Bailout, by Troy Vincent, at mises.org. Teachers unions and Government bureaucracies are examples of what is talked about above. Teachers unions are incentivized to get as much money for its constituency group as possible. That constituency is not the students it is the teachers. Politicians and bureaucrats cave in to these demands because the future fiscal problems that will arise, because of their decision, will be the problems for future politicians. And even if they are still in office, no one will remember that the previous decisions were responsible for the current fiscal problem. In this case the  feedback loop for politicians comes from the voters. But if voters are not informed enough to know what caused the problem, they can’t exercise their power. Ultimately voters will bear the fiscal burden of the decisions made by teachers unions and politicians. But voters have only themselves to blame for the problem because they were economically ignorant voters in the first place.

The War Between Public Pensioners And Tax Donkeys Is Heating Up, by Charles Hugh Smith, at oftwominds.com. Many State public pension systems are underfunded. Raising taxes is the only solution because we know the teachers unions will never give up anything. And politicians will always cave to the unions. Unfortunately someone will have to give something up. And that means tax payers will have to give up more of what they have produced. At some point this will come to an end. Because if you continue to consume more than you produce, at some point there will be nothing left.

US Budget Deficit Hits $600 Billion In 6 Months, As Spending On Interest Explodes, at zerohedge.com. And this: US Deficit To Soar Over 40% In 2019, Exceed $1 Trillion By 2020, at zerohedge.com. This debt is unsustainable. There will come a point where this debt can’t be paid off. We may have already passed the point of no return. Politicians and bureaucrats will never shrink the size of their fiefdoms, so collapse may be the only solution.

Californians Flee The State In Droves Over Taxation And Housing Costs, at zerohedge.com. Politicians have caused this problem. The solution is going to be forced on States like California when enough people leave. Where will the revenue come from when enough people leave. The scale will be tipped in the wrong direction. You can’t confiscate money from people who don’t exist.

Illegal Immigrants Shielded From University of California Out-Of-State Tuition Hike, by Keil Huber, at thecollegefix.com. If they are lucky they will spend more so the collapse can happen sooner.

LA Is Painting Some Of Its Streets White And The Reasons Why Are Pretty Cool, at cbsnews.com. Do the environmental crazies think there is no cost to their policies. $40,000 a mile adds up quickly. I hope this happens so California has to face economic reality sooner rather than later. It will be less costly.

Revealed: Mueller’s FBI Repeatedly Abused Prosecutorial Discretion, by Mollie Hemingway, at thefederalist.com. The legal system is important if a country is to function properly. But the rule of law has been in the process of breaking down for decades. When the rules don’t apply equally, and prosecutors are above the law, you no longer have a legal system.

What Attorney-Client Privilege?, by Andrew Napolitano, at lewrockwell.com. You may think this is OK because it is happening to Trump. But what is going to stop  prosecutors from doing this to you. Or rights are being trampled on. This is another example of the erosion of our the legal system.

More Hilarious Facts About Tesla From A Hedge Fund Shorting The Stock, at zerohedge.com. Government has been subsidizing the purchase of electric cars. This allows the waste of scarce resources to continue long after this waste would have been stopped under normal market conditions. Losses are just as important as profits in transmitting information to producers. Producers need to know what, and how much, to produce. When Government tries to pick winners, they usually fail miserable. And once again taxpayers get caught without a chair when the music stops.

WHERE SOLUTIONS COME FROM

Solutions Only Arise Outside The Status Quo, by Charles Hugh Smith, at oftwominds.com. Excerpt from the article: “…Institutions are fundamentally incapable of responding effectively or reforming themselves. The universal solution of failing institutions and hierarchies is throw more money at the failings in the doomed hope that doing more of what’s failed will magically solve the systemic problems. We see this dynamic in all the major public-private structures or our economy/society: Higher education (solution: make students borrow even more trillions, or have the government borrow more trillions); Healthcare (government needs to borrow more trillions), and national defense/security (government needs to borrow more trillions).”

“As a result, solutions are only possible outside these ossified, self-serving centralized hierarchies.”

“When faced with fiscal crises, central states/banks inevitably succumb to the temptation to print/borrow currency in whatever sums are needed to fill the shortfall of the moment. This….seems to be magic at first…..but eventually gravity takes hold and the currency’s purchasing power declines, as the real economy the production of goods and services) grows at rates far below the expansion of currency. Even the greatest empires in human history have been unable to resist the “easy” solution of devaluing currency…….

“Existing systems optimized for bygone eras and maximizing the security and wealth of insiders are doomed to fail…… Solutions will only arise outside the control and boundaries of existing systems, as all structural solutions threaten to obsolete or replace existing structures, displacing all the incumbents and insiders who benefit from the continuing failure of the institutions they manage and control.

Institutions like markets, money and law were created by spontaneous order. Government central planning did not create them. Since people don’t understand that these came about spontaneously, they also don’t understand that Government central planning has created all the problems with these institutions. Allowing solutions to come from the spontaneous order created by individuals making decisions, is the only way these problems can be solved. Government central planning can’t solve the problems it created, because it has no incentive to do so. Taking decision making power away from centralized Government, and returning it to individuals, is the only way this ends well.

Spontaneous Order = Free Market Economy.

April 12, 2013
Spontaneous Order

Spontaneous Order (Photo credit: KAZVorpal)

SPONTANEOUS ORDER CREATES COMPLEXITY.

For us to understand how free market capitalism works, we have to understand the concept of spontaneous order. In this video below titled, “The Lawless Streets of Hanoi, Vietnam”, the man filming the video doesn’t even understand what he is watching. He says,”There’s no traffic lights to be found and everybody pretty much does what they want……It’s mad chaos.” He’s used to seeing traffic centrally planned by signs, signals, or traffic cops, and because of this bias toward centrally planned order, he is incapable of seeing the complex order that is created by individuals voluntarily cooperating. (more…)

Let’s Take A “Serious” Look At Conspiracy Theories.

March 27, 2013

Let’s take a break and laugh at ourselves concerning conspiracy theories. Many of us fall into the trap of thinking their has to be complex explanations for everything. Many times there are simple explanations for complex situations. The simple fact that the earth is tilted on its axis explains why the seasons change. Seasonal change sets in motion complex processes from photosynthesis to bird migration.

Always remember correlation is not causation.

Luke’s Change: An Inside Job (view here)

 

This Star Wars conspiracy theory video is really funny. But let’s also understand that many people try to discredit arguments that they can’t refute with logic and facts, by labeling the person who puts forth the argument  a “conspiracy theorist”. The red flag should always go up when the person is being attacked, instead of his argument being  answered.