Economy Blues

[Rick Marken (2003.01.30.1410)]

A lack of understanding of closed loop control is not limited to students of baseball
catching. Here are some comments on the economy from the LA Times:

···

---
U.S. Economic Growth Slows to 0.7%
from Associated Press

  WASHINGTON -- The economy faltered in the final quarter of last
                         year as consumers-- nervous about a war with Iraq and their
own job
                         prospects and stock portfolios-- turned cautious and
increased their
                         spending by the smallest amount in nearly a decade...

                         For the economy to fully recover, a sustained turnaround in
business
                         investment is necessary, economists said.

----
But business won't invest if there is no demand. Businesses invest in order to
increase production in order to meet demand. Demand is money in the hands of
consumers (including business people) that was gained from participation in the
production process. If a small proportion of consumers controls so much of that money
that they can't use it for consumption, overall demand goes down so production goes
down as well. Increasing production via capital investment in this situation will
just increase inventory, unless the investment is a massive hiring process so that
the unspent capital is put back into the hands of consumers where it can be used to
buy the stuff being produced.

Anyway, the statement above shows (I think) that economists think of business
(production) and consumption (demand) in open loop terms. Production and consumption
are thought of as independent causes of economic performance. In fact, I think that
production and consumption are part of a closed loop process; people produce to match
demand in the form of money that was gained from producing what is demanded.

One final economic note: It looks like my pre-Bush predictions based on leakage
theory are coming true in spades. As Bush's policies push the maldistribution of
income to new levels of obscenity we see the economy disintegrating. I think the
only thing keeping us from a massive depression (20%+ unemployment) is ready access
to credit, which maintains demand high enough to keep unemployment below 10%. I can't
imagine that this Ponzi scheme can go on much longer, however.

The nice thing about this economic mess, though, is that people actually selected
those who are perpetrating it (well, maybe not by majority vote; but well over 50%
support Bush at the moment) so I guess I would have to say to the people of the US: I
see you have chosen to do away with the middle class.

Best regards

Rick

--
Richard S. Marken, Ph.D.
Senior Behavioral Scientist
The RAND Corporation
PO Box 2138
1700 Main Street
Santa Monica, CA 90407-2138
Tel: 310-393-0411 x7971
Fax: 310-451-7018
E-mail: rmarken@rand.org

[From Rick Marken (2003.01.30.1730)]

Fred Nickols (2002.01.30.1905 EST)--

Anyway, let's set the economic mess aside for the moment and turn our
attention to the foreign affairs mess. I don't know about the rest of you
but I'm controlling for an image of America and Americans in which picking
fights is distinctly un-American (ending them quickly, of course, is
equally distinctly an American attribute). It seems to me that we're
picking a fight with Iraq. Am I missing something here?

I'm with you completely. Saddam is certainly an asshole but why this asshole now?
There are so many others, many of whom are our friends (we have a predilection for
Latin American dictators, for example, as long as they aren't leftist dictators,
anyway). The only possible justification for this war that makes sense to me is if
Saddam is connected to al Queda. But Saddam hates al Queda (and vice versa)
because Saddam is a secular nationalist (a la Hitler) while al Queda is a bunch of
religious fanatics (like Bush).

I wonder why nobody is pointing out that Bush is lying about the purported
association between Saddam and al Queda? I guess it's wrong for a president to lie
about a blow job but not wrong to lie in order to get people blown up. Boy, I just
don't understand those good Republican values. Probably cause I'm a damned
agnostic.

I think this is a situation where you just have to go up a level a laugh at the
whole thing. I've discovered a wonderful cartoonist who helps me do just that.
Try this cartoon from Tom Tomorrow.

http://www.salon.com/comics/tomo/2003/01/13/tomo/index.html

By the way, I found this posted outside the office of one of our military
analysts. Many of them seem to know that this Iraq war thing is nuts.

Best

Rick

···

---
Richard S. Marken, Ph.D.
Senior Behavioral Scientist
The RAND Corporation
PO Box 2138
1700 Main Street
Santa Monica, CA 90407-2138
Tel: 310-393-0411 x7971
Fax: 310-451-7018
E-mail: rmarken@rand.org

[Fred Nickols (2002.01.30.1905 EST)] --

Rick Marken (2003.01.30.1410)

The nice thing about this economic mess, though, is that people actually
selected
those who are perpetrating it (well, maybe not by majority vote; but well
over 50%
support Bush at the moment) so I guess I would have to say to the people
of the US: I
see you have chosen to do away with the middle class.

I'm a bit more cynical. I think the "swells who run the show" chose to do
away with the middle class a long time ago. Oh yeah, before I forget, I
don't believe that voting and the "swells who run the show" have anything
to do with one another. We the people can vote until we're blue in the
face and it won't change a thing. The "swells who run the show" will just
keep putting one puppet after another in front of us -- from which array we
are to choose. An an old organization development (OD) consultant who
trained me put it, "The objective is to put three choices in front of the
decision maker, any one of which is fine by me." As another mentor of mine
put it, "Any time they tell you it isn't about money, it's about
money." To paraphrase, any time they tell you it isn't about oil, it's
about oil."

Anyway, let's set the economic mess aside for the moment and turn our
attention to the foreign affairs mess. I don't know about the rest of you
but I'm controlling for an image of America and Americans in which picking
fights is distinctly un-American (ending them quickly, of course, is
equally distinctly an American attribute). It seems to me that we're
picking a fight with Iraq. Am I missing something here?

Fred Nickols
nickols@safe-t.net

[From Bill Williams UMKC 31 January 2003 7:30 AM ]

Rick,

Why don't you try and see if you avoid simplistic statements like
"economists think" when any modestly informed viewpoint recognizes
that there are with the category "economists" a variety of viewpoints?

best

Bill Williams

[From Rick Marken (2003.01.31.0930)]

Bill Williams (UMKC 31 January 2003 7:30 AM )--

Rick,

Why don't you try and see if you avoid simplistic statements like
"economists think" when any modestly informed viewpoint recognizes
that there are with the category "economists" a variety of viewpoints?

Of course. Sorry. I just haven't seen anything written by an economist (re: the
macro economy), or non-economist, for that mater (other than TCP), that sounded
anything like a the control view that makes sense to me. But, of course, that
doesn't mean there aren't any such economists.

Best regards

Rick

···

--
Richard S. Marken, Ph.D.
Senior Behavioral Scientist
The RAND Corporation
PO Box 2138
1700 Main Street
Santa Monica, CA 90407-2138
Tel: 310-393-0411 x7971
Fax: 310-451-7018
E-mail: rmarken@rand.org