FW: Reply to: ANNOUNCE PCT and an economic emergency (SD7264)

[From Fred Nickols (2008.12.06.0732 MST)]

As you know, I forwarded Bill's letter to the SD list. Here's the first of two responses so far.



Fred Nickols
Managing Partner
Distance Consulting, LLC

"Assistance at A Distance"

-------------- Forwarded Message: --------------
From: "Carl Edwards" <cedwards@socialaw.com>
To: "'SDMAIL Fred Nickols'" <nickols@att.net>,"'System Dynamics Mailing List'" <sdmail@lists.systemdynamics.org>
Subject: Reply to: ANNOUNCE PCT and an economic emergency (SD7264)
Date: Sat, 06 Dec 2008 13:47:14 +0000

Dear Colleagues;
  Bill Powers has delineated a very real and serious problem. In
fact, it is one of several problems uncovered in the wake of the Great
Depression, studied at some length, and then seemingly forgotten over the
last decade or two. Jay Forrester has discussed this in other contexts, and
the Federal Reserve was in large part tasked with addressing the issue on an
ongoing basis to avoid repetition of actions that exacerbated the problems
of the 1930s.
  Two points, both related to human behavior. First, Bill's
discussion points to a very simple problem of human behavior often discussed
under the topic of "commons;" the reality that people will act in their own
interest rather than the group interest unless payoffs are modified to
encourage collective good. An obvious example is that employers lay off
their own workers to preserve their net but the lowering of employment
generally decreases everyone's potential advancement.
  Second, we are also now seeing in the U.S. economy government
actions which are seen, in large part correctly, as rewarding the least
productive payers in the marketplace. This, rather than raising
productivity and creating stability, has created confusion and instability.
If you examine the stock markets, markets generally react negatively to
these actions. Government, rather than changing its position, interprets
the market as telling them that even more disincentives are necessary.
  Powers is correct that America is in crisis, but it is a crisis that
would have easily been recognized by any good economist or behavioral
scientists in the late 1940s and quickly corrected. For some reason, we
have forgotten our history, and show no inclination to listen to those best
prepared to make productive suggestions.

Carl N. Edwards, J.D., Ph.D.
2 Spring Lane P.O. Box 279
Dover, MA 02030
Tel.: (774) 200-0201
Fax.: (866) 210-0595
E-mail: cedwards@socialaw.com