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Why the Middle East Conflict Never Ends

by rdf Mon Jan 5th, 2009 at 11:00:39 AM EST

The strife in the middle east has been going on, in its latest phase, for 60 years. Now when something goes on this long without being resolved there has to be a reason. The reason can usually be found by examining who stands to gain from the status quo.

I'll offer three hypothesis as to who these might be.

Read more... (46 comments, 1989 words in story)

What is Money?

by rdf Fri Jan 2nd, 2009 at 11:43:38 AM EST

With investments falling in price recently people have been looking at the whole concept of money and value more closely again. Money is a topic which has confounded thinkers for several thousand years, so I don't think I'll be able to explain it either. Instead I'll just ask some questions.

Until the invention of paper money, money was based upon some relatively rare tangible object. Silver and gold have been popular choices for a long time. Their virtue was that one can't counterfeit them, although there have been cases of adulteration and "clipping".

Read more... (3 comments, 650 words in story)

The Theory of Everything - Blame Darwin

by rdf Mon Dec 29th, 2008 at 05:06:25 AM EST

The human race is afflicted with the desire to make sense out of the world. Since the world is complicated the human mind tries to simplify by finding common features that explain it all.

I'm going to give my theory of "everything" right after I review some of the most popular ones of the past. Now by "everything" I actually mean human behavior. There have really been only two popular theories.

promoted by afew

Read more... (29 comments, 1389 words in story)

On Being Old - People and Countries

by rdf Tue Dec 16th, 2008 at 06:47:08 PM EST

One of the most important realizations of getting old is that there are some things that you just aren't going to be able to do, or do any more. This can be because of limited time, energy or health, or money. So you have to chose what you are going to attempt and what you are going to forego.

Suppose we postulate that the US has gotten "old". The present downturn may just be an "episode" of ill health, but what if we can see that we can't return to the bloom of youth even after it is over. (I claim Europe has been "old" since the end of the rapid regrowth after WWII ended as well.)

If we are willing to consider this possibility then we need to decide what are the aspects of society that we will keep and what are the ones we will give up.

Read more... (13 comments, 2092 words in story)

In Defense of Monopoly

by rdf Sun Dec 14th, 2008 at 11:48:03 AM EST

One of the principle axioms of capitalism is that we get the best products and services when there are many firms competing for our business. But there is a downside to this which is hardly ever discussed; even when it is, it is treated in a positive light. The downside is the waste generated when those who are less successful fail. The economist Joseph Schumpeter called this "Creative Destruction".

This gets into another, unexamined, axiom: that there are sufficient raw materials and resources available and that the benefits from competition outweigh the costs of the waste. In fact, the entire capitalist system assumes that resources will always be available. When they are in short supply the price will rise and the cost of production will also rise. These costs will, eventually, be passed through to the final product so business can continue, just at a new level.

Capitalists don't favor competition, they know the risks of being on the losing side in any contest. This is why they expend great effort in reducing competition. The techniques are well known. They include, collusion or the creation of combines or shared monopolies, price fixing, bribing or otherwise influencing government officials, and making restrictive deals with suppliers and customers to limit competition. Some of these techniques are usually seen as illegal, but are widely engaged in anyway. The risks of being caught and paying a fine don't act as a real disincentive since the potential gains are so large.

I'm going to suggest that we reverse the way the economic system is supposed to work and see if an alternative wouldn't be more "efficient".

Read more... (3 comments, 1330 words in story)

Dancing in the Streets

by rdf Fri Dec 5th, 2008 at 05:38:29 AM EST

The employment situation in the US is getting dire and even people like Paul Krugman are getting worried. He wonders what projects could be ramped up quickly to provide a counter to the drop in economic activity.

Here's my suggestion: more dancing in the streets.

Another intriguing suggestion from rdf. With a small edit. -- Jérôme

Read more... (8 comments, 280 words in story)

The Purpose of Education

by rdf Thu Nov 20th, 2008 at 03:08:30 PM EST

Recent efforts by conservatives in the US have reopened (again!) the issue of the purpose of education. In keeping with the tilt toward authoritarianism and conservatism over the past 40 years the push has been towards more structured education. This is a sharp change from the development of "liberal" education started by John Dewey at the beginning of the 20th Century. I examine both schools of thought below.

There are two views as to the function of education. Let's call them "knowledge" vs "process".

Read more... (28 comments, 1500 words in story)

Crisis - Drawing the Wrong Lesson

by rdf Mon Oct 27th, 2008 at 09:49:52 AM EST

I wrote awhile back about how this crisis was going to make big firms even bigger and reduce competition even more. This is the first time that I can remember where the government actively promoted business consolidation.

Others have started to notice as well, but not enough to change the course of action being undertaken in the "bailout". Just to show that others have understood what is happening (even if the pols don't or pretend they don't) here's a snippet from an overheard internal phone conference at Chase by a NY Times reporter.

Read more... (18 comments, 499 words in story)

Dead Cat Bounce

by rdf Mon Oct 13th, 2008 at 04:27:28 PM EST

This is the term on Wall Street when the market goes up after a sharp drop only to continue downward again.  It is assumed that only suckers will buy into a falling market while it is still on its way down. Unfortunately knowing when a market has hit bottom is impossible to tell, although there are any number of "experts" willing to take your money and tell you when.

Read more... (521 words in story)

Welcome to the post-capitalist society

by rdf Thu Oct 2nd, 2008 at 01:32:21 PM EST

I wrote a few weeks ago about why capitalism is becoming "obsolete": Capitalism must die!

I see that my projections were a bit premature. What is happening right now is the development of a post capitalist system. We are still groping for a name for this new arrangement: socialist capitalism, corporatism, etc.

The essence is that governments now actively promote the creations of monopolies or oligopolies, rather than opposing them. In addition the government has made explicit its promise that these monopolies will be protected from failure. Even when firms are "nationalized" this is just a step on the way to their being relaunched as for-profit firms once again. These are pseudo-private firms. The profits go to the select few while the losses are absorbed by the public.

Read more... (7 comments, 1896 words in story)

It's not a Meltdown - It's the Triumph of Capitalism

by rdf Mon Sep 29th, 2008 at 08:59:20 AM EST

There are many who are saying that this collapse "proves" that the US capitalist model is obsolete, or based upon false ideas.

I claim that it is just the reverse. What the US has had since the 1870's is syndicalism - a partnership between big business and government. In an earlier time people weren't afraid to call it what it is.

"The business of America is business."   --  Calvin Coolidge  

"...because for years I thought what was good for the country was good for General Motors and vice versa". -- Charles Erwin Wilson, GM president (1953)

Read more... (3 comments, 362 words in story)

The Crisis Explained - Really

by rdf Thu Sep 25th, 2008 at 10:24:14 AM EST

Analogies are never perfect, but here's one using horse racing. Don't expect a perfect correspondence to the banking situation, but I think it is close enough for government work.

Joe goes to the track and bets $2 on a horse.

Read more... (20 comments, 413 words in story)

Global Warming as an Economic Issue

by rdf Tue Sep 23rd, 2008 at 07:10:53 AM EST

As part of the ongoing debate about global warming there have been various studies which have tried to cast this as a problem in economics. The most comprehensive of these was created by the British Economist Nicholas Stern. The full report is available here along with various summaries.

For our purposes this is all that is required:

Using the results from formal economic models, the Review estimates that if we don't act, the overall costs and risks of climate change will be equivalent to losing at least 5% of global GDP each year, now and forever. If a wider range of risks and impacts is taken into account, the estimates of damage could rise to 20% of GDP or more.

Promoted by afew

Read more... (3 comments, 1156 words in story)

Who Should Chose Your Cultural Identity?

by rdf Sat Sep 20th, 2008 at 09:05:00 AM EST

While people claim that they abhor prejudice they seem to find nothing wrong with imposing cultural behaviors and norms on their children. Implicit in this is the belief that there is something special about their culture which is to be preferred in the education of their children. Then they complain when others stereotype them.

Why should a child have to adopt the rituals and conventions of their parents? Instead of being required to practice these rites why shouldn't they be free to chose their own? Why should I learn the music of my country if I prefer that of another time and place?

Read more... (5 comments, 601 words in story)

Econometrics as Signal Processing (Wonky)

by rdf Tue Sep 16th, 2008 at 12:41:43 PM EST

The purpose of this essay is to explore how the techniques used in economic analysis compare to those used in other disciplines. As in other social sciences, data in economics  is observational, rather than being obtained from controlled experiments. Analyzing such data can be cast as an information processing problem.

In this essay, I will draw a parallel between the two disciplines. The fundamental assumption is that any finite data set can be considered a "message" or "signal", embedded in noise. The noise in this case is additional information which is not relevant to the hypothesis under consideration. Extracting information from this "noise" then becomes analogous to techniques used in signal processing.

Read more... (3 comments, 2876 words in story)

Inefficient Health Care as a Social Good

by rdf Tue Sep 2nd, 2008 at 06:35:56 PM EST

People like me often rail against the inefficient and corrupt US health care system. I'll remind you of some of the worst problems.

  1. About 47 million or 16% of the population has no health insurance.
  2. Drug companies promote me-too and lifestyle drugs rather than doing basic research on life saving treatments.
  3. Drug companies use the patent system to charge monopolist prices for life and death drugs.
  4. Private insurance companies siphon off 30% of the money they get in premiums.
  5. Specialist doctors charge what they wish, drawing doctors away from family medicine where payments are limited by insurance contracts.
  6. Too many hi-tech medical procedures are pushed when cheaper alternatives are available.
  7. Too much money is spent on useless end-of-life care and too little on preventive care.

Read more... (749 words in story)

Using Price to Control Demand

by rdf Fri Aug 29th, 2008 at 12:44:10 PM EST

The core principle of economics is the law of supply and demand. Raise the price and demand will go down and vice versa. Common experience tends to confirm this, although with a fudge factor called "elasticity". If the demand doesn't go down as much as one would expect then it is said that demand is inelastic.

As the world enters into a period of fossil fuel limits, and as demand increases due to developing countries and overall population growth, discussions of using pricing to control demand have become popular.

This is all part of the "magic of the market" and "invisible hand" that has been standard fare since the rise of mercantilism in the 16th and 17th Centuries. The sensible economists are pushing for an increase in the cost of fuel through distinctly non-free market mechanisms. The most common idea being some sort of new tax plan.

Read more... (3 comments, 890 words in story)

The Rational Consumer

by rdf Fri Aug 22nd, 2008 at 02:21:16 PM EST

This story gets to the heart of the economic basis of our society - that we are all "rational" consumers:

An Update on Gardasil: Marketing Trumps Science - Billions Spent; Risks Remain Unknown

Read more... (3 comments, 290 words in story)

Capitalism Must Die!

by rdf Thu Aug 7th, 2008 at 12:42:16 PM EST

Now that the world is going through one of its periodic economic convulsions there is increased activity among the chattering classes as to what went wrong (this time). First I'll lay out the types of criticism of the situation. Second I'll explain what "capitalism" is. Last I'll go into why capitalism needs to be replaced and how to design the new economic system. If you aren't interested in the definitions, skip to the last part.

Read more... (9 comments, 1739 words in story)

Ricardo and Morality

by rdf Thu Aug 7th, 2008 at 03:58:42 AM EST

There is a nice Wikipedia article about "comparative advantage". It even cites one of the newest works by Economist Ha-Joon Chang where he argues that this idea worked adversely for developing countries.

I've decided, after seeing a lot of shoddy and self-serving economic research being passed off as science that we need to take a new approach. The era of the MBA and the bottom line has to come to an end.

The golden rule does not state "do unto others...as long as it is cost effective".

Promoted by afew

Read more... (24 comments, 1285 words in story)
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News and Views

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by Bjinse - Dec 11, 37 comments

Your take on this week's news

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People say that life is the thing, but I prefer threading

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