Business, Economics, Mathematics, Media Criticism, Political Commentary

How To Stop A Centralized Bureaucracy

28 Comments

Math:

The only thing that will upend the carefully crafted apple cart the political bosses have set up is math. The math that Mark talks about in the Soundcloud clip I posted is rapidly becoming a reality in states like Illinois. The answer from Democratic politicians has been to look for ways to increase taxes and fees to keep the shell game going. None of them have cut the size and scope of government. None of them have deregulated anything to allow more choice and freedom for people. Interestingly, the United States federal budget allocates 62% of all spending to entitlements, and the number will rise dramatically with Obamacare. It’s totally unsustainable but the crony capitalists in Washington don’t care about it. They’ll be fine.

They were told there would be no math.

28 thoughts on “How To Stop A Centralized Bureaucracy”

  1. My faith in math is shaken when they play with money supply and carbon credits. The end game will never be running out of money for the same reason economics says we will never run out of resources. The values and ratios will change, but control will get tighter.

    The only way out is to fight, get in their face and ridicule their false arguments… but we can’t even kill a simple minimum wage argument… how do we kill any others?

    We only win when they become unable to hold jobs because they are embarrassed by their false arguments. As long as Nancy Pelosi can say unemployment is good for the economy without getting laughed out of public life, we’ve lost.

    1. Actually more inflation usually leads to higher employment. If people have more money they spend more money buying crap which someone else has to manufacture. It’s called supply and demand.
      If you give people money it increases demand. Especially if you give money to poor people wanting to keep up with the Joneses.

      1. “Actually more inflation usually leads to higher employment.”
        What idiot pseudo-economist have you been listening to?

        1. I believe it’s Keynsianism, and it’s wrong. If it were correct, Japan would have 100 percent employment by now. So would we.

          1. Pretty much every Godzilla post is a war against economic reality; but then that’s generally true of “liberal” commentary everywhere. In this case, if every person in the world were employed, but needing to lug a wheelbarrow of inflated currency to the store just to buy a loaf of bread, presumably Godzilla would say, “Well, ALLRIGHT!”

          2. Japanese unemployment is 3.3%. You think that’s bad? Japan has a lot of issues but unemployment isn’t one of them. As for the USA at 5.5% it sure is doing a lot better than the EU average.

            Achieving 100% unemployment is kind of a pipe dream anyway.

        2. Japan has a GDP to debt ratio of over 200%. It does not have an unemployment rate of 3.3%. If you have been to Ueno station, you’ll see the cardboard housing projects brought about by people who lost their jobs and left their towns to save face. The number of men living in their rooms is quite high.

          Agreed, the amount of public works projects is high and has been high for 25 years. The amount of squandered resources for these roads in the middle of nowhere; bridges and other public works projects is staggeringly depressive.

          You cannot tell me that Japan is a Keynesian success story. And the US is obviously not. Sure our official rate is under six percent, but the metrics are skewed.

          1. Let’s think of it this way. The US population is growing right? As the population grows the production of goods and services will grow accordingly. So you have to, at least, print as much money as the increase of production from this population growth. Otherwise it will mean that old people will be paid more than new people. i.e. deflation.

            That is ONE variable. How about others? People leaving the workforce? Millennials that can’t get jobs? Boomers overstaying their retirement years. The government forcing a false housing boom, etc etc.

            For all the evils that come with inflation, those that come with deflation are much worse. With deflation comes the destruction of production capacity and actual poverty

            This is a Keynesian canard. There is nothing wrong with deflation, especially as it corrects an overly-inflated market. The middle class can certainly use deflation in housing, medicine and education, but those are artificially inflated by printing money that causes market distortions. This is not just money, but credit. Deflation rebalances a grossly distorted market caused by printing of money.

            Is this clear enough for you now?

          3. a Keynesian canard. There is nothing wrong with deflation, especially as it corrects an overly-inflated market
            To me the Panics of the XIXth century were clearly exacerbated due to a lack of liquidity at a time the US was in the Gold standard. They were solved with the Klondike Gold Rush increasing liquidity. Coincidence? I think not.
            There is no question that markets need a correction now and then and that bankruptcies are a normal part and parcel of the business cycle.
            However lack of liquidity in the system can be a problem in itself. The economy will not correct itself any faster if it has less liquidity and less velocity of money which is what would happen with the policies you propose. Your policies would turn a short crisis into a long depression. That’s my view by looking at things like the velocity of money and things like that. You are free to think whatever else you want. Economy is hardly an exact science anyway.

          4. If you can’t read the Financial Times article direct (not a subscriber) you can get to it via Google by searching for :
            “Japanese unemployment rate at lowest level since the late 1990s”

            As for that zerohedge.com article it ignores a bunch of things. One is that Japanese population is aging rapidly so their pool of labor is decreasing. Abe has been trying to convince Japanese women to participate more in the job market to ameliorate this problem but this is not something which can be easily changed as it implies some culture changes.
            The other thing zerohedge.com ignores is the phenomenons behind the underemployed in Japan. To a large degree this is because the new generation of Millennials is no longer interested in working long hours and want more time to enjoy their life doing whatever they want. So there are more people taking part-time jobs rather than accepting to be worked to be bone. People focus less on houses and more on traveling and things like that. This is partly due to economic factors. It takes a lot longer to buy a house today than it used to in the West. It can take like a decade of work while it used to take 3-4 years just 30-40 years ago. This is something which has happened across the whole West. At the same time airplane travels are a whole lot cheaper. So people change their priorities. One other side effect of taking longer to be able to own your own house in much of the world is that people are taking longer to form families and they have less children as they have less disposable income for children as much of it is spend on housing.

            Unless someone figures out a much cheaper way of constructing housing and enact policies to make land cheaper I don’t see these problems getting fixed any time soon.

          5. Liquidity is one variable and one that is easily corrected with a free market. Look at the depression of 1920. Oh wait, there wasn’t one because Harding reduced the size of the government and did not use the federal reserve to “fix” the situation. It was over in a year.

            Meanwhile, the depression of 1929 was fixed by stimulus and the use of the fed, and that lasted at least 11 years.

          6. From Wikipedia the deflationary Depression of 1920-1921 led to a rise in unemployment (5.2% -> 8.7%) and a drop in GDP (30% fall in industrial production) just like I said should happen.

            It also claims eventually there was capital flight from Europe that increased the gold reserves and that they cut income taxes. That basically should have increased the amount of money available to spend.

            Compare this with Brüning in Weimar Germany in 1930 where similar deflationary measures and state contraction measures were applied but with a simultaneous raise in taxes and cut in benefits (e.g. pensions, unemployment insurance) and the exact opposite happened. The government collapsed.

      2. If people have more money…

        Which is exactly where your argument flies off the rails. You are doing exactly what that idiot Pelosi is doing. Where did that money come from? Printing money doesn’t create new money, it dilutes existing money. The money is taken from producers and given to non producers. This reduces overall wealth.

        Money is a means of exchange.It is not a store of value. Value is stored in the things you can exchange money for. This is obvious if you consider what happens when nobody will accept money as payment. Now all you have is wallpaper or fuel for a fireplace.

        1. Printing money does not decrease overall wealth because what produces wealth are people and tools not paper. The money is just a medium of exchange. What printing does do is dilute existing money i.e. it makes people with a lot of cash savings (including rich people) poorer and as inflation increases the velocity of money also increases. This stimulates the economy.
          Of course if prices become totally unpredictable people start becoming unable to read price signals in the market and the whole thing collapses but that’s the other extreme of things.

          2. Let’s think of it this way. The US population is growing right? As the population grows the production of goods and services will grow accordingly. So you have to, at least, print as much money as the increase of production from this population growth. Otherwise it will mean that old people will be paid more than new people. i.e. deflation.
            For all the evils that come with inflation, those that come with deflation are much worse. With deflation comes the destruction of production capacity and actual poverty. Because if this USD will buy the work of more people the longer I wait to spent it, I will keep holding this USD for as long as I possibly can. This causes the fall in demand and the implosion of the market.

            Is this clear enough to you now?

  2. That doesn’t actually fight “The Bureaucracy”, just highlights some nominally expensive pieces of it.

    The idea that has to latch on to fight the idea of larger-is-better is showing that some of government’s tasks are fundamentally at least O(N^2) if not actually NP-Hard when performed from the ‘central control’ perspective.

    32 high school freshmen (under observation to enforce the lack of force or intimidation) can arrive at a “more optimum” distribution of their lunches in ten minutes of trading than their teacher could with a week of preparation and surveys. Because the teacher has to fundamentally -know- not just -a- value-cost assessment of every single item present, but each individual’s own value-cost assessment of every single item present.

    An individual has to evaluate 31 other meals. The teacher has to make 32 -times- 32 assessments. And … even that isn’t actually sufficient, because prior trading and time-passing affect the assessments.

    Now double the room to 64. Every individual is still at O(N). The central controller is still at O(N*N) … if not more.

    There’s a reason the answer to these problems always ends up being “We’re making macaroni and cheese in bulk, and you have to like it.”

    1. You will have 64 students and 32 bowls. Not only will each share a bowl, but will have to say with a smile they prefer that arrangement.

      Dissent is already at a level the control freaks can handle. Being cowards they focus overwhelming force on individual targets while others cower.

      Heroes are simply self identifying targets.

    2. This sounds like an interesting thing to study. Somewhat similar to Fred Brooks ideas in the Mythical-Man Month. Namely when he talks about the expenses of communication and how you show strive to keep teams small because of it.

  3. I’ve tried in vain to come up with a source where the method of calculating unfunded liabilities is explained. Kevin Williamson’s (otherwise) brilliant book The End is Near and it’s going to be AWESOME” cites a range of $100 to $150 trillion in unfunded liabilities, which exceeds total quantity of money on earth, and the cash value of all known assets. It strikes me as a fundamental problem that people alive today could have been promised more than they and everyone from now until they die has produced and will produce. In other words, I have a hard time believing that the unfunded liabilities are this large. Can someone point me to a source?

    1. My understanding is that the basic calculation is assume future obligations are lower than present ones by introducing an exponential function, such as derived from the average GDP growth (I don’t like using GDP, but there’s not much else out there) over the past few decades. The idea is that this function you derive represents both the effects of inflation and time value – namely, that having something now tends to be more valuable than having it later.

      Then a future obligation of X dollars at time T is scaled by dividing by the exponential function calculated that far in advance. Keep in mind also that some obligations particularly with Social Security will partially scale with inflation (indexed to CPI).

      Now take each obligation at the time it is intended to be paid, divide by your exponential to get an estimate of the current value of the obligation, and add them up. That’s your total present day obligation.

  4. My proposal: Any federal budget that is more than 17% of GDP in the fiscal year proposed (the 2% margin hopes to account for fluctuation) gets summarily NelsonMuntzed.

  5. If people have more money…

    They don’t. Did I make myself clearer this time?

    People do not have more money when you take it from some to give to others. Especially when you take it from producers and give it to non producers.

    Obama’s father believed a 100% tax rate would be fine since the government could then give you everything you need. Do you not see a problem with this reasoning?

  6. Government can’t “increase the amount of money available to spend.” Government can’t create liquidity by fiat. Government can only print more and more paper money with nothing to back it but a used car salesman’s promise–but that’s not the same thing. When prices inflate and dollars lose their value, that destroys liquidity and reduces the amount of money that consumers can spend because the money they have has lost its value.

  7. ” It’s totally unsustainable but the crony capitalists in Washington don’t care about it. They’ll be fine.”

    This is why math wont work.

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