There are several problems that present themselves whenever we begin to talk about policy.
Policy, by the way, is exhibited by the laws that governmental legislatures pass. Then, agencies adopt regulations in order to achieve the goals of that, said, policy. Imagine, if you will, a policy that wants to reduce crime. One of the keynote policies that came about in the last 50 years was Neighbor Watch. It was a simple idea. If you see something suspicious in your neighborhood, call the cops. There wasn't any increase in cost projected. The campaign simply stated that if if saw something suspicious in your neighborhood, call the cops.
Of course, once someone tells you that if there is a thing out there that you don't understand is suspicious, and the consequent to that suspicion is a simple call to the cops, you don't think that several events consequentially occur. One, the "crime reporting rate" increases, even if the calls to the cops is nothing more than that of an elderly lady watching a suspiciously acting cat. Two, the costs of providing basic police services increases, as cops roll to venues that weren't actually sites of real crime, but the sites of potential crimes, as reported by well-intentioned neighbors who should have simply asked the potential miscreant, what are you up to?
If you look at crime rates and crime reporting from the '60's to present, you'll actually see an increase in crime reporting when you take into consideration the effects of public service campaigns that were directed toward "reducing" crime. Most anti-crime campaigns will have this feature. Even if real crime remains the same, the number of reported cases increase. It is a self-feeding phenomenon.
One of the things that you see if you actually spend time looking at crime statistics is, how they report crime statistics. The "how" is the thing. I can tell you something about statistics. Since most people don't understand math, it is remarkably easy to report statistics that have actually little or no value; statistically.
A short side-note; if you haven't visited Briggs recently, do. Briggs is a guy with issues. He teaches at the college level and is constantly disappointed by the level of preparation he faces because of the ill-preparation of his students, for every class. Statistically, each of his students is an high school graduate. Heuristically, few of his students are prepared for the rigour of college study. And it seems at times that those who are prepared, would rather be doing something else.
My point is, it seems true, to me, that most people who engage in debate have little or no math in their lives. A campaign to reduce crime actually increases crime statistics. Campaigns to solve poverty increase the number of poor. The easiest person to argue against is the man who doesn't have the math skills to fight his way out of a paper bag. Where I love to argue, then, is within the realm of mathematics. Not always with genuine argumentation to stand behind. Take the Bell Curve.
Taking a look at this chart, I would ask only one question; where are the turning points? For each of these curves there are simple points that occur. One-two-three-four-five. But, it is the difficult points that are the most important. The easy points are the general areas where it is apparent that the graphed lines are clearly changing direction. The difficult points are when there are an increases or decreases in the rate of change in the y-axis. And, these are smoothed curves. Let's take a look at one of the lines above. The red line.
It's easy to see that a change occurs when the red line begins to more steeply rise. But, back at -2.5, there's also a change. The red line had been flat, and now is increasing. Similarly, around -1.4, there is another shift, when the rate of increase beings to slow.
These differences in rate of change are important. Visually, there are points when you can see that changes have occurred. In the case of the red line, those visually clear points occur around -2, 0 and +2. You can see the bends in the line actually change. These are good to see, but really don't tell the story behind the lines.
Some lines are drawn that are increasing (positive) and some are drawn that are decreasing (negative). Since we're dealing with a simple, two-axis curve, as you move from left to right, you'll see the values of y increasing. Then, decreasing. What you may not see is the decreasing rate of changes that occur on the left side of the peak, and the right side of the peak.Let's take a look at a triangle.
If you look at this graph, the thing you will notice is, moving from left to right, there is only one moment when the direction of the line moves in a different direction. The rate of increase from left to right is constant. Until it reaches its highest point. Its turning point. Then, it decreases at a constant rate to the right. One could say that this graph has a single "turning point." When the triangle reaches its apogee. Given the mathematical constraints imposed by the resulting graph, we definitely have a graph that describes a clearly constrained system. And constrained systems are good, since they allow us to have conversations about the factors that determine the shape of the curve described by the graph. The big difference between this curve, and the curve above, is the sheer straightness of the lower, versus the curviness of the line above.
Why is that?
When we started this conversation, it began with a narrative about crime. Well-intentioned people wanted to do something about crime, and so began a plea for greater reporting of suspicious activity which might be translated later into actual crime. Whether or not the crime did or didn't occur is unimportant. What did happen is, that there were more calls made to police agencies and concurrently, reported crimes increased. What I'm attempting to show you is, if you ask for reports of things, don't be surprised when reports of things increase. Industries begin on assumptions like this. Whole sectors of our economy are affected by linear thinking like this. It isn't that such thinking is non-rational. The potential problems occur because they are too simple.
Bubbles occur because of simple causality. Or, better, observations that occur, implying causality. We knew that crime was a problem. To solve the problem, better detection must occur. But what we found was, as detection of possible crime occurred, crimes increased. Or, better, were reported. What occurred was an over-reporting of crime, and in many cases, reporting of suspected crimes that weren't crimes at all. Crime Watch programs create reporting of potential crimes that inflate crime statistics, but don't really affect the number of actual crimes. But, if you are a part of an anti-crime committee, whether it's Mothers Against Drunk Driving, or Neighborhood Watch, you've made a commitment to a program that thrives with increasing numbers, whether statistically important, or not.
Increased reporting of "crime" becomes more important than actual crime. If MADD or Neighborhood Watch became irrelevant, their fund-raising would suffer. Previously held positions of power in legislatures or courts of public opinion would be diminished. Obviously, victims should be held in special reverence. It is curious that their own success becomes their own denouement. I don't pick on the MADD moms, or the watchful eagles of my neighborhood. It's simply easier to pick on MADD than it is on the true maniacs, the environmentalists.
See, with MADD, there are people being killed by drunks on the highway. Not as many as would be suspect by the propaganda of MADD. But MADD is simply instructive. Comparing the rhetoric of a MADD member with a member of the environmental Left shows a certain softness in understanding and compassion. The MADD member understands the weakness and uncertainty of the human condition.
And viewing the simple illustration above, it is easier to see how such simple cognitive errors can occur. There is nothing in the slope of the increasing angle of the triangle that presages the abrupt turn that occurs at it's apogee! If you have a simple mathematical model that is based upon "what has just occurred is the best predictor of what is going to occur," then you begin to have an understanding of what passes for model-making in most arguments you will hear, either around the water-cooler at the office, or in the cloakroom in Congress. Ninety-nine percent of what passes for intelligent conversation relates to the model I've just described. It doesn't matter whether you're talking about investments, how you golf, or raising your children, most of us take a look at what we've been doing, and determining the good, commit ourselves to maintaining that course.
The Leftist Environmentalist does not.
We have viewed the math, in graphic form, in a brief manner. There are relationships that occur between increasing and decreasing values, that seem to be observable. And, we can graph those relationships. But one of the challenges of the Left is to graph the relationship between their prescriptions for fixing the world, and their actual ability to fix the world. I'll admit, Leftists don't want to fix the world. They just want to fix humanity. Or, people. Because moss just doesn't carry the death threat that people carry. Unless it's your yard.
The math says that certain things increase until they no longer increase. (See figure.) At that point, a turning point occurs, and whatever was increasing, decreases. If not absolutely, at least in the rate of increase. In absolute terms, I can't think of a single thing, action, product, act, where that isn't the truth. (See Butterfly Effect.) And, upon further reflection, I can't think of a single thing that didn't have an absolute reduction, over time, of whatever that thing was. So, absolutely, whatever a thing was, at its apogee, it isn't there now.
This is simply a false syllogism. Any engineer of any note will admit that the first thing that he doesn't know is what he doesn't know. Models are good. Simple models are, in the main, better than complex models. But models that don't give you any usable information are shit.
If you wish to make an argument about anything, it seems to me that what you should do is state clearly what your position is. Take the issue of saving the planet through control over the production of power. Electrical power. Motive power. Power that makes industry possible. Not, political power.
There is an unearned simplicity exhibited by the Left. Among those on the Left I include several, if not many, Leftists that include our President, our state's Governor, and finally, my congressman and my state legislators. The math is the problem. And I grant you, that the math is difficult. The beauty of having our public schools graduate a plethora of young people unequipped of basic mathematics as a brain-storm of someone in the union movement is without question. How else do you explain an unerring inability to teach our youngsters the fundamentals of mathematics? But this argument is about math, logic and reason. So, disregard the effects of twelve years of government education. If you've made it this far, you weren't a victim of public school intolerance of bright kids.
The math, however, is unerring.
Rates of change are among the simplest relationships that are teachable. I know. I taught.
If you have a buck and invest it and end up with two bucks, then you have a rate of change.
D2 minus D1 equals change. In our case, it's one buck.
Whatever the period of time was, starting with one and ending up with two represents a rate of change. Let's think how we can model this.
The change is the result of something. Compared to that thing, how do we express the change?
I can't begin to tell you how unequipped we are to answer that question. I deal with business people who balk at the question. Bright people. Who can't tell you what form of an equation you would use to express the question stated above.
So, what does logic teach us?
When faced with questions of importance, most of us either don't have the tools, or don't know how to use the tools, to make a practical evaluation of the question. And if logic no longer has a role in examining the issues we face, what possible value should reason have?
When I was in grade school, the underlying value was to teach kids to optimize the learning curve with the fewest possible unimportant curricula being imposed. I was a part of a two-year learning experiment that had a purpose that was directed towards increasing the amount of necessary information needed by a student in contrast to that information that wasn't needed by a student, in order to maximize the learning time and minimizing the time needed to express that information to the student. Speed reading and comprehension were the sought values. SRA gave us learning packets that allowed us to achieve the greatest learning potentials, against non-SRA teachers that used "traditional" teaching methods.
Those of us SRA students really thought that we were on the cutting edge of teaching techniques. What we found out was, that we were in the main, autodidacts. I'm not sure that the teaching profession found that reassuring.
Not that all of us were autodidacts. But, that for a certain percentage of students, left to ourselves, we would be able to learn at rates that were above the green line in the first graph. Standardization didn't really mean anything to us, since we never were standardizable. What we did find out was that there were a great number of students who needed to find acceptance. The grading system, the social system, were more important that actual mastery of math, logic and reason. For many of us, we've spent that time trying to encourage others to gather the skills that should be a part of the quiver of our human experience.
But, how should I express this division between those who adhere to math, logic and reason, with those who have no clue? Environmentalism is probably the best example.
Let's do some heuristics on environmentalism, based upon math, logic and reason. What is the goal of an, or the, environmentalist/s?
Goal One: A cleaner environment.
Goal Two:
Or, did I miss something.
The environmental movement, if there is any movement, is boring. A cleaner environment. Step Two...nothing.
This is a graph of our monetary base, expressed against the excess reserves held by the banking industry. Remember the graph above? Of the triangle? Something about turning points?
The "environmental movement" is up in arms about capitalism. See, capitalism is a sin. There's no social justice involved in capitalism. Poor people are poor, because of their own personal choices. Rich people are rich, because of their own personal choices. Personal choice doesn't stand a chance in the face of social justice. As you can clearly see, even though we've been through two rounds of what has been called "quantitative easing," we see that instead of loans increasing, greasing the skids of capitalism, a concomitant rise in excess reserves has occurred. Monetarists and Rational Expectations economists predicted this. But the current vogue is with the Keynesians.
Keynesians believe in Tinker Bell. Really, really believe. They also believe in glitter and unicorns. Alas, all but glitter is false. We do have glitter. But glitter and glue isn't a way to run a country, even if the promise of unicorns, Tinker Bell coming back to life, and prosperity on the back of the evil rich is a strongly held belief. Strongly held beliefs tend not to be predictive. Remember the graph above.
What we do have is the demogoguery of the Left promising us, that, if we choose to put the dilemma of prosperity on the backs of the rich, we have someone to blame for our own bad choices. Here's an old guy, dead white guy, on the principle of having someone else paying for our own bad decisions:
Okay. That's one dead guy's opinion. So let's take a look at the graph I introduced earlier.
Why did excess reserves increase as the monetary base increased?
As part of the cure of the collapse of the banking system at the end of 2008, our wonderful national legislature, in connivance with our nation's top administrative officer, decided that solvency was to be the number one priority of our nation's banking system. You heard them talk about it. Risk is bad. High incomes and bonuses based upon performance were bad. How to make a world where risk no longer lived? Several laws were passed in the intervening years that spoke of the need to protect consumers. Trillions of dollars were dedicated to boosting demand for goods and services. Then, when those attempts at kick-starting the economy failed to kick-start the economy, the Federal Reserve began one of the most pernicious attempts at creating a demand bubble that has ever occurred. It came in the form of Quantitative Easing.
Billions of dollars are marketed by the FOMC each month. The problem was, demand for FOMC offerings would decrease if there wasn't an active secondary market for securities.
Then, concurrent with FOMC Treasuries, was a law change that allowed for banks to park their excess holdings with the Fed.
It gave the Fed excess liquidity. Brilliant.
Problem is, the Fed rate on excess liquidity turns out to be higher than the funds rate on Treasuries. While Treasury was out marketing T-Bills, the Fed was offering higher rates on excess funds. The demand for Treasuries was low, keeping the discounts off Treasuries at lower than market rates. Then, with QE1 and QE2, it became known that buying Treasuries would be followed with re-purchase of Treasuries by the Fed at higher prices, in an attempt to give nominal rates a lower profile.
A T-Bill has an offered rate of interest on the note. If you buy an one-hundred dollar T-Bill for an hundred dollars, Treasury offers you a rate of interest on the bill, if held to maturity. In an auction, you may offer 95-dollars for an hundred dollar T-Bill. What you have done is guarantee yourself at least a five percent return for your purchase, plus the offered rate of interest on the bill. When T-Bill prices go up, the rate of return on your bill goes down. And, vice-versa.
So what has the FOMC (Federal Reserve Bank) and Treasury done?
Treasury offers deep discounts on debt, banks purchase the debt and then resell the debt to the Federal Reserve at a profit. And then, to add insult to injury, bank their excess reserves with the Fed at rates higher than the offered rates on Treasuries.
This is the first time in my life that this has happened. But, what happens when excess reserves earn more as reserves in the Fed, than funds lent, either to purchase notes and bonds, or as lending to business?
Oh, yeah, baby. Excess reserves sky rocket!
Of course, the demagoguery sky rockets, too. Whenever you hear the President talking about the billions, nay, trillions of dollars sitting in the pockets of the rich, ask yourself, why?
The answer is right there in your face. Federal policy makes it more profitable for banks to park excess reserves in the Fed than it pays to lend. So, who created this policy? It wasn't the banks. It wasn't the evil Republicans. The answer is, it is our current administration. It is your President, your President's Treasury Secretary, and your President's pick to head up the Federal Reserve.
Is it a Ponzi scheme? Men of good faith will differ on that.
Today I had a conversation with a noted local on Medicare and Medicaid. Let me give you a disappointing statistic: less than one in ten of men or women in my age group, 40 to 60, can give you any kind of idea what the differences are between Medicare Part A, Part B, Part C, or Part D. And yet, I hear all kinds of criticisms of Representative Paul Ryan's attempt to fix the nation's largest entitlement programs. This isn't shocking to me. It simply, again, underscores the effects that demagoguery can have when demagoguery attempts to motivate the electorate.
So, what do we know.
We can't keep up an almost "Ponzi" scheme of financing government.
We have to address entitlements, but we know next to nothing about the entitlements.
We know that the Left will demagogue any change as threatening to the elderly, education, the working-class and women.
And yet, none of the claims of the Left will be, or are, true.
When you peel away the profitability of private enterprise, you create dis-incentives for the productive sector of the economy. It is, indeed, our ski chalets, our motorcycles, our fast cars, our big homes, that encourages us to produce for you. Take away our Sketchers, our visits to Nordstrom's, our appetite for golf and gold and we are, just like you.
Of course, we hire you. So, you're out of a job. But that isn't the point of social justice. The point of social justice is that we're all the same.
Hella goal.
