James Brody
September 26th, 2008, 02:17 PM
"I will gladly pay you on Monday for a hamburger today." J. Wellington Wimpy
----------
Bush, Paulson, Bernanke now reach to McCain and Obama to sell the idea that all will be well if they print $700 billion and buy with it mortgages: commercial paper that was overpriced for what it represented and sold too cheaply. And we reach quickly to the ideas of Marx and Engels: central planners are to take responsibility and authority for making us better. At the same time we quickly abandon the invisible hand described by Adam Smith and, in a different realm, Charles Darwin (Sowell, 2002). We reach for FDR's solutions that, in many ways, prolonged rather than alleviated the Depression (Shlaes, 2007).
Howcum?
Network physics (don't get scared!) has some hints. Whether in economics or in computer simulations, emergent network theory predicts when we will be rugged individualists and when we will be sheep (Brody, 2008; Csermely, 2006, 75; Barabasi, 2002; Barabasi & Albert, 1999).
That is:
1) There are distinct phases in the careers of emergent networks whether of humans, neurons, or electric generators: there are collections of
A) Individuals (whether particles or politicians or the chemicals in a cell),
B) The fit-get-richer (one participant recruits members that are similar and from them an emergent network of major and minor players unfolds, often one in which twenty percent of the players manage eighty percent of the business),
C) Winner-take-all (IBM, Microsoft, the Beatles)(Frank & Cook, 1995; Gladwell, 2000; Levitt & Dubner, 2005).
2) Resource distribution is a significant contributor to network organization. Rich environments support individuals who follow the general principles of synchrony - similarity and mutual influence - make local clusters (Strogatz, 2003). When an organization discovers resources, it also discovers self-interest (Kauffman, 2000). That is, it competes for survival and for dominance and to duplicate itself. Even the tiniest difference in fitness favors the emergence of winner-take-all conditions. Given access to resources, even Peoria can become Rome or Microsoft.
3) Resource failure, invasion, or geological crises favor mass union whether under the baton of a secular dictator, a religious figure, a military one, one or one from big business. Swarms of individualists go to their knees in the face of poverty, disease, or complacency and fragment, available to whatever invaders are nearby. Women will do nearly anything to secure their children, men will do nearly anything to secure their women, and everyone may eat roots and sometimes their children (Kuznetsov, 1970).
Impact of Winner-Take-All
The distribution of resources - whether you follow Smith or Marx - is a critical element for the form of your organization and much of the time, Tit-for-Tat and Raise-the-Stakes manage that distribution: you trade with people who trade fairly with you (Poundstone, 1992). And given the creative abilities of human minds, we excel in the creation of tokens, gifts, and coins - all substitutes that allow Mr. Jones to turn four hours of labor into dinner and a theater ticket or a few hours at the Pumptown Strip Club and allow Mrs. Jones to buy several days supply of groceries.
Emergent networks predict that the days of my parents, when it was a sin to be in any sort of debt, when $4000 bought a house, and one income supported parents and a gang of kids...days that would pass.
Organizations that support the use of credit multiplied like Bonobos. Paper money and MAC machines and MAC machines that don't charge a fee make cash less valuable. So do credit cards that breed like Bonobos: it's easier, for reasons of ergonomics and speed, to swipe a small sheet of plastic - often colored gold or platinum - than to open the wallet and leave the store with less money. Business people often do not save but spend their profits while depending on a bank loan to finance raw materials and salaries. Farmers depend on the same bank to buy seed and fertilizer for the coming year. And banks multiply the availability of money by handing what you gave them to people who may not pay it back.
For most people now, saving is less important than spending and it is a necessity to keep up with the latest from Apple, Dell, or Ryan Homes. If there is caution in these purchases, it is to make the most savvy choice, the get the best price for the moment. Christmas becomes a potlatch wherein the one who puts out the most trinkets becomes mayor for the coming year and our kids measure themselves still against their friends but the modern yardstick is more what you wear and what you have rather than what you know or what you earned.
As money becomes less valuable, labor costs go down: women (as they have done for more than two million years) replace the men who found and pacified a particular niche (Coss & Moore, 1998) but, because they are more interchangeable and for less money...after all, the variability between individuals is often greatest between males.
Even though cheaper, labor still costs money and drives the invention of gadgets that eliminate labor. Buy a robot: it does what you need, the same way every time, and recognizes emotions in the humans around it. Journalism consists of whatever Drudge puts up, Big Box stores drive out local businesses, Toyotas, Nissans, and Chevys all look the same, and the high end development around the corner grew from practices that were intended to benefit apartment dwellers.
Wimpy's Demon
Wimpy symbolizes the "free rider" problem: how do you eliminate cheats? Frank Raines and Jim Johnson - managers of Fannie Mae and Freddie Mac - collected tens of millions in bonuses. They now are economic advisers to Obama who, along with Chris Dodd, Nancy Pelosi, Harry Reid, and Barney Frank, are the largest pots for campaign donations from Fannie and Freddie. Public opinion - a mass of 200 million "cheater detectors" - wants someone punished. On the other hand, Democrats and progressives, escorted by Hugo Chavez, Castro's brother, and the other Marxists, don't.
Can we trust Wimpy? And how do you apply Tit-for-Tat's "two strikes and you're out" to a national mob?
------------
"It's all about confidence, stupid. Every financial system depends on trust. People have to believe that the institutions they deal with will perform as expected. We are in a crisis because financial managers -- the people who run banks, investment banks, hedge funds -- have lost that trust. Banks recoil from lending to each other; investors retreat. The ultimate horror is a financial panic. Paulson aims to avoid that." Robert Samuelson
JimB
References
Barabási, A-L (2002) Linked: The New Science of Networks. NY: Perseus. (A readable gift to all of us.)
Barabási, A-L & Albert R (1999) Emergence of scaling in random networks. arxiv:cond-mat/9910332v1, 21 Oct 1999. (More technical but not impossible)
Brody, J (2008) Rebellion: Physics to Personal Will. Lincoln, NE: iUniverse. Especially Chapters 2 and 3.
Coss, R, & Moore, M. (1998) Preschool girls differ from preschool boys in recognizing the utility of an arboreal refuge site. HBES 10th Annual Meeting, Davis, CA, July 8-12. Women have taken over male niches for the last two million years.
Csermely, Peter (2006) Weak Links: Stabilizers of Complex Systems from Proteins to Social Networks. NY: Springer.
Frank, R. & Cook, P. (1995) The Winner-Take-All Society: Why the Few at the Top Get So Much More Than the Rest of Us. NY: Free Press.
Gladwell, M. (2000) The Tipping Point: How Little Things Make a Big Difference. NY: Little Brown.
Kauffman, S. (2000) Investigations. NY: Oxford. An iconoclast but insightful: Kauffman's clearest statement about evolution, biochemistry, and heterocyclic relationships. A little dry.
Kuznetsov, Anatoli (1970) Babi Yar. NY: Washington Square. Should be required for all of us.
Levitt, Steven & Dubner, Stephen (2005) Freakonomics: A Rogue Economist Explores the Hidden Side of Everything. NY: Morrow. Best seller, clear examples, easy reading.
Poundstone, W. (1992) Prisoner's Dilemma: John von Neumann, Game Theory, and the Puzzle of the Bomb. NY: Anchor. Also Roberts, G. & Sherratt, T. (1998) Development of cooperative relationships through increasing investment. Nature, 394, 175-179. (The basic rules of cooperation and the history of their definition)
Samuelson, Robert (2008) The Great Confidence Game. September 22. Real Clear Politics. Http://www.realclearpolitics.com/articles/2008/09/the_great_confidence_game.html.
Segar, Elzie Crisler (1929) Popeye. See http://en.wikipedia.org/wiki/Elzie_Crisler_Segar
Shlaes, A (2008) The Forgotten Man: A New History of the Great Depression. NY: HarperCollins.
Sowell, T. (2002) A Conflict of Visions: Ideological Origins of Political Struggles. NY: Basic Books. Open door to top-down vs. bottom-up views of social organization, from Adam Smith and Edmund Burke until today.
----------
Bush, Paulson, Bernanke now reach to McCain and Obama to sell the idea that all will be well if they print $700 billion and buy with it mortgages: commercial paper that was overpriced for what it represented and sold too cheaply. And we reach quickly to the ideas of Marx and Engels: central planners are to take responsibility and authority for making us better. At the same time we quickly abandon the invisible hand described by Adam Smith and, in a different realm, Charles Darwin (Sowell, 2002). We reach for FDR's solutions that, in many ways, prolonged rather than alleviated the Depression (Shlaes, 2007).
Howcum?
Network physics (don't get scared!) has some hints. Whether in economics or in computer simulations, emergent network theory predicts when we will be rugged individualists and when we will be sheep (Brody, 2008; Csermely, 2006, 75; Barabasi, 2002; Barabasi & Albert, 1999).
That is:
1) There are distinct phases in the careers of emergent networks whether of humans, neurons, or electric generators: there are collections of
A) Individuals (whether particles or politicians or the chemicals in a cell),
B) The fit-get-richer (one participant recruits members that are similar and from them an emergent network of major and minor players unfolds, often one in which twenty percent of the players manage eighty percent of the business),
C) Winner-take-all (IBM, Microsoft, the Beatles)(Frank & Cook, 1995; Gladwell, 2000; Levitt & Dubner, 2005).
2) Resource distribution is a significant contributor to network organization. Rich environments support individuals who follow the general principles of synchrony - similarity and mutual influence - make local clusters (Strogatz, 2003). When an organization discovers resources, it also discovers self-interest (Kauffman, 2000). That is, it competes for survival and for dominance and to duplicate itself. Even the tiniest difference in fitness favors the emergence of winner-take-all conditions. Given access to resources, even Peoria can become Rome or Microsoft.
3) Resource failure, invasion, or geological crises favor mass union whether under the baton of a secular dictator, a religious figure, a military one, one or one from big business. Swarms of individualists go to their knees in the face of poverty, disease, or complacency and fragment, available to whatever invaders are nearby. Women will do nearly anything to secure their children, men will do nearly anything to secure their women, and everyone may eat roots and sometimes their children (Kuznetsov, 1970).
Impact of Winner-Take-All
The distribution of resources - whether you follow Smith or Marx - is a critical element for the form of your organization and much of the time, Tit-for-Tat and Raise-the-Stakes manage that distribution: you trade with people who trade fairly with you (Poundstone, 1992). And given the creative abilities of human minds, we excel in the creation of tokens, gifts, and coins - all substitutes that allow Mr. Jones to turn four hours of labor into dinner and a theater ticket or a few hours at the Pumptown Strip Club and allow Mrs. Jones to buy several days supply of groceries.
Emergent networks predict that the days of my parents, when it was a sin to be in any sort of debt, when $4000 bought a house, and one income supported parents and a gang of kids...days that would pass.
Organizations that support the use of credit multiplied like Bonobos. Paper money and MAC machines and MAC machines that don't charge a fee make cash less valuable. So do credit cards that breed like Bonobos: it's easier, for reasons of ergonomics and speed, to swipe a small sheet of plastic - often colored gold or platinum - than to open the wallet and leave the store with less money. Business people often do not save but spend their profits while depending on a bank loan to finance raw materials and salaries. Farmers depend on the same bank to buy seed and fertilizer for the coming year. And banks multiply the availability of money by handing what you gave them to people who may not pay it back.
For most people now, saving is less important than spending and it is a necessity to keep up with the latest from Apple, Dell, or Ryan Homes. If there is caution in these purchases, it is to make the most savvy choice, the get the best price for the moment. Christmas becomes a potlatch wherein the one who puts out the most trinkets becomes mayor for the coming year and our kids measure themselves still against their friends but the modern yardstick is more what you wear and what you have rather than what you know or what you earned.
As money becomes less valuable, labor costs go down: women (as they have done for more than two million years) replace the men who found and pacified a particular niche (Coss & Moore, 1998) but, because they are more interchangeable and for less money...after all, the variability between individuals is often greatest between males.
Even though cheaper, labor still costs money and drives the invention of gadgets that eliminate labor. Buy a robot: it does what you need, the same way every time, and recognizes emotions in the humans around it. Journalism consists of whatever Drudge puts up, Big Box stores drive out local businesses, Toyotas, Nissans, and Chevys all look the same, and the high end development around the corner grew from practices that were intended to benefit apartment dwellers.
Wimpy's Demon
Wimpy symbolizes the "free rider" problem: how do you eliminate cheats? Frank Raines and Jim Johnson - managers of Fannie Mae and Freddie Mac - collected tens of millions in bonuses. They now are economic advisers to Obama who, along with Chris Dodd, Nancy Pelosi, Harry Reid, and Barney Frank, are the largest pots for campaign donations from Fannie and Freddie. Public opinion - a mass of 200 million "cheater detectors" - wants someone punished. On the other hand, Democrats and progressives, escorted by Hugo Chavez, Castro's brother, and the other Marxists, don't.
Can we trust Wimpy? And how do you apply Tit-for-Tat's "two strikes and you're out" to a national mob?
------------
"It's all about confidence, stupid. Every financial system depends on trust. People have to believe that the institutions they deal with will perform as expected. We are in a crisis because financial managers -- the people who run banks, investment banks, hedge funds -- have lost that trust. Banks recoil from lending to each other; investors retreat. The ultimate horror is a financial panic. Paulson aims to avoid that." Robert Samuelson
JimB
References
Barabási, A-L (2002) Linked: The New Science of Networks. NY: Perseus. (A readable gift to all of us.)
Barabási, A-L & Albert R (1999) Emergence of scaling in random networks. arxiv:cond-mat/9910332v1, 21 Oct 1999. (More technical but not impossible)
Brody, J (2008) Rebellion: Physics to Personal Will. Lincoln, NE: iUniverse. Especially Chapters 2 and 3.
Coss, R, & Moore, M. (1998) Preschool girls differ from preschool boys in recognizing the utility of an arboreal refuge site. HBES 10th Annual Meeting, Davis, CA, July 8-12. Women have taken over male niches for the last two million years.
Csermely, Peter (2006) Weak Links: Stabilizers of Complex Systems from Proteins to Social Networks. NY: Springer.
Frank, R. & Cook, P. (1995) The Winner-Take-All Society: Why the Few at the Top Get So Much More Than the Rest of Us. NY: Free Press.
Gladwell, M. (2000) The Tipping Point: How Little Things Make a Big Difference. NY: Little Brown.
Kauffman, S. (2000) Investigations. NY: Oxford. An iconoclast but insightful: Kauffman's clearest statement about evolution, biochemistry, and heterocyclic relationships. A little dry.
Kuznetsov, Anatoli (1970) Babi Yar. NY: Washington Square. Should be required for all of us.
Levitt, Steven & Dubner, Stephen (2005) Freakonomics: A Rogue Economist Explores the Hidden Side of Everything. NY: Morrow. Best seller, clear examples, easy reading.
Poundstone, W. (1992) Prisoner's Dilemma: John von Neumann, Game Theory, and the Puzzle of the Bomb. NY: Anchor. Also Roberts, G. & Sherratt, T. (1998) Development of cooperative relationships through increasing investment. Nature, 394, 175-179. (The basic rules of cooperation and the history of their definition)
Samuelson, Robert (2008) The Great Confidence Game. September 22. Real Clear Politics. Http://www.realclearpolitics.com/articles/2008/09/the_great_confidence_game.html.
Segar, Elzie Crisler (1929) Popeye. See http://en.wikipedia.org/wiki/Elzie_Crisler_Segar
Shlaes, A (2008) The Forgotten Man: A New History of the Great Depression. NY: HarperCollins.
Sowell, T. (2002) A Conflict of Visions: Ideological Origins of Political Struggles. NY: Basic Books. Open door to top-down vs. bottom-up views of social organization, from Adam Smith and Edmund Burke until today.