Got Optimal?
It seems to me that one of the most underrated notions in the world is that of the “optimal” arrangement. You hear a lot of folks talking about things like ”exploitation”, “growth”, “fairness”, “maximizing profits”, etc, etc, but it seems to me we don’t talk nearly enough about how to structure the world in the way that best benefits the most people, ie to seek the optimal arrangement given the needs and contributions of all the players involved.
Nearsighted conservatives will sometimes mistake that kind of discussion as “socialist” because they see it as veering away from the competitive, individual forces that very effectively drive highly productive economies, but they forget that in the game of economics we should generally be looking at metrics such production divided by number of people (GDP), and this number will be bigger if we optimize correctly.
The left in this sense is usually too “far sighted”, looking to distribute the wealth that may vanish if we eliminate those individual and corporate competitive structures that are the hallmark of industrialization and the spectacular rise in the average standard of living in the industrialized world over the past century.
So, how to optimize things? Economist Vilfredo Pareto (OMG he’s Italian?! economic credibility challenge alert!) had some neat ideas with respect to optimizing systems where we’d examine them to find ways to increase the well being of some participants without decreasing that of others. http://en.wikipedia.org/wiki/Pareto_efficiency
I think this simple basic idea should factor in a lot more, especially for those who fret a lot about the inequitable distribution of production towards the rich. Those folks generally, and very wrongly, assume that redistribution won’t have negative effects on production. It will, although that certainly does not mean we should not redistribute anything. It just means we need to redistribute with *great caution* to avoid the catastrophic kinds of problems faced by basket case economies like North Korea.
I think the single greatest challenge of optimizing is the degree to which you factor in the needs of other nations. Optimizing with the rural Pakistan peasantry in mind is different than if we draw our lines at the US border and say to heck with the needs of everybody else. Although I believe we have a moral imperative to take the needs of the world into much better account than we do now, I also recognize that it’s not practical or even possible for those of us who enjoy the many benefits of industrialized capitalism to successfully integrate our economies with those of countries like North Korea or China or even very friendly “economic allies” like India. Fortunately for those guys – and probably for us too – industrial globalization and the communications and technology revolution are handling much of this task, often via the invisible hand of Adam Smith style free marketeering.
The future … is better optimized !
USA Debt Rating Downgrade to AA+ is from our failure to cut defense and entitlements
S&P’s decision to downgrade the US debt rating from AAA to AA+ is very unwelcome news but it should not surprise anybody, especially in Washington where neither party has been willing to tackle the deficit or the debt in a responsible manner.
It’s time to cut the only two things in the budget that really matter – the bloated portions of Defense and Entitlements. Even estimating (and then cutting back) the bloat at 10% – absurdly low given how recklessly this money is spent – we could solve all deficit and debt problems in less than a decade. DO IT, DAMN IT!
The Tea Party’s was right that debt and deficit are major concerns, but their approach to solving the problem has been almost infantile, lacking in strategy as well as substance. They won’t cut defense – clearly required to solve this problem unless you raise taxes which as they correctly note brings a host of other problems into the mix. Defense spending is so high it’s become counterproductive, creating blowback and international tension which is mostly a function of our own reckless big spending in hostile territory.
One does not have to be an isolationist to see that it’s time for a much more strategic spending focus. Troops can be paid well and protected – these portions need no cuts, but operations and maintenance budgets in each of the services are where the big money lies, and where the big cuts won’t create trouble for policy or troops.
The solution is pretty obvious to many of us out here in the real world, where two things are crystal clear: 1. Entitlements are out of control. The prosperity the USA has enjoyed for over a century as the kingpin of the industrialized world is winding down in favor of spreading the wealth around the globe, especially to the developing countries of China and India. This prosperity allowed us (and by “us” I mean everybody – from poor to rich) to enjoy health, welfare, education, and retirement benefits the rest of the world could only dream about. Liberal middle class folks are whining too much about how they might lose benefits they never paid for – much of this in the form of “defined benefits” where their contributions won’t match their benefit so it’ll have to come from future taxpayers. Social Security has this problem, but it’s easy to solve by lifting retirement age a few years for those who can afford the wait OR doing a ” means test” OR taxing higher income beneficiaries. If we do nothing the Social Security trust fund will run out in under 20 years according to most estimates. The fund is actually growing now but demographics in the form of fewer workers and more recipients will soon overwhelm the system. Unlike a well managed system, Social Security has promised more benefits than incoming payments can support.
Summary: Simple solution is to cut bloat in the two big ticket items of defense and entitlements. Problem solved, AAA restored. DO IT.
Collective Bargaining Rights, Wisconsin, and the end of Western Civilization as we know it….
A Facebook friend’s debate has me writing too much over there in private that should be written here in the bright light of the blogging sunshine where everybody can check in and …. YELL about it!
The question over there from my pal in Wisconsin was this: ”What will be the benefit and what will be the cost of removing the right of public workers to form collective bargaining groups?”
We went round and round about what I see as a critical issue in that debate which are the unfunded liabilities – mostly pension obligations – that seem to have come from collective bargaining aggressiveness. Surprisingly to me there are still a few large hold out advocacy organizations claiming we don’t have a pension crisis – NIRS is the best example. But clearly we DO have a crisis and it’s potentially very serious.
I’m hoping to hear from Fools Gold and Horatiox on this one as I think we may be coming close to an informed answer. The benefit to society: Slightly lower taxes from the reduced pressure on public spending. Assuming that bargaining bumps up public compensation costs by 10% (based on a conservative CATO paper that should not tend to make this a low number) we are probably talking about something like 5-7% “savings” to taxpayers if we eliminate bargaining (I’m assuming 50-70% of the cost of public sector is in form of compensation and related liabilities).
The cost to society: reduced public worker morale, perhaps reduction in productivity, and probably a reduced quality of workers who chose public service. Although these costs are hard to measure, it seems to me that the modest tax increase is probably worth those benefits to the extent the government services are justified.
A caveat for me would be whether collective bargaining tends to increase total public sector employment. To the extent it does it presents potentially much higher costs to the system. I do not believe the public sector is sustainable in current form and size without tax increases that are politically impossible (and ill advised anyway).
So for me a far more important current question is how we can get the softest landing as we scale back the bureaucracy from its current bloated conditions to a manageable size.
Google’s 10 to the 10th project winners – spawning innovative solutions.
Google’s Project 10 to the 10th gathered 150,000 ideas and filtered them to five great ideas listed below. Each will receive huge funding from Google:
Idea: Make educational content available online for free
The Khan Academy is a non-profit educational organization that provides high-quality, free education to anyone, anywhere via an online library of more than 1,600 teaching videos. We are providing $2 million to support the creation of more courses and to enable the Khan Academy to translate their core library into the world’s most widely spoken languages.
Enhance science and engineering education
FIRST is a non-profit organization that promotes science and math education around the world through team competition. Its mission is to inspire young people to be science and technology leaders by giving them real world experience working with professional engineers and scientists. We are providing $3 million to develop and jump start new student-driven robotics team fundraising programs that will empower more student teams to participate in FIRST
Make government more transparent
Project funded: Public.Resource.Org is a non-profit organization focused on enabling online access to public government documents in the United States. We are providing $2 million to Public.Resource.Org to support the Law.Gov initiative, which aims to make all primary legal materials in the United States available to all.
Drive innovation in public transport
Project funded: Shweeb is a concept for short to medium distance, urban personal transport, using human-powered vehicles on a monorail. We are providing $1 million to fund research and development to test Shweeb’s technology for an urban setting
Provide quality education to African students
Project funded: The African Institute for Mathematical Sciences (AIMS) is a center for math and science education and research in Cape Town, South Africa. AIMS’ primary focus is a one-year bridge program for recent university graduates that helps build skills and knowledge prior to Masters and PhD study. We are providing $2 million to fund the opening of additional AIMS centers to promote graduate level math and science study in Africa.
http://www.project10tothe100.com/
THANKS GOOGLE!
———— Joe rambles on —————-
I love the innovative spirit in contests and project like these, and also believe funding from deep pockets like Google is critical because I think in general innovations …. fail…. even in the for profit sector. However in that sector we reward success hugely, so we get a fair number of entrepreneurial “players” who are looking to win the innovation lottery, and these players tend to spin out a few good ideas among mostly bad ones.
The current USA system tends to dramatically reward success and ruthlessly kill commercial failure, which is probably a good approach to optimize business success. A common mistake by those who argue that “innovation is golden” is to only look at the few innovative projects that have had huge success (Apple Computer, Google, etc) and ignore the *thousands* of failed innovations, most of which most of us never hear about. One of the big lessons that should have been learned from the internet and real estate bubbles is that innovation does NOT foster success – it simply fosters new ideas. Most internet companies that were spawned during the bubble have failed where a few like Google have become global economic powerhouses.
But as usual I digress. THANKS Google for helping to spawn new ideas to do good. That’s cool.
Global vs Personal Priorities – DON’T keep mixing them up people!
Major breakthrough today in my confusion about why everybody gets so angry at me for suggesting the obvious – that we are pretty selfish, and than many of the concerns that today masquerade as “selfless” are in fact … selfish concerns.
My frustration and confusion stems from the fact that I know a lot of good folks really want the world to be a better place, are willing to devote time and treasure to that end, and are bright, generally rational people. Yet I also see so many of these folks working – often as “activists” for the right or left – in ways that don’t really seem to me to be productive. More like obsessive compulsive, and in many cases actually counterproductive, where the activism simply polarizes the debate and makes it harder to reach the compromises needed to move ahead. (Health care reform comes to mind in this respect).
The breakthrough? Good people are too busy trying to convince themselves that their personal priorities line up with global priorities when in reality …. they usually do NOT line up at all. It’s this conflict that leads people to get angry at me when I say ”hey, why not devote the time and treasure to health care in 3rd world rather than a new hospital wing or university wing in USA?”. The reason is that folks can’t bring themselves to admit that the hospital / university donation is a more accessible kind of charity (for those of us in the wealthy world) and will have a lot more visibility and personal satisfaction for them than giving that money for a bunch of PlumpyNut or Oral Rehydration Therapy in the third world.
This, I maintain, is a moral travesty and an unconscionable state of affairs. The return on investment by any rational measure is spectacular with one form of giving and trivial with the other.
Opposing comments are, as always, very welcome…
Feeling Good vs Doing Good
It seems these days I’m often pissing off friends and family for suggesting something that, frankly, is pretty obvious. Most of what passes as “doing good” these days are activities that make the feel-gooders feel good about themselves, their community, and life in general (that’s fine of course), but don’t do much to make the world a better place. It’s fine to engage in things that you enjoy that do not contribute to the greater good, but it is very important to recognize the difference, and not to conflate feel-good stuff with actual do-good stuff.
Real good comes in many forms, and thank goodness their are a LOT of people doing real good all around us. Friends and neighbors working and volunteering in health care, teaching, law enforcement, and hundreds of other public service jobs, NGOs building schools all over, Church groups teaching, etc, etc. Many of the folks doing that stuff are heroic, braving all kinds of bad conditions to bring health care, education, food, and good will to those who need it most.
But without even pointing out those obvious ‘feel good’ activities I’m going to hope we make better progress than we seem to be *re-defining* what it means to “do good”.
Those of us in the middle and up classes here in the USA enjoy historically unprecedented standards of living, and even those on welfare here in the USA live well by any reasonable global standards. Bringing this higher *standard of living* to the small numbers in the US and the huge numbers in other countries who do not benefit from our system is the greatest moral challenge of our time, yet I can’t help but think that the many “feel gooders” (and even worse – the political spenders on both sides of the political aisle) are distracting us and redirecting resources very inefficiently to projects that will have little significant positive impact.
As always, hoping folks chime in with their views about this, and for what it’s worse I’d agree that blogging is probably NOT an example of doing much if any good! Maybe I’m my own best example of the problem?
Misplaced compassion … kills
One of the most obvious things I assert is also the thing that bothers people the most. It’s that most of us tend to fret or show compassion over trivial or questionable things while we ignore the catastrophic circumstances that plague so many people around the world.
A great recent example is the effort to “find Paco”, a dog that was “lost” by Delta Airlines during a trip back to (the UK?) from Mexico. As with most stories like this, the perception at first glance is heart wrenching. But then the facts clear up why this story is ridiculously overblown.
Paco was a stray, picked up by a tourist couple, who then had him shipped home. It appears he escaped from his cage while on the tarmac in Mexico City and (I’m speculating here) headed back to the places where he’s more comfortable living. Sad for the couple, but hardly all that newsworthy, especially given the apparent outrage against Delta.
Delta’s offer to credit the couple only $200 for a lost pet was obviously a stupid move on their part, but I resent that people don’t get all the facts out there when trying to push these stories to a gullible public. If you are a compassionate person you MUST IGNORE PACO and spend your time thinking about the daily deaths of thousands from Malaria, rotovirus, and lack of clean water. Yes that task is more than overwhelming, but the whimpy “Find Paco” sentiment that people think makes them a “compassionate person” does nothing of the kind – it hardens them to the plight of millions who live in conditions we could largely fix if people would pay as much attention to that as they pay to missing stray dogs in Mexico. (How? If the developed world cut defense and entitlement spending by about 10% we could rebuild most of the developing world’s infrastructure IN ONLY A FEW YEARS. The strategic benefits alone would be staggering, but military enthusiasts are too blinded by irrational post-cold-war thinking while entitlement enthusiasts are too busy sending subsidies to the American lower and middle class, who contrary to our constant whining cost far more in bureaucracies and benefits than we pay for (can you say “National Debt”?)
The millions spent sending poor Free Willie back into the wild also comes to mind (he died soon after, lacking the skills needed to survive). Did people seriously think Willie would be happier in the wild? It was as if their *need* to fight against captivity programs trumped the animal’s own well being.
So instead of fretting over things that don’t matter much, why not pick your favorite extreme poverty charity and help out – then you can feel good…. AND actually do some good too! Here’s a start: http://twitter.com/charitywater
Google Luge Logo Pulled
After a large number of complaints Google pulled the daily Google logo – an Olympic Luge logo – from the home page and now features a very similar snowboarding logo instead. I think this was appropriate, but it’s always odd to me how harshly people react to this type of thing rather than paying attention to the monster issue of our time such as the health catastrophes facing much of the developing world.
But hey… I guess I’m doing that myself with this post? Shame on me, too….
Hope for Haiti Concert – Beyonce
http://www.mtv.com/videos/misc/474738/beyonce-halo-live.jhtml
The music from this concert was pretty amazing, and if you buy it from iTunes it’ll help Haitians recover from what now appears to be one of the greatest natural disasters in many years.
There’s a lot of political discussion that should center around how to best help developing countries, but I think that should wait until after we address the emergency needs with water, food, medicines, and security. After that I hope we start an international discussion about what it takes to rebuild a failed state into the healthy and vibrant democracy people deserve to live in – the kind of country we in the USA take for granted.
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