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.

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 !

5 thoughts on “Got Optimal?

  1. Whats that they say about computer code? Ninety Five percent of a program can be optimized, but only three percent of it should be.

    Pakistan? I thought it was the starving children in China we were supposed to go around thinking about all the time. Why ruin our lifestyle by thoughts of poverty and disease?

  2. Well, optimizing fairness might require that the very wealthy would have to pay more (via taxes, at least). There seems to be a teaparty “meme” that raising taxes on millionaires would mean raising taxes on them. Not the case. The older brackets (pre-Reagan) had high taxes on the very wealthy and kept them fairly low on middle and working class .

    • It’s a great point that the “higher taxes” on the rich will touch only a tiny number of people, almost all of whom can afford to pay more. However it’s also clear that governments will tend to tax before they spend responsibly. Joe the Plumber was not a smart guy, but he correctly understood something the “tax and spend” folks consistently and absurdly assert, which is that Government spends money responsibly. Basically, almost nobody can be expected to spend “other people’s money” as responsibly as they will spend their own. This truism is why clear thinking people will focus much more on government spending cuts before higher taxes. The problem with the Tea Party is not their rhetoric about cuts and taxes, it’s that they won’t advocate cutting waste where it’s greatest, which is in DOD.

      As Ron Paul wonderfully pointed out a few debates ago he will NOT cut defense, he’ll just cut the defense *budget*. If we could get Obama thinking more like Ron Paul on economic matters, he could become one of the great leaders of modern times.

  3. via the invisible hand of Adam Smith style free marketeering.

    That’s optimizing. At least…from the perspective of the one with the invisible claw.

    Pareto actually was a bit of a …lib-rall, JD. Rawls made use of Pareto optimization via the “Difference principle”. Neither Pareto nor Rawls were just high-fiving Smithian laissez-faire, but believed govt. had a duty to invervene when necessary to create “fair” economic systems (not to say efficient).

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