In an emerging era of regulation reform, talk of new Glass-Steagall Act is going to be muted. I suggest that this is the perfect time to process the regulatory failure that produced the Great Recession of 2007-2008 into reasonable restraints upon our most important financial institution, banks. I further suggest that a blanket separation of investment and commercial banking is, as former President Clinton said, not appropriate. The problem is too complex for simple solutions.
Banks exist to supply liquidity for fluctuating capitalist economies. In order to do that they must make money doing it. That is a hard fact of capitalist life. There is nothing in this scenario to deny them the right to take reasonable risks in equity markets in order to increase their return on investment. The problem lies in the phrase, 'reasonable risk', and how that can be regulated.
I am here arguing that there is a solution to that problem and it lies in regulating mathematical risk models which guide institutional investment. Risk models must be demonstrably and categorically shown to be reliable in a hostile critical environment before they can be employed in actual investment strategies. That is not a simple solution but it is not a simple problem.
The legislation can be written. I suggest it be considered.
Saturday, November 12, 2016
Saturday, September 3, 2016
Towards Sanity: A Living Minimum Wage
A market, an exchange of goods and services usually for money, is definitely an expression of human social existence. For all the exposure of the greed and excess of market players, markets have to serve society. They cannot otherwise exist. At the point that they exacerbate social ills and create unmanageable inequalities of station, social, economic, and legal, the greed and excess that make markets function effectively have broken the operational constraints of proper market dynamics and are loose, rather like a maniac escapee from a high security mental facility. The general case is, and the legitimate prejudice is, that something in the economy has lost equilibrium and is generating unsustainable numbers which are fueling aberrant economic behavior.
While draconian measures are the usual kneejerk reaction to this social collapse, and it is a social collapse, a measured response calculated to find the cause of the disequilibrium is far more desirable. Transfers of wealth are draconian and polarize society. The argument resolves around the question of the best employment of disposable income. According to the wealthy investment is more valuable to society and according to the poor, the general welfare is paramount to a functioning constitutional democracy. That argument is well beyond the scope of this blog and its resolution requires a fine balance in a society.
It is my contention that an adequate measured response to this social collapse would be an increase in the minimum wage to a level of true economic and social participation which has been found to be the foundation of the wealth and health of a society. The problem with letting the market set the price of labor is that that means that society considers labor a commodity to be traded and that indicates that philosophically society considers human beings a commodity. What kind of society would that be? A society of robots? That position is counter to the values of Western Civilization and well beyond the limits of reason. It is alienated, read insane, and cannot be tolerated in a constitutional democracy. That is the absolute argument for a minimum wage. As for the living minimum wage, it is a commonplace observation that a business paying less than living wages is not really in a value added economy. It is in the business of generating funny numbers that drive market psychology beyond its proper bounds.
While I believe that the mass industrial society that has turned us all into minions of the automated machine process and the consequent loss of self-esteem and the compensatory defensive reaction of grandiose self-concepts to be the root cause of this antisocial phenomenon, the redress to that mindless society currently in process is an entrepreneur/infrastructure model which, while far more conducive to psychological health, does leave far too many people out.
Central to this model is the notion that the bar to social and economic participation is being raised but is still attainable. That is nonsense. The bar is over everybody's head. IBM's Watson and a robot could have the average entrepreneur's lunch. The sooner we close the lid on the Pandora's box of the notion that technology is intrinsically superior to human beings, the better. Technology serves humankind and the boldest, measured, statement we can make to that effect is a living minimum wage.
While draconian measures are the usual kneejerk reaction to this social collapse, and it is a social collapse, a measured response calculated to find the cause of the disequilibrium is far more desirable. Transfers of wealth are draconian and polarize society. The argument resolves around the question of the best employment of disposable income. According to the wealthy investment is more valuable to society and according to the poor, the general welfare is paramount to a functioning constitutional democracy. That argument is well beyond the scope of this blog and its resolution requires a fine balance in a society.
It is my contention that an adequate measured response to this social collapse would be an increase in the minimum wage to a level of true economic and social participation which has been found to be the foundation of the wealth and health of a society. The problem with letting the market set the price of labor is that that means that society considers labor a commodity to be traded and that indicates that philosophically society considers human beings a commodity. What kind of society would that be? A society of robots? That position is counter to the values of Western Civilization and well beyond the limits of reason. It is alienated, read insane, and cannot be tolerated in a constitutional democracy. That is the absolute argument for a minimum wage. As for the living minimum wage, it is a commonplace observation that a business paying less than living wages is not really in a value added economy. It is in the business of generating funny numbers that drive market psychology beyond its proper bounds.
While I believe that the mass industrial society that has turned us all into minions of the automated machine process and the consequent loss of self-esteem and the compensatory defensive reaction of grandiose self-concepts to be the root cause of this antisocial phenomenon, the redress to that mindless society currently in process is an entrepreneur/infrastructure model which, while far more conducive to psychological health, does leave far too many people out.
Central to this model is the notion that the bar to social and economic participation is being raised but is still attainable. That is nonsense. The bar is over everybody's head. IBM's Watson and a robot could have the average entrepreneur's lunch. The sooner we close the lid on the Pandora's box of the notion that technology is intrinsically superior to human beings, the better. Technology serves humankind and the boldest, measured, statement we can make to that effect is a living minimum wage.
Saturday, April 30, 2016
The Justice Instinct
Although I have seen many attempts at a rigorous definition of 'justice', I have seen no clear triumphs including the Ancient Greeks. The results tend to be circular in their reasoning, culture bound sophistries. For a concept central to civilization itself, this is an unusual situation. From a naive perspective, what is justice.
Sugar cane was, from time immemorial into the Nineteenth Century, a slave industry. Sugar, it is generally agreed, is not healthy ingested in large quantities without a proper regimen. Yet the use of slave labor depressed the price of sugar to the point that this was fairly common. Therefore the deployment of an immoral economic system had an effect detrimental to the health of the people who allowed it to happen. That is justice. It is very close to irony and I know it when I see it.
From this observation it is obvious that any attempt a definition of justice would begin with the idea that for justice to exist it would have to be inherent in the nature of the universe. What, in simplistic terms, is the nature of the universe? Scalar fields decaying into particles. What is there of justice in that? Just from this superficial inquiry, the difficulty of defining justice is apparent. As in Wittgenstein's examination of 'game', a definition may not be possible.
If this is true, and so far it appears to be true, then justice, like game, like language, is an innate concept, a concept with which we are born. It could be a Kantian 'thing in itself' which interacting with perceived reality, generates specific bodies of law and cultural norms, categories of understanding.
So we are left with the justice instinct, bred into us and present at birth, which is unknowable and apparent only in the manifestations of its influence on law and culture. This may be the actual phenomenon and it cannot be conserved, only recognized. We know it when we see it.
Sugar cane was, from time immemorial into the Nineteenth Century, a slave industry. Sugar, it is generally agreed, is not healthy ingested in large quantities without a proper regimen. Yet the use of slave labor depressed the price of sugar to the point that this was fairly common. Therefore the deployment of an immoral economic system had an effect detrimental to the health of the people who allowed it to happen. That is justice. It is very close to irony and I know it when I see it.
From this observation it is obvious that any attempt a definition of justice would begin with the idea that for justice to exist it would have to be inherent in the nature of the universe. What, in simplistic terms, is the nature of the universe? Scalar fields decaying into particles. What is there of justice in that? Just from this superficial inquiry, the difficulty of defining justice is apparent. As in Wittgenstein's examination of 'game', a definition may not be possible.
If this is true, and so far it appears to be true, then justice, like game, like language, is an innate concept, a concept with which we are born. It could be a Kantian 'thing in itself' which interacting with perceived reality, generates specific bodies of law and cultural norms, categories of understanding.
So we are left with the justice instinct, bred into us and present at birth, which is unknowable and apparent only in the manifestations of its influence on law and culture. This may be the actual phenomenon and it cannot be conserved, only recognized. We know it when we see it.
Wednesday, March 23, 2016
To Be is To Do
I have been born knowing into a universe, knowing that I am and knowing that that proposition means something. I have then been born knowing what meaning means. As I have matured, I have learned the conditions of that perceived and calculated existence. I have learned that the nature of money is structural, that meaning is 'fit', no more, no less, I have learned that both my existence and my meaning are consequent upon my being born into a universe that structures that existence into real terms and supplies that meaning by simply being the larger, constant context of any cultural narrative which subtends any personal narrative I may generate. A universe may exist without me. I cannot exist without a universe. I have been born into a universe knowing and have constructed a personal narrative by learning that universe and the nature of that existence intellectually and by experience and I have accomplished this narrative, this exercise in meaning, by doing. Contemplation is action analyzed.
I have learned the nature of meaning by extrapolating my meaning, my 'fit' into my universe of relevant structure, into a general case of the structural nature of meaning. In analysis, a phenomenon is conserved when an observation 'fits' a theory. In action, a behavior has meaning when it accomplishes a relevant meaning structure in a logical fashion. Thus, existence, in real terms, is an exercise in meaning. It can be no other. Legitimate human action accomplishes meaning structures.
To be is to do.
http://www.amazon.com/author/johnfrazier
I have learned the nature of meaning by extrapolating my meaning, my 'fit' into my universe of relevant structure, into a general case of the structural nature of meaning. In analysis, a phenomenon is conserved when an observation 'fits' a theory. In action, a behavior has meaning when it accomplishes a relevant meaning structure in a logical fashion. Thus, existence, in real terms, is an exercise in meaning. It can be no other. Legitimate human action accomplishes meaning structures.
To be is to do.
http://www.amazon.com/author/johnfrazier
Thursday, February 11, 2016
Technology and Sanity: the Innovation Cycle
Warning: I am here going to have the unmitigated gall to modify and expand the insights of the great economist Joseph Schumpeter concerning innovation and disruption.
The innovation cycle is necessarily limited by the plasticity of the human brain which is not pronounced in the average person and lessens with age. Therefore the course of successful innovation is generational and the cycle itself is roughly sixty years. The historical record bears this out. The cycle of the railroad and telegraph, a coherent technological set, lasted from approximately 1840 to approximately 1900. The cycle of the automobile, telephone and radio, another coherent set, lasted from approximately 1900 to approximately 1960. We are still in the cycle of the mainframe computer, the jet aircraft and television, once again a coherent set, which should last until 2020 and be superseded by a set of gadgets, cloud computing and robots including drones.
What is noticeable from this type of analysis is that in the railroad cycle there is a clear break in 1872 with the Long Depression. In the automobile cycle there is a clear break in 1929 with the Great Depression. This is the classic innovation cycle. Apparently, armed with Professor Schumpeter's insights about the importance of entrepreneurs, we sidestepped a significant recession in 1990 by implementing new technology like the PC before the natural end of what I am calling Innovation Cycle Phase One of the mainframe cycle.
These clear breaks indicate a bipartite innovation cycle. Phase One is implementation and Phase Two is exploitation. Phase One results in massive disruption that induces what can only be called madness. In the 1860's, Phase One of the railroad cycle drove the fine madness of the American Civil War. In the 1920"s, Phase One of the automobile cycle drove the fine madness of the Jazz Age with its artistic treasures. In the 1960's, in an accelerated manner, Phase One of the mainframe cycle drove the fine madness of the cry for humane behavior of the Age of Aquarius. The nature of disruptive technology is that of a severe information overload which does have psychiatric consequences. The more inhumane the technology, the worse the effect.
Railroads are hostile. There is no evidence that human beings were designed to go fifty miles an hour in an iron horse like a dog in a car. Automobiles are hostile. Travelling seventy or eighty miles an hour while at the limits of control with no control over other vehicles at all may be exciting but it doesn't fall in the comfort zone of human capability. Mach One in a jet cannot help but be a transforming experience with unpleasant consequences.
Fundamental of change hostile to humane values is Phase Two, exploitation. In the railroad cycle not only were the machine tools of the railroad exploited to create new technology but human beings themselves were exploited, a not so fine madness, in the Gilded Age. The same pattern occurred in the 1930's but having witnessed the chaos and irrationality of the 1890's, governments instituted policies to counter Phase Two of the automobile cycle. These policies were as a leaf in a strong wind to the forces of change but they provided temporary relief for a time.
Thus the classic pattern of implementation and exploitation was effectively short-circuited in the 1990's by improved research and accelerated implementation so that both Phases, One and Two, are now occurring simultaneously. As in linguistics, there is a deep structure of the sixty year cycle profoundly obscured by these concurrent processes. It becomes difficult to analyze and address the consequences of this phenomenon.
The result appears to be an improved humane aspect to consumer electronics as the market demands it. Gadgets operating on the cloud like the smart phone and IoT are infinitely friendlier and more humane than an IBM 360 and a card reader. We are apparently on our way, from 2020 to 2050, into a humane age unlike anything that has ever existed. We are finding refuge, in Shakepeare's words, 'a frighted peace to pant', from inhumane technology while still reeling from intense innovation. This may induce a madness finer than anything known. It may induce sanity. It is going to be interesting.
The innovation cycle is necessarily limited by the plasticity of the human brain which is not pronounced in the average person and lessens with age. Therefore the course of successful innovation is generational and the cycle itself is roughly sixty years. The historical record bears this out. The cycle of the railroad and telegraph, a coherent technological set, lasted from approximately 1840 to approximately 1900. The cycle of the automobile, telephone and radio, another coherent set, lasted from approximately 1900 to approximately 1960. We are still in the cycle of the mainframe computer, the jet aircraft and television, once again a coherent set, which should last until 2020 and be superseded by a set of gadgets, cloud computing and robots including drones.
What is noticeable from this type of analysis is that in the railroad cycle there is a clear break in 1872 with the Long Depression. In the automobile cycle there is a clear break in 1929 with the Great Depression. This is the classic innovation cycle. Apparently, armed with Professor Schumpeter's insights about the importance of entrepreneurs, we sidestepped a significant recession in 1990 by implementing new technology like the PC before the natural end of what I am calling Innovation Cycle Phase One of the mainframe cycle.
These clear breaks indicate a bipartite innovation cycle. Phase One is implementation and Phase Two is exploitation. Phase One results in massive disruption that induces what can only be called madness. In the 1860's, Phase One of the railroad cycle drove the fine madness of the American Civil War. In the 1920"s, Phase One of the automobile cycle drove the fine madness of the Jazz Age with its artistic treasures. In the 1960's, in an accelerated manner, Phase One of the mainframe cycle drove the fine madness of the cry for humane behavior of the Age of Aquarius. The nature of disruptive technology is that of a severe information overload which does have psychiatric consequences. The more inhumane the technology, the worse the effect.
Railroads are hostile. There is no evidence that human beings were designed to go fifty miles an hour in an iron horse like a dog in a car. Automobiles are hostile. Travelling seventy or eighty miles an hour while at the limits of control with no control over other vehicles at all may be exciting but it doesn't fall in the comfort zone of human capability. Mach One in a jet cannot help but be a transforming experience with unpleasant consequences.
Fundamental of change hostile to humane values is Phase Two, exploitation. In the railroad cycle not only were the machine tools of the railroad exploited to create new technology but human beings themselves were exploited, a not so fine madness, in the Gilded Age. The same pattern occurred in the 1930's but having witnessed the chaos and irrationality of the 1890's, governments instituted policies to counter Phase Two of the automobile cycle. These policies were as a leaf in a strong wind to the forces of change but they provided temporary relief for a time.
Thus the classic pattern of implementation and exploitation was effectively short-circuited in the 1990's by improved research and accelerated implementation so that both Phases, One and Two, are now occurring simultaneously. As in linguistics, there is a deep structure of the sixty year cycle profoundly obscured by these concurrent processes. It becomes difficult to analyze and address the consequences of this phenomenon.
The result appears to be an improved humane aspect to consumer electronics as the market demands it. Gadgets operating on the cloud like the smart phone and IoT are infinitely friendlier and more humane than an IBM 360 and a card reader. We are apparently on our way, from 2020 to 2050, into a humane age unlike anything that has ever existed. We are finding refuge, in Shakepeare's words, 'a frighted peace to pant', from inhumane technology while still reeling from intense innovation. This may induce a madness finer than anything known. It may induce sanity. It is going to be interesting.
Friday, January 8, 2016
Markets and Moral Behavior
Following my petite rumination on the nature of moral behavior I am here going to examine market behavior as moral behavior. Assuming, from my previous blog, that moral behavior is that behavior which follows the dictates of self-interest and self-aggrandizement in terms of meaning and given a market that is an expression of human social existence operating solely in material terms, the problem is set before me. How do I rationalize such disparate universes?
The primary caution to any rationalization is that, as developed by Thomas S Kuhn, incommensurate systems exist. They are incapable of being rationalized one with the other. Market behavior and moral behavior may be, in fact, incommensurate as value systems. First, what do markets do? They administer human material existence at a very high order of efficiency. They discount every social contingency into the price of their products by the simple mechanism of 'moving' material plenty, real or virtual, 'to' material scarcity. Such 'movement' creates the opportunity for arbitrage, market profits. It is simple. It is effective. They do operate to self-interest and self-aggrandizement but only in material wealth and how that wealth is measured, today generally dollars.
What is a dollar worth in meaning? It is worth whatever the society it serves makes it mean. It has absolutely no intrinsic meaning. It is a piece of paper, a chunk of marginally worthless metal, an electron pulse. There is no meaning inherent in money.
What possible equation can be written to relate such different systems of behavior? The answer is simple. Talent. Just as language mediates thought and reality so talent mediates material existence and meaning. The worth of a dollar in meaning lies in the use societal talent makes of it. As finance has talent making markets and driving innovation and infrastructure so meaning has talent creating the possibility of meaning with vision and vocabulary. It is the task of this talent, in a sort of mission statement, to make money meaningful to, after Jeremy Bentham, the greatest number of citizens of that political economy to which it belongs, however defined.
Moral behavior in the world of markets, in the world of the incomprehensible demiurge creating order out of chaos, consists of material self-interest and material self-aggrandizement and a willingness to defer to legitimate talent. Life is not just about getting rich, money in such a system is almost worthless. Life is about meaning, living in it, creating it. Money, properly directed, can do that. As we arise from the ashes of the great Age of Nihilism, roughly speaking from 1872 to the present, let us concentrate on letting talent create meaning, not destroy it.
The primary caution to any rationalization is that, as developed by Thomas S Kuhn, incommensurate systems exist. They are incapable of being rationalized one with the other. Market behavior and moral behavior may be, in fact, incommensurate as value systems. First, what do markets do? They administer human material existence at a very high order of efficiency. They discount every social contingency into the price of their products by the simple mechanism of 'moving' material plenty, real or virtual, 'to' material scarcity. Such 'movement' creates the opportunity for arbitrage, market profits. It is simple. It is effective. They do operate to self-interest and self-aggrandizement but only in material wealth and how that wealth is measured, today generally dollars.
What is a dollar worth in meaning? It is worth whatever the society it serves makes it mean. It has absolutely no intrinsic meaning. It is a piece of paper, a chunk of marginally worthless metal, an electron pulse. There is no meaning inherent in money.
What possible equation can be written to relate such different systems of behavior? The answer is simple. Talent. Just as language mediates thought and reality so talent mediates material existence and meaning. The worth of a dollar in meaning lies in the use societal talent makes of it. As finance has talent making markets and driving innovation and infrastructure so meaning has talent creating the possibility of meaning with vision and vocabulary. It is the task of this talent, in a sort of mission statement, to make money meaningful to, after Jeremy Bentham, the greatest number of citizens of that political economy to which it belongs, however defined.
Moral behavior in the world of markets, in the world of the incomprehensible demiurge creating order out of chaos, consists of material self-interest and material self-aggrandizement and a willingness to defer to legitimate talent. Life is not just about getting rich, money in such a system is almost worthless. Life is about meaning, living in it, creating it. Money, properly directed, can do that. As we arise from the ashes of the great Age of Nihilism, roughly speaking from 1872 to the present, let us concentrate on letting talent create meaning, not destroy it.
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