How many drooling zombies did you manufacture today?

W… T… F…?!?

Since when did I need so much (mis)information about Michael Jackson??  Does my life, in some secret, hidden and dark way, revolve around Michael Jackson?  Is he the Grand Master of the Illuminati?  Was the Mona Lisa a portrait of him?  Am I the father of his babies?  The simple answer… NO!

You’d think he was going to jump out of his coffin or something.

Why then can I not escape the incessant coverage of his death, his life and funeral??  Having turned off the television in disgust, I find it’s even on the ABC and RadioNational radio stations.  For the love of god, there are people camped out at Fed Square in the freezing cold, in the middle of the night, to mourn together in front of the big screen.

If the Secretary of the UN died there would be less coverage and outpouring of grief.  Obama or the Pope might be able to garner this much attention.  So the media has elevated Jackson to the level of the PotUS or the head of the Catholic church – bit much don’t you think?  I thought there was a commandment against idolatry, so there should be a lot of Christians newly destined for Hell.  When you see such a gargantuan marketing effort like this … you start to wonder where the profits are going.  Evidently even groups with no avenue to Jackson’s estate are making a mint out of the public’s attention – and it’s in their interest to keep the attention there.

This smacks a lot of the ridiculous media obsession around the Beaconsfield mining accident – maddening 24/7 coverage of something that is of acute and private interest to a few, but voyeuristic and of little consequence to the masses.  When did the media decide this was their optimal model?  To latch onto a sensational topic, every tangential issue and lie it brings to the surface, and to beat it to death, to the detriment of every other happening in the world – we’ve got North Korea doing its best to trigger WW3 for christ sake.

Elsewhere in Newsland, ABC’s ‘4 Corners’ reported on the travesty of the WA ambulance system – shattered families, masses of whistle-blowers, simpering executive double-talk … the whole lot.  It will get little attention while the rest of the media is fueling the obsession over Jacko.  We may as well put up huge signs telling every crooked company and government to air their dirty laundry now, because the entire public is being drugged into a haze by the media and the media has its eyes closed.

I’m wondering whether the drop in the quality of the media is a product of its failing business models, or whether we lost confidence in its lucidity,  in its ability to hold people to account, and then lost the will to support something so tawdry.

Life in Opposition

Malcolm Turnbull must be feeling uncomfortable again.  He’s not been a popular boy for quite a while now.  I imagine he thought all his Christmasses had come at once with the recent maritime dramas, however once again he finds himself a victim of ‘opposition-itis’.  The aggressively negative tactics that are typically adopted by opposition parties have been brought to bear and turned many groups, even some of their own backbenchers, against the Liberal leadership.  Hooray for the “I’ll-be-black-you-be-white” political context of Australia.  In this issue it’s really more of an “I’ll be black and paint you white” context, since the refugees didn’t know there was any change in political or legal context to take advantage of.

Australia seems to be quite used to extended periods of very negative political drama with ‘liberal’ helpings of righteous indignation, however, the furors stirred up in the media by the opposition seem just as likely to damage the accusor as the target, or in the case of the global downturn quite possibly damage the whole country.  The current Liberal opposition seems to be having a particularly bad run, with negative outcomes after incessant public criticism of active financial measures in the global downturn, ambiguous leadership dramas casting doubt on Turnbull’s future and now general annoyance smattered across the whole community following their ridiculously aggressive and opportunistic attacks over the unfolding naval calamity.

Don’t we all deserve better than this?  Opposition parties treating us like children, trying to look like they are doing something constructive by hurling faeces at the incumbent with incessant, over-dramatised, emotive and typically baseless stirring in the media?

Shouldn’t the media itself be beyond this?  Can’t they come up with something better than immediately joining the shrill chorus?  And when they realise their folly, retrospective weak-as-tea apologies like those following the fake Pauline Hanson photos just aren’t good enough.

Obviously stories cost money and hot-issues which sell copies of ’serious’ newspapers to the ‘unserious’ spend-thrift markets sought by advertisers are hard to find, but what value is a media that unquestioningly latches onto anything sensational that is dangled in front of it?  If they are willing to be led around by the nose by sources like the opposition what credibility will they have?  Have the new weaknesses in media sales forced them to rely solely on front-page sensation, and has the fallout of under-analysis and misreporting become negligible?

But getting back on-topic, what is it to be in opposition?  Is the 4 year stint hard-wired to be a long deathmarch of slinging desperate attacks to appear relevant despite electoral impotence?  Surely not since quite often the opposition controls the senate and can block reforms, and quite often deals with minority parties give them temporary, if not semi-permanent, control over the lower-house itself.

Should opposition be a period where the party leadership is constantly in fear of internal collapse due to jockying rival factions?  That smacks of too many people angling for a chance at being PM rather than being in government to represent the people.  Surely a relevant party ideology, a dash of duty and some self-control should be able to keep people’s ambitions in line.  Heh, duty, I joke…

Should opposition be a period of automatically adopting the opposite stance to the incumbent?  This is a major issue that I believe is constantly damaging the country.  I understand the marketing need for a party to ‘brand’ its ‘message’ so as to be easily understood and distinguished by the populace, or even to avoid competing for the same slices of the electorate.  However this standard arrangement muddies the message and ideology of parties, when each races to take its preferred position with the slower having to settle for the opposite position… no matter how silly it looks.  “Under no circumstances must we appear to agree!”  If the first takes a moderate middle-ground does that inherently push the other even further out to draw a clear distinction?  But frankly this is getting so predictable that it’s comical.  If an incumbent had its head screwed on the right way they would grab the moderate stance on everything under the sun and stand back to watch the opposition paint themselves as a schizophrenic, mishmash, frankenstein of incoherent and internally inconsistent policies.  Maybe there’s some kind of secret agreement that they won’t do that to each other.

However, with political parties automatically claiming opposed stances, purely to ensure that they never give the other a hint of credibility, how can we ever have any meaningful discussion or progress on anything?  When at least one party is playing devil’s advocate and arguing for a stance that it doesn’t really support… how can anything sensible result?  And if every policy, decision and comment turns into this kind of misdirected and meaningless, skewed argument how is the country meant to feel confident in its past, present or future and be able to move forward?  When every moment is the outcome of inumerable political games, how can you have any confidence in it or the next?

Should opposition, or being in a major party for that matter, be the chance to engage in schoolboy name-calling and arguing?  Flatly no, and I fear it’s another major issue stunting the county’s progress.  What gives the elected representatives of the country the right to walk into the senate or lower-house and snear and smirk at each other, have “nyah nyah” moments, make bombastic and irresponsible accusations, and basically act like a bunch of 6 year olds?  This appears to be something specific to the Liberal and Labour parties where the assurance of their numbers brings out an immature gang mentality that engenders extended periods of cruel game-playing.  However, the smaller parties are typically in the venue to represent a small and serious minority with serious concerns that do not get much serious attention (did I use it enough times?) from the big 2, and therefore act with much more maturity and sincerity.  I have a feeling that the smaller parties have a very real fear that they may be unelected if they don’t live up to their electors’ expectations, whereas the members of the larger parties have a sense of impunity due to the undiscerning and uncritical voting habits of the general populace.  I think it was Joe Hockey that pointed out that this was but a small slice of the interactions in government and just a small chance for them to blow off steam, but when you actually watch Question Time and are presented with this behaviour, you see the speaker of the house exasperated and having to shout the representatives down, you see it take 10 minutes to get a single answer past interjections and argument … and you know that there is a foreign delegation in the room watching this mockery … you get a sinking feeling of doom … you become angry that these elected officials think that this is an appropriate offering to the national and international audiences.

Surely there has to be an alternative to this contrarian, childish status-quo.  We’ve already seen it, in the serious representatives of the minor parties and in the bipartisan actions of great statesmen in the past.  People who are intent on holding true to their mandate, who do not expect to win an election by swinging in the wind and scoring points but instead by honest and serious dealing with issues.

What does it take to deserve, or demand, a better type of leadership?

Can’t we do better than this? Neo-classical Economics is a Pseudoscience

[Related links/people/books:

• Economists are the forgotten guilty men - additional commentary
• Nassim Nicholas Taleb: the prophet of boom and doom
• The Dahlem Report - additional commentary
• Trust me - the experts here at Davos don't know either
• PBS - Frontline - Meltdown
• The Great Repression - additional commentary
• George Soros - discussions of psychology and philosophy in economics
• Hyman Minsky
• Mendelbrot - The Misbehaviour of Markets - chaos maths in economics
• Imperfect Knowledge Economics (IKE) - by Roman Frydman and Michael Goldberg]

A prelude to set the scene – borrowed from a commenter on Steven Keen’s ‘DebtDeflation’ blog

Q:
What would happen if engineers designed a bridge the way neoclassical economists have designed their model of the global economy?

A:
- The bridge would have foundations of dried shaving foam labelled “Assume the presence of reinforced concrete here”
- 10% of the structure would consist of lengths of cotton thread bearing sticky-taped notes saying “IOU one girder|stringer|cable|etc”
- the remaining 90% would consist of large areas of empty space that are annotated on the plans as “Will be filled by endogenous creation of decking” or “Section not required because structure is in equilibrium”

Yet, paradoxically, when the first sparrow attempted to perch on the bridge and caused it to crumble into dust, its collapse would cause a magnitude 10.2 earthquake and devastate everything within a 1000km radius.

Recently I have been thinking about our national and global society and how random its modern successes and failures appear to be – how this seems a poor way to build on the huge back-history of momentous sacrifices, advances and “never again!” moments that have come before.  By now, surely, with our technologies and allegedly clear understanding of how the systems of our society operate, we should be free to plot our course and advance steadily on autopilot while focussing on improving ourselves in so many necessary ways.  Unfortunately, our economy and economic policy have recently struck me as being disturbingly like ancient astronomers using fanciful and utterly incorrect contraptions in an attempt to explain and predict the heavens.  Once I started poking around I noticed the very same parallel being drawn in these articles: Economists are the forgotten guilty men and Now is the time for a revolution in economic thought.

How are we ever going to be able to live peaceful lives in a stable, safe world when every context is governed by economic “wise men” performing digital auguries, based on logic flawed at its most basic levels, explaining everything with scapegoat-of-best-fit and constantly mis-steering us?

As I started this entry I ran into the blog of Steven Keen whose book “Debunking Economics” was (is?) sold by a previous workplace of mine.  What I have read of his logic and discussions always makes a huge amount of sense to me.  He rails against the most basic tenets of our economics – well at least the basic tenets of the neo-classical economics that defines, “explains” and “steers” our world today.

Neo-classical economics appears to use as a basis some things that appear rather obviously naive.  For example:  How can anyone base a massively interconnected system’s smooth running around the assumption that every actor in it has full knowledge of the state of the whole system?  In this form of economics, to the best of my meagre and un-nuanced understanding, this is the case.  So for the economy to run effectively, and balance itself properly, it relies on every purchaser knowing about every product that can meet their needs … and every quality of those products … and of their producers … and how the prices vary across localities … even how they vary over time … As if.  Next time you need some pumpkin make sure you bone up on the international market and figure in shipping prices before you decide where to buy it.  How can a human consider a fraction of this information in every purchase that we make – let alone obtain the information.  We’re all victims of geographic, vendor or supplier lock-in for almost everything we ever buy.

Another obvious naivete is the tenet that all parties in the system behave rationally – even mechanically or slavishly – following the logic and actions that an economist with full knowledge of the system would.  However … no-one ever does.  People and corporations are more subject to influences on their psychology than to logic in most cases.  A crash? I’d better jump.  Wrong – the market already crashed!  It’s too late – now you’ve lost almost all of your money (“crystallised your loses” as they term it).  I can think of a good example of where traditional economics breaks down:  in the fear that corporations show when faced with a low-price product – they won’t buy it – if it doesn’t cost them millions it must be flawed in some way.  However neo-classical economic axioms would dictate that a consumer should always buy the cheaper of two equally appropriate products…  Enter psychology and the bizarre effects that it has on buying patterns.  Another current example is the way that the banks, the corporations and the people are all holding their breath (and their money), resisting the economic and political pressures being applied and waiting for a clear sign to jump.  In neo-classical economics there is no pause, no holding of breath, no hesitation or second guessing – it anticipates we all have full knowledge of the situation and of the outcomes of our actions, that we will act and act immediately.

Looking at our current situation it is plain and obvious that the best thing we can do is to continue as normal, spending, lending and employing – however people are saving (I can’t blame them), banks are denying refinancing to major companies (even those with massive assets), and companies are sacking employees (despite having significant profit margins).  No-one in the whole network is listening to the pressures applied by the government or the economists.

Yet despite all this we trust the concepts built on these basic assumptions – but the assumptions are flawed.  And we build models on the concepts – and the models are guesstimates and oversimplifications at best.  And we rationalise the past based on these assumptions – but in the flurry of a national or global economy nothing is as simple as they paint it.  And we even make momentous commercial, national and global decisions based on these assumptions – and eventually something snaps and everything grinds to a shuddering halt…

Despite being trusted to explain and steer our economies, the ’science’ of economics seems to have been completely incapable of rectifying its own market failures.  Japan, the intellectual and technological giant, has spent years trying to pull itself out of its financial hole, however international analysts have looked at the results so far and questioned whether the neo-classical measures that were taken have done more harm than good.  Massive spending and incentives on the part of the government, intended to resurrect the economy, actually encouraged a bond bubble that burst and caused its own crisis in the midst of the one they were trying to climb out of.

How can an economics of this kind be considered a science, or be trusted as one would trust a true science, when its models (laws) cannot account for the past, prevent disasters or even rectify itself?  That’s what a science is!  We look at what has gone before, define patterns, derive rules, use those rules to explain how and why those things happened, and go as far as applying those rules in making predictions, which we then use to validate our model, and then use those rules to manipulate events.  But in the case of economics this is a farce – its numerous models are divergent, no prediction holds and models are constantly modified to better reflect the recent past with no regard for long term accuracy.  Anyone who occasionally listens to financial news, or is vaguely following the current crisis, can see that economics is more about greed/self-interest, fear/paranoia and desperation than laws – it’s more like financial psychology than a science, with an equally egregious history, hand-wavey present, and always brimming with mountains of retrospective wisdom.

How can anyone look at a national or global economy and not have chaos theory come to mind?  Billions of seemingly inconsequential actions over time, millions of conflicting influences on the actions, inertia inexplicably building up where people can’t see it and then suddenly a tipping point or an elastic limit is reached and the whole system unwinds catastrophically into a smoking heap.

Economic forecasting and planning using the established models appears to be less reliable than the oft slighted meteorology.

How can economists and governments watch our debt-to-GDP levels spiking (as they have done numerous times before) and allow or encourage it, leading us to the inevitable bust (as it has numerous times before)?

An insider critique of our economic tradition has been written and it seems quite damning, pronouncing this crisis as a market failure of the economics profession itself.  I find it amusing to see the report quote economics writers (traditional neo-classical economists) as having noted “… the possibility of an increase of ‘systemic risk.’ But … this aspect should not be the concern of the banks…because it is the governments’ responsibility to provide costless insurance against a system-wide crash…”

So, as far as those economists were concerned, things should be ok and yeah sure our system and actions may lead to bigger and bigger risks building up to threaten the whole economic system, but it’s all ok because the tax payer will be there to wear the outcome and cost of our speculations and shortcomings…

Anyway – enough prattling.

How Afraid of Change Are We?

Perhaps I should instead be asking “How mercenary have we become?” or “How afraid are we of thinking?” or even “Is there really a problem?”

At what point did the Australian public become so mercenary that it allowed the government to dictate their breeding habits through bribery? How did the government(s) make the mistake of playing into the hands of the current epidemic of short-term thinking, and the long-term pitfalls it entails? Perhaps it is naive of me to ask these sorts of questions after seeing the blatant vote buying that occurs at each and every election. However, at what point did the aging of our population dictate that we need to relive the post-war population boom? The very same boom in births that created the problem of the current rapid rise in the average age of our population.

Given our aging population with its inherent relative reduction in government revenue (lower taxes due to a higher proportion of retirees and reduction of the tax base) and anticipated increases in the number and duration of pensions, why is the only viable solution to continually march towards some theoretically infinite population in the distant future? However, as crazy as it sounds that appears to be our plan. Our current policies logically dictate, when someone bothers to make the obvious extrapolation, that we aim to increase our population, ad-infinitum, at whatever rate is required to balance the books.

Not only are we breeding to balance the books, but we are also effectively importing tax payers and their children to contribute to this “solution”. In addition it appears that pensioners have been the powerless and silent victims of inflation for many years, watching their pensions covering fewer and fewer expenses, less and less food, less and less medical treatment, due to the lack of indexation. So our current policy also seems to be to deny pensioners food and vital medicines (ironically inviting huge hospitalisation costs down the track) in order to reduce their drain on the budget. How many other established spending policies are penny-wise and pound-foolish?

Our options seem to be that a) at some point we solve the problem through a tuning or rethink of our systems, b) we accept that our population will be forced to grow to infinite proportions, or c) perhaps there is no problem inherent in the aging of the population.

How can we even consider our current path (seemingly option ‘b’) in the knowledge of the hard constraints that are dictated by reality, such as water shortages, the consumption of our arable land, new infrastructure requirements, existing stresses on already inadequate infrastructure and so on? Have we all implicitly agreed to defer the issue, inevitably sowing the seeds of further and greater problems and, in doing so, left bigger issues, harder thinking and decisions for the next generation?

The thing I would like to know is: when did we stop being the smart country, the birthplace of so much vital thought, and instead allow ourselves to become intellectually lazy to the point of purely maintaining the status quo, mimicking the patterns of the past irrespective of the consequences? Has the typical requirement of governments justifying their actions been sidestepped by anaesthetising the population with low-hanging percuniary fruit?

What other options are there in this endeavour to re-balance the budget? And no, I’m not talking about “Soylent Green” or “The Running Man” type solutions – don’t even try to tell me that is what I am advocating or that it is the only other option.

For starters, we are living longer and many retirees feel they are discarded too soon – why not allow people to continue working for a larger proportion of their life as used be the case? This would raise the tax revenues (by broadening the tax base) and lower the outgoings for pensions immediately. I know that many people would glady take up the option to continue using the experience they have developed over the decades.

Another important question that comes to mind is that of self-funded retirees – those whose superannuation can be reasonably expected to support themselves until death. How will the maturation of our superannuation regulations impact the proportion of our population that is forced to rely on a government pension? This is a factor that I have never heard mentioned as a factor by anyone in the discussions of population aging. Surely at some point in the near future there should be the realistic expectation that the majority of retirees will be self-funded for the majority of their retired life. We have also had a policy of encouraging private health cover which, if it continues, should mitigate the issue of health costs to a significant degree. Luckily I have chanced upon a pre-financial-crisis analysis, which seems to have been considered worthwhile by the RBA, that explores these matters quantitatively (http://www.rba.gov.au/EconomicsCompetition/2007/Pdf/2007_second_prize.pdf). The analysis anticipates these superannuation regulations to cause a near halving of the proportion of people requiring a pension as their primary income during retirement. As a balance it anticipates a doubling of the spending on aged health care (though smaller in total than the pension), however if the proportion of the population contributing to private health care were to rise then this factor could become negligible.

If this is the case then how do we justify our fear of the aging of our population? How do we point to this increasing average age and justify throwing huge sums of money at the populace to encourage boom-bust style and ill-considered reproduction? After all, a significant proportion of the beneficiaries of the “baby bonus” saw it as a way to afford a large flat screen TV or rapidly stack bonuses into a small fortune, not as a small payment intended to alleviate the huge costs of responsibly raising a child.

Currently there is also a very real fear that the superannuation we save may evaporate or be too little to tide us over in reasonable comfort for the increasing proportion of our lives being spent in retirement. People are actually having to worry that they may live too long and see themselves being added to those that rely on the pension. Also, having witnessed the wholesale devaluation of superannuation savings in the current downturn, it would be prudent to ask whether anyone can reasonably expect their own savings, whether self-managed or fund-managed, to emerge unscathed from every bust and devaluation during their employment -and- during the whole of their retirement.

So do we also need more stringent regulation and risk mitigation on superannuation mechanisms to avoid the all too frequent loss of people’s life savings, and also to avoid the recent losses caused by over-reliance on investment in the stock markets that are so well known for their booms and busts. Are funds too profit focussed to be safe as storehouses for superannuation after retirement? Might we be forced to bank the whole sum at retirement to avoid permanent ruin in the busts that will inevitably follow? Self-funded retirees are not in a position to ride out asset devaluations easily and are liable to be dumped wholesale onto pensions permanently if the upset is significant. Do we need a bank guarantee of some sort to restore faith in the security of our hard earned savings?

As you can see, I am asking a lot more questions here than I am answering, but surely if enough intelligent people were having more discussions about these matters in public view (rather than the populace being led around by the nose through the crises du jour) then there would be less questions to address.

I’d welcome constructive suggestions and hard facts from any source that cares to read and contribute.

I’ll be posting about something else that irks me soon – standby.