The
Republican Candidates’ debate last night reminds me a lot of that famous short
video, where a big 900 pound gorilla actually appears on screen right in the
middle of a crowd of people in the middle of the screen but most people don’t
even notice it. And no – I am not referring to Trump, who did not appear at
all. Actually, there were a few interesting zingers, which the CNN commentators
did not notice...
The
biggest zinger for me was Rand Paul’s reference to a bill to “enforce
transparency and accountability” over the Federal Reserve, which Cruz strongly
supported. Yes, it seems clear now that Cruz is most fundamentally a puppet of
the oil folks, whose biggest endorsement is from Perry of Texas, another
such... but there are also folks out there who really do want to abolish the
Federal Reserve. There are SOME greedy folks in the financial sector who give
money to selected puppets to try to get favors which take from the middle class
and give to the poor, but there are other folks in the financial sector who
simply appreciate how bad it would be for all of us to have a world economic
depression. Serious talk by a leading candidate aimed at abolishing the federal
reserve is certainly a reasonable explanation for a lot of donors of the second
kind.
Just
how serious is it with the Federal Reserve?
The
Federal Reserve has a lot of parallels to the National Science Foundation
(NSF), where I worked for almost 30 years until almost one year ago. There are
lots of pockets of excellence and honesty in the federal government, and lots
of areas of the exact opposite – but on the whole I think of NSF and the FED as
the two areas where the highest level of excellence has been maintained the
most over the last few decades. Government OFTEN is stupid and oppressive and
corrupt, but it does not have to be that way. Ironically, a lot of the worst corruption is
associated with cynical people, such as some of the Republican Congressmen
swept in as part of Reagan’s coattails (with some time delay) who will say that
government is terrible, and then act to make sure it becomes so. I have seen
egregious tings on the Democratic side too, but a lot of the complaints sound
the way it would... if Nazi Germany did a PR attack on Israel, complaining
about how much military might Israel had mobilized... not mentioning their own.
Of
course, I know NSF better. NSF was funding above all two areas – high risk
basic research and education – which any really serious market economist knows do
call for effort above and beyond what short-term market forces would provide.
The great vision of Vannevar Bush, the greatest Bush by far, was to build a
foundation which was “in the government but not of it,” operated as much as
possible away from politics, based on the highest possible standards of
excellence, like a great university, staffed in great part by university people
trained to high independence and excellence. It was a vision of truly open
competition, with as much transparency as possible – and full feedback to all
applicants on the full truth of what happened to their proposals (to within the
legitimate limits of the privacy act and respect for IP) and the most constructive
possible guidance. No pork barrel additions or plus-up earmarks whatsoever.
None. Many generations of NSF directors (mostly recommended by the American
Physical Society APS or by “the deans”) were very strict about defending this
system, about not allowing even a tiny foothold for corruption (a slippery
slope), and about supporting the kind of free speech and honest dialogue
essential to making it work.
I
remember very clearly the time in 1988/1989 when I transitioned from a very
important but very constrained job at the Department of Energy to NSF – about the
same time as the fall of the Berlin Wall. “I fell like those other Germans...
escaping from the Iron Curtain to the free world, back to free speech and the
America I THOUGHT I was growing up in, in those old days in Philadelphia.” I
remember a colleague at DOE (higher in the chain) who said to me: “Your escape
gives hope to the rest of us locked up here (“lifers”) between these four white
walls.” Cynics said: “You have moved from a company which was a joint venture wholly
owned by the oil companies and the nucs to a smaller one jointly owned by APS
and the deans. You will benefit from a better corporate culture... for now...
until the oil folks get motivated to try M&A, or other stakeholders get
into the game.” And so it was. At first, when a new Congressional initiative
was announced on “Transparency and Accountability,” I shrugged my shoulders and
thought: “so what else is new? Those are two of the most fundamental values NSF
has always stood for. Sure, it’s good to reaffirm them, and we’ll do that...
but I have some other work to do in that space.” But then... well... did Goebbels
ever spearhead a “peace in our time” initiative? For awhile, the science
societies tried to push hard against the very worst of the abuses, when it
became clearer who the community was supposed to become accountable to as their
new line employers... and when certain staffers appeared to micromanage the
handling of selected proposals.... Chakkah Fattah, for all his failings,
spearheaded a lot of the resistance, until the FBI took him down, at the urging
of the same “cybersecurity expert” using it to take down Hillary Clinton with
far less real justification. And no, I have no plans at all to just dump in the
open all the many concrete threads and scenes of this complicated story. Still,
one thread: a minor staffing problem, requiring more transfers from other
agencies to fill in positions, especially program director positions formerly
held by rotators from universities, a system which several Congressional
staffers say they want to stop.
I was
certainly not the first to retire as the New Order came in, and there are
certainly others younger and more energetic than myself who may have a good
chance to fully restore the great vision of Vannevar Bush. But there are also many others who simply
chose to retire even before I did. I remember asking one of them, who got hit a
lot sooner and harder than I did: “Exactly what happened?” His reply: “All I
can say is... I owe you SOME answer... I can say... it is not the same NSF.”
And
so: last night, when Paul and Cruz announced they wanted a similar “accountability
and transparency” initiative at the Fed, a giant flood of explanation and
possibility and other aspects I haven’t written up yet all flooded into my
mind. In a way, it was similar to the “near death” experience in Florianapolis
which I mentioned in my previous blog post.
Especially since I do also know a lot about the Fed, and about what it
has been doing.
Of
course, I also know about people like Sarah Palin who legitimately distrust “all
those rich establishment people who are screwing us” (except for her minor “drill
baby drill” connections), and would be as eager to see the heads of those rich
people on a platter as were similar women at the time of the French Revolution.
Understandable. Maybe even Sanders might have quiet sympathies with those
feelings. Certainly I remember the Burr-Hamilton duel, and a serious threat
that SOME English-oriented bankers posed to the new emerging Republic. But
unconditional “racism” against bankers is as bad as unconditional “racism”
against Moslems or against self-proclaimed Christians, even though all three
groups do have some awful subgroups. (Jesus himself warned about the evil folks who
would come later pretending to speak in his name, but he didn’t get to speak on
Fox News last night... though in one brief moment Megan Kelly did give a hint
of his existence, which CNN commentators didn’t seem to notice. Now that I
think of it, Ayn Rand also warned against certain phony representatives of the
private sector in DC politics, and her follower Alan Greenspan is very much a
part of the story of the Fed.)
There
is little doubt in my mind that there is a serious risk now in American
politics of candidates not only for President but for other offices (like those
already capable of imposing a Dunkirk on NSF) imposing a twisted version of “accountability
and transparency” on the Fed which would be “transparent” only in the sense of
dumbing it down,
and
accountability and accessibility only to those campaign contributors who lurk
behind the likes of Rand Paul and Ted Cruz.
This
is a really serious risk, a risk to the entire world, because a really serious
global depression could result. The fact is that the world economy is a
nontrivial complex system. One might compare it to a complex aircraft (like
SR-71), where ripping out the automatic controls and turning it over a gee-whiz
enthusiastic two-year old unaware of the physics ... would be a way to kill the
two year old himself or herself as well as crash the aircraft. The world economy
is in a very delicate situation exactly right now. It could be handled
better... but on balance, the US part is in better shape and at less risk than
the EU or China part for now... despite things which could have killed us. The opportunity
to crash it all really fast is really obvious, to those who know how it works. No, it’s not just another play kitchen. It
requires the very highest levels of insight, excellence and understanding...
even to do the less-than-perfect job we see today.
Why I
do think I know that, enough to feel as upset as a parent in the passenger seat
as a wild kid drives next to ... lots of ways to die?
It’s
not that one or two of my four degrees was in economics, or that my GRE scores
in economics were about a hundred points higher than the next highest in the
Harvard economics department at the time... I learned a lot when I was at DOE,
and built the most accurate model ever of industrial energy demand (along with
transportation and oil and gas later). The Energy Modeling Forum of Stanford
validated that, and statisticians at Stanford had very good things to say about
the methodology. One percent error in multiyear backcasting is ‘way better than
an “R=square of 99 percent” (which should mean ten percent error in one-period
forecasting, but turned out to be far worse when we tested the models then best
known in that part of economics – all in the official DOE/EISA documents, details
posted on my regular web page). To drive that model, I had to fully understand
and use the Wharton Annual Model, which was far away the best model for
understanding interactions of energy and economy, AND interactions BETWEEN
different sectors of the economy. Both on that model, and on advanced “data
mining” statistical methods I developed, I interacted a lot with Mark French,
who moved from Wharton to the Fed. It drives me nuts at times to see how many
economic policy decisions are made by people whose intuition is limited to a “scalar
model,” WHETHER KEYNESIAN OR MONETARIST,
like the simple seven-equation model they taught in intermediate macroeconomics
at Harvard. From tracking real data in
periods of change, I learned how important STRUCTURAL CHANGE is, and how
important it is to see the whole vector picture, not just seven variables in
the head. Scalar thinking is the real reason why the EU is stuck in such a mess,
unable to appreciate the concrete things they could do to “have their cake and
eat it too.” The Fed does not see the whole picture either, but they have seen
enough of it to prevent what could have been a kind of rerun-but-worse of the
Great Depression (which, recall, was followed by the Nazi revolution). Hey,
folks, the Nazi Revolution would not be better even for the wild donors who
think Paul and Cruz are advancing their interests!
Why
don’t I show you the math here and now, instead of the background? Well, I have
summarized the math in other venues. Today I am retired, and will go back to
doing laundry in a few moments. A few hints on a few aspects lie at nss.org/EU.
A few
bits of the other stuff first?
OK.
Luda
got me to scan Pickety’s book. Yes, there is a new inequality problem. Yes, it
is serious. Someday I should do a whole piece on “leisure” for example – how we
ought to have more of it after the progress of automation, how the system has
been waylaid in part by a kind of imperfect competition like the models of Joan
Robinson but applied to the market for Congressmen, as well as to unique
input-output characteristic of the oil industry when oil prices are high, how “leisure”
has a strong link to key variables monitored in the “economics of happiness”
and to spiritual growth, a really serious variable feeding back to the other
variables (e.g. clobbering the price of oil when cultural and spiritual and
political distortions force overriding our appeals for a higher price on economic
grounds)... Konrad Lorenz versus Maslow. How “reformers” who are working to clobber
France’s culture should do the opposite, and assist other people.
Luda
has me watching the Netflix series “Occupied.” A powerful and stimulating
series, though of course (as with Ayn Rand and the Bible) best used if examined
from different perspectives. For example, do some people in the Middle East
already feel “occupied”? And must greens really be so stupid? (Minimizing the
probability of a fatal climate outcome calls for a strategy which understands
about dynamics of transition – like our RLADP mathematics. I have to admit that
I have seen left-brained greens as thick as some in that series.) But... I told
my friends in the real world, on the year I worked for Senator Specter... the bandaid
they need most for their brains is a better understanding of what Pareto
optimum really means. Even Richard Nixon, and even I when twelve, understood
how greater automation could be absorbed by a combination of things like more
leisure, more education and even negative income tax (with buffers to prevent
risky other things like welfare mothers with 12 children on drugs, extremes
which can be handled with moderate buffers)... Pareto optimality certainly does
NOT require the gradual phasing out of human existence from space first and
then earth.
Though
NASA was already gutted long before NSF (back when Congress set constraints for
the “60 day study” leading to Ares)... another case where rah-rah political
nonsense precludes serious technical success. NASA once was really great, but does anyone in
power really have the will to make it so again? I hear from lots of folks who
say “yes” – but then degenerate into iron triangle efforts to throw money away,
to friends on the left or friends on the right, but with no real prospect of
real product in either case.
Am
tempted to say something about an intelligent dream from night before last...
but ... not a proper time yet. Best of luck.
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