Of General Interest Politics/policy and origins issues

Thoughts on roots of growth and the ultimate resource — us

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First, a Merry Christmas and a happy new year to one and all!

Next, I ran across a lecture on Macro-Economics by Roger W Garrison of Auburn that I thought would be well worth digesting with some Turkey and Ham etc:

[youtube tR-Tta3Pm28]

I think this is of general interest, and also connects to one of the driving factors in elections and general policy trends: people vote their pocketbooks. Where, also, economic policies and promises are a key component of policy platforms that include issues on education, sci-tech and the like. So, understanding that wider context is relevant to debates over the design perspective. At basic level, we need to have enough of a layman’s grasp to address the “war on science/ progress” theme that so often drives appeals to reject design oriented thought as inimical to economic and general “progress.” (Somehow, progress to what tends to get ignored or overlooked.)

Let me zoom in a bit and extract and augment Hayek’s investment/production phases, value added triangle:

investment_wedge

The pivotal point here is that long before we get to consumable products, there is a long tail of investments and value-adding production rooted in resources and in the ultimate resource, the community of productive, capable people. So we need to modify the old saying, first you gotta grow it or mine it to include: educate it. That way as we “go around the circle” we can see that an economy depends on a natural resource base and is rooted in the community. Three nodal sectors join the domains: natural resources & hazards management, management and support of the human resource (through health, education and welfare efforts), and governance involving culture of governance and leadership, policy-making and policy implementing institutions that affect economic activities.

Garrison powerfully uses the production possibilities frontier model (in the form of capital investment vs consumption spending) to link the investment triangle and a loanable funds market model. I adapt:

hayek_triangle_macro

Here, we can see how in aggregate, the value producing chain of investments (duly lagged) contributes to consumption and investment. Most investment, of course, is replacement but some opens up new growth. And by shifting  to a savings-investment oriented culture, we can see how growth may be enhanced by a first sacrifice of consumption. Which will increase supply in the loanable funds market, naturally reducing rate of interest. In turn, that makes funds available to the longer-term, deeper investments that feed long term growth capability in an economy.

This brings up the challenge of tickling a dragon’s tail.

For, through monetary policy based intervention in the market, interest rate can be reduced, in an effort to trigger enhanced investment and growth. With people still inclined to consume at a higher level than where that moves us on the PPF frontier, the economy tends to move into the beyond the frontier arc of sustainable production levels. This is dangerous, but potentially strategic. Dangerous, as it may feed a malinvestment led boom triggering imbalances in the economy and feeding the tendency of any highly complex system with lags and feedback loops to become oscillatory . . . most famously the 8 – 11 or so year main wave [Kuznets] business cycle:

business_cycle_graph(In some cases, this can lead to outright depression. More, in a moment.)

Strategic, as it can help accelerate growth. Thus, the dangerous, dragon-taming role of development banking and linked investment banking or venture capital investing.

From another perspective, the Aggregate Supply/ Demand (AS-AD) view, we can see that a macro-economy has a general price level and level of output (GDP), more or less based on adding up individual markets [through the Leontieff input-output table that avoids double-counting]:

asad_macro1

The trick here is that as aggregate demand rises, bottlenecks appear and the economy saturates. It then tends to resist growth while becoming inflationary; overheating — one form of stagflation. Also, a shocked economy . . . oil price/supply shocks are classic . . . can compress the AS curve, pushing it in, suddenly stagnating an economy. To grow again, such an economy must create room to grow, by expanding relevant supply. (Down this road lies Hitler’s obsession with Lebensraum in the East at the expense of the Slavs, and of course just coincidentally this corresponds to dominance of the Eurasian heartland Mackinder discussed in his famous 1904 lecture on Geopolitics. [More, later; DV. Or if you are impatient, cf. here.] This will gve us a context for criticism of social darwinism and its legacy.)

Drawing back a bit, we can take a long term view, based on Perez’s S-curve generation-dominating technology perspective on the Kondratieff long wave:

tech_innov_diff_wave

Such an S-curve, per simple calculus, is the cumulative effect of a bell-shaped pulse of action, centred on the inflection point. Here, a generation-length wave of innovation and adoption that I like to picture from a marketing/investment perspective:

GenericProdStrategyChoice

The point here, is that dominant technologies are designed, funded and introduced, then surge into a marketplace, revolutionising the economic landscape. This is a context for Schumpeter’s creative destruction, by which the creation of a wave of new wealth undermines and makes obsolete old technologies and systems. And, in a limited resource world, we see saturation and dominance for a time.

Then, a new generation breaks in on the scene and the process repeats.

Immediately, this tells us that evolution of technology can be revolutionary and can happen suddenly. That is we see sudden appearance, dominance saturation/stasis, sudden disappearance and replacement, etc. But the world of technology is also telling us that intelligent creativity and design are drivers of such revolutions — in our experience. (The cultural dominance of “Evolution” tends to make us lose sight of the reliably observed source of innovation that comes out in functionally specific, complex, information-rich organised entities and systems [FSCO/I], intelligent design.)

Already, this is important, as it gives us a context of reference for thinking about transformational, revolutionary change, the pattern of a succession of eras dominated by a given order, and evolution by design.

An associated issue is the role of the human resource, especially what lies between our ears:

the_brain

The Smith Model for bio-cybernetic systems will also help us:

The Derek Smith two-tier controller cybernetic model
The Derek Smith two-tier controller cybernetic model

I have long argued that the brain is a processor substrate for the brain-body loop, but that we must also reckon that computation in the end is a blindly mechanical process, much like Leibniz’s mill wheels grinding one against the other. The explanation for the functionally successful complex organisation lies elsewhere than the inherently mechanical process of computation. Likewise, the responsible rational freedom that is a foundation of reasoning, warranting, knowing etc is not found in wheels grinding on wheels. Computation simply is not rational contemplation.

We thus see that the dominant, apparently oh so crassly material processes, products, dynamics and systems of an evolving high tech economy driven world pivot on creativity, ideas and designs deriving from the responsibly free, rationally reflective, deciding mind.

Of this, we must not lose sight.

(And of course, this points to the importance of health, education and welfare concerns in promoting the long term good.)

Pulling back, it seems in retrospect that the oil price surge of 2007 – 9 and high ptrice of oil for some years:

Oil Price 2006 - 15, NASDAQ
Oil Price 2006 – 15, NASDAQ

. . . and the 2008 – 9 global financial crisis and recession that have led to the lingering sluggish world economy, point to a long wave trough. So, the issue is, which technologies will power a new wave of transformation. Likely, a combination of deepening Information, Communication and Control Technologies, gene engineering based biotech and energy innovations.

All of which point to the central role of design in the creation of FSCO/I rich systems.

The dominant trends, then, point to a climate favourable to design and information based thinking.

Precisely the ideas climate in which ID will continue to thrive and grow. Somewhere out there, the shade of Marx is laughing. END

13 Replies to “Thoughts on roots of growth and the ultimate resource — us

  1. 1
    kairosfocus says:

    Merry Christmas to one and all, and a happy new year when it comes in a week’s time.

  2. 2

    Thanks KF and the same back at you.

    And thanks for that Smith Model for bio-cybernetic systems — much to digest in that graphic, especially to a software/systems guy like myself.

  3. 3
    kairosfocus says:

    AYP, pop me an email and I will send you some eye opening stuff from Smith himself. A great researcher and thinker. KF

  4. 4
    Eugen says:

    Thanks for an interesting post Kairos, I’ll watch video later. Merry Christmas!!

  5. 5
    kairosfocus says:

    Eugen, same to you! KF

  6. 6
    Robert Byers says:

    I have no confidence with anything from Austria or diagrams of the brain BUT i do agree its about US.
    Adam Smith was the first to get these things wrong.
    He tried to say wealth came from a newtonian system of human motivations.
    He said this because of newtons prestige in physics and i believe a atheistic and very anti Protestant stance. Not sure but pretty sure.
    Yet in reality wealth in nations as in people is entirely a matter of identity and intelligence. It is not human motivation for gain.
    Wealth, where applied, is relative to a person or peoples intelligence(after gods blessing) Its not newtonian.
    Smarter people make a smarter home. its fine to have no interference, free enterprise capitalism, however its only a special case that not interfering with smart people is better then interfering. Yet interfered smart people will beat non interfered dumber people.
    This is why the soviet union caught up fast with the west and the only reason to fail was a intellectually backward people relative to us. yet considering where they came from they moved faster in economic growth then the west in the beginning.

  7. 7
    kairosfocus says:

    F/N: How does believing that the world of life has in it strong signs of design (e.g. complex, coded algorithmic info and execution machinery) and/or the historic understanding of science and its methods, become translated into being ill equipped for a sci-tech era and for college? Especially, where design and information-based systems are focal to such an era? And, where it is increasingly clear that cell based life pivots on such systems? KF

    PS: For context, consider the US NAS/NSTA letter on the Kansas Science definition issue, especially:

    . . . the members of the Kansas State Board of Education who produced Draft 2-d of the KSES have deleted text defining science as a search for natural explanations of observable phenomena, blurring the line between scientific and other ways of understanding. Emphasizing controversy in the theory of evolution — when in fact all modern theories of science are continually tested and verified — and distorting the definition of science are inconsistent with our Standards and a disservice to the students of Kansas. Regretfully, many of the statements made in the KSES related to the nature of science and evolution also violate the document’s mission and vision. Kansas students will not be well-prepared for the rigors of higher education or the demands of an increasingly complex and technologically-driven world if their science education is based on these standards. Instead, they will put the students of Kansas at a competitive disadvantage as they take their place in the world.

    Note, the traditional definition being challenged was:

    KS, 2005 Definition: “Science is a systematic method of continuing investigation, that uses observation, hypothesis testing, measurement, experimentation, logical argument and theory building, to lead to more adequate explanations of natural phenomena.”

    . . . and the novel definition it sought to correct was:

    KS, 2001 Definition: “Science is the human activity of seeking natural explanations of the world around us.”

  8. 8
    kairosfocus says:

    F/N2: How important is it for John and/or Jane Q Public to become significantly better informed on core macro economics in an era where elections typically pivot on economic concerns? Just how well informed is the typical voter, especially as regards the concept that gov’t can “stimulate” the economy? Does s/he understand that monetary and/or fiscal interventions are often a case of tickling a dragon’s tail, especially where a public debt and/or public policy fuelled, malinvestment-based boom is triggered and leads to bubbles? [Think about sub prime mortgages tied to an em-brittled financial system and tightening up oil supply markets with the effective buffer capacity c 2007 – 9 being in the hands of the Saudis . . . ) What about things that are deemed too big to fail? How does the issue of a saturated and/or shocked and/or outdated economy . . . one based on major sectors vulnerable to the destruction side of creative destruction . . . needing to develop room for growth based on breakthrough innovations affect how we need to think about the long term? KF

  9. 9
    kairosfocus says:

    F/N3: What about Mackinder’s idea that the rise of rail etc allowed harnessing the resources of esp. the Eurasian heartland to create a global powerhouse that could destabilise the world geopolitically. (He had in mind a Russian or German super-state.) How about the concept that in our time Africa represents a similar high potential, weakly held continental basis, which will become the pivotal area for global power pushes in C21, especially coming through a contention between the West, the Islamic powers and China? Which last is already undertaking major investments especially to extract and ship raw materials to feed its hungry factories. What does such imply for the US as the leading maritime power? But one facing a 100 trillion dollar cumulative explicit and implicit public debt and/or obligation crisis? KF

  10. 10
    kairosfocus says:

    RB: Does labelling something as “Austrian” suffice to address the issues? KF

    PS: IIRC, AS-AD type analysis traces to Keynes etc. Kondratiev was Russian, and Schumpeter was only tangentially connected to the Austrian school; some Geographers argue we are in the 19th essentially tech/innovation driven long wave since the Song dynasty in China in the 900s; spectral analysis confirms there is “energy” in the right band to be a long wave too — it’s real. Ask Mr K’s ghost about the 1930’s. PPF is a commonplace, although Garrison seems to be innovative in applying it to a sort of intermediate level, underpinnings of Macro C and/or I tradeoff analysis; which is openly influenced by Keynes and Y = C + I + G + (X – Im) etc . . . which with wages being sticky downwards is a good slice of the core of the Keynesian revolution. ( Mix in Keynesian Cross and Consumption Function etc: https://www.youtube.com/watch?v=sTw0e-hwYAQ ) Loanable funds is little more than an application of S-D analysis. The Hayek production phases/time/ investments picture is a way to capture that at any time lagged long term investments in the early phases of an industry are crucial. I am emphasising the human resource (esp. between our ears), the linked issues of economy, community and natural base, with the implied challenges of governance and sustainability. And yes, Bruntland et al have a point.

  11. 11
    kairosfocus says:

    RB, I also have no problem with viewing the brain-body system as a bio-cybernetic loop, with the brain as an I/O computational controller. That particular kinds of processing would be in material part located in particular brain areas amenable to functional MRI analysis, is also non problematic. Especially as there is an architecture that points to a supervisory controller that integrates with the loop. Thus we see room for discussion of responsible rational self-aware freedom and for the brain as an I/O processor. KF

    PS: Just to toss in a live grenade, Hispanics are mostly Catholic with likely some animist influences. If Sci-Tech were not so wedded to atheistical evolutionary materialistic scientism and linked secularist revisionism of the history of ideas, would not such be very open to a design oriented approach? Which also fits an information age? So, is an increasingly Hispanic North America not a major opportunity for a more design friendly approach to science? (And, is evo mat scientism riding a demographic slide to extinction?)

    PPPS: I am looking at Java as a pivotal programming language for unleashing digital productivity, with an eye to math, visualisation and charting and sci-tech libraries, also ability to integrate things like Scala and Matlab. (BTW is there anybody out there who has modded Java to integrate such similar to how Windows applications readily take extensions?) At the other end, I am looking at Java’s ability to interface to children’s introductory languages such as Scratch, Alice and Greenfoot. And I have in mind that programming gives excellent exposure to the issue of dynamical coherence and to the logic of processes. Mix in interfacing and the Arduino and Raspberry Pi, and I can see whole domains of investment in the human resource and community capacity that can be very cost effective with huge leverage on economic opportunity.

  12. 12
    Robert Byers says:

    The concept of humanity has already been discussed by humanity.
    There is no evidence or reason to see a brain replacing the concept of the soul as the exclusive thinking thing. The mind only being a information system to work with. Wonderful and intimate but only a memory machine.
    Other ideas must earn their spurs.
    Evolutions brain idea has not done so but by aggression.

    I don’t see or desire a hispanic curve in North america and surely it would have no influence. it has no influence in those peoples own nations.
    Foreign immigrants just fall into line and never lead or contribute. Never happened yet.
    design friendly is already won with the public. its just forcing into submission deniers that design is a better option for creation.

  13. 13
    kairosfocus says:

    RB:

    The fundamental challenge posed by materialists is, in effect, seeing is believing. They see brains and nerves controlling bodies, they see computers, they infer that brains are enough.

    It is a shock for such to be asked, how do you bridge from computation and control/cybernetic loops to self aware, responsible, insightful, rational freedom. And, it deepens the shock, to learn that computational substrates work by blindly mechanical cause-effect chains, much like mill wheels grinding one against the other. It is functional organisation and carefully defined algorithmic information joined to loop tuning that allows effective function. And that leaves rationality, responsibility, genuine freedom, decision, purpose, intentionality, qualia [redness of a rose] etc unexplained.

    Don’t mention the self referential incoherence of evolutionary materialistic scientism.

    I point to demographics, and that speaks to hispanic influenced future.

    In the USA, immigrants, strictly, are forbidden the presidency. Though currently, the president is son of an immigrant Kenyan (for a time). A few years back, a son of Jamaican immigrants was Chairman, Joint Chiefs of Staff, Defense Secretary and Secretary of state, also a serious potential presidential candidate. He also happens to be (on one side of his family) a descendant of the UK Royal family through one of Queen Victoria’s sons. Similarly, a certain Heinz Kissinger shaped US foreign policy for decades. Much of the US’ surge to global sci-tech leadership traces to emigre scholars fleeing the rise of fascism in Europe in the 1930’s; think Einstein, von Neumann, Fermi, etc. Operation Paperclip’s scientists etc as war booty had more to do with the success of the Moon shot programme than many realise, starting with von Braun, chief rocket scientist.

    Historically, a Whitefield, a Wesley, a Lafayette, a von Steuben, even a visiting de Toqueville, a Carnegie (a Scottish immigrant), a Tesla, a Steinmetz and so many more have exerted considerable leadership in North America. Others such as Locke, exerted influence without even being there.

    Immigrants have exerted leadership, and material contribution is far more widespread.

    As for the rise of an information era vision of science and with it greater openness to design thought, there is a battle, but it needs to be seen that the trends are ID friendly.

    Where, such a view has to be understood as not opposed to genuine progress but instead likely to enhance it. Just contrast the two KS definitions for the classroom of science to see some of that.

    KF

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