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We are Information-Based Lifeforms
Human beings do not come equipped with fangs, claws, or thick fur. We’re not hard-wired to know what things we can eat and which we must avoid. We only survive through knowledge, knowledge acquired through sometimes fatal trial-and-error. Through such experimentation, we have evolved societies so complex that no one can understand more than an insignificant piece of them.
Fortunately, we have also evolved market processes, operating within a rule-of-law framework, that generates, assembles, and communicates the countless bits of information that exist in the minds of millions of people around the world, allowing them to cooperate with each other and coordinate their activities. The processes work so seamlessly and automatically that we need not be aware of their existence.
When governments do much more than, as Adam Smith wrote, maintain “peace, easy taxes, and a tolerable administration of justice,” they distort the information that the market generates and transmits. Manipulating the money supply, controlling wages and prices, subsidizing this industry, or penalizing that, all alter the prices by which markets convey their information. The falsification of data causes scarce resources that have alternative uses to be misallocated. The result is waste, pollution, poverty, and “business cycles.”
We are information-based lifeforms and we perform poorly in a world of disinformation.
Published in General
If I am understanding you correctly, you are capturing in words a phenomenon that I reflect on periodically. I take an example like road-building (perhaps not an ideal example due to its connection to bureaucracy) with its interaction of different levels of governance, along with local expertise informed by years of standardized knowledge. The huge network of highways and roads in our country resulting from that process blows my mind. I’m almost uncomfortable and exhausted by the idea that although I experience a financial cost, I don’t have to know a thing about roads–nothing technical, mental, or physical is directly demanded of me to produce and maintain them. Yet, I can use them to go about my life pursuits. All the cogs and wheels and tiny working pieces in our society is getting this network done, just one part of what we need to keep society moving.
I think what you are expressing is related to what Milton Friedman explained about the free market–how it can be compared to an organism in how it arises and develops naturally, akin to how language evolves without outside interference.
P.S.: What do you think of the fed’s role in adjusting interest rates, etc.? Also, the existence or role of a national bank has been a debate going back possibly to the early years of the Republic.
I like to compare the Fed’s job of steering the economy to trying to steer a car with some very special features: Its windshield is frosted so that the driver can’t see where she is going, and its side windows are just clear enough to allow her only a vague idea of where she is. The rear window alone affords an unobstructed view. Finally, the steering linkage is on a 30-second delay; the car will not change course until half a minute after the driver turns the steering wheel.
Now imagine trying to drive the car. You steer a straight course as long as you see the highway stretching out behind you in the rear-view mirror. When the road curves, you realize it only after you’ve driven off the shoulder. You turn the wheel to get back on the highway, but nothing happens. So, you turn the wheel a bit more. Again, nothing happens, so you turn the wheel still farther. Suddenly, the steering kicks in, and the car veers wildly. Desperately, you swing the wheel in the other direction, but the car continues drifting the other way. What follows is a series of violent overcorrections ending in a crash.
Trying to regulate a nation’s money supply works about the same way. Central bankers cannot peer into the future. They see only dimly where they are, and it is only in hindsight that their vision is reasonably clear. The impact of adjustments they make to the money supply may not be fully felt for a year or more. Such a system, like our car, is inherently unstable.
America’s central bank, the Federal Reserve, has a few extra gadgets in its vehicle to help the driver. A power assist has been added to both the brakes and the gas pedal. This assist, known as the “fractional-reserve banking system,” amplifies the Fed’s actions, though only after a variable time lag. In addition, the car’s dashboard includes a host of compasses – each pointing in a slightly different direction. These compasses (also on a time lag) sport labels such as: M1, M2, and MZM; CPI (the Consumer Price Index – a measure of general price changes), the Federal Funds rate (the interest rate that the Fed charges banks on loans), and the price of gold.
Even with these helpful additional features, driving the car can still be a bit tricky. Fortunately, Congress has thoughtfully provided the driver with some useful instructions. She is to maintain a steady speed to ensure a stable currency while, at the same time, continually accelerating to ensure full employment.
This is an instructive analogy. Thanks!
The problem is not disinformation, but disinformation from supposedly trustworthy sources. There is a lag, as with your analogy of the Fed steering, in adjusting to the reality that the trusted source can no longer be trusted. But we humans do pretty well when we know sources cannot be trusted. It’s just mixing the two types of sources that causes problems.
End the Fed. (Or is it too late and the money system will rightly collapse without the constant injection of money?)
The stock market will sure take a hit, but they can’t keep the spigot open forever. The big worry now is hyperinflation and the end of the dollar’s rein as the world’s currency.
China has been stocking up on gold, possibly with the aim of offering a gold-backed yuan as an alternative to the dollar should it collapse. Xi has shown himself to be such a bad actor that he may have scuttled that possibility.
Let’s hope.
Russia has also been buying up gold, I think recently as well. There has been talk of plans of Russian-China trade being conducted in gold backed Yuan.
I don’t want to get all conspiratorial, but Libya and Iraq, I believe, and others were going to mint a gold coin [the dinar, I believe], and go back to the gold standard, but then Iraq fell to the US and Libya fell by the US, so that ended that. And I’ve never heard where the Libyan gold went.
So, maybe war (economic, hybrid or hot) with China is next.
I largely agree, but the Big Lie mechanism of repetition and saturation is still effective, even against wary minds.
The short visual depiction of that:
There’s a distinct family resemblance.
You are missing something big here; perhaps the most important thing. Humans don’t respond to facts they respond to stories. The story that white copes kill innocent black men is compelling so people respond to it. All the facts only appeal to a certain (usually conservative) mindset.