The Steev's Journal

Time:

12:41 am.

I essentially quote something Ron Paul said about the issues of the underlying crisis and the cry for more regulation:

"I think we have to define the issues rather well. How did we get into trouble? What is the problem? One thing we don't ever do is define "capital." In the free market, capital comes from savings. We don't have any savings. [Recently] we've had the luxury of creating as much so called "capital" as we want because we were able to issue the reserve currency of the world."

From my point of view, I think Ron Paul hits the nail on the head. In *free* markets, capital gets created as a natural part of economic surplus. In the world of federally mandated negative interest rates (where we have lived since the dot com bubble popped), we have - through improper use of reserves - given incentive to financial institutions to lend the transient funds of the "current" economy towards creating capital that the underlying economy simply doesn't need. Essentially, we have loaned out the money we need to cover our *current expenses* with the expectation that we could always profit by taking out another loan to cover those expenses.

Another way to put this is that our wacky system gives us incentive to create capital using our debt and not our savings. Again, negative interest permits us to make money from debt, but actually lose money from savings (because inflation will depreciate the savings account). Why this is bad is because excess debt is a symptom of over-capitalization of the current economy (some people in the economy are producing more than is needed) - and over-capitalization should never be taken as a queue to create more capital! On the other hand, monetary surplus is a symptom of under-capitalization and should result in more capital being created.

In other words, natural incentives get screwed when "interest rates < monetary inflation rates" I think this can only happen when interest rates are manipulated outside of the dynamics of the system.

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Subject:	Ramblings on Free Banking
Time:	1:26 pm.

Yes I am still alive. As has been historically the case, I return here to post when I have something relevant to say that I want subject to public scrutiny. What I want to blog about is my reflections on the current economic climate - how and why I believe we got into this CF, and where I believe we should go from here.

The current situation has caused me to read up on monetary policy. I have come to side with a widely held belief: at it's core, the US banking system is setup *fundamentally* to privatize profit and socialize risk.

There are many reasons why this is the case, but I believe the fundamental underlying mechanism that causes this is reserve banking. In the US at least, this means that the central bank has control of the money supply primarily by enforcing reserve requirements on all traditional banks in the United States.

This causes banks to be focused on gaming their reserve - as the reserve (rather than the underlying economy's demand for money) is what dictates the amount of money the bank can create. Studying this reserve system leads one to realize that banks are so tightly controlled by the central bank that it is ludicrous to make the claim that they are private institutions.

Systemic failures like present happen precisely because the federal reserve system is a *monolithic* structure and *not* a network of independent banks. Hence, risk is naturally socialized because the real shareholders of the system are the same shareholders that own the central bank and the government - US government account holders (aka citizens and bond holders). It is therefore unjust to privatize the profits of these banks as they are *not* private organizations.

The way I see it, there are at least two possible solutions to the fundamental problem.

The first solution is to abolish the central bank and eliminate the reserve requirement - hence establishing a free banking system. Internet economies like SecondLife showcase the mechanics and possibilities of a pure free banking system.

The primary concern I have with this solution is that there will likely be a chaotic period in which banks will be forced to reorganize their incentive structure. Many would fail (i.e. lose depositor trust), and this period would be very lengthy and painful. However, in the end I believe the most efficient structure for a private banking institution would be to align the role of depositor and shareholder. This would turn banks into cooperatives similar to modern credit unions - with the exception that they would have full control over their own money supply.

The second solution to the problem would be to fully "nationalize" the traditional banking system by having the treasury or federal reserve repurchase the shares of all banks in the reserve system. This would therefore restore banking profits to the true shareholders of the reserve system - the US citizens. With this move, the revenue from banks would become government revenue and should theoretically move us away from a taxpayer based revenue system. In this regard, I believe the government would be steered into a more robust incentive structure. It could be operated similar to a cooperative bank, and hence rather than nationalizing the banking system, this could be viewed as "privatizing" the whole government (in so much as a cooperative is a private organization).

The second solution is probably the better policy decision in order to ensure stability, but I think the second alternative is just the first step in establishing a truly pure free banking system.

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Subject:	Interesting Thoughts
Time:	6:04 pm.

I apologize if I'm just being slow on my understanding of the concept of multiverse, but consider this:

Our observable universe consists of a calculable sphere with the earth precisely in the center. This is also called the Hubble volume. This sphere extends out to the surface of last scattering, which is the furthest observable surface that is causally connected to our point in the universe.

Anything about the multiverse beyond the surface of last scattering is conjecture. However, we *can* prove that our region of space is relatively homogeneous and flat (i.e. space-time around us largely conforms to a euclidean manifold).

Since geocentrism has proved a fallacy in the past, there is no reason to assume our observable universe is any different from any other reference frame. It is realistic to assume that the principle of general covariance applies to the Multiverse as a whole. What this means is that every observable Hubble volume of the multi verse should be equivalent.

Since we have all but discounted a closed universe, that means the Multiverse has to be infinite to preserve the principle of covariance. The real kicker is that this means that there have to be an infinite number of non-overlapping Hubble volumes in the Multiverse (infinity does crazy stuff). Since the state of our Hubble volume can likely be described in finite terms (there is only so much energy/mass contained in the volume), that means there are an infinite number of other Hubble volumes in the Multiverse that are in *exactly* the same state as our own. Every past, current and future state of our observable universe has already occurred elsewhere in the Multiverse.

Considering our latest study of the CMB we have all but proven the universe is open (probably flat) and homogeneous. That means one only has to apply Occam's Razor to the principle of covariance in order to arrive at the conclusion that there are an infinite number of instances of you reading this email in the Multiverse!

Crazy Stuff!

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Subject:	New Rush Album!
Time:	12:42 pm.

Buy. Listen. Absorb.

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Time:

8:12 pm.

On the twelfth day of Christmas,

seregost sent to me...

Twelve physics programming

Eleven statistics stargazing

Ten cuddles a-drumming

Nine algorithms biking

Eight tongues a-networking

Seven computers a-sampling

Six mathematics a-gaming

Five co-o-o-omplex systems

Four non-linear dynamics

Three fall nights

Two female types

...and a linux in an astronomy.

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Subject:	OMFG
Time:	1:58 pm.

Ack! That was some fucking heavy snow. It may not look like it in the photos, but my driveway was invaded by about 15 inches of the crap:

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Time:

1:02 pm.

I found this interesting paper on the discussion of social forms. The paper asserts that there are fundamentally four categories (thus far) of human organization. These are, in order of first appearance: Tribal, Institutional, Market, Network.

As societies advance in complexity, they take on attributes of the more complex forms. The newer forms don't supplant the older forms, but rather enhance and regulate these forms.

In an archetypal Western society, the first three forms are best represented in the following organizations:

Tribal(T): This form is all about tradition. It manifests in extended/atomic family structures, which are connected graphs.
Institutional(I): Anything involving hierarchal graphs: The state, the church, military, corporate structure
Market(M): The interaction of autonomous agents: capitalism, trade, free-market

Note that varying social forms are manifest in all types of organization. However, certain organizations are archetypal of each social form. In other words, each social form empowers certain organizational forms.

The author argues that modern society is essentially a T+I+M organization. Families give us our basic social architecture, The liberal state optimally provides legal and security frameworks, and the market efficiently produces and distributes goods.

What none of these institutions are efficient at doing is providing welfare or regulatory services. The State has tried, but ultimately failed to provide these services. Top-down approaches to distributed problems inherently cause bureaucracy (in both mercantile and welfare states). I believe the for-profit sector has also failed at providing these services. In fact, the unregulated market sector tends to decrease social welfare.

The author argues the fourth form of social structure (he calls this the general network form) is what will ultimately empower organizations capable of providing these regulatory services. His argument is that the information age is what is leading to this "network" form of structure. In a nutshell, this structure is all about easing connectivity. As such, the structure facilitates multi-organizational communication and hence circumvents the traditional barriers of tribal and institutional organizations.

Nascent forms of this new structure are things such as labor unions and the organized civil rights movement. Modern terrorist networks also fall under this new social form. In a more evolved state, these organizations coalesce into a new sector. This sector is being increasingly called the social sector.

The beginnings of this sector can be seen in not-for-profit corporations, non-governmental organizations, cooperatives and unions. The author argues that the social sector is best suited to regulating the public and private sectors and increasing social welfare.

As a consequence, he argues it best if states continue to lose power to the market and social sectors. The state will then become a democratic variant of its original form - providing legal and security frameworks. This will probably be a painful transition (as organized terrorism exhibits). Hopefully the social sector will check the power of totalitarian regimes.

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Time:

9:50 am.

I would really appreciate opinions on this idea:

A cooperative is a form of public institution founded on the concept that certain private goods (called club goods) are really borderline public goods. The argument is that it is most efficient for ownership of these good's production to be held collectively by all stakeholders. Modern cooperatives are governed like corporations with the exception that shares are distributed uniformly to all members of the cooperative. Consequently, dividends are distributed uniformly and the coop's managers must consider the best interest of all owners (and consequently customers and employees) when making decisions. In other words, cooperatives are essentially micro-scale representative democracies.

One of the primary tenants of neoliberal economic policy is that nationalization is a bad thing. Hence, there has been a drive towards corporatization of as many government institutions as possible. I believe this complete denial of the benefits of public ownership has led to the increasing corporatocracy that our society faces. Corporations are efficient at what they do, but they are incapable of optimally managing public goods. This is fundamentally due to the private nature of their ownership.

My argument is that a government should consider large scale cooperatization as a more scalable means to deal with private goods which have transitioned to the realm of club/public goods. Essentially, when a certain good starts to experience market failure (examples would be utilities, emergency medical care, transportation networks, distribution networks - think Walmart, etc.) it is deemed to have moved from the private to public domain. At this point, the government purchases all shares of the producing organization(s) and places them in a trust fund. This trust fund is then cooperatized (essentially it is a far more scalable version of the social security fund - which is itself a variant of a mutual fund). The government recoups the cost of the purchase by commandeering enough fund dividends to balance their ledgers. Except in periods of extreme economic hardship, the fund would not only be solvent but require zero net input from the government! American citizens would benefit from both cooperative control of public goods (this is the primary benefit of nationalization), and also from a far more scalable social security fund that would give the ownership society concept a true footing to stand on.

The beautiful thing is that this would maintain the profit incentive even for public goods. Cooperatives still work to increase the profit of their stakeholders, and hence operate fundamentally similar to corporations. However, cooperative stakeholders consider not only dividends as profits, but also salaries, prices and living conditions. Essentially, cooperatives reduce the externalization of expenses... They have less incentive to increase dividends at the expense of salary, prices or the environment.

Note that I am not advocating the elimination of market capitalism, corporations, etc. Capitalism has proven itself as an ideal mechanism for the production and distribution of private, non-essential goods. It fosters innovation, and has obviously increased the standard of living in the countries who have adopted it.

However, unchecked it has a downside when market maturity ultimately leads to private monopoly and subsequent exploitation of labor, consumer and environmental resources. The concept of national cooperatization fills a need which is obviously there. If it weren't, nationalization and socialization would not be such widespread ideologies.

Whew... Long winded. I really want to hear your thoughts!

Comments: Add Your Own.

Time:

5:18 pm.

Okay, I am willing to concede that real per capita GDP is increasing exponentially. The curse of economics is that there is often insufficient data to do proper empirical trending. However, approximate real GDP from 1870-2005 do show a subtle exponential trend, so I have created an exponential trend on my original 1979-2005 source production data.

It is important to note that an exponential productivity curve does *not* invalidate the hypothesis about income disparity below. It does extend the positive sloping time period, however an inflection point still exists. Trickle-down economics *still* fails at a finite time in the future. Ironically, when the inflection does occur, it is much more dramatic than if productive growth were linear. I will post an analytic proof of this soon.

However, considering a trend towards exponential growth has caused me to think of a possible macroeconomic theory that could significantly help to resolve both the sustainability problem of exponential growth and the income disparity problem.

It is my assertion that exponential growth (be it in population *or* worker productivity) is a bad thing (tm), simply because it cannot be sustained and leads to an irrational culture of growth. A finite environment (be it earth, Sol or the whole Universe) cannot long sustain exponential growth. In ecology, this is simply the concept of carrying capacity.

Assuming a more linear growth is a good thing(tm), what if we enact the following labor policies:

1) On January 1, 2007 mandate a global labor law of 40 hours per week per laborer (I'm going to call this the per capita productivity cap) By international law, any work above this amount must be compensated at 200% (making it more efficient in the long-term to hire another worker).
2) Annually, a global consortium reviews the yearly productivity figures and adjusts the per capita productivity cap to linearize the growth in productivity.

In other words, rapid increases in per capita productivity result in gradual work hour reduction to partially compensate for the increase in productivity. Overall, a linear growth is maintained, and I believe market forces would naturally cause the average salary to adjust to the new productivity cap.

Think of this as a macroeconomic policy that aims to constrain the growth culture for the benefit of global quality of life. In other words, this would combat the twin destructive forces of unsustainable growth and increasing income disparity.

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Time:

10:23 am.

Utterly hopeful.

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Time:

9:49 am.

Utterly depressing.

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Subject:	On Political Scalability
Time:	11:12 pm.

Okay, so observation and idea:

I believe voting in America has become an ineffective exercise in social gaming. I'll steal a couple of links from wikipedia:

1) Voter Fatigue
2) Rational Ignorance

In other words, our current representative democracy is manifesting the primary attributes that plague direct democracy. The representative system is no longer scaling. Gone are the days of town-hall meetings and impromptu debates. I think there is a real sense that state and federal politics are detached and ineffective at representation.

Now to the idea. I'm not claiming it is original. However, I have no known references... Essentially, representative democracy is fundamentally a tree structure. In its current state, it has only one level of indirection.

Each of us has to elect our representatives at every form of government. When the country was small, this was a perfectly reasonable responsibility. However, with millions of citizens we now are experiencing voter fatigue. We have too many candidates, and too many issues which we may not really care or know about.

Instead of this giant money machine, why not return to a fundamentally scalable approach?

Maintain a representative democracy, and the same basic state/federal structure we have today. However, instead of a two party ticket, start off small. Have a system wherein people are divided into small groups. Lets say a group of friends organizes into a small group of 10 people. These debate groups register with the state, and they exist with a single purpose:

Debate the issues relevant to the group and decide on a single person who is best able to represent viewpoints at the next level. This representative then moves to the next level where he takes part in a debate with 10 other representatives to elect someone to the next level of government. This repeats until offices have been filled at every form of government.

Say there are 250,000,000 eligible voters in the country. Assuming a balanced tree with each leaf containing 10 people, that would mean that log10(250,000,000) ~ 9 elections would have to be held to elect a single prime minister. Considering that we already have community->city->county->state->legislature->executive, 9 levels isn't all that unrealistic. We can always increase the forum size to decrease the number of levels.

This approach has the advantage of allowing people to locally debate regional issues at every level, and I believe have their issues more directly represented in higher forms of government. It has its own potential problems, I know. But is it possibly a solution to our current system?

Thoughts?

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Subject:	Genuine Progress Indicator
Time:	11:04 am.

The GPI, which has long been an important factor in environmentalism, is an effort to measure the *true* progress of a society. Since the Great Depression, our government has become increasingly reliant on the GDP metric as a measure of economic wellbeing. According to this metric, the United States is currently prospering like it has never before... Does that assertion honestly seem intuitive to most of you???

Even the inventors of the GDP metric never claimed it was a truly accurate indicator of human well-being. It is just a convenient and easy metric of social productivity (particularly useful in war-time).

Unlike the GDP, the GPI does not consider things such as environmental disasters and pollution as beneficial. For example, the Exxon Valdez disaster and Katrina both caused a marked *increase* in GDP. GDP also ignores such factors as skewed income distribution, national debt and non-market activities (such as stay-at-home parents). Crucially, any non-market work (charity,community,childcare) is considered literally valueless.

All these factors are why there is (in my opinion) such a stark contrast between the supposed macro-level economic recovery of the 2002-2006 time-frame, and what we as citizens are actually seeing in the trenches.

While the GPI is a more complex and less clearly defined metric than GDP, it is useful to look at some basic attempts at defining it - keeping in mind that certain aspects of the metric are obviously still subject to personal views.

This site has a basic graph of GDP to GPI that demonstrates the gist of the assertion. Essentially, there can be (and possibly has been) a simultaneous rise in GDP and a decrease in GPI. I personally think the GPI index more accurately represents the world-view of the average citizen.

In a nutshell, we as scientists may be to blame for putting too much emphasis on an incomplete metric!

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Subject:	yikes
Time:	9:59 am.

I have been hibernating for awhile on the economic issue. The present escalation of violence in the Middle East has brought me back into the loop. I just found an interesting article that shares a new (to me) viewpoint on the accelerating recession of the American economy. It is from a European magazine - possibly fanatical, but a bit compelling in these interesting times.

It pinpoints the opening of the Oil Bourse in Iran as a critical occurrence in world events. This was scheduled to happen at the end of March 2006, but has since been postponed until September. The basic concept is that Iran would begin pricing oil against the Euro, which could systemically lead to a mass depreciation (if not collapse) of the US dollar.

A collapse of the dollar as reserve currency would cause oil prices to skyrocket in the United States. This would correspondingly cause mass inflation in almost every good and service tied to oil (basically everything). People have already been borrowing from their home equity to sustain the meager economic growth of the last few years. Hence, a collapse of the housing bubble will likely also happen around the same time. The two combined would effectively lead to the loss of buying power for American citizens and corporations. This would then lead to the demise of the current world order - which is *totally* based on the stability of the dollar as a reserve currency.

It is argued that attempts to stabilize the dollar (not just oil) are the real reason behind the situation in Iraq and the Iranian Nuclear Crisis. Without stability of the dollar, the West will essentially collapse in much the same way the Eastern Bloc did in 1989.

If this were to come to pass, a new world order will then begin - and the United States will be a much less significant player. This is why I think everyone should be paying close attention to the current situation in the Middle East. Any spark can lead to a rapid escalation of this *very* delicate situation (think World War I).

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Time:

6:32 pm.

What's happening here folks? Are the Bourgeoisie actually starting to give their money to the poor?

Should I actually feel warm and fuzzy? Can human nature actually operate in a non-zero-sum manner? Is the free market actually correcting itself?

Seriously, after Warren Buffet's contribution, the Bill and Melinda Gates Foundation will be one of the largest organizations in history. And its goal will *not* be to maximize shareholder profits. Its goal will instead be to help those who need helping. At least until its primary caregivers die, I can see no other motivation. If you want to be cynical about that, just look at what it has already done.

For the moment, I'm being optimistic that the system might actually be correcting itself. Perhaps this is the beginning of a new institution? One born of the corporate economy, but governed by unselfish rules? And far, far, far more efficient than government spending.

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Time:

9:09 am.

Question - wouldn't a functional programming language be the best high-level model for programming a stream paradigm such as used by the cell processor?

Functional programming constructs by definition eliminate the need for a global heap. This is what one would need for a high number of fast processors running with relatively small local cache and high-latency main memory access. Hence, in a functional model stream "kernels" become sections of code that are flagged by the developer as potential candidates for distribution.

The flagging could be done by function composition and/or currying. In pseudo-LISP-like-code:

(kernel (+ 1 2 3 4 5) 0)

Would tell the virtual machine to create the plus function as a kernel and pass it the specified parameters. 0 would indicate the current kernel must wait for the task to complete (allowing preemption).

The beauty of this model is that the virtual machine could look for already existing instances of the kernel and just pass the parameters for execution. Pre-emption could be handled, and if no resources were available the code could just be loaded on the current processor and executed.

Thoughts?

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Time:

6:26 pm.

Update on Kellen:

We are home now. He is sleeping next to me. :-D

The doctors (there were five of them) believe it was indeed GERD that caused the problem. Medically, its difficult to know anything for certain. But its a very strong lead.

He is on Zantac, and we have to introduce rice into his formula. Apparently, the calorie intake will have the side-effect of turning him into a bowling ball. But if it helps him to hold food down, that's all good.

So... everything is now quiet again around the Porter household. :-)

/me crosses his fingers it stays that way.

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Time:

9:52 pm.

All,

We had to take my son Kellen to the St. Francis emergency room on Tuesday. He turned ghostly white and became lathargic at about 7AM, so we called the paramedics.

Once there, he had a ton of blood taken, an xray and a spinal tap *shudder*. Worst day of my life...

They primarily were checking for any aggressive infections. Fortunately, those tests came back fine. However, he was admitted to the Children's Hospital to undergo observation. We have been there since Tuesday.

The strongest lead so far is that he is suffering from a relatively aggressive case of esophageal reflux disease. A Barium ingestion (upper GI series) test showed that he is having periodic and powerful reflux capable of pushing stomache content far enough up his esophagus to enter his bronchial tubes and lungs. This is likely to have caused the apnea symptoms that alarmed us.

There are infant treatments for GERD, if that does turn out to be what the problem is. If the rest of his tests checkout, he will be able to get out of the hospital either late Thursday or early Friday.

I appologize I didn't inform anyone sooner. We have been so scared, tired and busy - communication was the last thing on our minds. Livejournal is the fastest way I know to broadcast the news.

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Time:

12:24 pm.

I managed to accidentally find a bug that brought the entire RLI mail and scheduling system down for the whole morning today.

MMM... Only a hacker would be proud of this accomplishment.

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Time:

11:18 pm.

Oh, yes! I have been delivered. I've been struggling with how to understand the blatant reality of the current global economy, and how we might go about fixing it. The prediction regarding widespread decreases in standard of living in the next few years was troubling at best. Then I started doing some research. The last time income disparity levels were this high was in the beginning of the great depression. And another important indicator of the great depression is that savings rate dropped to negative numbers. This happened for the first time last year, if you recall.

So it finally clicked. Perhaps we are not recovering from a recession, but entering a new depression. I now see all the signs of this, and doing a Google search for "second great depression" reveals a massive number of hits. Depressions are impossible to detect with certainty, as there has been so few of them. However, the arguments presented give higher-order themes that shed quite a bit of light on the problems I have noticed empirically. One is particularly appealing, and deserves a read:

http://www.financialsense.com/fsu/editorials/2005/0309.html

So, believe it or not this has given me a new birth of optimism. The answer to the problem is that there is probably no answer. The current economic system is fundamentally broken and is probably in the process of collapse. Rebirth will happen eventually - unfortunately it is a hard road for all of us to get there. However, optimism should come from the fact that the current problem is not a permanent trend - things will get better.

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