Comments on: Cycle of Stupidity http://www.3sigma.com/cycle-of-stupidity/ Surfing the brink of chaos Wed, 01 Feb 2012 20:47:53 +0000 hourly 1 http://wordpress.org/?v=3.1.1 By: More Moral Hazard | Three Sigma Systems http://www.3sigma.com/cycle-of-stupidity/comment-page-1/#comment-471 More Moral Hazard | Three Sigma Systems Thu, 12 Nov 2009 17:45:52 +0000 http://www.3sigma.com/?p=3166#comment-471 [...] my recent post, “Cycle of Stupidity“, I discuss the historical record that attests to willful stupidity. The only way out is to [...] [...] my recent post, “Cycle of Stupidity“, I discuss the historical record that attests to willful stupidity. The only way out is to [...]

]]> By: marc http://www.3sigma.com/cycle-of-stupidity/comment-page-1/#comment-455 marc Wed, 04 Nov 2009 19:40:12 +0000 http://www.3sigma.com/?p=3166#comment-455 Good points John, The argument in this entry is supposed to go like this: A reasonable system is first created and as such, can be improved. In fact, the authors make reference to the introduction of standardized coinage and currency as a starting place for the system. At another point, they say, they give the example of the system being cheated by manipulation of the value of those currencies (inflation and deflation). The system does what it does so long as the rules of the system are held constant, more or less. The arm system also, does what is does, moving this way and that way, but not ANY way. If you cheat the system by bending the arm in a way that is outside the parameters of the system, it hurts. It breaks the system. If you value the SYSTEM and it works, don't break it. Understand its limitations, understand and reduce variation, improve it. If you keep breaking it, you will just keep getting hurt. Stop doing that ;-) This is explained in terms of the economy, in the Fox-Penner's Baseline Scenario blog post at: http://baselinescenario.com/2009/11/03/peter-fox-penner-replies/ PS - See revised picture of arm. Good points John, The argument in this entry is supposed to go like this:

A reasonable system is first created and as such, can be improved. In fact, the authors make reference to the introduction of standardized coinage and currency as a starting place for the system. At another point, they say, they give the example of the system being cheated by manipulation of the value of those currencies (inflation and deflation).

The system does what it does so long as the rules of the system are held constant, more or less. The arm system also, does what is does, moving this way and that way, but not ANY way. If you cheat the system by bending the arm in a way that is outside the parameters of the system, it hurts. It breaks the system. If you value the SYSTEM and it works, don’t break it. Understand its limitations, understand and reduce variation, improve it. If you keep breaking it, you will just keep getting hurt. Stop doing that ;-)

This is explained in terms of the economy, in the Fox-Penner’s Baseline Scenario blog post at:
http://baselinescenario.com/2009/11/03/peter-fox-penner-replies/

PS – See revised picture of arm.

]]> By: john dowd http://www.3sigma.com/cycle-of-stupidity/comment-page-1/#comment-454 john dowd Wed, 04 Nov 2009 18:22:44 +0000 http://www.3sigma.com/?p=3166#comment-454 Yes and no. It would be better (?) to be able to have full use of the arm. To use the metaphor in the sense you are using it, that would entail some fix to the underlying problem. After the system goes bust, a mad scramble takes place that is essentially ameliorative in nature. The so-called "social safety net" (to the extent there is one) is deployed (e.g. extended unemployment benefits, public works projects) and steps are taken to right the ship and, when righted, the cruise continues. But isn't that like trying to improve quality by reacting to the outcome? Some changes need to be made in the sytem that produces the boom/bust cycles if we want to curtail them or make them go away. The precipitating events of this most recent bust, provide some clue as to what those changes need to be. The severity of this recession is due (most would agree) to lax regulation of financial transactions. That is where attention needs to be directed. But focus cannot be confined just to rules and enforcement. Structure of the financial sector needs to be considered. The interactions of trading and regulating agencies must be guided. Boom/Bust cycles are said to be inherent in Capitalism, but is that really the case? Is there not some brand of capitalism that can be devised that allows it to do the things it does well (create wealth, innovate) without unacceptable social cost? Isn't that the kind of work that needs to be done instead of devising a method to secure the doors more strongly after the barn has emptied? Boom/Bust cycles have been recurrent, but that doesn't mean they have to continue to be. The past behavior is not always an indicator of future trends. Yes and no. It would be better (?) to be able to have full use of the arm. To use the metaphor in the sense you are using it, that would entail some fix to the underlying problem.

After the system goes bust, a mad scramble takes place that is essentially ameliorative in nature. The so-called “social safety net” (to the extent there is one) is deployed (e.g. extended unemployment benefits, public works projects) and steps are taken to right the ship and, when righted, the cruise continues.

But isn’t that like trying to improve quality by reacting to the outcome? Some changes need to be made in the sytem that produces the boom/bust cycles if we want to curtail them or make them go away.

The precipitating events of this most recent bust, provide some clue as to what those changes need to be. The severity of this recession is due (most would agree) to lax regulation of financial transactions. That is where attention needs to be directed. But focus cannot be confined just to rules and enforcement. Structure of the financial sector needs to be considered. The interactions of trading and regulating agencies must be guided.

Boom/Bust cycles are said to be inherent in Capitalism, but is that really the case? Is there not some brand of capitalism that can be devised that allows it to do the things it does well (create wealth, innovate) without unacceptable social cost? Isn’t that the kind of work that needs to be done instead of devising a method to secure the doors more strongly after the barn has emptied?

Boom/Bust cycles have been recurrent, but that doesn’t mean they have to continue to be. The past behavior is not always an indicator of future trends.

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