Professor Ferguson,

If Network Theory is useful as a model for thinking about historical parallels, there may be other models from science and engineering that could be useful too.  Some of these describe systems that work well within a given environment.  They all work with feedback as a key component.  This is something that should be considered in government and other human endeavors.  How do we create structures that have good feedback?

Structures

What is the function of Democracy?  At the time of the American Revolution one of the main functions was to provide a workable government but  also to prevent the re-accumulation of power by monarchy.  Voting and was limited to landowners.   Whether or not it was the intentions of the founders, the words of the Constitution and the ideas described by these words carried a lot of weight.  Eventually the process created a much richer and more robust country.

Democracy is a balanced structure.  Much of the strength of democracy lies in the balanced structure of the three branches of government.  Voting by citizens provides a type of  feedback and is essential if the system is to work.

Will democracy continue to work well?  We have new tools and new challenges.  Two important things have changed since the inception of democracy in the US.   The first is a communication technology that has profoundly changed social dynamics and continues to do so.  Second, we are hitting limits in many areas, including geographic frontiers.

Unpredictable things can happen when one hits a boundary.  When Einstein described the behavior of light, he did not focus simply on light as it traveled through space, but rather described what happened at the boundaries.  “What happens when light is reflected?”   We should ask,  “What happens to democracy when it hits a wall?”   What resources do we have, and can we respond soon enough?  Do we have the structures in place to handle the changes?

The concept of Empire offered structure and a way to organize people at all levels.   China has a non-democratic form of government with a structure.  China may eventually get it right because they allow for a fresh look every 5 years plus an ability to change course as needed.   This may be changing however with Xi Jinping.

Competition

The first of your killer apps, competition, helps provide the gradient needed to drive the political process for choosing people as leaders.   A structure without competition is like a TV that is not plugged in.  The components are all there, but the electrons must give up some energy to drive the circuits as they slide down the gradient of 110 volts. Competition also helps to drive a thriving economy, but when it comes to finding useful information, mainstream media and education may be inadequate.  They may not be malicious but simply unable to keep up.

In true competition there should be players and there should be judges.  In the case of political races, the politicians are the main players and the people take the role of judge.  In an economy, one business is pitted against others to provide goods and services.  Consumers then judge which one is best by voting with their pocketbook.

In the free flow of ideas among the media, or in finding useful information, the role of player and judge is less clear.   As you point out, user engagement is the primary concern of companies such as Facebook.  Their ad model of revenue pulls in information of any kind – good and bad.   Most of mainstream media use the ad model for at least some if not all of their revenue.

Culture is connected and formed at the intersection of the environment and a genetic population.  If either changes then the culture changes.  A Clash of Civilizations is really a clash of stories, stories about how to survive in a particular environment at some point in time.  Conflict arose when people started to travel.   This mixture can potentially be good however.  Just as the constitution and establishment of democracy brought in new ideas, this hybrid of ideas can inform people on how to survive in a new and changing world.

Competition in the area of finding useful information should be competition on the receiving end of the information, among small local groups, even if they are discussion national issues.  The competition is used to find useful or interesting information.   Results of this competition can even be used for feedback on specific policies or general political issues.   Competition can be used in examination and reading of history when our education system does not or cannot do it.

Competition with a simple structure can be used for finding and filtering useful information and to filter out junk news.  The filter is the result of the competition itself.  This is not to dictate what people believe, but can help greatly in finding alternative pathways for problem solving.   If more censorship is carried out by private corporations or by the online crowd, this can be countered with the right kind of competition.  There needs to be a goal, a structure, and a gradient, plus adequate feedback.

Conservative Values

Einstein’s work was not accepted by many until it was verified with experiments.   Political values, both from the Left and Right, should apply in some fashion to many communities at the local level.  What would Conservative values and laws at a local level (town, city, county) look like?   What would Socialist or Communist values and laws look like?  These could be tested and compared on similar scales.

Most conservatives thinkers who have a public life only write about the pros of conservatism and the cons of left wing ideas.  They don’t carry out any experiments to test their ideas, though this could be done.

Choosing Democracy:Moving forward and solving problems.

John Anderson, referring to young voters who seem to reject democracy, made this statement followed by a question,  “We have so much.  What has gone wrong?”  It may be that we are losing purpose, both as individuals and larger groups.  At the same time we can see many voters want to see action on real problems.   This should favor the party in power that can tax and spend, giving at least the appearance that they are doing something and that the economy is growing.

Political and media commentators talk about growth in stock values, growth in the number of housing starts, and number of jobs.  But growth can be more than growing the economy and building more houses.  Biological models can be instructive here too, with growth at the cellular and organ level.  It is not simply a growth in height or weight, but a kind of growth that leads to an improved ability to handle a broader challenge and to increase stability.

This kind of growth also requires a goal, structure, gradient, and feedback.  The structure does not have to be a formal institution, but have some dimensions agreed upon by players.

Max Weber defined the state as that entity with a monopoly on the use of coercive power.  Empires of the past took land and property by force, then imposed structure and organization.  Both the political left and right view their main source of power as coming from DC which has that monopoly on coercive force, though some on both sides also put faith in local power.  Changing things more slowly over time can be done by paying attention to feedback and placing sensors in the right places.

Running an experiment is an act of constructing a question.  In society, who asks the questions?  This is a key part of feedback and needs to be considered carefully.

The success of China’s experiments will depend in large part on the quality of their feedback. Coercion makes it more like a project than an experiment, however.  Then there is no guarantee of success in solving social and political problems. In real competition whoever figures out the feedback problem will win the day.

 

 

To: John Fullerton, Capital Investment

From: John Suter, Communications Consultant

John,

Your answer to the question “What does a Regenerative Economy look like?”  was that it was already happening.   I think this is going in the right direction but much too slowly.  You need to find a community that can create or find the ideas that will make the transformation more real and give it words and concepts.   Mainstream media is too far behind and will not develop the words and concepts needed.

I was a member of the Slow Money of Northern California and we too had farmer entrepreneurs.  We had events on organic farms and played folk music for the crowd.  It had a following, but yet has not come into mainstream consciousness.

You need a community with competition among small teams (a division of labor) to find the ideas that will transform us into a Regenerative Economy.  Books like the one that Hunter Lovins suggested,  “Story Wars”, imply that the whole thing will happen from the seller’s point of view.   It ignores the listeners and buyers ability to filter the information.

At the 25^thanniversary of RMI, Amory Lovins said that he would have done things differently if he knew what he did now.  Why does it take so long?   It’s probably a complex set of behaviors when looked at from an academic point of view, but from a competiton, sports, or even a child’s point of view, it does not have to be.  Set a goal. Try.  Evaluate the feedback.  Try again.  Democrats see things as a one-size-fits-all.  Conservatives realize that human activity must match up with the local space and the local environment.   We actually need both, but it seems Democrats and Conservatives are not talking much these days.

I agree that we need to look at living systems.  Looking more closely, there are cells and sub-cellular organelles that are organized into their own units with some external connections for energy and waste management.  Does this provide a model for us?  It might, but the organization and creation must come from within too.

If you don’t look at the receiving end and simply create more small organic farmers, you are a supply side economist.  That may work up to a certain level.  We tried a community-farm-association delivery of food, but there is a limit to the number of tomatoes and lettuce that one can eat.

We must have some competition for moving useful information.   It must be judged by locals too, with input from any source. We have a newly developed nervous system mostly in place (Internet, etc) but need to develop “motor end plates” and other interfaces with the nervous system.  It should evolve rapidly with the right tools.   I can help if you don’t know how to get there.

The Chinese government as a multi-national corporation seems to be able to do things that we cannot seem to reach here in the US.   Experimentation and use of the scientific method is social learning in the broadest sense and a good thing.

But what does Democracy do? We can’t easily change to a non-democratic form of government.   Maybe it does call for cooperation and innovation.  I agree that a government which is mostly made up of lawyers (US) means that we spend too much time fighting each other over Trump and tax breaks.  It’s entertainment and the mainstream media follows it.  This contributes to our ignorance of China.

There is a case to be made for use of Information Group Games (IG or IGG) (a.k.a. Learning Games). You may be too busy, but you should find someone who could do some testing and experimentation of IGG on some local issue.  Someone needs to try the game and maybe tweek the rules a bit.  It can be a powerful tool despite the fact that it seems to be only local.  Advances in biopharmaceuticals is focusing on what happens at the local level (molecular and cellular) and it is proving to be a game changer.  IGG is a social information technology (SIT) that allows players to use recent advances in communication technology to help search for information.

Games are important too, more than just child’s play.   One might hear that Yao Ming and fellow basketball players spend their lives trying to put a ball through a hoop and wonder why.  But that would be missing the point.  The structure of the game and the challenge allows discovery of the human spirit and many opportunities for interaction and collaboration, spurred on by friendly competition that is generally positive.  IGG is a simpler game but yet provides some of the same opportunities.

Brief review of IGG (Information Gathering Game)

A dozen players chosen at random are divided into 3 teams of 3 each, plus there is a 3-person panel of judges.   The Discussion Question (DQ) is given and the players have a period of time to find ideas and information which their team can then summarize and present to the whole group.

The time allowed for search and discussion will vary  depending on the complexity of the issue.  It could be 10 or 20 minutes.  Other DQ’s might require an overnight period during which time the players can use any source of information or talk to anyone they want.

A panel of judges, also picked from the dozen participants, decides the winning idea.   Teams and judges can be re-mixed by the moderator and the process repeated until a useful idea is discovered.  The sponsor of this process, like a movie producer, can withdraw support if the group seems to have no direction.  Some IGG may become self-sustaining.  This is not simply crowd sourcing and the differences are important.

Ten Things IGG can do for China Greening:

1. IGG can help to change the Mindset.
2. IGG can be sensors in a system that needs reliable feedback.
3. Push Experimentation and Innovation in social communication.
4. Create a Division of Labor for Information Gathering.
5. IGG can make the Rule of Law easier.
6. Discover Non-uses of Energy.
7. Find essential changes to implement at the local level.
8. Use IGG across generations.
9. Use IGG across national borders for solving local problems.
10. Explore other types of growth.

(1)  IGG can help to change the Mindset.

I agree with JUCCCE’s emphasis on story telling and finding the right words.  It may be useful to show a fat, ugly guy in an expensive sports car, but that may backfire.

Immediately after your public service ad will be an ad from Ferrari, showing a fast car, handsome guy and beautiful woman having fun.  My two sons, ages 14 and 15, love fast cars . . . Can we change their dream?  Changing the mindset of anyone can be a major obstacle when there are so many competing stories.  IGG can first help to understand the dominant mindset and possibly gain insight on how to change it.  It is a process of discovery.

Some new words can have a positive effect. 

Changing words can help to change the mindset or at least to look at ourselves in a new way.  “Oil companies” who become “energy companies” may have suddenly opened many new opportunities for themselves and allowed people within the company to look for new, sustainable sources of energy.  If the Holy Grail is consumption, how do we attack this Holy Grail?  Changing the name “consumer” to “actor” or “player”, at least temporarily, can make people take more responsibility and feel more effective in their own lives.

“Meat-less” Monday must feel like a sacrifice and the person may not gain much benefit or feel different. Changing the phrase to “Meat Mondays” where eating meat only one day a week is a way to more likely reveal the benefits of cutting back on meat consumption.  Many people who cut back significantly will probably feel better within a week or two, though not all of them.   Not sure?  Do an experiment.

I read one report that said people who change from a carnivore diet to a vegan or vegetarian (v/v) diet will cut their carbon footprint in half.  Logically, carnivores should want other people to become v/v. It lowers the carbon load on the atmosphere and the carnivores themselves will have the best cuts of meat for cheaper prices.  Unfortunately it is not that simple since we all want to surround ourselves with people who support our story and our mental models.  Except for Bill Clinton, I don’t know any top level leaders who have made the change from carnivore to v/v.  They simply won’t or can’t change.  So don’t expect help from any leaders on this issue.

Stories and words, by themselves, are not enough.  

Business leaders tend to use “sustainability” to mean “sustainability of our business”.  This has limits since the company may not actually help sustain the local community.  Food companies like KFC, Pepsi, and McDonalds will not change their products or their approach until they actually get involved with a specific community to ask “what does it take to bring sustainability to this community and to these people?”  Nutrition education, if taken seriously, will shut the door on junk food distributors if those companies cannot change.

Co-creation of stories is essential.  The Story will be slightly different at each location because of different natural, social, and cultural environments at that spot.   It’s like airport terminals that are all different to reflect differences in local culture, even though the runways must all be standardized.  A story is not just a goal, but a pathway in getting there.  Some would say the process or pathway IS the story.  That may change the strategy of how we visualize what we want.

 “Transform desire. Desire creates market.”  Social norm placement can be limited if it becomes too obvious.  People resent being told how to think.  Be careful not to hide behind words.  There must be real action.   ‘Environmental movement ‘ can become a ‘prosperity movement’, but the word ‘prosperity’ can then be anything an ad agency wants it to be.  After changing Stories and Words there must be Action and Testing (SWAT).

The energy in a gallon of petrol is amazingly high.  When China goes green the rest of the world will still burn fossil fuel and this will come back to harm China too.  Owners of the machinery that use fossil fuel (airplanes, cars, tucks, generators, etc.)  will argue that it doesn’t make sense to not use the tools we already have.

(2) IGG can be sensors in a system that needs reliable feedback.

Good feedback is essential for the scientific method, just like experimenting or throwing spaghetti on the wall.  You mentioned that people in China are not innovative enough.  Still, they are very much like sensors in a control system that give feedback.  A sensor must give unbiased information back to the control.  If a thermostat reads 25 degrees but the actual temperature is 20 degrees, there will be a lot of wasted energy trying to bring the system back to the set point.  IGG can neutralize bias if structured correctly, using a random mix on each team. Mixed teams will not naturally form however unless required as part of the game.

IGG can give participants some time to listen, talk, and think.  People can make better decisions if they see more than one option.  The farmers who threw their pigs into the river may have seen no other option.

In democratic and non-democratic countries alike, IGG can help to develop that evasive “political will” by providing a structure for people to discover and discuss why, in some places, there are subsidies for oil but none for geo-thermal.

Nature uses competition. Capitalism uses competition too, but capitalism cannot solve problems that it helped to create until there are adequate and unbiased feedback loops.   IGG is a non-judgmental type of feedback that can be very useful before a government bureaucrat steps in to levy fines.

Do people really dream of 2 cars?  In one of your panel discussions, Vijay Vaitheeswaran brought up the possibility that instead of owning two cars (which automakers would love), maybe consumers just want mobility.  Simply using the word “mobility” here can help to find other options and other pathways.

IGG gives structure to information gathering.  Jared Diamond’s description of places like Easter Island makes me think that the people who lived there had no structure to gather and filter new ideas.  They might have discovered that some among them knew how to swim and fish, opening another way of survival.

Telling people something bad will happen and then not allowing them any input into the process is what BF Skinner called “learned helplessness”.  That can be avoided if one recognizes that there are great resources among the grass roots that can help any country move to a green economy, but there must be the right structure or process to make use of those resources.

 (3) Push Experimentation and Innovation in social communication.

Innovation must include social communication innovation and experimentation.  During the Q&A for the panel in New Zealand, the point was brought up that water is so cheap.  How does anyone incentivize the smarter use of water?  This is where a game structure can help immensely, making a competition of water savings.   Government, NGO’s and most businesses don’t have time to run it, but they could get an IGG process started.

Smoking is still harming many people and smoking cessation would make another good test case for IGG. Habits such as smoking have much in common with the personal and social psychology of climate change than one might think.  IGG was first begun with people who were trying to quit smoking, and it was fairly successful.  Players do not have to be smokers.  The goal might be to get a specific person (outside the group) to quit for a period of time, or the goal might be to find a pathway that would be useful to many smokers who want to quit.  Research by tobacco companies themselves shows that most smokers want to quit, so we know that people want to move in that direction if they can find a pathway.  Eventually, after several rounds, one wants to find some ideas that are effective.   At some point the story must meet reality.

(4) Create a Division of Labor for Information Gathering.

It seems that one of the most important things JUCCCE has done is to convene leaders to listen and talk to each other.  One wonders why they did not do this on their own.  They really needed the structure that JUCCCE provided.

In a similar way IGG provides structure (the game itself) to the task of gathering and filtering information.   IGG can provide an information gathering tool for farmers.  The farmer may want better info on a problem about pesticide use or other operation of the farm and may want to avoid penalty from a government official.  The farmer does not have to be a techie.  Players don’t have to care much about the issue but only want to play the game. Still, an IGG used in this way can multiply information sources many times over.

The farmer can start an IGG by putting in $5, then challenge a dozen other people to each put in $5. Each player on the winning team gets $15.  The farmer does not receive any money unless he or she is a participant in the game. It’s a stone soup recipe for finding useful information and done on the receiving end of information, helping to tune in what information is useful and tune out things that are less useful.

An IG group can be started by someone outside the farm, sponsored by someone who is willing to put in seed money to get it started.  The sponsor, like a movie producer, can withdraw support if he or she thinks the game is not productive.  It would be impossible for all farmers to visit an organic farm but the information needs to move and thought put into how and whether or not to make the changes.

(5)  IGG can make the Rule of Law easier.

If, as you say, an average citizen in China can report a business that is polluting too much, and even sue them in court, then contrary to what Niall Ferguson says, you do have the rule of law.  But whistle blowers in any country, democratic or non-democratic, have a common problem.  If they blow the whistle and damage a company that provides jobs to their neighbors, then the whistle blower will be ostracized.  An IGG can help to remedy this by providing a semi-private period (the team meeting) in which a complaint can be brought up and talked about before sending it to the courts.  It may be there are other solutions.  Companies who see benefit from this type of feedback may start IGG’s on their own.

(6)  Discover Non-uses of Energy

Where can we save energy by not using it?  Shut off the lights?  Turn down the hot water temperature?   Discover questions about efficient use of transportation?  The story of prosperity does not have to be a story about wasting energy.  There is a lot yet to be discovered, a lot of information to process and new ideas planted.

IGG can be a hackathon magnifier, bringing in people to the hackathon process that will greatly expand the tributary of ideas and sources of information.  It is not just cooperation with someone else’s existing idea that brings success, but using competition and games as a type of winnowing process.

(7) Find essential changes to implement at the local level.

In Borneo, logging companies are taking resources and not giving much in return. Dr. Kinari Webb, a Yale trained physician, started Health in Harmony to connect local health care with the care of the environment.  They create jobs that are not associated with logging.   But programs like this are not growing fast enough.  People in other villages wait for someone from the outside to come and ‘sell’ these ideas to them.  They cannot yet imagine or dream how it could be done in their own village.  IGG can help spread those ideas.

“. . . be afraid of standing still.“  If you simply go with the flow of current ideas, you lose control over your destiny. There is a lot of experimentation to do at the local level.  It will not be the same experimentation as the mayors and city planners, but it is experimentation nonetheless.  When talking about China, Jim Rogers says “there is innovation in scale”.   There is innovation too in finding, filtering, and moving useful information.  It just needs a way to process all the results.  IGG has applications in many local areas and helps people meet the leadership half way.

More examples of IGG applications at the local level:  Divide and conquer a book of several hundred pages by dividing it up into smaller bits and then re-constituting the important points, and do it all within and hour.    Another example might be to get more people to look at the Dream in a Box.   Use an IGG to get that process started, or at least to find the obstacles to implementation of the dreams.

Grass roots can help craft the story for their local level.  Some of the people on your panels point to the regional variations in water resources and the need to have meat in the diet (in the case of Subsaharan Africa). These are local issues that need input from the local people but ideas from the outside can help too.

(8) Use IGG across generations. 

I don’t know about China, but in the US, millenials don’t talk to seniors.  There may be a natural gap in their modes of thinking but social media is making that gap wider, and it’s a loss for the community.  IGG can help bridge that gap by mixing younger and older people onto the same team.  For a short period of time they are on the same team and they may or may not appreciate what the other has to offer, but they are not there to be nice.  Nor are they there simply to share their own story, but they are doing this to be problem solvers and to help create a new story that they can all try and test.

(9) Use IGG across national borders for solving local problems.

Henry Kissinger is very worried about OBOR.  He and Graham Allison (Destined for War) have several Youtube videos in which they discuss the probability of an incumbent power going to war with a rising power.  Graham Allison describes some of the factors, including entanglement of nations that have signed alliances and so are at risk of getting drawn into a war.  However, he also says that economic ties can help nations avoid war.

IGG is not “Us” versus “Them”.   It is not China versus the US (or any other country), because teams are mixed randomly with players from both nations on the same team (using communication technology). Yet the element of competition remains to motivate.  Doing a 1:1 mapping of towns in country A with towns in country B would be optimal with players from each town mixed together randomly into small teams.  The goal and Discussion Question might be oriented to help one town become sustainable.  Getting away from a mindset of conspicuous consumption will require something to which people can turn their attention, something outside their own self.  This is usually a good thing to do.

(10) Explore other types of growth.

Darien Green of SAP said that people will lose interest if a plan does not make good  business sense.  He also says that in the end, everything is driven by profit.  This is too short a view.

There are many other things that motivate and other ways of thinking about society.  You yourself pointed out the de-coupling of fossil fuel use and economic viability.  Examples from biology indicate that growth is not simply growing larger but growing more complex, and growing in ways that increase the security or durability of an organism.  In human society, education and communication are methods of growing that may not show up on a balance sheet, but they certainly help people at the local level to solve problems.

Conclusion:

People who turn away from conspicuous consumption still have a need for meaning and purpose in their lives – maybe now even more so.  But it can be something they do in their own community.   The Chinese government has given many people meaning and purpose by providing the jobs associated with the great modernization and urbanization plan.  This is a huge undertaking.

There are applications of IGG at many levels that can help.  GR citizens can start IGG on their own.  If there seems to be no interest, then one can increase the prize money (or other incentive), change players, or change the Discussion Question.  It may take some effort and investment to get started.

Many answers to the dilemmas will appear if one starts with the sustainability of a single, specific community.   If I have a company that hires people to make junk food for the next town, I can be a hero in my own town.  If I sell the same junk food to my own town however, I may be a villain.   A better thing to do is to provide nutritious food for all.  How to get there is the challenge.  It can be helped along with hybrid groups who can toss around some ideas, both for better nutrition and creating jobs.

Each form of government has it weakness.  Democracy can be very slow.  When the environment is changing rapidly, this may not be enough.  China cannot do it alone.  If China goes Green, fossil fuel will still be used by other countries and still pollute the atmosphere.  The carbon count will still increase and come back to hurt China.  So China must take a leadership role in this.

Does China expect other developing countries to go through the same type of growth spurt using Fossil Fuel?  This cannot happen.  China must help developing countries find sustainable pathways without using more fossil fuel.  The government has a full plate, but grass roots citizens can share this load.   During times of rapid change, we can give each other some kind of security.  We can also give them some task to do or challenge to face, plus give them a structure to make their efforts count.

 

A Role for Bitcoin in Puerto Rico? – Helping local economies grow.

Between a rock and an oversight board, many Puerto Ricans struggle, their economy running in the red for years, followed by two major hurricanes.  Getting back on track may require some outside help, but it will certainly require creative thinking.

Creation of goods and services to rebuild the island can be started more quickly if there is a way to connect local towns through means of exchange.   Bitcoin (BTC) or other crypto currencies might provide a way to do this with a multi-tier system and using BTC as an intermediary currency.   BTC’s can link into a system that creates G&S of real value where an existing system does not yet exist.

Local Currency and the role of Bitcoin

Local Currencies (LC) have been tried in many places with mixed success, but it does  provide some way for local exchange of goods and services. Currency of any kind is only a representation of the value of goods and services (G&S), which themselves have the real value and many of which are produced locally.  There are natural limiting pressures however, when an LC becomes successful enough so that some people start printing their own.  In these cases the government will not come to their rescue.

Example for Puerto Rico:

One town on the coast has surplus of fish to sell.  Another town in the central highlands has learned how to make Passive Solar Hot Water Heaters (HWH). The two towns might trade one hundred fish for 5 HWH’s, but the fish are ready now and the HWH will not be finished until two weeks from now. There is a need for a currency that represents the value of this exchange.

Transparency, Privacy, and Proximity

Transactions can be different if the parties know and live close to one another.  This may be good or not, but at least there is some type of accountability.  An LC needs to have sufficient transparency so that people at the local level can easily follow any of  the local transactions of their LC. Individuals and families at the local level can still use dollars in addition to the LC and BTC.

Points on privacy and strengths of each currency:

With crypto currency the integrity of the currency transaction is essentially built in.  But in some cases the quality of the goods or services being bought may not be worth the currency spent.  With crypto currency there is often no arbitrage or middle-man unless a third party is brought in.  Courts can be very slow and may not recognize the value of local goods and services.  This keeps people from trying anything new or being productive.

LC is for people who know and see each other on a regular basis.  BTC as an intermediary currency or currency eXchange (LCX) can be used for larger transactions between Town A and Town B in which the parties are strangers.   US Dollars (USD) offer a more private transaction.  With USD no one outside the merchants or the bank needs to know details of the transaction.  LC, on the other hand, should be transparent if only for some type of accountability that is not written into law.

One way to find a good starting level for an LC is to give a number (maybe 100) of ‘inactivated’ LC tokens (coins or paper notes matched to a local ledger) to everyone in the community. The only way that they can be ‘activated’ and put into general circulation is for the original owner to buy a local good or service.  High demand for goods and services will bring many tokens into the local economy quickly and a low demand will keep the number of tokens at a level needed to resist inflation.  Printing more tokens should only happen when there are more real G&S being created.  In that way, the growth of the local economy ties in with the growth of the money supply,. This is usually the case in a healthy economy.

Multiplying Factor for the Variability of BTC helps to stabilize the currency. 

OutsidePuerto Rico the value of BTC is measured against other currencies and influenced by political pressure.  This may continue to lead to wide swings in the dollar value of the BTC.  To some extent this can be compensated within a local region by assigning a factor, a multiplier to each BTC that reflects its dollar value on the day that it is used for a transaction.  It is measured relative to a hypothetical standard BTC value of $10K/ bitcoin and only for BTC transactions within Puerto Rico.   For example, if today’s price is $6K, then the factor would be 6/10.  If tomorrow the value of one BTC goes to $7K on the world market, then the factor of all bitcoins used for a transaction tomorrow in PR tomorrow would be 7/10.   Foreign exchange dynamics then would have less of an effect on the local PR-BTC market. Two BTC’s purchased with a factor of 0.5 (when one BTC is worth $5K) would be worth the same in the PR market as one BTC when the factor is 1.0.  This would tend to keep the value of local currencies stable and maintain the real value of G&S produced there.  What effect this would have on the world’s BTC market is unknown but may help to stabilize other markets also

Couldn’t the USD play the same role as a backup in a multi-tiered currency system? In theory one could either start with either a LT-BTC or the USD, but LT-BTC allows the trading of real value G&S among LC’s who don’t have USD.  BTC can play a role in getting LC ‘s off the ground by helping to stabilize and tie together the LC’s.  A somewhat similar system has been created at the national and international level where a two-tier system called SDR’s (Special Drawing Rights) helps to stabilize and maintain national currencies.  SDR’s are not available to individuals but only to central banks and large institutions when country has an unstable currency.

Maturing a local economy from the ground up. 

With a LC-BTC system there will be fewer but larger transactions for the BTC.  However this adds another role for BTC.  Initiatives by owners of BTC can help start LC’s and educate others on the role of BTC in town-to-town transactions.  Local economies linked to a larger Puerto Rican economy can grow from the ground up but links from the local currency to larger economies are needed.  With healthy local economies in Puerto Rico, they can build schools, clinics, hurricane shelters and homes that are more hurricane resistant.  It is in the interest of BTC owners to help create these links.

Florida: A Failure of Community

After the Florida shooting President Trump spoke words of comfort to the children. “We will be there for you if you are lost, alone, confused, and even scared. You will never be alone . . . “   Was he talking to the survivors of the tragedy? Obviously the FBI wasn’t there, even with a prior warning.

Maybe Trump was talking to young men, the young men who are lonely and confused and angry. Maybe he was telling them that they don’t have to do this kind of violence in order to get attention. But neither the president nor any government official can make angry young men feel part of a community.  Only the community can do that. It was a failure of community – not an online community, but a failure of a real community in real time and in a real place. Maybe such a community wasn’t even there. It’s not just up to law enforcement who, practically speaking, can only react to something gone bad.

I saw again the still photo, black and white, of two boys in the Columbine classroom, the killers in that massacre. Angry, lonely, fearful. They must have known they would not survive the day.

High School can be a place where hormones make growing teens feel off balance, disoriented, easily moody. The pressure to fit in with the crowd is a top priority in lives lived minute to minute, often doing things that are risky. Our pre-programmed biology creates a kind of dance, pushing us to establish a social hierarchy. There are top dogs and then there are the rest of us. It can be cruel. Many subdominant males get left behind. Some get cast out.

This story is not new. It has been written about in books such as Lord of the Flies and A Clockwork Orange, worlds of youth gone sour and turned violent. One can feel the youthful passions present in popular music of the day and then reflected back again in Stravinsky’s Dance of the Adolescents. In the Lord of the Flies there was no one to guide them, no clues on how to get along with other children, and so their situation brought out the worst. Social pressure on young people without guidance from an older generation is definitely high stakes. It writes a warped and cruel drama.

Older people forget these passions. We’ve found our parking spot and turn our attention to the next thing.   Ever since Robert Putnam’s Bowling Alone there have been warnings of what weak community bonds can look like, though it is often from a sociologist’s point of view more than what is experienced by the individual.

Girls don’t do these violent things as much as boys. Girls seem to form friendships with other girls that carry them though. Girls are not to blame for the violence but neither are they passive observers. Girls have their own special power over boys. Some of them are aware of this while others have their own self-concept challenges, but they too have this special power.

Teenagers seem driven – or maybe expected – to make fun of others, teasing, ignoring, saying cruel things to the weirdo, the kooks (whatever the current lingo), to the guy that stares at them and then tries to smile. It’s a Lord of the Flies, over and over again, a competitive field for the business of constructing and climbing the social ladder.  It’s serious stuff. Kids seem to know that, but I’m not sure they can see or sense a loneliness in others.

The Florida killer was reported to be an autistic young male. This does not mean that he was not sensitive to the pressures that build social hierarchies. He had recently lost his remaining parent. I would guess that outside of school he spent most of his time in front of a screen, playing violent video games or expressing his anger on social media, probably feeling even more alone. He didn’t want to go to school on Valentine’s Day, the day of the shooting.

Last year a flash mob in Oakland used their cell phones to coordinate the entrance into a subway car, told everyone to hand over their wallets and then left with their loot. The newspaper account was straight up news but still upsetting to read.   This was Clockwork Orange. It will be a challenge to the elders of Oakland, the parents, teachers, political leaders and police force.  What will the elders do? Simply catch and punish? Bring them to justice? Or somehow bring them back into the community?

How do we create a community where it is weak or non-existent? How do we find and bring in the angry, fearful young men?   Where is a place for them to connect?   Being alone is not bad. We all need some time alone. But inability to form friendships should be a warning sign.   When we see this, why are we unable to act?   One does not have to be their friend, but we can say hello, and maybe indirectly through other people help to find a place for the guy to fit in, to find some purpose in his life. That’s what leaders do.
In many ways the world of public school is not real, not real in the same sense that an apprentice might feel when learning a trade or learning skills from a parent.   High School students should work on real world problems, not just a hypothetical problem for extra credit. By themselves, students may not have enough experience to know how to connect and how to work on real issues, but their input may be critical to finding solutions.  Education, after all, is essentially about survival.

Where to start? Notice where students go when class is over and see if they have friends. Get to know the people around you and the neighbors too, but don’t limit it to neighbors. Go the distance to find someone (probably a young man) who doesn’t seem to fit in. If you find someone, don’t simply be nice. Ask them to do something. Give then a hammer or wrench and get them involved in a project. Help them find some place that itself has a real need. Sometimes just listen.

Influence of social media, violent videos, or overuse of drugs and medications are questions that a community should face up to. The lucky ones have extended families to help deal with it all. Many others among us have a nuclear family or a few close friends. Those outside the circle must become more than just “others”.

Crime of The Central Bankers –

Using the Power of the State to Mix the Real Economy with the Casino.

   -published on josuterdotcom, October 20, 2016

Social hierarchies and division of labor are essential to modern life. Our power as humans cannot be separated from the ability to create social hierarchies since, as individuals, we cannot do much aside from subsistence farming or hunting. The glue that bind us together includes language and the ability to create stories, some of which hopefully will reflect reality.   The other key ingredient is currency.   If we destroy the currency we destroy our ability to interact in a reasonable and kindly manner. Without a stable currency things fall apart.

Imagine what early currency might have been. A farmer and herdsman trade a bushel of apples for a goat. The apples are not yet ripe, so the farmer writes an IOU to the herdsman. This IOU is a form of currency.   It not only represents the value of the apples but is also a sign of the integrity of the agreement between two people. Suppose the owner of this IOU now makes many more copies of the IOU. It not only changes the value of the original IOU but possibly destroys a trusted relationship.   Counterfeiters of such IOU’s would not be looked upon kindly by the community.

Nineteenth century political scientist Max Weber observed that the nation-state is that entity which has gained a monopoly on the [legitimate] use of physical force. In modern society, central bankers and congress are responsible for maintaining the integrity of the currency and loss of this integrity harms our relationships with each other. This power of the state is what the Fed and other Central Banks use to enforce financial laws and regulations. They can do this by printing money or forcing interest rates to zero to save institutions who have bet too much.

Central Bankers misuse our trust by allowing a mixing of the real economy with the casino economy, then using the power of the state to enforce this connection.   Evidence for this connection is seen in the sky high Price to Earnings ration (PE).   A reasonable PE might be 10 or 15 to 1. Ten dollars invested in a growing business represented on Wall Street should earn one dollar more over a reasonable period of growth. But PE ratios are now as high as 60 to 1. No one expects that money to be paid back merely by growth of an honest business. Money invested at this level is made simply by staying ahead of other investors. Real and healthy investments are forced to support gambling.

Casinos have their separate economies with bouncers at the door who can spot persona non grata, clients who have not paid their gambling debts. Everyone who goes into a casino knows this.   The risk to the real economy is that this casino effect has been allowed to become entangled and mixed up with the casino economy. Congress, the Fed, and other Central Bankers use the power of the state to enforce this charade when they print money to bail out the banks. Retirement and honest investment funds will be brought down along with a casino that crashes because it is impossible to separate the two lines of investment.

3. The Free Market

Capitalism has delivered up a complex and difficult set of problems, some of which seem to be inherent in the social structure itself. Knowing the right questions to ask might lead in the right direction, assuming we have the political will. It’s a learning process for both individuals and groups. When the environment is stable, all seems well. When the environment changes, there is an immediate and overwhelming drive to find equilibrium and a stable foothold. Compared to this, democracy is slow and deliberate.

It is frequently said that the stock market is not the real economy, but anyone who lived through the stock market crash of 1929 would disagree.   If all the big players of today’s stock market had their own casino, it would not be a problem. They could win or lose from each other using the house chips bought at the door and exchanged on the way out. The real economy and the stock market are all connected via the currency however, backed up by courts and contracts. Use of the same currency is like being connected at the umbilical cord. The Fed can influence both the economy and the stock market by putting pressure on the value of the currency.

Allocation of Resources

Zero interest money (ZIRP), derivatives, and complex financial instruments have driven the stock market into the sky. If the stock market is 3 times the real national output, then the S&P is a casino. Investors try to guess what other investors will buy or sell, rather than invest in companies that have long term value to the economy. Derivatives are a bet that a stock will go up or down, leveraged to give a higher payback and minimize potential losses. It is unlikely that this is Friedrich Hayek’s allocation of resources by the free market.

Besides price discovery, does GDP measure the ability to move UI in general? Maybe not. A free market can also increase the supply of misinformation. A seller does not tell the buyer what the absolute minimum he or she would take for goods or services nor does the buyer tell the seller what she or he would be willing to pay. A merchant, even an honest one, is unlikely to divulge information about the market around the corner where the same item can be bought for less. Can we buy our way out of the serious challenges that lie ahead? It depends on our objectives and where we spend our money. How will people react? What questions we will discover?   What questions are we willing to entertain?

The increasing income gap between rich and poor is an issue that demands attention. Does it require a re-distribution of wealth, a Robin Hood taking from the rich and giving to the poor? In the short run this might work, but in the long run finding and moving UI may be more important. Economists then should also look at policies that encourage the creation of structures that help to find and filter information at the local level for maximizing security at that local level. There is a need for micro-restructuring, but only temporarily, and only for the purposes of finding and moving UI.

2. Growth

How important is GDP growth to human welfare? A graph of The Utility of Happiness measuring Contentment versus Average Income show a point of divergence where incomes continue to increase but separates from the relative flatline of contentment. Stated another way, no further increase in income will bring a further rise in happiness. (Easterlin, Layard, Frey, and Stutzer – Journal of Economic Behavior and Organization, 1995).

This divergence of happiness and income is showing us something important. People at the lower end of the income ladder work to meet basic needs of food, water, and shelter – their Maslow Basic needs. Some would include basic healthcare and education as part of the Maslow needs, a sort of Maslow Plus. In a modern society it is difficult to argue against this. These extra benefits are products of group efforts, not simply the individual effort required to obtain food, water, and shelter.

Those who have reached the Maslow Leisure Level may be motivated by other factors of status, power, or ambition. These characteristics are tied to what we think of as more aggressive people, so the label “leisure” may be misleading. It may be a perception of how others see them or the impression they themselves try to convey, leisurely strolling from one high-end shop to the next. Beyond that caricature, many people at the upper end of the income scale are not content to simply work for the basics and may want to focus effort on other things as well.

On the surface, maximizing GDP makes sense. Jobs should simply follow. But what kind of jobs? And at what income level? If employment were the only measure of economic health, we could hire one group of people to construct widgets and another group of people to de-construct those same widgets. We might all be employed. A more serious appraisal requires an economy connected to reality at some level in order to produce products and services that sustain us in the real world.

If GDP is not maximized, what else could be? An alternative and equally valid goal is to maximize security for an individual and the community within which they live. Security could be more important than maximizing GDP but less quantifiable, although it may be quantifiable indirectly by choices that people make.

Stability has become a mantra and de facto goal for economists and politicians alike, but stability is not exactly the same as security. Dictators like stability too and will use security – or lack of it – against their opponents in order to enhance their own security.  True security is able to change and keep up with a changing environment.

A writer from Ghana finishes his “Prayer for the Family” poem with the following:

“ . . .

This day again

you led us wonderfully.

Everybody went to his mat

satisfied and full.

Renew us during our sleep,

that in the morning

we may come afresh to our daily jobs.

Amen.”

(Sacred Poems and Prayers of Love, ed. Mary Ford-Grabowsky. Doubleday 1998)

This simple but profound prayer says much of what we wish, both for ourselves and for others, to get out of bed and do our daily jobs (GOOB for acronym lovers). It could be called “The Prayer of the Economist” since it covers the wishes and prayers of many economists as well.

A wrench has been thrown into this idyllic world: automation. Automation continues to take away jobs in the same way that farm mechanization took away the need for farm workers. Much of the loss of human jobs is to robots, computers, and automated processes. One can see this loss of jobs every day – at the grocery store, the toll taker on the bridge, the computer voice on the phone. A natural question that seems to follow would be “How do we keep people employed?”  Some countries have decreased the number of work hours per week to spread out the available hours. Such a solution may seem fair, but it is hardly the best use of the labor force. Decreased hours lead to decreased take-home pay and a widening Income Gap, neither a desirable nor optimal solution for maximizing security.

 An Economy of Information Structures – Part 1

(First in a 10 part series. Reprint of all 10 parts by request. )

Contents include:

1. Intro
2. Growth
3. The Free Market
4. The Power of Useful Information
5. Structures of Information
6. Systems
7. Power
8. Models and Metaphors – Catching Reality
9. Meaning and Morality – Politics and Power at the Local Level
10. An Economy of Information Structures – EIS

Part 1 – Intro

The 2008 financial crisis revealed an economic system that had serious flaws, causing many people to ask whether economics or the financial system need to be restructured. Was it a political problem, an economic problem, or was it systemic? Histories of financial boom and bust in many parts of the world suggest that there may be something in human nature or possibly in our economics that draw us into this cycle over and over again.

Admittedly it is difficult to change human nature but we can change the framework within which we live and think and work. This framework finds and creates information that becomes part of a belief system. Much of the restructuring can and should be at the local level with the intent of gathering Useful Information (UI). Using a broader definition of “information”, we must include not just data but input from any of the senses.

Finding and moving UI will be key in many challenges we face, especially when the environment is changing rapidly. Government creates another major, yet subtle framework within which we live and work. Even so, governments can still only supply part of our security. During long periods of stability leaders need the advice of historians and experts who know what worked in the past. During times of rapid change however, it becomes necessary to find additional new information and ideas – ideas that might come from anywhere.

In this paper we look at concepts of information flow, power, and leverage, plus information filters, structures, gradients, systems, a bit of psychology and religion.   Then we look at the four M’s of models and metaphors, meaning and morality. What is morality? What is the importance of competition? Finally we discuss what Herb Simon called the “Sciences of the Artificial” in an effort to find what other tools might be used to maximize security and create a longer lasting change.

Some words and concepts used here are defined explicitly. The reader may not agree entirely with the definition but it’s a useful starting point for discussion. A few lower case words are capitalized here to emphasize their importance. Some examples are given to clarify the concepts but readers are encouraged to consider examples from their own area of work and study.

                                   

The R-Bond Solution – The site of money injection does make a difference.

2008 and subsequent years saw a slew of bank failures. Weak economies around the world seem to be pulling us into another recession. When the Fed looks for tools to stimulate a lagging economy, they have ZIRPP’s, NIRP’s and a few QE’s as the few tools lying scattered at the bottom of the Fed’s tool box.

One way out of this dilemma might be to restrict the type of bonds that the Fed are willing to buy. If the economy goes into recession again, or if there is serious deflation, some banks will fail from over-exposure to bad debt. They will ask the Fed for a bailout. This is an opportunity for the Fed to purchase only Restricted Bonds (R-Bonds or RB’s) from any size bank rather than the QE’s in which the Fed purchased bonds only from a few large banks. By purchasing R-Bonds, the Fed could essentially underwrite 50% (e.g.) of face value of a bond. A $100 bond, paying $100 on maturity, would then cost the investor $50.

Bonds are and have been used frequently at many local levels to raise money for schools and needed infrastructure. These are for specific use and must be supported by people at that level who generally have a better understanding of what is needed.   In the case of Restricted Bonds, that bond must be restricted for use by designated type. An RB for bridges is only for bridges. An RB for schools is only for schools. e.g. An R-Bond for digging more coal would be short sighted, a fact that even people who live in coal country would realize when bankers in NYC may not.

The type of RB can be designed and chosen either at the Federal level or at the local level. Any specific RB can be blocked from implementation however, only at the local level by small cross-sectional groups of local level citizens (maybe chosen by birthdates). Local level people will have an understanding that there are limited funds, even with R-Bonds, since the local level and investors together must raise the other half of the bond money.

If RB’s can be started at the Federal or local level, the role of the States is to audit the process, making sure that the money is used for intended purposes. This process can be done expeditiously. It can save banks. It can re-direct the economy without picking specific winners and losers. RB’s can be created and sold by small and medium size banks too. RB’s can hit three birds with one stone: the economy, needed infrastructure, and clean energy.

There are other tools. The site of injection does make a difference.  An R-Bond stimulus can offer predictability for business investors. Employment must be in the areas that will help us survive and prosper. R-Bonds offer another site and a safer way to resuscitate the economy.

 

May 2, 2016