Monday, April 1, 2013

The Weather and the One Percent

From The Insupportable Equilibrium of Economic Thought by Mark Buchanan:

We’ll never understand economies and markets until we get over the nutty idea that they alone -- unlike almost every other complex system in the world -- are inherently stable and have no internal weather. It’s time we began learning about the socioeconomic weather, categorizing its storms, and learning either how to prevent them or how to see them coming and protect ourselves against them.

Buchanan's thought reminds me of this, from The Roaring 80s:

Kenneth Boulding, the distinguished economist, wrote that in the Great Depression, economists wrote about unemployment as if it were a bad hailstorm; then the Keynesian revolution gave some hope that nations could do something about the 'economic blizzards' that had previously been considered as random as the weather.

We can do something about the weather. We can prevent the storm.

Evaluating Buchanan's remark, it seems to me that there is a unique relation between learning how to prevent the storms and learning to protect ourselves against them. If you think of "protecting ourselves" as "every man for himself", then no. But if you think of it as protecting *us* -- protecting the people of this great nation -- then a unique relation exists. For it is exposure that creates the storm. And the method by which we protect ourselves is to limit our exposure to the weather.

If we -- all of us -- limit our exposure to the weather, the storm never comes.

Here's the catch: If almost everybody limits their exposure, then the weather is good, and the few who do expose themselves profit immensely. The ease with which such profits arise makes for a clear and sunny day, and everyone wants a picnic. Soon, therefore, the exposure becomes great; and exposure creates the storm.

You cannot run the economy the way we run the economy, and hope to achieve either prevention or protection. If you want prevention, you have to create limits that apply to everybody, not to almost everybody.

And if you want protection? There is no protection but prevention, or to be among the one percent.

 Also on storm prevention: An Arthurian Future 

No comments: