Wednesday, January 11th, 2012 at 7:30pm

Government can best help the economy by staying out of it.

Posted by admin
Trying to centrally control a large Economy is as impossible as predicting the Weather.

Advocates of government control somehow skip over the fact that they are reading tea leaves. It is impossible to predict the future of economic interactions and therefore impossible to create rules that cover every eventuality. Without an accurate forecast where do you even start? It’s like trying to steer a car with opaque glass.  Before you make any changes you need to know where the thing is going.  Without a clear view the car or the economy will likely crash and burn.

“It’s tough to make predictions, especially about the future. ” – Yogi Berra

It is impossible to collect sufficient information to make a forecast for more than a short time into the future.  Even if your data is accurate, there is a limit to how much information you can collect and calculate, before everything changes and you need to recalculate.   It is also impossible to predict “Black Swans”, unexpected events that have a large effect.

If you can only predict a few minutes into the future with the system as is, then you certainly can’t know with any precision what effect any changes you add to the system will have.

Weather forecasts are updated by the minute. How often is legislation, regulation and law updated?  Weather forecasting needs constant feedback from thousands of sensors.  So too does the economy need feedback from individuals and businesses.

Government systems have no such capacity.

To determine whether to use an umbrella, I look out the window every so often.   When I walk down a crowded the street with my umbrella, people use their own eyes to avoid bumping into each other.   I don’t need an umbrella law, at the National Level, to manage umbrella usage.  Most business regulations make about as much sense.   Sadly, the reason for many of these regulations, is to put small business at a disadvantage to the big corporations that fund the Politician’s campaigns. 

“every occupation, prospers by the aid which each receives from the other, and from the whole.  Common interest regulates their concerns, and forms their laws; and the laws which common usage ordains, have a greater influence than the laws of government. In fine, society performs for itself almost every thing ascribed to government.… Government is no farther necessary than to supply the few cases to which society and civilization are not conveniently competent. – Thomas Paine – “Rights of Man”
One need go no further than traffic congestion on the highway system and the roads to see why central planning does not work.   The future can’t be predicted, there is no mechanism to adjust future capacity as needed.   Small towns have better roads than some State and Federal Highways, because they can respond in a timely fashion to needs.   Politicians in charge of a large system can never make perfect decisions.  NEVER.  A distributed approach is the only way to respond to changes in a timely fashion. 

What’s wrong with Central Control?  Don’t we need control to stop the “evil corporations”,  “greedy rich”, dangerous products, health risks and the irredeemable nuts from the opposite Political party?   Sarcasm aside, is central control the best way to control anything?

Ever try to get something done with a group?  After trying to be everywhere at once and supervise every detail, exhausted and stupefied, you learn to set a goal and delegate tasks and authority.  Even in a small group like the boy scouts. a small business or even the home, miscommunication, fighting , disagreements, backstabbing and jockeying for position happens.  Tasks may be performed poorly, in an incorrect manner or not at all.   Fear of authority, consequences, ridicule or just plain laziness lead to covering up what was done wrong or is not working.   Feedback may not be spoken or reported.  All this is difficult enough to deal with in the small.  In the large, well…. you might be better off not leaving your garage.   

A small group of humans, especially the cream of the crap the Political parties elect to Congress,  cannot process the immense volume of data from millions of humans, hundreds of thousands of businesses, schools, farms, stores and on and on.  They can never know all their needs, correct wages and prices, or the effect the centralized controls have.   Plus, realistically, due to the limitations of physics, this can’t be done in real-time.  Even if by some miracle and God-like Computers they could pull it off, they could not respond in time, due to the inefficient nature of bureaucracy.    There are uncaring, dictatorial, unresponsive, inexperienced, politically elected or pulled in through Nepotism, incompetent, sometimes psychotic, anti-social or just plain lazy and stupid people involved in the process of making something work.   There will always be a high probability for screw ups and distorted communication with having so many layers of unfit, or even perfect, bureaucrats to filter through.  Things don’t get done properly on the way down the layers of bureaucracy and feedback does not find its way back up the chain of command.

And then there is corruption.  Governments become centralized due to the lust for power by Politicians and their cronies.    To maintain their power, their feeling of worth and most importantly their egos – to make-believe they are superior to the common masses, they need to make all the important decisions.   As their schemes lead to more inefficiency and chaos, the rulers increase controls to the point of becoming soft, nanny state or hard Police state tyrannies.  Centralized governments have large resources at their disposal (they take what they want from the people).  Coupled with the rule of the wrong cadre of people increases the probability of war.

The solution:  Distributed control and processing together with Checks and Balances on power, Quality Assurance and Accountability. ( The Founders put Checks and Balances into the constitution, but Political Parties, which span all branches of government and take away the representation from the people, render those controls useless.)  

Some Examples to prove the point:

In the Software, Computer, Network and Internet world – distributed local processing is the only way that works because Central processing would be overwhelmed with all the data and tasks.  If computers can’t handle Central processing, and they are so much faster, why would anyone think Humans can do it.  Large economic systems, Government systems, Health care system, in fact ANY large system, functions best with Local distributed processing.

The Internet is NOT centrally controlled.  It is made up of millions of computer routers and Servers, each adjusting its own traffic to the most efficient possible.  There is absolutely no way to predict every interaction or create rules that wouldn’t tangle traffic to a standstill.  There are only some basic rules and everything else is negotiated in real-time. 
 The economy is the same way.  Private people and companies are responsible for their small section and negotiate in real-time.  There is no way to predict every interaction or make rules that wouldn’t tie up the economy or drive it into a standstill (depression).   Too many rules slow the economy. 
Inferior and municipal courts are distributed processing.  Imagine if the one Supreme court had to judge every case.  If the Supreme court can’t do it, why does anyone think that the central government can plan economic details – which are a far more numerous than court cases.

The Military uses distributed processing.   Local Commanders handle the vast majority of tasks such as discipline, promotions and citations, supplies, food, equipment maintenance,, training, schools, housing and many more, all the while making sure the goals of  the Joint Chiefs are being followed.  No central command in the Pentagon could accomplish this.  They realistically know that information is only known, and decisions must be made, at the local level.   Especially in the split-second environment of the battlefield. 

Representative government is distributed processing of Democracy, when the population gets too big to be heard efficiently by one central authority.   Elections are also distributed processing and not centrally controlled.  State or Provincial government power is distributed processing. 

To guarantee distributed processing, the US constitution states that power not explicitly granted to the Central Government or explicitly forbidden to the States, is reserved for the States and the People. Our problem is that the Central government no longer obeys major portions of the original Constitution and has grown to the point where it cannot manage anything (I mean anything) properly.

Even Representative Democracy breaks down with too many people.  There is a limit to how many people can be represented or managed properly and how many representatives can be gathered without chaos.   In the US, the Constitution limited representation to 30 thousand people per district.  We are now at 600 thousand per district.  With so many people, the representative can not know what their district needs.  More problematically, he or She works for their Political party’s interests not the people’s and our districts are constantly altered for the best political outcome for Political parties

One solution is to do what Jethro told Moses to do in the Desert with 600 thousand people, which we already use as the model for our distributed court system.   Moses was overwhelmed trying to judge everything so Jethro suggested that… Every 10 people picks one to represent them.  (you can start at a hundred or 30 thousand if you want)  These representatives gather in a group of 10 people, who now represent a hundred, to discuss their respective issues. If there are issues that still need to be forwarded they pick one (who now represents a hundred).  These representatives gather in a group of 10 people who represent 1000, then 10 who represent 10,000 then 10 who represent 100,000 and so on until only one comes to Moses (or the government) with any issues that have not been addressed at one of the prior levels.  This way, we are assured that all the issues have been dealt with, instead of only one representative impossibly trying to understand the needs of 600,000 and take action on their behalf.  This would also get everyone to know at least 9 neighbors and get everyone to participate in the Political process.

Using technology and instant communication to find out what 600 thousand people need is unwieldy and is best spilt into smaller tasks with a few sub representatives.

Another example why economic control MUST be distributed and not centralized:
If I drop a rubber ball down my stairs, I can reasonably tell you where it’s headed after it hits the street. There are only a small amount of interactions and I can figure out by myself what effect they will have on my ball. I can even plan how to drop the ball so it bounces right into Mr. Busybody’s coffee mug.

But if everyone on the block drops a ball into the street it is extremely difficult to predict where any individual ball is headed or to know quickly enough how to influence an outcome.
If the goal is to prevent collisions let’s say, then as an individual taking care of my ball, I can determine if I need to run after my ball and pick it up, kick it, stop it, blow on it or even throw another ball at it based on what I see. So can any of the other individuals. Voila!  No collisions. That is the Free Market.
 If I tried to take care of two balls at once.   Maybe I could squeak through if the balls are close together. Three? Forget it. A street full? Maybe when pigs fly!

Imagine how hard it is to make up a general rule for all balls to avoid collisions. Just trying to calculate with three balls stumped mathematicians for hundreds of years. Calculating a Street full or an economy full or a global economy full is impossible. The variations are literally close to infinite. You have to break the calculation down to small sets of information. That is why government regulations can never take the place of the free market made up of intelligent individuals. 

A general rule can never replace a General. – Dr. Society

Did you ever plan a vacation? Flights, clothing, packing, coordinating schedules, parking, security checks, passports, excursions, tempers, frustration, motion sickness, medications, pictures, phone cards, gifts etc. There are so many things to get right just for a week.
Could you handle planning your neighbor’s vacation while you plan yours? How about planning your whole block’s vacation? If that makes your hair turn gray do you really think a few Politicians can plan millions of vacations, much less millions of businesses?

Central Control is a pipe dream.  Don’t get hooked. – Dr. Society.

Think of the game of pool. Think of the break. Can you predict where each ball will roll after the break?  It’s easy enough to predict when you hit one ball into another. But it gets progressively harder when you try hitting one ball to move a third and unbelievably hard to predict where the fourth ball hit by the third will go.

Imagine if all the balls are in motion. Now try making a shot.

But what if each ball could steer and find the pocket on their own.   That’s the free market.   If you keep your hands off,  you will have a perfect score.   Any control you exert will likely mess up the correct trajectory of the balls.

Government can best help the economy by staying out of it.

But they don’t.  Because they realized they can cheat.   They can’t control the system so they break it.   If they cover up some of the pockets (through regulations) then all the balls divert into their pocket.   Better yet steal the balls before they even get on the table (Wage and Payroll taxes).  Any wealth left over is stolen via more taxes, borrowing from foreign bank and the FEDERAL RESERVE printing money (which the people pay through devaluation of the currency) … and yet more taxes.

Our minds and creativity and the resulting Technology and increases in production due to technology are the only source of growth. The constant theft of the government (which appears as price inflation but is really the Deflation of the value of the currency hence prices must adjust upwards) is hidden by the deflation of prices due to technology. That’s the only reason the government can get away with it and not kill the economy.

In the end everyone could have been 100 times richer, and the economy much larger, if the government stayed out of it and didn’t take it all.