The subtitle to this entry is “Clinging to Religion and Guns”. Many people did not like Obama’s remark, however it is true. Don Bush’s policies have bankrupted this nation and people will have to move into the high population density regions. Force Labor Migration is what one should expect in a service economy. The only thing that cannot be exported readily is people. GE’s push on “Build, Build and Build America’s Infrastructure” is too late. The only valuable infrastructure will be along the interstate corridors. Why bother to fix up state roads and highways when the population is force to migrate into the high-density regions?
Up to a Morphism
Mathematicians use this term all the time, but what does it mean for an economist? The term is applicable to a structure-preserving map between one set of variables to another. The variables may not be related model wise, yet be relate algebraic topology wise. Let us take two unrelated issues the US of A public is faced with. The issue of private-public investment in roads and the issue of net-neutrality (Senator Stevens so call tubes for dump trucks).
Net-neutrality is a fight between the service’s business model base on $dollar value by a media broadcaster for their content. This content is sold by the service provider to their subscribers (the “OLD Media” model). The new media model is depended on the end user ability to have access to all sites. Net-neutrality means “old media” must be destroyed and morphed. Economic nomenclature would use the term creative destruction.
Communities are faced with a policy decision. The policy is a trade off between more channels represented by a communication lines to fewer channels, limited by spectrum space. Free Market competition dictates service providers must spend the capital for their own communication line (Dedicated Subscriber Line). Free Market Principles means each house should look like the image below:
Efficiency and society may wish to remove some of those lines. Society must answer the question of competition, access and growth. The explosive growth of the internet has caught some of the service providers short of capital expenditures.
Investment in roads has become an issue. A dedicated distribution system is in use by society. A few roads allow many to access to their particular “space”. The value of a road is directly related to the traffic on the road. If one takes the view that, the Free Market can predict the future, then one can conclude the road systems private companies are interested in are the regions of high population growth and the rest can be abandoned. History recorded this event as trucks vs. the railroad. The result of this event leads the railroads to abandon un-economic trunks.
Can you “see” the morphism? Can you describe the policies? Nice questions for economist to give their students.
If society decides to fear the “outside” then a government policy must allow production to be de-centralized. If society decides to become a service economy then one expects to have a boon in “ghost towns”. One should also expect an outbreak morph into a pandemic and to accept huge population loses due to “dirty bombs” and “Bio/Toxic” attacks.
If society decides to go with the “old media” model then one expects the internet to lose business. If society decides to go with “new media” then one should expect some clash with those who wish to social engineer.
I will account my personal experience on trying to start a company in Spokane, Washington. First, some background on the inept political and business leadership. (This rant does not include newly elected officials since they have not been caught with “their hand in the cookie jar”)
This one was really dumb; Petitioning for the creation of a new state in Eastern Washington.
Yep, that’s right SJM 8009 - 2005-06 is on the books.
There is an economic development organization. However, they are still attach to that treasonous organization Anti-US Chamber of Commerce and their Nazi Ideology and Fascist Dogma. Referendum Measure 67. They dictated it was All Trial Lawyers Fault.
Dysfunctional Gonzaga‘s New Venture Lab. This program was a real disappointment. They did not know how communicate. I guess picking up the phone or using e-mail was too difficult of a task. What do you expect from a bunch of students?
Dysfunctional EWU and WSU. They could not write a two-page project description outlining the experiment for Washington Technology Center grant.
I only write what I experience and my experience indicates not everybody has the same opportunities. There is a two-tier society. I live in an impoverish region of the state. The bad news is that it is the leadership of this area’s fault.
My expectation is that Spokane, Washington will become a impoverish “ghost town”. The population will become segregated into those that have the money and move and those that do not. Those that do not have the money will age. The services some areas provide, such as Jitterbug, will become un-economic in this area.
One can find a mathematical description that shows the driving forces behind the numbers. Let us start with Neoclassical Theory of Production’s return to scale using two inputs, capital and labor.
In a global environment, firms have many labor sources. This allows the use of convolution theory.
Given the same conditions, in each labor market, the firm has the same output. If the labor source has an overall lower cost, then the firm can either receive a higher profit margin and/or higher output. One can analyze the effect on society when there is a release of labor resources. Let’s face it, only one of two things can happen: either a policy is develop that picks up the labor slack and maintains society’s purchasing power or labor will have to lower their overall cost structure in order to compete. Don Bush’s policies have broken US of A’s labor monopoly. The US of A is taking the identity of the low labor cost counties’ labor force. Poverty has become entrenched. Society breaks down when poverty becomes entrenched. The poor have no loyalties to the government. Their loyalty is to those that can meet their needs. Whether that entity is a religious organization or is criminal. US of A’s society has gone chaotic. It is every man woman and child for himself or herself, this election cycle not withstanding.
The convolution theory of labor can give a hint at the economic and society’s forces involved. Assume a Hermitation matrix in the Producers Transition Matrix (if one does not like complex entries then one has to use a symmetric matrix).
With respect to society’s PTM, the constant is now one. Neoclassical Theory of Production dictates a drop of output (return to scale). There is a change of eigenvector with respect to society. In other words, the roots (eigenvalue) of the eigenvector have changed with a shift of production off shore.
One needs a “plausible” mechanism that will lower the wage structure of the labor force as an aggregate. In economics and business operations there is a field of math called dynamic programming. This is a set of procedures used to study inventory, how much capital should go into which plant, etc…
Government acts as if it is using a Monty Carlo type procedure to evaluate the value of policies.
Businesses act as if they use a Temporal Difference type procedure to evaluate the value of policies.
Example:
Given 8 episodes like the following;
1) Start in state A and go to state B with a reward of zero. Then go from state B to the termination state with a reward of zero.
2) Start in state B and go to termination state with a reward of 1.
3) Start in state B and go to termination state with a reward of 1.
4) Start in state B and go to termination state with a reward of 1.
5) Start in state B and go to termination state with a reward of 1.
6) Start in state B and go to termination state with a reward of 1.
7) Start in state B and go to termination state with a reward of 1.
8) Start in state B and go to termination state with a reward of zero.
The best value for B is 6/8 = ¾.
The best value for A is also ¾ using TD. The math ignores going from state A to B (zero reward). However, there is a 75% chance that B terminates with a reward of 1 (first episode was bad luck). Monte Carlo would have assigned a zero for the best value for A.
Two points are to be made about TD predictions.
- TD finds an estimate that is exactly correct for the maximum likelihood model of a Markov process. The “race to the bottom” is a maximum likelihood model of a Markov process. There can be other actions a firm can make like look for new source of materials, change their process and or cut their wage structure. It is generally recognized that labor is the major cost of a firm (unless one is an airline in which case the cost of jet fuel has become the major cost). But, the fastest way to cut cost is to cut labor.
- A TD procedure converges to the optimal reward value faster (in most cases). This point can be translated as while “Nero plays the violin, Rome burns”. In other words, a severe drop in economic activity would be a surprise to those who want to wade through all of the data and then change policy. This is the current thinking of the Bush administration. They what to wait until they can measure the effect of the stimulus checks before acting. I expect GDP to drop like a rock.
Viva La Revolucion!
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