Open Letter: The Fed Needs to Provide the Public Some Perspective

To: Federal Reserve Chairman Jerome Powell

Dear Chairman Powell,

The Fed is in an unenviable position today having to contend with problematic inflation, the economy’s restoration, employment disruptions, and the rather unpredictable interactions of the COVID pandemic with all aspects of life and economics. The uniqueness of the situation cannot be easy if one considers there is no reason that the normal understanding, theories and tools which economists would apply to helping sustain and guide the nation’s economy along a viable path can have the intended impacts expected. Add to this situation the normal or even heightened level of different opinions and perspectives that you share with the other Board members, the increased opinions and views of other economists, the always well-informed politicians, and the astute coverage which the news media provides on economic matters; and given those unusual conditions what could possibly go astray. Though the Fed’s tasks are neither easy nor often appreciated or understood, those efforts may be more important now than in recent memory.

The Fed’s decision to advance its “tapering” and accelerate interest-rate increases is just a reflection of the rapid dynamics that the US’s COVID-Consumer Economy is producing.

The unusual and extraordinary circumstances are changing daily and may call out for something even more unusual than the events causing them. The US “Misery Index” is high even though most economic indicators are remarkably in good territory. Inflation of course being the pernicious outsider, and chief factor threatening the recovery and the economy.

Given the economic risks to the current situation, the nation and the public need more than a calm and measured hand(s) on the economic tiller. The country needs someone to provide a more informative context in which the public better comprehends and recognize how our behaviors and reactions in these conditions may not act in our own best interests. America desperately needs a little grounding in economics. If the public does not connect the reality of the economic situation to their daily lives, their individual actions and choices are not just likely to cause the nation to suffer worsening impacts simply because we do not recognize how they are contributing to it by “being part of the problem”.

In a Consumer heavy/dominated economy, the aggregate behaviors of the consumers can easily overpower any other force(s) attempting to move the economy. Archimedes’ apocryphal quote: “Give me a place to stand and I will move the world” doesn’t just provide a lesson on mechanics or some salient life-lesson about the influence you can have by being in the right place and acting to some purpose. His “moving of the world” perspective can also inform our understanding about what moves the world; and how it is moved intentionally or moved without recognizing our own contribution to the ‘push’ on the lever. Ending ‘tapering’, raising rates, and other moves by the Fed are prudent steps but those steps may not exert enough leverage in time to counter the effects of the “800-pound” Consumer pushing on the economy and Inflation. Perhaps the Fed should consider using a tool that it has ready access to but may not recognize or feel is theirs to use.

The Fed should talk to the public about the Economy. I don’t mean talk to the financial industry, the banks, the Market, our political leaders, or the media. The Fed already does that. I mean talk to the public. Talk to the people who are the economy. The Fed needs to “inform” the public about how people ‘are’ the economy; and about how if you don’t understand the rules you are playing by you suffer the consequences, whether you like them or not. Perhaps you / the Fed think this is not your place or job; but you may be missing the most powerful lever and place from which you can ‘move’ the economy in these aberrant times.

This ‘informing’ goal cannot be done by ‘teaching’ economics 101; rather, the economic conditions operating in the public’s daily lives needs to be used to connect economic “cause” to economic “effect’. The reasons the Fed needs to do this are many. You want to increase confidence in the US’s economy, increase public belief in the Fed’s efforts to counter the conditions threatening them and the economy, and instill confidence in their own ability to act to help themselves. There are probably other reasons, but the above should be sufficient to justify the Fed acting to serve and inform the public’s need to know. If they act out of ignorance or fear, we already know the likely outcome. The current obsession, concern and focus on Inflation alone is indicative of where the public would benefit from understanding how their actions are moving multiple levers, each of which move inflation in the wrong direction.

There’s another reason the Fed needs to improve the nation’s understanding of how the economy depends upon the public understanding the economy in their own terms. Just knowing that the economy acts on multiple timelines simultaneously would be helpful. Does the public understand the Fed can only act in advance of a concern that is projected or in reaction to an unforeseen crisis after it has occurred? These disconnects between the forces that constantly drive the economy based on its underlying processes and the delay required for Fed interventions to work helps demonstrate why acting now is a corrective and not an immediate solution. Enabling the public to participate in moving the economic levers within their reach can help adjust the processes effecting their concerns. This knowledge is key to building the public trust and reducing their fears.

The value to the Fed of engaging in this effort would be it aligns with their efforts for influencing the future of the economy. The Fed is more likely to succeed in achieving its objectives if the public is engaged in accomplishing those goals. Just as importantly, if the public has a better context to understand their own choices, hopefully they won’t be acting in ways that obstruct the Fed’s efforts or actually worsen inflationary factors.

Just like timing is critical to confronting economic crises, your decision to engage with the public more fully will affect how effectively the Fed’s actions can be in reacting to crises. The Fed can choose to just depend upon the tools it currently has at its disposal, or you can choose to enhance the toolkit by empowering and engaging more forces that can brought to bear to rein in Inflation or whatever economic crisis needs to be dealt with.

If this perspective only provides you something to think about for a minute or two, I wish the Fed success in its endeavors.

No! More Math? Yes, But It's Simple Addition - Rogue Thinking #3

 

If you recall from Rogue Thinking #2, there is presently an enormous difference between COVID infections, hospitalizations, and deaths between vaccinated versus unvaccinated individuals. The difference does not favor the unvaccinated. But besides being a generally expectable outcome, there is more to be learned from this difference.

For one thing, the idea of ‘herd-immunity’ is shown to be more complicated than the simple notion of how a disease spread through a population until that population is either rendered self-protected, decimated, or extinct. COVID isn’t virulent enough to pose an extinction outcome as no totally lethal variant has emerged though that is always a risk. But even should one emerge, it would be highly unlikely to annihilate humanity but rather the current level of modern civilization. In essence, herd-immunity would be achieved by reducing our large civilization herds to small isolated pocket herds.

The COVID variants present today are following the more classic notion of how a disease spread through a population and reduces the herds numbers by some percentage. The way the disease spreads and the ease with which it is transmitted determines how quickly it reaches its herd-immunity state. The current phenomenon where COVID is producing the high differential outcomes between the vaccinated and unvaccinated might seem to be both obvious and puzzling at the same time.

On the obvious side is the basic expectation that vaccinated people either do not get ill when exposed due to their acquired immunity or their illness exhibits much lower severity of symptoms if any at all. Whereas the unvaccinated will results in outcomes expected from infections without any pre-infection acquired immunity. If you have a population evenly divided between vaccinated and unvaccinated that difference become apparent immediately. If you start with a totally unvaccinated population, you get the pandemic results that we saw with COVID. Once vaccines arrived, this created a new grouping within the population and the differentiated results begam emerging. From this ‘obvious’ perspective there is nothing unusual going on here. Except, there is more going on.

In your typical ‘herd’ there is just that transmission process operating according to laws of physics, biological activities, and laws of probability. The disease spreads, produces its ‘natural selection’ outcomes, and eventually creates the ‘herd-immunity’ end-state (of whatever type the particular disease creates). But that is not strictly true for COVID, or more precisely, the processes which are controlling the spread and results for the human herd.

In the US, COVID outcomes have diverged in concert with vaccinated versus unvaccinated as noted above. However, what are the “cause and effect” relationships which account for why someone is vaccinated or unvaccinated? If some people could not get access to vaccinations, then the question would be: “Why not?” But the evidence indicates the vast majority of unvaccinated people have self-selected to not be vaccinated. Is that self-selection just a random decision even distributed through the population? No. The data/evidence tells us that one of the most prevalent factors associated with this self-selection is political alignment. Given that the COVID virus is non-partisan, the connection of spread and outcomes to politics warrants some consideration regarding why.

It could just be that if you are unvaccinated that’s it. If vaccines are 95% effective, then viola! That would say that 1 out of 20 vaccinated people are not adequately protected, while all of the unvaccinated remain exposed. But that is just part of the obvious understanding of the situation and the simple math. Why are the bulk of the unvaccinated aligned with a conservative political party? This doesn’t mean that no conservatives are vaccinated or that no liberals are unvaccinated. It just means that there is numeric imbalance between those two orientations.  To explain the different outcomes, Occam’s razor would conclude that that is the simplest explanation. Your political alignment influences your self-selection choice, and that choice produces the predictable outcome based upon your party.

But there is much more that can be learned and that can be contributing to the excessive hospitalizations and deaths among conservative members of the population. For the simple math to explain it all, the disease must be spreading equally throughout the population which requires physical conditions to be the case. For example, the population of conservatives and liberals would uniformly distributed, the prevalence of the virus has to be uniformly present throughout the population, or method(s) of transmission has to be uniformly operating across the population. None of these conditions are or have been true. Consider how population density can be influential in where and how the virus spreads. Early in the disease it was most prevalent in high population density areas. What might influence key elements of transmission within the conservative population?

There are some very likely candidates. While no one candidate needs to be the ‘one’ that is causal, the aggregate affect may account for a significant part of the process producing the disparate results. Consider some of the following population attributes and factors:

·         Parents’ political party/alignment

·         Place of birth or where you were raised

·         Religious affiliation

·         Political orientation of friends, co-workers, neighborhood, community

·         Education: level, quality, region (urban, suburban, rural), economic status, major, …

·         Career / Employment

·         Economic status

·         Other factors which have some influence over your political alignment

Why do these attributes and factors matter in what political party you choose to align yourself with? Well, because each of them is part of the environment in which you grew into who you are. You learned from all the things that made up your environment and that presented you with the ‘facts’ and ‘knowledge’ about the world. If selecting your own political/ideological view were just something that you did and was not connected to these factors, math would say the data we see would be highly improbable. Children are much more likely to be/choose the same party as their parents. Your friends, neighbors, and community are more likely to be of your political alignment. If your religion is aligned to a political party, you are also likely to be. Much of this is due to your exposure to the ideas, values, rules, and behaviors that you experience as you grow from childhood to adulthood. To be a member of a family, a group, a community, or a region and be accepted by the other members puts a heavy burden on following the precepts of those entities. This doesn’t mean that there are no individual differences or rogue members but that there is a tendency toward a common perspective (a convergence toward the average). Being different is acceptable, as long as it is not too different and doesn’t violate an absolute behavior/belief of the ‘group’.

Conservatives (and liberals) are commonly found to live in communities/regions which are mostly concentrations of conservatives (or liberals). To paraphrase the “You are what you eat” concept, “You are where you grew up”. It is very human to be ‘tribal’.

What does all this have to do with COVID and the 20 to 1 disparity between the unvaccinated and the vaccinated? Well, if your ‘tribe’ decides that being vaccinated goes against the tribal values and is a betrayal of your commitment to the tribe; well, then your desire to be a member of the tribe is going to influence your decision. Conforming to the tribe’s position may even provide a strengthening of the bonds and beliefs in the tribe. It’s just human nature.

If conservatives live in communities that are composed of mostly or more conservatives, if conservatives interact with and engage more often with others who are conservative, if conservatives are more likely to choose to be unvaccinated because not getting vaccinated is perceived as following a conservative value then the spread of the virus among conservatives is increased. The consequences of those infections being more severe for unvaccinated individuals will contribute to the known outcomes. The 20 to 1 disparity in hospitalizations and deaths makes perfect mathematical sense. The process of herd-immunity operates locally through the transmission of the virus from person to person. The concentration of unvaccinated individuals due to factors like political alignment just plays into this process. It’s just simple math. It’s the math of epidemics/pandemics. It’s the math of herd-immunity. It’s the math of Darwinian evolution.

It has now also become the math of politics.

What If We Did a Little Math? - Rogue Thinking #1

 Don’t worry, this really isn’t about math that you have to do, so much as math you ought to have already been thinking about. There is no heavy lifting here, but you may have to be able to follow the reasoning.

COVID is on the up-tick again in the US; well, lots of nations. But not every up-tick or ‘surge’ is like the others. Let’s just take a US-centric view. The first surge (Wave) was COVID spreading in a generally pristine population of available hosts but it was also much more geographically limited; it wasn’t everyone yet. It’s growth just reflects a simple power function, it increases as it increases. If this isn’t that familiar to you, perhaps you remember a story about someone, the “hero”, being asking what reward they wanted for accomplishing some task for an emperor/king/ruler. The savvy reward recipient simply asked to receive an item [for example: a grain of rice, a penny, a small plot of land, …] that doubles in number each successive year on the anniversary of their accomplishment. It’s a highly under-valued reward if the hero lives to long life. [You could have the reward double every month, week, or some set number of days instead of yearly if you are not a patience ‘hero’.]

The second Wave came along and still had access to a wide-open population where more people hadn’t been infected than had been. Plus, the number of points from which a transmission can originate was vastly greater as a result of the first Wave. It had carriers in every state. So, even though there were people who had been exposed there were many more who were able to transmit it to all the very many  others who had not been exposed. It’s just a numbers problem. Remember that “hero” story? Consider the implications if there are a lot more heroes and each hero creates more heroes; or in this case the heroes are the viruses and the reward is a punishment and it doubles say every week.

During the second Wave steps were taken to contain COVID and progress was made by states invoking policies for reducing spread by using social-distancing, masks, lock-downs, and the disruption of the easy ways to transmit the virus. It worked, the spread declined. Then summer arrived and we re-opened (or many states did) and celebrated. And of course, another Wave, the third, was upon us as the school year began. I think this Wave ought to have taught us a decent lesson about “cause and effect” but that’s a physics lesson and we are focused on just simple math here right now. The third Wave was the ‘mother of all’ surges. Clearly the opportunities for transmission were excellent. The most likely reason is by this time COVID was everywhere and still most people had not been infected. By this time, COVID and policies regarding it had become political issue. There’s no rational reason for this but then what has reason to do with politics. Two important things happened. We had an election and vaccines became available

By February the terrible third Wave was rapidly abating, vaccinations were increasing, and it looked like the nation was making excellent progress. The effort to vaccinate the population “surged” (I couldn’t help myself) but began to run out of steam. It seems there were a lot of people who didn’t want to get vaccinated. Remember that ‘political’ thing! Still, the incidents of infection continued to decline, but a new COVID variant (Delta) showed up on the scene. By July the fourth Wave had been seeded and would grow; and of course summer was underway and people wanted to get back to ‘normal’. I am not sure that people knew what 'normal’ they were going to be getting back to but there was still a large number of people remaining available to be infected; and the Delta variant was more transmissible.

This is where we need to do that ‘little’ math I warned you about. Something interesting started to happen during the fourth Wave or just became much more salient with this Wave. As the vaccinated portion of the population increased the availability of hosts shifted toward the remaining unvaccinated. This is not to say that the vaccinated population didn’t have some individuals who were still going to be infected. We are talking about a large population where the COVID immunity efficacy spectrum will still have some hosts that are exposed to the virus exhibit symptoms and get sick. Just as the unvaccinated population has its own immunity efficacy spectrum. What the COVID new infections data was beginning to show was the unvaccinated were 90% of those infected. The unvaccinated are also more likely to be hospitalized (greater than 95%), and to be the majority of deaths from COVID (greater than 92%).

This is all that has already happened. The math to understand that is simple. Look at the relevant numbers. What is much more important is what would some simple math tell us will happen?

If 71% of the population is vaccinated, then 29% isn’t. For a population of 330M people that 234M vaccinated and 96M unvaccinated. Now more and more people are getting vaccinated, I suspect because slowly the math is sinking in. But there is still a really big part of the herd that is operating under different math than the rest of the herd.

With 110K (average) new cases a day, this is 110,000 cased divided by US population 330,000,000; or 33 people per 100K citizens in a population. But If 90% are due to unvaccinated people than that is 99,000 from the 96M people who have freely chosen to remain unvaccinated. And thus only 11,000 people from the 234M who are vaccinated. Using those numbers: 99,000/96M is 103 people per 100K unvaccinated citizens; and 11,000/234M is 5 people per 100K vaccinated citizens. That’s a 20-fold difference. If all else were to stay the same, then 20 times more people die from just choosing to not be vaccinated. This should have some implications for the herd.

Remember that ‘political’ thing? If the choice to be vaccinated or unvaccinated is determined or influenced by that ‘political’ factor, then over time for every 1 person in the political group who vaccinates dies from COVID there are 20 people in the other political group who die from COVID. I am not sure, but shouldn’t this be a problem for one of our political parties? The amount of a problem it could be for them will depend upon how long the pattern plays out.

This could be the most extensive Darwin Award worthy of being awarded.

What If We Did a Little More Math? - Rogue Thinking #2

 

If you don’t remember or haven’t seen the simple math that was done for the Rogue Thinking #1 article, then hopefully you will be able to accept its basic results. Those results are:

·         COVID infections are running at 33 new cases daily per 100K people as of the first week in December 2021.

·         Between the 234M vaccinated people and the 99M unvaccinated people, a little math will show that the Vaccinated sub-population’s new case rate is 5 people per 100K and for the Unvaccinated sub-population their new case rate equals 103 people per 100K. That is a 20-fold increase.

·         This disparity between the two groups carries forward to hospitalization and death rates (or even increases).

What those numbers tell us does not have to be limited to just how COVID progresses within those two population groupings. With a little more math there are other things that we can learn or be able to forecast.

You might also remember there was a “political” dimension to these results. Whether the connection between political alignment and/or ideology and the decision to be vaccinated or not is an interesting aspect of the results, we can agree that it is what it is. But we can look at what is and use a little math to see where we are going. The relevant view is given these correlated positions: Vaccinated & low new case rate versus Unvaccinated & high new case rate, provides some useful future results that ought to be ‘informing’ us or others about strategies and actions that are being taken (or ought to be taken).

For example, there are the mid-term elections in just under a year. The vaccine mandate issue is already playing out between the political parties. So, what would a little math tell us?

Let us assume that 1/3 of the country is dedicated to one side, 1/3 is dedicated to the other, and 1/3 is not dedicated to either political side. To simplify things lets’ split this last 1/3 into equal parts that are attracted equally to one of the other two groups. Thus, half the population is in each political group. Taking the new case rates would say that over some period of time the two groups cannot stay equal. One group benefits at the expense of the other. Now for the math.

If the new COVID cases run at the current 33 people infected per 100K across the population and this continues for 1, 2 or 3 months. Then we would see 3.3M new case in 1 month, 6.6M new cases in 2 months, and 9.9M new cases over 3 months. Those numbers don’t change anything unless getting infected caused individuals to change their political alignment. We can assume that it does not. So, no impact on the political front.

However, we can’t stop (or should not stop) here. For all those cases there are also deaths (and hospitalizations). Deaths could have an impact in the political sense. For one thing, everyone who dies before the mid-term elections will not be vote for their preferred political party. [I am going to forgo and ignore the inane assertion that one party will have the dead voters vote anyway. This seems reasonable because we have a lot of really stupid people who will be trying their best to find them, and experts who will easily be able to identify them if a state keeps its voting process even moderate effective.] What we need here is a death rate to use. Generally, 1 person per 100 infected dies within the US based on recent data. That means that we can forecast 1% of those monthly projections will die; or 33K in 1 month, 66K in 2 months, or 99K in 3 months. As tragic as this would be, it isn’t equal between the two groups.

Remember that 20 to 1 disparity, this is where it has some importance to our political entities. For one party 31K voters will die in 1 month and only 2K for the other party. Comparably, 62K voters versus 4K for 2 months and 93K voters versus 6K for 3 months. Those voter differences might be important to which party’s candidate wins in some elections. It will also have the potential to carry over into the next presidential election.

It’s not hard math to do. It is even rather obvious that you should not have to do the math to know that the original disparity of 20 to 1 would have implications to our political conditions on the ground.

Now someone might argue that while these loses are regrettable, they will be spread across the entire nation. Well, you ought to be able to do a little simple math and see if that’s true. I am thinking there is a Rogue Thinking #3 coming.

By the way, do they award Darwin Awards to politicians?

COVID Insights in a Divided America

 

In the two years since COVID began its attempt to dominate human activities across the globe, we have witnessed an ever-widening range of how humans and their societies react. This is especially notable in the US where COVID was not just a national healthcare crisis but also became one of the most inane and destructive of phenomena, a divisive political issue. As is almost always the case, the emergence of politics on an issue produces the host of symptoms, side-effects, and ailments that any infectious disease injects into a population.

Now while it is important to recognize that the nation has suffered much during the COVID plague and all evidence to date is that the harms done will continue for some time yet, there are lessons to be learned from the information being acquired and the knowledge that can be gained. This doesn’t diminish the pain, suffering and losses that many people and families have experienced and which the nation and our citizens should compassionately acknowledge. Just as the nation owes a great deal of gratitude to first-responders and healthcare workers, including the ‘essential’ workers who helped keep critical aspects of the economy going. These and many other responses to COVID’s ravages throughout the nation are outstanding examples of how a society and its members can collectively join together and demonstrate what it means to be an America of all its people.

Of course, then there are the politics and the politicians. For reasons passing all understanding, reasoning and sanity, COVID inflamed a fevered political contest over an unending list of issues that have weakened Americans’ resolve to end the plague and further divide people even more than ever. As foolish and counter-productive as these self-inflicted wounds have been, we must hope that despite our politics, political leaders, and political parties that the information, lessons and knowledge that can be gained is not lost, ignored or go unexamined.

To learn the valuable insights which are to be found amid the data and self-identified population sub-groups it is critical to acquire and preserve the data, to assess and analyze the data, and to provide comprehendible summaries and conclusions that the data reveals.

What are some of the insights that we have ample evidence on already? Well, we already know that the following issues have shown some distinctive divides:

·         Wearing a mask

·         Social-distancing

·         Remote learning for schools

·         Lock-downs

·         Vaccines

·         Vaccination mandates

·         Various forms of treatments for COVID

·         Economic relief packages

·         Ethnic, racial and other societal groupings like: age, sex, education, …

The insights that are available on these different topics of course come from different areas of expertise, or on some fronts from areas of non-expertise. Given how constantly many of these issues have been and continue to be covered in the news media and on social-media, there should be very few people who are not aware of the different views that surrounding each issue. What is learned on most of these issues will come from various entities, especially healthcare topic, that will present how aspects of COVID infections and outcomes varied by groups taking one side or another. Preventing and lessening the consequences of COVID has been shown for mask-wearing, social-distancing, vaccines & vaccinations, differential efficacies or inefficacies for given treatments, and on lock-downs or re-openings. This is all useful information and should enable STEM-oriented entities to use these learning to be more prepared and capable in dealing with COVID going forward and for other such epidemic/pandemic events in the future.

But those lessons are not the only things which we can learn; nor are they necessarily the more salient knowledge to be gained from our collective COVID experiences. What about factors/variables which logically should not be expected to show differential impacts and outcomes because of COVID? What about the irrational forces at play in this viral quagmire of infections, hospitalizations, and deaths? Yes, I am referring to politics.

But how would one demonstrate that politics has a meaningful and significant effect on COVID? Yes, we all hear politicians arguing over national policies. We see political leaders at all levels fighting over what they are going to do or not do, will permit or not permit, and claim is being done based upon the “science” and/or the data with or without providing where they got the ‘science’ or what the data is. But who in their right mind to trust politicians? There are even opportunities to see how some variable as mundane and inane as public school-boards’ policies.

How about we take a more STEM-oriented strategy and look at the data in ways that are not often if ever considered. Pick factors/variables which a priori don’t have any rational reason to be relevant to how COVID impact and outcome occur. Since politicians have taken up-front, in your face positions on various public policies doesn’t it make sense to use a political factor to assess the data? I am sure that you have heard someone from a news entity state that “COVID doesn’t care about your political alignment.” I am absolutely confident that that statement is true; but that doesn’t mean that politicians doesn’t have an impact on COVID.

What then does the data tell us about the latter “cause and effect” relationship? It tells a rather strange story. Take the publicly published data on COVID infections and deaths and hypothesize what you would expect to see if political affiliation has no causal relationship to COVID results. For COVID infections would there be roughly no difference in infection rates? Isn’t the same to be expected in COVID deaths? If these expectations are what you get than politics is unrelated to COVID just as COVID is unrelated to politics.

Let’s use the political alignment of each state’s legislature (which one controls the legislature) as a variable [Note: We could use the political party of each state’s governor as another variable.] Does that Legislative Party make any difference in COVID outcomes?

It does!

Ok, but how much does it matter? Well, with 60% of the states having Republican dominated legislatures what would indicate a difference of note? How about 22 or the worst 23 performing states in terms of infection cases are Republican. Of the 17 best performing states, 15 are Democratic legislatures, with 1 being a split legislature, and 1 being Republican. The random chance of this occurring is astronomically unlikely. If we examine the data once vaccines were available and promoted there is a slight improvement, but the unbalanced pattern persists [Jan. 1, 2021 was used as the start date.]. Of the worst 23 states, 3 are Democrats. Of the best performing 17 states, 4 are Republican and 1 is split. What about COVID deaths, does the legislative party matter there?

It does.

In looking at COVID deaths from the beginning, the worst 23 performing states had 6 were Democratic legislators, and of the best performing 17 states 4 were Republican and 3 were split evenly. Well these results are not as unlikely as the Infections, they are still not very probable. When a vaccine available analysis is examined, the results shift back to the very improbable results. Of the 23 worst performing states, 2 are Democrat legislatures and the rest are all Republican; and for the best 17 performing states, 4 are Republican, 3 are split and 10 are Democrats.

Now these results have to be telling us something relevant; and of course, the question is what? It’s not like there are only Republicans in Republican dominated states or Democrats in Democratic states, so there have to be factors which are more directly ‘causal’. The virus after all, really does not care or act differently because of your political alignment or the politically dominating legislative party. This leaves us with more to learn. Perhaps the secret ingredients reside in some of those divisive issues mentioned earlier.

But there is another insight that would seem obvious. It relates to whom is and who isn’t vaccinated. It is not a question of what the right choice is, but given the statistics on the differential outcomes for each choice, what can one predict? If unvaccinated folk are 5 times more likely to get COVID compared to vaccinated and the unvaccinated are over 10 times more likely to die than the vaccinated are. If you take the relationship of state legislatures and COVID and factor in these differential outcomes then one should expect that more Republican voters will die from COVID than Democratic voters. This seem to be a potential consequence for the Republican party that calls into question the wisdom of motivating their supporters to ‘resist’ vaccinations.

It will be interesting to see if the data continues to disadvantage one political party more than the other.

I suppose that the notion of the “wisdom of the crowd” has its limits.

The Flip-Flop MInd: A Political Enigma

 

I suspect the vast majority of people have witnessed the “flip-flop” mind but have not thought all that much about it. To “flip-flop” is a very popular turn of phrase in politics where it is exclusively used to accuse another politician of ‘changing their position on an issue’. Because flip-flopping is used by politicians and against politicians they oppose or dislike, it is very clearly used to ascribe a negative attribute to the other(s). You’ve surely heard the “First he/she voted for/against the bill and then voted against/for the bill.” They “flip-flopped.” The whole notion of flip-flopping is contaminated with this negative context because of its political misuse. Who could possibly respect a politician who ‘changed their mind’ on anything?

Before you judge that even the idea that “flip-flopping” may not be bad, dishonest, duplicitous, or dishonorable because “politicians” say it is; at least consider some non-political contexts for which “flip-flopping” would be appropriately applicable and viewed as admirable and even necessary to any rational adult. After all, how would you account for most of the advancements in human knowledge?

Let’s start with John Maynard Keynes: “When my information changes, I alter my conclusions. What do you do, sir?” [Note: His quote is often modified to: “When the facts change, I change my mind. What do you do?”] Now, you don’t hear any economists or other well-informed persons shouting “Flip-flopping” about Keynes; and you may remember that Mitt Romney used Keynes’ quote (the modified version) in defending his ‘change of view’ on an issue. In holding a position, I suspect many people expect that that position is based upon the ‘information’ / ‘facts’ that they know and believe are accurate / true. If someone finds out that the information / facts that they themselves used are not accurate or have changed in some meaningful way, I hope they don’t hold to the original view rather than their own improved understanding but that might be the case in some instances.

Then there is Einstein’s: “If the facts don’t fit the theory, change.” [Note: If you want to argue over the exactitude of the quote, I propose discussing it in an arena more focused on that topic.] I prefer Einstein’s: “The measure of intelligence is the ability to change.” Change is not a surprising concept in the scientific community, at least not unless it is someone trying to change your eponymous theory(ies) which just chafes like no get-out. But ‘change’ is what science pursues, it seeks a better and more accurate explanation and understanding of our human knowledge. It isn’t the case that there might not be an instance where one scientific view, theory or even law changes based on some new knowledge and then yet more information is acquired which could cause the infamous “Flip-flop” event. You might remember Einstein included a “cosmological constant” in his theory of general relativity to provide for a “static” universe. Later, he removed it because it was no longer accurate to expect a “static” universe. It turned out there was a need for a force that accounted for the accelerating expansion of the universe. He reintroduced the cosmological constant to conform to emerging new data and noted his biggest blunder may have been his mistake regarding the need for a cosmological constant. Einstein did “flip-flop”, but I don’t think it would demonstrate that he shouldn’t have bur rather the exact opposite. “Flip-flopping” in science may be a sign of the brightest among the brightest. They can deal with learning without being concerned with the self-recognition that they had been in error prior to acquiring new information.

While I would never expect a politician to possess the wisdom to understand the importance of changing one’s view, it can surprisingly happen. As noted above Mitt Romney had learned the lessons that many who came before him had taught. Included in this line of notable figures was Winston Churchill. Churchill’s contribution came via his view: “To improve is to change; to be perfect is to change often.” So, while most American politicians seem to tremble and be afraid of called-out for “flip-flopping” there is ample reason to believe that the issue is not the “flip-flop” itself but whether the politician can present an informed, well-reasoned, and convincing explanation of why their change of view isn’t a weakness but a strength. It truly is a shame that politicians for the most part are unable to rise to the level of intellect required to comprehend why their fears are not about the act of “flip-flopping” but are due to their inadequate cognitive abilities.

Separate from notable figures who demonstrate the wisdom of adapting and being capable of changing one’s thinking and positions, there are other bases for realizing the value and importance of “flip-flopping” when circumstances demand. Critical Thinking is exactly such a skill. Critical Thinking is highly regarded as an essential educational objective to be achieve. And a key attribute of ‘critical thinking’ is the capacity to adapt one’s understanding based upon the analysis of facts and ideas.

At this point, I would hope that the notion of “flip-flopping” is not the cut-and-dried notion that it is used as particularly in politics. In fact, in politics it ought to be much more prevalent and deserve some attention. If that attention results in some appreciation, and maybe even change, in the listener then it might be that relevant “flip-flop” event which is called for. I hope in the future to see an outstanding politician demonstrate that they can deliver on having the integrity, intellect, and competency to “Flip-Flop” in an epic manner that resets the entire mind-set of voters.

Now, let’s look at the dark underside of the “flip-flop”. You may not have been expecting this after the preceding exultation about “flip-flopping”. It’s not that I am “flip-flopping” on “flip-flopping”; rather I wanted to create a context around the idea of “flip-flopping”. You already knew that “flip-flopping” was bad. Perhaps now you might, even if grudgingly so, allow for the necessity of looking at the substance upon which the “flip-flop” is occurring. We are now ready for an example.

This example is fortunately from reality, and sadly it is both true and telling at the same time. Oh yes, and the example is found within our economic, societal, and political insanity. What is most salient is that the “flip-flopping” that is occurring here is not seen as “flip-flopping” by the very people who get so bent out of shape when another person is branded with this act.

Let’s start with a question: How is the US Economy doing right now?

The answer of course depends upon whom you ask. It also depends upon what you ‘mean’ by the US Economy. The ‘meaning’ part of this question isn’t all that hard to get financial and economic experts to answer and to do so with some consistency. They will provide a variety of metrics and theories that are used to numerically compare current conditions with previous conditions and then provide an assessment of Is the current state of the economy better or worse than it was relative to a given time period. These experts will also provide their forecasts for where the economy is expected to go from here although there is much less consistency and agreement in their projections.

On the political side, the assessment of the Economy is usually driven more by how one’s aligns with the party in power than any consistency in how data is used to determine a relative measure. If it hasn’t occurred to you yet, that is a form of “flip-flopping” that isn’t noted by politicians who are often among if not leading proponents of the “flipped” view. To help illustrate this phenomenon, let’s use an excessively easy to access economic measure: the Stock Market. There are a number of different systems for measuring the Stock Market reported daily: the Dow (there are several), the S&P (there are several), the NASDAQ (there are several), and other financial views such as the Russell (there are several). Then there is a raft of financial metrics used to assess the economy that are to numerous to list them all. There is the Gross Domestic Product, Return on Investment, Inflation rate, Employment rate, … and the list goes on.

If the level that the Stock Market is at is used to define the ‘success’ or ‘failure’ of the Economy then this readily available data would make it easy to perform the political comparison of whomever is in office. Except that isn’t what happens. What happens is a “flip-flop”. The Stock Market climbs and the party in the majority claims that they, their policies, and the nation are doing well and the Stock Market being at all-time highs proves it. The reasoning seems acceptable. They are in-charge and things are going well. However, when they lose their positions in the majority, there is a strange discontinuity that occurs. The Stock Market data, and the claims that go with it, no longer apply consistently. The Economy is no longer doing great even though the same status persists. The Stock Market has continued to improve its value. The all-time high today is higher than it was when they were the political majority, but now the Economy is in trouble. The Stock Market is no longer a good measure of the Economy. A “Flip-Flop” of the classic type but not called out because it would be a self-referential contradiction. You would be “flip-flopping” on your own claim of success.

The same critique applies to someone who rejected the state of the Economy being good when the Stock Market improved when they were in the minority, and then used and relied upon the improvement in the Stock Market as a sign of their success is just as much a “flip-flopping” partisan.

What can we conclude about “flip-flopping” if it can be either a good thing or a bad thing? We can learn that you must understand the reasons for why someone or some group changed their view or position. We can learn that the reasons must be based upon consistency in the logic that is being applied, and that the data used to support the original position isn’t disregarded because it is inconvenient or would refute the change that you are making.

On the political side, what we can learn is that we need to be more focused upon ‘critical thinking’ than upon a claim of someone “flip-flopping”, or worse “flip-flopping” ourselves because that is the correct partisan thing to do rather than to question if the “facts have changed” and we need to change our view to improve our ability to act intelligently for ourselves and for the nation. 

After both the Republicans and Democrats blinked on the National Debt Ceiling in October, both parties agreed to have another moronic showdown over the Debt Ceiling in early December. Mitch McConnell has set his strategy on the old, tired but tried and true strategy of not supporting any notion of raising the Debt Ceiling by Republicans. This tactic is used almost every time the Debt Ceiling becomes an issue, which it does almost every year because politicians (of both parties) are more than happy to spend whatever they want when in the majority but not when in the minority. Now this would be a sign of integrity and principle if they didn’t increase spending on their watch and supported paying for the debt without objection that had been approved by all Administrations prior to the next budget they are sponsoring. If any party wants to hold or reduce the Debt Ceiling then they must do so when they are the Administration setting the future spending, not complaining about paying for what had been approved being spent in the past. Typically, McConnell’s strategy would be termed “brinksmanship” because the Republicans would be using it to gain some leverage in negotiations in some legislative area. However, the current use of this strategy appears to be more of a pre-midterm election political issue positioning ploy. The Republicans will campaign about the Democrats’ recklessly burdening the taxpayers with more debt. Of course, there will be no admission that that debt included spending approved and authorized by Republicans.

It might worth considering whether the situation is appropriately characterized as a “brinksmanship” situation or whether it is more of a “Mexican standoff” where there is no strategy by which anyone can win. This must not be the perspective of McConnell or the Republicans since they believe that they can win with their strategy or else they are hoping that no one, especially the Democrats, can find a strategy that will defeat theirs. I don’t believe that it would be correct to think of this as a Mexican standoff, since I am sure that there is a strategy which defeats McConnell’s and the Republicans. I just don’t think that the Democrats are likely to be able to solve the problem and recognize the solution to countering McConnell’s strategy. Thus, I will continue with the “brinksmanship” characterization of the Debt Ceiling issue.

Now the Democrats are following their side of the “brinksmanship” strategy. They are seeking some path to pass the legislative authorization to increase the Debt Ceiling limit. So, they are looking to negotiate with this politician or that politician (both Democrat & Republican) to get sufficient votes to pass the authorization. They are looking for procedural approaches to get it passed. The Democrats are even looking at financial tricks that trump (I couldn’t resist) McConnell’s ploy. But it doesn’t seem likely that the Democrats will see a way to deny the Republicans the campaign issue that they are seeking.

What is needed is to not just know that this is a critical national issue or crisis but to understand the problem that McConnell has created. To properly understand the problem does mean that you have to know what it means to not increase the Debt Ceiling. Failing to raise the Debt Ceiling will have profound consequences which is why the “brinksmanship” terminology is very appropriate for this issue. Just to avoid the dire impacts of defaulting on debt payments, the Administration in-charge will use every accounting, management, and fiscal control at their disposal. Should they fail, every American will feel the impacts and the nation may suffer consequences for years if not decades.

The whole point of presenting the status of the current Debt Ceiling “brinksmanship” struggle was to provide the context for making it easy to understand what a successful counterstrategy would be for the Democrats.

McConnell’s strategy is based on the premise that he can’t lose whether the Debt Ceiling is raised by the Democrats or not. He and the Republicans will be able to use either outcome to his and the Republican party’s advantage. This was and is his error. It is the quintessential mistake in his analysis. He presumed that he had a win-win game position. What he hasn’t considered is that a better strategist might be able to look at the larger problem-space and see the problem more astutely and by exploring both the problem-space and the solution-space more thoroughly see and find a superior and winning strategy.

A key assumption that McConnell has made is that the Democrats must pass raising the Debt Ceiling and suffer having it used as a midterm and 2024 election issue, or they become responsible for the consequences to the economy, the public, and the nation that failing to do so will have. However, what if President Biden and the Congressional Democratic leadership put the decision and responsibility for the Debt Ceiling issue on McConnel and the Republicans? How does McConnell’s strategy retain his “win-win” assessment? It doesn’t. By simply recasting the decision to be one that the nation is looking to the Republicans for leading on, the Democrats at least re-establish the issue into the “brinksmanship” class of strategies. But with a little bit more problem-solving effort, the Democrats can make the Debt Ceiling issue a “win-win-win” for themselves. With some really smart leadership, the Democrats could potentially extend this strategy into a “win-win-…-win” strategy. This may be a bit much to expect of the Democrats, as neither political party has demonstrated much in the way of ‘smart’ leadership let alone ‘really smart’ leadership.

How would the Democrats recast the decision to this effect? Well, the Democrats through President Biden just have to literally come out and say: “The nation is facing an existential decision for the welfare of the nation’s citizens, its economy, and its leadership role in the world. Because this is a bipartisan issue and is a principled duty for the peoples’ elected Congressional representatives, the Republican leadership and its members of Congress are being asked to make the decision on raising the Debt Ceiling or not. Because this decision will have such broad and far-ranging consequences for the nation and our people, I will help the Republicans in their efforts. I will guarantee one Democrat vote for each Republican vote that they may need to authorize raising the limit, or if they need more Democratic support to accomplish that goal then I will get two Democratic votes to support each one of theirs. If the Republicans decide that the Debt Ceiling should not be raised and will not or cannot deliver adequate votes for passing this legislation, then the Debt Ceiling limit will not be raised based on the judgement and leadership of the Republican members of Congress.”

It should be easy to see why this strategy is an effective counter to McConnell’s. This doesn’t mean that there are no other strategies that might be equally effective or even superior, but it does demonstrate that politicians are not necessarily good strategist unless they are only confronting the quality of strategies that is to be expected of from other politicians.

What About the Benefits of Inflation?

All the media attention to Inflation is given Inflation a bad reputation. Yes, Inflation can be bad, but it isn’t bad by default. It’s a lot like Intelligence. Depending upon how high or low your Intelligence rating is there are favorable and unfavorable aspects of what implications that ‘score’ has for numerous situations and areas of your life. [Note: In comparing Inflation to Intelligence measures, it is critical to know that they have an inverted evaluative relationship. A high Intelligence score is viewed favorably while a low Inflation score is favored; and vice versa. There are other attributes between the two concepts which are not as easily aligned, such as there is no ‘negative’ Intelligence score except perhaps for politicians, but you can have negative Inflation: aka Deflation.]

So, how can increasing costs ever be a good thing? Is the media involved in some duplicitous effort to prevent the public being duly “informed” about the issues related to Inflation? Is the Financial industry and companies avoiding these aspects of Inflation because they have their own financial interests in the public’s perception that when you hear “Inflation” it only means bad things? What about the nation’s economists, have they somehow been drawn into a conspiracy of silence?

No, it’s just that the benefits of Inflation are often longer-term effects and some of the benefits occur and no one mentions or associates the fact that Inflation played a role in delivering the benefits. Another factor is that the negative side can often occur rapidly and have an immediate impact upon individuals’ lives and financial circumstances. There is a behavioral economic phenomena: Loss Aversion, which illustrates a disconnect between actual human behavior and the ‘rational’ consumer of classic economic theory where the value of a loss is greater than the value of the cost of the item that would be lost. The logic of cause and effect and the perception of value are not reliable facets of real-world economic operations. The benefits of Inflation suffer from both the missed or diminished attribution of “cause and effect” and the proper perception of the value that can be derived from it. To contort a well-known quote: “This Inflation is not the one you are looking for.”

In looking at Inflation, we see a rise in price. We don’t always know why the price increased but there is always at least one reason sometimes several. But let’s step back and look at the big picture. Somewhere in the process(es) that make the product/service that you are buying there is something that is causing the cost / price relationship to change. The thing that changes may be the cost of the material it is made from. It may be the cost of the workers who produce the material, fabricate the goods/parts that it is made of, or assemble it into its final for sale product. It may be the cost of fuel to run machinery or transport the goods, even the capacity of shipping ports or trucks, or to keep them at the right temperature. Let’s call theses causes: Type A – Supply Issues.

At this point, you know that there is another Type coming. Prices can also go up because you can make more profit if you charge more. In basic economic theory this a consequence of the supply-demand model. When demand increases and supply doesn’t increase to meet it, suppliers raise their prices because consumers will pay. This ‘scarcity’ effect can be due to there literally being no more of the supply available or that the ability to product more supply is limited by some part of the process which creates the product. You can’t grow more of the annual apple crop this year no matter how much demand there is for them. It doesn’t matter what caused the apple crop to be limited or the demand to be what it is. There is only what there is. Each apple becomes more valuable as long as consumers will keep paying more. Type B – Scarcity.

If the conditions are right, the supplier can raise the price just because they believe they can make more profit at the higher price. This only works if there is insufficient competition that the consumers are aware of.  Type C – Lack of Competition.

These different types of supply conditions create the necessity or opportunity for Inflation. And they also create the opportunity for how Inflation can produce benefits. With increased prices there are openings for someone to seize an opportunity to address one of the ‘causal’ conditions which creates a counter-response to the side of Inflation that we don’t like. Investments can be worth making in infrastructure or in production facilities, new fuel options can become cheaper than older ones, farmers can choose to plant more apple trees or to increase yields via new varieties, and entrepreneurs may enter the market and produce the equivalent or better products at lower prices. And the opportunity that Inflation creates may focus investment in research and innovations that alter the market for the product from marginally to completely out-competing it and replacing it in the marketplace.

Most of these benefits of course are less rapid than the conditions that sparked them; but there is no doubt that Inflation can be and is a significant factor in prompting efforts to counter its negative impacts. Yes, too much Inflation is bad mostly because the systems that have to respond to it are not able to adapt fast enough to avoid disruptions and problems for consumers but how much progress would have never occurred or been substantially delayed because it was too low?

These benefits are, I am sure, of little comfort to consumers today because they only feel the discomfort and frustrations. Perhaps we should consider how much our Consumer-driven economy mimics the answer to that awkward sentiment: “If you want to know what the problem is, take a look in a mirror.”

 

National Debt-Ceiling – The US’s Political Game of Chicken

Last week the Democrats and Republicans came to an ‘arrangement’ (an ‘agreement’ might be the impolitic term to use) to defer the resolution of the 2021 National Debt-Ceiling crisis by two months until second week in December. This means that they effectively increased the Debt-Ceiling sufficiently to bridge that “gap” of time. The problem itself is not really solved at all, it is just “kicking the can down the road” as almost everyone in the media is stating.

However, while Kicking-The-Can-Down-The-Road (KTCDTR) is a very typical political strategy for dealing with an issue that cannot be forced by one side because they control sufficient votes in both houses of Congress or they don’t have sufficient bi-partisan support to pass their decision. Since the Republicans chose what they see as a politically good strategy to improve their 2022 election campaign prospects, the Democrats cannot easily get approval for increase the Debt-Ceiling. It doesn’t matter that this is a pretty standard item to get approved with bi-partisan support, the Republicans see advantages for them to provide none. This is what politicians do.

While the deferral to December is a described as KTCDTR, a more appropriate analogy for the current maneuver is a game of “Chicken”. Whichever party or sub-group of politicians is trying to gain some advantage(s) in negotiations on the Debt-Ceiling issue, the strategy is basically playing “Chicken”. Whoever blinks, jumps, or calls uncle first loses. Sometimes no one ‘blinks’ and there is no winner and the public receives the “prize” which results from not getting the issue resolved. The “prizes” in the past from not passing Debt-Ceiling increases have not been good for the US or the public. So, the game of Chicken is still very much the right context to consider in the current crisis or the Christmas present crisis that is now to be anticipated.

The Democrats’ problem and thus President Biden’s is that without a couple of Republicans providing support in the Senate, they can’t just pass the increase which has been the standard and very simple solution. The Republicans have pushed the Democrats to the brink and believe they have a win-win situation. No matter what happens, it will be Biden’s and the Democrats fault for whatever happens.

Now, there is a solution for the Democrats, particularly for President Biden which solves their problem. It is a fairly easy solution in fact. That the counter to the Republican’s strategy is easy means that the leaders and members of both parties have done a bad job of problem-solving. The Republicans picked a strategy which is trivial to counter and turn the table on them. The Democrats haven’t been able to solve the problem the Republicans created which doesn’t speak well to their political skills either.

Someone is going to ask, “Well what is the solution, bright guy?” And the answer is that just look at the game. It is a game of Chicken. So that should provide a sufficient context to let you find any of the rather self-evident three solutions that are available. With a little savvy strategic planning, a very beneficial strategy can be had. Whether anyone in the Democratic party can find one of the solutions, we will have to wait and see; but they did not find it the first time around and have had to defer the game of Chicken until December.

Perhaps the solution isn’t so obvious to politicians or political operatives. They may not have mind-sets that are amenable to this type of problem-solving, if any type. Politicians nor their advisers may be all that experienced in strategic problem-analysis or solving. If their obstacle to finding a solution is their deficiencies in the skill-set, competencies, and knowledge for problem-solving methodologies then they may have to resort to the basic method that businesses sometimes use when they are unable to figure out how to solve a problem facing their business; hiring a consultant(s) that can lay out the options and even recommended a particular strategy.

Facebook's Terribly Hard Problems With Very Easy Solutions

Today’s CBS Sunday Morning segment on Facebook’s misinformation risks/dangers presented yet another assessment that there are severe societal problems that Facebooks has not just revealed but which it and other social-media platforms have enabled and empowered. Your piece used the COVID pandemic’s plethora of misinformation as it’s central focal point, but it has long been known that social-media has wrought a wide variety of harmful ills with the ability to spread more easily, broadly and dangerously.

Even the researchers on social-media’s impacts on society presented yet another societal problem which Facebook creates. Facebook may have the ability and right to restrict and block anyone they choose that might be investigating the ills of social-media or of the corporations which provide or profit from social-media but that just adds to an already long list of enabled problems. While Facebook doesn’t deny in total that there are problems with their platform or with social-media in general, they insist that they are working diligently to address and overcome these problems. Facebook also notes that this isn’t easy to do and that they have an obligation to their users, clients, and the business to not engage in censorship or other practices which would be wrong or illegal. Even the researcher talked about how difficult the problems that Facebook is enmeshed are to deal with and solve. This is where I fall off the log.

I am aware that Facebook and other social-media entities have claimed that the problems which are of grave concern or are just seen as minor annoyances are very hard to resolve. They even take credit and pride in stating how much time, effort, and resources they are ‘pouring’ into handling and correcting these problems they are investing. Facebook actually created an “Oversight Board” to monitor their performance in applying their standards and procedures properly, fairly, and effectively to prevent grave abuses by any Facebook users who are violating those standards. Technology experts, journalists, and reports also present assessment of the problems and the technical or business challenges and difficulties that need to be overcome to resolve any given problem area. And of course politicians, who provide no substantive value or comprehension of the problems or solutions to these problems, are also chiming in about the critical, urgent, and responsible need to ‘fix’ these problems. Note: As with anything that politicians are engaged with, there are opposing views of what the problems are since some problems exist only in the ideological views of the politicians as a fund-raising theme.

But what if the difficulties that Facebook, Twitter, YouTube, Google, Instagram, WhatsApp, … and other platforms providers, technology experts, social-media researchers, journalists, politicians, and the public at large are wrong? Is there a Law of Physics which requires that the solutions to the identified ills, abuses and problems with social-media are difficult? Is there some technological capability which is not yet within our grasp or competence to use in resolving these problems? Does the business or profitability model of social-media depend upon the very abuses and problems that the general public agrees need to be dealt with and solved? I suspect that many, maybe most if not all, think that none of the problems have relatively simple solutions or available solution strategies. However, there is no Law of Physics that prohibits this, there is no technical barrier to be breached, nothing about the social-media business eco-system or profitability model requires these problematic attributes to operationally persist. It may be the case that perception is reality in this context but then all that needs to change is one’s  perception and then “poof!” the reality is that these problems can be solve. And, they can be solved today; without a key breakthrough in technology (e.g. some advance in Artificial Intelligence capabilities); without a huge or even significant investment of time, effort, or resources; and without the need to sacrifice one’s business mission or profitability. In fact, solving these issues can be highly valuable to the social-media entities and to their clients and users. There of course may be some who don’t benefit, like politicians who won’t be able to raise campaign funds on these issues or they will not be able to legislate solutions which either utterly fail or make the problems worse.

So, why is it just accepted that there are no good solutions that are available? The answer to this problem may be that no one has asked the rather simple question: “What are readily available methods, approaches, strategies, and options for dealing with the [fill-in-the-blank] problem on Facebook (or any social-media platform)? The COVID Misinformation problem ought to have provided an excellent opportunity to ask this question, and Facebook should have at least one innovative designer or problem-solver who could have presented a dozen or more solutions that could have been and could still be implemented with little difficulty. Social-media experts and researchers should be able to present some insightful solutions. Journalist, reporters, and news media entities should have found someone who can explain the simplicity of solving these issues. I would say what politicians should have been able to do except, well: politicians!

If Facebook is serious about addressing these problems and haven’t found solutions that will work, have they done what any good and well-managed company would do when stumped by a business problem? Have they asked for help?

Transitory Inflation: Is It Sticky Notes or Cast Iron (Part 1)

 

There has been a growing volume of discussion on “Transitory Inflation” around the US’s COVID-Recovery. One might say: Almost an inflationary amount of media coverage on the question of what will happen in the US Economy. Some, like the Fed and the Treasury, are espousing the view that the up-tick in prices/costs that have come with re-opening the US economy are ‘temporary’ or ‘transitory’ and due to conditions related to the pandemic and due in large part to the supply-chain disruptions occurring simultaneously with rebounding consumer demands. Of course, there are those, like some financial industry leaders or economists, who assert that these inflationary price/cost increases will persist and will not be ‘transitory’.

Yes, I know; what a shock that there are different projections about inflation and from those who’s views on the economy are supposed to be most informed. That the ‘most informed’ are interpreting the same state of affairs differently would seem illogical; but this is more common than one might think. This of course raises the question: Who’s right? And that is where the answer is much like the economy itself. The economy isn’t simple, it isn’t preordained to react in a highly deterministic manner based on a numeric measure which is well understood in the context of economic theory; but which is abysmally poorly defined in the practical terms of reality.

Who doesn’t know that ‘Inflation’ is “a general increase in prices and a decline in the purchasing value of money”? Some will say: “the cost of goods increases”. Now as to who doesn’t know that, well it is not clear but if you asked a systems analyst, they might say that these definitions are not adequately defined in that they doesn’t tell you what happens because of those conditions. Now, if we add the complicating notion of “transitory” to the mix, the picture doesn’t get any clearer.

Let’s reset the discussion. First, let’s attempt to define “Inflation” a little more specifically. This doesn’t mean that economists or financial experts will agree, but they already don’t so what do we have to lose?

A general and useful definition of “Inflation” is:

The price/cost of some item or items (henceforth call ‘goods’) increases, while the following conditions are also true.

Conditions:

·         The value of the money, capital, wages, assets, or any other items unrelated to the goods, whose price has increased, have remained unchanged.

·         The consumers/customers of the ‘inflated’ goods continue to purchase these goods at the higher price/cost.

·         The level of supply of the goods and the level of demand for the goods must be measurable/quantifiable as variables in assessing the impact that this ‘Inflation’ will produce in the economy.

·         Open criteria: yet to be determined conditions which are needed to produce the consequences of these goods’ inflationary impact.

This is a more useful definition of ‘Inflation’, at least from a systems analyst’s perspective, because it allows for a more calculable way to derive consequences.

I want to point out at this juncture, that this is the simplest example of Inflation, and it may also shed some light upon what adding a ‘transitory’ factor or dimension to Inflation would require.

So, what does this definition of Inflation tell us?

First, it tells us nothing about what caused the price/cost of the goods to increase. Basic economic theory indicates that the price/cost of an item will increase due to any number of factors:

1.       The Supply/Demand principle indicates that price will increase if ‘supply’ is inadequate to meet ‘demand’. So, if supply decrease then price will increase as long as demand remains that exceeds the available supply quantity. Or, if demand increases but supply does not respond to adequately meet it then price will rise.

2.       On the opposite side of the inflation coin, the price/costs of good can decrease if ‘supply’ exceeds ‘demand’. This is the counter-part to inflation; it is deflation.

3.       Price may also increase even if supply and demand themselves are not actually relevant factors at play. If the ‘producer’ of the goods sees or thinks that they can increase their revenues and profits by raising prices, then that would create an inflationary force. This decision by the producer is a risk. As long as there is a reasonable level of free-market competition then the assumptions is that competitors will gain market share as long as they offer lower prices/cost. If the free-market concept doesn’t operate efficiently then some level of inflation occurs.

4.       There are some bizarre or outlier situations which create an inflation-like effect but have a dubious connection to the economic principle of a “rational consumer” which renders explaining or modeling the effect and projecting it somewhat difficult to achieve. An example of such an economic event is a fad. If a good becomes a ‘fad’ item then its price may well become detached at least for a period of time from a real supply-side constraint.

Taking the conditions which define inflation together with the factors that create the underlying price/cost changes provides a way to assess and project impacts from inflation on an economy.

Before we go further, it is important to recognize a relevant aspect of the economic concept. There is an assumption which needs to be acknowledge that often goes unstated. In discussing any economic concept there is a finite amount of funds that exists within the consumer population. This finite amount has a meta-reality to it, because while it is finite it is not fixed. This may seem a contradiction, but it has to do with what constitutes the underlying ‘value’ of things in the economy (or the world). Resources are constantly changing and with those changes their value may change. This aspect of value doesn’t usually change for individual consumers that frequently or rapidly; however, it can change in broader contexts. Take as an example: corn. The cost/price of corn doesn’t usually change that drastically unless some event causes a very extensive change in the entire market for corn or on something that corn production relies upon. An individual consumer’s decision about corn, to buy or not, has no real effect; whereas if a significant number of consumers alter their buying decisions their collective impact could change the ‘value’ of corn and thereby have an impact upon whether inflation or deflation happens.

What then is creating the current Inflation during this initial period of the US’s COVID Economic Recovery? Well, there are many of the factors mentioned above that are at play.

A.      Supply:
There are innumerable goods that are not available in quantities to meet consumer demand. So, the producers raise their prices because there is a willingness and tolerance among enough consumers to pay higher prices for the same goods at the inflated prices. Consider just a few of the goods that have made the news while there are likely multitudes more with less media attention:

a.       New Cars/Trucks

b.       Used Cars/Trucks

c.       Lumber

d.       Energy: Oil, Gasoline, natural gas

e.       Housing – new, used, rental

f.        Food: especially fruits and vegetables

g.       Food: restaurants, fast-food / take-out, away from home

h.       Airline tickets

i.         Medical expenses

j.         Something you know of perhaps

Then there is the Resources dimension of Supply that are associated with the production or procurement of the goods. The COVID pandemic also impacts and continues to distort this part of the Supply side. This facet of Supply includes things like:

a.       Workers. Perhaps the most dynamic and diverse resource. One of the reasons there are Supply problems in goods is that to get the goods into the market/economy you must have workers that are a key component in producing the Supply. Someone must make the parts and assemble them to have a new car. Someone must harvest material: food, lumber, petroleum, minerals, … . Someone is needed to take your order and deliver it to your table; or issue your boarding pass, and of course fly the airplane. You even need someone to sell you what you buy at a store or have delivered to your home.

b.       Materials. Along with workers there are the substances/materials that those workers are needed for acquiring, producing, and distributing. That new car needs the materials which all of its various constituent parts require.

c.       Capacity. When the need for supply increases for whatever reason, there are constraints imposed by how ‘responsive’ the production process is or can be in reacting to that need. How much production capacity exists limits how much can be produced no matter if you have more than enough workers, more than enough materials, and more than enough money. The time required to produce ‘X’ units may not be within your ability to change or control. The number of units that you can push through the manufacturing process at some number can not be increased. The amount of things that you can move from where they are to where they need to be is dependent upon literally how much space there is for the processes that move things.

B.      Demand:
This ought to be the easiest part of the Economy to both relate to and to understand. Demand is what everyone buys. Every purchase that you make from the smallest five-cent piece of candy at the check-out register (for those of you who have every been in a physical store), to signing the mortgage papers when you buy a home, to buying a seat on one of the commercial space-flight ventures; and everything in between. Demand is transferring some of your financial resources to someone else in exchange for those ‘Goods’ that they offer in that exchange.

So, what does all this mean for Inflation?

It is actually quite simple, if you are comfortable with the concepts of Supply and of Demand and how they interact then Inflation is just a process consequence that works to find a point of economic (monetary value) stability. Hopefully, you have seen a Supply vs Demand chart that relates the cost/price of goods rising or falling as these two factors change.

Inflation is just a response due to consumer behavior. The ‘transitory’ aspect of inflation thus is exceedingly dependent upon the same Supply / Demand  relationship in economic theory and thus upon the same consumer behavior. How to understand the Consumer-behavior aspect of Inflation and the ‘transitory’ question around the COVID-Recovery Inflation will be discussed in Part 2 of “Transitory Inflation – Is It Sticky Notes or Cast Iron?”