Wednesday, January 13, 2016

- Capitalism 4.0

A third clear difference between Capitalism 4.0 and the preceding versions of the system will be an understanding that markets and governments are both imperfect and prone to error. Acknowledging this inherent fallibility will not be paralyzing, but empowering, provided the new model of capitalism encourages experimentation and proves able to adapt to unexpected events. This capacity for institutional adaptation and ideological flexibility should be one of the distinctive features of the mixed economy of Capitalism 4.0. Competitive markets operate through trial and error and quickly correct small misjudgments. In politics, democratic competition plays a similar error correcting role. But markets can magnify errors instead of correcting them when herd instinct overtakes investors - and the same thing can happen in democracies when one ideology overwhelms all political debate. In a fast-moving, interdependent, and inherently unpredictable world, skepticism, experimentation, and flexibility are crucial. Adaptability and the willingness to admit errors will become a cardinal virtue in politicians and central bankers, as well as in businesspeople and financiers, in the world of Capitalism 4.0.

Thursday, January 7, 2016

The Economic System Surrounding Artifacts and Designs


From Washington to Beijing... Central Planning versus Markets..... Rhetoric vs Reality... Who's Zooming Who...

The term "planning" is often used to describe an economic system where the key decisions are made by political authorities, whether these are democratically elected officials or representatives of a communist or other totalitarian government. However, there is just as much planning engaged in by owners and managers of private enterprises under capitalism. The difference is in who is planning for whom. In a free market economy, millions of consumers, business owners and managers, investors, and others have their own plans - each for his or her own well-being, leaving the overall coordination of these plans in the economy at large to changing prices and the economic incentives that these prices provide for mutual accommodation. What has generally been called "planning" has been central planning - planning by a small group of officials for the economy as a whole.

Why is this important?....because today economies around the World - includiing The United States of America - are being run by Central Central Planners...

Politics versus Economics... and the law of unintended consequences...

When we are talking about applied economic policies, we are no longer talking about pure economic principles, but the interactions of politics and economics. The principles of economics remain the same, but the likelihood of those principles being applied unchanged is considerably reduced, because politics has its own principles and imperatives. It is not just that politicians' top priority is getting elected and re-elected, or that their time horizon seldom extends beyond the next election. The general public as well behaves differently when making political decisions rather than economic decisions. Virtually no one puts as much time and close attention into deciding whether to vote for one candidate rather than another as is usually put into deciding whether to buy one house rather than another - or perhaps even one car rather than another.

   The voter's political decisions involve having a minute influence on policies which affect many other people, while economic decision-making is about having a major effect on one's own personal well-being. It should not be surprising that the quantity and quality of thinking going into these very different kinds of decisions differ correspondingly. One of the ways in which these decisions differ is in not thinking through political decisions beyond the immediate consequences.......

..........The point is not simply that various policies may fail to achieve their purposes. The more fundamental point is that we need to know the actual characteristics of the processes set in motion - and the incentives and constraints inherent in such characteristics - rather than judging these processes by their goals. Many of the "unintended consequences" of policies and programs would have been foreseeable from the outset if these processes had been analyzed in terms of the incentives and constraints they created, instead of in terms of the desirability of the goals they proclaimed. Once we start thinking in terms of the chain of events set in motion by particular policies - and following these events beyond stage one - the world begins to look very different.

Hat tip ~ Thomas Sowell, Applied Economics, Thinking Beyond Stage One