From: asylvain@felix.filenet.com (The Chipmunk)
Newsgroups: ca.politics
Subject: Re: Distracted Economic Theory
Date: 27 Aug 92 20:11:04 GMT
            <1992Aug20.190624.24638@clipper.ingr.com>
            <l992h3INNmql@exodus.Eng.Sun.COM>
            <1992Aug24.185429.7380@clipper.ingr.com>
            <l9lc6tINNlat@exodus.Eng.Sun.COM>
Reply-To: asylvain@fritz.filenet.com (The Chipmunk)
Organization: Foundation for the Increased Wealth of Chipmunks

Written in article <l9lc6tINNlat@exodus.Eng.Sun.COM>
 by chased@rbbb.Eng.Sun.COM (David Chase):

: In article <1992Aug24.185429.7380@clipper.ingr.com> 
:       ald@clipper.ingr.com (Al Date) writes:
:> When you start throwing around terms like global 
:> vs. local function minimization in an economic context, I 
:> get a little confused.  Perhaps if you explained this a little
:> more, there might be something there that my brain could
:> decipher.  
:
: Okey-dokey, I'll give it a shot.  The intuition behind the Arrow paper
: (*) is that the way a "free market" seeks economic efficiency is not
: unlike many function minimization algorithms -- given a choice between
: equal products or services, you buy the cheaper one.  Note that
: function minimization algorithms can get "stuck" at a local minimum --
: if you take a 1$ step in any direction from where you are, you get
: less than 1$ back in added value.  To get to the true minimum, you
: might have to spend (or worse, invest, meaning "spend and wait") a
: very large sum of money.

This is probably why most people don't follow algorithms when deciding
where to spend their money.

: In the real world, probably the best example of this is the
: synergistic effect that popular hardware and software have on each
: other.  Because there are PCs everywhere, software writers see a
: potentially huge market, and thus they write software.  Because so
: much software is available, more PCs are sold.  Economies of scale are
: also involved.  The most popular computer architecture in the world is
: not the "best" architecture (divorced from the software which runs on
: it).  MSDOS is not the "best" operating system by any stretch of the
: imagination (all the power of MacOS with the friendliness of Unix).

This is true.  But what's the alternative?  Certainly it's not to force
anyone to abandon all their PCs and MSDOS systems.  Sure, maybe such a
move will pay for itself in a decade.  But maybe not.

See the problem with using "algorithms," which is why people don't use
them, is that you need a certain level of clairvoyance to make them
work.  Suppose we abandon (by govt stipulation) all PCs and MSDOS
systems in favor of Macs or some such.  How do we know that version 6.0
of MSDOS would have solved ALL your complaints against it?  Hell,
version 5 is already damn sight better than version 2, and who uses an 
OS without an application layer anyway?

: A second example (also close to home) is the transportation network
: that we have in the Bay Area.  *If* we rearranged all the houses, and
: added more rail (BART or CalTrain or light rail) and etc etc, then we
: *might* end up with a superior transportation system.

Therein lies the rub.  "Might" is the operative word.

But the costs of rearranging all the houses is a definite known.

: Doing that now
: would cost a hell of a lot of money.  If, at some point in the past,
: the powers-that-be had decided to subsidize local rail a little bit
: more, and local roads a little bit less, we might well have ended up
: with a superior transportation system [.]

"Might" again.

For this amount of clairvoyance, the "powers-that-be" *_might_* have
simply decided to put BART in place 50 years ago, then build all the
houses and industry around it.  The costs then would be microscopic
compared to today.

But just imagine, some idiot on the staff, who's crystal ball happened
to be cracked on the bottom, so they install all of it in San Jose
instead of San Francisco.  In the meantime, everybody moves to SF
instead of SJ, and you end up with the same headache.  Only the folks in 
SJ are happy as clams, 'cause the trains are hardly EVER busy.

: Note that this theory half-invalidates arguments of the form "if there
: were a better way, then we would already be there (or we would, as
: soon as the government quit meddling)".

Not quite.  The "better way" is always in the here and now, with no
assurance to the success or failure thereof.

I'm still amazed how people can compute all these graphs and charts and
"local minimization" and stuff, and expect that the "man on the street"
is actually going to follow any of it.

: It is quite likely that we
: would stay at whatever local minimum we had found.  However, it is
: also true that departing from the local minimum would cost more money
: (temporarily) than we could afford or were willing to risk (i.e.,
: seeking the better world might not be practical).

All of this depends.  It all ignores new inventions, new ideas, new ways
of doing things.  It ignores idiots who do something against conventional
wisdom 'cause they don't know any better, but just happen to get lucky.
They chance on an even better "local minimum," which others soon emulate.

It also assumes that all possible information is available to everyone 
so that "local minimums" can actually be figured out, like in a compu-
terized game of Chess.  Poker is probably a closer analogy to "real life"
than Chess ... MOST of the information is NOT available.

Notice that even you, in citing your examples of supposed ways of
improving things via earlier govt intervention, depended heavily on
the word "might."

Think how much worse things *might* have been, had the govt decided to
intervene as you suggest, but turned out not to be quite as bright as 
you think they are.

Another thing about "local minimums;"  When you allow the Govt to choose
how things are run, you have a whole different set of parameters which
determines which items are being measured.  Your "local minimum" is
computed in an entire different universe of variables.

Eg, politicians want to get re-elected, regardless of whether or not you
or I have a job.  If they need to spend us into bankruptcy for that end, 
then so be it.  Burocrats want to keep their jobs, regardless of whether 
their job-title is obsolete.  If they have to invent new regulations to
contradict old regulations to keep people coming to them for "help,"
then so be it.

This skews the computations into unbelieveable directions.  And since
the govt does it with the legal monopoly on the use of force, there's
little we can do about it, except complain.

: David Chase

-- 
The Chipmunk.
Opinions are mine, void where prohibited, taxed, licensed or regulated.
    "Do you cheat on your wife?" asked the psychiatrist.
    "Who else?" answered the patient.
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