My good friend Cynical Cynic sent me a link to an article by
Rik Myslewski of The Register about a speech given by Carter Mead, a pioneer in
microelectronic technology, at the International Solid-State Circuits
Conference in San Francisco.
Before you think I have unsuspected gifts, let me assure you
that my understanding of the term “Solid-State” doesn’t go much beyond that it
replaced the tube technology in my father’s beloved Crown and Marantz power
amplifiers. However, a few of Mr. Mead’s
comments particularly interested me.
Mead spoke about how the quasi-revolution in physics that
began with Einstein, Special Relativity and quantum mechanics has stalled, and
how new thinking is needed to advance it.
"Modern science started with an idea that was really
given to us by Galileo," he said. "The idea was the isolated
experiment. You took something and you very carefully sheltered from all the
influences around, and then you were seeing the fundamental physics of that
object."
Mead felt this worked, up to a point, but to go deeper you
needed to use a less dogmatic, less enclosed approach. “We have a list of
fundamental constants that we're not allowed to ask where they come from." He then announced that he planned to spend
the rest of his life doing exactly that, retesting fundamental constants within
a comparative framework.
Mead got me thinking about a book written in 1852 by Charles
Mackay, “Extraordinary Popular Delusions And The Madness of Crowds.” In it Mackay assays a variety of manias that
seized the public, including the Crusades, witch-hunts, millennialism, and alchemy. He adds to them three economic bubbles where
price became divorced from value; the South Sea Bubble, the Tulip Craze, and
the Mississippi Company Bubble. In all these, crowds become possessed of an
idea, and acted with a passion that went beyond rationality. Needless to say, these all ended badly.
Mackay and Mead are really talking about two different sides
of the same phenomenon. A belief,
whether grounded in science, or simply faith-based, drives future behavior and,
for a time, creates its own discrete self-reinforcing ecosystem. That ecosystem shelters it from new ideas,
even to the point of blocking information that could show it to be demonstrably
false. Mead tells the story of Charles
Townes, the Noblest who invented the maser.
He took his ideas to Neils Bohr (Noblest in 1922) and Werner Heisenberg
(Noblest in 1932) both of whom apparently laughed and told him he knew nothing
of quantum mechanics. Obviously, Townes
got over it.
You can see this encapsulated thought process in the
sequester arguments. First, there is the
ludicrous dispute over who suggested it first--it now being acknowledged that
sequester is a Bad Thing. Then, it just
degenerates into the same tiresome taxing and spending arguments we just
presumably litigated in the last election, with the same buzzwords, or, put
more simply, the Plutocrats vs. the Socialists.
Of course, this is nonsense.
Past the slogans, there is the fuzzy outline of an intellectual
construct. Instead of Newton and
Einstein, we have Classical Economic theory slugging it out with Keynesian Economics. Neither of these is a paragon of modernity. Adam
Smith published The Wealth of Nations
in 1776. Keynes’ seminal work The General
Theory of Money, Interest and Employment at least made it past the
Industrial Revolution to 1936.
Obviously, there have been a lot of changes in the world
since 1936, to say nothing of 1776. But,
for now, the biggest elephant in the room is something neither Keynes nor Adam
Smith could have anticipated; the initiation and growth of the major
entitlement programs, and the extraordinary increase in life expectancy. In Adam Smith’s time, life expectancy was
under forty, in Keynes’ about sixty. Now, it is roughly eighty, and benefits
(or suffers) from an unanticipated and somewhat perverse actuarial issue. Medicare gives access to healthcare to those
who might not have been able to afford it, and that allows them to live longer
lives. Put more bluntly, the better we
do at keeping our seniors financially secure and medically cared for, the
longer they live to use the programs whose cost we worry so much about. As brilliant as both men were, neither Smith
nor Keynes could possibly have been thinking about Medicare Part D, CAT Scans,
or the hordes lined up for the early bird specials.
How we deal with this is at least one critical part of the
sequester argument (the others are discretionary government spending and
taxing.) If we had infinite time, or this
were just a theoretical discussion to be mathematically modeled, we could leave
it to tweedy academics to fight it out over brandy and cigars.
Obviously, the sequester shows it’s not theoretical, and we
are certainly out of time. But, even if policy could be determined by the
best-trained minds, completely devoid of a partisan tilt, I think what Mead
would say is that old theories were highly unlikely to come up with the correct
solution. Just because an idea might be state of the art in 1776 or 1936 does
not mean it still works now, particularly when all this new and unanticipated
data has come in. He would probably urge you to clear your mind of all preconceived
notions, and test your basic assumptions.
Then choose the optimal course.
That, of course, is not going to happen. Gene Epstein, who writes for Barron’s, often
refers to the late Nobel Prize winning economist James M. Buchanan “public-choice theory” where
politicians reap short-term gains from spending money that can be paid back
long after they leave office. They therefore have a strong incentive to preach
and practice continued fiscal profligacy.
Epstein uses Buchanan to support his argument that entitlements are a
Ponzi scheme that needs fixing or even ending.
But, if he weren’t as conservative, he might have easily said that
public-choice theory also provides short-term gains from spending on defense,
or spending on tax preferences, or even asking people for less money in taxes than
the government legitimately needs to keep running. I admire Epstein’s writing greatly, but he
suffers from the same myopia that the rest of us do.
So,
is the political system at all capable of finding its way through the sequester
thicket and, ultimately, towards a more rational economic policy? Do election
results give a direction? I wrote above that these taxing/spending/entitlement reform
issues had just been litigated this past November. Actually, that was incorrect. What was litigated, or more accurately,
demonstrated, was public-choice theory. Mr.
Romney, afraid of losing the senior vote, promised them that there would be no
changes to their benefits. They rewarded
him with a fourteen-point edge on Election Day.
And he refused to say which tax expenditures and deductions he would
reform, merely that the whole would be net revenue neutral. No point in frightening people he intended to
take money from later. None of this
disproves Adam Smith, as neither Mr. Romney nor the GOP are exactly free-market
capitalists; they are, instead, pro business, pro wealthy, and pro getting
elected.
Mr. Obama, for his part, spoke as if raising taxes on the
wealthy would be the cure-all. Everyone would
be able to hold his or her own and even prosper if only the rich would pay
their fair share, the government “invests” and we did a little cutting on
defense. Mr. Obama and his party aren’t
Keynesians; they are pro-labor, pro social contract and also pro getting
elected.
And that makes this last election a lost opportunity, because
the political viability of serious entitlement reform, hard-nosed budget
reviews, and transparent tax reform hasn’t been tested. People are still
dreaming of a world in which, if there is a price to be paid, it will be paid
by others.
For this, we can blame both our political system, and
ourselves. Irresponsible politicians,
afraid to tell the truth to the people who elect them, have engaged in the same
behavior described in Mackay’s book. They have metaphorically sent children to
liberate the Holy Land, burned people at the stake, and stoked apocalyptic
fantasies. They feed the fanaticism that
leads perfectly rational people to insist on completely irrational positions. And
we are equally to blame, because it serves our self-interest and our ego to do
so. Read the comments in any on-line
forum, and you can see how average citizens declaim as if they were
experts.
Mackay also tells us that popular delusions destroy the
ability to see value (recall the GOP primary candidates all rejecting a
hypothetical deal that would have been 90% spending cuts for 10% tax increases.) He lists the following as payment tendered
for one tulip: Two lasts of wheat, four of rye, four fat oxen, eight fat swine,
twelve fat sheep, two hogsheads of wine, four tuns of beer, two tuns of butter,
one thousand pounds of cheese, a complete bed, a suit of clothes, and a silver
drinking cup.
That must have been some rare bulb. I wonder if that seller is still around to
give bargaining lessons? Either that, or maybe we can hire Carter Mead to start
questioning fundamental constants?
It has to be worth a try.
MM
