Regular readers now this but from the traffic it seems like some new folks are tuning in for the Euro-Crisis debate.
On video I have a tendency to smile and laugh a lot. I am also a generally happy-go-lucky type of person. This combined with my sloughing off of long term issues has people often mistake me for a Pollyanna. That is someone who thinks everything will be ok.
Ironically – or not – I believe the exact opposite. Everything will definitely not be ok. I often tell my students: if you ever find yourself worried sick about whether or not things are going to turn work out, don’t worry, things are definitely not going to work. Everything is going to go horribly, horribly badly.
This is the essence of life. We are not forever. Our institutions are not forever.
Indeed, in a relatively short time, we and all the things that matter deeply to us will be annihilated. They will not exist at all and they will never come back. Not at least as we would think of such. There will be no faint hint of them in the background of the universe or spirit occupying another plane.
All things we care about are at their heart information – particular arrangements of the building blocks of reality – and entropy eats information. Everything we care about will be gone.
Indeed, what we mean by the passage of time is ultimately the direction in which we and the things we care about die. The two are fundamentally inseparable because they are defined in terms of each other. Why we perceive death and time the way we do is a separate question, but there can be little doubt about the basic story here.
This is part but not the entire reason why I am so focused on making sure that policy addresses immediate suffering and is less concerned about the long-run.
The other is that I think we have far, far less control even over the “near long run” say the next 50 years or so, than we think. Its highly unlikely that we as policy makers are going to do something right now that radically alters the course of even the next 25 years.
As economists we can see that institutions matter, but if development economics has taught us anything it is that we cannot simply write down a set of institutions hand it to policy makers and walk away. There are fundamental reasons why institutions rise and fall and they do not appear to be due to the wisdom of the institution makers.
Yet, as impotent as we are in the long run, we are very powerful in the short run. This is because we have discovered a few levers that have profound impacts on short term human experience. One of them is the printing of money.
It didn’t have to be the case that money was so powerful. We can imagine a world where it is not. But, in this world money and its management are a very big deal. This extends, though somewhat less so, to credit systems in general. Credit matters a lot. We also have the power to influence credit. Again, we can imagine a world where we didn’t but this is not the world we live in.
In this world, runs do happen. In this world credit markets have multiple equilbria and in this world we can influence which equilbria comes to pass. This has profound short run consequences and should not be ignored.
Trying to avoid causing people undue pain should be our major goal. This is why I focus like a lase beam on a strategy of preventing the world possible shorterm outcome – a global financial meltdown – from stemming out of Europe.
Modeled Behavior 
11 comments
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Monday ~ November 28th, 2011 at 11:32 am
from Italy
Well, I think we do not need to get caught in any after-life theories for sincerely pursue the economic welfare, even from a Christian point of view, given the fact that we are here just temporary, then trying to maximize the present benefit for all of us in a fair way is good.
Monday ~ November 28th, 2011 at 2:57 pm
Gray, Germany
This story sounds very much like Keynes’ famous quote to me: “in the long run we’re all dead.”
Hoiwever, imho you seriously misunderestimate the corrosive power of an continous flow of bad policy choices. Maybe one big decision still can’t change the course of the next 25 years, but an abundance of small mistakes can have that impact. The proof is in the All-american pudding.
Monday ~ November 28th, 2011 at 2:58 pm
Gray, Germany
OT: A way to edit after the posting, just like at Disqus, would really be nice. Sry for all those typos,
Monday ~ November 28th, 2011 at 3:40 pm
Becky Hargrove
Part of the myths we tell ourselves, irregardless of how they actually manifest in the world, are at heart ways of comforting ourselves. When I tried to maintian my bookstore and finally could not, a comforting myth for me was that God did not want knowledge to be lost from the Universe. Another myth was that if I tried and failed at whatever my purpose might be, what would matter when God’s angels came to find me (alone in my room) was the evidence that I had in fact tried and that mattered. And of course the waking dream (real to myself at any rate) 30 years ago that I would one day have conversations with you about some of what is important in life. (Bear in mind of course that sometimes I understand the language of the crazy or the mentally ill!) Even so I do not think it too much a stretch to think of economic life as having a spiritual counterpart because it is wound so tightly with everything that is important to us as we go through life. Two years ago I told you those five components, here they are again:
maintenance – building – creating – healing – understanding. Our civilization could possibly move forward out of the creating phase.
Monday ~ November 28th, 2011 at 4:45 pm
Curt Doolittle
So, Karl, then what if most of us choose that we will not forgo personal opportunities for personal gain, and not seek the long term, but instead, seek to profit from the short term?
Isn’t the primary problem for every civilization, to create informal institutions that extend time preference? What if people cease to ‘fund’ those informal institutions? Are you saying that the classical liberal model is natural to man?
Several Property is necessary for economic calculation, cooperation and incentives. Each act of forgoing the opportunity to privatize property, and privatize opportunity, is a cost to the individual observing the institution. Why does he do this? Why does he bear that cost?
What is the consequence of destabilizing the inter-temporal bias that our traditions have embedded in us?
How is any society’s tendency to flock or swarm opportunity abated? Are you saying that monetary policy is enough? Or do you believe that the bubble will never burst? Or that opportunity to compete with others who do not share those same values, is not lost in the process of that misallocation of human capital?
Why is it, as many europeans have observed, that americans ‘obey the rules even if nobody is watching’?
“The purpose of conservatism is to concentrate capital in order to hold land. It is commonly referred to as a preference for ‘group persistence’. But the purpose of group persistence is to hold land.”
You may not yet be able to leap from your egalitarian position to land holding. But that’s the set of causal relations that matter.
And if we were to channel our efforts, not to land holding and group persistence, but to personal gain and consumption, then would not that be the antithesis of the social order you seek? WHat I am describing is an environment of massive corruption.
Or perhaps, you have not read Huntington….
Curt
FWIW: What makes you a progressive is how people act toward you. They act toward you that way because of your behaviors, including the biological, the environmentally learned, and the pedagogically instilled. You are constantly confronted with a confirmation bias. It is not a universal bias. It is the bias of birth, success and consequential privilege. It is not a choice.
Sunday ~ December 4th, 2011 at 10:10 am
Gray, Germany
“Why is it, as many europeans have observed, that americans ‘obey the rules even if nobody is watching’?”
Do they? The people, maybe, but the corporations?
Monday ~ November 28th, 2011 at 4:45 pm
Curt Doolittle
WORDPRESS HAS A PLUGIN THAT ALLOWS EDITING COMMENTS FOR X MINUTES. PLEASE INSTALL IT FOR THE BENEFIT OF ALL OF US.
Sunday ~ December 4th, 2011 at 10:11 am
Gray, Germany
I second that proposal!
🙂
Monday ~ November 28th, 2011 at 6:48 pm
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