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April 25, 2021



What geniuses selected full employment and rapid growth as overall goals for society? Jobs kill people and growth kills the environment. We should select for the idea that the more you know, the less you need. Markets are predicated on keeping you in ignorance so they can sell you what you don't know you don't need.

Nick Drew

@ "Regulations, he says, 'restrict businesses and individuals’ adaptability to new conditions – they curb within-market innovation.'"

Well, they might tend to. But here's an important caveat from my own sector (energy market). UK regulator Ofgem can often rightly be criticised, long and hard, for all manner of failings. But for true embodiment of the above-quoted view, go to European energy regulators. They are arrogant, obtuse, close, opaque, sluggish, defensive, mulish and inflexible. They regulate, and then they step away for years at a time, irrespective of feedback & consequences.

By contrast, Ofgem is (relatively) open, consultative, responsive, non-defensive, happy to experiment and reconsider in quick iterative loops. As a result, innovation thrives in the UK energy sector: we are (e.g.) pioneering a heap of new things that will be vital for zero-carbon. I have lost count of the number of times I have been in European energy-industry forums when continentals quite genuinely say "they do this already in the UK" and "it's so much better in Britain".

There's a lesson here: regulatory processes can be bad or good, and the key is institutional / attitudinal (& thus probably cultural). Settle for nothing less than flexible & open.


«We must ask of any decision-making system – that is to say, any power structure – what does it select for, and what does it select against?»

That is a very useful question, but it is also useful to ask what does (much overrated) "reality" select for or against?

The notable NN Taleb seems to think that "reality" selects for avoidance of ruin, a "satisficing" goal:

“My talk in Cyprus: without extreme paranoia, we can't survive. #ergodicity requires ignoring costs-benefits in the presence of ruin problems.”

That in an ideal world would be the role of regulation, as most power structures select for optimizing short term costs/benefits by pushing benefits to earlier and pushing costs to later.


Financial ruin problems are easily solved by printing more of the best money (US dollars).

Finance has figured out how to sell ergodic ensemble averages, so below-average individuals can avoid ruin by tying their bets to the ensemble average return. Stock markets go up more than down. And, the Fed can support stock prices to prevent or quickly mitigate ruinous crashes.

Costs can be put off forever, because credit eventually turns into money. See Mehrling 2011, https://ieor.columbia.edu/files/seasdepts/industrial-engineering-operations-research/pdf-files/Mehrling_P_FESeminar_Sp12-02.pdf

Note that Mehrling brushes over the fact that elasticity exceeds contraction of the money hierarchy. For example, the European debt crisis he mentions in the final paragraph was subsequently solved by more elasticity.

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