The economist lives!

hey friends!
There was a nice post, almost ready to be posted, and the durn laptop froze up. So here's something maybe a little different.
From Thanksgiving to the end of the semester I was extremely busy. Two weeks of writing on my two big papers for my professors, one week of intense studying for final exams. All the work paid off though. My exams went well. Both papers were very well received. A third paper will be published January 4th on the Mackinac Center for Public Policy website. All three of these papers focus on the same topic, a topic that has become an area of great interest to me and that I hope will have potential for the future - political possibilities. More particularly, the papers focus on developing a theory of a window of political possibilities and how that window can be shifted to result in policy applications.

Well, I'm hanging out with Larry Reed, the president of the Mackinac Center, in Naples, Florida - so I'm going to go for now.

Pearl Harbor Day!

Lest we forget either the tremendous sacrifices and triumphs of World War Two or the reality that we are at war even now - no, I'm not talking about Iraq - with an enemy that is more eager to destroy our way of life than the Japanese ever were.


One paper down, major homework getting done, then studying for finals and modifying the paper.

Arrogance of the intellect.

If I ever start using my education and training as a foundation for arrogance, you MUST set me straight. This week I have come to the conclusion that, while not all of the economics professors here at GMU suffer from arrogance, far too many of them do. Included in the afflicted are all three professors that I have classes with this semester. Now, this arrogance takes several forms, but all have the same root - forming judgments and beliefs based on seriously flawed and/or incomplete information. Now don't get me wrong, all three men are brilliant, and I respect all of them, but all three have allowed their intellect to impair their ability, in some areas, to absorb information that doesn't fit with a preconceived idea of how things should be.
One professor emphatically does not believe evolution, and is able to rattle off many logical and factual problems with the theory, but neither does he believe in design by the Creator. Why? Because his back hurts, and other physical aliments observed around him, make him think that humans were not perfectly designed. His intellect cannot accept the notion of a Creator, therefore, no Creator exists. So what does he believe? Hmmm, good question. Not in evolution, and not in God (in any sense).
The next prof. allows his intellect to make snap judgments about political issues. Sometimes he seems to be on target, but more often his assumptions are simply incorrect. Though I think he realizes that he doesn't have all vital information, he feels that he has enough to act and believe as if he had all pertinent information. He doesn't.
The third professor blatantly assumes that the rules he plays by are the only proper, the only rational, rules by which to think and form opinions. If you can argue and win from within his rules he may accept your point, but heaven help you if you try to argue that one of his assumptions about rationality, morals, motives, or another such human aspect, is flawed. His fervent belief in his perfect conception of rationality is, ultimately, irrational.

Three forms of arrogance: "This doesn't fit into my preconceived opinion of how things should be, so it must not be true." "I don't need to know all the relevant information, I know enough to make a judgment." "My approach is the only rational and proper approach to use." All three are dangerous both in academic and personal life, yet all three are oh so easy to slip into - especially for the educated mind.

Why should I believe as I do?

Tonight I had the pleasure of attending a debate between two of my favorite professors here at GMU about the rationality of religion. It was unfortunate that one debated the rationality of religious action and the other the rationality of religious belief, but the debate was fantastic nonetheless. I believe that the debate will be made available as a podcast (digital recording) for dispersal, and when it is I will link to it. Why should you listen to it? Because it provides excellent examples of a fantastic speaker (Dr. Larry Iannacone), the types of anti-religious arguments you hear all the time in academia (Dr. Bryan Caplan), and some good, non-experiential based, arguments for why religion is a rational action (again, Dr. I). Why non-experiential? Well, simply because if you base your entire argument for religion on experienced phenomenon you leave yourself open to counter-arguments such as "well, that's your experience and that's fine for you, but I've never experienced that", or, "are you sure you didn't just see/feel/experience what you really really wanted and expected to - kind of a mind-over-matter sort of thing."

All right, that's enough for now. I have many more thoughts on this though, so if you're interested, ask me.

God bless,

Read this

Wednesday I read a paper that made me laugh, smile, chortle, and think that perhaps it's time that economists stop pretending they can analyze religion without accounting for the supernatural. That leaves me with a significant question however - how can I provide additional depth to the work being done on the Economics of Religion by drawing God and the supernatural into the picture? Here's the paper - it's not long and really isn't as sacrilegious as it seems at first. And here's a good website for some background on what economists have just started doing with religion in the last couple years. Warning about that second website - it is substantially more complex and "economic".

Another one of these kooky 60 degree and sunny November days here in Virginia.... Yesterday I drove nearly all the way to the southern edge of the state while making a run for my part-time job. At least I didn't have to drive all the way to our branch office in Raleigh NC.

Was I born in the right decade?

Once again I have come across one of "my" economic ideas in a paper that was written in the 60s. I guess the challange for me now is to both learn to identify which ideas of mine that haven't been written about yet have merit (instead of just assuming they are so simple as to be worthless) and to explore new applications of these old ideas of "mine".

I have a question for you. Why is democracy the best? Do you have any economic, administrative, or effectivness reasons why democracy is the best form of government? I think that question can be solved rather easily, but more difficult is the question of which of the many voting methods is best.

Third random point. Yesterday, working in the AAV shop, I was marveling at the network of small and medium sized businesses that exist to produce the technical setups for tradeshows, conferences, concerts, etc.... Not only are there the companies that actually bring the equipment, set it up, and run the show (and even then they hire lots of freelance help for specific jobs), but there are also many companies that rent additional equipment, do shipping, even tasks as mundane as building cases in whish to transport and store expensive equipment.

The reset button

Have you ever had an experience that convicted you, illuminated your actions, and pushed you back on some course you had originally set?

When these experiences come from God they are just amazing and make me praise Him all the more. When I discover a particular "reset" on my own, I just kick myself. And when the reset comes from a friend, from realizing that by straying from my previous course I may have hurt someone I care about or caused them turmoil, I grieve for them and feel great remorse regarding my actions.

This afternoon something from one of my friends triggered this third kind of reset, and believe me, seeing how far and fast I can go from where I want to be when I try to take matters into my own hands just makes me all the more glad for God's grace and the constant advice/companionship of the Holy Spirit, and all the more committed to relying totally on the provision of my Father.

My friend - - I am deeply sorry, and thank you for (whether or not you intended to) setting me back on track.

In other news, I had a meeting/interview at the Tax Foundation this afternoon. Talking with several of the staff I discovered that one of their major points in the discussion on what attracts businesses to states is almost exactly the same idea I had and wrote a little about back in June. Now I really wish I had turned that thought piece into a full paper or article for MCPP. Good news though - it appears that I am moving from having "original" ideas that were first written about sixty years ago to simply not getting my ideas on paper fast enough to be the first. Guess I should write about my thoughts and ideas more, huh. :)

Went hiking with several friends yesterday. Fantastic day, so wonderful to be out and among God's forests, hills, and rocks again. The group hiked about 7.5 miles (one of the young ladies and I hiked about 1.3 miles more than the group). Here are a couple of pictures.


















Just a stream I really enjoyed hiking along. The goofy camera said the picture was blurry, but I like the picture the way it is.

Below is most of the group. The standing guy (Mike) and seated gal (Carolyn) both go to my church.
















And here's me, playing with the rocks again.

Behind the politics

More and more evidence continues to surface that we must give decentralized disaster relief more freedom in responding to crises. It seems as though worries over jurisdiction, licenses, and other bureaucratic nonsense hampered various small scale initiatives to provide assistance (article). Could there really be something to the wisdom of free-market economists' saying that a central authority has no hope of efficiently (or even workably) coordinating all relevant information and making the right decisions? Ok, so why do people clamor for stronger government response and protection after disasters? That's right, because then they do not have to take responsibility for their own actions and safety.

Apparently there is also a dispute over whether Amtrak was available to help move people out of the city (article), substantial emergency funds were unaccounted for or mis-spent before the fact (here and here), and my favorite of all religious groups in America - the envirowackos - strike again, causing more death and destruction (article).

More red tape (article). Just makes me upset.

No real profound economic thoughts, just been doing lots of reading lately - mostly about voting methods, rent-seeking, and various other facets of public economics and public choice. Played football (among other things) with friends from church yesterday, very sore all over today. So much fun....

YeeeeeHaaaaaaah!!!!!

I passed my Macro Economics Preliminary Exam!

I feel as though I should write something.

A possible bias may be a work here, but I find it rather sad that those most responsible (if anyone is) for the troubles in New Orleans most try to pass the blame while the one least responsible is the only one who has taken responsibility. I have actually heard people saying (and writing) that no blame rests on anyone except the President, while I strongly feel that, due to the evac plans that were not followed, the delays in requesting federal help (National Guard, etc...), and other various factors, what blame exists is to be found in lower levels of government.

Anything I could say has already been hashed to death, but you may have missed several points that I feel are crucial. First, the death toll stands at 659. Tragically high, yet not nearly the cataclysm that was initially feared. Second, to the best of my knowledge (and limited time), neither city evacuation plans and state response plans were followed completely. Third, everything that happened in New Orleans had been predicted and warned about for decades - expect perhaps the looting - and nothing was done by the "responsive and compassionate" leadership of the city and state. Fourth, it is the responsibility of the state governments to call for federal aid - especially when that aid involves military personnel. National Guard units are under the command of the governor. Neither was requested until after President Bush called and urged the governor to do so. Fifth, the talk about blacks being "targeted" in some way is preposterous. Look at the inner city of most urban areas. Anything that affects that inner city area is going to affect a greater number of "racial minorities" than "racial majorities".

There may be other salient points, and I make no assurances that the above is 100% correct, but it is true to the best of my knowledge given the limited time I've taken to be informed.

Now to some interesting economic thoughts - again, not original, but with my own spin.

First - the response of the free market, even though there are some tacit restrictions on prices, has been terrific. WalMart, Home Depot, cell phone providers, and other major retailers began preparing for the hurricane before it made landfall by stocking stores around the area expected to be hit with food, water, and relevant supplies (mobile cell towers and generators moved into the nearest safe zones in the case of the cell providers). Positive press was probably part of the story, but there was also money to be made. Survival items were given away, but markets existed for vastly increased quantities of "hurricane related but not survival" items.

Second - private relief efforts aside, the government spending/rebuilding/assistance/relief in disaster scenarios significantly decreases the costs of living in areas prone to disasters. My intelligent but non-economist mother saw this as a problem, and any economist worth his/her salt will heartily agree with her. Put in simple "economist speak", government disaster relief distorts the true costs of living in such areas, allowing more people to live in such areas than is best for the society as a whole. Instead of accounting for the true cost of potential ruin, they count on government relief to defray their costs. I have heard several economists who are concerned with the growing trend of increasing relief efforts and setting up special funds for victims of disasters. I agree with them. It is always easier, politically, to increase the amount of relief and be seen as "compassionate" than to decrease the relief and be decried as "heartless", "racist", and whatever else your political enemies will attempt to crucify you with. If we set up special funds for Katrina victims, al la 9/11 funds, where do we draw the line? At least with 9/11 you could draw a line at "victims of foreign attack during time of peace", though even that line is tenuous at best. Looking at things from a public choice perspective, it seems likely that more and more tax money will be spent on disaster relief of various kinds, and the costs of living in a disaster-prone area will continue to decrease.

Third - should we rebuild New Orleans? No, we should not rebuild it. Should it be rebuilt? Perhaps, but only if the costs of rebuilding are born by those who will live/work/have businesses there will we really know. Only then will we know if the benefit the residents expect to receive is greater than the costs of rebuilding.

Fourth - will the average income/wealth of New Orleans increase, stay the same, or decrease as a result of the hurricane? My bet is that average wealth will increase. If it is truly months before people are allowed back in to the entire city, I would expect that a lower proportion of low-income individuals will return to the city than the proportion of high and middle-income individuals.

All right, that's enough for tonight. I still have to read for class tomorrow. Do your homework, be willing to look beyond the major sources for news and information, and you won't need me.

NR

Enough!

In an ideal world, rescue would have come to all individuals trapped in New Orleans almost immediately, law and order would have been maintained, and the survivors would have been spared the trial that so many have born over the past five days. Instead, despite their best efforts (the US Coast Guard alone rescued 22,000 survivors and assisted with a further 9,400 rescues) the available rescue assests were overwhelmed by the magnitude of the disaster, worries about political correctness allowed looting and armed banditry to reach such a point that US military units have been conducting "combat operations" in the city, and the scale of flooding combined with the lawlessness contributed to the length of time required to extract all survivors taking shelter within the city. Yeah, things could have been done better, but I would argue that human factors have made things substantially more difficult than they otherwise would have been.

But wait!! What's this!? It looks as though, prior to the hurricane, all residents were warned that in the event that New Orleans was hit by a hurricane they (residents) would be responsible for their own safety and evacuation. Here's the article. Draw your own conclusions - I respect you enough to let you think for yourself.

Oh, and by now I am sure you've heard about Senator Clinton's request for a 9/11 commission style investigation into Katrina and the disaster response. Does that mean the commission would get to selectively ignore embarrassing revelations? It remains to be seen whether her request has true merit or whether it is a political maneuvering device to distract the administration.

'Nough for now. I was pleased to read that many of the Gulf refineries are beginning to restart operations, that crude oil prices have fallen below pre-Katrina levels, that we got through the Labor Day weekend without serious fuel problems, that various utility crews have made strides of progress in restoring service, and that engineers have been able to plug more of the levees around New Orleans and begin pumping operations.

Food for the hungry………..graduate student.

Yes, I went to the grocery store today. Buying food has become an unexpected pleasure, but also a little of a frustration as my mind glides over the many things I could make – if only I had the time, the reason (ie, guests), or the budget to purchase the ingredients. This economy we live in is truly amazing though. Bananas (fresh of course, and very tasty) were priced at $0.39 per pound. Stop and think about that for just a moment. What would be a reasonable real price for a pound of delicate fruit grown thousands of miles away, picked and rushed practically to your doorstep while still fresh, and available in such quantities that everyone has as much as they want?

How about less than five minutes of work by a low-skilled worker earning $5.50 an hour! Is that not incredible? Price is a marvelous signal of how resources need to be moved around in the market. Imagine if suddenly people began eating more bananas. At the low price of thirty-nine cents it would be easy to add several pounds of bananas to your weekly diet, and suddenly the grocery store would be running out or stock. Grocers would both increase the price they charge customers (but not too much or customers will shop elsewhere), which marginally reduces the poundage of bananas purchases, and the grocers would increase the price they pay their suppliers to provide a few extra boxes of bananas. By a similar mechanism, the increased money flowing to the suppliers would reach the growers (who may actually be one and the same, making the transmission of price very simple indeed), giving the growers - who until this time had been planting quantities of bananas and pineapples such that a box of one earned the same return as a box of the other - a very good reason to put more effort and land (resources of production) into growing bananas. Of course this story is highly simplified, but because prices were allowed to freely adjust at all levels, the increased demand for bananas was soon met with an increased supply. If price hadn’t been allowed to adjust shortages would have developed, there would have been “banana lines” in the grocery, and society would have been worse off by the value of the spent waiting in line.

Now let me jump to hurricane Katrina. Right off the bat, let me say that I am deeply sympathetic of the hurricane victims’ plight, they are in my prayers, and I understand that the nation should respond and help these many people get back on their feet. At this time I will not even touch the issue of to what level the federal government should be involved. Though it is true that the analysis of the costs and benefits of living in areas susceptible to natural disasters is badly distorted, that is a topic for some other time. However I would like to make a couple of “economist’s observations” about things I expect to see.

First, price controls. Refer to my story above. Now apply the same lesson to a shipment of generators headed for Alaska, output from a bottled water plant destined for Seattle, or plywood intended for developers in the Midwest. If the prices of these and many other goods that will be required in the hurricane-struck areas are not allowed to adjust, these and other goods intended for areas where life-as-normal continues will go where they are intended. Sure, the goods that are regularly supplied to the Gulf coast will continue to go there, but any increase in quantity will be slight regardless of how quickly stock sells out or how long the lines become. If prices are allowed to signal demand, generators, bottled water, plywood, and a thousand other goods will suddenly be freed-up from less vital requirements and made available to help with the recovery of the affected area. This reasoning also applies to the Atlanta gas panic on Wednesday. Though I hate to see gas prices going this high, I would rather see high prices than long lines at the station – even though I do have virtually no spare cash and lots of flexible time to wait in line.

Second, the economics of rebuilding. If anyone ever tells you that the rebuilding is somehow good for the economy, that it stimulates the economy, that it’s good for jobs, or any other such claptrap, they are wrong. As the great classical economist Fredrick Bastiat explains in his article, “What is Seen and What is Not Seen”, the resources that a society invests in restoring destroyed or damaged property are in essence wasted because they are expended merely to regain what was once had. So no, the rebuilding in the wake of Katrina is not a boon to the economy – resources and labor are merely being drawn from whatever other use they would have been put to in the absence of the destruction.

President Bush is absolutely right. It will take years to recover. My hope is that sound economic principles will be allowed to guide that recovery along as rapid a road as possible.

Well, I’m done writing for now. More later. Today I went to the VA DMV and officially became a Virginia resident. More on that too.

So yeah, 20 days later...

No, I haven't been sent on some secret venture to far off places. Instead I have been inward, in beyond the teeth and fingernails, through the epidermis, under the skeletal structure, into the very mind of man. What man? Why, me of course! Back in VA as of one week ago, but studying all the while for prelim exams. Last exam on Saturday. I promise I'll feed you shortly thereafter.

Published!

Ok, so it's not exactly the AER, but I'm happy nontheless. This is my first time published since writing about lasers and the future of warfare (don't laugh) for the Hillsdale Collegian. You can read my article for yourself here. I highly recommend poking around the rest of the Mackinac Center for Public Policy website as well.

"Think-tanking"

Just got out of a brainstorming session with a few of the other policy, communication, and advancement staff here at the Mackinac Center. The more I am here the more I begin to realize what a team has been assembled here. I'm off to Lansing (taking an early day) to attend the swearing-in of 6th US circuit court of appeals justice David McKeague, but you should check out the MCPP website.

A few more pictures

Here are the pictures of the "pit" and a couple more bursts.

More Fireworks Pics

Hello dear friends! Thought I'd share some pictures from the fireworks shoot on July 3rd at Delta Township. Some of the pictures are of setting up. You'll be able to see the racks and mortars that we hand-light and fire the shells from. Each tube contains one shell of either 3, 4, or 5 inches in diameter. The shells in the racks next to the fence are the finale. The finale is fused together so that several hundred shells can be fired with only a couple of lightings. I lit the finale in this show.

Davidson (16 yr old brother) took several pictures during the show. We are still learning the camera, so bear with us. Several of the pics show bursting shells. I hope these are obvious. A couple of the pictures show the environment we work in on the ground around the racks as we are lighting shells. In short it is loud with firing cues and the explosions of the lift charges, hot with our heavy gear and the flaming debris falling on us, busy with carefully thought-out but rapid movements, and such an incredible experience.

Enjoy!

fireworks

The fireworks shows that my family worked on this past week went very well. The show at Delta Twnshp on the 3rd went smoothly and normally. I shot the finale. On the fourth, setup was normal, but we had a significant amount of rain again (third year straight). I stood on the hill during the drenching to maintain the tarping and protect the shells, but even I was forced down when the lightning got just a little close. We only lost one shell in the main body during an hour of rain! Parks and Rec lost their nerve though, and the show was delayed 'till the fifth. Unfortunate this was, as I was unable to be there during the shoot or clean-up.

There were news-crews at both setups. Links to the shorts are below. Click the video link at the top of each article. One clip is entirely about fireworks, featuring Clayton, Davidson, Larry, and Roger Bonney. The second clip has several Russell boys in it and show some of the action on the hill in Lansing.

July 3rd - Delta, Sharp Park
July 4th - Lansing, the hill.

edit: belay that - the video seems to have been taken off the news site for the 3rd.
2nd edit: video now seems to be down from the 4th as well. Too bad.

Economically Speaking

Working here at the Mackinac Center for Public Policy, I have become convinced that Michigan needs to settle down. Or at least, that Michigan political executives and legislators must settle down. Instead of continually making and changing statements about what they intend to do to "fix" the state economy, there should be some sensible reforms enacted, then things should be left alone for a while. Thus would businesses, business owners, and entrepreneurs be shown that Michigan is stable enough to support long-term business investment. Instead, what we have right now is a climate where pols are proposing significant shifts to our business environment, the established rules are not always followed, and the future prospects of new businesses in Michigan are unstable. Instead of giving MEGA incentives and legislative handouts to those who would provide Michigan jobs we should provide them with a stable and predictable legislative base. Unfortunately, our governor and legislator seem intent on creating fault-lines.

Another imagination paper.

Hey gang. Probably the last of the short papers for a couple weeks at least - writing group is done for now and we'll see what I come up with over the summer. As opposed to the last paper, I'm actually reasonably happy with this one.

Imagination Required

Atop a slight ridge overlooking a large field a young officer sit on his charger. Briefly surveying the two armies locked in mortal combat, he couches his lance and leads his unstoppable cavalry in a charge to rupture the enemy’s lines. Suddenly he is brought up with a jerk as his horse goes down with a broken leg. As the charge sweeps around him an attendant brings up another horse. The young officer quickly remounts and leads his cavalry into the fray at the crucial time to turn possible defeat into decisive victory. After receiving the commendation of his general for his contribution to the victory, the young officer returns home to his loved ones.

Later that same evening the young officer’s mother is dismayed to find that the chain on his bicycle has ruined the cuffs of yet another pair of his pants.

What is imagination?

Nearly everyone is familiar with imagination in the context of childhood. In the role enabling and enhancing play it is truly important, it is the ability to create realities far beyond the merely physical, yet imagination does not lose its usefulness after one’s 18^th birthday, or even after the 98^th. Imagination remains incredibly important for any adult who hopes to solve the unexpected or create the unprecedented. It is seeing things where they are not. Imagination is that intangible ability that allows an individual to create something ‘new’ – a solution, product, or theorem that has never before existed. In particular, it is this last quality that prompts us to assume the other benefits of imagination as proven to be of value to the “grown up” world and focus on the value of imagination to economics.

Why is imagination important to economics and economists?

The economist who lacks imagination may be successful, able to analyze data and perform all the tasks normally expected of an economist. They may even be able to write papers that other people consider being helpful and contributory to the literature, but they will never make a truly revolutionary advancement of theory or ideas. The individual’s facility of imagination is what allows an answer to the query “what if…?” Though individual economists may be able to function without imagination, economics as a whole will wither if imagination ever fails. Lacking the spurs to analysis and research provided by imaginative innovations in economic theory, the discipline would quickly become stale, irrelevant, merely a method of analyzing the problems of the day with the methods of yesterday. Whereas, with imagination assisting theorists, economics as a whole drives ahead, seeking to analyze and understand the issues of today with the best methods of yesterday AND the new methods of tomorrow. For imagination to be available as a tool for the economists of tomorrow, it must be something they are accustomed to calling on throughout their lives. In today’s culture of provided entertainment, electronic and visual mediums that remove all necessity for imagination in entertainment and play, will there be a dearth of “imaginationists” in the future?

Is there a threat to imagination?

Cursory observation seems to reveal that every generation, every major shift in entertainment technology, has brought distraught cries that the children’s imaginations will atrophy. Robert E. Lee is known to have written home admonishing his wife to not allow their son access to many novels. It was Lee’s strong opinion that his son’s perspective on the world and his imagination would be weakened by reading accounts of another’s perspective of the world and life in a fictional book. Parents and elders have railed against television and more recent forms of childhood entertainment, decrying the lack of exercise and claiming a detrimental effect on young imaginations. Cave paintings probably met with similar criticism because they showed boys and girls images about certain aspects of life (hunting, skinning, etc) before the children experienced it themselves. Despite the concerns, from all appearances it would seem that the imagination of society has not suffered, with patents, inventions, and theories continuing to increase at an incredible rate. Economics in particular continues to develop new theories of markets and behavior, new ways to gather and analyze information, and new concepts of how mankind interacts with itself.

As economists, let us not distance ourselves from that little boy, riding his bicycle and waving a stick, who turns the tide of battle and wins the gratitude of a nation. We should all be so lucky.

slightly tardy

Ok, here's last weeks paper. I don't really like this one - it seems rather choppy and poorly written, but I don't have time to fix it right now. Yesterday's paper, the last for the semester, will follow later this week - prolly Friday.

The Role of the Selfish, Single, Working, Man

Who was the first person to purchase a DVD player? What brave soul paid hundreds of dollars for a device that could only play a very limited selection of movies? Were the first owners of DVD players willing to gamble that more movies would become available, despite witnessing the debacle of the videodisk player just a few years earlier? It seems rather amazing that people would make such a purchase. It is even more amazing that businesses would develop new technology and products that depart from previously established markets. There is risk. The company must start producing the new good before it can be purchased, cost must be incurred before the profit (maybe) arrives. The initial consumers must be willing to tolerate poor film selection, poor support, and an expensive piece of equipment that become obsolete very rapidly. Yet once enough people have purchased the good the benefits can be significant. Though this example specifically refers to DVD players, it can easily be seen how the same pattern has applied to many other goods.

A ‘networks effect’ is the term economists use to describe a good or process that experiences an increase in value as its use becomes more and more widespread. This also means that it is relatively less valuable to use/produce the good earlier rather than later. Companies would rather produce a good after it is seen to have market potential. Discerning consumers would rather wait to spend their hard-earned money until prices drop and use is sufficiently common to have raised consumer value to near its maximum level.

Companies can choose to develop new products or improve old. Each choice has its own risks and rewards. An old product has the advantage of an established market, but the risk that maybe something new will come along and supplant it. A new product has the advantage of perhaps developing a new market, replacing an old good, or gaining market share, but also has the risk of being, well, risky. Any new product carries uncertainty about whether it is a viable product.

So what gives a company the confidence to introduce a new good opening a new market such as some new gadget, equipment, or electronics device? Likewise, what possesses a consumer to purchase something so new no one really know how readily it will become a part of society? Why be the first to own a good that is expected to benefit from significant network effects, when at first the usage and network benefits will be rather small?

The answers to these questions are very intricate and require careful thought on the many factors involved, but I believe there is one element that has often been overlooked. This element can be summed up in two words. Boys. Toys.

Men, often relatively young and single but not necessarily either, seem to have a proclivity toward owning things that are “new” or “high tech” simply because they are. There is a strong flavor of competition in this – a man wanting either to have something before any of his friends does or wanting something because all of his friends already have it. Not all of this (generally) male behavior can be explained by competition though; a fair amount must be caused by just general male-nature. Gadgets, new “stuff, “toys” typically interest guys. All guys like new stuff that is high tech and interesting, but it is the single man, earning a decent wage, who can afford to indulge his taste for the latest new idea. Narrow selfishness causes him to purchase for his own enjoyment and to show off his new stuff for his friends, but in doing so he starts the ball rolling on network effects for the rest of us. It is the known existence of such consumers that give companies the confidence to delve into new products and new markets.

Back to the DVD player example. Starting from a small number of initial buyers, DVD makers have continued to develop and improve their products, numerous films have now been released on DVD, and we are well on our way to seeing the DVD burner become a normal method of recording data and video. Not bad for selfish young men with money to burn.

Meanwhile, in Fairfax

A young man was discovered permanently embedded in his Econometrics textbook this afternoon. Local police say it was most likely the result of studying indoors with temperatures reaching above 80* outside.

Today's random thought: Does business productivity go up in offices with windows on nice days? Or does productivity decrease?

Life is good, my God is good, friends are good, school is hard.

Private Military?

A [NR1] relatively recent addition to the American military industrial complex is the growth of the privatized military firm, or PMF. Classified in three major categories according to function, PMFs seek not to privatize the development and production of military goods, but to privatize the provision and application of military services. These military services range from logistical support and transportation, to training and advising, to armed para-military “security” forces and aerial reconnaissance or strike missions. There are even several foreign-based PMFs that have the capability to place a significant self-contained military combat unit on the ground anywhere in the world, complete with artillery and air support – all for the right price of course.

PMFs that openly perform combat duties have strong ancestral ties to the Swiss Guard and other organized mercenary companies of years past. Known as active or category one firms, the ex-Soviet Spetsnaz “Alpha Brigade” and the now-defunct “Executive Outcomes” of South Africa are prime examples. PMFs involved in training and advising of American and foreign military forces fall under the classification of advisory or category two PMFs. These are firms such as American-based MPRI, which in addition to running US Army ROTC programs has trained and developed the militaries of several foreign nations. Third category or administrative PMFs are firms such as Brown & Root Services, which has provided transportation, maintenance, and logistical support for the US military since its first contract in 1992.[1]

Though private military firms that hire themselves out to national governments for combat or training duties as an organized company of mercenaries is not a new idea, what the PMFs have begun to do in the United States is new and provokes, for perhaps the first time, the possibility of the United States privatizing a greater or lesser portion of its military combat power. Additionally, privatized military firms have become a very real part of the American military industrial complex as it stands right now by offering to provide certain capabilities more efficiently than the Department of Defense can provide for itself.[2]

Perhaps the most tantalizing possibility of the increased capability and usage of privatized military firms is the privatization of certain (or all) combat functions of the United States military. Militarily, a privatized system may be workable if the expectations for usage of the American military were radically changed to focus much less on overseas deployment and more on protection of the physical United States and our direct interests. Though a system in which, for example, Ford, Lockheed, and John Deer would compete to provide the Department of Defense with a combat wing of unmanned combat aerial vehicles would provide undeniable economic benefits, efficiencies, and more rapid adaptation of new technology, the concerns of such a system would outweigh any benefits. Questions could arise as to whether the private combat forces owed allegiance to the United States or to their direct employer. Other nations utilizing private combat forces have already experienced problems with “agent principal abandonment”, situations in which the hired forces either leave before contract fulfillment or pursue their own objectives to the detriment of the hiring nation[NR2] .[3]

The growth of PMFs will continue as companies show interest in developing or purchasing military components as a form of diversification. Evergreen Helicopter Services is an example of a firm that earns a large part of its income by filling civilian consumer needs. Evergreen provides helicopter services for firefighting, construction, rescue, and many other reasons. In addition to its civilian fleet, Evergreen maintains a capability to fly missions in support of peacekeeping operations – such as reconnaissance, transport, and even light attack. In another example CSC, a computer security and consulting firm, has purchased DynCorp, a para-military security firm. Here we see a firm with an established market in one area looking to add a military component, allowing it to now provide security services for physical as well as informational property. Before the era of privatized military firms Henry Ford did much the same thing by seeking certain military contracts for Ford motor company.[4]

Regardless of the future role of the privatized military firm, proper integration of the private and the governmental will be crucial to ensuring that PMFs are a factor that strengthens, not weakens, the armed forces of the United States in their role to protect the freedoms of the American people and to achieve success in the national military goals.

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[1] P.W. Singer, Corporate Warriors: The Rise of the Privatized Military Industry, (Ithaca: Cornell University Press, 2003), 138.

[2] Ibid, 133.

[3] P.W. Singer, Corporate Warriors: The Rise of the Privatized Military Industry, (Ithaca: Cornell University Press, 2003), 159.

[4] Ann Markusen; Yudken, Joel, Dismantling the Cold War Economy. (Basic Books, 1992), 46.

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[NR1]PMF chapter.

[NR2]MAIN ARGUMENT (tentative):

National defense need not be a purely public good.

It is conceivable that our nation would shift to reliance on 1^st degree PMFs.

This would force a more precise use of force away from the borders of the US

Tactical Pro; greater flexibility and adaptability of new methods / tech.

Tactical Con; less resilience to attrition.

CNTRPNT – both money AND “home” would motivate.

On defense yea, but not abroad.

US of A would be forced to severely restrict overseas deployments.

Just a short one, yeah right...

Hey folks! What a wonderful Saturday I had! Sunday wasn't too shabby either. Anyway, contact me if you want details.

So, I didn't post my writing group paper last week. I'll post last week's now, and this weeks in a day or two. Have fun Dame und Herr.

Is Michigan job loss really such a puzzle?

For over one hundred years, Michigan was an industrial and productive capstone. A wealth of natural resources launched Michigan to the top of lumber, copper, and iron production. The Michigan business environment allowed several major entrepreneurs to take root and flourish. Kellog, Dow, Ford, R.E.Olds, these men and others like them carried Michigan to a position of industrial and technological leadership. As recently as the mid 1990s, the city of Lansing produced more cars than any other city on earth.

Yet now Michigan has the 36^th most hostile business environment, with business taxes 50% higher than the average. Though still possessing key chemical and industrial capability, Michigan is certainly in a downward spiral. Unfortunately, the governor’s office is taking the route of government intervention and micromanagement, activities that do nothing to reassure businesses that the state government will not change the rules mid-game or raise taxes to pay for the next “great idea”.

Two instances in particular bear review, one because it is recent, and the other because of the sheer magnitude of the repercussions that can be expected.

The most recent ‘great idea’, and a prime example of the micromanagement that has become typical of this administration, involves further expenditure of state Medicaid money to create jobs in assisted living facilities. On April fifth, two thousand and five, WZZM News reported on Granholm’s "Jobs Today Jobs Tomorrow" initiative.[1] In a nutshell, this initiative would pay an additional five dollars per day for each Medicaid recipient residing at a facility. The governor intends that this money be reinvested in new construction and new staff, turned around and reanimated as additional Michigan jobs. Granholm is quoted in the article as stating that this program would provide approximately an additional $91,000 a year for each fifty residents on Medicaid at a facility. Though the program is labeled by the governor’s office as “revenue neutral”, it is unclear where, in a state budget $375,000,000 in the red,[2] the money to pay this extra $1800 per person would come from. Perhaps most dismayingly of all, Granholm is quoted in the article as saying that this initiative is anticipated to create five thousand jobs over the next three years, many of them temporary jobs relating to construction, but some nurses and other permanent staff. For a project that will currently cost an estimated $638,750,000 per year,[3] why settle for merely five thousand jobs of uncertain duration? What would happen instead if the state did not spend that money at all, but demonstrated restraint in tapping the pockets of residents and taxpayers – an effect, that if maintained, would surely increase the willingness of employers to locate in Michigan. Touted as a quick, temporary, fix, I see “Jobs Today Jobs Tomorrow” as instead becoming a permanent part of state Medicaid, ever more expensive as the allotment is pushed higher and higher.

The second example deserves more space than it will receive, but has also already been the subject of many writings and so will only be very briefly discussed here. 690 acres of land in southeast Michigan were put up for auction with two legislated requirements – that the bid accepted must equal or exceed estimated market price, and that the state retain water/mineral rights. Of the two bids; one met the criteria and one did not. The appraised value was $11.5M, the high bid was $25M, and the low bid of $9M was also contingent on obtaining all water/mineral rights. Despite the no-brainer that would seem to be dictated by constraints of the legislature, the governor’s office proceeded with selling the land to the low-bidder, supported by new legislation passed after the bidding.[4] Not surprisingly, the high-bidder filed suit, and, though rebuffed once, is continuing to appeal.[5]

Though there is still hope that the high-bidder will prevail, this incident has sent an unfortunate message to corporations; the only sure way of starting or expanding business in Michigan is to be the politically favored party, otherwise you may find the rug pulled out from under you. Businessmen do not like unpredictability. Nor do they like seeing signs that a state government cannot keep is hands in its own pockets. Result: Do business – and provide jobs – elsewhere.

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[1] http://www.wzzm13.com/news/news_article.aspx?storyid=38387

[2] http://www.milhs.org/Media/EDocs/HandoutOprFeb05.pdf

[3] 350,000 eligible residents x $1825 per person, per year.

[4] http://www.mackinac.org/article.asp?ID=6946

[5] http://www.detnews.com/2005/autosinsider/0504/08/C01-144004.htm

Hooo RAH!

I have now been recognized in an academic paper for the first time! True, it is in a footnote, for help given with research, but still -- -- once this paper is published.... Of course, I expect that this will be only the first of many that will have my name attached to them in some way, shape, or form. Dr. Hanson has even suggested that I work on something similar to this piece.

Oh yeah, I guess you'd want a link. http://hanson.gmu.edu/PAMpress.pdf

Following up my last post.

Game theory and the Schliefen Plan: Part Two

Assuming that both Germany and Russia were rational actors at the start of World War One, Germany must have had a perspective on its payoffs for going to war with Russia in support of Austria versus not going to war and allowing Austria to be defeated that caused “war” to be the rational choice at the time. Despite the horror of war, and in hindsight the particular horror of World War One, Germany acted on the time-tested practices of sticking with good, reliable, military allies (Austria) and not allowing timeworn enemies (Russia) to increase its sphere of military and diplomatic influence – which a military victory over the Austrians would certainly do. Additionally, at the start of World War One very few military minds had any idea of the military quagmire that would result from the first major applications of chemical weapons, new artillery weapons and techniques, the massed use of machineguns, and the contrary fortunes of war. However, in deciding to go to war with Russia, Germany acted as if expecting that no other nation would use the same thought process and logic in deciding whether to declare war on Germany as a result of German military actions.

The Schliefen Plan was the plan by which the entire German nation would go to war. As a result of the political and military climate, the only conceivable situation was one in which Germany would find itself fighting both France and Russia simultaneously. As France was expected to be able to mobilize an effective army and invade Germany sooner, the Schliefen was fully structured around the idea of swinging all possible German military might against France and knocking them out of the war within six weeks, then rapidly moving the German army to the eastern front and confronting Russia. Such was the inflexibility of the Schliefen Plan that if Germany found itself facing imminent conflict with Russia, they would be forced to attack France. This firm commitment was expected to give France cause to exert pressure on their ally, Russia, to stay in line.

So when Germany decided to honor their treaty obligations with Austria, they found themselves virtually required to attack France and force a peace as quickly as possible – though France was not initiating conflict nor even threatening to do so (why not just skip to the “move the army east” phase I don’t understand). The German staff felt that their best chance at a quick victory in France lay in attacking through Belgium.

Though the Belgian people and king had taken a strong posture of fighting to maintain complete sovereignty, Germany expected that as German troops actually crossed the border the Belgian government and military would accede to German demands for uncontested passage through the little nation. After all, the whole point of such posturing is to keep other nations out, not cause the devastation of your own nation by refusing to allow passage once the invader is already in, right? Game theory sub-game perfection would say yes, once it is clear that your initial strategy has not worked, do that which is most advantageous. Instead, Belgium fought – and they did not fight alone.

Belgium had recently signed a treaty with Great Britain stating that the British would both respect Belgian neutrality/sovereignty and exert military force to ensure others did as well. Despite knowledge of this treaty, the Germans, using game theoretical reasoning similar to that above, in no way expected England to actually go to war over “a mere scrap of paper”, instead expecting that England would back down from the treaty once Germany actually invaded Belgium and Great Britain saw that war was reality. In short, though the Germans seem to have violated basic precept of game theory in going to war, they expected both Belgium and England to adhere to sub-game perfection and allow Germany to march through Belgium unopposed.

What this tragic episode from history show us it not a failure of game theory, but rather, assuming rational actors, that incentives and perceived payoffs must be clearly understood by all involved. Information is key. For the Germans, it made the difference between a quick victory over France and a long drawn-out catastrophic defeat.

Random stuff

It's the end of March and a FABULOUS day here in Fairfax. I'm finished with Metrics homework and going to try to spend a little time outdoors. Oh, btw, sorry the last article posted, contrary to its title, doesn't have anything to do with the Schliefen Plan.

Random economic thought for the day - I wonder how divorce affects economic growth.

Have a wonderful, God blessed, day!

Game theory and WWI - very briefly

Life = good. Grad school = busy. Church = wonderful. My family drove down for Easter weekend. It was super to have them here, even if that meant I didn't get to dance this weekend.

So I know the last couple posts have been kind of lengthy, but it’s another one of the papers I am writing for my discussion group. The economic (or somehow related) ideas keep coming, but most of them aren’t getting written down. Anyway, here’s this installment of “random thoughts with Nathan.”

Game Theory and the Schliefen Plan

Game theorists talk glibly about many applications of game theory; how humans, unconsciously, go through life applying game theoretic techniques to many choices we make. What interests me are the applications of game theory to international relations – particularly those of the “strong” flavor; war and armed conflict.

Many conflicts, both their origins and their continuance, can be analyzed using game theoretic methods, but one conflict in particular begs to be examined and promises to, through its examination, throw light on many other conflicts. The war, for such it is, that so readily lends itself to game theory is World War One, the Great War, the War to End All Wars.

Vastly, and unfairly, simplified, basic game theory runs thus: You, the rational individual, given the information you have, make the decision or series of decisions that will maximize your benefit given constant or certain expected action by the other relevant entities. Expectations of the other’s actions change as expectations of information and other circumstances change.

Europe at the beginning of World War One was a messy place, made so by the tangle of alliances and treaties that bound each nation to others. Mutual defense pacts pledged that if either nation A or B was attacked, the other would declare war on the aggressor. These treaties, pacts, and accords grew from the incessant warfare that had covered much of Europe, the logic ran that if there were enough interweaving alliances, no one would go to war with anyone. While a bane for the strategist and politician, these treaties are a boon to the game theorist, with each nation generally being expected to keep these treaties, lending a certain measure of predictability and stability to the behavior of the political and military mess.

These treaties at the beginning of the war can easily be seen as a method by which a nation would attempt to firmly commit to a course of action that, were circumstances ever actually warrant application of the treaty, would seem too not be in national interest, in the hopes of ensuring that such conditions never actually arose. In other words, nations committed to war under certain conditions, hoping that the reliable and very real threat of war would dissuade aggressor nations from attacking allies. Each European nation participated in these treaties with one or more other nations and often with one of the “great powers”, and each European nation expected every other nation to follow through on their treaty obligations. There was stability in this system of pledged mayhem, just as game theory predicts will happen when the commitments are believable and punishments severe enough. What no one expected was a shock from outside the system of mutual defense treaties to set a match to the powder keg.

A non-governmental group provided that match, and the assassination of the Archduke Austria provoked a chain reaction of regrettable, but predictable given how the European nations had pre-committed themselves, events. Briefly, Austria went to war with Serbia. Russia, allied with Serbia, prepared to go to war with Austria. Germany, Austria’s ally, warned the Russians to stand down, then prepared for war themselves. Germany’s only war plan was rigidly dependant on fighting both France and Russia at the same time, knocking France out of the war within six weeks so as to bring the entire German armed forces against the Russians before the Russians could fully mobilize. To quickly knock France out of the war required that Germany invade through Belgium, activating England’s mutual defense treaty with Belgium. Thus, every major power in Europe was embroiled in war, those that were required to fight by treaty and those that simply saw an opportunity to strengthen their position in Europe, acquire natural resources and prestige, or reinvigorate a dying empire (the Ottoman-Turks).

In an attempt to banish war from European soil, the nations instead ensured that, once war started, it would engulf the continent. If a nation not directly threatened with invasion and fairly near the beginning of the chain of events, say Russia or Germany, had instead done the game theoretically unthinkable, and cheated, the Great War would never have occurred and the world would be a very different place.

my quasi-necessary paper

Early March, and it's sunny and clear outside - warm enough not to need anything more than a light longsleeve shirt. If I could, I would be playing frisbee in this weather! So this weekend, with the studying for a major exam tomorrow, dancing, and church responsibilities, I made time to write a short piece on political possibility theory. Enjoy!

An introduction to the Overton Window

Of the many ideas and options that exist in the political world and in the minds of politicians, what determines which ideas become reality and which ideas remain banished to the political ether? Somewhere on the spectrum of ideas from the crushingly socialist, and therefore radical, to the breathtakingly libertarian, and therefore also radical, must exist a range of ideas that actually stand a chance of being successfully implemented in the current socio-political climate. The range on the spectrum of ideas in which a policy initiative can be considered politically and socially viable is called the Overton Window of Political Possibilities. Regardless of the economic validity of an idea and how fervent its supporters are, if the idea does not lie within this window of opportunity it simply will not happen.

Politicians are self-interested. Of this there has been little serious doubt since the general acceptance of public choice arguments. Lawmakers will not support an idea unless it receives sufficient public acclaim and acceptance so that backing the idea does, at the very least, not harm the politician. Public policy is judged not its merit, but on its political viability. This only makes sense given politicians’ interest in preserving their jobs, but is often lamented by advocates of any policy that seems doomed to languish in the political shadows. The key insight of the Overton Window theory is that ideas initially outside the range of the politically possible are brought within that range not by political lobbying, but by moving the ‘window’.

Think tanks, pundits, and those economists who engage in policy issues often seek to advance their agendas though direct interaction with politicians. This strategy is a misdirection of energies. In the words of the Mackinac Center for Public Policy; “However principled a politician may be, he or she can only accomplish those things which are within a narrow window of what is politically possible at the present time.” Granted, there are some actions that lie within the discretion of politicians, but instead of expending resources to influence things that cannot be changed, those same resources should be used to shift the Overton Window.

Shifting the Overton Window requires changing the public’s perception of a policy issue. Perspective must be changed so things formerly infeasible become inevitable, through interactions with the public, educating, speaking, providing written perspectives, and conducting sound research. It is towards these aims that many who wish to see policy implemented should orient their resources. By shifting the window of possibilities, policies can be brought into effect with fewer negative “adjustment effects” among the people and whatever unenforceable intent supported the desire to create the policy will be more likely to emerge in society.

One example of an application of the Overton Window is homeschooling. Not too many years ago homeschooling was illegal in many states, and frowned upon even when it was legal. My family still knows people who faced state legal action in Michigan because they dared homeschool their kids during a period of time in which the laws were unclear at best. Yet, in Michigan and every other state, through a mixture of political and popular action, the window of political possibilities was shifted. What was once considered outrageous is now common, and no significant door of educational or employment opportunity remains closed to homeschoolers.

Could Overton Window theory also be applied to concepts of the slippery slope? It is fascinating to dream of ways that could be found to let socio/political “gravity” do the work of enacting and reforming policy, yet the difficulty has always been to find a way to guide the weight of policy as it rolls downhill. However, integrating a concept of political possibilities and the theory of slippery slopes results in the idea that instead of trying to guide the “stone” of policy it would be more advantageous to “shape” the slope so that policy will be “slippery” in the direction you like. Instead of putting a priority on efforts to influence policy makers directly, economists and proponents of ideas should focus on the people of the polity in question. In this way will the most pervasive and lasting reforms be made.

Creativity and society.

Ok, so this is an essay I wrote last week just for the heck of it. After discussing it last night with several classmates I have realized that parts of it should be re-written and strengthened, but that hasn't happened yet. You know, econometrics homework and all. Enjoy.

CHILDHOOD TOYS AND SOCIETAL CREATIVITY

During my childhood, my parents’ backyard was a little boy’s dream. Full-sized playground swing set, a large maple tree that was perfect for building forts in, spruce trees that were perfect for climbing, a corner of the yard that was designated for digging, a sandbox, and a wooden fence that often doubled as a wild-west stockade. Through the imaginations of my younger brother and I, that backyard was transformed into virtually every imaginable place and time period, for virtually every situation. The many hours spent in imaginative play in our backyard, plus the encouragement of my parents to find better, yet still proper, ways of doing things, instilled in my siblings and I something that has and will continue to play a fundamentally important role in our lives. Creativity. One of the fundamental aspects of the human thought process, creativity allows flexibility and agility on the road to finding a better way, a different way, or sometimes even any way at all. Creativity is important for home life, business success, artistic expression, and political or social problem solving. Those societies that successfully enjoy the full richness of the individual’s powers of creativity are those societies that posses the social, educational, legal, and cultural conditions necessary to encourage and allow both the development and the expression of creativity. Though the power of creativity is hardwired into the brain of every child, it can be stifled, or, even more tragically, lost. Each of the four societal conditions above interacts with creativity in a different way and can substantially alter either the expression or development of the individual’s creative powers.

In a societal setting, individual creativity manifests itself in a variety of different forms. These forms are private creativity, social or public creativity, business creativity, and artistic creativity. Private creativity is that which is exercised around friends, at home, and in personal affairs. Social or public creativity is that which is used to develop solutions to public issues in a non-business sense. This type of creativity would be used in a neighborhood council, a church, a school board, or even in politics to solve observed problems. Artistic creativity is what most people think of when they hear the word “creative” – performing and writing music, painting, sculpture, acting, and writing. Business creativity is that power necessary to find innovative solutions to marketing, production, and entrepreneurial issues. Though all four types of creativity can be lost over time as children are raised in an institutional and cultural structure hostile to creative development, it is business and public creativity that are most susceptible to restrictions on their expression. Private and artistic creativity largely take place out of the public eye, unobserved, and thus can persist despite rigid, unyielding, and unimaginative social structures, but business and public creativity exist to work change in the public eye and are thus easily squelched, even unintentionally, by burdensome legal, social, and cultural conditions. It is these easily destroyed expressions of creativity in public and business practices that are vital for the long-term health of any economic system.

For years, my younger brother and I enjoyed nailing guns together from wood and playing with them. Though we each had our favorites, each time we began to run short of the necessary pieces to fabricate our next idea, out came the hammer and pliers as we tore apart those rifles that just did not meet the grade anymore. Just as wood scraps of the proper shape and size were in short supply for my brother and myself, at any given time certain resources and qualified people with the proper experience are scarce in the nation’s economy as well. Rather than require that these people and resources remain occupied in a non-benefit maximizing fashion, the structure of the market and society needs to be willing to let – nay, needs to encourage – the failure of those businesses that are not providing the maximum benefit to society. In this way, in addition to natural resource growth, resources are released and freed for new business ventures and ideas. If my brother and I had not been willing to dismantle those rifles that we enjoyed less than we expected to enjoy our next creation, none of the rifles that became our favorites would have been made – including the wooden rifle that still stands in a closet at my parents’ house. This is precisely what is needed to maintain a healthy economy – a certain amount of turmoil and motion.[1] Business ventures need the freedom to start and to fail; only in this way can any economy achieve the greatest chance of discovering those ideas that actually work. Creativity comes into play in developing new business ideas, new ways of doing things.

Conversely, the more the natural motion of the economic “tide” is distorted, either by restricting the expression of business creativity in the implementation of new ideas or by artificially supporting failed business ventures – thereby tying up resources, the more stagnant the economy will become; outdated, inefficient, and lacking real, meaningful, growth. To avoid this result social, cultural, and legal structures must exist which protect individual effort and investment without seeking to maintain the status quo. Governmental regulations are especially suspect in this, often burdening entrepreneurs with “red tape”, requirements, and punishments for being “too successful” that reduce the entrepreneur’s creative agility.

Public creativity is also subject to many of the same influences. Though the blame largely shifts from government regulatory structures to social and cultural institutions, all too often individuals are prohibited from using their public or social creativity to solve a problem simply because “it has never been done like that before” or some other such reason. The result is a host of ideas in government and public life that were workable or the best available at some point in the past but which now have been superseded and should be replaced.

In the words of F.A. Hayek, and applicable to both business and public creativity; “It is in the pursuit of man's aims of the moment that all the devices of civilization have to prove themselves; that the ineffective is discarded and the efficient handed on. And this is the point, but it is important to have as large of a selection of ideas and possibilities to be chosen from as possible.”[2] Only through allowing and encouraging the use of creative powers in public and business life can a large selection of diverse ideas be obtained for society to choose from. Though repressed creativity in these areas would be disastrous for an economy, far worse can happen.

Some social and regulatory factors can restrict the expression or utilization of creative powers to solve business, economic, and political problems, but other social factors can restrict or prohibit altogether the very development of creativity in the individual. It is this result that is far more damaging, because once an individual has grown up without creativity being a part of his or her life, it is extraordinarily difficult to develop that creativity regardless of how hospitable the legal, regulatory, social, and cultural conditions may be. Though creativity is hardwired into the mind of every child, it needs to be exercised. If society stifles expressions of creativity in business and society, creativity can survive for a while, but will perish in less than one generation as children are unable to observe creativity and the use of creative solutions in day-to-day life. Here the educational structure of a society comes into play. Along with the example provided by adults, education has an important role in nourishing the natural creative drive.

The education system – whatever form it takes – must both allow creativity and yet provide structure. It is completely true that creativity, unconstrained by appropriate restraints, is destructive. Simply allowing children to “creatively” avoid truly doing their schoolwork only teaches avoidance and poor work habits, but encouraging creative ways to find the proper solution, the right solution, now that, that is how education can truly help foster creativity in a society. This responsibility is not limited to primary and secondary education – colleges and universities also serve to enhance individuals’ creative powers through pushing them to find solutions to ever more difficult puzzles. Enhancing and training natural creative powers is vital to ensuring that those abilities will be available for future use in the economic and social realms.

One of the primary ends of creativity is to better society, all of society.[3] Towards this end, a full realization of the individual’s creative powers requires a legal structure that protects human and capital investment while not weighing entrepreneurs down and decreasing their social and business ‘agility’. Society and culture must encourage flexibility. Even more important, social and cultural factors must celebrate, allow, and encourage change. An acceptance to change encourages creativity by rewarding it and actually allowing the creative solution to be applied. Finally, children must be encouraged and allowed to be creative in play and education through their years of growth. Only in this way will children grow into adults who have creative solutions ingrained in their thought process for access later in life. Though social, cultural, legal, and educational institutions can greatly dampen creativity, they can also greatly enhance the same. Creativity is too precious a commodity, a resource, to be squandered and suppressed by those who believe they know best for society.[4] It was creativity that allowed me to see my parent’s backyard as a zoo, a battlefield, the Wild West, or frozen tundra. It is now creativity that allows me to find interesting and sometimes unique methods of solving the puzzles posed by the graduate school faculty. One day, it will be creativity that assists me in finding answers to economic and social issues for the betterment of those around me and myself. May we all never lose that creative spark that inhabited our childhood play.

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[1] Unseem, Churn, Baby, Churn

[2] Hayek, F.A. 1958. The Creative Powers of a Free Civilization

[3] Hayek, F.A. 1958. The Creative Powers of a Free Civilization

[4] Postrel, Virginia. The Future and Its Enemies