A Homeostatic Look at the Economy

Received the following from my registered nurse cousin Nancy in response to the “Obama’s not the problem, Romney’s not the solution” posting:

As far as the economy (is concerned), all these attempts at regulation are in response to people making selfish, manipulative, immoral decisions. I’ve worked in healthcare which is highly regulated, and I have seen the regulations pile on and on over the years. I’ve also seen how easily people circumvent them, in the spirit if not the letter. I don’t think there’s any external substitute for people who have learned integrity from childhood.

I’ve been thinking of the economy as much like a human body: very complex with many interactions and systems to maintain homeostasis when one thing changes. Like the economy, there can be a lot of compensation over a long time before the ability to compensate runs out and there is some form of collapse. I’ve seen a person gradually put on hundreds of pounds of fluid before going in to acute heart failure and then wonder how that could happen so suddenly. I’ve also seen people get unusually thirsty and drink sugared pop for months til they were “suddenly” in a coma from a blood sugar of 1200.

OK. You have the collapse, and you do all the things that have worked in the past: drugs, IV’s, education. You get the patient stabilized (Low interest rates, stimulus, recapitalizing banks, etc.) Now, unless you can fix the underlying problem (reform labor markets, wean the system off being so dependent on credit, allow bankruptcies and foreclosures to proceed expeditiously), you’re left with giving drugs (more stimulus, low interest rates for an extended time), some of which cause side effects that create more problems and require more intervention. If the patient doesn’t take the medicine the right way, or refuses to follow advice about diet, exercise, etc, things gradually get worse and it’s more and more difficult to stabilize the patient. Death ensues.

I see the economy being at the stage of compensation using a lot of interventions that will cause more and more problems if they are maintained long-term, and no willingness to do the things that will improve things in the long run. In other words, I’m as pessimistic as you and have been ever since I first did research to try to understand what was happening in ’07.

The “death ensues” bit is a nice touch. Guess pessimism runs in the family. Even so, there comes a time when resuscitation attempts will probably prove futile.

“Are we there yet, Daddy?”

Ciao,
Dennis

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One Response to A Homeostatic Look at the Economy

  1. Dave the Engineer says:

    What do the banks, EU, Obama, The Fed, the Batman killer, public unions, city, state and federal politicians all have in common? A lack of morals and ethics. No governmental system will work without it, not democracy, not communism. Giving liar loans to an unemployed man to buy a house, then selling the loan to an unsuspecting fund manager is fraud. But we allow that now, not just in our “regulations” but in our acceptance of the unethical banker that made the loan. Politicians take an oath to uphold the law of the land. But now the US Senate has not passed a budget in 3 years, a legal requirement. Why are these Senators still collecting a paycheck? You can have all the rules and regulations you want but if you don’t enforce them, or worse, enact bad law that is objectively unethical in its implementation like Obamacare or Dodd Frank you punish the good for being good (as Ayn Rand wrote 60 years ago) and reward the bad for being bad. And what you reward you get more of. A lot more. I have saved all my life, I have no debts, at 64 I still work 50 hours per week, I’m on call 24 x 365. I’m being punished for doing this. So at some point I’ll go Galt.

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