Friday, February 27, 2009

Six Assumptions

When a system fails we need to reexamine our basic assumptions in building the system. Six assumptions we need to reexamine in our economic system are:

1. Cheaper is better
2. Bigger is better
3. Our neighbors mean nothing
4. An anonymous market is good
5. Trade always makes both sides richer
6. Fraud is good


Frank said...

I hope that your office move is going well.

I wanted to comment that I don't agree that the items you list are basic assumptions in the construction of our economic system. Rather, I think they are conventional wisdom that has crept into our system as it has evolved since the industrial revolution. In any event, I would agree that these notions must be taken into account as we try to rebuild our system. That is especially true of #3. As a enlightened society, we must first establish a dignified minimal living standard for all citizens.

Michael Hudson wrote a wonderful historical perspective earlier this week. I hope you find it interesting.

Ted Seeber said...

I was coming from more of an engineered standpoint- as our economy evolved, what were the assumptions behind each change, each evolution? After all, the economy, for all the rhetoric, isn't a "natural phenomenon". It's an invention- as much an invention as a car engine, a computer operating system, or a mainframe. The fact that it works much more like OS/360 than Linux is due to the exact same design constraints Brook's law and book The Mythical Man Month- too many cooks spoils the soup.

As to Michael Hudson's piece, it's something that has been troubling me for some time: the problem of freedom is that it includes the freedom to do evil. Having said that, I think subsidarity and a lack of anonymity go a LONG way- If Madoff had known he'd have to face his investors at church, school functions, civic duties, and wear many hats in addition to his chosen profession such as committee chairperson, mayor, or dog catcher, I doubt greatly that he would have either been able to amass millions OR chosen his ponzi scheme method of doing business.

There's a lot to be said for the small village/local government method of doing things, where no business has more than 40 employees and no city grows to more than 10,000.

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