It all should be done at once.
The idea of stimulus spending is to stimulate economic growth. Does anyone believe that will happen if we just dump money into exisitng systems which are failing?
That's why the President wisely wants to reform healthcare, education, lobbying, earmarks, and other dimensions of spending simultaneously with stimuli and bailouts.
When 5% of $ 1 trillion goes to "healthcare", it can have $0 effect, $50 billion effect, or $500 billion effect. It all depends on the microfoundations.
Similarly with infrastructure, energy, science and welfare. When we talk about $4 trillion in total spending, how it flows will make the difference between nirvana and doomsday. We could end up with a collapsed, unsustainable economy or a vibrant, sustainable one.
The choice is ours.
Are we willing to invest in models which will show how flows can best be directed to produce a sustainable economy?
Yes we are.
Lee
Showing posts with label budget. Show all posts
Showing posts with label budget. Show all posts
Thursday, March 12, 2009
Thursday, February 12, 2009
Saving the World-A $ trillion at a time
The reason there is so much confusion in Washington at the moment over how to stimulate the economy is that no one there knows. They don't know because they don't have the analytical apparatus by which to adeqautely gauge the impact of proposals on the economy
The analytical structures and databases, however do exist.
Below is a simplified version of what a stimulus budget being thrown around in Washington looks like:
Stimulus Stimulus
Component Budget *
Health $ 150000
Education 100000
Welfare 100000
Crime 10000
Infrastructure 70000
Energy 70000
Housing 30000
Transportation 50000
Tax Credits 300000
----------
880000
*$ 000,000
No serious attempt is made to estimate how each component and the total will flow through the economy in a demographically adjusted, probabilistically calculated, interaction robust, temporally realistic manner. To do that would require tools that are not being used.
Those tools do exist, however. Complexity scientists, actuaries, computer scientists, economists, and financial engineers have created data bases and analytical structures which can simulate how various options for economic stimulus will flow through the economy.
These scenarios can take account of interactions, uncertainties, demographic shifts, time frames, and other factors which ultimately impact of the way stimulus alternatives impact long term stability and growth. They can show how different alternatives will have different multipliers over time, and therefore greatly different impacts.
We can design a stimulus package which can be integrated with normal government budget activity to give a reasonably likely opportunity to transform the economy in a sustainable way.
We can show how that will happen and monitor the results so as to make adjustments as needed.
We can make it transparent with manageable accounting structures.
All we need to do is adapt methodology which is already out there.
We can do it
Yes we can.
Lee
The analytical structures and databases, however do exist.
Below is a simplified version of what a stimulus budget being thrown around in Washington looks like:
Stimulus Stimulus
Component Budget *
Health $ 150000
Education 100000
Welfare 100000
Crime 10000
Infrastructure 70000
Energy 70000
Housing 30000
Transportation 50000
Tax Credits 300000
----------
880000
*$ 000,000
No serious attempt is made to estimate how each component and the total will flow through the economy in a demographically adjusted, probabilistically calculated, interaction robust, temporally realistic manner. To do that would require tools that are not being used.
Those tools do exist, however. Complexity scientists, actuaries, computer scientists, economists, and financial engineers have created data bases and analytical structures which can simulate how various options for economic stimulus will flow through the economy.
These scenarios can take account of interactions, uncertainties, demographic shifts, time frames, and other factors which ultimately impact of the way stimulus alternatives impact long term stability and growth. They can show how different alternatives will have different multipliers over time, and therefore greatly different impacts.
We can design a stimulus package which can be integrated with normal government budget activity to give a reasonably likely opportunity to transform the economy in a sustainable way.
We can show how that will happen and monitor the results so as to make adjustments as needed.
We can make it transparent with manageable accounting structures.
All we need to do is adapt methodology which is already out there.
We can do it
Yes we can.
Lee
Thursday, February 5, 2009
Harmonious Modeling
Now we begin.
To build the new analytical framework needed to allow the Obama Administration to deliver on its promise of change, the following steps will be needed:
1. Empower the analytical team.
2. Develop team strategy.
3. Assemble the team.
4. Review existing models.
5. Survey new models.
6. Integrate models.
The goal is an efficient transition from the existing structure to one appropriate to the twenty first century. Any new structure will start with the existing economic/financial/public policy structure and integrate the needed actuarial, complexity and data structures.
Examples of output from the new model include:
Year
Scenario
Factor
Population
Resources
Infrastructure
Demographics
Health
Welfare
Defense
Medicare
Social Security
Debt Service
Transportation
Housing
Energy
Manufacturing
Financial
Education
GNP
NEW*
*Net Economic Welfare
It should be pretty obvious how such a model would transcend and improve upon existing ones. This model could test a wide variety of complex options, and even after an option is chosen it could monitor results and make adjustments as needed. It could test the actuarial soundness of results as well.
It could also test sustainability of results in terms of available resources and population levels.
It's time to get serious.
Yes we can.
Lee
To build the new analytical framework needed to allow the Obama Administration to deliver on its promise of change, the following steps will be needed:
1. Empower the analytical team.
2. Develop team strategy.
3. Assemble the team.
4. Review existing models.
5. Survey new models.
6. Integrate models.
The goal is an efficient transition from the existing structure to one appropriate to the twenty first century. Any new structure will start with the existing economic/financial/public policy structure and integrate the needed actuarial, complexity and data structures.
Examples of output from the new model include:
Year
Scenario
Factor
Population
Resources
Infrastructure
Demographics
Health
Welfare
Defense
Medicare
Social Security
Debt Service
Transportation
Housing
Energy
Manufacturing
Financial
Education
GNP
NEW*
*Net Economic Welfare
It should be pretty obvious how such a model would transcend and improve upon existing ones. This model could test a wide variety of complex options, and even after an option is chosen it could monitor results and make adjustments as needed. It could test the actuarial soundness of results as well.
It could also test sustainability of results in terms of available resources and population levels.
It's time to get serious.
Yes we can.
Lee
Actuarial Model of the Economy
An actuarial model of the U.S. economy would be probabilistic, demographic, holistic, complex, and actuariall sound. It would incorporate Enterprise Risk Management, Dynamic Financial Analysis, General Linear Modeling, Econometrics, and Complexity Science.
Who cares?
Well, the global and U.S. economies are on their deathbeds, the environment is collapsing, we are running out of resources, and the demographics of upcoming generations is unsupportable by existing institutions.
Unless somebody in Washington realizes that the analytical tools being used to evaluate public policy initiatives are outdated, and prone to misdiagnosis, (how do you think we got here?) all the "geniuses" in the world (Summers, Geithner, Goolsby, Clinton, Kudlow, Welch, Bernacke, Volcker...) will fail.
Who cares?
Well, the global and U.S. economies are on their deathbeds, the environment is collapsing, we are running out of resources, and the demographics of upcoming generations is unsupportable by existing institutions.
Unless somebody in Washington realizes that the analytical tools being used to evaluate public policy initiatives are outdated, and prone to misdiagnosis, (how do you think we got here?) all the "geniuses" in the world (Summers, Geithner, Goolsby, Clinton, Kudlow, Welch, Bernacke, Volcker...) will fail.
Demonstrating a model which will supplement and transcend the impossibly complicated financial and economic models currently in use is not realistic on a blog.
The basic outline of such a model, however, can be attempted.
The modeling team will consist of physicists, mathematicians, economists, computer scientists, financial engineers and actuaries with a mix of management, technical, and public policy expertise.
Such a team does not currently exist as such.
The model input will be as much detail about the federal budget and national economy as is deemed feasible and useful. It will be enough data to see all the major interactions which occur as a result of government activity but not so much as to be analytically unworkable.
The analytics will be a mix of traditional econometric and financial models supplemented by advances in actuarial science, complexity science, data-mining and visualization, and computer processing which have thus far not been utilized in public policy modeling.
The output will be impact by area by time frame by uncertainty level of alternative government actions. For example, if $100 million of government largess is to be bestowed upon the "auto industry", the impact on all areas impacting and impacted by the auto sector will be shown under various scenarios.
If $100 billion is to be allocated to the "financial sector'" the various ways that the money can flow through the economy under various economic scenarios can be tested. That allocation can (to some degree) be targeted to have the desired impact on national welfare.
For more information, go to my website, paradigmactuaries.com.
Lee
Thursday, January 22, 2009
Silent Spring
"There was once a town in the heart of America where all life seemed to live in harmony with its surroundings."
So began one of the most influential books in the history of our nation.
When Rachel Carson wrote Silent Spring, few Americans were aware of what has since become known as the environmental crisis. For the first time Americans were informed that economic activity can have consequences which are not foreseen in economic calculations.
A few years earlier, John Kenneth Galbraith had raised the alarm in a slightly different way in his book, Affluent Society.
"The shortcomings of economics are not original error, but uncorrected obsolescence."
Galbraith decried the lack of value put on "public goods" for which there may not be effective markets at a point in time, but which are essential to society's meaningful survival.
Charles Reich took up the mantle a decade later with The Greening of America.
"There is a revolution coming. It will not be like revolutions of the past. It will originate with the individual..."
These words are eerily apt today. A revolution began anew on January 20, 2009 and its echoes will be felt for generations.
In his last campaign, Bobby Kennedy said, "Too much and too long we seem to have surrendered community excellence and community values in the mere accumulation of material things...Our Gross National Product...counts air pollution,...the destruction of our redwoods and the loss of our natural wonder..."
"Yet the Gross Natoinal Product does not allow for the health of our children, the quality of their education, or the joy of their play......the beauty of our poetry...neither our wit nor our courage..."
The common thread in all this musing is that traditional economic thinking accounts for only a part of the nation's quality of life. Yet our economic and financial models still ignore anything considered unmeasureable.
Are we ready for a real economic transformation?
Are we ready for a sustainable economy?
Are we ready for govenment spending, bailouts, stilmuli, and regulatory activity which increases the long term welfare of our citizens?
Are we ready to use the best minds and technologies to solve our problems?
Can we do it?
Yes we can.
Lee
So began one of the most influential books in the history of our nation.
When Rachel Carson wrote Silent Spring, few Americans were aware of what has since become known as the environmental crisis. For the first time Americans were informed that economic activity can have consequences which are not foreseen in economic calculations.
A few years earlier, John Kenneth Galbraith had raised the alarm in a slightly different way in his book, Affluent Society.
"The shortcomings of economics are not original error, but uncorrected obsolescence."
Galbraith decried the lack of value put on "public goods" for which there may not be effective markets at a point in time, but which are essential to society's meaningful survival.
Charles Reich took up the mantle a decade later with The Greening of America.
"There is a revolution coming. It will not be like revolutions of the past. It will originate with the individual..."
These words are eerily apt today. A revolution began anew on January 20, 2009 and its echoes will be felt for generations.
In his last campaign, Bobby Kennedy said, "Too much and too long we seem to have surrendered community excellence and community values in the mere accumulation of material things...Our Gross National Product...counts air pollution,...the destruction of our redwoods and the loss of our natural wonder..."
"Yet the Gross Natoinal Product does not allow for the health of our children, the quality of their education, or the joy of their play......the beauty of our poetry...neither our wit nor our courage..."
The common thread in all this musing is that traditional economic thinking accounts for only a part of the nation's quality of life. Yet our economic and financial models still ignore anything considered unmeasureable.
Are we ready for a real economic transformation?
Are we ready for a sustainable economy?
Are we ready for govenment spending, bailouts, stilmuli, and regulatory activity which increases the long term welfare of our citizens?
Are we ready to use the best minds and technologies to solve our problems?
Can we do it?
Yes we can.
Lee
Wednesday, January 14, 2009
George & Laura (G&L)
The Bush's are a gift that keep on giving. From Sr. & Babs to Jeb & George, nothing but wisdom and sacrifice.
G&L's going away present is to let us know how lucky we are that they have led us for the last 8 years. Notwithstanding the destruction of the world and U.S. economies and ecologies, the grinding up of the American war machine, hundreds of thousands of dead and disabled world citizens and soldiers sacrificed to a phony cause, the end of America's leadership in the world, budget deficits that will haunt all future Americans, and a general malaise caused by a decade of hypocrisy, they are going back to Texas proud of their legacy.
If we've learned anything from this disaster of a Presidency, hopefully it is never again to elect a President who neither reads or writes. A President with no values and no understanding will never be able to rise to the level of vision needed to deal with the problems faced by the occupant of the office (can you say Palin?).
This year we had a choice, and we made it. Our new President has wisdom, humility, integrity, and the courage of real convictions. He reads and writes and thinks before acting. Like Bobby Kennedy and Martin Luther King, he believes in justice and pursues the truth.
If there's anything to be grateful for in America today it is that the long nightmare of Republican rule is at least temporarily ended. If the Democrats can resist the temptation to become their usual dopey selves, we may have a chance for a few years of governmental sanity. That could actually put us back on the path to harmony.
Lee
G&L's going away present is to let us know how lucky we are that they have led us for the last 8 years. Notwithstanding the destruction of the world and U.S. economies and ecologies, the grinding up of the American war machine, hundreds of thousands of dead and disabled world citizens and soldiers sacrificed to a phony cause, the end of America's leadership in the world, budget deficits that will haunt all future Americans, and a general malaise caused by a decade of hypocrisy, they are going back to Texas proud of their legacy.
If we've learned anything from this disaster of a Presidency, hopefully it is never again to elect a President who neither reads or writes. A President with no values and no understanding will never be able to rise to the level of vision needed to deal with the problems faced by the occupant of the office (can you say Palin?).
This year we had a choice, and we made it. Our new President has wisdom, humility, integrity, and the courage of real convictions. He reads and writes and thinks before acting. Like Bobby Kennedy and Martin Luther King, he believes in justice and pursues the truth.
If there's anything to be grateful for in America today it is that the long nightmare of Republican rule is at least temporarily ended. If the Democrats can resist the temptation to become their usual dopey selves, we may have a chance for a few years of governmental sanity. That could actually put us back on the path to harmony.
Lee
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