Ecologists or Economizers?

"I think this fool is probably lost."
--Wind In His Hair (Dances With Wolves)

Review of institutions that guided American Indian societies challenges claims that our Native American predecessors were guided by a unique environmental ethic that allowed them to operate as the 'pioneer ecologists of this country.' Instead, they, like all people, established economic institutions that governed resource use in response to abundance or scarcity.

Property rights, clear cutting forests, and production incentives exemplify societal institutions that governed economic activity. Truly communal property was scant. 'Tragedy of the commons' situations arose when economic institutions did not govern behavior (as they did for subsequent colonists).

Quoting the work of historian Louis S, Warren, the article notes:

"To claim that the Indians lived without affecting nature is akin to saying that they lived without touching anything, that they were a people without history. Indians often manipulated their local environments, and while they usually had far less impact on their environments than European colonists would, the idea of 'preserving' land in some kind of wilderness state would have struck them as impractical and absurd. More often than not, Indians profoundly shaped the ecosystems around them."

To that I might add that perhaps production technology was the primary distinguishing feature.

Like all people, our Native American predecessors were economizers.

Pinksourcing's Ignorance

Casey Ryback: I support women's lib, don't you?

Jordan Tate: When it works in my favor.

--Under Seige

Surely the producers of this video thought that they were displaying an edgy intelligence about the pay differences between men and women. In reality, they reveal their ignorance.

As suggested here, if women truly were getting paid less than their productivity reflects, then there would be huge opportunities for the Pinksourcing firm in the video, or for any entrepreneurial enterprise for that matter. Simply hire all those underpaid women currently making 77 cents/hr at their current employers, pay them more, and reap huge productivity gains, profit windfalls, and competitive advantage.

Holding one's breath in anticipation of this is not advised.

Academic Iron Curtain

"You are a slave, Neo. Like everyone else you were born into bondage. Into a prison that you cannot taste or see or touch. A prison for your mind."
--Morpheus (The Matrix)

Thomas Sowell compares the lack of idea diversity on college campuses today to the Iron Curtain era. During the Cold War, communists sought to restrict the flow of outside ideas to their citizens, lest the natives might discover better ways to live.

Sowell suggests that the modern academy seeks to restrict the flow of ideas as well thru practices such as hiring faculty whose ideologies align with the political left.

During the Cold War, the Iron Curtain was circumvented by outside sources such as Voice of America that broadcast to the people of the Soviet bloc so that they were not completely isolated. By helping people see that better opportunities were available to them, these outside providers of information helped bring down the Berlin Wall.

While acknowledging the array of electronic resources that could serve to bring down the Academic Iron Curtain for college students, Sowell seems to think that it will take an organized effort, a modern day Voice of America, to point learners toward those resources.

Not sure the effort has to be that organized, Dr Sowell. All it really takes is a few inquiring minds coupled with today's social networking technology.

Seems to me that everything we need is right in front of us.

Conditions for Open Borders

Always sweep with, with thrashing oar
Our only goal will be the western shore
--Led Zeppelin

As noted by Doug Casey, two conditions must be present in order for completely open border policy to advance prosperity. There can be no welfare services made available to immigrants, lest a free rider problem develops in the country accepting immigrants. Those who are forced to pay for this free ride suffer.

The other condition, which can be seen as a general condition of the first, is that property must be privately owned. Otherwise, squatter camps are likely in 'public' areas.

Standard of living increases when labor is mobile. Prosperity increases from immigration are restrained, however, when property rights are not fully respected.

Target's Small Box Format

The sun goes down
The night rolls in
You can feel it starting all over again
The moon comes up
And the music calls
You're getting tired of staring at the same four walls
--Glenn Frey

Big box retailer Target (TGT) is experimenting with smaller box stores that cater to urban markets. Graphic shows difference between typical store square footage and the smaller 'flexible format' footprint. 

One strategic concern is that TGT is moving away from the large scale format that makes it dominant in discount retailing. Smaller stores require different resources for merchandising and different supply chain competencies. For example, the article notes that deliveries to the smaller stores must be more frequent. Stocking choices and facility layout are also likely to vary from location to location. 

Such variation conflicts with the factor often associated with success in discount retail: standardization and efficiency.

A fundamental law of operations management is that volume (efficiency) and variety (catering to individual customer needs) are difficult to do together.

no positions

Pretense of Data Dependence

Drawn into the stream 
Of undefined illusion
Those diamond dreams
They can't disguise the truth
--Level 42

The Fed often claims that it is 'data dependent,' meaning that it grounds its decisions in economic data. Onlookers know that this is pretense, given, for example, the chasm between largely benign reported macro data that the Fed purports to follow and the extreme nature of monetary policy.

Instead, the Fed's behavior reflects selective reasoning. It hangs its hat on data that fit the institution's view of the world while discarding contradictory data.

Stated differently, whether the Fed is data dependent depends on the data.

Martingale Strategies and Central Banks

You've got to know when to hold 'em
Know when to fold 'em
Know when to walk away
And know when to run
--Kenny Rogers

Bill Gross discusses Martingale gambling strategies in the context of modern central banking policy. Gamblers who use Martingale strategy increase the size of their bets as they lose more. The intuition is that if you, say, double the size of your subsequent bet after each loss then at some point you are bound to recover your previous losses and then some when the cards, dice, etc. finally do turn in your favor.

The Martingale approach is bound to appeal to many people because it legitimizes the idea of taking more risk when you are behind. Aversion to loss is a core tenet of decision-making under risk as elaborated by Prospect Theory.

Bill Gross suggests that Martingale strategy appeals to central bankers, as it seems like they increasingly turn to more extreme and riskier monetary policy solutions after each preceding bet does not jump start the economy as hoped. Witness for example the NIRP strategies being implemented in Europe and Japan.

One obvious problem with Martingale strategy is that gamblers may run out of capital before their 'double down' bets hit. But wait, don't central banks run the printing press, permitting them to print an endless supply of money from which they can fund their next round of bets?

Not exactly, as Gross observes. One problem that central bankers face is the prospects of Big Inflation stemming from their money printing. If the size of their losses get big enough and those printing dollars make their way to markets for goods and services in sufficient quantities, then prices explode higher. The printing press, i.e, the funding source of central bank Martingale bets, shuts down when that happens.

Because they center on distorting interest rates lower, central bank Martingale strategies also threaten the lifeblood of capitalism--i.e., savings that serve to fund productivity improvement projects that advance prosperity. When capital is consumed, then the goose that lays the golden eggs of prosperity is dead, and there is no standard of living to wager on.

At that point, all bets, as they say, are off.

Prohibition Escalates Violence

"You wanna know how to get Capone? They pull a knife; you pull a gun. He sends one of yours to the hospital, you send one of his to the morgue."
--Sgt Jim Malone (The Untouchables)

Nice chart that demonstrates how prohibition escalates violence in society. An influential group in society views X (e.g., drugs, alcohol, guns) as threatening. This group influences government officials to pass a law banning X.

Because there is no longer a way to legally obtain X, its value grows (ECON 101--supply goes down in face of constant demand, thereby raising price).

Black markets naturally arise with the increase in price, as buyers and sellers see benefits that outweigh the cost of trading illegally. Crime, i.e., illegal trading of X, becomes more organized over time, and the frequency of violent crime in the market increases.

In response, law enforcement develops harsher tactics for combating the crime. Criminals become more violent in response.

And around she goes...

Faculty Voter Registration

All in all you're just 
Another brick in the wall
--Pink Floyd

Another study indicating the lack of political diversity in higher ed. Voter registrations records of over 7000 full time (tenured, emeritus, tenure track) faculty in five disciplines at 40 leading US universities found that 3623 were registered as Democrats and 314 were registered Republicans for an overall ratio of nearly 12:1.

Across the five disciplines examined, economics was the least biased at 'only' 4.5:1 while history 33.5:1 and journalism 20.0:1 were the most biased.

Institutionally, the only three universities under 4:1 are Ohio State, Case Western, and Pepperdine.

While such findings merely reinforce what is already known, those who believe that ideological diversity and tolerance should be the centerpiece of university environments should find the political bias in higher ed disturbing.

Dominant Coalitions

"There is only one reality in the world today. Look to the west, Judah. Don't be a fool. Look to Rome!"
--Messala (Ben-Hur)

In social settings, there is tendency for dominant coalitions to emerge. A dominant coalition is a group of people that exerts outsized influence on others. Dominant coalitions may be large in number, such as a democratic majority, or small in number, such as a senior management team in an organization.

The primary driving force behind the formation of dominant coalitions is that there is strength in numbers. Things often get done more thoroughly and quicker thru groups rather than thru individuals.

Dominant coalitions also have a social identity element to them. People often affiliate with groups in order to enhance their self-esteem. Particularly as its influence grows, a dominant coalition attracts individuals who want to increase self-esteem thru association.

Dominant coalitions might operate peacefully, exerting their influence thru non-violent persuasion. However, they can also operate forcefully, exerting their influence thru aggression.

The larger the dominant coalition and the longer it exists, the more it becomes institutionalized. Institutional entities, by definition, seek to remain powerful and maintain the status quo. Working against the status quo, however, are naturally changing environments with opposing forces that challenge influential coalitions and work to render them less dominant.

As such, it is likely that dominant coalitions will resort to violence over time in attempts to maintain their dominant position when peaceful influence no longer works.