Brian, as an economist, trained at the University of MN, and having worked with economists now at the Fed, this is well done. The key issues are predictability, property rights, and time consistency as you point out here. I would also add markets need to be well defined with enforceable and established rules and institutions that allow for investment decisions and allow for transactions to be easily done. Chaotic changes in the rules and institutions erode investability and transactability throwing sand into the gears a market.
But what many people will not understand in the underlying premise here is that pre-commitment and restraint actually provide more and not less freedom of action. To some, reducing the degrees of freedom makes no sense intuitively. But what they fail to see here is that we live in a dynamic world. If we look at decisions over time as a tree, if we go down a branch that pre-commitment would otherwise avoid, we are at a dead end! Pre-commitment to certain actions today allows for greater optionality at decision points in the future. That is why Odysseus was lashed to the mast! If not, the dead end was wrecking the ship!
Exactly! And that expanded menu of choices created by precommitment is what I meant by true power -- Kim Jong-un can make someone disappear with a snap of his fingers, but he can't attract a major international company to invest in his country. He can steal large slices of a small pie, but never effectively grow the pie. And that fragility is the illusion of power.
So, what we need is a good definition of “power.” This is something Phillips O’Brien at the University of St Andrew’s has been writing about, but that is in the context of war and strategy.
But in power systems or physics power is the amount of energy transferred per unit of time. If we think about energy transfer as being the ability to get people/companies/governments to “move” in way that are beneficial to society at large then we can see you KJU or weak dictator example in focus.
KJU can only move his own people (and not in ways he would hope) but cannot move anybody beneficially for his country, that is a lack of power. In contrast, Denmark has great power (relative to size) in moving and influencing policy in Europe toward the greater good for security and Ukraine in particular.
Another way to think of power…not fully baked, but a start.
Regardless of what trump does or doesn’t do in the future, and regardless of what happens in the short-term, the chaos trump has created and the poor decision-making trump has already demonstrated have irreparably harmed our economy in the long run. He has destroyed the trust other nations had in our stability and our ability to make sound economic decisions. In a historic turn of events, other nations are looking away from the United States and towards creating new and unprecedented partnerships with nations other than the United States. Ultimately, the United States will be left in the dust, although there is the possibility of a regime change preventing our descent into banana republic-dom.
I certainly agree that the erraticism and lurch toward authoritarianism has already done profound damage! This would make it much worse on the economic front (and as some other commentators have pointed out, he could also just wait out the clock with Powell, appoint a lackey, and end up producing "above board" politicization of the Fed in unprecedented ways that similarly damage the credibility and independence of the Fed).
No argument with what you are saying. But the point is he has already responded to his worst instincts as you have pointed out. It leaves him little room to change course. Now it is a matter of crashing the ship of state, or narcissistic collapse…neither ends well.
Unfortunately, The pedophile of the United States has successfully employed the tactics of commiserate-and-blame to attain the lofty perch of chief puppeteer and mob boss. I hope Trumpty-dumpty has his great fall soon, because I'm tired of watching him, his fellow felons and Duning Kruger classmates sabotage the progress of: Medicine, science, education, etc.
Thank you again, Brian; for providing past examples of the consequences of letting narcissists, sociopaths, and sycophants slither into positions of power, without adequate guardrails.
Thank you. I wish pundits were talking about this aspect of the “maybe!” firing of Sec. Powell. It feels like the country is falling so fast (heavy sigh)…
Brian, as an economist, trained at the University of MN, and having worked with economists now at the Fed, this is well done. The key issues are predictability, property rights, and time consistency as you point out here. I would also add markets need to be well defined with enforceable and established rules and institutions that allow for investment decisions and allow for transactions to be easily done. Chaotic changes in the rules and institutions erode investability and transactability throwing sand into the gears a market.
But what many people will not understand in the underlying premise here is that pre-commitment and restraint actually provide more and not less freedom of action. To some, reducing the degrees of freedom makes no sense intuitively. But what they fail to see here is that we live in a dynamic world. If we look at decisions over time as a tree, if we go down a branch that pre-commitment would otherwise avoid, we are at a dead end! Pre-commitment to certain actions today allows for greater optionality at decision points in the future. That is why Odysseus was lashed to the mast! If not, the dead end was wrecking the ship!
Exactly! And that expanded menu of choices created by precommitment is what I meant by true power -- Kim Jong-un can make someone disappear with a snap of his fingers, but he can't attract a major international company to invest in his country. He can steal large slices of a small pie, but never effectively grow the pie. And that fragility is the illusion of power.
So, what we need is a good definition of “power.” This is something Phillips O’Brien at the University of St Andrew’s has been writing about, but that is in the context of war and strategy.
But in power systems or physics power is the amount of energy transferred per unit of time. If we think about energy transfer as being the ability to get people/companies/governments to “move” in way that are beneficial to society at large then we can see you KJU or weak dictator example in focus.
KJU can only move his own people (and not in ways he would hope) but cannot move anybody beneficially for his country, that is a lack of power. In contrast, Denmark has great power (relative to size) in moving and influencing policy in Europe toward the greater good for security and Ukraine in particular.
Another way to think of power…not fully baked, but a start.
Regardless of what trump does or doesn’t do in the future, and regardless of what happens in the short-term, the chaos trump has created and the poor decision-making trump has already demonstrated have irreparably harmed our economy in the long run. He has destroyed the trust other nations had in our stability and our ability to make sound economic decisions. In a historic turn of events, other nations are looking away from the United States and towards creating new and unprecedented partnerships with nations other than the United States. Ultimately, the United States will be left in the dust, although there is the possibility of a regime change preventing our descent into banana republic-dom.
I certainly agree that the erraticism and lurch toward authoritarianism has already done profound damage! This would make it much worse on the economic front (and as some other commentators have pointed out, he could also just wait out the clock with Powell, appoint a lackey, and end up producing "above board" politicization of the Fed in unprecedented ways that similarly damage the credibility and independence of the Fed).
No argument with what you are saying. But the point is he has already responded to his worst instincts as you have pointed out. It leaves him little room to change course. Now it is a matter of crashing the ship of state, or narcissistic collapse…neither ends well.
Unfortunately, The pedophile of the United States has successfully employed the tactics of commiserate-and-blame to attain the lofty perch of chief puppeteer and mob boss. I hope Trumpty-dumpty has his great fall soon, because I'm tired of watching him, his fellow felons and Duning Kruger classmates sabotage the progress of: Medicine, science, education, etc.
Thank you again, Brian; for providing past examples of the consequences of letting narcissists, sociopaths, and sycophants slither into positions of power, without adequate guardrails.
Thank you. I wish pundits were talking about this aspect of the “maybe!” firing of Sec. Powell. It feels like the country is falling so fast (heavy sigh)…
Wonderful article. I’m not an intellectual or an academic but know truth and you have spoken it.