Sunday, March 11, 2018

We need Centrally Planned Economies?

Read an email, which took me to some politics on free trade agreements. Which brought me back to protecting diversity, and the need for centrally planned economies. One thing I noticed on the wikipedia articles on economics were the statistics which indicated the agreement between economists on various topics. Put another way economists lack independent thought and are very good at regurgitating what they were taught, irrespective of whether it makes any sense. The diagram explaining Free Trade on the Wikipedia article is not very helpful: but then I'm usually more concerned with logistics and production quantities versus demand forecast. A straight line implies that unit price or unit cost is constant: thus unit production cost doesn't decrease with larger production quantities. Is it price on the y-axis for both demand and supply, or is one cost, or what is the economic meaning of price? Anycase assuming the diagram is correct, it doesn't easy the explanation of the supposed benefits of free trade.

When I refer to centrally planned economies I am not referring to geographically bound government of nations. When studying business I remember a case study involving Ford: the car maker. The case study indicated that Ford had centralised autocratic control over all its global production facilities. The result was imposing American designed cars in regions for which the vehicles were ill suited and otherwise not what the locals wanted: and sales dropping. By providing more autonomous control to the local production facilities, including design of vehicles to suit local markets: there was some improvement to sales.

So on the one hand an example of central planning imposed on us which is not by our national government, and a case that central planning is probably a bad thing when exercised by corporations. Though the latter is questionable, as it requires central planning to grant autonomous decision making at the local level.

The point is we don't need national government for a centrally planned economy, we just need the appropriate co-operatives, and these co-operatives can be either local, regional, or global. It was already recognised in the 1990's that some corporations were more powerful (economically) than some nations.

If we had truth in advertising then some of our adverts would be along the lines of: "Eat more meat so we can kill more animals". Some people need to be eating less of everything, not just meat, whilst others need to add meat to their diet. I consider it a case where we need to produce the right amount, therefore we need to know what the right amount is: something which is not entirely possible. Retailers know when they have shortages, but would seldom have an accurate knowledge of the shortfall. Secondly retailers would need to purchase in multiples of the economic order quantity (EOQ) imposed by wholesalers. The wholesalers may then impose or have imposed on them EOQ by the producers. So expect some inefficiency of either surplus or shortage. Surplus is probably preferable than shortage, but it disadvantages the supplier. However surplus could be equated to zero, if surplus is deliberately produced as a reserve for future emergencies, or is otherwise a deliberate buffer to balance variations in demand.

The problem is appropriately defining the magnitude of the required reserve or buffer. Past and existing trials by government seem to result in farmers producing to sell to the government rather than the consumers. That is they increase production way beyond real demand. The government then has a problem paying for stuff it has no need of, thus quotas are then imposed.

What we need are dynamically adaptive systems which protect local producers from the pressure to adopt systems for supplying to global markets. We need to protect the diversity of small and large. We have a society and we need to protect the values of community, culture and society.

So sticking with my idea of protecting diversity, by imposing a 20% constraint and otherwise minimum of 5 entities, we need something like 5 regional exporters which supply to 5 national exporters. Similarly have 5 regional importers receiving from 5 national importers.

The local producer, produces to supply local demand, with surplus to pass onto the regional exporter: say no more than 20% of their production and then only if local demand is satisfied. If local demand cannot be satisfied, then regional import is permitted to supply the shortfall. If local producers can supply local demand if time was granted to increase production capacity, then imports are constrained by time: imports are on a diminishing supply schedule at the end of which import is zero.

Society having granted such benefit to local suppliers it doesn't expect to be held to ransom by them. On the other hand geography and history can provide advantages to certain businesses which results in lower production costs. These lower production costs are so low that they are not negated by the cost of transport over large distances. In such situation local suppliers are at a disadvantage: as they cannot reduce price any lower and otherwise have the minimum quality of life imposed by local standards.

The important issue is minimum quality of life imposed by local standards, not the absolute minimum quality of life. Just because the traditional Australian dream home is a 1/4 acre block with large single storey house, doesn't mean such nonsense should be imposed on the population of the world. Some people want small houses, some want mobility. Furthermore a lot of the large houses are unoccupied for a large part of the time. Most people don't work at home, so that's around 1/3rd of the time a house is unoccupied. Secondly around 1/3rd of time people are asleep: when asleep how big does the space need to be?

So whilst some people in the world, do live in conditions which we would call poverty, raising them out off such poverty doesn't involve imposing the lifestyles of industrial society on them. The people in poverty are not typically involved with trade with cities: as they have nothing to trade, hence poverty.

Some places have advantage because of low labour costs and low standards of living. Local trade between these people will improve living conditions if the people so desire, and there is some external assistance with respect to supply of suitable resources which are otherwise absent. For example cannot produce a steel axe if there is no steel, cannot produce steel if no iron ore. Cannot have water pipes if no materials to make water pipes.

Certain resources are not available everywhere, however if people are in a place, then expectation that water and food are available in such place. If the essentials are not available in a place then how sustainable is such a place for humans? However, even if resources are available there is still an issue of: how long will those resources remain available?

There is only so much biomass on the planet. The biomass on earth can be in either
  1. human form,
  2. resources used by humans
  3. or wildlife
As human population grows there is less biomass available in the other two forms, and one of those forms needs to feed the humans. So we need some limits in place, but we don't want limits to be imposed by authoritarian regime with penalties. We don't want to think about zero population growth, and the kind of constraints which would be required to control population growth.

We don't need to provide constraints if we have some common data for planning. For example we could take 10 billion as the maximum human population for earth. It may not be the correct value for the maximum sustainable population, but it is larger than the current 7 billion, and we are not currently capable of satisfying their needs. The current 7 billion are alive, so they have access to water and food: but their life's are likely short, uncomfortable and unpleasant.

By planning for 10 billion we are planning with a surplus built in, and also with a constraint. The constraint can be  moved, for example increased to 20 billion if it seems such is achievable or decreased to 8 billion if that seems more acceptable. Dropping to 5 billion however would pose some major concerns. As indicated previously the land mass can be divided into cells 5 km in diameter, and the world has a population which could place 1000 people in each cell. Assuming an industrial city-state has a limiting population of 10 million, and is 100 km in diameter, then only 1000 such cities would be required in the world. A 1 km square, with a 500m square hub can provide 5000 individual single storey dwellings around the hub. Such dwellings equally suitable for a couple and baby: with 2 storeys the dwelling suitable for a family of 4. Thus 20,000 people can occupy 1 square kilometre. So for the 5km diameter cell, 1000 people could be concentrated in a 1 km diameter hub, leaving a ring 2 km wide ring around the cell. A region 4 km wide between adjacent hubs. How much land to feed the people so that can determine how much of the ring is wilderness and how much used for agriculture. One suggestion is 0.5 hectares per person (though this figure seems to vary widely) required for food production: thus for population of 10 billion need 5 billion hectares of land for food production. Whilst 1000 people would need 500 hectares, provided by a outer ring 800m wide around a 1000m square hub: thats a 2.6km x 2.6km square in 5 km diameter cell. {1.4*(2.6/2)=1.8 km radius, 2.5-1.8=0.7km wide ring: 1.4 km wide region between adjacent population centres}

Implication seems to be that more concentrated populations of humans more preferable for preservation of the wilderness that equally distributing humans over the surface of the planet. Still has mentioned in earlier post individuals can still be custodians and responsible for a region: they defend it remaining wilderness.

So first issue in central planning for a cooperative is land usage and occupancy. Zoning isn't just a local issue, or national issue, it needs to be global. How much land in the world needs to be set aside for beef production and where can it be located? Clearly cannot locate beef production in countries where cows are sacred animals. What percentage of the world population naturally desires beef, as opposed to advertising imposing such desire. Does the world produce enough beef or does it produce too much? If it doesn't produce enough is it practical or desirable to produce more? If the world produces too much, how can production be reduced in a practicable and acceptable manner? If produce too much is it acceptable to increase demand by advertising? {Eat more beef so we can slaughter more cows.}

Forget about beef and meat: what about wheat, rice, potatoes? What about flour and bread? What about water?

As far as I am aware two international decades of water have failed to ensure a secure water supply for the world population. The  primary reasons being a failure to account for maintenance of the installed technology, and failure to account for population growth. Failure of the technology means cannot support the original population, and thus population growth magnifies the original problem.

Heritage is good if it provides a foundation on which to build the future, otherwise its an hindrance. Heritage however needs to be maintained. Whilst its a benefit to have a house that lasts 100 years rather than 1 year, and thus each year provides time which can be spent on other activity, eventually need to spend time replacing or at least maintaining such house. The same goes for the rest of the technology, and especially the nationally {geographically constrained} infrastructure, which we depend on.

But to a certain extent the building and construction industry build stuff just to stay occupied or is that employed: not building stuff because we really need it. So we have plenty of buildings, construction activity still occuring and yet have a housing shortage. How can that be? Its because the market is not capable of meeting social needs. The speculators buy up land and build houses for financial investment, for monetary profit, not to satisfy a social need. So they unwisely build large houses not affordable by the majority of people in the market. So the market provides goods which few people can afford. Better planning provides goods society actually needs.

Therefore we need to separate essential from the optional. The optional can fluctuate with the market, the essential has to be supplied. Population needs to be constrained in terms of its size, and its proximity to needed resources. That needs planning not just a free market.

Population doesn't migrate between countries it migrates between cities. So where is the world population going to be located? Population is an import, and such population needs health care, education and housing. On the other hand we can export, health care, education and housing. Humans have legs they are meant to be mobile.

One documentary a few years back indicated that in the industrialised West, towns were becoming ghost towns as the next generation left for the big cities: especially around mediterranean countries and coastal towns around Italy and Greece. These towns thus can import population: house the world's refugees. A mass migration of population around the world into the big cities and the smaller  towns. Especially migration of those people forced into lands which do not have the resources to sustain people.

This cannot be done by nations as nations have geographical constraints, it has to be done by multinational organisations, by peoples cooperatives. A nation builds hospitals locally, a non-government organisation (NGO) or co-op provides hospitals globally.  A global co-op needs to know where hospitals are required globally. Such an enterprise is unlikely to have built Adelaide Hospital when the populations primary concern was supply of health care to people in the rural towns and mining towns.

If we know we have 10 billion people distributed around 1000 city-states, with 10 million people each, then how many hospitals does each city need? How many people are needed outside the city centres, who also need to be served, and how are they to be served?

If there were at least 5 global providers of health care,would the needs of the world population be better served than by national governments? Not if the purpose of the provider is to make a monetary profit rather than satisfy the needs of the population: those with greatest need wouldn't get any services as likely least able to pay directly for such service. 

Users paying for services isn't the issue, the issue is users paying directly for services at the time of need. Users can either pay for services now to cater for future need, or they can take the service now and pay for the service at some future date. If people are unhealthy or in poverty, they cannot pay for the services now, irrespective of whether they get the benefit now or in the future. They thus need to gain benefit now and pay in the future. However going into debt isn't a good thing, rather than reap future benefit it's more likely to make things worse. But can those in need afford to put a penny in a penny savings bank? It worked in the past but would such penny savings banks work now? If you don't have enough to survive, how can you put something aside? Sometimes a gift without debt is necessary to make the necessary change. A surplus generated in one place funding a shortage elsewhere. For example the traditional harley street doctors generating high incomes by providing services to the rich, and using to provide free clinics to the poor.

The question is have professionals become less noble and more greedy, or have surpluses decreased and cost of providing free services been increased by increasing regulations. when it comes to things like the following:

then greed seems to dominate the thinking of these professional cults and  modern day rum corp. the time someone spends in training has little to do with how much they should get paid, it does matter if its a 3 year apprenticeship, or a 4 year degree followed by a 6 year internship. Just like it doesn't matter if GMH spent $1 billion on developing a new car. Either the market wants to pay the price or it doesn't? Either they want the product or they don't?

We the public are not stupid and there is no asymmetry of knowledge unless a monopoly deliberately creates one. Engineers Australia with a monopoly, with no other organisation to say its membership wouldn't know their knee from their elbow, intentionally removed the institute of engineering associates to push up prices and have trite work carried out by individuals whose qualifications are not appropriate to the task at hand. The fake honours degree (B.Eng) does not make a graduate conversant with the technology these people claim expertise. Furthermore these graduates do not have the aptitude and capability the degree is supposed to impart: if civilisation was dependent on these people then civilisation wouldn't exist because there would be no discovery of knowledge to pass on through educational institutions. They are not creative, not imaginative, and certainly not ingenious, and mostly not technically competent. To grant them monopoly through legislation is not acceptable. If anything we should take monopoly away from professions.

Does the monopoly granted to the medical profession benefit society with the health care system its needs or does the monopoly impede every attempt to provide a better system? Do lawyers defend the innocent or put killers on the streets? And architects they just pollute the environment with over sized junk.

No! Take monopoly away from such professions and don't grant any to a profession which designs weapons of mass destruction.

[break for tea and telly [(11/03/2018) 17:43]]

[back from tea [(11/03/2018) 21:36]]

Waffle rules!

So there is a problem, pinning it down so that it can be defined clearly is no easy task. If it isn't defined clearly then no solution can be properly implemented. The world is full of people with solutions: but few of these solutions have relevance to real world problems: they are solutions looking for problems. That's the wrong way round.

The basic problem is one of logistics: provide the right product, in the right condition, in the right quantity, to the right people, at the right time, in the right place at the right time.

The internet with online ordering systems helps with identifying the right products, quantities and frequency of supply. But wish lists are probably much better than actual orders.

Basic expectation is that employment in retail will diminish, in terms of working in bricks and mortar stores. These stores will mostly become showrooms, display centres. Sales will mostly be online, and employment will therefore increase in terms of courier services. Letter/mail boxes will increase in size to receive large parcels. Whilst won't be able to pick item up from showroom, the item will arrive at the persons home before they themselves arrive home. Though initially won't expect or be able to supply better than within 48 hours.

The central planning system will be the internet: the so called big data. However it is relatively clear the people currently dealing with big data are less than competent at interpreting such data. Popularity contests do not properly represent the views and values of the people. Just because have traffic passing a building doesn't mean that the traffic is a market. Likewise just because people visit a website or view an individual page doesn't mean people are a market or have any liking for such page. It certainly doesn't represent a mechanism indicating the need to supply more of such stuff. Peoples curiosity will eventually taper, they will have identified a source of rubbish and move on, and yet the evidence would have suggested people liked the rubbish. It's the all swans are white versus problem. As Karl Popper pointed out, we have to do more than accumulate evidence to support an idea, we also need to seek evidence against the idea, we need the imagination to consider alternatives.

Central planning for example is typically rejected on the basis that the USSR was a centrally planned military dictatorship, and that was bad. Cats have four legs, dogs have four legs, therefore all cats are dogs. And thus all central planning ideas are bad, with false assumption that free market capitalism is good.

Free market capitalism however has no social conscience. Society however has to have a social conscience, it is what makes it a society. A capitalist society is therefore a contradiction of terms.

For certain society needs to be dynamically adaptive to survive in a dynamic world. Society was largely created to provide a buffer against the vagaries of the natural world. Then capitalism threw us back into the maelstrom of chaos. The natural tendency of the universe towards increasing entropy (disorder). Though life tends to resist such disorder, with life, information and wealth considered as negentropy.

So ...

beats me I've written more than one paragraph, and therefore lost in my own thoughts.

[(11/03/2018) 22:15]

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[11/03/2018] : Original