Clearing

The stock market, roughly, represents the state of the economy* as a bunch of algos and people think it is likely to be in 6-12 months. In this context, the current unemployment numbers don’t mean anything. Remember, the stock market is a leading indicator, not a lagging one.

However, the stock market has been experiencing and is currently experiencing extreme distortions because bailouts never really let the market find a natural price for anything. Thus, among other problems, nearly all of the risk has been shifted to small investors and unwise ones. This has been occurring to some extent since 2001, but really ramped up in 2008 and after.

My larger point is that the stock market never represented the state of the economy. That’s not its goal, as much as a discrete-time stochastic process can represent anything over the short term.

*This is an extreme oversimplification, because its medium-term behavior (2-3 week time slices) more represents the earnings of companies versus their price now and their expected price in the future, discounted by risk. (And risk is just another name for uncertainty spread across the future).

Nost

“‘The cinema is an invention without a future,’ Louis Lumiรจre supposedly declared at the dawn of movie history. The historical parallel in Hugo, meanwhile, is also partially a wink to the future of movies in the digital age: if film survived, and even thrived, in the twentieth century, then certainly digital cinema (in whatever form) will thrive in the twenty-first. The anachronism, though, is readily apparent in the filmโ€™s unapologetic nostalgia. Hugo is more about understanding present developments (digital cinematography and 3D exhibition) in the movie industry through past future(s)โ€”the then-unimaginable potential of early cinema that even someone as visionary as Lumiรจre apparently couldnโ€™t seeโ€”than about actually imagining the still unrealized futures of digital cinema. There is an active resistance to imagining the future in favor of a reassuringly nostalgic look back since capitalismโ€™s greatest strength may be shutting down the potential futures of possible alternatives.”

–Jason Sperb in Flickers of Film: Nostalgia in the Time of Digital Cinema

Complexity

This piece doesn’t really tell anyone how to think like I do, but it is one of the few articles to acknowledge the existence of complex systems and their dynamics, by the ever-excellent Zeynep Tufekci.

As it turns out, the reality-based, science-friendly communities and information sources many of us depend on also largely failed. We had time to prepare for this pandemic at the state, local, and household level, even if the government was terribly lagging, but we squandered it because of widespread asystemic thinking: the inability to think about complex systems and their dynamics. We faltered because of our failure to consider risk in its full context, especially when dealing with coupled riskโ€”when multiple things can go wrong together. We were hampered by our inability to think about second- and third-order effects and by our susceptibility to scientismโ€”the false comfort of assuming that numbers and percentages give us a solid empirical basis. We failed to understand that complex systems defy simplistic reductionism.

Such a great article. She is one of the few — the very few! — who understand how complex dynamic systems function and their fragility. She isn’t writing about the economy here, but rather the initial response to Covid-19. However, the same lessons apply. Even the “experts” don’t really understand it and are now proffering all sorts of takes that will turn out to be wrong, just as occurred for nearly two months with Covid-19 (remember all the “face masks don’t work” and “seasonal flu is way worse” flapdoodle?). Yes, even economists. Perhaps especially economists.

And I love that she said this is not a Black Swan event, which it is not. It was, as she noted, “predictable and predicted.” We knew it was going to inevitably happen, just not exactly when. That is definitionally not a Black Swan event.

Now we’re seeing what happens when we don’t “overreact” to a grave threat. We’ll see it again when climate change really starts hitting hard — except that’ll be a hundred times worse.

Using Up

For the least sophisticated end user? I have yet to figure out how to write instructions in crayon, emojis and grunts. Seriously, there are some users out there that you wonder how they successfully blink. Working helpdesk caused me to lose what little confidence I had left in humanity. The things you see there are just unbelievable.

On The Tail

Exactly. Tail risks are really what bite you in the tail. We are seeing that now. We should have quite a few people thinking about things like this — even about AI. That’s the pernicious thing about tail risks. They sneak up and then it’s too late. Makes me laugh when I see such cluelessness because it’s exactly these people who when something unexpected happens are like, “Why didn’t someone DO SOMETHING?”

Branding The Self (Not The Ouchy Kind)

One of the problems with our society is that all too many people think which TV shows you watch says anything at all about you. I used to think so, too, when I was a complete prat. But when I realized some of the smartest people I knew watched what I considered complete brain-damaged garbage like Project Runway and Survivor, I reconsidered that view because I was wrong and, as noted, a prat.

Of course, capitalism (especially of the neoliberal variety) nearly requires this brand-identity association and differentiation. That is in part how it functions. It’s hard to blame people for thinking like this because they are trained in it nearly from birth. It is still, however, annoying to observe.

Psalm 74:19

It is a bad, evil bill. The Democrats have no spine and the Republicans have no soul, so this is what results.

Test And

A lot of the drama you’re seeing on Twitter between the right and the left regarding the economy will never be resolved because most liberals have deontological views and most of the non-liberals do not.

I am more of a consequentialist myself, obviously. To be clear, I think that test and trace is the way to go regarding Covid-19 and that we shouldn’t restart the economy just yet. My point is that if we wait three months, that there will be no economy left to restart and ~20 million or so deaths from that alone are likely (no, I do not care what economists say; as usual, they are wrong).

However, the liberals, with their deontological outlook and their hatred of any thought experiments, cannot recognize the real world has absolute limitations in almost all cases and that wishing that it weren’t so does nothing. It’s like risk: it can’t be eliminated, but it can be shifted.

Rank and file Republicans only care about the stock market, though. The liberals are absolutely correct to claim that they don’t care if your gramma dies, because they don’t, as long as the stock market goes up. But that’s not what I’m talking about here. The issue is that after a certain point — and I think it’s about three months — economic relations break in a way that cannot be mended. There will be no repair, only destruction. The economy isn’t a Windows 95 machine that can be rebooted when it crashes. It doesn’t work like that at all.

The Kantian categorical imperative was always a nice idea that doesn’t comport with brute reality. And we’ll get to see just how badly it works soon enough. Most of you won’t like it much.