Our Only Real Goal is Operational Agility

In a recent post, Warren Mosler comments on the economic impact of the recent FICA Hike and Sequester.

Warren's terse writing style is sometimes difficult for for beginners to follow, but it provides a very refreshingly different view of policy, showing how much divergence & uncertainty there is between goals, policy, investment strategy, governance tactics ... and unpredictable outcomes. Given that unpredictability, our only real goal is operational agility in realigning our goals, policies, strategies and tactics with ongoing versus preferred outcomes. 

For Pete's sake! We make simple outrageously difficult. Why? Simply for lack of adequate interaction?

This country has far more talent than it marshals to work together. Sequester is a minor issue. Squandering available talent is a far bigger issue. We're not even trying to build a whole greater than the sum of it's parts. Instead, we're hoarding the freaking parts!

We have too many partially blind people all squabbling over their incomplete views. That's reminiscent of a horde of gnats so thick you can't even see the economy they're mobbing. Just a mass of gnats (or piranha?) flopping around this way and that, like a drunken sailor.

Hottest bets in both 'Vegas and Wall St.? Waiting for proof of whether the piranha cloud shows even a semblance of active navigation, or just truly random floundering. 'Vegas and Wall St. are like drunks in an Irish pub, arguing over what will happen at their wake.
If everyone is driven by incentive, and the biggest return - by far - is ALWAYS the return-on-coordination, why don't ALL of us always see that biggest return as the biggest incentive? Simply for lack of adequate interaction?

A brain is not a brain if the neurons aren't all connected to one another. Similarly, group and cultural intelligence is not an impressive intelligence if all people aren't connected to one another, exchanging at least key feedback and iterative discussion.

Did I mention that our only real goal is operational agility? Please. Go practice some random acts of coordination.

CURRENCY OPERATIONS AND THE GROUP PSYCHOLOGY of SEMANTIC MOBILIZATION

Without first calling attention to context-dependent semantics, and static-local vs dynamic-aggregate context, it's impossible for a population of our size to have a coherent policy discussion.

Allowing confused semantics in fiscal policy discussions is exactly how we strayed into our current confusion even after initially going off the gold std way back in 1933.

Are you frustrated, wondering why we're reliving a problem we solved in 1933?

Are you also wondering why it's so hard to explain the floating value of fiat currency to people fixated on static, commodity value?

Are you baffled by orthodox economists refusing to discuss fraud?  Or cost-of-coordination?  Or return-on-coordination?   All are truly ancient topics in other disciplines.

Are you becoming aware of the horrifically disorganized semantics displayed in any group discussion of fiscal & monetary policy?

There's no need to feel alone, or to feel frustrated. Sensing and sampling all aspects of a distributed tuning task is simply a prerequisite for solving it. To tune a complex system, the 1st requirement is an adequately broad conceptual model. Otherwise, all efforts will make things worse rather than better - barring blind luck. Can you imagine wasting frustrating days trying to tune an engine by working on one piston, before realizing that there are 8 pistons involved? (Or even 10 or 12?) Imagine radio astronomers trying to tune coherent signals from a large array of receivers.

Our goal is coherent system tuning - not heroic, individual effort.

System tuning is both difficult, & trivially easy. Every sensory system in our body produces coherent signals from large arrays of dumb cells, distributed as sensory receptors, whether tactile, retinal, cochlear, vestibular, taste or smell. Their inter-connectivity wiring just follows some organized principals.

Coherent system tuning depends upon organized campaign design.
A tuning campaign has to first recognize the boundaries of the system to be modified - otherwise the system will respond in ways the campaign couldn't have imagined. Does that sound like the current, degraded state of our politics? There is a better way, so let's look for one.

Let's work backwards through the list above, using the operations of linguistic semantics are a reference point for campaign design.

Campaign design for a growing economy requires Semantic Mobilization.

Since we re-use words & meanings so fluidly, semantic mobilization simply means sharing enough group-wide discourse to know when given semantics apply to what concepts and tasks, local or aggregate-wide.  This isn't rocket surgery.  Shucks, given rational discourse, it's not even taxing! :)

The many inconsistencies producing Sophistry from adaptive semantics are well known, and are frequently mislabeled as mysterious "cognitive biases." In such essays, psychologists note that frequency of so-called cognitive biases correlate weakly with so-called measures of individual intelligence.

Let's ignore the vague definitions of both bias & intelligence. The approach itself is subtly misleading. A core, mal-adaptive mistake occurs in sophistry when broadcaster and audience presume that they're using the same semantic paradigm.

The definition of logic itself is looking for consistency in explaining unpredictable reality. Logic is defined as the reliable mapping of theory to discovered operations. In the process it selects sense from nonsense.

The book "Here's Looking at Euclid" provides a useful lesson, by comparing findings from math & linguistics. One key point is that many if not most "natural" sensory operations parse and encode context by relying upon signal ratios, not absolute calculations based on the arbitrary construct of an equally-spaced measuring systems.   You have to expect that the same, lean signal parsing characteristic occurs for all semantic parsing, not just for number systems.

It all boils down to how our brains actually re-map representations of changing contexts. Given that actual neural networks report on pattern associations as a shortcut to formal calculation, it's easy to postulate that the questioners are the responsible parties when it comes to coherent Q&A.

The whole purpose of language & semantics - and parsing them - is to free us from the tyranny of disorganization, not to see who can confuse whom.

When inconsistencies appear in dialogue, it's because we're so frequently asking context-dependent questions using QUESTIONABLE METRICS, usually in a inappropriate paradigm - i.e., those we were arbitrarily over-trained to use, after someone else developed them for some completely different sub-context. Everywhere you look we have dynamically degenerate semantics - rather like using the same 5-to-7 variable names in every software program you write.

A famous example is the Nobel acceptance speech by Max Planck. He noted that Ludwig Boltzmann was previously aware of the "Boltzmann Const", but that none had bothered to define it's value. Planck went on to derive it's value, in common units, but then went even further. He'd realized that by sampling different, newly defined, scientific units - & plotting the position of the Boltzmann ratio within different coordinate sets - you could make Boltzmann's Const be 1, or any value you wanted. This example is instructive for novices surprised to hear that there's a difference between currency issuers and currency users. Yes, Tommy, data really is meaningless without context.

The more you look at our use of semi-static semantic variables in very dynamic context-space, the more it's apparent that our own semi-static semantics are rate limiting for our own aggregate operations, which are diverse & dynamic.

Amazingly, there are multiple old books on this very topic as well, e.g: "The Tyranny of Words" by Stuart Chase.   He was one of the architects of the FDR New Deal, and realized that much of their policy confusion stemmed from non-scalable semantics. Politics as we know it won't scale simply because it's trying to map semi-static, personal semantics to dynamic, aggregate contexts. Everywhere you look, we need to "dynamically re-define our terms" for multiple, overlapping and changing contexts which can simultaneously scale from local to aggregate-wide.

For a complex system to grow, members eventually have to know their multiple audiences!  Otherwise we never know if we're broadcasting more confusion than clarification.

Ala Max Planck, there's an conclusion here that is completely orthogonal to the paradigm suggested by cognitive psychologists. Smart is a vague term implying hyper-aware context scouts, not dependable, predictable Luddites. A resilient system needs both, just as explorers need a conveniently unchanging foundation to stand upon. Even though there's no consensus, smart people are generally considered to be those with more distributed neural-net mappings & associations. Yes, they're more aware of & hence more easily recruited to subtle or weak associations. The underlying reason, however, is not a mystical "bias." Rather, it's due to the wider breadth and mismatched kinetics of waxing/waning synaptic connection patterns across our huge population of CNS neurons. Similar patterns - though not yet as robust - are expressed in the patterns of discourse expressed nationwide.

Resilient group intelligence gracefully handles semantic exceptions.
Semantic "bugs" in our neural-net operations have been recognized as sophic tricks since the time of Socrates & the Sophists. Adaptive Q&A depends on the distribution & adoption of context-dependent semantics. Managing the utility of that distribution is very similar to appropriately identifying fixed vs dynamic addresses & values in complex software programs. Much information in any optimally engineered system is made implicit by context, thereby achieving substantial resiliency and lower overhead.  In an adaptive race, there has not yet been any escape from the need to engineer in as many - but no more - short cuts & hacks as we can get away with.

At any rate, there's a general solution for people constantly bothered by the sloppiness of translating across old-to-emerging and local-to-aggregate slang & formal semantics. 

If you want an appropriate answer, just rigorously "DEFINE YOUR TERMS" when asking a question which you actually want the answer to.  Otherwise audiences will always answer the first "question" that their context-specific semantic shortcuts indicate to them is the one that you're presumably asking. It's not an inherent bias or stupidity, it's a short cut that gets them through most instances they've encountered, and one that they will continue to use until some out-of-range responses require closer attention. Getting diverse, initial responses from members of a large, diversely bored or engaged audience should never surprise us.

For anyone asking a question, it's a key mistake to presume that the audience is sharing your semantic paradigm. There's many a slip 'twixt the ear & the interpretation, not to mention the calculated implications.

All this still doesn't tell us which came first, psychology of individual stupidity, or the non-scalability of some psychology-specific paradigms. Yet it does make us better aware of the distributed subtlety of our policy context!

For example, for non-psychologists, the article "Cognitive Sophistication Does Not Attenuate the Bias Blind Spot" needs a more generally useful title. The following seems more useful to a diverse aggregate. "If you ask sloppily phrased questions of audience members from diverse contexts, using questionable semantics, you'll get a broad range of initial answers." However, that title might not sell as many books for psychologists. That brings up the topic of willfully - not just innocently - broken semantics, i.e., Bernays propaganda.

As Max Planck noted, ~100 years ago, parsing & leveraging coherent information exchange depends upon adaptive selection of an optimal coordinate system for signal coding & decoding.

Where does this leave 312 million people trying to seamlessly fuse diverse, developing personal paradigms with an aggregate paradigm that is also dynamic and developing? Hopefully with one, starting reference which we can build upon as a bedrock principle. We're constantly mixing semi-static local semantics AND dynamic aggregate semantics. That's a problem mathematically inherent to every growing network, organization, culture or market economy. By not recognizing and mitigating that cost-of-coordination, we constrain our own rate of mobilization and limit our aggregate coordination. Bypassing our return-on-coordination is the primary cause of our ballooning Output Gap.

We don't have to wring our hands over imagined cognitive biases, or console ourselves that ignorance represents things "no one could have predicted." To reduce our Output Gap, we need to be comfortably aware that diverse semantics is a minor cost of a resilient culture. Comically, psychologists also know this task by another name, the "Fallacy of Composition*," which is more aptly named the "Fallacy of Scale." Nevertheless, more advanced solutions come not from psychology, but from comparing the perspectives of other "uniquely blind" professions groping the same context from different perspectives.

The common solution to selecting group intelligence, avoiding fallacies of scale, and coordinating degenerate semantics is just adequate Open Source information exchange.

For your info, this was & is widely discussed in biology, systems theory & neural/analog network fields too. Consensus is that no component can ever fully sample, know or wield all the knowledge available from it's aggregate. Therefore, "group intelligence" is always held in the body of group-wide discourse, and cannot possibly be expressed by any one citizen or subgroup.

Utility of group discourse is, of course, dependent on group practice, above all else.  If a group doesn't actively probe & explore situation & capabilities, it doesn't sample the possible mappings between the two and doesn't get good at actually doing the mapping.  And it never masters the adaptive use of dynamic semantics.   No practice, no semantic mobilization.
We only have to let American policy sample and know more of what Americans know. Yet tempo counts. Since national intelligence is held in the body of population-wide discourse, it's also clear that our national intelligence can wax and wane very quickly, with changing patterns, extent & sampling of group discourse.  Our group intelligence can also fluctuate regardless of how much insight or knowledge is stockpiled in un-leveragable subsets of the population. Like any other analog network, the genius of a democratic culture is very much a use-it or lose-it talent.

What does this all mean for the semantic mess confusing all discussions of fiscal, monetary and general policy?  Without first calling attention to context-dependent semantics, and static, local vs dynamic, aggregate context, it's impossible to have a coherent policy discussion.  That set-up paves the way for all subsequent discussion.

* example Fallacy of Scale: If one person stands up at a sports stadium, they can get a better view. Ergo, if everyone stands up, they'll ALL get better views! (False)

A call for more experimentation in early education.

In keeping with the need to identify and articulate challenges, the Open Operations Forum is now formally calling for participants in a nationwide process of accelerating EDUCATIONAL EXPERIMENTATION.  Early success will presumably be achieved by networks of existing home-schoolers.


We NEED hyper-mutation at the level of elementary school education, and throughout K-12 schools - and ways to regulate selection from it's output.

Why?

Because we do not have an adequate cultural-equivalent to a modern immune system.  A culture exists of immense entanglements of densely-engineered transaction chains.  Discriminating which parts of our own, randomly emerging variation harms vs helps ... is a parsing task that gets harder every day.

Not only are we slow to generate options and solicit change, we don't have adequate mechanisms to adaptively regulate & select early rudiments of emerging cultural immune processes.  Statistics alone dictate that most attempts at cultural protection will produce auto-immune stresses.  Experimentation goes nowhere without parallel improvements in the selection process.

Our present cycle is that some changes occur despite all efforts.  Some complain that the change is bad, and that change itself must be regulated.  Then we go off on a tangent about whether to change or not, and how fast or slow.  All irrelevant. We must always tune to changing context.  We need appeal to no higher authority, process or pace.

If sexual recombination generates the stem-cells (new humans) of any culture, then we can make a case that schools are analogous to the spleen or thymus. Education & training  develops the ability of kids to parse cultural-immunity (discriminating sense from non-sense) plus the ability to regulate tolerance limits - so that we actively generate adaptive cultural change, but don't shoot ourselves in the foot en mass.

Therefore, the key challenge for all evolving cultures is rate of developing methods for discriminating emerging variants [most of which are nonsense :) excuse the pun].  Parallel to system evolution, nested selection of "grading metrics" occurs apace - as value metrics & parsing catalysts.  We're always using old grading methods in attempts to select novel innovations.  How do we discover cheaper/faster/better ways to parse emerging group-variance for emerging adaptive value?  Answer, in the end, "we" can't change faster than our grading methods do.  And it starts in elementary, dear Watson.

Reacting to external change with {internal changes plus selections from internal changes} constitutes two, continuously emerging, parallel re-MAPPING tasks.  We're always remapping our selection criteria in order to remap ourselves to context, fast enough.  That involves co-optimizing two co-factor sets simultaneously in one polynomial.  


In short, we need education & training systems to turn out citizens who are increasingly prepared to quickly adapt to evolving demands - i.e., kids able to tune their traditions to context, as fast as needed, not just argue over the absolute need for change vs tradition.

Anyone who's discussed perturbation of & settling in analog computing networks is not surprised - but this core task is completely foreign to the bulk of our existing electorate, who will heatedly argue for hours based on personal allegiance to CONSERVING traditional, completely un-examined - & always partially obsolete - value maps, rating systems & grading systems!  Our net electorate is actually convinced that we mustn't change, and we're busy perfecting our ability to churn out more students of the same mindset!

Tradition can be a delicate, even taboo subject, just like national suicide.

Only in ritualized sports, orchestra, dance, theater, construction, etc do students routinely learn that, to succeed, everything has to continually change.  

Ironically, attention-seeking toddlers & adult Control Frauds both learn that the only way to personally "win" is willingness to break any & all rules [for personal, not group, benefit].  By actively selecting for the confluence of {personal success + group tradition}, we unwittingly select for increasing cultural fraud as the ONLY possible outcome.  This Catch-22 insanity starts in schools, and is most easily prevented there.

The best way to change that may to continually change the education system at a faster pace, so that "components" in our electoral analog-computing-network become increasingly more flexible, adaptive & thereby resilient.  Not too much, but enough to meet emerging demands of group context.  We need neither too little nor too much change, but we always need change tuned to both the magnitude & pace of changing context demands.


Return-on-coordination trumps all other returns, by far.  It's why evolution works, and social-species dominate.


Therefore, the goal is to continually re-map growing sets of dynamic tolerance limits to dynamic context.  To manage the exponentially growing inter-dependencies that come with cultural growth, students must be comfortable constantly & quickly trading SOME local options for SOME group options that produce net benefit.  That means being less fixated on personal success, less wary of group change, and hence better able to pursue emerging return-on-coordination.  We need to change, in order to actively select for more, not less, cultural resilience.  We ALWAYS need to change how we train our kids, so they're even more resilient than we were.  To do that, we need to explore & select from training options - faster.

Below is just ONE of endless examples why:

Roger Erickson, May 2012; mmt-discuss

Subject:  re: painful to watch - Ron Paul vs Paul Krugman video debate 

 it's like a re-enacted debate between Ptolomeic vs pre-Copernican physicists. 

Americans shouldn't let Americans settle for archaic philosophies OR operations!
   ...
Ok, I'll extend my original statement. RP doesn't understand fiat monetary systems, PK doesn't understand banking operations, and OUR ELECTORATES DON'T KNOW THE DIFFERENCE!!!

This is a sad commentary on complex, human cultures. How much complexity can be constrained by remarkably pinheaded constraints? Every system has it's bugs. We've identified one permutation. It's not the only one that emerges entirely as a cultural phenomenon, "in the cloud" so to speak. Something has to be recursively placed in our educational system to provide future generations a bit more immunity to this form of cultural auto-immune disease.

Currency & Monetary Operations, And How To Use Them.

This blog kicks off with three questions, addressed in successive posts.

1) What are monetary operations, and

2) what are they for? [We forget, and even forget to ask.]

3) How do we seek a general method for answering those unending questions, and keeping emerging monetary Q&A meaningful to all.

As you'll see, these questions can't be separated, only revisited in a useful, variable sequence.

Initial answers, up front are, respectively:
bookkeeping;
for accelerating cultural growth; and
by simultaneously optimizing [people+nation], not either separately.

Some needn't read any further.

For the less astute here is post #1, what is money and what are monetary operations?

Money, or "currency," is what people use to denominate distributed transactions. It's that simple. If you have no need for widely separated transactions, then you have no need for currency. Adam & Eve didn't mention currency, just fig leaves. Who knows what they were really hiding.

In small groups, organization can track affinity bonds, and currency can be considered to be "backed" by Central Stores of arbitrary commodities. Yet as separation between transactions scales - with population size and/or market complexity - currency becomes a more distributed form of bookkeeping. A currency transition occurs, from primarily a store of local value, to primarily a unit of account for coordinating widely separated events in increasingly complex transaction chains. Transitions occur because net value to an organized group trumps any local definition of value. Strategic, organizational agility can't co-scale with population without a transition to fiat currency methods.

Someone smarter can always take your Central Stores, whether your men, your women, your horses, your gold, or any other commodity.  Therefore, currency is always backed by group initiative. Affinity bookkeeping can't scale with population, so organizational state requires more distributed logistics accounting. In larger populations, currency must be backed more & more directly by distributed public initiative.

"Why is state money better than gold?” Because the highest return is always the return-on-coordination. Scaling up ability to explore large-group options requires scalable large-group agility and scalable large-group intelligence & coherent alignment to emerging options. That's the same reason that species & armies are never resource constrained. The biggest constraint is always organizational ability. That means that only state-money denominations are agile enough to keep up with the kinetic demands of uncontrollable public initiative. Commodity-money was thoroughly tested, and was found inadequate. Its valuation has to be constantly re-scaled, simply because populations & their options scale faster than the magnitude of any commodity store. If that’s the case, just simplify and cut the commodity out of the re-scaling loop that links organizational ability to group outcomes.

Currency concepts differ for local-, mid- and broad-minded people. Minds-in-training start with personal transactions, while experienced minds also consider nationwide coordination. Somehow, that spectrum sums to a coordinated whole greater than the sum of it's parts.  It's no wonder that Ben Franklin, an early proponent of the return-on-coordination, was also an early student of fiat currency. For now, let's just agree that money or currency tends to mean different things to different people in different stages of their development.

To review the history of money, there are no better places to start than Wray's book Understanding Modern Money [a historical guide]. and Graebers book Debt: The First 5000 Years.