Sunday, October 28, 2012

An Entirely Complete Systems Analysis of Poverty

Hahahha I wish. When I'm able to provide a full systems analysis of poverty(wishful positive thinking - yay for grad school!), you'll know it before it would ever appear on a blog post...

In Dr. Norm Becker's post, The Cost Of Inequality, he recognizes Joe Stiglitz's perspectives presented in his book "The Price of Inequality".  

5 Important Myths - as presented by Stiglitz & interpreted by me:

1. America is a land of opportunity:

  • Upward mobility of people is heavily dependent on the income/wealth of their parents.This concept is best expressed at the merger of two metaphors. 
    • This land of opportunity, has unequal spaces between the rungs on the ladder of success. The amount required to go from step 1 to 2 is significantly larger than 9 to 10.
    • This difference might be illustrated in Maslow's Hierarchy of Needs

2. Trickle-down economics works.

3. The rich are the "job creators"
  • The rich take their money where the returns are highest - and right now that's in emerging markets - like China.
  • The engine of our economy is the middle class.
  • Forbes - The Real Job Creators: Consumers, this is sort of a hot topic, and really ties in to trickle-down economics, and it's important to understand the context of the flow of currency. It's really easy to get into partisan politics here, and end up with great information that might be biased(Like the unnecessarily controversial Nick Hanauer TED talk).

4. The cost of reducing inequality is too great - and would destroy our economy.
"It doesn't much matter how you get your greater equality, as long as you get there somehow". (Richard Wilkinson in comparing Sweden & Japan; big government & low regulation)

  • This is Richard Wilkinson's TED talk on "How Economic Inequality Harms Societies". I have a lot of thoughts on the myth of "reducing inequality will destroy our economy", and when it comes down to it, I feel that the cost of NOT reducing income inequality is too high. 

5. Markets are self-regulating and efficient, governmental interference is a mistake.

  • 2008. see NYTimes Series: The Reckoning
  • I'm reminded again of Jane Jacob's "Systems of Survival". When conflict arises between the two systems of Governance and Commerce, it typically appears as a two party system:
    • Liberals:
      • At their best: Propose controls and regulations on business that promote prosperity, ensuring true sustainability
      • At their worst: Attempt to unite governance with enterprise, producing marginal efficiency, and low innovation.
    • Conservatives:
      • At their best: True free market, human enterprise, creativity and innovation.
      • At their worst: Ignores the values of global health and habitat, primary interest only their own agenda, eventually leading to collapse. 
After writing this post, I'm reflecting on the importance of this issue. As mentioned in my previous post, "Profit/Prosperity" play a crucial role in the movement towards sustainability. Everything requires some sort of exchange for services. With help from my Education team, we've really started to look at the systems in play within our current educational models, and (no surprise) money is a huge issue. "Access to resources" affects home life, educational institutions, policy writing, etc. 

Relating back to the first myth, "America is a land of opportunity", is something that I want to see. I truly believe that as everyone is able to have their basic needs met, a tipping point of innovation & creation will propel us into the future. There is an obvious parallel at the top of Maslow's Hierarchy and the concept of sustainability.

Sunday, October 21, 2012

Ethics and Utilitarianism

As an Economics newbie, studying Return on Investment(ROI) this week was fascinating. I think most people understand it conceptually by asking themselves, "Is this worth it?". 

Is it Worth What?

What does "worth" mean? In Dr. Norm Becker's blog post, "Why Do Thieves Steal Famous Paintings That Cannot Be Sold?", I'm reminded of utilitarianism, and how definitions of value and utility vary greatly from person to person. As we continue through our education @BGI our capacity to assign numerical numbers to values such as "carbon emission" or "lives saved" will grow. I do believe in the power of numbers, as we can utilize them to aid understanding of the context of our dying world.

And yet, I find myself thinking that these numbers will ever be truly "accurate", because value-systems are so amorphous. A thousand dollars very different things from one person to the next. 

This is important, because numbers matter. We need to do the calculations, we need to understand the picture, and numbers provide a context for that framework. In a digital picture, numbers might represent the amount of blue pixels contained. High values might indicate that the picture has a blue hue, but it doesn't go further than that. Just because a particular investment might have a positive cash NPV, doesn't mean it's the right decision.
The Valuation of Money

What a weird concept.  Particularly as the U.S. currency is described as "Fiat money". How do we assign "value" to something that is structured around a belief system. That said, I understand the importance of currency as a medium of exchange, and don't necessarily believe that a currency has to be "backed".

How do we value services? How much more are we willing to pay for "good" customer service? What's the value of hiring people who are currently unemployed? How much is a picture worth? Or a Christmas tree? What about solitude?

People, Planet, Profit

Something about the "Profit" aspect makes me uncomfortable. I think my personal term would be "Prosperity".

Prosperity manifests in many forms, financial, environmental, social, etc. Using the word prosperity also allows multiple value systems to determine worth. In industry, having prosperity on your bottom line, gives you the motivation to really increase your gains on all fronts! This includes financial prosperity, as not including capital within your business plan could be detrimental!

Macroeconomic Theories

It's funny, as I was researching the "lack of critical thinking" within our educational model, I stumbled across an article discussing the lack of critical thinking within multiple macroeconomic theories.

The summary? There is no such thing as perfect rationality in economics. Likewise the reliance on behavioral economics that people will make "predictably irrational behavior" is an oxymoron. The empirical approach to studying our economy takes place "between perfect rationality and equal incompetence". 

I've always been a believer of balance and context. Particularly when it comes to human behavior; Whether it's recognizing numbers in an ROI as simply setting the context for an investment, or acknowledging that BOTH nature & nurture play a role in development. By truly understanding the context of decision-making, we will be able to make the best and informed decisions.

Gregory Mitchell, the author of the article summarizes it well, "While this middle ground position makes general theory development more difficult, it illuminates ways by which the legal system may foster rational behavior or counter irrational behavior".

Mitchell, G. (2002). Why law and economics' perfect rationality should not be traded for behavioral law and economics' equal incompetence. Georgetown Law Journal, 91(1), 67-94,96-167,95. Retrieved from

Sunday, October 7, 2012

Setting the Context

I pick up the phone; a panicked mother has found her child not breathing. As I walk the mom through infant CPR, I verify her location using her cell phone’s GPS. I send the closest paramedic to their house. Next, I check to see if any police cars are closer to get this kid hooked up to an infant defibrillator. In emergency services, if any of numerous systems fail, it can mean the difference between life and death. My experience as a 911 dispatcher epitomizes the importance of functioning systems. For me, it highlights the imperative need for system change when any component is dysfunctional.

Fundamentally, I am passionate about system change in the face of dysfunction. The problems of our world are all intertwined, and a macro perspective is essential in solution design. Twelve years ago, I developed a long term strategy to gain that macro perspective and achieve my ultimate career goals. This blueprint included building a foundation of education and experience until age thirty, followed by fifteen years in business and intrapreneuership, then finally moving into the education realm. I have remained committed to this “master plan” and am convinced that BGI has created a curriculum and community that would provide me with the knowledge and skills needed to pursue the next step in reaching my goals. BGI is an institution that reinforces two of my most fundamental beliefs: that business plays an essential role in generating solutions to many of our current global challenges and that education is one of the strongest catalysts for innovative system change.

My intention is to use this blog to document my learning and understanding of how our economic context sets the stage for our world.

Consumption diagram
Reading through the NY Times series - The Reckoning, it's startling to learn about the systems that were in place, as well as the intricate manners in which each system influenced each other. It was a weaving of system vulnerabilities; mortgages, bad loans, insurance, credit derivatives, susceptibility to fear, credit default swaps... the list goes on. From my perspective, it's extremely fascinating to learn about, and it's terrifying. When I relate to system thinking, and the massive systems/sub-systems within our world, the challenge of identifying leverage points is something I'm really hoping to gain in my education and experience. 

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