Like most engineers, I don’t let the lack of much economic training get in the way of good economic philosophizing/debating, but I’ve learned a lot from their takes on economics and policy. I particularly like Arnold’s recent discussion of Patterns of Sustainable Specialization and Trade as part of the explanation for the current economic downturn. I don’t think it tells the full story–I think there’s still room for some of the “Austrian” business cycle thinking, and some of the insights that “Mish” Shedlock has given about credit’s often-misunderstood role in economics.

If you aren’t reading these blogs on a regular basis, I’d suggest doing so. These guys don’t agree on everything, and you probably won’t agree with them on everything, but you’ll probably agree that most of the conversation there is enlightening.

Figured I’d share.

Now, even though I’m pretty libertarian, I can at least empathize with the goal of not letting poor widows get screwed by unscrupulous privately-traded companies…but we put the people in the 90th and 95th and 98th percentile in this same category?  Sure, privately traded companies, and especially startups can be pretty risky–even in strong and growing industries.  But really these days, investing only in publicly traded companies is no guarantee that you won’t get screwed.  There are all sorts of ways investors are allowed to do financially suicidal things with publicly traded companies, but aren’t allowed to take any risks with privately traded ones, even if they’ve managed to build net worths of several hundred thousand dollars not counting equity in their primary residences.

I just wonder what the investment environment would be like if the accredited investment rules had a cutoff bar of $500k vs. $1M.  Not that it’ll ever happen, just surprised to realize how high of a bar current accredited investment rules really are for investment.

That is all.

Someone actually made a rap video that I not only watched all the way through, but watched again. Alas, the ending seems all too close to reality.

Of course, with all the news going on about NASA lately, a couple of comments that appeared relevant stood out, like this one (emphasis mine in all quotes below):

It is characteristic of political arrangements that they go on long after an observer from Mars might think that surely their defects are so patent that they have exhausted their capacity for survival.

and recent comments by Senator Shelby and Senator Nelson reminded me of this one:

The Special Interest State could get along quite well when it simply nibbled at the edges of the society and economy, snipping off a benefit here and there, and when the number of victorious interests was limited. But the combination of moral entitlement, multiplication of claimants, and lack of limits on each and every claim is throwing them into conflict, and rendering unsustainable the ethic of the logrolling alliances that control it.

The guiding principle is that no member of the alliance will challenge the claims of any fellow member. But this principle has a limit, in that unlimited claims cannot help but impinge eventually on each other.

Referring to Democrats (though legitimately you could make this statement about most politicians of either flavor):

The groups regard the economy as a commons, and each is determined to loot as much as possible for as long as possible, regardless of the long term.

Lastly this concept has been on my mind a lot lately:

Rauch’s recommendation does not take account of the expansionist nature of the Special Interest State, however. If the evolution cannot be reversed, and the tendency toward expansion cannot be checked, and if at the same time the arrangements cannot expand forever, then we seem to have a paradox, because what cannot go on must stop. If the evolution cannot be reversed, and mechanisms of gradual adjustment are lacking, abrupt tectonic shifts are the only alternative. Change will not necessarily be violent, though that is certainly possible, but it could be sudden. If one characteristic of political arrangements is to continue longer than one might think possible, another is that when they change, they change with amazing speed.

Of course, as he pointed out, bad political arrangements have a zombielike ability to keep moving long after they should by all rights be dead. As someone once said, “there is a lot of ‘ruin’ in a nation”, and I think the same can apply to any entity. So, while I may be one of those who is so talented that he accurately predicts “nine of the past three recessions” so to speak, I think that people assuming that things will always be thus, because they’ve been this way for a while are eventually going to be rather surprised.

That’s what I thought of (while simultaneously being glad that I wasn’t drinking anything at the time) when I read the following (quoted in this post):

Similarly, the philosophy that playing the game of business and investment without rules (the technical term is Laissez-faire Capitalism) has driven our government since the election of Ronald Reagan, and went on steroids during the last two years of the Clinton administration and throughout the Bush administration.

Now, I don’t disagree that we’re now paying for stupid bipartisan policies going back at least as far as “the Gipper”. I also ought to mention that I think that some of the things the author of the referenced blog post has written about the current economic situation have been spot on. I just don’t think that anyone in their right mind, who has any clue about economics, could claim that the US has been operating under a “Laissez-Faire” system over the past two decades. Heck, I’m not sure there’s ever been even a single year when the US operated under such a system in its whole existence.

An economic system that actively intervenes in a “pro-business” or “pro-investment” manner is not the same as one that is Laissez-Faire. Not even close. In many ways, we have the very mercantilist/corparatist economics system that most of the “Laissez-Faire Capitalists” wrote against.

So, while there’s plenty of blame for the current collapse to be found in greedy businessman, clueless Wall Street chearleaders, and conservative politics, there are also plenty of blame for liberals, well-meaning progressives, and even many of the existing regulations that both exacerbated, and in some cases created a false sense of security that helped lead to this mess.

Blaming the current economic crisis on “laissez-faire capitalism” makes as much sense as blaming droughts on purple elephants in Greenland. The two have nothing to do with each other.

[Note: for all the space readers who are sick of my non-space posts, I'll make sure I post at least two space posts before I venture another economics or politics post]

Basically, the book covers how democratic nations end up stagnating due to special interests, and the mismatch in incentives between special interests and the country as a whole. Greenspun gave an example of this mismatch:

There are a handful of automobile producers and millions of automobile consumers. It makes sense for an automobile company, acting individually, to lobby Congress for tariffs. The company will reap 20-40 percent of the benefits of the tariff. It doesn’t make sense for an individual consumer, however, to lobby Congress. It will cost him millions of dollars to lobby against Congress and preventing the tariff will save him only a few thousand dollars on his next car purchase. The economy suffers because some resources that would have been put to productive use are instead hanging around Washington and because cars are more expensive than they should be.

[As an aside, one could probably look at recent events in public-sector space programs, and find at least one or two similar examples.]

It’s eerie how prescient Olson’s work appears to have been. None of it seems to be particularly surprising, but it sure does explain a lot.

Me, I disagree a bit with both analyses somewhat.  I actually agree with the Democratic side up to a point.  I think that this if nothing is done, that this is probably going to be a multi-year protracted recession/depression.  Probably the worst one since the Great Depression itself.  The difference is that while Democrats look at this as proving that the government has to do something, I see this as a best-case scenario if the government is smart enough not to try “fixing” the problem.  You see, admitting that the current economic situation is dire doesn’t imply that there are some magic-wand fixes that will make everything all better.

As Michael Shedlock pointed out in an open letter on his blog to President Obama:

With all due respect Mr. President, it is impossible to spend one’s way out of a problem, when the problem is reckless spending.

With all due respect Mr. President, you and Congress want to force banks to lend when banks (by not lending) are acting responsibly for the first time in a decade. Mr, President can you please tell us who banks are supposed to lend to? Do we need any more Home Depots? Pizza Huts? Strip malls? Nail salons? Auto dealerships? What Mr. President? What? And why should banks be lending when unemployment is rising and lending risks right along with it?

It is human nature to try to hope for easy outs to the consequences of one’s foolish actions. And quite frankly, both sides of the aisle have been leading us to this current situation for at least 10-15 years. I’m sure most drunks would love it if there were some pill you could just take that would instantly get rid of hangovers with no bad side-effects. I’m sure that college students cramming for finals wish there was some magical way that could make it possible to learn in one night what they should’ve been studying hard and paying attention to for a full semester (I’m sure they also wished there were some way they could go without sleep for long durations without it messing them up int he head). And everyone wants to find a magical way that saves them from the consequences of living beyond their means for over a decade (both individually, as well as voting for representatives that have the government living well beyond its means). I think the sooner people realize that just throwing trillions of dollars into all the pet spending priorities they already had isn’t going to solve the problem caused by two decades worth of profligacy.

Sure, if the government does nothing, we’re all screwed for a while. Unfortunately, that’s going to be the case no matter what happens.

I quipped under the Bush Administration that “I wish those who keep insisting on failing to learn from history didn’t have the power to force the rest of us to share in their remedial lessons”.  While I have to admit I was actually pleasantly surprised with Obama’s actions during his first few days in office (regarding issues like torture, Guatanamo, and foreign policy), I get the feeling that this time around the block I’ll get to sit in on other peoples’ remedial economics lessons.

My kids bought me an insurance company! Sweet children: they don’t even have jobs yet.

I’m really looking forward to helping pick up the tab for the past several decades worth of government fiscal mismanagement in this country.

But not to worry folks!  Our plucky moose-hunting Reformer (and incidentally that old guy on the ticket, who I hear may have been a POW for 5 years) will save the day!  With one snap of the fingers those mavericky mavericks will clean up the government, end earmarks, get the oil drills going, and usher in an era of such economic prosperity that it will be able to balance the budget while slashing taxes and having enough money left over to start up some wars with countries that looked at us funny.

Or we could be rescued by the candidate of change, who will swoop in, and…and…do something!  Something different than Bush and that old guy on Palin’s ticket!  Something so hopeful and changey that budgets will balance, sea levels will lower, there will be health insurance in every pot, and billions more will be freed up for malinvestment in our public education system.

I mean, with such awesome choices presented to the American people, what’s the worse that can happen?

Last week, I was asked to do a remote guest lecture for a university course on space development (being run by Dr Livingston). It was somewhat flattering to be grouped in the same category as much more experienced space technologists, pundits, and businessmen such as Dennis Wingo, Michael Kelly, Jeff Foust, and others. As part of the presentation on developing reusable orbital transportation, I discussed a short list of orbital space transportation approaches that I felt were the most promising directions for development.

So, over the next several weeks, I want to take a little bit of time to introduce and discuss some of those proposed approaches for reusable orbital transportation. Now, a lot of this may be a boring rehash for fellow engineers and technologists, but hopefully I can provide some useful discussion for those coming to this industry from non-engineering backgrounds. I’m planning on discussing the basic concept behind each approach, the potential pros and cons, the unknowns that need resolving for said approaches, and some thoughts on incremental development methods for resolving those unknowns. I may also go into some of the other topics I discussed such as my ideas on reusable transportation markets.

My goal is to provide a basic understanding of where we are, what we think some potential solutions might look like, and an understanding of some of the more probable paths that could take us from here to there (technologically). With that information as a background, it will hopefully make it easier to discuss how business, financing, and government policy issues tie in with the technological situation.

Hopefully I’m not biting off more than I can chew.