The Glooper

We had some debate at our house yesterday, following my post about Terry Pratchett’s Making Money, with a highlight of the book’s low-tech economic modeling machine, the Glooper. Both my sons, Economic Sphere and Political Sphere, thought I was wrong to recommend that you never use economic modeling. I didn’t believe I had said that; I certainly hadn’t meant to. But if they both understood it that way, then clearly I needed to clear up that paragraph. 

I ended the post with this: 

In the future, it would be wise, in our world, to remember that economic predictors can be counted on for accuracy just about as much as Hubert and his Glooper—if they have put as much careful thought into the correlations as Hubert has. Trusting the experts—ever, under any circumstances—to know better how to spend your money (or whether to keep it in your sock or mattress) is never a good idea. Good rule of thumb. 

There are two separate points there. First, economic predictors are frequently inaccurate, requiring careful thought about correlations between behavior, actions, and reactions among consumers, lenders, investors—people involved in economic activity. A model is more accurate when it accurately takes into account the almost infinite number of factors involved.

Second, inaccuracy being generally true, trusting decisions on how you spend your money to centralized government “experts” is a bad idea. I did not clarify at that point that I was referring not to economists in general but to centralized economic planning, thus the misunderstanding.  

I like the idea of economic modeling; I am delighted by the ingenious representation of it that is the Glooper. In our world economic models are now pretty much all mechanized on computer. They have their uses both on the macro (whole economy) level and micro (your personal financial planning decisions) level. We have a trusted financial planner, and we’re hoping Economic Sphere will gain experience to step into that role for us at some future point. 

What I don’t want is for the administration to use a highly inaccurate (typically Keynesian) model, and then act on that using our tax dollars and future debt in an effort to make changes. EVERY time they do this, they cause negative unexpected consequences. 

I briefly compared economic modeling to weather forecasting yesterday, and I’d like to expand on that a bit. Weather forecasting is getting better all the time. Computers help. Finding patterns, based on actual measurements, and comparing to what has happened in the past is helpful but not flawless. Usually meteorologists can tell us, “There’s a 30% chance of rain this afternoon.” What we want in information that will help us decide, Should I bring along a jacket or umbrella? Should I wear suede shoes today, or would I be safer with the aging leather? Can we count on the kids’ baseball game, or are we going to get rained out? When I travel, should I pack warmer or lighter clothes? 

What the weather report gives us is data. Then we can use that data to make our own decisions. I’m even glad we have the national level of weather predictions (macro level). When we first moved to Houston, weather was exciting and new. We had lived nearly a decade in a place where 330 days a year the prediction was “fair and sunny.” We didn’t even have a local weather station. We relied on one over the state line to a town an hour away. We didn’t need more accuracy, because time of year plus “fair and sunny” was about all you needed to know—except on the rare winter ice storm days. When we got here, the kids were glued to the Weather Channel. Rain was frequent, steamy, and voluminous. We had a tropical storm with six inches of rain within a month of arriving. And if you didn’t like the weather, it would change in an hour or so. We were glad the weather service was there to give us some clue in our weather-related decision making. 

But what I would not want would be some central weather center trying to control the weather—or my behavior. What if they decided that fair and sunny with a brief weekly rain was ideal, and so they worked toward that end? What if they believed that taking an umbrella had an effect on weather—or inverse effect; i.e., if people bring an umbrella, they won’t need it, so on the assigned rain days, we must require everyone to leave their umbrellas home—hats and hoods will be permitted in some locales? They may not know my personal sensitivity to heat and cold. They may not know my transportation and parking situation. They may not know my plans for various times of the day. But that doesn’t matter, because they will make decisions for us that will benefit the highest number of people. [Please don’t let this suggestion get to Washington, or it might become reality.] 

This is essentially what is happening when central economic planners decide to control the boom and bust cycle with artificially low interest rates (or loose lending policies), stimulus spending, or bailing out failing businesses, thus keeping capital involved in unsuccessful ventures so that it is not available for better uses. 

It so happens that yesterday a new central economic planner was announced, Princeton professor Alan Krueger. He will replace Austan Goolsby as White House Council of Economic Advisors Chairman, who replaced Christina Romer, who was chosen by Obama upon his election 2 ½ years ago. (There is a team of advisers; only Tim Geithner remains from the original team.)  

When Goolsby announced in June his intention to step down, Obama complimented him with this fiction:  

Over the past several years, he has helped steer our country out of the worst economic crisis since the Great Depression, and although there is still much work ahead, his insights and counsel have helped lead us toward an economy that is growing and creating millions of jobs. He is one of America’s great economic thinkers. 

Seriously? In what alternate reality? In Pratchett’s Discworld, there is a theory in vogue at Unseen University, summarized by Mr. Bent to Moist von Lipwig, that there are  

…an infinite number of universes, in order to allow everything that may happen a place to happen in. This is, of course, nonsense, which they entertain only because they believe words are the same as reality. Now, however, I can disprove that theory, since in such an infinity of worlds there would have to be one where I would applaud your recent actions and, let me assure you, sir, infinity is not that big! 

Yes. Given the opportunity, I would like to say those very words to our current tyr…er, uh, president.

Making Money

After the long, rather serious series on Israel (six parts, August 11 through August 26), I thought we’d do some light economic modeling today. 

Actually, I’m just going to give an update on my Terry Pratchett reading. While I was out of town, I finished reading Going Postal (as well as the 3^rd in the Fablehaven series—both of which I reviewed August 9th). So my son Economic Sphere, who is a big Terry Pratchett fan, loaned me the next Discworld book, called Making Money.

This time criminally minded Moist von Lipwig, who is bored with the now smooth running postal system, is tasked with reforming the banking industry of the semi-civilized city of Ankh-Morpork. 

Pratchett made mailing letters in his mythical place hilarious (I typed up nine pages of quotes that I had to keep for future amusement). So I think we can trust him to keep the more naturally funny economics world lighthearted. I’m only a third of the way through the story so far, so today is just sharing a few of Pratchett’s takes on the economic sphere. [Don’t worry about the length of today’s post; it’s mostly quoting Pratchett’s book and reads more quickly than you wish it would.]

Moist is taken on a tour of the inside of the Royal Bank of Ankh-Morpork by an official named Mr. Bent—a bean counter (in this case, a coin counter) of impeccable skill, who vigorously defends the gold standard:  

           “It is the metal that never fell from grace…. And it is also the only basis of a sound financial system,” Mr. Bent went on, while the torchlight reflected from the bullion and gilded his face. “There is Value! There is Worth! Without the anchor of gold, all would be chaos.”

            “Why?”

            “Who would set the value of the dollar?”

            “Our dollars are not pure gold, though, are they?”

            “Aha, yes. Gold-colored, Mr. Lipwig,” said Bent. “Less gold than seawater. Gold-ish. We adulterated our own currency! Infamy! There can be no greater crime!” His eye twitched again.

            “Er…murder?” Moist ventured….

            “Mr. Bent waved a hand. “Murder only happens once,” he said, “but when the trust in gold breaks down, chaos rules. But it had to be done. The abominable coins are, admittedly, only goldish, but they are at least a solid token of true gold in the reserves. In their wretchedness, they nevertheless acknowledge the primacy of gold and our independence from the machinations of government! We ourselves have more gold than any other bank in the city, and only I have a key to that door!”

            .…”I read somewhere that the coins represent a promise to hand over a dollar’s worth of gold,” said Moist helpfully.

            Mr. Bent steepled his hands in front of his face and turned his eyes upward, as though praying.

            “In theory, yes,” he said after a few moments. “I would prefer to say that it is a tacit understanding that we will honor our promise to exchange it for a dollar’s worth of gold, provided we are not, in point of fact, asked to.”

            “So…it’s not really a promise?”

            “It certainly is, sir, in financial circles. It is, you see, about trust.”

            “You mean, trust us, we’ve got a big expensive building?”

            “You jest, Mr. Lipwig, but there may be a grain of truth there.” Bent sighed. “I can see you have a lot to learn, and at least you’ll have me to teach you: (pp. 36-37). 

During the tour of the Mint, Moist learns that it costs slightly more to actually coin the money than the money it represents, which is maybe the reason he is needed. He has a confusing conversation with the Mint workers about it and follows up with a debate about the relative values of gold and apples. Later he has a similar discussion with a news reporter.            

I have a section of Spherical Model, Free-Enterprise vs. Controlled Economy that covers what is wealth, and what is money (not quite as funny as Pratchett's). Money is an arbitrary, agreed-upon representative of work, to allow for easier trading of wealth (results of work, built up). Moist is going through the same thought process. I don’t actually know yet where Pratchett will come down. In our house there’s some debate about whether the gold standard is the sanest approach, or whether fiat money could work—if you could strictly align the creation of money to the creation of actual wealth, possibly equivalent to the annual GDP or some other measure. If that were possible, the dollars in circulation would actually represent work accomplished better than gold-backed dollars would. Of course, the system we use doesn’t resemble an attempt to represent wealth much at all. It’s more like the “trust us; we have a big building but don’t actually turn in the money for gold” version that is paralyzing the economy in Ankh-Morpork. 

One thing I haven’t covered in my discussions much is economic modeling. I understand that making predictions is one of the functions of economists—sort of like meteorologists; accuracy would be nice, but isn’t necessarily expected. Pratchett’s low-tech description of economic modeling in the bowels below the bank are better than I could come up with to describe such modeling, and possibly all you ever need know: 

           Water gurgled, sloshed, and yes, glooped along glass tubing. There was a smell of salt.

            Bent nudged Moist, pointed to an improbable wooden hatstand, and wordlessly handed him a long yellow oilskin coat and a matching rain hat. He had already donned a similar outfit, and had magically procured an umbrella from somewhere.

            “It’s the Balance of Payments,” he said, as Moist struggled into the coat. “He never gets it right” There was a crash from somewhere, and water droplets rained down on them. “See?” Bent added.

            “What’s it doing?” said Moist.

            Bent rolled his eyes. “Hell knows, Heaven suspects,” he said. He raised his voice. “Hubert? We have a visitor?”

            A distant splashing grew louder and a figure appeared around the edge of the glassware.

            …. “You’re not seeing us at our best, Mr. Lipwick,” he said.

            “Really?” said Moist.

            ….“No, we’re so close to perfection, you see,” said Hubert. “I really think we’re nearly there…”

            “Mister Hubert believes that this…device is a sort of crystal ball for showing the future,” said Bent, and rolled his eyes.

            “Possible futures. Would Mr. Lipstick like to see it in operation?” said Hubert….

            “The Glooper, as it is affectionately known, is what I call a quote ‘analogy machine’ unquote. It sovles problems not by considering them as a numerical exercise but by actually duplicating them in a form we can manipulate: in this case, the flow of money and its effects within our society becomes water flowing through a glass matrix, the Glooper. The geometrical shape of certain vessels, the operation of valves, and, although I say so myself, ingenious tipping buckets and flow-rate propellers enable the Glooper to simulate quite complex transactions We can change the starting conditions, too, to learn the rules inherent in the system. For example, we can find out what happens if you halve the labor force in the city, by the adjustment of a few valves, rather than going out into the streets and killing people.”

            …. “It certainly looks very…complex, this thing of yours,” said Moist, striking out for normality.

            “Er, yes,” said Hubert, a little bit thrown. “And we are refining it all the time. For example, floats coupled to ingenious spring-loaded sluice gates elsewhere on the Glooper can allow changes in the level in one flask to automatically adjust flows in several other places in the system— …. And we’re adding fresh influences all the time. Indeed, I will not be satisfied until my wonderful machine can completely mimic every last detail of our great city’s economic cycle!”

            Something clanked, and colored waters began to foam and slosh along the bigger pipes. Hubert raised not only his voice but also a long pointer.

            “Now, if we reduce public confidence in the banking system—watch that tube there—you will see here a flow of cash out of the banks and into Flask 28, currently designated “The Old Sock Under the Mattress.’ Even quite rich people don’t want their money outside their control. See the mattress getting fuller, or perhaps I should say…thicker?”

            ….”Now see how bank lending is emptying as the money drains into the Sock?” Gurgle! “Watch Reservoir 11, over there. That means business expansion is slowing…there it goes, there it goes…” Drip! “Now watch Bucket 34. It’s tipping, it’s tipping…there! The scale on the left of Flask 17 shows collapsing businesses, by the way. See Flask 9 beginning to fill? That’s foreclosures. Job losses is Flask 7…and there goes the valve on Flask 28, as the socks are pulled out.” Flush! “But what is there to buy? Over here we see that Flask 11 has also drained…” drip

            Except for the occasional gurgle, the aquatic activity subsided.

            “And we end up in a position where we can’t move because we’re standing on our own hands, as it were,” said Hubert. “Jobs vanishing, people without savings suffering, wages low, farms going back to wilderness, rampaging trolls coming down from the mountains—“

            ….”You believe all that could really happen?” said Moist. “A bunch of tubes and buckets can tell you that?”

            “They are correlated to events very carefully, Mr. Lipswick,” said Hubert, looking hurt. “Correlation is everything.”…. “I just can’t get rid of the leaks,” said the little man, looking crestfallen. “I’ll swear that every joint is watertight, but we never end up with the same amount of water that we started with.”

            “Of course not, Hubert,” said Moist, patting him on the shoulder. “And that’s because you’re close to achieving perfection!”

            “I am?” said Hubert, wide-eyed.

            “Certainly. Everyone knows that at the end of the week you never have quite as much money as you think you should. It’s a well-known fact!”

            …. “Now demonstrated by the Glooper!” Hubert breathed. “I shall write a paper on it!”

            “Or you could write it on paper!” said Moist, shaking him warmly by the hand. “Okay, Mr. Bent, let us tear ourselves away! (pp. 62-67). 

Indeed! Economics is so much fun, it is hard to tear ourselves away. At least the way Pratchett describes it in Discworld.  

In the future, it would be wise, in our world, to remember that economic predictors can be counted on for accuracy just about as much as Hubert and his Glooper—if they have put as much careful thought into the correlations has Hubert has. Trusting the experts—ever, under any circumstances—to know better how to spend your money (or whether to keep it in your sock or mattress) is never a good idea. Good rule of thumb.

A Little Light Reading

I clipped this quote back in the summer of 1999; it relates to today’s post. 

At the dawn of time, Truth was wandering the world when she came upon a town and first saw people. Delighted, she entered the town to speak to them, but when they saw her, they ran away screaming in terror.

Dismayed and discouraged, she left the town. Soon she came across the most beautiful being she had ever seen, clothed in lovely robes of shimmering color. The being noticed how sad Truth was and asked the reason.

“When I saw the people, I was glad because I had so much to tell them” Truth said. “But when they saw me, they were afraid and ran away.”

“Well, of course, they ran away,” the being said, “for you are naken and people are greatly afraid of the naked truth. My name is Story, and I have many of these beautiful robes. Here, take one and let us go into the town together.”

When the people saw Truth clothed in the beautiful garment of Story, they greeted her warmly and asked her to stay.”

—A folk tale adapted by Tom Burger, 1999 

Much of my writing these days is pretty straightforward “naked” truth. But I often think of this quote. Sometimes I use analogies to get ideas across, or personal experience. Sometimes I use literature. I often use literature for gathering truth. 

Since it’s summer, I’ve been doing some light reading. I just picked up another Terry Pratchett Discworld book. If this is something you’re unfamiliar with, you might want to take a chance for a good laugh or two. My favorite Terry Pratchett is Good Omens, the apocalypse comedy [yes, you read that right] he co-wrote with Neil Gaiman (of Stardust novel and screenplay fame). But this particular book is from Discworld (a world that is flat and sits on the back of a giant turtle, if I recall the mythos of the series), called Going Postal. Pratchett is British, and who knows what his politics are, but as for skewering politics in general and human nature in specific, he is the master. 

A petty thief, Moist von Lipwig, gets hanged to within half an inch of his life (by a very skilled hangman), and then is offered the job of postmaster, as opposed to certain death. He takes the job. I am finding it necessary to carry around a stack of small sticky notes to mark things I want to remember, such as these: 

       There is a saying, “You can’t fool an honest man,” which is much quoted by people who make a profitable living by fooling honest men. Moist never tried it, knowingly anyway. If you did fool an honest man, he tended to complain to the local Watch, and these days they were harder to buy off. Fooling dishonest men was a lot safer and, somehow, more sporting. And, of course, there were so many more of them. You hardly had to aim…. 

       The world was blessedly free of honest men and wonderfully full of people who believed they could tell the difference between an honest man and a crook (pp. 17-18). 

As Moist settles in to the job that first day, he thinks, “What kind of man would put a known criminal in charge of a major branch of government? Apart from, say, the average voter” (p. 45). 

In the book, where semi-crooks inhabit the imagination safely, I am amused. If only Pratchett’s observation were less true in our world!

It was a book club day today, and we talked about a youth fantasy novel, the first of the Fablehaven series. I have since read book 2, and borrowed book 3 today from a book club friend—who has the whole set and promises that book 4 is the best. I expect we’ll put book 4 on our list for next year (even though I expect to finish the whole series in the next month or so).

I had hesitated to pick up this series. For one, I don’t right now have a young person in the house that the series is aimed at. Still, that was no hindrance for the Percy Jackson series (not very deep, but entertaining), and never stopped all of us from reading and re-reading The Chronicles of Narnia, The Lord of the Rings and The Hobbit, and the whole Harry Potter series. 

But I hesitated with this one, because I have come up against the occasional fantasy series that bores me—and I’m not easily bored. When a series has as a theme “you should use your imagination” or, worse, “you should follow your heart,” I roll my eyes. Sometimes an author’s imagination is really worth following, but sometimes it’s just an exercise, and it’s not mine. (Neverending Story, the old movie, was like that for me—sorry to those of you who loved it. Compare that to The Wizard of Oz, where the abundant creativity is a way of showing young Dorothy that there’s no place like home—to appreciate her black and white world and the people there who love her.) There’s nothing really harmful in developing imagination, but there’s not enough exploration of truly valuable human themes either.  

As for the “follow your heart” theme, note that these are usually aimed at teens. Think about it. How many teens do you know that are so Spock-like that their rational thought overrules their impulsive passions? Teens simply don’t need to be told “go with your feelings,” because that’s almost all they do. They need to be taught, “think it through; consider the consequences; wait and make a more informed decision.” So, that’s my little soapbox. 

Back to Fablehaven, a rather pleasant place to spend some summer afternoons. The two young people, Kendra and her younger brother, Seth, visit their grandparents—and come to learn of the fantastical world they preserve. Adventures ensue. But among the often humorous situations, Kendra and Seth are realistic characters, with definite tendencies, but believable thought processes. 

And here’s something there’s not enough of in literature for any age: everything they do has natural consequences. Even when they make mistakes that are unintentional, the consequences follow. Sometimes their grandparents are able to guide them through a process to overcome the negative consequences, but not always. They can’t just be magically bailed out at every turn. So their decisions are important. 

You can see their growth as they change from irritating each other to caring ultimately for each other and even risking their lives to protect each other and their grandparents. Kendra grows in bravery. Seth grows in thoughtfulness (although I suspect his growth is going to be strung out over several books). And their natural strengths—obedience for her, daring for him—are developed as assets, while they broaden and deepen other character traits.  

It was easy to care for these two young people, because they felt so real. And I appreciated the worldview of the author: family is important; choices have consequences; there is evil in the world, but there’s no reason to put it in your mind where the images will stay. Thank you, Brandon Mull. This is how is should be done.