Discussing inventory problems and economic order quantity with a client today. Things like the classic “Newsvendor Problem” (sometimes called the “paperboy problem”). Immediately after, just starting reading an econ piece on stimulus effects, and whether they are systemic, specific or some of both. i.e. If we assume at least that there are some problems with fiscal or monetary stimulus, are those problems system wide (price inflation), or structural (everyone decides to invest in horseshoes instead of computers).

Largely because of the types of inventory problems (by which I mean challenges to be solved, not “problems” in the sense of inherent obstacles) we have discussed, stimulus and low interest rates lead to mal-investment (poor capital decisions). i.e. Inventory problems only exist because of inherent metaphysical constraints. There is not an infinite warehouse or floor-space (space constraints), you cannot have all the future supply of baked beans moved to today (temporal distribution problems).

These concepts of inventory, stimulus, and mal-investment are inextricably linked. You can’t do everything (resource problem), and you can’t do everything now (temporal distribution problem). The most attractive capital uses are the lowest hanging fruit. Owners or lenders of capital must decide “Do we invest in picking peaches, sewing jackets, or building green-friendly batteries?”  These decisions are based on which projects are assumed to be declining (gas street lamps) and which are increasing (software); on which have high profit or low profit returns; and the cost of borrowing funds versus the return from loaning funds. Capital decision makers will make decisions on the lowest hanging fruit at whatever the given expected interest rates and expected pay-offs are. Risky projects will be foregone, in order to begin with those projects predicted to have better pay-off and/or more certainty.

Introduction of more readily available funds and lower interest rates for borrowing can only mean reaching deeper into the barrel to grab dodgier projects that didn’t previously pass muster (or they would already be underway). Incentives away from savings hurt once, robbing capital for future projects. But they also hurt a second way, because they can only inevitably lead to increasingly higher risk, and/or lower pay-off projects.

-TEO

So, an unusual second post.

This is an open curiosity of what everyone thinks of the Bilderberg Group.

If you are unfamiliar, see:

http://www.telegraph.co.uk/news/newstopics/politics/7804197/The-Bilderberg-Group-fact-and-fantasy.html

This is the new blog site of The Economic Optimist.

I’ve been batting around this name for about two or three years now. This originated from a discussion where I described my sudden paradigm shift as I thought about the positives and negatives of being stuck in traffic. I had a brief scare today when I stumbled upon Matt Ridley’s book: The Rational Optimist. This came very close to nabbing my thought-only title. And it looks like the subject and theme of his book is exactly what I had in mind.

I immediately wish-listed Ridley’s book, and began considering if it was time to “make my move” in the sense of putting thoughts down for public consumption, and claiming my title. A quick Google search returns nothing permanent for “The Economic Optimist”. There appears to have been a one-off article by that title. I have heard feedback from several friends who have made note of some of my better Facebook posts – friends telling me I should start my own blog. Now it seems is that time. This blog will be primarily anonymous. It is not the purpose of the blog to be about me, but to “be” the persona of The Economic Optimist.

So, here, now, today, is the seed for The Economic Optimist. The general premise for this blog is that here, now, today, *IS* the Golden Age. There was never a time in the past, a “Golden Age” when things were better in some way – a time which we should somehow regret losing and wish to return to. This blog represents no Pollyanna. There are negative and even terrible things about the world now; and particularly, there are people who do not enjoy the fruits of today’s Golden Age.

This blog will go on to discuss when those terrible things began, relative to the roots of our current Golden Age. We will discuss the root causes, if they exist, for terrible conditions, as well as the best conditions, and why some people are currently surrounded by whichever one best describes their current ambient level of prosperity – and hopefully, what should be done, or what would best lead to movement of people from the terrible, and toward the best fruits of our current Golden Age.

This site will exist primarily as a means for me to capture thoughts in a more permanent manner. This blog will not be hyper-technical, but will lean toward the more philosophical. Reason before ratios, logic over logarithms, meta-physics over metrics, and epistemology over Euler’s constant. I hope to continually revisit each topic’s essay, with the goal of burning away the flaws in my own reasoning and writing. I may digress. Over time, I hope to craft the most articulate version that represents The Economic Optimists view on each specific topic.

-The Economic Optimist