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Global Economy – A Control Theory Story

Listen, I know the title is dull as all hell, but sometimes I must pretend I’m an adult. Well, enough of that.

To preface, even though I might look boring, I’m no economist. I know severely little of the topic of economics, as my bank account can testify. This text is written from the view of an automation/control engineer, but is written in plain English.

That doesn’t mean it won’t be extremely boring to read, but I have done what I can to make it fun. If that fails, make no mistake, I have no sense of humor! But in the end, I hope it will serve as a nice allegory (I think I’m using that word correctly) to see my view of globalism and economy, and maybe even make you smile. The last one is by far the most important to me.

Although I have no formal education in economics, I do not have an informal education in economics either. That being said, I am very aware of the amount of bullshit a person can get away with by simply pointing to their education and say “Hey, look at this! I’m correct now.” This is a reason to take what I say with a grain of salt, but is also partly the basis for my ire with economics at large.

“Global Economy” simply means the outcome of multinational organizations, like the EU or the World Bank, having power to tell countries how they should trade with one another, or organize their own economic structure. Basically, controlling the economies of the countries that are members.

So, on to the topic!

Politics, war, immigration, health, jobs.
If you read the news, odds are these are the topics you are concerned about at the moment.

Immigrants are coming for your job or for the social benefits of your country, you’re concerned that the political climate is not in your favor, you’re worried about too much fat in your diet.

You’re at the gym trying to get your body in shape to look like what a fashion industry has suggested you look like this season (an industry mostly ruled by women and gay men, so of course they know what straight guys find attractive).

All these factors indicate healthy skepticism concerning the world around you, after all, humans are evolved/programmed to look for problems. That’s how we thrive. Alas, there is a fault in our programming; we can only identify problems in the domains we understand. By problem, I mean identify that something is not working optimally and should be changed (like the stack of dirty dishes in my kitchen sink that have been there for weeks).

Our attention span is limited, so when we identify problems we are prone to look for answers, but not really concerned about if the problems are fixed or not. We mostly just want to satisfy our need to not think about it, and these days the internet is often the guru we turn to. We are biased in our search for answers so we are oriented towards articles/videos/texts in media/academics that tell us something that satisfies this need, something that calms us down, but not necessarily something that fixes the problem.

“That lump on my back is worrying, but after a couple of hours on different internet massage boards, it turns I’m only suffering from late-onset dwarfism. Thank lord it’s not cancer!

Other times, as is common in political discussions, we are looking to sources that tell us the other side is wrong, and that we are right. Again, this is just a symptom of the same problem, confirmation bias. A feedback loop that urges us to go with the flow, instead of trying to see things from a different perspective. This is a well-documented human defect.

And so,
the media outlets will have you believe that the world is mostly a safe place (or like Norwegian media, just copy anything they see in the American news without really checking sources), and that the problems you facing can be blamed on those who are currently in power, or RUSSIA (although there are whispers in dark alleys and between dusty bookshelves that, logically, current problems results from those who came before, as problems take time to fester and grow. But it’s best not to think too hard about that). And so you click the articles that you agree with and feel justified in the process, and the media gets some cash. Ka-ching!

You’re sure that the politicians you vote for will bring more prosperity, and that the immigration will stop or at least slow down, or that the immigrants are all decent people that bring cultural enrichment to your society because a person said so. Odds are, these days, that person is waving a rainbow-colored flag and shouting about whatever makes him or her popular in the current social paradigm.

Maybe you’re getting an education and the state has promised that there will be jobs for everyone, even though we are on the verge of the 4th industrial revolution and automation is continually taking over more and more jobs (google Japanese sex-robots).
You’re going to the gym every day, and the booty is coming along nicely. You post images to social media, hoping that when the likes start ticking in, self-doubt will be a problem of the past. At least, that’s what I do!
Or maybe you’re an alpha male that is going his own way, and you satisfy your need for sexual and physical connection through a continuous consumption of porn, the most popular hobby among modern men.

So, metaphorically speaking we opt for the drive-through instead of cooking our own meals, so to speak. In the long term, we are not really concerned with solving problems, we just want to get them out of our lives.

This brings us to something we should be worried about. A very big problem, again, based on the assumptions that:

1: We can only identify problems in the domains we understand.

2: We are prone to looking for answers to problems, not fixes, making us seek out sources (media, politicians) with answers (statements) and not solutions (actions).

3: We are quick to vilify “the other side” as the reason for our problems, or maybe put the blame on the current political power.

4: Our attention span is severely limited.

Based on these assumptions about humans, the following fact should terrify you:

We have no idea how the economy works!

No idea, whatsoever.

Sure, a lot of people are highly educated within the field of economics, and can predict market failures or crashes years before they happen.
Some people are highly gifted with the foresight to invest in industry or currency, and cash out immense sums of money when a bubble burst or a currency collapses. There are economies around the world that are on the verge of collapse, or totally collapsed, where banks or individuals decided to do what they do best; get more money. And so, they run away with the money, and the people of the country suffer (google “George Soros bank of England”, but wait until you’ve finished reading, of course).

In stock trading, there is a term called momentum, it signifies that a stock is going up, and that investing in it will be wise because a stock that has momentum generally keeps going up for a while. Some investment companies base their entire trade model on this simple fact alone. This should highlight what complexity we are talking about here. Economics is a field that is so complex that these models are used simply because they seem to work a lot of the time. Again, the model for their business is: “Hey! Look! It’s going up! Quick!! Throw the money at it!”. Just let that sink in.

The same problem exists elsewhere, like in medicine, which is another field we don’t understand. The drug Accutane is an anti-acne drug that was popular some years back. No one really knows how it works, they just know that it does something to your body that stops acne, but the side-effects can be anything from nothing to devastating depending on the person. The drug was promptly banned in some countries when it was evident that it leads to birth defects in babies (which is arguably worse than acne) when pregnant women use it, yet it is still available in a lot of places simply because we know that it does the job, even though it can also mess you up.

But medicine is a tiny field compared to the economy. Medicine is concerned with the human body, and controlling disease.

Economy, on the other hand, is the foundation of the entire global society. Economy is what every nation state around the globe base their political platforms on. “We have this much money, and here’s what I’m going to do with it!” – Every politician in the history of the universe.

Saying that we understand the economy is a lie. A lie bigger than any religion, bigger than any politicians promise, bigger than any corporate shill. This should be evident by the fact that nobody really seems to be able to predict the future of the economy. There is no long-term plan.

The other side of this lie is that you think your money has value.

It’s paper. It has no value by itself, unless we all agree that it has. You can trade money for goods and services, but money itself has no value. Yet, money is the dominating factor in every society.

Think of the average rapper, throwing 100-dollar bills in the air. I am willing to bet that your first thought is NOT:

“Oh boy! Look how many goods and services that guy can afford! He sure is capable of entering into a large amount of voluntary transactions in the free market economy!”.

Your response is probably more like:

“Rap is for suckers! I don’t watch rap music videos, Egil! :)”

We are under the assumption that we understand economics. We don’t. We are basing who we elect, which policies we like and dislike, what level of social security we want in our country, and many other things on this assumption. We know how the economy looks today, that is true, but understanding something involves being able to predict its future state indefinitely (Hard word alert! Indefinitely means: for any length of time).

Time and time again, politicians have emergency press conferences discussing tax breaks, inflation, interest rates and currency devaluation.

Yet experts and politicians make promises based on the assumption that we can predict the economy of the future! How can you predict the long-term state of the economy? You can’t, and here is why: (hold on tight, things are about to become extremely boring!!!)

To control a system, you affect it from the outside with an applied force.

For example, a ship can be steered toward an island or location by adjusting the rudder. A car can be steered on ice by turning harder than usual against the slippery road.

In most endeavors, we are reliant on some sort of control system to alleviate human errors, because humans are basically glorified monkeys walking around in fancy suits. We hang up pictures of Albert Einstein and like to think that we are something special, but alas, we are not. We are ignorant, dumb animals. And the people that pose on the platforms of politics are ignorant, dumb animals. I’m an ignorant, dumb animal. You are not, just saying! You’re cool and smart. But, the people that control our money are ignorant, dumb animals. So, ignorant, dumb animals are pushing an economic model that they don’t really understand, and that’s probably a bad thing. At least when that model is growing!

Make no mistake, I do believe that capitalism and the open market is one of mankind’s best inventions, but there is a drawback when things become bigger.

Economy started with: “You have something I want. Here, take my thing and give me yours!”. Money was introduced to be the grease that made trade more fluid, yet the grease has spilled all over the place and countries and companies are prone to slipping, dragging the people down in the process.

You must understand the system before you can control it.

Basically, there are three ways to understand and control a system:

#1) You either know enough about a system, with physics and math and its dimensions (size, weight, etc.), that you can formulate a model (usually done by the nearest available Asian), and from that model you know what “levers to pull” in order to control the system.

#2) Or, you must apply an input to the system, and see how the system reacts, and log the results. Do this enough times and you have enough data to control a system without really knowing the inner machinations (+1 point to me for fancy word!).  All systems have certain features or parameters that affect how you can control it, first and foremost time. For large and slow systems, a long time is needed to really find a proper control algorithm, because you must observe the system over a very, very long time. Now extrapolate that thinking to global economy! That system is gargantuan, way outside the scope of our understanding. Outside our ability to identify the problems (like corruption and sleazy dealings). But, it gets worse! Global economy is not linear or static, it’s a dynamic system that’s always changing. Which means that by the time you have enough data to control the system, the system itself has changed.

#3) Manual control, also known as Maggi-control. Reacting to events with very little warning in advance. This is the method that is used to control the economy.

Let me paint you a picture:

For control option #1) from above, imagine a Formula 1 driver. Going 200 km/h around a track. A track he has raced a thousand times. He knows all the ins and outs of the raceway, and executes his rounds with pinpoint precision.

For control option #2), envision a rally-driver. She’s speeding along, not very familiar with the surrounding woodlands, but she has a map-reader in the passenger seat. Together they make a great team, one telling the other of what to expect behind the next turn.

Now, let’s look at how the economy is controlled!

Control option #3):

Imagine Maggi. A 98-year-old, almost blind, deaf and severely demented, sweet old lady. She’s strapped in behind the wheel of a Japanese turbo charged Nissan Skyline. A brick is put on the gas pedal, and she’s off. She can see about 20 meters ahead, less after her glasses fall of, and in addition she’s color blind and can’t see the difference between the red and green lights in the upcoming intersection.
Now, imagine Maggi-control for the global economy, putting Maggi behind the steering wheel of a 8000 ton Steam locomotive going on full burn through the inner city railway system, and every country has its own wagon. In addition, some of the more wealthy and sinister passengers have gone to the front to mix drinks for Maggi (seat belts on trains suddenly doesn’t seem so stupid after all…).

So, how do you control a system that is too large, too slow, and too unpredictable to understand? Well, first you need to limit the system, or simplify it. You put certain restraints on it, saying that the system is only allowed to function under these restrictions. You then make an assumption about the system working under these restrictions, and try to control it from there.

Imagine a person trying to control an egg, placed atop a hill. It’s very hard, but he does it. Then another egg is placed atop the hill, and another. Soon, too many eggs are rolling down all sides, and you have an omelette. So, the person sets up barriers, saying that the eggs are only allowed to roll either left or right. You restrict the freedoms of the eggs, to control a larger system, hoping that the restrictions will keep the system in check. The eggs are angry, because they want their freedoms, and would like to do as they please, so the person instead introduces so-called “trade deals”, which are too complex for the average egg to understand, and has nothing to do with trade and everything to do with control. The eggs all agree that “trade deals” must be good, so they go along with it.

This, in a sense, is the model for global economy. You put certain restrictions on countries, because their own wishes and freedoms make them too hard to control. The EU is gradually pushing restraints on its members (just look at the recent constitutional referendum in Italy). What is even scarier is that the people deciding the restrictions are in large part non-elected, professional negotiators who are open to bribes (or as the media calls it, “lobbying”) by multinational corporations(Satan) and mega-banks(super-Satan). The American economist Thomas Sowell said it best: “People who enjoy meetings should not be in charge of anything”, but when super-Satan slips a million dollars into your pocket, meetings can become quite an enjoyable pastime.

You can argue for and against global economic restrictions. In one way, it is a type of global socialism, to try and force equal outcome to all parties by taking from the rich, and giving to the poor. On the other hand, it’s an oppressive system in its very nature, because different countries have different amounts of exportable goods, and suddenly these things don’t belong to the people any more. In addition, it’s based on the lie that we understand the system we are trying to control. In additional addition, the restrictions are often put in place to serve multinational corporations, and not the people.

An argument against global economy is to restrict globalization, making people have sovereignty over their trade deals by making them simple and easy to understand, making the economies smaller systems that are easier to analyze and control, and hopefully, less likely to blow up in our faces!

For let’s face it, if global economy becomes a reality, we are all going for a ride on the Maggi-train. Choo-Choo!