6 ms·

This is certainly a wise parable. However, the way in which we routinely use stories of this nature from Communist countries as a source of kitsch hilarity leav

by DanI-S 15y ago

This is certainly a wise parable. However, the way in which we routinely use stories of this nature from Communist countries as a source of kitsch hilarity leaves a bad taste in my mouth. Mismanagement and the subversion of metrics to give the illusion of success happen universally, whatever economic system you live under. To some extent, it's human nature to game the system. By using these cliched examples, we're intimating that our society is somehow different. In reality, our atrocious metrics for success have caused us to spend the past couple of decades slinging fantastic financial rewards at those who have inadvertently sabotaged our economy in their hunt for ever-greater returns.

spindritf 15y ago
> By using these cliched examples, we're intimating that our society is somehow different. It is, the price system is fundamentally different. Even if those or similar processes take place within certain organizations (like large corporations or universities), most absurdities are largely confined to those organizations. And the examples from communist countries are great because they show where bureaucratically controlled economy leads, which is sometimes difficult to notice in systems where government's influence is more or less diluted.
- theaeolist 15y ago
  Yes, these absurdities only happen in large corporations, universities, hospitals, governments and other large organisations. Even though hot-dog stands and corner stores are free of such aberrations I'd still worry.
DanBC 15y ago
I'm uncomfortable with naming a nation. Especially with the US cultural thing of "polish jokes". But the article needs a nonsensical bureaucratic system, and CCCP communism provides an excellent example. I agree with you that a poor metric will do harm, and that there are plenty of examples in "western" manufacturing. (I used to work in electronic sub contract manufacturing, and I saw the nonsense that was ISO900x documentation.) Going further, there are a few things which need new names. "Mexican Bridge" - there's a four lane road bridge and politicians want to improve traffic flow so they remove the lines and paint more, turning it into a 6 lane bridge. That's a 50% increase in lanes, but now they are narrower and so there are more accidents. The politicians decide to go back to four lanes. That's a 33% reduction. Because they are politicians they call this a 50% - 33% = 17% increase. (This is from "How to lie with statistics", a great book with occasional uncomfortable language.) "Chinese Whispers" - the childhood game where one child starts by whispering a sentence to her neighbour, who whispers it to his neighbour, etc, and then at the end of the chain you compare the original with the final sentence. I've heard this called "Broken Telephone"; but no-one (in the UK) knows what I mean when I call it that. "Indian Giver" Louie CK does an excellent routine on this. And then there are other things which are fine, but which some people think aren't: "Nitty Gritty" (nothing to do with slave trading ships) "Chinese wall" (in business, no racist connotation) etc.
- spindritf 15y ago
  > I'm uncomfortable with naming a nation. This is the sort of a true lie ("prawdziwe zmyślenie") that accurately describes the situation in the People's Republic of Poland, no need to pretend otherwise.
nirvana 15y ago
"In reality, our atrocious metrics for success have caused us to spend the past couple of decades slinging fantastic financial rewards at those who have inadvertently sabotaged our economy in their hunt for ever-greater returns." This is exactly true, but it is also why these parables are relevant. The "atrocious metrics" you refer to were not created by the free market, but by the very same people who created them in the parable-- commissars. For instance, in 2001-2002, after the dotcom crash, I knew there was going to be a housing boom because the federal reserve made the cost of money lower than the rate of monetary inflation. (I didn't figure this out myself, though, but learned it from some wise economists.) Banks were incentivized to lend as much as possible, because a housing boom is what the commissars wanted (Paul Krugman wrote about it, for instance.) This created a lot of jobs and while it also created the real estate bubble and consequential crash, it was good for the Bush administration. The interest rates, the regulations on banks, and the inflation rate are all metrics created by the government. The low rates and high inflation are metrics that created a carry trade. The Clinton era changes in regulations[1] incentivized loaning money to people who could not repay it. Of course the FDIC, Fannie Mae and Freddie Mac are all government entities that distorted the market and created moral hazard. Simply eliminating the FDIC (but requiring banks to have deposit insurance) would have mitigated a lot of damage- the banks who were way over levered would have seen their deposit insurance rates go up, and thus be incentivized to not be over levered. It is not that our economy is immune to the impact of commissars. Our economy is ruled by commissars... we just pretend it isn't. If we want to eliminate arbitrary formulas like the ones in the parable, balancing the federal government (removing much of the need for inflation) and letting interest rates float in the market (rather than be controlled by the privately owned Federal Reserve corporation) would help. However, just like the situation in Communist era Poland in the parable, there are major political movements who think this is crazy talk and would like to spin these economic failings as proof that we need more commissars, not less. I can point to many members of both political parties in the USA who feel this way. [1] Early in the Clinton era there was a lot of muckraking about how banks were not loaning to ethnic minorities. This produced changes in the regulations. Later an independant study was done that controlled for the ability of the applicants to repay and found no bias. Bank weren't "greedily" refusing to loan to minorities, they were greedily loaning to everyone who could repay. The regulations, however, incentivized loaning even to people who couldn't repay, hence the boom & bust.
funkah 15y ago
I totally agree. Large, dumb firms in capitalist economies have many of the same bureaucratic inefficiencies and silly management theories. We tell ourselves that they'll suffer for it, but in reality they can become too big to defeat. Comcast and basically the whole US wireless telcom industry are good examples.

by DanI-S 15y ago

spindritf 15y ago

> By using these cliched examples, we're intimating that our society is somehow different. It is, the price system is fundamentally different. Even if those or similar processes take place within certain organizations (like large corporations or universities), most absurdities are largely confined to those organizations. And the examples from communist countries are great because they show where bureaucratically controlled economy leads, which is sometimes difficult to notice in systems where government's influence is more or less diluted.

theaeolist 15y ago
Yes, these absurdities only happen in large corporations, universities, hospitals, governments and other large organisations. Even though hot-dog stands and corner stores are free of such aberrations I'd still worry.

DanBC 15y ago

I'm uncomfortable with naming a nation. Especially with the US cultural thing of "polish jokes". But the article needs a nonsensical bureaucratic system, and CCCP communism provides an excellent example. I agree with you that a poor metric will do harm, and that there are plenty of examples in "western" manufacturing. (I used to work in electronic sub contract manufacturing, and I saw the nonsense that was ISO900x documentation.) Going further, there are a few things which need new names. "Mexican Bridge" - there's a four lane road bridge and politicians want to improve traffic flow so they remove the lines and paint more, turning it into a 6 lane bridge. That's a 50% increase in lanes, but now they are narrower and so there are more accidents. The politicians decide to go back to four lanes. That's a 33% reduction. Because they are politicians they call this a 50% - 33% = 17% increase. (This is from "How to lie with statistics", a great book with occasional uncomfortable language.) "Chinese Whispers" - the childhood game where one child starts by whispering a sentence to her neighbour, who whispers it to his neighbour, etc, and then at the end of the chain you compare the original with the final sentence. I've heard this called "Broken Telephone"; but no-one (in the UK) knows what I mean when I call it that. "Indian Giver" Louie CK does an excellent routine on this. And then there are other things which are fine, but which some people think aren't: "Nitty Gritty" (nothing to do with slave trading ships) "Chinese wall" (in business, no racist connotation) etc.

spindritf 15y ago
> I'm uncomfortable with naming a nation. This is the sort of a true lie ("prawdziwe zmyślenie") that accurately describes the situation in the People's Republic of Poland, no need to pretend otherwise.

nirvana 15y ago

"In reality, our atrocious metrics for success have caused us to spend the past couple of decades slinging fantastic financial rewards at those who have inadvertently sabotaged our economy in their hunt for ever-greater returns." This is exactly true, but it is also why these parables are relevant. The "atrocious metrics" you refer to were not created by the free market, but by the very same people who created them in the parable-- commissars. For instance, in 2001-2002, after the dotcom crash, I knew there was going to be a housing boom because the federal reserve made the cost of money lower than the rate of monetary inflation. (I didn't figure this out myself, though, but learned it from some wise economists.) Banks were incentivized to lend as much as possible, because a housing boom is what the commissars wanted (Paul Krugman wrote about it, for instance.) This created a lot of jobs and while it also created the real estate bubble and consequential crash, it was good for the Bush administration. The interest rates, the regulations on banks, and the inflation rate are all metrics created by the government. The low rates and high inflation are metrics that created a carry trade. The Clinton era changes in regulations[1] incentivized loaning money to people who could not repay it. Of course the FDIC, Fannie Mae and Freddie Mac are all government entities that distorted the market and created moral hazard. Simply eliminating the FDIC (but requiring banks to have deposit insurance) would have mitigated a lot of damage- the banks who were way over levered would have seen their deposit insurance rates go up, and thus be incentivized to not be over levered. It is not that our economy is immune to the impact of commissars. Our economy is ruled by commissars... we just pretend it isn't. If we want to eliminate arbitrary formulas like the ones in the parable, balancing the federal government (removing much of the need for inflation) and letting interest rates float in the market (rather than be controlled by the privately owned Federal Reserve corporation) would help. However, just like the situation in Communist era Poland in the parable, there are major political movements who think this is crazy talk and would like to spin these economic failings as proof that we need more commissars, not less. I can point to many members of both political parties in the USA who feel this way. [1] Early in the Clinton era there was a lot of muckraking about how banks were not loaning to ethnic minorities. This produced changes in the regulations. Later an independant study was done that controlled for the ability of the applicants to repay and found no bias. Bank weren't "greedily" refusing to loan to minorities, they were greedily loaning to everyone who could repay. The regulations, however, incentivized loaning even to people who couldn't repay, hence the boom & bust.

funkah 15y ago

I totally agree. Large, dumb firms in capitalist economies have many of the same bureaucratic inefficiencies and silly management theories. We tell ourselves that they'll suffer for it, but in reality they can become too big to defeat. Comcast and basically the whole US wireless telcom industry are good examples.