THE MACRO ECONOMICS PROBLEM
By Karl Arnold Belser
28 June 2015



I have mentioned several times in my blog posts that central control may have system problems because the creativity of individuals in society are in many cases undermined by government attempts to manage a particular situation.

The common core educational mandate is a good example because it encourages teachers to teach to a test rather than teach for understanding and application to real life. Many good teachers have left teaching because they do not have the freedom of action to innovate. As a result American students do not score well on the OECD competency tests called PISA. See my post  Financial Literacy.

Another example is how the United States government bailed out the banks and Congress by not letting the individuals who caused the sub-prime loan crisis receive the consequences of their actions. The result has been that the rich have gotten richer and the rest of the population have suffered a loss of net worth. See my post Mental Models and world Economics.

The macro economic problem is: What governmental policy might limit actions in which it is unclear how the action works to achieve the aims of the  social contract?

I want to state up front that I am not a Libertarian (i. e. I'm not anti government). I am a control systems engineer who would like to understand how systems work and how to architect such systems for best operation. In this regard I am interested in 
public policy for the operation of society at large. My slow hunch is that it is impediments to micro and macro feedback that cause many problems.

The Essential Properties of the Engineering Mind-Set post from the Farnam Street blog has motivated me to try to better formulate the problem. Using this post as a guide the first question is: What should the government be doing and why? It appears that the president and congress are not clear on their purpose. Some want the rich to get richer and others want to fulfill the Social Contract as I describe in my post Future Politics.

I believe that the Social Contract is key for an effective government.

Social contract arguments typically posit that individuals have consented, either explicitly or tacitly, to surrender some of their freedoms and submit to the authority of the ruler or magistrate (or to the decision of a majority), in exchange for protection of their remaining rights.
 from Wikipedia

The United States is a constitutional republic, and if there is a social contract the the benefits and limitations must be spelled out in the constitution. The social contract aspects are only partially stated in the US constitution. Hence there is currently a significant political disagreement about what the government should or should not do.

The federal government currently uses tax money to manipulate public policy such as mandates and bailouts. It is not clear that any rights of individual citizens are protected by manipulating interest rates, mandating how teaching is done, or giving preferential treatment to banks or corporations that have been badly managed.  The government is currently not willing to enforce this kind of thinking and it is way to costly for individuals to sue the government in the name of preferential or ineffective action.

I think that the social contract should be explicitly written and incorporated into the US constitution such that actions that adversely effect individual citizens are at least brought to a national vote. 

The citizens United decision by the supreme court has given excessive power to corporations, labor unions or other special interests with a lot of money.  I don't think that the social contract applies to groups of people. Money can be, and I believe is, used to subordinate the representatives of the people of the United States. The Citizens United decision clearly  illustrates that the social contract is not adequately stated in the US constitution.

I expect to write more about this subject as I become better educated on public policy. What is clear is that better communications between the micro economics (the people) and the macro economics (the government.) must occur if the nation is to function well. The question is: How can these communication paths be enhanced?
   
Last updated June 29, 2015
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