Friday, September 05, 2008

Holidays and Financial Stability .

Holidays and Financial Stability .
Andre Willers
5 Sept 2008

Holidays , dearly beloved by any working stiff .

But why do we have them at all ?

Why have potentially productive workers idle ?

The key concept is “Reserves” .

Societies that have survived the stress of wars , droughts , floods and other disasters must have reserves . But they must also use their capital efficiently .
The balance between these two competing needs have been addressed in “Infinite Probes” , “Infinite Probes 2” , “Reserves” , etc

It was shown that the most efficient reserves lie in the range 27% - 37% , with an average of 33% .
(This is for Beth(0) random fluctuations . See “Orders of Randomness” and “Orders of Randomness 2” )

Three methods of Reserves are shown and one projected future possibility :

1.Holidays .
Workers on holiday are a reserve . In times of stress , they can be called into service .
“All hands to the wheel” (or pump as the case may be) .
For more , see appendix A below .

This has two major drawbacks :

2.1Changing an efficient system into an efficient one has a long lead time .
Your country can be overrun before you can get into gear (eg Russia vs Nazi’s and Russia vs USA )

2.2 Too much efficiency .
Goldblatt (“The goal”) showed decisively how the conglomerates of the 1960’s foundered on this reef .
They strived to make every component of a manufacturing line 100% efficient . But random fluctuations could not be prevented . Thus huge inventories of obsolescent parts built up between the manufacturing stages , hampering innovation and eating up capital in storage costs .

This was compensated for by “Just In Time” (JIT) processes . But now there was insufficient inventories to handle shocks like oil-price fluctuations , wars , etc .
Note that money (Capital) is just another commodity .

3. Futures markets.
Reserves in the future .
The futures markets evolved to handle this , but there is a fundamental difference in the lead-time for material commodities (ie oil , iron ,etc) and Money , which can move at electronic speeds .
The theory only made provision for Beth(0) orders of randomness , and the whole thing became unstuck when higher orders of randomness became involved because of feedback mechanism involving humans .

During periods of reasonable equilibrium , the globalized system works ok . But if ANY part of it fluctuates by more than 67% , the whole system becomes unstable because of the varying lag-rates between the components of the system .

This is what happened in 2008 .
The destabilizer seems to have been bio-fuels disturbing the food-prices over the critical thresholds and exacerbating low food-reserves . The whole shebang then went unstable . Even oil , which was not the primary destabilizer . This went up steeply(destabilized) about a year after the food-prices started rocketing.

Everything is interlocked and extremely difficult to unravel at less than AI(3.1) level .
See “AI-1”)

This system does stabilize after a time , but parts of it might go over tipping points into different attractors (usually war and anarchy , like Sudan and Somalia) .

Collapse of Complex Societies .(Tainter)
These collapsed in the past essentially because of their inability to manage reserves .
They were not complex enough . (Did not have enough Mathematics)
They never even got to the JIT stage .
Present society is at least one level past that , and has a proven resilience (WWII) .

The markets and systems are presently evolving a system that will smooth the problems in the futures market , or at least decrease the draw-downs and severities of the fluctuations .
This is a process that will never end , since the knowledge of how to buffer the effects of self-interest of a part of a system is in an arms-race with this same self-interest .

It will probably involve buffering the lag-times between different commodities .Eg between money and wheat . This is at present rather primitively handled by closing-out dates for futures . A simple mechanism like different futures closing-dates is far from perfect , but better than the present system that treats a dollar of wheat the same as a dollar of Rubles .

This effectively adds a second dimension to monetary systems . But this has already been done to a degree by compound interest (Bonds) .

A promising route is the markets in future events now being run on the Internet .
The theory is that a market is a better predictor than theory .
Add some attempt at a theory of feedback systems like “Orders of Randomness” , “Orders of Randomness 2”
to give a better idea of the probability of an event .

A fusion of the above markets might be fruitful .

Appendix A
From “Infinite Probes”
We expect a reserve of 27%- 37% , with an average of 33% .

We put some actual numbers on it .
We look at Western Countries .(RSA , USA , EU)
There are 365 days in a year .
Take Saturdays and Sundays as holidays .
This leaves 365 – 2x52 =261 days .
Take a further 10 public holidays = 251 days left .
Total holidays = 114 (=365-251)

This is 31.2% (= 114/365 x100)

Add a further 14 days leave for the compulsory leave at Shops and Offices level .
This is 35.1% (= 128/365 x100)
Average = 33.15% (= (31.2+35.1)/2 )
This concerns the largest part of the work force .

Add a further 14 days leave for the supervisory extra leave .
This is 38.9% (= 142/365 x100)

These evolved for reasonably efficient work-forces .

What is amazing that these holidays are called different things (usually religious) in different societies , but the percentage in successful societies are more or less 33% for the majority of the population .
Sumerian , Babylonian , Assyrian , Roman , Medieval , Modern .

As we expect , since that is the optimal reserve for a successful Beth(0) society .
( A Beth(0) society is subject mainly to random fluctuations of the order of flipping a coin . See “Orders of Randomness” , “Orders of Randomness 2” )

Human social systems are deep-optimized for 67% working days and 33% holidays .
The Paleolithic Human Social Contract .

See “Is the Atkins diet evolutionary compatible?”
From the diet table it follows that about a third of work on hunting gets about 95% of the kCal .

Trying to run societies outside these boundaries in non-emergency conditions lead to all sorts of horrible things .

If there are too few holidays , inefficiency increases to the point of paralysis .
The system tries to conserve the reserve percentage .
Corruption becomes endemic . Note how the two go together .

If there are too many holidays , bureaucratic bloat sets in .
The bottom levels of the organization function efficiently . They eventually dispose of the top-heavy bureaucracy . (Also called a revolution.) . Then they fall prey to being too efficient as set out above .

And so it goes .

Ever noticed that the only Empires that successfully limited their expansion
(Egyptian , Roman and Chinese) rigorously enforced holidays (mostly religious) . The Romans were the richest in their heyday , and even slaves shared in the holidays . Like the licence of Roman women not to cook or grind wheat , this just fuelled the machine to get more slaves . But with enormous reserves when needed .

Towards the end of the Western Roman Empire , interesting things happened to the latifundia slaves . As their markets dried up and everybody became Christianised in a welter of hope or despair (depending on your social position) , the latifundia slaves (by now servus had become as non-PC as the k-word in SA) became villains (attached to the villa) . They had little to do , since the transport and monetary systems for their specialized agricultural produce (wine,olives,olive oil,wheat) had collapsed . So the church had a religious holiday for every day . To match this , they had to have an inflation of saints and martyrs .


No comments: