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

http://andreswhy.blogspot.com “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 http://andreswhy.blogspot.com “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 .



2.Inefficiency

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 http://andreswhy.blogspot.com “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) .



4.FutureX

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

http://andreswhy.blogspot.com “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
Holidays

From http://andreswhy.blogspot.com “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 http://andreswhy.blogspot.com “Orders of Randomness” , “Orders of Randomness 2” )



Danger:

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

The Paleolithic Human Social Contract .



See http://andreswhy.blogspot.com “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 .





Andre