WHEN LESS PEOPLE MAKE MORE FASTER, SOMETHING'S GOTTA GIVE

Import Prices Fell 2.7% in April, Biggest Drop in 14 Years (Joseph Rebello, May 14, 2003, Yahoo!)

Prices of imported goods registered the biggest drop in at least 14 years despite a slide in the value of the U.S. dollar last month, highlighting fears that the country's sinking inflation rate could develop into outright deflation.

Overall import prices fell 2.7% in April, marking the biggest decline since the government began keeping track of them in 1989, the Labor Department said Wednesday. The drop mainly reflected plummeting petroleum prices after the U.S. military victory in Iraq. But nonpetroleum prices also slumped.

Over the last six months, the Federal Reserve has grown increasingly nervous about the gradual decline in inflation, measured by consumer prices and the price index for personal consumption expenditure. Economists fear the PCE index could drop below 1% this year, the lowest level in decades.

Given that Chairman Greenspan testified before Congress that archaisms in the inflation measures overstate the rate by about 1%, that is deflation, right?

WHICH BEARS IN INTERESTING WAYS ON THIS:
WHY DO SOME SOCIETIES MAKE DISASTROUS DECISIONS? (JARED DIAMOND, April 28, 2003, Edge)

Education is supposed to be about teachers imparting knowledge to students. As every teacher knows, though, if you have a good group of students, education is also about students imparting knowledge to their supposed teachers and challenging their assumptions. That's an experience that I've been through in the last couple of months, when for the first time in my academic career I gave a course to undergraduates, highly motivated UCLA undergraduates, on collapses of societies. Why is it that some societies in the past have collapsed while others have not? I was discussing famous collapses such as those of the Anasazi in the U.S. Southwest, Classic Maya civilization in the Yucatan, Easter Island society in the Pacific, Angkor Wat in southeast Asia, Great Zimbabwe in Africa, Fertile Crescent societies, and Harappan Indus Valley societies. These are all societies that we've realized, from archaeological discoveries in the last 20 years, hammered away at their own environments and destroyed themselves in part by undermining the environmental resources on which they depended.

For example, the Easter Islanders, Polynesian people, settled an island that was originally forested, and whose forests included the world's largest palm tree. The Easter Islanders gradually chopped down that forest to use the wood for canoes, firewood, transporting statues, raising statues, and carving and also to protect against soil erosion. Eventually they chopped down all the forests to the point where all the tree species were extinct, which meant that they ran out of canoes, they could no longer erect statues, there were no longer trees to protect the topsoil against erosion, and their society collapsed in an epidemic of cannibalism that left 90 percent of the islanders dead. The question that most intrigued my UCLA students was one that hadn't registered on me: how on Earth could a society make such an obviously disastrous decision as to cut down all the trees on which they depended? For example, my students wondered, what did the Easter Islanders say as they were cutting down the last palm tree? Were they saying, think of our jobs as loggers, not these trees? Were they saying, respect my private property rights? Surely the Easter Islanders, of all people, must have realized the consequences to them of destroying their own forest. It wasn't a subtle mistake. One wonders whether - if there are still people left alive a hundred years from now - people in the next century will be equally astonished about our blindness today as we are today about the blindness of the Easter Islanders.

This question, why societies make disastrous decisions and destroy themselves, is one that not only surprised my UCLA undergraduates, but also astonishes professional historians studying collapses of past societies. The most cited book on the subject of the collapse of societies is by the historian, Joseph Tainter. It's entitled The Collapse of Complex Societies. Joseph Tainter, in discussing ancient collapses, rejected the possibility that those collapses might be due to environmental management because it seemed so unlikely to him. Here's what Joseph Tainter said: "As it becomes apparent to the members or administrators of a complex society that a resource base is deteriorating, it seems most reasonable to assume that some rational steps are taken towards a resolution. With their administrative structure and their capacity to allocate labor and resources, dealing with adverse environmental conditions may be one of the things that complex societies do best. It is curious that they would collapse when faced with precisely those conditions that they are equipped to circumvent." Joseph Tainter concluded that the collapses of all these ancient societies couldn't possibly be due to environmental mismanagement, because they would never make these bad mistakes. Yet it's now clear that they did make these bad mistakes.

My UCLA undergraduates, and Joseph Tainter as well, have identified a very surprising question; namely, failures of group decision-making on the part of whole societies, or governments, or smaller groups, or businesses, or university academic departments. The question of failure of group decision-making is similar to questions of failures of individual decision-making. Individuals make bad decisions; they enter bad marriages, they make bad investments, their businesses fail. But in failures of group decision-making there are some additional factors, notably conflicts of interest among the members of the group that don't arise with failures of individual decision-making. This is obviously a complex question; there's no single answer to it. There are no agreed-on answers.

What I'm going to suggest is a road map of factors in failures of group decision making. I'll divide the answers into a sequence of four somewhat fuzzily delineated categories. First of all, a group may fail to anticipate a problem before the problem actually arrives. Secondly, when the problem arrives, the group may fail to perceive the problem. Then, after they perceive the problem, they may fail even to try to solve the problem. Finally, they may try to solve it but may fail in their attempts to do so. While all this talking about reasons for failure and collapses of society may seem pessimistic, the flip side is optimistic: namely, successful decision-making. Perhaps if we understand the reasons why groups make bad decisions, we can use that knowledge as a check list to help groups make good decisions. [...]

[H]uman societies and smaller groups may make disastrous decisions for a whole sequence of reasons: failure to anticipate a problem, failure to perceive it once it has arisen, failure to attempt to solve it after it has been perceived, and failure to succeed in attempts to solve it. All this may sound pessimistic, as if failure is the rule in human decision-making. In fact, of course that is not the case, in the environmental area as in business, academia, and other groups. Many human societies have anticipated, perceived, tried to solve, or succeeded in solving their environmental problems. For example, the Inca Empire, New Guinea Highlanders, 18th-century Japan, 19th-century Germany, and the paramount chiefdom of Tonga all recognized the risks that they faced from deforestation, and all adopted successful reforestation or forest management policies.

Thus, my reason for discussing failures of human decision-making is not my desire to depress you. Instead, I hope that, by recognizing the sign posts of failed decision making, we may become more consciously aware of how others have failed, and of what we need to do in order to get it right.

Note that the barking dog here is environmentalism, while the dog that didn't bark is the population implosion. It appears possible that Mr. Diamond is a part of the very kind of problem--intellectuals blind to what's going on for religious reasons--that he's talking about. Posted by Orrin Judd at May 14, 2003 6:51 PM