I agree 100% but isn't the problem about where the boundaries of the system are drawn? What you describe sounds like either a unitary perspective or subobtimization.
There was a piece by Jon Stewart last week about how the banks got $700 billion without oversight because it's all intangible and we don't understand what they do. In contrast, people do understand cars and ask a lot of pointed questions. He went on to say that when the banks implode we get bupkas (zero) but with the auto industry, we at least get the cars.
BTW, I do agree that Stafford wasn't his own best advocate (nor am I for that matter) but he really didn't think his own models were the only answers. They were certainly what he brought to the table on short term consulting assignments or requests for a talk. He put a lot of work into them and thought they were useful. On larger projects such as Uruguay and certainly Chile he did bring in or try to bring in other approaches.
--- On Sat, 12/6/08, Roger Harnden <[log in to unmask]> wrote:
> From: Roger Harnden <[log in to unmask]>
> Subject: Re: Viable Economy #3
> To: [log in to unmask]
> Date: Saturday, December 6, 2008, 5:33 AM
> It's not just about BLAME, Stefan. It's anguish as
> to how many 'systems' -whether financial,
> health-care, education, social welfare - somehow (because
> they are 'systems') get absolved from any
> responsibility. I'm sorry, guys an gals, but there is a
> down-side to systems thinking. That's not to say it is
> not valuable, but that it has to be applied with a
> complementary set of tools concerning (as I keep plaintively
> saying) something akin to calculus of distinction. Only thus
> can part be distinguished from whole. And one of the
> problems we are addressing in terms of present financial
> crisis (and the present day UK crisis in child welfare
> services) is the failure for the fundamental need for such
> complementaryness to be recognised. The 'system'
> side IS widely recognised, embedded in discourse, and
> indeed, put into practice. And, I suggest, VSM - and
> Patrick's useful comments on the play of recursiveness
> have their place here - allows this flip-flop of whole and
> part to take place, and allow us to escape the otherwise
> oganisational tyranny of global system thinking,
> On 6 Dec 2008, at 00:15, Stefan Wasilewski wrote:
> > Allenna
> > Economics is not so hard and if left to Economists
> alone the world would be in an even worst state because the
> UK had a water based economic-model in the 50's that
> work but showed their assumptions wrong because is was
> > The combination of events that makes this mess even
> possible to solve is a series of accidental laws, driven by
> post criminal events, that were enacted in the late 70's
> and 80's and drove capital up first in the insurance
> industry and then the banks.
> > The failure of regulation was not to take the process
> one step further and demand all new financial products be
> vetted before being sold to the public whether so-called
> educated investor or joe.
> > The process that drove the reinsurance spiral of the
> late 70's and 80's was obvious to all but the DTI
> didn't stop it even when they could see the problem.
> Market forces drove capital up in the insurance industry and
> the rapid spread of globalisation also spread the processes
> of leverage within the reinsurance market into the capital
> markets: A CDO is a portfolio reinsurance similar to the LMX
> spiral that destroyed a lot of lives in Lloyd's.
> > Indeed I warned them that risk must be supported with
> Liquidity in the early 90's but JPM first brought out
> RiskMetrics then CreditMetrics and everyone thought that the
> world was Normal (Binomial). It isn't. They were using
> models and pricing processes that didn't fit the risks
> because data wasn't pure (LTCM).
> > All businesses, and finance is the most critical for
> risk pricing, are dynamic; conditional; and therefore
> unknowable unless you have a map to see where the risks are
> being played out. Top-down and bottom-up.
> > The risk pricing and swapping processes that existed
> in reinsurance in the late 70's were far more
> sophisticated that any I've seen in finance to-date but
> failed ultimately because their universe of risk was bounded
> in economic premium size, and coupled to Nature and the
> US's legal structure, which as we know is out of
> control. A society that sues for the merest whiff of money
> and doesn't accept self-responsibility for anything has
> driven us to the brink.
> > Previous emails herein have considered Blame. No
> single individual was to blame, that would demand a planned
> approach to the current situation and something I don't
> care to think about. What was to blame is our continued
> blindness is regulating leveraged banking when common sense
> says the worlds economic situation shows single figure
> yields but bankers think they can get 30% returns for years.
> > What was synthesised in my mind the moment I saw the
> VSM was the possibility
> > to couple bounded zones of economic operations
> > in a nested fashion and set up communication processes
> > with PC's that automatically adjusted feed-forward
> parameters and alerted management.
> > The Plumtree Insurance Company was Coopers &
> Lybrand's UK training model for insurance company audit,
> it had Expert Systems discretely placed at important parts
> of the processing of risk pricing and exposure monitoring.
> At the board reporting level the system had control over all
> the HP Mini's data, managing the DTI reporting function
> through another set of Rules. All the rules were
> self-similar because code was re-used over and over again to
> achieve simplicity and speed. The company could get its
> quarterly reports actuarially assessed and signed off within
> 2-weeks of close.
> > How do I know so much about this? Because I designed
> it using Lotus Symphony, a PICK-based HP software and an
> expert system shell called GURU using Compaq PC's in
> 1983, for a company called Bryanston Insurance Company
> (Robert Holmes a'Court Bell Group).
> > If you looked inside the company it had feed-forward
> parameters, networked audit, a board that didn't just
> sit monthly but daily and an online risk pricing system with
> one-day at best time-lags. As the business got more complex
> all we did was plug the new division into the system.
> > The company failed for two reasons. The DTI allowed
> the business to be bought but never asked the management
> what research they'd done on the acquirers for they had
> and the DTI had not. The second was human greed of a new
> group CEO who had no relative risk experience, again a DTI
> required monitoring process.
> > 11-years later, after all, Black Monday, the 1992
> debacle, LTCM, Big Bang etc I presented Synergy, a new
> insurance product, to the FSA whose initial response was
> 'why don't all financial products get looked at
> before they go on the market?' We agreed.
> > I'm reading Greenspan's autobiography for
> support in my PhD along with a book called 'A Devil of
> our own making' kindly sent to me by Angelo who you met
> last year. Greenspan could easily have spotted the problem
> if he'd got the right data for that was what he made his
> name in the first place. The problem is that they don't
> have the right data, don't vet products and their impact
> and have allowed common-sense to wither.
> > When Basle II was mooted, I presented products to
> adapt capital dynamically and look at operational risk
> through the eyes of the VSM, thereby forcing the regulators
> to search for boundaries and couplings across multiple
> domains. Everything you say in your reply to Barry is sound
> and economically good sense but when Harvard pumps out
> MBA's at the rate they have the re-education process is
> going to be horrid: The World had shown again fixed
> paradigms don't work but a good map will always guide
> you in principle.
> > In the capital markets volatility is where money is
> made and JPM are doing fabulously well today trading all
> sorts of stuff. So things aren't all what the papers/TV
> say they are.
> > For you, and those who had the staying power to get
> this far, there's more, thank you Allenna, you've
> made me sketch out the next 2-years of research work!
> > Stefan
> > On 5 Dec 2008, at 21:19, allenna leonard wrote:
> >> Dear Barry,
> >> While I make no claim to understanding economics
> myself, it would seem that we are not alone given the mess
> we're in. Regardless, economists need to understand some
> basic ideas about systems. Didn't Greenspan say his
> predictions were off because he hadn't accounted for the
> high degree of short term self interest that drive traders?
> Reward systems anyone?
> >> Speculator expectations seems as good a place to
> start as any. It might at least start the ball rolling.
> >> When I did the work for the Canadian Institute of
> Chartered Accountants we were always concerned with how
> 'soft' the basis for determining the figures that
> went into the 'hard' balance sheet were.
> >> Auditors are supposed to verify three assumptions:
> >> 1. the completeness assumption - had all the
> assets and liabilities been included?
> >> 2. the going concern assumption - would the
> company still be in business in 12 months? (Plenty of people
> think 12 months is inadequate for complex organizations or
> ones like the auto industry that are supposed to be able to
> provide parts and services for much longer periods)
> >> 3. the management good faith assumption (our work
> said that wasn't taken seriously enough and didn't
> go far enough - without a mechanism to assure transparency
> and solicit multiple perspectives)
> >> It was fun hearing the stories my deceased
> colleague Bill Bradshaw used to tell - like about how a
> whole audit unravelled when one of the auditors asked the
> simple question "And how many pensioners do you
> >> BTW, one of the things former banker Bernard
> Lietaer said was that debt driven expansion was inherently
> >> Allenna
> >> --- On Fri, 12/5/08, BARRY A CLEMSON
> <[log in to unmask]> wrote:
> >>> From: BARRY A CLEMSON
> <[log in to unmask]>
> >>> Subject: Viable Economy #3
> >>> To: [log in to unmask]
> >>> Date: Friday, December 5, 2008, 10:55 AM
> >>> This is my third rant about developing a
> >>> sound regulatory system for the global
> economy. For the sake
> >>> of brevity, I am going to make some
> >>> assertions, without much in the way of
> qualifying comments.
> >>> Please consider all of this as tentative and
> my challenge to
> >>> you to improve upon it.
> >>> OUR GOALS:
> >>> 1) Every national government in the world
> should have a
> >>> "Council of Systemic Advisors",
> similar to the
> >>> existing Council of Economic Advisors.
> >>> In the US we also have a Science Advisor to
> the President,
> >>> but there is no one charged with explicitly
> thinking about
> >>> systemic issues. A Council of Systemic
> Advisors would, in
> >>> the long run, have an enormous impact on
> government policies
> >>> and on the university and the roles of
> >>> within the university (which in turn would
> feed back for
> >>> more impact on government and corporations).
> >>> 2) We need Obama and his team of economic
> advisors to be
> >>> aware of and receptive to the cybernetic
> >>> insights re. regulation in complex systems.
> >>> To achieve goal #2, we do not need a fully
> developed design
> >>> for regulating the global economy What we need
> to begin are
> >>> a few well chosen demonstrations of where
> cybernetics would
> >>> dramatically improve on the current economic
> thinking that
> >>> led to the current crisis. At the risk of
> revealing my
> >>> abysmal ignorance about economics and the
> stock market, i
> >>> will suggest that the current system is
> largely a positive
> >>> feedback loop with "speculator
> expectations" as
> >>> the key level (to use Forrester's system
> >>> language). If this is even close to correct,
> then the system
> >>> is GUARANTEED to engage in wild swings and
> >>> collapse. Regardless of the correctness of my
> example, I
> >>> think what we need to get our ideas on the
> table is a few
> >>> such examples of systemic alternatives to
> grossly inadequate
> >>> designs.
> >>> STRATEGY
> >>> 1) We need a group focused on developing the
> examples of
> >>> where cybernetic thinking would dramatically
> improve upon
> >>> current orthodoxy. Hopefully there are at
> least a few of our
> >>> number who understand a little about economics
> and maybe can
> >>> do this fairly quickly.
> >>> 2) Obama is certainly the most important
> player right now,
> >>> but other nations should not be ignored. And
> getting to the
> >>> government of one country might well make it
> easier to get
> >>> to the government of other countries. Thus, we
> should all
> >>> work on our own national governments (and,
> where possible,
> >>> help each other). Thus we need a group focused
> on how to get
> >>> the attention of the national decision makers.
> >>> 3) This is much bigger than just management
> cybernetics. We
> >>> need to enlist every system thinker in the
> world. (NOTE: I
> >>> am now really going to reveal the ignorance
> resulting from
> >>> spending most of the last ten years as a
> carpenter and
> >>> ignoring the academic world, but perhaps i can
> still make
> >>> the point). We need to enlist and ally with
> groups such as
> >>> System Dynamics, Society for General System
> Theory (I know,
> >>> it transmogrified into a different group but I
> >>> remember the new name), and the organizational
> >>> folks such as Peter Senge who emphasize
> systems thinking.
> >>> Undoubtedly there are many others I don't
> know about.
> >>> NEXT STEPS
> >>> 1) We need to know who is interested and
> willing to work on
> >>> this project. Step right up and volunteer.
> >>> - your country
> >>> - sketch of your background, what you bring to
> the table,
> >>> how you see yourself helping.
> >>> 2) A dedicated forum, listserve or some such.
> Some of you
> >>> are much more knowledgeable than I about what
> we need to
> >>> support the project.
> >>> 3) Refinement of the goals and strategies.
> Clearly a
> >>> serious discussion has to refine these before
> we can do much
> >>> else.
> >>> 4) Think carefully about what other system
> scientists we
> >>> can drag into this project. Go ahead and
> recruit those you
> >>> can. Make lists of those you think might be
> useful but that
> >>> you don't have personal connections with.
> >>> A NOTE ON ME
> >>> I spent eight years teaching admin. in
> colleges of
> >>> education, then ten years in in teaching
> >>> management. I was then forced out of the
> university for
> >>> failing at TV teaching. I also had careers in
> >>> development (mostly with very large systems)
> and community
> >>> development. The last ten years I mostly built
> additions to
> >>> homes and recently became a novelist
> (discovered fiction is
> >>> a hell of a lot harder than technical
> writing!). All this is
> >>> by way of saying that I will have zero
> credibility with
> >>> government decision makers and that quite
> obviously someone
> >>> else is going to have to be the public face
> for this
> >>> project. This might not be an issue, it might
> well be that
> >>> the best public face for the project will
> become obvious as
> >>> we proceed. On the other hand, I often think
> of Thomas
> >>> Jefferson's comment that any politician
> who wants the
> >>> job is thereby disqualified because he will
> then make
> >>> decisions our of a context of preserving his
> >>> instead of a context of the common good. So
> this is
> >>> something to keep in the back of your mind as
> we proceed.
> >>> PARTING SHOT
> >>> This obviously can only be done if a group of
> us step up to
> >>> do it. Now is the time! And you are the One!
> Take one step
> >>> forward if you are willing to help save the
> world ....
> >>> Grace and Peace,
> >>> Barry
> >>> What i have not yet seen is any large number
> of people
> >>> explicitly volunteering to do much about it.
> >>> BARRY A CLEMSON
> >>> [log in to unmask]
> >>> 757-692-6673
> >>> Cybernetica Press at www.cyberneticapress.com
> >>> "It's not how much you do - it's
> how much love
> >>> you put in it.... Do small things with great
> >>> --- Mother Teresa ---
> >>> The true warrior may be killed, but he can not
> be defeated.
> >>> --- my paraphrase of Sensei Hamada ---
> >>> And peace rolled down like a mighty river.
> >>> -- Inspired by the prophet Amos 5:24--
> >>> "An enemy is a person whose story we have
> >>> heard."
> >>> -- Gene Knudsen Hoffman --
> >>> For more information go to: www.metaphorum.org
> >>> For the Metaphorum Collaborative Working
> Environment (MCWE)
> >>> go to: www.platformforchange.org
> >>> METAPHORUM eList Archive available at -
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