Voice of Sanity – November 2017

 

 

 

 

Piedmont Humanists

Membership: adults $24/year
Seniors/students $15/year

Editor: Joyce Bates

All correspondence to:

Email:
voice@piedmonthumanists.org 

Regular mail:
Piedmont Humanists
3620 Pelham Rd., Suite 5, #135
Greenville, SC. 29615

November 2017

 

The Voice of Sanity

THE NEWSLETTER OF THE PIEDMONT HUMANISTS

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Sunday meeting: There is usually a talk, video, or general discussion from 11:00AM to 1:00PM

Location: the Earth Fare 3620 Pelham Road, Greenville.

Dates for the Sunday meetings are: November 5th, 12th, 19th, and 26th. 

 

SATURDAY, NOVEMBER 4TH IS THE GAY PRIDE PARADE

It will be held at Barnett Park at 248 east St John Street in Spartanburg from 10am to 4pm.

 

November 11th: Second Saturday Brunch will be at10AM at the Golden Corral, 3240 North Pleasantburg Dr. Greenville, SC 29609.  

 

The Free-Thought group will meet at 7:00PM November 2nd, 16th, and 30th (Thursdays) for a meal at California Dreaming restaurant; 40 Beacon Drive; near the Pelham Road exit off I85. 

 

The Free-thought trivia and pool group will meet at Friar’s Tavern,

1178 Woodruff Road, Greenville, SC 29607.

We get together from 7:00 to 10:00PM on Thursday November 9th.

The November 23rd  date is Thanksgiving day.

 

For those new to Humanism a discussion group will meet 10AM Sunday November 26th.

Location: the Earth Fare 3620 Pelham Road, Greenville

 

                                                         

 

                                                                                                   HOW MARKETS FAIL

                                                                                                         Book Review

 

John Cassidy’s book How Markets Fail is divided into three parts. The first describes the better known economic theories in language that is thankfully understandable. The second is entitled “reality economics” and describes how certain human behaviors precipitate financial panics and boom and bust cycles. The third is a well written and horrifying account of the behaviors culminating in the real estate debacle in 2008. The article below concentrates on six major problems with a completely free market. These are thumbnail sketches of more complete analyses given in the book. 

 

SPILLOVERS

Spillovers are unintended consequences of market operations. An egregious real-life example of a spillover happened between the late 1940s and 1970s when GE dumped PCBs (polychlorinated biphenyls) into the Hudson River polluting approximately 200 miles of fresh and estuary water. It became the biggest superfund site in the US but dredging did not start until 2009. 

Global warming, of course, is the latest and biggest of the market spillovers. Industry has only begun to think about paying for it. We had been ignorant of the environmental and economic cost since the beginning of the Industrial Revolution and have been in denial since Michael Mann’s and Raymond Bradley’s research paper and “hockey stick” graph appeared in 1998. The fear is that warming may accelerate beyond our ability to switch away from fossil fuels in time to ameliorate the damage.

Spillovers are not all bad, though. Orchard and certain vegetable growers unintentionally created the beekeeping industry and neither can survive without the other.

 

MONOPOLY

Although the term “monopoly” is used rarely, monopolies have not disappeared. The top ten companies on the 1967 Fortune list were General Motors, Exxon, Ford, GE, Chrysler, Mobil, Texaco, US Steel, IBM, and Gulf Oil. Eight were still on the list either as independent companies or divisions of larger companies in 2009. Two modern examples of monopolies are Microsoft and Google. Microsoft has been under fire for a number of practices. One was forcing computer makers to include its Internet Explorer with each copy of Windows. At one point the D.C. District Court ruled that Microsoft’s anticompetitive practices violated the Sherman Act and recommended the company be divided into one facility manufacturing Windows and another manufacturing Office software. Google has attempted to digitize entire libraries without permission of copyright.

 

PUBLIC GOODS 

The modern market tends not to invest in brand new technology because the ratio of failure to success involved in bringing it to market is very high.  Private companies are much better off buying patents after the products are perfected and market-worthy enough to yield immediate profit.

We have many examples of expensive government projects that were later taken and developed into peacetime successful markets. The first high speed jets were built by Hitler’s Luftwaffe.  Research that created the B-47 Stratojet and the B-52 Stratofortress were prototypes for the first Boeing 707 passenger jet. Research projects originally financed by the Pentagon with taxpayer money have resulted in satellite television and GPS navigation systems.

Health care is probably the worst place for the market to be in respect to making a profit by insuring everyone. The whole point of actuary tables is to determine the chance of the insured getting sick as opposed to staying well and this demands that there be a healthy amount of low-risk policy holders to hold up those that get sick. Those who need care the most are the elderly and debilitated and are the last candidates for such insurance. If there is a dearth of candidates who will pay premiums to balance out the risk the enterprise will fail. The young and healthy have no motivation to buy this kind of insurance on the free market.

 

RATIONAL IRRATIONALITY

Sometimes choices we have to make as individuals are perfectly rational, but the same decisions made by many people can be socially disastrous. Here is an example:

There are two firms competing to supply electricity to a town. They each have an option to install scrubbers which will effectively take pollutants out of the air. The price of installing the scrubbers for each plant is $15 million. However, each firm has an option of installing a less effective ventilation system priced at only $5 million and each also knows that by installing the cheap ventilator there will be lawsuits costing about $5 million. Each firm forecasts that the gross profit for the year will be $20 million.

Therefore, even after paying for the cheap vent and the lawsuits ($10 million) they will still net about $10 million in profit from the original $20 million forecast. With the efficient scrubber of $15 million they will only net about $5 million. The CEOs of both companies cannot help but suspect that if they invest in the efficient scrubber the other company will go for the ventilator and gain in assets overshadowing theirs by $5 million. From the standpoint of each company the best course to take is the cheap vent, even though in the long run the efficient scrubber will be better for the community. This is completely rational for the market but has terrible social consequences.

The paragraph above is an example of the game “prisoners’ dilemma” only put in an environmental context. It illustrates well the conflict of individual interest versus public good. Another version of the same idea is known as “The Tragedy of the Commons”.

 

HIDDEN INFORMATION

The market is replete with hidden information.  A local example can be found in the used car lot. The dealer can say what he wants about the vehicle in question but other than kicking the tires the prospective buyer has no way to know for sure how the car was treated before it got on the lot.

Investing in stocks is another area of limited and unreliable information. While there is a way of obtaining facts about an investment most ordinary people have limited information other than a company’s or investment firm’s prospectus and little time or opportunity to observe anything firsthand.

Additionally, there seems to be the same uncertainty in forecasting what the market will do as there is in forecasting what the weather will do over an extended period of time. One can picture the probable future of both but the view into the future will always limited because the information required can be virtually unlimited.

Market theories also make assumptions about employment rather than look thoroughly into the problem. Most of the time unemployment figures “assume” that when people are out of work for long periods of time they are still actively looking for a job. Statistics show that many who are out of work have not searched for a job for a month or more. Also, there is no way an employer can know for sure whether an employee is going to be an industrious worker or not. It is simply a gamble.

 

HERD INSTINCT

There is another facet of the stock market that is bad for the vast numbers of uninitiated and good for those who familiar with its peculiarities and willing to take a chance. When certain stocks become popular everyone seems to want to buy them, especially if they are new and relatively cheap at the beginning. As these stocks go up more people enter the buying frenzy forcing the price up even further though the new company’s equity is far from solid and established. This is what happened during the dot.com bubble at the beginning of the century. These stocks were attractive and popular but they were not making real profits and there was no way of knowing which ones would survive.  The later an investor bought the stock the more he risked loss but many wanted to get on the “bandwagon”.*

Evidence of herd instinct became apparent when researchers as early as the 1960s discovered that upward moves in the market displayed “clumping” or moving in cycles. The same was true for downward moves. 

The herd instinct is in all of us and was demonstrated in the 1950s by Solomon Asch who ran a “vision test” at Swarthmore College. This test has been described in an earlier version of the Voice of Sanity. Essentially it involves students matching a line from a set of three on one card to a single line on another. It was found that when actors as a group intentionally and consistently matched lines incorrectly the single test subject tended to go along with the group even though the answers were blatantly wrong. A later experiment using fMRI scans showed that those few that resisted the herd registered heightened activity in the amygdala. The amygdala is the area of the brain in which danger is sensed.

 

In the end most of us don’t think very well when it comes to economics. Most of the time, we jump ahead to the easiest and most obvious answer rather than take a minute to rethink the situation. One of Cassidy’s very simple brainteasers is the one below. Answer it quickly then think again:

 

The combined cost of a bat and a ball is $1.10. The bat costs $1.00 more than the ball. What is the price of the ball?

(The answer appears at the end of the Voice)

 

Book source:

How Markets Fail, John Cassidy, 2009, Farrar, Strauss, and Giroux.

 

*During the fall of stocks after a bubble bursts it is possible to make a lot of money if one has the right resource, that is someone who will lend him enough stock to make it work. This is called short-selling and it combines cooperation with rational irrationality. The speculator borrows stock from a willing lender. He then sells it for the top price to an investor who thinks it will keep going up. When the price falls sufficiently the speculator buys it back at the lower price, takes his share of the profit and remunerates and returns the stock to its owner.

 


 

                                                                 THE POPULARIZATION OF SCIENCE IN THE PAST AND NOW

 

The popularization of science began back in the 17th century. Galileo, in spite of his obligations to the aristocratic Medici family of Tuscany, made sure that a few of his works were printed in the Italian vernacular as well as conventional Latin to benefit members of the middle classes. This was a move that definitely went against the Church’s official program and was part of the reason why Galileo got in so much trouble.

 

Because of cheaper printing and a growing popular distribution of scientific works, tradesmen and local manufacturers realized that science could advance their interests. This was especially true in Great Britain, Scandinavia, and some parts of Germany. By the 18th century interest spread as more people became literate and the standard of living began to rise.

 

Still, during this early time, the distribution of scientific literature varied depending on whether a country had a middle class actively developing industry or was a society that was more aristocratic and agrarian. In France, for example, Diderot’s and Alembert’s Encyclopedie was an exploration of the need for trade and industry, but it addressed only the aristocracy and was not available to those directly involved in these pursuits. In contrast Great Britain had the “Lunar Society”, an organization that put scientists face to face with industrialists and tradesmen.

 

Scientific popularization continued to spread in the 19th century but not without difficulty. Darwin’s ideas were and still are seen as unacceptable by many people. Joseph Priestley was forced to immigrate to the United States after his home and valuable laboratory were burned to the ground. Antoine Lavoisier had the misfortune to be a member of the aristocracy as well as a scientist and lost his head during the French Revolution.

 

The usefulness of scientific investigation could not be denied, though. Mechanics Institutes similar to modern European trade schools were created to provide a scientific education to those desirous of pursuing careers in science and/or industry. Germany became one of the first countries where universities incorporated natural science as a proper part of the curriculum.

 

Many modern disagreements about the value of the sciences had their roots in the debates that started in the 19th century. People were confused about whether science was a simple gathering of facts or sprang from conceptual insight. Then as now, many did not understand how the scientific method worked or were completely unaware of it as a necessary process in the investigation of nature. There were also questions on whether science was practical or theoretical. As today, many thought it was a waste of time to do scientific work out of curiosity. Darwin and Mendel both explored their interests because of a simple desire to know but neither was a scientist in the modern sense. Darwin was subjected to harsh criticism and Mendel was completely ignored but their works were recognized as essential parts of the puzzle of life in later research. No one could have predicted that Lyell’s exploration and understanding of rock layers would be useful to later mining and oil industries.

 

In the 20th century there were few scientists writing for newspapers. In both Britain and the US scientists were mostly ignored or interviewed more for entertainment value on television than for information. Jacob Bronowski and Carl Sagan were two notables who did much to put scientific advances in the public eye but both were criticized by other scientists for demeaning research. Another individual instrumental in getting young audiences interested in science was Don Herbert. His version of kitchen science extended from the early 1950s until reruns were discontinued in 2002.

 

Science is not dead in America as far as it goes for printed media. It is noteworthy that the Scientific American launched its first publication as a weekly newspaper in 1845 and reported on many inventions in its early years. It became a monthly magazine in 1921 and is presently the oldest continuously published monthly in the US. The National Geographic, first published in 1888 is still going strong with articles on science, geography and world culture. Popular Science has been around for 144 years, has won many awards, in its pursuit to explain scientific and technological subjects. Wired, first published in 1993, concentrates on technology and its effects on culture, economics, and politics.

 

While there is plenty of science in print and on the internet for those who are willing to look, there is a insufficient supply of material on television and in daily print and on-line newspapers. These are outlets that are the main feed to the general public. Consequently the American people are kept ignorant of scientific research that is altering the society in which they live on a daily basis.

 

Reference:

http://ieg-ego.eu/en/threads/crossroads/knowledge-spaces/peter-bowler-the-popularisation-of-science

Wikipedia is the source for the histories of the American magazine publications.

 


 

An Atheist in the Woods

 

An atheist was walking through the woods.

“What majestic trees!”

“What powerful rivers!”

“What beautiful animals!”

He said to himself

Suddenly he heard a rustling in the bushes behind him.

He turned to look… and saw a seven foot grizzly bear charge towards him.

He ran as fast as he could along the path.

He looked over his shoulder and saw that the bear was closing in on him…

He looked over his shoulder again and the bear was even closer…

And then … he tripped and fell.

Rolling over to pick himself up he saw the bear was right on top of him…

Reaching towards him with his left paw…and raising the right paw to strike…

At that instant the atheist cried out, “Oh my God!”

Time stopped… the bear froze… the forest was silent…

A bright light shone upon the man, and a voice came out of the sky..

“You deny my existence for all these years, you teach others I don’t exist

And even credit creation to cosmic accident….

Do you expect me to help you out of this predicament?”

“Am I to count you as a believer?”

The atheist looked directly into the light…

“It would be hypocritical of me to suddenly ask you to treat me as a Christian now.

But perhaps you could make the bear a Christian?”

…a pause…

“Very well,” said the voice…

The light went out. The sounds of the forest resumed…

And the bear dropped his right arm…brought both paws together…

Bowed his head and spoke…

“Lord, bless this food, which I am about to receive.”

 

Answer to riddle: The price of the ball is five cents.

 

 

 

 

 

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