An associate on the Global Citizenship forum on LinkedIn, Olimpiu Frant, posed the question if the wealth of the richest companies and countries was made by academic economists (such as from Harvard was his example). The follow-up question is if these are the same people who make policy and are driving industries and markets into the current widespread decline.
Because of challenges in language and unfamiliarity with the exact application of his what he call “Defects Science”, I don’t know if I’ll do this justice, but I’ll try. Frant asserts that academic economists are not experts in “economy” at all, but only in “trade” — the bulk of their expertise is in the milieu of supply chains, neglecting for the most part the process of actual production. Succinctly put, they are guiding us in the wrong direction because “Harvard is not making economists but mongers!”
Economy and Trade
How Frant defines and differentiates “economy” and “trade” is important here. By “Economy” he means specifically industry and agriculture. “Trade” is the trade of products and services, which of course includes all the banking (and speculations) based more or less on the real assets of industry and agriculture. This latter definition encompasses the troubles we are having with the mortgage crisis and banking, as well as bailouts and national debt from America to Greece.
He places fundamental importance on the empirical fruits of economy (production) rather than derivative or even arbitrary statistical analyses of currency and debt (banking). In a world where people, companies, and whole nations can be paper rich and quality-of-life poor or vice-versa, I find this a refreshing, if not vitally helpful perspective.
Frant’s theory of “Defects Science” is simple: All problems are caused by some defect in process or material, and it is specific defects that must be uncovered and directly addressed to prevent unwanted results. This is a reverse of the typical abstraction we find in [[economics]] or [[political science]], where we can only argue over causes and effects based on theories rather deal with them as concrete values in a formula whose result is actually known.
Using this model, I now realize the glaring cracks in our fundamental approach to economics as a discipline.
Instead of looking at technology, we look at the “technology sector”. Instead of examining medical practices to address costs, we look at health insurance “reform”. Instead of manufacturing efficiency, we look at labor issues. It is not that the latter of these are not real, but that they are effects that have then become causes of problems though regulation, speculative commoditization, and misplaced efforts as questionable ‘economic justice’. Capitalist investment has made all good things possible, but has become the ends instead of the means. Unions have jeopardized and eliminated countless jobs they served to protect. Governments have legislated controls of all sorts that have treated the patient of Free Market as the disease itself.
This brings us back to economists, who for the most part do not deal with the building blocks of the economy, only the systems between them. The modern world is run on such systems, no matter how abstract, so one would think even arm-chair economists should be running the show. Well, they are, and that is perhaps the problem. Market and trade systems are the focus of attention rather than the more tactile needs of supply and demand. No matter how high-falutin’ intellectually this may be, it is like a doctor knowing everything about the circulation of blood, but very little about the heart and lungs. And they don’t care.
This is Frant’s point. Economists do not know how wealth is created or used so much as how it is moved about. They are not the job creators and I guess that many are not investors beyond their own pensions. And I have found that those who are expert investors have quite different opinions from economists interviewed by the press. When I researched the “housing bubble”, I went to people in the trenches for explanations, not newspapers. And I got answers that beg solutions far different from the road we go down today.
As Frant puts it,
“Imagine if one University [has] one top professor … to teach electronics to the students, but he must ask for an electrician … to replace the broken fuse in his TV set! [And when chosen from academia] Those presidents may not ever know even where the “fuse” is located in the economy, let alone about how to replace the “broken fuse”, for to restart the economy!
I honestly never thought of it this way. Frant even used Fukoshima as an illustration, though I would express it a bit differently. You can’t blame the energy market on the disaster, but engineers. They are the ones responsible for ensuring the facility could withstand or handle such a disaster — or replace it with one that could. When there’s an economic disaster, instead of blaming corporations, banks, and unions, it is the economists whose theories are the whispers behind the thrones. The economy is being run, thanks to heavy government influence and control, by ECONOMISTS.
From this perspective, the influential economists are not really the students of the subject, but subjugators of it. It is the opposite of honest science — theory in practice has taken dominance over dealing with reality. Through influence on political policy, economic theories have created the result observed rather than observation being used to theorize and correct.
The argument can be summed up thusly: The creators of wealth and suppliers of demand are the industrialists and their workforce; the creators of the economic milieu that has been the focus of economists — and ground zero of the global economic crisis — is the result of failed economic policies, not the nuts and bolts of the economies themselves. And even if they were, economists are the wrong tool for the job.
Some praise from Olimpiu Frant regarding this article: “Ken, honestly, the connection of my principles with the general GLOBAL realities you made is simply: GENIUS!”
I Totally agree with your conclusions. I think though its not fair to blame economists though either as the cause, as it is the governments who place them in these positions which are the cause. They misunderstand what economics is, what an economist is and rather than a solver, it is based on the theory of how resources are uses, so it goes after the facts. So examining the fire after it has gone out in one sense to figure out how to light it again does nothing really to start it, if the materials needed no longer fit the required to make it burn. Innovators are needed but as long as the misunderstanding of those employing economists to do innovators jobs exist, and as long as economists want to do the jobs of innovators albeit, a total mismatch conflicted through huge pay benefits, this cycle in my opinion will continue. So Economists are the problem here as they have been allowed to head the food chain rather go back to their proper position – a theorist on how it works!
Having spent most of my career as a researcher and advisor on manufacturing practices and systems, this really helps me understand why the topics I care about never seem to be at the forefront of economic, political, or even investor debates. Without someone transforming low value stuff into high value stuff, the economy will grind to a halt, but few seem to admit or understand that. This is a wonderfully cogent view on what’s broken – theory trumping reality.
An economist proved that famine was not an economic problem but a logistical one. Now we send food to those areas of the world where food shortages exist.
Questions for economists to answer are,
how to provide incentive for people to be entrepreneurial and limit the stratification of wealth. How to prevent perversion of economic and political systems by those with wealth and power.
I believe economic stratification is natural and fair, but will always agree the battle must be fought to ensure and encourage economic mobility, which as you say, is not merely an economic but political problem.
The masses are starting to wake up to the realities of corporatism, but still bantering over the same Capitalist-Socialist paradigm. And what is corporatism, but the wedding of government and wealth? It’s the worst of both worlds. If we can find pragmatic (instead of merely well-meaning) solutions on this one issue, instead of fighting false class warfare battles, I suspect we’ll be on the fast-track to minimizing or even eliminating most of the world’s problems.
I so appreciate this exchange. Good clear definition of the issue without “single minded” blame for it. If people could have exchanges like this instead of the hatred and blaming that goes on, this world could find solutions much more quickly for those in need. Thank you all so much for this enlightenment.
I content that the answer to this question is NEITHER!
I have been a quality professional for 35 years now and can assure you that quality programs and defect analysis are not a guarantee of success or the solution to an economic problem. (As a side note the term defect science is a meaningless term). When it comes to economics, manufacturing or any other scientific endeavor you need reliable data to make prudent decisions (i.e. – root cause analysis done properly using proper statistical tools). Since I have a limited amount of words I can use I will keep this short and sweet.
1st Jesus (Our Lord and Savior, Creator and Sustainer of the Universe) said that the poor will always be with us (thus there will always be stratification).
2nd Our world is in a state of decay (2nd law of thermodynamics) and we will always have defects or random variation.
3rd a free market system has shown to be the best economic system to use (though I am sure most liberals will disagree).
The root cause of our misery or economic whose is the fact that our leaders and so called elite have lost sight of who the customer is! That’s why I have come up with this saying:
Consensus via intelligentsia is not proof nor is their recommended course of action the most prudent or effective. Our leaders (corporate, educational and governmental) need to understand they serve the people they govern and have to work with meaningful and tested data (not theory) to make prudent decisions.
As an example of this I present to you that CO2 is not causing global warming and the data they use is statistically flawed and in some cases made up. Moreover, you have a worldwide community chasing a symptom and not the cause of global warming (this is really a waste of time and money). Time and money would be well spent if they opened up our energy resources to lower the cost of energy (through innovation and investment and social responsibility) and allow the common folk to make a decent living and stop the control BS.
As a Demingist I also propose the 85/15 rule that says 85% of the problems in any operation are within the system and are management’s (or our leaders) responsibility, while only 15% lie with the worker. Also, the same thing holds true for human errors. 85% of so called human errors could be prevented by designing an effective system.
In a nutshell – no one is responsible for the mess we are in and everyone is responsible for the mess we are in. However, all should be part of the solution and not part of the problem.
I am going to end my comment with the beginning of an article that I think is the key to resolving our energy, economic and environmental problems:
(I will send a copy upon request)
“Ford’s Focus”, Quality Progress, September 2011 Page 48 by William Levinson.
The Term “TRIPLE bottom line” refers to the measurement of a business’s impact on people, planet and profits. These metrics may seem aggressive, but Henry Ford proved that their intelligent interpretation and application makes them synergistic and mutually supporting. Instead of being aggressive or ambitious, the metrics appear antagonistic or mutually exclusive-in other words, if you gain more of one you have less of the others. The idea that profit must come at the expense of people and the environment-or vice versa-is an example of what Stephen Covey calls the scarcity mentality, which Ford identified as early as 1926:
“For hundreds of years, men have been talking about lack of opportunity and the press need to divide up things already in existence. The world shackles itself, Blinds its eyes, and then wonders why it cannot run!”
Ed, your comments are very, very well taken.
If you would like, you are welcome to all the space you need by submitting a full-length version of this as an article which I can schedule to be posted as a follow-up on some upcoming Friday.
Ken S – would you like a full copy of “Fords Focus” for review? I have a PDF file I could send you if you like.
Also, I posted this on the authors LINKedIn discussion site and he will not allow it to go through.
What format would you like for the article?
For copyright reasons, I’d prefer a link to the file if there is one. For the article, plain text is preferred, but anything cut-and-apste capable is fine. There will be as little editing as possible, mostly formating issues, if any.
Also, if you could please create an account here (not subscribing, but registering) to be remembered for future comments and communication, that would be ideal. This will also make it easier if you might become a regular contributor.
I have registered but have not recieved confirmation yet. I will try to get the links you require but the articles I have are from hardcopy. It will take me a little while to get the links.
Olimpiu Frant • Edward,
Thank you for opinion, sorry I must tell you the truth!”
LOGICAL consequences of your claim:
.1) Economy is broken by it self!?
.2) Banks, Governments, Universities, Economists are useless form their birth!?
.3) We are waiting economy to fix itself!???
All your life you found the defects of the final product, and I am speaking here about the defects of those automations which CREATE your product!
The defect you found in one of a million same products produce 10$ economical lose!(If suppose 10$ is the market value of that product for a simple example to understand what I say)
The defect which stops the creator machine of your product for one week may produce ONE MILLION PRODUCTS NOT FABRICATED x 10$/PRODUCT = 10,000,000 $ economical lose!!!!!
Is, it similar for your economical /industrial/automations knowledge?
YES, if you never used it, and never get spectacular economical results from this SCIENCE!
Never for the economical industrial automation era market can be free!
You say, “liberals”, and I add: conservators,republicans,democrats, fascists, communists, want/decide some laws/government strategy of the market, Bankers a different one, and Economists ALL TOGETHER, because they are present everywhere!
All are doing something for their interest/control and will not agree you!
This is still 1000000 times more USEFUL for to search Earth and human life interest, than the 100% USELESS lost of money for NASA, CERN research of a dream out of space!
COMMUNIST attitude/strategy/philosophy, for to cover the communist leaders errors, I saw it for 40 years in my country!
“Nobody guilty” = nothing is true!(including your claim)
A) I content that the answer to this question is NEITHER!
B) I have been a quality professional for 35 years now and can assure you that quality programs and defect analysis are not a guarantee of success or the solution to an economic problem.
C) (As a side note the term defect science is a meaningless term)
D) 3rd a free market system has shown to be the best economic system to use (though I am sure most liberals will disagree).
E) Moreover, you have a worldwide community chasing a symptom and not the cause of global warming (this is really a waste of time and money).
F) no one is responsible for the mess we are in and everyone is responsible for the mess we are in. However, all should be part of the solution and not part of the problem.
ABCDEF are the quotes for which I answered previous post!
This is an interesting exchange, but we are perhaps using different models based on conflicting assumtions. I think efforts to understand each other better before disagreeing would be time well spent.
Yes this is an interesting exchange but, I think the differences are due mainly to theoretical (Ivory tower – Olimpiu stand) versus practical down to earth (My stance) application of problem solving. Olimpiu really did us a disservice by such a short, unsubstantiated response. Olimpiu’s Defect Science really boils down to Consensus Science which is very prominent in our society today. Also, based upon his response -“All your life you found the defects of the final, and I am speaking here about the defects of those automations which create your product!” – I get the impression that he thinks that I deal with only final inspection. This could not be farther from the truth since I deal with preventative measures on a daily basis. So, “Defect Science” boils down to problem identification and setting up a measurement or inspection process to prevent a reoccurrence of defects. This has been happening from the beginning of time (or the fall) and it is why I mentioned the 2nd law of thermodynamics in my initial posting.
Here is my general response to Olimpiu:
Olimpiu Frant • Edward,
Thank you for opinion, sorry I must tell you the truth!
And your statement: “Nobody guilty” = nothing is true! (Including your claim).
Olimpiu – your conclusion is flawed just like your defects science and binary logic. I really did not state an opinion. I presented a logical argument backed by articles and made factual statements.
Your whole response is too short and not truthful because you are really stating your opinion and not backing anything up with data. Moreover, your statements are really a misconception of my statements or they are your own interpretation of my comments. You need to provide a moral standard with your opinion so I can determine if indeed you are expressing the truth.
Moreover, your statement at the end “Nobody guilty” = nothing is true! (Including your claim)” is really just your opinion and is not logically true. So you use your own faulty logic (and opinions) to say my claim is not true! This is a classic straw man argument!
Next will be my response to C
Concerning your response to C)
(As a side note the term defect science is a meaningless term)
>YES, if you never used it, and never get spectacular economical results from this SCIENCE!
Response to above statement: I have saved the companies I have worked for a lot of money using normal quality tools and my ingenuity before Kiazen and other programs became popular. Two examples of which is my RAPOPI form (RAPID ACTION PROCESS ORIGIN PROBLEM IDENTIFICATION) and my ZNPO4 film weight determination test procedure. The ZNPO4 is a good example of the Ford’s focus document I reference in my response. Basically, I eliminated the use of Potassium Chromate and the waste disposal associated with it.
So you are making assumptions here and in your other responses.
Now, I am going to continue my response with a reply to Charles on your LinkedIn Discussion:
• Discussion: Are Economists the Solution or the Problem?
you and Edward are trolls.
The topic is economists not religion.
Posted by Charles
Charles: RE:@Lester, You and Edward are trolls.
You owe me an apology. I am not a troll and provided a thoughtful and logical response to the question.
“I contend that the answer to this question is NEITHER!”
And continued to demonstrate why and gave a recommended course of action (which is what a good quality professional will do)
I think that Olimpiu is a coward for not responding to my original posting and responding to you as if I was not part of this discussion. (I expect this from a communist since they are afraid of the light)
I have programming experience and have created my own defects database so when I say that the term defects science is a meaningless term I am qualified to do so. Also, his use of Binary logic is flawed.
His logic or his system is relativistic and falls apart since it does not have a standard that is needed to determine whether a value should have +1 or a -1.
Since biological systems on this Earth fall under either a Gaussian or Binomial distribution (Measurement Science) there needs to be some type of error analysis done to make any meaningful statements.
Olimpiu’s system is better represented by the following equation:
S(x) = Sum (All positive factors for the system) – Sum (of all the negative factors for the system).
Then the logic becomes:
If S(x) is positive (+) then the system is a good system.
If S(x) is Negative (-) then the system is a Bad system.
In other words you have a way to compare different systems to each other.
Now what we need is a standard system to compare against! So the question becomes which system can we use as a standard?
Moreover, Olimpiu system breaks down when you have to deal with infinity.
Using Olimpiu’s example to you:
“A) COMMUNISM = controlled market =
= + (advantages) – (disadvantages) =
=+( free/safe: education, health care, houses, jobs, retirement, sports, holidays, family future, security on the street/clubs) – (forbidden: to speak against party/leader, to write what you want, to become more than 5 times richer than the average) =
=+( 1,1,1,1,1,1,1,1,1) – (1,1,1) =+9-3 = + 6 “
There are more negatives (-) in a communism than three (His system fails here because these values are arbitrary) for example:
The number of Christians tortured or Killed in their system renders a value of (-) infinity since you cannot put a value on the life of an individual and thus I would not choose Communism as a standard to live by.
So a standard is needed to take all of the relativism out of his system!
Continuing with my response to C:
Moreover, if you take God (Jesus) out of the equation it will not represent reality!
Concerning: E) “This is still 1000000 times more USEFUL for to search Earth and human life interest, than the 100% USELESS lost of money for NASA, CERN research of a dream out of space!”
Again this is your opinion and nothing more and really does not address my comment (this is known as deflecting). Here is a link to the article (First Look at the Data) I reference in my statement:
Also, I have attached the article along with ocean temperature graphs that show the correlation between ocean temperatures and Hurricanes (Cat III or Higher) and one that shows the temperature decreasing these last few years. (A PDF of the article will be sent if requested) Thus I am not stating my opinion. Just the facts Mam! Please note the highlighted comments at the end of this article which contradicts the global warming alarmist’s claims that storms will increase in intensity!
“Nov. 29, 2005–The nation is now wrapping up the 11th year of a new era of heightened Atlantic hurricane activity. This era has been unfolding in the Atlantic since 1995, and is expected to continue for the next decade or perhaps longer.
“The tropical climate patterns producing the increased activity since 1995 are similar to those during the previous active hurricane era [ending in] the late 1960s. These patterns are opposite to the below-normal hurricane era, which ran from 1970 to 1994.”
Although NOAA is concerned with the how and the why, the oscillations are clear from the data. By analyzing the data in context, we can demonstrate these patterns beyond a shadow of a doubt.”
Besides there is a lot of technology that benefits mankind from NASA and space exploration so it really is just your opinion!
Using your OPTIMIZATION –STRATEGY and your formula (COMMON SENSE + GOOD SENSE = SUCCESSFUL STRATEGY) I will demonstrate the meaninglessness (or relativism) of the term Defect science in relation to global warming. Moreover, GIGO renders your OPTIMIZATION –STRATEGY and Defects Science to consensus science.
I stated “As an example of this I present to you that CO2 is not causing global warming and the data used is statistically flawed and in some cases made up. Moreover, you have a worldwide community chasing a symptom and not the cause of global warming (this is really a waste of time and money). Time and money would be well spent if they opened up our energy resources to lower the cost of energy (through innovation and investment and social responsibility) and allow the common folk to make a decent living and stop the control BS.”
My statement above is just COMMON SENSE combined with GOOD SENSE and will result in a successful strategy to sustain our lives and economy. Also, it is only common sense to realize that the CO2 molecule (along with plants-anti entropy) is responsible for sustaining life on this planet and will not cause the death of our planet. Look in your refrigerator and you will discover that 98% of the food in it comes from CO2! So it makes GOOD SENSE to look at CO2 as a renewable energy source. Moreover, from reliable data (NONGIGO) come reliable decisions or solutions.
Just think of all the wasted money and effort that is taking place right now, because we are chasing a symptom and not a root cause, since naturalistic scientists are using faulty data and lack common sense! Besides funding NASA and other space exploration endeavors should be considered an investment in our future and will eventually help us sustain life on this planet if we would only use common sense! That’s why I stated:
” When it comes to economics, manufacturing or any other scientific endeavor you need reliable data to make prudent decisions (i.e. – root cause analysis done properly using proper statistical tools).”
(A side note here: This is why I say Economists are neither the problem nor the solution to our economic condition – Strong companies and knowledgeable consumers affect an economic system!)
Here is a link to an article that is relevant at this point:
Here are two articles I have reference before and apply to a proper course of action which I stated at the end of my original comment or posting:
And a new one I just read: “Radical change is needed for the global economy to truly recover”
In this article you will find the comment:
“The leaders who continue to focus on sustaining an environment of quotas, fear and general paranoia will go the way of the dinosaur and acquiesce to leaders who create an atmosphere of cooperation, respect and progressive thinking, and who can give their employees a vision and meaning to the work they do.
In this paradigm, quality will no longer be a department or one person, but instead will become a fundamental way of thinking in the organization. This does not mean we’ll impose a uniform Orwellian mentality on people by putting them through Black Belt indoctrination camps. Instead, it signals the emergence of quality practitioners with the right education, a great attitude and a creative, revolutionary spirit.
These individuals will provide the right tools for day-to-day tasks and leadership in the form of coaches and mentors who are not afraid to think. As Deming wrote, we need to adopt a new philosophy and to provide leadership, not mere management.5”
Which our global leaders and so called elite should follow.
Thus a useful way we all can get involved with solving our problems rather than placing blame where it doesn’t belong!
End – Please note I will provide upon request a WORD document which contains these articles if you cannot access them.
The Economy is a complex, non-deterministic system that cannot be managed, understood or controlled by anyone. Fortunately, if the economy is Free Market based it will “self-optimize” (provided it is left alone)and the individual consumer will be the overall beneficiary. Which is exactly why academic economists detest this fact! They want the “power” and influence of a government position! It is like Astronomers understanding orbital mechanics but wanting to “control” the heavens to make things “better”.
Came across this and it reminded me of this article. It’s a rebuttal of Keynes / Krugman by an Austrian School Economist, and he basically says that current “demand-side” economists caused the problems and are prescribing more of the same as a solution.
I know what you know, the problem is you are speaking about what you do not know:
you never red my DEFECTS’ SCIENCE BOOK, so I must forgive you for all your imagination deviation from this new science!
Just answer me if your job/knowledge you used 35 years, against my new science, is able to answer SCIENTIFICALLY to this question:
“How can be a better wet electrical insulation in High Voltages than dry?”
Any idiot knows that the moisture is decreasing any electrical insulation!
But , the Defects’ Science is more clever: it may answer to this REAL anomaly [defect] ,
so I invite your intelligence to answer too, just for to understand
WHAT IS DEFECTS’ SCIENCE MEANING AND NECESSITY/UTILITY!
Important is that Ken understood the DEFECT of the economists same as I do! 🙂