It’s easy to forget that responses to actions aren’t linearly proportional to the force applied, that many situations have a convexity in which just a little more can make all the difference, and a little less does nothing.
1. This letter to the NYTimes on Friday points out one of them.
To the Editor:
If there is an original sin in the Obama administration, it is the fateful decision not to initiate an F.D.I.C.-style takeover of the American banking sector upon its collapse. Had the administration taken that step ? taking over the insolvent banks, firing management and recapitalizing them on sound footing ? much subsequent history would have been different. Once it lashed itself to the mast of a broken financial industry, however, putting the entire economy at the mercy of people focused on the size of their bonuses rather than the health of the economy, the administration could only hang on, silently and single-mindedly working to recapitalize the banks. Anything that threatened to interfere with that overriding priority ? exposing bad debts, reining in the foreclosure mess and, yes, aggressively investigating illegal activity by corrupt financial executives ? had to take a back seat.
Montreal, April 14, 2011^
2. The linear proportional approach to helping the rebels in Libya is another example of just too little.
3. Re Quantitative Easing 2, however, I don’t think any amount of easing will solve the economic problem. The cause cannot produce the desired effect, because easy credit isn’t the problem.
4. I don’t believe China won’t run into social trouble in the long run either, even though so far everything proceeds linearly towards growth without political freedom.
5. As for the US, sooner or later there will arise a successful popular nonlinear response to the linearly increasing concentration of economic power that isn’t devoted to popular improvement.