RE: The M/I ratio and the growth or decline of social systems:
M= systems Maintenance
I= Investment in systems quality
Testable Hypotheses:
When the M/I ration is over 1 the system is stable but not
improving the "quality of life". When the ratio is over 2 the
system is in decline, when over 3 the systems is in crisis. The
history of US in the last 30 years is a rapid decline from 1 or
1.5 to 2 or 3, a vast increase in overhead that reduces systems
productivity below the survival level.
Null Hypotheses: The companies (in the same business) and
countries that keep their eye on the ball will do a lot better
than those that promote process over product, become entangled in
their own bureaucracy, and forget investment and the long term
needs of the system.
Example: When the maintenance cost of an older car are greater
than the cost of replacement (I= total costs of an investment in
a newer car) you have a car in decline. When it is twice as high
you need to trash it, when it is three times the cost of a new
car, you must be crazy to drive the old clunker. If you invest in
good engine oil and a proper maintenance program it most like
will pay off but a new transmission in a 1985 Dodge Dart, or ?.
Morals = the operational definition of morality and virtue is
those habits and actions (customs and systems) that promote
behaviors which increase productive Investment(human and capital)
and decrease Maintenance costs. These habits and customs are the
universal beliefs in loyalty to family and firm, god and country,
hard work, trust, savings, domestic tranquility, and respect.
People of virtue are non-violent and prudent people don't require
and lot of help and make productive workers. Good behavior lowers
the chances of excessive fat, cancer, accidents, crime and
punishment, (police, courts, jails), social services (welfare),
and bad debts. Bad behavior creates an unpleasant corporation,
community and lower quality life style. The law of M/I is a
version of the "natural law" theory but in measurable terms.
Immoral actions (sin) is not cost effective.
The issue of effective but immoral (Fascist make the trains run
on time) is not often true in a modern economy. In most cases,
there is no way of being effective and immoral. (In the long run,
but in the long run we are all dead..) Certain cruel and unusual
actions maybe "tough love" necessary for survival or maybe just
mean, greedy, selfish and short sighted. The perception of the
motivation is very important. The "higher reason" must be clear
for painful, even unfair choices. To run up the national debt to
buy votes or give benefits to the rich, is immoral. To support
"bad habits" of the poor maybe also immoral; both require "tough
love" and wise judgment. (joke: The Christmas play is cancelled
in (DC).. because they couldn't find three wise men and a virgin)
In any society (organization, family, business, school, farm,
forest, or any ecological living system) when the cost of
repairs, system maintenance, simple law and order, legal fees,
health, routine decision making, routine staffing functions such
as purchasing, accounting, personal, routine supervision, non-
variable (not used in production) cost and non-capital costs are
greater than the productive variable cost (cost involved in doing
what the system does) the system is in trouble and may need
replacement. In public education more that 50% of the money never
gets to any activity which could be considered educational,
surprise ?
As a society we were less than 1 (M/I, more investment than
maintenance) until the 1960's. Our saving and investment ratio's
were higher and capital and infrastructure expenditures were much
higher than deprecation. Now as a society our deprecation costs
are greater than our investment - a net disinvestment. The M has
overwhelmed us - this is the root cause of the Republican
rebellion and the cause of "restructuring" and down sizing in
many organizations.
In a 6,000 billion economy:
600-800 billion for non-productive health care -
used in the last month of life, on chronic ailments and mostly on
the effects of bad habits ( smoking, drinking and drugs, bad
diet, stress, crime )
300 - 500 billion for prisons, cops, lawyers, courts, insurance
against crime, security systems, walled communities, private
"rent a cop", et al. Surely a growth business that does little to
improve our competitive position in a world economy. A lot of
this is spent in a vain glorious "war on drugs".
200 -350 billion for trash - useless junk that does nothing for
us. ( you are free to add your own favorites or stories here ) -
regulation that makes the situation worse, ( teacher
certification maybe special education ) and other stupid personal
policies, IRS tax law and the accounting business it generates,
military equipment that is useless, troops in Germany, gadgets
that don't work, most commercial television, 1000's of boards,
elections, commissions, studies, on and on. It is almost
impossible to be a "complete" fool, or 100% useless, but some
activity is very close. We would clearly be better off without it
... the liberation case.
So from a minimum of 1 trillion (1,000 billion) 17% to 2 trillion
30% of the economy is systems maintenance or waste. If 60% to 70%
is in direct or indirect consumption (if you pay Social Security
tax which is being spent by someone else, it's a transfer payment
that ends up in consumption) there is not much room for
Investment and savings. Productive investment or R&D is far less
than 10% (actually public and private is only 5%) but if you
count the productive part of education (less than half the cost),
home improvements, quality improvements, etc you could get to 10%
or even 15% but the ratio is from 2 to 3 times more M than I.
Great Britain has about the same ratio, Germany is more like 1.5,
Japan is still about 1 or less because of a high rate of saving,
the new tigers from Asia are .3. (Hong Kong, Korea, Singapore,
Taiwan, etc.) three times more I than M.. compared to three times
more M than I .. who wins and who looses. If a sports team spent
3 times as much on overhead, unnecessary coaches, front office,
public relations, than on the team that scores points (the final
product is entertainment not victory ) it most like will not do
well vs. a team where overhead is less than 20% of costs. That
much is clear..
***************************************************************
Peter E. Pflaum Ph.D. , Headmaster
GLOBAL_VILLAGE_SCHOOLHOUSE 225 Robinson Road, New Smyrna Beach
http://pflaump.ip.america.com FL 32169-2176 (904) 428-9609
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