"The man who prefers his country before any other duty shows the same spirit as the man who surrenders every right to the state. They both deny that right is superior to authority."
Lord Acton

Tuesday, February 15, 2011

Playing Chess, Go, and the Insanity of Government Games

I read something from a blogger I respect greatly over at Jesse's Cafe Americain that I just can't let go.   He wrote about his Japanese friend and reaction how the Japanese and Chinese are long term thinkers, while westerners (especially Americans) are short term profit seekers.  That is true in a sense.  He also brings up the point that the Asians think about the world as if they were playing the game Go, while the Americans view the world as if they were playing checkers.  The point of the game go is to lock up and control space on the board.  This point is often used in analogy to China locking up natural resources around the world namely oil.

In this modern global economy we live in one should not think linearly.  That is to say, so many things are now interconnected that pulling a string on one side of the world causes a seam to come open at the other side of the world.  The value of the dollar, and price of oil are so interconnected in such a complex web of systems and networks that a gallon of oil cannot simply double without affecting many other systems and eventually feeding back on itself in some way.  We're seeing this manifest itself now with the rising food prices in places of the world most sensitive to those prices.  (See my previous posts to read more on food inflation and monetary policy.)  This interconnectedness of trade increases the likelihood of real lasting peace, and makes national interests less relevant.  There is little difference if China operates African oil wells so long as the oil is sold on the international market.  The pricing mechanism works the same no matter who brings the oil to market.  Governments are continuing to become less relevant in our world so long as they leave their people in relative peace and freedom to pursue their own interests. 

The danger is those players that seek to control the network of systems, like an idiot going into a power plant control room going around the room clicking buttons at random.  They know not what they do.  This extends to government spending. The Japanese built lots of high speed rail during their lost decade, roads and bridges to nowhere, increased energy efficiency and more through profligate stimulus spending.  Sounds like good things perhaps.  Maybe those actions are less dangerous than the work of central bankers, but it's still a allocation of capital that is different than what would have been desired by the earners of those dollars which were taxed.  Governments playing games, Chess, Go, Civilization, or Thermonuclear War are the problem.  This is something the WOPR in the iconic 80's movie War Games learned in the video above.  "A strange game.  The only winning move is not to play".

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