Wednesday, November 18, 2009

Unquestioned Optimism...

As we've seen with the recent banking crisis, everything we do effects everybody, its just a matter of how much or how little. In this current financial problem, we've realized that the problem had actually been accruing for over thirty years, it was merely covered up by an optimistic, yet unrealistic, mentality. We thought the world would keep getting better and better, that we could keep borrowing and spending, getting deeper into debt for things we knew we couldn't afford. We thought it was our right to own the things we went into debt for. So we just kept buying and borrowing, thinking it would all be okay, when we were actually setting ourselves up for a big lesson in humility.

What happened was the financial collapse. It didn't really collapse, it merely self-corrected. It was a big correction to say the least. You see, things (e.g. houses, cars, commodities, etc.) were inflated. Inflated means that the price went up, but the actual value did not. Many economists would argue with me, but in my opinion, inflation is bad, so is deflation. Things should only have a price based on their actual value. By actual value, I mean the value based on the things' inherent qualities, situational qualities, and emotional qualities (i.e. what is it made of? Where is it located in time or geography? and how do I feel about it?). If we look at the housing bubble, for example,we see that the stuff they were made of didn't change, they were still in the same place, and how I felt about houses remained the same (a house feels warm, smells like grass I just mowed, is time-comsuming to maintain, is an expensive canvas) However, your emotions about houses may have changed and caused the entire bubble. Shame on you. ;)

For argument's sake, we'll assume that your emotions did not change, but that it was our ideas about houses that caused the housing bubble. Our ideas were that houses would go up in value, everybody had the right to own a house, houses were a no-risk investment, and that we didn't need to worry about our ARMs because rates would never go up (what?! rates go up? no way!)! Well, guess what happened. We've learned that houses don't always go up in value; people lose jobs; our privilege to own a home is forfeited when we borrow for more house than we can seriously afford; there is risk in every investment; and ARMs are horrible, but if we do get one we should be prepared for the rates to go up (save, save, save!).

What we discovered, was that our ideas were severely out of line with reality.

So what really caused the banking crisis and this current recession? One thing is blind optimism... I believe this mentality and the mentality surrounding the environmental debate are quite similar.

I need to note here that I may be making a couple foolish assumptions. I am not an expert on the environment or the economy, nor to I care to be. I'm simply making an observation and a link between two situations because a similar mental pattern correlates to both problems.

It may be that people do more to help the environment than I am actually aware, but, being a layman, I'll adopt the popular theory, which is that humans do a lot to harm the environment and our planet. Many link global climate change to human activities. Many give us only decades left on this planet, some give us more.

Here is what I'm going to say on this issue, having adopted this popular theory:

If we are going to continue using the earth's resources and land, let us realize that they are finite in quantity, though possibly replenishable. Our existence on this planet is not a right, it is a privilege. If we treat this world the way we have treated our finances, eventually our human system will collapse, the world will support us no longer. We will see deflation of people. The problem with this system collapse is that the recovery wont cost us in dollars, it will cost human lives.

So what do we do? Do we try to avoid the problem and let the system correct itself? Do we allow ourselves to be consumed by each other?

I would argue that nihilism is not the answer, but I would also say that starting to be responsible now is not enough. David Deutsch argues that if scientists generally agree that it is too late for any preventative approaches to have much affect, then we need to adopt a mentality of "problem fixing", not "problem avoidance".

"If you get punched on the nose, the science of medicine doesn't consist of teaching you to avoid punches." -David Deutsch, an amazingly brilliant man

We ought to find a way to fix our environmental problem while being responsible with our resources. These should happen simultaneously. Even further, I would argue that we ought to constantly be innovating new ways to better utilize our resources and gather them from multiple sources. As with finances, we ought to be responsible, fix our problems when they happen, and improve our financial stability and standards all at the same time. They are all equally important.

How it all ties together:

Finally, as with everything, we'll tie in to education... Our education is becoming commodified and this commodity is inflating. Sir Ken Robinson, whose TED video I posted recently, agrees that the inflation of education is a reality. The reality is that the jobs that required a BA ten years ago now require a PhD and jobs that required no degree now require a BA. Eventually degrees wont be worth anything.

We no longer have the luxury of treating our education like we have been treating our environment or our finances. Though superficially different, these things are fundamentally similar in how we ought to treat them.

Our education is finite, we only have until we die to learn as much as we can. Education does not always go up in value, the value is proportional to what you learn and how you apply it. In education there is value in differentiation. Education is a privilege, we must be willing to give with what we learn and constantly question what we know, otherwise we've learned nothing. When we learn, we are taking a risk, because we never know where that knowledge will take us. We don't need to borrow money to learn, we have many ways of learning. Some spending is likely, but if you are a patron of your local bookstore it will make your life easier. Libraries can be unreliable as far as supply goes.

If we can transform our ideas about education and learn better ideas in our educational system, we can change the world of finance and the world itself. Knowledge begets all things, including the way we treat our world and our trade. With a new way of learning we can take control of the future, and with it, do something that matters.

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