Today’s Washington Post reports that General Motors is likely to be building more cars overseas after it’s restructured (see www.washingtonpost.com/wp-dyn/content/article/2009/05/07/AR2009050704336.html).
The lead paragraph: “The U.S. government is pouring billions into General Motors in hopes of reviving the domestic economy, but when the automaker completes its restructuring plan, many of the company’s new jobs will be filled by workers overseas.”
And later, “Essentially in control of the company, the president’s autos task force faces an awkward choice: It can either require General Motors to keep more jobs at home, potentially raising labor costs at a company already beset with financial woes, or it can risk political fury by allowing the automaker to expand operations at lower-cost manufacturing locations.”
This will likely happen when Fiat takes over much of Chrysler, leaving the United Auto Workers with a large stake in a company who’s “salvation” lies in eliminating the jobs of their members. How fun.
This is viewed by the media as “ironic,” but in truth it’s an excellent example of what Jay Forrester of MIT explains in a memorable chapter of Urban Dynamics (1969) – unintended consequences resulting from intervening in the workings of complex systems. If you “push” on a complex system, it is quite likely to react in EXACTLY the opposite direction than you intended.
A city is a complex system. An industry is a complex system. Economies are complex systems. Countries are complex systems.
The Amazon.com listing of Urban Dynamics is a good place to explore – it lists 100 books that refer to it.
Another is Forrester’s wikipedia page.
It starts: Forrester was born in 1918 on a cattle ranch near Anselmo, Nebraska, in the middle of the United States. His early interest in electricity was spurred, perhaps, by the fact that the ranch had none. While in high school, he built a wind-driven, 12-volt electrical system using old car parts — it gave the ranch its first electric power.[1] After finishing high school, he had received a scholarship to go to the Agricultural College. Three weeks before enrolling, he realized a future of herding cattle in Nebraska winter blizzards had never appealed to him. So instead in 1936 he enrolled in the Engineering College at the University of Nebraska to study Electrical engineering. As it turns out this study was about the only academic field with a solid, central core of theoretical dynamics.[2].
After finishing the University in 1939 he went to the Massachusetts Institute of Technology, to become a research assistant and eventually spend his entire career. In his first year at MIT he was commandeered by Gordon S. Brown who was the pioneer in “feedback control systems” at MIT. During World War II his work with Gordon Brown was in developing servomechanisms for the control of radar antennas and gun mounts. This work was research toward an extremely practical end that ran from mathematical theory to the operating field. Experimental units were installed on the USS Lexington, and, when they stopped working, he volunteered to go to Pearl Harbor in 1942. He fixed the problem when the ship sailed off-shore during the invasion of Tarawa.[2]
That’s an intro that makes the entry hard to close! Last I knew, Forrester is still alive – more about that later.
The point here is that if you hope to design a governmental intervention that will have its desired effect, you’re in deep and dark waters – there are a lot of unintended consequences waiting for you! Like growing old, designing government is not for sissies!
As one f’rinstance, would YOU like to be in charge of redesigning how government(s) regulate the finance industry?
Have you noticed that since we discovered that some financial institutions are “too big to fail” many of them have gotten bigger, by swallowing their smaller, weaker cousins?
Does that result make the financial system more stable? Stay ‘chuned…