Moving to

I'm moving to Mostly.

I plan to use that site as a "self-marketing website" of sorts and to manage content in a way that I would otherwise not be able to do on blogger alone.

This blog will stay, ostensibly for more provisional ideas prior to refinement. I'll be gradually moving content (I still like) over to the other website. =)

Tuesday, May 3, 2011

Immigration, Optimizing KPIs and Honesty

Allow me to pretend I understand human nature: where the outcome is defined in purely financial terms, one is best off by being a rational maximizer. Suppose the main actor's pay is determined by some KPI, we shall call G, in a monotone fashion. (G rises, pay rises.)

Clearly, it is optimal for the actor to maximize G in so far as resources allow. If G can be pumped up by pushing a strategy that suffocates other actors, so be it. That is rational maximization.

Suppose we have an elementary economic model.
    G(p) = K (M - p) p
    A(p) = L p^{-a}
where a > 0. So G is the objective of the main player who controls p and A is the objective of the other actors who have no control over p.

G is a logistic model for GDP growth, and A denotes average wage where total wage is a concave monomial.

G is maximized at half absolute capacity (crush load), and since M is a rather large number, A(M/2) is tiny. Note that the main actor has no incentive to ensure that A(p) is a respectable number.

Now, the model is an obvious snipe at the immigrant labour policy. It is obvious that more immigrant labour means more GDP growth. But the lack of consideration of the average wage is (note: another snipe coming) symptomatic of a failure of all the PPE (Politics-Philosophy-Economics) graduates with excellent A level results to understand basic economics or making the assumption that the rest of the country does not understand.

Social Choice balances GDP growth and quality of life. The GDP growth KPI, in the parlance of economics, cannot implement the balance of GDP growth and quality of life. It would take very good men to resist the allure of optimizing their bonus KPIs at the expense of matters important to others. While it is possible to have a cabinet of such good men, let us protect the country. Let us legislate incentive compatibility into remuneration of our executive and our legislature. There is no negative impact of the on the good men who will direct their efforts in this direction anyway. Moreover, legislating this would be the honest thing to do, especially for a PPE graduate.

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