How to Solve It

The first model Barack Obama used to explain the 2008 financial crisis was in terms of a floor in need of mopping, which might be the reason he focused on health insurance legislation (as his hypothetical mop) while unemployment increased to include over 10% of the American workforce during his first year in office.

The economic model Obama now uses to explain the financial crisis is in terms of an automobile stuck in a ditch, which he uses to great effect for laughter from audiences on his political fundraising circuit.  But with all respect due to American workers currently suffering through the misery of unemployment unknown to Obama’s political routine, he won’t propose a successful economic solution for the United States until he gets serious about understanding the problem related to the economic downturn that came out of the 2008 financial crisis.

Inspiration for such an economic solution can be found in the classic mathematics text entitled How to Solve It, written in 1945 by Stanford University professor George Polya. The book’s theme involves a four-step process that can be applied to solving most any problem: the first step is to understand the problem, the second is to devise a plan, the third is to carry out the plan, and the fourth is to look back in order to check the solution obtained.

  1. Understand the problem.  What are the data? As an alternative to modeling the 2008 financial crisis data in terms of mopping a floor and an automobile stuck in a ditch, a solution might be more readily achieved in terms explained by MIT economist Charles Kindleberger describing displacement, speculation with credit expansion, an investment peak of financial distress, and a crisis ending in panic and a possible economic crash.
  2. Devise a plan. Have you seen a related problem before?  In Manias, Panics, and Crashes: A History of Financial Crises, Kindleberger provides a useful appendix with an outline of financial crises from 1720 to 1987. Another reference that describes problems similar to the 2008 financial crisis is American Business Cycles, 1865-1897.
  3. Carry out the plan.  Can you describe the necessary steps? Instead of describing how mopping a floor or pushing a car out of a ditch relates to the 2008 financial crisis, the President of the United States should recommend steps to Congress that have succeeded in alleviating past financial crises, such as those used to end the long-wave depression that plagued the American economy in the late 19th century.
  4. Looking back.  Can you check the result? Prospects for looking back in hindsight at a growing economy and increasing employment in the United States appear sufficient to abandon Obama’s economic model of the 2008 financial crisis, explained in terms of mopping a floor and pushing a car out of a ditch. Think instead of an economic model explained in terms of displacement, speculation, financial distress, and crisis that ends with the 2008 panic so that Americans might profit from Professor Polya’s advice for how to solve the problem of our economic downturn in the United States while avoiding a financial crash.

 

References

Barack Obama, “Remarks by the President at DNC Fundraiser,” The White House, http://www.whitehouse.gov/the-press-office/remarks-president-dnc-fundraiser-hammerstein-ballroom-102009.

Barack Obama, “Remarks by the President at a DNC Finance Event in Atlanta, Georgia,” The White House, http://www.whitehouse.gov/the-press-office/remarks-president-a-dnc-finance-event-atlanta-georgia.

George Polya, How To Solve It: A New Aspect of Mathematical Method, Second Edition (Princeton, Princeton University Press, 1973).

Charles P. Kindleberger, Manias, Panics, and Crashes: A History of Financial Crises, Revised Edition (New York: Basic Books, 1989).

Rendigs Fels, American Business Cycles, 1865-1897 (Chapel Hill: University of North Carolina Press, 1959).

Ronald Grey, “Of Mops and Cars,” Ronald Grey: Ideas for Presidential Leadership, https://ronaldgrey.wordpress.com/2010/08/03/of-mops-and-cars.

Advertisements

2 thoughts on “How to Solve It

  1. Pingback: Obama’s Funny Bed-Wetters « Ronald Grey

  2. Pingback: Best Way to Solve America’s Economic Problem « Ronald Grey

Comments are closed.