John, in an attempt to be constructive I've taken the unauthorized liberty to draft for you a possible (maybe) abstract for your GD theory that satisfies some of my concerns (using concepts mainly from Chapts. 4 & 7). I've also modified your title to suit my tastes, which of course may not suit yours. This will stand as evidence that I am not out to insult you. Please regard this as only a "strawman" draft.

-- DRAFT ABSTRACT --

"Generational Dynamics For Quantitave Historians"

The purpose of Generational Dynamics (GD) theory is to predict relevant shifts in cultural infrastructure that have important political implications. My objective in positing the GD model is to demonstrate that its dynamical aspects arise from specific attractors, which can be resolved algorithmically. I will argue that chaos theory offers a means for resolving these attractors by viewing them as fractal patterns of generations, because the principal discovery of GD theory is that the generational cycle is the key attractor in the chaotic course of political events.

The principle of GD therefore is attractor-based and derives its support from chaos theory. The overriding assumption of GD theory is that these generational attractors have algorithmic attributes that are useful for predictive purposes, given enough information about the infrastructure in question. By contrast, a null hypothesis would assert that no such algorithms exist in any measurable way, and therefore have no predictive value. In an attempt to reject this null hypothesis I will apply probability theory to the GD model, using a specified sampling methodology. My objective is to develop a fair and reasonable argument that not only rejects the null hypothesis but offers useful algorithms for predicting the course of political history.

Now it's your turn to be "insulting."

--Croakmore

Originally Posted by John J. Xenakis

In one corner of Europe, humans evolved in the form that we know
today, forming civilization A.

In another corner of Europe, humans evolved exactly the same, but
with one big difference: After a crisis war, Prophets did not rebel
against their parents. Instead, their Awakening turned out to be
another Crisis cycle, and there was another crisis war. (In S&H
terminology, this would be a "two-stroke" saeculum.) This was
civilization B.

When these two civilizations finally met each other in war, which one
would have won? Why?

A less that complete answer, but hopefully food for thought...

What you are describing is what I think of as a 'forced external crisis.' If a 4T power contacts a 2T power, and the 4T power has no vital internal conflict, or if its establishment focuses energy externally to deflect attention from vital internal issues, then we have an external conflict of crisis intensity. As the 4T power could be more easily mobilized and focused into an effective fighting machine, the 4T power would have an initial advantage. The 2T power, though it would rather find new values than fight a war of transformation, really has no choice. Faced with a grave external threat, one fights back. If the result is a hard fought war which forces major changes in the 2T culture, the culture might find itself suddenly in 4T mode. One has a traumatized generation of adults, and a generation of children who grew up in an uncertain world. In my opinion, an external forced crisis can create an anomaly. Look at what happened to China when the European powers started carving zones of influence. S&H style cycles do not necessarily exist everywhere in the world. Where they do exist, they are not necessarily dominant. One might reasonably expect major external forces acting on a culture to disrupt said cycles.

Some wars are won in the initial push. The fondly dreamed of 'Quick Victorious War' does happen. The Spanish American War and Mexican American Wars might stand as an example. In other cases, the problems of working in the enemy's territory at the end of a sometimes lengthy supply line are problematic. In some eras, fortifications have an advantage over maneuver. Thus, depending on terrain, weapons, politics, population sizes, moral, loyalty to the government, and many other factors, you might have a one year war with a fairly clean victory, or you might have a 5 year war, or greater. The five year plus wars exhaust an economy, a people, a culture. The long wars are more likely to create a true transformation. (I am more concerned with value shifts than duration of war or number of casualties. To me, a crisis war is one that transforms cultures.)

In one era, fortifications make war of aggression very difficult. Then someone invents siege cannons, and instead of small feudal states and duchies, the kings who can afford siege cannon create larger modern nations. Later, the rifled barrel and machine gun make defensive trench wars likely. The chance of quick decisive victory goes way down. A few decades later, with mass produced tanks and troop carriers, war of maneuver makes a come back. Decisive campaigns can wipe out any but the largest nations in a single campaign, but at the same time world wide alliances make containment of local aggressors possible.

Or at a much larger time scale, Agricultural Age cultures thrive in warmer climates than Industrial Age cultures. One would expect dominant Agricultural Age powers (Rome, Byzantium, Egypt) to be closer to the equator than dominant Industrial Age powers (Germany, Great Britain, France.) Thus, when asked who is likely to win a war in Europe between a 2T and 4T power, I would have to ask what century, what weapons, who is on the offensive, who is living in the warmer climate, who has the greater industrial potential, who has the greater population, who is fighting for Enlightenment values, etc... (Since the Enlightenment, the democratic states have generally had an advantage in morale and industrial productivity over the autocratic states, but not always.)

I believe in cycles. One can look at history and see repeating patterns. However, the attractors which create these patterns are not necessarily dominant and decisive. They are much more likely to suggest the timing of events than the shape of events. When asking who is apt to win a war, the question of which power is in which generation alignment would be way down my list of questions to ask. The 4T power might have an advantage in mobilizing sooner and having a united population and strong initial morale. This is not unimportant, but neither is it necessarily decisive.

In creating a new theory, one has to simplify. One has to reduce the problem such that the aspects one is studying can be allowed to dominate. This is why high school physics labs have equipment which simulates frictionless surfaces. Friction complicates the equations, forces the use of math which high school kids aren't ready for. When studying cycle theory, one is studying one of the more subtle influences in human history. One cannot assume this subtle influence is a dominant influence. One cannot assume that cyclical attractors cause wars, and neglect any and all other forces which can and do influence wars.

OK?

Originally Posted by John J. Xenakis

Dear Jeff,

Originally Posted by jeffw

> Is this a debating tactic? Change the subject when you're losing?
> You asked why the public mood in the High as it affected fighting
> the Korean War was different was different than the mood in the
> Crisis as it affected WWII. I gave you S&H's answer from their
> book. I'd like to know why you think you're explanation is
> superior to S&H's.

I've been studying TFT for four years now, and so, believe it or not,
Jeff, I already knew the TFT explanation, and I don't disagree with
it. I'm well aware that you're capable of copying a couple of
paragraphs out of TFT and posting them. I could have done that myself
if that's what I wanted. But TFT tells HOW people behave and how the
generations interact. I'm looking for an EVOLUTIONARY explanation for
WHY people behave that way, and WHY the generations interact that way.

That's BS John. You only started talking EVOLUTIONARY for the past few days. When you asked the question about the Korean War, evolution wasn't part of it. If you know TFT as well as you say you do, you wouldn't have asked that question in the first place.

Dear Jeff,

Originally Posted by jeffw

> That's BS John. You only started talking EVOLUTIONARY for the past
> few days. When you asked the question about the Korean War,
> evolution wasn't part of it. If you know TFT as well as you say
> you do, you wouldn't have asked that question in the first place.

You're a complete idiot. Please post the URLs of the messages where
you believe that I discussed the Korean War issue without reference
to evolution.

To help you with your research, let me point this out to you:
http://fourthturning.com/forums/view...=147342#147342
In that message, I outlined for Mike the evolutionary argument that I
wrote for my book a year ago. In paragraph #4 I referred to the
"point of minimum replenishment," the point after which a new crisis
war can be fought -- 45-50 years after the end of the last crisis war
for humans. Mike pointed out that I had a flaw in my argument about
"minimum replenishment," and that's where the Korean war came up.

Sincerely,

John

John J. Xenakis
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com

Dear Richard,

Originally Posted by Croakmore

> John, in an attempt to be constructive I've taken the unauthorized
> liberty to draft for you a possible (maybe) abstract for your GD
> theory that satisfies some of my concerns (using concepts mainly
> from Chapts. 4 & 7). I've also modified your title to suit my
> tastes, which of course may not suit yours. This will stand as
> evidence that I am not out to insult you. Please regard this as
> only a "strawman" draft.

> -- DRAFT ABSTRACT --

> "Generational Dynamics For Quantitave Historians"

> The purpose of Generational Dynamics (GD) theory is to predict
> relevant shifts in cultural infrastructure that have important
> political implications. My objective in positing the GD model is
> to demonstrate that its dynamical aspects arise from specific
> attractors, which can be resolved algorithmically. I will argue
> that chaos theory offers a means for resolving these attractors by
> viewing them as fractal patterns of generations, because the
> principal discovery of GD theory is that the generational cycle is
> the key attractor in the chaotic course of political events.

> The principle of GD therefore is attractor-based and derives its
> support from chaos theory. The overriding assumption of GD theory
> is that these generational attractors have algorithmic attributes
> that are useful for predictive purposes, given enough information
> about the infrastructure in question. By contrast, a null
> hypothesis would assert that no such algorithms exist in any
> measurable way, and therefore have no predictive value. In an
> attempt to reject this null hypothesis I will apply probability
> theory to the GD model, using a specified sampling methodology. My
> objective is to develop a fair and reasonable argument that not
> only rejects the null hypothesis but offers useful algorithms for
> predicting the course of political history.

I'm in the process of rewriting portions of the book, and I'm writing
a short "Introduction for Mathematicians." In support of your
suggestion, I'll consider adding an appendix that will more fully
describe the abstract model for mathematicians, and I'll include some
of your ideas.

Sincerely,

John

John J. Xenakis
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com

Dear Bob,

Originally Posted by Bob Butler 54

> What you are describing is what I think of as a 'forced external
> crisis.' If a 4T power contacts a 2T power, and the 4T power has
> no vital internal conflict, or if its establishment focuses energy
> externally to deflect attention from vital internal issues, then
> we have an external conflict of crisis intensity. As the 4T power
> could be more easily mobilized and focused into an effective
> fighting machine, the 4T power would have an initial advantage.
> The 2T power, though it would rather find new values than fight a
> war of transformation, really has no choice. Faced with a grave
> external threat, one fights back. If the result is a hard fought
> war which forces major changes in the 2T culture, the culture
> might find itself suddenly in 4T mode. One has a traumatized
> generation of adults, and a generation of children who grew up in
> an uncertain world. In my opinion, an external forced crisis can
> create an anomaly. Look at what happened to China when the
> European powers started carving zones of influence. S&H style
> cycles do not necessarily exist everywhere in the world. Where
> they do exist, they are not necessarily dominant. One might
> reasonably expect major external forces acting on a culture to
> disrupt said cycles.

Well, I'm not really hypothesizing a "forced external crisis." I'm
hypothesizing that civilization B evolves differently from A and
has a different kind of brain psychology or whatever so that it
actually enters a 4T-like era in its 2T. It doesn't want to find new
values in its 2T; it wants to fight a war of transformation. This is
because the people's brains are different or whatever has to happen.

Originally Posted by Bob Butler 54

> Or at a much larger time scale, Agricultural Age cultures thrive
> in warmer climates than Industrial Age cultures. One would expect
> dominant Agricultural Age powers (Rome, Byzantium, Egypt) to be
> closer to the equator than dominant Industrial Age powers
> (Germany, Great Britain, France.) Thus, when asked who is likely
> to win a war in Europe between a 2T and 4T power, I would have to
> ask what century, what weapons, who is on the offensive, who is
> living in the warmer climate, who has the greater industrial
> potential, who has the greater population, who is fighting for
> Enlightenment values, etc... (Since the Enlightenment, the
> democratic states have generally had an advantage in morale and
> industrial productivity over the autocratic states, but not
> always.)

I would have to respond that I'm looking for a long-term advantage
over many battles and wars, with a variety of climates, weapons, and
so forth.

Originally Posted by Bob Butler 54

> I believe in cycles. One can look at history and see repeating
> patterns. However, the attractors which create these patterns are
> not necessarily dominant and decisive. They are much more likely
> to suggest the timing of events than the shape of events. When
> asking who is apt to win a war, the question of which power is in
> which generation alignment would be way down my list of questions
> to ask. The 4T power might have an advantage in mobilizing sooner
> and having a united population and strong initial morale. This is
> not unimportant, but neither is it necessarily decisive.

This reasoning makes sense to me, but there's another side. In the
hypothetical civilization B, they're ready to fight wars of
transformation while they're still being led by heroes of the last
crisis war. Isn't that a big advantage for civilization B? Wouldn't
civilization B win more of those wars?

Originally Posted by Bob Butler 54

> OK?

OK.

Sincerely,

John

John J. Xenakis
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com

Well, I'll be damned. I actually figured it out, I think.

Anyway I still had a couple more questions.

For wars which are unnamed, should I simply name the participants and the dates?

There are some where the information is not sufficient to determine whether it is a crisis war or not (for example, from what we discussed, the possible Wampanoag War in the 1610s and the possible Iroquois war in the 1560s). Should I even mention those? That is more for narrative purposes, and I am not planning on doing that, although I may tackle it another day.

I had about 5 more but I am too stupid to write my thoughts down.
:x

Dear Matt,

Originally Posted by MichaelEaston

> Well, I'll be damned. I actually figured it out, I think.

Sometimes we even surprise ourselves.

Originally Posted by MichaelEaston

> Anyway I still had a couple more questions.

> For wars which are unnamed, should I simply name the participants
> and the dates?

> There are some where the information is not sufficient to
> determine whether it is a crisis war or not (for example, from
> what we discussed, the possible Wampanoag War in the 1610s and the
> possible Iroquois war in the 1560s). Should I even mention those?
> That is more for narrative purposes, and I am not planning on
> doing that, although I may tackle it another day.

> I had about 5 more but I am too stupid to write my thoughts down.

Just put down whatever you have, so that the work won't be lost. If
there's an empty space or something, just put in something like "TBS"
(which stands for "to be supplied"), or else write a short note
describing what the problem is.

If the war doesn't have a name, just put down a short description,
like the participants and the date. If there's a word you can use to
characterize it, then do so -- like "civil war" or "war over control
of the southern portion of Lake Erie."

In the case of estimated dates, put down the date, and put
"(Estimate)" after it. If you want to write a note a few words long
explaining what the issue is, then do so.

What are the other questions?

Sincerely,

John

John J. Xenakis
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com

Originally Posted by John J. Xenakis

?Well, I'm not really hypothesizing a "forced external crisis." I'm
hypothesizing that civilization B evolves differently from A and
has a different kind of brain psychology or whatever so that it
actually enters a 4T-like era in its 2T. It doesn't want to find new
values in its 2T; it wants to fight a war of transformation. This is
because the people's brains are different or whatever has to happen.

Hmm... First off, my schtick is supposed to be observing the world and deducing patterns from my observations. As I have not observed non-human worlds where people's brains are wired to care less about finding new values than fighting a war of transformation, what I could say would be the wildest of conjecture.

Also, from my perspective, it is values which are transformed. I see values as a collection of highly emotional lessons learned from any given culture's past. What problems is a culture apt to encounter? How are they solved? What is important to cling to? Thus, by definition, a war of transformation will transform values.

What you seem to be wanting to discuss is a Culture B that is more interested in an external conflict than proposing a religious revival -- a traditional awakening -- or a more secular values revival. Thus, the most obvious mutation would be a population focused on aggression and military values, less interest in religion and morality. This is one 're-wiring' that might result in a two stroke cycle, rather than a four stroke.

In the Agricultural Age, I might bet on the aggressive two stroke culture. Back then, war of aggression was quite often cost effective. The army sizes as a percentage of the population was small. Wars did not ruin the civilian economy or cripple the population as much. Militaristic values were quite clearly advantageous in that a military centered culture had a competitive advantage over a pacifist culture.

During the Industrial Age, I might bet on the four stroke values driven population. They would more easily adapt to an industrial pattern. They would be able to handle the switch from absolute to relative value systems. They would sooner adapt democratic feedback patterns, allowing them to purge corrupt and inefficient autocratic government. All this results in a more robust and productive industrial base, and a firmer commitment by the democratic population to resist the abuses common to autocratic regimes.

Or, more simply, the Agricultural Age was fairly static. Cultures did not change as much or as rapidly. The need to grow and change would be less. Thus, an aggressive rigid species would be able to hold its own. In the Industrial Age, there are a lot more changes going on. There is a greater need to examine and change the culture. A species more ready to acknowledge its flaws and propose new ways would have the advantage in a changing situation. Thus, among humans, since the Enlightenment, militaristic cultures have tended to lose wars of aggression against alliances of economic cultures.

There might be other ways to re-wire a species to favor two stroke rather than four stroke patterns. One might be able to make other arguments if one supposes other mutations. Me, I think crises are driven by a need to adapt cultures towards environments changed by new technology. Changing cultures means changing values. The more rapidly technology (or other factors in the environment) changes, the more need for mechanisms for change.

Thus, if one supposes a steady state situation, there is no need for four stroke cycles emphasizing renewed values every four score and seven years. Dynasties would kill for power, but there would be little true change and no real need for true change. If, on the other hand, technology, the environment, resource availability or whatever is in flux, tools like democracy, relative value systems, periodic awakenings and other mechanisms which initiate and harness change would be survival traits.

Recently I have had trouble opening your website through Firefox and I have had to use Internet Explorer. Do you have any idea why this might be the case?

Dear Bob,

Originally Posted by Bob Butler 54

> Hmm... First off, my schtick is supposed to be observing the world
> and deducing patterns from my observations. As I have not observed
> non-human worlds where people's brains are wired to care less
> about finding new values than fighting a war of transformation,
> what I could say would be the wildest of conjecture.

> Also, from my perspective, it is values which are transformed. I
> see values as a collection of highly emotional lessons learned
> from any given culture's past. What problems is a culture apt to
> encounter? How are they solved? What is important to cling to?
> Thus, by definition, a war of transformation will transform
> values.

> What you seem to be wanting to discuss is a Culture B that is more
> interested in an external conflict than proposing a religious
> revival -- a traditional awakening -- or a more secular values
> revival. Thus, the most obvious mutation would be a population
> focused on aggression and military values, less interest in
> religion and morality. This is one 're-wiring' that might result
> in a two stroke cycle, rather than a four stroke.

> In the Agricultural Age, I might bet on the aggressive two stroke
> culture. Back then, war of aggression was quite often cost
> effective. The army sizes as a percentage of the population was
> small. Wars did not ruin the civilian economy or cripple the
> population as much. Militaristic values were quite clearly
> advantageous in that a military centered culture had a competitive
> advantage over a pacifist culture.

> During the Industrial Age, I might bet on the four stroke values
> driven population. They would more easily adapt to an industrial
> pattern. They would be able to handle the switch from absolute to
> relative value systems. They would sooner adapt democratic
> feedback patterns, allowing them to purge corrupt and inefficient
> autocratic government. All this results in a more robust and
> productive industrial base, and a firmer commitment by the
> democratic population to resist the abuses common to autocratic
> regimes.

> Or, more simply, the Agricultural Age was fairly static. Cultures
> did not change as much or as rapidly. The need to grow and change
> would be less. Thus, an aggressive rigid species would be able to
> hold its own. In the Industrial Age, there are a lot more changes
> going on. There is a greater need to examine and change the
> culture. A species more ready to acknowledge its flaws and propose
> new ways would have the advantage in a changing situation. Thus,
> among humans, since the Enlightenment, militaristic cultures have
> tended to lose wars of aggression against alliances of economic
> cultures.

> There might be other ways to re-wire a species to favor two stroke
> rather than four stroke patterns. One might be able to make other
> arguments if one supposes other mutations. Me, I think crises are
> driven by a need to adapt cultures towards environments changed by
> new technology. Changing cultures means changing values. The more
> rapidly technology (or other factors in the environment) changes,
> the more need for mechanisms for change.

> Thus, if one supposes a steady state situation, there is no need
> for four stroke cycles emphasizing renewed values every four score
> and seven years. Dynasties would kill for power, but there would
> be little true change and no real need for true change. If, on the
> other hand, technology, the environment, resource availability or
> whatever is in flux, tools like democracy, relative value systems,
> periodic awakenings and other mechanisms which initiate and
> harness change would be survival traits.

This is a very interesting analysis of the balance between crisis and
non-crisis wars.

I've been thinking about your messages yesterday and today, I've come
to realize that I've been making a fundamental error for quite some
time now.

Since the beginning, I've been assuming that crisis wars are the most
powerful wars -- a country fighting a crisis war will be a much more
powerful and formidable enemy than a country fighting a non-crisis
war. I've always talked about a country fighting a crisis war with a
great deal of "energy," and I've always tacitly assumed that that's a
good thing, in the sense of making it more likely to win the war.

I've undoubtedly been influenced in this by what happened in the
Vietnam war, which was 2T for us and 4T for Vietnam, and they won. I
think a lot of people have been influenced the same way.

But today I've been looking at the question in a completely different
way: Take any war. If it was crisis, then change it to non-crisis;
if it was non-crisis, change it to crisis. Then how would the war
have been fought differently?

The conclusion I've reached is very much a surprise to me. It seems
that nations fighting non-crisis wars are a much more formidable
enemy than those fighting crisis wars.

I reached this new conclusion very simply by looking at a few recent
wars in the way I just described.

• Vietnam. I've always thought that Vietnam won because of
  their 4T "energy" with which they pursued the war. In a sense that's
  true, but the Tet offensive was a desperate 4T-type gamble, risking
  everything for victory, and it was disastrous for them militarily.
  They must have been shocked when Walter Cronkite declared the war a
  victory for them, after which America fought the war with America
  rather than with Vietnam. If they had fought this as a 2T rather
  than a 4T war, they probably still would have won, simply because
  they would have worn us out, but without the substantials risks and
  losses of the Tet offensive. So changing this from 4T to 2T for
  Vietnam makes this a more successful war for Vietnam.
  
• Korea and Vietnam. If we had fought these as 4T wars we
  would have used nuclear weapons, which might have drawn a retaliatory
  nuclear strike from Russia and China, which would have been
  disastrous. By fighting it as a 2T war, we had the common sense to
  cut our losses before courting disaster.
  
• Germany and Russia in WW II. Hitler was leading a 4T war.
  If it had been 2T war, Hitler would not have been so dumb as to invade
  Russia, at least not until other issues had been settled.
  
• Germany in WW I. Because it was a 3T war, Germany
  capitulated long before it had to, saving millions of additional
  lives on all sides. If it had been a 4T war, Germany would have
  fought to the bitter end.
  
• Napoleon with Russia. Napoleon would not have invaded if
  he were in a 2T war rather than a 4T war.
  
• Russia with Napoleon. If it had been a 4T war for Russia,
  then Russia would have defended Moscow and lost the war. As a 2T
  war, they retreated from Moscow and let Napoleon's army disintegrate.
  
• Civil War. How dumb was it to fire on Fort Sumter and
  fight a war with someone three times as big? That's what happens in
  a 4T war.
  
• Japan and Pearl Harbor. How dumb was it to bomb Pearl
  Harbor and fight a war with someone several times bigger?
  
• 1991 Gulf War. We set a limited objective, we reached the
  objective, and cleared out. In a 4T war we would have gone after
  Saddam, which, of course we did later.
  
• Iran today. It just dawned on me today that Iran is
  fighting a brilliant 2T war against Israel.
  
  Mahmoud Ahmadinejad is considered an international joke, an
  embarrassment to Iran, because he keeps saying stupid things, like
  "wipe Israel off the map" and "send Israel back to Europe" and "the
  Holocaust didn't happen" and "we'll build any nuclear plants we'd
  like." There's been talk in the press that Ahmadinejad will be
  replaced soon because he's such a clown.
  
  But if you change your focus and interpret Ahmadinejad's actions as a
  2T war against Israel, then everything makes absolute sense: He
  inflames Arab public opinion, intending to trigger a war between Jews
  and Arabs. This will involve the entire region, but Iran won't be
  involved except to supply weapons. At the end, Israel will be wiped
  off the map and all the Muslim countries in the region will be
  flattened -- except Iran, which will have stayed out of it. As the
  last country standing, Iran will be the regional superpower and will
  have hegemony over most of the Muslim world.
  
  He might even be coordinating all this with China. The two countries
  would be envisioning a world where China controls Asia and the
  Pacific, and Iran controls the Mideast and southern Europe.
  
  Under this interpretation, everything that Ahmadinejad has been doing
  makes sense. In fact, it's actually brilliant.
  
  On the other, if Ahmadinejad were pusuing a 4T war against Israel, it
  would be all-out war, and Iran would be flattened, just like everyone
  else.

These examples make it clear that 2T wars are much more potent than
4T wars, and this explains why nations avoid crisis wars for as long
as possible.

I had originally theorized that a crisis war exhausts a country,
using up so many resources (including people) that it needs to
"replenish" those resources over many decades because it can fight
another such war.

But that's not it at all. Crisis wars are usually disastrous for the
countries that pursue them. Countries avoid them until they're
forced into them by the stupidity of the generational constellation
that forms in the next 4T.

This also fits in with the "fifth turning" concepts that I've been
posting. What happens to a nation that goes through an entire Fourth
Turning without a crisis war? It enters a distinctly different era,
where the would-be artists turn into "Super-Nomads" that pursue
terrorist attacks and other violence to provoke a crisis war.

---

Things really seem to be falling into place now, but it raises a
completely different question: Why do nations have crisis wars?

Let's turn the problem around. Assume that:

In one corner of Europe, humans evolved in the form that we know
today, forming civilization A.

In another corner of Europe, humans evolved exactly the same, but
with one big difference: They never enter a "fourth turning." Their
brain psychology evolved differently so that they never develop the
4T anxiety -- the anger at immigration, the unwillingness to
compromise, etc. This was civilization B.

When these two civilizations finally met each other in war, which one
would have won? Why?

Obviously civilization B should win -- since it fights only
non-crisis wars, and is thus more formidable.

But if that were true, then why didn't humans evolve that way? There
must some part of the analysis missing.

And the answer has to be that crisis wars are necessary after all,
even though they're disastrous. Napoleon's loss may have seemed
disastrous, but it thinned out the population of Europe, getting rid
of the weak, the old, the fat, the stupid, the sick, and so forth.
It was good for Europe to go through that, because it made the
"European human stock" much stronger, more likely to win future wars.

So my whole concept of "replenishment" was completely wrong. Nations
avoid crisis wars because they're bad for them, not because anything
has to be replenished. But they have crisis wars because after a
while they get to top-heavy, too many old people, and too complacent.

But getting back to your argument, don't tribes and society in
Agricultural Ages get top-heavy also? Wouldn't they need 4T wars
just as much as the Industrial Age tribes, just to get rid of all the
old people sitting around, not able to do their share of plowing the
fields? Isn't a good crisis war just what an agricultural tribe
needs, to make the tribe as a whole young and virulent again, by
mowing down all the crones and geezers?

And doesn't America really need a crisis war today -- to get rid of
all those weak, sick, old people who expect too much Medicare and
Social Security than can ever be paid? It may just be that our
country can't survive without it.

Anyway, now I have to go back and rewrite the entire argument why the
same generational paradigm must apply to every intelligent species in
the universe.

Sincerely,

John

John J. Xenakis
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com

Dear Matt,

Originally Posted by MichaelEaston

> Recently I have had trouble opening your website through Firefox
> and I have had to use Internet Explorer. Do you have any idea why
> this might be the case?

I myself use Firefox all the time, and haven't had a problem.

What kind of a problem are you experiencing?

Does it happen on all pages, or just the home page when you go to
http://www.GenerationalDynamics.com - that's the only page on the web
site that uses JavaScript (to figure out that you really want to go
to http://www.generationaldynamics.com/ww2010.htm ).

Other than that, every web page uses HTML that was standardized ten
years ago, so that even old browsers should work fine.

Sincerely,

John

John J. Xenakis
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com

Well, I didn't do anything, and now it seems to be working. I literally just tried it 5 minutes ago and it wasn't.

But it used to say the file /ww2010.htm could not be found.

Anyways,

The conclusion I've reached is very much a surprise to me. It seems
that nations fighting non-crisis wars are a much more formidable
enemy than those fighting crisis wars.

I can't help but think America/England in World War Two would have been better off if we were in a non-crisis war (and Germany was in a crisis war).

Dear Matt,

Originally Posted by MichaelEaston

> I can't help but think America/England in World War Two would have
> been better off if we were in a non-crisis war (and Germany was in
> a crisis war).

What's your reasoning?

Sincerely,

John

John J. Xenakis
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com

Well, England might lose and fall to the Nazis. America would be fighting the Japanese, and all that separates the Germans from America is the Atlantic. In a 4T war, America might fall and would stay under Nazi occupation for many years.

If that were to happen, Hitler would kill many more Jews and other minorities and life would pretty much suck for the rest of us.

I came into this thinking, "Wow. If America's cycle had been a little off, we would have been screwed." Are you telling me otherwise?

Originally Posted by MichaelEaston

Well, I didn't do anything, and now it seems to be working. I literally just tried it 5 minutes ago and it wasn't.

But it used to say the file /ww2010.htm could not be found.

Well it is happening again, and it isn't just your site but a few others. It must be my computer or firefox.

John,

Originally Posted by John J. Xenakis

Dear Clark,

Originally Posted by Clark

> I'd like to take this up as a separate subject because it pertains
> to one of my initial objections to what you present on your
> website. Your website presents a graph of the stock average over
> the last 120 years with a regression line drawn through it and
> makes the conclusion that the stock average will revert back to
> the regression line. My comment was that the 3.5% or so economic
> growth rate over the last 120 years that underpinned the growth in
> the stock averages is significantly higher than the 1% or so
> economic growth rate over the last 2000 years. I then did some
> rough calculations that showed how I got to 1% and stated
> something to the effect that your assumption would not be valid if
> there was a reversion to long term growth rates and left it at
> that. The price structure that you present is a fractal. I don't
> know if you dispute that assumption but if you do, we can talk
> about that. As I stated before, economic growth, (incorrectly)
> represented by GDP growth as a proxy, correlates with the growth
> in the stock averages. GDP growth is comprised of growth in energy
> usage (approximately 2% per year) plus improvements in energy
> intensity (approximately 1.5% per year). Energy intensity is
> defined as the energy input in BTUs per dollar of GDP output.
> Therefore, the conclusions you make based on your graph implicitly
> assume that energy will not be a limiting factor in economic
> growth.

You're referring to an e-mail correspondence that we had many months
ago. At that time you said, "You show a long term growth line fitted
to the stock average. I think you mention long term real growth is
4.7%. Long term depends on how you define it. I know it's difficult
to extrapolate further back than you have based on stock prices.
However, I think it's safe to say that all of the wealth in the world
would have been worth at least a million dollars in 1 A.D. and it
might be worth 100 trillion now. This would imply a long term growth
rate of 0.9%."

After some give and take, I responded: "Here's a problem that's been
sitting in my (virtual) stack of tasks for a couple of years now: The
DJIA grew at 4.7% per year from 1890-2002, while the S&P 500 index
grew at 1.6% per year from 1871-2004. Now, why the huge range of
percentages, since they should presumably be measuring the same
thing? I believe that the answer lies in the selection of the 30
companies in the DJIA and the Byzantine methodology for computing the
index, but I haven't really researched it."

So a lot depends on what you're measuring. As I said at the time,
figuring out exactly why the growth rate of the DJIA and S&P indexes
are so far apart might throw some light on the correct methodology to
be used.

I do not know if GDP growth is as directly related to energy growth,
as you say. I don't believe that it's true, but at any rate it has
to be proven.

Yes, that was an e-mail exchange and then you posted it in it's entirety on this thread in late July, I believe.

I don't believe it can be proven that GDP growth relates directly to growth in energy usage. It can be theorized, correlated, and logically argued. I discovered a couple days ago that some of the broad concepts I've developed have also been explored and in more detail by David Stern at RPI. An abstract to one of his papers states:

Originally Posted by David Ian Stern

Physical theory shows that energy is necessary for economic production and therefore growth but the mainstream theory of economic growth, except for specialized resource economics models, pays no attention to the role of energy. This paper reviews the relevant biophysical theory, mainstream and resource economics models of growth, the critiques of mainstream models, and the various mechanisms that can weaken the links between energy and growth. Finally we review the empirical literature that finds that energy used per unit of economic output has declined, but that this is to a large extent due to a shift from poorer quality fuels such as coal to the use of higher quality fuels, and especially electricity. Furthermore, time series analysis shows that energy and GDP cointegrate and energy use Granger causes GDP when additional variables such as energy prices or other production inputs are included. As a result, prospects for further large reductions in energy intensity seem limited.

A paragraph from his summary paper entitled The Role of Energy in Economic Growth and Production follows:

Originally Posted by David Ian Stern

We believe that such a model explains the observations as parsimoniously as possible. In this model increased energy use does not generate much economic growth unless accompanied by increased use of capital and labor. However, increasing capital and labor use without increasing energy use also results in little gain in output. In our view, therefore, while energy is essential in production increased energy use cannot have been the driver of economic growth. Instead, the inability to expand energy use will hold back and constrain the level of economic output. The innovations that increased energy supply at the beginning of the industrial revolution removed a constraint * that prevented modern economic growth before then. Continuous smooth expansion of the energy supply and its rising quality has been essential to maintaining the growth path since then. The oil crises in the 1970s and early 80s show what happens when there is a hiccough in this smooth expansion path.

The summary paper can be found here.
http://www.rpi.edu/~sternd/energy-summary.html

Within the larger picture, I think there's a certain economic growth rate or rate of return that needs to be crossed in order to organize and maintain functioning stock markets. It wasn't until the Industrial Age that that growth rate was crossed and a growing supply of energy was necessary in order to cross that threshold.

David's statement that, "As a result, prospects for further large reductions in energy intensity seem limited" is true in my view within the Industrial/Information Age economy. If it becomes necessary to change the economy due to a lack of energy supply growth, a new economic worldview cycle will have to take form, the old industrial economy will collapse and energy usage will decouple (is that a word?) from economic output. I think that process may be beginning but I don't think the transition can be fast or smooth and I am not sure that there will be any functioning stock markets when it is over (or they may be functioning on a very limited basis).

Which brings me to another point. In all past cycles that you and I have discussed that involved panics and crashes, the US was on a gold standard so a stock market chart expressed in either dollars or gold would have had the same shape. That is no longer true today because the dollar is not fixed to gold. If you take a look at a chart of the Dow in terms of gold, it just recently dropped below the previous low point it reached in 2002 or 2003 (can't remember which was the low).

John,

Originally Posted by John J. Xenakis

Dear Clark,

There's almost no relationship whatsoever between forecasting short
term cycles and forecasting long term cycles. The methodologies are
totally different and completely unrelated. There's certainly no
"scaling."

I don't want to get bogged down in all this stuff. What you're saying here is absolutely true from a fundamental standpoint. There are certainly no miniature generational or K-cycles just as individual cells do not look like little people. However, the mechanistic behaviors are similar over various time frames. What the fundamentals are over small time scales I cannot say any more than someone could have described the organelles in a cell in the year 1492. I accept that there are some things I cannot prove but suspect are true based on experience.

By the way, Columbus set sail exactly 12 Metonic Cyles before the Peak of the South Sea Bubble (edit: August 2, 1492 + 12x19 = August 1, 1720 plus one day). OK, I'll stop there.

John,

Originally Posted by John J. Xenakis

Dear Clark,

After some give and take, I responded: "Here's a problem that's been
sitting in my (virtual) stack of tasks for a couple of years now: The
DJIA grew at 4.7% per year from 1890-2002, while the S&P 500 index
grew at 1.6% per year from 1871-2004. Now, why the huge range of
percentages, since they should presumably be measuring the same
thing? I believe that the answer lies in the selection of the 30
companies in the DJIA and the Byzantine methodology for computing the
index, but I haven't really researched it."

So a lot depends on what you're measuring. As I said at the time,
figuring out exactly why the growth rate of the DJIA and S&P indexes
are so far apart might throw some light on the correct methodology to
be used.


Sincerely,

John

John J. Xenakis
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com

I have a hand drawn chart book of the Dow Jones averages dating back to 1885. The preface to the book states, "From 1885 to 1897, Dow Jones & Co. used a single composite Average, made up largely of railroads. But in 1897 Dow decided to publish (daily) his two Averages, one to be an index of manufacturing and production (Industrial Average) and the other to be an index of shipping and transportation (Rail Average)." According to the charts themselves, the first average consisted of 14 stocks, 12 railroads and 2 industrials. The 2 industrials were Pacific Mail Steamship and Western Union. In the following year, 1886, 2 railroads were dropped from the average and the average consisted of 12 stocks until September, 1889, when a 20 Stock Average was introduced which consisted of 18 railraods and 2 industrials. The 12 Stock Average was discontinued in May, 1896 and the 20 Stock Average was discontinued at the end of 1896. In 1897, the Rail Average, composed of 20 rails and the Industrial Average, composed of 12 industrials, were introduced. In December, 1914, the Industrial Average was modified to include 20 industrials and was computed simultaneously with the 12 stock Industrial Average until the latter was discontinued in October, 1916. It wasn't until October, 1928 that the Industrial Average was expanded to include 30 stocks.

Sometime in the 1920s, Standard and Poor's introduced a stock average, but it didn't consist of 500 stocks until March 1, 1957.

According to a long term chart book I have that contains both averages, the Dow Industrials stood at approximately 500 in March, 1957 while the S&P 500 stood at approximately 45. Since then, the Dow has expanded approximately 22 fold while the S&P has expanded 28 fold, or 6.5% and 7.1% (annually), respectively, not adjusting for inflation.

Dear Matt,

Originally Posted by MichaelEaston

> Well, England might lose and fall to the Nazis. America would be
> fighting the Japanese, and all that separates the Germans from
> America is the Atlantic. In a 4T war, America might fall and would
> stay under Nazi occupation for many years.

> If that were to happen, Hitler would kill many more Jews and other
> minorities and life would pretty much suck for the rest of us.

> I came into this thinking, "Wow. If America's cycle had been a
> little off, we would have been screwed." Are you telling me
> otherwise?

If Britain and America had fought WW II as a 2T war rather than a 4T
war, the outcome might have been better. For example, perhaps we
might have thought up a better way of retaking the continent that
didn't require tens of thousands of soldiers to commit suicide on
Normandy beach. Hitler made a huge mistake by invading Russia too
soon. Maybe we would have found a way to goad him into making other
mistakes. I've always thought that Hitler was crazy anyway, and given
a little more time he might have completely destroyed himself.

The other thing is that the outcome of WW II wasn't so great anyway,
when you consider the fact that half of Europe was behind the Iron
Curtain. Maybe the absolute worst scenario - where Germany remained
in control of France - would have changed other things so that
the East European countries would have remained free.

Originally Posted by MichaelEaston

> Well it is happening again, and it isn't just your site but a few
> others. It must be my computer or firefox.

Try a few things:
http://www.generationaldynamics.com/
http://www.generationaldynamics.com/ww2010.htm
http://www.generationaldynamics.com/...?d=ww2010.home
http://www.generationaldynamics.com/ww2010/vcov1b.gif

Are there any differences among these? Do they either all succeed or
all fail?

Try some similar things with other web sites, and see if you can
narrow down the kinds of pages that are failing.

Sincerely,

John

John J. Xenakis
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com

Dear Clark,

Originally Posted by Clark

> The summary paper can be found here.
> http://www.rpi.edu/~sternd/energy-summary.html

> Within the larger picture, I think there's a certain economic
> growth rate or rate of return that needs to be crossed in order to
> organize and maintain functioning stock markets. It wasn't until
> the Industrial Age that that growth rate was crossed and a growing
> supply of energy was necessary in order to cross that threshold.

> David's statement that, "As a result, prospects for further large
> reductions in energy intensity seem limited" is true in my view
> within the Industrial/Information Age economy. If it becomes
> necessary to change the economy due to a lack of energy supply
> growth, a new economic worldview cycle will have to take form, the
> old industrial economy will collapse and energy usage will
> decouple (is that a word?) from economic output. I think that
> process may be beginning but I don't think the transition can be
> fast or smooth and I am not sure that there will be any
> functioning stock markets when it is over (or they may be
> functioning on a very limited basis).

My guess as to what's happening is this: The cost of energy relative
to the cost of labor and capital has grown exponentially over time,
and has only become significant in the last 1-2 centuries. Thus,
energy input now affects economic output in a way it didn't before.

Other things could affect output as well, if they became more
expensive. For example, if the cost of water resources became very
high relative to the cost of other inputs, then water input would
also affect economic output.

Originally Posted by Clark

> By the way, Columbus set sail exactly 12 Metonic Cyles before the
> Peak of the South Sea Bubble (edit: August 2, 1492 + 12x19 =
> August 1, 1720 plus one day). OK, I'll stop there.

If you look at a chronological listing of historical events, you'll
find many similar relationships that occur by coincidence.

Originally Posted by Clark

> I have a hand drawn chart book of the Dow Jones averages dating
> back to 1885. The preface to the book states, "From 1885 to 1897,
> Dow Jones & Co. used a single composite Average, made up largely
> of railroads. But in 1897 Dow decided to publish (daily) his two
> Averages, one to be an index of manufacturing and production
> (Industrial Average) and the other to be an index of shipping and
> transportation (Rail Average)." According to the charts
> themselves, the first average consisted of 14 stocks, 12 railroads
> and 2 industrials. The 2 industrials were Pacific Mail Steamship
> and Western Union. In the following year, 1886, 2 railroads were
> dropped from the average and the average consisted of 12 stocks
> until September, 1889, when a 20 Stock Average was introduced
> which consisted of 18 railraods and 2 industrials. The 12 Stock
> Average was discontinued in May, 1896 and the 20 Stock Average was
> discontinued at the end of 1896. In 1897, the Rail Average,
> composed of 20 rails and the Industrial Average, composed of 12
> industrials, were introduced. In December, 1914, the Industrial
> Average was modified to include 20 industrials and was computed
> simultaneously with the 12 stock Industrial Average until the
> latter was discontinued in October, 1916. It wasn't until October,
> 1928 that the Industrial Average was expanded to include 30
> stocks.

> Sometime in the 1920s, Standard and Poor's introduced a stock
> average, but it didn't consist of 500 stocks until March 1, 1957.

> According to a long term chart book I have that contains both
> averages, the Dow Industrials stood at approximately 500 in March,
> 1957 while the S&P 500 stood at approximately 45. Since then, the
> Dow has expanded approximately 22 fold while the S&P has expanded
> 28 fold, or 6.5% and 7.1% (annually), respectively, not adjusting
> for inflation.

That looks like interesting data. There are also 1850s stock
listings in the book that you recomended, The Emergence of
Lincoln by Allan Nevins that you recommended.

When you're determining growth rates, you have to use the longest
possible intervals. Obviously you can get any result you want by
jiggering the interval.

The interval that you've chosen, 1957 to present, is a short interval
that ends in the middle of a bubble. The bubble distorts the growth
rate.

I use Yale Professor Robert J. Shiller's figures on his web site at
http://www.econ.yale.edu/~shiller/data.htm , where he's collected
annual stock market data since 1871.

Sincerely,

John

John J. Xenakis
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com

Originally Posted by John J. Xenakis

Dear Clark,

Originally Posted by Clark

> The summary paper can be found here.
> http://www.rpi.edu/~sternd/energy-summary.html

> Within the larger picture, I think there's a certain economic
> growth rate or rate of return that needs to be crossed in order to
> organize and maintain functioning stock markets. It wasn't until
> the Industrial Age that that growth rate was crossed and a growing
> supply of energy was necessary in order to cross that threshold.

> David's statement that, "As a result, prospects for further large
> reductions in energy intensity seem limited" is true in my view
> within the Industrial/Information Age economy. If it becomes
> necessary to change the economy due to a lack of energy supply
> growth, a new economic worldview cycle will have to take form, the
> old industrial economy will collapse and energy usage will
> decouple (is that a word?) from economic output. I think that
> process may be beginning but I don't think the transition can be
> fast or smooth and I am not sure that there will be any
> functioning stock markets when it is over (or they may be
> functioning on a very limited basis).

My guess as to what's happening is this: The cost of energy relative
to the cost of labor and capital has grown exponentially over time,
and has only become significant in the last 1-2 centuries. Thus,
energy input now affects economic output in a way it didn't before.

Other things could affect output as well, if they became more
expensive. For example, if the cost of water resources became very
high relative to the cost of other inputs, then water input would
also affect economic output.

Since the beginning of the Industrial Revolution, the real cost of energy and other commodities has consistently fallen over time, yet energy remains tightly coupled with economic output.

I think it's more of a supply issue. Either the supply of capital and labor or the supply of energy will be the rate limiting factor in industrial ouput. Historically, the supply of capital and labor has been the rate limiting factor with the exception of the oil shocks in the 1970s and 1980s. Capital and labor have been able to expand technology and productive capacity at a certain limiting rate and the energy required to produce ouput has been adequately supplied. If the supply of energy is not sufficient to meet the expanding demands of capital and labor, then energy supply will become the rate limiting factor in economic growth.

Originally Posted by John J. Xenakis

Originally Posted by Clark

> I have a hand drawn chart book of the Dow Jones averages dating
> back to 1885. The preface to the book states, "From 1885 to 1897,
> Dow Jones & Co. used a single composite Average, made up largely
> of railroads. But in 1897 Dow decided to publish (daily) his two
> Averages, one to be an index of manufacturing and production
> (Industrial Average) and the other to be an index of shipping and
> transportation (Rail Average)." According to the charts
> themselves, the first average consisted of 14 stocks, 12 railroads
> and 2 industrials. The 2 industrials were Pacific Mail Steamship
> and Western Union. In the following year, 1886, 2 railroads were
> dropped from the average and the average consisted of 12 stocks
> until September, 1889, when a 20 Stock Average was introduced
> which consisted of 18 railraods and 2 industrials. The 12 Stock
> Average was discontinued in May, 1896 and the 20 Stock Average was
> discontinued at the end of 1896. In 1897, the Rail Average,
> composed of 20 rails and the Industrial Average, composed of 12
> industrials, were introduced. In December, 1914, the Industrial
> Average was modified to include 20 industrials and was computed
> simultaneously with the 12 stock Industrial Average until the
> latter was discontinued in October, 1916. It wasn't until October,
> 1928 that the Industrial Average was expanded to include 30
> stocks.

> Sometime in the 1920s, Standard and Poor's introduced a stock
> average, but it didn't consist of 500 stocks until March 1, 1957.

> According to a long term chart book I have that contains both
> averages, the Dow Industrials stood at approximately 500 in March,
> 1957 while the S&P 500 stood at approximately 45. Since then, the
> Dow has expanded approximately 22 fold while the S&P has expanded
> 28 fold, or 6.5% and 7.1% (annually), respectively, not adjusting
> for inflation.

That looks like interesting data. There are also 1850s stock listings in the book that you recomended, The Emergence of
Lincoln by Allan Nevins that you recommended.

When you're determining growth rates, you have to use the longest
possible intervals. Obviously you can get any result you want by
jiggering the interval.

The interval that you've chosen, 1957 to present, is a short interval
that ends in the middle of a bubble. The bubble distorts the growth
rate.

I use Yale Professor Robert J. Shiller's figures on his web site at
http://www.econ.yale.edu/~shiller/data.htm , where he's collected
annual stock market data since 1871.

Sincerely,

John

John J. Xenakis
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com

I'm using the longest interval where a comparison between the Dow Industrials and the S&P 500 can be made using actual data. The S&P 500 Index has only existed since March 1, 1957. If Schiller has extrapolated an index of 500 stocks and an index of 30 stocks back to 1871, I don't know why his extrapolation would result in such a disparity when the actual data does not for the time period that it covers. For the data that exists, the growth rates of the Dow Industrials and the S&P 500 are nearly identical. We're not primarily interested in the absolute growth rate for the time period from 1957-present, only the fact the growth rates of the two indices are nearly identical where actual data exists. As far as the growth rate from 1885-present, would you say at this point that it would be reasonable to use the Dow Jones data?

Originally Posted by John J. Xenakis

Dear Clark,

After some give and take, I responded: "Here's a problem that's been
sitting in my (virtual) stack of tasks for a couple of years now: The
DJIA grew at 4.7% per year from 1890-2002, while the S&P 500 index
grew at 1.6% per year from 1871-2004. Now, why the huge range of
percentages, since they should presumably be measuring the same
thing? I believe that the answer lies in the selection of the 30
companies in the DJIA and the Byzantine methodology for computing the
index, but I haven't really researched it."

Actually, using Schiller's data, I come up with an annual compound growth rate of (1178.28/4.44) raised to the power (1/(2005.4-1871.0)), or 4.24% for the S&P from 1871-2005 and 4.78% for the S&P from 1890-2005, which agrees exactly with your data for the Dow.

But now I see that Schiller's data is not inflation adjusted (this data is from the first column in his spreadsheet). At least, the data from 1957 on matches the data on my long term charts. Was your Dow data inflation adjusted? And where did you get it? I can use my Dow data on the hand drawn charts to do a computation from 1890 on by using ratios of the various indices to extrapolate backwards and see if they match.

OK, here it is. On January 1, 1890, the 20 stock Dow Average was priced at 78. At the end of 1896, it was priced at 51.5 and the old 12 industrials began the year 1897 at a price of 40.8. In 1914, the new industrial index began trading at 53.17 at the same time the old 12 industrials were priced at 73.48. There is no discrepancy between averages shown on the chart in 1928 when the Dow average of 30 industrials began. So, starting in 1890 at 78, I get an equivalent price for the 1914 index of 44.7 and then using Friday's closing price gives an annual compounded non inflation adjusted growth rate of 4.85%.

Getting back to my original point, the potential problem I see with energy is that growth rates have cycled around a high enough average that they have remained positive for essentially all of the industrial revolution. If the growth rate begins to cycle around some lower average due to energy supply constraints or if terrorist acts repeatedly result in oil supply disruptions, then growth rates may actually become negative for substantial periods of time. This might take the stock market to valuations more resembling those of the Great Depression or worse. All I'm really saying is that your website analysis should address this possibility in some fashion or at least state the assumptions. It would be a great public service because nobody that I know of is doing a thoughtful and accurate analysis of this issue.

Dow Jones Industrial Average vs S&P 500 Index

The Wall Street Journal

December 19, 2005

MARKET MOVERS

Tracking the Dow's Climb to the Summit The Industrials Are Much
Closer To a Record Than the S&P 500 -- And That Has Analysts Nervous

By E.S. BROWNING
Staff Reporter of THE WALL STREET JOURNAL
December 19, 2005

If you follow the Dow Jones Industrial Average, these are exciting
times.

The average is back near 11000, a level not seen since the first half
of 2001. At Friday's close of 10875.59, it would have to rise just 8%
to surpass its record of 11722.98 set in January 2000, almost six
years ago.

But if you prefer to track the other major big-stock gauge, the
Standard & Poor's 500-stock index, things look a bit different. The
two indexes are meant to reflect the same part of the stock market --
the biggest, most influential companies -- but the S&P 500 is nowhere
near a record. Even though it has been rising faster than the
industrials this year, it still would have to advance more than 20% to
return to its record of 1527.46, reached in March 2000.



On one level, the difference reflects the simple fact that the two
indexes are calculated very differently (more on that in a moment).
Both track big stocks, so they behave similarly over the long run,
succeeding in showing the same broad trends in the U.S. market, albeit
from alternative vantage points. But the differences in their makeup
can make them behave very differently over shorter periods.

For some analysts, the fact that the two indexes have been performing
differently this year is a source of concern. The reason: When the two
behave similarly, despite their different makeups, it suggests that
market moves are broad and well-established. When the indexes diverge,
it can mean that market gains are shakier, because they aren't
widespread.

"Right now, we have a pretty narrow advance," says Tim Hayes, chief
investment strategist at Ned Davis Research in Venice, Fla. That is
one reason the firm is a little nervous about the outlook for stocks
over the next few months.

The differences between the two indexes are substantial. The
industrial average is made up of 30 blue-chip stocks, chosen by senior
editors of The Wall Street Journal, published by Dow Jones & Co. Its
membership can remain unchanged for years. It typically is adjusted
only when a component company is acquired by another company or
becomes less prominent, or when a nonmember becomes so significant
that it seems appropriate to add its name. The latest change came in
April 2004, when American International Group, Pfizer and Verizon
Communications replaced AT&T, Eastman Kodak and International Paper.
The previous change was in 1999.

What is more, the blue-chip average is calculated based on raw stock
prices, and isn't adjusted for percentage changes or for the market
value of its components. Pfizer and Altria, for example, are Dow
components and have similar market values. Pfizer has more shares,
which trade at about $22 each. Altria has fewer shares, at about $77
each. A 10% move in Altria means a price change of about $8 a share,
which has a big effect on the industrials. A 10% move in Pfizer is
only about $2, which moves the Dow much less. So Altria moves the
industrial average more than Pfizer, even though the two companies are
similar in size.

The S&P 500, on the other hand, includes almost every big company
investors have heard of -- 500 of them. All the Dow components are in
the S&P 500. Because some S&P 500 companies are acquired every year or
suffer sudden declines, the S&P 500's makeup changes several times a
year.

And its calculation is the opposite of the Dow industrials'. The index
is meant to reflect the value of the overall big-stock market, so
moves in each stock are weighted to reflect the company's market
value. A 10% move in Pfizer would move the S&P 500 about the same as a
10% move in Altria. A 10% change in a bigger company would affect the
index more.

What does that mean? The S&P 500 tracks market quirks much more
closely than the industrial average. The Dow is the tortoise to the
S&P's hare, says Jeff Rubin, research director at Birinyi Associates
in Westport, Conn.

"There was a period back in the late 1990s where the S&P was putting
in many of the dot-com era names. Some have now been removed, or are
down 90%. If you look at the constituents of the Dow, none really was
caught up in the dot-com era," Mr. Rubin says, although components
Microsoft and Intel did fall heavily. "And the Dow never had an Enron
or a WorldCom."

The result: When technology stocks were soaring in the late 1990s, the
S&P 500 generally was outpacing the Dow industrials. The S&P 500 rose
27% in 1998, compared with 16% for the industrial average. During the
main market boom, from 1995 through the indexes' highs in 2000, the
S&P 500 rocketed 233%, while the industrials soared 206%.

But after the bubble popped, the S&P 500 slid 49% before it bottomed
out in October 2002. The Dow industrials tumbled 38%. Little wonder
that the Dow has gotten back within range of its record faster than
the S&P 500.

The comparison is even starker for the Nasdaq Composite Index, another
market-value-weighted index, which includes all the companies listed
on the Nasdaq Stock Market. It is dominated by the technology stocks
that fell hardest in the bear market, when the index fell 78%.

Which index would be the best place to invest? It depends on when the
investment is made. Money invested in a Nasdaq-100 index fund, which
tracks the largest Nasdaq stocks, would have more than quadrupled in
value from the start of 1995 through today, even counting the thudding
tech wreck. But a Nasdaq investor needs to have a strong stomach.
People who waited until the peak in March 2000 to buy the Nasdaq-100
still are down 64%, even including the bull market that began in 2002.
The broader Nasdaq composite is down 55% from its record. In other
words, both still would have to more than double in value to get back
to their records.

The comparison between the Dow and the S&P 500 is instructive. The S&P
500 outpaced the industrial average in the late 1990s and has done so
since the bull market began in 2002. This year, the industrial average
is up about 1%, compared with 4.6% for the S&P 500. General Motors and
International Business Machines have weighed on the industrial
average, and 14 of its 30 components are down for the year.

But taken over the whole period since the start of 1995, the Dow is
the winner, rising 184%, compared with 176% for the S&P 500. The Dow's
resilience in the bear market made up for the S&P 500's greater
strength when stocks were booming. That race went to the tortoise.

Write to E.S. Browning at jim.browning@wsj.com 1

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THE NEW YORKER
THE CRITICS

BOOKS

EVERYBODY’S AN EXPERT
by LOUIS MENAND
Putting predictions to the test.
Issue of 2005-12-05
Posted 2005-11-28



Prediction is one of the pleasures of life. Conversation would wither without it. “It won’t last. She’ll dump him in a month.” If you’re wrong, no one will call you on it, because being right or wrong isn’t really the point. The point is that you think he’s not worthy of her, and the prediction is just a way of enhancing your judgment with a pleasant prevision of doom. Unless you’re putting money on it, nothing is at stake except your reputation for wisdom in matters of the heart. If a month goes by and they’re still together, the deadline can be extended without penalty. “She’ll leave him, trust me. It’s only a matter of time.” They get married: “Funny things happen. You never know.” You still weren’t wrong. Either the marriage is a bad one—you erred in the right direction—or you got beaten by a low-probability outcome.

It is the somewhat gratifying lesson of Philip Tetlock’s new book, “Expert Political Judgment: How Good Is It? How Can We Know?” (Princeton; $35), that people who make prediction their business—people who appear as experts on television, get quoted in newspaper articles, advise governments and businesses, and participate in punditry roundtables—are no better than the rest of us. When they’re wrong, they’re rarely held accountable, and they rarely admit it, either. They insist that they were just off on timing, or blindsided by an improbable event, or almost right, or wrong for the right reasons. They have the same repertoire of self-justifications that everyone has, and are no more inclined than anyone else to revise their beliefs about the way the world works, or ought to work, just because they made a mistake. No one is paying you for your gratuitous opinions about other people, but the experts are being paid, and Tetlock claims that the better known and more frequently quoted they are, the less reliable their guesses about the future are likely to be. The accuracy of an expert’s predictions actually has an inverse relationship to his or her self-confidence, renown, and, beyond a certain point, depth of knowledge. People who follow current events by reading the papers and newsmagazines regularly can guess what is likely to happen about as accurately as the specialists whom the papers quote. Our system of expertise is completely inside out: it rewards bad judgments over good ones.

“Expert Political Judgment” is not a work of media criticism. Tetlock is a psychologist—he teaches at Berkeley—and his conclusions are based on a long-term study that he began twenty years ago. He picked two hundred and eighty-four people who made their living “commenting or offering advice on political and economic trends,” and he started asking them to assess the probability that various things would or would not come to pass, both in the areas of the world in which they specialized and in areas about which they were not expert. Would there be a nonviolent end to apartheid in South Africa? Would Gorbachev be ousted in a coup? Would the United States go to war in the Persian Gulf? Would Canada disintegrate? (Many experts believed that it would, on the ground that Quebec would succeed in seceding.) And so on. By the end of the study, in 2003, the experts had made 82,361 forecasts. Tetlock also asked questions designed to determine how they reached their judgments, how they reacted when their predictions proved to be wrong, how they evaluated new information that did not support their views, and how they assessed the probability that rival theories and predictions were accurate.

Tetlock got a statistical handle on his task by putting most of the forecasting questions into a “three possible futures” form. The respondents were asked to rate the probability of three alternative outcomes: the persistence of the status quo, more of something (political freedom, economic growth), or less of something (repression, recession). And he measured his experts on two dimensions: how good they were at guessing probabilities (did all the things they said had an x per cent chance of happening happen x per cent of the time?), and how accurate they were at predicting specific outcomes. The results were unimpressive. On the first scale, the experts performed worse than they would have if they had simply assigned an equal probability to all three outcomes—if they had given each possible future a thirty-three-per-cent chance of occurring. Human beings who spend their lives studying the state of the world, in other words, are poorer forecasters than dart-throwing monkeys, who would have distributed their picks evenly over the three choices.

Tetlock also found that specialists are not significantly more reliable than non-specialists in guessing what is going to happen in the region they study. Knowing a little might make someone a more reliable forecaster, but Tetlock found that knowing a lot can actually make a person less reliable. “We reach the point of diminishing marginal predictive returns for knowledge disconcertingly quickly,” he reports. “In this age of academic hyperspecialization, there is no reason for supposing that contributors to top journals—distinguished political scientists, area study specialists, economists, and so on—are any better than journalists or attentive readers of the New York Times in ‘reading’ emerging situations.” And the more famous the forecaster the more overblown the forecasts. “Experts in demand,” Tetlock says, “were more overconfident than their colleagues who eked out existences far from the limelight.”

People who are not experts in the psychology of expertise are likely (I predict) to find Tetlock’s results a surprise and a matter for concern. For psychologists, though, nothing could be less surprising. “Expert Political Judgment” is just one of more than a hundred studies that have pitted experts against statistical or actuarial formulas, and in almost all of those studies the people either do no better than the formulas or do worse. In one study, college counsellors were given information about a group of high-school students and asked to predict their freshman grades in college. The counsellors had access to test scores, grades, the results of personality and vocational tests, and personal statements from the students, whom they were also permitted to interview. Predictions that were produced by a formula using just test scores and grades were more accurate. There are also many studies showing that expertise and experience do not make someone a better reader of the evidence. In one, data from a test used to diagnose brain damage were given to a group of clinical psychologists and their secretaries. The psychologists’ diagnoses were no better than the secretaries’.

The experts’ trouble in Tetlock’s study is exactly the trouble that all human beings have: we fall in love with our hunches, and we really, really hate to be wrong. Tetlock describes an experiment that he witnessed thirty years ago in a Yale classroom. A rat was put in a T-shaped maze. Food was placed in either the right or the left transept of the T in a random sequence such that, over the long run, the food was on the left sixty per cent of the time and on the right forty per cent. Neither the students nor (needless to say) the rat was told these frequencies. The students were asked to predict on which side of the T the food would appear each time. The rat eventually figured out that the food was on the left side more often than the right, and it therefore nearly always went to the left, scoring roughly sixty per cent—D, but a passing grade. The students looked for patterns of left-right placement, and ended up scoring only fifty-two per cent, an F. The rat, having no reputation to begin with, was not embarrassed about being wrong two out of every five tries. But Yale students, who do have reputations, searched for a hidden order in the sequence. They couldn’t deal with forty-per-cent error, so they ended up with almost fifty-per-cent error.

The expert-prediction game is not much different. When television pundits make predictions, the more ingenious their forecasts the greater their cachet. An arresting new prediction means that the expert has discovered a set of interlocking causes that no one else has spotted, and that could lead to an outcome that the conventional wisdom is ignoring. On shows like “The McLaughlin Group,” these experts never lose their reputations, or their jobs, because long shots are their business. More serious commentators differ from the pundits only in the degree of showmanship. These serious experts—the think tankers and area-studies professors—are not entirely out to entertain, but they are a little out to entertain, and both their status as experts and their appeal as performers require them to predict futures that are not obvious to the viewer. The producer of the show does not want you and me to sit there listening to an expert and thinking, I could have said that. The expert also suffers from knowing too much: the more facts an expert has, the more information is available to be enlisted in support of his or her pet theories, and the more chains of causation he or she can find beguiling. This helps explain why specialists fail to outguess non-specialists. The odds tend to be with the obvious.

Tetlock’s experts were also no different from the rest of us when it came to learning from their mistakes. Most people tend to dismiss new information that doesn’t fit with what they already believe. Tetlock found that his experts used a double standard: they were much tougher in assessing the validity of information that undercut their theory than they were in crediting information that supported it. The same deficiency leads liberals to read only The Nation and conservatives to read only National Review. We are not natural falsificationists: we would rather find more reasons for believing what we already believe than look for reasons that we might be wrong. In the terms of Karl Popper’s famous example, to verify our intuition that all swans are white we look for lots more white swans, when what we should really be looking for is one black swan.

Also, people tend to see the future as indeterminate and the past as inevitable. If you look backward, the dots that lead up to Hitler or the fall of the Soviet Union or the attacks on September 11th all connect. If you look forward, it’s just a random scatter of dots, many potential chains of causation leading to many possible outcomes. We have no idea today how tomorrow’s invasion of a foreign land is going to go; after the invasion, we can actually persuade ourselves that we knew all along. The result seems inevitable, and therefore predictable. Tetlock found that, consistent with this asymmetry, experts routinely misremembered the degree of probability they had assigned to an event after it came to pass. They claimed to have predicted what happened with a higher degree of certainty than, according to the record, they really did. When this was pointed out to them, by Tetlock’s researchers, they sometimes became defensive.

And, like most of us, experts violate a fundamental rule of probabilities by tending to find scenarios with more variables more likely. If a prediction needs two independent things to happen in order for it to be true, its probability is the product of the probability of each of the things it depends on. If there is a one-in-three chance of x and a one-in-four chance of y, the probability of both x and y occurring is one in twelve. But we often feel instinctively that if the two events “fit together” in some scenario the chance of both is greater, not less. The classic “Linda problem” is an analogous case. In this experiment, subjects are told, “Linda is thirty-one years old, single, outspoken, and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice and also participated in antinuclear demonstrations.” They are then asked to rank the probability of several possible descriptions of Linda today. Two of them are “bank teller” and “bank teller and active in the feminist movement.” People rank the second description higher than the first, even though, logically, its likelihood is smaller, because it requires two things to be true—that Linda is a bank teller and that Linda is an active feminist—rather than one.

Plausible detail makes us believers. When subjects were given a choice between an insurance policy that covered hospitalization for any reason and a policy that covered hospitalization for all accidents and diseases, they were willing to pay a higher premium for the second policy, because the added detail gave them a more vivid picture of the circumstances in which it might be needed. In 1982, an experiment was done with professional forecasters and planners. One group was asked to assess the probability of “a complete suspension of diplomatic relations between the U.S. and the Soviet Union, sometime in 1983,” and another group was asked to assess the probability of “a Russian invasion of Poland, and a complete suspension of diplomatic relations between the U.S. and the Soviet Union, sometime in 1983.” The experts judged the second scenario more likely than the first, even though it required two separate events to occur. They were seduced by the detail.



It was no news to Tetlock, therefore, that experts got beaten by formulas. But he does believe that he discovered something about why some people make better forecasters than other people. It has to do not with what the experts believe but with the way they think. Tetlock uses Isaiah Berlin’s metaphor from Archilochus, from his essay on Tolstoy, “The Hedgehog and the Fox,” to illustrate the difference. He says:

Low scorers look like hedgehogs: thinkers who “know one big thing,” aggressively extend the explanatory reach of that one big thing into new domains, display bristly impatience with those who “do not get it,” and express considerable confidence that they are already pretty proficient forecasters, at least in the long term. High scorers look like foxes: thinkers who know many small things (tricks of their trade), are skeptical of grand schemes, see explanation and prediction not as deductive exercises but rather as exercises in flexible “ad hocery” that require stitching together diverse sources of information, and are rather diffident about their own forecasting prowess.


A hedgehog is a person who sees international affairs to be ultimately determined by a single bottom-line force: balance-of-power considerations, or the clash of civilizations, or globalization and the spread of free markets. A hedgehog is the kind of person who holds a great-man theory of history, according to which the Cold War does not end if there is no Ronald Reagan. Or he or she might adhere to the “actor-dispensability thesis,” according to which Soviet Communism was doomed no matter what. Whatever it is, the big idea, and that idea alone, dictates the probable outcome of events. For the hedgehog, therefore, predictions that fail are only “off on timing,” or are “almost right,” derailed by an unforeseeable accident. There are always little swerves in the short run, but the long run irons them out.

Foxes, on the other hand, don’t see a single determining explanation in history. They tend, Tetlock says, “to see the world as a shifting mixture of self-fulfilling and self-negating prophecies: self-fulfilling ones in which success breeds success, and failure, failure but only up to a point, and then self-negating prophecies kick in as people recognize that things have gone too far.”

Tetlock did not find, in his sample, any significant correlation between how experts think and what their politics are. His hedgehogs were liberal as well as conservative, and the same with his foxes. (Hedgehogs were, of course, more likely to be extreme politically, whether rightist or leftist.) He also did not find that his foxes scored higher because they were more cautious—that their appreciation of complexity made them less likely to offer firm predictions. Unlike hedgehogs, who actually performed worse in areas in which they specialized, foxes enjoyed a modest benefit from expertise. Hedgehogs routinely over-predicted: twenty per cent of the outcomes that hedgehogs claimed were impossible or nearly impossible came to pass, versus ten per cent for the foxes. More than thirty per cent of the outcomes that hedgehogs thought were sure or near-sure did not, against twenty per cent for foxes.

The upside of being a hedgehog, though, is that when you’re right you can be really and spectacularly right. Great scientists, for example, are often hedgehogs. They value parsimony, the simpler solution over the more complex. In world affairs, parsimony may be a liability—but, even there, there can be traps in the kind of highly integrative thinking that is characteristic of foxes. Elsewhere, Tetlock has published an analysis of the political reasoning of Winston Churchill. Churchill was not a man who let contradictory information interfere with his idées fixes. This led him to make the wrong prediction about Indian independence, which he opposed. But it led him to be right about Hitler. He was never distracted by the contingencies that might combine to make the elimination of Hitler unnecessary.



Tetlock also has an unscientific point to make, which is that “we as a society would be better off if participants in policy debates stated their beliefs in testable forms”—that is, as probabilities—“monitored their forecasting performance, and honored their reputational bets.” He thinks that we’re suffering from our primitive attraction to deterministic, overconfident hedgehogs. It’s true that the only thing the electronic media like better than a hedgehog is two hedgehogs who don’t agree. Tetlock notes, sadly, a point that Richard Posner has made about these kinds of public intellectuals, which is that most of them are dealing in “solidarity” goods, not “credence” goods. Their analyses and predictions are tailored to make their ideological brethren feel good—more white swans for the white-swan camp. A prediction, in this context, is just an exclamation point added to an analysis. Liberals want to hear that whatever conservatives are up to is bound to go badly; when the argument gets more nuanced, they change the channel. On radio and television and the editorial page, the line between expertise and advocacy is very blurry, and pundits behave exactly the way Tetlock says they will. Bush Administration loyalists say that their predictions about postwar Iraq were correct, just a little off on timing; pro-invasion liberals who are now trying to dissociate themselves from an adventure gone bad insist that though they may have sounded a false alarm, they erred “in the right direction”—not really a mistake at all.

The same blurring characterizes professional forecasters as well. The predictions on cable news commentary shows do not have life-and-death side effects, but the predictions of people in the C.I.A. and the Pentagon plainly do. It’s possible that the psychologists have something to teach those people, and, no doubt, psychologists are consulted. Still, the suggestion that we can improve expert judgment by applying the lessons of cognitive science and probability theory belongs to the abiding modern American faith in expertise. As a professional, Tetlock is, after all, an expert, and he would like to believe in expertise. So he is distressed that political forecasters turn out to be as unreliable as the psychological literature predicted, but heartened to think that there might be a way of raising the standard. The hope for a little more accountability is hard to dissent from. It would be nice if there were fewer partisans on television disguised as “analysts” and “experts” (and who would not want to see more foxes?). But the best lesson of Tetlock’s book may be the one that he seems most reluctant to draw: Think for yourself.

Thank you, clark.