How will the .gov bubble end?

For the last year, I’ve been referring to being in a .gov bubble—that a current western economic predicament has similarities to the .com bubble of 2000 alongside carry through from the 2008 bank crisis reaction too.

I’m no economist, so these are layman’s comments, but in a little bit like the way “the markets” pumped money into all and sundry back around the millennium changeover, so governments have been doing likewise now. And in rather the way that private debt at very low interest rates swilled around after the dot com bubble burst, now we have never-never land government money fuelling today’s calamity.

Unemployment is apparently very low, supply of many goods hard (for this and other reasons), and prices are going nuts. Why is there such a shortage of labour? None of it makes much sense, just like irrational exuberance in .coms 20+ years ago didn’t either.

And in the end, when it does make sense, it unwinds.

I’ve been pretty concerned about how this one will. We are seeing some of it starting now, exasperated by collective tiredness from the pandemic and of course war in Ukraine. Each country may have its own character of unwinding. The UK feels very 1970s now: stagflation, deteriorating labour relationships particularly in the public sector and a ballooning public sector.

Sometimes, alongside the misery, recessions and war do lead to accelerated progress. I hope this can be the case this time, in my two fields of work, namely refactoring core education and deploying computation far more deeply to make better decisions.

How do we encourage this? Perception of risks, and accompanying incentives, are key. We need to try radical new ways of doing things, not perceive that doing what we have always done is least risky.

Take universities. It’s easy to go back to “the norm” or an online version of it, but we ought to be finding ways to shorten and cutting the spiralling costs of education, increasing social and individual human contact. Is 3-4 years of 3 terms really right? Do we need lectures per se? Are the traditional subjects cast correctly? What modalities of teaching can best be used in what cases, now we have many new options? University education are a case where incentives of declining students may push reform, bottom up. In other cases, policies may specifically need set conditions correctly. For example, shouldn’t all government funded, quantitative research be mandated to provide computable data and smart papers as their output, ready for others to work from? This is unlikely to happen naturally; there’s no incentive to make it.

Popping of bubbles displays a suddenly unattractive situation, though in truth problems were accruing throughout bubble formation. When the bubble in question is not only your government, but more-or-less everyone’s it’s particularly damaging to trust and national cohesion.

I hope we can energetic step forward from the .gov bust as quickly as possible.