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P L A N N I N G

F O R

S C A R C I T Y

Remarks by

Hugh D. Gal u s h a , J r .
P res i den t
Federal R es er ve Bank o f M i n n e a p o l i s

at

the

C o nf er ence on Computing
In Montana Governments

H e l e n a , Montana
O c t o b e r 8, 1970

PLANNING

Three weeks ago we h e l d
Federal

the f i r s t o f a s e r i e s

R es er v e Bank o f M i n n e a p o l i s

range p l a n n i n g e f f o r t
priately

this

first

communi cati on

s e m i n a r was

ideas

d e v el o p ed

What d a t a
survival

instrument o f

i mp u ls e

is

answered.

institutions.

w ill

It

to t r y

to a p p l y

any d a t a e s s e n t i a l
its

For example,

sim pler

to the

f o r m s,

it

is

i n s t e a d o f a check as

With

item c o s t o f a c r e d i t

cents,

the per

and t h a t o f a check a t

form,

pro duc ed ahead o f the f a c t o f
techniques

and model

the a s s e m b l y o f h i s t o r i c a l

data - -

equations

relationships

ba se d upon t h e i r

o f d iffe re n t action

twenty c e n t s ,

card

the seven

fund t r a n s f e r by e l e c t r o n i c

most complex and s o p h i s t i c a t e d
is

be an e l e c t r i c a l

incentive.

r e f e r r i n g to s im u la t io n




t r a n s f e r r i n g and

the t r a n s a c t i o n .

be t h a t w h ic h

pain o f actu al

is

In one o f

c e n t s per i tem c o s t o f a d i r e c t

its

like

meeting,

t h e re w i l l

a po wer ful
In

in t h i s

from A t o B,

at f i f t y

and o n e - h a l f

Quite appro­

o f computer and

l i k e yours

I'd

long-

t r a n s f e r o f f unds

i mp u ls e t o s e t t l e
transaction

l a s t year.

the

in o u r s t u d y .

data a bou t o w n e r s h i p o f money c l a i m s .
the

this

In t h e s e few minutes

is e a s i l y

o f man o r h i s

at

d i f f e r e n t pa r ts o f our

d evoted to an a n a l y s i s

That d i s c u s s i o n ,

o f seminars

the w h a t , how, w h y , and who o f s t o r i n g ,

r e t r i e v i n g economi c d at a .
some o f the

to d i s c u s s

t h a t has been underway

technology.

was concer ned w i t h

FOR S C A R C I T Y

alternatives

experience.

This

that

is,

the d at a

to be h a n d l e d

it s occurrence.

building,

both o f which

I'm
involve

f a c t s which have o c c u r r e d - -

to each o t h e r ,

so that

the

results

in the f u t u r e can be s i m u l a t e d w i t h o u t
is

not Buck R o g e rs s p e a k i n g ;

in

the

most o f the

great

c o r p o r a t i o n s o f the worl d now use t h es e t e c h n i q u e s , wh et h e r i t be to

simulate

the p er f or ma nce o f a pi ane o r a r o c k e t ,

o f supply
modeling

and demand f o r thei r p r o d u c t s .
is

becoming i n c r e a s i n g l y

the a l t e r n a t i v e s

f o r c ou r s e

th at a c t u a l

this

correction

i mportan t?

experience

is

p r ob le ms ,
This

as p r e c i s e l y

It's

teacher - -

the b e s t t e a c h e r

i s b eca us e f o r many o f

economi c

and a c c u r a t e l y

b ec aus e t h e r e now i s

in f a c t ,

d et er mi ne
as NASA

teacher.

a reali zation
And c e r t a i n l y

i f we c o n t i n u e to

turn o ut

to be t he l a s t

it

r e l y on a c t u a l

in a p p r o a c h i n g many o f o u r s o c i a l

e x p e r i e n c e might v er y w e l l

levels

strides.

an e x t r e m e l y e x p e n s i v e

can no l o n g e r be o u r o n l y
e x p e r i e n c e as

I n the p u b l i c s e c t o r ,

soph i s t i c a t e d , and w h i l e we c a n ' t

can a s p ac e s h i p , we a re maki ng g r e a t
Why i s

o r t o match d i f f e r e n t

and ec onomi c

t e a c h e r we have.

t h e se t h e r e may be no s ec o n d chance to

try

for

a n o t h e r answer.
We have become a c o u n t r y o f s c a r c i t i e s .
resources,

and above a l l ,

time,

a re

in s h o r t

enough o f any one o f t h e s e to go a ro und,
wh et he r y o u r example
m o b i l e W o rk er s,
that escapes
projections

is

the f e d e r a l

the p i n c h .
f o r the next

In f a c t ,

supply.

states.

it

is

is

i t was

waste that

resources

difference

the U n i t e d A u t o ­

no U. S.

r e g a r de d as

an i n d i v i d u a l

f r o n t i e r was s l i p p i n g away,
more c o m p l i c a t e d .

the

in

frontiers

b eca us e the s u p p l y o f

The p r i c e o f

f a i l u r e was

low

concern.

two ways.

institutions

The i n v es t me n t

At the same ti me the p h y s i c a l

o f o u r s o c i e t y were becoming a
in money,

t a l e n t and time to

make them work has been e x p l o d i n g , wh et he r they a r e o r g a n i z e d




institution

the e x p a n d i n g p h y s i c a l

seemed l i m i t l e s s .

But we have been p i n c h e d

g r e a t deal

s i m p l y no t

the one common a s s u m p t i o n a l l

p e r m i t t e d o v e r much o f o u r h i s t o r y was p o s s i b l e o n l y

b ec aus e

little

A T & T ,

There

is

financial

two decades a g r e e upon.

The k i n d o f p r o d i g a l

human and n a t u r a l

Ther e

and i t makes

government,

o r any o f the f i f t y

Human t a l e n t ,

f o r p u b l i c or

2.

private

purposes.

s l o w e r has
it,

t oo ,

sector,

The p r i c e o f

failure

come the p u b l i c a wa rene ss

is

now r a p i d l y

increasing.

started

that

relates

is

not understand at a l l .

S u f f i c i e n t p er ha p s

by a pa r ade o f e x p e r t s

from IBM, H o n e y w e l l ,

our own computer p e op l e t h a t t h e r e e x i s t s
thing presently

factors.

in the p r i v a t e

solving

The f i r s t

v er y a dv an c ed ,

to s a y

that

Control

the hardware
o f t h e se

and which

I do

I have been c o n v i n c e d

Da ta ,

the c a p a b i l i t y

the B e l l

Labs,

and

to do a l m o s t a n y ­

c o nt e m p l a t ed .

C o s t s o f the hardware can be enormous,
the c o s t / b e n e f i t

ratios

is

the MHowM i n q u i r y .

What

made o f

is

after

in the s y st e m.

but

l o s e s when management f a i l s ,

two a s p e c t s ;

o f the c o s t / b e n e f i t

the s t a t e o f t e c h n o l o g y , which

it

much

c a n n ot be made up.

and the a n a l y s i s
to

be Penn C e n t r a l

e v e ry o n e

How the d at a a re to be h a n d l e d has
pr obl em,

a go;

pays p a r t o f t h a t p r i c e ,

Whether i t

o r Vi etn am in the p u b l i c s e c t o r ,

and the l o s s e s

it

to c l i m b y e a r s

it

really

so e v a lu a t i o n o f

the more i m p o r t a n t o f the two p r on gs o f

information

in hand,

t h o ug h ,

is

to be g a t h e r e d ,

and the uses

to be

s h o u l d be the d e t e r m i n a n t s o f the i n v e s t m e n t

Ther e a r e now e x i s t i n g

computer and communi cati on mixes

to

s e r v e a l m o s t e v e r y k i n d o f a u s er .
The how p ro bl em i s
M a t c h i n g the q u a l i t y

a p e o p l e p robl em,

and s k i l l

and m o t i v a t i o n o f the u l t i m a t e
" g o / n o go1 on
1
is

the b a s i s

Who w i l l

but
that

u s e r s o f the d at a - is

an e x c e e d i n g l y

it

no l e s s

t h e re are o n l y




the knowledge

d i f f i c u l t one,

and

have to be c o n c e n t r a t e d .

few woul d q u a r r e l

--

na mely,

c o n t i n u e t o be an economy o f s c a r c i t i e s .
I think

one.

the p e o p l e who must s ay

use the d a t a and f o r what p u r p o s e?

a s s u m p t i o n w i t h which
w ill

o f the computer t e c h n i c i a n s w i t h

o f the dat a - -

r e a l l y where o u r e n e r g i e s

and not a t e c h n o l o g i c a l

defensible,

two d i r e c t i o n s

I have o f f e r e d one

t h a t we have been and

Ther e m ig ht be l e s s

on the second a s s u m p t i o n —
possible

a gr eement ,

which

f o r human i n s t i t u t i o n s :

is,
up and

3.

down.

The re are no s o c i al

and economi c vacuums

in which

be con ti nued wi t h o u t e f f o r t , f o r f r i c t i o n ope r a t e s
men ts and bus i n e s s e s

as

it

does a g ai ns t mat te r.

move ahead toward d e f i n e d o b j e c t i v e s

is

f o r w a r d mot i on can

as s u re 1y aga i ns t g o v e r n -

Not to c o n s c i o u s 1y pi an to

to have un c o n s c i o u s ly

d ec i d e d to

f a l 1 beh i nd.
There has

to e x i s t

a set

o f ob j ec ti ves

f a i r l y well

a g r e ed upon among the u s e r s o f complex i n f o r m a t i o n
exist,

marks on the w a l l

and an abacus

systems.

are enough.

s ys te m t o s e r v e c o n f l i c t i n g o b j e c t i v e s

is
It

is

the s t a t e ,

ruinously expensive.

reasons.

g a t h e r i n g becomes

an e s s e n t i a l

make the d e c i s i o n s

necessary

I
I,

too,

lived

continue

wealth

and r e l a t i v e l y

in

free access

there has

the c o m p l a i n t

government

is not true,
is

private side.




a plus,
If

it

But

data,

been a net

exporting state

side th is

the s t a t e .
it

is

in a d d i t i o n

for

the p e o p l e who must

like

But

did n't

l a t e John S t e i n b e c k ,
I have n e v er been

matter,

is,

it's

upward s h i f t
frequently

are not a l l

suffered

the
the

that well

in

in

from net o u t - m i g r a t i o n ,

the age d i s t r i b u t i o n .

voiced

t h a t Montana

to a t a l e n t e x p o r t i n g one.

generally

given

than some o f the o t h e r a r e a s o f

still

than a minus,

i t was a

r e s o u r c e s w i t h which

I sense th in g s

it

the

b eca us e the b a l a n c e o f payments w i t h
rather

they want to be

For many y e a r s

really

fared b e t t e r

in the 1970 census

Further,
capital

and,

to the n a t u r a l

good Lo rd had endowed the s t a t e .

I suspect

leadership of

to the a t t a i n m e n t o f the o b j e c t i v e s .

c o u l d a f f o r d b eca us e

W h i l e the s t a t e

b u t the

the m a t t e r o f d at a

t o have a lo ve a f f a i r w i t h Montana.

the s t a t e

and

function

in Montana much o f my l i f e

luxury

the d i s t r i c t

Once d e f i n e d ,

supportive

conscious o f a sense o f d ir e c t i o n

Montana now.

impossible,

t o d e c i d e what

th ese

a computer

incumbent upon the

th ro ug h w h a t e v e r agency e x p r e s s e d ,

i nfor med about and f o r what

Unless

To d e s i g n

not o n l y

att empt would be

d e f i n e d and

but

I suspect

it

is

a

On the p u b l i c

the f e d e r a l
is

tr ue on

the

b eca us e the owners o f t h a t c a p i t a l

k.

believe

it

can be more p r o f i t a b l y employed e l s e w h e r e .

to curb the m o b i l i t y
have a d i s ma l
social

of ca p ita l,

r e co r d.

like

Ecological

and econ omi c c o u n t e r p a r t ;

be j u s t

as

commi tt ed

disastrous
in

is

In t h i s

It

its

can

sense,

out-m igration

t o be a s c a r c i t y

of capital,

to underemployment

economy, human and f i n a n c i a l

f l o w where they can be most p r o f i t a b l y employed.

Christian

martyrs

seems to me the c e n t r a l

individual

u p s e t t i n g that balance

no pr obl em but a s o l u t i o n

I s h o u l d know b e t t e r at t h i s
o f the e a r l y

the " b a l a n c e o f n a t u r e , " has

and a r t i f i c i a l l y

l o n g as we c o n t i n u e

resources w i l l

to curb the movement o f p e o p l e ,

equilibrium ,

the name o f p r o g r e s s .

As

attempts

to an economy as some o f the b i o l o g i c e v i l s we have

l i k e o u t - m i g r a t io n o f people,
o f b oth.

attempts

In o u r economy,

Montanan,

is

is

issue

alm ost

deep

point
in

than

but the s p i r i t

the marrow o f the Federal

f o r M o nt ana ns,

totally

to c o n t i n u e ,

the q u a l i t y

of

life

o bs cu re d by the smoke o f the

R e s er v e.
f o r the
rhetoric

coming from the two ex tr eme s.
At one end are t h o s e who e x t o l l
R ous se au w r o t e a bo ut .
call

These p e o p l e , w i t h

the Nobl e S a v a g e s .

f o r care packages,
areas,

provided

It

is

the v i r t u e s
apologies

t h e i r ambition

appropriately

o f the s i m p l e

to Mr.

to p e r f e c t

e fficien tly
In the o l d

as p o s s i b l e w i t h
d a ys ,

stick

neo-colonials

now t a l k

t o both b l e s s i n g s
noble

undertaking,

a sk what




from the s o i l ,

don't

a great

and p r o g r e s s ,
and i t

the f u t u r e s o c i a l

in the t r a d i t i o n

air,

as q u i c k l y

and w a t e r ,
en listed

were the

about p r o g r e s s .

n e a r l y ev er yone

is easy

Th es e,

l o ng .

as

of c iv iliz a t io n
deal

a round too

view the s t a t e s

the a i d o f the n a t i v e s

the b l e s s i n g s

s y st e m

the p a c k a g e s

th o se d e l i v e r i n g

to be e x t r a c t e d

a delivery

from the more p o p u l a t e d

from the Mother Co un tr y ev er ywh er e,

raw m a t e r i a l s

Ro us se a u, we can

f i l l e d w i t h money,

At the o t h e r extreme a r e the n e o - c o l o n i a l s .
o f those

life

to e m b a r r a s s

feels

and

one way o r a n o t h e r

rewards

There

a source o f

is

for

the n a t i v e s

a satisfyin g

they are j o i n e d

ring

in a

i n t o s i l e n c e - - t h o s e who t i m i d l y

and economi c c o s t s w i l l

be t o t h o s e

left

behind.

Random n o n - g r o w t h ,
But we are s t y m i e d
and a s s i m i l a t i o n
ment o f t h e s e
is

in t h i s
is

techniques

techniques

Together,

state.

a l u x u r y no one can a f f o r d .

the p u b l i c s e c t o r

is

I

recall,

little

the a d v a n c e ­

S t a t e and l o c a l

The s e co nd

government

I suspect

government.

--

This

session w ill

per haps more s e r i o u s

proportions.

a l s o caused a s h o r t f a l l

than any o f the

the m i d d l e ,

in

and t h e i r

The power t o t a x i s

different

working with
grant,

truly

reasonable

constituencies,

l i g h t o f those

facts.

rates
is

pitch

ratios

I suspect.

in a p p r o p r i a t i o n

economy o f the s t a t e ?

to l i s t e n

the p rograms

the power t o d e s t r o y .

to v a r i o u s

at what a pp ea r s

lim its

the o b j e c t i v e

and then

How much b e t t e r

to be

i t w o ul d be

impact o f t a x measures on

t a c k l e the p o l i t i c a l

question

in

the f u l l

and f i n a n c e d by a Ford F o u n d a t i o n

has been d e v e l o p i n g a computer pr ogr am c a l l e d
targets,

to an i n f o r m a t i o n s y s t e m
c o u l d be p l u g g e d ,




has awesome

f o r e x p e r i e n c e t o j ud ge the wi sdom o f the d e c i s i o n .

the U n i v e r s i t y o f M i n n e s o t a ,

computer c a p a c i t y

f o r much

The Upper Mi dwe st R es ea rch and Development C o u n c i l ,

they meet t h e i r s c h e d u l e d
access

in Montana has been

lobbyists,

of

decade.

income t a x c o l l e c t i o n s ,

i mpact o f t a x p r o p o s a l s on the t o t a l

and then w a i t

t o know w i t h i n

last

money ma rk ets

How can a l e g i s l a t o r p o s s i b l y measure the c o s t / b e n e f i t

constituencies

A definition

I s u s p e c t the b a c k l o g o f p u b l i c p r o j e c t s

immemorial

t h e re

be g r a p p l i n g w i t h s e r i o u s

f o r c e d you o ut o f n a t i o n a l

so

The way s i n c e time

g ov ernment ;

are s t a r t e r s .

o f the b ie n ni u m ,
It

the f e d e r a l
than a g r i c u l t u r e

you can do about s t a t e and l o c a l

one example.

the

is

they employ more p e o p l e

to work w i t h

gathering

to keep up w i t h

the f e d e r a l

economi c p o l i c i e s

measures - -

information

you can do about

b u d g e t a r y problems
National

in

in Montana.

and the t o o l s
Just

is

in the p r i v a t e s e c t o r .

as

There

a g r e a t deal

objectives

random gr o wt h ,

in v a r y i n g d eg re es by the f a i l u r e o f

the b i g g e s t b u s i n e s s

government.

like

RAFT to do j u s t

the M i n n e s o t a l e g i s l a t u r e

d et er mi ne d.

If

th is year w ill

i n t o which d i f f e r e n t p a t t e r n s o f

and t h e i r consequences

this.

taxation

have

and

At the h e a r t o f

and t e c h n i q u e s o f a h i g h o r d e r .

6.

it

Wi t h o u t

t h e s e , and the w i l l

b e i n g d e v el o p e d
k i n d s o f human
applied

in d i f f e r e n t p a r t s
in stitutio n s,

p olitical

p r oblem.

is easy

States,

public

When

I reflect
Wi th

and o n l y ab ou t 3% o f
few c i t i e s

of warring c it y

--

and p r i v a t e , work b e t t e r ,

its

to u n i t e S i o u x F a l l s

little

together.

Add to the

political

subdivisions,

intercity
plus

ca nn o t be

and the o b s t a c l e s

regional

It
enough t a l e n t
o r any o t h e r .

Thes e may s oo n,

in a

a collection
city

states.

and Gr ea t

to g et S p a r t a

inter-state

school

authorities,

Ther e are examples
t h e re

is

d istricts

and o t h e r

and a g e n c i e s

on the

Yet t h e re are s u c c e s s

metropolitan
to g i v e

though,

the a s p i r a t i o n s
government

us h e a r t .

is

in

state

o f t he p u b l i c

for

to d e l i v e r .

f o r many i n f o r m a t i o n s y s t e m s ,
care.

this

the c o s t o f

the economi c a s p e c t s o f

to e d u c a t i o n and h e a l t h

councils,

no t enough money and not

but more f u nd a m e n t a l ,

about

Falls,

and Ath ens

r e c o g n i t i o n o f common s e l f - i n t e r e s t have

I have t a l k e d e x c e s s i v e l y




like

or B i l l i n g s

may seem i n s u r m o u n t a b l e .

and the c a p a c i t y o f t h a t

than the a p p l i c a t i o n s

looks

in stitu tion s

i n e v i t a b l e w i d e n i n g o f the gap between

systems.

D istrict,

concentrated

random e x p a n s i o n o f computer f a c i l i t i e s

Less o b vio u s,

government ,

R es er v e

Da kota o r Montana ca us e

counties,

s h o u l d be o b v i o u s

to permit

and t h a t

than e f f o r t s

rivalry,

gov ern me nt s.

ce rtainly

—

d ifficu lt

l a n d a r ea o f the U n i t e d

and R a pi d C i t y ,

the a r r a y o f

and p l a c e s where p u b l i c

intra-state

F ed er al

in a common Sout h

more s u c c e s s

u n i t e d w a r r i n g c om mu n i t i e s ,

their

to make a l l

I am reminded o f a n c i e n t Greece and i t s

often

level,

upon the N i n t h

population

two e xa mp le s,

seem t o have

be an e x c e e d i n g l y

13% o f the c o n t i n e n t a l

to s i n g l e o u t j u s t

the

and d e s i g n e d

the Upper Mi dwe st too o f t e n

states.

Efforts

stories

o f the w o r l d ,

among the u s e r s w i l l

to d e s p a i r .

relatively

state

the k i n d s o f computer p rog rams

in Montana.
Coordination

it

to use them,

be l e s s

Ther e

is

information

important

a rea l

risk

7.

in

any t a l k
up s i m p l y

a bo ut computer and c ommuni ca ti ons
reinforcing

the u n i v e r s a l

human b e i n g no l o n g e r m a t t e r s ,
be more wrong.
human judgment

data,

is

available.

is

fast

health

care

the S t a t e ;

issues

in Montana than e v e r b e f o r e

to go b e h i n d the

to a s s u r e

have common p u r p o s e s
fairly

infatuated with

and the d e l i v e r y

today.

Montana a l l

Growth v e r s u s
the c o s t s

in my l i f e t i m e ,

life ,

no g r o wt h ;

f undamental

and a g r e a t e r w i l l i n g n e s s
of politician s

The p u r p o s e o f t h e s e s e s s i o n s

b e t t e r ways o f e x p o s i n g and m e a s u r i n g t h e s e

his

and d e l i v e r y o f

I s e n s e a g r e a t e r p u b l i c awa rene ss o f

o f now.

the b e s t

and e f f i c i e n t .

r h e t o r i c o f the a n c i e n t p o s i t i o n s

realities

is

are t r e a t e d

the s hape and r e qu i r e m e nt s o f h i g h e r e d u c a t i o n ;

tions

of

the s y s t e m a t i c g a t h e r i n g o f

these steps

individuals

a t some k i n d o f a w a t e r s h e d

t o the

Nothing could

to enhance the c a p a b i l i t y

A statement o f g o a l s ,

To an o b s e r v e r who has been

groups

the i n d i v i d u a l

is o b s o le t e .

i n t e r e s t o f a world o f s c a r c i t y

time o f government pr ogr ams

in

the s p e a k e r may end

in human a f f a i r s .

in p u b l i c p l a n n i n g t o make s u r e

is

that

audience that

and human judgment

the development o f p l a n s o f a c t i o n ;

the S t a t e

in h i s

Inform ation systems e x i s t o nly

The s p e c i a l
use o f what

fear

technology

realities

in a l l

is

their

and power
to f i n d
im plica­

t o b e t t e r s e r v e the p u b l i c .




8.