CHAPTER 1

Introduction

The quantification of the economic losses from or damages caused by an exploitative, adversarial, and predatory business environment is not easy. Economic exploiters and predators cannot be unhappy with this state of affairs. If the losses or damages inflicted by an aggressor cannot be:

1. clearly delineated,
2. "causally" linked to the aggressor, and
3. quantified,

then how can the associated obligations and liabilities be determined?

Some Tough Questions. The following questions are not easy to answer; but they are tractable and the answers must be vigorously sought. Nothing less than our economic and political well-being, if not survival, is at stake.

1. What constitutes predatory economic behavior?
2. Do laws favor lenders over borrowers? How do we measure the bias in laws and judicial procedures? How do we quantify the "net advantages" of Big Business and Big Government over citizens and small business owners?
3. How safe are small businesses in the United States, Canada, etc.?
4. What are the effects of misdirected loans, of excessive overinvestments by speculators and banks, etc., on the economy and on the survivability of small firms?
5. Can bank policies contribute to destabilizing the National economy?
6. In tough economic times, a bank can suddenly freeze, reduce, or call the loans of small firms. Are such bolts-from-the-blue strikes against small firms assaults against, or violations of the moral and economic rights of business owners, their families, and their employees?
7. How do we quantify the moral and economic rights of individuals, creditors, and banks?
8. What are the rights, duties, and responsibilities of businesses and banks in a modern Nation?

How do we model and codify an exploitative, adversarial, and predatory business environment? What evidence do we have that the business environment for small business is pernicious? What is the strength of this evidence? What are the natural consequences of adversarial and predatory attitudes and behavior? What rules link "causes" and "effects" or evidences and conclusions in such an environment? How do we deal with uncertainties?

One creative solution is to use expert systems. These can be designed to deal simply and simultaneously with complex knowledge and with uncertainty.

This book investigates the impact of bank-induced risks in a Darwinistic business environment on the survivability of sound but funding-limited small firms. The impact is modeled using an expert system with Monte Carlo simulation capabilities. Twelve firm- and environment-specific input evidences are considered. The input evidences cover:

1. The space-time structure and distribution of bank loans.
2. Bank policies, practices, and behavior.
3. The concentration of financial and commercial powers.
4. "Conscious parallelism"¹ or "tacit collusion" in the financial sector.
5. "Net advantages," enframed² in laws and judicial procedures, favoring lenders over borrowers.

The impact of the input evidences on three specific conclusions is investigated:

1. The bank suddenly and deliberately freezes, reduces, or calls loans of sound funding-limited firms.
2. Firms are destabilized.
3. Firms are destroyed or cannibalized by economic predators.

All the results are from Monte Carlo simulations.³ Several uncertainties are recognized and addressed:

1. The strength of the evidence (Type 1 Uncertainty) is varied from 0% (the business environment is not adversarial) to 100% (the business environment is adversarial and predatory).
2. The validity of the rules linking input evidences and conclusions (Type 2 Uncertainty relating to sensitivity and specificity) are varied from 0% (the rules are not valid) or 50% (the rules' validity is unknown) to 100% (the rules are perfectly valid).

² The concept of "Enframing" [Ge-stell] is Heidegger's invention. See Martin Heidegger, The Question Concerning Technology and Other Essays, translated and with an Introduction by William Lovitt, 1977, at 19.

³ The application of the Monte Carlo method to probabilistic systems and expert systems was suggested by James N. Siddall (1983 and 1990).