Dr. Vladimir A. Masch President, Risk Evaluation and Management, Inc.
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Vladimir Masch (for brevity, VM) turned to science after 10 years of work in industry (economic analysis, planning). In science, he has been working in mathematical economics and adjacent fields (Operations Research, Decision Science, strategic risk management, scenario planning, policy making under radical uncertainty) since 1960. He has degrees of Doctor of Science in Economics (1972) and Ph.D. in Economics (1964), as well as an Academic Rank of Senior Research Fellow in the specialty “Mathematical Methods in Economic Research” (1969).
In 1963, VM was one of 12 founders (called “twelve apostles”) of a major Moscow think tank -- the Central Economic Mathematical Institute of the Academy of Sciences of the USSR, or CEMI, set up to wean away the USSR from the practices of command economy. At CEMI, he headed one of its most important laboratories. Main line of work was modeling of long-range planning both of the Soviet economy as a whole and of individual sectors of industry. He remained there until 1972, when he applied for emigration.
His most important work in the USSR included the development of a macro model for planning the Soviet economy by industries and regions (1964 – 1965). For several years, the model was a banner project of CEMI. It was intended as a planning model; by a government decree, 400 planning and research organizations provided the information for the model. Two articles, of 1965 and 1967, outline the model in Russian and in English, respectively; they are presented in the Articles section of this site. (Item 9 of the 1967 article contains the concept of limiting the trade balance of the country, currently used in CFT – see below.)
In 1967, VM discussed the model for two days with Professor Jan Tinbergen of Netherlands, the first (1969) Nobel winner in economics and the author of the first macro models of the Netherlands, the USA, and the UK. Tinbergen did not propose a single change. (In 1968, Tinbergen tried helping VM to leave the USSR with his family. He got VM a job offer from the UNESCO Institute, but Russians did not let VM out.)
VM has developed not only the model, but also the algorithm for solving the enormous non-linear programming problem arising from that model. The problem had millions constraints and scores of millions of variables. It was successfully solved by 1972 on computers able to handle much simpler linear programming models with only up to 400 constraints.
VM founded the Russian school of modeling “multistage production and transportation systems,” later called in the USA “the supply chain”.
VM formulated the models and solved the problems of the long-range growth, development and plant location for a number of sectors of the USSR economy. The most important problem, both by its scope and the results achieved and implemented, was the coke coal industry (the second largest in the world) problem; the solution of the problem resulted in substantial investment in the industry and improvement of its activities. (See the 1972 article, in Russian, in the Articles section.)
He also headed one of the earlier applications of scenario planning in economics (with 15 scenarios) -– a major project of locating in the USSR an automobile plant to be built by FIAT (1967). The government accepted the project recommendations; the plant was built in Togliatti.
All in all, recommendations of VM made from 1966 to 1971 led to four decisions made by the Soviet Government, the GOSPLAN of the USSR, and the Presidium of the Academy of Sciences of the USSR. (In spite of his being both Jewish and under KGB surveillance for 24 years.)
He applied for emigration in 1972 and was allowed to emigrate in 1973, thanks to invaluable help from the US. He was one of beneficiaries of the “quiet diplomacy” of Dr. Henry Kissinger (a copy of a 1973 letter of Dr. Kissinger to Mr. Bud Yorkin, a prominent Hollywood producer, is in this section).
After arriving to the US in 1974, he worked initially at Bell Laboratories, and then as an independent scholar and consultant.
Currently VM is developing the theory of General Socio-Economics, or the discipline of making economic decisions beneficial for sustainable survival of the society in a democratic regime. As parts of that theory, he has originated two unique concepts of Risk-Constrained Optimization ® (RCO) and “Compensated Free Trade” (CFT).
RCO is an approach for solving complex socio-economic problems under radical uncertainty, which in this century will be inherent in any serious problem. VM has been working on RCO since the 1960s. (An US patent was granted for an earlier version of RCO in 1999.) RCO changes the paradigm of decision-making – from an artificial and risky “maximization of something” to a natural, evolutionary, and cautious “catastrophe avoidance.” It is devised to attain, as much as possible, the full purpose of planning – not only to achieve its intended goals, but also to avoid undesirable unintended consequences.
RCO embeds mathematical models in an ensemble of techniques that would neutralize potentially dangerous miscalculations. Perhaps the most important of these techniques is imposing on optimization models an additional function of “self-filtering,” so that they become very efficient “optimizing filters.” In addition, RCO meticulously screens decisions by six "synthetic" criteria that involve a new technique of "strategic frontier."
Thus, for the first time in more than 60 years, RCO legitimizes the high-level analytical use of a “computer -- optimization model” combination. No system on this planet is presently even remotely similar to RCO.
In 2011, RCO has been further generalized. Decisions are made in a complex world, in a “garbage can collection” of interlinked situations, events, problems, technologies, resources, and decision-makers. A novel Decision Network approach (by Han and Lai) combines analysis of all these items into a single structure. VM embedded that approach into RCO for conditions of radical uncertainty and, jointly with Professors Han and Lai, developed the first application of the resulting RCO/DN methodology, intended for urban planning.
Of course, RCO/DN is applicable universally, in any kind of organization. It importantly complements RCO in preventing the overextension of the portfolio of projects of that organization in respect to its resources -- physical, technological, financial, or human.
As for CFT, described in several items of the Articles section, VM originated the concept in 2004. It introduces a new type of capitalism – a “balanced” or “stabilized” capitalism that would prevent enormous trade disbalances in global economy, a main cause of the present crisis.
In CFT (simplified outline), the USA (currently the sap of last resort) sets a limit on annual trade deficit with each trading counterpart. If the counterpart wants to have a larger surplus, it must pay to the USA, government-to-government, the excess amount. If unpaid, all further imports from that country are directed to pass through a single custom agent in a single entrance city, designated for that counterpart.
CFT stems from a basic doctrine of economics – any “externality” on a common good, such as the trade balance of a country, should be “internalized”: a negative impact of an “externality” has to be countervailed by a constraint or a payment. Absence of such measures in the trade policy of the USA leads to a textbook "tragedy of commons" (their destruction because nobody exercises control). It comes from either stupidity or (more likely) willful negligence.
CFT uses our only remaining weapon, which is, however, overwhelmingly powerful -- the size of our market. If implemented, CFT would be the only system that, while controlling trade deficits, prevents both trade wars and inflation. It has dozens of other advantages, too. It would be a superb tool of both short- and long-term risk management.
Most important, CFT also could be a tool of both diplomatic persuasion and geopolitical containment, a la Kennan, of potential rivals and adversaries. (In the present situation, financial containment is much better than territorial.) Trade surpluses in the USA-China trade are the principal financing source of a dangerous arms race started by China. CFT will end reckless pumping money from our defense to China’s offense. (See “Ode to CFT” in the Articles section.)
The CFT approach is a compromise between free trade and protectionism and thus the novel third type of international trade. It has been implicitly approved by Professor Paul Samuelson: its uniqueness was confirmed by Professor Peter Morici (private communications both).
In 2011, VM was invited to give a lecture on “New Economics of Survival” to the NJ chapter of the Mensa Society.
VM is writing a book on “Politically Incorrect General Socio-Economics,” which covers both his criticism of the Anglo-American mainstream economics and his theory of using the market mechanism, while pushing the market in a direction, beneficial for sustainable survival of the society in a democratic regime.
The main idea of that approach is as follows.
Under conditions of the 21st century, democracy and unfettered globalization are incompatible. We must choose one of them. The latter will lead to 1984, from either left or right. A socio-economic crusade is necessary to eliminate that danger.
(In that connection, it is pertinent to pose the following question about AEA, American Economic Association. Question: What are the four main points of similarity between AEA and Al Qaeda? Answer: Both begin with A; Both contain "ae...a"; Both are adamant adherents of "creative destruction," whenever that process does not threaten their tenures; Both are very dangerous, 24/366.)
He is an Associate Member of RUTCOR, Rutgers Center of Operations Research. He also is the President of Risk Evaluation and Management, Inc., located in Warren, NJ.
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