I find economics fascinating. I should point out right away that I tend to swing heavily pro-market on most issues. With that said, I recently read an article that highlights the opinions of several academic scientists and economists regarding the current economic crisis. Two names caught my attention, Stuart Kauffman (a leading name in systems biology and computer science, and the author of At Home in the Universe, one of the few books that changed my life) and Michael Shermer (publisher of Skeptic Magazine). Here's a quote from Shermer's take on governmental and "top down" market intervention:
Life is intricate, complex, and looks intelligently designed, so our folk biology leads us to infer that there must be an intelligent designer. Analogously, economies are intricate, complex, and look intelligently designed, so our folk economics is to infer that we need an economic designer. This is why instinctually we look to top-down artificial solutions to problems that naturally arose from this bottom-up complex adaptive system... Life and economies, like language, writing, the law, civilizations, and cultures, arise spontaneously as self-organized emergent properties from within systems themselves and without the aid of a blueprint design by a clever engineer. Neither God nor Government are needed to explain such phenomena. In their stead, natural selection and the invisible hand explain precisely how individual organisms and people, pursuing their own self-interest in their struggle to survive and make a living, generate the emergent property of complex ecologies and economies. Both are Complex Adaptive Systems in which individual particles, parts, or agents interact, process information, learn, and adapt their behavior to changing conditions.
Fascinating. The theory of natural selection emerged from the economic laws of supply and demand. In fact, the term, "survival of the fittest" was originally used to describe free market systems. There's a certain beauty in the parallels between economics and ecology. So, if these parallels hold true, it's more than a little disturbing that we've been attempting to "play God" in the market place for the past 60+ years. I tend to agree with Shermer here. The best solution to a failing economy is not pretty, but limited intervention is probably the best long term solution. But, since we've already dumped a few trillion into the market in form of so-called "bailouts"... I hope I'm wrong.
5 comments:
"So, if these parallels hold true, it's more than a little disturbing that we've been attempting to "play God" in the market place for the past 60+ years."
I really have to stop thinking about these things, because I'm increasingly becoming an extremist in the sense that I'm believing more and more in the idea that the forces governing natural selection essentially govern everything from the formation of gas giants to the smoothing of stones in a river. It's fast becoming my Number 23.
I would argue, though, that regulation of the markets is not necessarily going against natural selection (playing God) per se; it is very much part of the process, representing the emergence of altruism in these sorts of socially interactive systems. I've flirted with the classical liberal position, but could never fully subscribe to it precisely because it tends to shun the altruistic aspect of social behaviour (perhaps not to a Randian degree, but close) that has been so important in the evolution of many organisms. Although a good 50% of the current crisis was caused by mismanaged regulatory policies (the Freddy/Fannie monopoly being central to the debacle), there was also a considerable role played by allowing certain parts of the market to run amuck in an orgy of short term, dog-eat-dog trade tactics that was very harmful to the vital establishment of trust in socially interactive situations.
Thanks for the comments DSK,
Sorry I missed your post, somehow I skipped over it between the holidays.
Altruism exists in nature because it benefits the system and is governed by nothing but the system itself, not through selective breeding or through an interruption of the system ecology. In that sense, I don't see how top-down regulation could ever be seen as an affirmation of natural selection. But, as to if we should be fostering natural selection in the market... here are my thoughts
I agree that a role for regulation may be helpful, and in my opinion, should exist in a modern economy. I'm sure we could all debate on where that regulation should and should not exist. I will just suggest that market economics do not exist in a moral vacuum. Part of the reason a company or product reaches success is by being ethical. I agree that abuse will exist in short-term business decisions. I'm just not convinced that this can be avoided through any alternative system. But, the only time they are allowed to run amok, unchecked is when government institutes a top down sanction and protection of the abuse. Otherwise, you're free to vote with your dollars so to speak. I'm sure not convinced that more regulation translates into ethical businesses. I think it's more likely to foster more mercantile abuse. As I see it, a top-down system is inherently more prone to abuse than any market driven system.
As an aside, did you mean number 42? otherwise, I'm lost on the 23 reference.
It was a Robert Anton Wilson reference rather than a Douglas Adams reference. Although 42 may well be an answer related to 23 in some manner
I think we're actually in agreement on the whole. Although I do maintain that government, when restricted to a role of protector of private property, is very much a part of the same moral (altruistic) system that our commercial sector and associated financial institutions generally inhabit.
"I don't see how top-down regulation could ever be seen as an affirmation of natural selection."
Well, it can and then, as we tend to observe more often, it doesn't. It can if, as Paine suggested way back, government sticks to its roots as simply being a convenient place for elected representatives to get together and deal with things that will ultimately enhance the freedom and security of those they represent (defence, and taking care of the infrastructural minutiae). That is, a collaboration born about on the principle of mutual benefit. It doesn't when government starts to shift its emphasis from one of governing to one of ruling.
"I will just suggest that market economics do not exist in a moral vacuum"
Totally agree. But the market still has it's fair share of thieves that are looking to exploit precisely the trust that, on the whole, facilitates the success of that market. Current Ponzi scheme scandal as a case in point. Although I'm all about the power of the pocket as a first step towards initiating change, rather than falling back on Big Gummint, when it comes to fraud in the market place this is often no more than closing the gate after the horse has bolted (probably with your dollar between its teeth). The threat of a government with authority to step in with the cuffs provides a more rapid deterrent than the possibility that you won't fool the next guy as easily as you fooled the last. But I don't think we entirely disagree with that, I'm just clarifying my position.
Cheers!
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