Evonomics – Who created the Economy?

Who Created the Economy?

Human action, but not human design

A lot of truth in this article, and also a lot of half truths and outright mistakes.

There is a half truth in the quote from Smith that each person “intends only his own security”. Smith got that wrong.
Sure there are some few sociopaths who intend “only” their own security. Most people also intend the security of friends and family and colleagues – it is called cooperation or compassion. Robert Axelrod received the American Science medal for essentially showing in Games Theory terms that cooperation requires attendant strategies to prevent cheating if it is to be stable. He demonstrated that the simplest class of such attendant strategies is the retaliator class – cooperate until trust is broken then retaliate hard enough to remove all benefit from cheating. We see it at many levels in our biology and our society, from emotions like jealousy and injustice to social conventions like our legal system that supposedly punishes cheats.

Thus Axelrod demonstrated in mathematics and logic that it is in fact sensible to care for far more than “only” our own security, provided we have agreed and functioning systems to remove most cheating strategies, and are actively looking for both cheats and new levels of effective countermeasures. And in an almost paradoxical twist, such caring and cooperation does end up actually being in our own long term self interest.

When viewed from this perspective, rather than the exchange aspects of markets being central, it can be seen that the distributed trust networks that are a part of real functioning markets were at least as important, and possible far more important, to prosperity than any value of exchange.

Certainly freedom is key to prosperity, and it is key at every level. At every level of society there needs to be freedom to question, to innovate, to experiment to determine if new methods, new ideas, do actually deliver benefit, or if there are other unforeseen complicating factors. This applies at all levels of knowledge, from household to trade guilds, to science, to philosophy (in as much as it can be said to differ from science, which is marginal or non-existent in some understandings).

And it can get very complex, as many levels arise, and there is much done for hidden reasons. Much of the legislation in place in the name of public safety is actually far more about protecting profits and monopolies, and when looked at closely actually causes far more harm than good.
Which is not to say that there are not people and businesses out there that do actively put people in danger for profit motives, those exist, but much legislation tends to give such cheating strategies much more protection than it does to the public in general.

The claim that “the cause of the great enrichment is still unknown” is utter nonsense.
There was no single cause.
There was a vast array of causes.
Weapons was one cause. The long bow, in the hands of someone trained in its use, made that man dangerous to all other men. As such it was a great equaliser. Kings and gentry learned to their cost that they could only push people so far, before someone would take retaliatory action.
Thus was authoritarian rule reduced in a sense.
New energy sources was another. Steam power allowed the multiplication of effort. Human power or horse power was no longer the limiting factor in production. Water power and steam power allowed more to be made by fewer people. That trend has continued as new forms of power have come on stream.
New ways of understanding processes became important. Looking for rate limiting steps, and focusing on those, sequentially, produced steady improvement at all levels, and as the number of levels at which improvements happen increase so the exponent of the increase increases.
New levels of understanding contribute, opening an exponentially increasing set of new boundaries to be explored. Unfortunately, part of that exploration was into new ways to keep the majority of people ignorant of the sorts of exploitation they were subject to, that is now a multi-level business consuming much intellectual resource.
Much of the increase in output came not from specialisation per se, but from the process improvements it allowed. A self sufficient generalist person is not significantly less skilled or productive than a specialist when actually on task, it is all the down time required to switch tasks where most improvements were made. Keeping a forge going and working it to capacity is much more time and energy efficient than starting it up for a short job then shutting it down again. In this sense, productivity gains were most often much more about process and energy than about the human skill involved. Rapid transport and rapid communication allowed for specialisation to be efficient. If you could start your own forge, use it and shut it down again quicker than you could walk to a blacksmith, then it was more efficient to do it yourself. The internet has taken that process close to its asymptotic limit.

People are still being fed the nonsense that we face a scarcity of material and energy. That is outright lies.
We know how to produce as much energy as anyone reasonably needs, using solar cells, geothermal and hydro, but that is distributed energy, and will destroy the vast profits being made by oil and energy companies from centralised production and supply.
As third and forth generation 3D printing comes on stream, and production becomes completely automated and decentralised, the need for exchange as a means of survival vanishes.

Smiths’ ideas of moral sentiment are a reasonable approximation to our more recent understanding of the depths of the strategy spaces explored by evolution at both genetic and cultural levels. Dawkins’ 1976 classic “The Selfish Gene” is still probably one of the best introductions to the topic around, and it is a topic of extreme depth, and recursively involves cooperation and competition in a dance where cooperation is clearly ever more dominant in the higher levels of the dance (as the benefits of cooperation grow exponentially and the likelihood of cheating being noticed rises exponentially).

What our society has not yet broadly caught up with, is that our modern ability to automate any process, using computers and robotics, gives us the capacity to deliver universal abundance of all essentials, but that market based economics must always value any universal abundance at zero.
When most things were genuinely scarce, markets and the information signals they provided made a lot of sense. Now that we can automate any process, market values actively work against the interests of a large section of society. Scarcity is now much more about the ways we have of thinking about things in terms of money, than it is about our inability to produce real goods and services.

Sure we need to clean up our technological act to be a much better fit with existing biological ecosystems, and the major thing stopping that is the very notion of capital, and the need to extract as much profit as possible from existing technology before replacing it with newer and more efficient technology.

Those at the top of the distribution heap have something of a myopic focus on the role competition in creativity and evolution, and are selectively blind to the ever increasing role of cooperation at all levels.

Certainly there is great truth in the fact that specialisation of roles allows for emergent levels of complexity.
And biology has a clear lesson for us here.
When a subset of the cooperative starts using resources for its own replication at cost to the operation of cooperative as a whole, we have a term for that – it is called cancer.

Much of the money system, the finance system, has become a cancer that threatens the life of humanity as a cooperative species.

And saying that is not in any way implying that everyone is the same or needs to be the same. It is saying that the system needs to deliver the essentials of life and liberty to every individual (life blood must go to every cell). Most individuals actually have quite modest needs, easily met.

The cancerous tumours of greed, creating risk to others, threaten us all.

We actually have ample creativity to supply all that anyone needs, and all that most people want, provided we adjust our systems to make it so.

Our systems of automation and production have actually taken us past the threshold where exchange based systems of value can actually send clear signals of what those real human needs and wants are.

Elinor Ostrom has shown us a series of alternative modes of cooperation (which align well with Axelrod’s work).

Yes – at a time where markets provided the best trust networks available, imperfect markets were better than no markets.

Now we have levels of communication available from the internet, and from high density personal storage, that allow us to develop widely distributed trust networks with very high redundancy and very high accuracy over time – much better than anything any market could ever provide.

The key, as Hayek pointed to, is seeing markets as information systems, and then seeing how the internet makes them redundant.

It is now clear, beyond any shadow of reasonable doubt, that markets, and their scarcity based value systems (money and capital), are now becoming the single greatest liability, and the single greatest threat to the most cooperative species ever to emerge on this planet – us!

About Ted Howard NZ

Seems like I might be a cancer survivor. Thinking about the systemic incentives within the world we find ourselves in, and how we might adjust them to provide an environment that supports everyone (no exceptions) - see www.tedhowardnz.com/money
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