Evonomics – Markets like Gardens

Complexity Economics Shows Us Why Laissez-Faire Economics Always Fails

Why markets are like gardens, not machines

So many great ideas in this post, and also so many mixed up ideas.

Laissez faire works in a sense, it produces the outcomes that it does, its just that in terms of long term survival probabilities, it delivers very low probabilities of long term survival for anyone in the system.
When things are genuinely scarce it works remarkably well (though with the noted problems), but as exponential advances in information processing bring about exponential advances in the domains where universal abundance is possible, the whole notion of markets (being a scarcity based value measure) introduces major instabilities that have a high probability of collapsing the system as a whole at some point (not just recession, but oscillation into a totally competitive modality taking all human life with it).

The article is really good, in as far as it explores complexity, and compares classical equilibrium economics with complexity economics. And that is only taking a single step into the realm of complexity. It is infinite, there are lots more steps.

Wolfram, with NKS, takes a step into the abstract and generalised realms of computation and relationship, but he holds on tightly to the notion of causality. He does go so far as to firmly establish the idea of maximal computational complexity, and thus demonstrate that there are entire classes, even in the most simple of computational systems, of systems that are not reducible to any sort of predictive formula. The only way to see what will happen in such systems is to run them and see. There are many levels of such systems in living systems, and as economics is the study of an aspect of human beings (an instance of a living system) there are many aspects of us that are not predictable in any sense (even if one assumes {as Wolfram does} that they are fully causal).

If one follows Bayes, and the experimental evidence of QM, where they actually seem to lead, then (in the twin contexts of complexity theory and probability theory) Ockham seems to take us to a place where any stochastic system which is constrained in some way to some set of probability distributions, will, in a sufficiently large collection, display sets of properties that deliver outcomes that very closely approximate hard causality.

So Wolfram, Dennett and many others hold firmly to assumptions of hard causality, which have the ultimate outcome of making us automata and invalidating any non-trivial level of morality. Much as I admire both Dennett and Wolfram and many others, the foundational assumptions of causality they cling to do not seem to follow Ockham’s dictates.

It seems clear, that in a world that is fundamentally stochastic, fundamentally random to some degree, then it will develop properties that deliver both a close approximation to causality in large collections, and allow for genuine (non-deterministic) freedom to coexist. Thus we can get what we seem to have, both causality and morality (though neither being absolute – though workable in practice).

So what does this have to do with economics?

Economics is in a sense a study of human behaviour – what do we do and why?

Behaviour is about goals and goals can be thought of as deriving from values – but that seems to not actually be how it is.

Actually what seems to be reality, is that at every level, evolution (natural selection, selective survival of variants) seems to select what works (at the genetic level, at the cultural level, and at any other sets of levels that might emerge). So it seems that ultimately, all of our likes and dislikes, all of our morality, our deepest or highest desires, derive from survival at some level of systems.

So when Beinhocker talks of “fitness landscapes” and “individuals and groups cooperate to compete” that is true in a sense, and if taken at face value it leads to a not very useful understanding of evolution.

In order to be useful, the understanding must look at the nature of the strategic environment, the nested levels of context, as well as the nested levels of associated sets of strategies. This applies from the subcellular groupings of RNAs, proteins, DNAs, into cells, organelles, and on up the genetic tree of diversity of life forms. It applies equally to the mimetic and cultural environments that have evolved on top of (and in the context of) those genetic systems. And it applies to those entities that have emerged from that nested set of cosmological, chemical and genetic contexts and the emergent mimetic and cultural contexts.

So in this context, there is some real power in the statement “What I think you think about what I want creates storms of behavior that change what is”, and the levels of replicators possible in the system seem to be infinitely extensible, not at all confined to the two reasonably well described ones of genetic and mimetic.

So rather than being like a garden, it is much more like wandering through a TARDIS, that every time you open a door to a room, it grows three new rooms, with three new doors, not just in the room behind the door you just opened, but in every room thus far in existence. This seems to be the nature of the reality we find ourselves in. The Zen Buddhists seem to have captured a flavour of it in their saying “that for the master, on a path worth walking, for every step on the path, the destination grows two steps further away”.

In such a reality, it is the values we as free agents choose (in as much as we do choose, and are not simply tools of our unexamined genetic and cultural history) that are of prime importance.

It seems clear to me that individual life must take pride of place, followed closely by individual liberty (our own and everyone else’s, in near equal measure) if we are to have any reasonable chance of living long enough to have a reasonable exploration of the infinities available to the enquiring mind. And in that context, Wolfram has clearly shown, that whatever basis one assumes, strictly causal, or more loosely constrained stochastic causal, the principle of maximal computational complexity will be our companion – which guarantees uncertainty and unknowability in practice of many classes of aspects of reality.

So it becomes very clear in logic and reason, that it is time for humanity to acknowledge the real historical utility of markets, the way in which they supported freedom in a context of genuine scarcity, and to move past such scarcity based paradigms into an age of freedom in abundance, where security (in as much as it can exist) is delivered by distributed trust networks, distributed information networks, distributed production networks, and massive redundancy at all levels (to give as much flexibility as possible to respond to the unknowns and unknowables that must logically reside in all complex systems.

The statement “If well-tended, markets produce great results but if untended, they destroy themselves” could arguably be said to be true for most of history up until very recently, when scarcity did genuinely dominate the world of goods and services.

Now that we have the computational ability to access universal abundance, either we go beyond economics, or economics will most probably destroy us – there really isn’t any stable middle ground.

[followed by]

Hi Robert,
The assumption that expanding numbers will create resource constraint is based upon the assumption of static technology. Our technical capacity is expanding at a far greater exponential than our population (population is currently about 3% per annum and dropping, while computation is 120% per annum and increasing). Thus we are finding ways to do more with less, faster than our need for more is increasing.

So yes, there are physical limits, and right now, we still have quite a bit of room inside the technology curve before we reach those limits.

When you look back into history, the hunter gatherer technology of sustaining humans required over a million square meters per person. As we developed agriculture that number has dropped, and as we refine agriculture and molecular level manufacturing even further, those number will drop further still. As we grow fruits and vegetables under cover, in small isolated units, we can isolate from insects and birds and mammals, and as filter technologies develop we will shortly even be able to remove airborne spores. Those two abilities remove the need for chemical sprays (which are low levels toxins for us, but much better than starvation).

The actual limit for humans, by living under our rooftop gardens and solar panels, on top of our water storage and deep underground recycling and high speed transport networks, seems to be around 500 square meters per person (for food and energy enough to live what most of us would consider a high standard of living – with energy efficient high tech giving us serving robots to do all the maintenance work on house and garden, and all the cooking cleaning etc required to maintain everything (including themselves). We’re not quite at the level of being able to produce all that technology right now, and it will certainly be available within 20 years, so we had better be prepared for it.
At that limit of technology, and leaving half the land surface for natural ecosystems, while modifying the rest for human use, we could sustain 10 billion people using half the land surface, none of the water, and having sufficient reserves to survive a loss of half the capacity to natural disaster.

If we were to use 20% of the ocean for food and energy farms for coastal megacities we could easily double that population. So about 20 billion is a practical limit if we are ensuring that every individual has the sorts of freedom of travel, communication and manufacture that I as the CEO of a software company consider reasonable.

Everything has to do with the technologies we employ. Currently most of our manufacturing technology is based on scales that suit human supervised tools. When we have molecular level nano-scale manufacturing and resource recycling, then everything changes.

So yes – we need to consider the ecosystem we live with, and we don’t need to be reliant upon them, we can isolate and optimise those aspects we need for survival purposes, while retaining the rest for enjoyment purposes. And I have been a lifelong conservationist, have studied ecology and biochemistry at university, currently chair our district zone water management committee, and a member of our regional biodiversity committee, and chair the Huttons Shearwater Charitable Trust, and have over 40 years involvement in fisheries management – so I don’t just write about this stuff, I do it in practice, and am all too conscious of the practical issues we face, and the technological advances needed to address them, and the inadequacy of free market incentives to do that job.

And yes – it seems clear to me that ultimately all of our values resolve back to survival at some level, through some chain of genetic or mimetic evolutionary linkages.
And yes, I am certainly all about systems that enhance survival probabilities for humans first and foremost, and for most other life forms also (not for those that pose significant direct threats to human survival).

And also yes – clean air, with about 20% oxygen, clean fresh water, adequate nutritious, tasty, safe food are all prerequisites for a full life, as are health care, education, transportation, tools, shelter, information, and general security (freedom from threats).

I have some issues with the “pursuit of happiness”, in as much as when you look deeply into the origins of happiness, at the genetic and cultural levels of evolution, through the many biochemical pathways, it seems to be various sets of survival directives averaged over the conditions present in the deep time of our genetic and cultural evolution. Little in that deep past is compatible our exponentially changing technological present, so many of the things that worked for our deep ancestors no longer work for us. So the default setting for “happiness” can lead us seriously astray (like drinking sugar water drinks) And with knowledge we can manage such things, and with that provisio, certainly, the pursuit of whatever we reasonably choose, within the context of the survival of ourselves and all others, and within the context of the greatest level of reasonable freedom we can supply to all.

I am not about serving anything.

I am about individual survival and individual liberty, and that comes in a context of cosmology, chemistry, evolution, and the existence of a large set of other sapient entities (human and non-human, biological and non-biological) with the same rights to life and liberty as myself. The complex system that results necessarily has flexible context sensitive boundaries at every dimension of interaction.

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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