Evonomics – Economists Should Stop Defending Milton Friedman’s Pseudo-science

Economists Should Stop Defending Milton Friedman’s Pseudo-science

On the pseudo-scientific nature of Friedman’s “as if” methodology

Agree with Ohminus – and it is also a bit deeper.

Milton was a very smart guy.
It took him all of about 30 seconds to get that fully automated production of goods and services completely changes the game – his response to a question I posed him was “that would be Nirvana wouldn’t it” – that was on 15th March 2003 – unfortunately he died 3 years later.

Yes there were paradigm changes from Aristotle to Galileo to Newton to Einstein and since.

Quantum Mechanics gave us the notion that the idea of causality might be just a useful approximation to something.
Wolfram’s investigations support that notion from a different paradigm again.

It is now clear, in both logic and experimental data, that this universe we find ourselves in is fundamentally unknowable and unpredictable in some very profound ways, and at the same time it is sufficiently close to causal at the scale of normal human perceptions that the difference is usually within the measurement error limits of our tools (and therefore itself uncertain).

It is now also clear that all human perception is of a subconsciously created, and slightly predictive, model of reality, created by the subconscious processes of our brains. The inputs from our senses usually keep this model entrained to reality quite closely, and the nature of the model is strongly influenced by our cultural and paradigmatic background. A lot of philosophers have a lot of work to do, both in epistemology and ontology, reworking their understandings to match this reality.

In the sense of managing our household, the household of humanity, and all the other life forms we share this third rock from the sun with, then yes, economics has a future, and it must be a future where markets and any value measure derived from them are bit players in a much broader set of values – prime amongst them individual life and individual freedom (in a responsible social and ecological context).

The age of money must end.

It was a valuable tool in our past, and the context has changed fundamentally, and the utility of money is now overshadowed by its dangers.

Money is a scarcity based measure of value.

Money cannot give a positive value to any universal abundance – no matter how important it is. Like the air we breath, arguably the most important thing to any human being, yet of zero market value wherever it is abundant.

Automation has the potential to deliver any definable good or service (or something sufficiently similar that no unaided human senses could distinguish the difference) in universal abundance.

Climate change, ecological destruction, poverty, etc are all true enough, real enough, in a very real sense, and at the same time each are trivial problems to solve with fully automated systems.

We are not short of energy, or matter, or ways of organising either.

What is currently limiting humanity is the ways of thinking about things and valuing things and interpreting things, that biology and culture have handed to us through their respective evolutionary processes.

We have some very complex social systems that are optimised for scarcity, and cannot deal usefully with universal abundance.

We can go beyond such things, into an age of security and abundance for all, and only if it empowers all and accepts the diversity that must result.

If we hold onto the idea of markets, then there will be poverty for the masses.

Poverty for the masses means injustice for the masses.

It is not safe being the target of someone with justice on their side.

The only stable way out of that, is to deliver justice to all.
That is incompatible with any market based system.

Markets always give a greater value to things that are scarce over things that are abundant (all other things being equal).
Markets (and exchange based thinking more generally) will always tend to destroy any universal abundance.

If we really value life and liberty, then the only stable option is universal cooperation (in a context of valuing individual life and individual liberty for all sapient entities, human and non human, biological and non-biological).
And we all know that raw cooperation is unstable, so we require sets of stabilising strategies (recurs to infinity). Hence the ancient maxim – the price of liberty is eternal vigilance.

In times of real abundance, cooperation always out performs competition, in all meaningful metrics.

We can deliver abundance to all.
We have the technology.

We just need to escape the dogma of our culture, and our blind reliance on the past as a guide to the future. In times of exponential change, such a strategy is far from optimal.

 

[followed by]

 

Hi Sally,

Depends a lot on how one defines such terms.

I say we do, right now, have the technology to fully automate the production and delivery of a large, and exponentially growing class of goods and services.

I have owned and operated a software company for 30 years.
16 years ago I was leading a largish team of developers on a largish project, when it became clear that there were constraints in the project that were not spoken of directly by any of the upper management parties. I was offered an ongoing job at $1600 / day plus expenses (working for a much larger company). It was very clear that I could make this money by putting about 100 people per year out of work.

Like many others I know, I chose a much lower income rather than pursue that path.
I devoted my systems skills to other levels of possibility space.

The technology has existed for many years.

The technology is not the issue. (And we can always develop better technology.) Sure, we don’t yet have Drexler’s atomic level precision ready for mass production, and we don’t need it, and it will be great when it gets here.

The issues are complex, and mostly have to do with the ways in which we think about things, the ways we value things.

All people use heuristic “hacks” when making value judgments.
Some people use money.
Some use “triple bottom line”.
Both have deep issues.
There are an infinite class of possibilities available.

For me, my choice is first and foremost the life of sapient individuals (all of them), and their liberty (in both social and ecological contexts). All other values being subservient to these.
And the journey of exploration of the space of the possible is an infinite one.
It seems likely that it will always be true that there are more efficient ways of doing things in the spaces yet to be explored.

And it is now true that we could fully automate production of key goods and services with existing technology.

Sure, it is a significant engineering challenge to assemble and debug the systems – that is definitely true. In this engineering sense, the technology doesn’t yet exist, and there is work to be done. And there isn’t anything fundamental that needs to be discovered to make it possible. And there are an infinite class of things that are yet to be discovered that could make it smaller and more efficient – that seems likely to always be true.

Lots of intersecting curves in lots of different dimensions – and many of them are exponential – heading for or having just crossed axes of interest.

Change, really fundamental change, even for the most conservative in society, is now unavoidable. The probabilities are now moving very much into a realm where we either all win, or we all lose. I don’t see many high probability areas in between.

Universal cooperation is definitely the low risk high reward option – for everyone.
We now have a very large set of classes of well documented stabilising strategies available to ensure the cooperative is not invaded by cheating strategies.

In times of exponential change, the past is not a good predictor of the future. That can be very difficult to come to terms with.

The most powerful long term outcomes are (beyond any shadow of reasonable doubt) in the “all win” class of possibilities.
And nothing is certain.

 

[followed by]
Hi George

Milton was a very bright individual, deeply engaged in statistics.
In what he wrote I am very confident that he was pointing to something deeper than a surface level interpretation.

And it seems there is something there, and I tend to agree with you that he got the wrong end of the bone he was worrying, and it seems likely to me that it was a different bone from the one you seem to be pointing to.

I’ve come to a different set of metaphors, to try and point towards the levels of complexity present in human beings, and the sorts of behaviours that are possible in different contexts.

If we go back to an understanding of falling bodies, that is a really complex set of systems.
At that time they did not even have an atomic model of gases, let alone decent understanding of turbulence induced drag. So while there was the presence of gravity, for many everyday objects, in the atmosphere, the acceleration due to gravity was rapidly countered by other effects.

One had to be very selective about contexts in order to be able to detect some of the deeper truths.

Like the idea of the earth being at the center of things.
That is in fact what we see.
We look out, and the Sun rises and sets.
The stars do their annual rotation.
The planets wander about.
That is what we see.

Creating a context where it seems sensible that the Earth is not the center of things requires far greater modeling complexity.

It is all about searching for contexts that provide maximal explanatory power. Such models can be far from simple, with many levels of abstraction.

Every individual has to start out making simple distinctions.
One has to be able to count to 2 before one can count to 3, or 4, or 1,000, or 10^220.
Simple binaries are always the simplest and first distinctions we make, and most often they are essentially random divisions of potentially infinite spectra, like the notion of light and dark, heavy and light, good and bad, right and wrong, and (in most real contexts) true and false.

It now seems clear that all human experience is of a subconsciously created model of reality, rather than of reality itself, but until we invented computers, and virtual reality games, how could most people have any access to a concept like that?

Games theory now tells us quite clearly, that provided a context has sufficient resources that all can survive and prosper, then cooperation always out performs competition, at every level. And cooperation requires attendant strategies to prevent cheating strategies from destroying it – recurs to infinity down that nest.

Wolfram has clearly shown many aspects of maximal computational complexity in reality (ie even if things were entirely causal, they would still be unpredictable).
Quantum mechanics seems to be telling us that our assumptions about causality are fundamentally flawed, and that our experience of a causal world is the product of massive collections of random events within probabilistic constraints.

Computational ability is doubling at times between 10 months and two years, depending upon which aspect of it one looks most closely at. Automation is proceeding at a similar pace.
Robotics is an aspect of automation.

We are not quite at the level of molecular precision in manufacturing (as per Drexler at al) and we are not that far away from it.

It is now clear, beyond any shadow of reasonable doubt, that the major purpose (in practice) of our legal system is now to put in place barriers to the production of universal abundance that would otherwise threaten the structure of the scarcity based economic system (it may not have started out that way, and that is what it has become in practice).

We have the technical capacity to produce a universal abundance of a large and exponentially expanding set of goods and services, but our modes of thinking and valuing prevent it from happening in practice.

So I do kind of agree with you, and I also don’t.

I know that Milton understood this aspect of the limitation of markets, because I personally had that conversation with him.

I think he was pointing to a limitation on the modeling capacity of people, and I think we now have tools to allow us to overcome such limitations.

I probably am a weird geek, who has spent far more time concerned with abstract spaces than with making money, and I have actually operated a software company for 30 years, so I do have some practical experience.

I am confident, beyond any shadow of reasonable doubt, that we need to go beyond money and markets, and that if we do so, we can experience an age of abundance and security beyond anything possible in a market based system.

And we do need to provide replacement (non-market) systems for all the many complex functions that markets provide, and that isn’t actually that much of a problem.

 

[followed by]
Hi George,

This is really tricky.
In one sense, I agree with almost everything you say, and in that context, what Milton said makes little sense.

In another sense, a more deeply probabilistic one, Milton still seems to be wrong to me, and he does seem to be pointing to something real, even if he made some errors along the way.

And it is really abstract, and really difficult to discuss with any clarity.

I read your http://www.rweconomics.com/EVKGT.htm paper, and it makes good sense as far as it goes. It just doesn’t go nearly far enough.

I am fundamentally questioning causality.
I am instead pointing in the direction of complexity, towards dispositionality, and to a potentially infinite nest of levels in a really complex set of systems.

To me, the behaviour of markets more closely resembles waves on the ocean. Waves form as a result of boundary turbulence between fast moving air masses and slower moving water. These waves change their shape when the deeper areas of their influence interact with another boundary layer (the ocean floor), causing the waves to stand up and sometimes to “break”. In the context of markets most of these flows and boundaries are currently in terms of information, concepts, and paradigms. Some people get great pleasure from “surfing” those high energy zones.

The system within which humans exist has far more than two boundary layers, many more than 4 dimensions, and the “wave” forms that result are far more complex. And many people seem to have an addiction to “surfing” those zones – they have adapted to live there, and seem to “like it”.

I think we can create conditions such people would enjoy, without the significant risk to the rest of us that their behaviours currently pose.

So while I kind of agree with a lot that you said – I am also clear that the fundamental assumptions underlying market based thinking now pose such a significant existential risk that they can no longer be tolerated. It seems that the most probable scenarios are, we either transition beyond market thinking, or we perish. And it is a complex disposition system, seemingly without hard causality, and to a good first order approximation, that does seem to be the most probable set of outcomes.

I am very conscious of Goodhart’s Law of complex systems “Any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes”.

So for me “The ultimate justification for” anything, is empowering the life and liberty of every individual (without exception). And liberty has to be in a context of responsibility in a set of physical, ecological, and social contexts- all of which are highly dimensional, dispositional complex systems.

Simple laws, simple models, while we must each use them as part of our personal growth paths, are not appropriate in adulthood.

The simplifying assumptions of economics can no longer be tolerated (in the context of the ability to fully automate the production and delivery of a large and exponentially expanding set of goods and services).

And it is really difficult writing of third level and higher abstractions when no accepted vocabulary exists for such things.

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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