Microeconomics, macroeconomics and complexity
Yes and no.
Have been a follower and admirer of Steve’s work for some years. Downloaded his Minsky software and spent a few days playing with different models.
Yes in the sense that we need to have simple sets of heuristics that work most of the time, in order to be able to make useful decisions with any sort of regularity, at any level.
No in the sense that the reasons for the complexity and the model failure are deeper, much deeper, and when looked at in this wider context show an imminent failure of the fundamental assumptions of economics.
Economics as a concept comes from a Greek term for the manager of a household, and incorporates the concept of stewardship.
If we widen that concept out, as many have done and do, to include all sapient entities and the systems that sustain us (physically and spiritually), then it is about much more than markets and money.
Economics has to be about valuing something.
What is it that people actually value?
There are many different alternative sets of values that are encapsulated in the abstract notion of value, and ultimately they come back to life and liberty.
How much of our time (our life) are we prepared to give to something, and how much of our liberty do we give to it (how much do we constrain our many levels of impulse to action to the achievement of some purpose)?
Ultimately, if the abstract idea of money measures anything, it measures these things, in practice.
Supply curves, demand curves, all come down to factors influencing how individuals choose to spend their lives and their liberty.
In a world where most things were actually scarce, using the market generated measure of value had a lot of utility. Under those conditions it really did lead to a general trend to optimise production and distribution in a way that lead to improvements in the general welfare of people, on average over time, acknowledging all the faults and problems that Steve and others have shown.
And things are now fundamentally changing.
The air we all breath is arguably the single most valuable commodity to each and every one of us, yet in most markets it has no value, because it is universally abundant.
Universal abundance has no market value.
Because markets measure exchange value, and value in exchange is some function of utility multiplied by some function of scarcity. When scarcity drops to zero, value drops to zero.
Why is that an issue?
Because for over a century we have been living in an age of exponential increase in computational ability. The doubling time is now under a year (do you feel twice as well off as you were last year?).
Computational ability allows automation.
That automation starts in the realm of information, analysis and transmission.
As the tools of production move towards molecular level manufacturing (as predicted by Drexler 30 years ago), automation will take over the realms of production and delivery.
Why are those things important?
How have we reacted to date?
Those things are important, because we are all individuals.
We each have our own life, our own liberty.
We each value those things.
Steve’s model clearly demonstrates that the only way to keep the money system anything like stable, is to maintain unemployment at a fairly high level. Unemployment is structural to the system in this sense.
The only way that could be stable socially is if everyone had a high basic level of income (Universal Basic Income UBI).
To date, the reaction to universal abundance in the arena of information has been to create laws to produce scarcity – intellectual property laws. The only possible justification for such laws is to maintain scarcity (structural poverty) to create market value.
In an age where we actually have the ability to automate any and all processes, then using market value as the prime planning and delivery tool actively works against the values of a large fraction of society. That simple fact generates real risk for all, at all levels.
We have the ability to fully automate meeting the reasonable needs of everyone on the planet, for food, shelter, education, health, transport and to also manage our activities within the biophysical and ecological constraints present on this planet.
Markets, in and of their own internal incentive structures, cannot ever do that.
All complex systems require boundaries.
Cells without cell walls are not cells, they are ocean.
Boundaries are a necessary aspect of complexity at all levels, physical and spiritual.
Just as cell walls are essential to our existence as cell based entities, so too are levels of morality essential to our survival as spiritual entities (all levels).
Morality provides an essential set of boundaries for social existence.
We are each fundamentally social entities.
The worst punishment we have is “solitary confinement”.
And that doesn’t necessarily mean that any specific set of moral precepts now existing is entirely appropriate to our current situation, and it does point in the general direction of something.
We are extremely complex.
We have many levels.
Steve’s columns X & Y have about 20 lines to them in most individuals. And at the level of each line exists complex sets of systems.
Our ability to understand anything does require us to make simplifying assumptions at every level. And that says more about our ability to understand than it does about reality.
At each level, our laws and models are unlikely to be entirely accurate, and they can be sufficiently useful approximations for particular purposes.
It might be possible to simulate the operation of a modern digital computer from quantum mechanical equations, but there does not exist enough computational ability in this universe to do so, so we make simplifying assumptions that work well enough to deliver useful outcomes.
Reality is complex beyond any ability to understand in detail.
We are the result of such complexity, not the cause of it.
There is no logical possibility of anything as complex as us understanding ourselves in detail, only in terms of simplistic approximations that are good enough for some purposes, but fail completely outside of that set of constraints.
We can meet the reasonable needs for life and liberty for everyone.
Markets left to their own internal sets of incentives cannot do that, not in an age of fully automated systems.
We can choose a path forward, and it needs to be one based in the values of individual life and individual liberty applied universally.
And in doing that it needs to be within contexts of social and ecological responsibility.
Breaking the boundaries necessary for complexity is not freedom, it is death! Complexity theory games theory, and computational theory can fill that gap in Nietzsche’s understanding, and completely invalidate the Post Modernists branch of nihilism. Evolution is about survival. Existence has a value in itself.
And the systems we find ourselves in are so complex, and the models that most people have of those systems are so simple, that sometimes the necessary boundaries are not at all obvious to most (can in fact be deeply hidden behind assumptions that were reasonable in times past but are no longer so).
Exponential change has that unsettling property, of exposing assumptions for the simple context sensitive heuristics that they are, rather than being any sort of universal law.
Perhaps the single greatest error of the last 200 years was to focus on the competitive aspect of evolution, and ignore the reality that all emergent levels of complexity in evolved systems require new levels of cooperation. And cooperation requires attendant strategies to detect and remove cheating strategies, which is an ongoing evolutionary process in itself. Arguably most of finance and politics and advertising are now dominated by cheating strategies.
That doesn’t mean we need to change the people necessarily, and it does mean that the people need to change their strategy sets.
We are the most cooperative species we know of.
Perhaps it is time to give that fact the majority of our intellectual attention.