Evonomics – Hayek meets information theory

Hayek Meets Information Theory. And Fails.

Modern economic theories of prices-as-information are seventy years out of date.

This post is kind of useful in the way it portrays information theory reasonably well.
This post is very poor in its presentation of von Hayek’s thoughts, as Guilherme and others accurately note.
That it ignores evolution is unforgivable.

Like most works, in attempting to simplify a very complex system, it over simplifies to the point of creating chaos.

Any attempt to understand anything to do with humans that does not acknowledge the many levels of dimensions of systems that are present in us from our evolutionary history, both in the genetic sense of the structure of our bodies and brains, and in the cultural sense of our language, knowledge, practices, and domains of embodied wisdom; must fail in many important aspects.

I recall attending a meeting of the International Institute of Fisheries Economics and Trade (IIFET) in 1984, and listening to the mathematical explanations of fisheries markets. They were all simplistic nonsense to me. At that point I had been a practicing fisherman for almost a decade, and had several years involvement in retail and wholesale fish markets. I also had a tertiary background in ecology, computing, psychology and neuro-chemistry. The fish markets I was involved in were all determined by the strength of the human relationships, involving reciprocity and trust far more than money, and money was an important factor.

Jordan Peterson (YouTube videos abound) has a great understanding of many of the levels of evolved embodied cognition and information processing present in the human brain, and the ways in which social interaction instantiates probabilities to particular classes of relationship and action.

Every individual human being is a constantly evolving entity, with infinite potential for the emergence of new levels of complexity.

This morning I was trying to explain to my wife and a friend the way in which genetic and social evolution provide us with contextually relevant heuristic hacks to simplify the complexity present down to something we can consciously handle. She misunderstood what I was saying, and asked me what a “heuristic axe” was. The idea of someone taking a heuristic axe to a forest of complexity was actually quite appealing to me.

Evolution, both genetic and cultural, has certainly supplied us with many levels of such “axes”, that allow us to make the sort of sense that we do of the forests of complexity within which we find ourselves (which are just mind numbingly vast when you actually seriously look at them).

Those hacks must have worked in our past, for us and or our ancestors, to get us here – that is kind of the definition of evolution – the differential survival of that which works most frequently with least cost in terms of time and materials, across all the contexts encountered over deep time.

The deep time of reality has exposed our ancestors to a vast array of strategic environments with existential implications. As a result, we all carry deep sets of context sensitive responses to many different sorts of contexts (our demons and monsters, as well as our better angels).
Cooperation was a fundamental part of that, at many levels.
Strategies to identify and punish strategies that cheat or prey on the cooperative are deeply embodied at many levels (as Axelrod’s logic demands).
Cheating on the cooperative is a very high risk long term strategy (however high the short term payoffs may seem, and however long one has “gotten away with it”).

The assumption by economics that there is any sort of equilibrium present is fundamentally flawed, and of course there are approximations to equilibria in complex highly dimensional strategic landscapes (John Maynard Smith’s multiple stable state equilibria is a low dimensional approximation to something with vastly more dimensions – thousands of them).

Every human brain is a computational system, optimised over vast time, for solving complex problems of social relationship within multiple simultaneous hierarchies while simultaneously meeting low level bodily needs for food, water, shelter, etc.

That simple fact is why decentralised capitalism has worked better than any sort of central planning, and must always do so.

It is our human need to seek simplicity, even where it does not exist, that has led to many of the profound mistakes of economics and economic thought.

The invention of the abstract notion of value embodied in money (a very useful myth in a very real sense), is both one of the most profoundly useful tools ever invented, and also one of the greatest sources of existential risk when taken too simply.

For the notion of money to work, everyone has to have the ability to get enough.
Automation is making that impossible in a free market. We can now fully automate systems faster and easier than we can train people.
For money to retain utility, it needs to be distributed to all in a reasonable fashion. Not a demand that everyone have only the same, but a demand that everyone have a necessary sufficiency. We know what will happen to distributions thereafter, and that is fine, provided everyone can live with what they have to start with (ongoingly).
If the money system is to survive, there must be some form of universal basic income (UBI), and freedom will produce diversity from that base.

Regulations need to be the minimum set necessary for the survival of the complexity present, and that is unlikely to be a small number, considering the large and expanding dimensions of complexity currently existing. So necessarily ongoing tensions and needs for conversations and negotiation of agreements.

And some things are likely to be eternal – like a respect for individual sapient life (human and non-human, biological and non-biological), and a respect for individual liberty (within the necessary minimum set of constraints required to sustain the many levels of complexity present – requiring responsibility in ecological and social contexts from all individuals).

The hardest thing for many cultures to accept will be the expanding diversity that must result – all dimensions.

And such freedom is not without constraints.
Constraints are essential for complexity to exist.
Without constraints, everything returns to amorphous goo.
Every new level of complexity will have a necessary minimum set of constraints for its survival.
In a social context, morality is such a necessary minimum set of constraints – which is not to say that any existing particular moral system is such a minimum necessary set of constraints (that is actually highly improbable).
At higher levels of complexity it has an analog in the set of attendant strategies necessary to prevent the cooperative being over-run by cheating (exploitative) strategies. And that will always be something of an evolutionary arms race, all dimensions, emergent and yet to emerge.

So currently economics still seems to be fundamentally flawed in the way in which it conceptualises value, and for its addiction to markets as a measure of value.

And as a base from which to evolve, it has a certain utility.

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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