Prediction, Retrodiction, and Co-Evolution in Social Processes

In evolutionary systems such as economies and other social systems, one cannot predict what will happen; one can only look back at what worked and explain it in its particular local, historical context. In this sense, evolutionary systems are like good stories: one cannot predict, but one can retrodict. The fact that it all seems inevitable, though, creates the false impression that we can then predict what will happen next. But we are wrong. As Beinhocker observes,

It sounds a bit circular to say that the units of selection are whatever the environment is selecting for (and against). But we have no choice; fitness functions are highly complex, multidimensional, and change over time. One cannot say a priori what the system is selecting for; one can only observe selection retrospectively, and thus only take an empirical, backward-looking approach to defining units of selection. (The Origins of Wealth, 283)

One can predict the outcomes of simple systems, but complex systems are inherently unpredictable. We cannot predict how individuals will interact to create the environment which selects for or against the units of selection. As Hayek observed, we can perhaps make pattern predictions, but that is the best we will ever be able to do. Similar kinds of things happen when similar interactions take place in similar environments.

Because of this, all entrepreneurial activity is a kind of "deductive-tinkering" (286). It is deductive because we have some idea of what works or may work in the environment we are working in, because we have seen what works in the past in similar kinds of environments; it is tinkering, though, because we can never know for certain if what we're doing will in fact work. There may be some small thing in the environment which will have an unepxected effect, and the entire system can collapse -- meaning your plans will fail.

Beinhocker is primarily talking about selection of business plans in a given economy at a given time, but the rule is good for any complex evolving process. It is true of social technologies. It is true of art forms -- there may be works which are ahead of their time in a real sense, meaning they will fail now, but may find their audience in the future. The most successful innovations are always those on the borderlands of the known and the unknown, blazing a trail for the future. However, just because something is well-known doesn't mean it will survive in the new environment. We may be able to appreciate Medieval romances, but I doubt if one were to try to write one now that it would succeed -- or that many would put up with the way women are portrayed. The same is true of business plans and social technologies.

The bottom line is that we are seeing several co-evolving complex processes at work. Business plans are always evolving, in relation to the evolution of physical technologies and social technologies. And all of this is taking place on the platform of interacting embodied minds creating complex, emergent social networks which in turn affect the complexity of the brains of the agents in the social systems, which affects social interactions that in turn makes the social environment more complex. The embodied brain and its environment (the various social orders and their economies) co-evolve to ever-more complex network structures. Out of this environment new social technologies emerge, new physical technologies emerge -- both then contribute to social complexity -- and all of this affects the kinds of business plans, which are made of evolving modules undergoing selection, that will work.

Now who in their right mind thinks they can predict the outcome of all of this?

Big Men vs. Free Markets

We love Big Men. They are our heroes. They are who we look up to. We admire Big Men of power -- Napoleon, Stalin, Julius Ceasar. We admire Big Men of industry -- Ford, Vanderbilt, Bill Gates. We admire Big Men of science -- Newton, Darwin, Einstein.

But we seem to admire the Big Man of power the most. I would be willing to bet most people can name more world leaders than major business people, scientists, and artists combined -- even though it has been the latter who have made almost all the positive contributions to human society, to our lives, and to our welfare. Why? Because we love the Big Man.

The Big Man is part of our evolutionary heritage. The chimpanzee troupe is ruled by an alpha male -- the Big Ape, if you will. Most social mammals have a hierarchical social network topped by an alpha, usually male. And the Big Man is a dominant feature of the human social landscape, from tribal leaders who determined how resources were distributed to CEOs who determine how corporate resources are distributed.

In a market economy, resources are distributed in a decentralized fashion, by the decisions of billions of people. While it is true that trade is also part of our human evolutionary heritage (with some proto-trade in bonobos, our closest relatives), it is a more recently evolved trait, which makes it feel less deeply ingrained than Big Man leadership and hierarchical social networks.

This feeling that Big Man-topped social hierarchies are more natural is why socialists wish to replace the decentralized market economy with Big Man economic planning and distribution. Such centralized control is thus not progressivism, but atavism -- indeed, primitivism and social Ludditism. The desire for stability is rooted in the idea that the Big Man can come along and create it, if we would only let him. The Big Man can save us all.

In truth, the Big Man is not here to save us. The Big Man in a tribal setting knows everyone, and has a vested interest in things going well for everyone, since he's probably related to everyone to some degree, and if the tribe fails, he goes down with everyone. This is also true at the level of business -- the CEO/President/business owner typically has a vested interest in the business doing well, lest he go down with the ship. But things are different when it comes to governing large numbers of people over a wide geographic area. In such an environment, the Big Man, separated as he is from any local knowledge or personal connections, wants to become the Big Man simply for the power -- which is the only thing left in large, impersonal societies.

It seems unlikely that we will ever get over our love of the Big Man. He is part of our evolved psychology, and is here to stay. Nietzsche loved the Big Man, though he typically named more artists than political leaders. Ayn Rand loved the Big Man, though she prefered the Big Man of industry (and the Big Man of art -- which is how she saw people like Victor Hugo and Dostoevski). And we all have our "heroes," even if we do not want to call them such.

But the Big Man is not here to save us. The Big Man is who gets in the way in our decentralized spontaneous order social systems that emerge from our more recently evolved traits such as trade for profit and creating and giving for reputation. With democracy, we try to decentralize and distribute power in the political economy -- but since we are evolved to associate power with the Big Man, I suspect that democracies will always be delicate, short of creating a powerless figurehead we can all pretend has power.

Or we can learn to transfer our need for the Big Man to masters of industry, to artists and poets and musicians, to scientists and philanthropists and masters of virtue. We can learn to transfer it to people who emerge naturally through their various spontaneous orders and economies, emerging as they create more and more network connections rather than through weilding political power over others.

It is perhaps a dream. The Big Man will never go away, and there will always be power and the power-hungry trying to get that power. There will always be those who want to be the Big Man of politics, even though it has no place in the world of self-organizing, scale-free network processes into which have since emerged.

But what will happen if we know this is what is happening? What will happen if we become aware of our own evolved psychology? What will happen, then, to the Big Man?

Tonight I watched The Dictator. And laughed. The entire audience laughed. We laughed at the Big Man of politics. We laughed because the Big Man of politics is primitive. Therefore the Big Man of politics is ridiculous. We can only hope that we continue to ridicule him out of existence.

What Happens When a God Falls?

Once upon a time there was a young man who everyone considered to be highly intelligent, who could learn whatever he wanted to learn, and who went to college to get a degree in biology. He was particularly attracted to the complexity of the science -- the difficulty made it interesting. However, this young man had a hard time getting close to people, and particularly had a hard time with women. His ease in academia convinced him he could do anything, that he could accomplish anything. And nobody told him differently -- in fact, everyone backed up his view of himself. Thus, he developed a God complex.

However, the fact that he could not seem to get into a relationship with a woman bothered him. He was of course looking for someone to save, as all Saviors do.

He went on to grad school, but found himself growing increasingly bored with what he was studying. It was too easy. He was growing restless.

He tried to get a job, but the only jobs he could get were menial jobs, degrading to a mind like his. He deserved more. He deserved better.

Why couldn't everyone recognize how great he was? So many used to, and now it seemed nobody did.

What happens when a God falls? Does he not fall farthest?

If this sounds like James Holmes, the Aurora, CO shooter, it's because it probably is a perfect description of what happened to him.

And how do I know? Because it's what happened to me. Learing about him, I was horrified to see myself when I, too, was 24. Yes, it happened at the same age, too.

Yet when I fell, I fell into myself, into an internal darkness. I externalized everything into my writing. I became a poet. I recovered.

When Holmes fell, he externalized immediately. We know the result.

Why does one externalize, like Holmes, and another internalize, like me?

We Cannot Manipulate Complex Systems Like We Can Simple Systems

The more complex something is, the harder it is to manipulate without creating unintended consequences.

We are very good at manipulating those areas of nature we study through the sciences of physics and chemistry -- the least complex sciences. Almost all of our technology was created through manipulating physical and/or chemical properties. We have done a little in biotechnology, but even here what we have done are the simplest kinds of gene manipulations, where a single gene has a single effect. This covers an unimaginably small fraction of biological possibilities.

We humans are able to understand -- and, thus, manipulate -- any level of reality less complex than ourselves. Biological manipulation is extremely complex, and therefore extremely difficult, but possible. But systems/processes of equal or greater complexity than ourselves cannot be manipulated with our knowledge of the outcomes. Our (inter)actions create social networks like the various spontaneous orders of the gift, market, divine, and political economies. They emerge from our (inter)actions, but that does not mean we can manipulate them at will and get the exact results we want, as we can do with simple physical and chemical systems. Simpler systems are easiler to manipulate, and the simpler, the easier. But when we are dealing with systems more complex than ourselves, including systems we are necessarily a part of, manipulation becomes increasingly difficult. The result is ever-more unintended consequences spreading through the system, wreaking havok in uninaginable ways.

It is important to have a real understanding of the nature of complexity, and the level of complexity for whatever it is you want to understand and/or manipulate. Know what you can know and what you cannot know. To think you can know things you cannot is hubris. To think you can know what the real consequences of your interventions, regulations, barriers, etc. will be is to claim to know what you cannot know. Just because we sent a man to the moon, that does not mean we can consciously create a solution for world poverty. The two abilities are utterly unrelated. Ironically, the more we try to directly intervene, the worse we often make it for people. Those who understand complex processes understand why this is.

The Economy as Dissipative Structure

A good example of a self-organizing system on the borderland of order and chaos (which is the realm of criticality, or far-from-equilibrium state) is a hurricane. Anyone who has experienced a hurricane has the feeling that the ocean is coming onto the land from the sky. That is because the ordered part of the hurricane is the ocean; the chaotic part of the hurricane is the atmosphere. The hurricane gains order as heat-energy enters the hurricane from the ocean, and it dissipates that energy by shedding bands of rainclouds. In fact, if the hurricane is shedding its outer bands of rainclouds, that means the hurricane is strengthening. This is what one expects from what are known as dissipative structures, of which self-organizing systems, including hurricanes, are types.

Dissipative structures have to dissipate parts of themselves to maintain their structures. A self-organizing system is thus a species of dissipative structure. To have self-organization, you have to have energy in, processing, and energy out.

An economy is a self-organizing system, or spontaneous order. To have a strong economy, you have to have energy in, processing, and energy out. This can of course be literal energy, such as electricity, which is turned into work. A product and heat are the outcomes. To create the product, you have to transform the energy into work and dissipate heat -- in other words, increase entropy. We can understand other elements of the economy much better if we understand the economy as a dissipative structure. Particularly if we look at it like a hurricane. A strong economy is thus one which sheds off its "outer bands" as it strengthens. "New energy," such a the creation of new technologies, enters the system, resulting in "old energy," such as old technologies the new ones replace, being shed. If you prevent the energy from dissipating, you don't get a stronger system -- you get weakening and, eventually, system collapse. Thus efforts to protect old technologies from newer ones will weaken the economy.

All such efforts at protectionism are thus system-weakening. This includes jobs. As an economy creates new kinds of jobs, one would expect it to dissipate whatever older jobs it can dissipate (this is known as outsourcing). If one were to protect people from losing those older jobs, the result would be a weakening of the economy overall. This is a problem of the seen vs. the unseen. It is easy to see the failing business, the disappearing technology, or the lost job. It is harder to see the new business, the new technology, or the new job. But it is because of the latter that the former happens. And if you prevent the former from taking place, you actually make it more and more difficult for more energy, for new things to enter into the system. This harms everyone over the long term, including those you are "helping" over the short term.

It is only by understanding the true nature of the economy, as a self-organizing, dissipative structure, that we can come to really see and understand these things. There are unintended consequences to well-intentioned protectionist actions precisely because the economy's structure is not properly understood.

Essentialism, Collectivism, and Scarce Resources

Humans have several default ways of thinking. We are essentially tribalist, and we are essentially essentialists. Exceptions do exist, but mostly we have to unlearn tribalism and essentialism, as they are species-typical ways of thinking. It could be possible to be one or the other, without being both. One could recognize "our tribe" vs. "their tribe" and not think there is something essentially different about "them" that makes them "them" other than simply being a different group of individuals. Or consider the fact that we think of a door as having an essence that makes it "door-like," but we do not have an us-them relationship with doors. What is the difference? As my friend Michael Beeson pointed out in a Facebook conversation, it boils down to the competition for scarce resources. If we believe the world to be a zero sum game, it makes sense to want to get rid of groups competing for scarce resrouces. Tribes hate tribes who are competing against scarce resources. Racists hate other races who are competing against scarce resources. Under Marxism, the proletariat have to overthrow the bourgeoisie because the latter control all the scarce resources that are supposed to belong to the proletariat. Democrats hate Republicans, and vice versa, because both are competing for the scarce resource of political power. It becomes easier to compete against these tribes if we further essentialize them. If we have an essence that make us "us," and they have an essence that makes them "them," and we (of coruse) are good, then not-us must be not-good. Once you get rid of zero-sum thinking, though, these collectivist ideas collapse, since one comes to understand that cooperative competition creates a positive sum process that can enrich everyone without anyone losing, meaning group is not pitted against group. If we can get beyond collectivist/tribalist thinking and beyond essentialism, we can get beyond the kinds of destructive ideologies that have dominated human history. In other words, as Ernst Mayr observes in Populations, Species, and Evolution (1970), we have to replace essentialist/typologist thinking with population/individualistic thinking:

The asusmptions of population thinking are diametrically opposed to those of the typologist. The populationist stresses the uniqueness of everything in the organic world. What is true for the human species, that no two individuals are alike, is equally true for all other species of animals and plants. . . . All organisms and organic phenomena are composed of unique features and can be described collectively only in statistical terms. Individuals, or any kind of organic entities, form populations of which we can determine the arithmetic mean and the statistics of variation. Averages are merely statistical abstractions; only the individuals of which the populations are composed have reality. The ultimate conclusions of the population thinker and of the typologist are precisely the opposite. For the typologist, the type (eidos) is real and the variation is illusion, while for the populationist the type (average) is an abstraction and only the variation is real. No two ways of looking at nature could be more different.

He further points out that

The replacement of typological thinking by population thinking is perhaps the greatest conceptual revolution that has taken place in biology. Many of the basic concepts of the synthetic theory, such as that of natural selection and that of the population, are meaningless for the typologist.

We all need to move from typological to populationist thinking, and not just in biology. It is relevant for our social thinking, as our social processes are exactly that: evolutionary processes. The mechanisms are, to say the least, highly similar. Anyone who truly understands evolution cannot be an ideologue for long, as ideological thinking is typological thinking, and thus violates the populationist thinking of someone who truly understands evolution.

The Nature of Poetic Order

This is an amazing insight by Richard Gabriel into poetic order. I will be putting this to use in looking at my poems.

How to Destroy Philosophy (and the Arts)

A recurring theme in Randall Collins' The Sociology of Philosophies is that there is an inverse correlation between the strength of a society's government and the strength of philosophy. China is a perfect example of this. Consider what Collins says about the development of philosophy and how this relates to how it developed -- and often failed to develop -- in China:

absence of idealism is connected more with the halting continuity of philosophical abstraction than with a more deep-rooted cultural trait. Idealism is never an early form but a sophisticated philosophical construction. A halfway house between revealed religion and rationalistic philosophy, idealism is couched at a level of abstraction which can be attained only through a long cumulative development of an intellectual network refining its concepts. (316) Idealism is of course not the only form of metaphysical abstraction. We can draw the lesson more generally. It is often asserted that the Chinese mentality is concrete and practical, with no taste for metaphysics. Yet metaphysical abstractions were periodically created in China. [...] Higher levels of abstract reflection are reached by applying epistemological considerations to conceptual problems. At least this is one route toward metaphysics, prominent in Greek, Indian, and European philosophy. The issue in China is less the absence of metaphysics than the rarity of sustained epistemological consideration. Epistemology becomes a focus when an intellectual community is balanced in debate, with sufficient continuity across the generations to give rise to specialization in the techniques of argument. Sophistical debate is a typical first step toward consideration of epistemology in its own right. (317)

The bureaucratic-political structure of China throughout the past 2000+ years, with intellectuals being the ones in charge of the bureaucracies, created a situation where there could be the philosophical equivalent to "regulatory capture," in which the politically favored group gained political power and simply crushed rivals rather than argue with them. When in power, the Confucians crushed the Buddhists and Taoists, and those two groups returned the favor (and crushed each other) when they gained power. Land and wealth were seized, taxes laid, people exiled, etc. Because there was a strong bureaucracy that was directly tied to intellectuals and education, it was easy to destroy one's opponents' intellectual networks.

When the destruction of intellectual networks interrupted further development on the abstract level, philosophical doctrines during the Han were carried on at a level closer to lay concerns. When structural conditions were again favorable to skeptical and sophistical debate, in the brief generations of the Pure Conversation circles of the Three Kingdoms, abstract philosophy emerged again. (317) Why were there such long periods of stagnation, even retrogression, on the plane of abstract philosophy? It was not simply a matter of declining material supports for intellectual life; the fall of the great dynasties with their material wealth is correlated not with mediocrity but often with the opposite. The Han, T'ang, and Ming were periods when the stagnation of abstract philosophy, at least outside of Buddhism, was at its worst. Here we see the importance not of material supports for intellectual life in general, but of the particular kinds of structural underpinnings which support or stifle creativity. The deadening touch of all these stagnant dynasties was precisely the way Chinese intellectuals were controlled by material incentives linked to the selection of officials for the state. (319-320)

Collins thus suggests that those intellectuals who argue that there should be more material support for philosophy to bloom are utterly wrong. It would -- and does -- have the opposite effect. And the fact that philosophy (and the arts for the most part) have escaped into the safety of our universities is not really good news, because "Schooling, which we associate with the life of culture, often operates as a deadening of culture, preserving the ideas of the past at the expense of creativity within the present" (320). Government support and universities thus result in conservatism in the absolute worst sense of the term. It is ironic that the so-called progressives who support government support for the arts and humanities would give us the columbarium of philosophy and the arts if and to what extent they are successful.

Economics as Coevolution Across Design Spaces

In The Origin of Wealth, Eric Beinhocker suggests that

Economic evolution is not the result of evolution in a single design space, but rather, as I will propose, the result of coevolution across three design spaces. In chapter 1, I briefly introduced two terms from Richard Nelson of Columbia University: Physical and Social Technologies. Physical Technologies are what we usually think of when we think of the word technology. Physical Technologies are designs and processes for transforming matter, energy, and information in ways that are useful for human purposes, for example, turning sand into glass or into silicon chips. Social Technologies are equally important, but often less at the forefront of our minds. They are the designs, processes, and rules that humans use to organize themselves. Villages, armies, matrix organizations, paper money, the rule of law, and just-in-time inventory management are all examples of social technologies. Business Plans play the critical role of melding Physical and Social Technologies under a single strategy, and then operationally expressing the resulting designs in the economic world. We need to think of Business Plans, Physical Technologies, and Social Technologies as three distinct design spaces because each has its own unique fitness functions at work. Business Plans tend to be selected for economic reasons, but Physical and Social Technologies may evolve for other purposes. (238)

Yet mainstream economics does not seem to consider any of these to be relevant to understanding the economy. Technological changes are considered to be "external shocks," even though Schumpeter almost 100 years ago pointed out the centrality of technological evolution to understanding the economy. I am guessing Business Plans are not being studied in economics departments, either -- if anyplace, they are studied in MBA programs. And Social Technologies? With the exception of the subcategory of money, are there any economists outside of the Austrian school interested in this? I am constantly amazed at how little of the economy mainstream economists actually study. However, hings are moving in the right direction, with behavioral economics, game theory, institutional economics, evolutionary economics, the integration CAS theory and agent-based modeling, and the rise of Austrian economics. With the complexity economics paradigm shift, economics as a whole, rather than just marginal pockets, might become a real science yet.

Interacting Economies, Institutions, and the Effects on Other Economies

In The Sociology of Philosophies, Randall Collins argues that

intellectual creativity is no mere reflex of economics and politics. There are three layers of causality: (1) economic-political structures, which in turn shape (2) the organizations which support intellectual life; and these in turn allow the buildup of (3) networks among participants in centers of attention on intellectual controversies, which constitute the idea-substance of intellectual life. Economic-political conditions determine ideas not directly but by way of shaping, and above all by changing, the intermediate level, the organizational base of intellectual production. (324)

However, the dominant philosophy of a culture in turn affects economic-political structures. In fact, one could argue that philosophical-political structures shape the organizations with support economic life, which in turn allow the buildup of certain kinds of economic activity. Also, economic-philosophical structures shape the organizations that support political life, which in turn allow the buildup of certain kinds of political activity. In other words, if we consider the fact that civil society is made up of the gift, market, political, and divine economies, the interactions of any three affect the organizational structures of the remaining one, and thus influence its network structure. Collins is focused on how the market and political economies interact to create the institutional structures underlying evolution in the divine economy, but there is no reason we could (or should) not consider how two or three economies interact to influence another one. In fact, Collins -- in this section, at least -- ignores the effect of the gift economy. I think there is little question that science and the arts have have a significant effect on the evolution of philosophies around the world. One could spend a considerable amount of time writing papers exploring the different combinations, what institutions they create, and the effects of those institutions on different economies' networks.

The 12% Solution

If the size of the federal work force is 17 million (in 1999, so let us assume it is larger in 2012 -- not to mention state, etc. workers -- meaning we will use this entire 17 million number for the rest of this analysis, since we will also assume someone has to work for the various governments), and the labor force is 154 million in a $15 trillion economy, and we assume that this same 17 million federal workers have a net effect on the economy of $0 (which is wrong, as they in fact have a negative effect on economic growth), how much economic growth do we miss out on by having all these bureaucrats not producing economic value? 154 million - 17 million is 137 million. $15 trillion / 137 million is $109,489 in value created. $109,489 x 17 million = $1,861,313,000,000 $1,861,313,000,000 / $15 trillion = 0.124 = 12.4% Or, if you prefer, 137 million/17 million = 12.4% I went through all the monetary calculations to show the money lost to our economy because of the existence of bureaucrats. True, this is a horribly simplistic calculation. And it ignores the fact that bureaucrats reduce value in the economy. And it ignores the fact that since many bureaucrats are highly educated, they could in fact create even more money per person, so I'm willing to stand by my calculation. The U.S. could have an economy 12% larger than it is. All we have to do is free the bureaucrats.