Austrian Theory and Historical and Empirical Analysis

This month's Cato Unbound is a bit "inside baseball" among Austrians and post-Austrians on Austrian economics and empirical analysis. Steve Horwitz starts things off with an argument that Austrian economists are in fact more empirical, because they consider more factors to be important for what contributes to the features of the economy than do other schools. At least among the Hayekian scholars I mostly associate with, there is little question this is true. Hayek said you can't be a good economist without being an interdisciplinary scholar, and I (and Horwitz) concur.

George Selgin gives a very clear rebuttal -- so clear that it seems clear where the problems are in his analysis. To some degree, there is little one can argue with in regards to what he says about economics analysis and about how many (let's say, half) Austrian economists do economics. However, I think he is missing the real critique of historical and empirical analysis.

Let us consider the minimum wage. If you look at the historical/empirical evidence, you will see that most of the time in the United States after the federal government raised the minimum wage, unemployment went down. Conclusion based on history and empiricism alone: raising the minimum wage causes unemployment to decrease. However, economic theory says increasing the minimum wage causes unemployment to go up. This clearly contradicts the empirics.

Or does it?

The problem is that we are dealing with a complex system. In a complex system, there is not a simple cause-and-effect relation. Whether or not there is a minimum wage, and whether or not one raises it if there is one, will affect unemployment -- but it is hardly the only factor affecting unemployment. If there are other factors acting in the economy to decrease unemployment more than the increase in minimum wage would increase it, you will of course see unemployment go down.

By understanding that the minimum wage increases unemployment, you can understand that without the minimum wage, unemployment would have gone down even more than it would have. Could a regression analysis help us understand how much a particular increase in the minimum wage would increase unemployment? Well, that would require that you include all the factors contributing to employment. But how can you do that? Here are a few of the things that will contribute to employment levels:

•  the property rights regime
• the institutional composition of the economy
• trade regulations
• economic regulations and enforcement
• immigration regluations and enforcement
• features of the black market for banned or regulated goods
• rate of innovation and entrepreneurship
• demographics
• general racial/ethnic attitudes of society at large
• child labor laws -- whether or not they exist, and their features if they do exist
• tax policy and changes
• monetary policy and changes

There are no doubt more. Please note that some of these are measurable, but some are not. You cannot actually quantify a quality (like racial attitudes), so this cannot actually be factored into a regression analysis. (The fact that there are people who think you can accurately measure such things as "happiness" such that you can mathematize it rather than create simple, inaccurate rankings does not disprove this point, but rather is a condemnation of those social scientists who are engaging in the logical fallacy of quantifying a quality.)

But even if there were nothing but measurable factors, you would have to make sure you are including all the factors involved -- and the ways in which they interact -- to do the analysis. What we are faced with is an incomputable problem. You might be able to discover general trends, but I doubt you would ever be able to say that if we raise the minimum wage from $6.00 to 7.15 per hour you would necessarily get an X% increase in unemployment.

What you can know is that an increase in the minimum wage will price out low-skilled workers. It can do so in a variety of ways. It may be cheaper to automate; it may be cheaper to hire one skilled worker rather than three unskilled workers; it may be cheaper to relocate to a place with a lower minimum wage; etc. The minimum wage may also drive some businesses out of business. Which of these will occur? In what ratios? What will the resulting effects be?

One resulting effect may be that, over time, as the minimum wage continues to go up, low-skill jobs are run out of a region, meaning nothing but high-skill, high-wage jobs are available such that a subsequent increase in the minimum wage will have absolutely no effect on unemployment. When, if ever, will this stage be reached? What conditions would have to exist for it to be reached at all?

So where does this leave us? It leaves us with Mises' praxeology. We have to understand the underlying principles of human action to understand what is happening in the economy. If we look at the historical and empirical data, we are seeing the surface results of an underlying set of complex actors engaging in complex interactions, reacting to complex factors.

Actually, it leaves us with both praxeology and contemporary computer modeling. But even the models have to have complex actors acting as humans would act. Which brings us right back to . . . praxeology. The models, too, only show us what will result over time -- the emergent patterns, or surface results. The computers can only run the underlying complex interactions, not make them transparent to the humans trying to understand the results.

And even with computer models, you have to make sure you have all the relevant parameters. One can never tell what was the relevant parameter in a historical situation that made this downturn better or worse than the last one. Most of the time, we think we know that this or that factor was relevant, but too often we are looking at surface issues and missing the underlying issues. We stop the cause-and-effect chain too soon, and have no real idea what caused the current conditions to be as they are or were.

A good example the Great Recession. What caused it? If you were to rely only on what mainstream economists and the news media have been saying, it is the fault of the mortgage companies who created the bundles with the toxic mortgages in them. But that is in fact pretty far down the road from the primary causes -- some of which are the factors explained by ABCT. Most people fail to see that it was government policy, government regulations, and cronyism that caused the Great Recession -- because few follow the causal chain far enough. Austrians do.

And few understand the complexities involved. How many economists consider entrepreneurship and innovation and technology to be "external shocks" to the economy? But such an attitude is the height of absurdity. Economic growth is caused by the above mentioned external shocks. Which means understanding the causes of economic growth is outside mainstream economics. Which is absurd. Interdisciplinary economists -- which include almost all the Austrian economists I know -- understand that there are a lot of complex factors at work. And the understand that economic analysis is at best incomplete unless you include all of these factors, that most of the things that "shock" the economy are not really external to it, but are necessarily part of the economy. This means economic analysis is necessarily extremely complex. And the more complex a phenomenon is, the less it is able to be reduced to mathematical analysis. Especially, as Hayek observed, if it is more complex than the entities studying it.

Finally, Julian Baggini and Lawrence Krauss debate some of these same issues in a somewhat different context. Are all questions that are "answerable" necessarily "empirical"? I think this is the real debate.

My People Page at the EDGE Center

My EDGE Center People Page is now up. I need to get them a better picture. Unless someone with some mad photoshop skills can clean it up and email it to me.

Senior Fellow, The EDGE Center

Over the past several months, I have been working with several people at UT-Dallas to help set up a social science research center there, the EDGE Center. EDGE stands for "Entrepreneurship, Diversity, and Global Empowerment," and is associated with the Office of Diversity at UTD. It was set up by Elena Labastida, though the directorship has been taken over by Euel Elliott since she left for a tenure-track Assistant Professor of Economics and Business position at the Anáhuac University. I will be a Senior Fellow and Editor of the EDGE's interdisciplinary social science journal, "Developments in Spontaneous Orders: A Journal of Diversity, Globalization, and Entrepreneurship." I am very excited about this opportunity. In addition to my editing duties, I will be doing research projects on spontaneous order theory and publishing papers as a Senior Fellow of the EDGE Center. We are presently working on getting the peer-reviewed journal together. It will be officially launched, online, January 2013. Papers on our research areas are welcome. Feel free to email me any and all submissions. We will also be showcasing research being done at the EDGE Center in a special "working papers" section of the journal. We are also hoping to make the journal highly interactive, and to include things like video of interviews and other aspects of research. If anyone wants to help us out at the EDGE Center, we welcome any and all donations. You will be supporting the work being done there, as well as the journal.

Political Conflict and Cultural Creativity

I've only read one thing by John Gray, his book "Straw Dogs." I find his overall world view dark and repugnant. I only later found out he had once been a Hayekian, but had for some reason taken a turn toward the dark side. In this piece he has at BBC, that darkness shows -- but he's not entirely wrong. He's right that conflict, competition, and freedom are important for culture. This is merely a repetition of Nietzsche's insights. There is little wrong with this statement, to be sure:

Culture may not need democracy or peace, but it can't develop without some measure of freedom - and that requires a diversity of centres of influence, working openly and at times in opposition to one another. Rightly, we've learnt to mistrust any directing cultural role for the state. When artists and writers rely solely on government, the result is at best nepotism and mediocrity.

In this, he fails to note what was really working in Medieval and Renaissance Italy -- the division of Italy into conflicting, competing polities. Nietzsche notes that ancient Greece, Medieval Italy, and 19th century Germany were all cultural powerhouses, and they were all simultaneously united by culture, language, etc. and divided politically. There was a delicate balance between unity and division that resulted in cultural creativity. I see the same story as well in Randall Collins' The Sociology of Philosophies. To get creativity in philosophy, there has to be freedom to allow conflict and competition. However, Gray is wrong about one thing -- but wrong in a subtle way -- and that is the role of politics in cultural creativity. Collins shows that when politics is involved in philosophy, creativity slows or even ends. But -- and here's the difference -- when there is government support without politics involved, or if there is conflicting political forces each supporting the arts, one can get cultural creativity. It is probably impossible for there to be truly apolitical government support for anything, which means if there is going to be government support combined with cultural creativity, there will have to be conflicting polities. The good -- and bad -- news, then is that we can expect a period of incredible cultural creativity very soon. Around 2020, if Turchin is correct. There was certainly considerable cultural creativity in the U.S. the last time there was a spike in violence in this country, c. 1970. In reality, it was more in the lead-in to 1970, just as the lead-in to the Civil War, the American Renaissance, was highly creative culturally. I see the conflicts arising. We should see the cultural creativity in the U.S. emerging soon if Turchin is correct.

Revolution Bubbles in History

The journal Nature has a fascinating piece on cliodynamics -- computer analyses of patterns in history. What I find fascinating is that they end up with exactly the same analysis as I had on the revolution in Egypt. Each each case, we were looking at bubbles and the causes of bubbles. There is a bubble that resulted in the violence/unrest bubble. The bubble of my analysis seems to lead to the bubble of Turchin's analysis. One gets boom-bust cycles in complex processes when there is positive feedback. Cheap money is a kind of positive feedback. There was an education bubble in the 1960's that led to the violence of the 1970's. I have been saying there is an education bubble now -- and Turchin predicts revolutionary violence in the U.S. of the same kind around 2020. Given that there is also a health care bubble, whose problems have been and will be exacerbated by Obamacare, though created by decades of third party payers, and given the fact that we are still trying to recover economically from the housing bubble, I suspect that 2020 will look far, far worse than did 1970.
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Update: more on cliodynamics. HT: Peter Turchin

Judging Orders from Different Orders

I want to discuss further the science-technology-market symbiosis I discussed in my previous post. This symbiosis has created an unprecidented level of material wealth and well-being fo rthose participating in civil societieis in which those orders are healthiest, most developed, and most interactive.

But that is all this triple order can do. It cannot make us more moral except insofar as it can (and will) encourage whatever behaviors -- hard work, innovation, creativity, efficiency -- that result in success within those orders. These are virtues within this triple order, virtues which may be shared by other orders, or may be viewed as vices in other orders. To a bureaucrat, there is no greater evil on earth than efficiency. Aesthetic qualities -- a central concern of the artistic order -- that cannot be made profitable are unimportant, or even harmful, in the market order.

Complaints that the market order can only improve our material conditions and not our souls are both correct in their assessment and utterly beside the point. The result of the science-technology-market order symbiosis is not to make us more moral, but to increase knoweldge and improve our material conditions. Morality is the realm of the moral order -- or, to be more expansive, the artistic-moral-philosophical symbiotic order. Yet, even here, boundaries blur -- the artistic-moral-philosophical triple order comments upon the science-technology-market triple order, which in turn has recently been directed, through the scientific order, to understanding the biological underpinnings of the moral and artistic orders.

At the same time, nobody would think it at all sensible to think the moral order should demonstrate "efficiency," as that has nothing to do with morality per se. And what would an "efficient" painting or poem be? Using values from one order to judge another can lead to nonsense. Also, would we expect the artistic order to make us better off materially? Hardly. That's not what it does. So we should not complain that the market order does not do things it is not even capable of doing. There are values which are higher in one order over the other. And there are people who feel comfortable in one order -- or set of orders -- over another. Why should we insist that everyone must prefer the order we prefer? It is the height of arrogance to insist that our values are the values all others should hold -- and that everyone should rank them as we rank them. "Judge not lest ye be judged" applies to those who show a preference for participating in one order over another.

Symbiotic Spontaneous Orders

Randall Collins' discussion of modern natural science in The Sociology of Philosophies is very interesting, and I think both accurate and enlightening.

He argues that modern science is "a distinctive form of social organization which I shall call rapid-discovery science," which emerged as a new network alongside that of philosophy.

Rapid-discovery science is actually two networks, "one of scientific and mathematical researchers, and in symbiosis with it a second network comprising genealogies of machines and techniques which generated an ongoing stream of new phenomena for scientific research" (382). Indeed, the laws of thermodynamics were discovered because of the invention of the steam engine, not the other way around.

What Collins is identifying is the emergence of "a kind of cyborg network" in this symbiosis. There had always been technology and, as such, a technological spontaneous order. And there had always been natural science and, thus, a scientific order. But the two interacting together really drove scientific discovery. More, this technological innovation also resulted in the rapid expansion of the catallaxy -- economic growth boomed. In a real sense, the market economy is also a kind of cyborg network. Each co-creates the other, and drives further growth.

We can thus see that science, technology, and the market economy are intimately tied together -- but perhaps not as many think. They are coevolutionary, co-creating spontaneous orders.

Why is it that these are able to become symbiotic with such explosive growth? Could others? Artists would love to think their orders could become symbiotic with the catallaxy and create a better order, but I suspect not. The artistic orders are more tied in with the moral order -- they are symbiotic. And all of these are thus "a new problem in philosophical space" which spurs "reconceptualization on a higher level of reflexivity" (382).

But now we are facing an interesting connundrum. What connects science, technology, and the market? What connects the arts, the moral order, and philosophy (I would place it in a similar triple-stranded symbiotic order with art and morals)? Is this not a somewhat modified version of C.P. Snow's separation of the sciences and the humanities, and never the twain shall meet? If we were not witnessing a further synthesis of science with the artistic and the moral orders insofar as science is now being used to understand the underlying structures of these orders, we are seeing bridges built. It will be interesting to see where this new symbiosis takes us.

The Structural Architecture of Idea Networks

A summary of Randall Collin's structural architecture of philosophical social networks (the philosophical order):

First: Intellectual creativity is concentrated in chains of personal contacts, passing emotional energy and cultural capital from generation to generation. (379)

Second: Creativity moves by oppositions. [...] Chains of oppositions creat the inner content of philosophies; new ideas unfold by negating the major points of rival positions on a shared topic of argumetn and a common level of abstraction. [...] Not zeitgeist, but structured rivalries constitute the successive moments of intellectual history. (379)

Third: The emotional energy of creativity is concentrated at the center of networks, in circles of persons encountering one another face to face. (379)

Fourth: The law of small numbers sets upper and lower limits to these oppositions [3-6 schools; more and you get skeptics or synthesizers]. (380)

Fifth: The law of small numbers structures dynamics over time, connecting the outer conditions of social conflict with the inner shifts in the networks which produce ideas. (380)

Sixth: Because intellectual life is structured by oppositions, leading innovators are often conservatives. [...] Conservative opposition under new conditions of heightened abstraction and reflexivity results in innovations under a veneer of pseudoconservatism. (381).

This seems to be the structure of social networks in the gift and divine economies. I would argue that philosophy qua philosophy properly belongs in the divine economy -- a statement that is certainly far more controversial now than it would have been a few hundred years ago (in the West -- it would be uncontroversial in most of the world even now).

Further, since the gift economy is also structured around ideas, we would expect it to be similarly structured. There are different theories (schools of thought) in physics, for example -- loop quantum gravity, string theory, M-theory. There are different schools in economics -- neoclassical, Austrian, post-Keynesian, etc. There are different literary movements -- postmodernism, new formalism, magical realism, etc. A close analysis would find that at any given time, there are typically 3-6 such movments in play and in opposition.

If we take literature, we can see that new formalism arose in opposition to postmodernism. New formalism is typically understood to be a "conservative" movement because of the emphasis on rhyme and meter. However, it is a conservatism in light of postmodernism and all of the movements that took place in the 20th century. Thus, it is in fact something new.

Given the fact that we now have online social networks, one has to wonder what effect it will have on these sorts of creative networks. Can it replace face-to-face? Or will that necessarily be part of it? Perhaps it can help strengthen what in the past would have been small movements made up of distantly scattered people by letting them connect and stay in contact until they can have face-to-face contacts. I have little doubt that both have been in play in my life. Those I have met face-to-face have helped me get to know people online, who I was then able to meet face-to-face. And I am able to connect with people across the world, whereas in the past movements were localized -- most of Moderism took place in Paris, and probably all the networks led back there.

The internet is thus going to alter these networks Collin talks about somewhat, but perhaps not all that radically. If we can get past childish ad hominem attacks on everyone who disagrees with us online, we may be able to realize it more than we currently do.

Call for Papers

January 1, 2013 will see the release of the inaugural issue of "Developments in Spontaneous Orders: A Journal of Diversity, Globalization, and Entrepreneurship," a peer-reviewed journal of the EDGE Center, a social science research center at UT-Dallas.


We are seeking papers for our inaugural issue on our journal's theme(s):

• Spontaneous Orders
• Entrepreneurship
• Diversity
• Globalization
• Science and Technology

We encourage all scholars interested in exploring how the above themes can help us better understand our social world to consider submitting original academic papers. Acceptable papers can range from case studies to theoretical explorations.

 

Since this is an online journal, we are accepting papers year-round. Papers will be published two at a time throughout the year, with each issue consisting of a year's worth of papers. To have a paper considered for publication on the release date, please submit by Oct. 1, 2012

 

Manuscripts should be sent as Microsoft Word attachments via email to zatavu1@aol.com. Manuscripts submitted to this journal should not have been published elsewhere and should not simultaneously be submitted to another journal.

 

Please be sure that the first page of your manuscript contains the title of the article, the names and affiliations of all authors, any notes or acknowledgments, as well as, the complete mailing addresses of all authors. The second page should contain no author information as well as an abstract of no more than 150 words and 5 to 7 keywords.

 

Manuscripts should be Times New Roman 12 font. We are an interdisciplinary journal, and the writing must be intelligible to the professional reader who is not a specialist in any particular field. Manuscripts that do not conform to these requirements and the following manuscript format may be returned to the author prior to review for correction.

Papers should be between 8,000 and 11,000 words in length. The entire manuscript should be double spaced.

 

I encouarge everyone to spread the word and to freely repost this call for papers.

Troy Camplin, Ph.D.

 

Senior Fellow, EDGE Center

 

Editor, Developments in Spontaneous Orders: A Journal of Diversity, Globalization, and Entrepreneurship

 

zatavu1@aol.com

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.