Hayek vs Keynes

To understand the importance of the famous debate between Hayek and Keynes, you need to take the "meta" view to take the debate in the context of what was happening at the time. As often happens, the real issue was hidden beneath what was ostensibly being debated.

See David Colander.

David Colander: Does "Economics" Have Too Much Influence Over Policy?

The best way to understand an issue is sometimes to follow the debate rather than just one "side." I had bogged down trying to understand Monetary Theory (Modern or otherwise).

This is an introduction to the thinking of David Colander. I tripped over him when reading "Modern Monetary Theory and its Critics." Colander presents himself as a "Historian of Ideas." He is a "big picture" guy who tries to understand ideas in depth but also concerning their real historical consequence.

For example, he points out that if MMT were applied by, say, the Tea Party, the result would be a nightmare (zero tax, no government). This provides a simple example of one assumption behind all economic "recommendations" - that the supporters are in political power - more or less permanently. After plodding through endless economic arguments, I also get a whiff of "motivated reasoning."

Beware of all statements that include other things being equal. "Things" are never equal. No proposed change can be made without effects on other factors, nor can the change be made while other changes are not being made. 

Colander distinguishes between economics as a theory of control (Keynsian and all its variations) and economics that simply provides inputs to decision makers.  "Conservatives" oppose any attempt to "control" the economy. The problem is that "hands off" cedes control to impersonal mechanisms such as the market and powerful politicians. Politicians, after all, are not elected by proposing sensible economic policy. They are elected by being the "last man standing" in a mud wrestling contest. Yet, it is politicians who ultimately control the levers of economic power. As Greenspan pointed out - sometimes, these "levers" don't seem connected to the real economy.

Truly modern economics is based on huge computer models of the economy - not a few simple "all things being equal" relationships like "supply and demand."  In any model, things like assumptions and initial conditions need to be made explicit. For example, "actors" are not assumed to have perfect knowledge or to behave rationally, as all "classic" economic theories assume. Everything is connected to everything else.

It is good to understand some economics, but it needs to be kept in context. Economics places constraints on what is possible. We must never assume that politicians in control or society, in general, will agree with any particular economic theory or act the way economists assume.

To cite the nastiest problem we now face, climate change is a problem that comes from physics, not economics. Solutions, if any, will come by massive changes to human behavior. Economic "incentives" are proving to play little if any useful role, yet the political debate is often couched in the fantasies of obsolete economics, such as growth and GDP.

---------------

P.S. A talk by Colander about complexity theory and its relevance to politics is here. Again the point is that "economics" is just one of many influences in the halls of power. "Government and markets are an odd married couple. Stuck with each other". He talks about placing an economic "frame" in the larger (complex) "meta-frame".

The Conservative Position

This is Milton Friedman on the concepts that are defended in Hayek's "Road to Serfdom." Hayek's thesis is interesting but also dated. He warns against top-down planning in the place of market control of prices, both by Socialists and Fascists of the time. George Bernard Shaw introduced me to Socialism 101  ("A Practical Woman's Guide to Socialism)." It dates from approximately the same period but is concerned with social justice. There is little consideration of how social justice would be achieved. We must assume a major reorganization of the economy according to some master plan. As Hayek pointed out, both Socialists and Fascists assumed this with little pushback. During World War II, economies became "planned" by necessity.

It turns out that "Road to Serfdom" is a free Audiobook. See these videos for discussions.

General Impression: 

Hayek goes to great lengths to defend his thesis that totalitarian "planning" is "more or less" the same thing as "socialism."  He confuses "socialism" with "communism." Modern readers can readily see that there are dictatorships of the left and right, with little or no difference when it comes to the liberty of citizens. Along the way, Hayek more or less concedes virtually all the elements of the modern "progressive" state, even including guaranteed "security of person" in the form of food, shelter, and health care -- those that are routinely denied by his "right-wing" fans. He is in a muddle explaining the workings of modern democracy, lost in his generalizations.

There is an obvious problem that we cannot agree on the ends or means of policy but, on the other hand, an obvious need for policy. Society in general (not just the government) needs "deciders."

His distinction between government and corporate power is fatal to his argument since all arguments against government power also argue against corporate power. In fact, power = the ability to plan. Individual "power" is seen as "freedom" - a different species of power. In fact, the "power" of all societal actors is in constant competition. "Power" of one actor A over another B is the ability of A to coerce B into behaving in a way desired by A. Society is a network of A's and B's - a power structure.  A's can be government, corporations, cultures, parents, or any coherent social structure. 

The marketplace very strongly determines how much power and freedom an actor has. Interventions of any kind (not just government) distort the workings of the market.  Generally, the A's have deeper pockets than the B's in every case.

In the end, Hayek puts his faith in the "efficiency" of markets. "Efficient" for whom? This is the identical objection he raises to "socialism" - who benefits?

(P.S.) Hayek's core point is actually true but I don't know if he saw it. If you regard society as a huge, dynamic, and unstable power network, you can see why the idea of "control" becomes problematic. Hayek understood this at a gut level, especially coming out of the chaos of post-war Austria. Yet, his shouting match with Keynes never quite came to grips with the central issue: can any "control" policy succeed?

Notes:

•  The existing state of Chinese society is a great example of the "planned" economy Hayek fears.  Established for good purposes, the machinery can be used for any purpose.
• The positive vision of a "free society" is tangled with the concept of a "free market."
• Interesting remarks on "liberalism" vs. "conservatism" changed meanings from the British context. "Liberalism" originally is about hands-off individual freedom (gardening). Conservatism defended the privileges of the rich and powerful.
• "Socialism" is a matter of degree, creating unintended consequences.
• Chapter 1: Glowing account of progress is, at least, a correlation but treated as a straight cause and effect. The growth of energy use is relevant. The crushing effects pointed out by Marx were ignored. 
• Explicitly sets aside "externalities," such as nature in general, which cannot, by definition, be "managed" by the marketplace. This is mentioned in Chapter 3.
• Totalitarian tendencies are presented as a part of a "socialist" movement rather than a thing of its own.
• Anti-competitive forces are seen as government, not corporations. He seems to think that monopolies fall apart on their own ...
• "planning against competition" = "planning"
• modern monopolies seem to contradict his understanding of how monopolies work. Specifically, the advantage of the "first mover" (IBM, Microsoft, Apple). His examples of government-supported monopolies and cartels are at least dated.
• At the very least, he admits that monopolies are "bad" because they are anti-competitive (by definition).
• Good to read this with climate change and pandemics in mind. "Liberty" of our current zillionaires is also relevant: assumed to be good in itself. Generally, there is little reflection on the relative power of individuals - assumed to be basically economic power -- i.e., it is fundamentally right and good that the goals of the rich should dominate those of the poor.
• He assumes that democracy is inherently flawed since it implies planning.
• His criticism of "planning" extends to all regulations, such as FDA
• Generally, his treatment of democracy is a bit of a joke
• Open to providing basic food, shelter, and clothing for everyone along with health care - "social insurance." Also, protecting individuals against the ups and downs of the economy. But not insurance against losses.
• He seems to offer some kind of roundabout objection to labor unions - a means of security. Unions interfere with the market system. Similar consideration could be applied to Americans locked into jobs because of "benefits." The asymmetric power relationships between employer and employee are not dealt with. One might ask if filling boxes for Amazon is a worse kind of "serfdom" than any contemplated in the abstract.

"The Conservative Mind" summarizes the conservative position better than Hayek's theories. One might suspect some "motivated reasoning" going on between theory (Hayek) and the "creed":

1. Belief in a transcendent order, or body of natural law, which rules society as well as conscience. Political problems, at bottom, are religious and moral problems. Narrow rationality, what Coleridge called the Understanding, cannot of itself satisfy human needs. “Every Tory is a realist,” says Keith Feiling: “he knows that there are great forces in heaven and earth that man’s philosophy cannot plumb or fathom.” 
2.  True politics is the art of apprehending and applying the Justice which ought to prevail in a community of souls. 
3. Affection for the proliferating variety and mystery of human existence, as opposed to the narrowing uniformity, egalitarianism, and utilitarian aims of most radical systems, conservatives resist what Robert Graves calls “Logicalism” in society. This prejudice has been called “the conservatism of enjoyment”—a sense that life is worth living, according to Walter Bagehot, “the proper source of an animated Conservatism.” 
4.  The conviction that civilized society requires orders and classes as against the notion of a “classless society.” With reason, conservatives often have been called “the party of order.” If natural distinctions are effaced among men, oligarchs fill the vacuum. Ultimate equality in the judgment of God, and equality before courts of law, are recognized by conservatives; but equality of condition, they think, means equality in servitude and boredom. 
5. Persuasion that freedom and property are closely linked: separate property from private possession, and Leviathan becomes master of all. Economic leveling, they maintain, is not economic progress. 
6. Faith in prescription and distrust of “sophisters, calculators, and economists” who would reconstruct society upon abstract designs. Custom, convention, and old prescription are checks both upon man’s anarchic impulse and upon the innovator’s lust for power. 
7.  Recognition that change may not be salutary reform: hasty innovation may be a devouring conflagration, rather than a torch of progress. Society must alter, for prudent change is the means of social preservation. Still, a statesman must take Providence into his calculations, and a statesman’s chief virtue, according to Plato and Burke, is prudence.  

This may be summed up as a preference for the "status quo" -- more than that, a belief that the "status quo" has some supernatural quality: decreed by God or the Market. It is no surprise that this set of beliefs appeals to the rich and powerful. There is no hint that status or power needs to be earned or, to put it another way, the lack of power and status for the great majority of humanity is just "as it should" be.

Panic - Part 3 - The Skeptical Environmentalist

Science shows us that fears of a climate apocalypse are unfounded. Global warming is real, but it is not the end of the world. It is a manageable problem. Yet, we now live in a world where almost half the population believes climate change will extinguish humanity. This has profoundly altered the political reality. It makes us double down on poor climate policies. It makes us increasingly ignore all other challenges, from pandemics and food shortages to political strife and conflicts, or subsume them under the banner of climate change.

Lomborg, Bjorn. False Alarm (p. 13). Basic Books. Kindle Edition.

Global temperature and GDP are both rising, and each affects the other. Our efforts to rein in temperatures will cost resources and lead to slower GDP growth. Rising GDP typically means more greenhouse gas emissions, which will speed up rises in temperature. In order to understand what the future holds, we need to get a grasp on exactly what these two variables mean, how they interact, and how much control we have over each.

Lomborg, Bjorn. False Alarm (p. 53). Basic Books. Kindle Edition. 

Lomborg's approach is similar to Rosling but he chooses a different pair of variables for his narrative. Lomborg is interested in the effect of temperature on GDP (and cost/benefit in general). Rosling uses GDP per person for his four population classifications as they vary over time. Both authors agree on the basic science of Climate Change. Lomborg, like Gates, wants to look at the cost of "fighting" Climate Change. Both Lomborg and Gates are talking about the same thing. What is the "green premium" for Gates is a "hit" to GDP for Lomburg.

The two approaches have different applicability in different scenarios. 

Where I am now, in the province of BC in November 2021, I'm sitting in a triple whammy of climate catastrophe: 

• Heat dome in the summer costing hundreds of lives
• Fires in the summer denuding swaths of forest making landslides more common
• Floods causing the evacuation of a good-sized down and shut-down of critical supply lines for millions of us

Gates could only talk about measures that would hypothetically prevent whatever costs might be assigned to all this. We would need to factor in the idea that climate change only makes these things more probable without really being able to assign an exact or useful probability. IPCC models (MAGICC) cannot climate effects on the scale of any of the BC problems.

Lomborg would (in principle) be able to assign a number to lost GDP and a "back of the envelope" for costs of preventing the problem (climate change or not) such as:

• Air conditioning and better services during record temperatures
• Improved forest management
• Vast flood management programs (billions), such as the one in Calgary intended to deal with another flood like the one in 2014

When you get down to particulars, you can see there are a lot of practical problems with Lomborg's approach, but you get the idea. Prevention of climate impacts costs money - lots of it. The cost of prevention may indeed exceed the cost of the impact being avoided. In theory.

The Gates approach has a problem called the "attribution paradox". He would need to somehow have some kind of model of the world with and without prevention measures along with a model of what the climate (specifically in the province of BC) would look like with and without global measures to fight climate change (say, model the actual climate). There are a lot of hypotheticals here - "counterfactuals". Gates has the advantage of a specific assumption: zero emissions in 2050. Of course, that suffers from the obvious fact that it will never happen, causing Gates to slip into Science Fiction.

Rosling would point out that this whole scenario is being played out in the world of the richest billion while the "poor" are being totally ignored by the news, along with ideas of hypothetical adaptation. 

My own opinion is that Gates and Lomborg's approaches can both be considered Science Fiction, but both give us to model the world in numbers within two or three orders of magnitude. We'd love more precision but it is unlikely that the real world will surrender more precision than that. Rosling's approach points to what we are missing in the entire discussion and, in fact, points to what we should be doing to help the ones who need help the most. Rosling may not give us solutions but he specializes is facts rather than Science Fiction.

Science Fiction famously gets it right sometimes. More often it gets it hilariously wrong. And sometimes, the real world turns out to be much, much worse than we could have imagined.

It is worth pointing out an important difference between Rosling and Lomborg. Rosling is concerned about general ignorance. Lomburg is concerned about climate panic. Both of these phenomena are as real as a heart attack -- things to concern us quite independently of the climate danger.

"Playing with Graphs"

Lomburg and Rosling sometimes use almost identical data, drawn to different scales to reach different conclusions:

And herein lies the central tension within climate policy, and one I will return to again and again. Tackling global warming means limiting the rise in global temperature, or even trying to reverse that rise. This means cutting carbon dioxide emissions dramatically, and as we saw, even stopping the entire rich world’s emissions of carbon dioxide will not be nearly enough. And this will mean giving up the cheapest and most reliable energy

Lomborg, Bjorn. False Alarm (p. 62). Basic Books. Kindle Edition. 

It is instructive to read these two sides by side. Broadly speaking, Lomborg fails to properly account for who it is seeing the benefits and bearing the costs. Lomborg sees problems and solutions from inside the bubble of the obscenely rich.

The key issue is resilience. Our BC horror show would play out very differently in Nepal or Afghanistan. This is what we mean by climate change disproportionality affecting the poor. Lomburg's perspective gets us thinking differently about our personal experience.

 "MORE RAIN"

Like most other things, global warming has both downsides and upsides. More rain can indeed lead to more flooding in some places. But more rain can also alleviate an existing drought. Overall, when we look at all the scientific evidence, while an increase in rain often does alleviate droughts, it generally doesn’t lead to more flooding, probably because humans use much of the additional water in agriculture and industry.

Lomborg, Bjorn. False Alarm (pp. 65-66). Basic Books. Kindle Edition.

The "rain" we worry about comes from tornados, hurricanes and the torrential sky rivers such has the "Pineapple Express". There is no such thing as a "good" hurricane, but it does seem to be true that relatively mild "sky rivers" are responsible for most of the rain that falls on California, with or without disastrous effect. The BC floods did not "prevent drout". They resulted in wide spread long term damage to the agricultural industry in BC.

The devil is in the details. "Good" climate change usually seems to emerge from a counter-factual fantasy world where everyone turns out to have been wrong and the author magically turns out to be the prophet of Utopia.

"HEAT AND COLD"

Lombard shows that cold kills more than heat. Therefor heat is, overall, a good thing. There are many things wrong with this argument. Why not compare heat deaths with snake bites? Heat deaths and cold deaths are very different phenomena. In fact, 

We would love to see a gapminder graph of this issue to see how both of these causes differ based on income. In fact, Rosling provides a relevant graph. If you are very poor, you are far more likely to be killed by any kind of disaster.

Lombard's case is basically that all these deaths are preventable. Perhaps true if you can afford it. My times in Saudi Arabia, Libya and Mexico were spent almost entirely in air conditioned facilities. The people I saw exposed to all risks (including the weather) did so with no options to mitigate the threat - in may cases, not even a roof over their heads. For example, many construction workers I lived in open tin shacks and earned enough ($1 per day) to put them in Rosling's "level 2", making them (in theory) three times more likely to survive (for example) extreme heat or cold. The "lefel 4" people in the same country would have eight times the survival rate of the poorest.

"GLOBAL GREENING"

Another thing we hear is Green is good, More C02 means more green, C02 is therefor good for you.

Other versions of this graph drop the fig leaf and chart "green" versus C02 emissions. The problem is that the data is a time series. The Y axis could be number of flat screen TV's.

There is nothing "green" about the BC crisis. Trees were replaced by mud. Crops were replaced by lakes. It is worth digging down into the specifics here, which also claim that desertification and drought have been decreasing. As far as I know, the data is, to put it mildly, "controversial".

We also see signs that Rosling could help us out here by asking where it is getting greener or dryer and who, exactly benefits or pays the cost? Not by country but by the individual wealth of the farmer. It is a sad reality of farming that a bumper crop doesn't necessarily mean a cash windfall, but a bad crop can put you out of business.

"The Reggie"

One simple way that we can get a sense of the scale of the effects of different cuts is by using the carbon trading system. The RGGI, or “Reggie,” is a carbon-trading marketplace covering the northeastern United States. It is just one of many around the world, but the first and biggest in the US.6 The RGGI puts a cap on the amount of carbon dioxide that large, fossil-fuel-run power plants can emit in the region. Then it allows emittance authorizations to be bought and sold. It costs about $6 to buy an authorization for one ton of carbon dioxide. If you buy an authorization, it means there’s one ton less that power plants can purchase. If you don’t use the authorization, that means all the power plants, between them, need to find a way to emit one ton less over the next year. Essentially, you’ve spent $6 and reduced global emissions by one ton. The RGGI puts the actions of individuals in perspective. It gives us a sense, for instance, of the scale of the impact of Attenborough’s promise. Cutting seven pounds of carbon dioxide would cost a little less than 2¢ on the RGGI. Attenborough might as well have just donated 2¢ to the climate cause.

Lomborg, Bjorn. False Alarm (pp. 113-114). Basic Books. Kindle Edition. 

Lomborg does manage to contribute a "truthy" measure of how much a unit of carbon prevention is worth (similar to Gates' "premium"). The concept is not bad and it relies on an arbitrary assumption that the RGGI actually does represent the value of keeping a ton of C02 out of the atmosphere. In actual fact, "cap and trade" scheme are famously corrupt. We no longer accept the idea that you can buy the right to pollute. But still ...

A "back of the envelope" calculation might be based on Gates' claim that we need to get 51 billion tons that we need to remove. Then we need a numerator - the cost of climate change to the world GDP, say, at 2 degrees of warming feared by Gates, welcomed by Lomburg and hardly a realistic "best case" scenario. This is very hard to come by, but lets say climate change at 2 degrees results in a 10% reduction to GDP (as opposed to the end of the world, as many assume). Global GDP is 150 trillion. 10% of that is 15 trillion. 15 trillion / 51 billion gives us about $300 per ton. To me, that confirms my suspicion that governments are going very easy on industry with the $6 figure. And we need to remember that the $300 figure doesn't include the cost of thousands of deaths, the disappearance of most ecosystems we know along with the species that depend on them, including us.

It is far more realistic to follow Gates' approach to estimate the "premium" cost of providing goods and services in a carbon-free way case by case. Very few of these cases present a "premium" as low as 10%. For example, the "premium" for gas should be about 100%, reflecting the difference between the zero-emission ideal (electric cars) and gas-powered vehicles. We can compare this to the timid but politically outrageous "carbon tax" in Canada of 6%. Like cap and trade, the number is political and has nothing to do with reducing carbon.

Of course, Lomburg would disagree with my back of the envelope challenge, saying he expects global GDP to increase, say, for the next century or so. But I am talking only of the obvious fact that GDP will increase less than it would because of climate impacts.

Lomborg's book is interesting and he's great to watch in person (see many videos) but my overall impression is that he succumbs to the economist's tendency to price out "externalities" while painting a rosy picture of the future.

I grew up in a place (Alberta) where such a mindset defined politics - even on the "left". Most of the time this was characterized by outright denial of climate change coupled with totally unrealistic prices for fossil fuels -- leaving out all "externalities". The left-leaning Federal Government sings the same tune. In Gates' terms, the premium will be negative. It should be noted that Canada's carbon tax is a slightly more sophisticated version of the Reggie along with Lombard's assumption that we can fight disaster with traditional economic models, which never actually model the real world.

While Lomborg deserves credit as an independent thinker, there is not much light between his arguments and those adopted by professional snake oil C02 salesmen such as Wrightstone. Wrightstone is actively deceptive. Lomborg is just wrong - basically off by one or two orders of magnitude.

What Money Can't Buy

In "What Money Can't Buy," Michael J. Sandel attacks the value issue as a philosopher.

Ideally, the job of a philosopher is to make us think more clearly about critical issues. As a philosopher, Sandel doesn't offer definitive answers. His business is to ask the right questions, clarify the terminology and provide "edge cases." If you watch Sandel's lectures on Justice, you will get a taste of his process: A "Socratic" moderation of discussions about what is right and why.

Sandel looks for "edge cases" and questions our vocabulary. The result is penetrating insight into the subject that pushes aside much of the discussion that assumes that justice can be achieved by tweaking the economy. Economics, especially since it embraced the concept of "incentives" has abandoned the pretense of moral neutrality. Specifically, economics is seen in the light of political philosophy.

Economic theories are thinly veiled political theories, which concern themselves with who shall have rights. These turn out to be discussions about who shall have anything at all. Faith in the "efficiency of markets," and the "invisible hand" substitute for arguments about justice, somehow rationalizing the situation where it is "efficient" for large segments of the population to be denied basic human rights. Sandel puts "markets" under the microscope. As discussed elsewhere, "money" greases the wheels of the marketplace, but the marketplace, not "money" is where most of our problems arise. Modern economists claim that the market is society. Everything is for sale. This is precisely the issue where Sandel makes his stand.

Sandel mostly limits his discussion to markets that are "greased" by money. The same approach is taken in "experimental economics" which has blown big holes in the theories of conventional economics for entirely different reasons than Sandel discusses.

Is it OK to offer woman money to give up her right to reproduce? How about selling the "right" to exceed the speed limit, waiving speeding tickets? How about "scalping" tickets to "free" public concerts? Why not sell kidneys? Hearts? Does it make sense to put a specific monetary value on life itself, as insurance companies and the UK government do? As I write, the Trump administration has agreed with Boeing that it's ok to kill hundreds of people with an aircraft with known problems in its autopilot -- problems with a known fix that it will take Boeing some time to roll out. What's the problem?

Sandel is an expert on the philosophy of justice and rights. It is therefore not surprising to find Sandel analyzing the way that markets create injustice or, to put it another way, force the poor to "sell" their rights to the rich.

The IOUTopia Model

I'm a career computer systems analyst, with a special love for "OOA-object-oriented analysis". OOA is particularly attractive since it comes very close to the way we think in a categorical way. After reading a few books on the economy, especially the "Value of Everything".

Here are some of the key objects in this model:

• Resources, such as corn, fish, wood, fuel. Each of these resources has its own profile as to how much "work" is required to obtain the resource, how much is available etc.
• The Market. This turned out to be the most complex thing to specify. How do you model trades between people? This question is at the heart of economic theory, such as, How does money evolve?
• The Person. Resources are owned and consumed by persons. To make the model work, we'd need thousands of these persons with different "policies" regarding consumption and trade.
• The environment. This object "owns" resources, but also knows about things like limits on these resources and "external" costs such as pollution.
• The "God" object provides the tick of a clock and things like seasonal variation, weather (success of fishing), seasons and outbreaks of disease.

At first, I looked into this as a system of linear equations, but this quickly fell apart. At most, this technique could be used to find initial conditions that satisfy a set of constraints. The need for a dynamic simulation emerged.

I have lots of experience as an IT manager. It became evident that actually creating a working model would require a small team working for a year or so. Another issue was whether this model would tell us anything worthwhile and, if so, how this information would be shared. 

In the end, I decided to shelve the idea. Even so, the model provided me a better image of the "cogs and gears" of the economy - something better than the images you see in an economic textbook and certainly an improvement over the semi-mythological view of the economy that is assumed by everyone in public debate.

If The Only Tool You Have ...

"If the only tool you have is a hammer, everything looks like a nail".

Most people shy away from simple math. In fact, publishers demand that no equations, however simply don't appear in popular books.

From this perspective, the simple graphs and equations that appear in introductory textbooks appear sophisticated. In particular, these tools have a hard time presenting anything but a super simple, static picture of the world.

If you approach the same situation with different tools, a very different picture emerges. Even simple computer simulations can show complex behavior that can't be reduced to equations of any sort.

I played around with this idea a bit but abandoned it because it would have involved an unrealistic effort to implement it. However, even while simply drawing up a specification, you can see the kind of things a model could address. Most important is the question of stability or even a stable pattern of oscillation. Model specifications seem to raise the possibility of chaos or ultimate collapse.

This is interesting because:

• The myth of the invisible hand is a static view. Any change will ultimately involve the system settling down to a new, stable state. An "optimum" state.  In a computer model, this is not assumed. You need to run the model. But the model specifications show a system that is likely to show chaotic (unpredictable) behavior.
• Any realistic model includes "environmental services", which are routinely left out of the conventional analysis. Even in a simple model, the inclusion of the environment raises the question of collapse either by exhaustion of finite resources or by exploitation of resources faster than they can be replaced. Any model that includes human population will assume that human population until limits of "environmental services" collapse.

If you are a thinker, eventually you need to come up with some idea of thinking itself. For me, "Surfaces and Essences" provides a "Royal Road" to the way our minds work. While the book has a focus on analogies in language, the final chapters shift to visual analogies and the role analogies play in scientific theory. What is the world "really like". The idea of "essences" in the title is that some analogies are better than others. The best ones provide a two-way isomorphism, where properties in one system can be deduced from (mapped on to) properties in another. Analogies are rarely this good.

A persistent problem with public discussion is that naive analogy underly the way we use language to describe an issue. Here is an explicit visualization that supposedly "explains" the business "cycle":

If you look up "business cycle", it is remarkable how smooth and neat the "waves" are. The same mental image seems to be in the mind of "climate change deniers". The assumption is "what goes up will come down".

The problem with this analogy is that it is far from "essential". It doesn't really tell us anything about the phenomenon of interest.

Real economic data looks much "rougher". It was Mandelbrot who discovered the real "shape" of curves like this - fractal.

Real Economy - The Stock Market

Fractals turn up frequently in nature. They exhibit a special kind of "randomness" that looks the same at every scale. In practice, even serious investors in the stock market are unfamiliar with this fact. In effect, the "wave" idea and the "trend" concept are forced into the data (usually in retrospect). These methods are famously unable to predict large changes, such as the 2008 crash. The easiest way to see this is that the wavey graphs are not an "essential" analog to the real economy. Climate change deniers are not familiar with any other way to see this kind of thing, yet the IPCC reports are full of graphs like this. In fact, under the surface, the IPCC models are massively complex. They don't depend on "wave" models, but on the way physical factors are known to interact. Weather is one of the first systems discovered to be ruled by chaos. We can expect nothing different from weather over the long term - climate.

The most trivial kind of graph is "marching bars", showing some quantity in a series of bars over time. Using a line instead of bars is a simple improvement, but still relies on the assumption that graphing X over time reveals the "essence" of the system under consideration. Those who have seen nothing else, and were perhaps confused by the examples they did see have a hard time visualizing an alternative. See if this graph makes sense to you:

How the quantity of sorghum produced depends on the Price

"Time" doesn't appear in this graph. In fact, the graph is a visualization of a few simple equations that supposedly illustrate certain "price points" and how they relate independent of time. This is an improvement over "marching bars", but the underlying "math" is trivial. Like all graphical methods, all data and factors that may be of interest are necessarily ignored for the sake of simplicity. Economics textbooks are full of this kind of graph, giving them an undeserved impression of sophistication.

A computer simulation is not limited to a few simplistic assumptions. Predictably, the outcome, depicted graphically, is not as neat as marching bars or waves.

An Output from "Symphony" Simulator

Compared to practical simulations such as those used to simulate climate, Symphony is a toy that makes little effort to map its model into real, objective facts or the relationships between them. What many would see in the above graph as "waves" I see as instability. Think of it this way, if your car wobbles from left to right on the highway, you will assume that there is something seriously wrong - not that it's designed to do that. You will suspect that quite soon, your car will wobble into the ditch. Historically, this is what modern economies actually do: they "wave around" for a cycle or two, then unexpectedly boom or crash.

We can be quite sure that there is not even a toy simulation behind most of the economic "stimulus" packages flogged to the voters. Especially when coming from the conservative politician, such policy seems to be based on (a) the invisible hand and (b) the idea that the economy is inherently stable and (c) at any given time, we are someplace on the "business cycle". One may assume that, behind the scenes, there are thousands of nerds playing with economic simulations. Unlike the IPCC, they don't release their methods, data or assumptions for public debate.

By the way, the IOUTopia model would have been at least as complex as "Symphony" with the additional complexity of finding a way to simulate the goals of thousands of individuals over generations. A glance behind the scenes at what the programmer sees when creating a Symphony model should give a hint at why I abandoned the IOUTopia model. I still hope somebody else does it.

The Symphony "sausage factory"

Rolesia is another economic simulator apparently similar in power, scope, and applicability to Symphony. They resemble IOUTopia only in showing the amount of effort that would go into making something like this. As far as I know, there is nothing out there that has the granularity envisioned in IOUTopia. These simulators appear to be tools for professionals who want to put a modicum of objectivity into their economic forecasts, using assumptions that are applicable to today's economy. IOUTopia was a tool to investigate the basics of what an economy is.

How Our Politics Misses the Point

An excellent CBC Ideas episode is a nuanced treatment of how we tend to become more "conservative" as we grow older. I felt that the entire discussion was missing the point, or at least the "lefties" and "conservatives" were talking past each other. We have lost sight of the real world around us and have grown to depend on utterly unreliable ways of thinking about it.

There is a lot to unpack here.

For one thing, words such as "liberal" and "conservative" suffer from "reification" - slipping into thinking that something is a "thing" just because we use a name. "Socialists" have famously never agreed on what "real" socialism is - they are always accusing each other of not being "real" socialists" The idea of "conservatism" is just as amorphous, as illustrated by its defenders in the CBC episode. Why, for example, is Trump "conservative". Of course, conservatives are quick to say he's not a "real" conservative. There are echoes of religious schism here ...

It seems to me that terms like "liberal" and "socialist" are used mainly by "conservatives" as pejorative terms for an ideology that may or may not exist as a cohesive political ideology. On the other hand, those who lean to the "left" misunderstand the nature of their opposition. To cite just one element of this, I rarely find a "leftie" who understands the religious core of the Republican party. There are many who will not vote Democrat because they honestly believe that God is a Republican.

My problem with the whole debate is that it is not really "about what it's about".

On the "left", the concern is officially about "social justice" - providing each citizen with a tolerable lifestyle and civil rights. "Lefties" regard the political project as engineering all aspects of the system toward this end. "Conservatives" tend to appeal to fundamental principles that they feel preclude the need for analysis. As with religious conservatives, political conservatives miss the rapidly evolving image of what things were like in the good old days.

On the "right", it's officially about money. Balanced budgets, GDP and taxes. They provide lip service to social justice but always want to know "who will pay". When talking to a "conservative", you always feel the implied answer: "Not me". Conservatives hate to pay taxes and they take it personally.

I think that other issues tend to "stick" to one side or the other out of a historical accident or careful "engineering" of the political climate. For example, there is no obvious reason why "conservatives" should oppose abortion rights or, specifically, the "right" of the government to have a say in the reproductive rights of an individual. There is no obvious reason why "conservatives" should be climate change deniers or gun rights advocates. It's a matter of strategic alliances.

The fundamental core division is, I think, over two ways of seeing the world: people who see the problems and opportunities of real people versus people who see the issue as a zero-sum game of who pays. This is unfortunate since you simply cannot see what is going on in the world through a lens of money.

• The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.
• The only function of economic forecasting is to make astrology look respectable.
• Under capitalism, man exploits man. Under communism, it's just the opposite.

John Kenneth Galbraith

In my reading of Galbraith, my "takeaway" was his insight that it's all about the "commons" - the assets we own together as a society. Political "left/right" fights, especially when taxes and balanced budgets come up, are about the "commons". For example, Should the "commons" include affordable medical care for all? Why do I have to pay for schools if I have no children? Why should I pay for libraries when I don't read?

Conservative opponents of "tax and spend" liberals tend to overlook the stunning expansion of the "commons" over the last two centuries, which has nothing to do with what kind of government is in charge. For example, a conservative that advocates that roads should be paid for by precisely the people who use them (toll roads everywhere) would be seen as a crackpot. We see this kind of thinking with privatized fire departments who watch buildings burn because the owner is not paying "insurance" to the right fire department. Perhaps we should have toll booths at the entrance to every park.

But that misses a deeper point. We have created an environment that is 99% artificial. Who are "we"? Increasingly, every object in our environment has been created by thousands upon thousands of faceless individuals in a production train. Sometimes we need to have our noses shoved into this fact by, for example, asking how we would make a toaster from scratch. I ask the reader to pick up any object nearby and ask if he could make it from scratch. A plastic spoon? A ballpoint pen? A sticky label? Do we have any idea how much every person in the production line of any of these things got paid for his contribution? Does such a question even make sense? The fact is that everything around us has been created by the human race. We have no idea who designed this stuff, who built it or how it came to be regarded as "ours". The money we paid for it is, generally speaking, an absurdly low estimate of its "worth". To a large extent, what we pay for things in this world is a pretty arbitrary measure of what their value is to us. We access the vast amount of that value for "free".

But how do we regard our money as "ours"? If we look closely, most of us are also involved in a production chain too Our own contribution is lost in a sea of other contributions, with some kind of value popping out at the other end as if by magic. For example, for 30 years I worked to improve aircraft safety. I have no idea if my contribution saved any one single life. It only makes sense to think of my efforts as a contribution to the work of millions in the transportation industry.

What I am left with is a vision of the "commons" as a vast universe of value. Each of us contributes and (maybe) gets paid for it. We withdraw things from the commons and (rarely) pay for that value.

We should have our political discussions around enhancing the value of the commons, reducing the cost of accessing it and fairly compensating those who contribute to it. Automation threatens to completely disrupt the "compensation" part of this system while driving down the cost of "things" that the commons produces. Some members of society see their access to the commons painfully restricted or eliminated while others seek to "fence off" the commons and call a chunk of it "theirs".

So why are some things so expensive and why do some people get paid almost nothing for their contribution?

It seems to me that it boils down to personal, individual, one-on-one service. You can't mass produce cancer care or Nobel Prize winners. But there is no shortage of people who will work in warehouses or flip hamburgers.

That's the status of my current thinking on this issue. The devil is in the details.

Intelligibility and he Birth of Paradigm

"Paradigm" is a word that refers to the grand unifying ideas that underpin our understanding of a phenomenon - perhaps all phenomena. Paradigms shift slowly as the old "believers" die and a new generation is open to new ways of thinking.

"Understanding" in this case is mostly about language: about how we talk to each other. If two people  subscribe to the same paradigm what they say to each other is intelligible - it "makes sense". Challenges to the paradigm always come in the form of impertinent questions. Why impertinent? Because the question comes out of left field. It makes no sense.

A successful challenge to the paradigm expands and revises language itself, so that it becomes possible to speak in new ways that "make sense". In the new paradigm, the old language is no longer intelligible. For example, we don't expect to see references to "phlogiston" or the "luminous aether" in modern scientific journals because "we" no longer speak of fire as a substance and no longer think electromagnetic waves are waves in a substance.

Accordingly, we entertain a few "impertinent questions" in this blog, recognizing that, to many readers, such questions "make no sense". The challenge is not simply to convince the reader of a proposition that makes sense but doesn't seem "true", but to drag the reader into a new way of thinking and speaking. Extending language.

• One of the core questions asked in my blogs is "Assuming you need a brain to have a mind, is that all you need?" This challenges two paradigms - the religious claim that the "soul" is independent of the body and the skeptical one that claims that mind is an epiphenomenon of physical brain activity. For most readers, it's hard to imagine what a third alternative would look like.
• Another impertinent question asks if there is any reason to suspect that money measures value. The entire discipline of economics assumes that value is somehow measurable and that the best measure is money. I equate economics with astrology - a "science" based on fundamentally wrong assumptions about the way the world works. It's just a way for "economists" to talk to each other with words that they all agree "make sense". It's a paradigm.

Assimilation

The original title of this blog was "Dragon Theory", which referred to my idea that humans create organizations that are alive in some sense and, in another sense, are machines like other human creations. There is a "flip side" to this theory. It's about how humans are assimilated into this machine. It turns out that assimilation is an easier thing for most of us to understand, since intelligent machines are (for most of us) a subject of Science Fiction ("AI"). In fiction, "AI" is presented for dramatic purposes as something super-human and implacably opposed to human life. "Real" AI is something else entirely. It presents a real and present threat precisely because it is so poorly understood.

The concept of assimilation is quite familiar to most of us. We take it for granted that "social" animals form entities (herds, swarms, flocks, schools) that have a behavior all their own - behavour that cannot be described solely as the sum of behavior of the individuals. Application of this idea to humans is, for some strange reason, resisted.

In the case of humans, social structure is more than a matter of simply sticking together for the purpose of hunting and safety. Human societies are intelligently designed. In this sense, they are intelligent machines.

It's also true that the way that humans are absorbed in these social structures (assimilated) is uniquely complex.  In this post, I'd like to focus on the most common and most powerful ways we are all assimilated:

• Being Alive.  To be alive is to actively participate in the Universe. This forces us to divide the world into things useful, things dangerous, "me" and "not me", "mine" and "not mine" ...
• Being Human. Obviously, we all share a human mind and body, making it hard to relate to such things as the immorality of driving species to extinction. We share a mortal time-frame of less than a century. Our senses are dull but our minds are full of speculations that would never occur to an animal with comparable intelligence (such as a dolphin).
• Culture. The most obvious aspect of culture is language, which limits what kinds of thoughts we can share and even the kind of thoughts we can have. Especially in the "West", philosophers have over-emphasize the role of language. Culture includes "technology" which surrounds us, opening all kinds of possibilities but also limiting the way we see the world. For example, if we have a gun, we will tend to use the gun to solve our problems with society. If we have poison, we will use it to exclude inconvenient living things from "our" environment.
• Flocking. The boid hypothesis hold that a great deal of human "group" behavour can be explained by simple rules governing all kinds of flocks and swarms. Deep psychology is not required.

Built on our common humanity and the fact that we are all absorbed into some kind of culture from birth, other powerful forces are brought to bear:

• Mythology. Structures our lives with a complex set of stories that provide a sense of "meaning" and direction (as long as they are not held up to close scrutiny)
• Economics, especially the mythology of money. For the vast majority of human beings in 2017, money (and the need for it) is as real as air.
• Status. Backed by cultural myths, human societies seem to automatically stratify into "haves" and "have-nots" - leaders and followers.
• Brute Force. We cannot overlook the fact that, for most of humanity, there is no choice but to participate in society, even at the most desperately poor and disadvantaged level. When we go to war, most of us are "cannon fodder" with our individuality seen as an inconvenience and obstacle to the functioning of the war machine. On the other hand, when the tools of brute force are placed in our hands, we tend to use them - turning others into objects that exist only to further our personal ambitions. Ironically, such ambitions are themselves a product of assimilation. The oppressor is as assimilated as the oppressed.

All these forces can add up to the dragon/assimilation phenomenon where, for example, young men can excuse the slaughter of "enemy" civilians as "just doing my job". Such mental gymnastics would be completely incomprehensible if we ignored the process that turns a helpless, innocent child into a mindless, expendable component in a war machine.