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.

The Invisible Hand

WHAT ABOUT THE INVISIBLE HAND?

The capitalist gospel includes myth of the "Invisible Hand" - the idea that the marketplace will magically balance out personal motives to create goods and services with optimum efficiency. This is more of an axiom than a sensible economic doctrine. Without a shred of evidence, conservatives believe that any attempt to interfere with the "free market" will produce inefficiencies. "Government" is regarded as a cost to be minimized.

Even though the idea of the "invisible hand" was dead on arrival (Adam Smith himself hardly mentioned it and never in the context it is used today), it is core current economic wisdom - accepted as an obvious truth.

Adam Smith first introduced the concept in The Theory of Moral Sentiments, written in 1759, invoking it in reference to income distribution. In this work, however, the idea of the market is not discussed, and the word "capitalism" is never used.

Wikipedia 

Looking at the above example, we can see how regulation may interfere with the perversity of the underlying process. After all, everyone in this chain of events is acting to maximize his/her own "utility", just as the invisible hand idea assumes.

1. The rush to satisfy a "market" motivates R&D performed by a corporation that has motivations that, if they were motivations of an individual, could be described as psychopathic. R&D performed by governments will presumably be specifically in the public interest, not in response to the opportunity for profit. However, R&D by a government is not represented in GNP, nor is there provision for the value of knowledge generated in this way.
2. The doctrine of the invisible hand ignores the perverse effect of competition, which drives down wages, encourages misrepresentation and moves competition into a psychological war to (a) persuade the public they need something they don't (such as bottled water) and (be) promotes a "brand" rather than a product when all products are essentially identical.
3. It is Government regulation, or lack of it, that allows corporations to create a long list of "external" costs, such as environmental costs and health risks.
4. It is laughable that a corporation like Coca Cola can draw water treated at public expense from the public water supply and sell it back to the same public at an insane markup, packaged in a bottle that it is somebody else's problem to dispose of. At the same time, the public will resist taxes for any reason, including improving the safety of the water they drink.

In our example above, the public would be better off if all the relevant players were sent home and paid to do nothing. It is no coincidence that this is pretty much the way we treat criminals.

While we are at it, it's worth mentioning David Graeber's idea of "Bullshit Jobs", jobs that contribute nothing (or less than nothing) to the general welfare. Again, such jobs add to the GNP, which (according to prevailing economic theory) assumes that a service is "worth" what somebody is willing to pay for it.

By the way, Graeber's "Debt: The First 5000 years" is a must-read for anyone who wants to understand "money".

ESSENTIAL GOVERNMENT

I recently played with a "Toy Economy" (IOUTopia) just to get a feeling of how an economy might work. I started by stripping things down to a minimum number of goods that might be traded, but with a "society" that was large enough to support a marketplace. Historically, "barter" appears only between cultures. Within cultures, the tradition of a regular marketplace seems to be a common attribute of civilization. I found that it was impossible to model (imagine) a marketplace without at least some light touch of regulation. In modern times, stock and commodity markets require a "market maker" who makes sure that there is always a market to buy and sell the underlying commodity. This, in turn, seems to require an agreed-to currency that allows us to compare the value of apples and oranges and make it possible to trade apples and oranges.

Another concept that creeps in is banking. As we have seen recently, the banks are an international government onto itself - above and beyond the powers of any nation to control. The evolution of banks actually precedes the evolution of the nation-state. Again, I recommend Graeber.

I also found that it was not possible to model an economy without including an explicit entity we might call the "environment". The environment provides a wide range of goods and services that are systematically ignored in prevailing economic theory. Returning to our subject, this deliberate blindness results in perverse incentives, for example: to pollute and over-fish. 

Perverse Incentives

Koestler was a master of analogies. He talked about magnetic storms, where everyone's "moral compass" swerves from "True North" without us realizing it.

The visual image of this led me to think of humanity as a bunch of iron filings around a magnet.  One of the striking things in this image is the fibers of filings - the way they bunch up and line up head to toe under the influence of the magnetic field. Looking closely, you see that each fiber has its own little magnetic field, resulting in the textured pattern.

I've given a lot of thought to the way humans "click" together, usually in "pseudo-persons" like corporations. This image invited me to consider another kind of alignment, the 'head to toe" relationship being the way people are connected, especially "transactional". A special case is a network of "perverse incentives" created by the social environment itself.
Here's an example:

1. We don't like bugs around for various reasons, creating a market for some kind of "solution". Sadly, this "market" may be for improved weapons for wars not yet fought.
2. Chemical companies jump in to take advantage of the "opportunity". This attracts the best and brightest scientists and lots of good middle-class jobs*. A big bump in GNP.
3. Corporations, in general, minimize costs. One way is to externalize these costs - make them somebody else's problem. Such things as pollution and "downstream" health effects on the users of their products. These costs don't show up on the corporate balance sheet. All this attracts shareholders. It looks good on the stock market.
4. "Downstream", people get sick and die, creating more jobs for lawyers and doctors. These unfortunate Joes create more GNP than Joe could ever contribute. In other words, John's death is good for GNP and jobs.
5. Cleanup of downstream pollution creates jobs, which also add to GNP.
6. Fear of polluted water makes people buy bottled water (another huge business). This is another industry that loves to externalize its costs. For example, plastic bottles are somebody else's problem.

The lesson to learn from this example is that we should be skeptical about politicians who claim that they will:

1. Create jobs
2. "Grow" the economy (GNP)

As the example shows, more "jobs" are not necessarily good for society in general, nor is GNP a good way to measure increasing "wealth".

This is just one example of the way we are linked by perverse incentives. Politics is full of them, as are banking. Perhaps these chains of incentives are the fabric of society.
--------------------------
* New York Times "Daily" Podcast sheds some light on the connection between "demand" for weapons and the ability of corporations to recruit or retain people to work on a new technology. Napalm and Artificial intelligence come up.

Dimensions of Value: Socialism and Capitalism

Socialism and Capitalism are both ways of combining theories of value with practices "on the ground" which purportedly reflect these perceived values.

SOCIALISM

It seems that Socialism pays special attention to three value-related concepts:

• "Fairness" in the system of allocating things of value. This needs to be unpacked a bit since there is a different concept, also called "fairness" in capitalism. The two concepts are so different that we can see part of the dispute as encouraged by a problem of language. The same word used in opposite senses, as in "newspeak".
• Equal influence on public policy. The "government" should act on behalf of all citizens and not be dominated by a certain segment. Being "rich" should not equate to being politically powerful. One person, one vote, not one dollar one vote.
• Since "Socialism" is fundamentally a political world view, "socialists" are, of course, willing to stretch the truth, sweep details under the rug and ally themselves with the devil to "win power for the people". This process often seems to throw the baby out with the bathwater, as with the Canadian NDP, who seems to totally accept the capitalist lexicon in an attempt to grab power. The ultimate value with any political party is political power itself.
• "Socialist" countries are willing to sacrifice the lives of their citizens for the sake of "society". I regard the willingness to do so on a spectrum. At one end are the "democratic socialists" who will fight to preserve general welfare. At the other end are "communists" who regard "society" as an abstract entity that has little do do with the actual welfare of actual citizens. Actual citizens are expendable. Dissent is to be suppressed to preserve the illusion of "society" as a "thing" worth defending. I regard "society" to be an illusion - a fiction - quite like the "Invisible hand" of the market so popular on the right.

CAPITALISM

• "Fairness" in capitalism boils down to holding property rights sacred - baked into the constitution. Any re-distribution of property, especially by the Government in (for example) taxes is "unfair". Morally wrong.
• In Marxist terms, those who own the "means of production" are entitled to all profits that arise from the use of those means of production. Profits, as well as the means themselves (industry), are private property. Re-distrubtion of these is morally wrong.
• Modern capitalist thinking makes room for "middlemen" - merchants and "platforms" such as Amazon, to have a moral right to their profits. It's a simple matter of arithmetic to see that the allocation of such profits is a zero-sum game between labor and capital. Therefore, the capitalist (valuing property rights) sees the suppression of wages (and therefore the value of life itself) as an "externality".  "Culture" or "society" is meant to deal with these "externalities" but not by means of expropriating of capital, especially through taxation.
• Capitalistic rhetoric often features "jobs" as a substitute for the value of human life. "Jobs" are the rabbit pulled out of the hat that, mysteriously, leads us to think of people as raw material for capitalistic production and therefore profits. The purpose of society, in general, is to provide "inputs" to industry and consumers for its outputs.
• Capitalists tend to treat "money" as the measure of all things. The entire discipline of "economics" is an effort to reduce all human value to money. If there is anything such as "socialist economics" I have failed to find it.
• To the capitalist, political power, like everything else, is to be purchased and owned. The capitalist loves to risk other people's money and other people's lives. You often see this attitude emerging in claims that the rich "own" the country because "they" built it. "They" own the real estate, the factories, the banks. They, therefore, have the moral right to "run the country". This is a claim that is rarely challenged in open debate. We tend to forget that their claim to ownership extends beyond the borders of our country (including Canada), resulting in "shooting wars" and the deaths of hundreds of thousands of politically misguided peasants in "other" countries. "Ownership" is everywhere achieved, maintained and defended at the point of a gun.

BETWEEN THE CRACKS

Both of these worldviews tend to systematically ignore whole categories of value. At bottom, they represent different worldviews along with different ideas about the way political power should be allocated in a "fair" way. Mostly economic power. Money power. Jobs. Taxes. GDP. 

We all seem to agree that political power is a value worth fighting for. In personalities likeMitch McDonnell, we see people who are willing to sacrifice anything to gain power, even allowing the country to be ruled by Russia rather than the Democrats. In every "political" struggle, it is power itself, rather than "values" of any type that are being fought over.

Stalin was the ultimate capitalist, clothed in Socialist rhetoric. Stalin owned the country. Its wealth was his to distribute. Every citizen lived and died at his whim. He starved millions to death to build up a modern industrial economy (capital). Individual citizens had zero political power and zero value in themselves. They lived in fear of their lives. Allowing millions to starve and millions of others to be imprisoned or exiled represents the logical end of a system of thought that attaches no significance to any human value. Yet, "right wing" rhetoric paints Stalin as the "ultimate socialist".

I tend to see the "Nordic" countries as examples of socialism at work. Everyone is guaranteed access to the necessities of life. Such values as a good education are taken for granted and "fairly" distributed. Major resources (such as fossil fuels) and the revenue from them are owned by the state. There are instructive differences between these countries. Iceland is not Sweden. Denmark is not Finland. But you see a commonality of assumptions - how people think of value. I call this system of values "democratic socialism". It is not even a close relative to "communism" - a totally different animal which I may come back to at some point. 

America is a country without a coherent system of values. "Capitalist" assumptions fill the vacuum, resulting in an atmosphere of false alternatives and alienation. Ignorance of the population (itself a consequence of education being a "commodity" to be bought and sold) leaves America open to almost any rhetoric. There are no accepted values worth defending. The American voter is effectively for sale, resulting in de facto rule by the rich. 

Even in this brief introduction, we see that our left wing/right wing assumptions place us with a false alternative. Socialism seems to cast a wider net than traditional capitalism and it seems to attract those who want to make the net bigger, such as "environmentalists". Even so, Socialists seem

to find it hard to admit to any concern that is not fundamentally economic. Who pays for health care? Why do the rich not pay their fair share of taxes? Why do a small number of people own the lion's share of wealth? The "left" cedes the floor to the capitalist "right wing" by treating these sorts of issues and this dimension as fundamental.

Climate change is an example of an issue "falling between the cracks". Both sides struggle to find an economic reason to avoid destroying the planet. Both sides manage to find the logic that supports massive investment in weapons that will if used, destroy us all. Both sides have trouble seeing over their borders to the suffering created for the masses who "fall between the cracks" as they arm wrestle for power within their borders and struggle to expand their domination at the expense of actual people.

The most glaring example of this is the USA, which makes laws for the entire planet, assumes the right to invade any country, kill anyone, destroy any economy but claims no responsibility whatsoever for the catastrophe it leaves behind for "others". There is a large aspect of "entropy" in this project. The USA doesn't leave "order" behind (such as tame capitalist economies). It leaves chaos behind. Ruined economies. Impoverished political debate. Kleptocracies. We need to step back and see the entropy in this situation. We can see it also in pictures of Europe in the aftermath of World War II. We can see it in failed nuclear reactors and the unrecoverable environmental mess that military activities leave behind in their wake.

MORALITY

Both "sides" of the political debate regard the "other side" as morally corrupt. Yet, in private, the individual is rudderless when it comes to defining what is or is not "moral". It seems arbitrary. It's in the "eye of the beholder". Yet, our "eye" is being steered in definite directions and away from the horrible truth.

Pope Paul's encyclical (on Human Life) points the way to a moral issue that both sides skip over. Are we morally obligated to leave an inhabitable planet for our descendants? Is it morally right to steal that planet for the benefit of people now living? Pope Paul attempts to expand orthodox Catholic theology to include a few "new sins". He also makes a brave attempt to convince non-Catholics that they need to re-assess their view of morality even if they reject "religion". There is a troubling connection between the Catholic concern for the "unborn" fetus and the welfare of the people who do actually get born. Most non-Catholics don't want to go anywhere near this way of seeing things.

I maintain that "morality" reflects the way we see (or fail to see) "dimensions of value". It boils down to how we see (or fail to see) the world with the full range of dimensions of value. Similarly, we see (or are made to see) certain aspects of value (such as money and the "good life") as the only values worth attention.

To a certain extent, we are free to challenge the way we see things. To exactly the same extent, morality is a matter of choice. But all of these frameworks of value are sold to us like Corn Flakes. They are woven into the very language we use. We can't address the question without figuring in the way that humans are "programmed" to see things a certain way, just as our biology programs us to see light in certain wavelengths and hear certain sounds but not others.

We arrive at the conclusion (not so surprising) that morality and values are intimately linked. The link is not something "out there" like the laws of physics. Or laid down by some supernatural being. It is the link between the individual and society. The individual sees morality (and therefore value) only through the filter held up by society and the environment. Under the spell of the capitalist, we can be made to "see" the "Invisible Hand" and the "Market" at work.  Under the socialist spell, we are tricked into feeling like we are supporting the "common good" without really knowing what this means.

Break the spell and a whole different world comes into view.

More on "Dimensions" here.