The Natural Chaos of Markets

By Sell on News, a global macro equities analyst. Cross posted from MacroBusiness

Having just watched the second episode of All Watched Over By Machines of Loving Grace by my favourite documentary maker Adam Curtis, in which he tells the “story of how our modern scientific idea of nature, as a self-regulating ecosystem, is actually a machine fantasy”, I am once again struck by what an absurd body of ideas, or more accurately, self delusions, much of modern economic prejudice-masquerading-as-theory is.

Curtis, in this episode, shows that the idea that there was a balance of nature was always flimsy, never supported by the empirical evidence, and based on extreme, self proving over simplifications. Ecological thought is about on the same level as economic thought, it seems. Nature is not in balance at all. Consequently all those ideas about self correcting systems — you know, Adam Smith’s so called invisible hand — also turn out to be a fantasy. The neo-liberal assumption that markets are like an ecology, a natural system that will self correct provided it is left alone, is also looking rocky. If, indeed, markets are natural systems — and they are not, they are created systems — then they will not self correct. The vegetative metaphor is extremely unpersuasive.

Curtis does not explore the implications for economics, his interest lies more in how we have given up the power to act because we have allowed machine driven systems to take us over. But what he traces is extremely damaging for General Equilibrium theory, a central plank of much economic “theory” and the basis of micro-economics. General Equilibrium theory basically borrows the vegetative metaphor, that there is a “balance of nature” and applies it to markets. This was always a nonsense move, because markets are not natural, they are artificial. As Curtis shows, it is double nonsense, because even if the metaphor holds, it leads to the opposite conclusion. That markets will probably not incline towards equilibrium at all. Quelle surprise.

In one sense, the assumption that there will eventually move towards equilibrium is typical of the kind of circular arguments of which economists are so fond. Balance is implied in the transactional structures. Balance sheets have to, well, balance; assets must match liabilities. Prices must reflect some sort of balance between supply and demand. That is what a price is. Debts must be repaid from income. And so on. In the artificial rules of finance, equilibrium is implicit.

But of course that is not what happens, especially when you allow markets to be “free”, and especially when you allow financial markets to be “free” to make up their own rules. They are not self organising systems that incline towards balance. They become out of control exercises in chaos that move towards anything but equilibrium. I cite the GFC, the Great Depression, the Latin American debt crisis, Japan’s asset bubble, the Asian financial crisis and ever so much more, even back to Tulipmania.

Accordingly, what needs to happen, in financial markets in particular, is that equilibrium is ENFORCED, and continually at that. I recognise that such enforcement is difficult in today’s global markets, but the idea that if things are left free, the system will self correct — which was Alan Greenspan’s now exploded assumption — is just plain wrong. It is a system of rules. When traders are left to make up their own rules, the system of rules will be weakened and may collapse. Ergo, continually enforce the rules to ensure that the necessary balances are maintained.

Curtis goes on to show how the vegetative metaphor was used to justify the networking of machines, especially the internet and social media. That is exactly the type of shift that has occurred in finance, with machines being used increasingly to unleash the forces of financial “freedom” (derivatives, algorithmic trading, the mechanisation of risk models, etc.) that is supposed to lead to a self correcting system but which actually leads to its exact opposite. It must, quite frankly, be stopped before it does more harm to our system of money. Not that I see much hope of that happening.

It is always fascinating how bad ideas become so poular. No-one is better than Curtis at showing how it happens, although he does not really explain why it happens. Perhaps it is simply mysterious. Perhaps it is what Chesterton meant when he said that when people give up older beliefs they do not then believe in nothing, they believe in anything. Perhaps it is just that metaphors are powerful, we must have them, and we have become susceptible to very bad ones.

I don’t know. What I do know is that it is about time to jettison the assumption that markets, left free, will be self correcting and incline towards equilbrium. The opposite is the case. And human beings need to be put at the centre of human systems, not pushed to the side as just components in a “system” (how that is happening now is beautifully documented by Curtis). That, in turn, means putting the consideration of morality (an equilibrium that actually makes some sense) back into the consideration of economics.

Tomas Sedlacek’s book, The Economics of Good and Evil: The Quest for Economic Meaning from Gilgamesh to Wall Street, might be a good place to start to reconstruct the entire discipline from the ground up. This is what he had to say in a recent interview:

So, “Does the system behave the way we want it to behave?” is ultimately a moral question, one that we are banned from asking. In economics, this is exactly the sort of a question we’re not allowed to ask, because economics is supposed to be a positive science, not a normative science. The difference is clear: positive statements should describe things as they are (“facts only, baby”), whereas a normative statement describes things the way we want them to be.

Let’s take Milton Friedman, who was, of course, the biggest proponent of positive economics. He wrote the famous essay “Economics as a Positive Science.” In that essay, on the first page, you will find the following sentence: “Economics should be a positive science.” Now, please tell me if that is a positive or a normative statement. [Laughter]

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  1. psychohistorian

    I never did figure out where we voted to build throw away crap instead of the most long lasting, reparable equipment. I still use a toaster built in 1928.

    Its all kabuki to hide the machinations of the global inherited rich around the world. Its too important and complicated for us little people to understand…….you just need more FAITH.

    1. Charlie Dodgson

      One turning point was GM under Alfred Sloan in the 1920s. To keep sales from drying up, they needed a way sell a car to people who already had a car, and they found it with the annual model change. And, of course, the associated massive marketing effort to convince people that it somehow made sense that discarding and replacing a perfectly good piece of machinery was progress…

      1. rotter

        then they learned that people, if they wished could hedge against that by keeping thier old car and stockpiling parts. so they move to china and starting building products that only work about 50% of the time, right out of the box. it was a stroke of “genius”.

        1. ambrit

          Dear rotter;
          A sibling who works at a giant greeting card cum cable channel company recently confidsd that that worthy enterprise is moving production of high value product back to the United States due to intractable quality control issues. “The Chineese factory managers only look at thier production numbers. Quality control doesn’t even come into the picture for them. They’re paid by the piece shipped, not the piece sold.”

          1. KnotRP

            Must be a smallish company where customer complaints don’t die on the contracted out tech support vine. Large multi-nationals tend to be too customer-hearing-impaired to notice anything but the front-loaded savings and front-loaded bonuses that come from selling the company reputation down the river….it takes years to destroy a reputation….that’s years of big bonuses for the American MBA locusts.

        2. jonboinAR

          I think I’ve bought 4 microwaves in the last 7 years. All major brand, all quit working. I didn’t buy a DVD player until about ’05. I’m on my 3rd one now. Yet our old VCR from the early 90’s was working fine until last winter when a power-surge during a lightning storm finally knocked it out. I’m here to tell ya’, the quality of consumer electronics seems to have gone kaputski.

    2. nonclassical mean you don’t “believe” the (Aldous Huxley-“Brave New World”) “..newer is better”, normative statement??!?

    3. securecare

      It began with the industrialization of production in the U.S. post Civil War.

      See the chapters on Quaker Oats & advertising in :

      “The Control Revolution: Technological and Economic Origins of the Information Society” by James R. Beniger.


      The “Information Age” began w/the railroads, not computers.

  2. Marat

    Ah, but the piece of evidence your missing for your conclusion is that the “true free market”, which we have never seen in history, isn’t anything like that.

    Those ‘bad things’ only occur with actually existing markets not the one in my head.

  3. Jose L Campos

    It is a true blessing that all theories are partially false. If they were right we would live in an unchanging boring world. As it is the world does not follow rules it creates them.

  4. Fiver

    Having not seen the series, but only read this piece, and the Wiki entry linked below, I of course cannot be definitive, but it sure seems to me on spec that this fellow’s portrayal of systems, feedback and ecology is both simplistic and dated. And while economists may still believe in a hydraulic balance-sheet “equilibrium”, ecologists (and physicists, and biologists, and systems theorists, and…) have been quite clear that change is constant, that any appearance of “equilibrium” is temporary, and that in complex systems there are any number of possible states that are stable, or in apparent “equilibrium” over time.

    To my mind, the principle of feedback is essential to understanding anything at all about the modern human being – a complex entity that shapes and is shaped by what it shapes – we are what we’re making. Our very minds and our array of mediated systems are essentially fusing. The logic of this truly thoughtless fealty to the God of Technology is that of the hive – and is at fundamental odds with human growth.

    1. Leverage

      Saw it sometime ago actually, but if I recall right, all this is explained in the documentary later in this part (the evolution of the discipline and how it negates old views).

      It’s an extremely good documentary, worth checking IMO.

      1. Jao

        Machines of Loving Grace has more than a whiff of absurdity itself, starting with the ridiculous sound-track, but also the gross over-simplifications of scientific thought. But I’m sure a lot of people in the anti-science crowd will love it.

    2. nonclassical

      (Fiver)-actually, the only “stability” in “states” inherent,
      is towards preservation of themselves…

      (from an old aquaintance, Frank Herbert)..

  5. John Merryman

    There is what Stephen Jay Gould called “punctuated equilibrium.” That systems tended to settle into increasingly regular rhythms and then collapsing for any number of reason. Apparently it was originally called catastrophism and supposedly competed with evolution, but the social bias was against it.
    Then there is complexity theory. Linear ordered systems, in a non-linear chaotic environment and how these interact and intermingle.
    I think of it as top down structure, versus bottom up energy. When they work together, then it’s a process of gradual evolution, as energy changes the structures it is absorbed by, but when these structures become too rigid to absorb new energy, they start loosing more energy than they gain and disappear, as the energy starts new structures.
    Economics has nothing on physics, when it comes to reality free speculation, but that’s another topic for another universe.

    1. Pelle Schultz

      That is not an accurate description of punctuated equilibrium. Punctuated equilibrium only describes the dynamics of evolutionary change.

      Before Gould’s work, evolution was generally thought to occur as a consequence of a relatively constant rate of change. This is called ‘gradualism,’ although biologists continue to argue whether that is the proper term.

      Gould (and Eldredge) observed (as did many others) that the fossil record was not generally supportive of gradualism. They therefore proposed that there were long periods of relatively little change ‘punctuated’ by brief periods of rapid change. Keep in mind that “brief” as used here would likely encompass the entire history of Homo sapiens as a distinct species.

      In biological terms, catastrophism is a mechanism (but not the only one) by which punctuated equilibrium might occur. Think large meteorite strikes or volcanic eruptions and the resulting rapid climate changes as possible examples.

    1. Stephen Haust

      Phil, how does this square with your love of Flann.
      Look, I could afford a bicycle – not sure about this.

  6. Jessica

    “It is always fascinating how bad ideas become so popular.”

    Surely the fact that these bad ideas all benefit the 1% at the expense of the rest of us explains part of their popularity. That and the fact the the 1% control the mainstream media and dominate business schools and university economics departments as well.

    What I honestly don’t understand is how anyone can raise the question of how obvious bullshit becomes accepted as Gospel, but then fail to mention the profound corruption of public discourse by moneyed interests.

    1. DC Native

      That’s exactly it. Many ideas don’t “win” because they are valid or beneficial to society, but because certain rich and powerful people want these ideas to “win.” Money is power, and most scientists, theorists, authors, journalists, politicians, etc., will bend over backwards if you wave enough of the green stuff in their face.

      Meanwhile, points of view adverse to the interests of those with money simply do not get funded. There’s no need to lock dissenters in a dungeon or put a bullet through their head; just give them a mortgage and send them a couple of monthly bills. It won’t take long for their practical side to take over, for them to abandon their cause of choice, and to sell their time and labor to some faceless company they don’t give a damn about.

      I don’t think it’s a coincidence that the University of Chicago (i.e., Rockefeller’s college) is the epicenter of the “free market” phenomenon that has impoverished the masses and amassed wealth with the select few at the top of the economic ladder.

      1. Barbyrah

        “There’s no need to lock dissenters in a dungeon or put a bullet through their head; just give them a mortgage and send them a couple of monthly bills. It won’t take long for their practical side to take over, for them to abandon their cause of choice, and to sell their time and labor to some faceless company they don’t give a damn about.”

        Simply: brilliantly stated.

      2. jonboinAR

        It (effective propaganda) still relies on a dull, passive public’s aquiescence. We’ve allowed ourselves to be sedated by cheap entertainment. Either we’ll change our focus by our own diligence or it will be changed for us when we discover waking up that our good life has gone away.

        1. Otter

          “We’ve allowed ourselves to be sedated”

          We have allowed nothing. The owners spend billions of our dollars and decades from every one of our lives to train us.

          1. jonboinAR

            I think the American public has been fairly complicit in this by being passive, more interested in football scores and stats than what’s going on in the political world or the economy. For as long as I can remember, many of my friends have been shockingly ill-informed. Their excuse, “It’s all a racket, anyway.”

    2. patrick

      The ‘powers that be’ know that propaganda regularly beats facts and logic. That is why they systematically strive to control the main media organizations. Whilst the control is not as overt as in a one party state, the prevailing comment is always around one economic set of theories with everything else drowned out. How else to explain the resurgence of the thought patterns that got us into the current mess.

      1. jake chase

        Veblen explained all this perfectly in 1904. Read the Theory of Business Enterprise and you will understand exactly why everything happens as it does. We don’t have an economic system; we have a business system. The needs of business are served perfectly, and everyone else gets what they get. Don’t expect public organs or universities to explain this. They are extensions of the business system. What you get from such sources is propaganda. Truth is extremely dangerous to entrenched interests. Why would they provide it or endorse it or tolerate it? It is quite funny that Marx made such a big splash with intellectuals, because Marx was naive about business reality. His frame of reference was 1840. He wrote about the economics of petty trade, understood nothing about the machine process which lies at the heart of the prevailing business system. If everybody read Veblen things just might change. The upside of being among the small number who do read him is you get a perspective which just might make you rich. I know readers on this site don’t care about becoming wealthy, but the truth is there isn’t much else of value a person could have done for the past 100 years, and I doubt there is much else a person can do now.

        1. Richard Kline

          So jake, Marx succeeded due to the argument for social justice embedded in his economic analysis. He would see that argument as intrinsic, though many others would seperate the two; that is the divide between political economy and economics.

          I agree Veblen was extremely good. Weber also had insights which exceeded those of Marx in that his reading of actual behaviors was much sounder. Concerning Veblen, then, you might contribute a copy of the text to the Library of the Occupation in Liberty Square.

      2. ECON

        Some years past I read the statement of an English economist (and Lord) paraphrased as : The Worker gets what he receives while the Capitalist gets what he wants.

    3. securecare

      “Economic history is a never-ending series of episodes based on
      falsehoods and lies, not truths. It represents the path to big money.
      The object is to recognize the trend whose premise is false, ride that
      trend, and step off before it is discredited.” – George Soros

  7. Rex

    “Having just watched the second episode of All Watched Over By Machines of Loving Grace”

    The episode seems to be blocked from viewing everywhere I have looked, including the link provided. Anyone know if it is available somewhere?

  8. John Merryman

    If one takes a Gaian perspective on the evolution of life on this planet, it is in the process of growing a central nervous system, in the form of human civilization. We just happen to be at an extremely adolescent and wasteful stage.

    1. Walt

      Now take the purported constitutional underpinnings of the teapartiers with their late seventeenth/eighteenth century dependence on a highly dubious natural right/natural law regime and you have a near-perfect pairing of two absurdly simplistic false paradigms. Grounding 21st century complexity in eighteenth century simple-mindedness: the invisible hand of the market and natural laws found… where?
      A brilliant recipe for enshrining a stultifying obsolete system – or, as Alexander Pope wrote and Voltaire re-affirmed: whatever is, is right!

      1. rotter

        Libertarians = same problem. Besides their Aspergers syndrome sufferer-like talent for overlooking the welfare of anything but themselves, the world which thier “philosophy” describes is a late 18th century romantic fairy tale world.It never existed,not even in the late 18th century.

  9. Richard Kline

    Why do people believe bad ideas? Because they want simple answers, and most bad ideas are simplistic extensions of good ideas which actually work in narrow contexts. It is the inability to evaluate the concept-context match or mismatch which dooms most popular ‘explanations’ to mediocrity or far, far worse.

    As a corollary, most people do _not_ want to understand how any particular thing works. They want simple rules which they can remember, and the food pellet to reliably arrive when they depress the lever. This is why God the Singular was invented, for example; an incredible hypothesis which no one in the preceding 150,000 years had believed, but by far the most simplistic hypothesis generated to that time. (Economics was not far behind.)

    Organicist metaphors are a natural, so to speak, and have both the clarity of simplicity and the putative evidence of stable effect. They were widely tried in the nineteenth century to explain any kind of systemic interaction one might think of; tried after God the Singular had been cast in a poor light which made the props of humankind holding Him up all too evident. But organicist metaphors simply failed upon closer inspection by some of those dratted nerds who actually are compelled to find out how things actually _do_ work by, you know, looking at them working rather than talking about them some where at a comfortable remove. The economics we have now depends entirely upon an armature of nineteenth century philosophy and empirical evidence. Every other discipline cobbled together at that time has moved on to incorporate actual, you know, evidence. Economics refused, perfering nice, simple-minded theory that allowed Mammon the Singular to remain hoisted above in a good light. I can’t think of a more vapid body of study then later 20th century economics. (Unless one considers _all_ of 20th century philosophy a body of study, a dubious contention which its participants would be only to happy to discuss enroute to tenure.) Economics has been the last bastion of organicist metaphors tarted up as a ‘positive’ achievement. When those who wish to do economic investigation finally accept that they lack the evidence to mathematize their subject but have to return to empirical (typically historical) study, the practice will have returned to its 18th century origins for a chance to start over and get it right(er) this time around.

    It may not be entirely accurate to describe nature as a chaotic system; there are local stabilities. What defines nature in an interesting way, specifically large, inter-dependent processes or environments, is that they self-modifiy. That is, their action transforms their environment so that they inherently breach the limiting parameters of their stable states in many instances. I would describe nature more as an aggregate of dynamical systems. Sound familiar, citizens? I could say more, but I once did; Yves has it archived somewhere . . . .

    On a final note, I never thought for a second someone would be able to condense the colossal and vain intellectual vacancy of Milton Friedman into a single sentence of six words—but wouldn’t you know, he did it himself for us! Thanks for the citation there, that’s priceless.

    1. Dan Duncan

      That Richard Kline –who refers to himself as a “polymath” (and poet too!)– would describe the work of someone else as a “colossal and vain intellectual vacancy”, while taking it upon himself to explain why simple minded Muslims, Christians and Jews believe one God…which was done at the end of a comment in response to a post wherein the original author watched a documentary–completely unrelated to economics–but nonetheless uses it as justification to state that “free-markets” (whatever the hell that means) is a myth…

      Really…this is utterly-fucking-priceless.

  10. annieb

    “Perhaps it is just that metaphors are powerful, we must have them, and we have become susceptible to very bad ones.”

    Read George Lakoff. He’s of course best known recently for his ideas about “framing” and in particular how bad the Democrats are at it (and how well the Republicans have done it) but his work on the centrality of metaphor to cognition is really fascinating. In particular, that the more abstract a concept, the more layers of metaphor we require to express it. Sound like economics?

  11. craazyman

    If you step far enough back and isolate your time frame, any natural system appears to be in a state of equilibrium.

    If you move closer or expand your time frame, the details emerge — pradation, ominivorism, death and recycling.

    You just have to understand your point of view and its implications, which very few do in reality.

    1. Moneta

      Good point. While I was reading the article, I was thinking about how I would see earthif I were on the moon.

      From that vantage point, I would affirm with great conviction that our economic system has no choice but to follow natural laws.

      1. bigsurtree

        We live in the Happy Holocene, where man has left his primitive state and the animal kingdom altogether. That’s why we have things like money, the great transcendent symbol of terrestrial autonomy. And we build weapons to protect this chimera. Western Civilization really isn’t much more than a series of wars of ideas with occassional breathing room for resting up for the next one. And of course real bodies have to be sacrificed so the “winner de jour” feels like a true, proud gorilla.

  12. John M

    “The neo-liberal assumption that markets are like an ecology, a natural system that will self correct provided it is left alone, is also looking rocky.”

    I found this statement to be supremely ironic. I’ve always thought that “free-market economists” should study ecology to gain insights on how free markets might behave. There are the chaos, the catastrophes, the routine crashes, mass slaughter, occasional mass extinctions, etc. Nature might balance things out, but the process is terrible for the individuals involved. Old Mother Nature is a Witch with a capital B.

    Then we have a whole branch of economics, “Ecological Economics,” where the idea is that economics should be enlightened by the laws of physics and nature, rather than oblivious to them.

    1. John M

      Of course, this statement here also displays a prejudice: “story of how our modern scientific idea of nature, as a self-regulating ecosystem, is actually a machine fantasy”.

      This is actually a bigoted description of how modern science views nature. Almost portrays science as oblivious to nature, rather than a very accurate description of how nature behaves. Who among scientists view nature as a “self-regulating ecosystem” — at least in the science they work at, as opposed to someone’s more distant opinion?

      1. Fiver

        “Science” now routinely makes claims to “knowledge” when it is pure speculation – a great deal of what is now taught as “true” – from cosmology to geology, from paleontology to brain chemistry – constructed from heaps of prior assumptions themselves built on a small numbers of tests.

        When someone says “In the first trillionth of a trillionth of a second, the Universe was….whatever” you’ve left orbit. That sort of BS is now rampant. Science is a powerful tool, but only that. It is anything but only arbiter of reality.

        1. John M

          You just might recheck your assumptions and your facts. Science is extremely accurate except at the frontiers. At the frontiers, science is still very much on the learning curve.

          Facts showing the accuracy of science: semiconductor products (from quantum theory), unmanned spacecraft flying to other planets (Newtonian physics) — sending a spacecraft from Earth to Mars is like hitting a golf ball from California to Los Angeles, and getting a hole in one. The electron magnetic dipole moment measurement and calculation (quantum electrodynamics) — QED’s accuracy in this case is like calculating the distance across the USA from first principles and being off by less than the diameter of a human hair. Everything electrical that we use today — based on classical electrodynamics of a century and a half ago.

          Some people are utterly oblivious to science around them, that they use in their daily lives.

  13. Trestle Rider

    When any individual action is always limited in power and influence, it is easier for self correcting equilibrium to operate. But when an individual action can wield significant power, and multiple individuals can wield it, then the larger body cannot move to equilibrium as easily.

    Unless and until too big to fail dies as a philosophy, and true price discovery of assets is restored, we will face further erosion of economic stability.

  14. Moneta

    Perhaps it is what Chesterton meant when he said that when people give up older beliefs they do not then believe in nothing, they believe in anything
    I’m one of those people who, over the last few years, has gone through a change in my belief system and can appreciate Chesterton’s theory.

    A couple of years ago, I told a friend I had no idea what I believed in anymore and therefore, had no idea how to bring up my kids. The law of unintended consequences seemed to prevail. Basically, all I could engage in was lassez-faire.

    I used to think we could regulate systems to maintain equilibrium. I now believe we can only do it with simple systems and since the economy is too complex and our human brains are limited, it’s a lost cause.

    When things are stable for a long time, due to heuristics, people become confident and less fearful and will take on more risk, naturally leading to a more unstable system.

    When conditions are good, populations grow until they get too big for their environment. Because of globalization, we have not felt it yet but I think we will. I still believe Malthus got it right but was too early.

    1. Moneta

      And when I say laissez-faire, I’m not talking about letting them run wild in restaurants. I’m talking about values and skill development.

    2. Blissex

      But the economy is by and large on a stable path. It has relatively small (few percent) oscillations around a long term path.

      The few percent oscillations are still rather uncomfortable (but only on the downside) though, and thus endless past debates about fine tuning and the Great Moderation and other fantasies.

      That the economy is largely on a stable path may be due to Keynes’ largely forgotten observation that almost all capital is long lived. A point that if Economics were not almost pure propaganda would have been studied extensively.

      Because the miracle is indeed the long term stability, not the short term all small oscillations.

      1. Moneta

        You sound complacent, as if we have nothing to worry about.

        Being in North America, it’s hard to imagine ourselves with nothing to eat and bad quality of life, like billions on this planet.

        Yes, on a global level, the economy might be fairly stable, but at the ponctual level, not necessarily.

        We could also go through centuries of expansion and suddenly go through a calamity, and in that grand scheme of things, it could look unstable for us. But when you look at it over thousands of years, it could be totally expected over a long term cycle.

      2. Fiver

        You conflate 70 years of (still-expanding) global (as opposed to Continental, then Hemispheric, then Atlantic/Pacific, then…) US Empire with a “miracle” of presumed “economic system” stability. Rome or any of its equivalents East and West were “stable”, sometimes for centuries, from the elite perspectives.

        Limit the current US population to only the Continental US and keep running this miraculous capitalist “growth” experiment. Instant collapse.

    3. JasonRines

      Malthus and Marx were both incorrect on total Armageddon. That doesn’t mean they didn’t have some valuable insights from observation. But as Richard stated succinctly, their research lack more concrete empirical evidence. 100 years is a long time these days considering the acceleration of our evolution.

      The tools we create be them government types or information systems are reflection ouf our evolution. Mankind now exists in a 4d model but leadership chooses to revert back to 3d models, like dogs eating their own vomit.

      There are a couple of physcisist and mathematicians that used topography to map global concentrations of wealth and of course that means power. The estimate of projection of power (kind of like leverage variable) was near 10x anybody else. They also not surprisingly are in the core with activities looking like a Bow-Tie formation which is actually a 5d model.

      Someone else here on this board commented about how people ahould not be commoditized they also should be at the core.

      In physics, time loops itself in a Bow-Tie formation in the fifth dimension. This creates pararoxes which are no problem in the fifth dimension but cause huge problems using 3d governments (pyramids). Both Rosthchild and the Founding Fathers understood 4d paradigms. One built a weapon for colonization and the other built a 4d system of checks and balances.

      It really is different this time because the bulk of mankind is now using 4d tools. So whether power mongers want to or not, their 3d model is now a dead man walking. They are just pissing into the wind but sadly for us the piss will land on our heads over the next decade. Don’t give a new license to temple priests if they failed to realize this time was different.

      If some bright kid like me can figure it out by 2004 with no PhD and no connections can figure this out with my PC I knew adoption and understanding was very close behind. Jay Rockefeller has lamented the invention of the web. He laments evolution itself and since he is less immune to its effects tends to be more malthusian. It is fear of loss of control that really bugs out sociopaths.

      1. Jim Sterling

        Malthus never predicted Armageddon, he predicted poverty and slow population growth tracking slow economic growth.

        That he wrote at the beginning of two hundred years of fossil fueled exponential resource growth, followed by always-lagging exponential population growth, was a bit of bad luck for his equilibrium theory, but what happens when the fossil fuels can’t drive exponential growth any more? Not Armageddon, but poverty.

        1. John M

          Something close to Armageddon will occur if oil runs short fast enough to cause a world-wide collapse. One only concludes Malthus was wrong if one complete ignores the cause of the discrepancy AND refuses to think about the future.

          An asteroid is in an orbit that is projected (through basic Newtonian physics) to crash the earth. We send up a rocket to deflect the asteroid a little bit, so that it misses the earth. Therefore, the projection was wrong and Newtonian physics was disproven, right? (Nonsense. The rocket used Newtonian physics to deflect the asteroid.)

  15. John M

    “When conditions are good, populations grow until they get too big for their environment. Because of globalization, we have not felt it yet but I think we will. I still believe Malthus got it right but was too early.”

    Malthus was definitely right. It’s simple math.

    Then there’s the human psychological aspect leading to the following conclusion: either the problem is hitting us now, or we have time to continue to procrastinate until the problem hits us.

  16. Blissex

    «But what he traces is extremely damaging for General Equilibrium theory, a central plank of much economic “theory” and the basis of micro-economics. General Equilibrium theory basically borrows the vegetative metaphor, that there is a “balance of nature” and applies it to markets.»

    That is a fantasy. General Equilibrium Theories were based on admiration for Laplacian style physics. It is based on the vision of the economy as an orrery, a machine of loving grace that has springs and counterweights and is therefore always exactly balanced.

    All in the service of Social Darwinism, as the central truthiness of General Equilibrium theories is that the distribution of income is a mathematical fact and rewards the best and brightest for their superior productivity.

    Some economists have been trying to introduce elements of non-mechanical vision such as prey-predator inspired dynamics or chaos theory or catastrophe theory based maths but they have been rejected because then the central truthiness becomes impossible to support, even using deliberate mathematical mistakes like those used in General Equilibrium theories.

    But the inspiration for General Equilibrium theory is not darwinism; it is Laplacian physics.

    1. Moneta

      Social Darwinism, as the central truthiness of General Equilibrium theories is that the distribution of income is a mathematical fact and rewards the best and brightest for their superior productivity.
      That’s where the discourse always gets complicated. Darwin never implied that the strongest and brightest got the rewards. His theory was that those rewarded were those who had the right genetics and characteristics required to survive in the altered environment. A bug might be a weakling in a humid setting but thrive with a weather change.

      Because of the general level of truthiness in public discourse, it’s hard to separate those who transfer the right sicentific priciples from one domain into the next from those who mix it all up.

  17. Sauron

    There are many reasons why people believe bad ideas. Just a few (some have already been mentioned above.)

    They are poor thinkers/not too bright.
    The ideas are advocated by people regarded as experts.
    “Everyone” seems to believe it. Obvious this consensus can be manufactured.
    It flatters them.
    It comforts them.
    It benefits them.
    The alternative is unpalatable.
    It’s simple.

  18. Matt

    I think you’re making the wrong distinction. The Great Depression was an equilibrium condition – it probably would have continued indefinitely if not for the massive fiscal stimulus of WW2. It was an equilibrium condition, but it was a highly undesirable equilibrium condition.

    The real lie of free market economics is not that it produces equilibrium, but that it produces a desirable equilibrium. The desirable state of economic affairs is an equilibrim, but an unstable one. That’s why we need active regulation of the market.

    1. Jane Doe

      Exactly. This is the predator-prey model I point out below. It is not that there isn’t a new equilibrium. It is that it is undesirable. Like global warming. It is not that the planet will not reach a new equilibrium. It is that it will be climate change that will not be very good for humans.

  19. Jane Doe

    I don’t understand the analogy, and I am not going to watch the documentary due to time constraints.

    Admittedly Ecology was my worst subject in my Biology major, and it has been a long time, but that’s not the way I remember Ecology.

    Take predator-prey dynamics. If the population of predator increases to the point that it wipes out the prey, the predator hunts itself into extinction. The equilibrium being discussed is that the one population impacts the likely survival of the other population. The same is true of global warming. Its not about control. It is about the dependency of one variable on another variable.

    If one dies, the other dies. Its an argument over limited resources. The same also happens if the prey is killed off by some external disease. Its not a control thing. Its about the self limitations of the system described.

    Doesn’t modern economics do the exact opposite? Doesn’t it assume that systems are not limited. That the predator can reach new equilibriums of greater and greater wealth? So, the “market” regulates itself by ensuring the outcomes people want.

    The difference here being that the outcome the predator wants in nature is not what happens. The predator wants to survive rather than go extinct. It does not want to destroy it system, but ultimately does. Don’t capitalists argue that their competition, if left unregulated by outside forces, will somehow not hit the wall of scarcity?

    Am I missing something here?

    1. Fiver

      You are quite correct. The producer has no idea what he’s talking about when it comes to ecology/environmentalism. He bases his arguments on a tiny sampling of popularized crap (Selfish Gene, Richard Dawkins) and a gratuitous trashing of the Club of Rome based solely on their use of models – that they were far more right than wrong, but just had the timing off, eludes him entirely – never mind that there are very, very few serious thinkers who think we are anything other than screwed, i.e., that the next 100 years are going to be a horror story.

  20. F. Beard

    Not one mention of banks in the article. Yet the banks have a government enforced money monopoly in our so-called “free market economy”.

    The conclusion fails because the premise is false -that we have a free market economy. We do not. Instead it is free market for everyone EXCEPT the banks who exist by government privilege such as a lender of last resort, government deposit insurance, legal tender laws for private debts and the capital gains tax on potential non-usury based money forms such as common stock.

    1. Marat

      I understand- your a decent person with high ideals. Unfortunately what you call “a free market economy” has never existed and has little to do with actual free markets as they have existed in real life. The premise is quite correct in its definitions- it’s usage is plain, ordinary, and used by many in everyday speech.

      Similarly many Marxists couldn’t see the connection between bad things such as the gulag and Marxism because those things would never happen in the imaginary Marxist society in their heads.

      1. F. Beard

        Unfortunately what you call “a free market economy” has never existed and has little to do with actual free markets as they have existed in real life. Marat

        Maybe so. But the banking cartel has to go anyway. Sorry.

          1. F. Beard

            Ideals are not necessarily completely attainable yet they are still valuable as a guide. In the US, we have the ideal of a free market and to a large extent it is a free market EXCEPT for the money system which is a government enforced counterfeiting cartel.

          2. ambrit

            Mr. Beard;
            Agreed, ideals are precepts for living, not necessarily enforceable goals. This is where the Greek concept of Arete comes into play. The striving is itself a laudable goal. The concept of the ‘Free Market’ can be framed as an imaginary construct attempting to explain an un-understandable underlying force. Like its’ cousin, ‘Chaos Thoery,’ the ‘Free Market’ is an attempt to systemize randomness. Both succeed to an extent; neither is God.

  21. Jim Elliot

    Around “truthiness”. Marshall Rosenberg is a psychologist who came up with an idea he calls “nonviolent communication”. One central premise is that much confusion and conflict between people is fostered by mixing observations with analysis. I think this is usually done without awareness and as a habit of our customary language, but it can also be done to manipulate and persuade. I energetically encourage looking into CNVC.ORG. I’ve been amazed over some years how simple these ideas were for me to grasp and also how uncommon it is to find clarity in any discussion.

  22. Walt

    Now take the purported constitutional underpinnings of the teapartiers with their late seventeenth/eighteenth century dependence on a highly dubious natural right/natural law regime and you have a near-perfect pairing of two absurdly simplistic false paradigms. Grounding 21st century complexity in eighteenth century simple-mindedness: the invisible hand of the market and natural laws found… where?
    A brilliant recipe for enshrining a stultifying obsolete system – or, as Alexander Pope wrote and Voltaire re-affirmed: whatever is, is right!

  23. Huxley

    I am with Fiver on this one. No system with interdependancies can function without a bias to self destruct. Boom and crash cycles are the result. Animal populations do it all the time. The difference in economics is that we don’t allow for certain segments to collapse. In my garden I know that if I let my trees grow too big my vegitables wont grow. I need to constantly enforce a balance, by pruning the trees. Letting them grow to a size where the pruning required to allow my to grow vegitables would be destroy the trees themseleves and it would be to late to have diverstiy in my garden.

    If I neglect to prune the trees and they overwhelm everything else growing there will come a piont when I will have to pull out my chainsaw and cut some down.

    Large portions of the finsncial services industry are beyond the point of pruning. We need some regulatory chainsawing.

  24. Hugh

    “I am once again struck by what an absurd body of ideas, or more accurately, self delusions, much of modern economic prejudice-masquerading-as-theory is.”

    You gotta love a description like that. Economics is just a form of charlatanism. And Jessica above asks the right question Cui bono? who but our looting elites does it benefit? Bringing these two ideas together is the key point. Economics is not just absurd. It is criminal. Its practitioners are not just ideologically driven careerists. They are rationalizers for and apologists of kleptocracy. They abet criminality. The mistake that so many of us make is according a certain degree of good faith to our elites that simply doesn’t exist. The housing bust was 4 years ago, the meltdown was 3 years ago, the European crisis has been going on for more than a year and a half. There is no way that these elites who claim entitlement to their power, prestige, and wealth based on being so far ahead of the curve could remain, in good faith, so far behind the curve for so long and just happen to make decisions and deliver up rationales that benefit themselves so massively at the expense of everyone else. We cling to the idea that these are really good people who are simply wrong, or even possibly bad people but not really bad, because the alternative is so uncomfortable, that they are not like us, that they are criminal, intend to enjoy the fruits of their criminality for as long as possible, and have no intention to act in any other way. They are today’s expression of the banality of evil. They can not be reasoned with. They can only be resisted and, hopefully, one day put away from the society they have so abused.

    1. SR6719

      Hugh: “We cling to the idea that these are really good people who are simply wrong, or even possibly bad people but not really bad, because the alternative is so uncomfortable…”

      In the Ferris wheel scene in Orson Welles’ film “The Third Man”, we get a pretty good idea of this elite mentality when Harry Lime looks down at the people below and says: “Victims, don’t be so melodramatic…. Would you really feel any pity if one of those dots stopped moving forever?….Does anyone think in terms of human beings?”

    2. Fiver

      Agree but would go further – it’s not just the kleptocrats, it has thoroughly infected elite structures and the people who constitute them across the board, and is now also broadly instilled in a large swath of the population at large. After all, we’ve had 3 generations now post-WWII where each succeeding generation is brought up to be more selfish, more supportive of official violence and oppression, less sensitive, less compassionate, less willing to sacrifice or share etc., while hyper-consumed with notions of personal health and safety, security, “family”, status etc., and above all, money as expressed in material consumption.

      It really, really mattered that the “left” essentially went to sleep decades ago in the apparent belief that what it had won over the preceeding century (culminating in the massive convulsions of WWI, the Depression, WWII) could not be undone – that an educated population once allowed to partake in broad prosperity (at least for the majority – urban whites) was incapable of being so completely corrupted it would repeatedly choose moral and ethical monsters as leaders.

      I blame my generation (Boomers)above all – while Wall Street and the Right were aggressively pursuing an immense,expensive, carefully planned and orchestrated campaign to roll back the very idea of social progress, Boomers’ response was to throw the notion of sacrifice of any kind under the bus, the quicker to get drunk or high or whatever, so long as it was “fun” and preferably easy – just as advertised.

      And now it’s a nation that is overtly fascist in relations with much of the rest of the world, and very nearly so domestically.

      There is an understandable desire to maintain the belief that Americans as a People are the noble and good and just People who “freed the world” in WWII, but are just stuck with a broken system run by bad apples. But Peoples themselves change for good or ill (what are they, if not their societies?) – witness what happened to the proudly civilized Germans, or what has become of Israelis.

  25. Eric

    Saying that any financial system doesn’t need regulation is like saying that you’d get more power from a nuclear reactor if you removed the cooling rods.

    Saying that the current U.S. financial system doesn’t need regulation is like saying that you’d get more power from a nuclear reactor, where in order to increase profits safety systems have been dismantled or neglected for decades, if you removed the cooling rods.

  26. Another Gordon

    Neoclassical economic’s fantasy world of equilibrium and balance rests ultimately on the Econ 101 image of an upward sloping supply curve intersecting a downward sloping demand curve to create a single balance point at which it would equilibrate if only governments would stop meddling. But how true is this as a representation of the real world?

    Well, it can be (sort of) true in primary industries but in many other industries the supply curve slopes down over at least part of its range – that’s what economies of scale is all about. And it can have discontinuities making for multiple “equilibria”. Bye bye neoclassical theory.

    So, for the economy to remain roughly stable over time requires regulatory intervention to prevent the system – or at least important parts of it – evolving towards a corner solution – in effect, regulations are needed to force the system to equilibriate somewhare in the middle as per the Econ 101 image. Hence the anti-trust laws of yesteryear.

    And there is another problem for neoclassicals. They glibly assume that if each individual market evolves towards equilibrium, then so to all markets collectively leading to “general equilibrium”. Err, no – this is a category error. They should read up on the three body problem.

    Once Isaac Newton had laid the foundations of gravity, it became an easy problem to calculate the orbits of a two body system – eg Earth and Sun. But introduce a third body and the system becomes chaotic and the orbits unsolvable because of feedback loops which so emplify the smallest errors in initial position as to make its evolution unforecastable. Even now scientists cannot say with absolute certainty that the solar system will endure until the Sun burns out (although they think it probably will).

    The economy contains many more and stronger feedback loops than the solar system (and much worse observational data to boot) so the neoclassicals’ error on this point is breathtaking.

  27. Max424

    The geniuses Pope and Voltaire were right. So was Uncle Milty Friedman. Mr. Market, by definition, is infallible. Whether it thrives or spins or gets wiped out by a solar flare, it is what is, and it will do what it will do.

    The brilliant Free Market theorist Doris Day summed it up most perfectly:

  28. Siggy

    Markets are the construct of people and in that fact they are inherently unstable and in perennial disequilibrium. If you don’t comprehend that fact you need to give it some consideration.

    Thought experiments that propose an equal number of buyers and sellers at a certain price are naive beyond my ability to comprehend.

  29. Susan the other

    What good is accounting when the whole system has failed? Not just the financial system, modern industry, capitalism, socialism, communism, but even the rationale behind productive living, trading and commerce. Who even cares if “economics should be a positive science” when all the facts are so devastating? It is only slightly more amusing that the word “should” implies that it is not so. The worst part is there is so much work to do – like the old song, You picked a fine time to leave me Lucille. Depressing. And the republicans still think we need more deregulation because what good is accounting when the whole system has failed. Right?

  30. JasonRines

    Say what? Show me the simple math for Malthus as based on the conclusion of ‘mass die off’. What were the casualties of war for the entire 20th century? 200m or roughly 5% is a mass die-off? Ok I’ll add famine and give you another 10%. 15% is a mass die off?

    The conclusion was extremely speculative and it showed. So show me some math and I will shred it for you. .

    1. Fiver

      Show me how 9 billion people at mid-century are going to become 12 billion (15 if Africa does not stop growing so fast) by 2100 when we cannot adequately support even half our current population and I’ll eat the next 10 hats I come across.

      We have a rendezvous with Malthus coming, and soon.

      1. JasonRines

        Fiver – I’ll be kind:

        1) Allow me to send you a Likert Scale. I consider casualties of 50% a 5 on the Likert Scale. I forecast a 3 on the Likert Scale. Do we agree or not?

        2) The gap in ‘money which should just be summed up to energy and social imbalance are in disequilibrium. Energy gap can be closed and many developments are not broadcasted or we would all be billionares already. Of course that will happen in theory but by then we won’t care.

        3) Does your analysis also include continued protections of monopoly? Six billion people working on energy gap in the information age may surprise. But fine, put bets on it Fiver the majority survive and i believe many casualties will be older by natural age and stress of brief fight for survival and the young in war.

        4) How many Einsteins await their turn at bat because of crowding out?

        Last, information and total social energy are increasing.

        Conclusion: It is good to be 41, how about you?

        1. Fiver

          You are indeed too kind by half, as this registered a great big Blank on my scale.

          You could wire all 7 billion of our brains together and not come up with the instantaneous conversion of matter to energy and vice versa which is what is about what is required if we wish to go for an even dozen billion (and why, pray, stop there?)on a badly damaged planet without losing most along the way – unless we all live in nutrient pods stacked in enormous warehouse complexes 24/7 plugged into Otherworld to keep us constantly amused while our robots tend the fields and ponds that cover the entire planet, virtually alone among species of large creatures of any kind. And who needed them, or anything else, right Jase? And once Earth is ass-deep in pods, we’ll just figure us a way to go to another planet having forgotten we have nothing left to do it with – except cannabalize half the pods.

          Nope. No problem here. We are ever the cleverest of beasts.

          1. skippy

            @Fiver, Huzzzz lol. I posted my comment above and went out on my deck to watch a storm in coming.

            Reflecting on Jason’s thoughts, I wished to mentally visualize a means to transport him to / in all aspects of being human past, present, possible futures. My imagery was to connect every human being, perished and living, in a timeless dimension. To live all our lives in one instant…simultaneously…to even scratch the surface of…whom we are…let alone where we are…and going.

            For you jason some Natalie:

            Skippy…the most arrogant species this universe has observed.

      2. Roland

        12 billion is not a problem, in terms of mere survival.

        However, unless there is a major breakthrough in energy tech (e.g. practical nuclear fusion), most of those 12 billion are going to have a pretty low physical living standard, with scarce water and energy supplies.

        Also, not much wild ecosystem left anywhere. Maybe a few jealously guarded preserves, with no access but for the elite.

        But the planet can support enough biomass to include 12 billion humans, no problem. Very few of those 12 billion will be rich in the fashion of the Occidentals of the past 50 years.

        What 12 bil really means, is a global civilization that, in terms of society and culture, resembles a traditional empire like China’s or Rome’s: a tiny elite lives richly and works its divine mission of being world-managers, and a whole bunch of subjects live near the subsistence line. That sort of civilization can grind along for centuries on end–very sophisticated but almost never thinking of anything new.

        It’s not hard to imagine a small global elite of eco-info-mandarins superintending over a happy planet of 12 billion well-managed, well-monitored stakeholders–for the general good, of course!

        With the lack of external barbarians to come along and tip it over, a global decadent oppressive eco-max civilization might even last tens of thousands of years! It might even last long enough to permit the biologically separate speciation of its elite.

        So get your 1% membership NOW!

    2. John M

      Simple Math:

      Population doubles in (say) 50 years. How long does it take to increase by a factor of 10? 20? 1000? Approximate answers are fine.

      Exponential growth can’t go on forever. It either gently slows down to a sustainable constant value (increasing the death rate or decreasing the birth rate — K-type population), or it crashes (r-type population).

  31. Jeff W

    I watched some of Adam Curtis’s All Watched Over by Machines of Loving Grace and, knowing a bit of systems theory, could not figure out what he was talking about. Then I stumbled upon these comments (here, here, and here), in reference to this piece by Adam Curtis in The Guardian about this same episode referred to above, which rather neatly, cogently (and politely) demolish Curtis’s thesis. (The Guardian piece is as good as the second episode itself in presenting Curtis’s argument.) In short, Curtis is, as the commenter says, engaging in a bit of hand-waving and throwing up dust in presenting “misleading, spurious and categorically inaccurate claims” leading to wrong conclusions.

    The documentary is compelling to watch but more for its artful and sort of loony way in which it weaves disparate strands into a seemingly coherent but entirely misleading tapestry—it’s a bit like a conspiracy theory without the overarching conspiracy—than for anything it says about systems. Referencing Curtis’s flawed view of systems in some discussion of the General Equilibrium theory might be compounding the confusion rather than dispelling it.

    1. Ransome

      Curtis is linking observations, he is not making a statement. The premise AWOBMOLG is derived from a sarcastic poem. His evidence are enigmas. The production was a starting point of discussion, not a conclusion.

      I lived in Yokohama, a city of wholes. City blocks were self-supporting. In America, waves of immigrants landed, displaced, moved uptown and into the suburbs, following their church and neighbors, retaining their folkways, yet stratifying. We are tribal among classes.

      Capitalism competes, expands, exploits, declines. You manage capitalists with capital controls. There is no difference between a capitalist and a construction worker, they have different skills that require managing.

    2. Fiver

      Excellent link.

      But I’d suggest Biophiliac does a better job of demolishing Curtis’ arguments than he does explaining exactly how UK Uncut, or anyone else preaching some variety of bottom-up, self-organized horizontalism gets us from the current profoundly concentrated, heirarchical, interlocked set of productive systems/structures on which 7 billion lives depend to something else viable and desirable without inadvertently consigning some of those billions to the scrap heap in the process.

      For example, just in the last 15 years, we’ve made the Internet completely indispensible, as in instant global catastrophe should it go down for even a couple weeks – as we made integrated oil companies (or food, or transportation, or health care, or education, or…) previously. We’ve been just stunningly stupid over the last century – we could not have put ourselves at more risk collectively and individually if we’d set out explicitly to do so. That some of our best thinkers have been shouting completely ignored warnings the entire time makes the scope and depth of our blindness even more, well, criminally insane comes to mind.

      1. ambrit

        My Dear Fiver;
        Several observations:
        First, it is implied, (I speak generally here, not about your good self personally,) that the present system has in some way been developed from a logical series of plans. I suggest that such a construction is false.
        Second, that people in general, especially those persueing power or wealth, plan much beyond the near horizon. Indeed, the automation of much of the financial sector exponentially accelerates this process, leading to graver consequences.
        Third, that politics can be run on a business model. History amply demolishes this Shibboleth. Reagan and his Kitchen Cabinet masters have definitively shown the moral, intellectual and financial bankruptcy of this theory. Aristotles ‘Philosopher King’ has been replaced with Lafers ‘Businessman King.’ Neither has an analogue in reality.

        1. Skippy

          Jason, is the only reasoning for your coming here, just to create a link to your site, possibly increasing page hits[?] (not looking so good, just checked).

          Skippy…for some one that recently stated that they USED to be a raging (debate[???]) libertarian, the narcissism is strong in you. I also remember you complaining about your efforts to help people but, others got in the way…Ummm…failure attributed to others and not self ummm…familiar ground, methinks.

          PS. I rescind my suggest for you to help in the folks Stans, they have enough problems as it is…eh.

        2. skippy

          You have a doppelganger here in Australia. On the Occupy Brisbane FB page a self professed Libertarian linked the Mises, org. My self and a PhD in social economics engaged him in debate and the resulting De-evolution of the Libertarian.

          Daymon Iddqd sorry, The first capitalism in my post was actual capitalism, contrary to what you keep calling capitalism (the corporatism in quotes). Austrian school of economics thinking is the only viable and right thing left to do and apply that has ANY chance of working and establishing itself for more then a hundred years or so of our current system (or 40 years of the completely fiat debt system that the worlds had).

          Look up a little thing called the industrial revolution then come back and explain how anything pre industrialised nation states has any inkling of specific relevance to this worlds current economic state (“last 500 years). Not to mention that the school of thought that the mises institute advocates has anything but relevance to a complete sustainable system of economics and “money” since.

          Why do you think it is a fantasy? Look at the constructs of the system and stop working and being blindfolded within them mr anu phd.
          Friday at 1:33pm · Like
          Dave Eden You do realise the industrial revolution necessitated brutal poor laws and massive state violence – the criminalisation of vagrancy, the enclosure of the commons, and then conditions of almost civil war as small scale petty producers resisted the changes going on in society? Let alone the monopolization of overseas markets through colonial occupations and outright pillage….
          Friday at 2:00pm · Like
          Daymon Iddqd I wasn’t talking about the social conditions of the time. Merely referencing the distinction between any other system you want to look at and what we currently have (and what people think we currently have minus the complete and utter corruption and fraudulence from the top down). Way to miss the point on nation state economics based on nothing swirling around a private centralised bank.
          Friday at 2:05pm · Like
          Dave Eden Which is an irrational situation – an irrational situation that develops out of, is not a pathological growth on, capitalism at this level of historical development. But feel free to keep on putting up pins for me to knock down, its a good distraction from work.
          Friday at 2:05pm · Like
          Daymon Iddqd Ok back to the “it hasn’t happened in my memory or irrelevant examples I can come up with therefor its not possible/irrational” ha ha… You actually gave me the perception that you don’t beleive in the incremental growth or change in direction of a systems pathological growth. Establishment will do that to you, man. Start with Ron Paul 2012 s plan. Enjoy your work.

          His last offerings:

          Daymon Iddqd No wonder people insult you.

          Daymon Iddqd Irrelevance.

          Daymon Iddqd Absolutely, so go do some research on capitalism and the differences to what we have and what causes those differences. Enjoy.

          Daymon Iddqd well because you are so “learned” we can jump into the “advanced” stuff I don’t really have anything I further wish to engage in fb wall chatter with you. So enjoy the free run after this post if you think you have some more cardboard worth chewing over.

          Daymon Iddqd Its like not calling the fat boy fat because you don’t want to hurt his feelings. bah bah sheep

          Daymon Iddqd What an imaginative mind

          Daymon Iddqd you go girlfriend

          Daymon Iddqd needs more cowbell


          Well you get the Idea. Reducing every thing to a state of Reductio ad absurdum, I find this a common trait in Librarians. Dr. David Graebers conversation with the folks at Mises is another fine example. Calling people idiots is not an argument nor debate, it is an egregious ad hominem.

          Skippy…a conversation from his FB page enjoy the company!

      2. Jeff W

        Thank you, Fiver.I’d suggest Biophiliac does a better job of demolishing Curtis’ arguments than he does explaining exactly how UK Uncut…Absolutely, I agree completely. I’d guess that, after three comments, he felt as if he had done enough. Given his evident erudition, I wish he had explained it a bit more but he’s saying, at least, that no one can explain it exactly—no one can predict “the emergence of significantly higher forms of complexity and organisation.”A “variety of bottom-up, self-organized horizontalism” (as you put it) might allow both that emergence and certain measure of resilience—the self-organization of groups such as UK Uncut likely involves flexibility and collaborative decision-making, both of which promote resilience. None of that means that any “bottom-up, self-organized horizontalism” will get us to something else more viable and desirable—but it might have some advantages that a more traditional top-down organization does not and certainly that Adam Curtis entirely missed.

  32. baldski

    Jane Doe: You are right about the predator/prey dynamics. National Geographic did a special on Wolf/Moose populations on one of the Apostle Islands in Lake Superior. If wolf population increased too far, the moose population dropped leading to a drop in wolf population. They both reached numbers where one sustained the other for mutual benefit. So, why do the one percenters want to kill off their prey, the 99%?

    1. Jane Doe

      Economics is not based on scarcity. It assumes, regardless of the model, that th pie can be grown. I say regardless of the model because even Marxism, as far as I can tell, seems to argue that the resources are scarce is because of the elite. This may be true as far as the historical realities. But, what about in a world of 7 bil, 10 bil, 20 bil people? What is the natural population point where resources- like jobs and basic survival needs – are not going to be enough? Especially in an automated and high productivity world?

      However, the basic rules of nature, whether biology, physics, system dynamics, does assume scarcity. Thus, the conflict. Its true that systems can become complicated. Its true that its hard to predict what will happen in a complex system. It is not true that the assumptions of what equilibrium means for science is the same as it is for economics, which is why I question the article. They are terms of arts in each of the respective fields that don’t mean the exact same things.

      The problem is not that the 1 percent believe resources and growth are infinite. The problem is that the 99 percent buys into the ideas that economics pushes because he makes what seems to be intuitive sense, but actually are ideas trading off our emotions. Again, even Marxism.

      1. John M

        It’s interesting. You are right about many of the economic models. Yet introductory economics starts by claiming that the problem is how to distribute limited resources.

        It’s a bait and switch, although I doubt that the cornucopians even think of it.

    2. Mel

      Konrad Lorenz, in _King Solomon’s Ring_ has an anecdote about two pet doves in a cage, where the alpha dove killed the beta dove. In the wild, he said, under-doves can usually get away and save themselves, so a tendency of alphas to murder isn’t enough to kill off the species. Parallel to the modern financial system left as an exercise for the reader.

      National Geographic (I think it is) also has a great show about the Southeast Asian 48-year rat/bamboo cycle. Not a steady system — there’s an awesome and exuberant 1-year population spike, then 47 years of very frugal numbers. A stable system, no matter how unsteady it is.

      The systems we see in nature are virtually all stable systems. Unstable systems have long since crashed and vanished by the time we get to where we would have seen them. We also have a cognitive bias against trying to learn about unique phenomena that happen once and will never be seen again. It would be like giving personal names to clouds.

  33. Charles Wheeler

    “It is always fascinating how bad ideas become so popular.”

    Particularly when they appear to serve the interests of a certain class (if only in the short-term:

    Hence the Efficient Market Hypothesis which ‘proves’ market fundamentalism will result in the best of all possible worlds, while Ricardian Equivalence ‘demonstrates’ the futility of government intervention, and Laffer’s Curve the insanity of taxing the wealth creators (as opposed to their workers). [Funny how RE only seems to apply to government spending and not the accumulation of private deficits.]

    Neoliberalism is the dominant ideology because it serves the interests of the dominant powers in society – not because it provides the best mapping of real-world economics. It has driven us to the cliff edge, yet it’s very failure is taken as proof that it needs to be implemented in a purer form.

    It’s proponents represent a latter-day priesthood, complete with latin texts impenetrable to the layman. Any sign of heresy is threatened with excommunication. But it describes a pre-Copernican universe.

    1. jonboinAR

      >>Neoliberalism is the dominant ideology because it serves the interests of the dominant powers in society…<<

      …and because most of us DON'T THINK!!!

  34. kevinearick

    “Currency Traders Suffering Worst Year Since 1991”


    So, I left you hanging with the hash table…

    Think of the stack as a string of strings, each with a virtual/dynamic string to every other string. Everything is related to everything. Each string may always compute the address of every other string, through algebraic reduction(though it is seldom necessary), because, fundamentally, they are all the same string.

    The only difference between strings is relativity, circulation of time/space, through the addition and subtraction of false assumptions (delay mechanisms), forming what appears to be an orbiting order, depending upon the perceiving string. Order is a false assumption, which creates delay.

    So long as you net 0, you can separate strings to create any charge orbit, event horizon, you want, but removing one or more event horizons must balance the transformation.

    Control is simple replication, automatically triggering algebraic reduction, which is why its resources are ever more efficiently reduced into implosion. All the proprietors have to do is net out debt, but then the curtain comes down, with no exit, so they delay, as volume shrinks and the environment automatically increases pressure. Time accelerates.

    As provided, they have now brought out the same reorganized rumor so many times that there is no news, and the human bots shoveling out the news are locked into the bot algorithms driving the market, so the central banks cannot keep up with the increasing torque of the black hole. They cannot get back out in front of the parade without a little help.

    Someone has to do the work and the manufactured majority is little more than a Peanuts gallery, which is bred to accept only replication as input, which then becomes the output, with all kinds of make-work sandwiched in between. Because they travel around a self-fulfilling prophesy, that’s all they understand.

    They import ever cheaper disposable products, living ever more disposable lives, subsidized by ever cheaper slaves across the planet, and then moan and groan when they become disposable, constantly throwing away better in return for worse, relative to environmental demand, which expects greater diversity (When in doubt, reduce to the bipolar and choose based on the weather).

    The result is like the friction heat of a virus reproducing in a petri dish. Pretty soon, the membranes (event horizons) explode, and because the proprietors have maximized efficiency across the global IC chip, in a mutually assured destruction design, they cannot unlock the reaction from within prisoners dilemma. But it is only their bred-in psychology locking them up.

    The timing, location and strength of the cognitive ignition threshold will determine propulsion, because they have turned all the other variables in the combination lock into relative constants, through their own algebraic reduction. Where do you want to go, what kind of community education do you want, and to what end?

    The strings are all already connected. The firing order depends upon the design perception, which must net all remaining event horizons out to 0 when you place them back on the stack. The greater the deviation, the longer it takes to recycle the products into their respective orbits. You can balance both sides of the fulcrum, the implosion and the new event horizon contact sets, or the fulcrum of fulcrums will do it for you.

    You have one remaining “problem.” You cannot connect to the outermost horizon without proof of intent. That’s the nature of the semi-neutral middle class. Because the proprietors employed the gifted technology against the gifters, they will lose at least two event horizons, depending upon new community development. The process doesn’t change from their perspective.

    Safeguard your own families, whether you believe in marriage or not, from the tyranny of the manufactured majority, socialism. The majority always seeks to simplify the everything to everything relationship, in a way it “thinks” will divert all energy to itself, with self-destructive hoarding, resulting in the false assumption of crony capitalism, scarce resources. Energy is a delayed perception.

    You have a stack, which is a hash table, which is a virtual everything to everything relationship, which is a perception delay, which is 1/0 – bipolar, +/- infinity, depending upon the perceptions you care to share, which depends upon whether you want to be a bot or anti-bot, or whether you wish to seek/expand the unknown horizon. Design accordingly.

    Enterprise architects give the corporations exactly what they want, psychographic anxiety control, without ruling out the future by embedding the AC into the DC, through productive time delay reconciliation. You might keep that in mind as you configure. A school of fish changes leadership with a frequency dependent upon the environment, resulting in symptoms across the event horizon timeline.

    A little chaos, backlash effectively implemented, goes a long, long way to toward trapping the shark in prisoners dilemma. It will swim, die, or struggle, serving a purpose. Once you write the code for the hash table and test it on the equipment over time, you will see why the nuclear family is so important to looking glass operation.

    Money as debt is a prisoners dilemma game, liquidating an economy of one quality product into two broken toys. Of course the proprietors/issuers want as much as possible in circulation, with as many levers as possible. Double-minded people are miserable and they love company, which is why the looking glass is a double-sided mirror, to give them what they want. The strait is there; stay between the lines.

    Multiply the nature of social clicks you remember in HS by a thousand and you have the Fed, the ultimate make-work jobs program. The state of the economy on/off depends upon how often the lead fish throws the shark a bone. Jesus, humility, is the way, but he got caught being prideful and became Job. That’ll happen; just continue. The YMCA is run by feminists for a reason.

    Prisoners Dilemma is the Golden Rule. PM is a temporary transition buffer. Stay in front of the curve. If you place them in a position to take advantage, they can’t help themselves. Use that to your advantage.

    1. Fiver

      First time I ever read a post by a character out of the novel Ragtime – you ARE JP Morgan, are you not? Why did you trouble to grace us with your presence?

  35. lonny

    This is one of your best ever Yves. I work oil exploration(as an independant producer) up in Canada for more than 30 years have listened (and watched) as legions of experts on commodity price, risk management, geological or geophysical interpretation, or reservoir modelling engineering expound and move forward with ridiculously simplistic models that are laughable in hindsight. Nature itself, and specifically the financial markets which are driven and modulated by selfish and erratic human behaviour is way more complicated than anything our puny, linear-thinking earthling brains can predict. But then again, guessing the outcomes, rolling the dice (aka wildcatting) is way (way)more fun than working at the sausage factory of life

  36. Paul Tioxon

    It has been a long standing issue, that there needs to be a restructuring of human knowledge, that the social sciences are too split into territorial departments. From Vico’s new science, to pragmatism. More recently, the scholarly unmasking and debunking of economics by Lewis Mumford unveiled the long standing foundations of our social order and the deficiencies of Economics.

    Here is an excerpt of his thought:

    “Mumford’s analysis of economic relations and ideals is always qualitative rather than quantitative, teleological rather than mechanistic. Quantities have their place, but only after the assertion of qualitative principles for guidance and perspective for which numbers are the servant rather than the master. There is no number crunching in his books, no econometric analyses of interest rates, consumer indexes, labor productivity, or gross domestic product, which in the current state of economic thought and practice is likely to be viewed as a disqualification to speak credibly about economic issues. (3) It is not that numerical relationships have no legitimate use or place in the sphere of economics. The problem, he argued, is an overconfident, self-satisfied ascendancy of quantification over imperatives of life that are more fundamental than production and consumption, buying and selling, weighing and counting: “The efficiency of an economic system depends upon the adjustment of the means of living to the needs of life: it is not a quantity but a ratio, and there is no indication at all that the amount of work or goods can be expanded without limit as capitalist economics proposes. In terms of life, a social scheme that produces a handful of olives and dates and bread may be more effective than one rich enough to produce a Roman banquet and a special chamber called vomitorium to take care of the results of gluttony” (1975, 340).

    At issue is the unbalanced relationship of quantification to an organic complex of human needs and possibilities that arise from living in a world governed by biological realities of energy flow and constraints on physical growth. Mumford’s reservations about mathematical aspects of science are usually accompanied by appreciation: “[E]very new quantum of accurate knowledge was precious…. Accurate, repeatable, verifiable knowledge … based on a standardized technique and capable of creating universally valid results … brought order and clarity to one whole aspect of reality” (1944, 247). While the “science” of economics has much to contribute even in its constricted sphere of inquiry, the problem lies in its attempt to ape the methods of physics when its subject matter involves human beings rather than planets and atoms. In doing so, economic thought has been swayed by an antiquated mechanical world picture that undermines human interests.

    The quantitative bias of modern economic theory and practice originated in a mechanistic worldview, fashioned and extended since the Renaissance, whose premise is that only measurable phenomena can yield knowledge. A mathematical model of nature, first applied to celestial motions by Nicolaus Copernicus and Johannes Kepler and then to terrestrial motions by Galileo Galilei, all in the sixteenth and seventeenth centuries, and finally unified under a single law by Isaac Newton in 1687, was consolidated in the eighteenth century Enlightenment and later extended to economic thought and analysis. The chief philosophical spokesman for a mechanistic conception of nature was Renee Descartes, who made room in his system for the new science (a universe of matter in motion governed by mathematical laws) by squeezing out of nature everything that resembles the subjective (i.e., nonmathematical phenomena–feeling, imagination, intuition). The great enterprise of the Enlightenment was to uncover laws of nature in all departments of human activity analogous to the law of gravity. ”

    I am not clear that anyone in economics or social science in general was looking to nature, but to the reigning paradigm of Newton’s mechanics. The world and society were seen not an ecological balance but a well crafted machine, with parts, that could be taken apart intellectually and put back together so that by reason we could understand how everything, including human society works.

    1. Fiver

      Good post.

      Mumford was brilliant, but I wonder if he underestimated our plasticity individually and collectively – that our greatest strength could become our fatal weakness.

      Our relationship to the natural world is one of total alienation. Empty our heads of unmediated experience, and what’s left? We are wired 24/7, from cradle to grave. What most of us do most of the time negates our own subjectivity. These and other observations he readily accepts if here today – but that our best and brightest with the rest of us in toe gleefully stay on this path, that they so love what they’re building they will repeatedly risk destruction of everything, and that we are all so eagerly compliant, he takes as an aberration – but what if it’s now who and what they/we really are? How long before the gulf between Mumford’s or even my generation’s (Boomers) ideal of humanity and that of a coming generation (kids of the current kids, perhaps?) is too wide for any real mutual understanding at all?

  37. Schofield

    How can there be balance when some human nature is univalent to the point of sociopathy, some bi-polar and prone to endless ambivalent cycling between egoism and altuism and then there’s the trivalent rest of us doing our best to triangulate a stress-free resting point between egoism and altruism.

  38. ToNYC

    “Adam Smith’s so called invisible hand — also turn out to be a fantasy. ”

    This bit of dissemblage should bring great comfort for the truly confused. Bio-dynamics can be best appreciated by observing the cycles you know in the context of the cycles (CYKNA).. yes, the cycles you nothing about. I am a challenge to your balance. Teacher teach thyself and learn from the other species in your environment, then and move along. Words are for those that play in the dust of those who don’t wait for approval.

    1. another

      “Words are for those that play in the dust of those who don’t wait for approval.”

      Nice words. Don’t hold your breath while waiting for approval.

  39. LRT

    Its perfectly true, but the devil will be in the detail. It is of course true that economic systems are not self-equilibrating. How could they be in the presence of innovation? Even where innovation is largely absent, you still have the fluctuations of human group psychology which tends to produce panics and euphorias.

    However, the predictable railing at something called neo liberalism does not take you to the key question. That is really, what do you want to regulate, by who, and how?

    We know from the attempts to introduce non-market systems that they too have problems, rooted in the same aspects of human nature which lead market based systems into panics and euphorias. Then, if you really are proposing a non-market system of some sort, you have specific questions to answer: how do goods get to people? When I work, am I paid? How do I get a house? How do I get bread, salad, fish, shoes? How do I end up living in one place rather than another? Somehow, all these things have to happen.

    Do I get issued them? By who? On the basis of what? And what if I would rather have a larger house further out and fewer holidays in Hawaii? Or more books? Or an older car? Do I get to swap entitlements?

    Much of the time people are arguing against a point of view which no-one really holds, and attributing completely paranoid motives. Almost everyone nowadays believes in some form of market and some form of regulation. The question is how and what.

    The two best thinkers on this subject are Mancur Olson and Kindleberger. Read them, and you at least understand what the problem is.

  40. Economic Maverick

    Are you telling me that the econ textbook that told me about markets tending toward stabilization and equilibrium (except for the occasional market failure) is a myth???!

    Just ruined my day

    The next thing you’re gonna say is that Santa Claus doesn’t exist…

    1. glassline

      And what economic textbook would that be? I was an undergraduate Econ major in the 80s I and the portrait of what “Economics” believes or teaches is so far from what I was taught that it really couldn’t even be called a caricature. I challenge anyone to find me a mainstream Econ textbook that draws the analogy between economic systems and biological systems, let alone one that asserts that both are inherently stable. The documentary linked to starts with a focus on Ayn Rand! A favorite straw-woman of economic debates.

      In my memory the Econ Profs were fairly humble due to the very difficult problems academic Economics attempts to grapple with.

      Greenspan had some ideas, he was in a position of power. As far as I could tell he admitted he was wrong (in front of Congress). The phenomena of increasing involvement of computers in markets is new, cutting edge, and seems to be increasing instability in financial markets. But the concept of markets being instable is so well known in Economics that it is a trope introduced to all Econ students in the example of the Dutch tulip mania.

      If anyone’s interested, here’s a link to the current undergraduate Econ curricula at Dartmouth. Does anyone see this idea of economic systems being stable like biologic systems reflected in these course offerings?

      LRT’s comment is insightful I think in it’s acknowledgement that the distribution of money/resources/power in a society is a difficult, messy problem.

  41. Jim Pivonka

    I am much more impressed with the analysis of the state of economics by the author of this piece than I am by the ideas in the Adam Curtis documentary he unfortunately and needlessly looks to for confirmation. His basic point, that the model of study used to elucidate knowledge of the natural world in inherently unsuited to the study of human made things, and that it is foolish to attempt to use the natural sciences for that purpose is inarguable.

    Likewise, critiques of economics which are based on its attempts to separate itself from its human origins and make itself a “positive” science – Mumford and many others, including Soros.

    But the position taken by the documentary maker Adam Curtis, in which he tells the “story of how our modern scientific idea of nature, as a self-regulating ecosystem, is actually a machine fantasy” is nonsense – there is no such “modern scientific idea of nature” except, apparently, in the minds of people who have not studied science, especially biological science and ecology, and who for some reason are hostile enough to that endeavor to choose to falsely attribute ideas and characteristics to it that it does not contain.

    Far from positing any steady state, homeostatic character to nature, our understanding of biological systems, and large physical systems, is through models of growth and change in dynamic, uncertain, and unpredictable environments which demand adaptation in response to externally imposed change. The ability of organisms and other systems to achieve local and temporary stability is remarkable, it is responsible for the success of those systems to a large degree, and it is of great interest. But it is absolutely understood to be a local and temporary condition, bio-energetically expensive to establish and maintain, and difficult to restore if disturbed to any significant degree. That, and the fact that these local and impermanent homeostatic states are essential to life and occur so frequently in nature, is what makes them so interesting and such an object of intense study. NOT any idea that these states are a model for “all of nature for all time”. We leave that kind of BS to the economists.

    I’d encourage the author and commenters who have been taken in by this foolishness to turn instead to critiques of economics, such as provided by the author, which are rooted in its hubris and misuses of methods from other disciplines.

    A sidebar here. I’d suggest some attention (I believe Yves Smith has already written on this) to the fallacies of “calibration” in building and fitting economic models to data sets. A good parody of that problem can be found here: (Polborn, 2001). A very interesting study of the problems of calibration generally, derived from failures in its use in geophysical models, is here: (Our Calibrated Model has No Predictive Value: An Example from the Petroleum Industry; J.N. Cartera, P.J. Ballestera, Z. Tavassolia and P.R. Kinga, in press)

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