I have an essay coming out in Bloomberg tonight which looks at the fascinating article I recently mentioned by Nick Hanauer and Eric Beinhocker. I've also posted some further discussion over at Medium on one particular aspect of their article -- the notion that capitalism is best understood as an evolutionary process for finding solutions to human problems. It's messy, wasteful, chaotic, and that's precisely why it works -- by allowing a parallel exploration by many minds of the huge space of possible solutions to human problems. Capitalism is an algorithm in much the way evolution is an algorithm (or at least is LIKE an algorithm).
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This is pretty much the point that Hayek spent years trying to get across. (I am no 'Austrian' btw, but definitely appreciate this bit of Hayek)
ReplyDeletehttp://www.econlib.org/library/Essays/hykKnw1.html
He was trying to explain that capitalism is a highly parallel information processing system, which central (single threaded) computation simply could not handle even remotely as well. But people are very blinkered by their metaphorical vocabulary -- too many people think 'algorithm?!?!?!' and are so overwhelmed by idiotic stereotypes of pocket protectors that they say 'NO relevance to cool stuff like money, banking, business, etc!!,'. But maybe the evolutionary analogy will help translate for the tech challenged.
yes, agreed, Hayek did have many interesting things to say.
DeleteWow, what a lot of nonsense!
ReplyDeleteEconomics is not "algorithmic", it is not "evolutionary", it is not concerned with processes that are analogous to anything in the natural sciences!
It is in fact, a moral science as Keynes believed and Robert Skidelsky keeps helpfully pointing out. It has nothing to do with physics. The real questions for economics are, "What kind of world do we want to live in?" or "What is life for?".
Sorry to be such a grouch.
George,
DeleteYou should read the article I mentioned. I think the authors very much agree with you!
Well, thanks for the reply.
DeleteI'm not sure how you see any agreement at all between myself and Beinhocker and Hanauer. They claim that capitalist economies are evolutionary or Darwinian, concepts gotten from the natural sciences. I'm saying that capitalist economies and economics are not remotely like evolutionary processes, IF THE PURPOSE IS TO UNDERSTAND 'WHAT LIFE IS FOR'.
Then there's this:
"Prosperity in a society is the accumulation of solutions to human problems."
I don't think Keynes would have agreed.
You might Robert and Edward Skidelsky's book, "How much is enough?" very interesting.
I love the Skidelsky's book that you mention. Read it last year. What I meant is that "finding solutions to human problems" is something almost everyone can agree is a good and worthwhile thing. We disagree on what a "solution" may be, and also on what is a "problem." It is here that we have the moral issue of working out what do we really want to do, what is the purpose of it all, etc. That's what I like about this formulation. It doesn't decide for us that we should have more GDP or something like that. Note the two paragraphs below from the Hanauer-Beinhocker essay, especially the final 4 sentences. This is what I thought you might agree with:
DeleteHow can it be that great wealth is created on Wall Street with products like credit-default swaps that destroyed the wealth of ordinary Americans—and yet we count this activity as growth? Likewise, fortunes are made manufacturing food products that make Americans fatter, sicker, and shorter-lived. And yet we count this as growth too—including the massive extra costs of health care. Global warming creates more frequent hurricanes, which destroy cities and lives. Yet the economic activity to repair the damage ends up getting counted as growth as well.
Our economic policy discussions are nearly always focused on making us wealthier and on generating the economic growth to accomplish that. Great debates rage about whether to raise or lower interest rates, or increase or decrease regulation, and our political system has been paralyzed by a bitter ideological struggle over the budget. But there is too little debate about what it is all for. Hardly anyone ever asks: What kind of growth do we want? What does “wealth” mean? And what will it do for our lives?
Well, I don't like the Beinocker, Hanauer(B & H) article because it's, in my opinion, completely second-rate for a number of reasons that I'm not fully clear about myself.
ReplyDeleteVery briefly, for what it's worth, it's technocratic view is not helpful. The problems they're(B & H) attempting to deal with are philosophical, methodological and political, full stop. Using a word like "algorithm" betrays a certain intellectual naivete or just plain ignorance of the real nature of what they're trying to talk about. I mean, wasn't that Keynes' point? If radical uncertainty about the future is the fundamental fact of social life, then economic activity cannot be "algorithmic", can it?
I'm glad you liked the Skidelskys' book, I also got a great deal out of it. I think if you read Skidelsky's biography of Keynes, you'd really enjoy it.
And most of my reaction to B & H's article comes from what I learned in that biography.
i think Capitalism is not bad muzik shqip
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The stock market surely is an algorithm - a quantum algorithm:
ReplyDeletehttp://arxiv.org/abs/1406.3531
The law school statement of purpose is an evolutionary process for finding solutions to human problems.
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