Saturday, June 23, 2012

Why Women Can't Have it All?

There's a furore over this Atlantic article in the latest issue. In fact, G is a little outraged, thinking it's another cunning article to make women feel bad.

No, says G, I am just reporting that other people are outraged!

I don't really see what is so new about it, to be honest, I say. It's another work-life balance issue lament. True, but not new, And I wonder if it applies more to a particular ivy-league northeastern set in any case. Especially those who work in law, or, as in many DC jobs, a lawyerish culture. The billable hour affliction has spread wide.

Maybe, says G. Though e-mail has really broken down the divide between home and work life. In any case, I agree with this Salon magazine response, which asks why we don't ask men if they are fully happy, fulfilled and having it all in the same way.

It's not as if people who work crazy hours are even that effective or innovative, I say. It's actually a productivity problem. You can't look at things in a fresh way if you're working 12 hour days. It's just grunt work.

And .... maybe also people are a little bitter that they don't have as much choice as they want in their lives, over the trade-offs. That's not purely a feminist issue. It's just not the pursuit of happiness.


Utopia: Sufficiency or Abundance?

A friend mentioned an academic book about utopias: Ecological Utopias: Envisioning the Sustainable Society by Marius de Geus.

The book as a whole is outside the scope of this project. But there is a very interesting distinction in the introduction between utopias of sufficiency , ,also called ecological utopias, and utopias of abundance.

Ecological utopias include More, Thoreau, Kropotkin, and Huxley. Abundance or technological utopias include Bacon, Owen, Saint-Simon and Bellamy. According to de Geus:

The ecological thinkers show themselves as opponents of abundant production and consumption. They emphasize that a perfect situation is not compatible with excess: abundance does not make people happy. In this unpretentious approach, the perfect society is not sought via prosperity, but individual and social happiness is instead found in a conscious relinquishment of material pleasures and the restraining of human wants. (p21)

He quotes another book, Stone Age Economics (Routledge Classic Ethnographies)by Marshall Sahlins:

.. there are two possible courses of affluence. Wants may be 'easily satisfied' either by producing much or desiring little. The familiar conception, the Galbraithean way, makes assumptions peculiarly appropriate to market economies: that man's wants are great, not to say infinite, whereas his means are limited, although improvable: thus the gap between means and ends can be narrowed by industrial productivity, at least to the point that 'urgent goods' become plentiful. But there is also a Zen road to affluence, departing from the premises somewhat different from our own: that human wants are finite and few, and technical means unchanging but on the whole adequate. Adopting the Zen strategy, a people can enjoy an unparalleled material plenty, with a low standard of living.
In technological utopias like Francis Bacon's New Atlantis or Edward Bellamy's Looking Backward, 2000 to 1887, he says, the approach is based on a spectacular degree of technological progress, a luxurious lifestyle, and dominance of nature.  

I can see this distinction makes sense. It actually has much older precedents, such as the idea in Buddhism that desire leads to suffering and the solution is the renunciation of striving and desire. And indeed a great deal of the current environmentalist movement has the ideal of making do with less. De Geus spends the rest of the book looking at Ecological utopias, incidentally.


But I'm not sure we always have to choose. In fact, I think a lot of what I am saying is that abundance means we have to exercise some restraint as well. Otherwise we have a society which becomes obese in every sense.


It also raises the issue of just what urgent needs, or basic needs are. That is something I could explore a bit more in due course, looking at both Rawls and Maslow (again).


Risk and Rescue


Atul Gawande, the brilliant surgeon and writer who wrote The Checklist Manifesto: How to Get Things Right, says in this commencement address that the key thing in taking risk is the ability to recover if things go wrong. That's what distinguishes risk from a gamble: 

So you will take risks, and you will have failures. But it’s what happens afterward that is defining. A failure often does not have to be a failure at all. However, you have to be ready for it—will you admit when things go wrong? Will you take steps to set them right?—because the difference between triumph and defeat, you’ll find, isn’t about willingness to take risks. It’s about mastery of rescue.


(h/t Slate)



Friday, June 22, 2012

Self-organization and fitness

We're still talking about Jane Jacobs. A few things tend to flow from seeing the economy as an ecosystem. Just like Stuart Kauffman, the mathematical evolutionary theorist we were discussing a few days ago, Jacobs notes that that the economy is not predictable.

A system can be making itself up as it goes along.. The weather is like that. Evolution is like that. Economies, if they aren't inert and stagnant, are like that. Since they make themselves up as they proceed, they aren't predestined. Not being predestined, they aren't predictable. p137
And just like Kauffman, she is fascinated by self-organization: 

Everybody talks about how amazing it is that the Internet is self-organized.. Also how remarkable that a system which originated when a very few computer users in universities and government offices, who had common research interests, linked their computers by telephone lines - how remarkable that it's ramified itself into a 'World Wide Web' by making itself up as it went along. Nobody planned such a thing. Is the Internet unusual?
There's something quite profound about this. Our ability to forecast is limited. We can't predict where things are going with any accuracy. But at least the system does have tendencies towards self-organization and structure.

The double nature of fitness

Another thing that matters is an ecological view is the nature of fitness and natural selection. She suggests Darwin's view of natural selection was in fact too narrow.

I'm proposing that fitness for survival by natural selection has two faces. . One is competitive success at feeding and breeding. This accounts for natural selection by survival of the fittest according to conventional evolutionary theory. The extreme version of the theory of fitness as determined by competitive success at breeding is the 'selfish gene' .. I'm suggesting this view is too simple. So was Darwin's own narrowing of success to competitive success. It doesn't take into account evolutionary success at habitat maintenance. Both the competition and the arena for competition are necessary. (p123)

Successful species coevolve. Lions could pursue game all the time, but bask and laze much of the day.

One could go on and on: Otters play on water slides; racoons gambol and roll about together - evolution has equipped them with things to do other than catching all the fish available or otherwise tearing apart their habitats. (p120)

It's a lovely poetic image, and it makes sense. Kauffman suggests the same thing based on his mathematical algorithms, rather than poetry.

Perhaps humans have even evolved a few traits that limit environmental damage, if very imperfectly, she suggests. They might include aesthetic appreciation or a tendency to tinker and invent new ways to do things - to mine coal instead of cutting trees for charcoal, for example.

I'll be developing the view that even if we can't accurately predict the course of the economy, we can have influence by exerting some control on what "fitness" means. I talked about this a few days ago here.


Thursday, June 21, 2012

How you Evade Collapse in Dynamic Systems

We're talking about Jane Jacob's book, The Nature of Economies, starting here. So, as we saw in the last post, differentiation and expansion change an economy over time just like a natural ecosystem.

But how does it maintain itself? How does it evade collapse? Traditional economics tended to believe the economy had a natural equilibrium. But you can't just assume stability (as if we could doubt that when we look at the current economic situation.) Natural systems continually have to adapt to change. They can and do collapse. And so Jacobs, in her evocative dialogue, looks at how that happens.

The economy is not a static entity. It a dynamic system, and , says Jacobs, there are four main methods by which dynamic systems evade collapse: bifurcations, positive-feedback loops, negative feedback controls, and emergency adaptations. They do not exclude each other. All four can be used at the same time.

A bifurcation, she says , is a term from chaos theory. It literally means a fork in the road. It is when

A system's instabilities of some sort have become so serious that for it to continue operating as it has been is not a practical option. It must make a radical change - take a fork in the road, travel into new territory.p87

For example, when Rome outgrew its water supply the Romans built aqueducts. A small business may evade collapse by finding a new market or producing a new product. Bifurcations change the very systems that gave them birth.

But they often have unintended and even unforeseeable consequences.

We live on an eternally restless planet. .. Its very creativity and fecundity require endless further corrections. No help for that. Pessimistically, we can despair at being trapped in economic and social systems impossible to perfect or even to make tolerably secure except, at best , for the time being. Or optimistically, we can take zest in the fact that the world affords, among its riches, endless streams of interesting and constructive opportunities to correct and correct and correct what we do. (p92).

Sometimes the only way to survive is to change - to find a new niche, to adapt.


Feedback is at the heart of maintaining stability. First, positive feedback loops:

Ecosystems are crammed with loops... Plants support animals that help fertilize plants; luxuriant plant growth supports more animals , and so on. It's impossible to imagine how either ecosystems or economies could fend off collapse in the absence of beneficent loops... Positive-feedback loops are the very structure, the very context within which bifurcations and diversity can emerge. (p94)

Feedback refers to information regarding a system that the system reports and responds to. This information can be carried by any medium - monetary, demographic, mechanical, chemical, electrical, whatever. The feedback triggers an effective response to its information. (p95)

The emphasis on feedback is very interesting. It is a more generalized and fruitful way to look at a wide range of economic and business behavior.

This is no doubt what is going on when a lot of more advanced companies search for "metrics". It's a matter of finding information that can be responded to to keep a balance. And that is what the price system does as well for the economy. There certainly was little emphasis on feedback as such in my economics textbooks at college.

It is not all good news, however. Positive feedback loops can sometimes turn into vicious circles of one problem reinforcing itself. In the wrong circumstances positive feedback intensify instability, she says. For example, overfishing led to investment in larger trawlers to maintain the value of the catch and employment, and the Grand Banks ecosystem collapsed.

Incidentally, "positive" and "negative" just refer to a tendency to reinforce or cancel out information, not any kind of value judgement.

That brings us to negative feedback. In fact, in her view Adam Smith was far ahead of naturalists in seeing prices as feedback information, although he didn't use the term. High prices stimulated production. Continual adjustments in negative feedback loops "created order out of volatile, uncoordinated confusing conglomerations of countless different enterprises and individuals, narrowly pursuing countless picayune opportunities and their own interests."

But, she argues, "economics failed to progress much further as a science", because it tried to make this one negative feedback concept explain too much.

Smith overemphasized economic specialization rather than diversification. Economics in general paid no attention to self-refuelling cycles. But high prices stimulate substitutes - differentiation - as well as more supply. The system changes. That element of innovation and new niches did not get enough attention.

However, Jabobs says, Smith was brilliant in realizing that feedback is only as good as the accuracy of the reporting of its information. So distorted prices - and inflation - are still seen today as fundamental problems for the economy.

In fact, as a sidenote, this is one of the paradoxes of central banking. It is hard to demonstrate that inflation causes as much damage as the public (or central bankers) believe, at least at steady rates in the single digits. The main avenue is to argue that inflation distorts price signals and hence reduces allocative efficiency. But this does not produce much actual evidence of problems. People and institutiions. easily adapt to that. In fact, the real reason for public hatred of inflation likely has more to do with the credibility and legitimacy of government, and the distribution of costs between creditors and debtors.

In any case, money is the main feedback mechanism in the economy. But it is not the only feedback mechanism that can or should exist.

Nature says money is a feedback-carrying mechanism.. Money is useful to economic self-regulation in the process we've come to call negative feedback control. But the usefulness of money is far from enough to explain how economies work. p12

I completely agree with this. We tend to reify money, but it is a tool, an institution which is constantly changing. We looked at some of the history of money here.

Crisis - and non-crisis

Finally, the fourth category of corrections are emergency adaptations to address temporary instabilities. For example, animals hibernate, plants adapt to survive droughts or forest fires or hurricanes. Bodies fight disease through fever.

But such crisis reactions can be damaging if kept on after the end of the crisis, as often happens. Keynes' deficit financing, she says, was intended to be a new negative feedback control which would keep the economy on course like a steersman correcting the course of a ship. But most governments hung on to it in good times as well, which created a "vicious circle of intractable indebtedness."

These four factors, she says, round out the key processes that maintain stability. There may be others, but it's not clear what they would be.

So to understand how economies work, don't think so much about fiscal policy in isolation, or quantitative easing. Think about feedback and loops and ecology.

I think this is highly persuasive, and at a generalized level ought to be applied to any ideas about how the economy ought to work better. It is also something else to bear in mind when we think about incentives. Incentives ought to be seen as part of those four mechanisms, not in isolation.

There's just a little more to say - about niches and fitness.


Wednesday, June 20, 2012

The Nature of Economics

We've been discussing several aspects of evolution and economics in recent posts. Here is another and rather different take.

Jane Jacobs changed the world of urban planning and the way we think about cities with her classic The Death and Life of Great American Cities (50th Anniversary Edition) (Modern Library). She argued for less superhighways and grand universal plans, and more attention to the detail of life at street level and the variety and intertwining of city life.

I read it years ago and it is a vivid and magnificent book, full of wry wisdom and creative insight. Jacobs is like an original genius, with extraordinary perception and a graceful and beautiful style.

She was essentially an amateur. She wrote about the Greenwich Village life she saw around her, and drove the major authorities in urban planning crazy. But she saw things that the so-caled professionals did not, and became one of the main names in urban planning herself.

She also had practical impact. She more or less killed the Robert Moses ideal of city planning stone dead, and was an inveterate opponent of "urban renewal" and city center expressways.

And ironically super math genius Stuart Kauffman also refers to her and her thinking about evolution and economics in the book we were just discussing, rather than all the great names of economics. She might yet have an impact on economic thought.

In 2000 she wrote another book, The Nature of Economies, which developed some ideas about cities and evolution in previous books It is more about ecology than the mathematical computation that Kauffman is interested in. It is a short book written in the style of a Platonic dialogue.

Development and Expansion

She starts off by discussing the nature of development and expansion. Instead of GDP growth, her view is much more about the growth of diversity and intricacy in an ecosystem. Expansion is like the growth of biomass. There is much more weight of life in a tropical forest than a desert. And the whole thing is a process, not a collection of things. It evolves.  

This is a different and productive view from our emphasis on monetary transactions in the national accounts. We'll walk through her definitions here, and then look at how she says the system maintains dynamic stability in the next post.

The starting point is differentiation.

Development is differentiation emerging from generality. A given differentiation is a new generality, from which further differentiations can potentially emerge. Thus the process is open-ended and it produces increasing diversity and increasingly various, numerous and intricate co-development relationships. All this is the consequence of one simple sort of event repeated, repeated, repeated and repeated. p22

You can see this in economic life, she says. Take agriculture and developing new varieties and breeds of plants and animals.

They've done this by fostering desirable differentiations and selecting those worth further fostering. Have you ever tasted a wild orange? Awful, though beautiful. p23

And development is a process.

..development is not a collection of things but rather a process that yields things. Not knowing this, governments, their development and aid agencies, the World Bank and much of the public put faith in a fallacious "thing theory" of development. The Thing Theory supposes that development is the result of possessing things such as factories , dams, schools, tractors, whatever- often bunches of things subsumed under the category of infrastructure. p33

This is where so much of the development effort in the third world went wrong. You couldn't just import capital goods and factories and railways and have a modern economy. Those things were the outcomes of a process. Instead, we ought to think of how the process works and what it requires, she says. It requires economically creative people and initiative for one thing.

Development is qualitative change. Expansion is quantitative change. The two are closely linked, but they aren't the same thing. p37

Self-refuelling and cycles

The difference between a tropical rainforest and a desert is not the amount of energy from the sun that falls on it. It's the myriad of ingenious ways that energy is used before being passed on in countless recycling circuits.

Expansion depends on capturing and using transient energy. The more different means a system possesses for recapturing, using, and passing around energy before its discharge from the system, the larger are the cumulative consequences of the energy it receives. (p47)

Successful cities and economies find ways to stretch the "energy" they import. They are like a conduit.

In the conduit, human labor and human capital transform imports - take them apart, recombine them, pass them around, recycle them, and by all these means stretch imports received into the conduit (p56)

The value gets stretched by a teeming diversity of economic activities, just like the biomass of a forest stretches the energy received by the sun in digressive ways.

So she emphasizes cycles. "Recycle, reuse, recombine, employ symbiosis." The richest places also tend to have the most intricate and diverse economies. They self-refuel themselves.

The practical link between economic development and economic expansion is economic diversity. Here's the principle, which applies to both ecosystems and the economies of settlements: Diverse ensembles expand in a rich environment which is created by the diverse use and reuse of received energy. p63.

Interestingly, there are parallels here with this HBR book by Umar Haique we looked at a while back, which argued for replacing value chains with value cycles. The more you can reuse things, the more average costs fall.

Jacobs says growing cities tend to replace imports - but, crucially, this is not the dumb import substitution policy of the 1960s and 1970s. They grow more differentiated and complex and import different things as a result.

The next step is how you keep the system on track.


Tuesday, June 19, 2012

How Much is Enough? A very important Skidelsky book

This looks as if is going to be a very significant book for my interests. Robert Skidelsky, the famous and brilliant biographer of Keynes, and his son (I think) have a new book out today, How Much is Enough?: Money and the Good Life.

There are some strong similarities with what I'm doing on this blog, but also some major differences.

The Skidelskys say in an article about their the book in the Chronicle of Higher Education:

The material conditions of the good life already exist, at least in the affluent parts of the world, but the blind pursuit of growth puts the good life continually out of reach. Under such circumstances, the aim of policy and other forms of collective action should be to secure an economic organization that places the good things of life—health, respect, friendship, leisure, and so on—within reach of all. Economic growth should be accepted as a residual, not something to be aimed at.

Over time, such a shift is bound to affect our attitude toward economics. To maximize the efficient use of our time will become less and less important; and therefore "scientific" economics, as it has developed since Robbins, will be demoted from its position as the queen of the social sciences. It can bring us to the threshold of plenty, but must then retire from its oversight of our lives. This is what Keynes had in mind when he looked forward to the day when economists would become as useful as dentists. He always chose his words carefully: It was as dentists, not doctors, that humanity would come to need economists; at the margins of life, not as a continuous, much less controlling, presence.

They have the same starting point as I did - Keynes' essay "Economic Possibilities for our Grandchilidren". They complain about the current state of economics. And they are argue for more of an emphasis on the Good Life, rather than procedural liberalism. I strongly agree with that. I think a more tangible vision of the Good Life is essential, and I think we've run out of room in liberalism. We need to talk about purposes and ends again, as I've been arguing. We need a more Aristotelian and less utilitarian view.

I'm clearly going to have to read the whole book. But at least from the essay, there are also some important differences between this and what I say. They stick much closer to Keynes original essay, unsurprisingly, and appear to see the issue largely as a choice to emphasize more leisure and less growth. Indeed, it appears to be anti-growth. It is a matter of having less wants, of having a more restrictive view of what we need.

It sounds more like a 1970s environmentalist view at first hearing, a 'small is beautiful' orientation.

I think they are asking precisely the right question. But I don't think they have quite the right answer. I will come back to this in much more detail when I read the whole thing.


Avalanches and Fitness

We've been discussing some aspects of evolution as it applies to the economy, especially evolutionary theorist Stuart Kauffman's ideas.

There is a serious downside inherent in all this, however. If the economy does have a tendency to evolve, there is no inherent teleology, no underlying guarantee it will be in ways which are good for us - however we want to define it.

And the system can be inherently unstable.

The central image here is of a sandpile on a table onto which sand is added at a constant slow rate. Eventually the sand piles up and avalanches begin.

Sandpiles, self-organized criticality, and the edge of chaos. If I am right, the very nature of coevolution is to attain this edge of chaos, a web of compromises where each species prospers as well as possible but where none can be sure if its best next step will set off a trickle or a landslide. In this precarious world, avalanches, small and large, sweep the system relentlessly. .. At this poised state between order and chaos, the players cannot tell the unfolding consequences of their actions. While there is law in the distribution of avalanche sizes that arise in the poised state, there is unpredictability in each individual case. If one can never know if the next footstep is the one that will unleash the landslide of the century, then it pays to tread carefully.

There are inherent limits to how much we can predict the future in a system like that:

We, with all the others, cannot foretell the avalanches and their intertwinings that we jointly generate. We xan do only our local, level best. We can get on with it. Since the time of Bacon our Western tradition has regarded knowledge as power. But as the scale of our activities in space and timehas increased, we are bring driven to understand the limited scope of our understanding and even our potential understanding. (p29)

It is almost a tragic view, even if, as Kauffman says, in practice we ignore it and do what we can anyway. It does suggest having firebreaks and some elements of resilience as well, though. Have several tables of sand, not just one.

There is another point. Kauffman does not say it, but one thing that we can do which species in nature cannot is potentially influence fitness itself in our environment. We can set some of the rules for our society and economy that are set by nature for natural evolution. And that is perhaps one of the few main ways in which we can influence the process.

The definition of fitness can to a large extent be set by us. Indeed, that is why in many cases innovation can be stifled or societies decline, because "protecting current elites" is the default value in many societies. Right now we generally set it to "Profitability or political transfers." If we set it to "help people flourish" the landscape could look different.

That means we need to think more consciously of the selection criteria for innovations and experiments in our evolving social and economic landscape. We need more of a sense of what to filter, what to encourage and what to discourage, and what is selected against.

We have to make economic evolution work for us. We need "selective breeding" of the things which serve human happiness best, just like farmers selecting seeds and transitioning to agriculture.

It is a little more complicated than basic policy choices, however. If we set policy to "maximize hens", it makes the niche of fox look all the more attractive. We are tied to realistic choices that take account of coevoluton. The system has to have stablizing defenses too.


Monday, June 18, 2012

What explains the Golden Age of Cities?

We were just talking about how crucial just the right balance between order and chaos is in evolutionary search, and how that might help explain the huge burst of complexity in the industrial revolution.

Here's another way to look at the issue. The great British urban historian Sir Peter Hall wrote a huge book in 1998: Cities in Civilization. Why are there bursts of extraordinary vitality and creativity in the history of cities - which indeed makes up most of the history of civilization - often followed by stagnation and decline?

Why was fourth century Athens an astonishing crucible of ideas, followed by two thousand years of slumber right down to the riots and anxiety of the Greek election today? Why did Elizabethan London or fin-de-siecle Paris and Vienna or early-twentieth century Los Angeles fizz with ideas? And why does no-one look to Vienna for the next big thing now?

Hall writes fascinating case studies of each of these cities, as well as quattrocento Florence, Weimar Berlin, and the technological boomtowns of Manchester and Detroit in their eras of growth. It is beautifully written and full of intriguing details in its thousand pages.

And his explanation: it's not simply wealth. It's not Marx's class relations, it's not Hypolyte Taine's "creative milieu" or Kuhn or Foucault.

Instead, the golden age of a city an evolutionary stage. The burst of creativity comes at a point of transition where an older order is breaking down and fluid, so the city is not rigid, but it isn't chaotic either. Take Athens:

Athens in the Fourth Century BC first gained enormously from the personal and social tensions brought forth by a unique moment of social evolution: a movement from a static, highly conservative, aristocratic landowning society to an urban, trading one open to talent. The old society gave wayin the face of the new, but at the same time bequeathed to it many of its values. We find that kind of transitional society at other particular moments in urban history, and nearly always it is highly creative; it is the society of Elizabethan London, of nineteenth century Paris, of Weimar Berlin. Such societies are invariably in social and cultural turmoil, riven by the battle between the celebrators of the old order and the proselytizers of the new. But out of that conflict comes unique creativity; a society emerges that combines the fine discrimination and critical standards of the old society with the scepticism and inventiveness of the new. Such was Athens. (p68)

But it does not last:

And the moral to come from the story of Athens is that creativity of that order is never stable; it carries with it the seeds of its own destruction. .. We shall see that it is always that way in the history of cities: the tension between the principle of order and the principle of freedom brings something uniquely wonderful, but it does not last beyond a few golden years, for the tension will result in victory - usually, though not invariably, for the forces of change - and with that the wellspring of creativity will dry up. (p68)

Florence had its astonishing golden age at the transition from medieval to modern values, as humanism began to break down older medieval thought. To be sure, there was an increase in the status of artists, and a surge in wealth. The surge in wealth in itself can produce a breakdown in traditional values. But it was in essence a particular kind of transitional state.

And as for the great industrial upstart cities: Manchester, Glasgow, Detriot, Berlin, Silicon Valley, Tokyo, some of it was certainly the growth of local networks or clusters of knowledge:

There was in every case a local network, which not only supplied highly specialized kinds of skilled labour and services, but also created a climate of innovation in which everyone learned from a dozen competitors: competitor-cooperators would be the best term.

But the character of the place mattered too:

The places in which this happened had a very special character: they were located at the fringe of what the geographer James E. Vance calls the "ecumene." They were not the leading cities of their day, but neither did they exist in outer darkness. All had a tradition in some activity closely related to the one in which innovation came: Glasgow in sailing ships, Detroit in transportation engineering, Palo Alto in radio, Tokyo in a range of craft production. And they had a quality difficult to define: they were free of older traditions, prejudices, restraints. Stadtluft macht frei, city air makes free, as the old medieval phrase goes; but in these small cities the air was particularly heady. There was a nervous energy, a belief that there was no limits to the possible. (p494).

Again, balance, the right degree of liquidity, was essential. And rigidity eventually set in again, certainly in the case of single industries which eventually collapsed in Manchester, Glasgow and Detroit.

Doesn't this recall Kauffman's discussion of the "edge of chaos"? You need the right degree of liquidity for innovation and progress. Such bursts of creativity have happened many times through history. It just so happened that the launch of the industrial revolution had much larger and long-lasting consequences - if not in its original hometowns. Coalbrookdale is not the megalopolis of our era.



The Democratic Dark Ages

So the pro-bailout party in Greece barely eked ahead of Syriza, 29.6% to 26.9%. This week will be a little less bumpy.

It is not changing the mood much, though. Spanish yields have spiked 22bp to a new historic euro-era high of 7.14% again this morning.

And here's the vivid phrase of the day: London Mayor (and Tory Telegraph columnist) Boris Johnson says dithering Europe is heading for the "democratic dark ages" as any government formed in Athens is subject to Brussels and Berlin. Strong language from even a British elected leader.


It won’t work. If things go on as they are, we will see more misery, more resentment, and an ever greater chance that the whole damn kebab van will go up in flames. Greece will one day be free again – in the sense that I still think it marginally more likely than not that whoever takes charge in Athens will eventually find a way to restore competitiveness through devaluation and leaving the euro – for this simple reason: that market confidence in Greek membership is like a burst paper bag of rice – hard to restore.

Without a resolution, without clarity, I am afraid the suffering will go on. The best way forward would be an orderly bisection into an old eurozone and a New Eurozone for the periphery. With every month of dither, we delay the prospect of a global recovery; while the approved solution – fiscal and political union – will consign the continent to a democratic dark ages.


Sunday, June 17, 2012

The Edge of Chaos

We were talking about a Cambrian explosion of complexity a few posts ago. The larger point is how the economy evolves, not just chordates or arthropods.

It is not just that there may be some resemblances to natural evolution. It is that the economy actually does evolve if variation, selection and adaptation take place. Instead of the nineteenth century idea of evolution as blood-soaked competition, think of it as a means to search a space of possibilities.

One important point in Stuart Kauffman's book At Home in the Universe: The Search for the Laws of Self-Organization and Complexity is the right balance between stability and flexibility is critical for evolution. Too much rigid order, and an organism has no adaptability. Too much change, and it could collapse.

The wonderful possibility, to be held as a working hypothesis, bold but fragile, is that on many fronts, life evolves towards a regime that is poised between order and chaos. The evocative phrase that points to this working hypothesis is this: life exists at the edge of chaos. Borrowing a metaphor from physics, life may exist near a phase transition. ... Were such systems too deeply into the frozen ordered regime, they would be too rigid to coordinate the complex systems of genetic activities necessary for development. Were they too far into the gaseous state, they would not be orderly enough. Networks in the regime near the edge of chaos - the compromise between order and surprise - appear best able to coordinate complex activities and best able to evolve as well. (p26)

So evolutionary systems have a tendency to show the right degree of flexibility.

Fitness landscapes

Kauffman talks about biologists notion of a "fitness landscape", where

the peaks represent high fitness , and populations wander under the drives of mutation, selection and random drift across the landscape seeking peaks, but perhaps never achieving them. (p27)

So you can think of evolution as a search for the highest point on a landscape, when you can't easily see around you. Sometimes all you have to do is walk uphill. But sometimes you might be just on a foothill, and much higher peaks are on the other side of a deep valley. How would you find them? How would you avoid getting trapped on a small hill, instead of keeping up the search for distant ranges?

It tuns out there is much one can say about the best way to search such a landscape for the highest peaks:

We will find in this book that where we are talking about organisms or economies, surprisingly general laws govern adaptive processes on multipeaked fitness landscapes. These general laws may account for phenomena ranging from the burst of the Cambrian explosion in bio-evolution, where taxa fill in from the top down, to technological evolution, to technological evolution, where striking variations arise early and dwindle to minor improvements.

The edge of chaos theme also arises as a potential general law. In scaling the top of the fitness peaks, adapting populations that are too methodical and timid in their explorations are likely to get stuck in the foothills, thinking they have reached as high as they can go, but a search that is too wide-ranging is also likely to fail. The best exploration of an evolutionary space occurs at a kind of phase transition between order and disorder, when populations begin to melt off the local peaks they have become fixated on and flow along ridges towards distant regions of higher fitness. (p27)

We already looked at some of these ideas in Steven Johnson's book Where Good Ideas Come From: The Natural History of Innovation. Johnson calls it "liquid networks". You need to have the right degree of interaction in a system for it to adapt and evolve effectively. The great cities are often just that sort of liquid network.

Johnson also stresses another one of Kauffman's ideas: the adjacent possible. Much innovation happens by exploring the adjacent squares on the fitness landscape, with occasional leaps towards more distant parts of the landscape.


Finally, another crucial idea: in some circumstances complexity can feed on itself. A system can go from subcritical to supracritical. As Kauffman says:

The striking possibility is that the very diversity of molecules in the biosphere can cause its own explosion! The diversity feeds on itself, dirving itself forward. Cells interacting with each other and with the environment create new kinds of molecules that beget yet other molecules in a rush of creativity. This rush, which I will call supracritical behavior has its source in the same kind of phase transition to connected webs of catalyzed reactions that we found may have pushed molecules into living organizations in the first place. (p114)

But cells themselves must remain subcritical.

That we eat our meals rather than fusing with them marks, I believe, a profound fact. The biosphere itself is supracritical. Our cells are just subcritical. Were we to fuse with the salad, the molecular diversity this fusion would engender within our cells would unleash a cataclysmic supracritical explosion. The explosion of molecular novelty would soon be lethal to the unhappy cells harboring the explosion. (p125)

So what should we take from this, especially in the context of explaining the industrial revolution and Deirdre McCloskey's book? The right degree of "near-chaos", of liquidity is absolutely crucial to searching out the best ways to evolve on a fitness landscape. It is possible that small institutional changes or changes in values or ideas could produce that right degree of liquidity and launch the search process into overdrive.

It is possible that just the right mix occurred in England, just the right degree of liquidity to start the evolutionary search algorithm. The balance of order and disorder is very important. And it did not take long for the whole system to go supracritical.