Gould

Well, what are we to make of all this?

Here’s something I came across in Diane Coyle’s recent book, “Cogs and Monsters”:

“A large range of factual subjects, evidently part of science and duly explainable (in principle) by empirical methods operating under natural laws, treats different kinds of inordinately complex and historically contingent systems — the history of continents and landforms, or the patterns of life’s phylogeny, for example — as not deducible, or predictable at all, from natural laws tested and applied in laboratory experiments, but crucially dependent on the unique character of antecedent historical states in a narrative sequence fully subject to explanation after the fact, but unpredictable beforehand.”

That’s Steven Jay Gould writing in 2003.

He gets it.

Does the economy fit into Gould’s set of “inordinately complex and historically contingent systems”?  Of course it does.  Indeed it’s one of the better examples.  We can always look back and untangle parts of the story as to how or why some economic phenomenon emerged or disappeared.  There are a wide array of perfectly valid economic points of view to cast backwards and articulate such stories.  Our arsenal is full of them.  But that doesn’t mean that any of them have future validity or that a trick played once will work out the same way twice.  Those natural laws so beloved of economists are simply observations that help explain the tracks in the sand we have left behind as we navigate the tides of technological, cultural, and cognitive change.  They are nothing more than a guide into the future and the impenetrable unknown.  

Of course it’s not quite as simple as that.

The enormous stability created by the path dependence of history dictates that deviance is unlikely to be too radical in the immediate future.  Further off is another matter.  

Who, for instance, could have imagined back in the early days of industrialization that our lives would be so totally intermingled with that of the machines we rely upon to deliver out current standard of living?

You are all, naturally, aware of Lynn Margulis’s contribution to evolutionary biology.  She argued that a major step along the way towards life as we know its was the symbiosis between various primitive life forms that ended up producing cells with nuclei.  The primitive forms still exist, but within a mutually beneficial greater whole.  They are no longer separable in the way they once were.

Do we need a theory of economic symbiosis?  Do we need to develop a narrative that organizes our steady journey into a machine mediated existence?  Alternatively, do we need to start discussing how our machines are becoming more and more to resemble us?  Our mutual dependence is quite clear.  Only our hubris stops us from recognizing the inevitability of a total merging in the future.  Where will the line between human and machine be drawn?  

Economists like to talk about “general purpose technologies” (GPTs).  The concept is one of those generalities that gets tossed around frequently in discussions of the history of economic growth and the contributions to that growth of various inventions.  GPTs are the holy grail of advancement.  Their effects permeate socio-economic activity to such a degree that each elevation in growth seems impossible with them.  The steam engine, electricity, the computer and now artificial intelligence are often mentioned as iconic GPTs.  But, perhaps, from the perspective of a less anthropocentric and very long term viewpoint the original and longest lasting GPT is the human.  That is to say that we deployed ourselves, our skills, our know-how, and our capacity to do work for millennia to solve the problem of survival.  It is only recently that we added other GPTs to augment that set of attributes.  We found an ability to multiply the effect of our own basic capacities and break free of the Malthusian trap.  In order to do so we entered into a bargain with our machines.  We designed them to serve us.  We own them.  We decide their fates.  We use them.  They would not exist without us.  And yet each of those statements has a negative.  As our dependence increased we began to serve them.  They came to own our ability to prosper.  They came to decide our fates.  They use us.  And we could not exist, at least as we now are, without them.  Where, nowadays, does the pragmatic line exist between the two species?  Especially as we are now designing machines that can think.  What next?  Machines that feel?

So, what are we to make of all this?

Perhaps that we need to re-invent economics in the manner Gould suggests.  As we march towards a true machine/human symbiosis a future economy is not predictable from the so-called laws of economics.  Those laws look backwards not forwards.  Ineluctable complexity is just that.  It cannot be avoided.  Let’s not pretend.  There are no laws sufficient for the purpose of prediction.  None.  So all economic arrangements are simply accommodative to our current circumstances.  Contingency is all.  

In a way this fits perfectly with the Hayekian view that Coyle references in her defense of so-called market forces.  She gives us the usual criticism, referencing Hayek, of centralized organization of an economy.  Since knowledge is dispersed and cannot be collated for central computation, we are told, decentralization is the best and only way to go.  She leaves it there.  At least Hayek left open the door to the rather obvious criticism: if we cannot compute centralized solutions due the dispersion of knowledge and the vastness of the volume of information, how can we then argue that any solution is any better than any other?  We cannot.  We have lost control of the situation.  We cannot identify any solution as being better, being in equilibrium, more efficient, or meeting any other qualitative criterion at all.  We simply do not know.  Everything is a guess.  Maybe based upon some fancy theorizing, but a guess nonetheless.  So markets cannot be called any more or less efficient.  We have, by using the Hayekian logic, acknowledged our ignorance.  To go beyond that ignorance is to venture into ideology.  

But you know all this.

Of course you do.

I ventured into this ramble because of a sequence of articles in the Financial Times.  The existence or absence of hubris is essential for understanding how we can deal with current issues.  In one article, Geoffrey Owen, a former FT editor, says the following:

“Shareholder-based capitalism, with competition between profit-making firms as its driving force, is the means by which society’s resources are used most productively for everyone.” 

That is a highly contestable statement.  Given our lack of true insight into the workings of the economy, and given the lack of integration of corporate theory into economics, by and large,  we simply cannot, and ought not, make statements like that.  We don’t know.  Indeed there is a steady accumulation of evidence that suggest shareholder value, when carried to the extreme, as it has been in recent decades, is greatly harmful to swathes of society.  So to sweep past that evidence and to make assertions that drop straight from the naive and idyllic self-serving assumptions of economists as if they were truths is misleading, and at a deep level purely ideological.

Contrast that with an article today by Martin Wolf who joins the lists as an advocate of monetary tightening in the face of today’s burst of inflation.  His entire article can be resolved into a single perspective: economies are too complex for any idea to be thought of as having enduring value.  The fashion in monetary theory ebbs and flows to reflect the current context.  What was good once is now bad.  And vice versa.  Wolf even trots out the old observation that technocrats have a foolish tendency to prefer being precisely wrong rather than roughly right.  He argues for humility and prudence on the part of central banks because of how little we know about the economy.  Apparently the humble and prudent approach is to squeeze the labor force to stop wages spiraling out of control.  I suppose neither humility nor prudence applies to profit margins which appear to be as wide as ever despite so-called cost pressures.   Economists seem to forget that despite arguing that inflation is “always and everywhere a monetary phenomenon” Milton Friedman gave himself an enormous caveat.  According to Wolf, he also said that money affected the economy with “a lag that is both long and variable”.  In other words he said he had no clue, but prefers to think it’s all about money.  In any case, contra the fashion in contemporary technocracy, prices are established by bureaucratic administration.  They are set to cover costs and achieve a target profit.  It is, as Kalecki explained a long time ago, the volume sold at this administered price, and the target profit, that will trigger a price change.

And yet there is Diane Coyle defending the advances in economics since the Great Financial Crisis, or GFC as she calls it, and the rise of economists as technocrats capable of taking a tough stand.  High on their elevated intellectual perch they can, according to Coyle, make those tough choices because they are not influenced by the vagaries of democratic influence.  In true technocratic style they can calculate and decide in society’s best interests.  Such Platonic perfection would be wonderful, would it not, were it possible?  

Personally I would prefer that they stop pretending to know something that they do not.  Frankly they should all take a leaf out of the critics of “total factor productivity” (TFP).  It is a measure of our ignorance.  Economics just doesn’t understand the drivers of growth in any coherent manner.  Why would it?  They are inscrutable. So TFP is just the odds and ends of ignorance.

Or, perhaps, it’s a measure of our symbiosis with machines?

Just a thought.