Cactus Club December 1997

Cycle I: Part 2

1 December 1997........short introduction to chaos theory

To begin our study of modern economics and spontaneous order we will introduce some ideas from chaos and complexity theory. A short introduction for those of you not familiar with this topic can be found here. Question: What is chaos theory?(PD)

2 December l997............some thoughts on chaos theory

Although chaos theory supposedly eliminates -- or counters -- determinism, it does not support freedom of choice (in the sense that human beings have the capacity to initiate their significant behavior). At most it leaves behavior subject to random influences. Just as quantum physics does not prove free will -- contrary to Popper and Eccles -- so chaos theory does not leave room for it. And since there are good philosophical reasons to construe free will as real, this poses a problem. Moreover, chaos theory postulates a good deal more irregularity in nature than is evident therein, at least in day to day living here on earth. Small events do not appear normally to have very large consequences; plans can be forged and most of them tend to work out pretty well; even human behavior, once a person has committed to it, tends to lead to predictable results. So I am not sure that chaos theory is of much consequence, but I could be mistaken. At least I would expect that it applies apart from the ordinary affairs of human beings.(TM)

3 December 1997............chaos and the socionomist

Quoting from Chaos by James Gleick--------"The most passionate advocates of the new science go so far as to say that twentieth-century science will be remembered for just three things: relativity, quantum mechanics, and chaos. Chaos, they contend, has become the century's third great revolution in the physical sciences. Like the first two revolutions, chaos cuts away at the tenets of Newton's physics. As one physicist put it: "Relativity eliminated the Newtonian illusion of absolute space and time; quantum theory eliminated the Newtonian dream of a controllable measurement process; and chaos eliminates the Laplacian fantasy of deterministic predictability." Question: Since chaos theory falls in the category of a physical science, why would a socionomist or for that matter a management consultant have any interest in it?(PD)

6 December 1997........complexity and spontaneous self-organization

Quoting from Complexity by M. Mitchell Waldrop--------"In every case, moreover, the very richness of these interactions allows the system as a whole to undergo spontaneous self-organization. Thus, people trying to satisfy their material needs unconsciously organize themselves into an economy through myriad individual acts of buying and selling; it happpens without anyone being in charge or consciously planning it. The genes in a developing embryo organize themselves in one way to make a liver cell and in another way to make a muscle cell. Flying birds adapt to the actions of their neighbors, unconsciously organizing themselves into a flock. Organisms constantly adapt to each other through evolution, thereby organizing themselves into an exquisitely tuned ecosystem." Questions: What is the history of the concept of "spontaneous-self organization"? Is it a relatively new idea?(PD) PD's Note: Please read the essay I,PENCIL, by Leonard E. Read which relates to economic self-organization.

9 December 1997........spontaneous order vs the second law

Quoting from At Home in the Universe by Stuart Kauffman-------"Most biologists, heritors of the Darwinian tradition, suppose that the order of ontogeny is due to the grinding away of a molecular Rube Goldberg machine, slapped together piece by piece by evolution. I present a countering thesis: most of the beautiful order seen in ontogeny is spontaneous, a natural expression of the stunning self-organization that abounds in very complex regulatory networks. We appear to have been profoundly wrong. Order, vast and generative, arises naturally." Question: Does Kauffman's contention conflict with the second law of thermodynamics which predicts increasing entrophy instead of spontaneous order?(PD)

10 December 1997..............chaos theory and Austrian economics

Quoting from the foreword to the book Chaos, Management and Economics by Parker and Stacey-------"..............the disequilibrium world they describe bears a striking similarity to the view taken by economists of the Austrian School. Chaos theory is compatible with 'the methodology and policy prescriptions of Austrian economics with its themes of spontaneous self-organisation, enterprise and creative destruction' rather than with neo-classical economics which emphasises equilibrium. Parker and Stacey's conclusions are very similar to those which most 'Austrians' would support, even though those conclusions are reached by a very different route(Colin Robinson). Questions: Is neo-classical economics obsolete? What about Keynesian economics? Should economics be more about explaining and understanding or about measurement and prediction?(PD)

12 December science and social institutions

Quoting from Austrian Economics--An Annotated Bibliography:Methodology of the Austrian School by Richard M. Ebeling in Austrian Economics: A Reader..............."An implication of subjectivism is what Carl Menger and F.A. Hayek in particular saw as the pervasive presence of the unintended consequences of human action. The undertaking of many individual plans in a complex social order, in which each actor's knowledge and horizon is limited, sets the stage for inevitable consequences that may be the result of human action but not of human design. One of the tasks of social and economic method and theory is to explain the emergence, formation, and evolution of the spontaneously generated social and market institutions that often coordinate economic and social activities independent of any single human plan." Question: Are institutions always spontaneously generated or can they be created to achieve some social purpose?(PD)

14 December l997........spontaneous order vs. government

Quoting from Bionomics by Michael Rothschild------------"Taken over time, the twin phenomena of competition and cooperation have yielded the diversity and abundance of the earth's ecosystem in one realm and the complexity and productivity of the global market economy in the other. The most difficult concept to accept about the natural world is that it runs itself. No conscious force is needed to keep the ecosystem going. Life is a self-organizing phenomenon. From the interplay of hormones in the human body to the expansions and contractions of the great Arctic caribou herds, nature's intricately linked feedback loops automatically maintain a delicate, yet robust balance. Markets perform the same function in the economy. Without central planning, buyers and sellers constantly adjust to changing prices for commodities, capital, and labor. A flexible economic order emerges spontaneously from the chaos of free markets." Question: If people spontaneously organize themselves, why have governments?(PD)

15 December 1997..............preserving our sense of justice

Quoting from Towards a Free Society by Gary Wolfram (TCC member)---------"Bastiat asks us to adopt a moral philosophy, to establish in our own minds what government may or may not do in preserving our sense of justice. Is there really a difference between my taking of your property without your consent by robbing you and my taking of your property by getting together with a group of others in our community and passing a law which takes away your property? If there is, then we need to decide how we are to distinquish between the two cases and what are the repercussions of adopting laws which enable us to take from one another". Question: Do most people have a "sense of justice" and if so, is it something they have learned or is it an intrinsic human feeling that has developed through evolution?(PD)

16 December 1997........obsolescence of neoclassical and Keynesian economics

Here is my response to your posted question about the obsolescence of neoclassical and Keynesian economics(10 December 1997).

To first address the issue of neoclassical economics, obsolescence isn't so much the case; it is instead limited, but still useful. Since economists of the neoclassical school take such pride in their science being the equivalent of the natural sciences, this should already be abundantly clear to them. The assumptions made in neoclassical analyses -- "best" technology, constant external conditions, and the like -- are essentially the same as assumptions made constantly in physics and engineering. Examples abound: the ideal gas law assumes properties of gases that simply aren't true in the real world, yet analyses performed using this law can be valuable nonetheless. Similarly, thermodynamic analyses using assumptions of isobaric or isothermal conditions, or piping system analyses assuming smooth pipe surfaces, may oversimplify the real-world conditions being evaluated, but can nonetheless yield useful results. Perhaps the most compelling example of all is Newtonian physics, which we have known for many years to be imperfect, yet continue to use to great effect. So long as the limitations of such scientific tools are understood and acknowledged, these somewhat flawed analytical methods -- including neoclassical economics -- remain of value.

It is the previous sentence that dooms so much of the analysis done using neoclassical tools. Rather than understanding and acknowledging the shortcomings of their analytical methods, many neoclassical economists seem to expect reality to bend instead to fit their neat analyses. While this may happen as well amongst scientists and engineers using the tools in my examples, the success of our natural science and engineering endeavors seems, to my limited view, to imply that the prevalance of such hubris in those circles is far more limited.

As to the case of Keynesian economics, it is a situation which exposes the fraud of so many economists who would equate their field with the natural sciences. For in the natural sciences, it is the pursuit of the practitioners to constantly test any theory in an effort to disprove it; the longer a theory stands up to such scrutiny, the more likely it is to be true. In the case of Keynesian economics, we have quite the opposite case; the theory was accepted as fact with no testing. What's more, the theory has, since its inception, been apparently disproven a number of times, both logically and empirically. Yet it remains, even among the most "respected" of practitioners of the dismal science, an accepted fact. In our schools it has passed from a tautology to a nearly religious status. Yet it is, in my admittedly un-credentialed view, not only obsolete, but a proven falsehood.(JV)

20 December 1997..........the moral sentiments

To make the connection and transition from Parts I and II to Part III of our socionomic studies, please read Adam Smith: The Moral Sentiments by R.J. Kilcullen. Notice the reference to feelings and unintended consequences. Question: How does this article relate to evolutionary psychology, modern economics, and natural law?(PD)