Cactus Club January 1999

3 January 1999..............remove the planner

Let's begin our January Dialogue on spontaneous social order by reading "To Create Order, Remove the Planner" by Sheldon Richman. Questions: Does our evolved proclivity toward hierarchy conflict with the natural laws of economic organization described in this article? Does economics education tend to revise our collectivist instincts? If the "invisible hand" concept were extended to all social relationships, would it constitute a theory of anarchy? Why aren't all economists at least libertarians? (PD)

6 January 1999................the Butterfly Effect, nonlinearity, and compartmentalization

Quoting from CHAOS: Making A New Science by James Gleick------------ "The Butterfly Effect acquired a technical name: sensitive dependence on initial conditions. And sensitive dependence on initial conditions was not an altogether new notion. It had a place in folklore: ----"For want of a nail, the shoe was lost; For want of a shoe, the horse was lost; For want of a horse, the rider was lost; For want of a rider, the battle was lost; For want of a battle, the kingdom was lost!"--- In science as in life, it is well known that a chain of events can have a point of crisis that could magnify small changes. But chaos meant that such points were everywhere. They were pervasive. In systems like the weather, sensitive dependence on initial conditions was an inescapable consequence of the way small scales intertwined with large.__________Nonlinearity means that the act of playing the game has a way of changing the rules._______To make a picture from the data, Lorenz used each set of three numbers as coordinates to specify the location of a point in three dimensional space. Thus the sequence of numbers produced a sequence of points tracing a continuous path, a record of the system's behavior. Such a path might lead to one place and stop, meaning that the system had settled down to a steady state, where the variables for speed and temperature were no longer changing. Or the path might form a loop, going around and around, meaning that the sytem had settled into a pattern of behavior that would repeat itself periodically. Lorenz's system did neither. Instead, the map displayed a kind of infinite complexity. It always stayed within certain bounds, never running off the page but never repeating itself, either. It traced a strange, distinctive shape, a kind of double spiral in three dimensions, like a butterfly with its two wings. The shape signaled pure disorder, since no point or pattern of points ever recurred. Yet it also signaled a new kind of order._________Few laymen realized how tightly compartmentalized the scientific community had become, a battleship with bulkheads sealed against leaks. Biologists had enough to read without keeping up with the mathematics literature---for that matter, molecular biologists had enough to read without keeping up with population biology. Physicists had better ways to spend their time than sifting through the meteorology journals. Some mathematicians would have been excited to see Lorenz's discovery; within a decade, physicists, astronomers, and biologists were seeking something just like it, and sometimes rediscovering it for themselves. But Lorenz was a meteorologist, and no one thought to look for chaos on page 130 of volume 20 of the Journal of the Atmospheric Sciences." Questions: Is society a chaotic system? If so, what are the implications of the Butterfly Effect and nonlinearity for social engineers and central planners? Is socionomic education helped or hindered by the compartmentalization of the scientific and academic communities? (PD)

8 January 1999...........soup, lasers, hurricanes, and civilization

Quoting from COMPLEXITY: The Emerging Science at the Edge of Order and Chaos by M. Mitchell Waldrop-----------"He found that he was most impressed with the writings of the Belgian physicist Ilya Prigogine._________Basically, Prigogine was addressing the question. Why is there order and structure in the world? Where does it come from?

This turns out to be a much tougher question than it might sound, especially when you consider the world's general tendency toward decay. Iron rusts. Fallen logs rot. Bathwater cools to the temperature of its surroundings. Nature seems to be less interested in creating structures than in tearing structures apart and mixing things up into a kind of average. Indeed, the process of disorder and decay seems inexorable--so much so that nineteenth-century physicists codified it as the second law of thermodynamics, which can be paraphrased as "You can't unscramble an egg." Left to themselves, says the second law, atoms will mix and randomize themselves as much as possible. That's why iron rusts: atoms in the iron are forever trying to mingle with oxygen in the air to form iron oxide. And that's why bathwater cools: fast-moving molecules on the surface of the water collide with slower-moving molecules in the air, and gradually transfer their energy. Yet for all of that, we do see plenty of order and structure around. Fallen logs rot--but trees also grow. So how do you reconcile this growth of structure with the second law of thermodynamics? The answer, as Prigogine and others realized back in the 1960s, lies in that innocuous-sounding phrase, "Left to themselves..." In the real world, atoms and molecules are almost never left to themselves, not completely; they are almost always exposed to a certain amount of energy and material flowing in from the outside. And if that flow of energy and material is strong enough, then the steady degradation demanded by the second law can be partially reversed. Over a limited region, in fact, a system can spontaneously organize itself into a whole series of complex structures.

The most familiar example is probably a pot of soup sitting on the stovetop. If the gas is off, then nothing happens. Just as the second law predicts, the soup will sit there at room temperature, in equilibrium with its surroundings. If the gas is turned on with a very tiny flame, then still nothing much happens. The system is no longer in equilibrium--heat energy is rising up through the soup from the bottom of the pot--but the difference isn't large enough to really disturb anything. But now turn the flame up just a little bit higher, moving the system just a little farther from equilibrium. Suddenly, the increased flux of heat energy turns the soup unstable. Tiny, random motions of the soup molecules no longer average out to zero; some of the motions start to grow. Portions of the fluid begin to rise. Other portions begin to fall. Very quickly, the soup begins to organize its motions on a large scale: looking down on the surface you can see a hexagonal pattern of convection cells, with fluid rising in the middle of each cell and falling along the sides. The soup has acquired order and structure. In a word, it has begun to simmer.

Such self-organizing structures are ubiquitous in nature, said Prigogine. A laser is a self-organizing system in which particles of light, photons, can spontaneously group themselves into a single powerful beam that has every photon moving in lockstep. A hurricane is a self-organizing system powered by the steady stream of energy coming in from the sun, which drives the winds and draws rainwater from the oceans. A living cell--although much too complicated to analyze mathematically--is a self-organizing system that survives by taking in energy in the form of food and excreting energy in the form of heat and waste.

In fact, wrote Prigogine in one article, it's conceivable that the economy is a self-organizing system, in which market structures are spontaneously organized by such things as the demand for labor and the demand for goods and services.

Arthur sat up immediately when he read those words. "The economy is a self-organizing system." That was it! That was precisely what he had been thinking ever since he'd read THE EIGHTH DAY OF CREATION, although he hadn't known how to articulate it. Prigogine's principle of self-organization, the spontaneous dynamics of living systems--now Arthur could finally see how to relate all of it to economic systems."

Questions: Was Ilya Prigogine the first to recognize the possibility of spontaneous order in an economic system? Is it also possible that the economy is only a subset of a larger self-organizing system called civilization? Is politics a part of or apart from this spontaneous social order, if it exists? (PD)

11 January 1999..................all human systems are feedback systems

Quoting from CHAOS, MANAGEMENT AND ECONOMICS: The Implications of Non-Linear Thinking by David Parker and Ralph Stacey---------------------"It follows that all human systems are feedback systems. Furthermore, those systems always involve non-linear relationships. In a linear system there is one and only one effect for each cause. There is, therefore, essentially no choice of outcome. In linear systems, the combined effect of two different causes is merely the addition of the effect of each cause taken individually. This means that linear systems can be understood by analysing them into their component parts and studying each component. The whole is simple the sum of the parts. Linear systems lend themselves to being solved and hence to being 'engineered'.

By contrast, in non-linear systems one cause may have a variety of effects, thus making choice a real possibility. Also, a non-linear system may be much more than the sum of its parts, so it is impossible fully to understand the system simply by analysing it into its components. Such complex systems are far more difficult to engineer successfully since potential outcomes can be formidably difficult to identify, let alone measure. People have choices, they often react in ways that are stubbornly individual, even peculiar, and group behaviour is more than simply the sum of individual behaviours. The study of non-linear feedback systems came to life in the West in the 1960s, expecially due to the work of Edward Lorenz (1963) on atmospheric turbulence and studies by Mitchell Feigenbaum (1978) on bifurcations and by Stephen Smale (1963 and 1980) and Ruelle and Takens (1971) on fractal dimensions and attractors. In the USA, Smalle's study of the mathematics of non-linear dynamics demonstrated that following very small events, the time-path or trajectory of a system can become highly complex, leading to chaotic turbulence.

It is now established in biology that complex oscillations in behaviour are widespread in life from the cell to the whole organism. This includes rhythms in respiration, cardiac muscle contraction and reproduction cycles in plants. Electrical activity of the brain in deep sleep has been found to act as a system with great intrinsic complexity and unpredictability. It has indeed been claimed by one of the leading pioneers of chaos theory that 'the dynamical complexity of the human brain cannot be an accident. It must have been selected for its very instability'. (Prigogine, 1988, p.98). Similarly, Edward Lorenz's work on climate has shown why atmospheric conditions are inherently unpredictable - beyond a few days ahead, at best. Climate, like nature in general, is a highly complex mixture of instability within stability. The weather may be unpredictable more than a few days ahead, but it stays within bounds. We know London will not have a temperature of 90 degrees F in January. We know it will not snow in Singapore. Non-linear feedback systems produce a mixture of order and disorder." Questions: What are the implications of non-linear feedback systems for central planners and social engineers? Because of the non-linear nature of human feedback systems, is it possible that projects and programs like Social Security, Medicare, minimum wage, rent controls, fiscal policy, and government schools could have the opposite result than the one intended? If so, isn't this also possible with private projects and programs? (PD)

16 January 1999................footpaths, language, and money

Quoting from "The Individualist and 'Compositive' Method of the Social Sciences" by F.A. Hayek, reprinted from The Counter-Revolution of Science: Studies on the Abuse of Reason, in AUSTRIAN ECONOMICS: edited by Richard M. Ebeling---------"The problems which they try to answer arise only insofar as the conscious action of many men produce undesigned results, insofar as regularities are observed which are not the result of anybody's design. If social phenomena showed no order except insofar as they were consciously designed, there would indeed be no room for theoretical sciences of society and there would be, as is often argued, only problems of psychology. It is only insofar as some sort of order arises as a result of individual action but without being designed by any individual that a problem is raised which demands a theoretical explanation. It is only in the very simplest instances that it can be shown briefly and without any technical apparatus how the independent actions of individuals will produce an order which is no part of their intentions; and in those instances the explanation is usually so obvious that we never stop to examine the type of argument which leads us to it. The way in which footpaths are formed in a wild broken country is such an instance. At first everyone will seek for himself what seems to him the best path. But the fact that such a path has been used once is likely to make it easier to traverse and therefore more likely to be used again; and thus gradually more and more clearly defined tracks arise and come to be used to the exclusion of other possible ways. Human movements through the region come to conform to a definite pattern which, although the result of deliberate decisions of many people, has yet not been consciously designed by anyone. This explanation of how this happens is an elementary "theory" applicable to hundreds of particular historical instances; and it is not the observation of the actual growth of any particular track, and still less of many, from which this explanation derives its cogency, but from our general knowledge of how we and other people behave in the kind of situation in which the successive people find themselves who have to seek their way and who by the cumulative effect of their action create the path.

It is the elements of the complex of events which are familiar to us from everyday experience, but it is only by a deliberate effort of directed thought that we come to see the necessary effects of the combination of such actions by many people. We "understand" the way in which the result we observe can be produced, although we may never be in a position to watch the whole process or to predict its precise course and result.

It makes no difference for our present purpose whether the process extends over a long period of time, as it does in such cases as the evolution of money or the formation of language, or whether it is a process which is constantly repeated anew, as in the case of the formation of prices or the direction of production under competition.___________In a sense some problems of theoretical astronomy are more similar to those of the social sciences than those of any of the experimental sciences. Yet there remain important differences. While the astronomer aims at knowing all the elements of which his universe is composed, the student of social phemomena cannot hope to know more than the types of elements from which his universe is made up. He will scarcely ever know even all of the elements of which it consists and he will certainly never know all the relevant properties of each of them. The inevitable imperfection of the human mind becomes here not only a basic datum about the object of explanation but, since it applies no less to the observer, also a limitation on what he can hope to accompllish in his attempt to explain the observed facts. The number of separate variables which in any particular social phenomenon will determine the result of a given change will as a rule be far too large for any human mind to master and manipulate them effectively. In consequence our knowledge of the principle by which these phenomena are produced will rarely if ever enable us to predict the precise result of any concrete situation. While we can explain the principle on which certain phenomena are produced and can from this knowledge exclude the possibility of certain results, for example, of certain events occurring together, our knowledge will in a sense be only negative; that is, it will merely enable us to preclude certain results but not enable us to narrow the range of possibilities sufficiently so that only one remains. The distinction between an explanation merely of the principle on which a phenomenon is produced and an explanation which enables us to predict the precise result is of great importance for the understanding of the theoretical methods of the social sciences. It arises, I believe, also elsewhere, for example, in biology and certainly in psychology. It is, however, somewhat unfamiliar and I know no place where it is adequately explained." Questions: If economics is more like astronomy than say physics, why do we have monetary and fiscal policy? What are the broader implications of Hayek's observations? (PD)

20 January 1999.................punctuated equilibrium and the Butterfly Effect

Quoting from BIONOMICS: Economy as Ecosystem by Michael Rothschild----------"In 1972, not long after the trilobite story came together, Eldredge joined with Stephen Jay Gould in publishing a scientific paper that laid out this explanation of evolutionary change. Gould had come to similar conclusions after studying an extinct species of snail that had lived in Bermuda. To describe the process of evolution as long periods of species stability intermittently disturbed by bursts of new species creation, Gould coined the phrase punctuated equilibrium. And even though not all biologists accept the punctuated-equilibrium version of evolution, many have become converts in the last two decades.

Like all powerful theories, punctuated equilibrium explains so much so simply. It does not require belief in radical transformations from one generation to the next. And in does not insist, as Darwin did, that an entire species be modified at an incredibly slow pace---a pace that, it turns out, is too slow to account for the evolution of modern life even over 4.6 billion years of earth history.

Essentially, punctuated equilibrium says that evoltuionary change happens neither overnight nor over millions of years, but rather in bursts that stretch for a few hundred or a few thousand years. It is pulsating evolution, a surge of relatively rapid change followed by a long period of stability or equilibrium. Punctuated equilibrium contends that once established, a species does not change. As long as it fits its ecological niche, there is no reason to change. If the environment changes, the species will migrate in an attempt to regain the ecological setting it needs. If the environmental shift is too extreme and migration fails, the species becomes extinct.

But well before a species dies off in the normal course of events, small groups will drift away from the main population, either by getting lost during an annual migration or by simply wandering off in search of less crowded, greener pastures. If such a group is fortunate enough to find an acceptable place to live, it will survive in reproductive isolation. Over several generations, mutations will modify the physical characteristics of the group, transforming the parent species into a new daughter species.

As the environment continues to change, a daughter species may come upon an unoccupied niche in the ecosystem left by the extinction of the parent species. In such cases, the offspring species fills an ecological vacuum. In other cases, where this evolutionary process endows a daughter species with physical advantages over a parent species that is not yet extinct, the offspring may not wait for the parent species to disappear. It may invade the parent's home territory and aggressively compete it out of existence." Question: If we combine the concepts of punctuated equilibrium from evolutionary theory with sensitive dependence on initial conditions( the so-called Butterfly Effect) from complexity theory and apply it to business, societies, and civilization, all being subject to the laws of spontaneous organization, can we better understand the futility of central planning and social engineering? Comment: The aforementioned futility notwithstanding, the combined instincts of tribalism, compassion, and the lust for power steer societies toward central planning and social engineering. (PD)

23 January 1999............more on non-linear complex systems

For an illustration of the concept of society as a non-linear complex system, please read "Patchwork of Old and New" by Virginia Postrel. Questions: Why does "this dynamic vision" lack a public vocabulary? Would more socionomic education make a difference? (PD)

26 January 1999.................coercion and the First Postulate

Quoting from TOWARDS A FREE SOCIETY: An Introduction to Markets and the Political System by Cactus Club member Gary Wolfram------------"Let's be a little more specific about what we mean by coercion. Hayek's definition is a useful one. Coercion is when you are forced to act, not according to your own plan, but to serve the ends of another. Now why is it important that people be free from coercion? One obvious answer is to satisfy the value judgement that individual freedom is important for its own sake. But an equally important reason, the implications of which are not as immediately obvious, is that coercion eliminates the individual as a thinking and valuing person.

Hayek was very concerned about the use of knowledge in society. In an earlier chapter we discussed the wonder of the market process in that it allows production and distribution to occur without requiring the vast amounts of information that encumber a command economy. Individuals respond to incentives and make decisions based upon prices and profit and this system results in a cooperative society which makes efficient use of resources and maintains individual liberty. If there is coercion in a society, then this system breaks down. The individual that is in the best place to make a decision is not allowed to make that decision. The decision is made by someone less knowledgeable or less informed and the outcome will be less efficient. Not only does coercion result in the loss of the sense of freedom that people value, it wastes the talent and knowledge of individuals, making society worse off." Comment: Here once again Professor Wolfram leads us from the technical considerations of spontaneous social order to the aesthetic aspects of social harmony. Questions: Is coercion always a bad thing? What about parents who put limits on the actions of their children? How does coercion relate to the First Postulate of Socionomics? What about Rothbard's criticism of Hayek's definition of coercion? (PD)