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economy, opinion, political

The Economy as a System

I am struggling with my own principles.

On the one hand I believe that the economy is a natural complex adaptive system that defies modeling and on the other hand I am proposing changes that will supposedly improve the situation. I do however not propose I understand all causes and that my changes would have a certain effect. I believe that my changes could have an overall positive influence on people and society and they would rectify the situation themselves. People cause changes not rules and regulations. The concept of free markets follows that but right now we only have freedom of capital and not freedom of people.

We can now spend endless time to figure out why it happened and whose fault it is. That is however absolute nonsense. I have said for the last twenty years that the stock markets are a casino and was laughed at. As we now do have a complex financial system that is nearly impossible to regulate, I propose that a simple set of governing principles would have to be put in place rather than putting in even more detailed regulation that no one will understand and whose effects are completely unknown. There are no quickfixes.

There is absolutely to reason to have pity with anyone (businesses and individuals) who lost money on the stock market. One should never play a game where the rules are so complex that no one understands them. But it is criminal for a bank or an insurance company to sign a contract that promises a safekeeping of funds for a certain purpose, may it be interest or a retirement scheme, and then turn to overly risky investments.

Unfortunately many of these contracts do not allow people to step away should they discover the truth. This is where I do see the role of government. Not in creating as many rules as possible for individuals as it does now, but rather in setting the principles and guidelines for financial markets and while we are at it for large corporations as well. Alternatively I would see the need to either prohibit businesses too large to fail or to simply tax them so heavily that they won’t even exist except there is such a big benefit that it can pay those taxes. At the same time do away with taxes for small corporations up to a 100 people. You will see the economy fluorish. Too large businesses are hindering free markets. Too large financial institutions are endangering the world’s financial system dynamics. As much I am in favor of a European Union, as much I am opposed to make it a superpower. It must remain a federation of free entities that cooperate out of free will.

I take issue with all forms of thinking that demand that we fully understand something to then plan to change it into something new. Regardless of what you call it. Causal analysis and plans for change are caused by our human tendency for arrogance. ‘System Thinking’ is as much a fallacy as are other concepts if it proposes to achieve full understanding. Physics had to come to accept that Heisenberg’s Uncertainty Principle stops us from measuring the presence and from predicting the future. The same is true on a classical physics and therefore on a systems level. Nature successfully defies reductionism because it is not built from components but it represents complex adaptive systems in various layers in which functions emerge rather than being predictable from lower functionality.

Mathematics are not the cause of certain effects in nature but they are models that describe certain levels of natural activity. This tendency to believe that a mathematical principle is a LAW is absolutely wrong. Once you grasp that  systems thinking turns into a humble acceptance of the wonderful dynamics and unpredictability of our universe. Therefore it is the Black-Scholes model of future utility that is responsible for our current financial crisis, that has been turned by the dynamics of the media into an economics crisis. Actually it is not the model as such that is the cause but the ignoramuses who used it. While I do agree that we need leaders that can inspire people to pull together towards a common goal we must cautious of leaders who think they know it all.

Green Thinking is also reductionist thinking because it puts the blame on people for anything to achieve a COMMUNIST political goal. We have absolutely no proof of any of the claims that are being made about climate change! We are not even sure of there is a substantial difference in climate change NOW to other times when the climate changed. The world’s climate is ALWAYS CHANGING! So the question would be: ‘Is it changing differently to what it would be without human influence?’ There are no answers to that. Yes, glaciers are receeding, but why we have absolutely NO CLUE. To say we do is either arrogance or political misinformation.

The whole idea of sustainability is wrong too. Nothing is sustainable, because nature is about dynamics and change. To sustain would mean to freeze the status quo. That in itself is a silly idea. Complex Adaptive Systems can not be modelled and reduced to components and explained with a set of formulas with which we could then predict the future of a sustainable world. That was LaPlace’s idea and every scientist knows now that he was wrong. The universe is not a clockwork of classical physics even with the added concepts of Thermodynamics.

If YOU believe that you are in any way better than someone else because you are applying ‘systems thinking’ then you fall into the same trap of human arrogance. We know a lot and understand nothing. Not because we are stupid but because nature is that way.

Someone who wants to promote CHANGE is building on the assumption that he understands what causes the current situation that is supposedly undesirable, even so he does not know what the situation will be tomorrow, which might be better than today, and then has a plan as to how a certain CHANGE will CAUSE a better (more sustainable?) situation tomorrow. System thinkers who ask for change are as dangerous as all others who want to stick with their current ways. Stop thinking in systems and start thinking in natural human terms. This is what I try to do. We are the only place where we can really cause change. Don’t ask for others to change, but first change yourself. Start with the man in the mirror.

The only thing we can change in this world is our own perception. Nothing else. People want explanations, they want security and predictability and those who want to take power promise these, whether it is a husband, a priest or a political leader. They all lie because it is something that can’t be promised! That is the change we need to work on. It has to do in a large part with the ability to be humble in the face of the great mystery of our universe. So let’s drop systems thinking and start to do ‘humane thinking’. Why do we try to abstract nature into something inhumane. All problems are caused by human tendencies, fallacies and sometimes ignorance. While ignorance can be bliss, the worst of all problems are caused by people who are so arrogant to think they know it all.

How about some humbleness for a change?

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About Max J. Pucher

I am the founder and Chief Technology Officer of ISIS Papyrus Software, a medium size software company specializing in communications and process management. I wrote several books and hold a number of patents. My quest is to bring common sense to IT, mostly by focusing in human quality issues rather than cost saving, outsourcing and automation. I am also Chief Architect at VIPorbit software which provides mobile relationship management.

Discussion

5 thoughts on “The Economy as a System

  1. once again (too) many ideas in one, showing the complexity decribed therein by example.

    Taking out only a few points:

    Why not take it a step further and stop taxing individuals?

    My mirror does not show a man.

    What is a communist political goal?

    Continued growth is just as illusory as sustainability. Even Marx was wrong in that he said that the only thing which really is created is what is grown on a farm – that also takes energy – there is no perpetuum mobile of any kind. But then the quesion is what “should be sustained”, that is: what does one want to sustain? I would expect that this is very subjective. The question also is: why do I want to sustain? Fear for my descendents, comes to mind first.

    From the introduction I would have hoped to read more on the freedom of people. What exactly do you mean?

    The article is thought-provoking.

    Posted by Karin | March 16, 2009, 7:23 pm
    • Hi Karin, my posts are already way to long …
      A communist political goal is to put people under a paternalistic rule for their own good. Obviously continued growth is an illusion. It does not really happen but it’s a number game. The worst growth problem we have is human population, but then we think it is important to create conditions in the rest of the world that more children will survive. Now that is strategy that will backfire eventually. There is a clear indication for a lack of systems thinking. Marx had a few good ideas, but he was not an economist but an idealist. What my descendants do is really their problem. Ecology will not be their problem but how to survive the onslought of Asian and African overpopulation.

      Freedom: What a strange subject. The only reason it makes sense is because it is essential for evolution in complex adaptive systems. No freedom … no evolution.

      Posted by Max Pucher | March 16, 2009, 10:43 pm
  2. I think we would all do well to read more Nassim Taleb and fight the urge to adhere to Gaussian principles that only make us feel better but certainly do not work. You make the point that we operate in a complex adaptive system and the fact is that we cannot manage any change, we can only disturb the system and then try to work with the result.
    We should embrace the fact that we cannot control it and spend out time developing the abilities to deal with constant change instead of trying to manage it.

    Posted by 1ronin | March 25, 2009, 12:25 pm
  3. I grapple with a lot of the same stuff. Been working on my own editorial. It is not easy. Major issue in my mind is that sustainability focuses on energy, fuel, food, etc and not much on thinking about the person’s cycle of life and how to sustain (health, education and living).

    Posted by Lavinia Weissman | March 26, 2009, 10:30 pm
  4. Hello Max,

    A thought provocing piece indeed. So much so, that it calls attention to the underlying ‘fabric’ of thought.
    In stead of starting from what one believes one could start from what one cannot deny. One can-not deny many things, for instance the observation that one needs distinction to deny anything in the first place. One cannot deny that the concept of distinction itself, then, cannot be denied without accepting it first (distinction).

    From this paradigm, many questions disappear. For instance the Systems thinking cannot be denied to imply distinction and synthesis, a most powerful combination. The paradigm of systems thinking creates clarity where lineair thinking represents confusion. As a blind instrument, no paradigm (including Systems Thinking) can ever fully capture dynamic complexity. Paradigms are a product of ‘mind’, the word itself implying some kind of ‘care’. The Universe, if one may refer to dynamic complexity and all it entails, is what it is. All else is derived from that, care included.

    All one can really observe is whether human action in progress, is based in a thourough systematic understanding that is actively challenging its own assumptions. The current and prevailing money system and consequent economic behavior do not meet those criteria… Undeniably so ;o)

    Posted by Cees de Bruin | May 3, 2009, 8:38 am

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© 2007-11 Max J. Pucher

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