Saturday, January 07, 2006

Three Versions of Dangerous ideas

Edge, the World Question centre, asks its annual question and invites some of the World’s brightest and articulate intellectuals from the science to give their views. In 2006 the question is: What is your dangerous idea? From their answers its web site published a 75,000 word report of what 119 intellectuals replied as their answers.

Check their brief but fascinating replies across the science spectrum at:

I chose three of the replies because they are related to Lost Legacy, not directly, but generically. A few comments follow each one.

Mihalyi Csikszentmihaly: psychologist; Director, Quality of Life Research Center, Claremont Graduate University and author, “Flow”

One of the most dangerous ideas at large in the current culture is that the "free market" is the ultimate arbiter of political decisions, and that there is an "invisible hand" that will direct us to the most desirable future provided the free market is allowed to actualize itself. This mystical faith is based on some reasonable empirical foundations, but when embraced as a final solution to the ills of humankind, it risks destroying both the material resources, and the cultural achievements that our species has so painstakingly developed.

So the dangerous idea on which our culture is based is that the political economy has a silver bullet — the free market — that must take precedence over any other value, and thereby lead to peace and prosperity. It is dangerous because like all silver bullets it is an intellectual and political scam that might benefit some, but ultimately requires the majority to pay for the destruction it causes. My dangerous idea is dangerous only to those who support the hegemony of the market. It consists in pointing out that the imperial free market wears no clothes — it does not exist in the first place, and what passes for it is dangerous to the future well being of our species. Scientist need to turn their attention to what the complex system that is human life will require in the future.”

This could be called ‘The Invisible Hand’ no 27. It is saved from this heading because it describes the invisible hand, correctly, as a ‘mystical faith’, which it has become as Smith’s legacy has been passed on with a meaning he never gave it. Some economists, inhabiting myriad US campuses, pass it on to their students, who absorb it as a meme and go on into journalism, academe and politics, and repeat it endlessly without blushing.

Smith’s metaphor has achieved iconic status, even acquiring the title of being his special ‘theory’. It was never his theory; it was and remains a metaphor, and not it was not even his, but Shakespeare’s Macbeth (3.2): ‘thy blood and invisible hand’. (See Archive entries, from the list on the right).

Meanwhile, Smith analysed markets in detail, in full and without mystical attributes in the rest of “Wealth of Nations”. There is nothing miraculous about markets, anymore than there is anything miraculous about the origins of language or the history of human societies or of human knowledge.

Moreover, Mihalyi Csikszentmihaly, can relax. Anybody believing the idea that free markets govern economics decisions in the US or elsewhere in the world is a long way from either economic or political power, and from the practice of government and many major corporations. That idea is a PR scam to persuade gullible politicians and legislators to ‘free’ businesses from all control, associated with that other non-Smithian idea (though it is also misattributed to him) of laissez faire. Smith was always suspicious of the motives of ‘merchants and manufacturers’ and always saw impartial competition as the remedy. That is why business leaders oppose imports that compete with them (foreign and domestic).

The second short essay came from Michael Sh
ermer: publisher of Skeptic magazine, monthly columnist for Scientific American and author, “Science Friction”:

"Where goods cross frontiers, armies won't. Restated: where economic borders are porous between two nations, political borders become impervious to armies.

Data from the new sciences of evolutionary economics, behavioral economics, and neuroeconomics reveals that when people are free to cooperate and trade (such as in game theory protocols) they establish trust that is reinforced through neural pathways that release such bonding hormones as oxytocin. Thus, modern biology reveals that where people are free to cooperate and trade they are less likely to fight and kill those with whom they are cooperating and trading.

My dangerous idea is a solution to what I call the “really hard problem”: how best should we live? My answer: A free society, defined as free-market economics and democratic politics — fiscal conservatism and social liberalism — which leads to the greatest liberty for the greatest number. Since humans are, by nature, tribal, the overall goal is to expand the concept of the tribe to include all members of the species into a global free society. Free trade between all peoples is the surest way to reach this goal.

People have a hard time accepting free market economics for the same reason they have a hard time accepting evolution: it is counterintuitive. Life looks intelligently designed, so our natural inclination is to infer that there must be an intelligent designer — a God. Similarly, the economy looks designed, so our natural inclination is to infer that we need a designer — a Government. In fact, emergence and complexity theory explains how the principles of self-organization and emergence cause complex systems to arise from simple systems without a top-down designer.

Charles Darwin's natural selection is Adam Smith's invisible hand. Darwin showed how complex design and ecological balance were unintended consequences of individual competition among organisms. Smith showed how national wealth and social harmony were unintended consequences of individual competition among people. Nature's economy mirrors society's economy. Thus, integrating evolution and economics — what I call evonomics — reveals that an old economic doctrine is supported by modern biology.”

Comment: this takes the opposite line to Mihalyi Csikszentmihaly about the efficacy of free-markets, but ends up with the same error of the invisible hand. However, the substance of his essay is correct, though I am not qualified to comment on biology and the assertion that trade establishes “trust that is reinforced through neural pathways that release such bonding hormones as oxytocin.”

My third selection is from Matt Ridley (author of the ‘Origins of Virtue’) founding chairman of the International Centre for Life and author, of “The Agile Gene: How Nature Turns on Nature”. He tackles the same dangerous idea (free-markets) from another angle, that of the curbing of Big Government. It’s so good I quote Matt Ridley in full:

Government is the problem not the solution”

“In all times and in all places there has been too much government. We now know what prosperity is: it is the gradual extension of the division of labour through the free exchange of goods and ideas, and the consequent introduction of efficiencies by the invention of new technologies. This is the process that has given us health, wealth and wisdom on a scale unimagined by our ancestors. It not only raises material standards of living, it also fuels social integration, fairness and charity. It has never failed yet. No society has grown poorer or more unequal through trade, exchange and invention. Think of pre-Ming as opposed to Ming China, seventeenth century Holland as opposed to imperial Spain, eighteenth century England as opposed to Louis XIV's France, twentieth century America as opposed to Stalin's Russia, or post-war Japan, Hong Kong and Korea as opposed to Ghana, Cuba and Argentina. Think of the Phoenicians as opposed to the Egyptians, Athens as opposed to Sparta, the Hanseatic League as opposed to the Roman Empire. In every case, weak or decentralised government, but strong free trade led to surges in prosperity for all, whereas strong, central government led to parasitic, tax-fed officialdom, a stifling of innovation, relative economic decline and usually war.

Take Rome. It prospered because it was a free trade zone. But it repeatedly invested the proceeds of that prosperity in too much government and so wasted it in luxury, war, gladiators and public monuments. The Roman empire's list of innovations is derisory, even compared with that of the 'dark ages' that followed.

In every age and at every time there have been people who say we need more regulation, more government. Sometimes, they say we need it to protect exchange from corruption, to set the standards and police the rules, in which case they have a point, though often they exaggerate it. Self-policing standards and rules were developed by free-trading merchants in medieval Europe long before they were taken over and codified as laws (and often corrupted) by monarchs and governments. Sometimes, they say we need it to protect the weak, the victims of technological change or trade flows. But throughout history such intervention, though well meant, has usually proved misguided — because its progenitors refuse to believe in (or find out about) David Ricardo's Law of Comparative Advantage: even if China is better at making everything than France, there will still be a million things it pays China to buy from France rather than make itself. Why? Because rather than invent, say, luxury goods or insurance services itself, China will find it pays to make more T shirts and use the proceeds to import luxury goods and insurance.

Government is a very dangerous toy. It is used to fight wars, impose ideologies and enrich rulers. True, nowadays, our leaders do not enrich themselves (at least not on the scale of the Sun King), but they enrich their clients: they preside over vast and insatiable parasitic bureaucracies that grow by Parkinson's Law and live off true wealth creators such as traders and inventors.

Sure, it is possible to have too little government. Only, that has not been the world's problem for millennia. After the century of Mao, Hitler and Stalin, can anybody really say that the risk of too little government is greater than the risk of too much? The dangerous idea we all need to learn is that the more we limit the growth of government, the better off we will all be


I think this is closest to Adam Smith’s lost legacy of the three. I think it would be treated as the most dangerous idea. Governments and their executive branch represent nearly half of the GDP in the advanced economies, more than half in the small-populated countries of Scandinavia and the poor, developing parts of the world. Big Governments have vast revenue earning, unproductive workforces, control the functionaries of state control and the effective powers of repression, should they decide to use them to protect their status (and most poor countries do so against internal dissent).


Post a Comment

<< Home