Unexpected and Unsuspecting

The future confronts us with an impenetrable complexity.  And the future is now.  Hidden within this new reality is an unexpected menace that we can only barely imagine.

In the densely interconnected world of digital networks, instant communication, and global markets we find ourselves arriving in what appears to be a seductively attractive frontier, but which in fact masks entirely new dimensions of danger.

It is a new and unpredictable world, and it hides hazards of unimaginable magnitude.

Exponential population growth and digital connectivity, along with warfare, fragile commercial distribution systems, and the global transmission of deadly diseases, are all contributing to rapidly intensifying complexity.

However, it is the immensity and density of digital networks that is most difficult to comprehend.  And it is here where we are learning that complexity itself can behave in very strange and disturbing ways.

Complex systems are capable of spiraling out of control suddenly and inexplicably.

Living as we do in the instability of today’s world, I think it important that we understand this.

In his book, “Ubiquity”, science writer Mark Buchanan writes that a natural structure of instability is in fact woven into the fabric of the world.

He writes that complex structures and processes – in geology, in rush hour traffic, in financial markets, and in the many intricate networks of human society – have a natural tendency to organize themselves into what’s called a “critical state,” in which they are poised on what he describes as the “knife-edge of instability.”

A critical state occurs when a system is poised for sudden change.

Some mathematicians and scientists now believe that a pervasive instability is a fundamental feature in nature – and in the structures of human societies.

Any event, even a small one, can have an effect that seems far out of proportion to its cause. A single grain of sand, for example, will cause a sand pile to avalanche. But it is impossible for us to know which grain of sand, which individual maneuver in heavy traffic, or which specific circumstance in the financial markets will trigger inevitable catastrophe.

What is the difference between something that is complicated and something that is complex?

James Rickards, who I introduced to you in the previous post, answers this question in his book, “The Death of Money: The Coming Collapse of the International Monetary System”.

Rickards explains: “Many analysts use the words ‘complex’ and ‘complicated’ interchangeably, but that is inexact. A complicated mechanism, like the clockworks on St. Mark’s Square in Venice, may have many moving parts, but it can be assembled and disassembled in straightforward ways.

“The parts do not adapt to one another, and the clock cannot suddenly turn into a sparrow and fly away. In contrast, complex systems sometimes do morph and fly away, or slide down mountains, or ruin nations….

“Complex systems include moving parts, called autonomous agents, but they do more than move. The agents are diverse, connected, interactive, and adaptive. Their diversity and connectivity can be modeled to a limited extent, but interaction and adaptation quickly branch into a seeming infinity of outcomes that can be modeled in theory but not in practice.

“To put it another way, one can know that bad things might happen yet never know exactly why.”

James Rickards goes on to expound on the instability of today’s financial markets and global economy.  He writes: “Bankers’ parasitic behavior, the result of a cultural phase transition, is entirely characteristic of a society nearing collapse.

“Wealth is no longer created; it is taken from others. Parasitic behavior is not confined to bankers; it also infects high government officials, corporate executives, and the elite societal stratum.”

Today the financial markets and monetary system are again poised “on the knife’s edge of criticality.”

My message here is the importance of preparing for severe unforeseen shocks.  It is essential that we not panic when confronted with the unexpected.  We must remain steady on our feet when others are ready to stampede.

Only with a commitment to justice – and the self-discipline for ethical behavior and moral responsibility – will we hold our communities together and begin to rebuild.

Yes, the road to freedom requires courage, but getting there depends on responsibility.

Tom

Please look for the next post on or about October 20: Why the Bankers Are Trapped.

New readers can find a project description, a draft introduction to the forthcoming book, and several chapter drafts on this page.

In Pursuit of Economic Stability

If we are to rebuild the foundations of the United States in a manner consistent with the ideas and ideals of past generations, how will that vision guide us at a very challenging time in our history?

What ethical precepts and economic principles will move us toward the goals of freedom, prosperity, and generosity of spirit, which appear to be just now receding beyond reach?

These are questions of utmost importance as we turn our attention to a future beyond the present difficulties.

Each of us has ideas about the America we want to believe in. We have personal principles. If we are to work together to forge a vibrant future for the United States, however, we will have to get ourselves onto the same page, roughly speaking.

And we can be sure that any principles we agree on will be severely tested.

Long-time readers will recognize these questions as central to the purpose of this writing project. It is a call to rise above our differences, to turn away from the venom and deceit of partisan politics and give priority instead to finding practical solutions and caring for the safety and security of our local communities.

Early chapters of the forthcoming book point to the strengths of the United States, both as a constitutional republic conceived in the vision of unity within diversity, and as a nation founded on principles of fairness, religious freedom, and moral responsibility.

Later chapters probe our understanding of freedom, both as a nation and in our individual lives. I am now working on Part 2, where we turn our attention to ends and means, envisioning the potential structure and responsibilities of a better future.

What will be the essential economic principles required to get us where we want to go, avoiding the volatile and unpredictable record of a disastrous past? And, how can we begin anew, building local cash economies to resist the predatory pressures of big money?

Most important, what vision of prosperity do we seek? Other than relative material comfort, what do we really want?

We will begin with the thinking of Stanford University economist John B. Taylor, who writes that “the best way to understand the problems confronting the American economy is to go back to the first principles of economic freedom upon which the country was founded. As these principles developed over the years, we can see periods when careful attention was paid to them and alternating periods when they were neglected. And we can draw clear conclusions from this history.”

Professor Taylor’s book, “First Principles” (2012), is helpful. In my own writing I have used the phrase “first principles” to identify the more fundamental moral principles that I believe undergird all others, including economic principles. I will continue to do so. However, the principles outlined by John Taylor will guide us well as we consider the means for structuring a more stable national economy.

I will add my thinking on the role of moral principle and social responsibility in providing the foundation for economic principles, and we will consider the implications of Professor Taylor’s wisdom when applied to rebuilding devastated local and regional economies.

The professor lists five defining principles for economic freedom, and observes with obvious interest that these five also happen to constitute principles for economic success. They are:

• A predictable (consistent) policy framework
• The rule of law
• Strong incentives
• Reliance on markets
• A clearly limited role for government

“Economic theory and experience,” he writes, “show that [these principles] lead to superior economic outcomes, including strong economic growth and rising prosperity. The principles of liberty that Thomas Jefferson and the other founding fathers first delineated in the Declaration of Independence in 1776 are remarkably similar to the principles of economics that Adam Smith first heralded in the “Wealth of Nations” in the same year, and that remain central to economics today.”

It is essential that we be guided by principle as we reconstruct the future from the ashes of the past. A principled future can only be realized by principled means.

Tom

Next week: Central Planning: Economic Intervention and Instability

Note to readers: Your thoughts and feedback will be appreciated; please join the conversation.