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Page added on January 21, 2014
A System Doomed To Fail
In the broadest sense, there are three types of systems in the world.
The first are simple systems which are characterized by only a few variables or agents, and which can be described by perhaps a handful of equations (or even one).
The second are systems which are characterized by disorganized complexity. These may consist of huge numbers of agents or variables, and their interactions cannot be described by simple equations; yet the overall system is well-described statistically through averages and can be described as being stochastic. Such systems are typically characterized by a stable equilibrium, provided there are no external shocks to the system. They are incapable of generating internal shocks or surprises. For example, you might consider the distribution of air molecules in a room. You may not be able to predict the motion of any particular air molecule, but you can be reasonable certain that the global population won’t do anything unexpected (like all move into one side of the room leaving a vacuum on the other side).
The third type of system is characterized by organized complexity. As the systems above, one may consist of many variables or agents, each of which is simple, but the system’s behaviour does not lend itself to statistical description because instead of the activities of each component dissolving into a background equilibrium, large-scale (even global scale) structure “emerges” instead of seething chaos. Along with these “emergent properties”, common features of such a system include multiple equilibria, adaptive behaviour, and feedbacks. There is no simple way to describe its behaviour, as much of the system’s history is bound up in its behaviour (what economists call “long memory”).
Complex systems, for all their unpredictability are remarkably resilient. The resilience arises from the way in which this type of system interacts with its environment–through the individual actions of its simple components, the system is able to gather information about its environment and modify its operations to adapt. Yet this adaptation and evolution all occur in the absence of central control.
The above descriptions–and characterizations of three types of systems–go back to 1948. Unfortunately it appears that Dr. Weaver was too optimistic when he recommended science develop an understanding of the third type of system “over the next 50 years”. Here we are 65 years later and we have made only basic improvements in our understanding of such systems.
What has gone wrong? I think it is partly due to the limitations of the Newtonian paradigm on which science has rested over the past few hundred years.
Back to Weaver. He asks,
How can currency be wisely and effectively stabilized? To what extent is it safe to depend on the free interplay of such forces as supply and demand? To what extent must systems of economic control be employed to prevent the wide swings from prosperity to depression? These are also obviously complex problems, and they too involve analyzing systems which are organic wholes, with their parts in close interrelation.
The Fed has answered.
Sixty-five years ago, economics was known to be a complex, organized system. Yet today, the Fed continues to set policy as if the economy were a stochastic system that could be sledgehammered into whatever equilibrium state is deemed politically expedient. I would further argue that the Fed has not managed to succeed even in hammering the economy into a desirable equilibrium, but rather has mastered the ability to create artificial statistics to “justify” its actions.
The system is doomed to fail, because the resilience of natural complex systems requires freedom of action for its individual components. We do not observe resilient complex systems with central control. Yet central control is the dominant ideology of our present political and economic systems. Total control, with a vanishingly thin veneer of democracy, ephemeral as the morning dew.
12 Comments on "A System Doomed To Fail"
Northwest Resident on Tue, 21st Jan 2014 11:27 pm
To put it all in perspective, think of the world economy as an old rubber lifeboat we are all floating in as the violent and unrelenting waves crash over us. Think of the Fed as that guy in the back of the boat with a bucket, desperately bailing water as he yells “Keep rowing, we’re doing great!”
rollin on Wed, 22nd Jan 2014 12:04 am
As Edward Abbey said, no government can exist without enemies. We are now locked in a set-piece threat scenario between advanced military nations. If one were to set aside it’s arms, it would be taken over by the others.
That is the “balance of power” scenario that allows governments to continue dominating it’s citizens. Any new government that would arise from rebellion would have to model itself after the old one to keep the governments from taking over.
Ben Franklin envisioned a helpful, safer society. Thomas Jefferson envisioned a dynamic society where government was changed by the people to meet new conditions. Neither envisioned a lock-down society where everyone is numbered, recorded, and watched.
PapaSmurf on Wed, 22nd Jan 2014 12:19 am
These articles are just hilarious to read. You clowns don’t really belong in the deep end of the pool.
Dave Thompson on Wed, 22nd Jan 2014 12:59 am
What little investment I have in the stock market has more then doubled since the 2007-08 “correction”. However the holdings I have only went up about 10% if you take what it was worth before the “Correction”. Subtract for inflation and the 10% is mostly negated. What does that tell you?
Makati1 on Wed, 22nd Jan 2014 12:59 am
Papa is off his meds again…
action on Wed, 22nd Jan 2014 1:46 am
Although the equation may be too complex to be conceived (if there is even an equation and whatever that means), the most important variable is certainly oil – the source of the pressure for its unbalance.
Davy, Hermann, MO on Wed, 22nd Jan 2014 2:22 am
We can look at the Fed as the top card on the House of cards or otherwise called “THE Ponzi Scheme” Yet, can you say anyone is really in control at the top. It seems to me this is just a self-organizing system with a complexity that is beyond control. The folks that pull the strings are just having their strings pulled. There is the act of command and control but in reality it is just reactions to actions outside of control. We can look at these phenomenon through science and mathematics and see multiple examples of system complexity. So, at this point we can reasonably say this system will behave like other similar systems in the past. This is true even though we are in a new normal characterized by a global system. This is a new state but it will not behave differently just because it is a new global phenomenon. So a long winded answer is collapse of this system must happen by its very nature as other systems have demonstrated. The position of this global system is ominous for a bifurcation.
J-Gav on Wed, 22nd Jan 2014 10:00 am
Makati – I’m not sure he’s off meds; I think he swallowed a whole handful of the wrong-colored ones.
J-Gav on Wed, 22nd Jan 2014 10:08 am
Northwest – Good analogy.
Davy – Good point. It takes a lot of hubris for anybody to believe they can control everything in a complex system. But that won’t stop them from trying … and they are able to yank things arou_nd enough to ‘change direction’ here and there. With no thought to the ‘unintended consequences,’ however. So yup, we can expect a discontinuity.
Northwest Resident on Wed, 22nd Jan 2014 3:36 pm
PapaSmurf reminds me of the idiot student in one of my high school classes who wasn’t bright enough to understand what the reading material was about, so he just laughed and poked fun at it in a pathetic attempt to mask his own stupidity. Come on, PapaSmurf, say something smart for a change, you f’ing idiot.
Davy, Hermann, MO on Thu, 23rd Jan 2014 1:03 am
Northwest Resident on Wed, 22nd Jan 2014 3:36 pm
PapaSmurf may be smarter then we think. He may like pissing people off…Or…he is a closet collapsnik who pretends to not be. You know the most hard core homophobic are usually gay deep down:)
Northwest Resident on Thu, 23rd Jan 2014 3:48 pm
You could be right about PapaSmurf, Davy. I like visiting peakoil because this is where I find articles and comments that tend to deal directly (without the B.S.) with the peak oil and other top issues that we face in our world today. PapaSmurf brings the B.S. with each post, and I must admit, I find that annoying. I do think that PapaSmurf is crying out for help, desperately attempting to incite somebody to knock some sense into him, to slap him up the side of the head and shake him back to reality. I simply try to oblige…:-)