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Max Borders, writing at TCS Daily:

…The whole idea of fixing, running, regulating, designing, or modeling an economy rests on the notion that, if the right smart guys are at the rheostats, the economy can be ordered by intelligent design. But the economy is no mechanism. There is no mission control. Government cannot swoop down like a deus ex machina to explain the inexplicable and fix the unfixable. Why? Because the knowledge required to grasp each of the billions of actions, transactions and interconnections would fry the neural circuitry of a thousand Ben Bernankes. This is what F. A. Hayek called the knowledge problem. Knowledge, Hayek reminded us, is not concentrated among a few central authorities but is dispersed around society. That’s why bad unintended consequences follow government interventions like black swans.

A few economists have not succumbed to the “fix it” fixation. They know that society is not like a machine at all, but an ecosystem. Faster than you can say market fundamentalism, a Keynesian will scoff at this metaphor. But his favorite trope has helped to stagnate many an economy; making Rube Goldberg apparatuses out of means-ends networks, perversion out of productivity. As Czech President Vaclav Klaus wisely notes: “The market is indivisible; it cannot be an instrument at the hands of central planners.”

…

So if not the machine metaphor, why an ecosystem? Economies, like ecosystems are complex adaptive systems. Nature, including the economy, can experience episodes of wild wobbles, fluxes and flows. But it almost always returns to a steadier state known as “ordered chaos.” That is, when it’s left alone. In clumsier but perhaps more familiar language—ecosystems tend towards equilibrium.

Both ecosystems and economies are distributed systems. In the former, billions of interdependent means-ends activities are a reflection of a billion preferences and choices. In the latter, species are dynamic and interwoven in a web of relationships. For both, the whole system is an ever-evolving cascade of change that is unfathomable to a single mind. Data snapshots may be useful for some things, but should not be intended as blueprints for government planners. Even sophisticated computer models will, like the old Philips machine, eventually fail. There are no oracles.

Read the whole thing. Understanding the difference between the machine and ecosystem models is crucial to understanding the mess we’re in, and the role that government can legitimately play.

Government regulation gets to do things like minimize parasites, not decide whether oak trees or pines will cover the landscape.

It absolutely oughtn’t  try to run the whole economy like a farm. We are not cows or sheep.

And see my brief summary of this:

Capitalism is the economic equivalent of evolution.

Socialism is the economic equivalent of Intelligent Design.

Communism is the economic equivalent of Young Earth Creationism.

Tags: ecology, Economics, Max Borders

This entry was posted on Thursday, January 15th, 2009 at 1:28 pm and is filed under Cool Stuff, Economics, Evolution, Government Idiocy. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.