Friday, May 20, 2011

Spontaneous order and the invisible hand

Along with detailing some personal guiding principles, I'm going to post some of my favorite writings. These are a favorite topic of mine.

“I, Pencil,” Leonard Read, 1958.

This economics class features your friendly drawer-dwelling #2 as the narrator, explaining the fascinating fact that no single person in the world knows how to make him. Instead, he is produced by thousands of people each of whom brings a certain piece of knowledge to the table – how to mine graphite, how to log wood, how to design a pencil machine.

“Who feeds Paris?” Frederic Bastiat, from Economic Sophisms. (Google Doc, PDF)

“On coming to Paris for a visit, I said to myself: Here are a million human beings who would all die in a few days if supplies of all sorts did not flow into this great metropolis. It staggers the imagination to try to comprehend the vast multiplicity of objects that must pass through its gates tomorrow, if its inhabitants are to be preserved from the horrors of famine, insurrection, and pillage.

And yet all are sleeping peacefully at this moment, without being disturbed for a single instant by the idea of so frightful a prospect.”

Or consider this problem: try to design some set of metrics to calculate the relative social value of a Civilization IV CD, a bushel of apples, and living in a studio apartment in New York City for a month.

How do you do that? Even if you could, I could easily add fifteen more items to the list.

Any metric you design will take lots of time and still be relatively arbitrary and imprecise. To demonstrate this, ask an acquaintance to assign numbers to the same items and compare results.

The alternative solution: you could just use money.

Commonplace are laments about our financially-driven society, how everything is monetized, how some things like the Civilization IV CDs are priceless, etc, etc. But that’s somewhat like only realizing you have a body when you get sick.

For one thing, complaining as complaining isn’t conductive to happiness. For another, you can’t go lay out in the sun, play Ultimate Frisbee, etc if you don’t notice your corporeality.

Ideally, it seems we should be about equally able to recognize the value of money and its pitfalls. That a toaster can be produced and sold for $5 – our awe and gratitude should be written in our hearts. The many variations of the thought, “Money isn’t everything,” – they should be on the tip of our tongues.

The latter is practiced by almost everyone; the former, by few. I only learned through reading Bastiat and Read.

“Seeing around corners,” Joanathan Rauch in The Atlantic, April 2002.

An economist, a political scientist, and a programmer team up to make computer models of society. They create models of human beings and are able to replicate corrupt societies transitioning to honesty, racial self-segregation in America, Zipf curves for distribution of income and city size, a native American society’s ecological and civilizational collapse. Even genocide in Bosnia and Rwanda.

“I don't think I'm alone in finding this artificial genocide eerie,” writes the author. “The outcome, of course, is chilling; but what is at least as spooky is that such complicated—to say nothing of familiar—social patterns can be produced by mindless packets of data following a few almost ridiculously simple rules.”

The warning is clear. Spontaneous order is a two-sided coin.

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