Right Reason

Capitalist Peace?

 

What problem could there possibly be with a data set choosing 1940 as its origin?

 

 

In an interview with Vox , Steven Pinker, the author of The Better Angels of Our Nature, argues that the world has been safer than it has ever been in the last hundred years, with the two main causes being capitalism and an Enlightenment morality. According to Mr. Pinker, capitalism has reduced the benefits of war since people can know get things from their neighbors without having to steal them. Rather than people generating their wealth through conflict, they now generate it through mutually beneficial specialization and trade. In turn, the Enlightenment morality, which has come hand-in-hand with capitalism, has helped to reduce violence by changing the way that people have calculated the costs and benefits of foreign policy. As Mr. Pinker explains:

In the 19th century, there was this cliché from [Carl] von Clausewitz that war was just the continuation of politics by other means: you consider whether to go to war [like any other policy option]. Now that's just not something decent leaders do.

Finally, cost-benefit calculations depend on what counts as a "cost." If you lose several tens or hundreds of thousands of your own citizens, is that a cost? And how big a cost is it? Now, increasingly, that counts as a cost: leaders are less likely to see their young men as cannon fodder, which means countries are willing to endure other costs to avoid that one. That's a result of the rise of humanistic sentiments, as opposed to nationalistic or ideological ones.

The problem with Mr. Pinker’s thesis, at least the most obvious problem, is that the data used to argue for a seventy-year long peace since the Second World War ended is horrifically biased and, as rigorously demonstrated by Pasquale Cirillo and Nassim Nicholas Taleb, Mr. Pinker’s naïve statistics don’t exactly hold up. The graph for the interview, produced by Vox and reproduced above, is close to fraudulent in the way that it cherry picks a starting date that has little to do with capitalism.

 

I won’t go deeply into Mssrs. Cirillo and Taleb’s argument. Instead, I will exhort any reader to at least skim it themselves. In short, the article demonstrates how cautious we have to be in talking about the trend of violence across human history and how critical assumptions are made if we were to simply look at the sample mean, as the observed mean is not an estimator of the true mean. On Twitter, Taleb also did what Vox’s hacks didn’t do and that is to graph more than mere battlefield casualties, as the destruction of war isn’t constrained to where the battles happen:

 

 

Getting back to my main target: Vox’s biased graph skews our entire understanding of the 20^th century by cutting out almost half of the pertinent data. Although the Second World War is generally the apocalyptic conflict that captures the imagination of contemporary commentators, its predecessor is the conflict that really set the stage for the 20^th century’s hot and cold wars. Furthermore, in the beginning of 1914, people could freely trade and move between borders to a much higher degree than they could now, so any argument for the capitalistic peace hypothesis needs to be able to address why the argument doesn’t hold for 1914. The world was, after all, interconnected in trade. Even Krupp, the supplier of most of Germany’s arms, had a business relationship with the British government, whose subjects would soon enough bleed out due to weapons produced by Krupp. 

Interconnectedness is, therefore, not a sure panacea to conflict, nor is the cosmopolitan attitude that comes along with interconnectedness. Indeed, the high degree interconnectedness of nations may very well have affected the statistical properties of war in the past century or so, since an interconnected world would probably have less small wars, yet there will always be a small chance of an apocalyptic war. Power laws are everywhere. Had Vox chosen, say, 1800 as the starting date for the graph, the graph would have told a story about how apocalyptic wars are very much possible in a capitalistic world. It would have been a story more compatible with a power-law world than a world made safe by the international division of labor. 

 

As a bit of an aside, one way I like thinking about the capitalistic peace hypothesis is with a basic thought experiment: Would a liberal Englishman reading a newspaper article about the ascent of Kaiser Frederick III, the liberal emperor, to the German throne, drinking his tea from China, his clothing made from Egyptian cotton spun in a Manchester mill, and with a copy of Adam Smith’s Wealth of Nations upon his bookshelf have imagined the slaughter that would define the political lives of his successors? I doubt it. 

Depending on his naïveté, he would have probably thought that the worst atrocities of human history were behind the population. If he were a child of the Enlightenment like Pinker, I really doubt that he could have foreseen the purposeful starvation of the Ukrainian population, by the government to follow the Tsarist régime to boot, and he would have never imagined the industrial slaughter of the central and eastern European Jewish population. 

Of course, as a thought experiment, this thought needs to be taken with a massive grain of salt. Nevertheless, I think it gets to a fundamental truth: The expounders of progress in the 19^th century would have been very disappointed with the fruits of the 20^th century. That, in turn, means that we should treat the notion of ‘progress’ with some caution. The broad pronouncements of the capitalistic peace hypothesis should ring a bit utopian to our ears.

 

Whatever philosophical problems I may have with Pinker’s narrative about Enlightenment morality, the most pressing problem with his view of history is statistical. Without a doubt, Vox’s data is biased. It cherry picks a starting date to create a graph that seemingly perfectly corroborates his hypothesis. Despite the seeming corroboration, starting a graph to illustrate capitalistic peace at 1940 is fraudulent and should be called out for being so. The commercial society didn’t emerge in the forge of the Second World War—indeed, the war did more to make a world safe for socialism than liberalism. Instead, the war broke out in a world where the international division of labor, innovation, and the pursuit of honest income was already apart of the daily lives of most belligerents. 

When we correct for the biased starting date and use more sophisticated statistical tools than a journalistic average, what we see is that the 20^th violent has been just as violent as many other periods of human history and even more violent than others. That’s certainly no argument for a fundamental change in the way that violence is treated in human society.

Garett Jones' Tenth Commandment Club

 

You shall not covet your neighbor's hour; you shall not covet your neighbor's wife, or his manservant, or his maidservant, or his ox, or his donkey, or anything that is your neighbor's.

Gen: 20.17 

 

In a review of Thomas Piketty's Capital in the Twenty-First Century, "Living with Inequality," Garett Jones makes a point that I think is much broader than merely a critique of Piketty's approach:

Instead of preaching to reduce inequality as a means to reduce social conflict, we should instead preach to reduce social conflict itself. The best way to defuse the situation is to teach tolerance for inequality. Piketty wants tolerance formerit-based inequality, for better workers earning more than others, for a reward to frugality, and the like. But we could also use tolerance for luck-based inequality: for the inheritor of a fortune, for the pretty-good CEO who gets an eight-figure bonus just because his company's product went viral on Vine. Political battles against inequality have too many invisible casualties—missing factories, unbuilt apartment complexes—even in the best of cases. And given the intense political world of the aging rich countries, we're unlikely to experience the best of cases.

That's why I propose the creation of the Tenth Commandment Club. The tenth commandment—"You shall not covet"—is a foundation of social peace. The Nobel Laureate economist Vernon Smith noted the tenth commandment along with the eighth (you shall not steal) in his Nobel toast, saying that they "provide the property right foundations for markets, and warned that petty distributional jealousy must not be allowed to destroy" those foundations. If academics, pundits, and columnists would avowedly reject covetousness, would openly reject comparisons between the average (extremely fortunate) American and the average billionaire, would mock people who claimed that frugal billionaires are a systematic threat to modern life, then soon our time could be spent discussing policy issues that really matter.

People who are genuinely materially desperate aren't the issue here. The Tenth Commandment Club has no qualms with a Jean Valjean stealing bread to feed his family. But the implicit emphasis of Piketty's Capital is with comparing the 1 percent (or 0.01 percent) to the typical person living in the G-7, a person who is, on average, more fortunate than most of the world's population and more materially fortunate than almost anyone living in the 19th-century novels that Piketty so loves to discuss. To paraphrase an old P.J. O'Rourke joke, just think about Mr. Darcy's visits to the dentist.

 

 Jones' point was probably inspired by Vernon Smith's Nobel Memorial Banquet Speech, when Smith said we wished to celebrate:

The ancient Judeo Commandments: Thou shalt not steal or covet the possessions of thy neighbor, which provide the property right foundations for markets, and warned that petty distributional jealousy must not be allowed to destroy them. Neither shalt thou commit murder, adultery or bear false witness, which provide the foundations for cohesive social exchange.

As usual, ancient wisdom does better than modern economics. Piketty aside, inequality is simply an unjustified obsession of far too many economists on the left. With that obsession they all too often violate the Tenth Commandment.

Nassim Taleb, a magnificent voice in the current debate in favor of ancient wisdom, lambasts those who have focused on inequality per se instead of the threat of those who gain income despite having not skin in the game:

Worry about skin in the game, not inequality. Worry about equality in opportunity not outcome. Worry about the powerful corporations taking over the system via lobbyists and blocking artisans. Worry about the class of privileged mandarins-WNSITG (with no skin in the game) taking over the system via "grandes ecoles"... 

Taleb also critiques Piketty's statistical measurements of inequality, but here I don't see myself talking about Piketty himself as much as larger trends within leftist economics.

Really, what matters is an ethical point: We all too often violate the Tenth Commandment when we talk about the threats of inequality. It doesn't matter whether our words are put in terms of the 99% or of the social conflict created by inequality, they are still motivating by wanting what is our neighbor's.

A pity is that one of the principalc jobs of the economist is to teach the public that the commercial society is morally good. That is something we can all learn from Adam Smith's research program from The Theory of Moral Sentiments to The Wealth of Nations. Through the honest pursuit of income, the very rich work towards the benefit of all. The very rich thereby deserve celebration, not derision. 

It is only when the very rich don't have skin in the game and when they use politics to game the system for themselves that we should worry. Otherwise we should simply be good Jews/Muslims/Christians/Smithians and respect the Tenth Commandments. As usual, traditional deontic morality > modern technical economics. 

The Public Debt as a Turkey Problem

 

 

 

Why does this graph matter? It matters because the upward trend in spending has not been matched by a similar upward trend in revenue, as shown by the graph below from the Congressional Budget Office:

 

 

The Congressional Budget Office has a projection until 2024, but that shouldn't be given too much salt. As Nassim Taleb quips in The Bed of Procrustes, "For the ancients forecasting historical events was an insult to the God(s); for me, it is an insult to man - that is, for some, to science." 

The Federal deficit is one big Turkey Problem. People take evidence that the trend has continued from Eisenhower on as evidence that the trend can last forver, falling victim to the classic problem of induction. At least the Congression Budget Office addressed that the continuing deficit reduces the Federal government's possible set of options when it comes to facing future crises:

Such large and growing federal debt could have serious negative consequences, including restraining economic growth in the long term, giving policymakers less flexibility to respond to unexpected challenges, and eventually increasing the risk of a fiscal crisis (in which investors would demand high interest rates to buy the government’s debt) (Ibid).

 

Surrounded by the dark forces of time and ignorance, the best we can often do is not to predict future crises, but to put ourselves in the position of rising to their challenge. After all, if future history were certain than it would have already happened. The Federal debt ties the Federal government to certain promises which reduce its options for the future, and by doing so it makes the Federal government fragile to unexpected change.

Adaptability is the key to success in a world like ours, and the deficit robs our government, day by day, of the adaptability it may need in the future. The shame is that, the Congressional Budget Office's forecasts to 2024 notwithstanding, we won't know what we need to be adaptability for until it has already happened. 

What is Complexity?

 

Melanie Mitchell, an External Professor at the Santa Fe Institute, provides a quick description of how the study of complexity can influence our understanding of the world in "How Can the Study of Complexity Transform Our Understanding of the World?" A short excerpt: 

The “study of complexity” refers to the attempt to find common principles underlying the behavior of complex systems—systems in which large collections of components interact in nonlinear ways. Here, the term nonlinear implies that the system can’t be understood simply by understanding its individual components; nonlinear interactions cause the whole to be “more than the sum of its parts.”

Complex systems scientists try to understand how such collective sophistication can come about, whether it be in ant colonies, cells, brains, immune systems, social groups, or economic markets.  People who study complexity are intrigued by the suggestive similarities among these disparate systems.  All these systems exhibit self-organization: the system’s components organize themselves to act as a coherent whole without the benefit of any central or outside “controller”.  Complex systems are able to encode and process information with a sophistication that is not available to the individual components. Complex systems evolve—they are continually changing in an open-ended way, and they learn and adapt over time. Such systems defy precise prediction, and resist the kind of equilibrium that would make them easier for scientists to understand. 

Most discussions of complexity go without a very good definition of what complexity is, so Mitchell's essay is certainly valuable in helping us focus on exactly what we mean by "complexity." 

 

Nassim N. Taleb provides his own description of the essential features of complexity in Antifragile:

The organic-machanical dichotomy is a good starter distinction to build intuitions about the difference between two kinds of phenomena, but we can do better. Many things such as society, economic activities and markets, and cultural behavior are apparantly man-made but grow on their own to reach some kind of self-organization. They may not be strictly biological in that, in a way, they multiply and replicate - think of rumors, ideas, technologies, and businesses. They are closer to the cat than to the washing machine but tend to be mistaken for washing machines. Accordingly we can generalize our distinction beyond the biological-nonbiological. More effective is the distinction between noncomplex and complex systems. 

Artificial, manmade mechanical and engineering contraptions with simple responses are complicated, but not "complex," as they don't have interdependencies. You push a buttom, say, a light switch, and get an exact response, with no possible ambiguity in the consequences, even in Russia. But with complex systems, interdependencies are severe. You need to think in terms of ecology: if you remove a specific animal you disrupt a food chain: its predators will starve and its prey will grow unchecked, causing complications and series of cascading side effects. Lions are exterminated by the Canaanites, Phoenicians, Romans, and later inhabitants of Mount Lebanon, leading to the proliferaton of goats who crave tree roots, contributing to the deforestation of mountain areas, consequences that are hard to see ahead of time. Likewise, if you shut down a bank in New York, it will cause ripple effects from Iceland to Mongolia. 

In a complex world, the notion of "cause" itself is suspect; it is either nearly impossible to detect or not really defined - another reason to ignore newspapers, with their constant supply of causes for things (Taleb 2013, 56). 

 

The notion of complexity and its implications for our cheished notion of causality has important implications for what it means to understand the world. The idea that in order to have knowledge of the world, we have to know its causes dates at least as far back as Plato's "Meno," and Aristotle provided a mature description of the doctrine in The Physics:

For the point of our investigation is to acquire knowledge, and prerequisitve for knowing anything is understanding why it is - in other words, grasping its primary cause. Obviously, then, this is what we have to do in the case of coming to be and ceasing to be, and natural change in general. Then, once we know the principles of these things, we can try to analyze anything we are looking into in terms of these principles (Aristotle. Phys II.3.194b18-22, trans. Waterfield).

The attempt to try and discover general causes of things within a complex system shall always fail. Whereas we can provide a general discription of a complex system like an ecosystem, as Taleb did above, we can never identify the exact causes. Instead, all we can do is to point out that there were certain patterns of events which lead to the creation of the world as we see it, and to humbly accept that we shall be able to go no further than that rough description. Rather than trying to understand those systems in terms of the arrow of causality, we can only understand them in terms of patterns, and that is how the notion of complexity should change our basic world view. 

 

 

Bibliography

Aristotle. The Physics. Translated by Robin Waterfield. Oxford: Oxford University Press, 1996. 

Taleb, Nassim Nicholas. Antifragile. New York: Random House, 2013.

Edge's Scientific Ideas Ready for Retirement

 

Edge recently published a roundtable of contributing authors arguing for what scientific idea they think should be abandoned in 2014 in “2014: What Scientific Idea is Ready for Retirement?”  Definitely worth at least skimming. Reactions to a few are below:

 

 

Nassim Nicholas Taleb argues that we need to retire the concept of standard deviation, which is both inferior to mean deviation and has been masquerading as that more sound concept ever since Karl Pearson introduced it in 1893:

The notion of standard deviation has confused hordes of scientists; it is time to retire it from common use and replace it with the more effective one of mean deviation. Standard deviation, STD, should be left to mathematicians, physicists and mathematical statisticians deriving limit theorems. There is no scientific reason to use it in statistical investigations in the age of the computer, as it does more harm than good—particularly with the growing class of people in social science mechanistically applying statistical tools to scientific problems.

Say someone just asked you to measure the "average daily variations" for the temperature of your town (or for the stock price of a company, or the blood pressure of your uncle) over the past five days. The five changes are: (-23, 7, -3, 20, -1). How do you do it?

Do you take every observation: square it, average the total, then take the square root? Or do you remove the sign and calculate the average? For there are serious differences between the two methods. The first produces an average of 15.7, the second 10.8. The first is technically called the root mean square deviation. The second is the mean absolute deviation, MAD. It corresponds to "real life" much better than the first—and to reality. In fact, whenever people make decisions after being supplied with the standard deviation number, they act as if it were the expected mean deviation.

Deirdre McCloskey and Stephen T. Ziliak’s The Cult of Statistical Significance is another compelling criticism of the problem of the mechanistic application of statistics to problems of society. When statistics are going to be used, the practitioner cannot simply apply cookbook formulas if he is going to get the soundest conclusions; instead, he must understand the way in which statistics manipulates data in order to make statements about wider phenomena. The difference between standard and mean deviation is an example of where practitioners need to get a best grasp of the tools they use. The advent of every practitioner being able to have a powerful computer has also alleviated the need for statisticians to rely on simpler means of calculation - one possible reason why the frequentist view of statistics won out against the Bayesian - and has made it possible for practitioners to integrate more demanding calculations within their statistics.

 

 

 

Peter Richerson, a biologist who is emeritus at the University of California, Davis, argues that the concept of human needs to be abandoned this year for an understanding based on variance:

The concept of human nature causes people to look for explanations under the wrong rock. Take the most famous human nature argument: are people by nature good or evil? In recent years, experimentalists have conducted tragedy of the commons games and observed how people solve the tragedy (if they do). A common finding is that roughly a third of participants act as selfless leaders, using whatever tools the experimenters make available to solve the dilemma of cooperation, roughly a tenth are selfish exploiters of any cooperation that arises, and the balance are guarded cooperators with flexible morals. This result comports with everyone's personal experience, some people are routinely honest and generous, a few are downright psychopathic, and many people fall somewhere in between. Human society would be entirely different if this were not so. The human nature debate on the topic was sterile because it did not attend to something we all know if we stop to think about it.

The problem with Richerson’s argument here is that, in course of making an argument against the notion of human nature, he makes claims which strongly resemble claims about human nature. The assertion that a third of people are saints, a tenth of devils in disguise, and the rest somewhere in between looks very much like an answer to the essentialist question of whether people are either good or evil. The assumption that such a question must be answered on a binary scale of either yes or no is simply a caricature of the study of human nature. 

At its best, the study of human nature is the study of certain propensities within humanity which are universal across human societies, like the Westermarck effect and a concern for purity. Even though Richerson’s criticisms of a naïve view of human nature which conceives of human nature as “causally prior to nurture both in evolutionary and developmental time,” its insights simply do not apply to more nuanced approach, like that within Edward O. Wilson’s book On Human Nature. 

 

 

Adam Waytz argues against the idea that humans are by nature social animals: 

Despite possessing capacities far beyond other animals to consider others' minds, to empathize with others' needs, and to transform empathy into care and generosity, we fail to employ these abilities readily, easily, or equally. We engage in acts of loyalty, moral concern, and cooperation primarily toward our inner circles, but do so at the expense of people outside of those circles. Our altruism is not unbounded; it is parochial. In support of this phenomenon, the hormone oxytocin, long considered to play a key role in forming social bonds, has been shown to facilitate affiliation toward one's ingroup, but can increase defensive aggression toward one's outgroup. Other research suggests that this self-sacrificial intragroup love co-evolved with intergroup war, and that societies who most value loyalty to each other tend to be those most likely to endorse violence toward outgroups. 

Even arguably our most important social capacity, theory of mind—the ability to adopt the perspectives of others—can increase competition as much as it increases cooperation, highlighting the emotions and desires of those we like, but also highlighting the selfish and unethical motives of people we dislike. Furthermore, for us to consider the minds of others in the first place requires that we are motivated and possess the necessary cognitive resources. Because motivation and cognition are finite, so too is our capacity to be social. Thus, any intervention that intends to increase consideration of others in terms of empathy, benevolence, and compassion is limited in its ability to do so. At some point, the well of working memory on which our most valuable social abilities rely will run dry.

Again, a problem that I have with Wytz’s argument is that he isn’t very generous to what people are talking about when they speak of humans as social animals. He says that the concept “has lent credibility to numerous significant ideas: that humans need other humans to survive, that humans tend to be perpetually ready for social interaction, and that studying specifically the social features of human functioning is profoundly important.” It seems that Wytz equivocates the claim that human beings have a propensity towards forming social relationships with the claim that human beings are altruistic, ever extroverted saints. Anybody who has read Darwin’s Descent of Man knows that that is not true, and that social propensities are often parochial propensities. Nevertheless, they are still there, and human beings have the biological capability to be social in a way otherwise unseen in the animal kingdom. 

 

Uncertainty and the Gun

 

 

"You were wrong for years, right for a moment, losing small, winning big, so vastly more successful than the other way around (actually the other way would be bust)."

-Nassim Nicholas Taleb, Antifragile

 

 

 “Do not play with guns!” “Do not point a gun at something you’re not willing to destroy!” These are common maxims of handling firearms. Simply, easy to comprehend, yet capable of savings thousands of lives across the world each year if they were fully heeded.

The injunction is also one that serves as a proper paragon for acting within an uncertain world. It depends neither on exact knowledge of either the changes of there being a round in the chamber nor knowledge of the payoffs involved. Instead, it relies on the recognition that, even though most events would may very well have inconsequential results, a single devastating outcome is possible. Therefore, uncertain about whether the gun is loaded, we ought to avoid playing with it to avoid this catastrophic event.

Most orthodox decision theorists would go about the problem simply by using the statistical device of expected value. With this perspective, one should play with the gun if and only if the expected benefits exceed the expected costs, with the expectation function being the payoff, whether that is the cost or benefit, multiplied by its chance of happening. This statement can be simply stated as:

i) E[B]-E[C]= b.p_b-b.p_c>0

To get the command not to play with the gun, one can easily assign a cost of negative infinity to the costs of dying to provide, under any situation – no matter how sure we are that the gun is unloaded, to never play with a gun.

From a practical perspective, this is clearly not a sound maneuver since there are worse things than dying, especially dying from a gun-shot wound. One can lose everything, have everyone one loves executed and then be hung, drawn and quartered. That is surely worse than being killed by the gun. Even killing a loved one instead of dying oneself from the action may very well be a worse outcome.

However, since we have assigned the payoff to dying from the gun as negative infinity, we are unable to make any outcome worse within the model; ergo, dying as a result from playing with the gun is not infinitely negative. It is some other number.

I’m confident most orthodox decision theorists would here make that cost low enough so as to overwhelm the expected payoff of playing with the gun, and so yield the reasonable answer prima facie not to play with the gun. This may be something fully in line with how most philosophers do decision theory, but there is an ad-hoc aspect to that solution that does not settle well with me.

After all, a theory that can explain everything explains nothing. If we go about fine tuning the parameters of (i) in any way necessary to get the desired outcome, then we aren’t actually saying that much. In addition, these concerns are heightened by the use of equations like (i) to not only explain normative behavior, but positive behavior in the world. (I) can just easily say that a person’s actions reflect that they estimated the expected benefits of her actions to be more than the expected costs of her actions as they can say that a person ought to act only if she expects the expected benefits to overwhelm the expected costs. So which one is it?

In addition, most decision theorists are cheating here. They're cheating because they're basing their method for how they go about fine tuning the parameters of (I) to get what they believe ex ante to be the proper course of action. That's neither a helpful nor an insightful theory; to the contrary, it is simply at best a post-hoc rationalization, and intellectual masturbation at worst. The decision theorist already knows, without needing the framework of (i), not to play with the gun, but what leads to that decision. I would wager it is because he understands that playing with the gun involves small rewards, the fun of playing with the gun, at the risk of horrific injury.

This judgment is much more in line with the rule-based heuristic above of avoiding situations with low payoffs and high rewards. Rather than being concerned about the expected benefit of playing with the gun, the decision theorist, without even realizing it, prima facie looks at the distribution of the payoffs involved and realizes that there in a very undesirable outcome within the distribution that ought to guide his concern. Then, rather than basing his statement for why not to play with the gun based on that distribution of payoffs, he then goes, and uses a calculated average in order to justify it. The decision theorist is thus cheating

Within a world of uncertainty, such as when we simply do not know if the gun is loaded and any guess as to the probability is simply making a figure up, we should act so as to put ourselves in the position to gain from the uncertainty. It’s not because we know that the expected payoff to playing with the gun is negative that we ought to play with the gun. Instead, it is that, even though we do not know the odds of the gun being loaded, we recognize a situation in which there are there are drastically undesirable outcomes that may be smothered away by the expecations functions of (i).

Knowing that all it takes for one of those violent outcomes to be realized is a single te with that intuition in mind we avoid the gun. No calculations of costs and benefits necessary, just recognition of the distribution of the payoffs, which we can infer from a rather elementary familiarity with firearms and human anatomy. Even if the expected payoff of playing with the gun were sufficiently high that expected-value theory would recommend playing with it (imagine a billionaire offering millions for someone to play), we know that the expected value hides a catastrophe (and its all fun and millions until someone gets shot in the head). Being right even a hundred times when playing with a gun and then being wrong on the next is much, much worse than not playing at all.

 

Recognizing the involved distribution of payoffs allows us to act so as to avoid those catastrophes. We don’t understand the world, it is simply opaque to us, and to prosper in this environment, we should act so as to benefit from that uncertainty. To state that we should never play with guns because even a positive expected value from the act hides a catastrophe is to act so as to take advantage of the uncertainty to aid our survival. It doesn’t matter that we think we know the odds of the gun being unloaded because we may be wrong, and so rather than that “may be wrong” perhaps emerging from the dark cloud of uncertainty, like one of Pacific Rim's kaiju, to destroy us, we use that uncertainty to guide us along a better course of action.  

The Imperative of Doxastic Commitment

 

 “Do not think that I have come to bring peace on earth; I have not come to bring peace, but a sword. For I have come to set a man against his father, and a daughter against her mother, and a daughter-in-law against her mother-in-law; and a man's foes will be those of his own household. He who loves father or mother more than me is not worthy of me; and he who loves son or daughter more than me is not worthy of me; and he who does not take his cross and follow me is not worthy of me.”

 -Matthew 10:34-38 (Revised Standard Edition)

 

 

Doxastic (from the Greek word δόξα -“Doxa” - meaning “belief”) commitment, a steadfast allegiance in action to the beliefs one holds, is an intrinsic precondition of honor. After all, one of the fundamental demands of honor is the condition of skin in the game, that the person in question be exposed to the costs of her actions. When an honorable human beings acts, she does so in a fashion that exposes her to not only the benefits, but also all of the costs, no matter how bitter, of that action.

The honorable person is thus fully exposed to all of the harmful consequences that result from her behavior. Just as she has her skin in the game when it comes to her ventures in the world exposing her to the harmful effects of those ventures going belly up, she has her soul in the game when it comes to her moral beliefs exposing her to being hurt by them. Nevertheless, doxastic commitment demands that we put our full soul into the game, and be willing to take whatever hurt that follows.

 

No one likes being hurt, and no one especially likes consciously opening himself to harm in the future. Soul in the game exposes the very fiber of our ethical being and identities to wounds, uncertain in their severity, so it should be no surprise that so many want to avoid identifying themselves with clear-cut moral propositions that doxastic commitment requires. As Cicero noted in On Duties: “From the beginning nature has assigned to every type of creature the tendency to preserve itself, its life and body, and to reject anything that seems likely to harm them...” Our animal nature thus expresses itself when we hedge on our believes and remove our whole soul from the game in order to avoid pain.

However, if doxastic commitment leads to a great chance of being hurt in the future, then would it not be rational to protect oneself against that pain by hedging one's beliefs? We need not abandon all of our moral commitment to do this; rather, we only need to be a bit wishy-washy on key matters that would bring up conflict. Our soul need not completely out of the game, but it could just play the game less intensely. However, this ignores the twofold importance of doxastic commitment. Not only is it a laudable trait for a human being to have, but doxastic commitment is conducive to the selection of the best moral practices across societies.

For one thing, fear of pain is never a virtuous motivation. It may illicit sympathy from an onlooker, but the impartial spectator would never applaud it. There is simply no honor in it. That being willing to accept great costs for one's beliefs is so important to honor is displayed in dueling traditions in history. Those customs demanded that a duelist be willing to sustain great bodily harm, and even death, to display their doxastic commitment and therefore their honor.

 

Another aspect of doxastic commitment is that it is much easier to keep people accountable for their beliefs in a community that adheres to that custom. Doxastic commitment thus allows for the efficient communication of desired moral conduct because a person with her full soul in the game is open to social cues that alert her to the desirability of her conduct. Why this is so can be understood in light of systems theory. In a complicated system in which paths of concatenation twist and turn this way and that, simple signals that illicit certain responses from the constituent parts of the system are a means of ensuring that the constituent parts of that system are operating as they need to ensure the health of that system. Thirst and hunger are two mundane examples by which an animal body, itself a system of many constituent parts, ensures that it is kept well fed and satiated. An animal need not take measurements of either hydration or nourishment to maintain its health; instead signals within the system provide controls that keep it acting towards the overall wellbeing of the whole system.

A moral community is also a complex, adaptive system since there is a constantly changing frequency of moral habits within it, and those frequencies can change based on the signals of approbation and censure they interact with. In order for the best patterns of conduct to multiply within the community, people need to learn what those best patterns of conduct are, and be put into a situation in which they are likely to actually go through with adopting them. Both are critically necessary. In order to discover them, people need to have their moral character open to critique. So much in human knowledge proceeds via the process of conjecture and refutation. This is especially true when all of the knowledge necessary to come to the final judgment is rarely at the disposal of any one person, which is certainly true in practical ethics. We may never have the knowledge to determine the judgment of the impartial spectator, but he social process of conjecture and refutation, of approbation and censure, can help us come close.

 

However, moral learning by approbation and censure can only function when there's soul in the game. When people do not put their whole soul in the game, they weaken the signals that they receive about the desirability and propriety of how they live their lives. When people choose to associate themselves with moral propositions that are so indefinite that they can be twisted to suit almost any situation imaginable, then they are unaccountable. Any attempt to criticize them is like trying to grip water: It will always frustratingly slip between one's fingers, ever in metamorphosis to accommodate the circumstances.

Worse, people are more likely to put their whole soul in the game when they are likely to receive praise than when they are to receive condemnation. So now not only is not holding to the habit of having soul in the game not only because it delays the process of the discovery of the best morals by conjecture and refutation, but it also corrupts that process because people will act so as to get a positive signal without truly having the trait that would bring that positive signal about. Not only do they not have their whole soul in the game, but the soul they put there is not their own.

 

As a result, doxastic commitment lends itself not only to personal virtue, but also the efficient operation of an ethical society in which everyone gets not only the benefits, but also the costs, of their moral beliefs, which in turn helps to weed out the least proper and least cleaved-to moral beliefs.

Doxastic commitment is thus not only a sine qua non for a human being's virtue, but also a rule that helps the efficient discovery of the best moral beliefs. Without soul-in-the-game, not only is an individual really incapable of standing for anything because he is incapable of being wrong on anything, but an individual is not accountable for what they have said before because they have not committed to it. A human being without soul-in-the-game is either too afraid of the pain that being open to the costs of one's beliefs or simply does not have any. The impartial spectator would certainly applaud neither.   

Selection and Self-Organization

 

 

“The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U. S. Steel illustrate the same process of industrial mutation-if I may use that biological term-that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. “

- Joeseph Schumpeter

 

Πἁντα ῥεῖ. Even though we have no record of Heraclitus ever saying that, πἁντα ῥεῖ - everything flows – has become the maxim of his philosophy - a philosophy in which we can never step in the same river twice or where justice is strife. Even rejecting everything else Heraclitus said, he was able to put into proper perspective something that must always be on our mind when thinking about, well, anything: Everything changes with time, and the passage of time brings along with it change that, poetically indulging in Heraclitus' concept of the unit of opposites, is the great creator and destroyer of all. In order to study complex systems like the economy over time, then we must take into account how they are able to cope with change over time and how by this process they are able to show design-like characteristics. To do this, we cannot rely on self-organization alone, but we must have recourse to the concept of selection

Self-organization is not a sufficient explanatory explaining the harmonization and coordination of complex systems with a changing world. Even if self-organized entities, whether it be cells or firms, can come into existence without selective pressures, they are surrounded and must survive within a changing world. In order to fine-tune those entities to the stresses and difficulties of survival. Selective forces are needed in order to adapt the entities that have self-organized to their environment, and to ensure that the population is dominated by that which can thrive, rather than that which is doomed. Yes, complex structures may very well be able to emerge without a designer via self-organization, like molecular self-assembly, but self-organization does not explain why populations are able to survive over time.

This is especially true for complex systems like the economy that are under the constant tyranny of Heraclitean flux. In biological evolution, the selection process operates very slowly, the holistic character of an organisms adaptations, and the conditions of the environmental ecology that determines the selective pressures upon organisms are relatively constant. Living fossils do exist. The fishes of the order Coelanacath, which had reached its current form just about four hundred millions years ago, which were thought to have gone extinct by biologists since the Late Cretaceous period just about sixty six millions years ago until a specimen was found off the South African coast in 1938.

 

In The Origins of Order, Stuart A. Kauffman argues that the existence of these living fossils like the order Coelanacath is a strong piece of historical evidence that once species gain their form via self-ordering phenomena, that selection cannot do much to alter the self-ordered forms of species, that order exists despite selection not because of it. However, within the market-economy, evolution proceeds at a much more rapid pace with much more demanding selective pressures than for biological evolution. The demands of profit-maximization do not treat living fossils within the economy very well, and even those business practices that date over a century have had to continuously adapt their practices to the demands of the world. As a result, Kauffman's argument that selection cannot do much to upset the form of complex evolutionary wholes is much less persuasive because it requires a relatively constant ecology and a slow pace of selection.

Limiting ourselves here to the social domain of evolution, if self-organization is the only means for the emergence of order, then the self-ordering entities must be able to deal with the problems that will bring and therefore they must be very robust against change. Important to recognize here is that all self-ordered creations must have non-anticipative strategies against the random shocks that time will bring. As a result, the only means by which a complex system can adapt to random changes is by the selection of those self-ordered objects that have “chosen,” a word that is often still must be used metaphorically since even objects self-ordered by a human mind cannot be designed in anticipation of all relevant future problems, After all, without specifying a selective pressure at work, there is no means by which entities that have self-organized will be able to survive over time. There is simply no way of speaking about self-organization and the survival of what has self-organized without invoking the concept of selection over time.

Once self-organized entities come into existence in society and time passes, bringing change along with it, some of those entities will continue to exist while some will dissolve into the dust. Even though change comes and goes, the complex systems that are human societies have generally endured. Moreover, they have generally thrived. This is especially true for market-economies. With that come questions about the adjustment of markets and how the overall health of the market is able to thrive even though so many of the smaller pieces that make up the market will ultimately fail. Markets do not do not adapt to change simply by the existence of self-organized entities like firms and stock markets. They adapt to change by the success of those most able to foresee future conditions and the failure of those incapable of foreseeing future conditions. Profit reigns supreme and, as Ludwig von Mises pointed out in Human Action, the source of all profit is the prediction, by accident or design, “the future constellation of demand and supply.” After all, it is through the competitive process that the firms, to take one example of a self-organized entity in society, most capable of maximizing their profits and thriving through time survive while those firms that are not able to are destroyed. Again, we see that in order to explain complex systems through time, we need to recourse to an explanation that has selection over time baked into it, and which helps make it fuller.

 

Nassim Nicholas Taleb has illumined the process by which complex systems adapt to change in his book Antifragile by arguing that a complex system can only benefit when its consituent parts are able to fail. What he calls the “antifragile” are those things in the world that benefit from variability, like how bones can grow stronger when physically conditioned, and the “fragile” that which does not benefit from variability like a porcelain tea cup, easily broken by the slightest. Taleb argues that a complex system can only benefit from variation if the individual components of that system are themselves fragile, and can be dissolved by change leaving only that which has lasted through the change. Returning to the example of the last paragraph, the health of the markets and their overall antifragility is only made possible by the fragility of individual entrepreneurs. Taleb himself recognized this and recommended in Antifragility that there be a “National Entrepreneur Day” to commemorate the legion sacrifices made by fragile entrepreneurs in order to secure the greater good of an antifragile economy

Like nature, the markets are red in tooth and claw. That which cannot anticipate the future conditions of supply and demand bites the dust while that which can remains and perhaps even prospers. Even though the fragile within the system may be destroyed, the system is benefited by the shocks brought about by variability since the shock has eliminated features within the system that could not stand the flux of change. Of course, no system is infinitely antifragile, so to speak. After all, a large enough shock will be able to completely eliminate a complex system in fell swoop, like an asteroid leading to world-wide, mass extinction, so it would be more sound to say that complex systems are antifragile up to a point. Nevertheless, their antifragility highlights that we cannot explain the adaptation of complex systems like the economy merely with the concept of self-organization; instead, what is needed is a theory that can explain the selective mechanisms by which those systems change. And how they change is by change in the frequency of their constituent parts, whether they are self-organized or not.

 

In the end, self-organization simply cannot be an adequate explanation for the adaptive nature of complex social systems since it cannot take into account the change that is brought upon such systems by the passage of time. We need selection over time for that. Only with the concepts of variation, replication, and selection can we provide an adequate explanation of how complex systems can more than simply endure through time, but can adapt to the environment that they are within.