Wednesday, August 19, 2009

The invisible hand of the market, Darwinism

I have long based my beliefs in favor of market regulation on what seems to be a significant flaw in basic economic theory. It turns out others are starting to come around. The analogy of an invisible hand within economics seems to be a firm parallel between the blind watchmaker of evolution. That economics is, at it's core, a Darwinian process where the system that makes the most money tends to survive. So from humble beginnings we end up with an amazing system that is intricate and impressive that self-regulates in basic ways like many simple biological evolutionary processes.

The laissez faire belief is that the market works best when governments and society keep their hands off and lets the hand of the market decide. What they don't seem to understand though is that nature is full of parasites, from worms that live in your eye, to plants that choke to death other plants, to viruses that take over your cells and mold that grows on your feet. Nature is largely a web of parasites. Organisms that devour plants for all the added energy and eat and leech and prey upon each other. And where nature gets along and works in some cooperative fashions the economic parallels are those of monopolies and trusts and market collusion. It isn't a dog eat dog world out there, in fact, dogs are pack animals and work together to devour various other kinds of prey. Rather than fight each other and yield benefits to the consumer, they work together in order to help each other and thus themselves.

There is a long relationship between the theory of evolution and economics. In fact, Darwin borrowed from and saw the light because of the economist Malthus. If the economies of nature were like the economies of humanity, then there is a required curbing of the exponential growth of all species and so any tiny advantage that crept into an individual would quickly become extremely important. The error behind laissez faire thinking is similar to humanity without society.

It is no coincidence that many of those who adhere to a firm belief of hands-off when it comes to the market also tend to oppose societal equality as well. The idea being, we should simply stay out of everything and let reality decide. These individuals show a strong adherence to the social Darwinistic idea that if somebody is poor, it is because he or she simply isn't the fittest when it comes to society.

The claim is that we should exist within a state of nature, within society, within economics, within the world. Such unbending faith is akin to Nietzsche heralding that coming prophesied Uberman, or Ayn Rand lamenting the evil of taxation as a scourge on the creative people. However, much as Hobbes' state of nature where there is "No arts; no letters; no society; and which is worst of all, continual fear and danger of violent death; and the life of man, solitary, poor, nasty, brutish, and short"-- the adherence to the belief that the invisible hand of the market is a benevolent Deus ex Machina leads to societal outcomes equally as disturbing. And while there is a certain draw to the idea of letting the chips fall where they may, the truth is that the strongest indicator of where you will end up in life is where you started in life. Much of business is successful but parasitic. Success in the realm of buisness is not indicative of a healthy econosphere or a satisfied consumer.

Prior to the regulations of the markets, we suffered collapses every decade or so. It was boom and bust like algae blooms, and a modicum of domesticating the markets to actually work for us rather than blindly accepting quasi-mystical beliefs in the unerring nature of the market, ushered in a long standing era of prosperity. When these regulations were reversed, we started to suffer the market blooms again in the form of various economic bubbles.

It is certainly true that nature designed a marvelous sheep, but with the human domestication of sheep, the benefits to mankind are pronounced, woolly, warm, and scratchy. The advocacy for regulations is an advocacy for domesticating the market. To make it work for us, rather than for its own self interests, which may or may not coincide occasionally with those of the consumer.

The parallels between economics and evolution are deep and far reaching. It is simply one of many directions the universal acid of evolution flows. I think it's actually a minor one (comparatively) but, as a result sheds considerable amounts of light.


Francois Tremblay said...

There are so many falsities in your entry that it's hard to understand how you came to such contradictory positions.

Tatarize said...

Oh, please do elaborate.

Contradictory positions? Like what?