Monday, May 17, 2010

More thoughts on complexity

I've posted already a couple of times recently on complexity, once in response to the Archdruid's take on it, and an earlier look at Anne of Tagonist's argument. I'm not convinced complexity per se is a problem. After all we humans are very complex physically, but that doesn't matter most of the time to us and we don't need to understand it in order to get through the day. We know we'll wear out in sixty or seventy years all being well and there is really nothing we can do to change that.

I've just been listening to a talk by Niall Ferguson called Fiscal Crises and Imperial Collapses: Historical Perspective on Current Predicaments which you can listen to here. In the second part of the recording, the Q & A section, there is some talk about how the complexity of the modern financial system might make reactions to current events inherently unpredictable, versus the situation which existed even say twenty or thirty years ago before computerised, automated trading took off. All such discussion seems to me to contain the unspoken assumption that the system can somehow be fixed: modified and reformed to be safer, better. But the question is, better and safer for whom?

The financial sector of the economy has grown hugely in the past twenty or so years and the amount of money thus allocated to it for wages and dividends has become a large "take" from the wages of non-financial workers. The Global Financial Crisis showed that when you are big enough to have the welfare of the rest of the economy wound around your finger, you can dictate the terms to governments, even when the crisis can be partly shown to be as a result of your own actions. This talk of predictability and control, or loss of it, really applies to how the financial sector might see their continuing share of power maintained.

Those of us who are outside the financial sector need not worry about any of this — we just need to avoid being under it when it falls. To those of us who still imagine they need to worry, all I can say is any illusions of you being part of that class which think they have a future of living without working — and this is what all the talk of investments and superannuation is all about — are unlikely to survive the catastrophes which will engulf the world of money over the next few years.

For someone living outside the financial world, the problems are simple. How do I feed/clothe/shelter myself and live in a peaceful community? But for those who want to jump on the gravy train, of course the problem becomes one of complexity! If you think that you can live in a fashion that ignores the limitations of a sustainable existence, you are necessarily involved in game playing on a huge scale with millions of other anonymous predators, both individual and corporate, all looking for a percentage of the action, which comes down to the power at some future date to force other people to work for you. This leads quickly to fantasies of legal oversight, punishment and control, with you being a beneficiary as one of millions of superannuation fund holders or self-funded retirees who imagine that your government can look after your interests.

Let me put it to you plainly. The world economy is in the early stages of a profound financial collapse. For now you can watch the riots in Greece on TV and feel a certain smug aloofness. Soon it will be coming to a town near you. The game we have been able to play for the past thirty years, starting from the nineteen-seventies where even the moderately intelligent soon realised buying and selling real estate in an inflationary economy was a great leg-up, is over. So are all the slightly more sophisticated schemes of getting involved in investment funds.

Find another game to play!


Anonymous said...

Thanks for a great post. As you point out, complex systems, such as the world financial system, can become very unpredictable, creating sources of instability. Nature, it seems, has built into its DNA reproductive framework dynamics (memory, redundancy, etc...) that limit unpredictability and unstability. Perhaps we can learn to better design man-made systems to do the same.

The Naked Mechanic said...

An essay by Tainter @

Lloyd Morcom said...

To Complexity: thanks Bernard. My thesis here is we need to make a value judgment as to which course do we pursue and what systems do we design: but do we try and refine the existing system or grope around for a new one?

My implication in this post is that the odds of a favorable outcome to reform of the current system (via politics-as-usual by the average punter through their elected representatives) is very low. The inertia of the system, the unequal power and influence of the various players (currently the big players obviously control the governments) mean the small fry like us are simply toast.

What we have seen in fact in the past couple of years is a massive transfer of future wealth from the majority to a powerful minority through financial and taxation arrangements. The outcome of this will be that in the future (if our current political and economic arrangements endure), there will be a privileged minority living from the efforts of what will be a vast impoverished class born into inherited debt — these will be the former middle classes and working classes of the industrialised west.

But I don't think the current political and economic arrangements will endure, unless we in the West fall quickly into North Korean style authoritarian societies. What we will get will be a mess, but somehow we will have to try and muddle through it, fending off extremist politics on one hand and predatory gangster capitalism on the other. A new system will emerge — it always does.

Lloyd Morcom said...

Thanks for the link Rob! Bernard, I don't know if you've come across the anthropologist Joseph A. Tainter (currently a professor in the Department of Environment and Society at Utah State University) but he has written a very influential book on complexity and social collapse, "The Collapse of Complex Societies".