What is “The Economy” Anyway?

Throughout this series, we’ve heard from numerous commentators who believe that conventional economic thinking isn’t keeping pace with the technological revolution, and that polarized ideological posturing is preventing the kind of open-minded discourse we need to reframe our thinking.

In this short TED talk, the author[1] of Americana:  A Four Hundred Year History of American Capitalism suggests that we unplug the ideological debate and instead adopt a less combative and more digital-friendly metaphor for how we talk about the economy:

“Capitalism… is this either celebrated term or condemned term. It’s either revered or it’s reviled. And I’m here to argue that this is because capitalism, in the modern iteration, is largely misunderstood.

“In my view, capitalism should not be thought of as an ideology, but instead should be thought of as an operating system.

“When you think about it as an operating system, it devolves the language of ideology away from what traditional defenders of capitalism think.”

The operating system metaphor shifts policy agendas away from ideology and instead invites us to consider the economy as something that needs to be continually updated:

“As you have advances in hardware, you have advances in software. And the operating system needs to keep up. It needs to be patched, it needs to be updated, new releases have to happen. And all of these things have to happen symbiotically. The operating system needs to keep getting more and more advanced to keep up with innovation.”

But what if the operating system has gotten too complex for the human mind to comprehend?  This recent article from the Silicon Flatirons Center at the University of Colorado[2] observes that “Human ingenuity has created a world that the mind cannot master,” then asks, “Have we finally reached our limits?” The question telegraphs its answer:  in many respects, yes we have. Consider, for example, the air Traffic Alert and Collision Avoidance System (TCAS) that’s responsible for keeping us safe when we fly:

“TCAS alerts pilots to potential hazards, and tells them how to respond by using a series of complicated rules. In fact, this set of rules — developed over decades — is so complex, perhaps only a handful of individuals alive even understand it anymore.

“While the problem of avoiding collisions is itself a complex question, the system we’ve built to handle this problem has essentially become too complicated for us to understand, and even experts sometimes react with surprise to its behaviour. This escalating complexity points to a larger phenomenon in modern life. When the systems designed to save our lives are hard to grasp, we have reached a technological threshold that bears examining.

“It’s one thing to recognise that technology continues to grow more complex, making the task of the experts who build and maintain our systems more complicated still, but it’s quite another to recognise that many of these systems are actually no longer completely understandable.”

The article cites numerous other impossibly complex systems, including the law:

“Even our legal systems have grown irreconcilably messy. The US Code, itself a kind of technology, is more than 22 million words long and contains more than 80,000 links within it, between one section and another. This vast legal network is profoundly complicated, the functionality of which no person could understand in its entirety.”

Steven Pinker, author of the recent optimistic bestseller Enlightenment Now (check back a couple posts in this series) suggests in an earlier book[3] that the human brain just isn’t equipped for the complexity of modern life:

“Maybe philosophical problems are hard not because they are divine or irreducible or workaday science, but because the mind of Homo Sapiens lacks the cognitive equipment to solve them. We are organisms, not angels, and our minds are organs, not pipelines to the truth. Our minds evolved by natural selection to solve problems that were life-and-death matters to our ancestors, not to commune with correctness or to answer any question we are capable of asking.”

In other words, we have our limits.

Imagine that.

So then… where do we turn for appropriately complex economic thinking? According to “complexity economics,” we turn to the source:  the economy itself, understood not by reference to historical theory or newly updated metaphor, but on its own data-rich and machine-intelligent terms.

We’ll go there next time.

[1] According to his TED bio, Bhu Srinivasan “researches the intersection of capitalism and technological progress.”

[2] Samuel Arbesman is the author. The Center’s mission is to “propel the future of technology policy and innovation.”

[3] How The Brain Works, which Pinker wrote in 1997 when he was a professor of psychology and director of The Center for Cognitive Neuroscience at MIT.