he is the man who arranges the economy?

July 1, 2012

Once upon a time, I posted a video tribute to both Tetris and the turbulent history of the USSR from an indie neo-folk band from England. It featured a supposedly prototypical Russian worker singing through the downs and a few ups of Soviet history while doing Tetris-inspired versions of his work, referring to invisible bureaus, cabinets, and secretaries telling him to build walls from shoddy or top secret blocks, a typical fact of life in an intensely supervised command economy where every resource in the nation was to be used to fulfill a grand, all-inclusive, five year plan. It didn’t work of course, but somehow, the notion of a command economy ruled by precise computations of economic inputs, outputs, and relationships lived on, and even ended up as a rather odd novel called Red Plenty. On the conspiracy circuit, the Zeitgeist Movement and it’s Venus Project offshoot advocate a sort of neo-Marxist technocracy in which computers would control economies rather than humans to ensure a fair distribution of resources and labor. I’ve tried to explain why this is a really, really bad idea in a few skeptical forums, but luckily for me, a mathematician at the University of Michigan tackled the bulk of it in a post that won a 3 Quarks Prize for science writing, showing that such computations just won’t work.

Now, he built his argument around the idea of a perfectly computed communist economy of Red Plenty rather than the hypothetical ZM/TVP technocracy but his conclusion still stands. Modern economies simply have too many variables and are too connected to be virtually manipulated by even the mightiest supercomputers. His logic is pretty airtight, showing why parallelizing this problem is simply unworkable and why the notion of how to optimize an entire economy is inherently flawed because ultimately it relies on someone deciding what will constitute optimal performance. So what would happen if you were to try and create virtual models of an entire economy in motion to serve as your guide? The program would take far too long to run to be viable and what it decides is optimal, if it’ll ever finish running to come up with any oracle-like response, the output would be an enormous spreadsheet of hunches based on what it was told should be considered optimal. May as well just declare what you think is right and cut out all the unnecessary middle-bots that will take thousands of years to run a single simulation. But how do you objectively decide what is and isn’t optimal and why?

While the analysis doesn’t focus strictly on math and veers off into the politics of fairness and economics in a free or command market, it leaves off another crucial problem with a computer-commanded economy. There will always be a black market ran by unpredictable humans and without global wars, economic technocracies will always have to trade with human-ran markets. Suddenly, all the intricate computer models fail because in their assumptions, they’re dealing with rational, predictable actors, even if their behaviors are very complex. As we saw with the Great Recession’s opening act, the Subprime Meltdown of 2008, assuming rationality isn’t a good way to make money. All the formulas that told Wall Street it could keep the gravy train going ignored that brokers and debtors lied, attempted desperate schemes to stave off incoming financial body blows, or had to deal with those who lied or attempted desperate schemes to stave off incoming financial body blows. Dealing with fraud wasn’t part of the equation. Dealing with human panic wasn’t a part of the equation. Predicting what action each decision-maker involved in the implosion on Wall Street and its subsequent bailouts would make would’ve resulted in so many permutations, you may as well have resorted to tea leaves and coffee residue to plan the markets’ reactions. And all that still excludes the other actors involved in the global economy.

Finally, let’s circle back to the recurring issue of who’ll decide what is and isn’t optimal in the cyber-command economy as per the ZM/TVP wish list. Even in a nation state of equals, whoever finds him or herself in charge of the central planning computer can be, as the Soviets used to say, more equal than others. Why? Because humans want things and if they have an opportunity to enrich and empower themselves with a few keystrokes it would be the height of naiveté to assume that they wouldn’t. Ultimately as long as there’s a hierarchy of any sort involved in any social structure, there will be authority figures who have to somehow be kept in check. To trust them with a machine assumed to be an economic soothsayer would invite an abuse of power, and with debates about what the digital economic oracle in question should be optimizing and how, we shouldn’t even bother, especially when we consider that its outputs would be biased, unwieldy, and impractical. Deciding the best way to run an economy isn’t a simple matter and economics offers no clear cut or easy answers. And as tempting as it may sound to simply outsource the problem to a machine, it won’t work. When we don’t know a good way to solve a large and complex problem, even our fastest and more powerful computers will produce little more than a flood of noise in response, much like our minds do when faced with the issue…

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  • knyaz

    Возможно Federal Reserve во время турбулентности доллара откажется от зелёного доллара (доллар другого цвета останется).Это создаст дефицит доллара,что увиличит ценность доллара как мировой валюты и остановит дальнейшее падение доллара.Также это избавит USA от большей части государственного долга.Доллар зелёного цвета будет принимать только USA за свои никому не нужные товары.Таким образом USA избавится от ненужных товаров.Отказ от доллара зелёного цвета Federal Reserve будет мотивировать тем,что в мировой финаннсовой системе находится огромное количество фальшивых долларов такого цвета.

  • Jay L

    Saying someing is too difficult to attempt and would take too long to calculate is using our intiillegence to make excuses rather than solve problems. A few metrics to optimize for could be per person growth in wealth, increase in performance on IQ, EQ, creativity, and physical tests, and happyness. Equality by supressing the best is as bad as disequality by amplifing a few. All decisions in the housing bubble were rational considering the loan officer told the applicant that houses never lose value and they would naturally have higher incomes and a more valuable asset by the time the adjustable rate hit. This let the loan officer close more desls for a higher bonus, the bank got to sell more MBS, the individual got a better house than they could afford, and the investors got AAA rated security pauing higher interest than treasuries. The decisions may have been rational but were based on misleading “information” by people who can not be prosecuted (bankers fund both parties in elections at all levels ). Computers excel at making more information avalable and can be neutral third parties. They are also doubing in performance every year, meaning a simulation too hard to run in real time now may be trivial in the future. The real challenge either way is the success of the deceivers. Kids who can’t get good grades by learning discover cheating is a universal skill that once perfected can be applied across all subjects. Those who excel at deception and manipulation become leaders, not programmers. They fear technocrats, which is why they degrade education even as they say they are improving education.

  • knyaz

    Большинство россиян не могут купить за свою зарплату жильё.Рождение детей в городах тоже не обеспечено деньгами для покупки жилья.На деньги которые выделяются для покупки жилья при рождении ребёнка жильё можно купить только в деревне в сотнях километров от городов.Если так будет продолжаться то в России примерно через 10 лет будет ипотечный кризис,который будет хуже чем в USA.

  • Kelly

    “All animals are equal, but some animals are more equal than others” (Animal Farm).

    One can only imagine all the conspiracy theories you would get the dissect if something like this ever came to pass.