Sunday, October 9, 2011

...dig in for the duration

By kay.e.strong


Occupy Wall Street is a grassroots movement fueled by dissatisfaction about financial and social inequities being borne by growing numbers of ordinary Americans—the 99%, to be more precise.

The 99% movement has evoked varied responses from blatantly dismissive---Republican presidential candidate Herman Cain: “Don’t blame Wall Street, don’t blame the big banks, if you don’t have a job and you’re not rich, blame yourself!”, to in your face:“We are the 1 percent” sign posted on an eighth floor window of the Chicago Board of Tradeand soft sympathy from Federal Reserve chair Ben Bernanke: “They blame, with some justification, the problems in the financial sector for getting us into this mess, and they’re dissatisfied with the policy response here in Washington. And at some level, I can’t blame them.”

The motives of the 99% are clarified in the article Protesters Against Wall Street (NYT 8 Oct 11)
“… protest is the message: income inequality is grinding down that middle class, increasing the ranks of the poor, and threatening to create a permanent underclass of able, willing but jobless people.
…the protesters are giving voice to a generation of lost opportunity.”
The good news is that the emergence of the 99% movement is evidence of a healthy dynamic system in action, at least, in my humble opinion.  It is not a threat to be quashed but rather a source of vital information to be processed through the system.  Though difficult for many to accept, there is nothing sacrosanct about the current economic design.

In his voluminous tome, The Origin of Wealth (2006), Erin Beinhocker tells a provocative tale of the wealth of nations. This tale fleshes out the role of evolution and complexity and disequilibrium as a normative state of the economy.

Evolution is seen as a general purpose algorithm for grinding through the design space of possibilities—variations on the mix of physical technologies + social technologies + business plans.  According to Beinhocker, wealth creation follows a simple but profoundly powerful three step evolutionary process: differentiate-select-amply.  As in the story of biological evolution, designs are discovered by trial and error with the successful retained, replicated and built upon; the unsuccessful discarded.  Beinhocker asserts that “if conditions are right, competition between designs for finite resources drives emergence of greater structure and complexity over time (P14).”

Economic evolution oscillates between two patterns for selecting the operational design of an economy: Big Men versus Markets.

Beinhocker narrates that “[i]n the early days of the economy, the selection process was fairly straight-forward—survival (P287).” A fit design allowed society to survive and struggle yet another day. Wealth arose as the difference between caloric intake and caloric expenditure.  However, as society and the economy grew more complicated the feedback loop on design selection becomes more detached.   Social factors began interfering with the natural selection process and the Big Man system emerged.  “In a Big Man economy, resources are directed toward the ventures that best lines the pockets of the Big Men. …In a Big Man system, the fitness function maximized is the wealth and power of the Big Man (and his [attendant] cronies) rather than the overall economic wealth of the society (P288).” Wealth creation favors the Big Men.  For as long as the distortions of the Big Man system are not life-threatening, the design plan remains unchallenged. Evolution’s clock-speed is slowed down.  “In extreme cases, …Big Men can actually stop economic evolution in its tracks …(P288)”.

By way of contrast, in a market economy resources are directed to ventures that make the best economic use of them; …the fitness function attempts to satisfy the overall welfare of the people participating in them (P288).

The emergence of the 99% movement is a first challenge to the economic design plan centered on Big Men. The social inequities identified by the 99% are supportive evidence against wealth distribution in a Big Man system.  Beinhocker, however, reminds us that “[i]n extreme cases, …Big Men can actually stop economic evolution in its tracks, and as long as people are merely close to starving, as opposed to actually starving, such evolutionary dead ends can last for a very long period (P288)”.

It appears the 99% have a long night ahead.  To go the distance, the 99% are going to need reinforcements to release the economic evolutionary process from the grip of the Big Men.



Kay Strong, Ph.D., Southern Illinois University, M.T., University of Houston, M.A., Ohio University; Associate Professor at Baldwin-Wallace College; Areas of expertise: international economics, contemporary social-economic issues, complexity and futures-based perspectives in economics. E-mail: kstrong@bw.edu

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This blog lives under the auspices of the Department of Economics whose mission has been to hold high the lantern beaming an "economic way of thinking" onto the world. Selfishness, rationality and equilibrium have been central to the teaching of an economic way of thinking rooted in the Renaissance. And, in this regard, the department has faithfully stayed the course. The intent of this blog, thinking out loud..., however, is to entertain exchanges which may challenge the centrality of economics as we teach it.