Left wing? Right wing? It’s complex.

In ‘The Origin of Wealth’ (see initial review here), Beinhocker has a long section where he applies his ideas about complexity and evolutionary economics to more practical contexts. He’s a McKinsey man, so one is obviously business strategy and organisation. Another is politics, where his ambitions are humble: “the Complexity approach to economics has the potential to make the historical framing of politics obsolete”. And we aren’t just talking “mushy” (his word) Third Way, New Labour pragmatic populism here.

"Nail them, even at personal cost to yourself" credit: SenorGif

He characterises the dominant Left-Right distinction as based on two disagreements: 1) how to view human nature (Left: humans are essentially altruistic and bad things are society’s fault vs. Right: humans are essentially selfish and pursuing self-interest is an inalienable right). And 2) the role of states vs. markets. According to complexity economics in both cases they are both wrong. On human nature, it turns out we are “conditional co-operators and altruistic punishers,” that is to say we operate according to a (hilariously) modified Golden Rule of: “do unto others as you would have them do unto you... but if others don’t do unto you, then nail them, even at personal cost to yourself”. Which has an intuitive resonance given my childhood Monopoly-playing experiences. Anyway, that nugget should be the foundation of policymaking (and Beinhocker shows how in welfare debates, for example), not outmoded conceptions based on Left/Right distinctions.

More interesting are his ideas about states and markets. I’m summarising horribly but basically, strong government intervention in the economy as advocated by the Left is misguided because, 1) faced with the vast complexity of the economy, human rationality is hopelessly inadequate - as Orgel’s Second Rule states “evolution is cleverer than you are,” so don’t try to be a market. And 2) if the arbiter of economic fitness is some politician or party at the centre (in Beinhocker's terms, 'Big Man') then the economy is likely to start to orientate itself towards promoting the interest of that politician or party. On the other hand, the Right's fantasy of unadulterated markets existing in pristine isolation is equally misguided, because the market as part of the economic evolutionary system is constructed out of a vast array of Social Technologies, comprising institutions, norms etc., many of which rely on government. The complexity solution? States help shape the ‘economic fitness function’ (= what we value and want the economy to work towards) whilst markets carry out the job of differentiating, selecting and amplifying Business plans according to this fitness function.

So what, expressing things in terms of complexity doesn't remove the niggly problems and trade-offs that are inevitable in politics, right? This is my initial feeling - taking the example above, to be honest at this point, pretty much everyone in the political mainstream agrees that states and markets both have an important role to play, so the caricatured socialist Left and free-market Right that Beinhocker slays aren't the issue. But complexity's basic insight that micro-behaviour matters for the operation of the system as a whole could be key. In fact Beinhocker suggests that it's here that we can find the answer to persistent poverty: in the norms guiding individuals’ behaviour (i.e. culture), which means that the usual prescriptions of the Left (redistribution) and the Right (laissez-faire, individual incentives) won't solve the problem. Some of the stuff he says about national cultures I am immediately wary of (anyone citing Samuel Huntington’s ‘clash of civilisations’ gets my alarm bells ringing), but otherwise it seems plausible.

I had a little rummage around Google Scholar and apparently the above paragraph sums things up more or less: according to Paul Cairney at the University of Aberdeen (gated, apologies), some people think that Complexity Theory in politics is a passing fad, whilst others gibber unintelligibly about a ‘paradigm shift’ (*ahem*). Getting concrete remains the issue: ‘mapping the landscape’, ‘modelling the struggle’ and ‘encouraging systemic emergence’ all sound wonderful but are basically unintelligible. Add in a greater use of trial and error, learning from pilot projects, and accepting a degree of ‘error’ when designing policies instead of seeing error as ‘failure’ and we’re getting closer to 'Monday morning' realities, but still vague.

Great, but what does it mean in practice? credit: http://thewildpeak.wordpress.com/

Specifics are in short supply, so as a conclusion I’ll veer hazily back to fun, broad, sweeping ideas. If evolution is super clever at sorting through designs to get the best one, we need to bring evolutionary processes inside political decision-making somehow. Duncan Green spells out the implications: “we need to find a way of designing and strengthening institutions to make non-market forms of selection and amplification as effective as possible”. And this means nibbling away at the margins at the goals of individual agents, the norms that guide behaviour and the feedback loops in the system.

This all amounts to saying that the answers remain very much unclear. But at least we have a new question: no longer “Left versus Right” but rather “how best to evolve?”

Goodbye Spain, you're going backwards

"I suppose there is no one who spent more than a few weeks in Spain without being in some degree disillusioned." George Orwell, Homage to Catalonia

I've come to the end of my time living in Spain. Unfortunately I haven't uncovered new truths about the nature of the Spanish soul. I do have a couple of quick sources of disillusionment to share about Spain and development though.

1. Spanish cuts in development have been drastic. As my hard-Left development professor begrudgingly pointed out, while Britain with its 'gobierno conservador' has hit the magic 0.7% target, Spain has gone from 0.49% GDP to 0.17%, with an overall fall of 70% since 2008. In some areas, like Spain's contributions to the FAO, UN or WFP, the budget cut has been up to 90%, which has reduced the country to irrelevance in multilateral debates. Not a month goes by without El Pais releasing something about 'los recortes en ayuda'. At the same time a former Valencia regional deputy has just been sentenced to prison for diverting aid funds for real estate projects. Add to that the permanent crisis of migrants trying to enter Spain via its North African enclaves (whilst occasionally being shot at with rubber bullets and subsequently drowning), and you have a mess.

2. Spanish NGOs are stuck in the 80s. In terms of professionalism, my experience of Spanish NGOs can be summed up with the word 'chaos'. This almost certainly has something to do with 1. above i.e. they have no money and so no paid staff, but even so... Aside from that, and I've mentioned this before, but NGO advertising in Spain, even from big-hitters like UNICEF, manages to hit up all of the 'poverty porn' no-nos. De-contextualised view of the situation in developing countries with white people sending money as the inevitable, paternalistic solution? Check. Dehumanising pictures of unnamed brown/black children depicted without dignity or respect? Check. One dimensional view of poverty? Check. Africa = hunger, disease, death? Check. You get my point.

I say Spanish NGOs are stuck in the 80s; I meant 60s. On the left is an advert I saw on Wednesday in Madrid and on the right, an Oxfam collecting tin from the 1960s. photo credit: WhyDev

I can't say I'm too optimistic about either. Although 81% of Spanish people agree that giving aid is "a moral duty and helps to build a more just and sustainable world," it's just not a priority for most people. Meanwhile, as Emily Roenigk points out, poverty porn works, as pernicious as it is.

I just hope that the kid in the picture is getting a chunky commission for her image rights.

Complexity meets economics: from caveman to the present today in three easy steps

“Wealth is knowledge and its origin is evolution”

Hark, those of you who don’t know about economics but would like to, or those who know about economics but are dissatisfied with the Neoclassical mainstream. Read this book. In fact, anyone who thinks about politics, business or development or anything should read it too, because it will fling open new mental doors (leading to complexity theory and other fun things).

In 450 compelling pages (hah), Beinhocker uses evolution theory to sketch out sometimes mindblowing answers to the basic questions of ‘what is wealth?’ and ‘how can it be increased?’. First of all, he meticulously sweeps away the Traditional economics which has so conspicuously failed in recent years, with its ridiculous assumptions like perfect rationality and fixation on the concept of equilibrium. Apparently it got lost in 19th century physics and forgot that “if the universe cannot escape the Second Law [of Thermodynamics], then neither can economics”. Instead, he shows how wealth is knowledge, emerging from a simple evolutionary algorithm: differentiate, select and amplify. Essentially, what biological evolution does for genes and living organisms, economic evolution does for business plans (broadly defined) and companies. As Beinhocker himself puts it, evolution says: “I will try lots of things and see what works and do more of what works and less of what doesn’t”. And the result of this ‘deductive-tinkering’? A complex adaptive system (‘explained’ in an earlier post so I won’t bore you here) which doubled world per capita GDP to $180 in the 15 000 years to 1750 AD, then in the following 250 years increased it 37 fold.

Because blurry tables explain things better than I do.

Going beyond parsing the intro, it’s a book that makes you challenge how we instinctively conceptualise the world around us. How often is it that you’ve heard a Business defined as “a person, or an organized group of people, who transforms matter, energy and information from one state into another with the goal of making a profit”? It’s rewarding but hard, thinking in systems, and not because you’re stupid; it’s “just that our brains are not wired to think this way”. Beinhocker also produces new, or at least unfamiliar terminology for his cast of evolutionary characters, from ‘Physical and Social Technologies’, to the ‘evolutionary design space’ to ‘schema readers’. But it’s done in an accessible way - at one point he uses the analogy of a toddler making Lego figures – and even with the occasional amusing anecdote: who knew that the Italian economist Pareto “spent his later years as a recluse in a Swiss mountain chalet with twenty angora cats”?

So an economics that can take us from caveman to the present day, and which does not depend on ironing out our humanity to make its models work. And with lessons for business strategy (think portfolio of experiments not taking a big bet), organisations, policymakers, and anyone who wants to effect change. Even nearly 10 years since it was first published, these are ideas that still haven’t broken through into the mainstream, as Kate Raworth recently pointed out. But it’s an exciting time for thinking, when the ground is shifting beneath your feet.

More to come on this, for sure, but for now, read the book.

Credit: cheezburger.com