So socialism has found a new form in trying to impose centralized order on decentralized specialists in a chaotic process: economic micromanagement via computer modeling! It will probably work about as well as computer modeling predicting man's impact on global warming.

So socialism has found a new form in trying to impose centralized order on decentralized specialists in a chaotic process: economic micromanagement via computer modeling! It will probably work about as well as computer modeling predicting man's impact on global warming.

There are two alternatives. Don't bail out the poorly managed financial groups or take the bailout and give it as a stimulus to the over 18 voting (citizen) population. Recession or runaway inflaction versus more business as usual with the bailout?
I would be eager to hear any alternatives.

Interestingly enough, this isn't the first time a physicist has shaken economic theory. Back in the mid 80's a physicist got noticed because he was proposing an economic model of a steady state economy. He pointed out that the models currently used were dependent on growth for sustainability. Consequently economists wanted growing populations and resource usage, but that was contrary to the reality of limited resources such as land, food, and energy. He pointed out that growth was not sustainable, so we have to devise an economic model that allows for ongoing investment without growth related returns. I wish I could remember his name.

I apologize for the spelling above.

Herman Daly if memory serves, Policebox.

Scientific fraud even for Global Warming scientists -- I have worked with a lot of scientists for quite some time, including GW scientists. So people think that all Scientists (global warming included) are pure, untainted, and never have any hidden problems, issues, or agendas?

This article reminds me of some work that W. Brian Arthur did around 1994-97 where he examined mechanisms of positive feedback at work in the economy. Positive feedback occurs when something feeds on itself. A common example of positive feedback is compounded interest. You earn interest on the interest, and the earnings feed on themselves. Another example is a bomb.

Whereas previous economists mostly studied negative feedback mechanisms that make the overall system stable and predictable

I’ll try again. This article reminds me of some work that W. Brian Arthur did around 1994-97 where he examined mechanisms of positive feedback at work in the economy. Positive feedback occurs when something feeds on itself. A common example of positive feedback is compounded interest. You earn interest on the interest, and the earnings feed on themselves. Another example is a bomb.

Whereas previous economists mostly studied negative feedback mechanisms that make the overall system stable and predictable; systems that tend toward equilibrium. Positive feedback mechanisms are those that make a system chaotic and unpredictable. I suppose economists may be forgiven if they assume that given a positive feedback and a negative feedback in the same economy, that they would/should somehow cancel. But the reality is that when you add a positive feedback to a negative feedback, you get a system that contains both a positive feedback and a negative feedback. This system might be called complex. Brian Arthur’s work was essentially a study of complexity at work in our economy.

I believe more economists today are ready to acknowledge the complex, even chaotic nature of the markets and even the economy as a whole. But I don’t think they know what to make of it. If you study a chaotic system you might just return to the starting point and say something like, “Yes, it’s chaotic, now we know why, and isn’t it a shame”. But the study of chaotic systems can also expose properties analogous to “temperature”, or the degree of chaos, and the things that affect the chaotic system.

I think economists need to study and to make policy makers aware that the policies we have adopted over the last 25 years have contributed to the degree to which positive feedback mechanisms have ruled the economy. These are policies that encourage speculation and leverage. Our policies have been opposite of anything that would cool a speculative economy – deficit spending, stimulus packages, bank deregulation, etc. We have passed tax cuts that reward speculation – cutting capital gains and dividends taxes. We are suffering a credit crisis right now that is a crisis of leverage (investing other people’s money). The bailout plan needs to be examined under the light of what it means to a chaotic economy that tends to feed on itself. It also needs to be examined against the backdrop of a rescue for the proprietors of leverage when the government itself is heavily leveraged in the government debt. If our addiction to foreign oil is frightening, our addiction to foreign debt is absolutely terrifying. This is also a system that has fed on itself, and we are now going to draw on that (gov’t debt) to finance the bailout. There’s a lot of stored energy there and I fear we are trading one Pandora’s box for another.

If this article is saying “Economists WAKE UP”, then I say amen.

Economists shouldn't be trusted with anything, but nor should anyone who proposes a rational solution to an irrational problem. Economists are bound by their rationalist, hedonistic calculating assumptions. Break out of that paradigm and things could get interesting. Thorstein Veblen (died 1929) pointed to some interesting alternatives in his books, particularly, The Place of Science in Modern Civilization or in his article critiquing Marginal Utility Theory. There's lots of interesting theory out there, but what matters is politics. Power. Not economic theory.