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What are the philosophical foundations of the US government?

How do we adjust our view of government and the relationships between citizens as the foundations of free market thinking become inapplicable due to economic complexity?

  • it needs to be revised to go forward .... it is a product of the massive paradigm shift in the sciences in general, and believe it or not its universal, its called complexity.  A complex system has 4 conditions: interdependent agents, diversity, communication, adaptation .... what makes a system complex is when those factors on a scale of 1 to 10 hit 5 plus or minus 1 at the same time.  Now what does this have to do with capitalism? As the size of a system increases and becomes complex, the rules change and most importantly cannot be logically derived or predicted from the previous rules.  It changes how the actions of the agents (people) interact, the outcomes, literally everything.  In physics we have 3 sets of rules: quantum (atoms), Newtonian (more atoms), celestial (a lot more atoms) .... in biology cells, a tissue, an organ system, organ function the best example, because without prior knowledge you cannot not logically go from the observation of a single cell to how an organ function, its called induction.  My point is this our ideas on freedom and liberty were created when the relationships between us where governed by simple rules, as citizen and buyers/sellers in a market.  We need to start thinking about this, generating discussion, tinkering with new ideas .... if we dont have better solution as these issues arrive, the default answer is going to be less freedom and liberty more goverment it is a new thing for economies .... think about the factors: Interdependence - think supply chains now, versus 50 years ago ... the earthquake in Japan put 3700 US companies out of business because critical components Diversity -  China, you have governments making international investments on a massive scale, not for profit, production, or even military reasons but to control access to commodities .... think of how that changes the behavior of other market players Communication-Adaptation - think about the speed at which information and prices change, that sounds like a good thing on the surface .... but think again for 2 reasons, first most productive asset are not that liquid or convertible, but all most all economic models assume they are which is why supply/demand models neglect time ... i gotta quote Keynes here "The market can stay irrational longer than you can stay solvent".  Second, Komogaroff's law ... as the flow of information increase the signal to noise ratio decrease Complexity changes everything, and here is why ... it makes the system more robust, but small things can tip the entire system .... i can give you a direct example, if the CEO of GM wanted to better secure their supply chain by increasing parts inventory 10%, unless there was an imminent well known problem how would that effect the stock price? How would that effect his pay/bonus? Think of the converse if he leans out the supply chain to "Just In Time" inventory ... the market creates an incentive to take hidden risk. Why did subprime MBS and CDO take down the banking system? Because if you weren't in them your bank was not bringing in the cash your competitors in them were which drove down your stock price .... everything adapted faster then the market could properly vet them aka noise

  • Answer:

    This is the 2nd time today I'm using this quote from Hayek, but it really gets to the core of it: The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. To the naive mind that can conceive of order only as the product of  deliberate arrangement, it may seem absurd that in complex conditions  order, and adaptation to the unknown, can be achieved more effectively  by decentralizing decisions and that a division of authority will  actually extend the possibility of overall order. Yet that decentralization actually leads to more information being taken into account. So the point is free markets deal with the scale and complexity that comes with scale, since it distributes the calculation among autonomous agents.   It is the centralized solutions, on the other hand, that fail to scale.

Rob Weir at Quora Visit the source

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Photographycally speaking, to adjust our view we have to adjust appurture and focus. Philosophically speaking, imaginary problems are the only complexities in the world. All economic theories start with "  all other things remaining equal   "......... and are criticized with, none of the assumptions are true in real world. Fact of life is most of human actions are intuitive and not logical. Logic is post facto analysis, supported by statistics. If you are looking for what should you do now, you will get an intuitive answer. More awareness would give better intuitive answers. But if you are looking for an answer for what should generally be done...... well, best luck to you.

Vishwas Londhe

The first step is to realize that the market can be totalitarian too. Our present form of capitalism is getting very much that way.

Jim Hassinger

My answer is based on Vietnam on. Country Joe McDonald sang a song entitled "I feel like I am going to die rag" at Woodstock; one of the lines was "What are we fighting for, don't ask me I don't ask me I don't give a dam, next stop is Vietnam" all the wars we have been in since  then the same is true, just substitute the name of the country. The answer was spelled out by  President Eisenhower in his last address to the nation. He warned us to control the Military Industrial Complex because of the profit they were making with extra high prices and most of the 1%'ers. made their money that way.  President Kennedy issued an executive order limiting us to one year plus one more year training the South to fight. President Johnson rescinded the order to appease them. So a losing war cost lives and the survivors received one of the worst GI bill. I never there, but I sent people there and carried them to their families in a box. Keep going war after war to make the 1%ers. Richer. Keep going war after and there is no chance to settle a religious war. All the elective officials know that but the good old boys took care of each other.  TFN

Thomas F. Noonan

The premise of the question is faulty. Government has those same factors to contend with, and problems with scale:: --  Interdependent agents:  Bureaucrats, politicians, enforcers, judges rubber-stamping enforcers, field agents and central offices in DC... --  Diversity:  As government takes on ever more tasks -- defense; justice; managing the economy; regulating what you may and may not eat, drink, and smoke; ensuring that nobody's feelings get hurt (nobody of the currently preferred groups, that is); running health care; etc. ad infinitum -- there are diverse and often competing interests. --  Communication:  We saw that a plethora of intelligence agencies couldn't talk to each other to get the job done.  There are various agencies duplicating each others' functions.  There are so many laws and regulations nobody is able to count them all; nobody can know for sure what is legal and illegal. After the '08 crash government officials were saying "Nobody saw it coming."  This despite several economists, and not just those of one school of thought, saying it was coming.  Apparently there was some lack of communication there. --  Adaptation:  Governments are always fighting the last war.  They fought in entrenched positions and static fortifications against the mobile warfare Blitzkrieg.  They sent tanks to fight insurgents (mostly because the military-industrial complex was scaled to build tanks).  They promoted Big Steel in an age of plastics.  They fund big manufacturers at a time when small high-tech companies are at the cutting edge.  One can find myriad examples of government's failure to adapt. Government creates hidden risk.  Fed prime rates are tweaked up and down, fueling speculation, then crashing speculation; creating inflation then trying to control inflation in a wild roller coaster ride.  Regulations may stop one practice -- at the cost of incentivizing innovative ways of getting around the regulations.  The new practices thusly prompted reward not solid business practice but rather hubris and audaciousness, at least until the system comes crashing down. Where would the Internet be if government were in charge of managing content and determining what users want?  In the Paleolithic age, I daresay.  Diverse people managed diverse content.  Millions of people communicated, in interdependent relationship.  And it worked out fairly well. Yet we're treated to a lecture about how government can better manage things than people can manage their own affairs?  Get real!

Dave Hines

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