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Back to bed

10 Nov 2021 | News Roundup

In one interview where he was challenged over his advice to tidy your room before presuming to be able to tidy the entire planet, Jordan Peterson made one of those pungent observations that seems obvious to some and incomprehensible to others. “I know the difference between someone who can make a complex system better and someone who will make a complex system worse.” And when you look at the damage to the economy already done, with worse to follow, by arrogant politicians who think they are “fixing the climate” through policies that will have no effect on the latter but will wreck the former, you get the troubling impression that the people in charge don’t even realize economies are enormously complex, let alone that it is possible to make them worse.

In that interview Peterson added immediately and bluntly that “Most people will make a complex system worse.” Which is fair enough but less depressing than it sounds because most of the progress that humanity has experienced, especially material progress, derives from there having been a handful of places where people embraced institutions that made things better. Namely free markets. And eventually the contrast with all the systems that made things worse, namely every system besides free markets, led to the latter being adopted almost everywhere.

One of the most ingenious elements of the market system was that it simplified the process by which people make decisions that promote common welfare: just look at prices and respond accordingly. As Friedrich Hayek explained in his lamentably obscure The Road to Serfdom, and Leonard Read simplified enormously in his classic 1958 essay “I, Pencil”, market prices resolve a transcomputable chain of interrelationships to a very simple calculation of whether it will cost less to make a pencil, or an insurance policy, than people will pay for it.

If so, businesses will go ahead and provide the good or service in question, and in so doing their private profit motive lines up with the public interest in making goods and services available in the most efficient way possible. So managing your business is, well, manageable. You don’t need to know why it’s profitable, only that it is. You make decisions based on the profit or loss that will result rather than on how everything connects to everything else. And “managing the economy” becomes fairly easy because it doesn’t require managing at all. Governments just have to protect people’s rights including enforcing contracts in impartial, efficient courts.

For central planners, of the hard or soft variety, no comparable mechanism to prices exists. Which means as soon as you sweep them aside and try to manage the whole production chain through central control, in the name of efficiency, fairness or any other “higher” value, you need to comprehend all the complexities at once. And you can’t, not because you are dim but because they are overwhelming.

In Read’s example, to make a pencil requires not just wood and graphite and a “ferrule” and some paint, but also the chainsaws used to fell the trees for the wood, the coffee the loggers drink, the ship that carries the logs, the cement for the piers at which they dock, the asphalt for the roads… and we’re only on the first component. We didn’t even get to the graphite, never mind the paint or that vexed “ferrule”.

As Hayek warned, in the kind of prose that gives “Teutonic” a bad name, an unavoidable consequence of taking upon yourself this unmanageable task is that what started as comprehensive planning rapidly turns into crisis management. And it spirals downward because each desperate short-run expedient to fix an urgent problem invariably makes the underlying misallocation of resources worse, by further suppressing the information available about tradeoffs or, in slightly less opaque terminology, “opportunity costs”. To put it in prose of the sort Hayek lamentably did not write, it is like someone trying to stamp out a brushfire with the hem of their pants on fire. (If anyone knows the origin of this metaphor please let us know; otherwise we’re claiming to have invented it.)

Which brings us to climate policy, in which governments otherwise convinced of the virtues of free markets drift into central planning in the name of saving the planet, as if all that was needed to remedy the hitherto fatal flaws in socialism was a sufficiently hyperbolic cause. A classic illustration of this mechanism is that in September, the British government actually ordered soldiers to start driving fuel tankers to refill empty gas pumps after nearly a week of long lineups and desperate motorists. To the fatuous enthusiast for central control, it looks like decisive action that solved the problem. But it’s actually the act of a desperado, the last line of defence (literally as well as figuratively) that only succeeded in masking how bad the problem is. Should a crisis erupt elsewhere while the armed forces are securing the energy necessary for life, what further resources exist to deal with it?

If the UK government had not charged ahead with eliminating the affordable energy consumers wanted in favour of something it had simply imagined could do the job instead, through a massive system of centralized regulation and taxation, British energy would have been provided by a decentralized network of private operators running pumps, driving trucks, making sandwiches and so forth based on the sorts of immediate price signals Read talks about, and there would have been no shortages. (Yes, sandwiches, because as per Read, in private markets people buy their own lunch from voluntary providers, but when it’s soldiers, the government feeds them.)

Other pertinent examples include Canada’s health care system and the Soviet economy. Or the awkward fact that to keep the lights on at COP26, the British government had to fire up coal plants at a cost of £4,000/MWh, 100 times the normal pre-crisis wholesale price, because in a country littered with wind turbines the only wind that was blowing was inside the conference hall. They simply did not understand that an energy grid is complicated and that having the emperor wave his hand airily and say “Go green” might be not the end of the story but the beginning of the really scary sad part.

So when it comes to making complex systems better, or worse, the first point is to realize that making them better necessarily involves decentralizing decision-making, so that no one person needs to know more than any one person can know. Or rather the second point, because the first is to recognize that they are complex. It is the fool who rushes in thinking it’s all so simple who is most absolutely guaranteed to turn a difficult situation into a disaster. And it’s not better to claim to recognize the complexity only to shove it aside, as for instance in this line from the Guardian’s George Monbiot that we also quote elsewhere this week: “In some respects, preventing climate breakdown is highly complicated. But in another, it’s really simple: we need to leave fossil fuels in the ground. All the bluster and grandstanding, the extravagant promises and detailed mechanisms discussed in Glasgow this week amount to nothing if this simple and obvious thing doesn’t happen.”

What if it does? What further complex effects might we expect from “simply” ceasing to use energy we can afford and rely on? Why, it remains simple… in his word processor: “For just $161bn – a fraction of the money governments spend on supporting fossil fuels – they could buy out and shut down every coal plant on Earth. If they did so as part of a just transition, they would create more employment than they destroy. For example, research by Oil Change International suggests the UK could generate three jobs in clean energy for every one lost from oil and gas.” This game is easy… to those who cannot perceive complexity.

Another such person appears to be Canada’s Prime Minister Justin Trudeau, whose boilerplate-headline “Politician concludes successful visit to wherever” press release on COP26 started “Climate change is the greatest long-term threat of our time, but it is also the greatest opportunity for our economy and workers.” How would he know? Has he ever so much as met the payroll for a pizzeria? No. But he can run an entire economy by exhortation and arm-waving.

This consideration means that the first requirement for being part of the solution to a complex problem rather than part of the problem is in fact humility, a recognition that even if you do possess outstanding talents they are not sufficient to allow you to function as emperor of the universe. As the great libertarian economist Ludwig von Mises responded, when asked what he would do if made dictator, “I would resign.”

No, wait. Humility is the second requirement. The first, again, is the capacity to recognize complexity. And those who persist in thinking all you need is love, Thomas Sowell’s “unconstrained” visionaries, are more dangerous if they are clever than if they are not.

To return to our beds, even cleaning a room turns out to be more complicated than it looks. You start by picking something up, then realize you need a place to put it, then realize you need a place to put it temporarily while you clear the spot where it really belongs, then that you need a trash bag for what’s in the temporary spot and so on in a chain that is manageable, but only because someone else made the trash bag and put it where you can simply go and get it.

At this point the available trash bags are full of bits and pieces of the economy while CO2 emissions continue to rise defiantly. And governments have no idea where to put the pieces back together, and don’t even know it’s hard. Such situations do not end well.

15 comments on “Back to bed”

  1. You will forgive me if I don't think about monetary policy at this moment.
    Said the genius in charge of the economy.

  2. Could we actually be looking at a massive racketeering scheme with our Prime Minister and our Minister of Finance playing a key role, because of their strong connections to Klaus Schwab and the World Economic Forum?

  3. The salient point about any system is that it almost always consists of a number of subsystems, all of which have to work correctly and, just as importantly, interact with each other in a well-defined manner. In an economic system, for example, buyers and sellers are two separate subsystems, and the interaction between them is defined by price. Get this right and the system works smoothly. Get it wrong and everything grinds to a halt.
    A case in point: Ottawa, Ontario recently introduced a light rail transit system. Like any transit system it has various subsystems, such as the permanent way, the signaling & control subsystem, the power subsystem, and of course the transport subsystem, i.e. the trains themselves. Ottawa made the classic mistake of having the politicians influence the selection of the latter, which meant that they ended up as the initial users of a new light rail train design which was selected on the basis that it was the cheapest on offer. The trains have spent most of the last year or two either broken down or otherwise non-functional because of interfacing problems with the other subsystems. Net result, enormous expenses to correct problems that never should have occurred in the first place, and a really annoyed citizenry.

  4. "a fraction of the money governments spend on supporting fossil fuels"
    It would be nice if you could address this. The last time I looked, taxes make up the majority of what I spend on gasoline and natural gas. That doesn't include the royalties paid by oil and gas companies on production. The industry seems grossly overtaxed, to me, and yet we constantly hear this.

  5. it’s obvious we’re being governed rendered idiots, who are so blinded by their zealotry that they cannot see the reality of a huge crunch in energy supply.

    their “plan” is more obvious, when you become aware their big Glasgow meet was powered with coal fired energy, when their new improved system started producing brownouts!

    if they can’t manage the power for a 2 week event, what would you expect from their 100 year “plan”?

  6. Great discussion. Highly recommend reading "7 Deadly Economic Sins" by James R. Otteson for even more of an in depth discussion of the "Great Mind Fallacy" along with Adam Smith's "The Theory of Moral Sentiments" as well.

  7. The totally delusional ruling class along with the armies of rent seekers they have created with gross fiscal incontinence - need to be given a simple message from the governed: Until we see "construction" started on an approved program to double our current electrical grid capacity with modern nuclear power, we don't want to even talk about capping or reducing production of fossil fuels, let alone convert to E-vehicles. The alternatives are all variants of a literal death-march to pre-industrial filth and squalor (fast-tracked road to serfdom).

  8. So here is my comment on “back to Bed.”

    This is a perfect example of what is wrong with most effort to challenge the global warming nonsense. There is no honest source of good information and argument against it. By ‘honest’ I mean coming from a non ideological, sane, factual understanding of human society.

    This is usually called ‘fascist’ or ‘right wing’ by the fake left loonies who are the enforcers of ’climate’ dogma. The same is also called ‘leftism’ or ‘communism’ by the neoliberal, libertarian, Austerian mess on the ‘right wing’ of the spectrum. This is the core problem with all public discussion about the climate thing but also nearly every topic nowadays.

    There is no clean information anywhere. Everything is coming from one of the two factions of the ruling class which are fighting for control of society and of the public voice. Public discussion is degenerating into a screech, a kind of white noise, where no truth can get through.

    Whenever something gets published which is factual and refutes some elite nonsense, it comes as a kind of bait and switch. Tagging along wth it is some complete nonsense from the other side of the ideological war. It gets tiresome to have to strip out the propaganda from the useful information, not only from my own internet feeds, but from my own mind.

    Climate nexus is the perfect example of this. It has lots of good stuff about the climate trope coming from the globalist/financialist/ neoMalthusians side of the ruling elite. But to get it I have to be soiled by the nationalist/industrialist side of the war among the elites.

    This article “back to bed” is typical. It is a mash up of ‘Mad Austrian economics’ with recycled cold war rhetoric about ‘communism.’ Nothing could be more foolish and futile than to try refuting it point by point to the strange people who put it out and who may or may not actually believe it.

    Here is all that really needs to be said about this brain rot about ‘price discoveries’, Markets’, and ‘life is too complicated to do any planning’. The world does not happen that way. We might as will be arguing about whether fairies exist.

    There are actually academics who pursue economics as a science, not as a pseudo religion. There are not enough of them. But they show very well that nothing is run by market mechanisms. That is completely unworkable.

    Anyone trying to make economic decisions according to ‘price signals’ is a sucker waiting to be taken. Any individual, business or other organization, or government which sets out to try to do something without a good plan is headed for calamity. Toward that, sane people look for a secure supply of what they need; they do not bid in a market.

    These ideas are popular because they keep the public confused. I like to call this ”Mad Austrian talk” because it mostly originates with a group of Austrian economists from about a century ago. In those days “Austrian Talk” was a Term often used in Europe at a time when the Austrian Empire was failing and its rulers were losing their collective minds.

    As failing or insecure elites often do, they engage in rhetorical campaigns to try to alter people’s consciousness, to erode their sense of reality. As usually happens, the elites started to believe their own rhetoric. Especially toxic was the nonsense coming out of the Austrian universities under the title of ‘economics.’

    So what “Austrian School Economics” or “Mad Austrian Economics” is about is trying to construct economic theories according to ‘thought experiments’ instead of scientific study of actual economies. In other words, about what they wanted to believe or were told to create a justification for, rather than observation of reality. As a guide to directing a national economy, their ideas were useless.

    However, it was a very successful way of keeping the middle classes of the old Austrian empire bamboozled for awhile until the elites could move their wealth out of the way and let the rotting shell of the old economy collapse. These Austrian economists could find ready employment in other countries where industrial capitalist elites were consolidating their control. They trained other pseudo-economists in their system, such as Milton Friedman.

    The rhetorical style of the Mad Austrians has also been refined over time. Good examples of the old style could be read in the works of Von Hayek or Hitler. The methods crossed the ideological line and the later bolsheviks and other ideological leftists started talking this way. Refined examples are seen all over the internet these days, from both the extreme left and the extreme right.

    The toxic noise on the net is the result of two competing factions of an elite fighting for control, each creating their own street and internet armies. The neoMalthusians want to reduce the world’s population and to create a world government to do it. The global warming nonsense is their project.

    The project of the industrial capitalists is simply to keep us all enslaved and the economy ‘growing’. To cover themselves off they need the unfounded rhetoric about ‘markets’ and ‘planning bad! Government bad!’ Of course the ida of limiting growth and protecting natural resources is highly inconvenient to them.

    One of the reasons the global warming message has remained so strong is that there has been little to organize any opposition to it. What counter argument there is tends to come out of right wing capitalist blowholes, which discredits it with most of the public. So the ‘anti’ side is losing where it should be pretty easy to win.

    Global Nexus is relatively effective as an anti warming source. Its authors can put together good arguments. But then they start all this bogus economics and red baiting and do it rather poorly. Thus they largely negate themselves.

    What I am watching for is a really good site that argues against the warming crap form out of a serious ‘left/progressive’ place. I think something like that will come along fairly soon. Until then, I glean what I can from this ‘Climate Nexus’ thing…

  9. Wow! They actually let this through. Pardon all my errors. I slapped it together pretty quick. But its still very good. Worth revamping and publishing elsewhere. tr

  10. There is some good stuff in your comment but I think it could use some streamlining. I found it a bit hard to follow. Maybe because my mind was on comments which are typically short and more to-the-point. This is more like an article.

  11. Of late I have been reading about the five laws of stupidity,

    1. Always and inevitably, each of us underestimates the number of stupid individuals in the world
    2. The probability that a certain person is stupid is independent of any other characteristic of the same person
    3. A stupid person is one who causes harm to another person or group without at the same time obtaining a benefit for himself or even damaging himself
    4. Non-stupid people always underestimate the harmful potential of stupid people
    5. The stupid person is the most dangerous person that exists

    The author of these laws created a matrix to set out how to pick out the stupid. The X axis is from losses to self to benefits to self and the Y axis is from losses to others to benefits to others. He places the stupid in the lower left quadrant, losses to self and losses to others.
    It occurred to me that this same matrix could be applied to Kurt von Hammerstein-Equord’s statement about his officers.
    “I divide my officers into four classes; the clever, the lazy, the industrious, and the stupid. Each officer possesses at least two of these qualities. Those who are clever and industrious are fitted for the highest staff appointments. Use can be made of those who are stupid and lazy. The man who is clever and lazy however is for the very highest command; he has the temperament and nerves to deal with all situations. But whoever is stupid and industrious is a menace and must be removed immediately!”

    Change the X axis to stupid to clever and the Y axis to industrious to lazy and you have that person who must be removed immediately in the lower left quadrant. A person who would cause losses to others and himself, the most dangerous person who exists.

  12. Further to the stupid, lazy (etc) graph, I offer the following that I found on a German Army notice board and tend to apply to the current Canadian government.
    The Six Phases of Planning (Die Sechs Phasen der Planung)
    1. Enthusiasm
    2. Confusion.
    3. Disillusionment.
    4. Seeking the guilty.
    5. Punishing the innocent.
    6. Rewarding the uninvolved.

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