It is time to stop quivering in our boots in pointless fear of the future and just roll up our sleeves and build it.
- Ray Pierrehumbert

Sunday, May 6, 2007

It's time to upgrade the OS

Economics isn't the machine, it's just the operating system. Consider the "great depression".

The day before the 1929 stock market crash, the world was no wealthier than the day after in real terms. The operating system crashed.The actual poverty was a consequence of the failure of the operating system, not a failure of crops or industry. It was a software failure, not a hardware failure.

That it has not repeated with the same force is a consequence of actual human intervention into the processes by which economic transactions occur, not of some "laws of nature" that "economic science" merely discovers.

It is time for a conscious redesign of the economic structure. We need a smooth transition to a new operating system or an abrupt and nasty one will be foisted upon us by reality.

This need not be and should not be conceptually extreme or radical, but it can't be shallow and symbolic either. We need to build some way for the sustainability requirements of the long time scales to impact day-to-day decisions about utility. Otherwise we will be throwing out the baby and cherishing the bathwater.

Changing "the entire economic structure of the world" is a matter of will, and is no small task, but in the end, it's words, not deeds. Whether farmers grow the corn or AMD makes the Opterons is a matter of deeds. The economic structure is not provided by God, it is a deliberate social construction, one which effectively motivates some behaviors and effectively demotivates others. Beliefs to the contrary strike me as rationalizations of the beneficiaries, like monarchs muttering about the "divine right of kings".

We can choose which behaviors are rewarded and which are not by upgrading the operating system. This must be done carefully and judiciously, and with due attention to motivations and rights, but under current circumstances it has to be done substantially and without delay.

1 comment:

Fergus said...

Michael: I agree that there is a lot to be said for looking at the way in which the economic system operates, in particular in relation to markets. I struggle, for example, to understand the reasoning behind creating a market in carbon as a mechanism for reducing emissions. As far as I can tell, all it does is create a mechanism for making money from trading in them.

But I also wonder whether overhauling the 'operating system' will prove to be sufficient, even if it eventually becomes necessary. The underlying problem lies in a society which is defined in terms of its consumption. If this is the essential driving force behind the system - ever increasing production feeding ever-growing consumption - then what needs to be overhauled is the very basis on which capital economies are founded. I don't know how this is possible without damaging those economies seriously.