Re: [unrev-II] OHS/DKR for regulating markets

From: Paul Fernhout (
Date: Thu Jan 27 2000 - 19:13:37 PST

From: Paul Fernhout <>

Mike Taylor wrote:
> Hirohide, this is where we come apart. For example, according to people's
> serious and sincere best projections and estimates in the past, we should
> be starving and enduring serious commodity shortages right now. But this is
> not the case. The market has solved these problems.

Mike, I agree in general with general your point here.

A few comments:

The Club or Rome report and related
simulation which led to many of these predictions has been discredited,
and even at the time was held in low esteem by many. It was a naive
simulation that did not allow for any technological improvement.
Even Malthus, in later editions (1806, rarely cited), recanted the
notion that population always grows faster than food supply.

Julian Simon, an economist who wrote "The Ultimate Resource", a book
about how people are the ultimate resource and find ways to make things
cheaper or find replacements, would certainly agree with you.
And to an extent, I agree with Simon's main point.

Both the Club or Rome and Julian Simon are described here:
Some typical counter-arguments to Simon are here:

I probably agree much more with Simon's point of view than ZPG's (Zero
Population Growth's), with some key exceptions. One major point is that
IMO Simon does not deal well with diminishing biodiversity as one
irreplaceable resource.

The places where I differ most from laissez faire economics as Simon
more-or-less advocates is in evaluating market players, external costs,
and chaos.

Market players: If a person does not have any money (a unskilled person
starving in poverty, unable to work), then the market will not meet
their need because they can not participate in the market. You may argue
that other market players make take it upon themselves to solve this
problem through charity or variants of
charity (taxation and redistribution via welfare or education or jobs
training or economic development). That is true, but it is not a
*direct* working of the market.

Also, because markets take time to work, even if the market might come
to help someone eventually, if they need help now, then non-market
intervention may be justified. Well-educated, well-fed, well-informed
individuals in a well-working community with access to capital are a net
resource. It takes investment by society (including parents) to make
them that way. Otherwise, people can be a non-resource (deficit?). Even
when everything goes well, accident or illness or a bad choice can cost
someone much of their productivity. Unfortunately, in today's USA, for
example, politics leads us to spend money to lock up people instead of
to spend money for prenatal care, educational daycare, parental leave,
and community services like after-school centers.

External costs: In various cases, one can make something at a profit
(gasoline for example) by passing "external" costs onto others. External
costs for example are related to pollution, work place accidents,
consumer accidents, defense costs, health risks, disposal problems,
social fragmentation costs, esthetic costs like a loss of a view, and
moral/spiritual anguish. You may argue one can sue for damages, or
create laws related to fines for external costs, but again this is not a
*direct* working of the market. It was only after long difficult fights
that people have the limited protective laws they have today. (It used
to be when you went to work for a company, you assumed the risk of
injury by free choice.)

This issue of external costs gets more subtle when it relates to unknown
costs (perhaps requiring research to discover). Then the issue is not a
directly measurable cost, but a vaguer risk. For example, according to
the World Watch Institute, every person on the planet has 500 chemicals
in their body that did not exist before 1920.
Yet, on the other hand Simon would say less people die of pneumonia. It
is hard to weigh some of these risks.

Chaos: Current theories of systems theories and chaos show that many
systems (like markets) exhibit chaotic trends. For example, if one keeps
piling grains of sand on a pile, they tend to stick, until every once in
a while a whole bunch fall together as a landslide. (See Per Bak, "How
nature works")
This chaotic property of economic systems can result in grave harm to
individuals and societies, and in the case where some of those
individuals or societies control weapons of mass destruction, extreme
damage to society and environment. Consider here the implications of
financial meltdowns in the newly created Russian "market". This chaos
factor is also related to the unknown and the need for paradigm shifts
-- the "ant nest breaking its branch and falling in the river" scenario
Doug discussed.

So, for markets to be humane, there must be charity for those unable to
participate in the market, and there must be laws governing activities
with external costs, and there must be regulations to prevent chaos.
Notice I am applying a word "humane" which is value laden to the design
of an economic system. As moral creatures, I would argue we must. The
only question is what are our non-economic goals, and how can we
structure our economics best to achieve them? For example, in "Small is
Beautiful", E.F. Schumacher talks about what "Buddhist Economics" would
be like -- where the most important value of the work was the spiritual
uplift of the worker.
It is part of the "scarcity" model of economics that we assume we must
have the most "efficient" system, where efficiency is defined very
narrowly (and probably in an economically successful person's best

> I have the reverse
> problem. It is not conceivable to me that a knowledge base could encompass
> the knowledge of all the market participants. It is clear that the best
> opinion of all the energy market participants today is that the problems
> are not as serious and immediate as some people claim. If they were,
> intelligent people would be investing accordingly.

Probably true, as far as actually running out of energy.

However, fossil fuel use has many external costs relating to health
risks, defense spending, tax losses, ecological damage, and social
disruption. These are not paid by the energy companies, but by certain
specific disadvantaged individuals or wildlife, unknowing consumers, and
society. The major reason to shift to alternatives sooner than the
"market" is planning for has to do with these external costs. However,
the "market" is not able to correct for these, because it is not

> Markets do work. I must say that any theory that fails to acknowledge this,
> and to take into account the human motivations of self-interest, is
> seriously flawed, in my opinion. Quite frankly, I feel that a reliance on
> centralized mechanisms to manage social problems is not only foolhardy but
> very dangerous. The repeated failures of centrally-managed economies show
> this.
> Central management elites believe that they know better than the unwashed
> masses that compose markets. Time and time again they have been proven wrong.

I agree with your general sentiment (subject to the limitations above).
Markets work to an extent and have certain limitations. I think you are
correct that the implications a OHS/DKR run by an elite will not solve
world problems better than a network of people involved with the market.
I think a very good question you implicitly raise is, given the market,
where can an OHS/DKR fit in?

We already have charities and lawmakers interacting with the market. The
issues is, are the charities and lawmakers making good choices? If not,
why not? Can an OHS/DKR help with this? For example, government
investment in research tinkers with the market. What should the
government invest its (our) research dollars in? How can this process be
above vested or special interests?

I think an OHS/DKR related to world issues will have great value in
several areas.

One is organizations who are involved with handling either the charity
or regulation required to make markets work humanely.
* Congress
* government agencies like the EPA
* non-profits, like World Watch
* NGOs like the Millennium Project

Another user of an OHS/DKR is a group who is either trying to transcend
the market or to jumpstart it where it doesn't exist now, like:
* Voluntary Simplicity -- avoiding the market
* Space Settlement -- putting the market in a bigger space
* International Aid -- helping where there is no (or a tiny) market
* Nanotechnology -- eliminating/restructuring the market (for
manufactured goods)

Also, Simon would argue individuals in a wealthy society can pay to
remediate "external costs". For example, a resident of a modern city no
longer has to deal with horse manure or dead horses or cholera. Still,
one must understand the damage and figure out ways to deal with it or
prevent it or pass laws against it. This requires knowledge and
organization to apply economic wealth well. An OHS/DKR could help with

> I can certainly agree that where a group or organization has common goals
> and basic agreements so that they can work together effectively, then
> Doug's ideas can form a powerful tool. What I am trying to get at is that I
> do not think Doug's tools will work where there is not a considerable level
> of agreement on assumptions, goals and facts between the participants. That
> is where the market, which resolves disagreements by allowing participants
> to take positions based on their views (different views are essential for a
> market - at the market price there is a buyer and a seller and the buyer
> must see more value than the seller) functions.

I'm not sure the users of an OHS/DKR have to agree, any more than the
users of a mailing list have to agree (beyond the agreement of
civility). A key value of an OHS/DKR is to allow points to be made,
discussed, archived, and revisited, so a group understanding can evolve.
Obviously, the group must have some common interest, if they are to stay
as a group. That group may not all agree, but at least they all have
access to a rich source of information for making decisions
independently or collaboratively.

A separate issue from understanding is action. Since different people
have different (economic) interests, even when part of the same group,
their individuals actions may differ even given the same information. I
think this is fundamentally not resolvable. I think of the issue as many
overlapping senses of "self", where being "selfish" means one thing when
thinking of you as an individual, another when thinking of yourself as a
(part of a) family, another when thinking of yourself as (part of a) a
community or various groups. These roles often conflict even in one
person. So, in that sense, even an individual using an OHS/DKR for their
own decision making faces a difficult task.

-Paul Fernhout
Kurtz-Fernhout Software
Developers of custom software and educational simulations
Creators of the open source Garden with Insight(TM) garden simulator

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