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

From: Eric Armstrong (
Date: Sat Jan 29 2000 - 13:46:30 PST

From: Eric Armstrong <>

This is brilliant, Paul. A few comments below, but I just wanted to
say that I visited your Web site and I am *extremely* impressed
with your "Garden with Insight" educational software at

Paul Fernhout wrote:

> 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.

Granted it was inaccurate. But that is *tremendous* progress. Edison
once said that he had successfully found 10,000 things that would *not*
work for an electric filament before settling on copper wire. No complex
software project goes out without bugs. Most can't even get the user
interface right without a lot of feedback. Microsoft does the best
interface work of any company on the planet (despite being ethically
impaired in other areas) and they *still* don't get it right much of the
time. When they do, it's generally not until the 3rd revsion.

If the club of Rome had a problem, it was due a limited ability (time,
financial resources, technology) to update the model. Then, too, there
is the very serious problem that it takes *years* to get useful
feedback. That makes revisions difficult to accomplish. A really big
maybe (but an interesting one) is the possibility that the Millenium
Project might be instrumental in developing feedback channels that allow
models built on a smaller scale to receive usable feedback in near-real
time. It might take decade or two before a really usable model came out
of it. But if it did, it would be fascinating.

The more important danger, I think, lies that in assuming that because
it has always been so, it always will be so. We have cleverly managed to
find ways around resource-limitation problems, but that doesn't mean
there is open-ended chain of discoveries ahead of us that will do so
forever. Imagine that society of ants in the tree. Their population is
growing. But by working together, they manage to forage deeper into the
jungle and find ways to bring back more food for their growing
population. They invent lots of neat ways to do that, and are feeling
very good about their ability to do so in the future. But now imagine
they are living on an island. When they get to the edges of the island
-- that's it. There is no more.

One of the simulation's more interesting conclusions, as I recall, was
that if something *didn't* happen that resulted in a drastic reduction
in population, the ensuing population growth would swamp the boats.
Maybe the model was dead wrong. Or maybe it wasn't, and just off by a
hundred years or so, due to human ingenuity. (We'll probably know by

> 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...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.

Yes. Society functioning as a whole, for the benefit of society as a

> 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....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.

Risk which is again passed on to others. The legal attacks on tobacco
companies have produced at least one "check and balance" in the form of
lawsuits. The framers of the U.S. constitution did a remarkable job of
setting up a system of checks and balances within the branches of
government and, with the first amendment, enusring the power of a free
press to act as an additional check. (The right to keep and bear arms
was intended as the ultimate check, to preserve the ability of the
people to overthrow a government that got out of hand. That one is
turning out to have other unfortunate social consequences, but the
principle of preventing rights from being usurped is and was a powerful

What the constitutional framers had no inkling of was the eventual power
of business. Markets are clearly a very good thing. But how can business
activities be (appropriately) kept in check while still allowing for
legitimate feedback into the policy making process?

One must also be alert to the advertising, in this area. It is
remarkable how often a law passes that requires the law industry to
implement some safety feature, and then 6 or 8 months later the ads
appear touting that feature as something the company "did for you"
because they really, really care. If you believe the advertising, you
would think that regulations were never necessary! But the sweatshops,
company towns, and union-busting activities that occured in the early
half of last century (never saw myself using *that* phrase) attest
convincingly to the fact that personal greed and ambition do require
external restraint. (Equally, the failure of centrally-controlled
economies point out the total regulation is not the answer. The answer
lies in somewhere in the middle ground we are currently exploring.)

> 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....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.


> 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.

That is such a totally *great* summary, I can't tell you.

> 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?

Too good.

> 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.

> > Markets do work....Central management (doesn't)
> >
> 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?

> I think an OHS/DKR related to world issues will have great value in
> several areas.
> <many good points snipped...>
> "external costs" 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
> this.
> A key value of an OHS/DKR is to allow points to be made,
> discussed, archived, and revisited, so a group understanding can
> evolve.

Inspiring. Can't think of a better project to expend my effort on.

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