In an attempt to create a graphic to illustrate a very generalized representation of the Crisis Cycle, I used strait lines to indicate four specific economic states. This being cyclic of course insisted that it would repeat as it has in our economic history. The graphic thus had an appearance similar to a saw wave produced in the oscillators of the synthesizers that are used to create digital instruments for digital music production. This is what is seen in the graphic above.
The next graphic depicts the four states that I wish to focus on in order to reduce the Crisis Cycle into explanatory segments. The legend at the bottom of the graphic points to the states represented in the saw wave pattern and to the written explanations below.
This is an analysis of the Crisis Cycle as it is expressed under Capitalism. Of course the previous economic paradigms have had similar results; however the components and the social orders were much different. The underlying drivers were the same though.
Our economic systems are growth based. Economic incentives are leveraged to maximize growth. The one most influential appears to be the corporate model. Corporations are coerced toward growth by dividends that are promised to stockholders; who help to fund corporations by buying stocks. This is mutually beneficial while the market is growing as the increasing profits are shared with the stockholders by increasing the value of the stocks. The corporate model also has an advantage over small business as it can leverage its ability to trade in much larger volume and even provide services for itself to cut costs even farther. This allows corporations to have more competitive pricing, more resources for expansion, more to offer manufactures as a distributor, more resources for marketing and more funding for research and development etc. During the growth state the corporate model is poised to control most of the markets, The growth state begins with growing numbers of businesses. This is the horizontal growth that makes economies stable. Since there are so many businesses with so little overall influence, if one or even many were to fail, there would be little felt by the economic system. As corporations continue to grow and corner markets, the growth becomes more vertical. This means a smaller number of larger businesses with more overall influence in the economy. Such businesses can actually leverage their interests when they are in the interest of the economic system. This isn’t necessarily destructive when corporations are providing growth for the economic system.
When the economy is heavily influenced by large corporations, mistakes made by them is felt in the economy. This is a situation where the interests of a large corporation being leveraged can be destructive. This is because this situation is indicative of growth maximum. This is characterized mainly by market saturation and flux in the economy. Since large corporations begin to lose the advantages that they once had in this state, the ability to continue securing dividends becomes more questionable with time. In order to continue increasing profits, large corporations have been employing new strategies. Small businesses are now being bought out in the interest of risk management. Research and development is a risky proposal in that, it may or may not pay off. The advent of “Start Ups” allows large businesses to buy proofs of concept rather than investing in projects with a probability of failure. This however enables the instability of the economic system by working against the needed horizontal growth. This of course compounds the problem. Nefarious behaviors are also more likely in such a urgent situation. Corporations are addressing issues in ways that are destructive not only to the economy but also to the public establishments. Tactics like offshore shelters and regional monopolies are some of the most well known. There are also instances of not delivering on agreements for subsidies though the subsidies are accepted. Anti competitive behaviors to defend cornered markets are fairly common. Mergers are still occurring even though it’s likely to further destabilize the economy. Ex-corporate employees have taken positions in government organizations making regulation improbable even though the organizations are still being funded. When corporations become so influential that the well being of a substantial percent of the population relies on the well being of individual corporations, there’s little leverage for accountability. Reform is unlikely in this state due to this lack of leverage. This suggests that the economy is to continue becoming more and more unstable.
Falling stock prices, large mistakes or even concerns about impending decline can set off a chain of events that has catastrophic effects on an economy. Something similar is probable in an economy that is both at growth maximum and unstable. Since decline is statistically likely, it is expected. This has the effect of a percentage of the population preparing for the event by saving. This is currency that is dormant as opposed to in flow. This of course compounds the problem. The rising dividends are an eventual source of failure as the gap between the profit margins that secure them and the dividends themselves closes. When there is little confidence in a companies ability to produce a return, the most likely outcome is loss of stockholders. This is an eventuality for any corporation and a larger problem during economic instability. The nefarious behaviors can have catastrophic effects as well. An instance as large as the real estate scandal in 08 could create a chain reaction in other unstable markets, sending the entire economy into decline. This is all due to an expectation of growth under growth maximum. Over time the need for growth becomes more dire and less likely until the economy collapses under its own weight. The result is economic depression. This includes increased instances of hunger, disease, homelessness, suicide, mental illness, etc.
In the midst of economic depression, the populous is coerced to create solutions for the resulting issues. Behaviors become more frugal as access to resources is more constrained. Localized partnerships are more reliable as infrastructure is less reliable. Gardens become a tendency, barter becomes more common. Grass roots solutions begin to rebuild the foundation for the economy. Public services for food, clothing health care, and housing are an imperative as society regroups.
The most concerning issue intrinsic to the current economic system is it’s basis on growth. The lack of sustainability that results produces issues that are not only economic but also ethical, moral and legal. Loss of capital, property, health and even life is an expected result from this model. This is in keeping with previous monetary systems. It’s well understood more modernly that the perceptions of scarcity entice those more sensitive to threats to become more aggressive. This results in disparity and has since the dawn of civilization. This expresses itself through the cycle until the system collapses.
The most appealing part of the saw wave is the pinnacle. If there were no incentive toward growth there would be no fertile soil for the nefarious behaviors to grow. This however isn’t a likely scenario as incentives are the mature technology of political systems. This is in spite of their cyclic, catastrophic failure. Political institutions have a tendency to try to coerce the behaviors that are deemed favorable through positive and negative incentives. This at times has the opposite effect or some strategy arises that enables sidestepping. Overall incentives have been proven generally ineffective.
An attempt at solutions for Capitalism tends to result in the same conclusion. Reform is insufficient for a significant favorable result. The outcomes that Capitalism has produced have been liberating and have raised the standard of living under growth; however Capitalism has the opposite effect under growth maximum. This is keeping with previous economic systems. The social hierarchies have always been built with access to resources as the primary driver. All of the disparity that resulted from nefarious behaviors was likely in the interest of previsions for inner circles. This was promoted by the more aggressive or fortunate allying with each other until the social hierarchy was built. This obviously still occurs today. The evidence is overwhelming that this is to be expected under any currency system.
The Crisis Cycle may not necessarily be a part of humanity’s future. Models are being formulated that mitigate many of the issues that arise with monetary economics. This is a very opportune time for such an occurrence. New models could be implemented during decline given that they are a path of least resistance. This may not be unlikely as a collapsing system would be easy to exit. The probability is better still if the types of solutions that the new models are offering correspond with the types of solutions that are employed under recovery. Now is the time to research and develop post currency solutions.
An effort to maximize accuracy can have the effect of leaving out interesting principles and behaviors. Probability specifically targets the most likely outcome and assigns a confidence value to it. This is essentially two layers of probability; one for the outcome itself and one for the confidence that the prediction is correct. This however doesn’t attend to less likely outcomes that could have interesting effects and maybe even applications. Less likely outcomes just aren’t part of the focus of the method.
The common value of probabilistic logic resides in its ability to achieve strong truth values for scientific purposes and also more reliable effects for economic applications. This is because it’s based on the principle that “n” out of “n” times a specific occurrence will result. The less difference between the numbers, the more reliable the prediction.
Where this could be more of a purely exploratory method is where it is used to find interesting principles and effects that are less likely to occur. Though there is an obvious problem with the second layer of probability regarding the confidence value, numerous trials with patterned outcomes might result in interesting data points. Some of the confidence might be conserved by increased numbers of trials and observing recurring patterns. This of course might cause concern with the added expense accrued with added numbers of trials as well. Being aware of more physical principles, however might result with employing more layers of probability.
It’s well known that observation is subject to the perspective of the observer. As a result causation seems to be more of a method of aiding human understanding of classical systems than a maximally accurate account of complex physical interactions. The human perspective revolves around the human experience. This is observing interactions in a linear chronological sequence. This includes focus on a singular sequence of events as well, due to cognitive abilities.
Interactions rather appear to be much much less finite than causality would suggest. Considering influence in classical mechanics is intrinsically difficult. As closed systems are rare and not generally interesting, influence is extremely complex. To consider how a single interaction influences a system, some influence value would be useful. This is difficult to deduce as there are simultaneous interactions that are influencing that particular interaction. This begs the question, how many interactions need to be accounted for, for correction to get the most accurate influence value. It would stand to reason that influence would be distributed in a somewhat even manner however this would not account for normalization. This may suggest that existence of an overarching, unified, synergistic principle feeding back into the whole of known physical reality. This might be explained by considering that there are numbers of simultaneous interactions; and individual entities are thus required to be normally influential by being compatibly interactive with a number of other entities. This would also suggest that classical systems are composed of complex feedback loops. This opposes the causation that is our experience. This also might explain the usefulness of probabilistic logic in testing and understanding complex systems.
The arguments previously made in this article are a build to this argument. I’m concerned that probabilistic logic is more of a method for humans to explore QM rather than an accurate description of quantum behaviors. One might expect that probabilistic logic produce more favorable outcomes under observation where there is lack of perceptual tools and a critical mass of repeated experience to draw from. It’s well known that probabilistic logic is useful in human ability to make predictions and this may be generating noise in deducing quantum behaviors.
This of course would not argue with the standard model as it is based on clear mathematical yields. Rather the rotation matrices are more akin to the synergistic feedback loops described in the “causality” section.
Pattern recognition might prove to be more useful if employed more aggressively. This might leverage more human and computational system ability towards exploring the physical known. This may suggest that maximally accurate prediction may not produce maximally accurate descriptions of nature.
This is intended to not only support that socioeconomic systems are the result of the unfolding of natural processes, but also to make a case for and illustrate a framework for modeling socioeconomic systems in conjunction with those natural processes.
The greater function of a socioeconomic system appears to be in the interest of first, the sustenance of a population, secondly maximized wellness of the population and then the general raising of said populations standard of living. In order to maximize the probability of achieving these goals, consideration and accommodation of the natural processes is in order. Where this is not the case however, the various forms of risk should be to some degree expected. This is potentially an issue due to the heuristic manner of human thought and behavior. Though the scientific theory exists to make the connection between the theory itself and socioeconomics, it is not commonly made in practice.
In this article I will be distinguishing between the underlying and overarching physical processes, and the biological and behavioral processes. This is in an effort to show where socioeconomic systems can produce Entropy and thus the risk associated with it. I also hope to provide axioms to model systems that have the potential to mitigate such risks.
It is said that the universe is in the business of Entropy. It is this natural engine of variation that produces the complexity that we observe. Without this the very matter that composes us would not exist; much less our socioeconomic system. A more precise explanation of how this occurs is intrinsically difficult for humans to understand. For this reason, I implore those who are not familiar with credible literature on the subject to familiarize themselves with it. For the time being, I’ll provide a brief explanation. The physical fundaments of our universe are quantum mechanical and thus behave probabilistically. This provides variation in systems that lack it where interactions with varied physical entities is not present, such as the interactions in the classical systems that we more readily understand. This isn’t to say however that Entropy doesn’t exist in classical systems. It’s often – maybe too often – thought of as abnormal or disruptive to the mass of existing normal or novel systems. For the purpose of this particular argument, it can be defined as that which is not long normal or novel.
Though not quite as influential as Entropy, Normalization is an extremely important process in the formation of humanity and thus our socioeconomic system. This is the engine of self organization of natural systems. It is a process that determines whether or not a particular pattern or system becomes viable. The fact that Entropy is so much more influential than Normalization suggests that this is often not the case. As a matter of fact extinction is normal in that it is the more common outcome. For a more comprehensive explanation of how this is, the Second Law of Thermodynamics would be the proper citation. For the positive utility of this article however, normalization of the socioeconomic system is the focus. This fact does support the importance of doing so though.
When a pattern or system is newly normalized, it is considered novel. This is a contrast between it and a long normal pattern or system. It would be expected that over time it would just be considered normal. This is a distinction that is made in the context of the causality of the processes described. Entropy is normalized to become Novelty which sustained becomes normal.
Normality is associated with the heuristics that we employ to simplify our function and thus function more efficiently with our natural constraints. This is a high level explanation of how normality isn’t interesting to human attention. It is novelty that we attend. This being the case, and considering that Entropy is the first stage of the production of Novelty, attention to normalization is important in realizing the desired outcome.
2) Natural Selection:
A natural process more specific to the emergence of modern humans might help to clarify this particular argument. For an effort to truncate it in intent but not in the more generalized context that is the focus of this article, drawing attention to the correlations between Emergence and Natural Selection may suffice. This is an attempt to keep a singular train of thought active for the reader and effectively connect the natural processes between the two theories.
Biological systems and the natural systems in which they reside coexist in a synergistic ecosystem. Entropy can occur when this synergy is disrupted. The transition from the common ancestor to Hominid is explained with a possible environmental change as an influential pressure. It’s the punctuated variations over time in these complex systems that initiates the change that is to become normal. This is also where the risks become more understandable and potentially concerning to humans. This draws the argument nearer to the original intent.
The norm in ecosystems is a wide variety of biological life living in synergy known as symbiosis within biomes. Normalization tends to produce niche’ organisms that cooperate with the environment via self interest; due to the risk of extinction. This has very specified pressures that produce this effect as an aggregate. Behavior is coerced in ways such as location and abundance of necessities, location and abundance of predators or prey etc. The synergy between biological life and the environment is maintained through a complex process of self organization that revolves around impulses that are intrinsically cooperative. This is brought about probabilistically as uncooperative behaviors and often the biological life that yields them become extinct. Extinction isn’t however necessarily an unfavorable outcome. This process allows for a transcendent form of extinction that requires a large span of time to produce. It’s the abrupt form of extinction that leaves no successor that is the unfavorable outcome.
By a finite human account, Novelty comes extremely slowly with Natural Selection. Millions or even hundreds of millions of years can pass before obvious change is discernible in biology. This is a bit of a problem in referring to evolutionary advancement under this particular context; however consideration from a longer time scale can maintain the clarity. There is also more abrupt instances where natural disaster or some other short term environmental change brings about a relatively abrupt change in biology. Something similar is suspected with the transition between the common ancestor and the hominid and with the transition between the hominid and modern human as well. In contrast with the rest of biological life on Earth, humans appear to be relatively novel.
3) Technological Advancement:
In keeping with the correlates, technology has been a source of novelty in human advancement since the dawn of humans. This has had an effect that has outpaced Evolution by orders of magnitude. It has the potential to out pace our evolutionary advancement to the extent that eventually human understanding can no longer produce novelty with it at an accelerated rate. This is a point at which niche’ existence becomes more probable for legacy humans. This accelerated advancement appears to be a consequence of the abrupt evolutionary novelty that likely occurred in the dawn of our species.
Solution for a large brained and physically capable animal need not necessarily be the work of Natural Selection. An animal intelligent enough to consider Negative Utility in the abstract is likely intelligent enough to form patterns that solve problems in a novel way. This of course has brought about a novel form of Entropy in the perception of humans. The ability to have some understanding of natural systems could even have resulted in natural systems having introspective awareness of Entropy through humans. Technology has also had the effect of disconnecting humanity from nature. Replacing natural settings with creature comforts and modern conveniences has removed the prior concerns that the ecology leveraged against human behavior.
As we advance our technologies become more difficult for us to understand. Scientific Theory becomes more and more strange to our experience. The Entropy that disrupted a niche’ organism in the savanna now appears to be reaching an asymptote of sorts. The purely human capabilities cannot be credited entirely for many of the more recent advancements. This has been the case for hundreds of years. Our technological advancement has helped us to see our potential in many ways in conjunction with our natural abilities. Technology itself has been a normalizing environmental factor in that regard.
The solutions that technology has provided have been for the most part novel. Favorable outcomes for human existence have flourished under advancement. Not only have humans been sustained with advancement, the human condition has been much more novel as a result. More recently human necessity in the socioeconomic system is becoming less obvious.
Again, socioeconomic systems are intended to first sustain a human population, second maximize the wellness of a human population and lastly raise the standard of living of a human population. Since humans are obviously different in intellectual capacity and physical dexterity from all of the other life on the planet, it would be wise to consider to what degree humans are truly novel beings or a significant source of entropy. It would seem that both are very much true in many respects thus an economic survey is in order for the sake of a successful socioeconomic system.
Human behavior and attention are the result of vast expanses of time in which successful biology has transcended itself through synergistic interactions with the environment. The technological progress of late has disrupted that synergy to a significant degree without much effect on our natural predispositions produced by evolutionary processes. This occurred through the contrast of the rapid pace of technological development and the slower pace of Evolution. This is not often considered in economic survey. Rather it is most commonly referred to as “Externality”. This suggests that an effort is being made to disconnect the physical realty from Socioeconomics. The common practice of addressing socioeconomic issues is with incentives. This practice is beyond mature in that, it has been falsified as effective by the behavioral sciences. In many cases the outcome in practice opposes the desired outcome. This is a factor that has produced significant entropy; and thus has the potential to produce extinction and existential risk.
Accommodating human predisposition and creating awareness of environmental factors relevant to specific economic endeavors has been a growing practice though not a common one. This could potentially be a normalizing factor if executed effectively either along side of existing models or in the process of designing business models. The latter seems more likely to have the desired result as it would become part of the heuristic; rather than the constant struggle that the former has always been with little to no favorable result.
Culture seems to be a more probable source of novelty than Economics; in the long run. Technological advancement can be a source of novelty for the time being; however niche’ existence is the norm for biology unless environmental factors change it. Even so, the eventuality is still niche’ existence for biology specifically.
Prediction that suggests that human economic interaction with the environment would be totally replaced with high technology has a concerning implication. This revolves around the notion that humans would no longer be economically viable and potentially costly. Economically it would be wise to make ourselves useful. This also seems to be probable when considering that humans have a natural predisposition to do so. It’s human nature to create meaningful lives; and this expresses itself in very useful ways. A scenario where humans are completely cut off from economic interaction with the environment is one where the potential for entropy and the extinction and existential risk that results is enormous.