Building Systems

It started with the mathematicians and the scientists  — Galileo, Descartes and Newton.  The idea that the universe could be conceptualized as a system following universal and natural laws created a world view that threw medieval thought and Aristotelian scholasticism in the trash heap of history.   Instead of a world of particulars there were universals, the same laws of physics apply everywhere in our space-time universe.

Before long such thinking was applied to human behavior, yielding both powerful insights and dangerous dogmas.   Giambattista Vico’s theory of history published in Scienza Nouva (1725) is one of the first, yielding a theory of historical evolution and class struggle that influenced diverse thinkers from Karl Marx to James Joyce.   Building systems to explain human behavior created a new way of thinking that would change the world.

Adam Smith, author of "The Wealth of Nations"

Adam Smith was a moral philosopher whose 1758 book Theory on Moral Sentiments brought him to prominence, but his system building classic Wealth of Nations changed everything.  It showed both the power, and the potential pitfalls, of system building.

Throughout history merchants knew that if you increased the supply of something while demand stayed steady the price would drop.   The “law of supply and demand” was part of the practical knowledge of doing business throughout history.   Yet Smith took and it formalized it into a law and along with notions like the importance of the specialization or labor created a systemic view of market economics which came to be called capitalism.   He published Wealth of Nations in 1776 and it became a smash hit.   It described the workings of the industrial revolution, and for the first time argued that as individuals pursued their self interest they would inadvertently yet in a very real way be promoting the public good.   The idea that individual self-interest was not bad (greedy, selfish, etc.) but rather good (it allowed the market to create prosperity and adapt) was knock out stuff.

Of course, if you read Smith carefully, you see that the system builder recognized that his system was not self-sustaining and perfect.  Unlike Newton’s mathematically precise world, markets are human constructs and do not operating magically or naturally.   Smith argued that the wealthy can collude and circumvent markets, exploiting labor and using their power to benefit themselves.   Self-interest has limits, if capitalism is to work.   Indeed Smith skewers the wealthy of his day, often with rhetoric that is more fitting for Occupy Wall Street than the University of Chicago.

The problem is clear:  human system building simplifies a myriad of variables into a model that works well, all other things being equal.     Because human behavior is variable across cultures and time, any system that generalizes by definition has limited applicability.   Moreover, due to complexity the simplification is a good starting point for basic principles, not for claims of universal truth.   Smith understood this.

But those who came later made the fatal flaw of turning systemic thinking into ideology.   Theories of how reality work came to be grasped with a religious zeal as being the truth.   That rationalized looking at the world abstractly.   Perhaps the best example is the response of Great Britain to the Irish potato famine of 1846-51.    The Irish were starving in droves (over a million perished) but a libertarian philosophy led them to rely on the market rather than to intervene.   To this day when there are crises people say “individuals can help if they choose.”   That sounds good in theory, but in reality not enough ever choose to do so.

Once you embrace a system as an ideology, you lose the capacity to recognize that the system itself is an imperfect model of reality that doesn’t always work.   One further interprets reality through the system, and finds reality always fits ones’ ideological world view.   With a complex reality that one can interpret in a variety of ways, one can always support ones’ pre-existing view.  If one holds on ideology with a kind of religious fervor, there is never any reason to doubt one is right.

System builder Karl Marx

Karl Marx, writing 50 years after Smith, admired Smith’s work and considered him his “favorite economist.”   Most importantly, Marx (who also admired Vico) tried his hand at system building.   Like Vico he tried to explain the broad flow of history, using the tool of the dialectic borrowed from Georg Hegel, the German Philosopher he had studied.   Hegel’s dialectic was used to examine ideas, Marx used it to examine economic history — historical materialism.   Like Smith Marx used his system to look at how the economy functions, getting an explanation of why capitalism was leading to sweat shops and working class misery rather than prosperity.

Marx’s system suffered all the flaws that Smith’s did, perhaps more so due to the methodology of relying on the dialectic.  Moreover, Marx was not just a theorist like Smith, but a political activist who hated the poverty and misery he saw in the working class.   This led him to make a fundamental error: he extrapolated his system into the future without supporting his vision with evidence.

Marx’s insights on how capitalism function are still used today by people analyzing the political economy.   They’ve been altered and updated, but like Smith, his theory has proven resilient.    Both Smith and Marx – as well as others – have contributed to our capacity to make sense of how the economy functions.   But Marx’s extrapolation into the future imagining a perfect class free society without any exploitation led to horrific abuses of power by revolutionaries determined to achieve this just and utopian future.

System building leading to ideology is dangerous and misguided.    Ideology leading to dreams of utopia and a desire to make that utopia real are dangerous.

Ideology is not the same as having a perspective and a set of beliefs.   Everyone needs perspective and beliefs to make sense of the world, but you don’t need ideology.   Ideology comes from taking a systemic representation or model of reality and using it as the framework through which to interpret reality.

The systems are themselves not bad; they are useful.    In fact, Smith and Marx both provide useful systems that are not in contradiction to each other, even if they focus on different factors as relevant in different contexts.    It is useful to understand, try out and explore the potential and limits of a lot of abstract systems of thought, efforts to model and make sense of reality.   The danger comes when one mistakes the system for a true representation of the actual laws of nature.   The mistake intensifies when the ideology is grasped with a religious fervor so that the holder of the “one true ideological belief system” sees battling the others to be just and necessary, just as the religious soul might believe she must defend the one true faith.

Now is the time to step back from ideological delusions.   Building systems is a good thing, they help us understand, analyze and try out theories about how reality works.   But all systemic thought has limits, and the sophisticated thinker can try out different systems and explore where they lead, not needing to think he or she has the one true world view.   Moreover, humans construct culture and worlds; how the world changes, even human nature, is somewhat malleable in light of those activities.   As we move forward into the 21st Century job one must be to shed ideological dogma and think creatively about the transformations taking place.

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  1. #1 by modestypress on November 16, 2011 - 01:25

    But those who came later made the fatal flaw of turning systemic thinking into ideology.

    Very true. One of the most serious flaws of human thinking.

  2. #2 by pino on November 17, 2011 - 03:44

    The idea that individual self-interest was not bad (greedy, selfish, etc.) but rather good (it allowed the market to create prosperity and adapt) was knock out stuff.

    There is a difference in earnest self-interest and greed. No one looks askew at the man who labors 70-80 hours a week while sacrificing all the finer things in life only to find that later in life he is wildly successful. However, that same man is universally despised if he cheats and and amasses his wealth through fraud.

    Smith argued that the wealthy can collude and circumvent markets, exploiting labor and using their power to benefit themselves. Self-interest has limits, if capitalism is to work.

    While I agree that the wealthy can, and do, collude and circumvent, that is or should be cared for under existing laws speaking to fraud. It should not be seen as a knock on the freedom of markets.

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