All posts by Roy Guisinger

Philosophy

Complex Economics – a political metaphor for the math-inclined

Once upon a time, in a land not too different from our own, there were two political parties. For the sake of distinction, we might call them Posicans and Negicrats. In principle, both parties wanted the same thing for their people: freedom, prosperity, education, health, safety, and so on.

complex economics

Imagine: complex economics

Unfortunately, the politicians were divided on one particular point, which caused them to support contradictory solutions for their economic problems: The Posicans, it turns out, insisted the square root of one dollar (?$1.00) is one dollar ($1.00). Meanwhile, the Negicrats believed the square root of one dollar (?$1.00) is actually negative one dollar (-$1.00). Both sides could make reasonable arguments for their assertion, suggesting that their opponents were wrong. Moreover, neither side could account for the square root of negative one dollar (?-$1.00) and accused anyone who considered such a complex thing of imaginary thinking.

Ultimately, the people were completely divided and their land was cast into a long and bitter conflict. Neither side was willing to believe the other could be correct and imagined their foes were solely interested in personal gain. As the debate continued over many years, it became obvious that members of the opposing viewpoint were corrupt.

It was not apparent to anyone that both sides of the ideological divide were correct, just as much as they were both wrong. Both Posican and Negicrat economics provided only simple and incomplete solutions to a more complex problem. When a theory of complex economics, and the tools to support it, was ultimately proposed, it consistently accounted for all of the Posican ideals as well as all of the Negicrat ideals at the same time.

However, locked into their narrow view that the truth could be only one way or the other, neither Posicans nor Negicrats could believe their economic model was a restrictive one. They would not consider that their society might be able to have it both ways where everyone could prosper.

Ultimately, unable to challenge their basic paradigm, the conflict continued, the world burned, and all was lost.

Civilitics: a complex solution to simple economics; not so easy to understand, but worth the effort.

Founder's Journal

Observations of December 2015

This blog has remained mostly dormant for the better part of two years while I explored other avenues for leveraging civilitic thinking into the world. And yet, not one of those efforts has created the level of interest that the subject warrants. Even though there is widespread contempt for the economic status quo, it seems that the promise of civilitic society is too divergent for any but the most devoted change-makers to investigate at the level needed to successfully master the material.

Of course, economists will doubtless point to the lack of widespread public interest as evidence that civilitics is flawed in some way. It is something of a self-fulfilling prophesy. One economist with whom I had the opportunity to speak about civilitics, pointed out that he was significantly more valuable to society than most other people, as evidenced by his substantial income. And yet, following his reasoning that income is commensurate with contribution, we should conclude that the contributions of people who receive no financial compensation for their labor, are exactly worthless. However, I do not recommend explaining to stay-at-home care-givers that their daily contribution has no value.

IviCivi: A civilitic social app

IviCivi: A civilitic social app

It is worth mentioning that another, more progressive, economist observed, “I have never seen anything like this before; it solves the [economic] problem of one person one vote.”

So, rather than boxing with the shadows of phantom economists, let me simply affirm that I remain convinced the implementation of a civilitic society (in some form) remains the singular greatest hope for re-civilizing humans and curbing the problems they continue to experience. Upon grasping the breadth of this principle, it becomes abundantly clear that the greatest problems we face are simply because of the illusory need to trade for everything, and the insecurity that accompanies the illusion.

This brings us to December 2015. Many discussions with influential community leaders, educators, social activists, and others, have yielded no spread of civilitic thinking or any motion toward a working civilitic system. My own effort to “walk the talk” and forego compensation in exchange for work has failed to set any notable example for others except, to demonstrate the strong hold exchange economics has upon the world by casting my family into near poverty.

In the past  year, I have created and transferred ownership of the civilitic effort to a new entity: the International Civilitics Institute (ICI). The http://civilitics.org website has morphed from being a simple blog, to representing the public face of the ICI, although it continues to serve both purposes. In addition, the ICI has taken on The IviCivi Project, which is a public campaign to create a civilitic infrastructure as soon as resources can be marshalled. So now the International Civilitics Institute will be able to move forward more deliberately to achieve the goal of a civilitic world.

Implications, Philosophy

Cheating in a tokenized world

I recently came across an excellent lecture given by Dan Ariely at Google. His topic was behavioral economics and the ways in which human decisions are influenced by outside conditions. Of particular interest is a part of the discussion that deals with cheating behavior and the use of tokens. For proper context, I recommend watching the entire lecture but the truly relevant part begins at about 41:56 (see quotation below).

Authors@Google: Dan Ariely

According to Dan’s research, humans are less likely to cheat with money directly than they are to cheat with things once or twice removed from money. When students were given the opportunity to lie about an amount of earned tokens instead of money, the degree of cheating doubled.

In Dan’s own words:

For me this is perhaps the most worrisome experiment of all we got because we are moving to be an economy that is not about money; it is about things that are at least one step removed from money. Think about a CEO who is back-dating their stock options. It’s not money, it’s stocks; it’s not stock, it’s stock options. It’s not asking for more, it’s just changing the date a little. Could it be that somebody who would never imagine stealing $100.00 from a petty-cash box could nevertheless very easily back-date their stock options and still feel honest about their overall behavior. I think the answer is absolutely yes. Could it be that when people cheat on Paypal and other things that are a step removed from money (credit-cards) it is actually easier for them to be (to feel) honest and at the same time cheating.

So what happens when we take a step away from money but in the other direction. Rather than abstracting money to something else, like tokens or stocks, what if we test the human willingness to cheat with respect to something of immediate value rather than after it has already been abstracted into money?

Dan said that stealing is more common when we take a step away from money and his examples only are in the direction of more, rather than less, abstract forms of value. But how would the likelihood of cheating change if we went from money to something more immediately valuable? Would we experience an increase in cheating, just as when going beyond money, or would be find that cheating was actually less? Would we find that money is itself one step removed from real human value?

Dan is a scientist and clearly states that we need to do experiments to determine these sorts of behaviors. They can not be intuited. Someone needs to initiate a comparable experiment where actual value was one of the experimental controls. Could we imagine an experiment similar to the test-taking scenarios that Dan outlined, but in which payment was not in the form of money, but rather in something of intrinsic value to humans – candy perhaps? Is the Coke experiment already an answer to this question?

The real question here is whether the use of money as an abstraction of value has already created a tendency for humans to cheat – a tendency that might be repaired somewhat by a civilitic model in which people’s rewards are more closely tied to the more-real value (the contribution) of their actions.

Examples, Implications, Philosophy

Changing the GDP calculation?

According to an NPR story (Lady Gaga Writing A New Song Is Like A Factory Investing In A New Machine), the United States government is about to revamp the way gross domestic product (GDP) is calculated because economists are realizing that intangible investments contribute to the GDP and should be included in its overall calculation. In the Lady Gaga example, “the value of the time she spent working on new songs; working in the studio” is now worthy of being counted in the GDP. Investments in filming movies will also receive GDP status, as will investments in research and development.

Credit: MarkyBon

Credit: MarkyBon

So let’s get this straight: song-writing is a value-added activity and represents a contribution to the domestic product. While it may seem like a smoke-and-mirrors tactic to artificially inflate the GDP in order to make the economy look better (which could easily be the real motivation behind this change), the new calculation is a step in the right direction. It is an economic way to approximate heretofore unrecorded contributions to the public wealth. As such, it is a tiny bit closer to the implicit civilitic understanding that every value-added contribution is inherently beneficial to society and counts toward the wealth of a nation.

Since economics and civilitics are based in totally different principles, we must have a common measurement concept if we are going to compare them in a meaningful way. It would be just as inappropriate to discuss the overall ivi of an economic system as it would be to consider the GDP of a civilitic system. But let’s assume for a moment that GDP is a measure of the benefit to society (by the expenditure of effort and money) over the period of a year. Technically, this is not the case, since automobile accidents and disasters contribute to the GDP. But if we consider just the positive aspects of GDP, then the GDP might actually be an economic allegory for ivi. A national ivi (should we call it a GDI – gross domestic ivi?) would be a time-average positive contribution by a nation’s people, something vaguely similar to the GDP. Of course, ivi is a running average and is not bounded by any sort of annual calculation, but we could certainly measure it only once a year if we wanted.

An activity that is a freely-given contribution to the world and society is a civilitic activity. So song-writing – at least by reputable artists – is certainly an ivi-generating activity and the addition of song-writing to the GDP brings that calculation more parallel with an ivi calculation. The same is true for film-making or research and development. But what about other ivi activities that still will not be included in the GDP?

So far, the breadth of activities included by economists – even with the new rules – is grossly incomplete. For example, the GDP does not include domestic activity such as caring for children, cleaning house, or doing yardwork. These activities are also investments in the value of a nation and the well-being of its people. Child care only increases the GDP when it is being done for pay, usually by someone who is not the child’s parent, but doesn’t it still contribute to the wealth of a nation when it is being performed by the child’s parent? Is house-cleaning only important when it is done by a maid service? Is mowing a yard only important when compensation is paid to a landscaping service?

Economists need to explain where and why they draw a line between investing in a new song and investing in other value-improving aspects of our society. Furthermore, since they have now decided to add some of these activities into the GDP calculation, how are we to measure them or assign a GDP value? How much is GDP is that new Lady Gaga song worth while it’s being written and how does that compare with a song being written by my friend Peggy Lang?

In contrast, civilitics handles these questions intrinsically by allowing society to decide the value of all activities. If you mow a lawn, write a song, take care of children, or research a new technology, civilitics calls upon society to assign an ivi value. How much real value is added to society when a board chairperson spends the morning preparing for a shareholder meeting? How much value is added when a mother is available to help guide her child through a moral crisis? Ultimately, economics can only attempt to model calculations which are simple and natural for civilitics.

Implications, Philosophy

Adam Smith was wrong

Adam Smith is considered the father of modern [exchange] economic theory and his ideas about economics have influenced economists for hundreds of years. One of the basic tenets he is often credited with espousing is paraphrased in the Wikipedia article:

…when an individual pursues his self-interest, he indirectly promotes the good of society. Self-interested competition in the free market, he argued, would tend to benefit society as a whole by keeping prices low, while still building in an incentive for a wide variety of goods and services.

Some philosophers have taken this idea to the extreme, such as Ayn Rand in her book The Virtue of Selfishness. While it is clear that Smith was aware of far greater complexities in the exchange economic system than are captured in this abbreviated idea, they are less-often mentioned, or perhaps outright whitewashed, by an exchange economic establishment that would like to promulgate the simplistic notion that the market works best when it is unregulated and governed only by self-interest.

John Nash – Governing Dynamics

In his work on governing dynamics, for which he later received the Nobel Prize, John Nash addressed how an isolated strategy of self-interest does not necessarily lead to the best possible outcome. A fictional example of this principle was portrayed in the 2001 movie, A Beautiful Mind, as seen in the accompanying clip. In that simple account, John says of Adam Smith’s self-interest principle,

[Adam Smith’s theory is] incomplete… because the best result will come from everyone in the group doing what’s best for himself and the group.

This is significant in that it is exactly how civilitics differs from economics. Exchange economics gives each participant in the marketplace an opportunity to negotiate independently and maximize their own self-interest. As a result, self-interest, frequently manifested as greed, is the dominant principle. In contrast, civilitics shifts compensation into the public domain, creating a mutual dependence on both what is best for the individual and what is best for the group, just as Nash proposed.

This characteristic of self- and group-interest is intrinsic to civilitic systems because of the explicit lack of reciprocity in civilitic relationships. As a result, the reward system is negotiated upon the values of society instead of by self-interested greed, leaving little or no need for enforcement, regulation, or mandates to control civil behavior.