Saturday, January 11, 2014


(Continued from Monsters)

UCLA's Institute For Pure And Applied Mathematics, Conference On Mathematics Of Social Learning, January 9, 2014

- This guy from the Santa Fe Institute talked about his new way of computer modeling of prices. In the usual supply and demand model, it is unknown how a price is arrived at. There is no central auctioneer asking an audience, who will pay 100? who'll pay 50? who'll pay 5? His solution was to consider prices private. Each buyer and seller starts with an idea of how much he wants or will pay, then looks at what other people are selling at or paying, finds out if they are successful, and adjust his own sale or buy price accordingly. Prices evolve individually.
- I missed the lecture. What happened when he ran the model?
- Stable price arose.  At the buffet I told him that he was only partly right. Prices were set individually, but they only partially evolved. Mostly they were set by a social expectation.
- How do you know that?
- That's what he asked me. I said from experience buying and selling old watches between other dealers in Europe. Prices willing to be accepted by shopkeepers, for example, were three times what they paid. If the buyer wouldn't or couldn't pay, price would be lowered if there was a need for cash, otherwise there would simply be no transaction.
- Like in the housing market after the 2008 crash. Very few people were buying. People offered property for sale only when they had to. What did the economist say?
- His father, a furniture dealer, demanded 40%. He said, come to lunch, we'd talk.
- And?
- I didn't go.
- Why not?
- Don't be offended, but I don't like the people here. This is not my world.
- What is your world?
- I don't know what you think of the theory of evolution. I'm of the opinion that it is something like the theory of mysteriously stable supply and demand. The economic model works a little, but only because of stability provided by social characteristics, not economic, of human nature. The same is true of why the theory of evolution appeals to us. Social, not biological characteristics are at work. For random adaptations to be selected, and evolve in one direction, they have to at each step be advantageous. That in the natural world is almost impossible to believe. The mathematician Berlinski gives the example of evolving a paper cup, starting with a tube, and later adding the bottom disc. The tube isn't much use for drinking. Compare what happens in the computer simulation of evolving individual prices. Two things are necessary for stable prices to result: attachment to the path already set out on, the process of looking for a price, remembering what has happened and continually readjusting trial price in response, and the expectation that you will be able to succeed. That is, that you know there is such a thing as a right price. The theory of evolution fulfills neither condition, neither requires keeping to the same path nor has a known end looked for.
- That's the stuff of our world. I asked, what is yours?
- Rousseau wrote that society becomes corrupt when people act in response to other people's demands so as to get power over them, rather than do what they know by personal experience will be good for themselves. In the natural life are both requisites for successful evolution: the individual path stuck to and continually referenced, and known goal: happiness. The theories of evolution and market stability describe individuals responding to other individuals and the world without the continual reference to past experience and individually known goal, in other words, are built on the model of corrupt human behavior.
- You think we are impersonal and put ambition ahead of being happy?
- I do.
- But you profit by the work we do.
- Nietzsche wrote that certain people were drones: they work but don't reproduce, don't themselves play a part in evolution.


- Consider the so-called problem of free will. In scientific research, social convention keeps scientists to a path and sets the end. Following the path, however, each scientist can go at his own rate and make some deviations of direction. To that extent the scientist can be an individual, while participating in the social project. An individual develops habits, and adapt his habit to the circumstances of the world as they change in response to the habits he allow himself to practice. As an individual, the scientist does exactly what he wants to do. As a scientist, however, he sees it is possible, given exact knowledge of his habits and circumstances, to predict his every thought and action. He finds this possibility disturbing. How you ever wondered why?
- He's not free to do anything he wants if he has to do what we can predict he will do.
- But why would he want to do anything he doesn't want to do?
- That's an interesting question. Yet I for one, if I examine myself, do want to do, at least potentially, what I don't want to do. I want to be free to do anything, and then choose to do what I want.
- Unconstrained by dedication to individual path or to individually determined end? You see the implication? Wanting to be able to do what we don't want explains the appeal of the unreal models of evolution and supply-demand economy. The freedom to do what we don't want is precisely the freedom to accept the demands of social convention, to find out what other people want and then do it to obtain power over them.