Arnold Kling  

Spontaneous Order Denied

PRINT
Mortgage Markets: The Public ... Book Watches...

Doug Rushkoff says that our capitalist society is neither spontaneous nor an order. He thinks it came about because of some decisions made by monarchs in the 13th century.


The first innovation was to centralize currency. What better way for the already rich to maintain their wealth than to make money scarce? Monarchs forcibly made abundant local currencies illegal, and required people to exchange value through artificially scarce central currencies, instead. Not only was centrally issued money easier to tax, but it gave central banks an easy way to extract value through debasement (removing gold content)...

The second great innovation was the chartered monopoly, through which kings could grant exclusive control over a sector or region to a favored company in return for an investment in the enterprise...

We ended up with an economy based in scarcity and competition rather than abundance and collaboration; an economy that requires growth and eschews sustainable business models. It may or may not better reflect the laws of nature -- and that it is a conversation we really should have -- but it is certainly not the result of entirely natural set of principles in action. It is a system designed by certain people at a certain moment in history, with very specific interests.

In response, George Dyson writes,

How to best transcend the current economic mess? Put Jeff Bezos, Pierre Omidyar, Elon Musk, Tim O'Reilly, Larry Page, Sergey Brin, Nathan Myhrvold, and Danny Hillis in a room somewhere and don't let them out until they have framed a new, massively-distributed financial system, founded on sound, open, peer-to-peer principles, from the start. And don't call it a bank. Launch a new financial medium that is as open, scale-free, universally accessible, self-improving, and non-proprietary as the Internet, and leave the 13th century behind.

Why focus on just finance? In the last sentence, substitute "decentralized non-monopoly approach to government" for "new financial medium."

By the way, I do not endorse either of these essays. Among other things, Rushkoff needs to say "hoard" rather than "hord."


Comments and Sharing





COMMENTS (22 to date)
Joe Cushing writes:

I really don't' see centralized currency or chartered monopolies as cornerstones of capitalism. Neither make our capitalist society what it is.

BlackSheep writes:

He seems to be talking about mercantilism. But hey, if that's his definition of capitalism, then I'm going to join in his opposition to capitalism.

BlackSheep writes:

And how contradicting is that guy? He says, on one hand, that monarchs wanted to establish a more scarce currency than gold. On the other hand, that they wanted to confiscate the citizen's wealth by debasing the currency (ie. making it less scarce).
This guy should learn one or two things about economics before bashing the entire profession.

Gary writes:

My favourite non-criticism of capitalism is that it is a system of artificial scarcity. Where is/was there a greater abundance (material goods, health, free time, etc.) than in modern-day capitalist countries?

Good points Joe and BlackSheep.

William writes:

Can anyone understand what Rushkoff means by "scarcity" in this article? I don't understand the article, but I feel like that concept must be one of the keys to understanding it.

Has anyone read Life, Inc.? Maybe that contains some clues.

Koromo writes:

Shouldn't he study more Economics and Economic History before writing a book about it?
I mean, every opinion is valid and all that, but... If you didn't study enough the subject, chances are, writing a book about it isn't gonna be a very productive task.

Sorry about my poor grammar. English is not my primary language.

Gu Si Fang writes:

In Northern Europe, prior to the 13th century, silver monies were issued by feudal lords who had power over a limited territory. These monies were debased on a very regular basis. This did not penalize the lords much, because any kind of trade inside and between those feudal domains had shrinked a lot anyway. Money was not scarce : commerce was.

When feudal lords lost much of their power to the king who centralized seignoriage, inflation went on, but in a more centralized fashion. It was just a predatory economy where he who controlled a territory lived off it.

One interesting development occurred when merchant cities such as Venice and Florence started minting their own gold monies around 1200 onward. They were into the business of international trade, and wanted to develop exchanges with Northern Europe. The italian matapan, the florin and the ducat soon started circulating in all Europe due to their excellent quality.

The difference was not whether those minters were public or private, centralized or decentralized, but that they had to "sell" their monies and could not force people to use them. Since they had no monetary privilege outside their city, they could make a profit from minting, but could not get seignoriage out of it.

Mark writes:

Rushkoff's essay is economic history as science fiction. Normally it is possible to identify where someone's mistaken ideas are coming from but in this case I think he may be just be making things up off the top of his head?

mark writes:

I have never heard of Rushkopf so I thought I had missed something. Then I read his essay which is mercifully short. It is full of generalizations (monarchs did X, for instance), and silly implications regarding causality (after currencies were supposedly centralized, he notes without further comment that the plague came -- are we meant to see a connection?) and cites no sources or data. It is not a contribution to anything.

Monte writes:

If science can take on God, it should not fear the market. Both are, after all, creations of man.

This is an interesting idea, but one that, IMO, is based on a false premise. The market is no more a creation of man than is freedom. It is simply a process that we've learned through experience works better for meeting our needs than any other. It's only when we cease acting on our behalf and attempt to act for others collectively that we create something that should be feared.

Thank God there are still plenty of us left in this world to recognize that.

El Presidente writes:

Monte,

It's only when we cease acting on our behalf and attempt to act for others collectively that we create something that should be feared.

Why should that be any more frightening than depending on people who, as a matter of principle, refuse to choose their actions with concern for anyone's wellbeing but their own? Furthermore, why shouldn't we be equally afraid of beliefs and/or policies that start from the first principle that a person's best interest can possibly be opposed to the best interest of others? Can we reason it to be true, or do we simply pronounce ourselves moral authorities and selfishness ("egoism") a moral principle as though the latter does not put the former squarely in doubt when taken to mean that it's alright to screw other people as long as government isn't involved?

Troy Camplin writes:

I read the article by Rushkoff, and it demonstrates a complete lack of understanding of economics and of spontaneous orders. He draws false boundaries between the natural and the artificial, and has no understanding how an economy can become a spontaneous order from a non-spontaneous foundation. With him, we see the danger inherent in over-historicizing, leading to historical determinism. I'm surprised the Edge published something that incredibly sloppy. They usually don't.

El Presidente writes:

Once fiat currency is permitted, the best reason I can think of to enforce a monopoly on money is to minimize arbitrage and the large scale disruption it can cause. Given enough resources, a private interest can ruin any fiat currency in the world. The point of instituting currencies that span a larger market and represent more total value is to dwarf the resources of private interests and thus their capacity to manipulate currencies for private gain and social loss; to create a system they must work within rather than a system they can rise above. Our inability or unwillingness to jealously guard this monopoly contributed to the most recent bubble(s)/collapse. Relative consolidation of resources into fewer and fewer hands also poses a threat to currencies because it makes arbitrage more viable and lucrative. Krugman explained it better than I could.

With respect to government, the same is true. Greater decentralization allows for greater regulatory arbitrage. It also permits and promotes greater innovation, but it's a two-edged sword that begs for balance rather than a go-for-broke approach. For example, this is the sneaky little problem that people who are advocating interstate health insurance markets don't seem to acknowledge. A national market without national rules creates a race to the bottom in a zero or negative-sum game as Tom Daschle had the courage to point out yesterday on MTP.

Sometimes I get the impression that we are Tower-of-Babel economists. That is, we resign ourselves to the notion that in large groups we could accomplish whatever terrible thing we set our minds to but broken into smaller units we are no less wicked yet substantially less potent. That's fine as long as there is someone around to shake up the ant farm occasionally. If we get rid of that role, it's only a matter of time until something we didn't 'design' fills the vacuum. Will we have more or less influence over that than we do over representative government? I feel like this is basic reasoning that is somehow lost or ignored in pursuit of libertarian ideals. Am I incorrect?

Gary writes:

After reading the essay, I see that most of it is a criticism of markets, economics, and capitalism as written about by his journalistic compeitors - Chris Anderson, Malcolm Gladwell, and Clay Shirky - rather than people who might know a little more about economics. Economists, say.

Douglas might be both pleased (personally) and chagrined (professionally) to learn that many economists think little of those and other journalists' musings on economics.

John F. Opie writes:

Hi -

I got really, really annoyed by the article of Douglas Rushkoff and fisked it here:

http://21stcenturyschizoidman.blogspot.com/2009/09/if-youre-going-to-say-economics-is-dead.html

Very annoying. Apparently fact checking is a rather new concept to at least some of these folks...because even 30 seconds with google sufficed to disprove his "theory" of how money was developed.


John

[Blog URL around name edited: corrected from schozoidman to schizoidman--Econlib Ed.]

Monte writes:

El Presidente,

Me: It's only when we cease acting on our behalf and attempt to act for others collectively that we create something that should be feared.

You: Why should that be any more frightening than depending on people who, as a matter of principle, refuse to choose their actions with concern for anyone's wellbeing but their own?

Many agree with this view. And from an ethical standpoint, it’s one that’s difficult to disparage. From a practical standpoint, however, history teaches that collective societies simply do not prosper as well as those organized around the individual. Mises argued that when we attempt to prioritize the needs of society over that of the individual, an antagonism emerges that requires the individual to sacrifice his “egoistic designs to the benefit of society.” I just disagree that individuals should be compelled by the state to share its concern for the well-being of others. The thought of society using force to accomplish anything, to me, is frightening.

Furthermore, why shouldn't we be equally afraid of beliefs and/or policies that start from the first principle that a person's best interest can possibly be opposed to the best interest of others?

I find the prospect of choosing whether or not to depend on or compete against people who are self-interested less frightening. I have no choice or stand no chance against the state

Can we reason it to be true, or do we simply pronounce ourselves moral authorities and selfishness ("egoism") a moral principle as though the latter does not put the former squarely in doubt when taken to mean that it's alright to screw other people as long as government isn't involved?

I disagree with your position that selfishness means “screwing other people.” If individuals pursue their selfish wants and desires playing by the rules that we, as a society, agree are fair and balanced, how can we accuse them of screwing other people?

Floccina writes:

El Presidente wrote:
The point of instituting currencies that span a larger market and represent more total value is to dwarf the resources of private interests and thus their capacity to manipulate currencies for private gain and social loss;

Are you suggesting that we should not allow non Government institutions to create money?

El Presidente writes:

Floccina,

Are you suggesting that we should not allow non Government institutions to create money?

No. I'm simply saying we need to enforce our franchise and not allow them to do it privately, sureptitiously, or in blatant violation of rules that we have established to minimize the possibility of negative externalities. We allow institutions to issue credit (augment the money supply) within certain guidelines. For government policy to be effective, it needs to be based on real numbers, and letting the market regulate itself by surrendering control of the money supply is foolish. If you will recall, several members of the House and Senate (Chris Dodd comes to mind) began asking questions about the breadth/totality/accuracy of measures of the money supply prior to the collapse. The answers they received were usually something like, "pick a measure, any measure". That should be a little troubling.

El Presidente writes:

Monte,

Forgive my late reply. I overlooked your comment.

I disagree with your position that selfishness means “screwing other people.” If individuals pursue their selfish wants and desires playing by the rules that we, as a society, agree are fair and balanced, how can we accuse them of screwing other people?

You may disagree with that position, but that doesn't mean it's mine. I did not equivocate. I very clearly stated that your position authorizes individuals to screw other people as long as government isn't involved, not that pursuing one's interest is necessarily screwing other people. You made no mention of social contracts or societal boundaries, such as laws, except to be hostile toward them.

It's only when we cease acting on our behalf and attempt to act for others collectively that we create something that should be feared.

If laws do not exist to promote common interests, then they can only exist to frustrate or promote individual interests, or for no reason at all. This makes them unacceptable given your previous comment because they interfere with acting on our own behalf.

My position: I firmly believe that there is nothing which is in my best interest and not in yours. The challenge isn't to choose which one to pursue. The challenge is to find our mutual best interest because that is the only best interest either of us has. That takes a lot of work that we never begin if we disagree about the fundamental premise. People who think that their selfish interest is righteous scare the crap out of me because even if they ever realize they're wrong it will probably only be after they achieve what they thought they wanted and find out it wasn't really what they wanted at all. That takes far too long and costs far too much in many cases. What should we tell people who must pay the price for somebody else's path to enlightenment; congratulations on your martyrdom?

Monte writes:

El Presidente,

Appreciate the response.

I very clearly stated that your position authorizes individuals to screw other people as long as government isn't involved, not that pursuing one's interest is necessarily screwing other people. You made no mention of social contracts or societal boundaries, such as laws, except to be hostile toward them.

Let me clarify. I’m not strictly libertarian in the sense that I’m hostile towards or opposed to limited forms of government. I do believe we need some level of intervention to maintain social order, provided it’s consistent with our constitution and passes the litmus of consent. By acting for others collectively, I mean establishing a collectivist state which seeks total control over the means of production and enjoins to itself the right to suppress all dissenting views for what it sees as the good of society.

I firmly believe that there is nothing which is in my best interest and not in yours. The challenge isn't to choose which one to pursue. The challenge is to find our mutual best interest because that is the only best interest either of us has.

The problem is that there will always be differences of opinion regarding which policies we feel may best serve the public interest, many of them mutually exclusive. We must ultimately rely on elected officials to settle those differences, often to the dissatisfaction of us all. It seems to me that the best possible social contract, then, is the one which accords us the most freedom to choose. That necessarily requires a smaller, less intrusive form of government.

That takes a lot of work that we never begin if we disagree about the fundamental premise. People who think that their selfish interest is righteous scare the crap out of me because even if they ever realize they're wrong it will probably only be after they achieve what they thought they wanted and find out it wasn't really what they wanted at all. That takes far too long and costs far too much in many cases. What should we tell people who must pay the price for somebody else's path to enlightenment; congratulations on your martyrdom?

At the opposite end of that spectrum lie self-righteous leaders who are empowered to give us what they think we should have whether we want it or not, and that scares the crap out of me. Mistakes are a constant reminder that we’re all human, but I prefer to make my own and at a far smaller cost to society than those perpetrated on us by well-intentioned bureaucrats.

El Presidente writes:

Monte,

Mistakes are a constant reminder that we’re all human, but I prefer to make my own and at a far smaller cost to society than those perpetrated on us by well-intentioned bureaucrats.

I don't begrudge you your preference. You point out the danger at the opposite extreme and I agree. It seems then that balance is what we ought to seek, which requires communication, deliberation, and the pursuit of consensus. If we cannot reach consensus on an issue and the danger/cost of action exceeds the danger/cost of inaction then I would agree with your position. However, I don't take it for granted that this always the case. I think quite often it is not. So, it begins with communication. I think that's what we're doing and I apreciate the exchange.

Monte writes:

Pres,

If we cannot reach consensus on an issue and the danger/cost of action exceeds the danger/cost of inaction then I would agree with your position. However, I don't take it for granted that this always the case. I think quite often it is not. So, it begins with communication. I think that's what we're doing and I apreciate the exchange.

Agreed. The biggest problem with communication is the illusion that it has taken place (G. B. Shaw), which is not the case here.

Thanks, and I'm sure we'll talk again.

Comments for this entry have been closed
Return to top