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Economies / Societies as "Complex," "Emergent" Phenomena

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Mike Phenow Posted: Wed, Jan 13 2010 12:44 PM

Hello,

Though a regular Mises.org and LewRockwell.com reader, this is my first post here.  I appreciate your patience in humoring me a bit.

I posed this question to Walter Block and, not knowing the answer, he suggested I pose it here.

Having begun personally studying Austrian Economics a few years ago (thanks to my exposure to Ron Paul), but not being the most knowledgeable on the breadth and depth of the corpus of Austrian literature, I would very much like to know if there exists a book on a specific topic. Invoking my own version of the statist mantra, "there oughtta be a law!" I say, "there oughtta be a book!"

I will do my best to try and explain:

As I've started to educate myself on Austrian economics over the last few years by reading Mises, Rothbard, Hazlett, Hayek, Hoppe, Woods, Rockwell, Block, et al, I've noted that the principles, methodologies, and conclusions of the Austrians have close analogs in other fields, but I have only rarely seen these connections explicitly pointed out and never developed.  I'll often be reading something Austrian and I'll get the proverbial light bulb and a flash of recognition from a completely unrelated field and vice versa.

One of the things a scientist absolutely loves is independent corroboration.  When something is independently discovered, especially in a distant time, place, or field of study, it does a lot to bolster the validity of a claim, and chances are good that you're on to a universal truth.

Similarly, whenever I am confronted with new information, I always have to integrate it with my currently-held beliefs.  If I can't, I have to go back and rethink my own beliefs or reevaluate the new information until I can reconcile them so that I can settle on a consistent world view.  I don't deal well with cognitive dissonance and I can't seem to believe that the universe isn't consistent and coherent.

In fact, as Douglas Hofstadter points out in "Godel Escher Bach", if there is one defining characteristic of the universe, it's that it is self-similar.  We should not be surprised to find recurring patterns.  In fact, if we don't, we should be highly skeptical.

One of the first things that jumped out at me as a cross-field connection is the striking similarity between the methodological individualism of Austrian economics and Darwinian evolution through natural selection.  Of course, this has to be immediately qualified that they aren't one and the same.  It isn't to say that Austrian economics is nothing more than the misunderstood notion of "survival of the fittest."  While there are many notable similarities, the one that is most compelling to me is that (as Mises points out in "Socialism") such heights of complexity (as described by Leonard Read in "I, Pencil") can not be designed or managed by a central authority.  Instead, it is the seemingly-miraculous outcome of independent actors following fundamental, axiomatic rules on a large scale with only local interactions.  This phenomena is also illustrated in Rothbard's "What Has Government Done to Our Money," where he explains that money (that great boon to the pickle-owning-chicken-wanters of the world) could not have arisen through government fiat, but could only have emerged on the marketplace from a commodity.

Louis Carabini, in his recent "Inclined to Liberty", touches on this connection in Chapter 30: "Spontaneous Order vs. Intelligent Design", where he cites Mises, Dawkins, and Cosmides & Tooby to draw the connection between the spontaneous order in evolution and free markets.  The Dawkins book he cites, "The Blind Watchmaker", does an excellent job of explaining spontaneous order.  Reading the Carabini chapter, I was exclaiming out loud, "Yes, finally!"  Then I realized it was only two pages.  Shoot.

These thoughts got me wondering not only about the connections that can be drawn, but the labels that could be given to the common phenomena itself.  This got me thinking back to a short, one-credit math course I took on a whim during my computer science degree that dealt with dynamical systems, more popularly known as chaos theory.  Of course, it is an ill-named theory.  It would be more appropriately, though less spectacularly, named order theory.  James Gleik wrote a book named "Chaos" that deals with chaos theory.  It demonstrates seemingly simple, deterministic systems that take simple inputs and yield spectacular, unpredictable outputs.  It also deals with how seemingly noisy, chaotic systems can have a great deal of unexpected order under the surface.

While chaos theory tends to deal with the more purely mathematical aspect of this phenomena, I recently read a book by Steven Johnson named "Emergence," which deals not with novel mathematical formulas, but with biological systems, cities, and the like.  It does a fairly good job of describing emergent systems, but after a couple of pages, I excitedly turned to the ten-page index in the back, expecting to see a whole slew of Mises citations and found none.  Here was a guy doing his best to describe systems that displayed order, complexity, feedback, self-organization, and adaptive learning in systems composed of nothing more than simple, rules-driven actors only communicating locally--while being completely unaware that Mises had brilliantly outlined the whole thing down to the last detail, all from axiomatic first principles.

I recently piked up a few more books that appear to address the topic: "Complexity: A Guided Tour," by Melanie Mitchell, "Simplexity," by Jeffrey Kluger, and "The Perfect Swarm," by Len Fisher.  I am hoping these will help to further shed some light on the connections.

This is a very quick, messy, and rough glimpse into the topic.  Anyhow, basically, the book I am looking for is one that explains economics (and possibly libertarian theory as a whole), as understood by the Austrians, and shows, using examples from wide-ranging fields, how they are "Complex," "Emergent" systems.  If such a book exists, I would love to read it.  If it doesn't, I would love to write it (if I could ever find the time).

I think such a book would do a number of things.  First, I often hear Austrians trail off saying something nebulous about how "economies are fundamentally complex..." without really having a vocabulary to describe complexity or a way to relate it to other phenomena.  Such a book might help provide this vocabulary and the related references.

Second, I think some of the insights gained in making these connections could help bolster some of the claims that Austrians make.  Statists always wave off the claim that large economies can't be centrally planned and orthodox economists wave off the claim that you can't make large-scale, aggregate economic calculations or predictions.  But, if economics could be tied to other, more tangible, visible, generally understood systems, perhaps it would sink in.  I think people hear the claims of Austrians and libertarians and think, "OK, so the rest of the universe works one way--we can measure, manipulate, and master things; but in economics and politics, you say we can't productively control anything..."  We need to be able to answer back, "No, the rest of the world doesn't work that way.  There are other complex, emergent systems that you can't productively meddle in without bringing about unintended consequences."

Finally, and this is perhaps the most compelling reason for a book like this, is that I think it could finally bring the issue to the left.  Most on the left like to pride themselves on being "intellectual" and driven by science, reason, and compassion.  If Austrian economics and libertarian theory could be brought to them in relation to other things the they understand and associate with, they might be brought around to seeing that an adherence to the Austro-libertarian, anarcho-capitalist viewpoint is the only scientific, rational, compassionate stance.

Anyhow, sorry for the long, disjoint brain-dump.  I've just long wanted to ask somebody (who might know) if a book like this might exist.  Since there were clearly no references to the Austrian in the pop science, I thought there might be references to the pop science (that I was unaware of) in the Austrian.

Thanks for your time.  I have many more thoughts on this subject, but will leave it at that for now.  I would appreciate any pointers, guidance, or feedback on this issue from all you bright folks.

Thanks!

Mike

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Mike Phenow:
I posed this question to Walter Block and, not knowing the answer, he suggested I pose it here.

Ha!  Walter "moderate" Block passing the buck to the radicals.  Smile

I read your post and I don't understand the question.  It seems to be an essay about how we need a particular book.

Could you boil it down to something more concise?  I am sure you will get some answer to your query.

"When you're young you worry about people stealing your ideas, when you're old you worry that they won't." - David Friedman
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I'd like to understand better what you are looking for.

I read your statement

Mike Phenow:
Mises had brilliantly outlined the whole thing down to the last detail, all from axiomatic first principles.
and I can't square that with your request
Mike Phenow:
  the book I am looking for is one that explains economics (and possibly libertarian theory as a whole), as understood by the Austrians, and shows, using examples from wide-ranging fields, how they are "Complex," "Emergent" systems.  If such a book exists, I would love to read it.  If it doesn't, I would love to write it (if I could ever find the time).
i know I'm missing something or misinterpreting something.

Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid

Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring

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Stranger replied on Wed, Jan 13 2010 1:01 PM

Steven Johnson's book is crap, Melanie Mitchell's is okay but inconclusive.

If you really want something universal, read A New Kind of Science. I swear by it.

Since there are no books specifically on the subject you asked, I will bump my thread: http://mises.org/Community/forums/t/10470.aspx

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Giant_Joe replied on Wed, Jan 13 2010 1:04 PM

I think he's looking for a book that uses some kind of Austrian analysis of problems and phenomena. Or using some other kind of analysis (scientific or mathematical) to describe phenomena like spontaneous order or the failing of centrally-planned systems.

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Boundaries of Order?

"When you're young you worry about people stealing your ideas, when you're old you worry that they won't." - David Friedman
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AJ replied on Wed, Jan 13 2010 1:18 PM

Mike Phenow:
I'll often be reading something Austrian and I'll get the proverbial light bulb and a flash of recognition from a completely unrelated field and vice versa.

One of the things a scientist absolutely loves is independent corroboration.  When something is independently discovered, especially in a distant time, place, or field of study, it does a lot to bolster the validity of a claim, and chances are good that you're on to a universal truth.

I don't know of any book like this, but the general theme you brought up is a GREAT idea.

The same idea prompted me to write this post - one of my first on these forums, asking about market-like processes in nature. It was not so well received because I didn't point out all the differences along with the similarities, and because I was just starting out in my study of economics.

Here is something about spontaneous order written by someone who I gather is a panarchist-leftist (not really sure). May be some interesting ideas in there.

http://www.panarchy.com/Members/PaulBHartzog/Papers/Panarchy%20-%20Governance%20in%20the%20Network%20Age.pdf

I don't know if you will find that book you're looking for, but I for one would greatly appreciate any discussion of this type, as well as links to any publications in this vein.

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What you are describing is the book I dream about writing 2-3 years from now.  Wanna write it with me? :D

 

 

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Thanks for your quick replies.

I apologize for the confusion.  I trying to give a quick sense of what I'm talking about and the central point got lost.

I think people often fail to understand and accept Austrian economics because the fail to grasp the nature of the system.  People conceive of it as something that can be precisely measured and constructively manipulated because they think of it as a fairly simple, hierarchical, predictable, deterministic system.  To me, the very crux of what the Austrian school teaches us, a la Mises' methodological individualism and such illustrations as Read's "I, Pencil," is that it is a "complex," "emergent' system that we can only understand if we first understand the axiomatic "rules" that govern the behavior of the individual actors and, from that fundamental understanding, develop theories about their interaction and the resulting phenomena.

My interest is in the fact that, all too often, people either understand this in markets (the right) or they understand it in the natural world (the left), but few fail to see the connection or develop it.  I agree that Steven Johnson's book is crap, but it had some interesting examples and the entire time I was reading it, I was thinking about Austrian economics.

I want a book that I can give to an educated person (particularly on the left) and say, "See, these things we're saying about economics are not just crazy individualistic ideals, but must be so given the very nature of the system.  You might recognize this type of system in certain examples throughout nature and in evolutionary theory itself.  More is different.  When a system has more people, interactions, time, or space, the system is not just bigger, but fundamentally different."  There seems to be more and more books coming out in the pop science literature about these types of systems, but they seem to fail to see that this is how economies work.  The omission is glaring.  I want a book that explains "emergence" and "complexity" as such and comes right out and says:  "economics is such a system."

Stranger, I liked your post on Wolfram.  I think we are talking about much the same thing.  I question his assertion about evolution, but I think the central thesis is correct--that the complexity of the system has emerged from the networking effects of the individual actors and is thus beyond the comprehension or computation of any system or individual that is not itself at least as complex as the entire system itself.

Does any of this make any more sense now?

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AJ replied on Wed, Jan 13 2010 1:50 PM

Then I think you'll need to write it. Or hash out ideas here until someone turns them into a book.

One big thing I always notice is that the logic of the socialist calculation argument could probably be applied to a lot more things, even within libertarian theory itself. Someone brought up IP and the economic calculation just today.

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To me it makes perfect sense, and I´ve been thinking a lot along the same lines.

One book that might be of interest to you is Daniel Dennett's "Kinds of Minds."  I think there is potential to add additional pillars of support to  the notion of the synthetic a priori by linking it to the way minds, and eventually abstract thinking and thus reason, have evolved alongside bodies throughout history - piece by piece.  Dennett's "Tower of Generate and Test" is a conceptual framework that might very well help us explain WHY we can reason in the abstract and communicate this to others, and why the category of action is a real phenomenon instead of an ideal one, instead of "just" insisting that we can because denying it is self-contradictory.

Reasoning in the abstract is an evolutionary beneficial trait, and especially when dealing with complex systems, right? 

Send me a PM or hit me up on Facebook or something...I´d really like to discuss this with you further.

I´m a PPE(Philosophy, Poli Sci and Economics) undergrad so I have a very soft spot for interdisciplinary thinking in general, and this line of inquiry in particular. 

 

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Mike Phenow:
I think people often fail to understand and accept Austrian economics because the fail to grasp the nature of the system.

I think it is because AE has been poorly marketed until recently (thanks in large part to Jeffrey Tucker).

What would your book do that "I, Pencil" does not?

Market research, market research, market research.  You know what you want to tell people, and you have constructed a model of what you think they would like, but you need to market research, to find out what appeals to your audience, and yields your desired result.  The only way to do that, is to test.

I would suggest that making better intellectual arguments is only a small part of the battle.  Delivery and authority are just as crucial.

"When you're young you worry about people stealing your ideas, when you're old you worry that they won't." - David Friedman
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Thank you all for your intelligent, insightful responses.  I had no idea this forum was so active.  I lament that I did not know about it sooner.  I will have to spend more time here.  A big thanks to Walter "Moderate" Block for pointing me here.

liberty student:

I immediately thought of this one too, though, from the introduction, does not appear to directly address this in the way I'm looking for.  I also perused through the books at the Mises store (that I haven't already purchased) that might address this, but nothing jumped out at me.

EinarFridgeirs:

What you are describing is the book I dream about writing 2-3 years from now.  Wanna write it with me? :D

Nice!  (More independent corroboration!)  Quite possibly, if, as I said, I can find the time...

AJ:

Then I think you'll need to write it. Or hash out ideas here until someone turns them into a book.

One big thing I always notice is that the logic of the socialist calculation argument could probably be applied to a lot more things, even within libertarian theory itself. Someone brought up IP and the economic calculation just today.

I think you're quite right that it will have to be written.  This is pretty much the answer I was expecting.  I agree that the socialist calculation argument should be applied to more things.  The IP discussion is a very interesting and crucial one.

EinarFridgeirs:

To me it makes perfect sense, and I´ve been thinking a lot along the same lines.

One book that might be of interest to you is Daniel Dennett's "Kinds of Minds."  I think there is potential to add additional pillars of support to  the notion of the synthetic a priori by linking it to the way minds, and eventually abstract thinking and thus reason, have evolved alongside bodies throughout history - piece by piece.  Dennett's "Tower of Generate and Test" is a conceptual framework that might very well help us explain WHY we can reason in the abstract and communicate this to others, and why the category of action is a real phenomenon instead of an ideal one, instead of "just" insisting that we can because denying it is self-contradictory.

Reasoning in the abstract is an evolutionary beneficial trait, and especially when dealing with complex systems, right? 

Send me a PM or hit me up on Facebook or something...I´d really like to discuss this with you further.

I´m a PPE(Philosophy, Poli Sci and Economics) undergrad so I have a very soft spot for interdisciplinary thinking in general, and this line of inquiry in particular. 

It is interesting that you bring up Daniel Dennett.  I have a number of his books, though have not had time to read them all.  I am somewhat wary of bringing it into the discussion (or the would-be book), but I think the arguments of the "new atheists":  Dennett, Dawkins, Hitchens, Harris, et al have a lot to contribute to the discussion as well.  This has to be broached tactfully so as not to alienate, divide, or to say that, "if you believe in Austrian economics, you must be an atheist," but I think the argument that there could not be a manager in the market because the manager would have to be smarter than the market is the same argument that we cannot posit a creator for the wonders of the universe because the creator would have to be that much more wondrous, thus himself requiring a creator, resulting in an infinite regression.

liberty student:

Mike Phenow:
I think people often fail to understand and accept Austrian economics because the fail to grasp the nature of the system.

I think it is because AE has been poorly marketed until recently (thanks in large part to Jeffrey Tucker).

Agreed.  And I second the tip of the hat to Jeff Tucker.

liberty student:

What would your book do that "I, Pencil" does not?

I think such a book should expand upon and develop the central thesis of that short essay.  Also, it should bring to bear upon the issue the concepts of "emergence" and "complexity" as such, using a wealth of economic and non-economic examples.

liberty student:

Market research, market research, market research.  You know what you want to tell people, and you have constructed a model of what you think they would like, but you need to market research, to find out what appeals to your audience, and yields your desired result.  The only way to do that, is to test.

Agreed.  I have floated this idea to a number of people with a variety of backgrounds and have generally gotten a good response.  This post here is another round of market research.

liberty student:

I would suggest that making better intellectual arguments is only a small part of the battle.  Delivery and authority are just as crucial.

I agree totally.  In fact, this is one of the main reasons for such a book.  Mises' arguments, if properly studied and considered, are utterly compelling.  What use then of Rothbard, Hayek, Hazlitt, Hoppe, Block, Woods, Rockwell, and the rest?  It is important to develop the ideas, put them into context, and illustrate them with compelling, familiar examples.

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I am somewhat wary of bringing it into the discussion (or the would-be book), but I think the arguments of the "new atheists":  Dennett, Dawkins, Hitchens, Harris, et al have a lot to contribute to the discussion as well.  This has to be broached tactfully so as not to alienate, divide, or to say that, "if you believe in Austrian economics, you must be an atheist,"

I agree, but this book is 100% atheist-free, so the material should not be too controversial.  I didn't even know Dennett was a member of the Brights or in any way connected to the "new atheism" camp until after I checked him out on wikipedia once I finished the audiobook. 

"...Minds" is strictly ruminations on the possible evolutionary reasons for the development of cognition and higher-order thinking.  It apparently builds on his earlier book "Consciousness Explained", which I have yet to check out.

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EinarFridgeirs:

I am somewhat wary of bringing it into the discussion (or the would-be book), but I think the arguments of the "new atheists":  Dennett, Dawkins, Hitchens, Harris, et al have a lot to contribute to the discussion as well.  This has to be broached tactfully so as not to alienate, divide, or to say that, "if you believe in Austrian economics, you must be an atheist,"

I agree, but this book is 100% atheist-free, so the material should not be too controversial.  I didn't even know Dennett was a member of the Brights or in any way connected to the "new atheism" camp until after I checked him out on wikipedia once I finished the audiobook. 

"...Minds" is strictly ruminations on the possible evolutionary reasons for the development of cognition and higher-order thinking.  It apparently builds on his earlier book "Consciousness Explained", which I have yet to check out.

Indeed, Dennett has been dubbed one of The Four Horsemen.  There is a great two-hour discussion among the four of them here:

http://video.google.com/videoplay?docid=-869630813464694890

http://video.google.com/videoplay?docid=-225595257312538919

I don't think the book would necessarily be 100% atheist-free, but it perhaps should be as a tactical consideration.

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When I said "this book..." I meant Dennett's book :D

Here's a juicy tidbit from an Amazon review that anyone who has read Hoppe's "Economic Science and the Austrian Method"  should recognize immediately:

Dennett is famous among philosophers for devising the concept of "the intentional stance." The intentional stance is interpreting the behaviour of an entity." The range of entities is extensive - a simple thermostat has predictable behaviour - when the room is cool, the device closes a circuit turning on the heat. According to Dennett, the simplest creatures exhibited similar "robotic" behaviour, but as life evolved, more complex patterns developed. Dennett argues that "adopting the intentional stance is not just a good idea but the key to unraveling the mysteries of the mind - all kinds of minds." In his view, intentional systems have progressed along the course of evolution in ever complex steps. Humans, with the development of language, have achieved the highest level of cognitive abilities.

Isn't this line of thinking a stone's throw away from the rationale behind the Action axiom? 

Being able to point to a process by which such an ability would evolve out of a purely physical being would further justify the Austrian epistemological arguments IMO.

 

 

 

 

 

 

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WisR replied on Wed, Jan 13 2010 6:39 PM

The Origin of Wealth is a book you should read.  It talks about a number of 'experiments' of very simplified situations and 'individuals' within them with limited information and some basic heuristics for making decisions, and how markets 'evolve' out of them, or the spontaneous order (and with it chaos-like systems) that characterize them.

Unfortunately, with the exception of some references to FA Hayek, it buys into the notion that governments are necessary to setup the proper frameworks for markets to evolve within.

The book was really good, though, you should give it a try.  It's unfortunate that the author couldn't step back and see that the most fascinating subject of all is how things he assumes have to be provided by government can be provided in its absence.  That is, the actions of individuals can bring about a spontaneous order of law, security, and the like.  

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Stranger replied on Wed, Jan 13 2010 7:36 PM

Mike Phenow:

 

Stranger, I liked your post on Wolfram.  I think we are talking about much the same thing.  I question his assertion about evolution, but I think the central thesis is correct--that the complexity of the system has emerged from the networking effects of the individual actors and is thus beyond the comprehension or computation of any system or individual that is not itself at least as complex as the entire system itself.

That is also Hayek's position on the division of knowledge.

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I think reading both F.A. Hayek, and K. Popper together (e.g. The Constitution of Liberty, at least the first couple chapters, and Objective Knowledge: An Evolutionary Approach) would help bringing to attention the importance of problem solving in spontaneous order, and emergent phenomena. 

Abstract liberty, like other mere abstractions, is not to be found.

          - Edmund Burke

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Mike Phenow:

liberty student:

I immediately thought of this one too, though, from the introduction, does not appear to directly address this in the way I'm looking for.  I also perused through the books at the Mises store (that I haven't already purchased) that might address this, but nothing jumped out at me.

After reading today's review of Boundaries of Order, it appears that it does deal with these subjects for at least part of the book.  Added to my must-buy list.

 

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Mike, it just occurred to me, because he posted here today, but I would bet that David Friedman has done some work on this topic.  But I can't recommend anything as I am only familiar with the odd video's appearance and The Machinery of Freedom.

This video in particular may help indicate why I suspect he has written on the phenomena you are seeking knowledge about.

"When you're young you worry about people stealing your ideas, when you're old you worry that they won't." - David Friedman
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JAlanKatz replied on Fri, Jan 15 2010 1:56 PM

I just applied to Mises for the summer in a related area.  I'm also working on a paper on this topic.  I come at it a bit unusually - I'm a math grad student, so my approach is more formal and abstract than the average economist working on chaos.  (A lot of chaos theorists in economists tend to think that chaos theory is a great way to prop up socialist argument - I take this to be a case of "path dependency" or "lock-in" rather than a fact about how chaos looks in economics.)  I think Austrians and chaos theorists have a lot to say to each other.  Austrians can point out to chaos theorists that they contradict themselves - they talk about lock-in and path-dependency as characteristics of a system, fair enough - but then believe that the way to get out of the path is government - which is just another complex system.  Why shouldn't it have these features?  In other words, you can't have a theory about interactions and then bring in a group of people as a god from the machine.  But chaos theorists also have things to say to Austrians.  What we tend to do is take axioms (could also call them simple rules for interactions - even the autistic principles influence interactions) and logically derive consequences, such as "the law of diminishing marginal returns."  What we've done, then, is churn out more rules, but we've still said little about economies.  If we want to give a picture of an economy, we need to see how these rules interrelate with people in the picture, not just logically.  So chaos allows Austrians to actually paint a picture of a rich economy.  (I relate this to Kirzner's point about Menger's "all-encompassing vision of an economy driven by the subjective wants of consumers" and how his students undercut his vision by taking only parts of it, such as the subjective theory of value.) 

I tend to think that Boundaries of Order was an approach towards this, and in ways quite good, but in other ways it falls short.  The biggest issue is that it had the feel of many libertarian books - many books feel like the author started with his point "freedom is good" or whatever, and then found a language to express the point in.  This one feels like he expressed his point in the language of complexity, without necessarily using many of the insights of complexity.  That is, rather than derive the conclusion from chaos theory, he stated it in terms of chaos theory.  Personally, I don't think it's reasonable to attempt to derive "markets and property" from chaos directly, I don't think it can be done.  Rather, I'd derive ethics from chaos, then markets from ethics, then finally use chaos to paint a picture, as above.  But I wouldn't say that chaos in economics can be used to show that markets are good, at least not directly.

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