Dear Friends,
It seems to me, when distributive justice by political favor is the policy of government, as it is the Obama administration, it increases interconnectedness, while at the same time decreasing the feedbacks of the complex system, that is an economy. The increase in interconnectedness is because, as government redistributes our wealth to those politically favored people and firms, we all become more dependent on government favors, and on the largess of government… we become more connected to government and society and less independent. The other side of the coin is that when government, as a policy, eschews the market system, the feed backs that are inherent in the market system are eliminated. People stop looking to their life experiences for information, such as, where we can invest, work, produce and live, and instead we turn to the government, who has taken over this fundamental aspect of market economics. Every time this has been tried it has led to oppression, starvation and collapse. Here I will show why.
Economies are complex systems. They are made up of individuals, who are interconnected through the economy, culture, society and government, we are diverse, we learn, and we respond to the cues of the market, society and our government give us. Adam Smith explained that, it is the “invisible hand” of the market that guides us to make self interested decisions, that improve the lot of Man, without consciously meaning to. This is a reference to complexity theory without actually knowing complexity theory. Economies are complex systems in every sense of the word.
When interconnectedness is tempered with strong feedbacks a complex system has less long tailed events. Long tailed events are outcomes that fall outside the normal bell curve of likelihoods that would be expected in non complex systems. People are between three feet and eight feet tall. If we plot the heights of all people, we get a bell curve, but if someone is born who is a Tom Thumb, ie. six inches tall, we have a long tailed event. Long tailed events in economics include crashes and bubbles. When government interferes with the feedback system we have more frequent long tailed events.
Another negative result is, tempered interconnectedness by government actions, makes people loose the ability to recognize high spots in the dancing landscape of economics. Markets loose their ability to meet the needs of the people by removing the people’s access to stimuli. As a result, people and firms often find themselves unable to adapt to new and changing circumstances… economies flounder, government gets bigger, and people become oppressed.
The way distributive justice through political favor lowers the natural feedback in an economy are many, varied and pernicious. This happens because the government seeks to raise the power of the Elite by negating, to the best of it’s ability, the negative consequences of bad behavior.
Lack of feedbacks create the environment where, people can act in ways that make no sense in the real world but can continue, for a time, through government interference. Like, for example, people can spend their entire lives on welfare… not being productive, people and corporations rent seek instead of providing products that meet human needs, babies are aborted, people can avoid saving for retirement, favored companies can be unprofitable for decades, without failing, due to government favor… among others.
We see the results in Greece, where government has destroyed the people’s ability, to behave as self interested actors rightly understood. When Greece is kicked out of the Euro zone and the Drachma is reprinted, it will certainly be the largest bill in the World… because it will need so many zeros on it.
Whenever governments in the past have stepped in and all but eliminated the natural feedback’s of the markets, we have seen oppression, due to government’s need for absolute power, to mitigate natural consequences, we have seen starvation due to the inability of people and firms to recognize and respond to human needs, moreover, we always see the eventual collapse of the economy, and inevitably the governments themselves. North Korea, Zimbabwe, Greece, Argentina, and Wiemar Germany are only a few examples of this phenomenon in action. This is the inevitable result of socialistic thinking. Distributive justice by political favor, due to the effect it has on the complex system of an economy, always minimizes the feedback’s that act as Adam Smith’s “invisible hand.”
The real question is, are the people of the World aware enough to stem the tide of redistributive justice, or will the whole World become Zimbabwe in a few years?
Sincerely,
John Pepin
