Aesthetic Reveries, Part 1
“I am convinced that the nations and people who master the new science of Complexity will become the economic, cultural and political superpowers of the next century. “ Heinz Pagels
Creation continues through the media of man. Intelligence, when viewed primarily through a materialistic lens, is the process of transforming the larger environment in the function of a homeostatic being. We identify the appearance of Homo Sapiens by the transformation we made to our historical environment in the shape of tools, and cave symbols. In fact, modern humans have so significantly shaped the Earth’s geology that scientists are proposing naming a geological epoch after us, the Anthropocene.
Shapes, symbols, tools and transformation are concepts tied intimately with the word information. The etymology of the word information is deeply tied with transformation; the root of both words being to form something or to shape. Our own bodies carry the information formed through bottom up evolutionary mechanism in the form of DNA. The same way our DNA encodes our biological information, our tools encode abstract knowledge from thousands of human generation. Although the information encoded in our genetic code has a limited shelf life, information encoded in our technologies has a longer shelf life and connects us to the lifework of our ancestors. Standing on the shoulders of giants is not merely a platitude but an existential necessity.
The computer is the apotheosis for our tools as in it we have encoded information from physics, mathematics, formal logic, electrical and mechanical engineering, as well as business and art. With the computer we have built a general purpose machine, equally at home doing high frequency trading, composing music, sequencing the genome or writing a new Constitution. The common thread among these endeavors is information.
Information stands as a mediator between the material and the abstract or what we call the real and the ideal, it is a gateway between the actual present and the potential future. The computer and the Internet, as brokers of information, are the linchpins that will determine how our societies will continue to transform both our inner and outer worlds. The individuals and societies that will adopt the equivalent concept of property rights in the computational space, are the ones who will advance, grow and set the cultural, political and economic agenda for the next centuries much like the British Empire affected the modern world.
I want to paint a picture about how we arrived at this place in history and what is happening to our societies now that Creation continues through man’s media.
Genus
Humanity’s beginning might be opaque but the graph above gives us a good place to start our story. After millennia of stability, global GDP started growing exponentially in the 18th century.
Even if the assumptions about the cause of this growth are debatable, the scale of GDP increase makes it easy to agree with the idea that humanity entered into a new era. What does the graph tell you about this new era? Well it depends on what you want to see. If you are a mathematician you might start talking about exponential functions and asymptotes. An economist on the other hand might be interested in GDP’s inability to capture a full picture of the economy.
However, I think there is one view of GDP that is seldom discussed. If you take economic activity to be just an issue of efficient resource distribution, I think you are leaving aside the most important question. Who decides what a resource is? As we start to answer this question it becomes easy to understand that primarily the economy is a discovery mechanism, a large parallel computer that creates new ways of being for us. George Gilder in his book “Knowledge and Power” explains the importance of viewing wealth as proxy for knowledge:
“Most educated people understand that knowledge leads to wealth creation, but this understanding is incomplete. It is not that knowledge creates wealth—wealth, in its deepest form, is knowledge. Matter is conserved, as physics teaches us. The Neanderthals had every natural resource we have. Wealth is created by the learning curves that result from a million falsifiable experiments in entrepreneurship by economic actors in mostly free market economies. If knowledge is wealth, growth is learning.”
How do we explain this boom in knowledge creation then? And why do we see an inflection in the 1800s? Before we answer these questions we have to think about the fundamental issue at hand. The graph can be interpreted in multiple contexts, in fact so can anything. This fundamental complexity becomes even harder to escape when we start interpreting historical phenomena as recorded in the few texts that have survived. The problem compounds even further when you think about the interest and incentives of the institutions that created these texts. If you do embrace this inescapable complexity you can come to terms with the fact that all explanations of the hockey stick graph (or other graphs for that matter) will be biased in some form. They will be infused by a previously held theory. Now, because I hold this view I like to look at the explanatory theories of someone that lays their biases on the table for all to see.
“I’m a literary, quantitative, postmodern, free-market, progressive-Episcopalian, Midwestern woman from Boston who was once a man. Not ‘conservative’! I’m a Christian libertarian.”
Perfect! Seems to me to describe the paragon of an objective mind, wouldn’t you say? This description, of course comes from Deirdre Mccloskey, a renowned economist who started out as a Marxist and then became a free-market advocate. Mccloskey's magnum opus, the Bourgeoisie Trilogy, argues that the hockey stick phenomenon cannot be explained by the Marxist ideas of colonial or class exploitation. The “Great Enrichment” was primarily the result of new ideas. Following on the steps of Adam Smith, Mccloskey argues that the bourgeoisie norms that emerged from the “nation of shopkeepers” and the Dutch Burghers led to a virtuous cycle of development and compounding growth.
Now, in case my standards of objectivity might not be aligned too neatly with that of polite society, then, how about we look at the explanations of Mr. Acemoglu from the venerable MIT? In his book “Why Nations Fail” he argues that brick and mortar institutions like courts, and theoretical institutions like habeas corpus, and private property are responsible for our Great Enrichment. These institutions might either be informal, or formal. The former are enforced through social mores like loyalty and shame and the latter, depending on where you are in the world, are enforced either by men with Glocks or with TTs.
I think you can synthesize both Mcclosky’s and Acemoglu’s work by saying that institutions and new ideas work together in a virtuous loop. Good ideas create more good ideas. But if you don’t feel at home with this loopines we can make it a bit more linear and tidy. Let’s say that some ideas are upstream of others, and institutional arrangements are upstream of technological ideas. Once we implement good social institutions technological and economic progress should follow. Where does the spirit of these good institutions comes from then? Lest we fall back into a loop we will have to leave this question for another time.
Yet the understanding our linear expression creates is not actionable. You cannot copy the institutions of Germany and send them to Greece to somehow create a tzatziki fueled German economy. We have empirical evidence that pushing for the adoption of pre-packaged institutional frameworks does not lead to the flourishing of the target economy. William Easterly and Dambisa Moyo have dedicated their lives to explaining why International Development, which represents one of those atavistic vestiges of interventionist top down mentality, has drowned out market growth and has created incentives for corrupt governments to sustain their reign. I think the best way to compress their work is by thinking of international development as a means of taking money from the poor in rich countries and giving them to rich people in poor countries. Easterly’s and Moyo’s literature reminds us that we cannot escape personal responsibility in making important trade offs on the road to growth. In other words, growth is not just mechanical or dormant knowledge in books, but it is an embodied active process that human beings have to choose to enact everyday.
Why is it important to understand what growth is and how it started? Because it is the key idea behind the modern world. Regardless of the Rousseauian proclivities we exhibit when thinking about our past ties to nature, Mother Gaia and Father Ouranus are a bit nonchalant about our ultimate fate. Super volcanoes, asteroids, climate cataclysm, pandemics, and food crises are but some of the entropic vectors that can lay waste to our civilizations and possibly all human life. Creating knowledge and embodying it in our tools seems to have been the primary reason our species has been so successful and is the only way we have to withstand future cataclysmic events. Beyond its importance for our current world an understanding of what growth is can also help us understand what is to come.
Seen from a purely materialist perspective, human beings are processes that seek to transform their environment in order to thrive. We seek to transform at larger scales, at higher dimensions and at a faster rate. We transform both our physical environment and our inner minds. Can this transformation continue infinitely? Kurzweil thinks this growth in transformation is a law of the universe and calls it the Law of Accelerating Returns. He thinks evolutions builds on its own increasing order, with biological evolution leading to technological evolution which in turn continues into computational evolution. (Generally understood computation also means transformation.) Kurzweil’s view maps well to Gilder’s view of the economy as an information creation engine. It seems that these vision of the economy points towards a future of radical accelerating change.
Whether we will grow asymptotically closer to the singularity or achieve it and become a Solaris type oceanic intelligence we cannot know. However, as our knowledge of the physical world grows, necessarily we will find ourselves with a double-edged sword in our hands. We can use our knowledge to promote the protection and continuation of human life but we can also use it to accelerate its eradication. The issue becomes even more problematic when you understand the fundamental limitations involved in the prediction of outcomes from our interventions in complex systems. In fact, as we increase the dimensionality of our interventions, the response will be more nonlinear and unpredictable.
So far the story is that our need to transform our environment is our primary mode of survival. Economic growth is primarily the accumulation of knowledge about how to transform our environment and protect our species from entropic forces. This growth was accelerated and sustained by peculiar institutions like individual and property rights, due process and the corporation which emerged in Northern Europe. These institutions created an environment where people became incentivized to use local and tacit knowledge to take risks and discover knowledge in the interest of profit and social good. Finally, the amount of knowledge in our hands is a double edged sword that can be used to promote life or to eradicate it.
2020
Western societies are at the top of the GDP hockey stick and Globalization is pulling the rest of the world along. To understand how this amount of wealth will change the world we can start by looking at the countries that have been surrounded by this wealth the longest. In Enlightenment Now, Steven Pinker gives us an idea of what to expect. He rightly observes that The Great Enrichment has made us all better off in various metrics “pertinent to human flourishing”. We are seeing increases in education levels, longevity, leisure time and safety as well as decreases in poverty and disease. Yet the reason why Pinker wrote the book is because he knows that ”majorities in fourteen countries—Australia, Denmark, Finland, France, Germany, Great Britain, Hong Kong, Malaysia, Norway, Singapore, Sweden, Thailand, the U.A.E., and the United States—believe that the world is getting worse rather than better.”
We can ascribe this persistent modern ennui to a perennial aspect of the human soul. Perhaps the masses will see their error once their purchase Pinker’s books and remain in awe in front of his impressive graphs. Yet I suspect there’s something more to the story. Since we spent the last section talking about the merits of growth, it would only be fair to check how we are doing presently with this metric to understand if it can answer our question. As you can see from the graph below we are still growing, however the growth rates have decreased.
The Fed is not the only body reporting on this problem and it seems to be a world-wide phenomenon. Are these decreases in the rate of growth enough to explain the general malaise felt in the world? I don’t think so, however, they are an important indicator.
I am sure you have heard the hackneyed expression that civilization is only three meals deep. Growth is important specifically for this reason. If the economy stops growing we get stuck in a vicious loop of zero sum game thinking that leads to internal and external conflicts. Economic life stops being a quest to create wealth by growing the “pie”, and transforms into a game of rent seeking. Social trust is the first thing that suffers as a consequence. As trust falls, we see a decrease in the power of traditional elites to change the dynamic. This loss of faith in elites transforms in loss of trust in the ability of traditional institutions to affect change. As the the vicious cycle exacerbates, the conversation predictably moves to conspiratorial debates about global enemies affecting local wealth. Then the demos wills into power strongmen who move to take local control of global information technology like banks and media. This move shocks economic networks and leads to a cycle of lower growth and increases the prospect of violent strife. Although I can describe this cycle in broad strokes, we don’t know how it starts specifically and we don’t know how to stop it when it does.
Sadly it seems that we are seeing the first part of this cycle play in front of our eyes. You may easily see the decline in trust by sampling a piece of the ferocious culture wars raging on your internet platform of choice. If you would not like to partake in a sampling, it might suffice to know that in 2016 trust and confidence in key American institutions like banks, organized religion, news media, and Congress was “below historical averages, with two institutions -- newspapers and organized religion -- dropping to record lows.” This trend continued in 2018, leading to comments like this by Richard Edelman :
“The United States is enduring an unprecedented crisis of trust. This is the first time that a massive drop in trust has not been linked to a pressing economic issue or catastrophe like the Fukushima nuclear disaster. In fact, it's the ultimate irony that it's happening at a time of prosperity, with the stock market and employment rates in the U.S. at record highs.”
This loss of trust in key establishment institutions is also present in European countries as evidenced by the rise of antiestablishmentarianism. Edelman also notes, this loss of trust is happening at a time of relative prosperity. What would happen to social trust if the rate of growth decreased further and we had a recession? Should we expect the rate of growth to continue decreasing? The short answer is we don’t know. Let’s look at the long answer.
There have been around 210 stated reasons for why the Roman empire fell. It’s safe to say that we might be able to find even more theories explaining the decrease in GDP growth rates. I will focus on listing only 4 popular ones. One theory pushed by the economist Robert Gordon is that “The Great Enrichment” was a special period of discovery for General Purpose Technologies like electricity, internal combustion engines, and the Internet, and we unlikely to see more. A second theory says that growth is driven by innovation which in turn is primarily driven by startups entering the market. Growth rates are decreasing because we are seeing a decrease in the number of companies entering the economy. A third theory says that US companies are not spending enough money on R&D but are instead sitting on billions of cash. Sometimes this is explained by high corporate tax rates, and other times by quarterly capitalism which increases the time preference of companies for quarterly profits. Finally, the argument that GDP is not capturing the full value of the transaction mediated by the internet is also popular one. However, it does not seem to hold as much water as some want to believe.
To compound the issue of slowing growth we are also facing the connected looming problem with pensions and demographics across Western countries. Sovereign pension funds suffer from underfunded liabilities due to the decline of the workers/retiree ratio. In simple terms, retirees are living longer and birth rates are decreasing.
“The biggest problem, however, is the continually perpetrated “lie” that markets compound over time. Pension computations are performed by actuaries using assumptions regarding current and future demographics, life expectancy, investment returns, levels of contributions or taxation, and payouts to beneficiaries, among other variables. The biggest problem, following two major bear markets, and sub-par annualized returns since the turn of the century, is the expected investment return rate. Using faulty assumptions is the linchpin to the inability to meet future obligations. By overestimating returns, it has artificially inflated future pension values and reduced the required contribution amounts by individuals and governments paying into the pension system.”
By 2050 we might have 400 Trillion pension time bomb. This problem will exacerbate if between now and 2050 we experience another economic crisis. In the US we find ourselves with a decreasing rate of growth, a demographic crisis, ballooning entitlements, increased healthcare cost, increased education cost, ballooning national debt and decreasing trust in key social institutions. To top it all off we also see a stupendous concentration of power in the handful of few California companies that broker information for billions of human souls.
Maybe this is the reason why majorities in developed economies think the world is getting worse. I think it’s fair to say, that we are clearly feeling the effects of what it means to wield a double edged sword. We have never been this powerful and so fragile at the same time. Our problem is intractable and irreducibly complex. Much like we don’t have a human being with the knowledge to make a simple pencil we do not have people that can compress knowledge from monetary theory, demographics, intergenerational congressional budgeting, politics and religion. Deep inside we want to believe these problems will fix themselves. After all, regardless of all those cool cyberpunk aesthetics in RoboCop, crime in the 90s fell and the 2008 financial crises came and passed without much pain for most of us.
This is where I can’t help you. The truth is I don’t know. I don’t know how salient these trends are, or if we will see a reversal. We have to decide individually. I think aesthetics are at the foundation of this decision. What is true? What is good? What is beautiful? David Gelernter, an internet visionary, holds these questions in high regard :
"As important as scholarship and science are, arts and religion are more important...Arts and religion define, in a sense, a single spectrum rather than two topics. And this spectrum is where you find mankind's deepest attempts to figure out what's going on in the universe... The best scientists are often the ones who are plainest about their non-scientific interests. Feynman's intro physics books are the best of all physics intros in part because he talks freely about beauty: Here's a beautiful theorem. Here's a beautiful fact. My own small contributions to software were guided at every step by my search for beautiful design.”
Aesthetics is destiny.