18 October 2016

Cybernetics, Game Theory, and Economics

In Adam Curtis' documentary The Trap, he links Game Theory to Economics. Game theory-inspired economics has a lot in common with cybernetics in that modern Neo-classical economics argues that economies, like organisms, tend towards homoeostasis, or in economic jargon, to equilibrium.

It is true that organisms, ecosystems, and Gaia all tend towards homoeostasis, or to put it another way they all have feedback mechanisms that sustain the environment in state that is conducive to life and is typically deflected from the equilibrium that would hold under inorganic chemistry. For example having 21% oxygen in our atmosphere is not something that could be sustained by chemistry alone, but requires constant renewal from living sources. Left to itself oxygen reacts with just about anything to form oxide compounds that are hard to break down. Without life on earth, the oxygen levels would plummet from 21% roughly 0% in quite a short period of time.

When James Lovelock was asked to contribute to a NASA project for finding life on other planets, he told them to look for systems out of equilibrium. Look for too much oxygen for example. One didn't need to actually visit Mars to decide if life exists there, one need only measure the composition of the atmosphere which one can do by spectroscopy right here on earth. It turns out that the atmosphere of Mars is at chemical equilibrium. Therefore, there is no life on Mars. The requirements of living systems are very different from the chemical environments found anywhere on earth at present, and bound within each living cell is a modified vestige of that original milieu in which life originated (which was probably in warm, alkaline, thermal vents)

Neoliberalism draws on such economic theories, from libertarianism, from merchantilism, and game theory to create the idea of the black box called The Market. The argument is that the market is a homoeostatic system that seeks equilibrium. It responds to inputs directly to produce outputs. The theory is that there is a linear relation between input and output and that the participants in the system are rational, but selfish and greedy (as if selfishness and greed are rational!)

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