Chaos Has Gotten A Bad Rap

There are two words that really separate us hard-core libertarians from small-government Republicans and civil-liberties-focused Democrats:  Chaos and Anarchy.  Libertarians love chaos and anarchy, while most Americans still cringe from these words.  For most folks, chaos is some Road Warrior-style dystopia and anarchy is Molotov cocktails sailing into passing cars.

But chaos and anarchy are in fact the hallmarks of a free society.  They imply a bottom-up society where the shape and pattern of everything is driven by the sum of individual decisions, each decision made with that person's own optimization equation of his or her best interests, constrained only by the requirement they interact with other people without use of force or fraud.   Our wealth, our technology, our modern economy are all born out of this chaos.

I have heard it said that capitalism is not a system, it is the anti-system.  This is the true beauty of capitalism -- it is the only way for human beings to interact with each other without compulsion.    Every other approach to organizing society involves some group of people using physical force to coerce other people.

This does not mean that every individual decision made, every investment choice, or every business model in a free society is mistake-free.  Society and the economy are in fact riddled with mistakes.  The HAVE to be, when one considers that the shape of this country is the sum of literally billions of individual decisions, small and large, made every day.  The key, however, is that the outcomes are generally robust  to mistakes, even large ones.  Business people, for example, who make large mistakes see their business fail and their capital disappear and their assets repurchased in bankruptcy by other business people who may well make better, smarter use of them.  Costly mistakes only persist when they are enshrined by law and enforced by government, and thereby protected from the forces that tend to act to correct them.

But despite all we owe to our capitalist system that fundamentally strives on anarchy, we attend schools run by large authoritarian institutions, like the Catholic Church or the US Government, which train us from an early age to fear chaos.  This is not surprising, because the opposite of anarchy is control, regimentation,  and top-down planning, all the things that authoritarian institutions strive to have us meekly accept.   Large investments in public education in Western countries have always been in times of rapid expansions of state power and control.  This was true in France in the early 19th century and Germany in the early 20th.  It is even true in the US.  If you doubt this, and want to claim that public education is all humanitarian, then why does the state make it so hard to opt out?  The ultimate argument of every opponent of school choice is always some gauzy notion that public schools create a "shared experience," which sounds a lot like indoctrination to me.

The current administration is dominated by technocratic planners.   For them, any process that is not being controlled top-down by "smart" people like themselves is by definition a failure.   When I say that the current administration is reminiscent of Mussolini-style fascists, I am not implying that folks are going to be rounded up soon and sent to camps.  I mean that the animating assumptions -- that any process controlled top down is more efficient than one that is allowed to operate bottom-up and chaotically -- are similar.  FDR, for example, and much of the American intelligentsia were driven by very similar assumptions, and the National Industrial Recovery Act (fortunately struck down by a non-packed Supreme Court) was pretty directly modeled on Mussolini's economic planning system.

Examples?  Well, the GM/Chrysler situation is a great one.  One can easily paint a story that Obama's work to avert bankruptcy at these companies is just a crass political handout to powerful unions who supported him.  But, just as easily, one can portray these efforts as a man who is uncomfortable letting the fate of a large sector of the economy play out beyond his control.  Obama killed school choice in Washington DC despite fairly strong evidence of its success, because, again, everyone being educated in his or her own way just cedes too much control.

Another good example is this one, from the Anti-planner:

Ron Utt, the Antiplanner's faithful ally, has uncovered the first steps of President Obama's plan to force smart growth on those parts of the country that managed to escape the housing bubble. The departments of Transportation and Housing & Urban Development have signed a joint agreement to impose smart growth on the entire nation.

Under the agreement, the departments will "have every major metropolitan area in the country conduct integrated housing, transportation, and land use planning and investment in the next four years." Of course, nearly all of the metropolitan areas that already did such integrated planning suffered housing bubbles, while most of those that did not did not have bubbles. The effect of Obama's plan will be to make the next housing bubble much worse than the one that caused the current financial crisis.

Obama first hinted about this plan in a town hall meeting in February. "The days where we're just building sprawl forever, those days are over," he told a group in Fort Myers, Florida. "I think that Republicans, Democrats, everybody recognizes that that's not a smart way to desig, n communities." Not everybody.

As a note on city planning, I will not claim a direct causality, because I am the first one to warn of the danger between directly correlating two variables in a complex system, but check out this map of job losses in the recession, noting the situation in Houston as the least planned city in the country.

job-losses

  • DrTorch

    A great little microcosm to compare "smart growth" could be found in MD/VA through the 1990s and early 2000 years. MD had Glendenning as governor, who was a large figure advocating "smart growth", and after leaving the governorship, helped establish the "Smart Growth Leadership Institute".

    Despite media jabs and ads to the contrary, the facts showed:
    VA residents had shorter communtes
    VA residents had lower taxes
    VA residents had safer roads
    VA residents had more bicycle paths (and more use)

    MD had, and continues to have, problems w/ lack of sidewalks and pedestrians getting hit.

  • http://politicalcalculations.blogspot.com/ Ironman

    If it helps better understand what chaos really is, here's how it's described with respect to the current stock market, but the description would apply to almost any system described as being chaotic:

    "We're coming to the conclusion that a lot of people have the wrong idea about chaos. For example, if you ask someone if the stock market is a pretty chaotic place these days, they'll say it is and what's more, we'll agree with them. If then you ask them if that's a good thing or a bad thing, they'll say that chaos in the stock market is a bad thing.

    "But is it really? Here's the thing we're finding out about chaotic systems: Chaos is where all the basic rules apply, but outcomes are difficult to anticipate because of the complexity of the interactions involved.

    "What makes those interactions complex is the effect of interdependencies in the market...."

    One should read "basic" in the quoted passage above as being equivalent to "simple." The rest of the post goes on to talk through how one could have used some pretty simple relationships to work out where stock prices have been going since December 2008.

  • The other coyote

    The two reddest states in the country, Texas and Oklahoma, saw the most job growth.

    Why doesn't anyone else see that?

    Which is precisely why I keep writing Michael Steele and telling him that Texas and/or Oklahoma should be the first Republican primary in '12. Why should left-leaning states like Iowa or New Hampshire shove another McCain down our throats.

    Interestingly, Duncan Hunter won the Republican straw poll in Texas (held early in the campaign, long before the primary election).

  • The other coyote

    If anybody's wondering, I'm betting the jobs Colorado lost are in the oil & gas business. Rigs have been laid down like crazy, and especially so in Colorado, where the environmental wackos are trying to permit the industry out of business. If you're an E&P company, and you are only going to drill one well, and you could do it in CO or Utah, I guarantee you would pick Utah.

  • morganovich

    ironman-

    i think you mistake "chaotic" for "volatile". the market is not chaotic right now. internal correlations are running very high. this is one of the reasons were are seeing more volatility. if everything has a high r squared to a couple of variables, that is not a chaotic system.

    as a sidenote: anyone who claims to be able to predict the market with a few simple variables should be treated with great suspicion. if it were that easy, loads of people would figure it out which would instantly make it not work anymore. data mining correlations out of past data is easy, but it nearly always lacks predictive ability.

  • morganovich

    just to be clear, as i realize i did not state this well-

    by "not chaotic right now" i mean relative to usual. obviously, it is still a complex system, but it is being driven by fewer and better correlated variables than usual.

  • Les

    Using compulsion to get what you want does, outside other factors (like someone stronger using compulsion to reverse your gains), tend to lead to more profitable exchanges for the one using compulsion. If I trade equitably with you then you get some of my stuff and I get all of your stuff, but if I smash your head on a rock I get to keep all my stuff and I get all of your stuff to. One of the primary flaws in Randian rational-anarchism is the assumption that everyone will act as rational independent motivators, where everyone's potential for violence is adequately balanced-out by everyone else's potential for violence. People don't work that way, and will congregate together by bonds of family and friendship to work cooperatively on the small scale, but with groups still large enough to screw-over any individual who gets in their way and society becomes dependant upon the good graces of the largest and more powerful sub-groups within it.

    Where collectivists fail is in the assumption that such a tendency toward collective cooperation can be easily scaled-up by fiat to include not just one's immediate friends and family but an entire nation-state. Those who ascribe precedence to government-sponsored authority over citizen authority fail to realize that someone with a government badge is just as human as someone without same and is open to the same temptation to employ compulsive tactics to gain 'something for nothing'.

    http://www.atomicnerds.com/?p=501 is an interesting essay on just how human brains are wired and how they make the tendency toward centralization of power feel so natural to so many people.

  • Hammer

    Les,
    You are a little off there. The assumption is not just that violence will be met tit for tat, but also that initiating violence will make one an undesirable partner in trade. In other words, anyone who finds out that you smashed your previous partner's head off a rock will not likely be willing to deal with you in any fashion that doesn't involve your head and a firm object. Thus folks trade long term benefits for short term gain if they resort to violence, and most people are sane enough to see that that is a very bad idea.

    Of course, there are always going to be people that are not sane enough to come to that conclusion, but those same people are not sane enough to follow laws against such things either, so inevitably their lives end in a similar fashion.

  • Les

    Hammer,

    Anyone who is likely to start smashing people's heads on rocks to get their way is likely to continue doing so, so being forced to deal with the world through purely head-bashing means for such a person is a small inconvinience. When such a head-basher does appear no appeals to 'enlightened self-interest' will make him curb his head-bashing tendencies, only raising the odds of his head-bashing resulting in reciprocal head-bashing to 1:1 will stop him.

    And this still does not address the tendency of humans to congregate in groups, gangs, tribes, clans etc.. and make small or great self-sacrifices to enhance the group's power despite it being more 'rational' to strive as individuals, thus creating power-imbalances that throw great spanners in the works of any idealistic anarcho-libertarian society. This is why I personally loathe the apparent preeminence of Randian philosophy in even 'Small-l' libertarianism, Objectivism fails to factor for human nature just as badly as Communism ever did.

  • EscapedWestOfTheBigMuddy

    Look at the I-35 corridor go!

    You've just mapped the interstate twixt San Antonio and Dallas...

  • http://vox-nova.com Blackadder

    From the title of the post, I was sure you were going to go off on Jackie Chan's recent comments about how the Chinese "need to be controlled" and that "with too much freedom... it can get very chaotic, could end up like in Hong Kong or like in Taiwan."

  • Link

    I don't know that chaos is the right metaphor -- "stasis vs change" may be better, and less off-putting.

    There's another aspect to this ... Here's some examples I use.

    Phone companies like AT&T had a lot invested in big managed networks -- as an organization they had difficulty seeing that TCP/IP would improve to the point it would undermine the need for switched networks -- even if AT&T helped develop this technology -- even if individuals at AT&T could see foresee this.

    IBM gave away the PC market to Microsoft and Intel, famously. They couldn't or wouldn't extrapolate Moore's law. IBM gave away other markets as well to the like of Oracle and EMC.

    During WWII, a lot of decision making power was in the hands of one guy -- Vannevar Bush, our head scientist. He liked the idea of the a-bomb, and bet big on it. He didn't believe in rocketry -- and so let the Germans leap ahead, even though WPI's Goddard was a pioneer.

    ... so if big bottom-lined driven organizations with the smartest specialists can't get foresee unexpected opportunities, how do we expect huge unaccountable government bureaucracies to do better.

  • Douglas2

    Looks like Washington DC is the place to go if you plan to relocate for better job prospects.

  • http://myweeklycrime.blogspot.com Elliot

    Les, your argument is a nihilistic one: people do bad things (unprovoked head-bashing), even when you try to stop them, so why bother trying to stop them? For some of us, it matters that we take a stand for what is right, despite the result not always being what we want, due to the actions of others not under our control.

    More here.

  • GU

    Coyote,

    For the most part I don't disagree with the substantive policy positions you advocate in this post. But, trying to convert non-libertarians with "chaos & anarchy" language seems like a poor rhetorical tactic. Maybe this post was just preaching to the choir (which is fine), but I wouldn't try to use this on a leftist or big-government conservative.

  • http://politicalcalculations.blogspot.com/ Ironman

    morganovich wrote:

    i think you mistake “chaotic” for “volatile”. the market is not chaotic right now. internal correlations are running very high. this is one of the reasons were are seeing more volatility. if everything has a high r squared to a couple of variables, that is not a chaotic system.

    then clarified:

    just to be clear, as i realize i did not state this well-

    by “not chaotic right now” i mean relative to usual. obviously, it is still a complex system, but it is being driven by fewer and better correlated variables than usual.

    I won't disagree with you if you substitute "currently has low levels of 'random' noise relative to signal" for "is not chaotic right now". As for using the word "chaotic" to describe the current stock market, I'll stick by that since what we observe in the market fits what we know about the behavior of chaotic systems. Just the variation in time shifting alone is sufficient to make even dealing with one or two variables complex enough to be considered chaotic, and that doesn't even take variation in the related amplification factors over time into account. And even with that, you can achieve high R-squared correlations.

    I do recognize that the current low level of noise in the market makes forecasting a lot easier to do. Having gone through the historic data, I can identify several periods where the methods that work now would not be effective. The peak of the "Dot-Com Bubble" of April 1997 to June 2003 and the Black Monday Crash of 1987 are very good examples of times when the level of noise in the stock market were quite high, rendering the limited method I've developed quite useless for a prolonged period of time.

    as a sidenote: anyone who claims to be able to predict the market with a few simple variables should be treated with great suspicion. if it were that easy, loads of people would figure it out which would instantly make it not work anymore. data mining correlations out of past data is easy, but it nearly always lacks predictive ability.

    Yes and no. What you're describing is part of the "efficient markets" hypothesis. There's a classic joke where two people, one an economist, the other a regular guy, are walking along when both spot a $20 bill on the ground. The regular guy says "Hey a $20! Want to split it?" The economist, believing in efficient markets, says "No. If that were a real $20, someone would have picked it up already."

    If you believe in efficient markets, where let's say that everyone over time learns and adopts one system for setting stock prices given everyone's shared future expectations, what you would see would be the lag in the time an opportunity is discovered to when it closes shrink substantially, as markets react as quickly as possible to the new information.

    In practice though, where a stock index is concerned, the complexity lies in all the underlying transactions that set the level of the component stocks that make up the composite index. No one can ever know, at any given time, when Company AAA's bad news will offset Company BBB's good news (or the other 498 companies in the index), nor can they easily determine how any company's specific news will affect the index given the respective weightings of each company within the index. Add that to the appeal of competing investment theories or even the nature of the specific news for each company in the index on any given day, and you've got quite a lot of play in the system.

    But let's say that there's no play in the system. Let's say that everyone buys into that system I've described and reacts instantly to the arrival of news to reset stock prices instantaneously. Care to guess where the level of the stock index will be set?

    Traders might not enjoy much of an arbitrage opportunity, but people still make and lose money through all the other forms of investing.

  • Les

    Elliot:

    Not nihilistic, realistic. The Free individuals can deal with random head-bashers on a case-by-case basis, I'm just unconvinced that in an anarcho-libertarian utopia like what I hear many Randians in the current libertine movement calling for that such head-bashers will remain random and not group together for mutual protection against reciprocal head-bashing and the like; though communal head-bashing would be only the most extreme of problems such a society would face, collusion being another. This is why Rule of Law (Not rule of Kings, not rule of the Elite, not rule of 'The Party' or rule of the group that can bring the most head-bashers together) is so important.

    I'm fully on-board with the idea that we need fewer, clearer, simpler laws that intrude the least upon the peaceable actions of individuals and with the most leeway for allowing citizen-enforcement rather than maintaining absolute state monopoly on law-enforcement and maintaining accountability for All those who enforce.. I just have this feeling that Randian Libertarians are looking to toss the Baby of Civilization out with the Bathwater of Statism without realizing it.

  • http://myweeklycrime.blogspot.com Elliot

    Les,

    Your use of terms like "utopia" and "libertine" indicate you are either ignorantly buying into simple-minded stereotypes or deliberately trying to build strawmen to bash. I'm of no use to you if you're not prepared to engage in a more meaningful dialog.

    I can't speak for all the people who describe themselves as one type of individualist or another (libertarian, Objectivist, etc.). In my experience, many of these people have a shallow understanding and have not fully integrated the basic principles of liberty. Perhaps they've read a bit of Rand and are able to parrot some ideas, but are only able to offer muddled counter-arguments in a prolonged debate. Or, perhaps they've developed a good portion of their political values independently--only partially influenced by Locke, Rand, and Rothbard--without following a set script. Does that give you an idea of what I mean in my first paragraph?

    One more thing: this idea that people influenced by Ayn Rand (who rejected anarchy) want to throw out "civilization" doesn't make sense. Viewing man as a heroic being and advocating reason over force is choosing the best qualities of civilized behavior, while compromises with collectivists are an erosion of such qualities.

  • Les

    We're just going to have to agree to disagree. I'm just stating my disenchantment not with libertarianism as a whole but with what I perceive as an over-reliance upon Rand's philosophy which I see as unrealistically hyper-rational and self-centric (her condemnation of altruism leaves a particularly foul taste in my mouth; not to mention how difficult it is to try and explain to people things such as that libertarianism does not decry welfare out of a perceived Objectivism-influenced attack on charity (which most people interpret as selfish if not sociopathic) but rather as an objection to government interference and influence upon charity... and then turn on the TV and see people at the tea parties waving 'Free John Galt' signs and quoting Atlas Shrugged.)

  • Bearster

    Ironically, I decided to comment because I wanted to say that, while Coyote makes a number of good points, when he calls a free market "anarchy", this is misleading at best.

    And then I read several comments here by Les using the term "Randian anarchism." Ayn Rand made it quite clear that anarchy was the worst form of tyranny imaginable. For an example in today's world, look at Somalia. Anarchy is an unstable social system in which successively bigger and more brutal thugs murder each other and everyone else, trying to bring stability in the form of totalitarian dictatorship.

    Les, you may agree or disagree with this conclusion, but you cannot in any honesty attribute the anarchist view to Ayn Rand! (The Libertarian Party's support of anarchism is one reason why she condemned them and their founder Murray Rothbard, who at the time was trying to imply that she supported him.)

    Rand was against altruism, which she noted was not about helping people but is really a doctrine of self-sacrifice. Altruism switches contexts in answering the question "what is the good?" altruism answers in terms of who the good is *not* for, the actor. It does not explicitly say what the good is, though implicitly it defines the good as trading away a greater value for a lesser value in return: others before self, neighbors before family, country before neighbors, the world before country, and animals before people.

    Rand was also against government-enforced altruism.

  • tomw

    Did I miss the release of the latest Five Year Plan in the Great Leap Forward? Did Chairman Obama swim in the Yalu yet? Are the educated being relegated to the Red states to pick tomatoes?
    Adam Smith envisioned the invisible hand of the market directing people in their best interest. Our taxcheat Treasury Secretary is sitting in his office with his laptop planning and deciding which banks can be ALLOWED to pay back their forced loans. He has no help because he has the air of a bullseye painted on the backside of every suit he owns. I understand he has not signed a long term lease in the DC area. [not really, but..]
    The Stalin and Mao era planners never were successful. The goals were counter productive, and the huge brickbat of government took away any possibility of initiative. If you succeeded, you were a target. Better to blend into the incompetency engendered by central planning. The president is so ignorant of history that it is painful to watch.
    Being mean, I wish pain upon those idiots that voted this incompetent ignoramus into office. Perhaps they will learn.
    tom

  • http://myweeklycrime.blogspot.com Elliot

    Bearster, Somali warlords are small-scale dictators. According to some articles I've read, many of these dictators impose harsh Sharia law.

    When one of these warlords manages to defeat all the others and establish a lasting monopoly on the use of force, suddenly he'll have a seat at the UN.

    When I read free market anarchists opposing rule by force, I don't see how they have anything in common with the Somali savages.

    Les, what is "hyper-rational"? Are you arguing that one needs a certain level of irrationality?