Economics, in my mind, is the art of organising, aligning and optimising human activity and production with our material needs and moral principles. What sort of moral principles are we talking about? Well, in order of importance, I’d say preservation of humanity and the biosphere, prosperity, and meritocracy. We want to try to promote efficiency, fairness and proportionality, while incentivising positive participation, and trying to prevent perverse outcomes.
Looking around the world today, I’m not certain we’ve succeeded in doing that. The worst failures, in my mind, come from the application of simplistic principles that don’t appreciate the complexity of the challenge. The extreme ends of economics are most guilty of this – puritanical right wing free-marketism that wishes to abolish all government and declares business can do no harm, and leftist central planning that seeks to have a supposedly uncorruptable government micromanage every economic decision and venture. I think a fairly reasonable reaction to these extremes is to compromise – use a mixed economy that gives government a role in vital infrastructure, natural monopolies and market failures, while utilising competition, the price mechanism and the ‘invisble hand’ of the market to give us finely tuned incentives and optimisations elsewhere.
But I feel we could, and probably should, take the concept of a mixed economy further. We can approach the problems with more nuance. When powerful companies are able to influence the regulations they operate under, the economic system can become distorted in ways that no longer align with our basic moral principles. Likewise where a government department finds ways to control its own performance indicators, or public perception of it, or its funding stream, the entity breaks free from human control and becomes an end unto itself. The problem is not government or business, its conflict of interest. Not just personal conflict of interest, but a structural one, one that detaches the economic system from the goals its meant to serve. Individually, for business, government and individuals, these conflicts of interest seem like prudence and reasonable pursuit of success. But at a national or international level, they look more like zero-sum or negative-sum tradgedy of the commons problems that sap our economy’s full potential.
We need to better think about how we structure mixed economies. Both government and business need to play a role, but we need to think about how those roles can avoid becoming structural conflicts of interest. Today, with human technology magnifying all our most potent effects on each-other and the biosphere to unprecedented intensity, it’s more vital than ever that we get this right.
What follows is an attempt to describe the details of this problem, as well as some principles that might help us move towards a more prosperous and humane economy.
- Part 1 – The Island – How both the left and the right have failed to resolve economics
- Part 2 – Conflict of Interest and an Economic Separation of Powers – Striving to address the failures of economics
Moderating and Optimising Cooperativism
Many of the ideas produced by the left can be fraught with unintended consequences. On the days where I’m in a left-wing kind of mood, I’ve always thought the tradition that looked the least like this was cooperativism. Cooperatives mean that utopian ideals can be safely tested and practiced without causing chaos and instability. My best attempts to research indicates they succeed at a rate about the same or higher than small businesses too. Some time ago I attempted my own contribution to these sets of ideas – combining cooperativism idealism with market principles and entrepreneuralism. I’m less sure about these ideas than before, because the main difficulty with cooperatives isn’t that they don’t work nicely, it’s just that overwhelming majority people aren’t idealistic enough to form them, and I don’t know how to solve that. Still, I’ll leave these here in case someone, somewhere, finds them useful.