Economics

How Norway Proves Laissez-faire Economics Is Not Just Wrong, It’s Toxic.

A surprisingly simple solution to the conflict between self-interest and mutual benefits at all hierarchical levels

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By David S. Wilson, Dag O. Hessen 

Life consists of units within units. In the biological world, we have genes, individuals, groups, species, and ecosystems – all nested within the biosphere. In the human world, we have genes, individuals, families, villages and cities, provinces, and nations – all nested within the global village. In both worlds, a problem lurks at every rung of the ladder: a potential conflict between the interests of the lower-level units and the welfare of the higher-level units. What’s good for me can be bad for my family. What’s good for my family can be bad for my village, and so on, all the way up to what’s good for my nation can be bad for the global village.

For most of human existence, until a scant 10 or 15 thousand years ago, the human ladder was truncated. All groups were small groups whose members knew each other as individuals. These groups were loosely organized into tribes of a few thousand people, but cities, provinces, and nations were unknown.

Today, over half the earth’s population resides in cities and the most populous nations teem with billions of people, but groups the size of villages still deserve a special status. They are the social units that we are genetically adapted to live within and they can provide a blueprint for larger social units, including the largest of them all – the global village of nations.

Groups into Organisms

The conflict between lower-level selfishness and higher-level welfare pervades the biological world. Cancer cells selfishly spread at the expense of other cells within the body, without contributing to the common good, ultimately resulting in the death of the whole organism. In many animal societies, the dominant individuals act more like tyrants than wise leaders, taking as much as they can for themselves until deposed by the next tyrant. Single species can ravage entire ecosystems for nobody’s benefit but their own.

But goodness has its own advantages, especially when those who behave for the good of their groups are able to band together and avoid the depredations of the selfish. Punishment is also a powerful weapon against selfishness, although it is often costly to wield. Every once in a great while, the good manage to decisively suppress selfishness within their ranks. Then something extraordinary happens. The group becomes a higher-level organism. Nucleated cells did not evolve by small mutational steps from bacterial cells but as groups of cooperating bacteria. Likewise, multi-cellular organisms are groups of highly cooperative cells, and the insects of social insect colonies, while physically separate, coordinate their activities so well that they qualify as super-organisms. Life itself might have originated as groups of cooperating molecular reactions.

Only recently have scientists begun to realize that human evolution represents a similar transition. In most primate species, members of groups cooperate to a degree but are also each other’s main rivals. Our ancestors evolved to suppress self-serving behaviors that are destructive for the group, at least for the most part, so that the main way to succeed was as a group. Teamwork became the signature adaptation of our species.

Extant hunter-gatherer societies still reflect the kind of teamwork that existed among our ancestors for thousands of generations. Individuals cannot achieve high status by throwing their weight around but only by cultivating a good reputation among their peers. Most of human moral psychology – including its other-oriented elements such as solidarity, love, trust, empathy, and sympathy, and its coercive elements such as social norms enforced by punishment – can be understood as products of genetic evolution operating among groups, favoring those that exhibited the greatest teamwork.

From Genes to Culture

Teamwork in our ancestors included physical activities such as childcare, hunting and gathering, and offense and defense against other groups. Human teamwork also acquired a mental dimension including an ability to transmit learned information across generations that surpasses any other species. This enabled our ancestors to adapt to their environments much more quickly than by the slow process of genetic evolution. They spread over the globe, occupying all climatic zones and hundreds of ecological niches. The diversity of human cultures is the cultural equivalent of the major genetic adaptive radiations in dinosaurs, birds, and mammals. The invention of agriculture initiated a positive feedback process between population size and the ability to produce food leading to the mega-societies of today.

Cultural evolution differs from genetic evolution in important respects but not in the problem that lurks at every rung of the social ladder. Just like genetic traits, cultural traits can spread by benefitting lower-level units at the expense of the higher-level good – or by contributing to the higher-level good. There can be cultural cancers, no less so than genetic cancers. And for teamwork to exist at any given rung of the social ladder, there must be mechanisms that hold the wolves of selfishness at bay. A nation or the global village is no different in this respect than a human village, a hunter-gatherer group, an ant colony, a multi-cellular organism, or a nucleated cell.

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Modern nations differ greatly in how well they function at the national scale. Some manage their affairs efficiently for the benefit of all their citizens. They qualify at least as crude superorganisms. Other nations are as dysfunctional as a cancer-ridden patient or an ecosystem ravaged by a single species. Whatever teamwork exists is at a smaller scale, such as a group of elites exploiting the nation for its own benefit. The nations that work have safeguards that prevent exploitation from within, like scaled-up villages. The nations that don’t work will probably never work unless similar safeguards are implemented.

Accomplishing teamwork at the level of a nation is hard enough, but it isn’t good enough because there is one more rung in the social ladder. Although many nations have a long way to go before they serve their own citizens well, a nation can be as good as gold to its own citizens and still be a selfish member of the global village. In fact, there are many examples in the international arena, where nations protect their own perceived interests at expense of the common global future. We will address some of these issues for Norway, which serves its own citizens well by most metrics and also has ambitions to serve the global village well, but still sometimes succumbs to selfishness at the highest rung of the social ladder.

The Norway Case

Norway functions exceptionally well as a nation. Although it is small in comparison with the largest nations, it is still many orders of magnitude larger than the village-sized groups of our ancestral past. Seen through the lens of evolutionary theory, the dividing line between function and dysfunction has been notched upward so that the whole nation functions like a single organism. This is an exaggeration, of course. Self-serving activities that are bad for the group can be found in Norway, but they are modest in comparison with the more dysfunctional nations of the world.

Norway’s success as a nation is already well known without requiring an evolutionary lens. Along with other Nordic countries, it scores high on any list of economic and life quality indicators. The success of the so-called “Nordic Model” is commonly attributed to factors such as income equality, a high level of trust, high willingness to pay tax, which is tightly coupled to strong social security (health, education), a blend of governmental regulations and capitalism, and cultural homogeneity. These and other factors are important, but we think that viewing them through an evolutionary lens is likely to shed light on why they are important. Our hypothesis is that Norway functions well as a nation because it has successfully managed to scale up the social control mechanisms that operate spontaneously in village-sized groups. Income equality, trust, and the other factors attributed to Norway’s success emanate from the social control mechanisms.

Our evolutionary lens also sheds light on Norway’s behavior as a member of the global village. Not without reason, Norway prides itself as a “nation of goodness.” Norwegian foreign policy no doubt plays a positive role in world affairs, also aiming for a “civilized capitalism,” and Norway is the country that has pressed the UN to accept guidelines that make not only states, but also multinational companies, liable for violation of human rights. Also, Norway is currently the world’s most active advocate of corporate social responsibility on all international arenas. Hence, in this context, Norway has done a great deal to behave as a solid citizen of the global village. On the other hand, for all its success and wisdom, the management of the state pension fund illustrates that even Norway is sometimes guilty of selfishly feathering its own nest at the expense of other nations, the planet, and, therefore, ultimately its own welfare over the long term.

The Norwegian Government Pension Fund Global is by far the world’s largest sovereign wealth fund, currently exceeding 800 billion USD, and rapidly growing. The fund is owned by the state on explicit behalf of current and future generations. It is administrated by the Ministry of Finance, which gives guidelines to the investment branch of the Norwegian State Bank (Norwegian Bank Investment Management, NBIM). A separate Council of Ethics (appointed by the government) serves the role of advising the Ministry on which companies to divest from due to serious ethical misconduct (details in the structure and mandates can be found here).

The fund has two major ethical concerns: It should provide good returns to future generations, and it should not contribute to severe unethical acts. The major emphasis has been on the first goal. A core management issue is the rule of maximum spending (handlingsregelen), i.e., that no more than 4% of the annual income can enter the annual state budget for public spending. This ensures that the fund will be used for the long-term welfare of Norway, not just short-term welfare.

This is admirable management of common goods and can serve as an example of how natural resources can be managed for the benefit of an entire nation. At the opposite extreme, consider Equatorial Guinea, which allocates almost the entire income from its oil to the benefit of a single family (the president and his close relatives). For the rest of the population, the life expectancy is 51 years, and 77% have an income of less than 2 US dollars per day. Most other oil-producing nations direct at least some of their revenues to collective goods, but much of it is diverted to political and corporate elites and/or short-term spending. In this context, the Norwegian Pension Fund is quite unique with is long term investments.

However, if we go further and ask whether the investments are to the benefit of the long-term welfare of the global village, the answer is very close to a “No.” The main goal of the fund is maximum return, and although Norway has set up to 3 billion NOK aside for preservation of rainforests, it has also (at least up to now) invested heavily in logging companies replacing rainforest with palm oil. There are also heavy investments in mining industries, coal and oil companies, and other activities that do not contribute to a sustainable future. There is no overall “green,” sustainable, or ethical profile for evaluating investments. There is only an Ethical Council that advises the Ministry of Finance, which decides (often after considerable delay) whether or not the bank (NBIM) should divest in certain companies that perform major, unethical practices. Such divestments are made public, so at least they are open to the gaze of Norwegians and the rest of the world – no doubt increasing their impact. The problem is, however, that the investments per se are guided almost solely by the principle of maximum returns, not by principles of long term, sustainable (environmental as well as morally) investments that would benefit the global village – as well as Norway. So, if even Norway fails to recognize the long-term benefits of a strategy beyond narrow national self-interest, what kind of mechanisms can be invoked to the benefit of the global village?

Organizing the Global Village

Norway’s double standard at the highest rung of the social ladder is typical of most nations. Around the world, politicians talk unashamedly about pursuing the national interest as if it is their highest moral obligation. Double standards easily trigger a feeling of moral indignation. How could persons or nations be so hypocritical? But wagging fingers at nations is not going to solve the problem. A smarter approach is to understand why moral indignation works at the scale of a village, why it doesn’t work at the scale of the global village, and how it can be made to work with the implementation of the appropriate social controls.

Imagine living in a village and meeting someone who talks unabashedly about her own interests as if no one else matters. As far as she is concerned, the other villagers are merely tools for accomplishing her own ends. How would you react to such a person? Speaking for ourselves, we would be shocked to the point of questioning her sanity. We might entertain similar thoughts, but we wouldn’t be so open about it. Moreover, our selfish impulses are tempered by a genuine concern for others. Empathy, sympathy, solidarity, and love are as much a part of the human repertoire as greed. We would probably experience the same feeling of moral indignation welling up in us that we feel toward Norway’s questionable behavior. Even if we remained dispassionate, we would avoid her, warn others, and feel moved to punish her for her antisocial ways. As would most of the other villagers, so despite her intentions, she would probably not fare very well.

Moral indignation works at the scale of villages because it is backed up by an arsenal of social control mechanisms so spontaneous that we hardly know it is there. The most strongly regulated groups in the world are small groups, thanks to countless generations of genetic and cultural evolution that make us the trusting and cooperative species that we are.

The idea that trust requires social control is paradoxical because social control is not trusting. Nevertheless, social control creates an environment in which trust can flourish. When we know that others cannot harm us, thanks to a strong system of social controls, then we can express our positive emotions and actions toward others to their full extent: helping because we want to, not because we are forced to. When we feel threatened by those around us, due to a lack of social control, we withhold our positive emotions and actions like a snail withdrawing into its shell.

This is why people refrain from unethical acts – to the extent that they do – in village-sized groups and why cooperation is accompanied by positive emotions such as solidarity, empathy, and trust. The reason that nations and other large social entities such as corporations openly engage in unethical acts is because social controls are weaker and are not sufficient to hold the wolves of selfishness at bay. This is why politicians can talk openly about national self-interest as if nothing else matters – even though a villager who talked in a comparable fashion would be regarded as insane.

Understanding the nature of the problem enables us to sympathize with the plight of Norway when it chooses how to invest in the global market. Like a snail, it might want to emerge from its shell and support the most ethical enterprises. But to do so might be too costly in a market environment that rewards naked selfishness. Norway might be required to shrink into its shell and make selfish investments to survive. After all, snails have shells for a reason.

A third option is available to Norway and all other nations, which is to create the same kinds of social controls at a large scale that curtail selfishness in smaller groups. This is also costly, like investing in ethical enterprises that don’t yield the highest profits, but it has a more lasting benefit because once a social control infrastructure is in place, it is the ethical enterprises that yield the highest returns. Norway has come a long way to employ this principle in its official foreign policy, but it is clearly lagging behind on the global business scene when it comes to own investments.

There is evidence that village-like social controls are starting to form at larger scales without the help of governments. In the United States, a nonprofit organization called B-lab (B stands for benefit) provides a certification service for corporations. Those that apply for certification receive a score on the basis of a detailed examination. If the score exceeds a certain value, then the company is permitted to advertise itself as a B-Corporation. Xiujian Chen and Thomas F. Kelly at Binghamton University’s School of Management recently analyzed a sample of 130 B-corporations and compared them to a number of matched samples of other corporations. The samples were matched with respect to geographical location, business sector, corporation size, and other variables. In all cases, the B-corporations were either as profitable or more profitable (on average) than the corporations in the matched samples. Engaging in ethical practices did not hurt, and might even have helped, their bottom lines.

More analysis will be required to pinpoint why B-corporations do well by doing good. One possibility is that they have become like villages in their internal organization so there is less selfishness from within. Another possibility, which is not mutually exclusive, is that consumers are increasingly adopting a norm that causes them to prefer to do business with ethical companies and to shun unethical companies, exactly as they would prefer and avoid people in a village setting. Certification as a B-Corporation makes it easier for consumers to evaluate a company’s ethical reputation. Knowing someone’s reputation comes naturally in a village setting, but work is required to provide the same information at a larger scale. Adherence to other codes performs a similar function, such as the UK Stewardship Code (FRC 2012), the International Corporate Governance Network´s Code (ICGN) or the Singapore Code of Corporate Governance Statement on the Role of Shareholders (SCGC) to mention a few.

There are even indications that the corporate world is becoming more village-like without requiring formal certifications. As an example, Apple chief executive Tim Cook was recently criticized by the National Center for Public Policy Research (NCPPR) for failing to maximize profit for its shareholders by investing for the benefit of the climate and the environment. Cook became strikingly upset and advised those with such narrow self-centered goals to sell their stocks. He was behaving precisely as a good villager would behave – and if his reaction became the norm among large corporate entities, the global village would become more like a real village without the need for formal certifications.

It might seem too good to be true that consumers and the corporate world are spontaneously starting to hold the wolves of selfishness at bay by implementing the same kinds of social control that we take for granted at a village scale. If this did come to pass, then Norway would no longer be faced with difficult choices in how to invest its vast wealth in the global market, because the most ethical companies would also be the most profitable. But if this is happening at all, it is still in its initial stages. At present, it is still the case that some of the most profitable investments are of the cancerous variety.

Therefore, Norway is faced with a difficult moral choice similar to that of most investors. It can remain in its shell and make the most profitable investments to maximize short-term returns for its shareholders (in this case, the Norwegian population) without regard to worldwide ethical concerns, or it can emerge from its shell, live up to its ideal standards in domestic as well as foreign policy, and join with other right-minded individuals, corporations, and nations to help create the social control system that can make ethical practices most profitable. The crucial point is that this is a win-win situation in the long term because, ultimately, we are all in the same boat, and what is good for the world, in a long-term sustainability perspective, will also be good for Norwegians.

A New Narrative

In this essay, we have sketched a surprisingly simple solution to the apparent conflict between self-interest and mutual benefits at all hierarchical levels. We are suggesting that the social dynamics that take place naturally and spontaneously in villages can be scaled up to prevent the ethical transgressions that routinely take place at a large scale. Why is such a simple solution not more widely known and discussed? Although we immediately realize this solution when it comes to cell-organism relationships or individuals within villages, we do not realize that the same principles also hold for companies or nations. One reason is because of an alternative narrative that pretends that the only social responsibility of a company is to maximize its bottom line. Free markets will ensure that society benefits as a result. This narrative makes it seem reasonable to eliminate social controls – precisely the opposite of what needs to be done. Governments have been under the spell of this narrative for nearly 50 years despite a flimsy scientific foundation and ample evidence for its harmful effects. We can break the spell of the old narrative by noting something that will appear utterly obvious in retrospect: The unregulated pursuit of self-interest is cancerous at all scales. To create a global village, we must look to real villages.

Originally titled Blueprint for a Global Village.

24 October 2015


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  • Cynthia Gurin

    “As far as SHE is concerned…” How intriguing that although the overwhelming number of likely examples would be male, the author has elected to make the proposed transgressor in the story feminine.

    • Jukka Aakula

      Your comment has nothing to do with the main point of the article.

  • Jukka Aakula

    But how idealistic is it to transform a multicultural society to a Scandinavian model? It took hundreds of years for our Scandinavian models to develop?

    And I think they do not look very stable in spite of that. Is the Scandinavian model going to survive the mass immigration. The Scandinavian wellfare states are less capable of integrating immigrants through participation in work with our strong unemployment benefits than say UK or US.

    The Scandinavian model was originally based on a homogenous population according to Gunnar Myrdal. Can it survive the heterogenization of the population through mass immigration.

    Even theoretically following Bowles model – in his Microecomics book – with two equilibria (Hobbesian and Roussean) the Hobbesian was more stable and the Roussean less so.

    Ps. As a person living on the Russian boarder I mainly hope US is going to get a person who minimizes isolationism in US Foreign Policy.

    • Charles Richardson

      As a person who is a citizen of the United States and having lived here all of my life, I am of the view that my country could and should start implementing some isolationist policies.

      For starters, our government has been maintaining the bulk of military defense for our European allies, including Norway, since the 1940s, all at our expense as taxpayers. This costs us hundreds of billions a year. The European countries have contributed minimally to their own defense and contributed nothing in monetary compensation for this.

      Secondly, our government has signed trade agreement after trade agreement that has enabled and abetted globalization at the very costly expense of exporting most all of our decent paying industrial jobs to low wage countries. To cite an example, when I was a child in the 1970s, the largest employer in the United States was General Motors, a company who paid good, middle class wages. Now, the largest employer here is Wal-Mart, a giant retailer whose employees are paid minimum wage, which is a slave wage similar to what a Chinese worker might earn. All the durable goods sold in those stores, that were at one time manufactured here, are made in, you guessed it, China.

      Illegal immigration has been a huge problem and has further worked to depress wages in our country. It seems funny to me that Americans get scolded by Europeans for wanting to put an end to the influx of unskilled and uneducated people coming to our country illegally. Yet, for a guy like me to emigrate to one of the Nordic countries, I would have to jump through a million hoops, a haystack of paperwork, and wait years to do so.

      In brief, we, the ordinary Americans, are broke. Our country is in serious decay. I think it’s time Europeans started paying for their own defense. I think our government needs to suspend all of our current trade agreements and renegotiate them in a way that doesn’t hurt our workers or trash the environment. We need to spend our money on us. The rest of the industrial world needs to grow up and quit sucking us dry. That’s my American perspective on your point.

      • Jukka Aakula

        “or starters, our government has been maintaining the bulk of military defense for our European allies, including Norway, since the 1940s, all at our expense as taxpayers. This costs us hundreds of billions a year. The European countries have contributed minimally to their own defense and contributed nothing in monetary compensation for this.”

        I very much understand your concern. I think European countries should increase their efforts on defence. But still without US the countries boardering with Russia are not capable of protecting their freedom even if they would use 50% of the national product to defence.

        I can not force you to participate on the European defence ofcourse. I however hope US will participate.

  • Swami Cat

    There are some great points made in this article. I am sure there are plenty of things other countries can learn from Norway, just as Norway learned from its neighbors and predecessors. And I don’t just mean this in terms of socializing the extraction of fossil fuels and using the oil profits to fund a general welfare pool.

    I also like the idea of experimentation with B Lab certification. Seems like a healthy, evolutionary learning process, like bigger versions of Angie’s List, Better Business Bureau, Underwriter Laboratories, and so on, Any single scoring non competing system would of course be almost guaranteed to be captured by special interest groups, potentially ones within the regulated set itself. But, yeah, independent, competing voluntary certification processes are cool in theory.

    But now to reveal the rhetorical tricks or deficiencies of the article (you choose which)

    First is the hidden assumption that village life was somehow idyllic. It was a time of great cooperation, low crime, and happy and prosperous people from a Disney cartoon. In reality, static villages have been characterized as the low point of human history. Great arguments can be made for the benefits of nomadic forager lifestyle (by definition NOT village), or for modern globalized economies, but the ten thousand year era of agricultural villages was an era of widespread, almost universal Malthusian poverty, exploitation of the poor by the powerful, short lifespans, rampant disease, kids dieing off faster than you can name them, and rates of violence TEN TIMES higher than modern society (See Pinker for details).

    Exploitation, suffering and privilege basically define the village lifestyle, indeed to such a degree that historians often actively debate the issue of why foragers ever got looped into this dysfunctional paradigm (a massive case of unintended externalities).

    Wilson is correct that cooperation is easier in smaller groups than larger. But what he seems to forget is that an important factor is entrance and exit options and freedom of association. Indeed, I could build a case that it was in great part the conversion from nomadic life to stationary village life which tied people to the land and surplus of agriculture leading to their impoverishment and virtual or actual enslavement/enserfment.

    The take-away is that in reality what differentiates us from villagers is how absolutely unimaginably greater we are at cooperation than they were. Not ten or a hundred or a thousand times better, unimaginably better. This came about via institutional experimentation and cultural evolution among hundreds of vompeting and cooperating states with countless institutions within institutions. Indeed, corporations are one form of such a cooperative organization, as are the mechanisms of the market.

    And this is where Wilson goes completely off the rail. The last fifty years has been the greatest era for the extension of global cooperation, and has seen the greatest improvement in living standards, lifespan, political freedom, GDP per capita, literacy, equality of opportunity, and the greatest reduction in extreme poverty (usually impoverished villagers btw). War, slavery, political violence and discrimation are at historic lows too.

    Nobody disputes the above gains in global human progress over the last two generations. Wilson just hopes you are too ignorant to remember it or know it. If so, he has the cure… An about face on what got us so well off and replacing it with his vision.

    Read his last paragraph again. Governments have been under some spell for the last 50 years. How is that working out again? Oh, prosperity beyond anything any species had ever experienced in 3.8 billion years of evolution. Some evil spell.

    Don’t get me wrong, we can do even better. Maybe Norway has some new things to teach us, and maybe Apple has some things to teach Norway. Probably both. Perhaps Wilson and Hessen are open to feedback and will offer a partial retraction or clarification. Who knows?

  • ari9999

    “…social control is not trusting. Nevertheless, social control creates an environment in which trust can flourish.”

    “Trust everybody, but cut the cards.” —Finley Peter Dunne (1867-1936)

  • Patrick Pine

    Norway and other Scandanavian countries also have two big differences from the US – first they do not spend money on “health care” like the US and second, but perhaps more notably, they do not invest in the military industrial complex to anything remotely approaching what the US spends – so their economy does not have to carry nearly as high a burden relative to the US

  • While the article raises some real issues, i agree with much of what Swami Cat wrote about the things that are missed, and I seems to me that it has been oversimplified too far, still too many hidden assumptions.

    To me, there are 5 major themes that need expansion, and some of them are touched on in the article: understanding, complexity, cooperation in evolution and stability (Axelrod and Ostrom), values, and exchange as a concept.

    One theme is on understanding, and how at every level of abstraction and understanding every individual must build from simple beginnings to more complex approximations of reality. The simplest possible distinction is a binary (one of two), from whence children get ideas like hot and cold, light and dark, good and bad, right and wrong, wet and dry. All of these are the simplest possible approximation to things that are potentially infinite in gradation. And some of those ideas that form so early in our childhood form patterns in our minds that are hard to go beyond.

    It seems that each of us lives an experiential reality that is actually a software model of reality that is slightly predictive (by a small fraction of a second) that is constructed by our subconscious brains based upon a combination of factors selected over deep time by genetic evolution, mixed with factors selected over thousands of generations through cultural evolution, mixed with factors of our individual experience of our individual life, mixed with our own distinctions, abstractions, intuitions, choices and habits (at all levels of thought). We are, each and every one of us, extremely complex entities, far more complex and far more diverse than most current or past cultural constructs give any real hint at.

    It seems that we never actually have direct access to reality, only ever to the model that our brains create. We can influence this model at many levels (potentially infinite), yet never entirely control it. Understanding something of complexity, of constraints and boundary conditions (flexibility, selective permeability, etc), is essential to a powerful understanding of ourselves.

    Sure, it can sometimes seem that we are slaves to habit at culture at every level, and to some degree that is necessarily so, reality is simply too vast to be conscious of all levels simultaneously, so we must develop habits and heuristics (rules of thumb that work most of the time) at every level of awareness. And we are actually capable of creating new levels, and new actions, if we can see benefit in the context.
    We have a strong tendency to underestimate ourselves and others. We tend to get trapped in sets of beliefs that seemed reasonable at certain early periods of our lives, but are not nearly so reasonable in our current context.
    And we all have the ability to change that, however unlikely it may seem.
    I have observed in happen in thousands of individual cases.
    I have no reasonable doubt that anyone can do it, if the context (at every level) is appropriate.

    The next major theme is complexity.
    We have to simplify things to make sense of them, we have no other option, and there is a strong tendency in most educational institutions to over-simplify, beyond the dictates of necessity.
    Much work has been done in the last century on the nature of complexity. For anyone interested in details, Wolfram’s work is worth serious study, and that gives most people far too much brain pain for comfort.
    David Snowden (a complexity theorist and practitioner with impressive credentials) has come up with a classification system for complexity and how to respond appropriately to it that while a simplification, is a useful simplification. He calls it the Cynefin Framework, it was featured as the cover story in the November 2007 issue of the Harvard Business Review, and it has 4 categories – simple, complicated, complex and chaotic. Only in simple systems are the constraints on the system sufficiently clear that strongly rule based systems are appropriate. In all other classes of complexity, individuals need greater degrees of freedom to make appropriate decisions (within a broader framework of responsibilities).

    In reality, all systems involving people have all classes of complexity to some degree.
    Learning what sorts of constraints are appropriate and when extra degrees of freedom are required is in itself a very complex process, and more art than science. Politics, business, ethics, culture and economics are all constantly moving feasts in an ever expanding set of dimensions. Heuristics that have worked for millennia can fail catastrophically under the rapidly changing conditions we find ourselves in today.

    As the original article hinted, our understanding of evolution has evolved substantially since Darwin.
    It is now clear, that cooperation is at least as important as competition in evolution generally, and plays an increasingly important role at the higher levels of evolved systems, in both genetic and behavioural (cultural / mimetic) terms.
    Axelrod gave us a good theoretical introduction to the infinite realm of stabilising strategies that are required to allow cooperation to flourish and not be invaded and destroyed by cheats.
    Biochemistry is showing us many different classes of strategies at the lower levels of molecular and cellular organisation that have direct analogues in higher levels of social organisation.
    Elinor Ostrom showed us that Hardin’s tragedy of the commons hypothesis is not a general theorem, but is true only of a limited class of contexts. Cooperatives can be stable even in economic terms, provided the strategies to prevent cheating are fair to all levels.

    Arguably our current legal systems, with their upper and lower bounds on punishment are unfair at both ends of the spectrum, in that they are too harsh on those at the bottom of the wealth spectrum and utterly insignificant to those at the upper end of the spectrum.
    And in a complex reality, there will always be a need for justified exceptions to any rule.

    This leads into the next theme, which is rules versus values.
    There is a maxim often accepted in philosophy that one cannot derive an “ought” from and “is”.
    It seems clear to me, beyond any shadow of reasonable doubt, that such a notion is merely an artefact of a set of unexamined assumptions, and doesn’t actually hold up in the light of a modern understanding of all knowledge being bounded by uncertainties.
    Quantum mechanics seems to indicate that at a fundamental level, all is uncertain, perhaps even random, yet constrained within certain boundaries of probability. Much of QM deals with amplitudes of waves of probability. And when one sums such waves over large collections of particles over large enough times (the sorts of spaces and times of normal human perception), many things act in very predictable ways, and the world of our perceptions seems very predictable indeed in some areas (and not very predictable in others, like weather or individual people).
    So how does this relate to values?
    It seems that if one is to take the simple expedient of valuing one’s own existence, and one’s own freedom of action, then, analysed in the context of the sorts of complex systems we find ourselves to both be and be engaged with, it is in our own long term self interest to be cooperative with other entities, provided there is a reasonable probability of there being sufficient abundance for all.
    If there is not sufficient for all, then it makes sense to adopt ever more competitive strategies.
    Evolution has encountered this change of context many times.
    Large scale extinctions are relatively common in the fossil record.
    Events that are not sufficiently violent to cause large scale extinctions, but still wipe out over 90% of most individuals in populations are even more common, frighteningly so when one looks closely at what evidence we do have.
    So we all come with many levels of context sensitive strategies that can incline us towards competitive or cooperative behaviour, depending on the sort of context that seems most probable to us at some intuitive or logical level (and both sorts of levels are important to human behaviour).

    We seem to be the first species to reach a level of both awareness and technical capacity that we can see both the need for and the possibility of global level cooperation to mitigate the very significant risks of such crises.
    So it seems clear, beyond any shadow of reasonable doubt, that it is in the long term self interest of all of us to adopt universal values of individual life and individual liberty, where we accept certain constraints on our own freedom of action where there exists a reasonable basis that the risk of those actions to the life or liberty of others is unreasonable. And there are no hard boundaries possible on the test of reasonableness here. Such a test has to be, in a very real sense, a best guess on the basis of all parties.

    The last major theme is that of exchange as a value, and of the systems that we have created based upon that value set.
    Here is where I can agree in part with Swami Cat, that our economic systems display all the levels of complexity Snowden identifies (and more), and that they are often chaotic, and often display complexity beyond anything yet present in our economic models. No argument there.

    Where I have an issue with markets is at a deeper level, at the level of the sorts of systemic incentives that are present in markets.
    Markets are places of exchange, where actors offer things they have a surplus of for some token of value (money) and then exchange that token of value at some later time for some thing that they have a perceived scarcity of.
    In that aspect, markets have played a very important role in getting us to this point. Most of our past is characterised by genuine scarcity at many different levels.

    What most people find very hard to get, is that the situation is changing, and changing exponentially.
    200 years ago, I would have had to write these words down, then had them typeset, then printed with ink on paper, and physically distributed to people. A slow and expensive process.
    Now I click on a “Post” icon on a screen, and this information is available to anyone who is interested in a few milliseconds, at a cost that is a good first order approximation to zero.

    Digitisation, and digital automation allows the effective marginal cost of duplication and delivery to be close enough to zero that the difference doesn’t matter.

    My time and labour and intellectual creativity (such as it is) in producing these words and the concepts embodied within them are given freely as gifts.

    I started working with computers over 40 years ago, and have run a software company for 29 years. I have had a passion for understanding life and systems that goes back over 50 years.

    All that practical experience with many levels of systems and complexity has given me a very uncommon set of abilities to see patterns within patterns at many levels of abstraction.

    And if one can make the step of going beyond the obvious, and step into uncertainty, then something else becomes available.

    Looking at markets, and exchange, it becomes clear that markets must value any universal abundance at zero. It is really simple, that if everyone has what they want of item, then there is no willingness to exchange anything for it – its exchange value, its market value, is zero.
    The obvious example is oxygen in the air – arguably the single most valuable thing to any human being, yet of zero market value due to its universal abundance.
    In a certain sense, you might say – so what? That’s obvious.

    Yes it is obvious, but what isn’t so obvious, until you actually look, is looking back the other way down that chain of incentives.
    If markets have a zero value on universal abundance, then will a market ever deliver universal abundance? No.

    Markets will approximate universal abundance for those of us with sufficient money.
    I am in the privileged position to have enough money that I have the freedom to engage most of my time in exactly what I choose.
    Most are not so lucky.

    In any exchange based system, most will always be “not so lucky”.
    Markets require scarcity to function.
    The Intellectual Property laws that are now so central to the debate around the TPPA (Trans Pacific Partnership Agreement) are a case in point. We are creating laws that create scarcity for most, where the only reason for such scarcity is to maintain a system of exchange (and profit). Scarcity, in fact poverty, is an integral and necessary part of any free market system. Any market based system requires that some experience scarcity so that others may experience abundance.

    Any system which has market values at the top of the value hierarchy will have meat level incentives to create and maintain poverty at a level that maximises profit.
    If is possible to create an economic system that has as its highest values individual life and individual liberty, and within those values to optimise markets to deliver the greatest levels of security and freedom possible (which means constraining market forces in ways that shift their natural tendencies). This is the sort of work that Ostrom did, and it appears to be infinitely recursively applicable to emerging levels of awareness and complexity.
    In such fashion, we could create the sort of system that maintains a high minimum value, without putting any fixed constraint on upper bounds. This seems to be partly what the Norwegians have done, and they did have the luxury of oil profits to do it with.

    We now need to move away from oil, and into distributed solar and other distributed forms of energy, and that will hurt oil companies and the monopoly profits that they have enjoyed for decades, so will have severe resistance. And solar is on a two year doubling exponential at present, that has been stable for 30 years. We have solar panels on our roof.

    So yes, we do need to move away from our current devotion to markets, and yes markets have been great for innovation and freedom compared to alternatives, and that is now changing, as we transition to a digital world.

    Everything is changing, as our brains tuned to linear prediction and intuition are overwhelmed by an exponentially growing set of exponential trends in information, technology and social interaction.

    It is a rapidly changing environment, and markets are clearly nearing (if they haven’t already passed) the point of delivering nett social utility, and actually delivering more risk than reward.

  • I loved this. It was like reading an article from the future written by someone who has transcended so much of today’s freedom-loving selfish narrative that dominates American culture. Well done!

  • Helga Vierich

    Not all villages over the past 10,000 years were problem free, not are they today, but there numerous examples of cooperation through self-organizing common interest groups, such as this one from Niger. https://www.youtube.com/watch?v=_7FF4ZmkrcE

  • Helga Vierich

    Certainly there is a case to be made for very different life experiences for rich and poor once state societies developed, a pattern that has continued to the present day, even in Norway (although Norway has gone further than many states to even things up), Such as this report illustrates: Superior in Life—Superior in Death. Dietary Distinction of Central European Prehistoric and Medieval Elites http://www.researchgate.net/publication/279201724_Superior_in_LifeSuperior_in_Death._Dietary_Distinction_of_Central_European_Prehistoric_and_Medieval_Elites- even though the accounts of how miserable the lives of peasants in feudal times were may have been exaggerated Medieval England twice as well off as today’s poorest nations http://www.physorg.com/news/2010-12-medieval-england-today-poorest-nations.html and research in the United States indicates is still prevalent there, and starts young: The stark difference between what poor babies and rich babies eat – The Washington Post..http://www.washingtonpost.com/blogs/wonkblog/wp/2014/11/04/the-stark-difference-between-what-poor-babies-and-rich-babies-eat/ see also Income inequality leads to more US deaths, study finds http://medicalxpress.com/news/2012-05-income-inequality-deaths.html and
    http://www.salon.com/2015/06/01/welcome_to_feudalism_america_how_the_1_percent_is_systematically_destroying_the_middle_class/
    This cultural pattern is maintained with the connivance of human nature: rich people develop self-affirmaiton fallacies to go along with their better health and opportunities (typified by Donald Trump) https://www.youtube.com/watch?v=IuqGrz-Y_Lc – a finding by Paul Piff – which is also supported by research done by David Sloan Wilson, blogged about here http://bigthink.com/Mind-Matters/science-closes-in-on-the-reason-rich-people-are-jerks
    and meanwhile the poor are affected cognitively and in many other ways by the stress of being insecure and raised by anxious and depressed parents:
    Scientists Find Alarming Deterioration In DNA Of The Urban Poor http://www.huffingtonpost.com/2015/05/08/poverty-race-ethnicity-dna-telomeres_n_7228530.html

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  • A Complicated World

    As a short-term snapshot, Norway and other Scandinavian countries may seem to work, to be some kind of utopia to aspire to. But in quite a few ways they don’t “work” as well as outsiders think they do and the negative long-run implications of certain policy and institutional evolution is approaching quickly in terms of economic sustainability, education outcomes, innovation, investment, and ability to integrate immigrants.

  • Justin Schultz 789

    To regard geopolitics from the view of global village is extremely premature. The highest level of complexity is neccisarally in competition with others of it’s own kind. When there are enough competitors at a given level then cooperation between some of those competitors against the rest of the competition becomes viable. At this stage deciding who to cooperate with and who to defect against is very important. Given enough resources cooperation can ultimately win out inside a group and a higher order level of complexity emerges, that is well adapted for crushing the remaining lower level systems outside of itself (though the lower level systems can adapt to become parasites of larger systems). However during the previous stage there was a finite scale of the social network that gave rise to the higher level of complexity. That social network eventually grows too big to scale up any further and the larger system then reproduces itself through binary fusion. Competition between the two highest level systems begins anew.

    I didn’t even lean on group selection for that analysis, if you incorporate group selection as the mechanism for ascending the ladder of organization then by definition you need competition between different budding social groups to advance their evolution which drives cooperation within a given social group even as the social group competes with outside social groups. No matter how you look at it, competition never goes away, it just gets pushed up to higher orders of complexity (though the potential for internal discord is always present, cancerous self-serving subsystems and foreign parasites, which is why a strong immune system is a necessary subsystem for any system to protect itself).

  • Seattle Sam

    I think you would find that things work pretty well in US communities that are predominately composed of Scandinavian-Americans.

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  • Gregarious Antithesis

    I see this issues being addressed by the likes of Nick Hanauer and the Patriot Billionaires who come out saying destroying the middle class at the gain of a very few is bad for everyone. This article is right on the money in terms of how things should work and it is very utopian but a dream worth having for the survival of the planet. What it doesn’t address is the biggest problem we all face and the problem with it is you can’t reason with it is religion. Religious people are unreachable and their thinking is dangerous and what drives the wedge between people and cultures. So without addressing religion and its influence it don’t see any real longterm change happening.

  • I would say that the hed “Laissez-faire Economics Is Not Just Wrong, It’s Toxic” uses a straw man, but for the fact that the article says nothing about laissez-faire.

    • Xness

      I say that you’re lethally wrong, and suggest that you gaze skyward.
      The sky being converted into a omnipotent terrorist, armed with weapons of mass extinction, well, ain’t nothing straw about it.

      I say that you take your philosophic hands off my daughter’s throat, as your lack of knowledge, which you publicly parade, contributes to a “premature and perverted death” for my daughter.

  • Warren Gilchrist

    Something like this economic model I conceived may eventually help to realise the ideals of responsible global citizenship expressed here: https://gilstamp.wordpress.com/a-new-economy-based-on-energy-efficiency/

  • Mario López

    All cool and dandy, but… any serious Sozialökonomik analysis à-la-Schumpeter needs to factor in the impact on the business cycle of massive amounts of oil. Otherwise, it is leaving out one of the pillars of a serious economic analysis.

  • Andre Almeida

    The self-interested behavior of the economic man is the basis for sustaining most of the assumptions of modern economic theory. Starting from the scientific control that Pareto optimization is carried out based on the efficiency of the various economic factors, such as supply, demand and income, the non-fulfillment of this presumed efficiency leads to irrational uneconomical behaviors that affect the construction of the Pareto Optimum Intended as a goal. Such optimum is realized when the condition of one economic agent is improved without the condition of another agent being worsened. However, the construction of this Optimum does not consider the peculiar conditions of the various economic agents regarding the initial informational and material conditions that each agent possesses so that it can play in terms of economic efficiency and contribute, through maximization of self-interest, so that this balance Accomplish and dominate.
    The utilitarian condition of welfare in a market society is valued by the greater utility that a given agent can maximize in a counterpoint between pleasure and pain. On the basis of this assumption, all compete on an equal footing to maximize their resources in the face of pretended happiness, so that such self-interested conduct of the various economic agents will produce a certain balance between the various factors that make up the economic game.
    Considering the critical construction developed by the Nobel Prize in Economics (1998) Amartya Sen in which the deontological foundation of the Economy escapes to a greater ethical rigor with respect to the numerous aspects of rational self-interested conduct, especially the condition of agent, in which it can establish Behaviors of satisfaction or not of their well-being, considering values ​​and goals of life that necessarily do not fit with a self-interested conduct based on the utilitarian maximization of the own resources individually characterized. It is not only the self-interest that determines the economic direction. For Sen, the condition of the agent is that “a person can value the ethical promotion of certain causes and the occurrence of certain events even if the importance attached to these facts is not related to an improvement in his own welfare.”
    To what degree will economic agents be willing to cooperate rather than maximize their own interests? Some aspects of this duality can be analyzed and studied in different societies through the Theory of Games. Notions such as strong reciprocity, hitchhiking, conditional cooperation and cooperation with punishment are tested in games such as the prisoner’s dilemma and the ultimatum. Research shows that most participants do not allow self-interested behaviors in which a particular participant wants to take greater advantage over the other or the others. For example, in the ultimatum game, more than half do not accept a proposal for dividing a certain value where there is extreme advantage for the proposer (80% or more), so that strong reciprocity ends up limiting any measure of maximizing rationality 0 <1). Otherwise, 2/3 propose between 40% and 50% of the value of the award.
    Considering that through public goods or altruism (agents' cooperation) public policies or private social welfare initiatives can be built and promoted, considering that Sen's proposal for the promotion of social rights as a counterpoint to the instrumentalism of the The most efficient way to punish hitchhikers (those who fail to cooperate but continue to enjoy the result of cooperation) is to promote institutions that oversee and apply effective punishments to hitchhikers.
    It is assumed that the development of human capacities (HDI) is only achievable through the promotion and realization of the fundamental rights of citizenship, so that such promotion will allow the achievement of an economically more balanced society where all will be beneficiaries, due to the Intended, ie the defense of collective and diffuse interests involving issues of consumption, citizenship, environment, democracy and quality of life.
    From this imbricated overlapping of ideas about the way human beings make their decisions on the threshold of rational self-interest or cooperation is characterized as the agent. By conceiving that the individual ethical valuation of each economic agent allows him greater autonomy and freedom for the conduct of his life without the need to reach a certain stage of well-being, economics is closer to the social sciences than to the physical sciences.
    Pareto optimum and economic prediction
    The concept of Pareto Optimum does not have a unanimity among economic scientists that can elevate it as part of what it is from a positive economic perspective. First, its construction has non-falsifiable premises. In addition, the concept starts from the utilitarian doctrine that is moralistic. It is intended to positively construct a moral and utilitarian concept for achieving a balance that is neither predictable nor mathematically. Several are the valuations used to construct a pretended part of the positive economy, such as consumer sovereignty, non-paternalism and unanimity. All are values ​​constructions that are intended to be universal. Faced with the non-scholarly concession of Pareto's optimism, it would be wiser to classify it as part of normative economics (ought to be) than of positive economics (as it is).
    Counterfeiting
    For Mark Blaug, the adoption of falsificationism as the fundamental basis of the construction of the methodology of economic science would allow to appease the methodological antagonisms of scientific production in which economic science itself is indeed found. How is economic science to get rid of the dogmatic chasm in which it is sometimes accused, since conventional economic theory rests on the assumption that economic agents are rational (tautology)?
    The fiction of knowledge – Obstacle to foresight (Friedrich A. Hayek)
    (…) "A very simple example is enough to show what the nature of the difficulty is, in fact. Consider a football match played by a few people with very similar skills. If, in addition to our general knowledge of the individual skills of the players, we could know a few particular details, such as the degree of attention of each one, their capacity of perception, as well as their cardiac, pulmonary, muscular, etc. We could predict the outcome of the game. In fact, if we are very familiar with the game and the teams, we certainly have a good view of the factors that determine the outcome of the game. Even so, it is logically impossible for us to find out all the particular data we are talking about. Thus, the outcome of the game is beyond what is scientifically predictable, despite how much we can know about the effects that certain events may have on the outcome of the game. This does not mean, however, that we can not make any predictions about the course of the game. If we know the rules of different games, when watching one of these games, we can immediately tell what it is and what types of plays we can or can not expect the players to do. But our ability to predict will always be restricted to these general characteristics of possible events: we can not predict particularities of unique events. "
    (…) "Despite all this – and I want to re-emphasize this point – it is still possible to obtain predictions that, having been falsified, satisfy Popper's test of empirical significance" 1.
    To submit the theoretical assumptions of a determinant scientific economic model to empirical rigor is to enable the use of falsificationism or the possibility of refutation as a method of research and economic scientific production.

    1 – The Classics of the Economy – Volume 2 – Editora Ática

  • ABro1973

    One factor that I consistently see left out of the analysis of population economics the the effect of the environment on the society and individual responsibility levels.

    Norway is a COLD country with a very harsh environment. A poor person without social support in Norway would have a very hard time surviving – at first. Obviously poor people survive in cold climates but they but they must be much more intelligent and industrious to do so.

    Climates like Equatorial Guinea allow a much less industrious and intelligent population to survive. A social outcast could sit on the shore of a river for a year, fishing and eating fruit. No savings, no industrious planning and building, are necessary to survive. Further, lots of kids isn’t a problem. They don’t need to be clothed, housed, or fed through harsh winters. They can practically fend for themselves.

    As a result, completely different social patterns develop. The colder climates develop far more industrious, savings-oriented cultures, by necessity.

    But these societies need OUTSIDE ADVERSITY to do so. If being in/out of society is really an option, most people won’t be inclined to invest much in staying in. And the society will start to fall apart fairly quickly unless the people at the top have really, really good reasons to keep it together.

    • Be Savic

      Uhm, has it occurred to you that your post is just a tiny bit racist? And also has nothing to do with actual science (lesser crime between the two, admittedly).

  • Vijay S. Jodha

    The authors seem oblivious to the pitfalls of applying observations about the natural world, to other fields such as economics and topping it with terms better suited to theological discourse.One is left wondering, for example, if the good bacteria in the stomach that aid digestion, are selfish, altruistic, acting for local needs or for sake of the larger global village i.e. the body housing that stomach? Even Darwin was against such an approach even though his popular (and largely misunderstood) idea of ‘survival of the fittest” continues to do the rounds. For those too young to witness it, it legitimised colonialism and mass murder of indigenous people worldwide. One would think that distinguished academicians like these would build their intellectual edifices without such shaky (and in face of such evidence) quite dubious foundations.a

  • GaryReber

    Laissez-faire boils down to concentrated ownership of the non-human means of production. That is the most significant problem facing America that prevents America from instituting “civilized democratic capitalism.”.

    The Federal Reserve should function similarity to the Norwegian Government Pension Fund Global, but instead of being owned by the State, the Federal Reserve Regional Districts should be owned by each citizen residing in each Districts territory. The Federal Reserve should provide interest-free capital credit loans via local banks specifically for investment in qualified responsible and ethical corporations growing the economy, thereby broadening and creating new capital owners creating new wealth and generating income. The capital credit would be repayable out of the future earnings of the investment, with no requirement of past savings. The the loanee promissory note can be offset to the government’s central Federal Reserve Bank in return for the cash equivalent of the amount of the loan, less a local bank administrative fee. The only cost to the direct lending bank in making a loan to the corporation would be the administrative fee, or about 2 percent of the loan’s principal and then another 2 percent for capital credit insurance, with an additional quarter of a percent paid to the Federal Reserve Bank to monetize the loan and give the lender the same cash as it would have had if it had actually loaned money to the corporation that receives the investment. Also the loans should be insured against failure to perform, using commercial capital credit insurance or a government re-insurance agency (aka the Federal Housing Administration concept). National capital credit insurance would replace the requirement for past savings to pledge security.

    Capital formation investments are made by companies annually based on projections a number of years out (at least 5 to 10 years) with the expectation that the investment will pay for itself as a result of sustainable growth and consumer demand. Thus, the concept embraces the idea that capital formation is self-financing. The question is who pledges the security and takes the risk of failure to return the expected yield from which to repay the loan. This is the critical role of capital credit insurance that is necessary to broaden capital ownership whereby EVERY child, woman, and man can become a capital owner.

    Conventionally, most people do not have the right to acquire productive capital with the self-financing earnings of capital; they are left to acquire, as best as they can, with their earnings as labor workers and the pledge of past savings. This is fundamentally hard to do and limiting. Thus, the most important economic right Americans need and should demand is the effective right to acquire capital with the earnings of capital. Note, though, millions of Americans own diluted stock value through the “stock market exchanges,” purchased with their earnings as labor workers, their stock holdings are relatively minuscule, as are their dividend payments compared to the top 10 percent of capital owners.

    What historically empowered America’s original capitalists was conventional savings-based finance and the pledging or mortgaging of assets, with access to further ownership of new productive capital available only to those who were already well capitalized. As has been the case, credit to purchase capital is made available by financial institutions ONLY to people who already own capital and other forms of equity, such as the equity in their home that can be pledged as loan security — those who meet the universal requirement for collateral. Lenders will only extend credit to people who already have assets. Thus, the rich are made ever richer through their continuous accumulation of capital asset ownership, while the poor (people without a viable capital estate) remain poor and dependent on their labor to produce income. Thus, the system is restrictive and capital ownership is clinically denied to those who need it.

    Thus, as binary economist Louis Kelso asserted: “The problem with conventional financing techniques is that they address only the productive power of enterprise and the enhancement of the earning power of the rich minority. Sustaining or increasing the earning power of the majority of consumers who are dependent entirely upon the earnings of their labor, or upon welfare, is left to government or governmentally assisted redistribution of income and to chance.”