Whenever we casually chat about the economy or society in general, each person in the conversation implicitly holds a mental model of how all the actors in society fit together. Our understanding of these relationships determines our opinions and colours our language. For instance, if you believe that the job market is one giant hierarchy where the rich and powerful CEOs put in little effort but command all the wealth, while the poor are holding everything up and receiving a fraction of what they produce(the worker exploitation model) then your opinion on the minimum wage will be different from someone who views the job market as a ladder of apprenticeship where young workers expect to give up good pay in the present in exchange for job satisfaction and high pay in the future. In the former model, a higher minimum wage is unambiguously better for the poor. In the latter, a high minimum wage prevents the poor from accessing the skill ladder and eventually ascending it. Neither person is wrong in either supporting or opposing the minimum wage. They just see the world differently.
The funny thing about the above image is that if you replace the word capitalist with government, you have a pretty good representation of how libertarians view the current system as well. So you have seemingly polar opposite belief systems having the same world view, but for labels. No wonder most internet arguments are flurries of back and forth label tossing until the ultimate label, hitler, is tossed out like the joker card (I think I just had an idea for a new card game). So how can we expect healthy democratic discourse to function if I see society as a chessboard and you see it as a game of monopoly?
Well the reason our communication seems to break down in this way is because most people reason by analogy instead of looking at society for what it is: interacting humans. Our insistence on bad metaphors is what causes discourse to fail. International trade isn’t a sports game; the economy isn’t an engine; the pie isn’t fixed nor is it growing because there is no damn pie. We get so caught up in speaking in analogy that we eventually forget that our dialogue is all based on fictional imagery. We go one step further and begin internalizing our stories as though they’re factual representations of reality. To quote the rapping F.A. Hayek:
The economy’s not a car, there’s no engine to stall
no expert can fix it, there’s no ‘it’ at all.
The economy’s us, we don’t need a mechanic
Put away the wrenches, the economy’s organic.
Thinking in first principles
Elon Musk often credits his innovative strategies with reasoning from first principles and contrasts this with faulty reasoning by analogy. The idea is that instead of trying to compare some complex structure like the economy to something you’re used to thinking about such as chess, rather break the complex structure down into its atoms and rules and see what you can discover from that. Darwin helped us do this with biological evolution. By discovering the principles of natural and sexual selection, we are now able to reason about the behaviour of biological systems in response to stimuli. For instance, it’s not a big surprise to us that north african elephants have recently started birthing tuskless offspring. The survival of the fittest principle means that elephants have to adapt to the selection pressure of poaching or go extinct. This is not to say that empirical observation is useless. But our understanding of the principles of natural selection gives us a lens with which to interpret the phenomenon of tuskless elephants.
Society from first principles
So let’s do away with capitalism and socialism, with engines of growth, globalisation and class struggles. Let’s not speak about concepts like America and China as though they’re thinking, breathing individuals who can make decisions. Let’s break society down into it’s components (people) and the rules that govern the components (legislation and customs). When you do this, you can rephrase the problem of solving societal problems as one of understanding how people respond to rules. That’s it. Now that we have our first principles we can draw a whole bunch of powerful conclusions about society without once dipping into ideology or analogy:
1. Non-linear complexity scaling: Every rule added increases complexity exponentially and makes planning a good outcome a leap of faith.
Go back to the biological evolution example. Using just 1 or 2 laws of nature such as natural selection we can explain unbelievable species diversity and ecosystem dynamics. And even then, it tests the bounds of our conceptualization. Now imagine trying to understand a society of unique humans governed by 1000s of laws. To illustrate the difficulty, take a fictional society of 4 people. All 4 are employed and person A smokes marijuana in private. A new law is passed banning the possession of marijuana and person A is locked up. The other 3 have their taxes raised to pay for inmate warehousing. Meanwhile person B is struggling with his finances, having a large mortgage to pay off. The pressure from the higher taxes causes him to ask C for some assistance. C was considering taking out an insurance policy from D but instead makes side payments to B. When A is released from prison, he is unemployable, owing to his prison sentence. He steals from C to meet his drug habit. Because C is uninsured, she now has to stop making side payments to B to rebuild her wealth. B then defaults and loses his house to repossession. Witnessing the rise in crime and homelessness, D raises insurance premiums, making it harder for C to ever be insured. What started off as a simple drug ban has transformed into higher insurance premiums and an explosion in homelessness. Now imagine the butterfly effect of such a law on the lives of 300 million people. Notice how I made no analogy. I reasoned with real people living real lives and used induction to scale it up to 300 million.
2. Cognitive bounds: If the members of a society can only assimilate a small subset of all rules then their behaviour will become increasingly chaotic and disorderly from the perspective of the referees. The members will feel as though they live under arbitrary rule, rather than a republic.
There’s a saying that everyday you break at least 3 laws without knowing it. I’m not sure whether that’s true or not but it captures the idea that most of us have no idea what ambient laws we operate under. The popularity of republics since the early Roman republic is a recognition of the benefit of keeping rules few and stable and it is the reason tour guides in Philadelphia brag about how small the U.S. constitution is compared to other countries. Societies which progress from rule by decree of a tyrant to rule of law experience a rapid rise in living standards. This is because arbitrary rule has a chilling effect on planning because plans take time to come to fruition. For instance, if you have saved up enough money to start a business but you suspect that your business might be seized from you by the local prince once it becomes profitable then you might be inclined to just sit on your cash, rather than go to all the effort of setting up a new enterprise. In modern democracies we’ve replaced the arbitrary decisions of tyrants with unfathomable mountains of red tape. Our inability to assimilate every single law and ordinance acts as a chilling effect on our planning in the same way that the fear of a local mafia shaking us down might because the hammer lands in a way that we can’t cognitively predict. Instead of risking breaking a law we didn’t know existed, it is safer in the presence of seemingly infinite laws to just do what you know is permitted and leave the daring plans to those who can afford legal teams. Countless bitcoin enthusiasts have abandoned their plans of replacing the banking system at the foot of Mount Legislation.
3. Redundancy: If a rule exists for one problem that can adequately deal with a new problem then DO NOT add more rules.
Because we know that each rule greatly increases complexity and that humans can only respond to few rules before resorting to tunneling through rule mazes, it follows that rules should only be added as a last resort. This means that if a rule exists that already deals with a problem at hand, do not add more rules! For instance, laws against drunk driving supposedly make drivers safer by encouraging police to prey on motorists who might appear to be over the limit. But what are these laws aiming to achieve? A reduction in road carnage and property damage, of course. Yet, laws exist to deal with this already. If you kill a pedestrian under the influence, you are guilty of negligence and manslaughter. If you crash into another car while drunk, your insurance will not pay. People often argue that drunk driving laws increase the punishment stick with which drunk drivers can be hit. But since driving licence tests usually specify sobriety, courts can use these as an admission of guilt and impose much harsher punishments on drunk drivers. The damage doesn’t stop there, however. Laws against drunk driving aren’t only wasteful and redundant. They are also harmful because when they punish drivers who happen to be over the limit but who always employ extra caution when driving drunk then the net catches a certain portion of false positives — drunk drivers who are not dangerous. In this way lives are needlessly ruined with prison sentences that would not have been ruined in the absence of drunk driving laws.
4. Rabble Rabble Rabble: If you think that when something goes wrong in society, the answer is to make more rules, you’re part of the problem, not the solution.
If you are one of those people who says “They should really make that illegal” or “We need to ban that” then you’re either a savant who can process the unfolding web of complexity that your proposed law will usher in or you’re very irresponsible. Before thinking of new rules with which to manage those around you, first make sure you understand how the current rules are creating the problems you’re complaining about. Not everything works in a linear cause and effect manner and the rules you propose don’t magically change society in the way you intend simply because of their wording. For instance, it should be uncontroversial by now to say that banning drugs won’t make drug addiction go away. Britain’s ban on homosexualy didn’t make Alan Turing straight; it killed him. The U.S. subsidies of college loans didn’t make it cheaper to go to college; they gave the colleges the ability to charge higher prices. For the same reason, removing a rule doesn’t create a simple linear cause and effect outcome. The abolition of slavery in the U.S. kicked off a surge in agricultural industrialization, not the expected bankrupting of the cotton industry. When the question was asked “who will pick the cotton with no slaves”, could anyone at the time have predicted that cotton productivity would explode after slavery?
No room for rational discourse
A balanced and healthy society needs to hold rulemaking in reverence and treat the creation of new rules as an absolute last resort. Every new rule must be carefully considered and if possible, tested in a microcosm. Unfortunately, almost every major parliament or congress has become an orgy of rule creation. There are very few mechanisms in place to reverse this trend. Occasionally a supreme court ruling strikes down an outdated law. In the meantime, 2000 more have been passed that will never even be considered for judicial review and none of them have sunset clauses. It’s impossible for the average voter to think about or discuss all these rules so we end up falling back on our faulty reasoning by analogy and political parties speak to sweeping narratives instead of the specific rules that govern us. The result? More ideology. Less rational discourse.
The rise of rule refugees
The growing Seasteading movement is a response to the high cost of all this rule making. People who understand the importance of well defined rules such as serial entrepreneur Peter Thiel are funding the establishment of communities in international waters in the absence of all the rule madness on land. The hope is that different rule sets can be tested and refined in open water petri dish economies so that we can narrow down and empirically test what makes a society prosperous by actually creating ocean-based prosperity. The land analogue to seasteads are charter cities. The idea is to set aside a city sized piece of land in a host country that isn’t beholden to the laws of the land. A simple, short charter of rules is drafted to govern property rights and dispute resolution. The growing popularity of both movements suggests that an increasing number of people are experiencing rule overload. My hope is that the pioneering work of the rule refugees establishes a new understanding of the human relationship to societal rules and we move from ideologies and analogies to deliberate and thoughtful rule planning, informed by reason and evidence rather than emotion and intolerance.
There is no troll
The next time you find yourself debating a friend over politics or economics, see if you can avoid speaking in analogy and aggregation. Try to speak only of the web of humans we call society and like Charles Darwin, address the fundamental laws that govern us. Try to get your friend to do the same. If they do, then at least you’re having a real conversation about real people living real lives in a real world. If they insist on reasoning by chessboards, car engines and social structures then at least acknowledge to yourself that it’s not a debate you’re having, it’s just story time with a friend.