I feel a little disappointed that I haven't finished The Survival Paradox quicker, because one of the themes running through it is the unreasonableness of the modern obsession with 'rational' economics.
Firstly, there is a difference between 'rational' and 'reasonable'. There is a wonderful 'rational' solution to the 'Fox, Chicken, Grain' puzzle, in which a farmer has to use a small boat, in which he can only transport himself and one of his cargo (fox, chicken or grain) at a time, to cross a river. Leaving the fox with the chicken, or the chicken with the grain will result in disaster. The rational solution is satisfying to work out, but the reasonable question remains: why is a farmer carrying a live fox around with him?
The number of important decisions made daily on the basis that they are rational is something that genuinely concerns me. Particularly when at its core, western rational economics has an apparently bonkers principle: compound interest.
Older civilisations recognised that compound interest wasn't viable, because while value was still linked to concrete stuff (be it gold, sheep or grain) a debt or investment subject to compound interest would one day require you to pay back more 'stuff' than there was on the earth. Which would be silly.
When we magically unlinked value from the concrete world and created the paper based currency we know as money today it was intended to be a 'promise' which could be exchanged for real gold when the time came. But even 300 years ago, over confident banks released more paper money than they could back up with gold in their vaults, assuming that the flow of gold would be so continuous that as long as their hands moved quicker than the investors' eyes then all would be well. Then there was a war and the gold supply dried up and some of the paper money became worthless.
Fearing that this might happen again, instead of passing legislation that prevented banks from issuing more paper than they had gold, in 1833 a law was passed 'guaranteeing' the value of the paper currency, so that people would continue to have confidence in it, even in times of low gold supply. (It was only passed in England and Wales, there is still no legal guarantee of bank notes in Scotland).
So - here we have a prime example of what I have been calling 'The Alpha Trap' in action. Alphas have privilege. The status of an alpha is a result of the status quo - whether that is a set of collective beliefs which holds them to be special (king, queen, priest, soothsayer) or a common understanding of today's survival problems which frames them as an appropriate solution (politicians, CEOs, football managers). So, what is the number one priority of an alpha?
Maintaining the status quo - because this is what affords them their privilege.
The Alpha Trap is particularly rife in rational economics. 'Rational' Economics is a game which relies upon most of the participants having a rough understanding of the 'rules', while a few alphas gain advantage by having a more in-depth understanding and a closer position to the levers. House prices are linked to interest rates because we believe them to be, and so on. The people who repeatedly reinforce the rules are of course those alphas who personally benefit from being able to expertly play the system. If we decided the rules were nonsense then those alphas would quickly find themselves unable to maintain their privilege.
Wouldn't that be kind of fun?
I have to admit that I am reacting to each further news bulletin promising impending doom with a little bit of glee. And also sadness, because I've read that one tenth of American families are more than 3 months in arrears with their mortgages, and I've no doubt that those people are experiencing stress and pain. What interests me though is how a government can dress up a rescue package as being for the benefit of those people when it is so clearly geared to the advantage of the financial sector. If you want to prevent families having their homes repossessed, pass a law preventing repossessions.
For global politics I can see the current crisis as wonderful and positive. Do I sound insane?
The reason for my optimism is that capitalist westerners are caught in a set of thinking where we confuse having more 'stuff' for being better people. To solve the impending Climate Change crisis we're going to have to cooperate with other societies who don't have as much 'stuff' as we do, and frankly we collectively look down upon those people because they don't have iPods. If we don't shift our attitudes rapidly then we'll see millions, even billions of people in the undeveloped world die through human-generated natural disaster during the next few decades.
So, I'm looking at the markets falling, and the banks collapsing, and the government experts backed into a corner where they finally admit that 'rational' economics isn't actually a proper science, despite all the numbers and graphs and formulas, and is really just a widely held set of beliefs ... possibly even superstitions ... and I'm excited. Because normal people are losing their faith in the status quo of rational economics, and starting to ask the question "what next?"
