But isn't the problem that these abstractions exist precisely to help coordinate real things? The economy (and by extension, to a limited degree, the stock market) directly influences a lot of real things and basic needs.
I think the problem is that there's lots of hidden costs or incorrect assumptions in much of the way society functions. We overestimate how rational people are, many costs get swept under the rug or ignored as "something for future people to deal with", certain costs are just hidden, we fail to account for corruption and fraud, and so forth and so on.
It's not really that we use abstractions or models, it's that many or all of them are incorrect, and we proceed as if they're correct, even when we seem to know they're not.
I don't think this is just limited to the environment. Sometimes I wonder if this is some defining feature of our age, rampant fraud or disingenuousness. Maybe it's always been this way, and maybe it doesn't matter.
Abstractions and models tend to get more correct over time. Sure sometimes we get off track or even go backwards, but if you look back at all of recorded human history our abstractions and models are generally a better fit to objective reality than ever before. You have an opportunity to help improve them further, if you choose to take it.
The problem has to do with the order of values which is evinced by our economic activity. Ideally, money should be ordered towards facilitating the exchange of real things, which are in turn ordered towards a good life, and so on to higher meaning beyond that, but that is not what is transpiring. We can see this not only in the huge tranches of the economy devoted to trivial or deceptive things, but also in routine decisions: be they irresponsible, greedy personal choices, or larger organizational habits which have devastated human communities and the environment for the sake of making a number in a spreadsheet go up.
Further, this takes the form of a novel crisis in that the scale and speed at which the consequences keep coming are without precedent among societies with similar vices in the past.
These abstractions were once configured for specific purposes (e.g. help Caesar expand his empire by incentivising newly conquered villages to feed the soldiers that will soon be conquering their neighbors), and the people who configured them died long ago, and we're just still following the old program.
We need to figure out how to reconfigure them. For instance, instead of the gold standard, let's back our money on permanently sequestered carbon. And once that problem is solved, we'll reconfigure it for the next thing.
Yes. However, using modern computing and communication technology, it would be possible to run a complex economy with calculations "in-kind". That is, most calculation could be done using the inputs and outputs of millions of processes. Such an economy could avoid the instability of our current economy with its cyclical booms and busts.
> using modern computing and communication technology, it would be possible to run a complex economy with calculations "in-kind".
No, it wouldn't. It's not a matter of the speed of the computing; it's a matter of the number of information channels available. The amount of information that would need to be processed to run a complex economy goes up exponentially with the size of the economy, but the number of information channels available only goes up linearly with the size of the economy. I think it was Hayek who first pointed this out more than a century ago.
The proper tool to "run" a complex economy is decentralized computing, otherwise known as a free market.
> Such an economy could avoid the instability of our current economy with its cyclical booms and busts.
The way to avoid cyclical booms and busts is for the government to stop messing with markets. The government should not be subsidizing some products and services and penalizing others. It should let the market work out what products and services are produced and consumed.
You mean you should let decide to monopolies and oligopolies what products and services we need right? There is no such thing as an ideal free market. Free market is an human model and therefore just an abstraction. The gap between theory and reality makes all the difference in the world.
Sure there is. A free market is a market in which all transactions are voluntary. That's the natural state of a market. We see many markets that are not free only because governments either prevent people from engaging in transactions they would otherwise choose to make, or force people to engage in transactions they would otherwise not choose to make (the obvious example of this is coercive taxation).
I'm not sure what you mean by "information channels". Wouldn't a factory mainly just need to communicate its inputs and outputs the computer or computer cluster doing the calculation? Similarly for distribution centers. In particular, would much more information need to be transmitted in a planned economy than in a market economy? Remember that, while there are millions of products in the economy, any given center of production or distribution is unlikely to use more than a few thousand.
I don't think the computation cost scales exponentially. If it did, the decentralized free market computer would not be able to accurately compute the economy. Paul Cockshott claims to have found a planning algorithm with O(n log n) complexity, which is very manageable.
The main problem with free markets is that they lead to extreme inequality and subsequent conflict. A planned economy could distribute the surplus much better.
I disagree that the government should withdraw from the market economy. The government can help alleviate the failures of the market. For one thing, the market is generally short-sighted, while governments can think more long-term. For example, it is my understanding that the Chinese government has invested a lot in solar panel technology and implementation. You would probably agree this is a good thing, given the severity of the climate crisis.
By the way, the following are some of what have informed my opinion here:
> I'm not sure what you mean by "information channels".
I mean information channels to and from the central computer.
> Wouldn't a factory mainly just need to communicate its inputs and outputs the computer or computer cluster doing the calculation?
If that's all it's doing, a free market does that fine. There is no need for any additional computation. Similarly for any other economic actor.
If the central computation is going to improve anything over what the individual economic actors would do on their own, it can only be by computing what the inputs and outputs should be for all economic actors, better than those actors can do themselves, and then dictating those inputs and outputs to the actors. Otherwise there's no point to it. And that is what it can't do based on the information argument I gave.
> I don't think the computation cost scales exponentially. If it did, the decentralized free market computer would not be able to accurately compute the economy.
Wrong. The decentralized free market computer's capacity scales exponentially, since each individual economic actor is computing their own actions. The centralized computer, however, has to compute everyone's actions. That's why it faces an insurmountable information problem that the individual actors doing their decentralized computing do not face.
> The government can help alleviate the failures of the market.
No, it can't. That is the lesson of history. Every time governments have done this, they have made things worse, not better. That is not to say that market failures do not exist, only that the failures of government are worse.
> the market is generally short-sighted, while governments can think more long-term.
You have this backwards. Government time horizons are the next election. Individual market actors can have time horizons going out decades--for example, individuals saving for retirement. Governments can't even keep their social security trust funds safe from being raided by the legislature when it wants to fund some white elephant.
> it is my understanding that the Chinese government has invested a lot in solar panel technology and implementation.
Quite possibly it has. That in no way means China might not be even better off if it were not centrally controlled by the government.
> You would probably agree this is a good thing, given the severity of the climate crisis.
No, I wouldn't, because I don't think climate change is a crisis. And as far as I can tell, neither do the Chinese. They are investing in those technologies not because they believe they need them themselves, but because they believe they can sell them at a substantial profit to Western countries who are much more worried about climate change than the Chinese themselves are.
> I mean information channels to and from the central computer.
This makes no sense to grow exponentially then. Information channels grow exponentially in a peer-to-peer network but only linearly in a centralised one. You can trivially see this in computer networks. One server with eight clients will have 8 connections. Eight peers will have 64 connections. Adding one more node will make the centralised solution add one more connection. Adding one more node to the peer-to-peer solution adds 17.
You say "a free market does [calculation] fine," but it has obvious deficiencies that I have already remarked upon. As I have said before, the optimization problem can be solved on modern computers without the problems of the market. The inputs and outputs of individual processes are known in a market system, so logically this information can be centrally recorded for use by the planning process. If a production center doesn't produce output at exactly the expected rate, the expected rate can be adjusted.
About computing capacity: Maybe free market capacity scales exponentially (with the number of actors?) but I don't see how it could. If an economy of n actors has a "capacity" of e^n, the average capacity of an actor would be e^n/n, which is about the same as e^n. How could an individual actor have such capacity? Perhaps my analysis here is mistaken.
Regarding government intervention, let's look at an extreme example. Do you think that, during World War II, the U.S. should have structured its wartime economy around free market principles? Did it make things worse by not doing so?
About government planning for the future: First of all, social security gets gutted because the U.S. government is not a government of the people. Business interests have too much control (that is, more than no control at all.) You also say governments are shortsighted because of elections. Even if this is the case, this is not a necessary part of government. The governance model described in the book I linked is based on sortition rather than election. China's current system, while authoritarian, is also able to plan for the future.
It seems you agree that China investing in solar power is beneficial to it, even if you disagree on the reason. So you agree that, all else being equal, it is better for China to have invested in solar power than to not have done so. In this case, this is a clear example of a government acting in the market with a good outcome. This contradicts your previous point.
> You say "a free market does [calculation] fine," but it has obvious deficiencies that I have already remarked upon.
And as I have already remarked, central planning does not fix those deficiencies, it makes them worse.
> the optimization problem can be solved on modern computers without the problems of the market.
I strongly disagree, for the reasons I've already stated, but it doesn't seem like we're going to resolve that here.
> Maybe free market capacity scales exponentially
Yes, because the computation consists of the individual actors deciding their actions and the communication of price signals between them. (Note that while I say "price signals", these are much more general than just money prices. Many positive sum trades are made that do not involve money.) That's a general feature of distributed computing: you have to count the communication between the nodes as part of the computation.
> Do you think that, during World War II, the U.S. should have structured its wartime economy around free market principles?
Yes.
> Did it make things worse by not doing so?
Yes.
> social security gets gutted because the U.S. government is not a government of the people.
Ah, the No True Scotsman argument. Every time socialism fails, socialist ideologues say it's because it wasn't true socialism.
> The governance model described in the book I linked is based on sortition rather than election.
I'll take a look. However, I am extremely skeptical that any governance model can fix the fundamental problems with centralized control.
> It seems you agree that China investing in solar power is beneficial to it
I said that China's government believes it will be beneficial to China. They could be wrong. But even if they're not, that is not at all the same as saying that it is the most beneficial thing that could be done with the same resources. I am not saying that governments never do beneficial things. I am saying that governments, on net, will do worse than a free market would do. That is also not the same as saying a free market would always achieve an optimal result; in many situations there may simply be no way of achieving an optimal result. But that does not mean all achievable results are equivalent.
Perhaps look into Australia. We have much tighter regulations than the US or UK when it comes to lending, and we've largely avoided recessions, including in 2008.
COVID got us, but that did have a physical reason behind it.
The way we use money to coordinate activity is very selective: Money only solves problems when those with problems have money. This means that the environment and the poor are generally not served by capitalism.
It's not really that we use abstractions or models, it's that many or all of them are incorrect, and we proceed as if they're correct, even when we seem to know they're not.
I don't think this is just limited to the environment. Sometimes I wonder if this is some defining feature of our age, rampant fraud or disingenuousness. Maybe it's always been this way, and maybe it doesn't matter.