The Temporal Problem of Biological Relativity and Its Relation to Hayek's Views of Civilizational Development

In his book, Dance to the Tune of Life: Biological Relativity (D. Noble 2017), Denis Noble presents the principle of biological relativity “as simply that there is no privileged level of causation in biology; living organisms are multi-level open stochastic systems in which the behaviour at any level depends on higher and lower levels and cannot be fully understood in isolation” (2017, 160). This characterization was preceded by Noble’s paper, “A theory of biological relativity: no privileged level of causation” (2012) and followed by the popular science book, with brother Raymond Noble, Understanding Living Systems (R. Noble and Noble 2023). An additional point made in the paper is that “Each level provides the boundary conditions under which the processes at lower levels operate. Without boundary conditions, biological functions would not exist” (D. Noble 2012, 58).

The evidence for biological relativity is strong, and I have no grounds for criticism—it seems to be right. However, it prompts the question, “If there are levels (the Nobles prefer nesting, or inner/outer levels to higher/lower), don’t the inner levels precede the development of the outer ones in time?” And, if the answer is, “Yes,” don’t we have to wonder if the outer level is actively constructed by the low level and, hence, agreed to by it in a way that we have little or no concept of what “agree” means?

In Hayek we see a similar problem where he argues that civilization creates reason:

Man did not adopt new rules of conduct because he was intelligent. He became intelligent by submitting to new rules of conduct. [italics in original] (Hayek 2021, 522)

Hayek seems to deny that developing new rules of conduct involves trial-and-error learning, which requires, in Popper’s terms, the creation of a theory and its testing followed by error elimination, demanding intelligence. Elaine Sternberg finds a similar problem when she writes:

Unlike the Ferguson formula of ‘human action but not human design’, the alternate formula—’the unintended coordination of intentional action’—clearly differentiates orders from their elements. It therefore also helps clarify the relation of spontaneous order and reason. (2021)

The creation of civilization requires reason to create a new theory, to enact it, and then to evaluate the results. While Hayek is correct that civilization is not designed in toto, incremental uses of reason, not necessarily with good results, produces civilization.

To conclude, I believe that both in biological causation and in civilizational development there is a bootstrapping process in which the current base must, in some way, produce and/or accept the new constraints that then establish the new base upon which, if successful, the next leg is built. This process may be expressed in terms of Popper’s tetradic schema, P1->TT->EE->P2: problem situation one leads to tentative theories followed by error elimination producing problem situation two. The implication that a teleological process is at work seems inescapable.

Bibliography

Hayek, Friedrich A. 2021. Law, Legislation, and Liberty: A New Statement of the Liberal Principles of Justice and Political Economy. Edited by Jeremy Shearmur. XIX. The Collected Works of F. A. Hayek, volume XIX. The University of Chicago Press.

Noble, Denis. 2012. “A Theory of Biological Relativity: No Privileged Level of Causation.” Interface Focus 2 (1): 55–64. https://doi.org/10.1098/rsfs.2011.0067.

Noble, Denis. 2017. Dance to the Tune of Life: Biological Relativity. Cambridge University Press.

Noble, Raymond, and Denis Noble. 2023. Understanding Living Systems. Cambridge University Press.

Sternberg, Elaine. 2021. “The Power and Pervasiveness of Spontaneous Order.” Column. Econlib Articles, July 5. https://www.econlib.org/library/columns/y2021/sternbergspontaneousorder.html.

 

Mises and Popper on Action

 Today the Ludwig von Mises Institute published my short article, "Mises and Popper on Action," a result of my joint project with Rafe Champion to explore the synergy between Popper and the Austrians (The Austrian School of Economics as a Popperian Metaphysical Research Programme).

If two schools of thought seem to be not only right, but incompatible, there are only two choices: 1) one or both of them are wrong; or 2) their differences may be resolved through semantic reconciliation and the discarding of mistakes that are of minor consequence. Rafe and I have been on the latter path for some time and hope our work encourages others to take the same path.

“Tutto nello Stato, niente al di fuori dello Stato, nulla contro lo Stato”—Benito Mussolini

 Mussolini's fascist slogan, translated as "everything for the state, nothing outside the state, nothing against the state," is the underlying theme of an article published by Mariana Mazzucato on Time Magazine's Web site as It's 2023. Here's How We Fixed the Global Economy.

This utopia, straight out of the fascist playbooks of the 1920s and 1930s, and possibly even owing an intellectual debt to Edward Bellamy's Looking Backward, will have its own Albert Speers bringing forth the next generation of fascist architecture. One wonders why this splendid utopia has not been brought forth in the past, as Bellamy's book projected; and why so many of the attempts to achieve heaven-on-earth have succeeded primarily in bringing hell-on-earth to the world in addition to the domestic population.

We only need to look to California, our own little laboratory of utopian social engineering, to observe the results of efforts that Mazzucato would endorse. Escalating homelessness, a failing high-speed rail project, and a power grid, due to an emphasis on renewables, that is inadequate to meet demand are just the high points for a state that is losing large numbers of businesses and citizens due to high costs, taxes, and regulations.

It leads one to wonder, who is it that really ignores empirical data? How is it that success stories like Hong Kong (created by John Cowperthwaite and described by Milton Friedman) and post-World-War-2 Germany (the German Wirtschaftswunder, heavily influenced by the economic liberal and Mont Pelerin Society member Ludwig Erhard) are ignored. And why is it that failures like Nazi Germany, Fascist Italy, the Soviet Union, North Korea, etc. are also ignored. At this moment, I believe it is due to our imaginations—our imaginations that make it possible to believe in a return to the Garden of Eden.

Modern Monetary Theory is really Magical Monetary Theory

In my quest to understand things economic, I have run into Modern Money Theory (MMT) a number of times, and have adopted the habit of calling it "Magic Money Theory" because it seems to bestow magic properties upon money issued by governments. Feeling that I, perhaps, just didn't understand what MMT theorists were talking about, I searched for their responses to Weimar inflation--something that would seem hard for MMTers to explain. As a result, I stumbled upon L. Randal Wray's series of articles at EconoMonitor, entitled Zimbabwe! Weimar Republic! How Modern Money Theory Replies to Hyperinflation Hyperventilators (Part 1), Not Worth a Continental! How Modern Money Theory Replies to Hyperinflation Hyperventilators (Part 2), and http://www.economonitor.com/lrwray/2011/09/07/helicopter-ben-how-modern-money-theory-responds-to-hyperinflation-hyperventilators-part-3-2/. These articles did nothing to change my views of MMT, and actually makes me wonder if "Maniacal Money Theory" might be more appropriate.

Wray starts his defense of MMT by stipulating 'that government spends by “keystrokes”, this is a description'--no argument there. But then he goes on to state, 'If critics were correct that government spending by “printing money” necessarily leads to hyperinflation, then most developed nations would have hyperinflation all the time.' As far as I know, no critic says printing money "necessarily leads to hyperinflation," but they generally would say that it risks hyperinflation. The claim is hyperbolic as governments can and do reverse inflationary policies. The concerted actions of Reagan and Volker in the early 1980s illustrate the point.

The claim is made that "gold and silver coins were the Sovereign’s IOUs that happened to be recorded on metal (rather than on paper or electronic balance sheets)," but sovereign IOUs on paper, such as Tsarist bonds, are now generally worthless, while a Tsarist rouble will, even if melted down, its sovereign connection (and collectibility) broken, purchase a nice dinner for two. A gold coin is no one's debt--it's an asset.

A clear indicator of the falsity of what the MMTers call "nominalism" is that sovereigns began coinage with precious metals and then debased the coinage, producing greater numbers of coins and inducing inflation. Without this credible beginning, coinage would have had virtually no value. The MMT narrative also fails to explain the use of cigarettes as currency in POW camps, although this article attempts to discredit the idea as irrelevant. Note that Menger only argued that money was derived from the most liquid commodity, with reference to why that commodity was the most liquid (see Carl Menger, Principles of Economics, p 257-262). After all, he was one of the founders of the marginal revolution and the concept of subjective value. MMT also fails on the private coinage front, described in George Selgin's Good Money.

It is correct that governments who claim to be on a gold standard go off it in crises. However, this reaction is generally to a specific class of crisis--war. Wray implies that money-printing constraints are removed to cope with financial crises, but this phenomenon is more closely related to interventionist and, later, Keynesian policies that came into vogue in the 20th century.

What I admit that I do not understand, is why currency boards or a gold standard would present a problem. The country that creates its own money through keystrokes should be able to buy the foreign currency it needs on the deep foreign exchange markets or, likewise, acquire gold. Perhaps, gold markets are not deep enough, but surely the forex markets are. How could there be "imprudent expansion of these IOUs relative to ability to actually deliver the foreign currency or gold," when currency may be created without limit to acquire these assets?*

Near the end of the second "reply" we find the following aside: "(If you think about it, calling in all the coins to melt them for re-coinage would be a very strange and pointless activity if coins were already valued by embodied metal!)." But this recoinage makes perfect sense, as it is the method by which the sovereign may default on its debts. Reducing the amount of gold or other valued commodities and replacing them with base metal, while declaring the coins "legal tender" enabled the sovereign to pay of debts and purchase more commodities. This circumstance takes advantage of the non-neutrality of money as the sovereign was the first to use the debased money at current prices--prices that would increase as the new money flowed into circulation.

In the last segment there seems to be a slight-of-hand--the fact that reserves are not lent is paraded as a reason inflation cannot occur; but the reality, which is glossed over when the deposit multiplier is mentioned, is that 10 times reserves (as much as 30 times by investment banks before the financial crisis) may be lent. The fact that the Fed pays interest on excess reserves (reserves that reduce the ratio of lending to reserves) reduces the incentive to make loans, reducing inflation.

Finally, Wray suggests that unemployment will keep inflation down, ignoring the data from 1961 to 1984, along with "rational" increased net savings by firms and households. The latter, of course, increases reserves and, without the demand or the incentive (due to interest being paid on excess reserves) reduces the deposit multiplier and, hence, inflation.

MMT seems to rest on assumptions that are easy to criticize, and it seems to have a very limited following (Bernie Sanders seems to be their political champion). It contradicts our view of the state as incompetent at best and evil at worst. Did some bureaucrat invent money, or was it that a monarch saw the possibilities of wealth extraction that coinage provided? Was it Menger's evolution or political fiat?

So, what do we have here? Primarily, I would say that it is an argument that creation of money by the state does not necessarily lead to hyperinflation. On this point we can agree, as that is rarely the argument. But is money the creation of the state, or simply the commanding of an instrument created by individuals in order to enslave them? The latter is the view of economists in the Mengerian tradition.

* It has come to mind that the MMT people must think that the population of a country, no matter how little confidence they have in the money still must use it to pay debts and taxes, while people of other countries do not need to purchase, causing a collapse in the foreign exchange markets. However, in Zimbabwe, my understanding is that the US$ was being used in private commerce as the currency collapsed. In When Money Dies, Adam Ferguson documents the fact that farmers in Saxony would not accept German paper currency for produce (p 151). The fact is that unlimited production of fiat money can and will produce hyperinflation, even without the mistakes MMTers claim are required.

The GDP Fixation

Every Friday I receive a free investment letter from John Mauldin, an investment advisor who has enough credibility to get on CNBC, hold conferences with top speakers and produce an investment letter read by millions. Recently, he has been harping on GDP (as in GDP = C + I + G + (X-M), where C is consumption, I is investment, G is government spending, X is exports and M is imports). Now, if we accept that increased GDP is good, then any decrease in G is bad. However, some economists disagree and suggest that G should, in fact, be subtracted from the equation, as government spending is spending that people would otherwise forgo or channel into activities other than invading Iraq, bailing out banks or purchasing car companies that have failed to be competitive. Such an economist is Murray N. Rothbard who, in America's Great Depression, describes a measure he calls the Gross Private Product, or GPP. To quote him (pg 224),

In the pleasant but illusory world of "national product statistics," government expenditures on goods and services constitute an addition to the nation's product. Actually, since government's revenue, in contrast to all other institutions, is coerced from the taxpayers rather than paid voluntarily, it is far more realistic to regard all government expenditures as a depredation upon, rather than an addition to the national product. (emphasis in original)

So, Rothbard's equation is

GPP = C + I - G + (X-M)

where G now represents the maximum of government revenues and government spending - the value it extracts from the economy. Rothbard elaborates more on GPP and the reader may want to follow up on his ideas. In fact, I think that Rothbard may be too harsh on government spending, as there is some value produced in some spending - it's just impossible to know what it is as it is not subject to consumer sovereignty or profit and loss.

Now, if Mauldin were like Paul Krugman - that is completely ignorant of the Austrian School of economics and a shill for Democrats - I wouldn't blame him. However, Mauldin does know about the Austrian School and was apparently present when Gary North and Mark Skousen interviewed F. A. Hayek. Mauldin does disagree with the Austrian Business Cycle Theory (ABCT) and has said in his newsletter that he is more inclined to Irving Fisher's views; but how can a thinking person suggest that G - government spending - must not be reduced too quickly as it will lead to a reduction in GDP and further economic pain? Yes, a reduction of government spending will injure some parts of the population, but that capital is then freed up for productive uses. The longer we delay that reduction the greater - and wider - will be the pain.

What Do We Favor?

I have been reading Jeremy Shearmur's Hayek and After: Hayekian liberalism as a research programme (London, Routledge, 1996) and am struck by the recurring discussion about how Hayek's ideas will or will not produce the result he (Hayek) favors. The amazing thing to me is that he favors any particular results, other than the satisfaction of consumer wants. Hayek is the chief proponent of what may be called "spontaneous order" - market-generated order that appears when no central plan is imposed on the market - and one finds it difficult to reconcile that with the idea that any particular outcome may be preferred. It is this very idea of a preferred outcome, especially when uttered by an economist, that supports the interventionism that Hayek generally rejects. This inability to accept market outcomes, no matter how displeasing they might be to your sensibilities, has led to the acceptance of the state or the invention of extra-market moralities by those who could have known better.