27 January, 2009

Positive Feedback

Given how little I understand about economics (even as, I would suppose, a relatively interested observer) I'm hesitant to stick my oar in, but here's what scares me about the current incarnation of the stock market.

What bothers me about the current situation is that the oft-cited level of "confidence" is twice divorced from truly representing the "grass-roots" status of the economy. Through interpretation into share prices and then aggregation into larger indices, the efficacy of businesses themselves is obscured. And indeed, traders are making individual decisions on the basis of their "confidence in the market" - a third factor of whether these indices might go up or down.

Surely there is an integral and unavoidable positive feedback loop in this system? In short, because the market is deteriorating, it will deteriorate further. Positive feedback mechanisms are by their very nature immoderate - they "snowball". It further seems that there is nothing in the current set-up of the economy that discourages this state of affairs. Indeed, for the players within the system, continual fluctuation is presumably favourable. Whether the same can be said for the broader population, I'm not sure.

I do know I'm not alone in questioning the foundations of our economy at this time. Terms such as 'confidence' seem indicative of a bizarre form of mysticism in play, and we can't help but wonder if the traders understand this much better than we do.


I do my best to stay away from the still-fucking-ludicrous 'debate' between Christianity and atheism, which is not a new thing. Every e-mail I receive or youtube link I get forwarded just further entrenches my view that human beings need something to argue about just as much as they need something to worship. That Dawkins, Hitchens et al. seem to believe that their "one big push" will put the matter to bed simply bemuses me.

It's difficult to determine whether the garbage spewed on each side is intellectual dishonesty of the worst kind or merely old-fashioned ignorance. It's easy for laymen to misrepresent scienfitic theory, for example, and scientists who rush headlong into philosophy don't get it right straight away. But arguing over Hitler's belief system (so, y'know, we can decide whose column the 6 million Jews go in) is as reprehensible as it is ridiculous.

But of course we know why this happens. The public debate is much less the proving ground for ideas than an intellectual boxing match. Anyone who has been punched in the face knows that immediately afterwards nothing matters but to strike back, by whatever means. It rarely attracts the kind of person who would graciously cede a point when incorrect, but instead the chest-thumping public schoolboy.

The discourse isn't worthless. But clearly we need to tinker with the format. The more we scrutinise the arguments we sink into, at least one point becomes clear: We are descended from apes, but not by as much as we'd like to think.

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