George Soros, INET, and those who can shape the conceptual framework of the world

I watched this video:
George Soros at INET

I have also been following for several years now the general economic debate and literature leading up to the financial crisis and since it happened.

Some thoughts struck me I had to get out onto ‘paper.’ I am just going to try and spill them out here in a bit of a rush during the next 15min or so.

First, some comments on reflexivity. I have read several papers and interviews and bought a couple of books by George Soros, so I understand his stance and what reflexivity is. It is not incompatible with the doctrine of today. Mr Soros is fundamentally driven to promote openness and freedom, and the concept of freedom is at the root of reflexivity. In essence he is drawing a distinction between hard and social sciences because of the indeterminacy that freedom of thought gives, and he recognises a feedback loop between identification of knowledge about societies and the social reaction to that knowledge.

It is a peculiarly neutral position. Those who reject freedom on a neuroscientific and/or behaviorist basis are held as modern day heretics. Liberal doctrine is so engraved into the Western mindset that to take something akin to a Skinnerian position is met in the mainstream, typically, with outright hostility. To deny freedom as a concept is to put oneself immediately into a distant and isolated realm of heterodoxy. One is condemned as a religious extremist or authoritarian despot. In this regard, Mr Soros is orthodox and quite contemporary. On the other hand, his recognition that human responses to information about humans represents a feedback loop in a dynamic system, and that society is best and most practically described as a dynamic system, with financial institutions playing a major role in the mechanics of that system, is altogether a useful, fairly radical, heterodox position to take. It is antithesis to the mainstream economic belief of rational agents operating in a market that automatically maintains equilibria and allocates resources automatically in the best possible way.

I think that dynamic systems is where INET and Mr Soros’s beliefs will go, it is how they will evolve. The notion that humans might somehow be indeterminate rests on the idea that we are free to choose and that somethine metaphysically isolated from reality is able to govern us in unexpected ways. The “I”. The homunculus that sits at the Cartesian center of consciousness. The real truth I think is that ultimately everything is natural, and the time may come that we will all be completely predictable, be completely transparent to advanced technology, and that machines will be able to see precisely what brains are and how they behave, in order to predict and govern them perfectly. I see no conceptual barrier to this possibility.

It reminds of Christian traditions prevalent still today in Western Europe: the idea that man and human activity is somehow unnatural while everything else is. To me, this is a bizarre concept that an earthquake, tsunami, flower or cloud is somehow natural, good and acceptable, while atomic reactors, roads and the telecommunication infrastructure, the internet is not. In contrast, I see no difference – we, like clouds, are all natural, and everything that there is is natural. There is no choice, control or freedom and no-one is the cause or consequence of anything.

Another important comment raised in the video is that there is a harmful dialogue about state vs market and market vs state. I agree and I see this as additional confirmation that we are all coming, slowly, to the conclusion that dynamic systems and control theory is the correct way forward for describing, predicting and governing societies. Aside from all the minority economists (I won’t bother naming, INET will do this in time I think) who are now gradually becoming the mainstream and everything they have been warning us about and pointing to over the last few years, there is the obvious and self-evident truth, that society as a complex system has a resource allocation system, a control or governance system, that is made of the state, the telecommunications, the media and the financial organisations. They send signals that allocate and direct resources. They are the nervous system. They are not roads, they are not arteries, they are not muscles, food, land resources. They are the control mechanism. Collectively they are the government.

It makes no sense to talk about the government in the colloquial meaning. The state is nothing without the banks, and the banks are nothing without the legal framework. We are all coming to the realisation that the governance system of society today is a complex agglomeration of technical systems, state entities, banking entities, and so on. It also makes no sense to talk about free markets when the vast majority of money and aggregate demand is synthesised in the commercial banking sector, which is merely a part of the agglomeration just mentioned. Debates about circuitism or centralism, theories of monetarism, are all ultimately beating about the bush: the plain truth is that it’s all an interdependent system where the governing aspect must respond to signals about the state of things and act as it does, where signals and actions are expressed in terms of money, media or what have you.

In this light, I couldn’t help feeling that when Mr Soros talks of reflexivity he was speaking as if a young prince a long time ago was only just beginning to realise that he was a member of the ruling/governing group. He may have wished for a certain reality, or described a reality and thus placed an expectation on it, and found to his surprise that suddenly it was either that way, or not that way. As the prince becomes a king, he accepts his role as ruler. Reflexivity seems like a period of confusion. Those who are participants in the governance section of a system, involved in sending signals and allocating resources, need to accept their role too, and everything they say or do IS by definition governance.