Thursday, 17 January 2019

Good Cop, Bad Cop Economics: Good Cop

In the last Blog post, entitled Good Cop, Bad Cop Economics: Bad Cop, I had a few choice words to say about the left's culpability in the social/political/economic problems that preoccupy so much of their attention. I ended by promising a follow-up in which I offer a solution to how all this can be put right with a pretty radical but effective overhaul of our current framework.

The way to reform the system is simple in explanation but more complex in execution (and very timely perhaps, given the current Brexit debacle over an exit strategy). It is this: enshrine in law any policy that proves to be demonstrably beneficial in net terms to the economic well-being of the country. Now obviously this must come with caution, because it is not always easy to empirically verify whether the economic well-being of the country improved as a direct result of a policy, or whether there were other important factors not related to a particular policy.

But thankfully most economic logic carries enough weight to show why a policy is either a good one or a bad one - and if such positive policies became legally binding they would be safe from party political interference and protected from the dangers of being reversed for political gain. Provided the people making the laws understand the indubitable economic benefits that the nation will enjoy from these acts of legislation, and are able to convey them in a way that laypeople can understand, there are plenty that could be instituted right away.

For example, it could be made law that the UK may not impose any import tariffs on foreigners - a policy that unquestionably harms both the nations involved in the trade exchange. Even if foreigners don't reciprocate and still wish to impose tariffs on us, we would still be better off not imposing tariffs on them.

Another example, it could be made law that no politician is allowed to interfere with the price system generated in a supply and demand market. From now on, the price of everything must be governed by market signals, not woefully inadequate politicians. No longer can politicians make it illegal to sell your labour below a set price, or tell you how much or how little you have to charge for a good or service. Leaving prices to the market signals of supply and demand will make the nation better off by eradicating the numerous deadweight costs associated with price fixing.

A third example, it could be made law that no domestic government can interfere in the competition process by subsidising new businesses or bailing out failing businesses. A fourth example, it could be made law that all income tax is flat, not progressive, and that top rates do not exceed a certain high-end threshold (probably somewhere in the region of 30%, but lower ideally). It can also be enshrined in law that governments won't tax corporations (which only ends up falling on employers and consumers anyway). Both of those would ensure politicians get the incentives the right way round - that they are incentivised to manage their public spending properly, not treat taxation as a money tree.

The public needs laws like these to protect them from their own economic misunderstandings. Once it started to be more widely known that these laws would make the nation better off - in terms of GDP, levels of outside investment, job creation, lower levels of unemployment, or any other assessment you care to make - the nation will be a lot easier to govern if the electorate better understands the link between market freedom and economic well-being. More or less every nation in the world that does well in terms of sustainably higher GDP also does well in terms of prosperity, freedom and well-being too.

With the introduction of such laws there will be less of a need for party political rivalry in playing fast and loose with the public's knowledge deficiencies and the extent to which they can be seduced by short-sighted policies. Laws like the above would also counteract the short-termism of political parties' interests whereby they rarely get to feel the long term effects of bad policies or get held accountable for their mistakes.

There is one obvious caveat to the above. Well, two if you allow for the fact that occasionally even sensible legislation may need to be temporarily reassessed on a case by case basis if it's in the public interests to do so (but we'll allow for the fact that this is hardly an insurmountable issue). No, the main caveat I have in mind is that such a radical change to the political framework would have to evolve over a (hopefully) short period of time - it would be too drastic to introduce as a fait accompli shake-up of the system right away. The reason being; there would need to be a transition period during which the public spending bill could come down while at the same time the private sector revenue goes up. Like children learning to walk, it would be foolish to demand that they run.

The upshot is, if done proficiently, these are the radical measures that are needed to properly transform our political landscape from the grass-seed of failure and incompetence to the fresh wheat of success and prosperity. Cutting the grass may keep it neat and tidy - but it'll never give you a field of wheat. If we want to get political wheat, we need to put away the shears and go down into the soil, where the economic foolishness of the present day political landscape can be ploughed up and re-sown.

Saturday, 5 January 2019

The 'Destroying Our Planet' Fallacy

One of the biggest fallacies out there is the complaint that we are 'destroying our planet'. We keep hearing rallying calls to care for the earth - but, alas, the people who think we are destroying it are confusing their terms.

The earth is not a sentient being that can be destroyed, and nor does utilising its resources constitute destruction of the planet. The resources we use are vital ingredients for making the world a better place, reducing suffering and misery, and increasing knowledge, well-being and the quality of life we have.

Take a forest as a good example. Cutting down trees for the paper and replanting more is not destroying the earth - it is utilising a vital resource that enriches humanity greatly. Yobs setting fire to a forest, on the other hand, is a case of being careless with the planet's resources because they are being supplanted for value-less ruination.

The large swathes of people who are constantly telling us that we are destroying our planet are seeing our use of resources as being like burning down a forest when they should be seeing it as being like making paper from trees. The earth is a giant rock that's over 4 billion years old: it was here long before we were, and it can survive long after we have gone. The notion of destroying it is a fallacious one. The only thing we can destroy is our capacity for utilising its resources, but given that it is the utilisation of its resources that they mistake for its destruction, the accusation is laughable.

For obvious reasons, saving the planet (by which it is meant ‘the earth’) must always be a secondary aim behind saving the planet (by which it is meant ‘life on the planet’). If preserving life and increasing well-being are the primary goals, then part of that goal (the most urgent goal, in fact) is to bring an end to global poverty and help the neediest people out of their plight of impoverishment.

This leaves those who think we are 'destroying the planet' with a big problem, because the only way to bring an end to global poverty and help the neediest people out of their plight is to help those people attain economic freedom, and the ability to trade, be self-sufficient, and productive in the broader market economy. And, of course, the only realistic way to achieve this is to generate the kind of industry and globalised expansion of the market that will come at the cost of using some of the earth's natural resources.

The upshot is, in the short-term future, to eradicate global poverty entirely, we're going to have to carrying on making the best use of the earth's raw materials. Like most things, there's a trade off, and all it takes for an intellectual malady to occur is the slightest reactionary ignorance to assert that 'We are destroying the planet' as though there's no need for consideration of the benefits vs. the costs of doing so.

It is thanks to the use of the earth's resources, particularly since the Industrial Revolution, that we've moved the human condition from a state of widespread poverty to a state of greatly reduced poverty and much more prosperity. Of course there's still a way to go, but as the developing world countries increase their infrastructure and market potential, they are going to be using the most ecologically efficient technology - so there is every reason to continue to develop and pioneer more environmentally efficient methods of industry.
Realistically, the things that are the biggest ingredients in achieving this - free trade, healthy imports/exports, high employment, sensible and equitable government spending, a good legal system, cultural plurality, immigration, global travel, welfare systems, human rights, property rights, family rights, and being freer citizens* – are going to have an environmental cost that is more than compensated for by the good it will do for the neediest people in the world.

Sadly, it's usually the lack of these things that is behind the killing of endangered species and the causing of extinctions, as well as people in developing countries not having a proper stake in their own country's resources - all of which are certainly things to be spoken out against.

Wednesday, 19 December 2018

Misunderstanding Inequality: Heroes & Villains

The world has seen unprecedented economic growth in recent times, alongside which the world has seen unprecedented increases in capital inequality. Many people feel joy about the first fact and despair about the second fact. So much so, in fact, that many of the nation's problems seem to get blamed on inequality - even the fact that some families are struggling to make ends meet.
A moment's thought should make it obvious that the problem with someone's economic hardship is their absolute state of well-being, not their relative well-being in relation to rich people. Alas, despite being obvious, it is doubted by many - primarily, one imagines, because of a) envy, and b) being tripped up by the fixed pie fallacy. The reality is, economic growth naturally engenders marked differences in people's incomes. In fact, much of the time one person's large wealth increase affords many others an opportunity to work, as anyone who has ever been in McDonald's Sainsbury's or Domino's would know.
It's also the case that economic growth actually dispenses disproportionately greater benefits to the poorest in society - because not only does it create jobs, which creates money to spend, which creates more jobs, and so on - it also improves their consumption. Once upon a time only the richest people televisions, cars and mobile phones. Now most people have these things, not to mention access to the entire world's knowledge at the touch of a button, and the uncountable other riches that our forebears would have thought impossible.
The upshot is, wealth inequality is a so-called problem that's hugely overblown. As long as everybody's absolute well-being and standard of living continues to increase, the income gap isn't much of a problem - quite the contrary, it's a natural non-linear feedback effect of a free market of voluntary exchanges.
In fact, monetary inequality with concentrations of capital in the top quintile is actually evidence that a lot of people are becoming better off by purchasing those goods and services through voluntary transactions. As the gap between richest and poorest is narrowing in pretty much every area apart from capital, it's easy to see how much more equal we are becoming, not more unequal.
Inequality through the lens of discrimination
Moreover, as I explained in this Blog post, most inequality is due to rational decisions made by people - called statistical discrimination - that play out in terms of society's revealed preferences. In terms of incentives, statistical discrimination is one of the most easy to understand in society, despite some people's distaste for it.
Consider when the European Court of Justice (ECJ) ruled that the long-established practice of setting insurance prices according to sex is illegal discrimination. Or consider that even though women statistically live longer than men, insurance companies are no longer allowed to offer different annuity values to men and women.
So men come off better on car insurance, effectively being subsidised by safer driving women, which is the same as saying that women come off worse by paying a penalty for less safe male drivers. Both those situations are reversed in the annuity situation.
When everyone in a particular group is homogenised, the statistical variances are cancelled out as individuals are assessed based on the characteristics of the group as a whole, not on their own merits and demerits. In many cases this is obviously foolish and wrong. It's much better if men and women are not treated the same in terms of insurance premiums, because women ought to be rewarded for being statistically safer drivers.
The inevitable consequences are that some very unsafe women drivers benefit on the back of the average safety of women drivers, and some very safe male drivers lose out because of the average safety of male drivers. Safe male drivers are discriminated against not proximally because of their sex, but more distally because they are pooled with characteristics that we commonly associate with less safe driving.
Another example of where discrimination occurs when people are pooled with a group that have an easily identifiable weighted average is that if women are more likely to leave work in their thirties to have children, then some employers are more likely to choose men, even if it means missing out on better talent. Some cry foul of unfair discrimination, but sometimes it is a rational thing to do, as employers look to increase the probability of stable utility and efficiency.
But that's not the end of it. Suppose 32 year old Jack and 32 year old Jill are going for a job as project manager in Bob's company. Everything else is equal, so Bob hires Jack purely on the following probabilistic grounds: that there is a chance that Jill may wish to have time off for motherhood and possibly revert to part time hours thereafter. But now suppose the above scenario again, apart from one difference - Jill is slightly better than Jack, but doesn't get hired because Jack is less of a risk in terms of future motherhood. Jill goes on to get a job as project manager in Margaret's company, has a child five years later and returns to work after six months.
Bob's preference for Jack over Jill when they were equal was probably a rational choice, but when Jill was better, Margaret gained by recruiting a better project manager, whereas Bob gained a decent project manager too. In other words, rational discrimination usually produces a levelling effect, and employers know that irrational discrimination is an imprudent recruitment policy that hits them in the pocket.
The underlying reality about statistical discrimination is twofold: a) it's almost impossible to detect in the first place because people's real motives are not in full view of the public; and b) in a society that values liberty and freedom of choice, people should be perfectly free to statistically discriminate any way they wish. Generally I favour the egalitarian, classical liberalism (of the Hume, Smith, Ricardo kind), meritocratic ethos, and the view that individual pursuits and a bit of luck play important parts in our journey, as does the 'reap what you sow' maxim.
Consequently, then, while I'd hope for equality of opportunity wherever it doesn't unfairly disadvantage others, I don't expect equality of outcomes, and I think many people trying to interfere in society to correct things that don't need correcting are, quite naturally, misjudged and making the situation worse. There are several, often connected and complementary (what should be more obvious) reasons why unequal outcomes occur, and why that is no bad thing:
1) The effort people put in to things is unequal, which should rightly yield unequal outcomes. Those who work hard and study hard have a better chance of being rewarded for their efforts - and that should be encouraged. A surgeon should be higher on the income ladder than a taxi driver or a tyre fitter, and I don't want society to be less unequal in this regard.
2) The risks and inconveniences people take are unequal, which should rightly yield unequal outcomes. People who do jobs with highly scalable outputs, risky jobs, dangerous jobs and jobs with unsocial shift patterns should be paid commensurate to these factors, and once again I don't want society to be less unequal in this regard either.
3) The "slings and arrows of outrageous fortune" inequality. This one is often overlooked or not given enough attention, but there are quite natural inequalities by the fact that nature is not very democratic at all. When it comes to health, looks, size, shape, talents, intelligence, sensory apparatus, opportunity and background, nature is far from democratic - there is a notable difference in all of these human qualities in each of us, as their attainment depends on undemocratic things like fortune and pursuit. A significant proportion of outcomes in society are down to luck, serendipity of circumstance and being in the right place at the right time, bringing about expected inequality of outcomes.
4) Rewards for innovation in a 'winner-takes-all' market. Most of the world's biggest gaps in income equality are because of innovators, entrepreneurs and job creators (usually one and the same) who have become wealthy by being good at providing things many people want. Market are democratic in that consumers vote with their purchasing habits, and therefore inequalities of this kind are not a problem that needs addressing - they are the result of freely made human choices in a competitive marketplace.
What so many get wrong in this area of discourse is in the misattribution of causes for outcomes. It's a base fallacy narrative that, unless corrected, will continue to misinform them about the so-called unfairness and injustices in society. Inequalities that have legitimate causes based on the above four explanations are often misrepresented as societal injustices and misattributed to the plight of human infirmities - something I've blogged about numerous times before.




Sunday, 11 November 2018

The Circuit Board Of Mental Excellence

Minds are perhaps best thought of like circuit boards - and a coherent, consistent, accurate worldview is represented by a set of small lights that all stay illuminated in conjunction with truth and facts. Information, in the form of propositions, is like enlarging the circuit board, and increasing the assembly of data circuits and the copper that delivers electricity to illuminate the lights.

The size of the light display depends on the dimensions of the worldview, which itself primarily depends on the time, effort and intellectual rigour put in to the process of building a larger and larger circuit board that can facilitate an ever-increasing light display. A genius polymath may have a light display about the size of a football field; a highly intelligent polymath may have one about the size of a tennis court; and an average person may have one about the size of a small back garden.

Now here's the key thing. You can increase the dimensions of the light display by learning more, and by increasing the connectivity of your mental artillery - and to some extent, most people do this on their life journey. But what they don't do enough is stand back and check the light display to see how many of the bulbs have gone out. Nor do they step back and observe clusters of light patterns that have gaps because the additional bulbs required to illuminate the pattern more comprehensively are missing.

A large, light display with all the bulbs illuminated is extremely rare - but it ought to be the primary objective for anyone who strives for truth, facts, proficiency of reasoning and excellence of mind. The beauty of the light display is that its consistency of illumination is exhibition to the fact that one's ideas, thoughts, views and propositions fit nicely into the rest of the circuit board of experience. If you keep getting things right, the new beliefs operate consistently with the structural workings of the circuit board, not disrupting the electricity to other items on the board. But if you get things wrong, and introduce faulty viewpoints into the equation, you disrupt the electricity flow, both to local illumination clusters, but also to isolated bulbs elsewhere in the display.

Naturally, given the complexity of the mind, and the complexity of everything there is to know, and the near infinite ways to perceive reality, this is a really epistemologically intractable model of analysis. But it isn't that difficult to identify practical examples of how the malfunctioning of the circuit board may occur, as most people host mutually contradictory or incongruent ideas, especially due to identity-based dispositions, cognitive biases, emotional self-preservation and propensities for over-simplicity.

For example, suppose you're a Christian with a fairly comprehensive understanding of scripture, but because of your upbringing you've been infected with the cultural virus of young earth creationism, with a limited recourse for correctives. The cluster of lights pertaining to Biblical exegesis and hermeneutics is going to be affected as the connection between the conductors supplying the electrical power will be shorted. The high current flow of falsity will put out some of the theological lights, and prevent other bulbs from being added to the cluster. This will mean others see you as a Christian with inadequacies in several areas of discourse - especially when it comes to Biblical interpretation of text and other related areas of science and how the edifice operates and functions - which will have a corollary effect on the consistency of your worldview, and on the impression and influence you have on the world as a Christian.

Here's another example. Suppose you're quite economically and politically astute, but you become duped into believing that there is a systematically unfair gender pay gap in the UK, or that price controls on housing might alleviate the shortage. As with the first example, your circuit board will be negatively impacted, lights will go out in various areas across the display, and there will be patches in the clusters that never get the bulbs required for a full illumination of the pattern. You might start believing that price controls in other areas of the economy will start to do some further good; or you might start over-exaggerating the extent to which climate change alarmism is fruitful; or you might take your eye of the principles behind the law of least effort; or you might develop too much a victim-mentality, and so forth.

I could offer loads more examples, but I think the gist of this is crystal clear: there is always a price to pay for bad ideas, false beliefs and inadequate reasoning - and these things infect; first at the individual level, then at the familial level, then at the community level, and then more widely across societies and even nations as falsehoods spread memetically.

By equal measure, though, there are always rewards for building a prodigious circuit board that provides the power to a fully illuminated light display that consistently, coherently, factually and truthfully supports the ideas, views and beliefs associated with all the major and minor subjects, and the interconnectedness between them all. In fact, I'll take it further: there is no better way to live, and no more rewarding and no more necessary and no more morally and intellectually compelled pursuits for any human being.

Wednesday, 7 November 2018

Good Cop, Bad Cop Economics: Bad Cop

For some of you this will sting a bit, but it has needed saying for a while now. It is you, the left, that stand accused as being the principal cause of most of the economic problems in your home country. You are largely to blame for the state of the NHS, for the problems with social care, for the high unemployment levels in the under 25s, for the fact that too many people are doing university degrees, for the housing shortage, for much of the decline of UK industry, even for the rise in inequality in this country. Moreover, you are also largely to blame for Donald Trump, for Brexit, and for the rise of far right groups in the UK and across Europe.

Here is why you are to blame: your combination of wilful naiveté and yet strong opinions about the things mentioned above helps encourage the people that govern us to adopt all manner of foolishness on the basis that they think you will throw them out of office if they don't acquiesce. For decades you have been complicit in creating a political climate based on nonsensical arguments, shoddy counterfactuals and lazy myopia - fervently endorsing ideas and policies that are either based on factual misinformation, poor reasoning or idly choosing to ignore or overlook large swathes of the population that feel the costs of your decisions.

Take the most obvious case in point - the NHS. You have for years treated it like a sacred religion, and forced politicians to live with the lie that it can be sustained in the same way it was for the first four decades of its existence. Your belligerent demands for it to be safeguarded from proper market-based resource allocation has pressured politicians to ignore the supply and demand crisis, the costing crisis, and the fact that our living longer, our increased aging population, the increasing number of diagnoses and the increasing technological scope for medical advancement means it is no longer operating under the same framework under which it operated a few decades ago.

You have created this problem, by making politicians so terrified to respond to these realities that instead all they can do is resort to pathetic party political tit-for-tat squabbling about who puts more money in to the NHS and under whose leadership it would be less worse off. You have left them feeling like they have no option but to behave this way.

There are plenty of other cases where you have done something similar. For decades you have applied social duress on our politicians and made them believe that the only chance they have of carving out a political career is if they publically endorse a whole menu of economic foolishness that satisfies your beliefs. Where there is inequality, and people struggling to make ends meet, people struggling to find work, people in developing countries struggling to enter the competitive global marketplace, and people struggling to pay their rent or being able to afford to live in big cities - you must take a lot of responsibility for these things, because the truth is, the government you have been complicit in fattening up is responsible for pretty much all of these problems (and that is no exaggeration).

You have demanded that the political institutions that put up barriers to free trade become ever-bigger and more powerful; you have pressurised politicians to perpetuate facile price floors like the minimum wage; you have made more and more voracious demands on the earnings of the nation's most prodigious innovators and job creators; you have intransigently peddled the long-standing fairytale that the answer to most of the nation's problems are to be solved with higher taxation and more public sector involvement in our industries; and you have repeatedly promoted the economically toxic policy of domestic subsidies and the bailing out of financially deteriorating businesses and industries.

In short, you have pressurised the politicians of all parties into normalising bad policies - policies that increase unemployment and make it harder for the unemployed to obtain work; policies that stunt job creation; policies that make the cost of living higher for ordinary working people; policies that stifle growth and dissuade outside investors; policies that keeps regions in industrial atrophy; and policies that makes vital public services like health far more vulnerable to financial crises than they need to be.

For decades you have insisted on injudicious political ideas, and then demanded that the only people fit for governance are people who will enforce these ideas. And an equally bad (arguably worse) knock-on effect of this is that most of you let politicians get away with not having to proficiently justify their policies at a level beyond the superficially inane. You will almost never see a politician under even the slightest bit of pressure to admit the costs of a policy as well as the benefits, nor even acknowledge that most policies profit a small proportion of the population at the expense of a larger (unconsidered) group.

How preposterous it is that enshrined in our cultural climate is the habitual dismissal of majority groups affected by a policy, and the normalisation of anaemic economic arguments. And how sad that the politicians that govern us have to survive on spin, on popularity-mongering and by forever being afraid to admit their mistakes, or of having a public change of mind, or of introducing a prudent policy if it's unpopular.

You have played a big part in creating this monster and the concomitant lefty social commentators and politicians that feed on its body lice. And this needs to be at the forefront of your mind every time you open a paper or turn on the TV and see what you think is an injustice, or a group of people struggling to find work or live as comfortably as they could be. Most of the things you complain about and strive to fight against are creations of your own making. You are like Geppetto smashing up Pinocchio with a hammer, or like Victor Frankenstein taking an axe to the monster you've spent decades creating.

Fear not, though - the next Blog post that will be following this Bad Cop offering will be the Good Cop approach to remedying all that's wrong as per the above criticisms. I will offer a solution to how all this can be put right with a pretty radical but effective overhaul of our current framework.

Tuesday, 23 October 2018

On Evolution & Random Walk

In one of my most popular papers, I wrote about how the universe is governed by a biased random walk, giving us a Divinely choreographed mathematical skew that can create enough order to facilitate stars, evolution and life. Many of you have asked whether, in that case, biological evolution is also similarly governed by a biased random walk. Actually, nobody has asked that - but it’s one of the most interesting and intelligent questions a reader could have asked if they were on the ball with this, because it’s exactly the right sort of question to be asking.

As a reminder, a random walk describes a path derived from a series of random steps in a mathematical search space - so, for example, whether a drunk man staggers left or right with each step of the walk is entirely random (50% chance of left or right), as is his final destination after N number of steps. Using this model, if you mapped the drunkard at point A, and tried to predict his position after, say, 100 steps, you would not be able to deterministically predict his final location.
So let’s ask the question, then: is biological evolution governed by a random walk process? The answer is yes and no, but mostly yes. If all the proprietary parts in evolution’s mathematical space (which I’ve called ‘morphospace’) are all randomly walking through evolution with their distinct genetic drift and mutations, contingency says that, like a group of drunkards walking independently, we would expect them to have arrived randomly at different evolutionary endpoints. However, evolution is not a purely random walk process - and there are two reasons why: one is fairly simple, and the other is pretty complex. Let’s start with the simple one first, as discussed by Richard Dawkins in his book The Blind Watchmaker.

“I don't know who it was first pointed out that, given enough time, a monkey bashing away at random on a typewriter could produce all the works of Shakespeare. The operative phrase is, of course, given enough time. Let us limit the task facing our monkey somewhat. Suppose that he has to produce, not the complete works of Shakespeare but just the short sentence 'Methinks it is like a weasel', and we shall make it relatively easy by giving him a typewriter with a restricted keyboard, one with just the 26 (capital) letters, and a space bar. How long will he take to write this one little sentence?”

That describes what evolution would be like if it was a random walk process. But of course, it isn’t, as Dawkins is happy to acknowledge:

“We again use our computer monkey, but with a crucial difference in its program. It again begins by choosing a random sequence of 28 letters, just as before ... it duplicates it repeatedly, but with a certain chance of random error – 'mutation' – in the copying. The computer examines the mutant nonsense phrases, the 'progeny' of the original phrase, and chooses the one which, however slightly, most resembles the target phrase METHINKS IT IS LIKE A WEASEL. The sequences progress through each generation:








What this describes is what is called a ratchet effect (cumulative selection) where beneficial traits lock into place, rather like how card players get to keep their favoured cards after each shuffling of the deck. To expound on this, evolution requires four fundamental things to underpin the system.

1) Variation: there is variation in traits.

2) Inheritance: these variations can be passed on to offspring.

3) Differential survival(/reproduction): given the reproductive potential of most organisms, a population should be able to grow (this is not always what happens, of course)

4) Natural selection: those with heritable traits that make them more likely to survive by passing on genetic material.

The above example of METHINKS is not precisely illustrative of how natural selection works; rather it is illustrative of how cumulative selection can lead to rapid change over a relatively short period of time. The analogy was used to answer the criticism that there has not been sufficient time for particular structures to evolve by "random chance.” The analogy shows that random variation can lead to rapid organisation of structure, provided that there is selection for the structure. The analogy defends the 'rapid' part, not the 'selection' part.

Suppose a specific complex sequence, such as just the letters that make up the word 'METHINKS' corresponds to something complicated, like a human eye. The chance of hitting the sequence such as 'METHINKS' by fortuity alone is very small - 1 in 209 billion (That is, 1 in 26 to the power of 8, for this 8 letter sequence, drawn from an alphabet of 26 letters). Similarly, conjuring up a human eye out of nothing also has a vanishingly small probability, it might as well be zero. But, as I said, this is a poor analogy for evolution, because evolution acts as a 'ratchet', so when a correct letter clicks into place, it stays there (as indicated by capital letters), so it can achieve the target phrase in much fewer attempts, say 40:

1) 'sgfcsgo' ...

10) 'fETopcrS' ...

20) 'xETrINsS' ...

30) 'METoINKS' ...


Now the question is, doesn't there have to be an intelligence to compare the target sequence 'METHINKS' against the sequence that evolution is trying out, or in real terms, the comparing of the 'proto-eye' to the target eye that is evolving? Well, in evolution, intermediates give advantages, and when those advantages accumulate, like in poker when you keep the cards you need for a good hand and toss out the bad ones, more sophisticated survival parts are created.
By this model above, the first attempt corresponds to being totally blind. The 10th try might correspond to a patch of photosensitive cells, so the organism can know if it is light or dark. The 20th try might correspond to ridges forming around these cells, so they are in an indentation, and the shadows of the ridges could give some information about which direction the light is coming from. The 30th try could correspond to the ridges starting to close up, so the light comes only through a small hole, so that the organism has much better information about the direction of the light, like a pin-hole camera. The last, 40th try, could correspond to a lens forming over this hole, which focuses light onto the photosensitive cells, resulting in a high quality image.

The point is that 1% of an eye is better than no eye, and 50% of an eye is better than 20% of an eye, and so on. At all stages, this extra light information available to the organism improves its survival value, and so the genes for making 1%, or 20% or 80% or whatever, is preferentially passed on to future generations. So, it's not as if an intelligence compares 20% of an eye to a complete human eye, and said 'ahh, this is better than its cousin, with 15% of an eye, I will let it pass on its genes for making this eye', but simply that when a predator comes along, it will see it before its cousin sees it, so its cousin will get eaten and not pass on its genes for making the 'inferior' 15% of an eye, but the 20% of an eye individual will pass on its genes. Of the offspring, some might have 19% of an eye, others might have 21% of an eye. Then the 21% of an eye will be more likely to survive, and its offspring might have 22% of an eye, and so on, all the way from humble beginnings until a complete, complicated and accurate eye is formed. The target sequence above merely corresponds to something that aids differential reproduction.

Having established all that, here is where we get to the more complex considerations, because underneath all that is a highly complex mathematical picture, which gives us another way to consider random walk. What’s happening in biological evolution underneath that layer is that there is a huge biochemical morphospace that has a connected structure through which evolution’s reducible complexity can traverse. Take, for example, irreducible complexity and reducible complexity - they refer to the arrangement of stable organic structures in evolution’s ‘morphospace’, but they cannot most primarily be understood at the level of the organism, because morphospace is not an adaptive landscape where we visualise the relationship between genotypes (or phenotypes) and reproductive success, and model fitness on the height of the landscape. Morphospace is a mathematical model of the form of connectivity between patterns – so a reducibly complex morphospace means that the biological structures that populate the evolutionary landscape form a connected group.

You may think of the system as being like a gigantic sponge made up of very tiny fibrils that connect the evolutionary structure together. If the connection has no broken off parts then the random walk of evolution can move across the whole structure. In fact, this is a particularly good illustration because sponges are composed entirely of mobile cells which can move about between different layers of tissue and reallocate themselves to take on different tasks. Sponges have totipotency, which as you may know, is the ability of a single cell to divide and produce all the differentiated cells in an organism. This allows any fragment of a sponge to regenerate into a self-sustaining organism.

So biological evolution is random walk, but as I said at the start, it is not entirely random walk. Firstly, because the ratchet effect locks beneficial mutations in place, but secondly because although the biochemical engine of evolution is underwritten by probability envelopes concerning whether a particular genetic trait will be passed on to subsequent organisms - and that, at least in terms of the mutations themselves, does approximate random walk - there are sufficient constraints on the system to bias the model in favour of order.

If we take an evolutionary starting point and then generate a random walk on the organism, then the probability favours random walk statistics (in formal terms,  a Gaussian probability distribution across the search space) - a probability curve in the shape of a distribution graph with no evolutionary biases. In the actual evolutionary landscape, though, what happens is random walk plus incremental variants in the search space; that is, we see a bias in the system that conforms to the ratchet mechanism of natural selection’s operation for fitness.

What you have to remember is that by the time we get to the level of order in the universe that contains our planet’s chemical substrate, the majority of the cosmological groundwork has already been done. It’s a bit like showing a movie at the cinema: your viewing pleasure is the tiny end part that succeeds all the planning: the screenplay, the casting, the rehearsals, the production, and the filming that went into making the movie. In mathematical terms, biological evolution is like showing an ingenious movie at the cinema that God has already written and produced - what we see is the most accessible elements of a complex creation process that involved ingenious twiddling of the mathematical laws to eventuate in a biochemical random walk substrate on which biological life can flourish.

In terms of evolutionary genetics and inheritance, our movie-watching lens of analysis looks like probabilistic search space of numerous configurational possibilities which generates successful survival machines, with genes using bodies as vehicles for propagation, many of them outliving their hosts by millions of years. Evolution, then, has an isotropic random walk directionality, but a relatively constrained search space in terms of the four fundamental underpinnings I mentioned earlier (variation, inheritance, differential survival and natural selection).

So, in simpler terms, going back to our group of drunkards on a random walk - if they all live in the same apartment block, the neighbourhood in which they are walking has enough limitations on the road and path structure, and they meet enough friends along the way to gently nudge them on the right course, and both those things mean that they have more of a chance of all arriving back at the same place.
The kind of biological evolution we see from those cinema seats can only work if the randomness of the mutations plays out within a very small probabilistic search space - and the groundwork for this was already done when the blueprint for the universe was written into the laws of physics. By the time the second law of thermodynamics gets scrambled into action we have an intricately directed form of entropy: where biology is organised under the constraints of the information implicit in its machinery, and at the same time still remains within the ordinances of the second law of thermodynamics.