Tuesday, 7 July 2015

The Unique Beauty Of Capitalism's Success Story

I want to show you two pictures, and ask you to think about what they have in common….

Here is picture 1 - it's a murmuration of starling birds preparing to roost:

Here is picture 2 - it's a shot of Manhattan:

The commonality I have in mind is that they are both the result of what's known in complex systems theory as self-organising structures, where each individual is contributing to the whole in looking after its own interests. The starlings are using basic rules determining how each individual of the flock responds to its neighbours. The most notable thing is that one doesn’t need any governing central planning principle to underpin the system – all that’s needed is the procedures for each bird to look after itself, and those beautiful flight patterns emerge in collective form. 
The starling murmuration tells us plenty about how we went from primitive hunter gatherers to citizens of places like Manhattan in just a few millennia, and how once the wheels of industry were in motion the acceleration of our progress exponentiated. The primary driving force of this has been trade, and the value created (signalled by prices and behaviour) in a supply and demand market
Think back to what the first transactions might have looked like. Once upon a time, a hunter-gatherer trades a piece of meat for some fur. The trade is beneficial to both parties because each gets something they value more than the thing they parted with. Nowadays, in this far more sophisticated age, each day involves millions of transactions, where value is created because for the buyers the price they pay is valued less than the item they are purchasing, and for the sellers the income they receive is valued more than the item they are selling.
This is the primary process that has led to our being much more advanced and prosperous humans in such a relatively short time: it is one of the most stupendous self-organising mechanisms the world has ever seen - so complex that it cannot possibly be controlled from on high, yet so efficient that it has been the driving force that has lifted tens of millions out of poverty, constructed things like the city of Manhattan, engendered an interconnected world of travel and information-sharing, brought us a rich variety of goods and services from a multitude of diverse cultures, paid for health care, education, social services, defence, armed forces, emergency services, medicine, science, the arts, roads, technological advances, and countless other illuminations on the vast circuit board of human progression.
It's always worth bearing that in mind when you have a downer on capitalism. The reality is, it almost resembles a miracle how through the local activity of individuals looking after their own local interests the wider results produce things as wonderful as Manhattan, worldwide travel and the Internet.
The way that trade and competition brings about self-interest for the good of humankind, where prices near-perfectly match supply and demand and create so much value and advancement, is one of the most uniquely beautiful things the human story has ever witnessed. What's particularly remarkable about it is that there is almost nothing else in the world quite so efficient - even biological evolution has no mechanism quite as spectacularly efficient as this.