That's right! Haven't read the book but I'm somewhat familiar with the basic idea.
Many successful frameworks in other areas have adopted a similar approach, like agile software development that uses an iterative approach to incrementally deliver value and reduce risk.
But it is possible to misapply evolutionary thinking too, which will often look exactly like an appeal to nature. (Nature does it this way so it must be optimal/better and we should do the same.)
"Yet we are also completely justified in regulating at least some aspects of a free market in order to avoid the worst outcomes (as we are already doing). The question is how often, in what circumstances, and to what extent."
Great article Philip, comparing the market with nature's system of natural selection. I am planning on article on this very topic! As for your question, to what extent should the market be regulated, I follow two overarching principles. First, the market cannot create the conditions that sustain it. That is, some regulation/ law is required; a free-for-all is not possible. Second, those regulations should be as minimally forceful and intrusive as possible, but not less. Finding that balance is difficult and probably requires making it easier for governments to undo non-functional laws and regulations.
One reason to lean towards fewer/minimally intrusive regulations (but not less) is that in reality most laws and policys seem hard to undo in practice. Once a law or framework has been added they are rarely repealed. So the regulatory burden doesn't decrease, but only increases in practice, probably stifling innovation and growth etc.
We also tend to "overregulate" in practice because we (people/governments) aren't willing to accept the tradeoffs and negative externalities that come with a market economy, even though overall calculus is positive for almost everyone over time. (i.e. economic growth and wealth.) When people see injustices in society they feel that "someone" must do something about it, but that something often makes things worse overall either because the policy or law has unintended consequences or because it stifles growth in the long term.
So to your point I think we'd do better as a society if politicians, law makers and the public leaned towards fewer or lighter regulations, rather than more. Nevertheless, you need to look at every situation or problem and make the right call for that circumstance.
But we’ve deregulated for decades in the U.S. And non of the oil and gas companies making billions for decades have paid for the externalities they’ve inflicted on everyone.
I can't speak to the specifics of deregulation and/or subsidies for gas and oil in the US. But I don't think that undermines the general point of leaning toward fewer regulations, and specifically "to look at every situation or problem and make the right call for that circumstance."
With regard to the externalities from oil and or more generally fossil fuels, I agree that we haven't addressed those properly (hence climate change and millions of people dying from pollution from coal etc), but I think the way to do that mainly is from an (ideally Global) Tax on CO2 (or green house gas emissions) such that the market can adequately price in the very real externalities the world suffers as a result of fossil fuels.
Yes. There is a kind of asymmetry in government, it can only make laws and doesn't really have a clear path for removing them. I envision a future where someone can take the law to court, literally, if that law does not serve its intended purpose, and the court can send the law back for revision or elimination.
I feel like I've this seen idea in a movie or TV-show at some point, but I can't remember where. In any case, this seems like a very necessary step to avoid legal "bloat" in our society.
The inherent problem with capitalism isn’t a problem unique to capitalism: it tends to augment power imbalances.
While it’s true that the market has given us so much, it has also increased the power differentials. Without going into detail at this point, that’s why even homeless people have mobile phones.
We produce more stuff, but the profits of selling that stuff allow the richest to buy up assets. The sheer amount of money chasing assets, particularly land, is such that housing is less and less affordable, while products are more affordable.
In the West, we profited from the arbitrage of globalisation while the houses we lived in got snapped up by landlords. That arbitrage is balancing out now.
Fewer people own assets now and that trend can only continue. As the increasing monopolisation of housing increases, people will only spend more and more of their income on rent.
I’m not sure there’s a policy out there that can buck this trend. It will reach a point where we all become peasants in a feudalistic world, or overthrow the whole thing. I’m not advocating for either outcome; just making a prediction.
I hope it doesn't come that in the end. But I think that the rise of the YIMBY movement, for example, and the realization that a lot of issues come down to the fact that we don't build enough, is a cause for optimism.
While I don't disagree that capitalism produces inequality ("power differentials"), perhaps often unfairly so, it might not be as bad as the Picketty's of the world claim, and that in the end inequality is the price we must pay for prosperity. Which doesn't mean we can't better than now, even under a largely capitalist society.
I actually just published a longer essay arguing for the primacy of economic growth as a tool to improving the world over the long term, which addresses some of the points you raise (although not housing specifically). https://philipskogsberg.substack.com/p/the-engine-of-progress-why-growth
My current take is that with capitalism, markets, and so on we can easily point to a lot of problems and externalities, and it's easy to imagine much better systems. But it might be a lot like our relationship to democracy - it's the worst of all systems but it's still better than everything else. Let's be careful before we throw away the baby with the bathwater.
I've been researching this same subject and I'm so relieved to see you cover it so well. Whether or not something should be more free or more regulated depends highly on what it is. Some things need to be more regulated, somethings need to be less. There is no magic wand that can apply these settings across the board.
Yea it’s very much something that needs to be done on a case by case basis. The key is understanding the specific consequences and externalities to be regulated or taxed. Rather than applying an ideological shotgun approach. Easier said than done of course , but still.
I find evolutionary thinking to be useful in almost all domains of social science.
Matt Ridley's "The Evolution of Everything: How Ideas Emerge" makes a strong case for it.
That's right! Haven't read the book but I'm somewhat familiar with the basic idea.
Many successful frameworks in other areas have adopted a similar approach, like agile software development that uses an iterative approach to incrementally deliver value and reduce risk.
But it is possible to misapply evolutionary thinking too, which will often look exactly like an appeal to nature. (Nature does it this way so it must be optimal/better and we should do the same.)
"Yet we are also completely justified in regulating at least some aspects of a free market in order to avoid the worst outcomes (as we are already doing). The question is how often, in what circumstances, and to what extent."
Great article Philip, comparing the market with nature's system of natural selection. I am planning on article on this very topic! As for your question, to what extent should the market be regulated, I follow two overarching principles. First, the market cannot create the conditions that sustain it. That is, some regulation/ law is required; a free-for-all is not possible. Second, those regulations should be as minimally forceful and intrusive as possible, but not less. Finding that balance is difficult and probably requires making it easier for governments to undo non-functional laws and regulations.
Thanks! I think this is spot on.
One reason to lean towards fewer/minimally intrusive regulations (but not less) is that in reality most laws and policys seem hard to undo in practice. Once a law or framework has been added they are rarely repealed. So the regulatory burden doesn't decrease, but only increases in practice, probably stifling innovation and growth etc.
We also tend to "overregulate" in practice because we (people/governments) aren't willing to accept the tradeoffs and negative externalities that come with a market economy, even though overall calculus is positive for almost everyone over time. (i.e. economic growth and wealth.) When people see injustices in society they feel that "someone" must do something about it, but that something often makes things worse overall either because the policy or law has unintended consequences or because it stifles growth in the long term.
So to your point I think we'd do better as a society if politicians, law makers and the public leaned towards fewer or lighter regulations, rather than more. Nevertheless, you need to look at every situation or problem and make the right call for that circumstance.
But we’ve deregulated for decades in the U.S. And non of the oil and gas companies making billions for decades have paid for the externalities they’ve inflicted on everyone.
I can't speak to the specifics of deregulation and/or subsidies for gas and oil in the US. But I don't think that undermines the general point of leaning toward fewer regulations, and specifically "to look at every situation or problem and make the right call for that circumstance."
With regard to the externalities from oil and or more generally fossil fuels, I agree that we haven't addressed those properly (hence climate change and millions of people dying from pollution from coal etc), but I think the way to do that mainly is from an (ideally Global) Tax on CO2 (or green house gas emissions) such that the market can adequately price in the very real externalities the world suffers as a result of fossil fuels.
thanks for the comment!
Yes. There is a kind of asymmetry in government, it can only make laws and doesn't really have a clear path for removing them. I envision a future where someone can take the law to court, literally, if that law does not serve its intended purpose, and the court can send the law back for revision or elimination.
I feel like I've this seen idea in a movie or TV-show at some point, but I can't remember where. In any case, this seems like a very necessary step to avoid legal "bloat" in our society.
The bloat is like free radicals building up in the body, death by a thousand cuts.
The inherent problem with capitalism isn’t a problem unique to capitalism: it tends to augment power imbalances.
While it’s true that the market has given us so much, it has also increased the power differentials. Without going into detail at this point, that’s why even homeless people have mobile phones.
We produce more stuff, but the profits of selling that stuff allow the richest to buy up assets. The sheer amount of money chasing assets, particularly land, is such that housing is less and less affordable, while products are more affordable.
In the West, we profited from the arbitrage of globalisation while the houses we lived in got snapped up by landlords. That arbitrage is balancing out now.
Fewer people own assets now and that trend can only continue. As the increasing monopolisation of housing increases, people will only spend more and more of their income on rent.
I’m not sure there’s a policy out there that can buck this trend. It will reach a point where we all become peasants in a feudalistic world, or overthrow the whole thing. I’m not advocating for either outcome; just making a prediction.
I hope it doesn't come that in the end. But I think that the rise of the YIMBY movement, for example, and the realization that a lot of issues come down to the fact that we don't build enough, is a cause for optimism.
While I don't disagree that capitalism produces inequality ("power differentials"), perhaps often unfairly so, it might not be as bad as the Picketty's of the world claim, and that in the end inequality is the price we must pay for prosperity. Which doesn't mean we can't better than now, even under a largely capitalist society.
I actually just published a longer essay arguing for the primacy of economic growth as a tool to improving the world over the long term, which addresses some of the points you raise (although not housing specifically). https://philipskogsberg.substack.com/p/the-engine-of-progress-why-growth
My current take is that with capitalism, markets, and so on we can easily point to a lot of problems and externalities, and it's easy to imagine much better systems. But it might be a lot like our relationship to democracy - it's the worst of all systems but it's still better than everything else. Let's be careful before we throw away the baby with the bathwater.
I've been researching this same subject and I'm so relieved to see you cover it so well. Whether or not something should be more free or more regulated depends highly on what it is. Some things need to be more regulated, somethings need to be less. There is no magic wand that can apply these settings across the board.
Thanks!
Yea it’s very much something that needs to be done on a case by case basis. The key is understanding the specific consequences and externalities to be regulated or taxed. Rather than applying an ideological shotgun approach. Easier said than done of course , but still.