Synthesis http://www.synthesisips.net Wed, 26 Jan 2022 12:41:05 +0000 en-US hourly 1 https://wordpress.org/?v=6.1.5 Global Incoherence http://www.synthesisips.net/blog/global-incoherence/ http://www.synthesisips.net/blog/global-incoherence/#respond Fri, 17 Jul 2015 16:43:11 +0000 http://www.synthesisips.net/?p=956 By Greg Fisher I was recently asked to take part in a roundtable co-organised by Nik Gowing and CIMA (the Chartered Institute for Management Accountants). The roundtable was designed to feed in to the Churchill 2015 conference in November, and was on the subject of ‘thinking the unthinkable’ with regard to global leadership. The premise, […]

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By Greg Fisher

I was recently asked to take part in a roundtable co-organised by Nik Gowing and CIMA (the Chartered Institute for Management Accountants). The roundtable was designed to feed in to the Churchill 2015 conference in November, and was on the subject of ‘thinking the unthinkable’ with regard to global leadership. The premise, which I agree with, is that the world is changing rapidly, such that those in positions of authority who are meant to lead us through such problems are being overwhelmed by multiple wicked problems.

Complex-system-US-Afghan-mindmap1

How to plan when you don’t know what’s going on? courtesy of Oxfam

These wicked problems include: climate change; ISIS; the Arab Spring (which I see as a generally good thing); the financial crisis of 2008 and the ensuing global recession; and rising tensions between the West and Russia.

I thought I would share my thoughts, some of which I shared at the roundtable, on this (hugely complicated) subject via a blog article.

Ultimately, I see these wicked problems arising from a tension between two broad points: the world looks more like a closed system that is now hitting capacity constraints; and we are employing a ‘simple systems’ mind-set to what are complex system problems.

The World as a Single, Closed System

The first point is that the world is now behaving more like a single, closed system than at any point in human history. It isn’t actually a closed system because it is open to the sun’s energy but, if I were to put it bluntly, there is no longer any ‘outside’ from which we can import solutions and export problems. At the same time, feedback effects have become more pronounced, and the earth’s capacity constraints have begun to be tested by the simultaneous growth of the human population and its average per capita consumption.

earthThese features appear to have arisen from the stunning advances in transportation technology over the past hundred years or so and, more recently, by the advancement of information and communication technology. All of this has cultivated a much more integrated, interacting world.

Prior to this, for several hundred years, the world was organised, both in a real and a legal sense, in to nation states, which operated – broadly speaking – like small open systems. In such a world, you can generally ignore the impact you have on the wider host system. You can also export some types of problem (sending convicts to other shores, for example) and import solutions to other types of problem (invading resource-rich countries, importing slaves etc.).

And, generally speaking, the more powerful countries were more able to seek solutions from their outside than the less powerful, and they could do this without any expectation of a significant detrimental response / feedback. Hence, empires were built.

We have moved away from this world for the reasons cited above: transportation technology, ICT, and increases in population and per capita consumption. Of course, the resulting wicked problems are not only important at the global level for national politicians and diplomats: they are also challenging the senior executives of organisations of varying sizes and types. The environment for many directors has changed, and continues to change, rapidly.

The ‘Simple Systems’ Mind-Set

The second point is that the dominant way of thinking in the world is reductionist, linear and static. Reductionism is the idea that we can break a whole system in to parts to understand it; linearity is the notion that cause is proportional to effect (i.e. small causes create small effects and vice versa); and by static I mean that dynamical effects are either ignored or under-emphasised.

In my opinion, this ‘simple systems’ thinking is demonstrated most clearly in orthodox Western economics. But economics is not merely an exemplar here, it is also important because it has widespread effects on corporations and governments all over the world. It frames decision making concerned with trillions of dollars of resources.

Now, an important point to note here is that the simple systems mind-set is a reasonable approximation for decision-making in the old world of multiple small open systems. Indeed, the relationship between the two is brought in to focus if we make the inverse point: we can imagine this simpler mind-set emerging in this old world as a reasonable approximation of how it works. Our pattern-recognition capabilities are, after all, concerned with reasonably approximate hypotheses.

In my opinion, and this is the core point of this article, the global wicked problems listed above have arisen because we are living in a world for which the simple systems mind-set is no longer a sufficient approximation. Among other things, the world in which we now live has no outsides, it is prone to cascading effects (like global financial crises) and acute feedback effects.

Examples

070705

Bus No. 30, 7 July 2005

A few examples of wicked problems are worth dwelling on.

In yester-year, oil deficient countries could invade less militarily powerful nations without too much expectation of backlash. By contrast, in recent years, when oil-rich countries have been invaded we have seen such acts met by terrorism performed by members of the indigenous population who identified with the invaded country (cf the 7 July 2005 London bombings).

Climate change is the most obvious example of small, open systems externalizing their problems. This looks like a classic tragedy of the commons problem (although we should be careful of mapping metaphors).

Perhaps the most provocative example I would offer is the current Ukrainian crisis. Most people in the West now see this situation merely as Russian aggression but I think this aggression was a response to something. In my opinion, this crisis was cultivated by short-sighted Western foreign policy, starting with Western powers supporting an uprising against the democratically elected President of Ukraine, Viktor Yanukovych in February 2014.

With the passage of time, it is easy to associate Yanukovych with his alleged order to fire on civilians; however, it is important to delve in to the detailed chronology of what happened before this. The opposition forces had already rallied and it looked like they would overthrow Yanukovych (who, I reiterate, was democratically elected).

In all, it appears Western governments set aside their emphasis on democracy because they thought it suited them to have a pro-European president of Ukraine. After Yanukovych was overthrown, Western institutions supported the incumbent government (which had not been elected so it would be more accurate to describe what happened as a coup d’état) e.g. the IMF provided a $3.2bn loan in May 2014.

buk aa missile

The Buk Anti-Aircraft Battery, thought to have been used in the downing of Flight MH14

The point being made here is that Western foreign policy makers did not appear to imagine that Russia would respond by annexing the Crimea and supporting rebels in Eastern Ukraine. I would argue that this was because their thinking was based on simple system thinking, which includes a lack of foresight.

I hope readers see that none of these comments are intended to support Yanukovych firing on civilians, nor Putin’s action at home or abroad. I am merely shedding light on how myopic Western foreign policy was vis-à-vis supporting the ousting of Yanukovych.

Conclusion – What To Do?

My colleague, Rhett Gayle, adopted a pertinent word when we discussed this in preparing for the CIMA roundtable: coherence. I will expand on this in another article but here I will simply say that to survive and to be sustainable a system has to be coherent. What I mean by this is that the so-called parts of a system should not be working in conflict with each other (Francis Heylighen talks about ‘alignment’); rather they must be sufficiently consistent with each other to support existence and sustainability. This tension between the growing number of wicked problems in the world and the ubiquity of the simple systems mind-set points strongly towards a current state of global incoherence.

This leads us to an inevitable question: how do we move to a point of global coherence?

birds flocking

Understanding complex behaviour: birds self-organising

Simply put, we need to develop and use a mind-set which is more fitting of today’s complex world. It should not surprise readers to find me writing that the complexity sciences offer a lens to see the world in a way which is closer to how the world now works. It recognises system-wide emergent properties which reductionist strategies are blind to; it appreciates non-linearity where small changes to a system can give way to large changes; and it is appreciative of dynamical effects, among other things. It also teaches humility and caution.

I should emphasise, however, that while I view the complexity sciences as a better approximation of today’s reality than the simpler mind-set described above, I am not arguing that it’s perfect, as if it were the only answer we need for all time. Paraphrasing slightly, two of my colleagues (Paul Ormerod and Hank Sohota) have both pointed out that the simpler mind-set is a special case of a more complex perspective on the world. Human thought often evolves in this way (Einstein noted in one of his books that he saw classical physics as a special case of General Relativity, which holds for low speeds and low gravity). It is entirely possible that a subsequent way of thinking, which we cannot yet imagine, will come to hold complexity science as a special case.

But, in the meantime, I would argue that the complexity sciences are befitting of our time.

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Sustainable Forests: Government Control vs Social Self-Organization http://www.synthesisips.net/blog/sustainable-forests-government-control-vs-social-self-organization/ http://www.synthesisips.net/blog/sustainable-forests-government-control-vs-social-self-organization/#respond Fri, 17 Jul 2015 16:01:19 +0000 http://www.synthesisips.net/?p=953 By Greg Fisher Recently I was involved in a small piece of work funded by an NGO called PEFC (via AKC Global), which is the world’s largest certifier of sustainable forests. One of the most interesting things I witnessed in this work was the contrast between two perspectives in this domain: one which held that […]

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By Greg Fisher

Recently I was involved in a small piece of work funded by an NGO called PEFC (via AKC Global), which is the world’s largest certifier of sustainable forests. One of the most interesting things I witnessed in this work was the contrast between two perspectives in this domain: one which held that government laws and regulations should lead the processes of anti-deforestation and afforestation; and another which promoted what I would call social-self-organisation, where non-government actors lead the way.

forest_beams

Courtesy of harmoniaphilosophica

I thought I would unearth some of what’s going on in this domain to show how social governance does not necessarily have to be led by governments.

Top-Down-ism

Within the material I read, it was striking how a substantial amount of the framing, notably that coming from government, implied top-down ‘statist’ approaches would work well in efforts to combat deforestation. I don’t think this was civil servants simply talking their own book – it seemed to be more about how they framed the issue. This framing incorporated a deterministic ‘theory of change’ which, to my mind, sat awkwardly with the complexity of reality. In a nutshell, this point of view held that laws and regulations could be imposed on countries, and then enforced, and this would reduce the amount of deforestation. Indeed, substantial amounts of money have been invested in promoting this view: it seems to be at the heart of the European Voluntary Partnership Agreement (VPA) initiative.

I can see at least three problems with this approach. First, illegal logging (which is the focus of VPAs) can be made legal at the stroke of a policymaker’s pen. When looked at from a global level, national laws can seem pretty arbitrary: the impact of making such logging legal, namely the amount of forest saved from logging, might be zero.

Second, good laws can be put in place – sometimes at great cost – but then circumvented e.g. through corruption. Officials endowed with the responsibility to enforce these laws can use their power to take backhanders. Having spent time in the DRC, I can testify to the significance of this (which is not to say this is only a developing world problem).

Third, and possibly most important, forests that are protected by law might not be sustainable. People wishing to know more about what forest sustainability certification requires can look at p10-11 of PEFC’s brochure Promoting Sustainable Forest Management. These pages contain PEFC’s 7 (heart-warming) criteria[1]. A number of these point to pre-requisites for sustainability e.g. maintenance of forest ecosystem health and vitality (no. 2), and the enhancement of biological diversity (no. 4). If some of these criteria are missing from a legally protected forest then it might simply die.

Appropriately, these 7 criteria fit neatly in to a complexity science perspective on ecosystems e.g. the need for diversity, and the protection of enabling functions like soil and water (no. 5).

Social Self-Organisation

In contrast to this top-down approach, there has been a lot of work going on at the grass-roots (literally and metaphorically!) in the past 20 years which has seen vast tracts of forestry land become independently certified as sustainable (I have included some data below).

These developments have largely been about consumers, producers, and intermediaries along the supply chain.PEFC logo

Consumers (and representative groups) have demanded (either directly or indirectly e.g. through consumer research) that products containing forestry produce come from sustainable sources. For example, when shopping for printer paper I will look for certain logos (PEFC, FSC, or an equivalent one).

Producers have responded to this demand by managing their forests sustainably and by seeking ways to demonstrate this. Indeed, this is how PEFC came about in the late 1990s: a group of forest-owners wanting to demonstrate, with third party verification, their sustainability credentials. Certification, along with appropriate verification and auditing processes, have been an important way of marrying consumers with producers.

However, consumers and producers are not the only members of the cast in this play. In our complex economies, with sometimes long and over-lapping supply chains, intermediary organisations exist. These can include commercial companies that create pulp from wood, others which turn pulp in to paper, and wholesale companies which sell to retailers, which then sell to consumers.

It should be clear that, along this supply chain, there is room for dodgy dealings. Produce from non-sustainable sources might enter this entire network if just one company fails in its due diligence.

The credibility of this entire infrastructure rests not only on the producers, therefore. As a response to this, certification has been introduced for organisations along the supply chain.

Now, most of the action across the supply chain is among non-government organisations. Indeed, a lot of what PEFC does is to rubber-stamp national certification schemes which are also non-government. However, it would be wrong to suggest no national government are involved: the Brazilian and Chinese governments are examples of countries where there is such involvement.

This nuance aside, I would call this whole ecosphere of consumer demand, sustainable production and supply-chain certification eco-capitalism because it is almost entirely a response to the consumer, and it is largely independent of governments. One might say here that the eco-consumer is Eco-King.

Of course, many of the environmentalists on the left of the political spectrum would probably balk at associating environmental sustainability with capitalism but it is essentially what is happening here.

Similarly, there are probably free-market fundamentalists who would argue this isn’t really capitalism, as it all seems guided by these strange certification things. Surely selfish utility maximization combined with information asymmetries and prisoner-dilemma dynamics (all supported by a bunch of clever maths) would mean it would all implode in a heap of corruption. My answer to this (admittedly straw-man!) critique is that real world capitalism exists in a field of institutions like sustainability certification. For example, the kitemark has been an important way of signalling minimum standards of certain goods in the UK for the past hundred years. Without the kitemark, certain markets would probably not exist.

Furthermore, institutions[2] like certification have been enabled by organisations like PEFC and FSC, which operate in ways similar to how the British Standards Institute maintains the kitemark.FSC

Pudding Proof

We could argue at length about which of these two approaches – top-down-ism and social self-organisation – is most effective but the proof, as my mother would say, is in the pudding. To this end I would ask: how do these two approaches compare in terms of pure hectarage?

Under the VPA arrangements, over the past 8 or so years 0m hectares of forest have been legally protected under VPA agreements. That’s right, this is not a typo: nothing. By contrast, the increase in forestry land falling under PEFC’s certification umbrella over the same period was c46m hectares, adding to PEFC’s existing stockpile to come to about 263m hectares today. To put this in to perspective, 263m hectares is equivalent to the whole of Finland, France, Germany, Italy, Spain, Sweden and the UK combined.

Of course, it would be easy to argue that PEFC started in 1999 so it had a head start; however, it is even easier to argue that the budgets available to the EU governments dwarf the funding available to PEFC (its current operating budget is about £2.5m per annum).

The Crux

The overarching point I want to make in this article is that what I would call social governance architecture does not need to be run by or through governments. The governance of the whole sustainable forest infrastructure is widely distributed and does not run through a single, global hierarchical organisation. Indeed, PEFC would see itself as a part of the enabling environment in this domain, not as a top-down controller.

However, before any libertarians start applauding too loudly, this is not an argument for there being no role for governments, either in this specific domain of forestry sustainability nor in social governance generally.

In other domains, collective action can only be enabled by governments because individual actors are typically not well placed to achieve this. Individuals are often located in an environment or context with little power to change the whole context. Consider, for example, the coordination required in large infrastructure projects like Crossrail. In these circumstance only governments have the power to bring about this type of re-patterning of the world.

Indeed, I would argue that governments might have some role to play in sustainability forestry governance. I can think of two: in countries where corruption is a low risk, the governments might help augment the credibility of certification schemes e.g. through the use of law and justice systems. Second, to catalyse the spread of non-government governance, especially in poorer countries where forests are being felled at an alarming rate.

FOREST_Greenpeace

The Boreal Forest (courtesy of Greenpeace)

 

[1] In the spirit of balance and fairness, I should point out that there are many other sustainable forest certifiers: PEFC’s main ‘competitor’ is the Forest Stewardship Council (FSC), and there are a number of others. PEFC and FSC are by far the largest.

[2] I use the term here more in the academic sense: institutions can be processes, like certification, or things like legal entities with buildings and people.

 

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A New Kind of Economy is Born http://www.synthesisips.net/blog/a-new-kind-of-economy-is-born/ http://www.synthesisips.net/blog/a-new-kind-of-economy-is-born/#respond Mon, 07 Oct 2013 16:40:53 +0000 http://www.synthesisips.net/?p=918 Social Decision-Makers Beat the “Homo Economicus” By Dirk Helbing The Internet and Social Media change our way of decision-making. We are no longer the independent decision makers we used to be. Instead, we have become networked minds, social decision-makers, more than ever before. This has several fundamental implications. First of all, our economic theories must […]

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Social Decision-Makers Beat the “Homo Economicus”

By Dirk Helbing

The Internet and Social Media change our way of decision-making. We are no longer the independent decision makers we used to be. Instead, we have become networked minds, social decision-makers, more than ever before. This has several fundamental implications. First of all, our economic theories must change, and second, our economic institutions must be adapted to support the social decision-maker, the “homo socialis”, rather be tailored to the perfect egoist, known as “homo economicus”.

The financial, economic and public debt crisis has seriously damaged our trust in mainstream economic theory. Can it really offer an adequate description of economic reality? Laboratory experiments keep questioning one of the main pillars of economic theory, the “homo economicus”. They show that the perfectly self-regarding decision-maker is not the rule, but rather the exception [1,2]. And they show that markets, as they are organized today, are undermining ethical behavior [3].

Latest scientific results have shown that a “homo socialis” with other-regarding preferences will eventually result from the merciless forces of evolution, even if people optimize their utility, if offspring tend to stay close to their parents [4].[1] Another, independent study was recently summarized by the statement “evolution will punish you, if you’re selfish and mean” [5]. Is this really true? And what implications would this have for our economic theory and institutions?

In fact, the success of the human species as compared to others results mainly from its social nature. There is much evidence that evolution has created different incentive systems, not just one: besides the desire to possess (in order to survive in times of crises), this includes sexual satisfaction (to ensure reproduction), curiosity and creativity (to explore opportunities and risks), emotional satisfaction (based on empathy), and social recognition (reputation, power). Already Adam Smith noted: “How ever selfish man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it.”[2]

Dirk Helbing, professor of sociology at ETH Zurich and complexity scientist concludes: “The social nature of man has dramatic implications, both for economic theory and for the way we need to organize our economy.” As we are more and more connected with others, the “homo economicus”, i.e. the independent decision-maker and perfect egoist, is no longer an adequate representation or good approximation of human decision-makers. “Reality has changed. We are applying an outdated theory, and that’s what makes economic crises more severe,” says Helbing.

Outdated theory, outdated institutions

In fact, recent experimental results suggest that the majority of decision-makers are of the type of a “homo socials” with equity- or equality-oriented fairness preferences [1,6]. The “homo socialis” is characterized by two features: interdependent decision-making that takes into account the impact on others and conditional cooperativeness. However, the “homo socialis” takes self-determined, free decisions. He is not ripping off others, afterwards giving back some of the benefits to others through taxes or philanthropy. The “homo socialis” decides rather differently, more considerately, recognizing that friendly and fair behavior can generate better outcomes for everybody.

“But social behavior is vulnerable to exploitation by the ‘homo economicus’,” continues Helbing. In a selfish environment, the ‘homo socialis’ cannot thrive. In other words, if the settings are not right, the ‘homo socialis’ behaves the same as the ‘homo economicus’. “That’s probably why we haven’t noticed its existence for a long time,” believes Helbing. “Our theories and institutions were tailored to the ‘homo economicus’, not to the ‘homo socialis’.”

In fact, many of today’s institutions, such as homogeneous markets with anonymous exchange, undermine cooperation in social dilemma situations, i.e. situations in which cooperation would be favorable for everyone, but non-cooperative behavior promises additional benefits [7, Fig. 2].

New institutions for a global information society

In the past we have built public roads, parks and museums, schools, libraries, universities, and homogeneous markets on a global scale. What would be suitable institutions for the 21st century? “Reputation systems can transfer the success principles of social communities to our globalized society, the global village”, suggests Helbing. Most people and companies care about reputation. Therefore, reputation systems could support socially oriented decision-making and cooperation, with better outcomes for everyone [8]. In fact, reputation systems spread on the Web 2.0 like wildfire. People rate products, sellers, news, everything, be it at amazon, ebay, or trip adviser. We have become a “like it” generation, because we listen to what our friends like.

Importantly, recommender systems should not narrow down socio-diversity, as this is the basis of happiness, innovation and societal resilience. “We don’t want to live in a filter bubble, where we don’t get an objective picture of the world anymore,” says Helbing with reference to Eli Pariser [9]. Therefore, reputation systems should be pluralistic, open, and user-centric. “Pluralistic reputation systems are oriented at the values and quality criteria of individuals,” explains Helbing, “rather than recommending what a company’s reputation filter thinks is best. Self-determination of the user is central. We must be able to use different filters, choose the filters ourselves, and modify them.” The diverse filters would mine the ratings and comments that people leave on the Web, but also consider how much one trusts in certain information sources.

“Reputation creates benefits for buyers and sellers,” says Helbing. A recent study shows that good reputation allows sellers to take a higher price, while customers can expect a better service [10]. Reputation systems may also promote better quality as well as socially and environmentally friendly production, suggests Helbing. “This could be a new approach to reach more sustainable production, based on self-regulation rather than enforcement by laws.” One day, reputation systems may also be used to create a new kind of money, speculates Helbing. The value of “qualified money” would depend on it’s reputation and thereby create incentives to invest in ways that increase a money unit’s reputation. It might create a more adaptive financial system and help to mitigate the recurrent crises we are facing since hundreds of years. But the details still have to be worked out.

Benefits of a self-regulating economy

Reputation systems could overcome some of the unwanted side effects of anonymous exchange thanks to pseudonymous or personal interactions. Thereby, they could potentially counter “tragedies of the commons” such as global warming, environmental exploitation and degradation, overfishing, … – constituting some of our major unsolved global problems. We can witness such kinds of “social dilemma problems” everywhere. So far, governments try to fix them with top-down regulations and punitive institutions. However, these are very expensive, and often quite ineffective. “Basically all industrialized countries suffer from exploding debts,” says Helbing. “I believe we cannot pay for this much longer, we are at the limit. We need a new approach.” As Albert Einstein pointed out: “We cannot solve our problems with the same kind of thinking that created them.”

Institutions supporting the “homo socialis” such as suitably designed reputation systems would enable a self-regulation of socio-economic systems. “But self-regulation does not mean that everyone can choose the rules he likes,” explains Helbing. “It only works with an other-regarding element. The self-regulation rules must be able to achieve a balance between the interests of everyone, who is affected by the externalities of a decision.”

Helbing explains the benefits: “Other-regarding decisions can overcome the classical conflict between economic and social motives. Self-regulation could also overcome the struggle between the bottom-up organization of markets and the top-down regulation by politics. This would remove a lot of friction from our current system, making it much more efficient – in the same way as the transition from centrally planned economies to self-organized markets has often created huge efficiency gains.”

This can be illustrated with an example from urban traffic management. “Traffic control is a problem where not everybody’s desires can be satisfied immediately and at the same time, like in economic systems. It is a so-called NP-hard optimization problem – the computational effort explodes with system size, as for many economic optimization problems, e.g. in production and logistics.” The study compares three kinds of control: A centralized top-down regulation by a traffic center, the classical control approach, and two decentralized control approaches. The first one assumes that each intersection independently minimizes the waiting times of approaching vehicles, as a “homo economicus” would do. The second one decides in an other-regarding way: it interrupts the minimization of waiting times, when this is needed to avoid spill-over effects at neighboring intersections. Helbing summarizes: “The ‘homo economicus’ approach works well up to a moderate utilization of intersections, but queue lengths get out of control long before the intersection capacity is reached. The bottom-up self-regulation based on the principle of the ‘homo socialis’ approach beats both, the centralized top-down regulation and the bottom-up self-organization based on principles of the ‘homo economicus’. Other-regarding behavior improves the coordination among neighboring intersections. It makes Adam Smith principle of the ‘invisible hand’ work even at high utilizations.”

Economics 2.0: Emergence of a participatory market society

But will such a self-regulating system ever be implemented? Helbing is convinced: “It’s already on its way. The Web 2.0, in particular reputation systems and social media are driving the transition towards a new economy, the economy 2.0. We see already a new trend towards decentralized, local production and personalized products, enabled by 3D printers, app stores, and other technologies.”

Such developments will eventually create a participatory market society. “Prosumers”, i.e. co-producing consumers, the new “makers” movement, and the sharing economy are some examples illustrating this. “Just think of the success of Wikipedia, Open Streetmap or Github. Open Streetmap now provides the most up-to-date maps of the world, thanks to more than 1 million volunteers.” Helbing stresses: “This is just the beginning of a new era. A new intellectual framework is emerging, and a creative and participatory era is ahead. The paradigm shift towards participatory bottom-up self-regulation may be bigger than the paradigm shift from a geocentric to a heliocentric worldview. If we build the right institutions for the information society of the 21st century, we will finally be able to mitigate some very old problems of humanity. ‘Tragedies of the commons’ are just one of them. After so many centuries, they are still plaguing us, but this needn’t be.”

Further Reading:

D. Helbing, Economics 2.0: The Natural step towards a self-regulating, participatory market society, Evolutionary and Institutional Economics Review (2013), see

https://www.jstage.jst.go.jp/article/eier/10/1/10_3/_article

and also

https://www.youtube.com/watch?v=ZHYxMHm4t6U or http://www.youtube.com/watch?v=Ef2Ag_rwouo

[1] Henrich, J., R.Boyd, S. Bowles, C. Camerer, E. Fehr, H. Gintis, and R. McElreath, “In search of homo economicus: behavioral experiments in 15 small-scale societies,” Am. Econom. Rev. 91, 73-78 (2001).

[2] Murphy, R. O., K. A. Ackermann, and M. J. J. Handgraaf, “Measuring social value orientation,” Judgment and Decision Making 6(8), 771-781 (2011).

[3] Falk, A. and N. Szech, “Morals and Markets,” Science 340, 707-711 (2013).

[4] Grund, T., C. Waloszek, and D. Helbing, “How Natural Selection Can Create Both Self-and Other-Regarding Preferences, and Networked Minds,” Scientific Reports 3:1480 (2013), see

http://www.nature.com/srep/2013/130319/srep01480/full/srep01480.html

[5] Adami, C. and A. Hintze, “Evolutionary instability of zero-determinant strategies demonstrates that winning is not everything,” Nature Communications 4:2193 (2013); Evolution will punish you, if you’re selfish and mean, see

http://esciencenews.com/articles/2013/08/01/evolution.will.punish.you.if.youre.selfish.and.mean

[6] Berger, R., H. Rauhut, S. Prade, and D. Helbing, “Bargaining over waiting time in ultimatum game experiments,” Social Science Research 41, 372-379 (2012).

[7] Helbing, D. “Globally networked risks and how to respond,” Nature 497, 51-59 (2013).

[8] Milinski, M., D. Semmann, and H. J. Krambeck, “Reputation helps solve the tragedy of the commons,” Nature 415, 424-426 (2002).

[9] Pariser, E., Filter Bubble (Carl Hanser, 2012).

[10] Przepiorka, W., “Buyers pay for and sellers invest in a good reputation: More evidence from eBay,” The Journal of Socio-Economics 42, 31-42 (2013).

 

Dirk Helbing is Professor of Sociology, in particular of Modeling and Simulation, and member of the Computer Science Department at ETH Zurich. He earned a PhD in physics and was Managing Director of the Institute of Transport & Economics at Dresden University of Technology in Germany. He is internationally known for his work on pedestrian crowds, vehicle traffic, and agent-based models of social systems. Furthermore, he coordinates the FuturICT Initiative (http://www.futurict.eu), which focuses on the understanding of techno-socio-economic systems, using Big Data. His work is documented by hundreds of scientific articles, keynote lectures and media reports worldwide. Helbing is elected member of the World Economic Forum’s Global Agenda Council on Complex Systems and of the German Academy of Sciences “Leopoldina”. He is also Chairman of the Physics of Socio-Economic Systems Division of the German Physical Society and co-founder of ETH Zurich’s Risk Center.

 

Notes:


[1] Experts should note that there has been research on so-called “altruistic behavior” in social dilemma situations such as the prisoner’s dilemma since more than 3 decades. However, if scientists would have understood the “homo socialis” with other-regarding preferences already before, the key concept of the “homo economicus” should have disappeared from the economic literature since a long time, but it didn’t for a reason. In fact, the increasing empirical and experimental evidence for fairness preferences and unexpectedly high levels of cooperation in one-shot prisoner’s dilemma, dictator and ultimatum games have been waiting for a convincing theoretical explanation until very recently. It is important here to distinguish between other-regarding preferences and cooperative (“altruistic”) behavior. Other-regarding preferences means that people intentionally do not maximize their payoffs, but try to consider and improve the benefits of others. Most game theoretical work is strictly compatible with the concept of “homo economicus”, identifying mechanisms that make it advantageous in one way or another to cooperate. For example, if the “shadow of the future” in repeated prisoner’s dilemma interactions is long enough, it creates a higher payoff when people cooperate, and that’s why they do it. In other words, some mechanisms such as repeated interactions, punishment, transfer payments, and others change the payoff structure of a prisoner’s dilemma game such that there is no dilemma anymore. Martin Nowak has mathematically shown that many such mechanisms can be understood with Hamilton’s rule, according to which people cooperate when the benefits of cooperation exceed the costs. Other work shows that cooperation in prisoner’s dilemma games may survive if people imitate more successful behavior of neighbors, but if one believes in rational choice, why should people imitate, if they can reach a higher payoff by another behavior? In fact, all such cooperation in spatial prisoner’s dilemma games disappears, if imitation is replaced by a “best response” rule, which assumes a strict maximization of utility, based on the previous decision of the interaction partners. In Ref. [4], Grund et al. have combined such a “best response” rule with standard evolutionary rules of mutation and selection, when people reproduce. The unexpected outcome was a “homo socialis”, if offspring stay close to their parents, which they often do. But the transition is not smooth. It requires the population to go through a phase where unconditionally “friendly” behavior is dysfunctional, which happens only by “mistake” (due to mutations). Random spatio-temporal coincidence of people with friendly traits is equally important for other-regarding preferences to emerge. However, conditionally cooperative behavior resulting from other-regarding preferences may also occur between strangers, i.e. they do not require genetic relatedness, as the following movie shows: http://vimeo.com/65376719. In any case, spatio-temporal correlations (here: the co-evolution of individual preferences and behavior) can promote cooperation more than expected for a payoff-maximizing “homo economicus”. These new discoveries mean that key concepts of both, the theory of evolution and of economics, must be reconsidered.

[2] Smith, A., The Theory of Moral Sentiments (A. Millar, London, 1759).

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What to make of the complexity paradigm? http://www.synthesisips.net/blog/what-to-make-of-the-complexity-paradigm/ http://www.synthesisips.net/blog/what-to-make-of-the-complexity-paradigm/#comments Mon, 07 Oct 2013 16:39:27 +0000 http://www.synthesisips.net/?p=902 by Ben King I would like to thank Greg Fisher for inviting me to write this blog, and also thanks to Rhett Gayle and Torben Kaas for commenting on earlier drafts. My primary interest is identity and cultural evolution as a complex adaptive system, a focus that has led me through multiple disciplines both objective […]

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by Ben King

I would like to thank Greg Fisher for inviting me to write this blog, and also thanks to Rhett Gayle and Torben Kaas for commenting on earlier drafts. My primary interest is identity and cultural evolution as a complex adaptive system, a focus that has led me through multiple disciplines both objective and subjective. These all seemed to point in the same direction, to the conclusion that the emerging complexity paradigm holds revolutionary potential of unprecedented breadth. I wanted to use this opportunity to share some thoughts on the nature of the complexity paradigm, as well as its potential impact on cultural evolution. With so much at stake – global warming, resource depletion, growing complexity etc – it is vitally important that we understand the dynamics of paradigm shifts, so that we may both effectively communicate this new paradigm and have realistic expectations of the challenges ahead.

Hard and soft paradigm shifts

Since the beginning of the modernist era, specialisation in the sciences has been hugely beneficial to humanity through the concentration of skills and knowledge into distinct communities and cultural systems. Some turned out to be highly amenable to empirical study – the ‘hard sciences’ – revealing a convergent objectivity which accelerated the synthesis of knowledge. That’s not to say that all scientific paradigms transitioned smoothly; psychological, generational and institutional factors ensure that orthodoxy will always, and beneficially, fight-back before finally dying out. Other disciplines did not fare so well however, and it soon became clear that objectivity in the ‘soft sciences’ was altogether more elusive. Modernism’s continued effort in this regard was successfully interrupted in the mid-20th Century by the wave of postmodernism, a paradigm encompassing the arts, history, literature, anthropology, sociology and far beyond. Advances in communication technology inspired and facilitated the emergence of social histories, minority voices, a rejection of reductionist objectivity and an acknowledgement of the validity, or even inherent “truth”, of all subjectivities. At their extremes, modernism and postmodernisms’ exclusive emphasis on objectivity and subjectivity respectively were equally flawed and misguided.  Yet in expanding the boundaries and diversity of discourse, postmodernism at least re-established the necessity for including the subjective within concepts such as identity, the self, and power. In doing so, it both reflected and contributed to a period of great social upheaval and civic emancipation within the cultural system in which it spread.

The legacy of the complexity paradigm

That both the hard and soft sciences may be best described by network and complex adaptive system theory is an idea that is beginning to gain traction. This idea suggests that the lasting legacy of the complexity paradigm will be most powerfully conceived as a synthesis of the Modernist/Post-modernist paradigms; a social paradigm shift, rather than simply a scientific one. For while advances thus far have given us comfort, modern medicine and the power to mitigate the cruel whims of nature, they have had little qualitative effect on the basic model of top-down self-organisation of society. From religion and theology, to the nation state and political philosophy, to corporate institutions and macroeconomics, history is the story of institutionalised, ideological self-organisation whose authority is founded on the perceived control over all manner of complex systems: the cosmos, weather, society, markets, etc. Until recently, these ruling ideologies have monopolised our cultural environment, defining our shared identity and shaping our cultural normatives. Complexity could change all of that, its conclusions objectively undermining this authority in all such models of self-organisation. Complexity can be to politics and economics as the early sciences were to religion: an inclusive framework capable of creating a bottom-up shared identity bound by humility and shared methodology, rather than arrogance and fear of a manufactured ‘other’.

The challenge ahead

That the complexity paradigm will play out in an increasingly global cultural system is exhilarating – it’s universality hinting at the possible elimination of the ‘other’. Yet it’s also terrifying, since the scale of global inequities thus revealed suggest that those in power do not have much time left to pro-actively adapt. The convergence of global political and economic cultural systems is removing crucial checks and balances, raising the prospects of global cascades (such as the recent financial crisis) to dangerous levels. We risk insurmountable moral and conceptual divergences which, in a globalising yet politically centralising world, pose significant systemic threats for the environment, the global poor, and the disenfranchised.

Our best hope for a peaceful transition is for complexity to inspire the mobilisation of the multitude to counteract en-masse, a la Postmodernism, the cultural saturation of outdated ideological influence. No silver bullets, no vanguard taking powers’ place. Instead, the complexity paradigm will bridge humanity’s historical and arbitrary divides and allow everyone to finally relate to one another in the same language. We are about to witness the greatest revolution history has ever seen, and if successful, perhaps the most important there ever will be.

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People Are Not Billiard Balls http://www.synthesisips.net/blog/people-are-not-billiard-balls/ http://www.synthesisips.net/blog/people-are-not-billiard-balls/#comments Mon, 19 Aug 2013 17:21:50 +0000 http://www.synthesisips.net/?p=904 The Idea of Semi-Permeable Agents By Greg Fisher A couple of months ago I attended a fascinating workshop organised by my colleagues David Hales, Jeff Johnson and Jerey Pitt, on the subject of ‘agents’ and ‘agency’ within the context of complex systems and computer simulations.  The discussion was excellent in part because of its content […]

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The Idea of Semi-Permeable Agents

By Greg Fisher

A couple of months ago I attended a fascinating workshop organised by my colleagues David Hales, Jeff Johnson and Jerey Pitt, on the subject of ‘agents’ and ‘agency’ within the context of complex systems and computer simulations.  The discussion was excellent in part because of its content but also because of the people I met and the work they’re doing.

During the discussions, something kept jarring within me – a quiet voice was telling me there was something not quite right with some of the language being used.  I realised it was in the domain of what my philosopher colleague, Rhett Gayle, refers to as atomism, which is when agents in some system are viewed as fixed, with an impermeable boundary surrounding them (in effect or in reality).  The term comes from the very old idea that atoms were the smallest ‘things’ in the universe, making them indivisible by definition.  We now have quantum theory, which tells us that atoms aren’t in fact the smallest ‘stuff’, however the concept of atomism has remained.

We can visualise this idea by thinking about billiard balls bouncing off each other: the balls interact but they remain – essentially – unchanged.

An important critique of Complexity theory (or, rather, how it is being practiced by many) is that some complexity theorists are being atomistic about how they think about people.  It was this that was gnawing at me at the workshop.  I thought I’d articulate these thoughts here and also introduce the idea of the semi-permeable agent, which I believe would help us move away from atomism when thinking about people in complex social systems.

We can start by looking at John Holland’s emphasis on semi-permeable boundaries in complex systems (see, for example, his book “Signals and Boundaries: Building Blocks for Complex Adaptive Systems”).  The idea is self-evident: some boundaries are impermeable, which means nothing can penetrate them, neither escaping from within nor entering from outside.  And, at the other extreme, we can think of a perfectly permeable boundary where everything penetrates.  Of course in extremis this means there would be no boundary at all but it’s a useful idea nonetheless.

In between we are in the world of semi-permeable boundaries, which let some things ‘in’ – but not all – and they let some things ‘out’ – but not all – allowing whatever is inside the boundary to evolve internally.  Here, ‘things’ which might transfer across the boundary might include matter, energy, and information.  Clearly, if there is a two-way flow across the boundary then we can see very easily how the semi-permeable agent and everything it interacts with will co-evolve.

Impermeability

The traditional approach to agency within social sciences, including economics, is to treat human agents as if they had impermeable boundaries, which is an atomistic approach.  For example, standard microeconomics treats agents as if they had fixed preferences and a given budget.  They are not influenced by other agents.

Cognitively and psychologically we ourselves make similar simplifications in our every day lives.  The abstract word ‘person’ is a simplification which engenders the idea that we are discrete entities.  And we are given names to distinguish us from other people, implicitly drawing a boundary around each of us.

So, in the West at least, we seem biased toward thinking of people (and other animals and objects) as impermeable, bounded entities.  We can add ‘context’ around some entity but more often than not we think of the entity as if there were a boundary between it and its context.

This form of abstraction has a lot of use – it has helped our ancestors make sufficient sense of their world, allowing ‘them’ to survive and reproduce.  And this process of abstraction isn’t wholly “wrong”, although I would point to it as a form of ‘coarse-grained cognition’, a term coined by Murray Gell-Mann.  When we look at human agents more closely – more fine-grained if you like – we see that reality is more, well, complex.

Permeability

Of course, at the other end of the spectrum, if humans were perfectly permeable then the notion of a human would be irrelevant and we wouldn’t have a term for it.  My colleague David Hales wouldn’t exist, for example (which some people might be ok with).  Of course, in our everyday world, the idea that we don’t really exist would be absurd.

Semi-Permeability

A Semi-Permeable Boundary

It is preferable, I would argue, to think of human agents as semi-permeable.  On the one hand, imperfect permeability leads us to recognise individuals existing in their own right; but they are not impermeable as if atomism were true of people.  We are somewhere in between: we are semi-permeable.

We can unpack this some more.  It should be obvious that we exchange matter and energy with the rest of our environment through consumption, waste, breathing, etc.  But there is also an exchange of information – we sense things and we also give out signals, allowing others to sense what we’re doing.  Of course, this is true of all organisms, not only humans.

Complex Social Systems

Delving further in to the realm of people and information, it is clear that we use this sensed information to build quite sophisticated internal models of the ‘outer’ world.  Our central nervous systems have evolved to recognise patterns and to deduce things, and our imagination can anticipate potential futures and alternative circumstances.  With this in mind, and thinking about groups of semi-permeable people, we can see that the norms, values and moral principles we hold are best thought of as socially constructed by semi-permeable agents.

For example, and on the whole, people in British society value freedom of speech (slander being a typical exception) – it’s a value many of us absorbed from others when we grew up and it is something we most of us perpetuate (others absorb it from us).  How we frame things – which we might think of as our cognitive architecture – is also co-constructed by socially emergent processes.  This is not just about what we might learn at school or university, it is inherent in the every day language we use.

The processes involved in our internal modelling are both fascinating and complex.  Our sub-conscious seems to play a significant role in our values framework, which has a substantial influence on how we ultimately behave.  We might think we make reasoned, dispassionate choices with our conscious brains all of the time but our subconscious brains have a substantial role to play in the framing of, and values implicit within, our conscious thoughts.  And this sub-conscious architecture is substantially – if not entirely – socially constructed.  This is a very different view of agency to that we see in economics, for example.

To conclude, complexity theorists have inherited the idea of impermeable agents from a long history of reductionist science.  History matters, and it is always tempting to revert to what we know.  To move in a better and new direction, I think we need to think of (and model) human agents as semi-permeable – I offer this as a better (though still coarse-grained) approximation of human agency in complex social systems.

 

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Beyond the plc http://www.synthesisips.net/blog/beyond-the-plc/ http://www.synthesisips.net/blog/beyond-the-plc/#comments Fri, 07 Jun 2013 09:50:58 +0000 http://www.synthesisips.net/?p=894 On Monday Civitas published a book written by me and Paul Ormerod entitled “Beyond the plc”.  A press release and summary can be found on Civitas’ website here. In this article I want to provide some background to this work in two broad ways.  First, I will frame our thinking in the context of collective […]

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On Monday Civitas published a book written by me and Paul Ormerod entitled “Beyond the plc”.  A press release and summary can be found on Civitas’ website here.

click on the image to be re-directed to Amazon...

In this article I want to provide some background to this work in two broad ways.  First, I will frame our thinking in the context of collective action (helping distinguish it from any political ideology).  And, second, I’ll mention how our approach takes an evolutionary (or ‘complex’) view of the economy.  When discussing political ideologies, I will use libertarianism and statism as reference points, well aware that these do not represent the plethora of views in political philosophy.

While not a homogenous group, many libertarians argue that we should minimise the scale and role of government in society and the economy.  I have a lot of sympathy with that since I believe that freedom for individuals is an important foundation stone for successful societies.  However, I have not seen any fully robust and compelling theoretical frameworks from libertarians explaining exactly when and how government action is sensible (though Hayek had a good crack at it).  I shouldn’t be too critical: the main problem, in my opinion, is that until fairly recently we have lacked the intellectual technology to understand the complexity of society, from which we can better understand collective action (both its nature and options for execution).  I believe the new technology which can and will enable a better understanding of collective action is Complexity theory, as applied to social systems.

Many libertarians argue that broadly free systems gravitate towards what Hayek referred to as a state of ‘catallaxy’, which is a libertarian-speak for ‘an ordered society’.  It is roughly equivalent to general equilibrium in economics.  But the more extreme libertarians under-emphasise two important things, in my opinion.  First, that broadly free societies gravitate to inequality over time due to positive feedback effect (on the whole rich people get richer and vice versa); and, second, society is replete with collective action challenges resulting from people interacting.

I’ll leave the inequality point for another article.  The need for collective action can be seen in my domains of life, transportation being a good example because of the potential for damaging interaction i.e. collisions.  In motoring we are required to maintain cars to a reasonable standard (MOTs in the UK) and to pass driving tests, requiring us to learn the ‘rules of the road’.  Also, technologies are deployed to make the roads safer e.g. traffic lights and roundabouts.  In effect, society acts collectively to minimise the risk of harm or death on the roads and institutions are deployed to maintain this ‘interaction architecture’.  Importantly, some of this architecture would emerge naturally, without institutional interventions e.g. which side of the road we drive on would probably emerge quickly, but I don’t think all useful motoring architecture would.

More generally, we might say that reflexivity means that an ideal outcome in some interaction is not always guaranteed, or determined, without some form of co-ordinating technology.  In game theory terms, nash equilibria can be different to socially preferable outcomes, a point well demonstrated by the Prisoners’ Dilemma.

Of course, in many (probably most) interactions, no institution or technology is necessary e.g. two people walking along a corridor too narrow for both can work it out themselves.  But for some interactions, like at road intersections, some technology can be useful to ration space safely.  I have written elsewhere that recessions can be thought of as collective action challenges, as can infrastructure projects like Crossrail.  It is a concept not limited to challenges like ‘the tragedy of the commons’.

Looking at the other side of the political spectrum, it is important to emphasise that statism (by which I mean centrslised control) is not the answer to all collective action challenges.  The need to co-ordinate people’s interactions in certain domains does not mean that some hypothetical omniscient national policy maker should do it.  In fact, the information required for people to self-organise is very often distributed among the population, a point Hayek made brilliantly in a lot of his work.  He rightly argued against top-down control-freakery by people who did not – and could not – know enough.  (To be clear, Hayek often referred to centralised control as ‘collectivism’, which is not what I mean by ‘collective action’).

So if collective action is useful in society but statism isn’t the answer, where does this leave us?  There are two broad implications, in my opinion.  First, we need to work on the theory of collective action and, as argued by Elinor Ostrom, this needs to be done in the context of Complexity science since social systems are inherently complex.  Second, we need to be a lot cleverer than crude statism about how we ‘do’ collective action, wherever it is desirable and feasible.

The book Paul and I wrote for Civitas was (I hope) written with these two points in mind.  In the book we developed a complexity theory-inspired understanding of what organisations are and what organisational forms are, before considering whether we should act collectively in this domain (and, if so, how).  Our policy recommendations should be viewed as forms of collective action built from a complexity-inspired view of the economy.  Let me outline some of the key points.

 

  • Consistent with Organisation Theory, we argued that organisations exist to integrate the actions of specialists but we added to this the importance of creativity that arises within heterogeneous groups (cf Peter Allen’s work).  Integrating experts well is important for efficiency whereas creativity is important for resilience i.e. organisations need to respond then the world changes.  As argued by Bernard Lietaer, efficiency and resilience are essential for survival (and flourishing) in complex ecosystems.
  • In the book we assume that organisational forms are defined by legislation, the role of which we argue is to mitigate uncertainty for stakeholders.  Metaphorically we might think of organisational forms as being like species in an ecosphere (say, felines) whereas specific organisations are equivalent to individual organisms (e.g. a specific cat).
  • This role of ‘mitigating uncertainty’ is at the heart of the form of collective action we recommend in the book.  The plc’s success was in part because in the original Joint Stock Companies Acts (1844 and 1856), the relationships between various stakeholders were well defined and this helped to reduce uncertainty for investors.  These acts did not cause the industrial revolution since it was already underway but they helped to catalyse larger-scale, publicly-sourced investment in corporations.
  • This mitigation of uncertainty can be best achieved, we believe, by legislation supported by a mature legal system and enforcement.  So, for example, if owners renege on their debt obligations, the combination of an unambiguous piece of legislation and legal institutions will help creditors recover their investment.  Ex ante this reduces investment uncertainty, thereby encouraging investment.  It is tempting to leave such things to common law but common law (in effect) acts with a lag in an evolving society, which maintains some uncertainty.  Legislation can be more contemporaneous and therefore relevant, so there is a role for legislation in the collective action we promote.
  • An important piece in the analytical jigsaw was to think of the economy as an evolving process, not as a static ‘thing’.  Once we frame the economy in this way, and consider organisational forms like species in an ecosphere, we can see that the plc looks increasingly obsolete in the digital age.  It is still relevant to industrial firms but these are a shrinking proportion of the 21st Century economy.
  • The implications of economic evolution is that as a society we need to observe the emerging patterns in the economy and offer entrepreneurs a portfolio of organisational forms which suit their heterogeneous and evolving needs.  An excellent example of a new form is the Community Interest Company (CIC), which is being used by thousands of social entrepreneurs today.  Interestingly, the CIC was promoted by the Cabinet Office and not the DTI (at the time).
  • In practice, such observation of the evolving economy and the consideration of potential new organisation forms needs to be done by an institution with relevant expertise, in ‘conversation’ with the rest of the economy.  In the book we argued that the institution most suited to this role was the Department for Business, Innovation and Skills.

To conclude, a point I wanted to emphasise here is that our book does not reflect any political ideology and it is not meant to support either the left or the right.  Our work builds on the important advances in complexity theory, recommending how we can, as a society, act collectively to enable economic activity.  Some libertarians would probably view it as left-ist because we dared to suggest there is a role for an institution (in this case a government department).  Equivalently, socialists would probably view it as right-ist because we want individuals and firms to lead in economic activity, not the government.

 

 

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Whatever happened to all those miners? Shocks and economic resilience http://www.synthesisips.net/blog/whatever-happened-to-all-those-miners-shocks-and-economic-resilience/ http://www.synthesisips.net/blog/whatever-happened-to-all-those-miners-shocks-and-economic-resilience/#comments Fri, 19 Apr 2013 16:14:47 +0000 http://www.synthesisips.net/?p=884 Where have all the miners gone?  To judge by the rhetoric of the BBC and other media outlets, whole swathes of Britain lie devastated, plagued by rickets, unemployment and endemic poverty – nearly thirty years after the pit closures under Lady Thatcher! The reality is different.  There is indeed a small number of local authority […]

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Where have all the miners gone?  To judge by the rhetoric of the BBC and other media outlets, whole swathes of Britain lie devastated, plagued by rickets, unemployment and endemic poverty – nearly thirty years after the pit closures under Lady Thatcher!

The reality is different.  There is indeed a small number of local authority areas where employment has never really recovered from the closures in the 1980s.  But, equally, there are former mining areas which have prospered.

Thirty years ago, in 1983, there were 29 local authority areas in the UK, out of a total of over 450, in which mining accounted for more than 10 per cent of total employment.  A mere handful of areas still remain scarred by the closures. Wansbeck, on the bleak Northumbrian coast, had 21 per cent of its jobs filled by mining in 1983.  Now, employment remains 25 per cent lower than it was then.  Elsewhere, reality is not as bad as the image.

The old mining areas at the heads of the South Wales valleys are meant to symbolise industrial decay.  But in Merthyr Tydfil, there are 8 per cent more jobs than there were in 1983.  Admittedly, in Blaenau Gwent, based on Ebbw Vale, employment is 12 per cent lower. This is hardly permanent devastation.  In Easington on the Durham coast, miners made up no less than 41 per cent of all local employment.  But even after this devastating blow, losing almost half the area’s jobs, employment now is only 9 per cent lower than it was in 1983.

In contrast, there are real success stories.  North West Leicestershire and South Staffordshire used to have lots of miners.  But employment in both areas is now some 40 per cent – forty! – higher than it was in 1983.

The experience of the individual mining areas differs dramatically in terms of their resilience, their ability to recover economically.  Three years ago, I published a short article in Applied Economics Letters (link) on the changes in employment in all the mining areas between 1983 and 2002.  Total UK employment grew by 23 per cent, and in the ex-mining areas as a whole by just 9 per cent.  But it was growth and not decline.

A key influence on this has been the attitude of the workers.  Statistical analysis shows that the more militant an area was in the bitter and controversial miners’ strike in the winter of 1984/85, the less well it has done subsequently.  In Leicestershire, one of the success stories, only 10 per cent ever supported the strike in the first place.  In Wansbeck, support was 95 per cent, and even when the strike was ending rapidly in March 1985, 60 per cent were still out.

Economies have the capacity to recover from even the most dramatic adverse shocks, both at national and local levels.  But to do this successfully, the workers must be willing to embrace the future rather than cling to the past.

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Google as God? http://www.synthesisips.net/blog/google-as-god/ http://www.synthesisips.net/blog/google-as-god/#comments Thu, 04 Apr 2013 11:08:43 +0000 http://www.synthesisips.net/?p=867 Opportunities and Risks of the Information Age by Dirk Helbing (ETH Zurich) “You’re already a walking sensor platform… You are aware of the fact that somebody can know where you are at all times because you carry a mobile device, even if that mobile device is turned off. You know this, I hope? Yes? Well, you […]

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Opportunities and Risks of the Information Age

by Dirk Helbing (ETH Zurich)

“You’re already a walking sensor platform… You are aware of the fact that somebody can know where you are at all times because you carry a mobile device, even if that mobile device is turned off. You know this, I hope? Yes? Well, you should… Since you can’t connect dots you don’t have, it drives us into a mode of, we fundamentally try to collect everything and hang on to it forever… It is really very nearly within our grasp to be able to compute on all human generated information.” 

 Ira “Gus” Hunt, CIA Chief Technology Officer [1] 

 

If God did not exist – people would invent one! The development of human civilization requires mechanisms promoting cooperation and social order. One of these mechanisms is based on the idea that everything we do is seen and judged by God – bad deeds will be punished, while good ones will be rewarded. The Information Age has now fueled the dream that God-like omniscience and omnipotence can be created by man.

For many decades, the processing power of computer chips has increased exponentially – a process known as “Moore’s Law”. Storage capacity is growing even faster. We are now entering a phase of the “Internet of Things”, where computer chips and measurement sensors will soon be scattered everywhere producing huge amounts of data (“Big Data”). It’s not just cell phones, computers and factories that are more and more connected, but our coffee machines, fridges, shoes and clothes, among others.

Gold Rush for the 21st Century Oil

 

This huge amount of data, including credit card transactions, communication with friends and colleagues, mobility data and more is already celebrated as the “Oil of the 21st Century”. The gold rush to exploit this valuable resource is just starting. But the more data are generated, stored and interpreted, the more will it be possible for companies and secret services to know us better than our friends and families do. For example, the company “Recorded Future” – apparently a joint initiative between Google and the CIA – seems to investigate people’s social networks and mobility profiles. Furthermore, credit card companies analyze “consumers’ genes” – the factors that determine our consumer behaviour.

Our individual motivations are analyzed in order to understand our decisions and influence our behavior through personalized search, individualized advertisements, and recommendations or decisions of our Facebook friends. But how many of these “friends” are trustable, how many of them are paid to influence us, and how many are software robots?

Humans Controlled by Computers?

Today, computers autonomously perform the majority of financial transactions. They decide how much we have to pay for our loans or insurances, based on our behavioral data and on those of our friends, neighbors and colleagues. People are increasingly discriminated by obscure “machine learning” algorithms, which are neither transparent nor have to meet particular quality standards. People classified as dangerous are now eliminated by drones, without a chance to prove their innocence, while some countries are discussing robots rights. Soon, Google will drive our cars. And in ten years, supercomputers will exceed the performance of human brains.

Is Privacy Still Needed?

What will the role of privacy be in such an information society? Some companies are already trying to turn privacy into a marketable commodity. This is done by first taking away our privacy and then selling it back to us. The company Acxiom, for example, is said to sell detailed data about more than 500 million people. Would it be possible to know beforehand whether the data will be used for good or bad? Many will pay to have their personal data removed from the Internet and commercial databases. And where data removal is not possible, fake identities and mobility profiles will be offered for sale, to obfuscate our traces.

Information Overload

“Big Data” do not necessarily mean that we’ll see the world more accurately. Rather, we will have to pay for “digital eyewear” that allows us to keep an overview in the data deluge. Those not willing to pay (possibly also with personal data) will be blinded by an information overload. Already today, we cannot assess the quality of the answers we get online. As the way in which the underlying data are processed remains hidden to the user, it is hard to know how much we are being manipulated by web services and social media.  But given the huge economic potential, it is pretty clear that manipulation is happening.

The Knowledge-Is-Power Society

The statement “knowledge is power” seems to imply that “omniscience is omnipotence” – a tempting idea indeed. Therefore, who collects all the data in the world, such as the National Security Agency (NSA) in the United States, might hope to become almighty, especially if equipped with suitable manipulation tools. By knowing everything about us, one can always find an Achille’s heel. Even CIA director General David Petraeus was not immune to this risk. He became the victim of a love affair irrelevant to his duty.

The developments outlined above are not fantasy – they are already taking place behind the scenes or are just around the corner. Yet, our society and legal system are not well prepared for this.

The American dream of omniscience and omnipotence (see the God’s eye) is imprinted in each 1 Dollar bill. This and the belief in God (“In God We Trust”) is suggested to be the basis of a new world order (“Novus Ordo Seclorum”). Source: Wikimedia Common, see http://en.wikipedia.org/wiki/File:US_one_dollar_bill,_reverse,_series_2009.jpg

A New World Order Based on Information?

Some people may see information and technologies as new tools to create social order. Why should one object to a computer or government or company taking decisions for us, as long as they are in our interest? But who would decide how to use these tools? Can the concept of a ‘caring state’ or a ‘benevolent dictator’ really work? In other words, can supercomputers enabled by Big Data take the decisions that are best for us?

This has always failed in the past, and it will be also unsuccessful in the future. Not only do many systems fail under asymmetric information (if some stakeholders are very well informed and others very badly). The performance of all computers in the world will also never be sufficient to optimize our economy and society in real time. Supercomputers cannot even optimize the traffic lights of a big city in real time. This is because the computational effort explodes with the size and complexity of the system. Just a very simple society could be optimized top down, but who would want to live in it?

Privacy and Socio-Diversity Need Protection

The aforementioned “omniscient almighty society” cannot work. If we all did what a super-intelligent institution thinks is right – it would be as if children always did what parents are asking for, never becoming adolescents. Then they would never take autonomous decisions, and find their own way. Privacy is a necessary ingredient for the development of individual responsibility and for society. It should not to be understood as a concession to the citizens.

“Private” and “public” are two sides of the same coin, each of which cannot exist without the other. People can only adjust to the thousands of normative public expectations every day, if there is a private, protected space where they can be free and relax. Privacy is an invention that reduces mutual interference to a degree that allows us to “live and let live”. If we knew what others think, we would have far more conflicts.

The importance of unobserved opinion formation is demonstrated by the crucial role of anonymous votes in democracies. Would we only adjust ourselves to expectations of others, many new ideas would not emerge or spread. Social diversity would decrease, and thus the ability of our society to adapt. Innovation requires the protection of minorities and new ideas. It is an engine of our economy. Social diversity also promotes happiness, social well-being, and the ability of our society to recover from shocks (“resilience”).

Social diversity must be protected just as much as biodiversity. Today, however, the Internet recommends us opinions about books, music, movies and even about friends and partners. This undermines the principle of the “wisdom of crowds” and collective intelligence. Why should a company decide what is good for us? Why can’t we determine the recommendation algorithms ourselves? Why don’t we get access to relevant data?

An Alternative Vision of the Information Age

Also in an increasingly unstable world, surveillance, combined with the manipulation or suppression of undesired behaviors, is not a sustainable solution. But is there an alternative to the omniscient almighty state that matches our ethical values? An alternative that can create cultural and economic prosperity? Yes, indeed!

Our society and economy are currently undergoing a fundamental transformation. Global networking creates increasing complexity and instability that cannot be properly managed by planning, optimization and top-down control. A flexible adaptation to local needs works better for complex, variable systems. This means that managing complexity requires a stronger bottom-up component.

In the economy and the organization of the Internet, decentralized self-organization principles have always played a big role. Now they have also spread to intelligent energy networks (“smart grids”) and traffic control. One day, societal decision-making and economic production processes will also be run in a more participatory way to better manage the increase in complexity. It seems the natural course of history. A growing desire of citizens to participate in social, political and economic affairs is already found in many parts of the world.

 

The Democratic, Participatory Market Society

In connection with a participatory economy, one often speaks of “prosumers”, i.e. co-producing consumers. Advanced collaboration platforms will allow anyone to set up projects with others to create their own products, for example with 3D printers. Thus, classical companies and political parties and institutions might increasingly be replaced by project-based initiatives – a form of organization that I would like to call “democratic, participatory market society”.

To ensure that the participatory market society will work well and create jobs on a large scale, the right decisions will have to be taken. For example, it seems essential that the information systems of the future will be open, transparent and participatory. This requires us to create a participatory information and innovation ecosystem, i.e. to make large amounts of data accessible to everyone.

The Benefit of Opening Data to All

The great advantage of information is that it is (re)producible in a cheap and almost unlimited way, so that the eternal struggle for limited resources might be overcome. It is important that we take advantage of this and open the door to an age of creativity rather than limiting access to information, thereby creating artificial scarcity again. Today, many companies collect data, but lack access to other important data. The situation is as if everyone owned a few words of our language, but had to pay for the use of all the other words. It is pretty clear that, under such conditions, we could not fully capitalize on our communicative potentials.

To overcome this dissatisfactory data exchange situation and achieve “digital literacy”, one could decide to open up data for all. Remember that most countries have also decided to turn the privilege of reading and writing into a public good by establishing public schools. It is well known that this step has boosted the development of modern societies. Similarly, “Open Data” could boost the development of the information society, but the producers of data must be adequately compensated.

A New Paradigm to Manage Complexity

Access to data is essential for the successful management of complex dynamical systems, as it requires three elements: (i)  proper systems design to support predictability and controllability, (ii) probabilistic short-term forecasts of the system dynamics, which need plenty of reliable real-time data, and (iii) suitable adaptive mechanisms (“feedback loops”) that support the desired system behaviour.

Managing complexity should build on the natural tendency of complex dynamical systems to self-organize. To enable self-organization, it is crucial to find the right institutional settings and suitable ‘rules of the game”, while avoiding too much top down control. Then, complex systems can essentially regulate themselves.

One must be aware, however, that complex systems often behave in counterintuitive ways. Hence, it is easy to choose the wrong rules, thereby ending up with suboptimal results, unwanted side effects, or unstable system behaviors that can lead to man-made disasters. The financial system, which went out of control, might serve as a warning. These problems have traditionally been managed by top-down regulation, which is usually inefficient and expensive.

Loss of Control due to a Wrong Way of Thinking

Whether a system can be adequately managed or is self-organizing in the way we want is a matter of systems design. If the system is designed in the wrong way, then it will get out of control sooner or later, even if all actors involved are highly trained, well equipped and highly motivated to do the right things. “Phantom traffic jams” and crowd disasters are examples of unwanted situations that occur despite all efforts to prevent them from happening. Likewise, financial crises, conflicts and wars can be unintended consequences of systemic instabilities. Even today, we are still not immune to them.

Therefore, we need a much better understanding of our techno-socio-economic-ecological systems and their interdependencies. Appropriate institutions and rules for our highly networked world must still be found. The information age will revolutionize our economy and society in a dramatic way. If we do not pay sufficient attention to these developments, we will suffer the fate of a car driving too fast on a foggy day.

Decisions Needed to Use Opportunities and Avoid Risks

To meet the challenges of the 21st century and benefit from its great opportunities, a Global Systems Science needs to be established in order to fill the current knowledge gaps. It aims to generate new insights allowing politics, economy and society to take better informed, more successful decisions. This could help us to use the chances of the information age and minimize its risks. We must be aware that everything is possible – ranging from a Big Brother society to a participatory economy and society. The choice is ours!

 

About the author

Dirk Helbing is Professor of Sociology, in particular of Modeling and Simulation at ETH Zurich, and member of its Computer Science Department. He earned a PhD in physics and was Managing Director of the Institute of Transport & Economics at Dresden University of Technology in Germany. He is internationally known for his work on pedestrian crowds, vehicle traffic, and agent-based models of social systems. Furthermore, he is coordinating the FuturICT Initiative (http://www.futurict.eu), which focuses on the understanding of techno-socio-economic systems, using Big Data. His work is documented by hundreds of scientific articles, dozens of keynote talks, and media reports in all major languages. Helbing is elected member of the World Economic Forum’s Global Agenda Council on Complex Systems and of the German Academy of Sciences “Leopoldina”. He is also chairman of the Physics of Socio-Economic Systems Division of the German Physical Society and co-founder of ETH Zurich’s Risk Center.

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Innovation in Dynamic Networks http://www.synthesisips.net/blog/innovation-in-dynamic-networks/ http://www.synthesisips.net/blog/innovation-in-dynamic-networks/#respond Tue, 26 Mar 2013 11:43:02 +0000 http://www.synthesisips.net/?p=849 By Greg Fisher This is the second of two blog articles that follow on from NESTA’s roundtable on Systemic Innovation.  The previous blog focused on systems, whereas this one is about innovation. How we view social systems has been fundamentally challenged in recent decades by the emerging science of complex systems.  Stuart Kauffman described this […]

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By Greg Fisher

This is the second of two blog articles that follow on from NESTA’s roundtable on Systemic Innovation.  The previous blog focused on systems, whereas this one is about innovation.

How we view social systems has been fundamentally challenged in recent decades by the emerging science of complex systems.  Stuart Kauffman described this well in his book Re-Inventing the Sacred where he contrasted the Laplace view of a clockwork universe with one of an inherently creative and uncertain universe.

The Clockwork Universe

In the Laplace-inspired view, which emerged during the Enlightenment, there is only fundamental physics (the study of sub-atomic particles and even smaller “stuff”) and applied physics.  In Laplace’s view, the latter can be determined from the former, which means the present can be fully understood and the future predicted.  In this interpretation of the universe, there is only stuff bouncing around in the void with a set of fixed and – in principle – identifiable laws that fully describe how they bounce.  In this universe, creativity is irrelevant.

Our understanding of the universe’s complexity has improved significantly in recent decades, through the new science of complex systems, which has helped us see that innovation plays a central role in it.  Moreover, while my two blog articles emphasise different things – systems and innovation – it should be clear that they are related: innovation plays a fundamental role in the dynamics of complex systems.

Kauffman explained that a core concept missing from Laplace’s view is that of emergence.  Some people view this as the central principle of complex systems because from it springs a fundamentally different view of the universe at large and social systems more specifically.  Emergence is the idea that if we combine two or more “things” then what we get might be something genuinely different to the two constituent parts, which was not predictable beforehand.  For example, Kauffman pointed out that nobody has been able to determine the properties of water from its constituent atoms of hydrogen and oxygen.  We only know the properties of water from empirical observation.  This might sound unbelievable but it is nevertheless true and it holds for all molecules and their constituent atoms.  Kauffman described this as a “quiet scandal”, explaining that the properties of water are emergent, meaning the universe is inherently creative.

Anyway, this is all very interesting but what does it mean for systemic innovation?  Here I thought it might be useful to distinguish between two different forms of innovation.  My description of emergence is important for distinguishing between these two types.

There is no point in me re-inventing the wheel here because I can refer to the work of W. Brian Arthur.  Specifically, Arthur wrote a book called The Nature of Technology, in which he usefully distinguished between two forms of innovation.  The first I will call re-arranging the furniture, and the second I will call creative innovation.

By re-arranging the furniture, I am referring to the type of systemic innovation that adjusts the patterns of relationships between parts of a system without any creative, emergent phenomena.  Arthur referred to this in his book as “new solutions given existing technology”.  Importantly, re-arranging the furniture does not mean no value is added because the new arrangement might well be useful all round.  As an example, we might think of a company changing its management structure, including its lines of authority and accountability.

The second form of innovation is what Arthur referred to as “novel technologies”.  This is where something genuinely creative has occurred i.e. where something genuinely new has emerged.  Above I referred to the properties of water emerging from the constituent atoms.  In his book, Arthur discusses how novel technologies are invariably built from combinations of existing technology but where the act of combination creates something genuinely new.  We might think of this as when the whole is different to the sum of the parts.

Of course, the lines between these two types of innovation can be blurry.  For instance, the example of a company changing its management structure might follow some new intellectual technology developed in the management sciences (Arthur argued these were also forms of technology).  If so, we could view this management change as part of the cascading of some novel technology across a whole system.

The implications of all of this for NESTA’s new work theme of systemic innovation are, I think, twofold.  First, I think both these forms of innovation can be included in their work; and, second, I recommend that NESTA warmly embraces the “complexity revolution”.  That revolution is moving us away from the clockwork view of the universe in which there is no creative innovation of any description and where systems are fundamentally static.  In fact I asked Arthur if his important book, The Nature of Technology was informed by the complexity sciences at all and he replied in a private correspondence in the following way (re-printed with permission):

“I don’t think my book would exist at all without my immersion in complexity. Complexity is in no small part about the emergence of new patterns, and new objects, out of the old. And my book – especially the main chapter, 9 – is squarely about that. Novel entities arise out of a given network of previously-arising entities. It doesn’t get any more “complexity” than that. Combinatorial evolution is very much part of complexity sciences.”

 

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Dynamic Versus Static Systems http://www.synthesisips.net/blog/dynamic-versus-static-systems/ http://www.synthesisips.net/blog/dynamic-versus-static-systems/#comments Tue, 26 Mar 2013 11:28:22 +0000 http://www.synthesisips.net/?p=846 By Greg Fisher Recently, Paul Ormerod and I were invited to a round-table at NESTA to discuss systemic innovation.  After that meeting, we were invited to write a blog reflecting on this issue.  I thought I might be neat to write two articles, one on systems and one on innovation.  Here I will tackle systems and, […]

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By Greg Fisher

Recently, Paul Ormerod and I were invited to a round-table at NESTA to discuss systemic innovation.  After that meeting, we were invited to write a blog reflecting on this issue.  I thought I might be neat to write two articles, one on systems and one on innovation.  Here I will tackle systems and, more specifically, I want to draw attention to the differences between static and dynamic systems.  This is often under-emphasised when thinking about whole systems.

How we make sense of, or cognitively frame, a problem is fundamental to how we then solve it.  Often we don’t realise how we’re framing something because this happens in our subconscious and, understandably, we spend little or no time thinking about how we are thinking about something.  And, if our aim is to encourage, facilitate or enable innovation within systems, we first need to understand what we mean by a system.

A Static System

What do you think when you read or hear the word “system”?  I’ll share mine: when I close my eyes and consider what I mean, I have a vague notion – a picture if you like – of an interconnected whole.  Call it a network of lots of parts, with a complicated set of inter-connections.  The diagram opposite is roughly what I imagine.

The words vaguepicture, and interconnected are key here.  The vagueness of the term “system” suggests we should expect multiple definitions, or meanings, from different people.  “Picture” implies a snapshot – a moment in time being captured.  And interconnectivity is central to systems, clearly.

But this is a somewhat static definition of the word “system”.  Few of the words used to describe what I imagine imply any sort of dynamism.  In fact, the word “picture” leans me much more toward a static interpretation.

Is this a problem?  Well, yes and no because it depends on the context and how and why I use the word.  If I am concerned with a broadly unchanging system then my personal definition of this word isn’t terrible.  But problems arise when we use words or framings that sit awkwardly with the real world we are trying to grapple with e.g. when the system I am considering changes (e.g. the weather) and I frame it as if it were static.

Moreover, I would argue that quite a few people think of systems in a similarly static way.  In fact, some of my colleagues in the complex systems arena deliberately avoid using the word system because they interpret it in a narrow, static way, which jars with the inherently dynamic and creative nature of complex systems.

A good example of this is Ralph Stacey, who has written extensively about systems thinking and systems approaches, and who has argued that complex systems are fundamentally different to static systems.  The word he uses to characterise complex, dynamic systems is transformative: their fundamental nature is one of continuous, unpredictable change.  By contrast, he argues, systems approaches are broadly static, and this approach is highly problematic if we are concerned with social systems, because these are constantly evolving.

Personally I think Stacey goes too far in his criticism of systems thinkers because he seems to impose a narrow and prescriptive definition on what is in fact a heterogeneous collection of people and thoughts.  If you look at the work of Prof. Michael Jackson (Hull University) and John Seddon (Vaguard Consulting) for example, their work implies a much greater fluidity in human systems than Stacey seems to think.  People like John have sensibly applied systems approaches to real world problems with a good dose of common sense, accounting for the dynamic nature of people on the ground.  Of course, this is not to say that systems approaches haven’t been mis-used by others – they have.

A Dynamic Universe: The Eagle Nebula

When thinking about evolving, interconnected systems I sometimes prefer to use the term dynamic networks.  The academic literature tends to use the term complex systems but I mean the same thing.  “Networks” imply interconnectivity and they are associated with the now enormous literature of network theory; and the adjective dynamic helps to orientate us away from a static view of systems.

So in thinking about systemic innovation we must not get trapped by a static meaning of the word “system”.  NESTA’s CEO, Geoff Mulgan, has catalysed a work theme around systemic innovation in social systems, which means they are dealing with inherently dynamic systems.  Geoff wrote a book called Connexity, which in my language was mostly about complex social systems, where he captured this point well.  But, nonetheless, it is important that this valuable work theme starts with clarity about static and dynamic systems, leaning toward the latter if it is concerned with social systems.

A useful way of thinking about dynamic networks is to think of them as a mixture of patterns and change.  I described this briefly in a blog article “Patterns Amid Complexity”.  I wrote this article because the emphasis on dynamics and uncertainty in the complexity sciences can lead to a random view of human systems.  This is a mistake.  In complex social systems we benefit from structure, or patterns (like language and institutions), which are key parts of these systems.  Such systems also change because of creative innovation, which is the subject of the next article.

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