Top down vs bottom up systems

On policy making and growing government and monopoly

I wouldn’t know where to classify myself in the political spectrum, but I like the term localist coined by Nassim Taleb. I guess I am a lot of localist and a believer of heterodox economics. Societies and their values change with time; and the more organic and adaptable a system the better it will thrive. I’ll come back to the term localist later.

Two girls, one economic model

Most problems arise when we try to solve all problems with one model. Anti-Keynesian and anti-Krugman sentiments are very strong among libertarians. They say government interventions with good intentions end up creating large government body that eventually leads to inflexibility, bureaucracy, and corruption. Liberals say the opposite is the true. That having a free market creates monopolies where large corporate bodies can control the media and gain the ability to manipulate the public in ways no different to inflexibility and corruption of the government.

The reality is that both are true. Every model has its flaws. Through no fault of their own, governments and corporates will strive to grow, or at least maintain the status quo. After all, what we see is what remains from the competition. Scandinavian countries seem to understand this better, with the right cocktail mix of free market and socialist policies, but then every successful country have its perks that cannot be applied to other countries. Norway has oil, Switzerland with its unique geography and banking, and Finland has Fins. Of course, by successful I could mean something very subjective, but it could also be GDP, average living standard, overall level of corruption, and how many Fins you have (always a good measure). Also, Switzerland isn’t Scandinavian, but you get the drift.

On the other hand, the cocktail mix in the US of A is a bit messed up. It is a two headed monster with a large government with much of its tax payer money (and its debt) being used to protect large companies and their monopoly and oligopoly. It will be really difficult to downsize the government, because it always is difficult to downsize anything. Emotional impact of giving a candy to a kid is totally disproportional to that of taking it away from a kid. This has always been an issue way before the Trump days. The system was always rigged.

A painting by Toronto Raptor Chris Bosh many hundreds of years ago.

Bottom up systems

Nassim Taleb’s suggestions on improving the systems make a lot of sense. His book Antifragile talks about elements in creating a system that thrives in disorder. When a system is fragile it will build up damage when exposed to stressors and soon break. A robust system is where small stressors don’t do as much harm, but most robust systems have eventual breaking point. An antifragile system is a system that gets stronger by being exposed to stressors. It is a term Taleb comes up with after realising that we do not have a word for it. He wrote the whole book on it full of brilliant examples and ideas, but personally I find it very clunky and not catchy at all. ANTIFRAGILE…

A lot of biological systems are antifragile. Like our muscles, exposing them to small stressors such as heavy lifting exercises make them stronger. Kids that grew up more free range style than being overly protected end up being more fearless and ready to face the real world as grown ups. The start up ecosystem thrives on lots of entrepreneurs throwing themselves into the wall and feed the lessons back to each other for eventual great impacts.

Nassim Taleb disguised as some rapper. After all, nobody has seen them in the same room together.

Essentially, having this organic bottom up approach creates antifragile systems that can survive under the most difficult of the times. Of course, there are exceptions and we always need somewhat of a balance. Taleb’s thoughts are extremely rich and impossible to be distilled like what I am doing now. He refused to be classified as libertarian and coined the term localist instead, in one of the many interviews I’ve watched of his on Youtube. It is the reflection of his views on decentralisation with more focus on promoting local businesses, and opposite of globalisation. It pretty much reflects what I have been advocating for a long time. It is a natural progression in the shapes of society that is post-developed world, with more artisan shops and local produces and self sustaining ecosystem. It naturally addresses a lot of global issues we face as well such as climate change caused by mass production and mass transportation.

USA is the perfect candidate to implement such system, by introducing more political diversity within each state. Reduce national tax, increase state tax, incentivise local businesses, and create more decentralised hubs of powers. It will be hard though, unless more mainstream economic celebrities pick up on Taleb’s brillian ideas, because Taleb himself remains very challenging.

He is not here to entertain us. I am sure he thinks very lowly of Malcolm Gladwell, who is much less scientifically sound, but much more entertaining to read and listen to; therefore a much better medium at spreading knowledge. I am a big fan of both. I am also a fan of Nate Silver and Thomas Piketty. Taleb praised Silver while destroying Piketty. Silver reduced Gladwell as a hedgehog in his brilliant book The Signal and The Noise. Why can’t we all get along. I am introducing too many names and terms. I’ll go into The Hedgehog and The Fox some other day.


No model is perfect. There will always be unintended consequences. Every policy that isn’t designed to deal with the unknown unknowns will suffer. Read and listen to Taleb. His theories are based on logic and ethics. We need to minimise information asymmetry, increase transparency where there is concentration of power, and design systems that are antifragile and with skin in the game (which is what Taleb’s next book will be about) for all parties involved.

Moar

Incerto — Nassim Taleb on Medium (economics and politics)

Five Thirty Eight — Nate Silver’s publication (economics, politics, sports, and forecasting)

Revisionist History — Malcolm Gladwell’s podcast series (behavioural economics)