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Saturday, June 30, 2007


Paraphrasing an acquaintance of mine: The world is the same as it's always been, it keeps changing. Some of those changes are incremental in nature and some represent a radical break with the past. This means that things are uncertain, especially about the future. She does such a nice job, so I'll let Virginia Postrel explain:
We hate not knowing the future. Soothsayers are as old as history. But the kind of soothsaying that runs on giant computers, that fills the pages of business publications and informs the decisions of legislators and regulators, is different from old-time magic. Rather than tap omniscient forces operating outside time, it claims scientific knowledge of the present, or at least of everything important about the present. Drawing on that information, it then predicts what people will do and how their actions will shape the world. Or it tells them how they must act and assumes it can foresee the results.

The world is full of X-factors, the unarticulated and unrealized knowledge that can be elicited only by experience and experiment.

It is possible to discern patterns and to test that analysis against others'. But the competition-the test-is crucial. Most predictions are wrong, and the more specific the claim, the more likely the error.

In his bet with Paul Ehrlich, by contrast, Julian Simon was able to predict confidently that the prices of five metals would decline from 1980 to 1990. His prediction was based on a dynamic understanding of resource use; his mental model assumed increasing knowledge about alternative sources and applications, feedback from prices, and competitive pressures to do more with less. Simon bet only on the general trend, however, not on specifics.

"Most experts believe that without deep changes in both industry behavior and government policy, U.S. microelectronics will be reduced to permanent, decisive inferiority within ten years," wrote MIT's Charles Ferguson in a famous 1988 Harvard Business Review article. He called for a government-directed policy to help U.S. chip companies threatened by foreign competition and denounced the "fragmented, 'chronically entrepreneurial' industry" of Silicon Valley.

Ferguson and his mandarin contacts just Couldn't envision an industry driven by microprocessors, software, and networks rather than memory-chip manufacturing. Instead, they assumed an essentially static world, anticipated disaster, and demanded industrial policy.

"Economists moved by the invisible hand," who understood the dynamic patterns of the industry but did not try to predict its exact evolution, knew more than Ferguson's "experts"-for the very reason that they recognized the limits of their knowledge.

Technocratic plans assume the very things they try to enforce: that the world is simple and easily controlled, that it changes only in predictable ways, that it can be mastered.

Predictions go wrong because there are many possible sources of error: environmental shocks, bad or incomplete models, bad or incomplete data, sensitivity to initial conditions, the ever-branching results of action and reaction. Writing of technology, the physicist Freeman Dyson notes that its inherent unpredictability makes centralized decision making hazardous:
...human legislators act as if the future were predictable. They legislate solutions to technological problems, and they make choices between technological alternatives before the evidence upon which a rational choice might be based is available.

Unexpected events or patterns often make perfect sense in hindsight. But the very difficulty of predicting the future points up how little we know-or can know-about the present. The present is, after all, the basis of all prediction. Management guru Peter Drucker, among the most perceptive of trend spotters, declares emphatically that "I don't speculate about the future. It's not given to mortals to see the future. All one can do is analyze the present, especially those parts that do not fit what everybody knows and takes for granted. Then one can apply to this analysis the lessons of history and come out with a few possible scenarios. . . . Even then there are always surprises."

Knowledge is at the heart of a dynamic civilization-but so is surprise. A dynamic civilization maximizes the production and use of knowledge by accepting widespread ignorance. At the simplest level, only people who know they do not know everything will be curious enough to find things out. To celebrate the pursuit of knowledge, we must confess our ignorance; both that celebration and that confession are central to dynamic culture. Dynamism gives individuals both the freedom to learn and the incentives to share what they discover. It not only permits but encourages decentralized experiments and competitive trial and error-the infinite series by which new knowledge is created. And, just as important, a dynamic civilization allows its members to gain from the things they themselves do not know but other people do. Its systems and institutions evolve to let people develop, extend, and act on their particular knowledge without asking permission of a higher, but less informed, authority. A dynamic civilization appreciates, protects, and nurtures specialized, dispersed, and often unarticulated knowledge.
Some people refuse to accept the nature of uncertainty and grasp its' implications. I like to call it the Rodney Dangerfield of concepts: it don't get no respect!

Update: thought this banner from this blog was appropriate

Politics is mainly a contest between those who think they know but don't (The Left and the Greens) and those who know that they don't know (Conservatives and Libertarians)

1 comment:

Bret said...

Rodney's dead, isn't he? Thus we've paid him our last (no) respects.

My perspective is perfectly aligned with Ginny's post, but I didn't like the phrase "knowledge is at the heart of a dynamic civilization" because knowledge is widely distributed and that phrase implies that it's centralized. I know she doesn't believe that and goes on to state that, but still, one should be careful with words.