Sunday, February 24, 2013

Inequality: Complex machines, simple cogs | The Economist

Inequality: Complex machines, simple cogs | The Economist

Mr Lindsey approaches the question of rising inequality through the prism of complexity. Modern economic growth, he notes, has been the story of positive feedback loops between specialisation and knowledge accumulation, which have given rise to ever more complex social and economic systems. Economic outcomes in this world come down to differential abilities in managing complexity.

In Aperiomics this complexity is largely hidden in society until the chaos causes collapses, for example in the GFC. Until then we see glimpses of orderly exponential growth. This specialization is often not knoweldge accumulation but an accumlation of rumors and deceptions, for example like beliefs and hype in a real estate boom. The assumption is that someone else somewhere understands it which feeds back into false confidence then disillusionment in a crash. 

  The story of economic growth as one of ever increasing complexity is attractive. I'm not sure I'm sold on the idea that a steady increase in societal and economic complexity must necessarily lead to more inequality, however. That is certainly the story of the past 30 years, but I don't know if it's the story of the era of modern economic growth as a whole.

This inequality comes more in an Iv-B and V-Bi disconnect, Iv-B is like a poker game of bluff where some do far better creating inequality and happens around innovation.

 The honing of assembly line techniques allowed for further deskilling, but workers were able to capture a large share of the gains from the resulting surge in productivity. Production was becoming more complex, but jobs were getting simpler, and the upshot was an explosion in opportunities for high-wage, middle- to low-skill employment.

Assembly lines grow like Iv-B root and branch structures, parts are put together into a whole like roots coming together onto a trunk. Jobs can become more spcialized and chaotic, they can lead to an exponential growth or explosion of employment or collapses if industries fail. The system can be highly unstable as the explosion of growth in the 1920s led to the Great Depression.

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