Damek.

The strength of science is the principle of falsification. On that note, I came across this intriguing post about Intelligent Design and other nonfalsifiable ideas at TPMCafe:

…saying ID explains everything that is not irreducibly complex means it only explains natural phenomena that cannot yet be explained by any other theory. In other words, it’s the catch-all biological answer for when there is no good answer.

Consider some familiar questions. Why are there more lawsuits now than there were in the 1960s? Because people aren’t willing to take responsibility for themselves. Why are more people declaring bankruptcy now than they did in the 1980s? Because people aren’t willing to take responsibility for themselves. Why is health care more expensive than it was in the 1950s? Because people aren’t willing to take responsibility for themselves. Does that answer sound familiar?

Moral decline is the catch-all economic answer for when there is no good answer. While the threat from intelligent design theory is just now on the horizon, the threat from moral decline theory has already hurt families through a series of “reforms” to tort law, bankruptcy law and medical malpractice law. Not that these laws were perfect as they were. But at least the old laws were based [on] falsifiable statements about the world, such as, “consumers are buying dangerous products,” or, “people will work harder for themselves than for their creditors.” When we make laws based on nonfalsifiable statements like, “people have gone bad,” we’ll never know when our laws are based on false views of the world.

A commenter says:

If we are looking for solutions to our social problems and ignoring the fact that we are all selfish and operate from a selfish point of view, the discussion of morality and it’s influence on this topic is essential.

Another commenter puts this into falsifiable terms, an observation on human nature:

Let’s put that another way: on balance, human beings will act in ways that put their own interests above other considerations.

I still have problems with this. Ignoring altruism, I think it’s clear from everyday living that people do occasionally, if not quite often, put other considerations above their own interests. Perhaps it only appears that way, and the behavior really stems from at least a perception of self-interest on the part of the actor. It’s an area of anthropology with a lot of complex variables — and anyway, I digress.

The point is that, upon reading this post and connecting morals and irrational behavior with economics and science, the idea of self-interest gelled for me with the subject of the previous post, efficiency and resilience.

See, it occurred to me that market systems use the natural human tendency to act with self-interest to generate efficiency. In theory. In practice, self-aware self-interest works against this and you get exploitation, cartels, monopolies, and the middle- and upper-classes working to perpetuate themselves.

Now, over the long term, the human species is pretty resilient and therefore immune to these sorts of things. They work out in the long, long run. However, on a slightly smaller scale, civilizations aren’t too resilient unless they put some work into correcting against these problems. In order to do this work, you need falsifiable ideas about economics and human nature to explain the problems.

It further occurs to me that socialism is an attempt at getting rid of the problems by replacing the system altogether. Consider: “If X, there would be no need for markets and the problems of markets would therefore go away.” Unfortunately, “X” hasn’t quite been worked out yet (if it ever will be). However, much of the socialist critique of markets is still worth learning, if not using, in attempting to construct falsifiable theories about markets on which to base laws and policies. But again, I digress.

Anyway, the point is that, despite the problems that overreaching self-interest creates in markets, markets can be very efficient, sometimes ruthlessly so. And most attempts so far at engineering humane resilience into markets have failed, partly due to the same overreaching self-interest, but perhaps mostly due to a lack of efficiency.

If the best systems must reach a balance between efficiency and resilience, the best societies must reach a balance between markets and market controls. The problem lies in finding falsifiable ideas upon which to base the controls. Because, unfortunately, we’re all the experiment. Let’s make sure our theories are scientific before we go about trying to test them out, eh?