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Amwelladmin (talk | contribs) (Created page with "{{a|risk|}} ===Survival of the fittest=== ====Market models==== Modeling how human beings behave in the absence of rules. <br> =====Model 1: {{author|Adam Smith}}’s {{br|The...") |
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The market is an analog for the ecosystem. How we believe human beings behave in the absence of rules conditions how we feel about the market. There are two basic models: | |||
=====Model 1: ''{{risk|Benign}}'', per {{author|Adam Smith}}’s {{br|The Wealth of Nations}}===== | |||
=====Model 1: {{author|Adam Smith}}’s {{br|The Wealth of Nations}}===== | |||
Assumes conditions for human interaction that do not in practice exist: | Assumes conditions for human interaction that do not in practice exist: | ||
*'''A level playing field''': perfect equality, capability, opportunity and symmetry of information between participants.<br> | *'''A level playing field''': perfect equality, capability, opportunity and symmetry of information between participants.<br> | ||
*'''Rational participants''': players act in an economically rational way <br> | *'''Rational participants''': players act in an economically rational way <br> | ||
*'''Information is free''': Information is universally, immediately available, and therefore has no value (so there is no particular value in keeping it) | *'''Information is free''': Information is universally, immediately available, and therefore has no value (so there is no particular value in keeping it). | ||
*'''No collusion''': | *'''No collusion''': The corollary of the level playing field: participants are honest, do not abuse their natural advantages and do not conspire to subvert the market. Thus, a person can treat the market as it seems. | ||
=====Model 2: {{author|Thomas Hobbes}}’ {{br|Leviathan}}===== | =====Model 2: ''{{risk|Brutish}}'', per {{author|Thomas Hobbes}}’ {{br|Leviathan}}===== | ||
Survival of the most brutish. Nature is red in tooth and claw. <br> | Survival of the most brutish. Nature is red in tooth and claw. <br> | ||
*No cooperation | *No cooperation: Others will stab you as soon as look at you. | ||
*No altruism | *No altruism: Noone acts out of genuine disinterested compassion for another. | ||
*No trust | *No trust: The delicate conditions required for {{risk|trust}} to thrive do not exist. There is little {{risk|trust}}, so no {{risk|cooperation}}. | ||
==== | ====They ''are'' only models —“[[Nomological machine]]s”==== | ||
*They model reality by proxy, they don’t describe it. | *They model reality by proxy, they don’t describe it. | ||
*They are idealised shorthand, and depend for their coherence on key simplifications that do not in fact appear in nature: no friction, symmetry, no supervening causes, homogeneity, infinite elasticity etc. | *They are idealised shorthand, and depend for their coherence on key simplifications that do not in fact appear in nature: no friction, symmetry, no supervening causes, homogeneity, infinite elasticity etc. | ||
=====Problems===== | |||
Of course, neither model completely reflects reality. | |||
*'''{{risk|Information}}''' | |||
**''Information is inherently valuable''': Information is ''not'' universal, immediate, or homogeneous. Much of commerce would fail if it were. ''Therefore'' those who have information first have a distinct advantage over those who do not. | |||
**''Therefore it is economically rational to hoard information''. This tends to make it less likely that information will be free, a key assumption of the {{risk|Benign}} model. | |||
*'''{{risk|market}} conditions and cooperation strategies are interdependent''' | |||
*'''{{risk|Cooperation}}''' | |||
*''We do cooperate''' In the right conditions individuals form natural alliances to share and protect valuable assets (like information). | |||
*''Cooperation brings economy of scale and natural advantage: Cooperation rigs the {{risk|market}} in favour of the cooperators against the unaffiliated, thus taking the market further from the {{risk|benign}} ideal. This is not, intrinsically, a bad thing. It is rational, logical and sensible behaviour. Nepotism is an instance of this kind of cooperation: it relies on a structure of trust. It is better viewed as a defensive strategy to ensure those we deal with we can trust, than an offensive strategy to keep strangers out. | |||
*Cooperation ''changes'' the {{risk|market}}: where there were ten equal players, now there are nine: Eight equal small ones, and a bigger one. | |||