Butterflies, boom and bust
It’s very strange when you discover that the view you have of the world that you take as obvious and self evident is not in fact shared by everyone. Or even most people.
I’m not talking about the difference of perspective caused by being in a different part of the world or a different culture; or even of a difference in political view, where even the most fervent believer is at least aware of the opposing views and in many ways knows that he or she is defined by their opposition to those views as much as their belief in another. No, this is something more fundamental: like discovering that what you see as ‘red’ is not the same colour that others see and call ‘red’. It’s so obvious that you never thought to question it.
I had this revelation while watching, of all things, a BBC4 programme on Chaos Theory, which linked the mathematics to the two biggest issues in the news today – the credit crunch and climate change.
I’ve always been bemused by the government’s claims to have eradicated the “boom or bust” cycle. I took this as really rather silly, and put it down to the usual sort of rhetorical overkill that all politicians are prone to having from time to time. Not once did I believe that they actually believed this; let alone that the bankers, money men, regulators and press would share this view because they obviously knew better. And surely not the top economists, the real thinkers who understood far more of this stuff than I could ever hope to? Turns out that pretty much all of them had been sucked in. They really believed that we had miraculously found our way to a state of perfect equilibrium and that the old destructive cycles were behind us.
Even now, I look at this and have to ask: how the hell could so many intelligent people be so spectacularly dumb? It was surely blindingly obvious that the boom and bust cycle hadn’t been beaten; moreover that it can never be eradicated because it’s intrinsic to the system. It’s one thing to make nice speeches about it for political purposes, but to believe it? Come on!
So what, I’m saying I’m so smart I could see the credit crunch coming? Not hardly. In fact I’m feeling very dumb and blind for not having realised that so many other people didn’t think this way. As for the reason I came to this conclusion as being to obvious? All I can think is that it’s down to my education in my teens and twenties.
I majored in mathematics and spent six years studying the subject at university: when I left, I never looked back and I’ve had little to do with maths ever since, which you could say is a horrible waste of a very expensive education (sorry, dad) but which I happen to think set me up for a very good career and life – by convincing me that my nature was not for academia. But even though I have left maths far behind, it seems that the lessons you learn in those formative years never leave you and shape your thinking forever, so that when others look at the economy and have trust and faith in the masters of the universe, I look and see the unknowable erratic nature of chaos theory.
Chaos was relatively new when I was at university: only one lecturer there was really looking into chaos, and I rather think the rest of the faculty saw him as “lecturer lite”, wasting his time on a superficial fad of no importance because it let him draw pretty pictures on fledgling computers (fractals, in case you know the jargon.) Twenty five years on and it’s quite another matter: this fad has become in its way as important to our understanding of the world around us as Newtonian physics, although where Newton brought understanding, control and order, chaos brings – well, chaos. Uncertainty. Unpredictability.
The key to chaos is the discovery of “sensitive dependence on initial conditions” – which means that the slightest change in how you set something up can be quickly magnified into huge effects down the line that wreck your predictions. This has become popularly known as “the butterfly effect” which is often – inaccurately – summarised as “the flapping of a butterfly’s wings can cause a hurricane on the other side of the world.” In fact this is very much not what chaos says: chaos vehemently refutes the straightforward view of linear causality, that A causes B and will do so every time. What the butterfly effect really says is that the mere flapping of a butterfly’s wings results in such uncertainty that however good your forecasting methods, you have no idea whether there will be a hurricane, sunshine, snow or sleet. Your prediction becomes unstable very quickly because of this one thing that you overlooked; and of course in reality, the world is full of butterflies and other sources of air turbulence, none of which you can factor into your forecasts and so shows just how impossible the task of weather prediction is. It’s not a question of getting better theories or bigger computers: chaos shows that the task is impossible in a quite fundamental way.
The vast majority of people still seem to look to science, technology and mathematics as modern day gods: a way of being able to know all there is to know, and through that knowledge to control the world around them. It’s why so many laypeople and even economists started to believe they knew enough to run the economy without boom or bust anymore. Unfortunately, what a lot of 20th century mathematical discoveries have been telling us and proving beyond doubt is that there is an awful lot of things we can and will never know: not all theories are provable (Godel) or computable (Turing); predictions will fail (Chaos) and even attempting to know the position of a physical object can be impossible (Heisenberg).
So if you come from a mathematical background you sense the limits. You realise that – however much you know – it’s not nearly enough to beat chaos. Even a relatively simple system will spin out of your predictions, and if you make the system so complex that the “butterfly” can show up anywhere – and then push the system so that it’s running near maximum – then the destabilisation is going to happen even more quickly and hit overnight. That’s what happened with the fast growing markets made massively complex by globalisation and free trade: the one tiny flap of wings could come from anywhere in the world and overwhelm the supposedly stable system at any time. It just happened to be sub-prime mortgages in the heart of middle America – this time.
Another basic tenant of chaos theory is that when the instability starts to show up, it seems to come out of nowhere and is irresistible: it is the “tipping point”, to use another piece of jargon now in common use. It’s like pushing a boulder around the plateau at the top of a mountain: very simple to fool yourself into believing you’re in control and it will always be that easy. But get an inch too close to the shear sides, and suddenly the boulder is out of control. Now if you get in front of that formerly benign boulder to try and stop it, you’ll get crushed. The equilibrium state has been disturbed and nothing is going to set it right again, the boulder will roll until it finds a new state of rest. That’s what governments have been finding with the market: where once they thought a tweak of an interest rate here, a touch of government spending there would do the trick, now they find that these tools are impotent. Their economic plans are getting pulverised by the rolling boulder, and no one knows where that rock will come to a stop.
And markets should be more controllable than some of our other problems. They are, after all, just a load of humans, working to very human agendas (make money; make more money). Common sense says that they shouldn’t be jumping off cliffs like lemmings because it’s not rational, it doesn’t help them make money; and yet as we watch the markets tear themselves apart and people lose money left right and centre. It seems that even a bunch of self-motivated humans can’t resist the overriding forces of chaos.
Even less the climate. Here there is no intelligence to try and temper the forces of chaos. The climate is going to follow the rush to a new equilibrium wherever it goes, and if it wipes out life on earth in the process, what does it care? This is what really, really concerns me right now. Just as the existence of “boom and bust” seemed self evident to me, so does the sensitive dependence of the weather on the environmental conditions and the signs that the climate has already passed the tipping point. The changes we’re seeing in the climate are out of all proportion with the supposed causes, just as the boulder’s movement once past the edge is out of all proportion to the slight push we gave it, and the market’s massive swings out of any sense of scale of the news it is allegedly reacting to. The climate’s rate of change is getting faster and faster and no longer in proportion to the causes.
The climate is, it seems, in a rush to a new equilibrium. The tipping point has been passed. Which is not to say we shouldn’t still try and do something to shut down the initial causes – it might make the new equilibrium more tolerable to life than if we keep on churning out CO2 – but we should put aside the fantasy that if we switch off lights and cut down on flights that the world environment is going to go back to what it used to be. It’s not. The world has changed and the only question is whether the new world is still one that we can live in, or whether Mother Earth is going to evict us with a wink and the damning verdict that we are indeed the weakest link.
I’d love to be wrong about this one. I really would.