Economics Is Not Natural Science

By Douglas Rushkoff
Edge, August 11, 2009

Edited by Andy Ross

The marketplace in which most commerce takes place today is a product of engineering. Thinkers are less likely to provide us with genuinely revolutionary axioms for a more highly evolved marketplace than reactionary responses to the technical innovations that threaten to expose the marketplace for the arbitrarily designed poker game it is.

It is particularly treacherous to limit economic thought to the game as it is currently played. This widespread acceptance of the current economic order as a fact of nature ends up compromising the impact of new findings. Write books that business likes, and you do better business. But just because it pays the mortgage doesn't make it true.

Most of these concepts end up failing to accurately predict the future. Instead of 25 years of prosperity and eco-health, we got the dotcom bust and global warming. Immersion in media is not really good for us. The decentralizing effect of new media has been met by an overwhelming concentration of corporate conglomeration.

The economy in which we operate is not a natural system, but a set of rules developed in the late Middle Ages in order to prevent the unchecked rise of a merchant class that was creating and exchanging value with impunity. This was what we might today call a peer-to-peer economy, and did not depend on central employers or even central currency.

Feudal lords, early kings, and the aristocracy were not participating in this wealth creation. They needed a mechanism through which to maintain their own stature. The two ideas they came up with are still with us today.

The first innovation was to centralize currency. Central banks issue the currency in the form of a loan to a bank, which in turn loans it a business. Each borrower must pay back more then he has acquired, necessitating more borrowing. An economy with a strictly enforced central currency is ruled principally by the debt structures of its lenders and borrowers.

The second great innovation was the chartered monopoly, through which kings could grant exclusive control over a sector or region to a favored company in return for an investment in the enterprise. This gave rise to monopoly markets. The resulting economy encouraged people to accept employment from chartered corporations rather than create value for themselves.

Like artists of the Renaissance, most scientists, mathematicians, theorists, and technologists today must find support from either the public or private sectors to carry on their work. This support is not won by calling attention to the Monopoly board most of us mistake for the real economy. It is won by applying insights to the techniques through which their patrons can better play the game.

When a potentially destabilizing and decentralizing medium such as the Internet comes along, this style of inquiry follows the story only until a means to arrest its development is discovered and new strategies may be offered.

The rules of the economic game as it is currently played reflect neither human values nor the laws of physics. The market cannot expand infinitely. How many other species attempt to store up enough fat during their productive years so that they can retire? How could a metric like the GNP accurately reflect the health of the real economy?

The net offers people the opportunity to build economies based on different rules. We can startup and even scale companies with little or no money, making the banks and investment capital on which business once depended obsolete. We can develop local and complementary currencies, barter networks, and other exchange systems independently of a central bank.

We must stop perpetuating the fiction that existence is dictated by the immutable laws of economics. We must reveal economics as the artificial construction it really is. Although it may be subjected to the scientific method and mathematical scrutiny, it is not a natural science. It is game theory.
 

Sports Ancient and Modern

By Douglas Rushkoff
From a talk with John Brockman
Edge, October 25, 1999

Sports spectacles today are rallies designed to promote our allegiance to corporations. I went to a Jets game where a chain of steak houses handed out small signs to every fan. When the Jets sacked the opposing team's quarterback we were supposed to hold up the sign, which read "Sack Attack." On the back of the sign, however, facing each fan was the name of the restaurant chain. They took the most aggressive, most carnivorous moment of a football game, where we sack the opposing quarterback, and used it as an opportunity to program us with their name and logo, So now we're going to associate the steakhouse with "Ah, we killed them!"

Meanwhile, everything else going on at a sports game is still based on ancient Roman techniques. The Roman games were intended to demonstrate class mobility by showing that slaves could become regular citizens. If a slave really won enough gladiatorial contests, he would be elevated to the status of citizen. What's happening in sports today is very similar, except it is an inner-city kid who gets out of the ghetto because he has talent, and has chosen to spend his energy on entertaining, rather than mugging us. Successful gladiators were permitted to commit terrible crimes, even rape, without fear of being punished — and without damaging their images among the fans. Same way here. No matter how many times a sports hero is arrested, we'll still forgive him. He has license to do these terrible things so that we can vicariously experience his outrage and pain — as well as our own safety and control.

And in the end, who's paying for it all? Look at the scoreboard. It's not the emperor any more. It's whatever corporation has paid for that scoreboard to be there. It's name is right on top.

In a sense nothing has changed: the same kinds of techniques that have been used for centuries by emperors, kings, popes and priests, are now being used in service of the corporation.
 

AR  I saw that economics was not a natural science back when I was an undergraduate already. As for bread and circuses, we all know America is Rome Redux. This is stuff I was contemplating for my next book ... hmm, I must part a few more veils in my dreams.