Standing on the Sun. Christopher Meyer

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СКАЧАТЬ Keynes said about the power of new mental models:

      The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.⁵

      So let us point out that capitalism is nothing but a set of rules, some explicit but most implicit. The rules dictate the conduct of exchanges, economic and otherwise, among owners, managers, citizens, and the state. Some of these rules turn out to serve society better than others. For example, in the introduction we mention the question of how a capitalist society should deal with an entrepreneur whose venture fails. If a business goes bankrupt, it might be considered fair to hold its founder completely accountable for the loss. Those who can't repay their investors or vendors might justifiably be sent to debtors' prison. On the other hand, throwing a borrower in jail, in addition to the costs of incarceration, removes the possibility of repayment—and meanwhile deprives society of whatever business venture that bold risk taker, now wiser, might have pursued next.

      Developing bankruptcy protections as an alternative to debtors' prison is one of the steps in the more general shift Romer noted from vengeance to compensation. It was logical to realize that treating debt as a sin meant taking potentially productive assets out of the labor force and paying to imprison them. In a society that prized innovation, it made more sense to acknowledge that debt happens and devise a system for dealing with it productively. The rules changed, and capitalism adapted.

      Coevolution

      Did a less punitive stance toward capital squanderers mean they got off scot-free? Ideally, no. Easing up on bankrupts threatens to create what economists call moral hazard—a situation in which someone has an incentive to make bad choices because others will pay for them. For the rules to serve society well, they must achieve a careful balance that encourages reasonable risk taking while discouraging recklessness and free riding. And note that some of that balance can be achieved by rules other than laws. For most of the twentieth century in the West, moral hazard was contained by the social stigma of bankruptcy; debtors' prison or not, “going bust,” becoming a “deadbeat,” and declaring financial failure were sufficiently painful that no non-sociopath would choose them.

      But after leniency regarding bankruptcy became the norm, some borrowers responded to that change with new behaviors. A century without debtors' prison eroded society's aversion to bankruptcy, and it became a tool of management. Frank Lorenzo, former CEO of Continental Airlines in the United States, embraced bankruptcy in the 1980s to restructure its labor agreements, even though Continental was not in such dire balance sheet straits that Chapter 11 was necessary. Lorenzo shocked business commentators but also earned their admiration for the creative use of the law. In that case, moral hazard was not an issue: there's no suggestion that Lorenzo's predecessors considered the bankruptcy strategy when negotiating raises with pilots in earlier years. But when Lorenzo didn't burn in business opinion hell, it inspired a truly bankrupt use of bankruptcy law: land speculators in the 1990s observed that in Florida and Texas, the law allowed them to walk away from deals gone bad, and thus they began buying high-risk properties. The deals looked bad to anyone who feared bankruptcy, but to those immune to its stigma, it was an attractive “heads I win, tails my creditors lose” opportunity. Since then, Florida has evolved its bankruptcy statutes to close this loophole, as community shunning was no longer a sufficient deterrent. Indeed, according to the Web site of a Florida bankruptcy lawyer, “There are no good or bad reasons to file for bankruptcy … There is no shame, stigma or embarrassment in filing bankruptcy anymore.”

      Yes, this should put you in mind of bailouts, whether in the context of AIG or Greece, and yes, it's been a similar story: Anglo-American capitalism has so strongly rewarded financial innovation, and has been so averse to letting financial institutions take their lumps, that moral hazard has moved from a curiosity of economists to the editorial page. And yes, we have lawyers, in many cases holding public office, who defend those institutions as doing their jobs as society needs them to. But that's not our point here.

      Our point is to introduce you to the key concept of coevolution. This is the phenomenon by which changes in one species spur reciprocal changes in another, in a sort of arms race of adaptation. As computational biologist Stuart Kauffman says, “When the frog gets a sticky tongue, flies get Teflon feet.” The growth of digital networks and the changes in the music distribution industry are an economic example. The rules and technologies beget innovations in behavior; the new behaviors induce changes in the rules (in this case, both social and legal).

      The behavior of capitalists coevolves with social values and the law. A qualifiying phrase we used earlier—“in a society that prized innovation …”—speaks to the reciprocality involved. Society's needs and values, and the conditions created by current technology, constitute the environment in which competing rules are judged. When one set of rules replaces another, it's a matter of fitness for that environment.

      Fitness and Selection

      We've already described (in chapter 1) the different world in which capitalism now finds itself. It's a world of values, needs, and technologies that certainly have not been prominent in the past. So striking is the difference that capitalism's critics, and some of its adherents, fear it will never be equal to the challenge. These are the people who, whether they would put it this way or not, see capitalism as a machine. They imagine something like a car, designed for paved roads, now having to perform in an ocean. Unable to retool itself, it will engage its gears, spin its wheels, and sink.

      A Buick in the Pacific exhibits a disastrous lack of fitness for its milieu. But an AquaBuick's inventor might notice that internal combustion engines work in boats, and tires could serve as life preservers, and find another way to make a living. And in nature, when species find themselves in changing environments, some of them indeed do adapt.

      The ones that have the best chance of responding to change are those that have a lot of variations in their gene pools to start with. Individuals that had quirky, even hampering, features in the old world find themselves relying on those features to survive. And if they live long enough to produce offspring, they pass down those newly useful features.

      The perhaps depressing fact is that this is the whole purpose of sex: to ensure that there are always enough innovative designs with the potential either to improve on the previous solutions or to suit a newly changed environment better than the old model. Nature arranges to take two sets of instructions for making an organism from the current generation—the parents' DNA—and recombine them in a structured but somewhat random way to make a new set of instructions.⁶ Then the new genotype grows the phenotype, as a new blueprint gives rise to a building.

      Next, of course, the environment, through selection, decides whether this new variant was a good idea. The phenotypes that work well in the environment are fit, and the fittest survive and get a preferential opportunity to breed the next generation. The elements of its genotype get a chance to “radiate,” or show up in multiple successor species. (It's the same basic phenomenon when a product thrives that has a certain characteristic, and then that characteristic gains prevalence. This is why, post iPhone, touch screens are becoming ubiquitous.) Evolution is the outcome of new ideas presented to the environment by recombining old ideas and waiting for selection to operate.

      If the environment is unchanging, the same genes will prove fit again and again. If something suddenly changes, though, the chance of survival is increased if there's a reservoir of alternatives to fall back on. This is why the СКАЧАТЬ