First Stab at a New Book: The Matrix: The Conjunction of War, Economic Theory, and the Economy
Vincent Portillo, a colleague, will join me in putting a new book together. We only have 10 paragraphs to show for our effort, but any comments will be very much appreciated. Getting an introduction down is important, not only for communicating with readers, but for sorting out our own ideas. Thanks.
This book is an exploration of the complex and fascinating interactions between war, the economy, and economic thinking. Whether you realize it or not, a complex Matrix resulting from the interactions of war, economics, and economic thinking creates a powerful force field that affects almost everything you do. This force field, not unlike gravity, is both pervasive and invisible. However, the effects of the Matrix are unpredictable. In a world vulnerable to the possibility of serious destruction as the result of both military and economic miscalculations, taking account of this Matrix is imperative.
The effects of the Matrix are far more complex than those of gravity. Obviously, an engineer designing an airplane must take into account the force of gravity to avoid future calamities. Complete command of the necessary scientific knowledge and care in the building of the plane is insufficient to guarantee future safety. The human interface creates an ever-present risk once pilots, mechanics, and air traffic controllers take over responsibilities for the plane.
A far more intricate network of human behaviors interacting with the Matrix leads to pervasive uncertainty, making the challenges of responding to the Matrix are far more daunting than the straightforward responsibilities of those who are responsible for the plane’s safety. The Matrix presents another dimension of complications. If a pilot flies into a mountain, the immediacy of the consequences makes interpretation of the event fairly simple.
In the case of the Matrix, choices today may set off a chain of events that may have important consequences years or decades in the future. Looking back to identify a single — or even a small set of events as the cause is very difficult. After all, events occurring in previous millennia still remain the subject of ongoing debates among historians. To make matters even more complex, the Matrix can cause contradictory outcomes.
Here again, the human element comes into play. Any attempt at identifying causality comes up again the tendency to understand the sequence of events in light of pre-existing ideas or ideology. Consequently, one must exercise extreme caution in any attempt to manipulate the Matrix. Nonetheless, the risks of doing nothing are even more dangerous, considering the potential dangers or perhaps even likelihood of environmental, economic, or military disaster. Actions to prevent cataclysmic outcomes require great care, backed up with a relatively holistic perspective.
Economics occupies a special place in this intricate Matrix with economics serving as a bridge between the other two principals of the Matrix: war and the economy. Almost unintentionally, in the seventeenth century, modern economics developed to a large extent in response to questions raised by the needs and the consequences of warfare.
Three economic thinkers provide interesting perspectives into the sort of complexity and unpredictability that can plague efforts to respond to the matrix. The first, Adam Ferguson, commonly credited with originating the concept of unintended consequences, wrote: “If Cromwell said, [t]hat man never mounts higher, than when he knows not whither he is going; it may with more reason affirmed of communities, that they admit of the greatest revolutions where not change is intended, and that the most refined politicians do not always know whither they are leading the state by their projects” (Ferguson 1773, p. 205). Modern readers of Ferguson often his idea to suggest that governments are ineffectual in improving the economy; that everything should be left in the hands of business, which can presumably foresee the future. Here, Ferguson’s insight will be put to wider use.
Joseph Schumpeter is famous for having popularized the concept of creative destruction — the idea that the most successful entrepreneurs pursuing their own interests can promote prosperity by disrupting an economy. XXX will treat war as more than wholesale slaughter; that war can also have positive unintended consequences, adding a double meaning to the destruction in creative destruction. The ancient Greek philosopher, Heraclitus, hinted at this double meaning, writing, “Thy name is life, thy work is death.” (In Greek, the bow, an important weapon at the time, and life were synonymously called bios.). Obviously, war involves more life than death, but war creates some good outcomes, although not for the right reasons. For example, military considerations in the United States help to promote both racial integration and the school lunch program. A Matrix-wide analysis calls out for taking account of those lesser positive effects.
Frank Knight offers a third insight into our exploration of the matrix. Knight distinguished between what he called uncertainty and risk. The latter can be measured, almost statistically, while the former defies rational calculation. Risk is operative in flipping a coin or playing a game of dice, one knows in advance the chances of a particular result. In many other ventures, nobody has a clue on what the outcome might be. Overconfidence and hubris amplify the challenges posed by uncertainty. Because the matrix is riddled with pervasive uncertainty, Knightian modesty becomes an important virtue.
Another less mainstream economist introduced an important insight. Karl Marx emphasized the centrality of social relations — not just the superficial relations between those who market goods and services and their customer, which constitute virtually the whole of economists’ concern, but rather the whole gamut of social relations. This perspective offers important insight into the human relations, which constitute the most intractable dimension of the Matrix.