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The Modern Global Economy's Bottomless Nut Bowl

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"It is the ever-increasing exchange of ideas that causes the ever-increasing rate of innovation in the modern world," writes Matt Ridley, author of The Rational Optimist. It's an inexhaustible river of invention and discovery that irrigates the human condition, preventing it from stagnation, Ridley claims, eventually concluding that in a world where free exchange rules, not only are equilibrium and stagnation avoidable, they are impossible.

It's an attractive idea, one that seems correctly drawn from 50,000 years of observations. After all, even intellectual heavyweights such as Adam Smith Robert Malthus and John Stuart Mill failed to anticipate the ever-smoldering fire of innovation and creativity that has, thus far, failed to quietly die out, victims of the economic concept of diminishing returns.

To explain the modern global economy’s bottomless nut bowl, you must explain where the perpetual innovation machine and its increasing returns came from. They were not planned, directed, or ordered. They emerged, evolved, bottom up, from specialization and exchange. The accelerated exchange of ideas and people made possible by technology fueled the accelerating growth of wealth that has characterized the last century. Politicians, capitalists, and officials are flotsam bobbing upriver on the tide of invention.
This description of emergent innovation owes a debt -- perhaps a debt, as we shall see, owed quite literally -- to the concept of complexity theory and complex adaptive systems. Indeed, the assertion that equilibrium is impossible in our system of free exchange is also rooted in the concept of non-equilibrium systems, particularly as might be found in non-equilibrium thermodynamic, systems in nature that are not in stationary states because they are subjected to frequent interruptions by the flow of matter to and from other systems.

And then, he says, there's the sex; always the sex.
"Ideas are having sex with other ideas from all over the planet with ever-increasing promiscuity. The telephone had sex with the computer and spawned the Internet. "
I don't question Ridley on any of these points, or the descriptions of our free exchange of ideas and the continuous and discontinuous flux of irruptive sexual idea encounters. No, I agree with all that. It's just that I believe we have entered a long period of reduced exchange, contributing to a diminishing of the idea sex drive.

From the perspective of Socionomics, this is simply the broadest economic manifestation of a large-wave downturn in social mood, marked by what Robert Prechter characterizes as a general decline in freedom of all types, from individual to economic to political.
POSITION:  No positions in stocks mentioned.