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      "author": "skinnercrypto",
      "body": "<center>![What does a Hot Cup of Coffee, Economics and Cybernetics Have in Common?](https://i.imgur.com/RADj0sR.jpg)</center>\n\nI originally posted this on my Patreon the other day! If you want early access (and wanna support my super awesome cybernetic community adventure) please consider joining! Just go to [THIS LINKY RIGHT HERE.](https://www.patreon.com/richardskinner) For the cost of a cup of coffee a month, you TOO can take part in my super awesome writing endeavors.\n\nALSO, it's great to be back on Hive, had to step away for a bit, but I have a newfound purpose (see above). I wanna get bigger now that I have a reason to.\n\nIn any case, HERE WE GO!\n\nSo, I've been doing some preliminary research into how the economic model for the community would look like, and my thinking took me away from what we would normally call the \"orthodox\" models of the dominant \"Neoclassical Synthesis\" of economics.\n\nNamely, I'm interested in establishing more grounded assumptions for the economic model: Assumptions that are amenable to the cybernetic project of finding and maintaining stability. This is a big project, because it requires me to have a rather large working knowledge of:\n\n1.) Thermodynamics, and all the really fun statistical mechanics associated with that understanding.\n\n2.) Economics, which is pretty much the same, albeit rigorous in a different way.\n\n3.) Cybernetics, which I'm slowly acquiring a pretty good grasp on.\n\nI'm just trying to fundamentally change the world. No pressure.\n\nSo, Neoclassical economics tends to have some basic underlying assumptions:\n\n**Assumption 1: Consumers are Rational.** If you have taken a step outside the past 200,000 years or so, you can probably tell that in many cases (and increasingly so in our modern world) that this is probably not the case. People can be impulsive, emotional and generally not in the best state of mind to make economic decisions, especially given the zeitgeist that is dominant today. Additionally, people don't (mostly always) have perfect information to make rational economic decisions. As a result, market inefficiencies develop naturally from the pure fallibility of human condition.\n\n**Assumption 2: Firms Exist to Maximize Profits.** Okay, this does appear to be the case in the contemporary mixed/capitalist economy most modern nations tend to have. The hidden \"sub-assumption\" here is that most companies not only exist to make a profit but exist to continuously attempt to make increasing profits year over year.\n\nIf a company with a particular number of assets and debt (which is considered an essential part of growth in business - see the DuPont Equation for more), and they have a net income of 1 million dollars this year, but a net income of 900,000 dollars next year, the company sees this as losing money. This comes down to productivity - the way a company uses resources. Continuous growth in capitalist economics is the norm, and this is untenable in the real world. One might even argue that there is a correlation between the search for continuous growth and the \"boom and bust\" cycles all too common with capitalism. That being said (and even Karl Marx would agree), Capitalism is extremely good at growth. Cancerously good, depending on who you talk to.\n\n(Side note, The mere mention of Marx is a turn off to some people. I'm no Marxist, and though I sympathize with a socialist state of mind, I don't necessarily subscribe to it. The idea is to create a NEW SYNTHESIS, something which no economic philosophy largely adopts today.)\n\n**Assumption 3: Market Equilibrium is an Economic Priority.** In short, this means that we want supply to meet demand as much as possible. A market in equilibrium is seen as an efficient market, and surely this does appear to be the case. That being said, the Neoclassical synthesis does not necessarily have the... \"robustness\" to effectively bring this state of affairs about, and there are better ways of understanding it, I believe. Bear with me, I'll get to that. Equilibrium in an economic sense is tangentially related to stability, and I shall elaborate on this.\n\n**Assumption 4: Value Derives from Utility.** This is a very interesting assumption if not for the singular reason that it is an assumption of how objects in an economic system are ultimately valued. Value doesn't derive from the costs of production, but rather from how much people value that which is produced. In other words, this assumption states that there is not a one-to-one correlation between production costs and value. In other words, it is completely possible to make a product for 5 dollars, and the value in the market is only 3 dollars.\n\nThis seems to me to be a bit... odd. Allow me to explain. Say I took a gram of hydrogen. The specific energy of that gram of hydrogen does not fundamentally change when one leaves the house with it in their pocket. The idea here is that value is subjective in many ways and does not necessarily reflect the physical reality of the thing which is valued. In essence, neoclassical economics acknowledges a decoupling of \"what it is worth in terms of resources\" and \"what people believe it is worth\". I think this is something that must be reconciled in a more substantial way.\n\n<center>**THERMODYNAMICS AND ECONOMICS!**</center>\n\nStrangely enough there is quite a bit of work that has gone into connecting thermodynamics with economics. Big names in the field include Nicholas Georgescu-Roegen, John Bryant and Jing Chen. They were interested in different ways with the project of providing a more... physical basis to economic thought. And why not? We aren't magical beings in a magical world, where magical fleeting ideas like \"value\" is based on some spurious, nebulous thing. It's not all turtles all the way down: Thermodynamics runs biological processes. Biological processes and life in general is contingent upon what is called \"thermodynamic dysequilibrium\". It has even been argued that LIFE IS A CONSEQUENCE OF THE SECOND LAW OF THERMODYNAMICS!\n\n\n<center>![Astronaut](https://i.imgur.com/qVHPbSw.jpg)</center>\n<center>**OH SHIT HERE WE GO!**</center>\n\nThis physical process of life requires changing high entropy into low entropy, which is in a way of speaking, is gradients of energy in nature producing order. We also know this as life. That very process in and of itself is contingent upon mass and energy exchange with the environment, which is in cybernetics and systems theory (among other disciplines) closely mapped to \"input\" and \"output\". We are super complex accounting ledgers for energy, with a purpose. The purpose of a system is what it does, and we eat, sleep, reproduce, and watch Netflix. Very important idea.\n\nSo, there are some fundamental things that we can probably assign as extremely valued, and those include the physical necessities we need to survive. the cost of these types of things tend to be inelastic, meaning that the price one pays for say, a loaf of bread or insulin may not be something domineered by cost. You need it, and if you can't get it, you've ultimately booted yourself from the \"Reality\" server to do eternal lag.\n\n<center>**CYBERNETICS!**</center>\n\nCybernetics is communication and control in the animal and machine. If we were to view our world and find schema in common with many different disciplines, we will find that control (whether it be how gravity controls orbits or how steroids control inflammation) is that thing which we find literally everywhere. This is important because what it means is that causal connections between objects in the world tend to have a limiting or a liberating effect on these objects. Those objects are Systems, which are a conglomerate of interacting parts.\n\nSystems can be simple or complex. Cyberneticists understand the complexity of systems through something called Variety. In short, variety is the number of possible states of a system. For example, say you had a system {Coin 1, Coin 2}. The two passible states of each part of this system is Heads (H), or Tails (T). A two-coin system has 4 possible states: {H,H}, {H,T}, {T,H}, and {T,T}. The variety of the two coin system is 4.\n\nThe Law of Requisite Variety states that two systems are stable when their variety is equal to one another. For example, if I were in a room of 50 people and giving a presentation, I might find that their variety (loud conversations, moving around, etc.) greatly outmatches my own. In order to quiet the crowd, I must attenuate their variety in order to make it match my own. In other words, I blow a whistle loudly and everyone shuts their pie holes and listens. Stability flows from an equilibrium of variety between systems, and the variety of systems tells us how well one system can manage the operation of another.\n\n<center>**BRINGING IT TOGETHER (THE \"BATMAN BEGINS\" OF MY ECONOMIC SYNTHESIS)**</center>\n\nNow, Something REALLY INTERESTING: There is a similar concept in Thermodynamics, and that is of course, entropy. There are a few types of entropy as envisioned by folks like Claude Shannon and Ludwig Boltzmann, but the idea is relatively simple: *Entropy considers all the possible states of a system*. In statistical mechanics, this entails looking at all the microstates of a system. In Shannon entropy, this is the amount of information in a system. In cybernetics, this is essentially the complexity of the system.\n\nA high variety system has low entropy, meaning there is a LOT of possible information (or useable energy) available within the system. A low variety system has high entropy, meaning it has less possible information (or useable energy). This makes sense, right? It's easier to multiply numbers with a calculator than an abacus. The complexity of a system \n\nThis might not seem like much, but entropy is a cornerstone concept in thermodynamics. From this point, further research will be done to create an economic theory that will be used to construct the economic domain of the cybernetic community. In short, we ground economics physically, and we use the tools we produce in addition to cybernetics to create a stable economic system. this should not be confused with a steady state economic system, for the system we create may grow with time, albeit within the bounds of what is physically possible (via the first law of thermodynamics - conservation of energy). \n\nI call this theory I'm working on Thermoeconomic Cybernetics. If that name doesn't excite you, I don't know what will.\n\nThanks for reading!",
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