The overoptimized society

[The2ndWheel]

http://www.energybulletin.net/node/47364

For former Wall Street hedge fund manager and self-styled student of uncertainty Nassim Nicholas Taleb an important cause of the current financial meltdown is best described by ecological science. The system has become overoptimized. The consolidation of finance into the hands of fewer and fewer large players--banks, insurance companies, investment banks, and giant hedge funds--has made it less vulnerable to frequent crises, but more likely to produce a severe crisis when there is a breakdown in the system.

What used to be country-specific or regional crises, now become worldwide crises. In the past we've had the Mexican crisis, the Asian crisis, the Argentinian meltdown and most recently the utterly devastating hyperinflation in Zimbabwe. But none of these became global crises.

"It's vastly more optimal to have one large bank than 10 small banks. It's more efficient," Taleb told The News Hour with Jim Lehrer recently. " when one bank, large bank makes a mistake, OK, it's 10 times worse than a small bank making a mistake." The moral of the story: A world with a lot of small banks is far more resilient than one with a few large banks. That's the kind of result one would expect in biological communities, and it turns out to be true, not surprisingly, in human communities as well.

[Deja Q]

1. I thought it was due to greed, not ecology. Whatever.

[Fovea]

2. the same phenominon is happening in labor

where greater efficiency destroys jobs that are not replaced by better jobs.

Now it means jobs leave the shore, and the former worker remains a former worker.

The solution is the mandated 32hr workweek.

[GliderGuider]

3. Resilience and efficiency are inversely related in any complex system

The more efficient (i.e. optimized and non-redundant) a complex, adaptive system becomes, the more it loses resilience and the more likely it is to experience cascading failures. This is basic stuff, and has been understood for a long time. Banks participate in a complex, adaptive economic ecology in exactly the same way that plants and animals do, and the same rules apply.

I don't know why anyone is surprised at the failures we're seeing these days, whether in economics, energy or the ecology. At their root they are simply system failure precipitated by loss of resilience.

http://www.resalliance.org/1.php