A Socialist Paradigm Has Turned Scientific Research on it's Head at the Santa
Before I had ever heard of Ludwig von Mises, Friedrich A.
Hayek, Murray Rothbard, and, thus, the Austrian School of
Economics, I had enthusiastically followed the economics
research undertaken by the Santa Fe Institute (SFI). My interest
in the institute emerged after reading Dr. Stuart Kauffman's
fabulous book At Home in the Universe: The Search for
the Laws of Self-Organization and Complexity (published
Dr. Kauffman is a member of the Santa Fe Institute, which
is the world's leading research institute pertaining to the
science of complexity. A particular line, in Dr. Kauffman's
aforementioned book, struck me as important: "It is our quest
to understand emergence of this ordered complexity all around
us, in the living forms we see, the ecosystems they construct,
the social systems that abound from insects to primates,
the wonder of economic systems that actually deliver us our
daily bread and astonished Adam Smith into the conceptualization
of his invisible hand."
It was this line, combined with the concept of self-organization,
which gave me hope that brilliant scientists would produce
research supporting the wonders of capitalism while demonstrating
the reasons as to why socialism/central planning has utterly
failed and has only lead to wide-scale poverty. After all,
socialism/central planning is a concept antithetical to spontaneous
self-organization. Unfortunately, the Santa Fe Institute's
economics research program --particularly in the area of
poverty -- has shown me that the socialistic paradigm that
is so common in academia is literally blinding their research
Instead of promoting capitalism, which is inherently an
unplanned, self-organized, and a successful economic system,
SFI's research regarding poverty has a Marxist class-struggle
flavor to it while promoting wealth redistribution-- i.e.
taxation and redistribution, by a central governmental authority,
with the goal of alleviating poverty.
In my opinion, logic has been completely suspended here.
Thankfully, a few years ago, a friend introduced me to Austrian
Economics. It is here that I have found my intellectual home.
I learned that economic calculation is impossible in a socialist
commonwealth and that capitalism provides the best chance
for all individuals to prosper. If the researchers at the
Santa Fe Institute want to learn how to alleviate poverty,
then their most fruitful research will come from using an
Austrian perspective. This will truly require a radical paradigm
shift. Ironically, it will be a shift back to accepting the
truth that a robust economy is self-organized and, thus,
an unplanned phenomenon.
For those who are not familiar with the science of complexity,
it is a relatively new science that is somewhat difficult
to define. At the heart of this science is the belief that
spontaneous order -- or self-organization -- emerges as a
result of physical laws, which clearly remain undiscovered.
A broad definition of self-organization is as follows (taken
from the book Swarm Intelligence: From Natural to Artificial
Self-organization is a set of dynamical mechanisms whereby
structures appear at the global level of a system from
interactions among its lower-level components. The rules
specifying the interactions among the system's constituent
units are executed on the basis of purely local information,
without reference to the global pattern, which is an emergent
property of the system rather than a property imposed upon
the system by an external ordering influence.
Using this definition, I would strongly assert that central
banks such as the Federal Reserve are formed under the pretense
of providing an ordering influence to the market place, and
yet, are completely unnecessary for a free-market order to
emerge. The same can be said of a central taxing authority
bent on creating a more perfect society via wealth redistribution.
As I will discuss later, central banks and central taxing
authorities end up as destabilizing influences and, therefore,
cause disorder and poverty.
If one was to reword the above-mentioned description of
a self-organized phenomenon into economic terms, then it
couldn't be done any better than the following quote from
Dr. Murray Rothbard's magnum opus Man, Economy, and State:
Directly, voluntary action - free exchange - leads to
the mutual benefit of both parties to the exchange. Indirectly,
as our investigations have shown, the network of these
free exchanges in society - known as the 'free market'
- creates a delicate and even awe-inspiring mechanism of
harmony, adjustment, and precision in allocating productive
resources, deciding upon prices, and gently but swiftly
guiding the economic system toward the greatest possible
satisfaction of the desires of all the consumers. In short,
not only does the free market directly benefit all parties
and leave them free and uncoerced; it also creates a mighty
and efficient instrument of social order. Proudhon,
indeed, wrote better than he knew when he called 'Liberty,
the mother, not the daughter, of order'.
It is quite possible that there are no physical laws of
self-organization responsible for the emergence of a free-market
social order. Certainly, Dr. Rothbard did not advocate such
a concept (i.e. that there are physical laws responsible
for self-organization). Nevertheless, the great Austrian
economist and Nobel laureate Friedrich A. Hayek did feel
that research regarding spontaneous, self-organizing processes
was a worthy endeavor. For example, Dr. Hayek stated the
following in his book The Fatal Conceit: The Errors of
Socialism: "Adam Smith nevertheless remains the butt
of jokes even among economists, many of whom have not yet
discovered that the analysis of self-ordering processes must
be the chief task of any science of the market order."
If I have done anything here, I hope that I have demonstrated
an intellectual connection between Austrian economics and
the science of complexity. Therefore, it would seem that
the Santa Fe Institute's economics researchers would be most
interested in studying the free-market order as advocated
by Dr. Kauffman (unless he really didn't mean what he stated
in his book At Home in the Universe). As I will show
below, SFI's scientists are defying logic and are advocating
socialistic prescriptions for alleviating poverty.
So let's get to the Santa Fe Institute's suspension of logic.
As I mentioned earlier, SFI is involved in researching the
socio-economic issue of poverty. It appears to me that SFI's
researchers believe the solution to the problem of poverty
lies with socialism instead of capitalism -- which is an
unplanned, self-organized economic system. As an example,
here's what was stated in the Santa Fe Institute's "2000
Annual Research Report":
SFI is in the midst of hosting four interdisciplinary
workshops seeking to better understand the persistence
of economic and social inequality in both groups and individuals,
its impact on the ability of groups to cooperate in the
pursuit of environmental sustainability and other common
objectives, and the capacity of governments and other collective
actors to alleviate poverty and economic insecurity given
the constraints of global economic integration. The workshops
address the following topics (I've shortened the workshop-topic
descriptions without preventing you from getting the gist
of each topic):
- Poverty traps. For economic, cultural, technological
and institutional reasons, otherwise identical individuals
often suffer or enjoy divergent fortunes as a result of
differing initial conditions; as a result individuals,
ethnic groups, nations and other entities can remain locked
- The intergenerational transmission of economic inequality. The
impact of parental wealth and income on offsprings' economic
success is substantialÖ
- Inequality and environmental sustainability.
- Globalization and egalitarian redistribution. The
freer movement of capital, goods, people and information
is thought to raise the costs and compromise the effectiveness
of some national policies designed to raise incomes and
economic opportunity for the least well off.
Plain and simple, these workshops will provide no contributions
to gaining a better understanding of poverty. The Santa Fe
Institute is simply seeking ways to help government redistribute
wealth, via taxation, in order to alleviate poverty. This
is not science, it is scientism. Nowhere have I found any
research from SFI pointing to governmental central planning
as a key cause of poverty. To me, this makes no sense considering
SFI performs research regarding self-ordering phenomena.
Wouldn't it make sense to explore the idea of making a free-market
economy even more robust so that poverty could be alleviated
(i.e. looking at deregulation, eliminating the Federal Reserve,
reducing taxes, etc.)? A left-wing paradigm clearly can lead
to a suspension of logic, especially considering that Ludwig
von Mises has shown that economic calculation is impossible
in a socialist commonwealth (please refer to Dr. Mises' exce!
llent book Economic Calculation in the Socialist Commonwealth).
For me to make the claim that the Santa Fe Institute is
seeking ways to help government redistribute wealth via taxation
is a strong statement, although it is self-evident from looking
at the above-mentioned socialist-flavored workshop topics.
All doubt will be removed once you read the following quote
from an interview with Sir Robert May, who sits on the Santa
Fe Institute's Science Board. I found this information on
page six of the Summer 2001 edition of the SFI Bulletin.
This section of the article was ironically subtitled "Making
He also has ideas about applying complexity theory in
the social sciences, particularlyÖeconomics, a field
he sees as desperately in need of "transforming insights
that respect data." And the advent of e-commerce provides
a fruitful new area to explore. One possible topic is taxation. "As
money becomes more and more virtual it is going to become
harder and harder to levy taxes," he argues, "other than
from individuals that are located in particular places
in ways that much of commerce is not." He suggests an SFI
program to explore the implementation of new tax regimes
to offset the inaccessibility of commerce, and the social
consequences that might follow from a shift of the tax
burden from corporations hiding out in cyberspace to individuals
who the government can still find.
In other words, the Santa Fe Institute wants to help government
hunt you down and tax you wherever you may be in the world.
Of course, Sir Robert May is making the mistaken assumption
that government creates wealth when the opposite is true.
Government destroys wealth and perpetuates poverty.
As any adherent of Austrian economics knows, inflation is
a hidden and redistributive tax. Moreover, it is a central
bank that causes inflation. When a central bank can create
money out of thin air, the power to depreciate the value
of money is frightening, and eventually socially devastating.
Let's look at the United States'
Federal Reserve and its long-term destruction of the dollar's
purchasing power. Since the Federal Reserve's founding in
1913, the dollar's purchasing power has depreciated by over
94% (go to the Inflation Calculator, at the Bureau
of Labor Statistics, at www.bls.gov and
you can confirm this horrific destruction of the dollar's
purchasing power). ! P>
If having the government create money out of thin air leads
to prosperity, then Argentina and Brazil should
have become the world's wealthiest countries by the end of
the 1980s. Instead, the ravages of inflation lead to greater
poverty and massive social unrest in both of these countries.
It is simply amazing that the Santa Fe Institute's research
scientists haven't figured this out yet. Families in America are
having more difficulty making ends meet because the prices
of goods and services are rising over time, directly du!
e to the dollar's depreciation brought on by the Federal
Reserve itself. Using a little bit of logic here, doesn't
it stand to reason that it will be more difficult to climb
out of poverty if the prices of goods and services are rising
continuously? The very government the Santa Fe Institute
wants to serve, is the same entity that helps perpetuate
poverty through the pernicious tax of inflation.
Naturally, Austrians advocate a 100% gold standard. Through
a socio-economic selection process, gold and silver emerged
as money. When gold and silver are used as media of exchange,
the tendency is for the prices of goods and services to decline
over time. With this being the case, logic would also dictate
that declining prices, for goods and services, should alleviate
poverty over time as well. Once again, I have not seen any
research from the Santa Fe Institute regarding the positive
role that a gold standard would play in the battle against
poverty. Keep in mind that governments hate gold because
it restricts government's ability to spend money on every
pet project that comes down the pike. A gold standard forces
government to live within its means just as American families
A favorite tax amongst those who view the world with a class-struggle
(i.e. Marxist) paradigm, is the estate tax. By taxing an
estate, government believes it is taking from the rich and
giving to the poor. Moreover, it is attempting to prevent "the
intergenerational transmission of economic inequality" (to
use SFI's words). In reality, the death tax has produced
results that are exactly the opposite of its essential goal
(i.e. to redistribute wealth in order to help the less fortunate
climb the socio-economic ladder). Republican Congresswoman
Jennifer Dunn's April 5, 2001 press release titled "House
Buries Death Tax" provides excellent insight as to how the
death tax tends to perpetuate poverty instead of alleviating
it. She stated the following:
This onerous tax has a crippling grip on economic expansion
and doesn't discriminate when it comes to victimizing Americans.
Victims of this tax can be found in minority communities,
where it takes an average of three generations to build
an economic foothold in the community ñ but this
tax puts a stranglehold on growth ñ causing minority-owned
small businesses to close shop after only a couple of generations.
Because of the death tax, women in particular are struggling
to pass their businesses on to their children. This was
confirmed by a recent survey of women business owners where
60% of the respondents indicated the death tax will hurt
expansion plans. Sadly, that's after women were given equal
access to business loans just 25 years ago.
It is interesting to note who was in favor of scrapping
the death tax. Congresswoman Dunn received the support of
over 100 organizations including the following four:
- The Black Chamber of Commerce
- The Hispanic Chamber of Commerce
- The National Indian Business Association
- The Nature Conservancy
These people understand that wealth redistribution is tantamount
to wealth destruction. If this was not the case, then LBJ's "Great
Society" program would have been a smashing success. The
best way to allow people to climb the socio-economic ladder
is to let them keep their own hard-earned money. Confiscatory
taxes only serve to make it more difficult for all families
to grow wealthier over time. Members of the above-mentioned
organizations know this. It is time for the central planners
--and their enablers such as the Santa Fe Institute-- to
understand that the outcomes of their plans tend to be the
exact opposite of what they had hoped. The death tax provides
a perfect example.
For the Santa Fe Institute's economics research program
to regain sound footing, it must shed its Marxist-colored
glasses and get back to its fundamental research of spontaneous
order. In their research, I am sure that they will find that
liberty, a rule of law securing private property rights,
and sound money (i.e. gold) will provide the conditions for
a robust economy to emerge without the need for central planning.
In turn, poverty will be alleviated over time. Of course,
Austrian economists already know this.
In closing, I want to pass on a powerful quote from Friedrich
A. Hayek. This quote came from his marvelous book The
Fatal Conceit: The Errors of Socialism. For clarification
purposes, when Dr. Hayek uses the term "extended order" he
is referring to a complex adaptive system (a free-market
I have been attempting to explain how the extended order
of human cooperation has evolved despite opposition from
our instincts, despite fear of all the uncertainties inherent
in spontaneous processes, despite widespread economic ignorance,
and despite the distillation of all these in movements
that seek to use allegedly rational means to achieve genuinely
atavistic ends. I have also maintained that the extended
order would collapse, and that much of our population would
suffer and die, if such movements ever did truly succeed
in displacing the market. Like it or not, the current world
population already exists. Destroying its material foundation
in order to attain 'ethical' or instinctually gratifying
improvements advocated by socialists would be tantamount
to condoning the death of billions and the impoverishment
of the rest.
If the Santa Fe Institute continues on its path of serving
government through promoting taxation and redistribution,
then its goal of helping reduce poverty will be met with
the exact opposite result. Just look at the results of the
death tax and at the results of the "inflation-fighting" Federal
Reserve. Conscious central planning/socialism has increased
poverty all over the world.
Should the Santa Fe Institute become serious about understanding
spontaneous processes, in the field of economics, it will
discard any pretense that somehow conscious central planning
has anything to do with spontaneous economic processes. Such
an intellectual error is breathtaking yet can be rectified
by shifting to an Austrian paradigm. At this point, they
will come to understand that abolishing the inflation-happy
Federal Reserve and abolishing confiscatory taxes will be
the best economic policy prescriptions it could ever make
to help alleviate poverty.