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Scientific and other knowledge could be typically a sooner rather than a later casualty of a deep crisis. What remains might be often a very non-representative part of the knowledge existed: a few baffling mathematical or astronomical observations may stay around, but some simple technological tricks would strangely look missing. How often that occurred through the history? How much can Occam's razor help us to know?

As DeAnander tells, much knowledge is lost in "improving" times as well. One speculative example is Lucio Russo's hypothesis that Helleniac greeks already had a deep understanding of science methodology, but it get lost amid Roman "efficiency".

Booming times are in fact ordained predecessors of busts. Collapses happen under special conditions, and any unusual flourishing very likely has roots in removed brakes against the special conditions. Say, the stock market has higher risk of collapse precisely when it is growing beyond expectations.

In economic jargon, the Western (or capitalist) civilisation is highly leveraged one - it is performing better than any social arrangement most of the time, but there is a "systematic" risk of meeting growth boundaries. Here we can see a conflict of empirical induction and Popper's falsification logic: people tend (or are persuaded) to follow behaviors that appear to be most successful currently, even if those behaviors cannot possibly give the same success to everyone. Eventually, one has to take risks to be most successful. But statistically, the same risks are rewarding to a predictable portion of participators. Or worse yet, the flourishing conditions for "everyone" are destroying themselves under growth. And once conditions unnoticeably change, a "rare event" arises, unpredictable from the empirical time series of merry growth. Then your usual compulsion can hurt and bankrupt you.  

Of course, the "rare events" can be deduced from basic knowledge of the world. But purely logical deduction is dull and inferior to empirical induction in practical importance most of the time. Even if you suspect bad turns, you are pressed not to fall behind in "performance". Staying with the herd looks safe enough.

Most of the institutional investors who thought that risk was mispriced were nevertheless reluctant to invest on that view because of the cost of carrying that trade. Since virtually all such institutional investors are agents and not principals, they could not afford to take a position that involved a series of short term losses. They would appear to be better investment managers by focusing on the short term gains that could be achieved by going with the herd to enhance yield by assuming increased credit risk.
by das monde on Tue Sep 25th, 2007 at 11:18:24 AM EST
Other angle is provided by Naomi Kleins' new book "The Shock Doctrine". (A long review is here.) The difficulty of handling "rare" shocks can be employed in conflicts to confuse and defeat adversaries; Pentagon claimed to have adopted this philosophy in Iraq (remember Boyd's "Patterns of Conflict" and Rumsfeld's poetry).

But if shocks are so effective in confusing and reorienting people and societies, wouldn't anyone use them more broadly? According to Naomi Klein, capitalist elites are making use of all sorts of shocks to concentrate more power for themselves. Chicago school shock therapies in Chile, Argentina, Russia, Poland did nothing but impoverish small businesses and much of broad population, and gave huge profits or power to relatively few. The 1997 Asian crisis had feeble reasons and was savable, but it allowed to buy up Asian enterprises for cheap. The Katrina hurricane and the 2004 Christmas tsunami allowed to purge poor residents of New Orleans and the tropical coasts for more "effective" development. If "shock and awe" is working as designed in Iraq, their real adversary is Iraqi people. The capitalist elites make every crisis an opportunity exclusively for themselves.

Taking to the extreme, an Armagedon type crisis would suit them "perfectly", or so they may think. They see market meltdown, global warming and peak oil coming, and they may be eager to meet them soon. They will know how to manipulate confusion and fear, and they know what they want to take. They can take all over the world, and have totalitarian power unseen on Earth. Unprivileged survivors would wake up in the world without any pretence of democracy and universal rights. History would be written where George W is a great saver, and slaves would be grateful to suffer. The elite would keep selective knowledge exclusively for themselves, and may have an energetic policy to pursue any Albertians and Prometheuses. Unwanted knowledge would have to survive for long centuries to be of use again.

Why wouldn't they do it? The profit growth would stop with a collapse, wouldn't it? Or is so that no profit growth or wealth gap can beat the attraction of power dominance? Once the position of the elites is secured, they can forget profit competition and cooperate nicely, thank you.

Would they succeed? Would an Armageddon be a different kind of "rare event" than they are used to know? Would something (or someone) shock themselves into obedience?

by das monde on Tue Sep 25th, 2007 at 11:29:16 AM EST
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