Chaos Theory and Economics

Smart, well-meaning people have tried to plan economies at amazingly precise levels of detail. Consider the five-year economic plans of the former Soviet Union. Essentially, a group of economists would decide, say, how many dump trucks would be needed in Latvia in five years. Then they would work backwards, deciding how much steel would be needed for that many trucks, and then how much iron ore and manganese would need to be mined to supply the steel mills, and then . . . you get the idea. The calculations for dump trucks alone were incredibly complex, not to mention insensitive—they had no way to allow for any changes in the economic environment over the next five years. It simply couldn’t be done, which is why the Soviets often ran out of things like toilet paper, and why we now speak of the former Soviet Union.

By contrast, the capitalist system seems chaotic. No centralized body decides what the supply of any given product should be. No one is minding the store. Yet somehow the system self-organizes over time. When was the last time you wanted to buy popcorn, but couldn’t? Or toilet paper? Or a dump truck, for that matter? Somehow, our needs are met quite well in the almost complete absence of master planning. Given certain premises—that people tend to act in their own self-interest, that they will benefit from their own labor and innovation, that those who don’t play fair will be punished— over time spontaneous order succeeds where central planning could not. With extremely complex systems like economies, in fact, self-organization may be the only choice.

Time Mastery: How Temporal Intelligence Will Make You A Stronger, More Effective Leader by John K. Clemens, Scott Dalrymple