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« The Education Plantation | Main | Do your beliefs shape reality? »

What is the science behind free markets and capitalism?

Just had the following published in The American Thinker which you can find here or you can just keep reading…

The economic system called capitalism has been described in many ways but at its core it is quite simply free people freely interacting with other free people.  Capitalism has transformed the world by producing more wealth than any other economic system in the history of civilization.

But why does it produce such wealth?  Some have said freedom is the magic potion; that left to their own devices free people will outperform any other economic system. 

That is true but the ultimate reason is deeper and firmly based in science and fact.  In the past few decades a great deal of research has been done on what is called swarm intelligence.  Swarm intelligence attempts to explain and understand the collective behavior of group animals; think of honey bees, schools of fish, herds of bison, flocks of birds, etc.

The intelligence of the swarm is a significant multiplier.  Rather than relying solely on individual intelligence, these groups create a collective intelligence that is orders of magnitudes beyond that of any individual member.

They do so without any leader, with no management of any sort, with no one “seeing the big picture”.  In fact having no one in charge is a key ingredient to swarm intelligence.  This incredible increase in intelligence is driven by countless interactions between individual members with each following simple rules of thumb and reacting to their local environment and those members around them.  That’s it.

Perhaps counter-intuitively, but if an individual member did attempt to become a leader the group intelligence would drop precipitously.  And although it may be difficult to grasp, this self-organizing behavior has no cause and effect, it simply is.

Think of the intelligence of one of the members of these swarms versus the intelligence of the group.  We are not talking about adding a few group IQ points but rather increases in intelligence by orders of magnitude.

My hypothesis is this same process is the scientific basis for the success of capitalism and in fact the success of the human race.  This swarm intelligence has always been at work but with our highly developed communication skills and the ability to record and store knowledge our collective swarm intelligence is truly astounding.  Just like the honey bee, our swarm is orders of magnitude more intelligent than even the brightest among us.

And thus capitalism, which is just individual freedom as expressed in an economic system, is absolutely certain to “work”.  It is a scientific fact just as certain as gravity.  And just like the swarm it does so with no leader, no management, and no one seeing the big picture; no cause and effect, it just is. 

And just like the swarm, when we attempt to place leaders in this process the collective intelligence plummets.  This explains why governments and their activities are always going to be far stupider than free individuals going about their daily lives.  This isn’t a political statement but a factual one.

Again, we aren’t talking about knocking off a couple group IQ points but rather magnitudinal increases in stupidity.  This stupidity multiplier isn’t restricted to governments but to all organizations, the larger the worse.  Anyone who has worked in government, the military or other large organizations has seen it every day.

Some economists have noted that during the Soviet Union’s existence the central planners had to daily determine the prices of literally hundreds of thousands of things and thus the system was terribly inefficient as they had no way to accurately determine this.  My hypothesis is even if they could have accurately determined each and every one of these prices, they still would have failed.  The stupidity multiplier of their command-and-control economy ensured this.

The science on this is clear.  If we want to maximize our collective well-being and wealth, if we want to maximize our freedom, if we want to maximize our collective odds for survival we must allow human swarm intelligence to do its magic.  And governments are not the solution but are rather the destroyer.  The science is clear.

John Conlin is an expert in organizational design and change.  He also holds a BS in Earth Sciences and an MBA and is the founder and President of E.I.C. Enterprises, www.eicenterprises.org, a 501(c)3 non-profit dedicated to spreading the truth here and around the world, primarily through K-12 education.

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