Distributed Resilience and the Knowledge Problem

A year ago, many economists failed to predict a 25 standard deviation event. But then again, seismologists fail at this all the time. And when they do, the science of seismology does not undergo a period of existential against. Mark Thoma writes:

We may never be able to predict earthquakes far enough in advance and with enough specificity to allow us time to move to safety before they occur, but that doesn’t prevent us from understanding the science underlying earthquakes…even though earthquakes cannot be predicted, at least not yet, it would be wrong to conclude that science has nothing to offer. First, understanding how earthquakes occur can help us design buildings and make other changes to limit the damage even if we don’t know exactly when an earthquake will occur.

In short, macro-economics is the new seismology.  So how are we to avoid the consequences of catastrophe? How are we to build resilient structures? I couldn’t help but think of this parable from Kevin Kelly’s recent essay:

Nobelist Herbert Simon conjured a timeless fable to illustrate this principle. Imagine two old watchmakers assembling a batch of fine gold watches built from 1,000 tiny parts each. One of the watchmakers (call him Tempus) starts with the first gear and keeps adding the next part until the watch is done. If Tempus gets a phone call and puts down his work, the delicate assembly falls apart and he has to start over again. However the other watchmaker (Hora) assembles the watch in subgroups of 10 pieces each. Now if Hora is interrupted and puts down his work he loses no more than one hundredth of his progress. Simon calculated that if there was a one in ten chance that the watchmaker’s next step might be interrupted (since both watchmakers had many loyal customers clamoring for their quality craftsmanship) then it would take Tempus on average 4,000 times as long to make the same watch as Hora.

In Simon’s fable, Hora’s invention of modularity forms a ratchet which prevents his progress from backsliding. Science philosopher Jacob Bronowski calls that ratcheting “stratified stability.” Risky innovations are stabilized by operating as modules. The worst that can happen is that complexity will collapse down to the stratum of the previous stable unit.

Governance that builds like a Tempus is more susceptible to catastrophic events and slower to recover; governance that proceeds like Hora–in a distributed, modular fashion–prevents backsliding. I leave it to you to judge whether the U.S. government is more of a Tempus than a Hora.

(HT Arnold Kling)