China's Quid Pro Quo

China seems happy to support the dollar regime by buying up new US Treasury debt issues, provided they're allowed to use their dollars to acquire real wealth.

Here's an outline:

1.  The expanded US spending requires someone to give the government dollars now in exchange for a promise by the government to pay them even more dollars in the future.

2.  If enough people aren't willing to buy US Treasuries, then Treasury auctions will fail and the US government will run short of funds.  The result could run from the mild (government needs to scale back spending plans a bit, or shift the maturity or return on their debt issues) to the extreme (perception of future inability to raise enough debt to pay off current debt leads to fears of a default, widespread selling of Treasuries, and a collapse in both the Dollar and the ability of the US government to fund even basic expenditures this year).

3.  Aside from being the single largest purchaser of US Treasuries, China is also the single largest holder.   They're a bit stuck between a rock and a hard place--stop risking more dollars on US debt and the value of their existing holdings may plummet, but keep buying it and they increase their exposure to dollars that may plummet in value regardless.

4.  China also recognizes that it has a huge thirst for natural resources of all types, and that it will need to secure future supplies if it (here, the Chinese Communist Party) is to continue to deliver standard of living improvements to its citizens--the tacit trade-off the Communist Party makes for civil order.

5.  One solution:  keep supporting the US Treasury issues while spending as large a share of foreign currency reserves as possible on locking up large supplies of natural resources around the world.  If the "West" permits this, then China will keep supporting the dollar regime as long as the dollars it already has can be used to buy "real" assets.  If the West balks, then let one or two treasury auctions fail and see if their position changes.  If not, then all those dollars China has in existing Treasury holdings aren't worth anything anyway, so there's no point in throwing good export revenues after bad future promises.

This appears to be exactly what China is doing.  While there was stiff resistance to an earlier attempt to acquire UNOCAL (something the Chinese covet for its Burmese resource holdings), China seems to be trying again, first with attempts to acquire a larger share of Rio Tinto and OZ Minerals (the latter has already been blocked by the Australian government).

What will China target next?  My guess is that there will be a concerted acquisition spree this Spring.  If China targets outright ownership of various reserves through purchasing resources companies or exploration rights, especially in regions where China has greater ability to exert (present or future) military control, or where governments can be easily swayed to support Chinese rights, then that supports the argument that China is taking a mercantilist approach.  South East Asia, Papua New Guinea, Indonesia, many African nations, and parts of South America (Venezuela, for example) are likely early targets.  

Of course, even if the West permits these critical resources to be acquired by China through peaceful purchases, this only extends the debt-spending period for as long as China can still purchase attractive resources.  At some point it is likely that 1) prime acquisition targets run out, or 2) the West catches on to this game and calls China's financing bluff.  It's a bit like the advice given by Jon Voigt's character in "National Treasure":  the US government's budget will remain intact as long as the status quo remains unchanged.  As soon as China can't get anything of real value (in its perception) for its dollars, it no longer has any reason to support the dollar regime by diverting a significant portion of its economic product into Treasury holdings.

Something to keep an eye on over the next few months...

Core Reading, Back Online

After a bit of a SNAFU with the "upgrade" to Google's hosting of this blog, some key document links were broken.  I'm now hosting them through Google Docs (let me know if that doesn't work well for you).  If you haven't read these, I highly recommend as the basic introduction to my philosophy (though some, like A Theory of Power, are now 6 years old and feel like a slighly different "me").  Here they are, use and share freely:

A Theory of Power
The New Map
Die Neue Landekarte (The New Map, German translation)
The Private Law of War

Emergence 7: Global Workspace Theory

New Scientist has a very interesting article out this week, entitled Firing on all neurons:  Where consciousness comes from (hat tip to Ron).  It explains a several-decade-old theory of consciousness, the Global Workspace Theory, that is finding significant support in new studies.  While the article never mentions "Emergence," it direclty addresses the attributes of structures that give rise to strongly emergent phenomena such as (I argue) consciousness.

Briefly, the Global Workspace Theory, first advanced by Bernard Baars in 1983, suggests that "non-conscious experiences are processed locally within separate regions of the brain, like the visual cortex.  According to this theory, we only become conscious of this information if these signals are broadcast to an assembly of neurons distributed across many different rgions of the brain - the 'global workspace.'"  Recent evidence, as noted in the New Scientist article, suggests that "widespread 'broadcast' of signals across the global workspace [distributed parts of the brain]" is a key precipitant of the emergence of conscious awareness of these signals.  The article does not, notably, address how consciousness emerges in the first place, but I think there is likely some correlation between how signals enter conscious awareness and how consciousness emerges initially.

Additionally, the article emphasises that "long-distance connections may be the architecture that links the many separate regions together during conscious experience," something that I have long argued as a key to information processing efficiency in distributed systems.  For example, outside the brain, it is the distant/disparate and weak connections that most efficiently and effectively facilitate information processing in human social networks.

The New Scientist article raises two more interesting facets of the global workspace theory.  First, the article notes that one key appears to be a lack of conflict in the signals broadcast across the global workspace.  When multiple contradictory signals are received and processed by the brain, the brain subconsciously discriminates and selects an "approved" signal, which is then broadcast across the workspace and enters conscious perception.  It is not clear whether this is also a prerequisite of consciousness, but one can hypothesize that there must be a unity of message across the network for strong emergence to occur?  This raises interesting questions about the role of hierarchy (one way of message discrimination) in this process.  However, it's worth noting that this unity of message appears to be a prerequisite for a message to enter conscious perception, not for the creation or emergence of that conscious perception in the first place.

Second, the article notes that the global workspace theory addressed what it terms the "easy problem," that is, describing the correlation between patterns of brain activity and consciousness.  It does not address--and doesn't really even begin to open the door to how one would address--the "hard problem" of how and why that consciousness (strongly emergent phenomenon) emerges in the first place.

Regardless, I think this higher-resolution understanding of the neuronal patterns from which consciousness emerges is informative.  We're still largely groping in the dark, but this evidence seems to support my general theory that weak and long distance connections, and dense networks of these connections, are key attributes of a structure that will give rise to strong emergence.  What seems much less clear (or, increasingly unclear) is the degree to which a unified message must be broadcast over that network to either (a) enter consciousness that already exists, or (b) allow that consciousness to emerge in the first place.  This latter issue seems to be more problematic for any efforts to spawn strong emergence in human social and economic networks -- more on that next week!

Toxic Asset Bailout

Denninger has a very troubling concern about today's proposal to cleanse banks of toxic assets.

It works like this: Bank A pretends that it has $150 billion in reserves against which it is allowed to loan money. However, $100 billion of that are so-called "toxic assets"--Securitized mortgages backed by highly suspect Credit Default Swaps, for example. This $100 billion it claims to "have" in these mortgage holdings are actually worth about $20 billion on the open market, but it can't sell them for that because then it suddenly has only $70 billion in assets, which makes it over-leveraged on its existing loans, unable to make new loans, a target for an FDIC takeover, etc. But now, with the new cleanse program, it can form a new entity to bid on its own assets--a subsidiary that offers to pay $80 billion, say, for the $100 billion in securitized mortgages. The government, under the new plan, puts up a significant chunk of this money and guarantees the rest, so the bank's exposure in paying $80 billion for $20 billion in assets is actually only $5 billion or so. So the bank sells the assets for $80 billion, plans to write off the remaining $5 billion as a loss, and transfers the worthless mortgage-backed securities to the taxpayer...

Translation: disguised bail-out.

All of this is well and good (albeit potentially highly inflationary) until people stop buying US treasury debt. China claims that it will continue to buy US debt, but this will be yet another case of actions speaking louder than words...

Neo-Chiefdoms or Big-Men Networks?

I recently discussed the potential for collapse of the Mexican Nation-State, and I’ve previously written about my view that the Nation-State system in general is fading. What will replace it? In general, I reject Philip Bobbitt’s hypothesis in “Shield of Achilles” that the Nation-State system will be replaced wholesale with a “Market-State” system. To be fair, however, he isn’t necessarily advocating that Nation-States will be replaced by Market-States in the way we flip a light switch. Rather, he is arguing that, for all the reasons the nation is no longer a viable constitutional basis for state power, the market may represent an alternative toward which states may--and some are already--transition toward. While I presented a more detailed critique of Bobbitt’s theory in my essay The New Map, recent turmoil in the markets, the rising violence in Mexico, and countless other events around the world suggest that the state--regardless of its constitutional basis--is slipping from its dominant role. I have little doubt that some vestige of the state will remain for the foreseeable future. However, in terms of geography, penetration, and time, the reach and control of the state will increasingly be limited. It will present voids in these various dimensions that will be filled by other power structures. And that’s the topic I plan to address in this post: what will fill the vacuum of state power?

In anthropology, the traditional progression of social order, from lower to higher complexity, is as follows: tribe, big-man group, chiefdom, proto-state, and state. While the lines between these designations are necessarily blurry, there is also a general increase in centralization and hierarchy as one moves from the less complex to the more complex. Do these anthropology terms provide any insight into the social organization of Nation-States post collapse, or of Nation-States that have transitioned to Market-States and abandoned the notion of a social contract? Perhaps--here are two contemporary examples:

In Mexico, the effective penetration of the state is rapidly retreating, and has been effectively replaced--at least in some areas, times, and roles--by the drug cartels. While consistently referred to as “drug-cartels” in the domestic and foreign press, that term doesn’t seem to do justice to their political platforms or business models any more than it suffices to call Goldman Sachs a “bank.” More accurately, these drug cartels could be described as diagonal chiefdoms. In the anthropological lexicon, “chiefdom” means an intermediately complex form of social organization that 1) exhibits ranked social order, but 2) does not control or extend institutionally into all aspects of social organization. The cartels are certainly ranked (making them more “complex” in the standard lexicon, than big-man groups), and they also exhibit a limited institutional reach (falling short of proto-state by largely ignoring any commitment to a social contract and delegating religion and spirituality to a non-integrated catholic church).

Conversely, I think the internet--specifically the “blogosphere” (a terrible term, but there you have it)--stands as an example of a “big-man group.” More precisely, it is a network of big-man groups that already occupy a diagonal beyond the exclusive control of the state. Big-man group is another anthropological term that requires defining: a non-hierarchal social structure structured by the influence of “big men” actors (of either sex, or even potentially corporate form) who gain their influence through success in a relevant endeavor--growing tubers in Melanesia, popularity in High School social systems, or visitor counts and links in the blogosphere, for example.

Why does it matter what organizational structure back-fills the retreating state? Consider these alternate structures in light of Hakim Bey’s concept of the “TAZ” (actually, his essays on periodic autonomous zone, permanent autonomous zone, or no-go zone may be more appropriate here) and Hardt & Negri’s “Diagonal”: these neo-chiefdoms and neo-big-men-groups are not exclusive in Cartesian space, but rather coexist--with the Market-State, and with each other. Within the Nation-State context this is often phrased “civil society,” but in a post-Nation-State world it will be much different. These Chiefdoms and Big-Men Groups will go beyond modern civil society and fill the vacuum of part of the role of the state--specifically, rather than a single state claiming a monopoly on the use of violence within a Cartesian space, multiple organizations, actors, and networks will claim some source of legitimacy in the use of violence.

Minimizing the oppressive use of violence is far more than a mere nicety--the difference between the minimally complex hierarchal structure (chiefdom) and the minimally complex non-hierarchal structure (big-men network) may be the difference between success or failure (especially from a median quality of life standpoint) in a post-Nation-State, post-Peak Oil civilization. Without the energy surpluses required to fuel a broad-based consumer society, and the related ability to impose a global “South” as a productive base, local feudal chiefdoms do not hold much promise for the median, especially after enough of the local surplus has been siphoned off to maintain the trappings befitting chiefly rank. Just ask the median Mexican in Sinaloa or Tijuana how well that system is working for them. Conversely, the overlapping big-men network represents the application of the blogosphere model to the primary economy. I’ve discussed the benefits of this type of model elsewhere--resiliency through decentralization, parallel innovation/information processing, the elimination of the information processing burden of a centralized hierarchy, the elimination of the need for political surplus that can no longer be sustained in a post-peak environment, etc.

Certainly any power vacuum left by a retreating state will be filled by some combination of both hierarchal and networked organizations. The lesson here--as undeveloped as my thinking out loud may be--seems to be that we must take the initiative to ensure that this vacuum is not filled by an inferior, hierarchal solution along the lines of a neo-chiefdom

Emergence 6: Learning from the Structure of our Brains

In this series on emergence, the core dilemma that, appropriately enough, has emerged from this inquiry is that science does not have an adequate explanation for how emergence occurs--specifically, how the theorized phenomenon of "strong emergence" works.  This post will address this problem by looking at what gives rise to, arguably, the clearest example of strong emergence:  human consciousness as an emergent property of the brain.

Is human consciousness strongly emergent?  This question first requires defining "strongly emergent," which I will define as:  a phenomenon that is supervenient on a substructure but that is fundamentally irreducible to laws governing that substructure and which is capable of exerting downward causation on that substructure.  That's a mouthful, and for those who haven't read the second post in this series, "Weak vs. Strong Emergence," it may be worth the five minutes to do so.  That said, it appears that human consciousness meets there criteria:  despite decades of intense investigation, science has so far been unable to demonstrate how consciousness is reducible to the biological structure of the brain--or even to come up with seriously considered theories of how this might be so; and consciousness is clearly capable of exerting downward causation on the structure of the brain--everything from suicide and drug use (which affects the biochemical makeup and functioning of the brain) to more subtle effects such as emotion (changing blood flow patterns) and meditation (which, over time, evidence suggests can fundamentally re-wire certain brain hardware).

Contrast strongly emergent human consciousness with "weak" emergence--the many social and natural phenomena that, while being theoretically reducible to the laws governing individual components, and capable of modeling and simulation, are practically too complex to understand in any way other than by modeling and simulation.  The human brain/consciousness pairing is particularly intriguing in the study of strong emergence because 1) despite many, many examples of "emergence," the consciousness is the only clear example of "strong" emergence that I'm aware of; 2) it is exceptionally well studied; and 3) it is something of direct interest and access to all of us.

What characteristics of the brain appear to facilitate strong emergence?  In "Social Emergence," Keith Sawyer notes that:

Complexity theorists have discovered that emergence is more likely to be found in systems in which (1) many components interact in densely connected networks, (2) global system functions cannot be localized to any one subset of components but rather are distributed throughout the entire system, (3) the overall system cannot be decomposed into subsystems and these into smaller sub-subsystems in any meaningful fashion, (4) and the components interact using a complex and sophisticated language.

P. 4-5.  The human brain arguably exhibits all of these attributes, but is particularly notable for the first attribute--many components interact in densely connected networks.  Another notable sociologist and systems theorist, Talcot Parsons, noted that decomposable systems--that is, systems comprised of functional modules that only interact at specific points and in specific ways--are far less likely to exhibit emergence than are non-decomposable systems.  While neurology and psychology suggests that certain brain functions are localizable to what are arguably functional modules, the phenomenon of consciousness (or, as some suggest, related set of phenomena) does not seem to be so localizable.

I suggest that this notion of "localizable" is better viewed as a matter of "non-hierarchal."  Where components are organized into hierarchal structures, they are almost by default localizable, and this hierarchal nature may provide insights as to why this matters--in hierarchy, the "base of the pyramid" does not communicate freely and frequently with the base of other pyramids, but rather this communication is channeled and mediated through the hierarchal structure itself.

I also think that pattern of connections between neurons in the brain is critical--rather than a "lattice" or "crystal" structure where neurons are routinely connected to only those physically proximate neurons, the brains neurons tend make relatively distant and non-uniform patterns of connection.  I've discussed this type of connectivity elsewhere as an optimal configuration of "small worlds networks," and I think it plays an important role in consciousness because it amplifies the connective and communicative power of already dense networks.

Based on this foundation, it seems that the key structural attribute of the human brain is dense networks of weak (more than just physically proximate) connections with very little or no hierarchal structure noticeable in the operation of individual neurons or their pattern of connectivity.  Out of this structure, human consciousness emerges, apparently irreducible to the action of the neurons themselves, yet able to influence the structure of those neurons (both on a micro-level of memories, personalities, etc., and on a macro-level of biofeedback in various forms).

Of course, without a clear understanding of how and why strong emergence occurs (something that, by the very nature of a phenomenon being strongly emergent may be unknowable?), we are left with the leap from "these properties are present in a system that produces strong emergence" to "therefore the presence of these properties in a system causes strongly emergent phenomena."  While we should recognize this logical leap and not attempt to sweep it under the rug, we would do well to also recognize that this is very much the same leap that we always take when reaching conclusions as to causation.  As Scottish philosopher David Hume pointed out plainly, at some point we always make the unsupported leap from (simplified) "this happens after that happened" to "this happens because that happened."

With only one good example to work with (human brain --> consciousness), I'm not yet ready to state that it is the structure of the brain that creates consciousness, or the corollary (and what I'm really interested in) that replicating these structural attributes elsewhere will similarly produce strongly emergent phenomena supervenient on that structure.  This is, however, my working hypothesis--I'd love to hear thoughts on other examples that tend to support or refute it.  In the next post, I will conclude this series (at least for now) with the application of this hypothesis to building a sustainable social structure.

Readers may also find my litigation checklist of interest.

Emergence 5: Emergence Facilitated by Social Structure

What social structures facilitate emergence (particularly strong emergence), and how can we best modify our current social structures to better facilitate beneficial emergence?  This is a challenging set of questions, partially because it has been little studied, and partially because it is difficult to directly experiment with social structure when we have but one interconnected society to observe, and where we can't really "experiment" on society as a whole directly.  None-the-less, this post will attempt to explore the circumstances and attributes of society that lead to--or repress--emergent phenomena.

One method to gain insight into the circumstances that facilitate emergence in society is through the use of agent based modeling.  Early efforts to model societies did not use autonomous agents, but rather used hierarchically organized units controlled by a centralized controller.  Sawyer, Social Emergence p. 147, citing Connah and Wavish 1990.  However, when researchers began to experiment with decentralization, and designing systems of autonomous agents not subservient to any centralized control, they were better able to reproduce emergent phenomena.  Id.  Additionally, agent based modeling has shown that social norms must be known and understood by the individual agents in order for cooperation (one emergent phenomena) to emerge--it is not sufficient for these norms to be imposed from above.  This observation that "social emergence cannot occur unless the participating agents have explicity representations of mutual beliefs, team plans, and team goals and are capable of communicating to negotiate and coordinate their beliefs and plans," (Sawyer p. 179, quoting Tambe, 1997) suggests the importance of pushing both the decision making and understanding about the overall social system down to the lowest possible level as a means to facilitate the kind of behavior that can result in emergence.

Another method to gain insight into the circumstances that facilitate emergence is to look to historical examples.  Some sociologists have observed that emergence is a function of both the number of units and the complexity of the rules of interaction between members of a society.  Baas (1994); Darley (1994) (paraphrasing Sawyer, Social Emergence, p. 97).  While it is purely anecdotal, history also makes clear that powerful cultural, scientific, and spiritual innovation takes place in environments of free-flowing interaction between peers far more than in rigid and hierarchal structures:  the Renaissance arising out of the merchant class of Italian city-states; classical philosophy arising out of the quasi-democratic gentry of Athenia and other Greek city states; innovation springing from the university environment modeled after the generally peer-society of monastic orders rather than from the hierarchal structures of state administration or militaries; the cultural advances of relatively more free and freely communicating societies such as 1960's/1970's USA and Western Europe vs. 1960's/1970's USSR and Eastern Europe; etc.  This kind of historical analysis could go on indefinitely, but I think this brief introduction is sufficient to propose--though not definitively prove--the importance of peer-to-peer communication, peer equality, leisure time, and routine interaction between diverse groups as important to the facilitation of social emergence.

What about "strong" emergence specifically?  Thus far the limited examples available to us on how and where emergent properties come to exist in society does little to explain how strong emergence (emergence that is fundamentally non-reducible and capable of downward causation, as opposed to merely practically non-reducible) arises.  This is especially troubling because it is strong emergence that (as I will explain in the concluding post in this series, next) holds the greatest promise to re-shape society.  I think there are two lessons from this.  First, we need to study those systems that do exhibit strong emergence to see what can be learned (see below).  Second, we should realize that strong emergence may not always be clearly identifiable (e.g. the noosphere, the "global brain," synchronicity, etc.), and that by facilitating emergence generally we may in fact be facilitating strong emergence.  At a minimum, I am aware of no evidence to suggest that the structures that facilitate emergence generally can inhibit strong emergence specifically.

Frustrating, but as the next post will discuss, there may be further insight to be gained by analogy from analysis of another system that does (apparently) exhibit strongly emergent properties:  the human brain.

Readers may also find my litigation checklist of interest.

Jon Stewart and the Fifth Estate

I'm a bit surprised that Jon Stewart's "interview" of Jim Cramer hasn't garnered more attention. Many media outlets (with the notable absence of CNBC, which is pretending it didn't happen) have mentioned the existence of some "smack-down" between Stewart and Cramer, but few have give the content of the interview any analysis.

It was the most important piece of journalism of the financial crisis to date. Watch the whole interview from last night here. Notably--and this was the hidden theme of Stewart's criticism of Cramer and CNBC--it came from a self-professed "fake news show."

Maybe the Fourth Estate is hoping that, by giving the existence of this interview lip service, but pretending that it was only funny--rather than an indictment of the Fourth Estate itself--they could somehow marginalize Stewart's conclusions. If you haven't watched the interview, please do so. Then consider whether the main-stream press, regardless of which political market-segment they try to capture, can remain legitimate when it is fundamentally designed to opitimize profit, not distribute civilizationally-valuable and accurate information.

The unresolved question lingering around Stewart's interview is whether or not the problem we've encountered is "solveable," meaning that with proper regulation and reporting we can get back to business as usual and live in a world where investment returns are something more than, to quote Nassim Taleb, "money borrowed from destiny with a random payback time."

Regular readers will know that I think we're facing a phase-shift from perpetual growth to perpetual contraction, driven by diminishing energy supplies, ecological constraints, and diminishing returns on our investments in technology and other forms of complexity. Most people, I imagine, will refuse to accept this even if they realize that it is 100% true. What will this lead to? John Michael Greer has an excellent piece answering that question.

Mexico: A Collapse Update

I’ve been predicting the collapse of the Mexican Nation-State since 2006. It turns out that was a bit premature. But with violence flaring, the potential for collapse in Mexico is once again in the headlines. Oil production continues to fall, border violence is up, and the government is preparing for a showdown with the drug cartels. I’ll argue below that the government will keep the wheels on through 2009, but that the Mexican state will collapse shortly thereafter, ushering in the beginning of the end of the Nation-State.

It’s been difficult to read a paper or watch the news recently without hearing about the growing troubles in Mexico. The US military’s Joint Forces Command issued their Joint Operating Environment 2008 report recently that listed Mexico and Pakistan as the most likely states to collapse in the immediate future (PDF, see p.35 for analysis of Mexico). Even 60 minutes ran a segment about the rising drug violence.

Of course, readers are probably already aware that a root cause of the problems in Mexico is the precipitous decline of Mexican oil production and an even faster decline in the level of oil exports. Add to that declining remittance incomes being sent home by migrant workers in America, declining tourist revenues, and lower revenue per barrel of oil exported, and the Mexican state is experiencing a severe financial crunch.

While the fiscal stability of the Mexican state is impacted by continually declining oil production and oil exports that are declining even faster, this impact is mitigated to some extent because PEMEX hedged the majority of its oil production through 2009 at roughly $70/barrel. Depending on the price of oil in 2010, Mexican oil revenues stand to drop off a cliff as PEMEX loses hedge coverage.

Does this mean the Mexican state is finished? The current crack-down by the Mexican military and federal police is, I think, best seen as a last-ditch effort to save the state. But it is also evidence that, by the very existence of this pitched battle, the state retains enough viability to pose a threat, and therefore to be targeted.

In military theory, pitched battles are only consciously joined by both sides when both have an incentive to risk the main body of their force—-either because they think they can win a decisive victory or because they are running out of the political, logistical, or economic ability to sustain their army in the field and must seek a decisive action while they can.

Clearly the drug cartels smell blood—-and tactics like forcing the resignation of the Juarez police chief by killing one or more police officers every 48 hours demonstrate their desire for a decisive engagement. Additionally, the motivation behind a recent truce among rival drug cartels may be to facilitate a joint offensive against the government.

In my opinion, the Mexican government is seeking a pitched battle for the second reason—with their oil hedges only in place through 2009, and with oil production, remittance income, and tourism dollars poised to continue a sharp decline, the state may not have much more than a year of financial viability in which to cripple the drug cartels.

While a pitched battle may be politically expedient for the state, I think the cartels are too widespread and deeply ingrained to be defeated militarily. Salvation for the Mexican state will require regaining the long-term ability to compete with the cartels as a provider of social order and economic activity—-something that cannot be gained on the battlefield. At a minimum, in order to finance its ongoing viability, the state needs significantly higher oil prices to increase export revenue or a rapid recovery in the US to generate an increase in remittance income. Given the current economic climate, the occurrence of both of these seems highly unlikely—-there is simply no way of knowing where the tipping point lies, whether either one of these factors, or both, can save the Mexican state from eventual collapse. And without a renewed fiscal foundation, the eventual collapse of the Mexican state seems inevitable…

Impacts of Increasing Instability in Mexico

First, the increasing instability in Mexico will have a significant impact on PEMEX’s ability to maintain the necessary levels of investment to minimize production declines. This creates a positive feedback-loop: faster declines mean more financial difficulties, more instability, and less investment, precipitating even faster declines. In 2009, PEMEX plans capital expenditures of roughly $20 Billion. Traditionally, due to laws that prevent foreign ownership of many categories of natural resources, PEMEX has relied on debt to finance capital expenditures. More recently, PEMEX has also been pushing for a reform to the Mexican oil law that would allow foreign companies an ownership stake in Mexican projects in exchange for investment. Regardless of whether PEMEX pursues debt or equity financing, instability in Mexico’s property rights regime—-certainly including the potential for governmental collapse—-will seriously hamper these efforts.

Certainly the impact of disintegration in Mexico will have an impact north of the border. There is already a clear spill-over in criminal activity in border states. At some point, the national security threat to the United States will bring calls for intervention—but are there any effective options? The sprawling yet dense cities and mountainous rural terrain of Northern Mexico should give any military planners pause, especially in light of recent American experiences in Afghanistan and Iraq. Some commentators have even suggested that Mexico, not Iraq or Russia or Afghanistan, will be the defining national security challenge of the Obama administration.

The potential impact on Mexican oil production seems clear. More superficially, the situation in Mexico gives commentators of all stripes something to worry about. The spill-over of drug violence seems to preoccupy most mainstream talking-heads, but a few commentators have traced these problems back to their roots—and see a much more troubling threat. Specifically, the troubles in Mexico are an early sign of the failure of the Nation-State model. I’ve written about this extensively, and my intent here is not to re-hash my critique of the Nation-State system: if you’re interested, here’s an academic paper on the topic. The key is that the trends pulling Mexico apart at the seams are ubiquitous—-Mexico is merely facing this perfect storm first. As the Nation-State dominos begin to tumble next--Pakistan perhaps, then Iraq, then Russia, then Italy, then China, then Indonesia, etc.—-the pressure on the rest will grow. And many of the most threatened states are also the most critical to global oil exports.

While I don’t think Mexico—in its current form—has many years left, I hope I’m wrong. It’s a beautiful country (especially if you can get outside the Americanized hotel zones), with a vibrant culture. It may even prosper in a post-peak world under some different form of social and political organization. And a token state-shell may last for decades (another global trend, I suspect)—after all, the cartels will probably be happy to delegate parts of the social contract to the “sovereign.” But, for all practical purposes, the Mexican state won’t survive to see 2012.

Emergence 4: Strong Emergence and Entropy

Back to the Emergence Series now, and the path is set for the final four posts.  This post will consider systemic entropy (the Second Law of Thermodynamics that entropy is always increasing) in light of strong emergence.  The following two posts will look at what causes emergence--I will argue probably strong emergence--in first human society and second human cognition.  The concluding post in this series will argue for how a Rhizome structure can be modified to facilitate (strong) emergence regardless of whether it is a stand-alone social network or merely an influence on and component of broader society, and how emergent properties can specifically enhance the operation of that network.

I should note at the outset that I am not arguing that strong emergence somehow invalidates the Second Law of Thermodynamics, or even that it is a true "exception."  However, I do think that the operation of strong emergence may interface with the energy demands of society in interesting and potentially useful ways.

The Second Law of Thermodynamics says, in a nutshell, that in any closed system (e.g. the Universe) entropy (disorder) is always increasing.  The practical result of this is that the Universe will eventually die a cold death because the useful forms of energy need for organization of complex systems (e.g. life) will be used up, and there's no reversing that arrow (unless, of course, there's enough dark matter for the Universe to collapse back in on itself again, there's some unknown interaction with other parallel universes making *our* Universe a non-closed system, or many other possibilities that are best left to the cosmologists and theoretical physicists).  From a more practical perspective living in an essentially closed-system planed (with the notable exception of a known/fixed rate of solar energy input), and for a society facing an energy crisis, we need to figure out where to get the energy to power our civilization going forward.

These may seem like two entirely separate areas of inquiry--strong emergence and the energy crisis facing our civilization.  I'll admit that this is a bit of an aside from the previous thrust of this series to understand emergence itself, but it will act as a segue to the "so what" of the series--what good will it do to understand emergence?  The ultimate answer will come in the seventh post in this series, where I lay out a picture of how we can structure our society to facilitate emergence and reap the advantages of strongly emergent phenomena.  But this post will look at one simple possibility:  that strong emergence may facilitate coordination and communication within our civilization in a manner that is far more energy-efficient than our current mode of hierarchal and mechanical communication, and perhaps that even works around, if not actually contradicting, the Second Law of Thermodynamics.

Our civilization's current schemes for economic coordination and communication are extremely energy intensive.  If you think about it, accepting politics as the process of distributing limited resources in an environment of unlimited wants, our entire political superstructure is an energy-hungry mechanism for economic coordination.  Yes, our economy is driven by many individual actors, but these actors act upon an infrastructure and a rule-set that is provided by this superstructure.  And, as I have argued elsewhere, epiphenomena related to this superstructure are what drive our civilization's perpetual growth an unsustainability.  In a future of decreasing net energy availability, this superstructure will become increasingly non-viable, and we will need to engineer a replacement.

How can we move away from this energy-hungry and undesirable superstructure without losing the critical ability to communicate and coordinate economic and social activity?  After all, while it is theoretically possible to simply revert to a latice of self-sufficient nodes, without a powerful and social system of communication and cooperation between these nodes, we will either pave the way for a re-aggregation into oppressive neo-feudal states or, at a minimum, we will abandon many of the important fruits of complexity such as medicine, engineering, and vast reserves of technical knowledge that will be needed to optimize quality of life going forward.  Especially to the extent that surplus energy is a limiting factor, I think that strong emergence may offer a superior means to economic coordination and communication than do our present hierarchal and mechanistic structures.

How can strong emergence facilitate communication and coordination?  Consider our brain (a model of facilitating strong emergence) vs. a computer (modeled after our civilization's current system of hierarchal and mechanistic coordination and communication).  Admittedly, our brains use a fair amount of energy, but because information processing (consciousness) emerges from them, rather than being the mechanical result of a massively hierarchal information processing system, our brains produce the kind of information processing and communication capability that would require thousands of times more energy if replicated by a mechanical computer system.

Why is this?  Do strongly emergent systems operate within our current understanding of the Second Law of Thermodynamics?  Are they, at a minimum, far more efficient at communication and coordination (albeit not in the clear and hierarchal manner we're accustomed to) when measured by the amount of entropy produced per "unit" of resulting communication?  I think that, anecdotally, the answer appears to be "yes."  I'd love to measure this empirically, but until we truly understand (if ever) how strong emergence functions, this will remain unmeasurable.  I don't think, however, that this is reason enough to ignore the potential to use strong emergence as a means to remodel our civilization in a way that will allow us to reverse the arrow of hierarchal complexity, and move continually toward a more connected, more fulfilling, less energy-consuming civilization.

That will be the focus of the remaining posts in this series:  to look at how our brain and our civilization do manifest emergent properties in order to understand how to increase the role of emergence in our future civilization, and then an explicit discussion of how we can do this to move toward a more sustainable and fulfilling society.

Readers may also find my litigation checklist of interest.

Thursdays, legal posts, and blog plans

Yes, a Thursday post, and the first of many...

As some may have noticed (with my recent "Surge Capacity" post and my development of a Litigation Checklist), I'm writing a bit more about law on this blog--a trend that I plan to continue without abandoning the main themes of this blog of civilizational theory, systems theory, geopolitics, and energy.  Going forward, I plan to keep posting on Mondays on these topics--in the works right now are continuations to the Emergence series, the Diagonal Economy series, and draft chapters of my second book (working title: "The Problem of Growth").  In addition to these posts, however, I plan to add an additional post on legal topics most Thursdays, including work on a revised litigation checklist system, a series of posts on open-source checklists in general as a tool for managing complexity, posts on the future of law/lawyers, as well as posts on litigation strategy and tactics.  In many cases, there will be overlap between the Thursday "legal" posts and my general themes, so I think all readers will find them of interest--if not, it will be easy to keep them separate...

Also in the works, getting back to posting at The Oil Drum, which I'll cross post here:  an update to my previous series on geopolitical feedback loops in oil production, as well as a post on the energy-saving potential of distributed/decentralized production.

Towards a Scale-Free Energy Policy

With gas and oil prices far below recent highs, and the nation’s attention turned to the “financial crisis,” energy policy is no longer in the political spotlight. But for a variety of reasons, such as the relentless march of depletion and the effect of low prices on investment in future oil and gas production and the development of renewable sources, there has never been a greater need for a bold new energy policy.

But energy policy is not the only crisis that we face. Far from it. More than a brilliant new political solution to our energy problems, what our civilization truly needs is to adopt a bold new process for developing political solutions in the first place. We need a process for developing political solutions that doesn’t depend on someone else to solve our problems for us, but that simultaneously allows people with more power to carry a commensurately larger share of the burden. We need a process for developing political solutions that increases systemic resiliency, rather than driving ever lower civilizational marginal returns on investments in hierarchal complexity. We need a process that leverages parallel information processing and develops locally-appropriate solutions, rather than clinging to the Nation-State fantasy that a single state solution can adequately serve a monolithic “nation.”

In short, we need to implement a system of scale-free design.

Scale-free design describes a process that operates similarly at any scale, at any level of organization, that is fractal in structure. It is neither grass-roots nor top-down, but rather consciously, simultaneously “all of the above.” More than that, rather than merely a collection of separate national, local, and individual programs, it strives to develop programs and practices that operate simultaneously at all these levels. A simple example would be the achievement of 25% energy self-sufficiency—that is, for individuals to produce 25% of their energy needs domestically, for communities to produce a further 25% of their energy needs locally, etc.

Scale-free policies provide all the benefits listed above. A scale-free energy policy does not reinforce a top-down structure of society, but rather builds resiliency by increasing self-sufficiency at all level and eliminating single points of system failure and the potential for cascading failures. For those who have read my writings on rhizome, it is a process that is fundamentally compatible with both our present political structure and with a rhizome alternative, and that can help to foster just such a “diagonal.” Rather than increasing the hierarchal nature of our civilization, it presents the potential to facilitate a more networked, peer-to-peer version of society—critical in an age of resource constraints because this at least reduces our structural need for perpetual growth. Additionally, scale-free processes abandon the antiquated, serial method of innovation and information processing favored by traditional politics (the “cathedral”) and instead leverage parallel processing, a “bazaar” of innovation. The result is that, rather than trying one solution until we can confirm that it fails to meet our diverse demands, we simultaneously develop thousands of solutions that are tuned to our many separate needs, and then share what works, what doesn’t, where, and why for the next iteration.

Scale-free energy policy promises all of these benefits. Such a policy will also focus on renewable sources and simple, vernacular technologies where possible. While renewable, carbon-neutral sources are not a strict requirement, any honest search for resilient solutions must avoid those “solutions” that actually do nothing more than shift the timing or mode of our crisis. Similarly, a solution cannot be truly scale-free, and does not provide the promised resiliency, if it does actually enhances an individual’s or community’s reliance on technologies or materials that it cannot itself produce. This is not an orthodoxy that individual solutions must not use metals they cannot mine and smelt themselves, as an extreme example, but rather suggests a guiding principle that simplicity—of materials, construction, operation, and repair—appropriate to the level of organization is yet another means of enhancing long-term resiliency.

This notion of scale-free design is applicable to many political problems: the fundamental structure of our economy, our system of law and norm-enforcement, our military tactics, etc. While I plan to elaborate on specifics of a scale-free energy policy in the near future, today I’ll briefly outline a pragmatic approach to this theory. A scale-free energy policy should, at a minimum, invoke simultaneous actions at the individual (household), community, regional, and national level. It should not focus exclusively on only conservation or generation at any of those levels, but instead realize that 1) generation (in whatever form) is necessary on every level, 2) conservation is similarly necessary, but 3) conservation must be approached with an understanding that picking the low-hanging fruit first (the highest elasticity demand) is counter-productive in that it actually reduces the overall systemic elasticity. These ends can be achieved through tax-breaks, direct subsidy or works programs, and (not to be neglected) simple explanation and coordination (public-private partnership, state-federal cooperation, etc.). More important than describing specific programs at this point (at least in a post intended to explain the scale-free design process) is the statement of a simple imperative: every action, at every level, should be conceived and executed within this scale-free framework. What that means is that people don’t need to wait for their government to get with the program: any level can independently implement a scale-free solution, part of which includes advocating its adoption at other levels…