[P2P-F] self-regulating markets

Tue Jun 21 07:15:26 CEST 2011

2011/6/20 Smári McCarthy <smari at immi.is>:
> This is a common understanding of self-regulation, but really it's
> doublespeak.
>
> A system is self-regulating if and only if it possesses the capacity to
> control its state in entirety.
>
> I contend that, as an extension to Ashby's law, a system can only
> self-regulate if its regulatory overhead is zero.
>
> Ashby's law roughly states that only variety consumes variety, or, in
> order to control a system with a certain amount of variety, the control
> system must have at least as much variety. For system X to control
> system Y, V(X) >= V(Y).
>
> However, this reading is somewhat naïve, as the system X actually
> "spends" some of its variety on regulating system Y. We can call this
> the "regulatory overhead", and it is roughly equal to V(Y) in the
> trivial case: Unless the regulation of a system is the intent of the
> system, its purpose will be less well served by the regulation.
>
> So, it stands to reason that if a system X is self-regulating, then one
> of these will follow:
>
>  - X's sole purpose is self-regulation (i.e., it's a trivial
> self-regulating system)
>  - X does not manage to capture its entire variety, meaning that it is
> only partially self-regulating.
>  - X's regulatory overhead is zero.
>
> What does it mean, when the regulatory overhead is zero, then?
>
> It means that either V(X) = 0, or, that all of the regulatory work
> produces beneficial byproducts. i.e., the system, by virtue of
> self-regulation, achieves other goals as well.
>
> Whether this is possible, I do not know.
>
> I have not yet seen a self-regulating system. The universe expands and
> cools, the human body whithers and dies. However, a town can be governed
> by a state, which can be governed by the laws of physics. There is
> sufficient variety in the Universe that it cools slowly - its velocity
> of deregulation is low.
>
> Self-regulating markets then either have accomplished zero regulatory
> overhead, or, they yield no nontrivial results (zero surprisal; 0 bits
> of information output), or, they are leaking variety, in the sense that
> they are not actually stable, but are deregulating at some rate.
>
>  d(R(X))/dX > 0
>
> Just thinking out loud...
>
>  - Smári

I think you are right, Smári.

There are no fully "self-regulating" systems.

Even where corrupt organizations have imposed influence on
governments, the activity itself exists in an environment that is in
dynamic state. The dynamics may simply take longer to make themselves
apparent.

For instance:

A popular business man establishes a perception that natural gas is
the answer for the United States to impending oil shortages
http://en.wikipedia.org/wiki/T._Boone_Pickens#Natural_gas

A company or companies may push the government to allow for
http://en.wikipedia.org/wiki/Hydraulic_fracturing to harvest natural
gas from shale deposits. The company perhaps succeeds in influencing
the government to de-regulate this type of activity.
http://www.huffingtonpost.com/2011/01/03/fracking-pollution-in-wat_n_803737.html
However, the activity rapidly ends up affecting people not directly
involved with either the regulating parts of the government, nor the
corporations. Namely, the affected are the people who live where the
Hydraulic fracturing is taking place. Their ground water (drinking
water) becomes unusable. Now, the company and government may find
themselves dealing with a set of factors that possibly were not
foreseen, and are not easy to control, as people who live in the
region become aware of what is happening and work to resist it in
effective ways.
http://adoptresistance.blogspot.com/2011/02/buffalo-bans-fracking-in-groundbreaking.html

-- 
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Sam Rose
Hollymead Capital Partners, LLC
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"The universe is not required to be in perfect harmony with human
ambition." - Carl Sagan