Liberty as a Consequence of Human Action


Statistical economics is focused only on studying the action of individuals. This comes from a requirement that the observer must be able to count events. Miracles can and do occur, and we are at a loss for describing them. Things happen in life that we have no comprehension of. Our knowledge is limited, however, our ability to seek and find correlations is astounding. The process of observing the world around us and attempting to explain it is where science is born. We formalized the process of science by adding a weak requirement, that what we study in science is reproducible. This is the very heart of the scientific method and is why I define science as the study of reproducible events. As our understanding of the world changes so to does what becomes reproducible. This distinction is important. Statistical economics is a formal science. It is only concerned with what we can count, and does not presume to define any other structure, or steer analysis by arbitrarily excluding certain sets of observations.

The foundation of statistical economics is Ludwig von Mises’ Action Axiom:


By restricting our analysis to human “agency” and what we can observe, we have adequate basis to derive macroeconomics. This formally links micro to macro and that micro findings and understanding have direct analogues in macro. This extends John von Neumann and Oskar Morgenstern’s approach to game theory into macro economics. This is when it gets interesting for me. In game theory, there is this one particular game called the prisoner’s dilemma. John Nash showed that in this game there exists an equilibrium that is not the optimal equilibrium. It is the Nash Equilibrium. Nash showed that when faced with a set of choices to take from one another or cooperate, that the “prisoners” will both opt to take from one another and end up with less than what they would have had had they cooperated.

I am reading John Rawls’ “A Theory of Justice”. I find that Rawls seems to base his theory on resolving this dilema and that the base course of human action is to default to take from one another, creating the need for a third party to administer justice and prevent us from being barbarians.  I am not a trained philosopher. This assessment is only based on my analysis of Rawls’ logical foundations. The key point I think in Rawls’ veil of ignorance is that he ignores our past interactions. Because he does this, the sub par Nash equilibrium is the most likely outcome. Here I propose a different veil of ignorance, the one I used to derive statistical economics. That we as observers of society are unable to uniquely identify individuals within society. We can only know enough that individuals exist and act. These individuals have their own unique path and history that defines their current state (this is mathematically analogous to the Action Integral) This is Nozick’s approach in his “Anarchy State and Utopia”, where he provides a counter argument to Rawls.

By defining our veil of ignorance in such a manner as to allow individuals’ past histories the prisoner’s dilemma now becomes a game that is repeated over and over. Axelrod and Hamilton found that the evolutionary solution of the repetitive prisoner’s dilemma is the optimal solution for both parties where they cooperate. This lead to Regan’s trust but verify method of nuclear disarmament. There is a zero-sum game, where the survival of the human race depended on mutual cooperation with no preexisting structure for cooperation between these two countries. These two countries developed a rule of law through treaties that are mutually agreed upon. A wonderful case study of Hayek’s ideas on the source and formation of common law.

This brings me to what I am trying to show, that the idea of Liberty as Respect for Persons is a strong condition of the repetitive prisoners dilemma. Because it is strong, it has limited applicability. The only necessary and sufficient conditions for defining liberty are the Action Axiom and that we are only concerned with what we can observe, while not excluding there are things that we can’t observe, much less explain.  My beef with Mises is that he thinks that it is not necessary for us to be able to count. Not only that but that we should not count. While Mises got the action axiom right, he ignored one of humanity’s greatest gifts, numeracy.

There is more to the statistical economic approach. It is now possible for us to measure (in theory) liberty. This measured quantity is entropy. One of the key concepts of systemic stability is that a system must have a positive entropy gradient. If the entropy is reduced the system becomes unstable and can bifurcate into several distinct states. Jaynes calls the entropy gradient the most important consideration for policy makers. Society moves along an entropy gradient at a rate proportional to the entropy gradient times the dither. The universe tends toward increased entropy. It seeks stability. This is the great truth we found.  A physicist friend was asked to sum up all of science into one tweet. His reply was, “Entropy always wins.”

The natural tendency of the universe is towards states of higher entropy. We call this the second law. In studying human society, we find that humanity tends towards states of increased individual and societal entropy. This seemingly inevitable progression is almost inevitable. If we are not watchful stewards of our liberty, we can reduce our entropy. If we do so, our society will aimlessly drift and a butterfly event will catalyze society leading to bifurcation (aka revolution). In which case, our society failed its primary mission, to survive and artificially limited entropy. If however, we expand too quickly and overextend our society can become vulnerable and be overrun and fail. Survival is the only indication of success.

Here I am optimistic and think that our current aimless meandering is due to artificial constraints put on us by our government reducing our entropy gradient. We can affect change and restore stability to society by addressing those policy constraints that limit our ability to act.

Change is inevitable. Our response a matter of choice.

Leave a Reply


You are commenting using your account. Log Out /  Change )

Google+ photo


Twitter picture


Facebook photo


Connecting to %s

%d bloggers like this: