The toxic link between compulsory superannuation, PPPs and infrasturcture priorities

Service for the address by Kenneth Davidson's to the Melbourne Unitarian Church, Sunday March 4, 2012

Opening Words

"The first man, who after enclosing a piece of ground, took it into his head to say, 'This is mine' and found people simple enough to believe him, was the true founder of Civil Society. How many crimes, how many wars, how many misfortunes and horrors would that man have saved the human species, who pulling up the stakes or filling up the ditches, should have cried to his fellow! 'Be sure not to listen to the imposter; you are lost if you forget that the fruits of the earth belong equitably to us all, and the earth itself to nobody'."

Jean-Jacques Rousseau's "Discussion on Inequality"


Herbert Alexander Simon (1916 - 2001) was an American political scientist, economist, sociologist, and psychologist, and professor who contributed to cognitive psychology, cognitive science, computer science, public administration, economics, management, philosophy of science, sociology, and political science. With almost a thousand very highly cited publications, he is one of the most influential social scientists of the 20th century, a genuine polymath.

Some of his awards included the ACM's Turing Award, the Nobel Memorial Prize in Economics, the National Medal of Science, and the APA's Award for Outstanding Lifetime Contributions to Psychology.

Herbert Simon was a member of the First Unitarian Church of Pittsburgh.

The following is from his final academic paper, Complex Systems: The Interplay of Organizations and Markets, delivered in July 2000.

Nowadays complexity is fashionable topic.. Complexity can arise from sheer numbers... there are enough problems in describing .. systems of interaction to occupy large numbers of physicists and probabilists well into the indefinite future.... We see human beings, collected in societies .. interacting with each other..... to accomplish our purposes. In particular we see two kinds of patterns of action that, together, occupy a major fraction of human activity... One of these patterns is the market.. The other pattern is the organization... A central task of the social and behavioral sciences... is to build a theory of how markets and organizations behave, how they come into being, grow and eventually dissolve.

What has always been thought remarkable about markets is their low degree of explicit organization: the independence of the participants in going their several ways yet bringing about ... an orderly pattern of (usually) equilibrated transactions...

[Simon then describes some counter examples to this "idyllic description" of markets, pointing out recurrent business cycles, the ubiquitous role of money, why central planning takes over during periods of war, or is more effective in the initial stages for third world countries. These are well known; but then he raises a new issue ... ]

So a final question that may be raised about markets is why this system ... found itself rapidly 'parasitized' by large corporations. It is silly to call contemporary ... economies 'market economies'. They are organisation-and-market economies.... the basic reason for their existence [is] the need for some activities to be coordinated more closely than can readily be done through market exchange... To minimize costs, organizations try to divide up their activities in such a way that that there is a maximum of independence for each of their [hierarchical] component divisions... there is much denser ... interaction within components at any level than between components. Suppose, further that this system is evolving through a process .... where designs are evaluated as wholes against their 'fitness'. Changes in the components may be thought of as mutations... Hence, the reason that we see in the world only complex systems that are nearly decomposable is because such systems are the ones that survive the fitness competition.... [w]e know that market competition will not maximise fitness, or even assume its rapid growth, unless the competitors are nearly-decomposable so that improvement is not blocked. Market competition is not adequate substitute for effective design of complex organizations.

One argument that that has been advanced strongly for the advantages of markets is that their effectiveness depends solely on the self-interest of the economic actors... bolstered by the argument that selfiinterest is the only motive that can survive the forces of natural selection. [But] [i]n a creature of bounded rationality, such as human beings are... individuals who are endowed with ... receptive[ness] to social influence have substantial fitness advantage to those not so endowed.

[M]y purpose here has not been to give you a finished story of the emergence of .. organizations into their present place of prominence... It was rather to reaffirm the centrality of large organizations in modern society, and the need to deepen our understanding of their structure and workings... and manage that system so we may use it more effectively to meet our human needs."

Closing Words

The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.

John Maynard Keynes, General Theory of Employment, Interest and Money