Gloom and Doom

In my first posting here a few days ago, I alluded to the belief held by many scientists (Richard Dawkins is an obvious example) that the cosmos is essentially a random process and has no overall order or purpose. I noted then that I disagree with that view and also that many scientists have come to question it.

There are two main reasons, I think, why this random model came to be prevalent. The first is Darwinism, which holds that species evolve as a result of random genetic mutations. The second is physics, which models matter as “particles” that interact randomly. I could also throw in the concept of entropy, a consequence of the second law of thermodynamics, which Victorian physicists first theorized would lead eventually to the “heat death” of the universe.

All of these things together produced an astonishing pessimism among the intellectual elite of the late 19th century, epitomized by Matthew Arnold’s marvelously gloomy 1867 poem “Dover Beach”:

Ah, love, let us be true
To one another! for the world, which seems
To lie before us like a land of dreams,
So various, so beautiful, so new,
Hath really neither joy, nor love, nor light,
Nor certitude, nor peace, nor help for pain;
And we are here as on a darkling plain
Swept with confused alarms of struggle and flight,
Where ignorant armies clash by night.

As I indicated the other day, I think the emphasis on randomness (as well as the gloom) is overwrought, to say the least. Even granting that, for example, atoms in an unconfined space move and interact randomly, as soon as they do interact, various natural laws and forces (gravity, the strong and weak nuclear forces, etc.) come into play to create structure. Similarly, even if a new, more “advanced” species emerges as a result of a random genetic mutation, that species’ existence (and success) increases the likelihood that a future mutation will produce an even more advanced and successful species.

An analogy: Suppose a rainstorm forms directly above the Continental Divide. The individual raindrops will fall randomly around the divide. But as soon as each drop hits the ground, gravity and geology kick in, and the pathways those drops take from that point on are predictable: They will flow either to the Atlantic Ocean or the Pacific (leaving out evaporation, absorption, being swallowed by grizzly bears, etc.).

Similarly, the widely held Big Bang model in cosmology holds that the initial state of the universe was a hot fog of more or less randomly distributed particles. But natural laws have gradually drawn matter into recognizable patterns or structures – galaxies, clusters of galaxies, stars, planets, etc.

Another way of putting it: The proponents of randomness claim the natural state of matter (and energy) is “equilibrium” – basically a more or less uniform distribution. That state may be disturbed occasionally by random events (stars colliding and so on), but it always returns eventually to equilibrium.

In contrast, researchers in recent decades (Nobel Prize laureate Ilya Prigogine, for example) have noted and analyzed the many instances of systems that are, as they say, “far from equilibrium” – that is, they exhibit self-sustaining and self-reproducing non-randomness. Today, there’s lots of interesting work being done on studying complex systems and creating models that take account of the wholeness of objects instead of breaking them down atomistically; one place to see some of that work is the Web site of the Center for Integral Science.

Despite these developments, mainstream economists continue to insist that financial markets are well-modeled as a random process. The leading proponent of this view is Burton G. Malkiel, a Princeton economics professor whose book “A Random Walk Down Wall Street” remains the Bible of this viewpoint. In essence, Malkiel claims financial markets tend toward equilibrium because all investors (the “particles” in this model, characterized as “rational agents” who seek to “maximize their personal good”) have access to the same information. Occasional “shocks” caused by the introduction of new information, or other “inefficiencies,” are quickly damped out as investors adjust. As a result, fluctuations in the markets are random and unpredictable, so it’s impossible to “beat the market” through timing or other strategies.

It’s a nice, neat, self-consistent theory, but in the four decades since Malkiel first published the book, there has been abundant research showing that the random walk doesn’t actually provide a good model of market behavior. A search for the phrase “random walk” in the Research Papers in Economics online IDEAS database produces one study after another showing that the random walk hypothesis fails when applied to a wide range of financial markets.

Even so, random walk theory continues to be taught in economics classes. (Malkiel himself remains unrepentant, or maybe he just isn’t keeping up with the literature; I interviewed him in the early 1990s and asked him whether any of the then-emerging criticisms of his theory from the perspective of nonlinear dynamics/“chaos theory” had given him pause, and he responded by talking about the so-called January Effect, which has nothing to do with nonlinearity.) One result is that when the stock market jumps 900 points one day and plummets 400 the next, everyone seems astounded, and we hear the so-called experts “explaining” these moves in terms of that day’s news headlines.

The alternative – or “an” alternative, at least – would be to acknowledge that financial markets exhibit some sort of orderly structure. That’s a claim that has long been made by a variety of non-academic observers and analysts (Elliott Wave Theory is a notable example). If true, the identification of the details of that order would have potentially enormously profitable implications. So far, if anyone has figured it out completely, they aren’t telling.

Just Gimme Some Truth

“Pilate said to him, Are you a king? Jesus answered, You say I am a king. For this I was born, and for this I came into the world, to bear witness to the truth. Everyone who is of the truth hears my voice.
“Pilate said to him, What is truth?” (Jn. 18: 37-38)

This passage from the Gospel of John (chapter 18, verses 37-38) has been on my mind a lot lately, maybe because of the inexcusably prolonged presidential campaign, maybe because I’ve had to spend a lot of time the past few years dealing with marketing and PR people.

In John’s book, Jesus doesn’t answer Pilate’s question. In fact, Pilate doesn’t actually give him an opportunity to answer; it’s a truly rhetorical question. Here we have an upper-class Roman interrogating a Jewish laborer-cum-holy-man and not wanting to bandy words with him; as a presumably well-educated man of his time, Pilate has heard or read the extensive philosophical discussions of “truth” and isn’t interested in hearing some backwater crackpot’s views on the subject.

And in any case, John already has given us the answer: “Jesus said to him, I am the way, and the truth, and the life.” (Jn. 14: 6) In brief, Jesus himself is truth, but the overly worldly Pilate can’t see it even when it stands directly in front of him.

A Zen teaching known as the “Flower Sermon” presents, I think, a similar message: One day, the Buddha sits before his disciples and instead of launching into the expected sermon simply holds up a flower. The disciples don’t understand, they scratch their heads and whisper to each other, “What does he mean?” Except for one, Mahākāśyapa, who just smiles.

The lesson in both cases, I think, is this: Truth is what really IS. Or put another way, every real thing is true, is a truth.

Where untruth enters is in any attempt to describe or explain what is. Whenever we venture beyond the actual object and start trying to give an account of its nature or causes or relationships or meanings, we run the risk of getting it wrong, of falling short, of misrepresenting reality. It isn’t necessary to attribute this to deliberate deception or plain stupidity, either; as Plato and his followers emphasized, every representation of a reality is, so to speak, less real than the thing it represents.

Such a representation, account, explanation or description was referred to by Platonists as a “logos.” Many modern Christians are aware of that word as meaning simply “word,” because of the standard translation of the opening verse of the same Gospel of John: “In the beginning was the Word, and the Word was with God, and the Word was God.”

But that translation conveys nothing of the many implications the word “logos” would have held for John and his readers. By the time his book was written (late first or early second century), “logos” had been in use as a technical philosophical term throughout the Greek-speaking world (which included most of what we now call the Middle East) for a full four centuries at least. In Platonism, it especially referred to the expression in physical reality of an inexpressible “higher” reality: Just as a spoken sentence is an incomplete expression of a thought, a person or a dog or a tree is an expression of (so to speak) God’s idea of a person or a dog or a tree.

Another way of translating logos might be “narrative,” in the sense in which that term is used by social science types nowadays: a description of life and the world that we believe explains “the way things are,” that gives us a sense of how to fit into this complex and often confusing universe, and that helps us justify our choices and goals.

For example, the much-discussed “clash of civilizations” between the Christian (or post-Christian) West and the Muslim East might better be described as a “clash of narratives.” Similarly, the “culture wars” within American society could also be said to be a conflict between or among narratives. In both cases, I think this way of looking at it helps explain the frustration and exasperation felt by people who can’t understand why their opponents can’t see the point, why they “just don’t get it”: because both sides are looking at their narratives, not reality.

It was the ancient Greeks, of course, who invented formal logic, and I think they were impelled to do so by their own democratic traditions: They saw the risk of their institutions being hijacked by demagogues and sophists who could sway public opinion with untrue but emotionally stirring speeches about the issues. They realized that good decisions depend on good information, and saw the need for a reliable way to separate true statements about reality from untrue ones.

That analytical apparatus still exists, naturally, but judging from the blatant falsehoods so widely stated in our time – by the media, the marketers, the lobbyists, the lawyers and of course the politicians – our culture leaders obviously are confident that few of us have the time, the knowledge or the will to use it – or to “bear witness to the truth.”

Playing with Fire

I’ve been a bit surprised by the amount of agonizing in the financial media (and among politicians) over the question of what caused the recent “financial meltdown,” as it’s being called. The reason I’m surprised is because the answer is very simple and obvious.

Let me run through the background briefly before stating the obvious:

We’ve been hearing that the current “crisis” is “the worst since the Great Depression.” I’m not so sure about that, but the Great Depression is a handy place to start. During that prolonged and severe economic downturn, hundreds of banks across the United States failed. In response, the administration of Franklin Roosevelt instituted numerous regulatory safeguards intended to prevent a repetition. Among those New Deal safeguards (most of them contained in what became known as the Glass-Steagall Act):

* Commercial banking – involving the taking of deposits and making of loans – and investment banking – involving the underwriting of investment securities – were separated.

* Commercial banks also were barred from acting as stockbrokers or insurers.

* Commercial banks were required to charter separate holding companies in every state where they operated, effectively preventing any bank from doing business nationwide.

* The Federal Deposit Insurance Corp. was created to guarantee that customers would not lose their deposits in the event that a bank did fail.

Similar safeguards also were set up to protect the savings and loan industry, which was confined to making residential loans, in contrast to commercial banks, which could also write mortgages on commercial property.

These safeguards worked pretty well for many years from the perspective of protecting depositors and keeping the banking system out of trouble. One side-effect, however, was that bank stocks came to be regarded as dull, unglamorous, slow-growth investments, something for risk-averse old fogies to hold.

As time passed and new generations of executives poured out of the business colleges and into the banking industry, the trauma of the 1930s faded, and some of those freshly minted MBAs started looking for ways to jazz up the sector and make bank stocks a more attractive option for aggressive investors.

The first big change came mainly during the 1980s, when the industry mounted a full-scale assault on interstate banking restrictions. As those restrictions were eased, big regional and “super-regional” banks emerged through mergers. One of the most significant of those was the merger of C&S-Sovran (itself formed by the merger of Georgia-based Citizens & Southern with Virginia-based Sovran) with NCNB (formerly North Carolina National Bank) to form Nationsbank. Not quite 20 years (and numerous further mergers) later, Nationsbank is now Bank of America.

Through the 1990s, the industry continued to chip away at the New Deal safeguards. In rapid succession, banks were allowed to open securities brokerages and to sell insurance. (And just as rapidly, problems arose; the aforementioned Bank of America, for example, settled a class-action lawsuit that had accused its brokerage salespeople of misleading customers into thinking their investment accounts were protected by the FDIC.) By 1999, industry lobbyists had been so successful in persuading lawmakers to remove the firewalls and other protective measures that the final repeal of Glass-Steagall that year was largely a formality.

That this removal of safeguards was inherently very risky seems not to have crossed anyone’s mind, despite the implosion of the savings and loan industry only a few years before. That “crisis” came about when the industry was allowed to start making loans on commercial real estate. Thrift executives with no experience in commercial property started throwing money around like inebriated conventioneers in Las Vegas, rushing to offer financing for a zillion speculative strip malls. When the economy went into recession in mid-1990 and those strip malls couldn’t find tenants, the S&Ls saw their loan losses skyrocket, and eventually the federal government had to step in.

Which of course is exactly what’s happening now, and for much the same reason: because industry executives with newfound freedom from regulatory safeguards and dollar signs in their eyes and a concomitant belief in perpetual economic expansion rushed headlong into investments they didn’t understand very well. What’s more, abetted by the real estate industry, they dragged a lot of financially unsophisticated customers along with them, putting people into far more house than they could afford by creating new kinds of highly “leveraged” mortgages that were guaranteed to go sour at the first hint of economic trouble.

So to the question that’s vexing so many – “Why is the banking system teetering on the verge of collapse?” – here’s one way of answering:

Suppose your city has burned to the ground, and you learn that the cause was some kids playing with matches. You quite reasonably forbid any kids to play with matches ever again, and you rebuild your city. And after a while, after you’ve gotten used to living in your rebuilt city, some more kids come to you and say, “Can we play with matches now?” What do you expect to happen if you say yes?

Focus

We’re all familiar with the use of the word “focus” as a sort of psychological term; for example, “You need to stop worrying and focus on getting the job done.” I suspect most people probably understand this usage as a borrowing from photography, which would give “to focus” a meaning something like “to direct one’s attention toward a specific object so as to make that object stand out clearly from all others.”

However, the use of “focus” in photography is itself a borrowing. The word is Latin in origin and originally meant “hearth.” Thus, it referred to the center of the home, around which the life of the family revolved, the source of warmth, of nourishment and, most importantly, of light. On that basis, the term has clear symbolic ramifications; Pythagoras is held to have taught that at the center of the universe is a kind of metaphysical fire which he called Hestia, which of course is the name of the Greek goddess of the hearth.

Pythagoras also was believed by some ancient writers to have been the first person to use the word “kosmos” as a name for the universe. Our modern word “cosmos,” as a term that simply means “the physical universe,” is not at all equivalent to the ancient Greek word, which carries implications of orderliness and beauty (hence the English word “cosmetic”). Thus, some recent translators of ancient Greek writings have taken to using the phrase “world-order” to translate “kosmos.”

The idea that there might be some sort of overall order in the universe has become quite alien over the past couple of centuries as advances in physical science have been interpreted as somehow disproving traditional beliefs about God, creation and the meaning of it all. In the extreme view, we live in a universe of randomness in which any meaning that exists is what we ourselves create by the heroic exercise of individual will.

I think that view is untrue. I also think it’s unscientific. And some scientists these days are starting to recognize at least that it’s inadequate, because if you look around the universe, you find that there is in fact quite a bit of orderliness. So there’s a fair amount of studying going on of “self-organizing systems” and “emergent order.” You can even find reputable scientists discussing our “order-producing universe” – which might be another way of translating “kosmos.”

Still, after decades of repetition by the intellectual elite, the idea of an essentially random, meaningless existence has had a pervasive influence on Western culture. Following Darwin and Nietzsche, and even more after Einstein and Heisenberg and their colleagues, we’ve learned that we live in a universe that has no center, no order, no purpose – the product of an inexplicable cataclysm, and fated merely to collapse back into nothingness or fizzle away into a tepid and inert miasma.

In a kind of parallel development, the centering-point in our lives has gradually disappeared. The hearth gave way first to the radio, then the television, though both could still provide a “focus” for family life. But then we needed personal TVs in every bedroom, and 200 channels to watch instead of just three. Then it was a computer wired to the Intenet, and now a cell phone, an iPhone, a BlackBerry or a PDA. And while the techie fans of such things may claim they’re more “connected” now, it really all tends toward disconnectedness, a decrease in shared experience and an increase in isolation – in other words, a more random and meaningless existence, but self-inflicted.

What I plan to do in this blog is find opportunities to call attention to how the underlying order of reality is reflected even in the seemingly messy and disorderly details of life in today’s world. I’ll probably make fairly frequent reference to the economy and financial markets, because I have professional expertise in those areas and they’re especially interesting these days to a lot of people. But there’s nothing I’ll rule out as a topic of discussion, because everything is connected, nothing in this universe is explainable without reference to everything else, the history of each thing is the history of us all. Or as Tennyson put it:

Flower in the crannied wall,
I pluck you out of the crannies;
Hold you here, root and all, in my hand,
Little flower; but if I could understand
What you are, root and all, and all in all,
I should know what God and man is.