From Meme to Market: A conversation between two thought processes
By Kevin D. Rollins
Noble Essayist: I’m trying to write an essay (and maybe a book eventually) entitled,
“Social Change and the Pattern of Life in Human Society”
Hofstadter in KDR: Well, that sounds like the kind of essay I would like to write…I
don’t deal with “Social Change” usually but I do know a lot about patterns and how to
think about them. I seek the ultimate nature of truth through the exploration of
translation and transformation.
Noble Essayist: Exactly, that’s why I came to talk to you. Can you help me sort through
all these different memes I’ve encountered in Don Boudreaux’s micro class and help me
put them into a framework to see how they can help me 1) fulfill my essay assignment
and 2) build a pointer toward the larger work?
Hofstadter in KDR: Well, your lordship, you’ve already taken the first step by writing it
like this. You’ve created a space for us talk about the problem, and you’ve presented a
reasonable short-term goal in pursuit of a grandiose and exciting long-term goal.
Noble Essayist: I appreciate your help, as long as you don’t mind speaking in my voice?
Hofstadter in KDR: Well, that’s up to you, I don’t have much influence with the output
channel manager. As long as you are comfortable with writing an essay as a
conversation?
Noble Essayist: I got the idea from your conversation between the symbols Achilles and
the Tortoise in Metamagical Themas.
Hofstadter in KDR: Ah yes, they discuss the difficulty of talking about the self
represented by the “I” symbol. The mind often self-describes its operations as unitary,
when in fact there are multiple symbols and memes bouncing around vying for
dominance. How do you see this plugging into microeconomics?
Noble Essayist: Okay then, I see a relationship between the kind of conversation we are
having in here, between the patterns like the two of us, the actions we take as a group of
thoughts, and how that meta-pattern operates in the world. The world of course is a much
bigger and more complex pattern, basically all the physical, real constraints and
scarcities, in which the infinitely rich thought processes of all the billions of metapatterns (we call them people) operate on together through a bunch of interaction
mechanisms like markets, law, culture, and bureaucracy.
Hofstadter in KDR: Well, that’s an interesting description of the world, have you
considered what it might look like as some other kind of pattern that we could talk about?
You know how much I love mapping and analogies.
Noble Essayist: I do have some ideas about that, but first I want to develop an
overarching frame so that I can clearly write about the connection between this odd
enterprise and the serious business of economics.
Hofstadter in KDR: This seems like a bit too much fun for the dismal science.
Noble Essayist: I agree, but why do Gordon Tullock, Douglass North, and Deirdre
McCloskey get to have so much fun?
Hofstadter in KDR: Alright, why don’t you lay out the puzzle pieces that you have so far,
and we can think about how they might fit together in different ways.
Noble Essayist: Excellent, that is exactly what I was hoping for. Okay, Boudreaux is
pretty hot on Julian Simon. The mind is the ultimate resource. Basically, the mind is
how we transform scarcity into opulence. Raw materials just sit there until we use them.
Hofstadter in KDR: Well, if the mind is the ultimate resource, it must be pretty important
to those bean-counting economists. Is that why we are explicitly revealing ourselves as
memes rather than as the uniform “I”?
Noble Essayist: Unfortunately, a lot of economists don’t seem to appreciate how
important the thoughts in the mind are. We see economists making graphs that show an
equilibrium point, but not how the world adjusts towards it. “Total Factor Productivity”
is a symbol for, “we have no theory of social change so let’s stuff it in a symbol and call
it an exogenous variable.” So, yes, part of the motivation is to draw attention to the
thought processes that must be at the center of our analysis.
Hofstadter in KDR: Describe how these thought processes interact, what kind of action
do they have? Like a Rubik’s Cube has only so many ways you can turn it, and these in
turn give a strategy for solving it.
Noble Essayist: I think of the thought processes in the individual person as cogs that are
turning together, mutually influencing each other, and then these are all turning a greater
wheel, what I described as the “meta-pattern” a moment ago. This meta-pattern turns in
coordination with the patterns of the world. We normally think of these as “social
systems.”
Hofstadter in KDR: So, it sounds like everything runs pretty smoothly, are there
constraints on the turning of these cogs? Are economists like clockmakers?
Noble Essayist: Well, we make toy clocks that mimic the action of real clocks. We want
to be able to turn the cogs to see how different wheels should be expected to turn other
wheels. If you think of bicycle wheels you have some cogs that by turning them a little,
they can turn much bigger wheels a lot.
Hofstadter in KDR: So, there is a sort of physics analogy here: economists are trying to
figure out the dynamics of “leverage.”
Noble Essayist: Yes, we might say it like that. I think the most important diagram in all
of economics is the one that shows human population over the last million years. It’s in
North’s Understanding the Process of Economic Change (p.89). It shows a flat line for a
million years, then a slight uptick upon the inventions of mathematics and writing several
thousand years ago, then it gets steeper one thousand years ago. Three hundred years ago
suddenly we see the line go near vertical. At each of those points of slope change, we are
seeing economic leverage take place, with the last being the most significant. What made
it do that?
Hofstadter in KDR: You think it was something in the minds of people that brought it
about.
Noble Essayist: Yes, but it is not completely in the minds of individuals. Some of the
knowledge (the design of how the social cogs work) is outside any individuals’
knowledge. We have what we call coordination rules.
Hofstadter in KDR: Are these “coordination rules” memes in themselves? Are people
aware of them?
Noble Essayist: To some degree they are, but I would say that most people are not
explicitly acting on them. They are closer to what Adam Smith calls the “Four Sources
of Moral Approval” or his “Invisible Hand.” Their outcomes are given not by the explicit
thought (of the action to be undertaken) but by how a thought interacts with other actions
of people within society.
Hofstadter in KDR: Give me a specific example.
Noble Essayist: Okay, the price mechanism is one such coordination rule.
Hofstadter in KDR: Didn’t KDR once say that, “A price is what a price does.”? Isn’t that
a lot like, “You are what you eat.”? Just an obvious definition?
Noble Essayist: You are quite right, KDR wrote that on an exam and on Twitter, I think.
What that means is that the numbers people think of as prices: a symbol indicating the
amount of currency a person must produce to receive a particular item is only “price” in
nominal terms. The real price of something is its opportunity cost – what you give up to
get it.
Hofstadter in KDR: That’s a pretty commonplace statement -- defining opportunity cost
that way. I could have read that on Dictionary.com.
Noble Essayist: The point is that it isn’t just a symbol that represents a certain dollar
amount. The price is a mechanism that decides what gets done, who does it, and who gets
to possess whatever has been produced. If we think of productivity as a thought, as a
conception that lives as a thought in the mind, and the other thoughts are trying to decide
whether to do it or not, they must consult the outside world. Inside the mind the question
arises, “Should we do this?” How would they know? They cannot know without asking
the question of the outside world. But, the outside world is not set up to answer them
directly. If meta-pattern Al asks meta-pattern Bob whether he should make Banana Pies
and sell them at the Mad Max Road Rally next week, the best Bob can tell him is whether
he knows anything about the preferences of meta-patterns (people) at the Mad Max Road
Rally.
Hofstadter in KDR: Is the relationship between Al and Bob analogous to the memes in a
person’s head?
Nobel Essayist: It isn’t clear that the social systems constitute the same function as our
concept of “I”. But, you might say the analogy works if the “I” function chooses the
answer when no individual meme could know how the decision will be made.
Hofstadter in KDR: Okay, so you are saying that the price mechanism is sort of an “I”
function that integrates the behavior of the meta-patterns.
Noble Essayist: The price mechanism gives the answer to the question. If no one has
sold Banana Pies at the Road Rally, there isn’t a table of science that gives the answer to
the question. The price is discovered through the act of production and selling. If it
doesn’t sell, that means that Al is not coordinating properly with the other meta-patterns.
After he has produced the Banana Pies, he goes to the Road Rally and tries to sell them at
a nominal price of $5 a pie because it took Al 10 hours to make 50 pies and he feels that
an income of $25 an hour is well justified.
Hofstadter in KDR: Wait, I understand what you are getting at. But you have already
spoiled the clarity of your statement by saying that Al feels justified making $25 an hour.
The belief that his time is worth $25/hour, he must already have gone through a process,
interacting with the outside world. Otherwise, $25/hour is just a symbol and has no
meaning.
Noble Essayist: That’s right, but let’s imagine that Al is a total jerk and has no basis for
his assumption of $25/hour. He will either find out that he undervalued his time, or
overvalued it by the rate at which his Banana Pies are purchased at the $5 per pie fee. He
doesn’t know what the right nominal price is, nor do his customers, but they discover it
through coordinating to the price mechanism.
Hofstadter in KDR: Can we fit this into the cogs and wheels analogy? We have different
meta-patterns that each have their own wheels which want to move in a certain way, but
sometimes they are grinding rather than fluidly meshing with other cogs. This price
mechanism is like a cog that operates in another dimension to spin the meta-pattern cogs
in the direction of being more fluid and mutually supporting.
Noble Essayist: I like that analogy. And this brings us closer to understanding how we get
economic leverage. The more cogs that are involved in the process, the greater the
energy we are placing at the price mechanism focal point. When millions of people are all
engaged in this process, the rate of discovery of coordination foci increase as does the
prosperity of individuals. This is what we are seeing in the population diagram.
Hofstadter in KDR: Sir, I fear you have jumped a few steps too far with your last
statement. We’ve clearly set up how individual meta-patterns can be pulled into more
fluid “leverage”-creating relationships, but now you are suggesting that new foci are
appearing, that this process is creating new coordination rules as a product of the price
mechanism.
Noble Essayist: Jumping ahead indeed, but only because I find it so exciting to consider
this aspect of the nature of economic growth. Actually, I should explain it, because it
gives us the opportunity to talk about Boudreaux’s price-quality matrix as well as
downward sloping demand curves, Coase’s insight, and the role of entrepreneurship.
Hofstadter in KDR: Four new tools all at once! I’m curious to see how we are going to
build this into our meta-pattern-social-cog machine that we are constructing.
Noble Essayist: Really it is only two new tools, but we might see them as one. If we
think about how meta-pattern Bob goes out into the world, and what he is seeking, we see
him trying to leverage his understanding of his own productivity possibilities and trying
to fit them into the larger patterns of the world in the way that makes him as best off as he
can imagine.
Hofstadter in KDR: He is trying to turn with the other wheels in such a way that he gets
pushed in the direction he is trying to go.
Noble Essayist: Right, so now let’s consider how entrepreneurship and downward sloping
demand curves fit into this. Do you remember when you talked about knob-turning and
the crux of creativity in Metamagical Themas?
Hofstadter in KDR: Why yes, I believe I argued that all creativity was turning a knob.
Say, you had a man riding a bicycle. One knob might turn the man into an elephant and
then into a tree and then into a badger. Another knob might turn the bicycle into an
aeroplane or a steamboat. Yet another knob might turn the bicycle into a tricycle, or into
a frame with 1000 wheels.
Noble Essayist: Yes and you pointed out that the real trick was not just turning knobs that
had already been discovered, but to create an entirely new knob that turns things in a way
no one has thought of yet.
Hofstadter in KDR: Knobs sound an awful lot like cogs. Would you say that
entrepreneurs are knob-makers and can move the meta-pattern cogs in new directions?
Noble Essayist: Sort of. The new knobs are envisioned inside of a particular meta-pattern,
let’s call her Entrepreneurial Emily. EE sees that within the current framework, there is a
focal point to which multiple meta-patterns could move to and they would all be better
off. Her turning of the knob simply translates the fixed constraints in such a way that they
all perceive a better opportunity. She is working within the constraints of the world, but
by doing so, she changes the world.
Hofstadter in KDR: So you are saying that entrepreneurial knob turning is not actually
changing a man into an elephant, but simply seeing the elephant-in-the-man in such a
way that the man would like to be an elephant?
Noble Essayist: Hmmm… let me put it in economic terms. Boudreaux has a great
diagram in which he graphs the interests of companies and consumers in a price-quality
space. Consumers want more quality and a lower price and companies want to make
more profit which means they want to produce at a low cost (low quality?) and sell at a
high price. We assume that different bundles give equal utility to consumers and where
these are equal, we say the consumer is indifferent. There are similar such equivalent
bundles – we call them isoprofit curves – for the companies. A company can move along
the isoprofit curve, the one representing “normal” profits, such that a consumer would be
willing to pay a higher price to get the higher quality. The company momentarily earns a
higher price and yet the customer is better off. In this sense the company is recognizing
the opportunity to change their own margins, and those of their customers
simultaneously.
Hofstadter in KDR: What do you mean by “normal” profits?
Noble Essayist: Normal under conditions of competition. This is another attribute of
using the price rule. As soon as this creative knob is known to other meta-patterns, they
can turn it too, and the temporary advantage – being able to control the price at a focal
point – is lost.
Hofstadter in KDR: I’m beginning to understand. So, finding a new knob is like finding a
point in multi-dimensional space in which the cogs can turn each other to a greater
advantage.
Noble Essayist: Exactly, and moreover, this illustrates the price coordination rule further
that it by offering advantages for those who seek out new knobs, it influences the metapatterns towards this type of activity.
Hofstadter in KDR: So, you are saying that the system is not just one-way, where
individual patterns influence the meta-pattern and then the meta-patterns coordinate, it
goes both ways.
Noble Essayist: Yes, the coordination in the outside world advances to the degree that the
meta-patterns choose the correct thought processes and align themselves to the more
productive coordination rule.
Hofstadter in KDR: Okay, you also mentioned Coase’s insight.
Noble Essayist: Coase is important because he is describing how coordination focal
points emerge. He is saying that if transaction costs are low, people can use the price
mechanism to solve the their conflicts.
Hofstadter in KDR: He is describing the conditions under which the cogs can easily slide
each other into position to give each other leverage.
Noble Essayist: Yes, very good. Transaction costs are the parts of the meta-patterns and
the social system that make things sticky, that prevent the Entrepreneurial Emilys from
stirring up the ingredients to make a better world. Economists would call them better
“institutions” but we might think of them as widening the possible set of foci at which
cogs can meet.
Hofstadter in KDR: So, we have thoughts that drive the behavior of individual metapatterns, these meta-patterns must coordinate with other meta-patterns to pursue mutual
gain, meanwhile, the meta-patterns can only coordinate so well as given by their
individual thoughts about how to coordinate. Yet entrepreneurs help them think better by
giving what amounts to new memes. I think you are ready to close the loop…
Noble Essayist: Hofstadter, you are such a friend! Economics is about having the right
conceptions about how society operates. Social change is about finding focal points that
not only alter the current behavior of meta-patterns, but they do so in such a way that new
and better coordination rules are discovered.
Hofstadter in KDR: Sir, I think you should take a rest now. This is a lot to think about.
Noble Essayist: It has been a real pleasure, Hofstadter.