By James Pethokoukis and Neil Chilson

In The Wealth of Nations, Adam Smith wrote of the “invisible hand” that directs free market operations. Today, economists speak of “emergent order” — order that emerges spontaneously without any central direction. But we’ve come a long way since Adam Smith. On this episode of the “Political Economy” podcast, Neil Chilson discusses emergent order and how it should guide policymakers in the complex world of the 21st century.

Neil is a senior research fellow for technology and innovation at the Charles Koch Institute and the author of Getting Out of Control: Emergent Leadership in a Complex World.

Below is an abbreviated transcript of our conversation. You can read our full discussion here. You can also subscribe to my podcast on Apple Podcasts or Stitcher, or download the podcast on Ricochet.

Pethokoukis: Your book is about emergent order, and that sounds like there’s no plan. If it’s not about planning and it’s not chaos, what is emergent order?

Chilson: You’re right, my book is not about creating a grand plan. In some ways it’s about pointing out how often grand plans fail. But that doesn’t mean that we shouldn’t plan at all. We contribute to emergent order outcomes, where nobody controls the outcome and nobody really controls the system, but orderly, beneficial exchanges happen. We contribute to those in part by the plans that we make and how we try to execute them.

You in the economy have to act for order to emerge. And part of the message of my book is that we can’t just sit back and let the world happen to us. We don’t have control over the systems we interact with, but we can feed into the feedback loops of the institutions that we participate in. So it’s not that there is no point in planning. It’s more understanding and being humble about what we can actually achieve through planning and being ready to adapt our plans when the environment changes, which it inevitably will.

What is an example of a beautifully ordered system that emerges? And how does it get sent spinning out of control by planning?

One of my favorite examples is from James C. Scott’s book, Seeing Like a State. The Germans back in the 1800s wanted to increase their lumber output from their forests. And so what they did is they essentially replanted the forest in very orderly, quite aesthetically pleasing rows of trees, of a very specific tree that was the favorite for lumber. It was very easy to go in and cut down trees when they were ready. But that complex ecosystem, which served many needs other than lumber, was completely upended by this.

The natural ecosystem was completely disrupted, to the point at which it was essentially a monoculture and very quickly was subject to disease. Although in the short run it jacked up the output of lumber, in the longer run, it was actually greatly reduced. And so that’s a good example from the natural ecosystem side of not only control disrupting the many uses of a complex system, but maybe even undermining the particular goal that the person trying to step into control is trying to achieve.

I had a conversation with the historian Margaret O’Mara about the rise of Silicon Valley. You had Stanford University and then the Defense Department started plowing money and boom. After the fact, it looks like, “Oh, it seems very logical that would happen.” But there was no plan.

I think sometimes people try to look at Silicon Valley and then they’re like, “Well, we’ll create the same conditions in our area and Silicon Valley will happen here, too.” And what we see is often, and this is true in complex systems, it’s more than just you put all the elements together and you hit a switch and it goes.

Kevin Kelly has a book called Out of Control. He talks about how you could put together a bunch of bees and you don’t get a hive. He also talks about how you could understand every single thing about the individual bee, but that doesn’t explain the behavior when they come together in a hive. And so complex systems are not like machines where you just assemble all the pieces and then you turn it on and it works. So that makes them very hard to design. And it also makes them pretty much impossible to control, even though there are lots of ways to influence them.

Is the world so complicated today that to let order emerge would be chaotic? Some people will say, “We tried letting order emerge. The outcome is plutocracy, vast inequality. Maybe we need to have less emergent order and a lot more directed order.” How do you respond?

I’ve actually seen that argument, which Mises tackled in the socialist calculation problem. There’s people who now argue, essentially: “We can collect enough data to solve that now, and we’ll just let a machine do it.” I’m really skeptical.

Often the same people who will say that about the economy will look at the environment and say, ” It’s this complex system that will have all these unintended consequences if we mess with nature.” And so they seem to understand and embrace the emergent order nature of nature, but don’t seem to see the parallel to economics. And often, people on the right are the flip of that.

If you see a problem in the economy or you see a problem in the environment, it’s not to say that we shouldn’t try to address those problems, but that we should be humble about what we can actually achieve when we do that. There’s a lot of knowledge captured in the system that is not expressed. And if we sweep away the system and try to put a designed system in place, the consequences of that is a system that’s less well-adapted to all of the people who are participating in it. Even if I accept the many of the problems that people point out in the economy, I continue to be skeptical of our ability to reshape everything from the top down.

What would be the cautionary note that you would give policymakers today?

Well, the book has six principles for emergent leadership. But the one I would mostly focus on for policymakers today is around humility. There are two principles, actually. One is deeply understanding what you actually can control and what you can’t, and focus on the things that you can. And second, being humble, even in that space, about what you’re likely to achieve. And I think those two principles are missing from a lot of the discussion in DC. But they should be much more widely embraced. And I think there are good reasons in my book for why people across the political spectrum would want to do that.

James Pethokoukis is the Dewitt Wallace Fellow at the American Enterprise Institute, where he writes and edits the AEIdeas blog and hosts a weekly podcast, “Political Economy with James Pethokoukis.” Neil is a senior research fellow for technology and innovation at the Charles Koch Institute.

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