By James Pethokoukis and Neil Chilson

In economics, “emergent order” refers to systems of order that spontaneously emerge without any central direction or plan. It is the unplanned order of supply and demand that makes market economies work. But critics of a hands-off approach to policy contend that order is likely to devolve into chaos without rational, calculated planning. In this episode of “Political Economy,” Neil Chilson discusses the lessons of emergent order for policymakers and whether this concept still applies in the complex, data-rich 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.

What follows is a lightly edited transcript of our conversation. You can download the episode here, and don’t forget to subscribe to my podcast on iTunes or Stitcher. Tell your friends, leave a review.

Pethokoukis: One of my favorite sayings is one which I stole from former Obama Treasury Secretary Timothy Geithner, in which he said, “Plan beats no plan,” because without a plan, you have chaos. But your book is about emergent order, and that sounds like there’s no plan. If it’s not about planning and detail and it’s not chaos, what is emergent order?

Chilson: It’s a great quote and it’s actually pretty decent advice, I think. 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. And sometimes they can fail really miserably. But that doesn’t mean that we shouldn’t plan at all. In fact, as participants in what I would call a complex dynamic system (this is what complexity scientists would call it), 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.

So it’s not that there is no point in planning. We are planning creatures. We are tool-using creatures. 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.

Let me read a couple sentences, because listeners love it when I read: “Beautifully ordered systems can and regularly do emerge from the independent actions of molecules or cells or people, without anyone being in charge. And in fact, seemingly small interventions into a complex system could send it spinning out of control and even destroy it.” What are a couple examples of beautifully ordered systems that emerge? And how do they get sent spinning out of control?

Sure. A simple example from physics would be something like a whirlpool. You let the water out of your bathtub and this structure forms. It’s not static. It’s continuously moving. It’s a bunch of different elements, a bunch of different molecules, that are interacting with each other under these forces and it creates a structure. That structure is persistent, but can be easily disturbed. Your idea might be, “I want to try to shape this structure,” but it’s very easy to destroy it if you’re trying to shape it with your hand, for example. That’s a simple physics example. There’s lots of examples in economics of a bottom-up system that works very well, and then a controlling force tries to step in and control something about it for their purposes and spins it out of control.

One of my favorite examples is from James C. Scott’s book, Seeing Like a State. He talks about German forestry. The Germans back in the 1800s wanted to increase their lumber output from their forests. They were wild forests. They were not planned at all. 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 maintain the forest, in some ways. It was very easy to go in and cut down trees when they were ready. It was very easy to measure the metrics of the lumber output. But that complex ecosystem, which served many needs other than lumber, was completely upended by this. So peasants who gathered firewood from the forest could no longer do that in the same way.

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 required a whole bunch of follow-on interventions to try to save the project that the government had put into place. 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.

You’re a smart guy. You operate at a very high level. I’m going to bring it down a level. And what this makes me think of — interventions into a complex system with unintended outcomes — is the film Jurassic Park, where the scientists thought they understood dinosaurs. It turns out they really didn’t. Before they knew it, they’re running for their lives. If I look at the Industrial Revolution or, as economist Deirdre McCloskey calls it, “the Great Enrichment” — how the world went from being super poor to not being so poor — through an emergent order lens, how did that happen?

Yeah. So I’m a huge fan of McCloskey’s work. I think I actually have a copy of Bourgeois Equality right here behind me, and I cite her quite a lot in the book. So economics is one of the fields that first identified emergent order concepts. Adam Smith talks about them. He doesn’t use that term. In fact, the more common term in economics is “spontaneous order.” But the way that it happens — and I think McCloskey’s telling is not only quite literate, but very compelling evidentiary-wise — is that people started following some simple, basic rules at the individual level around property rights. There was also a change in culture around, basically, the entrepreneur. The innovator became somebody to be admired rather than somebody to be feared.

And those cultural changes, along with some of the basic principles around property rights, allowed individual exchanges that were not designed top-down, but where one innovator would see a problem out there in the world and try to solve it and then subject it to a market test, where people voted, essentially, with their dollars about whether or not they supported it. And over time, of all these many, many experiments, some succeeded, many failed. And then people moved on to try to solve a new problem, and over time, that created the very widespread prosperity through the creation of new business models and new technologies.

So almost all of them, you cannot design from the top. In retrospect, they might look obvious, but in looking forward, it’s very hard to tell which of these experiments would’ve worked. But the collective result of these many, many, many experiments by individuals, or maybe even individual firms, sums together to be this great leap forward in technology and in widespread betterment for human society.

As you were mentioning that, I was thinking of a conversation I had with the historian Margaret O’Mara about the rise of Silicon Valley. And if you look at it after the fact, it seems very obvious. You had Stanford University and then we just had the Defense Department and they started plowing money and boom. And we had this tremendous innovation hub. There was a plan created — this was post New Deal, plans were very big. So this was like the latest plan coming out of that kind of ethos. I mean, she laughed. She goes, “No, there was no plan at all.” After the fact, it looks like, “Oh, it seems very logical that would happen.” But there was no plan.

Yeah. And 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. Many emergent systems actually have a long startup time, essentially. All of the intelligence in the system is through the interconnections between the parts. And it takes time to make those interconnections, even if you have all the elements in the same place.

Kevin Kelly has a book that’s actually called Out of Control. So it was written in the ’80s and it takes a much more science/biology take on this. But 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 you put thousands of them together, or 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. It’s more like some really complicated types of baking recipes, where you have to put the pieces together, but then it takes a long time for them to actually integrate, for the dough to rise, for example, so that you get a system that actually 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 it appropriate to call the economy a machine? Sometimes I’ll use that word. I’ll call it a “jobs machine” or a “growth machine.” But what you’re describing doesn’t sound very machine-like. It sounds very biological. And it does not sound artificial. And if I start calling the economy a machine, have I already taken a step in the wrong direction?

Yeah. I think Hayek actually points this out. He says that often we have this mental model, and I think one of Russ Roberts’ videos on the Hayek versus Keynes thing has a really good set of lines around the economy not being a machine. The difference between a machine and something like an organism, even some of the simplest organisms, is exactly what I was talking about with the bees earlier. You can take an auto engine apart, and if you understand every single piece, it’s complicated. That’s the difference between complex and complicated. An auto engine is complicated. You can take it apart. And if you understand the function of every single piece, you’ll be able to sort of sum those functions together and understand how the whole engine works.

That’s not true for an organism, where if you took it apart into its different pieces, even if you understood those pieces, there’s something about the connectivity between those pieces, the knowledge exists in the relationships between those pieces in a way that can’t be reduced and summed.

And the economy is very much that way, because the interactions between individuals are so context-specific and because relationships are built over time, not just at the individual level, but between the supplier and the producer. And there are all these intangibles that can’t really be measured. And you can’t sum together all the pieces to get a really accurate picture of where the system is going. Often you have to paint with a very broad brush about what the future of the economy is going to be, and precise predictions are just off the table, because of the complexity of the system.

Adam Smith . . . that was a long time ago. Life was simpler then. It’s a complicated world. We need to make plans, despite our conversation about plans earlier. We just can’t let things kind of happen. It’s a world so complicated that to let order emerge would be chaotic. We have goals for our society. It’s not like we need a lot of good plans. And thanks to AI, we have more information than ever. We have big data, and then we’ll have bigger data. Maybe we can create our own order a lot better than we used to. Maybe one day the AI will do it for us.

Yeah. I’ve actually seen that argument, the sort of revival of the calculation problem that 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. There could be a sort of nihilistic take on emergent order, where you basically say, “Ah, it’s complicated. I don’t understand. I’m just going to sit back. If I’m meant to do something, great, I will. If good things are supposed to come to me, they will. I’m out of control here.”

But the whole point of emergent order is it actually requires people to act — you in the economy have to act for order to emerge. In an ant farm, the ants can’t just sit back and do nothing. They’re following the simple rules that they have. They’re following the inputs that they have, using the local knowledge that they have. And so they should try to be the most ant-like that they can. And that’s true also for humans, I think. And part of the message of my book is that we can’t just sit back and let the world happen to us.

This is one of the flaws, I think, of the Stoics, who said, “Don’t try to control things you can’t control. Your lot in life, in many ways, is out of your control.” And they’re not wrong about that. But I think they didn’t have a good model for how much influence we can have on the institutions and the systems that we interact with. We don’t have control over them, but we can feed into the feedback loops of the institutions that we participate in. And in many ways, our greatest work as humans is to improve the institutions that we participate in, even though we can’t control them.

And one of the messages in my book is: One of the best ways to help improve the institutions that you’re part of is to play your role within them as best as possible. And also to help them play the role that they’re supposed to serve, that they’re intended to serve, as best as possible. And this applies to institutions from Congress, to your family, to your local community group, and even groups of friends. I think these same principles of realizing that we cannot control a complex system, but we have the ability — and in many ways, the moral obligation — to influence the systems that we participate in, is one of the key reasons we should stop trying to be in control and focus on influence instead.

Some people are going to hear what you’ve said so far. They’re going to say, “Well, here’s what’s really going on. This is a bunch of fancy talk and it’s a defense of the neoliberal market, capitalist markets. That’s what he’s really talking about. And guess what? We tried that, and what is the outcome? I mean, we care about the outcome and the outcome has been bad. The outcome has been stagnation. The outcome is plutocracy, vast inequality. Maybe we need to have less emergent order and a lot more directed order and a directed purpose to our society.”

In the chapter where I talked about where emergent order came from, I intentionally paired economics and biology — which are the two major fields where emergent order concepts come from — to combat this a little bit. Often the same people who will say that about the economy will look at the environment and say, “Well, we shouldn’t try to design things in the environment. You’re messing with nature. 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. They’ll often say, “I buy that markets are emergent and that we don’t control them and intervening and designing them doesn’t work very well, but there must be some grand design in nature.” And I don’t want to get into the creationist debate, because as a religious believer myself, I think emergent order is quite compatible with theology, in many ways. But, quite intentionally, I think people just don’t realize how emergent order, as a basic principle, is consistent both in biology and in economics in a way that should make us humble about how much we think we can design either of those systems. So 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.

The concept often is that we should just sweep away the past systems and redesign everything from the bottom up. But what we know from biology, what we know from history, and increasingly from psychology, is 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, we might have something that is in some ways more aesthetically pleasing, but often it will be a sort of shallow solution that only addresses one set of problems instead of the whole big host of problems that are out there in the world. And 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 many of the problems that people point out in the economy, I continue to be as skeptical of our ability to reshape everything from the top down as I think many people would be if I said, “Well, we should just redesign nature so that we don’t have erosion and we don’t have species that kill each other.” I think that level of intervention in nature would make many people as nervous as I am about similarly drastic interventions in the economy.

Perhaps your book will create a moment of embrace of emergent order. We do not seem to be in that moment in Washington, where there’s a lot of very expensive plans that will affect all areas of the economy. 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.

My guest today has been Neil Chilson, author of Getting Out of Control: Emergent Leadership in a Complex World. Neil, thanks for coming on the podcast.

Thanks a lot. Great to be here.

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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