Tuesday, November 20, 2012

Can you huddle?

A recent study from the American Physical Society’s Division of Fluid Dynamics demonstrates that penguins that face harsh Antarctica winters huddle optimally. There are two important findings. First, even though each individual penguin is driven by a selfish motivation to capture maximum available heat for itself, the ultimate outcome appears to result in democratic allocation of aggregate heat among the participants. And second, the shape of the societal huddle seems to be utility maximizing if all uncertainties are taken into account.

These findings have multiple implications. It reinforces the idea that a system, in which individual participants are local utility maximizers, tend toward societal optimum. Many have been concocting theories to explain the behavior of complex systems top down and they get lost in the process as the complexity of their own theories overtake them. The efficient market hypothesis, that argues prices tend toward optimal levels by the actions of selfish participants has been objected to those who think it is too simplistic. Similarly, the origins of planned and socialistic societies follow a consistent disbelief in the actions of the selfish individual and a misplaced trust in a few, who govern them.

Those who do not believe in the power of free markets, trade and societal organizations, may want to look South, where those less endowed have constructed better systems.