The Ouroboros Economy II

A few months ago I took the opportunity of the Business Week cover depicting the economy as ouroboros for a few snickers (“Ouroboros to Mise en Abyme,” 28 July 2008). Now the ouroboros economy makes another appearance, this time in the much more serious pages of The New Yorker (Lanchester, John, “Melting into Air,” 10 November 2008, pp. 80-84). Again, I don’t have anything in mind: it’s just an icon shopping around for more meanings. But Mr. Lanchester gives it a novel and grandiose go:

… finance, like other forms of human behavior, underwent a change in the twentieth century, a shift equivalent to the emergence of modernism in the arts — a break with common sense, a turn toward self-referentiality and abstraction and notions that couldn’t be explained in workaday English. In poetry, this moment took place with the publication of “The Waste Land.” In classical music, it was, perhaps, the première of “The Rite of Spring.” Jazz, dance, architecture, painting — all had comparable moments. The moment in finance came in 1973, with the publication of a paper in the Journal of Political Economy titled “The Pricing of Options and Corporate Liabilities,” by Fischer Black and Myron Scholes.

The revolutionary aspect of Black and Scholes’s paper was an equation that enabled people to calculate the price of financial derivatives based on the value of the underlying asset. … The trade in these derivatives was hampered, however, by the fact that — owing to the numerous variables of time and risk — no one knew how to price them. The Black-Scholes formula provided a way to do so. It was a defining moment in the mathematization of the market. The trade in derivatives took off, to the extent that the total market in derivative products around the world is counted in the hundreds of trillions of dollars. Nobody knows the exact figure, but the notional amount certainly exceeds the total value of all the world’s economic output, roughly sixty-six trillion dollars, by a huge factor — perhaps tenfold.

It seems wholly contrary to common sense that the market for products that derive from real things should be unimaginably vaster than the market for things themselves. With derivatives, we seem to enter a modernist world in which risk no longer means what it means in plain English, and in which there is a profound break between the language of finance and that of common sense. …

If the invention of derivatives was the financial world’s modernist dawn, the current crisis is unsettlingly like the birth of postmodernism. For anyone who studied literature in college in the past few decades, there is a weird familiarity about the current crisis: value, in the realm of finance capital, evokes the elusive nature of meaning in deconstructionism. According to Jacques Derrida, the doyen of the school, meaning can never be precisely located; instead, it is always “deferred,” moved elsewhere, located in other meanings, which refer and defer to other meanings — a snake permanently and necessarily eating its own tail. This process is fluid and constant, but at moments the perpetual process of deferral stalls and collapses in on itself. Derrida called this moment an “aporia,” from a Greek term meaning “impasse.” There is something both amusing and appalling about seeing his theories acted out in the world markets to such cataclysmic effect.

Ouroboros to Mise en Abyme

A few unsystematic thoughts on Ouroboros and mise en abyme:

  • I almost mentioned Douglas Hofstadter’s book, I Am a Strange Loop, in last week’s post (“The Mythical Economy,” 23 July 2008). He could have gone with Ouroboros on the cover too, but instead he went with mise en abyme.

    Or maybe he couldn’t have gone with Ouroboros. While Ouroboros is, on a superficial level, obviously a strange loop and a symbol that could be seen as self-referential, a peek at the index of Hofstadter’s book at the entry for “video feedback” — a technological mise en abyme — shows that he has a thicker analogy in mind:

    video feedback, 65-71; as candidate for strange loop, 103, 187, 203, 361; epiphenomena in, 68, 70-71; fear of meltdown, 56, 57; fractalic gestalts of, 204; lack of “I” in, 203; lack of perception in, 75-77, 187, 203; lack of symbols in, 203; lack of thinking in, 203; locking-in of patterns in, 70; parameters of, 65-67, 69, 75; reverberation in, 67-68; two systems entwined in, 210-211, 253-254; vanilla loop in, 208

  • While I’m amused at the notion of an Ouroboros economy, I can’t really think of any real correlate to the slightly humorous image. Unless maybe something like a naturalistic notion of the human economy, wherein the human economy is nature parasitic upon itself. The destruction of the biological world as giving birth to the artifactual or the cybernetic world. Ouroboros reborn for the Twenty-first Century!

  • The thing that’s really causing me to bring up mise en abyme is some thoughts on how people think about the future. People are faced with the need to decide and nearly all decisions that people make are, when not completely about the future, at least future-oriented. People’s thoughts about the future are divided into two closely related activities, carried out in tandem: planning and prediction. Prediction occasionally becomes an activity of its own, but for the most part prediction is an activity carried out in service of the more pragmatic planning.

    Planning is a branching strategic game. It works like this. I have a goal whose attainment is not simple: it involves a number of steps and it could be thwarted at any one of them. I start with my known situation and have a vague idea what the path to my goal would be and I make a series of hypothetical decisions. I test the soundness of a hypothetical decision by predicting the outcome of such an action. That is, I imagine a potential future.

    In the first round, the one inaugurated in the present, I know what my options are because they are present. In the second round and in all subsequent rounds, I must employ prediction to imagine what options I will have to choose from because from then on I am dealing in an imagined future. I repeat the hypothetical decision, predict, test, simulate new options algorithm down until I reach the last round whose decision results in the attainment of the goal.

    When I make predictions about the future, I rarely make a single prediction, since prediction, especially the sort of intuitionistic variant that people employ for the purpose of most of their planning, is not a very reliable. So I predict a range of possible futures. And in each possible future I face a range of possible decisions that I can take. Predicting and planning branch. Most of these I abandon in favor of the most fruitful seeming paths. But if a path dead-ends, I back up until I find the probable fateful decision that sent me down the path to the dead end. I recollect the other options at that possible future and imagine my way down another branch. I also generally flag a number of contingency plans. I went with this predicted future, but as things actually unfold, if it turns out that I predicted wrong, I have a plan ready for that other branch too.

    When I have what I imagine to be a satisfactory path from present to goal, I lock in each decision hypothetically made into “what I’ve decided upon.”

    This is a pretty systematic model and not necessarily exactly how most people make plans. People rarely sit town and carry it out algorithmically from beginning to end. More frequently people engage in this activity in fits and starts, not taking the problem from start to finish, but working on pieces that strike them at various occasions throughout their day. They absentmindedly do it while at their work computer, or do it extremely quickly while laying a joint plan with a partner over the telephone. Or maybe they try to be thorough about it and make a list on a notepad so they can see what’s done and what still in need of attention. Whatever the case, I think that ultimately this is what people are doing.

    The important point for mise en abyme is that near future decisions can only be locked in once more distant future decisions have been validated. Each step is dependent on the one after it having been made first. One starts the planning and predicting from the present and works one’s way forward, but one decides, as it were, backward, from the future to the present. Predictions and plans regarding the immediate future include as a part within them predictions and plans regarding the immediate future, which in turn contain predictions and plans about the distant future and so on. My thoughts about the future are mise en abyme insofar as they contain within them further thoughts about more distant futures.

    What one is doing in this process of planning for the future is conducting is a depth first search of potential futures. And depth first search is canonically thought of as recursive.

  • Mise en abyme seems to have a lot more analogistic or systemizing potential. Scale symmetry (e.g. fractals) along with all the related phenomena that can be grouped under that pattern seem coterminous with mise en abyme. Hegel’s logical schema seems like a highly abstract instance of mise en abyme, where each intellectual system is subsumed into a higher order intellectual system.

  • Perhaps there is a historical development of the conceptual depth and sophistication of the idea of self-referentiality. Ouroboros is simple cyclicality, though extrapolated into a notion of infinity or eternity. Homunculus is a limited instance of scale symmetry. Modern formal recursion are the culmination.

The Mythical Economy

28 July 2008, BusinessWeek, Ouroboros and Moloch

BusinessWeek decides to portray the economy as Ouroboros, the serpent swallowing it’s own tail. Oddly enough, I’ve had Ouroboros on my mind quite a bit lately.

And they decide to portray Fannie Mae and Freddie Mac as Moloch.

Moloch whose buildings are judgment! … Moloch the stunned governments! …
Moloch whose blood is running money! …
Moloch whose eyes are a thousand blind windows! Moloch whose skyscrapers stand in the long streets like endless Jehovahs! …
Moloch whose soul is electricity and banks! …
Moloch! Moloch! Robot apartments! invisible suburbs! skeleton treasuries! blind capitals! demonic industries! …
They broke their backs lifting Moloch to Heaven!