Ole Peters: Ergodicity economics and world peace
Ole Peters
@ole_b_peters on Twitter
AI Summary
This Twitter thread discusses the concept of ergodicity economics and its relationship to world peace. It explores how ergodicity questions the assumption that what is good for the collective is good for the individual, leading to social dilemmas. The thread also highlights the impact of focusing on GDP as an ensemble average, sacrificing individual well-being, and the erosion of democracy. Understanding people's perspectives requires ergodicity economics.
Original Post
1/nA thread about ergodicity economics and world peace, why not.
A quantity is ergodic if its average over an ensemble of systems is the same as its average over time.
Ergodicity economics questions whether ergodicity holds.
But what's that got to do with world peace? (View Tweet)
In the social context, the ensemble is usually a population, and the ergodicity question becomes this: does the average over the population represent what happens to the typical individual over time?
So this is about the relationship between collectives and individuals. (View Tweet)
You may think: whatever is good for the collective must be good for the individual because the collective is made up of individuals.
In economics, that corresponds to working with "the representative agent," and it's precisely the ergodicity error. (View Tweet)
When ergodicity is broken, the interests of the collective and the individual can be in conflict. A situation economists call a "social dilemma."
To fully understand social dilemmas, formally, properly, we need ergodicity economics. (View Tweet)
Let me give you an example to make the promised link to world peace.
GDP, these days, is almost the only thing we hear politicians worry about. Policies are designed to boost GDP.
But GDP (per capita) is an ensemble average, not a time average. (View Tweet)
And economies grow multiplicatively, which means ergodicity is broken, and the individual experience is systematically different from that of the collective.
The mother of all social dilemmas: we can sacrifice individual well-being on the altar of GDP worship. (View Tweet)
When this is done successfully, politicians pat themselves on the back and parade GDP figures around.The voter, meanwhile, an individual, doesn't feel the GDP and becomes ever more alienated and disconnected from what the politicians are saying. (View Tweet)
Until a demagogue comes along, these days called "a great campaigner," the Achilles heel of democracy. Said demagogue will prey on the disconnect between the electorate with valid grievances and politicians blind to those grievances. (View Tweet)
The result is an erosion of democracy, polarization, two sides shouting at each other, assuming ill intent, while it's an honest but catastrophic lack of understanding.
For world peace we need to understand where people really come from, and that requires ergodicity economics. (View Tweet)