In the early 1970’s many of the great Libertarian minds gathered to submit papers and concepts around liberty. This conference became an annual affair and was known as the Libertarian Scholars Conference. Some of the greatest advancements in Libertarian thought came out of this conference which lasted into the early 1980’s. This conference help usher in great growth and interest in Libertarian thinking.
Thanks to some generous donations the Mises Institute is bringing back the Libertarian Scholars Conference which will take place in New York on October 20th. Over 40 scholars from around the world will be sharing their works on the study of liberty. I was fortunate to have my abstract chosen and am greatly honored to be presenting alongside some of the past and present giants in the field of Libertarian thinking. I only hope that the effort I have put into my latest work will help build upon the great work that has already been created. Below is the abstract I submitted, I will be releasing my full white paper after the event.
The third and fourth industrial revolutions created rapid advancement in technology while simultaneously creating a shift in epistemology. The advent of the personal computer and internet open the gateway for new opportunities in communication and disseminating information. For the first time in history computing power and data storage is allowing for the combination and analysis of large data sets. The promise of big data and artificial intelligence is one that will allegedly change humanity. However, is new technology and data creating new knowledge or are we wrapping ancient philosophical inquiries in a shiny technological wrapper.
For decades society has been promised smooth economies and prosperous environment using sophisticated modeling and econometrics. In practice it has driven more extreme business cycles the more advanced technology has become. Technology has not changed the underlying foundation of epistemology and the same problems we are facing now were addressed by many great minds during the enlightenment era and throughout Austrian economic thought.
As society shifts the epistemology pendulum further to empiricism history echoes the words of warming from Kant, Descartes, Mises, and Menger. The great rationalists understood the limitations of induction and scientific inquiry. If they were here today they would likely state that the problem of big data is the problem of induction and its natural conclusion will end in circular reasoning.
The stakes are higher now as we turn to technology and empiricism for societal solutions, technology stands to potentially compound societal issues. Humanity now has more information and justification of a partial picture to make claims which makes it inherently more dangerous. The war for power will be waged through big data and artificial intelligence, those wanting to assert centralized authority and dominance will use the illusion of technology to accomplish this task.
This paper explores the importance of epistemology as it relates to new technological advancement and the dangers of trusting technology to deliver new truth. The problem we face is not the technology, it’s the epistemology and worldview behind the technology. Mises warned us of this problem in his great book the Epistemological Problems of Economics.
“Only a perfect being, whose omniscience and omnipresence would enable him to survey all the data and every causal relationship, could know how each erring human being would have to act at every moment if he wanted to possess the divine attribute of omniscience. If we were to attempt to distinguish rational action from irrational action, we should not only be setting ourselves up as a judge over the scales of value of our fellow men, but we should also be declaring our own knowledge to the be the only correct, objective standard of knowledge.”
The issue at hand is the illusion of omniscience and omnipresence, there are no perfect all-knowing beings in society nor are there perfect all-knowing technologies. However, big data and artificial intelligence will be used as a proxy to be that perfect being and system. Only sound epistemology can defend against this intrusion on our liberty and human action.
We only need to look to the field of economics and the capital markets to see this problem in action. The 2008 mortgage crisis is a perfect example of the systemic failure of financial innovation and misguided epistemology.
Central bankers and hedge fund managers around the world took an a posteriori methodology to the markets, believing their models could measure and properly assess risk. More simply stated, they could control the markets.
Two core fundamental issues illustrate the limitations of big data and econometrics in this example. First, the use of econometrics to manipulate interest rates, Zero Interest Rate Policy (ZIRP), disconnects the market from time preference originary interest rates leading to a misallocation of resources. This results in an overemphasis of behavioral data for pricing risk, specifically, the consumer credit score. Trillions of dollars in capital are reliant on a posteriori knowledge causing exponential risk in the market due to malinvestment.
When supply of savings and time preferences do not drive interest rates in a marketplace there is no way to properly price risk on capital. Without the foundation of market interest rates, we turn to induction, an over emphasis on a posteriori data to price risk. Technology tries to mask the logical fallacies and explain away historical truths to maintain the status quo.
ZIRP and human behavior data like credit scores have illustrated the inefficiency of technology and misguided epistemology. Without sound theory and reasoned a priori thinking, society is bound to continue to chase the technological utopia.
“If the past, by bringing surprises, did not resemble the previous past to it (what I call the past’s past), then why should our future resemble our current past?” Nassim Taleb