To finish a thought from last week's class, optimization in one part of a system might lead to sub-optimization in another. I immediately thought of a book I'm reading on triathlon training. It is best to have less flexibility in your ankles when it comes to running since it helps transfer your forward momentum more efficiently, however, during swimming you want more flexibility in your ankles to kick. Working on one sport might have trade-offs for another. Another aspect of triathlon training our reading has made me think of is limiters to performance. For example, being able to run for an extended period of time means you most likely have good aerobic endurance. Improving aerobic endurance by running further and further and by increasing training volume will only get you to a certain point of fitness, though. At some point, larger gains will happen by focusing on a limiter like muscle strength, anaerobic capacity or... eating less pizza and drinking less beer *sigh* than focusing on a strength.
A great example of a systems problem, which has actual relevance to socio-environmental systems, that our reading made me think of was incorporating renewables into the grid. Getting our electricity depends upon an intricate system that matches generation to demand while humming along at 60Hz. Extraordinarily, this system can accommodate electricity being generated by anything from a 2 kW photo-voltaic system on someone's rooftop to a 500 MW coal-fired power plant dozens of miles away. While individual towns and cities have electric utilities that provide their generation, that is just one aspect of the entire national grid that has sub-systems working in hierarchies like Independent System Operators and Regional Transmission Operators built into it allowing for stable intermediate forms. Other aspects like day-ahead energy markets have optimized the economics of the system and brought prices down in many places by allowing for competition within the dispatch order. Entire agencies like Federal Energy Regulatory Commission and the North American Reliability Commission are responsible for regulating who contributes to the grid and making sure they operate reliably. Each subsystem has a niche in the grid enhancing its overall ability to function. This system works so well (besides because it has to) because each sub-system can make its own structure more complex and the hierarchy involved encourages specialization. Hopefully, this adaptability and autonomy will continue to allow additional renewables on the grid. When the electric industry first began, none of these subsystems existed. It was through a process of learning, adapting, and optimizing the system that we see the grid that is before us today.
Speaking of the early days of the electric industry, initial escalation between private and public utilities lead to a cycle of fierce competition, consolidation, and then a monopoly. From that escalation, state-protected monopolies and the regulatory compact was born. Many of these systems archetypes mentioned like escalation are attributed to a flaw in the political economist Adam Smith's theory on how individuals function within a system. According to Smith, "homo economicus acts with perfect optimality on complete information, and second that when many of the speicies homo economicus do that, their actions add up to the best possible outcome for everybody (107)." Unfortunately, this is fiction. Meadows claims, "We don't even interpret perfectly the imperfect information that we do have" (107). Our lens of subjectivity only lets in the information that supports our mental models, and after all our mental models of the world are not reality.
Question: Why is it that material by Libertarian think-tanks resoundingly cite Adam Smith's work when justifying competitive markets free of government regulation?
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