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  • Writer's pictureTai Rattigan

Free market Capitalism, Physics and why Ray Dalio can't be right about China's economy


A hand drawn diagram demonstrating things going from organized to random


I read Ray Dalio's book Principles for Dealing with the Changing World Order when it came out, and it just didn't resonate with me. It was well researched, well written, and I really like Ray Dalio's view of the world. I was disappointed and I didn't know why.


The All-in Summit in LA featured Ray Dalio as a speaker, I was fortunate enough to attend the event and David Friedberg asked him a great question - 'Is the decline of the US economy preventable or is it simply physics?' recording here. This connection between physics and economical regime change stuck with me and has been zipping around in my head ever since.

This post is my musings on this subject, mostly just to get it out of my head - but also in the hope that someone else is interested in a conversation about it! Let me preface this post with a few things:


  1. I am not a political person - I don't have the right to vote in the US, don't judge people by their politics, and generally think its mostly a energy suck to spend time thinking about politicians.

  2. I am not a physicist and have a very rudimentary understanding of physics.

  3. This post is not in anyway in judgement of people, the countries they live in, or their behaviors.

With that done. Let's jump into it, bear with me!


Free Markets, Entropy, and Evolution: A Symphony of Natural Selection in Economics


The universe has a fascinating way of ordering itself, and in the ceaseless dance of particles, the concept of entropy emerges. When juxtaposed with the dynamism of free markets, this physical law uncovers striking correlations. The intricate workings of free markets mirror the continuous evolutionary experiments that drive forward the best and most efficient outcomes.


Evolution, Entropy, and Free Choice


Evolution operates through countless experiments – organisms adapt, compete, and either survive or become extinct. The most successful adaptations persist. In democratic systems, citizens vote for policies or leaders that align with their needs or beliefs. The process is imperfect, but it attempts to optimize societal outcomes.


Free markets, offer an almost immediate feedback mechanism. Every purchase is a vote, a declaration of what works or doesn’t for an individual. Products or services that meet consumers' collective needs and want to thrive, while those that don’t wane.


Market forces dictate the rise and fall of various empires or socio-political systems. Dictatorial regimes or systems often falter because of resistance to evolution/change seeing it as a loss of control. Instead of adapting to challenges, these systems suppress them, often with force. This stubbornness can be likened to resistance against increasing entropy – a futile endeavor.


In contrast, free markets capitalize on change, continuously evolving to find the most effective path. The strength of capitalism lies not in its political ideology but in its embodiment of evolutionary principles. It’s not in opposition to communism per se; it's akin to entropy and evolution, continuously seeking the optimal state.


Libertarianism and the Limits of Unfettered Evolution


There's an allure to the libertarian ideal – letting the most successful ideas win without intervention. Yet, much like evolution, the process can be brutal. Failed experiments might have dire consequences for individuals - this is where the beauty of democracy shines. While it embraces elements of free-market libertarianism, it also offers safeguards that limit potential damage.


Yet, a delicate balance is essential. Over-regulation can stifle the natural selection of ideas and solutions, which is the core strength of free-market systems. There is significant regulatory overreach in the democratic political system today which is slowing down the evolutionary forces of free market decision making.


Trusting the Masses: Democracy's Evolutionary Strength


Democracy's endurance is a testament to its ability to combine the best of both worlds. It has the agility of free markets, ensuring evolution continues while offering protective measures against potential fallouts. As we move forward, trusting the collective intelligence of the masses and recognizing the universality of principles like entropy and evolution can guide us toward optimal societal structures.


In conclusion, by understanding the intertwined concepts of free markets, entropy, and evolution, we can better appreciate the inherent wisdom of systems that mirror nature's principles. This is why China cannot be the replacing World Order as Ray Dalio suggests, the level of control applied to their market means it does follow the laws of physics - it may charge in the right direction for a time, but will ultimately falter from human errors which cannot correct themselves like free markets.


If you made it this far, thanks for humoring me!




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