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From Scientific Revolutions to Economic Evolution

Updated: Jun 14, 2022

Our economic system is showing signs of a paradigm shift. Whether considering impact, crypto or new forms of capitalism, something is changing. To recognize where things may be going and how they change, it is worthwhile to understand what paradigms are, and how they transform our reality.

Interpreting reality

When we look at the classic rabbit/duck “illusion”, what do we see? Whether you see a rabbit or duck, all that’s really there are lines and dots. But, our world is complex, and our minds interpret its complexity into representations or ideas that are easier for us to understand. Really, we can choose between the rabbit and the duck because nothing is there but our interpretation of those same lines and dots.

This makes clear why all that really matters is that we agree on things. It doesn’t matter if they are capital-T True or not. Consensus is what defines truth more often than not, and consensus, for lack of a better word, is good. You cannot see the rabbit and the duck at the same time, just as you cannot read this sentence in much more than one way. The letters are agreed upon, and their order (and your understanding of that order) is under consensus.

What do we learn from this? There is no observation that is clean from personal interpretation and theory. We have values and ideas about the world and they inform how we see it. What validates interpretation is not so much truth, but rather consensus on what truth is. This argument over consensus has a cycle that we can learn from.

The Structure of Scientific Revolutions

Thomas Kuhn wrote The Structure of Scientific Revolutions in 1962. The book was a watershed moment. Kuhn challenged the scientific community by proclaiming that there is no scientific observation without interpretation, and that science has a repeating pattern of changing observations. Kuhn dubbed that change of observation a "paradigm shift". The book also popularized the term paradigm and today it has become almost commonplace.

Kuhn suggests that one might think that science is an ongoing discovery of “truths” compounded upon one another, or canceling each other out of existence, only to beget greater truths. This interpretation of scientific history is mistaken, and if we are to actually understand the nature of science, we must look at the patterns that arise throughout the history of science.

Kuhn’s analysis can be “translated” into other disciplines and reveals a striking pattern in many spheres of human existence. I will attempt to condense Kuhn’s analysis into a number of paragraphs for the sake of clarifying his view. If you are particularly interested in science, I suggest reading the book.

The pattern of scientific revolutions

Looking at the history of science, we recognize a recurring pattern of how science is conducted. This is true in a micro and a macro sense. That is to say, it may be true of how to conduct a scientific inquiry at large (popper’s theory of falsification) or in a particular field (Newtonian physics being replaced by Einstein’s Theory of General Relativity). Kuhn proposes that scientific revolutions occur in 5 stages:

- Pre paradigm/pre-science – In this phase, a number of schools of thought/ theories exist, but they are at odds with one another. No one school of thought is dominant.

- Drift – Different schools of thought compete for dominance.

- Normal Science – One of the theories or doctrines becomes dominant and becomes the commonly accepted school of thought in the scientific community. The theory becomes the paradigm.

- Crisis – The dominant model or paradigm begins to show flaws and anomalies that are irreconcilable.

- Scientific Revolution – A new paradigm emerges and replaces the old paradigm.

Let’s break this down by looking at this process happen throughout the history of astronomy:

In pre-science or the pre-paradigmatic phase, several different theories are around to explain why something is observed in the ways that it is. For example, in the ancient world, when looking at the heavens, different astronomers would log the movement of the stars and would ascribe different reasons or explanations for their movements.

For example, ancient Babylonians would track the movement of stars to recognize ominous periods and forecast eclipses. By the 8th century BC, these diaries and logs were so well detailed that a Babylonian astronomer would know to a good degree where a star might appear in the sky and when. So much so, that these logs were used centuries later by Ptolemy to set an arbitrary beginning for a calendar era.

In the 4th century BC, when Aristotle looked at the heavens, he had thought that the stars rotate around the earth and that they were orbiting on fixed circles around us. This was congruent with many other ideas of physics he had proposed at the time. Aristotle's theories made good sense to the observer, and they became widespread and dominant. His ideas became the paradigm.

However, to explain why some stars, like Venus and Mars, go into retrograde (seem to move back across the sky and then loop back on to course) astronomers like Ptolemy explained that these circles around the earth don’t simply loop around the earth, but also around a fixed point on their orbit circle.

Ptolemy’s universe, or his interpretation of the movement of stars in the sky, became the dominant paradigm for astronomy for over a millennium and a half. Any astronomer living after Ptolemy needed to contend with his interpretation of the movement of the planets and Aristotle’s physics. And who could blame them? it seemed perfect, and it worked. Using Ptolemy’s model, you could correctly predict the movement and placement of the planets, the tools filled their purpose.

And here we come to explain the next stage in the cycle. After a paradigm is set, meaning, a theory becomes dominant, normal science ensues. Normal science is dictated by a certain theory or a synthesis of theories. The paradigm is associated with certain tools. The tools can be equations that are widely agreed upon that form “axioms” or “dictates”, physical experimentation tools, and books that are taught to students of the future.

The job of a scientist during “normal science” is to keep exemplifying how the paradigm works. Adding layers of “proof” to the paradigm, conducting experiments that explain the fringes of the theory. The theory becomes the lens through which we view the world, it defines the questions we ask, the experiments we should hold, the ideas worth even considering. The questions asked during normal science are questions that serve the paradigm, other questions are simply not interesting.

Anomalies can emerge during normal science and they remain as riddles to be solved by future generations. Think of Mendeleev who created the elemental table in chemistry. When he created it, it was not completely populated. It was up to chemists of the future to articulate and experiment until all the holes are filled.

Mendeleev's original table of elements

Mendeleev's table had room to grow, so the riddles can be slowly answered and anomalies incorporated into the paradigm. Anomalies can persist for a long time without shattering the paradigm. But as more questions emerge, as more holes are poked in the theories, the paradigm begins to enter a period of crisis. From crisis we move to the revolution and of competing ideas.

At the beginning of the 16th century, Copernicus posited boldly that the Earth actually orbits the sun (heliocentrism), along with the other stars and planets. Later that century, Kepler begins to study the motion of planets, beginning to question what was Aristotle’s physics.

Tycho Brahe, a Danish astronomer later also suggests another model for Geo-centrism that incorporates heliocentrism as well and is different from Copernicus’ ideas. And finally, Galileo Galilei comes along and decides to point his telescope upwards to the skies. Galileo noticed that Jupiter had moons too, just like Earth! And that the way that they orbit does not fit with the physical paradigm of the era. So begins a scientific revolution.

Similarly to the pre-paradigm era, the scientific revolution stage is tumultuous, and is full of rivalry and arguments different theories and paradigms vie for dominance until one emerges as most fitting, by consensus. The other theories are either incorporated or left to die with no followers.

And so, after the views of Galileo, Kepler and Copernicus were widely adopted, a new paradigm was born. That paradigm moves into normal science once again, with new experiments, new tools to prove heliocentrism, the movement of the stars and physics in general, a new explanation for the nature of the universe itself. And what had changed? Had the moon changed its rock formations? Did the stars rearrange their order? All that had changed was our understanding of our reality.

What is a paradigm exactly?

When the paradigm shifts, we throw away our old textbooks and write new ones. The new books become dogma until the next paradigm shift. That is the nature of scientific revolutions. A never ending cycle that does not progress linearly, it merely shifts our attention and interpretation of reality.

It doesn’t happen all it once. But it certainly happens and repeats itself throughout history. Books are written and re-written to justify the dominant paradigm; they retell history to justify reality as it is interpreted by the contemporary. Pupils learn the paradigm, as the latest and most important thing to have happened.

These revolutions are invisible. They are invisible because they are weaved into our lives. They are put in our textbooks and taught as capital-T Truth. You cannot challenge them because there is not a “thing” to challenge. You cannot argue with them, because there is not a single institution to rebel against, it is the very language we speak, it is the very tools we use.

Be sure, if you were taught the Ptolemaic universe and Aristotelian physics, you would have no reason at all to doubt it: it was perfect, it worked, and it was useful. It explained everything you needed to know, it would not occur to you to challenge it. If you think you wouldn’t be fooled, just know that you too view the world today through a paradigm – just ask yourself what exactly is a black hole? What does a photon look like? We have theories, but we do not have the tools to know.

Kuhn asks, “…Is the constant acceleration produced by a constant force a mere fact that students of dynamics have always sought, or is it rather the answer to a question that first arose only with Newtonian theory?...” Do we not have similar axioms and truths in economics? Is growth not infinite? Is GDP not good?

A paradigm is nothing more than a collection of truths that a group believes in, through which they view and interpret reality. It’s a set of tools to solve a set of problems. This happens in physics, in chemistry, and I suspect, in economics as well.

Our world in crisis, our model shifting

I believe we are in crisis in our world today. I think this is evident politically and culturally. But inseparable from those facets of our society is our economic system. We have seen some ups and downs just over the past few decades, but really, what is coming into question is this version of capitalism that has been dominant since the industrial revolution.

Kuhn mentions that a scientific revolution is recognizable through a few characteristics:

1) Variations of theories trying to explain the anomalies of the current paradigm:

  • The market is fixing our social and environmental woes. The market is supposed to fix most things, and if not the market than government. So why aren't things getting any better?

  • Note the rise of different economic theories that are becoming more and more popular. Socialism has become quite popular term in the political zeitgeist again.

  • More books are being written about new forms or “patches” to our current form of capitalism: stakeholder capitalism, conscious capitalism, citizen capitalism, and so on.

  • These all signal the frustration with the current paradigm in economics.

2) Revisiting of terminology and foundations:

  • Cryptocurrency has brought to life a question that worried economists decades ago about the meaning of value. Fiat, and particularly the dollar, are no longer pegged to gold. Gold used to be the standard for value, agreed upon by all. Now we are challenged with new digital currencies such as bitcoin, begging the question of, what is value? Where does it come from?

3) A turn to philosophical conversations:

  • Are there limits to growth on a finite planet?

  • How do we value nature and society? And why are they not accounted for in our economic system?

4) Anomalies begin to be counterexamples for the theories:

  • Things such as centralization and “trickle down” economics are no longer an example of good practice, success or justification for capitalism. They have become the examples of why it isn’t working.

5) There is a feeling that the paradigm has filled its role and it cannot serve us any longer:

  • Growing unrest and political divide along socio economic lines make it clear that there is mass disappointmen with our institutions, particularly being let down by the economic system.

  • Around the world movements protesting governments and banks (e.g., Occupy Wall Street.

  • Crypto currency slowly becoming less of a speculative assett and gaining mainstream adoption and utility.

There is clear resistance to the current system, clear frustration. But it an alternative does not come easily. Kuhn writes: “…in learning a paradigm, the scientist acquires theory, methods and standards together, usually in an inextricable mixture. Therefore, when paradigms change, there are usually significant shifts in the criteria determining the legitimacy both of problems and proposed solutions.”

What I believe Kuhn is saying is that in the period of shifting paradigms, it is hard to accept the new paradigm. It’s a package deal that seems to undermine the foundations of what people understand as truth. A live example of this is how crypto raises so many objections, why people feel that it is full of corruption or simply isn't real. Yet, most people don't know nor question our current methods and would not give the same criticism of some Wall Street institutions’ corruption and practices like fractional reserve banking.

Our anomalies and our possible shifts

Our economy is beginning to show its anomalies. We are beginning to feel that the system is unreasonable. It is not a coincidence that Bitcoin gained popularity over these past two decades. Only in a world where financial crises happen can we expect a reaction like “A peer-to-peer electronic cash system” to sound like a good idea. Only in a world of poor money management and hoarding by centralized market forces can we expect decentralized exchanges to sound plausible. Centralization used to be a source of safety and of belief. Today, we trust no one, so we can only trust everyone.

Millennials have already experienced two major economic crashes in their young adult life. All the while, we see billionaires going to space for joy rides while 400,000 children under the age of 5 may die of hunger this year in Yemen (that’s about a death every 75 seconds…). I don’t actually blame the Bezos and the Musks of the world for this. They are products of the system; they use it as it is meant to be used. But we are exposing the fault lines of an economic system that gives some individuals the power to exist in a separate reality, where they hold little accountability, while our planet and societies crumble.

Crypto is popular because its elements are the solutions to the issues we take with our current economy:

- Lack of transparency

- Centralization of power

- Intermediary systems in a borderless world

- And more…

I also believe that Impact is a response to this strange economic system that does not account for our commons. Our world is one where it is profitable to create products with slave labor and ship them across the earth while polluting the air we breathe. We see fault in this but are largely helpless.

Companies patch up our economic system with different metrics and standards for impact. They create digital dashboards and CSR reports to show how well they are doing. But these are still tools of the paradigm that are used for marketing and a quieting of the conscience more than anything else.

New tools and trends such as social impact bonds and impact investing do not align with the paradigm, they are outliers and have yet to see mainstream adoption. They do not answer the needs of the day, the gravity of the moment. They are not widely adopted because they do not create a good enough return. That is the only metric that matters to most in this system.

Why is ESG investing so successful? Not because it creates actual impact, but rather because it protects profits. ESG is a metric that protects the investors and shareholders from environmental, social and governance risks of a company. It’s almost a proxy for seeing how well managed a company is. It does not create positive impact nor does it measure positive impact. It is a weak metric and an unreliable substitute for fixing anomalies. It is an example of another theory competing for the paradigm shift that we recognize we must make.

Stakeholders must replace shareholders, accounting for impact must be as commonplace as risk assessment, environmental services must be renumerated as much as any other service. We cannot let the illusion of never-ending growth on a finite planet go on.

If this seems implausible to you, consider that once, risk was not part of investing. It was popularized in the mid 1900’s. Today it is inseperable from investing and analysis. The same can happen with impact.

Paradigm shift

In the same way that science finds anomalies, and so the paradigm must shift, this can also happen in economics. If we find the paradigm is ill suited to answer the questions, to solve the problems of normal economics, we must move on. We are beginning to understand that economics doesn’t work just to maximize utility of individuals, we are not homo-economicus, we are complex nets of networks and systems.

The fact that underpins all of this science, economy, politics, etc. is that everything is only what we make of it. It is dots and lines, empty and meaningless until we ascribe value to it. The only thing that exists is our interpretation of reality – in this way our current economy is based in our interpretation of the nation state and fiat. As we move past that, so our tools must change.

We are in the midst of this paradigm shift. I see it when I see tokenization of impact, when I see projects that value services of nature and land, I see it when we organize differently in DAOs, when we are decentralizing everything, and with force. The ground is shaking, and I suspect that we will see this in our lifetime.

It’s important to note, that paradigm shifts take time, they don’t happen all at once. Between the death of Copernicus and the birth of Galileo two decades passed. I believe that this revolution is happening, and it will take time, hopefully the scale and speed of this digital age will expedite things.

The purpose in revolution

When Darwin suggested evolution, the most troubling thing for people at the time was not that man had evolved perhaps from apes or something like that. But rather that evolution had no goal in mind. That there was no masterplan, it was again, empty and meaningless.

Before Darwin, studying the wonder of nature, the “design” of humans, and of creatures, made it so clear that only divine intervention could create such wonderful things. But the thought of absolute randomness disturbed many.

In the same way I believe the evolution of ideas has no particular goal. We bring about new paradigms as an ongoing process of elucidating the world as we perceive it, or perceive it should be. This can seem disturbing. This can feel pointless, or daunting. Does nothing have a point? A purpose? A goal? What’s the point?

Well, I understand the existential and depressing view that nothing has a point and everything is empty and meaningless. But this can be viewed exactly in the opposite way, as a rabbit, or a duck. It’s a choice. The emptiness and meaninglessness is really an opportunity to instill meaning into everything. It’s all made up anyway, so why cant we at least make it so it makes sense with what we hold dear to us?

It’s all a matter of where we place value. Crypto economies can suffer the same human faults as traditional economies (scams, greed, communities, exclusivity, etc.) because they are run by the same people, the world is still the world, nature is still nature, this is just another interpretation of it.

Capitalism is a word we’ve used to interepret and use our greed and egos to bootstrap and grow our civilization. It works. Crypto will be no different – but we can make it better this time around, infuse values and purpose into it, literally program our economy. Except this time, we have the opportunity to program some failsafes that look out for others, that value nature.

We can instill purpose into our economy. It’s ours to make, its ours to define. The fact that impact and regeneration are missing from our economic system does not mean that we should just let them continue to be missing, we can choose to bring them in, perceive them as valuable, give them meaning through the lens of our economy.

All money is a representation of value. We value work, we value commodities, we value comfort, and so on. That’s why we exchange our money, a representation of our energy incarnate, for those things. Now let us value nature and our society itself, let us recognize what we know to be true and put our energy towards that.

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