Tuesday, February 24, 2009

Collapse of Complex Systems II: Marginal Returns Trigger Implosion
February 24, 2009

As systems counter increasingly marginal returns with greater complexity and energy inputs, a breaking point is reached where the system either implodes or citizens choose to let it crumble.

Astute correspondent Geoffrey G. recently recommended The Collapse of Complex Societies and offered this insightful summary of author Joseph Tainter's primary thesis:

You cite Rifkin's argument about how marginal returns on conquest led to the collapse of the Roman Empire. The U.S. Economy: Increasingly Marginal Returns (January 15, 2009). I haven't read Rifkin's book, but this is very familiar: it is the argument of archaeologist Joseph Tainter in his 1990 book The Collapse of Complex Societies.

Tainter argues that societies collapse as a result of diminishing marginal returns from increasing complexity. In response to diverse pressures and changing circumstances, they adapt in ways that make them more complex (complexity seldom diminishes). In many cases, the situation reaches a point at which marginal returns on increases in complexity turn negative, and people actually prefer collapse to continuing to live under the current regime. Then the society collapses (i.e. undergoes a rapid decline in complexity).

He deals specifically with two major techniques for avoiding collapse, technological innovation and new sources of energy, but argues that these too suffer from diminishing marginal returns and therefore offer no ultimate way out."

Thank you for the recommendation and comments, Geoffrey. I have augmented Trainter's excellent (but written-for-academia) study with these more general-audience works:
The Fall of the Roman Empire
Collapse: How Societies Choose to Fail or Succeed

We don't have to look very far to see various complex systems completely mired in diminishing returns and thus poised for collapse. How about the "healthcare" system ( a.k.a. sickcare) of the U.S., which vacuums up an ever-increasing percentage of national wealth (some 16% of the entire GDP) but which produces ever more marginal increases in measurable health, longevity, etc.

By many metrics, the health of the nation has decreased even as ever more stupendous sums are thrown at more MRI machines, more tests, more procedures, more medications, more lawsuits, etc. Lifestyle-related chronic diseases are outstripping population increases, as are possibly pollutant-related conditions like autism.

The "fix" to date is ever greater complexity. The sickcare system is a hopeless snarl of legalese, pharmaceutical research mumbo-jumbo ("if we take out the sick patients, then our new drug has a measurable positive effect, more or less equivalent to the placebo effect..."), arcane insurance forms and exemptions, mind-bending Federal and state regulations, and billing insanity.

Since our entire system is set up on a "fee for services" basis, then services must be rendered regardless of efficacy. Telling the patient to lose weight and walk 20 minutes a day is not a billable service, hence the under-emphasis on prevention or a set of incentives which rewards patients for taking responsibility for their own health and charges them for refusing to do so.
Instead of prevention which would alleviate many chronic conditions and lower the nation's medical costs, we get bills like this:

1. wake patient up to administer sedative: $500
2. sedative: $200 ($2 generic pills)
3. glass of water to take sedative: $100
4. test patient to see if sedative worked: $400
5. consultation to review side-effect of sedative (sleep disruption): $1,000
6. prescription of medication to counter side-effect of sedative: $200
and so on. Then the bill must be massaged by various levels of bureaucracy to ascertain who pays what, if the charges meet federal fee standards, etc.

Ironically, both the U.S. and the Chinese healthcare systems are doomed because both are employer-based rather than national. In the U.S., as costs zoom up, employers cannot afford $1,000/month insurance costs per employee (and their families). In China, as state-owned enterprises and collectives have closed, then there is no alternative system to provide care for unemployed or marginally employed workers.

Instead of a simple, rational system, the U.S. has attempted to fill the yawning gaps in this failed employer-based healthcare model with ever-more layers of complexity which require ever-greater sums of money and energy.

Sadly, well-intentioned "reforms" and all the good work of hundreds of thousands of people working in the system cannot address these fundamental flaws and marginal returns.

The complex sickcare system is visibly ripe for collapse. All the "fixes" proposed which do not remove layers of complexity are doomed to merely push the system closer to collapse.

We might add numerous other complex systems to the list of systems which increase in cost and complexity even as the returns on rising investment become ever more marginal:
1. financial legerdemain (derivatives, "financial innovations", securitization, et.)
2. debt
3. DoD weapons procurement
4. governance (see California bankruptcy)
5. legal system (lawsuits, counter-suits, violations of thousands of overlapping regulations, etc.)
6. regulation of small business (overlapping authorities galore)
7. campaign finance "reform"

That's just off the top of my head. I am sure you can add many more systems whose complexity and marginal returns have pushed them to the brink of collapse.

While we're on the subject of "collapse," here are a few other relevant titles:
Fruitless Fall: The Collapse of the Honey Bee and the Coming Agricultural Crisis
The Coming Economic Collapse: How You Can Thrive When Oil Costs $200 a Barrel
Reinventing Collapse: The Soviet Example and American Prospects
Shameless pitch for my own book: Weblogs & New Media: Marketing in Crisis

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