The Market Mind Hypothesis, page 33
Second, although a symbol cannot be fully reduced to a signal (see also Subchapter 7.2), we could view the signal as the format with which the symbol is realised physically. Specifically, the physical properties of the symbol include the bio-electric signal which accompanies its emergence in consciousness. This also involves the physical route via the neural circuitry along which the symbol’s emotional charge will build. In terms of (innate) affect—like that of the light bulb—let’s also recall what Bateson stated about his own “difference that makes a difference” in the context of Kant’s “idea”:
It is able to make a difference because the neural pathways along which it travels and is continually transformed are themselves provided with energy. The pathways are ready to be triggered. We may even say that the question is already implicit in them. (Bateson, 1972, p. 459; emphasis added)
This ‘road-map’ is similar to what neuroscientists call “connectivity patterns” which contain “latent knowledge” (Dehaene et al., 2006, p. 209).
Regarding the dynamics, a symbol is signalling information whose content is non-exhaustive as far as meaning is concerned because that meaning continues to be shaped out of (the interaction with/exploration of) the unknown. This process of discovery, while the symbol is being shaped, is experienced phenomenally and takes place as ‘life at the edge of chaos’. Living symbols combine both familiarity and novelty. The selection of such contents is echoed in neuroscience, here emphasising the complementary market forces (in italics) at play:16
The mistake made by many cognitive scientists is to view symbolic content as static, timeless entities that are independent of their origins. Symbols, like the vortices of the river, may be stable structures or patterns that persist for a long time, but they are not timeless and unchanging … the processes that govern how a pattern is selected from myriad possibilities must be incorporated in any set of organisational principles for living things. These processes often involve cooperation and competition, and a subtle interplay between the two. (Kelso, 1995, p. 1 and then p. 6)
This dynamic setting, involving ranking, scoring, selecting, and the like, allows us to explore the special symbolic nature of numbers.17 Here I would like to apply it metaphorically to complementarity which can manifest itself at various levels. I build on what I discussed elsewhere in this book, including in Appendix 1.
In general, so stripped down of any specific characteristics, how should we see contraries, and how do they complement. In other words, how does that ‘magic’ synergy ‘emerge’ from the tension between two contraries? In the case of the mind the complementarity between (the unconscious) S1 and (the deliberate) S2 involves a tension which drives the dynamics. In symbolic numerical terms:
There emerges a tension of opposites between the One and the Other. But every tension of opposites culminates in a release, out of which comes the “third”. In the third the tension is resolved and the lost unity is restored … There is an unfolding of the One to a condition where it can be known—unity becomes recognizable; had it not been resolved into the polarity of the One and the Other, it would have remained fixed in a condition devoid of every quality. (Jung, 1938, para. 180; emphasis added)
The polarity of deliberate manifestation as the “Other” (or the Two) opposite from the unconscious source of “One” generates the novelty as the “third” (or Three), that is S3, with the “release” being the discovery which sustains the mind as a complex adaptive system.18 It can be applied to other (meaningful) experiences, like win (birth) and loss (death). The Three uniting the One and the Two, in the process enriching the former with “quality”, leads to my “strange loop”19 depiction of a meaningful experience as an ‘Ouroboros chain’ of three sections:20
1 = One => Unconscious origin (e.g. intuition) ≈ S1
2 = Two => Deliberate function (e.g. logic21) ≈ S2
3 = Three => Phenomenal culmination (e.g. A-ha)22 ≈ S3
The Ouroboros (Figure 6.1), the serpent or dragon eating its own tail, has been an ancient symbol for reflexivity, a concept that existed long before Soros applied it in investing.
Figure 6.1: Ouroboros.
Specifically, it symbolises self-generation by way of the ultimate form of creative destruction. It also captures renewal by re-entry. Biologist Francisco Varela, for example, adopted the Ouroboros as a symbol for re-entry in his calculus of self-reference. In his discussion of symbol-mediating loops, Clark states more generally:
Such loops are effectively enabling new forms of re-entrant processing: They take a highly processed cognitive product (such as an idea …) cloth it in public symbols [e.g. prices], and launch it out into the world so that it can re-enter our own system as a concrete perceptible … and one now bearing highly informative statistical relations to other … perceptibles. (Clark, 2013a, p. 185; emphasis added)
In the above, the fringes of an experience’s strange loop (i.e. One and Three) both remain outside (as in ‘escape’) the deliberate domain but meet, like the head and tail of the Ouroboros, in the non-computable ‘discovery’ space to convey the meaning.23 The importance of the exchanges between these systems in their creations while crossing boundaries is echoed by modern insights: “In nature’s pattern-forming systems, contents aren’t contained anywhere but are only revealed by the dynamics. Form and content are thus inextricably connected and can’t ever be separated” (Kelso, 1995, p. 1).
As I mentioned, this was a prelude to the next chapter which will relate this to the main numbers in markets: prices. But first an intermezzo.
Intermezzo: Parallels Between Mind and Market. What is Mind? What is Market?
Years ago I lectured to young economists at an Economics School in Trieste, introducing them to complexity science and the concepts, methods, and tools of Coordination Dynamics. It was up to them, of course, to determine if any of it was useful. The economist Axel Leijonhufvud (and indeed Ken Arrow at an earlier event at UC Irvine) expressed a lot of sympathy with Coordination Dynamics, as did his colleague at the time, Vela Velupillai. In my book with David Engstrøm, The Complementary Nature (MIT Press, 2006), I actually used buying~selling in the market economy as an example of the complementary nature of Coordination Dynamics (pp. 231–234)—cycles, bistability, phase transitions, decision-making, fluctuations, etc.
So, when Patrick invited me in 2010 to become one of his external PhD advisors, I was intrigued about his idea of formalising the “market mind”. The first time we met was at an interdisciplinary conference at the University of Essex, organised by economist Sheri Markose. We kept in touch and in May 2022 I spoke at the MMH inaugural symposium in Panmure House in Edinburgh, Scotland. The present book is a beautiful realization of Patrick’s ideas, at the same time providing a stimulus and an agenda for future work. Supported by references from Hayek, Knight, Sornette, and others, Patrick suggests the two-legged premise of mind-as-market and market-as-mind, both culminating in consciousness. Considering that we don’t properly understand markets and minds, let alone consciousness, between ourselves he has his work cut out for him. Still, though not for faint hearts, it is a worthwhile challenge from my point of view, which is that coordination is crucial for both consciousness and markets. What follows are some constructive remarks, including a few specific questions, intended to help shape the research agenda that Schotanus is building with a growing team of collaborators.
For starters, which mind are we talking about? The market mind certainly doesn’t look and sound like the mind of ordinary cognitive (neuro) science, with its neat compartments and connections that correspond to mental categories such as thinking, feeling, deciding, and moving. Instead, MMH’s market mind looks more like the brain~mind of Coordination Dynamics which studies the whole system as its various parts synergistically interact. This means identifying relevant collective variables or order parameters for particular functions and their dynamics—how brain states evolve and change–without necessarily tying a piece of anatomical structure to a function. (That’s because the same piece of anatomy is often involved in multiple functions, and different pieces of anatomy can realize the same function). In economics, collective variables could be defined in the space of buyers and sellers, whereas prices qua coordination device (and synergetic indicator) could be seen as an outcome variable that acts to couple things, like goods and services with securities. Careful attention, of course, must be paid to the correspondences involved.
Coordination Dynamics considers the concept of “intrinsic dynamics” essential, e.g. for understanding learning. New information has been demonstrated to cooperate~compete with intrinsic dynamics and determine the rate and character of learning. An obvious area for future research is that individual (within-brain) and social (between-brain) learning appear to be governed by the same dynamical principles. What corresponds to “intrinsic dynamics” in the Market Mind (Hypothesis?) If it is an element of price discovery, like discounting news, this should be further formalised. For example, there seem to be similarities between active inference (i.e. limiting free energy) and active investing (i.e. limiting free lunches), in the sense that in both cases hypotheses get continuously and reflexively tested and updated.
Regarding the emergence of consciousness in the market, to me this is no different than ‘free will’ or consciousness itself as emergent. That is, the complex assembly of simpler elements generate behaviour that is not predictable from the individual components and is describable by rules that are independent of those components (though constrained by them, i.e., as ‘upward causation’). In Coordination Dynamics (CD) this ‘complex assembly’ is called a synergy, which (along with nice properties like degeneracy and multifunctionality, common to markets) is governed by a principle called circular or reciprocal causality. Whereas synergies may be viewed as natural compressors of information, the nonlinear synergy dynamics expands the range of possibilities endowing a system with autonomy or choice (‘downward causation’). At the same time, dynamics offers a natural way to explain mood swings, like that between euphoria and despair. In CD, qualitative changes in thought and affect correspond to phase transitions triggered by specific and non-specific changes in control parameters.
Compression~expansion is just one of the complementary pairs of Coordination Dynamics. In my view, the MMH needs to better integrate the source of complementarity, namely metastable coordination dynamics, the synergic tendency toward dependence (integration) that coexists at the same time with the anti-synergic tendency toward independence (segregation). Cooperation~competition, individual~collective, inter~intra, micro~macro, etc. are all complementary. In the context of ‘free markets’, I would call this freedom—not being attached to one or the other, but to see their complementary relation.
This brings me to Adam Smith and his “invisible hand”. One of the most characteristic though underrecognized features of complex biological systems is their ability to spontaneously (and simultaneously) recruit and annihilate whatever degrees of freedom are needed to accomplish goals and tasks. Due again to their nonlinear coordination dynamics, patterns of coordination are assembled and disassembled with ease to accommodate functional demands. This indeed echoes Smith’s division of labour in his “butcher, brewer, and baker” sense.
Not surprisingly, there are several MMH topics and views I do not feel entirely comfortable with. For example, borrowing Hayek’s “practical dualism” is risky because any dualism implies separation. Hayek’s own emphasis on having to use it for language purposes—due to our ignorance of the “unitary order” to which the mental and physical both belong (which he acknowledges)—only compensates so much. I welcome Patrick’s attempts to further improve on it via his portfolioism as well as via optimising such language, for example, by using “exchange” instead of “interaction”. For me, however, the implication of the squiggle for mind~matter interaction can hardly be overstated, namely—that for a nonlinear, symmetry breaking metastable coordination dynamics—mind and matter are complementary. A mouthful, but true.
Regarding ‘physics envy’, if economics has slavishly followed physics, the question (as previously for that of mind) is which physics? Mechanical worldviews based on Newtonian physics will not work for these kinds of complex systems. What will? There is a “mindless” (not intended to be derogatory) physics of self-organisation which does not require any external or internal “homunculus-like” agent. That’s great but it’s not going to be enough for MMH, in which market dynamics refer to processes that are universal and shared between minds and markets. The reality is that no physics exists (yet) of ‘intelligent’ self-organisation, in which intelligent agents and collectives of agents figure prominently. This, I would say, is a major challenge for MMH and the rest of us.
To conclude, the particularly compelling aspect of the MMH research programme is its potential to set the scene for a necessary paradigm shift in economic thinking. Despite the many challenges, I see the possibility of a remarkable scientific reconciliation between the market-as-mind and the mind-as-market that will embrace recent theoretical and empirical developments in the brain and cognitive sciences, for example in so-called 4E Cognition. I am particularly excited that my field of expertise, the science of coordination (i.e. Coordination Dynamics), with its key notion of the metastable brain~mind, may contribute to, or even play a significant role in, understanding the market mind, both in terms of individual and collective experience.
Patrick Schotanus has made a creative step. This book can be our guide for making that shift.
Scott KelsoGlenwood and Martha Creech Chair in Science, Professor of Complex Systems and Brain Sciences at Florida Atlantic University, andco-author of Dynamical Systems and The Complementary Nature.
Chapter 7
On Discovery: Am I Free?
Indeed from the ontological point of view we must as a general principle leave the primary discovery of the world to ‘bare mood’.
Martin Heidegger
7.1
Introduction
Man is not and never will be the master of his fate: his very reason always progresses by leading him into the unknown and unforeseen where he learns new things for.
Friedrich Hayek
Discovery is a reflexive “mind~body” loop, both at the individual and collective level.1 The MMH focusses on discovery because it is a spontaneous, unpredictable process that is exemplary for the mind’s complexity, in this case by producing knowledge while remaining itself unknown. In fact, discovery is the structural part of the explanatory gap. There are two important components to discovery, namely its process and its outcome (or content). While you may have a clear idea what you would like to discover—which is about content—what you’ll encounter along the way, when that comes along, and how it will appear will be more ambiguous—which is about process.
To further clarify I connect discovery and the explanatory gap to both true uncertainty and incomplete knowledge. True uncertainty—the impossibility to know the future2—is a consequence of the explanatory gap. We do not fully understand mind~matter exchange, like the occurrence of (outside) material events and our (inside) mental responses to them.3 But we are curious and try to by gaining insight. Therefore I related it earlier to ontological uncertainty: by inserting time. This is about the process of (self-) discovery, whereby the A-ha experience of an insight itself, including the timing of its eureka moment, remains a mystery. So, true uncertainty does not prevent us trying to ‘predict’ the future by inventing it, driven by such discovery. This reduces our incomplete knowledge which I related earlier to epistemological uncertainty. In other words, epistemological uncertainty reduces when gaps in our knowledge are filled by insights, the content of discoveries. This is in contrast to irreducible ontological uncertainty.
Closing the gap, incentivised by A-ha experiences,4 is the (subliminal) motivation that drives our enquiries and research, in all fields of life. In mind-as-market terms, an insight is a mental reward, a profit, often only received after investing heavily in both intuition (S1) and logic (S2). Importantly, an insight has its own feeling value as it is coloured by the (S3) sensation of such an A-ha experience during the eureka moment as an epiphany. It is awakening and enlightenment, which is more than simple awareness. It conveys novelty in a qualitative sense, including hurt if the discovery is painful (e.g. a shock). This sensation is thus not relevant in terms of the self-evidence of a proposition (i.e. the deductive result). Rather it is relevant as a phenomenal payoff (return quality) from the beliefs, biases, doubts, thoughts and so on invested through S1 and S2. As mentioned in Appendix 1, I like to call insight the purest alpha among the returns in consciousness space; an impression that makes an impression, to paraphrase Bateson.
The importance of discovery in society, in particular as a conscious experience in economic agents, is one of the MMH’s overarching messages. Earlier I discussed consciousness as the dual realisation of information bridging mind and world. Discovery is the moment these two connect and a (knowledge) gap is closed. This embodied engagement starts at an early age, initially involving shaping the self:
