Cornflakus Economicus

In an interesting recent piece, Cynicus Economicus has expressed his anger and disgust at “the unholy alliance between the politicians, academia, the central banks and the financial giants […] leading the West down a road to destruction.

Tiberius has a few words he would like to share about this analysis, but, as ever, his reply will be somewhat tangential.

The Cornflake Effect

Since childhood we have all known that it’s a Law of the Breakfast Table that the smaller, powdery, less-desirable bits of cornflakes always find their way to the bottom of the box, while the large, crunchier, altogether-better pieces seems to gravitate towards the top.

We may have pondered on this for a while over our bowl and wondered why it is that the heavier flakes are not the ones that sink furthest to the bottom as our youthful common-sense would imply they should:

Why does this odd, counter-intuitive arrangement of cornflakes actually happen? Is there something more sinister involved? Do the larger of the cornflakes ‘conspire’ together to stay on top of their smaller brothers? Have the cornflake-makers themselves ‘conspired’ to create a box which presents their most desirable product at the top?

But then the bus arrives, we grab our bag, and it’s time for another school day.

As we get older we realise that, like most things, the explanation is a much less exciting one; the seemingly-bizarre distribution of the contents of our box was actually the inevitable outcome of a number of  fairly mundane factors:

  • Cornflakes are not all the same size and shape, and they do not tessellate well;
  • They are placed compactly in boxes of a certain size, which when shaken about causes the small pieces to break up further;
  • This increasing differentiation between the cornflakes forces an inevitable movement determined by their size and shape;
  • The smaller pieces fall between the gaps in the larger cornflakes and settle at the bottom of the box.

The inevitability of the interaction of these factors means that you will always get this same outcome and, unless you have an annoying younger brother who gets to a new box shortly before you do and slyly turns the inner-packet upside down (Tiberius: “little git!”), the first bowl of a new packet will always be the best, and the last bowl the worst (unless you’re one of those freaks who enjoys drinking his cornflakes!).

Some people use this phenomena to suggest that social stratification is, like the distribution of cornflakes in the box, a law of nature. We see this especially amongst the social-Darwinists who, using a particularly skewed interpretation of evolutionary priniciples, suggest that our current system of capitalism is the most ‘natural’ we can hope for, as it is in tune with (and sympathetic to) our supposed selfish predispositions.

This form of argument however overlooks the most crucial component of the Cornflake Effect – what we might call the systemic factor : the box itself.

What if, instead of putting them in boxes, the cornflake-makers simply poured all their cornflakes onto the floor of their factory  – how then might we expect the cornflakes to be distributed?

Or imagine if one particularly enterprising cornflake-maker got around the problem of ‘final bowl disgust’ by distributing his cornflakes in a perfectly spherical container whose sides were soft enough not to break even the most fragile of flakes – would all cornflakes be considered more equally?

How about if the box remained the same, but it was decreed by law that all cornflake boxes should have designs that look the same upwards and downwards, and therefore that all packets spent as much time one way up as another: would the first bowl still be much better than the last?

All this is to imply that talking about a “natural” or “normal” way for the flakes to be distributed is itself an oversimplification. Side-stepping the obvious issue that cornflakes are not a naturally-occuring phenomena anyway, it is our human interaction with them, the way we determined they should be distributed via technologies and social arrangement that are a crucial determining factor in their ultimate fate.

So now, filled with a sustaining bowl of cornflakes inside us, lets us look again at the crux of Cynicus’ argument:

I do not buy the conspiracy theorists, or that there is a nascent New World Order. I am far more inclined to the view that incompetence and idiocy are greater drivers of events than hyper-intelligent Mr. Evils plotting world domination.

He is right: there (probably) is no New World Over in the way defined by the internet counter-culture (Alex Jones, et al), for it implies the existence of a group of people with a strong enough in-group bias to be sustainable, yet with so little compassion as to be essentially psychopathic to the rest of humanity. Tiberius does not see how this is logically possible outwith an analysis that is either antisemitic (“they are all Jews”) or insane (“they are all reptiles/aliens”). Failing this, you are left to explain a group of people who are evil enough to want to dominate the world, yet sociable enough to get along with one another in engineering the task.

Instead, Cynicus goes on to complain that:

The only explanation that fits the facts is the grubby clubbiness of the system. It is not the great New World Order conspiracy, but rather the conjunction of interests between well placed individuals. Each, in their own way, moving forwards for their own personal gain. It is not the activity of great conspirators, but rather the collective movement of little men, of people who can think only of their personal gains. Money, vanity, power. [Emphasis Tiberius’]

And again, he is right.

But wait a moment, don’t “people who can think only of their personal gains” form the bedrock of the system of liberal capitalism that Adam Smith wrote about and which Cynicus Economicus defends?

“by pursuing his own interest, [the individual] frequently promotes that of the society more effectually than when he intends to promote it.”

Adam Smith, Wealth of Nations, 1776.

“The answer to Lemming’s question, and perhaps the questions of others, is that there is no basic problem in economic growth, and no real problem in a system built around consumption.

In other words, the underlying system works.”

Cynicus Economicus, Capitalism and Consumption

The problem is that you can’t have your cornflakes and eat them too; you can’t claim a system of competetive-consumption is fine one minute, and then complain when you realise that such a system throws-up ruthless, self-serving individuals.

Cynicus is, in essence, getting angry at the big cornflakes, when he should be getting angry with the box.


At the risk of kicking a man when he is down, this seems like as a good a time as any for Tiberius to offer some thoughts on what he thinks are the underlying difference between his own and Cynicus’ analysis.

Cynicus has recently been offering his blog as a forum for others to express somewhat dissenting opinions and may be interested in hosting this. If not, they will be placed on here shortly.

Published in: on May 10, 2009 at 7:54 pm  Comments (6)  
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6 CommentsLeave a comment

  1. Tiberius,

    Thanks for the comments on the blog. I thought I would respond to your points.

    Like yourself, I do believe that the cornflake packet is wrong, but perhaps I would like to see it as a shape different to yours. However, there is no inconsistency in my argument.

    I argue that the free market system allocates resource where they are wanted. I also argue, as you correctly identify, that there is an unholy alliance at the top of the present system.

    The error in your critique is as follows; the current system of interventions and bailouts is what allows the unholy alliance. Take away the guarantees, the special position of particular banks, the bailouts and so forth, and you have a different situation. That is a situation where the politicians and banks at the top do not have the power to win.

    I have always argued against the bailouts on the principle that this is unwarranted interference, and economically damaging. Take away such interference and there is no unholy alliance. Take away the government’s ability to print money and run deficits, and you remove another of the problems.

    I have argued strongly on these points throughout my blog. As just one example, I have even pointed out the following in my post on fractional reserve banking:

    “Another interesting point from history is that gold changer (from now on I will call them bankers) were sometimes regulated. In one Italian city, the bankers placed collateral with the city in order to be allowed to have a cloth with a shield on their trading table. This was an assurance to the people who deposited with the banker that he had collateral, but others could still act as a banker without such collateral. In other cases a city would have a system of limited licenses, which allowed them to only have a few bankers to monitor. This oligopoly regulation had an advantage for the ‘regulators’, which was that the city would be able to demand preferential credit terms for the city government as part of giving access to the city banking market.”

    And later regarding modern regulation:

    “Above all else, it is possible for banks to lend to government with no reserves whatsoever. This means that, in principle, a bank can loan to their government without any deposits whatsoever. This is blatant encouragement to lend to the government and it might be considered that it is no coincidence that the debt of many OECD governments continue to grow at a shocking pace. You may be unsuprised to find that the provision of this facility was not changed in Basel II, though the mechanism has changed…”

    This is just one example amongst many.

    This is the root of the unholy alliance, and it has nothing to do with free markets. It is the close relationship between banks built upon regulation, and the mutual interdependence of the government and banks that is the problem.

    My cornflake packet would indeed be different. I would prevent the collusion between banks and government, and also prevent the issuance of debt by the government. As Adam Smith says:

    “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

    The quote is not a 100% fit, but I think that you can see the point here.

    As such, ‘yes’, the freemarket system does work. ‘Yes’, those at the top are profiting. ‘No’, they do not do so due to a freemarket system but as the result of interventions and distortions by the government.

    You suggest that ‘At the risk of kicking a man when he is down….’ I am not sure that this is an accurate statement. My points throughout the blog are consistent. However, there is a large amount of material, and it is easy to misunderstand one single point when not taken in the context of the whole.

    Whilst I do occasionally change my mind on individual points, the change is consistent with underlying principles. Those principles are fairly clear and straightforward.

    Your comments on my blog are always appreciated, and I look forward to more of the same in the future.

  2. ‘Like yourself, I do believe that the cornflake packet is wrong, but perhaps I would like to see it as a shape different to yours.’

    Like a flat box?

    What then if a few cornflakes developed the ability to somehow ‘morph’ through the packaging, regardless of their size or weight. Would they spend their time trying to communicate to the remaining ‘boxed’ cornflakes that, ‘the box is but an illusion!!!’ ?
    Would they explain to the remaining cornflakes that ‘outside the box, we are all level, but we can only be cornflakes alongside each other! For our corn-flake-ity can only be truely understood, by being cornflakes alongside each other here on this table’……..?

  3. @Peebs

    Sounds like someone has watched The Matrix too many times!

    “Of course, no one can be told what a cornflake box is, you have to open one up and try a bowl for yourself.”

  4. Note:

    Tiberius’ reply to Cynicus’ comment can be found here.

  5. Hi Tiberius,

    I’ve finally found my way to your blog – thanks to the PRC authorities who two days ago also managed to block the web site of our friend ‘cynicus economicus’ forcing me to be a bit more creative with proxy servers, but I fear that this solution is a cat and mouse game I’m bound to lose in the long run, so don’t be surprised if I disappear for long periods of time.

    I really like your ‘cornflake box’ analogy, but seem to draw different conclusions from it than you or your commentators. It has always puzzled me that both the proponents and opponents of “free markets” do not realize that “free markets” are inherently unstable – there is a strong positive feedback mechanism in markets which reinforces any advantage that some market “players” may initially gain – by chance, design, “first mover advantage”, location etc. If unchecked, this advantage multiplies itself to the point where all competition is eliminated and we end up in a monopoly (or similar) situation. This is not just theorizing – the history of business shows this happening over and over again. The reason why we’re not all ruled by a single corporation is that the process is “distorted” by government and other “non-economic” action and factors (anti-trust legislation, consumer movements, periodic wars, nationalism, religious upheavals, geographic constraints, technology and so on). This is not a novel thought – the “positive-feedback” theory lies at the heart of Marxism, and non-Marxist thinkers, such as Bertrand Russell described it as far back as the 1930-ies (Freedom and Organization, 1934).

    Just as the physical properties of cornflakes, coupled with the law of gravity, the shape of the box and movement during transport ensure that the big cornflakes will stay on top, while the small pieces will accumulate on the bottom, the operation of (initially) “free markets” ensures that over time, the “winners” will completely overwhelm the “losers”, and will use their clout to shut the doors to any threatening competition, by taking over legal and political power (and often bring down the entire system in the process). The recent debacle in the financial markets, would surely be a great opportunity for new entrants into the banking and financial spheres to appear and prosper, if the “free market” theory is correct. But we are not seeing anything like that – only the further merger of existing giants into even bigger giants (bolstered by government handouts paid for by the taxpayer). Nothing in the mechanism behind the situation is particularly difficult to grasp, except the seemingly universal faith that the “market system” is somehow inherently “self correcting”. Even Adam Smith did not think that this is the case, and expressed this view on numerous occasions in his writings.

    Changing subjects, here are a few final words from me towards our discussion on the CE blog (seeing that the thread is closed). My distinction between ideological and non-ideological positions is admittedly a rather fuzzy one, and it is easy to find borderline cases about which one can have endless discussions. But extreme “hard-ideological” positions have existed in the past and do exist presently (with children denouncing their parents to the secret police as an extreme example). A set of beliefs justifies being called an “ideology” if it forms a coherent, all embracing system describing reality. The examples you mentioned (“democracy”, “human rights”, “property rights”) are certainly beliefs (sometimes strongly held), but as ideologies go, much “weaker” than for example Marxism-Leninism (or, for that matter Austrian libertarianism). It is interesting that the prevailing “western” ideology of “democratic liberalism” follows the thought of J.S. Mill, which is so weak and internally inconsistent (in a purely philosophical sense), that first-year philosophy students are invited to refute Mill’s arguments as part of their homework assignments. For a rigorous thinker, such a situation is unacceptable, but this is precisely what distinguishes an ideologue from a “normal” person – the normal person does not care whether the theory is internally consistent or not, but whether it “makes sense” in “normal” life, and accords with his/her sense of morality and decency. CE’s commentator Steve Tierney unwittingly confirmed this stance, by stating that he is “something of a libertarian”, but then added that he only accepts the bits of libertarianism, which suit his general outlook. Is this such a bad thing?

    Finally, the preoccupation with ideology itself seems to be a bit of a red herring (propagated by intellectuals who are keen to show their relevance in world affairs). Ideologies do not create monsters – it is monsters who adopt ideologies, which suit their needs (there is never a shortage of ideologies)

    Best regards

  6. Matt,

    Agree with all you say re “free markets” and hope this is made obvious on the other post.

    re “ideological and non-ideological”:

    Think you’re right to draw the distinction between ‘beliefs’ and ‘ideologies’ – hope to write more on this in future, time permitting.

    re “Ideologies do not create monsters – it is monsters who adopt ideologies, which suit their needs (there is never a shortage of ideologies)”

    Yes and no. There probably is something more of what you’d call a ‘dynamic interplay’ at work. Ideologies do create monsters, but monsters also create ideologies. If one doesn’t accept this then, ultimately, they have to fall back on the ‘bad apples’, or ‘evil genes’ fallacies.

    As ever though Matt, you’ve given Tiberius plenty to mull over – so thanks!

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