I don’t understand why people don’t understand this. An ecosystem is a much more accurate (and more useful) analogy. And I’ve always found this amusing/frustrating:
Keynesians on the left are eager to dismiss Intelligent Design (ID) as the creationist afterthought to evolution, but just as eager to embrace its analog in economics. Disciples of Adam Smith know better. Darwin, after all, read Smith. As the late naturalist Stephen Jay Gould wrote, “the theory of natural selection is a creative transfer to biology of Adam Smith’s basic argument for a rational economy: the balance and order of nature does not arise from a higher, external (divine) control, or from the existence of laws operating directly upon the whole, but from struggle among individuals for their own benefits.”
It’s particularly ironic (and there must have been some cognitive dissonance) that Gould wrote this, because my understanding was that he was a life-long Marxist. And of course, the opposite applies as well — many free marketeers refuse to believe in biological evolution. They understand that there is a natural emergent order in the marketplace, but can’t believe that life could evolve unguided from above.
I’m one of those weirdos who believes in both free markets, and free nature.
[Update late morning]
Arnold Kling has some thoughts on the myth of the “economic multiplier”:
It is amazing what happens when you assume that you live in a linear world. You say that the multiplier for government spending is 1.57.
Really? Over what range? Think of it this way: at which level of additional government spending would the path of U.S. real GDP be the highest?
(a) $100 billion in spending above the baseline
(b) $1 trillion in spending above the baseline
(c) $100 trillion in spending above the baselineIf you use a constant multiplier of 1.57, the right answer is (c). Yet we know that this is not the right answer. At $100 trillion in additional government spending, the United States would be operating like Zimbabwe, with similar results.
This is similar to the (dumb) argument often made by space advocates that space spending has a high (or higher) “multiplier” effect than other kinds of spending (the study most cited on this is the one done by Chase Econometrics back in the 70s).
Yes, obviously, if you pay engineers to do things, they’ll go out and spend the money on goods and services, and create more jobs for other people. And yes, if you develop technology, some of it is bound to have an economic benefit and improve productivity, or create new products, and grow the economy.
But when one makes these kinds of arguments, it’s all too easy to ignore what you’re spending the primary money on. It really does matter what product the engineers are building with government money. When it comes to space, does anyone think that it makes no difference whether we had continued to employ people building and flying Saturns, or had developed the Shuttle? Or that if we’d developed a better version of the Shuttle (perhaps by starting with smaller prototypes, and continually improving the concept over the past thirty-five years) that it would have made no difference in our prospects for being spacefaring? That it makes no difference whether we spend thirty-billion dollars developing Ares, or instead something that actually reduces the cost of access to space?
To listen to the “multiplier” argument, it doesn’t matter at all. Having the engineers design a machine to bore a hole to the earth’s center has the same economic value as to build a space elevator.
When we are talking about government spending, it isn’t sufficient to talk about how much we’re spending, and whether or not it will “stimulate the economy.” We have to talk about what we’re spending it on, and unfortunately, much of what the Democrats want to spend it on will (relative to letting people decide what to do with their own money) not create wealth, or grow the economy, but rather destroy it. It’s what governments do.
But not a Free Lunch. Or a Free Launch…
When I read On The Origin of Species, so about 25 years ago, I remember thinking how well the things Darwin was saying about species competing within their niches would apply to different companies competing in the free marketplace.
Yes, they are the same phenomena. Emergent systems; emergent order from chaos. Both the biosphere and the economy are quite complex, but it is the nature of emergent systems to become more complex over time. The really incredible bit though is to realize how they are different: the rate of mutation and memetic transfer within the economy is accelerating, while those are mostly fixed values in the biosphere.
It’s still very useful to compare these phenomena as well, as one can inform the other even today. The fall of Rome was much like an economic extinction event, with a loss of diversity and overall loss of fitness and efficiency. It took a long time to recover from that, just as it would take a long time to recover biologically from another asteroid strike or super-volcano. Likewise you can see the freezing of economic evolution in China after the 14th century when memetic mutation and transfer were effectively outlawed. Communism is just as efficient as a human body would be if it refused to breath or digest food without first receiving a conscious order to do so from the frontal cortex.
Good and reasoned argument against turning the private sector over to the government to run. Not that it will make much difference, I’m afraid: based on the last few elections it appears the public is in the grip of some hysteria that creating or allowing Big Brother to be created would be good for them. That there’s little if any evidence of this from past experience doesn’t seem to matter: perhaps they really do think the world ends in 2012 and they don’t care any more.
I am someone who is both a free marketer and religious. The idea that life evolved completely according to evolutionary processes without “guidance from above” is inconsistent with my understanding of deity.
The comparison between divine involvement in creation and planned economies isn’t really fair. If central economic planners truly were omniscient and omnipotent then they probably could run an economy better than a free market. Men do not have the same abilities and knowledge as God, at least according to my Christain belief system.
Brock is wrong when he says that both economics and evolution are “emergent order from chaos”. I’m not foolish enough to take on economics, but as far as evolution goes, once you have a replicator, Darwinian-style evolution is inevitable – but that is not “emergent”, at least not in the sense meant by Santa Fe Institute followers.
You’re wrong Rand, we spend $13 trillion a year in the US economy. That’s 100% of GDP. If we didn’t spend that, there would be no GDP. The multiplier for the whole economy is 1.
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My favorite part of the “good jobs” speech is that they’re encouraging kids to become engineers by making engineering jobs. Yes, but they are also encouraging them more to become government engineers and deterring them from becoming private sector engineers.
“once you have a replicator, Darwinian-style evolution is inevitable”
A replicator is not sufficient for Darwinian-style evolution. A perfect replicator would not produce any evolution–just lots of identical copies. A replicator which was not perfect, but where any error in the replication produced a reduction in the overall performance of the replicator (within the niche in which the replicator was operating) would give us the opposite of evolution. Only a replicator in which errors in replication have the chance of producing improvements in the replicator have the potential for evolution. Assuming finite resources, you’d also need a way to eliminate the less successful versions of the replicator. For evolution the mechanism proposed for errors in replication which might produce an improvement in the replicator is mutation, and the mechanism for eliminating the less successful versions of the replicator is natural selection.
Okay, this post is WAY after the fact, but I’m going to put it in anyway.
“The Economy Is Not A Machine”
“…”
“…many free marketeers refuse to believe in biological evolution. They understand that there is a natural emergent order in the marketplace, but can’t believe that life could evolve unguided from above.”
A counter comment is:
“The cell looks like a complex machine”
…many machine designers and engineers refuse to believe that life was intelligently designed. They understand that cells and animals have many small and large parts that look and behave as if they were designed, but can’t believe that life could have been designed.
The free market works from lots complex emergent behavior. Car engines work from careful design and engineering. Emergent behavior does not immediately win as the obvious choice for life unless you discount intelligent design a priori.