You can access Part I of this review here:
http://political.epinions.com/book-review-3689-3581C57F-39B3EA9F-prod5
and Part II of this review here:
http://political.epinions.com/book-review-6CBC-1ACD2AEA-39CADC71-prod6
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The concept of a “self-directing” economy is hard for many logical people to accept. When Adam Smith first suggested that markets seemed directed as if by an “invisible hand,” the idea seemed to many as mystical and, therefore, unscientific. 300 years later, the science of chaos seems to be vindicating Smith’s hunch, but self-organizing systems are still a fairly difficult concept to comprehend.
Self-organizing systems aren’t mystical, however. They’re just non-linear, built on the math of iterative feedback loops (like z <-/-> z[squared] + 1, where the product of the equation is fed back into the equation) rather than simple linear equations (1 + 2 = 3). Just as an ecosystem operates on feedback loops (say, a fox population being influenced by a rabbit population being influenced by plant availability being influenced by bacteria levels, etc.), an economy operates on a web of complex feedback loops, as well. “Feedback-loop formulas are fundamentally different from the ‘linear’ equations that generate the smooth curves of Newtonian physics and equilibrium economics,” Rothschild writes. “Most natural phenomena are nonlinear. Only a tiny portion of nature’s processes meet the rigid criteria of linear math.” [p.258]
Rothschild’s emphasis on economies being natural phenomena doesn’t, however, rely on our somewhat flawed understanding of what constitutes “nature.” For example, he writes that “the notion of stable populations in a ‘balance of nature’ is a myth. And if the ecosystem is thought of as a living organism, the population swings of a species may be seen as an organizing signal for the ecosystem.” [p.263] When nature is balanced, it’s not because of an inherent equilibrium; rather, nature is periodically unbalanced, wobbling, tipping, and righting itself… a process known as self-organization.
Rothschild doesn’t spend much time explaining the mechanisms of self-organizing systems; he takes for granted that his readers already understand those mechanisms, labeling them as simply “chaos.” But he does give a few non-economic examples of self-organizing systems, including the human heart:
“The discovery of chaos in the healthy heart is turning cardiology on its head. It has long been believed that a healthy heart is a perfectly regular metronome, returning to its normal, periodic pulse soon after being disturbed by some external stress. An irregular pulse was thought to be a symptom of a diseased heart, one unable to maintain a steady pace. But sophisticated computer analysis shows that it’s just the opposite. A diseased heart beats with extreme regularity in the hours prior to a heart attack. It is the healthy heart that beats chaotically.
“In light of this new knowledge, the emerging view is that chaos is healthy because it keeps the heart flexible, ready to respond to changing physical demands. When a chaotic system is perturbed by an external shock, it eventually wobbles back to its starting point. But when a linear system is bumped, it tends to remain slightly off kilter.” [p.262]
Markets fluctuate unpredictably (chaotically), defying human management. Self-regulation is directed by the simple fact that individuals directly bear the costs of their bad judgment which, according to Rothschild, is the only mitigating factor against human greed. Market chaos, then, is not a term meant to denigrate market functions, but to validate them – not as a “more correct” ideology, but as naturally occurring phenomena. “Only decentralized, self-organizing evolutionary systems manage to make the most of scarce resources… Today, for example, markets could be created to relieve the threat of global environmental devastation, a monstrously complex problem that has been made far worse by several decades of ‘command-and-control’ futility… most environmental activists remain blind to the fact that the chaotic, self-organizing system known as capitalism is the only tool we have to rescue the chaotic, self-organizing system called nature.”[p.272, 282]
Unfortunately, most environmentalists base their economic beliefs on Marxist thought. “In intellectual circles, socialism is still synonymous with social consciousness… To be antiwar, one must be against capitalism. To be proenvironment, one must be against capitalism. To care about the poor, one must be against capitalism. On all vital political questions, the morally correct position demands strict allegiance to anticapitalism.” [p.340]
Of course, Marx had no concrete reason to trust market forces: “Marx could not have described profit as a flow of surplus economic energy whose reinvestment creates new information. He could not have explained profit as the reward for organizational learning. He could not have imagined profit as a positive-feedback signal transmitted to a firm through its network of ecological relationships. Biology had yet to construct this vocabulary of ideas.” [p.324]
What is in the current vocabulary of present-day Marxist environmentalists, however, is the term “holism,” simply defined as the whole being more than the sum of its parts. It’s ironic that environmentalists miss the holistic nature of a self-organizing, capitalistic economy, though Marx, himself, had a valid excuse: “Marx never imagined the existence of a ‘positive-sum process, where the whole is worth more than the sum of its parts – a phenomenon where value is created by the cooperation of diverse economic specialists. The biological concept of mutualism – also called 'symbiosis' – was unknown in Marx’s day.” It’s known today, but largely ignored.
Instead, as Rothschild writes, environmentalists dismiss self-organizing principles and tend to look to human/government management for the answers. “They believe sincerely that only government rules can compel the changes in economic behavior needed to rescue the ecosystem before it collapses. But since ecosystems and free markets are so profoundly alike, a truly ecological view of the pollution problem leads to precisely the opposite conclusion.” [p.273]
So why would Americans be interested in reading this book? Certainly if capitalism has a home, it’s in America, right? Not in Rothschild’s view. “Indeed, in the midst of the greatest spurt in information evolution since the invention of the printing press – when investment in technology and education are paying extraordinary returns – America has been pathologically anti-investment and antieducation… Reversing America’s economic decline demands a reversal of these basic policies. This is by no means impossible, but to change course in a democracy, there must be widespread agreement as to the nature of the problem. And, tragically, a political consensus strongly supportive of a revival for American capitalism is most unlikely. Far too many of America’s most influential figures – in government, the media, and academia – still believe Marx’s core message that profit comes only from coercive exploitation.” [p.340]
Why do the powerful in America still uphold Marx’s hatred for profit? Because they still don’t understand the function of profit in a self-organizing system such as an economy; it’s basic ignorance -- the foundation of most problems plaguing humankind. “[U]nless we understand why capitalism works, we will never be able to make the most of it. We will continue to pursue public policies that fly in the face of immutable economic processes.” [p.334]
Obviously, I’m quite impressed with the information presented in Bionomics, but I would criticize the fact that Rothschild fails to resolve a contradiction that seems to me rather central. On page 48, in his chapter, The Mythical Machine, Rothschild notes that one basic error in Marxist thought is the emphasis on “classes” or groups of people, while Darwin’s theory bases competitive sorting among “distinct individuals.” Yet on page 103, he writes, “Like death in the ecosystem, bankruptcy is an essential aspect of the economy, but while bankrupt organizations die, unemployed workers do not. In the economy, natural selection acts upon the organization, not the individual.” There does seem to be an obvious resolution: that an organization is comprised of unique individual workers while a "class" denotes equality on an economic strata, but I'd rather have Rothschild's clarification on this point rather than my own speculation.
This contradiction aside, I’m still intrigued by the argument Rothschild has painstakingly laid out. Another favorite author of mine, Stuart Kauffman of the Santa Fe Institute, wrote in At Home in the Universe: “[O]nce it becomes obvious that the economic web we live in largely governs its own directions of transformations, one begins to think it would be very important indeed to understand these patterns in the real economic world out there.” I think it’s our responsibility to our community to understand the real economic world out there, and such chaotic, self-organizing patterns are exactly those Bionomics is attempting to help us understand.
Recommended:
