Bionomics 101
by Michael Rothschild
This article appeared in Upside (May 1992).
Bionomics is a fundamentally new way of thinking about the
economy.
Several questions about the basic tenets of bionomics keep
coming up,
so I'll try to provide some succinct answers.
How does Bionomics differ from conventional
economics?
To begin with, all traditional schools of economics are
based on the
concepts of classical physics, while bionomics is based on
the
principles of evolutionary biology. Isaac Newton described
the universe
as a perfectly predictable clockwork mechanism. And orthodox
economics describes the "economy as a machine." Everyday, we
hear
about "jump-starting" or "fine-tuning" the "economic
engine." We're told
that the "economy is losing steam" or that the government
needs to
repair a failed "market mechanism." Like Charlie Chaplin in
Modern
Times, deep down we imagine ourselves as cogs in a vast,
invisible
economic machine.
Bionomics rejects "economy as machine" thinking?
Absolutely. Instead, Bionomics says that an economy is like
an
"evolving ecosystem." A modern market economy is like a
tropical
rainforest, populated by vast numbers of highly specialized
organizations instead of highly specialized organisms.
They're all linked
together in an incredibly complex web of competitive and
cooperative
relationships. Each company works to survive in its market
niche just as
each individual organism works to survive in its ecologic
niche.
How does the economy evolve?
All living things evolve. Over time, they become more
complex,
specialized and efficient. In nature, this happens when
genetic code, the
information recorded in the DNA molecule, undergoes mutation
and
natural selection. Biological evolution creates new species.
Similarly, in
our economic ecosystem, technological information recorded
in books,
databases, technical manuals, source code, and blueprints is
altered by
innovation and market competition. Technologic evolution
creates new
industries.
Are you saying that the economy runs itself?
For the most part, yes. Remember, even though the tropical
rainforest
is the most complex thing on the planet, nobody designed it
and
nobody runs it. Truly complex phenomena cannot be planned,
they
emerge spontaneously. They self-organize. Bionomics argues
that the
market economy is just such a process. No one planned the
market
economy and nobody's in charge of it.
Bionomics holds that capitalism is not an ism. It is not a
belief system,
like socialism. Instead, the market economy, like a tropical
rainforest, is
the product of a naturally occurring, spontaneous
evolutionary process.
How do Bionomics and conventional economics differ
on the process of technological change?
I know this is hard for non-economists to believe, but
orthodox
economics essentially ignores technological change. The
first rule of
economic modelling is "Assume technology holds constant."
Once you
make that assumption, you can make predictions; like a 1%
rise in
GNP will increase car sales by 1 million units and that
steel production
will rise by Y tons because the average car uses 1000 pounds
of steel.
It's all neat and tidy input/output tables.
But once you allow technological change into the model,
you've got
unpredicatble complexity. For example, even as GNP rises,
changes in
travel patterns like telecomuting and air travel whittle
away at
automobile demand. Car makers keep substituting more and
more
aluminum and plastic for steel. Across the economy, new
technologies
keep changing the relative value of alternatives. In
reality, all the
input/output ratios are fluid and dynamic. Precise
predictions become
impossible. But rather than admit that, orthodox economists
choose to
ignore technological change. Bionomics, by contrast, pays
primary
attention to technological evolution.
Does Bionomics reach different economic policy
conclusions than orthodox economics?
Yes, of course, and there is a consistent pattern to these
differences. If
you believe that the "economy is a predictable machine,"
then you
logically assume that the government ought plan, control,
manipulate,
and repair that machine. There is a built-in bias toward
intervention. If,
on the other hand, you believe the economy is a like a
rainforest, you'd
be very cautious about intervening. You'd be "ecologically
sensitive,"
careful not to damage the bionomic ecosystem. You wouldn't
send the
Army Corps of Engineers in to "fix" the Amazon rainforest,
and you
wouldn't use industrial policy to "fix" our high-tech
economy.
Does that mean no role for government?
No, that's impossible. But instead of distorting and abusing
the
economy by constantly tinkering with subsidies, taxes,
regulations, our
government ought create a stable policy climate that
cultivates
spontaneous technical evolution and economic growth.
The tragedy of machine thinking is that it leads to a
"command and
control" mentality. Bionomics thinking leads to a policy
approach which
is patient and nurturing.
What specific economic policies would Bionomics
challenge?
For example, the machine mentality, says we should use
top-down
regulation to force a clean up of the environment. And today
we use
state planning and a vast bureaucracy to get results.
Bionomics says we
should use markets instead. Organizations, like organisms,
respond to
feedback signals in their environments. In the economic
environment
those signals are called prices. Because the law says air
and water are
free, with a price set at $0, organizations overuse those
resources.
They resist regulations that close off access to those free
resources.
But if the law said you had to own a permit to emit a ton of
carbon
dioxide, dumping CO2 would no longer be free, and companies
would
quickly find a new techniques to cut CO2 output and avoid
the cost of
buying CO2 permits. Pollution markets would harness the
creative
power of high-tech capitalism.
What does Bionomics say about U.S. competitiveness?
First, we have to realize that we already have an Industrial
policy in the
U.S. Unfortunately, it's an Anti-Industrial policy. Instead
of encouraging
earnings, savings, and investment, we tax them very heavily.
At the
same time, the Federal government hardly taxes consumption.
At the corporate level, most American executives think of
their
companies as profit-making engines. They work hard to get
these
machines to run just right, but the world around them keeps
changing,
messing up their plans. When I teach bionomic methods to
corporations, I stress that a company is a living, learning
organism.
Everyone in a company must work continually improve its
operating
methods. Furthermore, to survive over time, a company must
hold as
much of the territory, or market share, in its niche as
possible. This is
the way Japanese executives think. Taking market share or
capturing
territory in a competitive landscape comes first. Profits
will follow.
If we're going to turn around the American economy, it's
going to take
something much more profound than anything we've previously
considered. At both the public policy and corporate levels,
that process
of reform will have to start with a fundamental rethinking
of our most
basic ideas about what a market economy is and how it works.
Copyright 1992 The Bionomics Institute
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