# The Evolving Web of Future Wealth

The web of connections among goods and services in an economy may be the long-missing key to understanding how novel innovations and new wealth arise

An Algorithmic Model
There are profound reasons that the structure and growth of the economic web is not part of current economic theory: modern economic theory is deeply mathematical. What mathematical framework would allow us to say that the screw works complementarily with the screwdriver to create value? What algorithmic model can describe unforeseeable Darwinian preadaptations in the economy? There may be none.

The hope of finding a mathematics that could describe and predict how novel goods and services unfold as the economy evolves into its adjacent possible thus seems precluded, at least at present. But even if the growth of the economy is not algorithmic, an algorithmic approach may still be of use in finding statistical features of model economies for comparison to the real one. Crucial here is the enlargement of the current framework: a concept is needed to mathematically tame the "adjacent possible."

One such approach is a "grammar model" that represents goods and services with binary symbol strings, such as (000). Within our model, the number and diversity of the strings can stand for renewable resources, appearing each year. Symbol strings can act on one another to create new symbol strings. For example, a symbol string with a (000) in it can rewrite the (000) in a second string into a (1010). A "grammar table" lists all the pair rules for these transformations. This arrangement can simulate a simple economic production function.

Intuitively, one sees that if the starting (and renewable) number of strings is small, that their diversity is low and that the grammar table has few pair rules, symbol strings will probably not be able to act on one another and few novel symbol strings will be created. We call such behavior subcritical. A subcritical economy cannot generate a growing diversity of goods and services. On the other hand, studies show that as the number of pair rules, resource strings or both increases, the system can abruptly transit into a supercritical domain where a large—perhaps unending—diversity of symbols strings may be generated. We call this explosion of goods and services supracritical.

Networks of Productive Pairs
We have recently idealized the above model and have confirmed analytically and numerically the existence of the subcritical and supercritical phase transition. In this idealization we map the problem of interacting strings into the setting of the autocatalytic networks that describe how one good can act on another to produce some third good. We will call such pairs productive.

We can take a wheel and a rope, for instance, and combine them to form a tackle, or we can use the rope to secure a boat at the pier. So ropes can be used in various productive pairs, as in (rope, wheel) -> tackle. Obviously most pairs we form randomly will not be productive. There is no rule that would allow us to do something useful with a supernova and a fish (except possibly in some psychedelic science fiction novel).

Next, we can ask whether the underlying production network instantiates some good, beginning solely with a fraction of the available possible goods. In a way we mathematically benefit from our profound ignorance of the real economic web's detailed structure because it forces us to model the catalytic network as basically random.

The absence of any particular plan underlying some catalytic economic network allows us to see something fascinating. If a random catalytic economic network contains sufficiently many productive pairs, then below some critical number of initial goods there are insufficiently many productive pairs to sustain the invention of new goods. Above this critical number of initial goods, however, practically all possible goods arise within comparatively few generations of production.

Economic Opportunities
Some real-world economies appear to be subcritical. Joseph E. Stiglitz of Columbia University describes one African nation whose major economy consists only of diamond and cattle exports. One of us (Kauffman) lives in Alberta, Canada, which exports shale oil, animal and forest products, and has an information technology industry correlated with the oil industry. These two economies appear to be subcritical: they do not seem to be creating an ever growing and changing diversity of goods and services complement and substitute for one another. By contrast, the U.S. economy, the European economy, the global economy and perhaps other national and regional economies appear to be supracritical, creating an ever changing spectrum of novel goods and services.

View
1. 1. Angela-SciAm 02:29 PM 5/9/08

Interesting article

2. 2. Ed Keer 04:45 PM 5/9/08

This may be wild speculation, but you might want to look at a theory of grammar called Optimality Theory (OT) which is a theory of multiple constraint satisfaction. OT could give you a model for what pares the products in the economic web.

3. 3. Peggylynn 09:59 PM 5/9/08

If inovation has not been taken into account we are missing an important variable. Every crisis spurs invention because it is a break in the norm. Invention leads to new products and also to reassessment of old products or processes. A crises opens oportunities for individuals to have an impact. Our business and agencies and processes grow ridgid with time and offer few opportunities for creative people to make a difference. When the systems break down or over impact peoples lives in a negitive way such as the price of oil, it pushes people to reach into their minds for solutions not apparent in the real world. They start to make new connections in desperation. If our econimists are not taking that into account they are probably missing the boat most of the time.

4. 4. David Leppik 10:07 PM 5/9/08

This is an interesting perspective, but it sounds a little too abstract to be predictive.

I find it particularly interesting that the model attempts to explain innovation while focusing only on goods. Goods and services tend to be interchangeable, and the modern diversity of goods is itself a mass-production replacement for custom design.

The difference between a subcritical and supracritical economy may have nothing to do with the diversity of goods or industries, but rather the diversity of knowledge and talent, along with the opportunities and incentives to exploit knowledge and talent.

5. 5. Craftsman 12:41 AM 5/10/08

This article is somewhat confusing as it appears to be the work of at least 3 authors, with references to even others. It is certainly worth reading, but such articles are usually not publicized on a wide enough scale, and remain only as interesting tidbits of "work" in professorial circles. I believe this article might have been more digestible by separating it into its several components . Also, it seems to concentrate more upon production of goods, as opposed to services. One Item I thought most useful involved the improbability of innovators projecting too far into the future, due to the continually changing factors in each generations lifetime. Perhaps that is a very positive factor for the future generations of peoples all over the world who will have continuing opportunities to innovate. But, as the world continues to deplete currently useful resources, humans may find it necessary to adapt, in reverse, to more primitive means of subsistence, and thus less wealth. Darn it.

6. 6. paolomagrassi 08:05 AM 5/10/08

I appreciate that complexity theory aficionados like Dr. Kauffman are obsessed by the notion (emerging from the present article, too) that mathematics is too 'algorithmic' and/or too 'deterministic' to tackle 'complex' problems.
However, as the history of science has shown many times, the enchanted realm of mathematics is full of solutions (including fairly complex ones) in search for problems: there may exist a mathematical construct out there that suits the idea of catalytic economics better that binary symbol strings.
The concept is fascinating and my humble suggestion would be for the authors to bounce their ideas off some mathematicians if they want to seriously pursue it.

--
Edited by paolomagrassi at 05/10/2008 1:09 AM

--
Edited by paolomagrassi at 05/10/2008 1:10 AM

7. 7. mlewis777 03:04 PM 5/10/08

I believe you are on to something very important here. I am sharing a link to this article with some friends and colleagues, which I almost never do.

8. 8. fowlbruce 01:22 PM 5/11/08

And what here is original? These ideas have been circulating in the OR+Physics community for decades.

9. 9. John_Toradze 06:11 PM 5/11/08

Plus
Anything to help break the death grip that de facto "Lemming Theory" has on venture capital is good. (By Lemming Theory, I mean the practice of VCs rushing in together based on "defined sectors" rather than looking for new sectors to create.)

Minuses
1. This network of value idea is not old hat, it's ancient hat. What does the author think stock and mutual fund analysts [u]do[/u]? They look for linkages, companies that will be affected. They track the web of value and make money based on time-arbitrage of recognition of linkage.
2. The author derides mathematics/algorithmics then proposes a new algorithmic model in the next breath? What?
3. I don't think much of his model. It's useful only in abstract as far as I can tell. How on earth he is going to make those binaries and the rules relate to reality is beyond me.
4. The problem is rarely mathematics or algorithmics as a discipline. The problem is having the wrong expressions to represent reality. There's a big difference. Mathematics is just a language. Algorithmics are just another kind of language. Having done both, I tend to think mathematics is purer, but there are relatiionships that disappear in the instantaneousness of mathematical expressions.
5. I don't think he is correct in his discussion of probability functions. Statistical estimation constantly intrudes itself into domains in which all outcomes cannot be known. These are, then, estimates. What the author is thinking of is basic probability theory. But it is a simple matter to define a set as having known and unknown members, and sample among the known to estimate the unknown.

Work needs more development to be useful. Also leaves out fundamental matters, such as the social capital. At this point, overall, a big "who cares?" in terms of anything practical. Scholarly development could be suitable to a specialized journal.

--
Edited by John_Toradze at 05/11/2008 11:12 AM

--
Edited by John_Toradze at 05/11/2008 11:13 AM

10. 10. dwilcock 07:44 PM 5/11/08

In terms of visualization of the linkages between complimenary and substitute products. I started to visualize a graph very similar to this:

http://thomas-fletcher.com/friendwheel/bigwheel.gif

Perhaps from an obscure source, but I found the visualization tangible.

Thank you for an interesting article.

Duncan.

11. 11. waltond 07:52 PM 5/11/08

This is an interesting and plausible idea, but the presentation is seriously flawed: surely there must be societies that fall in one or the other of the 2 categories that could be used for evidence (I can think of Canada as one example). The lack of such data weakens the argument considerably. My second problem is with the presentation that is along the lines of a news item that is meant to entertain rather than inform.

12. 12. judykk 12:37 PM 5/12/08

The analysis presented here is very interesting, but I think there are a few other points that might be made. 1) Economies are a measure of how much socities monetize life. For example, one can provide child care, or one can earn money to pay for it. One can form a group to learn to play music, or one can take lessons. The net results may be the same, but in the case of a monetized life, the government and the financial sector get to a larger share of everyone's life and the economy is said to be thriving, as measured by the government and the financial sector. 2) Economies also measure the regard societies place on having stuff. There are certain basic needs for the human body and spirit and these can be met in a variety of ways. Some cultures are ok with simplicity and working with their hands. These cultures have a smaller footprint on the planet and are probably more resilient in times of disaster. Perhaps having a culture that is "subcritical" is something to be strived for. 3) A rapidly expanding economy often has individuals or institutions who are skimming the cream from the rest of society. These include government, the financial sector, and the innovators who are successful.

13. 13. christopher.mims 04:39 PM 5/12/08

This made for an intriguing read, but it's hard to see what this theory predicts that isn't already in the realm of common sense: some economies are under-developed and lack the ability to become self-sustaining economic powerhouses. Others don't have that problem. And occasionally problems can cascade through complex systems with tight linkages, leading to disaster. (cf. the Fed's reasoning for bailing out Bear Stearns)

That said, and having no idea if this analogy is worth anything, this notion of a "supercritical" state reminds me of Wolfram's thinking about Class IV automata -- that is, automata that reach a state of self-sustaining, endless pattern generation. Your rules seem simple enough to be embodied in a cellular automata scheme (and anyway, by definition the Game of Life is a universal computer).

I wonder what your system would look like when expressed as a 2-dimensional automaton of this type, and whether that would yield any new insight.

Also, while I appreciate your selection mechanism, couldn't we add a second one -- that in some cases there simply aren't the resources to support all the new possible combinations of parts that are required to make an economy go supercritical? Isn't, after all, the finite supply of resources what limits the development of economies over time -- i.e., given only so many humans, energy and goods, this is why the Internet wasn't invented until the late 20th century instead of two weeks after the start of the industrial revolution?

14. 14. KendoBoSai 12:26 AM 5/14/08

Thinking about your examples of the computer and hula hoop, I doubt the web would have a center or edge. Nodes would have variable linkages to others. Can the greater potential of the computer over the hula hoop come from the computer's larger number of preadaptations? It reminds me of the larger number of bonds that larger atoms can make.

If one populated a model with many of the known goods and services in an economy, one might be able to automate linkage generation by searching against, say entries in wikipedia. Models could be developed for subcritical and supracritical economies. Then one might be able to use the more complex model to guide investment in the less developed economy by looking at what potential linkages had small tunneling barriers in the less developed economy. In your example of Alberta's diminishing oil economy, one might compare it to that of Texas after it experienced its peak oil and see what that state did. Look at Alberta's information technology market.

15. 15. Assegai 08:12 PM 5/15/08

There is a model for showing how innovation aids growth, the model has been around for three years in a paper entitled Point X and the Economics of Knowledge found here, http://mpra.ub.uni-muenchen.de/3735/1/MPRA_paper_3735.pdf

It is so simple, take before industrial revolution, there was a copper industry and there was a glass industry. Electricity invented led to more uses of copper and more employment. This also aided invention of television, therefore glass not only was making cups and gootles but now was part of tv, a screen more people employed. It is simple and economists do have a model just because one does not know, one should not speak, who should develop a model, any ethnic group any race, we are looking for a particular ethnic group or race.

16. 16. Peter Lewin 04:07 PM 5/18/08

This article is right on target in two ways. 1. It provides a revealing and accurate picture of the dynamics of economic growth and development. 2. it provides a valid criticism of current "mainstream" economic approaches to growth and development. But in both of these the authors should be aware that they have been substantially and importantly preceded. Mainstream "neoclassical" economics is not the only economic framework out there. An intellectual community (network) known as the "Austrian School of Economics" has a rich and profound stock of knowledge that contains essentially the points made in this article. Specifically the work of economists F. A. Hayek, and particularly L. M. Lachmann on the theory of Capital as a structure of complementarities and multiple specificities (rather than as a homogeneous aggregatable stock or quantity) is highly relevant and should be cited.(See http://www.utdallas.edu/~plewin/Lachmann%20Legacy.htm http://mises.org/about/3234. (Ctd. in next post).

--
Edited by Peter Lewin at 05/18/2008 9:19 AM

--
Edited by Peter Lewin at 05/18/2008 9:19 AM

17. 17. Peter Lewin 04:12 PM 5/18/08

Both Hayek and Lachmann benefitted from the work of Joseph Schumpeter whom the authors do mention. Two omissions from the article are 1. The nature and role of knowledge in economic growth - how knowledge is related to the complementary artifacts that make up the capital structure and 2. the role of social capital, particularly, those structures of common law, customs, habits, procedures, etc. without which the web of wealth could not exist (so they are crucially complementary to it) and which facilitate the dynamics of wealth creation. Promise keeping, property rights, etc. are key. This article is wonderfully complementary to this existing, largely heterodox, literature in economics.

18. 18. SCIENCE SAVES EARTH 08:50 PM 5/19/08

Check out all 18 or so comments on this Evolution and analogy to Wealth.

Do you see any numbers or equations? Do you see any theorms or proofs?

To this date and time, all there is only philosophy and little science except a PDF on X point economics that I read in detail.

This is barely a scientific issue. Yet people like it, to rationaize their own grandious images of themselfs.

There is a lot of money in this fashion model beauty science, wherein some of the dumbest people, can parade around their so called intellect, in a self serving and vain method.

Ask them, is future wealth random? Random is a scientific standard.

They will say no. Future weath is a linear projection of their own narcisist egos.

Peace.

19. 19. Peter Lewin 09:52 PM 5/19/08

So unless it in numbers or math its not science? Hmmm.

20. 20. SCIENCE SAVES EARTH 10:15 PM 5/19/08

Sorry Dr. Lewin if I interfered with your explaination.

--
Edited by SCIENCE SAVES EARTH at 05/19/2008 6:59 PM

21. 21. Fred Flament 10:30 AM 5/21/08

Forgive me for being rude, but I do not see nothing new in this paper : it is long recognized that the "standard" models taking the economy as a given are not sufficient. There are even a bunch of economists working on the growth subject. So the field is open for a new paradigm taking that into account, and the self organizing structures might well be a very interesting path to follow. In this paper the authors seem to discover the weaknesses of the economic science and share that with us. Maybe Sciam should integrate economics into its main topics.
B.R.,
Fred.

22. 22. Assegai 01:46 PM 5/21/08

This paper was written in 5 hours especially for Kauffman,Scientific America and for this topic, I thought these things were pretty obvious, So enjoy it Kauffman, http://mpra.ub.uni-muenchen.de/8799/1/MPRA_paper_8799.pdf

But I still maintain that the paper"Point X and the economics of Knowledge" in my previous post gave a clear indication of innovation and growth. Thanks

23. 23. Equalcompany 08:12 AM 5/22/08

Wealth lies in a man's knowledge that he has enough. Likewise, the national wealth or the global wealth would be an attitude rather than a quantity. This is the innovation in man that is essential for any true wealth.

24. 24. Richard Melmon 01:44 PM 5/23/08

Silicon Valley drives an evolving web of future wealth as a matter of course. It's impact is global and local. It's progeny pervasivly affect global economics and culture. It's local wealth creation attract the best and brightest in a virtueous circle of positive reinforcement that Schumpeter would appreciate. Silicon Valley can be seen as a macroevolutionary mutative system that significantly altered the world-wide intensity of innovation. It works because all of the input factors necessary to innovation are here, and fully fungible. However, the critical input, the winning idea on the "next big thing" is never algorithmically supplied. It always comes out of an intuitive spark by some individual. There is no system to make such ideas, but here the infrastructure exists to allow the competition of such ideas for emergence to take place under ideal conditions.

25. 25. zeus1970 02:15 AM 5/28/08

The captialist nation we live in will not allow innovation in anyway to improve the lives of americans that they cannot make money off it or does away with the way we do business in a greed based society.

--
Edited by zeus1970 at 05/27/2008 7:24 PM

--
Edited by zeus1970 at 05/27/2008 7:33 PM

26. 26. kosimov 10:07 AM 5/28/08

It is obvious that this is a work in progress. There are a number of notes from the author(s) to himself/themselves, about what words to use, what to put where, and places where they aren't sure what to say. I think it is best used as a starting point for further development. Harsh criticism as though this is the final work which has been thoroughly edited and contains everything the author(s) have to say, is not productive at this point. I will be interested to see the FINAL paper, if/when it is made available, which contains the total of the author(s) theories, opinions, conclusions, etc.

The most obvious thing which is yet to be determined is: what is a real, high quality, working, usable model? What "proof", either mathematical or otherwise, will be offered when the paper is complete, etc.

27. 27. kosimov 10:45 AM 5/28/08

Don't you think you are being a bit harsh? This is not a finished paper, as is obvious from the notes still present in some key locations, which are notes from the author to himself, to find more to put in that location, etc. And, there are comments which state that certain items are not yet known or accepted, etc. So I think this is perhaps a "thinking paper", presenting what is known about an interesting idea and methodology, trying to find answers to the questions still open by trial and error or ?? And, welcoming constructive comments to do so....

Also, I wonder if it is correct to assume that mathematical "proofs" (which are often theories themselves, or which depend on other theories, etc.) are the final word in any treatise dealing with subjects which are at least partially abstract and difficult, if not impossible, to define and thus, evaluate. For example, the author talks about supply and demand in some places. How is "demand" quantified and used in proofs or calculations? To be of use in determining ABSOLUTE mathematical truth or negation, it would need to reduce to numbers, equations, math systems, etc. , which all support and do not contradict one another. Sooner or later, in trying to find the right numbers, some non-concrete concept will show up which cannot be numbered accurately. Can demand be quantified by simply making it equal to total sales? Or would sales have been higher if supplies had been higher, or if geographic availability of supplies was better, and so on. It can become very complex and, in my opinion, there will always be one or more significant factors which cannot be quantified perfectly, hence, assumptions or other abstractions will have to made if a totally mathematical model and proof is required. And those assumptions would, by definition, defeat the math of the mathematical proofs.

It would be like trying to define, mathematically, all the parameters for a deep space flight using only primitive algebra; even though there is probably a massively burdensome and non-convergent algebraic method requiring assumptions, adding inaccuracies by the nature of the intermediate math, etc.,, it would be much wiser to "invent" calculus and beyond, making the calculations much simpler, if you understand calculus. Which is, in essence, what Newton did when he "invented" calculus: he realized the existing tool for solving his problems was not suited to the task, so he created a tool which was crafted to fit the problem, using, of course, principles and processes he could verify and prove before using them.

Staying with that example, what we would need is a new kind of "Math", whether is already exists or needs to be created, which can handle the ambiguous and perhaps even contradictory "proofs" you require. And then, only those who know that math will be able to "believe" or "reject" the proofs; nobody else, who doesn't know the math, will know how to interpret the results. So the problem we now face would still exist; the only difference would be who accepts the proofs and who rejects them (or at least, cannot form an opinion....). My intuitive feel for this question, and this is totally non-scientific, or at least, I don't know the science behind intuition (but I do know how often my intuition has been right in my 40+ years of work in science and engineering), my feel is that there will always be a portion of the whole of the definition and quantification of the problem which will not lend itself to whatever method is used to try to "prove" it. The only proof will be a trial of a new method to see if works to a level which most can accept. Then, we do it all again, trying to reduce or even eliminate the exceptions....etc.... you know the drill..

Sorry for the long and wordy text; I get that way when it is too late to be up and writing this stuff, and my brain doesn't have sense enough to stop and go to sleep... or perhaps it did go to sleep, depending on your opinion of what I write! Hope you get my point, though. There are, and always will be, some aspects of "life" and the systems which are part of life, which are at least "non-linear" to an nth degree, when the best tools we have can only reach to an n minus one or more degree (n-mth degree, where m is zero to n-1). We can do marvelous things if we recognize this and minimize the errors, especially if we know and accept the facts and don't try to force a non-linear system into a linear one (using linear here to represent one which is purely logical and totally defined by math....). We have to have non-linear methods of defining and using the knowledge, which often are not very tasty to the palate of people like me and you, who are used to being able to model everything we work with, with a math model, using the math we know, and then, we can work through the math and determine whether the system is real or not. I have trouble with the "non-linear" stuff also, but, I know it is there, and I try to use it in ways that do not try to force it to be what it isn't: sometimes, the math we know can't handle the problems we create or need to understand. Of course, we can decide to reject everything that won't fit our models, which, (considering the emphasis of this site), isn't very scientific, is it?

I don't know if I am even saying anything worthwhile here..... perhaps this message is a bit like the paper we are critiquing: just a work in process, expressing the initial facts and opinions, hoping to initiate interest in the problem.....but decidedly not complete and well finished....

28. 28. Angela 10:45 PM 5/28/08

At first I was surprised that you seemed to describe a completely new way to express what much of my work in product development is about- finding new uses for existing features as in the tractor example. However, the principles seem well defined already. The basis are the ground rules for analytical work: break it down to its components, see what characteristics they have. Look at all possible combinations. And there you go: the more components the more possible combinations and interactions and so on. But please go on quantifying these relations and describing your results in such delightful clarity.

29. 29. marcelo1229 11:31 PM 5/29/08

It is odd not to find even a casual mention of Porter's economic/industrial clusters and their role in innovation and economic development. The concept has been around for over twenty years.... and is commonly used for development planning....

See: http://www.eda.gov/Research/ClusterBased.xml

for a summary on industry clusters

regards, Marcelo1229

30. 30. FB3636 06:11 PM 5/30/08

I think the first thing needs to be analyzed is number of patents issued each year vs. money made per person per year graphs for all countries.

31. 31. Sanjeev 07:02 AM 6/6/08

"Are firms located near the center of the web" presupposes that there is a web structure with a center. It could be a network with no center!

32. 32. gs_chandy 11:13 AM 6/7/08

> "Are firms located near the center of the web"
> presupposes that there is a web structure with a
> center. It could be a network with no center! -- Sanjeev

Jorje Luis Borges wrote, I believe, rather profoundly about [i][b]"a circle whose center is nowhere and whose circumference is everywhere"[/b][/i] (or something to that effect).

--- GSC

33. 33. gs_chandy 12:39 PM 6/7/08

The article surely raises many questions - though it may not as yet provide answers to any of those questions. I would not on this account consign this approach to the garbage heap as at least one reader seems to have done.

For sure, as the authors suggest in a sidebar to the main article: [b][i]"Understanding evolution in living systems and civilization may call for a new view of science"[/i][/b].

I would, in fact, go [i]very[/i] much further: Our extraordinary [i][b]'successes'[/b][/i] in science and technology - the tools that have given us the unique ability amongst all of living creatures to shape the world as we think we want it to be - it's these very successes that have also contributed significantly to the mess we are creating on planet earth which may well become a desert planet (like Mars? Venus?) within just a few hundred years becuse of these astonishing 'successes' of ours!. The entire progression of human abilities in regard to exploitation of our planet surely demands that we now need to create for ourselves a [i][b]'new view of science',[/b][/i] - and we need to do that most urgently indeed!

Properly understanding evolution in living systems may well help us better understand the systems we create (for it's those systems that give us our imagined [i][b]'control'[/b][/i] over planet earth). And surely the study of economics, [i][b]if effective[/b][/i], should help significantly, for it is, after all the economics of our human ventures that direct how we exploit planet earth.

That said, I believe the authors have not adequately indicated how we may gain adequate control over our 'human systems' that determine how we exploit planet earth's resoures in what they have sketched out as [i][b]"The Evolving Web of Future Wealth"[/b][/i].

What may lead us humans to better understanding of ourselves and our real position on planet earth is simply this: we need to become properly aware of how the things we do from day to day in pursuit of our wants and desires may [i][b]"contribute to"[/b][/i] each other and to the goals we are pursuing, as individuals [i][b]AND[/b][/i] as groups (organizations - commercial and other; communities; nations)[b].[/b]

John N. Warfield has developed powerful modeling tools (and a whole way to look at 'complex systems') that enable us to perceive, with significantly enhanced clarity, how the things we do, the ideas we have, may contribute to each other and to the goals we believe we are pursuing. Information about Warfield's seminal contributions to systems science and systems design is available at http://www.jnwarfield.com and from the "John N. Warfield Collection" maintained at the library of George Mason University (see: http://ead.lib.virginia.edu/vivaead/published/gmu/vifgm00008.tp).

One of the major difficulties with our conventional mode of discussion (pure prose - in which this whole discussion here at SciAm is being conducted, alas) is that prose is [i][b]'relentlessly linear'[/b][/i], while real life and our ideas about real life are complexly inter-relatied, highly multi-linear. By thinking and communicating in pure prose as this forum currently demands, we are constraining our communications into 'linearity' - with the result that we all too often do not understand what the communicator is actually trying to communicate (through his/her multi-linear perceptions of the systems under consideration)!

John Warfield's work enables us to discuss complex issues in what I call [b]'prose + structural graphics' ([i]p+sg[/i]),[/b] which can enable us to capture much more of the complexity of the real-life situations we confront in the communications we make about them (than is possible in pure prose).

I believe Sciam editors might very usefully think in terms of investigating just how [i][b]p+sg[/b][/i] may help enhance such communications on complex issues such as [i][b]The Evolving Web of Future Wealth.[/b][/i]

-- GSC

--
Edited by gs_chandy at 06/07/2008 5:40 AM

--
Edited by gs_chandy at 06/07/2008 5:44 AM

34. 34. Sanjeev 10:45 AM 6/9/08

1. "One such approach is a "grammar model" that represents goods and services with binary symbol strings, such as (000). "
This is great idea and could be generalized to representing relationships in XML to give it richer context.
2. "Networks of Productive Pairs" : "Ontology" uses similar techniques to define relationships between tuples. The relationships can have be of different types including ones that could be described by differential equations.
3. This kind of modeling will allow the "special" Algorithm Model to be mapped to "General" Systems Theory model.
May be this will allow cross border flows, exchange rates, basket of goods traded etc etc to be modeled more effectively.

35. 35. imag94 08:16 PM 6/9/08

Kauffman et al: comes up with plausible scenarios in explaining innovation and growth though lives out one important fact.
Countries fall into supracritical and subcritical states due to the application of 'WELFARE' norm into the equation of analysis.

Welfare is maintained in the economies especialy supracritical economies by introducing "Competition". This lead to more failures of products other than Primary and Secondary failures. These are failures due to obsolence or innovations by a Competitor.

In USA the Automobiles change their models more often due to this fact.

It becomes imperative for Companies to innovate for survival. The enhancement of the StockHolder value stipulate one company to innovate and survive rather than stagnate resulting in cheaper products, advanced technologies.

Product failures are often the norm in US due to this cycle of competition breeding innovation leading to product failures and even sometimes market failure.

I believe in the short run we are going to forfeit the Landlines for Mobile phones and may be later the bulky computers with more portable and even handheld types. So the Market for Landlines is under threat.

Mathew Cherian

36. 36. telepathic 08:54 PM 6/9/08

A completely self-verifying and fully integrated explanation for economics can be attained simply by tracing its development AS A PROCESS from its point of origin. This has little to do with elements such as trade or barter, etc., with which modern thought typically assumes as "fundamental" to economics, but overlooks the simple observation that trade itself presupposes a process already in motion. No previous explanation for the nature of economics has ever started from such a premise, so it has never come to light that the physical economic process is actually a dynamic energy fractal, and like any fractal, it expands into a pattern of seemingly infinite complexity on the basis of only a single reiterative principle. In the case of "economics," this reiterative principle is otherwise known as an energy feedback loop, which first appears in and as the basic relationship of any given consumer to food. (Consumers expend energy in order to obtain more energy... ad infinitum) In other words, "economics" in its present state is merely a misinterpretation perpetuated by sociologists, who have little gift for understanding energy processes. The modern economist is therefore poorly prepared to understand in what way the underlying reality of the economic process remains an unrecognized field of applied physics.

37. 37. kent987 02:47 PM 6/12/08

A major value of this approach is being able to focus on relationships that otherwise would go undetected and therefore misunderstood. It asks us (enables us) to discover what actually is important and liberates us from over-reliance on our predispositions and assumptions regarding what matters. There are many areas of understanding that will benefit from such an approach. What existing tools (software) can help me begin utilizing it to achieve a greater understanding of the sytems underlying markets or constituencies with which I am working every day?

38. 38. Assegai 04:43 PM 6/13/08

Thinking of a biological model I have realized maybe somebody else did that if we take society as living, and that there is economic growth, that growth must be fed, just like a baby, it is fed and it grows, even an adult to sustain themselves we are fed. There is waste, pollution etc just as a biological being. Now what is interesting, these are very rough thoughts, is that for the economy to grow we must feed it, new products are new limbs or cells, these cells need to grow, they take from the earth, hence need of new or a greater amount of materials to sustain the cells functioning properly, could be useful, I need a holiday just a rough sketch taking it biologically waste is recycled, the earth recycles human waste, a way must be found to recycle waste from the living being that is the economy, I don't know, five cents for now.

But as can be seen, economics needs to be inspired by all science not just physics, biologically seems to be closer to reality because it considers waste, a model based strictly on outdated physics does not consider waste. If we kept urine or excrements we would die, if we do not get rid of pollution we will die, though that pollution is a result of our growth and appetite for a healthy economy waste is produced, therefore innovation means growth but in many instances more waste.

The problem with models is they take time, the basic principles, then the mathematical relationships, just thinking about it would be another 12 months of heavy thinking, but it is easier for the common man to understand, its opened my eyes, like babies the economy needs to be fed, innovation is a new cell or an old limb growing bigger, it needs energy, baby gets it from food, the economy from extra resources, don't make the mistake of comparing a mature economy like USA with China, China is a big big baby innovation not really needed just apply old technology, USA is a teen, needs innovation.

--
Edited by Assegai at 06/13/2008 10:49 AM

--
Edited by Assegai at 06/13/2008 11:05 AM

39. 39. Sanjeev 07:57 AM 6/23/08

"Economics needs to be inspired by all science not just physics, biologically seems to be closer to reality because it considers waste"
Welcome to world of "Complexity", "Eigen's Hyper Cycles" and "Gaia Ecology Theories". It will be nice if Kauffman et al introduce these concepts in the article and then move on to their economic theory. This will help readers who are not well versed in these theories to understand the article better.

40. 40. Assegai 04:42 PM 7/21/08

Understand time and you will understand why some societies are ahead of others in terms of this web and why others are behind. Nothing fantastic, Einstein showed us the way.

http://mpra.ub.uni-muenchen.de/9643/

Read it, be a scientist, see how theories in science affect everything, time dilation, developed countries have significant time dilation allowing more products to be created.

41. 41. slimjim25 02:15 PM 9/19/08

You can clearly see this on the Internet. Content-based sites fuel Google, which fuels more content sites AND spins off companies like ReputationDefender to clean up its messes. All of these companies need Visa and MasterCard to process their transactions, which leads to yet more infrastructure around payment processing. The list goes on.

42. 42. creatingwealth 10:49 PM 9/19/08

Interesting article...

Jake
http://www.becomingyourownbank.com

43. 43. Moizjohar 10:56 AM 2/13/09

=====================

<A href="http://mls.fastrealestate.net/b/mls-listings">mls listings</a>

44. 44. martynstrong 05:05 PM 6/19/09

A needed innovation:

Capital markets are unstable. In the past there was no way to make them stable. But today we have computer power that can be used to make them stable.

By using the greater computer power of today we can have a much higher turn over of capital in the capital market. This higher turnover will make the market harder to game or control and the market will no longer have the unstable run ups or declines. Who can change or control the market when say 20% of the capital is trading each day?

So now that we have the compute power to provide for all these transactions that will smooth out the market how do we force people to turn over at a rate of 20% a day? Easy, put a cap gains tax of 0% (zero) on all gains of 7 days or less and put a cap gains tax of 90% of all gains of more than 7 days.

The likes of Yahoo, Micosoft and/or Sun Micro Systems will give us the systems that will provide automated software agents to support turning over one's investments every 7 days (based on the specs you give the agent).

A system like this will make the financial markets work as smoothly as the local fruit market.

45. 45. auerswald 10:14 PM 8/27/09

Readers of this essay may be interested in 1994 working paper by Kauffman and another set of co-authors (Jose Lobo and me) on a very similar theme. That paper is titled "Diversity, Economic Webs, and Growth" and is available at
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1460991
Here's the abstract: "In this paper we build upon work by Jacobs (1961, 1963, 1984) and Glaeser et al. (1993) to derive the following hypothesis: diversity of economic agents is conducive to innovation, and thus to growth. We present a simple model of a small open economy existing in a world where prices are fixed exogenously, capital (in this case knowledge capital specific to the firm) is immobile, rival and excludable. There is no market for the exchange of knowledge capital, so persistent quasi-rents accrue to firms with better than average productivity. We discuss some results pertaining to special cases of the model. We then extend the model to allow for external economies and to examine the relationship between economic diversity and growth. This leads to a tentative conclusion that may reconcile two distinct views of economic growth: the view that diversity of economic activities drives growth, and the view that economic specialization drives growth. We propose that these two phenomena represent distinct episodes in the evolution of economic systems. "

46. 46. Kathryn 11:29 AM 11/2/09

Thinking both larger and smaller may help this argument advance.
Larger:
Instead of one technology, such as the automobile, take together: autos, telephones, and electricity. All created at roughly the same historical moment and independently of one another. The dynamic is reinforcing in a way that reflects larger, much more significant economic change. It restructured both human social networks and their subsequent material expressions. Importantly, it defines increased "resilience" rather than increased "growth". It also syncs with mobility of material goods, process control through information flow, and metabolic change of basic resources.
This brings to mind integrating those systems which are always linked in initial thought experiments, but rarely followed through on. Biology has genes. Mathematics has numbers. Language has words. Each has structure, prime elements, and incidence of occurrence. Do they intersect in any ways? Where? Does that mean anything at all?
As for computerization, the last global financial crash begins to define the limits of human capacity to manage small unit flows at speeds that make them difficult to aggregate in time to anticipate and mitigate higher level impacts.
Smaller:
Most, if not all, biological systems operate as a diverse web system. Pre-Cambrian and Cambrian life forms underwent gales of creative destruction and consistently arose from simple, homogenous life forms to greater diversity structurally and numerically. This in turn created and continues to create greater resiliency, which may be important to more complex life forms (humans and the planet earth) than growth. So, by its most fundamental assumption, "growth", classical economics may be fatally flawed.
Look also at the metabolic (energy) efficiency of highly niched and stable rainforest systems, where it is extremely rare to find forest floor debris, which as it falls from the treetops is grabbed and converted. And the microbial content of forest floors ensure that debris is rapidly metabolized.
The human genome with its wealth of so-called "junk" genes may be an example of your idea of preadaptivity. But our stable system of genes may preclude any rearrangement of one or two, unless done in a complementary fashion and in concert and at the right level, for any beneficial change, such as extended life span, to occur.

You must sign in or register as a ScientificAmerican.com member to submit a comment.
Click one of the buttons below to register using an existing Social Account.

## More from Scientific American

• News | 2 hours ago

### Federal Flood Maps Left New York Unprepared for Sandy, and FEMA Knew It

• News | 4 hours ago

### Smart Wig Could Compete with Google Glass

• News | 4 hours ago | 1

### Will to Persevere Can Be Triggered by Electric Stimulation

• Climatewire | 6 hours ago | 4

### Will Arctic Meltdown Produce More Greenhouse Gases or Less?

• Reuters | 9 hours ago | 4

More »

## Latest from SA Blog Network

• ### Can We Harness Disruption to Improve Our World's Future?

STAFF
@ScientificAmerican | 1 hour ago
• ### British Storm Brings Up History's First Work of Social Media

Plugged In | 2 hours ago
• ### Rolling on Wheels That Aren t Round

Observations | 2 hours ago
• ### The future of nuclear energy: Let a thousand flowers bloom

The Curious Wavefunction | 2 hours ago
• ### UMN agrees to outside review of clinical research practices but what parts and by whom?

Molecules to Medicine | 7 hours ago

## Science Jobs of the Week

The Evolving Web of Future Wealth

X

Give a 1 year subscription as low as \$14.99

X

X

###### Welcome, . Do you have an existing ScientificAmerican.com account?

No, I would like to create a new account with my profile information.

X

Are you sure?

X