Growth opportunities for subcritical and supracritical economies may be very different. Supracritical economies endlessly afford new economic niches that invite invention, local and foreign investment and the potential for great wealth creation. As old technologies die, capital can migrate to new sectors of the supracritical economy to drive further wealth creation. Subcritical economies appear not to have these properties. For instance, in Alberta, oil wealth currently yields a $7 billion (Canadian) surplus annually. But it seems reasonable that in several decades, alternative energy resources will be more than competitive and preferred by ecologically conscious consumers. Demand for Alberta oil may then decrease. As it does, where locally will capital migrating out of the dying oil industry go? In a subcritical economy, no major new investment opportunities may exist.
The speculative possibility that subcritical and supracritical economies have very different growth properties seems worthy of study. The persistent diversity of wealth in nations across the globe is a puzzle to many economists. If a distinction between subcritical and supracritical growth patterns has merit, what are the implications for attracting local and foreign investment into poverty-stricken subcritical economies around the world? If 45 percent of the world's population lives on a few hundred dollars a year, it seems worth exploring the implications of economic webs for economic growth. We may discover alternative ways of abetting economic growth.
Gales of Creative Destruction
The economist Joseph Schumpeter is famous for having introduced the idea of "gales of creative destruction." When the car replaced the horse, many old goods and services (such as horse-drawn buggies, saddleries and smithies) went virtually extinct, while whole new industries and communities grew around oil, gas, paved road, motels and suburbia. With our algorithmic model we are able to quantify Schumpeter's gales:
Let us return to the network of productive pairs we were considering earlier. Essentially all goods that are technologically possible are producing each other in self-sustaining patterns. There is no intrinsic reason why this pattern should ever break down. However, our model does not yet contain utility, which we may model as an external selection process. If then, as in human societies, some products go out of fashion because preferences shift (say, from horses to cars), then occasionally some goods will be cancelled in the fully self-sustaining network. We call such exogenously triggered extinctions "primary defects." With each such defect, about twice that many productive pairs with which this good was involved will also vanish on average. As long as a good gets produced by at least one productive pair it remains in the game. When a good loses all its productive pairs it too will vanish. This disappearance we call a "secondary defect."
It is intuitively clear that when the first primary defects are introduced into the system, the effect on secondary defects will be marginal. Most of the products born of defective productive pairs can still be created by alternative productive pairs. But at some point many goods can only be produced by a single productive pair, and all of a sudden a few more defects have devastating consequences. The whole system ceases to be self-sustaining and breaks down in a cascade of secondary defects–a gale of destruction.
Our idealized grammar table model yields Schumpeterian gales of creative destruction whose size follows a power-law distribution. Surrogate data, in the form of firm failures [over time?] in many countries, also follow a power law that is close to our predictions.
The basic conclusion is that catalytic economic systems have three dynamical regimes. In the sub- and supercritical regimes, the system is dominated by destruction or creation; although the system fluctuates, it essentially remains either in one or the other. However, when the system is prepared critically, we observe a different behavior wherein Schumpeterian gales of creation and destruction occasionally throw the system from one phase into the other.
See what we're tweeting about
46 Comments
Add CommentInteresting article
Reply | Report Abuse | Link to thisThis 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.
Reply | Report Abuse | Link to thisIf 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.
Reply | Report Abuse | Link to thisThis is an interesting perspective, but it sounds a little too abstract to be predictive.
Reply | Report Abuse | Link to thisI 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.
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.
Reply | Report Abuse | Link to thisI 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.
Reply | Report Abuse | Link to thisHowever, 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.
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Edited by paolomagrassi at 05/10/2008 1:09 AM
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Edited by paolomagrassi at 05/10/2008 1:10 AM
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.
Reply | Report Abuse | Link to thisAnd what here is original? These ideas have been circulating in the OR+Physics community for decades.
Reply | Report Abuse | Link to thisPlus
Reply | Report Abuse | Link to thisAnything 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.
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Edited by John_Toradze at 05/11/2008 11:12 AM
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Edited by John_Toradze at 05/11/2008 11:13 AM
In terms of visualization of the linkages between complimenary and substitute products. I started to visualize a graph very similar to this:
Reply | Report Abuse | Link to thishttp://thomas-fletcher.com/friendwheel/bigwheel.gif
Perhaps from an obscure source, but I found the visualization tangible.
Thank you for an interesting article.
Duncan.
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.
Reply | Report Abuse | Link to thisThe 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.
Reply | Report Abuse | Link to thisThis 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)
Reply | Report Abuse | Link to thisThat 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?
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.
Reply | Report Abuse | Link to thisIf 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.
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
Reply | Report Abuse | Link to thisIt 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.
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).
Reply | Report Abuse | Link to this--
Edited by Peter Lewin at 05/18/2008 9:19 AM
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Edited by Peter Lewin at 05/18/2008 9:19 AM
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.
Reply | Report Abuse | Link to thisCheck out all 18 or so comments on this Evolution and analogy to Wealth.
Reply | Report Abuse | Link to thisDo 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.
Talk about junk science.
Peace.
So unless it in numbers or math its not science? Hmmm.
Reply | Report Abuse | Link to thisSorry Dr. Lewin if I interfered with your explaination.
Reply | Report Abuse | Link to this--
Edited by SCIENCE SAVES EARTH at 05/19/2008 6:59 PM
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.
Reply | Report Abuse | Link to thisB.R.,
Fred.
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
Reply | Report Abuse | Link to thisBut 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
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.
Reply | Report Abuse | Link to thisSilicon 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.
Reply | Report Abuse | Link to thisThe 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.
Reply | Report Abuse | Link to this--
Edited by zeus1970 at 05/27/2008 7:24 PM
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Edited by zeus1970 at 05/27/2008 7:33 PM
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.
Reply | Report Abuse | Link to thisThe 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.
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....
Reply | Report Abuse | Link to thisAlso, 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....
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.
Reply | Report Abuse | Link to thisIt 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....
Reply | Report Abuse | Link to thisSee: http://www.eda.gov/Research/ClusterBased.xml
for a summary on industry clusters
regards, Marcelo1229
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.
Reply | Report Abuse | Link to this"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!
Reply | Report Abuse | Link to this> "Are firms located near the center of the web"
Reply | Report Abuse | Link to this> 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
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.
Reply | Report Abuse | Link to thisFor 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
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Edited by gs_chandy at 06/07/2008 5:40 AM
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Edited by gs_chandy at 06/07/2008 5:44 AM
1. "One such approach is a "grammar model" that represents goods and services with binary symbol strings, such as (000). "
Reply | Report Abuse | Link to thisThis 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.
Kauffman et al: comes up with plausible scenarios in explaining innovation and growth though lives out one important fact.
Reply | Report Abuse | Link to thisCountries 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
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.
Reply | Report Abuse | Link to thishttp://postparadox.blogspot.com/
paradox1@hickorytech.net
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?
Reply | Report Abuse | Link to thisThinking 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.
Reply | Report Abuse | Link to thisBut 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.
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Edited by Assegai at 06/13/2008 10:49 AM
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Edited by Assegai at 06/13/2008 11:05 AM
"Economics needs to be inspired by all science not just physics, biologically seems to be closer to reality because it considers waste"
Reply | Report Abuse | Link to thisWelcome 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.
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.
Reply | Report Abuse | Link to thishttp://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.
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.
Reply | Report Abuse | Link to thisInteresting article...
Reply | Report Abuse | Link to thisJake
http://www.becomingyourownbank.com
Can I get some more information about it?
Reply | Report Abuse | Link to this=====================
<A href="http://mls.fastrealestate.net/b/mls-listings">mls listings</a>
A needed innovation:
Reply | Report Abuse | Link to thisCapital 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.
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
Reply | Report Abuse | Link to thishttp://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. "
Thinking both larger and smaller may help this argument advance.
Reply | Report Abuse | Link to thisLarger:
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.