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