Archive for the ‘Economy Formation’ Category

Humanity’s Most Complex Creation

January 31, 2008

Take a look around your house. Take a look at what you are wearing. Take a look out your window.  No matter where you are, from the biggest industrialized city to the smallest rural village, you are surrounded by economic activity and its results.  Twenty-four hours a day, seven days a week, the planet is abuzz with humans designing, organizing, manufacturing, servicing, transporting, communicating, buying, and selling.

The complexity of all this activity is mind-boggling.  Imagine a small rural town, the kind of quiet, simple place you might go to escape the hurly-burly of modern life.  Now imagine that the townspeople have made you their benevolent dictator, but in exchange for your awesome powers, you are responsible for making sure the town is fed, clothed, and sheltered each day.  No one will do anything without your say-so, and therefore each morning you have to create a to-do list for organizing all the town’s economic activities.  You have to write down all the jobs that must get done, all the things that need to get coordinated, and the timing and sequence of everything.  No detail is too small, whether it is making sure that Mrs. Wetherspoon’s flower shop gets her delivery of roses or that Mr. Nultey’s insurance claim for his lumbago is processed.  Even for a small town, it would be an impossibly long  and complex list.

Now think of what a similar to-do list might look like for managing the global economy as a whole.  Think of the trillions of intricately coordinated decisions that must be made every minute of every day around the world to keep the global economy humming.  Yet, there is no one in charge of this to-do list.  There is no benevolent dictator making sure that fish gets from a fisherman in Mozambique to a restaurant in Korea to provide the lunch for a computer worker who makes parts for a PC that a fashion designer in Milan uses to design a suit for an interest-rate futures trader in Chicago.  Yet, extraordinarily, these sorts of things happen every day in a bottom-up, self-organized way.

It is clear that the global economy is orders of magnitude more complex than any other physical or social structure ever built by humankind.

The Origin of Wealth by Eric D. Beinhocker

Questions of origins play prominent roles in most sciences. Where do economies come from?

September 7, 2007

Questions of origins play prominent roles in most sciences. It would be difficult to imagine modern cosmology without the Big Bang, or biology without evolution.

“Where do economies come from?”

Traditional economic courses begin with “assume an economy.”

The process of economy formation presents us with a first-class scientific puzzle.

Joshua Epstein and Robert Axtell, researchers at the Brookings Institute, decided to conduct an experiment to see if they could grow an economy from scratch. Like biologists trying to cultivate life in vitro in a petri dish, Epstein and Axtell wanted to see if they could spark economic life in silico, in the simulated world of a computer.

They wanted to go back to the very beginning, to a state of nature, and have a model that included nothing more than people with a few basic abilities, and an environment with some natural resources. They wanted to find out the minimum conditions required to set off a chain reaction of economic activity. What would it take to get the system to start climbing the ladder of increasing economic order?

[My Comment] To make a long story short, Epstein and Axtell created a model they called Sugarscape, and the model was successful in spawning economic activity. The thing of interest to me, however, is the notion described in the preceding paragraph – get back to fundamentals, rethinking how we got to where we are now (this applies not just to economies, but to everything), and considering whether we have arrived at a desirable place.

The Origin of Wealth by Eric D. Beinhocker