"Zen teaches nothing; it merely enables us to wake up and become aware. It does not teach, it points." ~D.T. Suzuki

Wednesday, March 28, 2012

Evolutionary Economics

Evolutionary Economics

Was that Adam Smith's
 Invisible Book of a Moral Market?

"Anyone who believes
in infinite growth on a finite planet
is either mad or an economist."

Yes the economy is about money
but business is all about people and innovation

Wouldn't it be cool to live in a world where innovation like this is the rule and not the exception?

Adam Smith's book The Theory of Moral Sentiment. It's what I found sorely lacking in today's practice of economics. I want my company to change that.

 Here are a couple of 1st paragraphs
 from the 1st two chapters;

Of the PROPRIETY of Action
Consisting of Three Sections

How selfish so ever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it. Of this kind is pity or compassion, the emotion which we feel for the misery of others, when we either see it, or are made to conceive it in a very lively manner. That we often derive sorrow from the sorrow of others, is a matter of fact too obvious to require any instances to prove it; for this sentiment, like all the other original passions of human nature, is by no means confined to the virtuous and humane, though they perhaps may feel it with the most exquisite sensibility. The greatest ruffian, the most hardened violator of the laws of society, is not altogether without it.

CHAP. II Of the Pleasure of mutual Sympathy But whatever may be the cause of sympathy, or however it may be excited, nothing pleases us more than to observe in other men a fellow feeling with all the emotions of our own breast; nor are we ever so much shocked as by the appearance of the contrary. Those who are fond of deducing all our sentiments from certain refinements of self-love, think themselves at no loss to account, according to their own principles, both for this pleasure and this pain. Man, say they, conscious of his own weakness, and of the need which he has for the assistance of others, rejoices whenever he observes that they adopt his own passions, because he is then assured of that assistance; and grieves whenever he observes the contrary, because he is then assured of their opposition, But both the pleasure and the pain are always felt so instantaneously, and often upon such frivolous occasions, that it seems evident that neither of them can be derived from any such self-interested consideration. A man is mortified when, after having endeavoured to divert the company, he looks round and sees that nobody laughs at his jests but himself. On the contrary, the mirth of the company is highly agreeable to him, and he regards this correspondence of their sentiments with his own as the greatest applause.

This is the same Adam Smith. Amazing isn't? Doesn't quite fit the image we have of how business is done today. How did the greatest economic minds ever miss reading or understanding about the constraints to selfishness and the empathic nature of mankind? I have not seen much evidence that has been incorporated into past economics.

A Shameless Plug
This is why I'm starting
MU-Peter Shimon Consulting
Disruptive Digital Darwinism

I will put together what I've learned of human science
and consult based on evolutionary economics
(I can't stop any Zen that might get in there)

I want to disrupt the way we live and do business,
to work at and promote the hell out of
getting us to a good place.
And I want it done with good science.


Jeremy Rifkin - Empathetic Civilization
I have posted this clip before,
 but it bears repeating
(my thanks to GW)

The Empathetic Evolutionary Economy

Now supposedly, Adam Smith wrote the theoretical book on capitalism and economic philosophy as practiced today. But he also wrote another book seldom mentioned, called the Theory of Moral Sentiment. In it he asserts that it is in one's own self-interest and nature to empathize and care for his fellow man. That's the point, "the common good" that selfish free markets are supposed to have as a goal. Has no one read that one, I wonder? How did the economists miss it?

Free markets must play within moral guidelines, even selfishness has enlightened self-limits. Maybe in the short term they may gain, but in the long run it's a losing game. Now here's where Darwin comes in. It's not only survival of the fittest. It's more like the race is won by the swiftest, first out of the gate, or sometimes its just luck of the draw, but it's almost always with something new. It can be a sprint at some points but mostly it's a long distance run. In nature it is also not always a race that one wins by knee-capping his competitor. Competition can be the engine of innovation under certain conditions. Most often in nature species don't evolve and become the dominant type by willfully or strategically wiping out all competition. it may happen, but not always the rule. Bio-diversity is a stabilizing force for all species in an eco-system.  Species can and do co-exist in spite of apparent competition and maintain an equilibrium. However this lack of ruthlessness can apply even in predation. It too has limits. Successful predators don't eat all their prey. A predator who whether by strategy or "selfish" instinct, eats all his prey only ends up left to eat himself to extinction. BTW, anyone ever seen the movie Soylent Green?

I think it is no small coincidence that in the new digital world, many of the old business models and companies that don't adapt to the new social and information realities are called dinosaurs. The dinosaurs are the ultimate poster-child for extinction and like the dinosaurs we can see many have already gone and many are faltering. There is mass extinction awaiting those businesses that don't adapt quickly enough, including the long time dominant giants. Kodak is only one of many.

There are things about what's going on in the world in which I can see parallels with what we see in the natural history of the planet. According to the theory of punctuated-equilibrium by Niles Eldridge and Stephen Jay Gould, events change the ecological landscape and mass extinction of the current players ensues for those not adapted to the new conditions. In their place spring up small upstarts, that were in what previously was a stable ecology, but relatively un-open to the small and or new. An unstable ecology of rapid change occurs, (maybe weather or asteroid) and opens up previously unavailable terrain, greater opportunities for new adaptive radiation come with that. There is competitive release and the survivors quickly gain ground, grow and in time become dominant, depending on how well they do in the new conditions. Bio-diversity will recover, but not the same critters as before. There is an explosion of new species with innovative adaptations to fill the niches. Succession forest are somewhat similar, they need sustained changes to gradually build up an environment that supports big trees. You don't immediately get forests on razed land without a succession of grasses, shrubs, small trees, a variety of r strategist and K . After going through different stages with different types of trees and other plants will there be the ecology that supports big trees.

But really, aren't we familiar with this pattern in economics as well? Business markets, the way people make a living, have gone through boom and bust cycles throughout the history of human economic activity, disruptive ones usually due to technological or other innovations. In science, people in an environment fostering disruptive ideas often lead to those innovations.

© 2012 MU Peter Shimon

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