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

Wednesday, August 1, 2012

Punctuated! Economics?

or Models for the Tempo & Mode of Change in the Evolution of Business

"We believe that punctuational change
 dominates the history of life..."

Niles Eldredge & Stephen Jay Gould
Evolutionary & Revolutionary Disruptions:
How change usually occurs

The scientific paradigm shifts discussed  in
The Structure of Scientific Revolutions, by Thomas Kuhn, were based on correlations with shifts in worldview within the society and cultures. These disruptive changes weakened old views, opening the ground for new scientific paradigms to emerge and be accepted. It is suggested that only then can these new theories generate a sustained flurry of new research for years to come. 

Perhaps Nikola Tesla was right when he said “The practical success of an idea, irrespective of its inherent merit, is dependent on the attitude of the contemporaries. If timely it is quickly adopted; if not, it is apt to fare like a sprout lured out of the ground by warm sunshine, only to be injured and retarded in its growth by the succeeding frost."

And perhaps Charles Darwin's sense of this contributed to his not publishing the Origin of Species until many years later. His comments on Vox populii seem to imply it as well (What Theories Need). 

Kuhn's paradigmatic shifts punctuate the history of scientific theories, although sometimes they also occur in small clusters. Kuhn's insights into these shifts happen can readily be applied to fields beyond the domain of science.

These shifts or changes seems to reflect a similar pattern in a theory of evolution explaining how speciation takes place. No, it is not strictly Darwinian. Darwin proposed a gradual change over time, something he seems to have embraced from Charles Lyell's geological processes. Although Thomas Huxley had warned him about the difficulties with it. Darwin, as others did, struggled with the lack of fossil evidence to support gradualism.

Years later what Niles Eldredge and Stephen Jay Gould proposed in a 1972 paper, were periods of stasis punctuated by rather drastic and rapid changes in species. It was an explanation for the patterns seen in the fossil record. The occurrence of speciation that is the grand parade of natural history is not strictly gradual and is aptly described by the musical term it resembles; a staccato. This theory came to be called Punctuated-Equilibria. Often called by the singular, equilibrium.

Business people often like to use nature as justifying metaphors such as, it's the law of nature, dog eat dog, and it's a jungle out there. All this seems to be based on rather old fashioned ideas of nature and outdated, misunderstood science. Ok, if your going to use nature as an analogy for business then at least do it with more accurate and updated science. Don't just imagine the way things are. Learn, and see it for what it really is.
Systems With Varying Levels Of Complexity

Ros Wilson's Punctuation Pyramid

Punctuation or Disruptions can occur at each level

In reality, ecosystems are not so 2 dimensional.

In fact, these systems can get very complicated.

Yet, there are ways to understand & manage them.

We owe our existence to punctuation or disruptions.
That is what made it possible for our kind to thrive.

Humans were not destined to evolve. We came about because of chance mutations allowing bipedalism. Walking upright was better adapted to the rapidly changing global environment...
from more woodland to more savannah.
But evidence shows, we had some luck on our side.

The Lucky Ape
Punctuated Equilibria & the BP Oil Spill

While this video may illustrate how speciation would occur with this theory, (that is, during disruptions to the equilibrium of the ecosystem) the morphologically different shrimp are not yet a different species if they are still successfully breeding with the eyed individuals.This case still is a good "micro" scale example. If those caustic conditions were to persist, the eyeless shrimp could become the only kind of shrimp in the area. In the new conditions, eyeless shrimp would totally replace the previous population (with eyes).Let's hope this is only temporary.

While refinements (sustaining innovations) in species occur during stasis or times of relative equilibrium, the really drastic transitions (disruptive innovations) come from major punctuations.

Note  each period marks a drastic change in type

Eldredge & Gould Explain Punctuated Equilibria 1991

A model for disruptive periods in economics?

A highly resolved phylogenetic Tree Of Life
Generated using iTOL: Interactive Tree Of Life
using completely sequenced genomes.
Punctuated Equilibria

Disruptions/Punctuation & Sustaining/Equilibria

The book Punctuated-Equilibrium (2007) by Stephen Jay Gould came out 35 years after the 1972 paper and 5 years after Gould's passing.

Here's a quote taken from the book jacket:

"What emerges strikingly from this book is that punctuated equilibrium represents a much broader paradigm about the nature of change -- a world view that may be judged as a distinctive and important movement within recent intellectual history. Indeed we may now be living within a punctuation, and our awareness of what this means may be the enduring legacy of one of America's best-loved scientists."

I see that Punctuated Equilibria in evolutionary history is robustly mirrored in the stable (sustaining innovations) and unstable (disruptive innovations) revolutions we see in economic history. If indeed we are in a disruptive phase and there seems little doubt of that on almost every level including economic, then insights may be gained and practical models designed to better manage these complex ecosystems. Ecology, the science of ecosystems, does just that.

So why should we adapt to an evolutionary economics? Well, because ecosystems are what economies are.The basic premise is things interact together organically, not mechanically. The other constant is; only change is permanent. The best approach to studying ecosystems is a system thinking approach. Evolutionary economics just happens to be such a science.

This kind of scientific approach to economics includes all the levels of interaction. Looking at the big picture, the web of inter-relations as an organic whole. The modeling for ecosystems provides a realistic view of the potential costs and profits. It would be better at predicting an optimum course of action. It suggests not necessarily moving toward the maximization in all cases but optimization of profits over a larger time and geographic scale. So, if it could be more accurate a predictor and also more profitable to us, why shouldn't it be used in economics?

In future posts will flesh out just what I mean.
Niles Eldredge 2012
Be warned. You have to be a bit hardcore to sit through this.
But, if you want a background and personal history of the theory, This talk is a must watch.
© 2012 MU-Peter Shimon

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