Econology Part 3: Eleven economics lessons from ecosystems
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This an immediate continuation of a series describing a new way to look at the economy. Because many concepts were introduced in earlier parts, it would be useful to read them first:
Part 1a: It's not the economy, Stupid; it's economics
Part 1b: The depth and breadth of economies
Part 2: The ecology of economies]
Ecological water cycles tend to be more apparent than economic cycles because even in metropolitan areas, we personally experience seasonal changes in weather and precipitation and observe its effects on local wildlife every day. We see the link between rain and plant growth and more plants means more bugs and squirrels. Most people have a far different perspective of the economy. We work to earn money to buy the things we need and want. Repeat. When our earnings are no longer enough to support us, we don’t know who or what, precisely, is to blame. We’re told numbers and statistics like ‘GDP’, ’S&P500’, ‘labor report’ as if they would everything into focus. This is why the water cycle metaphor is so powerful and necessary. The images and patterns of the natural world can help convey a better understanding of enormously influential economic principles.
[For a point by point discussion and comparison of the ecological water cycle and economic cycle, please refer to Part 2 of this series.]
So first a quick recap. Figure 1 is a diagram of the ecological water cycle which is essentially the movement of water through the natural environment. In the process of cycling, water undergoes several transformations from liquid (rain) to biomass to water vapor which turns into clouds in the atmosphere and returns to precipitation again.
As covered earlier and shown in Figure 2, economies share many features with the water cycle.
From this similarity, the ecological water cycle can shed a great deal of light on how economies work and dispel some oft repeated and misleading talking points. Below are some of the lessons that can be learned through such a comparison.
(1) Economies exist to promote the survival and wellbeing of workers.
Plants are not mobile nor do they have the luxury of externally stored water to be tapped at need. In order to grow and survive, they must capture rainwater before it evaporates or drains away. To cope with differences in available water, plants have evolved two strategies. They either conserve the water they manage to secure or they manipulate their environment to increase the flow rate of their local water cycle; more frequent rain means more opportunities to take in water. Desert plants use the first strategy, deciduous trees in temperate climates use both and rainforest vegetation use the latter. The resulting ecological water cycles are the product of biota adapting, manipulating and exploiting the geochemical water cycle to support its own continuance and propagation.
Individual economic activity, in modern parlance, earning income, is personal production. Earned income is spent to purchase the goods necessary to support life. Expanded to the larger economy, all economic activity, the production, exchange and use of economic capital, serves a similar purpose, the continuance and propagation of economies, more precisely, participants of economies.
(2) The circulation of capital drives economies.
The ecological water cycle is the dynamic movement of water in response to biogeochemical forces. Life on land both contributes and makes use of the cycle to support their self-propagation.
Economies circulate capital to the same effect. Workers do not have the capacity to store enough capital to support themselves indefinitely and capital degrades (loses value) over time which means it must be renewed through the cycle of production, exchange and use. Circulation is also how spending becomes income.
Figure 3 shows spending capital returns capital: Pink corporation produces pink; their producers ‘spend’ or exchange their pink wages for green. The the demand by pink workers for green keeps green producers employed. The same is true for Green workers who buy pink with green wages. Pink’s spending becomes Green’s income and Green’s spending becomes Pink’s income. The most real life example of this is at farmers markets where the spending of buyers is the direct income of producers.
(3) The size and productivity of economies are correlated with total capital in circulation and cycle rate.
The total biomass of an ecosystem equals its size and reflects the total water in circulation. Its productivity is determined by the rate water cycles in the system.
The total capital in an economy reflects its size; capital per worker is the marker of wealth. The rapidity of capital turnover is linked to productive capacity.
(4a) Economic expansion (growth) are periods of increased capital flow which lead to increased productivity. Economic contraction (recession) is the opposite, periods of reduced capital circulation which decrease productivity.
Seasonal variations in rainfall affect productivity in a predictable pattern so plants and animals have evolve adaptations to survive the lean periods. However, unusually wet or dry growing seasons cannot be predicted and can immediately affect on growth and reproductive potential of affected organisms. These generally do not persist beyond a single growing season and have minimal impact on the long term productivity and health of ecosystems.
The economic version of drought is recession. Regardless of the cause, the result is less capital gets circulated which reduces production capacity. Recovery from an economic downturn into a period of expansion can often be spurred by the introduction of additional capital into the system.
(4b) Economic revolution is an extended period of expansion/contraction which results in a massive restructuring of production of capital.
Persistent changes in rainfall which lasts for years into decades are climate patterns which profoundly effect the productivity and resilience of ecosystems. Over time, selective pressure would force ecological succession to favor a completely different array of biota, one adapted to the new rainfall conditions. Human created examples of such phenomena include desertification of semi-arid agricultural land leading up to the Dust Bowl and the drainage and development of the Everglades. The current climate change crisis threatens all global biomes.
Economic revolutions come about by either internal foment (home grown technological advances brought about the Industrial Revolution in Europe) or external instruments (post war industrialization of Japan). Advances in productivity initially increases the size and wealth of economies by increasing total capital and capital per worker. Over time, this often percolates and spreads egalitarian ideas through the rest of society. [Side note: In situ de novo ecological revolution is not impossible, just incredibly unlikely. Any environment capable of sustaining life is much more likely to be colonized by existing species than support the emergence of new species; there is no need to reinvent the wheel.]
(5) Primary producers are the foundation of economies.
Ecological primary producers in ecosystems are autotrophs, the majority of whom harness energy from the sun to convert commonly available small inorganic chemicals into the complex building blocks of organic life. Only the primary producers at the foundation of the food web are capable of this simple to complex transformation. All other trophic levels either directly or indirectly use the biomass of primary producers to supply their energy needs or as building blocks to grow themselves. Though fully integrated into their local food web, a number of primary producers are not dependent on higher trophic levels. In other words, many plants do not need animals but all animals need plants.
On the whole, economic primary producers in the agricultural and and extractive sectors are foundational in that all goods are fashioned from the products of these sectors and the demand for all services directly or indirectly stems from the production of said goods. At the organizational level, primary producers are the workers who produce the bulk of the goods and services offered by a particular enterprise. Secondary and tertiary producers may add value but they are fully dependent on the output of primary workers. And similar to ecosystems, while secondary, tertiary and upwards producers may improve the output (increase productivity), they are not essential. As it turns out, primary producers are essential to economies but higher level producers, not as much.
(6a) Economic production is the direct transformation of unfinished input capital into marketable capital.
With the exception of primary producers, biological producers transform input capital (water in vegetation or animal) into more of themselves. Primary producers transform inorganic capital (water) into organic capital (vegetation) which feeds the rest of the food pyramid.
Workers transform provided materials into finished goods and services which support the remainder of the production pyramid.
(6b) Markets enable the indirect transformation of marketable capital (through spending).
The biological processes of transpiration, respiration, evaporation contribute to the water cycle through the transformation of water from an organic form (food) to an inorganic form (water vapor in the atmosphere). This transformation frees individual water molecules to integrate into the water cycle in different locations and different forms.
There are several ways to construe spending by workers:
-Workers are paid a fraction of the capital they make (a shoemaker is paid in shoes). They ’spend’ their wages by exchanging them in the marketplace for goods and services produced by other workers (shoemaker trades shoes for food produced by farmer).
-Convert the capital into currency and workers are paid the money value of a fraction of the capital they make (shoemakers are paid a fraction of the gross value of the shoes they produce). [Either workers sell their products for currency or capitalists sell their products and return some currency to workers.] Workers then spend their wages for goods and services produced by other workers.
In either case, the labor of workers is transformed into the labor of other workers through the exchange of the goods and services they produce.
(7) Central banks are an emergent institution of economies. They do not contribute marketable capital (goods or services) but rather modulate the movement of capital in the system.
Clouds are concentrated airborne condensates of water vapor. Their formation requires some minimum concentration of water vapor - emergent phenomenon. They literally are ecological water carriers.
Central banks are an emergent institution of economies in that an economy must reach a certain size and complexity to need and afford a central bank.
(8) Government is a repository for unexploited capital.
Ecosystems can recover from droughts when local streams, rivers and lakes support the survival of sufficient flora to reseed areas decimated by the lack of moisture. Migrating fauna could then repopulated the affected area as soon as food becomes available. Additionally, natural reservoirs hold/store unused water for future growth - if Siberia were to warm to tropical temperatures, water stored in snow would be able to support the growth of rain forests.
Government can serve a similar fail-safe function in periods of economic recessions. Two sets of practices highlight how the U.S. government played significant roles in the economic development of the nation: Homestead Acts which transferred public lands to private control and the New Deal which did much to speed up the rate of recovery from the Great Depression.
Natural resources controlled by governments are held in reserve to be exploited in case of future economic need.
(9) Mixed economies are both stable and productive.
In ecological climax communities where every niche is filled, no single biological interaction can meet all the calorie needs associated with biomass production. Take for example, the reindeer food chain in boreal ecosystems: herbivorous reindeer prey on lichen known as reindeer moss. Lichen do not prey on another producer of biomass to support their growth; rather, they are symbiotic composites of a fungus and a cyanobacteria. This type of mutually beneficial symbiotic relationship enables these primary producing autotrophs to be a major source of food for reindeer. Even this two trophic level food chain involves at least two biological interactions, predator-prey and symbiosis. Eliminating either interaction would decrease the productivity of the ecosystem (none of the species in the system can adopt the others’ survival strategies).
Reinforcing the observations of ecosystems, economic history also suggests mixed economies are more stable and productive. The inherent tendency of capitalist economies to endure extreme cycles of expansion and recession is given proof by the Great Recession and Great Depression in the U.S. The collapse of U.S.S.R. and East Germany reflects the failure of state socialism to produce enough to meet the needs of their workers. The most stable and productive modern economies are the Nordic model mixed economies.
(10) Economies have no inherent expectation of profit.
Ecological communities evolve through the selective pressure exerted by community members and the environment on each other. In theory, populations in stable climax communities are productive enough to provide sufficient prey for predators without dropping below minimum viable populations. The relationships between predation, predators, prey and mutualists keeps the populations of all species in healthy balance. Predation weeds out sick and elderly members of a population, thereby decreases the load born by the prey of prey. Surplus production in the ecological sense is the excess population expected to be loss to predation. To exceed surplus production into ‘profit’ production would damage the ecosystem in unexpected ways (also unlikely due to the complex web of biological interactions keeping populations in check).
Possibly the most heretical economic statement ever made: The circulation of capital in economies does not presuppose a need to return profit nor constant growth in total capital. There is a need for technological growth to adapt to constantly changing economic/social/cultural and environmental conditions.
(11a) Market systems/structures are independent of economic systems.
Most of the water on the planet is stored in natural reservoirs. Geochemical forces acting on these reservoirs account for the largest portion of the water cycle (see here and here). While biological production may play a role in the local water cycle, it is not essential to the global water cycle.
Markets can range from completely open (so called ‘free’ market) to regulated (best example is rationing); market regulation is independent of system of production, be it capitalist or socialist. Rationing can and does occur in nations with generally free markets (gasoline during the oil crisis in the 1970’s; water in the ongoing California drought). Economic systems are also independent of market regulation; goods and services are not distinguished by their means of production (a co-operative farm watermelon is indistinguishable from a factory farm watermelon).
(11b) Markets can never be completely closed.
Exchange of inorganic water between biomes occurs by way of clouds which cannot be constrained within defined geographic limits. Organic capital exchange occurs through animal migration and wind-borne transfer but that’s a small fraction of cloud capacity.
Markets can not be fully regulated because: (1) Market transactions are transient so they are easily disguised. (2) Markets can be difficult to define; is the exchange of services - say babysitting for lawn mowing - a market transaction? (3) Markets are malleable and highly adaptive; they can be divided into legally sanctioned markets (includes grey markets) and all market activities of informal economies (black markets, informal barter markets, illegal drug markets). (4) A fully regulated market is antithetical to ‘exchange of surplus production’ aspect of economies; a fully regulated market is not a market.
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These are just a few key aspects of economies which become evident when compared against ecosystems.
Part 4 will detail how capitalistic ideology lead to our current economic crises.
Econology Part 4: Emergent flaws of Capitalism
Update: It may be accurate to call these 'Fundamental Principles of Economics' but I'm holding off until I get some decent feedback. So far, I've posed questions of various economists to identify the foundational principles of economics. So far, none have responded in a meaningful way.
Also, add:
(12) In all economies, workers and consumers are one and the same. It is impossible to separate these roles in any individual. Workers consume capital to produce capital and consumers consume the capital produced by workers.
This is added in case readers of my series missed out on this important relationship.
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