This morning’s post is a bit of a ramble, but it’s really trying to setup the scene for the issues I want to blog about over the next few days. One thing that was kind of obvious early on to me, was that biologists and economists don’t spend a lot of time talking to each other. There are exceptions, but this is usually pretty rare. The end result is that there’s a fair bit of misunderstanding and friction. In the good old days of the 19th C, this wasn’t the case. Darwin was very likely to be familiar with Adam Smith, and definitely was familiar with the economist Malthus.

So, the goal here is to tackle some of these misunderstandings. From an intellectual level, there are a lot of similarities between economics and biology. That’s kind of how I made the transition. I was already familiar with a lot of these shared concepts.

First, both biology and economics says there’s an underlying reality. A shark hasn’t been designed to be an efficient, predatory fish. It’s that way because the processes of evolutionary selection and variation, have ended up at this morphology. Likewise in economics, what we observe about a lot of economic facts are caused by undirected processes. This is the invisible hand metaphor at play. Prices aren’t high because of greedy businessmen. They’re high because of market forces.

Second, both disciplines use competition a lot. Competition drives many biological processes. Competition drives many economic. The graph of the Cournot model of competition between two firms, looks exactly the same as the graph of the Lotka-Volterra model of competition between two animal populations. Biological models of optimal forage strategies, mirror economic models of rational behaviour.

Third, both disciplines recognise that new properties emerge from different types of organisation. An economy is different to a single market, which is different to a household, which is different to a single consumer. In biology, you can’t use the organisation of single cells, to model the behaviour of whole populations. No amount of examination of a cell, would lead you to conclude that kakapo lek for instance.

From an ecological perspective an economy is a way of reducing human scarcity problems. It’s not a organisation for delivering free health care or making Simon Cowell rich. Originally, human populations struggled in the face of food scarcity, and from variations in food supply. Some days hunters would be successful, some days they would not. Being in a group where people shared food would have helped survival. Trading norms probably emerged from this desire for mutual gain.

Trade also meant you weren’t so restricted by local environmental factors. Trading resources that you have in local abundance (say fish) for resources are rare (say wood), is mutually beneficial- so there’s an incentive to go from trade within a group to trade between groups. You get freed from the restrictions that local resources put on you. And because you put a bit less pressure on local resources, it can be more sustainable. And with growing populations, you open up the scope for more specialisation and more trade. All of this takes us further and further away from the binding resource limits of early humans.

Admittingly, it isn’t quite as straightforward as this, but the point I think is to understand that an economy isn’t a designed system. It’s big, and kind of organic and operates with lots of feedbacks- just like an ecosystem. Governments can drive it in certain directions for a while, but the whole basis is about trying to reduce scarcity problems. NZ foresters who sell logs to China, are helping to reduce a local log scarcity in China. And they don’t do it because they love the Chinese. They do it because it’s profitable.