Leviathan Revisited

The global economy is complex, possibly the most complex object in the known universe. Some argue this is good reason to restrict who gets to debate and negotiate its inner workings. Yet we all routinely interact with intimidatingly complex systems within the economy in our day to day lives, and our strategies to tackle this are as applicable to thinking about how economies work as they are for navigating them. Models and metaphor are essential for filtering out often confusing and unnecessary detail, allowing us to glimpse the economy, building both familiarity and distance between the observer and the problem.

These models need not be mathematical. People have used economic metaphors since before Thomas Hobbes imagined his monster, and the economic lexicon has long been riddled with them. Inspired by Mandeville’s The Fable of the Bees, Adam Smith’s conception of the ‘invisible hand’ became a defining metaphor of laissez-faire economics. While these metaphors have served to offer a rudimentary understanding of economics among the wider public, they have often been abused by those pursuing ideologies incompatible with a sustainable economy. Perhaps now, for an analysis that meets the challenges of our time but continues to make the economy accessible, we should look for fresh models and metaphors.

The ecological economist sees common behaviours between eco-biological and economic systems due to the ubiquitous effects of the physical constraints on growth and development. For example, although the economic orthodoxy continues to consider the role of energy as somewhat marginal, the ecological economist sides with everyday experience and the laws of thermodynamics in placing it front and centre. Just as on average the food you eat provides you with approximately 100 Watts of power to maintain yourself in a highly ordered state, so too the global economy currently consumes around 20 terra Watts to do likewise. Some might justifiably dislike GDP as a measure of economic performance, but the emerging picture is that it too is a thermodynamic metric, reflecting what is known as 'useful' work, i.e. it appears we value the portion of all energy use that makes a material difference to the order of things, underscoring the influence of thermodynamics in the economic system.

This order creation is reflected in the structures that make up both bodies and economies, and the functions these structures support. These structures determine the productivity of systems, or the efficiency with which they can do 'useful' work, with more complex, differentiated structures being associated with higher efficiency functions. Biology shows us that an important driver for the development of this structural complexity is size. As growth makes systems bigger, the internal distribution costs inevitably rise as the component parts move further apart. Over the life cycle of a body this effect is so profound that ultimately it curtails growth, making you the size you are.

For the economy fighting to maintain growth, it is forced to construct ever more complex structures in an attempt to offset this 'diminishing return to scale'. In response, the evolutionary forces shaping both the body and the economy appear to have settled on hierarchical network structures to maintain efficiency. Although those promoting ecologically inspired design might marvel at this coincidence, those of us who are interested in equality should immediately recoil at the way inequality becomes hard wired into the operation of the economy through these hierarchies, just as it is in both single organisms and ecosystems.

Like the economy, your macroscopic body is comprised of a very large number of interacting microscopic elements. These interactions result in novel emergent behaviours, and this severs the causal links between what happens in the small and in the large – predicting how I behave by looking at my DNA is as misguided as believing macroeconomics can be derived from microeconomics. Indeed, once the structural complexity reaches certain thresholds, there comes a need for coordination, with hormones and nervous systems filling this role in the body just as information flows do in the economy.

Moreover, structural complexity can be seen as the encoding of information into the material fabric of these systems. This encoding is the product of investment of free energy, raising the productivity and hence the value of structures. It is not surprising therefore that the evolution of the economy toward greater complexity is synonymous with the dematerialisation of these 'capital' investments. Such a strategy requires the ability to predict which structural configurations provide appropriate 'returns on investment', suggesting that, like economics, biology requires forecasting skill on its investments. Such complex structures are also fragile, requiring large investments in defence and repair.

If the second law of thermodynamics calls for all things to degrade, we should be astounded that both biology and economy do precisely the reverse for long periods: they both grow and create structural order out of disorder. Perhaps for those who believe in human exceptionalism, the fact that people build ordered things feels completely natural. We conceive of this through the lens of investment, using left overs to make the structures that yield future returns. But what if, as some are now suggesting, this order creation process actually represents the evolution of systems toward their most likely state; however miraculous it might appear? We do not choose to grow our bodies; what if economies are destined to grow too, until they can't?

With the alarming and thus far largely unrelenting coupling of economic growth and environmental devastation, this should give us pause for thought. If in this we see limited agency, we may be right, but where Hobbes and Smith looked at nature and were confirmed in their self-regulation ideology, we should see acknowledging the direction of the thermodynamic tide as the first step to rowing against it. The economy may indeed be monster-like, but it is our job to take that monster on.



Dan Chester and Andrew Jarvis, May 2018