Principles of Market Fundamentalism, No. 7: Ecosystem

Economies are like dynamic ecosystems, not static machines, because economies evolve.

1. Value

2. Exchange

3. Rules

4. Money

5. Entrepreneurship

6. Inequality

7. Ecosystem <

8. Emergence

9. Transaction Costs

Principle Seven:
Economies are like dynamic ecosystems, not static machines, because economies evolve.

Let’s extend our biological metaphor into a general understanding of economies as ecosystems.

The Ecosystem Principle relates to the Law of Flow, which means that all living systems vascularize to form channels to accommodate flows. It also relates to the nature of the economy as being like a rainforest, as opposed to being like a thing that can be built, run, or fixed. The core idea is that the economy is not like a machine but more akin to something biological—a complex adaptive system. 

Machines can be complicated. Still, an individual can fully understand, design, and engineer their causes and effects. But no one can fully understand, design, and engineer an ecosystem. The same can be said about an advanced economy.

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The implications of this principle are numerous, but the evolved nature of the economy stands out. Each organization functions analogously to an organism in a niche. The organism must consume enough calories to survive, whether large or small. The organization must earn enough revenue to survive, whether large or small. Any organism must adapt as other organisms compete in the evolutionary fitness landscape.

Wouldn’t it be great if an omnipotent, omniscient power (government officials) could intercede to create better outcomes? There is no human equivalent to God, despite the posturing of the political class.

As we stand, mouths agape at the unfolding evolutionary ecosystem in which technological innovation functions, we will come to appreciate the failures almost as much as we do the successes. (See Creative Destruction.) The ecosystemic view allows us to appreciate the feedback loops that continuously shape the living systems in which we can flourish as human beings.