What grasslands and barnacles can teach us about regulation, deregulation, and the meaning of free markets.
Since the advent of our catastrophic economic troubles, there has been a spate of diaries recognizing the necessity of regulation to the maintenance of free markets: Smintheus, David Frenkel, and many others have all weighed in on the subject.
There are tremendous parallels between economics and the science of ecology.... understandably since they are both systems sciences that attempt to comprehend the workings of dynamic systems: the flow of money in the case of economics and the flow of energy and materials in the case of ecology. They share a fundamental similarity in mathematics and methods, moreover the similarities go much deeper.
Observations about this crucial relationship between economics and ecology are not by any means original to me. Howard T. Odum pointed this out in a groundbreaking body of work, of which the 1974 landmark paper Energy, Ecology, and Economics is a prime representative.
His ideas are part of an intellectual stream known as Ecological Economics, which has its own national and international academic societies and which is represented in academia by all the usual trappings: academic departments (example), scholarly conferences, and peer reviewed journals.
I'm a lowly biology teacher in southern Alabama. I'm acutely aware that DailyKos is read by eminent experts in all fields including my own. All that follows is my own understanding of Odum and others. Any misconceptions are mine and not those of the giants upon whose shoulders I'm standing. Any specialists reading this are begged for tolerance and are welcome to make correcting comments.
From the perspective of ecologists, as system scientists, the economists have taken too narrow a view of their profession and its scope. The economic system is not self-contained. It is a (rather small but highly significant) subsystem within the larger ecological system of the earth. If you persistently burrow down through the layers of meaning, you can discover that money represents the flow of energy. The cycling of money in the economic system can be shown to be driven by the cycling of energy and materials in the larger ecological system.
The purpose of the above is to lay a foundation for the claim that specific ecological relationships can be used to throw light on the functioning of economics, and that the connections are hardly metaphorical, but rather in many cases direct and practical. Biologists/ecologists who seek to understand complex systems have a tremendous advantage in the diversity of nature. If you are interested in confirming or shedding light on the results of theorizing or modeling, seemingly every possible relationship within or between species can be found somewhere in the diversity of life on earth.
Remember the powerful and attractive picture evoked by the phrase (originally disparaging but often used today with approbation): "a nation of shopkeepers." This evokes the picture of a million thriving entrepeneurial units giving life and vitality to the fabric of the national scene. In such a situation the reality of the economic system might in many ways accurately mirror the idealized fantasy of the invisible hand. In this situation of maximum diversity the relationships between supply and demand, competition and price, and consumer choice might be fairly likely to play out in ways predicted by the free-market ideologs (i.e. libertarians).
What do we find over and over again in the real world? A superior competitor (Big Box Mart) enters a thriving local market. Gradually, or sometimes suddenly, the lesser competitiors fall by the wayside.
The end result of a simple competitive system without regulating interactions is that there are winners and losers and the end of competition.
We end up with a market dominated by monopolies, wielding power so absolute as to be a de-facto political system. This is what we see historically in the oligarchies of Latin America. A tiny ownership class dominating a massive peasantry held in grinding economic and political servitude. This is what we recall from memories of the Gilded Age. This the future we see depicted in the cyberpunk fantasies of William Gibson and others.
So, let's restate the problem from the perspective of the systems scientist. How do we take a competitive system existing in some dynamic transformative state on the continuum between "a nation of shopkeepers" and global corporate fascism and cause it to move in the direction of maximum competition and maximum diversity? How can we bring about and maintain this happy system state? Since economic systems and ecological systems operate in arguably similar ways, are there actual living communities whose interactions shed light on the problems of markets?
Any biologists/ecologists reading this will instantly know the punchline of this tale I'm winding as soon as they see the subject of the next section:
The Rocky Intertidal Community of the Pacific Coast.