While Bionomics is non-partisan, it does provide a shared language for discussion among liberals and conservatives alike. In the following essay, David Ish comes at Bionomics from a liberal point of view.

He believes that the concept of "homeostatis" points policy makers towards regulation and makes a case for it in his piece Regulation and Growth - An Integrated Bionomic Perspective. What do you think?

Replies can be sent to David at Zudan@aol.com or you can join our evolve@bionomics.org mailing list where a discussion of this topic is ongoing.

REGULATION & GROWTH -- AN INTEGRATED BIONOMIC PERSPECTIVE

By David Ish

Michael Rothschild recently put the question "If the economy is a rain forest, should the government be a gardener or a forest ranger?"

Free market types would undoubtedly opt for the latter, and would no doubt rejoice in the findings of a study conducted by the Forest Service in British Columbia some years ago in which a number of reforestation techniques -- burning, re-seeding, replanting, and others -- were tried in different patches of the forest after clear cutting to see which was the most effective method for bringing back the woods as quickly and densely as possible. To the amazement and chagrin of the forest rangers the patch that proved to be the most effective was the control patch -- the one that the forest service left alone and did nothing at all with.

Well that's it then isn't it? The free market enthusiasts have had their point made with overwhelming bionomic evidence so we might as well all quit and go home let the free market rip.

But as exciting as this laissez-faire news is from a bionomic perspective, I can't help but feel it could be useful to develop a somewhat deeper and more integrated analogy than the rain forest, one which sees the government and its regulatory activity as inclusionary rather than as a force majure external to the system. A metaphor that sees the marketplace not as a stand-alone, but as the driving force -- maybe the chloroplast, to be bionomically correct -- of a total economic system that in addition to the free marketplace includes the government, with its spending and taxing structures and regulatory functions.

I feel this would be a useful exercise because while it is true there are no bureaucracies in nature, wherever you look in nature, on whatever level of nature -- cellular, organismic, ecological -- you will find regulation. Regulation is pervasive in nature.

Just one example of many in cellular regulation is the regulation of the rate at which cells bring in oxygen and nutrients through their cell membranes to combine in the oxidation process in order to release energy from the nutrients and make it available for the anabolic tasks of cellular development, maintenance, and division. Too much oxygen, or too many nutrients, and the oxidation rate, the burn rate isn't right. Cells regulate their burn rate better than a finely tuned carburetor. They are the envy of any corporation trying to get a hold on its supply and demand.

On the next higher level, more or less, warm blooded organisms for example regulate their body temperature. Great lengths are gone too, from shivering on the one hand to sweating on the other, to keep the body's temperature within a certain, narrow range.

On the ecological level, ecologies maintain their biodiversity by regulating the populations of their animal and plant life, holding them in check, in balance, by limiting them, from the bottom up, via their available food supply, and, in most cases, from the top down as well, via predators. Some populations within an ecology may expand for awhile while others decline, but there is, over time, a tendency to come back to a certain balance point. A healthy ecology is like a good portfolio manager. It succeeds by diversifying its risk. When the energy level in a certain population is low, when it's in decline, well there are plenty of other population stocks to ride that are on the upswing.

So we have regulation on all levels of nature. But what precisely do we mean by regulation?

It's meaning of course is right there in the etymology--it's to make regular. To mediate the influence of forces and effects so that things never get too far out of hand, so that spiky peaks and valleys are smoothed out into a contained, gentle range of variation.

The purpose of making regular, in biological terms, physiological terms, is to create what's called homeostasis, a stability that basically allows specialized cells in an organized system to go about their business without worrying too much about their own survival. The system provides them with everything they need to get the job done -- oxygen, nutrients, the raw materials of minerals, to keep processing all the things the overall organism needs to perpetuate and propagate itself. Cells left to their own devices -- bacteria, say -- are in a constant scramble for survival. There's no convenient stream of blood or intracellular fluid for them, bringing them a steady supply of food and oxygen so they can just keep on cranking out a consistent level of insulin, say, the way a cell in the pancreas does. The organism has systems in place to buffer the cells from the extremities in variation it experiences -- drawing energy reserves from fat cells, for example, to keep things going if there is no food it can take in for some time period -- by providing it with a dynamic, steady-state guaranteed environment in which to perform its specialized functions. Homeostasis is the result of the social contract the cell made way back in its evolutionary history to come in from the cold and get a steady job working on the assembly line.

The metaphor implied here in this last example between the corporation as organism and the employee as a cell has been developed very fully of course by Michael Rothschild in Bionomics. To that significant work I would add only one further striking parallel. Corporations are bodies --it's right there in the word itself again. The word corporation is from the Latin corporare, to make into a body. And just as you don't have a single cell in your body today that you were born with, Citicorp, founded in 1812, no longer has any employees on their payroll -- or even drawing pensions -- that were around when their corporation papers were filed. But despite this turnover on your part and theirs, one hundred percent total replacement of all constituent body parts several times over, for the moment anyway, you live on, and so does Citicorp. In both cases what keeps you together is a structure of information, a matrix of information that transcends the mere material biology that passes through it. It is, you can say, perhaps even in a Platonic sense, the idea of the body.

So there are indeed deep parallels between a corporation and an organism. But at this point I would like to elaborate a perspective on bionomics which I call an integrated bionomic perspective, that in a sense suggests something beyond parallels.

First the integrated bionomic perspective sees learning and evolution rather than being parallel as being fractally related, that evolution and learning are different expressions of the same phenomenon, the same underlying essentially algorithmic process. On an evolutionary level we might refer to it, as Daniel C. Dennett did recently in Darwin's Dangerous Idea as blind groping. On the learning level, individual or organizational, we could refer to it as trial and error -- Kaizen, in Japanese. The medium in one case is DNA and in the other something which sits atop the DNA substrate --namely the toss-off of brain cells and neurosynaptic connections. The medium is different, and the time scale is vastly different. But there is an underlying form which we recognize, and which gives it its identity, just as a figure is a recognizable figure whether it is molded in clay or cast in bronze. It is the same thing, just expressed --- literally pressed out -- in different medium.

So an integrated bionomic perspective first of all sees evolution and learning as fractally related. Secondly, just as the integrated bionomic perspective sees a fractal relationship between learning and evolution it also sees a fractal, rather than a parallel relationship between ecological and economic systems. An integrated bionomic perspective sees our economy not just a metaphor for our ecology, but rather, as an extension of ecology, or, in another way of putting it, as an elaboration of our ecology on a higher level of abstraction, as learning is an elaboration of evolution on a higher level of abstraction, or within learning itself, the way the information age can be seen as an elaboration of the machine age on a higher level of abstraction. From this integrated bionomic perspective the economy is seen as vitally linked to the ecology and in a sense can be seen as a virtual ecology.

Let me take a paragraph or two to develop this concept a little further:

A natural ecology at its core is essentially no more or less than a highly complex and diverse distribution of energy which is basically feeding on itself. As we no doubt remember from high school, plants use the energy of sunlight to split off hydrogen atoms from water molecules and combine them with carbon dioxide molecules from the atmosphere to create carbohydrates. The energy of the sunlight is stored in the plant as carbohydrates as a kind of battery to be drawn on later to fuel the plant's metabolism. Since animals can't convert sunlight to get the energy they need to drive their metabolism the way plants can, they eat the carbohydrates in plants, or they eat other animals which have eaten the plants. As has been pointed out, the food chain is in fact, a fuel chain, an energy chain. Virtually all ecology consists essentially in the consumption and conversion of sunlight from one form of energy to another.

But when we get to harvesting some of that sunlight for ourselves, say by cutting down some of the trees, the ecology crosses a threshold and becomes an economy. The trees become timber, and the timber becomes currency. A good portion of the sunlight stored in the timber as carbohydrate is now sitting in a bank somewhere stored as money, compounding interest and, because of its virtuality, growing at a much faster rate than the forest does. Money basically does grow on trees, The source of all money, in fact, is of course the natural world, be it animal, vegetable, or mineral. From an integrated bionomic perspective the natural world, the ecological world, is the true source of capital for the capital of the virtual economic world.

Of course in the case of the trees that were cut down a good portion of them didn't make it all the way to the bank as retained earnings. A lot were burned for firewood, and went up the chimney. But that's just the good old second law of thermodynamics at work, as it's at work on all levels of nature. Most of the energy that gets carried forward in the development of dynamic complex systems goes up one chimney or another. Some solar energy, once stored on the bottom of the fuel chain as carbohydrates in plants may get all the way to the top of the chain to a top predator like a sea otter, but most of it's used up along the way, keeping the metabolisms going of all those forms of animal life between the algae and the otter. Animals really aren't a very efficient way of passing energy along. About 90 percent of the energy they consume gets burned up supporting their metabolisms.

Most of the money that passes through a corporation doesn't wind up as retained earnings either -- it goes right out the door -- for materials, labor, taxes, dividends. It's dissipated feeding all the metabolisms of the suppliers, employees and stockholders, who, when all is said and done have to eat as well, have metabolisms which they have to keep burning.

But some earnings are retained. Some energy does get all the way to the top, and keeps feeding the growth of complex dynamic systems, be they organisms or corporations, ecologies or markets. But in the process, at whatever level energy passes through in the chain, it engages a metabolic homeostasis.

In the economic world companies almost always try for a certain homeostasis on their own. Depending on a number of things -- how close to the edge they are, how deep their financial resources, how quickly their markets can turn on them-- they may for example not furlough or lay off their employees during downturns. They are willing to take a hit or two on their absolute efficiency and productivity to keep things running smoothly, not lose valued employees to the market place, or competitors, because they chose to lay them off to keep their productivity up. Employees, after all, have their own drive for homeostasis going. The steady paycheck. The fixed term mortgage. Any employer who can satisfy that need is attractive to employees. If orders are down, but they look to be up next week, maybe you can let them spend a little more time sweeping the floors or getting caught up on their filing. When there's nobody in the store, as the old Chinese proverb goes, its time to paint the counter. Despite their tremendous capacity to innovate and process change the Japanese, with their tradition of lifetime employment, understand the value of homeostasis very well, and the competitive edge it gives them in the global marketplace.

But there can be a limit to how much homeostasis a company can generate all on its own, without paying a big price for it in the end. The Japanese have a culture devoted to homeostasis. America does not, and any attempt by a company to create homeostasis at the expense of ignoring market forces can lead to disaster. Anyone remember Chrysler back in the pre-Iacocca years when they kept all the production lines running by selling to a company controlled, production controlled "store"? It kept a lot of people working for a while, making too many cars that in the end, not enough people were willing to buy. That decision to stay hyper homeostatic resulted in a big crash, when the second law of thermodynamics really took over and a lot of energy went up the chimney, dissipating out of the system in both lost jobs and shareholder value.

Companies can do a great deal of internal regulation on employees with conditions of employment, and with suppliers with specifications and company standards but they can't really regulate their markets, their customers. They can try to for awhile, as Chrysler did, and in a demand hungry economy like the one Henry Ford had when he said customers could have any color model T they wanted as long as it was black, they can succeed for awhile. But while market control, market cornering, may be the secret dream of any enterprise, it is doomed to be an illusive one.

But to return to the model which includes the public sector we can see that countries, as well as companies, also serve as instructive analogues to organisms -- to bodies. But unlike companies countries can regulate their market, that is their citizenry, the consumers of the goods, services, and benefits the citizenry receives in exchange for the price it pays in taxes. Or to place it in yet another perspective we can say that a society uses the government it forms to regulate itself. So welcome to the body politic.

So why do governments regulate, other than having seemed to have formed a bad habit they just can't shake? Remember those piney patches in British Columbia? Why, as people like to say, particularly business people, can't we get government off our backs?

Well governments I think generally find themselves in the regulation business because of a demand from the populace in one form of another for homeostasis which the government deems to be in the national interest. Sometimes it's out and out called regulation, but sometimes it's called by another name, like tariffs, subsidies, or prices supports. We have put tariffs in place to protect domestic industries and jobs, to avoid a sudden break in the price of products due to a flood of inexpensive foreign competition to domestic producers. We have paid farmers not to grow a variety of products as an effort to regulate the balance of supply and demand and avoid gluts that would create economic instability. We have subsidized industries, guaranteeing them a certain ROI because their products were deemed to be vital to national defense. We have provided people over 65 with the steady paycheck of social security. All in the interest of maintaining one form or another of homeostasis.

In the creation of homeostasis there is a parallel between biological regulation and the self-regulation of markets and the regulation of markets by government fiat or influence.

Two distinctive kinds of regulation are recognized in the creation of biological homeostasis -- intrinsic, those built into the organs that produce them, and extrinsic, regulation of the organ by the nervous system and the endocrine system. Sometimes an organ has enough self regulating intelligence on site, but by and large regulation is a systemic affair, because the need for regulation is a systemic need. Maintaining homeostasis is maintaining steady supply, and you can't maintain a steady supply unless you know what the demand is, and that requires feedback loops, information coming in from the system to tell you what you need to produce. Calcium needed by the body for example to maintain the ability of muscles to contract and for cell membranes to hold their appropriate level of permeability may be increased due to muscle building exercise. When calcium levels in the blood fall below a certain level a negative feedback loop is activated, stimulating the parathyroid gland which secretes a hormone stimulating the resorption of calcium phosphate crystals from the bones and from the kidneys, where they were on their way out to head down the drain. Then when the calcium in the blood rises again to its normal level the parathyroid shuts off production of the hormone that was stimulating the resorption.

In generic, diagrammatic terms the process of homeostasis in the body is seen to consist of three parts -- sensors, usually a wide array, which detects any deviation from a particular set point, an integrating center, which receives the information from the many different sensors, and effectors, such as muscles and glands, whose activity is either increased or decreased in such a manner by chemical communication from the integrating center as to bring any specific level back to the set point it needs to be operating at.

This generic description of homeostasis seems to me to also describe very well the way the Federal Reserve Board acts in regulating the money supply, which is to say the energy supply of the economy, to keep the overall economy in a homeostasis where it is neither running a temperature or suffering the big hypothermic chill of a deep recession.

All those leading indicators, CPI, GNP, market, etc., the many different indicators constitute the wide array of sensors, as to whether the economy looks like it may be breaking out or dropping out of homeostasis. This information is fed into the minds of the people that sit on the Federal Reserve Board, which constitutes the integrating center of the system. Out of those minds comes a decision -- raise, lower, or stand pat -- and that decision--if it's to raise or lower the interest rate, becomes an effector on the system, making money easier or harder to get, keeping the metabolic rate of the economy at a hopefully healthy level.

(An important aspect of that integrating center known as the Federal Reserve by the way is that it integrates both positive and negative feedback loops. An integrating center dedicated sole to positive feedback loops and corrective devices, like some South American governments of years past, quickly finds its homeostasis broken by run away inflation.)

There may be some debate as to whether the Fed could do a more effective job than it has of controlling the money supply, but by and large I think there's agreement that it works pretty effectively, and that one of the reasons that it does is that it's a separate body from the government. The Fed can keep its own counsel without getting bogged down in political considerations or influence. That's what makes it a fairly effective bionomic simile -- it's not required to be involved in a protracted process of political deliberation. It's hard to imagine the parathyroid holding hearings with the folks at cell membrane and muscle contraction about their increased demands for calcium while the representatives of bone and kidney want to give the parathyroid well developed, scientifically accurate position papers on how much more difficult it is to give up calcium phosphate crystals in an aging body. That's an analogy headed for a breakdown.

The relative effectiveness of the Fed and its suitability as a natural bionomic model might lead one to the bold notion that society could best be served by having all regulatory agencies with the quasi-independent status of the Federal Reserve Board, which would be staffed by experts in their respective fields and free of political influence. I'm not really frightened that anyone would jump to that conclusion, but I would like in any case to point out that perhaps what makes the Fed relatively effective as a de facto regulatory agency is not just that it sits on its own perch and not under the administrative wing of the government (bionomic metaphors to the last) but that its response rate is appropriate to the task at hand. Part of the reason for this is the political deliberative loop has been lopped off, that's for sure. But some regulatory response rates are disastrously slow for reasons above and beyond whatever factors commissioners and bureaucrats may bring to bear on the process. Take the FDA. The process of validating the efficacy of a drug through the application of developing the appropriate epidemiological studies under current criteria for standard procedures consistent with the scientific method which scientists, not bureaucrats, can feel comfortable with, is somewhere around ten years. That's about how long it took scientists for example to show for sure there was a link between eating red meat and colon cancer. And they weren't even trying to get a handle on the efficacy of a drug.

The FDA, in the case of AIDS and more recently other terminal illnesses has loosened up its criteria for experimental drugs if terminally ill people are willing to risk the side effects. But a hard look needs to be taken at how the process of the scientific method can be accelerated to provide appropriate response time without being compromised. I would return here to a bionomic example. Chemical reactions in living systems proceed at a much faster rate than normal because of the presence of enzymes in the biological mix which serve as catalysts for accelerating the reactions. What is needed to create drug approval is not a quick and dirty watered down version of the scientific method, but an enzyme equivalent, something that will allow that method to proceed at a faster rate than under the standard conditions of the past. Some of this is underway -- e-mail versus snail mail for peer review studies can probably lop of few months off a ten year cycle.

Well, so far we've made a little excursion and said some things about homeostasis, tried to introduce something called any integrated bionomic perspective, and drawn a few analogies about regulation between biological systems and a couple of Federal Agencies. But are there any conclusions to be drawn here? Any cautions?

For one thing I guess I would encourage us all to recognize homeostasis as a powerful bionomic force in the economy, and that it is that biological imperative for balance and stability that calls forth and will continue to call forth a regulatory response to economic development from the body politic. From an integrated bionomic perspective administrations should examine all their regulatory functions from the standpoint of their homeostatic value, and be alert to what measures they need to take to keep their response rate relevant to maintaining an appropriate homeostatic value.

But one important point that needs to be made here I think is that while there is perhaps a fractal relationship between biological regulation and economic regulation, the analogies which I have drawn out of that relationship are somewhat flawed because on the biological side they are drawn from mature systems while on the economic side we are dealing with a growing, or at least developing economy. While I believe the impulse and drive for homeostasis is as strong in the economy as it is in other living systems, the economic balancing act is taking place in a system that is continuing to grow in its complexity. In the biological examples given, there are no shifts in set points. The temperature of a human being doesn't go from 98.6 this year to 98.9 next year to 99.4 the year following the way the consumer price index does. The biological complexity of the human being is complete -- the complexity of the economy is not.

So in the economic environment we must view regulation and homeostasis in the context of growth and development. And in that context it may be worthwhile taking a look at whether we have developed appropriate systems of measurement. Some argue, and forcefully, that our basic accounting is out of whack because it doesn't take into account the downslide of our ecological substrate. They argue that the way we figure things ignores the link between our ecology and our economy, and that if we added what's happening in our ecological world to the books we would soon see that we are in a period not of growth but of recession, because our topsoil is eroding at a rate that puts our plant power, the fundamental power of stored sunlight that drives the whole system, into steep decline. A UN survey completed in 1992 showed that every year while the world population increases by 92 million, 24 billion tons of topsoil disappear. From an integrated bionomic perspective this means that if we don't put our ecological capital on the books we are living in a fool's paradise, accumulating virtual capital without recognizing we are depleting the real ecological capital the virtual capital is drawn on..

So to really measure true growth, to be on the safe side, it would seem we should try to find a way to take ecological factors into account. To measure true growth maybe instead of thinking about the gross national product we need to think about gross national complexity. How much better a job did we do this year over last in applying information to energy in the refinement and distribution of raw materials? That might give us a better handle on things. It would give us a better picture of just what it is that needs regulating to achieve an appropriate and dynamic homeostasis. To control growth.

Finally I would say we live in a period of history where we are on an absolute tear to deregulate everything as quickly as possible. If we can begin to see the homeostatic value of the regulatory function perhaps we will be less in a hurry. Have our policies of deregulation really worked all that well? Let's take a look at turbulence that ensued when we let the deregulating genie out the bottle for the airlines. The chief purpose of airline deregulation was to give the consumer a break by making things more competitive on price. Competition ensued all right, competition which proved ruinous to the industry, and, in the end, to the consumer. The industry has lost more money under deregulation than all the profits it accumulated from Kitty Hawk to 1978, when deregulation first began. There have been 200 bankruptcy filings, and as of 1992 30 percent of the nation's fleet capacity was in or near chapter 11. But while this competition was ruinous to carriers the consumer at least got a better price, right? Yeah, right. From 1975 to 1993 the consumer price index for all commodities rose from 58.2 to 131.5, while the CPI for airfares alone rose from 38.0 to 178.7. -- more than double the increase for all commodities, while point to point travel time, because of the emergence of the hub and spoke system remaining carriers were forced into as a survival strategy, increased. And the second law of thermodynamics wiped out a lot of jobs and a lot of shareholder value in the process.

Well, I'm well aware that genies don't get back into their bottle very well, and that raising questions about the efficacy of deregulation in the 90's is not the way to get invited back to dinner parties. But once we finally overcome our current distrust of government and can begin to see it and craft it not as our enemy but as our servant, we can ask of it and demand of it the kind of regulation that will provide us with an appropriate homeostatic buffer to the great uncertainties that will continue to be visited upon us in the name of the rewards and joys of unbridled competition.

Direct replies to David Ish (Zudan@aol.com).