How does Bionomics differ from conventional economics?
To begin with, all traditional schools of economics are based on the concepts of classical physics, while bionomics is based on the principles of evolutionary biology. Isaac Newton described the universe as a perfectly predictable clockwork mechanism. And orthodox economics describes the "economy as a machine." Everyday, we hear about "jump-starting" or "fine-tuning" the "economic engine." We're told that the "economy is losing steam" or that the government needs to repair a failed "market mechanism." Like Charlie Chaplin in Modern Times, deep down we imagine ourselves as cogs in a vast, invisible economic machine.
Bionomics rejects "economy as machine" thinking?
Absolutely. Instead, Bionomics says that an economy is like an "evolving ecosystem." A modern market economy is like a tropical rainforest, populated by vast numbers of highly specialized organizations instead of highly specialized organisms. They're all linked together in an incredibly complex web of competitive and cooperative relationships. Each company works to survive in its market niche just as each individual organism works to survive in its ecologic niche.
How does the economy evolve?
All living things evolve. Over time, they become more complex, specialized and efficient. In nature, this happens when genetic code, the information recorded in the DNA molecule, undergoes mutation and natural selection. Biological evolution creates new species. Similarly, in our economic ecosystem, technological information -- recorded in books, databases, technical manuals, source code, and blueprints -- is altered by innovation and market competition. Technologic evolution creates new industries.
Are you saying that the economy runs itself?
For the most part, yes. Remember, even though the tropical rainforest is the most complex thing on the planet, nobody designed it and nobody runs it. Truly complex phenomena cannot be planned, they emerge spontaneously. They self-organize. Bionomics argues that the market economy is just such a process. No one planned the market economy and nobody's in charge of it.
Bionomics holds that capitalism is not an ism. It is not a belief system, like socialism. Instead, the market economy, like a tropical rainforest, is the product of a naturally occurring, spontaneous evolutionary process.
How do Bionomics and conventional economics differ on the process of technological change?
I know this is hard for non-economists to believe, but orthodox economics essentially ignores technological change. The first rule of economic modelling is "Assume technology holds constant." Once you make that assumption, you can make predictions; like a 1% rise in GNP will increase car sales by 1 million units and that steel production will rise by Y tons because the average car uses 1000 pounds of steel. It's all neat and tidy input/output tables.
But once you allow technological change into the model, you've got unpredicatble complexity. For example, even as GNP rises, changes in travel patterns like telecomuting and air travel whittle away at automobile demand. Car makers keep substituting more and more aluminum and plastic for steel. Across the economy, new technologies keep changing the relative value of alternatives. In reality, all the input/output ratios are fluid and dynamic. Precise predictions become impossible. But rather than admit that, orthodox economists choose to ignore technological change. Bionomics, by contrast, pays primary attention to technological evolution.
Does Bionomics reach different economic policy conclusions than orthodox economics?
Yes, of course, and there is a consistent pattern to these differences. If you believe that the "economy is a predictable machine," then you logically assume that the government ought plan, control, manipulate, and repair that machine. There is a built-in bias toward intervention.
If, on the other hand, you believe the economy is a like a rainforest, you'd be very cautious about intervening. You'd be "ecologically sensitive," careful not to damage the bionomic ecosystem. You wouldn't send the Army Corps of Engineers in to "fix" the Amazon rainforest, and you wouldn't use industrial policy to "fix" our high-tech economy.
Does that mean no role for government?
No, that's impossible. But instead of distorting and abusing the economy by constantly tinkering with subsidies, taxes, regulations, our government ought create a stable policy climate that cultivates spontaneous technical evolution and economic growth.
The tragedy of machine thinking is that it leads to a "command and control" mentality. Bionomics thinking leads to a policy approach which is patient and nurturing.
What specific economic policies would Bionomics challenge?
For example, the machine mentality, says we should use top-down regulation to force a clean up of the environment. And today we use state planning and a vast bureaucracy to get results. Bionomics says we should use markets instead. Organizations, like organisms, respond to feedback signals in their environments. In the economic environment those signals are called prices. Because the law says air and water are free, with a price set at $0, organizations overuse those resources. They resist regulations that close off access to those free resources.
But if the law said you had to own a permit to emit a ton of carbon dioxide, dumping CO2 would no longer be free, and companies would quickly find a new techniques to cut CO2 output and avoid the cost of buying CO2 permits. Pollution markets would harness the creative power of high-tech capitalism.
What does Bionomics say about U.S. competitiveness?
First, we have to realize that we already have an Industrial policy in the U.S. Unfortunately, it's an Anti-Industrial policy. Instead of encouraging earnings, savings, and investment, we tax them very heavily. At the same time, the Federal government hardly taxes consumption.
At the corporate level, most American executives think of their companies as profit-making engines. They work hard to get these machines to run just right, but the world around them keeps changing, messing up their plans. When I teach bionomic methods to corporations, I stress that a company is a living, learning organism. Everyone in a company must work continually improve its operating methods. Furthermore, to survive over time, a company must hold as much of the territory, or market share, in its niche as possible. This is the way Japanese executives think. Taking market share or capturing territory in a competitive landscape comes first. Profits will follow.
If we're going to turn around the American economy, it's going to take something much more profound than anything we've previously considered. At both the public policy and corporate levels, that process of reform will have to start with a fundamental rethinking of our most basic ideas about what a market economy is and how it works.