Economic Ecosystem

Max Borders, building on themes that I regularly harp about, presents an interesting simile: the economy is like an ecosystem. It’s a good description, and has the advantage of portraying economic realities to people who have no interest in economics. The message is clear: if you mess with the economy, you have no idea of what the ultimate consequences will be. As with ecology, economists have only some high level and incomplete understanding of what the rules are. Will “fixing the economy” with a stimulus package cause things we want to happen or things we don’t want to happen? We’ll get some of both. How much? Don’t know. When? Don’t know. Who will be helped and who will be hurt? Don’t know. All we do know is that we’ll pay a big price to get whatever results we get, even if the results are something we don’t want. Ecosystems are like that. So is the economy.

Originally published January 14, 2009

UPDATE: Someone else has had similar thoughts!

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5 responses to this post.

  1. I like the term economic eco-system. I’ve been looking for more references to it. Do you have a favorite. We’re using the term in Santa Fe, NM with our economic development efforts to ensure people understand they are part of a larger environment and their behaviors impacts others.

    Regards,
    Andrew (Drew) Tulchin
    drew@socialenterprise.net
    cell +1.202.256.2692 *** office +1.505.715.6927
    skype: dtulchin

    SOCIAL ENTERPRISE ASSOCIATES
    http://www.socialenterprise.net
    Financial Performance * Social Impact * Environmental Sustainability

    Reply

  2. Posted by Andrew Hanlon on February 20, 2011 at 10:45 am

    Hi, I’ve been thinking about this for a long time, and following a brief conversation I re-googled the term and found this site.
    My theory is that economics is not “like” an ecosystem – it is an extension of THE ecosytem. Energy flow through ecosystems is similar to money through economic systems, they both rely upon energy from the sun, they both have plants (agriculture) and minerals (mining) as their primary producers and have corresponding higher trophic levels (manufacturing and service industries have herbivores and and predators as their correlates).
    therefore theories that apply to one should apply to another. Species represent industries. Where we have waste in an industry, a new species must be introduced to balance the ecosytem (through tax or other monetary incentives).
    If you’re interested in taking this further I have quite a lot of ideas, how economics could be changed to mimic healthy ecosytems and become more stable, and how increased ecosysted health could be made to correlate directly to wealth.
    I don’t know if any of these ideas will work, because I’m not an economist, I’m an ecologist (well, I studied ecology at University).
    🙂

    Reply

    • Posted by jimdew on February 20, 2011 at 5:09 pm

      Thanks for commenting. I’d be cautious about pushing the analogy too hard. In ecosystems, a state of equilibrium is observable and (presumably) desirable. In economics, a state of equilibrium is hypothetical and not particularly desirable, since that stops improvement in human material well being. I guess my point is that both economies and ecosystems are very complex results of emergent self-ordering systems. Ecosystems have no moral dimension, being neither good nor bad. Economies determine how many starve and how many don’t, which is clearly a question of human morality.

      Reply

    • Posted by Billy Mark on July 8, 2011 at 3:27 pm

      I’d be interested in hearing more of Andrew’s ideas. How can i respond to him?

      Reply

      • Posted by jimdew on July 8, 2011 at 4:20 pm

        Sorry, I can’t find his contact. Maybe he’ll see your query here.

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