Dear Friends,
On behalf of Igor Matutinovic, I am initiating the discussion thread on
Economic Networks.
We are looking forward to much fruitful dialog.
The best to all,
Bob & Igor
************************************************************************
Organic
and Cognitive Dimensions
of
Socioeconomic Systems and Their
Relationship
to Sustainability
Igor
Matuttinovic
GfK
- Center for Market Research
Zagreb,
Croatia
<igor.matutinovic@gfk.hr>
and
Bob
Ulanowicz
Chesapeake
Biological Laboratory
Solomons,
Maryland USA
<ulan@cbl.umces.edu>
Let us assume that economies have two basic
dimensions of
internal order: one is organic and relates to functional and structural
properties, which have their analogue in other living systems like
ecosystems; and the other is cognitive, meaning that a broad
perspective of the world that human agents hold streamlines collective
behavior and economic activities. Both dimensions of order are
maintained by dissipating the fabric of the natural environment. These
dimensions are dynamic and the change in their internal parameters
reflects on the scale and intensity of the interference with natural
structures and processes.
On the organic side we propose that dynamics in
industrial
market economies are essentially autocatalytic (Matutinovic, 2005).
Autocatalysis refers to "any cyclical concatenation of processes
wherein each member has the propensity to accelerate the activity of
the succeeding link" (Ulanowicz 1999, pp.41-55). Through competition
and selection autocatalysis imparts organization to a system, which can
be recognized, among other things, in the asymmetric distribution of
flows among its members. It appears that industrialized economies have
reached a high level of internal organization (ascendency),
characterized by (truncated) power-law distributions across different
structural and dynamical variables (size of firms, size of cities,
degree distribution of business links, business cycle fluctuations
etc.). (Matutinovic, 2002; 2005)
Because of their inner dynamics and openness to the
wider
system, economic autocatalytic assemblages, like their counterparts
elsewhere in the living realm, exhibit growth and centripetality in
that they amass material and energy from their environment.
Additionally, as a consequence of competition and selection,
autocatalysis tends to ratchet all participants towards higher levels
of performance (Ulanowicz 1997, p.46). This process is not confined to
a single loop but transfers its influence to the wider systemic
environment via connections that exist among assemblages of different
autocatalytic loops. One example of autocatalytic process in economy,
which comprises all of the above mentioned properties, is the formation
of industrial clusters. Centripetal process of amassing material and
energy can also be seen on the global scale, where the G7 (economic
system level) and multinational companies (agent level) appropriate
disproportionate chunks of natural sources and sinks. Modern market
economies are probably much more efficient in their resource
consumption than the early industrial or pre industrial societies. The
problem is, clearly, that the scale of their dissipative processes has
increased markedly with respect to those of natural sources and sinks,
a situation that is generally regarded as unsustainable.
Another aspect of "organic" in socioeconomic
systems is related
to diversity. Ecological economists generally agree that functional and
structural aspects of biodiversity have their analogue in socioeconomic
systems, especially when we regard the global economy and the
biosphere. Socioeconomic diversity is functionally related to
thermodynamic efficiency in energy/resources exploitation, adaptation
to local environments, avoiding of head to head competition over
resources and preserving resilience to yet unknown shocks and boundary
conditions (Matutinovic, 2001). The issue of loss of socioeconomic
diversity is closely related to that of scale of dissipative processes:
as the number of industrialized economies increases (maximum power
efficiency increases) the cumulative burden on environment becomes
unbearable, and the thermodynamic efficiency of the system goes down
(as societies "modernize" according to the Western model they become
increasingly unable to stay with their particular local climatic and
other natural endowments).
On the cognitive side we can make distinction between
worldviews, institutions and mental models. One can define worldview as
a set of beliefs, symbols, values and segments of objective knowledge
that is widely shared by a society over a considerable period of time
(for at least one generation). It provides a socially-shared cognitive
framework that relates an individual to her or his natural and social
environment. Institutions generally define behavioral framework in a
given society. They streamline most of the societal and economic
activities, and provide a degree of behavioral stability and
predictability over longer periods of time. Institutions may be defined
as "a regularity of behavior or a rule that is generally accepted by
members of a social group, that specifies behavior in specific
situations, and that is either self-policed or policed by external
authority". Mental models are cognitive devices employed at the level
of the individual agent, and are composed of values, beliefs, rules,
and habits that relate an agent to everyday life situations. The
process of interaction between mental models at the individual level
and worldviews and institutions at the level of society is complex and
multi-directional, to the extent that it is impossible to construct
clear-cut boundaries of mutual influence or unique causal loops. We can
focus, however, on influences that work down the heirarchy: from the
worldview, to institutions, and finally to the behavior of the
individual. Since a dominant worldview and its institutional framework
are shared by a society, they define its prevailing and characteristic
behavioral patterns. There is a feedback from behavior to the worldview
which symbolizes that individual or group actions may affect the
prevailing paradigm either gradually (cultural evolution) or abruptly
(social revolution). Technological advance and change, which result
from individual and collective actions, feeds eventually back to
behavior by affecting directly life styles, and indirectly by
influencing the dominant worldview. An example of the first is the
impact of mass production of automobiles on individual transport
habits, and an instance of the second is the reinforcement of those
values that are related to individualism, freedom of movement, and
material possessions as status symbols. Collective behavior and
available technology define the overall impact that socioeconomic
system exerts on environment.
Selection <---------------
Process \
| |
| |
| ______________ WORLDVIEW
<---------.
| / \
| | |
\|/ \|/ |
Institutions Update |
| |
| _ ENVIRONMENT |
| /| \ |
| Action / Reaction \ |
| / _\| |
--> Behavior Feedback
Information
__
/\
/
Uncertainty
FIGURE
1
A dynamical model of institutional change under feedback
would
depict such change as involving two major elements: the natural
environment, and the cognitive constraints embodied in the prevailing
worldview (Figure 1). The institutional framework defines the
collective behavior of a society with respect to the natural
environment - basically the patterns of exploitation of its sources and
sinks through the activities of production and consumption. These
activities produce a reaction from environment which feeds back to the
world view in the form of information. Proper interpretation of
feedback information is disturbed, however, by fundamental and
procedural uncertainty, since scientific models and theories cannot
fully encompass the complex dynamics of ecosystems or the biosphere. An
ambiguous or partial interpretation of feedback information will impact
negatively on its ability to update the dominant worldview. For
example, uncertainty in the interpretation of data related to global
warming weakens any update of the current materialistic, growth
oriented worldview and, consequently, results in only palliative
institutional changes (a slow and uncertain adoption of Kyoto Protocol;
the introduction of trading in pollution permits instead of imposing
more stringent rules on industry and consumer behavior, etc.)
Similarly, early misinterpretation of low ozone levels in Antarctic as
"data noise" most probably retarded global institutional action (the
Montreal Protocol) against the application of CFCs in manufacturing and
consumer products. Institutions are subject to a selection process
that may be cultural (social and economic) or environmental.
A negative environmental feedback, however, does not act on
an
institutional framework directly - a dominant worldview acts as a
"censoring body" that filters alternative courses in institutional
change regardless of their objective value or urgency. This process of
biased and constrained institutional selection retards societal
learning and adaptive change in collective behavior. The model implies
the likelihood of a worldview replacement after a single, strong update
event (e.g. environmental collapse) or when the cumulative effect of
the updating process had surpassed a threshold, beyond which a dominant
worldview becomes untenable. However, when this final change might
happen remains intrinsically unknowable. It remains a fundamental
uncertainty as to whether the dominant worldview in the North will be
changed in time to avoid major ecological/socioeconomic crisis.
It is important also to note that the welfare liberalism of
the
North and the drive towards economic globalization are both strongly
tied to the notion of efficiency. Time and again, socio-economic
changes are justified on the basis of their contributions to overall
efficiency. While it is true that autocatalysis promotes efficiency,
without which an economic community is liable to being displaced, the
lesson from the biological realm is that efficiency is not what
sustains communities in the long run. Diversity of processes and
sectors implies the co-existence of various degrees of efficiency. The
cost of retaining structures and processes of less than optimal
efficiency (referred to as "overhead" in network analysis) can be more
than recouped when the system is impacted by a novel disturbance. At
such time of stress, it is usually from the suboptimal system elements
that a response arises that allows the system to persist. As an extreme
example, a community that outsources most of its manufacturing
capability in the name of the efficiency of low-cost labor elsewhere,
obviously becomes highly vulnerable to any multitude of perturbations
that might disrupt global trade. The integrity of ecosystems is said to
reside in a tension between the (opposing) trends towards efficiency
and diversity. To extirpate either would render the system
unsustainable (Ulanowicz 1995.) The same likely could be said of social
and economic systems.
The pursuit of sustainability may be, therefore, related
primarily to the possibility of change of the prevailing (Western)
worldview based on materialistic values and an unjustified,
disproportionate belief in the ability of market efficiency alone to
mediate most of the social, economic and environmental relations. The
positive change of dominant worldview should subsequently reduce the
intensity of autocatalytic processes in the world economy, and release
the current pressure to diminish cultural diversity. It will,
therefore, reflect on the "organic" dimension. Without such systemic
changes we can hardly hope that any further improvements in
organization of material/energy flows (industrial ecology, cleaner
production and similar concepts) will help solve the problem of our
impact on Nature. The "window of vitality" must be related in
socioeconomic systems to both cognitive and organic dimensions.
References:
Matutinovic, I. 2001. "The Aspects and the Role of Diversity in
Socioeconomic Systems: an Evolutionary Perspective". Ecological
Economics, 2, 239-256.
Matutinovic, I. 2002. Organizational patterns of economies: an
ecological perspective. Ecological Economics, 3, 421-440.
Matutinovic, I. 2005. The Microeconomic Foundations of Business Cycles:
>From Institutions to Autocatalytic Networks. Forthcoming in Journal of
Economic Issues, December.
Ulanowicz, R.E. 1995. Ecosystem integrity: A causal necessity. pp.
77-87. In: L. Westra and J. Lemons (eds.). Perspectives on
Ecological Integrity. Kluwer, Dordrecht.
Ulanowicz, R. E. 1997. Ecology, the Ascendant Perspective. New York:
Columbia University Press,.
Ulanowicz, R.E. 1999. Life after Newton: an ecological metaphysic.
BioSystems 50: 127-142.
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Received on Tue Apr 26 15:35:43 2005
