Loet wrote:
Yes: because the economy is equilibrating. Innovations upset the tendency
> towards equilibrium (Schumpeter) and thus induce cycles into the economy.
> This is the very subject of evolutionary economics.
>
> Marx's problem was that the cycles cannot be stopped and have a tendency
> to
> become self-reinforcing. However, the modern state adds the institutional
> mechanism as another subdynamics.
Besides innovations, even stronger cause of instability of the capitalist
economy is its tendency to create diversity as a consequence of competitive
interactions. Diversity, like in ecosystems, means redundancy and
informational entropy (just think about the variety of any consumer product
available on the market). Because of general technical constraints in
production (production indivisibility, economy of scale, etc.) and
forward-looking investment decisions which are based on incomplete
information, redundancy of firms transfers aperiodically in absolute
redundancy of output (overcapacity) that clears itself during the downward
phase of the economic cycle. Marx was right in that the cycles cannot be
stopped but wrong on the prediction that they will become worse. After the
Great Depression an nstitutional toolbox of countercyclical policies was
gradually put in effect, which constrained the absolute values of peaks and
bottoms, but did not eliminate the business cycle. Redundancy/diversity, on
the other hand, is essential for competition and innovation to persist in a
economy. It creates informational entropy and gives a momentum to
material/energy entropy production, as the constant influx of diversity
maintains the economic system in it "juvenile", highly dissipative state.
Best
Igor
----- Original Message -----
From: "Loet Leydesdorff" <loet@leydesdorff.net>
To: "'Stanley N. Salthe'" <ssalthe@binghamton.edu>;
<fis@listas.unizar.es>
Sent: Monday, March 05, 2007 8:22 AM
Subject: RE: [Fis] Continuing Discussion of Social and Cultural Complexity
>> It is indeed tempting to suppose that, in the philosophical
>> perspective, the object of human economies is to produce entropy!
>>
>> STAN
>
> Yes: because the economy is equilibrating. Innovations upset the tendency
> towards equilibrium (Schumpeter) and thus induce cycles into the economy.
> This is the very subject of evolutionary economics.
>
> Marx's problem was that the cycles cannot be stopped and have a tendency
> to
> become self-reinforcing. However, the modern state adds the institutional
> mechanism as another subdynamics. I am sometimes using the metaphor of a
> triple helix among these three difference subsystems of communication and
> control: economic equilibration, institutional regulation, and
innovation.
>
> A triple helix unlike a double one cannot be expected to stabilize (in a
> coevolution), but remains meta-stable with possible globalization. I
> suppose
> that this has happened.
>
> With best wishes,
>
>
> Loet
>
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>
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Received on Thu Mar 8 12:26:05 2007
