Scientific American: The Evolution of Future = Wealth

When the world changes unpredictably over the = course of=20 centuries, no one is shocked: Who blames the Roman centurions for = not=20 foreseeing the invention of rocket launchers? Yet monumental and=20 surprising transformations occur on much shorter timescales, too. = Even in=20 the early 1980s you would have been hard-pressed to find people=20 confidently predicting the rise of the Internet or the fall of the = U.S.S.R. Unexpected change bedevils the business community = endlessly,=20 despite all best efforts to anticipate and adapt to it--witness = the=20 frequent failure of companies' five-year plans.=20

Economists have so far not been able to offer much help to = firms trying=20 to be more adaptive. Although economists have been slow to realize = it, the=20 problem is that their attempts to model economic systems focus on = those in=20 market equilibrium or moving toward it. They have drawn their = inspiration=20 predominantly from the work of physicists in this respect (often = with good=20 results, of course). For instance, the Black-Scholes model used = since the=20 1970s to predict the volatility of stock prices was developed by = trained=20 physicists and is related to the thermodynamic equation that = describes=20 heat.=20

As economics attempts to model increasingly complicated = phenomena,=20 however, it would do well to shift its attention from physics to = biology,=20 because the biosphere and the living things in it represent the = most=20 complex systems known in nature. In particular, a deeper = understanding of=20 how species adapt and evolve may bring profound--even=20 revolutionary--insights into business adaptability and the engines = of=20 economic growth.=20

One of the key ideas in modern evolutionary theory is that of=20 preadaptation. The term may sound oxymoronic but its significance = is=20 perfectly logical: every feature of an organism, in addition to = its=20 obvious functional characteristics, has others that could become = useful in=20 totally novel ways under the right circumstances. The forerunners = of=20 air-breathing lungs, for example, were swim bladders with which = fish=20 maintained their equilibrium; as some fish began to move onto the = margins=20 of land, those bladders acquired a new utility as reservoirs of = oxygen.=20 Biologists say that those bladders were preadapted to become = lungs.=20 Evolution can innovate in ways that cannot be prestated and is=20 nonalgorithmic by drafting and recombining existing entities for = new=20 purposes--shifting them from their existing function to some = adjacent=20 novel function--rather than inventing features from scratch.=20

Economics should shift its attention from physics to = biology

=20

A species' suite of adaptive features defines its ecological = niche=20 through its relations to other species. In the same way, every = economic=20 good occupies a niche defined by its relations to complementary = and=20 substitute goods. As the number of economic goods increases, the = number of=20 ways in which to adaptively combine those goods takes off = exponentially,=20 forging possibilities for all-new niches. The autocatalytic = creation of=20 niches is thus a main driver of economic growth.=20

We do not yet know what makes some systems more adaptable than = others,=20 but research on complexity has yielded some clues. Some of my own = work on=20 physical systems called spin glasses suggests that the level of = central=20 control over subsidiary parts of a system is an important = consideration.=20 Too much control freezes the system into limited configurations; = too=20 little causes it to wander aimlessly. Only systems that hover on = the=20 border between order and chaos exhibit the needed general = stability and=20 capacity to explore the universe of possible solutions to = challenges.=20

The path to maximum prosperity will depend on finding ways to = build=20 economic systems in which new niches will generate spontaneously = and=20 abundantly. Such an approach to economics is indeed radical. It is = based=20 on the emergent behavior of systems rather than on the reductive = study of=20 them. It defies conventional mathematical treatments because it is = not=20 prestatable and is nonalgorithmic. Not surprisingly, most = economists have=20 so far resisted these ideas. Yet there can be little doubt that = learning=20 to apply these lessons from biology to technology will usher in a=20 remarkable era of innovation and growth.=20


October 16, 2006

The Evolution of Future = Wealth

Technologies evolve much as species do, and = that=20 underappreciated fact is the key to growth

By Stuart A. Kauffman

When the world changes unpredictably over the = course of=20 centuries, no one is shocked: Who blames the Roman centurions for = not=20 foreseeing the invention of rocket launchers? Yet monumental and=20 surprising transformations occur on much shorter timescales, too. = Even in=20 the early 1980s you would have been hard-pressed to find people=20 confidently predicting the rise of the Internet or the fall of the = U.S.S.R. Unexpected change bedevils the business community = endlessly,=20 despite all best efforts to anticipate and adapt to it--witness = the=20 frequent failure of companies' five-year plans.=20 Economists have so far not been able to offer much help to = firms trying=20 to be more adaptive. Although economists have been slow to realize = it, the=20 problem is that their attempts to model economic systems focus on = those in=20 market equilibrium or moving toward it. They have drawn their = inspiration=20 predominantly from the work of physicists in this respect (often = with good=20 results, of course). For instance, the Black-Scholes model used = since the=20 1970s to predict the volatility of stock prices was developed by = trained=20 physicists and is related to the thermodynamic equation that = describes=20 heat.=20 As economics attempts to model increasingly complicated = phenomena,=20 however, it would do well to shift its attention from physics to = biology,=20 because the biosphere and the living things in it represent the = most=20 complex systems known in nature. In particular, a deeper = understanding of=20 how species adapt and evolve may bring profound--even=20 revolutionary--insights into business adaptability and the engines = of=20 economic growth.=20 One of the key ideas in modern evolutionary theory is that of=20 preadaptation. The term may sound oxymoronic but its significance = is=20 perfectly logical: every feature of an organism, in addition to = its=20 obvious functional characteristics, has others that could become = useful in=20 totally novel ways under the right circumstances. The forerunners = of=20 air-breathing lungs, for example, were swim bladders with which = fish=20 maintained their equilibrium; as some fish began to move onto the = margins=20 of land, those bladders acquired a new utility as reservoirs of = oxygen.=20 Biologists say that those bladders were preadapted to become = lungs.=20 Evolution can innovate in ways that cannot be prestated and is=20 nonalgorithmic by drafting and recombining existing entities for = new=20 purposes--shifting them from their existing function to some = adjacent=20 novel function--rather than inventing features from scratch.=20 *Economics should shift its attention from physics to = biology* =20 A species' suite of adaptive features defines its ecological = niche=20 through its relations to other species. In the same way, every = economic=20 good occupies a niche defined by its relations to complementary = and=20 substitute goods. As the number of economic goods increases, the = number of=20 ways in which to adaptively combine those goods takes off = exponentially,=20 forging possibilities for all-new niches. The autocatalytic = creation of=20 niches is thus a main driver of economic growth.=20 We do not yet know what makes some systems more adaptable than = others,=20 but research on complexity has yielded some clues. Some of my own = work on=20 physical systems called spin glasses suggests that the level of = central=20 control over subsidiary parts of a system is an important = consideration.=20 Too much control freezes the system into limited configurations; = too=20 little causes it to wander aimlessly. Only systems that hover on = the=20 border between order and chaos exhibit the needed general = stability and=20 capacity to explore the universe of possible solutions to = challenges.=20 The path to maximum prosperity will depend on finding ways to = build=20 economic systems in which new niches will generate spontaneously = and=20 abundantly. Such an approach to economics is indeed radical. It is = based=20 on the emergent behavior of systems rather than on the reductive = study of=20 them. It defies conventional mathematical treatments because it is = not=20 prestatable and is nonalgorithmic. Not surprisingly, most = economists have=20 so far resisted these ideas. Yet there can be little doubt that = learning=20 to apply these lessons from biology to technology will usher in a=20 remarkable era of innovation and growth.=20 ADVERTISEMENT

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