Science in Society Archive

Are Economic Systems Like Organisms?

Dr. Mae-Wan Ho

1. The need for an organic theory of the organism and of economic systems

Hodgson (1993) and Ormerod (1994) are the latest among a string of economists to declare their own discipline "in crisis" within the past 15 years. And like the others before them, they trace the crisis to the mechanistic foundations of modern western science itself. They call for an alternative, organicist approach to economics. Precisely the same critique of neo(classical) Darwinian theory of evolution has been taking place since the 1970s (see Saunders, and Oyama, this volume; Ho and Saunders, 1984; Ho and Fox, 1988; Ho, 1996a), with a "new organicism" emerging (see Ho, 1996b and references therein) which explicitly affirms Whitehead's (1925) view that nature cannot be understood except in terms of a theory of the organism that participates in knowing and in constructing reality. This happy coincidence in the evolution of ideas entices me to explore more tangible links between a tentative theory of the organism and sustainable economic systems.

As Hodgson and Ormerod and many others have observed, Darwinian and free-market theories are of the same cloth. The ideology of unbridled competition and self-interest, supposed to govern supply and demand in the free market, to a large extent, inspired Darwin's theory of evolution by natural selection - that unbridled competition and self-interest lead inevitably to the survival of the fittest. Free-market theory developed in the wake of industrialization and the rise of capitalism, and became translated into mathematics in analogy with the laws of equilibrium thermodynamics and statistical mechanics. Neo-Darwinian theory, expressed mathematically in population and biometrical genetics, is based on the same equilibrium, mechanistic assumptions, and has even closer links with statistics (see Weber and Depuy, this volume). The common roots of human economy and the "economy of nature" has been made explicit by Ghiselin (1974).

Koslowski (1995) has recently produced a comprehensive critique of both sociobiology and neo-Darwinian bioeconomics, pointing out that,

"The adoption of sociobiological, evolutionary theories in our culture is not merely a scientific question as to the correctness of hypothesis, but also a normative question of social philosophy, whether we want to and ought to understand ourselves by the sociobiological model...The way a society defines itself simultaneously constitutes an aspect of this society's reality.." (pp.83-84).

The present paper offers a theory of the organism and of a sustainable economic system as an organism. I hope thereby to define an alternative social reality to the neo-Darwinian, which many of us would find more consonant with our deepest experience of nature's unity.

A sustainable system has all the essential characteristics of an organism - an irreducible whole that develops, maintains and reproduces, or renews, itself by mobilizing material and energy captured from the environment. What is the nature of the material and energy mobilization that makes an organism? I begin with a brief description of a tentative theory of the organism - developed in detail elsewhere (Ho, 1993; 1994a, 1995a,b; 1996b,c) - as a dynamically and energetically closed domain of cyclic non-dissipative processes coupled to irreversible dissipative processes, which effectively frees the organism from thermodynamic constraints so that it is poised for rapid, specific intercommunication, enabling it to function as a coherent whole. I shall then show how this novel theoretical framework may begin to provide normative criteria for sustainable economic systems, thereby also exposing some of the inadequacies of current models and assumptions.

2. What is an organism?

2.1 The organism transcends thermodynamic constraints

Organisms are so enigmatic from the physical, thermodynamic point of view that Lord Kelvin, co-inventor of the second law of thermodynamics, specifically excluded them from its dominion (Ehrenberg, 1967). As distinct from heat engines which require constant input of heat to do work, organisms are able to work without a constant energy supply, and moreover, can mobilize energy at will, whenever and wherever required, and in a perfectly coordinated way. Similarly, Schrödinger (1944) was impressed with the ability of organisms to develop and evolve as a coherent whole, and in the direction of increasing organization, in defiance of the second law. He suggested that they feed upon "negative entropy" to free themselves from all the entropy they cannot help producing. The intuition of both physicists is that energy and living organization are intimately linked.

The idea that open systems can "self-organize" under energy flow became more concrete in the concept of dissipative structures developed by Prigogine, (1967) and Haken (1977) that depend on the flow and dissipation of energy, such as the Bénard convection cells and the laser. In both cases, energy input results in a phase transition to global dynamic order in which all the molecules or atoms in the system move coherently. From these and other considerations, I have identified Schrödinger's "negative entropy" as "stored mobilizable energy in a space-time structured system" (Ho, 1993, 1994a, 1995b), which begins to offer a possible solution to the enigma of living organization.

2.2 The organism stores mobilizable energy over all space-times

The key to understanding the thermodynamics of the living system is neither energy flow nor energy dissipation, but energy storage under energy flow (Fig. 1). Energy flow is of no consequence unless the energy is trapped and stored within the system where it circulates before being dissipated. A reproducing life cycle, i.e., an organism, arises when the loop of circulating energy closes. At that point, we have a life cycle within which the stored energy is mobilized, remaining stored as it is mobilized, and coupled to the energy flow.

Figure 1. Energy flow, energy storage and the reproducing life-cycle

Figure 1. Energy flow, energy storage and the reproducing life-cycle

Energy storage depends on the highly differentiated space-time structure of the life cycle, whose predominant modes of activities are themselves cycles of different sizes, spanning many order of magnitudes of space-times, which are all coupled together, and feeding off the one-way energy flow (Ho, 1993; 1995b, 1996c,d). The more coupled cycles there are in the system, the more energy is stored, and the longer it takes for the energy to dissipate. The average residence time of energy in the system (Morowitz, 1968) is therefore a measure of the organized complexity of the system. An intuitive representation is given in Figure 2. I have proposed (Ho, 1994a; 1995b) that open systems capable of storing energy tends to evolve towards an extremum, or end-state, in which all space-time modes become equally populated with energy under energy flow. This implies an evolution towards increasing complexity, which we shall come back to later.

Figure 2. The many-fold cycles of life coupled to energy flow

Figure 2. The many-fold cycles of life coupled to energy flow

Coupled processes are familiar in metabolism in living systems: practically all thermodynamically uphill reactions - those requiring energy input - are coupled to the thermodynamically downhill ones - those yielding energy - (see Harold, 1988; Ho, 1995a). That living processes are organized in cycles is also intuitively obvious by a casual examination of the metabolic chart depicting the known biochemical reactions in our body, which shows how the cycles are entangled in a complicated web-like network. Another prominent way in which cycles appear is in the familiar form of the wide spectrum of biological rhythms - with periods ranging from milliseconds for electrical activities of single cells to circadian and circa-annual cycles in whole organisms and populations of organisms (Breithaupt, 1989; Ho, 1993). These cycles also interlock to give the organism a complex, multidimensional, entangled space-time, very far removed from the simple, linear space and time of Newtonian physics (Ho, 1993; 1994b). Thus, integral relationships are maintained between well-known cycles such as the heart beat and the respiratory rate (Breithaupt, 1989). Remarkably, mutations in two genes of Drosophila which speed up, slow down or abolish circadian rhythm, also cause correlated changes in the millisecond wing beat cycle of the male fly's love song (see Zeng, et al, 1996). This correlation spans seven orders of magnitude of characteristic timescales, reflecting the full extent of storage and mobilization of energy in the living system. As all the space-time modes are coupled together, energy input into any mode can be readily delocalized over all modes, and conversely, energy from all modes can become concentrated into any mode. In other words, energy coupling in the living system is symmetrical, as argued in detail elsewhere (Ho, 1993; 1994a; 1995a,b; 1996c,d).

In analogy with the treatment of the steady-state by Onsager, Helmholtz and others (see Denbigh, 1951), I propose (Ho, 1966c,d) that the organism is a superposition of non-dissipative cyclic processes, for which the net entropy production balances out to zero, i.e., SDS = 0, and dissipative, irreversible processes, for which the entropy production is greater than zero, i.e., SDS > 0 (Fig. 3).

Figure 3. The organism frees itself from the contraints of energy conservation and the second law of thermodynamics

Figure 3. The organism frees itself from the contraints of energy conservation and the second law of thermodynamics

The cyclic non-dissipative branch will include most living processes because of the ubiquity of coupled cycles, for which the net entropy production most probably does balance out to zero, as Schrödinger (1944) had surmised. In this way, the organism achieves dynamic closure to become a self-sufficient energetic domain (Ho, 1996c,d). The dynamic closure of the living system has a number of important consequences. First and foremost, it frees the organism from the immediate constraints of energy conservation - the first law - as well as the second law of thermodynamics, thus offering a solution to the enigma of the organism posed by Lord Kelvin and Schrödinger. There is always energy available within the system, for it is stored and mobilized at close to maximum efficiency over all space-time domains.

Two other consequences of dynamic closure are that, it frees the organism from mechanistic constraints, and creates, at least, some of the basic conditions for quantum coherence.

2.3 The organism is free from mechanistic constraints

One of the hallmarks of an organism is its exquisite sensitivity to specific, weak signals. For example, the eye can detect single photons falling on the retina, where the light sensitive cell sends out an action potential that represents a million-fold amplification of the energy in the photon. Similarly, a few molecules of pheromones in the air are sufficient to attract male insects to their mates. No part of the system has to be pushed or pulled into action, nor be subjected to mechanical regulation and control. Instead, coordinated action of all the parts involves rapid intercommunication throughout the system. The organism is a system of excitable cells and tissues poised to respond specifically and disproportionately to weak signals, because the large amount of energy stored can automatically amplify weak signals, often into macroscopic actions (Ho, 1996c,d). That is why organisms cannot be understood in mechanistic terms.

Stored energy is coherent energy capable of doing work. That implies the organism is a highly coherent domain, possessing a full range of coherence times and coherence volumes of energy storage. In the ideal, it can be regarded as a quantum superposition of activities - organized according to their characteristic space-times - each itself coherent, so that it can couple coherently, i.e., non-dissipatively, to the rest. The theoretical arguments and empirical evidence for quantum coherence are presented in detail elsewhere (Ho, 1993; 1995b, 1996c,d).

The main implication of quantum coherence for living organization is that it maximizes both local freedom and global intercommunication. The organism is in a very real sense completely free (Ho, 1996b). Nothing is in control, and yet everything is in control. An organic whole is an entangled whole, where part and whole, global and local are so thoroughly implicated as to be indistingui-shable, and where each part is as much in control as it is sensitive and responsive. There is no choreographer orchestrating the dance of molecules in the living system. Ultimately, choreographer and dancer are one and the same (Ho, 1995a).

3. What would an organic economic system be like?

3.1 The organic approach versus the neo-classical mechanistic approach

Does the theoretical framework of the organism just presented have any relevance for economic systems? While both Hodgson (1993) and Ormerod (1994) stress the need to go beyond the mechanistic, linear approach of the classical theory to a nonlinear, organic approach, there are immediate problems that have to be addressed. First, there is no compelling a priori reason to believe that economic systems should be like organisms. Economic systems are constructed by human beings, and experience tells us that as many human institutions are run in hierarchical mechanistic fashion as those that are organic and cooperative.

There is a large element of self-fulfilling prophecy about human action, given that reality is shaped by human volition. Ormerod cites some revealing experiments carried out in Cornell University with economics students and students in other subjects. In the first experiment, they were paired up as 'allocator' and 'receiver'. The allocator was given $10 and told to divide the money between the two. The receiver could accept or reject what was offered by the allocator. If the receiver rejected the offer, then neither player received anything. The results showed that economics students, presumably having been taught the importance of self-interest, which, in the west, has a tendency to be confused with selfishness (see Ho, 1996e for detailed argument that they self-interest and selfishness are distinct), performed significantly more selfishly. In the second experiment, the students were each given some money and asked to divide it into two accounts, one public and the other private. Once all the decisions were taken, the students were told that the money in the public account would be increased by the organizer and would then be equally distributed among the students. For the group of students as a whole, the best solution was to put all their money in the public account, but for the individual, the best strategy was to put all the money in the private account, and still receive a share of the public money. The economics students were found to have contributed on average 20% to the public account, whereas the non-economics students contributed no less than 50%. This is a clear demonstration, not only that there is nothing 'pure' about knowledge in the sense of it being divorced from life (c.f. Hodgson, 1993). On the contrary, the wrong kind of knowledge can lead us astray, or in any case, lead us where we do not want to go. Ormerod (1994) and Hutton (1995) both argue that monetarist doctrines have shaped (and ruined) the economies of many nations since the 1970s.

The second problem with the organic theory of economics is that even if the economic system is like an organism, it may be more like a sick organism than a healthy, sustainable one. So, while Ormerod's analysis of unemployment data (in terms of Lotka-Volterra equations of ecology) makes much more sense than the linear classical approach, it leaves us in want of definite criteria whereby one may distinguish a healthy economy from the unhealthy. Here is where I believe a concept of a healthy organism may begin to provide normative, diagnostic criteria for a thriving, sustainable economy. In other words, I am proposing that a healthy economic system should be like a healthy organism. It is all too easy to forget that an economic system is a society of people bonded by social contract to make their living together, by utilizing and transforming resources, the purpose of which is to achieve a good life for all. It is therefore in everyone's interest to have a healthy economy.

The economy is, to first approximation, an open system through which resources extracted from the 'source' - the ecological environment - flow to a 'sink' - the most immediate mental picture of which is the municipal dump. Models of economic systems as dissipative structures have already been entertained by economists (see for example, Mayntz, 1992; Witt, 1996). Dissipation or wastage can come in many forms, as we shall see. Various commodities and services are exchanged or traded between 'source' and 'sink', and 'values' are added in processes of manufacture, creative acts of art or artesanship, whose equivalence to energy or otherwise need to be fully justified and explicated, along with such qualities of life as happiness, health, contentment and well-being, not to mention clean air, nutritious food, comfortable shelter from inclement weather and unpolluted environment.

Like an organism, the economic system may be conceptualized in terms of cyclic, nondissipative exchanges or transformations of resources, coupled to the dissipative flows or wastage due to deaths, depreciations and other entropy- generating, irreversible processes. As resources come ultimately from the ecological environment, it makes sense to embed the economic system properly in its ecological setting (Fig. 4).

Figure 4. The coupled flows of the economic and ecological cycles in a sustainable economic system.

Figure 4 makes clear that the ecological environment is also conceptualized as a self-sustaining organic system of cyclic non-dissipative processes coupled to the dissipative, one-way energy and material flow. To what extent is that justified? Lovelock's (1979; 1996) Gaia hypothesis proposes that the entire earth is a self-organizing, self-regulating system maintained far from thermodynamic equilibrium under energy flow. In those respects it is indeed like an organism (see also Saunders, 1994). (The most conspicuous sign of the earth's self-regulating property is the constancy of its atmosphere, which is a highly non-equiibrium mixture of gases. The atmospheres of Mars and Venus, by contrast, are equilibrium mixtures of spent, or exhaust gases reflecting their lifelessness.) The local environment of an economic system, say, Britain, also has its own local self-organizing, self-regulating properties to some extent, although it is clear that local economies (and environments) are coupled to the global through imports and exports of materials, human beings and capital.

In the context of the planetary ecosystem, it is recognized that human activity has had a far from benign effect. This has prompted the establishment of a "Geophysiological Society" for the study of planetary health (Kump, 1996). I suggest that our present model of the organism may begin to offer some diagnostic criteria of health.

3.2 How to be a healthy, organic economic system

To be a healthy organic economic system as much as a healthy organism, one should maximize balanced (symmetrical) flows and minimize dissipation for a given rate of inflow of resources. An obvious way to decrease dissipation is to minimize wastage and to recycle resources. Recycling also increases the dynamic closure which is a pre-requisite to a self-sustaining, self-reproducing organism or economy.

Another important factor that decreases dissipation is the degree of space-time differentiation which stores energy and delays the dissipation of the (energetic) value of resources (see Fig. 2). Space-time differentiation, I believe, is the reason complex ecological systems are more stable and viable (see Pimm, 1991; DeAngelis, 1992). Conversely, it is why intensive farming involving large-scale monocultures have such devastating ecological effects, as they wipe out space-time differentiation (or biodiversity) both directly through clearing vegetation for agriculture and indirectly through harmful effects of herbicides, pesticides and fertilizers on indigenous species. The real importance of biodiversity may be that a diverse ecosystem enables space-time differentiation to be maximized, rather than the number of species per se. Of course, the two are expected to be highly correlated, but space-time structure of ecosystems in terms of the life cycle times and spatial distribution of species has more to do with 'niche partitioning' for the most efficient utilization of resources than any conventional explanation in terms of natural selection.

I have proposed that open systems capable of storing energy will tend to evolve towards an increase in space-time differentiation for storing mobilizable energy over all space-times (Ho, 1994a), an increase in organized complexity, in other words. This self-organizing principle is manifest in the increasingly complex differentiation of multicellular organisms both in development and in evolution, into organs, tissues and cell types. These form so many nested dynamic compartments and microcompartments down to the interior of cells, facilitating the rapid and efficient mobilization of energy and resources (Ho, 1995a).

Some evidence that this principle may apply in ecology has come to my attention recently. There does seem to be an increasing complexity of trophic webs and diversity of niches and microniches in long established ecosystems compared with new ones or ones that have been stressed (Schneider and Kay, 1994). The increase in complexity of trophic webs is, moreover, associated with an increase in efficiency of energy and resource utilization. We are re-analyzing the data to see how they bear out the concept of energy storage presented here more precisely (Schneider, Kay and Ho, 1996).

In economic systems, the principle of increase in organized complexity can be seen to operate to some extent in the 'division of labour' subsequent to the industrial revolution. Witt (1996) offers a stylized record of the increasing differentiation of labour that accompanies the growth of modern economies. The substitution of human physical work by non-human energy sources and machines gave rise to a whole variety of "lower mental work" and services in controlling, monitoring, tooling and adminstering machinery. The production processes themselves also become more dependent on services as well as explicit technical knowledge and "higher mental work" of all specializations. This in turn, generated the need for training and education. Recent advances in automation and information technology are substituting out some categories and creating others of "lower mental work" such as microchip manufacture and assembly. They also give rise to "higher mental work" in software and hardware design.

There may indeed have been an increase in space-time differentiation of economic systems subsequent to industrialization. Agrarian communities are organized around the village and the fundamental annual crop cycle, with lower and higher harmonics of the yearly cycle of human activities in tune with the rotations and revolutions of planets and stars. By contrast, industrial societies do not have a fundamental timescale. Manufacturing outputs are in hours or days, and may take place simultaneously in spatially distant sites. Fixed capital machinery have typical turnover times of 5 to 10 years whereas human capital (Becker, 1966) takes 25 years or more to 'accumulate' and become obsolete in 65 years on average. Firms and small companies have a life time of perhaps 10 to 20 years, while large, multinational corporations may last over several human life-times. Electromagnetic and electronic communications and transactions, on the other hand, can take place across the globe in a matter of split-seconds. To facilitate circulation of resources over the entire gamut of space-times, the financial or banking systems have also evolved to increase space-time differentiation in the availability of capital.

Tapping non-human energy sources and substituting human physical work by machines in industrial societies have no doubt led to an increase in energy storage capacity in proportion to the space-time differentiation of the system. However, the increase in intensity of energy flow and exploitation of environmental resources may be far in excess of any increase in the system's storage capacity. For a given space-time structure, there is a probably an optimum to the rate of in-flux of resources, such that increasing the rate of extraction of resources from the environment beyond that point will no longer make the system more 'energetic', because there is a limit to the amount that can be stored. If resource flow is too fast, it will merely over-heat the system, i.e., increase the rate of dissipation. Whereas natural systems, including indigenous non-intensive agrarian societies have co-evolved with their ecological environment, industrialized systems have generally upset the balance by increasing the rate of exploitation, particularly of non-renewable environmental resources, far beyond the regenerative capacities of the environment, and outstripping the rate at which space-time differentiation can increase to absorb and store the extra inflow of resources.

Thus, while development and industrialization may improve the rate or efficiency of resource extraction, they do not necessarily make the system richer. Increase in resource extraction can indeed impoverish the system as a whole by destroying the environment or even undermine the pre-existing space-time structure of the economic system. This thermodynamic limit to productive resource utilization is the basis of the law of diminishing returns. A case in point is intensive agriculture associated with the Green Revolution in India, which not only depleted ecological biodiversity, but has also thrown small farmers and local distributors out of work, creating conflict that completely undermined the pre-existing socioeconomic structure (see Shiva, 1991). Space-time differentiation of both ecosystems and economic systems is an area which will benefit greatly from future investigations.

To be a truly healthy organism, there must be a balanced flow of energy and resources. That means maximizing coupled flows that are as equal or symmetrical as possible, so that resources can be readily mobilized or distributed throughout the system. In practice, it requires resources from parts of the system in surplus to be promptly diverted to other parts in deficit, as would be achieved with a responsive and responsible banking system. Reciprocity in coupling ensures that the direction of flow may be reversed at other times: debtors and creditors can reverse roles as the need arises. Symmetrical relationship implies the maximization of intercommunication, and vice versa.

To illustrate the principles of a healthy economic system, I shall briefly examine how the economy and economic systems may be analyzed with the help of this novel theoretical framework.

3.3 Money, energy and entropy

The first thing that comes to mind whever the word 'economics' is mentioned is money. It is indeed money that makes the economists' world go round. So, it is all too easy to equate the circulation of money in real world economy with energy in the living system. It has even been fashionable, in biochemistry text-books, to regard the universal energy transduction intermediate, ATP, as 'energy currency'. However, money is by no means equivalent to energy. If one wants a really good analogue to energy in real world economy, it is affection, trust and good will, for which, originally, the gift was a token. Later on, people traded goods or services, value for value, which again depend on trust and goodwill. The problem arose with the introduction of money, which is only arbitrarily related to the real value of things and services. I say this inspite of learned volumes which have been written on the subject (see Crowther, 1940).

The result is that all money is not equal. The flow of money can be associated with exchanges of real value or it can be associated with sheer wastage or dissipation. In the former case, it is more like energy flow, in the latter case, it is pure entropy. Classical economists beginning with Adam Smith have devoted much effort towards a theory of "natural value" of things and services (see Barber, 1967), on the explicit recognition that there is a natural price at which a 'freely' competitive system may come into equilibrium. However, as the experience of the past centuries have shown, prices are subject to all kinds of manipulations by human beings, which is why the economy cannot be tuned simply by controlling money supply (Hutton, 1995). Obviously, the energy/entropy divide is not clear-cut, and there is a continuum from a 'just' and completely equal exchange which is purely energetic, through various degrees of entropic costs when value for money is unbalanced, being either too high or too low, to the purely entropic when the flow is associated with wasteful, unnecessary consumer goods or services, or is essentially decoupled from anything else, for example, in the huge profits reaped in financial and money markets (c.f. Hutton, 1995).

Because the economic system depends ultimately on the flow of resources from the natural environment, which has its 'natural ecological economy', entropic costs can either be incurred in the economic system itself, or in the ecosystem. Thus, when the cost of valuable (non-renewable) ecological resources consumed or destroyed are not properly taken into account, the entropic burden falls on the ecological environment rather than on the economic system. But, as the economic system is necessarily coupled to and dependent on input from the ecosystem (see Fig. 4), the entropic burden in the latter will feedback on the economic system as diminished input, so the economic system becomes poorer as a result. In our model, poverty is absolute, as there is a finite optimum rate at which resources can be utilized and transformed. That also means when individuals amass excessive resources, others become poorer in absolute terms. Poverty threatens the survival of the system as a whole. It represents an unbalanced, uncoupled system (see below).

One might think that 'value' and 'worth' are too subjective to say anything rigorous about, but evidence that money is both energetic and entropic is provided by the well-known unreliability of assessing the real "wealth of nations" - equivalent to the mobilizable energy or resources stored in our model - from the Gross National Product (GNP) - the amount of spending, in US dollars, on goods and services carried out by various sectors of the economy. Several attempts have been made to improve on GNP. One example is the Measure of Economic Welfare (MEW), which takes account of unpaid household work, ascribes value to leisure and costs (negative GNP) to aspects of urbanization such as the necessity to pay for travel to work. Between 1929 and 1965 in the United States, MEW grew, on average, by 1.1% per annum compared to 1.7% per annum in GNP. Another recent suggestion is the Index of Sustainable Economic Welfare (ISEW), which makes deductions for depletion of non-renewable resources and long term environmental damage. For the years between 1950 and 1986 in the United States, ISEW grew by a mere 0.9% per annum compared to 2% in GNP (see Ormerod, 1994). These differences are perhaps minimum estimates of the entropic burden borne by the economic system and the ecosystem to which it is coupled. Entropic burdens, if unrelieved, are 'deaths' of the system.

Another suggestive estimate of energetic yield versus entropic costs come from the comparison of 25 rice cultivation systems (see Shiva, 1991), of which 8 are pre-industrial in terms of low fossil fuel input (2-4%) and high labour input (35-78%); 10 are semi-industrial with moderate to high fossil fuel input (23 - 93%) and low to moderate labour input (4 - 46%); and 7 are full-industrial with 95% fossil fuel input and extremely low labour input of 0.04 to 0.2%. The total output per hectare, calculated in GigaJoule (GJ, unit of energy) in pre-industrial systems fall into a low and a high output subgroup, the output of the low subgroup, comprising 5 of the 8 systems, are one-twentieth to one-fifth of the full-industrial yield. However, the output of the high subgroup are 2 to three times those of the full-industrial systems. The yield of semi-industrial systems are more homogeneous, with an average of 51.75 GJ, while the yield of full-industrial systems, even more uniform, average 65.99GJ.

When the ratio of total energetic output to total input is examined, however, pre-industrial systems range between 7 to 10, with the figures for the most productive systems being as high as 15 to 28. Semi-industrial systems gave ratios of 2 to 9, whereas the ratios of full-industrial systems are not much better than unity. These figures illustrate the law of diminishing returns remarkably well: there seems to be a plateau of output per hectare around 70-80 GJ, which is only rarely exceeded, as in the 3 high yielding preindustrial systems of Yunnan, China. Intensification of energy input leads to a drop in efficiency which is particularly sharp as input approaches the output ceiling. This drop in efficiency reflects the increasing entropic costs of high rates of dissipation, which occurs when the rate of energy input exceeds the capacity of the system to store the energy, as mentioned in the last Section. The exceptionally high output of the Chinese systems is also an indication that the energy storing capacity of a system can increase, depending on the space-time differentiation and the dynamic closures introduced. For example, the utilization of farmyard and human manure as organic fertilizers, which has been traditionally practiced in China, will have the effect of increasing dynamic closure (see also Section 3.5).

The living system depends, not just on stored energy, but stored mobilizable energy. Hence energy stashed away that cannot be mobilized is unavailable for work. As such, it is also equivalent to entropy. Thus, a country like Britain, dominated by the financial markets, and 'rentiers' who expect high returns from investments and underinvest (Hutton, 1995), bears all the hallmarks of a system with a high entropic load. Much of Britain's investment is also diverted overseas to exploit cheap labour costs or cheap resources, encouraging environmental destruction in the Third World. This further increases the entropic load on the global ecological system, which, as explained above, feeds back on the world economic system to make it poorer on the whole.

3.4 Symmetrical coupling and space-time structure in economic systems

Symmetrical coupling of energy mobilization is a hall-mark of the healthy organism. It is that which enables the system to mobilize energy at will and in a perfectly coordinated way. It involves certain reversibility of flows and reciprocity in relationships. What would these be for the economic system? It would be a relationship of trust and goodwill, of cooperation, of connectivity in the system, so that intercommunication is optimized. It would be a smooth and balanced coupling of production to consumption, of employer to employee, of lending to borrowing, of investment to modest profit-taking. It is based on a differentiated space-time structure, and a respect for that structure, so that debts and surpluses can be properly distributed and re-distributed to offset one another and to maintain the system as a whole.

A slight digression into the living system will illustrate what I mean. For our muscles to work, even under the extreme exertion of say, long distance running, or better yet, a man running away from a tiger, energy has to be efficiently mobilized over a range of space-time scales. The immediate energy supply is in the form of the universal energy intermediate, ATP, which biochemists themselves have likened to "energy currency". The important thing in a healthy system is that the ATP is never allowed to become depleted in the working muscle (otherwise the man will be mauled and killed by the tiger). How is that accomplished? It is accomplished by a cascade of energy 'indebtedness' to more and more distant, longer term energy stores, which are replenished after the crisis is over, and the man can recover and have a hearty meal (see Ho, 1995a). Thus, for the economic system to function effectively and efficiently, it has to achieve a smooth distribution and redistribution of surplus and indebtedness in space and time as the need arises.

In the free-market model, each player is supposed to out-compete every other, in order to reap the maximum benefit in the shortest time. The assumption is that the players on both sides of the relationship are equal so that if the producer produces shoddy goods and charge high prices, consumers will shop around and only buy the best and cheapest available, and so an equilibrium will eventually be reached. Even if that were true, a lot of unsustainable wastage or dissipation would have been generated before the equilibrium is reached. More to the point, real world economies consist of big, multinational companies as producers/employers who see it as their job to reap maximum profit for their shareholders, who, in any case, do not have any say in running the companies; and powerful banks as lenders who may charge high interest rates and expect quick repayment. In the absence of proper regulation, as in Britain's deregulated economy (see Hutton, 1995), those are just the conditions for uncoupling and dissipation.

Hutton has contrasted Britain with a number of different economies including Japan and Germany, which are deemed to be more successful than Britain. It is of interest that both Japan and Germany go to great lengths to create and foster cooperation and trust, between employers and employees, among different companies (through cross share-holdings in Japan) and between companies and banks, which make much more favourable, long term loans to companies, respecting the realistic timescales required for companies to mature.

In Germany, employees are represented on the board of directors of companies and participate fully in making decisions. This has meant that Germany has largely avoided the uncoupling effects of long-term strike actions. Britain, by contrast, has had an adversarial employer-employee relationship which led to the growth of trade union powers in post-war years. The Thatcher era succeeded in breaking the unions only to create the greatest uncoupling of all, the high unemployment rate, with irreplaceable talents and skills going to waste, not to mention the burden of human suffering and social alienation. Unemployment and poverty threatens the survival of the system as a whole.

3.5 Dynamic closure and sustainability

As emphasized earlier, a thriving economic system has two branches, the cyclic, non-dissipative branch, which requires dynamic closure, and the irreversible, dissipative branch. Dynamic closure is the key to a self-reproducing or sustainable economy. This principle has been well-appreciated by traditional indigenous farmers in their "internal input farming system" (Shiva, 1991), which essentially involves closing the nutrient cycles of plants and animals as much as possible. It depends on a reciprocal, symbiotic relationship between farmers who farm and tend, and propagate the animals and plants, which in return provide sustenance for them and their community. It involves the minimization of waste by judicious recycling of nutrients, and diversification in the utilization of resources. By contrast, the so-called "high yielding varieties" introduced by the Green Revolution are designed to break nutrient cycles, dispense with recycling to depend on intensified external input. The lack of dynamic closure and the intensification of external input are the reasons why fully industrialized agricultural practices are so energy inefficient, and ultimately nonsustainable.

Dynamic closure depends on cycles of human reproduction, reproduction of life-stock and crop-plants, manufactured goods and so on, integrating with cycles of investment and reinvestment for self-renewal and maintenance, if not for growth. The cycles are interlocked, or catenated. Present generations work, not just for themselves, but for their children's and parent's generations. Past debts are being repaid, or surpluses consumed, while present debts or surpluses are being created for the future. These circulation of resources in space and time are essential for the survival of the system as a whole. Each generation invest and re-invests towards the immediate and distant futures.

When these cycles are broken, the dissipative branch inevitably increases at the expense of the non-dissipative, and threatens the sustainable reproduction of the system itself. Re-investment must occur in the business/industrial sector, as much as in housing, public transport and most of all, in education. Skilled labour, as well as professionals and managers have to be trained and retrained to replace the aging or obsolete generations. UK industry has had a poor record in investing in people, despite the recent initiative by the very name. The depletion of "human capital" means that the system effectively wastes away. There is indeed a desperate need for renewing and reconnecting the life-giving, life-sustaining cycles.


I have outlined a theory of the living system as a dynamically closed, self-sufficient energetic domain of cyclic non-dissipative processes coupled to irreversible dissipative processes. Mobilizable energy is stored over all space-time domains, so that intercommunication is optimized, enabling the system to function as a coherent whole.

I show how this conceptual framework can provide diagnostic criteria for a healthy organism and by extension, a healthy economic system. A healthy organism maximizes cyclic, non-dissipative, symmetrically coupled flows while minimizing irreversible, dissipative flows of energy and resources. It maximizes space-time differentiation, and dynamic closure so as to increase energy storage within the system. This leads to new insights concerning the equivalence of money to both energy and entropy, such that economies cannot be tuned simply by controlling the money supply. It also makes explicit the role of trust, cooperation and goodwill in fostering symmetrically coupled flows, and the importance of re-investment in all sectors in achieving dynamic closure of the system on which a self-reproducing, sustainable economy is ultimately dependent.


I am grateful to Ulrich Witt, Bruce Weber, Susan Oyama, Peter Saunders and Peter Koslowski for comments on earlier drafts of this paper. In addition, I would like to thank Teddy Goldsmith, Vandana Shiva, Martin Khor and many other colleagues of the Third World Network for raising my awareness on world economic issues. None of those mentioned should be held responsible for the shortcomings.

Article first published 01/08/00


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