The Competitiveness of Nations
in a Global Knowledge-Based Economy
|
Exhibit 2: Production Function of a Knowledge-Based Economy
14.3.2 Coevolution &
Coconstruction |
Epithet It is safe to say that enterprise which depends on
hopes stretching into the future benefits the community as a whole. But individual initiative will only be
adequate when reasonable calculation is supplemented and supported by animal
spirits, so that the thought of ultimate loss which often overtakes pioneers,
as experience undoubtedly tells us and them, is put aside as a healthy man
puts aside the expectation of death. John Maynard Keynes, The General Theory of Employment, Interest and Money: Chapter 12 The State of Long-Term Expectations, 1936. * Index & Epithet not in published dissertation |
1. I have now progressively and in increasing depth and detail defined knowledge as:
a monophonic abstract Platonic noun reflecting the elemental biological human need to know, the immeasurability and incommensurability of knowledge and its general expression in inherently limited human languages including mathematics. The biological need to know constitutes the material cause of knowledge;
a diaphonic verb – Science by Design – reflecting that the reductive method including in the experimental sciences always take place within the constructive framework of Design. Science by Design constitutes the efficient cause of knowledge;
triaphonic forms of personal & tacit, codified and tooled knowledge then expressed as inputs to the production process as codified & tooled capital, personal & tacit labour and toolable natural resources, and as final outputs of that process as the Person, Code and Tool. These three constitute the formal cause of knowledge –somatic and extra-somatic; and,
quadraphonic content individuated, socialized, legalized and economized using the etymological WIT, psychological PSI, epistemological EPI, pedagogic PED, legal IPR and economic FLX. Content constitutes the final cause of knowledge – the what, why, who, where and when of knowledge
2. New knowledge contributes to creative destruction (Schumpeter 1942, 81-86) of the Nation-State or what Kauffman calls ‘coconstruction’ and ‘coevolution’ (Kauffman 2000, 216). Both the irresistible force (knowledge) and the immovable object (the Nation-State) are organic not mechanical entities. Ideologically, they are ‘epistemic objects’ (Rheinberger 1997).
3. New knowledge affects some or all of the constituent institutions and networks that make up a Nation-State. It mutates their structure, form and function. It alters their ‘fitness’. In the Standard Model of economics, the relevant structure is the production function. The national production function is simply the horizontal summation of the individual production functions of all firms. There is no government. All production is done by private firms while the State buys from such firms using compulsory payments from the population, i.e., taxes. The State is, in this sense, a consumer, not a producer.
4. First, I will examine the term ‘competitiveness’ as used in current debate about the global knowledge-based economy. Second, I will review the production function of a traditional manufacturing-based economy and then re-design it to reflect a knowledge-based economy. Third, I will propose biological ‘fitness’ as a more appropriate and robust criterion than competitiveness. Fourth, and finally, I will consider comparative advantage with respect to knowledge as a noun, verb, form and content. And, as will be demonstrated, comparative advantage is in fact ideologically commensurable between biology and economics.
225
1. As noted by Stéphane Garelli, Director of the World Competitiveness Project, some scholars believe that the Nation-State does not compete, only business enterprise (Garelli 2002). This flies in the face of history. The Nation-State is the most complex organizational form yet evolved. It functions in an environment populated by other Nation-States. In one form or another, it has been involved in competition with its fellows since before recorded history, often the most violent competition - war. Even in times of peace, Nation-States constantly defend and strive to extend their influence and power through diplomatic and other means including state-sponsored industrial espionage (Whitney and Gaisford 1996). And war, of course, is but “the continuation of state policy with other means” (Clauswitz 1832).
2. With the fall of the Berlin Wall the search began for the pattern or leitmotif of the new post-Cold War world. For Samuel Huntington, it was “The Clash of Civilizations?” (Huntington 1993); for Robert Kaplan, it was “The Coming Anarchy” (Kaplan 1994). A very different set of scenarios were cast, however, at about the same time. One concerned alternative futures for the “information superhighway”, the graphic or icon-based World-Wide Web (WWW) which appeared in 1994. Another set concerned corporate and national competitiveness in a global economy.
3. With respect to the WWW, on the one hand, this electronic gateway appeared to open onto Marshal McLuhan’s pastoral “global village” with free access to knowledge by all anywhere in the world. The distant poor of the Third and Fourth Worlds would ‘plug in’ and prosper with their new found knowledge. On the other hand, the Net” was portrayed as a cybergothic nightmare as charted by William Gibson in a series of novels written between 1984 and 1993 (Gibson 1984, 1986, 1988, 1993). In Gibson’s version of the webbed future, the mind’s eye fills with swirling multimedia, merging and mutating into a consensual hallucination called “cyberspace” (a term coined by Gibson). This virtual reality rushes forward fueled by techno-greed for knowledge contained in streaming columns of bits and bytes graphically
226
portrayed in the Wachowski Brothers’ motion picture The Matrix (Wachowski Bros. 1999). Hackers, or what in 1984 Gibson called “console cowboys”, fight for encrypted information using identity theft, spam, Trojan Horses, viruses and worms as well as ‘black ICE’, i.e., intrusions countermeasures electronic, often fatal to hackers. In the process, individuality and privacy erode before the ceaseless search for knowledge by corporate techno-elites that know which buttons to push while the rest of humanity cannot program a VCR. In Gibson’s future. corporations (and governments) protect know-how and trade secrets by implanting “neural bombs” in employees. If an employee’s loyalty slips, the bomb goes off killing or mentally maiming: the bottom line, knowledge is protected. Even artificial intelligence has a place in Gibson’s world qualifying for citizenship in Switzerland (Gibson 1984).
4. A very different information-based scenario emerged, however, with the 1992 World Competitiveness Report published by the World Economic Forum and the Institute for Management Development in Geneva, Switzerland since 1980 (WEF & IMD 1992, 3). This report introduced the concept of “the softer side of competition” reflecting the shift to a knowledge-based economy. It noted that in “the industrialized world today, only 15% of the active population touches a product. The other 85% are adding value through the creation, the management and the transfer of information” (WEF & IMD 1992, 4). This scenario I call the competitiveness of nations in a global knowledge-based economy.
5. Economic competitiveness has always been with us. Contemporary usage, however, extends traditional mass market price competition to “working smarter” in response to consumer demand for higher quality more customized goods and services, globalization and technological advance. Competitiveness promises profitable and progressive industries, more satisfying jobs, higher salaries and higher tax revenues collected at lower rates to supply social investment in deficit and debt retirement, education, health, infrastructure and welfare. It promises to make one’s country, community or company “top dog” in a confusing kaleidoscopic post-Market/Marx world in which former enemies are now trading partners.
6. Competitiveness is generally expressed in sports metaphors such as: “skating where the puck is going, not where it is” which captures its anticipative nature (Wilson 1992). In this game, however, some win and some lose in an “us/them” conflict deciding the destiny of our children, our communities and our country. Arguably, global competitiveness has ideologically quenched the last embers of the ‘60s revolution of rising expectations. Fear of job loss has smothered the hopes of citizen consumers and workers. Instead of George H. Bush Sr.’s “kinder and gentler society”, we live with George W. Bush Jr.s fear of downsizing, obsolescence, out sourcing, privatization, redundancies and technological displacement. This threatens:
227
· living to work rather than working to live;
· vocational training and specialization rather than education and cultural rounding;
· fear of job loss rather than pride in one’s work; and,
· fear of the Third World and immigrants as threats to economic security, not partners in a cosmopolitan, cultivated, equitable, peaceful, prosperous, stable and tolerant tomorrow.
7. A global knowledge-based economy, however, is not just a Darwinian struggle for individual, corporate, communal or national survival. Arguably it is the apotheosis of the human species marking its “departure or release from earthly life” (OED, apotheosis, 4). Born of the earth, humanity driven by its biological need to know has spawned a global economy based on intangible virtual property called knowledge. And with this knowledge it has got itself into outer space, certainly a departure from earthly life.
8. Whether the global knowledge-based economy becomes a heaven or a hell on earth, the game is afoot. National innovation systems are being constructed. Educational systems are being transformed including re-introduction of standardized testing. Intellectual property rights are continuingly being updated in an effort to keep up with new technological matrices to codify and tool knowledge. Firms are appointing Chief Knowledge Officers. And, in this game, the object at play is the production function of the firm and Nation-State.
1. The concept of the production function is perhaps the most elegant contribution of economics to human thought. It is the recipe of inputs (factors of production) to maximize the output of a firm or nation. It is defined “by a given state of technical knowledge” (Samuelson 1961, 570). In symbolic form, a production function can be expressed as:
Y = f t (K, L, N)
where:
Y = output
f = some function of …
K = capital
L = labour
N = natural resources
t = time
2. This reads: Output (Y) is some function (f) in a given time period (t) of capital (K), labour (L) and natural resources (N). In effect, the state of technical knowledge, or technology,
228
is implicit in the ‘f’ of the equation. It is the recipe. How much of each input, in what combinations and under what conditions can ingredients be mixed to produce maximum output and minimize cost? This is technology. It is also time specific, i.e., it has vintage.
3. If the object at play, the ball or puck, is the production function then each firm or nation is a team constantly adjusting its play to gain advantage over its opponents. For a knowledge-based economy, the production function and each of its parameters can now be stated in terms of knowledge. I will briefly summarize inputs and outputs and then present a re-designed production function for a knowledge-based economy.
1. The traditional factors of production – capital, labour and natural resources - can be expressed as codified & tooled capital, personal & tacit labour and toolable natural resources.
2. Capital is codified and tooled knowledge, i.e., knowledge fixed or tooled into an extrasomatic matrix. It is “knowledge imposed on the material world” (Boulding 1966, 5), or, “frozen knowledge” (Boulding 1966, 6). It comes in two forms:
· codified knowledge as human-readable information management systems and databases, operating manuals and libraries as well as associated intellectual property rights such as copyrights, patents, registered industrial designs and trademarks; and,
· tooled knowledge as ‘hard-tooled’ plant and equipment plus related ‘soft-tooled’ knowledge such as machine-readable computer & genomic programs, standards and techniques.
3. Labour as personal & tacit knowledge is somatically fixed in an individual as neuronal bundles of memories and the trained reflexes of nerve and muscle. It comes in three forms: productive, managerial and entrepreneurial.
4. Initially a natural resource may appear simply part of the environment – animal, plant, mineral, etc. With new knowledge, however, such environmental artifacts become recognized as toolable into goods and services serving human purpose, satisfying human wants, needs and desires, i.e., all of Nature will eventually become toolable natural resources as humanity technologically enframes its environment, i.e., planet Earth.
5. At any given point in time there is a given stock or quantity of factors of production. In the Standard Model, physical capital stock is static or fixed in the short-run until additional factors are acquired in the long run. In a knowledge-based economy, however, codified and tooled capital is not static but rather dynamic and organic, exhibiting mutation, change and
229
increase even with no new additions. Fusion and fission takes place. For example, with no additional capital plant and equipment, labour can learn (personal & tacit knowledge) how to use existing equipment more effectively and tinker with it (development) to maintain or improve its capacity.
6. In this way, inputs to a knowledge-based economy are more like financial rather than physical capital. The English word ‘stock’, in its financial sense, is not found in any other language except by adoption. Its origin is obscure linking a trader's capital to a trunk or stem from which gains are the outgrowth (OED, stock, VI).
1. The economic value of knowledge is satisfaction of the human biological need to know:
a) directly through final goods or services satisfying carnal as well as intellectual, emotional and intuitive needs to know; and,
b) indirectly through intermediate or producer goods and services used to create final ones and which, in the production process, become part of the final product or lose their identity.
2. Knowledge takes three forms as an intermediate output (a means to an end) and as a final consumer good (valued in-and-of-itself) - the Person, Code and Tool. For clarity, I restrict Person to the natural person possessing personal & tacit knowledge. I restrict Code to matter coded to carry semiotic meaning from one human mind to another. I restrict Tool to matter tooled to carry function, i.e., to measure and/or manipulate the physical world as sensor, tool or toy. A Code or Tool, however, have meaning or function only through the agency of a Person. In this sense, the Person is the ultimate input and output of a knowledge-based economy. And in the guise of personal & tacit labour one can meaningfully speak of a ‘labour theory of knowledge’.
3. Knowledge outputs serve three primary purposes. First, a knowledge output may serve knowledge-for-knowledge-sake. In the philosophy of science this is associated with the research community embracing universities, colleges and affiliated research institutes. The importance of academic research is that it is not restricted by immediate applicability. In aesthetics, i.e., the fine arts, it is associated with art-for-art’s-sake. Consumer demand to know for the sake of knowing also should not be under-estimated as demonstrated by the success of the entertainment industry, NASA and other scientific as well as religious institutions. The hunger to know is a force that moves budgets.
230
4. Nonetheless, traditionally Art and Science are subject to epistemic limits. In the natural & engineering sciences, knowledge by sight is dominant, i.e., seeing the numbers, seeing the graph, seeing is believing (Idhe 1991). Other senses are suppressed. In aesthetics, the distant senses of sight and sound are dominant with the contact senses of taste, touch and smell suppressed (Berleant 1964). In economics, however, knowledge-for-knowledge-sake is subject to no epistemic inhibition. Limitations of law may artificially restrict our means but do not stop us from pursuing our pleasures. The failed attempts to prohibit ‘forbidden knowledge’ such as prostitution (carnal knowledge) and drugs (altered states of conscious) are examples. If there is a human need to know, the first economic question becomes: Is there a profit to be made? The second: Is there a law limiting that profit? The third: Is there a way around the legal limitations? In this sense, economics is an amoral rather than an objective science.
5. Second, any output (Person, Code or Tool) may serve a utilitarian purpose such as knowledge-for-decision-or-profit. In the societal guidance mechanism (public, profit and nonprofit), knowledge supports policy development and program implementation as well as product development, innovation, production and marketing. In the military, knowledge as ‘intelligence’ plays a similar role. The reality of decision (public, profit, nonprofit or military), however, is that it is inevitably subject to time and therefore knowledge constraints. As revealed by Eric Jantsch (1967) in his pioneering survey of technological forecasting and assessment for the OECD, there is never enough time or enough knowledge to make a fully rational decision. ‘No-knowledge’, i.e., knowing without knowing how one knows, inevitably plays a role. The most a decision maker can achieve is ‘informed intuition’. This is consonant with the failure of calculatory rationalism in the Communist Bloc during the Market/Marx wars. Von Hayek was right. Simply put, there is more to knowledge than calculation. Local knowledge combined with an anonymous price system works best. Abstract knowledge combined with human hubris works worst.
6. Third, a knowledge output (Person, Code, Tool) may serve as knowledge-for-ethos reinforcing or disestablishing, e.g., revolutionary tracts, the characteristic spirit, beliefs and customs of a nation, community, firm or individual. The most extreme examples are mass conversions initiated by an Abraham, Moses, Christ, Mohammed, Buddha and Confucius as well as more recent examples of the Republican and Communist Revolutions. The citizen is motivated by the need to know about his or her world. How wide or narrow this need will be varies between individuals and the times in which they live. Ethos is the world of Walter Lippman’s Public Opinion and “the pictures in our heads”, i.e., that part of the world that we
231
cannot experience directly through our native senses (Lippman 1922). This is the public domain of a knowledge-based democracy fed by a free press.
1. The production function of a knowledge-based economy (KBE) is displayed as Exhibit 2. It reads: Output (Y = Persons, Codes and Tools) is some space/time period (s, p) function (f) acting on an embodied stock (e) of codified & tooled capital (K), personal & tacit labour (L) and toolable natural resources (N) subject to continuous endogenous (n), disembodied (d) and exogenous (x) technological change and to changing government policy (g) fostering or inhibiting specific knowledge domains and practices (EPI), disciplines and specialities (PED) and intellectual property rights (IPR).
2. In contrast to the production function of a traditional manufacturing-based economy, the KBE production function:
- transforms all factors of production (K, L, N) and outputs (Y) into knowledge that is ultimately personal & tacit;
- defines each factor and output by a unique set of knowledge qubits, i.e., ∑q = (WIT, PSI, EPI, PED, IPR, FLX);
- introduces location (s) as well as the historical time period (p) as a salient variable;
- introduces organizational (HSS) and design (Arts) technology to compliment physical (NES) technological change;
- introduces Government (g) as a defining variable by selectively fostering or inhibiting specific knowledge domains and practices (EPI), disciplines and specialities (PED) and intellectual property rights (IPR);
- integrates disembodied (d), embodied (e), endogenous (n) and exogenous (x) technological change into the same production function;
- expresses personal & tacit and codified & tooled knowledge as the staple commodities of a global knowledge-based economy; and,
- resolves the schism between capital and labour subsuming human capital as well as managerial and entrepreneurial talent under personal & tacit labour.
3. If the production function is the object at play in the global-knowledge-based economy then each firm and nation is a team constantly adjusting and refining strategy, tactics and logistics to gain competitive advantage over opponents. The question, however, arises: Is sports-based competitiveness the appropriate criterion of success?
232
Production Function of a Knowledge-Based Economy
Y = f s, p ( K e, Le, N e ) d, n, x ,g (1)
where:
Y = Person, Code & Tool
K = codified & tooled capital
L = personal & tacit labour
N = toolable natural resources
f = some function of
s = space
p = time period or era
d = disembodied technological change *
e = embodied technological change *
n = endogenous technological change *
x = exogenous technological change *
g = government **
and,
e = h (P, O, D) (2)
d = g (P, O, D) (3)
n = i (P, O, D) (4)
x = j (P, O, D) (5)
where,
g, h, i & j = some function of
and,
P = physical technology ***
O = organizational technology ***
D = design technology ***
where,
P = α ( p, c, t ) (6)
O = β ( p, c, t ) (7)
D = γ ( p, c, t ) (8)
and,
α , β , y = some function of
where,
p = personal & tacit knowledge (9)
c = codified knowledge (10)
t = tooled knowledge (11)
and,
p, c & t = ∑Q (WIT, PSI, EPI, PED, IPR, FLX) **** (12)
where,
Q = a combinatory set of knowledge Qubits
Notes
* Technological Change: impact of new knowledge on the production function of a firm or nation,: disembodied (systemic) or embodied (localized); and endogenous or exogenous to the firm or nation
** Government: as ‘rule maker’ of, among other things, intellectual property rights and national innovation systems. While government partners with private owners of K, L & N & decision making is political and therefore exogenous to the economic system. It plays one or more roles as Custodian, Facilitator, Patron, Architect and/or Engineer of the national knowledge-base.
*** Physical Technology from the Natural & Engineering Sciences (NES); Organizational from the Humanities & Social Sciences (HSS); Design from the Arts – literary, media, performing & visual.
**** A Qubit is a four-fold unit of knowledge including the etymological WIT (knowing by the senses, mind, doing, experience); psychological PSI (knowing by Reason, Revelation, Sentiment, Sensation); epistemological EPI (knowing by the NES, HSS, Arts, Practices); pedagogic PED (knowing by domain/practice, discipline, sub-discipline, speciality); legal IPR (knowledge fixed in a utilitarian or non-utilitarian matrix, Person or public domain); and, economic FLX (knowledge as disembodied, embodied, endogenous or exogenous technological change)
233
1. In sports, it is the opposing team that is the challenge. The playing field, the environment itself, is generally fixed, invariant and subsidiary to the consciousness of players at play. In biology, however, natural selection involves not just an opponent but also new invariants and affordances thrown up by an ever changing environment. In this sense Darwinian fitness is not simply bodily strength, intelligence, vigor or bravery vis-à-vis rivals. Rather, fitness is a compounded result of the mutual relationship between an organism and its environment including symbiotic as well as predator/prey relationships. And, as will be seen, symbionts can significantly enhance fitness, i.e., the probability one will survive and leave descendants.
2. A fitness landscape is thus constantly changing, altered and distorted by perpetual adaptation by competitors and symbionts as well as environmental variation and change such as increased heat or cold, wet or dry and the rise and fall of mountains, etc. Shifting to a biological metaphor expands focal attention to include the environment and symbionts, dimensions the sports analogy does not readily capture.
3. In this regard, Kauffman has extended fitness in molecular biology to the economy, or the ‘econosphere’ (Kauffman 2000, 211-241). He argues humanity exhibits the same basic pattern of behaviour as all life - making a living:
The parallels are at least tantalizing, and probably more than that. While the mechanisms of heritable variation differ and the selection criteria differ, organisms in the biosphere and firms and individuals in the econosphere are busy trying to make a living and explore new ways of making a living. (Kauffman 2000, 216)
4. I will now examine three of Kauffman’s principle ideas: the autonomous agent, coevolution/coconstruction and the adjacent possible. I will then apply them to a concept he finds commensurate with economics: comparative advantage. Arguably, what Malthus did for biology by inspiring Darwin, David Ricardo did for Kauffman.
5. Kauffman’s intellectual affinity with economics as well as his debt and contribution to it is apparent throughout his work. In this regard, he recommends a series of very sophisticated mathematical techniques for application in economics. Their sophistication is such that I am not qualified to judge their internal workings or technical merits. I have, however, strong epistemic reservations, as previously noted, about low grade social scientific data fueling ever more sophisticated mathematical models, i.e., garbage in garbage out. Such low quality evidence
234
should not be confused with that generated, relatively speaking without human mediation, by the instrumental experimental natural & engineering sciences including biology.
1. Kauffman’s central concept is the autonomous agent (Kauffman 2000, 49-79). This is a Kantian-like entity with natural purpose acting on its own behalf in an environment and able to reproduce itself through “thermodynamic work cycles” (Kauffman 2000, 49). For Kauffman, such work cycles involve, in almost Heideggerian fashion, the constrained or enframed linkage of endergonic (energy requiring) and exergonic (energy releasing) chemical reactions whereby:
the coherent organization of … constraints on the release of energy … constitutes the work by which agents build further constraints on the release of energy that in due course literally build a second copy of the agent itself…” (Kauffman 2000, 72)
2. Kauffman thus extends Kant from the cellular to the molecular level where he finds autocatalytic sets of “self-reproducing molecular systems” (Kauffman 2000, 130). In effect, he finds the origin of life in chemistry. He argues that life is the inevitable outcome of some threshold concentration of organic chemicals widely dispersed throughout astronomical space. While this may be so, like Kant asserting there would never be a Newton for a blade of grass, Kaufman concludes that while linking exergonic and endergonic reactions is essential to definition of an autonomous agent, life itself is a “mysterious concatenation of matter, energy, information, and something more …” (Kauffman 2000, 47).
3. In the biosphere there is also a hierarchy of autonomous agents. Kauffman points to the evolutionary transition from single-cell organisms without nuclei, prokaryotes, to eukaryotes, i.e., single-cell organisms with a nucleus plus mitochondria in animals or plastids in plants using chlorophyll. He concludes that:
eukaryotic cells are symbionts of two or more earlier separate autonomous agents that contributed the mitochondria, the plastids, and perhaps the nuclear structure of eukaryotes into a single novel reproducing entity, the eukaryotic cell. (Kauffman 2000, 120)
4. Life, of course, has burgeoned far beyond single-celled creatures. Kauffman notes there are some 265 different cell types in the human body (Kauffman 2000, 182). Each is an autonomous agent. Each, however, collectively combines to form a higher order agent – an organ - that, in turn, forms a functioning part of a yet higher order agent – the individual human being. Kauffman takes this hierarchy up from the geosphere of chemistry to the biosphere to the noösphere and beyond to the universe itself. The process I characterize as the increasing diversity and complexity of autocatalytic systems pursuing Kantian natural purpose.
235
14.3.2 Coevolution & Coconstruction
1. The mechanism driving increasing diversity and complexity is coevolution defined as the mutual evolutionary influence of two species (molecular, organic or social) that become dependent on each other. Each exerts selective pressures on the other, thereby affecting each others’ evolution. This often involves morphological coconstruction, e.g., the shape of an orchid flower matching the bill of the hummingbird. Coevolution and conconstruction apply in both symbiotic and predator/prey relationships between autonomous agents.
2. In fact, Kauffman argues that the primary mechanism of molecular evolution is not the template model of sequentially constructing DNA step-by-step up the ladder. Rather it is through coconstruction of its segments by sets of mutually dependent autocatalytic molecules that then integrate the parts into a new coherent living whole. This catches the Kantian sense that “each part is reciprocally means and end to every other. This involves a mutual dependence and simultaneity that is difficult to reconcile with ordinary causality” (Grene & Depew 2004, 94).
3. Given an ever changing fitness landscape, autonomous agents constantly adapt, adjust and evolve or go extinct, e.g., out of business, sometimes in avalanches of change. They do so by experimenting with mutations called preadaptations or exaptations which:
… in an appropriate environment [are] a causal consequence of a part of an organism that had not been of selective significance [but] might come to be of selective significance and hence be selected. Thereupon, that newly important causal consequence would be a new function available to the organism.” (Kauffman 2000, 130)
Arguably, in a knowledge-based economy, research & development (R&D) plays a commensurable role. It should be noted, however, that the concept of the self-organizing universe based on coevolution was first (to my knowledge) put forward by Eric Jantsch in Design for Evolution (1975) and then The Self-Organizing Universe (1980).
4. There are at least two other important characteristic of life on a fitness landscape. First, having reached a peak of fitness if the rate of mutation, change or experimentation becomes too rapid, i.e., crosses some threshold, then “the population ‘melts’ off the fitness peak and wanders away across the fitness landscape” (Kauffman 2000, 155). As will be argued below, this may be the case with some traditional First World countries. Second, among the many border or transition states identified by Kauffman as characteristic of life one of the most intriguing is that life exists on the quantum/classic frontier.
… it is probably of more than passing interest that real living entities, cells, do straddle the classical and quantum boundary. One photon hitting a visual
236
pigment molecule can beget a neural response. In short, real living systems straddle the quantum classical boundary. If there is a tendency of coevolving autonomous agents to increase the diversity of alternative events that can occur, then living entities must eventually hit the Heisenberg uncertainty limit and abide at least partially in the quantum realm. (Kauffman 2000, 149)
1. But from where do preadaptations and exaptations come? According to Kauffman, using chemical reaction charts as his model, they come from the ‘adjacent possible’ consisting “of all those molecular species that are not members of the actual, but are one reaction step away from the actual” (Kauffman 2000, 142). Extended to the noösphere, it is those thoughts and ideas which are candidates for application at the next level of ideological evolution. Economic and biological systems expand or explore the adjacent possible as quickly as possible subject to timely selection of the fit and unfit, e.g., going out of business. If selection takes too long, then fitness may decline or simply melt away. Arguably, this explains ‘de-industrialization’ of some First World Nation-States. They maintained existing plant and equipment, e.g., in steel production, until fully depreciated through voluntary (and sometimes involuntary) quotas on imports from developing Asian producers who were investing in the best new technologies emerging from the adjacent possible. The fitness of the West fell, at least in terms of the traditional manufacturing-based economy.
2. A characteristic of the chemical adjacent possible is that its size (its possibilities) increases exponentially faster than the increase in the diversity, complexity and number of autonomous agents. For example, a doubling in diversity may result in a fourfold or greater increase in the size of the adjacent possible, i.e., the number of new possible forms just one step away from becoming actual. This, Kauffman argues, is one reason for the proliferation and diversification of life. The same may be said for knowledge itself. From this conclusion he argues that there is: “a tendency for self-constructing biospheres [and econospheres] to enlarge their workspace, the dimensionality of their adjacent possible, perhaps as fast, on average, as is possible ...” (Kauffman 2000, 244). This means an exponential increase in the ways and means by which autonomous agents make a living is the inevitable outcome of increased diversity and complexity. The transition from an agricultural- to a manufacturing-based economy demonstrates such an exponential increase in job opportunities, not just in number but in the kinds of jobs.
3. Kauffman is, however, critical of contemporary economics for its treatment of compliments and substitutes in what he calls the technological adjacent possible. Quite simply,
237
the Standard Model offers no explanation for the emergence of compliments or substitutes or for the increasing diversity and complexity of new goods and services, e.g., the book versus the DVD player. Kauffman uses the classic example of the automobile replacing not just the horse but also the network of goods and services associated with it. He points out the new web of compliments that followed innovation or emergence of the automobile. These included paved roads, garages, gasoline stations, parking lots, car insurance, the drive-in, then the drive-thru, etc. Such ‘Kauffman webs’ are, at least in part, commensurate with Paul David’s “network externalities effects” in economics (David 1990, 356). Kauffman would have us, however, look much deeper into the adjacent possible for compliments and substitutes to enhance economic fitness.
1. If the production function is the most elegant contribution to thought by economics, i.e., Y = f (K, L, N), then the theory of comparative advantage is one of its most obscure. When challenged by mathematician Stanislaw Ulam to “name me one proposition in all of the social sciences which is both true and non-trivial,” the Nobel Prize winning economist Paul Samuelson responded with the theory of comparative advantage because:
That it is logically true need not be argued before a mathematician; that it is not trivial is attested by the thousands of important and intelligent men who have never been able to grasp the doctrine for themselves or to believe it after it was explained to them. (Samuelson 1969)
2. This obscurity partially results because the theory engages a complex web of economic ideas including absolute advantage, division and specialization of labour, exchange, factor endowments, opportunity cost, production possibility frontiers, relative prices and trade. Furthermore, it would more accurately be called the theory of comparative cost rather than of advantage. And, of course, some of its results appear counter-intuitive.
3. Semantic obscurity has lead to the theory finding general expression as a numeric example such as that first used by David Ricardo to demonstrate the theory in his 1817 book The Principles of Political Economy and Taxation. In his case, it concerned wheat and wine production in England and Portugal. In summary, comparative advantage means that mutually beneficial exchange is possible whenever relative production costs differ prior to trade. One of its counter-intuitive deductions, however, is that if a country enjoys an absolute advantage in the production of all goods and services, i.e., can produce all of them cheaper than anyone else, it is still better off trading with other countries. The theory was used by Ricardo to counter
238
arguments in favour of protective tariffs and trade barriers