Ecological systems are observed associations of species in specific environments or regions. Without insisting on a slavish copy of this concept to economic systems, it is important that the elements of an ecosystem and an econosystem remain at least parallel or the benefits of the predictive nature of ecosystem theory will be lost to the econosystem. To that end, let’s return to the species/lucrespecies parallel. A biological species is a population of individuals with similar characteristics that reproduce more like individuals. A lucrespecies is analogous in that it is a population of entrepreneurs with similar characteristics and that tend to create more entrepreneurial entities that are of similar characteristics. I previously chose the example of the biological species of human beings (Homo sapiens) as analogous to the lucrespecies of car manufacturers. In these two analogous species, the individuals are respectively people, like you, and corporations, like Honda and Toyota.

So to look for and distinguish different econosystems, like different ecosystems, one must look for assemblages of lucrespecies in specific socio-political environments or geographic regions. In a previous blog, I mentioned some terrestrial ecosystems. Without doing too much imagining, if I ask you to visualize a tropical savannah I am sure that in your mind you see rolling plains of grass and shrubs mixed with isolated low trees and herds of large herbivores. I also imagine you would not have much trouble telling me what is the top predator. This is a relatively simple ecosystem by comparison let’s say to a tropical rain forest. Can you as easily tell me what the major herbivores are in a tropical rain forest? Or what the top carnivores might be in a South American rain forest? This is a much more complex ecosystem with many more and much smaller species in general than a tropical savannah. A tropical desert is even less complicated, although probably less familiar.
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I present here a working hypothesis of the evolution of economies. The basis for the evolutionary hypothesis is as much practical as it is based on an extensive review of the literature. The review I did do certainly provided much food for thought, but there seemed not to be a coherent thread based on a single principle as is found in biological sciences. This despite the fact that much of today’s ideological fervor centres on Milton Friedman’s and others attempts to link capitalism to Darwinian evolution and even uses the phrase “survival of the fittest.” In fact, it is not analogous to evolution, but instead to ecosystems. Earlier attempts by Hyak can be excused for making this egregious error because concepts of ecology were not developed yet. It remains true however, that Friedman seemed not to examine with any rigour the predictions of an evolutionary model of the economy with the observed behaviour of economies. He certainly lived into the era of ecological thought.
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All of these are spontaneous self-starting processes. When we look at “evolution” we know to look at the many types of species and their evolutionary relationships, in today’s view, genetic phylogeny. When we look at “ecosystems” we know to look at the patterns of species diversity and distribution. So they are not the same viewpoint, but they are made up of the same things. When we look at economies, I am willing to bet most people do not separate the two major aspects of the economies — the range or diversity of types of economies and their evolutionary relationships derived over very long periods of time and in addition the patterns of economic species diversity and distribution in a region.

Natural evolution has no ultimate goal, no defined milestones, no direction, and no purpose. The results of evolution are on-going rudderless experiments. Each element in the experiment has only two major objectives, survive and reproduce. Organisms respond to the entire range of conditions that make up their environment. Natural selection is a blind tool choosing those genes that allow individuals to survive and reproduce best. Only one species would exist were it not for naturally occurring variation. Diverse conditions lead to diverse species. While there is no natural management of evolution, there are well-known examples of artificially managed evolution. Continue reading →

The classification of ecological types and zones into major terrestrial biomes is as follows:

Mountains (High Elevation)
Tundra
Temperate Forest
Marine/Island
Desert
Tropical Dry Forest
Cold Climate Forest
Grassland
Savannah
Tropical Rainforest

Each of these biomes has a special set of physical conditions within which it exists. The naming is essentially derived from those physical characteristics and the most important types of primary producers that are found there.

The classification of economic types is … well all over the map.
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Determinants of diversity in an ecological economy. What in the heck does that mean?

If we look at a wide variety of ecosystems, some are much more diverse in the number of species than are others. If we look at economic systems in the world today, some are very diverse in the number of “economic species” — sets of similar corporations. Economies vary from a low number of economic species, and a low number of individual corporations or entrepreneurs, to high levels of diversity and individual entrepreneurial entities. On the face of it the determining factors to create these four extremes seem simple enough. The greater the energy source(s) and the more abundant the raw materials, the easier it should be to have both high levels of individuals and economic species within any system. In actual biological examples this simple equation holds up for “simple” ecosystems.

Oh, and I should comment that ecosystems and economic systems as I use the terms are fundamentally in geographically defined regions. On a very broad scale, of course, both the economies of the world and the ecosystems of the world are global in scope, but the two ecol and econ systems are regional, even the current largest economic systems are based on based in a geographical region.
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Just like natural ecosystems, economic systems flow both energy and raw materials through them. But unlike natural ecosystems, today’s economic systems are very primitive, undeveloped and crude in their use and division of resources and use of energy. Most natural systems rely on an infinite supply of energy (the sun) and are limited by raw materials. The current economic system has moved to finite fossil fuels for energy, so will be limited both by raw materials and energy.
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While the prevailing wisdom so far considers the competitive forces in economy to be similar to those of evolution, in the preceding posts, I have argued that the better model is ecology. An ecological model can also be characterized by the catch phrase “Survival of the fittest”.

Furthermore the time frame for an ecological model of competition is much more reasonable than for evolution. Ecological changes are visible in time frames that range from a few hours to a hundred years, whereas evolutionary time frames are more on the order of thousands of years at a minimum — even for economic evolution.
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A Beginning Taxonomy Using Biological Templates for Economic Types

The derivation of an ecological model requires a definition of the evolutionary units on which the ecological competitive system can operate. Here is a preliminary and hypothetical table of natural and economic analogues for purposes of testing the hypothesis. Evolution, of course operates on the genetic level, while ecology primarily operates on individual level. The expression of both ecology and evolution that we see around us is the complete biological environment, and the same is true for the economic system. We see it all, but in both cases what we see is really the result of intertwined simple processes that can result in amazingly complex and intricate products, if given enough time. To create sensible new words is difficult, so I will use a slang term for money as the base root for the taxonomy. The slang term is “lucre” as in “filthy lucre”.

Much has been made of the relationship between evolution and the economy, especially at the early stages of modelling the free market and again in very recent years. While beneficial use can be made of the principles of evolution in economic systems, they are not suitable for understanding or managing economies in the time scale of human life spans or even over the span of time a given country or regime survives.

Natural evolution is a spontaneous process that has no predetermined milestones or end points. The progression of evolution is completely dependent on the random variation that occurs at the genetic level in the cells of the organisms. The basic genetic code combined with these random variations, usually small, determine the characteristics of individuals in the population. Natural selection, often characterized as the “survival of the fittest” operates by eliminating individuals or reducing the numbers of progeny from the group who do not compete well against other individuals. We see these changes as gradual shifts in the characteristics of a species or of losses, gains, and changes in species composition over vast periods of time. Noticeable species changes from evolution in nature are usually not apparent in time spans less than thousands or tens of thousands of years. The natural selective forces act on the DNA are mediated by the individuals and are seen as species changes.
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