Bioeconomics: How Biology Solved Economics Billions of Years Ago

Though not immediately evident, the disciplines of biology and economics are essentially the same. Both are concerned with investigating how living organisms arrange themselves to produce, consume, and allocate resources in a world of scarcity.

There may be limits to what we can learn from brainless microbes; no microbiome will enlighten us on a theory of interest rates, or any other strictly human invention.

But a substantial portion of economics is devoted to the examination of information systems. It is here that biology has recorded vast, ancient registers of knowledge for us.

Biology as an Information System

Of particular interest to us is the role of planning in an economy. This is the never-ending debate of which resources, if any, should be managed by a central government authority. As we will see, this is a peculiar human convention.

In biology, there is no complex organism that is managed in a top-down manner.

We will often describe the body in an authoritarian convention when we say things like "the brain controls the arm," but, taken literally, this couldn't be further from the truth. It is far more accurate to say that nothing is really under control.

As Above, So Below

A quick tangent about complexity may be helpful here.

Stock markets are a fantastic example of complexity, and perhaps the best way to visualize how our universe works.

On the day to day, stock price fluctuations are fundamentally unpredictable and chaotic, seeming to move in no general trend. When you zoom out of this day to day chaos, you find a spontaneous order in the noise, a trend moving in a general direction.

In the same way, the physical laws of nature are the result of zillions of particles which, alone operate in ways we don't comprehend, but on the whole, create trends in a general direction that give us phenomenon like heat and electricity. This is the basics of statistical mechanics.

If this fact were fully appreciated, we might hesitate in calling any physical phenomenon "constants," as everything will fluctuate at the microscopic level. There is no clear reason why they must remain constant or why they cannot be influenced by other factors.

I bring up this tangent because all of biology works in the same way. We can forgive ourselves when we say "the brain controls the arm" due to sheer practicality of language, only if we appreciate that the mechanism for which a brain moves an arm is an emergent phenomenon - a bubbling-upwards, rather than a top-down command.

Descartes has famously compared the human body to a machine, but he truly struggled to understand how the body could function like any machine he’d ever seen, given that humans never recite a fixed output given a fixed input. Descartes was surrounded by simple, rigid machines in his day, but he struggled to fully conceptualize an internet, and how complexity creates far more varied responses.

The process for how the arm is moved is not a straightforward, yes or no response from the brain, but unimaginably massive debate between various sections of the brain, to which the average conclusion is the ultimate movement of the arm. This is how we can predict basic human decisions 11 seconds before the decision reaches consciousness.

Mass Coincidence of Wants

In economics, there is a concept called the double-coincidence of wants, which describes two people who realize they can mutually benefit by exchanging goods or services. Every complex organism might be seen as an absolutely massive coincidence of wants.

In biology there is a very similar concept called biological mutualism, the classic example being the clownfish and the anemone.

In microbiology it is often referred to as symbiosis.

The beauty of these ideas is that organisms can help each other while helping themselves, and even create a more complex system that benefits the whole - and mind you, all of this is happening without any organism “caring” for any other, or without even being conscious of other organisms. They happened upon a configuration that made sense for the largest numbers of organisms.

Humans are perhaps the first creature to recognize this phenomenon, and can purposefully act in this way. We are the first to consciously learn that we can help ourselves by helping others, and created systems that expedite this process. It is this alone, this purposeful social cooperation, that has catapulted humanity to wealth and prosperity never-before seen by any other animal.

Fatal Problems of Top-Down Organization

Human beings have the peculiar case of intelligence, and this leads them to assume that they could potentially engineer a system that is far more practical than what nature could provide.

We have seen this assumption in the various forms of socialism. The proponents of these ideas, they believe that individuals are generally uninformed or incapable of making rational decisions for themselves, and we might could collectively make better decisions by outsourcing the burden of decision-making to a select few, ideally elite human beings.

But this is confusion. No matter how intelligent the select few, it has never made sense to place the power to solve complex problems into the hands of fewer people.

Greater decentralization ultimately allows for a more complex organism. It is then no coincidence that every attempt to manage our economic system in a top-down manner leads to an eventual breakdown of the system.

The failure of socialism is not a failure of human nature or of greed, as it is so widely cited. It is quite clearly a fatal flaw in the logic and the capability of the socialist information system.

This has been called the Economic Calculation Problem, and some variation of the problem will exist in every case a state subverts market prices. No market transaction is involved in the state redistribution of resources and no accurate information about how this transfer affects the supply and demand can be obtained.

Many socialists have recognized that this is an actual problem, and attempted to resolve it by stating a market could be simulated alongside socialism with supercomputers. To say this is infeasible is an understatement, it’s metaphysically impossible.

It is impossible to "solve the market," no matter how advanced the algorithm. A market is a continuously adaptive system, where even the predictions about the market will influence the state of the market. It’s an infinite recursion loop that cannot be resolved. I have written much more on this idea in this piece.

The market economy allows all actors within the system to determine where resources are allocated just through every day buying and selling. A natural selection process takes place that (over the long run) chooses the businesses that create the most value within the system. It should theoretically evolve by the same mechanisms that life evolve.

Whether or not this system is perfect is debatable in the same way that we might debate whether evolution of life is perfect. Though there are times I am tempted to throw my arms up in the air and scream the universe is broken, I cannot conceive of something that contains more information about the universe than the universe itself. In the same way I cannot conceive of a system that contains more information about the market than all the actors within the market. I will refer you to efficient market hypothesisand let you decide for yourself.

What is for certain is that the socialist system attempts to remove itself from this natural evolutionary feedback system, and restricts market decisions to state bureaucrats. In this way, the system necessarily loses the primary metric that guides the selection of enterprise: profit and loss. This is the goal of socialism of course, the socialists believe the concept of profit and loss to be primitive, brutish and greedy; to which they would prefer far more enlightened, conscious metrics.

Whatever metrics they decide will be arbitrary, constrained and very likely to not represent the macro goals of the market. They are certain to be more aligned with the priorities and preferences of the state managers. It is without question that the Soviets made considerable advancements in rocket science, space travel, and even sports science, but they did so at the expense of basic necessities like food.

This is not a distant, historical hypothetical limited to completely socialist systems, but a problem you experience today in your everyday life, in whatever country you live.

How do police departments, which are nearly always state-run, determine if they’re doing a good job? How do they determine if they’re using their resources effectively? The amount of tickets they issue? The amount of revenue they extract from the public? The number of complaints they get?

The question is really up for debate, and likely differs by each department. One thing is for sure, their metrics need not be influenced by the citizens they’re meant to protect.

New Life

Our economy can be seen as the beginnings of an even more complex organism, where every cell is a complex conscious creature. This complex organism is only possible through increased decentralization of knowledge and decisions, as nature has made clear to us.

It has been said that social media sites like Twitter can act like a collective brain, and this comparison is surprisingly accurate. You may view trending topics differently knowing that is exactly how thoughts occur in our own brain.

And what of AI?..