The Resilience Stability Trade-off: More lessons from Nature (Chancellor take note!)

I can’t, wouldn’t, claim credit for this extremely interesting extract from a really well informed blog by Ashwin Parameswaran – the link to the item is below and, if you like this I would recommend a visit.

In view of the continuing displays of utter dis-engagement from the real world – where citizens dwell – by [the bankers’ and Corporations’ pawns] those we refer to as “Political Leaders”, I really wanted to get this out there for some thought. Surely if a Government “micro manages” a budget, to achieve short term results – which is entirely in keeping with the culture that got us all into this mess – without fully considering social costs they are merely deferring the inevitable and extremely unlikely to achieve their goals at macro level!? The national economy is, in itself, a Complex Adaptive System (CAS) and a node/hub within the global CAS so, unless a holistic view is taken, a sustainable progressive strategy is unlikely.

But please don’t linger too long on my own comments as the full article is worth reading from economic, ecological and social perspectives. Complexity is the thread.

Mancur Olson. In his final work “Power and Prosperity”, Olson notes: “subsidizing industries, firms and localities that lose money…at the expense of those that make money…is typically disastrous for the efficiency and dynamism of the economy, in a way that transfers unnecessarily to poor individuals…A society that does not shift resources from the losing activities to those that generate a social surplus is irrational, since it is throwing away useful resources in a way that ruins economic performance without the least assurance that it is helping individuals with low incomes. A rational and humane society, then, will confine its distributional transfers to poor and unfortunate individuals.” Olson understood the damage inflicted by rent-seeking not only from a systemic perspective but from a perspective of social justice. The logical consequence of micro-stabilisation is a crony capitalist economy – rents invariably flow to the strong and the result is a sluggish and an inegalitarian economic system, not unlike many developing economies. Contrary to popular opinion, it is not limiting handouts to the poor that defines a free and dynamic economy but limiting rents that flow to the privileged.

via The Resilience Stability Tradeoff: Drawing Analogies between River Flood Management and Macroeconomic Management at Macroeconomic Resilience.

I have taken a final thought on the ecological perspective, or learning “lessons from nature”, from a contribution to a recent discussion on “Power Laws and Accidents” by an eminent mathematician:

Adaptive processes tend to be based on sample stats…and hence tend to seriously under-estimate the dangers when the sample stats tend to significantly under-estimate the true parameters.

Epidemics fit this model. Perhaps more surprisingly, so do forest fires: the patterns of burnt ground versus growth at various stages evolve to provide stability. More trees leads to disaster. Less trees leads to more trees. In between there can be a sustainable forest, with periodic moderate fires. If we make an analogy with finance, then in finance we try to build fire-breaks and then to have as many trees as possible. This can work for a while, but at some point the defenses will be breached, and then one has a wipe-out. It is more sustainable to have a forest with random lightning: if it is frequent enough the forest will never grow to a dangerous condition.