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.

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

  1. Ashwin says:

    David – Thanks! That comment on forest fires is absolutely spot on – Which esteemed mathematician would that be?

    • My pleasure Ashwin. The comment was from David Marsay a fellow member of the “Back Swan” Group on Linkedin.

      It is the idea of creative destruction described by economist Joseph Schumpeter. A recession should be like a good forest fire, Schumpeter argued. You’ve got to burn off the deadwood before you can allow the new growth through. We ain’t short on dead wood but I’m struggling to visualise an emerging sea of green shoots from the Private sector scorched earth!

  2. Ashwin says:

    That’s the million dollar question!

    The problem is that the long period of micro-stabilisation has left us at serious risk of collapse if we allow a fire now. In a forest with fires that are allowed to occur naturally, the post-fire landscape is an immensely productive one with lots of green shoots. But in a stabilised system, the eventual fire may lead to collapse.

    Hence my point that the manager’s task in a stabilised system is akin to choosing between the frying pan and the fire. That’s the question that I’m intrigued with the most right now – it’s obvious that pre-emption is best but it seems that all managers of complex systems wait till they’re staring into the abyss. What can we say about the strategies that may take us back from the brink of disaster without simply postponing the day of reckoning? Obviously the answer may very well be nothing but I’m hopeful that there’s something else to be said.

  3. IMHO: After a random event like a forest fire some life remains in the scorched earth. However, apart from lost structure as an outcome [criticality] any remaining “structure” will have been starved of nourishment during the fire [ becoming fragile]. Survivors were those , often with the most robust root system, best equipped to survive, repair and stabilise. Then to renew and increase the inter-connections that are the framework and structure [complexity] that defines a complex dynamic system.

    As the effectiveness of the interdependencies grows so does the complexity, diversity, robustness, chances of survival and…the ability to withstand [uncertainty] most events that beset a forest!!!

    Dynamic systems are inherently complex and robust with sustainability “built in”. Exo/endo events that affect the stability, functionality, interdependencies, robustness are first reflected in the complexity of the system.

    Even if there were the understanding of systems and the means to measure and manage complexity prior to now the current “elites” , as they have done, are prepared to stick with what they understand, control and got them where they are. They know how rotten things are but blaming others, denying, dismissing or defending the indefensible are familiar traits. These people are afraid of interdependence. It is a threat to the dependence that they rely upon and is sold as independence. Like debt as credit!

    Quantitative and transparent threatens qualitative and opaque.

    We know what the systems are, their purpose, how they work and that it was not the fault of the systems nor uncertainty, that they collapsed. The operators – who started the fire and then tried to smother it [micro manage] – rather than admit that their greed-fuelled intervention had introduced excessive risk [systemic – macro], complexity, etc. Micro managing demonstrates the lack of understanding of a system [spending review?].

    The system needs a new culture. One that understands its own nature and responsibilities.Transparent, interdependent and sustainable.

    It takes “Risk Leaders” to redesign and build the alternative framework. Build it an they will come because what reason is there to continue to subscribe to such a blatantly flawed belief system!???



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