According to Professor Geoffrey West, “You could not have evolved a complex system like an organism or a city – with an enormous number of components – without the emergence of laws that constrain their behavior in order for them to be resilient.” In this article, we will see how scientific research in complex systems can provide us with new tools to better understand the global evolution of our economies.
What we hope for
Never ending economic Growth is a globally embraced idea, a unifying goal for the majority of mankind. Economic growth will fix all problems, bring us contentment, realization of our dreams and happiness through materialistic improvement without end. Growth will turn political, religious, ethnical conflicts into co-operation. It will prevent war by connecting and integrating us economically beyond national interests for the better of us all. We want it to go on forever, to be “open-ended”.
Definition: Economic growth is the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP.
But what if growth can and will come to an end? What if the complex adaptive socio-economic systems that have brought us such huge increases in living standards are losing their ability to create more growth? To understand more about this, we may turn to the new science of Complex Systems to better understand how they grow, decline and eventually collapse.
How systems grow and why Scientists like professor Geoffrey West, a British physicist turned biologist, then leader of the Santa Fé Institute and author of “Scale: The Universal Laws of Growth, Innovation, Sustainability, and the Pace of Life in Organisms, Cities, Economies, and Companies” have found that there are indeed mathematically definable universal laws of growth, aka scaling, that apply to all growing systems, from bacteria in a Petri Dish to Cities, companies and economies. One important common driver behind growth are the familiar economies of scale which allows a system to create surplus resources, which when applied again allow even more growth and by the repetition of these same economies of scale, lead to more absolute growth etc. etc. This is the same exponential increase in speed that we know well from an accrued interest calculation. The law of scaling growth seems true for all systems, simple as well as complex, including socio-economic adaptive systems and even when they are populated by learning and adapting individuals. Growing follows certain universal laws
...and why they collapse and die
It is however clear that no complex system grows indefinitely. Economies of scale fade. They are what scientists call “time finite singularities”. In other words, factors that drive growth don’t last forever. This is why it is possible to determine a mathematically calculable life expectation for complex systems. Over time, more and more resources created need to be diverted to the upkeep and protection of the system, leaving less and less resources for sustaining growth. This leads to growth slowing and stagnating, the complex system “matures”, then ossifies and eventually collapses. This is intuitively understandable for biological systems such as mammals, from the smallest mice to humans to the biggest whales. For these systems it is the metabolic rate and the system’s ability to supply cells with the necessary oxygen and nourishment to function, that set the limit.
For mice the calculable expected life span is only a couple of years, for us humans it seems to be somewhere just below 125 years, for the Arctic whale it is over 200 years. What science has found is that not only biological systems with a life span limited by metabolism, have an in-built mortality. Socio-economic adaptive systems also have one. The average life of listed companies in the US is just over 10 years. At the same time there are other complex system, such as cities, which have not stopped growing or collapsed……at least not yet. So why do some complex system last and grow while others follow the same pre-determined mortality path as a mouse or a whale?
Except, if they re-invent themselves!
Scientists have found that a maturing complex system can actually re-set its’ death clock thereby extending its’ expected life span and create a new period of growth. The key is innovation. Even after a period of stagnation, a new growth period can follow if the system is capable of finding and implementing a deep fundamental change that dramatically alters the way the system uses resources. Since the industrial revolution we have seen many technological innovations which have altered how we use resources and produce growth. But innovation is not only technological. The 200 yearlong accelerating growth of cities, aka urbanization is a non-technological change, and it is today the biggest driver of economic growth. Urbanization is happening at an exponential, or as scientists call it, at a super-linear pace across the globe. One million people around the globe move to cities every week. There means that the equivalent of a new New York of city-dwellers is created every 3 months. At this pace, almost 80% of the world’s population will live in cities by 2050.
The special case of cities
What makes cities especially interesting is that they have been better than most other complex systems at re-inventing themselves. Some cities have had periods of decline but then found new ways, new missions, new life. Scientists believe this dynamism has to do with the lack of central planning of what people do in cities. People flock to cities to exchange ideas, create barter and find new ways in a spontaneous adaptive process. This is not done by central planning. It is spontaneous and it is fast! Scientific research about these social processes is at early stages so a lot is left to be done before we can claim having a good understanding of them.
What we need to recognize is that urbanization as a driver of growth is a time finite singularity that will eventually and probably quite soon come to an end. What will this end look like? Will cities start to “eat” each other? Can there be only one city in the world? Hardly. So, what will the end of urbanization look like? We don’t know. Will we be able to find another singularity, like urbanization, to re-set our clock and have another growth spurt?
...but they too may collapse and die
Just like the second law of thermodynamics dictate, for every order created by consuming energy, there is dis-order elsewhere. In the case of cities there are clearly also negative singularities, which grow at the same pace as the city itself. Some of these need to be managed, controlled, contained to prevent them from reaching toxic levels where they risk killing the system. For cities the negative, toxic singularities, are well known; congestion, pollution, disease, waste, social segregation, crime. All of which need increasing amounts of resources to ensure they do not become toxic. Policing, new traffic systems, waste management, tighter security, health and other care systems to just mention a few.
Even if urbanization will soon come to an end and lose its growth generation capacity, cannot global growth be extended through more technological innovations? Maybe, but it is not a given.
In the end, one catch will get you
Unfortunately for us, there is one problem that even very re-innovative systems cannot dodge. For each new fundamental re-innovation, the pace of innovation has to speed up. In other words, for each generation of fundamental innovation, the shelf life of each innovation gets shorter and shorter as well as its’ resulting growth spurt. We don’t just have to fundamentally re-invent our complex systems; we have to do so more and more often. There is a limit for this of course. We cannot fundamentally re-invent technology or society every day, probably not even every year. There is a limit. We are already at a pace where at least one fundamental re-innovation has to happen within the life span of an individual. Can it get faster? We will soon find out.
Not to forget, it is only deep fundamental change in how the system uses energy and produces additional resources that works as a get-out-of-jail card. A new iPhone version doesn’t qualify, not even driverless cars. And we are already at a dizzying pace of re-innovation, perhaps close to the last re-innovation. An example: Many in the young generation starting to work now, are likely to have to re-invent themselves one or several times during their working life as the skills acquired during education become obsolete or are replaced by new technology. This is quite a big jump from the slower paced world in which our ancestors in the industrial revolution in the 19-th century lived.
Artificial Intelligence? We don’t know what it can bring yet. What we do know is that we as individuals and thinking parts of a complex adaptive system are constantly learning, changing, adapting our behavior and the way we act as we seek to change our relative position in the system. Complex systems have many feed-back loops and it is through social interaction that the total system “learns” to be adaptive and create new order. So-maybe the next wave of necessary innovation is not even technology driven. It could be a fundamental social change in how we use resources. Maybe the next innovation will be in societal organization and energy consumption relative to maybe not just economic out-put but other types of fulfillment?
What can be learnt from all this?
A: Science tells us that everything that grows does so in about the same way. For sometimes very long periods of time. Subject to the same laws. However open-ended growth, economic and otherwise, is not a stable state but driven by time finite singularities, which will eventually fade.
B: All complex systems tend to behave like biological systems with a life span that is calculatable.
C: The only way to extend growth is to innovate at an ever-increasing pace. Not small technological innovations! BIG fundamental system changing re-innovations.
D: Even the most re-inventive, adaptive, dynamic system will eventually have to re-invent itself faster than possible. Then it collapses. And it happens just as the hypersonic innovation speed is at its’ peak.
The world we live in
We are members of several complex systems. We should ask ourselves which of these are in the mouse category and which are more like creative cities? Where are our national political systems, our international organizations in their life cycles? The EU? The capitalistic system as we now know it? Democracy itself?
Do any of these systems show signs of stagnation and increased bureaucracy? Do they have to allocate increasing amounts of resources to fend off toxic negative singularities? Do they welcome or deny the need for constant innovation? Have they become risk averse and harvesting rather than creative? Have they been tilted to channel disproportionate parts of their resources to non-productive hoarding? Which of them will be around during our children’s life and which will be confined to the dust-bin of history?
The only thing that is certain is that we are living with a pace of change that is unprecedented and accelerating. We will have a very interesting next 20 or 30 years. What it will look like is, as they say, a whole other story.
“Several systems we take for granted are likely close to their best before date”