The Origin of Wealth

The Origin of Wealth

Evolution, Complexity, and the Radical Remaking of Economics

Eric D. Beinhocker

Collective Brain

Why isolated groups lose knowledge and capabilities.

For evolution to function, knowledge must be transmittable (and therefore able to be codified in some form). If Larry has some tacit knowledge about how to make particularly beautifully formed hand axes, but he cannot encode or transmit the knowledge in any way, then that knowledge will, sadly, die with Larry and not be a part of future hand ax PT evolution.
Commodity Clock

Every treasure becomes tomorrow's ordinary commodity.

It was she who said, “In this place it takes all the running you can do, to keep in the same place.” There is no such thing as winning a Red Queen race; the best you can ever do is run faster than the competition. ... In evolutionary systems, sustainable competitive advantage does not exist; there is only a never-ending race to create new sources of temporary advantage.
Tempo Gradient

Decision-making speed determines conflict outcomes.

The economy is, after all, chock full of supply chains, inventories, and time delays. The actual causes of macroeconomic oscillations are no doubt multifarious, but the lesson of the Beer Game is that the causes of the cycles may ultimately lie in the way in which the inductive rules people use in their decision making interact with the dynamic structure of the economic system.
Entropy Tax

Import order constantly or dissolve into disorder.

The presence of free energy is what enables a complex adaptive system such as an ant colony to stay away from equilibrium, create order, and be dynamic over time. If you remove that energy, then entropy takes over and the system decays and eventually reaches a state of stasis or equilibrium. As one of the participants at the SFI meeting, University of Michigan theorist John Holland, once put it, “in fact, if the system ever does reach equilibrium, it isn’t just stable. It’s dead.”
Invisible Crack

Microscopic defects propagate silently until catastrophic failure.

Complexity catastrophes help explain why bureaucracy seems to grow with the tenacity of weeds. ... Rather, network growth creates interdependencies, interdependencies create conflicting constraints, and conflicting constraints create slow decision making and, ultimately, bureaucratic gridlock. ... The reason is that IBM fell prey to a complexity catastrophe.
Mental Maps

Simplified models systematically fail in complex reality.

The physicists were shocked at the assumptions the economists were making—that the test was not a match against reality, but whether the assumptions were the common currency of the field.