26. Why Economies are like Rainforests

In my last blog I talked about ‘recipes’ (applied modules of knowhow) and ‘webs of givens’ as engines of wealth creation. I gave the example of the classic cookery recipe which rests on taken-for-granted ‘givens’ such as access to an oven, an energy source, cooking utensils, ingredients and the recipe user’s ability to read — all of them only made possible by immense amounts of accumulated human effort and ingenuity.

Recipes, I said, “only become possible and useful thanks to multiple webs of givens, built up over decades, layer, by layer, by layer”. For example, each of the givens in the cookery recipe is a recipe in its own right resting on its own web of givens. There is the recipe for how to make and assemble the materials and components needed for an oven, the recipe for safe affordable energy supply, different recipes to produce each cooking ingredient, and so on. Until very recently, too, most cookery recipes relied on another taken for granted given: the fact that it was printed on a piece of paper.

Printing itself rests on its own exquisitely designed web of givens. Here are a few of them.

Early printing presses worked by pressing a raised surface that had been covered with ink onto a piece of paper. For this you needed paper which, at that time, was a novel invention. Previous receptacles of the written word — parchment and vellum — were very expensive. Paper-making at that time relied on an arduous process of soaking piles of rags for several weeks so that they fermented and then beating them to a pulp (hopefully with the help of a water-powered pumping mill). You also had to make ink of the right texture, and to adapt the use of a screw to bring two flat surfaces together (a process already used widely elsewhere, for example, in olive presses).

Then there was the type itself. Each piece of type had to be pre-made to high levels of precision so that they could all be put together and held securely to create a single, perfectly flat surface that could be pressed down upon. The skills and tools needed to create these interchangeable parts were incredible. The craft of organising type into ‘cases’ had to be invented from scratch.

Only when all these things — paper, ink, type and typesetting and casting, and actual printing presses — were all present and correct could ’printing’ gel or crystallise into a working recipe. Once it did, it spread rapidly, and as it did so it became just another ‘given’ in a whole host of new recipes. Schooling came to rely on printed textbooks. New industries of book publishing and distribution emerged. Political and religious pamphleteering became common stock of public debate. And so on.

Building momentum

If we leave the story here however, we get a misleading picture of knowledge’s role in material wealth creation. What I’ve described so far looks like a hierarchy with every new recipe acting as a sort of ratchet, creating a secure base upon which new recipes can be built. In this way, recipes are built on top of each other, layer by layer. For example, you can’t have printing without paper, you can’t have a publishing industry without printing, and so on. (To get this idea in a fun way, see this video).

This hierarchy effect is incredibly important. It’s how economies build momentum. But it’s not the whole story. Once recipes are invented, they rarely stand still for long. Every new recipe brings with it constraints, limitations and trade-offs that people naturally want to reduce or eliminate; that prompts them to seek improvements to each component within each web of givens. Result? Even as recipes are being built one on top of another, each component within these recipes is also subject to constant change.

Such changes ‘inside’ webs of givens are equally important for economic momentum: they drive waste reduction, affordability and availability. Take newspapers, for example. Newspapers only became possible after every key component in printing’s original recipe was reinvented. They used paper made from wood pulp rather than fermented rags. They replaced the flat screw thread print with a circular drum that could print much faster; human energy sources with steam (and later electricity); and single pieces of metal painstakingly assembled into ‘cases’ by lines of hot metal and then by electronics. They also replaced the use of raised surfaces for the pressing with photolithography (which prints using the principle that ‘oil and water do not mix’).

This replacement effort took time. The first daily newspaper, The London Courant, hit the London newsstands (a new invention) in 1702, two hundred and fifty years after Guttenberg.

Such changes within webs of givens often reverberate ‘sideways’ across complete economies. When steam and electric power were invented for example, they had nothing to do with printing. But once they were invented, they transformed it. Sometimes these transformations are so far-reaching that entire webs of givens are rendered wholly or partially redundant. Electricity replaced steam entirely. Just look at the effect of digital on the publishing industry. Today, it’s no longer a ‘given’ that cookery recipes are printed on pieces of paper. They may well be read online.

For these reasons, modern economies aren’t based only on hierarchies of recipes. They also form interconnected networks where each ‘given’ within one recipe acts like a node in a web of nodes, each one acting as a given in other recipes. When changes are made in one node they ricochet and reverberate up, down and sideways, creating avalanches of change, both big and small.

Economic bootstrapping

The more recipes there are, the more interdependent and circular such systems become. They begin to bootstrap themselves. The Hindu story of Indra’s Net helps describe this. The story goes like this:

“Far away in the heavenly abode of the great god Indra, there is a wonderful net which has been hung by some cunning artificer in such a manner that it stretches out indefinitely in all directions. In accordance with the extravagant tastes of deities, the artificer has hung a single glittering jewel at the net’s every node, and since the net itself is infinite in dimension, the jewels are infinite in number. There hang the jewels, glittering like stars of the first magnitude, a wonderful sight to behold. If we now arbitrarily select one of these jewels for inspection and look closely at it, we will discover that in its polished surface there are reflected all the other jewels in the net, infinite in number. Not only that, but each of the jewels reflected in this one jewel is also reflecting all the other jewels, so that the process of reflection is infinite.”

In Indra’s Net, every node in the net is held in place by the existence of the other nodes. In modern economies, each recipe in the system is held in place, and made possible, by other recipes. The more this happens, the more ‘bootstrapped’ the system becomes.

The best analogy I can think of is the incredible diversity and creativity of rainforests. Rain forests are extraordinarily rich and diverse not because they excel at extracting nutrients from the soil beneath them. In fact, the soil in the Amazon rainforest is among the poorest and most infertile in the world, having been leached of its nutrients by rain over centuries. The humus layer, which is the dark organic stuff in the soil that develops when plants or animal matter break down, is minimal nearly everywhere — sometimes only a few centimetres thick.

The jaw-dropping abundance and richness of the rain forest (tens of thousands of plant species, including countless medicinal plants, over 2.5 million insect species, 1,300 kinds of birds, 430 mammals, over 3,000 fish species, hundreds of different amphibians and reptiles) doesn’t lie in the extraction of nutrients from the soil. It lies in recycling — a complex web, an Indra’s Net — whereby everything that exists in the rainforest gets re-used, creating the environment for many other things to also exist.

Why does this matter?

This, increasingly, is how modern economies operate. It matters for many reasons.

First, if you’ve read my previous posts in this series, I’m describing and explaining how economies work in a way that doesn’t put money, price and accounting ‘profit’ at the centre of it all.

Second, if you slash and burn a rainforest it doesn’t just bounce back. Once all those interdependencies are gone — if too many of the nodes in Indra’s Net are destroyed — the entire system collapses. It becomes a desert and remains that way. With financial cancer now running amok in formerly advanced industrial nations and disdainfully interested in such matters, we’ve witnessed 40 years of industrial slash and burn. Large parts of our economic rainforest are now suffering their own desertification. We can no longer take material prosperity for granted. That’s a problem. A really big problem.

Third, it raises an important question. How to ensure the health of rainforest-like wealth creating ecosystems? One big difference between rainforests and modern economies is that economies are human-made. Is it possible to ‘plan’, ‘manage’ or ‘design’ systems like this? Or can we only leave them ‘free’ to run their ‘natural’ course? These are really big questions. I’ll return to them later when I talk about systems. But for the moment let’s just recognise the possibility that tired old oppositions between ‘free markets’ and traditional state socialism might not do them justice.

Fourth, it offers a small glimmer of environmental hope. The industrial age was based on extracting raw materials (including fossil fuels) from the earth and using them up. It depleted non-renewable resources and created pollution, including global warming. That’s unsustainable.

In contrast, rainforests sustain their incredible richness and diversity without depleting non-renewable resources or creating pollution. True, they need a constant influx of energy, but they take it from the sun. Perhaps we can do the same with economies: take our energy from the sun while constantly enriching our Indra’s Net of recipes for wealth creation. After all, many of the most important ‘resources’ in modern economies are not non-renewable. The most important ‘means of production’ of all is the human brain, and when we use knowledge and information we don’t ‘use them up’ — we actually enrich them so that the more we have the more we can create.

Perhaps our future choice is not between ‘no growth’ and unsustainable growth that depletes the earth’s resources and endlessly pollutes, but something else entirely — the increasing richness, diversity and complexity that’s made possible by the constant recycling of nutrients; that far from always ‘using resources up’ infinitely expands possibilities.

Which takes me to my last point. When we produce something, we don’t do just one thing. We actually do three things. 1) We produce the thing itself, so it can be used. 2) In doing so, we develop the capabilities that make it possible to produce this thing, and other things like it. 3) In doing this, we create a platform for the invention of new recipes based on new webs of givens. In other words, wealth creation isn’t just about making things, it’s about making possibilities. That’s my next blog.

Next in this series: 27. Searching for ‘Better’: Engine of Wealth Creation

Previous: 25. Infrastructure: The Cinderalla of wealth creation

The full contents of this blog series can be found here.

Bibliography

Books and articles I found particularly useful researching this blog include:

• Chris Freeman and Francisco Louca, As Time Goes By: From the Industrial Revolutions to the Information Revolution, Oxford University Press, 2001
• Robert Friedel, A Culture of Improvement: Technology and the Western Millenium, MIT Press, 2007
• Nick Hanauer and Eric Beinhocker, Capitalism Redefined, Democracy Journal, Winter 2014
• Ian Mortimer, Centuries of Change: Which Century Saw the Most Change?, Bodley Head, 2014
• Joel Mokyr, Gifts of Athena: Historical Origins of the Knowledge Economy, Princeton University Press, 2002
• David Warsh, Knowledge and the Wealth of Nations: A Story of Economic Discovery, W.W. Norton, 2007