Economic Webs and The Evolution of Wealth

Stuart Kauffman

Finnish Distinguished Professor Signal Processing Departments Tampere University of Technology

University of Vermont Departments of Biochemistry and Mathematics

Economic growth theory considers aggregates such as GDP, and has tended to ignore the specific structure and productive competencies in an economy with respect to its capacity for growth. In the past 50,000 years, the diversity of goods and services has grown from perhaps 1000 to billions. The diversity of production capacities has grown vastly as well.

An economic web is a bipartite graph consisting of goods as nodes and production capacities as boxes. Factors that are inputs to production of a product (node), are denoted by arrows from the input factor nodes to the box, and arrows out to one or all product nodes.

I will discuss three major topics:

1. As the diversity (number) of production capacities increase on one axis, and the number of goods that can serve as input factors increase on a second axis, a roughly hyperbolic curve in this space separates a subcritical from a supracritical economy. The former cannot generate an increasing diversity of goods, from a supracritical economy that can generate an increasing diversity of goods and novel production capacities. Alberta Canada is subcritical, exporting wood, oil, wheat and beef. Ethiopia is subcritical, exporting coffee. The global economy is supracritical. Transition to supracritical behavior is an essential feature of economic growth.
2. There are knowledge spillovers, as is well known, from production of one product to those that are similar. R. Hausmann has mapped this in some detail. A high diversity of production capacities suggests ease of combining these to produce new goods.
3. It is a fundamental fact that we cannot finitely prestate the goods and services that will emerge in an evolving economy, just as we cannot finitely prestate what adaptations may occur in biological evolution by Darwinian exaptations. We cannot make probability statements here because we do not know the sample space. No law can be had for this unfolding. Therefore in the real economy, not only do we not know what WILL happen, we do not even know what CAN happen. All the above have major implications about fostering economic growth, and policy formation, when governments want milestones that cannot be set with respect to goods whose possibilities cannot be foreseen.

Slides:

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About the speaker:

Stuart Alan Kauffman (28 September 1939) is an American theoretical biologist and complex systems researcher concerning the origin of life on Earth. He is best known for arguing that the complexity of biological systems and organisms might result as much from self-organization and far-from-equilibrium dynamics as from Darwinian natural selection, as well as for applying models of Boolean networks to simplified genetic circuits. Kauffman rose to prominence through his association with the Santa Fe Institute (a non-profit research institute dedicated to the study of complex systems), where he was faculty in residence from 1986 to 1997, and through his work on models in various areas of biology. [extracted from Wikipedia]

Contact information:

Stuart Karuffman