Sapient governance I. Part A

What would an operational level governance look like?

What follows is a result of a number of questions that I have pursued over many years. The standard education system did not really provide me with answers. So I took charge of my own education and most of what I offer is a result of not following the provided educational path. If you have been content with what our education system has fed you, then much of this will seem foreign, possibly bizarre.

An economic system

What I plan to do now is explicate, through a series of blogs, what an economy and governance based on hierarchical control theory might look like. Two blogs ago I asked if there might be a "sapient form of governance." I hinted that it would embody principles of natural governance systems found in living systems. Those principles involve hierarchical control understood from a systems science approach.

For those who have had a biology course in high school or college this shouldn't be too harrowing. Just in case, and for those who haven't heard these terms before I will include links to Wikipedia articles for background explanation. If an article there has some problematic content I will flag it with a * so that the reader is alerted to take the content with critical thinking turned on. Here is the plan. I will try to show that our economic system is really no different in its principles of operation, indeed even the nature of its components, from a living system. Living systems have been described at several different scales; sub cellular, cellular, organism (tissues), population, community, and biosphere. I will not provide examples at every scale, but I will assert that these deep principles can be found at each scale, making their universality highly likely. After grasping the principles of organization and operation of these systems (living and economic) I will then examine the control structures that living systems have employed to assure steady-state, continued existence, even in light of a dynamic and sometimes challenging environment.

The main theme here is that the economy is essentially the metabolism of life. Various components in a living system enjoy some existential benefit from the metabolism operating properly. For human society the beneficiaries of a well functioning economy are obviously individual humans. We must never forget that the individual human is the purpose of the economy. I will get back to the philosophical argument for human individual centrality at a later time. I presume few people will have any argument against this point of view. Along the line I will examine questions about the tradeoff between the value of the individual and the collective. Certain political theories put more weight on the latter, not entirely improperly it turns out, but I think the consensus holds that there should be no undue emphasis on society above the individual. It reminds me of the argument about nature vs. nurture. False dichotomy. Now we know that it takes both in a dynamic, intricate, mutually affecting dance. More on that later. Just a note of warning to any objectivists or libertarians out there; you will be deeply disappointed in what I have to say about the centrality of individuals as it pertains to the social matrix, so don't bother to read this blog unless you have an open mind.

In the below diagram (right click on the thumbnail and open it in a new tab/page if you can't see the detail) I have consolidated a lot of detail to illustrate the main features of all dynamic, complex systems, but in terms of what we might think of as our economic system. Briefly let me go through the components.

A economic system (generic)

Every living system on the face of this planet, including and especially our human-built economic system, is essentially based on this architecture. Every system depends on the Ecos for a variety of resource inputs, mostly low entropy material, and for services like absorbing wastes and creating those low entropy resources. The folks in Ecological Economics realized this quite some time ago. Classical economists are a bit chagrined to admit it. Right now, so-called environmental economics is attempting to cover their tracks with ideas about externalities, costs that are not currently accounted for on the books of economic actors, but should be. But the main point is that the combination of the system economy and the Ecos form a semi-closed system that must act in balance with respect to the material flows in order to operate in perpetuity (i.e. be sustainable).

The Earth receives its energy inputs (raw energy in the figure) mostly from the Sun. Some energy comes from gravitational and radioactive decay sources deep in the planet (geothermal), while some gravitational energy in the form of lunar tidal forces is also received. The bulk of real-time energy input, however, is solar energy flux (light radiation). The Earth has a steady-state energy budget that determines where the input goes and is used, the trophic dynamics of the biosphere being part of that budget. Owing to the Second Law of Thermodynamics, all processes convert energy inputs into work and/or other types of kinetic form and as a result lose a certain amount of energy in the form of heat. The wavy lines emanating from the tops of process circles (one to represent all consumers) is waste heat that is lost to the system and cannot do any useful work. This physical fact is a biggy in the scheme of things!

Mankind has several direct interests in the energy budget. The first might arguably be the food production driven by photosynthesis*. But truthfully, photosynthesis is at the base of almost all living processes that provide services such as oxygen production and CO2 removal. The second would be the climate. Humans without clothing and housing are limited to the areas on land where the climate is most favorable. Clothing and housing represent among the first levels of non-direct (non-food-based) energy subsidization. So, too, fire.

Fire represents the use of historically aggregated (stored) solar energy that uses exothermic fuel (wood) to subsidize by warming. Thus with clothing, housing, and fire humans have extended their range beyond the boundaries of climate constraints.

Work animals like horses and oxen rely on food but provide yet additional energy subsidy to human life by providing the muscle in larger scale farming, for example. Thus humans, with agriculture, extended their energy sources. But I have already transitioned into the diagram's second major process — production. This circle represents all processes that take in energy from the energy capture processes and do the useful work. In the human economy this is the product manufacture and service delivery components. This set of processes use energy to rearrange molecules and process information to provide consumers (the small circles) with the things they supposedly want or need.

A distribution function (e.g. wholesalers and retailers) spread the products and services to consumer processes via various transport mechanisms. The consumers do just what their name implies. They consume the products, etc. in various ways, degrading low entropy material to higher entropy wastes. The consumers typically feed back energy to the production and distribution processes as labor. Believe it or not, these are distinctly represented in living systems in the exact same kind of role. More on that later. Energy usable for doing useful work is also distributed through various channels to all processes in the system. That is represented by the solid black line across the top of the figure. It is important to understand this as a one-way route with each process using up a bit of the energy so that it dissipates as waste heat. This latter fact is absolutely inevitable and must be understood in order to grasp the holistic dynamics of systems.

In the end all material, even some low entropy material (e.g. plastic packaging), ends up as garbage. Energy needs to be consumed to purge the system of this refuse. And it ends up being pushed into Ecos sinks where it is supposedly isolated from the main system. Of course, as we now understand with so many manmade substances going into landfills and decomposition products seeping into water tables, we're not really protected from many of them.

So this figure represents an abstract version of all living systems (see below). What I have not put into the figure, and what is vitally important, but I covered it in a previous blog on, "What is money?" is the counter flow of messages from energy sinks to energy sources that provides information about how much energy should be used to operate the process (how much product to produce), and that is money flow. For example, energy flow in the form of labor is sunk in the production processes and distribution functions, hence money flow is from those process back to the labor that provided that energy. Similarly the consumer (who provided the labor) is the sink for products representing embodied energy*. Hence, the consumer pays in money for the product (services). Money also flows counter to the flow of energy available to do work. Every process that receives energy must pay money as a message that energy is needed.

Living systems economics

The figure above is really an abstraction of a general steady-state dynamic system. It survives by virtue of flow-through of energy and materials. The latter can be recycled through the Ecos so long as energy flows through it as well. But energy flow is one-way. Energy can be stored temporarily for later use, but always ends up flowing through and out of the system. The energy that comes into the system is called raw in that it needs to be captured in a form that can do useful work. Most energy conversion processes, like photosynthesis, but also photovoltaic, can only convert a small fraction of the raw energy into useful energy. Photosynthesis is surprisingly inefficient in this regard, generally at less than 1% of the incident light. It also varies with the intensity of the light.

Plants convert sunlight into stored energy packets, carbohydrates such as sugars and starches. These, in turn, are used by organelles in the cytoplasm called mitochondria that convert the energy in carbohydrates into still smaller packets, a small molecule called adenosine triphosphate or ATP (see previous Wikipedia article), which act as little portable batteries. ATP is the main currency of the cell, being distributed to other organelles where the work gets done. Production in cells is handled in a variety of organelle, but the ribosomes are representative. Ribosomes are the factories where protein, the main tool set and construction material of the cell's economy get manufactured. Energy stored in the ATP is given up to drive chemosynthesis (similar things happen with lipids and more complex carbohydrates). It is also the basis for tactical work like moving the cell (picture an amoeba crawling along, or a muscle cell contracting), or logistical work like transporting materials and energy packets from points of production to points of use. The latter are the energy consumers, producing additional low entropy material or even digesting old (usually damaged) materials for export as waste or recycling. In other words, these consumers are also the laborers in the cell.

Where is the market principle in a living system? It turns out that ATP distribution is based on demand and priority. As long as the system is not under external stress (temperature, pH, or other environmental conditions) and is thus not needing to put too much energy into repair work, cooperating processes have methods of signaling one another to speed up or slow down. In the former case more ATP is allocated, and less in the latter case. Some processes are competitive, however, and place demands on the ATP distribution which then needs to allocate according to a priority need (more on this when we get to coordination). The distribution of ATP and raw material resources is thus a demand market-based system. There is no central authority controlling the distribution of resources except in emergencies (environmental stress). There is, however, distributed regulation of processes to maintain a logistical agenda. That is what I will take up first below. Of great importance in understanding natural markets as allocation mechanisms is that the market signals must be clear and timely. For the system to work there cannot be any impeding or distortions of these signals. In fact, much of disease comes from some agent thwarting the normal signaling resulting in imbalances in some aspect of the economy.

When we get to the scale of whole multicellular organisms we still find an internal economy based on cooperation and occasional competition when needed to subdue a stress. I think it is relatively easy to see the same kinds of energy extraction/production/consumption relationships (e.g. digestive tracts, livers, and muscles). But what about at the population or species level. Multicellular organisms need to reproduce, generally by sexual means. Thus to one degree or another these organisms need to cooperate and, when necessary, compete for resources. Green plants produce their own food through photosynthesis at the cellular level. They can basically just sit there and feed, so to speak. But they do need to reproduce so some form of inter-individual signaling and cooperation is needed.

Animals are different from plants in that they do not produce stored energy from sunlight through photosynthesis. They must eat plants or other animals to obtain the low entropy material containing stored energy. To an animal, the rest of the biosphere is the Ecos so far as energy and material flow is concerned. But aside from that distinction the internal economics works exactly the same way. You can see this system in cells, in bodies, and in ecosystems. In each case there is a lot of minutia to wade through to get at the fundamentals but they are there and have been identified regardless of scale or variations in detailed mechanisms. For more background on this at the ecosystem level see this article on Howard T. Odum.

Of course in the animal world the currency is food. A rabbit is a wolf's source of energy and material so the notion that individual consumer/producers (rabbits eat vegetables and produce rabbit meat!) are also the currency of the realm causes us to pause in trying to describe this as an economy. After all, in the description of cellular metabolism as economy just above, ribosomes didn't eat mitochondria for energy. But looked at from the standpoint of the wolf population, rabbits are just one kind of currency. Wolves have to provide food for their offspring, not just themselves. Furthermore, they are pack animals (social not weight carrying) who interact on many levels especially with regard to obtaining food and procreation. So we are justified in thinking about a wolf economy where all the active components are wolves.

What is different between the human economy and a living economy (aside from the fact that our currency doesn't try to escape and we don't have to eat it) has to do with innovation and changes in the internal components, tools, and usage of resources. This is where any theory of governance based on hierarchical control theory and using principles from biological economy will need to accommodate the human condition. Or, as I will argue at some point in the future, the human system may need to moderate its creative enthusiasm wisely (see discussion of 'growth' below). Below I mention the fact that ribosomes don't spontaneously and autonomously start a new product line. Evolution has to act on biological systems to introduce innovation. But also recall I mentioned that there was a great advantage of this stability in terms of benefit to the components — a sort of job security if you will. I'll get back to that in a future post as well.

Operational governance of a living economic system

The central question that we need to address is what is the best approach to governance of an economic system? For now I will focus on the operational level since this is the one that all components (and all people) come in contact with. It is the most immediate determinant of component well-being. The central feature of operational control that is compatible with a market economy is known as homeostasis or 'same-staying'. The principle applies to fundamental processes that constitute the main aspects of a living system. For example, within a cell the balance of various ions is critical to maintaining life. Processes within the cell operate to maintain the concentration of these ions in a critical range in the face of flux caused by external conditions. As I will try to show homeostasis is a form of distributed control that relies on messages from the environment of the homeostatic process (e.g. other homeostatic processes). These messages, in the form of chemical messengers such as calcium ions, hormones, or neurotransmitters, are the equivalent of money in a monetized economy. They signal the need for the homeostat to increase activity or decrease activity as needed to keep the process in its appropriate range. Thus the interactions of various processes with homeostatic control are essentially mediated by a marketplace.

Homeostatic control (generic)

The above figure shows a generic homeostatic controller based on feedback, the fundamental principle of cybernetics. A process is 'designed' to produce a specific set of products in response to input signals (e.g. requests for products) and resources (material and energy). The process may issue demand signals indicating need for increases or decreases in supplies. But the governance of the process starts with measurement of the processes own product, comparing it to requirements (the set point), which may be genetically determined or, as we will see later, may be determined by a coordination level signal, and using an error (positive or negative) to activate a controller. The controller is the homeostat. It issues a control signal to the process to up- or down-modulate its activities. If there is too much product relative to the set point, then the process has to back off its activity. Not enough, it has to up its activity.

Another form of homeostasis involves reaction to an external condition, such as restrictions on the input flows due to some environmental disturbance. In such cases the homeostat will be sensing the inputs (instead of or in addition to the outputs). This is a type of feed forward cybernetic control. The process cannot change the input, but may be able to substitute a secondary material or energy source to keep a minimal level of activity. Many physiological processes involve marshalling reserve or substitute resources when something happens to the primary resource.

Now imagine that each process circle in the economy figure above is its own homeostatic control process. The outputs of some processes are the inputs to other processes. And in a very complex system, one with many different producers and consumers, you can see that the give and take, the signaling, the flows, the general dynamics (over time) can lead to an overall stable economy subject only to perturbations on inputs to the system as a whole.

It is important to recognize that while this is an economy, where a multitude of processes generally cooperate for material and energy resources, much like a supply chain in industry, each process is still constrained to do the job it was designed for. Ribosomes don't suddenly decide to expand into the complex molecule packaging market, thereby competing with the golgi apparatus. As a general rule, competition only becomes necessary when some critical material input is in short supply and multiple processes need it to operate. Under those conditions, the coordination control level will execute a priority schedule for which operational processes get to proceed and which need to down modulate for the good of the whole system.

One very important question about an economy has to do with the role of growth. I mentioned above that a natural economy such as is found in living systems can achieve stability, meaning that all of the needs of the components are being met in a fluctuating but on average steady-state dynamic. But economies grow under specific conditions. In living systems an economy, such as a cell, grows when it is initially small. There is a whole field of study about what constitutes an ideal 'size' for a living system. There are many trade offs that have to be taken into account. For example, the volume to surface area ratio is important in heat dissipation/regulation. Why are whales largish and shrews smallish? Too many considerations to take up here. But one thing is evident throughout the living world (and there are a few exceptions, of course): Things grow to a 'natural' size for their kind and then stop growing.

Human economies have seemed to have a tendency to grow without constraint. When humans occupied an insignificant fraction of the world this was appropriate. Just like a daughter cell, after mitosis, will grow to reach the natural size for that cell type. The cell needs to reach its optimum operating size, however that is defined genetically (and evolutionarily). Organs, too, in developing embryos grow to their 'right' size and then stop. Whole organisms grow from embryonic size to their optimal size and then stop. But human economic systems don't know when to stop. And this is leading to all kinds of problems. Monsters, in biological systems, occur when one or more parts of an individual fail to stop (or fail to reach optimal size) growing. Gigantism occurs when the whole organism fails to stop growing at the right size. The human economy has failed to stop growing when its presence started having an adverse effect on the environment. So the human economy has become a monster.

We need to consider what an appropriate size means, both for the economy as a whole and for components within the economy. This means addressing the size of the ultimate consuming components - us, and it means understanding what growth means for a company (a producer). Much of the 20th century was about growth of companies to become multi-national entities, individual wealth whenever possible, and before that, in the prior centuries it was about national expansion and empire. One would think that with all the negative experiences we have discovered and learned about with all of these kinds of growth, we would have realized that there is something wrong with the concept of growth beyond a certain limit. But sadly this seems not to be the case.

There is a difference between growth (increase in bulk or size) and development (increase in complexity). The latter leads to increasing stability under the right conditions. It is progressive evolution. The former simply provides a means for systems to achieve an optimal size. Economies of scale obtain only up to the point when diminishing returns take over and the system reaches a point where marginal gains equal marginal losses. There is no real point in growing further.

Every human, as a component in a social system, needs to eat adequately, have shelter, clothing, etc. Forgetting for a moment the notion that some individuals get more of these things than others, it is the case that the social economy must be capable of providing these for every individual. There must be a basic level of feedback control that assures these conditions remain within the critical boundaries. Each person is a participant in a marketplace of labor and consumption and, as a responsible adult, learns to regulate their own situation to the best of their abilities (like a homeostat). Unfortunately there are cheaters who take advantage of imperfect information and disrupt the communications that would allow a market regulation to take care of itself. Also the nature of products and services in the human economy has gotten such that these are extremely complex and the average human is not capable of making value judgments as a basis for purchase decisions. Instead we've come to rely on advertisement, peer pressure, or apparent entertainment potential when buying stuff (and services). These factors and a few more complicate the market mechanisms and disrupt a smooth operation. It is as if various viruses had infected a cell and were interrupting normal operations by tricking the cell to manufacture more viruses. And that really happens, doesn't it. That is where we begin to see the need of a new level of control that can mitigate viral infections and, as it turns out, smooth out the overall operation level when it becomes so complex that time delays in signaling and other factors cause wild oscillations in the components' activities.

The human economy, our society in general, has some serious problems with regard to how it works as a natural system. What should it look like if it were to follow a more natural pattern? What size should it be relative to the Earth and the rest of the Ecos? What are individuals in the economy? What is their purpose? These are the questions I want to explore in Part B.