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(9/20/98)

CHAPTER XIV. A

BIONOMICS -- ECONOMICS AND THE WISE COMMUNITY

This Chapter will provide in-depth analysis of a reference source[1] that seems to offer hope for harnessing economics in the cause of a Science of Religion. Economics is a core problem for a Science of Religion. In contrast to Lippman and Galbraith it is clear to me that there is not a direct relationship between economics and the good life. However, neither are they unrelated. But this issue seems to require a whole different approach than has been used up to this point. Traditional economic theories whether capitalist or socialist do not seem to be very helpful in truly understanding economics and utilizing it for the good of humanity in general.

[1] BIONOMICS appears to provide some helpful insights. Its clarification of the role of science and technology in reducing prices so that products "naturally" become cheaper and cheaper allowing more and more people to have them gives a hopeful note absent from traditional economic thought. Rothschild's theory that biological evolution and economic evolution are equivalent processes seems like a useful idea.

Rothschild's economic theory does not directly relate to ideas about the Wise Community and Wise Persons. Therefore, it will take thought and effort to determine how well his ideas fit with a Science of Religion.

(p. xi) "Capitalism, or the market economy, or the free-enterprise system --whatever you choose to label it -- was not planned. Like life on earth, it did not need to be. Capitalism just happened, and it will keep on happening. Quite spontaneously. Capitalism flourishes whenever it is not suppressed, because it is a naturally occurring phenomenon. It is the way human society organizes itself for survival in a world of limited resources."

RESPONSE: Although, evolution and the universe work without planning, in human society we can't avoid planning. The only issue is finding guidelines for our planning that achieve our goals rather than diverting us from them. We know evolution will happen in a natural way without planning. But by the same token we know that evolution can be guided and controlled in many ways through planning: when human beings breed cattle for increased milk and meat production, chickens to lay more eggs, dogs to have any one of a score of different characteristics. So economic processes must be capable of guidance in ways that are more likely to achieve better ends. There must be ways to help the changes resulting from science and technology guide manufacturing and services toward the Wise Community.

It is only when we have unclear goals, disagreements about what is desirable, and ignorance about how the processes work that planning becomes self defeating and counter productive.

If we recognize that the core goal is to produce and maintain a Wise Community made up of Wise Persons and what this means then we have a clear guidepost to use in our efforts to control and direct economic processes.

(p. xii) "...the chief distinction between the biologic and economic forms of evolution is speed. Technological change happens roughly one million times as fast as genetic change."

"...economists are still baffled by the forces that propel economic change. To get their models to work, orthodox economists must assume that technology does not change. Unable to shed this absurdity, conventional economic theory has lost all touch with economic reality."

RESPONSE: My past study of economics has always left me feeling that what I was reading was unconnected ideas and concepts. There was no cohesiveness. Clear connection between ideas and the real world were minimal. As a result the above criticism of traditional economic theory feels right to me. Now I am anxious to see how well Rothschild's approach holds up under the scrutiny of professionals.

(p. xiii) "Human sociobiologists employ far more sophisticated language than old-fashioned social Darwinists, but the core allegation is the same -- people are born to behave the way they do."

"...bionomics holds that economic development, and the social change flowing from it, is not shaped by a society's genes, but by its accumulated technical knowledge."

RESPONSE: For the first time humanity is entering the realm where we can alter an individual's genes to change from less desirable to more desirable. But, in spite of that it is clear to me that all social problems have more to do with bad philosophy/religion than with bad genes.

(xiii) "Though the analogy between genetic and technologic evolution is powerful, it is not perfect."

(p. xiv) "The analogy drawn here observes that organizations, like organisms, are built in complex hierarchies."

"To persist, regardless of size, every form of life tends to become specialized, developing a particular way of getting by that only a few direct competitors in its niche can match. Avoiding head-on competition -- in the wild and in the marketplace -- leads to diversity which in turn, promotes interdependence....Taken over time, the twin phenomena of competition and cooperation have yielded the diversity and abundance of the earth's ecosystem in one realm and the complexity and productivity of the global market economy in the other."

"The most difficult concept to accept about the natural world is that it runs itself. No conscious force is needed to keep the ecosystem going....Markets perform the same function in the economy....A flexible economic order emerges spontaneously from the chaos of free markets."

RESPONSE: As indicated earlier a society cannot avoid regulating its markets in all kinds of ways. The goal should be to clarify which of those ways are most likely to achieve desirable goals.

Up until very recently ecosystems have run themselves. However, the foregoing becomes less true every day. For the past few hundred years human behavior has become a greater and greater force in ecosystems. Up to this time societies have done their thing and any influences on ecosystems have been ignored by them. Now human societies must begin to take responsibility for their behavior (as they have with ozone depletion). In the future they will have to guide evolution more carefully and more rationally. The foregoing will be one of the prime responsibilities of a Science of Religion. (See Chapter XXVIII.)

In the past mutations of the available DNA have guided the evolution of a species. In the future human beings will need to make whatever changes are necessary in DNA to allow those species desirable for our well being to continue within the changing world. Some of the changes in the world are produced by human behavior, some are produced by the natural changes that always go on in the universe. But either way without responsible intervention human life at its best cannot continue. This includes the biodiversity that makes our world a treasure and an ideal place to live.

(p. xiv) "Two centuries of economic thought, both capitalist and socialist are based on the concept of 'economy as machine' rather than 'economy as ecosystem.'"

RESPONSE: It seems clear to me that economy as ecosystem is a superior model and may lead to improved understanding of the key elements of an economy.

(p. xv) "...this book calls for a profound change in our expectations of government, for a new understanding of how it can and cannot be used to foster prosperity. Bionomics does not deny the need for a social safety net, but it compels a rethinking of the net's design."

RESPONSE: If BIONOMICS can help us achieve the foregoing than it is truly a very big step in the right direction.

INTRODUCTION: Genes and Knowledge, p. 1:

(p. 7) "...once the Sumerians settled down to farm intensively, the population in each community could grow into the thousands. In these first cities, it must have been difficult to control disputes, particularly over rights to stored grain. Developing an efficient writing system was a response to the pressing need for better economic information."

(p. 8) "It is impossible to overstate the significance of Gutenberg's invention [of the printing press]."

"Within a few decades of Gutenberg's invention...printing technology had spread written knowledge throughout Europe."

(p. 9) "...without printing, the Scientific Revolution at the turn of the seventeenth century could not have started."

(p. 10) The Cambrian explosion of the diversity of life 900 million years ago resulted from the invention of sexual reproduction. This event brought on "the debut of multicelled organisms -- jellyfish, sponges, and worms. The first shelled animals (primitive mollusks) and the first arthropods (trilobites) -- ancestor of insects, spiders, and crustaceans -- also emerged at this time."

(p. 12) "...the similarities between genetic and technological information suggest that biologic and economic life are actually parallel versions of the same basic evolutionary process. If this is true, modern biology's detailed understanding of evolution...should be of great help in comprehending both our past and our future."

"PART I: EVOLUTION AND INNOVATION," CHAPTER 1, Hints of Change

(p. 20) "In 1687, two centuries after the Scientific Revolution germinated, Isaac Newton established modern science with his publication on MATHEMATICAL PRINCIPLES OF NATURAL PHILOSOPHY."

(p. 23) Thomas Newcomen in 1712 constructed his first steam engine at a coal mine near Dudley Castle in Staffordshire, England. It generated approximately 5 horsepower.

(p. 25) The Newcomen steam engine had less than 1% efficiency. Nevertheless by 1775 nearly 600 were in use.

(p. 27) In 1775 James Watt produced a better steam engine. Watt's engine used 75% less coal for the same power. In 1784 Watt developed a rotating shaft. In the 10 years, 1790-1800 more steam engines were built than in the preceding 90 years. By 1800 machine power reached critical mass and set off the chain reaction of the Industrial Revolution. "It was to be the greatest transformation in human history since the hunter-gatherers turned to agriculture."

RESPONSE: As indicated in Chapter XV, "The Hunter-Gatherer in the Modern World," we stand in need of a new revolution. To the degree that a Science of Religion comes about we should begin to use the organization, tools, etc. of the industrial revolution to develop our "Wisdom" potential and achieve a new kind of balance with our environment similar in a basic way to that possessed by the hunter-gatherers.

CHAPTER 2 -- Theories of Change

(p. 28) "Jean-Baptiste Lamarck was the first scientist to advance the idea of evolution, 'descent with modification,' the idea that modern species are life-forms derived from primitive predecessors." He promoted the view of gradual change. Also, he coined the term biology. He died a few days before 1930.

(p. 32) "Adam Smith, a Scottish philosophy professor, was the first...to grapple seriously with the basic questions of economic life. Not surprisingly, Smith was influenced by Newton's model of the physical universe as he searched for the 'natural order' of the economy. Where Newton explained that gravity was the central force holding the universe together Smith argued that individual self-interest held human society together."

RESPONSE: To say that self interest is what holds society together is to make it easy to put a bad spin on this matter,and totally miss the point of what a person is and what a society is. Because many of the social thinkers of the 1800s developed ideas about self interest that were mis-focused they laid an erroneous foundation for western society that limits us in many, many ways even to this day.

The reality is that human beings are social beings. Their connection to humanity is far deeper than "self interest" usually implies. "Self interest" has traditionally been defined so as to hide the human bond between an individual and their community. The use of "self interest" in economic theory makes it easy to think of people as disconnected atoms doing their thing without considering how their actions impact their society. In addition the foregoing is thought to magically work to their and everyone else's benefit.

Since it is my claim that religion is the social institution that brings a community together I have added reason to look closely at Smith's claim that a community is held together by self interest.

Certainly, self interest in its broadest meaning is not an irrelevant issue. However, it isn't until we begin to consider that human beings act to achieve a feeling that their life has meaning that we get to the core of the issue. This understanding allows us to grapple with the actual issues in a way that leads us toward building a Wise Community made up of Wise Persons. At this deep level self interest has relevance in economics as it does in philosophy and religion. However, I think the real problem has always been the difficulty any individual has in understanding which choices best serve their self-interest. Obviously, the rapist, murderer, thief, liar, tyrant, etc. is normally under the impression that they are serving their own self-interest. Most philosophers and religious persons would feel they are in error. Coming up with testable answers is the goal of a Science of Religion.

True self interest may be one component of the glue that holds society together. It also lies at the heart of human choice. As a result it is the responsibility of a Science of Religion to understand and teach about true self interest. A Wise Community must provide whatever resources and opportunities are necessary so that individuals do not act against their own best interests in any realm of their life including the economic realm.

(p. 33) "...the inherent diversity of individual talents, combined with the innate human desire to satisfy self-interest, leads members of society to organize themselves to perform tasks for which they are particularly well suited...."

"Paradoxically, when individuals pursue their special aptitudes in an effort to satisfy their selfish desires, the end result is social harmony."

RESPONSE: The above hypothesis of how best to achieve social harmony is an interesting idea. I wonder if it has ever been tested. It may well be that social harmony is so easily achieved. However, it seems to me that this assumption is an over simplification and requires a little fleshing out in order to serve the needs of the Wise Person in a Wise Community.

I think it is the previous kind of thinking that got us totally off the track in understanding the role of religion in society and the essential role it plays. I'm sure it has had an equally negative effect in economics.

The diversity of human talents and desires is indeed a fantastically important social resource. But people will not spontaneously organize themselves in such a way as to best utilize these diverse talents and desires. This is probably one of society's most important roles, to help individuals find how to utilize their unique abilities to achieve the maximum social benefits. The foregoing requires organization as well as enlightened thinking. Volume I, Chapter Two, " Organizing for a Wise Community," addresses some of these issues. Chapter One of Volume I also explores this concern.

(p. 32) Adam Smith, IN INQUIRY INTO THE NATURE AND CAUSES OF THE WEALTH OF NATIONS, 1776:

"It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love and never talk to them of our own necessities but of their advantages."

"Adam Smith did not build his analysis of the economy on how he thought people should act; he constructed his theory from observation of how they did act."

RESPONSE: Not really. He developed his theories based on his interpretation of their actions. He speculated as to their motivations and interpreted what he saw as acting out of self-interest. However, there is a whole layer of social bonding that he overlooked because it was too common-place, too universal, too familiar to see.

In the absence of such social bonding and adequate understanding by the individual of their own true self-interest, individual actions will deviate often in disastrous ways from those envisioned by Smith. As a result a Science of Religion must exist in order for any society to avoid having its economy behave in bizarre ways typical of current societies; i.e., hopelessness, child abuse, welfare, unemployment, etc.

(p. 33) "Like its Newtonian model, Smith's economy was essentially stable. Smith described the machinery of the market economy, but he did not foresee that the mechanism itself was about to undergo dramatic change."

"...David Ricardo and Thomas Malthus, also saw the economy as a closed and unchanging system."

"Ricardo's ideas were to become central to Karl Marx's economic thinking."

"Ricardo's bleak program grew out of the simple but terrifying logic of Thomas Malthus' 1798 AN ESSAY ON THE PRINCIPLE OF POPULATION. Malthus argued that the natural rate of human population growth is geometric (1-2-4-8-16, exponential in today's terminology) and always exceeds the arithmetic (1-2-3-4-5, linear) rate of increase in food production. He contended that famine, disease, and war were the only way the population could be kept in balance with the food supply....[which led] Thomas Carlyle...[to label] economics 'the dismal science.'"

(p. 35) "By 1833...workers under 18 years of age were limited to 69-hour work weeks. Children under 11 were limited to 48 hours."

RESPONSE: It seems to me that in the above described situation the factory owners and managers are "pursuing their special aptitudes in an effort to satisfy their selfish desires," (Rothschild p. 33) but producing not social harmony, but a pathetic society and laying the groundwork for revolution. Social harmony in terms of fair working conditions came not from the selfish desires of the factory owners, but from the humanity of enlightened government. It seems to me that this kind of guidance may always be necessary.

CHAPTER 3 -- Darwin's Vision

(p. 37) Darwin began the voyage of the Beagle in 1831 believing in special creation. By the spring of 1837, six months after his return to England, Darwin was convinced that species change."

(p. 38) "Having come to this conclusion, he decided to discover exactly how they changed."

"To crack the species question....he took the unusual approach of reading widely, particularly in disciplines unrelated to biology and geology -- such as psychology, philosophy, social theory, and political economy."

(p. 41) "Within a decade of its publication [in 1859], THE ORIGIN's capacity to explain concisely so many previously incompatible facts made reluctant believers out of the vast majority of the scientific establishment as well as much of the educated public."

"By the time Darwin died in 1882, his theory of evolution had become the central organizing principle of all biological thought, as it remains to this day."

CHAPTER 4 -- The Mythical Machine

(p. 44) "Starting with [Adam] Smith, [Thomas] Malthus, and [David] Ricardo, economists constructed their systems of thinking with concepts borrowed from Newtonian physics."

(p. 45) "Because the intellectual superstructure of modern Western economics was erected on the foundation of Newtonian physics, it has become unstable. Today's best economists are quite unable to use modern theory to draw coherent and consistent conclusions from the stream of incoming data. Economists disagree among themselves so completely that their advice to political leaders amounts to little more than a spectrum of conflicting opinions."

"The weakness of modern Western economic theory has implications that go far beyond our inability to eliminate poverty, provide full employment, or meet foreign competition."

RESPONSE: If BIONOMICS can indeed move us beyond this current state then we will have abundant justification to rejoice.

(p. 46) "The Malthusian dilemma seemed so inescapable that it became the necessary point of departure for any new economic idea."

"Logically, economic thinkers had three possible ways to deal with Malthus's population principle. First, they could propose ways to alleviate its cruel consequences....this was the common thread of socialist reformers and communist revolutionaries. The second choice was to ignore the inevitable tragedy....This 'head-in-the sand' approach was pursued by capitalist economists. The third alternative, showing that Malthus was simply wrong -- that production increases could outpace population growth --has never been seriously pursued by any school of economics."

RESPONSE: It is indeed curious that after 200 years during which industrialized nations have moved in exactly the opposite direction from Malthusian thinking, we still all accept the scenario that disaster is just around the next corner and it is unavoidable.

(p. 47) Friedrich Engels and Karl Marx published THE COMMUNIST MANIFESTO in 1848 which consisted of only 20 pages!

RESPONSE: This is a good example for us all. Length isn't everything. Brevity can be a virtue if one wants to be widely read.

(p. 48) G.W.F. Hegel's dialectical principle is that any idea or thesis stimulates an opposing view -- the antithesis. The conflict is resolved in a compromise, or synthesis. This synthesis starts the idea cycle all over again."

RESPONSE: Obviously, this dialectical process does occur in certain situations. But the concept is inherently wrong-headed. It is based on the idea that thought is supreme and that it is the source of answers rather than recognizing that empirical study is crucial. The validation of any answer cannot be guaranteed without resort to study of how the universe really works. The answers we derive from experiment and observation are totally outside (above) the dialectical process.

It is very likely that dependence on this kind of approach doomed communism from the beginning. It (like traditional religion) was always vulnerable to authoritarianism, rationalization, the-end-justifies-the-means thinking, absolutist, ignoring real-world results.

(p. 48) "Where Darwin emphasizes competition among unique individuals, Marx stresses conflict between homogeneous classes."

(p. 49) "When Karl Marx and J.S. Mill charged off in opposite theoretical directions, they tore open the great ideological chasm between Left and Right that still defines the modern political landscape."

"Mill was...quite sympathetic to the goals of the socialists."

RESPONSE: If BIONOMICS can actually break down the barriers between Left and Right and establish a new consensus this would be remarkable and much to be desired.

(p. 49) Mill's law of diminishing returns states that putting more effort into production gives proportionally less results.

(p. 50) "...Western economists became obsessed with the concept of equilibrium [a stationary economy as the ideal]."

Beginning in the 1870s the "marginalists" developed the idea of "decreasing marginal returns" as the building block of modern equilibrium, or neoclassical economics."

(p. 51) Alfred Marshall of Cambridge around 1900 replaced J.S. Mill's book. His views depended on things not changing. His equation only worked if none of the input factors changed during the computation.

RESPONSE: The concept of equilibrium and endlessly repeating cycles are ideas present in all primitive thinking. It seems incredible that it lies at the core of twentieth-century economics. With this kind of thinking it is easy to understand why economics has been of limited value in making real-world decisions.

(p. 52) "...economists, both Marxist and Western, never adopted the rigorous testing standards of natural science."

"...by 1820, the falling living standards of English workers had bottomed out. From that time on, rising productivity and slowing population growth began to raise the prosperity of the average citizen of England."

But the above wasn't known till the 1960s with the advent of computers and research groups.

RESPONSE: This point seems very important to me. It is a core piece of data if we are to understand economic processes. It seems like another example of real trends getting lost within the clutter and "noise" of complex changes.

(p. 53) "Freed of the most basic restraint of science -- testing theory with facts -- modern Western economics has completely lost its way."

"...neither side [Marxist or Western] has yet resolved the central dilemma of how the economy changes."

RESPONSE: Another hope BIONOMICS promises. Can it deliver?

CHAPTER 5 -- Life's Pulse

(p. 59) Punctuated equilibrium proposed by Niles Eldredge and Stephen Jay Gould provided the mechanism that seems to explain how evolution takes place. A large gene pool is too vast to change much through mutations. In order to change, a small number of a species must be cut off from the larger gene pool so they can concentrate any variation and channel it into widespread change throughout the gene pool.

RESPONSE: Why do many species exist in such a limited geographical area? Could it be because of the requirements discussed in the concept of punctuated equilibrium? That is, if change is too slow and diffused in a large gene pool, under certain circumstances the geographical area must be small enough to drive rapid evolution in order for a species to survive.

The foregoing could have significant relevance to economics. It would imply that if a market becomes so large that it is decoupled from the forces of change, it loses the forces that drive change and maintain a viable product. The U.S. auto manufactures may be an example of this.

This point should give us some concern when we consider that as the economy grows larger and larger geographically it may be more and more difficult for the person with a great idea to get their company started because the existing T. rex's may stomp them and eat them alive before they can impact the market place.

This issue is equally relevant to all areas of thought and belief. Against the flood of ideas, promotion and self-serving actions of existing positions, the revolutionary new idea may get totally lost in the swelter.

CHAPTER 6 -- Brains and Tools

(p. 66) "...discarded tools are the fossilized form of the knowledge used in their manufacture."

(p. 73) "...we might think of a machine as a fossil representing the state of technological information at the time it was made...."

CHAPTER 7 -- Technology's Rhythm

(p. 75) "Neither gradualism nor catastrophism allows us to understand the inherent nature of change, be it biologic or economic."

(p. 76) "The intrinsic unpredictability of technological evolution makes a mockery of every effort to plan the future."

"...many Western economists acknowledge that they have precious little to say about the role of technology in economic change."

"After decades of bitter experience, the world's socialist countries have discovered that when people are denied the opportunity to satisfy their self-interest, the natural processes of technical advance collapse. Reluctantly, the leaders of these nations have come to realize that only by dismantling the bureaucratic superstructure of state planning will there be any hope of revitalizing their moribund economies. None of them realize it, but, by moving to capitalism these countries are unshackling the natural phenomena of economic evolution."

RESPONSE: To imply that no planning is possible, nor desirable is as erroneous as to think that all change can be predicted and planned. What is needed is processes that encourage change in what appears to be the most desirable directions. This must be done without unduly restricting new ideas to develop, be tested and utilized to the degree that they prove to be beneficial.

(p. 77) "...everyone knows that capitalism works better. But because the evolutionary nature of economic change is not yet recognized, no one can convincingly explain why."

"Unless the spontaneous, unpredictable character of evolutionary economic change is understood, there is a strong possibility that many of today's economic reforms will ultimately be undone."

PART II: ORGANISM AND ORGANIZATION, CHAPTER 8 -- Form and Function

(p. 81-82) "Just as every complex organism is comprised of cells organized in tissues and organs, large firms are composed of work cells arranged in hierarchies of departments and divisions. As in nature, all the critical life-giving functions take place inside individual cells, where people use knowledge to transform resources into goods and services."

"The biologic and economic system owe their similarity of form to their similarity of function. In nature, organisms convert genetic information into tissues. In the economy, organizations turn technological information into products. Since both information realms are constrained by limited resources, they evolved similar ways of efficiently turning resources into more information."

(p. 87) "With few deviations, these principles of form and function [specialization of an organism's cells] apply to economic organizations. Underlying the complexity, there is a universal pattern of organization. Inside every work cell, people use tools and knowledge to turn energy and materials into products. Whatever the product happens to be the flow of production mimics the protein-building process of organic cells: prepare the incoming materials, rearrange their components into new configurations, and package them into deliverable products."

(p. 90) "The entire global economy is comprised of work cells and organizations engaged in independent production and exchange of products...all organizations cope with essentially the same tasks that face a single living cell."

RESPONSE: I see a significant break-down in the analogy on this point. All organisms have as their essential goal to reproduce to make more of their kind. Most of their energy goes into doing this as efficiently as possible.

In business there may or may not be a desire to grow and set up new branches. Its primary goal is to make a profit for the owner of the company. So success is not measured in terms of how many Mcdonald outlets there are, but in how much profit each sends to the head office.

One would assume that the larger the business is the greater its profit would be. But it is the profit that determines success, not numbers.

CHAPTER 9 -- Design by Compromise

(p. 92) "...the evidence is now convincing that the modern cell began as a collaboration of ancient bacteria."

"...the ultimate function of any organism is to copy the information encoded in its DNA."

(p. 93) "Over time, natural selection favors genes that build and operate structures that more efficiently convert resources into more DNA."

"When it comes to efficiency, the highly compartmentalized structure of cells gives them a big edge over bacteria."

(p. 96) "To keep the tissues and organs of more complex organisms in sync, increasingly elaborate control systems are needed."

"The human brain amounts to just 3 percent of total body weight but burns about 20 percent of all the energy derived from food."

"...most of life's choices...are left to...[each] cell."

(p. 97) "...sole proprietors are enormously diverse and productive; they are viable in market niches that cannot support larger organizations."

"...most individuals work in cooperative economic cells. Employing two to about six people, these work cells are the primary organizational units of the economy."

(p. 98) "A sixth of all Americans work in firms with fewer than 20 employees...."

"Oscillating between centralized and decentralized designs, companies seek but never find the perfect organizational structure."

CHAPTER 10 -- American Perestroika

(p. 99) "Since technology evolves so much more rapidly than genes, organizations change shape far more quickly than organisms."

"...our descendants will almost certainly judge the 'computer-on-a-chip' to be the most economically significant technical achievement of the previous 500 years. The microprocessor will rank at the very pinnacle of human invention because -- like the printing press -- it slashed the cost of encoding, copying, and communicating information."

(p. 100) 1940s -- ENIAC, first American made computer. Nineteen years later in 1959 the integrated circuit was developed.

(p. 101) "Between 1947 and 1987, the transistor and the integrated circuit drove down the cost of a single switching device by a factor of 100,000. Computing power that once had cost $3 million could be had for $30."

"By delivering on the promise of computer technology, the microprocessor thrust the world's capitalist economies into a new economic era -- the Information Age."

(p. 102) "Almost unnoticed at first, microchip technology began to revolutionize the workplace and lay the technical foundation for the integrated global economy of the twenty-first century."

"The promise of the new economic era could not be achieved without first breaking down the structure of the existing economy. The 1982 recession, the most severe economic downturn since the Great Depression, marked the disruptive phase of this restructuring."

"Many commentators, particularly those on the political Left, saw the tidal wave of bankruptcies and unemployment as an unmitigated human tragedy -- a prime example of capitalism's inherent weakness."

"In reality, the 1982 recession was particularly severe because two otherwise-unrelated events coincided. First, a decade of monetary mis-management and runaway inflation was abruptly ended triggering the sudden shrinkage of an overstimulated economy....Second, inflation had masked the inefficiency and technological backwardness that had become commonplace among American firms."

(p. 103) "Propelled by the microchip revolution, global economic competition had been intensifying since the mid-1970s, but until inflation was stopped, many firms managed to put off the day of financial reckoning."

RESPONSE: Very interesting. What does this mean, "breaking down the structure of the existing economy"?

(p. 103) "A recession serves the same purpose as a harsh winter. Weak organizations in each industrial species are weeded out, leaving more room for the survivors to grow. Even though it is traumatic for those involved, the death of organizations is just as important to the vitality of the economy as the birth of new firms....In the economy, natural selection acts on the organization, not the individual."

"The best protection for workers is an economic system that helps the jobless update their skills to match the needs of prospering firms."

"Poorly managed organizations...should die."

"unemployment -- a necessary consequence, of allowing firms to go bankrupt -- is unquestionably capitalism's roughest edge."

"Of those dismissed between 1981 and 1986 (including the 1982 recession), one-fourth found new jobs within five weeks and 60% were hired within 6 months. Less than 20% were out of work longer than a year."

"The tragedy of long-term joblessness is caused by a failed education system. It is not a necessary feature of a capitalist system."

RESPONSE: This sounds very straight forward and factual. However, since I was one of those unemployed for over three years, I know the issues are more complex then indicated here. I think critical examination will indicate that there are other important dimensions to the issue. A good place to advance this examination is by studying AMERICA: WHAT WENT WRONG? , by Donald L. Barlett and James B. Steele.

It may well be that most people benefit when poorly managed organizations die. But might there not be better, more humane and more effective alternatives. What about not just updating the skills of the jobless, but to update the skills of managers to help businesses change and alter their processes to stay efficient and to utilize the resources and energy they have accumulated. It seems to me that at least in some cases this would be better than starting over from scratch.

This seems to me to be a place where economic evolution might benefit from being different from organic evolution. A business might evolve without dying. If it could pass through a transforming restructuring this might be far more efficient than the disbanding, destruction and death of a business that has fallen on bad times.

In the Great Depression County Agents -- selected because they were better farmers -- were hired to visit other farmers and teach them how to do a better job. Not all farmers were ready to learn, but many were and this process helped them prosper and the economy to prosper also. Society has a deep responsibility to ensure the well-being of its people at the highest level possible. And focusing on our education system as the only problem may be overly simplistic. Certainly another problem area is unemployment insurance which is provided only while one is fully occupied seeking work of the kind they were doing when they lost their job. Support while retraining would be an obvious corollary to Rothschild's ideas.

CHAPTER 11 -- A Common Fallacy

(p. 106) "The profound economic and military consequences of the microchip -- a technology far too complex and fast moving for the Soviet system -- forced the hand of the Soviet elite."

"Even the most fervent communists now admit that the Marxist economic program has utterly failed. Curiously, though, no one seems to know exactly why."

(p. 107) "In the past, many Western thinkers argued that a Marxist-style economy was just one of several alternative economic systems. According to this view, a decentralized market-oriented economy is no better or worse than a centralized state-controlled economy. Both systems have pluses and minuses."

"But from a bionomic perspective, such open-mindedness cannot be maintained. If the workings of the economy parallel the functions of the ecosystem, if organizations follow the same principles of form and function that govern the evolution of organisms, then there is but one natural mode of economic organization....Any economy that disrupts the interplay of immutable organic forces is inherently flawed and doomed to failure."

"After seven decades of a system erected on Nineteenth-century Marxist theories of how an economy should work, the Soviet leadership has concluded that these theories cannot work....Marxism failed because its core elements violate processes essential to the functioning of all living, evolving systems."

RESPONSE: The above sounds unduly dogmatic to me (or perhaps it is only unclear as to the limits of what "there is but one natural mode of economic organization" means). Evolution allows for the virus as well as the Tyrannosaurus Rex. Some conditions favor one and some the other.

The error is not in planning but in setting up a bureaucracy that unduly limits change, input of individual insights, and creativity. Any planning of a kind that would have prevented the synergistic changes that allowed honey bees and flowering plants to co-evolve would seem to be self-defeating. Most of modern commerce would be impossible were it not for technology that initially would have seemed to have nothing to do with transportation; i.e., the steam engine, or specific discoveries and inventions involving the use of new alloys and materials.

Some things can be easily envisioned and predicted and planned for. Others are totally unforeseen and unpredictable. If a process is set up that is not able to take the foregoing into account it must cause serious problems.

The prime problem with communism is that the system started with a dogma that could not be questioned or altered. As a result there was no mechanism to correct errors and input new knowledge and understanding. It got further and further from reality until traumatic change -- possibly, the microchip -- caused the system to self destruct much like the collision of a meteorite caused the demise of the dinosaurs since they lacked the attributes necessary to bridge the effects of the cataclysm.

The inference given in Rothschild's above statements is that only a totally "free," unplanned economy is "natural" and any introduction of planning is "unnatural" and must lead to the failure of the economy. I'm not aware of any aspect of evolution that can be interpreted to support such a position.

(p. 108) "Over the last century, Marx's vision of an economically empowered community attracted hundreds of millions of adherents. Marx's supporters believed that by planning a common future and eliminating the waste and duplication of competing enterprises human progress would be accelerated....Intuitively it makes sense that everyone would benefit if people worked together as members of a community, for their common good."

"But what is intuitively obviously is often incorrect...As the size of a community increases, each member's sense of personal obligation to each of the others becomes diluted."

RESPONSE: It not only makes sense that everyone would benefit if people worked together as members of a community, for their common good -- it seems to me we must take this as a goal and examine anything that makes it appear untrue or not to work. The exact mechanics as to how people can best work together needs to always be flexible and open-ended, but it's the bottom line meaning of a Wise Community and a Wise Person.

Our deepest thinking, our most sustained study and research must always be focused on this issue and any place where it is not working as well as current resources and knowledge allow.

I would say that at its core the failure of communism was as much a failure of western philosophy and religion as it was a failure of economic thinking. Marx was as much in the dark about what life is all about and what religion really is, as any other western thinker.

Because 19th century thinkers were not able to get to the core of issues, they developed theories that were in basic error. Since science itself incorporated many of these basic errors there was no way to test, experiment, accumulate data and correct these inherent weaknesses.

It seems to me that an economically empowered community is not in conflict with enlightened capitalism. There should be ways to help individuals and groups use their talents, energy and special characteristics to fill social needs so as to be economically empowered. The point is they would have to function so as to be economically viable and competitive. Although -- depending on all the circumstances -- they might receive special benefits and help in order to maximize their contributions to society and to fulfillment of their positive potential.

Society must find ways to ensure that every person who desires can work at a living wage, doing things of value to them and society. However, living wage is tied to the specifics of how one is living and this can be done in ways that are inherently satisfying while at the same time not costly. Chapter XV has more ideas along this line.

(p. 109) "Without the self-policing behavior that grows out of self-interest, irrationality pervades the economy."

RESPONSE: There are many issues buried in the above simple statement. Self-policing has to be the goal of a Wise Community since a Wise Person could always be counted on to do the right thing in so far as they had the knowledge and understanding necessary. But of course we do not currently have Wise Communities or Wise Persons, nor clear theories on how to get them.

As indicated elsewhere self-interest is not always obvious, therefore, social institutions to help persons make choices are essential. See Volume I, Chapter Two, " Organizing for the Wise Community."

And of course underneath all of this is the recognition that a SFLIHM (a Sustainable Feeling that one's LIfe Has Meaning) is a core goal and must be consistent with true self-interest. Otherwise self-interest becomes focused on short term choices that don't consider the rest of humanity and our long term well-being.

(p. 110) "In the consumer sector, the Soviet economy has been completely devastated by the long-term effects of a bureaucratically controlled, commons-style organization....Goods available in all but the most impoverished Third World countries simply cannot be produced by an economy designed to comply with Marxist theory."

"...even a 'perfect' economic model running on the fastest imaginable supercomputer cannot define a plan for an entire economy."

RESPONSE: And, it seems like this is the most critical truth to understand. Whenever, economic planning is done care must be taken to select factors or approaches that to not require data that is inherently unavailable. Ideally one would monitor the feed-back loops so properly focused energy could be applied when a parameter moved outside planned limits.

(p. 111) "Today, computers allow incredibly complex calculations, but the economists' mathematical models simply cannot predict the structure of an economy endlessly reshaped by the chaos of innovation."

"By its very nature, an evolving economy cannot be planned, so the entire rationale for centralized economic decision-making collapses."

RESPONSE: If one compared an ecosystem (and therefore an economy) to a weather system there might be sufficient similarity that one could use weather models to assess what will happen in an economy. One might not be able to make accurate long range predictions for all aspects of the economy any more than one can make accurate long range predictions of the weather, but one might at least clarify short term changes and understand how different inputs effect various outputs.

(p. 113) "The Soviets have several styles of capitalism from which to choose, ranging from Hong Kong's laissez faire to Sweden's government dominated approach. Reasoning from the biological analogy, some might argue that government should have no role in the economy....[that it should] be a pure market economy...."

(p. 114) "But such a view overlooks a rather pivotal fact. Human beings are different from all other creatures. We are conscious beings. As social animals we are socially conscious."

"The issue is not whether a capitalist economy ought to have a commons, but rather what portion of an economy's output should be distributed through its commons....If creating a commons is the only feasible way to cope with a particular social need, what technique can be borrowed from the free market to manage the commons as efficiently as possible? Each nation...will come to somewhat different conclusions on these questions. There are no absolute answers."

RESPONSE: The above seems to me to be very, very important. With this understanding one should have the tools to use economic theory to build a Wise Community.

(p. 114) "Experience shows that another century of the Left/Right polemics that grew from classical economics cannot provide useful answers. But from the bionomic perspective, it is possible to identify proposals that will work in concert with, rather than against the natural forces of economic evolution."

RESPONSE: And it is these proposals from BIONOMICS that need to be looked at carefully. To the degree that they appear compatible with a Science of Religion we should support them and help them become known and adopted.

PART III, ENERGY AND VALUES: CHAPTER 12 -- Surplus and Genes

(p. 118) "...during a dive in 1977, near the Galapagos Islands...the geologist crew of the Alvin stumbled upon the impossible....a surrealistic panorama teeming with bizarre creatures: huge white worms topped with red plumes...surrounded by bright yellow mussels, crabs, shrimps, and gigantic clams...in the total blackness miles beneath the surface of the ocean."

In these vent communities "most of the bacteria actually live inside the bodies of vent animals....In a harsh environment, cooperation is crucial to survival."

RESPONSE: It is these kinds of events that prove over and over why empirical observation and study are crucial aspects of any understanding. We have no way to know what the universe is really like until we observe it. But our observation always comes from a state of ignorance. Therefore, we never fully understand anything we observe. As our understanding grows, as our observations are extended, we can slowly perfect our wisdom. At the same time it will be weakened when crucial pieces of the puzzle are missing.

(p. 119) "...it takes work to build complex molecules out of smaller components. Without information to channel and control it, energy is just diffuse energy. And information, without energy available to it, cannot reproduce and cannot be alive."

(p. 120) "In a sense, individual bumblebees are not complete organisms; the colony as a whole is the real organism. In a beehive, an ant colony, or a termite nest, individual insects are more like mobile cells, parts of a larger social organism."

(p. 122) "...a bumblebee's energy consumption nearly doubles in cold weather."

"A newly hatched worker has no specialty and at first will stumble around ineptly, trying to extract food from a wide variety of flowers. But after a few trips, the worker will...begin to specialize on one plant species."

"While inexperienced bees need an hour to collect a full load from jewelweed flowers, experienced bees need only six minutes."

(p. 123) "The 'organization' of a bumblebee hive is merely a consequence of individual specialization."

(p. 126) The bumblebee demonstrates that, "all of nature's elaborate contrivances of bumblebee anatomy and behavior come down to nothing more than a way of turning profits into information."

CHAPTER 13 -- Profits and Technology

(p. 127) "Businesses, like bumblebees, turn profits into information....new equipment, more buildings, and research and development." All of these things represent the accumulated knowledge of the companies making each particular product.

(p. 128) "...turning profits earned today into information for tomorrow -- is the same for both organisms and organizations. In both realms, profits make possible the natural process of growth and renewal."

(p. 130) In the 1930s "...Matt Hooley would regularly drive around the Midwest looking for a better way to do business -- searching for ideas that would build his sales volume, raise his modest profits, and ensure his store's long-term survival."

(p. 138) "As the history of the Hooley family grocery business demonstrates, the expertise -- or corporate genetic information...did not emerge full-blown. This knowledge evolved over the course of a century....Every step in the evolution of this business required the investment of past profits....Using the stored-up energy that profit represents, they were able to turn their ideas into a new kind of business."

(p. 139) "...the Hooley's story is quite representative of how profit-seeking organizations in every industry reinvent themselves again and again...such prosaic innovations are the very stuff of economic progress under capitalism. And they keep coming about because firms struggling to eke out profits in a challenging, competitive environment have little choice but to invent ways of whittling down their costs while simultaneously improving their products."

"Like grocery store species, bumblebee species probably become more narrowly specialized and cost-efficient over time."

Chapter 14 -- SAVINGS & TAXES

"Even in predominantly mutualistic systems, examples of unfair behavior are not hard to find."

RESPONSE: At some level unfair behavior may be an inherent aspect of life in a universe with a Second Law of Thermodynamics. However, there must be a concerted effort to ensure that social practices and individual actions are done in ways that minimize unfairness. In addition there must be social resources available to ensure that any person seriously harmed by unfairness has access to help that ensures no permanent harm is done.

(p. 142) "In too many cases, employers profit and customers save at the expense of workers suffering from various forms of discrimination."

"But under modern mutualistic capitalism exploitative situations are noteworthy not only because they are unconscionable but because they are so unusual....The freedom to choose among alternative employers and suppliers keeps economic players honest. Cooperative relationships generate cost saving that are shared between the partners as profits."

"...since most profit flows from intimate cooperation and the clever application of ideas to cut the costs of life's necessities, profit deserves a far better press than it has received."

"In a market economy, either a mutualistic company contributes value to society or it has no customers....The knowledge base of the computer firm, the company's 'genes'...imparts real value added to raw inputs."

"In the broadest sense, value-added -- the difference between the cost of inputs and the worth of finished products -- can be thought of as social profit.

RESPONSE: To say that mutualistic capitalism has made exploitation rare is either to severely limit the meaning of exploitation or to overlook the fact that few workers currently escape significant warping of their character because of the atmosphere in which they work. Could these businesses survive without this exploitation? It seems to me we need to know. Until proven otherwise, I must believe that they can not only survive, but thrive.

The area of worker salaries seems like a critical area. If we recognize the importance of human resources as the ultimate resource it seems like this is an area that needs a lot more attention than it has gotten up to this point.

Currently economists treat salary as just another cost of doing business. However, in a Wise Community salary might be treated in a very different way. It seems to me salaries should be handled as a social resource rather than merely a cost. Although the cost of salaries must be considered very seriously by the business, they have a value to a society above and beyond the cost of raw materials, etc. They should receive tax benefits for the business and other breaks that make it possible to give the highest salaries possible so that workers have money to enjoy life and contribute to the well being of the community.

The political Right focuses on unemployment as the best way to fight inflation. Yet in current society being unemployed tends always to feel like an attack on the individual's self-esteem and reduces one's ability to live the good life. As long as we are working with limited resources, it may be necessary for economies to function in such a way that some people get hurt. But this cannot be accepted as a law of the universe and an essential aspect of the way things must work.

(p. 143) "Needless to say, the existence of taxes on profits is a crucial distinction between profit flows in nature and in the economy....in the American economy, nearly half of an organizations's profits will be drawn off by various types of profit taxation. How would an ecosystem's vitality be affected if half of each organism's energy profits were drained from the system?"

RESPONSE: Of course draining of energy profits in an ecosystem is exactly what happens. Building the hive is taxes. It drains energy from egg production. Fighting other bees or enemies is taxes. It drains energy from egg production. Fanning air into the hive is taxes. It drains energy from the hive. These and scores of other social activities show us the way we must look at taxes. If we only see them as a drain rather than essential to being able to do business, we will totally miss the point!

The critical point is, Are there better ways to impose taxes? How can we use taxes to encourage the goals of society and discourage those things moving in the wrong directions. Taxes on cigarettes and alcohol are good examples of the best use of taxes, but of course these are very small revenue sources. It could well be that taxing savings achieves exactly the wrong effects as Rothschild indicates elsewhere.

Obviously, we must ensure that the things governments spend money on have the most positive benefit possible, also.

(p. 143) "Of course, human societies are not ecosystems. They are communities of conscious beings who have established governments to deal with problems that cannot be managed effectively through private means. Like all other organizations governments must have revenues. Taxes imposed by law meet that need. Nonetheless, since profit is the flow of surplus economic energy that pays for technical innovation, and since new technology is the ultimate source of rising living standards, does it make good sense to tax profits as the primary source of government revenue?"

RESPONSE: Possibly not. Let's dig in and see.

(p. 144) "...since a household's profit could be saved if it were not taxed away, the 'income' tax is, in reality, a tax on potential household savings."

"Consequently, the U.S. government's single most powerful economic policy device is designed to discourage household savings and encourage consumption."

"The design of the tax system is crucial to an economy's long-term vitality, because it influences countless millions of consume/save decisions."

(p. 145) "...for most of American history (from 1787 to 1918) federal revenues came from tariffs on imports and taxes on consumption."

"A nation that began the twentieth century without taxes on household savings ended up with a government utterly dependent on such taxes."

"The dire economic consequence of a system that taxed savings did not begin to emerge until the late 1960s."

RESPONSE: What do other economists have to say about the foregoing characterization?

(p. 146) "...before WW II, before the 'income' tax system reached its present form, Americans saved a larger portion of their earnings than the Japanese."

(p. 147) "Surveys now show that most Americans don't save at all. With so much of their earnings deducted for various taxes before they even see their paycheck, and with rules that explicitly encourage consumption, this should hardly come as a surprise."

"In short, a tax that originally intended to force the super-wealthy to pay their fair share of the nation's expenses became a system that compelled average citizens to liquidate their savings, borrow against the future, and consume. From the 1960s to the 1980s, America's savings as a percent of GNP dropped from 11% to 4%. Today, the U.S. has less than half the average savings rate of the major industrialized nations and about one-fifth the savings rate of Japan."

RESPONSE: However, the problem can hardly be blamed totally on this aspect of taxes. As I understand it taxes have been shifted by Nixon and Reagan in such a way that real income for the middle class has been significantly reduced while real income for the very rich has been significantly raised.

(p. 148) "Making matters even worse, the federal government's thirst for resources drains them away from productive investment. With America's pool of savings so limited, massive government borrowing bids up market interest rates and makes many private investments unprofitable. The much-criticized 'short term mentality' of American business executives is an inevitable consequence of the high cost of capital....High-risk, long-term investments, the kind represented by virtually all technological innovation, can be pursued only by those with abundant saving and a low cost of capital -- namely the Japanese."

"Together, an anti-savings tax system and gigantic federal deficits have grievously damaged America's economic future."

RESPONSE: Taxes should be utilized for productive investments. If they are not this needs serious consideration. Federal funds have played a major role in the utilization of technological development. Roads and enforcement of social regulations are essential investments for a productive society. Schools, hospitals, a military force sufficient to deter invasion, etc. are essential to a productive society. If taxes are being used in non-productive ways we must ask why and alter these procedures. John Kenneth Galbraith raises the issue that at this point the military have almost total control over their own budget with no oversight from other areas of concern. Since current world conditions do not justify current military expenditures this represents a serious non-productive use of taxes.

(p. 149) "Why did America erect such a destructive tax system and then compound the damage with runaway deficit spending? Simply put: because traditional economics never grasped the connection between the economic present and the economic future."

"Specifically, economic thought has been crippled by two fundamental errors. From the time of Karl Marx, profits have been widely regarded as inherently evil....For Marx, the economy was an indestructible machine, not a living ecosystem whose continued existence depended upon the recycling of economic energy."

"The second crucial error was made by John Maynard Keynes. Perhaps, the most influential economist of the twentieth century, Keynes argued that recessions and depressions, particularly the Great Depression of the 1930s, were caused by too much saving and not enough consumption."

"...in short order, Keynes's dogma of inadequate demand, had created a vast new 'commons problem.' Here the commons was the pool of savings normally invested in the future economy."

RESPONSE: If Rothschild's above criticism of Keynesian theory holds up then significant changes in our tax laws seem required.

Marx's error was only a smaller part of a larger error made by all philosophers and serious social thinkers of the 17 and 1800s. That error was the unrecognized assumption that a society also is an "indestructible machine, not a living ecosystem." They didn't realize that a society is a delicately balanced system with necessary components. As a result they totally missed the point of the role of religion in a society. They failed to understand that the connection between individuals and their society is critical and must be nurtured. They didn't realize that in spite of the innate drive of all healthy human beings to be part of a society, that drive can be so shaped by experience that it becomes destructive to the person and to the society. It is my hypothesis that societies of the past that flowered and then disappeared usually did so because their religion's "glue" lost its power.

Lack of understanding about the foregoing key point not only led the U.S. to establish an economic and court system based on the adversary system, but to make this idea a basic assumption of government. Luck has gotten us this far, but I predict that our luck is about to run out!

(p. 150) "Now that we recognize the disastrous consequences of Marx's attack on profits and Keynes's predilection for deficit spending, it is possible to redesign basic policies and begin America's economic recovery."

"...no law of nature requires that a government raise the bulk of its revenue from an income tax."

"A sound tax system need meet only two requirements. First, it must be fair within each generation....Second, a tax system must be fair across several generations."

"The most promising idea is to create a new federal sales tax...that is tied to consumption of goods and services."

(p. 151) "In the end, the cleanest solution would be to tax all consumption at the same rate and then rebate the first several hundred dollars of federal sales tax each person pays on basic consumption items."

RESPONSE: Most of the above sounds worth exploring. However, the other side of the argument is overwhelmingly powerful and captured by a statement by John Kenneth Galbraith[2], "...the most effective instrument for achieving a greater measure of income equality remains the progressive income tax."

When we talk about "fair" we open up a big can of worms. Fair depends upon one's point of view. If one had a Wise Community made up of Wise Persons fair would mean those things that lead to greater numbers of persons achieving both of these Wises. But in current American life there are those willing to call things fair that I would call exploitation. Is it fair to pay someone a salary too low for them to live on while making an exorbitant profit? Is it fair to have a society where many are not able to find jobs so they can maintain hope in their life and at the same time contribute to society. Is it fair to keep the bulk of society in a mental state where they direct their time and energy to cheap thrills of no lasting value except as a lesson of things to avoid?

(p. 151) "Many consumption tax supporters endorse something called the VAT (Value-Added Tax), instead of a federal sales tax. The VAT is the common form of Western European consumption tax. Under this system, taxes are added into a product's price as it moves through each stage of production....Finally, the consumer pays for all the layers of VAT, and all the producers get full refunds."

"Two problems weaken this approach. First, the VAT requires a large bureaucracy to handle the paper work. Second, and more important the VAT is buried in the price of final goods and services....In a democracy, taxes -- like prices -- should be clearly labeled."

(p. 152) "To eliminate the existing bias toward borrowing and consumption, federal income-tax rates should be cut as federal sales tax is implemented. For example, a 10 percent federal sales tax with a $250 rebate to every person would raise nearly $200 billion, or almost half as much as the corporate and personal income taxes now raise. If income tax rates fell from 15/28 percent to roughly 10/18 percent, the federal government would raise just about as much money as it now does, but the incessant pressure to consume rather than save would be relieved. The right mix of tax rates on income (savings) and consumption would rebalance the economic system and revive long-term growth."

RESPONSE: The change from 15/28 percent to 10/18 percent strikes me as being grossly out of balance. If those with the least income are now paying 10% on all their purchases just like those with the most income, they are paying a significantly higher percent of their income. If they then have their income tax reduced 5% while the rich have a 10% reduction this seems grossly unfair to me.

PART IV -- LEARNING AND PROGRESS: CHAPTER 15 -- SURVIVAL TRAINING

(p. 156) "'Comparative psychologists have spent about 100 years in the more or less serious scientific study of animal intelligence. It cannot be claimed that they have very much to show for their pains.'"

(p. 157) "One of the few principles accepted by all the experts is that learning, whatever its complexity, depends on the accumulation of experience....improved performance -- the tangible result of learning -- is a product of repetition."

"In a famous 1922 experiment, Edward Tolman, a leading psychologist at the University of California at Berkeley, and his graduate students measured the effect of experience on learning by testing laboratory rats....the results showed three distinct phases in the experiment. In the first half-dozen trials the rate of improvement was...about 20% time decrease with each doubling of experience....During the next six runs, performance improved..[to] 50%...Then after about the twelfth run, progress stopped....Apparently the rats had perfected their technique...."

(p. 159) "...for a time, some investigators believed...they could determine the rank order of animal intelligence...Since no two species are identical, designing unbiased experiments is impossible."

(p. 160) "The EQ [encephalization quotient] compares the actual brain/body ratio of a species to its predicted ratio. The human's EQ of 7.44 means that the human brain is 7.44 times heavier than would be mathematically predicted for a typical mammal of human body weight. Homo sapiens has the highest EQ of any species, living or extinct."

(p. 161) "...two species with exactly the same EQ...will have different types of intelligence because of differences in their ways of life."

RESPONSE: I take the above to support the concept of HBAURS (Human Beings Are the Ultimate Reference System). By pointing out that different animals have a different type of intelligence it is shown that intelligence is not some objective aspect of organization as many writers and philosophers have thought. Intelligence is particular to the specific organism (or robot/ computer) involved -- their sense organs, brain size and complexity, their size, their food, methods of reproduction, etc. As a result there can be no Universal Reference System that all "beings" can share. It will depend on the specifics of the "being" under consideration.

The difficulty of communicating with another animal whether dolphin, chimpanzee, ape, etc. is as much an aspect of the limitations of our intelligence and experience as theirs.

(p. 164) "If there is a single anatomical basis for modern civilization, it is the brain's ability to convey its internal imagery to other brains through writing."

"In effect the evolution of technology is an outgrowth of literacy -- humanity's unique biological capacity."

RESPONSE: But before literacy, comes talking. And it is talking that sets humanity apart from the other species. Literacy is an order of magnitude beyond that.

Chapter 16 -- ORGANIZATIONAL LEARNING

"...our species has come to dominate the planet because a unique feature of our brains allows us to form intelligent organizations."

"Just like Edward Tolman's maze-running rats, intelligent firms ought to demonstrate clear 'learning curves.'"

"But how can one measure the 'learning curve' of an organization?"

(p. 166) "An organization gains a unit of experience each time it completes one unit of output....Converting inputs into finished goods and services is the essential function of every economic organization."

"...a firm's cost per unit of output is analogous to a rat's time per maze run....In both organisms and organizations, performance is measured by the cost associated with a particular unit of experience."

"With accurate data on unit costs and cumulative output, it should be easy to plot a firm's learning curve."

"...because firms keep modifying their products, the unit of production experience is unstable, making impossible any perfectly fair cost comparisons between earlier and later units."

(p. 167) "For a variety of reasons, the actual economic value measured by a dollar...keeps changing over time."

"With prices climbing ever upward, it appears as if the cost of everything we buy...keeps rising. But because we measure value with an ever-shrinking unit, we cannot fairly compare today's prices with yesterday's. To allow meaningful historical comparisons, statistical adjustments must be made to compensate for inflation."

(p. 171) "If a new method proves successful, the...[organization's] competitors will adopt the innovation unless it is kept secret by the innovator."

(p. 172) "The leakage of new technology from innovators to copiers is the mechanism of industry-wide 'learning.'"

(p. 176) "Bit by bit, without fanfare or even customer awareness, the real cost of...[any product] will continue to decline as the industry's accumulating experience drives its learning."

RESPONSE: For me this is one of the most exciting and joyous conclusions of Rothschild's writings. It states issues in a clear enough way so that we can see in one particular way life is getting better and better. Properly used I would hope this insight would help us extend this vision to all other areas to help us develop a Wise Community made up of Wise Persons.

CHAPTER 17 -- THE UNIVERSAL CURVE

"...the process of organizational learning revealed by the learning curve is not restricted to egg farms or to agriculture. Organizational learning is a universal economic phenomenon."

"Literally thousands of studies have shown that organizational learning occurs in every industry. Indeed, if there are industries in which learning does not take place, they have yet to be reported....Organizations and industries, like intelligent organisms and species, learn to become more efficient as they gain experience in solving problems."

"Oddly enough, despite its power to help explain why capitalist economies grow ever more productive, the learning curve has lingered in semiobscurity for nearly 60 years."

(p. 178) "...few realize that learning is the prime cause of the steady rise in the standard of living."

"The first careful observations of organizational learning were made in 1922 by Theodore P. Wright, a 27-year-old MIT-trained engineer."

"By plotting his data [for airplane production] on a double-log graph, Wright discovered that the assembly labor declined 20 percent with each doubling of production experience."

(p. 185) "T.P. Wright noticed the learning effect in airplane assembly because the phenomenon is most conspicuous when previous experience is slight and the rate of experience growth is high."

(p. 179) "Without question, Wright's learning curve played a key role in bringing America's industrial potential to its full might."

"But during the 1950s and early 1960s...the learning curve was largely ignored."

"The learning curve languished in obscurity until 1966 when the Boston Consulting Group (BCG)...conducted a study for a client in the semiconductor industry."

"To distinguish this across-the-board cost erosion from the notion that learning only applied to labor, BCG rechristened the learning curve the 'experience curve.'"

(p. 180) "Product or service, high or low tech, fast or slow growth, foreign or domestic, labor or capital intensive -- learning curves are found because they reveal a fundamental property of all competitive economic organizations. Like intelligent organisms, organizations improve performance as they accumulate experience."

(p. 181) "The curve implied that the firm with the largest share of its market would gain production experience -- and reduce unit costs -- faster than smaller competitors. At comparable prices, the leader's cost advantage would translate into wider profits and faster growth."

"BCG argued that under certain conditions, a firm could seize industry leadership with a preemptive strike against its competitors. By slashing prices below costs, winning the biggest share of industry volume, and accelerating its cost erosion, a company could get permanently ahead of the pack."

(p. 182) "Even though the learning curve proved to be too broad a concept to satisfy all the information needs of an executive facing a particular decision at a specific time, a simple formula that accurately describes historical cost behavior in every known industry would seem to be a perfect candidate for discussion, if not adoption, by economists. But this never happened."

(p. 183) "...the entire edifice of classical economics rests upon the assumption that technology does not change. Unless 'technology is held constant,' it is impossible to calculate the 'equilibrium prices' at which consumer purchases and supplier output magically 'clear all markets.'"

"John Stuart Mill, the nineteenth-century philosopher whose ideas undergird modern equilibrium theory, built his economics on the 'law' of diminishing returns. Diminishing returns means that adding more inputs cannot yield as much incremental output."

"As Mill wrote, 'Were the law different, nearly all the phenomena of the production and distribution of wealth would be other than they are.' But the learning curve...proves indisputably that all sectors of the economy, including agriculture, operate according to increasing rather than diminishing returns...Since real costs keep eroding there is no way to calculate an equilibrium price. No equilibrium prices, no equilibrium economics. It's as simple as that."

"Economists should not be singled out for ignoring unpalatable facts. Every academic discipline defends its accepted wisdom until that superstructure is torn apart by new facts....Once an elaborate theoretical edifice has been lovingly crafted by generations of respected scholars, it is terribly difficult to admit that its just plain wrong."

"By ignoring the learning curve, orthodox economics negates the very thing that is unique about human economics -- the capacity to respond to experience with intelligence and creativity. By steadfastly denying that output grows faster than input, conventional economics abides by Thomas Malthus's...'iron law' [of 1798 which] said that population would grow exponentially while food production could only expand linearly. The horrifying but unavoidable consequence was intensifying global poverty, intermittently relieved by population declines stemming from epidemics and war."

(p. 184) "Hindsight is supposed to be 20/20, but somehow the historical record [4 fold increase of population of last 200 years that has been outpaced by food and industrial production] has failed to impress theorists in either camp of conventional economic thought. On the Left, Karl Marx and his followers accepted Malthus's prediction and dedicated themselves to remedying the inevitable impoverisation of the working class by redistributing output from the rich to the poor. On the Right, J.S. Mill and the equilibrium economists who followed him also accepted Malthus's population principle, but they chose to overlook its long-term implications. Concentrating exclusively on the near term, they constructed mathematical models of a mythical, machinelike economy where the population does not grow and technology never changes."

"Compelling evidence of the learning curve's universality has been available for nearly 20 years, but neither the Left nor the Right has recognized the learning curve for what it is -- proof that the 'law of diminishing returns' is wrong. As Mill himself pointed out, if the 'law' of diminishing returns was false, nearly all the rules about the production and distribution of wealth would be different. Instead of a depressing world where the good things in life become ever more expensive and unattainable, where output is crippled by the inevitability of diminishing returns and rising marginal costs, we would see an economy of abundance where real costs continue to decline, so that even the poorest members of society eventually gain access to benefits once reserved for the very rich."

"This, of course, is precisely what happens under Capitalism."

RESPONSE: The above points out a very real and a very serious problem. That is the difficulty human beings have to change their mind once an idea gets firmly implanted. Although, the core of the scientific method requires just this kind of ability to change, I doubt if one scientist in 100 is able to in fact change their basic assumptions as new evidence and new explanations are discovered.

This is probably the greatest challenge to producing a Wise Community and Wise Persons because both depend upon such openness to growth and change. New psychological tools and world views that demand such change must be developed and structured so as to make such growth and change not only possible but necessary.

Beyond this the foregoing also holds out the vision of the good life for all persons. The Wise Community made up of Wise Persons with every individual participating becomes a realistic hope. The challenge is to get the process started and well enough developed so that the destructive trends currently gathering momentum do not make such change impossible.

(p. 185) "Although capitalism will never produce a Utopia where all the desires of all the people are fully satisfied, worsening poverty is not preordained. As long as there is learning, there will be progress. The truth of the learning curve obliterates the central myth of the 'dismal science.'"

"Ultimately, it is human creativity that distinguishes learning by organizations from learning by organisms....A firm's efficiency is constrained only by its technology, and its technology is limited only by its members' ability to work together as an intelligent, creative organization."

RESPONSE: To me Utopia would not aim to produce conditions whereby "all the desires of all the people are fully satisfied." Rather, it would produce an environment in which all person could achieve a SFLIHM (a Sustainable Feeling that one's LIfe Has Meaning). This is very different.

However, more importantly BIONOMICS seems to me to clarify the "way the world works," and makes it seem almost inevitable that we will be able to produce a Wise Community made up of Wise Persons. Although, there is not a direct relationship between wealth, material things, and the Wise Person, they are indirectly related in many ways. In a world of abundance the Wise Community would be vastly simpler to produce because the resources to do so would be more available for the necessary educational, therapeutic, etc. institutions.

(p. 186) "Since at any point in time the economy produces a mix of long-established [with longer periods of doubling] and newly invented products, and since economists study time-related rather than experience-related measures of performance, traditional economic monitors do not reveal clear patterns of change."

(p. 187) "Over the course of nearly three centuries, the pulsating rhythm of sudden and gradual change drove down the real cost of machine power from roughly $6,000 to $3 per horsepower."

"Wherever one looks, the same basic pattern of economic progress reappears."

(p. 188) "Since few journalists bother to adjust for inflation when making historical comparisons, the public is thoroughly convinced that real prices keep rising. For example, hardly a month goes by without some television commentator whining about the escalating price of cars. Before castigating the greedy automakers, the commentator fondly recalls the 'good old days' of 1912, when Ford's Model T listed for just $600. Neglecting to adjust for the erosion of the dollar's value, he'll inevitably fail to realize that Ford's Escort -- the company's current best-seller and an immensely superior vehicle -- is actually 20 percent less expensive in real terms than that 1912 Model T."

RESPONSE: In spite of taking college economics, prior to reading BIONOMICS I was right there with the journalists. If I haven't gotten anything else this insight is worth the price of the book. The whole economics picture changes when one realizes that it is inflation that accounts for increasing prices while real prices for goods and services actually decrease over time.

But worst of all is the fact that those who normally teach and discuss economics must be aware of the above phenomenon. And, yet, I have never read this fact stated in a way that makes it clear as Rothschild has done.

RESPONSE: To me the above is so exciting I want to run out and insist that everyone I meet reads this book. No matter what errors and misperceptions Rothschild incorporates in BIONOMICS, the mind shattering ideas he includes are too important to overlook.

However, Rothschild's discussions of the "learning curve" doesn't directly tackle the issue that we live in a universe of abundance and it is only human ignorance that keeps us from all sharing in this abundance. Although the most important abundance is the abundance of love and caring from other people that exists in a Wise Community, there is also the abundance of opportunity to study, learn, create, master the problems which we encounter. And of course there is the abundance of wealth -- health, food, clothing, housing, tools for hobbies and games, and every other thing that adds to our ability to achieve and maintain a SFLIHM. All these things are possible and only need to be sought to be achieved.