Answers to the questions posted on March 12

Here I will give answers to the two questions asked in my preceding post, dated March 12, 2015.

Question 1: Why do people form firms?

Quick Answer: To exploit a resource pattern.

Discussion: 
A “firm”, if you are not familiar with this usage, means a business firm. This term is used by economists to describe a business organized under a single ownership or control.

Our question “Why do people form firms?” is an important question for economists because the main models of neoclassical economics can not explain why people form firms. We see firms all around us. But neoclassical models of supply and demand in markets rest upon assumptions which seem to eliminate any possible need for firms.

This inadequacy of neoclassical models motivated Ronald Coase’s 1937 paper “The Nature of the Firm”. Coase called attention to transactions costs and suggested that people form firms to reduce transactions costs. His great work spawned a new sub-discipline in economics. Wikipedia tells more.

The Resource-Patterns Model of Life (RPM) offers another answer to our question “Why do people form firms?” People form a firm to exploit a resource pattern (RP). Figure 1 recalls our first example in which a population of critters exploits a RP which none of the critters acting alone could have exploited. We might call this population, which thrives by following a simple set of rules, a firm. The concepts which I am trying to build, at this stage in our development of RPM, overlap somewhat but not perfectly with the meanings we impute to our common terms "organization" and "firm".

Figure 1: A thriving community (exploiting a RP by following rules).

Let us consider two ways that critters might have formed this firm.

1. Spontaneously
When we think about it, it seems evident that a population of critters living in the vicinity of a resource pattern will eventually discover and exploit the pattern. Just random movement can explain the discovery, if we allow enough time. Furthermore, critters may be endowed with properties such as curiosity and civility which increase the speed with which they could be expected to discover the RP.

2. With forethought
First, remember two of our assumptions:

• There are resource patterns in the universe.
• Living Things survive by finding and imbibing resources.

In our thought experiments we will endow our critters with increasing abilities of calculation and perception. At the outset our critters do not know that the resources upon which they rely are distributed in patterns around them in their environment. But, given certain levels of intelligence and experience, our critters will recognize such patterns and they will focus their activities in order to minimize the effort they expend to gather their necessary resources from these patterns.

Later on, given more intelligence and experience, our critters might guess that there exist other RPs in the universe out beyond their community, as yet undiscovered by critters. That is, they will guess that there are patterns of RPs in the universe. Some fortunate critters in an established community may lend their surplus resources to a party of explorers. The explorers, upon traveling to a location that seems to promise viability, may succeed in establishing a new community. Such a community, we could claim, had been established with forethought, and not from time-consuming spontaneous discovery.

Question 2: When does planning for a new firm succeed?

Quick Answer: When the plan connects with a resource pattern.


Discussion:

Figure 2: A thriving population (center) ready to attempt colonization.

Consider Figure 2. We see an established population of critters exploiting a resource pattern in the center of this area. We also see an available resource pattern to the right of that established population. Recall that the dotted line around the RP means that we human modelers know about the RP, but the critters do not know about it yet.

We imagine, as we have just sketched above, some colonists are sent out from the established community, following hopeful plans to settle new RPs. In Figure 3, we see the results of two such plans, one plan being to establish a new colony to the right of the parent, the other being to establish a new colony to the left of the parent.

Figure 3: One plan destined to fail; another plan likely to succeed.

I hope it is obvious to my reader that one of these plans (to the right) has a good chance of succeeding, while the other plan (to the left) has no chance at all. Will you join me in supposing that, in order for a plan to form a new firm or organization to succeed, it is necessary that the plan connects with a RP?

Test Your Understanding of RPM

Here are two questions which I hope a reader of this blog will find easy. Remember, try to answer in the framework of the Resource-Patterns Model of Life, and not in terms of other models you may have learned.

Question 1: Why do people form firms?

Question 2: When does planning for a new firm succeed?

If you need to review, look at earlier entries on this blog. The paper from last week should be enough.

Answers will be given in the next post.

Life in Levels

This is a draft of Chapter 4, in the book outline

Life Grows From Level to Level

Introduction

The Resource-Patterns Model of Life (RPM) suggests that life grows in levels. This chapter develops this Life-in-Levels (LiL) concept.

Note about the term “level”
In this writing I adopt the term “level” for a central concept. Previously I have used “generation” for the same concept – while apologizing that I was stretching the meaning of “generation”. I could not think of a better term. But now I have learned of a paper by Herbert Simon (1962) in which he uses “level” for an analogous concept. I follow his lead.

Look at our biological past: Life has grown in levels

We have evidence that life on Earth has grown in levels. We know that our human bodies are made of many cells, that is we are multicellular organisms. But other living things on earth, such as amoeba and paramecia, have just one cell, and, as we learn from biology, our multicellular type of body is a newcomer in the history of evolution. Perhaps a billion years ago there were no multicellular organisms; single-cellular organisms were the fanciest creatures on Earth. Somehow, through a historical process which we are only beginning to understand, it seems that single cellular organisms discovered ways to live together, to create gradually more complex multicellular organisms.

Even though this seems like fantastic progress, from single- to multi-cellular organisms, I have read that some biologists are even more impressed by the progress made in an earlier step of evolution. The single cells which I have mentioned, and the “cells” of which we usually speak, are called eukaryotic cells by biologists. These eukaryotic cells, when examined under a powerful modern microscope, are seen to be incredibly complex. Like a human city, eukaryotic cells contain a large number of specialized structures. And many of the specialized structures in eukaryotic cells look to biologists like close cousins of even smaller and simpler life-forms known as prokaryotic cells. Biologists are impressed by that evident feat of organization, from single prokaryotic cells to municipalities of prokaryotic cells (to eukaryotic cells).

Prokaryotic cells, a class which includes simple bacteria, were once, in their turn, the masters of the Universe. Or at least they were the largest and most advanced form of life on Earth, and that for a few billion years! According to the fossil record, it seems that prokaryotic cells first appeared perhaps three billion years ago, and stood atop life’s kingdom until the development of eukaryotic cells about one billion years ago.

To summarize, we can pretty clearly see three levels.

1. prokaryotes,
2. eukaryotes,
3. multi-cellular present-day organisms, like us.

Notice that each visible organism in the higher levels (2 and 3), which at first appears to our senses to be a single entity, turns out, when we look more carefully, to be composed of many smaller living components. I suppose the same may turn out to be true of prokaryotes, the level to which I have assigned number 1. But these three levels are enough for this introductory discussion. The challenge for us humans, as I suggest next, concerns the possibility of level 4.

A new level of life now grows as we organize our lives

I propose that this growing process continues. As we people go about organizing our affairs we are in process of building a next-higher-level of life. Think about all the kinds of organizations that we form: families, partnerships, business companies, churches, governments, the United Nations. These organizations are able, because of their internal order, to accomplish things which would not be accomplished by a disorganized but otherwise equal set of constituent individuals.

A contrast with methodological individualism

This proposition, that we are engaged in building new super-organisms, may seem incredible to some readers. Some of my friends staunchly defend methodological individualism, which asserts that analysis of human affairs must focus on the choices of individual humans, and which denies that useful analysis can be performed while viewing organizations or aggregates of human individuals. But I would like to ask methodological individualists to consider the idea that a human organization can have a voice. I choose “voice” as an activity to consider, since its expression includes both thought and physical action.

Voice of an organization
It seems clear to me that a representative of an organization, while speaking on behalf of the organization, speaks with a power which is lacked by an individual while acting alone. Barak Obama, while speaking as President of the United States, gets much more respect and attention from other heads of state than he got while speaking as a member of the state Senate in Illinois, because as President he is in fact speaking as the executive officer of the United States government. The United States government has a voice, I assert, and even though it comes from an individual human, it differs in significant respects from the voice of an unaffiliated human.

Voice of a human
To continue my argument, consider the voice of a human. One of us proud humans will probably assert with confidence that he, as an individual human, speaks with a voice which he possess and controls. But think about the biological production of a voice, about the nerve cells and the muscle cells. Any one of those cells could discredit the idea that the human has a voice, using logic parallel to that used by methodological individualists to discredit the idea that an organization made of humans has a voice. Each cell can accurately assert that the human did nothing which was not actually the work of individual cells. To the cells it probably seems that they are making all the decisions, they are doing all the work.

So, on the question of whether you might perceive that an organization has a voice, it may depend upon whether you, the observer, represent an organization yourself in your communications.  If you do then you may be especially interested in the communications of your organization’s peers; you may be interested in the voices expressed by other organizations.

Emphasizing the growth between levels

So far I have tried to establish a view of levels in the growth of life. But obviously what is interesting and important to us humans now is what goes on between levels, on the process of organizing. How does life advance from one level to another? How do the constituent organisms accomplish their reproduction, organization, and survival within a larger “skin”?

The process of growth in levels which we have discussed so far may be represented like this:

1 → 2 → 3 → 4

Here I am saying that the most interesting part is not the numbered stages which we can recognize, but rather the arrows between stages. We humans, organisms living in level 3, grapple every day with frustrations and tensions in the organizations of which we are members. We try to improve the organizations. In this way we are thrusting toward level 4, I suggest.

Aspects of LiL

Here we will clarify a few aspects of growth from level to level.

Outsiders remain on the scene
When a new level of organisms takes shape and comes into view, some organisms from the earlier level remain living independently in the environment. That is, not all members of that earlier level joined in the new order. After eukaryotic cells formed, for example, there still remained many prokaryotic elements living in the environment. These prokaryotes were cousins of the others which had joined into the new order, and their descendants still live independently in our environment today. This suggests that the environment which could support the earlier level can still support the earlier level, even though many members of that earlier level have become subsumed, in our view, in larger organizations. The earlier level was, and remains, a viable way for a race of organisms to survive.

Organizations are heterogeneous
My discussion so far has suggested the possibility of similar or related organisms on one level joining together to form the higher level. But actually the larger organization probably includes many dissimilar constituents, including some lifeless raw materials which are manipulated by the living elements. For example, consider the prototype of a family farm of the early 20th century. We envision the farm containing its family of humans, its cows, chickens, hay and corn fields, fences, barns, and machines. This gathering of diverse elements into a productive farm organization may represent a stage in the development of a single, new, and larger organism.

A way to separate organizations into eight classes

As we focus upon the growth of organizations we naturally notice that organizations differ. There is a bewildering array of organizations. To clarify our thinking we will find it helpful to subdivide what we mean by “organization”, by noticing characteristics which are possessed by some organizations but not by others. I suggest three characteristics with which we may accomplish such a division:

1. Member-Aware. In some organizations the members are aware of the existence of the larger organizations. In other organizations this is not the case.
2. Self-Aware. Some organizations possess a self-awareness, by which I mean these organizations have headquarters which can make conscious decisions on behalf of the organizations. Other organizations lack this trait. 
3. Encoded. Some organizations have an ability to reproduce themselves. I call this "encoded" because I suppose that ability to reproduce requires that the constitution (or the set of decision rules) of the organization be codified somehow. Other organizations lack this trait.

These three yes-or-no (boolean) characteristics create a taxonomy with eight categories of organizations (because 2x2x2 = 8). In my 1999 paper I have written more about this taxonomy and given examples of each of these eight types.

The relationship between organizations and resource patterns

Some of the types of organizations which we humans form, such as families, business firms, religious orders, and states, can be seen frequently whenever we look at a human society. This frequent appearance of a type of organization suggests there is a resource pattern in the environment. It suggests we humans are suited to exploit the resource pattern when we cooperate appropriately, accepting rules conforming to the resource pattern. The business practice of franchising suggests, where it succeeds, a planned order, a mastery of some of the necessary factors that hold a specific style of organization together.

The importance of this thesis to the Resource-Patterns Model of Life (RPM)

This idea, that life grows in levels as outlined above, mixes with other ideas in RPM. I think it is part of RPM, but not the most important part. Most of RPM can stand independently of this life-in-levels idea. So RPM may offer valuable insights to you even if you reject LiL. But I have to admit that I want to take more time to explore the interdependence of the several ideas that mingle with RPM.

The possibility of inter-level learning

You might reasonably doubt that this grand idea of LiL could be of any use. So consider this. We might take what we have learned about organization on one level and see if it might help us understand organization on another level. For example, our successes and failures as humans, as we try to build businesses and other super-human organizations, may give hints to biologists who are trying to understand how single-cellular organisms managed to overcome the organizational difficulties entailed in establishing multi-cellular organisms.

The tantalizing "Origin of Death" thesis of George Wald

A poster caught my eye on the campus of SUNY at Buffalo when I was an undergraduate. Probably this was in fall 1969. The poster announced a guest lecture titled “The Origin of Death”. The thesis, presented by George Wald of Harvard, struck me and has lingered in the background of my thoughts ever since. Now I see that it may promise inter-level learning.

We should notice, Wald told, two facts about most primitive forms of life such as most single cellular organisms:

1. they reproduce by dividing in two. They divide their bodies while giving each offspring a copy of the parent’s DNA; 
2. they do not necessarily die of old age.

So an amoeba that we see today could arguably be a billion years old. Throughout all that time it never grew old and died, although obviously it has divided many, many times along the way. We, on the other hand are not so lucky. We necessarily die of old age, as do all other higher forms of life.

Wald examined the advance of the complexity of organisms, an advance parallel with the progress of evolution, looking for the origin of death. He discovered that death appeared on the scene at the same time as sexual reproduction. Apparently, at this stage in the history of evolution, organisms discovered the way to create an embryo which would grow its own new body, after mixing DNA with a partner. At this stage is was no longer necessary for the body of the parent to survive. The genes had found a way to continue their existence, while each body would live only for a time as a temporary carrier. Death as we know it originated at the same time as sex as we know it.

For me this suggests a possibility of inter-level learning, which I will describe by using anthropomorphism. Imagine if you will that you can identify with genes. The genes faced an organizational problem. They had discovered a design, an organization plan that worked except for one flaw. The managers, whom the genes hired and placed in charge of the organization, always expressed their own selfish interests by diverting the aim of the organization to serve their (the managers’) interests, rather than the interests of the founders and owners (the genes). Try as they might, the genes never discovered any way to manage the self-interests of the managers. The genes knew how to start an organization with rules which enabled it to thrive and succeed for a time in that given environment, but every single time the managers, in whose hands the genes entrusted the organization, steered the organization onto a different and ultimately self-destructive path.

To recap, the genes knew a good organizational plan and knew how to write it down, but the genes could not learn how to entrust this plan for any prolonged period of time to a management team. The genes found a solution in sexual reproduction. In that solution, the managers empowered by the genes were given motivation to reproduce and thereby to pass on copies of the genes’ management plan – copies which had not been edited in any way by the current managers. Thus the genes discovered, in sexual reproduction, how to give prolonged life to their good organizational plan.

Conclusion

Leading up to this chapter, we have learned that when we observe many organisms of a similar size surviving in an environment, it should suggest to us that the environment contains resource patterns appropriately scaled to exploitation by those organisms. Otherwise those organisms could not survive.

In this chapter we have learned to suspect that our universe contains resource patterns on a large range of scales, and living things growing into those scales. We probably assume that life started on a tiny scale, sustained by tiny resource patterns. But the universe also has resource patterns on medium and large scales. We living things seem to be building ourselves level by level so that we can reach, one day, the astronomical scales.

References:

Alchian, Armen, "Uncertainty, Evolution and Economic Theory", Journal of Political Economy, 58:211-21, 1950.

Hammer, Richard, “The State Is a Form of Life, a Legitimate Peer in the Family of Organizations”, Formulations, Vol. 6, No. 4, 1999. Available on Internet.

Kabnick, Karen and Debra Peattie, “Giardia: A Missing Link between Prokaryotes and Eukaryotes”, American Scientist, January-February 1991, pg 34-43. Available on Internet.

Kelly, Kevin, Out of Control: The New Biology of Machines, Social Systems, and the Economic World, 1994.

Simon, Herbert, “The Architecture of Complexity”, Proceedings of the American Philosophical Society, Vol. 106, No. 6. (Dec. 12, 1962), pp. 467-482.

Wald, George, “The Origin of Death”, 1970, a lecture given apparently many times (once attended by this author in Buffalo, NY), and published by Wald’s son on Internet.

Wikipedia pages on: Eukaryote, Prokaryote, Symbiogenesis.

Wilson, David Sloan, Evolution for Everyone: How Darwin's Theory Can Change the Way We Think About Our Lives, 2007.

Cooperation Encouraged by Resource Patterns

A paper presented at the Austrian Economics Forum,

North Carolina State University, Raleigh, North Carolina,

March 6, 2015

Introduction

I have a model of life which encompasses our experiences as living things, a general model which grows from complexity (or chaos) theory. I will try to show you my theory and some of its sub-theories. Economics and morality are among these sub-theories. But the view of economics suggested in my model relates only partially with the current range of academic economics, as I will suggest.

A First Look at the Theory

My theory starts in my experience. I seem to be a living thing. I seem to think. I seem to sense things around me. I have wants, for food, safety, and relationships with other people.

• Fortunately I live in a world where my wants can be filled, if not always then at least well enough that I’ve survived this long.
• And I believe that I have many peers, that is there are others around me whose experience is probably like mine. And there are other living things not so much like me, also all around me.

So, extrapolating from that experience which I believe all of us share, let me give you the assumptions underlying this model of life.

Living Things Exist in a Universe 

Properties of Living Things

• senses,
• purpose,
• memory,
• calculating capacity,
• resource consumption,
• resource storage,
• ability to act,
• nondeterministic choice of actions.

(The above list does not claim to be a complete list of properties of living things, but I hope it contains the most important elements, the highlights.) 

Properties of the Universe

• space and time,
• living things exist in the universe,
• resources patterns. That is, the resources necessary to sustain life exist here and are distributed in patterns which may be discovered by adequate powers of perception.

Living things survive by finding and imbibing resources.  If living things don’t find enough resources their numbers will decrease.  If living things find abundant resources their numbers can and probably will increase.

I believe these assumptions, or axioms of the theory, apply to living things on all levels: bacteria, people, and nation states. Do you agree?

For the time being I have decided to give this model of life a name, being the Resource-Patterns Model of Life, RPM for short. I will sometimes abbreviate: living thing as LT; resource pattern as RP.

Considerations

In each increment of time each LT has a range of choices about how to act.  Probably most of these possible actions will be useless in that these actions will not contribute to the effort to imbibe resources.  So a LT needs to narrow its range of choices.  This focusing of choices is the principal requirement of the LT's calculating capacity.

Any particular supply of a necessary resource must be finite, assuming that this supply has been discovered by LTs at a particular place and time.  This supply can be exploited only until it runs out. Ongoing life therefore requires an ongoing discovery of new supplies of necessary resources.

Cooperation

Thought experiment 1, a world with two continents

Suppose there is a planet which has two continents. The first, a frozen polar continent, gets 99% of the planet's precipitation, but is so covered with glacier that only a few blades of grass grow during the warm week of summer. The second is a vast, warm desert, with fertile soil but no water. Notice the possibility for agriculture if fresh water can be transported from one continent to the other.

Figure 1: A world with two continents, promising agriculture.

Suppose that this agriculture, if achieved, could support a population of one billion humans for the foreseeable future. But suppose that at present, with no agriculture, only ten thousand humans live on this planet, and they live near starvation in scattered bands.

Now obviously the task which we see, which promises vast wealth in the form of crops, cannot be achieved by any one of the humans. This task requires companies, or whole industries, of ice carvers, shippers, and farmers. But, equally obviously, the humans can achieve it if they organize and combine their efforts appropriately, each doing a small part of the whole task.

Considerations, 1

What can we say about the circumstances in which cooperation may help LTs to exploit some RPs?

Consider three kinds of circumstances:

• Some resources are abundant but far away, too far away for a single LT to exploit.
• Other resources are near at hand but too difficult to extract without specialized tools or knowledge.
• Some resources may be extracted only through an effort which continues during a long span of time.

Thus, if a set of LTs can discover modes of cooperation, that set of LTs may flourish in an environment where a similar set of LTs, but without cooperation, would perish.

Thought experiment 2, a green plant, with its millions of cells in roots, leaves, and stem

The environment in which these cells live has a resource pattern: above the ground there is abundant energy in sunlight and below the ground there is abundant water; but the distance between these two necessary resources is too great for any of the cells, acting alone, to exploit. The plant is an organization in which each cell plays a part. Without participating in the scheme of the plant probably few of these cells could have survived in this environment.

Considerations, 2

But keep this in mind. Resources might be other living things. We people live by cooperating to exploit cows and wheat. But it does not stop there. We can also exploit other people through our cooperation.

This model, I argue, offers a basis for some social science, for some economic models.

Thought experiment 3, tabletop critters

Now I will develop one more example. This has become my principal model to date. It serves to help illustrate my points about morality.

Figure 2: Tabletop critter, a tiny, perhaps one-cellular living thing.

Imagine a flat surface, perhaps a tabletop, upon which some tiny, perhaps one-celled, critters live. These critters need both water and sugar to live, and this tabletop upon which they find themselves is basically a desert. The wind blows and occasionally deposits a few molecules of water or sugar within reach (Figure 3). This just barely enables the critters to survive and reproduce themselves.

Figure 3: The initial condition on the tabletop.

Now suppose that onto this tabletop fate places a drop of water at some spot, and a crumb of sugar at another spot a centimeter from the water (Figure 4). Suppose that this distance, a centimeter, is much further than any one of these critters can travel in its entire lifetime.

Figure 4: A resource pattern is added to the initial condition.

But suppose that the critters do have ability to pick up raw materials, carry them for small distances, and then drop them again. Then this environmental feature, the pair of reserves of water and sugar, looks like a niche ready to be exploited. If the critters can learn appropriate rules of behavior, millions of them can start to live in a filament of trade between the water and sugar (Figure 5).

Figure 5: Critters follow simple rules of cooperation to establish a thriving population.

The critters which would make up this chain of trade would need to follow some simple rules. Such rules might be:

1. If you see water on the left, carry it to the right and set it down.
2. If you see sugar on the right, carry it to the left and set it down.
3. If you get thirsty or hungry, help yourself to what you need from the materials that pass through your possession.

Considerations, 3

With this model before us, we can consider three points.

1. The rules (reminiscent of the planet with two continents) are not arbitrary. The rules work because they help the critters exploit an environmental feature which is bigger than any of the critters, and which none of the critters can change. So in a sense the environment in which the critters live determined the rules, more than the critters themselves.
2. The perhaps-surprising fact that millions of critters can live successfully by following only a few simple rules derives from the simplicity of the environmental feature. The rules are simple because the feature (a distance separates the two essential resources) is simple.
3. Cooperation, which is expressed as behavior restrained by rules, is necessary for success in many of its forms.

The biggest question for life is: How will the rules be learned? Remember that I asserted the rules in this thought-experiment model. But suppose the critters do not have me doing that for them? Suppose they are out there on their own, doomed to fall back to primitive hunter-gatherer existence when the presently exploited resource pattern runs out? I have some ideas on how to start searching for rules, but more questions than answers.

We might think of that line of exchange as one living thing,  and not as the numerous individual LTs that comprise the line. Indeed, one of us humans looking at the tabletop without the aid of magnification will probably report seeing one thing. Whether the line of exchange is perceived as one living thing or as a multitude of critters probably depends upon the needs and abilities of the perceiver.

Rules, formation of organizations

There may be debate about whether the line of exchange is one living thing, but we can without difficulty call that line of exchange an organization. People form organizations, some of which we call firms. Recall that Ronald Coase famously asked: Why do people form firms? This visualization in the model of the critters helps us to propose an answer to that question. I propose that people form firms to exploit resource patterns in the environment.

Figure 6: Two different resource patterns cultivate two different sets of rules.

In Figure 6 we see two thriving organizations of critters. Notice that they must have different rules. If a critter wandered from one organization to the other, and tried to behave in the new organization according to the rules of its former organization, it would fail. We have the same critters in the two organizations, but different rules of behavior: rules determined by facts in the environment and not by wishes of the critters.

Figure 7: An undiscovered resource, an opportunity for improved life.

But how will the rules be discovered? In Figure 7, the dotted line around the deposit of sugar indicates that the sugar is there, but as yet it remains undiscovered by critters. Perhaps it lies just a short distance beneath the ground: easy to get but still unknown.

There is a tension between cosmos (spontaneous order) and taxis (planned order). We can plan to a small extent; there are firms after all. But we are constantly discovering anew, driven by feedback from the real world, the limitations on our new attempts to plan.

Searching for RPM’s dependence upon economics and other science

In this section I will review what I have found relating to RPM in three fields: complexity and agent-based modeling, mainstream economics, and Austrian economics.

Relating to complexity and agent-based modeling

To the extent that RPM grows from agent-based modeling in complexity theory, let me tell that I have been enthusiastic about agent-based modeling pretty much since the beginning of that practice in the 1980s. I have tried to catch up with the literature as it relates my work a few times in the decades since then. In the early 1990s I read books on the new field (Kelly, Waldrop) and I owe to those books much of the inspiration for my most complete paper (1997) on this subject to date. But there are important parts of RPM which I believe I have not seen developed by other writers, in particular my emphases on the necessity of rule-restricted cooperation and the moral influences upon group psychology suggested by that necessity.

If RPM indeed covers new ground, why would others have overlooked a study which seems so clear and promising to me? One explanation might be that others are looking in another direction. I have a bias, I admit, to counter the growth of government power. From my biased viewpoint it seems that many others work with a different bias. The others’ bias leads them to be either neutral or favorable toward the prospect of an expanding state, it seems to me. Therefore, through their scholarly work, they either accept or support extension of state powers.

As evidence for my conjecture about these biases, below I copy a listing of 19 accomplishments reported by Joshua Epstein (p. 7–8) (For brevity I have omitted references, names and dates, which Epstein supplies for each accomplishment.)

A range of important social phenomena have been generated in agent-based computational models, including: right-skewed wealth distribution, right-skewed firm size and growth rate distributions, price distributions, spatial settlement patterns, economic classes, price equilibria in decentralized markets, trade networks, spatial unemployment patterns, excess volatility in returns to capital, military tactics, organizational behaviors, epidemics, traffic congestion patterns, cultural patterns, alliances, stock market price time series, voting behaviors, cooperation in spatial games, and demographic histories.

Out of those 19, it seems to me that 12 or more might be in part motivated by ambition to demonstrate a problem in laissez-faire society. Motivated, in my view that is, to support the possibility of expanding state power. Whereas I see only 3 or 4 out of the 19 which might have been motivated to show a superiority of laissez-faire society.

Jason Potts (in Cosmos & Taxis 2:1) lists five ways that innovation may be explained in Cosmos.  None of these five touch RPs, as I see it. But Potts does occasionally and indirectly show awareness of the environment.

If my RPM research is finding things which others have not found, it may be because I am looking for things which others do not seek. I will welcome your reactions.

Relating to mainstream economics

Consider the situation where a prospering population of critters survives by following simple rules between deposits of water and sugar. I think the prosperity and the rules of cooperation are important economic categories, but I see little that relates to these categories in mainstream economics. And I do not think that my model of tabletop critters stands upon absurd assumptions which disqualify it from consideration. RPM offers a new way of modeling some economic situations which we living things face every day, a way that overlaps only slightly with mainstream economics.

Figure 8: A textbook supply-and-demand chart.

Recall that the starting point of so much of mainstream economics is the chart of supply and demand, and recall that this is about commodities. It is about goods traded in a market for a price, an amount of money.

Figure 9: Where are the commodities, markets, prices, or money in this thriving economy?

Now look again at the thriving economy of a population of critters (Figure 9), and tell me where you see any of those items italicized in the previous paragraph (commodity, market, price, money). None of those items exist in the primitive economy as modeled. You might say that water and sugar are commodities in this model. But I would counter that water a long distance from the large reserve of water differs substantially in its importance from water a short distance from the reserve; water is not a commodity in the economic sense.

Figure 10: What a market might look like in the tabletop critters model.

If there were to be a market on the tabletop, it might look something like pictured in Figure 10. Such situations may be studied in RPM, I suppose, but that is not a direction I find enticing at present.

Wealth is certainly an important concept in economics. A critter on the tabletop can be poor or wealthy, I claim, depending upon its circumstances, and poor or wealthy in ways with which we humans can empathize. In a RPM sub-project, which I have called Wealth in Institutions, I suggest that wealth may consist of having favorable choices. A critter with favorable choices for its next move, or for its plan for many moves to come, is a wealthy critter. But such wealth is not clear in mainstream economics, to my knowledge.

One major difference I see, between RPM and mainstream economics, concerns the mainstream’s emphasis on competition, competition held as a favorable ideal standard never fully attainable. But I claim that real life is not nearly so much about competition. It is about opportunity for cooperation that brings prosperity. To focus on competition overlooks the fact and promise of economic growth.

Another important difference is RPM’s connection with resources from the Earth on which we live. Mainstream economics, on the other hand, seems to float above the earth. Mainstream economics – like mathematics – seems to consist largely of concepts which should be true in any world. It is fine to float above the Earth, but the abstraction makes it too easy for practitioners to propose policies that seem to have lost sight of necessary conditions of life.

Supporting my contention that mainstream economics floats above the Earth, I notice the first two equations offered in the chapter on production functions in a respected textbook of microeconomics (Nicholson & Snyder).

q = f (k, l, m, …)      equation 9.1

Thus, a firm’s output is a function of capital, labor, materials, and possibly some other inputs. The textbook continues: “For … most of the purposes of this book … it will be more convenient to use a simplified production function …”.

q = f (k, l)       equation 9.2

Their science proceeds without materials.

Relating to Austrian economics

From what I understand of the socialist calculation debate, Mises focused upon prices of factors of production. Hayek focused upon information available to planners. It is my impression, at this stage of my education, that these men worked toward a truth which RPM shows more simply and clearly: The stuff we need comes from the Earth, not from votes in the central committee. The stuff we need exists in certain places, not in other places, and can be obtained through particular specialized procedures, but not through abstracted procedures.

A communist critter in the planning office cannot know where the next large reserve of water will be found. If a population of critters has attained some prosperity, then that prosperity has come about because critters all across the tabletop have incentives and means to use knowledge they discover in their wanderings.

To be fair to the Austrian side in the socialist calculation debate, I suppose the Austrians argued as they did because they were arguing against mainstream economists. They were not arguing against RPM.

And, to be fair to both mainstream and Austrian economics, I admit that my ideas about where RPM could go show increasing abstraction; the resulting models start to look more like established economics. When the critters become fancier (having promises, contracts, and money), they will gain for themselves more certainty that their necessary wants of water and sugar will be satisfied. And their certainty will extend farther into the future as the critters succeed in learning how to exploit resource patterns. Ultimately critters in ivory towers will make models which ignore the necessity to discover food on Earth.

What Should Living Things Think?

In Figure 5, we saw the success that came to critters who were given rules which guided them to successful cooperation. But living things do not always have deities or story tellers to supply them with such rules. In the general case, living things have to discover rules by themselves. This opens a huge field of questions about which I will say only a few things here.

When critters start to succeed, they should start to invest in “research”, i.e. in wandering unexplored regions hoping to discover new resources. If critters are given capacity to learn specialized occupations then they will probably discover that they do better when they employ that gift and indeed divide themselves into specialized roles. A need for specialty in critter-type research is confirmed by Joshua Epstein who tells that random wandering, which we know intuitively will eventually find the trading path between water and sugar, often takes prohibitively long in computerized agent-based modeling. My own experience with computerized agent-based modeling corroborates this difficulty of finding resources through random wandering.

The cooperation of critters may be enhanced if they learn language.

It will not be enough if our critters are merely satisfied or happy, because Darwinian survival may be awarded to another species in which the members were never satisfied with how much they had secured their lives, and the lives of their progeny, against improbable calamities. Calamities will strike. Only a few will survive, if that. Survival may be awarded to the descendants of wealthy critters who, in spite of their wealth, continued to aspire for more assurances of well being.

Since the difficult and large challenges of the critters’ world can be solved only through cooperation, it will probably be a good strategy to have some critters specialize on planning. These specialists would focus upon what might be done by an organized group of critters. That is, I suppose it will be best to have critters that specialize in leadership, or rule-giving.

But we must not lose sight of the fact that some living things survive by eating other living things. Living things represent, after all, a pattern of resources in the environment. If rules of cooperation can be discovered to enable one set of living things to thieve from, or eat, another set of living things, then in many cases RPM encourages that feeding. Deceit may be encouraged where it can succeed. So critters need to be suspicious, at least in some circumstances which are not easy to nail down.

Even though some living things may find it best to feed upon other living things, remember our first example of great success which critters found, not by turning upon each other, but by behaving in cooperative, mutually gainful patterns. A neighbor critter may supply you in trade during his lifetime with twenty times as much resource as you could acquire by killing and eating him. As such, a successful race of critters may have an evolved disposition of civility.

Conclusion: Theses which might be supported by the Resource-Patterns Model of Life

In this concluding section I will list a few propositions which may be given substantiation in extended use of RPM.

• The idea of “increasing returns” (W. Brian Arthur) is not surprising but makes sense in RPM when existing technologies are carried into use on new, larger RPs.
• Favorable conditions, in which critters find it wise to seek cooperation and not predation, probably, when mixed with Darwinian evolution, give rise to civility, to fellow-feeling. Property rights (negative rights) arise in the context of a need to discover new ways of cooperating (new rules to exploit as yet undiscovered resources).
• The great economic successes in life, which have been achieved by our human species, have almost always grown in places and ways which were not conceived ahead of time. Our great successes were not planned. Rather these successes grew as a consequence of our civil dispositions.
• If a set of rules discovered by critters can be duplicated and applied successfully again and again, that implies there are numerous instances in the environment of a correlated type of resource pattern. In such circumstances it will probably be wise for critters to encode the rules. Such encodings may be named commandments, genomes, or corporate franchising plans.
• Political debate in the US does not appear two sided to me, but rather is one-sided insofar as only one side is organized by vision of how it can proceed. The state provides a visible hand. It is easy for people to believe what they can see. The opposition to this visible hand is not organized, is not visible, except and to the extend that a new threat of coercion from the state motivates organization among those who stand to lose from this threat.
• Life seems to grow in levels, such as from single-cellular organisms to multi-cellular organisms (such as we are) to the organizations which we make (families, firms, states — which I propose may be considered as living). There is a possibility of inter-level learning. For example, our successes and failures as humans, as we try to build businesses and other super-human organizations, may give hints to biologists who are trying to understand how single-cellular organisms managed to overcome the organizational difficulties entailed in establishing multi-cellular organisms.
• But there might be dark and foreboding strains in this inter-level learning. George Wald points out that death in old age, necessary as it seems to us highly evolved organisms, is not necessary in lower forms of life; in the record of evolution the necessity of death started at nearly the same time as sexual reproduction. Also, recall that all the cells in our human bodies have the same DNA (the same written rules); this should chill an advocate for freedom of thought and expression in our human level.
• Assuming that life grows as RPM suggests, and that we humans are now the highest form of evolved life in our solar system, the future looks promising. We have barely started to tap the energy of the sun, and we have not yet started to snack upon the raw materials of Jupiter. This is the optimism of Julian Simon.

Addendum (June 2016): Do you think you have understood this material? Take the quiz.

Bibliography

Coase, Ronald H., "The Nature of the Firm", 4 Economica 4, 1937.

Ekelund, Robert, and Robert Hébert, A History of Economic Theory and Method, 3^rd edition 1990.

Epstein, Joshua, Generative Social Science: Studies in Agent-Based Computational Modeling, 2006.

Hayek, Friedrich. “The Use of Knowledge in Society”, 1945.

Kelly, Kevin, Out of Control: The New Biology of Machines, Social Systems, and the Economic World, 1994.

Kuran, Timur, Private Truths, Public Lies: The Social Consequences of Preference Falsification, 1995.

Lavoie, Don, Rivalry and Central Planning, 1985.

Mises, Ludwig, Bureaucracy, 1944.

Nicholson & Snyder, Microeconomic Theory, 10^th edn,, 2008.

O’Driscoll, Gerald, and Mario Rizzo, The Economics of Time and Ignorance, 1996.

Potts, Jason, “Innovation is a Spontaneous Order”, Cosmos + Taxis. Volume 2, Issue 1, 2014.

Simon, Herbert, “The Architecture of Complexity”, Proceedings of the American Philosophical Society, Vol. 106, No. 6. (Dec. 12, 1962), pp. 467-482.

Simon, Julian L., The Ultimate Resource 2, 1996.

Smith, Adam, The Wealth of Nations, 1776.

Smith, Vernon, Rationality in Economics, 2008.

Sowell, Thomas, Classical Economics Reconsidered, 1974.

     - A Conflict of Visions: Ideological Origins of Political Struggles, 2007.

Wald, George, “The Origin of Death”, 1970, a lecture given apparently many times (once attended by this author in Buffalo, NY), and published by Wald’s son at <http://www.elijahwald.com/origin.html>.

Waldrop, M. Mitchell, Complexity: The Emerging Science at the Edge of Order and Chaos, 1992.

Other works by Richard Hammer on this subject

• An Engineer’s View of Morality, Set in a Model of Life, (1997) the first and most comprehensive coverage.
• Perceived Order, this ongoing blog proffering pieces of a book to-be.
• Life in Levels, draft chapter of the book to-be.
• Wealth In Institutions, a website offering a related thesis.