Friday, 8 July 2011

Capitalist Rats (econ and ecology analogy)

The ecology analogy is considered a good one. And the libertarian right will often use naturalistic phrases, survival of the fittest in explanation of why free unfettered markets are best.

Animals compete for their food in their different niches, likewise, companies and even people.

So lets push this analogy.

Size of Economy and Diversity of Economy.
Size of Island and Number of Species in an Island

If we rewrote the axis,

log number of businesses vs log number of citizens.

then there is bound to be a similar relationship. Clearly a village with a corner shop and a farm is quite a limited simple economy, but an economy of a large island or continent has many businesses often producing the same goods in competition: similar to the competition between different birds for the same worms and bugs.

This diversity gives many variations. And in our economy the diversity will give many choices of who to buy from and we might think different innovations are more likely to occur, the more species there are competeting.

Evolution can be driven most aggressively by contest with another species.

I think the libertarian right appreciate this sort of mindset and seek to scale it up to boost opportunity for growth. More trade, spreads the size of the economy, their world free trade utopia should in their mind scale up too.

But there is a big problem.

The rat and other invasive species have, when they have encountered new ecologies, disrupted and reduced biodiversity in a crashing manner. Perhaps the same is true for size of the economy? As tariff barriers have fallen, diversity of the economy may fall. Indeed with huge capital flows driving trade by moving production upon the advantage of labour costs, goods are now being produces more cheaply with older technology.

Production processes in many areas have taken a step back in our world economy as labour utilisation levels fall in developed world.

in a related post, Consider my Gardening Analogy, This is what libertarian capitalism looks like
And a related controversy - wikipedia: Optimum Currency Area Size.

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