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Are Economic Systems Like Organisms?
1 The need for an organic theory of the organism and of economic
2 What is an organism?
- 2.1 The organism transcends thermodynamic constraints
- 2.2 The organism stores mobilizable energy over all space-time
- 2.3 The
organism is free from mechanistic constraints
3 What would an organic, economic system be like?
- 3.1 The organic approach versus the neo-classical mechanistic approach
- 3.2 How to be a healthy, organic economic system
- 3.3 Money, energy and entropy
- 3.4 Symmetrical coupling and space-time structure in economic systems
- 3.5 Dynamic closure and sustainability
1. The need for an organic theory of the organism and of economic
Hodgson (1993) and Ormerod (1994) are the latest among a string of
economists to declare their own discipline "in crisis" within
the past 15 years. And like the others before them, they trace the crisis
to the mechanistic foundations of modern western science itself. They call
for an alternative, organicist approach to economics. Precisely the same
critique of neo(classical) Darwinian theory of evolution has been taking
place since the 1970s (see Saunders, and Oyama, this volume; Ho and
Saunders, 1984; Ho and Fox, 1988; Ho, 1996a), with a "new organicism"
emerging (see Ho, 1996b and references therein) which explicitly affirms
Whitehead's (1925) view that nature cannot be understood except in terms
of a theory of the organism that participates in knowing and in
constructing reality. This happy coincidence in the evolution of ideas
entices me to explore more tangible links between a tentative theory of
the organism and sustainable economic systems.
As Hodgson and Ormerod and many others have observed, Darwinian and
free-market theories are of the same cloth. The ideology of unbridled
competition and self-interest, supposed to govern supply and demand in the
free market, to a large extent, inspired Darwin's theory of evolution by
natural selection - that unbridled competition and self-interest lead
inevitably to the survival of the fittest. Free-market theory developed in
the wake of industrialization and the rise of capitalism, and became
translated into mathematics in analogy with the laws of equilibrium
thermodynamics and statistical mechanics. Neo-Darwinian theory, expressed
mathematically in population and biometrical genetics, is based on the
same equilibrium, mechanistic assumptions, and has even closer links with
statistics (see Weber and Depuy, this volume). The common roots of human
economy and the "economy of nature" has been made explicit by
Koslowski (1995) has recently produced a comprehensive critique of both
sociobiology and neo-Darwinian bioeconomics, pointing out that,
"The adoption of sociobiological, evolutionary theories in our
culture is not merely a scientific question as to the correctness of
hypothesis, but also a normative question of social philosophy, whether we
want to and ought to understand ourselves by the sociobiological
model...The way a society defines itself simultaneously constitutes an
aspect of this society's reality.." (pp.83-84).
The present paper offers a theory of the organism and of a sustainable
economic system as an organism. I hope thereby to define an alternative
social reality to the neo-Darwinian, which many of us would find more
consonant with our deepest experience of nature's unity.
A sustainable system has all the essential characteristics of an
organism - an irreducible whole that develops, maintains and reproduces,
or renews, itself by mobilizing material and energy captured from the
environment. What is the nature of the material and energy mobilization
that makes an organism? I begin with a brief description of a tentative
theory of the organism - developed in detail elsewhere (Ho, 1993; 1994a,
1995a,b; 1996b,c) - as a dynamically and energetically closed
domain of cyclic non-dissipative processes coupled to irreversible
dissipative processes, which effectively frees the organism from
thermodynamic constraints so that it is poised for rapid, specific
intercommunication, enabling it to function as a coherent whole. I shall
then show how this novel theoretical framework may begin to provide normative
criteria for sustainable economic systems, thereby also exposing some of
the inadequacies of current models and assumptions.
2. What is an organism?
2.1 The organism transcends thermodynamic constraints
Organisms are so enigmatic from the physical, thermodynamic point of
view that Lord Kelvin, co-inventor of the second law of thermodynamics,
specifically excluded them from its dominion (Ehrenberg, 1967). As
distinct from heat engines which require constant input of heat to do
work, organisms are able to work without a constant energy supply, and
moreover, can mobilize energy at will, whenever and wherever
required, and in a perfectly coordinated way. Similarly, Schrödinger
(1944) was impressed with the ability of organisms to develop and evolve
as a coherent whole, and in the direction of increasing
organization, in defiance of the second law. He suggested that they feed
upon "negative entropy" to free themselves from all the entropy
they cannot help producing. The intuition of both physicists is that
energy and living organization are intimately linked.
The idea that open systems can "self-organize" under energy
flow became more concrete in the concept of dissipative structures
developed by Prigogine, (1967) and Haken (1977) that depend on the flow
and dissipation of energy, such as the Bénard convection cells and
the laser. In both cases, energy input results in a phase transition to
global dynamic order in which all the molecules or atoms in the
system move coherently. From these and other considerations, I have
identified Schrödinger's "negative entropy" as "stored
mobilizable energy in a space-time structured system" (Ho, 1993,
1994a, 1995b), which begins to offer a possible solution to the enigma of
2.2 The organism stores mobilizable energy over all space-times
The key to understanding the thermodynamics of the living system is
neither energy flow nor energy dissipation, but energy storage
under energy flow (Fig. 1). Energy flow is of no consequence unless the
energy is trapped and stored within the system where it circulates before
being dissipated. A reproducing life cycle, i.e., an organism, arises when
the loop of circulating energy closes. At that point, we have a life cycle
within which the stored energy is mobilized, remaining stored as it is
mobilized, and coupled to the energy flow.
Figure 1. Energy flow, energy storage and the reproducing life-cycle.
Energy storage depends on the highly differentiated space-time
structure of the life cycle, whose predominant modes of activities are
themselves cycles of different sizes, spanning many order of magnitudes of
space-times, which are all coupled together, and feeding off the one-way
energy flow (Ho, 1993; 1995b, 1996c,d). The more coupled cycles there are
in the system, the more energy is stored, and the longer it takes for the
energy to dissipate. The average residence time of energy in the
system (Morowitz, 1968) is therefore a measure of the organized
complexity of the system. An intuitive representation is given in
Figure 2. I have proposed (Ho, 1994a; 1995b) that open systems capable of
storing energy tends to evolve towards an extremum, or end-state, in which
all space-time modes become equally populated with energy under energy
flow. This implies an evolution towards increasing complexity, which we
shall come back to later.
Figure 2. The many-fold cycles of life coupled to energy flow.
Coupled processes are familiar in metabolism in living systems:
practically all thermodynamically uphill reactions - those requiring
energy input - are coupled to the thermodynamically downhill ones - those
yielding energy - (see Harold, 1988; Ho, 1995a). That living processes are
organized in cycles is also intuitively obvious by a casual examination of
the metabolic chart depicting the known biochemical reactions in our body,
which shows how the cycles are entangled in a complicated web-like
network. Another prominent way in which cycles appear is in the familiar
form of the wide spectrum of biological rhythms - with periods ranging
from milliseconds for electrical activities of single cells to circadian
and circa-annual cycles in whole organisms and populations of organisms
(Breithaupt, 1989; Ho, 1993). These cycles also interlock to give the
organism a complex, multidimensional, entangled space-time, very far
removed from the simple, linear space and time of Newtonian physics (Ho,
1993; 1994b). Thus, integral relationships are maintained between
well-known cycles such as the heart beat and the respiratory rate
(Breithaupt, 1989). Remarkably, mutations in two genes of Drosophila
which speed up, slow down or abolish circadian rhythm, also cause
correlated changes in the millisecond wing beat cycle of the male fly's
love song (see Zeng, et al, 1996). This correlation spans seven
orders of magnitude of characteristic timescales, reflecting the full
extent of storage and mobilization of energy in the living system.
As all the space-time modes are coupled together, energy input into any
mode can be readily delocalized over all modes, and conversely, energy
from all modes can become concentrated into any mode. In other words,
energy coupling in the living system is symmetrical, as argued in
detail elsewhere (Ho, 1993; 1994a; 1995a,b; 1996c,d).
In analogy with the treatment of the steady-state by Onsager, Helmholtz
and others (see Denbigh, 1951), I propose (Ho, 1966c,d) that the
organism is a superposition of non-dissipative cyclic processes,
for which the net entropy production balances out to zero, i.e.,
0, and dissipative, irreversible processes, for which the entropy
production is greater than zero, i.e., SDS
> 0 (Fig. 3).
Figure 3. The organism frees itself from the constraints of energy
conservation and the second law of thermodynamics.
The cyclic non-dissipative branch will include most living processes
because of the ubiquity of coupled cycles, for which the net
entropy production most probably does balance out to zero, as Schrödinger
(1944) had surmised. In this way, the organism achieves dynamic
closure to become a self-sufficient energetic domain (Ho, 1996c,d).
The dynamic closure of the living system has a number of important
consequences. First and foremost, it frees the organism from the immediate
constraints of energy conservation - the first law - as well as the second
law of thermodynamics, thus offering a solution to the enigma of the
organism posed by Lord Kelvin and Schrödinger. There is always
energy available within the system, for it is stored and mobilized at
close to maximum efficiency over all space-time domains.
Two other consequences of dynamic closure are that, it frees the
organism from mechanistic constraints, and creates, at least, some of the
basic conditions for quantum coherence.
2.3 The organism is free from mechanistic constraints
One of the hallmarks of an organism is its exquisite sensitivity to
specific, weak signals. For example, the eye can detect single photons
falling on the retina, where the light sensitive cell sends out an action
potential that represents a million-fold amplification of the energy in
the photon. Similarly, a few molecules of pheromones in the air are
sufficient to attract male insects to their mates. No part of the system
has to be pushed or pulled into action, nor be subjected to mechanical
regulation and control. Instead, coordinated action of all the parts
involves rapid intercommunication throughout the system. The
organism is a system of excitable cells and tissues poised to respond
specifically and disproportionately to weak signals, because the large
amount of energy stored can automatically amplify weak signals, often into
macroscopic actions (Ho, 1996c,d). That is why organisms cannot be
understood in mechanistic terms.
Stored energy is coherent energy capable of doing work. That
implies the organism is a highly coherent domain, possessing a full range
of coherence times and coherence volumes of energy storage. In the ideal,
it can be regarded as a quantum superposition of activities - organized
according to their characteristic space-times - each itself coherent, so
that it can couple coherently, i.e., non-dissipatively, to the rest. The
theoretical arguments and empirical evidence for quantum coherence are
presented in detail elsewhere (Ho, 1993; 1995b, 1996c,d).
The main implication of quantum coherence for living organization is
that it maximizes both local freedom and global
intercommunication. The organism is in a very real sense completely free
(Ho, 1996b). Nothing is in control, and yet everything is in control. An
organic whole is an entangled whole, where part and whole, global
and local are so thoroughly implicated as to be indistingui-shable, and
where each part is as much in control as it is sensitive and responsive.
There is no choreographer orchestrating the dance of molecules in the
living system. Ultimately, choreographer and dancer are one and the same
3. What would an organic economic system be like?
3.1 The organic approach versus the neo-classical mechanistic approach
Does the theoretical framework of the organism just presented have any
relevance for economic systems? While both Hodgson (1993) and Ormerod
(1994) stress the need to go beyond the mechanistic, linear approach of
the classical theory to a nonlinear, organic approach, there are immediate
problems that have to be addressed. First, there is no compelling a
priori reason to believe that economic systems should be like
organisms. Economic systems are constructed by human beings, and
experience tells us that as many human institutions are run in
hierarchical mechanistic fashion as those that are organic and
There is a large element of self-fulfilling prophecy about human
action, given that reality is shaped by human volition. Ormerod
cites some revealing experiments carried out in Cornell University with
economics students and students in other subjects. In the first
experiment, they were paired up as 'allocator' and 'receiver'. The
allocator was given $10 and told to divide the money between the two. The
receiver could accept or reject what was offered by the allocator. If the
receiver rejected the offer, then neither player received anything. The
results showed that economics students, presumably having been taught the
importance of self-interest, which, in the west, has a tendency to be
confused with selfishness (see Ho, 1996e for detailed argument
that they self-interest and selfishness are distinct), performed
significantly more selfishly. In the second experiment, the students were
each given some money and asked to divide it into two accounts, one public
and the other private. Once all the decisions were taken, the students
were told that the money in the public account would be increased by the
organizer and would then be equally distributed among the students. For
the group of students as a whole, the best solution was to put all their
money in the public account, but for the individual, the best strategy was
to put all the money in the private account, and still receive a share of
the public money. The economics students were found to have contributed on
average 20% to the public account, whereas the non-economics students
contributed no less than 50%. This is a clear demonstration, not only that
there is nothing 'pure' about knowledge in the sense of it being divorced
from life (c.f. Hodgson, 1993). On the contrary, the wrong kind of
knowledge can lead us astray, or in any case, lead us where we do not want
to go. Ormerod (1994) and Hutton (1995) both argue that monetarist
doctrines have shaped (and ruined) the economies of many nations since the
The second problem with the organic theory of economics is that even if
the economic system is like an organism, it may be more like a sick
organism than a healthy, sustainable one. So, while Ormerod's analysis of
unemployment data (in terms of Lotka-Volterra equations of ecology) makes
much more sense than the linear classical approach, it leaves us in want
of definite criteria whereby one may distinguish a healthy economy from
the unhealthy. Here is where I believe a concept of a healthy organism may
begin to provide normative, diagnostic criteria for a thriving,
sustainable economy. In other words, I am proposing that a healthy
economic system should be like a healthy organism. It is all too
easy to forget that an economic system is a society of people bonded by
social contract to make their living together, by utilizing and
transforming resources, the purpose of which is to achieve a good life for
all. It is therefore in everyone's interest to have a healthy economy.
The economy is, to first approximation, an open system through which
resources extracted from the 'source' - the ecological environment - flow
to a 'sink' - the most immediate mental picture of which is the municipal
dump. Models of economic systems as dissipative structures have already
been entertained by economists (see for example, Mayntz, 1992; Witt,
1996). Dissipation or wastage can come in many forms, as we shall see.
Various commodities and services are exchanged or traded between 'source'
and 'sink', and 'values' are added in processes of manufacture, creative
acts of art or artesanship, whose equivalence to energy or otherwise need
to be fully justified and explicated, along with such qualities of life as
happiness, health, contentment and well-being, not to mention clean air,
nutritious food, comfortable shelter from inclement weather and unpolluted
Like an organism, the economic system may be conceptualized in terms of
cyclic, nondissipative exchanges or transformations of resources, coupled
to the dissipative flows or wastage due to deaths, depreciations and other
entropy- generating, irreversible processes. As resources come ultimately
from the ecological environment, it makes sense to embed the economic
system properly in its ecological setting (Fig. 4).
Figure 4. The coupled flows of the economic and ecological cycles in a
sustainable economic system.
Figure 4 makes clear that the ecological environment is also
conceptualized as a self-sustaining organic system of cyclic
non-dissipative processes coupled to the dissipative, one-way energy and
material flow. To what extent is that justified? Lovelock's (1979; 1996)
Gaia hypothesis proposes that the entire earth is a self-organizing,
self-regulating system maintained far from thermodynamic equilibrium under
energy flow. In those respects it is indeed like an organism (see also
Saunders, 1994). (The most conspicuous sign of the earth's self-regulating
property is the constancy of its atmosphere, which is a highly
non-equiibrium mixture of gases. The atmospheres of Mars and Venus, by
contrast, are equilibrium mixtures of spent, or exhaust gases reflecting
their lifelessness.) The local environment of an economic system, say,
Britain, also has its own local self-organizing, self-regulating
properties to some extent, although it is clear that local economies (and
environments) are coupled to the global through imports and exports of
materials, human beings and capital.
In the context of the planetary ecosystem, it is recognized that human
activity has had a far from benign effect. This has prompted the
establishment of a "Geophysiological Society" for the study of
planetary health (Kump, 1996). I suggest that our present model of the
organism may begin to offer some diagnostic criteria of health.
3.2 How to be a healthy, organic economic system
To be a healthy organic economic system as much as a healthy organism,
one should maximize balanced (symmetrical) flows and minimize dissipation
for a given rate of inflow of resources. An obvious way to decrease
dissipation is to minimize wastage and to recycle resources. Recycling
also increases the dynamic closure which is a pre-requisite to a
self-sustaining, self-reproducing organism or economy.
Another important factor that decreases dissipation is the degree of
space-time differentiation which stores energy and delays the dissipation
of the (energetic) value of resources (see Fig. 2). Space-time
differentiation, I believe, is the reason complex ecological systems are
more stable and viable (see Pimm, 1991; DeAngelis, 1992). Conversely, it
is why intensive farming involving large-scale monocultures have such
devastating ecological effects, as they wipe out space-time
differentiation (or biodiversity) both directly through clearing
vegetation for agriculture and indirectly through harmful effects of
herbicides, pesticides and fertilizers on indigenous species. The real
importance of biodiversity may be that a diverse ecosystem enables
space-time differentiation to be maximized, rather than the number of
species per se. Of course, the two are expected to be highly
correlated, but space-time structure of ecosystems in terms of the life
cycle times and spatial distribution of species has more to do with 'niche
partitioning' for the most efficient utilization of resources than any
conventional explanation in terms of natural selection.
I have proposed that open systems capable of storing energy will tend
to evolve towards an increase in space-time differentiation for storing
mobilizable energy over all space-times (Ho, 1994a), an increase in
organized complexity, in other words. This self-organizing principle is
manifest in the increasingly complex differentiation of multicellular
organisms both in development and in evolution, into organs, tissues and
cell types. These form so many nested dynamic compartments and
microcompartments down to the interior of cells, facilitating the rapid
and efficient mobilization of energy and resources (Ho, 1995a).
Some evidence that this principle may apply in ecology has come to my
attention recently. There does seem to be an increasing complexity of
trophic webs and diversity of niches and microniches in long established
ecosystems compared with new ones or ones that have been stressed
(Schneider and Kay, 1994). The increase in complexity of trophic webs is,
moreover, associated with an increase in efficiency of energy and resource
utilization. We are re-analyzing the data to see how they bear out the
concept of energy storage presented here more precisely (Schneider, Kay
and Ho, 1996).
In economic systems, the principle of increase in organized complexity
can be seen to operate to some extent in the 'division of labour'
subsequent to the industrial revolution. Witt (1996) offers a stylized
record of the increasing differentiation of labour that accompanies the
growth of modern economies. The substitution of human physical work by
non-human energy sources and machines gave rise to a whole variety of "lower
mental work" and services in controlling, monitoring, tooling and
adminstering machinery. The production processes themselves also become
more dependent on services as well as explicit technical knowledge and "higher
mental work" of all specializations. This in turn, generated the need
for training and education. Recent advances in automation and information
technology are substituting out some categories and creating others of "lower
mental work" such as microchip manufacture and assembly. They also
give rise to "higher mental work" in software and hardware
There may indeed have been an increase in space-time differentiation of
economic systems subsequent to industrialization. Agrarian communities are
organized around the village and the fundamental annual crop cycle, with
lower and higher harmonics of the yearly cycle of human activities in tune
with the rotations and revolutions of planets and stars. By contrast,
industrial societies do not have a fundamental timescale. Manufacturing
outputs are in hours or days, and may take place simultaneously in
spatially distant sites. Fixed capital machinery have typical turnover
times of 5 to 10 years whereas human capital (Becker, 1966) takes 25 years
or more to 'accumulate' and become obsolete in 65 years on average. Firms
and small companies have a life time of perhaps 10 to 20 years, while
large, multinational corporations may last over several human life-times.
Electromagnetic and electronic communications and transactions, on the
other hand, can take place across the globe in a matter of split-seconds.
To facilitate circulation of resources over the entire gamut of
space-times, the financial or banking systems have also evolved to
increase space-time differentiation in the availability of capital.
Tapping non-human energy sources and substituting human physical work
by machines in industrial societies have no doubt led to an increase in
energy storage capacity in proportion to the space-time differentiation of
the system. However, the increase in intensity of energy flow and
exploitation of environmental resources may be far in excess of any
increase in the system's storage capacity. For a given space-time
structure, there is a probably an optimum to the rate of in-flux of
resources, such that increasing the rate of extraction of resources from
the environment beyond that point will no longer make the system more
'energetic', because there is a limit to the amount that can be stored. If
resource flow is too fast, it will merely over-heat the system, i.e.,
increase the rate of dissipation. Whereas natural systems, including
indigenous non-intensive agrarian societies have co-evolved with their
ecological environment, industrialized systems have generally upset the
balance by increasing the rate of exploitation, particularly of
non-renewable environmental resources, far beyond the regenerative
capacities of the environment, and outstripping the rate at which
space-time differentiation can increase to absorb and store the extra
inflow of resources.
Thus, while development and industrialization may improve the rate or
efficiency of resource extraction, they do not necessarily make the system
richer. Increase in resource extraction can indeed impoverish the system
as a whole by destroying the environment or even undermine the
pre-existing space-time structure of the economic system. This
thermodynamic limit to productive resource utilization is the basis of the
law of diminishing returns. A case in point is intensive agriculture
associated with the Green Revolution in India, which not only depleted
ecological biodiversity, but has also thrown small farmers and local
distributors out of work, creating conflict that completely undermined the
pre-existing socioeconomic structure (see Shiva, 1991). Space-time
differentiation of both ecosystems and economic systems is an area which
will benefit greatly from future investigations.
To be a truly healthy organism, there must be a balanced flow
of energy and resources. That means maximizing coupled flows that
are as equal or symmetrical as possible, so that resources can be readily
mobilized or distributed throughout the system. In practice, it requires
resources from parts of the system in surplus to be promptly diverted to
other parts in deficit, as would be achieved with a responsive and
responsible banking system. Reciprocity in coupling ensures that the
direction of flow may be reversed at other times: debtors and creditors
can reverse roles as the need arises. Symmetrical relationship implies the
maximization of intercommunication, and vice versa.
To illustrate the principles of a healthy economic system, I shall
briefly examine how the economy and economic systems may be analyzed with
the help of this novel theoretical framework.
3.3 Money, energy and entropy
The first thing that comes to mind whever the word 'economics' is
mentioned is money. It is indeed money that makes the economists' world go
round. So, it is all too easy to equate the circulation of money in real
world economy with energy in the living system. It has even been
fashionable, in biochemistry text-books, to regard the universal energy
transduction intermediate, ATP, as 'energy currency'. However, money is by
no means equivalent to energy. If one wants a really good analogue to
energy in real world economy, it is affection, trust and good will, for
which, originally, the gift was a token. Later on, people traded goods or
services, value for value, which again depend on trust and goodwill. The
problem arose with the introduction of money, which is only arbitrarily
related to the real value of things and services. I say this inspite of
learned volumes which have been written on the subject (see Crowther,
The result is that all money is not equal. The flow of money can be
associated with exchanges of real value or it can be associated with sheer
wastage or dissipation. In the former case, it is more like energy flow,
in the latter case, it is pure entropy. Classical economists beginning
with Adam Smith have devoted much effort towards a theory of "natural
value" of things and services (see Barber, 1967), on the explicit
recognition that there is a natural price at which a 'freely' competitive
system may come into equilibrium. However, as the experience of the past
centuries have shown, prices are subject to all kinds of manipulations by
human beings, which is why the economy cannot be tuned simply by
controlling money supply (Hutton, 1995). Obviously, the energy/entropy
divide is not clear-cut, and there is a continuum from a 'just' and
completely equal exchange which is purely energetic, through various
degrees of entropic costs when value for money is unbalanced, being either
too high or too low, to the purely entropic when the flow is associated
with wasteful, unnecessary consumer goods or services, or is essentially
decoupled from anything else, for example, in the huge profits reaped in
financial and money markets (c.f. Hutton, 1995).
Because the economic system depends ultimately on the flow of resources
from the natural environment, which has its 'natural ecological economy',
entropic costs can either be incurred in the economic system itself, or in
the ecosystem. Thus, when the cost of valuable (non-renewable) ecological
resources consumed or destroyed are not properly taken into account, the
entropic burden falls on the ecological environment rather than on the
economic system. But, as the economic system is necessarily coupled to and
dependent on input from the ecosystem (see Fig. 4), the entropic burden in
the latter will feedback on the economic system as diminished input, so
the economic system becomes poorer as a result. In our model, poverty is
absolute, as there is a finite optimum rate at which resources can be
utilized and transformed. That also means when individuals amass excessive
resources, others become poorer in absolute terms. Poverty threatens the
survival of the system as a whole. It represents an unbalanced, uncoupled
system (see below).
One might think that 'value' and 'worth' are too subjective to say
anything rigorous about, but evidence that money is both energetic and
entropic is provided by the well-known unreliability of assessing the real
"wealth of nations" - equivalent to the mobilizable energy or
resources stored in our model - from the Gross National Product (GNP) -
the amount of spending, in US dollars, on goods and services carried out
by various sectors of the economy. Several attempts have been made to
improve on GNP. One example is the Measure of Economic Welfare (MEW),
which takes account of unpaid household work, ascribes value to leisure
and costs (negative GNP) to aspects of urbanization such as the necessity
to pay for travel to work. Between 1929 and 1965 in the United States, MEW
grew, on average, by 1.1% per annum compared to 1.7% per annum in GNP.
Another recent suggestion is the Index of Sustainable Economic Welfare
(ISEW), which makes deductions for depletion of non-renewable resources
and long term environmental damage. For the years between 1950 and 1986 in
the United States, ISEW grew by a mere 0.9% per annum compared to 2% in
GNP (see Ormerod, 1994). These differences are perhaps minimum estimates
of the entropic burden borne by the economic system and the ecosystem to
which it is coupled. Entropic burdens, if unrelieved, are 'deaths' of the
Another suggestive estimate of energetic yield versus entropic costs
come from the comparison of 25 rice cultivation systems (see Shiva, 1991),
of which 8 are pre-industrial in terms of low fossil fuel input
(2-4%) and high labour input (35-78%); 10 are semi-industrial with
moderate to high fossil fuel input (23 - 93%) and low to moderate labour
input (4 - 46%); and 7 are full-industrial with 95% fossil fuel
input and extremely low labour input of 0.04 to 0.2%. The total output per
hectare, calculated in GigaJoule (GJ, unit of energy) in pre-industrial
systems fall into a low and a high output subgroup, the output of the low
subgroup, comprising 5 of the 8 systems, are one-twentieth to one-fifth of
the full-industrial yield. However, the output of the high subgroup
are 2 to three times those of the full-industrial systems. The yield
of semi-industrial systems are more homogeneous, with an average of 51.75
GJ, while the yield of full-industrial systems, even more uniform, average
When the ratio of total energetic output to total input is examined,
however, pre-industrial systems range between 7 to 10, with the figures
for the most productive systems being as high as 15 to 28. Semi-industrial
systems gave ratios of 2 to 9, whereas the ratios of full-industrial
systems are not much better than unity. These figures illustrate the law
of diminishing returns remarkably well: there seems to be a plateau of
output per hectare around 70-80 GJ, which is only rarely exceeded, as in
the 3 high yielding preindustrial systems of Yunnan, China.
Intensification of energy input leads to a drop in efficiency which is
particularly sharp as input approaches the output ceiling. This drop in
efficiency reflects the increasing entropic costs of high rates of
dissipation, which occurs when the rate of energy input exceeds the
capacity of the system to store the energy, as mentioned in the last
Section. The exceptionally high output of the Chinese systems is also an
indication that the energy storing capacity of a system can increase,
depending on the space-time differentiation and the dynamic closures
introduced. For example, the utilization of farmyard and human manure as
organic fertilizers, which has been traditionally practiced in China, will
have the effect of increasing dynamic closure (see also Section 3.5).
The living system depends, not just on stored energy, but stored mobilizable
energy. Hence energy stashed away that cannot be mobilized is unavailable
for work. As such, it is also equivalent to entropy. Thus, a country like
Britain, dominated by the financial markets, and 'rentiers' who expect
high returns from investments and underinvest (Hutton, 1995), bears all
the hallmarks of a system with a high entropic load. Much of Britain's
investment is also diverted overseas to exploit cheap labour costs or
cheap resources, encouraging environmental destruction in the Third World.
This further increases the entropic load on the global ecological system,
which, as explained above, feeds back on the world economic system to make
it poorer on the whole.
3.4 Symmetrical coupling and space-time structure in economic systems
Symmetrical coupling of energy mobilization is a hall-mark of the
healthy organism. It is that which enables the system to mobilize energy
at will and in a perfectly coordinated way. It involves certain
reversibility of flows and reciprocity in relationships. What would these
be for the economic system? It would be a relationship of trust and
goodwill, of cooperation, of connectivity in the system, so that
intercommunication is optimized. It would be a smooth and balanced
coupling of production to consumption, of employer to employee, of lending
to borrowing, of investment to modest profit-taking. It is based on a
differentiated space-time structure, and a respect for that structure, so
that debts and surpluses can be properly distributed and re-distributed to
offset one another and to maintain the system as a whole.
A slight digression into the living system will illustrate what I mean.
For our muscles to work, even under the extreme exertion of say, long
distance running, or better yet, a man running away from a tiger, energy
has to be efficiently mobilized over a range of space-time scales. The
immediate energy supply is in the form of the universal energy
intermediate, ATP, which biochemists themselves have likened to "energy
currency". The important thing in a healthy system is that the
ATP is never allowed to become depleted in the working muscle
(otherwise the man will be mauled and killed by the tiger). How is that
accomplished? It is accomplished by a cascade of energy 'indebtedness' to
more and more distant, longer term energy stores, which are replenished
after the crisis is over, and the man can recover and have a
hearty meal (see Ho, 1995a). Thus, for the economic system to function
effectively and efficiently, it has to achieve a smooth distribution and
redistribution of surplus and indebtedness in space and time as the need
In the free-market model, each player is supposed to out-compete every
other, in order to reap the maximum benefit in the shortest time. The
assumption is that the players on both sides of the relationship are equal
so that if the producer produces shoddy goods and charge high prices,
consumers will shop around and only buy the best and cheapest available,
and so an equilibrium will eventually be reached. Even if that were true,
a lot of unsustainable wastage or dissipation would have been generated
before the equilibrium is reached. More to the point, real world economies
consist of big, multinational companies as producers/employers who see it
as their job to reap maximum profit for their shareholders, who, in any
case, do not have any say in running the companies; and powerful banks as
lenders who may charge high interest rates and expect quick repayment. In
the absence of proper regulation, as in Britain's deregulated economy (see
Hutton, 1995), those are just the conditions for uncoupling and
Hutton has contrasted Britain with a number of different economies
including Japan and Germany, which are deemed to be more successful than
Britain. It is of interest that both Japan and Germany go to great lengths
to create and foster cooperation and trust, between employers and
employees, among different companies (through cross share-holdings in
Japan) and between companies and banks, which make much more favourable,
long term loans to companies, respecting the realistic timescales required
for companies to mature.
In Germany, employees are represented on the board of directors of
companies and participate fully in making decisions. This has meant that
Germany has largely avoided the uncoupling effects of long-term strike
actions. Britain, by contrast, has had an adversarial employer-employee
relationship which led to the growth of trade union powers in post-war
years. The Thatcher era succeeded in breaking the unions only to create
the greatest uncoupling of all, the high unemployment rate, with
irreplaceable talents and skills going to waste, not to mention the burden
of human suffering and social alienation. Unemployment and poverty
threatens the survival of the system as a whole.
3.5 Dynamic closure and sustainability
As emphasized earlier, a thriving economic system has two branches, the
cyclic, non-dissipative branch, which requires dynamic closure, and the
irreversible, dissipative branch. Dynamic closure is the key to a
self-reproducing or sustainable economy. This principle has been
well-appreciated by traditional indigenous farmers in their "internal
input farming system" (Shiva, 1991), which essentially involves
closing the nutrient cycles of plants and animals as much as possible. It
depends on a reciprocal, symbiotic relationship between farmers who farm
and tend, and propagate the animals and plants, which in return provide
sustenance for them and their community. It involves the minimization of
waste by judicious recycling of nutrients, and diversification in the
utilization of resources. By contrast, the so-called "high yielding
varieties" introduced by the Green Revolution are designed to break
nutrient cycles, dispense with recycling to depend on intensified external
input. The lack of dynamic closure and the intensification of external
input are the reasons why fully industrialized agricultural practices are
so energy inefficient, and ultimately nonsustainable.
Dynamic closure depends on cycles of human reproduction, reproduction
of life-stock and crop-plants, manufactured goods and so on, integrating
with cycles of investment and reinvestment for self-renewal and
maintenance, if not for growth. The cycles are interlocked, or catenated.
Present generations work, not just for themselves, but for their
children's and parent's generations. Past debts are being repaid, or
surpluses consumed, while present debts or surpluses are being created for
the future. These circulation of resources in space and time are essential
for the survival of the system as a whole. Each generation invest and
re-invests towards the immediate and distant futures.
When these cycles are broken, the dissipative branch inevitably
increases at the expense of the non-dissipative, and threatens the
sustainable reproduction of the system itself. Re-investment must occur in
the business/industrial sector, as much as in housing, public transport
and most of all, in education. Skilled labour, as well as professionals
and managers have to be trained and retrained to replace the aging or
obsolete generations. UK industry has had a poor record in investing in
people, despite the recent initiative by the very name. The depletion of "human
capital" means that the system effectively wastes away. There is
indeed a desperate need for renewing and reconnecting the life-giving,
I have outlined a theory of the living system as a dynamically closed,
self-sufficient energetic domain of cyclic non-dissipative processes
coupled to irreversible dissipative processes. Mobilizable energy
is stored over all space-time domains, so that intercommunication is
optimized, enabling the system to function as a coherent whole.
I show how this conceptual framework can provide diagnostic criteria
for a healthy organism and by extension, a healthy economic system. A
healthy organism maximizes cyclic, non-dissipative, symmetrically coupled
flows while minimizing irreversible, dissipative flows of energy and
resources. It maximizes space-time differentiation, and dynamic closure so
as to increase energy storage within the system. This leads to new
insights concerning the equivalence of money to both energy and
entropy, such that economies cannot be tuned simply by controlling the
money supply. It also makes explicit the role of trust, cooperation and
goodwill in fostering symmetrically coupled flows, and the importance of
re-investment in all sectors in achieving dynamic closure of the system on
which a self-reproducing, sustainable economy is ultimately dependent.
I am grateful to Ulrich Witt, Bruce Weber, Susan Oyama, Peter Saunders
and Peter Koslowski for comments on earlier drafts of this paper. In
addition, I would like to thank Teddy Goldsmith, Vandana Shiva, Martin
Khor and many other colleagues of the Third World Network for raising my
awareness on world economic issues. None of those mentioned should be held
responsible for the shortcomings.
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