Beinhocker (2006) The Origin of Wealth

[Andrea]

Every Christmas I treat myself by reading something that I normally don't have time for, and this year I picked up Eric Beinhocker's "The Origin of Wealth: Evolution, Complexity, and a Radical Rethinking of Economics" ( http://en.wikipedia.org/wiki/Eric_Beinhocker ). I confess to having a bit of an aversion to anything to do with economics but exchanges on Systemsplace has made me feel a bit guilty about my total ignorance in this area. So I thought that maybe Beinhocker's book wouldn't be such a hard pill to swallow. In fact, it's probably one of the best books I have read in a long long time! Maybe polishing off the bottle of sloe gin we made over the summer probably helped

What surprised me the most is the speed by which I got through this book. It's 454 pages of core text and 34 pages of footnotes is actually misleading since the text is written in some of the smallest font I have ever come across (4 or 6!) But I loved every single page and had real problems putting it down. This is probably one of the most accessible, up-to-date and fascinating books on the complexity/systems sciences that I have come across lately. Although it was written in 2006, it makes some of the most recent books look totally out of date!

What I love about it is that it uses the whole range of systems disciplines, (network science, behavioural economics, system dynamics, cognitive science, multiagent simulations etc) to destroy the theoretical and practical foundations of traditional economics and how these are practised in management. I finally have a clear picture of what I have despised for so long, and, more significantly, a new model of economics which is in complete agreement with my understanding of the structure, processes and functioning of complex adaptive systems.

I share Beinhocker's critical realist stance, and his insistence that portraying organisations as complex adaptive systems is not a metaphorical exercise, but determined by clear laws which govern the behaviour of all evolutionary systems, from bacteria to multinational corporations. I also agree with his main message that these evolutionary systems are driven more by the non-zero-sum win-win game of cooperation rather than the zero-sum win-lose game of competition. I.e. it is the former that determine success in the latter, hence ecology's (and society's) trajectory towards greater levels of mutualistic interdependence. But what I love most of all is his wonderful use of language -- he invents the term "deductive-tinkering" to capture the idea of action learning through blending analysis and intuition; the "big man" organisation to describe the dysfunctional dominance of hierarchical and centralised systems of governance; "punctuated equilibrium" to clarify the perceived impacts of creative destructive cycles; "amplification" to explain positive feedback ; "fit order" to get across the tricky idea of anti-entropy and its crucial relevance to organisational management; and I could go on and on -- my copy of the book is now covered with post-it notes stuck to almost a 1/3 of the pages!

Somehow, I feel a lot more optimistic about the future -- Beinhocker has managed to transform concepts that I have previously only come across in disparate and unrelated disciplines into a single coherent narrative of direct relevance to business management; while at the same time allowing anyone with a non-economic background to deeply engage with what seemed to be obscure and incomprehensible macro-economic and micro-economic theories. Crucially, he presents a new model of business management for an increasingly uncertain and complex future.

[Teiana]

<notices andrea has been in and been reading: thinks ' oh good' because she's only got terry pratchetts take on football 'unseen academicals' as her christmas reading, and has been feeling twitchy about the fact it's fiction, which she doesn't do very often, and really thinks she should make more of an effort to read 'improving' books, only has read all the ones she had and wasn't quite sure what to read next.>

[Andrea]

I just come across a PDF file of the presentation Beinhocker gave to the UK government Cabinet Office summarising the book:
http://www.cabinetoffice.gov.uk/strateg ... world.aspx

It's an excellent visual representation of the concepts presented in the book.

Although not a systems book, alongside Beinhocker's "the Origin of Wealth", I would also strongly recommend reading Tim Jackson's "Prosperity without Growth: Economics for a Finite Planet" (the book emerging out of his work with the Sustainability Commission - http://www.sd-commission.org.uk/pages/r ... erity.html ). Beinhocker explains in the language of complex adaptive systems how markets, and the behaviour of companies within them, function, while Jackson raises the bigger question: "For what?"

[Teiana]

hmm one of the slides seems not to have realised 'Borders' have gone bust...

[Andrea]

I didn't want to open another thread on "bashing traditional economics", since this is very much Beinhocker's main thesis. But another radical economics hero of mine has just posted a brilliant response to the climate-gate hullabaloo currently raging in the media:

http://www.guardian.co.uk/commentisfree ... -economics

I think this is going to turn into one of my favourite quotes of all time:

An academic-type gives a lecture, listing the outcomes of climate action: energy independence, clean water, clean air, green jobs, liveable cities, healthy children etc etc, while a man in the audience blusters, "But what if it's a big hoax and we create a better world for nothing?"

also check out the "impossible hamster" video clip: http://www.neweconomics.org/

[Andrea]

Do a 'neill' - tick all the boxes, go for a bike ride.

And here is probably the biggest difference.
You can do very well on T306 by "doing a Neill". It is a typical course where they want you to pretend to be stupid to begin with and then "suddenly realise" the correct way of doing things by paying careful attention to what is written in the block.
Basically T306 is less about thinking than about recycling what you read.

T214 was less suited to the "Neill" approach.
It asked you to do things that it had not yet taught you.
It even asked you to make up your own "framework" without even telling you what a framework really was.
It needed 100% brain and you never knew if you were going to get 10 or 90% when you sent a TMA off.

Neill's extremely perceptive analysis of the difference between T306 and T214 reminded me of a very interesting passage within Beinhocker's book:

At a crude level, there are fundamentally only two ways of running a large organisation. One is to use the structure of management hierarchy. We can define roles, goals, tasks, and procedures; then measure individual and group performance against those goals; and reward and punish accordingly. Such a structure serves to reduce the degrees of freedom of individual agents and constrain them to desired behaviours. The benefits of this approach are control, reliability, and predictability. Using the structure lever increases the odds that people will do what they are supposed to do, and not do what they are not supposed to do. Although I've described the use of hierarchy in rather unflattering terms, it can be very satisfying for people to have a well-defined role, interesting tasks to carry out, and clear measures of success -- particularly if it pays well. Without such hierarchical structures, we'd still be in caves rubbing sticks together to make fire.

The second method still requires the skeleton of hierarchy, but uses less command and control muscle on the bones. Rather than using structure and process the guide individual behaviour, an organisation can rely more heavily on culture. The primary advantage of a culturally driven organisation is that cultural rules tend to be more flexible than structures. Cultural rules provides general guidance, but leave the "how" up to the individual. In short, they require individuals to use their brains. [p. 374]

I am sure that the "new" T214 is a bit better organized because it is now being presented the third time - the first time was chaos.
But I am sure that it is still "challenging".

Yes, I really hope that, at least for Block 2, we've got it right this year -- we've added a bit more "command-and-control" so that we don't have the cultural equivalent of total anarchy, but there is still plenty of scope for people to use their brains

[llamagirl]

I'm just about to tackle this impossibly long looking book - it may take me some time

I've just finished Tim Jackson's 'Prosperity without growth' (thanks for the recomendation Andrea!) which I found to be very clearly written and it has clarified for me the fundamental assumptions behind mainstream economics and made it glaringly obvious why it doesn't work. I'm not sure whether this book has left me feeling positive or negative about the potential for the neccesary changes to the economic system or not, I still don't understand how in reality it would happen, the social changes that are needed seem so far from mainstream culture. At the moment I'm a business studies student who wants nothing to do with business because it no longer makes sense to me and I can't see a way of working in the business world without having to go along with these senseless ways of doing things.

I'm hoping that Beinhocker will give me a new way to look at things so that I don't have to give up and resign myself to spending the rest of my life working in my windowless office for a company that really does not like its employees very much

[Andrea]

Glad you found Tim Jackson's book interesting . But I think I agree with you: he does an excellent job of illustrating what the problems are with the current economic system, but is a little bit vague about the practical measures that are needed to turn things around. We'll need a much clearer template if society as a whole is to make the radical shift.

I was listening to a BBC radio 4 programme a couple of days ago (can't remember which one), and apparently the current debt of the British government amounts to £13,000 per person, and this will grow to £25,000 per person in the next four years. And the bulk of this debt was not actually created during the recession, but built during the unprecedented 16 years of continuous economic growth. There is clearly something wrong here.

Eric Beinhocker's book, on the other hand, is crystal clear about the way forward. He is actually "pro-market" and "pro-growth", which is not something that I instinctively feel attracted to, but he makes an extremely compelling case for how it could work. Because I'm comfortable with the systems concepts he deals with, I can totally understand how his approach would work in practice. It's actually given me a much more optimistic view of economics and business in general. Maybe after reading this book, you'll be able to see some hope in both your local business context and the world economy in general? I certainly felt much better after reading it

[Teiana]

We'll need a much clearer template if society as a whole is to make the radical shift.

will we? Only i feel a bit puzzled ... perhaps there are two 'andreas', one supporting things like 'one big clear template' and 'society as a whole'... and the other supporting everything being devolved to local groups and local solutions. One of them keeps saying we shouldn't wait around for the big template to be magically produced but work on smaller scales, and then the other says things like 'We'll need a much clearer template if society as a whole is to make the radical shift. '..so it sounds contrariwise.

surely we'd need lots of small templates and lots of small shifts? or are we abandoning the devolved model in favour of a nice big 'save the world at once' model where one nice benevolent person figures out a solution which we all subsequently adhere to?

[Andrea]

Maybe "template" wasn't the right word to use

SSM, for example, provides a very clear process for people to follow, but doesn't propose the solution apriori. Eric Beinhocker's application of complexity science to economics and business management doesn't "pick the winners", but creates an environment which allows for a very rapid evolution of "fit" systems. What I thought Tim Jackson's book missed was an indication of what practical steps were needed to get us out of this mess -- he provides plenty of vague ideas (mostly progressive "big government" kind of stuff), but I have no faith in top-down measures and so it would have been nice to see him giving guidelines on how change could emerge from the bottom up -- something which Beinhocker does really well.