Why Corporate Regulation is a Socioenvironmental Necessity. Part 3 of 5: Why does A Diverse System = A Stable System?

Delighted that you’ve joined us for the third installment of our first Arkadian analysis for 2012, where over five short articles, we will show how we reached the series title’s conclusion by way of the following question: –

“What difference between natural / social systems and the current economic system causes the former to tend towards diversity and stability, and the latter, uniformity and instability?”

In Weeks 1 and 2, we investigated why ecosystems and ‘civilisation’ tend towards diversity and stability. It was proposed this was attributable to virtuous dynamics that promote long-term systemic stability and resilience by driving increasingly fine-grained specialisation / cooperation, whilst inhibiting environmental dominance by particular species or social ‘groups’.

Next week we will be putting forward an explanation as to why the current economic system displays the reverse trend but, for now, we thought it worthwhile to explain briefly the connection between diversity and stability. Why exactly does a change in the former result in a like change in the latter?  

Put simply, in a diverse system, the health of the whole (‘productivity’) isn’t dependent on the performance of only a few parts.

For example, imagine a disadvantaged family where Dad is the only breadwinner. If he has an accident, no-one eats. If the house blows down in a storm, there’s no-one to rebuild it. Compare the situation with a second family where several other members also contribute to the household income. Because ‘productivity’ is distributed across several people, the overall family ‘system’ is much more able to adapt to an accident-prone Dad and / or a force majeure.

A classic instance of systemic over-dependency at a macro-societal level is Ancient Egypt, which teetered on a single variable: the annual flooding of the Nile (taken from the excellent ‘Water’ by Steven Solomon). The ‘inundation‘, as it was known, rejuvenated the plains with fertile silt and washed away soil poisons, to produce the most self-sustaining and fertile farmlands of the ancient world.

The exclusive focus of the political elite was water management: senior priest-managers led departments for overseeing dikes, canal workers and measuring river levels; and top dog, Pharaoh’s, fundamental godly responsibility was mastery of the flow of the great river.

Unsurprisingly then, the Nile and Egyptian history ebb and flow in perfect synchronicity. Without exception, the Old, Middle, and New Kingdoms, as well as the later periods of Greek and Byzantine rule, bloom with the return of the regular cycle of flooding and crumple with climactic dry periods into centuries of disunity, chaos and foreign invasions. Thus, despite many environmental blessings, ultimately, the stability and resilience of this mighty civilisation and its elite were slave to the caprices of its one water source, in a way that a country with abundant springs, rivers and lakes could never be.

Our third and final example – the current economic downturn – illustrates uniformity and instability at a global level. Here, the world’s banking system was rendered so fragile by the interdependency of a few titanic banks and financial services firms, that massive external intervention was required to prevent total meltdown when one of them, Lehman Brothers, filed for bankruptcy in 2009. It is a crisis and an intervention for which we shall all suffer for many decades to come.

But why had the economic system not behaved like the natural / social systems we looked at in Weeks 1 and 2, and become increasingly diverse and stable as it expanded? We hope you’ll drop in next Friday to find out.

Why Corporate Regulation is a Socioenvironmental Necessity. Part 1 of 5: Why do Ecosystems tend towards Diversity and Stability?

Happy New Year and welcome to our first Arkadian analysis of 2012. Over the next five weeks we will be working towards the conclusion of the title of the series by exploring the answer to a simple question: –

“What difference between natural / social systems and the current economic system causes the former to tend towards diversity and stability, and the latter, uniformity and instability?”

In a world where the latter now poses a mortal threat to the former, we considered this to be a question of some significance. Could we learn from the way natural / social systems self-regulate in a way that benefits all, to design an ecologically-and-socially-just economic system?

Our analysis will be set out in five short articles, launching Friday mornings throughout January and early February: –  

(1) Why do Ecosystems tend towards Diversity and Stability? Friday 6th January 2012.

(2) Why does (did) Civilisation tend towards Diversity and Stability? Friday 13th January 2012. 

(3) Why do Diverse Systems = Stable Systems? Friday 20th January 2012. 

(4) Why does the Current Economic System tend towards Uniformity and Instability? Friday 27th January 2012. 

(5) How do we create a Diverse and Stable Economic System? Friday 28th September 2012. 

So without further ado, let’s move onto our first question of the series:
Why do Ecosystems tend towards Diversity and Stability?

As a general rule the longer that ecosystems remain undisturbed by external factors, the richer they become. The oldest – the rainforests – are estimated to hold over half of all species, despite covering only 6% of the Earth’s surface. Why should 70m years of evolution against a backdrop of dynamic climate fluctuations give rise to increasing variety and not just a few dominant species?

MODEL 1 of our analysis below proposes an answer (N.B. If you have trouble reading the text, click on the diagram to open it in a new browser tab and then refer back to the explanation here).

Begin at the topmost variable and follow the arrows clockwise around the loop. (1) Put yourself in the position of a species that pursues total dominance over its local environment. (2) Despite considerable early successes, it’s not long before your manipulation and consumption begin to impact adversely on other species. (3) As local biodiversity diminishes, so too do the health, resilience and stability of the ecosystem as a whole, (4) resulting in ever-tighter constraints on your actions and, ultimately, the collapse of the environment upon which your own survival depends. (5) Your extinction kills off that suicidal gene that motivated your thirst for dominance, leaving an open stage for adaptive strategies that promote ecosystemic diversity and stability.

Thus, coming full circle, (1) Your Environmental Dominance Strategy proved self-defeating because it led to Ecosystemic Weaknesses that constrained and, ultimately, negated, You! In Systems Dynamics a feedback loop like this where the impact of a variable is reduced by the effects it causes is called a ‘Balancing Circle’.

A further notable dynamic here is a pair of ‘Virtuous Circles’ (feedback loops where one delight leads to effects that enhance the first delight, and so on), which we’ve termed the ‘The Diversity Engine’.

Here, (6a) the more the processes of natural selection incline towards interdependence, the more opportunities are opened up for new evolutionary adaptations. Thus, through increasingly fine-grained cooperation and specialisation between species, diversity itself drives diversity.

Moreover, as the environment grows ever more rich and complex, (6b) species dominance becomes increasingly futile and improbable, removing a further constraint on the trend towards diversity. And so both circles turn.

But (we hear you say) isn’t there a species that has had a radical effect on its local environment but has (thus far) escaped extinction? We hope you’ll drop in next Friday for Part 2, when we shall be exploring the curious exception of Homo Sapiens.