The Natural Economy

Every economy on Earth is facing large problems. The slow down in the USA, tackling environmental policy in Europe, controlling the effects of growth in China, and providing basic services in Africa are all examples of the looming problems. The fact that policymakers are missing is that the economy is a system, and like any other system it's made of entities, subsystems, and processes. These Comparing it to another system such as the life system on Earth:

	Economy	Environment
Entity	Individuals, companies	Organisms
Subsystem	Geographic, Online	Ecosystems
Processes	Investment	Reproduction
Interactions	Trade, Employment	Predator/Prey
Governing Laws	Regulations, Policy	Laws of Physics

The similarities are intriguing. Every participant is acting in their own interest which causes new entities to fill niches (Such as lichens in nature. The long tail in ecnomics). These innovators help to expand the system (certain plants grow faster in recently burned forests. The tech industry provides jobs to many recently impoverished populations). Resources flow throughout the system (Energy and water in nature. Money moves through trade and investment in the economy). Some act as buffers (Trees to absorb CO2. Banks for lending.) while others inadvertently work together (The tiny fish that clean sharks' teeth. The joint ventures between multinational corporations).

This leaves questions unanswered though. Why hasn't the success of industrial nations spread to the destitute parts of Africa? Why can't even well developed economies be sustained without government management the way the earth sustains life without having to alter the natural laws? I believe the answers are in the laws: the laws crafted always have unintended consequences (sort of like how every drug has side effects). These mismanaged regulations act like an economic pollution, disrupting the entire system.

Milton Friedman proved to most of the world that the less regulation and government intervention in economic affairs is better for the economy. I think it caught on so well because laws intended to solve one problem usually creates other problems. The regulation we humans make are not 'natural' or universal like laws of nature. As an example, gravity has an effect in all situations, from the planets circling or limiting flight to certain creatures on earth. The difference is the effect of the law of gravity always serves the purpose of maintaining equilibrium. Tax laws provide loopholes, energy subsidies that keep rates low discourage more expensive renewable energy, i.e., the laws we create are imperfect. This is likely because most laws crafted are reactive instead of proactive. (This is inherent in democracy because it requires consensus.)

The idea is that as a society we should work towards making our economy more 'natural' in this sense. It will provide more stability and equality for all. The process will not be easy, like science it must constantly be reexamined with increasing understanding. This will be hard to reach consensus on as the system is so complex. I think the best idea would be to start with tenants we can agree on such as achieving energy security or easing the forces that keep more people from investing in retirement rather than relying solely on pensions. It will take time and there will be mistakes, the central bank had to learn how to work as well as they do now (it's been seventy something years since we've had a worldwide depression). It may be a pipe dream but you've gotta have some hope.

What are your thoughts o n the matter?