Doyne Farmer

It's like, Having the economy work is like having a square meal every day and having that energy allow you to walk around and do the tasks you need to do. Very fundamental to everything we do. And now the ecology analogy comes from the fact that ecology is really a theory about specialists. I mean, what is grass? Grass is an organism that takes sun and earth and water and makes grass with it.

It's like, Having the economy work is like having a square meal every day and having that energy allow you to walk around and do the tasks you need to do. Very fundamental to everything we do. And now the ecology analogy comes from the fact that ecology is really a theory about specialists. I mean, what is grass? Grass is an organism that takes sun and earth and water and makes grass with it.

A zebra is an organism that turns grass into zebras. A lion is an organism that turns zebras into lions. They're all specialized. But the interactions can be rather long range. Get rid of the lions, grass gets hammered.

A zebra is an organism that turns grass into zebras. A lion is an organism that turns zebras into lions. They're all specialized. But the interactions can be rather long range. Get rid of the lions, grass gets hammered.

So even though the lion might not interact with the grass except to roll around in it occasionally, because the lions are controlling the zebras and the zebras are controlling the grass, it's all connected. So economists sort of, I mean, Adam Smith already said something like that. But our models very explicitly do that in a bounded rational setting because why are we specializing?

So even though the lion might not interact with the grass except to roll around in it occasionally, because the lions are controlling the zebras and the zebras are controlling the grass, it's all connected. So economists sort of, I mean, Adam Smith already said something like that. But our models very explicitly do that in a bounded rational setting because why are we specializing?

We're specializing because we're only boundedly rational. We get good at doing very specific things. We can't do everything. And so we put that in from the start and our models because we can put in more institutional structure and so on, allow us to think about the ecological part of the story with more richness. Now, back to the metabolism part of the story.

We're specializing because we're only boundedly rational. We get good at doing very specific things. We can't do everything. And so we put that in from the start and our models because we can put in more institutional structure and so on, allow us to think about the ecological part of the story with more richness. Now, back to the metabolism part of the story.

The metabolism, it's a bit different from your body in that metabolism is maintained by an ecology that the metabolism is feeding. The metabolism feeds all of us, but we're making that happen by each of our specialized roles.

The metabolism, it's a bit different from your body in that metabolism is maintained by an ecology that the metabolism is feeding. The metabolism feeds all of us, but we're making that happen by each of our specialized roles.

We're like the little cells inside your digestive system that are themselves being fed by the fact that we're digesting food, but those cells can be very specialized and doing very different things.

We're like the little cells inside your digestive system that are themselves being fed by the fact that we're digesting food, but those cells can be very specialized and doing very different things.

Yeah. We were inspired by ecology. One of the nice things about hanging out at SFI is you get to know a little about a lot of things. And we said, well, the same basic thing is going on in the economy because we have all these specialists. And in particular, in ecology, one of the central ideas is that of a trophic level.

Yeah. We were inspired by ecology. One of the nice things about hanging out at SFI is you get to know a little about a lot of things. And we said, well, the same basic thing is going on in the economy because we have all these specialists. And in particular, in ecology, one of the central ideas is that of a trophic level.

with the grass, grass has a trophic level of one, zebras have a trophic level of two, lions have a trophic level of three. And the way you compute trophic levels is you say an organism is equal to one plus the average trophic level of the things it eats, right? So, so. And you can actually just write that statement down and derive a key equation about the economy.

with the grass, grass has a trophic level of one, zebras have a trophic level of two, lions have a trophic level of three. And the way you compute trophic levels is you say an organism is equal to one plus the average trophic level of the things it eats, right? So, so. And you can actually just write that statement down and derive a key equation about the economy.

Because in this case, what happens is industries, trophic level in industry is one plus the trophic levels of its inputs. And labor, we put as the foundation, that's trophic level zero. So an industry that purely has labor has trophic level one. It turns out this is very closely related

Because in this case, what happens is industries, trophic level in industry is one plus the trophic levels of its inputs. And labor, we put as the foundation, that's trophic level zero. So an industry that purely has labor has trophic level one. It turns out this is very closely related

to a concept in economics called output multiplier, which is used in a different way, but defined in a similar way. The prediction then is that the deeper your supply chain is as an industry, the faster you'll improve. I go, wait a minute, that sounds weird. Well, first of all, the depth of the supply chain is the trophic level here. Why?

to a concept in economics called output multiplier, which is used in a different way, but defined in a similar way. The prediction then is that the deeper your supply chain is as an industry, the faster you'll improve. I go, wait a minute, that sounds weird. Well, first of all, the depth of the supply chain is the trophic level here. Why?