A review by inquiry_from_an_anti_library
The Origin of Wealth: The Radical Remaking of Economics and What it Means for Business and Society by Eric D. Beinhocker

adventurous informative reflective medium-paced

3.0

Is This An Overview?

Wealth is an emergent property that evolved through people’s cooperation.  Cooperating for rewards, for mutual benefits.  Society enables synergy between people, differences within people, to create non-zero-sum outcomes.  Wealth that is enhanced by the productivity of labor, through specialization created by division of labor.  Cooperation made possible by various social technologies, which are the rules people abide by. 

Wealth is contained in knowledge, for knowledge enables people to transform resources into value.  Originating and improving through the process of evolution.  A method of competing to survive that filters out errors and enables the successful competitors to share their traits.  There is no best strategy for survival, no sustainable competitive advantage.  Any competitive advantage is temporary.  Survival itself is success.  Competition allocates finite resources, with markets being better due to their ability to innovate in disequilibrium.

 

How Complex Is Cooperation?

Evolutionary successful strategy of cooperation builds on past methods.  Innovate based on what was, but innovations have diminishing returns.  To keep high returns, more innovation is needed.  It might be impossible to predict the changes that evolution enabled, but societies can be designed better.

The collective has emergent properties.  Properties that do not exist within the individual.  Emergent properties such as complexity.  Enabling systems that are dynamic and nonlinear.  Systems that have self-reinforcing cycles of positive feedback, and self-regulating cycles of negative feedback. 

Cooperation can have a network effect, in which products that garner more users based on the number of users the system has.  Networks can provide a lot of value, but they can have consequences.  Networks can become too complicated.  Creating a complexity catastrophe.  When the networks grow too much, a negative change somewhere has drastic effects on various other parts.  Networks create interdependencies that have conflicting constraints, that create gridlock.  Local pain in change can prevent change in the whole system even if the change would improve the whole system.  Hierarchy can enable a better flow of information, to enable complexity along with the interdependencies.  But hierarchies have their own informational problems, such as information degrading.

 

How Has Economics Changed?  Or Did Not Change?  How To Simplify?

Physics was imported into economics which gave economics mathematical precision, at the cost of realism.  For some, it did not matter that the assumptions were not realistic, as long as they made correct predictions.  That the system acted ‘as if’ the assumptions were correct.  But, the purpose of science is explanations, not predictions.  The explanation and conclusion need to be tested.  Economics took ideas from physics, but while physics kept changing, economics did not.  Physics went from deterministic to dynamic and indeterminate.

Various economic ideas were wrong because economists were using science appropriately.  Assumptions are meant to simplify, but not contradict reality.  Economists used assumptions inappropriately by taking them to an extreme, that contradicted reality.  But there has been improvement, by enabling more realistic assumptions such as through the satisficing rather than making perfectly rational decisions.

 

Caveats?

Evolution is an integral concept to explain wealth, cooperation, and complexity.  Evolution is considered to provide beneficial change by error correcting problems.  The problem is that evolution does not provide only benefits, but also consequences.  Evolution can enable traits that are better for the individual at the expense of the system, at the expense of cooperative ventures.

While the author critiques various economic ideas, and referenced them as having been more static, there are also references to how the ideas have changed, improved, and were integrated within various fields.  The author provides various updated ways that economics has improved, has evolved.