Charting the Course of Socioeconomic Evolution

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It has become fashionable in recent years to assert that we are living through a paradigm shift every bit as historic as the industrial revolution.  Countless voices have argued that the internet will prove in the long run to be at least as disruptive as the printing press.

Are these merely provocative analogies or is there a common process underlying each set of events?

Fundamentally these are statements about the nature human productive activity, our methods of organizing that activity, and the tools that facilitate that organizational structure.  Our evaluation of such claims must then be grounded in an understanding of the evolution of organizational structures.

Niche Construction

Lorenz thought that the world is knowable, but it is knowable through the categories of the knower, which were shaped by evolution.

So evolutionary adaptation by natural selection results in a partial correspondence, a kind of isomorphism between the structure of the world and the organization of the knower. On that account, organisms do not make theories of the world, they are theories of the world. [emphasis mine]

-Sam Bowles paraphrasing Conrad Lorenz

The ecological environment is not nearly as natural as we might think.  In reality it is a composite of active efforts by myriad organisms to construct niches that enhance their own prospects for survival and reproduction.

Niche construction is not a phenomena isolated to ecology.  The organism itself is a constructed niche.  It is the niche constructed by and for the genetic material.  Biological organisms are quite literally the ecological environment evolved around their DNA.

In the case of the human organism, niche construction takes the form of the society we see all around us, and that society exhibits the same isomorphism described in the quote above.  Human civilization is an emergent and embodied theory relating the human organism to its external world.  To whatever extent human society expresses a compelling theory of the world, it thrives.

Niche construction promotes survival by buffering the organism from the environment.  Just as the DNA uses the biological body to insulate itself from external selection pressures, so too human civilization serves to buffer the human organism from environmental selection pressures.

However, if/when each evolves towards greater complexity and capability, each creates new pressures – both internally and externally.  Externally, more capable evolutionary machines require a more fruitful environment to sustain themselves.  Internally, more complex evolutionary machines require more advanced means of mediating their own complexity.

Given this perspective, we can interpret claims like those at the start of this piece as references to a constructed niche evolving towards greater complexity.  DNA evolved T-cells, red blood cells, and neurotransmitters.  Humans have evolved language, money and information technology.

The remainder of this piece will address common themes apparent throughout the recent evolutionary history of those mechanisms, including:

  • how they influence the form of self-organizing social structures
  • how those structured societies evolve towards internal and external limits
  • the dynamic balance between change and stability, innovation and conservatism, adaptability and survivability
  • how that dynamic equilibrium responds to mismatch between organizational capacity and constraints

Understanding the dynamics common to various coordinating mechanisms should allow us to better understand the shifts currently underway in appropriate context, and thereby to better predict the course that current transition might take.

Clarifications and Disclaimers:

Before I dive off the deep end, a bit of housekeeping:

Throughout this piece I use the term “society” frequently.  My usage does not assume any particular definition.  For our purposes, society simply refers to: an interconnected and dynamically interdependent population.

Secondly, what follows is an exercise in pattern recognition.  The goal is to develop a framework with which to organize further exploration.  This piece is not intended as the definitive explanation for all human history.  That much should be obvious.  I do want to encourage your comments and criticisms.  However, I hope you will be mindful of the intended purpose and moderate your feedback accordingly.

Onward…

Four Coordination Paradigms

In a series of previous posts I developed (with your feedback) a framework outlining four modes of economic exchange (read: value creating exchange):

  • Relationship Economy -    illegible exchange between related parties
  • Political Economy -             legible exchange between related parties
  • Transactional Economy - legible exchange between unrelated parties
  • Attention Economy -          illegible exchange between unrelated parties

There exists a distinct historical trend in relation to these four modes of coordination that will allow us to repurpose the model towards our current ends…

Relationship Economy

Prehistoric man would have perceived only the relationship economy.  Prior to the advent of agriculture and the formation of stationary civilizations, all “economic” behavior was organized relationally.

Relationship economies were characterized by relative equality and a general lack of structure.

The modes of coordination available to prehistoric man were entirely informal.  All individuals within small tribal groups enjoyed reciprocal relationships with one another.  Productive activity was organized cooperatively and the fruits of that productive activity were allocated according to social norms and customs.

Political Economy

When nomadic tribes began to form stationary civilizations, around the time of the agricultural revolution, new organizational principles emerged.

The political economy is what we are familiar with by reference to the ‘great civilizations’ described in history books.  Through most of recorded history human society was organized predominantly via political coordination.  These societies were characterized by real power projected through hierarchical institutions.  Individuals gained power through explicit status in formal bureaucracies.

Though much production remained within relational units (extended families, small communities), the relational unit was now embedded in a new reality that had grown up around it.  In larger civilizations – enabled by agriculture – individuals could no longer rely exclusively on shared norms to mediate social behavior.  Activity that extended outside the immediate community was mediated by codes of conduct defined by formal institutions.  Productive activity and the allocation of resources were also mediated by a hierarchical social structure.

Transactional Economy

Political economies proceeded to dominate the world scene for thousands of years.  It is only within the past couple hundred years that the transactional paradigm has emerged as the predominant mode of economic coordination.

Transactional economies are characterized by a decentralized self-organizing structure.  Power and influence are a function of access to resources, primarily financial capital.

The bulk of economic activity is coordinated through impersonal markets.  The production and distribution of resources is decentralized and mediated by self-adjusting pricing mechanisms.

Correlations

Admittedly, all of the above is described in very broad strokes.  For those interested in detailed historical examples of each paradigm I recommend David Graeber’s Debt – The First 5000 Yearswhich I recently reviewed.  My distinctions between relationalpolitical and transactional economies roughly parallel Graeber’s distinctions between communismhierarchy, and exchange respectively.

Unfortunately, Graeber never builds much conceptual architecture around that basic outline, leaving it to readers to extract their own patterns from the voluminous historical evidence he presents.  With the remainder of this post I will begin outlining the first couple layers of conceptual scaffolding, as I see it.  As you have surely surmised, I will eventually incorporate a fourth category (attention economy), for which Graeber does not offer a parallel. The failure to recognize that fourth paradigm is likely the foremost reason why Graeber seems to favor such an anachronistic position.

After establishing the overall pattern in this post, I will turn in future posts to the competitive dynamic that plays out in the rivalry between paradigms, which will prove particularly interesting as applied to the current shift towards attention economics.

The Evolutionary Pattern

Below is an illustration of the pattern described so far (the arrows labeled rationalization and specialization will be addressed later on):

The Arc of Socioeconomic Evolution

Human civilization first takes form in relational tribes and remains in that state for quite some time.  The transition to political economy begins around the same time as the agricultural revolution and the advent of stationary populations.  Both of those characteristics – geographic fixedness and development of agriculture – engendered population grow that which was possible with a nomadic lifestyle:

 The shift to agricultural food production supported a denser population, which in turn supported larger sedentary communities, the accumulation of goods and tools, and specialization in diverse forms of new labor. The development of larger societies led to the development of different means of decision making and to governmental organization. Food surpluses made possible the development of a social elite who were not otherwise engaged in agriculture, industry or commerce, but dominated their communities by other means and monopolized decision-making. [wikipedia]

Though human civilizations began dabbling with debt and money thousands of years prior to the industrial revolution, much of that early dabbling amounted to mere dead end experiments.  Transactional markets did not reach a self-sustaining and self-perpetuating inflection point until the last couple hundred years.  That transition corresponds roughly with the industrial revolution.

Admittedly, the criteria ‘self-perpetuating’ and ‘self-sustaining’ are subjective.  Nonetheless, it is fair to say that the industrial revolution marked a shift away from markets that existed primarily as vehicles for politically oriented rent-seeking, and towards markets driven primarily by market forces.  Surely politically motivated market interventions continues to exist even in present day, however governments’ ability to manipulate markets without provoking massive unintended consequences has steadily decreased.  In other words, governments have become minority players.

The Stimulus

What precipitates the phase changes demarcating individual paradigms?

The scale and complexity achievable within each paradigm is functionally constrained.  The coordination mechanisms available within a given paradigm are limited in both:

  • their ability to mediate internal complexity
  • their ability to foster technological solutions to environmental constraints

As growth and development proceed within a given paradigm, pressure on existing coordination mechanisms mounts and faults begin to form.  Without new tools one of two outcomes is inevitable:

  1. Failures of internal coordination sabotage further growth
  2. Unchecked expansion becomes cancerous and crashes into environmental limits

Collapse

Both cases describe a form of collapse.  Joseph Tainter has described the first type, arguing that societies collapse when they encounter problems they are unable to solve:

Tainter argues that sustainability or collapse of societies follow from the success or failure of problem-solving institutions and that societies collapse, when their investments in social complexity and their “energy subsidies” reach a point of diminishing marginal returns. He recognizes collapse when a society rapidly sheds a significant portion of its complexity. [wikipedia]

Collapse in this case takes the form of stagnation or implosion.  The social infrastructure, having exceeded certain limits, produces more costs than benefits and begins tearing itself apart.  In dramatic cases a period of chaos ensues and the population reverts to a simpler way of life until a new paradigm is developed.

Jared Diamond has addressed second situation – collapse as a result of environmental depletion.  Though I haven’t reviewed all of Diamond’s work, my impression is that the collapses he studies are even more destructive.  When environmental constraints are exceeded, complete collapse – resulting in the death of entire populations – tends to follow.

This second sort of collapse may derive indirectly from failings of the first sort.  For example, resource depletion may be avoided if appropriate rationing mechanisms exist.  Similarly, effective signalling mechanisms may be used to raise the alarm and mobilize a search for solutions.  It is when the capabilities don’t exist that populations charge recklessly into environmental collapse.

Revolution

Fortunately, collapse is not the only possibility.  If seeds of the next paradigm can be sprouted in advance, twin technological and socioeconomic revolutions may gain momentum in reaction to the cracks emerging in the existing paradigm.
As noted above, the transition from relational economy to political economy occurred concurrently with the agricultural revolution.  Likewise,  the transition from political economy to transactional economy coincides with the industrial revolution (in the developed world).
In both cases, each side of the pair requires the other.  New socioeconomic paradigms are enabled by new coordination technologies, and their adoption is stimulated by the increasing complexity that new technologies engender.  Similarly, the invention and distribution of new technologies is facilitated by advancing socioeconomic paradigms.

The Social Technology Stack

At this point it is worth addressing a subtle misconception.  It would be easy to read “revolution” as an overthrow of what came before.  That is in fact how we use the term in the geopolitical context.  For example, The French Revolution and The American Revolution were violent conflicts involving the overthrow of old regimes and the birth of entirely new regimes.

Social revolutions present a different character.  Note that in the previous section revolution is offered as counterpoint to collapse.

The emergence of political economy did not (necessarily) imply a violent a dissolution of relational communities.  To the contrary, hierarchical structures must have initially taken form within relational communities.  Likewise, the emergence of transactional markets did not coincide with a violent overthrow of political institutions.  Rather, markets were created by extant political bureaucracies as a means of furthering their influence.

The antagonism that eventually develops between adjacent paradigms is characterized more accurately by the modern definition of disruptionrather than the conventional meaning of revolution.

Transitions

As such, transitions from one paradigm do not represent wholesale change, but instead an accelerating shift at the margin.  Earlier modes of organization may gradually lose influence while remain pervasive in a dwindling capacity. The historical events we assign to demarcate transitions are really just tipping points.  To borrow John Hagel’s terminology – such events are merely harbingers that the core is being pulled towards the edge.

If we were to visualize the evolutionary arc in three dimensions it might look something like a migrating sand dune – the tail gradually shrinking in prominence,  meanwhile the leading edge grows as it is swept forward into virgin territory.

Dialectic rivalry emerges only once the child paradigm grows large enough to threaten the parent.  Moreover, the dialectics themselves are ultimately hollow.  Whatever rivalry may develop, the child cannot snuff out the parent without smashing its own foundation…

Foundations

Each successive paradigm is built upon a foundation constructed in previous periods.  The ideological pillars of political institutions are built upon social norms originally established within the relational context.  Transactional markets sprout only on ground that has been prepared by political hierarchies.

Without the necessary foundations later paradigms are not achievable.  As Graeber points out, the spontaneous emergence of money from primordial barter is a myth.  Communal hunter gatherers would have been mystified by – and likely violently opposed to – the notion of a economic exchange outside the context of custom and ritual.

This is a reality rediscovered all too frequently by development economists, uber-philanthropists and ambitious technocrats.  Well meaning efforts to install market oriented institutions in developing countries have consistently met with disappointing results.  Effective markets require not only well developed institutions, but also a culture of compatible norms and ethics.  Without these foundations markets serve only to produce more efficient corruption [see this recent Econtalk podcast for more].

The Socioeconomic Paradigm Shifts

Let’s dig more deeply into the specific characteristics of the two transitions discussed so far.  In the illustration above I labeled them rationalization and specialization.  We will find that each is a reaction to the particular pressures – the abundance and scarcities – created within the earlier paradigm.

Rationalization

Definition: to make rational or conformable to reason.

Rationalization, in this context, is the process of introducing explicit structure to a previously informal society.  What relational tribes lacked, quite simply, was stability.  The lack of formality has a certain utopian appeal but it also undermined progress.  Nomadic tribes could only produce as much technology as they could carry.  Moreover, reliance on implicit norms restricted relational groups to a scale at which ubiquitous relationships could be maintained (Dunbar’s number +/-).

Rationalization required formalizing implicit social norms, thereby producing explicit standards.  This code of conduct, as such, would allow individuals to expect consistent behavior from others, independent of context.  It is that standard of context independence that would have allowed populations to grow beyond previous limits.

Over the course of thousands of years, greater scale and complexity would have demanded increasing explicit structure, which in turn enabled still greater scale.  And it was the stable, structured, and populous civilization that formed the foundation for the next shift.

Specialization

Specialization is the process of subdividing the labor pool and allowing different groups to focus on developing expertise in specific roles.

Specialization can only emerge from within a rational social structure.  Prior to the advent of stable political economies specialization would have been dangerous.  If you specialize – relinquishing your self-sufficiency – and the social structure proves unreliable, you could starve.  The greater your dependence on unrelated parties for your survival, the more assurance you will require that the existing status quo will not be suddenly disrupted.

If you can rely on people outside your immediate family to act predictably, your universe of feasible productive activities expands dramatically.  However, specialization also introduces a wedge into the hierarchical society.  As individuals specialize they become more expert in their chosen fields than people above them in the hierarchy.  The more specialization, the more intractable this problem becomes.  Economies that are both highly specialized and highly diverse (deep and wide) eventually become unmanageable. Hierarchy becomes at best impotent, and at worst destructive.

It is at this point that decentralized markets become a necessity.

Upcoming: competitive dynamics, attention economy, other stuff…

photo courtesy of Jon-Luke

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  • http://www.newcommbiz.com/ tacanderson

    Great post, as always Greg. I think it’s going to take me a bit to process all of this but I’m a little curious about your idea of the Social Technology Stack. First off, I love that phrase but the section underneath didn’t seem to have anything to do with social technology. I’m well familiar with  @jhagel:twitter concept of Pull and the underlying exponential growth tied to the dynamics of the 3 laws of technology that he talks about but I think you’re trying to say more than that, and I think I really like where you’re going with it so I’m hopeful that you’ll elaborate. 

    • http://OnTheSpiral.com/ GregoryJRader

      What I am getting at is the stuff described under “foundations”, that social technologies are layered on top of one another rather than replacing what came before, and that the prior layers are necessary to ensure smooth functioning.  As such, culture and custom never disappear, they merely move to the background.  Likewise, markets don’t replace hierarchical institutions, they merely commandeer the foreground.  

      I’ll have to address this further in a future post (I had to cut a lot to keep this post to “only” 3000 words).  It all seems rather obvious when talking about historical events that we take for granted but the same principle is decidedly less obvious when look forward.  People love making claims of the form “X is killing Y”, which almost always result in false dialectics.  When people actually try to implement “X” (the new) while completely denying “Y” (the foundational stack) they end up producing hollow and occasionally disastrous utopian experiments.     

  • http://micahredding.com micah

    In setting up the image as a spiral, you imply that either A) the system is reaching its endpoint, or B) the system will begin to re-iterate previous levels at a higher order.

    Which do you think it is, and if (B), what do you think comes next?

    • http://OnTheSpiral.com/ GregoryJRader

      Well it is not A…the system is not reaching an endpoint any time soon barring some sort of highly unlikely catastrophe.  

      I don’t want to speculate too definitively about what comes next, because speculation is all it would be.  I also don’t want to give away all my material for future posts ;)

      What I can say in a quick teaser format is that the foundation created by the attention economy will be a deep information layer.  That information layer is gradually enabling a sorting process, allowing us to group ourselves based on variables other than geographic historical accidents or institutional affiliations.  I expect that the internal dynamics of these groups will parallel certain relationship economy dynamics, but with the benefit of all the social/technological infrastructure laid down through the prior paradigms.   

      Now, what types of variables those groups will be organized around and what form they will take…that I can’t say without really delving deeply into unfounded speculation. 

  • Tiberius Brastaviceanu

    very interesting, thank you for sharing, I’ll be get back to it for more :)

    • http://OnTheSpiral.com/ GregoryJRader

      Thanks. Look forward to any feedback you might have…

  • http://daneteam.wordpress.com/ Neil LaChapelle

    I’ve been reflecting on something as you described this cycle, namely that the presence of the past may either distort or boost the effectiveness of the leading edge. If the old structure buffers itself from the leading edge, that is dysfunctional. If it lets itself be transformed by that leading edge, it’s functional. Say a blogger is able to monetize, and turns the blog into a relatively large media company. It stabilizes as a firm, and becomes a legible relational structure.

    If the founders of that firm bequeath it to, say, their children, or internal cronies – those might be relational systems that were buffered from perturbations from the leading edge of the social formation. That would lead to the common problem of firms going into decline when their propagation through time is handed off to a relational network (bequeathed to children). Interestingly, there are lots of sayings in different cultures about this phenomenon, sayings like “shirtsleeves to shirtsleeves in three generations” (the founder creates a business, the child who inherits it manages it less well, the grandchild who gets it next ruins it completely, the great-grandchild is a labourer again).

    However, in organizations where there are active mentorship networks, internal and external networking, and so on – where relational activities are used in parallel with political ones to groom and test new talent, and where outside networks are engaged with the same purpose, then successors can be found who are actively grappling with ongoing and upcoming realities of the enterprise.

    If the spiral has a depth dimension, maybe this is levelling up, instead of backsliding.

    • http://OnTheSpiral.com/ GregoryJRader

      I am still grappling with this theme myself.  On the one hand, we clearly recognize ossified foundations, resistant to change, as dysfunctional.  On the other hand, there is some value to conservatism.  We don’t want to be constantly casting aside those things that do work simply because they have become unfashionable.  At any given time there will be parts of the foundation that need to be reformed by elements of the leading edge.  There will also be elements of the foundation that need to be preserved as well as elements of the leading edge that need to be institutionalized so that they may be preserved.  

      That seems to be what you are describing in your third paragraph…institutional structures that remain exposed to enough elements of the leading edge to maintain this balance.  

      Definitely a lot more to explore along this theme…

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  • Michel Bauwens

    I have seroius doubts on this scheme, but have looked at it only superficially … tribal gift economies are ritualized and hence, not really informal in my understanding of the term … the rules of custom are extremely strong .. and what is illegible about the attention economy ? the way I see it, the holoptical transparency of p2p collaboration is much more legible than market transactions of which there is no trace in the cash economy, or the info is privatized or protected ..

    • http://OnTheSpiral.com/ GregoryJRader

      Michel, your interpretation of “legibility” is somewhat different than that intended above.  I picked up the term from Venkat Rao’s description here: 
      http://www.ribbonfarm.com/2010/07/26/a-big-little-idea-called-legibility/

      In short, this notion of legibility implies something like – orderliness to an uninitiated observer.  Legibility suggests standardization, or at least potential for standardization.  It suggests externalization of tacit knowledge into the physical objects or environment.  

      Tribal gift economies may be ritualized but in many cases you have to be an anthropologist to recognize their economic significance.  Likewise, attention economy collaborations may be transparent in qualitative ways but they are often not transparent in the sorts of quantifiable ways that would be transparent to an outsider.  A disinterested observer cannot judge the economic significance of a collaborative group in the same way he can evaluate the standardized and aggregated financial activities of corporation.  

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  • http://daneteam.wordpress.com/ Neil LaChapelle

    I’m re-reading this post as part of my effort to digest and respond to your latest post (“Innovation Starvation and the Zero Bound”, Nov 1, 2012). I just wanted to draw your attention here to one thing you wrote in the post above:

    “Niche construction promotes survival by buffering the organism from the environment.  Just as the DNA uses the biological body to insulate itself from external selection pressures, so too human civilization serves to buffer the human organism from environmental selection pressures.”

    Are you familiar with the cybernetic understanding of buffering as Requisite Variety (and the corollary concept of Limited Variety)? They’re described at the Principia Cybernetica website (pespmc1.vub.ac.be).

    I just wanted to ask so that maybe I can use those concepts in conversation without explaining them…

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