Let’s
appreciate the wonders of a world of organic feedback signals that
naturally guide everything from the smallest particles in the universe
to complex human relations. I enjoy observing the natural
world and learning from the individuals who have studied it for
millennia. Do you know why leaves change colors? The Earth, it seems,
has been revolving for more than 4 billion years around the Sun, as the
Sun itself travels through the Universe.
When the Earth reaches this part of
its annual path, the northern hemisphere is tilted away from the Sun’s
light and heat. Because of the shortening of the length of daylight and
cooling temperatures, leaves are signaled chemically to stop their food
production. When chlorophyll, the extraordinary green chemical that
absorbs from sunlight the energy that is used in converting carbon
dioxide and water into so much of the world’s food, sugars, and starch,
breaks down, the yellow to orange pigments of carotenes and xanthophyll
are unmasked. Other chemical reactions develop red anthocyanin.
Tree Signals
In the book, We Discover,
Suzanne Simard tells the story of growing up in the forests of the
Pacific Northwest, Canada and how she made her sensational discoveries
in forest undergrowths that also involve signaling and feedback.
“[We showed] that Douglas-fir and paper birch were intimately interconnected in a diverse mycorrhizal fungal network. Even more, we reported that photosynthetic carbon moved back-and-forth between the two tree species through this network, but with net transfer from birch to fir. The net gain in carbon by fir was enough for the trees to make seeds and reproduce. We also found that the more shade birch cast on its fir neighbors, the more carbon it donated…Eventually, we discovered that the direction of net carbon transfer changed over the growing season, with Douglas-fir sending some of its carbon back to birch in the spring and fall when birch was leafless…We found that old trees rapidly transmitted carbon, nitrogen and water to the seedlings, increasing their nutrition, survival and growth. In drier climates where the forests experienced drought stress, old trees transmitted more water to connected seedlings than did trees in wetter forests where they were replete. Thus, this intricate below ground telecommunications system appeared essential for the recovery and resilience of the forest under stress…Mycorrhizal networks have also served like telegraphs for transmission of biochemical signals. We have recently discovered that injury to one tree resulted in the transmission of defense signals through the connecting mycorrhizal mycelium to neighboring trees, even though they were a different species. These neighbors responded with increased defense-gene expression and defense-enzyme activity, resulting in increased pest resistance.”
Amazing and beautiful, isn’t it?
Though the structures and rigors of school can squelch enthusiasm for
learning and creativity, I remember, while cramming for biochemistry
tests towards my undergraduate degree in Biology, still marveling at the
intricate dramatic events happening within living cells and on their
surface membranes and through their ion channels that continuously
respond to shifting electrical and osmotic gradients creating the
performance of cells’ functions.
It was later, during my medical
training, that I learned how calcium, sodium, and potassium flowing
through their channels in the heart’s nerve and muscle cells
rhythmically create cycles of electrical impulses, action potentials,
depolarizations, contractions, and repolarizations, that keep our hearts
beating and beating in time.
In physics classes, I learned about
the physical forces that act upon everything in the universe, that for
every action there is an equal and opposite reaction. In Chemistry
classes, we studied how conditions need change for chemical reactions to
occur. We learned about catalysts and rate-limiting steps, how
collisions between molecules must be strong enough to break molecular
bonds in the reactants, resulting in a rearrangement of atoms to form a
product or products.
Feedback Mechanisms
Maintaining our bodies’ homeostasis is complex, but handled through feedback signals from various circulating molecules.During
my medical training, I most enjoyed learning human physiology,
particularly the tremendous array of feedback mechanisms in human
bodies. These occur on the molecular and cellular levels, as discussed
above, but also grossly across organ systems. The endocrine system, for
example, which controls our hunger, thirst, sleep and wakefulness, body
temperature, growth, metabolism, energy, mental vigor, digestion,
nutrient absorption, blood sugar levels, our fight and flight
mechanisms, water balance, blood pressure, sex hormone cycles including
menstruation and reproduction, is constantly active within these
feedback loops.
Maintaining our bodies’ homeostasis
is complex, but handled through feedback signals from various
circulating molecules, including hormones, ions, sugars, etc., that bind
to receptors on glands’ cell surfaces stimulating or inhibiting hormone
secretions by glands, autonomic nerve impulses, and other bodily
processes.
Importantly, we also learned how
malnutrition, insult, trauma, infection, cancer, toxins, even excess
nutrients such as sugar and even water, harm our bodies by disrupting
these natural balances.
Interconnected Systems
These patterns and systems seem to
exist throughout organic, ecological, and animal systems. Like the trees
in forests and the cells in living organisms, humans too are
“intimately interconnected” to each other. One such important way is
through our markets, the mechanisms we’ve used for millennia to interact
and trade our labors, goods, services, capital, technologies,
discoveries, cultures, arts, music and rhythms, ideas, compassion. And,
we humans also naturally respond to signals and incentives. And, also
like those varying tree species, human individuals, and communities
possess various skill sets and comparative advantages. Like the forest,
trading on our diversification and specialization provides mutual
benefit allowing us, individually and communally, to survive and
prosper.
When we are free to commune voluntarily, these systems are more so efficient, just, and peaceful, creating more wealth. When
we are free to commune voluntarily, these systems are more so
efficient, just, and peaceful, creating more wealth. It is wealth that
enables us to educate ourselves and our children, provide for our health
care and safety, nourish ourselves with healthy foods, enjoy hot
outdoor showers, protect our environment, aid others, and engage in the
activities in which we delight.
We Must Cooperate
The parable, and now it’s beautiful animated movie, I, Pencil,
expertly demonstrates the division of labor among humans cooperating
peacefully worldwide while responding to signals and incentives in
acting in their self-interests. As wonderful as it is, the world in
which we live is one of scarcity. We must produce in order to consume,
so we combine our labor with the nature-given resources available to us.
Humans, like other animals, have a constant need to choose among
alternate labors. Humans also have the good fortune to have the problem
of choosing among capital and technologies. Therefore, we also must
judge when to save, rather than consume, to create capital for future,
more efficient, production.
The price system solves the
complicated problem of choosing which alternative applications of labor
and capital individuals and communities use to meet the many different
needs and wants of different urgencies around the planet. There exists a
natural interplay of fluctuating interrelationships of costs of
production, prices, and profits.
Most of us understand how supply and
demand affect prices. The more individuals want a product or service
(A), the more they are willing to pay for it, increasing the profit for
producers and signaling them to supply more of ‘A.’ Others interested in
earning profit are then incentivized towards producing this commodity
and abandon producing others (B, C, D…), the supply of which falls. The
increased supply of ‘A’ reduces its price and also the profit margin
(towards the general profit margin across industries of similar relative
risk.) The freer, more organic, the market, the more prices for
customers and profits for producers trend towards zero.
When the demand for ‘A’ falls or
supply is too high and prices drop, the least efficient producers of
‘A,’ whose costs of production are the highest, move on towards
different industries where they have more comparative advantages and can
provide these commodities more inexpensively to consumers.
Industries expand at the expense of
other industries, as labor, land, and capital are diverted, although
aggregate/total production may increase. It is in this way that
different commodities are naturally regulated. One can see how the
organic price system helps producers provide for us the goods and
services we most need and want at the least cost to society, increasing
our standards of living, i.e. wealth, and minimizing scarcity.
Disruptions
It takes some consideration to understand the opportunity costs. One
can likely also infer how political bureaucratic interventions,
infections, e.g. price-fixing, subsidies, tariffs, deflected costs, and
liability caps, can disrupt and poison this natural system, making it
less efficient and impoverishing us.
Henry Hazlitt wrote, ”The whole of
economics can be reduced to a single lesson ... The art of economics
consists in looking not merely at the immediate but at the longer
effects of any act or policy; it consists in tracing the consequences of
that policy not merely for one group but for all groups. Nine-tenths of
the economic fallacies that are working such dreadful harm in the world
today are the result of ignoring this lesson.”
It's easy to see the beneficiaries of
public subsidies - a corporation, bank, or farmer, and those they
employ and others with whom they trade. It takes some consideration to
understand the opportunity costs.
Consider that without government
intervention General Motors would have sold their assets to other
companies allowing this capital to be used more efficiently. Legislators
made claims about the jobs saved, but what of the jobs lost from where
the subsidy money, if left to us, would have been invested and spent
otherwise?
Unseen Costs
These lost jobs are difficult to
appreciate as they would have existed in thousands of places. A free
market would naturally direct the resources to the most efficient and
productive activities, creating more wealth for everyone and expanded
industry and employment. If we want a vital and innovative economy,
there must be mobility. Affected producers will move on to more
productive industries. Retarding this flexibility hamstrings the system
impoverishing us.
Many people, who favor protectionist
policies, are concerned about what they see as unfair competition from
abroad due to competition from low-wage foreign workers, subsidies from
foreign governments to their industries, and tariffs. Protectionism has
rightly been called "a good label for a bad cause," because it is really
an exploitation of the consumer. When a foreign government subsidizes
an industry, the prices of their products fall. The citizens of that
country, who pay this subsidy through taxes, suffer a lower standard of
living. Their fellow citizens working in this industry benefit, as do
American and other foreign consumers who enjoy the cheaper prices. And,
since American and other foreign consumers pay less for particular
products they have more disposable income. This increases the demand for
other products, creating more jobs for workers in other more productive
industries at home in the States and abroad.
Tariffs will increase the output and
employment in a particular industry at home, but foreign producers will
sell less to us and therefore they will have less money to spend on an
array of U.S. products. This will increase unemployment in other
industries in the States.
When there are higher levels of
savings in a society, banks have more money to lend and therefore
naturally lower interest rates to entice entrepreneurs to borrow. The
low-interest rates signal to producers that society is saving for later
consumption. They may then begin projects, funded by these savings, that
may take longer, but that will lead to more efficient production
processes down the road.
Booms and Busts
Artificial credit inflation, printing
money-lowering interest rates, distorts this signal by making it appear
that a large enough pool of savings exists to sustain production
projects. This stimulates a boom as production expands. Unfortunately,
the reality, in this case, is that consumers do not have savings for
later consumption, and a bust follows.
Human
history and current events are littered with unfortunate examples after
examples of state aggression by governments around the world causing
awful harm to innocent individuals, families, and communities.We
watched the housing industry boom and bust recently, dropping us into a
devastating economic depression with many suffering. For decades the US
Congress encouraged mortgage lenders to expand subprime lending. The
industry was happy to oblige, given the implicit promise of federal
backing. It was an abandonment of reasonable lending practices with
borrowers with poor credit characteristics getting mortgages they
couldn't handle. Subprime lending soared and the housing industry
boomed.
When Congress removed the limitations
of the Glass-Steagall Act while still implicitly guaranteeing coverage
of banks’ losses, they eroded market mechanisms that would naturally
engender restraint. In free markets, greed for profit is tempered by
fear of losses. But here was a moral hazard where bankers were
perversely incentivized to take high risks (malinvestments) with
depositors' money as any profits would be enjoyed and any losses would
be covered by present and future tax-payers. Once housing prices
declined and economic conditions worsened, defaults occurred. This left
the industry holding large amounts of severely depreciated mortgage
assets.
Congress then committed the same
errors that prolonged the Great Depression, trying to artificially keep
prices from falling. Instead of allowing overvalued financial assets to
take a hit and trade on the market at true value, the government
purchased overvalued assets to hold. Now hundreds of billions of dollars
that is tied up in illiquid assets is money that is not put to
productive use that would increase our wealth and well-being.
Lastly, human history and current
events are littered with unfortunate examples after examples of state
aggression by governments around the world causing awful harm to
innocent individuals, families, and communities. This is almost always
met with resistance, blowback, and an ongoing cycle of violence, that we
hope is losing steam.
Let’s appreciate the wonders of a
world of organic feedback signals that naturally guide everything from
the smallest particles in the universe too complex human relations. By
freeing them to work efficiently, to engage in ever more beautiful
exchanges, we will all enjoy a more just, greener, prosperous, and
peaceful existence.
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