Metaphors to help us think about economic growth

Niall Ferguson towards the end of his talk about six ideas that set the west apart from the rest for an ascendancy that lasted half a millennium (an ascendancy that is now ending as other nations are adopting those ideas and economies are converging), noted that "complex civilizations may collapse quite suddenly, they do so sometimes, because they live at the edge of chaos."

Lucy and Ethel in this video have no problem when the conveyor belt is moving slowly and chocolates are widely spaced. As it speed up more and more, they reach the edge of chaos and leap over into catastrophic failure. They wrap the most chocolates at a speed which is just above their comfort zone but short of that which causes panic.

 Think of driving. Most of us driving at school zone speeds are in complete control and have no chance of an accident. Driving on the normal highway, speeds tend to be at the edge of control and accidents do happen. Most of us trying to drive at the 215 mile an hour pace of stock car racers would lose control at the first curve. If we want to get from one place to another as fast as possible in our car we will tend to drive as fast as we can without incurring too high a risk of the car going out of control and having an accident.

In both the chocolate factory and the driving examples, you may have occasional near accidents as you are coming to the limits of your ability to control the process.

I think Ferguson is suggesting that something comparable is happening with economic growth. Economies in order to grow quickly have to be willing to accept a certain amount of instability and working at the edge of their ability to control things may suffer catastrophic accidents. Perhaps societies that are willing to grow more slowly may be more stable. Maybe occasional relatively contained economic downturns are the price of high rates of growth.

Of course, the guys who drive race cars are chosen to do so exactly because they have better ability to drive really fast without crashing than do the rest of us. It is a combination of fast reflexes and athleticism that allows them to control the system better than we mere mortals. Maybe some cultures are better able to grow their economies really fast without crashing.

High performance military aircraft have now surpassed the ability of even the best pilots to avoid crashes, so those pilots must have their alertness and reflexes Maybe some cultures are deriving technology and other means to augment their abilities to run high performance economies without crashing.

I really like the idea of the leading economy or society of the day as a complex system working at the edge of chaos. I have been reading about the fall of the Roman Empire, and maybe that is really the answer; the Roman Empire was running at the edge of chaos with 5th century institutions and slipped over the edge.

I would suggest that American society, bigger than that of Rome at its grandest, has been able to run successfully at a faster pace with more complexity, because institutions and management technology have improved greatly over 15 centuries. The question is of course, how much faster can we go, how much more complex can we become before we reach the edge of chaos? Or are we there now?