Red Queen Economics

What economists can learn from biologists

Only few economists are interested in the economics of IT. Prominent economists, such as Solow, Stiglitz, Krugman (all Nobel laureates) keep emphasizing that investments in IT have not led to productivity improvement. And they point to a large number of scientific publications that come to the same conclusion. The former FED chief Greenspan said lately that he regrets that firms keep investing in computers and software, and not in production means that could improve their productivity. They may be right, but is it relevant? I am convinced that economists cannot understand the importance of IT, because what's really happening does not fit into their models.

Biologists do not study IT. But if they would, they would come to quite different conclusions. They would see the economy as an ever evolving ecosystem with a lot of interdependent players, constantly adapting, evolving, and proliferating not only to gain comparative or competitive advantage, but also to survive. They compete with ever-evolving and opposing organisms. In their view, investment in IT is for survival, not for productivity. IT is a disruptive development, that touches ever more businesses, and it will continue to do so for many decades to come. IT-driven start-ups are ruining everybody's business. If you do not keep up, you will lose.

Biologists accept these "costs" as necessary in order to survive, whereas economists keep looking for productivity gain as the key to economic growth. What perspective would you choose if you would work for a publisher today? 

The term Red Queen Economics is borrowed from biologist Leigh van Valen, who in 1973 proposed the Red Queen Hypothesis, in which he states that species need to evolve in order to remain extant. In his turn he borrowed the "Red Queen" from Lewis Carroll's book: Through the Looking-Glass. The Red Queen character explains to Alice why she was constantly running: "Now, here, you see, it takes all the running you can do, to keep in the same place".

Already from 1992, I have been collecting books and articles written by authors who think organically, just as I do. On this site, I am publishing blogs, articles and comments on other peoples' articles and books. Are you interested to read them? Or do you want to participate in the discussion, become a member and have acces to content, make personal notes, and send and receive messages. Sign up.


Modern economic insights

In his publication “Rethinking Robin Hood” Angus Deaton asks attention for the rising inequality in the west. He refers to a report by Kathryn Edin and Luke Shaefer, who found that “several million Americans – black, white, and Hispanic – now live in households with per capita income of less than $2 a day, essentially the same standard that the World Bank uses to define destitution-level poverty in India or Africa. Finding shelter in the United States on that income is so difficult that $2-a-day poverty is almost certainly much worse in the US than $2-a-day poverty in India or Africa."

The cause of this new poverty is globalization. Western firms have closed down their factories and transferred the labor to Asia, Africa, South America and the east of Europe, profiting from low wages,…