Complex systems are inherently challenged to establish an equilibrium between efficiency, the maximization of output with minimum input, and robustness, the capacity to withstand disruption. In economic systems, this equilibrium manifests itself in tendencies towards centralization or distribution, as favored by existing circumstances. Today, selective pressures drive that equilibrium relentlessly toward the side of efficiency, and from this fact flow many of the social and cultural pathologies of modernity.
Highly centralized production is extremely efficient, at the cost of great sensitivity to disturbances: as a recent example, recall the ongoing fluctuations in the semiconductor market resulting from COVID-lockdown-induced disruption of silicon supply chains. The advent of industrial production in general was a tremendous step towards centralization. Where production of goods previously occurred in loosely connected village-scale networks distributed over whole continents, technological developments permitted the consolidation and magnification of productive capacity in a much smaller number of factories.
I use the term “selective pressure” deliberately, to emphasize that the prioritization of efficiency or robustness goes beyond the question of response to incentives (perverse or otherwise), though incentives such as laws and policies can have some influence on the location of the equilibrium. Systems will organically discover it for themselves through the execution of the same evolutionary processes that operate in nature. In biological systems, the general trend is toward a smaller number of more specialized parts. The biologist Sean Carroll illustrates this concept using the example of evolutionary development over geological time. The body plans of ancient arthropods like centipedes and millipedes are constructed by repetition of many poorly-differentiated segments…
…to which we can compare more recent animal forms like reptiles and humans.
Biological systems are subject to upper limits on the amount of specialization they can accommodate*. Highly specialized organisms can effectively reduce their food supply to a single point of failure, with disastrous consequences in the event of disruption.
The selective forces operating on economic systems are stability and chaos. In stable, predictable environments (i.e. prolonged periods of peace), centralization and consolidation become more favorable, as they permit greater efficiency of production. It is only in chaotic, unpredictable environments that distributed production becomes more favorable: as long as the sea lanes remain open and there are low obstacles to the flow of goods, it will be more efficient to transport raw materials from many points of origin to one central factory. This is the nature of the equilibrium between robustness and efficiency under contemporary circumstances, and it will remain so as long as those circumstances persist. Stability means that circumstances can be safely assumed to persist, which in turn means that they can be taken for granted as part of the environment. Much of the time, gains in efficiency are brought about by effectively outsourcing parts of productive processes to the environment.
The prioritization of efficiency or robustness is not essentially good or bad. However, it should be clear that the current equilibrium favors efficiency to an unhealthy extent. Centralization and consolidation have progressed so far in the pursuit of greater efficiency that single points of failure abound. Processes have been optimized to such an extent that there exists in many areas virtually no excess capacity to address disruptions. In agriculture, the quest for greater efficiency has steadily reduced the diversity of corn crops. Manufactured goods and construction materials are closing in on the absolute minimum viable durability. Ever-more-insistent efforts to foist plant-based milk and meat substitutes on a disgusted populace are attempts to further streamline supply chains by eschewing the necessity for animal husbandry and refrigeration, with the ultimate aim of eliminating biological processes altogether: even eating bugs is only a transitional stage on the path towards industrial food production from entirely abiotic or even inorganic chemical feedstocks. Outside the realm of manufacture is the much- (and rightly-) maligned campaign of real estate purchases embarked upon by enormous consolidated financial firms like Blackrock, or the metastasis of the “as-a-service” model**. What these have in common, apart from their increasingly open opposition to human flourishing, is their valence as more effective ways to extract value from a given productive effort. If these shadows remain unaltered, the endpoint of increased efficiency is consolidation of all economically productive activity, and the elimination of all non-productive activity: the reign of anti-Christ.
The optimal equilibrium for economic systems is shifted away from efficiency by an increase in available resources or the invention of new technology. Available resources can be increased by the exploitation of a new frontier or the destruction of existing corporations. Again, similar patterns apply in biology. Species undergo adaptive radiation to exploit new environmental niches as they become available, whether through migration or disaster, just as new companies will proliferate to exploit new technologies or resources. The last historical event which provided a meaningful selective pressure in favor of distribution and robustness was probably the second world war. No subsequent shock was sufficiently great to reverse the broad trend towards consolidation which governed industrial development in the United States during the 20th century. Since the end of the Cold War, the trend has only accelerated, likely because of the great increase in stability afforded by the immediate reduction in the threat of sudden nuclear Armageddon. Even more recent shocks like 9/11, the 2008 financial disaster, and COVID have acted only to skip a few clicks of the ratchet. There is no reason to expect that changes in policy would significantly alter this state of affairs; indeed, to the extent that policymakers are concerned with this equilibrium they seem unanimously dedicated to furthering its movement towards efficiency.
What would have to happen in order for the economic environment to exert greater selective pressures toward robustness?
*You thought I was going to bring up the pepper moths, didn’t you
**As a case in point, WordPress itself has recently placed the option to justify text behind a paywall.