Journal Notes, A. Allan Schmid, 8/9/2002


Potts, ch. 4, “Systems Theory and Complexity”


Evolution towards complexity is a balance between order and chaos, between stasis and change. 91


An example of a system becoming more ordered is vertical integration of a supply chain securing a single connection between a primary resource (pork) and several stages of transformation (slaughter, retailing).  “The system has become more ordered in the sense that connections that were once in principle multiple and variable (a market supply of numerous possible connections) are locked into a single connection (the internalization of a previous market dealing.)” 92  The idea of balance suggests that this change toward order in one subsystem is accompanied by more disorder in another part.  “The security gained by increased confidence in supply channels may unleash experimentation in the use of these materials.” 

            “Order and coordination arise in an economic system both by processes of selection and by processes of self-organization.  The upshot is a free lunch.”92    By a free lunch Potts means “the spontaneous emergence of order (for free) manifest as a situation where the whole is greater that the sum of the parts.”  The emergence of systems, which are then able to act as elements for higher-level systems and so on, is what is meant by the emergence of order.” 92-3   “Order arises in systems by the limitation of interaction to a low number of connections.” 93 


Potts is full of surprises.  “The market works because it is imperfect and not in spite of it.  These imperfections, and let us call them institutions in the widest sense of the word, are not imperfections but evolutionary adaptations.  They are not imperfections in the sense that their removal would take us closer toward perfection, but rather they are evolutionary adaptations and without a priori status.” 97  We want a system “that can exhibit order amidst environmental turbulence by localization of effect by decomposition.” 97 


“It is not the case that the economic system is internally determinate, buffeted only from the outside; rather, change continuously erupts from within, feeding self-transformation and self-organization.  In such cases, the supposed random component is endogenous and the determinant component is mostly non-linear relation, feeding back in often surprising ways.” 102  “Complexity is neither random nor determinant, but both simultaneously and inextricably.” 102 


“If dynamical equation are coupled to each other, such that there exists irreversibility and feedback, then a number of criteria are weakened: (1) stability is not guaranteed; (2) convergence is not guaranteed; (3) a unique path from cause to effect cannot always be defined.” 103


“Order means efficiency at a point in time, which in the biological realm means being well adapted to the conditions of the given environment.”  “Order and change must be traded off against each other, we cannot have both.” 107