Energy, aesthetics and knowledge in complex economic systems

Over the past two decades, macroeconomists have come to stress the importance of the acquisition and use of new knowledge in generating economic growth. There have been two distinct schools of thought: endogenous growth theory and Darwin-inspired evolutionary economic theory. Once we attempt to place these theories in a complex systems context, we discover that the dissipative character of economic systems must also be considered. It is argued that, when this is done, economic growth has to be viewed as a co-evolutionary process involving both the acquisition and use of new knowledge and the acquisition and use of energy. This modifies substantially the prevailing approaches to understanding economic growth. In particular, qualitative considerations, involving the aesthetic character of dissipative systems and the outputs that they generate, have to be dealt with explicitly. Aesthetics relate to the nature of the connective structure that systems exhibit. This, in turn, is dictated by connective rules (for example, chemical, physical, biological and socioeconomic) that are imposed or adopted. Here we can observe a homology running from the basic physio-chemical rules that dictate the structure of DNA though to the rules which allow more complex structures to exist. For example, rules embodied in languages are fundamental in social structures. In economic systems, the process of competitive selection remains relevant, but it is argued that the process of self-organisation, mediated by the emergence of institutional, organisational and technological rules is more fundamental. The is a clear co-evolutionary historical association between energy and knowledge growth but we are not yet clear as to the direction of causation, if any. It is concluded in the paper that it is fundamentally important to understand the nature of this evolutionary connection before the environmental crisis that humanity currently faces can be addressed effectively.

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