A tribute to Eric Beinhocker

Eric Beinhocker

On an early morning walk years ago a friend told me about Eric Beinhocker’s book, The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics. In a review of the book, William Grassie said: “The genius of the book is Eric Beinhocker’s grand synthesis of diverse fields of research, including physics, evolutionary biology, anthropology, psychology, game theory, information theory, and economic history, all to tell the big story about why traditional neo-classical economic theory fails, and how “Complexity Economics” works.”

Beinhocker inter alia explored the relationship between economics and biology, and concluded: “Economic wealth and biological wealth are thermodynamically the same sort of phenomena, and not just metaphorically.  Both are systems of locally low entropy, patterns of order that evolved over time under the constraint of fitness functions.  Both are forms of fit order.” Stated simply, businesses (enterprises) and biological life are both subject to Darwinian competition: the fittest survive.

Beinhocker concluded that economic value is created by thermodynamically irreversible processes that reduce entropy locally while increasing it globally, and in reference to some human purpose. This leads to the understanding that: “A business is a person, or an organized group of people, who transforms matter, energy, and information from one state into another with the goal of making a profit.”

Beinhocker’s ideas formed the basis of our exploration of the similarities between ecology and enterprise dynamics. These studies serendipitously revealed extraordinary orderliness in the enterprise structures and dynamics of South African towns. The development of methods to identify, enumerate and classify enterprises in South African towns based on information in telephone directories and on the internet, enabled the development of an extensive enterprise database that helps to answer all kinds of questions about enterprise structures and dynamics.

This blog will over time examine aspects of this orderliness and their implications with regard to entrepreneurship and the alleviation of poverty in South African towns.

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