The Swarm and free markets

July 4, 2007


This month, National Geographic has a terrific article on what is known as “swarm intelligence”; the ability of a group of animals (bees, ants, fish, wildebeasts, etc.) to work efficiently toward an optimal goal without any one specific individual in the group knowing what that goal is.

From the NG article:

Where this intelligence comes from raises a fundamental question in nature: How do the simple actions of individuals add up to the complex behavior of a group? How do hundreds of honeybees make a critical decision about their hive if many of them disagree? What enables a school of herring to coordinate its movements so precisely it can change direction in a flash, like a single, silvery organism? The collective abilities of such animals—none of which grasps the big picture, but each of which contributes to the group’s success—seem miraculous even to the biologists who know them best. Yet during the past few decades, researchers have come up with intriguing insights.

One key to an ant colony, for example, is that no one’s in charge. No generals command ant warriors. No managers boss ant workers. The queen plays no role except to lay eggs. Even with half a million ants, a colony functions just fine with no management at all—at least none that we would recognize. It relies instead upon countless interactions between individual ants, each of which is following simple rules of thumb. Scientists describe such a system as self-organizing.

That’s how swarm intelligence works: simple creatures following simple rules, each one acting on local information. No ant sees the big picture. No ant tells any other ant what to do. Some ant species may go about this with more sophistication than others […] But the bottom line, says Iain Couzin, a biologist at Oxford and Princeton Universities, is that no leadership is required. “Even complex behavior may be coordinated by relatively simple interactions,” he says.

That sounds strikingly similar to this explanation of free markets by Don Boudreaux of Cafe Hayek:

The case for free markets rests chiefly upon the recognition that the competition and feedback within markets tend to weed out firms and practices that do not satisfy human desires. No one acting within markets needs to aim at generating beneficial system-wide outcomes.

Such outcomes emerge “spontaneously” (as the late Nobel economist F.A. Hayek put it). They emerge through the interactions of millions of people, each with his own limited knowledge and personal weaknesses.

The market system feeds and magnifies those practices that people find useful and starves and shrinks those practices that people find to be useless or harmful.

Adam Smith understood that the system is the solution when he wrote that beneficial market outcomes are the result of an “invisible hand.”

As both a nature lover and an amatuer student of economics, there is a certain beauty in all of this.


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