ELSEVIER
StructuralChange and EconomicDynamics 8 (1997)453-469
STRUCTURAL CHANGEAND ECONOMIC DYNAMICS
A dynamic model of socioeconomic systems based on hierarchy theory and its application to sustainability M a r i o G i a m p i e t r o a, K o z o M a y u m i b,, a Istituto Nazionale della Nutrizione, Roma, Italy b Faculty oflntegrated Arts and Sciences, University of Tokushima, 1-1 Minamijyosanjima, Tokushima City 770, Japan
Abstract
Socioeconomic systems are seen as complex, adaptive, dissipative systems, stabilized by informed autocatalytic cycles. The energy budget of society is determined by a dynamic equilibrium between the supply and demand of useful energy per hour of labor. Parameters affecting this equilibrium belong to different hierarchical levels (individuals; economy; environment). Improvements in 'efficiency' can only be defined at a particular point in time and space (quasi-steady-state view). Improvements in 'adaptability' can only be defined from an evolutionary perspective. Short-term and long-term perspectives cannot be reduced to a single description. Technological changes imply trade-offs between efficiency and adaptability rather than 'absolute improvements'. © 1997 Elsevier Science B.V. Keywords." Hierarchy; Dynamic modelling; Efficiency; Adaptability; Sustainability
1. Introduction
A system is hierarchical when it operates on multiple spatiotemporal scales, that is when different process rates are found in the system (O'Neill, 1989). In other words, systems are hierarchical when they are analyzable into successive sets of subsystems (Simon, 1962, p. 468) or when alternative methods of description exist for the same system (Whyte et al., 1969). H u m a n societies and ecosystems are perfect examples of complex hierarchical systems and this represents a major complication in their analysis, especially when dealing with the issue of sustainability (Giampietro, 1994a; Giampietro, 1994b).
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Components of hierarchically organized systems can be called 'holons' (term introduced by Koestler, 1969). A holon has a double nature (Allen and Starr, 1982 pp. 8-16): it is at the same time a whole made of smaller parts (e.g. a human being is made of organs, tissues, cells, molecules, etc.) and a part of some greater whole (an individual human being is a part of a family, a community, a country, the global economy, the biosphere). Therefore, hierarchical systems have an implicit duality: holons have their own composite structure at the focal level, but, because of their interaction with the rest of the hierarchy, they perform functions that contribute to so-called 'emergent properties'. These emergent properties can only be seen from higher levels of analysis. The problem in dealing with these entities is that the space time closure of their structure (the holon seen on the focus level from the lower level) does not coincide with the space time closure of their role (the holon seen on the focus level from the higher level). Because of the peculiar functioning on parallel scales, hierarchical systems can be studied either in terms of structures or in terms of functional relationships. Established scientific disciplines rarely acknowledge that this unavoidable and prior choice of 'perspective' implies a bias in the description of complex hierarchical systems and this represents a major complication in their analysis, especially when dealing with the issue of sustainability (Giampietro, 1994a; Giampietro, 1994b). For example, analyzing complex systems in terms of structures implicitly assumes: (i) initial conditions (a history of the system, which is affecting its present behavior) and (ii) a stable higher level on which functions are defined for these structures in order to make them meaningful and stable in time. Similarly, to have functions at a certain level, one needs to assume stability at the lower levels where the structural support is provided for the function (Simon, 1962). Hence, no description of the dynamics of a focus level, such as society as a whole, can escape the issue of structural constraints (how--what is going on at lower levels?) or functional constraints (why--what is going on at the higher level?). The purpose of this paper is to present a model based on hierarchy theory that establishes a relation between the description of socioeconomic systems at one particular level (the focal level) with the description of the corresponding higher hierarchical level (e.g. the ecological level) and the lower hierarchical level (e.g. the individual perspective of humans operating within the society). Equations, simulations and validation of the model with data from our database are not presented here, but references to published work are given in the text. Owing to the hierarchical nature of socioeconomic systems, which implies a complex behavior (parallel processes detectable on different space-time scales) when dealing with the sustainability of interactions, we must analyze the process of selforganization of society in a dual way: (i) thermodynamic stability of present dissipative structures--related to the congruence of mechanisms of dissipation (technical coefficients describing the socioeconomic system) and availability of gradients of free energy (characteristics of boundary conditions)--system seen through a snapshot picture; (ii) stability of the functions--related to the ability of the information system providing the controls in keeping the congruence of the mechanisms
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of dissipation with changes in boundary conditions (evolutionary view)-(Giampietro, 1997a). In practical terms this translates into a dual reading of a socioeconomic system: (i) on the process side, by assuming the system as in a quasi-steady-state and studying the pattern of investments of useful energy (this is provided in Section 3); and (ii) on the control side by studying the profile of human time allocation (a proxy for control capacity assessed at the societal level) between efficiency and adaptability from an evolutionary perspective (this is provided in Section4). A general overview of the possible applications of this model along with concluding remarks is given in Section 6. Based upon a hierarchical reading of the system, we choose the society--seen as a whole--as the focal level of analysis. Such a black box can be described by variables such as level of energy dissipation, GNP, population size, life expectancy at birth, etc. which are defined and assessed at the hierarchical level of the entire society. The corresponding higher level, the ecological level, can be seen as the ensemble of biophysical processes on which society depends. At this higher level, we assess the scale of the processes of natural self-organization of ecosystems seen as dissipative systems based on solar energy (this class of systems was first investigated by Prigogine's school--e.g. Nicolis and Prigogine, 1977; Prigogine and Stengers, 1981) by using a set of variables which can be defined and assessed only on a larger scale than the one used for describing society. These variables refer to the amount of solar energy and biomass used in self-organization, and the size of ecosystems directly and indirectly exploited. As the lower hierarchical level one could choose individual economic sectors, specific social groups, or individuals, using those variables which describe the characteristics of the interaction with the societal level that are of interest in the analysis.
2. Theoretical framework
Humans alter the ecosystems in which they live with their technology in order to increase the 'efficacy' of the process of production and consumption of goods and services in society. They attempt to stabilize and 'improve' the structures and functions of society according to a set of internally generated values in face of a set of given boundary conditions. The process of self-organization of society can be described in terms of two different types of activity: that related to 'efficiency' and that related to 'adaptability'. This has to do with two functions in the evolution of the system (Schneider and Kay, 1994): (i) sustaining the short-term stability of the process by taking advantage of existing favorable gradients. That is, efficiency according to present boundary conditions (Conrad, 1983); and (ii) sustaining the long-term stability of such a process by maintaining a high compatibility in the face of a changing environment. That is, adaptability defined as the ability to be efficient according to unknown future boundary conditions (Conrad, 1983). The main idea of the model of analysis presented here is that technological development of a society can be described in terms of an acceleration of energy throughput in the primary sectors of its economy generating a decoupling between
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the profile of human time allocation (human time seen as a proxy for the available capability of control) and the profile of exosomatic energy allocation (exosomatic energy seen as a proxy for investment of useful energy). Exosomatic energy is the useful energy throughput outside human bodies as opposed to endosomatic energy (the energy metabolized by humans) as proposed by Georgescu-Roegen (1971). In modern societies, a smaller and smaller fraction of total human time is used for running the primary sectors of the economy (e.g. food security, energy and mining, manufacturing), whereas the material throughput in these sectors has increased dramatically. A scheme presenting an overview of the parallel allocation of (i) exosomatic energy (ET) and (ii) human time over different compartments of the economy is given in Fig. 1. The overall flow of exosomatic useful energy (ET) and the total amount of human time (THT) are used: (i) to procure and transform energy input in the energy sector and to procure raw materials (ii) to build and maintain exosomatic devices (manufacturing sector), (iii) to guarantee food and environmental security, (iv) to provide services in the service sector and (v) to support human activities outside work in the household sector. Activities (i), (ii) and (iii) have been defined as CI activities (Circulating Investment stabilizing the steady-state). The sectors using exosomatic energy going into CI activities are indicated as: E&M (energy and mining), B&M (building and maintenance), FS (food security), ES (environmental security). All together these sectors absorb an amount of working time assessed by C. Activities (iv) and (v) have been defined as FI activities (Fixed Investment increasing adaptability). The flows of exosomatic energy going into FI activities are indicated as: SS (service sector), HH (households), whereas the human-
/ ~ H°useholld(HH)"l--~ JFI a c t i v i t i e s ~ / r ~
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Fig. 1. Parallel allocationof exosomaticenergyand human time.
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time allocated in these two sectors is respectively, B and A. Clearly: (E&M+B&M+FS+ES+SS+HH)=ET on the energy side and ( A + B + C ) = THT on the human time side. By assessing the flows and parameters presented in Fig. 1, we can describe, for any defined society, the particular autocatalytic loop of exosomatic energy in terms of demand of labor WS = B + C (determined by the labor productivity in different economic sectors) related to the stabilized flow ET. A parameter called S E H - 'Strength of the Exosomatic energy Hypercycle'--measures the supply of energy accessible to society per unit of working time in the primary sector of the economy. SEH can be expressed as a combination of technical coefficients. On the other hand, if we change perspective, moving from a biophysical analysis of technical coefficients (the matrix of inputs and outputs of energy and labor in different sectors of the economy as depicted in Fig. 1) to a socioeconomic perspective, we can still describe the relation between energy demand and labor supply, but this implies an inversion of the terms 'demand' and 'supply' with respect to 'useful energy' and 'labor time'. The demand of exosomatic energy consumed by society per unit of working time allocated in the primary sectors of the economy has been called BEP (Bio-Economic Pressure). Several variables (referring to different perspectives of the socioeconomic system) can be used to characterize such a pressure and they can be aggregates into this numerical indicator (e.g. age structure, level of education, labor load, etc.). Such a pressure is generated by societal activity aimed at improving material standard of living. BEP tends to push faster and faster energy and matter throughputs within the economic process (e.g. producing and consuming more goods and services per capita). According to the scheme in Fig. 1, the energy throughput (the level of energy dissipation--ET) at which society's energy budget can be stabilized (when requirement is equal to supply) is defined by: (i) characteristics of the society determining the level of consumption of energy per unit of human time; and (ii) characteristics of the interaction technology/natural resources determining the supply of energy per unit of human time. Putting this in a hierarchical perspective we have that, at the focal level, society can be seen as a dissipative system whose energy budget must be balanced: the energy consumed by society to stabilize its structure and functions must be made available through its interaction with the environment. However, simply matching energy demand and supply does not necessarily guarantee stability for the system. The energy balance defined on the focal level is stable only if it is compatible with both: (1) lower level constraints related to the 'biophysical' (food requirements, labor supply) and cultural dimensions (minimum level of material standard of living which is considered as acceptable and social equity acceptable to members of society) of socioeconomic organization; and (2) higher level constraints, that is compatibility with 'ecological' boundary conditions. 2.1. Check on the interface focus~lower level (intensive variables only) Is the current material standard of living: (i) technically feasible; and (ii) culturally acceptable?
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By adopting our model we can translate this question into a problem of congruence of two parameters: (i) is it possible to have a BEP (wanted by people)=SEH (achieved by technology)? (ii) is the current BEP above the minimum acceptable value (BEP*) defined by current cultural identity? It should be noted that BEP, even if defined in terms of a set of measurable characteristics defined at the level of the society as whole, provides indications about material standard of living as perceived by lower level holons (Pastore et al., 1996). 2.2. Check on the interface focus/higher level (intensive and extensive variables)
Is the dimension of the total energy throughput dissipated by society compatible with the stability of boundary conditions? Put another way, is the amount of inputs taken from the ecosystems and the amount of wastes dumped into the ecosystems compatible with the stability of the processes of self-organization occurring in the ecosystems with which the society is interacting? In order to answer this question we have to first define the concepts of Environmental Loading and Critical Environmental Loading. The concept of Environmental Loading was first introduced by H.T. Odum (1996) as an attempt to put in perspective human interference with the activity of self-organization of those natural systems with which humans interact. (i) Environmental loading--indices of Environmental Loading, defined as human interference on the activity of natural systems, can be obtained by comparing (i) assessments of the scale of human activity (e.g. input demand and waste production) to (ii) assessments of the scale of ecosystem activity (e.g. regenerative capacity and absorbing capacity); or, alternatively, by comparing (i) densities of matter or energy flows induced in the ecosystems by human alteration to (ii) densities of matter or energy flows in a natural ecosystem in the absence of human alteration. (ii) Critical Environmental L o a d i n ~ t h e maximum level of Environmental Loading which is still compatible with the stability of the process of self-organization of ecosystems with which society is interacting. Note that any attempt to compare the scale of activity of human societies to the scale of activity of ecosystems implies a combined use of intensive variables (such as level of energy dissipation per unit of control--e.g. W/kg of humans in society and W/kg of biomass in ecosystems) and extensive variables (such as 'control capability' available in the information system--e.g, population size for human society and total biomass for ecosystems). The check on this interface is totally different from the one made about the focus/lower level check. In that case the optimization is related only to what happens within the system (optimal allocation of economic resources according to marginal costs). This is the point made by Daly (1992) about standard economic analysis which focuses mainly on optimum allocation. This carries the risk of overlooking the effects of the size of the economic system on the stability of boundary conditions. The question about the compatibility focus/higher level can be translated into the following condition: Is current EL
