Monday, January 4, 2010

Complex Systems, Unintended Consequences, and the Nile Perch

The biologist Garrett Hardin coined the term "ecolacy" to describe an awareness of the sensitive interdependency relationships that underlie complex adaptive systems (such as natural ecosystems and human economies). Ecolacy was one of Hardin's famous "filters against folly"---educational components that could assist us in attempts to avoid major private and public policy mistakes.

Hardin spent many years discussing the Tragedy of the Commons, the thorny social dilemma in which rational individual attempts to maximize utility correspond with a lack of individual responsibility to conserve resources, leading to common areas---such as the public English pastures that were destroyed by cattle overgrazing---being exploited and ruined, to the detriment of all. His eventual conclusion was that the private markets could not prevent the tragedy, so the coercive power of the state had to be employed.

With all due respect to the late Professor Hardin, I believe that he went too far in this regard, at least in terms of underestimating the ability of local stakeholders to self-police common areas. Still, the Tragedy of the Commons is a critical issue for free-market disciples to explore, and we will save the vitally important works of Ronald Coase and Elinor Ostrum for another day. This post will use Hardin's ecolacy filter to punctuate our previous discussion of the dangers of commitment-based strategies when accurate forecasting models are not available.

Lake Victoria, the largest freshwater lake in Africa, will provide our crime scene. Victoria was the subject, inadvertently, of an experiment in ecosystem engineering. In the 1950s and 60s, the decision was made to introduce the Nile perch, a large, aggressive predatory fish, to Lake Victoria in order to increase tourism revenues in the region by launching a sportfishing industry. Given the vast size of the lake and the relatively small numbers of a single species being introduced, little time was apparently spent on considerations of how sensitive the ecosystem's trophic webs actually were, or how a disruption in one area of a complex system could introduce larger, unpredictable problems in other sectors.

The Nile perch quickly established itself as a dominant top-tier predator and began feeding on the huge supply of easy prey, including native chiclids that were unique to Lake Victoria. The prey fish, in turn, had been responsible for eating large amounts of surface algae: as the population of the Nile perch's prey decreased, algae went uneaten. As dying surface algae descended into the lake's depths, it consumed oxygen and rendered deeper waters anoxic, which damaged that part of the ecosystem by making it less hospitable to former residents. Fish that used to regulate the lake's snail population were unable to perform this duty, so snail numbers increased and with them so did the incidents of schistosomiasis, a terrible parasitic disease carried by snails, among the local human population.

For centuries, local fishermen had survived off of the tilapia fish that inhabited Lake Victoria in teeming numbers. The damage radius increased still further as local fishermen found that the high-fat-content Nile perch could not be sun-dried (unlike the former staple, the smaller, native tilapia). The perch required fire cooking, and the requirement for fire wood decimated the supply of available tree cover on the lake's shoreline. With less tree cover, of course, came a far greater rate of erosion, so the lake's nearshore waters became muddier and still more ecological damage occurred.

An independent, angrily anti-globalization film called Darwin's Nightmare has posited that the introduction of the Nile perch also created a kind of indirect weapons-for-fish program, as cargo planes carried Kalashnikovs and 7.62x39mm in and carried Nile perch out (destined for European restaurants) of the Mwanza region of Tanzania on the shores of Lake Victoria. I have overnighted in Mwanza and taken the ferry from there, but my very superficial acquaintance with the area leaves me with no idea whether or not the allegations made in the film are accurate or not. Clearly I do not agree with the anti-globalization sentiment, but I still found the film worth watching (in a rather depressing sort of way).

One aspect of the balkanized nature of modern academic disciplines that I find most dissatisfying is the compartmentalization of complex system research into different silos. Many of my fellow free market enthusiasts seem to have surprisingly little respect for natural ecosystems or concern for the capacity of these systems to undergo violent, quite sudden, unpredictable transformations when sensitive tipping points are breached. In the same vein, I frequently find that wildlife conservation types and environmentalists will quickly sound the alarm regarding the sensitivity of natural ecosystems, but will simultaneously endorse major, aggressive statist intervention in the markets, and will downplay how changing incentives create perverse, unintended outcomes, great loss of entrepreneurship and innovation, niche opportunities for corruption and rent-seeking behaviors, and great fragility.

Perhaps the reason for this apparent divergence is the aforementioned Tragedy of the Commons, which seems to pit the highly individualistic, profit-maximizing behaviors of the free market directly against the need to protect natural systems from degradation, leading to great suspicion of free market approaches among many environmentalists. I believe the responsibility lies with free market disciples to address market-based or locally-generated solutions to the Tragedy of the Commons, and to help to create a more harmonious environment for the study of complex adaptive systems in various forms. Even as we wait for that happy day of reconcilation, however, it appears to me that an understanding of the beauty, strengths, and vulnerabilities of complex adaptive systems in both natural and manmade spheres---a logical extension of Hardin's ecolacy filter to encompass economics as well as ecology---should compel us to be very wary of intervention, unpredictability, and the Law of Unintended Consequences.


  1. I thought you were going to tie this back to the previous post, but perhaps that was meant to be an exercise left to the reader: it seems to me that the problem of many (most?) "free market enthusiasts" and their failure to engage environmentally protective strategies goes back to the issue of commitment-based versus adaptive strategies. As usual, people place unwarranted faith in the accuracy of their prediction models or their ideology, and they let that get in the way of adaptability.

  2. That's a very good point, Jay. I understand the reluctance of many environmentalists to endorse free markets because of the problem of the commons and fears that unfettered "greed"-motivated behavior will lead to ecosystem holocausts. In terms of free market disciples being willing to directly engage in meaningful debate regarding biodiversity conservation efforts and put forth positive doctrine, I am optimistic that Ostrum's 2009 Nobel Prize is a step in that direction.

  3. eToro is the #1 forex broker for rookie and advanced traders.