“An African elephant is a strategy for making thermodynamic profits and reproducing in the environment of the African bush, and a Coronatae jellyfish is a strategy for making thermodynamic profits and reproducing in the environment of the deep ocean.”
Perhaps my favourite experiment discussed by Beinhocker is actually a computer simulation, run by Epstein and Axtell, named Sugarscape. In essence, they program an enormous chessboard, with piles of sugar on each square of varying heights. Agents (‘people’) are distributed across the squares with various abilities to find sugar, move around, and survival needs in terms of units of sugar. Agents are allowed to move around, eat, die, and have children, and Epstein and Axtell essentially just press go and see what happens.
What happens is a miniature economy, and one with very few assumptions embedded. Individuals move around and various patterns form: average wealth goes up, and over time average abilities increase as the more capable agents reproduce, and we see a fall in social mobility and increase in inequality as wealthy agents have children who also become wealthy. As Beinhocker rightly points out though, it is however not as simple as the skilled agents becoming wealthy; wealth levels are a function of the entire system, and no one factor appears to determine them. In other words, it’s complicated.
If the experimenters add a second type of resource, spice, then we also see trading. Trade routes develop, like virtual Silk Roads, and we see market towns, middlemen, and complex hierarchies of trade. If you want, you can even think of these as virtual investment banks and retail banks, though at some point the analogy will break down, or at least I hope so.
Beyond telling us that life is complicated, what does such a simulation give us? In broad strokes, it suggests modern economics is doing okay, at least in how it describes computer simulations: we see the development of trading as most economists would have predicted. It also gives us a lot more. It tells us what sort of fundamental conditions are necessary for an economy to appear; gives us an idea of how extremely complicated initial conditions will work themselves out; and it lets us work with entire populations where every single member is slightly different, rather than relying on simplified versions of populations as economics often does. Most of all, however, it lets us test ideas. We can introduce minor variations, and see what happens in the Sugarscape economy. Of course, our real economy is vastly different from Sugarscape, but it’s a start.
If you want to pick up The Origin of Wealth, you can get it here (or in the UK or Canada).