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Understanding Social and Economic Systems as Evolutionary Complex Systems

Professor Peter Allen Uncertainty and Surprise, Austin, Texas, April 10th – 12th, 2003

Talk
Uncertainty and prediction – mechanical frameworks Structure from disorder – emergence and surprise. Emergent Systems/Bundles. Structural Attractors Multi-level co-evolution Implications

Real, hard Knowledge – The Newtonian Paradigm
Establish the components that make up a situation (planets and Sun, functional components) Write the laws of interaction (Gravity, control system) Set the “model” to the current situation and then simulate and predict the future (and the past), explore the effects of possible actions. It is completely clear. A Mechanical System…. Prediction of the FUTURE
Input Output

Based on unchanging dynamic!!

Why do we like a mechanical picture?
Only a mechanical system can be perfectly UNDERSTOOD Only a mechanical system is TRANSPARENT Only a mechanical system provides clear, predictions of the future, and of the effects of a particular intervention BUT SURPRISE, SURPRISE, THE WORLD IS NOT MECHANICAL – it is literally MORE than that - FORTUNATELY

What are the assumptions that take us from REALITY to a mechanical representation???
What is “more than mechanical”? EVOLUTIONARY?

Creating “KNOWLEDGE” is often about simplifying REALITY to mechanics
Complexity
Freedom Reality
Dictionary
Post Modernists

Take out the detail – the non-average: Decontextualise
Fixed Dynamics Chaos Theory, System Dynamics single trajectory..

Self-Organising Evolutionary Model With “Noise” Model Evolutionary: Ecology, Biology, Economics, Social Systems, Organisations, et al
X
Z Y

Mechanical Model
X Z Y

Statics

Constraints

Spontaneous changes of Regime, System Adaptation

Equilibrium Model

Quantity

Prediction???

Simplicity
1 2 3 4

Assumptions
5

Price

Boundary – Classification – average types – average events

Evolution and Adaptability result from (are driven by) the NON-AVERAGE
Current structure/process (average) results from earlier non-averageness so FUTURE structural change will result from currently hidden non-average ideas or behaviours. Either from inside or outside

Understanding is a “creative” but socially constructed act. It is also NOT understanding.
Economic Performance, Growth, Marketing.
F G H

Technology, Skill base Training, Automation
X Z Y

Free markets… Evolving Markets New Technologies

Sustainable Development?? Innovative strengths?
Motivation, incentives, Performance measures,
L M N

Reality???

C D E

What is the TRUTH? What is the basis for decisions

Creativity, originality, Design skills, production quality

Structures Evolve into new dimensions
In between instabilities our interpretations may hold Beginning
Instabilities

So people can rationally optimise, but this DRIVES the system towards instability. Optimising in one regime may lead to disaster when change occurs In the multiple changing dimensions, these “regimes” are STRUCTURAL ATTRACTORS

Later...
Increasing Dimensions are invaded

Qualitative Changes occur in between Quantitative Ones

Evolutionary systems break symmetry…..
New Dimension N+1
Curr e in N nt Syste m dime nsio ns...

P.M.Allen, Population Dynamics, Stability abd Evolution, PNAS, 1976

Complex Systems are emergent “synergies”...

Exploration into new dimensions and disciplines…..

INSTABILITY if they grow!!!! Dimensions and Attributes Change! BOUNDARIES CHANGE on system

Learning, Knowledge and SURPRISE
Facts–theory–diagnosis- prescription: KNOWLEDGE. In physics knowledge doesn’t change the facts But, in social science if use our KNOWLEDGE it affects reality and changes the “FACTS” In a changing world to find the present “facts” we must always doubt our current theory and keep proving it Science is about DOUBT – not the truth. Are our assumptions valid?

Policemen with performance targets:
Interpretive Framework Policemen - Types? Which are more likely? Crime figures by type? Actions, Policies, Behaviour From crime figures Decide on Targeting Seek targets

+

Some targets are Positive. Successful Convictions obtained Crime figures generated

Evidence, facts, “knowledge”

“Performance” measures are relaxed:
Now we can check out how this works….. Let us look at the EXCEL program Weighting of Past Noise Target Pressure Response of not target 6 0,1 1 0,1

Apparent and Real Crimes
4 3.5 3 2.5 2 1.5 1 0.5 0
Ja n0 Ju 0 l-0 Ja 0 n0 Ju 1 l-0 Ja 1 n0 Ju 2 l-0 Ja 2 n0 Ju 3 l-0 Ja 3 n0 Ju 4 l-0 4

Low Targeting

Apparent Crime Rate X Apparent Crime Rate Y Real RateX Real rate Y

The real and apparent Crime rates are the same

This result is completely GENERIC:
Oil fields, Fishing, Stock Markets, management practices, new products, new designs… Policemen are not scientists. Even scientists today are paid on results rather than on truth. Theorising as to their “cause”, however, is very “intuitive”. In science we try to make verifiable theories and test them. But in social science this is more difficult We cannot easily distinguish “tacit” and “codifiable” knowledge – other than by experiment!!

The Problem is everywhere….
A doctor, an expert in epilepsy, diagnosed over 600 children as epileptic, when they weren’t He was an expert in his expertise, but not in his NON-expertise The response was to talk of surveillance of doctors by other doctors…… Need an “open mind” first…..

Emergent Structure…
Just as in the Brusselator and many other examples, the “policemen” problem shows how structure can emerge in non-linear systems. Emergent structure changes the system qualitatively If what emerges finds some fulfils some function in its environment sufficient to get the resources to fight the 2nd Law, then it survives

So structure emerges spontaneously
A self-organising dynamic undermines the assumptions about its variables – endogenous evolution will occur…

Technological Evolution: Logistic Equations
Masaaki Hirooka Faculty of Information Science, Ryutsu Kagaku University, 3-1, Gakuen Nishimachi, Nishi-ku, Kobe, 651-2188 Japan e-mail: hirooka@umds.ac.jp

Computer Electronics, but true for ALL Industries!

Core Technologies

Possible Products

Product Diffusion

Surprise comes from “bundles”
In Evolution there are multi-levels: types of cells, types of organs, types of “life histories”, types of organisms Evolution has created new technologies, sectors, firms, practices, skills, products… So we have bundles, and bundled bundles…. Nobody knows how to make an aeroplane – but Boeing does.
A system is an emergent Bundle. The bundle must pull in resources to survive….

Multi-Level Evolution of Manufacturing
History in terms of the exploratory bundling of practices that occur in auto-manufacturing organisations Trace out which still exist, and which characteristics they have Look at organisational forms as bundles of practices, and the performance of a bundle depending on the synergy or conflict of its practices
NEXSUS: work involving Cranfield and Jim Baldwin at Sheffield, Inst of Mechanical Engineering

16 different mixtures of 53 Characteristics
Standardisation of Parts Assembly Time Standards Assembly line layout Reduction of Craft Skills Automation (Machine paced shops) Pull Production System Reduction of Lot size Pull procurement planning Operator based machine maintenance Quality circles Emloyee innovation prizes job rotation large volume production mass sub-contracting by sub-bidding exchange of workers with suppliers Training through socialisation Proactive training programmes Product range reduction Automation (Machine paced shops) Multiple sub-contracting Quality Systems Quality Philosophy Open Book Policy with Suppliers Flexible Multifunctional workforce set-up time reduction Kaizen change management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

TQM sourcing 100% inspection sampling U-Shape layout Preventive Maintenance Individual error correction Sequential dependency of workers Line balancing Team Policy Toyota verification of assembly line Groups vs. teams Job enrichment Manufacturing cells Concurrent engineering ABC Costing Excess capacity Flexible automation of product versions Agile automation for different products In-Sourceing Immigrant workforce Dedicated automation Division of Labour Employees are system tools employees are system developers product focus Parallel processing Dependence on written rules Further intensification of labour

27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53

4 of the possible 53 practices

Auto Manufacture: 16 Organisational Forms:
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. Ancient Craft System Standardised craft System Modern craft System Neocraft systems Flexible Manufacturing Toyota production Lean producers Agile producers Just in time Intensive Mass producers European mass producers Modern Mass Producers Pseudo lean producers Fordist Mass producers Large Scale producers Skilled large Scale producers

Evolution of Organisational Forms
From McCarthy, 1997

But different new practices interact…
The 53 characteristics interact Some are “synergetic” and some “conflict” Questionnaire (Jim Baldwin) returned by 70 companies So we can explore possible structures…
1 13

53x53 Pair Interactions

0.8 0.6 0.4 0.2 0 -0.2 -0.4 -0.6 -0.8 -1 -1.2

0.6-0.8

0.4-0.6 0.2-0.4

0-0.2

-0.2-0

-0.4--0.2

-0.6--0.4 -0.8--0.6

-1--0.8

-1.2--1

49 S1

S7 S13 S19 S25 S31

S37 S43 S49

25 37

The Network of Interactions:
+ and - Connections
35 30 25 20 15 10 5 0 1 5 9 13 17 21 25 29 33 37 41 45 49 53
100

Total Positive = 207 Total Negative = 351 Out of 2809

Total + Total -

Positive and Negative Links

10

Total + Total -

Network with a power law: p(r) =pmax e-.3r
1 11 16 21 26 31 36 41 46 51 1 6

Simulating Organisational Change
Manufacturing Evolution
Time

Landscape of Potential

Overall Performance

53 Possible Practices

Evolution is to increasing SYNERGY
Successive structures have greater synergy Organisational forms are STRUCTURAL ATTRACTORS Key branching leads to forms that conflict

0 3 5

10

11

11

11 10 5 4 7 7

678

Synergy per individual

17 conflicting factors

Evolution in Character/practice space

Competition….

But different branches compete….
Performance

As performances evolve at different rates some evolutionary branches are eliminated On the whole faster innovation tends to win
Time

But competition of PRODUCTS/SERVICES
Environment of potential customers, Regulations, financial changes….. NPD Product/Service Design Firm Strategy Organisational Core

MARKET
A bundle of characters that has emergent properties that Pull in sufficient resources will grow….

Firms compete through their products
NPD Product/Service Design Firm Strategy Organisational Core NPD Product/Service Design Firm Strategy Organisational Core

NPD Product/Service Design Firm Strategy Organisational Core NPD Product/Service Design Firm Strategy Organisational Core

Costs Qualities Marketing Servicing Price Strategy

NPD Product/Service Design Firm Strategy Organisational Core

Multi-Level Evolution

Evolving bundles of practices Types of Organisation

Evolution - Emergent Structural Attractors
Dictionary:
Systems are created by Bundling core components, practices, technologies, capabilities, content…. Structural Attractor If net Synergy

+ +

?
Possible Nodes of behavioural types Multiple Dimensions, synergy and conflict

Diversity of pathways into The Future:

Surprise Surprise – We only know later!
TIME

Dictionary:

Reality

Not surprisingly, Lao Tzu had it right !
The way that can be spoken of is not the constant way The name that can be named is not the constant name Science has found the limits of rational analysis We must perform in two contradictory ways:
– Targeting goals efficiently using “knowledge” – Exploring beyond these and reflecting on the discoveries

Conclusions –1: Levels of the Co-Evolutionary System

Economic Activities
Economic Sectors
Industries
Business Networks Supply Chains
Firms, Companies
Departments Groups
Individuals

Human Needs
Urban/Rural
Sectors
Industries
Firms
Individuals

Products & Services
Different Markets
Product Ranges
Products

Emergent Needs But over time these change…..

Emergent Capabilities through STRUCTURE

Concepts
Designs
Components

Emergent Attributes

Conclusions - 2
Integrated view of multi-level co-evolution of social and economic system Exploratory behaviour required for survival Internal Diversity required for exploratory behaviour Semi Post-Modern view of uniqueness of each situation

Conclusions - 3
Systems evolve through the creation and destruction of successive structural attractors. “Restless Capitalism” is a system that can do this But, in stable times will always reflect what dimensions are “measured”, and create short term gains in these, at the cost of the other dimensions (environment, stress, community….) Social and Economic evolution is driven by our striving and our necessary ignorance to destroy and re-create structures, giving surprise at all levels. Buddha was right!