Fork the Economy to Fix the Economy
Forking the economy, to fix the economy? That may sound impossible as the $100T global economy appears to be hell-bent on extracting and consuming the earth’s resources with the momentum of a locomotive.
But historically major economic forks have occurred following the development of new production and valuation protocols. And we now live in an era of rapid technological evolution that is contributing to new economic protocols. Case in point, the most valuable companies of today were developed using e-commerce technologies that did not exist 20 years ago. Technologies being developed today are being applied to ecological and climate issues to capture an estimated economic (natural capital) value of $25T. This looming scenario is not just making the upcoming economic fork seem possible, but inevitable.
Hard Forks and Soft Forks
Forking, in this case, is a term derived from blockchain lingo. Forking describes what happens when new protocol is added to blockchain code that results in a new value pathway. A hard fork occurs when the new code is not compatible with the existing system, and so it results in two separate blockchain ecosystems. A soft fork occurs when the new code is compatible with the existing system, and so it results in an expanded blockchain ecosystem giving access to old and new values. The economic forkings described in this article are soft forks where value is additive, and the new fork is compatible with the previous economic ecosystems.
The Economy as Ecosystems
Economic systems function as self-organizing ecosystems. These ecosystems have evolved over time and will continue to evolve. Six economic ecosystems are identified in the graphic below. Four of them exist today and two of them are predicted for the near future. The four existing are Ecological, Agriculture, Business, and E-Commerce ecosystems. The Eco-Commerce Ecosystem is predicted to emerge in the coming year or two, and the Eusocial Ecosystem in the coming decade. The thesis of this article is that as each economic ecosystem matures, new protocols are developed to address emerging issues. When the new protocols are adopted by a critical mass, a forking occurs. If these businesses are profitable, the ecosystem expands, and the new fork becomes part of the economic system at-large. Due to the rapidity of technological evolution many will witness multiple forkings; the recent e-commerce forking and the predicted eco-commerce and eusocial forkings. The purpose of the latter two forkings is to incorporate natural capital value into the economy, and then human and social capitals, respectively.
In the Beginning
In the beginning, nature, or the Ecological Ecosystem, provided humans with all their needs. This could be referred to the “Garden of Eden” era where the food, clothing, and shelter was readily available for those who hunted and gathered. The economic protocol at the time was to utilize what grew around you or you had a nomadic lifestyle to follow animals or locate edible plants seasonally.
This era may have lasted hundreds of thousands or millions of years. As the graphic shows, it was the first economic ecosystem.
New Production Protocol
In the Ecological Ecosystems, hunters and gathers began domesticating plants and animals resulting in new agriculture protocols such as landscape management, tool development, and innovations related to meet these new needs. This led to an economic forking that created the Agriculture Ecosystem about 10,000 years ago. In this economic ecosystem, people created permanent settlements leading to the establishment of transportation, mechanizations, and trade routes and lines of communications.
Figure 1. Origin and Evolutionary Pathway of Economic Ecosystems and their Forkings. Human interaction with natural and social ecosystems is in a constant state of flux. When new production protocols are adopted, they may cause new values pathways and an economic forking. The rate of socio-economic evolution is increasing causing diminishing period of times between forkings. Hunter and gathers required hundreds of thousands of years to domesticate plants and animals. This led to a forking and Agriculture Ecosystems began in ~10,000 BC. Trade expanded communication and innovation leading to a string of Industrial Revolutions that incorporated new production protocols. Business Ecosystems developed digitation and the internet leading to E-Commerce Ecosystems and sophisticated cryptography, GIS, and blockchain technologies. The emerging Fourth Industrial Revolution is creating a wealth of new technologies that will be applied to multiple sectors that may cause a forking. In this illustration, it is predicted an Eco-Commerce Ecosystem will emerge to capture the unaccounted-for value of ecological systems (~$25T). After a natural capital valuation platform is developed and an Eco-Commerce Ecosystem is established, a forking to a Eusocial Ecosystem is predicted to account for additional human and social capitals. (Adapted from Analysis on Complexity and Evolution of E-Commerce Ecosystems (Liu, H, et al. 2013, p43), Shared Governance for Sustainable Working Landscapes (Gieseke, T. 2016, p201), and a EcoCommerce and the NCU: How to Fork to the Next Economy (Gieseke, T. Online Session, 2022).
First Industrial Revolution
As the Agriculture Ecosystem matured, the First Industrial Revolution emerged in the 18th century. The new production protocols of this industrial revolution included steam power, smelting, and mechanization. These new protocols were significant enough to initiate a new fork.
Business Ecosystem
Business ecosystems emerged as manufacturing moved from cottage industries to more specialized manufacturing. Businesses were built around specialized skills and knowledge and they became reliant on each other for supplies and parts needed to create the final product.
Advances in technologies led to the Second Industrial Revolution that emerged around 1870. Electricity, greater division of labor, and mass production were adopted. The Third Industrial Revolution or so-called digital revolution emerged shortly after the 1950s. The ensuing hi-tech protocols greatly enhanced communication and information sharing within and among businesses. It should be noted that industrial revolutions in themselves did not cause a forking of the economic system, as in this case, they just created greater efficiencies within the Business Ecosystem. A forking occurs when new protocols add a new value proposition to create a new dimension of the economy, and not just greater efficiencies of the existing economic ecosystem. The Third Industrial Revolution and the new internet and Web 1.0 protocols prompted an economic forking in 2000.
E-Commerce Ecosystem
The E-Commerce Ecosystem was more than a digitized version of business ecosystems as it provided an entirely new business model via the multi-sided platform. New production protocols were based on Web 2.0 enabling Amazon, Uber, Airbnb and others to apply business models where customers are far more involved within the production and consumption processes. This new model of exponential business growth was exemplified by a 2014 quote by from Brian Chesky, Airbnb exec, who stated that “Marriot wants to add 30,000 rooms this year. We will add that in the next two weeks”. Such growth was impossible prior to the digitization of business ecosystems and the ability to generate network efforts.
Fourth Industrial Revolution
Within the E-Commerce Ecosystem, the Fourth Industrial Revolution is emerging and bringing new production protocols related to developing a cyber-physical system. These technology breakthroughs are occurring in fields such as artificial intelligence, robotics, the Internet of Things, autonomous vehicles, 3-D printing, nanotechnology, biotechnology, materials science, energy storage, and quantum computing. These are accompanied by cryptocurrencies, blockchain, massive GIS databases, the continued buildout of Web 2.0 and the introduction of Web 3.0 and the metaverse.
At the Socio-Economic-Ecological Crossroads
While Fourth Industrial Revolution technologies are exciting and amazing, there is no guarantee a forking will occur to the next, best economic ecosystem. To date, the E-Commerce Ecosystem only appears to be adding momentum to the $100T global economy by creating greater efficiency in the economic system’s quest to extract and consume the earth’s resources. Counterintuitively, using a natural resource more efficiently does not conserve that natural resource, but provides more people with access to consume the resource. That is not to say that efficiency use should not be pursued, but it is not a stand-alone strategy to sustain a resource. Through these new efficiencies, the E-Commerce Ecosystem can now meet the growing wants and needs of a lot more people that will eventually order almost anything for same-day drone delivery. Very efficient and very consumptive.
The question society is trying to ask is, “Will the Fourth Industrial Revolution have the capacity and conscious to supply human needs and address local, regional, and planetary concerns?
NCU as a Catalyst for an Economic Forking
The next economic forking may be the first forking that society collectively and consciously chooses. During the last two decades, thousands of eco-markets have been developed and fledged, but none have taken flight. There is the will, but not yet the way. We are learning that our environmental values are far less tangible than our economic goods, and hence, an accounting system that brings enough physicality to the less-tangible values is needed.
An NCU (natural capital unit) with the Fourth Industrial Revolution technologies can act as a catalyst to fork the economy into this new space. The NCU and a novel natural capital classification system (below) is able to account for and succinctly describe the entirety of natural capital and ecosystem service potential for each NCU or grouping of NCUs. The NCU-NCCS describes four natural capital layers and the associated ecosystem services. The existing economic system has the means to account for and transact the provisional ecosystem services in the top, second, and fourth layers, but it lacks a coherent and interoperable accounting and transacting system for the third layer containing the less tangible or intangible ecosystem services. Using the NCU to account for the values in the Biotic-Conditionally Renewable Bio-Processes layer would be significant enough to fork the economy. And it is not just due to the estimated $25T in unaccounted for wealth (although that helps), but because the new protocol changes the dynamics of the economy to the degree that new values, previously unattainable, are created.
Figure 2. NCU-based Natural Capital Classification System. The NCU-NCCS categorizes natural capital based on abiotic and biotic layers, and further describes those layers based on their renewable, conditionally renewable, and non-renewable status, and finally the source of the capital such as energy, biological systems, or physical substances. Specific types of ecosystems services are generated from each NCU layer. Adapted from A System of Natural Resource Accounts (Longva, P, 1981, p8), EcoCommerce 101 (Gieseke, T. 2011), and applied and modified for the NCU from Shared Governance for Sustainable Working Landscapes (Gieseke, T, 2016, p170).
Eco-Commerce Ecosystem
The cyber-physical systems of the Fourth Industrial Revolution have the capacity to create enough physicality for ecosystem service data to function as private and club goods. This digitization to convert public and common goods to private and club goods would spontaneously create traditional market conditions. This conversion recognizes the value that is created by life itself and how those living functions contribute to a functioning world. An Eco-Commerce Ecosystem adds this living value, or perhaps using Adam Smith’s terminology, a “value for existence”.
Note: A detailed description of the NCU and the EcoCommerce Ecosystem platform and logic can be found in a recent article, NCU: The Common’s Denominator.
Value for Existence
Adam Smith succinctly explained the entirety of the economic system of his time with the two phrases, “value of use” and “value in exchange. “Value of use” defines the economic value for goods and services that an individual needs to maintain their well-being. “Value in exchange” defines the economic value for an individual that is supplying the goods and services to another individual to create a profit. Relative to an individual, there is a physical limitation on how much “value of use” a person can consume. A person may cut down a tree each year and use it to heat their home for a winter. But relative to “value in exchange” a person may cut down an entire forest each year to generate additional profit. The physical limits in this case, is the time, money, and equipment needed to raze the forest. As noted, the third and fourth industrial revolutions have created great efficiencies in expanding an individual’s consumption relative to “use” and their ability to expand their capacity to “exchange”.
To economically govern the “values of use and exchange”, a third value, “value for existence” captures the intrinsic value of the living entity, whether that is soil, plants, animals, and other domains, kingdoms, and phyla. It may seem odd that we have to make the argument or economic case that life on a living planet is actually what creates the value we enjoy, but that is the task at hand. And perhaps it is not that people, organizations, governments, and institutions don’t recognize this, but that since the economic system does not recognize this, they may feel they have no choice, or no choice that is integrated with their quest in “value of use” and “value in exchange” objectives. Much like the value of a physical factory is accounting for, society needs an accounting system for the living factories as well. Challenging, but not impossible with Fourth Industrial Revolution technologies.
Living Factories
Regulating (living) ecosystem services are the functions and processes (carbon sequestration, water cleansing, pollination) of the living factories, much like conveyor belts and robotics are part of the functions and processes of physical factories. Neither living or physical capital are magic and therefore, must be managed to create optimal production conditions and long-term viability. The living aspect of natural capital conducts work from an economic perspective much like the non-living mechanizations conduct work in a factor. The NCU becomes the accounting systems for these living factors to bring in these classic economic externalities into the economy.
Using Fourth Industrial Revolution protocols such the spatial web, artificial intelligence, virtual reality, augmented reality, Internet of Things, digital twins, remote sensing, and the like with bring the full suite of natural capital and ecosystem services from an intangible state to a tangible state where the economic system can value its existence and value what it provides. Once the socio-economic participants begin to realize the value of the living component of natural capital via the economic system, and this value is recognized as significant and profitable, an economic system that connects people to [NCU] space via shared governance may be enough to create another economic fork related to human and social capital.
Eusocial Ecosystem
Eusociality, or true sociality, refers to a highly interconnected social structure where the actions and objectives are beyond self-interests, and therefore, have the capacity to meet goals that are for the collective.
Eusociality is both rare and oddly distributed in nature. It is found in ants and bees, some wasps, termites, some thrips, aphids, and beetles. Strangely, two species of mole rats are the only vertebrates that engage in truly eusocial behaviors, but humans are close to eusociality and are sometimes loosely characterized as such. Species that acquire eusociality are often referred to as superorganisms as they contain a highly sophisticated and interconnected system of communication that enables them to act and react symbiotically and collectively for the benefit of all.
It doesn’t take much of an imagination with AR/VR, metaverse, etc.to envision how the Fourth Industrial Revolution could generate an economic fork toward a Eusocial Ecosystem — at least to some degree. Humans, no doubt, will remain far more independent in their actions than a colony of ants directed by pheromones, but with that said, the new protocols of the Third Industrial Revolution and those of the pending Fourth Industrial Revolution have proved that people are highly influenced by the consensus of the interconnected collectives being developed in the digital spheres. The economic value of an Eusocial Ecosystem could be immense as societies may be able to address socially-embedded wicked problems using tools not in existence today.
Conclusions
Economic ecosystems are more fundamental than industrial revolutions, but they are certainly related. One can view the industrial revolutions as the tools of the economic system, where economic ecosystems are what the economic system is going to use those tools for. One does not directly dictate the other.
Society is in the stressful transitionary and overlapping period between the third (Digital) and the fourth (Automated or Cyper-Physical) industrial revolutions. The backdrop to these highly advanced technological revolutions is a growing awareness that the economic system does not have a capacity to account for the ecological systems it is highly reliant on. Because of this, society often has a collective perspective that taking care of our planet (environmental policies) is actually detrimental to the economy.
And in some senses, that is both bazaar and correct. If the Amazon Forest is only viewed economically as having “value of use” and “value in exchange”, and no “value for existence”, then the collective will of the economy and its participants will end up focusing on the two former and perhaps loosely on the latter. In the long-term, it would be bazaar if the collective did focus on the latter to the degree that it would be override the former two values. Asking anyone to act as an economic martyr is a futile long-term strategy.
Even locally, it is unrealistic for widespread support of living natural capital when the economic system ignores it. The Seattle Green Space Coalition, a citizens group that brought to the attention of the city council that Seattle’s parks and other landscapes contributed $3 billion to the community and therefore, when lands were converted, a portion of that value was lost.
Regardless of the interest or intent of the city council, the council stated that currently there is no room for accounting for natural capital within the economic model they use in determine land use decisions.
Without creating the economic space or room to account for natural capital, people, communities, nations, and the global society will continue to take the lead of the economy and ignore these economic values. Of course, there will continue to be a groundswell of citizens, groups, and organizations to influence corporate and governmental policies to squelch the economic system, but those have and will continue to prove to be lacking in long-term success.
The concept of economic forkings can also contribute positively to the question, “Should the economy grow or degrow?” A: The economy should add value by maturing and mature can occur via economic forking.
Thankfully, the economic system is forkable. And not only is it possible to fork the economy, but it is also inevitable. And each fork appears to be coming in shorter time periods. A forking to the EcoCommerce Ecosystem is amazingly an option to move forward on today.
Join Us for a New Kind of Conversation!
Tim Gieseke and Jerry Hatfield will present NCU: The Commons’ Denominator in a live interactive session on November 3, 2022, at 11:00 a.m. US Central. The session will be hosted and moderated by Andrew Crosby of Third Horizon Earth. For more information and to join us, register here.
As economic-based solutions emerge for ecosystem service markets, the need for a new accounting system is also emerging. The NCU platform has the leading potential to become this accounting framework as it is rooted in economic and ecologic logic. This is a solution that will be trialed and applied in 2023!
Tim Gieseke had careers in government, non-profit, and the private sector with each encompassing the space between economic and ecological aspects of land management. He is also a farmer and the first-noted ecocommercist. He authored a trilogy of books; EcoCommerce 101 (2011), Shared Governance for Sustainable Working Landscapes (2016), and Collaborative Environmental Governance Frameworks (2019) that describe the environmental, social, and governance aspects of initiating an EcoCommerce Ecosystem.
