Wednesday, August 1, 2007

Equilibrium, RIP

The idea of a system in equilibrium has been central to the economic thought of the last hundred years. From economics, it has spilled over into many business plans. Today, it's quite popular to talk about "balance" in product lines, personnel, or budgets.

Economists borrowed the idea of equilibrium from the physical sciences, where it had been quite useful. Unfortunately, economic systems are not equilibrium systems.

New research reveals economic systems are open-ended systems. They never achieve equilibrium. In the words of one researcher, if an economic system ever did achieve equilibrium, it would mean the death of everything in it.

Living things change, and then they change the world around them. Like it or not, the mere fact of our presence will change the world. Our actions will change it even more. The world is forever out of balance.

Rather than spend precious time and money attempting the impossible task of holding any system together in a stable equilibrium, we should recognize the challenges and opportunities of change. This includes not just economic systems, but all human social institutions, from culture to commerce.

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