Exploring J. Doyne Farmer’s latest publication, Making Sense of Chaos, has been a captivating journey as I prepare for an upcoming discussion. One particular insight on page 53 caught my attention, where Farmer astutely observes:
Though we often refer to pieces of the production network as supply chains, this is a bad metaphor: The production network is full of branches and is more like a tangled web than a chain. (italics in original)
It’s refreshing to witness a non-economist presenting such a profound economic perspective. Don Boudreaux echoes a similar sentiment in his article “The Economy is Not a Series of Supply Chains,” published by the American Institute of Economic Research on April 13, 2020:
A Web Isn’t a Chain
The interconnected nature of our modern economy is a fundamental reality, where nearly every productive enterprise is intricately linked to others. While the term “supply chain” is commonly used, it fails to capture the complex interconnectedness of today’s economy. Rather than distinct and independent chains, our economy resembles a vast global web of interdependence. Each output relies on numerous inputs, with each input serving multiple purposes across various outputs. This intricate web, beyond human comprehension, is essential for sustaining our mass prosperity. However, it blurs the distinction between “critical supplies” and “uncritical” ones, as every component plays a crucial role within this interconnected system.
The dynamic nature of economic change, driven by market forces and natural factors, constantly reshapes the connections within this economic web. Whether through innovation like the assembly line or resource depletion like an iron-ore mine, these changes continually alter the intricate network of relationships among economic nodes, sometimes subtly and at other times dramatically.
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Postscript:
Russ Roberts recently conducted an interview with Farmer discussing his book on EconTalk. Arnold Kling also provided a review of Farmer’s work.
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