One of the difficult ideas to explain in economics is how a spontaneously ordered markets result in such a marvelous outcome: the greatest benefit to society. Markets, with proper laws and foundational regulations, guide self-interested or greedy agents into creative, innovative actions that are not only good for the involved economic agent, but society as a whole.
It is not easy to convey the efficiency of spontaneously ordered markets to students. They seem to understand how self-interest or greed orders an individual’s activities profitably, but not how this benefit extends to society. Russ Roberts, in his EconTalk interview with Deborah Gordon, "Gordon on Ants, Humans, the Division of Labor and Emergent Order," discovers a brilliant example to describe spontaneous order—ant colonies.
Ant colonies are well ordered and appear to operate under some sort of central command, but it is not so. The colonies have no central planner. Each ant secretes pheromones and hydrocarbons based on conditions surrounding the colony. Other ants smell the pheromones and hydrocarbons, and use these scents to guide their actions into digging, patrolling, and foraging. As the scents change, ants alter their behavior and the colony adapts and prospers.
Imagine the confusion that would result if a queen ant did order activity in the colony. How would the queen know the conditions around the colony? Should the ants dig, and how deep? How many ants should patrol and where? Once patrolling is accomplished, how many ants should forage and in what direction? Each reporting function would be new to the colony, time consuming, contain less information than spontaneously ordered functions, and be totally unnecessary.
Humans behave in a manner similar to ants. Each has an infinitesimal knowledge about the overall functioning of the economy. The best home builder (brightest, hardest working and most honest) probably has no idea how roof tiles are produced, let alone how automobiles are assembled. Each individual collects information provided by prices and profits and directs his or her activities accordingly. As prices and profits change, economic activity through individual action changes. Resources are reallocated, products are innovated, and the economy adapts and prospers.
Collective behavior in a human colony creates confusion based on insufficient information if colony planners attempt to alter the reallocation of resources and innovation within society. Planners just don’t have the information possessed by thousands of economic agents. Diverting resources to information gathering and planning is time consuming and costly; diverted resources cannot be used to produce goods and services.
It is here I believe that the analogy between ants and humans breaks down. Ants follow secreted chemicals that dictate their actions. The human brain allows for a wider range of behavior that may profit the individual but be destructive to others and the entire human colony. Foundational rules such as the prohibition on theft and definition of property rights support the spontaneous ordering of resources and innovation. While there is disagreement among economists just how broad these foundational rules and regulations should extend, it is clear that nearly all economists believe that society should maintain through collective actions the greatest freedom possible on resource allocation and innovation.
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A wonderful analogy. Perhaps newly elected President Obama would do well to pattern his economic decisions after that of the queen ant and allow the economy to right itself.
ReplyDeleteDr. Wilson, I agree with what you say. I believe that each individual in an economy should hold specific knowledge of the economy that they devote what they do to. Putting the power in the hands of one single person, or queen ant, to delegate out responsiblities and jobs to a multitude of subordinates just makes things more confusing. Not only would this being hold way too much power, but they would not have the knowledge to pass judgements on all activities, such as how to best build a bank to how to successfully teach a kindergarten class. This is why i support specialization in our economy. It helps us get more things done. A person who is specialized might be able to make a fair judgement on how to efficiently use his resources best by specializing in a certain resource while also benefitting by trading with another specialized manufacturer. This queen ant of sorts might not have the right qualifications on the produciton and manufactuering of this certain resource and might make a poor decision by not using their resources effienciently. This would place their production under the production possibilities frontier, which as pointed out makes them ineffecient.
ReplyDeleteWarren Burns
I greatly enjoyed this analogy and felt that something as simple as ants helped me understand the concept much easier. I think it is ironic when people try to control the economy too much, whether with "big government" or by brute force. History, and nature itself, shows us that this system does not bring a beneficial outcome for society. Take a country like Germany under the rule of or Iraq under Saddam Hussein. When strict regulations were put on a people group in relation to what they can/cannot do, there is either suppression of ideas and lack of growth or a revolt by those under these restrictions. I
ReplyDeleteIt's just like forcing a kid to play a sport. If it isn't what he likes to do it won't come easy to him, and he probably won't perform at his fullest potential. The parent is most likely wasting time that could be spent finding what his/her child enjoys and giving them the freedom to grow and succeed. When a kid does what he's good at and let's others do what he isn't, the overall state benefits and is more successful.
A very helpful picture.I find special significance in the part about the failings of the system that would have to replace the "economy" of the ants if they abandoned their hydrocarbons. Not only would the information used to make decisions be incomplete, it would also require a large "bureacracy" to control and regulate the message courtiers. I find this reminiscent of all of the measures taken by communist states to manipulate the populace. All of the regulation measures remove workers from the system and shifts the PPF curve left and down, representing the reduction in the productivity of the system.
ReplyDeleteHmm... this was a very interesting analogy. Ants and Economics? Who knew there were similarities. However strange of a comparison this is I actually understand how the two are similar. I enjoyed the idea that to succeed in our human lives we must remain as individuals. Collective thought and loss of originality would result in our ultimate destruction. Very thought provoking, no offense but I actually LIKED this blog. :)
ReplyDeleteDevin Smith
Bruceville-Eddy
I can't help but to think of communism; would it necessarily be wise to let so many uneducated (who are not really equipped with pheromones or spider-senses) to fix their own economy? As you said in class, the economy will always fix itself. I don't know if you think society's pheromones will do it or America will fluctuate back on “on top” on day. I really did enjoy the analogy though, it made me think.
ReplyDeleteJen Lavallee
I do not agree that the analogy between humans and the ants breaks down. For example, let's say one ant finds "food" (this food is actually ant poison) and sets off chemicals to let the other ants know that it has found food. These ants are going to come to where the first ant was and eat some of the poison, too, and probably set off chemical signals to notify other ants...therefore, one ant could do something that would be destructive to the entire ant colony.
ReplyDeleteI agree with the comparison of ants to humans and will notice more in the actual economy of this analogy. The ants follow smell as humans follow prices which will help guide and shape demand curves in the economy. I really enjoyed this scenario and certainly hope our economy can fix itself as well.
ReplyDeleteStudent,
Jordan Finstad
Very well written. I thought the idea of the queen ant regulating the actions for the entire colony was fantastic. When governments attempt to control every aspect of their citizens lives, they are quickly overwhelmed. The unity of the ants is what makes the colony prosper, not the regulation of the queen. We need the Government to allow the market to correct itself.
ReplyDeleteI enjoyed this blog. Ants and humans thought of as one. Most of us follow what we are being told whether it leads to desrtuction or not. We are suppose to have this idea that what we are following is the right way but knowone really knows...not even the ants. We just hope that what we are doing and what we are being told is right.
ReplyDeleteI really thought that the analogy about ants and how their colony work compared to the way humans work within markets was really neat. I have to admit that Microeconomics is one those subjects that goes right over my head, but when I read this article I finally felt like I understood a topic. It's really cool to know that even though there are no set plans or rules that we follow in our markets it still runs so smoothly, yet so competitive for both buyers and sellers.
ReplyDeleteDr. Wilson,
ReplyDeleteI believe that if one person had "absolute power", they would definitely "corrupt absolutely". They would begin making changes according to what they would benefit from, instead of the whole community. Also, the competitive market would be destroyed. If one person was in control, everything would be run the same and there would be no difference in where you go to get groceries or clothes.
Darlene Gorgan
The ant analogy really made it clear that the production will greatly increased along the production possibility frontier when there is no one directing each individual ant to a specific job. It increases because the time and labor that would have been needed to cordinate everything could instead be devoted to the production of tunnels or the gathering of food. Sometimes things look so much easier on a smaller scale.
ReplyDeleteMaddie Harper
This really helped me understand how ants and humans can relate to one another in society. I think Deborah's opinion is a very realistic analization as to how our society should react with the business industries and such because without a "queen bee" we would be lost. I like how Deborah says ants and humans adapt and prosper in the changes that are thrown their way. As mentioned above, if there is someone who has absolute power then they will corrupt absolutely. I agree with this because that person will only try and do things that will benefit them and not the society as a whole. All in all, I'm very pleased with the "queen bee" we have running out country and helping us out. =]
ReplyDeleteMichelle Davis
Once the human races tunes into their senses and become more aware of their surroundings we will be able to balance between spending time on goods - services and information gathering - planning. Somehow we must increase are productivity, If it requires us to spend more time in the short term on planning and information gathering to produce the desired results in the long run so be it. For everything comes down to productivity in the past, the present, and the future.
ReplyDeleteThe ant analogy really helped paint a picture about how the economy works. I never realized how many different people with different knowledge it takes to make our society and economy work the way it does. Even though there is not a single person with a definite plan for us, everything still works out the way it should. Even if there was one person, I never thought of how much knowledge they would actually have to have to run everything. Who would have thought ant analogies would help so much?
ReplyDeleteI like the analogy here, despite a few holes. As the ants carry on with their work, they don't go on strike, ask for a raise, or take a lunch break. They colony as a whole is focused on one objective and press on without a complaint. The same can be said for other insects, such as honey bees, who's hives are massive metropolises of organization. The difference between these bugs and people is that people are selfish. Each ant benefits the other ant, who benefits another, and so on. By supporting one another, each ant is cared for. In the economy greed rules us, and some by chance end up better off than others. I'm not saying that the ants have it all right, but maybe if America could start to work as a team instead of pursuing personal endeavors we might get through these economically hard times a little easier.
ReplyDeleteI never would have thought to think about the function of the ecnomy in comparison to the hidden behaviors of an ant colony. Great analogy, make sense in a way.
ReplyDeletejoe garza
In a more perfect world, we could easily say and believe that the economy would spontaneously fix itself through the unselfish efforts of the people. Ant colonies seem to work perfectly; each little ant does its job, while the queen bee is not required to do more than oversee the ants’ progress. The only major difference between these ants and the people in our society is the greed which drives many Americans. In a drowning economy while most people are somewhat affected by the economic turmoil, others benefit from it and do not bother ending it. Many are greedy and refuse to pull their weight in order to better the economy for all. Also, I do not believe we can expect our uneducated populace to make the informed decisions required to strengthen our economy. For this reason, I think a “queen bee” is quite necessary at this time or at least until America gets back on track. If American people could function like worker bees, then our economy would definitely be better off.
ReplyDelete-Monica Pantea
If everyone in the economy did there part and laid down a "scent" or trail for others to follow and succeed, then we would be as "perfect" as ants. As it is now, the competitiveness of humans is too strong. The emotion for us to succeed and not the other guy in this economy will never allow us to be a totally independent economy like the ants.
ReplyDeleteSo it seems that ants are more organized and functional in a group than humans are. Ants always look out for each other while humans are usually more concerned with increasing their profit. Fire ants especially have shown their cooperation together their and team skills in the central Texas area where they killed off all of the red ants. Humans may have these same skills, but we sure hide them well beneath our financial needs. I do not think, however, that it would be to anyone's benefit to start secreting chemicals all over the place for others to follow. There are far too many germaphobes for that to ever work.
ReplyDeleteGarrett Jaynes
I agree with how the two are related. People do follow others in the market such as when someone makes an investment in something and talks about it to his friends and the investment looks productive, his friends might chose him to follow. This is also true for people buying products or using a service. This would increase the Frontier because the 'colony' will follow other and increase demand. The same thing is also true if there is bad press about an object, service, or investment. This would decrease demand.
ReplyDeleteSara Mac Aulay
Although we are the most advanced species on the planet, we seem to be the least cooperative. I agree with the analogy and believe that we concentrated on competition with ourselves too much to realize the destruction that we do to each other. We try to succeed at anything at whatever cost to beat out another person. Not realizing that we are just beating out our own king.
ReplyDeletePratik Patel
In the ant world this system works perfectly. Every ant follows the "rules" and corruption and selfishness are not issues within an ant colony. If humans lived as ants do, living only to serve the colony as a whole rather than each individual, then a version of this system would work for us. However, we do not like in a utopia and humans are selfish. We live as if ants ignored the chemicals and tried to do everything for themselves.
ReplyDeleteBryan E.
The analogy was great. I never really looked at humans agaisnt an ant colony. But you are right. As humans we jump on the band wagon a lot and just do as other people do. I think we need to branch off and have our own thoughts and choices, but so much like ants we stick together. We are exactly like the trail of ants headed for the left over food one behind the other.
ReplyDeleteKrislyn Combs
The ant analogy was an interesting out-take on things. As a society, we need to let the economy find its balance again by stopping our desire to control it and let things happen naturally; eventually, everything will be set right again.
ReplyDeletePeggy Freeman
I enjoyed this blog. Ants and humans as one in a sense. Though I am not entirely sure if I agree that there should be more than one individual in charge. I don't believe in absolute power for one individual but you can't have too many individuals running a business or country.
ReplyDeletem.g.
This blog put me in another insight on ants. I have alwasys thought that ants worked under the dictation of the queen. Now to me it seems like they are like any other creature. Meaning that they adapt to there enviroment. THis is so in humans in the fact the no matter what choice the human picks, it is for the just that one human. Meaning the human doesn't care how it effects another person.
ReplyDeleteDr. Wilson,
ReplyDeleteRuss Roberts’s analogy of ants and how individuals react in the marketplace has given me a greater understanding of Adam Smith’s concept of the “invisible hand” in the free market. The “invisible hand” is the reactions of individuals in the marketplace who make decisions based on the reactions of others in the market for the benefit of their own well being. This hive mind reaction of economic agents allows for the smooth operation of the world markets just like ants in a well organized colony. I hope that the current economic intervention is not a mistake that will slap at the invisible hand but help guide it into the direction it needs to go.
Your student,
Mark Balko
Though I had heard comparisons of ant colonies to human beahvior, I had never really read a comparison to economics.
ReplyDeleteIf I understand ant behavior correctly, most ants are nomads, meaning they move once the resources in their region are used up. In the beginning years of human many tribes were nomadic, and to this day there are still some societies that still behave in this manner.
By being nomadic both ants and tribes insure that the natural resouces have the necessary time to replenish. In many populized areas we are beginning to see the reverse effect where the resources must be brought in from around the world because the regional resources are insufficient.
With resource allocation in mind, how then is an economy to allocate its scarse resources efficiently? Many of us have seen how governmental intervention has had negative effects in the past, such as the regulations of the electrical markets. Because of this regulation the infrastructure in Texas never really kept up with the developing structure of the state, and though many of us complained about the high prices of electricity once the industry became unregulated, we can see how much more efficient all the producers of electricity are becoming because of market competition.
After researching the invisible hand a lot more (since I find it very interesting!), and equating a "queen bee" to the government, I learned that without any regulation, we could come up with a lot of externalities that could even lead to our own destruction (ex- climate change). And if there are many externalities, markets do not function properly, because of the mass sufferings of other unknown elements. Something I had never thought of though, I found through Joseph Stiglitz, a Nobel Prize winning economist, who also brought up the fact that when markets are not regulated, you can have "too little research"- noting that it was the government that backed up finances for new technologies such as the internet and the first telegraph line.
ReplyDeleteSo I think there should be a balance- markets should not be allowed to go haywire- where people don't have justice and rules aren't enforced, but then again government shouldn't interfere too much as to not allow people to make their own judgments and progress...
I agree with this post. I enjoy a good analogy and this was an excellent one. I believe that this analogy brings about an interesting point that deals with the economic problems our country is facing currently. Many companies are going belly up and I feel that it is partly due to the fact that one person or a small group of persons is trying to control the direction of the companies future. Yes this people (CEOs) may in fact be well studied in their specific company and how it should be maintained, but clearly they were unprepared for the economic decline that began happening. They were unable to determine decisions that needed to be made to save their company. It is important for us to become knowledgable in whatever career we choose, but we must also remember to be prepared for certain changes that are inevitable. If I am a wheat farmer, surely I will know every aspect of the wheat cultivating industry. However, it will be just as important for me to understand things about other industries that can affect mine so that I will be fully prepared to make any changes necessary, just as the ants do when one senses a change in environment, the other ants fall in line and change their course of action.
ReplyDeleteGreat blog!
Your student,
Lauren Ragan
I really liked the analogy made to the ants and humans. I always thought that ants had a chain of command that they followed in order to work so efficient. Different from the ants people are at times are reluctant to learn or take an active role in issues that affect others. They are happy being in their own circle and don't care about other things other than providing for their own families.
ReplyDeleteFurthermore unless you have an education in those fields your say in issues of that nature won't mean much. We are all caught up in classifying our selves by income or levels of education and also in the responsibility of who does what. In our society we have diggers,patrolmen, soldiers, heads of state,and the president.
I enjoy making comparisons as much as the next person, but with this one I would have to disagree. Even though it's a very clever idea it seems to me to take away from the real problems in this country. The problem being a certain few run this country the rest just dig on command.
This analogy really helps. One person can never control everything by themself. With everyone working together toward the same goal it is possible to better oneself and other things at the same time. One person having too much control is never a good thing.
ReplyDeleteI like the post and agree with the view of independent thinking and specialization as the ideal principles for a functioning free market. Total control as seen in communists nations could be compared to extreme control from the queen ant in the colony. As seen with the fall of communism, the unsuccessful attempts for one or a select group making the decisions for individual roles in society. I agree that free markets with limited government evolement is best.
ReplyDeleteThe product possibility frontier would definetly be higher than a economy with government assignments and reporting involved with the control of the individual roles. With out the control the "Invisible hands" could go to work and weed out the inefficientcies and sighnal for needed adjustments.
Your Student
Andrew Huegel
I recently read an interesting comment made by a great economist by the name of Hayek. He said that "markets process more information than could possibly be mastered by a mastermind". Indeed he was speaking of the human mind. My question is, if that is correct, who then determines what is "order"? We know that spontaneous means "good" and order is just that, "order". But isn't it one's own opinion of what is orderly? Shouldn't it be more or less of a system that works for you (your market)?
ReplyDeleteLiving in a changing economy as we do and with all the intelligent minds of people around us -I'm sure that there is more than just 1 way of doing things. So therefore, more than one person can do it.
As society changes, people are just as capable as ants ("As the scents change, ants alter their behavior and the colony adapts and prospers")to adjusting and making the best of situations. That, in my opinion, should be basis of what we refer to as the "order".
It’s been proven time and time again, a free economy is a healthy economy. The more money and power a government, or in this case a “Queen Ant,” has responsibility over, the more mistakes will be usually made. This statement; “Diverting resources to information gathering and planning is time consuming and costly; diverted resources cannot be used to produce goods and services”, exactly describes exactly these sentiments. Just as we have seen with the fall of the Soviet Union, free markets will outlast all others and will forever reign supreme, at least until the world can find complete utopia.
ReplyDeleteYour student,
Andrew Brown
I really like this analogy, it makes the concept easier to understand. It kind of reminds me of communism when they are talking about not having a "central planner" I think that having one person having absolute power will lead to corruption. It also makes me think that if we stopped trying to control the economy things might just work out on their own naturally.
ReplyDeleteThis is a great way to introduce people to the "invisible hand" concept. History shows us time and time again that free markets can benefit everyone (more or less) and the fed would be good take this into account every now and then.
ReplyDelete-Reagan Eklund
I agree with the ant analysis. I think that politicians should pay more attention to this. Lately, many have not followed this advice, including Bush with his bailouts, and Obama with his bailouts and "Czars". More government control only makes things worse, as is evident by such programs as social security.
ReplyDeleteJacob White
I found the analogy between the humans and ants very interesting. Could you imagine how life would be if our decisions were controlled by smells? I do believe our own actions speak louder then words and the decision we make do effect our economy everyday. Which is what made our economy expand to a diverse world of choices. I also see the difference between reality and bugs. I do believe the decisions the hire authorities has made our economic problem worse by throwing money everywhere. As Im sure they where thinking of the glass half full of the dramatic changes that would acquire.As with that I think the politicians should pay more attention to the example in the blog.
ReplyDeleteI agree with you to a point. Ants seem to be motivated by the greater good of the colony. Humans usually seem to have their own personal goals in mind. Ants are abel to function under anarchy much better than humans ever could. Ants function only out of instinct, while humans seem to need more motivation. However, I do believe that smaller government works better in economics, tariffs and raising the minimum wage are all bad ideas.
ReplyDeleteAustin Rushing
In an ant colony, every ant does their own job and only that job. They only do what comes natural to them by instinct. Every ant gets the job done for the better of the colony. Us humans have a mind of our own and do what we want, wether or not if it's whats better for the economy. But although humans do what ever they want, it's better this way because one person with absolute power would later end in corrution.
ReplyDeleteI do believe that this paints a nice picture, specificly when you are discussing the effectiveness of communism. The nation (ant colony) benifits most from having the freedom to have a market economy. By taking it away and replacing it with a more socialist economy the nation becomes less productive.
ReplyDeleteAaron Rogers