I am reading a book by J. Doyne Farmer latest, Hearing the commotion, for an interview I will hold next week. On page 53, Farmer makes a good point, writing:
Although we often call the pieces of the production network as supply chainsthis is a bad metaphor: A production network is full of branches and is more like a tangled web than a chain. (original italics)
It’s nice to see someone who isn’t even an economist making that economic point. Here’s how Don Boudreaux does it in detail in “The Economy Is Not a Series of Supply Chains,” American Institute of Economic Research, April 13, 2020:
The Web Is Not a Chain
The first fact is that, in our modern economy almost every productive enterprise is connected to every other productive enterprise. This connection is the action that is translated by the word “supply chain.” However, this term is very misleading. Today’s economy is not a series of supply chains working together, each very different from, and independent of, the others. If that were the case, there would be very little challenge in pulling one or more chains in the home economy to stay there fully, from start to finish.
Instead of a collection of separate chains, our modern economy spans a single globe the web of communication. Within this web every output is the product of innumerable inputs and each type of input is often used to produce innumerable types of output. This web of connections – the complexity of which is beyond human comprehension – is essential to our now massive prosperity. However, its existence – ‘everything-is-connected-in-some-way-to-everything-else’ – means that there are no straight and clear lines that separate “important things” from those that are “unimportant”.
Another thing that destroys the existence of any such objective and clear lines is economic change – both a change that cannot be separated from the damage of the creation of the market economy (for example, the invention of the assembly line), and a change imposed on humanity in nature (for example, the invention of the assembly line) for example, the abolition of the iron mine). Such change always reorganizes – often slowly, but sometimes dramatically – the special connections that each part of the great economic web has with countless other nodes.
Postscript:
Russ Roberts recently interviewed Farmer in his EconTalk book. Arnold Kling recently reviewed the book Farmer here.
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