Trade-offs in Physiology, Ecology, Economics, and Life

A new approach

For about the past ten years now, I’ve been applying an approach based on trade-offs to understand and develop models of the growth and behavior of plankton. My colleauges and I call it Optimality-based modeling. This approach has also been proving quite successful for studies of terrestrial ecology. When I got into this, there were a good examples of its application, but most ecological models were formulated by stitching together different equations for different processes. Most often the equations were purely empirically based, that is chosen to match the observed functional response, but without any theory for deriving the precise equation.

One really nice thing about this approach is that it can provide a theoretical basis for deriving not only functional equations that before were merely empirically based, but also how the shapes of the response will adjust with changing conditions . Nevertheless, I've learned first hand that it takes time and a great deal of effort to change the dominant paradigm, because scientists also cling stubbornly to the familiar. I mention a specific example relating to this approach in my recent post about Cognitive Biases.

Physiological Trade-offs

Here’s a physiological trade-off for humans.

The first few studies in which I applied this approach considered only physiological trade-offs. Here’s an example of one for phytoplankton (free moving, single celled algae), which I tested against data from observations in this paper.

Ecological Trade-offs

Then I began to consider ecological trade-offs, which depend on the interactions of predators and prey, or other interactions between organisms. Here’s a relatively simple ecological trade-off that was considered in this theoretical study concerning the evolution of competitive ability for nutrient uptake.

That trade-off has observable effects in the present day. For example, this recent study has found that this same effect partially explains the observed patterns of phytoplankton blooms in the English Channel.

Kill-the-Winner Effects

That last one embodies a kind of Kill-the-Winner (KTW) effect, which has long been discussed in ecology.

Recently my friend and colleague Sergio Vallina published this paper in which he compared various equations that have been developed to represent the KTW effect and clarified the impact on prey diversity. Here’s a much simplified diagram of the effect on diversity.

Trade-offs in Economics and Life

Of course it’s obvious that we humans face all sorts of trade-offs in life, and I figured there had to be some economics literature on trade-offs. However, I didn’t find nearly as much as I expected, and nothing very satisfying, until I found the work of Thomas Sowell. He discusses trade-offs extensively in his great book Knowledge and Decisions.

Opportunity Costs: trade-offs in using time or other resources

The most obvious trade-off that we humans, and all animals, face is opportunity cost, when doing A now precludes doing B now. However, as Sowell makes clear, it’s very important that most trade-offs are incremental, not categorical. We get to choose how much time (or money) to allocate to A, and only to that extent is our ability to do (or buy) B limited.

Opportunity Cost on Steemit

To maximize one’s enjoyment from Steemit, or even more narrowly to maximize one’s rewards in terms of Steem, it’s necessary to find a balance between time spent writing posts versus time spent reading others' posts. If you never read anyone else’s posts, you’ll most likely be so ill-informed about what others value and expect that you’ll have a difficult time posting content that they value. On the other hand, if you spend all your time reading and none posting yourself, you won’t get any rewards.

Information from Market Prices allows resource allocation subject to multi-dimensional trade-offs

Human behavior being very complex, it may seem daunting to consider realistic trade-offs between the myriad ways in which we can choose to use our time, money, and other resources. But, entrepreneurs in particular do this all the time. The reason it’s possible, aside from our wonderfully powerful brains, is that market prices convey information about the relative value of time and all the different resources, including both raw materials and labor, that go into producing products. It was from this insight that Ludwig von Mises realized nearly a century ago that socialism must fail, because it does not allow the prices of capital goods to be determined by free market exchange.

Can we learn more by considering trade-offs in life?

Maybe I’ve become obsessed with trade-offs, because I’ve found them so useful in my research. However, I think there remain many unexplored possibilities to exploit them for understanding economics and for business decisions. If anyone has any other suggestions of economics literature concerning trade-offs, please let me know in the comments.

Although it must be much harder to quantify trade-offs for human behavior than it is for plankton, I think it’s possible. Cost-benefit analysis in essence quantifies trade-offs. I think the tools of optimality-based modeling may also be useful for understanding economics and business decisions. Even if we can’t make precise, quantitative predictions, the qualitative information could be valuable.

Further Reading

If you found that interesting, you may also like my follow-up post, Diversity-Sustaining Mechanisms in Biology, Ecology, and Economics.

S. Lan Smith

Kamakura, Japan

August 30, 2016