Can we think of the economy as something analogous to natural ecosystems? This thought emerged to my mind on a bear-observation excursion and I immediately started to explore this idea further. I believe that economics and ecology, two seemingly distinct fields, are actually very similar and can tremendously learn from each other. In this article, I will look at the most striking similarities and ideas and argue why I think both sciences study almost the same subject. I will look at properties of both systems and analyse them from top-down, looking at the macro-level first, then diving into what drives the change in both fields and then focusing on the micro-level.
In this article, I’m drawing on my reflections, conversations with economists and ecologists and (scientific) work I came across. I’ll cite loosely.
Quick definitions
Let’s define four key terms for the purposes of this short analysis. The economy is defined as a spatially bound area that quantitatively describes flows of resources used by humans. By economics, I refer to the scientific discipline of studying human decision-making about resource allocation. The term ecosystem refers to a bounded area specifying relationships between all living species in it and the ecology is a scientific discipline studying these relationships.
Relationships, equations and emergence
The first and most obvious similarity is that both disciplines study relationships of entities and agents in an isolated system. This is also the first argument to think about working from top to the bottom. Both economics and ecology can study the planet as a system, but their methods are usually more meaningful on a finer scale.
A network analysis of the relationships reveals insights in both systems and allows for quantitative outcomes defined by some equations. In ecology, this is typically through differential equations, biological equilibriums are generally dynamic. Traditional economics argues for static equilibriums, but this assumption has been challenged by modern approaches such as complexity economics. While static equilibriums tend to be great for studying certain phenomena under strict assumptions, the analogy with biology is more representative of real economic systems that do behave more dynamically and the system disruptions are not always external.
Such dynamic systems then tend to show emergent behaviour – this is where we see patterns on a larger scale. In an economy, agents’ (individuals) behaviour aggregates to a certain, mostly rational strategy which is then summed into larger and larger systems that operate in a coordinated way. Global economy, federations, nations, cities, neighbourhoods, individuals, you name it. In ecosystems, this can go as low as ant colonies behaving as an individual and then species interacting in a balanced way up until the whole biosphere showing interactions that are interdependent.
Money, money, money…
The next step is to compare what actually powers both systems. In economics, this is simple – all resources are proxied to money. In ecology, the main resource is usually energy. However, when we think about it deeply both serve as currencies and at the end of the day even money and wealth can be described in terms of energy (or physical resources put into it). Sure, a bear might not care about a piece of art, but a beaver family with a surplus of time and energy will invest it in a bigger, sturdier lodge — more stored food, safer from predators, better insulated against winter.
There are, however, examples where direct “transactions” occur even in the wild. For example, trees trade sugar with mycorrhizae for the extension of their root systems and other services. The most striking difference would be that money can be created, while energy cannot, the energetic flow is still external and money is tied to energy. A lot of the value is dependent on energy flows and the creation of money does not mean energy is created, rather than used more efficiently.
Growth and its cycles
This opens the door for other interesting analogies. Economic growth, accompanied by its oscillations, is also quite fundamental in ecosystem development. They experience the birth, growth and maturity phase, followed by a decline or catastrophic shutdown (from both internal and external forces) and subsequent rebirth. Energy flows are constantly changing, mimicking booms, busts and business cycles. Lotka-Volterra equations are a nice example.
The core enabler of the growth is, in both cases, the infrastructure. Due to scaling laws, the most notable analogy of cities and their infrastructure in the ecosystems are biodiversity hotspots. The abundance of species enables greater growth of life and energy stored in the system – something you will rarely see in monocultures.
Finally, you could argue that our sophisticated debt system is hard to replicate by animals, but even that is present in the nature. Yes, squirrels are not thinking of collateralised debt obligations, but think of their hoarding, which is kind of behaviour that mimics future value.
Agents everywhere
Now that we see both systems emerge from agents’ interactions and we have their currencies defined, we can wrap our minds in yet another interesting analogy. In both economics and ecology, the agents’ behaviour is intrinsically motivated by the exploitation of available resources.
This gives rise to specialisation. In ecology, the mechanism is, understandably, driven on a longer time scale through natural selection. In economics, the evolution is faster because of technology. But in the end, in both systems, there are symbiotic relationships, parasites, specialist roles and other control mechanisms that ensure every possible surplus of the resource is exploited.
There are, of course, market inefficiencies. Consider an invasive species that arrives in an ecosystem with no natural predators: unchecked, it monopolises resources and crowds out established competitors, collapsing the diversity around it. The economic mirror is a firm that captures a market with no effective competition — a monopoly, or a heavily subsidised entrant dumping goods below cost. In both cases the missing ingredient is the same: a control mechanism that would normally keep any single agent from consuming the entire surplus. Sometimes, though, the inefficiency is endogenous, built into the system’s own design rather than introduced from outside.
Negative externalities such as the free-rider problem, coming from the system design, are similar to overgrazing problems in systems with lacking or removed predatory mechanisms.
Homo Economicus
Naturally, the most compelling argument for difference between ecology and economics is the rationality of their respective agents. Progress in behavioural economics has shown that humans are not fully rational — we exhibit loss aversion, herd behaviour, and countless other biases. But rather than separating us from nature, this actually reinforces the analogy: animals navigate their environments through evolved heuristics too, and those heuristics occasionally misfire. The difference is one of sophistication and timescale, not kind. To a certain extent, animal behaviour can already be modelled through economic tools such as dynamic games — and it works. What humans add is institutional memory, language, and technology, which accelerate the evolutionary feedback loop dramatically. Markets clear faster, specialisation runs deeper, and strategies compound across generations in ways no ecosystem can match. But the underlying logic — agents exploiting resources, responding to incentives, finding equilibria — is the same.
Homo economicus is an idealisation of something real, in the same way that a frictionless plane is a useful fiction in physics. And if that’s true, then economics is less a uniquely human invention and more an application of ecological principles onto a particularly fast-moving ecosystem — one that happens to run on money instead of sunlight.
What would that mean in the end?
The main idea behind this article was to identify the parallels and show that we, humans, and our systems are not so dissimilar to the natural world and that many of our inventions mimic what is already produced by billions of years of life. People often think of these fields as significantly different, but as I hopefully showed, there are certainly many concepts in both sciences that can be cross-applied and allow to learn from each other. In particular, recent applications of physical and ecological modelling to economics yielded a lot of success and led to the expansion of the traditional theory to concepts such as dynamic equilibria or agent-based modelling.
Many of the economics phenomena show the same patterns as the natural ones. Can we model financial panic contagion through epidemiology? Do we need economic models to understand or manage biodiversity? How do economic competition models compare to biological ones? Can outcomes be predicted based on their analogies? These types of questions are what keep me awake and what can drive both fields into a symbiosis.