01/02/2013 10:47 am ET Updated Jan 23, 2014

The Balance Between Competition and Regulation

There is a lot of talk these days about how the market can solve everything, and this really boils down to a conversation about the value and merits of competition. Competition is a concept that extends far beyond economics -- it governs most of our biological world. Competition has indeed provided history with numerous useful processes, including biological evolution. Competition can produce amazing results. But there is another equally important process that is also prevalent in nature and our human world which I want to discuss here: regulation.

Most everything in our world is regulated at some level. Our bodies are highly regulated. Our computers are regulated. Our air traffic is regulated. Regulation is essential to balance. Regulation is essential to avoid negative results that could have far reaching or frequently occurring consequences -- negative results like a poor distribution of labor, low blood sugar, melted motherboards, or mid-air collisions.

Competition is best suited for exploring and testing unexplored possibilities and uncertainties. The natural world and society thrive on a mix of regulation and competition: explore the unknown while avoiding catastrophes.

Tightly connected to the idea of regulation is the concept of cooperation. As Martin Nowak and Roger Highfield point out in their book SuperCooperators, cells within the human body favor the greater good over self preservation; they "respect the greater needs of the body and multiply in an orderly fashion to create the kidney, the liver, the heart, and other vital organs." Recent research supports this concept where it has been shown that cells living in the bodies of mammals are regulated to have a lower metabolic rate than if they were living alone [2]. This benefits mammals with increasing metabolic efficiency and may have allowed for the evolution of larger organisms. In my area of research we have recently shown that budding yeast gain a reproductive and energetic advantage by living in clusters and that a key advantage in becoming a multicellular organism is cooperative living [3].

It serves us to remember that the world we live in is the product of considerable, extensive, and ongoing cooperation. Economic, social and cultural success within the United States is possible because of our infrastructure, education, legal and countless other systems. Nowak and Highfield explain this concept in the context of a simple restaurant breakfast:

Delivering that hot coffee and croissant also relied on a vast number of ideas, which have been widely disseminated by the remarkable medium of language. The result is a tightly woven network of cooperation stretching across the generations, as great ideas are generated, passed on, used, and embellished, from the first person to drink a beverage based on roasted seeds to the invention of the light bulb that illuminates the coffee shop, to the patenting of the first espresso machine. The result, that simple everyday breakfast, is an astonishing cooperative feat that straddles both space and time.

Fundamentally, our society is held up by an enormous collective agreement to exchange with each other and play by common rules in a common system. Competition is useful for evolving our economy, but the market's true foundation is human cooperation.

As Frans De Waal put it in his book The Age of Empathy: Nature's Lessons for a Kinder Society:

The father of economics, Adam Smith, understood as no other that the pursuit of self-interest needs to be tempered by 'fellow feeling.

Long ago, American society embraced competition as its chief organizing principle even though everywhere one looks--at work, in the street, in people's homes--one finds the same appreciation of family, companionship, collegiality, and civic responsibility as everywhere else in the world.

Remembering that competition allows both biology and human economic systems to innovate and explore possibilities, and that regulation and cooperation prevent system crashes, we need to reexamine how we design, manage, and allow our economic systems to evolve. There are many simple mechanisms, which lead to cooperation, that are beneficial to the community as a whole. For example reciprocity (see Nowak and Highfield), the idea of repeated interaction between individuals, deters maliciousness between people because they fear future repercussions. One of the major challenges in our recent economy is that individuals can make bad decisions with big payoffs and expect little to no future consequences. One possible way to fix this would be to tie top executive earnings to a company's success both during and shortly after a given individual's tenure. Perhaps encouraging repeated interactions and heightened awareness of the long-term success of the company.

Finding ways to regulate our actions, encouraging honesty and cooperation, is something that the scientific community has wrestled with for some time. In his book On Fact and Fraud: Cautionary Tales from the Front Lines of Science, David Goodstein points out that science is founded on the ability to trust the results of other scientists. In this light, science is a huge cooperative enterprise where progress is based on open and accurate presentation of information. Through a system of peer review and constant reanalysis of prior results, the human enterprise of science does its best to regulate an environment where transparency and cooperation is highly valued. This system still allows for the highly productive, explorative and competitive nature of science that has produced a vast amount knowledge, technology, and economic benefits.

Although this system is not complete, it continues to improve itself and provides one of many examples of how it is possible and beneficial to combine competition and regulation in order to balance fair play and innovation. We'd be lost without it.

1.) Nowak, M. & Highfield, R. (2011) SuperCooperators: Altruism, evolution, and why we need each other to succeed (Free Press).
2.) West, G. B., Woodruff, W.H., & Brown, J. H. (2002) Allometric scaling of metabolic rate from molecules and mitochondria to cells and mammals, Proceedings of the National Academy of Sciences 99, 2473-2478.
3.) Kempes, C.P. and Dutkiewicz, S. and Follows, M.J., (2012) Growth, metabolic partitioning, and the size of microorganisms, Proceedings of the National Academy of Sciences 109, 495-500.
4.) De Waal, F. (2010) The age of empathy: Nature's lessons for a kinder society (Three Rivers Press).
5.) Goodstein, D. (2010) On Fact and Fraud: Cautionary Tales from the Front Lines of Science (Princeton University Press).