Friday Fungus: On fungal economics - yeast or mushroom?

Or rather fungal metaphors in economics:

Arnold Harberger offered a nice metaphor thinking about this difference in his Presidential Address to the American Economic Association back in 1998, entitled "A Vision of the Growth Process" and published in the March 1998 issue of the American Economic Review. Harberger discusses whether economic growth is more likely to be like "mushrooms," in the sense that certain parts of a growing economy will take off much faster than others, or more like "yeast," in the sense that economy overall expands fairly smoothly overall. He argues that "mushroom"-type growth is more common.

Of course both yeast and mushrooms are fungus but the metaphor in question is made better still if we understand what's happening in the two processes. Harberger sees only the fruiting heads of the mushrooms - the visible manifestation of a symbiotic growing system:

Mycorrhizal partnerships are symbiotic, or mutually beneficial, relationships between plants and fungi, which take place around the plant's roots. While there are many species of fungus which do not form these partnerships, the vast majority of land plants have mycorrhizas (from the Greek mykes: fungus and rhiza: root), and many plants could not survive without them. Fossil records show that roots evolved alongside fungal partners and that fungi may have been crucial in helping plants evolve to colonise the land, hundreds of millions of years ago.

Broadly speaking, there are two main kinds of mycorrhiza: Arbuscular mycorrhizas penetrate the cells of their host's roots, and most plants develop this type. Ectomycorrhizas surround the roots without penetrating them. Trees may form either type, and some form both. In each case there is cell-to-cell contact between the plant and the fungus, allowing nutrient transfer to take place.

So not only is Harberger's view of growth correct - it's unpredictable in its location, mushroom-like - but when we look closer he has a fascinating metaphor for the way in which that unpredictable growth affects the wider economy (extending mycorrhizas) and the society that economy feeds (the tree symbiote of the mushroom).

The yeast analogy, on the other hand, is a managed, planned and controlled system. That yeast converts the sugars in the dough into carbon dioxide and alcohol making the bread rise (and rise again as we bake off the alcohol). When it's baked the yeast is dead and we must start again if we want more bread. There is no beneficial system - everything is the result of external intervention.

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