In order to understand economics, you must first understand chemistry. That’s my story at least, and I’m sticking to it. I’m neither an economist nor a chemist (not a real one anyway), but I’ve been thinking a lot about how to understand economics in chemical terms.
In a previous post I discussed autocatalysis, the mechanism by which a bunch of different molecules can react with each other in such a way that they end up producing more of themselves, at the cost of using something else up. The ideas in that post don’t only apply to chemistry – you can use them to think about just about any kind of physical process. In this post I’ll talk about how to think about the economy as a whole in autocatalytic terms. But let’s start with something on a smaller scale, the process of baking bread: