What is an Economy?

My ideas about economics start with imagining the simplest possible economy; a single individual human. I view this individual as an economy of one. Being a purposeful agent, this individual acts to control his inputs, the most important being those that are necessary for survival: food, water, and oxygen, etc. These inputs are controlled relative to specifications that are set autonomously inside the controller himself. In order to control, say, water input, the controller must vary his actions appropriately (going to different locations to find filled streams, building a cistern to collect rain water, etc) to compensate for disturbances (dried up streams, drought periods, etc) and keep the water input at its specified level.

This control process embodies the main components of an economy: production and consumption. The controller is acting to produce products that it can consume as inputs. So the simplest economy is the controlling done by an individual. At the level of the individual, then, economics is the same as psychology; it is simply the science of control. Economics separates from psychology once many individual controllers are involved. But it's not just the number of controllers that matters; what matters is how these individuals organize themselves into societies of controllers. As Adam Smith points out, the most significant thing about a collection of humans that makes up an economy is specialization in terms of production. From a control theory perspective, specialization means that now individuals in a group no longer produce everything they consume; part of each person's controlling is done by others. The individual who used to control his food input by doing his own hunting, butchering and cooking now depends on others to do this, while he takes care of producing other things, perhaps services like child rearing, which help control inputs for others as well as, possibly, himself.

Once we have specialization we have people depending on each other for the control of their own inputs; cooperation is essential. This makes specialization somewhat risky; non-cooperation by those producing the food could mean loss of control of food input by those who are specializing in child care, for example. But apparently people are very good at cooperating, at least in their own tribal groups, so specialization probably got started very early in human evolution. Small bands of humans were, thus, the first multi-individual economies, with some people specializing in hunting, others in food preparation, others in child care, etc. At this point there was probably no need for bartering or money; with very little specialization it is probably easy to share the fruits of specialization; the food producer just shares food with the child raiser and doesn't worry about how much child rearing is needed to get a certain amount of food. Anthropology might help at this point; it would be interesting to know whether there are small groups of people where there is some degree of specialization (division of labor) that allows individuals in the group to control for what they need (survive) without the need for barter or money.

So the essence, for me, of a multi-individual economy -- the kind of economy studied by economists -- is specialization, where each individual's ability to control their inputs depends, to a certain extent, on what is produced by every other individual. An economy is interdependent or "collective" control by a group of individual control systems. The interdependence is required by specialization. The success of this kind of control depends on cooperation; sharing. If the people who makes the food won't share with the people who take care of the kids, for example, then specialization won't work;it is literally every man (and woman) for himself (controlling alone).