Economies that can become part of nature

from my Finance Lab blog posts

Nov 2013 note:  Since this popular post was written I’ve kept pushing my search for better explanations.  It’s basically a very simple universal principle for how growth leads to stability.   Every successful ‘project’ in nature, of any kind or scale, starts with using its resources to build more access to resources, expanding on itself, and then stabilizes by changing its strategy before it is overbuilt.    It’s easy to recognize that turning point in one’s own projects or new relationships.  It’s that point when you “have enough to manage” and can turn to bringing it to fruition, not taking on more for seeing good reason to secure what you already have.   Taking on more for no reason would threaten what you began.    

As a shift from taking territory to homemaking

Your self-investment strategy begins with searching for how to expand on a great beginning, using gains to expand your gains, and is uninhibited at first.  It’ll only succeed if sensitive to the approaching need to stabilize and switch to “homemaking”, and creating a secure “niche” in the environment for what was built.   What changes in the investment strategy is its “targeting radar” for the best use of its resources.  

As the organization is built up it first prospers by expanding its control of its environment, creating new internal organization and overhead costs.   The value of building by bigger and bigger steps (creating more overhead while depleting the availability of resources) naturally reverses.   Then like homemakers who “see success in sight”, the radar shifts to caring for what they built as a whole and that “near environment” it needs to be secure.  It’s a switch from taking territory and building bigger things, to caring for how things fit together and work smoothly throughout the whole, from aggression to caring.  


Mar 12 2010: Twenty-five years ago I learned that Keynes had come to the a similar conclusion I then had had, about how to achieve a stable steady state economy.  At the same time I found out Ken Boulding, the leading economic theorist and leader of the General Systems Theory community, had been talking about it for decades after Keynes too.   But their efforts had gotten culturally buried.

Because it was pure systems ecology, without any cultural roots in the business or finance community, his proposal seemed utterly radical.  He first called it “the widow’s cruse” after a biblical story about Elijah giving an old widow an inexhaustible cup of oil and bowl of flower (1, 2).

How natural systems can remain profitable at limits to growth.

Keynes’ had realized that capitalism would produce an over-investment crisis when the environment started producing diminishing returns.   At that time acting to stabilize growing investment, as his main work had been about, would destabilize the economy as a whole.

The real crisis would come from those with wealth continuing to increase their investment savings and so multiplying their investments and demands on the productive economy for growing returns.   The Increasing demands on the non-growing economy would then undermine the economy’s profitability to the breaking point.

It was called “the fallacy” by everyone around him, though, and so it broadly remains considered today, by the few who know of it.

Continue reading Economies that can become part of nature

We assumed the purpose was growth, so it wasn’t studied

Reposted from my Finance Lab blog


The way social customs develop, and community standards, what to expect is formed by agreement and not by research all the time. Then people teach what others before them agreed on.

I think that could be the main reason why for a few hundred years everyone assumed the right thing for economies would be regular % change just because everyone wanted steady improvement. It seems the effect of multiplying economies on the earth was never really studied, but just whether it to fix the problems that arose or not.

As a physicist in the mid 70’s I was watching the curiously creative behavior of a lot of uncontrolled natural “economic systems”, heat transport by convective currents inside buildings. I spent a couple years doing of 24hr micro-climate fingerprints of buildings, closely studying how their air current networks competed for flow channels and evolved new organization several times a day as the sun moved around.

Every individual air current begins with a little feedback loop, that animates the development of its heat transport system… Continue reading We assumed the purpose was growth, so it wasn’t studied

Switching the “spender of last resort” when government goes broke…

Sometimes it pays to recognize circular arguments with no escape, and realize one or more of the core assumptions causing that needs to be questioned.

The presently brutal and worsening job market in the developed countries is often discussed with a circular argument: that stimulus isn’t working so we need more, but governments run a risk of collapse if the jobs are not productive… That is now heard over and over, and it’s worth looking at it as painting a circle of common assumptions that everyone would like to escape.

The problem caused by economies becoming unresponsive to Keynesian stimulus was actually brilliantly studied by Keynes… His simple conclusion was that when stimulus provided by governments filling in as “spenders of last resort” didn’t work then investors would need to take that role, even to the point of ending the accumulation of investment to make economies physically sustainable. The assumption that is not variable is that we live in a finite world. Continue reading Switching the “spender of last resort” when government goes broke…