Category Archives: among best

Organic thinking and making things whole

Walter Hosack AIA posted on the AIA Environment forum to which I replied, about organic thinking as something architects could advance as a key to the survival of our place on earth, noting that design is always two things: “…The first is a gift. The second is a responsibility”, and suggesting architects have a broader responsibility to learn how to think and design organically, and help bring about a Symbiotic Period of life on earth.

Walter,

In principle I couldn’t agree with you more, but to escape long standing habits of linear thinking in our culture we would need lots of true examples of organic thinking, and develop an awareness, motivation and technique.   The surprise answer I come to is that architects are already quite good at it, but have not quite understood how their approach to design could widely apply. Continue reading Organic thinking and making things whole

Defining netGDP for steering a planet

What’s the cost of increasing investment when you’re already over-invested…??

Many organic and environmental systems display talents for taking care of themselves we could use, using internal steering to avoid approaching hazards and be responsive to change. In studying how they do it one comes across some wonderful new lines f practical of environmental systems research.

fyi – originally posted to World Ecology Research, a related recent post here is Where I’ve gotten so far

Natural systems display remarkable feats of self-control, but studying them fail to connect with the current scientific paradigm for representing everything as controlled by external forces, described by equations. The internal steering mechanisms within natural systems, organisms and economies, etc, are continually reorganizing in much too fluid ways to be described by any kind of equation, or rules for collections of automatic agents either.

The continued interest of the sciences remains only entirely about control theory, unfortunately.The lack of interest within science hasn’t stopped people from productively exploring the territory, only prevented communicating with our wider intellectual culture.

If you look at recent scientific history there were a number of scientists who made great contributions to understanding natural systems, whose work on other questions was accepted while their insights into considering complex systems more like organisms was discarded. It’s not hidden from view at all, for example, that nature arranges environmental systems is as cells of organization.

Those cells of organization also clearly emerge from their own environments, by a self-animated complex process of growth. One needs only ask whether that organization is delivered from the outside or generated within, to observe that complex systems seem to grow by exploiting their environments not being controlled by them. Their organization develops internally.

So, my view that our intellectual culture now finds itself a simply huge stack of “overdue homework”. Just how extremely overdue that homework is may make it seem like nearly starting over, with the whole project of learning about the earth.

For the past several centuries we have been making ever greater strides by multiplying our control of everything on earth, only now to find the process itself going out of control … Considered as a whole system, our profits from controlling nature were constantly allocated by the capital markets to multiply our control of nature, taking it too far to now to gracefully recover from.

What we need are the secrets of nature, how her growth systems come to a climax of vitality rather than of exhaustion. Oddly the first person to notice the elementally simple investment allocation strategy for doing that was J.M. Keynes.

He actually wrote the whole concluding chapter of his theory of economic growth on the subject of its limits. It’s still the correct basic template for how our economic system could exhibit self-control in managing its own growth.

Tragically to the readers of The General Theory the idea appears to have seemed completely alien, and that is why it was entirely ignored as people used the rest of Keynes’ work to build a profoundly unsustainable growth system. As an ecosystem, the strategic use of your profits to multiply your process needs to stop sometime, just to preserve the profitability of the system, whether measured in net-energy terms or a proxy measure of value like money.

When the scale of a system is stabilized while it is still profitable, those profits then become available for the self-management task of steering the system that growth built.

In 2011, of course, there is no discussion of whether Keynes’s strategy for saving the growth system from itself would be needed now, or ever, and how much it would be worth to the world economy to survive as both a cultural institution and a physical system. In 2011, 80 years later, it clearly still seems to be such a “shocking new idea” that people perennially just turn their attention to other popular subjects to avoid it.

Of course, those more popular subjects are not relevant, in the case the system is not steered to survive physically as well.

Keynes discussion in Chapter 16 of The General Theory, was on the natural limits of money. He presented it as a choice for people accumulating savings in a profitable economy until either they a) choose to stop accumulating savings and use the profits for something else of value or b) have to stop accumulating savings in an economy that generates no profits.

Saving financial earnings for more investment as a rule would only stop when aggregate investment earning become zero. Keynes thought it would be fairly easy to have increasing investment become increasingly unprofitable, as of course, we now see with riveting clarity in our present conflict ridden environment, saying:

If I am right in supposing it to be comparatively easy to make capital-goods so abundant that the marginal efficiency of capital is zero, this may be the most sensible way of gradually getting rid of many of the objectionable features of capitalism. Ch 16, iv, pp3

The easy mistake is to confuse his “marginal efficiency of capital” (a measure of the system as a whole) with being a measure of market rates of return. The total of individual rates of return can be zero when the gains of some are canceled out by the losses of others, and measures only reflecting current rates and not enduring rates are misleading as well.

By not even looking for when increasing investment would become decreasingly beneficial, economists appear to have never seriously tried to devise a way to measure whether new investment was making the economy more or less profitable in the long run. There was no need, with perpetual growing profit assumed instead.

That then becomes the direct cause for economic policy ignoring the crossing point, where erupting financial liabilities went unmeasured and the net life-cycle return on increasing investment went below zero. Because we had not been asking we didn’t learn how to measure, the profitability of the system as a whole.

So Keynes’ strategy is simply and purely to keep the economic system profitable, to avoid effects of compound growth becoming unprofitable. I’ve done some of the key work on the physics of environmental systems that will enable that work, on how to make whole system measures.

That’s a study called Systems Energy Assessment (SEA)which shows from a whole environmental systems point of view how to combine “in-house” energy uses with “out-sourced” ones. The statistical finding is that (nominally) 80% of the total energy uses purchased as an operating cost of business are going uncounted. That will help to more accurately measure the real costs of business decisions both today and for the future.

The basic equation of whole system profitability, used to signal the approach of over-investment, can start as simply defining GDP as a “net” quantity, of positive and negative values. The negative GDP values would reflect the foreseeable emerging liabilities of unsustainable development in the past, for example.

That might also be thought of as a negative discount rate, as costs not only for mitigation, but for also having to prematurely rebuild the infrastructure of the economy if over expansion has made it unprofitable.

netGDP = GDP + negGDP

as an environmental measure depreciation due to over-investment in the earth.

One clearly needs to start by carefully choosing only firmly answerable parts of the question to ask, rather than just guessing at totals. You’d want to combine hard measures of clear financial costs with proxy measures to watch carefully, in attempting to make netGDP a true measure of the long term health of the system and the wisdom of its investment choices.

What happens in natural systems is that during initial growth netGDP > GDP as growth fosters growth. After the turning point (where “getting bigger” = “getting too big”) then netGDP< GDP.

One of the proxy measures that would seem most helpful, then, is to locate that turning point when the net benefit of expansion and the net liability of emerging conflicts could be seen clearly approaching. That’s the point when the natural role of finance is to switch from “growing the system” to “steering the system”, a whole new plan for the use of wealth.

The main cost everyone can understand is climate change. Our hidden financial liability for fossil fuel development is needing to basically redevelop the whole world economy.

As a round number we need to get rid of 80-90% of our carbon fuel use, in 30 years. All our development is still carbon intensive, though. There are greatly added liabilities, then, for still becoming further dependent on increasing fossil fuel use, as all the world’s growth strategies are relying on.

One need not have a theory to clearly see how difficult it is to reduce the carbon intensity of GDP. It’s had a remarkably slow and steady historical rate of decline, at about 1.3% per year.

So, the only apparent technically feasible way to do it is to lower GDP. Using Keynes’ template, that would done by creditors spending their savings to facilitate that without causing cascading failures in the interests of long term profitability, despite a current loss.

So yes, it’s a big problem, and people are emotionally inclined to do anything but just buckle down and ask the right questions. Somebody needs to, though, so that anyone can have a believable road map for making their decisions in the future.

We just don’t have any believable road map in public discussion now. We definitely don’t want to shrink carbon pollution by reducing living space and everything else, by 80%, for everyone to essentially share our homes and live with households with 5 times as many people.

That IS the math though. Could we find some sort of equivalent and make the transition profitably? Not in annual terms, but certainly, if we’re asking true netGDP with a view to the future.

As a culture we allowed the assumption that continued growth would always produce current multiplying profits, and we constantly discredited the people from Malthus to the present who pointed out the obvious grand error in that. To now “find yourself in the real world” we need to “study like hell” rather than keep playing games, and the way to make a profit today.

 

 

Three Wider Scientific and Economic Implications

The new scientific method presented in Systems Energy Assessment (SEA) allows economic systems to be studied by physical science methods,

so that our accounting method can match nature’s.

The first major practical finding is that the total energy demands of businesses have been undercounted, with the standard LCA method commonly fining only ~80%.   It does not count the outsourced energy uses for the scattered services businesses hire to operate, or their environmental impacts.

  1. Realistic Life Cycle Financial Accounting & business balance sheets
  2. Discovering how much of nature’s systems are hidden from view
  3. Study of complex systems as both natural objects and abstract concepts

These three main wider scientific implications of the method are found on the SEA resource page with other notes and resources. Each of which would take more explaining, but might also be helpful for suggest the intriguing challenges for learning how to apply science to the task of making the earth work for us, and us to work for the earth at the same time.

Continue reading Three Wider Scientific and Economic Implications

The telling mental gap at “Gapminder.org”

There’s a now famous study of progress in human welfare, with a common glaring flaw.

The flaw interestingly betrays how humans are dazzled by positive information, and quite forget what we’re looking at.

Hans Rosling has traveled the world, presented at the TED talks many times and raised huge amounts of money for his work, based on the beautiful data animation videos he has produced, like the one on world progress in human welfare over the past two centuries.

It displays the remarkable course of human progress, as proof positive of the soundness of the capitalist approach to economic development and the universal value of creating wealth for all that is evident in the data. It is indeed a remarkable history.

Gapminder image of the modern world

Continue reading The telling mental gap at “Gapminder.org”

big news from (Henshaw, Grantham &) the earth

My article in New European Economy describes the 10 year global price spiral in natural resource markets as a true “Decisive Moment for Investing in Sustainability” (local PDF copy).  It shows the world is now pressing natural limits for affordable resources, in a way as potentially explosive and dangerous to a growth economy as a global financial bubble, with more lasting effects.

The long expected “big crunch” at the end of growth has a surprising shape.

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For a growth economy shifting from having ever cheaper to ever more unaffordable resources is the long expected “big crunch” at the end of growth.   We just didn’t know what it would look like, or that it would be a bigger and more urgent dilemma for prosperity than climate change.

A major business leader, Jeremy Grantham, recently issued confirming report on the future of natural resources from his view Wake Up! The Age Of Cheap Natural Resources Is Over (200k) .   It’s a critical new issue, marking conclusive evidence of a change in the natural environment’s response to us.  How people respond now matters a great deal.

The popular effort is likely to be to accelerate our depletion of resources rather than relieve our growing demands  Continue reading big news from (Henshaw, Grantham &) the earth

The oddest rationalization of all – “in misinformation we trust”

This is a slightly edited version of my comment on Andy Revkin’s NY Times Dot Earth blog, on “Rationalization masquerades as reason”

The odd rationalization of them all is that what we ask the economy to do by spending money has no environmental impact… if we don’t see it. It’s illogical, but is actually how nearly everyone thinks, that you have no responsibility if you have no information about it.

For example, the real total impacts of using money are naturally going to be an equal share of the world total per dollar, on average. That’s just a mathematical tautology. Everyone will agree in principle, but most then still count the impacts of *their* spending as “0″, instead of “average”, because they don’t see what to count. Continue reading The oddest rationalization of all – “in misinformation we trust”

We need better conceptual models for reading economic data

Reposted from a guest blog entry at the Capital Institute

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The recent INET meeting at Bretton Woods organized by the Institute for New Economic Thinking (INET) with support from people like George Soros, brought together a large group of leading creative economists and ecological systems scientists, to push the envelope in discussing how to reorganize the world economic system. Choosing the same site for which the world changing Bretton Woods conference after WWII was named, was both intentional and seemed quite appropriate.

A strong “vision” seemed to be emerging, even if the details of how to advance it were not so clear. All might agree that nature’s economies seem to work better than ours, and we need to change something. The concluding conversation between Paul Volker and George Sorospresented some of the broad issues, nicely moderated by Gillian Tett, and was quite interesting.

I liked the session on “Complexity Economics” particularly. It really is necessary that people begin thinking of the economy as a complex system, and to learn the lessons of ecology for understanding how it can learn to be as stable and healthy as ecologies.

The concluding comments were also a very nice lead-in to my own approach, that to meet the challenge of using complex systems modeling, what we need are better conceptual models for reading economic data. A good example of new data needing new concepts was discussed in another session by Duncan Foley and I insert his first graph below.

US National income, Value Added & Employment
Continue reading We need better conceptual models for reading economic data

The economic meaning of “steady state”

Herman Daly offers his view of what a “steady state economy” is and how to use the term in a guest blog post on the Capital Institute website. I agree that understanding the meaning is more important than exactly what name you use, but there are important types if “steady states” not yet being discussed.

My comment, posted there and below, is for helping distinguish between the “lively” and “lifeless” forms of steady states that are possible for economies in nature. Of course, I raise the curiously overlooked concise meaning that Keynes would have given the type of lively and conflict free stable state of healthy economies too, as he discussed in “The General Theory…” but was misunderstood.

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Finding the Fitting Name

I’d agree with Daly that ultimately what you call the ideal kind of steady state for an economy matters less than whether what you achieve is something close to an ideal steady state. I study the physics of “open systems”, a.k.a. natural economies, and there are clearly discernible “ideal” steady states one might seek to achieve.

There are the ecosystems that while relatively stable and full of competing populations also display such deep and diverse complementary relationships between populations that the whole system operates with a relatively low level of internal conflict. Continue reading The economic meaning of “steady state”

Nurturing “cash cows” or “crash cows”?

Note: this is a draft concept for the Apr 2011 article on “what to do” aimed at a wider business audience “A decisive moment for investing in sustainability

For other discussions of “what to do” from an environmental systems science view, see also the 6/10/11 notes for Alex Jakulin’s Foo Camp talk on my work and my various discussions of the natural limit for money that Keynes identified which comes down to one thing. That’s the subject for slides #5-8, for for Aleks’ talk. or search my site for “what to do”.

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All natural systems start with growth like economies, using a “seeding mechanism” for planting seeds to multiply the “start-up” system. That mechanism, which for money is the use of investment to grow investments, has to change form to become a “steering mechanism” [switching from being a “Crash Cow to a Cash Cow” so the “end-up” system can transition from growth to becoming sustainable, if it is to survive beyond its start-up period.

The world seems to be at a particularly decisive moment, not quite being recognized. There’s a strong and creative professional sustainable investment advise community, emerging and being given paid positions and increasing influence, throughout the finance, business and government economic decision making communities. Continue reading Nurturing “cash cows” or “crash cows”?

The fit with Alexander – and clearer escape from our traps

Our oil addiction, like all addictions, became a physical trap, and shaped our ways of life to fit its temporary needs.

Needing to consume ever more of the remaining affordable oil supplies also has pollution effects that will permanently disrupt the earth’s climate.

We do it to achieve an evidently false image of “economic stability”.

The design of our environment, our spaces and uses, will change adaptively as some parts of what we built find new lasting uses and others don’t.  Christopher Alexander is an architect whose “Pattern Language” explores how the natural processes of reshaping the spaces we live in over time has created urban spaces perfectly fitting their use as a form of natural environmental design.

The patterns of space as an image of their uses

One can discover how we fell into the trap of dependence on an ever growing use of oil with no future.  That won’t quickly change the world we built around it though.  As we respond, the natural forces and our responsive thinking will reshape our space, likely leading us to follow nature’s paths to finding opportunity and harmony. Continue reading The fit with Alexander – and clearer escape from our traps