Supplemental notes for 3/12/10 Economies that Can become part of Nature

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How an economy can relieve growing internal and environmental strains that would trigger a wider than local collapse.

It’s a subject enough people need to understand before the shrinking time to respond slips away.

5/18/19

Current economic thinking on Keynes “widow’s cruse” repeatedly misses the whole point. Keynes illustrated his discovery that capitalism would have natural limits of overinvestment with the parable from 1 Kings 17 about Elijah granting God’s gift to an impoverished old widow, of an inexhaustible jar of flour and jug of oil, to last until rains came again.   In Chapter 16.V of The General Theory, he directly states what he meant, saying that to avert the worst crises of capitalism as growing returns from exploiting people and the earth reached limits:

“In so far as millionaires find their satisfaction in building mighty mansions to contain their bodies when alive and pyramids to shelter them after death, or, repenting of their sins, erect cathedrals and endow monasteries or foreign missions, the day when an abundance of capital will interfere with an abundance of output may be postponed.“

It is clear he is talking about the world economy becoming managed as a healthy cash cow, solving the “tragedy of overinvestment in the commons” by spending returns on investment.  That is the better choice than letting the share of income earned by capital continue tending to infinity as the productivity of exploiting people and the earth shows diminishing marginal returns.   To put it crudely, you might simplify the parable to “better to be a cash cow than dead meat.”   Better a circular money economy, as in naturally balanced systems, than endless compounding of worthless promises.

For the owners of the world the choice is to either be generous enough in spending their profits to relieve the people and environment of ultimately unproductive demands – caring for the earth, or alternately to drive their exploitation to exhaustion, leading the earth into an all-consuming plague of plagues as growing ealth extraction becomes more disruptive than constructive.  In Chapter 16 Keynes also said that time we would face that would not be far off, and now it appears we see he was right.

Historically the Romans and the fabled “Egyptians” of the Exodus seem to provide the real world models for owners of the world, making the wrong choice as their fortunes reached natural limits.   The actual Egyptians, thriving for ages giving good work to their population during the annual floods, seem to offer one example of the other choice.   Nearly all of us make that basic choice in our careers, learning to back off from making excessive demands on our environments as a key investment strategy to use, letting other things flourish, all the time.

Of course, there are lots of other principles to follow in maintaining the productivity of a network of resources, such as not spending all the profits on unproductive services.   Equally tough moral choices lie in needing not to accumulate overhead that depletes your energy returns on energy invested, EROI.   It would seem very easy to bankrupt a big and otherwise seemingly healthy business, culture, or whole economy, letting its energy costs rise to equal its energy returns.

6/15/11

J.M. Keynes devoted the concluding theory chapter of his design for modern economics, Chapter 16 of The General Theory, to describing the natural limits of money in a free market system .

It seems economists were generally confused as to why Keynes would consider that, and didn’t study what Keynes had to say about where following the rest of his theory would lead. He pointed to why a market economy will continue to have growing savings and keep making growing investments even when natural limits and environmental conflicts make that increasingly unprofitable for the system as a whole.

He also described the alternative that would allow the whole system to remain profitable in the long term. Either way the expansion of wealth and money would reach a climax. Either investors would continuing to accumulate savings until they produced no net returns and businesses failed, or by spending enough assure the long term profitability of the whole.

The one choice is utterly disastrous and the other a bit unappealing to some but a way out of a real trap.  It’s counter intuitive in many ways, and forces us to recognize that every part of an economic system depends on the good health of the whole. Continue reading Keynes’ “widow’s cruse” – capitalism to natural growth →

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 →

How we can reduce our negative impacts on the world is by finding the right question to ask.

Choosing the right things to spend on doesn’t really do that, for two very good reasons.

Most money you spend will have about average impacts per dollar anyway. If you think where money goes and how each product takes so many kinds of inputs, every dollar really uses the whole economy, and on average, now produces about 1.0 lb of CO2!

Because it generates profits it also stimulates economic growth at around 3% a year, made possible by a similar increase in what we are trying to take control of in nature, per dollar. So buying expensive “green” products does more harm than cheap products by having nearly the same average impacts throughout the world, per dollar. You could buy cheaper products, but because you’d then buy more there’s no escape… either way.

Continue reading What to do… to steer our unmanageable world →

I think the answer is, well, yes of course… Most people seem to
intuitively confuse increasing their access to resources with increasing the
supply when increasing their access to resources actually decreases the earth’s
supply.

This is another way to understand the various mysterious efforts
to reduce the impacts of growth by streamlining and accelerating growth, which
of course multiplies its impacts. It basically means we are not being
self-critical and asking the hard questions. The easiest data to display the
effect with is the world energy/GDP balance:

Continue reading Does increasing resource supply accelerate depletion? →

From Jim Maendel on a Linkedin Foresight group

Phil,
[I was] just looking for smart people to join our group. After checking out your site, I believe you may be overqualified. Your stuff is brilliant. I found this portion on the market pundits fascinating, from The Bump on a Curve Notepad:

“Well, I’ve been wondering for a long time why the flows of change are so hard for people to see, and do think there’s some kind of “fixed world illusion” to contend with. There’s a list of reasons why we don’t update our information regularly and so miss the flows of change because of that.

It’s a little speculative, but another detail caught my attention recently, that even when repeated changes in “normal” are quite dramatic, people often only have to “sleep on it” to readjust and see even very short lived situations as if they were permanent and a brand new permanent “normal”.

Nearly every pundit and media source from 2007 to the present has radically changed their stories about the economic collapse nearly every week… for example.  They always seeming very comfortable with the “ever present” finality of their quickly changing stories. It’s like there’s a “reset button” that they all keep using, in their sleep, that completely hides the facts of accelerating change. Continue reading Noticing change, through the fixed world illusion →