What GDP & the Dow measure

Originally “Where I’ve gotten so far”, A somewhat better summary of my work that Rex Weyler found helpful started from a discussion titled “Are Stock Markets Ponzi Schemes or Real Wealth?”. Rex wrote back: “This and the SEA presentation on your site are helpful. Thanks.”

To me and I think to most economists “the stock market” is not seen as directing the economy, just in the news.

In reality it’s a game of mutual pick-pocket
played by the rich, that helps banks measure the credit worthiness of businesses

I added a line for US GDP to the nice graph of US Quads of energy use & Dow Jones prices done by Charlie Hall (1).   It’s remarkable.

It seems to expose a bit of a “fraud” in what people have been told of the role of the stock market. Clearly both GDP and energy use have generally followed smoothly progressive curves.  Clearly the Dow doesn’t track or lead either.

There’s a lot more to why US energy use stopped growing and GDP kept growing, but the DOW really seems to be just sailing off on its own.  It reflects no aspect of either of the consistent indicators of economic wealth.
(1)Dow Jones, US energy & GDP

Continue reading What GDP & the Dow measure

Seminar on my work at June 2011 Foo Camp

Aleks Jakulin is a systems scientist, entrepreneur and professor at Columbia University, a very interesting guy, who was invited to present at the June 2011 Foo Camp meeting information space hackers and scientists. The invitation is to present the work of someone else, a nice twist, and Aleks chose to present my work, also incorporating some of my years of discussing our approaches to general systems theory with our mutual friend Stan Salthe.

We chose the working title:
System archetypes & anarchitypes… because my interest has always being in the natural processes that are “model breaking”, like the enduring eventfulness of change and how events are reliably individualistic. Below are some of the notes and images he’ll be working from as he builds a conversation on the subject.

Once you have a reliable image for something, an impression, a belief, an equation or rule, how can you keep clear in your thinking that it’s something of your own invention? Failing to do so seems to be central to the “curse of knowledge” that people can only look into the past, and our rules for things often leave us horribly unprepared for the future. Continue reading Seminar on my work at June 2011 Foo Camp

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”

Using net-energy system boundaries to study working units of nature

Important new tool for understanding businesses as physical systems AND measuring their total resource demands

The research paper Systems Energy Assessment (SEA) now published as of Oct 2011, with Charlie Hall’s special collection of Biophysical Economics papers New Studies on EROI in Sustainability (MDPI).  The pre-publication copy can be found at the Cornell physics archive, and at the references site www.synapse9.com/SEA, along with other notes.

There are two main findings. One is that if you consider physical causation as a way to trace how energy uses are connected, a business needs to be considered as a whole organization of working parts. At present statistical measures of business energy use treat businesses as just a collection of technologies with no operators or environments. That difference can be measured, and seems to call for a typical increase in the environmental energy use impacts and risk exposures of businesses by about fivefold.

The other main finding is that it seems generally possible, for the first time, to use objective methods to locate the natural organizational boundary of individual net-energy systems in the environment. That allows traditional thermodynamic and net-energy physics analysis and to refer to organizational units of the environment as subjects of natural science.

 

What’s one thing everyone could do, to slow climate change

An exchange with John Baez on his Azimuth blog.

Phil Henshaw says: May 28, 2011 at 1:54 am

I think the actual problem, and why it’s so intractable, is that our “resource management system” is designed to serve our financial system,… not the reverse.

Our financial system is designed to create stable positive financial returns, so people can keep adding their winnings to their bets, and have an ever multiplying “free lunch”. The critical energy management decision necessary for doing as best one can at that (allowing punctuating the endless boom with enough busts all the time…) is to accelerate the economy’s use of inexpensive energy as fast as economically feasible, forever.

What results when people model their implementation of physical law following rules they happen to like for financial law, is it creates a simply enormous explosion of wealth that produces a completely unmanageable society and economic system (instead of a comfortable home on earth).

I think that’s a big part of what is so self-defeating in the human intention to “tame nature” to behave like we think it should. We haven’t seen the value of watched nature to see how it works first.

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Reply, John Baez says: May 28, 2011 at 8:56 am

Can you translate these insights into an answer to the question: “What is the one best thing everyone could do to slow down climate change?”

If so, would the answer be some version of “think differently”? Or is there a concrete action that you can propose?

Reply, Phil Henshaw says: May 28, 2011 at 9:27 pm

The theoretically necessary step, that no one seems to understand when stated in abstract terms, is for the net-energy surplus that was first applied to growing the system, now be applied to adapting the system to a finite and fragile planet. The world’s institutional economic models and planning assumes there will never be a need for that, and money can keep compounding forever.

The practical means of changing that comes from J M Keynes, and what to do with money when the economy can’t grow. It follows from how the surplus resources for growing the economy were managed to start with, by the use of profits from investment to proliferate more investment.

To keep investment funds from becoming worthless when the economy can’t grow, and make the system manageable again, you’d need to deflate that money spiral. As a personal matter it means the people whose money it it need to stop growing it, and be careful to invest it in good purposes.

That would involve a)devoting investment funds to sustainable development rather “fast money” and b)stop adding investment profits to expand total investment, divesting net profits for some other good purpose. There would be a lot of negotiation as to how to achieve that, of course, as all our institutional plans assume it’ll never occur.

“That would involve a)devoting investment funds to sustainable development rather “fast money” and b) stop adding investment profits to expand total investment, divesting net profits for some other good purpose.”

I’ve been getting traction with some of the leading thinkers in the ethical investment community (John Fullerton, Hazel Henderson and others) by saying it’s a matter of combining “green investment” with “green divestment”, redirecting the savings in the “giant pool of money” for good purpose, to reduce the absolute scale of our demands on the earth.

Keynes actually wrote a whole chapter of his big book on it, Chapter 16 in The General Theory, though due to the cultural belief in perpetual growth his entire profession ignored it completely. I have a scanned copy on my site fyi. It’s readable, but you have to fight through his discussing it in terms of the aggregate variables of the world economic system, entirely ignoring any social or political debate… To find my references to that, and to “the widow’s cruse” parable he first discussed in in terms of, you can browse my blog posts mentioning Keynes –http://www.google.com/search?sourceid=chrome&ie=UTF-8&q=site%3Asynapse9.com%2Fblog%2F+keynes.

Phil

p.s. Yes, now it would seem that the business people of the time took the magical secrets Keynes offered for how to stabilize the growth system for making more and more money, and have now successfully run it completely into an impenetrable wall of natural complications and resource exhaustion, just as Keynes predicted and explained clearly how to avoid. So, the one thing everyone can do is start reducing appetites and investments, while divesting their profits and making that a new truth for society, as they begin to study and understand why.

Why “going to the edge” makes you rich, and assures falling over

The problem with “going to the edge” in nature is she keeps moving the edge, back and forth.

It’s a trap. Having a practice of always maximizing your take and going to the limit leaves you vulnerable to natures perennial habit of leading you on when she moves it out, unaware that the natural next step is moving it back.

The things that are more of a problem are the ones your’e close enough to the edge of to make it impossible for you to respond to in time, when they move. The pattern of natural fluctuation is somewhat like an irregular pattern of breathing. Continue reading Why “going to the edge” makes you rich, and assures falling over

Wild Resiliency – thought is an ecological experiment too

A post to Wild Resiliency on The Seven Keystone Processes – adding that thought is an ecological experiment too.

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I liked the statement at the top, that:

“we too easily believe ourselves to be the center of the universe and the measure of the world”.

How we somehow manage to conjure up the notion that the flickering images of our minds as the facts of nature, actually placing each human at the center of “their” universe, has long been a puzzle to me. I see its power often enough.

It’s a great deal of fun to have a quite believable universe to live in, much as a fantasy, where we each can have everything we see or experience mean anything we like to fit the other beliefs we happen to like. Continue reading Wild Resiliency – thought is an ecological experiment too

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

What kind of search is finding the new model?

This is a response to Graeme Rickard’s post on Apr 27 to the Australian environmental network GreenLeap, discussing why the dimensions of the environmental problem seem increasingly unsolvable.

Graeme,  When you notice that many of our best traditional solutions are making our energy and environment problems much worse now, it raises the stakes, but also lets you trace existential dilemma to its logical origins.

The origins of the problem provide solid evidence the problem is our whole model, not shortcomings in our execution.

To have the epiphany needed to change your whole way if thinking, though, seems require finding some hidden dimension of our thinking that can be “uncurled” to help us find ways to branch off the model we have toward something else.

How some of our most trusted solutions simply won’t work at all exemplifies the problem. The “solution” of providing more energy to an “energy starved” economic system with an infinite energy appetite, actually just feeds the addiction. It does not cure it. Continue reading What kind of search is finding the new model?

Is it “the system” or “the excess”?

In Finance Professor Earns “King’s” Ransom, John Fullerton of the Capital Institute about a professor, acting as an expert witness, paid $1 million dollars in the financial fraud trial of Raj “King”.  It looks to me that he was paid to say the information, that Raj had traded on, was available to the public, so… somehow would not actually “illegal” to use even if the way he got the insider information was illicit.  (wow!)

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To me the question is how to tell the difference between using money to make money as a general good as our culture treats it, and the natural limits at which it upsets and falsifies everything we stand for to continue supporting it. It seems to take us to where power is too powerful to put limitations on, and that’s not good. Continue reading Is it “the system” or “the excess”?

New systems science, how to care for natural uncontrolled systems in context