{"id":1229,"date":"2010-04-04T00:00:35","date_gmt":"2010-04-04T04:00:35","guid":{"rendered":"http:\/\/www.synapse9.com\/signals\/?p=1229"},"modified":"2019-05-19T09:54:33","modified_gmt":"2019-05-19T14:54:33","slug":"keynes-widows-cruse_capitalism-to-natural-growth","status":"publish","type":"post","link":"https:\/\/synapse9.com\/signals\/keynes-widows-cruse_capitalism-to-natural-growth\/","title":{"rendered":"Keynes\u2019 \u201cwidow\u2019s cruse\u201d – capitalism to natural growth"},"content":{"rendered":"

Supplemental notes for 3\/12\/10\u00a0Economies that Can become part of Nature<\/a><\/p>\n

_______<\/p>\n

How an economy can relieve growing internal and environmental strains that would trigger a wider than local collapse.<\/h3>\n

It’s a subject enough people need to understand before the shrinking time to respond slips away.<\/p>\n

5\/18\/19<\/p>\n

Current economic thinking on Keynes “widow\u2019s 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<\/span><\/em><\/strong> 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.\u00a0 \u00a0In 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:<\/p>\n

“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.<\/em>“<\/p>\n

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.\u00a0 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.\u00a0 \u00a0To put it crudely, you might simplify the parable to \u201cbetter to be a cash cow than dead meat.\u201d\u00a0 \u00a0Better a circular money economy, as in naturally balanced systems, than endless compounding of worthless promises.<\/p>\n

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.\u00a0 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.<\/p>\n

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.\u00a0 \u00a0The actual Egyptians, thriving for ages giving good work to their population during the annual floods, seem to offer one example of the other choice.\u00a0 \u00a0Nearly 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.<\/p>\n

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.\u00a0 \u00a0Equally tough moral choices lie in needing not to accumulate overhead that depletes your energy returns on energy invested, EROI.\u00a0 \u00a0It 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.<\/p>\n

6\/15\/11<\/p>\n

J.M. Keynes devoted the concluding theory chapter\u00a0of his design for modern economics,\u00a0Chapter 16 of The General Theory<\/a>,\u00a0to describing the natural limits of money in a free market system .<\/p>\n

It seems economists were generally confused as to why Keynes would consider that, and didn\u2019t 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.<\/p>\n

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.<\/p>\n

The one choice is utterly disastrous and the other a bit unappealing to some but a way out of a real trap. \u00a0It’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.<\/p>\n

A strong case seems possible that we have reached a global point of diminishing profitability for growth, affecting the whole economic system. \u00a0 That could well be\u00a0the cause of increasingly intense debates over the direction of the economy for decades, the dangers of resource depletion and climate change, the erupting strains of many kinds leading up to the 2008 collapse, the great economic volatility ever since, and the continuing persistent rise of basic resource costs.<\/p>\n

Those can all be grouped under evident natural causes for there now being too much money chasing too little real economic opportunity. \u00a0 They could well be the main source of our\u00a0growing concern with\u00a0\u201csystemic risks\u201d and for \u201cnothing we do seeming to work\u201d. From his view from the 1930\u2019s Keynes had predicted a point at the end of growth when the whole economy would sour, as increasing investment was increasingly unproductive. He stated plainly he thought that point of excessive financial capital would be fairly easy to achieve.<\/p>\n

What we now see are the convergence of all the hidden liabilities from past bad investment practices. We have the rapid deterioration of the environment, the high debt and noncompetitive cost structure of the developed economies, the globally escalating food and fuel resource prices due to theglobal condition of demand exceeding supply<\/a>, and our beginning to feel the heat of climate change, that together seem to prove the case.<\/p>\n

Seeing the necessity to halt this progressive deterioration is where one finds the boldness to consider the one last option that would actually work, reducing whole system economic demand on the earth by regulated divestment of excess savings. It could be done if a simple principle was followed universally, and social peer pressure was what enforced it, and both of those seem quite possible, but it takes global learning and communication of a new kind. Finding some means to do it is an indispensable step to relieving our burden on the earth and finding the funds for other purposes needed to restore a healthy sustainable economy.<\/p>\n

Of course, it also can\u2019t be done without\u00a0better ways to measure economic impacts and their financial liabilities<\/a> as well as things from everyone else\u2019s lists too. The following is the original of this post. You can use a\u00a0site search for references to Keynes<\/a> , and go to my\u00a0blog list of \u201cnatural economy\u201d posts<\/a> to find other discussions of how and why it\u2019s important to restore a \u201ccircular economy\u201d now that our \u201cgrowth economy\u201d is becoming unprofitable and multiplying our complications.<\/p>\n

4\/1\/10<\/p>\n

Keynes was also a misunderstood systems ecologist\u2026 among many things, and there\u2019s a trail of evidence that he discovered the secret of how natural systems switch from multiplying complex designs to refining simple solutions, he gave it the strange name \u201cthe widow\u2019s cruse\u201d after a bible story about the gift of an inexhaustible cup (I Kings 17:8\u201316). His proposal makes no real sense to anyone, unless, you consider our \u201ccrisis of capitalism\u201d as a growth ecology creating insurmountable internal problems for itself at natural limits and needing to switch to\u00a0nature\u2019s usual solution for that<\/a>.<\/p>\n

The general conservation equation for auto-catalytic growth compares the resource for making products (P<\/strong>) and the saving from it for developing the process (S<\/strong>). If the linked markets for it\u2019s \u201cwork\u201d and \u201cinvestment\u201d grow and stabilize together, then the system stays in balance as it develops. \u00a0In an economy that occurs when the returns added to savings (S*r<\/strong>) and spending from savings (S*s<\/strong>) match the increase in products (P*p<\/strong>).<\/p>\n

When physical limits cause product growth to stop,\u00a0p = 0<\/strong>
\nTHEN\u00a0stable change over time<\/strong> requires:
\nEITHER: \u00a0\u00a0r = 0<\/strong> and an end to average positive returns on investment
\nOR:\u00a0 r – s = 0 <\/strong> so the comfortable positive returns are spent on purposes other than multiplying returns
\nSO:\u00a0 both\u00a0S1\u00a0=\u00a0S0\u00a0+ S0\u00a0(r – s)<\/strong> and\u00a0S1\/P1\u00a0=\u00a0S0\/P0<\/strong><\/p><\/blockquote>\n

That\u2019s Keynes \u201cwidow\u2019s cruse\u201d idea for turning the economies into an \u201cinexhaustible cup\u201d with a lasting sustainability plan, to spend enough of the seed money on something useful for the system to stabilize it.<\/p>\n

It\u2019s not about stabilizing growth but stabilizing a healthy economy without growth, treating it as a natural living system switching to maturation, sacrificing the practice of limitless growing investment and concentrating wealth. \u00a0 It would be a big cultural change for us, but once it\u2019s realized\u00a0why it was always going to be physically necessary<\/a>\u2026, as at the end of growth there is no other healthy economy option \u2026 \u00a0there are ways to\u00a0provide quick systemic relief<\/a>.<\/p>\n

It\u2019s also an application of \u201cnew physics\u201d, using scientific models to refer to and assist in studying complex physical systems that remain undefined. That\u2019s an approach that avoids representing nature as the conceptual model used, and allows connecting different languages of interpretation through their references connecting aspects of the same physical things.<\/p>\n

Physical systems that operate by themselves in relatively passive environments develop by auto-catalytic growth from a seed process of some kind, generally animated by their own self-organizing parts. The whole system develops by treating some of its products as operating surpluses, and using them to build the process. That multiplies its scale and the surpluses until the erupting internal and external environmental imbalances disrupt or exhaust it, or trigger a switch to maintaining the surpluses and adapting to the new environments by completing and perfecting the design its operations.<\/p>\n

Jul 2011<\/p>\n

a steering mechanism, guiding the system toward sustainability, seeking profitable options for the system as a whole<\/h3>\n

For other views of \u201cwhat to do\u201d from an environmental and systems science view, see also my \u201cWhat to do<\/a>\u201d from 3\/6\/10 and my<\/p>\n

My various other discussions can be found from a site search of Synapse9 for mentions of keynes<\/a>, most discussing\u00a0the natural limit for money that Keynes identified.<\/p>\n

It\u00a0comes down to one thing, that is the subject for slides #5-8, in my 6\/10\/11\u00a0notes for Alex Jakulin\u2019s Foo Camp talk on my work<\/a>.<\/p>\n

All natural systems start with growth like economies, using a \u201cseeding mechanism\u201d for planting seeds to multiply the \u201cstart-up\u201d system. \u00a0For money and the economy, it’s the regular use of investments to grow investments. \u00a0That mechanism, like any growth system’s start-up\u00a0mechanism, has to change form to become a real\u201csteering mechanism\u201d<\/strong>.<\/p>\n

As a start-up system it acts to continually expand itself at maximum rates. To become an\u00a0\u201cend-up\u201d\u00a0steering mechanism, guiding the future of the system toward sustainability, it has to change to seeking profitable options for the system as a whole, avoiding expansion that only becomes ever more unprofitable.<\/p>\n","protected":false},"excerpt":{"rendered":"

Supplemental notes for 3\/12\/10\u00a0Economies that Can become part of Nature _______ 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\u2019s cruse” repeatedly misses … Continue reading Keynes\u2019 \u201cwidow\u2019s cruse\u201d – capitalism to natural growth<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","footnotes":""},"categories":[7,8],"tags":[],"class_list":["post-1229","post","type-post","status-publish","format-standard","hentry","category-econn","category-theory"],"_links":{"self":[{"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/posts\/1229","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/comments?post=1229"}],"version-history":[{"count":2,"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/posts\/1229\/revisions"}],"predecessor-version":[{"id":3994,"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/posts\/1229\/revisions\/3994"}],"wp:attachment":[{"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/media?parent=1229"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/categories?post=1229"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/tags?post=1229"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}