{"id":3355,"date":"2016-02-24T21:59:02","date_gmt":"2016-02-25T02:59:02","guid":{"rendered":"http:\/\/synapse9.com\/signals\/?p=3355"},"modified":"2016-04-01T10:49:08","modified_gmt":"2016-04-01T15:49:08","slug":"did-keynes-boulding-both-really-say-that","status":"publish","type":"post","link":"https:\/\/synapse9.com\/signals\/did-keynes-boulding-both-really-say-that\/","title":{"rendered":"Did Keynes &#038; Boulding both really say that?"},"content":{"rendered":"<blockquote>\n<ul>\n<li><em>ed note: \u00a0 The current discussion of the core dilemma of capitalism, as a limitless system for creating growing wealth, is in terms of the crises we now face caused by it, producing socially\u00a0disruptive innovation and growing financial inequity. \u00a0 Those include \u00a01) threats of rapidly growing social inequity, 2) unsustainable national and private debt, 3) disruptive scales of job loss from globalization and\u00a0automation, 4) demands for unachievable ever\u00a0faster\u00a0and ever more complex learning and\u00a0change\u00a0, 5) the rapid\u00a0depletion of earth&#8217;s resources, 6) disruption of the climate and earth&#8217;s ecologies, and of course 7) increasing international conflicts between conflicting economic interests, \u00a0and of course, \u00a08) growing risks of grand scale financial\u00a0collapses due to failing promises,\u00a0as a kind of general list. \u00a0It&#8217;s quite a list. \u00a0 There&#8217;s been a very long\u00a0debate but mostly scattered in pieces and hidden from view. \u00a0That&#8217;s both because the primary\u00a0culprit is our whole way of life, naturally hard to talk about, and what to do with\u00a0&#8220;money&#8221; .<\/em><\/li>\n<li><em>The <span style=\"text-decoration: underline;\">design of our economic system<\/span> that defines &#8220;capitalism&#8221; is very simple. \u00a0It&#8217;s\u00a0&#8220;the use of investment\u00a0profits to build up investments&#8221;. \u00a0That&#8217;s it. \u00a0 Why such a simple practice has a hold on us is that it\u00a0promises both society and individuals ever\u00a0faster growing\u00a0profits without growing\u00a0work. \u00a0 Of course that tends to end up badly, having been much too good to be true from the start. \u00a0 The equally simple <span style=\"text-decoration: underline;\">design of all natural systems<\/span>\u00a0is that &#8220;any system needs to build up to get started, and then stop building up to continue&#8221;. \u00a0The two definitions conflict. \u00a0 Keynes and Boulding foresaw that the two would come to blows, once the economic system had built up and needed to stop building up to continue. \u00a0 They saw\u00a0capitalism\u00a0could become like\u00a0a natural system and <span style=\"text-decoration: underline;\">can\u00a0change\u00a0only if investors spend their profits<\/span>. \u00a0The sense of it is that investors would &#8220;pay it forward&#8221;\u00a0so their profits would take care of the future rather that keep &#8220;paying it back&#8221; so old money could take ever more from the future. \u00a0It would let\u00a0our economic system first build up, and then stop building up, to be able to continue, with no guarantees but as a possible path forward. \u00a0 It&#8217;s all too simple as a design problem, as how all enduring natural systems develop and needs the social principle to make sense. \u00a0The dilemma is completely\u00a0unsolvable\u00a0as a financial problem within capitalism, though, challenging our\u00a0 whole\u00a0way of life as a rather immediate concern. \u00a0 jlh\u00a03\/14\/16\u00a0<\/em><\/li>\n<\/ul>\n<\/blockquote>\n<p style=\"text-align: center;\">____________<\/p>\n<figure style=\"width: 426px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/www.3quarksdaily.com\/3quarksdaily\/2014\/05\/the-crisis-of-capitalism-income-in-the-post-employment-age.html\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/synapse9.com\/issues\/images\/3QuarksDaily-800wi.jpg\" alt=\"\" width=\"426\" height=\"239\" \/><\/a><figcaption class=\"wp-caption-text\">The intensification of work for concentrating wealth and profits. \u00a0&#8211;\u00a0Click &#8211; to see QuarksDaily article on how this process drains our world.<\/figcaption><\/figure>\n<p>&nbsp;<\/p>\n<p style=\"text-align: center;\">_____________<\/p>\n<h4 style=\"text-align: center;\">from a 21st century view&#8230;&#8230;<\/h4>\n<h4 style=\"text-align: center;\">Your\u00a0question is, \u00a0do we all\u00a0use our profits to extract increasing\u00a0pay back from others,<br \/>\nbuilding up an ever growing drain on what makes our world profitable?<br \/>\n______<br \/>\nOr do we pay our profits forward to assure our world remains healthy<br \/>\nto grow our\u00a0own ideals, our families, our communities and our world,<br \/>\ntreating\u00a0profits\u00a0as a gift to what matters?<br \/>\n______________<\/h4>\n<p>&nbsp;<\/p>\n<p><strong>J.M. Keynes and Ken Boulding were early and mid\u00a020th century &#8220;whole system thinkers&#8221;<\/strong>. \u00a0 They were true geniuses, struggling for words to convey how complex systems with all independent parts work as a whole somehow. \u00a0 It&#8217;s truly the profound puzzle of nature, how illogical it is that all the independent parts of systems would act as if they\u00a0were all coordinated. \u00a0 They didn&#8217;t stop at just looking for simple rules of prediction having no idea where they came from or when they might change. \u00a0 \u00a0They also looked for and found elementally simple organizing principles of design, for how the parts of market economies coordinated with each other as whole systems and what drove them, central principles they weren&#8217;t able to communicate and that have yet to be appreciated at all. \u00a0 From their views\u00a0they did each say that:<\/p>\n<h4 style=\"text-align: center;\">the world economy would soon bankrupt itself\u00a0by over-investment,<br \/>\nas a\u00a0natural limit to unlimited financial growth,<br \/>\ndue to the central driving financial\u00a0practice of compound investment<\/h4>\n<p>Each was also a expansive thinker with their own ways of speaking about broad principles, so they are hard to read too. \u00a0 It&#8217;s only by learning to think about the economy <em>as a whole system, with all its parts working together,<\/em> and <em>distributing its surpluses and shortages throughout all its connections<\/em>, that you can piece together from their writings the common finger prints for the above simple principle as\u00a0what they were clearly saying.<\/p>\n<p>I had some extra help with it, though. \u00a0 I learned of Keynes&#8217; work on the natural limits of finance from speaking with Ken, having gotten a chance to ask him in person, if he knew of any economists who had studied the limits of compound investment as a natural limit to growth. \u00a0\u00a0I had asked Ken about it in 1983, and was able to\u00a0understand what he said on the subject, because I had been searching for a few years already for\u00a0anyone else who had discovered the principle, that growth systems, if not interfered with, would naturally upset their own conditions for growth. \u00a0 It&#8217;s a completely invariant natural principle.<!--more--><\/p>\n<p>Ken told me of how he had taken a course from Keynes at Oxford, I think it was, and learned of Keynes&#8217;s view that the continual reinvestment of profits to continually multiply investments would necessarily bring an end to investment growth with net profits declining toward zero, in the aggregate. \u00a0That last phrase &#8220;in the aggregate&#8221; is very important to include, for the principle to make logical sense. \u00a0Keynes had illustrated what it meant with his Biblical story of\u00a0&#8220;the widows&#8217;s cruse&#8221; (or &#8216;cup&#8217;), a story about Elijah visiting an old widow and giving her an\u00a0inexhaustible cup of oil\u00a0(I Kings 17:8\u201316), to illustrate sustainable investment as resulting from the profits always being spent. \u00a0I then also found Keynes more specific discussion of the economic principles in his 1932 <em><a href=\"http:\/\/www.synapse9.com\/ref\/Keynes-ebook-TheGeneralTheoryCh16notes.pdf\">General Theory of Employment, Interest and Money Ch 16<\/a><\/em>\u00a0and Ken&#8217;s own inclusion of the principle in his 1962 <a href=\"http:\/\/www.synapse9.com\/ref\/Boulding%201962%20ch17.pdf\"><em>Reconstructing Economics<\/em> (ch 17)<\/a>.<\/p>\n<p>I had\u00a0discovered it \u00a0when studying growth as a natural process seen in the transformations of all kinds of other natural systems, and had self-published a book on it in 1979 <em><a href=\"http:\/\/www.synapse9.com\/jlhpub.htm#79-5\">An Unhidden Pattern of Events<\/a>, including the essay &#8220;<\/em><a href=\"http:\/\/www.synapse9.com\/pub\/1979_UnhidPatt-theInfiniteSoc.pdf\">The infinte society: Growth induced collapse<\/a><i>&#8220;. \u00a0<\/i> That&#8217;s where\u00a0I first described the pattern of systemic over-investment to the point of bankruptcy as one of escalating societal, financial and technological crises together, like we&#8217;ve been facing for a few decades now.<\/p>\n<p>The strangely simple reason for every\u00a0part of the economy being driven to some state of crisis and facing ever more\u00a0desperate circumstances, is that &#8220;steady growth&#8221; is a process of ever bigger and faster changes in how everything in the system works. \u00a0 Nothing can respond to ever faster change and so has to draw on the surplus capacities that are usually shared to create resilience throughout the system, resulting in that resilience being exhausted everywhere in the system at once. \u00a0 What that gives you a way to imagine the same thing happening in your home or office to see how putting increasing demands on a whole system naturally results in causing it to fail, working as a whole and every part being pushed to its limits of its ability to work together at once.<\/p>\n<p>Keynes picked a story of Elijah coming to visit an old widow to illustrate. \u00a0 Most people would find the biblical stories of God\u00a0needing to cleanse the world of economic wrong doing with\u00a0terrible &#8220;plagues of plagues&#8221;, as in the narratives of &#8220;the flood&#8221;, &#8220;the tower of Babel&#8221; and &#8220;the Exodus&#8221;, as\u00a0more clear examples of wrongful prosperity becoming self-defeating.<\/p>\n<p>It can be easy to understand the basic principle, that if you demand ever growing profit from a finite set of capabilities,\u00a0your investments will fail to produce the returns. \u00a0 What&#8217;s hard is to imagine the world economy as a &#8220;whole system&#8221;, as a network of exchanges in which &#8220;the accounts balance&#8221; and where\u00a0overwhelming constraints can develop. \u00a0Among other things Keynes said:<\/p>\n<blockquote><p>&#8220;Thus for a society such as we have supposed, the position of equilibrium, under conditions of laissez-faire, will be one in which employment is low enough and the standard of life sufficiently miserable to bring savings to zero&#8221;<br \/>\nCh 16 The General Theory<\/p><\/blockquote>\n<p>and Boulding:<\/p>\n<blockquote><p>&#8220;It is clear from the business-savings identity (8) on p. 249 that there cannot be any long-run future for business savings. In the long run there cannot be a perpetual increase in business money holdings, or in net household indebtedness to business, and in the stationary state there cannot be any long-run business accumulations.&#8221;<\/p><\/blockquote>\n<p>Most recently I&#8217;ve been discussing the broad evidence I see of the long radical deflation\u00a0in energy prices( and other commodity prices too) as indicating we have now actually reached the point of bankrupting the earth. \u00a0 It&#8217;s indeed a bit\u00a0counter intuitive, such that only a person like me might catch the pattern. \u00a0 It&#8217;s also a hypothesis that seems to cover the wide varieties of distress seeming associated with it that are otherwise improbable to occur all at once.<\/p>\n<h4 style=\"text-align: center;\">Where to start may be with our seeming to face \u00a0a \u201creverse energy crisis\u201d,<br \/>\nas if all the resource producers can\u2019t get rid of their assets fast enough.<\/h4>\n<p>What delivers the true answer to why that whole pattern is taking place, and I think it might be to then notice that the resource rich producers seem to have all become over committed financially too, like everyone else as well.\u00a0\u00a0 That\u2019s a big part of the reason for Saudi over-production, uncontrolled overhead costs. \u00a0\u00a0Of course, it was also over development of oil as a resources too, and prior commitments for the expected revenue now going unmet.\u00a0 All the producers then seem to be in great need for cash and selling at bottom dollar having assumed the price would always hold.<\/p>\n<p>The common cause I think might explain it all, then, would be that the financial \u201crecovery\u201d from the 2008 world financial collapse was done with borrowed money, not spending. \u00a0That clearly caused country on earth to\u00a0maximize its use of credit, and whatever you think of it, that appears not to have revived the economies enough to get out of debt, but only sink ever further into it,\u00a0so it looks like the bet made for the world \u201crecovery\u201d just \u201cdidn\u2019t work\u201d.<\/p>\n<p>jlh \u00a0[draft]<\/p>\n","protected":false},"excerpt":{"rendered":"<p>ed note: \u00a0 The current discussion of the core dilemma of capitalism, as a limitless system for creating growing wealth, is in terms of the crises we now face caused by it, producing socially\u00a0disruptive innovation and growing financial inequity. \u00a0 Those include \u00a01) threats of rapidly growing social inequity, 2) unsustainable national and private debt, &hellip; <a href=\"https:\/\/synapse9.com\/signals\/did-keynes-boulding-both-really-say-that\/\" class=\"more-link\">Continue reading <span class=\"screen-reader-text\">Did Keynes &#038; Boulding both really say that?<\/span> <span class=\"meta-nav\">&rarr;<\/span><\/a><\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","footnotes":""},"categories":[3,6,7,8,9,13,15,16],"tags":[],"class_list":["post-3355","post","type-post","status-publish","format-standard","hentry","category-among-best-2","category-mail","category-econn","category-theory","category-policy","category-stories","category-trans","category-whattodo"],"_links":{"self":[{"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/posts\/3355","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\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/comments?post=3355"}],"version-history":[{"count":18,"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/posts\/3355\/revisions"}],"predecessor-version":[{"id":3390,"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/posts\/3355\/revisions\/3390"}],"wp:attachment":[{"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/media?parent=3355"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/categories?post=3355"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/synapse9.com\/signals\/wp-json\/wp\/v2\/tags?post=3355"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}