Immetric (part II)

A sketch of the real economy, drawn from here. See also "The Story of Stuff" here.

A previous post criticized our current economic system (method of resource allocation) on several fronts. That begs the question--if this one isn't working, what should we replace it with?

Whenever we design something, there are certain steps to follow. First, we need to decide what we want the economy to do. I offer the following:

An economy should reliably provide subsistence to all.

That is, all humans should have access to enough healthful water, food, and shelter to contribute fully to society. Any resource use beyond that is a cultural or political matter and should be decided by the people not by economists. The reliability condition means that the system must be robust and flexible enough to function amid the normal disruptions of life, and it implicitly forbids any irreversible or unpredictable degradation of the planet. There is already enough food, water, and goods produced to satisfy the needs of everyone on the planet--it's just a matter of allocating it more intelligently.

Second, we need to understand the "universe" we're working with. That sets the limits on the economy. How big can it be? How much resource consumption and pollution can the biosphere tolerate? The classical view of economics as a tension between supply and demand is woefully inadequate here because it ignores limits entirely.

That was fine when the economy was far from its limits, but these days, such a view is dangerously simplistic. A better picture of the economy is shown at the top of this post. The limits are the supply of energy and raw materials, the capacity of the biosphere to absorb waste products, and the physical dimensions of the Earth. The sectors or aspects of the economy can be tweaked to improve the operation of the overall economy.

Third, we need to sit down and design the structure of the economy. We don't need to re-invent the wheel: there have been many economic systems throughout history, and we can learn from their successes or failures. I can't go much further without getting into specifics; there is a body of work already out there describing possible economic models and how to get there. Personally, I favour ecological economics, which is based on steady-state use of materials and energy rather than perpetual growth.

Sustainable electricity--not as easy as it sounds

In the past few months, along with job hunting and reading and keeping house, I've occasionally worked on a technical side project. I didn't write about it here because, without a workshop or money for components, I could only do a literature survey. I will be busy with my new job for a while, so I thought I may as well go back and explain what I'm trying to do.

In our society, fossil fuels are the basis of our material well-being. We rely on them for transportation, heating, cooling, lighting, food, clothing and consumer goods, pharmaceuticals, and many other things. Other energy sources (besides hydropower and nuclear power, which are near their technical limit) make up a tiny fraction of our energy use. However, fossil fuels are being depleted much faster than they are regenerating--we've already consumed more than half of all crude oil on earth--and our demand is increasing exponentially. Even with strict energy efficiency measures, sooner or later we will have a sudden and painful scarcity of fossil fuels. In certain sectors it is better to move forward to a low-energy paradigm, such as organic agriculture or solar heating, or simply do without; in others, we must use alternative energy (electricity) to maintain our health and comfort while avoiding ecological damage. This last category is what this project is concerned with.

A major problem with the alternative energy industry is that units are manufactured almost entirely using fossil fuels. Alternative energy is currently more expensive per Watt than fossil fuels, so in a free-market system manufacturers will use fossil fuels. If and when there is a fossil fuel shortage, though, it will be difficult for society to switch to a non-fossil-fuel energy source. Moreover, in the long term the only way to have a sustainable energy supply is to manufacture energy sources entirely without fossil fuels. So the central question is this: how can alternative power sources such as solar panels, wind turbines, cellulosic alcohol, fuel cells, or geothermal power plants be manufactured and operated without fossil fuels? (Cost will be ignored for the time being because I assume that the prototype will not be widely adopted until fossil fuels are unavailable or much more expensive.)

Moving picture review

Apropos of nothing, here are some Youtube clips I enjoyed.

Athletic stock footage set to music:


The exquisite Rita Hayworth with Fred Astaire:


Charlie Chaplin in a dramatic turn--his closing speech from 1940's "the Great Dictator":


The opening of Watchmen. The film had to cut about half the material of the book due to time constraints, so instead they have this brilliant montage:

Несдержанность

Уже был целый год, пока я не писал по-русски здесь. Я думаю по-английски или по-французски и сразу пишу мысли так. До времени, когда я мыслю что-то по-русски, я перевожу свои прошлые тексты на русский язык.


по Beehive Collective

В прошлых месяцах я был неохотно праздным, итак я иногда писал о портящейся экономике у нас. Вредных последствий много, но официальные объяснения и средства противоречивые и нелогичные. Я вполне инженер; когда нахожу незнакомую сломанную машину я думаю, <<Что делает этот выключатель? как машина работает в холодном дне? что происходит когда прерываю электричество? Могу ли я починить сам?>>

К сожалению наша экономика действительно как машина. Капитализм* двигатель, который только работает на одну сторону. С 1991 года капитализм победоносный в целом мире и видим результат: быстрый и необратимый экологический гибель, безграничное производство вооружения и одноразовых товароф, распространённая бедность, непредсказуемые крахи, искажения демокрации и непрозрачный механизм. Другие критикуют то, что он стирает нашу индивидуальность, уменьшает красоту на товар и подчиняет свободную волю финансовой необходимости. По-моему, первый список уже опрадание найти новую систему.

Другие длинно написали об этих проблем. Я просто разъясню свой список.

♦Экологический гибель. В капиталистической системе ценность только в деньгах, товарах и труде. Новый компьютер высоко ценят (тут $1000), а чистый воздух без ценности. Система двигается к максимуму суммы ценности, поэтому является много компьютероф и мало чистого воздуха. Почти всё в природе без финансовой цены, и поэтому природу непрерывно унижают. Правительство может бороться против этого, но пока есть такой побуждение, правила и наказания не остановят повреждение.

Эта слепота очень вредная. Учёбные говорят, что наше самое сильное оружие против изменяющегося климата наши лесы потому что они потребляют CO2, стабилизируют климат, умеряют засухи и наводения и не нуждаются в содержании. Но в математике капитализма доски дорогие а живые деревья ничего не стоящие. Климат конечно тоже без ценности; разрушение богатства из-за изменённого климата не относится к этому на счётах. Поэтому ровняют лесы с землёй пока мы придумываем дорогие и неиспытанные приборы.

♦Безграничное производство. У нас в богатых странах есть прибор iPhone. Он и телефон и маленький компьютер. У нас уже всякие такие приборы... лучше ли жизнь с добавочным? А продают миллионы этого, и каждый потребляет ресурсы и скоро становится отбросами. К финансовому богатству прибавляют кредиты а не дебеты: новый iPhone прибавляет $500, а брошенный в следующем году не отнимает ничего. Двигатель капитализма потреблял бы и загрязнял бы, из-за нового прибора в каждом году, до нашего последнего дыхания.

Одни говорят, что потребители свободно требуют такие товары и их быстрые изобретение, производство и распределение означают, что капитализм работает. Это ясно неправда. После того, как придумывают новый прибор платят биллионы за рекламы чтобы создать требование. Предлагаю эксперимент: пусть остановят рекламы везде во время года, и мы увидим то, что потребители сами решат.

Торговля вооружения привелигированный рынок одноразовых товароф. Не надо подождать несколько годоф до неудачи товара; товары построены к быстрой неудаче (пули, ракеты, бомбы) или построены с многими тонкими деталями (тайные бомбовозы, автоматические самолёты, Щит Против Ракет). Человеческая жизнь нигде не находится на счётах оруженных корпораций.

♦Мировая бедность. Города палаток, работа как раб, беззаконность, голод, плохие санитарные условия, болезнь, невежество. Воины угоняют фермероф, выращивают непищевые культуры и этими деньгами продают оружие из наших заводоф. Океан кормил бедных с начала истории; сейчас богатые страны высыпают его механическим рыбным флотом. Полезные минералы уже у богатых перед тем, как добудут их. С капиталистической точки зрения эти хорошие. Бедные ничего не стоящие. Бизнесмены не извиняются... капитализм и их оружие и их оправдание.

♦Бумы и крахи. Все здесь говорят о настоящем крахе, а я редко слышу критику системы. Вспоминают люди, что такие крахи случались десятки раз? Потому что финансовое богатство воображаемое, оно может сразу же явить и исчезнуть. Даже математический анализ кажет, что в такой системе большие и неровные колебания бумажного богатства. Говорят, что капитализм лучшая система создания богатства, а он разрушает богатство часто и непредсказуемо. Хорошая денежная политика и хорошие финансовие правила улучшают это, хотя под чистым капитализмом их нет. Трудно действительному человеку готовиться к будущему, потому что успех зависит и от действительности и от настроения дальних и незнакомых финансистоф.

♦Искажения демокрации. В обществе со строгой собственностью и большим неравенством, одни могут стать очень властными. Почти все президенты и министры миллионеры. Демократические выборы становятся состязаниями богатых. Много важных проблем игнорируют, потому что они не касаются богатых. Ещё более капиталистическая система, то больше разрыв между народом и штатом.

♦Непрозрачный механизм. Хотя под <<идеальным>> капитализмом у каждым вся информация, действительный рынок не так. Большинство экономических деятелей огромные корпорации, которые хотят секретность. Всё-таки есть так много информации в настоящей экономике, что только самые большие организации могут знать обширно. Несколько корпораций фальцифицирует свои счёты (особенно перед крахом рынка). Поэтому трудно починить проблемы системы; после краха у бюрократоф мало информации. Трудно механику починить машину с закрытыми глазами! В прошлом году несколько банкоф национализировали США, которые ничего не знали об их. Невозможно понять или починить капитализм без ясности.

Профессоры экономики должны осматривать структуру и поведение капитализма, а к сожалению они обычно бесполезны. Передаваемые критики могут мешать действия богатых, поэтому легче экономистам оправдывать решения, которые сильные уже выбрали. Их теории логичные только когда игнорируют всякую информацию.


Бюрократы, которых мы выбрали починить нашу оборванную экономику, думают, что она как машина. Они не глупые... они сами богатые, и они приносят пользу нашей системе. Нам надо не такие экономические <<механики>> или <<инженеры>> а врачи. Врачи понимают, что не стоит дать хлеб бедному если его лёгкие повреждаются. Даже в хороших годах капитализм вредный. Нам решить действительные проблемы людей; затем сможем создать теории.


*В этой статье я определяю капитализм так: он система, которая распределяет ресурсы между многими автономными экономическими деятелями. Они всегда поступают, чтобы увеличивать свое финансовое богатство (измеряемое по $, Р, и т.д.). Труд, капитал и товары покупают и продают свободно. Потому что потребители хотят товары добавленной стоимости (которым надо и труд и капитал и простые товары), финансовое богатство всех деятелей увеличивает. Всё произведённое лично и всё у личностей. Нет коллективных организаций, так например штаты, корпорации и профсоюзы.

Filler

I found a text file with commentary from my pre-blogging days, so I may reheat some when I feel like posting but don't have anything new to say. Most are excerpts from online debates I've had--in this case, a woman opined that since Greens cherish life, we should work to make abortion illegal.


If I understand you correctly, your point is that as environmentalists, we should hold all life sacred, including human fetuses. I take the opposite view: to me it is arrogant and human-centric to think that a human embryo has equal value as, say, a grown dog or an oak tree. Human DNA or not, a first-trimester fetus is on par with an algae colony in complexity and consciousness. (In fact, I would be more upset at the arbitrary murder of an algae colony, because it is part of a balanced ecosystem whereas a human fetus is not.) There are many fully conscious and fully developed humans and animals who are victims of capricious violence and death, and as far as I'm concerned, they should take priority in Green Party policy.

Practically speaking, we can't always be pro-nature and anti-violent--we need to kill other life forms for food, to correct unbalanced ecosystems, to make space for us to live, and so on. You could just as easily argue that those "feed into the hierarchy of might makes right," and maybe you'd be right, but that wouldn't change the necessity of it. (A British satirist recently suggested that environmentalists should all commit suicide, because we're damaging the planet just by being alive!) We need to weigh the merits of the options available to us, not impose a blanket prohibition on all violence; there are many historical instances when nonviolence led to more death and suffering than judicious violence would have.

So let's look at our options on abortion. First, if we made clinical abortions illegal, we would go back to the 19th century--women would be forced to stab themselves with coat hangers, drown their newborns in a river, or raise the child in an abusive relationship because of social or economic pressures. Second, we could set requirements on who can have abortions. No doubt many women today have abortions unnecessarily, but I don't think the state should be the one to decide when they are necessary and when they aren't. That would force women to publicly reveal their private life and sexual habits and would likely drive many of them to unsafe abortion clinics. Third, we could allow women to choose for themselves what is best. To me, that is the lesser of three evils even though as you point out, it is violent and anti-life.

Immetric

illustration by the Beehive Collective

Over the past few months, to escape my unwilling idleness, I've occasionally written here about the unfolding economic mess. It's certainly causing a lot of suffering, yet the official explanations and remedies are so confounding and counterintuitive that I can't make sense of them. I suppose it's the engineer in me: I discover an unfamiliar, half-broken machine and ask myself, "what does this button do? how well does it run on a cold day? what happens if the power is interrupted? can I fix this myself?"

Unfortunately, the machine analogy is too apt by half: capitalism* is like an engine that only runs in one direction. Since 1991, we've witnessed the triumph of capitalism worldwide, and look at the results--increasingly rapid and irreversible ecological damage, overproduction of armaments and disposable consumer goods, endemic poverty in most of the world, unpredictable crashes in wealthy countries, distortions in democratic political systems, and an irrational and opaque mechanism. Some criticize it for more intangible reasons: robbing people of their individuality, elevating the seven deadly sins to virtues, reducing beauty to a commodity, and subordinating free will to a dollar-maximizing imperative. For my purposes, the flaws I listed above are more than enough reason to discard that economic model.

Others have written at length about these problems, but I'll just clarify what I mean:

♦Ecological damage. Capitalism only assigns value to things which can be commodified. A new computer is $1000; clean air has no value. Since capitalism maximizes financial wealth, society will have many computers and little clean air. (See also "overproduction" below.) Nearly all components of a healthy ecosystem are assigned zero value, so they are routinely despoiled to retrieve those components which are considered valuable. Government intervention can counteract this, but as long as there is economic incentive to pollute, regulation and enforcement will always be a step behind.

This lacuna has far-reaching consequences. Scientists tell us that our best weapon against global warming is our forests because they consume CO2, stabilize climate, moderate floods and droughts, and require no upkeep. But in a capitalist system, lumber has value while a living tree has none. A modified climate, of course, also has no value; the wealth destruction due to freak weather is written off as an act of god. So the world's forests continue to be clearcut while we devise expensive and unproven carbon-capture-and-storage devices.

♦Overproduction. Let's call it the iPhone syndrome. We already have ways of cheaply storing and listening to music; playing games; organizing our affairs; and talking to our loved ones. It would be hard to argue that having one device which combines all those functions would improve our quality of life. Yet millions of iPhones are sold, which consume finite resources and quickly become waste. Financial wealth accumulation is all credit and no debit; a brand-new iPhone adds $500 to the wealth of society, but a discarded iPhone a year later subtracts nothing (in fact, there is a small credit because the garbage man is paid to drive it to the landfill). The engine of capitalism will blindly keep polluting and consuming oil and industrial metals to make iPhones until a new gadget replaces it or the raw materials are exhausted.

Some argue that consumers (species Homo capitalis) demand these products, so their rapid development, production, and distribution is a sign that capitalism works. That's simply not true. After a new consumer good is developed, billions are spent to market it, that is, to create demand for it. I propose an experiment: stop all advertising worldwide for one year, and let consumers decide for themselves what they want.

The arms trade is a privileged niche market of consumer goods. Instead of waiting a few years for the product to break down and be replaced, the manufacturer creates products which are designed to be destroyed in a matter of weeks (bullets, missiles, bombs) or which require a large number of fragile components (stealth bombers, drones, Missile Defense System). Human life doesn't appear on Lockheed Martin's balance sheets.

♦Global poverty. Tent cities, sweatshops, lawlessness, famine, poor sanitation, no medicine, no education. Warlords (state or non-state) displace subsistence farmers to grow cash crops for export and use the money to buy guns from our factories. The sea, which fed the poor since the dawn of mankind, is denuded of fish by industrial fishing fleets. Any useful minerals are "owned" by the rich before they even leave the ground. From a capitalist perspective, all this is considered positive. In this world, if you have no cash, you don't count. The business community is unapologetic: capitalism is all the logic they need. They use their knowledge and resources to mercilessly extract wealth from the poor. Even if foreign aid met the UN target of 0.7% of rich countries' GDP, nearly 100% would still be devoted to this cold and mechanical exploitation. What's worse, the industrialized world has consumed so much of the world's resources that it's now mathematically impossible for the rest of the world to ever live as well as we do--there just isn't enough oil and minerals left.

The global trade imbalance is repeated in microcosm within capitalist countries. The Dow Jones industrial average was above 10 000 for almost ten years, so in theory there was more wealth than ever before; but even then, millions of Americans had inadequate food, shelter, and social services. I'll be charitable and assume that the government is interested in solving those problems; but even so, there are millions of businessmen who can benefit by exploiting the poor who have speed, scope, and flexibility the government can never match.

♦Booms and busts. This is what everyone's talking about, but I never hear any systemic critique or any mention of the dozens of times it has happened before. Because of the imaginary nature of financial wealth, it can be created or destroyed in an instant. In case real-world experience was not enough, stability analysis (a mathematical tool) shows that the financial system is prone to large and erratic oscillations in paper wealth. Although it is supposedly the most effective wealth-creation system, capitalism destroys wealth seemingly at random. From the perspective of a real person, this makes it impossible to confidently plan for the future because assets and employment depend on the emotional state of distant financiers. Only sound monetary policy and financial regulation can avert this, neither of which exist in pure capitalism.

♦Political distortion. In a society with strict property rights and high financial inequality, it is logical that rich individuals who wish to do so can become politically powerful. Prime Ministers and Presidents are almost uniformly millionaires. Elections often become a money-spending contest, which favours the party whose members have the most financial wealth. Many important issues are ignored because they don't interest the rich power brokers. The more purely capitalist an economy is, the more it suffers from such a nation/state disconnect.

♦Opaque mechanics. Although "ideal" free-market capitalism assumes perfect access to economic information by many independent actors, the reality is very different. Most activity is performed by large private companies which have an interest in secrecy. Even with publicly available information, only large organizations can afford to gather extensive data. Some companies falsify internal or public bookkeeping, especially right before a market crash. This makes it difficult to fix systemic problems; when the economy crashes, decision makers' only source of information is public data... which is bit like trying to fix a car engine with your eyes closed. Last year the US government nationalized several bankrupt banks with no idea of their true financial situation. Without transparency, there is no hope of fixing or even understanding modern capitalism.

Academia, which in theory should investigate the behaviour and problems of capitalism, is unfortunately mostly useless. Because so much money is involved, there is a strong incentive for economists to justify the status quo or decisions which the powerful have already taken. For instance, Reagan's tax cuts for the rich led to "trickle-down economics", which even now has some believers. Such theoretical systems are only self-consistent insofar as they ignore contradicting factors. Without well-funded research, it is more difficult to identify solutions for many problems of capitalism.


Unlike me, those we elected to fix the EconoMess still consider the economy a machine to be fixed. They're no fools: most of them benefit directly from the "wealth output" of that machine. But what we really need is not economic "engineers" or "mechanics" but doctors: someone who understands that feeding a hungry man is no use if the man's lungs are collapsing. Even in good times, capitalism simply doesn't work. Let's address the real needs of real people and then worry about the theoretical details.


*My working definition of capitalism is a system of resource distribution characterized by many independent actors, each of whom act to maximize their financial wealth (ie net worth in dollars, euros, etc.). Labour, capital, and goods are bought and sold in a free market. The demand for value-added products will distribute resources so as to maximize the total creation of wealth. All goods and services are produced privately and all wealth is privately owned, that is, individuals have no right to property except through paid labour, capital gains and interest, or gifts and inheritance. Pure capitalism has never occured because it assumes the absence of corporations, labour unions, states, and other collective institutions.

Clever as FOX

Any time I read comment threads or internet message boards, I find a vocal minority who are completely batty. (On some boards, they're a majority.) Nothing is too outlandish. The economic meltdown is Obama's fault; creationism should be taught in science class; taxes should be abolished; climate change is a conspiracy by scientists to get more funding; all moslems hate freedom; our soldiers can only win if we publicly support them; Jesus loves you but if you don't praise him he will torture you for eternity; and on and on... I enjoy debating, but faced with such "arguments" I hardly know what to say. I used to keep a set of e-ripostes to cut-and-paste whenever I saw the same old drivel, but now I rarely bother. As they say, "don't try to wrestle a pig; you'll both get dirty, and besides, he enjoys it."

Bust'd

I ran across an obscure 1975 book by JK Galbraith, Money, a brief and entertaining history of currency and banking. In recent times, that consists of capitalism's great booms and busts (interspersed with central planning during major wars). With respect to the US, he sketches out the crashes of 1778, 1819, 1837, 1857, 1873, 1884, 1893, 1907, 1921, and 1929 (to which we could perhaps add 1973, 1980, 1987, 2000, and 2008). The root of the problem is always someone's "new" way of creating money out of thin air; if investors and legislators go along with it, it becomes a financial bubble which wreaks havoc when it bursts. Afterwards, remorseful legislators impose restrictions to prevent a recurrence... and a few years later those restrictions are quietly removed.

He illuminates some patterns. For one thing, financial bubbles are often the consequence of military overreach. A clear example is the US War of Independence, which could not conceivably be financed by taxation (there was no state apparatus yet) or loans (creditors were not convinced the fledgling state would survive). So the American rebels printed money (see image above) with a certain (inadequate) amount of gold to back it up. True, the money devalued almost to zero after the war, but by then the state was secure. If you think that's ancient history, just look at The Three Trillion Dollar War. The event that bursts the bubble is usually in the civilian real estate or stock markets, but the original bubble came from the monetary policy of the state.

He also points out:

"During the last century and until 1907, the United States had panics, and that, unabashedly, is what they were called. But, by 1907, language was becoming, like so much else, the servant of economic interest. To minimize the shock to confidence, businessmen and bankers had started to explain that any current economic setback was not really a panic, but a crisis. [...] By the 1920's, however, the word crisis had also acquired the fearsome connotation of the event it described. Accordingly, men offered reassurance by explaining that it was not a crisis, only a depression. A very soft word. Then the Great Depression associated the most frightful of economic misfortunes with that term, and economic semanticists now explained that no depression was in prospect, at most only a recession. In the 1950's, when there was a modest setback, economists and public officials were united in denying that it was a recession--only a sidewise movement or a rolling readjustment. Mr Herbert Stein, the amiable man whose difficult honor it was to serve as the economic voice of Richard Nixon, would have referred to the panic of 1893 as a growth correction." (103)

Alas, all too true. With each burst bubble, a legion of teleconomists appears with new mushmouth words for it: "market correction", "slowdown", and most recently "credit crisis". We need macroeconomists who actually study the real economy, draw conclusions, and make reasonable predictions and recommendations--people with intellectual integrity and a memory longer than 6 months--not the glorified grief counselors we have now. Joseph Stiglitz, are you listening?

Galbraith touches on many other topics as well. Here is a good passage about the de facto adoption of cigarettes as the currency of 1945 Germany:

"This was the equivalent, in all respects, of a well-considered coinage. The single cigarette was excellent small change; the package of twenty and the carton of two hundred were convenient multiples for large or major transactions. The decimal form was modified but not to the point of mathematical difficulty. Few forms of money in history have been more difficult to counterfeit. None had within it such an excellent tendency to self-regulation of its value. If the exchange value of cigarettes had a tendency to fall, i.e., if supply was too great and the price of products in exchange for cigarettes too high, there was a tendency for the holder of this coin to smoke it up or offer it to his addicted friends rather than pass it on. This had the effect of reducing supply, maintaining value." (251)