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The Grand Failure of Conventional Economics

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"If we take the very long view, we find that all of conventional economics developed in the era of ever-cheaper, ever-more abundant energy and the miraculous "low hanging fruit" productivity gains made possible by cheap energy and the tools of mass production and industrialization. Like a creature that was born in the morning and has only seen daylight, conventional economics has never experienced night and so it has no conception of darkness.

This is true of classical, neo-classical, Marxist, Socialist, Keynesian, Neoliberal, "Capitalism with Chinese characteristics," etc."

 

http://www.oftwominds.com/blogapril11/failure-of-economics3-11.html

Politics is subservient to conventional economic theory which is running the global economy into the ground.

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Economics Seminar Ends

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Thank you all for being here. This seminar is now over. I want to recap a few
important points.

All one needs to know about economic theory can fit on one sheet of paper. The
material can be found at http://tinyurl.com/3huenty

The centerpiece of neoclassical theory is "Pareto Optimality" (AKA, "economic
efficiency," AKA, "equilibrium"). If Pareto is false, then it's all false.

In 1952, Maurice Allais tested the Pareto theory and found that it failed to
correctly predict consumer behavior:

"A test of the theory's validity was presented to Savage by Maurice Allais over
lunch, during a conference in Paris in 1952. Allais made Savage fill out a list
of questions with which he could show that Savage violated his own theory." --
Floris Heukelom, Kahneman and Tversky and the Origin of Behavioral Economics,
2007

Pareto optimality was falsified in 1952. Economic efficiency was falsified in
1952. Economic equilibrium was falsified in 1952.

Economics became politics in 1952 when Friedman decided to ignore the fact that
his theory had been falsified.

Friedman was wrong in principle. Nash was wrong in principle. Neumann and
Morgenstern were wrong in principle. Game theory is wrong in principle. Animals
are "logical" -- NOT "mathematical":

"People surely do use some sort of logic. All languages have logical terms like
not, and, same, equivalent, and opposite. Children use and, not, or, and if
appropriately before they turn three, not only in English but in half a dozen
other languages that have been studied. Logical inferences are ubiquitous in
human thought, particularly when we understand language. … Logic is
indispensable in inferring true things about the world from piecemeal facts
acquired from other people via language or from one's own generalizations." —
Steven Pinker, HOW THE MIND WORKS, 1997

Biologists tell us a mathematical animal couldn't have evolved.
http://tinyurl.com/3kq7v3r

For an idea of how animals actually "decide" See http://tinyurl.com/3oklvsm

Global Capitalism is now limited by global "net energy." Thus, a economic reset
wouldn't solve the world's economic problems.
http://www.jayhanson.us/NewSynopsis.pdf

Capitalism can't run backwards and will eventually be replaced by other
political systems. The rich will not allow political change until it impacts
their personal lives -- by then it will be to late to avoid the worst. IMHO, a
rerun of Weimar Germany is our most-likely future.

Aloha,

Jay

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Energy and Evolution

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Energy and Evolution

Introduction

The aim of this wiki edit is to aid in answering the question;

"Is it possible for humanity to define, arrive at and sustain an ecological footprint that is within the Earth's carrying capacity and simultaneously improve people's quality of life in a way which is fair?"

To help answer this I am incorporating recent advancements in neuro-scientific and human evolutionary studies with the systemic imperatives of energy acquisition.

 

Evolutionary Psychology

Evolutionary Psychology is the study of human nature through the lens of our genetic heritage. Because it has in no small part developed from the field of Ethology, the study of animal behaviour, it has managed to avoid many of the political pitfalls found in conventional psychology and the social sciences in general (Buss, 2005). In the same way our physiology was shaped by life on the Savannah's of the Pleistocene, so to was our psychology. In fact, when it comes to the fundamentals, the acquisition of energy resources, evolution has been shaping our psychology because from localized famines to global extinction events, resource scarcity has occurred continuously since life first began. 

The Evolved Brain

The brain is not a general purpose problem solving machine but has evolved to be domain specific (Buss, 2005) or modular in form and function. This modularity is so specific that when a study of people were asked to think about killing an animal and later asked on killing a human, two different areas of the brain showed activity on an fMRI scanner (Konnor, 2003). This functional specialization has evolved because the brain is an adaptation executor reacting to environmental cues (Buss, 2005). Moreover, the brain is for all intents and purposes a meat computer (Hanson 2010).

The Importance of Energy

To remain dynamic all systems, which includes all living organisms and the societies they create, must have an energy throughput (Daly, 2004). Moreover, they attempt to maximize this throughput. Firstly, by maximizing energy input and secondly by increasing the efficiency of their internal processing. This is known as the Maximum Power Principle (Odum, 2007). This can be seen throughout all human societies, past and present, who attempt to maximize growth by exploiting natural capital and increase efficient throughput of that capital by the division of labour and formation of social hierarchies.

Evolved Adaptation-Cooperation

Humans are social animals with an innate sense of cooperation and altruistic tendencies which go beyond that of just helping related kin. This is because people who cooperated survived and left more descendants than those who did not (Hanson, 2011). We can cooperate on one level while competing on another. For example we cooperate with each other in the formation of our societies while at the same time compete for status because of the greater access to resources it provides us. One example of how humans work together is warfare, an intensely cooperative venture where one group coordinates their aggressive actions against another.

Evolved Adaptation-Warfare

Aggression is a means of co-opting the resources of others and can occur at the individual or group level (Buss, 2009). Warfare is exclusively a male affair and observed across cultures and throughout recorded history (Buss, 2009). That it is so prevalent suggests it is a successful evolutionary adaptation for the acquisition of resources and a strategy that will most likely raise its ugly head when resource scarcity environmental cues are perceived, then acted upon by the subconscious mind.

Evolved Adaptation- Dispersal

Another way in which a group can deal with scarce resources is dispersal, an evolved strategy that has also been observed in other social primates. A divide is created within the group along cultural, religious, ethnic lines etc. The dominant group then forces the rest to leave the immediate environment freeing up more local resources for themselves now there are less mouths to feed. The refugees are invariably forced into a worse environment which is often dangerous for their survival. For example, the Polynesian tradition of voyages of discovery where islands at carrying capacity forced groups of people to take up journeys by boat to find new land.

 Conclusion

The evolutionary influence on our psychology in relation to acquiring energy is very ancient. Because resource scarcity events are relatively common over time, this influence is reinforced on a regular basis. Human reaction to the perception of resource scarcity events such as the peaking in production of fossil fuels is highly likely to be subconscious/genetic rather than conscious/learned in response. Moreover, These innate responses are unlikely to be considered fair and in no way incorporate an abstract notion such as human rights, which is unique to our current society.

References

Buss D.M. (2005) The Handbook of Evolutionary Psychology, New Jersey, John Wiley & Sons

Buss D.M. (2009) Evolutionary Psychology, The New Science of the Mind, USA, Pearson Education, Inc

Daly H.E. (2004) Ecological Economics, Principles and Applications, USA, Island Press

Hanson J (2010)'The Brain is a Meat Computer'[online] http://tech.groups.yahoo.com/group/America2Point0/ message to America 2.0 forum

Hanson J (2011) From Capitalism to Democracy, [online] http://jayhanson.us/index.htm (Accessed 30, May 2011)

Konnor M (2003) The Tangled Wing, Biological Constraints on the Human Spirit, USA, Henry Holt & Company 

Odum H.T. (2007) Environment, Power and Society, New York, Columbia University

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Reductionist Thinking Reaches it Limits

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"The necessary changes are both curricular and institutional. One reason that many doctoral programmes do not adequately serve students is that they are overly specialized, with curricula fragmented and increasingly irrelevant to the world beyond academia. Expertise, of course, is essential to the advancement of knowledge and to society. But in far too many cases, specialization has led to areas of research so narrow that they are of interest only to other people working in the same fields, subfields or sub-subfields. Many researchers struggle to talk to colleagues in the same department, and communication across departments and disciplines can be impossible."

http://www.nature.com/news/2011/110420/full/472261a.html?WT.ec_id=NATURE-20110421

It would seem reductionist thinking is subject to the law of diminishing marginal returns.

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Quote of the Day

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"Energy has always been the basis of cultural complexity and it always will be … the past clarifies potential paths to the future. One often-discussed path is cultural and economic simplicity and lower energy costs. This could come about through the “crash” that many fear — a genuine collapse over a period of one or two generations, with much violence, starvation, and loss of population. The alternative is the “soft landing” that many people hope for — a voluntary change to solar energy and green fuels, energy-conserving technologies, and less overall consumption. This is a utopian alternative that, as suggested above, will come about only if severe, prolonged hardship in industrial nations makes it attractive, and if economic growth and consumerism can be removed from the realm of ideology."

 
Joseph A. Tainter

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Beyond Growth or Beyond Capitalism?

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Edited by Neal Grout, Sunday, 10 Apr 2011, 08:48

Abstract:

Recent publications have revived interest in Herman Daly’s proposal for a Steady

‐State Economy. This paper argues, first, that the idea of a steady‐state capitalism is based on untenable assumptions, starting with the assumption that growth is optional rather than built into capitalism. I argue that irresistible and relentless pressures for growth are functions of the day‐to‐day requirements of capitalist reproduction in a competitive market, incumbent upon all but a few businesses, and that such pressures would prevail in any conceivable capitalism. Secondly, this paper takes issue with Professor Daly’s thesis, which also underpins his SSE model, that capitalist efficiency and resource allocation is the best we can come up with. I argue that this belief is misplaced and incompatible with an ecological economy, and therefore it undermines Daly’s own environmental goals. I conclude that since capitalist growth cannot be stopped, or even slowed, and since the market‐driven growth is driving us toward collapse, ecological economists should abandon the fantasy of a steady‐state capitalism and get on with the project figuring out what a post–capitalist economic democracy could look like.

 

Dr. Richard Smith

http://iprd.org.uk/wp-content/plugins/downloads-manager/upload/Beyond%20Growth%20or%20Beyond%20Capitalism.pdf

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Money Energy Flows

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Edited by Neal Grout, Tuesday, 5 Apr 2011, 17:27

“Minerals are inexhaustible and will never be depleted. A stream of investment creates additions to proved reserves, a very large in-ground inventory, constantly renewed as it is extracted… How much was in the ground at the start and how much will be left at the end are unknown and irrelevant… There are plenty of fossil fuels and no limit to potential electrical capacity. It is all a matter of money.” 

 M. A. Adelman, 1993

“…the world can, in effect, get along without natural resources… at some finite cost, production can be freed of dependence on exhaustible resources altogether.”

 — Nobel winner Robert Solow, 1974

 

 The economic unit of measure is “price” — which is a “transitory effect” — not a “cause.” For example, a dollar’s worth of oil today will not be a dollar’s worth of oil tomorrow

- Jay Hanson

 

 

The flow of energy through the economy is not dependent on the flow of money; in fact the exact opposite. Money (an abstract concept) is a reverse flow on energy throughput in an economy and dependent on that energy.

Its therefore not possible to invest our way out of a net energy crisis.

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The Collapse of Globalization

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Edited by Neal Grout, Friday, 22 Apr 2011, 16:02

 The Collapse of Globalization


http://www.truthdig.com/report/item/the_collapse_of_globalization_20110328/

Posted on Mar 27, 2011

By Chris Hedges

The uprisings in the Middle East, the unrest that is tearing apart nations such as the Ivory Coast, the bubbling discontent in Greece, Ireland and Britain and the labor disputes in states such as Wisconsin and Ohio presage the collapse of globalization. They presage a world where vital resources, including food and water, jobs and security, are becoming scarcer and harder to obtain. They presage growing misery for hundreds of millions of people who find themselves trapped in failed states, suffering escalating violence and crippling poverty. They presage increasingly draconian controls and force—take a look at what is being done to Pfc. Bradley Manning—used to protect the corporate elite who are orchestrating our demise.

We must embrace, and embrace rapidly, a radical new ethic of simplicity and rigorous protection of our ecosystem—especially the climate—or we will all be holding on to life by our fingertips. We must rebuild radical socialist movements that demand that the resources of the state and the nation provide for the welfare of all citizens and the heavy hand of state power be employed to prohibit the plunder by the corporate power elite. We must view the corporate capitalists who have seized control of our money, our food, our energy, our education, our press, our health care system and our governance as mortal enemies to be vanquished.

Adequate food, clean water and basic security are already beyond the reach of perhaps half the world’s population. Food prices have risen 61 percent globally since December 2008, according to the International Monetary Fund. The price of wheat has exploded, more than doubling in the last eight months to $8.56 a bushel. When half of your income is spent on food, as it is in countries such as Yemen, Egypt, Tunisia and the Ivory Coast, price increases of this magnitude bring with them malnutrition and starvation. Food prices in the United States have risen over the past three months at an annualized rate of 5 percent. There are some 40 million poor in the United States who devote 35 percent of their after-tax incomes to pay for food. As the cost of fossil fuel climbs, as climate change continues to disrupt agricultural production and as populations and unemployment swell, we will find ourselves convulsed in more global and domestic unrest. Food riots and political protests will be inevitable. But it will not necessarily mean more democracy.

The refusal by all of our liberal institutions, including the press, universities, labor and the Democratic Party, to challenge the utopian assumptions that the marketplace should determine human behavior permits corporations and investment firms to continue their assault, including speculating on commodities to drive up food prices. It permits coal, oil and natural gas corporations to stymie alternative energy and emit deadly levels of greenhouse gases. It permits agribusinesses to divert corn and soybeans to ethanol production and crush systems of local, sustainable agriculture. It permits the war industry to drain half of all state expenditures, generate trillions in deficits, and profit from conflicts in the Middle East we have no chance of winning. It permits corporations to evade the most basic controls and regulations to cement into place a global neo-feudalism. The last people who should be in charge of our food supply or our social and political life, not to mention the welfare of sick children, are corporate capitalists and Wall Street speculators. But none of this is going to change until we turn our backs on the Democratic Party, denounce the orthodoxies peddled in our universities and in the press by corporate apologists and construct our opposition to the corporate state from the ground up. It will not be easy. It will take time. And it will require us to accept the status of social and political pariahs, especially as the lunatic fringe of our political establishment steadily gains power. The corporate state has nothing to offer the left or the right but fear. It uses fear—fear of secular humanism or fear of Christian fascists—to turn the population into passive accomplices. As long as we remain afraid nothing will change.

Friedrich von Hayek and Milton Friedman, two of the major architects for unregulated capitalism, should never have been taken seriously. But the wonders of corporate propaganda and corporate funding turned these fringe figures into revered prophets in our universities, think tanks, the press, legislative bodies, courts and corporate boardrooms. We still endure the cant of their discredited economic theories even as Wall Street sucks the U.S. Treasury dry and engages once again in the speculation that has to date evaporated some $40 trillion in global wealth. We are taught by all systems of information to chant the mantra that the market knows best.

It does not matter, as writers such as John Ralston Saul have pointed out, that every one of globalism’s  promises has turned out to be a lie. It does not matter that economic inequality has gotten worse and that most of the world’s wealth has became concentrated in a few hands. It does not matter that the middle class—the beating heart of any democracy—is disappearing and that the rights and wages of the working class have fallen into precipitous decline as labor regulations, protection of our manufacturing base and labor unions have been demolished. It does not matter that corporations have used the destruction of trade barriers as a mechanism for massive tax evasion, a technique that allows conglomerates such as General Electric to avoid paying any taxes. It does not matter that corporations are exploiting and killing the ecosystem on which the human species depends for life. The steady barrage of illusions disseminated by corporate systems of propaganda, in which words are often replaced with music and images, are impervious to truth. Faith in the marketplace replaces for many faith in an omnipresent God. And those who dissent—from Ralph Nader to Noam Chomsky—are banished as heretics.

The aim of the corporate state is not to feed, clothe or house the masses, but to shift all economic, social and political power and wealth into the hands of the tiny corporate elite. It is to create a world where the heads of corporations make $900,000 an hour and four-job families struggle to survive. The corporate elite achieves its aims of greater and greater profit by weakening and dismantling government agencies and taking over or destroying public institutions. Charter schools, mercenary armies, a for-profit health insurance industry and outsourcing every facet of government work, from clerical tasks to intelligence, feed the corporate beast at our expense. The decimation of labor unions, the twisting of education into mindless vocational training and the slashing of social services leave us ever more enslaved to the whims of corporations. The intrusion of corporations into the public sphere destroys the concept of the common good. It erases the lines between public and private interests. It creates a world that is defined exclusively by naked self-interest.

The ideological proponents of globalism—Thomas Friedman, Daniel Yergin, Ben Bernanke and Anthony Giddens—are stunted products of the self-satisfied, materialistic power elite. They use the utopian ideology of globalism as a moral justification for their own comfort, self-absorption and privilege. They do not question the imperial projects of the nation, the widening disparities in wealth and security between themselves as members of the world’s industrialized elite and the rest of the planet. They embrace globalism because it, like most philosophical and theological ideologies, justifies their privilege and power. They believe that globalism is not an ideology but an expression of an incontrovertible truth. And because the truth has been uncovered, all competing economic and political visions are dismissed from public debate before they are even heard.

The defense of globalism marks a disturbing rupture in American intellectual life. The collapse of the global economy in 1929 discredited the proponents of deregulated markets. It permitted alternative visions, many of them products of the socialist, anarchist and communist movements that once existed in the United States, to be heard. We adjusted to economic and political reality. The capacity to be critical of political and economic assumptions resulted in the New Deal, the dismantling of corporate monopolies and heavy government regulation of banks and corporations. But this time around, because corporations control the organs of mass communication, and because thousands of economists, business school professors, financial analysts, journalists and corporate managers have staked their credibility on the utopianism of globalism, we speak to each other in gibberish. We continue to heed the advice of Alan Greenspan, who believed the third-rate novelist Ayn Rand was an economic prophet, or Larry Summers, whose deregulation of our banks as treasury secretary under President Bill Clinton helped snuff out some $17 trillion in wages, retirement benefits and personal savings. We are assured by presidential candidates like Mitt Romney that more tax breaks for corporations would entice them to move their overseas profits back to the United States to create new jobs. This idea comes from a former hedge fund manager whose personal fortune was amassed largely by firing workers, and only illustrates how rational political discourse has descended into mindless sound bites.

We are seduced by this childish happy talk. Who wants to hear that we are advancing not toward a paradise of happy consumption and personal prosperity but a disaster? Who wants to confront a future in which the rapacious and greedy appetites of our global elite, who have failed to protect the planet, threaten to produce widespread anarchy, famine, environmental catastrophe, nuclear terrorism and wars for diminishing resources? Who wants to shatter the myth that the human race is evolving morally, that it can continue its giddy plundering of non-renewable resources and its profligate levels of consumption, that capitalist expansion is eternal and will never cease?

Dying civilizations often prefer hope, even absurd hope, to truth. It makes life easier to bear. It lets them turn away from the hard choices ahead to bask in a comforting certitude that God or science or the market will be their salvation. This is why these apologists for globalism continue to find a following. And their systems of propaganda have built a vast, global Potemkin village to entertain us. The tens of millions of impoverished Americans, whose lives and struggles rarely make it onto television, are invisible. So are most of the world’s billions of poor, crowded into fetid slums. We do not see those who die from drinking contaminated water or being unable to afford medical care. We do not see those being foreclosed from their homes. We do not see the children who go to bed hungry. We busy ourselves with the absurd. We invest our emotional life in reality shows that celebrate excess, hedonism and wealth. We are tempted by the opulent life enjoyed by the American oligarchy, 1 percent of whom control more wealth than the bottom 90 percent combined.

The celebrities and reality television stars whose foibles we know intimately live indolent, self-centered lives in sprawling mansions or exclusive Manhattan apartments. They parade their sculpted and surgically enhanced bodies before us in designer clothes. They devote their lives to self-promotion and personal advancement, consumption, parties and the making of money. They celebrate the cult of the self. And when they have meltdowns we watch with gruesome fascination. This empty existence is the one we are taught to admire and emulate. This is the life, we are told, we can all have. The perversion of values has created a landscape where corporate management by sleazy figures like Donald Trump is confused with leadership and where the ability to accumulate vast sums of money is confused with intelligence. And when we do glimpse the poor or working class on our screens, they are ridiculed and taunted. They are objects of contempt, whether on “The Jerry Springer Show” or “Jersey Shore.”

The incessant chasing after status, personal advancement and wealth has plunged most of the country into unmanageable debt. Families, whose real wages have dropped over the past three decades, live in oversized houses financed by mortgages they often cannot repay. They seek identity through products. They occupy their leisure time in malls buying things they do not need. Those of working age spend their weekdays in little cubicles, if they still have steady jobs, under the heels of corporations that have disempowered American workers and taken control of the state and can lay them off on a whim. It is a desperate scramble. No one wants to be left behind.

The propagandists for globalism are the natural outgrowth of this image-based and culturally illiterate world. They speak about economic and political theory in empty clichés. They cater to our subliminal and irrational desires. They select a few facts and isolated data and use them to dismiss historical, economic, political and cultural realities. They tell us what we want to believe about ourselves. They assure us that we are exceptional as individuals and as a nation. They champion our ignorance as knowledge. They tell us that there is no reason to investigate other ways of organizing and governing our society. Our way of life is the best. Capitalism has made us great. They peddle the self-delusional dream of inevitable human progress. They assure us we will be saved by science, technology and rationality and that humanity is moving inexorably forward.

None of this is true. It is a message that defies human nature and human history. But it is what many desperately want to believe. And until we awake from our collective self-delusion, until we carry out sustained acts of civil disobedience against the corporate state and sever ourselves from the liberal institutions that serve the corporate juggernaut—especially the Democratic Party—we will continue to be rocketed toward a global catastrophe.

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1st Critique of the Eco Footprint Model

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Edited by Neal Grout, Friday, 6 May 2011, 19:15

The Futility of Trying to Reduce Your Carbon Footprint

 

Introduction

This short essay will explain why individuals’ attempting to reduce their carbon footprint within the greater context of living in a socio-economic system, is ineffectual as a means of protecting the environment. Moreover, due to backfires in the rebound effect attempts to reduce energy use will only cause greater environmental damage in the form of supply side resource depletion and the increasing pollution of environmental sinks.

 

What is an Ecological Footprint?

The ecological footprint model is a measure of human population demand on our environment, the Earth’s biosphere. It represents the amount of resources we use, including renewables such as fish stocks and forest, and non-renewables such as mined metals, minerals and fossil fuels. It also represents the environments ability to absorb the corresponding waste generated by human socio-economic activity. The concept was originally developed by William Rees and Mathis Wackernagel when they published their book; Our Ecological Footprint: Reducing Human Impact on the Earth.

In 2006, humanities total ecological footprint was estimated using the eco-footprint model at 1.4 Earths – that is the area needed to support the world’s human population at that time. Clearly this shows humanity in overshoot, with numbers in excess of its environmental carrying capacity, and considering that the human global population is still growing exponentially with a doubling time of approximately 44 years, our impact on the environment is also increasing at an accelerating rate.

The footprint is a useful tool when comparing lifestyles and consumption behaviour between various peoples and cultures worldwide and for explaining in simple terms the ecological concept of carrying capacity. Its use as a tool in attempting to alter personal consumptive behaviour is ineffective due to Universal energy laws which affect all systems from non living Bernard cells which form in heated liquids through to living beings and the systems they are a part of such as our globalized Industrial society.

 

The Thermodynamic laws and the Maximum Power Principle

As far as we are aware, through corroboration based on empirical measurement and the falsifiability/refutability of the scientific method, these laws are Universal and absolute. All open, dynamic systems are subject to them.

 

The First law; Energy can be transformed from one form to another but cannot be created or destroyed (you can’t get something for nothing).

The Second or entropy law; while quantity remains the same (First Law), the quality of matter/energy deteriorates over time. Usable energy is irretrievably lost in every step of system processes (perpetual motion machines are impossible).

The Third law; the entropy of a perfect crystal approaches zero as the absolute temperature approaches zero (not relevant to this essay).

The Maximum Power Principle (MPP); during self organization, system designs develop and prevail that maximize power intake, energy transformation, and those uses that reinforce production and efficiency.

The MPP can be broken down into systemic priorities.

The first priority of a system is to maximize energy intake (Odum, 2007).

The second priority is to maximize efficiency in its energy processing. When there are no excess, unused resources to be found, a high diversity of cooperating units develops, with better efficiency and division of labour (Odum, 2007).

This second priority explains the formation of hubs/hierarchies within open systems as they try to maximize power throughputs.

 

 

The Rebound Effect, Jevons Paradox and Backfire

If we want to understand what’s going on in a system we need to look at it through the energy lens (Logan, 2010). The rebound effect is otherwise known to economists as Jevons paradox after the mathematician who first proposed the theory. In his 1865 book, The Coal Question, Jevons wrote;

"to suppose that the economic use of fuel is equivalent to a diminished consumption. The very contrary is the truth. As a rule, the new modes of economy will lead to an increase of consumption according to a principle recognized in many parallel instances…. The same principles apply, with even greater force and distinctiveness to the use of such a general agent as coal. It is the very economy of its use which leads to its extensive consumption…. Nor is it difficult to see how this paradox arises…. If the quantity of coal used in a blast-furnace, for instance, be diminished in comparison with the yield, the profits of the trade will increase, new capital will be attracted, the price of pig-iron will fall, but the demand for it increase; and eventually the greater number of furnaces will more than make up for the diminished consumption of each. And if such is not always the result within a single branch, it must be remembered that the progress of any branch of manufacture excites a new activity in most other branches and leads indirectly, if not directly, to increased inroads upon our seams of coal…. Civilization, says Baron Liebig, is the economy of power, and our power is coal. It is the very economy of the use of coal that makes our industry what it is; and the more we render it efficient and economical, the more will our industry thrive, and our works of civilization grow (140-142)."

What Jevons is describing with his paradox is a function of the maximum power principle (Logan, 2010). Any attempt within a system to increase efficiency of energy use only leads to increased energy throughput. Environmentalists often refer to this as a rebound effect backfire which is gradually being recognized as having a greater effect than previously thought (Sorrell, 2010).

An example of direct rebound effects would be individuals who make energy efficiency alterations to their accommodation. This saves energy which also produces cash savings in their bank account. Unless they were very careful on where this extra money was spent it could easily cause a backfire if for example they used the savings for a holiday abroad with the ensuing fuel expenditure on the flights involved.

Even if individuals take great care over their energy expenditures there is little they can do about indirect rebound effects. Energy that is unused by individuals will be redistributed elsewhere in the growing socio-economic system which makes up society as Jevons explained.

 

A Real Solution

If we as a society are going to get serious about our impact on the environment then supply side command controls such as production quotas incorporating maximum sustainable yields and rationing programs, which were successfully introduced by many countries during wartime, are the best options. 

 

Conclusion

Many, if not most, people believe humans are somehow above the limits of energy resources. Ignorance about energy develops during times of accelerating growth (Odum, 2007). Many people believe that cutting back on their energy use by introducing efficiency measures reduces their impact on the environment. Jevons paradox and the MPP tell us this is not true either on a personal or societal level.

 

Works Cited

Jevons, W. S. (1865). The Coal Question.

Logan, M. (2010, Oct 1st). Whither Complexity?Retrieved Mar 17th, 2011, from University of Alaska Anchorage: http://www.math.uaa.alaska.edu/~afkjm/video/MaryLogan-Energy/MaryLogan-Energy.html

Meadows, D. (2008). Thinking in Systems. Chelsea Green Publishing.

Odum, H. (2007). Environment, Power and Society for the 21st Century. New York: Columbia University Press.

Sorrell, S. (2010, Mar). Energy, growth and sustainability: five propositions. PDF file.Retrieved Mar 17th, 2011, from SPRU University of Sussex: http://www.sussex.ac.uk/spru/research/sewps

Wackernagel. (1996). Our Ecological Footprint. New Society Press.

 

 

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Quote of the Day

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"What we urgently need now is fuel, heavy and light oil, water and food. More than anything else, we need fuel because we can't do anything without it. We can't stay warm or work the water pumps," 

 Masao Hara, the mayor of Koriyama city

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Special Guest Speaker - Dr. Richard G. Wilkinson, Professor Emeritus of Social Epidemilogy

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Edited by Neal Grout, Saturday, 19 Mar 2011, 10:15

Abstract - Population health tends to be better in societies where income is more equally distributed.

Recent evidence suggests that many other social problems, including mental illness, violence, imprisonment, lack of trust, teenage births, obesity, drug abuse, and poor educational performance of schoolchildren, are also more common in more unequal societies. Differences in the prevalence of ill health and social problems between more and less equal societies seem to be large and to extend to the vast majority of the population.

After discussing the evidence and considering the overwhelming statistical correlation between income inequality and social ills, Wilkinson concludes that these relationships are likely to reflect a sensitivity of health and social problems to the scale of social stratification and status competition, underpinned by societal differences in material inequality.

http://www.fhs.sfu.ca/news/events/special-guest-speaker-dr.-richard-g.-wilkinson

 

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World energy crunch as nuclear and oil both go wrong

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Edited by Neal Grout, Saturday, 19 Mar 2011, 10:14

"Dr Euan Mearns at the Oil Drum said Fukushima has shattered democracies' faith in the safety of nuclear power. If Japanese engineers had prevailed despite the worst that nature could muster, it would have vindicated the industry. "Alas, this is not the case. The future of the human global energy system has just changed course with potentially far reaching consequences for civilisation," he said."

 

http://www.telegraph.co.uk/finance/globalbusiness/8386829/World-energy-crunch-as-nuclear-and-oil-both-go-wrong.html 

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This Time We’re Taking the Whole Planet With Us

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This Time We’re Taking the Whole Planet With Us

http://www.truthdig.com/report/item/this_time_were_taking_the_whole_planet_with_us_20110307/

Posted on Mar 7, 2011

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When will Oil Production Peak?

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"Just because output was lower in 2009 than 2008 does not necessarily mean the fall was geologically imposed. We think oil production was lower in 2009 than 2008 because of lower demand caused by the recession, itself caused in part by the spike in the oil price to $147/barrel. That in turn appears to have been the result of an effective plateau from around 2005 to 2008. What's more, output has risen strongly in 2010, rising by 2.8 million b/d in 2010 over 2009, and is forecast to rise by a further 1.5 million b/d this year (IEA - see http://omrpublic.iea.org/). In January this year, IEA figures, which are based on an all-liquids definition similar to the BP Stats, showed production at 88.5 mb/d, against 87.8 mb/d in July 2008. So already we are 700,000 b/d above the previous peak. Chris Skrebowski, ODAC trustee and independent forecaster, suggests the crunch will come in 2012/2013 at 92-94 mb/d. More generally we think that forecasting the precise date is now less important than preparing for the event. Whenever it comes, peak oil is far too close for comfort."

The ODAC team

http://www.odac-info.org/newsletter/2011/02/18 

 

This is probably the most accurate analysis of the situation I have come across.

Neal

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Confessions of a Mortgage Broker

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When I was a mortgage broker I was close to the problem, I was able to get mortgages for 98% of everyone who walked through the door , ex bankrupt , self employees, 8 times income , self cert , anything , the banks would help by manipulating the process to make sure everything went through .

I am not an economist but why if I could see that this was a process that would eventually cause disaster was it not stopped by the powers that be , FSA turned a blind eye and they have the full power of govt to stop what they want , I was doing mortgages were it came to light the client was fraudulent , I informed the lender they still completed the mortgage , client got no grief whatsoever the police could not be arsed total mortgage fraud being ignored . 6 months before the credit crunch hit we were up to 95% self cert if you had a pulse you got a mortgage.

The biggest UK player for adverse mortgages was the Lehman brothers, they owned 75% of the adverse lenders here, every 100-200 million of mortgages sold were securitized and sold off to bigger investment banks, Goldman sachs etc etc , all looked good high interest rates big profit margins , all lovely jubilee on the surface, but property prices were getting out of control , I had people buying garden sheds just to own another property . It is a common fact people with bad credit don’t change their spots they are used to not paying so the slightest problem they stop paying. The moor corrupt brokers were doing 200k mortgages to unemployed people fucking accident waiting to happen.

Abbey national would pass any mortgage as long as they took insurance, great underwriting that isn’t it , banks were lending on any type of dogs hit property towards the end high rise , prefab everything , ten years of this , combined with credit cards so easy to get it was a joke , 0% balance transfers etc etc I had clients who were part time cleaners with £125k credit limits explain that one .

Anyway shit hit the fan all in one go everyone stops paying as it has reached the limit, an absolutely obvious problem brewing for years, but allowed by the authorities to continue total bollocks. Suddenly 100’s of billions of pounds went bad, and the credit system fell off a cliff. No more securitisation fuck that the investment banks were not interested overnight in any more mortgage securities. The old way of lending had been replaced largely by securitisation, banks used to lend money they had on deposit etc but were lending money they did not have. Bang Lehman brothers gone in heart beat, I came back from Tenerife and within 3 months the adverse mortgage business was finished , the cleaner lenders were fucked by self cert and to high income multiples and fucking piss poor underwriting .

So we see meltdown , total meltdown if the govts did not bail out the banks we would have seen UK possible bankrupted , the bailout has created the false economy for last 2 years , but the problem is bubbling , lenders are not going to go back to lending like they did before for a f...ing long time , the housing market as not dropped due to this false economy people holding prices but not selling , the the second kick comes the property market is going to drop like a sack it has to get back to 3.5 times the average income as this is what’s safe for banks to lend as it had always been in the past average income in uk 30k so 30k times 3.5 times £105k , avg property price is still £175k so something is wrong , I know a lot of mortgage brokers and they are fucked the banks will only lend to the perfect candidate , so something got to give a possible 75k drop in price , fucking mass repossession and mass shortfall .

Im a b2b telecoms broker I see all types of business and mostly all of them are in trouble to some extent so were the coming out of recession bit from, if we get the second kick the injured ones are fucked.

They are now setting up govt agencies like SOCA to combat fraud, the FSA is going to renamed and there out there fining people 100s of k to fucking lat don’t you think .

Luckily telecoms works as it is a necessity for business and if you are saving clients money it makes it easier as I don’t have to take money of anyone , still hard because a lot of business are depressed , i ve had guys sit and cry in front of me when i ve been to see them etc etc .

 

Simmon Dunn


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Corporate Corruption

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"Obviously businesses in our system must be kept from having any ability whatsoever to influence government decision-making in any way, or the system breaks down. When businesses are able to influence government, they will influence government in ways that provide themselves - and only themselves - with more profits, meaning lower costs, meaning fewer jobs at worse pay and not protecting workers, the environment or other businesses. And, they will fight to keep their ability to influence government, using the resulting wealth gains to increase their power over the government which increases their wealth which increases their power over the government which increases their wealth which increases their power over the government which increases their wealth which increases their power over the government which increases their wealth which increases their power over the government ..."

David Johnson

 


http://www.truth-out.org/businesses-do-not-create-jobs65095

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Corporate Behaviour

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Edited by Neal Grout, Saturday, 6 Nov 2010, 06:42
ELEVEN INHERENT RULES OF CORPORATE BEHAVIOR by Jerry Mander

The following list is an attempt to articulate the obligatory rules by which corporations operate. Some of the rules overlap, but taken together they help reveal why corporations behave as they do and how they have come to dominate their environment and the human beings within it.

1.  The Profit Imperative: Profit is the ultimate measure of all corporate decisions. It takes precedence over community well-being, worker health, public health, peace, environmental preservation or national security. Corporations will even find ways to trade with national "enemies"—Libya, Iran, the former Soviet Union, Cuba—when public policy abhors it. The profit imperative and the growth imperative are the most fundamental corporate drives; together they represent the corporation's instinct to "live."

2.  The Growth Imperative: Corporations live or die by whether they can sustain growth. On this depends relationships to investors, to the stock market, to banks and to public perception. The growth imperative also fuels the corporate desire to find and develop scarce resources in obscure parts of the world.

This effect is now clearly visible, as the world's few remaining pristine places are sacrificed to corporate production. The peoples who inhabit these resource-rich regions are similarly pressured to give up their traditional ways and climb on the wheel of production-consumption. Corporate planners consciously attempt to bring "less developed societies into the modern world" to create infrastructures for development, as well as new workers and new consumers. Corporations claim that they do this for altruistic reasons to raise the living standard—but corporations have no altruism.

Theoretically, privately held corporations—those owned by individuals or families—do not have the imperative to expand. In practice, however, their behavior is the same. Such privately held giants as Bechtel Corporation have shown no propensity to moderate growth.

3.  Competition and Aggression: Corporations place every person in management in fierce competition with each other. Anyone interested in a corporate career must hone his or her ability to seize the moment. This applies to gaining an edge over another company or over a colleague within the company. As an employee, you are expected to be part of the "team," but you also must be ready to climb over your own colleagues.

Corporate ideology holds that competition improves worker incentive and corporate performances and therefore benefits society. Our society has accepted this premise utterly. Unfortunately, however, it also surfaces in personal relationships. Living by standards of competition and aggression on the job, human beings have few avenues to express softer, more personal feelings. (In politics, non-aggressive behavior is interpreted as weakness.)

4.  Amorality: Not being human, corporations do not have morals or altruistic goals. So decisions that maybe antithetical to community goals or environmental health are made without misgivings. In fact, corporate executives praise "non-emotionality" as a basis for "objective" decision-making.

Corporations, however, seek to hide their amorality and attempt to act as if they were altruistic. Lately, there has been a concerted effort by American industry to appear concerned with environmental cleanup, community arts or drug programs. Corporate efforts that seem altruistic are really Public relations ploys or directly self-serving projects.

There has recently been a spurt of corporate advertising about how corporations work to clean the environment. A company that installs offshore oil rigs will run ads about how fish are thriving under the rigs. Logging companies known for their clearcutting practices will run millions of dollars' worth of ads about their "tree farms."

It is a fair rule of thumb that corporations tend to advertise the very qualities they do not have in order to allay negative public perceptions. When corporations say "we care," it is almost always in response to the widespread perception that they do not have feelings or morals.

If the benefits do not accrue, the altruistic pose is dropped. When Exxon realized that its cleanup of Alaskan shores was not easing the public rage about the oil spill, it simply dropped all pretense of altruism and ceased working.

5.  Hierarchy: Corporate laws require that corporations be structured into classes of superiors and subordinated within a centralized pyramidal structure: chairman, directors, chief executive officer, vice presidents, division managers and so on. The efficiency of this hierarchical form (which also characterizes the military, the government and most institutions in our society) is rarely questioned.

The effect on society from adopting the hierarchical form is to make it seem natural that we have all been placed within a national pecking order. Some jobs are better than others, some lifestyles are better than others, some neighborhoods, some races, some kinds of knowledge. Men over women. Westerners over non-Westerners. Humans over nature.

That effective, non-hierarchical modes of organization exist on the planet, and have been successful for millennia, is barely known by most Americans.

6.  Quantification, Linearity, Segmentation: Corporations require that subjective information be translated into objective form, i.e. numbers. The subjective or spiritual aspects of forests, for example, cannot be translated, and so do not enter corporate equations. Forests are evaluated only as "board feet."

When corporations are asked to clean up their smokestack emissions, they lobby to relax the new standards in order to contain costs. The result is that a predictable number of people are expected to become sick and die.

The operative corporate standard is not "as safe as humanly possible," but rather, "as safe as possible commensurate with maintaining acceptable profit."

7.  Dehumanization: In the great majority of corporations, employees are viewed as ciphers, as non-managerial cogs in the wheel, replaceable by others or by machines.

As for management employees, not subject to quite the same indignities, they nonetheless must practice a style of decision making that "does not let feelings get in the way." This applies as much to firing employees as it does to dealing with the consequences of corporate behavior in the environment or the community.

8.  Exploitation: All corporate profit is obtained by a simple formula: Profit equals the difference between the amount paid to an employee and the economic value of the employee's output, and/or the difference between the amount paid for raw materials used in production (including costs of processing), and the ultimate sales price of processed raw materials. Karl Marx was right: a worker is not compensated for full value of his or her labor—neither is the raw material supplier. The owners of capital skim off part of the value as profit. Profit is based on underpayment.

Capitalists argue that this is a fair deal, since both workers and the people who mine or farm the resources (usually in Third World environments) get paid. But this arrangement is inherently imbalanced. The owner of the capital—the corporation or the bank always obtains additional benefit. While the worker makes a wage, the owner of capital gets the benefit of the worker's labor, plus the surplus profit the worker produces, which is then reinvested to produce yet more surplus.

9.  Ephemerality: Corporations exist beyond time and space: they are legal creations that only exist on paper. They do not die a natural death; they outlive their own creators. They have no commitment to locale, employees or neighbors. Having no morality, no commitment to place and no physical nature (a factory, while being a physical entity, is not the corporation). A corporation can relocate all of its operations at the first sign of inconvenience—demanding employees, high taxes and restrictive environmental laws. The traditional ideal of community engagement is antithetical to corporation behavior.

10.  Opposition to Nature: Though individuals who work for corporations may personally love nature, corporations themselves, and corporate societies, are intrinsically committed to intervening in, altering and transforming nature. For corporations engaged in commodity manufacturing, profit comes from transmogrifying raw materials into saleable forms. Metals from the ground are converted into cars.

Trees are converted into boards, houses, furniture and paper products. Oil is converted into energy. In all such energy, a piece of nature is taken from where it belongs and processed into a new form. All manufacturing depends upon intervention and reorganization of nature. After natural resources are used up in one part of the globe, the corporation moves on to another part.

This transformation of nature occurs in all societies where manufacturing takes place. But in capitalist, corporate societies, the process is accelerated because capitalist societies and corporations must grow by extracting resources from nature and reprocessing them at an ever-quickening pace. Meanwhile, the consumption end of the cycle is also accelerated by corporations that have an interest in convincing people that commodities bring material satisfaction. Inner satisfaction, self-sufficiency, contentment in nature or a lack of a desire to acquire wealth are subversive to corporate goals.

Banks finance the conversion of nature insurance companies help reduce the financial risks involved. On a finite planet, the process cannot continue indefinitely.

11.  Homogenization: American rhetoric claims that commodity society delivers greater choice and diversity than other societies. "Choice" in this context means product choice in the marketplace: many brands to choose from and diverse features on otherwise identical products. Actually, corporations have a stake in all of us living our lives in a similar manner, achieving our pleasures from things that we buy in a world where each family lives isolated in a single family home and has the same machines as every other family on the block. The "singles" phenomenon has proved even more productive than the nuclear family, since each person duplicates the consumption patterns of every other person.

Lifestyles and economic systems that emphasize sharing commodities and work, that do not encourage commodity accumulation or that celebrate non-material values, are not good for business. People living collectively, sharing such "hard" goods as washing machines, cars and appliances (or worse, getting along without them) are outrageous to corporate commodity society.

Native societies—which celebrate an utterly non-material relationship to life, the planet and the spirit—are regarded as backward, inferior and unenlightened. We are told that they envy the choices we have. To the degree these societies continue to exist, they represent a threat to the homogenization of worldwide markets and culture. Corporate society works hard to retrain such people in attitudes and values appropriate to corporate goals.

In undeveloped parts of the world, satellite communication introduces Western television and advertising, while improvements in the technical infrastructure speed up the pace of development. Most of this activity is funded by the World Bank and the International Monetary Fund, as well as agencies such as the US Agency for International Development, the Inter-American Bank and the Asian-American Bank, all of which serve multinational corporate enterprise.

The ultimate goal of corporate multinationals was expressed in a revealing quote by the president of Nabisco Corporation: "One world of homogeneous consumption. . . [I am] looking forward to the day when Arabs and Americans, Latinos and Scandinavians, will be munching Ritz crackers as enthusiastically as they already drink Coke or brush their teeth with Colgate." Page 31

********
In the book, Trilateralism, editor Holly Sklar wrote: "Corporations not only advertise products, they promote lifestyles rooted in consumption, patterned largely after the United States.... [They] look forward to a post-national age in which [Western] social, economic and political values are transformed into universal values... a world economy in which all national economies beat to the rhythm of transnational corporate capitalism.... The Western way is the good way; national culture is inferior."

Form Is Content Corporations are inherently bold, aggressive and competitive. Though they exist in a society that claims to operate by moral principles, they are structurally amoral. It is inevitable that they will dehumanize people who work for them and the overall society as well. They are disloyal to workers, including their own managers. Corporations can be disloyal to the communities they have been part of for many years. Corporations do not care about nations; they live beyond boundaries. They are intrinsically committed to destroying nature. And they have an inexorable, unabatable, voracious need to grow and to expand. In dominating other cultures, in digging up the Earth, corporations blindly follow the codes that have been built into them as if they were genes.

We must abandon the idea that corporations can reform themselves. To ask corporate executives to behave in a morally defensible manner is absurd. Corporations, and the people within them, are following a system of logic that leads inexorably toward dominant behaviors. To ask corporations to behave otherwise is like asking an army to adopt pacifism.

Corporation: n. An ingenious device for obtaining individual profit without individual responsibility. —Ambrose Bierce, 1842-1914.

Excerpted from: IN THE ABSENCE OF THE SACRED: The Failure of Technology and the Survival of the Indian Nations, Sierra Club Books, 730 Polk St.. San Francisco, CA 94109.

from the Winter 1995, EARTH ISLAND JOURNAL which is published quarterly by , 300 Broadway # 28, San Francisco, CA 94133 Phone: 415-788-3666; FAX: 415-788-7324
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Quote of the Day

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"As a minister, I experienced the power of industrialists and bankers to get their way by use of the crudest form of economic pressure, even blackmail, against a Labour Government. Compared to this, the pressure brought to bear in industrial disputes is minuscule. This power was revealed even more clearly in 1976 when the IMF secured cuts in our public expenditure. These lessons led me to the conclusion that the UK is only superficially governed by MPs and the voters who elect them. Parliamentary democracy is, in truth, little more than a means of securing a periodical change in the management team, which is then allowed to preside over a system that remains in essence intact. If the British people were ever to ask themselves what power they truly enjoyed under our political system they would be amazed to discover how little it is, and some new Chartist agitation might be born and might quickly gather momentum."

 

Tony Benn

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Dispersal Dynamics in Response to Scarce Resources

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Edited by Neal Grout, Saturday, 19 Feb 2011, 06:38
I was watching a program on National Geographic last month about a troop of monkeys who lived at a Hindu temple in India. I missed the start of the program so I'm not sure if the temple was dedicated to the animals or they had just decided to take up residence there but people who came to the temple often brought food for the monkeys.

There were 3 bathing pools in the temple and it was decided to close 2 down and drain them so they could be cleaned. This meant that only one gate to the temple would remain open and there would be a reduced amount of visitors allowed in.

Within a couple of days of the visitor numbers being reduced and less food being brought in for the monkeys the troop of about 80 split into two equal sized groups. The first group lead by the original matriarch, her family and other monkeys of appropriate size and status forced the other group to split off by attacking them and then took up a position by the only open gate to aquisition the food that was still comming in.

The splinter group made up of mostly smaller monkeys were not allowed to come near the open gate and within a day were forced to move from the temple to the nearby town in search of food. This was a high risk strategy because danger of injury or being caught was increased.

What can we expect from humans once needed resources become scarce? Will we sit back and do without or try to aquisition more for ourselves by creating divisions along cultural, ethnic and religious lines?
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The Hurdles of Steady State Economics

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Edited by Neal Grout, Saturday, 28 Aug 2010, 10:31

A steady state economy is one which remains within fixed parameters (while allowing for the natural oscillations that occur in all dynamic systems) as opposed to our current economic system which is based on a compound growth model.  However there are two major problems, one socio-economic and the other biophysical in nature, which must be overcome before the foundations of a steady state economy can be laid.

The sub-optimization of the world’s corporate/financial system

Humans form hierarchy’s to facilitate the workings of their societies.  On the simplest level this can be a headman instructing the other villagers on building a dam to improve their agricultural production. The work is performed much faster and easier if directed by one competent leader than if each man performs to what he thinks is best. These hierarchies form subsystems within the greater whole system. In the past banks and corporations arose to help facilitate the workings of society. Banks for example were safe stores of wealth and were able to loan money to projects that would otherwise have not gone ahead. But in a world where capital wealth equals political power it was only a matter of time before the sub-optimization (subsystem domination to the detriment of the greater system) of the corporate/financial system took place.

Clear evidence of corporate/ financial sub-optimization can be found in the  TARPs bank bailouts of 2008 when the political subsystem, now subservient to the financial subsystem, rejected the moral hazard argument and declared the banking system ‘too big to fail’ and taxpayers (the lowest rung of the social hierarchy) were forced to foot the bill.

When the corporate/financial subsystem has such a tight stranglehold on the rest of society from the political top to the taxpaying bottom and presenting a model of perpetual growth as the only way forwards, then how can a steady state economy possibly be initiated without first a separation of corporate interests and politics? And how could such a separation be brought about?

 

An Overfull World

Herman Daly, one of the world’s most prominent ecological economists, describes our current situation as a ‘full world’.  He argues that in the last 80 years economic policies such as the growth model which seemed a good idea for reducing poverty no longer work because humanity is coming up against the biophysical constraints of our environment, the biosphere. These constraints include both resource depletion and degradation of environmental sinks. According to the Wackernagel Eco-footprint model, which is accepted by a majority of the environmental science community, humanity currently uses the equivalent of one and a half worlds to support the almost 7 billion and growing population. From an ecological perspective, this puts humanity 30% in overshoot of its environment. Humanity is therefore not in a full world but an overfull world.

Considering these biophysical constraints how can a steady state economy be initiated without first dealing with the inevitable decline that must take place bringing the economy back to a level where it can be supported by the environment?

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