New Year's Eve Blue Moon

"If we lived back in 1945 and were told of all the marvelous technological breakthroughs of the past half-century, we would imagine that societies would now be living a life of leisure. Why has this not occurred? The reason is largely to be found in the predatory behavior that has enriched the finance, insurance and real estate (FIRE) sectors." Michael Hudson.

Doesn’t this go to the heart of the matter? Not a heart that people typically feel beating in the depths of our multifaceted, slowly globalising World Culture, not the heart of any serious practical expectation or analysis of where we are and whither we might, or ought, to go, but isn’t this the crux of everything? Haven’t we allowed ourselves to become too blinded to what is possible if only ... if only some other things might fall into place, if only others could see things this way? Haven’t we thoroughly over-egged our half-baked cake? Haven’t we failed most miserably to keep things simple?

We are a frantic people running around in ever more complicated and interlocking circles just so we can eat and stay warm. Hunter-gatherers did a better job. With luck some of us get to enjoy it, yes, even enjoy holidays and gadgets. (What joy!) But the freneticism! The emotional exhaustion; the scraped-clean, bone dry, spiritual fragility; the absence of vision characterising our wild ramblings, all ring a discordant hollow, a dead note, a bewildering cacophony. It is in this tangle we are caught, it is this mess of directionless activity which blinds us.

I’ve been at a loss for a few weeks now, unable to put finger to keyboard, word to feeling, but not sure why. Everything is repeating like a drab groundhog day. The mantra-drone we emit almost autonomically has become quietly deafening. I can make no sense of the rattling chaos, like a baby stuck in the early stages of its development incapable of magicking order from the wastes of light and sound it must understand. At a loss, I’ve decided simply to point.

Between us and a proper understanding of wealth lies millennia of cultural detritus. We are so accustomed to measuring “value” monetarily we have mistaken money for the world. Money makes the world go around. It is no longer the Sun that is the centre of our system, it is money. We are enduring not a Copernican, but Goldman Sachsian Revolution. We have become money-tropic, money-centric, and are going mad on this misnoma. We have had, for some long time now, perhaps a century, the technical know-how to prioritise important things like health, dignity, trust and community above monetary wealth, but have failed to implement a change of direction. We fill our time with such inane chaff we hardly know up from down any more. Inflation, deflation, eternal GDP growth, job-loss recovery, job-loss growth. Why? Because money is the sun and moon of our world, its night and day, its turning, its growing, its beginning and end. And Money said, let there be light, and there was light, and it was metered. Money, like all levers to power, coallesces inexorably to itself and corrupts absolutely. Not just those who wield it, but all of us. We are sick in it, with it; breathing it out and in; imbibing, digesting and egesting it, as it rots us all to husks. Let’s get sick of it.

There is another way: Demote money. Demote the high priests of this sick religion. Relearn.

Competition versus Cooperation: the final conflict?

“Mutual Aid” by Peter Kropotkin (1902) and comments I read almost everywhere on the internet put me in mind to write on this topic, which is, I think, one of the most important aspects of the transition we are passing through today. What place competition, what role cooperation? Is one mightier than the other? Is that even a valid question? I think so, if only as a titillating appetizer to draw the reader into the debate. It informs this article.

Kropotkin’s book is a masterwork of well written, erudite and scholarly analysis. Not all questions are answered (they never will be), it is not without controversy and no doubt some of it is out of date, but its core thesis – that cooperation is a more effective tactic than competition in the struggle we call “survival of the fittest” – is sound. This is an important observation; it is not, says Kropotkin, that “survival of the fittest” is just another way of saying “competition,” but that there are alternative tactics which can be deployed by living organisms, as they adapt to, and find a rhythm of living within, the environment of which they are a part, whose composition they help make up. Cooperation is a tactic, as is competition, tactics, furthermore, we can compare, understanding each better by virtue of the exercise.

In the early pages of Mutual Aid Kropotkin recounts an interesting story of a zoologist who took a bag full of ants – a cooperative insect – into a field free of ants, and emptied it there. The ants quickly dominated the territory. All solitary insects – beetles, grasshoppers, etc., dropped whatever they were doing and fled for their lives. Kropotkin, explaining this, observes that cooperative animals are capable of courage and self-sacrifice, complex battle tactics and other skills, unlike solitary creatures. Cooperative animals display higher intelligence too, proving capable of otherwise impossible feats, such as termite mounds which have their own air conditioning. Homo sapiens sapiens escaped Earth and put footprints on its satellite.

My thoughts on the matter are simple. We hear often the refrain that humans are competitive by nature, but compared to wolverines, for example, we are not, not if cooperation is the opposite of competition. We are social first, competitive second (what competition really means I come to later). The evidence that we are social is all around us; families, language, culture, art, cities, nation states, the internet, Facebook and so on. None of this would be possible if we were competitive first and foremost, incapable of cooperation and compromise. That this is quite a controversial statement is not lost on me, but is in fact further confirmation of how susceptible to received wisdoms we are. Group-think, “sheeple,” peer pressure, cliques are all further evidence of our social nature. A consensus is arrived at by various means, and then stuck to, or calcified, by various means also. But consensus can be very wrong, no matter how hard won: the Earth was famously once flat; physics experts used to know manned flight was impossible, until two people who had not read the experts’ books proved them wrong. My belief is that our understanding of competition, the consensus we have achieved on it, is likewise flawed, and needs closer inspection via open and honest debate.

The etymology of the word is latin: com and petere, com meaning “together” or “with,” petere “to seek” or “struggle toward.” The origins of competition are therefore social, and its original meaning reflects this; to strive together toward a common objective. It seems we need not be sociopathic about this competition thing, see nature as a Hobbesian battle field of each against all, after which one creature is left alive on a desolate planet, enjoying its last minutes alive as the final victor of The Survival of The Fittest. Surely this is not what nature is all about. Competition can include cooperation, cooperation can include competition. Perhaps they are not opposites. Perhaps economics has a poor understanding of this most essential element of its theory.

A myth has arisen around the notion of competition which is removed from the complicated reality of how things really work. Nature (and there is only nature; nothing is unnatural) is a complex collection of processes, or systems, dynamically interrelating and exchanging energies, doing work, growing and contracting, digesting and egesting, going in and out of balance. Competition is a part of this, as is cooperation, as are other things, but what it is most certainly not is a total, all out war. If it were, something or someone would have won by now. After all, it’s been going on for billions of years. And anyway, what would “victory” actually mean? What is the point of destroying things on which we depend? What is victory, exactly?

In economics there is the myth of perfect competition, out of which, as well as out of the misunderstood work of Darwin and the foolish “selfish gene” idea, we have a generalized idea of competition, in the economic realm, as selfish, efficient and ruthless, as the fuel that powers The Invisible Hand which ensures its effect is good, despite people always acting on their own self-interest. Were the economic choice between “competition” in this sense, and State run interference, I’d take competition every time, but I think we are erecting a false dichotomy when we make this comparison, when we present ourselves with this black and white choice.

There can be no perfect competition, and there must be a State of some kind. Economic activity is dependent upon humans coming together to exchange stuff. Humans coming together is how States form. Human activity becomes socially organized, rather than staying chaotic and wholly unpredictable, for the simple reason that humans prefer it that way: we are social, so we agree upon rules. But we are “flawed” too, often "irrational," and cannot be perfectly informed about the goings on in the market place, so in the messy hubbub of buying and selling, in that organic and multi-faceted process, dominant parties (aka The Successful) emerge. In that all trade is predicated on the necessary rationing out of scarce resources, and in that a medium of exchange is necessary to enable complex trade, we have here a system – the market – which can only lead to monopolies and/or cartels, which themselves could only be inhibited by perfect competition, which itself is impossible. Therefore the market can develop in no other way. Systemically, inherently, it is about securing differential advantage. There is no other way to play this game, there is no other way this game can play out.

So we are back to competition. For a multitude of very valid reasons human activity gave rise to markets, and markets are supposed to stay efficient and mostly beneficial via competition. And yet, under its remit, on its watch, we have developed built-in and perceived obsolescence, an after-care industry only necessary in its current size because of poor quality construction, highly effective and pervasive advertising to pump repeated consumption of nonsense goods, the idea that shopping is therapy, perpetual GDP growth as a necessity, and other anomalies, all of which cause distortions harmful to the environment in which we operate, and on which we depend for our very existence. Is competition, as we have mythologized it, delivering what it is theorized to? Can a market be other than Hobbesian in its conception? Can it be other than Orwellian in its long term outcome? How do we combine cooperation and competition wisely within economic theory? As I have said elsewhere, economics – as other disciplines – should not allow the walls erected between it and others to stand any longer. Answering these, and other very important questions, obliges us to tear these walls down. Why shouldn’t the fruits, say, of zoology and geophysics, where relevant, influence economics, change it, improve it?

Competition is both real and necessary, but poorly understood. The model I like most is open source software, in which the original meaning of competition, as defined above, seems to find its most healthy expression. That Bill Gates referred to it as Communism is telling, don’t you think? That its product is both “free” and of high quality tells its own story. Economic theory should be paying very close attention.

The madness of crowds

"No warning can save a people determined to suddenly grow rich." Lord Overstone.

I can’t confirm the good gentleman spoke (or wrote) that provocative sentence, but it’s a good one nonetheless (split infinitive aside). It means you can’t do nothing when crowds get mad (double negative aside). Depressions happen. Shit happens. All true, as far as that goes.

But guess what, “rich” has meaning in a particular context, one of differential advantage engendered by an ongoing competition over scarce goods and services. In such a system, any people can suddenly determine to become rich, because society, via various means, makes it very plain indeed that success is measured monetarily. Not all people fall prey to this message, but the vast majority does. Nice guys finish last. Survival of the fittest. You know the story.

My personal reading of this wee pearl of wisdom is that monetary systems are inherently destructive, because they falsely map a philosophy of scarcity over a situation of abundance. The dissonance set up by this false mapping has a number of harmful and unnecessary consequences. One is the calcifying of hierarchies as the “succcessful” secure their positions, the other is a tendency to consume unwisely, to make a passion of consumption because this demonstrates success. To be forced by an unwise paradigm to squabble over artificially scarce goods and services is to ensure cyclical collapse. As we become global in the force of our numbers, the ecosystem is being pulled ever more into our self-inflicted, unhealthy rhythm of overconsumption and collapse. We are now also able to poison it with newly invented chemicals. The abundance that might be sustainably nurtured is squandered because our management of it is informed by the wrong philosophy.

Because we encourage competition over scarce resources, we are obliged to expect the madness of crowds to crave what the “successful” have; riches. We tell ourselves, in all sorts of ways, that this is what life is about. What right does any of us have to bemoan this when it happens!

Wisdom will be finding the right place for competition, and the right place for cooperation. Once we have that, abundance will follow, whereupon we can allow people to be individuals at last, free enough to become whatever they can, with enough space in which to grow up, and make their own decisions. Monetary wealth need have nothing to do with it. Riches need be no carrot, poverty no stick.

But who would make the decisions?

Typically on my blog I don’t like to deal with the nitty-gritty of resource-based economies (I do that elsewhere), but felt it might be worth while having a little piece out there in the blogosphere addressing one particular issue, which has troubled me as it has troubled others. It is this: if a resource-based economy has no nation states, no political parties, no corporations and no medium of exchange, who makes the decisions? The idea that some automated process could make decisions of state, alarms people: That’s not how things are now! Humans do that work, always have done, always will do! Relying on machines or other non-human processes would be a huge, technophile-driven folly, the worst kind of scientific positivism.

So the question is a very important one, since it confronts us with our own ideas about what it is to be human and in control of our lives. Understandably, it is not an easy question to answer. But the reason it’s hard to answer is that the question itself is misleading. For example, if I were to ask: Who makes the decisions in free market economics, or crony capitalism, or casino capitalism, whatever you want to call the planet’s dominant system, what would the right answer be?

Politicians? They certainly put on a great show of making decisions, but what’s behind that show, and how much of it is real?

Mega-corporations? Perhaps, but only in part, and how do they coordinate themselves?

We The People? Not really; voting once every few years is hardly enough influence to say we make the decisions.

Consumers? A little bit, yes.

But maybe we should put all these factors together, call them the Invisible Hand, and say it makes the decisions. That is probably quite close to reality, but also perhaps at some distance from the way we mythologize the idea of leaders making big decisions, and free individuals making little decisions in their billions. Indeed, isn’t the Invisible Hand a blind miasma of various technologies enabling various crowd-behaviours, apparently incapable of true long term thinking? It is also, in a real way, an “automated” or “machine-like” process, beyond purely human, individual control. As such, what sense does it make to say the Invisible Hand “makes” decisions, in the way we think of humans doing so?

And while there is perhaps a certain wisdom in the Hand’s blindness, and maybe too a useful humility in accepting that long term planning is most often doomed to constant revision and change, it is only on paper that the Invisible Hand works this way, due to the impossibility of establishing a perfectly competitive market. In practice the Hand is not really blind, and is most definitely corruptible. Without perfect competition the Invisible Hand cannot function as theorized, serves instead the powerful few to the detriment of the vulnerable many. Only perfect competition can prevent the few from becoming overly powerful, and perfect competition is impossible. (Regarding long term planning, although a side issue to the main question, I do think a resource-based economy would be capable of this, since it would have a completely different set of priorities and built-in incentives.)

In short, this post’s question is not easy to answer, because it is the wrong question. There has never been anyone “making” decisions, nor will there ever be. There is an ongoing process of action and reaction, of various systems dynamically interacting, all giving rise to progress, change, suffering, upheaval, stagnation etc., always some mix of technology and human being. One without the other is almost inconceivable. Technology is, after all, human ingenuity made real.

What we should therefore be asking of all socioeconomic models, as one part of coming to understand them better, is how are decisions made. I here offer humbly an answer which is I think relevant to them all: Humans and their technologies jointly arrive at decisions. In monetary systems the technology we call money, in combination with government, central banks, the IMF, major corporations, as well as other technologies such as computers and database software etc., arrive at the major decisions (such as interest rates and the laws of business) that govern our lives, and steer civilization. The Consumer, by shopping, sends some signals to the listed institutions. The success or otherwise of these decisions is always open to debate – there is no such thing as perfection. Advertising influences very strongly what the Consumer does, so the Consumer is influenced by one powerful part of the status quo just outlined. “Freedom of choice” is illusory.

So who makes the decisions nowadays? Nobody does. The lion’s share of “decision making,” when you really think about it, is made by technology, a particular technology called fiat money. For as we all know, if an idea or plan does not make financial sense, it does not make sense at all. Money talks. Money decides. Money is a technology, a very human invention, not an act of god.

So the only difference between a resource-based economy and contemporary monetary systems would be the technology deployed to partner humans in arriving at decisions. With the scientific method in the driving seat, not money, arriving at decions would be a more reasonable and healthly process than the profit driven, perpetual GDP growth dependent decision making process we struggle with today. Furthermore, as much of societal infrastructure as possible would be automated, making the material side of life as transparent and smooth flowing as possible. Without the hassle of making a profit or earning a decent wage, without the endless complexity of tax law, money supply control, interest rates, exchange rates etc., the range of decisions to be made would be reduced to more functional areas, such as soil health, air and water cleanliness, energy, and providing abundance.

In a resource-based economy, only things that made sense – to the best of our ability to determine this – would make sense, as distinct from their money making/saving potential. The absence of the profit-motive, the freedom from appeasing sponsors and financiers generally, of meeting bogus, money-dependent deadlines, would mean long term thinking would more likely rise to prominence. As today, no one would make decisions, as today they would be arrived at, but as an improvement over today, priorities such as the ecosystem and human dignity would be front and center. There’s nothing wrong with that, and nothing, other than fear of our own ignorance, to be afraid of.

The main obstacle between us and mature, radical change, it seems, is the way we have mythologized ourselves to ourselves, and our reluctance to give these myths up. Putting away childish things is hard, but, I fervently hope, not impossible.

More on growth

As an addendum to yesterday’s post, I want today to throw in a quick thought exercise on GDP growth, in the form of a metaphor. Economics has defined growth in a very clumsy way as expanding GDP. If we see socioeconomic models as subsystems of Earth’s ecosystem, and not as theoretical ivory towers looking down on and removed from the world “out there,” we quickly recognise that economic growth occurs at the expense of other subsystems of that ecosystem. In another system – the human body – when one of its subsystems grows perpetually, we call it cancer. While it depends on perpetual growth of its own produce (goods and services to be consumed by itself), economics can only be “cancerous,” from the point of view of the system which houses it. It can only see perpetual growth as “healthy” if it ignores the ecosystem which hosts it.

Ignoring the ecosystem is flat out stupid. It can indeed be made sick in the way a human body can be made sick, it just takes a bit longer, and is far harder to diagnose. It can “heal” itself though, right itself, find a new equilibrium, at the expense of the cancer that ailed it. This rediscovery of some new equilibrium would likely destroy our civilisation. Reassessing economics’ definition of growth is, for this reason, somewhat of a priority.

A scarcity of unfettered thinking

Economics is not a science, it is an art. Its pioneers may have had noble intentions, such as the most equitable and sensible distribution of goods and services possible, they may have wanted to maximise the good and minimise the bad, but there seems to have been a collective failure in the predictive power of economics in recent years, or at least, perhaps thanks to the internet, such failure is now more famous than ever before. Physical laws tend not to undergo such perturbations (quantum mechanics aside). Economics seems to have become the art of obfuscation in the way philosophy can be, in the way religion can be. Centuries ago great minds debated how many angels could dance on the head of a pin. Today economists debate how many derivatives can dance at the head of an economy.

We have a problem, do we not, when something as simple as direction of price, that is inflation and deflation, cannot be predicted. The experts of this dismal science cannot agree; is inflation coming, or is it deflation, or is it both at the same time, or maybe stagflation? Surely this is a sign that something is very wrong in the kingdom of Denmark.

The typical reaction to this pressure is to prove ever more strenuously that one’s own opinion is the right one, to shout louder in more and more complex terms why it is that one has been right all along. A lifetime of effort and study have been invested. This is not a small matter of betting on the wrong horse at the tracks. These are career defining times for many, and the pressure is intense. The punter wants to know why the experts screwed up. Even the Queen of England has asked her pointed question. Why did economics experts fail?

So what qualifies me to take a stab at this most difficult of questions? Absolutely nothing. I am a two-time university drop-out, a daydreamer, and a poet/novelist of questionable skill. But I am also a concerned and interested human being, who has come to believe, passionately, that it’s up to “We The People” to chance our arms and help the experts out, whether they like it or not. I am prepared to risk opprobrium, or worse, ringing silence, in the faint hope that my own small effort here helps in some tiny way to clear heads, and focus attention on the right areas. This is my take on what is wrong with our kingdom.

Folks, we need to get back to basics. If the big guys and girls can only squabble like children, and make mistake after mistake, when it is unclear what mistakes even are, what latitude predictions must be granted, we’re not going to find the reasons for this chaos at the top end of this discipline. We have to look at its foundations. To my inexpert eyes the whole structure is wobbling. There can only be two possible explanations for this: 1. it wasn’t put together right, or 2. the real world out there is so full of unknowable and uncontrollable variables theory can’t keep up with it. Either way, by my lights we are obliged to focus our attention in the basement. Economics 101 needs to be revisited.

There are two main foundation stones to consider in such an exercise, one is scarcity, the other is ownership or private property. Both are assumptions. My question here is this: are they justified?

I’ll start with scarcity. Economics defines scarcity as infinite wants versus finite resources, which sounds like an eternal problem where there can only be too many people competing over too few things. It’s insoluble. People are greedy, insatiable even, and there’s only so much stuff out there. Hence we need the clean and cold arbitration of a medium of exchange – a prerequisite for the market place – so that a price mechanism can, in a totally impartial manner, distribute the scarce stuff amongst the greedy competitors. The market may well be hard, even cruel at times, but life is like that. Take a look around you. Nature is competition. Unfair in the particular, certainly, but fair over time.

And yet I am not insatiable, and neither is my wife. All joking aside, I don’t know any people so greedy they can’t be satisfied. In short, I don’t think wants can be infinite. Not only can there only be a finite number of people on the planet, this finite number of people cannot exercise the finite total of their wants simultaneously. Wants are brought to the market place in fits and starts, over whole lifetimes, finite lifetimes. The load is always changing. Furthermore, should there be some people incapable of “having enough,” whatever that really means, they are physically constrained from exercising their endless greed, from bringing it to bear on the market place in totality, by the limits of their purchasing power, by the size and number of their homes, by the size of their stomachs, their need for sleep, recuperation, indeed by their very mortality. Wants cannot be infinite. They can change, they can exceed supply, but they cannot be infinite. This, to me, is very important.

It therefore makes sense to define scarcity as finite wants versus finite resources. That sounds like a totally different type of problem to the classical definition. I’m not implying scarcity is not a problem, rather that economics has defined it badly, and this fallacious definition adversely effects the entire structure. The definition needs to be reassessed, and the following types of question asked: Is scarcity a design problem, i.e. solvable? Can humanity’s incredible ingenuity produce goods and services in abundance? What does abundance do to economic theory? Is scarcity a good or a bad thing? For example, technologies such as cold fusion, radiant energy panels, and the STAIR battery could make clean and renewable energy abundantly available to everyone on the planet. (As an aside, this need not be about peak oil, but simply about new technologies making old ones obsolete. The Stone Age did not end for lack of stones!) What effect would clean abundant energy have on the energy industry? On tax revenues? On centralisation itself? Establishing a sensible definition of scarcity, dealing with it thereafter as a design challenge, has profound implications.

On to the second foundation stone. Ownership is an idea, albeit one that seems to be natural; tigers with their territories, for example. But, because ownership is a very old human word drenched in a particular history, a mountain of law, and deep entanglement throughout economics, politics and culture generally, we need to subject it to closer inspection.

Tigers have no clue about ownership as a concept. They simply operate in a particular boundary, inside which the amount of prey necessary for the tiger’s ongoing survival can be sustained. That is not ownership in the legal sense, that is an operational function of tiger-type living. Tigers cannot want more and more territory because scarcity increases value, nor hoard to take care of themselves in their old age. Humans, on the other hand, both understand and are vulnerable to ideas, unlike other animals. This is a crucial distinction. Human behaviours change according to the type of society in which they are raised. A quick look at hunter-gatherers, at the Alouette Eskimos, at the history of the people of St Kilda demonstrates this.

Ownership is an idea that effects human behaviour, not a part of our biology which effects our behaviour. A better word for it might be “access.” Ownership affords exclusive access to a thing. Exclusivity, in this sense, means, at least functionally, “sufficient.” Ownership affords the owner sufficient access to the thing owned. Ownership is furthermore a necessary legal concept because of scarcity. Without scarcity the need for ownership vanishes, transforms into abundant access to that which we need and want. Functionally speaking, it is the access that is important, not the paper actuality of the legal sense of ownership. If you have ownership without access, you have nothing. Access without ownership, on the other hand, is not a problem. Renting a home, for example. Or borrowing a friend’s book, or hiring a car, etc. To collapse the above into one sentence: The idea of ownership has a particular utility (sufficient access) whose importance is dependent upon the conditions (scarcity) in which it operates.

Private property, it turns out, is an anomaly in our biological history. Of course there are for hunter-gatherers issues such as mating partners and the whole “selfish gene” meme (a gene cannot be selfish, it has no sense of self!), and yet doesn’t private property, as a defined and understood concept, really have its roots in farming? Farming is a technological solution to some of the negatives of hunter-gathering, a way of coping with the uncertainty of weather and other natural challenges. My point here is that a human technological development gave rise to the need for the legal concept of ownership. Might further technological development give rise to its demise? If the arc of our development is currently towards abundance and away from scarcity, could ownership become a redundant concept? What effect might this have on economics?

Because I don’t want to write a hugely long tract, I will close with some further, brief points. Technological unemployment is real and not a lump of labour fallacy as orthodox economics posits. It describes the slow, ongoing trend of replicating human abilities via mechanical means. Human abilities are finite. Therefore, due to our technological progress, we are rendering human labour progressively less necessary to the economy. This has a negative impact on purchasing power, and on money itself, since money derives its value ultimately from human labour, whether it be sweat-of-the-brow grunt work, or high level creativity. This is a problem economics must address, unblinkered.

Economics should not lock itself away from physics, sociology, psychology, history etc. Economics is central to society because money is central. It is too important to leave alone, to rot incestuously in its own unexposed juices. Because the things we really value – after the material side of things have been taken care of – cannot be valued monetarily; friendship, trust, the ecosystem, family, community, love; and because money makes revenue generating parts of society more “important” than non-revenue generating, we have a built-in problem with money’s relative importance. That is, it tends to concentrate to itself and cause overly powerful, monopolistic power accrual whereby “business” and “politics” necessarily fuse (as if they were ever separate!). Because perfect competition is impossible (another foundation stone of economics), because rational and perfectly informed market participants are impossible, excessive profits are systemically unavoidable.

Competition over scarce resources is a monopoly-creating mechanism, an inherent property of markets, “free” or otherwise. Economics must address this problem honestly and openly. After all, money is less important than we are; without humans it has no meaning or use. This logic needs to find a place in economics, before we experience global civilizational collapse, due to generations of irrelevant education, eroding topsoil, diminishing drinking water, less and less healthy air, etc. For these reasons and others, money must be demoted. We need a new economics capable of coping with such a concept, capable of coping with reality as it is, not as we theorise it to be. Establishing a new economics is up to us. All of us.

The strange magic of economic growth

What is economic growth? Basically, rising GDP, which means producing an increasing amount of goods and services. But I believe that answering this question properly demands of us that we look at growth generally.

"Out there in the real world" growth appears to be energy exchange. For example, a system has some mechanism (such as eating and digestion) for taking in energy, then converting this energy into growth and/or work, expels waste, and does this for as long as it stays cohesive. Entropy takes its toll, of course, and the system eventually collapses. Another point to consider is that the amount of energy in the universe has not changed one bit since the big bang. Therefore, growth is ongoing exchange of a finite amount of energy circularly between different energy-cycling systems. Growth is part of a cycle requiring "borrowing" energy from "out there", then returning it via waste and work.

Economic growth must surely obey these laws. Economics cannot entertain a definition of never ending growth without defying the laws of physics -- for every action there is an equal and opposite reaction. Economics must take the universe into account, must -- more prosaically -- take the ecosystem which supports all economic activity into account. So, if we hear politicians and economists claiming credit for some growth miracle via the correct handling of the economy, we are obliged to ask at what cost this growth came. Whence the energy that fuelled it? What handles the waste? Where the cyclicality? When will the entropy come, and how?

To my mind, what we have been witnessing these last millennia is humanity's improving ability to do more with less, as Buckminster Fuller used to say. There are no economic miracles, only miracles of human ingenuity, or, to put it another way; technology has been increasing our productive efficiency. Without technology there can be no economic miracles. Where would we be without the plough, or without the domestication of the horse? What use wisely timed changes in the base rate, what function the injection or retraction of money into and out of the economy, how relevant skilled tweaking of the tax code without technology delivering improving efficiencies? Surely economic "growth" is nothing more than the benefits of technological developments distributed (to whatever extent) throughout society! There can be no such thing as perpetual economic growth, there can only be the distributed benefits of technology, be it a plough or a super computer.

Also worth remembering is that the success afforded us by our ingenuity, resulting in our numbers on this planet now nudging 7 billion, has come at the cost of other energy exchange systems, such as rain forests. This is neither a good nor a bad thing until our impact on the ecosystem brings to an ugly halt our ability to sustain civilisation. So, while I believe the planet we were so fortunately born on is abundant in all that we need to live in high quality, we need, at 7 billion and rising, to be very aware of our cumulative effect on it. This awareness should not only include what we consume and how sustainable that consumption is, but also what we bring into existence (I'm thinking of chemicals etc), which the planet is then forced to eat and digest for the first time in its long life. When we create a thing, we are responsible for it, but can only ask the planet to process it one way or the other. Wherever we throw things away, we are doing so on the planet. Are our economic models taking sufficient account of this most obvious truth? Or is their wierd understanding of growth in fact a threat to civilisation?

Should we be learning a new and healthier way of understanding growth? I believe so. Should we strain every sinew to develop a socioeconomic system that does not depend upon growth? Abso-bloody-lutely.

The profit conundrum

First of all, what is profit?

Economics defines it as money which accrues to the entrepreneur (or owner) after all costs of production have been paid, or, more simply: that portion of revenue he can keep for himself once he's paid all his bills. Nowadays, with corporations and the Universe's most complicated tax code, this simplified picture is rarely observable in the real world, but I think it suffices for my purposes here.

The definition implies need. It gives rise to the question of amount: how much is good? how much is enough? Of course, the more profits we earn, the richer we become, all things being equal. (That's one of my favourite weasel-expressions of all time: "all things being equal" -- all things have never been, and will never be equal.) Ultimately though, no one really needs to be rich, and therefore profits are unnecessary as soon as their amount exceeds that which the entrepreneur needs to live her life. And yes, how much an entrepreneur actually needs is also open to debate, a debate that can have no conclusion.

As I understand it, economics resolves this little conundrum by reference to the market, and a particularly heavenly form of market place where "perfect competition" reigns. In a perfectly competitive market all participants are rational and perfectly informed about price and, for example, what's going on over there at Joe's Emporium, who's trading gold over at Sarah's at what quantities, what new products are coming out next week, which are the best products, etc. etc. etc. In this beautiful world profits are kept to a bare minimum because the competition is just so damned fierce. No one can monopolize anything; the other market participants, being perfectly informed, would be on to it in a shot! Imagine that, a market of total transparency. So, excessive profits simply cannot last much longer than a couple of units of perfected time, aka two shakes of a lamb's tail. Why oh why can we not establish such a wonderful system? Well, because people are not rational, and cannot possibly be perfectly informed. It follows therefore that profits are a problem.

Why? Because money is power, or a lever to power. As I discussed earlier, monetary systems depend on money (duh!), so those who have the most money can, should they choose to do so, use it for power and shaping things to their continuing advantage. We call this corruption. Corruption and money, like scarcity and money, are inseparable. You can't have one without the other. So, because there can be no such thing as perfect competition, profits must by definition become excessive, and the system inherently vulnerable to corruption at levels of intensity that lead to cyclical and systemic collapse. I imagine this sounds familiar.

For me, a human being concerned with the ramifications of transitioning to a resource-based economy, this presents a problem. Not only do I not believe in prohibition, I believe the healthiest socioeconomic systems are those which allow their members the maximum possible freedom. Since transition away from money requires money, there will be profits; no perfect competition is possible. Therefore corruption remains a serious problem during transition, lowering the chance of success considerably.

At the moment the only suggestion I have is the redesign of money, combined with a conscious decision to set up a societal infrastructure for making money slowly redundant, is the way to address this problem. We would need a money that cannot be accrued, that "expires" in some way, as it did in the Wörgel system of pre-war Austria. But this is a very delicate problem indeed, whose solution is beyond my humble powers. It needs thorough discussion.

There is no such thing as a Right

You’ll likely think this entry’s title cynically titillating, a small man’s petty attempt to attract attention with a cheap piece of sensationalism. It’s not. I mean it sincerely -- and besides, I hardly have the audience that would make such a tactic appropriate ;-) .

Rights are ideas born of liberal thought, whose focus is the self, the individual. In this tradition individuals have Rights to things like “freedom” and “the pursuit of happiness.” Seen in isolation there is nothing wrong with this, but the idea gives rise to important questions: From where do these Rights come? Who defends them? How are they enshrined? How do they manifest in the body? These are not easy questions to answer, and it is not my intention to try. Mine is a more general inquiry.

Is it sensible to adhere to a philosophy which revolves around a notion of defensible Rights, Rights which forever need protecting against one kind of tyranny or another? Doesn’t the unintended logic of vulnerable and fragile Rights mean inexorable drift to dependency on collective power, produce in fact a populace of individuals reliant on a mighty state for the protection of that which is “rightfully” theirs anyway? For no matter how noble the intent, how necessary the idea of Rights for our civilizational progress, is there not an intrinsic weakness in this idea that leads to tyranny, that unwittingly reintroduces, in modified form, the very beast it sought to conquer? Does not the struggle to defend and claim Rights foster dependence, where it should foster independence?

We don’t actually need Rights, which are anyway just ideas we came up with (as powerful as ideas are). Rights are not “real” things like frienship, trust and respect. We need instead, I suggest, to invert the idea and recognise our obligations, to ourselves and to each other, as well as to the ecosystem of which we are a part, in which we are embedded. A willingness to recognise and fulfil our obligations is a sign of maturity and independence, qualities the vast majority of us lack. If we felt ourselves obliged to understand the world and its systems to the best of our abilities, such that we benefit from each other’s ongoing attempts to become what we are becoming, there would be no need for a mighty collective power to defend Rights to this, that and the other. Obligations don’t need defending, for they encourage cooperation and commitment to ongoing, general betterment. They need to be recognised, understood, and lived. Rights are inalienable and therefore unlearned, requiring no wisdom to be demanded, nor any sense of the consequences when they are acted on. Obligations are learned and then owned, almost as a process of osmosis.

We should not want the Right to pursue happiness, like a child pleading to watch TV after doing its homework! We should recognise our obligation to pursue happiness, simply because the more happy people there are, the happier we are as individuals and as societies. Having the Right to “freedom” means nothing unless we understand the responsibility “freedom” brings with it. Far better to learn about the complex relationships between things, and contemplate what freedom means within this context. Only then can we recognise our obligations as individuals given shape and proportion by the society in which we live. We don’t need to learn passively a list of Rights we all happen to have been born with, we need to understand our role in the world and the obligations this role brings with it.

And none of what I have said here should be taken to mean I believe in force. I think it possible to set up an open system of education in which children want to understand these things, in which they are encouraged to learn how to learn independently , within the context of the interconnectivities of life. A forced obligation is no obligation at all, it is an order. As Carl Gustav Jung said, "Free will is doing gladly that which we must do."

The twin evils of GDP and global population growth

Global population growth is predicted to peak by around 2050, which is less than two generations away. If we look at growth rates by region, we see that affluent areas are growing more slowly than poor, with, in 2005, Europe reported as having 0%, North America 1%, Oceania 1.1%, Asia 1.2%, Latin America and the Caribbean 1.4% and Africa 2.2% population growth. This increase in population growth rate across the regions is almost the perfect inverse of the regions' relative affluence. Going forward, population growth does not appear to be our major problem, at least not in terms of space for living and feeding the billions. Indeed, the "cure" for unbridled population growth seems obvious: global affluence and a decent education for all, something we seem presently unable to afford.

Our socioeconomic models, on the other hand, suffer from terminal problems. They have evolved around the assumption of perpetual GDP growth, and cannot function without it. Perpetual GDP growth may prove very hard to sustain once global population starts falling, even before considering the exponential function and impact on the ecosystem we are blindly devouring to the bone. Coupled with what I see as steadily declining demand for human labour due to technological developments (aka technological unemployment), it seems our current economic model needs to be looked at with a very fresh set of priorities as well as bold thinking. Were we to think long term more readily, say over a generation forwards, surely we would clearly recognise a pressing need to examine all reasonable proposals to deal with the real and urgent problems I briefly mention above. Proposals, that is, that can reasonably address all of these issues!

I always say a resource-based economy will take a few generations to introduce. When we think in that kind of time scale, we expose both how pressing the challenges we face are, and also that the idea of a resource-based economy, initially so alien and loony, suddenly makes more sense, seems even pragmatic, wise and doable. But just because it is a distant prospect in terms of becoming an up and running system, does not mean we shouldn't start early tests now. We can, and The Venus Project have worked out how.

Money as incentive

I watched this last night ("How open source projects survive poisonous people") and it blew me away. At about thirteen and a half minutes in, Brian Fitzpatrick (the other presenter is Ben Collins-Sussman) tells the following story:

"Ben and I worked in a different company where we dealt with different clients and we said, you know, 'yeah, you should use this method where people can write consistent log messages.' And this guy said, 'I can't get my developers to write consistent log messages!' And our friend Carl just about choked on his own tongue, because, he's like, 'I have an open source project over here with about 35 UNPAID VOLUNTEERS, who follow this insanely detailed log message specification for EVERY check in that they do! So don't tell me that you have a problem with your paid developers, if I get the people coming off the internet for free to do this.'"

One of the most stubborn beliefs people have about money, is that you need its rewards and incentives to get unwanted work done. The above quote shows, as does open source software generally, that the quality of outcome, the passionate desire to do good work, is, at least at times, a better motivator than money, even within a capitalist system, in which we are bombarded day and night with a cultural message that preaches exactly the opposite. I find this incredible and profoundly inspiring.

Can manufacturing be the world's job saviour?

This sentence caught my eye today (I saw it at Econospeak):

"Among the 1.3 billion Chinese people, approximately 800 million have, accordingly, no buying power".

That's a chunk over 50% of their huge population without significant purchasing power. I find this compelling evidence in support of the slow process of technological unemployment generally, especially in light of outsourcing towards China, and in light of the graph I put together in an earlier blog. In that graph East Asia is the worst performer in the global employment-to-population stakes. That is, East Asia from 1998 to 2008 experienced falling employment relative to its population, during a period of intense outsourcing, and, in China's case, electrifying GDP growth. As the article I quote from mentions, China (and other countries) cannot be the recipient of jobs from elsewhere unless they keep wages low. Having high numbers of their population desperately struggling with poverty is part of this gruesome equation.

Why should this be evidence of technological unemployment? Because if human labour were in high demand, China's trick would be impossible to pull off. In detail technological unemployment is almost impossible to prove. One has to find instances of redundancies explicitly due to some technological innovation, and show that that innovation, in reducing the cost of producing some good or service, does not lead to an equal amount of employment elsewhere in the global economy in time honoured trickle-down style. That is not an easy task, and certainly way beyond my limited resources. Similarly, new companies can start up on the back of some new technology and employ less people to produce more stuff than they might otherwise have done. Such a thing would not show up in the statistics as evidence of unemployment growth.

In simple terms, we produce more and more stuff with less and less human labour. That is the pattern. Without the technological developments replacing what human labour once did, demand for human labour would increase, and would be visible in rising wages and higher purchasing power. On top of this, demand needs to keep up with (including purchasing power) the ever increasing quantities of stuff available for purchase. Were demand truly infinite (as in infinite wants), who knows what miracles of consumption we might pull off (forgetting for the sake of discussion the little issue of the ecosystem). But wants are not infinite, wages must be kept low, technological developments do mean producing more with less people, and so we have a major problem.

Unless, of course, we begin testing, with a view to pursuing, a resource-based economy. Blocking this endeavour are two major factors. One is a status quo which would cease to hold the reigns of power should such a direction be adopted, the other is our love-hate relationship with labour and money. We believe strongly, without really looking at it, that money is the only incentive out there to get unwanted things done, to reward good work, to demonstrate success etc. Because this seems to have been the case for millennia, we think it a fact of life, as ordinary as air, as inevitable as death. If this were true, then I'm afraid we would be marching ourselves to our doom.

There have been exceptions to this mode of living, with no money as incentive mechanism, and without waged labour as indicator of societal usefulness, all of which produced vastly different behaviours from their "citizens," citizens who were (or are) as genetically homo sapiens sapiens as are we.

So after all that I return to this post's title: Can manufacturing be the world's job saviour? No, it can't. Quotes are easy to come up with, compelling arguments far harder, but this one is eye-catching enough to use:

"Within ten years, less than 12% of the U.S. work force will be on the factory floor, and by the year 2020, less than 2% of the entire global work force will still be engaged in factory work."

It's the soft skills that are hardest to replicate technically, not the manual. But even there, artificial intelligence and other database softwares will wreak havoc with employment over the coming decades. The only thing that can stop this is civilizational collapse. Lets learn to embrace the process as the emancipation from unwanted slog that it is, and construct a different society that can maximize the benefits of humanity's ingenuity equally for all, while keeping human dignity and the ecosystem at the very forefront of our concerns.

The priorities of money

Please read this article on the sustainability of medicine. In my view it highlights one unfortunate consequence of all monetary systems generally -- despite the fact the article looks solely at the US system -- namely that money can only assume too much control and power. What follows here is my simple take on how money is guaranteed to do so, no matter which monetary system it operates in.

Because in monetary systems it costs money to get things done, profit making, or revenue generating ventures have to be prioritized over loss making or revenue losing ventures. Furthermore, because being rich is necessarily better than being poor, there is an inherent pressure in monetary systems for money (and therefore power) to concentrate increasingly to itself over time. This means that profit making enterprises become increasingly important as the "freely" available pool of money shrinks. Profit making enterprises consequently become increasingly powerful too. Control the money, control the monetary system. This strikes me as an inevitability.

The linked-to article above, the Mike Shedlock comment on the economic madness of building new schools are potent reminders of how culturally vital things like health and education must come to lose access to adequate funding in monetary systems. Only by choosing to re-engineer or redesign society along resource-based economy lines, by choosing willingly and knowingly to wean ourselves off our dependence on scarcity and money, can those institutions which deliver true value be prioritized permanently, and not just while sufficient money is available for the more "noble" causes.

Biophysical economics: shiny, new and good?

This article appeared in Scientific American on October 23. I read it today and see its content as an important part of changing course at a civilizational level. The following quotes from the article represent the key issues:

"In 1926, Frederick Soddy, a chemist who was awarded the Nobel Prize just a few weeks before, published "Wealth, Virtual Wealth and Debt," one of the first books to argue that energy should lie at the heart of economics and not supply-demand curves."

""If you go from using a 20-to-1 energy return fuel down to a 3-to-1 fuel, economic collapse is guaranteed," as nothing is left for other economic activity, said Nate Hagens, editor of the popular peak oil blog "The Oil Drum."

"The main problem with neoclassical economics is that it treats energy as the same as any other commodity input into the production function," Hagens said. "They parse it into dollar terms and treat it the same as they would mittens or earmuffs or eggs...but without energy, you can't have any of that other stuff.""

We ignore these sound observations at out peril. And this isn't some idle chatter in the halls of academia. Economics is a co-opted quasi-science used primarily as a tool to maintain the status quo's grip on power. In the interests of humanity we need to give the dismal (quasi) science a thorough, apolitical and scientific going over.

However, I remain firmly ensconced in the optimists' camp, because renewable (solar, geothermal, wind, radiant energy) and other clean energy sources (cold fusion, Black Light's hydrinos) are sufficient to power civilization forwards for centuries. That said, the carrying capacity of the planet -- a shifting variable due to technology (see Malthus) -- needs also to be taken into close account. Assessing it to the best of our ability is a top priority. There's only so much soil and water; without one or the other we won't last very long at all.

That I support wholeheartedly The Venus Project's proposals might, in light of the above, seem, to the unversed in them, counter-intuitive or even idiotic. And yet it is abundance that encourages cooperation and a more balanced relationship with the ecosystem than scarcity, which encourages hoarding and greed. We are faced with profoundly radical challenges which require profoundly radical solutions. We are consuming ourselves to death, while the sociopaths at the wheel slam down on the gas pedal with increasing mania. It's up to us now folks. The system has become destructive and utterly corrupt. We must remove our support of it and demand open, honest and public discussions of all verifiable ideas that might offer hope.

As one of planet Earth's billions of humans I demand we put our best minds and strongest ideas to some apolitical process for sorting the wheat from the chaff, then act on the best of the proposals. Time is running out.

Banking, scarcity, greed and change!

Fractional reserve banking is a given in most discussions on the topic of money, lending, and Central Banks. Central Banks are lenders of last resort, “designed” by their architects to stabilize the financial system. The oft quoted ratio is 10:1, which means banks can lend out to customers ten times the amount of money they hold in reserve. The money lent out is of course not taken directly from their safes -- how could it be? you can’t lend out 10x more than you have! -- but created “out of thin air.” That this happens is non-controversial and neither good nor bad in and of itself. The system “works” in the way all games work; people agree to play along. Should there be a flaw in the design, the game will become unplayable at some point, and people will take a fresh look at the “rules of the game.” I think that’s where we’re at right now.

The dry theory is that commercial banks are fed money by Central Banks, and then lend on that money at a 10:1 ratio. Money is first created by the Central Banks, then pumped through the economy’s veins at a speed of 10:1 by the commercial banks we all know and love. Please read Steve Keen’s analysis of this process, which shows, contrary to the dry theory, that in fact the reverse is true. Commercial banks lend to customers first, creating money as debt into the system, then the Central Bank reacts later on, feeding money to the commercial banks as they see fit. This is a very important piece of analysis which tells us a lot about the system, which is nowhere near as neat and tidy as theory suggests (quite a shock!).

Of course, I’m looking at this through the eyes of someone who believes a resource-based economy is now the only logical direction to follow for humanity. That’s my agenda, which I make no attempt to hide. For me therefore, the most vibrant and bright aspect of the nature of money is it’s insoluble bond with scarcity. This fact has unavoidable consequences, one of which is hoarding, otherwise known as greed. This dynamic explains how it is that the dry theory of money creation is at odds with the dirty, messy, day-to-day reality of life on the ground. There is demand for money, commercial banks are where one gets this money, commercial banks must make increasing profits, they have a quasi-legal right to create money, hence they do so, even advertising to encourage customers to borrow more and more.

So the pressure in any socioeconomic system built atop the presumption of permanent and unavoidable scarcity -- which engenders money -- is towards debt-fueled growth, as people compete to “succeed” demonstrably in material terms, always seeking to outdo each other. Money cannot be other than a symbol of success, and must be scarce, therefore the inescapable pressure within monetary systems tends strongly to unsustainable “growth,” and cyclical boom and bust. Fractional reserve banking's history is littered with this pattern.

Again, I see this as neither good nor bad. Nature is cyclical. There are seasons, forest fires, extinctions, and other longer cycles, which need not be regular or predictable to be cyclical. However, there is are two unnecessary negatives in money cyclicality (if I may call it that), and they are entrenched divisions along rich and poor lines, and too much fear. In other areas of nature, change is freer in its scope, and no sticky divisions seem to arise. Humans can “artificially” maintain a particular, preferred balance, via law and governmental institutions, and solidify a status quo in such a way that change is slowed down and impeded, dangerously so. This system-calcification is enabled by many things, in my view though, scarcity is chief among them.

As I have argued elsewhere, scarcity is part perception, part fact. Hunter-gatherers confirm this, as did the islanders of St. Kilda. In perceiving abundance, one is prompted to share and cooperate, and deal with hard times with cooperative tactics, not competitive. Bernard Lietaer is very good on this point. Money exists as a tool to deal with scarcity, to enable complex trading of scarce goods and services, and by design encourages competitive and hoarding behaviours, fearful behaviours, inspires fear of want, of material poverty, etc. This dynamic leads to calcification of whatever status quo emerges out of the struggle to find balance -- all systems, human or otherwise, constantly seek balance (though never achieve it). This scarcity based, calcifying dynamic impedes change.

Change, however, is unstoppable, is the only constant. Everything is in a constant state of dynamic flux, never achieving a settled equilibrium. The less able we are, culturally and societally, to appreciate this, the more damaging and disruptive change becomes, and this is magnified further still as our culture becomes global. Part of the thesis which argues a resource-based economy is the best way forward for us all, is that it copes better with change. In that the direction seeks to end material divisions and make all mediums of exchange redundant, in that it calls for cooperative, not competitive behaviours, calcified divisions are less likely to emerge. Money is a tool, a lever for enforcing fixed divisions, and is therefore deployed by the “successful” against the “unsuccessful.” A resource-based economy is absent such a lever by design.

Meanwhile, change -- in the form of technological development -- continues apace even within the calcifying status quo, but our many, similar, worldwide Central Bank Fractional Reserve systems fail to adapt to it, seem incapable of understanding the consequences, refusing to look openly at the data, the technology, the mood, the slowly shifting paradigm. Technically speaking, how hard would it be to keep drinking water clean and abundant for everyone? Certainly not impossible. Sadly, in financial terms it makes next to no sense to do so -- the more scarce a resource is, the more money can be made from it, assuming demand. Is it technically impossible to prevent the further erosion of top soil? Not at all, but financially speaking, chemical fertilizers make sense, regardless of the consequences. Permaculture, hydroponics, organic farming techniques combined could provide sufficient food for all of us, in abundance, but, of course, this makes no financial sense. The solutions to the energy crisis are a concerted effort away from being ours, yet the resultant clean energy abundance makes little financial sense. Saving the ecosystem which supports us makes little financial sense, or at the very least threatens the current status quo.

We have unwittingly forced ourselves into a corner. Money and scarcity are locking us in. The solution is abundance and the cooperation this necessarily inspires. We are our own enemies here, because we have been socialized for centuries, maybe millennia, with a world view based on scarcity. If an uneducated schmuck like me can take a fresh look, we should all be able to. But that’s up to us, no one else. We are each of us obliged to make the effort to take on new and challenging ideas openly and unprejudicedly, if we want to minimize the damage the coming collapse will cause.

More thoughts for this today

Thought 1: Money cannot motivate culture to solve the energy problem along lines that would remove money from the economy.

Cold fusion is on the verge of being a problem solved, and along with Black Light Power and 80% efficient radiant-energy panels will render the burning of fossil fuels redundant, and nuclear power too.

The problem is tax revenue. The technologies I have mentioned would likely, in combination, reduce demand for power plant energy considerably, which means for metered energy, which means massive loss of income for governments around the world, not to mention the rather powerful oil industry. A big headache for us all. Curing the world of its energy problems opens up a huge can of worms, unless energy stays metered and centralized. Our system was not designed to deal with this situation, with the solutions that are there waiting to be deployed. Clean, abundant energy for everyone is a pain in the buttocks for the current system.

We need a new system.

Thought 2: We are not ready for abundance, but it is coming just the same. We "know" money makes the world go round, that people are born greedy and lazy, and that the only way you get things done is by paying to get them done. Things have to make financial sense before they make sense, right? We have the tech and the know-how to alter the system dramatically for the better, but we can't. We have neither enough money (what a bummer) nor enough wisdom. So, we must ask ourselves and each other which of the things we are certain about -- like greed, scarcity, money and laziness -- are received wisdoms, or rest upon received wisdoms, and question them till we know.

Question all assumptions. We only have the one planet. Humans, love them or loath them, are fascinating. I think this fact alone makes us worth saving.

Thought 3: Can a money be designed that does not have a logical bond with scarcity, and which does not lead to it making virtually all "important" decisions? Could we automate money creation with some transaction tracking AI database software that monitored global economic activity and employment, removing money from and introducing it into the system as necessary? Imagine a totally secure, "no-notes-n-coins" currency, where all citizens had one account, where interest was unnecessary because no banking service would be necessary, where there was next to no overhead for storage. Then imagine only one tax, a sales tax on non-essentials, unavoidable and idiot proof. What would that be like? No more accountants and bankers for a start. Way smaller government and NO CENTRAL BANK. Crazy. But would it work?

Schools are economic madness!

"Building schools is not the answer when the cost of education is too high already. Building a school creates jobs one time. Everyone has to pay through the nose for it for years to come in staffing and administration costs in addition to paying back the bondholders with interest for the upfront money to build the schools.

Such proposals are economic madness." Michael Shedlock

This struck an emotional nerve. I respect Mike Shedlock as someone who calmly analyses the data, and perhaps I am over-reading this statement, but to argue that building schools is economic madness says to me that economics is madness. If there is a need for better education in Utah (I take that as a given -- everywhere on Earth needs a better education system by the way) the good people of Utah cannot afford not to invest in education. If they wait -- and it could be the best part of a generation if things are as bad as Mike Shedlock suggests -- and thereby hope to save money, that uneducated or poorly educated generation won't know shit from shynola, will probably be bad parents with a negative attitude to education generally, will not be able to compete in the increasingly global market place, and will reduce chances of building a better future considerably. Utah will have more money (maybe) and fewer properly educated people. Doesn't sound like a win win to me.

How can money be so very important that everything takes second place to it!? To think so is insanity. I hope I am misreading the man...

Anyway, I had to get that off my chest. In my opinion there is nothing more important than education (apart from the ecosystem). That money-glasses can see it otherwise tells its own story.

Employment to population ratio by region (10 years)

Here is a chart I derived from ILO figures. While my earlier post shows global employment to population ratio slowly declining, the detail view (by region) of this is quite a messy picture. I am unable to read very much into this at all, except that it does not really show increasing production efficiencies percolating through to increasing employment. Nor does it clearly show the opposite.

The star performer appears to be Latin America. I suspect this is not a result of outsourcing, but rather the result of the sort of trajectory witnessed when a region escapes some economic quagmire (the only way is up). Otherwise the surprise poor performance is East Asia, which would be predominantly China and Japan. As China is often thought of as a growth success story, and a recipient of much outsourcing, this is an odd result. Overall, the main story I get from the chart is one of flat performance with some clear rises and falls standing out from an otherwise dull crowd.

On the whole inconclusive I feel, not supportive of either one theory or the other(technological unemployment versus increasing efficiencies leading to rising employment). Rhetorically I could argue that because globally jobs are required to keep the economy healthy, which is a strong pressure to create jobs in whatever way possible, and because production efficiencies have been improving over the last decade thanks to the Internet and advances in robotics etc., the relatively flat performance of the world's regions would tend to suggest that classical theory (increasing production efficiencies lead to increasing employment) is not born out by the data.

I want to end this post with a US chart showing growth in public compared with private sector employment. I wonder to what degree this is a global phenomenon. Is the public sector taking up as much slack as it can?

Some thoughts for the day

Thought 1: If we don't have enough money to protect the ecosystem from our destruction of it, yet we do have the resources and know-how, money is in the way.

Thought 2: A resource-based economy is a way of making an elite redundant, by automating what they do. It is the only socio-economic model where everyone must become their own master. Daunting but good.

Here is a video ("Overpopulation is a Myth") which is I think highly relevant for the resource-based economy idea. I notice the usual knee-jerk reactions in the comments on YouTube. What the video clearly tells me is that there is abundant space on planet Earth for all us humans and then some. The only thing that is causing us to threaten our continued existence on Earth is our socio-economic model. It does not seem to have any capacity to take the environment sufficiently into account. It is predicated upon scarcity, which encourages hoarding, greed and differential advantage. Change the system, change our relationship to each other, and to the planet.

Infinite wants are not possible

I hope in the following post to show infinite wants are impossible. Humans can be satisfied with what they have, at least to a degree sufficient to upend economic theory. Without infinite wants there is no scarcity of the sort economics requires, without scarcity there is no need for a medium of exchange. Infinite wants are an essential, if not the essential component of economic theory. Without it, I suspect economics collapses. My general question to people who believe infinite wants are possible is this: can you prove it?

Economics believes wants are infinite. On top of this belief comes the concept of scarcity, which is the result of the clash between those infinite wants and pesky finite resources. Believing wants are infinite, you can, for example, go on to believe increasing efficiencies leads to increasing employment; produce it more cheaply and they will buy, so to speak. A simplification I know, and yet the very idea that increasing production efficiencies lead to increasing demand for labour implies this.

So, the economy produces more and more stuff with fewer and fewer humans involved in production, but because there are infinite wants out there, this stuff is purchased, and these purchases then filter through to “increasing need for human labour.” There are two problems with this. One is wants cannot be infinite; there is only a finite amount of people on the planet, and not one of them can consume anything in infinite amounts, nor can the finite total of demand of all people on Earth be brought to bear simultaneously. Wants are, quite simply, not infinite. The second problem is highly visible in The Spirit Level (Wilkinson and Pickett), in particular in a chart showing happiness levels flattening out after an income level of roughly $40,000 annually. It seems that people can indeed have enough stuff. We don't want an infinite number of DVD players, or hifi equipment etc., and we recognise too, in that we self-report our happiness level in this way, that money can't buy you happiness, to paraphrase the Beatles. Demand is elastic, but not infinitely so. (On a side note, we tend to buy more DVD players than we might want to because they break – do they really have to break so often?) Seemingly, once a certain level of material comfort has been reached, if this is secure, all sorts of tricks must be deployed via advertising to get people to buy things. Artificial demand has to be generated to keep the economy ticking. Bush II implored Americans to shop after 9/11. This should tell us something. Why would any of this be necessary if wants were infinite?

So there are two fallacies which spring from the poor definition of scarcity which lies at the root of economics. One is this faith consumers will keep on buying and buying, certainly that they'll keep on demanding, the other is that increasing production efficiencies can only lead to increasing levels of employment.

Let's think about the second. What is the ratio here, exactly? How much does employment rise by, when efficiencies rise by say 10%? I doubt very much there can be a fixed ratio, since demand is unpredictable. A company can over-produce, or a product that was selling well can go out of fashion for any number of reasons. But there must be some basic principle discernible here, some fundamental process.

The world is an economy made up of national economies, viewing things from the point of view of money. There is some fluid number of employable people and some fluid number of consumers on the planet. If manufacturing a car once required a 50:50 human to machine ratio, but now requires a 1:10 human to machine ratio, this is true all over the world, not only in the country where the invention took place. If the 10% of human labour needed to manufacture this car in the US is outsourced to India, the ratio is maintained. Sure, more people are employed in India, but not the same as would have been employed prior to the invention. The need for less people in the production of that car is instantly a global phenomenon. Other companies not capable of the newly attained production efficiencies will suffer, and have to retool as fast as possible. Once the invention has been made, less people are needed to produce that thing globally and forever. Humans are expensive, need holidays, food, housing and sleep, and get sick. Getting rid of them in the production process makes financial sense, globally, because machines require less maintenance, generally speaking.

If increasing demand for this cheaper car means more paper work is generated, then more humans are employed in accounts or HR maybe, and perhaps more car salesmen are needed down the line. Until, that is, software can replicate much of what accountants and HR employees do, or the way we buy cars changes. This then globally too. Outsourcing does not mean a fixed amount of labour being employed where labour is cheaper. There is also the decreasing need for humans in the workplace over time, right down from extraction through to manufacture and to retail.

Each invention that replicates (mostly betters) what a human can do, takes one job type away from humans. How many new job types can we create for ourselves? Which of our abilities will remain beyond the reach of machines and AI forever? And if there are any, will they be enough to power a global economy in terms of job creation and purchasing power? And for how long can we collectively fail to notice that buying and buying stuff does not make us happy? The data showing this is there, it's just a matter of getting it noticed. Finally, when will economics recognise that demand is not infinitely elastic, that is, that wants are in fact finite?

Tech unemployment is sooo unhip!

One of the internet's more intelligent economics bloggers posted this yesterday. I read in high hopes for some mention of technological unemployment, believing, as I have done for some time now, the term must surely gain new traction soon, but found none. Micheal Shedlock, a writer I respect, lists twelve reasons why the "recovery" might turn out to be a job loss affair (i.e. recovery with rising unemployment), and not one of them mentions technology.

It seems well educated economists truly believe technological developments that replicate what humans can do for the economy can only lead to rising employment. Unemployment is caused by other things, like over-capacity, over-consumption, outsourcing, consumers economizing, etc. I am not in a position to argue against each of Mr Shedlock's 12 points, but do wonder at this general and stubborn refusal to take an open and honest look at the role of technology in this process of rising unemployment.

This is my take, for what it's worth:

1. humans are biological entities with a limited range of abilities;
2. humans are unstoppably inventive, and getting better and better at replicating these human abilities, even improving on them;
3. as we invent more and more hardware and software that can replicate more and more of the finite range of our "natural" abilities, there is less and less need to employ humans to produce what we want to consume;
4. as less and less humans are needed in the work place, there is less and less purchasing power, which leads, in a heavily consumerist world, to increasing levels of debt, or over-consumption; and
5. the debt burden can only increase for so long until it pops, leading to the situation we have today -- a job loss recovery.

Now maybe my 5 step process is too simple, I don't know (I do like to keep things simple though), but doesn't it make sense? Why do we see, globally, falling labour participation over a ten year period of positive GDP, and certainly over a decade of increasing production efficiencies? This inquiring mind wants to know.

If technological developments which improve productive efficiencies lead to higher employment levels generally, why then is there rising unemployment anywhere? Why rising natural employment? Surely it would only take a few years for humans to retrain to take on the new work? Not generations surely? I'm going to take a look at employment levels in India, China and South East Asia, beneficiaries of outsourcing. Just what exactly is going on here?

Our old friend and foe, Human Nature

"Lenin’s ideas fell apart in practice, due in no small part by the human tendency of greed for posession [sic] and power." From a comment at Naked Capitalism

The comment is in response to an important posting by George Washington discussing which socioeconomic system currently best describes the US. It is well worth a read, if only for the fact that it encourages thinking about the question, but that is not what I want to comment on.

The person behind the above quote goes by the name of tgmac and seems to know what he is talking about, expresses what he wants to say eloquently, and all in all seems like an intelligent human being. And yet, there is an assumption in his post that human nature is fixed and tends towards greed for material possessions and power. Typically one has this opinion because history demonstrates that this is the case. Look at all that warring, raping, pillaging, cheating, blackmail, fraud and downright psychopathic tomfoolery that litters the pages of virtually any history book you care to open. Of course we can say with a high degree of confidence that human nature is bad. Just look around you.

What is very seldom considered is that recorded history began at a time when scarcity was not, at least in the economic sense, a solvable problem, and when our knowledge of ourselves, psychologically and biologically, was very poor. Organically and in some ignorance, and under pressure of particular environmental conditions -- like harsh winters and poor agricultural skill -- we have fashioned into our languages and philosophies a very hard to shake relationship with scarcity that is, at least technically, no longer helpful. We also have inherited a rather lazy understanding of ourselves as biological entities characterised by greed and ambition, at least at the popular level. Economists and historians are seldom also zoologists and biologists, neither are they anthropologists or child psychologists etc. Economists in particular have a particularly narrow and shallow view of the human being, assuming it to be rational, selfish and greedy.

Without blathering on for pages let me finish with a couple of questions and a couple of links. Question 1: What exactly are the pathways from genetics to behaviour? Question 2: Why did the islanders of St. Kilda display no laziness until, after 2,000 years without it as incentive, they were introduced to money in the mid nineteenth century?

The links:
My paper on human nature
Peter Joseph's orientation guide, pp 69-77

Scarcity: foundational economic assumption

“Infinite wants versus finite resources” is the definition of scarcity that underpins economic theory. Because of this fundamental law a medium of exchange – money – will always be necessary. To suggest otherwise is to fail to face reality as it is. Sure it’s fun to dream and speculate a rainy Sunday away with such imaginings as the end of scarcity, but well-trained, hard-nosed economists know better: scarcity is a fact of life.

They know and accept the exceptions though; air for example. There is a finite amount of it, we humans need it to live, indeed we can’t do without out it for more than a few seconds, and yet we don’t have to pay for it. We need no medium of exchange to distribute this most essential resource.

So is it just air’s relative abundance that makes it free? Only partly. It also has qualities that make, say, “owning” it difficult; it’s everywhere and ignores all national borders. It is also so desperately vital to life, withholding it from customers to raise price above zero results in their death. Not good for business. (I have the feeling though, that if someone could work out how, it would be turned into a tradable commodity. Let’s not go there.) But whatever the reasons, we don’t have to part with money to breath air, even though it meets the scarcity definition above.

Friendship cannot be distributed via a medium of exchange, not because it is scarce or abundant, but because to do so would destroy it. Money and friendship don’t mix in terms of trade. Ditto love and trust. The best business can do is associate such things with their products via cunning advertising, and sell it to us that way – sell us what we already have. Of course that’s fake, but it does happen, and does shift product. Nevertheless, friendship itself cannot be sold, despite its relative scarcity and desirability.

So there are exceptions to the rule which fully meet the definition of “scarce.” And yet hardly anyone in their right mind believes high culture can run without a medium of exchange. My question to unbelievers is this: What proportion of resources needs to stay scarce to keep a medium of exchange unavoidably necessary? For example, suppose a redesign of cities, transport and energy use made shelter, transportation and energy abundantly available. Would we still need a medium of exchange? What if the system for transporting goods and services were fully automated and redesigned to use only clean, renewable energy? What if hydroponics, permaculture and desalination plants, plus other water-purification processes, made food and water abundantly available for everyone, everywhere? Would we still need money? Are all these “ifs” pipe-dreams, beyond the technical wit of man? The Venus Project suggests not.

What if the only things that need remain scarce – if we really went at scarcity as if it were a design challenge, if we challenged our best minds to produce things in abundance – were things like the top flat of an apartment building, or the love of a good woman? Would we need money then? Just how unavoidable is scarcity, scientifically speaking? Shouldn’t we try to find out, scientifically, and not rely forever and ever on a weird definition (what the hell are infinite wants!?) written a few centuries ago by a Brit working for the East India Company?

I think we should. I think we should test all assumptions. Scarcity is one of them.

Impressive stuff from the experts...

"Office for National Statistics said yesterday gross domestic product unexpectedly shrank 0.4 percent in the third quarter. None of the 33 economists surveyed by Bloomberg predicted a contraction." Bloomberg

Nuff said.

Two charts on technological unemployment

Source: Washington's Blog

I find this chart very interesting, because it shows how low unemployment was in the early 1900s. I suspect most people don't know this. It also hints at, therefore, a possible trending of unemployment upwards, which somewhat disagrees with the classical economic thesis that increasing production efficiencies lead to lower unemployment; if there's one thing we can all agree on about the last century or so, it is that technological developments have increased production efficiencies.

Here is a chart I put together from ILO data which suggests that even the proportion of the global workforce in work can fall during periods of global GDP growth:



And as I have posted elsewhere, the natural level of unemployment, which is a measure of the supposed healthy amount of unemployment in an economy, has been climbing over the last 100 years too. Economists seem to think that the current level of healthy unemployment is about 7 to 7.5%. The pre-war level (if I'm not mistaken) was around 3-3.5%. That unemployment was under 2% in the early 1900s tells its own story. So even though I accept, to a limited degree (see post below) that technological developments lead to new work and new jobs, the idea that it leads to more work being done by humans is not born out by the actual facts.

Food for thought I hope.

Technological unemployment as left wing technophobia

I stumbled across this article the other day, and wanted to address it as well as I am able. The article basically attacks those on the left (I do not consider myself left wing) who claim technological unemployment exists, is bad, and must be stopped. I agree with the article that technological unemployment is misunderstood and misdiagnosed, but not that it does not exist in an ongoing and "threatening" way. I put "threatening" in speech marks because it is only a lack of creative thought that turns what should be a much needed emancipation process for all people, into an evil.

Two things leaped out at me on initial reading. One was the palpable certainty emanating from the article that the author (Gerard Jackson) was right, while those he dismisses are hopelessly wrong. The other was the fire and brimstone hatred for the left wing and liberal party. I'm always suspicious of the content of tribal bickering, doubly so when the bickering parties are 100% convinced of their rightness, but nevertheless, one should always look at the arguments, not whence they come, nor how they are couched. So, let's look at the arguments.

"Any assertion that technology destroys jobs is based on the fallacy that capital is a substitute for labour and not a complementary factor. This belief in turn springs from the fallacy of composition, confusing the part with the whole. This is not to deny that machines do not destroy jobs — they do. But the process by which this is done expands real purchasing power, lifts living standards and raises the demand for labour in general. Therefore observers have confused the destruction of certain jobs with the destruction of employment, thinking they are the same thing."

I assert that technology destroys jobs, while the pressure to find waged labour creates new ones. Employment levels rise and fall in response to many factors, one of them being technological developments introducing machinery that can do better some job-role than any human can. As technology expands the area of labour it can perform, so human labour increasingly migrates to services, where human soft skills reign supreme. In other words, the destruction of job-types forces human labour increasingly onto the "dry land" of the services sector. ILO charts show this quite clearly, and while the pattern is slower in developing countries where even agriculture still employs sizable proportions of the working population, the technology to replace them exists. The speed with which agricultural (and manufacturing) labourers are replaced is slowed by financial considerations.

"based on the fallacy that capital is a substitute for labour and not a complementary factor."

This is somewhat vague. It is true that machinery which improves production efficiency tends to increase demand and thereby improve employment prospects, but only as an unintended consequence. The machinery was not invented to improve employment prospects, which is fine, nor was it designed to employ more people to run it than it replaces. The employment "slack" is taken up in another sector, typically services.

"Rather than being a substitute for labour capital is a means of economising labour, because it is the least specific factor, and making it more efficient."

This strikes me as casuistry. What is the real difference between substituting and economising? Either way there is displacement. Either way people lose their jobs. In time efficiency gains filter through to increased demand somewhere else (perhaps in another country, most likely in another city) where demand for jobs (perhaps in retail) increases. How often are the very people who are displaced by technological developments the very ones who find new work where they live as a direct consequence of that particular technology?

Mr Jackson mentions x-ray machines and jet flight. These are good examples of technology that directly creates new work (even though air travel is competition for railways there is still a choice), or at least principally. But what happens when stewards and stewardesses, pilots and co-pilots are replaced by software and robots? What happens when x-ray machines are no longer operated by humans, but by AI or other computer software?

"Technology can only be applied through capital. It would be pointless having the best programmers in the world if you cannot supply them with computers. Technology, including so-called information technology, is always applied through capital which in turn is fuelled by savings. It therefore follows that savings limit the extent to which investments in technology, no matter how highly advanced or desirable, can be made."

Yes, programmers need computers, but computers are manufactured largely without human hand. Skills such as programming and computer design are still in demand, but this is hardly the point. The point is the proportion of human ability that can be replicated by machines. As to capital being funded by savings, that sounds naive considering the indebtedness of virtually the entire planet to banks, the indebtedness of the banks to one another, and leverage ratios above 30:1. Investment is funded by the extension of credit, which has only a tenuous link with savings in modern (seemingly 100%) high risk banking (which will stay high risk until the tax payer can no longer afford to clean up the bankers' mess). However, that money is an impediment to technological development generally I accept.

There is then some high blown castigation of simple-monded left-wing technophobes, then this:

"These views overlook the fact that machinery is primarily employed to raise output per unit of input, i.e., productivity, not to displace labour."

Nevertheless, regardless of intent, a machine designed to do what humans had done displaces labour. Weapons designed to keep peace can be used to kill. It's not the intent that matters, its the consequences.

There follows a long description of the way increasing efficiencies of production lead to higher levels of employment, which is indeed born out by economic history up till now, a point I do not seek to gainsay. Indeed, the article I am criticizing is not aimed at me. I am not left wing, and I am most certainly no technophobe. I seek the emancipation of waged-labour generally, via an economic system that does not need a medium of exchange; a resource-based economy. In such an economy technology is purposefully deployed so that humans no longer have to do tedious, repetitive and mind-numbing work. This position is neither left nor right wing, it is fringe, it is unorthodox, and I doubt Mr Jackson has even heard of it, and I can't blame him for that.

The article then talks at great length about demand for new goods and services made cheaper by technological developments. However, there are some assumptions inherent in this well-known thesis. One is that demand for goods and services will always increase just because the price falls, regardless of how the environment copes with our rapacious appetites, and regardless of how clued up the buying population becomes (see The Story of Stuff for a hint of how attitudes to consumption might be changing). The other is that consumerism will always reign supreme. The Spirit Level was published in February 2009, after the article was written, and shows very clearly indeed that happiness is not owning more and more shiny things, nor is it earning more and more money. Gerard Jackson, being -- based on his article's content -- an orthodox economist, would probably assume that it is, or, at least that rational people are invariably motivated to acquire more and more wealth. But maybe even economics' troublesome "rational market actor" is capable of change. Maybe those rational buyers and sellers are starting to put two and two together. Maybe they are slowly becoming insensitive to the allure of conspicuous consumption.

"Without labour-economising technology the American telephone system would collapse. In 1972 it was estimated that using 1900 technology 20 million operators would have been needed to handle the volume of calls. (Taken at face value technology has destroyed more than 20 million jobs in this sector alone). In 1998 it was estimated that American telephone traffic uses so much computer power that if it were done manually the number of operators would exceed the numbers generating the traffic. So where did all the operators go? To other jobs, every one. That’s where."

This is a very important and well made point. Humans are becoming incapable of coping with the volume of work that needs to be done to run the global economy. We often just don't make the grade. As Mr Jackson rightly points out new jobs have been created to find work for the displaced workers, if not specifically then generally, but for how long can this pattern persist? In that we sleepy, hungry, sweaty creatures can't compete with our machine counterparts in areas A, B, C and D, how long until machines, computers and AI take over right up to P, or V? What biological evidence is there showing we will always be necessary in the work place, that we are infinitely capable of staying ahead of our ability to replace what we do in the workplace?

"Seeing the economy as integrated stages of production, as we should, rather than isolated sectors, as is frequently the case, helps put things like information technology in their proper perspective because it forces us to seek out economic linkages."

Again true, but as I have written elsewhere, technological unemployment should be seen as the ever improving ability of humans to replicate via machines, computers and software what they do physically. Seen in this light, the economic linkages of agriculture down to supermarkets, restaurants, cookery books and cookery TV shows become largely irrelevant. That the economy can be notional divided up into interlinking sectors does not alter the fact that humans have a particular skeleton, musculature and brain, yielding a particular, limited and replicable range of abilities.

So while it is true that increasing efficiencies can be seen to have led to higher demand for labour (although flat real wages in America over the last few decades suggests otherwise, even after factoring in globalisation -- why aren't the low-skilled skilling up and getting those luscious high-pad jobs?), the pattern created by technological unemployment and re-employment is one of incremental encroachment on the skill set humans have, and therefore predicts that this pattern of increasing efficiencies leading to higher employment will eventually break down. That may well be happening right now. Technically we can replace agricultural workers worldwide should we agree to do so, and remove humans from the factory floor in huge numbers (Jeremy Rifkin predicts 2% of global workforce working in factories by 2020). Now we are replicating our soft skills increasingly adroitly. Soon we will have hardly any skills left to replicate. Cashpoint machines, automated restaurants, the Eureka Machine, accountancy software, self-healing hardware, automated monitoring, AI generally, nanotechnology, are developments in their infancy, and I have not mentioned by far all that are out there.

As wonderful as we are, our abilities are largely replicable in the workplace. There will always be things that humans can do better than technology (although that is actually quite a bold statement), like friendship, society, courage, creativity, but these skills will not, I believe, be able to generate money sufficiently to run the current system. How can friendship or trust be paid for? Can you pay people to be courageous or creative in numbers sufficient to keep a global economy going? Will we pay each other to watch each other's films, or read each other's literature, or buy each other's art? I doubt it very much.

We need therefore to draw up plans that lay out a direction towards emancipating humanity from unwanted, forced labour via technological development and ingenuity. We need to give The Venus Project much more of our time and energy.