Monthly Archives: October 2017

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The Economics of a Useless Narrative, or why Kate Raworth gets attention.

Kate Raworth is all the rage these days. She presents a donut shaped representation of the nine planetary boundaries and asks economists to think about it when they use their simple model of producers and consumers. It sounds great. We need to take care of poor people, our planets resources etc. You’d think we’d be happy, but we’re not. The reason is that she fails to do two very important things :

1. Do more than state the problem

Our world economy is defended by econonomists, not designed by it. It’s already running, money flows, resources get scavanged and mined, oil (very imporant) drives trucks, cranes and the banks try to optimize their profits and the amount of money flowing. Economists have one option : To work in service of that system. The other option is to not work or choose another profession. Why? Because they are the key salespeople of the economic system, the ones that will always sell it more no matter what you say. So does Kate. This is the second failure:

2. She fails to name the key driver behind all the destruction : Fossil energy

Granted, she does mention that the flow of energy is very important, but then she talks about the sun, food production. She never mentions oil, gas, coal. This is insane. Our economic system would instantly collapse if we could not buy oil, gas or coal with our money. Every transaction we make still largely depends on some fossil fuel being available somewhere to burn, whether in the factory, the power plant, the truck, the home of the worker.

What kate does is exactly what banks (World bank etc.) have been doing for decades, which is to focus on fighting poverty. What does that mean? Expansion of fossil fuel use (if you don’t put the focus on that). How do we know Kate is old school? Because the use of solar, wind, renewables totally upends the economic system, and totally breaks the domination of that production/consumption cycle.

Fossil energy drives pollution also because it allows competition where there would not be the resources for it otherwise. The most stark example of this is wars. Fossil fuels allows for the production of weapons for both sides, endless amounts. Only when people fight over fossil fuels is there any reason for banks, oil companies, industry to stop the fighting.

Kate simply restates the problem and then distracts us from the real challenge, which is how to have an economy based on replenishing resources like sun and wind. We have written about the Roboeconomy before, which is an economy where robots do most of the work, including restauration of our ecosystems, all running on renewables.

The roboeconomy will come about as extraeconomic nuclei grow and connect into networks of waste free, energy self sufficient wealth creation systems.

A key aspect of the roboeconomy is the growth of ‘extraeconomic’ nuclei of activity. These are regions where interaction with the wider economy is not allowed or not necessary. Imagine a water botteling plant, that runs on solar, that has solar trucks, that recycles bottles it brings back from the supermarket itself, and that also recycles bottles using solar. All this fully automatic. What will the cost of water be? Of course there is an initial investment, but what if the plant was set up using cash, no loans. Then it could run with minimal maintenance (of course there will be maintenance robots). It will outcompete all other water brands.

A simpler example is a zero-meter house, one that doesn’t need any fossil or electricity energy input. Such a house doesn’t have gas, electricity connections, it doesn’t make money flow but it keeps it’s owners warm and comfortable. It has become an extraeconomical island because if it is fully owned, payed off, then the owner barely needs to go out into the world to work. Only for some food. But if it has a basement with hydrophonic vegetable robots that run on solar from the roof, even that is no necessary. Think zero-meter greenhouses. Of course right now hydrophonics is used to sell as much plastic oil and other crap, because it exist in an economy that has a core function : To maximize the utilization of fossil fuels.

The key strategy of the fossil fuel/banking or what we call the carboncredit system is to distract us by making us look for solutions 1. Where there are none 2. That involve using the fossil credit economy.

So we are not impressed with Kate, she is a distraction and she doesn’t point out the real challenge to economics, which is that it will have to deal with the disappearance of banks, of big financial institutitons, and needs to prepare to become expert in the managing of local autonomous independent ecosystems, EVEN independent of bank loans. Surprisingly enough economics is already pretty good in these things, because most companies function as autonomous independent systems, with one difference, they’re always deep in debt and working hard to pay it off (or just pay the interest) by seeking profit and being agressive in the market. This is where the biggest change will come : Less competition.

Just think of the bakers in the world. Most of them don’t compete, they fullfill a function locally, they are spread out over the urban areas quite evenly. They don’t have to go into deep debt to dominate the bread baking world, at least not if there isn’t some crazy financial tirant in charge. Of course we do have global bread, bagel, donut, hamburger franchises, which compete unfairly (judging by the tax incentives). But we don’t need to, and we won’t have them if bakers and farmers cooperate to grow, harvest and bake in a closed cycle extraeconomic system. Then bread will be very cheap or even free.

Kate puts poverty first, then living within our ecological means. If we don’t do the second thing first, we will never be able to do the first in any lasting or meaningfull way, in fact, we’re likely to do the first by doing the last.

The above will happen with many products we use, they will become debt free autonomous production systems. The largest portion of the money, which now goes from consumers to the fossil energy companies through the banks, will evaporate. Money will mainly be used to divide tasks because 1. energy will never be payed for and 2. resources will always be recycled. 3. labour will be avoided when it isn’t spiritually enriching. Kate’s trick is to mention all the aspects that we need to consider and strive for but not the key change which is the dissapearance of fossil fuel cashflow and credit dependence. Yes of course we should consider our well being, of course we should work within the limits. The real challenge for economists is to understand the robo- and extra- economy, but that’s really not what their future employers (banks, financial institutions, insurance companies etc.) want. Nor Kate.

Johan Rockstrom (Mentioned by Kate) Adapt, resilience  Johan Rockström massive challenge feeding 9 billion people. “We can not expand , we have to use current land” “Carbontaxes it won’t work” “We can feed the poor” “What are the planetary boundairies”. Rockstrom is also a pro fossil typical ‘adapt, move with the punches’ non contributor.

Will Steffen (also mentioned by Kate) How do we fit in with the cycles of the planet. Reduce pressure of agriculture. Carbon neutral aviation fuels. That sounds much better, short term solutions.

Nine planetary boundaries

  • Stratospheric ozone depletion. …
  • Loss of biosphere integrity (biodiversity loss and extinctions) …
  • Chemical pollution and the release of novel entities. …
  • Climate Change. …
  • Ocean acidification. …
  • Freshwater consumption and the global hydrological cycle. …
  • Land system change. …
  • Nitrogen and phosphorus flows to the biosphere and oceans.
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The Impossible Responsibilities of a Consumer

We follow the news, we learn what is going on in the world, and it’s not pretty. What we see is that there’s powerfull technolgies, dangerous industrial processes, bands of agressive profit seekers that are not controlled. Talking about the ‘economy’ is just a weak attempt to feign structure and coherence, in fact, the Ubers and fracking companies and other ‘disruptors’ show us there’s only as much prosecution of crime as there is profit in prosecuting.

Here’s the thing : We’re born human. We have a limited capacity to grasp our surroundings, we try to find food, shelter, company. Of course we are raised in a culture where those things are readily available and there’s lives that can be lived with lots of quality and happiness, and then there’s ones that suck, that in some cases matches our talent, in others are the result of oppresion and abuse.

But no human sits in his room and thinks “Lets build a nafta cracker” or “Lets roll out a mobile phone network”. These things have come about because of organizations larger than man. They are industrial products, created by many small steps. Motivated by ‘profit’, which is what you need to be able to take more small steps towards more profit. In the process the people in those industries had better lives for sure, but they never stopped eating, drinking, sleeping etc.

This is all fantastic, and we should thank those that discovered penicillin, then found a way to grow it in eggs, then found a way to industrialize that growth process and make the cure to many infections available across the world. Of course you could thank  banks who invested and supplied the infrastructure to trade and manufacture and get things done, even if their main goal was to 1. own everything and 2. sell fossil fuel credit.

The problem is that a new born child will never grasp all of what’s going into enabling its modern life. Many people living today never really tried to understand how a phone works or a television or the internet. They are what we call consumers. They work at a job that has modest economic value, and they live lives as if they where hamsters in a cage really. If they get sick they don’t know how to cure themselves, if the car breaks down they don’t know how to fix it, if they TV or internet stops working they have no clue… And if a nuclear powerplant or refinery nearby explodes what can we expect of them?

You could answer : There there are fire fighters and experts who fix things. You’d think that. But of course the consumers we described above never made sure that was the case. So maybe there isn’t a fire department, or a well trained body of experts to deal with a nuclear calamity. You’d think industries all have thier safety institutions, but they might not, they might not be up to date, they might have become underfunded because politicians not doing their job.

A consumer can’t tell if a politician that tells them taxes go down and immigrants will be send home also takes care of the risks of industry. We may pretend citizens all have this responsibility when they vote politicians into office, but how can a consumer know who is primarily preoccupied with his/her own life know? How can a voter know what the consequences are of voting for Trump or for Clinton? Now that it is Trump how can a voter be held responsible for what EPA chief Scott Pruitt decides to do? How can we pretend a voter is responsible for policy if the corruption is so blatant (like a member of parliament claiming it’s commonplace to be payed by the industries one makes decisions on, or Trump supporting Puerto Rico recovery by handing $300 mln to a company of one of his campaign donors).

The basic consumer in our economy now is expected to keep a machinery going, keeping it safe and well monitored (which when it harms profits of industry is under threat). How can a consumer be expected to ensure medical services remain of the highest standard. How does he/she know we are executing the best policies to ensure health and future of all, meanwhile maximizing the wealth that people create in their jobs? It is insane to expect that!

A big reason why we should NOT expect a consumer to be able to bear this responsibility is because our economy has incentive loops, local reinforcing effects that instead intice people to be irresponsible, especially when they are in a job that gives them control, a job that is entrusted to them because people believed they could handle the responsibilities.

For example, a medical doctor gets invited to a course by a pharmaceutical company. They produce pills that are twice as expensive and a bit more or as effective as the alternative. They come with a training course held in Aspen, Colorado, in the winter. Of course this doctor will go on this trip, take his wife and children. Then he will prescribe the pills, and more money will flow around the system. He doesn’t know more about the pills than the pharmaceutical company tells him, so if 20 years later the pills prove to have been worthless or toxic who can we blame. No consumer patient of this doctor will ever get to decide or know (in most cases).

The incentive loops and shortcuts seem now to have spawned completely fallacious politicians. Trump, May, those involved in Brexit, they lie and lie and lie, but they make the rules the consumers must live by. The incentive shortcut is so obvious in the US, where campaigns are expensive multi hundred million dollar things. The media breath in that money every four years (unless there is an assasination), and will let opponents compete for add space. This is why channels like Fox and CNN are increasingly partisan, it is simply cheaper to buy a channel than to pay to get on one. But how is the voter to be considered responsible for this?

People are dying of hunger and thirst in Puerto Rico, and Trump plays with their dependency (not even aware PR is part of the US) of course other pars of the US are a mess because climate change was not addressed in time, because of the same incentive shortcuts that have nothing to do with the voter. Members of congress are immune from prosecution for insider trading, so if you want to bribe one, just tell him a stock ticker name so he/she invests. Then you buy a lot of those stocks, raising the price, then the congressman/women cashes in, and you get your text in the bill. Of course no lawmaker will think of a law by themselves anymore, they come al ready to copy paste!

The consumer is left with the choice to either be somewhat informed, angry and unhappy or be ignorant and happy. Of course the latter means the world goes to shit, becuase the incentive loops creep into every safety measure that reduces profits for the companies and industries they work for. Consumers want to work, earn money, enjoy their lives that fullfill their dreams, and thus will not care if clother mean slavery, meat means torture, clean air and water become a thing of the past and the Earth swings into climate chaos..

Even though some consumers feel and act responsibly, they do not know a tiny % of what still goes terribly wrong, and in some cases (like in the US right now) they can’t even fathom all they ways their lives are increasingly contained in an industrially designed straight jacket, while the resources they imagine to exist (because nature movies) are being used up, not replaced. They don’t even know if the life they live is the best possible because control and ownership over the local surroundings is minimized and channeld to stuff that makes them good consumers.

The author of this is old school, empirically minded and raised frugally. Now poverty will depress you and make you more realistic (because depression -is- being aware of the bare reality of your life), and thus less of a good consumer. The consumer ‘trusts’ things go right in parts of the economy they don’t understand. A realistic person just feels anxiety about what can go wrong and affect his/her life that is out of his/her control. A war in the middle east or a nuke fired from North Korea to mainland US, a crash of the financial system, a hacking of a nuclear plant or the grid, release of bubonic plague, hospitals without staff, gas stations without gasoline, bakers without bread, no water etc. etc. It all has to go right and the system that should make that happen is out of your control..

Trump not keeping his promises means that your vote for him (if you voted) gave you no control whatsoever. Your vote for Clinton didn’t either, so that once in 4 year event was a useless exercise. You can’t be held responsible, you did not get the responsibility, you are not responsible. Even Trump is not. Nobody is it seems, there are just (financial.status,sexual) incentive loops, and it takes genuine experience and insight to know which of those we should protect and which we should break, if we are even able to do. But the consumer is not able in most cases.

Unless..

It should be the job of every citizen/consumer to constantly reduce the power of the most powerfull over them. If power can not be trusted to consider their interest, it should not exist. To vote for congress where every representative is backed by millions makes no sense. The average voter is not going to get served. What the politician will do is to make the voter worry about super irrelevant issues like abortion or immigrants, where changes are not going to change the lives, while tax incentives for campaign sponsors are silently implemented. The voter/consumer/citizen should not believe the hype.

It sounds backwards but today nobody needs to decide to build a nuclear reactor anymore. They are obsolete. We have solar/wind/geothermal and wave energy sources which can be easily understood, controlled and managed. Doing this as local as possible makes a lot of sense, and takes power away from unkown, untrusted entities.

Banking need not be global of super long range in most cases. The essential trade is between farmers and non farmers, because one creates the food the other group needs. All other trade is luxury, when there is no trade necessary in water or energy.  So the logical thing is to more clearly connect the farmers and the consumers, so that both know where the other is. Of course the US shielded itself from famines by using printed dollars to buy food of the world market, leading to hunger in the supplying country in some cases!

Once the focus is more on local autonomy, the incentives to lobby and influence a central government weaken, and lawmaking can once again be driven by widely shared concerns, ones people are willing to sacrifice and change their behaviour for.

A simple example is that in the formation of the new dutch government, a law change was added that didn’t come from any of the cooperating political parties, none had suggested to abandon divident tax, which taxes income from holding stocks and bonds. Who did? The VNO-NCW, a right wing (but pretend neutral) advisory board to the government. Why? To lure in Brexit banks and companies (who think about leaving London). The cost of this measure was calculated to be 1,4 Billion Euro. This was expected to be available for education healthcare what have you, but apparently -no- politician decided to give it away.

A normal consumer tied up in his/her lives never thought about the tax break above, never cared where London banks run their business. But in the banking world, real estate world, expat rental world, a financial incentive emerged to tweak the laws so banks and other companies where more inclined to come to Holland. Politics out of control!

The incredible responsibilities we all have to keep our lives safe from calamities with industrial installations or unintended consequences of laws created for profit seems to dictate that we all make an effort to reduce the existing powers to a size we can understand, and that we limit our consumption to where we can see the origin of what we consume. How else can we pretend to be responsible, and if we don’t want to be responsible, how can we feel safe?