Tuesday, April 30, 2013

Economics as a Religion - Losing Our Faith

It stands to reason that as the power of the Catholic Church was replaced with economic doctrine, that doctrine can in turn be replaced. That is, we can learn to lose our "faith" in economic reason as its tenets increasingly become unsound and contradicted by evidence.

And that crisis of faith is all around us. As I write this, it has emerged that a paper from two of the leading Cardinals of the economic priesthood used to defend "austerity" contained a number of sloppy mistakes, ruining their conclusions. Their research was accepted unquestioningly by the media and the establishment as revealed truth, but the error was uncovered by a 28 year old graduate student. One of the discredited economists is a member of the Harvard faculty and former IMF chief economist whose columns run in major publications. In other words, an ensconced member of the elite. Another elite economist recently declared that the financial system is increasingly run by sociopaths for their own benefit, while corrupting democratic politics. Another has been on a crusade to point out the debilitating effects of inequality. Numerous books are questioning the obsession with growth, various economists are questioning the orthodox versions of economic theory, and new organizations are talking about alternatives.

The analogy is often made to Thomas Kuhn's The Structures of Scientific Revolutions. Kuhn was mainly talking about revolutions in the natural sciences, but his thinking also holds for the pseudoscience of economics. His point is that a "paradigm shift" must occur in which the entire world view is upended before progress can occur. This often happens, as Niels Bohr put it, "one funeral at a time," as people who conservatively hold to old ideas die off and new people who accept the new ideas come in. The classic case Kuhn analyzes is the displacement of the geocentric model of the universe, accepted since Ptolemy if not earlier, with the heliocentric model developed by Copernicus and championed by Galileo.

And the signs are all around us. While being told how "free trade" would make us all better off, cheap goods from overseas have eliminated American manufacturing, leaving in its wake minimum wage service jobs, with the result of the the American heartland becoming benighted wasteland of abandoned factories, decaying houses, crumbling schools, and drug dens, mired in unemployment, poverty, crime and hopelessness. Real median incomes have not budged in forty years and in recent years have actually declined, even with corporate profits at all-time highs and the rich being richer than ever before, all while prices of necessities (gas, housing, education, health care) continue to skyrocket. The American public has been told they need "more education" to compete, yet even with the best-educated workforce in history, mass unemployment stalks the land. Unemployment sits side-by-side with overwork. Houses sit abandoned in a country mired with homelessness and child poverty. Military and police spending continues to increase,along with social dysfunction. Overall happiness levels have gone down, not up, with a larger economy. Goods become shoddier every year. Obesity levels, diabetes, mental illness and autism are all increasing.  Austerity and shrinking government budgets have failed to bring back prosperity, nor have lower taxes. And we need not even discuss environmental destruction and pollution. Are we starting to lose our faith?

Over and over, the words of economists ring hollow, and they sit impotent as society crumbles around them. Meanwhile, the words of sociologists, who tell us how corrosive inequality is to society, and of natural scientists, who warn of an uninhabitable planet as we burn through non-renewable and irreplaceable resources, are ignored and marginalized. Protests have been ignited around the world against politicians who care more about balancing budgets and repaying bankers than citizens unable to find work, properly educate their children, heat their homes, run their businesses, access their medications, adequately feed themselves, or put a roof over their heads.

Is it time for a new paradigm? Maybe the Market is not infallible after all. Maybe enabling the rich does not bring about the best outcomes for all.  Maybe the absence of regulations or protectionism is not the path to prosperity. Maybe free trade is not all it's cracked up to be. Maybe markets aren't naturally headed toward equilibrium and maximizing utility. Maybe the rich have not "earned" their outsize wealth. Maybe the rich just get richer and the poor get poorer, forever.

We now know:

Rather than  a rational market headed towards equilibrium, the Market is a gambling parlour driven by emotions like greed and fear and subject to regular manias, bubbles, panics and crashes, not to mention outright manipulation.

Corporations instinctively seek monopolization and control of entire markets to increase efficiency and maximize profits through measures like the vertical and horizontal integration of markets.

Mergers, acquisitions, buyouts and business failures naturally lead to a small number of corporations controlling entire markets (banking and finance, automobiles, agricultural commodities, Internet and cell phone service, big-box retail, microchips, software, just to name a few). The big fish eat the little fish.

Humans are not rational, but emotional, and embedded in webs of reciprocity and mutual obligation.
Pecuniary gain is not the major, nor the sole, motivating factor for human effort and creativity. We want our work to be meaningful, fulfilling and helpful to others.

Monetary relationships are power relationships, and money influences and corrupts governments and undermines the regulatory atmosphere that we count on to manage the commons. All capitalism is "crony" capitalism, and "bad" capitalism always drives out "good." (Phillip's Law).

A rising tide does not lift all boats.

"Externalities" are the rule, not the exception; nearly every transaction in the economy affects other people who were not included in it, since everything is ultimately connected.

Rather than job creators, the wealthy are more often speculators, causing more destruction than creation. "Creative destruction" is often just a fancy economic term for looting.

Absent government controls, industries will engage in deceptive practices, collusion, price fixing, extortion, and rank profiteering. Rather than "free exchange," many businesses are predatory, such as the banking, healthcare and education cartels.

Debts always outgrow the "real" economy, since the real economy is constrained by the laws of thermodynamics, whereas debt grows exponentially forever. Market saturation and diminishing marginal returns means growth has to slow or end for most businesses.

More growth does not correlate to more happiness. Too much choice leads to dissatisfaction. Wants and needs are not the same, our appetites are not insatiable, and we quickly become accustomed and inured to any windfalls or setbacks.

Inequality is corrosive to a healthy, functioning society, a healthy, functioning democracy, and, increasingly, even a healthy, functioning economy.

Unregulated market activities are burning through resources at a unsustainable rate, and environmental destruction is increasingly undermining the very natural systems we depend upon for human survival.

Energy and material resource flows are the prime drivers of the economy and living standards, yet are completely ignored in economic theory, along with things like money creation, banking, debt, psychology, etc.

And then there is the fundamental value system that says productivism and maximizing wealth should be the only goal of society, that we are atomized rational utility maximizers, and that nature has no intrinsic value outside of human use. I think most people find these value judgements abhorrent, even as they implicitly accept them. I could go on, but I'll stop here.

No one knew what would came "after" the Catholic Church or the feudal system, or that anything could come after the Catholic Church and the feudal system. The supposedly hyperrationalist accounting regime that has managed the planet to date is failing, and I think even defenders of the system know it's no longer tenable. But, like the Church, they're fighting like hell to control the debate, to preserve their status, to marginalize their critics, and to make sure we believe that "there are no alternatives." As Adam Curtis put it:
One of the guiding beliefs of our consuming age is that we are all free and independent individuals. That we can choose to do pretty much what we want, and if we can't then it's bad.

But at the same time, co-existing alongside this, there is a completely different, parallel universe where we all seem meekly to do what those in power tell us to do. Ever since the economic crisis in 2008, millions of people have accepted cuts in all sorts of things - from real wages and living standards to benefits and hospital care - without any real opposition.

The cuts may be right, or they may be stupid - but the astonishing thing is how no-one really challenges them.

I think that one of the reasons for this is because a lot of the power that shapes our lives today has become invisible - and so it is difficult to see how it really works and even more difficult to challenge it.

So much of the language that surrounds us - from things like economics, management theory and the algorithms built into computer systems - appears to be objective and neutral. But in fact it is loaded with powerful, and very debatable, political assumptions about how society should work, and what human beings are really like.

But it is very difficult to show this to people. Journalists, whose job is to pull back and tell dramatic stories that bring power into focus, find it impossible because things like economic theory are both incomprehensible and above all boring. The same is true of "management science". Mild-mannered men and women meet in glass-walled offices and decide the destinies of millions of people on the basis of "targets" and "measured outcomes".

Like economics it pretends to be neutral, but it isn't. Yet it's impossible to show this dramatically because nothing happens in those glass-walled offices except the click of a keystroke that brings up another powerpoint slide. It's boring - and it's impossible to turn it into stories that will grab peoples imaginations - yet hundreds of peoples' jobs may depend on what is written on that slide.
And David Graeber:
... under no conditions can alternatives, or anyone proposing alternatives, be seen to experience success. This helps explain the almost unimaginable investment in “security systems” of one sort or another: the fact that the United States, which lacks any major rival, spends more on its military and intelligence than it did during the Cold War, along with the almost dazzling accumulation of private security agencies, intelligence agencies, militarized police, guards, and mercenaries. Then there are the propaganda organs, including a massive media industry that did not even exist before the sixties, celebrating police. Mostly these systems do not so much attack dissidents directly as contribute to a pervasive climate of fear, jingoistic conformity, life insecurity, and simple despair that makes any thought of changing the world seem an idle fantasy. Yet these security systems are also extremely expensive. Some economists estimate that a quarter of the American population is now engaged in “guard labor” of one sort or another—defending property, supervising work, or otherwise keeping their fellow Americans in line. Economically, most of this disciplinary apparatus is pure deadweight.

In fact, most of the economic innovations of the last thirty years make more sense politically than economically. Eliminating guaranteed life employment for precarious contracts doesn’t really create a more effective workforce, but it is extraordinarily effective in destroying unions and otherwise depoliticizing labor. The same can be said of endlessly increasing working hours. No one has much time for political activity if they’re working sixty-hour weeks.

It does often seem that, whenever there is a choice between one option that makes capitalism seem the only possible economic system, and another that would actually make capitalism a more viable economic system, neoliberalism means always choosing the former. The combined result is a relentless campaign against the human imagination. Or, to be more precise: imagination, desire, individual creativity, all those things that were to be liberated in the last great world revolution, were to be contained strictly in the domain of consumerism, or perhaps in the virtual realities of the Internet. In all other realms they were to be strictly banished. We are talking about the murdering of dreams, the imposition of an apparatus of hopelessness, designed to squelch any sense of an alternative future. Yet as a result of putting virtually all their efforts in one political basket, we are left in the bizarre situation of watching the capitalist system crumbling before our very eyes, at just the moment everyone had finally concluded no other system would be possible.
Maybe it's time for a new revolution. David Graeber, again:
Revolutions are thus planetary phenomena. But there is more. What they really do is transform basic assumptions about what politics is ultimately about. In the wake of a revolution, ideas that had been considered veritably lunatic fringe quickly become the accepted currency of debate. Before the French Revolution, the ideas that change is good, that government policy is the proper way to manage it, and that governments derive their authority from an entity called “the people” were considered the sorts of things one might hear from crackpots and demagogues, or at best a handful of freethinking intellectuals who spend their time debating in cafés. A generation later, even the stuffiest magistrates, priests, and headmasters had to at least pay lip service to these ideas. Before long, we had reached the situation we are in today: that it’s necessary to lay out the terms for anyone to even notice they are there. They’ve become common sense, the very grounds of political discussion.
Perhaps it's time for a new revolution that incorporates what we know about economics, psychology, resources, and the like into rational systems of economics and governance that really will give the human race a fighting chance at survival and happiness. If it happened before, it can happen again. Just as the new system was not built in a day, neither can the alternatives.

Sunday, April 28, 2013

Economics as a Religion and the Idea of Progress

The idea of economics as a religion is not so farfetched after all. The scientific revolution came right at the same time as social relations were undergoing a profound shift in Western Europe. The Church's influence had been waning since a large part of the flock had broken off during the Reformation, partially in relation to the corruption of the Catholic Church (for example, the selling of indulgences to raise money for the pope's lavish lifestyle), and partially because the monopoly the Church held over scripture had been broken by the printing press and translations of the Bible into vernacular languages.

Combine that with the remarkable discoveries of science and mathematics, and the rise of a burgeoning merchant class whose wealth and influence was beginning to rival those of the feudal aristocracy and clergy, and you've got yourself a  bona-fide social crisis. The universal Catholic Church (a redundancy), which had presided over the social life and rituals of a relatively stagnant Western Europe since the fall of the Roman Empire, was coming under a lot of pressure to accommodate the  new ideas, and was pushing back as large hierarchical systems inevitably do.

Things came to a head in the days leading up to the French Revolution. Ideas began to circulate in the coffee houses of Paris that were actively and openly hostile to the concepts of monarchy and religion, ideas which would have been thoroughly squelched in years prior. A number of philosophers (the philosophes) wrote treatises that considered human social relations in light of logic and rationality (as did earlier English philosophers such as Hobbes) rather than custom and tradition. The encyclopaedist Denis Diderot famously wrote that "mankind will never be free until the last king is strangled with the entrails of the last priest." The colonies of the New World existed beyond the range of kings in self-governing mode, and England's thirteen colonies decided to become completely independent and go their own way, with no king or state religion. It was explosive stuff.

The powder keg went off during the French Revolution - the King and much of the aristocracy was killed, and the old social order was upended. Products were flowing in from every corner of the world, and Europeans came in contact with cultures that had never even heard of Catholicism, yet seemed to function more or less serviceably. The first factories came online, and the rural and household economies was just starting to come under pressure from mass industrialism. New Protestant Christian sects based upon disparate readings of the Bible by various itinerant preachers began popping up like daisies and spreading new religious ideas. The latter half of the eighteenth century seemed to upend a social order that had existed for as long as anyone could remember. The question was, what would replace it?

So if you were a philosopher living around this time, what form  the "new" social order would take was a foremost concern. One of the lesser-known people to seriously take this question up was Claude Henri de Rouvroy, comte de Saint-Simon.

Saint Simon was an aristocrat who had seen both revolutions - he had fought in the American revolution, and had manage to survive (although he was imprisoned for a time) the French revolution. He decided to dedicate his life to philosophy after experiencing a "vision" of Charlemagne in prison. Despite his passion for philosophy, Saint-Simon's ideas never coalesced into a coherent doctrine, and his thinking was often muddied, confused and repetitive. He seemed to arbitrarily bring up ideas and then abandon them, reacting to events of his time rather than attempting to bring his ideas in any sort of consistent or practical conclusion (today he would probably be diagnosed as bipolar). Nevertheless, his ideas did have a profound influence on the next generation of European philosophers, developing a following around him, and even, briefly, a religion.

For religion was central to Saint-Simon's ideas. Before Nietzsche proclaimed the death of god, Saint-Simon felt that religion had become outmoded, and that the Church's control over peoples' behavior was fading into irrelevance thanks to social changes, economic realities and scientific discoveries, yet he believed that religious ideas were absolutely essential for the harmonious functioning  of society. He believed that the masses of the people needed a religion to believe in or else society would descend into chaos (such as the chaos of the French revolution).

His proposal was for science to essentially replace religion, that is, to assume the temporal and moral power of the Catholic Church. Often, this is phrased as a call for a "church of science" to supplant the vacuum left by the Catholic Church, and people's faith in scienctific principles to replace faith in God*. He called for scientists to become the new priests, and educate the people in the wonders of science. He put forth Isaac Newton as a sort of "pope" of the new religion, and gravity as a substitute for God. This may seem a bit bizarre to us today, but Newton's uncovering of a mysterious, omnipresent, invisible "force" that kept heavenly bodies in their place and caused apples to fall to the ground, and it's illustration and prediction by the use of maths, seemed as remarkable to people of the late eighteenth century as the idea of an invisible, unseen, all-powerful God was to medieval people. It was then thought that gravity would be the unifying force to unite all the sciences until subsequent discoveries refined that view.  Long before Star Wars, Saint-Simon proposed a belief in "the force" with Newton as Obi-Wan Kenobi.
Saint-Simon argued in the Introduction to the Scientific Studies of the Nineteenth Century that religion should be used as a political tool and that, rather than educating the masses in his physicism, they should be encouraged to continue to believe in God. This, he felt, was the only way to ensure social stability. Like many other writers and thinkers of this period Saint-Simon was fearful of a repeat of the horrors of the Revolution. Thus the educated elite (who would run the rational society of the future) would keep their adoption of physicism a secret, pretending in public to believe in the old religion.
http://www.thegreatdebate.org.uk/Saint-Simon.html

And just as people's belief in scientific principles would replace those of religion, those same scientific principles would provide illuminate the new social organization that would rise from the ashes of medieval feudalism. Saint-Simon believed science would uncover the "laws" of society as assuredly as physics had uncovered the "laws" of the physical universe. Once those laws were uncovered, it was thought, society could be run as rationally as a clockwork machine, with none of the messiness and chaos of the feudal system or the Terror. But from where would these scientific principles emerge?

The same year as the American colonies had proclaimed their independence and James Watt had perfected his steam engine, a Scottish philosopher named Adam Smith published an enormous volume describing the new field of "political economy": An Inquiry into the Nature and Causes of the Wealth of Nations. Smith described the changing nature of the rapidly expanding trade-based mercantilist economy, and the new modes of production such as the division of labor. He asserted that people working in their own self-interest managed to somehow make overall society function and average people better off over time (with many qualifications to that concept that have been subsequently ignored).

Later "worldy philosophers" and "social scientists" expanded on Smiths ideas, and even applied mathematical principles to these concepts, much as Newton had done with the physical world, uncovering things like the "laws" of supply and demand. It soon appeared that all of these "rules" of social organization would be uncovered and understood. This is exactly what Saint-Simon was looking for. He fell in with the French industrialists and businessmen who were inventing the new economy in France, in particular Jean-Baptiste Say. It increasingly began to look like business and productivity would provide the long sought for organizing principles to replace the dying feudal order and the Catholic Church. Saint-Simon 's writings lumped scientific discovery and business enterprise together as "industrialism," and called for industrialism to provide the overriding organizing principles of society, with "industrialists" replacing the aristocracy the new ruling class based on merit and social value alone:
Saint-Simon became increasingly influenced by Jean-Baptiste Say, one of the Idéologues. Say’s writing highlighted the increasing importance of industry, reflecting the shift away from the centrality of agriculture that was taking place in Western Europe. Say used the term “industry” in a much more general way than we tend to today, referring to many types of productive work, including scientific endeavour, scholarly work and business. He emphasised the value of labour, pointing out, like the great political economist Adam Smith, that it was labour that generated wealth. Thus he maintained that it was not government but economics that was the dominant force in modern society. Say believed that social stability would be re-established through industrialisation. Since more and more people would play a productive part in economics there would be greater co-operation and improved social consensus. Thus political economy would be the true science of society.

Saint-Simon’s To all Englishmen and Frenchmen who are passionate about the public good (1815) shows clearly the influence of Say, echoing many of his ideas. In it, Saint-Simon suggested creating a Baconian Society which would play a key role in unifying Europe. This society would be grounded in the scientific method, using observation as its main tool in deciding how society should move forwards. It would provide a historical understanding of the march of progress over the last 400 years. Emphasising the importance of industry, Saint-Simon picked up on Say’s definition of industriel as including business, science and intellectual endeavour, defining society as the “mass and union of men devoted to useful works.”

In his usual astute manner Saint-Simon decided to capitalise on his new found enthusiasm for business and industry by producing a new journal called l’Industrie (Industry), which would be backed by industrialists, bankers and the like. l’Industrie began publication in 1816.

In May 1817, Saint-Simon set out in l’Industrie a declaration of principles which emphasised the need for freedom from government interference for producers and consumers in the new industrial society. The primary role of government, he argued, should be to facilitate the freedom to produce. This meant limiting the influence of the nobility, church and other non-productive members of society. Political writers would assume political leadership under this new system of organisation as they were the people best placed to improve the common lot. A clear connection was made between literary and scientific industry and that of commerce and manufacturing. In Letters from Henri Saint-Simon to an American in the same volume of l’Industrie, Saint-Simon made explicit his new found certainty that political economy would provide the foundation for a positive science of politics. Based on the notion of industry laid out in the declaration of principles, the “science of production” would generate the knowledge necessary to reorganise society rationally, securing a better social system for the future.
In other words, business is the ordering principle of society, and businessmen its natural rulers. Government only exists to facilitate this "natural" working order which has been illuminated by the "laws" of economics, which are as fundamental as the laws of gravity. Interfering with these laws could only cause regression to the more primitive forms of social order.

While Saint-Simon's ideas went much beyond this (he is considered to be the forerunner of both socialism and technocracy, and his apprentice, Auguste Comte is often credited with the invention of sociology), it is the above principles which became the guiding assumptions of modern economic theory. In the subsequent years, "economics" assumed more and more social importance, considering that the first person in history to be identified as an "economist", Thomas Malthus, lived only two hundred years ago (Adam Smith was primarily a moral philosopher). Now economics is a major course of study, and there are hundreds of thousands of them, directing our governments, managing our industries, running our banks, financing our businesses, all using the alleged "science" of money flows and interest rates and the "laws" of economics to manage society. Saint-Simon's ideas of a technocracy administering society according to basic economic laws undergirds the economic world view described earlier. Thus economics as the replacement for religion is not so farfetched at all. In fact, it follows from history.

A couple side notes. Once of the more influential philosophers preceding Saint-Simon was the Marquis de Condorcet. Condorcet was a brilliant mathematician, and once of the early interpreters of Newton's calculus. He was an advisor to Turgot, the minister of King Louis XVI, who had tried to liberalize the French economy from it's static administration (for example, he wished for grain to be traded on open exchange rather than distributed by the state as a way to prevent shortages and famine)**. Condorcet's ideas revolved around the idea of the government using the new scientific discoveries to improve the well-being of citizens and facilitate trade, an idea so obvious to us today that we hardly give it a second thought. He felt that government should maintain bureaus of scientists to advise kings in the best way to govern. In this, he was a successor to Francis Bacon's ideas and a forerunner to the technocracy movement. He even invented a weighted method of elections, the Condorcet method, to overcome the limitations of strict majority (yes, we knew there were problems and solutions for this two hundred years ago already).

Condorcet, unlike Saint-Simon, did not survive the French Revolution. While on the run and in prison, though, he wrote an influential pamphlet called Sketch for an Historical Picture of the Progress of the Human Mind. This was one of the first true codifications of the Enlightenment Idea of Progress - that scientific discovery would led to better and better lives for all, and the human society was on a long slow read to perfection, and scientific discovery would eventually allow a perfect society to from and the lot of human being would continue to improve forever, once all the kinks were worked out. He described all of human history as a series of ten epochs, with society progressing through each epoch at different rates. Post-revolutionary France was in the ninth epoch, with the tenth being the final state where science would bring about the ideal social state:
While it is clearly related to much that had already been written about the rights of man, and discarding the superstition and authority of the past, this was a very different type of work. Through an historical study of the development of human thought, Condorcet hoped to point the way towards future improvement of the human condition. His history consists of nine “grand epochs” of the past, and a tenth epoch in which he advances “some conjectures upon the future destiny of mankind.” However, while his description certainly has time dependence running it, with a corresponding advance in human understanding and material well being, Condorcet is clear that progress is uneven. This is not a naïve view of a continual improvement in the human conditions – not everyone benefits from advances that are made; knowledge and wealth are not always shared; and the states described in each epoch actually frequently run alongside each other. He is explicit in pointing out that there are even people who still live in states corresponding to the first and second epochs. However, part of the point of recognising the progress that has already been made is to point to a trajectory towards a better future state.
http://www.thegreatdebate.org.uk/CSketch.html

Condorcet's ideas of progress were central to the new economic ideas floating around at the time, so central, in fact, that they are taken for granted.  Like other tenets of faith, it is simply assumed to such an extent that people don't even think about it much less question it.

And a final note- Jean-Baptiste Say, mentioned above, is the founder of Say's Law, another tenet of modern economic faith. Say argued that since the production of goods generated income, that income would seek to buy more goods. So the income a businessman makes and pays to his employees would have to go somewhere, and that somewhere would be in the purchase of more goods, causing more goods to be produced (and hence more wages seeking more goods, etc.). Thus, production of goods necessarily created demand for more goods. Say asserted that human wants were essentially insatiable.***

Say's Law has been hotly debated ever since by economists. It came under scrutiny during the Great Depression, since Say's Law dismisses the idea that there would ever be a glut of goods, or that peoples' desires would ever be satisfied.  It also dismissed the idea that workers would be paid too little to purchase all the goods they produced (a necessary tenet of some economic theories such as Marxism). During the Depression, it looked like overproduction and efficiency set the economy off its wheels. There were plentiful supplies of everything, but no demand. Say's Law was summed up critically by John Maynard Keynes as "supply creates its own demand."

Yet Say's law is still treated as an article of faith, even if it is not explicit. It is an essential feature of "supply-side" economics; the idea that if you give businesses every incentive to produce more and more (low taxes, minimal wages, etc.), that this increased production will bring about prosperity for all. Say's Law argues that a "general glut" is impossible. It also assumes that there is no point of satiety, and there will never be too much stuff for people to buy. It assumes that there are no monopolies that can control markets. It assumes that there are no negative effects from production such as resource depletion and pollution. It is the main justifier for low taxes on the wealthy and businesses, even if it is not stated outright.

*Alain de Botton has called for a "Church of Atheism," and has called for the creation of a temple to this end.

** It was Turgot, who first officially described the modern Idea of Progress, according to Wikipedia. He also predicted a lot of Adam Smith in his descriptions of the European economy.

***It's also used to justify unlimited immigration since more immigrants = bigger economy = more jobs.  This is a good example to show how these "laws" actually are used to justify patent absurdities.

Saturday, April 27, 2013

Economics Is Our Religion

Blogger note: this is in response to the Archdruid Report's latest series of posts, this one in particular.

There are a good series of posts currently running on the Archdruid Report exploring a concept he has referred to often but not explicitly spelled out - that the notion of progress is essentially the main religious faith that underpins modern societies.

It's an intriguing notion, and I think there's much truth in it. But I'm going to propose the idea that it's in need of refinement. In fact the real religion that undergirds our modern societies is actually economics - and the belief in progress is actually a component of that doctrine, rather than the doctrine itself.

Think of it this way - Christians believe in an afterlife. This belief is an essential feature of Christianity. But it is not, in itself Christianity. It is a necessary component of the set of semi-coherent and self-reinforcing beliefs that make Christianity work as a religion. Yet Christians do not describe their religion as the religion of afterlife. They do not go to church and confess belief in afterlife-ism. Even many non-Christians believe in an afterlife. It is merely a tenet of the religion, not the religion itself.

Similarly, I would argue that the notion of progress is essential to the free-market economics that is the guiding social structure of our world today. It is not so much the belief in progress, but the concepts of the "science" of economics, that took over the social order of Europe and the world after the "death of God" proclaimed by Nietzsche. Economics claimed to be a "rational science," yet it is based around around certain core assumptions that are unquestioningly accepted by people today. And, it is claimed, as long as we adhere to these beliefs and assumptions the living standards of the human race will improve continually forever.

One core principle of the religion of economics is that productivism is a goal in and of itself that will bring about an earthly paradise and that everything must be sacrificed to the cult of productivity: functioning communities, local economies, family relationships, healthy ecosystems, social justice, equality, physical and mental health, societal well-being and happiness, leisure time, etc. This spirit of sacrifice that runs throughout capitalism at every level resembles to me nothing so much as a religious impulse. As the philosopher Slavoj Žižek put it:
"Capitalism is, and this I'm almost tempted to say what is great about it, although I'm very critical of it, Capitalism is more an ethical/religious category for me. It's not true when people attack capitalists as egotists, they don't care for... no! An ideal capitalist is someone who is ready again to stake his life, to risk everything, just so that production grows, profit grows, capital circulates. His personal or her happiness is totally subordinated to this. This is what I think Walter Benjamin, the great Frankfurt School companion [and] thinker had in mind when he said Capitalism is a form of religion. You cannot explain, account for a figure of a person that [is] capitalist, obsessed with expanded circulation, with the rise of his company, in terms of personal happiness."
You see this today in the belief that the poorer nations of the world will adapt market economies, and will eventually all become wealthy and prosperous. Look at China. They literally tore their society apart when they embraced Capitalism. Peasants left their villages and families by the millions to go to work in factories for sixteen hour days  and sleep in spartan bunks in dormitories for a pittance. Entire villages became infected with cancer, the sky became dark with haze, and the rivers became filled with toxins and dead animals. They were willing to do this becuase their descendants, they are told, will get an education and live comfortable, affluent, Western lifestyles once China becomes rich and the wealth trickles down to the masses. How can one not describe this as a religious faith, similar to that of the medieval peasant whose bitter toil would store up for him rewards in the next life? Except today the rewards are material and in this life, just in the future. Currently, the Chinese look upon the future as sort of a "promised land" for their descendants, and their rewards as creature comforts rather than eternal life. The fact that this is already unravelling in Western countries does not seem to discourage their faith.

Another underlying belief is that economic growth equals progress, and that progress will solve all ills. This why progress is an essential component of the "religion" of modern economics. More growth means better and better living standards for all in perpetuity, the argument goes. Similarly, more growth leads to "innovations" which will solve every problem humans will ever encounter.

For example, a widespread belief is that somebody, somewhere, will come up with inventions like a new power source, or a non-polluting technology, or artificial intelligence, that will be introduced into the market and cure all our ills, political, environmental, and social, even sickness and death in the views of the more extreme believers. Innovation is an "ultimate resource" that will never be exhausted and will overcome even the finite nature of the earth itself! How can one not see this as a fundamentally religious belief? Thus, economists preach that anything that hinders or limits economic growth must be forbidden, and we must do all we can to "promote innovation" no matter the cost to the wider society.

Another fundamental article of the faith is the idea of trickle-down: the idea that if the wealthy and powerful are given an environment to operate without any constraints, that their actions will ultimately bring about a better life for all, whereas restraining their actions in any way will only cause us to be poorer in the long run and do more harm than good. It seems to justify the "ruling class" of capitalism the way The Divine Right of Kings justified absolute monarchy for centuries. It's the "great man theory" of economics.

Another article of faith is often called the "Just World Hypothesis." According to this article of faith, the economically productive are rewarded exactly in proportion to their contributions to society; no more, and no less. Wealth is correlated with virtue and social contribution. There can be no cheating or gaming of the system, because all the actors in the Market possess total freedom and perfect information, and thus the market will eventually dispense retribution against those who cheat and reward those who are virtuous. Everyone is born with the same opportunities, and anyone who prospers does so by their own abilities and nothing else. Thus the wealthy have "earned" every last penny of their income and wealth through "hard work and sacrifice" and to take away any of it (as with taxation) is "theft." Thus, a hedge fund manager who earns ten thousand dollars in a single day has contributed that much "value" to society, as has  professional sports player who earns 120 million dollars a year.

The flip side of this is that the poor are always deserving of their fate for being lazy and unproductive. Low pay can only be explained by peoples' work as having "lesser social value." than others. Prosperity is available for everyone if only they work hard enough, and anyone who is suffering hard times has brought their fate down upon themselves and has no one to blame for their failures but themselves. (This is similar to the Calvinist idea of "the Elect of God").

Central to the religion of economics is the concept of "The Market." The Market is not treated as a human construct, but rather as a semi-divine entity, and is regarded with a quasi-religious awe. It is considered benevolent, all-knowing, and infallible, just like the theological concept of God. Any problems with the Market are caused by human interference and a lack of understanding, not by the Market itself, because the Market is infallible. Overtly religious terms like the "invisible hand" are used in reference to the Market. The "invisible hand of the Market," we are told, allocates all goods and services in an ideal manner in accordance with its divine will, and we never to question the "wisdom" of the Market or interfere with its  workings. It must be left alone to work its magic. The Market is benevolent, but it is also capricious, rewarding those who adhere most closely with its wishes, and punishing those that deviate from its strictures. The Market is synonymous with human freedom, and regulating or interfering with the Market in any way at all is tantamount to taking away peoples' freedom.

If there is  downturn, then we have "sinned" against the Market, and must put our house in order. If we pay down debt and cultivate surpluses to restore "balance" to the Market, it will once again shower us with prosperity for our virtue just as in times past. "Austerity" is the way we collectively punish ourselves for our exuberance, and the market will reward us for our pain and suffering. Debt is equated with weakness and shame, and budget surpluses with health and prosperity, almost as if we're treating money like grain in an agricultural economy. The lives of ordinary workers are sacrificed to the Market as surely as prisoners were slaughtered by the tens of thousands to appease the rain gods atop Mayan temples.  It is a religious, not a logical impulse.

The workings of the Market have been revealed to us though a series of "prophets" - Adam Smith (the Jesus of economists), David Ricardo, John Stuart Mill, Wilfredo Pareto, Kenneth Arrow, Irving Fisher, Paul Samuelson, John Maynard Keynes, Eugene Fama, Milton Friedman, et. al. Each prophet expands our understanding and brings us closer to the "truth,"and we must judiciously study their writings, even ones written centuries ago. Economics even has its Antichrist - the devil Karl Marx, and his heretical doctrine of Communism which must be rooted out and eliminated wherever it is found.

Just as no one can agree on the nature of God, we can't agree on the nature of economics either - instead of Methodists, Lutherans, Presbyterians, Calvinists, Mennonites, Catholics, Mormons and others; we have Keynsians, Austians, Marxists, Neoclassical economists, the "saltwater" and "freshwater" schools, etc. Heretics, such as behavioral or biophysical economists, are dismissed and marginalized (but thankfully not killed anymore)*. Like Galileo, no one is allowed to challenge the orthodoxy of the faith. We even use terms like "orthodox" and "heterodox" to describe economic ideologies, surely a testament to how much economic thinking is influenced by religious thinking. See Wikipedia's entry for heterodox economics.

Economics claims to define the very nature of human beings today. Where people were once defined by religion as immortal souls in need of redemption, we are now defined us as "walking calculators" - perfectly rational self-interested solitary individuals always seeking ways to derive the maximum personal benefit for the least amount of cost. It also illuminates our view of the natural world. We assume everything in nature can be assigned a price for "ecosystem services," from the value of a clean river to the pollination activities of bees. If an animal or ecosystem does not provide enough "economic value" to us, we are free to let it be destroyed or go extinct, with no moral condemnation. Thus, a forest has no value in and of itself as part of creation until it is chopped down and turned into products for human use. Similarly, for example, an animal, rather than being part of God's creation and thus intrinsically valuable, is simply a number on a spreadsheet, and can be allowed to go extinct if it provides too little economic "value."  This is a profound shift in man's view of the world, and it is hardly ever even acknowledged. If something shapes the fundamental world view of a people, how can it not be said to be a religion? And how can that world view not govern our actions?

Economics also determines our social relationships and social hierarchy. You are now defined by your role in the economic order rather than your place in the feudal caste system or your familial or tribal relationships. So instead of king, peasant, serf, vassal, villein, knight, yeoman, or chief, we have business owner, investor, CEO, entrepreneur, businessman, professional, blue-collar worker, unemployed, etc. Each of these form their own "class" in society which is not so different from that of the Middle Ages. We relate to each other not out of blood relations or mutual obligations, but as isolated individuals seeking maximum benefit by impersonal exchanges in the market. There are no obligations other than to maximize one's own profit, and altruism is disparaged. Blatantly unjust and exploitative social relationships are justified by economics just as theologians once defended the Divine Right of Kings, the Crusades, papal infallibility, blasphemy, indulgences, serfdom, and slavery.

In the same way theology was a major course of study in the Middle Ages for many of the brightest young men from the upper classes, economics today is a popular course of study for many of the children of the wealthy seeking to gain power and influence. At prestigious universities they are indoctrinated into a system with it's own jargon and implicit world view, and that world-view becomes the tunnel through which they see the world. They come up with theoretical constructs like Ricardian Equivalence, Pareto Optimality, the Efficient Markets Hypothesis, and the Exogenous Growth Model and explain everything on that basis (compare to theological jargon such as "binitarianism," "unconditional election," "hyper-dispensationalism" and "imminitizing the eschaton"). These concepts are taken for granted, just like Noah's flood and original sin, and eveything is built off of those first principles.

Rather than the Bible and Aristotle, they use economic texts and mathematical equations which are abstruse to the commoners to justify things like free trade, offshoring, deregulation, usury, financialization and mass layoffs which common-sense would seem to imply are destructive to society. Economists have prestigious chairs at universities and write books and papers. They advise governments. They travel to conferences all over the world. Just like being in the Medieval clergy, it can be extremely lucrative and rewarding for practitioners - economists are some of the wealthiest and most influential members of society for doing essentially no productive activity.

Just as kings once consulted with Cardinals and Archbishops to determine the appropriate course of action and had advisers schooled in theology, today's world leaders have cabinets full of economists to tell them what to do, not natural scientists, sociologists, philosophers, or engineers (e.g. The President's Council of Economic Advisers).

Just as Christianity privileged itself on providing the ultimate answers to all important questions - from justifications for war to the  age of the earth to the motion of the planets - economics has been apotheosized to a similar degree with the rise of "Freakonomics." Economists claim to able to explain absolutely every aspect of human social behavior in terms of rational incentives and game theory - from the raising of children, to dating and marriage, to schools and public health (see, for example, nudge theory) - and determine the optimal course of action for governments to take at the local and national levels. Economists are dispatched like missionaries all over the world to convert the "heathen" - poor counties that have not yet embraced the gospel of free market liberalization and global trade (such as in Latin America in the 1970s).

Just as the medieval world view was reinforced every Sunday by church services performed by the clergy, turn on the TV and our economic world view is constantly reinforced by the media. Economists pontificate from the television news programs and from the pages of the New York Times and the Wall Street Journal like preachers explaining God's will to the peasants from their pulpits. Free markets and economic growth are preached as a self-evident truths in all media outlets, even "leftist" ones. The debate boils down to little more than what are the appropriate levels of spending and taxation, and how do we bring about the maximum amount of economic growth. The Market must be appeased, and sacrifices must be made no matter how much poverty, unemployment and social dysfunction it creates.

Note that our banks look like temples. They are stately, majestic, imposing buildings by design, utilizing the finest, most expensive materials from all over the world. This is not accidental. The chairman of the Federal Reserve is like the "pope" of capitalism, with the Federal Reserve Board as his college of cardinals. He is elected essentially for life, and his every pronouncement is a world-changing event for the faithful. There are magical rituals and incantations like creating money out of nothing ("keystrokes"), and transmutation of precious metals into money. There are sacred dates like Tax Day and the end of the fiscal year. Sometimes we proclaim a "tax holiday" instead of a religious holiday. Economists even claim to be able to predict the future - in fact it's part of their job description!

Powerful institutions like the IMF and World Bank make rules behind closed doors that affect millions and superseded democratically-elected governments. Sometimes economists are even appointed as rulers of nations, the idea being that the principle goal of leaders today is not to maximize societal well-being, but to "balance the books" - the statesman as accountant. I remember hearing about "interdict" in the Middle Ages - a Pope would order priests to refuse services to the faithful in order to bring about unrest and topple leaders at will. Compare that to economic sanctions levelled against any world leader who defies the global economic order and you'll see that financial institutions, like the Church, are set above governments, even democratically elected ones.

In the Middle Ages when there would be a crisis of faith - a famine, say, or a plague, the apologists for the Catholic religion would not question their faith; they would just come up with ex-post-facto justifications such as "it is God's Will, and humans cannot comprehend God's will," and could advise little more than prayer and forbearance. Similarly, the negative outcomes of the market, from stock market crashes to housing bubbles to climate change, to pollution, to resource depletion, to widespread unemployment to social dysfunction, to rising levels of unhappiness and poverty are waved away by economists as "externalities" - natural workings of the Market that must be endured and can easily be corrected with the proper technocratic management if only we keep the faith. Economists' failure to predict the economic downturn, or to agree on the what the appropriate course of action is to remediate it, are similarly rationalized away, and no fundamental change in world view is even contemplated.

Yet economics, like theology, is a pseudocience. It is non-falsifiable. It starts from first premises, such as the ones I outlined above, and seeks evidence to justify those premises while dismissing any and all alternatives or contrary evidence (like the Church once dismissed astronomy and human evolution). Economic debates resemble nothing so much as medieval dialogues on how many angels can fit on the head of a pin. No matter how often they are proven wrong, no one questions the basis for their belief. That sounds a lot like religion to me.

So I would argue that the religion of progress is actually a subset of the religion of economics. Economics fulfills all the criteria of a foundational religion of a society, just like the Medieval Catholic Church, Confucianism or Islam. It establishes the fundamental social order and legitimizes the ruling class. It defines social relationships between people and purports to describe fundamental human nature. It is based on a set of beliefs with no rational, empirical basis, just sacred texts and theory. It is consistently contradicted by real-world experience, yet it is never questioned. It is the advisor to governments, and defines the parameters in which they must operate. It has it's own priesthood and hierarchy, its prophets and apostates. It has its conflicting schools of thought and its heretics. It has its declarations of faith and ruthlessly crushes any and all alternatives. It has its sacred temples, its rituals, it's indocrination tools, and its own terminology. It is a universal faith - its institutions straddle the world. It claims to be the source of ultimate truth. It has its sacrificial lambs, and its black sheep. It is, quite simply, the fundamental religious dogma underpinning modern human society.

* for example, Frederick Soddy, Thorstein Veben, Herman Daly, Nicole Foss, Charles A. S. Hall, Hazel Henderson, etc. Even "established" economists like Michael Hudson, Steve Keen, Ha-Joon Chang, John Quiggin and others are ignored if they step outside the acceptible bounds of orthodox thinking.

Zeitgeist watch. I'm hardly the first to say it. Here are some other articles on the same theme:

Are markets Our God? (Harvard Business School)
The Religion of Economics (John Seed)
The ‘laws of economics’ don’t exist (The Edgy Optimist)
Economics: pre- and post- Copernican (Transition Milwaukee)
Scientific viewpoint or 'religious' belief: My cat explains energy optimism (Resilience)
The Market as God (The Atlantic)
Economics as Religion (Decline of the Empire) and see Two TED Talks, Open Thread Two years ago, I posted the following comment to this post:
[Economics] starts with a foregone conclusion – like the idea that so-called “free” markets, lack of regulations and globalization will make everyone better off - and then gathers evidence to support those conclusions. And isn’t it interesting how the forgone conclusions of economists always end up supporting the wealthy and powerful? In fact, its antecedent is medieval theology. References to sacred texts like The Bible and Aristotle were substituted for any type of empirical evidence, and anything that did not fit that world view (like a receding glacier or a dinosaur fossil) was discarded or explained away by tortured logic.

Many observers have compared the economics profession to the Catholic Church of the Middle Ages. In fact, their role is precisely the same – to provide a philosophical justification for a clearly dysfunctional and unjust social order. Rather than kingship by divine right, it attempts to justify to the masses things that are clearly absurd – like Americans competing against workers all over the world will make all of us more prosperous. Or that supply creates its own demand (Say’s law). Or that infinite growth is possible on a finite planet. Of course the conclusions of economists always support those who wield the money and power. Coincidence? The sole purpose of economics as it is practiced today is to come up with justifications for the status quo. Think about it – the “father of classical economics,” Adam Smith, did not attempt to come up with some sort of ideal, rational system, he merely described what was already happening. Then later, these observations became codified a “science.”

The conceits of modern economics come out of Enlightenment attempts to make social governance as “rational” as Newtonian physics. Two critical ideas underlie this - that individuals were atoms whose interactions were as precisely quantifiable as the effects of gravity on physical objects, and that the “laws” of economics were as immutable as Newton’s laws, such as F=MA. Never mind that every “law” of economics has been proven false (even supply and demand – have you looked at college prices lately), and that the money system is an entirely artificial creation, subject only to whatever rules we wish to apply. This has gotten even worse as what used to be called institutional economics was replaced with abstract mathematical models promoted by game theorists and think-tanks. With institutional economics, the effects of policy were implicitly an object of study. When the idea of the market as a perfectly rational, all-knowing machine that correctly allocates all resources became gospel, any questions about social effects were tossed out the window. Economics finally realized their Enlightenment goal. Too bad their “Market” seems to be identical to the Medieval Catholic Church’s notions of God – all-knowing, all-powerful, capricious, and most of all, never to be questioned under any circumstances. That why economists can no more explain financial crises than medieval monks could explain famines or the Black Death to the suffering populace.

The truth is, markets have always been driven not by scientific principles, but by greed and fear. Is there a quantifiable unit that measures greed (may I propose the “Blankfein” as such a unit).

Like the Catholic Church, modern economics does not tolerate dissent. Remember Galileo? If you look up heterodox economics (type it into Wikipedia) you can see what happens to people and ideas that do not fit in the current economic free-market paradigm. Any apostates from this world view , no matter how intelligent and qualified, are dismissed entirely. In fact, the ultimate “heterodox” economist, Karl Marx, seems to have predicted exactly what is happening to capitalism, and a few more intelligent observers are starting to note that uncomfortable fact, to wit:

http://blogs.hbr.org/haque/2011/09/was_marx_right.html http://seekingalpha.com/article/187119-the-fate-of-capitalism-was-marx-right http://www.oftwominds.com/blogaug11/crisis-of-capitalism-8-11.html http://www.bbc.co.uk/news/magazine-14764357

As Adam Curtis so aptly put it in a recent blog post, mainstream economists and think-tanks are designed not to come up with solutions, but rather to limit our ideas to those that benefit the already powerful and preserve the status quo. Here is an eloquent statement from his blog:

“The guiding idea at the heart of today's political system is freedom of choice. The belief that if you apply the ideals of the free market to all sorts of areas in society, people will be liberated from the dead hand of government. The wants and desires of individuals then become the primary motor of society.”

“But this has led to a very peculiar paradox. In politics today we have no choice at all. Quite simply There Is No Alternative.”

“That was fine when the system was working well. But since 2008 there has been a rolling economic crisis, and the system increasingly seems unable to rescue itself. You would expect that in response to such a crisis new, alternative ideas would emerge. But this hasn't happened.”

“Nobody - not just from the left, but from anywhere - has come forward and tried to grab the public imagination with a vision of a different way to organise and manage society.”

“It's a bit odd - and I thought I would tell a number of stories about why we find it impossible to imagine any alternative. Why we have become so possessed by the ideology of our age that we cannot think outside it.”

Friday, April 26, 2013

Your Grandchildren Have No Value

Good interview with Jeremy Grantham on the Guardian, if you haven't seen it. The reporter also released some transcripts of the interview:

Jeremy Grantham on population growth, China and climate sceptics

Jeremy Grantham on how to feed the world and why he invests in oil
Capitalism does millions of things better than the alternatives. It balances supply and demand in an elegant way that central planning has never come close to. However, it is totally ill-equipped to deal with a small handful of issues. Unfortunately, today, they are the issues that are absolutely central to our long-term wellbeing and even survival. It doesn't think long-term very well because of high discount rate structure. If you're a typical corporation anything lying out 30 years literally doesn't matter. Or, as I like to say: QED, your grandchildren have no value. And they usually act as if that was true, even though I'm sure they are actually very kind to their grandchildren.

My favourite story is about the contract between the farmer and the devil. The devil says, "sign this contract and I'll triple your farm's profits". But there are 25 footnotes, as there always is with the devil. Footnote 22 says that 1% of your soil will be eroded each year, which is actually horrifyingly close to the real average over the past 50 years. The farmer signs and makes a fortune on a 40-year contract. And his son then signs up for the next 40-year contract and makes a fortune. And his son then signs up for the third and final contract. He still does very well, and in the final 20 years the family has accumulated enormous wealth, but the soil has gone. It's the same story for all his neighbouring farms and everyone is out of business. My sick joke is that at least he will die a rich farmer when all the starving hordes arrive from the city.

Every graduate who took Econ 101 would probably sign that contract. There is no single theory that is used in economics that considers the finite nature of resources. It's shocking. But not as shocking as the pathetic waste of space over the last 50 years given to "rational expectations", which allows a whole generation of bankers and central bankers to believe that the market is efficient. None of it applies to the real world, or to messy human beings, many of whom are a little crooked when they have to be. It's been a disaster and a complete waste of time.  
It has been remarked before that modern economics is belief in a perpetual motion machine. Capital and labour, but no mention of energy. Without energy the whole thing grinds to a halt and the whole theory is demonstrated to be totally false. I'm late in the game at recognising this. One of my new heroes is an economist called Kenneth Boulding who, at 22, got a paper into Keynes's journal. At the age of about 50 he realised that economics was not taking its job seriously, that it was not interested in utility, in real serious improvement in the world, but that it was increasingly interested in new, elegant mathematical theories designed to get career advancement, over usefulness. He said the only people who believe you can have compound growth in a finite world are either mad men or economists. He also said: "Mathematics has brought rigor to economics. Unfortunately, it also brought mortis."
I don't quite understand his optimism on Chna, though. It seems like they are making the exact same mistakes.

Thursday, April 25, 2013

Climate Change and Agriculture

Here's a happy headline to go with your morning joe: Millions face starvation as world warms, say scientists (The Guardian):
As food experts gather at two major conferences to discuss how to feed the nine billion people expected to be alive in 2050, leading scientists have told the Observer that food insecurity risks turning parts of Africa into permanent disaster areas. Rising temperatures will also have a drastic effect on access to basic foodstuffs, with potentially dire consequences for the poor.

Frank Rijsberman, head of the world's 15 international CGIAR crop research centres, which study food insecurity, said: "Food production will have to rise 60% by 2050 just to keep pace with expected global population increase and changing demand. Climate change comes on top of that. The annual production gains we have come to expect … will be taken away by climate change. We are not so worried about the total amount of food produced so much as the vulnerability of the one billion people who are without food already and who will be hit hardest by climate change. They have no capacity to adapt."

America's agricultural economy is set to undergo dramatic changes over the next three decades, as warmer temperatures devastate crops, according to a US government report. The draft US National Climate Assessment report predicts that a gradually warming climate and unpredictable severe weather, such as the drought that last year spread across two-thirds of the continental United States, will have serious consequences for farmers.

The research by 60 scientists predicts that all crops will be affected by the temperature shift as well as livestock and fruit harvests. The changing climate, it says, is likely to lead to more pests and less effective herbicides. The $50bn Californian wine industry could shrink as much as 70% by 2050.

The report lays bare the stark consequences for the $300bn US farm industry, stating: "Many agricultural regions will experience declines in crop and livestock production. The rising incidence of weather extremes will have increasingly negative impacts on crop and livestock production. Climate disruptions have increased in the recent past and are projected to increase further over the next 25 years.

"Critical thresholds are already being exceeded. Many regions will experience declines in crop and livestock production from increased stress due to weeds, diseases, insect pests and other climate change-induced stresses. Climate disruptions to agricultural production have increased in the recent past and are projected to increase further".
"We'll adapt" is hardly a suitable answer. In the past, adapting has usually meant a collapse and dieoff. Ironically, it's those of us who've been warning of that who are most eager to change the status quo. For his part, Stuart Staniford finds no decline in crop yield to date. Seems to be hard to believe with all the droughts and floods.

Wednesday, April 24, 2013

The Limits of the Earth

Here's an article on Scientific American about the problems that we face in the future. It's a pretty good rundown of the situation:

The Limits of the Earth Part 1 (Scientific American)

He identifies the following major areas of concern:

1.) Feeding The World

2.) Deforestation

3.) Fresh Water

4.) Ocean Overfishing

5.) Climate Change

All that means the end of growth right? No, according to the author. Why not?
The first is the moral ground.  Roughly one billion people alive today on the planet have access to automobiles, air conditioners, and central heat.  The other six billion do not.  Two billion lack access to a toilet.  One billion lack access to electricity.  The bulk of the growth to come over the next few decades – in global GDP, in energy consumption, in CO2 emissions, in food consumption, in water use – will all come from the developing world.  That growth isn’t trivial.  It isn’t about building McMansions or driving SUVs.  It is, by and large, growth that reflects the aspirations of billions of people around the world to rise to a level of comfort that nearly everyone in the rich world – even those we consider poor – enjoy.  A path forward that doesn’t allow room for billions to rise out of poverty and to at least this modicum of comfort is not a very appealing one.

The second is the practical grounds.  What power do we have to stop those in the developing world – where almost all the real growth is to come – from consuming more?  Very little.  Perhaps it is resource scarcity itself that will halt the growth of consumption.  But if so, that won’t happen easily or peacefully.  As demand for energy, food, and water all rise, if supplies remain stagnant (or even drop) prices will rise, unrest will kick in, and violent conflict is a very real possibility.  Already we’ve seen that drought helped start the civil war in Sudan’s Darfur region that took hundreds of thousands of lives, and that China, India, and Pakistan – three nuclear armed powers – have exchanged sharp barbs over scarce water resources in the region where the three countries meet.

A world where growth is over is not a world we’re very like to enjoy.

We are in short, up against immense resource problems at the same time that we’re facing incredible growth in demand.  We’re between a rock and a hard place.

Is there a way out of this mess?  Can we grow wealth for billions while solving the environmental challenges facing us?  I think we can, if we make smart choices, and fast.
Er- really, aren't those a question of  distribution? That really has nothing to do with growth, per se. Are we being distracted?

The Limits of the Earth Part 2: Expaning the Limits (SciAm)
And the ultimate solution to those problems is innovation – innovation in the science and technology that we use to tap into physical resources, and innovation in the economic system that steers our consumption.
Ah, yes, the magic of innovation. Where have I heard that before? Perhaps he doesn't realize that all of these problems were ultimately caused by earlier innovations!

The solutions are pretty standard – better agricultural techniques in the third world combined with genetically modified crops will fix the food problem. A cresting population caused by industrial prosperity will solve the overpopulation problem. Fish farming will solve the overfishing problem. Better membranes for desalinization will solve the water problem. And solar panels and better batteries will solve the energy problem.

The rub is: we’ve already solved all the problems once before. I’m sure you could have argued that the harnessing of electricity would have solved all our problems at the beginning of the century. Instantaneous communication could be achieved via the telegraph and later, radio, bringing about a new era of world peace. Anywhere in the world could be accessed within a matter of months by steamship, zeppelin, and later, airplane. ”Feeding the world” would be solved by artificial fertilizers and mechanized agriculture. Add to that fact that the internal combustion engine meant that we would no longer require horses for transport or plowing, freeing up more land for food and ridding the filth from city streets. The division of labor, mass production and the assembly line would solve the problem of production once and for all. Indoor running water and plumbing would prevent disease. And antibiotics would eliminate many of our most feared diseases, forever.

A paradise, right? Do you feel like you’re living in paradise where we’ve solved all our problems?

Now we’re fretting about feeding seven billion instead of one billion. As discussed here, artificial fertilizers have caused massive dead zones via runoff, dependence upon natural gas and exacerbated global warming. Cars have caused pollution, sprawl, ghettos, and more deaths collectively than all the world’s wars every year, not to mention wars for fossil fuels. We’re worried about terrorists blowing up airplanes. The majority of humanity lacks sanitation and running water, stuff we've known how to do for over a century, now. Overproduction has caused waste, incessant advertising and joblessness. And antibiotics are rapidly losing their effects due to disease resistance caused by natural selection. Oh, and let's not forget permanently fucking up the climate. I could go on.
Are we on track to win this race?

That’s not at all clear. Consider, for a moment, climate and energy.  Multiple groups have proposed plans by which the world could be powered almost entirely by renewable energy by 2050, or, in the most ambitions plans, by 2030.

Yet even as those plans are articulated, worldwide CO2 emissions are rising, not falling.  In 2012, the planet as a whole emitted a record-breaking 35.6 billion tons of CO2 into the atmosphere.  And the concentration of greenhouse gases in the atmosphere is surging along with our annual emissions. In 2012, atmospheric CO2 concentrations rose by the largest amount in 15 years to a new level of 395 ppm, most of the way to the 450ppm that climate scientists have articulated as the threshold for dangerous warming.

The fundamental driver here is economics.  Consumers, businesses, and industry want energy. They need energy.  That’s true everywhere in the world. And they will buy whatever sort of energy is cheapest. Indeed, if a new source of energy is sufficiently cheaper than the old, consumers will switch their energy consumption from the old to the new.

If we want to win the race against climate change, one thing matters more than all others:  make renewable energy (including storage) cheap.  Dirt cheap.  And do it fast.

How do we do that?  Fundamentally, we need to increase the pace of innovation. 
The author recognizes the need for reforms like carbon taxes and subsidies for alternative energy. Yet how likely are these in a world wracked with debt crises, collapsing economies, increasing inequality, police and mass surveillance states, and governments riddled with corruption and cronyism, from the United States to Russia to China? That's missing from his analysis, but is a crucial part in comprehending the likelihood of a solution (and what's preventing it). I don't he's truly thinking through the magnitude of the changes required. See the quote from Steve Keen here.

That said, there are a lot of good and interesting ideas here, and some good facts. Clearly he's done his homework. But the shrinking the size of the human enterprise to a manageable scale, distributing the surplus we already have more evenly, eliminating waste and inefficiency, and social/political reforms would be my preferred solutions. Innovations are a subset of that.
I’m an optimist. I believe in humanity’s ingenuity. Even on the path of the hard way, I think we’ll prevail. We’ll scramble and find solutions. Yet the cost will be far higher a decade or two from now than it would be if we started today. And the scars will run deeper, in species lost, in acidified seas, in forests chopped or burned down, in climate-created famines and pestilence, in wars and conflicts born of resource scarcity. Or perhaps I’m wrong, and on that hard path we simply won’t respond in time, in the way that other cultures of the past failed to respond to the disasters that ultimately led to their collapse. It’s not a chance any of us should be eager to take. Easy way or hard way. The choice is ours.
I wish I could agree with that. But the way it stands now, the choice lies with the elites. I know which one I choose.

Luck or Talent?

The United States is an unequal society. According to the Congressional Budget Office, the top 20 percent get about half the nation’s income, compared to the 5 percent of all income shared among the bottom fifth of households. The top 10 percent of the population controls about 70 percent of the wealth. Among rich countries, America’s inequality is certainly extreme. But the world as a whole is an incredibly unequal place. Norway—held up as a model of equality—still sees the bottom fifth of households with incomes less than a third (PDF) those of the top fifth.

Why is there such inequality? The choices we make as individuals can put us considerably above or below our peer average in terms of income or happiness or status. But our peer average itself is set by forces beyond our control—factors such as to whom we were born. And our peer average explains our relative standing against national averages far more than our own choices.

Take the importance of family. In the U.S., about 50 percent of variation of wealth and about 35 percent to 43 percent of variation in income of children can be explained by the relative wealth and income of their parents, suggest economists Samuel Bowles and Herbert Gintis. One reason for this tight relationship is that parents who were educated are far more likely to educate their own kids. According to Michael Greenstone and Adam Looney of the Brookings Institution, the median wage of the average American male—employed or not—has declined by $13,000 since 1969. Most of that drop is because of plummeting earnings among those with a high school diploma or less, something that’s highly dependent on your parents. Evan Soltas examined the General Social Survey data and concluded that if your father didn’t graduate high school, you are eight times more likely not to graduate high school yourself—a 22.2 percent chance, as compared to a 2.9 percent chance among kids whose fathers did graduate.

The advantages of a privileged background don’t stop at graduation. Tufts economist Linda Loury suggests that half of all jobs in the U.S. are found through family, friends, or acquaintances. Canadian economists Miles Corak and Patrizio Piraino look at how often men end up working at the same company where their father worked, finding that as many as 40 percent have done that at some point. The proportion rises to 70 percent among the top 1 percent in income distribution. This helps to explain why the relationship between the earnings of parent and child is even higher at the top end than it is across the population at large, according to Corak. One-third of successions between chief executive officers in publicly listed companies in the U.S. involves an incoming CEO related by blood or marriage to the old CEO, the founder, or a large shareholder. That’s bad news for the share price, according to Francisco Perez-Gonzalez of the NBER, but clearly good news for the newly appointed relative.
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How Did the World's Rich Get That Way? Luck (BloombergBusinessweek) I think that applies to Mr. Bloomberg, too.

Tuesday, April 23, 2013

Deep Thought

Haven't had time to read, but these papers sound fascinating. I'm not sure I could understand them, though.
A modification to one of the most fundamental laws of physics may provide a link to the rise of intelligence, cooperation - even upright walking.

The idea of entropy describes the way in which the Universe heads inexorably toward a higher state of disorder.

A mathematical model in Physical Review Letters proposes that systems maximise entropy in the present and the future.

Simple simulations based on the idea reproduce a variety of real-world cases that reflect intelligent behaviour.

Raphael Bousso of the University of California Berkeley said: "It has always mystified me how well this principle models intelligent observers, and it would be wonderful if Alex's work could shed some light on this."

Prof Bousso showed in a 2007 paper in Physical Review D that models of the Universe that incorporated causal entropy were more likely to come up with a Universe that contains intelligent observers - that is, us.
Entropy law linked to intelligence, say researchers (BBC)
Living standards were constant for thousands of years before the industrial revolution. Malthus explained it this way: population grows faster when living standards rise; therefore, changes in technology alter the density of population but not the average welfare. This paper challenges Malthus’s explanation of the constancy and replaces it with the theory of group selection.

Malthusian theory is inadequate because it misses the fact that a dollar’s worth of diamonds contributes less to survival and reproduction than a dollar’s worth of grain. Grain is a subsistence commodity and a diamond is a surplus commodity. The Malthusian force anchors the average level of subsistence, but not that of surplus. If the surplus sector had grown faster than the subsistence sector, then living standards could have grown steadily before the industrial revolution, but they did not. The constancy of living standards thus implies that growth was balanced between subsistence and surplus, something Malthus did not explain.

To explain the balanced growth, I propose the theory of group selection. Selection of group characteristics, including culture and technology, goes on by migration and conquests. Since living standards rise with the ratio of surplus to subsistence, migrants and invaders usually move from places relatively rich in subsistence to those relatively rich in surplus. They spread the culture and technology of their subsistence-rich origin to the surplus-rich destination – the bias of migration favors the spread of subsistence over that of surplus. Even if surplus cultures and technologies would develop faster than subsistence ones in a local environment, the o setting biased migration balances the two sectors on a global scale. This explains the constancy of living standards.

My new theory reinterprets why living standards declined after the Agricultural Revolution and stagnated afterwards, how the Industrial Revolution happened and where the prosperity of Roman Empire and Song Dynasty came from.
Subsistence economies and surplus economies (Marginal Revolution)

Monday, April 22, 2013

Artificial Fertilizers and Unintended Consequences

Artificial fertilizers are the classic progress trap - innovation leads to higher populations, total dependency on that innovation, and unintended consequences. Which requires us to "innovate" ever faster to avoid the catastrophes precipitated by earlier innovations.

Imagine I had told you at the conclusion of the guano war that we would have the ability to fix nitrogen from the air and distribute it in the ground in unlimited amounts. "All of the world's problems would be solved!" is the cry of the 1890's optimist.

But now we need to feed seven (going to 10-11?) billion people, taking up every patch of arable land, causing deforestation, soil erosion, and mass extinctions, among other things. Plus we are dependant upon rapidly depleting and non-renewable fossil fuels for the process, and rapidly working through our fresh water supplies. And we are creating things like algae blooms, dead zones, and atmospheric emissions undermining the stable climate upon which agriculture depends (exacerbated by the overpopulation caused by the 'success' of agriculture in the first place). Would our 1890's optimist have seen that coming?

So why are today's optimists any different?
Modern agriculture was born when an abundant supply of synthetic nitrogen started flowing at Oppau. The Haber-Bosch process busted wide open the natural limits on plant growth. Nitrogen is a building block of all proteins and other molecules necessary for life, including DNA, and a critical nutrient for all plants and animals. Most of the nitrogen naturally fixed from the atmosphere for plant use is captured by bacteria that grow on the roots of legumes like peas and bean plants. Ammonia is transformed by these symbiotic bacteria into nitrates, which are then taken up by plants. Until 1913, cultivating legumes, recycling manure and crop residues, and mining deposits of bird droppings in South America were the primary sources of nitrogen in agriculture.

Bosch figured out how to react hydrogen culled from natural gas with atmospheric nitrogen at very high temperatures and pressures and in the presence of an iron-based catalyst. The resulting ammonia gas could be easily transformed into ammonium nitrate or urea for use in fertilizers. His work effectively removed the primary limiting factor that kept human populations in check.

Where would we be without this feat of modern alchemy? Well, for starters, many of us wouldn’t be without it: Half of us wouldn’t be alive today if not for synthetic nitrogen.

The Oppau Stickstoffwerke was a kind of existential hinge. In 1913, there were about 1.7 billion people in the world, and the factory fixed about 7,300 tons of nitrogen in its first year. Today there are 7 billion of us and more than 120 million tons of nitrogen are produced every year using techniques that haven’t changed all that much. More than 80 percent of that reactive nitrogen goes into fertilizers for agriculture. A 2008 paper in Nature Geoscience contains a remarkable graph showing how closely world population growth has tracked the increase in fertilizer production—and how a world without it could sustain only 3.5 billion people. That counterfactual can make one’s head swim a bit. It’s like imagining the Back to the Future scenario of your parents never marrying, but on a global scale, or the plot for a Malthusian-themed Newt Gingrich alternative-history novel. Another mind-blowing way to think about it: On average, half of the nitrogen in your body was synthetically fixed.

For this reason alone, the Haber-Bosch process is considered by many scientists and historians to be the most transformational technological development of the modern age. But the case gets even stronger once you consider all of its unintended consequences. For, as with the original Prometheus, progress always comes with a price, in this case water and air pollution, deteriorating human health, reduced biodiversity, soil acidification, and accelerated global warming, to name a few.

Adding all that reactive nitrogen has effectively fertilized whole ecosystems beyond farms’ boundaries, creating a host of downstream and downwind problems. “One atom can have cascading effects on land and water, causing loss of biodiversity, algal blooms,” says Eric Davidson, president of the Woods Hole Research Center and an expert on the global nitrogen cycle, “and the same atom of N keeps getting cycled through the system.”

This nitrogen cascade manifests in a variety of ways. Nitrogen oxides contribute to the production of ground-level ozone, or smog, which increases the risk of serious respiratory illness and cancer; a different problem arises in the stratosphere, where these gases destroy beneficial UV-blocking ozone. Nitrogen fertilizers also stimulate natural bacteria to produce more nitrous oxide, which contributes to acid rain and is a greenhouse gas that traps 300 times more heat per molecule than does carbon dioxide. Reactive nitrogen infiltrates surface streams and groundwater, polluting drinking wells. Excess levels of nitrogen in some ecosystems bolsters some species at the expense of others, leading to overall reduced biodiversity.

Perhaps the most visible impacts are the huge “dead zones” in the Baltic Sea and other areas downstream from farms. One of the worst is in the Gulf of Mexico, where fertilizer runoff carried by the Mississippi River feeds huge algae blooms that deprive other organisms of oxygen. The zone changes in size depending on the flow volume of the river and other seasonal factors. Last year it was about 6,700 square miles—larger than Connecticut.
A Dangerous Fixation. Synthetic nitrogen was born 100 years ago; it’s why half of us are alive. (Slate)

More Thoughts On Boston

I wasn't going to write about this again, but I'll just mention a couple more things, and then we'll move on.

Like Jim Kunstler, I am allergic to conspiracy theories. That said, I do believe there are conspiracies. We know this from history. In fact, my first (and only) published article was on the now-defunct (as far as I know) Online Journal, pointing out that the government must have had foreknowledge of the Sept. 11 attacks (the anthrax letters are pretty damning evidence that everyone seems to conveniently forget).

Thanks to Naked Capitalism for reminding me of a story I read but didn't remember where. It was a Mother Jones story about the fact that all of the major "terrorist plots" since Sept. 11 have ultimately been  set up by the FBI to "trap" potential terror suspects. In other words, they would not have happened without government prompting. The money quote:

“The problem with the cases we’re talking about is that defendants would not have done anything if not kicked in the ass by government agents,” says Martin Stolar, a lawyer who represented a man caught in a 2004 sting involving New York’s Herald Square subway station. “They’re creating crimes to solve crimes so they can claim a victory in the war on terror.”

I alluded to this in my comments. But it keeps looking more and more like this is the case, or that these guys really were patsies. There was an interview with the suspects' mother on the BBC (hardly a conspiracy site) claiming that her son was controlled by the FBI for the past five years. Their father in Russia also claimed that they were set up by the government. You could dismiss this as parents saying "my dear little precious could never do such an awful thing." Still, who knows these people better than their own parents?

And I'm wondering what these guys were even doing in the United States with their parents living in Russia and England. How did they support themselves? Dzokhar was only a high-school student, and Tamerlan seems to have been an amateur boxer, but that's not a job you can support yourself with. And he was even married apparently. WTF? What was his "real" job, I wonder? College isn't cheap, and these "poor immigrants" didn't seem to be hard up for money.

And the younger suspect seems to have had no idea he had even committed a crime at all. He continued to "tweet" normal 19-year-old papblum after the attack (and before the attack as well - not much of a radical). And he seems to not to have even known he was a suspect:
While Boston frantically searched for him, Dzhokhar Tsarnaev apparently wasn’t very worried. The 19-year-old was on the campus of University of Massachusetts-Dartmouth, where the suspect was a sophomore, and went to class every day after the attack until officials released his photograph late Thursday, reports CNN. On Wednesday, two days after the Boston Marathon bombing, Tsarnaev went to the gym and, according to a witness, even attended a party at night with his soccer buddies, according to the Boston Globe.

“He was just relaxed,” the unnamed witness said. Tsarnaev led such a typical student life after the bombing that even after his photo was released as a suspect, some who knew him didn’t make the connection. “We made a joke like—that could be Dzhokhar,” said a 22-year-old resident assistant at the dorms where Tsarnaev lived. “But then we thought it just couldn’t be him. Dzhokhar? Never.”

http://www.slate.com/blogs/the_slatest/2013/04/21/dzhokhar_tsarnaev_went_to_a_party_two_days_after_boston_marathon_bombing.html?fb_ref=sm_fb_plugin_activity

Pretty icy behavior for a Muslim guy who just set off two bombs in police-state America. And this benign portrait of this "killer" has been confirmed by literally everyone who knew the kid. He seems more like your average 19 year old hip-hop-loving stoner rather than a budding radical Muslim terrorist. And note that Chechens are angry at Russia, not the U.S., so why bomb a random target, and not even a government one at that?

So what I wonder is, was Tamerlan's real job an undercover FBI agent trained to infiltrate Muslim radical groups in America and/or Russia? That seem to square with the "normal" domestic life he led, along with his athleticism and his lack of a "real job. Maybe the reason he started getting "more religious" was because he had to as part of his cover. He would have been an ideal recruit.

Then, one day, you are asked by your handlers to show up at the finish line of the Boston marathon. You bring your kid bother along. There seems to be evidence that there was some kind of drill and a significant security presence at the finish line. Maybe he was there as part of that, but working for the government. Some claim that "keep calm," and "don't panic" was broadcast over the loudspeakers before the explosions went off. And isn't it interesting how all these links between these "random" terror suspects and the FBI just keep coming out (much like the September 11 terrorists):
The FBI has confirmed that it interviewed Tamerlan Tsarnaev, the older of the two brothers authorities say were behind last week's Boston Marathon bombings, in 2011 at the request of a foreign government, which officials have since identified as Russia. The FBI, however, says that its agents didn't find any evidence of suspicious activity and, as a result, closed the case.
http://www.slate.com/blogs/the_slatest/2013/04/22/tamerlan_tsarnaev_russia_trip_is_an_airline_to_blame_for_the_fbi_not_knowing.html

So even after the explosions you go about your daily life until you turn on the TV and see a picture of you and your kid brother identified as terror suspects. You know you were at the scene of the crime, because they told you to be. So what do you do? You run, that's what. Initially, I took their shootouts with police and possession of bombs as a sign of guilt, but now I'm not so sure. First we were told that Tamerlan died in a shootout, then that he was accidentally run over by his brother. And his death sure is convenient, isn't it? Where did these guys learn to shoot guns well enough to fight off trained policemen, I wonder?

The younger brother was taken into custody, barley alive, but is supposedly unable to speak. He is able to communicate through writing, though. I wonder what he'll say. And I wonder if we'll ever get to hear it.

And the reasons for all of this are pretty obvious. As one commenter on NC put it:
Well, the whole affair stinks with the relentless and lying speculations in the media. I think this was, if nothing else, a good opportunity to test a police-state takeover of an entire city. The authorities now know that there will be no objection to such a thing by the people who have proven time and time again that they want an authoritarian state and this recent incident guarantees that’s what were going to get.
So they now know they can shut down a major American city and control it at will. It's not like they can use a "drill" to test that. And they might also know that people can be set up for crimes, declared a "terrorist," and be killed or vanished without skepticism or due process Scary stuff.

And note how, unlike the last time there was this much economic inequality, the acts of violence are all against average citizens instead of elites (no bombings of all those empty billionaire houses or yachts?). As I've said before, there is an easily documented revolving door between banks and national security services. During the Cold War, those security services developed finely-tuned ways to destabilize societies to prevent communism from emerging or to overthrow legitimately elected governments (Chile, Guatemala, Nicaragua, Angola, etc.) - divide and conquer, control of media, funding opposition parties, random terrorist attacks to keep people on edge, assassinations, etc. Well, those same techniques that prevent communism "over there" work just as well domestically. I've heard many commenters openly wonder why there is so little opposition or reaction to our second Gilded Age. Could this be the reason?

I don't make claims one way or the other.  It's too early to tell. I go where the evidence takes me, and we'll see what evidence comes out. But as it stands now, this story stinks.

BONUS: security theater, martial law, and a tale that trumps every cop-and-donut joke you've ever heard (popehat)