Malthus

Thunberg put her finger right on one of the key drivers of the problem: the fairytale of eternal economic growth. Many of us mistake that problem as a problem with capitalism, but really it’s more of a malthusian dynamic than that: you simply cannot and should not assume that population and industrialization can ramp indefinitely. Usually when I say something like that, someone will swan in and declare that Malthus was wrong and that we can handle a much larger population, if we’re smart about it and use resources wisely, etc. But the problem with that is that the larger your population is, the more damaging it’s going to be when something goes wrong and breaks those assumptions. I’m speaking here from my history as a descendant of Irish migrants who fled to the US because there was too much dependence on the potato. Potatoes were what brought my Norwegian ancestors over, too. Potatoes were a miracle food at the time and allowed some parts of the planet to expand their carrying capacity. not accounting for what might happen if the carrying capacity suddenly dipped because of British greed and airbone fungus. We can grow the population much larger than it is, sure, but what are the failure modes when the feedback loops get tighter and tighter. During WWII, the Bengal Famine [wik] was not a result of a drought (as it has been whitewashed to be) but rather a supply-chain management problem where the British thought they’d do well to hedge their bets against a nazi blockade by taking Bengal’s rice crop. 2.1 million people died of hunger, probably not realizing that it was Winston Churchill who had knifed them. As the population goes up, the catastrophic results of that sort of hiccup goes up, too. -- Marcus J. Ranum

the nature of markets

Regarding the nature of markets and capitalism, there's a form of natural selection at work, plus the concept of externalities. Externalities are costs that are borne by society rather than by the individual business, or benefits that are shared by society rather than accruing to the individual business. And this raises the dilemma of capitalism, and why markets cannot be trusted to work for the public good except in very limited circumstances:

1) A business will never consider a cost that is borne by society as a whole rather than by the business in specific; and

2) A business will never spend money to produce a benefit that is shared by everyone, but the cost borne only by the business itself.

Market forces work to society's benefit only when there are no externalized costs or benefits involved. The public good will be served by the profit motive if and only if the two are congruent. and that is not always (or even usually) true.

Natural selection takes this form. A business that behaves in an ethical fashion beyond what the law requires will be at a disadvantage in competition with others that have less scruples. Or, to put it more bluntly, business sinks to the level of thuggery that the law allows. That's not because business people are inherently Immoral, but because immoral business people put moral ones out of business, except where the law creates a level playing field and room for morality to operate.

If the law allowed it. business people would routinely hire assassins to kill their competitors. Those unwilling to take this action for moral reasons would be killed by those who were willing to. We see this in the illegal drug trade, where an unenforceable attempt to eradicate a commodity altogether drives the business outside legal protection altogether. The only reason we don't see it in legitimate business practice, is that the law forbids it.

In short, the idea that business immorality derives only from the state's attempt to regulate the economy has no basis either in observed fact, or in reason. If we want business to behave ethically, we must make that a legal requirement. -- Brian Rush

Diminishing Returns

[...] the human bias to keep doing more of what worked so well in the past leads to doing more of what failed even as results turn negative. The dynamic in play is diminishing returns: the yield on the policy that worked so splendidly at first diminishes with time.

Credit offers a cogent real-world example. When credit becomes available in a credit-starved economy, it generates a rapid, sustained expansion as credit-worthy borrowers borrow and spend on new productive capacity, consumer goods, housing, etc., all of which further drives expansion. But once credit has saturated the entire economy, the only pool of borrowers left are uncreditworthy (i.e. at risk of default), and the only projects left unfunded by credit are laden with risk. Either way, credit expansion stops: either lenders prudently refuse to issue credit to risky borrowers and ventures, and credit expansion grinds to a halt, or they foolishly lend money to borrowers and ventures which predictably default, triggering a credit crisis that brings imprudent lenders to their knees and triggers cascading defaults as declining asset prices push marginal borrowers into bankruptcy. Doing more of what was successful [...] -- expanding credit -- is now doing more of what's failed. Expanding credit in a credit-saturated economy only sets up cascading defaults.

The human response to the failure of what worked so well is disbelief: the problem, we reckon, is we didn't do enough the first time. So the answer to the failure of extending more credit is to extend even more credit and lower lending standards so anyone who can fog a mirror can get a loan. At this point, diminishing returns become negative returns: doing more of what's failed is now not just unhelpful--it's actively destructive. Cramming more credit down the throats of risky borrowers and ventures guarantees a full-blown credit crisis when the defaults start taking down lenders and crushing asset prices that were dependent on credit expanding into eternity. -- Charles Hugh Smith

A World Without Growth?

Arthur Miller wrote that "an era can be said to end when its basic illusions are exhausted". Economic growth, the central illusion of the age of capital, may be ending.

Growth underpins every aspect of modern society. Economic growth has become the universal solution for all political, social and economic problems, from improving living standards, reducing poverty to now solving the problems of over indebted individuals, businesses and nations.

All brands of politics and economics are deeply rooted in the idea of robust economic growth, combined with the belief that governments and central bankers can exert substantial control over the economy to bring this about. In his 1929 novel The Great Gatsby, F. Scott Fitzgerald identified this fatal attraction: "Gatsby believed in the green light, the orgiastic future that year by year recedes before us. It eluded us then, but that's no matter—tomorrow we will run faster, stretch out our arms farther. 

[...] Over the last 30 years, a significant proportion of economic growth and the wealth created relied on financialisation. As traditional drivers of economic growth, such as population increases, new markets, innovation and increases in productivity waned, debt driven consumption became the tool of generating economic growth. But this process requires ever increasing levels of debt. By 2008, $4 to $5 of debt was required to create $1 of growth. China now needs $6 to $8 of credit to generate $1 of growth, an increase from around $1 to $2 of credit for every $1 of growth a decade ago.

Debt allows society to borrow from the future. It accelerates consumption, as debt is used to purchase something today against the promise of paying back the borrowing in the future. Growth is artificially increased by spending that would have taken place normally over a period of years being accelerated because of the availability of cheap money. With borrowing levels now unsustainable, debt engineered growth may be at an end.

Growth was also based on policies that led to the unsustainable degradation of the environment. It was based upon the uneconomic, profligate use of mispriced non-renewable natural resources, such as oil and water.

The problem is the economic model itself. As former Fed Chairman Paul Volcker observed on 11 December 2009: "We have another economic problem which is mixed up in this of too much consumption, too much spending relative to our capacity to invest and to export. It's involved with the financial crisis but in a way it's more difficult than the financial crisis because it reflects the basic structure of the economy." The simultaneous end of financially engineered growth, environmental issues and the scarcity of essential resources now threatens the end of an unprecedented period of growth and expansion.

Policy makers may not have the necessary tools to address deep-rooted problems in current models. Revitalized Keynesian economics may not be able to arrest long-term declines in growth as governments find themselves unable to finance themselves to maintain demand. It is not clear how if, at all, printing money or financial games can create real ongoing growth and wealth.

Low or no growth is not necessarily a problem. It may have positive effects, for example on the environment or conservation of scarce resources. But current economic, political and social systems are predicated on endless economic expansion and related improvements in living standards. Growth is needed to generate higher tax revenues, helping balance increased demand for public services and the funds needed to finance these. Growth is needed maintains social cohesion. The prospect of improvements in living standards, however remote, limits pressure for wealth redistribution. As Henry Wallick, a former Governor of the US Federal Reserve, accurately diagnosed: "So long as there is growth there is hope, and that makes large income differential tolerable."

The social and political compact within democratic societies requires economic growth and improvements in living standards. Economic stagnation increases the chance of social and political conflict. Writing in The War of the World: History's Age of Hatred, Niall Ferguson identified the risk: "Economic volatility matters because it tends to exacerbate social conflict…. periods of economic crisis create incentives for politically dominant groups to pass the burdens of adjustment on to others… social dislocation may also follow periods of rapid growth, since the benefits of growth are very seldom evenly distributed… it may be precisely the minority of winners in an upswing who are targeted for retribution in a subsequent downswing".

Politicians, policy makers and ordinary people do not want to confront the possibility of significantly lower economic growth in the future. Like Fitzgerald's tragic hero Gatsby, the incredulous battle cry everywhere is: "Can't repeat the past? Why of course you can!" But as philosopher Michel de Montaigne asked: "How many things we regarded yesterday as articles of faith that seem to us only fables today?"

A recent book The World Without Us was based around a thought experiment–what would a world bereft of humans revert to. We should be worried about what a world without growth, or, at best, low and uneven rates of growth will look like. 

Satyajit Das

Allocation Practice

Democracy is an efficient method to allocate assent to available power holders. Capitalism is an efficient method to allocate resources to available uses. And Science is an efficient method to allocate truth to available hypothesis. They all have plenty of defects and need vigilance. But alternatives, like autocracy, communism, or mythical explanations have proven themselves to be much worse.

The Dark Side: we have cookies

Inevitabilidade

Temos um problema catastrófico nas fontes da economia global -- recursos, energia -- e nos seus escoadouros -- poluição, aquecimento global. De que forma e quão profundamente as nossas soluções para os direitos económicos e políticos -- capitalismo, democracia -- terão de se transformar para serem capazes de verdadeiramente atacar esta questão? 

Passado, Presente, Futuro

"As an island in space, the world could not rely on imports from elsewhere; nevertheless, it was already heavily dependent upon imports from elsewhen. [...] The human species, through technological progress, had made itself more than ninety percent dependent on phantom carrying capacity – a term we must now define. Phantom carrying capacity means either the illusory or the extremely precarious capacity of an environment to support a given life form or a given way of living. It can be quantitatively expressed as that portion of a population that cannot be permanently supported when temporarily available resources become unavailable." Overshoot, William R. Catton

Lei de von Liebig

"[W]e need to step outside the usual economic or political frames of thought, go back two-thirds of a century before the 1929 crash, and reexamine for its profound human relevance a principle of agricultural chemistry formulated in 1863 by a German scientist, Justus von Liebig. That principle set forth with great clarity the concept of the “limiting factor” [...] Carrying capacity is limited not just by food supply, but potentially by any substance or circumstance that is indispensable but inadequate. The fundamental principle is this: whatever necessity is least abundantly available (relative to per capita requirements) sets an environment’s carrying capacity.

While there is no way to repeal this principle, which is known as “the law of the minimum,” or Liebig's law, there is a way to make its application less restrictive. People living in an environment where carrying capacity is limited by a shortage of one essential resource can develop exchange relationships with residents of another area that happens to be blessed with a surplus of that resource but happens to lack some other resource that is plentiful where the first one was scarce.

Trade does not repeal Liebig’s law. Only by knowing Liebig’s law, however, can we see clearly what trade does do, in ecological terms. Trade enlarges the scope of application of the law of the minimum. The composite carrying capacity of two or more areas with different resource configurations can be greater than the sum of their separate carrying capacities. ...] A good many of the events of human history need to be seen as efforts to implement the principle of scope enlargement." Overshoot, William R. Catton

Overton

A janela de Overton é um conceito da ciência política, introduzido por Joseph P. Overton, que descreve um facto social inescapável: os conceitos considerados aceitáveis para serem discutidos publicamente são muito limitados. Esta janela altera-se com o tempo, reciclando, esquecendo, introduzindo termos e ideias, soluções. Por exemplo, no século XIX era possível falar publicamente de políticas raciais ou de eugenia, mas agora seria equivalente a um suicídio político (ao ponto do corrector automático não conhecer a palavra eugenia e sugerir-me 'Eugénia'). Como exemplo inverso temos o casamento homossexual, algo aceitável para discussão hoje em dia, mas mesmo o mais racional, coerente e influente dos pensadores liberais de há 100 anos jamais ousaria discutir o tema em público. Não é certo que a janela se alargue com os anos, mesmo imaginando possível uma qualquer métrica. A única certeza empírica é a janela ser limitada. 

O transformar da opinião pública para que certas ideias passem de impensáveis para radicais, de radicais para aceitáveis, e finalmente de aceitáveis para essenciais, é um papel social da maior importância. É um caminho percorrido por inúmeras pessoas ao longo dos séculos, desde filósofos e políticos a outros agentes sociais. Os direitos humanos, a igualdade das mulheres, a abolição, a separação da Igreja e do Estado, a liberdade de expressão, o trabalho infantil, a independência da Justiça, todos elas consideradas ideias impensáveis algures no passado. Devemos muito a todos os que lutaram e sofreram as consequências para nos legar estas subtis mas críticas heranças. 

A minha opinião é que existe um problema muitíssimo grave com a actual janela de Overton. A civilização globalizada caminha para uma mudança radical, talvez inédita, mas não é possível abordar certos tipos de solução por políticos e outras figuras públicas que prezem a sua reputação. Esta mudança deriva de estarmos a atingir uma série de limites físicos do nosso planeta. Limites energéticos, sobre-população, o colapso de um sistema financeiro de natureza exponencial, uma pressão intolerável sobre o ecossistema. O tema do ecossistema é abordável mas não o é um certo tipo de raciocínio que aponta à sua resolução. Não é admissível explicitar a ligação integral entre o ecossistema planetário e a economia global. Não é possível admitir que o crescimento -- actualmente um conceito sacralizado -- possa ser negativo à economia e à sociedade, que é possível pensar políticas baseadas na estabilização da produção global (a steady-state economics) e não no crescimento infinito. Igualmente, não pertence à janela de Overton o constatar que todas estas questões estão relacionadas, e que os problemas económicos do Ocidente podem ser meros sintomas iniciais dos limites que estão a ser atingidos. 

Um exemplo particularmente difícil: será inevitável discutir a limitação do número de carros privados existentes. Estes são responsáveis pela maior parte dos cerca de 80% do consumo de petróleo mundial que é dedicado aos transportes rodoviários. A médio prazo (talvez 10, talvez 20 anos) este consumo crescente colocará em perigo o uso do petróleo (de extracção barata) para uma actividade à qual não existe alternativa: a aviação. Mas que político arriscaria informar a população que será preciso mudar a forma de nos deslocarmos para acomodar uma diminuição progressiva e a eventual proibição do uso de automóveis daqui a uma geração? A resposta é simples: ninguém. Este é um tipo de discussão que está totalmente fora da janela de Overton. O perigo é que se, e quando, este assunto entrar na discussão pública, a maior parte do combustível barato disponível estará já demasiado perto da exaustão. A partir daí o combustível da aviação ficará dependente de fontes fósseis muito mais caras, o que implicará o colapso do mercado aéreo para níveis de décadas atrás, pelo preço que os bilhetes atingirão para acomodar o preço do combustível. Poderá isto não acontecer? É possível. É possível que ocorra algum desenvolvimento tecnológico -- que os últimos 50 anos de investimento das companhias petrolíferas foram incapazes de conseguir -- e nos inundem de algum novo tipo de petróleo economicamente competitivo*. Mas não é provável. E no entanto, a probabilidade deste evento ocorrer é, literalmente, indiscutível.

* O pico de produção de petróleo convencional ocorreu por volta de 2006. [World Energy Outlook 2010, Key Graphs, p.7]

"[...] in 1980, U.S. federal usury laws, which had previously limited interest to between 7 and 10 percent, were eliminated by act of Congress. Just as the United States had managed to largely get rid of the problem of political corruption by making the bribery of legislators effectively legal (it was redefned as "lobbying"), so the problem of loan-sharking was brushed aside by making real interest rates of 25 percent, so percent, or even in some cases (for instance for payday loans) 120 percent annually, once typical only of organized crime, perfectly legal-and therefore, enforce­ able no longer by just hired goons and the sort of people who place mutilated animals on their victims' doorsteps, but by judges, lawyers, bailiffs, and police." (pg.376) Debt, The First 5000 Years, by David Graeber (2011)

Políticas

Como pode uma economia sustentável ser compatível com a exigência de crescimento constante? Uma economia que tem de crescer para existir não lida bem com limites ou fronteiras. Só que o mundo é este, tem um volume fixo, e há décadas que usamos mais do que a sua capacidade natural de regeneração. A tecnologia e a ciência também têm limites humanos e económicos, e é provável que tenhamos, neste domínio, já entrado em ganhos decrescentes. Se, por azar nosso, uma economia sustentável for similar a um ecossistema, como parar, dar um passo atrás, como travar este comboio desgovernado que insistimos em acelerar?

Separação

"Anyone of any persuasion ought to be able to acknowledge that economic logic indicates that imposing a price ceiling on milk will, other things equal, create a shortage of milk. But that in itself is not an argument against the policy. Mises assumed the policymaker would have thought that result bad, but the economist qua economist cannot declare it such. As Israel Kirzner likes to say, the economist’s job in the policy realm is merely to point out that you cannot catch a northbound train from the southbound platform." - Sheldon Richman

Ferramentas cognitivas

A Estatística e a Economia são disciplinas muito subvalorizadas no nosso ensino. A Estatística lida com o inevitável da evidência finita e de qualidade variável. Por exemplo, ela diz-nos que a certeza e a impossibilidade são conceitos ideais que podemos apenas aproximar. A Economia ganha a sua razão de ser porque os recursos são finitos e as decisões de os usar acarretam custos e riscos nem sempre evidentes. Por exemplo, ela diz-nos ser impossível erradicar totalmente um problema social pelos limites económicos dos ganhos decrescentes. Este tipo de ideias são importantes na educação de cidadãos aptos a usar os seus direitos económicos e políticos na consolidação de uma sociedade cívica como a nossa.

Gestão

As pessoas são livres mas exercem a sua liberdade e as suas capacidades dentro da sociedade e da cultura a que pertencem. O possível e o admissível são contingentes e limitados por muitas direcções, como pela geografia, pela história ou pela cognição humana. Estudar disciplinas que gerem o finito, como a Ética ou a Economia, é um passo importante para lidar com a frustração do limite.

Centralização e Comunicação

"[...] many economists argue that socialism is infeasible because people lack the cognitive capacities it requires to work. The “Calculation Problem” [cf. wikipedia] holds that in large-scale societies, it is impossible to make good economic calculations without market prices. Market prices convey information about the relative scarcity of a good in light of the effective demand for that good. Market prices provide a simple vehicle for producers and consumers to adjust their behavior to scarcity and demand. According to the Calculation Problem, socialist planning cannot work, even if everyone were motivated to make it work, because planners do not have access to real prices or to a workable substitute for prices. The problem of planning an economy is too hard for a small bureau of planners. (In contrast, in a capitalistic economy, everyone is a planner.)" Jason Brennan, Cohen's Why Not Socialism?

The Road to Serfdom III

The point which is so important is the basic fact that it is impossible for any man to survey more than a limited field, to be aware of the urgency of more than a limited number of needs. Whether his interests centre round his own physical needs, or whether he takes a warm interest in the welfare of every human being he knows, the ends about which he can be concerned will always be only an infinitesimal fraction of the needs of all men. This is the fundamental fact on which the whole philosophy of individualism is based. It does not assume, as is often asserted, that man is egoistic or selfish, or ought to be. It merely starts from the indisputable fact that the limits of our powers of imagination make it impossible to include in our scale of values more than a sector of the needs of the whole society, and that, since, strictly speaking, scales of value can exist only in individual minds, nothing but partial scales of values exist, scales which are inevitably different and often inconsistent with each other. From this the individualist concludes that the individuals should be allowed, within defined limits, to follow their own values and preferences rather than somebody else's, that within these spheres the individual's system of ends should be supreme and not subject to any dictation by others. It is this recognition of the individual as the ultimate judge of his ends, the belief that as far as possible his own views ought to govern his actions, that forms the essence of the individualist position. F.A.Hayek, The Road to Serfdom

The Road to Serfdom II

The liberal argument is in favour of making the best possible use of the forces of competition as a means of co-ordinating human efforts, not an argument for leaving things just as they are. It is based on the conviction that where effective competition can be created, it is a better way of guiding individual efforts than any other. It does not deny, but even emphasises, that, in order that competition should work beneficially, a carefully thought-out legal framework is required, and that neither the existing nor the past legal rules are free from grave defects. Nor does it deny that where it is impossible to create the conditions necessary to make competition effective, we must resort to other methods of guiding economic activity. Economic liberalism is opposed, however, to competition being supplanted by inferior methods of coordinating individual efforts. And it regards competition as superior not only because it is in most circumstances the most efficient method known, but even more because it is the only method by which our activities can be adjusted to each other without coercive or arbitrary intervention of authority. Indeed, one of the main arguments in favour of competition is that it dispenses with the need for "conscious social control" and that it gives the individuals a chance to decide whether the prospects of a particular occupation are sufficient to compensate for the disadvantages and risks connected with it. F.A.Hayek, The Road to Serfdom

Sci-Philosophy IV

We have a disturbed relationship with our past which religion cannot explain. We are primitive in unexplainable ways, our lives woven of the familiar and the strange, the reasonable and the insane.

Governments always commit their entire populations when the demands grow heavy enough. By their passive acceptance, these populations become accessories to whatever is done in their name.

Does a populace have informed consent when a ruling minority acts in secret to ignite a war, doing this to justify the existence of the minority's forces? History already has answered that question. Every society in the ConSentiency today reflects the historical judgment that failure to provide full information for informed consent on such an issue represents an ultimate crime.

Does a population have informed consent when that population is not taught the inner workings of its monetary system, and then is drawn, all unknowing, into economic adventures?

Communal/managed economics have always been more destructive of their societies than those driven by greed. This is what the Dosadi says: Greed sets its own limits, is self-regulating. Frank Herbert, The Dosadi Experiment

Prioridades

"The reason that we spend more [on healthcare] than our grandparents did is not waste, fraud and abuse, but advances in medical technology and growth in incomes. Science has consistently found new ways to extend and improve our lives. Wonderful as they are, they do not come cheap. Fortunately, our incomes are growing, and it makes sense to spend this growing prosperity on better health." Greg Mankin