Archive for the 'economy' Category


Exergy and Economy

(This post is a reaction to “The Physics of Energy and the Economy” on “Our Finite World” by Gail Tverberg)

Dissipative systems use exergy, which might be just a nitpicking, but I think not: to use those words make the process of dissipation more palpable.

I see the economy as a net of pathways, consisting of production units (from big companies down to single crafts(wo)men), which works most effectively in a semi-stable environment, i.e. no big fast changes. Then, the units can develop routine and skill in their respective task and the net does not suffer high transaction losses. Parameters change all the time: some production units become more effective than others, the amount of work to get raw materials changes, sometimes to lower, sometimes to higher levels, demand structure changes, the terms of exchange (aka prices) change and so on. To a certain extent, the net can rearrange, its elements can learn new skills, so that the overall efficiency does not plunge.

I support here the Marxian notion, that the relative value of anything on the market is in the long run defined by the amount of human work put into it.

So, to be more precise in definition, a collapse of the economy can be seen as the net beeing ripped apart, which leaves some chains of production more or less intact, while others, neighbouring to the rip, “die from starvation”, so to say. The overall production falls to the level of what is delivered by the relatively intact part.

Now enter two characters on the stage: productivity gains by investment, which is investment of work of course, reflected by a money stream, and information loss about the environment, aka negentropy loss, or entropy increase. They are somehow distant relatives of one another.

Productivity gains by investment decrease more and more, reflecting the fact, that human needs stay – more or less – the same, while the production process is approaching the most effective way to fulfill those needs.

OTOH, negentropy loss places a growing strain on the production system. Lower and lower concentration levels of raw materials can be compensated for by higher and higher exergy use for their concentration. A bigger and bigger part of our yearly exergy budgets is directed to raw material extraction, while the exergy stream is itself beeing limited by external factors, most prominently global warming, and secondly the growing scarcety of high concentration exergy itself.

Can the economy deal with this strain? My answer is: yes, if, and only if, the changes, which are undoubtedly profound, don’t come at too fast a pace, and if the economy is made deliberately more resilient.

What is a resilient economy? One with a little bit less specialization and more general skills, one with sounder financing to prevent one mesh of the net cracking to initiate a rip across the system.


Texas, Syria und Indonesia and the cap-and-trade-system

A film about climate change on three spots:

Texas: Here, people believe intensively in God and that mankind cannot change big things like the climate, and that the drought, thats ruining texan agriculture is God-given. A female climate scientist, who manages to be a trusting christian at the same time, travels about and teaches the reality of climate change.

Syria: It is the former farmers, whose living has been destroyed by the long drought before the civil war, and who did get nothing from the regime, who joined the rebels first (see last blog post).

Indonesia: Here, the government is so corrupt, that it doesn’t even protect a national park from beeing converted into oil palm plantations.

40 % of world wide CO2 – emissions come from deforestation, not from human energy use!

(This is why the use of wood pellets for heating has to be scrutinized, wether the pellets come from over-exploitation. Hard to find out for imports. Generally, the motto should be “Don’t heat, insulate!”.)

Indonesia is in absolute numbers as well as per capita one of the larger emitters of GHGs in the world – only because of the astronomical emissions caused by slash-and-burn (look up here).


yearsoflivingdangerously_indonesiannationalpark_3 Image: Oil palm seedling in a slash-and-burned Indonesian national park.

There are several attempts to stop the palm oil frenzy. The EU has after long years of discussion implemented an obligation to label ingredients of food, but not before end of 2014 and with no hint of wether the palm oil comes from proper cultivation.

Emission certificates: A general emission certificate system including imports would help in this case. The importer would be obliged to buy certificates according to the emissions related to his goods. This would mean for him to give proof as to where his palm oil comes from exactly. Palm oil from slash-and-burned areas would be more expensive and less sought after.

Basically, the same arguments hold for an emission tax, if it is applied to imported goods, too.

It could be so simple… All this is far from our daily life. Still.


about “sustainable growth”

What is growing? The “gross product” (GP).

That is: the sum of the monetary evaluations of all products and services of a subsection of mankind, called state. There is a subtle difference between gross national product and gross domestic product, which is of no importance for the following, so just “GP”.

As a side note, it would be better to speak not of “products and services” but of “transactions”. In a economic transaction something happens between people, accompagnied by an exchange of money. This concept depicts better the flowlike nature and the diversity of the process.

Imagine now a gigantic societal price list, in which all transactions are listed by some category.

Prices vary by time and place. So if we divide all transactions by sort, region and time into categories, like “20 minutes physiotherapy 2013 in Germany” or “1 biological bread 2013 in France”, we get a distribution of price events around a mean and take this mean as price for the category.

So the GP can be represented as sum of amount x price for all categories.

How is it growing? (given no-inflation conditions)

  1. Increase of total working time.
  2. Increase of added value per working hour, i.e. the productivity.

Now productivity can be broken down into two kinds:

  1. Quantitative productivity. The concept relates to measurable and countable quantities: numbers of pieces, amount of material put out or treated.
  2. Qualitative productivity. If it is growing, the products or services created per working hour is considered more valuable by a sufficent number of people, reflected by a higher price.

Question: Do we need growth at all?

Answer: Basically not, but … productivity is increased every year. If economic value added stays the same, total working time decreases. As individual working times are inflexible, more and more people become jobless. This is a problem.

And what is “sustainable”?

The term has been coined with respect to the world as a whole, but with a clear focus on the catching up of the “third world” and on longterm foresight, i.e. a considered and resource–sparing advancement. It contains also an aspect of minimizing risk and creation of corresponding institutions. (See Wikipedia for that.)

As another side note, I don’t like very much the term “development” in the context of the productivity slope between world regions, because this very broad term is squeezed into a very narrow meaning: the catchup of the poor countries – which has never been meant serious at that (over here). It is somehow a smudging term.

It is clear, that a process, which is using up the existing resources as fast as possible and is piling up high risks by changing the climate is not “sustainable” in the above sense.

Qualitative productivity, sustainability and the societal price list

The remarkable property of qualitative productivity is, that it is strongly linked to the societal price list. This is the point, where one has to disengage oneself a little bit from the mainstream paradigm, and because of which I wrote down all this.

If a cell phone gets a better display or a car a greater mileage or a physician a better education, these are all very clear cases of  higher qualitative productivity.

But there is another aspect, which is not so obvious: value system shift in society, expressed and reflected in a change of the societal price list.

An example is pure biologically produced foods. In the last ten years, more and more people were ready to pay more money for food, if it was biological. Now with conversion to pure biological production, quantitative productivity decreases. But as biological foods are considered more valuable – and are consequently higher priced – the GP can grow nevertheless.

A similar case is subsidized regenerative energy use. Here, e.g. with high state subsidies in Germany, the value decision was not taken as a sum of many individual decisions, but by a small circle of government people. So for society as a whole, regenerative energy use was worth the cost, even if the individual may have grumbled about it.

The flexibilty of the societal price list

Such a price, which has not been created by market forces, is nevertheless an expression of a sense of value, only by the “volonté générale”, as opposed to the “volonté de tous”, which translates into the will of the market.

Lately it has become clear, that market is not the highest authority for economic advance. That it can’t cope with certain tasks in society is commonplace. To be added is, that it is influenced to the highest degree by fashions, moods, advertising, culture and subculture et c. Like a snake, it curls and twists left and right, back and forth. Apart from basic needs, there is no prior structure, no “natural” decision in weighing up of the different impulses towards status, attractivity, distraction, community spirit, lust et c. Even health and to be alive itself has for different people at different times a different significance.

Advertising is in this game not just a liar, who only promises pleasure. To a certain degree, its promise is self-fulfilling: if something has been described to me as beautiful, I tend to experience it as beautiful. (This comes out of the deeply social nature of our emotions.)

Now if sustainability becomes important to us, so important, that we start to be ready to spend money for it, we immediately get our “sustainable growth”.

The societal price list, the societal system of values, expressed in prices, can easily lead to sustainable advance  – and it is in our own hand.

What does this mean specifically? A brainstorming.

We could promote higher positive value  – i.e. demand -  to the following things:

Education, Art, child care, care for old people, physical and mental health care, biologically produced food and raw materials.

We could promote a higher negative value and charge a higher price for:
green house gas emissions, non natural use of landscape and consumption of fossil raw materials.

Complete the list yourself 🙂 .

February 2018
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