"System change is now inevitable. Either because we do something about it, or because we will be hit by climate change. '...

"We need to develop economic models that are fit for purpose. The current economic frameworks, the ones that dominate our governments, these frameworks... the current economic frameworks, the neoclassical, the market frameworks, can deal with small changes. It can tell you the difference, if a sock company puts up the price of socks, what the demand for socks will be. It cannot tell you about the sorts of system level changes we are talking about here. We would not use an understanding of laminar flow in fluid dynamics to understand turbulent flow. So why is it we are using marginal economics, small incremental change economics, to understand system level changes?"

Thursday, December 4, 2008

Not getting it

In a fine example of not understanding radically changed new circumstances, French economists have managed to convince the Sarkozy administration to subsidize purchases of new automobiles, to "stimulate" the "economy".


Economists will try anything to put Humpty together again, and who knows, maybe they will have succeed for a little while, but we had better start thinking about a what a post-Humpty economy looks like instead.



Mitchell said...

I suppose the basic issue is economic growth, and whether a given growth-promoting policy is only producing fictitious or deleterious growth. Some notes towards an improved conception of growth in value, economic or otherwise:

"Accounting for Growth" by Ayres and Warr has some popularity among people who think the role of physical inputs is the key neglected factor in the theory of growth. As an Oil Drum poster put it, "when they used an economic model that considers both growth in energy use and growth in energy efficiency, it explains the vast majority of US economic growth between 1900 and 2000, except for a residual of about 12% after 1975."

There may be room for a single further lengthy phase of growth through the institution of a sustainable economy. The recycling sector could become much much larger, and we already know about the need to change the energy base. There also may be plenty of room for "growth", in the sense of increased value or increased quality of life, on the less material side of things - in anything virtual, and in anything involving information-dense molecules (biotech, nanotech). For that matter, in theory even multitudes of much bulkier items could have their value improved in a recycling economy, simply by being recycled and replaced with a superior generation of products which are designed and used in a better way.

Recent experience suggests that one might at least be cautious in trying to use these other forms of value as a way to maintain economic growth as currently perceived, via financialization or commodification. Some of their value may in fact lie in their non-financialized, non-commodified nature.

Population growth is an obvious consideration. We are already in a situation where the IMF considers anything less than 3% global economic growth a global recession, because that much is needed just to keep us standing still, per capita.

And as a transhumanist, I have to point out that eventually, there's the universe. The only extraterrestrial resource we can use right now is sunlight, but eventually we will end up in the science-fictional world of having the power, if we wish, to drill the asteroids or terraform Mars - for example. It's not very relevant to the problems of sustainability on Earth, it's more like what comes afterwards, but it's a genuine part of the bigger picture.

Michael Tobis said...

Corrected link for the above-mentioned Ayres and Warr paper