"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?"

Saturday, June 27, 2009

Long Time Coming

Via Erik Conway on Facebook, via Encyclopedia of Earth
Title: The Economics of the Coming Spaceship Earth
Author: Kenneth Ewart Boulding
Source: H. Jarrett (ed.), Environmental Quality in a Growing Economy, pp. 3-14. Baltimore, MD: Resources for the Future/Johns Hopkins University Press.
Year published: 1966
It's interesting though not flawless. "The question of whether there is anything corresponding to entropy in the information system is a puzzling one" is a bit of a clunker, wouldn't you say? And I'm still inclined to think of von Bertalanffy, whom he cites directly, as a hack pretending to be Norbert Wiener. But the interest is more than historical.
Economists in particular, for the most part, have failed to come to grips with the ultimate consequences of the transition from the open to the closed earth. One hesitates to use the terms "open" and "closed" in this connection, as they have been used with so many different shades of meaning. Nevertheless, it is hard to find equivalents. The open system, indeed, has some similarities to the open system of von Bertalanffy, in that it implies that some kind of a structure is maintained in the midst of a throughput from inputs to outputs. In a closed system, the outputs of all parts of the system are linked to the inputs of other parts. There are no inputs from outside and no outputs to the outside; indeed, there is no outside at all. Closed systems, in fact, are very rare in human experience, in fact almost by definition unknowable, for if there are genuinely closed systems around us, we have no way of getting information into them or out of them; and hence if they are really closed, we would be quite unaware of their existence. We can only find out about a closed system if we participate in it.


The closed earth of the future requires economic principles which are somewhat different from those of the open earth of the past. For the sake of picturesqueness, I am tempted to call the open economy the "cowboy economy," the cowboy being symbolic of the illimitable plains and also associated with reckless, exploitative, romantic, and violent behavior, which is characteristic of open societies. The closed economy of the future might similarly be called the "spaceman" economy, in which the earth has become a single spaceship, without unlimited reservoirs of anything, either for extraction or for pollution, and in which, therefore, man must find his place in a cyclical ecological system which is capable of continuous reproduction of material form even though it cannot escape having inputs of energy.

The difference between the two types of economy becomes most apparent in the attitude towards consumption. In the cowboy economy, consumption is regarded as a good thing and production likewise; and the success of the economy is measured by the amount of the throughput from the "factors of production," a part of which, at any rate, is extracted from the reservoirs of raw materials and noneconomic objects, and another part of which is output into the reservoirs of pollution. If there are infinite reservoirs from which material can be obtained and into which effluvia can be deposited, then the throughput is at least a plausible measure of the success of the economy. The gross national product is a rough measure of this total throughput. It should be possible, however, to distinguish that part of the GNP which is derived from exhaustible and that which is derived from reproducible resources, as well as that part of consumption which represents effluvia and that which represents input into the productive system again. Nobody, as far as I know, has ever attempted to break down the GNP in this way, although it would be an interesting and extremely important exercise, which is unfortunately beyond the scope of this paper.

By contrast, in the spaceman economy, throughput is by no means a desideratum, and is indeed to be regarded as something to be minimized rather than maximized. The essential measure of the success of the economy is not production and consumption at all, but the nature, extent, quality, and complexity of the total capital stock, including in this the state of the human bodies and minds included in the system.

In the spaceman economy, what we are primarily concerned with is stock maintenance, and any technological change which results in the maintenance of a given total stock with a lessened throughput (that is, less production and consumption) is clearly a gain. This idea that both production and consumption are bad things rather than good things is very strange to economists, who have been obsessed with the income-flow concepts to the exclusion, almost, of capital-stock concepts.

Emphasis added (along with a couple of paragraph breaks for easier reading).

The same site describes Boulding as follows:
Kenneth Ewart Boulding (1910-1993), an American economist famous for his emphasis on the social, moral, and ecological implications of economic growth. Boulding coined the term “spaceship earth” to emphasize the energy, material, and environmental limits to economic growth. He compared the economy to biological systems in terms of its need to use energy to transform materials, which in the process produces wastes. Boulding suggested that the current “cowboy” economy, defined by the wasteful use of nonrenewable resources, must ultimately be replaced by a “spaceship” economy, powered by renewable energy and characterized by efficient recycling of materials. Boulding was a founding intellectual in the field of ecological economics.
I had thought the Spaceship Earth idea was Bucky Fuller's. Clearly there was some mutual influence between Bucky and Boulding.


gravityloss said...

I wonder, what if you did salsa but as a sauce, perhaps with tomatos? Paging Claude Shannon on information and entropy... :)

I'd like to "get" cybernetics but somehow it seems to be in large part mostly handwaving at least over here. Maybe I'm just not diligent enough to get deep enough.

I'm coming to this from a brain / neural networks angle - how you could combine probability to control theory.

I've seen physicists get to the scary Fokker territory in regards to this. Maybe that's what it must be and there's no simpler way...

gravityloss said...

Okay, clearly, someone said it formally and to the point and better than I would have put it now. And he said it about 43 years ago.

Huge thanks for the info. This will certainly find its way around.

(In my real world connections, not through the blog.)

Michael Tobis said...

Regarding Cybernetics, yes, I think most of what calls itself that is just handwaving. But it's not as though Wiener's more substantive ideas were abandoned. They pervade systems engineering, communication engineering and signal processing.

I don't know the first thing about this scary Fokker territory you refer to, perhaps because the fellows name is sure to induce snickering among students in English-speaking countries. Would you care to elaborate?

Regarding Boulding, yes, I think his insight is enormously clarifying. Confusion of stocks and flows is pervasive in non-technical circles. That it lies at the root of the confused state of modern economics seems very plausible. It certainly seems to summarize the error in a well-defined quantitative way.

I wonder how much anyone has worked on this idea in the intervening forty-odd years.

Marion Delgado said...

Someone on a web community was promoting "Quantum Economics" and decided the fundamental unit was individual trade transactions. Reminded of this by the "hack" comment in the first part of your paragraph. I pointed out that quantum is not a word meaning small, or even atomistic, it means that in a sense reality is not continuous in the math or intuitive sense, that below certain limits delineations are physically meaningless, and that at best a transaction would have to be some sort of building block like an atom - because there are cumulative microtransactions - and that it wasn't an isomorphism to any subset of quantum physics for that and a dozen other reasons. I suggested she come up with the observed phenomena that necessitated looking at economics non-continuously first, just as physics did, if she wanted to make a start at grounding a new economics that would be scientifically interesting (even if still a bit scientistic). I got a very, very, very hostile response.

Finally I realized she was reinventing Austrian economics, which has been such a total disaster for mankind, precisely because of its sloppy, data-averse and pseudoscientific nature.

I always liked Jeremy Rifkin's Entropy precisely because it focused on getting across the exact points that would smack humanity in the face instead of hair-splitting arguments.

Michael Tobis said...

I disagree with you, Marion.

Rifkin has no grasp of thermodynamics and that book is exemplary of what makes me suspicious of people who try to tie economics directly to thermodynamics.

gravityloss said...

Fokker-Plank it was to be exact. Yes, coincidental name :). This stuff is used in time variant probability distribution stuff.

It was used (as one tool among many) here to model the effect of anesthetics to the brain as a whole:


The paper is available for download there.

So, how is the macrobehaviour changed when you change some parameter of all the microthings? (There is a huge number of microthings and they have feedback.)

Curiously when you change the microparameters back, the whole goes to a different state from the original.

Maybe all this is old hat for an atmospheric physicist like you.

It seems to me to be one "cybernetics" kind of a problem solved directly with hardish science (there have to be a huge number of assumptions there to enable such simplification though).

Memory's all hazy about how everything was done exactly, but there is actually some math there. I don't pretend to understand what's going on. I haven't followed the field at all for a few years. It seems they're also looking at learning now.

It is very fascinating how high level behaviour can be inferred from low level phenomena.

Aaron said...

The other name in the circle is Jay Forrester. See for example his work on systems dynamics.

EliRabett said...

The concept of open and closed are used incorrectly, but what do you expect of physicists. The distinction should be between a closed (in the chemist's sense of no interchange of matter) and an infinite system where any outputs are diluted to zero.

Marion Delgado said...

to quibble 3 posts back, I'd still say for the Bantam New Age Series Entropy was a very worthwhile book.