The Wealth of Nature
July 10, 2009 10:15 AM Subscribe
Recently, John Michael Greer has been exploring a little known idea of the deceased economist E.F. Schumacher (a student of the oft-discussed Keynes). "Schumacher drew a hard distinction between primary goods and secondary goods. The latter of these includes everything dealt with by conventional economics: the goods and services produced by human labor and exchanged among human beings. The former includes all those things necessary for human life and economic activity that are produced not by human beings, but by nature. Schumacher pointed out that primary goods, as the phrase implies, need to come first in any economic analysis because they supply the preconditions for the production of secondary goods. Renewable resources, he proposed, form the equivalent of income in the primary economy, while nonrenewable resources are the equivalent of capital; to insist that an economic system is sound when it is burning through nonrenewable resources at a rate that will lead to rapid depletion is thus as silly as claiming that a business is breaking even if it’s covering up huge losses by drawing down its bank accounts."
The series of essays so far:
Survival Isn't Cost-Effective - (In which he tears apart one of the most proposed solutions for peak oil - ecovillages and lifeboat communities.) "The unstated assumption seems to be that as soon as the intrepid residents of such a community move into their solar-heated cohousing units, start up the wind turbines and the methane generators, and get to work harvesting tree crops from the permacultured landscaping all around, industrial civilization will disappear in a puff of smoke and take its taxes, debts, and miscellaneous expenses with it. Pleasant though the prospect might seem, I am sorry to say that this isn’t going to happen."
The Thermodynamic Economy - (In which he tackles tackles the problem of stagflation.) "He [Schumacher] pointed out that for a modern industrial society, energy resources are not simply one set of commodities among many others. They are the ur-commodities, the fundamental resources that make economic activity possible at all, and the rules that govern the behavior of other commodities cannot be applied to energy resources in a simplistic fashion. Commented Schumacher in Small is Beautiful: 'I have already alluded to the energy problem in some of the other chapters. It is impossible to get away from it. It is impossible to overemphasize its centrality. [...] As long as there is enough primary energy – at tolerable prices – there is no reason to believe that bottlenecks in any other primary materials cannot be either broken or circumvented. On the other hand, a shortage of primary energy would mean that the demand for most other primary products would be so curtailed that a question of shortage with regard to them would be unlikely to arise' (p. 123)."
Where Economics Fails - (Where he explores the misapplication of the idea of supply and demand.) "the theoretical relationship between supply and demand functions only when supply is not constrained by factors outside the economic sphere. The constraints in question can be physical: no matter how much money you’re willing to pay for a perpetual motion machine, for instance, you can’t have one, because the laws of thermodynamics don’t take bribes. They may be political: Nazi Germany had a large demand for oil from 1943 to 1945, for example, and the Allies had plenty of oil to sell, but anyone who assumed on that basis that a deal would be cut was in for a big disappointment. They may be technical: no matter how much you spend on health care, for instance, sooner or later it’s going to fail, because nobody’s yet been able to develop an effective treatment for death."
The Wealth of Nature - (In which he explains why Adam Smith was wrong to say "The annual labor of every nation is the fund which originally supplies it with all the necessities and conveniences of life.") "Thus Adam Smith’s dictum cited earlier badly needs reformulation. The product of the natural environment of every nation is the fund which originally supplies it with all the necessities and conveniences of life; the annual human labor is simply the energy input required to turn some of that product into forms useful for human beings. The wealth of nations, it turns out, is ultimately the wealth of nature, and the sooner the value of natural cycles and primary goods is taken into account, the better chance our descendants will have of avoiding the self-defeating habits that are pushing modern industrial system down the long road to collapse."
The series of essays so far:
Survival Isn't Cost-Effective - (In which he tears apart one of the most proposed solutions for peak oil - ecovillages and lifeboat communities.) "The unstated assumption seems to be that as soon as the intrepid residents of such a community move into their solar-heated cohousing units, start up the wind turbines and the methane generators, and get to work harvesting tree crops from the permacultured landscaping all around, industrial civilization will disappear in a puff of smoke and take its taxes, debts, and miscellaneous expenses with it. Pleasant though the prospect might seem, I am sorry to say that this isn’t going to happen."
The Thermodynamic Economy - (In which he tackles tackles the problem of stagflation.) "He [Schumacher] pointed out that for a modern industrial society, energy resources are not simply one set of commodities among many others. They are the ur-commodities, the fundamental resources that make economic activity possible at all, and the rules that govern the behavior of other commodities cannot be applied to energy resources in a simplistic fashion. Commented Schumacher in Small is Beautiful: 'I have already alluded to the energy problem in some of the other chapters. It is impossible to get away from it. It is impossible to overemphasize its centrality. [...] As long as there is enough primary energy – at tolerable prices – there is no reason to believe that bottlenecks in any other primary materials cannot be either broken or circumvented. On the other hand, a shortage of primary energy would mean that the demand for most other primary products would be so curtailed that a question of shortage with regard to them would be unlikely to arise' (p. 123)."
Where Economics Fails - (Where he explores the misapplication of the idea of supply and demand.) "the theoretical relationship between supply and demand functions only when supply is not constrained by factors outside the economic sphere. The constraints in question can be physical: no matter how much money you’re willing to pay for a perpetual motion machine, for instance, you can’t have one, because the laws of thermodynamics don’t take bribes. They may be political: Nazi Germany had a large demand for oil from 1943 to 1945, for example, and the Allies had plenty of oil to sell, but anyone who assumed on that basis that a deal would be cut was in for a big disappointment. They may be technical: no matter how much you spend on health care, for instance, sooner or later it’s going to fail, because nobody’s yet been able to develop an effective treatment for death."
The Wealth of Nature - (In which he explains why Adam Smith was wrong to say "The annual labor of every nation is the fund which originally supplies it with all the necessities and conveniences of life.") "Thus Adam Smith’s dictum cited earlier badly needs reformulation. The product of the natural environment of every nation is the fund which originally supplies it with all the necessities and conveniences of life; the annual human labor is simply the energy input required to turn some of that product into forms useful for human beings. The wealth of nations, it turns out, is ultimately the wealth of nature, and the sooner the value of natural cycles and primary goods is taken into account, the better chance our descendants will have of avoiding the self-defeating habits that are pushing modern industrial system down the long road to collapse."
Call it cynical closemindedness, but I'd be a lot more inclined to trust the gentleman's pronouncements on economics if his apparent area of expertise were not Druidic Spirituality.
posted by Diablevert at 11:02 AM on July 10, 2009 [1 favorite]
posted by Diablevert at 11:02 AM on July 10, 2009 [1 favorite]
In fairness, these days I'm not exactly inclined to trust pronouncements on economics from people whose area of expertise is economics.
posted by Riki tiki at 11:06 AM on July 10, 2009 [3 favorites]
posted by Riki tiki at 11:06 AM on July 10, 2009 [3 favorites]
Call it cynical closemindedness, but I'd be a lot more inclined to trust the gentleman's pronouncements on economics if his apparent area of expertise were not Druidic Spirituality.
What economist isn't a crystal ball gazer with a penchant for verbosity?
posted by Bathtub Bobsled at 11:08 AM on July 10, 2009
What economist isn't a crystal ball gazer with a penchant for verbosity?
posted by Bathtub Bobsled at 11:08 AM on July 10, 2009
I'd be a lot more inclined to trust the gentleman's pronouncements on economics if his apparent area of expertise were not Druidic Spirituality.
I have a feeling that even within the already marginalized peak oil community he is marginalized further because of his religious affiliation. However, he does do a very good job of not mixing his religion into most of his essays (at least where it's not necessary).
But truly these are not his ideas. He is only expounding on Schumacher's ideas and applying them to specific situations in order to illustrate a point.
posted by symbollocks at 11:17 AM on July 10, 2009
I have a feeling that even within the already marginalized peak oil community he is marginalized further because of his religious affiliation. However, he does do a very good job of not mixing his religion into most of his essays (at least where it's not necessary).
But truly these are not his ideas. He is only expounding on Schumacher's ideas and applying them to specific situations in order to illustrate a point.
posted by symbollocks at 11:17 AM on July 10, 2009
Call it cynical closemindedness, but I'd be a lot more inclined to trust the gentleman's pronouncements on economics if his apparent area of expertise were not Druidic Spirituality.
Because people can't possibly study more than one thing.
posted by knave at 11:18 AM on July 10, 2009
Because people can't possibly study more than one thing.
posted by knave at 11:18 AM on July 10, 2009
Riki tiki: "In fairness, these days I'm not exactly inclined to trust pronouncements on economics from people whose area of expertise is economics."
Well the author isn't really making any pronouncements of actual economic theory per se, he seems to be mostly distilling (arguably dumbing down) the work of a distinguished economist to make it more approachable.
I don't find that any more offensive than the idea of a non-physicist rehashing Feynman or something; as long as the author doesn't butcher the source material and lets its underlying ideas come through, it seems like a non-issue.
Anyway, off to do some reading...
Although to be fair, it would be a bit of a crime to Feynman as most of his work is readable by the non-physicist already.
posted by Kadin2048 at 11:36 AM on July 10, 2009
Well the author isn't really making any pronouncements of actual economic theory per se, he seems to be mostly distilling (arguably dumbing down) the work of a distinguished economist to make it more approachable.
I don't find that any more offensive than the idea of a non-physicist rehashing Feynman or something; as long as the author doesn't butcher the source material and lets its underlying ideas come through, it seems like a non-issue.
Anyway, off to do some reading...
Although to be fair, it would be a bit of a crime to Feynman as most of his work is readable by the non-physicist already.
posted by Kadin2048 at 11:36 AM on July 10, 2009
I have a feeling that even within the already marginalized peak oil community he is marginalized further because of his religious affiliation...But truly these are not his ideas. He is only expounding on Schumacher's ideas and applying them to specific situations in order to illustrate a point.
I take the point and have read the posts with interest; thank you for linking them. Nevertheless, I retain reservations. Peak oil is a subject that interests me and which I've read a fair bit about. I don't think it gets nearly the attention it ought. However, I have noticed among many, though not all, of the people interested in the idea of peak oil, there is a pronounced strain of....satisfaction at the idea that industrial society will shortly collapse. The prospect is congruent with other, previously held beliefs.
For me, this raises my hackles a bit, in the sense that I feel it necessary to bring an elevated level of skepticism to anyone pronouncing on this topic. Perhaps such implicit stereotyping on my part leads me to misjudge the man. But I confess I'd love to read the response of an orthodox economist to his remarks, to have something to bounce them off of....
posted by Diablevert at 11:39 AM on July 10, 2009 [3 favorites]
I take the point and have read the posts with interest; thank you for linking them. Nevertheless, I retain reservations. Peak oil is a subject that interests me and which I've read a fair bit about. I don't think it gets nearly the attention it ought. However, I have noticed among many, though not all, of the people interested in the idea of peak oil, there is a pronounced strain of....satisfaction at the idea that industrial society will shortly collapse. The prospect is congruent with other, previously held beliefs.
For me, this raises my hackles a bit, in the sense that I feel it necessary to bring an elevated level of skepticism to anyone pronouncing on this topic. Perhaps such implicit stereotyping on my part leads me to misjudge the man. But I confess I'd love to read the response of an orthodox economist to his remarks, to have something to bounce them off of....
posted by Diablevert at 11:39 AM on July 10, 2009 [3 favorites]
John Michael Greer and Aubrey de Grey should start a Beard of the Month club.
posted by adamdschneider at 12:07 PM on July 10, 2009
posted by adamdschneider at 12:07 PM on July 10, 2009
Riki Tiki: Yeah, and that Newton guy studied alchemy, fuck classical physics!
posted by absalom at 2:08 PM on July 10, 2009
posted by absalom at 2:08 PM on July 10, 2009
Yeah, and that Newton guy studied alchemy, fuck classical physics!
Eh. From my point of view, the relevant question is not, "Is it possible the man is right?"
It's "Is the man right?"
There have been many geniuses who made valuable contributions to the study of X, who were nevertheless hopeless crackpots on the subject of Y.
But there have always been far, far more hopeless crackpots than geniuses at work in the world.
When a construct comes along that both a) completely contradicts the conventional wisdom on a complex topic, and b) flatter's one's own commonsense prejudices as to how the world works, the instinctive thing is to go, "Finally! Someone who Gets It!"
But the sensible, skeptical and cautious thing is to go, "My, what a pleasing conclusion. What are the chances that it's wrong?" That's my belief, anyway.
posted by Diablevert at 11:21 PM on July 10, 2009 [1 favorite]
Eh. From my point of view, the relevant question is not, "Is it possible the man is right?"
It's "Is the man right?"
There have been many geniuses who made valuable contributions to the study of X, who were nevertheless hopeless crackpots on the subject of Y.
But there have always been far, far more hopeless crackpots than geniuses at work in the world.
When a construct comes along that both a) completely contradicts the conventional wisdom on a complex topic, and b) flatter's one's own commonsense prejudices as to how the world works, the instinctive thing is to go, "Finally! Someone who Gets It!"
But the sensible, skeptical and cautious thing is to go, "My, what a pleasing conclusion. What are the chances that it's wrong?" That's my belief, anyway.
posted by Diablevert at 11:21 PM on July 10, 2009 [1 favorite]
Schumacher's book Small Is Beautiful (1973) is still in print and worth checking out if you find his ideas interesting.
"Schumacher argues that the modern economy is unsustainable. Natural resources (like fossil fuels), are treated as expendable income, when in fact they should be treated as capital, since they are not renewable, and thus subject to eventual depletion." (summary from wikipedia)
Small Is Beautiful also discusses the idea of Intermediate Technology. Schumacher founded the Intermediate Technology Development Group, which over the years has developed into the charity now known as Practical Action.
posted by memebake at 1:27 AM on July 11, 2009
"Schumacher argues that the modern economy is unsustainable. Natural resources (like fossil fuels), are treated as expendable income, when in fact they should be treated as capital, since they are not renewable, and thus subject to eventual depletion." (summary from wikipedia)
Small Is Beautiful also discusses the idea of Intermediate Technology. Schumacher founded the Intermediate Technology Development Group, which over the years has developed into the charity now known as Practical Action.
posted by memebake at 1:27 AM on July 11, 2009
Call it cynical closemindedness, but I'd be a lot more inclined to trust the gentleman's pronouncements on economics if his apparent area of expertise were not Druidic Spirituality.
Doric Greenbone, Accountant Of The Wild Wood.
posted by The Whelk at 5:24 AM on July 12, 2009
Doric Greenbone, Accountant Of The Wild Wood.
posted by The Whelk at 5:24 AM on July 12, 2009
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