This page has been archived and commenting is disabled.

Guest Post: The Grand Failure Of Conventional Economics

Tyler Durden's picture




 

Submitted by Charles Hugh Smith from Of Two Minds

The Grand Failure of Conventional Economics

The "fixes" of conventional economics such as Keynesian stimulus will all fail catastrophically within the next 10 years.

The next decade will see the complete failure of conventional economics. Why is this so?

If we take the very long view, we find that all of conventional economics developed in the era of ever-cheaper, ever-more abundant energy and the miraculous "low hanging fruit" productivity gains made possible by cheap energy and the tools of mass production and industrialization. Like a creature that was born in the morning and has only seen daylight, conventional economics has never experienced night and so it has no conception of darkness.

This is true of classical, neo-classical, Marxist, Socialist, Keynesian, Neoliberal, "Capitalism with Chinese characteristics," etc.

Not one of these ideological strands of conventional economics recognizes the limits on conventional "growth" as measured by GDP, increased production, etc. When the planet's population stood at 500 million, there were sufficient resources to enable a doubling to 1 billion. Then 1 billion tripled to 3 billion, which doubled to 6 billion. Now, the 600 million high-energy-consumption "middle class" of post-industrial economies is expanding four-fold to 2.4 billion.

There simply isn't enough oil on the planet, in any remotely plausible scenario, for 600 million of China's 1.3 billion people to live on an American scale of oil consumption, not to mention 600 million of India's 1.2 billion, and so on for every developing economy.

As population and energy use per capita have expanded, the curve of consumption approaches an exponential function. Frequent contributor Harun I. has often commented on the impossibility of this curve continuing in the physical world we inhabit. Exponential Growth and Depletion: Chart of the Century? (May 3, 2010)


Here are his recent comments on the impossibility of limitless growth as defined and measured by conventional economics:

Think about what pension funds expect, 8 percent per annum. Let's think about this in terms of inputs and output. For simplicity's sake let's round to 7%. This means that every ten years inputs have to double in order for outputs to double. On the finite sphere that we call earth this reaches its limit at a pace that accelerates. Imagine that today if we were to make two iPads per household. In ten years we would need to make four, then eight, then sixteen, etc. We already have gone from one car per household to two. Since four cars per household is unlikely all eyes are upon China (brace for disappointment).

This goes back to my discussion on thermodynamics. The net energy required for every chemical reaction is constant. In a finite realm, more of something cannot be made. If stranded at sea with few rations of food and water, you can consume it all in one day or portion it out. Regardless of what is decided there will come a point where nothing is left. This nullifies the notion that each successive generation can have a better quality of life. Within the finite sphere of earth, this is simply not possible.

Many smart people have placed their hopes on technological innovations such as nuclear power, fusion, biofuels, and so on. As I have noted here many times, under close examination, each of these promises of limitless cheap energy either violate the laws of thermodynamics or they have severe limits in scalability, cost, waste, etc., or they end up being dependent on cheap, abundant oil for their functioning in the real world.

Others look to innovations such as iPhone apps to provide "growth," conveniently forgetting that an iPhone app is just as dependent on electricity, security, a power-hungry Internet, etc., as a sewage system, highway network or any of the other infrastructures of modern life.

Nothing in conventional economics of any flavor suggests how to create "growth" when oil is scarce/rationed and it costs $300 per barrel. Having been conceived in daylight, conventional economics has never experienced darkness, and has no way to conceptualize a world without "limitless growth."

Behind today's carefully contrived façade of normalcy, the only limitless resources are paper money and propaganda. Everything else is limited by real world constraints. An economy which consumes ever-greater quantities of real-world resources such as oil, and harvests renewable resources such as timber and fish at rates far in excess of their renew rates, will soon encounter shortages and higher prices as those with paper or electronic money bid for the remaining reserves.

The Keynesian experiment is being extended to its ultimate point of failure. Interestingly, China, Europe, Japan and the U.S. are all pursuing the same Keynesian credit-expansion Grand Strategy. It is the single tool available to States and Central Banks imprisoned by conventional economic theories, and they are hitting that single policy switch like cocaine-crazed lab rats clamoring for another hit.

Their lab cage is our world.

The Federal government is now borrowing in excess of $1.6 trillion every year to prop up the Status Quo, fully 11% of America’s GDP and 40% of all Federal expenditures. This stands in stark contrast to the traditional economic view that deficits in excess of 3% of GDP a year are inherently destablizing. Now we borrow roughly four times that much (once we include the off-budget “supplemental appropriations” that run into the hundreds of billions of dollars every year) and the political and financial class evince a complacent confidence that these extremes are sustainable indefinitely.

The globalization of financialization is another conventionally approved system that is unraveling. The world’s central banks and governments are waging an unprecedented “war” on global financial instability using the “battle plans” perfected in the wake of the Great Depression in the 1930s. Unfortunately, they’re fighting the last war, and today’s global financial system is fundamentally different from the one which imploded in the 1930s.

Theirs is not a failure of individuals, but of the whole of conventional economics.

These articles dismantle a key part of conventional economics, the benefits of "free trade":

Economists Are Hopelessly Naive About International Trade

The theory of "comparative advantage" and why it's wrong.

Behind all the elaborate theoretical facades, the foundations of the current system, globalization and cheap, abundant energy, are eroding, and as they devolve then so too will all the promises of "permanent growth" made by conventional economics, along with all the policies and theories that were hatched in the bright light of a long-ago morning.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 04/04/2011 - 11:59 | 1132723 Note to self
Note to self's picture

"Well whud we sposed ta do, ya mo-ron?"  

Mon, 04/04/2011 - 12:24 | 1132848 covert
covert's picture

we have already seen evidence of this before in china and europe & it will get worse. we must either leave this planet or decend into slavery again.

http://covert2.wordpress.com

 

Mon, 04/04/2011 - 12:28 | 1132856 spiral_eyes
spiral_eyes's picture

bilderberg, bitchez

Mon, 04/04/2011 - 14:31 | 1133520 sgt_doom
sgt_doom's picture

Kudos and props to that remark, spiral_eyes!

"The next decade will see the complete failure of conventional economics. "

No offense to the blog poster, but this is kind of a nonsensical blog to begin with, I mean, by conventional econ you evidently are referring to the dismantling of the American economy, as so many others have been dismantled in the past by the global banking cartel.

I assume the blogger doesn't realize there is NO economy in the USA?  That when the Fantasy Finance Sector makes up 75% or more of the GDP, only "commerce" continues to exist (as it has since the first people roamed the Serengeti), but as there is NO media in the USA, so too there is NO economy anymore.

So how exactly can "conventional economics" exist when there's no economic system in place?

Many of the people who routinely view this site are aware that the USA is simply a gargantuan Ponzi scheme.

sgt_doom's revised reading list:

The Rich and Super-Rich, by Ferdinand Lundberg

The Predator State, by James K. Galbraith

Treasure Islands, by Nicholas Shaxson

Trade, Development and Foreign Debt, by Michael Hudson

Wall Street Capitalism: A Theory of the Bondholding Class, by E. Ray Canterbery

The Road Through 2012: Revolution or World War III, by David DeGraw

Brothers: The Hidden History of the Kennedy Years, by David Talbot

Death of the Liberal Class, by Chris Hedges

The Age of Unreason, by Susan Jacoby

The Handmaid's Tale, by Margaret Atwood (fiction, but extremely pertinent to our times) 

 

Mon, 04/04/2011 - 12:29 | 1132869 Sancho Ponzi
Sancho Ponzi's picture

"Suck it in and cope"

Mon, 04/04/2011 - 12:44 | 1132943 Highrev
Highrev's picture

The writing's on the wall and it doesn't get any clearer.

Tue, 04/05/2011 - 03:18 | 1135874 MisterAmbassador
MisterAmbassador's picture

You could give me credit for making most, if not all, of these same points in my previous posts, but nah.  My posts about population and oil increasing the carrying capacity of the planet were 'flagged as junk'.  Oh well.

Mon, 04/04/2011 - 12:03 | 1132734 TraderMark
TraderMark's picture

Good news folks.  The new paradigm service economy is going to add 50,000 McDonalds jobs on April 19th to replace those boring old manufacturing jobs that once existed.  $8.30 an hour, expect a good 500,000 applications for these highly sought after quality jobs, and let's get ready for the "better than expected" April payroll report in a month from now.

http://www.fundmymutualfund.com/2011/04/mcdonalds-mcd-set-to-hire-50000....

Mon, 04/04/2011 - 15:44 | 1133939 Matte_Black
Matte_Black's picture

Sir. Your conclusion is grossly incorrect.

I predict that a mere 300,000 will apply for the 50,000 jobs.

/kidding

Mon, 04/04/2011 - 12:05 | 1132749 crzyhun
crzyhun's picture

Let's see- Malthus, Paul E, McNamera, Club of Rome, and Gore...all in the same boat. When do we recognize this for what it is? It's falsehood. The economic growth issues are population issues, see in Japan are due to Zero family growth, same in China, same in Euro social land. This is mere eugenics in drag! And it is not cured by run away open boarders either. 

JUNK.

Mon, 04/04/2011 - 12:24 | 1132845 TDoS
TDoS's picture

You tried to smear the post as "Eugenics," though it never once suggested anything remotely close to that.  You failed to acknowledge any of the clear and well stated points in the post, or to refute them.  Then you yelled "Junk."

Junk is right.  

 

Mon, 04/04/2011 - 13:00 | 1133016 kridkrid
kridkrid's picture

People love their strawman... it excuses them from having to think.  That's a good 90% of American politics... how quickly can I label someone or something a Socialist or Nazi... make it political, make it emotional so I can intellectually "check out".  Same here... "eugenics"... provides cover to someone who doesn't want to consider the mathematics working against us in so many areas of our lives.

Mon, 04/04/2011 - 13:21 | 1133123 Rodent Freikorps
Rodent Freikorps's picture

Fuck you.

Forced abortions. Mass sterilization. A "Planetary Regime" with the power of life and death over American citizens.

The tyrannical fantasies of a madman? Or merely the opinions of the person now in control of science policy in the United States? Or both?

These ideas (among many other equally horrifying recommendations) were put forth by John Holdren, whom Barack Obama has recently appointed Director of the White House Office of Science and Technology Policy, Assistant to the President for Science and Technology, and Co-Chair of the President's Council of Advisors on Science and Technology -- informally known as the United States' Science Czar. In a book Holdren co-authored in 1977, the man now firmly in control of science policy in this country wrote that:

http://zombietime.com/john_holdren/

 

Mon, 04/04/2011 - 13:34 | 1133197 kridkrid
kridkrid's picture

bravo... an excellent example.

Mon, 04/04/2011 - 13:39 | 1133229 Rodent Freikorps
Rodent Freikorps's picture

I never thought the US would die with a whimper.

I still don't.

I just no longer will bet money on which side wins.

Mon, 04/04/2011 - 16:16 | 1134102 Matte_Black
Matte_Black's picture

+winning

Mon, 04/04/2011 - 22:02 | 1135386 TDoS
TDoS's picture

Even if what you're saying isn't complete hyperbole, it has ABSOLUTELY NOTHING to do with the article. The planet has a finite carrying capacity, this is not a matter of opinion. It's fucking math, plain and simple. The original post is describing how traditional economists do not consider this math in their analysis. Clearly, the people who found their way to Zerohedge via an Alex Jones link don't grasp this concept either.

Mon, 04/04/2011 - 14:44 | 1133593 ibjamming
ibjamming's picture

Bullshit...  Purge the country of blacks and mexicans and this place could be great again.  We've become mediocre because we MUST include brown people in everything.  It's like fielding a sports team and having to have a percentage of women on it.  Let's go back to using the best people have to offer...no interference.

Mon, 04/04/2011 - 15:34 | 1133868 immalittlepunchy
immalittlepunchy's picture

Wow, really?

Mon, 04/04/2011 - 16:16 | 1133967 Matte_Black
Matte_Black's picture

*rimshot* <canned laughter>

When a rich man uses the word 'nigger' you don't actually think he is referring to the color of a man's skin, do you?

 

Mon, 04/04/2011 - 16:23 | 1134155 Live_Free
Live_Free's picture

 It's like fielding a sports team and having to have a percentage of women on it. 

-Or like fielding a sports team and having to have a percentage of

crakcer a$$ white people on it.




Mon, 04/04/2011 - 19:31 | 1134881 Diogenes
Diogenes's picture

Hahahahahahahahaha he's got you there :)

Mon, 04/04/2011 - 22:03 | 1135392 TDoS
TDoS's picture

When exactly was this country "great?"  When it was exploiting the post World War 2 lack of European competition, when it was exploiting the free labor of the brown people you hate, or when it was stealing land from a whole host of other people you probably feel are beneath you?

Mon, 04/04/2011 - 13:05 | 1133041 disabledvet
disabledvet's picture

actually i agree with comment.  key problem in analysis in article is "population as problem."  actually ever increasing populations solves so called "growth" problem.  it's when population declines....

Mon, 04/04/2011 - 13:32 | 1133183 r101958
r101958's picture

Not!...the population could stay at 0 growth and finite resources would still deplete. The population explosion was caused, in large part, by that wonderful, inexpensive resource called oil.

Mon, 04/04/2011 - 16:19 | 1134120 LawsofPhysics
LawsofPhysics's picture

and the Habor Bosch process.

Mon, 04/04/2011 - 16:48 | 1134284 BobPaulson
BobPaulson's picture

Haber. But yeah. The "green revolution" just made the population problem worse.

Mon, 04/04/2011 - 12:11 | 1132778 cossack55
cossack55's picture

SSSSSHHHHHH. Some of those little yellow folks might hear ya, and there is bunch of em'.

Mon, 04/04/2011 - 12:13 | 1132792 Rodent Freikorps
Rodent Freikorps's picture

Go Corn!

KoRn - Coming Undone

http://www.youtube.com/watch?v=VYG3f9vCUiQ

 

Mon, 04/04/2011 - 12:22 | 1132826 beastie
beastie's picture

Are economists retarded?

http://screwtapefiles.blogspot.com/2011/04/are-economists-retarded-part-...

Article explores why economists will never be right.

Mon, 04/04/2011 - 17:19 | 1134441 TheMerryPrankster
TheMerryPrankster's picture

economists are a trailing indicator.

Mon, 04/04/2011 - 19:35 | 1134891 Diogenes
Diogenes's picture

Saw an article recently where some psychologists tested people to find out if they made rational decisions as predicted by economic theory. The only people who behaved "rationally" were mathematicians and sociopaths.

Mon, 04/04/2011 - 12:26 | 1132852 dexter_morgan
dexter_morgan's picture

Reminds me of that scene in "Back to School" where Dangerfield is discussing things with the stuffy economics 'professor'. Hilarious. What the hell is a widget? OK, then go back to fantasyland.

Mon, 04/04/2011 - 12:34 | 1132890 Amish Hacker
Amish Hacker's picture

Another way to look at the End Game: start with the traditional family. Dad works as a carpenter, Mom stays home and raises Buddie and Sis. They can afford to own a home, and public schools actually teach. But the financial screws tighten, and now Mom has to work, too. What to do with the kids? No problemo. Turn the schools into places to warehouse the kids during the work day. The word "daycare" enters the language.

Again the screws tighten. Dad and/or Mom has to take a second job. Still, nearly impossible to maintain living standards, as wages stagnate and prices climb. What now? Credit cards for everyone! Borrow today's prosperity from tomorrow. But what comes after unpayable quantities of debt (which is where we are now)? 

Massive fail. Finis.

Mon, 04/04/2011 - 12:33 | 1132894 kaiserhoff
kaiserhoff's picture

So, we are at the end of history.  There will never again be any new technologies, no innovation, no substitution.  We've heard this shit many times before.

We will, at some point, be at the end of ever-expanding bureaucracy and banking cartels, but that's a good thing.  As to why anyone, anywhere, hires an economist..., excellent question;) 

Mon, 04/04/2011 - 12:37 | 1132898 kaiserhoff
kaiserhoff's picture

Mon, 04/04/2011 - 12:42 | 1132926 Milestones
Milestones's picture

Someone has finally zero'ed in on the absurdity of our world situation. A finite world cannot sustain infinite growth. Popullution IS the overwhelming world problem and the longer we ignore it the more desperate will the problems become for mans future. We either come to grips with it or it will resolve itself in a most brutal fashion in the next few decades.     Milestones

Mon, 04/04/2011 - 14:36 | 1133549 sgt_doom
sgt_doom's picture

Ya know, Milestones, the other day I read that the storms and climate in general, is getting windier and supposedly the scientists don't know why! (One wonders who all these scientists are the newsy stenographers are speak of?)

Obviously, since the study by NASA back in 2008, indicating the Earth is losing it's magnetosphere, the winds and storms will continue to worsen.

What I have just done is correlate the obvious.

Wish more American Zombie Consumertards could do likewise.

Mon, 04/04/2011 - 12:43 | 1132941 LawsofPhysics
LawsofPhysics's picture

Damn that finite planet.  Hedge according.  I mean what else can you really do? Every decision you make is, essentially, a hedge.

Mon, 04/04/2011 - 14:35 | 1133552 sgt_doom
sgt_doom's picture

Short the planet Earth, but go long on porn.....

Mon, 04/04/2011 - 12:55 | 1133004 BobPaulson
BobPaulson's picture

We need to shrink, but since every single metric we use for success measures it in terms of our exponential growth, we will do everything we can to secure our destruction. Easter Island. Sustainability is anathema to all current economic theories. My prediction is we will choose suicide over sustainability.

The required collapse will hurt. It won't be fun, even if you have a basement full of gold and firearms, IMO.

Mon, 04/04/2011 - 13:08 | 1133052 kridkrid
kridkrid's picture

The newer zeitgeist movie talks about the very word "economy".... I had never really given it much thought... "economics" has become about growth, is measured on growth, but the word itself: a. Careful, thrifty management of resources, such as money, materials, or labor.  It was a piercing thought... our system contradicts the very word.

Mon, 04/04/2011 - 13:07 | 1133048 airedalesrule
airedalesrule's picture

Moore's Law anybody?

Mon, 04/04/2011 - 16:47 | 1134270 Flakmeister
Flakmeister's picture

Examine the corresponding growth in energy to produce and power those cute little chips....Thermodynamics and Entropy (information) is a bitch....

Mon, 04/04/2011 - 13:07 | 1133051 sangell
sangell's picture

Spot on but, when the notion that bacteria caused infections was realized, it didn't mean every doctor ran to sterilize his instruments and wash his hands. They were 'old school' and still believed in the methods they had been taught.

So it is with our current economists and government officials. They are 'old school' too and know no other way than what their education and experience have taught them. I guess that means we are as doomed as  the patient with cholera was at the hands of an 18th century doctor.

Mon, 04/04/2011 - 13:07 | 1133061 falak pema
falak pema's picture

Planned obsolescence is now planned deflation and re-positionning in new economic areas. The fight to win on productivity will hotten-up further as the real economy shrinks as more money looks for fewer goods. All you have to do is look at two potentially high labour intensive, relatively high tech sectors : financial/banking services and editing/publishing services. Both use the english language as global medium. Both now massively move further and further down the outsourced/automated route; cutting back labour by standardizing automated, computerized, reporting-data processing systems, using third world countries to service global systems and save on home based 'entitlement' costs in developed countries. This is another global tsunami in the making via Internet and cloud computing. No getting away from it. Watch out brave new developed world; now having its juicy butt chewed to the bone! BY THE INTERNATIONAL ENTREPRENUEUR WHO RESPECTS NO NATIONAL FLAG. He is part of the oligarchy now!

Mon, 04/04/2011 - 13:15 | 1133102 TruthInSunshine
TruthInSunshine's picture

Ex-Goldman Sachs executive and now head of the NY Federal Reserve, William Dudley, said "an iPad in every pot."

Mon, 04/04/2011 - 13:20 | 1133117 btdt
btdt's picture

Y

    A

        W

              N

Come on Tyler.

                        Sure it's Monday AM,

                                     but don't post slow and sleepy posts like this.

 

Mon, 04/04/2011 - 13:33 | 1133180 bbq on whitehou...
bbq on whitehouse lawn's picture

This is what other planets are for. This is what happened in the 14th century and why Europe had to explore new worlds.

Without new lands this tired old game ends. The US could break up into lots of states and default on its federal debt. Civil war 2.0 anyone?

So civil war 2, planet express, or default.

Of course kick the can is still working, so no need to be hasty.

Mon, 04/04/2011 - 13:38 | 1133218 TrustWho
TrustWho's picture

Tyler, excellent article and many responses surprised me. As a trained economist, you are absolutely correct that economics assumes infinite growth as all inputs have substitutes, especially in the macroeconomic field. In the microeconomic field, all inputs have substitutes; however the theory assumes subtitutes will cost more money; thus and will negatively impact production. Therefore, the economic world does have a paradigm to help understand the choices we face, but no one wants to be labeled a pessimist; therefore we all find the world more comforting if we just assume the infinity god exist and no one does the hard work. (Note: Corn ethanol is excellent case of failure as corn ethanol is a substitute for gas; however corn ethanol production consumes more crude oil than it saves; therefore conventional economics says we should not produce corn ethanol, but we do. Is the problem conventional economics or stupid leaders?) 

The world is facing constrained growth and is why I have always been an opponent of globalization. In a global, constrained resouce world, the highest per unit consumer of world's resource will fall to the mean. Since the world's resources are fixed and more people consume more resources, the mean consumption per person will also fall.

To me this is just simple math like the demographics that should drive social security debate; however most americans refuse to believe. The zerohedge response to your constrained resource argument is disappointing, because we need a economic paradigm that will allow the society to make rational choices. Without this paradigm, there is only one solution...WORLD WAR III. Constrained resources will not kill us, but human greed will.   

Mon, 04/04/2011 - 13:46 | 1133257 LawsofPhysics
LawsofPhysics's picture

It's a miracle!  An economist that actually believes that the laws of thermodynamics and physics will affect, and must be considered in, the economic models these academic assholes keep shilling to the public.

My wife came from a conservative family and we almost got a divorce when I started buying silver and gold in the late 80's and 90's.  Funny she does not complain now, especially since we turned half our paper holdings (kept physical) into 40 more acres of land that we are now leasing to an international agricultural company.

 

Someone photo-capture this page, I don't think you will hear and economist say these words in public.

Mon, 04/04/2011 - 16:15 | 1134111 falak pema
falak pema's picture

Maybe your wife will divorce you now for not making enough silver and gold! An appetite is a greedy thing if we can't control it, like a multiple orgasmic thrill...If the company is Monsanto or into schist gas you will have a problem of another kind! But don't tell your wife that...she may still believe in gold like Lot's wife. You never know where the lightning will fall.  Keep the wolf from eating the sheep...if you can!

Mon, 04/04/2011 - 16:21 | 1134145 LawsofPhysics
LawsofPhysics's picture

Gold and silver are simply good stores of value.  We know that and have plenty of like minded neighbors and are well armed.  Don't worry, the sheep are fine.  We eat the wolves on a regular basis.

Mon, 04/04/2011 - 13:58 | 1133326 btdt
btdt's picture

You are trained in what? Nixonian Futurama-nomics?

Or is it Tyler who you are referring to as "trained"? Can't tell.

"allow the society to make rational choices"

Who is it that does this 'allowing'? 'Society' doesn't make choices, individuals make choices.

"world's resources are fixed and more people consume more resources, the mean consumption per person will also fall."

You mean people in your future will only get 1/2 a buggywhip? Or 1/2 a stuck Prius gas pedal?

"the theory assumes subtitutes will cost more money; thus and will negatively impact production"

Like substituting semiconductor RAM for magnetic core memory?

 

 

 

 

Mon, 04/04/2011 - 14:29 | 1133509 TrustWho
TrustWho's picture

Actually, food is the focus and inputs are soil, water, and fertilizer--N, P, K. P is thought to be the most limited fertilizer input. You can run the experiment to determine the production impact when substituting magnetic core memory for soil. I think this debate creates such an emotional irrational response because people like you assume you are in control. Wealth has little meaning when you are fighting for food. For the people who worship the infinity god, biotechnology is your technology of hope, so place your bet. Malthus did not predict the technology of hybridization and other genetic manipulations of nature. He would have never imagined the scale of irrigation. However, his basic theory of exponential population growth will overwhelm a food system...just observe any ecosystem over time. Have you ever hunted?  

Mon, 04/04/2011 - 14:52 | 1133598 Dr. Acula
Dr. Acula's picture

>However, his basic theory of exponential population growth will overwhelm a food system...

So what are you predicting exactly?

That there will be more people starving in the future then that there are right this second?

Or that everyone will starve simultaneously, because we'll be distributing tiny amounts of food equally to everyone over the planet using some kind of amazing high-tech distribution system?

BTW, if you are surrounded by exponential numbers of weak, starving, defenseless people, then wouldn't you be able to find a source of calories before your own demise?

Mon, 04/04/2011 - 15:09 | 1133721 TrustWho
TrustWho's picture

First step is education and recognition that we live in a constrained world. Tyler's article should make everyone think. I actually believe current economics (micro) does address the problem of allocating scarce resources whether output is growing or falling. The problem is making the most efficient choices  when output is falling. The current debt/deficit problem says peolple are incapable of sharing a shrinking pie.

I am actually hopeful with appropriate leadership, like Winston Churchill, American people could re-capture their father's quite can do attitude and create a solution for all. The question is would people today accept Wiston Churchill as their leader with his message of sacrifice for the good of the nation?

Mon, 04/04/2011 - 15:29 | 1133843 btdt
btdt's picture

What are you a Turing test?

Winston Churchill?

Go find another place to post your nonsense.

Mon, 04/04/2011 - 16:09 | 1134056 TrustWho
TrustWho's picture

...so you are an organic nut.  You must be afraid of inorganic food. I have been looking for inorganic peanut butter, but I have had no luck. Do you have any understanding of organic chemistry?

Mon, 04/04/2011 - 16:17 | 1134109 TrustWho
TrustWho's picture

I can not speak....you decide?

Mon, 04/04/2011 - 16:48 | 1134278 Flakmeister
Flakmeister's picture

Hey, you ran away when we were playing...tsk, tsk...

Mon, 04/04/2011 - 15:37 | 1133900 btdt
btdt's picture

Well I live in Organic HQ, the people's republik of Santa Cruz.

I have a degree in ENVIRONMENTAL Horticulture, I am a geologist. Soils are something I know a little about.

I am not in favor of biotech and genetic manipulations, factory farming, chemical solutions or other "miracles" brought on by people driven by Malthusian delusions.

I have observed ecosystems from the Artic to the equator... over many decades.

Hunting? Ya got me there.

What are you doing on this site? Go away.

 

 

Mon, 04/04/2011 - 14:30 | 1133503 Dr. Acula
Dr. Acula's picture

>economics assumes infinite growth

No. Economic science deals with scarcity. It is only scarce goods that can be economic goods. Economics is not about entertaining fantastic delusions of infinite abundance.

Furthermore, growth is not a scientific concept and there is no way to quantify it. For example, the production of marijuana might be a positive thing viewed by one person or might be negative thing viewed by another. There is no means to sum the subjective valuations of two people, or to compare the subjective valuations of two people, or even that of the same person at different times. GDP is a fallacy and doesn't even include one of the most important scarce economic goods, viz. leisure.

>corn ethanol production consumes more crude oil than it saves; therefore conventional economics says we should not produce corn ethanol

You're confused. Economics is a science; it does not say that anyone should do anything. If I made a financial profit, then I would produce corn ethanol. Especially if the government handed me the money.

>I have always been an opponent of globalization.

So, if I want to trade with a foreigner, how many men with guns do you propose putting in my way?

>Since the world's resources are fixed

I'm not even sure how to respond to this fallacy. Where do you think potatoes come from?

 

Mon, 04/04/2011 - 14:49 | 1133610 TrustWho
TrustWho's picture

microeconomics states an efficient system will allocate inputs to outputs when marginal cost = marginal revenue. Corn ethanol fails this economic equation. You are absolutely right that people and politicians make choices all the time. You take your subsidies build your wealth but limited resources are being mis-allocated and wealth is being destroyed.

Mon, 04/04/2011 - 15:26 | 1133818 natew
natew's picture

I'll add one more...

> the mean consumption per person will also fall.

Consumtion of most resources per person has fallen for decades, and yet our standard of living has improved.  This is called efficeincy and productivity.

And the marginal rule of substitution is more of a point in time, where substitution will almost always be to lower the cost in either short term or long term.  Substitution is a means of lowering the cost of production.  Only government would induce the other case.  Business could substitue labor with automation for a long term savings on production.  If resources are higher in cost, the process of substitution whould be that to replace with cheaper resource, no?  Why substitute otherwise?  Point of assuming increasing costs over time may be correct, but it think the economic reference was not.

Mon, 04/04/2011 - 13:51 | 1133292 sangell
sangell's picture

Thing is any economist ( G-20 government technocrat) would tell you that a country with a population growth rate over 3% is heading for trouble but would find it a great success story to find a country with a stable population with its GDP growing at 6%.

While there is some difference between the sustainability of economic growth and population growth they are not entirely dissimiliar and at some point both become impossible to achieve.

Mon, 04/04/2011 - 14:35 | 1133537 Dr. Acula
Dr. Acula's picture

"a great success story to find a country with a stable population with its GDP growing at 6%"

FYI, GDP can be increased arbitrarily by creating more tokens of exchange, i.e. money.

Mon, 04/04/2011 - 16:49 | 1134283 Flakmeister
Flakmeister's picture

Nominal yes, for real, you have to fuck with the deflator...hey, wait a minute!?

Mon, 04/04/2011 - 13:54 | 1133301 sbenard
sbenard's picture

It's all those "unprecedented measures", which is just a glib way of saying, "We haven't the slightest idea what we're doing, and we're just playing with the chemistry set until we blow up the neighborhood"!

Mon, 04/04/2011 - 14:03 | 1133361 newworldorder
newworldorder's picture

The yellow brick road road leads to natural or imposed world population decrease. Something the human race does not want to contemplate, but that nature will impose on us.

Mon, 04/04/2011 - 15:41 | 1133913 SilverFiend
SilverFiend's picture

Great post.  In fact there are many super wealthy people actually working on de-population programs including Warren Buffett and Bill Gates.

 

http://www.pop.org/content/billionaire-boys-club-worlds-plutocrats-1471

Mon, 04/04/2011 - 16:13 | 1133465 Stuck on Zero
Stuck on Zero's picture

Lets have a little imagination.  The realtionship between GDP and energy use was true till the invention of the Internet.  Many people now spend more on their digital services than on their cars.  Smaller houses, closer to city centers are in vogue and Priuses are more popular than SUVs.  3D TV, virtual presence, smart systems, robotics, etc will drive demand in the future.  These services and products are not nearly as energy intensive as the boats, vacation homes, and RVs we used to call entertainment.  In addition, improvements in energy efficiency have meant getting more for less.  Sweden, Denmark and Germany have similar or better standards of living than Americans and their economies are half as energy intensive.

Mon, 04/04/2011 - 14:30 | 1133508 jmc8888
jmc8888's picture

Again CHS tries to see tomorrow through today's lenses. 

Nuclear is possible, fusion will be.  It takes work, by scientific minds, and money for decades.  We've had this option, for decades, we'll still have this option, decades from now....but at what cost to our children's future if we wait? All of their future?

Again CHS proves that in 1905, if somebody talked about the future of transportation, he would no doubt say it would be impossible to have big metal things flying people and goods all around.

Charles Hugh Smith is to fusion

What some 1905 'transportation expert' would be to flight

Good thing our lab discoveries aren't predicated on CHS's two second thinking on the subject, and is in reality achieved by lifelong dedicated people focusing on a single subject. 

Mon, 04/04/2011 - 14:41 | 1133579 natew
natew's picture

Other than Keynesian solutions being a failure and having a poor monetary system, this article is severely oversimplified.

Preoccupied by exponential charts mises the understanding of economics.  Economics is about scarcity in resources and how the economy handles them.  Everything we use or by has scarcity or limited resources calculated into the prices.  The only thing that can distort that behavior is of course government.

This article makes it sound like it is some surprise that resources are scarce and everything will be a surprise at the "end".  Government can hide some of it, but inevidibly a free market will respond to the scarcity, and most importantly, adjust to changes.  

History has shown that as scarcity increases, so has inovation.  From transportation, electricity, and computers.  All of which have lowered in price as production increased with a specific technology.  One could say, in the long term, scarcity actually improves our standard of living, as scarcity will aways force efficiency. 

When oil hits $200/barrel there will be hundereds of energy solutions that will be viable.  There are already 100s out there only being held back by a less than $100/barrel cost.  It's not the job of the economist to "suggests how to create "growth" when oil is scarce" ,but to objectively understand the behavior of the scarcity.  Once one of these expensive alternatives are mass produced, prices will drop.  And scientifically, no resource technically just goes away.  All materiials are transformed and stay on the earth, it just that many are in a form that not yet useful or cost effective to use. 

And Ian Fletcher is not a good economist.  He grabs onto every economic myth he can find and puts on his blinders and spews out half the truth to achieve his view.  His comparative analysis ideas are only 50% of the picture.  He's simply a proctectionist and has interests of specific corporations.  Because of his narrow approach of economics, he fails the objectivity test.  Based on his poor theory, no company should be allowed to move, even within USA, as a company moving from New York to Michigan would cause jobs to be lost in New York.  Theory ends there.   Take Fletchers words with a very fine grain of salt.  Or do what he does, only take the half of what he says that fits your view.

 

Mon, 04/04/2011 - 16:48 | 1134290 Flakmeister
Flakmeister's picture

Please elaborate on these "solutions"... Seriously, I am all ears.

Mon, 04/04/2011 - 22:01 | 1135389 FreedomGuy
FreedomGuy's picture

Nice post. The problem I have with this article is there is an idea that some really smart guy or group of "intellectuals" can actually manage things better than a free market. While economics is about scarcity it is even moreso about choices. At different prices and difficulties people make different choices. The fact that many people make different choices leads to innovation. The great weakness of governments is that they make one choice for everyone and they can never see the future. How many models of car or cell phone would we have with absolute government control? Actually, I can show that we would still have model T's and rotary phones.

There is the other side of economics, especially free market economics and that is the moral and social considerations in individuals making their own personal choices. If I own myself or my factory or my commodities then it is my choice as to how to trade them. I can with a guy named Wu in China, Mbeke in Africa, Smith in England or my next door neighbor. It will always be done with imperfect information but there is often discovery in the process. When elite groups like governments intervene in these choices for some greater good...always a collective good, then freedom is abridged, innovation is stunted, happiness is mitigated and generally speaking quality of life is limited or reduced. This is why the freer nations are always and without fail the most prosperous and generally have the happiest populations. The intellectual intervention for the collective good always devolves and is corrupted to political favoritism. What was voluntary trade and association becomes involuntary trade and association. The fruits of those two systems are vastly different. The former always fails and the latter always succeeds.

The next fallacy I see is the idea of limited resources and some future Malthusian disaster. I have heard this all my life and it is always shown false. Yes, in constant terms with no innovation there are limits. However, at different prices and values, ethanol can work, or wind, or it pays to clean up coal or run long gas lines to the arctic circle as oil depletes. Innovation continues and unfettered and distorted tends to solve all these lifestyle problems. The reason so many Indians, Chinese, Africans and others are poor is NOT limited resources. Their problems derive directly from government and even their own cultures. There is enough energy and food for productive decent people worldwide, especially given the strong correlation between rising prosperity and decreased birth rates.

Mon, 04/04/2011 - 23:26 | 1135573 Flakmeister
Flakmeister's picture

No, price does not matter. It is arbitrary. What matters are joules, or better yet, how we spend our flow of joules in making/extracting more joules. It is thermodynamics. Cold, hard and cruel. All economic activity is leveraged off of the net energy available to society. Energy margins do not improve with volume, if anything, they ultimately get worse.

 

 

Tue, 04/05/2011 - 12:32 | 1137407 FreedomGuy
FreedomGuy's picture

When the sun runs out of energy and gravity stops we will run completely out of energy. We have infinite supplies of energy but at different efficiencies and price points.

Tue, 04/05/2011 - 12:41 | 1137469 Flakmeister
Flakmeister's picture

Solar yes, gravity, no....

Even with solar, you have to convert that energy into something useful in a manner that leaves you excess energy...Imagine a solar cell factory (and the attendent inputs) being completely powered by solar. If you can make it work you are home free....

Tue, 04/05/2011 - 15:43 | 1138296 FreedomGuy
FreedomGuy's picture

Gravity thru the use of hydroelectric and tidal/ocean turbines. Yes, all do have an initial energy input. Even an oil burning plant has that.

Tue, 04/05/2011 - 15:46 | 1138309 Flakmeister
Flakmeister's picture

Global hydro power is basically maxed out....tides only work in some places and it is not scalable...

Mon, 04/04/2011 - 14:49 | 1133619 Clueless Economist
Clueless Economist's picture

I am NOT a failure

--the Clueless Economist

Mon, 04/04/2011 - 15:05 | 1133711 Mr Anderson
Mr Anderson's picture

I think we can all agree that the average standard of living will go down. It is in your best interest to protect your standard of living. Live near a PUD that owns a hydroelectric facility. In a community with a strong local farm sector. You'd be really set if your town/city water system was gravity flow.

The rub will still be oil.

Mon, 04/04/2011 - 15:20 | 1133792 themiestro
themiestro's picture

"This goes back to my discussion on thermodynamics. The net energy required for every chemical reaction is constant. In a finite realm, more of something cannot be made. If stranded at sea with few rations of food and water, you can consume it all in one day or portion it out. Regardless of what is decided there will come a point where nothing is left. This nullifies the notion that each successive generation can have a better quality of life. Within the finite sphere of earth, this is simply not possible."

 

That is some deep, profound, rational and very realistic shit.  Welp... that makes me want to head to the cooler for a mid day beer.

Mon, 04/04/2011 - 15:25 | 1133813 themiestro
themiestro's picture

Beer's done.....  shouldn't this be 1/x if everything is finite?  I don't think you can go exponential with finite.

Mon, 04/04/2011 - 15:24 | 1133817 tradewithdave
tradewithdave's picture

True with one important exception. 2nd law of thermodynamics is not a "law". It is a statistical probability based on ever-increasing entropy. Since Poincare's recurrence theorem is true your thesis has a flaw, albeit conventional wisdom.

Dave Harrison
Tradewithdave.com

Mon, 04/04/2011 - 16:16 | 1134083 themiestro
themiestro's picture

Ahh so it is more like quantum mechanics.  Things can be in more than one place at one time.  Hopefully my investments are in the right place at the right time.....  That's what counts, even in bizzaro world.  Probability bitchezzz.

Mon, 04/04/2011 - 16:25 | 1134156 themiestro
themiestro's picture

This is why I like trading over fundamentals Mr. Tradewithdave.  I like the purty pictures, not so much the math.  I guess you do too!

Mon, 04/04/2011 - 16:17 | 1134110 LawsofPhysics
LawsofPhysics's picture

"True with one important exception. 2nd law of thermodynamics is not a "law". It is a statistical probability based on ever-increasing entropy."

Dave,

Please don't be selective about how you cite facts.  Gravity isn't a law technically either, neither is the theory of electricity.  While the second law is "a statistical probability based on ever-increasing entropy" as you say, don't forget to mention that it has been observed everywhere and has never not been observed for any chemical process occurring in the known universe.  For example, a plant may appear to fight entropy as it goes from a seed to a seedling, but this comes at the expense of the entropy created by the release of photons from the sun as it burns its nuclear fuel.  

Yeah, lots of things in science are not technically laws, they have just been consistently observed despite numerous attempts to shoot down the hypothesis. For new science this may mean something, but for "laws" that have with stood the test of time, well, they probably are not changing.

Mon, 04/04/2011 - 17:09 | 1134402 tradewithdave
tradewithdave's picture

That would depend on how you define " probably."

Mon, 04/04/2011 - 16:53 | 1134316 Flakmeister
Flakmeister's picture

Dave,

         yes, it is statistics but the parent distribution is a motherfucker

e-E/(kT)

This is not a binomial distribution.... Let's just say it converges fast and hard....

Mon, 04/04/2011 - 17:10 | 1134416 tradewithdave
tradewithdave's picture

Fast yes, hard no.

Mon, 04/04/2011 - 17:27 | 1134479 Flakmeister
Flakmeister's picture

Hard enough.... do this experiment, take 10 gm water at 280K and add 10 gm of water at 295K.... measure all temperatures to 2 ppm, do it a million times. Plot the chart....

Mon, 04/04/2011 - 16:15 | 1134092 Stuck on Zero
Stuck on Zero's picture

When sperm whales were being driven to extinction and no more whale oil was forthcoming other, equally insightful pundits were saying the same thing!

Mon, 04/04/2011 - 16:18 | 1134123 falak pema
falak pema's picture

Moby dikk

Mon, 04/04/2011 - 16:51 | 1134303 AldoHux_IV
AldoHux_IV's picture

I don't think the law of thermodynamics can be so blindly applied to something that behaves beyond laws of physics. 

Mon, 04/04/2011 - 16:56 | 1134326 Flakmeister
Flakmeister's picture

Huh??? The economy is the leverage of surplus energy... WTF do you think energy flow is about but thermodynamics?

Mon, 04/04/2011 - 18:14 | 1134653 VyseLegendaire
VyseLegendaire's picture

In a way this blog is right, in a way no.

'conventional' economics is not 'normal' or 'sustainable' economics, even though it is indeed conventional today, and will likely implode.

Thats not to say that 'normal' or 'logical' economics could not be indefinitely sustainable.  This would require the abolishment of central banks and, likely, governments as well.

When you place your faith in faraway magical priesthood of 'leaders,' catastrophe in inevitable. 

Tue, 04/05/2011 - 00:15 | 1135669 Bartanist
Bartanist's picture

There are other solutions ... but then nah, because they are either really bad for the TPTB or people in general.

Tue, 04/05/2011 - 03:55 | 1135895 SqueekyFromm
SqueekyFromm's picture

Well, this is a friggin depressing Internet Article. Am I going to have to live on a farm, clean up horse poop, and milk cows and stuff??? Because I sure can't go around killing poor little chickens or anything. This is not going to be as much fun as drinking margies at the Mexican restaurant.

Squeeky Fromm, Girl Reporter

Tue, 04/05/2011 - 04:53 | 1135924 honestann
honestann's picture

On the facts, this article is badly flawed.

However, their conclusions may end up being correct because of the concentration of power into the hands of the predators-that-be and the predator-class who cannot create, think or produce their way out of a wet paper sack.  Let's put it this way, since the world is increasingly coming under centralized control.  Are the conditions on earth any different if the world is run by a craven spoiled-brat politician versus a creative, benevolent scientific and engineering genius?  As an individualist, I do not propose this thought experiment to accept or sanction centralized control, but only to contrast "what will be" from "what could be", given the nature of reality.

To begin with, the article is factually incorrect in many ways, and appears to purposely ignore other facts.

But before we list errors and omissions, let's agree that some of what the article says is correct.  The earth cannot sustain a population of 700 trillion humans (100,000 times the current population).  That would leave about 5 square meters of land per human... plenty enough room to lie down, but not much more.  Of course the subconscious engineer in me immediately raises his hand and notes we could cover the entire surface of earth with a 1000 story deep building and thereby reduce the population density by 1000 times.  But such points only pushes the question aside for a while, and begs the entire question of "quality of life", which has already been far too sacrificed already.

The point is, practical limits do exist in any finite sphere like earth.  Those limits are real.  They exist.  No question or debate, and I would argue many have been pushed too far already.  So what's my gripe?

Essentially, my gripe is the assumption that while population grows, ability to supply the population cannot.  That's wrong.  I say this as a matter of fact and of capability, even though personally I wish the population of earth was 100 times less, plus or minus.  I most definitely prefer quality over quantity, but that's just me.

For example, oil is not the only available or practical energy source.  Far from it.  For starters, consider this.  If the money spent to bail out huge financial institutions was spent to buy the most cost effective solar panels and small wind turbines, every home in the USSA would now have free solar panels and/or wind turbines on its roof.

Also consider the following energy source, conveniently omitted from the article.  Stand back from earth a few thousand miles and take a look at the planet.  Now, slice it in half, right through the core.  Hmmmm.  Interesting, no?  Except for an incredibly thin crust on the outside, the entire planet is molten-hot rock.  To claim there's insufficient energy available is disingenuous and wrong.

This is not science fiction either, since geothermal power plants have been operating for decades, and quite a few especially efficient locations are sitting empty for lack of development.  Why?  Because the big financial players can make more money quicker with their fraudulent fractional reserve leveraged paper-shuffling scams than they can developing real productive enterprises.

The problem is not lack of energy opportunities.  Don't forget that 1,400,000 kilometer diameter, 2e30 kilogram, unshielded nuclear fusion reactor that we see every day of our lives (with apologies to folks in Seattle).  Yes, I refer to the sun.  Solar panels and wind turbines are not the only way to extract energy from that big honking nuclear fusion reactor... that is, until the EPA bans the sun for lack of sufficient safety protocols, or the government claims ownership.

To summarize the energy part of the argument, there's plenty of energy for more humans than any of us would care to see populate planet earth.  However, even though the article is completely wrong on the facts, it may well be correct on results, for the predators-that-be and predator-class are now powerful enough to destroy the energy future of mankind.

I also had to laugh at the pension question!  Hahahahahaha.  How funny!  Doesn't everyone at ZH already know the answer to this "problem"?  It's obvious!  By jiggering the "official" inflation rates the predators-that-be will assure actual inflation will be over 10% even as the advertised rate of inflation is 2% or 3%.  Therefore, the 7% return discussed in the article is actually a 3% loss per year!  That's is an exponential decay, not an exponential explosion.  Leave it to economists to create a worry opposite of what people should be concerned about.  And leave it to the article to imply that somehow humans need to increase their consumption (of iPads no less) to survive.  We need lower calorie diets, not higher ones.

Then comes the farce argument of "thermodynamics" and the incredible example of "limited quantity of seeds on the life-raft".  Before the author mentioned "thermodynamics", he should have introduced the  fundamental "conservation principles".  But even before that, he should have computed how long human life can be sustained on the energy stored in the molten-hot earth, and that portion of sunlight that intercepts earth.

The sun should last a few billion more years, and I'd guess the heat of earth ought to last nearly as long.  Exactly what time-frame is the author worrying about, I wonder?  If he's worrying that the destructive behavior of the predators-that-be and predator-class will prevent us tapping the sun and earth, then I concur.  If he's worrying about sucking the sun and earth dry, well... he has an even longer term view than I do, which is saying something!  Of course, if we consider that longer viewpoint, I'd have to say that mankind is completely insane if it hangs around earth while unlimited star systems and galaxies to explore!

Back to the "conservation principle" and "thermodynamics".  The "conservation principle" says "nothing fundamental can be created or destroyed... only its form can be changed".  Which means the quantity of material on earth is more or less fixed.  In other words, no material is consumed.  In other words, the quantity of all materials will not materially change over the course of history.  And so far, we've barely scratched a tiny fraction of the thinnest bit of the surface layer.  The "net energy" in a chemical reaction is relevant, but not overwhelmingly important as long as the earth core is hot as blazes and that unshielded nuclear fusion reactor in the sky keeps fusing hydrogen into helium.

The fundamentally mistaken attitude of the author is perfectly illustrated by the life raft example he gives.  Most humans would indeed starve themselves to death and perish.  But that's mostly a statement about how stupid modern humans are.  Ancient humans do not consume their seeds, they plant them.  Come harvest time they have thousands times more seeds, plus the veggies and fruit those seeds are hidden within.  At which time they extract the seeds, eat the fruit and veggies, and repeat indefinitely.  That's growth of supply.  That's exponential production.

Which brings us to the fundamental problem of the author's approach.  He thinks like a predator.  He assumes all that exists is destruction (also called "consumption").  To be sure, he is strongly encouraged to take such a viewpoint by the predators-that-be and predator-class.  Consider the fact that the apologists and propagandists that speak for the predators-that-be actually call "consumers" (as in destroyers) 70% of the economy!  Hahahahaha.  Talk about Orwell... consumption AKA destruction == production!  Give us a freaking break!

The fact is, brains work, if you let them, if you don't confuse them, thwart them, brainwash them, destroy them.  Today, almost the entire organized effort of society is directed towards confusing, thwarting, brainwashing and destroying human consciousness.  Perhaps that's why so many humans are discouraged... they honestly cannot see or imagine how "life can work".

The author is correct to point out the lies and scams promoted by jerks who promote many of the "solutions" that consume resources but don't deliver.  He is correct largely because all large organizations are run by scam artists, financed by scam artists, and what kind of propaganda do you expect out of scam artists who focus their entire lives on destructive predatory behavior (stealing from producers)?

If even a fraction of the wealth funneled to these sleazebags found its way to honest, ethical producers who are only interested in implementing effective systems... then the problems would vanish.  Not overnight, but in years to decades.  While we cannot expect that, given the death grip the predators-that-be and predator-class have on the world today, this is nonetheless what reality offers, and the way life could be.

The nature of reality is not the problem.  If the author could see through my eyes, the author would understand that.  He understands fiat money, corruption, propaganda and destruction are available in limitless supply.  He fails to understand what is possible in this universe in the absence of fiat money, corruption, propaganda and destruction.

-----

For the few interested in the fallacy of the conventional understandings of "thermodynamics", consider the following thought experiment (you can observe the evidence if you're an astronomer).  What is the ultimate form of "maximum entropy", which is the state in which... supposedly... no further energy can be extracted?  Well, let's see.  That would look something like a super low density cloud of random hydrogen atoms floating around in deep outer space.  These atoms would have a temperature of a near zero degrees kelvin (near "absolute zero").  That's just about as perfect entropy as anyone can imagine, and the argument most people make given the "principles" of thermodynamics is, "all the energy is used up, no energy is available, no more energy can be extracted".

What's the problem with that?  Can I extract energy from those hydrogen atoms?  No, I can't.  But I don't have to.  I just wait.  Perhaps 1 billion years.  Perhaps 2 billion years.  Perhaps 5 billion years.  And what happens?  Eventually the random motions of those hydrogen atoms lead to an area of slightly higher density, which of course has slightly higher gravitational attraction on surrounding hydrogen atoms, which pulls those hydrogen atoms their way, which leads to an even higher concentration, which has higher gravity, which attracts more atoms... and on and on an on for a few hundred million years... until we find a massive ball of hydrogen [and a few other] atoms that has such an enormous gravitational pull towards it's center that the pressures and temperatures at the center become so high that... nuclear fusion occurs, and we have a new star (the most energy-rich, energy-available, anti-entropic environment you can imagine).  So much for the conventional understanding of the principle of thermodynamics.

The important point is this.  In small enclosed or limited environments on earth, entropy works as the author implies, energy is lost from the system, just as conventional understandings claim.  However, they almost always ignore the most massively astronomical example of the opposite, complementary "anti-entropic" phenomenon... the universe, and all the stars and galaxies in the universe.

This should serve as a metaphor too.  On the one hand we have the predators-that-be and predator-class.  They are destroyers.  They are indeed examples of super-high entropy.  On the other hand we have the creative, scientist, engineer, inventors... the producer-class (at least the few not working as destroyers for government, organizations or most modern corporations).  They are producers.  They are examples of anti-entropy, of energy-rich, of energy-productive beings.

The question for mankind is this.  Do they want to be pulled into the black-holes of predatory destruction?  Or do they want to be soar to ever greater and more glorious heights with the stars of production?  So far, humanity is letting the predators drag them into the black hole abyss.  Will humanity wise up before it is swallowed by the darkness?  I doubt it.  But make no mistake... the choice exists.

Sat, 04/09/2011 - 22:18 | 1154277 thames222
thames222's picture

Conventional economics in America are doomed because no young people today know what to do with their money, nor do they have any to invest.  The financial markets are dying, and the consumer economy is all but gone.

 

www.forecastfortomorrow.com

Do NOT follow this link or you will be banned from the site!