The earth is flat

Not because of boredom but rather out of curiosity I lately visited the website http://www.nakedcapitalism.com/ a few times to read articles about economics from renowned experts.

I like this website and I highly recommend it!

The first surprise was, that economists view themselves not as followers of a cult or a religion, but as scientists. The second surprise was, that the articles are entertaining, artfully formulated, well researched, and logical correct.

I regard nevertheless some of the articles as academic nonsense (though at a very high intellectual level), because the included argumentation and the offered analysis and conclusions are based on premisses that are solidly contradicted and proven false by human history, science (with the exception of economy, if economy is indeed counted as science), and recent ecological, social, and political developments.

 

The first flawed premise is the assumption that infinite growth is possible. One doesn’t have to be an academic to understand, that infinite growth of economic activities (implying infinite increases of resource consumption, waste, environmental pollution, habitat destruction) is not possible on a finite planet.

Most people outside the estate of economics agree, that the earth is not flat and is indeed a ball (or an oblate spheroid, if one wants to be scientifically correct) with a limited surface. Galileo Galilei and Nicolaus Copernicus were not the first persons to realize this, even ancient Greek philosophers like Pythagoras already vented the idea of a spherical earth.

The planets surface area is 510,072,000 square kilometers, 361,132,000 square kilometers are covered by ocean, the land mass is 148,940,000 square kilometers large.

It is necessary to mention these scientific details because apparently even intelligent people like the authors of the mentioned articles about economics until now are not able to understand the implication of a round earth with a limited surface.

For many modern economists the earth is still flat and has an unlimited surface, therefore unlimited growth is possible. Most economists dismiss the apparent limits of economic growth, manifested by resource scarcity, environmental pollution, habitat destruction, mass extinction of species, and climate change, as temporary problems and inconveniences that human ingenuity (manifested in scientific and technological progress) will be able to fix in the end.

A few bright minds try to harmonize the assumption of unlimited economic growth with the reality of a limited earth surface (and consequently limited resources) by predicting that scientific and technological progress will enable humanity to provide the basic needs and manufacture the necessary tools and machines more efficient because the advanced processes will use less energy and materials.

But higher efficiency, higher productivity will not result in economic growth as modern economists define it. GDP is the combined value of produced goods and applied services. When technological advances result in tools and machines that last longer and need less maintenance, it will reduce GDP. When distribution services are better organized and cheaper, it will reduce GDP. When electricity can be supplied cheaper because of improvements in energy conversion efficiency it will reduce GDP (except when people start to waste the cheap electricity). When goods because of advanced science can be produced and sold cheaper it will reduce GDP. When goods can be produced with less workers (higher productivity), people will lose their jobs.

The immense economic growth during the industrial revolution was enabled by coal powered steam engines, later by electricity, by internal combustion engines, by the use of new materials (plastics), by mass production (assembly lines), and by industrial agriculture (fertilizers). Only the massive extraction and use of fossil fuels made economic growth on this scale possible.

Which leaves us to the second false premise.

The second false premise is the assumption that the second law of thermodynamics doesn’t apply to economics.

As a reminder a few shortened formulations of the second law of thermodynamics:
Every process will increase the total entropy of the universe.
Heat cannot flow spontaneously from a lower temperature material to a higher temperature material.
It is impossible to convert heat completely into work.

Which means that the energy of fossil fuels cannot be recycled (or only to a small part and with disproportionate effort). When coal or oil or natural gas are burned, a significant part of the energy is dispersed into the air in form of hot exhaust fumes and there is no way to use this energy again in a similar way. Common sense would tell that also.

The easily extractable deposits of coal, oil, and natural gas will soon be exhausted and the remaining deposits can only be exploited with high costs and severe environmental destruction. As a result the cheap fossil fuels which we are used to are definitely a thing of the past. As a further result the geo-strategical moves of the great powers are now driven by energy politics, mineral rich countries are destabilized, bombed, invaded and devastated in terrible wars, fought solely to secure the dwindling resources.

We have of course a quasi renewable source of energy, which is sunlight. Solar and wind energy, hydroelectric power, tidal energy, and biomass energy will last till the sun one day explodes into a supernova. Why not use this quasi never ending energy source?

Answer: A switch to renewables, which is the most obvious solution to the looming energy crisis, is unfortunately costly because the solar panels and the wind turbines have to be produced and maintained, while the power grid has to be updated and expanded. Hydroelectric power plants on the other hand are big construction projects and impact large areas of natural habitat.

What about nuclear energy?

Nuclear energy is expensive (if all hidden costs are included) and risky (Fukushima Daiichi). There is no way to store the highly radioactive waste safely for thousands of years. Thorium reactors may be less risky but will be more expensive and will produce nearly the same amount of radioactive waste. Usable fusion energy is still pure fantasy.

To sum it up, the economic growth model based on the cheap energy of fossil fuels was a short period of human history that is going to end soon.

The third flawed premise in the mentioned articles is the assumption that competition is helpful to keep the economy functioning and necessary to spur innovation and technological progress. Economists discuss this issue since decades (Schumpeterian growth models by Aghion and Howitt for example) and have stressed the “monopoly escape from competition effect” that innovation brings. (I’m really confused by that. Why need companies to “escape from the competition effect,” if competition is so healthy and beneficial to economic activities?)

Undoubtedly in a hostile environment, where everybody is on her or his own, where one constantly has to be on guard and watch her or his back, innovation can give a crucial advantage in the fight for survival. But constitutes such an environment indeed a society and constitute the material transfers and acquisitions there an economy?

An economic system can be defined as the combined effort of all members of a larger group of individuals (a tribe, a village or town, a region, a nation) to meet the basic needs (water, food, shelter, clothing) by building necessary structures and producing necessary tools and machines.

This particular definition implies that all individuals of the group support the joint effort, work together,  cooperate. Competition is normally viewed as the opposite of cooperation and is, as everybody who worked in a team can confirm, counterproductive, detrimental, irritating, and dangerous in any joint effort.

Intra-species competition is seen by some evolutionary biologists as a driving force of adaptation and evolution by natural selection, it undoubtedly sorts out the week individuals. Intra-species competition results in exhausting and often deadly fights.

Economic competition similarly often results in the destruction of the losing competitor, which causes tremendous losses of know how, of jobs, of material assets like buildings and machinery. “The winner takes it all,” the losers are left with nothing. Competition also often means that more goods than necessary are produced (surplus goods), that universal access to crucial materials is blocked and scientific knowledge is withheld by a competitor.

In an economic system that is a joint effort to the benefit of all, bright ideas, new technologies, scientific advances will be shared so that everybody can profit from them. That is not happening in todays economies, where patent laws and the intellectual property regime try to hinder universal access to know how and scientific knowledge.

The claim, that competition is the main driver of innovation has not much merit and it can be easily proven that patent protection and intellectual property laws rather hinder innovation and technological progress. Anyway, most research is done on universities (Caltech, Oxford, Stanford, MIT) and in government research facilities (NASA, DARPA). Whole industries have profited from NASA research. Semiconductor electronics, computers, the Internet were all joint efforts of public institutions with some help of private companies. Most scientific research was and still is paid by public funds, while the benefits are reaped by private companies.

Competition may not necessarily spur innovation but it certainly spurs growth, because size makes a difference in the battle for market shares as bigger companies are able to squash their smaller rivals with overwhelming force.

There are many examples that competition doesn’t see the best and most innovative product succeed: VHS versus betamax, ReplayTV versus TiVo, Internet Explorer versus Netscape, Windows versus Apple Mac OS. There are many examples of innovative products which didn’t succeed: Apples Newton or Steve Jobs Next computer for instance.

Clayton Christensen describes in “The Innovator’s Dilemma,” how cheap, inferior products sneaked up behind the front runners and outsold them. Christensen also coined the term “disruptive technology.” What he doesn’t tell is, that all the perils to innovation are caused by competition.

Hopefully the addressed points and associated examples were able to show, that the costs and dangers of competition by far outweigh the benefits of by competition necessitated innovation and adaptation. Competition is destructive and unforgiving, it makes no sense in a humane, egalitarian society and in an economy that is a joint effort for the benefit of all.

Why does it then exist?

Competition makes sense in a hierarchical, violent, oppressive, class based society where the ruling class are predators which are competing for the pray. Competition makes sense in a martial society to eliminate weak members and to hone the martial skills. Competition makes sense in an individualistic society where everybody has to care for him/herself.

Competition and cooperation can coexist in a class based society, where the members of the ruling class (clan, cast, aristocracy, plutocracy) cooperate to keep the lower class in check, to enslave and exploit the lower class population. Usually the members of the ruling class will also compete among themselves, because that is what they have learned and are used to do. They have to constantly switch between cooperation and competition, which can be tricky, tiresome, sometimes deadly. Artifice, intrigue, corruption, fraud, deception, and treachery are key ingredients of such a society.

A competition based economy is ineffective and wasteful, it can only survive if resources are plentiful. 

There were many societies of tribes and nations in human history which were based on cooperation and sustainability, but they all were destroyed by ravaging competition based societies who had gained an advantage by ruthlessly exploiting their own resources and who needed to conquer new territory because the resources in their homeland were exhausted (Huns, Mongols, conquistadors, all colonial powers).

Objection: While the mentioned arguments may be true to some extent, isn’t competition a part of human nature, aren’t we all hardwired to compete?

Answer: There is not much evidence that competition is part of the basic human instincts and even if it where so, the human brain is more changeable/formable than that on any other creature we know (a trait which is called brain plasticity) and it is possible to override even the most basic instincts. When a baby is born, many areas of the brain are not developed yet, the baby consequently cannot survive on its own and needs years of nurturing and education to acquire the necessary survival skills.

Rudimentary actions and reactions of a baby, a toddler, a child that could be interpreted as competition efforts are in fact exploratory moves to find out the limits and rules of its social environment. There are successful education models (Montessori, Reggio Emilia approach) which emphasize cooperation and don’t use competition to increase ambition and motivation.

Finally, if nothing else is left to say, economists will argue that economic growth is necessary to feed an ever growing global population, prognosticated to be nine billion strong in the not too far away future.

Nine billion, maybe even more!

This is a serious point because, as economists will assure us, on our flat earth with its infinite landmass population increase and the hence required economic growth will go on and on forever.

Nine billion people! A deadly serious issue indeed even if (and especially because) the earth is a ball. A deadly serious issue which doesn’t lend itself to satire. But that has to be discussed on another day in another blog.