Question Everything

Sapient governance I. Part A

What would an operational level governance look like?

Economy governance — Natural economies in living systems

When I started this post I imagined I would get all the contents into a single article. But after several hours of typing, I realized that it wouldn't work. As simplified as I've tried to make this subject, it is still huge. Therefore I have adopted a different strategy for this and probably subsequent postings. Here I will just roughly summarize the content but provide you with a link to my academic site where the whole article can be found.

So here is the outline.

1. Economics is basically the concept of allocation of resources and decisions about what will be produced and consumed. The human economy is part of an overall governance system that assures that, in general, people are going to work in this economy to everyone's benefit. But real economies that have evolved over time don't seem to really work to this end. What I do in the article is claim and, I hope, show that the concept of economy is ubiquitous in the natural world, especially in the realm of biology. In fact, I would assert that our economies are really just extensions of this general model of complex, dynamic systems achieving stability and longevity in an otherwise uncertain environment.
2. Market-based economies characterize what goes on in the various kinds of transactions that take place within a living system (cell, organism, population, community, ecosystem). I will say now, and show later, that the markets are not the only form of governance in operation. Later we'll see the coordination and strategic control levels and their roles in comprehensive governance. My point in this piece is just that markets form a major aspect of operational control.
3. I show a generic economic system and then argue that it has correspondences in living systems.
4. I delve into some low level details of operational control starting with basic feedback and homeostasis. I attempt to demonstrate that complex organizations of homeostatic processes trade products by virtue of signaling that helps mediate transfers, similar to our use of money to signal what work is to be done.
5. I finish by mentioning some important differences between human economies and natural economies, pointing out that these need to be considered in any thoughts about designing a natural (sapient) economy for humanity. In some cases, for example the rights of individuals, the economy design needs to accommodate what is unique to humans as components in an economic system. In other cases we should take guidance from living system economies that have learned (through evolution) how to provide stable environments for their components. For example I raise the question of growth and point to the fact that the human economy, unlike natural economies, seems not to have recognized that nothing can grow forever!

This first article only looks at the operational level in a hierarchical control structure governance. And there is much to cover just at this level. Part A covers the outline above. Part B will examine how we apply the principles suggested from the study of natural economies to the design of a healthier human economy. That means, an economy that supports and fulfills human needs and aspirations without destroying the Earth.

Sapient Governance II will start to examine the nature of coordination in living systems. As it pertains to human society and economy, this is where we start looking at formal government and its logistical role in regulating those parts of an economy and those members of society that threaten instability. I will use the same tactic of explicating what we find in living systems as examples of the principles and then identifying those principles at work in the human economies, both current and what could be.

Finally, in Sapient Governance III I will delve into strategic control. I will follow the same basic plan of attack, but here there will be a major deviation in that for the biological world the strategic part of governance can be largely wrapped up in one word — evolution. The only relevant example from biology for strategic level control comes from the brains of mammals and birds where the cerebral cortex (specifically the neocortex) provides some primitive strategic control for the individual. For humans, the brain is capable of orders of magnitude more strategic control over life. Humans have transcended an important boundary of the biological world when they became recurrent symbol processing agents. If you have read any of my past postings on sapience then you will know why I call this series Sapient Governance. Not only are humans themselves capable of strategic thinking and planning, but so too is the society of humans (as well as all social organizations). From that standpoint, I then will be looking to launch into something I've hinted at before: what is the strategic plan for humanity and planet Earth?

I hope this format works for readers. I would apologize for the length, but sometimes you just can't say all that needs to be said in a few paragraphs. Even so, I only cover the territory roughly. You could write a whole book about this!

An example of eusapience: Nelson Mandela

Nelson Mandela celebrated his 90th birthday today. A man who spent 27 years in prison and his early life under apartheid yet he came out of that resolved to find peace in his land, indeed the world. He is one of the eusapients as far as I am concerned.

Thank you Nelson.

[Edited: 7/19/0]

Is there a sapient form of governance?

If not democracy, capitalism, and markets, what? How about natural governance?

This comes from an article in the Los Angeles Times today:

WASHINGTON -- For a generation, most people accepted the idea that the core of what makes America tick was an economy governed by free markets. And whatever combination of goods, services and jobs the market cooked up was presumed to be fine for the nation and for its citizens -- certainly better than government meddling.

No longer.

Spurred by the continued housing crisis, turmoil in financial markets, spiking oil prices, disappearing jobs and shrinking retirement savings, the nation and its political leaders have begun to sour on the notion that the current market system is the key to a fair, stable and efficient society.

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"There may be a backlash against markets at the moment," acknowledged Kevin A. Hassett, economic studies director at the American Enterprise Institute in Washington and an advisor to presumed Republican presidential nominee John McCain. "But the backlash doesn't seem to be informed by any alternative view of how the world works."

Yet the sheer volume of setbacks that people have been dealt has sent consumer confidence to some of its lowest levels in half a century, according to Reuters/University of Michigan surveys. A remarkable 84% of Americans are convinced that the nation is on the "wrong track," according to a recent Gallup poll.

In just the last week, the financial markets have provided ample new evidence that markets are not working smoothly.

It does seem to be true that more and more people are questioning the efficacy of so-called free markets when there are so many gamers out there whose only thought is to figure out how to manipulate the market to their advantage. It goes deeper, of course. Even unwitting advertisers are trying to skew the consumer markets, e.g. making people believe that having an SUV will protect their families in the event of a crash. The truth is that too much information is obfuscated or just plain unavailable in a complex, technological society like ours. And market efficacy relies on free flow of information. We are witnessing the collision of three forces that have always been assumed to be 'goods'. Corporate industrialism, profit-motivated capitalism, and exponential development of science and technology (which makes complexity, well, complex!) have given the gamers an edge. They have found how to break a legitimate political system, and hence a way to break the workings of democratic government.

The problems with government in this age are legion. The first problem is the way the political process now operates in a representative democracy. Too many gamers here as well. Too little real information. Voting is buying. And lacking the conditions of a true free market where would-be leaders can compete on the merit of their ideas, the electorate (buyers) is fully informed, and no one is playing 'framing games' as George Lackoff might say, the political process in the US is badly broken. And what about the special interests/lobbyist games that go on in Washington (and probably all state capitals and big cities). Since politicos have to worry about the next election, and money buys elections, those who can wave the largest bundle of cash in front of a politician's nose seem to get favored treatment more often than not. The political process is moribund and no one seems to want to admit it.

So I think it safe to claim that our system of governance is sadly broken. Capitalistic, market-based democracy may have been better than socialistic dictatorships, but it is turning out it is better for lining the pockets of those who take unfair advantage of the system to the detriment of those who accept the system as just a given.

I've already visited the issue of rethinking capitalism and banking and questioned the efficacy of democracy as a means of deciding who will be our governors (legislators, presidents, mayors, etc.) I then proceeded to introduce an idea about how governance is accomplished in natural systems using the hierarchical control theory from systems science to suggest there is a better way to conceive of social governance.

I'm now ready to explore a possibility; that using hierarchical control theory and our knowledge of what kinds of control mechanisms have actually evolved in societies, we can begin to construct a workable, humanistic, and balanced governance system for mankind that will be in accord with nature. Tall order, I know. But bear with me. Here is what we are shooting for.

 

[right click on image to expand it in a new window or tab]

In the image the oval represents the world as a whole — called the Ecos (home). Also call it Gaia, if you prefer. But it is everything on and surrounding this Earth. The three stacked rectangles represent the Man-made part of the world. This is not to scale! Pretend the Ecos is maybe 100 times larger than the rectangles.

The rectangles you may recognize as a different version of the hierarchical control model I diagrammed in a question post about, "If not democracy, then what?". The model consists of a bottom level where all the operations of economic interest take place. This is, for all practical purposes, the economy. Stuff gets made, services rendered, etc. in this level. All the larger circles are meant to represent the organizations that conduct the production processes. The smaller ones are consumer processes. Note that the whole system gets an input of solar energy and waste heat is radiated to space. Effectively no material comes into the system so all inputs to the economy must come from the Ecos or be recycled. That is just the way it is. Also note that the available solar energy must be apportioned to balance the needs of the Ecos and those of the human economy. That too is a given.

The main mechanism for distributing the inputs to all of the producing and consuming processes is, lo and behold, a market. Not only that but it is a market in which money is used to communicate value judgment and choices, just like we do now! Except that in this market the amount of money in circulation matches, to within a nominal degree of accuracy, the amount of energy that is entering the economy from the Ecos. That is, the amount of high quality energy available to do useful work.

The next level up, the coordination level, contains the main market monitoring and regulatory mechanisms of the logistical portion of governance. This is the function that assures free flow of information (to the extent that is possible), education, and regulatory interventions needed to balance (optimize) operations for the benefit of all. I'll get back to what constitutes the benefit for all in a bit; that needs to be addressed lest this sound like an exercise in socialism, dictatorship, or so-called planned economies. The purpose of logistics is to make sure all of the components in a system are behaving according to the rules and that an equitable sharing of resources takes place. What counts as equity is yet to be determined.

Along with logistical governance, in the coordination level, is tactical management. This function deals with coordinating the human economy with the rest of the Ecos. It monitors the state of available resources and regulates the inputs, outputs (garbage), and recycling processes. It's main job is to keep the balance between humanity and nature. It works with the logistical management to keep the population level in line with the capacities of the natural world to provide inputs and absorb outputs without damaging the basis of those services.

You should be able to see that all of the above mentioned functions are already a part of most governments, but mostly in a haphazard way. Governments, like all natural complex, dynamic systems, have evolved by trial and error, discovering these functions and experimenting with various implementations. That is simply because these are the very mechanisms that have evolved in different contexts throughout the history of the world. Of course, living systems are the premier examples. But as I have written previously we see this evolution in every kind of social organization like corporations and military units.

Today the coordination level of the economic system is embodied in numerous regulatory agencies and data gathering organizations. All of these agencies and organizations operate on a fairly common model of operations called neoclassical economics — some version of Adam Smith's observation along with a bunch of closed systems theories about how the world works. But, as I have argued before, this model is incomplete at best, and in many cases just plain wrong. It isn't a good operating model on which to base tactical and logistical decisions. Its failures are precisely why we are having so many problems today and why so many so-called experts keep getting it wrong. Woe onto Mr. Bernanke!

We needn't, however, throw the baby out with the bath water. Happily there is a model of economics that is in tune with the true way the world works and it succeeds in using the good parts of classical economics. That is called Ecological Economics. Unlike neoclassical econ, EE doesn't treat the economy as a closed system. Rather it recognizes the flow of materials and energies into the economy that are treated as natural capital, and the outflows of garbage and heat that must be processed by the Ecos. The basis for designing a truly functional coordination level is captured in this new economics model. In later posts I will unpack some of these mechanisms to demonstrate how EE can be used to design good governance at this level.

Finally, the top rectangle represents the strategic level of governance. This is where the truly long-term and far sighted decisions will be made — where collective wisdom is operative. For example, this level of governance must monitor the progress being made in both material and spiritual well being of humanity in light of the capacities of the Ecos. As progress is made, say in technological capabilities — new technologies are invented and new knowledge is produced by science — this level is tasked with decisions like supporting a strategic drive into outer space. This level has the job of maintaining the long-term viability of the planet as a home to humanity and the entire biome. Unlike the coordination level, where a complete model of decision process is available in the form of EE, the strategic level is less well understood. However there are clues in both the biological models (brains) and what has been tried so far, such as in the UN, North Atlantic Treaty Organization, OPEC and other transnational organizations. I will tackle some of these issues in the not-too-distant future. For now lets just say that the best example of strategic governance to date was demonstrated by the founding fathers of the Constitution of the US. Not in the particulars of mechanisms they developed, like checks and balances between the branches of government (and the branches themselves), but in the wisdom they showed and the philosophical attitude they took. They were looking into the future as best they could, and most would agree did a pretty damn fine job of anticipating some of the problems we have today. What they could not do is anticipate the way in which industrialism, capitalism, and technology would converge and develop into a lethal brew. Most of what is wrong with the Constitution and the government it outlines is that it could not adequately adapt to the rate of change and the ultimate greed of the few who rob our spirit and wealth through blurring the information we need for a democracy to work. They had some insight into human nature, but not enough.

Today we have so much more experience, knowledge, and models of how things work. We have a holistic vision of systems science to guide us. What we lack is the wisdom to use that to create a better form of governance that will stand the test of time and, I would hope, give humanity an opportunity to evolve its sapience to levels where all human beings could achieve understanding. We must ask: How can we find a way to intentionally create a natural and holistic form of governance? The framework, the theory, is right in front of us if we will just open our eyes to it. We are clever enough to make it happen. But are we wise enough to do so?

What is the real problem?

As I have written before, we must be certain that we are working to solve the right problem. Back in March I asked this question: What if we tried to solve the wrong problem?, noting that a problem may look intractable if not properly understood. If we are not careful in understanding what is really wrong, and characterizing it properly, we can end up wasting resources trying to solve something that either isn't actually the true problem, or is literally intractable as posed.

A problem exists when things don't feel right. You know you're sick when your body doesn't feel right. That is a medical problem. In my last blog I suggested the parasitic-caused disease model as strongly analogous to the human relationship with the biosphere. The host in a parasite infestation can be diseased and show symptoms of it, just like the Earth is currently showing symptoms of mankind's over-growth and over-consumption. Let me refine the analogy even more because I think there are clues in there that we can use to better understand the real problem that needs to be solved.

As with any disease the victim suffers general malaise and one or more symptoms. These are the external manifestation of the disease, they can be observed. And they can sometimes be treated directly by a palliative. If the patient has a fever, prescribe aspirin. That should help.

But it only helps with the fever. It does not cure the disease. You have to dig deeper to find what systemic aspects are being affected that, in turn, cause the symptoms. A lot of different physiological conditions can give rise to a fever (though generally it is some kind of infection that has triggered the immune system). The real question is what are the physiological markers (the chemical profile showing what is out of balance)? Knowing this tells you what is going wrong physiologically that constitutes the disease state. There might be medical interventions at this level that will help alleviate many symptoms but it is still not a real cure.

Deep inside this whole system is an active agent that is the distal cause of the disease. Even if you manage to treat the physiology to dampen the disease, the continued presence of the agent can generally mean a recurrence of the problem in the future. The only cure is to find and eradicate that agent. Completely.

As I see the social and individual responses to what is ailing the Earth I am reminded of these three levels of treatment. Indeed, most of what I see reminds me of simple palliative treatments. Take the symptom of global warming due to greenhouse gas emissions. We understand that forcing the energy balance of the atmosphere to higher mean temperatures is going to cause even more symptoms - climate changes, some of which will be maximally disruptive. So what is the cure? Since this is only a symptom we can only think of palliative treatments. For example, in this case, we pull out the old cap-and-trade/market mechanism. We do this because it seemed to work for sulfur dioxide emissions back in the 90s (but see this article by Gar Lipow). Cap the emission of a bad substance and allow an open market for trading permits to pollute. It is claimed to have worked for that particular problem (and why is an interesting study in contrast with the CO₂ emissions problem). And since everybody desperately wants the market to be the solution, we'll haul it out and give it to the patient in hopes that it will work again. But that is only treating a symptom. Not the agent of the disease.

What about medical interventions in the physiology, or in our case, the infrastructure from which the emissions come? Mostly that is factories, transportation, and home heating/cooking. There are proposed interventions. Alternative energy production can be ramped up to allow reduction in burning fossil fuels. Automotive efficiency standards could be ratcheted up to reduce emissions, or a newer form of electrified transportation could be built. Some new technology might be needed to make it all work. But this is still only treating an intermediate cause of the problem. And there are substantial questions about whether we really can actually do any of these things. Even if we did, what would the consequences be? Would we all breathe a collective sigh of relief and then go out and expand our per capita energy use as well as seeing the underdeveloped world get the same ability to use energy? Where does all that energy come from? Could we then, one day, be faced with real thermal pollution (like cities produce thermal pockets just from the amount of heat generated by them)? Like medicinal interventions, what might be the side effects? And might they be worse than the disease?

These treatments cannot cure the disease, only set it back a bit. Because the agent of the disease is us as parasites. We simply cannot control our urges to procreate and consume as we are currently constituted genetically. Nor can we face the need for some more comprehensive and restrictive governance mechanisms that compensates for these proclivities. On the other hand, once the symptoms become so severe that they are causing us pain (the host retaliating) perhaps we'll consider the real cure — fixing ourselves. Or, as happens in the natural world, the parasite can undergo evolution that introduces a regulatory function making it less lethal, even more benign.

As I pointed out in my last blog, parasites and hosts have been co-evolving since shortly after the beginning of life on this planet. That evolution has produced some truces in which the parasite is regulated in such a way that the host does not become sick. This is to the advantage of the parasite as well as the host, since then, the host will live longer to provide a stable home for the parasite. It's one of those rare win-win situations. That is what needs to happen with the mankind/Earth situation. Earth provides a marvelous environment in which to thrive. But the parasite human is currently too greedy to know when enough is enough. As pointed out in prior posts, cleverness is not enough. We need the kind of hierarchical regulation that comes from strategic thinking, that comes from sapience. Humanity needs to develop the wisdom of nature.

Where my questions have led me

The conventional wisdom supposes that human beings represent the epitome of intelligence on planet Earth. Regardless of your theory of origins of Homo sapiens, special creation or evolution, you probably view humans as a special case of animal life. No other animal on this planet works in the realm of abstract symbols (languages) to produce artifacts and understanding of how the world works. That certainly qualifies as special.

But if we are the most intelligent creatures on this planet, then something is wrong. We are doing some pretty stupid things and don't seem to be able to stop ourselves. We wantonly destroy one another. Moreover, we are in the throes of taking down many species with us though our greed for more power. and the worst part is too many of our number can't or won't see what is happening.

This blog has been devoted to explorations based on a fundamental question. If we are so smart, why is the world the way it is? And I have been sharing with readers many subsequent questions and some possible answers along the line. I have been trying to make sense of our world, our species, its impact on the world and itself. I've tried to use systems thinking to approach this and have not focused on any one aspect, like global warming or peak energy, because I see all aspects as interrelated. There is one central aspect, however, which I feel is the ultimate cause of problems. And this is no surprise to many people who intuitively know that there is something wrong with human nature that is at the root of everything else. Even the ancients knew it when they created the story of Adam and Eve and so-called original sin. Man's weakness of morality and long-term foresight but strength in cleverness has been at the base of every tragedy, every failing in human history. Preachers preach salvation through renouncement of sin; and still we sin. Even in the Vedic tradition, Hinduism and Buddhism, where man is perfectible but only with concerted attention to spiritual pursuits, humans start out corruptible and seek salvation through prayer, meditation, right living and, for all of those, discipline. We are not naturally and spontaneously able to live rightly, even though we have a glimpse of what it means to do so.

Wisdom has been sought from time immemorial. Wisdom has sometimes been recognized by many less wise, when it appears in those few remarkable beings over the ages. But it has been in general short supply for the whole history of mankind. Why? Here is what I think is the reason and the results we actually witness today. Humanity is not the ultimate, or the possible epitome, of true integrated intelligence. This species is just a step on the path in that direction. But if we don't recognize where we are and take corrective action it could be the last step before falling off the cliff. We've been walking this path in the fog of ignorance. If we don't wise up, literally, we will make a wrong turn and go over that cliff.

The metaphor often used for the human condition is disease, generally that humans are a cancer on the Earth. I have already weighed in on that particular version as inappropriate because what we are experiencing is part of a natural process — evolution. Rather I think of humans as more like a parasite that has gotten out of control and is causing a disease condition to the Earth, but one that is 'curable'. One cure, of course, is to kill off the parasite and this is something the Earth's immune system may do. Another is to reduce the parasite's population to a level where they effectively become commensal, living on the host but not causing symptoms. The ideal condition for the survival of a parasite is to not cause disease or death in the host, but to live in a steady state condition just below the level of harming the host.

I prefer to think of humanity as having become a killer parasite. And that is the metaphor we need to use to think about our situation. Like any disease that you don't understand you can treat the symptoms and hope the patient gets better, you can give massive doses of antibiotics to aid the immune system, or you can do research to find the root cause. The bug or genetic propensity or the chemical imbalance (toxin) that is the ultimate cause of the symptoms. That is what I have been trying to do.

So, here is my personal view from trying to make sense of the situation. For what it is worth.

The Problem

As humans have evolved to this point there is an imbalance in the human psyche between cleverness and sapience; much cleverness, just a little sapience.

Cleverness is a combination of intelligence and creativity. These have evolved to a high degree in Homo sapiens in response to a need to solve complex problems and provide for adaptive response to a complex environment. Intelligence provides the memory capacity, learning competency, and rational engine for reasoning. Creativity provides a means for association by analogy, developing metaphoric thinking, and conducting stochastic exploration through concept space, trying new connections. Cleverness is the main engine of decision processing, but left to its own devices can only deal with limited time and space. It seeks rationality (cause and effect) in decisions. Intelligence evolved for efficient exploitation of the environment, creativity evolved for generating explorations to find new ways to exploit the environment. From an evolutionary standpoint these evolved to increase our competency in fulfilling our drives and needs (and in our case some learned wants) originating in the more primitive brain stem and limbic systems — the affective part of mind.

Affect is the ancient brain capacity to influence, and sometimes force, decisions/actions based on very primitive criteria for survival. It is the basis of emotions and moods, which are recognized consciously after the fact. Affect helps the rational decision mind by biasing certain branches of the decision tree (either making them attractive or repellant), effectively producing a greedy approach to local decisions. There is no long-term consideration from affect (follow the heart).

Sapience is the brain capacity for processing tacit models of the world to produce judgments that are comprehensive, moral, and effective over the longer term in guiding decision processing. Sapience is the basis of planning, foresight, moral sentiment, and selection of what to learn in guiding cleverness for the construction of models. Sapience can override affect to some extent, thus allowing longer-range thinking to guide decision making. Sapience is the basis of wisdom.

In Homo sapiens the effectiveness of sapience is limited. Sapience, like all cognitive capacities, follows a distribution curve across the population. It is more than likely that either it is a normal distribution with a low mean, or it is a skewed distribution (more likely) toward the low end of capacity. This is often the case for newly emergent biological traits in evolution. Either way, the fundamental problem for humanity is that its biological basis for sapience is not sufficient to do a good job of guiding cleverness in ways that are relevant to a global scale and high cultural complexity. But that is just the situation our cleverness has produced.

The Direct Effects

Like all biological systems humans have evolved to find an optimal tradeoff in the energy gained vs. the energy used in living. They have to use a great deal of energy to find more energy (food) and sufficient excess that they can pass on to their developing progeny. In their cleverness, however, they have discovered the trick of using external energies such as wood for fire, animals and water to replace human muscle work, and most recently fossil fuels. They have invented tools to assist them exploit energy flow more efficiently, and as a consequence grow their numbers inordinately — following their biological mandate. This drive to maximize energy flow has led to many consequences outside the normal scope of biology. Our cultures, even ancient ones, reflect our natural propensity to exploit resources for our own biological purposes.

We've done this for so long now that we simply take it for granted. We even invented a model of the way things work, called economics, that has little to do with physical reality but has provided a wonderful justification (rationale) for consuming full speed ahead. So we have treated our finite world as if it were infinite. It isn't hard to understand why. When the world held fewer than a billion people it must have looked infinite in its capacity to supply resources and absorb our wastes. But we blinked and suddenly there are 6.7 billion of us, still consuming resources as if they were infinite in supply and spewing garbage which is accumulating. Worse yet, we've continued to develop technologies that allow each individual to account for more personal consumption and garbage per unit time by using ever more units of energy.

Every so often a clever person with some greater inherent wisdom would question this process. Malthus was one. But in the species general lack of wisdom and exuberant cleverness, someone would invent something that 'proved' Malthus wrong. Or so it always seemed. And the consumption train just kept on steaming ahead. We've had modern Cassandra(s) with respect to population overshoot. But like Cassandra, few if any listened. Many mocked.

The real devastation was the dehumanization of people. Somewhere along the line human life became a commodity. I think it must have happened soon after agriculture became a production affair in Egypt and Mesopotamia (and in parts of China and the Americas). Slavery seems to have emerged quite early in our history and became a regular business as civilizations emerged. Human life became so cheap that humans found it quite customary to kill one another for power and wealth. This too is part of our low sapient nature. In terms of brain function, the weaker prefrontal cortex cannot adequately subdue our baser instincts in the limbic system. When population densities reach a critical level, as they must in large-scale agricultural efforts as occurred in the Nile delta, the value of a single human life seems to be diminished. Yet throughout history most wise men and women have been associated with peace and harmony. Or at least they could be seen to practice the greatest good for the greatest number when times were rough. More evidence that humans are not inherently wise — the dehumanization of others. Abu Grahib is just the latest example.

More evidence of mass dehumanization is found in the modern 'civilized' world of commerce. Our whole industrial society is organized around work and economic growth. The individual counts for little. They are just workers and consumers. They produce and they consume. And they do it so that a few 'capitalists' can enjoy the gains of profit. To what end? Even our education system is designed to produce more cogs for the machine. 'Just another brick in the wall' (Pink Floyd).

The Symptoms

What has been the result of cleverness without wisdom? The symptoms are rife and their ugliness is becoming evident with each passing day now. The rate of harm caused by our blindness in the fog of ignorance is accelerating. We appear to be on the shoot-up portion of an exponential curve. And we know from science that a process that shows exponential behavior is ultimately headed for a crash.

Our population is now, by most accounts, in overshoot. We will go from 6.7b to 9.5b in just 40 years. I know the UN projects that population growth rates will subside and that 9.5b represents a plateau. But those projections are based on a business as usual model that has development and education of women spreading with democracy. Given the nature of peak oil and its consequences, we will not have business as usual. Indeed development for the so-called developing nations is likely to come to a screeching halt. Already there are food shortages and food riots going on in several of these countries. All bets are off. But given the shape of the population growth curve, I suggest that we are already in crash territory. There will be no plateau followed by a soft landing.

Every new human puts increasing stress on the ecos. This is especially true in the developed world and grossly so in the United States. One of the major symptoms of lack of wisdom in an overly clever species is the incredible disparity of wealth between individuals within a nation and between nations. This has long been the cause of conflict in the world. Sure madmen leaders pull the triggers, but the idea that there are the haves and have nots and that is just the way it is, is the height of foolishness. And the height of dehumanization of the other.

Well this is what we get for our hubris (another way of saying lack of wisdom and understanding of reality). Our profligate energy consumption and CO₂ emissions have physically altered the thermodynamics of the atmosphere and the chemistry of the oceans (acidification) with as yet unknown consequences for all life on this planet. We've used fossil fuels so indiscriminately, thinking ourselves so clever to have invented SUVs, that we now are approaching a time when those fuels will be increasingly difficult to obtain. We will see the price in monetary terms going up as the energetic costs in recovering what is left in the ground skyrockets. And we will most likely need a huge increase in energy in order to adapt to climate changes.

We can expect other commodities and necessities to peak as energy becomes increasingly expensive. Everything we do economically is based on energy flow. Everything. So expect peak food, peak water, in fact, peak everything (see Richard Heinberg's book by that title.)

What is the Remedy?

As with all parasitic outbreaks we need to discover a remedy before the patient dies. Now bear in mind, based on everything I've just written, this means a severe reduction in the parasite population. I see no way that every individual's impact on the Earth can be reduced to such a level that a population of 9.5b will not make the Earth sick. Right now the patient's own immune system is kicking in. I fully acknowledge that James Lovelock's Gaia Hypothesis holds a deep truth about the systems of Earth. The consequences of global warming will be severe and destructive to many. The Earth will purge the parasites.

The only long-term cure for the disease is for the human race to get wise. Since there is a biological basis for wisdom, sapience, this means increasing, through an evolutionary process, the brain capacity for sapience. That is, the solution to the problem is the same one that has always been operative in this world. The system must evolve. If humans are to be a part of that process, if there are to be a species of humans in the distant future of this planet, then this current species has to evolve into a new species with a better brain. We don't need more intelligence or creativity. We already have lots of that. We need better judgment. We need more wisdom.

I realize this view is not encouraging when we think we want the problem to be something like: How do we save humanity and the world, or in other words, how do we keep what we have now going? But that is really asking the wrong question. Evolution is natural and inevitable. But it as often as not involves extinction. There is no guarantee that humanity will survive the consequences of its own mess. We are not that much different from yeast in a bottle of grape juice. We use up the sugar and pollute the environment with the equivalent of alcohol and then die. Job done.

But there is one important difference between us and yeast. We can actually see what is happening. We can anticipate the future if things continue the way they are. And what I anticipate is the need for two major actions in order to lower the most devastating impacts and give our species a chance to adapt to the future world. First we need to start an immediate crash program to reduce our energy consumption and population growth (and I do mean now and severe) and a similar crash program to construct a new economic system based on renewable energy flow. The second is to increase the research on sapience (neuropsychology, behavior, developmental, and genetic sciences) so that we can identify sapience capacity much as we do intelligence today. People of like intelligence tend to seek one another out, especially for mating! If people knew more about sapience and its behavioral characteristics they could seek mates of similar qualities. Since wisdom, as a recognizable trait, doesn't tend to emerge until later in life, especially after the main reproductive years, the judgment tests would have to be correlated with genetic markers for sapience. I've alluded to this previously. Society will have to place a big premium on babies resulting from unions of high sapient individuals.

And though I tremble to think and say it, democracy won't produce this result. Again, democracy is one of those things we take for granted because of our history and the stories we tell ourselves about how great it is. But, as I've tried to argue with postings on hierarchical control systems, governments based on democratic processes alone are doomed to failure when the social organization gets too complex. This argument extends to market-based economies as well. This is the same story as the evolution of life itself, but now writ at the social level. Our own government today (USA) is a prime example of the failures of democracy, even a representative democracy. Our government is in shambles and everyone recognizes this even if they don't want to admit it directly (the Congress's approval ratings have dropped into single digit territory as I write this - can you imagine that?) Besides, no single national government can tackle the problems. The only way anything is going to get done is by developing a hierarchical control structure for governance of the globe (or rather the people parasites on the globe). Actually the analogy works pretty well since commensal parasites have evolved internal control and communications mechanisms to prevent their numbers from overwhelming the host; part of a hierarchical control approach.

Something new in governance (government + markets) is needed. Something that recognizes the real needs of operational level, coordination level (tactical and logistical), and strategic level management. This is provably nature's way of organizing dynamical, complex systems (life is the existence proof). It is where we are headed, libertarians liking it or not. The real question is will we get there before a cataclysm or not. I suspect not. In fact I'm guessing that we are so unwise that it will take the cataclysm to get peoples' attention. I hope I'm wrong on that.

The good news is that there are sapient individuals in this world. The law of large numbers guarantees it! There is hope for humanity. It just doesn't look like the hope that most people think of when they think of the need to solve our problems. My hope is that enough clever people who also are sufficiently wise to see this will be thinking not about their own skins, but the fate of the genus Homo. My hope is that the long-range planners will position themselves to take action once the sh*t hits the fan. My hope is that the rest of us clever people will heed the writing on the wall, even if we don't completely understand it, and take actions as outlined above, to ensure that our genus will have a shot in the far future world. We humans can have an active role in our own evolution.

In future postings I will pursue some of the topics I've hinted at in prior posts and consolidated here. For example: A strategic plan for planet Earth.

How do you make sense of anything?

As a follow-up to my last question, I offer this claim: Systems science as a framework for understanding is a way to make sense out of the messiest set of wicked problems. Let me explain.

Those who have been reading this blog for a while know that I have been an advocate of systems science as a means to understand the world and all of its bits and pieces. For me, systems science is the epitome of science itself, providing a framework for both reductional analysis and holistic integration. Its language is a meta-language of science and adoption of systems thinking is essential to grasping even those areas of life that are seemingly not under the auspices of ordinary science. The qualitative aspects of systems science can be applied, I claim, to any area of human life, even the humanities.

My claim goes even further in asserting that the brain (human and animal alike) is a system that automatically perceives and conceives systemness in the world; it mirrors representaions of the systems with which it comes in contact. Systemness is not an official word, but it should be. It is the quality of being a system (outlined below). And I hold that our brains quite naturally do the work of organizing our sensory perceptions as well as our conceptions into systems because that is the way the real world is organized. Our brains evolved under selection for the capacity to perceive the world in a systemic way. It automatically sees objects as systems and also sees relationships, especially causal relationships, between objects as components within a larger system. We see things as wholes, but also as parts of a greater whole with the interactions between the components as part of the larger system dynamics. Of course, I also think that the average Human 1.89 brain is limited in the scope and realization of this. Expanded and explicit systems thinking is part of sapience and is not at a global or long time-frame scope in Homo sapiens.

Even so, our brains are automatic system recognizers and systems model builders if things don't get too complex. It is the way we see the world.

If true (and take a minute to try to see the world in any other way to provide a contradiction!) it is surprising that it has taken mankind so long to discover a formal and explicit way to articulate systemness. Of course it is embedded implicitly in our language and our way of interacting with the world — we are ourselves components in the world system. I ask my students to explicate the word 'thing', an exercise they seem to have never been called upon to do, nor thought of themselves, surprising since it is probably the most useful word in the English language (I'm no linguist but I'm guessing there are similar words in other languages). It is a general placeholder for an object or even a thought that has a wholeness quality to it. The world is full of things, both named and un-named, that all have that common quality. And things interact with one another. Things do acts, either in seeming isolation (for a time) or to other things. The boy threw the ball. The ball flew through the air. The ball fell to the ground. The ball hit the ground. The completeness of these acts, in themselves, are perceived as a larger 'thing'. We can even say, "that thing did its thing," without grammatical conflict simply because the one 'thing' is part of a larger 'thing', an action that is part of a system.

The world isn't comprised of disconnected things doing unaffecting things. Though it may be largely stochastic and even chaotic (in the deterministic chaos sense) all things interact with other things. The world is organized in the sense that all things are connected to all other things even if infinitesimally weakly. This is the way the world is.

Given the systemness of the world and the things in the world, wouldn't it be helpful to construct a formal language of systemness that could be used to describe the world, and its parts, in such a way that it helps us discover the organizations we have thus far missed? In other words, knowing a priori that the phenomenon we are observing is part of a system and constitutes a system, even if we don't know all of the constituents or all of the interrelationships, if we know the principles of systemness we can use this general knowledge to discover the particulars in this case. Systems science is our guide to further understanding the phenomenon by telling us what we should be looking for in its workings that we have heretofore missed.

The principles of systems science are the first, first principles!

So what is systemness? Qualitatively a system has a number of properties that can be enumerated and identified in real world 'things'. One of the first properties is that of boundary. Discrete objects usually have clear boundaries, like skin or bark or... you can tell the system from the background or environment. But sometimes the boundary isn't crisp in nature; it can be fuzzy. What is the boundary of a nation? Its borders? What about a language? Regardless of the sometimes problematic nature of boundaries we do manage to either perceive them or construct them (for convenience) in such a way that they allow us to recognize another important property.

Systems have inputs and outputs that perceptibly cross the boundaries. Quite nicely, these inputs and outputs consist of just three fundamental 'stuffs'. These are matter, energy, and messages. The latter are actually conveyed by the flow of matter and energy (think electrons for example) but because they can provide information to the receiving system and because they are so smallish compared with mass flows, they get special consideration. I should add that messages sent to other systems allow for an extremely efficient way to have a causal impact on the receiver. One day I will devote a whole blog (or several) to the nature of messages and their special role in systems interactions.

Inputs and outputs of stuff over time constitute the behavior of the system. One can start to get very quantitative about this, but for now I won't. Suffice it to say that inflows and outflows can be measured and correlated from outside, allowing the observer to make some predictions about how the system will behave under other regimens of inflows, that is what outputs it produces given certain inputs. This is often referred to as 'black box' analysis. You can see what the system is doing from the outside, but you might not be able to say how it is doing it.

Systems have internal structure (components) and dynamics (interrelations) that require considerable work to explicate. You basically have to take the system apart or do 'white box' analysis unless its boundary is transparent (glass fishes!) This generally means destroying the system, which hopefully isn't the only one of its kind. This kind of analysis has been the stock and trade of normal science, the kind most people learn about in school. It is particularly difficult when you find components are, themselves, sub-systems, or systems in their own right. Then you have to keep dissecting until you get down to some fundamental level where you already have a model, like the molecular level in biology. This is the form that people call reductionist, although the philosophical form of reductionism posits that everything can be explained from that reduced systems state. Analysis should not be confused with reductionism. When physicists state that they are looking for the grand unified theory (GUT) or theory of everything (TOE) they don't mean to say they are looking for some fundamental theory that could be used to reconstruct everything at higher levels of organization in the universe. They mean that they have found the natural stopping place for reductionist analysis. You don't have to dissect any more. [I'm waiting for someone to work on the Theory of Everything Essential That's Hot, or TEETH, to go with the TOE and GUT.]

Systems form these natural hierarchies of organization and complexity. The latter is just a measure of how many kinds of components and how many kinds of interrelationships the components can have with one another. The more the merrier. Biology, and its complexity, has been the hotbed of discovery of systemness. Life is now understood to be based on a hierarchy of increasing complexity from atoms up to organisms and beyond to ecosystems. You can't really understand any level in the hierarchy without understanding the whole. And even then you need to understand its (the biosphere's) relationship with the rest of the planet. We are just, unfortunately, discovering this essential quality of systemness. Everything in a complex, dynamic system, is connected. The butterfly effect is generally in effect.

Possibly the most important system (or subsystem of the world) that we seem to have the least knowledge of at present is the human social system. Actually that is the social system of social sub-subsystems of social brains. Once, before the world got flattened, we could basically see boundaries around cultures of the world and we could study other cultures as objects. But with a McDonalds on nearly every city square throughout the world the boundaries are getting harder to perceive. Today it is very meaningful to talk about the global community of mankind as one system that is significantly impacting every other system on earth, atmosphere, biosphere, hydrosphere, and lithosphere. And, in not understanding the noosphere (the gossamer thin film of minds), we are in danger of having an impact that could preclude the further evolution of organization on this tiny blue, green, and white ball.

Biology is an excellent example where systems science is having a great impact on how science is done. In fact there is now a whole field devoted to studying systems biology. The principles of systems science (only some of which I've mentioned here) are used to guide the analysis and modeling (another form of white box analysis) of biological phenomena. Already this approach has yielded tremendous results. The human genome project and all of genomic science has developed by applying systems theory (e.g. network theory applied to genetic and epigenetic control of development). Breakthroughs in understanding, not mere cataloging of phenomena, are coming on a nearly daily basis. The same can be said for neuroscience and understanding of what is going on in the brain.

But the biggest payoff of elevating systems science to a preeminent position in the science pantheon is in education where we could, if we just realized it and had the will to do it, provide every child with the fundamental tools for making their own sense of the world. Learning the explicit form of systems science is far more natural than learning to read or do arithmetic! That is because it is what the brain does naturally anyway. All education need be is a refining and bringing out the systems thinking we all do already. Subject content will follow and serve as examples of systemness rather than be presented as stuff you have to learn just because it might come in handy someday. Systems science is something everybody can use in all aspects of life. Seeing the systemness in new things prepares one to categorize and understand the particulars of a single subject.

Given a solid basis in systems science (qualitative) a young mind will be better prepared to investigate the factual and quantitative aspects of the world. Rather than trying to teach every person to be a scientist or be a mathematician — the way we are currently trying to force every mind into a single mold — and thus turning a vast majority off on either topic, we should be helping each young person learn how to use systems thinking to master whatever topic they find interesting in itself. Learning math or science is much easier when you have the right motivation, such as you are trying to understand why some phenomenon works the way it does. Math and science can be brought into the lessons on an as needed basis as students explore the world and discover a need to have a particular bit of knowledge or a particular quantitative tool to further their investigations. Teachers become sensitive guides that can bring to bear the specific pointers to needed tools at the right time.

Of course, we may never see such a world with such a graceful form of education. Not with Human 1.89 in charge. Educational reform of the kind I envision is all but impossible with the sparseness of wisdom now had by our species. Maybe Human 2.0 would manage it. I dream it, but, alas, I will never know it.

How do we make sense of a messy world?

A goofy looking tourist comes across something unusual...

What the hell is that? What the hell is that thing? (a look of recognition) Oh, I know what that is. (staring more intently at the 'thing', then a look of puzzlement) What the hell is that?

Steve Martin in a Saturday Night Live skit.

Making sense of some complex messy situation is what humans do. But we also tend to take that we do this for granted. Sometimes it helps to make our thinking processes more explicit so that we can think about the processes themselves and in doing so make them more effective. Psychologists call this metacognition, where ordinary cognition is just the thinking process itself.

So in the hopes that we can improve our sensemaking abilities lets consider:

What triggers us to think about phenomena is when those phenomena are surprising. When something doesn't happen the way we expect it to we have a problem. I'll get back to the reason that these situations are problems in a bit. To follow this process in a linear fashion I'll keep on the main track. Like Steve Martin in that famous SNL skit, we recognize when something is amiss. We realize when something doesn't fit our model of the world, when something doesn't look right. Or we are surprised by something we've never seen before. Our emotions can go through a whole panoply, from surprise to fear, the default if we can't rule out danger, to annoyance, to conviction that it is not that strange (denial), and so on. Martin did a masterful job of doing just that in his skit.

The first step is to try hard to match the phenomenon up with something we do know something about, to try and fit it into patterns that we have encountered before. That takes some mental work since the measure of our surprise is essentially a measure of how unlike anything we would recognize it is. This, in fact, is what we mean by information — news of difference or the unlikelihood of the phenomenon vis-a-vis our prior experience and knowledge. The greater the surprise we feel the more informative something new is. Of course, if it is too surprising we suffer information overload. Our nervous systems are not able to adequately process the information.

Failing to make a reasonable categorization we get to work on the real issue, learning the nature of the phenomenon and putting it into the context of our larger personal world. We try to make sense of the phenomenon. We are compelled to do this because we deeply need to survive. And new phenomena might be either dangerous or a potential benefit to be exploited. We won't know until we understand it and its relationship to our world. That is what makes surprises problematic. Not only might the phenomenon be harmful or beneficial (important in either case but particularly so if it is harmful), but it may be recurrent over time, in which case we had better understand it in relationship to other parts of the world that we do understand. If we learn those relationships we may find causal cues that alert us in the future that the phenomenon is imminent and we can prepare for it. For example if we experience a tornado and noted the quality of the sky (cloud formations, color, etc.) just before it touched down we will remember that sky pattern as a warning that a tornado could form in the future.

All unexpected social phenomena are incredibly complex with many hidden variables (like what are the thoughts going on in other minds!). We call these 'wicked' problems. They are so under specified in our minds that we simply haven't got ready ways to grasp their significance or project what is going to happen in the future. Problem solving, in the sense of avoiding harm or exploiting opportunities (or in some cases, maybe just maintaining the status quo) requires first grasping the nature of the phenomenon and connecting its nature to the larger world. Solving the problem involves understanding the problem and its consequences well enough that you can anticipate future states of the world under various possible actions that might be taken. If the phenomenon looks to be a recurring one (e.g. teen pregnancies are rising vs. you learning that your teenage daughter is pregnant), then one needs to develop a policy for action for the future. Policy problems are wicked.

How does one, or a group, come to understand phenomena of this sort. Typically our model of cause and effect is limited due to the fact that there are too many hidden relationships and hidden causes. Nevertheless, we do look closely for evidence of temporal ordering in events and use our abductive reasoning to attempt to construct a working model. There aren't many options for testing a model in wicked problems like we do in ordinary science. We construct hypotheticals but can't really test them. Instead we have to refine our models by observation.

It isn't strictly true that we can't do experiments, of course. We do this all the time when we intentionally say something to see how someone else will respond. Or if we take an action to see what others will do in response. But most people are not terribly manipulative; indeed we tend to think someone who is suffers a form of mental disorder. It is probably a minor instrument in our repertoire. More generally we rely on simple observation and relational associative learning to develop our beliefs about what causes what.

Between repeated observations of phenomenal relations with inductive learning and whatever experimenting we can do, we seek to understand what is happening. Ideally we can develop a model of the phenomenon such that we understand what sequence of events lead to what consequences and what it means to us (danger or opportunity). If our inner motives include protecting our kin or our tribe or whatever group we associate with (or alternatively if we are looking for exploitive opportunities for the group) then the process is essentially the same but now the scope is much larger. In any case it is a groping for understanding so that we can comprehend the phenomenon and use it in some sense that constitutes the sense making activity.

Understanding includes knowing what actions we need to take to alleviate harm or exploit the opportunities. But more than simple reaction, we often seek causative triggers that allow us to control the phenomenon (like controlling fire or planting seeds). This is our inventive side, using our creative thinking to explore possible ways we can initiate a desired result. Given that we can anticipate a phenomenon, we can also take proactive steps to get the outcome we desire, usually at a lower cost than had we been reactive. This, after all, explains how we have mastered so many aspects of nature. We are wired to exploit and we have the cognitive tools to do so.

What we don't have is an ability to see long into the future and anticipate the consequences of our own short-term masteries. We are not equipped to integrate over larger scopes of time and space than the immediate. Burning coal or oil solve immediate problems but create longer-term problems of a global scope. The long history of mankind solving small-scale wicked problems (think Henry Ford figuring out how the workers in his plant could purchase one of the cars that they had worked on) and the exponential rate at which such problems have accumulated and been tackled masked the fact that all of these solutions had ultimate global consequences. Some of those consequences, like mass production creating the consumer, have seemed good, at least at first. Others like burning fossil fuels at exponentially increasing rates, have proven harmful.

These are wicked problems at time and spatial scales that are nearly impossible to comprehend. Making sense out of the whole mess that we now have is probably beyond the ability of any single human and probably beyond the capabilities of even a large group of people. The reason is that there are so many interrelated problems with internal factors driving other problems, effectively the hidden variables I mentioned earlier. Take for example the issue of global warming melting the Arctic ice cap. As horrendous as this is, at the very same time we seem to be passing the peak of oil production, driving up the cost of energy. We have long ago passed the peak of oil discovery (in terms of estimated volume of each new find times the number of finds per unit time). Ordinarily we might think that by the normal laws of economics the increase in cost would drive down demand, but so far that has been minimal on a world-wide basis. So what are people talking about if the ice cap melts? They are excited about the prospect of drilling in the Arctic ocean for OIL! That's right, lets drill for more to keep the price of oil down, so we can burn more, and never mind that burning this stuff is why we have global warming in the first place. Solving one problem (cost of oil) will just increase the severity of the other problem (global warming) and human nature doesn't seem to get it. This is truly a wicked problem.

I am, as I write this, returning from a meeting with a small group of researchers and practitioners. We are organizing a project to develop a set of computer-mediated collaboration and discourse mapping tools for sensemaking at a global scale. We call the effort Global Sensemaking, or GSm (go here to see our group social network, and here to see our emerging ideas). Our objective is to develop Internet (World Wide Web) software that enables dedicated sensemakers (e.g. global climate scientists and policy makers) to collaborate in an effort to understand the impacts of global problems (like global warming on climate). If the pattern of sensemaking described above holds true, then the hope is that these efforts will lead to positive actions that mankind can take to solve the problems. Currently the only real methods for sensemaking and collaboration has been the normal science process — research and publish — which takes years just to produce the knowledge base. Collaboration and integration has had to wait for conferences and, in the case of climate change, the meetings of the IPCC (International Panel on Climate Change) that take place only occasionally. The GSm group seeks to provide tools that allow on-going collaborations and data gathering/interpreting so as to, it is hoped, speed up the process of sensemaking. With on-line tools, too, the various stakeholders in a sensemaking process will not have to travel long distances to accomplish this work. [BTW: I am traveling by train, 21 hours each way between Seattle and Berkeley CA and sleeping in coach leaves a lot to be desired.]

Of course, it is still an open question (and will remain so until sense is made out of these problems) that we actually do know the real nature of these problems such that we can prescribe solutions. Many people who assume we do are ready to sally forth with solutions they think will help, e.g. solar energy systems to solve the energy and climate problems (usually preceded with a "all's you need to do is...". But I am afraid these are simple reactive approaches (ideas) and are not anticipatory as a result of solid understanding. We have yet to know how we will expect to exploit or avoid until we really know what the problems are and what are the trigger or leverage points in the causal networks. Still, we feel compelled to try. I suspect, however, that our margin of error in picking solution actions is very thin. We are running out of time and we cannot afford to pick technologies and actions that will exacerbate some other problem while we think we are solving the one in focus. In this sense, the global problems we face are second-order wicked. They are wickedly wicked! Thus, I think it is imperative that we attempt to make global sense of these global problems, and soon. In prior blogs I've written about systems science and its ability to provide a framework for understanding the way the world works in a more holistic fashion. My efforts in this GSm work will be to embed systems principles in the design of tools in order to help GSm users apply systems thinking to their work. We have ideas about how to do this but tackling the design of such tools is, itself a wicked problem! Wish us luck.

Rethinking capitalism and banking (length alert!)

Starting with the basics.

The basics, it turns out, are not in traditional economics but in physics. To produce a useful product or service it takes energy in order to do the work. All production requires mechanical, electrical or, chemical work be done, hence energy is required. But there are special conditions that must be met before energy can be used to do work. Namely, the energy has to be at a high potential difference compared to the 'sink' or place where the used up energy goes after the work is accomplished. Such a potential difference can be recognized in, for example, the difference in temperature between the fire in a boiler and that in the cooling coils of a steam turbine. Heat at a high temperature boils water that expands pushing the turbine blades to do mechanical work. The steam must eventually be condensed back to water to start the cycle over again. The energy in the burning of a fuel at a high temperature flows through the boiler/turbine/condenser system doing the work and exiting it from the condenser coils as waste heat. The heat flows off into the environment, which is at a much lower temperature. Generally speaking the energy is thus dissipated in an unrecoverable form. That means the waste heat can do no more work. In actuality energy loss in the form of unrecoverable heat occurs throughout the system. Heat is given off by each stage from boiler to condenser.

Let me briefly explain if you haven't had a basic physics course (if you have then skip down a paragraph). Whenever energy is converted from one form to another, say from electricity in a circuit to mechanical motion, as in a motor, some of the energy is sloughed off, so to speak, in the form of waste heat. This is one of the consequences of the Second Law of Thermodynamics. That law states that some portion of energy is lost at each conversion. A more refined version provides a way of determining what the theoretical upper limits of work that can be achieved with each kind of conversion. Details are in the geometry of the work process, friction, etc. They need not bother us here. What we do need to take away from this fact is that no work process can ever come close to one hundred percent efficiency in its use of energy. Efficiency is a ratio of work out for energy in. And typical efficiencies for ordinary chemical, electrical, and mechanical systems range from ten to eighty percent, with most on the lower end. One very important form of chemical work is the conversion of sunlight into carbohydrates (a form of stored chemical energy) accomplished by photosynthesis in plants. In this process the average efficiency is amazingly between 0.5 and 1.0 percent! As productive as plant life is in converting sunlight to biomass the thermodynamic efficiency is quite low. This does not bode well for the concept of biofuels unless the rate of use of the fuels is substantially less than the rate of production of biomass. Plants will convert sunlight as long as the sun shines. They aren't particularly fast at it, but they are steady. And they grow over large areas. That is the good news. The bad news is that we have a penchant for burning the fuels both day and night, and there are so many of us that it is not likely that photosynthesis will ever be able to supply our desires.

What does all of this have to do with capitalism? You might think I'm about to launch into a promotion for investing in alternative energy technologies. That is not a bad idea, but I want to write about something much more fundamental as a prelude to a further discussion of how we might design the economy to be sustainable in the future. Capitalism, as it is currently practiced is not particularly sustainable. It has lost its original meaning and value. Now it has become simply a means for making the rich richer, and as a consequence, the poor poorer.

If you recall, I hold that money is really just a form of information about the availability of energy to do useful work, or at least it should be viewed that way. If we put this idea together with the above concepts of work and thermodynamics we get a very interesting way to look at capitalism. Namely, capital is excess energy available to do work. It is a concentration of energy that is at a higher potential than the surrounding economy! When a capitalist accumulates wealth (money) and then invests it in, say, manufacturing facilities and wages guess what gets done? Work. The capitalist has exchanged her tokens of available energy for work to create the facilities and for the energy inputs from labor to produce products that someone else is willing to exchange their rewards for doing work (money). These are called customers, and these days we call them consumers for a good reason. If the capitalist has produced a product lots of customers want, she can charge a price that returns the original investment plus a profit and the whole cycle starts again. Adam Smith famously noted that the capitalist's self-interest (profit) would provide both incentive and fuel to keep this cycle going. But that, it turns out, isn't quite right.

There is just one problem with the standard economic view that I just summarized. If capital is excess energy, in reality, it has to come from some source. It has to be converted into a usable form. And, as work is accomplished, it is dissipated into the atmosphere as waste heat. It's a one way trip. This may be a bit subtle, but unless the product that the capitalist produces is something that increases the available energy to the whole economy (a tool; see link above), energy will be used up and lost forever without any net increase in energy in the future. In other words, the world loses energy and can do less real work in the future. [In fairness to Smith he also wrote about moral issues related to capitalism. He can't be faulted for the fact that greedy people have conveniently ignored his works in moral sentiments and find justification in his explication of the 'invisible hand'.]

The motive for being a capitalist is also questionable by Smith's report. Self-interest easily morphs into greed it seems. People begin to expect profits to grow. Somewhere in there the invisible hand lost a grip.

Originally profit amounted to skimming a bit of the excess energy produced by producing tools. Investing energy into tools that produce more energy (like plows for example) can create a situation where excess energy is produced for a time. Profit is a percentage of the excess returned to the capitalist so that she can continue investment in maintaining or even growing the production capacity (growth of equity). Perhaps, if things go well and for short periods of time, the returns may allow a small percentage of the profit to go to the capitalist as a reward (dividends). Such is a sustainable system where all of the energy inputs and outputs balance and the production of any excess is temporarily stored for future use.

Banks were originally about storing excess energy! The notion of a bank is incredibly simple. It originated in the construction of common grain storage facilities. When growing conditions were good (back in Mesopotamia) the farmers could store their excess production in the facilities. Writing was invented originally to mark the amount of grain from each farmer so that s/he could reclaim that grain when winter or bad growing seasons required it. An overseer of the granary would make a living protecting and accounting for the grain (this actually worked for all storable food products) by charging a small percentage of the grain from each farmer. Granaries are representative of a very general systems concept called buffers. A buffer is a temporary storage facility that helps smooth out the flow of energy when there are ups and downs in production. A physical inventory is another example of a buffer.

After the invention of money as tokens of wealth (grain in this case) things got a little more complicated. Banks as buffers for tokens, vs. grain, became an abstraction of the real underlying process — storing energy directly. Then some inventive banker came up with a clever, but not wise, idea. Money could be used to purchase stuff, like more seed and plows, etc. Banks could lend money to farmers who could show promise for bringing in a bumper crop, thus increasing the excess in the granaries. So the idea that we could take some of the prior excess energy and use it to 'invest' in future production was born. At one fell swoop we got debt financing and capitalism. At first the idea was quite worthy, as long as no one got greedy and the crops came in as expected. Occasionally the weather didn't cooperate and the whole society suffered. People, especially bankers, quickly developed the notion of risk. And it was a short step from that to the idea of those doing the lending mitigating risk by extracting a profit from the practice of lending. Wow! What an idea! If you were in the business of managing the flow of energy (money) you could have your cake and eat it too! Not a bad invention, for a few, that is.

Banking soon invented the concept of lending some peoples' rightfully owned assets to other people who promised to increase production and thereby pay back even more excess than would have otherwise been expected. If you could get the excess back before the rightful owners demanded to withdraw their portions, hey you could make a handy profit and nobody would be harmed. Right?

Fractional reserve banking is the greatest rip-off of all time. It has the effect of creating new energy, or seeming to. Today we recognize different kinds of money. There is the basic currency printed by the government and used for normal buying and selling (economists call it M1). Then there is the money created by banks through fractional reserves. This allows banks to loan out of their savings accounts (other people's money) as long as they retain a fixed percentage of those funds on hand, in case the rightful owner comes knocking on the door wanting their money. This magically creates more money (M2 and above). The original money is simultaneously in the bank, as far as the owner is concerned, but it is also back in circulation supposedly being invested in new wealth creation. Of course no new energy was actually created in this process. It just appears to have been.

Then we get to the final act in this drama. The borrowers no longer are constrained to produce new wealth (produce tools) with this phantom capital. They are permitted to buy toys and entertainment. They are permitted to buy bigger houses and cars that add no new wealth to the economy. Its all on the theory that economic growth is a good thing and when we spend money we are creating jobs. But what we are buying are just for pleasure and egos. No new work can be accomplished as a result of these expenditures, we just feel better about ourselves. Meanwhile the capitalists are attracting and concentrating capital by enticing many more who, because they were able to borrow money for frivolous purposes now feel like they actually have excess capital to spare, willingly buy the stocks of companies that make toys and entertainment. Stock, the original mechanism for aggregating enough capital for investment, is now traded on secondary and tertiary markets; not so that the companies are particularly better off, capital wise, but to provide so-called liquidity to the market players. And then, additionally, to provide hedges against bad investments, to become a huge legalized gambling game for those who felt a little rich. And we are led at last to the greatest scheme of them all, market bubbles as people actually believe that they can create wealth out of nothing but speculation on... what? Just on speculation.

Bringing us back to energy. The basis of the speculative frenzy is a belief that we will have more capacity to do work in the future, in other words more energy. People are willing to take a risk, either borrowing or lending, because they believe that tomorrow will bring more wealth than today. They believe it because that is the way things have worked out in the past, for the most part. Most people think about it in terms of getting richer. The more money you own the more work you can have done for you in the future. They have forgotten that money (wealth, riches) really only represents energy, or should. Money, today, is based on pure fluff. Banking has been perverted to generate economic activity even when that activity is purely based on consuming energy without producing new tools — to produce future energy. The only way we got away with this is that the run up in fossil fuel production, especially oil, over the last hundred years has masked the reality. As long as we could pump more oil, with its tremendous energy concentration value, the scheme seemed to be working. People did get rich, some obscenely so. But because the reality was only a mask it also depended on depleting natural resources at an increasing rate and ripping off those less able to look out for their own economic interest. The twin perversions - capitalism and banking - combined to produce many more poor people than rich.

Real capitalism would be the process of concentrating energy resources in order to do work that would ultimately produce tools — implements and procedures. Those, in turn, would increase our net available energy to do even more work in the future. An automobile, for example, is a transportation tool when it is used to get one to and from one's job, assuming that job involves increasing net energy (so a yacht salesman would not count). It ceases being a tool when it is oversized and wasteful, when it is more an adornment or status symbol. Not that some form of adornment/symbolism doesn't have a place in society. It does. But it just can't be the main reason for existence of our objects. Capitalists are people who organize the concentration of energy and deploy means of production for the benefit of society. What passes as capitalism today is more about making a quick buck for one's self. There is little thought of what is good for society. The evidence — Enron, the Dot Com bubble, the current bad debt financial debacle, shall I go on?

And real banking? We still need to be able to buffer energy and material flows due to surges and delays. If we make excess wealth we need to have a safe haven to store it until it is needed to generate new wealth. Real banking, without the fractional reserves allowance, and real capitalism combined would be the boon to humanity that they started out to be. But it takes a healthy dose of ethics, moral courage, and understanding of the real currency flow (energy) to eschew a selfish desire to get rich and game the system. It also takes a special responsibility by capitalists and bankers to manage resources for the good of humanity. Adam Smith's invisible hand is the wisdom demonstrated by these people to make the right choices. Unfortunately Human 1.89, as a rule, doesn't seem to have the capacity to have this level of wisdom. That is why capitalism and banking have gotten so perverted. It will take Human 2.0, Homo eusapiens to manage it.

Which is more ethical...?

We have reached a point where we need to ask some very hard questions and make some very difficult judgments.

Consider the following problem. By 2050, a little over forty years from now, according to the UN study on population, there should be over nine billion people on this planet. At the same time multiple forms of analysis regarding the notion of an 'ideal' population size for humans are converging on the conclusion that mankind has already overshot this ideal, or sustainable, size. For example ecological footprint analysis suggests that we are overextended by 20% after taking into account issues of technology and life-support services degraded by human development and expansion. Several psychological analyses have put into question the idea that humans can feel comfortable in densely populated areas. Finally, with the possible advent of peak oil, and the fact that most of the capacity for supporting a larger population depends on technology run by cheap energy, the situation may be, indeed, dire.

What happens when you take the energy away? Contractflation has a number of unsettling scenarios, all of which involve suffering by life in general, but humanity in particular.

At the same time climate change is looking more like sooner than later. The number of extreme weather events per annum has been increasing worldwide. The Arctic ice sheet and mid-latitude glaciers seem to be melting faster than was expected as little as five years ago. The possibility for an ice free Arctic in just a few years is startling but real. Take away the capacity to do economic work (energy) and at the same time increase the need to do the work of adapting, and combine this with the impacts on food supply by climate change and you get a foreboding feeling that things are going to be really rough.

It occurs to me that we are going to soon be faced with unthinkable choices. These choices are going tax the best minds in ethics and are going to be repellent to the vast majority of ordinary folk. We will face the question, "What is the least worst that we need to do?" But we brought this on ourselves and it is time to take responsibility, like an adult who has realized that his wild living as a youngster now means he has to make amends for it all somehow.

Take for example the population issue. Is it more ethical to impose mandatory limits on childbearing, as done in China, or watch the younger generation produced otherwise die in agony? As long as many simply don't see the possibility of the latter situation, of course, it seems like a non-choice. And therein lies a horrible conundrum. The suffering won't actually start until it is too late to do anything about it. I don't see a gradual slide into that condition, which would allow us to develop a gradual extrication from it. It will likely come on rather quickly, comparatively speaking. A tipping point phenomenon, it will pass a point of no return and accelerate uncontrollably. In the worst case scenario civilization will collapse in just a few years time, after which social order will devolve into chaos.

If even a little accurate, this kind of problem leaves us with an especially difficult moral problem. In order to lessen, ease or even prevent that kind of scenario we need to be taking action right now. Indeed, not unlike the problems with global warming or peak oil where we should have been acting long ago, we may already be too late to prevent problems. We need to consider how we will prevent the most severe form of collapse. The dynamics of population growth are well known. Population at time t equals population at time t - 1 (time step) + births - deaths (same time step). As the flow of energy into human capital expanded, so did the population. As medical science has extended life span, the population expanded. Birth rates exceeded death rates and now we have 6.7 billion people and counting. To change the rate of growth of the population you need to decrease birth rates and, at least, not extend life spans any further. Those are fundamental issues. We might be able to accept policies that prevent further development of life-extension technology. But policies on the birthrate side are far more difficult. Simply relying on the so-called demographic effect (developed nations, emancipated, educated women -> lower birthrates) is a non-policy and in any case will probably work too slowly to achieve a true reduction in population size in time to have a positive effect. Something more radical is more than likely going to be needed.

Here is why it might not happen in time. Too many people still buy into the notion that a growing economy is a good thing. Despite the mounting evidence to the contrary most people still believe that as long as the GDP is growing all is right with the world — or, at least they are likely to have a job. Never mind that to sustain a growing economy means you need an expanding marketplace, more buyers to accommodate those sellers and their needs for growing profits. And that means you need more people. Some developed nations are, today, looking for policies to actually increase their birthrates. They have fallen below the presumed 2.1 births per woman rate at which a population is stable, neither growing or shrinking. These governments are worried that if their populations are shrinking then so too will their economies. And that is not good. At least that is what most people believe.

At some point, I suspect within the next decade, the truth will become sufficiently exposed that all governments will be starting to think about more aggressive forms of birth control. It is unfortunate that we have come to this, but there it is. Reductions will come, either by plan, with humane motives, or by consequences with nature doing the dirty work. A number of people have faced this conundrum and writhen eloquently about the problem with population growth and its consequences. I recommend Prof. Kenneth Smail's article on Growth is Madness. Prof. Smail has written extensively on the issue and offers a reasoned, humane way to address policy.

For my part I have this rather dismal view of Human 1.89 (Homo caladus [formerly known as sapiens]) not being sapient enough to make the right choices. We are clever enough and have the intellectual capacity to understand the problem, but not enough wisdom to make good judgments about what to do. That is both individually and collectively. So I suspect we will simply do nothing and respond as best we can to the crisis. In other words, we are caught in an ethical trap. Because we lack a sufficiently broad and deep perspective we believe it is wrong to interfere with reproductive rights so that we are relegating children born today and anytime in the near future to suffering. Our ethics is still quite immature, I think.

Can you say contractflation?

OK. It doesn't have the same lexical qualities as stagflation (combination of stagnation and inflation). Remember the double digit inflation days of the Carter period? It was coupled with little or no economic growth and so the moniker was invented to capture, what was until then, the unusual characteristics of a flat economy coupled with high inflation rates.

Contractflation sounds awful. My only excuse in coining this is that if follows precedent, you know like somethinggate is used to point to the latest administration scandal where a cover up is suspected. Why append 'gate' to any descriptor of a scandal just because the first big one started at the Watergate hotel in Washington DC? Who knows? But the habit seems to have been formed. So I'm merely following suit here.

Contractflation is a combination of contraction and inflation trying to emphasize what I think we will have as the next phase of economic reality in the world. A new word because our economy is going to start to shrink by conventional standards (growth rate of the GDP, see: "How might we face economic contraction?") while, at the same time, we will experience increasing inflation. Ironically, both effects come from the same cause — diminishing amounts of energy available to do useful work.

As the energy flow reduces due to peak oil first, followed by peak natural gas, and then peak oil, less real work can be accomplished. Ergo, the economy goes into a contraction phase as fewer products and services can be produced. That alone will drive some prices up, but it is even worse than that. Because money value is not tied directly to available energy (i.e. a dollar's purchasing power is measured in units of energy rather than floating freely - in this case in free fall), a unit of money will be able to buy less work, also causing prices measured in that money to rise. It will be a double whammy. Supply falls, demand stays the same or grows, currencies worth less. Classic.

But for the Great Depression we have never really experienced anything like this in our history. There is a major difference between now and then, however. Then there was a growing capacity to supply energy, meaning that a recovery only needed concerted energy investments (like Grand Coulee Dam) to increase the amount of available energy for useful work. Increases in coal and oil during and after the depression along with a stimulus boost due to WWII allowed us to crawl out of that crater. If we are entering the period of post peak oil we face an entirely different set of conditions.

It takes oil input to power the mining of coal and the pumping of natural gas. In other words, if oil goes into decline the cost of the other fossil fuels will start to rise and force them into peak and decline much sooner than expected. It takes oil and natural gas to power agriculture. The current run up in food prices can be attributed to the decline in oil due to demand (mostly from China and India) growing beyond effective supply.

That leaves alternative energy sources as the only real solution but there are some fundamental problem here that most environmentalist don't seem to grasp. First is the sheer scale of the replacement problem. Since oil accounts for something in the neighborhood of 50% (very rough estimate) for our energy needs (primarily in transportation, heating, and farming), coal another 30% (electricity), and natural gas about 10% to 15%, and alternatives barely show up at all (< 5% altogether) think what kind of massive construction and switch-over would have to take place over the next decade just to keep up with our gluttonous energy consumption now. As the oil production diminishes over that time, the cost will climb tremendously. Then since coal and natural gas depend on oil-based energy inputs to extract and refine, their costs will rise commensurately. Farming will become far more expensive as diesel fuel and natural gas (for fertilizer production) increases in cost. Indeed, the very production of alternative energy capture capital (solar panels, windmills, etc.) will increase as will the cost of installing and repairing them. Thus even alternative energy costs will grow over time until they become self-sustaining (a solar panel produces enough extra electricity to build its own replacement, essentially). No one knows when that might happen, or even if it can happen at the current consumption rate.

In the end, the more currency tokens out there trying to represent fewer and fewer BTUs of available energy, the less each token is worth. The less work each token can buy. Combined with the fact that with less work actually possible given the less energy to do that work with, there will be less goods and services to buy anyway. The economy will be in contraction and money will be tending toward worthlessness. Depression. But with no attempt to replace the energy input to the economy, there will be no recovery from this sad state - contractflation. The word is ugly in many ways.