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« Steps toward an energy solution 4 | Main | Rush will get his wish »

March 03, 2009

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cam

I proposed something similar to the World Economic Forum about ten years ago. It didn't fly then but things may have changed since. I have a copy of my paper if you are interested.

Brad

Hi, so I'm just starting to learn about economics. I'm pretty skeptical of many of the mainstream ideas, and very sympathetic to your goals, but there's something about your plan that doesn't quite make sense to me. The problem I see is that the system you describe doesn't seem to have any way of accounting for people's preferences which, as I understand it is a major role of our current money system. How would one person buy something from another person when the price of that object is fixed? What if the seller is unwilling to sell at that price, but the buyer is willing to spend a higher price that both agree to? Traditionally this trade would be seen as creating a more satisfying situation for both people (a Pareto improvement). Another problem is allocating very scarce or positional goods - how much is waterfront property worth? It doesn't necessarily take any more energy to produce or maintain than an inland parcel of land of the same size, but there is not enough waterfront property for everyone to have an ocean view. If we cannot price these things according to how much people value them, how do we decide who gets them? And assuming the world is best off when the people who want something the most are the ones who get it, how can an efficient allocation be achieved?

I hope this comes across as helpful rather than critical. If I felt qualified I'd try to suggest some solutions.

-Brad

Florifulgurator

Hm. The plow example suddenly made me doubt...: So, we got that shiny new plow. The energy invested gets well returned by higher productivity for some time - until suddenly the field's humus/carbon is exhausted because the deep plowing oxydized it away. And the comes the dust bowl...
(A similar classic is applying too much lime - a saying here in Germany goes like: Lime makes rich fathers and poor sons.)

George Mobus

Brad,

It did come across as helpful. Thank you for the comments/questions.

These are good points. But they all are predicated on the BAU notion in economics that starts with freedom of choice. If there really were complete freedom of choice in nature and the economy, then the classical economic notion of utility and market prices being established by desires is clearly OK.

But my point is there really isn't the kind of freedom of choice that most economists subscribe to. It starts with the laws of physics (specifically the laws of thermodynamics). We like the illusion that we have choices and that if we feel a value for anything that is for sale, we should be able to pay whatever we can afford to get it.

Unfortunately this simply isn't the case in physical reality. And my starting premise is that we are subject to physical reality just as much as the rest of nature. We must attend to constraints on trades and those start with energetics.

One resolution to the waterfront property, for example, is to not allow anyone to own such property unless their use of it advances the production or saving of exergy. This is clearly a restriction on our so-called freedoms. But it also recognizes that people occupying waterfront just because they can (apparently) afford it turns out not to be a good idea. Think of what happened to the wetlands around New Orleans due to occupancy - and how things turned out with Katrina!

The best current example of why we should forgo our beliefs in complete freedom of choice and unfettered markets is what is happening now in so many of the financial and real estate markets. When people feel free to pay whatever they want (and sellers to charge whatever the traffic will bear) we stand the risk of bubbles - inflation of prices for no other reason than people feel they are in competition to 'own' some perceived asset.

I hope this helps explain my thoughts a little better.

George

George Mobus

Hi Florifulgurator.

The plow example was meant simply to point out the nature of increasing exergy by increasing efficiency. You are right, of course, that there are always second-order effects and unintended consequences from any new invention. My proposals to incorporate hierarchical control systems thinking in governance is, in part, to provide mechanisms to regulate such unanticipated results.

On the other hand, if we were wise about what to do once an invention increases our potential exergy, we would turn it into conservation (keep it potential for a longer time) and not turn our savings into new growth. In the case of the plow, it would have allowed us to turn fewer acres of land into farm rather than choose to farm more land, presumably to create greater riches (and produce more children).

It is our choices of what to do with increased exergy that are problematic, not the principle in and of itself. Lacking inherent wisdom about the nature of systems, balance, etc. we have invariably chosen the growth option which leads to scaling issues for any industry we undertake.

Imagine what life would have been like for a species that naturally grasped the notion of savings for the future and did not elect to spread and conquer nature.

Hope this explains it better. I'm with you though. Given the kinds of foolish choices our species makes in practice it would seem not such a good idea to create more exergy! My argument is that if we see our past mistakes for what they were, we should learn and change our ways. On that score I am not terribly hopeful, however.

George

Utah electrician

I found one website with the details of electrical service.It has very good information.What are the latest technologies to save electricity?

Salt Lake City electrician

Hi,

Nice article... there are so many energies like mechanical, chemical etc. but in that electrical energy plays an important role.Salt Lake City electrician

Amjad Syed

Hi George
What is your comment on Mathematically Perfect Economy which blame "interest" on money as the source of the current economic disaster.Please comment....
Thanks.

George Mobus

Amjad,

Sorry for the delay. Been extremely busy of late.

I have never heard of the "Mathematically Perfect Economy" theory so I am not qualified to comment on it. As far as interest on money I certainly agree that the whole concept of interest as profit is problematic and probably the reason the early Christians (among others) forbade usury.

George

salt lake electrician

There are definitely many ways to save electricity and of course $. This website shows some cool things you can.

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