What Everyone Knows That Ain't So
It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so.Of course ignorance, the ‘what you don't know’, is partly to blame for people having beliefs that they ‘know for sure’ regardless of any veracity. So, not knowing leads to a conviction of ‘knowing’ whatever one feels is right even when it isn't. And then they make decisions based on knowing what isn't so.
Attributed to Mark Twain (Samuel Clemens)
Unfortunately, the real world, you know, where veracity actually matters, has a way of correcting our mistakes when we foolishly barge ahead with actions that fly in the face of truth. Unfolding before our eyes is the tragedy of leaders and followers alike barging ahead with actions based on beliefs in the way the world works that are simply wrong. At least they are wrong now, in the current context of social evolution. Once, some time ago when the world was less full of people and our clever artifacts, we made some observations about subjects like economics that seemed to hold water. We saw that certain kinds of actions led to more physical wealth being produced and so we formalized some prescriptions for how to act to continue the increase in wealth. Again, these seemed to work, so our confidence in them increased. Today, there is a conventional wisdom about how the world works that is based on those former experiences, obtained long before we had any notion of whole systems and hidden feedback loops. That conventional wisdom is held with something approaching faith, conviction that because it was always thus, always will it be thus.
The core problem is that what seemed to work in the past is now failing to work as it did then. The problem with the human condition is that we are essentially blind to how things actually work systemically and so have no clear idea of how those old rules could possibly be failing today because of changed conditions. The average human thinks linearly when it comes to causality. A causes B causes C, etc. They do not grasp circular or mutual causality where A causes B causes C causes A. And they really don't grasp a more nuanced version in which a change in A causes a change in B causes a change in C causes a change in A. Or that these change influences can be either positive or negative and lead to much more complex (nonlinear) results over time. Most people want simple answers of the form: do X and you will fix Y.
This is understandable from two perspectives. The first is that we humans lived, for a long, long time, in a simple linear-causation world as far as we could tell. Hit a nut shell with a rock and the nut meat will be available. Throw your spear at your enemy and you may kill him. Problem solved. It is natural that under the conditions of simple problems encountered by relatively simple cultures we should have developed a world view that reflects this kind of thinking. The other perspective is that our world didn't stay simple, with relatively linear experiences. With the industrial revolution came sudden increases in complexity in our human-built world. Those increases came more rapidly than our minds could adapt to the new experiences of nonlinear causal relations. Technology has worked to amplify the feedbacks that characterize nonlinear systems (and all systems contain nonlinearities). Now we find ourselves creating more problems with new technology and respond to solving those problems by developing yet more technology, which, of course, just creates more complex problems (see Joseph Tainter's, “The Collapse of Complex Societies” for an explanation of this feedback loop and how it leads to societal collapse).
So engrained in our thinking is the linear version of causality that we cannot break out of this vicious cycle. We fail to see the fallacy of linear thinking and continue to hold to those conventional notions that had once seemed to work so well.
I continue to be astounded and frustrated at the politicians, industrial leaders, media talking heads and pundits who drone on about how bad things have gotten but simply cannot break out of their conventional mind sets to explore how the world really works, to grasp the complexities and nonlinearities and try to seek understanding of why things are the way they are rather than assuming there is some causal factor that if we just fixed that, everything would be fine.
The one that continues to drive me nuts is the oft stated belief that what we need to do is get the economy back on track to growth because we all know that that is what leads to income increases and hence more wealth consumption. People honestly believe that some day we will return to a growing GDP, a housing market of appreciating values, full employment in a service-based (no manual labor for me thank you), consumer-oriented economy. And that that is a good thing. They simply cannot see that it is exactly those conditions that led to our current predicament. Their blindness comes mostly from a complete lack of knowledge about the role of energy in the economy and the nature of feedback loops. Energy and real physical work as the basis for real wealth production is something everyone has taken for granted because, well, we've always had it in the past.
Indeed we have had it in the past. The discovery of fossil fuels was the inflection point in a take off to full-on exponential growth in population and conversion of natural resources into widgets, along with pumping excessive wastes into the natural world unable to absorb them at the rate of production. If you pump it (or dig it) they will burn it. And burn it we did. It was abundant, once upon a time, and it was relatively easy to extract, once upon a time. And we simply didn't care or even think about the fact that it was finite in quantity. Oh a few thinkers, and even a few presidents, recognized the possible conundrum and offered some warning remarks, but the citizens of the OECD countries and Americans in particular were having too good a time creating frivolous entertainments and novelty widgets and overly-adorned, otherwise practical, artifacts. No one listened. Not really. Indeed many economists, acknowledging the limitations of finite fossil fuels invoked their beloved law of substitution to rationalize that when the fuels started getting expensive due to depletion we would simply find another source of energy, probably through some technological innovation. That is how the world worked according to their interpretations.
Only now it doesn't seem to be working out quite the way they thought it would. Nuclear is in deep trouble owing to the problems seen at Fukushima (among others). Wind and solar power represent less than one percent of global energy production and that is limited to intermittent electricity generation which is problematic (another case of solving a problem with technology leads to new problems!) There really isn't anything on the technology horizon that can be scaled up fast enough to substitute for fossil fuels without causing some serious pain.
The so-called economic recovery (the GDP supposedly did grow even if at an anemic rate) has not led to job creation and no one can see how jobs will be created unless everyone goes out shopping to create demand in this consumer-based system. But how can they shop if they don't have jobs and incomes. As we were sliding down the back side of peak net energy (that which actually drives the economic engine) people continued to shop for a while based on credit. Some of that borrowing was based on the notion that their houses would be worth more in the future and that could be used to service the debt. How did that work out for everyone?
So here we are, stuck in a moribund economy with the ‘experts’ still mouthing the conventional wisdom based on linear thinking and a complete lack of knowledge/understanding of how the world (the physical reality) actually does work. Every move they suggest or policy decision that the governments make (like the recent announcement about releasing oil from the Strategic Petroleum Reserve to curb speculators from pushing up the price of oil) will simply exacerbate the predicament. Absolutely nothing they can do using their antiquated models will cause the economy to rebound in any meaningful way. They can try to keep up the illusion with tricks like Quantitative Easing but those are just more Ponzi scheme on top of an already bloated GDP based on the Ponzi scheme of financialization. It is a house of cards and it will crash.
Here is a list of a few conventional wisdom items that prevails even against all of the contrary evidence.
- Markets can solve all economic issues.
Unregulated markets in a complex, opaque society open up the opportunity for abuses and unfair profit-taking, which we have now seen in spades.
- Capitalism is the most efficient method for allocating capital to productive uses.
Is entertainment and sports, a huge market segment, productive? What about tanning salons? What makes the typical capitalist omniscient when it comes to understanding what will actually contribute to the good of mankind? Profit potential? Illegal drugs are very profitable. Are they productive? Adam Smith, the moral philosopher, would be pretty chagrined at how this ‘invisible hand’ stuff is working out.
- A growing economy is good for everyone.
A rising tide raises all boats, right? Clever rhetoric, but false metaphor, unless you realize that most of those little dinghies are anchored to the bottom on short lines. The fact is that no physical system can grow indefinitely. All systems are constrained by physical limits of resources and/or waste removal. This is a fundamental law of nature and the human economy is no exception. Once again we see sheer ignorance allowing all of our pundits to blindly accept the belief that a growing economy is a good thing.
- We can grow the economy in perpetuity.
See point above. Admittedly some pundits have conflated growth with development and driven by liberal motives claim that we still need economic growth to bring everyone out of poverty. Presumably then we can stop growing. Only that isn't what they really mean. Given enough energy, which thankfully for the Earth we don't have, we would continue to grow our conversion of natural resources into trinkets. We simply do not understand natural limits. And no matter how we frame it, a crash is inevitable if we grow past those limits.
- Period-to-period increase in GDP signals the health of the economy.
The remarkable stupidity in this belief is that the GDP is not even a measure of economic wellbeing, whatever that might be. Even many economists realize this fallacy but cannot imagine any other measure that they could easily make that would be a true measure of wellbeing. Indeed no one really knows what wellbeing would look like.
- A service-based economy is viable.
I'll polish your shoes and you give me a haircut. We'll hope someone else is growing and processing the food, building the houses, etc. You can earn your living selling insurance and spending your income on fast food services, or go to a ball game or a NASCAR race. Who needs infrastructure? Who needs long-term assets? Bankers and Wall Street brokers can tell you they make good money providing their services, pushing paper around and telling you it is now worth more, so their cut is taken.
- A consumer-based economy creates and maintains jobs for all.
I buy that thingamjig, which means someone has to build that thingamajig. They have a job. Of course they have to build lots of thingamajigs and sell them to lots of folk like me in order to make an income sufficient to allow them to pay their rent, buy their food and clothing, and buy the whatshamacallit that I make for a living. Oh and by the way, neither the thingamajig, nor the whatchamacallit are really useful for anything. They're just nice to have around to make others think you are rich enough to afford having them.
- Wealth creation in the American economy is based on information and finance.
Ever eat information or live under a roof made of stocks and bonds? We'd like to believe that most people in our modern OECD economy are information workers. They invest some of their earnings in stocks, like buying shares in Facebook whose profits come from advertising revenues. The ads are for products that are essentially whatchamacallits or thingamajigs.
- The monetary wealth of the nation can be ‘decoupled’ from energy.
Laughs hysterically at monumental stupidity and ignorance.
You will continue to hear our pundits, politicians, economists, and most common citizens (er, that is consumers) spout these nuggets of wisdom. Even as things get worse, they will press that these truths are self-evident and need to be heeded.
Politics doesn't matter. Ideological difference only translate into how we should go about fixing the system so these principles can work effectively. The right will continue to believe in their heart of hearts that tax cuts and deregulation will solve everything. Lefties will continue to push for stimulus packages and Keynesian policies in an attempt to jump-start the economy toward ‘healthy’ growth.Libertarians will clamor for even freer markets without any kind of government intervention. They will all have their own prescriptions to cure the disease. But they will all absolutely agree on what the disease is and that we'll know we're over it when the economy is growing again.