Friday, October 3, 2014

Four pillars of Sustainable Economy

The four pillars of sustainable economy

background: We believe the world is going to hell in a hand basket: 

- overpopulation,

- peak oil and resource depletion (with the threat of water and resource wars on the near horizon),

-  climate change (and its almost undefinable potential for socio-political chaos), etc.. 

            If we want to do something positive in the few years remaining to us, what positive contribution could we leave behind? Specifically, how could we create "cultural refugia", viable communities (large or small..) capable of embodying the best values of our existing civilization(s) and also capable of weathering the storms of chaotic change that lie ahead. We will witness unprecedented storms of rapid - and global - ecological collapse (including human population die off), war, hunger, the forced (ecologically driven) reduction in humanity's ecological footprint..

            Now, given the cheery prospects lying ahead, what have we learned about creating a new kind of economy, one in which, for example, human occupation of the land either maintained soil fertility, biodiversity and aesthetic quality or even - wonders of wonders! - actually increased fertility, diversity and natural beauty? Could we even dare to dream that people might actually pass on an "improved" world to their descendants? Is this even possible?

           Well, the various proposals for an ecologically balanced, renewable resource based economy I have studied seem to incorporate, implicitly or explicitly, the following four "pillars" or basic principles:

1st pillar of sustainable economy: Any viable economy - sustainable "unto the 7th generation" - must conform to the "laws" of physics, in general, and particularly to those of thermodynamics, the study of the transformations and flow of energy (heat).

            Now, as soon as we begin this exercise, we are struck by the fact our conventional, university taught economics is founded on very shaky ground indeed. The most elemental observation of material systems negates one of the false axioms of (neo-)classical economics: the requirement of (and capability of maintaining) infinite growth on a finite planet (see footnote 1). Neo-classical economic theory requires the physical absurdity of infinite growth since it postulates that investors will only invest if they are assured of a return on their investment (profit). Profits can only exist if the money supply (somewhat linked to the intensity and volume of economic activity) is constantly increasing: there must always be more money in the pot to keep the investors coming back. Alas! Physics and thermodynamics demonstrate the absurdity of such a position. A constantly increasing volume of economic activity on earth would require a constantly increasing use of energy and material resources. This, of course, is impossible on a finite planet whose finite volume can only contain a finite volume of energy resources and raw materials. A modest growth rate of 2% per annum if sustained for a century would result in a 7 fold increase in the money supply, economic activity and energy utilization! Such exponential growth, typical of compounded interest, is observable in nature but only in exceptional cases.

   (1)- In emergency situations. A rapid transition from one level of biological activity to an other: the cardiac rate of an animal chased by a predator. It must quickly ramp up its cardiac rate from a "resting" state in order to get away.Typically, the initial acceleration is exponential (increasing rapidly). It then falls off, followed by an exponential deceleration (see note 2).

           logistic curve: transitory exponential growth resulting in a rapid transition 
           from one level of activity (cardiac rate) to another

   (2)- uncontrolled growth ("infinite growth"!) is a prelude to system breakdown (cancer is a biological example of deregulated growth).

         This graph, "population versus time", shows how a bacteria colony, resulting from a single bacterial cell, grows over time (given sufficient food). The hick: with exponential growth, food is never sufficient! Eventually, the colony will reach its "Limits to Growth", it will exhaust its food supply and crash. Ecologists refer to this type of "boom / bust" pattern as ecological overshoot / undershoot. Overshoot: when there are too many individuals for the resource base of the environment. Overshoot, or overpopulation, is generally followed by ecological undershoot: the population typically crashes to a small value, often much smaller than the environment could maintain if it had been harvested sustainably. Interestingly, humans - who are supposed to be smarter than bacteria - have been following the same pattern of catastrophic overgrowth for several centuries..

          Finally, thermodynamics rather convincingly demonstrates that perpetual motion machines are not possible. In reality, even a useless machine that only turned a wheel without doing work could not turn forever: friction in its bearing and gears or against the air in which it turned would eventually dissipate the initial impulse as heat. It would eventually slow down and stop, no matter how well greased the mechanism was.

 2nd pillar of sustainable economy: Conformity of economic activity to the "laws of ecology". This means respecting nature's self-regenerative "life-support system" upon which our biological existence depends. At present, by disturbing the equilibria of natural nutrient cycles, we are, in effect, cutting off the branch we are standing on. Consider the carbon cycle. Human released greenhouse gases like carbon dioxide (CO2) and methane (CH4) - which oxidizes to CO2 over time - add (relatively) "small" amounts of these gases to the atmosphere (compared to the amounts naturally cycling through the ecosystems of the world). However, two centuries of continuous high-level excess CO2 production, since the industrial revolution, are now acidifying the oceans to potentially dangerous "tipping points" with numerous potential knock on effects (some of which are unpredictable and represent unknown hazards to which we expose our children and grandchildren). Among these is the reduction in phytoplankton (microscopic ocean plants, the base of the food chain). If left unchecked, our CO2 emissions could, theoretically, provoke a collapse of the oceanic ecosystems with a concomitant reduction in fish stocks (needed to meet the protein needs of an already overpopulated planet). 

         Another important "design principle" found in nature which we stupidly ignore: don't put all your eggs in one basket! Why? Well, if you drop it you risk losing all your eggs. In four baskets, there is some assurance. You can lose at most 25% of your eggs if you drop a basket. In practice, this means, for example, not allowing one type of fuel to monopolize your energy system. Our modern economies are powered by rapidly depleting fossil fuel energy: oil, natural gas, coal. A more resilient approach would emphasize renewable energies: wind, solar (passive thermal, focused thermal, photovoltaic..), geothermal, hydro-electric, wave and tide power, biomass.. It should be remembered that nature's design principles have been honed by 3.5 billion years of Darwinian evolution. We ignore Mother Nature's wisdom to our detriment! (note 4)

           Another global ecological problem created by our failure to live within the bounds set by the laws of ecology: industrial "farming" (agro-business or agro-industry) kills soil organisms which leads to a reduction of essential organic soil content. We are actually losing soil to unsustainable industrial "agriculture" while population continues to rocket up exponentially. Are we mad..

healthy soils contain a lot of organic matter (vegetable residues) and moisture

3rd pillar of sustainable economy: economic behavior should be based upon and regulated by the application of scientific knowledge of human decision making behaviors, specifically economically motivated behaviors.

          Some recent research on collective decision making and collective responsibility is interesting. People, despite the opinion of pessimists, appear to be capable of passing on a self-regenerating resource - like soil quality - to future generations but only if a consensus is reached on how to exploit that resource for current participants (the generation living today). The resource must be protected from overexploitation by a minority of Evil Greedies and, to this end, an efficient centralized "peacekeeper" or rule enforcer should be designated by the collectivity.

"Cooperation is often seen in experimental economic games because actions can be reciprocated. But this trait is of no help in one of the most important types of cooperation: cooperation with future generations who cannot reciprocate if we refrain from overexploiting their resources. To test the conditions under which cooperation with the future can occur, Oliver Hauser et al. developed a laboratory model of cooperation — the Intergenerational Goods Game (IGG) — that differs from previous games in which selfishness creates social efficiency losses for group members. Instead, selfishness negatively impacts subsequent groups. Experiments involving more than 2,000 subjects demonstrate that when decisions on resource extraction are made individually, the resource is rapidly depleted by defectors. But when participants are forced to vote on how the resource should be exploited, it is exploited sustainably across generations. Voting works for two reasons. It allows a majority of cooperators to constrain a minority of defectors, and as all players receive the same amount after a vote, cooperators need not worry about losing out relative to others." (Emphasis added)

from Nature : 10 July, 2014, page 165 

         Such research suggests that the Free Market Ideology is faulty: it tends to lead to a free-for-all in which everyone, especially future generations, loses. 

         This, of course, get us into some interesting "chicken or egg" reflections on the nature of democracy. Democracy means, of course, "rule by the people". Now, all societies need rules to regulate the behaviors of their members and to canalize instinctive behaviors and strong emotions into creative, non-destructive pathways. A code of warrior honor may regulate the ways in which retributive justice or vengeance may be enacted. Religions bind tribes into collective behavior patterns as surely as genes regulate the behavior patterns of insect collectivities (ants, termites, bees..) In human societies, particularly democratic ones, we are left with the quandary: if behavioral regulation (habits, customs, taboos, laws..) is necessary and the people are the rulers, then the people must control the Social Controllers who, in turn, control them! It is a classic "recursive self-organizing" circuit or loop: which came first the chicken or the egg?

            I believe social psychology should study the efficiencies to be gained from decision making and economic activity in small scale, self-regulated, participatory socio-economic units. Over millions of years, our ancestors, both human and protohuman, became experts in small scaled, decentralized, participatory decision making and economic activity: the ancient hunter gatherer community counted no more than a few dozen to several hundred individuals.. (note 3)

            Research should also study the rampant diseconomies of scale arising from "Free Market" ideologies with a view to eliminating them (while maintaining any existing economies of scale where possible). For example, some technologies - computers - appear to be highly "concentrative", requiring agglomerations of highly specialized knowledge and materials, capital; centralized planning and management. How do we integrate such centralized economic structures into decentralized, participatory, democratic societies - without destroying the participatory and democratic values..

4th pillar of sustainable economy: the moral, religious, transcendental or spiritual dimension. The third pillar - Social Psychology - gives us some tools to regulate our collective economic and decision making behaviors. But regulate to what end? To what Ultimate Goal are we committed?

             Like Socrates and Aristotle we must ask "what is the good life?" for our age. What values should we be willing to die - or live! - for? Does life have a meaning? Such questions are, of course, notoriously "open ended". Unlike "closed problems" which have a fixed, universal and unchanging answer, open ended questions have no final answer even if - Oh, perverse Divinity! - they are most important questions of all. Each generation, even if inspired by a strong Tradition, must ask these important, universal open ended questions anew. These questions, or rather their provisional answers, provide a standard (humanism) by which economic activity is be evaluated. These provisional answers also provide goals toward which economic behavior should be directed, for example, toward some ideal of the Common Good.

             Sustainable economics cannot be a three-legged stool! In some ways, the 4th pillar, the most subtle and imprecise, is also the most important. It is the most difficult for our "materialistic", profit driven culture with its emphasis on immediate, short term gain and its ostentatious social ranking founded on the amount of stuff we consume (or waste).. 


The Four Principles of Sustainable Economy: conformity to laws of

- physics (particularly thermodynamics)
- ecology (particularly protection of vital ecosystem services)
- social psychology (collective decision making)
- the ethical, spiritual dimension: what is the good life? what values to die / live for?


1- axiom, axiomatic system: An axiomatic system consists of some undefined, primitive terms and a list of statements, called axioms, concerning the undefined terms. One obtains a mathematical theory by proving new statements, called theorems, using only the axioms, logic, and previous theorems.

Adapted from

             Geometry was traditionally organized as an axiomatic system. Of course, GIGO: Garbage In - Garbage Out! If you program the computer badly or feed it bad (or badly organized) data it will barf back garbage for results. An axiomatic system is only good - "useful" - if the "primitive terms" and the axioms relating them to one another correspond to reality. Since neo-classical economics postulates infinite growth on a finite world, some of its axioms are faulty and obviously need correction in the light of realism..

            Another false axiom of neo-classical theory: resources (raw materials) are infinitely interchangeable. This is patently false but incomprehensibly taught and accepted as truth in universities - houses of "learning"!! Gold, for example, is a better electrical conductor than copper. But gold is not a substitute for copper wiring: too rare, expensive, soft and heavy. Copper, while not a good a conductor as gold, has the just the right mix of electrical, chemical and physical properties that make it an ideal conductor for practical use.  

2- exponential growth: examples. Population growth of bacteria. You start with 1, then it splits into 2 cells and so on for each "daughter" cell in subsequent generations: 1 - 2 - 4 - 8 - 16 - 32 - 64 - 128 - 256 - 512 - 1024. It only takes ten divisions (generations) to go from 1 to a 1,000 cells (assuming none die)

           Another example of exponential growth: interest rate compounded regularly. Say you have $100 at 10% per annum. After one year you have 100 X .1 = 10 dollars interest. Add this to the capital gives $110 for the second year: 110 X .1 = 11 dollars interest which gives $110 + 11 = $121 principal for the third year. Then 121 x .1 = 12.10 dollars interest in the 4th year.. Note that the interest is always greater than the previous years. This, of course, indicates a long term unsustainable growth situation.

3- social economy the economic sector composed of entities (enterprises, cooperatives, associations, funds, foundations..) attempting to achieve social goods (services, products..) through economic activities. The economic entities of this sector typically are democratically governed (1 person = 1 vote) and participatory. They are either non-profit or profits are re-invested or re-distributed within the organisation.

Example: producer / consumer coop. A group of city dwellers contracts several local farmers to provide an "annual foodbasket" of produce to each participant in exchange for a fixed sum of money.

4- Peak Oil: consider a tree full of fruit in autumn. We start by picking the fruit on the lower branches because they are easy to reach. Then, we have to reach higher to get at the remaining fruit. We have to expend more energy and take greater risks: to get the highest fruit we may have to mount a high ladder. The same principle applies to petroleum or any other non-renewable resources. It is possible - with difficulty! - to calculate the amount of energy obtained from a barrel of oil to the amount of energy expended to find and extract it, refine it into finished products (gasoline, diesel oil, plastics..) and transport the finished products to their destination. As easy to exploit oil fields deplete, we are forced to go after the "high hanging fruit". Accordingly, the Energy Return on Energy Invested (EROEI) ratio will diminish over time. Some  typical EROEI figures cited for the petroleum industry:

1930 - 100:1,   1970 - 30:1,   2010 - 8:1
         Thus in1930, one obtained 100 times as much energy from a barrel of oil as one expended to extract the oil, refine and ship its products. In a mere 8 decades the ratio has fallen to a paltry 8 to 1 ratio! What more proof of non-renewable resource exhaustion could one hope to find?


  1. slightly updated version 17 sep, 2014. Any feedback - constructive criticism especially - will be appreciated!

  2. 2nd draft: quite a bit of work! "Stream of consciousness" composition may get the creative juices flowing but makes for messy text to edit.. :-0

    We welcome YOUR Creative Criticism :-D


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