Oct 10 2012

Is man-made capital a substitute for nature’s capital?

Kal @ 19:15

Paul Craig Roberts was Assistant Secretary of the Treasury under Reagan and was one of the main proponents of his supply-side economics. I thought those policies were totally ridiculous at the time and paid him very little mind. For the past couple of weeks I have been reading his blog, PaulCraigRoberts.org. He has strong opinions and he knows a lot about economics. At least some of what he says is spot on. On Friday, 5 May he published the text of an interview by World Affairs Monthly. He talks about the evil of offshoring jobs and suggests something that could be done to alleviate it. Good stuff.

He then goes on to talk about the limits of growth, a topic rarely discussed by mainstream economists.

A more fundamental problem than economists’ ingrained misconceptions about jobs offshoring and free trade is the Solow-Stiglitz production function that is the basis of modern economics. The Solow-Stiglitz production function assumes that man-made capital is a perfect substitute for nature’s capital. This assumption means that there are no ecological limits to economic growth. When we run out of natural capital, man-made capital simply takes its place.

As Nicholas Georgescu-Roegen demonstrates conclusively, this assumption, which is the basis of modern economics, is “a conjuring trick.” Man-made capital and natural capital are complements, not substitutes. Production transforms resources into useful products and into waste products. Natural resources are what are transformed, and labor and man-made capital are agents of transformation.

What is happening in today’s world is that nature’s capital is being exhausted, both the resources and the waste sinks–the places that the waste products from production can be deposited. The air, soil, water, and oceans themselves are being polluted by the waste products of economic activities. As these “external costs” from pollution are not included in costs of producing GDP, economists have no way of knowing if an increase in GDP is worth more than its cost….

There is a lot more food for thought in the interview. Give it a read.


Category: Accounting | Conventional Economics | Economics | Employment | Politics | Steady-State Economics

Apr 16 2010

Time to end the two-wage-earner family?

Kal @ 17:36

John Michael Greer has an interesting post up about the economics of both husband and wife working for wages titled A Blindness to Systems. His  basic point is that the US could end the unemployment problem overnight just by having one of the partners in a nuclear family stop working for wages and begin working at home for the common good of the family. The Blindness to Systems aspect is that there are a lot of costs associated with that second income, but that these are often ignored in the decision process of whether or not that second partner should work for wages.

Some of the benefits to the family of one partner staying at home include better cared for children, fewer work and commute expenses,  less time wasted commuteing, better nutrition due to home cooking, possibility of a garden, and home constructed clothing, to name a few.

Some of the benefits to society would be less wasted resources, happier and healthier children, and higher average wages due to increased competition for available workers.



Category: Economics | Employment | Guaranteed Wage | Politics | Population | Steady-State Economics | Sustainability

Jul 9 2009

Unemployment is too low

Kal @ 13:37

Last week the official US unemployment rate reached 9.5%. Of course, this includes only those "actively seeking work." Or another way to think about it is those with remaining unemployment insurance benefits to collect. The actual number of unemployed is thought to be between 16% and 20%, and rising.

Given the common belief in "full employment is a good thing", these numbers are pretty depressing and way too high. But that is not the only possible perspective.

From the point of view that mostly those persons engaged in the basics of life should be employed, then perhaps the number should be around 50%. The basics: Food, Shelter, Transportation, Communication, and Security. Of course, there are other important things, but generally speaking they are luxuries. Some people should clearly be working on luxuries, but it is unreasonable to expect all of our excess labor to be so employed.

The main problem comes about because we have coupled the notion that it is necessary to have a job to have a life. As things stand now, to be unemployed is almost a disgrace. Well, maybe for a few weeks but then folks start to see you a bit as if you had the swine flue. Don't get too close, it might be catching. And nasty things start happening to you, your car and house payments come delinquent and soon you are walking on the street. Or maybe lucky enough to have relatives who can help and you are driving an old wreck and living back at home.

But it does not have to be like that. All of the folks who live here have to be supported in one way or another. Even the tea-baggers mostly agree with that. Why not do it with dignity and relieve the pressure on the planet to keep everyone running at full blast just to keep up a decent lifestyle?

Of course, those folks who go to work every day should get more than those who get to go fishing. Maybe we can even find a way to share the fishing time as well as the work time. But do we really want to put our family, friends, and neighbors on the street just because the economy is winding down a bit to a more rational level?


Category: Economics | Employment | Guaranteed Wage | Politics | Recession | Steady-State Economics | Sustainability

Jun 8 2009

Food Not Lawns

Kal @ 12:00

Yesterday as I was driving here in Santa Cruz, there was a large banner on a wall with the slogan, Food Not Lawns.

This is not exactly a new concept, after all, there is now an organic vegetable garden on the White House lawn. And thoughtful people everywhere are planting a bit more in their home gardens this summer. But what if the front lawn fell out of fashion? What could be done with all that sunshine, fertilizer, and water?

I found an article in the Orange County Register written by Cindy McNatt: Cities and businesses, how about losing the lawn?

We've been asked as homeowners to cut back on water use, lose the lawn, get greener, reduce green waste and go organic. The California Friendly Garden Contest acknowledges some of these efforts.

I'm not sticking up for front lawns here, but think about this: Many homeowners use their lawns for family fun and entertainment. For possibly half the population of people who keep a lawn, it serves a function —- at least in the backyard where games are played and canines romp.

Compare the family lawn to the acres of grass planted around commercial buildings, public medians and retail stores. No children playing kick ball, no dogs rolling in the sun, no one catching a nap or picnicking under a shady tree.

Nick Mrvos of the Irvine Ranch Water District tells homeowner groups, "If the only feet that make contact with grass are the guys that mow it, it might be time to consider alternatives."

It doesn't matter how large or small the commercial landscape is, you will no doubt find a strip of grass that needs to be mowed each week. Some swaths we saw were so large they might equal 25 or more typical homeowner lawns. Others were so small they didn't even make sense.

I doubt there is a way to measure how many acres of "silly strips" are planted in grass, but if you spend any time in HOA neighborhoods, or the commercial areas of your town, or even drive through the local takeout restaurant and notice the stupid strip of grass in the planter, you wonder how it adds up in resources. 

Greenbelts are not "green" anymore. Tom Larson, adviser to the Metropolitan Water District said these parkways were designed on the East Coast in the 1800s for storing excess snow. Don't you think it's time to move on?

Commercial building owners could save thousands a year in maintenance fees if they lost their lawns. Ditto for homeowner associations where shrubs and ground covers could be maintained once a month instead of weekly. Cities that need to cut back expenses could lose the grass in purposeless places.

Ron Vanderhoff said, "These greenbelts are from a bygone era. Water, chemicals, runoff, excess fertilizer, green waste, herbicides, air pollution, fossil fuels used all add up to a big mistake in today's era of using less resources and protecting the resources that we do have."

So how 'bout it then? Can cities, HOAs, and commercial property owners pitch in?  [emphasis is mine]

Let's use this estimate, half the population of people who keep a lawn, and try to guess how much productive land could be freed up.



Category: Employment | Morals | Recession | Steady-State Economics | Sustainability

May 19 2009

The Price of Being Poor

Kal @ 09:55

Think about it.  This is by Ian Welsh.

Washington Post hits on how much it costs to be poor - the way that the poor are forced to pay more, not less, for virtually everything; if not in money, then in time.

A friend of mine put it most simply.  Poor people spend time to save money.  Well off people spend money to save time.  That’s how you know where you are, assuming you aren’t living beyond your means.

The WP article isn’t bad, but it doesn’t really get the full flavor of poverty.  When you look poor, and if you’re poor long enough you will, you just get treated worse by virtually everyone.  They know you don’t have money, know you don’t have power, and thus know they can push you around, disrespect you or just ignore you.

My favorite story along this line is when I was barely making ends meet by doing odd jobs helping people move, doing yard work and painting houses.  One day after painting a garage, I walk into a bank with the check from the day’s work (this is in the eighties).  I’m disheveled, covered in dried paint, and look awful.  The teller wants to hold the check for two weeks.  I can’t wait that long, I need the money for rent.  I walk out of the bank.

I go back to the rooming house I’m living in. I shower, shave and comb my hair.  Then I go find my last set of good clothes - gray flannels, dress shirt, blazer, tie.  I put them all on, and I head back down to the bank.

Unlike a lot of people who are poor, I haven’t always been poor.  I went to one of the most elite private schools in Canada (ranked second at the time, after Upper Canada College).

I wait in line, and irony of ironies, I get the same teller.

She cashes the check.


But I don’t say anything, because I know she could capriciously change her mind.  I just walk out.

A couple years later, during the same extended period of poverty, I get to the point where I can’t even pretend to be middle or upper class.  And on occasion I get rousted because, while I’m clean, I look pasty, my clothes are threadbare and my glasses are literally taped up.  One time a security guard throws me off the property of a hotel I went into to use a pay phone.  In another case, I get tossed off the University of Ottawa campus: I’m beyond the point where I can fake being a student, even though I’m the right age, and was one just a few years before.

In the last ten years, since I ascended back into the middle class, I’ve never had any such situation come up.

Odd that.

The worst thing about being poor is the way you are treated.  There is no rule more iron, in my experience, that the less you get paid, for example, the worse you will be treated at work.  Clerks in stores treat you worse.  Government bureaucrats can often barely conceal their contempt.  And so on.

The upside, I suppose, is that people show you who they are.  The rare person who treats you exactly the same as they do everyone else is revealed as the shining gem they are.  In particular the friends who stick by you even when you’re down and out show themselves to be real friends, as opposed to those who follow the rule given in so many self-help books to cut off less successful friends, and thus reveal their complete moral bankruptcy to the world.

You learn who you can actually trust, who actually cares about you, and who is actually a decent human being who doesn’t enjoy being able to kick down on someone they figure can’t kick back.

It changes how you see people.  Oddly, before I was poor I thought practically everyone was scum (I was a cynical teenager).  Being poor convinced me that there were some truly good people in the world–people who would help you, be kind to you, or just treat you respectfully, even when there was nothing in it for them.

In ugliness and deprivation, beauty and kindness are much much more obvious.  All the more so, because so few meet this test and pass.


Category: Conventional Economics | Economics | Employment | Guaranteed Wage | Morals | Politics | Recession

Feb 28 2009

Bank Bailouts Make Things Worse

Kal @ 10:42

There is an interesting and thoughtful article at The Oil Drum titled: Through the Looking Glass: Thoughts on the Financial System, Fertilizer Prices, and Our Food System. The author calls himself "Steve from Virginia." He lays out in great detail how he thinks pumping money into the banking system is both causing and accelerating deflation.

The main idea is that deflation has the effect of increasing the principle of a loan because the loan has to be repaid with more expensive dollars. The higher the rate of deflation and the longer the time period, the lower the chances that any given loan will be repaid. Under those circumstances no rational bank can lend, because the money they lend would be less and less likely to be repaid as deflation drives the borrowers deeper and deeper into debt.

Driving this entire process is a mysterious force called 'supply and demand'. When there is a large amount of currency (supply) relative to the smaller amount of goods or services (demand), prices for the goods and services increase. While this is happening, money never reaches the masses and workers who consequently cannot afford to buy the increasingly expensive goods. The businesses are unable to SELL the increasingly expensive goods; the businesses price themselves into Chapter 11.

Businesses either refuse the liquidity and risk insolvency or make use of the liquidity which drives up prices ... and risk insolvency! This 'Heads-I-Win-Tails-You-Lose' mechanism caused many bankruptcies during the Great Depression.

The Masters of the Bad Loan Universe call this liquefaction Re-inflating the Economy. They don't realize they can only inflate PARTS of the economy--the wrong parts. Here, liquidity simply spreads deflation farther and faster. 



Category: Conventional Economics | Economics | Employment | Guaranteed Wage

Feb 14 2009

Full Employment Revisited - Is your job poisoning the world economy?

Kal @ 16:18

Cost benefit analysis for your job

Its all about natural resources, land, water, oil, coal, steel, etc., the list is a long one. Economic activity, our businesses and our jobs, produce benefits for us, and also consume resources. Economic activity ranges in societal value from extremely valuable all the way down to zero value, and some activities even have negative value. The societal value of your job is directly dependent on the value of the economic activity that is paying your salary, and on the resources consumed in the course of your doing the job. I am proposing a simple cost-benefit analysis.

I want to be very clear, that while I think many of our jobs are counterproductive, I do not think the people that hold those jobs are less valuable. I think you are worthy of our full support,

Historical perspective

From the earliest days in America work has been how we defined ourselves. From Wikipedia:

John Smith was eventually elected president of the Jamestown council in September 1608 and instituted a policy of discipline, encouraging farming with a famous admonishment: "He who does not work, will not eat."

That principle has continued, not only unabated, but considerably reinforced over the years, until now it takes two wage earners to support most families. If one or both of these wage streams is interrupted for any reason, the typical family faces disaster. Many of us have a very small margin between paycheck and homelessness.

From our perspective as workers, a job is what it takes to survive and thrive in the modern world. From the perspective of most employers, the job is a necessary expense to make money. From the perspective of capitalistic theory, anything that makes money is equally as valuable as any other thing that makes the same amount of money. So by definition, your job is valuable and by extension, you are a valuable person. If you happen to be unemployed at the moment, it is not so clear what your value may be.


Tags: , ,

Category: Climate Change | Employment | Guaranteed Wage | Morals | Politics | Resource Depletion