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Page added on August 19, 2014
Italy: the story of the donkey and the economist
There is an old story in Italy (but also in other Mediterranean regions) that tells of a man who tried to train his donkey to work without food. So, he gradually reduced the beast’s daily ration of hay. Later on, the man reported that, unfortunately, the donkey had died just when it had learned to go without any food at all.
The man of the story must have been an economist. He was trying to optimize the system and he had defined the “efficiency” of the donkey as the ratio of the work performed divided by the amount of hay consumed. He had found that reducing the amount of hay improved efficiency and, with impeccable logic, had brought the idea to its natural conclusion.
Something similar seems to be taking place with the economy of whole countries. Economists define as “efficiency” the ratio of the GDP produced per unit of energy consumed. Noting that this ratio has been increasing for many Western economies during the past decades, they conclude that economies are becoming more and more efficient. They even speak of “decoupling”, noting that the GDP can keep increasing while the energy consumption remains constant – or decreases. This is supposed to be a wonderful thing.
Unfortunately, the problems with this optimistic interpretation appear stark clear with the case of Italy. Notice, in the graph above, how this “efficiency” shot up just when the Italian economy started to collapse, with a decline in GDP, loss of more than 25% of the Italian industrial production, massive increase in unemployment and all the related disasters. (See here, and here for reports about the post-peak Italian economy)
The increase in efficiency shown by the graph is a pure illusion. The Italian economy is not becoming more efficient but, simply, contracting. Industries are closing down and people become unemployed. As a consequence, less energy is consumed in manufacturing and for transportation. At the same time, other elements of the economic system, say, rents or property taxes, remain relatively unaffected; government spending, for instance, tends to go up. Hence, the GDP doesn’t decrease as fast as energy consumption and the ratio of the two increases (*). Obviously, that’s nothing to be happy about.
Concepts such as “efficiency” and “decoupling” seem to be based on highly aggregated parameters; too much to provide a useful interpretation of what’s happening in a country’s economy. That doesn’t mean that the economy cannot get more efficient with time, just as a donkey may learn to work even with a reduced hay reaction. But, without energy, and especially without cheap and abundant energy, an economy simply starves and, eventually, it suffers the fate of the donkey of the story.
Cassandra’s legacy by Ugo Bardi
10 Comments on "Italy: the story of the donkey and the economist"
energyskeptic on Tue, 19th Aug 2014 2:34 pm
I used to trade economist jokes with Charles Hall and others at ASPO conferences, here’s just a few:
Three economists go hiking inn the woods. They get lost. It starts to get dark. They are hungry. The wind begins to chill them. But they aren’t worried.
Why?
Because as economists, they know that their demand will somehow produce sandwiches, flashlights, etc. – and soon.
———————-
A civil engineer, a chemist and an economist are traveling in the countryside. Weary, they stop at a small country inn.
“I only have two rooms, so one of you will have to sleep in the barn,” the innkeeper says.
The civil engineer volunteers to sleep in the barn, goes outside, and the others go to bed.
In a short time they’re awakened by a knock. It’s the engineer, who says, “There’s a cow in that barn. I’m a Hindu, and it would offend my beliefs to sleep next to a sacred animal.”
The chemist says that, OK, he’ll sleep in the barn. The others go back to bed, but soon are awakened by another knock.
It’s the chemist who says, “There’s a pig in that barn. I’m Jewish, and cannot sleep next to an unclean animal.”
So the economist is sent to the barn. It’s getting late, the others are very tired and soon fall asleep.
But they’re awakened by an even louder knocking. They open the door and are surprised by what they see: It’s the cow and the pig!
——————————
Q: How many economists does it take to change a light bulb?
A1: None. The darkness will cause the light bulb to change by itself.
A2: None. If it really needed changing, market forces would have caused it to happen.
A3: None. If the government would just leave it alone, it would screw itself in.
A4. None. “There is no need to change the light bulb. All the conditions for illumination are in place.
A5. None, because, look! It’s getting brighter! It’s definitely getting brighter !!!
A6. Just one, but it really gets screwed.
————————-
A woman hears from her doctor that she has only half a year to live. The doctor advises her to marry an economist and to live in South Dakota. The woman asks:
will this cure my illness? Answer of the doctor: No, but the half year will seem pretty long.
———————————
Q:Why did God create economists ?
A:In order to make weather forecasters look good.
—————————–
Q: What do you get when you cross the Godfather with an economist?
A: An offer you can’t understand.
——————
An economist was opening the door of his BMW when suddenly a car came along and hit the door, ripping it off completely. When the police arrived at the scene, the economist was complaining bitterly about the damage to his precious BMW.
“Officer, look what they’ve done to my Beemer!” he whined.
“Geez! Could you be more materialistic?” asked the officer. “You’re so worried about your stupid BMW, you didn’t even notice that your left arm was ripped off!”
The economist finally noticed the bloody left shoulder where his arm once was.
“Oh my gosh! Where’s my Rolex???!!!”
Plantagenet on Tue, 19th Aug 2014 3:01 pm
That last one is actually a lawyer joke—
Peter Vesborg on Tue, 19th Aug 2014 4:20 pm
Qoute from someone on Bitcointalk.org:
“As I’ve said on a number of times on this forums, the one thing that makes a discipline scientific is its actual power to predict the future, andnot the fact that it somehow “explains” things.Physics is a science: given enough data about powder chemistry, wind, angle, projectile mass and shape, gravity and distance, you can accurately predict where a shell will land once fired. A very useful tool to have.Real science can land robots on Mars. Try and ask any economist to pull off something like that.Economics, whichever cult you happen to be follow (Keynes, Austrian), isnot a science: its predictive power is essentially non-existent.On the other hand, economics, however has borrowed all the lesser attributes of a real scientific discipline, in particular the complex jargon: economists have long realized that there was much money to be made fooling regular people into believing they have a clue about anything.In fact, you can pretty much draw a one to one parallel between economics and astrology: they use the same technique (fooling the gullible), serve the same purpose (ensuring the practitioner makes a living), and have similar predictive power: None.”
andya on Wed, 20th Aug 2014 1:24 am
GDP energy efficiency is a red herring, it doesn’t take into account the energy required from imports, or from companies based in said country with revenues coming from overseas.
Global energy efficiency stays pretty close to stable.
Norm on Wed, 20th Aug 2014 4:37 am
i like the story about the donkey. it is a great example of typical human intelligence.
Davy on Wed, 20th Aug 2014 6:59 am
I have a descent insight into mostly northern Italy having an Italian girlfriend from the Dolomites now for 5 years. When I go to Italy I am impressed with the high standard of living. When I say standard of living I am not saying this from a business or economist point of view. I see it from how people live. I see how they treat the land. I see it in what they eat. Europeans have one of the highest standards of living in the world in relation to a quality of life from the basics. They are an efficient people. They chose to take more time off and enjoy life instead of working like a dog to buy some needless toy like an American might or being forced by a harsh business environment to work instead of enjoy some roses. I see Italians in the mountains use simple tools to cut their high quality mountain grasses. They store these grasses in traditional hay barns. Their cattle are treated very well in small herds on wonderful pasture. Italy may have a collapsing industrial base. Italy may have a whole series of predicaments facing it like everywhere. Yet, Italy is going through the stages of descent that need to happen for a country to adjust to a post BAU or fractured BAU economic activity. The Italians have survived many difficult events over several thousand years. They have a wonderful culture and way of life. I put them high on the list in the renaissance that is ahead. A renaissance that is the rebirth of economic activity in a post BAU world. This of course will not be like the renaissance of old. We face less with less with too many people and a collapsing ecosystem of support. Yet, with this likely everywhere the Italians will have transitioned sooner and developed survival and mitigation skills earlier than elsewhere. We have allot to learn from the Italians and Greeks in this regard. It is my hope the US beings this descent sooner than later. It is only through crisis that the needed changes will be made.
JuanP on Wed, 20th Aug 2014 8:36 am
Davy, I have always considered the Tuscan hill villages a most useful example for a potential post collapse future social system. I agree with you that they may be poorer in GDP per capita terms, but most people there live better, more harmonious lives than most people where I’m at. Collapsing from that can’t compare to collapsing from Miami, LA, or NYC.
Davy on Wed, 20th Aug 2014 9:19 am
Juan, I believe your homeland was heavily influence by Italian immigration for better and worse lol.
JuanP on Wed, 20th Aug 2014 10:06 am
Davy, I am 25% Italian, 25% Catalan Spanish, 25% French, and 25% British. A typical Uruguayan mix of ancestors. After the Spanish last names, the Italian, French, and British are the most common last names down there. My paternal grandmother’s parents were born in Northern Italy, but I’ve never been there and probably never will. Italy is a very beautiful place.
Davy on Wed, 20th Aug 2014 10:18 am
Damn Juan, if you had tits and ass I would marry you lol. My 1st wife was 1/2 French and 1/2 Spanish but grew up in Madrid. She was a volitile mix but worth it to a Midwestern boy in his mid 20’s.