Broadly about specifics
Posted: Sat 23 Jul 2016, 07:15:20
(I originally wrote this as a post in the When a cornucopian rejects Jevons Paradox thread, but then decided that it deserves a separate topic).
People always like to talk about a "system", without explaining what the "system" is, as the word sounds solid enough such that no one would ask any questions. In any event, whenever someone talks about a system, he implies that there is a function that describes that system:
F = F(x1,...,xn, t),
where x1,...,xn is a set of independent variables, and t - is time.
An example of such a function in a thermodynamic system is temperature; in a mechanical system - momentum, and so on. An economic system is usually described by function "GDP", or "output" designated as Q. In the most general form,
Q = Q(p, m, R, t)
where p - is people, m - is money, R - is resources (this is a vector or even a matrix), and t - is time. Here the analytical division begins, because most people do not recognize this function in this form.
First, the primitive "naturalists" go. They discount the money as an inconsequential nonsense, and believe that people and labor is a resource which is indistinguishable from other resources. In their world, the output function looks like
Q = Q (R, t).
In other words, the output function is driven purely by the laws of physics. Sounds familiar, doesn't it? This is quite a significant share of the "peaker" or "doomer" audience - various resourcists, entropyists, anti-entropyists, thermodynamists, eroists, energetists, propagandists of the "Monstrovich's paper" and so on. These people fail to notice that for thousands of years, when the energy and resources were available in abundance, and when, according to them, the growth of output Q should have been at its maximum - because the "total available energy and resources" were at maximum - nobody gave a heck about those energy and resources and the growth was minuscule or non-existent, and something outside the realm of Q(R,t) should have happened in order to mount the present-day growth machine.
These people are often preaching some sort dystopian future as the "cure from present-day ills" - all people and resources should be arranged in a specific order in accordance with some formulas and calculations (which they don't usually "have to hand"). However, as they normally see themselves as subjects rather than objects of their experimentation, they fail to notice that if they were subjected to their own recommended treatment by someone else, they could be very unhappy about their place in that new order.
The next category is "austrians" (from the "Austrian school of economics"). This is probably the majority of the audience, and majority of the educated humans at large, even though they are unaware of it. These recognize the uniqueness of people and labour in the equation, but believe that money are an expression of value of resources, and thus, are indistinguishable from resources - you can take any resource and use it as money. Therefore, "money are objective" and are not an independent variable, and from their perspective the output function looks like this:
Q = Q (p, R, t).
The expressions that characterize this approach are "gold is money", "printing money equals inflation", "petrodollar", "energy is money" and so on.
The “austrians” do have an economic theory that demonstrates that the humanity should be on an unimpeded path to prosperous economic development. However, in practice they observe that the reality fails to live up to their theory. Their explanation is simple (as luckily “people” is a separate independent variable in their approach): the failure of economic development is due to some evil conspiracy "at very particular levels" (banksters, illuminati, Jekyll island, fractional reserve banking, evil capitalism etc), and if we change "wrong people" p at those levels, to "right people" p', then the economic paradise will come. The volumes of letters being typed in devotion to this topic is absolutely astounding.
The next group is “orthodoxists”, traditional economists, econ101 etc. These people suffer from multi-polar personality disorder. They basically adopt any form of the output function that helps them advance their argument at any specific moment even if this is contrary to what they were saying a minute ago. On one hand, they kinda recognise a separate role of money - they have the production function etc. Since they sense that money do not have to follow the logic of physics laws (“money can be made from thin air”) while the output function is somewhat proportional to money, they argue that “growth can be unlimited” in a limited “system”. They conveniently forget at this moment, however, that on another page they argued that money were an expression of value of resources (i.e. “money are objective” in full agreement with the “austrians”) and as such should be subject to the same physical limitation as the resources do. And even then, their “unlimited growth” argument is akin to saying “I sold you 1kg of meat today, tomorrow I will sell you 1000g of meat, thus achieving 100000% output growth”, as their argument, at a closer look, boils down to playing with the money denominations.
So, what's the point?
The point is that we understand that
Q = Q (p, m, R, t).
Don't we?
People always like to talk about a "system", without explaining what the "system" is, as the word sounds solid enough such that no one would ask any questions. In any event, whenever someone talks about a system, he implies that there is a function that describes that system:
F = F(x1,...,xn, t),
where x1,...,xn is a set of independent variables, and t - is time.
An example of such a function in a thermodynamic system is temperature; in a mechanical system - momentum, and so on. An economic system is usually described by function "GDP", or "output" designated as Q. In the most general form,
Q = Q(p, m, R, t)
where p - is people, m - is money, R - is resources (this is a vector or even a matrix), and t - is time. Here the analytical division begins, because most people do not recognize this function in this form.
First, the primitive "naturalists" go. They discount the money as an inconsequential nonsense, and believe that people and labor is a resource which is indistinguishable from other resources. In their world, the output function looks like
Q = Q (R, t).
In other words, the output function is driven purely by the laws of physics. Sounds familiar, doesn't it? This is quite a significant share of the "peaker" or "doomer" audience - various resourcists, entropyists, anti-entropyists, thermodynamists, eroists, energetists, propagandists of the "Monstrovich's paper" and so on. These people fail to notice that for thousands of years, when the energy and resources were available in abundance, and when, according to them, the growth of output Q should have been at its maximum - because the "total available energy and resources" were at maximum - nobody gave a heck about those energy and resources and the growth was minuscule or non-existent, and something outside the realm of Q(R,t) should have happened in order to mount the present-day growth machine.
These people are often preaching some sort dystopian future as the "cure from present-day ills" - all people and resources should be arranged in a specific order in accordance with some formulas and calculations (which they don't usually "have to hand"). However, as they normally see themselves as subjects rather than objects of their experimentation, they fail to notice that if they were subjected to their own recommended treatment by someone else, they could be very unhappy about their place in that new order.
The next category is "austrians" (from the "Austrian school of economics"). This is probably the majority of the audience, and majority of the educated humans at large, even though they are unaware of it. These recognize the uniqueness of people and labour in the equation, but believe that money are an expression of value of resources, and thus, are indistinguishable from resources - you can take any resource and use it as money. Therefore, "money are objective" and are not an independent variable, and from their perspective the output function looks like this:
Q = Q (p, R, t).
The expressions that characterize this approach are "gold is money", "printing money equals inflation", "petrodollar", "energy is money" and so on.
The “austrians” do have an economic theory that demonstrates that the humanity should be on an unimpeded path to prosperous economic development. However, in practice they observe that the reality fails to live up to their theory. Their explanation is simple (as luckily “people” is a separate independent variable in their approach): the failure of economic development is due to some evil conspiracy "at very particular levels" (banksters, illuminati, Jekyll island, fractional reserve banking, evil capitalism etc), and if we change "wrong people" p at those levels, to "right people" p', then the economic paradise will come. The volumes of letters being typed in devotion to this topic is absolutely astounding.
The next group is “orthodoxists”, traditional economists, econ101 etc. These people suffer from multi-polar personality disorder. They basically adopt any form of the output function that helps them advance their argument at any specific moment even if this is contrary to what they were saying a minute ago. On one hand, they kinda recognise a separate role of money - they have the production function etc. Since they sense that money do not have to follow the logic of physics laws (“money can be made from thin air”) while the output function is somewhat proportional to money, they argue that “growth can be unlimited” in a limited “system”. They conveniently forget at this moment, however, that on another page they argued that money were an expression of value of resources (i.e. “money are objective” in full agreement with the “austrians”) and as such should be subject to the same physical limitation as the resources do. And even then, their “unlimited growth” argument is akin to saying “I sold you 1kg of meat today, tomorrow I will sell you 1000g of meat, thus achieving 100000% output growth”, as their argument, at a closer look, boils down to playing with the money denominations.
So, what's the point?
The point is that we understand that
Q = Q (p, m, R, t).
Don't we?