Wednesday, March 14, 2012

More Wishful Thinking from Designers

Jeremy Rifkin (author of The Third Industrial Revolution: How Lateral Power is Transforming Energy, the Economy, and World) writes (3 November, 20ll – a very late post) in The Guardian HERE

Saying goodbye to Adam Smith at the Dawn of the Third Industrial Revolution”

“The great economic revolutions in history occur when new communication revolutions merge with new energy regimes. The communication technology becomes the means to manage the increased complexity, flow, and reach of economic activity made possible by the energy mix
In the 19th century, print technology and public education gave rise to a print-literate work force with the communication skills to manage a coal powered, steam-driven, First Industrial Revolution. In the 20th century, the telephone, and later, radio and TV, became the communication media to manage the commercial life of the Second Industrial Revolution driven by oil, the automobile, and a mass consumer culture.: …

“… Every economic era is marked by the introduction of a new energy regime. In the beginning, the extraction, processing, and distribution of the new energy are expensive. Technological advances and economies of scale reduce the costs and increase the energy flow until the once-abundant energy becomes increasingly scarce and the entropy bill from past energy conversion begins to accumulate. The oil era followed this curve over the course of the twentieth century, peaking in 2006.

“While there is a fractious debate going on around the world about our debt-ridden culture and the need to live within our means, there is little serious attention directed to the ultimate debt we have incurred over the course of the First and Second Industrial Revolutions as a result of our profligate consumption patterns—our debt to the earth's biosphere. Climate change is the entropy bill— the planetary debt— for two centuries of burning fossil fuels to propel the First and Second Industrial Revolutions. What we thought was a growing store of accumulated societal wealth was really only the momentary enjoyment of goods and services made possible by the burning of vast amounts of fossil fuels and the release of carbon dioxide into the earth's atmosphere. Learning to live within the earth's budgetary restraints by not consuming nature's endowment faster than the biosphere can recycle the waste and replenish the stock is the ultimate test of our species' ability to live within the planet's carrying capacity. This is what sustainable economic development is really all about.

What, then, are we to conclude about the nature of gross domestic product (GDP)? We think of GDP as a measure of the wealth that a country generates each year. But from a thermodynamic point of view, it is more a measure of the temporary energy value embedded in the goods and services produced at the expense of the diminution of the available energy reserves and an accumulation of entropic waste. Since even the goods and services we produce eventually become part of the entropy stream, for all of our notions of economic progress, the economic ledger will always end up in the red. That is, when all is said and done, every civilization inevitably ends up sucking more order out of the surrounding environment than it ever creates and leaves the Earth more impoverished. Seen in this way, the gross domestic product is more accurately the gross domestic cost, since every time resources are consumed, a portion becomes unavailable for future use.

The changes taking place in how we measure and understand wealth creation are so profoundly disruptive to the way we have thought over the past two hundred years that spawned the first two industrial revolutions, it is likely that much of the classical and neoclassical economic theory that accompanied and legitimized these two earlier industrial eras will not survive the newly emerging economic paradigm.

I suspect that in the years ahead the still-valuable insights and content of standard economic theory will be rethought and reworked within the purview of a thermodynamic lens. Using the laws of energy as a common language will allow economists to enter into a deep conversation with physicists, engineers, chemists, ecologists, biologists, architects, and urban planners, among others, whose disciplines are grounded in the laws of energy. Since these other fields are the ones that actually produce economic activity, a serious interdisciplinary discussion over time could potentially lead to a new synthesis between economic theory and commercial practice and the emergence of a new, explanatory economic model to accompany the Third Industrial Revolution paradigm
Reconceptualizing economic theory is no longer merely an interesting intellectual exercise, but an urgent task if we are to develop the appropriate tools to expedite our transition into a post-carbon future

I think Jeremy Rifkin exaggerates the role of Newton in Adam Smith’s thinking. He reported on the Newtonian impact on philosophy as an advance on what proceeded it in understanding the science and natural phenomena (see Adam Smith’s ‘History of Astronomy’, [1744-c.1758] 1795, posthumous).

Whether we think of three industrial revolutions or two is a choice about what we intend to say. And Jeremy Rifkin has an agenda, broadly known as ‘Carbonised Climate Change’, previously known as ‘global warming’ (what happened to that incarnation?). On a Universe-level scale we are talking about many tens of billions of Earth years, though in Earth-scale terms, we have (or our descendants have) several billion years left on Earth. Nothing on the scale of the Universe can stop what is happening to entropy because its causes are such that whatever we do on Earth is too puny to be a consideration. Only on the scale of billions of galactic activities, or lack of, will that final end to the Universe be decided.

But note how Rifkin is prolific on what is allegedly happening on Earth now and in the recent past millennia, and relatively sparse on the details of ”reconceptualizing economic theory” to “develop the appropriate tools to expedite our transition into a post-carbon future”. It is a fallacy, namely that “reconceptualizing economic theory” had anything to do with the social forces, puny as they were in the last five or six centuries, that led to the tentative commercial, non-agricultural, regimes that had appeared from c.11,000 years ago on the borders of present-day Turkey, Syria, Israel and Jordan and led to the mis-named “industrial revolution” in Northwestern parts of Europe, initially in present-day Netherlands and England.

Adam Smith did not ‘invent’ nor theorise about ‘capitalism’; his books were read by few people and not by all those directly involved for several generations in activities relating to what some call the ‘industrial revolution’ a sixty-plus years series of events that largely happened after Smith wrote Wealth Of Nations, and after he had died in 1790. ‘Capitalism’ is a word invented in English in 1854 by novelist, Thackeray, in 1854 (The Newcomes). If Adam Smith had never lived the world would still resemble what we have now. This world was caused by untold numbers of anonymous individuals acting under whatever motivated them individually to act. They didn't wait to be inspired by economists or anybody else.

Whether there were ‘first’ and or second’ industrial revolutions, and whether there will be a ‘third, we can be sure that ‘economic theory’ will have little to do with it. I refer readers to my post of last Saturday on Adam Ferguson quotation: “the result of human action, but not the execution of any human design”. Ferguson also, graciously notes that his now famous observation was influenced by Jean François Paul de Gondi, cardinal de Retz (1613-1679), whose ‘Memoirs’ were first published in in 1717. In these Memoirs, he quotes Oliver Cromwell on the “Fixity of men's designs and Uncertainty of their destiny” (see John Foster, Biographical Essays, 3rd edition, John Murray, 1860).

I do not hold much hope that Jeremy Rifkin's belief that some economists will have much of a role in his prescribed "urgent task" of designing mankind's destiny. Whatever is going to happen is already underway, or not, as the case may be. Cromwell and Ferguson have stated our prospects about right.


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