Economics and the limits to growth
November 9, 2010 by Thomas H. GrecoHere are some wise words from economist Herman Daly
Thermodynamic Roots of Economics
by Herman Daly
The first and second laws of thermodynamics should also be called the first and second laws of economics. Why? Because without them there would be no scarcity, and without scarcity, no economics. Consider the first law: if we could create useful energy and matter as we needed it, as well as destroy waste matter and energy as it got in our way, we would have superabundant sources and sinks, no depletion, no pollution, more of everything we want without having to find a place for stuff we don’t want. The first law rules out this direct abolition of scarcity. But consider the second law: even without creation and destruction of matter-energy, we might indirectly abolish scarcity if only we could use the same matter-energy over and over again for the same purposes — perfect recycling. But the second law rules that out. And if one thinks that time is the ultimate scarce resource, well, the entropy law is time’s irreversible arrow in the physical world. So it is that scarcity and economics have deep roots in the physical world, as well as deep psychic roots in our wants and desires.
Economists have paid much attention to the psychic roots of value (e.g., diminishing marginal utility), but not so much to the physical roots. Generally they have assumed that the biophysical world is so large relative to its economic subsystem that the physical constraints (the laws of thermodynamics and ecological interdependence) are not binding. But they are always binding to some degree and become very limiting as the scale of the economy becomes large relative to the containing biophysical system. Therefore attention to thermodynamic constraints on the economy, indeed to the entropic nature of the economic process, is now critical — as emphasized by Nicholas Georgescu-Roegen in his magisterial The Entropy Law and the Economic Process (1971).
Why has his profound contribution been so roundly ignored for forty years? Because as limits to economic growth become more binding, the economists who made their reputations by pushing economic growth as panacea become uncomfortable. Indeed, were basic growth limits recognized, very many very prestigious economists would be seen to have been very wrong about some very basic issues for a very long time. Important economists, like most people, resist being proved wrong. They even bolster their threatened prestige with such pretension as “the Sveriges Riksbank Prize in Economic Science in Memory of Alfred Nobel” — which by journalistic contraction becomes, “the Nobel Prize in Economics,” infringing on the prestige of a real science, like physics. Yet it is only by ignoring the most basic laws of physics that growth economics has endured. Honoring the worthy contributions of economists should not require such flummery.
I once asked Georgescu-Roegen why the “MIT-Harvard mafia” (his term) never cited his book. He replied with a Romanian proverb to the effect that, “in the house of the condemned one does not mention the prosecutor.”
Thermodynamic Roots of Economics
by Herman Daly
The first and second laws of thermodynamics should also be called the first and second laws of economics. Why? Because without them there would be no scarcity, and without scarcity, no economics. Consider the first law: if we could create useful energy and matter as we needed it, as well as destroy waste matter and energy as it got in our way, we would have superabundant sources and sinks, no depletion, no pollution, more of everything we want without having to find a place for stuff we don’t want. The first law rules out this direct abolition of scarcity. But consider the second law: even without creation and destruction of matter-energy, we might indirectly abolish scarcity if only we could use the same matter-energy over and over again for the same purposes — perfect recycling. But the second law rules that out. And if one thinks that time is the ultimate scarce resource, well, the entropy law is time’s irreversible arrow in the physical world. So it is that scarcity and economics have deep roots in the physical world, as well as deep psychic roots in our wants and desires.
Economists have paid much attention to the psychic roots of value (e.g., diminishing marginal utility), but not so much to the physical roots. Generally they have assumed that the biophysical world is so large relative to its economic subsystem that the physical constraints (the laws of thermodynamics and ecological interdependence) are not binding. But they are always binding to some degree and become very limiting as the scale of the economy becomes large relative to the containing biophysical system. Therefore attention to thermodynamic constraints on the economy, indeed to the entropic nature of the economic process, is now critical — as emphasized by Nicholas Georgescu-Roegen in his magisterial The Entropy Law and the Economic Process (1971).
Why has his profound contribution been so roundly ignored for forty years? Because as limits to economic growth become more binding, the economists who made their reputations by pushing economic growth as panacea become uncomfortable. Indeed, were basic growth limits recognized, very many very prestigious economists would be seen to have been very wrong about some very basic issues for a very long time. Important economists, like most people, resist being proved wrong. They even bolster their threatened prestige with such pretension as “the Sveriges Riksbank Prize in Economic Science in Memory of Alfred Nobel” — which by journalistic contraction becomes, “the Nobel Prize in Economics,” infringing on the prestige of a real science, like physics. Yet it is only by ignoring the most basic laws of physics that growth economics has endured. Honoring the worthy contributions of economists should not require such flummery.
I once asked Georgescu-Roegen why the “MIT-Harvard mafia” (his term) never cited his book. He replied with a Romanian proverb to the effect that, “in the house of the condemned one does not mention the prosecutor.”
When will the dollar die?
October 28, 2010 by Thomas H. GrecoAs I’ve said before, the debt-money system has a built-in debt/growth imperative, based as it is on compound interest.
Exponential growth cannot be sustained forever.
If debt MUST expand over time, it must be heaped upon either the private sector or the public sector.
When the debt carrying capacity of the private sector has been reached (as it has been now), the public sector must pick up the slack (as it has been doing for most of the past 100 years, but especially since 2008).
That is why I call government the “borrower of last resort.”
National governments are unique in being able to play this role because of their collusive arrangement with the banking cartel.
Once the government has absorbed all the available savings from the private sector, or if government debt cannot be marketed at acceptable rates of interest, the central bank will monetize the debt. That is the essence of inflation; generally rising prices are the result.
Exponential growth cannot be sustained forever.
If debt MUST expand over time, it must be heaped upon either the private sector or the public sector.
When the debt carrying capacity of the private sector has been reached (as it has been now), the public sector must pick up the slack (as it has been doing for most of the past 100 years, but especially since 2008).
That is why I call government the “borrower of last resort.”
National governments are unique in being able to play this role because of their collusive arrangement with the banking cartel.
Once the government has absorbed all the available savings from the private sector, or if government debt cannot be marketed at acceptable rates of interest, the central bank will monetize the debt. That is the essence of inflation; generally rising prices are the result.
The disappearing middle class
October 26, 2010 by Thomas H. GrecoThis recent article by Prof. Bill Quigley does a good job of describing the facts about the destruction of the middle class: Socialism? The Rich Are Winning the US Class War: Facts Show Rich Getting Richer, Everyone Else Poorer
Democracy lost in America
October 22, 2010 by Thomas H. GrecoDemocracy is all but dead in the United Sates. Prof. Robert Reich, in his recent article, The Perfect Storm, outlines the dimensions of the situation. Now it’s up to “we the people” to do something about it.– t.h.g.
Massive inflation is on the horizon
October 14, 2010 by Thomas H. GrecoThe National Inflation Association has just published an article titled, America’s Currency Crisis is Now Underway. I pretty much agree with their assessment but they are touting gold and silver investments as the best way for people to protect themselves. While a little bit of investment in precious metals may yield some short-term profits, I think our long-term survivability requires investment in those things that support life–food, clothing, shelter, energy, etc.
My advice is to shift your investments from Wall Street to Main Street. Before your nest-egg loses all its purchasing power, invest in local enterprises that make you and your community more self-reliant and secure.
Read what I wrote about that a few weeks ago in my article, Investing in Uncertain Times.
My advice is to shift your investments from Wall Street to Main Street. Before your nest-egg loses all its purchasing power, invest in local enterprises that make you and your community more self-reliant and secure.
Read what I wrote about that a few weeks ago in my article, Investing in Uncertain Times.
Tom Greco PART 3 of 3 at The Economics of Peace Conference Sonoma Ca 2009 on Vimeo
October 13, 2010 by Thomas H. GrecoTom Greco PART 2 of 3 as The Economics of Peace Conference in Sonoma Ca 2009 on Vimeo
October 13, 2010 by Thomas H. GrecoTom Greco PART 1 of 3 at The Economics of Peace Conference Sonoma Ca 2009 on Vimeo
October 13, 2010 by Thomas H. GrecoThe Economics of Peace-Part I
Coming Soon: World Government and Global Currency
October 10, 2010 by Thomas H. GrecoI, along with many others, have been trying to raise awareness about what the global elites have planned for us. The article, A Global Central Bank, Global Currency & World Government, is Andrew Marshall’s recent offering on the subject.
Financial self-defense
October 10, 2010 by Thomas H. GrecoWe’ve all been forced to play a game of real-life monopoly. The economy today is being milked, and we all are being parasitized by the banks and the government. Ever more people are beginning to understand the mechanics of how this is being done and looking for ways to protect themselves. The entire system of money and banking, with the help of top-level political leaders, has been structured to enable the few to exploit the many. The need is for a fundamental restructuring of money and the exchange process. In the meantime, there are some things that we can do to mitigate the effects of a corrupt system This article that appeared in AlterNet several months ago provides some advice.
10 Ways to Screw Over the Corporate Jackals Who’ve Been Screwing You
10 Ways to Screw Over the Corporate Jackals Who’ve Been Screwing You
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