The abundance of scarcity (and vice versa)

In response to my post last weekend on the emergence of meta-money, a hall of mirrors, in global finance, a US reader, Toby, said something that really had me thinking.

This is a very important article which, sadly in my view, does not address Perpetual Growth, a key component of the challenges facing humanity. There is this sort of unquestioned faith in The System that Things Have Always Been This Way, only recently, heaven knows why, derivatives came along and all hell broke loose. What to do?

It never really occurred to me to look at that issue, but when one does it creates an interesting cross reference or two. I believe those who worry about growth in this way are getting two things confused. Let us start with a definition. What is “economic growth”? A record of transactions. Can transactions continue to expand? Yes. They are only limited by the number of agreements that people can strike. So in one sense, Perpetual Growth is possible.

But that is not what people like Toby (or Jeremy Grantham, for that matter) are talking about. They are talking about continually increased consumption of finite resources, which obviously cannot be continued indefinitely. It is an understandable enough confusion. In the industrial era, the two were aligned. because there was only a limited amount of meta-money, the transactions largely reflected consumption. The two could be aligned. But in the post-industrial era, there has been a shift away from tangible, finite resources, and towards intangibles such as knowledge, brands, rapidly increasing computer power that results in less use of resources — and of course, the big one, meta-money. The significance of this has been to some extent covered up because China and India are still going through the industrial era. Their economic rise is putting great pressure on global resources. Had that not happened, mining would probably have been continuing its decade long decline and energy demand would probably also be plateauing.

So we are now at an intriguing cross roads. Some parts of the economy are subject to severe limits. Food is one. Goldman Sachs has a report out on the consequences of rising food inflation in developing couintries. It argues that it is mainly a consequence of changes in demand and supply due to greater purchasing power and some supply side constraints such as a reduction in arable land. There is expected to be a 70% increase in world demand for food as the global population rises to 9 billion. There is debate over whether we are reaching peak oil, but we are reaching peak in many other resources: zircon, for instance, mineral sands. Water will almost certainly become a problem. And so on. So the tangible world is subject to severe limits.

The intangible world has the opposite problem. It is not nearly as limited, but in many cases it should be. There is no real limit to the amount of derivatives contracts that can be struck, but there should be. A financial mechanism designed to be on the fringes now dominates. Applying the limit of common sense, this is crazy, quite frankly. The only limit in new economy transactions, such as those based on social media, or Twitter or communications commerce is time. There are only so many hours in the day to do it. Otherwise, they can continue indefinitely.

So for good sense to prevail we need to do a few things.

1. Recognise that growth is not the same as consumption. Then look for new forms of economic growth (transactions) that reduce the use of resources. This is the point of a book called The Sixth Wave, by James Bradfield Moody Executive Director, Development at the CSIRO.  Its thesis is just what is being discussed here, that growth can continue, consumption can’t, ergo the new growth will come from business that reduces consumption. Bradfield Moody argues that this is the sixth Kondratieff cycle, where the new economic growth spurt will be located.

2. Admit that in some areas that are not subject to limits, limits should be imposed to stop the system from collapsing. The most pressing is the explosion of meta-money. Toby quoted Professor of economics Franz Hoermann from “Das Ende des Geldes”:

Debt-money has no independent physical existence, is neither scarce nor valuable material, has no substance whatsoever. It is simply a method for controlling human behaviour, for shepherding people into unpleasant activities, performed for others, activities which then produce numbers on paper or in computers, numbers we then call money. If there is no provable material substance present in the debt-money system, and this system only functions for as long as all of us believe in it, then this system cannot be said to be scientific.

Any system which does not rest on physical foundations and relies, for its functioning, on the belief of all its adherents, is in fact a religion. And when a religion is forcibly prescribed by the state – the use of debt-money as legal medium of exchange – then we are dealing with a state religion.

But, since the general public has been explained none of this, the people of so-called free market economies find themselves in a secret state religion, which, without their knowledge and agreement, shapes and determines their lives in perpetuity. [His translation.]

Hoermann is exaggerating. It is not a religion, although it is a value system. It is more that a system that is used to shape people’s behaviour; it also represents shared value (and in any case, who is doing the “using”?) But paring it back, he has a point. It does not have physical foundations, and that is what has led to the recent excesses in global finance.

3. Develop a new type of economics that deals with both the tangible and the intangible — and does so separately. Neo-classical economics and related idiocies all have a heavy positivist bias. “Something is only real if there is a transaction, and transactions must reflect something tangible.” Neither is true. The whole epistemological basis should be jettisoned. They should start again. There should be one economics for scarcity and another economics for what is not scarce. They will have different imperatives.

So, let’s get to it. Should take a week or two. The intangible economics involves dealing with the subjective, as another respondent last weekend, Valissa, noted. This means there can be no more pretence of being scientific and objective, other kinds of rigour will be required:

RE: “subjectivity is becoming the new objectivity”
 Or as I would say it… ‘The meaning of life is the meaning YOU give it!”

The increasinging personalization of meaning vs. meaning as given by a group, collective, or authority/establishment (be it religious, academic, political, etc) dogma/belief system.

RE: “we will see a growing readiness to accept …uncertainty”

Agreed this is very important… was just talking with my husband about this last night and it’s something I’ve been ‘practicing’ mentally for some time now. It comes more naturally to me than my husband. He still feels more comfortable with black-white/hyper-defined thinking but has been working on increasing his grayscale.

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  1. Armand Tamzarian

    “Neo-classical economics and related idiocies all have a heavy positivist bias. “Something is only real if there is a transaction, and transactions must reflect something tangible.””

    Not to defend theoclassical economics but some examples exist in which intangibles are taken into account — and I can only speak of the USA:

    Hedonics in GDP calculations — someone subjectively decides the actual change in value of an item.

    Imputed rents in the CPI — the rent that you would get for your owner occupied house if it was in fact up for rent. No transaction takes place yet this actually makes up a significant portion of the CPI.

  2. Alex Heyworth

    Good to see someone making this point in print, SoN. I have always maintained that as we move to a more and more service dominated economy in the post industrial world, growth can continue without increasing resource consumption. Few people seem to get this point, even though most service economies illustrate it in spades. Who would have thought, 30 years ago, that you could make a living as a wedding planner?

    • Wouldn’t the fact that people can make a living as a Wedding Planner (sic) indicate that weddings are becoming larger and more complex events, thus suggesting a greater consumption of resources?

    • Problem is, you can’t have a post-industrial economy, unless you’ve offshored all your ‘dirty’ industries elsewhere.

      While I believe its possible to have growth without consuming more resources, I don’t believe there are any examples in the world today — the West simply off-shored the dirty stuff. Wedding planners my indeed make a living, but today’s wedding planner has bigger ecological footprint than last century’s factory worker.

      Ultimately our economic processes must be become vastly more efficient than they are today. The only truly sustainable civilisation is one that takes nothing from the Earth but still provides a high standard of living. Its entirely feasible, if expensive, but what hope do we have when Tony Abbott spends every waking moment demonising the carbon tax?

      I can’t let this thread pass without a few Kenneth Boulding quotes:

      – Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.
      – Mathematics brought rigor to Economics. Unfortunately, it also brought mortis.
      – Economists are like computers. They need to have facts punched into them.

      • I was thinking that last quote applies to our good friend Adam Carr.

        Economists are like computers. They need to have facts punched into them.

        Actually, all three would apply to Adam Carr.

    • Post industrial world? I don’t think so, and definitely not this country (we are in danger of becoming almost solely pre-industrial! (Our reliance on mining and agriculture).

      The proliferation of services occurs within the broader success of industrial application and innovation. Furthermore, a services economy can only grow significantly in times of economic prosperity. Economic stagnation or decline will result in a corresponding decline in the services sector.

      In reality, in this modern world, these sectors are intertwined, but in my view, the industrial sector is paramount, industrial growth in effect giving rise to the services sector.

      Who knows, into the future we may again see the rise of the agrarian society – the need to feed ourselves preeminent.

      The abandonment of industrial capability in order to seek a post industrial service sector economy is essentially a fallacy – the industrial processes required in 21st century life will continue to be undertaken and their importance should not be underestimated.

      The question of when ‘enough is enough’ in terms of consumer items, their manufacture and consumption, is philosophically something else again. Small is beautiful! Less is more!


      • 3d1K, you’re correct when you say that services occur within the broader activities of an industrial economy. For the most part, most service based businesses exist to support or facilitate industrial output. This covers everything from the wedding planner example through to a diesel mechanic – services facilite the production, delivery or consumption of resource based industrial production.

        For many years the unions talked about how automation would put workers out of jobs when the reality not quite so dramatic. Since the industrail revolution began, the inception of new and more efficient ways of producing continues to spawn new service related activity in support of that production capability.

        What this means is that outside of money supply creation through debt facilities, interest and voodoo financial markets (derivatives etc), there can be no growth in real terms without some tie back to physical constraints determined by the environment we live in.

        We can’t produce our way out of this situation – we’re in too deep. The fundamental nature of our society will have to change in order for us to even begin to consider a sustainable future (if such a thing exists.)

        British historian Arnold Toynbee is quoted as saying that “civilizations die from suicide, not by murder.” I would like to think that he was wrong, however if you look at his twelve volume analysis of the rise and fall of civilizations through time, you may just realise how much trouble we are in!

  3. Alex Heyworth

    Dear me, quite a few people seem to have missed the point entirely. The point about a services economy (as ours is, notwithstanding the nonsense spouted above about our “reliance” on mining and agriculture) is that a large part of the work force is employed performing services for other people, ie they do not actually produce anything material. In Australia, that is over 70% of the work force. If they do not produce anything, their work is also, ipso facto, low in resource consumption as well (relative to a factory worker, for example). Yet the result of their labour is still something our society values and is prepared to pay for.

    As society becomes more and more service oriented, more and more of our “consumption” becomes the consumption of services, rather than material objects. This is not saying that the consumption of material objects declines – clearly service economies tend to be the most affluent and therefore the biggest consumers of stuff in the world. What I am arguing is that the consumption of “stuff” becomes a smaller and smaller proportion of what we value; even when we consume stuff, we are prepared to pay high prices for the elaborate preparation of it – dinner at a three Michelin star restaurant, anyone? As a result, less and less of economic growth represents an increase in the stuff consumed, more and more of it represents either straight out services or services that enhance our enjoyment of stuff we already consume on a regular basis.

    It seems to me that anyone who has lived sufficiently long in Western society would recognize this fact. This is what I took SoN to be arguing, and what I thought I was agreeing to. I really didn’t expect a torrent of attacks.

    BTW, as regards growth continuing exponentially forever, even economists don’t really believe that. However, for many of the things we use, the limits imposed by the amount contained in the Earth are really so large as to be infinite for all practical purposes. There are others that are already in short supply, and many others in a range of lesser or greater scarcity in a huge range in between. But man is the master of substitution. When something gets scarce, we use something else.

    Energy is the key to all this. Which is why the current tug-of-war between those who want to limit energy use to the rich and those who think it should be provided cheaply to all mankind is so important (and so heated).

    • Alex, reliance on mining and agriculture nonsense? Really. If you believe this, tell me the other story – I am open to persuasion.

      As H&H conceded, without mining, we’d already be Ireland. Agriculture (meant both livestock and agricultural commodities), it’s always there doing its bit, under-appreciated, but in this ever growing world, vitally important. My mantra – you can’t eat NBN connections.

      And please, don’t take it as criticism of your perspective. You have in fact initiated a distinct thread, and an interesting one, in this opinionated world of ours.

      But, my God, QC (below) has nailed it.

    • OH, c’mon Alex,

      ” I really didn’t expect a torrent of attacks.”

      Being a bit thin-skinned, aren’t we?

      I would have thought it would be better described as ” a torrent of alternative viewpoints and intelligent debate”, wouldn’t you?

      Didn’t see anything “attacky” about it.

    • ARIA restaurant near the Sydney Opera House is not 3 star Michelin..merely 2 Hat but the degustation experience at $260 per head is definitely worth it.

  4. Alex, I’m with you. Yes, that is very much what I was arguing — and contending that we do not have an economic theory, or method, that matches this demonstrable fact. What is undeniably scarce is an economic theory that deals with these subtleties of scarcity and abundance.
    And you are dead right on energy, too, in my view.

  5. I may be 4 whiskeys into my Saturday night, but I’m going to weigh in on this excellent and rather intellectual post. I both tip my hat to SoN and apologise in advance for any spelling errors. Hiccpu.
    I have to side with Lorax on this one – I don’t believe there is such a thing as the “post-industrial” economy. The West may seem to have one, but I think it’s only as temporary situation driven by the marked difference in education levels and capital stock (and hence productivity) of the developed and undeveloped world. We don’t make widgets in the West anymore because it is cheaper to do it in Chindia, the BRICs or whatever other up-and-coming-country acronym they use these days. If the average Chinese worker demanded a minimum $570 per week to clean a toilet or $150,000 per annum to be an engineer in a coal mine then we’d soon stop buying Chinese goods because they’d be cheaper to make here. That’s what globalisation is all about – competitive advantage on an intra-nation scale.
    However, it cannot go on forever as Chinese, Indian, Burmese, Congolese and every other ese increase the labour rates and enjoy a higher standard of living. At that point very far into the future, transport costs will probably make manufacturing more cost effective in your home county. The West will have an “industrial rebirth”; we’ll find that wedding planners and personal trainers are spread a little more evenly amongst the globe and once again here the clang of metal in Australian manufacturing shops.
    That does not discount the rise in “intangible” goods like branding, intellectual property and systems/software. These are all very important and ultimately increase our productivity (well, maybe not branding), which is the essence of better standards of living. The West just seems to have a monopoly on them because we’ve had a couple hundred years of building capital stock and making things more efficiently that we now have the luxury to invest in these intangible assets. But having a wedding planner pay their dog trainer with money they earned by supplying services to the young personal trainers is not a real economy. No one in that little transaction merry-go round is making something better, more efficiently, with less energy, materials or human labour. And I believe that is the essence of improving the living standards of humans – increased productivity.
    Without better productivity, we’d still be chasing gazelle across the Serengeti with fire-hardened wooden spears and fighting the Hyena’s for carrion. Improving productivity without a manufacturing process is like to win the Tour de France on foot. Almost impossible and a little pointless.
    So after taking that little side route, I’d have to disagree with the new paradigm argument. “The intangible economics involves dealing with the subjective, as another respondent last weekend, Valissa, noted. This means there can be no more pretence of being scientific and objective, other kinds of rigour will be required:
    RE: “subjectivity is becoming the new objectivity”
 Or as I would say it… ‘The meaning of life is the meaning YOU give it!”
    It may seem like we live in a world of Nike swooshes and 70% service economies, but the truth is on a global scale we still make a truck loads of things to sustain the standard of living we enjoy. It;s just that those things are made in places like Foxconn in China rather than Illawarra or Port Kembla. An iPhone app may make a million bucks, but you still need to make the iPhone.
    And the last time mankind abandoned objectivity and rational analysis en masse, scale we got the dark ages. No thanks.

    • QContinuum. Perfect. Wish I had said. Sort of tried to…ah but for such eloquence.

      There is no new paradigm.

      I think I’ll switch from wine to whiskey…

    • Oh this bit is gold…

      But having a wedding planner pay their dog trainer with money they earned by supplying services to the young personal trainers is not a real economy. No one in that little transaction merry-go round is making something better, more efficiently, with less energy, materials or human labour.

      Indeed. In fact no-one in that little transaction is making or doing anything that’s an economic necessity. The world would continue without wedding planners, dog trainers and fitness consultants, but it would grind to halt if China making us widgets, because we simply don’t know how to do it anymore.

      No-one is denying that the “services economy” makes up an ever growing proportion of GDP in western economies, but its largely fluff and luxuries that we can afford (at least in Australia) because we have valuable rocks. Other Anglo economies are currently discovering that they probably can’t survive by selling “financial services” to each other, and at some point, someone has to do something useful.

      I’ve read economists who say that peak oil is not an issue for western economies because our “oil intensity” has fallen dramatically in the past few decades, as we’ve moved to services-based economy. Well lets take away the oil and see how far we get!

    • Please, please, please,

      What brand of whiskey is it that you’re drinking?

      The one I drink has me talking left-handed by the second nip, let alone the fourth.

      I reckon by the time I get through a half-bottle of yours, I’ll understand the meaning of life 🙂

      Great post.

  6. Alex Heyworth

    Well, it seems that even though there is quite a bit of disagreement about where we are at, there is some agreement, at least, about where we should be heading. Everyone agrees we have to look to use less stuff. The challenge will be to maintain, or even improve, quality of life at the same time. Those of you who are younger than me will be taking up that challenge, I have no doubt.

    • and a first step toward using less stuff would be recognising population growth is not desirable either locally or globally.
      We have an economic system that works reasonably well when human populations are expanding…driving consumption of all resources, but we have no paradigm at all for the steady population state? In the past it could be argued we did not need one…..but it’s clearly an imperative now.

      • Agreed. We need an economic system that can grow without growing the population, and that must include so-called under-populated countries like Australia, countries that are suffering “skills shortages” and countries with aging populations.

        They are all excuses for not solving the problem, and more immigration is always the answer. It only kicks the can down the road for the next generation.

        I’m sick and tired of hearing about why Australia needs more people, but the rest of the world doesn’t … or Australia is less than 1% of the world’s population, so nothing we do will have any impact.

        Demographers are almost as annoying as economists!

  7. Agreed Alex – mindless consumerism is a waste of materials and labour resources, not to mention rather limited in a world of finite resources.

    Doing more with less is what underpins our quality of life.

  8. Ok, Rant on..
    While most of you go off on ethyl alcohol I would like to express a contrarian point of view.
    There are wedding planners in our western society precisely because it takes less people to do the dirty work. Compared to England in the 18th century we have machines which save a heap of time and effort. This gives a whole bunch of people in our society an opportunity to do meaningless work and we are socially engineered like Pavlova’s dog so that we think we are happy and fulfilled. It’s all worked out some time ago. The thinking of Ann Ran was well and truly countered with the Iron Mountain meetings in the US back in the early 1950’s (Ref “The Report from Iron Mountain”). The 1970’s brought a change of direction (a bad choice IMO) where space, rocket ships and other “manly” pursuits was diverted with the reintegration of the feminine into decision making. This required a rework to “keep the population happy and busy” with pretend jobs and required the utilisation for the great feminine power “spin”, and what are derivatives but the ultimate spin?. For those of you older than 40 you most likely studied George Orwell’s “1984”. Cast your mind back to the horror you felt then about the society he portrayed. Then re-read it. I was shocked at my own response when I realised how much my own view has been shaped to the point of acceptance of what I once found so shocking and manipulative.
    For those of you who fear “the lack of resources” I would suggest it is all in your own minds. There is plenty of everything in our solar system and recently we have found in other solar systems as well. It is time to “man up” again, jump into our space ships and rediscover the joy and wounder of this universe. Surely exploration is far more rewarding than debating the finer points wedding planners.
    Hmm, perhaps I have said too much, just go back to your satellite TV and get an even larger dose of emotion over watching the latest reality shows sheeple are addicted to… yes much more meaningful and life fulfilling.

    Rant off

    • For those of you who fear “the lack of resources” I would suggest it is all in your own minds. There is plenty of everything in our solar system and recently we have found in other solar systems as well. It is time to “man up” again, jump into our space ships and rediscover the joy and wounder of this universe.

      Oh dear, this website really does seem to attract them doesn’t it. Someone obviously has no clue just how far away the planets and stars are, and how much energy is required to get there.

      • Yeah,

        Wonder how much energy it took just to bring a bag of rocks back from the moon?

        Maybe somebody ought to watch more reality TV shows, and less of “Star Wars”.

      • Actually “The Lorax” and Julius you are perfect examples of the” fear of lack”.

        If we are going to blog on “The abundance of scarcity” then we need to look at our bias. My argument is that Perpetual Growth is possible, we live in an abundant universe. The other issue Sell on News raised was Anglo Saxon productivity. Which goes to my second point, Abundance is there if we are prepared to work for it. I will give you two examples where our collective bias are preventing progress and where we are choosing to ignore Abundance because we are lazy. Both projects are profitable and achievable with our current technology. Both projects require large cap ex and a collective decision to support the effort for 5 to 10 years. Helium 3 provides the solution to the limits on our population and resources required to improve our lives. Liquid Trees addresses the issue of a lot of our wast by-products of our current lifestyles. Both projects are exciting and offer hope for our collective future if we can overcome our bias and are prepared to work for it.

        Helium 3 mining on the moon will fund the entire effort to establish a self sustaining colony( on the moon). It will pay for the gravity tax to jump start our sustained presence in the solar system. I encourage you to search beyond the wicki entries and read some of the scientific papers. For understanding and inspiration check out the archives of and
        In summary Helium 3 is a by product of the fusion reaction in our sun. Huge quantities have been accumulating in moon dust over the millennia( transported via solar wind). Helium 3 is the one element that we, right now, can use as fuel to power fusion reactors and generate electricity. A very conservative estimate (due to limited sampling) indicates enough fuel to generate all the worlds power requirements for at least the next 400 years. A one kilo bottle of the stuff is enough to power the entire US for 4 years. So Lorax and Julius not only can we afford our leap into the solar system but our survival as a species requires it. I encourage you to look more deeply at you own bias and open your socially controlled foggy eyes and rediscover some of the true joy of abundance.
        The second project “Liquid Trees” is harder to research but I was actively involved in it back in the late 80’s and early 90’s. The project stopped dead with the change of government but not before it was costed and fully scrutinised at a one week conference in the old parliament house. In summary it is based on Piping Human waste from Adelaide, Melbourne, Sydney and Brisbane to the middle of NSW. Along the way harvesting methane for power generation, Urea and many other chemicals. The end product would capture huge amounts of carbon by growing trees and provide heaps of wood. The cost 6 to 9 billion in 1992 $ with a profit of over 1 billion PA within 10 years (from the chemical and methane harvest alone) and a lot more once the wood starts to be harvested in 20 to 30 years. Jim Snow was the political force behind it and I encourage you to research what is available. If only we had the guts back in the 90’s to make the call. No need for a price on carbon!!

        • Hmmm … should we invest a little in preserving this jewel of a planet, or try our luck on the desolate dust balls that make up the rest of the solar system?

          Sadly, this site seems to attract the nutters.

          • Lorax,

            You can always pick the starry-eyed (no pun intended)zealots by their flowery, over-the-top, and somewhat meaningless, use of language. For example – “…your socially controlled foggy eyes..” and “…the true joy of abundance…”.

            Also, there is always an underlying assumption in their ramblings that those who would disagree with them are obviously socially-challenged, introspective luddites, totally incapable of lateral thinking, or of questioning the status quo, and basing their entire understanding of life on entries in Wikipedia.
            These zealots believe that they, and they alone, understand the meaning of life, the universe, and everything. The life experience of others, their lifetime education and observations, are all underpinned by the prevailing orthodoxies and structures, and are totally oblivious to other possibilities.
            Only they, the zealots, can lead us all into the brave new world – and we can figure out the real world costs and implications later.
            This bloke has got the lot in bloody spades!

          • Excelent put down, ok so I am a scumbag nutter. Ignore me just investigate the figures yourself, they will suprise you.

        • No, not a scumbag nutter.

          Just somebody who has perhaps interesting ideas, but is unable (yet) to elucidate them without demeaning those around him.

          May I remind you that your opening contribution to this discussion included the words:

          “Hmm, perhaps I have said too much, just go back to your satellite TV and get an even larger dose of emotion over watching the latest reality shows sheeple are addicted to… yes much more meaningful and life fulfilling.”

          I don’t believe that such an approach rates much of a mention in the publication “How to win friends and influence people”.

          Perhaps you might like to get a copy and read it – you might find your ideas receive more consideration, and perhaps even acceptance, as a result.

          • Dear Julius,
            Thank you for the olive branch, even if it did come with a back hander (no doubt due to my smack on the head comment). I choose not to take the offered branch because I have seen your intelligence and insight in other posts, along with many others in this blog.
            SON’s article was excellent, well thought out and inviting us to peel back an onion layer in our perception of the world which I resonate with. To then read the comments was, to say the least, disappointing. Yours and others mindset behind comments like “do more with less” or even “how to win friends and influence people” is IMO so not what the original post was about and so obviously based on modern social conditioning/bias. It was developing into a big one sided love in. So I said something strong.
            You and a number of the people who posted have the potential to develop a much deeper understanding. I am quite happy to be labelled a nutter if it gets you thinking outside of the box.
            I will sit back down now and leave you with this quote. “95% of the population are followers, 4% are watchers and 1% are doers”. I would like to think members of MB are aspiring to be a part of the 4%.

  9. Very interesting posts – both thought provoking and hangover inducing, an excellent combo.

    I’m also going to poke the consensus opinion here. Hopefully I don’t wake the beehive too much.

    Assuming the relevance of the institution of marriage, wedding planners absolutely add value. By efficiently and effectively planning weddings, wedding planners free up the Einsteins and the SoN’s of the world to get back to their previous, perhaps more obviously productive endeavors, although I probably shouldn’t speak for Einstein…

    Let’s face the facts here. Maybe this is slightly unfair, but your wedding planner doesn’t have a lot to contribute to the scientific canon. Perhaps his or her specific talents are best used in other fields.

    Hypothetically, (sustainable) growth leads to specialization which leads to efficiency and productivity which leads to more (sustainable) growth etc.

    What say ye, hornets?

  10. Debt based money vs tangible money (commodity money).

    As Anna Schwartz, economist, Monetary school, observed: The Anglo-fractional reserve banking model favours debt and speculation over savings and investment.

    Ask yourself which does the non Western world favour? Remember that debt based money is a Western strength.

    So the West won the Cold War. How will the “Rest” win the peace? By allowing the West to continue with their dictatorship of hubris- our currency, your problem mantra delivered by US Secretary John Connoly?

    Or will the “Rest” opt for a more equitable outcome (stop cheating us with your funny money)-commodity backed money. Level the playing field.

    Culture. In the West we are mainly “rules based” organisationally and explicit. In the “Rest” they are mainly “relationship based” and implicit.

    Let us now look at some subtle and IMPLICIT (key word) that the Rest are giving.

    Chinese Premier Wen carries a copy of Adan Smiths ” Wealth of Nations” under his arm, in public travelling overseas.

    Russian Prime Minister, V. Putin speaks at a meeting at Davos, Switzerland and utilises a key word-“disproportionalities”- a term wich we associate with classical economics.

    Several weeks ago Mr. Putin lets fly with a statement about monetary “hooliganism” in the West.

    Russia and China saw first hand with the Russian collapse, LTCM derivatives debacle (Russian based, US implemented), Western carpet baggers run amok.

    So the West has based it power on cheap credit and cheap energy. Forget the claptrap of “post industrial” and service based economies- they are financial phenomae best expressed by “we think, they sweat” and post colonial secondment and subjugation. Where does the money originate to engage the services- hint look at Tourism-The entire industry was guilty of gross stupidity, they never asked where the tourists income was coming from earned, derivided or supplied.
    Cheap credit is over, the 60 year credit cycle is bust.

    The energy mainly resides in the “Rest.”

    In the West we are taught the factors of production at university-Land, Labour, Capital etc.. Yet none, or very few know the factors of wealth creation.(classical).

    Factors of wealth creation:
    1. It is grown.
    2. it is mined or quarried.
    3. it is elaborately transformed from the above two factors.

    Paul Volcker, former US Fed Chairman: A floating currency regime favours competitive advantage.
    What is the implied opposite of this statement.. that a fixed regime favours comparative advantage??

    Casino capitalism and derivatives. Imagine we are countries sitting around the roulette wheel. (Remember the real world debacle of the exploding roulette ball). The casino owners (global reserve currency, held at present by the US Legacy issue) roulette ball explodes (derivatives bust) in the faces of everyone present.
    How much FIAT or faith do you have in the owners?
    Why do derivative dealers in the West get government sanctioned kings ransoms and a bullet in the neck in China?

    So 6 billion people may favour commodity backed money they can understand or will they favour casino capitalism with never ending exploding balls, that is totally out of their control?

    China, Russia and the Rest want harmony, stability, peace and prosperity. They do not believe Western fiat will deliver.

    The SDR programme is a tactic on the way to the strategic imperative of commodity backed money. Their strength so to speak.

    The Wests share of global GDP is shrinking, whilst the Rests is increasing.

    The learned are equipped to inherit a world that no longer exists. It is the learners who will be equipped to inherit the future. Back to the future?

    So esconced in their ivory towers, slaves to dogma and idealogies, what do they see, if they ever get off their arse and look out the window? The sun, low in the sky. Dawn or twilight? The sun sets in the West and rises in the East. The sun is setting ON the West and our ivory tower cheerleaders, who missed the biggest EVENT in a century will call for a new dawn. Village of the damned.

    So all you FIATISTS, MMT’rs, Neo-whatevers, debt merchants, speculators and their handmaidens, stick to your debt based delusions and savage the arse out of each other for the diminishing pie.

    Personally, I’m off to join the Rest for a chance at a share of the increasing pie. Got gold, love mining and farming and being productive. Go with the people who create wealth, not dissapate it.

    Goodbye Betty Battenberg, you cheating , old crone.

    Hello, Gong Li , you sexy thing.

  11. I think the polarisation of this debate demonstrates the point: we need a different economic thinking for tangible/finite resources and intangible/less finite economic activity, such as wedding planning.

  12. The Japanese take on all of this is worth thinking about. Here in Japan we have a service economy proportionally as high as in the western economies (surprised about that? I was) and yet we still make a lot of the world’s widgets. How? Bigger and better machines ( no this is not Gittins!). The small proportion of the economy devoted to manufacturing is enormously productive. Perhaps when the ‘post industrial societies’ have exhausted the option of relying on housing bubbles and derivatives trading to pay their dog trainers, they will find they have some catching up to do.

    • Alex Heyworth

      Interesting perspective. But as long as we can supply services (or, in Australia’s case, raw materials) to the Japanese in return for their widgets, all is well. Personally, I don’t think Australia’s iron ore, uranium, coal or bauxite are going to run out any time soon.

  13. Great post SON, even if I don’t completely agree with the premise.

    All service based activity within the economy is in support of, or underpinned by resource consumption. I can’t think of one activity that is not related, either directly or indirectly, to consumption of a physical resource. Just because we choose not to quantify the cost, it doesn’t mean that it’s not there. Consequently, according to my overly positivist, contrarian view of the world, there ARE limits on the quantity and value of all transactions, even those of financial markets. Mind you, that doesn’t make them all productive and valuable (ie wedding planners!)

    We can continue to delude ourselves as long as we like that we can trade or produce our way out of this situation of excessive resource consumption but it’s not going to change anything. That is, until something like our good friend Maslow’s work shows up in one of a couple of ways:

    1/ Scarcity of tangible resources begins to impact on our social, safety and physiological needs. At such time the system will likely fall apart as confidence in Fiat money system evaporates and individuals begin to place more value self-preservation than in obeying the rules of the system/society.

    2/ Higher order needs fuelled by greed and desire for power/control continue to monopolise the control of shrinking resources through increasing consolidation of financial control or physical force. In the case of further wealth concentration, the associated reduction in availability of necessary resources will lead to the situation above. In the case of military or other physical force, the system rules are subject to significant change based on the outcome.

    Whilst there are a plethora of social theories to explain why it happens like this, but suffice to say that the pattern has repeated itself countless times throughout history without much variation.

    But of course this time it is different…

  14. ‘There should be one economics for scarcity and another economics for what is not scarce. They will have different imperatives.’

    Well said – start teaching it today. Thank you for the article.

  15. For a better understanding of what growth means (=expontential increase) please watch the following video.

    The whole series takes about an hour, but is well worth your while.

    And I’m sorry but the whole example of wedding planner shows a little naivety. The wedding planner does not grow their own feed, supply their own fuel, or dig up the coal to supply their electricity.

    In order for there to be people whose soul job is to perform trivial jobs completely unessential for our survival demonstrates the huges excesses of food, shelter and fuel we have in our current society.

    Resources such as oil and coal make this quite easy, because the energy returned on energy invested is quite high. For example, investing one unit of oil historically produced 25 units of energy, and coal 8 to 1.

    However, a wedding planner investing one day of their energy is not going to free up a month for their client!

    It would be interesting to see how your service economy would grow if it had to spend all its time providing its own food and resources.

    • Alex Heyworth

      That is exactly why I pointed out upthread that this is all about energy. Energy is the critical resource that makes possible all the improvements our society has that make it far better to live in than a subsistence farming society. (If you claim not to agree with this point, I question what you are doing participating in this debate. Get back to your farm!)

      I really cannot see why you think the wedding planner example is naive. It exemplifies the specialization that has enabled modern society. Of course a wedding planner produces nothing of what they consume. That is the point.

  16. Exactly! So we agree that it is all about energy. And that to achieve growth in services has required a growth (exponential increase) in the consumption of energy.

    I urge you to watch the video by Professor Bartlett, as he explains the ramifications of growth simply and plainly.

    The point he makes is that regardless of the size of the resource you have, if you continue to increase your consumption of it exponentially (to grow) then you will still quickly hit the limits of that resource.

    For example 3% real growth involves a doubling of consumption every 23 years. (ln2/0.02 = 23.1 yrs) And if that were to continue, then consumption would be 4 times greater in the next 23 years. And 8 times greater in the 23 years after that.

    Or to put that another way, after 23 years a 1000 year resource becomes a 500 year resource. And after another 23 years it becomes a 250 year resource, and so on.

    If it were possible to continue growing until the resource is completely exhausted, then it would take roughly 100 years to consume what was a 1000 year resource.

    To put it another way, if we grew 3% a year for 125 years, and then consumption remained constant. Every 23 years we would be consuming what it used to take us 1000 years to consume.

    (1000 yrs x 0.5^n = 23 years
    solve to get n = 5.44 doubling periods, or 5.44 x 23 = 125 years)

    It becomes difficult for us to come to grips with this because we have only ever lived through an exponential increase of energy and resource availability over our lifetimes. And within this framework it is easy for services to flourish, as any work we used to do has been replaced by fossil fueled machines.

    However the implication seemed to be that increasing specialisation in services will allow our economy to grow indefinitely. But that is a nonsense!

    For the sake of the discussion, growing wedding planners at the rate of 5% a year is not refilling the giant oil fields of the world, nor is it refilling underground acquifers, nor is it replenishing phosphate mines, nor high grade iron ore, nor coal mines, nor is it increasing arable land per person!!!

    My point about food is that if more than 4% of the population (in Australia) was required to produce the food we eat (by removing tractors, long distance transport, fertilisers etc that are all using finite resources, many of which are about to reach peak extraction rates) than we would not have the luxury of growing services… we would all be knee deep in muck!

    • Alex Heyworth

      Spot on as regards the limitations of exponential growth. I couldn’t agree more. On specialization, can we agree that, in principle at least (and frequently in practice), it increases efficiency? If not,why has it happened?