Peter Cooper — Pain of Austerity Brings No Future Gain

In a nutshell, the economy comes down to this: we have available labor time and natural resources with which we can produce some stuff and distribute it. Unemployment now means lost production now that can never be recovered in the future.

Real waste.

heteconomist
Pain of Austerity Brings No Future Gain
Peter Cooper

Leo Hickman — GRANTHAM: Capitalism Is Great, But It Assigns No Value To Your Grandchildren

Jeremy Grantham: "Capitalism does millions of things better than the alternatives. It balances supply and demand in an elegant way that central planning has never come close to. However, it is totally ill-equipped to deal with a small handful of issues.

"Unfortunately, today, they are the issues that are absolutely central to our long-term wellbeing and even survival. It doesn't think long-term very well because of high discount rate structure."

Business Insider
GRANTHAM: Capitalism Is Great, But It Assigns No Value To Your Grandchildren
Leo Hickman, The Telegraph

Jeremy Grantham gives a shout out to Kenneth Boulding, author of Evolutionary Economics, Ecodynamics, The World as a Total System, The Economics of Human Betterment, and many other works. Boulding was also aware of monetary economics, sectoral balances and functional finance. See, for instance, Economic Analysis, rev. ed., 1948, p. 399-402. See also L. Randall Wray, "Kenneth Boulding's Reconstruction of Macroeconomics," Review of Social Economy; December 1997.

Grantham: One of my new heroes is an economist called Kenneth Boulding who, at 22, got a paper into Keynes's journal. At the age of about 50 he realised that economics was not taking its job seriously, that it was not interested in utility, in real serious improvement in the world, but that it was increasingly interested in new, elegant mathematical theories designed to get career advancement, over usefulness.

He said the only people who believe you can have compound growth in a finite world are either mad men or economists. He also said: "Mathematics has brought rigor to economics. Unfortunately, it also brought mortis."

This is a fairly long interview, but it is worth reading for several reasons. One is, of course, that Jeremy Grantham has been around for a long time and speaks from deep experience. In addition, he is essentially saying that what matters is real resources rather than money.

We don't build things on paper and yet we've begun to talk as if we do. People say that the Chinese have built all their railroads on debt, to which I say, "no, they haven't". They've built them with real Chinese people and real cement and real steel that are part of the real world.

McKinsey: Resource revolution

The new McKinsey report Resource Revolution: Meeting the world’s energy, materials, food, and water needs shows that the resource challenge can be met through a combination of expanding the supply of resources and a step change in the way they are extracted, converted, and used. Such resource productivity improvements, using existing technology, could satisfy nearly 30 percent of demand in 2030. Just 15 areas, from more energy-efficient buildings to improved irrigation, could deliver 75 percent of the potential for higher resource productivity.

Meeting the resource-supply and productivity challenges will be far from easy—only 20 percent of the potential is readily achievable and 40 percent will be hard to capture. There are many barriers, including the fact that the capital needed each year to create a resource revolution will rise from roughly $2 trillion today to more than $3 trillion, with additional capital requirements to pursue climate change and universal-energy-access agendas. The benefits could be as high as $3.7 trillion a year, however, if carbon had a price of $30 per metric ton and if governments removed substantial resource subsidies and taxes.

Policy makers should consider action on three fronts: [1] unwinding subsidies that keep prices artificially low and encourage inefficiency; [2] ensuring that enough capital is available and that market failures associated with, for instance, property rights and incentives are corrected; and [3] bolstering society’s resilience by creating safety nets to help very poor people deal with change and educating consumers and businesses to heed the reality of future resource constraints.

Read it at Peak Oil

McKinsey: Resource revolution

Full report downloadable in PDF

Mish — Population: The Elephant in the Room

Read it at MISH'S Global Economic Trend Analysis
Population: The Elephant in the Room; Peak Oil Implications on Population Growth; What Level of Human Population is Sustainable?

by Mike "Mish" Shedlock