Dietrich Vollrath — Who are you calling Malthusian?

Everything you wanted to know about "Malthusian" summarized, if you wanted to know.

Growth Economics
Who are you calling Malthusian?
Dietrich Vollrath

Charles Eisenstein makes FT


Steven Keen also gets a shout out.

The Financial Times | Alphaville

Towards a steady-state economy?
Posted by Izabella Kaminska
(h/t Andy Blatchford via emial)

Supply-led vs Demand-led Transactions

Lavoie & Godley nail a fundamental, ideological error still undermining orthodox economics.

"Reversed causation also affected the link between investment and saving: ... Neoclassical macroeconomics is essentially supply-led; this to us is its fundamental weakness: [In reality] capitalist economies, most of the time, are demand-led. They generally suffer from a lack of effective demand, not from a lack of capacity or a lack of labour resources."

This fits fundamental biology. All reactions pursue sensed potentials. They do not follow predetermined intent. The world is, after all, completely unpredictable. Classic economics seems worse than overly anthropomorphic when it comes to what are rank assumptions about aggregate behavior patterns. Orthodox economics actually makes incredibly autocratic presumptions.

For example, mountain men & trappers didn't save up their currency and then go out to acquire beaver pelts.

Rather, they borrowed & underwent tremendous privations to acquire pelts, in order to sell at a profit.

A carrot is more compelling than a stick, brick or stale bread.  Ever seen McDonald's successfully selling dry toast, regardless of how much supply they have?

There seems to be an age-old confusion about dual use of currency as a commodity to be saved and as a virtual unit denominating expanding credit.

Credit clearly precedes currency in all social species, denominated via affinity bonds. Once created, actual commodity currency is always both at least a brief store of value and also a unit of account. Yet as populations grow, the role of currency as a unit of fiat credit constantly grows while the utility of money as a commodity becomes negligible.

Any tribal or family member is inherently familiar with limitless credit extensions, most of which are written off. In a social species, interpersonal credit is always a minor cost of pursuing aggregate return on coordination. Scalable social affinity pursues net margins. Ideological intent is just system noise. Teamwork simply works.

We're back to a conundrum. How does a modern, supposedly educated, population so thoroughly divert itself with ideologies which are so obviously self-defeating? The object of our aggregate is survival & growth of our coordinated nation state, NOT hoarding of whatever unit of account we utilize in order to coordinate some, notable transaction chains.

Our problem is entirely one of ideology. There is, by definition, no problem with fiat currency. Our class ideology is misusing our aggregate fiat. That situation only occurs when aggregate communication falters, leading to a declining rather than a more perfect union. Misused aggregate fiat - aka maladaptive policy - can only occur with poor situational awareness by an aggregate.

We're always in this together. We're just not acting like it.

Fighting over resources

Gunmen in speedboats shoot dead 15 people aboard fishing vessels in apparent dispute over access to lucrative waters.

Read it at Al Jazeera

Filipino fishermen killed in 'tuna turf war'

Third Of Global Workers Either Unemployed Or Impoverished

One in three workers worldwide is either living in poverty or unemployed -- a share that totals about 1.1 billion people -- according to the International Labour Organization's Global Employment Trends 2012 report. And the employment crisis may actually be worse than many think. The report found that if all of the nearly 29 million workers that were expected to participate in the labor force before the 2008 financial crisis were taking part, than the global unemployment rate would swell to 6.9 percent from its current 6 percent. As it stands now, those workers have simply become discouraged and dropped out of the workforce.

One factor driving the global jobs crisis could be the elevated levels of unemployment in many countries in the eurozone, which is currently in the midst of crisis. In Spain, the unemployment rate was 22.9 percent as of November, while in Greece the unemployment rate is 18.8 percent. And citizens the world over seem to be concerned.Unemployment is the globe's fastest rising worry, according to a December BBC poll.

"Despite strenuous government efforts, the jobs crisis continues unabated," ILO Director-General Juan Somavia said in the report. "What is needed is that job creation in the real economy must become our number one priority."

Read the rest at The Huffington Post

Global Jobs Crisis: Third Of Global Workers Either Unemployed Or Impoverished
by  Jillian Berman

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

Bill Mitchell — The costs of unemployment – again

Read it at billy blog
The costs of unemployment – again

by Bill Mitchell

Must-read, of course.

Hanging by a thread

The systems on which we rely for our financial transactions, food, fuel and livelihoods are so inter-dependent that they are better regarded as facets of a single global system. Maintaining and operating this global system requires a lot of energy and, because the fixed costs of operating it are high, it is only cost-effective if it is run at near full capacity. As a result, if its throughput falls because less energy is available, it does not contract in a gentle, controllable manner. Instead it is subject to catastrophic collapse.

Read the whole post, article really, at Fleeing Vesuvius, On the cusp of collapse: complexity, energy, and the globalised economy by David Korowicz

(h/t Clonal)

I would have subtitled the article, "Hanging by a thread." Civilization really does hang by just a few threads, and if any one of them is cut or breaks, the whole house of cards comes crashing down. This is systemic risk in the extreme.

Every engineer knows that redundancy is required in fragile system to ensure that if any key components fail, there is an adequate backup. That's why cars have emergency breaks, for example. There is little redundancy built into the modern global economy, whose purpose is to materially provision humanity, and few buffers are available for vital resources.

James K. Galbraith on Economic Consequences of Rising Resource Costs

This is joint work with Jing Chen and it’s work in progress addressed to a question that we believe has not be adequately dealt with, in fact barely dealt with at all, in any major tradition — neither in the mainstream nor in the Keynesian or progressive responses to the crisis so far.

The question that we are addressing, that we would like to address, is to the implications of rising resource costs for economic systems in general and for the structure of economic society.

Our approach is to treat the economy as having the same form as a biophysical system — something that it obviously does — insofar as economic life is part of human life and involves interaction between organized society and the natural world.

The meaning of this idea, in essence, is that you have to be able to get more value out of your environment than it costs to extract it. Otherwise, you cannot live.

That is true for any form of living organism and it ought to be true, certainly is true, for society as a whole....

Read the rest at FireDogLake: James K. Galbraith: The Implications of Rising Resource Costs for Economic Systems

This is an important talk given by Prof. Galbraith at the Association for Evolutionary Economics (AFEE) session of the Allied Social Sciences Association (ASSA) meeting on January 9, 2011. It was transcribed by selise, who posted it to her diary at FireDogLake. Thanks, selise.

Jeremy Grantham - Time To Wake Up, World

Summary of the Summary

The world is using up its natural resources at an alarming rate, and this has caused a permanent shift in their value.

We all need to adjust our behavior to this new environment. It would help if we did it quickly.

Summary

• Until about 1800, our species had no safety margin and lived, like other animals, up to the limit of the food supply, ebbing and flowing in population.

• From about 1800 on the use of hydrocarbons allowed for an explosion in energy use, in food supply, and, through the creation of surpluses, a dramatic increase in wealth and scientific progress.

• Since 1800, the population has surged from 800 million to 7 billion, on its way to an estimated 8 billion, at minimum.

• The rise in population, the ten-fold increase in wealth in developed countries, and the current explosive growth in developing countries have eaten rapidly into our finite resources of hydrocarbons and metals, fertilizer, available land, and water.

• Now, despite a massive increase in fertilizer use, the growth in crop yields per acre has declined from 3.5% in the 1960s to 1.2% today. There is little productive new land to bring on and, as people get richer, they eat more

grain-intensive meat. Because the population continues to grow at over 1%, there is little safety margin.

• The problems of compounding growth in the face of finite resources are not easily understood by optimistic, short-term-oriented, and relatively innumerate humans (especially the political variety).

• The fact is that no compound growth is sustainable. If we maintain our desperate focus on growth, we will run out of everything and crash. We must substitute qualitative growth for quantitative growth.

• But Mrs. Market is helping, and right now she is sending us the Mother of all price signals. The prices of all important commodities except oil declined for 100 years until 2002, by an average of 70%. From 2002 until now,

this entire decline was erased by a bigger price surge than occurred during World War II.

• Statistically, most commodities are now so far away from their former downward trend that it makes it very probable that the old trend has changed – that there is in fact a Paradigm Shift – perhaps the most important economic event since the Industrial Revolution.

• Climate change is associated with weather instability, but the last year was exceptionally bad. Near term it will surely get less bad.

• Excellent long-term investment opportunities in resources and resource efficiency are compromised by the high chance of an improvement in weather next year and by the possibility that China may stumble.

• From now on, price pressure and shortages of resources will be a permanent feature of our lives. This will increasingly slow down the growth rate of the developed and developing world and put a severe burden on poor countries.

• We all need to develop serious resource plans, particularly energy policies. There is little time to waste.

[Emphasis added]

Read the full report: GMO QUARTERLY LETTER - April 2011