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|Discarding Archaic Economic Doctrines|
How did economists get it so wrong…and why they always will?
The prospects for an endless stream of words working in organized fashion to answer these two questions are of great possibilities and scope. Indeed well beyond a few yeoman paragraphs. The discussion is a short venture of analysis and conclusion to encourage conversation and further thought.
The answers to both questions reside in either the absolute denial of or the limited algebraic measures given to the principles and laws of physics (all natural sciences actually) and exponential effects in orthodox economic equations. It seems that the full integration of these laws and effects into the orthodoxy of economic theory is lacking.
Are these laws politically inconvenient to include? Are economists simply alchemists who ignore exponential principles? Do they simply craft fancy stories based on the tea leaves of complex geometric symbols? Personally I have a suspicion that the answers to these questions is yes, when physics, natural sciences and the exponential function are not given the weight they deserve in the field of economic concerns.
Because the system failed in 2008, all the historic theories and beliefs should be in question. This massive failure means consideration should be given to tossing out all of the preceding ideas. Then test, retest and consider new possible hypotheses and theories.
Common sense begs that we further ask the question “is the present economic equation simply a fraud?” One that is based on the past collective muses of charlatans using fancy words and mathematics to keep the wolves at bay. Common sense also asks if we were to reinvent economic theory from scratch without knowledge of prior beliefs, how would it compare and contrast to the present system. Of purposes in this discussion, two are to pinpoint key weaknesses in the current system and fuel creative thought toward a new model, with a goal to better manage the planet.
So far no one has pinpointed the causes of the 2008 failure nor have they said that we have done such and such to fix the broken parts, the likelihood of another even more massive failure is still a high probability. Particularly, if the laws of physics and exponential effects are ignored, economists getting it right is absolutely impossible. Absolutely.
The Economic Equation
Origins of economics trace back to the simpler days of Adam Smith when concerns were focused on the best ways to manufacture pins. We have come a long way baby. The term economics itself is perhaps archaic, even superfluous as it fails to embed a sense of our modern complexity and the vast interrelated areas of concerns. Thus a new term may be required to better define the broader complex nature of a revised field of study.
The argument for a new term gathers strength when we ponder a possible mathematical equation as opposed to a linguistic definition as a device for understanding economics. The mathematical equation defines an algebraic formula that includes as variables all the known human fields of study ranging within arts and sciences. The fields of human study are vast; totalling in the thousands.
Each field (variable) has a function with its own ever changing character.
Measuring and observing both the dynamics of each variable and the inter-relationships among variables are impossible human and mechanical tasks. Simply, this is because the changes of both dynamics and variables are constant and instantaneous, with unknown consequence. One small obscure change can have an enormous and pervasive effect. Indeed, terminal
Accepting this mathematical definition suggests that economics includes in some measure all fields that pertain to human life. Secondly it is impossible to know what variable or field has the greatest impact on outcomes at any one point in time. Thirdly the boundaries of what forms the linguistic definition are ambiguous, not lending itself to a complete area of concern, For this discussion, a new term is used that may better conceptualize the scope and dynamic of this mathematical definition. The term is “Realonomics”.
Physics, Exponential function
For brevity, while realonomics consists of vast areas of human study it may be prioritized into say fifty primary fields. Leading with economics, it is then combined with history, anthropology, mathematics, rhetoric, politics, sociology, logistics, statistics, neurology, psychology and so on.
This discussion centres largely on the role and implications of physics in the mathematical equation that defines realonomics. The emphasis is placed on physics and exponential concepts over other fields as its effects are clear, pervasive and more time critical in importance to the fate of the planet Second much has been discovered in this field since the time of Adam Smith that has not been incorporated into the orthodoxy of economic models. Examples include relativity theory, thermodynamics and quantum concepts as discoveries that are not well-integrated. Third even simple mathematical functions such as “exponentials” are not fully asserted in the orthodox models. The combination of these shortcomings results in a false view of reality that causes long-term dysfunctional economic and human behaviour. Very dangerous.
In the end, realonomics embraces a much stronger marriage with physics and exponential math to gain a better understanding of the larger realities we face.
Plainly, quantum concerns are of the largest order, often defined and existing in the hidden and perhaps smallest particles or principles of order. So “quantum realonomics” is concerned with the big picture as related to the hidden particles and principles of “realonomics
The premise of current economic models centres on the individual transaction and its intrinsic ability to properly steer; by accident, human activities in the right direction. It leaves the course of human existence to the luck of a series and aggregation of accidents that is surely a romantic belief. Quite foolhardy too.
Instead the premise of “realonomics” centres on the implications of the outcomes of the aggregation of transactions and their relationships to the course of human existence. It tests the benefits of these outcomes against the criteria of sustaining current and future existence; rather than just measuring the simple immediate benefit of a transaction. Its equilibrium equation seeks to balance the current and future needs of humanity, with the perspective of its possibilities and related probabilities. Quantum concerns move the level of examination to an even higher stratum with emphasis on the hidden constructs affecting the larger picture.
To illustrate the application of “quantum realonomics” the following analysis is provided of our planet.
Quantum Realonomics of Earth
Earth in its simplest clinical construct may be broken into two driving variables. These constructs are population and utilities. Utilities are both external and internal to the planet. Currently, the external utilities cannot be controlled, while the internal utilities may be controlled and managed to meet the objectives of the planet’s indigenous population. Examples of external utilities are heat, light, gravity and so forth. Whereas its internal utilities consists of atmosphere, minerals, water, ecosystems and other physical elements. These internal utilities are split between renewable and non-renewable elements with renewable elements dependent on the external utilities for renewal. For ease of this analysis assume "renewable elements" are infinite.
Battleground earth is thus the conflict between its population and internal utilities that are non-renewable elements. Think of these elements as a vast absolute reservoir that is to be used by the planet’s indigenous population over an unknown specified time. Once exhausted then the population must find more on other planets or exist on only the renewable elements. If the population’s existence is organized and highly dependent on non-renewable elements, then its journey may cease when they are gone.
Two factors related to population may affect the usage of these non-renewable elements. Greater per capita consumption or population size or both, will act to speed the use of the absolute reservoir of resources to its exhaustion. Add the exponential function of mathematics to these population and resource constructs, then “the time line to exhaustion is dramatically shortened.” Dramatically…
The Devil is in the Exponentials
Little attention is paid or else little is understood of this dooming mathematical concept, so a quick refresher is in order. There is a simple rule to determine how many years it takes for any population of items to double using basic long division. Simply divide the growth rate 7% (say 7) into 70, and the result is a doubling of the population in ten years. In twenty years it is four times the original size, in thirty years it is eight times, and so on. This calculation is commonly referred to as the rule of seventy-two
Now applying this exponential rule to the population and reservoir of absolute non-renewable elements provides interesting observations and outcomes. Assume a population of 1,000 and a utility reservoir of 10,000 units. Every ten years the population doubles and it uses 1000 units of the utility reservoir every ten years per thousand. So in the first ten years it uses 1,500 units with an average population of 1,500 (2000+1000/2 = 1,500). In the second ten year period the units used doubles to 3000, and in next period they only use 5500 units, not 6000 as the 10,000 originals units are then completely exhausted.
Observe that their population continued to grow itself exponentially every ten years, while even knowing they would soon extinguish their resources. Not a very bright bunch most would say doubling their population every ten years to fuel the rapid depletion of all their resources. In fact, in their last ten years powered by exponential winds they used more resource units than they did in the first twenty. Hmmm…certainly not an astute move, yet growth is good?
Unfortunately it does not matter in the quantum sense for Earth if we double the population every 10, 25 or 50 years. The result is ultimately the same because the math speeds its path to exhaustion of the planets non-renewable elements. Before this happens inflation will be rampant, while government debt and deficits will charge out of control. Bringing out the worst in social and political upheaval as the march of growth plays on. Sound familiar? You see…the devil is in the exponentials.
Speculating Outlooks and Remedies
Poor ole Earth, for it is now theoretically possible to determine the approximate date that its non-renewable elements will no longer exist. Divide, the current annual per capita utility use multiplied by the population, into the total theoretical utility reservoir of non-renewable elements. The number that results is the most likely date the reservoir will experience the exhaustion of its non-renewable elements based on current population and consumption .Add the exponential growth math, and the date moves much closer. It is not a big number in either cases, and is still subject to errors, guesses and unknown, unknowns.
The remedies start with an abdication of the orthodox economic doctrine that encourages unbridled exponential growth in consumption, pollution and population of the planet. In turn we need to embrace a model that aligns economic thinking with both the planet’s physical exponential realities and the laws of physics. By starting with this change, the policies, beliefs and behaviour at all levels have an opportunity to adjust and slow the path to the complete depletion of non-renewable elements. This is not an easy change. This is hard and complex. This is necessary.
“Au pays des aveugles les borgnes sont rois”
T A McNeil
First Financial Insights Inc.
July 7, 2011
“in the country of the blind, the one eyed men are kings”
Est modus in rebus: There is a proper measure in things.