Prompted by the letters page of the Economist of August 8th I was minded to construct and submit the following letter to the ed. of the Economist. I know absolutely zip about conventional macro- economic theory, but I am in no doubt about the impact of the financial crisis, bailouts, and MPs expenses furor upon my household and domestic economy.
Here’s the letter and footnote as emailed to Economist.com. I posted a draft of the letter to CiF on the Guardian online. At the time of writing it has four recommendations; hardly exceptional, but a start.
To the ed. of the Economist magazine;
Tony Hays (letters, Aug 8th) disclosed that he considered taking a degree in economics 50 years ago but was dissuaded on the grounds of being advised “that the exam questions would be the same from year to year, but that the correct answers would differ each year.” He elected instead to pursue a career in engineering. He ought to be well placed to understand financial market failure and recession.
Is it not apparent to all and sundry that the macro-economy is a system with inherent instabilities capable of comparison with and to the laws of dynamics as applied to unstable physical systems such as flogging sail, snaking caravan, or unsecured gate swinging in a fresh breeze? In each instance force(s) send the system swinging one way to the point where counter forces are activated to send it swinging back.
Surely, super-extension of money supply involving increasing degrees of risk associated with ever greater extension of credit must inevitably reach a glass ceiling from where it must rebound? The only comfort is that the periodicity is somewhat greater than a clanging gate on a stormy night. Perhaps this is congruent, but nonetheless a simpler explanation to that of Prof. Meghnad Desai whose letter in the same issue describes “a disequilibrium dynamic stochastic system.”
I cannot help wondering if degrees of complexity in human constructs stand in the way of comprehension, or wonder if things might be more stable if humankind could find a way to pin monetary economies with the natural economies of the Earth and do so sympathetically to natural hyper-cycles and hierarchies. Might it be the Sun, stupid?
.. Perhaps if economists were to reflect somewhat anthropologically upon the human departure from the natural subsistence economy, see that as the origin of trade and the origin of a wider economy, then make comparisons…
The following footnote went with the submission;
It is difficult for me to elaborate on the above while remaining brief, and while the final paragraph may seem like a call to fundamentalism, this is not the case. But it is a suggestion of a direction to take to gain understanding.
The natural subsistence economy is caloric not monetary, and species in general must satisfy the caloric economy or die. The imperative is to match caloric return from food to caloric effort in relation to existence, provisioning, and avoidance of predation. It was once the same for human ancestors. Fail to satisfy the imperative and death, extinction possibly, results.
The emergence of a wider human economy stems from the time when humans became sufficiently adept at provisioning food so as to have a degree of freedom from the natural imperative. Our ancestors had time to give over to making tools and trinkets. The modern scale of the macro-economy is simply measurable by the degree to which it surpasses the subsistence economy.
So, somewhat provocatively, I postulate that economists who study the flow of money are a bit like physicians who might once have recognised the importance of blood without fully understanding its’ purpose. Blood circulates energy and nutrients in a hierarchical biological being (yep, we are frequently guilty of overlooking these natural evolutionary and biological hierarchies inherent in the ‘self’) and manages waste. Money circulates energy and nutrients around the economy.
21st century challenges are plural; climate, sustanability, and economic. Prince Charles addressed these in his Dimbleby lecture. He has a book due next year, ‘Harmony’, which purports to link these themes. I don’t know what he has chosen as the conceptual vehicle.
My paradigm lies in the facilitation and comparisons hinted at in the above. I have a graphical representation of the transitions that bring us to where we are today. Further development is needed.
I find two observations are significant.
In the departure from a fundamentally constraining natural economy and with the accompanying accumulation of ‘knowledge’, complexity is a token of two sides. Upside and downside. People do now speak of an ‘economy of knowledge’
Second, in the transition from barter to multi-nationalism and viewed from an anthropological perspective the nature of trade has evolved from collaborative, that is negotiated between parties of loosely equal muscularity, to exploitational and predatory.
.. And in a three for two offer it has something to say about chronic disease, esp. obesity and diabetes.
There is more to be learned from the model, perhaps, such as the constant need for emerging technologies, and why full employment is an unrealistic goal.
The marginalisation and failure rates of small and medium businesses is an economic evolutionary consequence of a system that has vested a false belief in the nature and worth of ‘capital’ as constructed by humans. Virtuous economic hierarchies and hyper-cycles are imploding around humankind just as our disregard for the natural counterparts is degrading and destroying those.
Events are telling us to direct attention to Earthly capitals. Root and branch reform is needed. We must find a way to enjoy monetary economies while operating within the constraints of natural ones.
The Earth is an energy system subservient to the Sun; Life and humans are energy systems ultimately subservient to the Earth. Economies circulate energy. Wake up world, take a good luck.
Comment on the guardian has been interesting. In recognition of the failing of conventional capitalism there has bee a debate raging between proponents of capitalist and socialist agendas. Division and entrenchment will get us nowhere save for reinforcement of the resonant and cyclical nature of the periodic pendulum like swing between the two.
If we could just ditch our conditioning and vested interests then recognise true capitals for what they are, then capitalist, socialist and green agendas might converge; that in itself may some imply or infer something of the validity in the postulation. Ideological I know, however, if we are to face concern over food insecurity head on then perhaps the error of ours ways may be apparent to all but the most pig-headed. The need to feed ourselves is fundamental after all.