Wednesday, September 23, 2009

Why Economists Fail

The last two posts here on The Archdruid Report, while they dealt with issues that are becoming increasingly hard to avoid as industrial society begins its long slide down the slopes of Hubbert’s peak, were something of a distraction from the theme I’ve been trying to pursue for the last few months, the theme of deindustrial economics. I want to return to that theme here, and continue exploring the possibilities and risks of economic life in an age of decline.

Mind you, it may have occurred to many of my readers – and it has certainly occurred to me – that there’s something distinctly odd about an archdruid setting aside his white robe and oaken staff for the chalk and blackboard of the economics classroom. I am not an economist; I don’t even play one on television, and my background in economics consists mostly of extensive reading and study in what nowadays would be considered the fringes of the subject – most notably the writings of the late E.F. Schumacher, which set this sequence of posts in motion.

Yet there’s a case to be made for discussing economics from a standpoint distinct from that of today’s economists – in fact, from nearly any imaginable standpoint other than that of today’s economists. That case could draw its initial arguments from many points, but the most obvious one just now has to be the near-total failure of contemporary economic thought to provide meaningful guidance to the macroeconomic challenges of our time.

This may seem like an extreme statement, but the facts back it up. Consider the way that economists responded – or, rather, failed to respond – to the late housing boom. This was as close to a perfect textbook example of a speculative bubble as you’ll find in recent history. The very extensive literature on speculative bubbles, going back all the way to Mackay’s Extraordinary Popular Delusions and the Madness of Crowds, made recognizing another example of the species easy enough. All the signs were there: the dizzying price increases, the huge influx of amateur investors, the giddy rhetoric insisting that prices could and would keep on rising forever, the soaring rate of speculation using borrowed money, and the rest of it.

By 2005, accordingly, a good many people outside the economics profession were commenting on parallels between the housing bubble and other speculative binges; by 2006 the blogosphere was abuzz with accurate predictions of the approaching crash; by 2007 the final plunge into mass insolvency and depression was treated in many circles as a foregone conclusion – as indeed it was by then. Yet it’s a matter of public record that among those who issued these warnings, economists – who should have caught onto the bubble faster than anyone – could very nearly be counted on the fingers of one foot. On the contrary, the vast majority of the economists who expressed a public opinion on the subject insisted that the delirious rise in real estate prices was justified and that the exotic financial innovations that drove the bubble would keep banks and mortgage companies safe from harm.

These comforting announcements were wrong. Those who made them had every reason to know at the time that they were wrong. No less an economic luminary than John Kenneth Galbraith pointed out decades ago that in the financial world, the term “innovation” usually refers to the rediscovery of the same limited set of bad ideas that always, without exception, lead to economic disaster. Galbraith’s books The Great Crash 1929 and A Short History of Financial Panics, which chronicle the carnage caused by the same gimmicks in the past, can be found on the library shelves in every school of economics in North America, and anyone who reads either one can find every rhetorical excess and fiscal idiocy of the housing bubble faithfully duplicated in the great speculative binges of the past.

If this were an isolated instance of failure, it might be pardonable, but the same pattern repeats itself as regularly as speculative bubbles themselves. Identical assurances were offered – in some cases, by the identical economists – during the last great speculative binge in American economic life, the tech-stock bubble of 1996-2000. They have been offered by professional economists during every other speculative binge since the profession of economics came into being. Take a wider view, and you’ll find that whenever a professional economist assures the public that some apparently risky course of action is perfectly safe, he is usually wrong.

A colorful recent example was the self-destruction of Long Term Capital Management (LTCM) in the early 1990s. One of the two Nobel laureates in economics on LTCM’s staff announced publicly that the computer models the company used for its hugely leveraged trades were so good that they could not lose money in the lifetime of the universe. Have you ever noticed that villains in bad movies very often get blown to smithereens a few seconds after saying “I am invincible”? Apparently the same principle applies to economists, though the time lag is longer; it was, as I recall, some five years after this announcement that LTCM got blindsided by a Russian foreign-loan default that many other people saw coming, and failed catastrophically. The US government had to arrange a hurried rescue package to keep the implosion from causing a general financial panic.

Economists are not, by and large, stupid people. Those who work in some of the less glamorous subsets of the field have worked out a great many useful tools for businesses and individuals, and the level of mathematical skill to be found among today’s “quants” rivals that of many university physics departments. Yet the profession seems to have become incapable of learning from its most glaring and highly publicized mistakes. This is all the more troubling in that you’ll find many economists among the pundits who insist that industrial economies need not trouble themselves about the impact of limitless economic growth on the biosphere that supports all our lives. If they’re as wrong about that as so many other economists were about the housing bubble, they’ve made a fateful leap from risking billions of dollars to risking billions of lives.

What lies behind this startling blindness to the evidence of history and the reality of the downside? Plenty of factors doubtless play a part, but three seem most important to me.

First of all, for professional economists, being wrong is much more lucrative than being right. During the runup to a speculative binge, and even more so during the binge itself, a great many people are willing to pay handsomely to be told that throwing their money into the speculation du jour is the right thing to do. Very few people are willing to pay to be told that they might as well flush it down the toilet, even – indeed, especially – when this is the case. During and after the crash, by contrast, most people have enough calls on their remaining money that paying economists to say anything at all is low on the priority list.

The same rule applies to professorships at universities, positions at brokerages, and many of the other sources of income open to economists. When markets are rising, those who encourage people to indulge their fantasies of overnight wealth will be far more popular, and thus more employable, than those who warn them of the inevitable outcome of pursuing such fantasies; when markets are plunging, and the reverse might be true, nobody’s hiring. Apply the same logic to the fate of industrial society and the results are much the same; those who promote policies that allow people to get rich and live extravagantly today can count on an enthusiastic response, even if those same policies condemn industrial society to a death spiral in the decades ahead. Posterity, it’s worth remembering, pays nobody’s salaries today.

Second, like many contemporary fields of study, economics suffers from a bad case of premature scientification. The dazzling achievements of science have encouraged scholars in a great many fields to ape science’s methods in the hope of duplicating its successes, or at least cashing in on its prestige. Before Isaac Newton could make sense of the planets in their courses, though, thousands of observational astronomers had to amass the raw data with which he worked. The same thing is true of any successful science: what used to be called “natural history,” the systematic recording of what nature actually does, builds the foundation on which science erects structures of hypothesis and experiment.

A great many fields of study have attempted to skip the preliminaries and fling themselves straight into scientific research. The results are not good, because there’s a boobytrap hidden inside the scientific method. The fact that you can get some fraction of nature to behave in a certain way under arbitrary conditions in the artificial setting of a laboratory does not mean that nature behaves that way left to herself. If all you want to know is what you can force a given fraction of nature to do, this is well and good, but if you want to understand how the world works, the fact that you can often force nature to conform to your theory is not exactly helpful.

Economics is particularly vulnerable to this sort of malign feedback because its raw material – human beings making economic decisions – is so complex that the only way to control all the variables is to impose conditions so arbitrary and rigid that the results have only the most distant relation to the real world. The logical way out of this trap is to concentrate on the equivalent of natural history, which is economic history: the record of what has actually happened in human communities under different economic conditions. This is exactly what those who predicted the housing crash did: they noted that a set of conditions in the past (a bubble) consistently led to a common result (a crash) and used that knowledge to make accurate predictions about the future.

Yet this is not, on the whole, what successful economists do nowadays. Instead, a great many of them spend their careers generating elaborate theories and quantitative models that are rarely tested against the evidence of economic history. The result is that when those theories are tested against the evidence of today’s economic realities, they often fail.

The Nobel laureates whose computer models brought LTCM crashing down in flames, for example, created what amounted to extremely complex hypotheses about economic behavior, and put those hypotheses to a very expensive test, which they failed. If they had taken the time to study economic history first, they might well have noticed that politically unstable countries tolerably often default on their debts, that moneymaking schemes involving huge amounts of other people’s money usually end up imploding messily, and that every previous attempt to profit by modeling the market’s vagaries had come to grief when confronted by the sheer cussedness of human beings making decisions about their money. They did not notice these things, and so they and their investors ended up losing astronomical amounts of money.

The third factor driving the economic profession’s blindness to its own mistakes is more complex, and will demand a post of its own. Few things seem less related than the abstractions of metaphysics and the gritty realities of money, but there’s a crucial connection. Underlying today’s economic thought is a specific set of metaphysical assumptions, and those assumptions form the foundation of sand underneath the proud and unsteady towers of today’s economic theories. In next week’s post I plan on taking a hard look at the metaphysics of money, in the hope of finding a less problematic basis for economic life in the approaching deindustrial age.

72 comments:

w g carr said...

OK, this is not really related to today's excellent essay but let's all list some innovations that in 400 years will still be remembered, low-tech and useful: food preservation (canning and freezing), germ theory of medicine, bacteriology, public health e.g. sanitation, public health e.g. plague amelioration (they stopped many a plague before antibiotics and vaccinations, vaccination production is low-tech, the telegraph and steam power. I'm sure this audience will be able to list many more.

ariel55 said...

Dear Mr. Greer,

I'll be patient as you attempt to find a "less problematic" financial reality for the future. It seems to me that you're going to have to find a different kind of people, in order to make anything work in the future. Best wishes and thanks for the post.

RDatta said...

Thank you for the clarification. Ti would seem that in aspiring to be a science, while neglecting the scientific method - economics becomes a quasi-science; in the process it abdicates the opportunity to be an art and becomes a quasi-art. But nevertheless it acquires status, reflected amongst other things in the No Bell prize.

flute said...

Sorry to be nitpicking but there is actually no such thing as a "Nobel laureate in economics". The proper name for the prize is "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel" and this prize was not instituted by Alfred Nobel himself, but rather by the Swedish central bank in 1969. In this way they used the good name of Alfred Nobel to lend some glamour to their economics prize. I think good old Alfred would strongly disapprove of such a prize.
Therefore I always call the winners of this prize "Riksbank laureates in economics", so as to avoid this blatant misuse of Nobel's name.

Apart from that - it's a great post as usual!

All the Best

Henrik "Flute"
Stockholm, Sweden

Alan said...

Long before "economics" appeared on college curricula, the study of humanity's economic activities was called "political economy". This name accurately reflected the truth, known to almost everyone except, apparently, economists, that economic activity is dominated by politics (and always has been). Those models which earn their originators Nobel prizes never take politics into account and thus never accurately reflect reality.

Kevin said...

A beautiful post. Over the past few years in particular it has become apparent even to me, whose eyes glaze over a the slightest passing mention of recondite financial instruments, that there is something seriously wrong with the putative science of economics, and I now more than suspect that it is rather some kind of scientistic projection of an ideology.

...being wrong is much more lucrative than being right.

I seem to recall that you yourself have cited the quote which states that it is difficult to make a man understand something when his livelihood depends upon his not understanding it. I suspect that the reasons of economists for not predicting the housing crash are similar to the reasons of petrochemical and government scientists for arguing over more than twenty years that anthoropogenic global warming is a myth based on premature conclusions drawn from flawed or incomplete date, and that besides it's bound to be beneficial.

...like many contemporary fields of study, economics suffers from a bad case of premature scientification.

I feel certain that is true. The same applies to psychology, as Aldous Huxley pointed out in one of his essays, in which he observed that Dickens and other writers of his time were far subtler psychologists than psychiatric writers of the day. A false sense of pseudo-scientific certitude characterizes that discipline down to our time, and the same appears to be true of economics.

Posterity, it’s worth remembering, pays nobody’s salaries today.

I myself have independently observed this. I can hardly help noticing posterity's dilatoriness in recompensing the legacy of art I have sought to bestow upon it, and gather that I am not the first painter to have had this experience.

Elizabeth M Rimmer said...

And thus you also nailed what is wrong with the GM debate.

Matthijs said...

Hi John, thanks for another great post. I study economics and find your essays to be eyeopeners. My professors don't agree with me, but that's pretty much the essence of today's post.

Offtopic: the link to richard Heinberg's Museletter refers to a strange japanese/chinese website.

Bootstrapper said...

The subtitle of Schumacher's book says it best: "A Study of Economics, as if People Mattered."

john said...

1st,again maybe!!!!

Druid-dude I love you,you are a haven of absolute sense in a world gone capitalisticali-mad.I treasure your wisdom and your prose.

Thank you.

J.D. Smith said...

A few related points come to mind.

Nicholas Talib has spoken far less kindly and discreetly of the economics profession than you have. In his now-famous wording, the models of LTCM and others fail to take into account the "black swans" of rare events such as the Russia-Asia crisis.

Among widely recognized economists, Nouriel Roubini was one of the few to question the emperor's wardrobe choice during the last bubble.

Finally, along with these bubbles comes the repeated lesson that, like the petrodollar glut that led to the Third World debt crises of the 1980s, "cheap" money stupefies both lenders and borrowers.

Isis said...

JMG,

Two things.

First, the LTCM investors fully deserved to lose their shirt. Their 'guru' came out and said they wouldn't lose money within the lifetime of this universe, and in spite of the obvious fact that the human species and its concept of money will have vanished long before the universe comes to an end, they failed to call him a quack and run for their lives (or for their money, as the case may be). No sympathy from me there.

Second, thanks for your discussion of the first two reasons that economists fail. The first one (that being wrong is more lucrative than being right) was obvious to me even before you pointed it out, but the second one (the premature scientification) clarified a lot of things for me. I had long been sensing that something of the sort was going on, but never quite managed to put my finger on it.

RudolfC said...

Another excellent post. Apropos of your second paragraph, making pronouncements dressed in white robe and holding oaken staff might in fact be just the ticket to a great career in economics! Perhaps that should be required dress for all practitioners of the "science"...

More seriously, I'm coming to the conclusion that, should I want quality advice on matters economic, perhaps I should consult a historian!

cheeba said...

Hm. I wonder if, in addition, there is something endemic to the general mindset of people working in this kind of field, i.e. a tendency to focus on the fragmental at the expense of the holistically inclusive. (Alright, full disclosure, I've been reading 'The Stone Monkey' again...).

I am thinking of something related to the 'premature scientization' you refer to - a subtle but inexorably growing bias towards increasing focus on 'mathematisisable' fragments of economic mechanism at the expense of the broader curves of organic non-linearity.

As Ms Rimmer points out, it is also a flaw in much climatology (whether large enough to disprove the entire hypothesis is antoher matter), and, pertinent to what's on my mind this week, also something that historians have incerasingly been guilty of - a pedantic exactitude in relation to the minutiae of history blinding them to the broader sweeps and curves of cultural physiognomics.

Good stuff, anyway. I've been enjoying the whole Schumacher theme.

Danby said...

The monks and priests who invented the study of economics, which as Alan pointed out, they called political economy, started from the question "How should we order our economic life to achieve the good?" Being Scholastics, they engaged in endless arguments on what constituted the good, and of course, whether their proposed arrangements would actually achieve it.

When the great disaster in western thought called "the Enlightenment" struck, the Liberals asked instead "How can we, and our patrons, make more money, preferably without working?"

And the rich control the political side of the equation, as they always have, even in so-called People's Republics. So we wind up with our government handing out trillions to bankers who were so inept as to lose trillions of other people's dollars, on the basis that bankers are somehow exempt from ordinary accountability.

SP said...

When the central tenets of economics, namely:
-that decisions are made by rational agents
-all players in the market are equally informed
etc...
are demonstrably false... you have to wonder why they bother.

I'm always amused when these collapses occur that they are termed "market failure" as of course the theory could never conceivably be wrong!

You may find this book useful...

Debunking Economics see the Chapter Extracts

Myrto Ashe said...

This was so good I joined your 481 fans. Thanks for making it funny and so well-thought out.

Joel said...

There are some stirrings from economists, so perhaps they will wake up to this kind of thing.

I'm enjoying this article on, among other things, the benefits Keynes had from a adopting a broader metaphysics, and how this distinct metaphysics makes him difficult for economists to understand, to the point that one of his better biographers, Skidelsky, doesn't think of him as an economist at all!

OneCrazyMama said...

I'm with ariel55 in thinking that a "less problematic" financial reality would take an entirely new breed of human.

Great post as always, though. I think economics and psychology have some similarities when it comes to the validity of the conclusions reached. Human behavior is painfully complex (your use of the word cussed is so perfectly fitting that I had to smile when I saw it).

OT: I recently read a book about the dangerous misdiagnoses of psychological problems. I was shocked at how often, women in particular, are diagnosed with mental illness when they are truly suffering from a physical disorder.

For this reason, I tend to think most behavior--even of a maladaptive sort--has a physical or environmental cause at its root.

All of this, I know is off topic, but I say it in an effort to voice my complete agreement that premature use of scientific modeling is a dangerous game.

Science is a tool for understanding reality. Reality exists on its own and in its own way. Therefore science is not an end in and of itself.

John Michael Greer said...

WG, no, it's not, but this is the sort of thing we're talking about over in the Cultural Conservers email list.

Ariel, I disagree. That's like saying you need a different kind of people in order to have a system of medicine that isn't the leading cause of death -- as modern industrial medicine is right now in the US, by the way.

Rdatta, exactly.

Flute, so noted, but it gets very verbose having to say "the The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel laureate" every time.

Alan, right you are -- and that's going to be discussed in detail in a future post.

Kevin, no argument there -- if I could get present value of future money for those of my books that will still be read a century or two from now, assuming for the moment that any of them will be, I'd be happy!

Elizabeth, granted. And a dozen other current debates.

Matthijs, thanks for the heads up -- I'll check on it.

Bootstrapper, I'm planning one right now that will be subtitled "Economics as if Survival Mattered."

John, thank you!

JD, the funny thing is that many so-called black swans -- like loan defaults in politically unstable countries -- aren't even that rare.

Isis, you're welcome. From my perspective, at this point, anyone who expects to get rich by speculation is one of the people Ben Franklin was talking about when he discussed the longevity of the relationship between a fool and his money...

Rudolf, better still, read up on history yourself, with Galbraith's books at the top of the list.

Cheeba, true enough, and I'll be talking about the irrational worship of quantification in next week's post.

Danby, and now most of those who call themselves conservatives are asking the same question as the liberals. My question is why they keep on coming up with the same answer, even when it doesn't work.

SP, thanks for the link.

Myrto, thank you.

Joel, Adam Smith wasn't an economist either. More on this in forthcoming posts...

Crazy Mama, most contemporary psychology combines a bad case of premature scientization with a radically false model of the human mind -- and let's not even talk about that forbidden word "spirit." It's no wonder that your chances of getting over a serious psychological condition with therapy are statistically equal to your chances of getting over it without any help at all.

John Michael Greer said...

Ahem. People, please remember that profanity will get your post deleted, even when it's an excellent post. This is an all ages blog and needs to be able to get through school filters. Gav, if you'll find some slightly less robust translation for the verb "chier," and resend with that, I'd be happy to put your comment through.

Danby said...

JMG,
I was referring to "Liberals", as the 18th century party that promoted laissez-faire markets called themsleves, not to what are today called "liberals" (or conservatives for that matter).

The Liberals were opposed by the Absolute Monarchists. Neither party has a correspondent today, although both the liberals and conservatives of modern politics claim descent from the Liberals. But that's largely because the Liberals won. As it turns out, both our national political parties seem to believe in handing out money by the trillions to banksters. I don't really see much of a distinction between them on that score.

And although I do know a couple of Monarchists, even they don't believe in the divine right of kings.

J Gav said...

Ah, the economists! I suppose every profession has its own set of 'tendencies to err' but economists are a particularly admirable lot in this respect, aren't they? Not only do they consistently make the same mistakes but, as you point out, they are also consistently emboldened by them, as opposed to being chastened.

The 3 factors you lay out to explain this sorry state of affairs are convincing and the third one certainly deserves the extra weighting you intend to give it.

Indeed, the habit of looking at the world through the prism (or should that be 'prison'?) of an economic ideology and its bottom-line obsessions has become so pervasive that it might be termed the 'default mindset' of so-called post-modern societies. And those close enough to the core "value proposition" of this arrangement are sure to benefit, in the short term, whatever that means. The adjective 'parasitical' immediately springs to mind. When anyone is in a position to 'externalize' the costs and reap all the lucre, they're bound to get fat and, over time, no doubt sassy as well. Economist Michael Hudson mentions another common feature of parasites: they trick the host into thinking that they're actually doing her a favor!

What cost-benefit analysis doesn't want to see, however, is much more important than what it does see. Namely that they, the clever economists, quants, model-makers and market-makers share the same biosphere as the rest of us. Which means that, however brilliant the algorithms may be, finding ingenious new ways to trash the Earth whilst calling it 'creating value' bodes extremely ill for future generations, including the offspring of said geniuses. The fact is that nothing can really be 'externalized' at all, simply because there's nowhere for it to go - nowhere for it to be other than here on this planet! The British have an expression: "Too clever by half," which gets part of the picture but perhaps 13th Century French poet put it better when he wrote: "Con est l'oiseau qui chie dans son propre nid." My translation: "It's a dumb bird that fouls its own nest."

Respectfully,
Gav

NZSanctuary said...

@w g carr

Vaccination, if you do some digging into the first 100-odd years of it, did not reduce mortality in any meaningful way – sanitation did. Despite forced public vaccination in Europe in the mid-late 1800s, there was no reduction in Smallpox until cities moved to modern sewerage systems around the turn of the century. Doctors also began washing their hands, which helped hospital death rates decline (when hand washing was first suggested it was ridiculed by the medical profession). Those counties/towns that did not take up vaccination, but concentrated on other methods to prevent the spread did much better than those that relied on vaccination.

The mortality rates for all other diseases declined massively before vaccines for them were introduced. The one exception is Polio, but there the definition of the disease was changed (twice, I believe) after the vaccination was introduced, and DDT, a likely exacerbator, was banned a few years before (polio incidence surged after the introduction of DDT and was in decline the year after DDT was banned - before the vaccine was made). Without the vaccination the definition change alone would have wiped out over 90% of cases...

Current study reviews show that the flu vaccine does nothing to reduce the mortality rate form the disease.

Sanitation, clean water, and food, is what prevents the majority of infectious disease. Antibiotics have been a great help too, but they are overused and have lost much of their effectiveness due to the resistant bugs that have developed as a result of this overuse.

Megan said...

Obsession with quantitative data strikes me as an example of 'looking where the light is best.' The quantitative aspects of a subject may not be the essential ones, but they are the ones for which we have powerful and well developed methods with impressive track records, so we focus on them anyway.

PRiZM said...

JMG,
I'm looking forward to next weeks essay. Putting economics in the context of a science opens up a world of explanations of why things happen as they do. Scientist use their scientific method, economists in this case, always starting with their hypothesis, and more often than not those guesses are extremely wrong resulting in responses they often did not expect. In the end, it all boils down, in my eyes, for a way that an 'elite few' can control the masses. Thank you, sir!

Patz said...

I was referred to your blog last week, the Daydreams of Destruction thread. I enjoyed it thoroughly. With no disrespect meant, I have to say that for me you are preaching to the choir. I started with Jay Hanson's site dieoff.org in the 90s and have read William Catton's Overshoot plus several books and blogs on peak oil. We have truly hit the wall in energy, food, water the environment, finance and that giant elephant in the room, population.

If it's not too late to comment on that thread I have two points I'd like to add. 1. while it may be worthwhile to assess general probabilities, it is too chaotic to make any kind of analysis as to how the coming collapse will play out. 2. I don't think we differ from any other species in our response to the discovery of an abundant resource and having the ability to remove population limiting factors such as environment and predators.

We focus so much on "human exceptionalism" that we rarely realize that as a species we don't behave much differently than bacteria or fruit flies. Thus our trajectory through bloom--overshoot---dieoff would fit the same graph as any other species.

We think there was a point at which we could have rescued our situation but there was not---not in any real sense. Nothing in any of the ways in which we've organized our lives, politically, economically, socially would allow for the logic of how to achieve sustainability to take hold.

Our intelligence and ingenuity is just an artifact, albeit a wonderful one if you like whizzing around the world sampling its myriad delights.

On economists, add that they are indoctrinated into mystical priestly concepts in university such as the sanctity of "the market" and other such non-negotiable beliefs.

I look forward to reading many more of your posts. Thank you.

John Michael Greer said...

Danby, thanks for the clarification. The only monarchists I've ever met had beliefs that would scarcely pass for monarchism three hundred years ago, too.

Gav, true enough. The obsession with quantitative analysis will be central to next week's post.

Sanctuary, the good thing about sanitation is that it can be done with very low-tech methods. For that matter, carbolic acid -- the first effective antiseptic -- isn't all that hard to synthesize, either.

Megan, your crystal ball is working well, I see. Stay tuned to next week!

Prizm, I'd say it's more a case of an elite few deluding themselves into thinking that they control much of anything. More on this in a future post.

Patz, granted, the details are impossible to gauge in advance. The broad picture is another matter. If you know how overshoot and dieoff work in other species, and you know how catabolic collapse has happened in other societies, you can make useful predictions about the general course of events -- just as people were able to predict the outcome of the housing bubble quite accurately several years in advance. That's one of the projects of this blog, and also of my books on the same subject.

z said...

JMG, if you are familiar with LaoZi, then you could see this post just elaborated what was said there in 20-word.

PRiZM said...

With all due respect, the 'elite few' are controlling our planet's life systems into destruction on nearly every imaginable level. While granted, they don't control our individual minds, collectively, as you have pointed out many times, billions are doomed to die. And frankly, this is perhaps where I disagree with this belief, or at least this is how I have perceived many essays, that the individual has control of their destiny, and that collectively, we want what is best. I personally see a select few who are intent upon destruction, for whatever reason. Perhaps, I just need a little guidance to help work on my perspective.

Kevin said...

JMG, I've tried to read your paper about catabolic collapse, and will have to give it at least one more go. Would you say it is characteristic of catabolic collapse that a society so afflicted eventually treats its own crumbling infrastructure as a depletable resource, cannibalizing it and thereby contributing to its own accelerating downfall? It would nice to know if I at least got that much right.

Kim said...

I enjoyed your post about economists' thinking, and look forward the next installment.

It seems to me that another reason that economists have not seen what is coming is that Earth System Science was missing from the education of many or most of today's middle-aged prominent economists. In many U.S. high schools, the smart kids skipped over Earth Science and went straight on to Bio or Chem. Even if they took a geo course in college, the Earth System perspective (focus on flows of energy and matter with intertwined feedbacks) that is so prominent in today's geoscience curricula was very uncommon when they were in college. Bio courses were likely little help, in that during the time that the baby boomers were in college, the Bio departments in many prestigious U.S. colleges had shifted heavily towards the study of cells and smaller, and away from the study of organisms and ecosystems.

Lacking an educational grounding in any kind of Earth Systems thinking, it is perhaps not so surprising that economists failed to notice that the human economy is embedded within the larger global ecosystem, and that therefore growth of any single entity or process is not sustainable indefinitely.

I blogged about this on "Earth & Mind: The Blog" (http://serc.carleton.edu/earthandmind/posts/economists_wron.html) under "How Did Economists Get it So Wrong?"

Coy Ote said...

Great article and much food for thought!
You have found some stones in a gravelpile of economic complexity. I only wish your words were being read as often as my neighbors watch such drivel as "American Idol."

I look forward to your next post.

Tony said...

J Gav,

I love the "no doubt sassy as well" comment. Thanks for making me laugh. Also, I've been talking for a while about the foolishness of pooping where we live (I don't usually put it so kid-friendly), which is what our modern society seems so much to excel at. I speak a bit of French, so I'm going to try to remember that quote!

Jason said...

JMG: It's no wonder that your chances of getting over a serious psychological condition with therapy are statistically equal to your chances of getting over it without any help at all.

That's only roughly true and only overall. Your chances go up evidentially if you choose Rational Emotive Behaviour Therapy or Cognitive Behavioral Therapy -- the two systems which most closely resemble ancient Stoicism, not coincidentally, and which require personal philosophical responsibility for the contents of one's own mind.

There are promising things going on with some other trauma therapies eg. EMDR as well.

In general the emptor of wellness had better caveat quite a lot. 'Evidence-based medicine' is prone to skewed statistics these days, esp. with drug-based treatment.

Emotional health suffers a lot in downturns until you know about apatheia, and you won't get that from Freud. Hermetics, Stoicism and Taoism combined is my personal prescription which I can recommend from experience.

On the subject of this week's post, what I really 'love' about economists is their vocabulary. It allows them to say the opposite of the truth and make it sound right. Several good examples in this comments page already.

The concept of 'risk' is a great one. As JMG implies, it's hardly smart to set up something that can't succeed, watch it fail, and then say -- well, it was risky anyway. :)

ramps said...

One difficulty in predictions, economic or otherwise, is the crucially important detail of timing. Indeed for many purposes timing is everything.

I sold a city appartment in 2001 figuring that as its value had doubled in 4 years and now exceeded rental yield, price was too high. Had I been in the postition to advise others (yikes) they would have not rewarded me for my timing, even to this day, though maybe by 2012....?

Time heals, but I still bear the weals!!

Thanks JMG for your superb prose as always.

ariel55 said...

Dear JMG; I found a book ad and thought of you: By Thomas H. Naylor, it is about Vermont and is entitled "Secession". The ad reads, "Tom Paine for the 21st century. A surprisingly compelling argument for applying the small-is-beautiful philosophy to the United States itself.--Jay Walljasper, Editor of Ode magazine.

J Gav said...

Dear All,

This modest contribution in the form of a few quotes from financial history (the not-so-attractive sibling of economics writ large) is not meant to suggest that plucking a few lines from the past is a substitute for critical thinking today. It is meant to support JMG's empowering advice to have a good hard look at the history of economics, finance and monetary systems.

"The study of money, among all other fields of economics, is one in which complexity is used to disguise truth, not to reveal it.(p. 15) The process by which banks create money is so simple that the mind is repelled." (p. 29) John Kenneth Galbraith, Money, Whence it Came, Where it Went, 1975.

"There is something so consummately ridiculous in the idea of a nation's getting money by paying interest to itself upon its own stock, that the mind of every rational man naturally rejects it. It is something, really, little short of madness to suppose that a nation can increase its wealth, increase its means of paying others ... that it can do this by paying interest to itself! When time is taken to reflect, no rational man will attempt to maintain a proposition so shockingly absurd." British MP William Cobbett, Paper against Gold, p. 83, 1810.

Over a century later, an American would refer to this absurdity in these terms:
"Such a system assumes that you can borrow yourself out of debt."
Willis A. Overholser,A Short Review and Analysis of the History of Money in the United States, 1936.

"If all the bank loans were paid, no-one could have a bank deposit and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash or credit...We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredibel, but there it is ... It is the most important subject that intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied." Robert H. Hemphill, at the time, ex-Credit Manager of Federal Reserve Bank of Atlanta, in his foreword to Irving Fisher's book, 100% Money, 1935.

The point is that many features of our economic woes today, which we feel to be somehow 'new,' have occupied people's minds for centuries. I very much look forward to the Archdruid's views on the metaphysical aspects of this other "predicament."

Respectfully,
Gav

MarcosLagoSalado said...

Hello--thanks for another great post.
It ties in with 2 things of interest i have read lately the first one (link at bottom)is a link to the huffington post article "priceless: how the federal reserve bought the economics profession" interesting among other things for showing the fed's intolerance for dissent. Secondly "Web of Debt" by Ellen Brown, for me at least, has been quite revelatory on a number of historical aspects of money creation --for one the concept that all money is "fiat" money but that if it is government issued rather than private or semi-private it can more directly benefit the real economy
http://www.thenews.com.pk/print1.asp?id=199813

J Gav said...

Jason,

I'm not at all sure that JMG implies that risk-taking is inherently bad. We all take certain risks on a daily basis, after all. Exactly what's on the line? is one important question; the other being; Who will the consequences fall upon if the risk-taker has miscalculated?

Gav

J Gav said...

PRiZM,

That there is an elite in a position to exert undue, unconstitutional and sometimes illegal influence in US society is probably on the mark. That they are "intent upon destruction" as you say is another proposition! When one wants milk, one doesn't kill the cow.
Not that all proceeds in some strictly logical fashion either in the minds of 'the powers that be.'
I would guess that they play it kind of by ear, a longer-term view giving general direction to their actions and various quick-fixes and controlled ricochets to deal with the shorter-term situations.
Gav

HanZiBoi said...

Hi Michael:

Another splendid post...as have been so many of your others!

The main question for the priesthood of economists is this:

Why trouble one's self with history and natural laws when gods need not comply with such trifles?

Above all else it should be obvious to anyone who will see that ecomomists aspire to be gods. Jesus move on over - the supremely clever theoretician who can tame the boom/bust cycle and bring forth a continuous uninterrupted increase in Material Abundance is the New Messiah!

John Michael Greer said...

Z, you probably won't be surprised to hear that many druids, myself among them, consider Lao Tsu a kindred spirit and Taoism, in a sense, an elder brother of our tradition.

Prizm, it's easy, and rather comforting, to imagine that what's wrong with the world is the fault of "an elite few...bent on destruction." It's a lot less comforting, and therefore harder, to recognize that collective decisions in which each of us has participated are the driving force behind our predicament, and that the "elite few" are simply those who have clawed their way to the top of an unsteady heap, and that the heap itself has internal dynamics they do not control and often cannot even influence. Everything I see leads me to think that this latter model is the more accurate one, and energy spent blaming our troubles on scapegoats might be better put elsewhere.

Kevin, yes, that's central. If you remember that a society that cannibalizes its own capital stock can take pressure off its dwindling resource base, and win itself a temporary reprieve from decline, you've got the core of the theory -- the stairstep process of decline that results when a complex society overshoots its resource base.

Kim, thanks for the link! I'm not sure even a good earth sciences course would have made the difference, for reasons I'll get to next week, but it might have helped.

Coy, so do I.

Jason, granted, there are therapies that work. The mainstream of contemporary psychology ignores them -- often because they're "not scientific.' Gah.

Ramps, timing's probably the most difficult thing to get in any prediction of the future. You'll notice that my predictions of catabolic collapse include only the vaguest timeline, and this is why. It's more than a little like the weather; I'm confident enough of seeing snow this winter that a snow shovel will be on the hardware store shopping list shortly, but only an idiot, or perhaps an economist, would try to predict this far in advance the exact days on which it will fall.

Ariel, well, we'll see. I'm by no means certain that chopping the US into quarreling successor states will be an improvement.

Gav, thanks for the quotes!

Marcos, thanks likewise for the references!

HanZiBoi, nicely put. Too many of today's economists seem to be working overtime on proving the ancient Greek concept that hubris inevitably leads to nemesis.

PRiZM said...

Thanks JMG, for the response and for all the time you spend personally interacting with the many of us. I like the challenge that the information you provide and responses, give to us and that alone inspires to delve deeper into the subject matter.

Thank you also Gav, for your responses as well.

Ruben said...

@Kevin

JMG rewrote his paper on catabolic collapse in his book the Long Descent. It is considerably easier reading, so buy the book!

r.

Kevin said...

Thanks for the clarification. I'll have to revisit your paper to grok the distinction between "capital stock" and "resource base."

Jason said...

Gav: I'm not at all sure that JMG implies that risk-taking is inherently bad.

Never said he did.

If a venture is certain to fail, it's silly to call it 'risky'. Risk implies uncertainty, but if something is certain to fail, there is no uncertainty. :)

When LTCM fails no-one wants to see that failure as inevitable, so 'risk' is the word hauled out. But the designers said it was 'certain to succeed' where in fact it was certain not to.

J Gav said...

Tony,

Sorry for the late response. I'm glad to see that you take an interest in my probably offbeat and weird-sounding contributions to this excellent blog. Though I don't actually recall if my intention was to be humorous in the part that you mention, it was definitely intended to indicate that there's a certain (twisted) logic in the way things play out in economics, as elsewhere, when a perverted baseline "set of assumptions," as JMG would say, is allowed to establish the rules of the game.

What's surprising about the fox strutting around the henhouse like he owns the place? ... when he does own the place? The question then becomes: Why would anybody want to own such a place? To channel gains to themselves and friends, no doubt, but I think there's something else at work here. Those who appear to "run things," in fact don't! They're on a fast-spinning carrousel and can't get off. They do what they know how to do but their skills-set is sadly lacking in breadth and depth, no matter how impressive it is in their specialty area. So they continue putting splints on the patient's leg when he's suffering from coronary occlusion. And they'll tweak things around the edges and they'll pretend to have found the failsafe mechanism needed to guarantee this or that desired outcome ... But it will never come because "hacking at the branches," as opposed to "striking the root" (in Thoreau's famous distinction), can only result in the real problem getting swept under the carpet.

So, what's the "real problem?" I don't pretend to have it all figured out but I could add something to my previous post here, which seemed somehow incomplete to me. I think I was wrong to speak of "this other (ie economic) predicament." After mulling over JMG's latest one more time, I would rather say that most of the "real problems" we face, be they linked to climate change, energy and resource depletion, biodiversity loss or spiritual confusion, are all part of one and the same predicament: we don't know who we are and rarely have the courage to make an honest effort to find out. For example, deep acceptance of what it means to be part of Nature, not separate from it, has ramifications that are scarier than you'd think for many people. So we allow institutional symbol manipulators to tell us who we are and hope we'll get by with that ... until the next crisis. I'll leave the metaphysical tie-ins to a nimbler mind than my own in next week's Archdruid Report.

As for the French quotes, I somehow forgot to give the latest poet's name: Conon de Béthune, 13th C. Nor did I give the original text of the quote from Paul Valéry last week. It is: "La meilleure façon de réaliser ses rêves, c'est de se réveiller." It's always nice to be able to do some reading in a language other than one's own, maybe something to do with getting a different perspective.

Best,
Gav

John Michael Greer said...

Prizm, you're welcome.

Ruben, thanks for the plug!

Kevin, the resource base is what hasn't yet been converted into "stuff." The capital stock is the "stuff." Oil in the ground, fertility in the soil, workers not yet employed and discoveries not yet made but within reach are all part of the resource base; fuels and fertilizers in drums, grain in silos, workers at their jobs and knowledge in libraries are part of the capital stock.

Jason, exactly. When somebody jumps off a forty story building it's not really meaningful to talk about the risk of hitting the ground.

Gav, excellent! I suspect the core of our predicament can be narrowed down a bit further -- or rather there are specific factors that interact with our common human unwillingness to face ourselves, and have landed us in this specific predicament (as distinct from the many other fine messes we could have gotten ourselves into). More on this later on.

J Gav said...

Jason,

Mea culpa. A misreading on my part of your final paragraph.
A side-note. I like the references you give, with the following two reservations: I'm less dismissive of Freud - he's easy to criticize now that we've seen how his work on hysteria was biased, but what's bias? In his time, who had gone further in denouncing social indoctrination as a cause of cultural malaise? Yes, some of the ancient philosophies had - and in a much less science-based world - but with the progress-minded Industrial Revolution going full bore, he was nevertheless prescient in more than one book: The 5 Lessons, Psychopathology of Everyday Life, The Future of an Illusion, Metapsychology, not to mention his work on dreams.

The second reservation concerns the notion of "apatheia." Not that I'm against it, per se, nor do I contest the idea that is has applications today. It's just that presenting it as a cure-all in downturns seem a bit excessive. Using it to turn off disturbances when the psyche really needs to seems justified; using it as a Weltanschauung in order to tune out entirely may be less helpful. I'm not implying that you personally are doing so - just a cautionary note on a general level.
Thanks for responding and setting me straight,
Gav

ariel55 said...

Dear JMG,

I confess to a very deep curiosity as to how deep your reflections are going to go. I think I am with you at the bottom line which is that humanity was ALWAYS in "predicament". I agree that it is high privilege to have your interactions with us here. Thank you for your gifts, time, and efforts!

secondera said...

In addition to favorable geography and all of the resources and benefits thereof, the US has pretty much avoided stunting political upheaval for two reasons. One is that the political system bends like a reed in the wind. It gives just enough and at the appropriate time to shed forces which would otherwise break it. The other is that the dominant American paradigm of what the US stands for and what it does in the world is an effective agent of control. The American Dream myth plays into this in a big way.

Before economics adheres to scientific rigor, it needs to do its part in supporting the myth which perpetuates this system. That is not to say that where you see economists deviate from logic, they are putting in effort directed by some moonlit cabal towards this goal. But it does need to tithe to certain dogmas such as the system still being capitalist despite major structural changes in the mid 20th century, that it is impartial, ignoring data showing very little class mobility and the one you mention where it is scientific and adheres to natural law despite the illogic and man made design.

If economics failed to do this and instead devoted itself to accurately describing the true system of wealth distribution, it would risk exposing the man behind the curtain and remove one of the pillars of the American Dream myth. This could potentially expose the system to changes earlier than necessary.

Some individuals have done just that, whether in the political, economic or social spheres, but these have usually been easily ignored since their messages stray beyond the working paradigm.

Jason said...

Gav: I'm less dismissive of Freud

I certainly wouldn't dismiss him altogether, and Jung still less. But what JMG refers to are simple statistics -- psychodynamic approaches these days often don't actually work if you are going by the numbers, whereas the evidential base for REBT and CBT is fairly strong.

Personally I think that's partly because the psychodynamic approaches are not easy to pass on as a training, whereas something like CBT is. (To get analyzed by Jung would have been different from A.N.Other Jungian perhaps, for all kinds of non-verbal reasons.) But I also agree with JMG that many modern therapies involved a misprision of the way human will functions and (I think) a fundamental underestimation of what human beings are capable of if they put their 'minds' to it.

The second reservation concerns the notion of "apatheia."... Using it to turn off disturbances when the psyche really needs to seems justified; using it as a Weltanschauung in order to tune out entirely may be less helpful.

Forgive me, the use of the word I'm making is the ancient Stoic one: a + pathos = 'without passion.' That is, undisturbed by false judgments of value. In my opinion this state of apatheia (which does not look for results) is fundamental to all human spiritual activity and health. It's nice to see moderns like Albert Ellis understanding this too.

The idea of apatheia is very far from what we call 'apathy' now, and even the faintest glimmers of it are only achieved after long training, by means of real self-knowledge. This is not 'turning off disturbances' (which are the same things as passions) but realizing there is no need for them because they are based on mistaken inner judgments, a rather different idea. I was trying to follow on from the discussion of Stoicism last week etc.

J Gav said...

Ariel55,

Thanks for the reminder, even if it wasn't so intended, that patience is always something to work on. Definitely something I need to relearn, though I'm not finding it easy in these times filled with so much urgency.

Gav

J Gav said...

Dear All,

Firstly, thanks to all for making this an interesting experience.

As an utter beginner in participatory blogging, I thought I would share an impression or two. This (ie the past two weeks in The Archruid Report's comment section) has been my first involvement in such an exercise and I've already managed to find myself either blundering into or narrowly avoiding the following pitfalls:

- Misrepresenting one's own views as well as those of others.
- Unhelpfully engaging in potentially antagonistic ad hominem exchanges which inevitably veer off-topic
- General loss of focus and purpose as regards the 'raison d'être' of a blog
- Not respecting certain rules on language use or post length. On this last point, some of us (like me) tend to be on the wordy side. Although JMG evidently allows some latitude on this one, we (I mean 'me' again) may be tempted to push a little too far.

In the hope that this might be of some use to other neophytes who happen along,

Respectfully,
Gav

J Gav said...

Jason,

Points well taken. I have some familiarity with writings on REBT and CBT, no direct experience but they seem to provide ways of dealing with the ravages of our way of life that have demonstrated efficacy.

My reference to misrepresentation below in another post in fact concerned what I had too hastily sent off to you. Of your views firstly, for reasons already mentioned and of mine, since I am really no fan of psychoanalysis of any stripe. Given a straight-up choice, Jung or Freud, I'd have to go with the former but, frankly, I don't want to be on either one's couch. Fact is, one of my neighbors is a Freudian psychoanalyst and occasionally we chat. I don't pull any punches with him but he has convinced me that, at least sometimes, he does get some positive results. Hard to say what's going to work best when, where and with whom.

As for apatheia, I realize how words get terribly distorted over time and can even come to mean something close to the opposite of their original meaning. I think I had in mind the Christian Greek use of the word, which I don't much care for (more or less "blind obedience").

Still, if we, as a society, started addressing problems before they become problems,instead of eternally treating symptoms of something deeper, we might be able to reduce the number of therapies on offer by eliminating part of the need for them.

I intend to propose another thought or two on the subject tomorrow in a little more detail if I can get my head around it.

John Michael Greer said...

Ariel, thank you. Hang on and see!

Secondera, nicely put. Ideology is incompatible with inquiry, and to the extent that economics is dominated by ideology, it loses the capacity to correct itself. Still, there's another factor at work, which I'll be addressing shortly.

Jason, the clarification's probably a good idea. Stoic terminology isn't exactly common usage these days. It's occurred to me more than once that good clear English equivalents of apatheia and the like would be a useful thing to settle on.

Gav, for a novice at this you're doing fine. I don't normally cull posts for length, though longtime readers will recall a certain neoprimitivist who posted a screed no less than 25 screens long and managed to push that envelope further than I was willing to see it go. Not every thought can be expressed tersely. Still, thanks for being aware of the issues!

das monde said...

The debate on the economics science is ranging widely, especially when such big names as Paul Krugman step in. Of the current analyzes of the crisis, I find this series and Steve Keen's blog most interesting.

I see the main reason of this failure of economics science a certain top-down selection pressure. JMG mentions that being wrong is much more lucrative than being right for economists, and his example implies a bottom-up pressure of investor masses eager for good news. Average investors indeed are good only in following each other or talking head gurus - but that does not stand in the way of putting concerned gurus on TV.

The evolution of economics of the last 3-4 decades, especially the rise of the Chicago school "free market" monetarism at the depressing expense of alternatives, is not a typical academic development. Before the 1970s, Milton Friedman and the Chicago school were far from a "mainstream science" status. But their economics started to attract very good funding (perhaps because it offered a convenient justification of wilder economic order?!). Their growth of influence was very well organized, especially internationally (starting from Chile) and politically (see Reagan, Thatcher). The selective bias was well supported by a row of ideological think thanks, such as American Enterprise Institute, Cato Institute, Club For Growth, Heritage Foundation. That gives quite a different impulse for being wrong more lucratively.

By the 1980s, the Chicago school economics became virtually the only recipe for third world and post-socialist economies and economists. The IMF and the World Bank became enforcers of the Washington consensus, pushing for one-sided economic reforms and globalization everywhere.

And then we have the "Nobel commemorative" prize, indeed not particularly bounded to award "greatest benefit for mankind". That prize became a brain sport most favorable to Chicago specialists.

All in all, it was a wild but organized drive towards the boom-and-bust economy of today. Who could have resisted? We can only guess, what mistakes would have economists made without that kind of lucrative pressure.

Jason said...

Gav: I have some familiarity with writings on REBT and CBT, no direct experience but they seem to provide ways of dealing with the ravages of our way of life that have demonstrated efficacy.

Well I don't wish to be seen as jockeying for them, but yes, they are evidentially in a good position, and it's interesting that they dovetail with Stoicism and similar ideas in many respects. They also differ in many respects too of course. But this is not the time or place! :) I myself don't exactly look to 'society' either...


JMG: Stoic terminology isn't exactly common usage these days. It's occurred to me more than once that good clear English equivalents of apatheia and the like would be a useful thing to settle on.

I always liked the title of Albert Ellis' book, 'How to make yourself remarkably less disturbable.' :) I think 'undisturbableness' for apatheia would do if you are of a whimsical turn, as I am. But to be 'without passions' is the actual and real definition for me, and then you have to define passions which in a sense you can do only from experience.

Being a philosophy, Stoicism can be redefined by each person practicing it. (One ancient Stoic came to believe pleasure was the greatest good and visited brothels for the remainder of his days!)

There are a number of modern Stoics (eg. Keith Seddon) publishing reprints of old materials, running courses in inner peace and banding together in internet groups. They probably have words for those concepts too, but I haven't read them because they've turned Stoicism into pure materialism (for reasons of 'progress', naturally!) and as a result have lost all the useful connections with Hermetics, Platonism, etc. So they don't interest me.

But we are well off-topic here.

w g carr said...

Pratical Economics (my view): The world financial system has been pretty much a Ponzi scheme since the collapse of Bretton-Woods in 1971 in that currencies are based only on good faith. However, this may be the only pratical way to produce the volume of exchange needed. ATM the USA is printing money to buy its debt (yikes!).
The Contrarian approach of investing has been very useful to me: the herd is always wrong and the Rothschild comment: "Buy when there is blood running in the streets, especially if it's your own".
The debt bomb has arrived (huge unfunded liabilities for the US gov't and the states) and politicians being what they are can only inflate the debt out of existence rather than tell one group they can't get paid. See post WWI.

J Gav said...

w g carr,

Alas, I can only agree that all this "quantitative easing" will eventually lead to inflation and an even louder hammering of the dollar. Japan survived this sort of situation because it exported loads of stuff. How big's the market for 'Cheezos' these days?

When you're running the biggest Ponzi-scheme in the history of the world, systemic in fact, as you say, that day of reckoning doesn't look too pleasant but come it must. The Fed's out of ammo and probably doesn't have many friends left either so, when the shooting starts, I'm not even sure that being a contrarian will do the trick.

A major problem with the whole shebang is that if it doesn't grow, it doesn't work - and if it continues to grow, it's headed for an even steeper cliff somewhere down the line.

I try to take a little solace from history but that doesn't always work either. It seems we're not quick learners. The Romans found out about the downside of debasing your currency over extended periods of time; John Law nearly destroyed the whole French economy in the early 18th C with his truly "royal" Ponzi scheme etc.

Seeking an opinion here, this idea has occurred to me regarding our more modern mess: could the granting of the status of personhood to corporations in 1886 (which I regard as sheer folly) have worked as a sort of (unintended) seed legislation for the later expansion of lobbies and eventual control by those lobbies of some of our vital government processes? Maybe retaking control of what's left of democracy in the U.S. could start by sorting out whos's who. Whacky? What do you think?

J Gav said...

JMG

I can't help asking myself what these "core factors" you refer to might be. To be honest, related questions have nagged me off and on for some time now but I've never been able to put anything together to my satisfaction to explain the 'core' issues.

At present, my attempt to do so takes the notion of 'personhood' as a pivotal factor. The reasoning is simple, no doubt too simple, and is based on a question: What chokepoint must humans pass through to move as smoothly as possible from childhood to adulthood with a view to becoming positively-contributing members of a civil order? Would this not also be a sort of make-or-break point for social, political and economic coherence?

If it is fair to say that societies in a state of constant, protracted (pre-collapse) flux tend to lose their coherence in the shuffle du jour, depending on whatever ideology is dominant, the precise nature of that which is lost remains to be determined. Since, causally speaking, this in turn manifests in social disharmony such as increased mental illness, criminality, loss of a sense of self and community and so on, it must be considered a matter of some importance.

What exactly are we neglecting that allows such gaping holes in our ability to construct collectively? How is it that we create 'identities' so fragile that they cling desperately to the latest fashion, gadget, pop-star or TV series in their quest for meaning?

To begin a tentative answer to these questions, I'll posit this backdrop, not new, but adapted to suit my purposes: 3 spheres - the material, ie the down-to-earth aspects of human experience; the ethereal or supernal, wa-a-ay up there ; and a transitional or intermediate place meeant to serve as facilitator, navigator or bridge between the first two spheres mentioned.

Now, here comes the "leap." At some point, whether they realize it or not, humans generally need assistance in dealing with the intimidating uncertainties which accompany notions like 'infinity,' the 'meaning of life' ... or death. The stuff of the third sphere. Alone, an individual human can easily lose her way trying to negotiate the maze of possibilities, always ripe for speculation. Hence the need for mediation, which can take many forms. Ours has pretty much been reduced to an administrative, accounting, star-system cum self-help guide operation. However, if shamanic and druidic societies, for example, have always had initiations and ceremonies to mark key moments in the life of an individual or community, it isn't because they think it's fun but because they serve a vital purpose.

With no meaningful (ie community-legitimized) mediation, the narcissistic tendencies of the immature human risk hypertrophy while, conversely, social skills atrophy, leading to all manner of conflict and misunderstanding. Granted, this sort of Initiation with a capital 'I' is often painful, psychologically and sometimes physically depending on the culture, but a fully-integrated person emerges from it, one for whom understanding the importance of maintaining balance among the 3 spheres has become second nature. Once this is achieved, cooperative work toward common goals becomes "less problematic," as you say. This can not be accomplished with truncated individuals, shorn of those tools that a healthy society provides its citizens in order to help them make sense of the world. Instead, that sort of society sends them up Competition Creek without a paddle.

Social glue! Without it, the first severe test that comes along can send personhood flying to pieces like a shattered mirror and taking yet another chunk of community along with it. To be sure, as substitutes for initiation, we put out a steady stream of new ways to get over this or that hump in life, but there's no longer anything to initiate people into! There's no 'there' there.

Could it be that one reason for our predicament lies in our failure to ensure adequate initiation and rites of passage for our youth and citizens in genere? There must be an interface with metaphysics here somewhere.

Kevin said...

Thanks again JMG for that succinct clarification. I see that resource base and capital stock appear to be analogous to Schumaker's primary and secondary goods. Gobbling up capital stock to spare the resource base seems rather like living on credit to spare your savings. I can think of a country that's been doing that ever since the solar panels came off the White House roof and "55 too slow" became a popular bumper sticker.

Straha said...

So what other messes could we have gotten ourselves into besides our unwitting experiences in climate modification and running out of oil without finding an alternative? Enlighten me please.

J Gav said...

Jason,

Just wanted to come back briefly to your comment: "I myself don't exactly want to look to 'society' either." But I think you do! Otherwise, you wouldn't have written this last week: "It's about exiting the common value network that holds real meaning in check."

If you wish to exit a defective "common value network," you must have some idea of what you would like to see take its place. And I doubt that you intend to substitute an "every man for himself and the devil take the hindmost" mentality as a remedy.

So, unless you believe that a one-by-one conversion to something saner (over how many years?) will cut the mustard, you can only be talking about something social,i.e.involving 'society.'

I'm not convinced that's off-topic but to be sure I'll add this: Early 20th C Austrian economist Joseph Schumpeter is the one who coined the term "creative destruction," later contorted into the Chicago Boys' romp. Today we've got the destruction part down pat but don't seem to have come up with a great deal in the way of creativity, other than to perpetuate an unsustainable system. All alone in one's corner, creativity is no doubt still possible but what would it mean?

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Aaron Newton

w g carr said...

Frankly, J Gav, I'm at a loss ATM to know what to do about the incipient predicted inflation. I agree with JMG that hard asset purchases (e.g gold) are mistaken. I had a 175 ac. farm/ranch and in 15 years it never made base expenses(taxes, insurance, etc.) It was very secure but probably not as secure as living in a nice area. Maybe staying nimble on your feet(quick and the dead) may be best. LOL, see JMG's recent move.

Jason said...

Gav: So, unless you believe that a one-by-one conversion to something saner (over how many years?) will cut the mustard...

I'm afraid I do in fact believe that sanity is only achievable individually and by lengthy work. What you mean by 'cutting the mustard' I'm not sure, since I'm not trying to construct a plan to remedy the entire situation.

As JMG has been saying, many versions of the basic tools necessary have been available all along. Some use them, most do not! :)

I certainly believe that societies could exist which are easier to become sane from than ours (I think the good Archdruid's 'EcoTechnic Future' is being eagerly awaited since he might have some thoughts on the matter) but there's no need to wait for it, as he was saying. We also don't know how to design societies very well yet -- and no society could exist that does the work of obtaining human freedom on one's behalf. That's what I meant by exiting the group mind.

J Gav said...

Jazon,

Thanks for the clarifications. Can't say you're wrong about individual change, just that, if you're right, I don't think we have the time to make a large enough shift to avoid the hard landing. That's what I meant by cutting the mustard. I.e. You could change the "may have missed its chance" in the last paragraph of JMG's latest post to "has missed its chance."

Unless maybe use of the tools you speak of gets past a certain "critical mass" as Sharon Astyk mentions in her "Dreaming a Life" post.

One thing's for sure: there's a lot of enthusiasm building for the "Eco-technic Future."

Jason said...

Gav: Can't say you're wrong about individual change, just that, if you're right, I don't think we have the time to make a large enough shift to avoid the hard landing.

Well careful, you may be mixing up two different things. My original comment about 'exiting the groupmind' was not my answer to the question of what to do about peak oil, but to the question of how to 'really live', which was the topic back then -- with JMG's response to Tony about wanting to 'really live' in these new times. If you want to 'really live' or have a life filled with meaning, at this or any time, go ahead -- you will have to 'exit the groupmind that holds real meaning in check' in order to do it, is all I was saying, and you can do that at any time, decline or no decline, is what JMG was saying.

I did also mention that times like these may inspire more people to attempt real work on themselves, and I think that's true -- but I'm not looking to that to prevent a 'hard landing'! Plenty more people will respond to these times in ways that improve survival odds and make life more bearable, and if enough gets done, the landing could be softened up quite a deal still.

This has nothing to do with 'really living' though, necessarily, let alone with the kinds of utopia that are being thought about idealistically and romantically in so many quarters. If you want to 'really live' -- live a life filled with meaning and be what a human being can be, that's something different from dealing with peak oil! The latter is just about getting to live at all and survive with maybe a little dignity and some valuable stuff brought along (culturally not materially valuable I hasten to add), but that's not 'really living' any more than the fag-end of the industrial age with its TV and malls is 'really living'. 'Really living' comes from somewhere else altogether! :)

Car Free Mile-End said...

when i read the initial mention of the metaphysics of money, i immediately thought of the underlying collective value-judgment that bestows value/ worth on the precursors to currency in the first place: why do we like gold so much? it seems only to have the widespread (historical)use of looking pretty - and the ability to inspire others to do work to acquire some portion of it.
today's currency shares that abstract power of deferring work and simplifying exchange. the creation of money, and the exponential equations that expand it's presence is equally abstract. that it really only exists as a counterpart to real activity in the real world seems to be covered by a cultural blind spot.

Wendy Rockwell said...

You might find interesting the simple, straightforward and correct economic predictions based on the economic theories of Henry George.

http://www.progress.org
http://www.interunion.org.uk/
http://www.gltn.net/
http://www.geocities.com/RainForest/3046/
http://www.earthrights.net/
http://www.cgocouncil.org/

wendy rockwell