Before I copy my remarks on flat-Earth economics (taken from “On the Conservation-within-Capitalism Scenario”http://dematerialism.net/CwC.html
), here is Jay Hanson's list of commonly-known false assumptions in neo-liberal economics:
1. People are Bayesian equation solvers. (The entire argument for market outcomes rests on this known false assumption.)
2. Money is just a medium of exchange. (This known false assumption hides the political power of money.)
3. Energy is just a commodity. (Production is assumed to be a function of only capital and labor.)
4. Debt is neutral to an economy.
5. Wants are identical to needs.
6. The environment is part of the economy instead of the other way around.
Also, I wish to repeat Nate Hagen’s observation that nearly all of modern economic theory has arisen during the petroleum portion of the fossil-fuel era. It may be viewed as an artifact of fossil fuel use.
Also, from “The Economic Growth Trap” by the late David Delaney:
The Economic Growth Trap
Economic growth requires increasing the amount of high quality energy and materials degraded by the economy each year. Economic growth on a finite planet will eventually stop. If it does not exhaust the resources needed for its continuation, it will stop earlier for some other reason. Allowing resource depletion and biosphere degradation to terminate economic growth will produce catastrophe. Unfortunately, our dependence on economic growth makes it extremely unlikely that we will give it up voluntarily before the catastrophe. Our dependence has at least four aspects: A) in the need to deal with adverse consequences of labor-reducing innovations, B) in commercial bank money, C) in the need to maintain tolerance of inequality, and D) in financial markets.
A) The first dependence on economic growth is in the need to avoid the adverse consequences of innovations that reduce the need for labor.1 By definition, each labor-reducing innovation either increases the amount of a good produced or throws some people out of work. Firms that create or exploit a labor-reducing innovation create new jobs internally by driving other firms out of business. The new jobs implementing the innovation offset the loss of jobs caused by the innovation, but the innovating firms don’t necessarily hire all of the job losers, because the innovation reduced the total amount of labor needed to produce the original amount of the good. In order to re-employ all job losers, the economy must grow to produce more of the good with all of the original workers, or produce more of some other good with the cheaper labor (the job losers) now available. In either case the economy grows. Much of what we consider progress is due to labor-reducing innovations. In order to live without economic growth, we would have to give up this kind of progress, or introduce arrangements to allow workers who become unproductive to retain their relative wealth and self-respect, or relegate most people to a repressed underclass. There is a powerful incentive to avoid these contingencies by encouraging economic growth.
B) The second dependence on economic growth is in the creation of money by the act of borrowing at interest from commercial banks. Much of the money in each loan by a commercial bank is created by the loan itself. The bank collects a fee—the interest—for providing the service of creating the money. Other ways of creating money have been explored in theory and practice. Successful local currencies have been based on some of these alternatives, (see Douthwaite, Short Circuit, page 61) but all national money is now created by interest-bearing loans from commercial banks. This way of creating money contributes instability to an economy based on it. In order to keep the money supply from contracting when a loan and its interest are paid, a larger total of new loans must be created, increasing the money supply. (This is not transparently obvious. For a more detailed explanation, see Douthwaite, The Ecology of Money, page 24.) When the economy grows to match the increasing money supply, the value of money is relatively stable, and commercial-bank-created money is benign. If the rate of economic growth does not match the rate of growth of the money supply, the money supply becomes unstable. Given the use of money created by interest-bearing loans from commercial banks, an economy can minimize the resulting instabilities of the money supply by sustaining moderate growth. Monetary instability would put significant hazards in the way of deliberate attempts to contract our economy unless the creation of money was radically reformed.
C) The third dependence on economic growth is in the political and geopolitical need for tolerance of inequality. Differences of wealth are at least as great within the developed countries as they are between developed and developing countries. Think of the ratio of the average income of American CEOs to the average salary of workers in their companies. Domestically and internationally, the tolerance of the poor and middle classes for the existence of wealthier classes and countries depends on a belief in economic growth. The poor struggle, while seeing that others are wealthy and still others are grotesquely wealthy. The poor are told a story: if they keep to their work and to their diversions, and tolerate the rich, they will be better off in the future than they are today. They believe this story, or at least don’t revolt against it, because it is supported by propaganda and shared myths, and has been true for many. When economic growth disappears forever, the poor, like everyone else, will recognize that they will be progressively worse off, with no future relief possible. The peaceful tolerance by the poor and the middles for the rich will disappear. A peaceful end of economic growth would require redistribution of wealth, with consequent political and geopolitical contention. Desire to avoid the contention makes it unlikely that deliberate elimination of economic growth will be attempted before economic growth is ended by nature. The intolerance of differences of wealth that will then appear will itself not be tolerated by the rich, causing additional domestic and international conflict just at the advent of other adverse changes. At that time, if not before, tyrannical repression of the poor will greatly tempt the rich.
D) The fourth dependence on economic growth is in the financial markets—the mechanism of capitalization of public corporations. Public corporations, the main actors in industrial economies, depend on financial markets not only for capital for innovation, but for discipline, valuation, motivation, and a major part of their rationale for existence. Owners of capital—investors—give the use of it over to public corporations by buying equity or debt in financial markets. They do so only because they expect that they will, on average, and over the long term, receive back more than they gave up. That expectation disappears when most investors understand there will be no economic growth. Most of the apparent wealth of the world consists of equity and debt bought and sold in financial markets. . Any realistic possibility of the end of growth would fill investors with something like terror. Political initiatives to bring an end to growth will be opposed by investors with every means at their command. The controversial nature of proposals that would reduce or eliminate economic growth will likely prevent the proposals from reaching even the status of political contention. When the onset of sustained economic contraction is generally perceived, investors will withdraw from financial markets. The resulting failure of the markets will make many necessary developments impossible to finance and will produce confusion and stasis in public corporations just when we need them to adapt to new circumstances.
Finally, cut and pasted from http://dematerialism.net/CwC.html
, here is my contribution:
Finiteness of Earth
If The Earth were a flat plane extending to infinity in all directions, market forces would induce geologists to find sufficient fossil-fuel deposits to meet growing demand for primary energy simply by extending the frontiers of petroleum exploration. If the United States were a nation state the territory of which could be expanded indefinitely so as to capture infinite sunlight or wind or to discover arbitrarily many growing plants, renewable energy, too, could be harvested to any extent necessary to the economy. Presumably, part of the basement of the flat earth would be flooded with an extremely hot magma from which infinite energy might be withdrawn without more than infinitesimal cooling whereas the rest would be riddled with pockets of crude oil and natural gas that might be found by drilling deeper and deeper. Moreover, migrating animals driven from their original habitats by the expansion of the human population and its growing economy would find even better habitats safe from human incursion for as long as necessary. Regrettably, a nation with a finite territory in a finite world is the stage on which the Conservation-within-Capitalism Scenario is to be enacted.
Inaccessibility of Outer Space
Some people might object that, while sustainable growth is impossible on Earth, we should in no wise limit our thinking to this tiny orb. This is a fair objection that deserves a serious answer. Within our lifetimes, travel to distant worlds has become almost routine – in fiction if not in reality. I wish to point out the principal objections to this idea at this time and refer disbelievers elsewhere:
1. Ultimately, colonization involves conquest and depredation, which was never right but perhaps excusable at the time of Magellan as no serious philosopher had addressed the issue previous to Magellan’s time as far as I know and, even more likely, as far as Magellan knew. Nowadays, it would be very difficult to find someone who would not acknowledge that most serious philosophers reject conquest and depredation as acceptable behavior. Even the predatory Neo-Cons cloak their rhetoric in Liberal, i.e., politically-correct, clothing.
2. The limitation of travel speed by the speed of light makes travel to extra-solar planets capable of supporting life inconsistent with the longest lifespan of a human being that can reasonable be expected to be achieved within the Twenty-First Century – dreams of suspended animation notwithstanding. Suppose, on the other hand, that, despite the improbability of doing so, a spaceship could be built sufficiently complete that the children, the children’s children, and so on for many generations might enjoy a reasonably bearable life living on that spaceship perhaps under conditions no worse than conditions on Spaceship Earth; and, suppose, in addition, that such a nation of space travelers could retain as part of their cultural heritage the understanding of their mission as space travelers to continue human existence upon a habitable planet at a distance of many light years from Earth. Supposing all that, the generation that was faced with imminent arrival at the destination would necessarily regard the arrival as essentially the end of the only world they had ever known. Although, in this thought experiment, we know that life might go on, they might anticipate it with the same dread as we should experience facing the end of life on Earth.
3. To make life on the spaceship so comfortable that the impending arrival at the distant habitable planet will seem like the end of the world would require a truly large spaceship - perhaps the size of a small moon. To build it would require harvesting the very last of the useful resources of Earth. The expected energy returned on energy invested is poor.
Additional objections, in particular moral objections, can be found in my paper On Space Travel and Research.
Impossibility of Sustainable Growth in a Finite World
Clearly, a positive rate of growth (in energy consumption per capita and population) sufficiently close to zero can be sustained until any given future time. That is, if you give me a time in the future (a million years, say), I can find a positive rate of growth sufficiently small that it can be sustained until that time other factors not intervening (ten to the minus 23rd power fractional increase per year, say). On the other hand, no matter how short a period of time is given, a rate of growth can be found that will make further growth infeasible – whether or not such a rate of growth is attainable. These are simple facts of arithmetic and are not open to political debate.
The arithmetical exercises that form the centerpiece of this paper may convince a few people who are not susceptible to the illogic of sustainable growth in a finite world. Many people will find such exercises completely unnecessary as they know that any rate of growth whatever in either population or standard of living (or both) that redounds to an increase in the rate at which energy is degraded is unsustainable. This can be proved on purely logical grounds without a single computation. Nevertheless, it is probably worth taking the trouble to provide actual numbers corresponding to various rates of growth. In these exercises, I have satisfied energy deficits with nuclear energy because nuclear power installations (NPIs) exhaust our share of the surface area of Earth to the least extent of any technology that can be assumed to be sustainable provided only that fissionable materials can be created at least as fast as they are degraded. Since a fast breeder reactor has been made to operate intermittently for short periods of time in France, for example, it is reasonable to suppose that technological progress over the better part of a century could make fast breeder reactors stable and reliable. What cannot be created is additional surface area of Earth on which to place them. In addition, nuclear plants require copious water supplies; and, if thermal splitting is accomplished to provide hydrogen for fuel (directly or to treat other substances to make other fuels), the fresh water that will be converted to atmospheric water must be replaced, presumably by transporting and desalinating ocean water, which might lead to ratios of Energy Returned over Energy Invested (ERoEIs) less than one. Also, since we are very close to or even past Peak Water, a water balance might show that nuclear plants run out of water even before they run out of land, however this analysis and thermal splitting of seawater will be deferred to another paper.