|Michelangelo's Creation of Man|
"from the dust of the ground"
So, unsurprisingly, if one looks at any product or service that meets our needs, it has a material basis, starting with the air, food and water we must consume to survive.
Thus, the economy that supports meeting our needs necessarily rests on the limited -- thus scarce relative to competing possible uses -- land, air and water, energy sources and flows etc. in the world around us.
[U/D, May 16] Economics, 101, lesson 1 . . . let's pause:
Economics is the study of allocation of scarce resources across competing possible uses, in light of the desire to better and better meet our needs (usually as translated into wants, backed up by ability to pay for products that target those wants -- often expressed in money). Thus also, the real economic cost of a given use u1 of x1 units of resource R, is the sacrificed opportunity to have produced x2 units of u2 instead, the "next best" alternative. This is, of course, the principle of opportunity costs. A common case is saving and investment in capital . . . productive . . . goods rather than direct consumption in the short run, leading to higher productive capacity in the longer run that can then sustain a higher level of production and consumption, i.e. a better standard of living. Such requires also that systematic exploration of desirable possibilities in our world that we term research and development. But . . .
a --> to rationally take the risks involved in research, development, saving and investment on the relevant scale, there has to beb -->such a reasonable expectation of a high enough return to the saver-investor [the Capitalist] and to the Entrepreneur with the valuable productive idea behind the prospective capital investment (which must be implemented through sound management and skilled labour with an eye kept on all times to monitor and control money flows -- accounting), thatc --> across time the relatively few successes pay for failures to succeed in markets and to cover the given up opportunity of working in less risky jobs. Indeed,d --> profits are in effect returns to the risk of enterprise and
e --> interest is the "rent" on the use of savings as adjusted for the degree of riskiness of that use.
Where also, in a world based on "dust" and energy flows, the basis for all production and consumption of goods, services, ideas, information, entertainments etc, will be "animal, vegetable or mineral" [or microbes etc.], or all of these.
From all of that, it logically follows that, "first, you gotta grow it, or mine it."
In other words, agriculture and extractive industries are the base of the economy. These produce primary foodstuffs and raw materials etc, leading to value added services that transform such into forms best suited to meet our needs, which also involves services. (A modern economy's value added is dominated by such services.) Consequently we can identify the basic structure and value-adding processes of an economy.
All of this further means, if you don't grow it or mine it "here," you gotta import it.
Thus, you gotta pay for it.
Which in the end -- for a secure, stable and sustainable economy and society -- requires adequate production rooted in one's local resource base.
Even Tourism requires sunshine, beaches, oceans and lush hinterlands . . . with good public health that keeps the notorious old "tropical diseases" in check.
Therefore, resources that come to us from nature are pivotal to development and sustainability, with the added twist that many of the necessary resources are non-renewable and many materials are very hard to recycle, that being expensive, energy intensive and sometimes just not possible.
So, in the long term as we move to a more sustainable economic pattern we are going to be forced to look at alternatives that can be recycled and/or are renewable. Or else, are in such abundance that they will be able to carry the economy for a very long time.
As one example -- cf. the KF blog Capacity focus, 1 post here (and this site) -- thorium and uranium are present in sufficient quantities that fission based nuclear power is a reasonable candidate to keep the electrical grid going for many decades if necessary, until we can create a hydrogen fusion based economy. For Uranium, pebble bed modular reactor technologies are well worth exploring. Thorium is particularly attractive as the molten salt reactor is very controllable . . . operators of a test reactor in the 1960's would literally routinely turn it off and go home for the weekend! . . . and it is associated with the so-called rare earth metals, which allow creation of small and powerful magnets; in turn leading to small and powerful electrical motors. (It helps, that that would also break the world out of critical dependence on China for those strategic metals.)
Fuels (or more broadly, liquid, gaseous or solid highly concentrated energy carriers) will always be needed for vehicles and portable systems, and for that, liquid hydrogen, hydrogen-rich organic liquids (such as alcohols) and the like look good, especially if joined to fuel cell technologies. In the shorter term, we need to look to bio-mass based diesel fuels [where light diesel fuel is effectively equivalent to current kerosine based jet fuel], bio-butanol based ersatz gasoline, and alcohol based fuels in general. That is, Diesel and Otto cycle reciprocating engines, with little or no modification, can be moved over to a credible biofuels basis.
Alcohol based fuels cells are already potentially quite attractive as power sources for laptops and the like.
Solar photovoltaics, windmills and the like could also be a part of this picture, but I do not currently expect these to dominate it, for various reasons.
Across this century, if we move to such an alternative energy base, we should be able to transform the tropics, do widespread desalination that opens up vast arid regions, and creates a base for stabilising the world economy. Especially, by breaking our dependency on oil.
Longer term, if the Bussard polyhedral electrostatic potential well hydrogen fusion technology or the like works out, this century would also be the one in which we lay the basis for solar system colonisation, with the Moon and Mars then the Asteroid belt the obvious prime targets. A Bussard rocket engine could carry a ship to the gas giant planets within a hundred days of travel.
Unless there is a breakthrough in physics, the solar system is our effective universe; given the time and effort that would be required for interstellar travel.
But, that is fairly speculative, and some of it will doubtless shock environmentalist sensibilities.
Which, in my view, could do with a few shocks.
(Just for fun, hang around here for a bit, and see if those often demonised or derided and dismissed folks make some sense or not. And yes, there is a whole other side to the story that we simply do not hear in the news or the policy consultations in our region. A warning sign. You don't have to agree with them in toto or even in part, to understand that we should at least know why there is such another side that has reasonably informed and expert people on it. BTW, that side includes Bill Gray, of hurricane prediction formula fame.)
Let's come back to earth.
For instance, we must appreciate that some renewable resources can be depleted, after which it will be very hard for them to come back -- deforestation and the "commercial extinction" of fish species . . . caught out to the point where the population has crashed so hard that the fishing industry is wiped out . . . being clear cases in point.
And of course, while some non-renewable resources are indeed in such abundance that their supplies will last for many centuries -- well beyond the time when they will have been replaced by substitutes -- others are going to be depleted fairly soon, such as ore bodies.
For such resources it makes sense to attach a reasonable levy that goes to build up onward investments for follow-on industries, as well as to provide an uplift to stakeholders, communities and the nation as a whole. But, there is a common enough pattern where countries that have hit on bonanzas deplete them, do not build value added industries, simply try to gain wealth off raw materials and commodity exports, and end up in trouble, with depleted resources . . . too often with a devastated bio-physical environment, and a leaky tyre economy . . . temporarily pumped up, only to deflate again once the bonanza is over:
In turn, the dependence on resources means that as we live and work in a community, we must draw resources from the bio-physical environment, and put stresses upon it. This forces us to face questions of collectively managing this drawing and stressing action in the interests of long term sustainability (with onward issues on property rights, fairness, liberty, rights, power balances etc etc):
Immediately, we again see the point that we cannot cut apart bio-physical, socio-cultural and economic matters and manage them as isolated sectors, they are necessarily inextricably intertwined and deeply entangled.
Hence the three environmental domains concept, that the environment -- our surroundings -- constitutes three interacting domains:
I: The bio-physical (often . . . an error . . . "the environment")
II: The socio-cultural
III: The economic - policy
Any one aspect or sector therefore needs to be managed in light of the whole and its deeply entangled interactions.
However, even that is not enough, as information which guides decisions is not equal to truth, and even if we were to be all in agreement, we suffer individual and collective bounded, finite, fallible rationality . . . when we can manage to be actually rational and reasonable.
Where also, depending on the specific matter, information may be out of date and decision-making processes may be hopelessly locked up in delays, contentions, misunderstandings and confusions.
Indeed, the Austrian School of Economics reminds us, that -- contrary to the sort of subtle pretence of omniscience that too often tends to pervade the upper levels of bureaucracies, leading to a delusion of unchallengeable wisdom and to domineering arrogance -- no centralised decision-making body can possibly access all the relevant information required to manage an economy adequately, much less process it in good time.
(That's why free enterprises and markets are economically superior to tightly centralised government controlled economies, as the decentralisation of decisions across households and firms in a common market space allows for more flexible and robust exploration and tapping widely dispersed and localised or hidden information at source, leading to a collective, cumulative decision that tends to be superior. It also localises the impact of failure or blunders. However, when "my" freely running my factory causes "you" to suffer air pollution and poisoning of the river from which we all must drink and catch our fish, that raises a different set of questions. [I here hint at the Coase theorem, and also at wider welfare economics issues. For instance, if the agreement is reasonably enforceable, pollution credits can be sold to the factory owner by the government acting as steward of the common air and waters, which if well done, will tend to push the incentives towards reducing pollution in an economically effective fashion. However, where there are issues of pervasive corruption, lack of transparency/accountability [key decisions are as a rule made behind closed doors, by unaccountable power brokers . . . ] and gross power concentrations and massive marginalisation, that too will tend to break down. There are no easy solutions here.])
So, we see how government is needed as protector of the civil peace of justice, and freedom and enterprise are also needed, in a context where while markets are important, they have well-known breakdowns that lead to a significant and reasonable role for public, transparent, democratically accountable regulatory bodies. That is, we are back to:
The pivotal role of information points to a need for transparency and accountability, thus good laws for firms for accounting, and also freedom of information and public official accountability and integrity law.
Likewise, issues of resource depletion and the desirability of shifting to recycling of materials and renewable resources (especially energy) points to a role for government in promoting these, starting with underlying research. For instance, the usual roadblock to developing geothermal energy . . . common in the Eastern Caribbean region . . . is the high capital cost and high risk of exploration, joined to a highly technical nature. That points to a role for government and support from international development aid agencies. But, there need to be in place systems to reduce the risk of waste, ill advised decisions, and the usual problem of corruption that can emerge anywhere. Because of the pivotal nature of energy, I have advocated for the creation of technical, exploratory and regulatory energy offices with accountability not only to a ministry but to a stakeholder-based board and with a technical and scientific advisory panel, and a mandate for regular public accountability including public forums on the state of energy, as a basis for managing the energy transformation that will be required in our region.
Most forms of renewable energy fall under the same or similar challenges as hold for geothermal. (Cf recent KF blog post here.)
Likewise we need to beware of resource depletion or stressing ecosystems beyond their ability to cope. Especially, when we deal with non-renewable resources or renewables subject to depletion.
That requires long term research, based on careful exploration and monitoring.
Thus, the significant regulatory role of Departments (or, sub-departments) of Natural Resources and of the Environment.
Where also, such Departments will need capacity to carry out programme based project cycle management -- cf. here for example (and the handbook here) -- in the context of a list of priority initiatives that are a part of an integrated long term sustainable development plan and programme of action. (Montserrat's SDP, here, is worth looking at as a sparker for thinking.)
Lastly (for today) -- but not least -- to reach the societal decisions required to carry forward a sustainable path for managing natural resources then points to renewal of democratic, participatory, transparent government.
But then, all of that points to a need to begin right now, on pain of the consequences of ignoring these issues.
So, again: if not now, then when, if not here, then where, if not us, then who? END