The Wealth of Nature
July 10, 2009 10:15 AM Subscribe
Recently,
John Michael Greer has been exploring a little known idea of the deceased economist
E.F. Schumacher (a student of the oft-discussed
Keynes).
"Schumacher drew a hard distinction between primary goods and secondary goods. The latter of these includes everything dealt with by conventional economics: the goods and services produced by human labor and exchanged among human beings. The former includes all those things necessary for human life and economic activity that are produced not by human beings, but by nature. Schumacher pointed out that primary goods, as the phrase implies, need to come first in any economic analysis because they supply the preconditions for the production of secondary goods. Renewable resources, he proposed, form the equivalent of income in the primary economy, while nonrenewable resources are the equivalent of capital; to insist that an economic system is sound when it is burning through nonrenewable resources at a rate that will lead to rapid depletion is thus as silly as claiming that a business is breaking even if it’s covering up huge losses by drawing down its bank accounts."The series of essays so far:
Survival Isn't Cost-Effective -
(In which he tears apart one of the most proposed solutions for peak oil - ecovillages and lifeboat communities.) "The unstated assumption seems to be that as soon as the intrepid residents of such a community move into their solar-heated cohousing units, start up the wind turbines and the methane generators, and get to work harvesting tree crops from the permacultured landscaping all around, industrial civilization will disappear in a puff of smoke and take its taxes, debts, and miscellaneous expenses with it. Pleasant though the prospect might seem, I am sorry to say that this isn’t going to happen."
The Thermodynamic Economy -
(In which he tackles tackles the problem of stagflation.) "He [Schumacher] pointed out that for a modern industrial society, energy resources are not simply one set of commodities among many others. They are the ur-commodities, the fundamental resources that make economic activity possible at all, and the rules that govern the behavior of other commodities cannot be applied to energy resources in a simplistic fashion. Commented Schumacher in Small is Beautiful: 'I have already alluded to the energy problem in some of the other chapters. It is impossible to get away from it. It is impossible to overemphasize its centrality. [...] As long as there is enough primary energy – at tolerable prices – there is no reason to believe that bottlenecks in any other primary materials cannot be either broken or circumvented. On the other hand, a shortage of primary energy would mean that the demand for most other primary products would be so curtailed that a question of shortage with regard to them would be unlikely to arise' (p. 123)."
Where Economics Fails -
(Where he explores the misapplication of the idea of supply and demand.) "the theoretical relationship between supply and demand functions only when supply is not constrained by factors outside the economic sphere. The constraints in question can be physical: no matter how much money you’re willing to pay for a perpetual motion machine, for instance, you can’t have one, because the laws of thermodynamics don’t take bribes. They may be political: Nazi Germany had a large demand for oil from 1943 to 1945, for example, and the Allies had plenty of oil to sell, but anyone who assumed on that basis that a deal would be cut was in for a big disappointment. They may be technical: no matter how much you spend on health care, for instance, sooner or later it’s going to fail, because nobody’s yet been able to develop an effective treatment for death."
The Wealth of Nature -
(In which he explains why Adam Smith was wrong to say "The annual labor of every nation is the fund which originally supplies it with all the necessities and conveniences of life.") "Thus Adam Smith’s dictum cited earlier badly needs reformulation. The product of the natural environment of every nation is the fund which originally supplies it with all the necessities and conveniences of life; the annual human labor is simply the energy input required to turn some of that product into forms useful for human beings. The wealth of nations, it turns out, is ultimately the wealth of nature, and the sooner the value of natural cycles and primary goods is taken into account, the better chance our descendants will have of avoiding the self-defeating habits that are pushing modern industrial system down the long road to collapse." 
posted by -harlequin- at 10:26 AM on July 10, 2009