From Post Hydrocarbon to Post Debt society. Can Capitalism exist without debt? #MemoryHoleLazaruslinkpost)

rogerglewis July 21, 2015 2 Comments

Colander (2005, p. 175) notes: ‘‘Individuals are not born as economists; they are molded through formal

and informal training. This training shapes the way they approach problems, process information and carry out research,which in turn inﬂuences the policies they favour and the role they play in society. [Only in the very last pages (pp. 508–510) abox is presented as a kind of afterthought, in which the question is addressed: ‘‘Will growth make us happy”. The answergiven is twofold: ‘‘Income is not the only determinant of happiness, but clearly happiness rises with income …” and ‘‘Thus,although growth will not make us as happy as we expect it to, it will still make us happier than we would be if there were nogrowth”. Neither statement is convincingly supported with data, arguments or studies. Nor are the fundamental criticismssummarized in Section 2 being addressed

New Eras are usually identified and then defined well after the event, perhaps the most well-known example is the Renaissance or Enlightenment another is the Dark Ages. We are already 30 years into the post-hydrocarbon renewable energy era part of the reason that eras are defined afterwards is that there are overlaps as things change and the difference between half full and half empty is a matter of interpretation and historical spin.

My own thinking regarding future areas of interest for business is very much focused on post Debt and post-hydrocarbon solutions. I am still undecided whether capitalism can exist as a political Economic choice without debt. Our monetary and Economic technology is far behind our technological capability. Time for a reboot!

http://www.gizmag.com/tesla-model-s-ludicrous-mode/38526/

Regarding debt technology and the monetary, backwardness. Steve Keen has been calling for a Copernican revolution in economics to recognise the considerable forces mobilised by debt. This shorter video on the alternative to Neo-Liberalism is well worth a watch.

Published on 24 May 2015 ´´When the economic history of our epoch is written, three key phenomena will feature: a period of tranquillity giving way suddenly to a crisis, rising inequality, and rising private debt. Using my model of Minsky’s Financial Instability Hypothesis, I show that these three phenomena are all related. There is a direct link between rising debt, rising inequality, and the crisis itself. The key to reducing inequality and ending economic stagnation is to reduce private debt through “Quantitative Easing for the Public” or a “Modern Debt Jubilee”. This is the keynote speech I gave to the #IEEP conference in Pula, Croatia on May 23rd, 2015, Steve Keen

EDIT 27 TH March 2017

GDP Critisisms.

The Below is a Lazarus Link from the memory hole series.

https://web.archive.org/web/20161222100218/http://dnr.maryland.gov/mdgpi/Documents/GDP_Paradox.pdf

This Paper disappeared from the original source and I had placed it in a document of notes for another blog

https://letthemconfectsweeterlies.blogspot.se/2014/08/predictability-probability-and-knowing.html

Predictability probability and Knowing. Corinthians 13

2.1. Principles of proper accounting

The use and calculation of the GDP indicator is inconsistent with two principles of good bookkeeping: (i) divide clearly

between costs and beneﬁts; and (ii) correct for changes in stocks and supplies. GDP really represents an estimate of the costs

instead of the beneﬁts of all market-related economic activities in a country. In addition, GDP does not capture all social costs

as it omits external costs.

It is well-known that the GDP indicator was never developed for the purpose of welfare measurement. In 1665 Sir William Petty produced the ﬁrst estimate

one extrapolates a constant tempo of real GDP growth towards the distant future, it is evident that any correlation with social welfare will be lost somewhere along the way. To illustrate this, note that extrapolation

of a 2% yearly growth rate 1000 years into the future would result in a GDP that is (1.02)

1000

# 400 million times the current

GDP. It is difﬁcult to imagine that individual or social welfare could increase to such an extent. This suggests that if there is a

positive (average) correlation between GDP and social welfare, it should be very close to zero.

Lexicographic preferences

Basic needs like water, food, shelter, company, respect and freedom cannot be traded off against luxury services and

material goods.

2.7. Environmental externalities and depletion of natural resources

An important subcategory of unpriced effects relates to use of natural resources and the environment. This involves negative external effects as well as goods and services delivered by nature

3. How serious is the inﬂuence of GDP information on the economy?

In the ﬁrst place, one wonders why governments invest structurally in calculating and predicting GDP. This investment is

shared by all countries, and since the GDP is standardized through the United Nations System of National Accounts, it allows

for an international comparison of countries in GDP terms

The importance of GDP information for ﬁrms, investors and citizens/consumers is illustrated

by the media – television, radio, newspapers, ﬁnancial and other magazines, and internet – informing us on a daily basis

about the status of our national GDP, both over time and in comparison with other countries. To illustrate the widespread

inﬂuence of GDP, note that a search on the internet on July 7th, 2008 for ‘‘GDP” delivered 44,700,000 hits (and ‘‘Gross domestic

product” 4,970,000 more). This is, for example, more than ﬁve times the number of hits for ‘‘social welfare”, viz. 8,470,000

A recent indirect but important effect of GDP information relates to climate policy. Among the most inﬂuential climate

policy studies are economic analyses in which the policy cost is expressed in terms of a reduced rate of GDP growth (an early

study is Nordhaus, 1991; for an overview see Tol, 2008; and for a critical evaluation Söderholm, 2007). This type of research

has received much attention from policymakers, notably since it was widely diffused through reports of the IPCC (Intergov-

120 J.C.J.M. van den Bergh / Journal of Economic Psychology 30 (2009) 117–135ernmental Panel on Climate Change). In fact, in deciding to not ratify the Kyoto Protocol, the Bush administration referred to

Nordhaus’ work as providing an important motivation.

This is not the end of the story. Through pessimistic (optimistic) responses by individuals, ﬁrms, and governments to forecasts of a low (high) rate of GDP growth, GDP information creates a pro-cyclic effect. This resembles the way in which behaviour in ﬁnancial markets is steered by perceptions, leading to herd behaviour which causes expectations to become tru

: GDP not only is an inadequate proxy of social welfare but also has a considerable impact on public and private

economic decisions. By implication, GDP represents a serious information failure.

Conceptual

simpliﬁcation of choices is not an unusual strategy followed by humans, and has been well documented in the literature

on behavioural economics. For example, human choice is often in accordance with the ‘isolation effect’, which represents

a simplifying approach to compare the performance of complex alternatives (Kahneman & Tversky, 1979).

In addition, conformism, docility, socialization and imitation can explain why GDP is without much criticism accepted by

the majority of citizens and economic students alike.

r, Colander (2005, p. 175) notes: ‘‘Individuals are not born as economists; they are moulded through formal

and informal training. This training shapes the way they approach problems, process information and carry out research,

which in turn inﬂuences the policies they favour and the role they play in society. [

Only in the very last pages (pp. 508–510) a

box is presented as a kind of an afterthought, in which the question is addressed: ‘‘Will growth make us happy”. The answer

given is twofold: ‘‘Income is not the only determinant of happiness, but clearly, happiness rises with income …” and ‘‘Thus,

although growth will not make us as happy as we expect it to, it will still make us happier than we would be if there were no

growth”. Neither statement is convincingly supported with data, arguments or studies. Nor are the fundamental criticisms

summarized in Section 2 being addressed

In fact, one can come up with another

set of quality-of-life indicators, such as pollution, living space, serenity, direct access to nature, congestion and work stress,

with which GDP per capita correlates negatively in certain income ranges. Third, correlation does not guarantee causality.

Although liberty, health and literacy often will act as necessary conditions for sustained GDP growth they do not necessarily

improve by continued growth beyond a certain income level

These various counter-arguments are supported by an extensive empirical study by Easterly (1999). It uses a panel dataset of 81 indicators covering up to four time periods (1960, 1970,

1980, and 1990) and seven areas: (1) individual rights and democracy, (2) political instability and war, (3) education, (4)

health, (5) transport and communications, (6) inequality across class and gender, and (7) ‘‘bads”. Depending on the statistical

method used, it is found that income per capita has an impact on the quality of life that is signiﬁcantly positive for only 32,

10 or 6 out of 81 indicators. The author concludes that the results can be partly explained by long and variable delays between growth and changes in the quality of life and that for many quality-of-life indicators global socioeconomic progress

(–growth) is more important than home–country growth

, Pissarides, 2000). Further, GDP growth does not necessarily reduce unemployment for several other

reasons: it may involve outsourcing associated with retaining much of GDP domestically while moving jobs to elsewhere;

and growth often goes along with creative destruction, i.e. disruption of old economic activities, which in turn implies (temporary) unemployment in speciﬁc sectors or job types. Of course, employment in combination with wages or productivity

will affect the GDP, suggesting the relevance of a reverse causality (and correlation at times).

Another often expressed view is that GDP provides a basis for estimating tax revenues. This might then allow one to forecast taxes, to evaluate creditworthiness in the case of providing loans to countries (as done by the IMF and the World Bank),

or to determine fair ﬁnancial contributions of member states to a federation of states (e.g., USA, EU). In this case, GDP does

not function as a performance indicator but more modestly as a model variable.

s (de Bruyn & Heintz, 1999; Stern, Common, & Barbier,

1996). What comes out of these studies is that nearby problems relating to human health, like local water and air pollution,

are solved if income rises, but that many other environmental problems are not solved or at best shifted in space (e.g., export

of solid waste, incineration) or time (e.g., landﬁlls). In general, it is therefore not true that economic growth solves environmental problems. This means that GDP information is not as relevant to understand the dynamics of solutions to environmental problems as was initially believed.