Deep thought – Oct 18

Click on the headline (link) for the full text.

Many more articles are available through the Energy Bulletin homepage.

Benoit Mandelbrot, Mathematician, Dies at 85
Jascha Hoffman, New York Times
Mandelbrot set – enlargement of a section: Source: Wikimedia Commons Benoît B. Mandelbrot, a maverick mathematician who developed an innovative theory of roughness and applied it to physics, biology, finance and many other fields, died on Thursday in Cambridge, Mass. He was 85.

… Dr. Mandelbrot coined the term “fractal” to refer to a new class of mathematical shapes whose uneven contours could mimic the irregularities found in nature.

“Applied mathematics had been concentrating for a century on phenomena which were smooth, but many things were not like that: the more you blew them up with a microscope the more complexity you found,” said David Mumford, a professor of mathematics at Brown University. “He was one of the primary people who realized these were legitimate objects of study.”

In a seminal book, “The Fractal Geometry of Nature,” published in 1982, Dr. Mandelbrot defended mathematical objects that he said others had dismissed as “monstrous” and “pathological.” Using fractal geometry, he argued, the complex outlines of clouds and coastlines, once considered unmeasurable, could now “be approached in rigorous and vigorous quantitative fashion.”

For most of his career, Dr. Mandelbrot had a reputation as an outsider to the mathematical establishment.
(16 October 2010)
Noted in comments at The Oil Drum. Editor Gail Tverberg said she liked his book The Misbehavior of Markets.

-BA

Japan Goes From Dynamic to Disheartened
Martin Fackler, New York Times
… Few nations in recent history have seen such a striking reversal of economic fortune as Japan. The original Asian success story, Japan rode one of the great speculative stock and property bubbles of all time in the 1980s to become the first Asian country to challenge the long dominance of the West.

But the bubbles popped in the late 1980s and early 1990s, and Japan fell into a slow but relentless decline that neither enormous budget deficits nor a flood of easy money has reversed. For nearly a generation now, the nation has been trapped in low growth and a corrosive downward spiral of prices, known as deflation, in the process shriveling from an economic Godzilla to little more than an afterthought in the global economy.

Now, as the United States and other Western nations struggle to recover from a debt and property bubble of their own, a growing number of economists are pointing to Japan as a dark vision of the future. Even as the Federal Reserve chairman, Ben S. Bernanke, prepares a fresh round of unconventional measures to stimulate the economy, there are growing fears that the United States and many European economies could face a prolonged period of slow growth or even, in the worst case, deflation, something not seen on a sustained basis outside Japan since the Great Depression.

Many economists remain confident that the United States will avoid the stagnation of Japan …

Still, as political pressure builds to reduce federal spending and budget deficits, other economists are now warning of “Japanification” — of falling into the same deflationary trap of collapsed demand that occurs when consumers refuse to consume, corporations hold back on investments and banks sit on cash. It becomes a vicious, self-reinforcing cycle: as prices fall further and jobs disappear, consumers tighten their purse strings even more and companies cut back on spending and delay expansion plans.

“The U.S., the U.K., Spain, Ireland, they all are going through what Japan went through a decade or so ago,” said Richard Koo, chief economist at Nomura Securities who recently wrote a book about Japan’s lessons for the world. “Millions of individuals and companies see their balance sheets going underwater, so they are using their cash to pay down debt instead of borrowing and spending.”

Just as inflation scarred a generation of Americans, deflation has left a deep imprint on the Japanese, breeding generational tensions and a culture of pessimism, fatalism and reduced expectations. While Japan remains in many ways a prosperous society, it faces an increasingly grim situation, particularly outside the relative economic vibrancy of Tokyo, and its situation provides a possible glimpse into the future for the United States and Europe, should the most dire forecasts come to pass.

… In 1991, economists were predicting that Japan would overtake the United States as the world’s largest economy by 2010. In fact, Japan’s economy remains the same size it was then: a gross domestic product of $5.7 trillion at current exchange rates.

… And the future looks even bleaker, as Japan faces the world’s largest government debt — around 200 percent of gross domestic product — a shrinking population and rising rates of poverty and suicide.

… Japan’s loss of gumption is most visible among its young men, who are widely derided as “herbivores” for lacking their elders’ willingness to toil for endless hours at the office

… The classic explanation of the evils of deflation is that it makes individuals and businesses less willing to use money, because the rational way to act when prices are falling is to hold onto cash, which gains in value. But in Japan, nearly a generation of deflation has had a much deeper effect, subconsciously coloring how the Japanese view the world. It has bred a deep pessimism about the future and a fear of taking risks that make people instinctively reluctant to spend or invest, driving down demand — and prices — even further.

“A new common sense appears, in which consumers see it as irrational or even foolish to buy or borrow,” said Kazuhisa Takemura, a professor at Waseda University in Tokyo who has studied the psychology of deflation.

… in the past 15 years, the number of fashionable clubs and lounges has shrunk to 480 from 1,200, replaced by discount bars and chain restaurants. Bartenders say the clientele these days is too cost-conscious to show the studied disregard for money that was long considered the height of refinement.

… Hisakazu Matsuda, president of Japan Consumer Marketing Research Institute, who has written several books on Japanese consumers, has a different name for Japanese in their 20s; he calls them the consumption-haters. … “There is no other generation like this in the world,” Mr. Matsuda said. “These guys think it’s stupid to spend.”
(16 October 2010)
Fascinating look into what the future may hold for us. The article points out that Japan’s economy has been no-growth for the last 20 years. The journalist and the economists he quotes are freaked out by the fact people aren’t spending like drunken sailors, but for many of us, Japanese society may represent be a saner and more reasonable world. Is it so tragic that there are fewer nightclubs?

Reader Doe comments, “All in all, things aren’t that bad at all in no growth Japan.” He recommends the following article, which we just added at EB. Quite a contrast to the NY Times hysteria.
-BA

The economic fallacy of ‘zombie’ Japan
Steven Hill, Guardian
Paul Krugman and others have got Japan wrong: Americans should be so lucky as to get a Japanese-style lost decade
—
… [How] should we regard a country that has 5% unemployment, the lowest income inequality, healthcare for all its people and is one of the world’s leading exporters? This country also scores high on life expectancy, low on infant mortality, is at the top in numeracy and literacy, and is low on crime, incarceration, homicides, mental illness and drug abuse. It also has a low rate of carbon emissions, doing its part to reduce global warming. In all these categories, this particular country beats both the US and China by a country mile.

Doesn’t that sound like a country from which Americans and others might learn a thing or two about how to get out of the hole in which we’re stuck?

Not if that place is Japan. During and before the current economic crisis, few countries have been vilified as an economic basket case so much as Japan.

… Two lessons of our times are that economic bubbles eventually burst, and that the environmental consequences of unbridled growth in this age of global warming are severe. In other words, the real game is no longer strictly about economic growth; it’s about sustainability and learning to do more with less. The era of US-style trickle-down economies is over for wealthy countries because trickle-down is neither economically sound nor ecologically sustainable. The developed nations must lead the way towards a different path of development.

This is not an easy challenge, yet it is the course that Japan and Germany have chosen. Americans would be wise to learn from them. If the US didn’t have such a trickle-down economy that has produced so much inequality – if it was, in fact, better at sharing its wealth – perhaps it wouldn’t need so much fiscal stimulus and growth.
(11 August 2010)

The Undeserving Rich:
Collectively produced and inherited knowledge
Gar Alperovitz and Lew Daly, Dollars and Sense
… RECENT ESTIMATES SUGGEST that U.S. economic output per capita has increased more than twenty-fold since 1800. Output per hour worked has increased an estimated fifteen-fold since 1870 alone. Yet the average modern person likely works with no greater commitment, risk, or intelligence than his or her counterpart from the past. What is the primary cause of such vast gains if individuals do not really “improve”? Clearly, it is largely that the scientific, technical, and cultural knowledge available to us, and the efficiency of our means of storing and retrieving this knowledge, have grown at a scale and pace that far outstrip any other factor in the nation’s economic development.

A half century ago, in 1957, economist Robert Solow calculated that nearly 90% of productivity growth in the first half of the 20th century (from 1909 to 1949) could only be attributed to “technical change in the broadest sense.” The supply of labor and capital—what workers and employers contribute—appeared almost incidental to this massive technological “residual.” Subsequent research inspired by Solow and others continued to point to “advances in knowledge” as the main source of growth. Economist William Baumol calculates that “nearly 90 percent . . . of current GDP was contributed by innovation carried out since 1870.” Baumol judges that his estimate, in fact, understates the cumulative influence of past advances: Even “the steam engine, the railroad, and many other inventions of an earlier era, still add to today’s GDP.”

Related research on the sources of invention bolsters the new view, posing a powerful challenge to conventional, heroic views of technology that characterize progress as a sequence of extraordinary contributions by “Great Men” (occasionally “Great Women”) and their “Great Inventions.” In contrast to this popular view, historians of technology have carefully delineated the incremental and cumulative way most technologies actually develop. In general, a specific field of knowledge builds up slowly through diverse contributions over time until—at a particular moment when enough has been established—the next so-called “breakthrough” becomes all but inevitable.
(March/April 2010 issue)

Jerry Mander: Climate change v capitalism: the feast is almost over
Jerry Mander, Guardian
… During the great heydays of capitalism – the last two centuries of spectacular development and growth – we lived in what the great ecological economist Herman Daly called a “full world” of resources. We thought they were unlimited, some kind of permanent gift to the human race from God, so we could display our stewardship, or something. But it’s not a “full world” any more. Somebody should tell our leaders.

In addition to those climate impacts, we now face rapidly diminishing supplies of cheap oil and other fossil fuels. They call it “peak oil”. This is catastrophic for our system. Cheap fossil fuels were the primary engine that grew our society over the last two centuries. That’s soon over, and there is no combination of sustainable alternative replacements capable of maintaining industrial society at nearly its present level.

Perhaps ultimately even more important is the global scarcity of fresh water. The World Bank already predicts the next world war will be over water. Healthy topsoils are also seriously diminished, as are agricultural lands, converted to other uses, and global food supplies, which are ever more expensive. So are forests and their hundreds of crucial byproducts, as well as biodiversity of every kind, life in the oceans, coral reefs, and key minerals, including coltan (for your mobile phone), lithium, phosphorous, lead, zinc, tin, copper, gold, and hundreds of others. Following two centuries of voracious exploitation of every mineral, metal and biological resource, we will soon be facing what Daly calls an “empty world”.

Watch for the big announcement: THE PARTY IS OVER. Without ever-expanding resources, ever-expanding production and consumption, our economic growth model becomes a relic, instantly obsolete. But so far, no one in leadership roles (with one or two exceptions, as we will see) is admitting to that. If they know it, they’re too scared to say so.

… Meanwhile, [Bolivian President Evo] Morales, the only head of state from an indigenous heritage, made his position clear, first in Copenhagen, and then in Cochabamba: “We have a stark choice between capitalism and survival,” he said. “The countries of the world have failed in their obligations … Either capitalism lives or Mother Earth lives.”

Morales proposed three ideas: 1) nature should be granted rights that protect ecosystems from annihilation, under a Universal Declaration of Mother Earth Rights, with enforcement powers; 2) poor countries should receive compensation for crises they face but had little part in creating, as per the G77 position; and 3) there should be a continuing “world referendum on climate change”, open to all people. Further meetings are ongoing.

Morales also denounced systemic dependency on economic growth and overconsumption as being inherently harmful to the earth, and he advocated for the economic practices of indigenous peoples.

… Already there are many hundreds of groups, from every continent, at work defining the ingredients of an alternative economic system, one that can live within the carrying capacity of the planet. I don’t have room to describe their work here, and it varies depending on political orientation. But, a few points.

The universal quest is to define systems that that can deliver economic sufficiency and equity, permanently, while remaining within the carrying capacities of the planet. Most accept that systemic economic growth will soon be over, though growth is encouraged in specific timely activities – for example, certain renewable energy forms, local agriculture practice, sustainable building and the arts. Other ingredients of a new economy that some groups advocate include:

… That is the tiniest sample of what thousands of people are now discussing in various forums, including Cochabamba, World Social Forums and many others. For more information, I suggest internet searches of some of the following: Post Carbon Institute, Transition Towns movement, Center for the Advancement of the Steady State Economy, New Economics Institute, Global Footprint Network, Ecosocialist International Network, New Economy Working Group, ETC Group, The Story of Stuff, 350.org, left or green biocentrism, Dark Mountain Project, Indigenous Environmental Network, Tebtebba foundation, Food and Water Watch, Navdanya, Third World Network, International Center for Technology Assessment, Global Alliance for Rights of Nature, Rainforest Action Network, Institute for Policy Studies, International Forum on Globalization. These will doubtless lead to dozens of others.

Jerry Mander is the founder of the San Francisco-based International Forum on Globalization. His books include Four Arguments for the Elimination of Television, In the Absence of the Sacred, and The Case Against the Global Economy (with Edward Goldsmith) and Alternatives to Globalization (with John Cavanagh)
(15 October 2010)

The Upside of Technological Inefficiency
Justin, Extraenvironmentalist, Episode #4
Oil is more efficient than coal; coal is more efficient than wood. We’ve been using more efficient energy sources throughout the timeline of modern industrial society yet our ecological footprint has continued to grow. If our technology has been making us more efficient all along, why do we continue to grow our ecological footprint? Could changes to the way humans make decisions within an economic system do more good for degraded ecosystems than shiny new technologies? What if we just all participated in the extractive economy less?

In Extraenvironmentalist #4 Justin talks with Conrad Schmidt who is among many other things, founder of the British Columbia Work Less Party and author of Alternatives to Growth: Efficiency Shifting. We talk about ways some macroeconomic level solutions could improve the economic situation, some alternative explanations to why the economic collapse of 2008 began and how an SUV might be more ecological beneficial than a bike. We’ve interspersed clips of Conrad’s documentary films in with the interview so be sure to visit Conrad’s website for his videos and books!
(14 October 2010)
The actual interview starts at about 4:25 minutes into the podcast. -BA