Homework-induced epiphany…

…possibly laced with a good dose of Dunning-Kruger, so I’d appreciate it if people more edumacated in economics would point out if I’m missing something or drawing ignorant conclusions.

Anyway, I just finished slogging through the math-heavy section of my economics textbook that dealt with different forms of economies, most notably “pure competition”, “monopolistic competition”, “oligarchy”, and “pure monopoly”. This being the textbook I previously described, it did not contain any human beings and stressed economic efficiency a lot. And of course there’s only one system that produces both allocative and productive efficiency (meaning that resources in the system are allocated in the most “desirable” way, and that everything is produced in the cheapest possible way): the pure competition.

Anyway, so here’s how that’s supposed to look in graph form:

on the left is what an individual company’s curve would look like, on the right is the graph for the entire industry. Now, I’m mostly interested in the right left chart. that dot saying P=MC=minimum ATC is the point at which production supposedly occurs in a company in a purely competitive economy. p=price of each unit of product, MC=marginal cost (i.e. the cost of producing and selling one more unit), ATC = average total (i.e. variable and fixed) cost cost, (i.e. average cost of each unit sold). so the point at which each of these companies produces is the point at which the price for each unit sold is exactly the same as the cost of producing it.

Think about this.

This means this company is making zero economic profit. It’s not supposed to make any, in the long term. If it did, that would mean it is producing at a point on the demand-curve above ATC, the difference being the profit. And you achieve efficiency only if you don’t produce above minimum ATC.

According to that model, profit is inefficient.

Now, the graph on the right claims that some profit is being made even with efficient production. That’s the orange part called “producer surplus”. How this producer surplus comes about out of a market made up by companies which all function like the one in the right chart, I don’t know, and that’s the part where I’d really love a real economist to step in an explain.

Anyway, back to the single company. The one that isn’t supposed to make any economic profit in the long-term. What human thought-process would make a person enter such a market, where businesses operate at zero economic profit? What person adds to their workload for no profit? Now, I can see that there’s a group-profit here. After all, things are being produced. And if you’re a laborer, then you’re getting paid, because your wage is part of the variable cost included in the ATC. But what’s in it for the individual entrepreneur? Wouldn’t it be more profitable to such a person to not go into business, and instead use that otherwise unprofitably invested time to, I don’t know, plant a vegetable garden to reduce food-costs instead?
The answer my textbook provides is about short-term fluctuations: sometimes demand for a product rises, which causes price to rise creating a short-term window of profitability. This is where more businesses enter the market, supply rises, and profit goes back down to non-profitable levels (for balance, sometimes demand shifts in the other direction and short-term losses result). But then what? The model seems to say that the companies then just go on blithely producing things at no profit (because shutting down is more expensive), but is that realistically really what would happen? A whole industry full of businesspeople not earning much of anything on their business, and being ok with that? I find that hard to believe. What seems to happen in the real world is that businesses attempt to prolong that small window of profitability for as long as possible. I can think of two common ways of doing this.

1)The window of profitability is created by an upward (or rightward on the graph) shift in demand. Creating a continuously shifting demand-curve would create a continuously open profitability window, even when more and more businesses enter the market or expand production capabilities to satisfy the demand. Thus, growth-economics and the never-ending race upwards until we run out of resources.

2)The window of profitability is profitable because the number of companies was sufficient for a lower demand, thus introducing a temporary shortage in producing businesses, and thus a price-spike. Businesses could attempt to keep that level by driving new businesses out of business, buying them, merging, etc. And once you’ve started that process, you have very little, AFAICT, that prevents that process from continuing past the original point and turning this “purely competitive” market into an oligopoly. Oligopolies, btw, are inefficient but very profitable.

So here’s two things. One, shouldn’t libertarians hate large profits, since they’re a blatant sign of economic inefficiency and a sign that the market isn’t working? And two, how exactly does a perfectly competitive market remain so, when there’s no rational motivation to create and maintain a business that makes no profit in the long-term?

I’m thinking an explanation of how the left chart leads to the right chart could probably answer those questions. But without that answer, it just doesn’t make any fucking sense.

My Economics Textbook (part two)

Let’s start today’s post with the following quote(emphasis mine):

Some economists say that ghe distribution of annual consumption is more meaningful for examining inequality of well-being than is the distribution of annual income. In a given year, people’s consumption of goods and services may be above or below their income because they can save, draw down past savings, use credit cards, take out home mortgages, spend from inheritances, give money to charities, and so on. A recent study of the distribution of consumption finds that annual consumption inequality is less than income inequality. Moreover, consumption inequality has remained relatively constant over several decades, even though income inequality has increased.

after reading that, I had to go check when this book was originally published. I mean, we’ve just been through a massive economic crisis caused in part precisely by consumption being greater than income. And we’ll be spending a LOT of time recovering from it! At the end of that article is an even more stupid quote from The Economist:

More than 70 percent of Americans under the official poverty line own at least one car. And the distance between driving a used Hyundai Elantra and a new Jaguar XJ is well nigh undetectable compared to the difference between motoring and hiking through the muck. … A wide screen plasma television is lovely, but you do not need one to laugh at “Shrek”.
Those intrepid souls who make vast fortunes turning out ever higher-quality goods at ever lower prices widen the income gap while reducing the differences that really matter.

First, that must have been written by someone who has never driven a used anything; because my experience with old cars is that they have a very bad habit of breaking down when I need them to get to work most. And of course 70% of poor people have a car; there’s virtually no public transportation system, and living near jobs is unaffordable. In fact, virtually every application I’ve ever had to fill out asked whether I had “reliable transport”, which translates to “do you have a car that won’t break down” in most circumstances. And yet, 30% DON’T have a car, and when oil-prices spiked a few years back people had to quit their jobs because they couldn’t afford putting in enough gas to get to their jobs. To praise America’s car-dependence is some sort of perverse (and the same goes for the “even homeless people have cellphones” argument: of course they do, how else are they supposed to stop being homeless? cellphones have become a necessity for many of them), and so is the “reducing the differences that really matter” comment. The ability to watch TV is “what really matters”? The ability to drive a car is “what really matters”? Really!? And here I thought that would be affordable housing, nutrition, healthcare, and education. You know, the things more and more Americans are simply not able to afford. And I could write a rant about “higher-quality goods at lower prices”, too, since for the ACTUAL things that matter this is often not true. My ancient cast iron pans are worlds better than any newfangled teflon-coated piece of shit I could buy from Walmart and which will fall apart in a year or two. Electronics might be the only exception here.

Anyway, the entire chapter on inequality is like the quote, a longwinded attempt at pretending it’s not so bad. For example, they explain that the rising inequality since the 70′s was primarily caused by a sudden increase in the need for highly skilled workers in biotech, IT, etc instead of blue-collar workers. And then smoothly transitioning into explaining how this increased demand for skill explains the astronomic rise of CEO pay. Which, as far as I can tell, are actually two entirely separate things, but whatever. Also, I was under the impression that the demand for blue-collar work was replaced by a demand for service-industry jobs, which are mostly even less skilled and more importantly not unionized. That, combined with their claim that “incomes have risen in all quintiles, income growth has been fastest in the top quintile” (is that so? I was under the impression that the lowest quintiles were barely, if at all, keeping up with inflation, nevermind an actual rise in incomes) seems to indicate that they want to claim that rising inequality means that no one got poorer, but that plenty of people got richer. Which is pure and unadulterated bullshit.

And then they top this off with a beautiful tu quoque: “Second, increased income inequality is not solely a U.S. phenomenon. The recent rise of inequality has also occurred in several other industrially advanced nations”. Indeed it has. And? It’s still a bad thing. And “in several” implies that it didn’t increase in ALL of them. Did these other nations not have an increased need for IT, biotech etc. professionals? Do they have no need for highly skilled CEO’s and highly paid athletes and entertainers? Or is it maybe that these things alone don’t explain the rising inequality?

Then there’s a chapter on healthcare. In the beginning paragraph is this sentence: “Those with insurance or other financial means receive the world’s highest-quality medical treatment, but many people, because of their inability to pay, fail to seek out the most basic treatment.” While the second half of that sentence is correct, the first is only true for a subset of the insured. Plenty of people with insurance get shitty care, get denied treatments or payment for treatments, have their treatments delayed while the hospitals and the insurance fight over what is or isn’t covered, etc. And then there’s the fact that many insurance plans still don’t cover preventive care (The insurance plan for NDSU students for example only covers visits to the doctor when you’re sick).

Then they do some “international comparison”: they admit that “for whatever reason”, the U.S. has the highest spending, but at least, “there’s general agreement that medical care (although not health and not “preventive care treatment”) in the United States is probably the best in the world.” and what the bloody fuck does it mean to have the best medical care in the world if your preventive care and your health sucks? Anyway, then they list all these awesome things brought to you by the U.S. medical system. And they’re the very same things that the not-best-in-the-world systems in Europe have achieved as well, at much lower costs: rising life expectancy, “most advanced” equipment and technology, virtual elimination of polio, angioplasty, bypass surgeries, transplants, prosthetics, joint replacements, etc. The only point I’m willing to give them is that most of the medical research funding comes from the U.S.

And then comes the section that talks about the Moral Hazard Problem of health insurance. Now, I know that this is hypothetically relevant, but come on… “if their insurance covers rehabilitation programs, some people may be more inclined to experiment with alcohol or drugs”? Really? I’m thinking that belongs into the “hypotheticals I pulled out of my ass” category. Plus, they list people going to the doctor more often and requesting more test as a negative effect of health insurance.

In the chapter on Supply and Demand, we get the following essay:

Ticket prices for athletic events and musical concerts are usually set far in advance of the events. Sometimes the original price is too low to be the equilibrium price. Lines form at the ticket window and a severe shortage of tickets occurs at the printed price. What happens next? Buyers who are willing to may more than the original ticket price bid up the ticket price in resale ticket markets.
Tickets sometimes get resold for much greater amounts than the original price – market transactions known as “scalping”. For example, an original buer may resel a $75 ticket to a concert for $200, $250, or more. Reporters sometimes denounce scalpers for “ripping off” buyers by charging “exorbitant” prices.
But is scalping really a rip-off? We must first recognize that such ticket resales are voluntary transaction. If both buyer and seller did not expect to gain from the exchange, it would not occur! The seller must value the $200 more than seeing the event, and the buyer must value seeing the event at $200 or more. So there are no losers or victims here: Both buyer and seller benefit from the transaction. The scalping market simply redistributes assets (game or concert tickets) from those who would rather have the money (and the other things that the money can buy) to those who would rather have the tickets.
Does scalping impose losses or injury on the sponsors of the event? If the sponsors are injured, it is because they initially priced tickets below the equilibrium level. Perhaps they did this to create a long waiting line and the attendant news media publicity. Alternatively, they may have had a genuine desire to keep tickets affordable to lower-income, ardent fans. In either case, the event sponsors suffer an opportunity cost in the form of less ticket revenue than they might have otherwise received. But such losses are self-inflicted and separate and distinct from the fact that some tickets are later resold at a higher price.
So is ticket scalping undesirable? Not on economic grounds! It is an entirely voluntary activity that benefits both sellers and buyers.

Yes, this is a defense of scalpers. As an explanation of supply and demand, using scalping would have worked; but actually defending it? It doesn’t even work “on economic grounds”, since the scalpers don’t provide a service that wouldn’t be available to the buyers otherwise: the tickets they sell are not tickets that magically add capacity. Rather, scalpers remove tickets from the original supply-pool, and distribute them back to the pool of people wanting the tickets, to whom these tickets are now not available at the original price. They get something for nothing. (and what’s with the implication that scalpers sell “their” ticket? If it’s an event the scalper actually wants to attend, they will. Scalpers sell additional tickets, i.e. ones that have no value to them beyond the price they themselves paid for them).

And lastly, this is another instance of “assume robots”. Imagine for example that the sponsors of the Soccer World Cup decided to price their tickets at “equilibrium price”, which would mean the tickets would go for hundreds of thousands of dollars. The result would be worldwide riots, not a calm “oh well, I can’t afford it, I guess I’ll watch it on TV instead”. NO ONE wants that kind of publicity, especially since it would be likely to result in dead people.

And even in less drastic situations, you REALLY don’t want to price yourself out of theoretical range of too many of your fans. After all, very few sports teams and musical entertainers primarily earn money from their shows. Most of it comes from sales of merchandise and advertisement, with the live performances being more like the “free gift with purchase” enticement that mostly is just supposed to cover the costs of maintaining/renting the venue. With musical events, there’s of course some balance necessary between the need of the venue owners to make a profit and the performers to maintain mass appeal, but only venues that actually strive for a certain level of “elite” appeal would use high pricing to limit the number of people who will show up, in my experience. The entertainment business simply cannot be reduced to its economic components only.

In the same chapter you get another essay, this time proposing a legal market for human organs. Their main arguments for it are that people should be free to make any transaction they want, that this would increase the number of people who sell their bodies at death(!), and that not making it legal just means the trade goes on illegally.

Goddamn robots again. After all, the same argument could be used for selling oneself (or one’s children) into slavery. After all, that also happens on the black market already, it’s economically viable-ish, and will increase the availability of cheap human labor. It’s also still a really shitty idea once we remember that we’re talking about human beings, not robots and their spare parts. Besides, the claim that it would increase the number of people who give their bodies away after death is disingenuous, since it blatantly ignores that there’s already better ways to do that (opt-out instead of opt-in policies), and that no one gives a flying fuck about what people do with their dead bodies; it’s the sale of organs out of still perfectly alive bodies, which actually might still need those organs, that’s the problem.

Lastly, a possibly minor point is also the selectiveness on some of their graphs. For example, when showing examples of countries on the Index of Economic Freedom, they use Hong Kong, Ireland, and the US as examples of “free” countries, but not Denmark; similarly, they use Venezuela, Cuba, and North Korea as examples of “repressed” countries, but not Zimbabwe or Syria. This isn’t much, but it still makes it look like you need to be a neo-con country to be free, while all (and only) socialist countries are repressed. Also, that graph is sourced to The Heritage Foundation; not exactly the world’s most unbiased source.

There’s still about 1/3 of the book I haven’t looked through. I expect the same problems to crop up there. If they piss me off enough, and are interesting enough to write about, I might make a third post about them in the future. But I think this is quite a lot of clusterfuckery already, and certainly pretty good evidence that these sorts of textbooks are what produces so many libertarians in this country :-/

My Economics Textbook (part one)…

…or “now I know why this country is infested with libertarians”.

My textbook for my Microeconomics class arrived the other day, and I’ve been leafing through it, reading bits and pieces of it. I have no opinion about the various models presented in there, not being an economist (d’uh), but some of the phrases in it, some of the opinions, and some of the “real-life examples” for economic principles etc. are disturbingly bad. If this is what most college-educated Americans know of economics (and it’s very possible, since the textbook claims to be the most commonly used one), I’m no longer surprised so many of them are libertarians.

Some of it may well be a problem with it being a beginner’s class, and thus full of stuff that’s so simplified, it’s almost wrong. It happens. However, when half the explanations seem to include an invisible “assume a spherical cow population of cheap, expendable, emotionless robots”, the simplifications actually end up being potentially dangerously wrong.

Can’t get even past the preface explaining the changes since the last edition, before we get to this awesome paragraph (emphasis mine):

This chapter addresses the question of whether the world is becoming overpopulated and rapidly running out of resources. It covers topics such as declining fertility rates, the optimal rate of resource extraction, resource substitution, resource resource sustainability, oil prices, and alternative energy sources. An understanding of the basic economic principles of natural resource economics will be critical to future voters and leaders. This micro treatment of natural resource and energy topics is particularly timely since many students are regularly exposed to alarmist views on these subjects

ooooh, “alarmists”, what a wonderful start. Ok then, let’s go to Chapter 15: Natural Resource and Energy Economics. First, we get a fairly decent (as far as I can tell) assessment of demographic development, with the minor smearing-by-omission of Malthus, whose assessment of the dangers of populations was quite right for a world in which two things didn’t exist: female emancipation and reliable birth control. The book only says that he was wrong. Also, a strange paragraph about how women had to have many children just so at least two could survive to adulthood, and that “parents – initially unaware that such a revolutionary change in death rates has taken place – for a while kept having six or more children”. Something tells me that wasn’t nearly as planned and premeditated as it sounds. Like I said, “assume robots”…

Then we go to resource usage: all these doomsayers were wrong because in fact the supply of resources has been increasing. True enough, so far, since we haven’t run out of anything significant yet. And what will happen when we do run out? Well, population growth will stop and reverse, and resource use has also leveled off (Forgetting to mention that many have leveled off waaaaay above sustainable levels while some don’t HAVE sustainable levels at all, and that some have leveled off ONLY on a per-capita basis was a pure accident, right?), and therefore we can conclude that future technology will prevent demand for resources exhausting their overall supply (wut? that would require the ability to increase efficiency to the point where you can create something out of nothing, or replacing it with an equivalent. just what is equivalent to iron? oil (for fuel AND plastics AND medicine)? potable water?!). Oh, and “even if we were to run out of oil, alternatives would quickly become available”. IF we run out of oil? Also, I’d like to know their definition of “quickly”. New stuff only comes quickly to those with money, and these new resources wouldn’t be cheap, merely relatively cheaper than the now extremely expensive oil. Oh, and we’re not going to run out of energy because of “clean coal” and fuel made from turkey guts. Really. And lastly, overexploitation is caused by “incomplete property rights” (because no one ever over-extracts their own resources and companies ALWAYS carefully plan years and even decades ahead instead of worrying primarily about increasing next quarter profits. Just ask the Enron Guys). This is exemplified by the tiresome example of successful vs. unsuccessful wildlife preservation: State-run programs always have massive problems with poachers. Programs that have the local population as “owners” of the wildlife, i.e. in control of the tourism (they run it, they profit from it, etc.) give the population more incentive to protect the animals and not kill them. This is phrased as a “public property vs private property” thing, when in all the programs I’m familiar with the “property” is communal, at the village-level. If it were in fact private, I suspect it would just cause the same situation as with Medieval European”private hunting reserves”: the owner has incentive to protect the forest and the wildlife, but everyone else doesn’t.

At the end of the chapter, there’s a little essay called “Is Economic Growth Bad for the Environment?”. They argue that it isn’t, because rich countries have higher EPI scores. They even have a nice chart that indeed shows a very strong correlation between EPI scores and GDP per person. Which of course tells us fuck-all about economic growth, and conveniently ignores the fact that most extraction and manufacturing, the source of most resource use and pollution, has been outsourced out of these rich countries into the poor countries. And a certain economist whom I won’t name even suggested exporting waste. Plus, even scoring the highest on EPI doesn’t mean it’s enough, if “highest” still means using too many resources, spewing too much CO2 into the atmosphere, degrading arable land, unsustainable use of water, etc.

To round off the “economics and environment” issue, in another chapter, they have this to say about Climate Change:

Economists also stress that the market mechanism, through its system of prices and profits and losses, will make appropriate adjustments based on new climatic realities. Air-conditioner sales may rise; snow shovel sales may fall. Some agricultural lands probably will be deserted; others farther north will be cultivated. The maple syrup industry in New England may shift to Canada. Nevertheless, the transition costs – the costs associated with making economic adjustments – of global warming will undoubtedly be very high unless some actions are taken to reduce greenouse gases. But industrial economies are built on carbon-based energy sources, so the costs of reducing such gases are also quite high. The relevant question from the economic perspective becomes: Will it be less costly for society to reduce greenhouse-gas emissions or simply to try to mitigate their effects?

First off, what lands further north? The soil-less Canadian Shield? The permafrost currently sinking into the ocean? And this would of course happen at the cost of the forests that are currently covering these areas, but without new forests sprouting up in the abandoned deserts (see Iraq and Egypt for what happens when agricultural lands stop being agricultural).

And secondly, “cheap, expendable, emotionless robots” again. I know this is an economics textbook, not an ethics textbook, but you can’t tell me that there’s even a question about which solution would be better: entire countries are scheduled to become uninhabitable, and I’m having a hard time believing such massive disruptions to settlement patterns(nevermind massive death for a moment; apparently human life, especially brown human life, is cheap) could be cheaper than CO2 emission reduction.

This concludes the environmental part of the rant. Since the post is already pretty long, I’ll stop here, and write the rest tomorrow (I really really will, promise. It’s already partially written anyway).

Farmers in developing countries reject GMO’s. Why?

I recently found this article about Haitian farmers planning on destroying Monsanto seed. It reminded me of the stories of Indian farmers doing the same, and it stunned me that people in these extremely poor countries would be willing to destroy crops; especially Haiti, which just suffered a huge disaster, and where just a few years back people were eating mud. Now, I’m personally biased, but I wanted to really know whether these farmers were really acting in their best interest, based on experience with these crops, or whether they were like the teabaggers, talked by outsiders into acting against their own interests out of ignorance and fear.

After a little bit of digging, what I discovered was a massive discrepancy between scientific papers, which claim increased yields¹, as well as reduced need for pesticide use², and the writings of NGO’s and social workers which reported increased pesticide use and increased debts accumulated by the farmers. Usually I’d just go with the scientific studies, but I was having a hard time believing that thousands of Indian farmers would commit suicide if their financial situation weren’t as bad as reported. And eventually, I came across a somewhat comprehensive article^3(pdf!) that explained the discrepancy at least in part: all the scientific studies are usually done within 1-3 years of adopting the GM crop; but a few studies showed that over a longer period, pesticide use between bt and non-bt crops evens out after longer periods of time either because of increase of secondary pests, or because of resistance:

‘Bt Technology Adoption, Bounded Rationality and the Outbreak of Secondary Pest Infestation in China’ claims that after seven years of Bt cotton introduction in China (1996 to 2004), the expenditure on pesticides for Bt and non­Bt was identical in 2004 at $101 per ha and the earnings from Bt cotton were lower [Mishra 2006]. Narayanamoorthy and Kalamkar (2006) reported the economical viability of Bt cotton for Indian farmers (Maharashtra). Contrary to expectations, the total quantity of pesticides used in Bt cotton variety MECH 162 was higher than non­Bt cotton varieties. The average net profit from Bt cotton was Rs 31,880 per ha, about 80 per cent higher than that from non­Bt cotton. There was no significant difference in pesticide use between Bt and non­Bt cotton varieties. However, it is too early to generalise in India, where four million small and marginal farmers have taken up cultivation of Bt cotton with estimated adoption rate of 50 per cent by the end of 2007 [Mishra 2006]. Illegal and spurious seeds coupled with non­maintenance of minimum 20 per cent refugia by these farmers may result in severe pest attack on Bt cotton due to selection pressure and outbreak of secondary pests like whitefly [Chari 2006]. The bollworm is expected to develop resistance in 2007­/08, where it was introduced in 2002 [Kranthi 2006][ed.:and indeed, it apparently has].

The same article also notes the significantly higher fertilizer reqirements of bt-cotton:

Fertiliser use was the highest in the case of Bt cotton, fol­lowed by hybrid cotton and was the least in the non­hybrid cotton varieties. The nitrogenous fertiliser use in Bt cotton was higher by 23 and 31 per cent when compared to the other hybrid and non­hybrid varieties, respectively. The respective phosphatic fertiliser use was higher by 17 and 50 per cent and the potashic fertiliser use was higher by 104 and 413 per cent. The use of zinc­sulphate was also higher in Bt cotton by 25 and 10 per cent, respectively.

Note also that at least the potash is an energy-intensive fertilizer, since it’s mined and then transported; phosphate is also usually mined. This means that as oil-prices rise, so will the cost of those fertilizers.

Anyway, the term “incorrect use” shows up in that article as well as a couple others that mention less-than-expected yields of GM-plants. I’m suspicious of that term, since it seems to mean that these crops can only grow in very specific circumstances. In wealthy countries where farmers can control the environment in which their crops grow more thoroughly and consistently, this might not be too big of a problem (though, with global warming and Peak Oil looming on the horizon, even wealthy Western farmers might loose control of conditions just enough to cause problems, maybe); but in poorer countries more prone to various environmental disruptions, and where the profit margins are smaller and income and financial relief in case of drought or other possible disasters is significantly less certain, it might be too difficult to expect the maintenance of the exactly necessary conditions by a sufficiently large percentage of farmers, year after year, to prevent these problems from eventually cropping up and rendering GM-plants unprofitable.

There were other reports of GM-plants failing (or not succeeding enough to be worth implementing): GM sweet potatoes in Africa and bt-cotton in Indonesia⁴; bt-cotton on small South African farms⁵ (their conclusion is especially noteworthy, since a lot of agriculture in developed countries consists of small farms, and any shift away from that has always resulted in massive misery, starvation, homelessness, etc. for the suddenly landless). There’s suspicion that GM-plants are toxic when consumed⁶. GM-companies are prone to stealing traditionally developed/discovered traits, patenting them, and therefore potentially depriving the original developers of the free use of those traits⁷. And lastly, the development of GM-plants is just another step in the arms-race that has, over the last 50 years or so, led to an explosive growth in use of herbicides and pesticides, which has impoverished and bankrupted many farmers, disrupted many ecosystems with its poisons, and even poisoned people themselves, while only modestly improving yields for short periods of time, while at the same time destroying top-soil and demanding increased fertilizer (which I already mentioned will be more and more of a problem in the future).

So, overall, I have to come to the conclusion that GMO’s are indeed not a good thing for farmers in developed countries; alternatives such as organic farming with local, non-patented seeds seems more promising than the participation in a race that makes agriculture more expensive, more fuel-intensive, more toxic to humans and the environment, more sensitive to any and all imperfections in implementation, and robs farmers of the freedom to use their seeds as they see fit. And sometimes, it robs them of their livelihood altogether.

Those who forget history…

Excerpt from Chile’s Free-Market Miracle: A Second Look, by Joseph Collins and John Lear:

Starting in November 1981, a series of banks and businesses began to fail, including several if the principal conglomerates that had benefited most from privatizations of government-owned companies and sweeping financial and business deregulation. The result was a drastic contraction of the economy that rivaled the worst years of the Great Depression. the gross domestic product (GDP) dropped by 14 percent in 1982, and official unemployment rose to over a third of the labor force (and in reality even higher). Suddenly the Chilean “miracle” had little to show for itself except a heavily indebted and failing private sector and an economic base incapable of supporting such high level of debt.

The military government responded by distancing itself from free-market policies, at least long enough to bail out the private sector. Over the next two years, the government absorbed the debts of many large businesses, restoring them to soundness before selling them off to private interests. Other companies were sustained through preferential exchange rates with which they could pay their dollar debts. The government would up taking on as public debt some $16 billion in foreign loans, most of which had been originally incurred and often recklessly spent by private Chilean conglomerates.

By contrast, middle-class families watched with disbelief and anger as the balances on their home mortgages, indexed to the dollar value of the peso, soared; but the government offered them no relief.

This was written in 1995.

link-dump

1) “success oriented planning”, Big Oil edition: remote shut-off? we don’t need no stinkin’ remote shut-off!

2)The Arizonan immigration-law is sparking calls for boycotts on multiple fronts: baseball, businesses, other cities, foreign countries

3)random obligatory anti-corporate link: two simple statistics

Functional redundancy, “success-oriented planning”, and the global economy

I’ve been working on this post for a while, and it still doesn’t feel quite finished, but because of the Iceland volcano outbreak, I’m gonna post it anyway, since it’s relevant. Maybe there will be a part two if this version ends up needing too heavy revision/expansion.

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Functional redundancy is a term used in biology and ecology mostly (and in software engineering, too); it refers to different components of a system performing similar functions, so that in case of disruption, they can take over each others’ functions(in ecology, that would be the ability of another species to fill a particular, suddenly empty niche that is necessary for the functioning if the whole ecosystem). Having a lot of this functional redundancy is usually seen as a sign of the health and resilience* of a system¹, ².

A similar concept exists in engineering³, where critical systems usually have multiples as fail-safes.

In both cases, the redundancy is “expensive”, i.e. it uses more resources/energy than a system without it would. This means that in ideal and/or stable conditions, a system with redundancy functions at sub-optimal levels, because the redundancies reduce efficiency. What this generally means is that every system must balance resilience against efficiency.

And this is where “success-oriented planning” comes in. You see, in business, redundancies are almost always considered wasteful, and are cut out. Overstaffing, overequipping, overtraining etc. are all seen as flaws, as things that cut into the bottom line. And so, they are removed as much as possible. But of course this only works in ideal conditions, so doing this means you’re planning on succeeding, and are not making any contingency plans. This, on paper, generally looks significantly more efficient in both time and money. In reality though, every fuckup (and there always are fuckups) costs more time and money, because there are delays in acquiring the extra resources required to fix the problem**. Sometimes, the fuckups are so many, or so huge, that they destroy the plan altogether, when a less efficiently but more pessimistically designed plan might have survived.

And what does this have to do with Iceland’s volcano? Well, the volcano shut down Europe’s most popular, cheap, and least subsidized for of transport. Stories about people stranded on vacation were abundant; usually further down were stories about suddenly overfilled trains and ferries, even though often both have additional trains/boats in service. Similarly, even though there was squeaking about possible future food shortages in stores, there really weren’t any, partially simply because a lot of stores are replenished once a week, but partially also because not all foods have to be transported from very far away, thus risking spoilage.

Those things are all symptoms of functional redundancy, maintained almost entirely by state-funding/intervention: the rail is state-owned in most European countries, and so are many ferry services. Even road maintenance, for all those newly rented and now hard-to-come-by cars, is state funded. Similarly, the existence of spare vehicles and crew, which was mobilized to deal with the suddenly increased demand, is a sign of maintained redundancy. So is the existence of the vast majority of European agriculture.

If transportation would have been left to capitalist competition, there wouldn’t be this multiple redundancy in transportation. The buy-off and deconstruction of America’s public transport in those cities in which it was sold to private interest is pretty good evidence for this: in LA for example, there was an excellent network of trolleys within living memory of some of its senior citizens; now the only way to get around is to drive. And additionally, even if additional systems existed, they’d be just as understaffed and under-equipped as many purely for profit, non-subsidized companies are (for example, ancient undermaintained airplanes, and overworked long-distance truck-drivers), so they would hardly be equipped to shoulder such a sudden shift in demand.

Similarly, if the flight-stoppage had lasted longer and Europe had to subsist on its own food reserves, even this early in the year, it wouldn’t have been a disaster, because food is still produced in Europe. This is almost completely a question of functional redundancy, since according to free marked principles, virtually no food should be produced in Europe at all, and it all would have to be shipped/flown in from overseas,*** from cash-crop producing cheap-labor countries. This would have spelled a disaster for Europe, as well as the supplier countries, since they wouldn’t be able to sell.

Now, a volcano eruption disrupting flights is a bit of a freak-event. But it’s not like were not facing a similar, more predictable and also more permanent disruption in the near future. Peak oil is looming⁴, or might have even passed, and transportation and agriculture will be likely its most notable victims.

The Green Revolution for example is entirely fossil-fuel based, and so is its descendant, the GMO revolution****; neither will successfully continue to function in a post-cheap-oil world. Fostering small scale, local agriculture could provide some functional redundancy (Yes, small scale, local agriculture is capable of feeding the world; Victory Gardens provided as much food during WWII as large-scale agriculture did. Thanks for asking), but modern subsidies, especially in the US, do precisely the opposite, subsidizing monoculture on ginormous scales. This is entirely counterproductive. So is the continued push for agro-fuels, which will die the moment fuel-intensive agriculture does.

Transportation is in a similar and partially worse pickle. I’m not aware of oil-free kerosene-alternatives at all. Cars may well be turned into all-electrics in the next decade, but then they’ll still run on fossil fuels everywhere except in France maybe, and that would mean more CO₂ emissions, which we can’t afford for obvious reasons. The current flight-crisis is showing that trains can barely handle having to pick up the slack for a short-lived temporary flight outage. What will happen when both flying and driving suddenly become non-existent or heavily reduced? What will happen in the US, where the train map has a rather HUGE holes in the middle⁵, and most the trains run only once a day as it is (oh, and they regularly get stuck in the mountains in the winter, and no trains cross the Cascades and Rockies for days, even weeks then)?

As far as I can tell, the USA has lost the ability to create functional redundancies in the 80′s, when every politician seems to have run on the “running government like a business” platform, and the only subsidized business, agriculture, has been subsidized in entirely the wrong direction, i.e. away from diversification and towards monoculture and specialization. It’s an entire country build according to “success-oriented planning”, i.e. this idiotic, powerful American optimism and exceptionalism that keeps on fueling its economic bubbles***** and that eschews even thinking about a Plan B, and which, as a result, has pretty much only one solution for every problem, and often it’s already a pretty jury-rigged one. There isn’t much resilience in the system.

Europe is somewhat better off, especially because they already have a lot of this infrastructure in place and because new non-fossil-fuel infrastructure is being created that might make transitions easier. But for some unfathomable reason, quite a few European governments seem to want to become more American: more car-dependence, more “tax-rebates”, more “business-friendly”, and more useless agricultural subsidies that only prop up existing agriculture, rather than providing a non-fuel-intensive alternative.

And the rest of the world? Australia has never had much in the way of natural resilience; there’s a reason agriculture never developed there, and it’s on it’s way to its natural death now with more stress, and more irregular weather and less rain.

And the entire developing and undeveloped world has virtually no resilience left at all; domestic agriculture has become nonexistent, while export agriculture will become non-existent when transporting food across the world will become too expensive; and this is in the areas that aren’t being fucked over by global warming, and industrial erosion and poisoning.

On the whole, it seems the global economy is one big exercise in “success-oriented planning”. It’s time to fess up that that was probably a really dumb idea, and start building (and allowing other countries to build) some resilience into the most important bases of our systems (I mentioned agriculture and transportation, but electricity in general as well as communication are other important examples). I suspect it’s a wee bit late to prevent all disasters, but better late then never, I’d say…

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*resilience being a measure of how much you can fuck with a system until it finally cannot compensate, collapses and becomes a completely different system

**the new “solution” to this faulty planning is the creation of the disposable human. Temp agencies for example provide insta-experts/workers/whatever to companies. This precarization of labor creates fucktons of problems for the workers, especially in places like the U.S. where temp-workers don’t get benefits and get paid less than the equivalent permanent employee would, but it works just awesomely for the companies. ugh

***incidentally, there’s already been reports of some exotic and out-of-season foodstuffs spoiling because there was no way to deliver them from the countries in which they were grown to Europe; this has serious consequences on the countries where these crops are grown, because they usually lack diversification and functional redundancy, either as a consequence of colonial history, or as a consequence of World Bank and IMF blackmail that destroyed localized, non-cash-crop agriculture and various state-subsidized industries.

****both the high-yield agriculture of the Green Revolution, and GMO crops, are fertilized and pesticide/herbicide intensive, as well as labor-intensive, and therefore only profitable when economies of scale come into play. They also both lack in genetic diversity within and between varieties which would supply the plants with some of that flexibility and resilience to change.

*****probably best exemplified by the massive pre-financial-crisis hubris of “We’re an empire now, and when we act, we create our own reality.”

Walton’s fault

because he’s annoying me with his insistence that capitalism is so superawesomely good for our quality of life, here’s some actual science on that subject:

money can’t buy happiness, but it makes you more stressed

community makes people happy

men mostly want to work less, but can’t

sense of neighborly community important for teen wellbeing

income irrelevant to well-being; consumerism disruptive to fostering social relationships

everybody working isn’t good for the family

Consumerism and structural violence (pdf link!)

generic conclusion

in a nutshell (including some stuff from studies i didn’t link): most studies show that consumerism isn’t correlated with happiness, or is negatively correlated with it; income is only relevant up till it satisfies basic needs, then it’s only relevant in relative terms, and greater social gradients make correlation with relative wealth more pronounced; membership in a community and cooperation, self-determination and ability to express oneself, and stability and security are all more or less strongly positively correlated with health and happiness, but are rarely found in the modern economy, with the exception of co-ops. Economically invisible labor (gardening, child-raising, productive hobbies etc) can have positive effects on wellbeing, but the effect is suppressed where economic status is seen as important.

Whatever good thing capitalism has done for us in the West it ha reached its pinnacle decades ago, and well-being has decreased for the majority of Westerners since then. Outside of the West, capitalism is mostly creating ecological crises, and re-creating the early industrial working conditions that anti-capitalist forces have managed to abolish in the west (extremely low wages, extremely long working hours, extremely dangerous work conditions, slave-like rule of bosses/managers over workers; child labor; etc.), destroying indigenous and local economies and social support networks, etc.

and it’s not offering any solutions to the agricultural and industrial resource depletion and climate change.

it’s a fucking disaster, and if that’s the best we can do, we’re royally fucked.