How to Rendition An Inconvenient Economist


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    Science? Or Religion? I’ve said this before, but just in case: I have very little appreciation and/or patience for the field of economics and it
    [See the full post at: How to Rendition An Inconvenient Economist]


    Excellent article. I must admit this is the great disconnect. I thought about this as a pilot- such a prodigious energy expenditure, and for what? To make people go fast?

    Also, the economy adds distortions to otherwise physically impractical endeavors. take electrical generation for example. The best steam turbines run at 33% efficiency. That means 2/3 of the energy input is wasted as heat. if that energy input is coal, take another 10-15 % off the top to mine the coal and ship it the the generating station. Then if we consider another 15% loss in transmission, and further losses in the efficiency of the end-use machinery or illuminating device, we are operating at a net loss. Is it possible? Does it actually take more energy to shove the electricity into your house than you can derive as a benefit?

    If this doesn’t make sense physically, how does it make sense economically? Only because the ponzi scheme is complicated enough, and delayed long enough to blur the physical realities that spell the doom of our modern energy-consuming society. And also because we so far have had the luxury of so much energy at our disposal that we could afford to waste it in a profligacy so opulent that it may never have an equal.

    Mark T

    I haven’t heard any discussion by the economists or politicians about the tidal wave of debt that is engulfing Canada.

    The following information is from a Statistics Canada credit market summary data table as of the end of June 2012: (The debt statistics for Canada up to the end of September 2012 will be released in about 3 weeks by Statistics Canada).

    Total debt in Canada as of the end of June 2012 (bottom line of the data table) was 5.1 Trillion $

    From the end of June 2011 to the end of June 2012 the total debt in Canada increased by 209 Billion $.

    For that 12 month period the total debt in Canada increased at a rate of 572 Million $ per day.

    I would have to agree with Karl Denninger when he said (a few years ago) “You cannot expand credit at a rate faster than GDP forever without suffering a financial panic and collapse”.

    Mark T

    Let me try that link in my post again:

    If it still doesn’t work please go to the Statistics Canada website and put “credit market summary” into the search box to get to the data table I have referenced in my post.


    “The older I get, the more cynical I become about government intervention in the economy.”

    Gee, if I didn’t know any better I’d say ol’ Stevie boy is starting to sound like an Austrian! It is true that those who work for the government statistically have the lowest opinion of government programs. Maybe that’s because when you are funded by theft and you are not constrained by the profit motive, only negative outcomes are possible?

    You need to go deeper. You have to look at the violence. You have to look at the contradictions.

    You have to be able to see the guns and how they skew the incentives, always for the worse. It’s so hard for people to see, and then once you do, it’s impossible to unsee.

    taxation is theft.
    war is murder.
    violence against those acting peacefully is always wrong.
    We know these things and practice them in our own lives, yet we make this magical exception for the goons of the state.

    everything they have is stolen.
    everything they say is a lie.
    everything they claim to do, their aim is the opposite.

    the war on drugs = rampant drug abuse
    the war on poverty = rampant and always worsening poverty
    the war on terror = rampant terrorism (TSA? SWAT? Drones?)
    public schools = mass indoctrination and retardation of critical thinking

    It’s hard to accept. I get it. Twelve years in government indoctrination centers takes a lot of undoing.

    But trust me – its worth it. Cast it aside. Let it go. Once you see those who claim the right to initiate violence against others as the scum that they are, it all falls into place.

    It’s time to put down the gun.


    FB post in response to this article by some guy named John Vermazen:

    First of all, the idea Karl Popper, anti-communist extraordinaire and apologist for the West in the Cold War, wrote the final word on science is absurd. Falsifiability was critiqued at length, it isn’t how science is actually practiced. Kuhn and Lakatos wrote the definitive works revising the concept in light of plain reality, while Paul Feyerabend famously reduced Popper to absurdity in Against Method.

    Secondly, Steve Keen is nothing but a new wave alt-Keynesian who proposes strategic state interventions into a capitalist economy with debt jubilees. He is an apologist for capitalism. His MO is to create a “capitalism that works better” where the capitalists still exploit labor and systematically maldevelop the globe while wrecking the environment, but with less losses from crises and slowdowns.

    The Marxist labor theory of value is not the Ricardian labor theory of value; it is not true that there exists some metaphysical value attached to each and every commodity exact equivalent to the concrete amount of labor-time which was put into producing it. People think this because they only read Vol. 1 of Capital, and nothing else. Marx’s point was to CRITIQUE Ricardo’s theory of value, and classical political economy generally. The fact is that calorie counting is and has never been the constraints on actual production–what is the restraints is there are a fixed number of hours in a day that a laborer can work. To go on and on about thermodynamics is pure absurdity: it goes without saying production always conforms to thermodynamic constraints because thermodynamic constraints govern ALL PHYSICAL PROCESSES. The EIA and IEA constantly produce reports on how much energy we consume–its hardly written off as a carry-over. The fact is that no energy has ever been recovered for “free”–the Earth’s surface recieved the same amount of potential energy from the sun for millions of years. What changed? The social organization of human labor to exploit the potential chemical and solar energy through domesticated crops that greatly expanded the capacity of food storage available to human social units in given units of time. That said, if we ever have a communist mode of production, econophysics-like concepts may be important to the purposes of in-kind and physical accounting for value-less production processes.

    In any case, the Marxist theory of value is better dubbed the value theory of labor. The central issue is how human creative capacities must be accounted for as labor-values, must be subordinated psychically and socially to production as a concept–this itself is the product of a society based on wage-labor and generalized commodity production: the capitalist mode of production. The social revolution is the overthrow of human creative powers being caged within value.


    I don’t know enough to argue with this guy, except that I know this sentence from his response is hogwash: “The fact is that calorie counting is and has never been the constraints on actual production–what is the restraints is there are a fixed number of hours in a day that a laborer can work. “


    I have a strange feeling that Steve will become even more cynical once he factors in energy into his QED model.

    2-nd Law: You can’t break even:


    Deconstructing The Price Of Gold – Gold Bugs Better Sit Down For This One

    Tao Jonesing

    While I am a fan and supporter of Steve Keen, his solutions will ultimately perpetuate the problems he seeks to solve.

    Here’s the reality: economics is not a science but a rationalization for the current distribution of power. Note: I said “power” not “wealth” or “income.” Power within the collective is all that matters.

    Keen’s problem is that he does not understand that money and credit as they exist today function to (1) secure the current power of the elites and (2) consolidate ever more power in their hands. Our economy is based on diverting the value created by the division of labor into the elites’ hands, and money and credit are the primary basis for accomplishing this. Unless you fundamentally change the nature of money and credit, nothing will change in the long run. Sad to say, Steve does not propose such fundamental change.

    At the end of the day, he is just another good guy trapped in the cage imagined for him by the bad guys. It is not enough to “debunk economics,” you have to ignore them altogether.


    Hi Illargi,

    There are people out there trying to do honest work that neither violates thermodynamics nor fails falsifiability, instead of dictating some belief system incapable of defining either debt or value.

    I guess that will be the remaining aboriginal/indigenous pre-industrial peoples – what’s left of them. Without being too Zerzan, all civilization is based upon conquest and the subsequent ‘assimilation’ (theft) of resources whether from the ‘natural’ (existing self sustaining ecosystems) and the sustainable humans who exist in such, or from other ‘civilisations’. Trying to get the current high priests of this current culture to change would be like trying to stop the Aztecs priests from performing their blood sacrifices to their gods, or to fight Cortes – not gonna happen dude…. their mindset/system was just too tight.

    Without digging into John Gall’s Systemantics too deeply, his axiom of


    (Gall, 2006, “the Systems Bible”, 3rd Ed. p.130) has stood the tests of time, the Family being his best example.


    steve from virginia

    Keen is a giant among ordinary economic men, this does not mean there are no grounds for criticism. First of all, Keen does not question the productivity or viability of industrialization itself (which is where our problems lie). As w/ Keynes, industrialization is assumed to be ‘a force for good’/a force of nature. Economists’ job is to make adjustments at the margins so as to keep the factories and businesses running properly.

    Second of all, Keen critiques finance and debt management even though finance and debt management aren’t the central economic problem (the markets are fine and finance is an important component to any way out of our mess). The real problem is the illusion of industrial productivity: at-scale economic enterprises do not pay for themselves. Speculative ‘investments’ are made in purely financial instruments because there are no other investments to be made.

    The only productive enterprises are those that don’t require credit or require very little: small-scale enterprises that rely on creativity/economic necessity rather than at-scale material transformation. For instance, a town filled with cobblers and cabinet makers is productive in that there are more shoes and sofas being produced every year and a good market for these things. However, there is nothing for a capitalist to invest in … there isn’t the appearance of great output to leverage. The capitalist lends to an ‘entrepreneur’ (thief) to open shoe- or furniture factories (in China) in order to steal the markets that belong to the town’s workers (by way of credit-subsidized lower prices).

    See ‘Walmart’.

    “… calorie counting is and has never been the constraints on actual production–what is the restraints is there are a fixed number of hours in a day that a laborer can work. To go on and on about thermodynamics is pure absurdity …”

    That is simply nonsense, it is calorie mis-counting. The illusion is that input materials are fairly priced which they are not. If a gallon of gasoline was priced equal to the amount of human labor it represents it would cost $1500 per gallon. It is this ‘saving’ — between what an input costs and what it would cost if priced alongside labor equivalents — that sets the boundaries of industries’ false- ‘productivity’. The subsidy only lasts as long as the material input in question is in plentiful supply. If not there is a ‘scarcity premium’ attached to it and firm/system ‘profitability-narrative’ is rendered false and vanishes. More credit provides a lifeline … but only for a little while.

    Only governments … can fund money-losing enterprises for long periods. The Europeans learned this lesson during some of their many wars …

    The high input cost- shrinking profits/shrinking credit dynamic is blitzing the Continent’s countries into oblivion under everyone’s noses! France borrows roughly €200 million every single DAY … money that is simply thrown away for fun … There is nothing to show for that money wasted … or the fuel that money is exchanged for. How long can such nonsense go on? Once France is admittedly insolvent it won’t be able to borrow any more. Then what?

    All great surpluses — including surpluses of cheap inputs, cheap credit, surplus profits — have greater associated costs. Those costs are where the thermodynamics appear.


    Using an econometric unit of energy flux density [joule/$/sec^2] to quantify the value of production does rely on arbitrary EROEI boundary conditions. This becomes problematic when accounting for the embedded energy of tools and the energetic leverage of innovation, but no more so than with monetary valuation.

    The first law of gravitonomics:

    All economic activity is leveraged on the facilitation [labor] and maintenance [capital] of a food surplus.

    All social control is leveraged off the facilitation and maintenance of a food shortage/scarcity.

    The first statement is falsifiably true.
    But it seems to indicate a gross misvaluations of labor and tools employed in food production, which should be valued more than their price affords.

    Providing that hierarchical division of labor decouples capital surplus from food production [grain tokens], and providing that all social control constrains economic activity and limits aggregate surplus, the corollary is also true.


    Ah the physiocrats! Haven’t heard them mentioned for 30 years or more, it’s about time. The National Organization for Raw Materials (NORM) would
    argue that stealing the labor and raw materials (artificially low prices for farm commodities) from rural America for the last hundred years leads to unending debt. The “law” of supply and demand requires many willing buyers, many willing sellers, and equal access to information. None of which exist. NORM believes that the country has been in a Depression for decades, masked only by the growth of extreme debt.


    Thank you for an incredibly lucid explanation of where value comes from. I would prefer that you had used the term “wealth” instead of value. This is my conclusion from some years of independent rumination but you have put it crystal clear for me by relating it to the laws of thermodynamics. I intuitively knew that energy was at the core of wealth but you made the jump to the thermodynamic laws. WOW. I have already printed this blog post and filed it. It is great to have you back and writing regularly. Say hello to your female collaborator. I enjoyed her conversation at our dinner table a year or so ago.

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