Saturday, September 29, 2007

Influencing Demand

Demand for a product can be thought of as the product of two numbers: How many people want the product; and how many units that each person is willing to buy.

The first number can be increased by simply exposing the product to a large number of people, informing them of its potential value to them (what they can gain from using it).

Manipulation of the second number involves maximizing the amount of value that people perceive. If the product is competing with other products, the producer can increase demand by demonstrating its relative advantages (including offering more supply than the competition, which is manifested in either a lower price or a lower cost to the buyer for acquiring the product due to more convenient access).

A government can influence both demand and supply by imposing a tax on a product. This effective increase in the price of the product gives the market the impression of increased demand, but it acts as an additional cost to the producer since the producer can’t use the additional money to increase the supply of the product. Because supply doesn’t increase proportionally to the “demand” the price continues to stay elevated. Actual demand will drop in the presence of other, untaxed products perceived by buyers as having equivalent value that are easier to get (because they have a lower price).

Friday, September 28, 2007

Product Lifecycle

The difficulty of adopting new technologies is a consequence of the typical product lifecycle.

The life of a product begins with a single unit of production and a single unit of demand, the producer. The producer creates demand by demonstrating its value to others. Price of the product increases as demand grows, pressuring the creator to increase supply, converting some of the demand into capital to provide the resources for doing so. As price drops in response, the producer (motivated by the potential for profit, getting paid more than it cost to produce the product) increases demand to bring the price back up; this involves exposing the product to more people and potentially adding value to the product (using capital paid for by either of the profit, or barring that, loans by investors).

If demand decreases, the producer loses incentive to increase supply; and if it drops irretrievably below the amount necessary to maintain any supply, the producer stops producing the product. Likewise, if the cost of maintaining the supply increases, the supplier must increase demand to compensate or reduce production.

“Technology” is what producers use to convert resources into products, and if there is no demand for its related products, a technology is literally worthless. A technology is truly successful if it is used in the creation of multiple products.

Wednesday, September 26, 2007

Time Constraints

We may have less than ten years to bring new energy and manufacturing technologies into common use.

“Peak oil” experts and my own projections of energy production rates indicate that oil production will reach a maximum within ten years and then rapidly decline. Over the past 30 years, populations of other species have declined by over 30 percent (by my projections, the fraction may be as high as a half), and the pace is increasing. One of the greatest impacts of pollution on the environment, global warming, may reach a point soon where it is self-sustaining; and experts predict that we must drastically reduce our emissions of greenhouse gases within a decade to keep from reaching that point (and the costs of not doing so could be catastrophic).

An economic change of this magnitude is unlikely to occur without a huge increase in demand for products and services based on the new technologies, and a corresponding decrease in demand for what people are currently buying. Demand is unlikely to grow based on just utility: New products and services are likely to be viewed as highly expensive replacements (expensive because the supply is comparatively low). Potential consumers must perceive additional value that justifies the difference in price.

Tuesday, September 25, 2007

Supply Options

If the current sources of fuel, materials (such as petroleum-based plastics), and service-providing elements of the biosphere are all we can ever have, the prices for everything we produce, as we approach the limits of supply, will rise rapidly. This prospect leaves us with the options of reducing consumption or finding alternative sources. We are in fact exercising both options: Consumption is slowing, and the research and development of alternative fuels, materials, and life is accelerating.

The decrease in consumption is due to several reasons. More women are becoming empowered, and this tends to result in lower birth rates. The growing worldwide conservation movement is gaining traction. And death rates are increasing due resource-driven wars, disease-causing compounds in what we consume, and pollution (what we deposit and then indirectly re-consume in the environment, as well as “external effects” like climate change and species loss).

Research and development of alternative energy sources includes renewable ones such as solar energy collection, wind turbines, and bio-fuels; and higher yield ones such as nuclear fission and fusion. The search for new life is dominated by bioengineering (literally, creating new forms of life or modifying existing ones to be more resilient and productive), but also includes the exploration of other worlds such as Mars, where we may be able to jump-start a whole new ecosystem. There is also some hope that new technologies such as nanotechnology might allow us to radically increase our efficiency and range of resource use and manufacturing, literally manipulating the essence of matter itself.

Monday, September 24, 2007

Natural Cost

Throughout history humans have “consumed” energy and mass in their environment, transforming some of it into people, some of it into enduring forms not found in Nature, and much of it into waste. Before we began creating new chemical compounds, the rest of life (comprising the other members of Earth’s biosphere) was able to recycle almost all of what we produced and wasted; and yes, even us.

As our technology has matured, an exponentially increasing amount of mass and energy has been consumed, so much that the biosphere can’t keep up; and much of what we’ve produced and wasted is unavailable for reuse, now or in the future. This is effectively destroying the biosphere because we’ve reduced the amount of resources available for other life; this is evidenced by an increase in the rate of species extinctions that may soon rival the result of a major asteroid impact.

The cost of what we produce includes these effects. We are not only depleting the supply of fuel whose energy drives our activities, we are depleting the supply of life that processes our waste, stabilizes the weather, provides food, and performs innumerable other services that enable and enrich our lives. In an ideal world, we would account for this cost in the prices we pay.

Sunday, September 23, 2007

Chains of Dependency

The supply of a finished product or service typically depends on several inputs which contribute to its “cost,” what the producer and others paid to acquire, assemble, and deliver all of the components of the item. Everyone in the “value and supply chains” also adds a “profit” to the purchase price, a reward that in a healthy economy is used to keep them in business when supplies fall short and they need to acquire more, find substitutes, or grow their businesses to offer other types of items.

Generally as the price of something goes up, people (buyers) will try to find cheaper substitutes, reducing the demand and therefore the amount of money (and profit) received by the original supplier (including the supplier’s associated chains of production and delivery). This also provides an incentive for the supplier to maintain supply.

Since energy is an input to all products and services, it is no wonder that its price driven by the cost of extracting fuel, processing it and delivering it – affects the price of everything. As supplies of fossil fuels drop and people realize that they can’t increase, more money will be spent on alternatives. Believers in a free market economy (and the dubious assumption that the world economy approximates one) sustain the hope that “the market” will be able to replace the fossil fuel supply before it runs out. Unfortunately for them and us, there are hidden costs that make the problem much more complex, and are reducing the available time even more than consumption alone.

Saturday, September 22, 2007

Money and Resources

Despite the disconnection of the amount of money to the amount of resources whose demand and supply are known, the fact that money is used for the purchase of real items results in a correlation between expenditures and resource consumption.

For example, annual U.S. personal expenditures (dollars per person) is the cube of the environmental global ecological footprint (in billion 2003 global hectares), which is a measure of the total human impact on the biosphere and is closely tied to annual energy consumption. Gross World Product (GWP), a measure of the total value (in money) of the world’s products and services, varies linearly with global ecological footprint (increasing by about one-tenth of the increase in footprint).

The supply of energy and the supply of resources available to the biosphere are becoming better known over time. Annually, we are exceeding the renewable resources available to the biosphere by 42 percent, and the fraction is growing by four percent (of the limit, 11 billion global hectares) per year. Fossil fuels, comprising 85 percent of annual world energy production, have fixed supplies (known reserves) that are 99 times our current annual production.

The situation with fossil fuels is a bit more complicated than the total would lead us to believe. We have 42 times our current annual production of oil left (which we count on for 37 percent annual energy production), with 62 years left for natural gas and 232 years left for coal (each accounting for 24 percent of our annual energy production). And the amount of each type of fuel we consume each year is growing.

Thursday, September 20, 2007

Trading Money

One of the most significant deviations from a perfect economy is the buying and selling of money. This effectively breaks the definition of money as a representation of the value of tangible items; it becomes an item of value itself. As a result of this practice, money loses its utility in the functioning of a reality-based economy and the economy mutates into one that is mostly concerned with the trading of money (in the U.S., most if not all of the money currently in the U.S. economy is not backed up by anything real). Anyone who is part of such a system and doubts this should ponder the ubiquitous role of “interest” in personal finance; interest is purely a payment for money.

Before money became a commodity, its amount was tied to resources whose demand and supply were reasonably well known: precious metals. If it were to continue being used in an ideal world, a similar relationship would need to be established (though I would probably substitute energy for gold).

Wednesday, September 19, 2007

Money and Price

In our economies, money is used to represent the value of resources, products, and services. Price – the amount of money we exchange for something – is proportional to the ratio of two amounts that have been measured with the same units. It measures how much of the supply of something that people want to acquire (demand) as a fraction of the supply.

As price goes up, the probability is reduced that supply will go down; that is, people won’t buy as much. In my electrical analogy, price acts like an inductor, resisting changes in current. Slowing the drain on supply provides time for the supply to be increased (while the high price provides an incentive for the producer to do so), thus decreasing the price. Over time, in a perfect economy (“free market”) with unlimited raw resources (people as well as material), prices will tend to stabilize.

A perfect economy is one where everyone has unrestricted access to producers and accurate information about the quality and supply of what they’re buying. Also, the consumption of a product or service will affect the supply or demand of other products or services in predictable ways (if at all), which everyone will be aware of. Since perfect markets (and unlimited resources) do not exist in reality, societies must exercise some control over their economies to approximate ideal behavior; and in the best cases this is done through government (in the worst cases, government creates or contributes to the problems).

Tuesday, September 18, 2007

Dynamic Demand

A combination of freedom and technology has enabled more and more people to create their own “circuits,” significantly influencing the quality and quantity of resources available to everyone (and everything) else. In an electrical analog, the result would be a degradation of the entire system’s performance, and in our ecological system we are seeing similar consequences. These facts are behind my belief that to create an ideal world we must reorganize our societies so that everyone coordinates their behavior with that of everyone else, or at least follows the same standards of interaction with each other and the environment.

One way that grids of electrical power can help their generators and components (such as appliances) stay within their operating limits is to use “dynamic demand.” A similar approach to the management of resources throughout the world economy would require that each “load” (person) have and react appropriately to feedback about the status of the entire system, using the equivalent of “local load control.”

Capitalist systems theoretically use price as a way to monitor and control resource distribution by keeping the ratio of demand to supply of products and services relatively constant. Unfortunately, the correlation between what people buy and the resources used has been corrupted so much as to be almost indiscernible, except in the case of energy, which modulates everything.

Monday, September 17, 2007

Freedom and Operating Range

Providing freedom to move and change one’s self is one tool for enabling people to live within their “operating range,” restricted only to the extent where they might damage others. The success of this tool depends not only on the amount of freedom allowed, quality of rules, and proper enforcement of those rules, but also on the operating range of the entire system. And the range of the system is ultimately dependent on its environment and quality of interaction (impedance matching) with that environment.

Humanity is apart of a larger system, the Earth’s biosphere, which interacts with the non-living Universe to extract resources and deal with its waste. The types of resources available, and our ability to access and process them, determines how much variability in conditions we will have to work with. So that resources will be continuously available, our “waste” must be processed back into resources (or at least not interfere with the production of those resources). Our ability to efficiently “complete the circuit” and the fidelity of that connection equally impacts our system’s range of operation.

Freedom, therefore, is simply one part of an overall strategy to maximize each person’s longevity and quality of life. The other two parts of the strategy are the management of interactions between people and the controlling of inputs and outputs of our population.

Saturday, September 15, 2007

Matching Networks

Since one of the goals of my ideal world is electrically analogous to allowing each component (person) to operate within its preferred range of conditions, “impedance matching” is critical. Think of a filter: Only those signals that are within a component’s operating range can get to it (or through it); everything else is shunted somewhere else. Similarly, the “matching network” enables the component to attract signals it requires to keep operating.

In an economy or a society, pre-conditioning in the form of education enables people to be productive and to interact with others (in our analogy, modify and share signals without damaging other people). A certain minimum amount of resources allows them to at least live (passing signals that others might want or need). Where a people can’t adequately connect with others, they are helped by people who specialize in helping them (or, if they are destructive, reducing their impact); these specialize people are the equivalent of matching networks.

In the analogy, consumption of resources is equivalent to “power,” which is proportional to “resistance.” Like an electrical resistor, some of what we consume is converted to waste (“heat”). For people among us who have a high amount of intrinsic wastefulness, the resources (“current”) that reach them will likely need to be reduced, based on the requirements of the rest of the components. This reduction is also one of the functions of a matching network.

Thursday, September 13, 2007

Product Analog

If we could view the economic equivalent of a spectrum analyzer, where each frequency (or combination of frequencies) corresponds to a product, the power reading could tell us, with some mathematical manipulation, how many there were in whatever part of the system we were connected to. By looking at different parts of the system, we could watch these products move around, get cancelled out, or be created, depending on the circumstances.

The movement of a product would be enabled in one of two ways. One way would be for a component or group of components to change the “impedance” of the path to a location of the “signal” enough to connect to it with minimum degradation; the signal would then be “shared” among all of the components in the path. Another way would be for the components generating the signal to physically move from one part of the system to another, with the “purchaser” providing energy for the move and establishing the appropriate connections to the new part of the system so the signal wasn’t degraded.

Tuesday, September 11, 2007

Operating Limits

The electrical analogy of an economy potentially may provide some insight into how to use an economy to meet my requirements for an ideal world (or at least learn the reasons why it can’t).

Assume that each person is equivalent to an electrical component, and that happiness or wellbeing is proportional to life expectancy (basically, the amount of time available to reach and stay within one’s “comfort zone”). Then the optimum situation, which also maximizes longevity, one of my ideal world’s other goals, is equivalent to an electrical component’s most efficient range of operating conditions.

Each person has something like minimum and maximum power limits (how much energy per unit of time can be handled), temperature limits (randomness in the environment that can be tolerated), and input and output impedances (the range of resistance to signal magnitude and variability that the person can work with among those that supply resources and those that consume the person’s “products”). If these limits are exceeded, then damage results, manifested as health problems.


For charged particles to move through an electrical system, the particles must be allowed to feed back into their source, establishing a “circuit.” If such a path is not provided, or it is breached in any way, significant motion stops, signals can not be created, and the system is effectively non-functional. Electrical engineers call such a condition an “open circuit.” Alternatively, a path may inadvertently be established that bypasses all of the components of the system, leading directly back to the source; this is called a “short circuit” and is equally useless.

Similarly, an economy will cease to function when part of the system disables the flow to the rest of the system (by either becoming incapacitated or too wasteful). If this happens or the system is “disconnected” from its resources, it will become the equivalent of an open circuit. If the extraction of resources requires most of the resources, leaving little or none for the rest of the system, the system becomes the equivalent of a short circuit. The system could also be disabled if part of the system establishes its own link back to the resources, thus bypassing the rest of the system (from the viewpoint of the rest of the system, this is considered a short circuit).

The world economy is well on its way to becoming an open circuit, with a combination of waste and using up of resources (becoming effectively disconnected).

Monday, September 10, 2007

Economies and Electronics

Electrical engineering has many analogs to economics. Often when creating an electrical system, an engineer will seek to create a certain type of signal (pattern of changing energy over time) at a specified place in the system, where the “signal” is analogous to a product or service in economics.

This effort typically involves the generation of charged particles (the generator performing a function analogous to the extraction of natural resources), the manipulation of the path those particles take (using resistors, which are analogous to “distribution”), and the creation of signals (using various components such as inductors and capacitors, which are like factories or service providers that merge resources into various configurations). Signals are passed from one major part of the system to another (producer to customer) through “matching networks” (combinations of resistors, capacitors, and inductors that preferably do not appreciably change the signal, but just compensate for differences between the parts of the system; these are analogous to marketing organizations, including retail stores). Inevitably there are costs, in energy (particles) and quality of signal (each “component” acts as a “customer” to some extent), which must be offset for the desired signal to appear at the right place at the right time.

An ideal capitalist economy can therefore be modeled as system of components that is evolving to optimize the efficiency of signal transmission and modification throughout the system, with each component having maximum influence over the characteristics of the signal at its location.

Saturday, September 8, 2007

Economics of Needs

One of the basic assumptions behind capitalism is that all people inherently seek to maximize their economic power (wealth). In capitalism, the goal of “the market” is to efficiently enable the creation and exchange of wealth, which is manifested as labor or capital (material resources). Translate “wealth” into “the ability to serve one’s needs” and this economic system can be seen as a cultural tool for matching people who want to give something (and have something to give) with those who want to get something (and have something else to give in return).

The “creation” of wealth occurs when someone wants something, but has nothing the person who has it would want in return. There is an incentive for either locating more resources (outside of the system shared by the two people) or reconfiguring existing resources (“adding value”) so that they appear to be something different or can be used in a different way. The ability to create wealth can itself be considered a type of resource to be traded, resulting in a need to create demand (cause people to want something new) that itself can be traded.

It is easy to see how the trade of both supply and demand creation capabilities can drive the exponential growth of an economy. Where natural resources are used, it will be accompanied by an exponential growth in consumption, the principal cause of the current resource crisis (another being the undervaluing of waste as a cost).

Thursday, September 6, 2007

Matching Needs

Isolated groups that find ways (preferably institutional) to match people who can serve each other’s needs could be expected to be more content, on average, than those that are unsuccessful. It should be noted that violence would not necessarily disappear in successful groups; it would just reach a level that everyone considers acceptable. Also, if environmental conditions caused an increase in stress, the successful group would need to be able to adapt.

Interacting groups would be forced to find new ways that include everyone as part of a new group. The world is currently experiencing the ultimate version of this, as all groups are drawn into the creation of a final, global community. The success of this effort will literally determine the future of our entire species.

Meanwhile, the environmental changes that have accompanied the merging of humanity, coupled with the depletion of critical resources, threaten to tear the world apart again, introducing epic stresses on the entire population that could lead to our complete demise. It is therefore critical that any solutions to maximizing happiness (and conversely, minimizing stress) be flexible enough to apply in any group, making the disintegration (if we are unsuccessful in avoiding it) as painless as possible.

Wednesday, September 5, 2007

Balancing Power

The reigning in of power in my vision of an ideal world is not likely to involve the arbitrary and forceful distribution of wealth evenly among all of the world’s people. The goal of maximizing everyone’s longevity and wellbeing is something we would all be working toward voluntarily, which would hopefully reduce the net amount of force used.

There is a large part of the population (perhaps as much as a third) that is primarily motivated by accumulation of personal power, which wealth represents. There is also, fortunately for them, another part of the population which prefers to be dominated (ideally, an equal fraction). Matching these two groups of people might be a good strategy for keeping the power seekers from attempting to force their will on the remaining fraction of the population that neither wants increased personal power nor wants someone else’s imposed on them. For those power seekers who are not content with controlling those who want to be controlled, defenses (which might, admittedly, involve force) would need to be erected by society to limit their power over the rest of the population. Equivalently, if there are more people who want to be dominated than who are willing to dominate them, society will need to at least minimally take care of them.

The resource crisis imposes an additional restriction on the power seekers. With Earth’s natural systems breaking down because of too much consumption and its attendant waste, the association of wealth with accumulation of material goods must be challenged if not broken, which in the transition period will likely be interpreted as a reducing of power. We are to some extent already seeing this, with environmentalists being portrayed as closet socialists.

Tuesday, September 4, 2007

Limiting Small Groups

For my purpose of discussing the requirements and characteristics of an ideal world, the putative global dominance group is an example of a small group (in this case, about 200 members) that should not acquire significant power that can be used in the service of its own arbitrary objectives (especially the subjugation of other people).

A related example is the “military-industrial complex” famously warned about by President Eisenhower in his farewell address. The institutionalization of weapons manufacturing (as opposed to ad hoc efforts) has led to the promotion of war as an economic necessity. A similar situation has developed with regard to for-profit health care, where the existence of multinational corporations depends on a fraction of the population being sick (or at least believing it is).

While artificial life may be a few years away, the U.S. has already created a legally new form of life: the corporation. Corporations in this country, which enjoy tremendous economic power, are now treated as persons. Meanwhile, they remain committed to the express growth and concentration of power that benefits only their stockholders (and now their survival as a “person”), which is the exact opposite of maximizing the welfare of everyone.

In an ideal world, where the members of these groups signed on to the goals of maximizing the longevity and welfare of our species and all of its members, it is unlikely that such groups would maintain their current forms. As a bare minimum, their growth potential, in power and membership, would be severely limited.

Monday, September 3, 2007

Global Dominance Group

In The Global Dominance Group: 9/11 Pre-Warnings & Election Irregularities in Context, sociologist Peter Philips (who is also director of Project Censored) and his coauthors make a well documented and thoroughly researched case that:

“The leadership class in the US is now dominated by a neo-conservative group of people with the shared goal of asserting US military power worldwide. This global dominance group, in cooperation with major military contractors, has become a powerful force in world military unilateralism and US political processes.”

According to Philips, et al, the global dominance group (GDG) is a subset of the “higher circle power elites” (HCPE), who are “a segment of the American upper class and are the principal decision-makers in society.” The GDG’s most prominent members are the president and vice president of the United States.

The ultimate goal of the GDG is summarized in a quote by President Eisenhower’s vice president, Henry Wallace:

“…To capture political power so that, using the power of the state and the power of the market simultaneously, they may keep the common man in eternal subjection.”

It is tempting to dismiss the GDG as a classic conspiracy theory. Typical such theories are limited in facts, explanatory power, and verifiability. The GDG appears to be more of a traditional theory, offering a plausible explanatory connection between easily checked facts that has predictive value. As a bare minimum (and this is my favorite part), it exposes interesting information and apparent relationships that need to be explained.

Saturday, September 1, 2007

Imminent Threat

For over a year, evidence has been mounting that the leader of the world’s remaining superpower, the United States, is planning an attack that might include the use of nuclear weapons. Ironically, the goal of such an attack would be to deny the target country – Iran – access to nuclear technology. Observers fear that attempts by Iran to influence the future of Iraq may be used as part of a pretext for drawing it into the ongoing Iraq war. Complicating the situation is Iran’s strategic alliance with China and Russia, two nuclear-armed nations, in opposition to U.S. attempts to influence Central Asia, specifically the U.S. plan to deploy a missile defense shield over Eastern Europe. These events contribute to the threat of a third world war that could involve a nuclear exchange, and must therefore be watched very carefully.

In my ideal world, no nation or group would be allowed to gain enough power to pose such a threat. Such a policy would fly in the face with the popular yet incorrect belief that “might makes right.” If everyone’s agreed definition of “right” were as I define it (that which maximizes the longevity and welfare of our entire species) then all people would be working toward a common goal that would not include the maximizing of power by any individual or group.