A mighty debate has emerged in the corridors of Z block, where I have an office at QUT. As you might expect, I was the instigator of this debate. It all started innocently enough, when I proposed that we examine an article that suggests people do not know their own tastes and preferences (you can find a version of it here http://www.bos.frb.org/economic/wp/wp2005/wp0510.pdf).
If we do no know whether something is good or bad, and simply use our immediate environment for clues, where does our free will fit in? And does the concept even exist?
It is a hard thing to question the idea of free will, and that is probably because there is no agreement on a specific definition. I will try and narrow this down. The definition must certainly cover the notion that each individual is responsible for their own actions, as they are an expression of their free will. This enables us to differentiate actions as the result of personal will as opposed to the will of others. It must also entail the idea of choice. That the actions we choose to take were not set, and that we faced opportunities to exercise our free will to determine which choice to make. Free will must therefore be a necessary precondition for any personal responsibility.
My debate in the corridors started because I suggested that of course free will cannot exist, because free will itself must have a cause. An idea cannot come from nowhere. And if it could, why do we pursue scientific endeavour? If one thing can come from nowhere, what is to stop many other physical occurrences coming from nowhere? This lead nicely into the idea of determinism, which put simply, says that every cause has a cause. So if free will causes my actions, then something must cause my free will. In the article we examined, this free will was caused by the suggestions of the author during his experiments.
I might take this a step further. Recent experiments have shown that decisions that might have previously bee regarded as free will, can be predicted up to 10 seconds before they are made by scanning unconscious brain activity (see http://www.physorg.com/news127395619.html). So in that period between the prediction of the choice, does the participant have free will to change their decision? I suggest not. If you have seen any of Derren Brown shows, this type of control by the subconscious seems all powerful (you can read about him here http://www.derrenbrown.co.uk/ or check youtube for some interesting videos).
So if our decisions are caused by subconscious environmental cues, and are made before we even know it, where does this leave free will and personal responsibility? How can we convict a criminal for his actions when they are determined solely by his environment (and genes of course)? To turn this conundrum around, how would we convict an alternative criminal whose free will appears from nowhere? His defence would be that my free will just appeared in my brain and made me do it – it was beyond my control. So some level of causality is required, although my brain gets tired thinking about these issues. (maybe have a read of http://plato.stanford.edu/entries/freewill/)
These are some interesting issues, and point to the heart of scientific endeavour and our understanding of humanity. What are your thoughts? How would you define free will? And do you believe every cause has a cause?
Tuesday, August 19, 2008
Wednesday, August 13, 2008
Externalities v irrationality
I would like raise an issue that has been rattling around my mind for many years now. After spending time travelling to various countries around the world, trends regarding the attitude of countries to personal and community responsibility have begun to emerge. For example, in Canada ski resorts bomb for avalanches outside the skiable terrain and search these off-piste areas at the end of each day. In Austria, unless there is a danger of avalanche on-piste it is every man for himself in other areas. You find similar things around the cities. In Vancouver I noticed people cross the street wherever and whenever suits. In Brisbane you get fined for jaywalking. I’m sure you can think of many other ways that some governments choose to protect individuals from themselves, but fail to protect individuals from the actions of others.
An economist would take the stance that role of government is to protect property rights, and in particular, to rectify the externalities that occur when one persons actions incur costs on another. In all other ways, individuals should be able to rationally choose for themselves the amount of risk they are willing to take. Let’s take Australian smoking regulations as an example. The first point of call for governments was to protect individuals from themselves by requiring warning labels on packaging. It was not until very recently that governments stepped in to protect non-smokers from smokers in many public buildings with indoor smoking laws.
Another example is the regulation of bicycle helmets (which is unique to Australia). Governments seem so keen to protect cyclists from themselves but fail to provide any road space for cyclists, nor training of the appropriate treatment of cyclist by drivers in the licence test, to protect them from the actions of others (or maybe that’s why we need helmets).
While I’m on to the cycling thing, I also seem to choke all the way to work each day from the exhaust of the motoring public. Pollution of this nature is the classic example of an externality in economics. It’s great that I have a helmet to protect me from falling, but the actions of others are costing me my lungs! Fair enough, I drive too, but since I bear a cost from ‘road pollution’ I would be happy to bear the cost of strict pollution regulation. Remember, I should be able to act in any way I choose as long as it does not impose costs on others. I have no right drive if that is the case.
I know some of you are thinking that the helmet laws and smoking laws are there to save the community incurring the health care costs, but you'll see from my health care post that such preventative actions lead to increased rather than decreased health care costs. The main message here is that root of these issues on the accepted scope of the legal term ‘duty of care’. In some countries, the government is seen to have an overly tight duty of care to the public, while in others there is much more personal duty of care.
So what is the reason for such frustrations? Simply, it offends me that an adult member of society cannot take responsibility for their own actions, while at the same time is in a position of bearing the costs of the actions of others. Also, it worries me that we are breeding a society that bears no personal responsibility, and has legal recourse to blame others. We laugh sometimes at the outcomes of court cases in the US, but don’t think we are immune from such stupidity. Imagine a society where I could governments take responsibility for individual stupidity. Where would it end? I agree that governments should make an effort to create a safe society, but they should not take responsibility away from the individual. They should protect us from others and let us take the consequences of our own actions.
Any thoughts, or interesting examples that I have missed?
An economist would take the stance that role of government is to protect property rights, and in particular, to rectify the externalities that occur when one persons actions incur costs on another. In all other ways, individuals should be able to rationally choose for themselves the amount of risk they are willing to take. Let’s take Australian smoking regulations as an example. The first point of call for governments was to protect individuals from themselves by requiring warning labels on packaging. It was not until very recently that governments stepped in to protect non-smokers from smokers in many public buildings with indoor smoking laws.
Another example is the regulation of bicycle helmets (which is unique to Australia). Governments seem so keen to protect cyclists from themselves but fail to provide any road space for cyclists, nor training of the appropriate treatment of cyclist by drivers in the licence test, to protect them from the actions of others (or maybe that’s why we need helmets).
While I’m on to the cycling thing, I also seem to choke all the way to work each day from the exhaust of the motoring public. Pollution of this nature is the classic example of an externality in economics. It’s great that I have a helmet to protect me from falling, but the actions of others are costing me my lungs! Fair enough, I drive too, but since I bear a cost from ‘road pollution’ I would be happy to bear the cost of strict pollution regulation. Remember, I should be able to act in any way I choose as long as it does not impose costs on others. I have no right drive if that is the case.
I know some of you are thinking that the helmet laws and smoking laws are there to save the community incurring the health care costs, but you'll see from my health care post that such preventative actions lead to increased rather than decreased health care costs. The main message here is that root of these issues on the accepted scope of the legal term ‘duty of care’. In some countries, the government is seen to have an overly tight duty of care to the public, while in others there is much more personal duty of care.
So what is the reason for such frustrations? Simply, it offends me that an adult member of society cannot take responsibility for their own actions, while at the same time is in a position of bearing the costs of the actions of others. Also, it worries me that we are breeding a society that bears no personal responsibility, and has legal recourse to blame others. We laugh sometimes at the outcomes of court cases in the US, but don’t think we are immune from such stupidity. Imagine a society where I could governments take responsibility for individual stupidity. Where would it end? I agree that governments should make an effort to create a safe society, but they should not take responsibility away from the individual. They should protect us from others and let us take the consequences of our own actions.
Any thoughts, or interesting examples that I have missed?
Sunday, August 10, 2008
An effective approach to environmental issues
Those regular readers (Dan I’m thinking of you here) might get the impression I think we should do nothing for the environment, since ‘the system’ will just take over and our actions will be rendered either useless, or at worse, counterproductive. But there are some things I believe are effective, and should be doing now.
For starters, my previous blogs have made clear that without physical constraints resource consumption will continue at the maximum pace allowable by current technology. My ‘solution’ is to apply artificial physical constraints in some way before the true limits of the national or global resources are reached. The effect of such limits will be identical to when true physical limits will be reached – resource prices will rise and labour productivity will wane unless technology proceeds at a pace that more than offsets these price rises. I would expect that a general drop in production, which would appear as an economic recession, but I would also expect changing preferences of society resulting in new consumption habits, and also technology change to ease this burden on the well-being of society. This approach is an example of total supply side constraint, which is the only truly effective way to reduce resource consumption. Demand side constraints we have already seen to be next to useless in decreasing resource consumption (and associated land disturbance, pollution and other environmental woes).
This artificial limit could simply be achieved through traditional conservation – which means ‘fencing off’ some land areas we agree are untouchable. These areas will continue to provide society with those ecosystem services we take for granted but generally overlook since they fall outside the scope of any formal institution. Filtration of air and purification of water through the water cycle does not fall within national borders, nor is ownership of these services likely to exist, but they do have tremendous value to humanity. We should ensure a minimum level of supply of these services to society by taking some land out of the formal economic system, to be designated to the informal supply of ecological services.
In my version of this ‘solution’ (The inverted comma’s are to show that the solution is not without it’s own problems. The social unrest when incomes are going down and resource rich land is lying untouched nearby is one of them) it is not simply a matter of taking some land already untouched an saying this now protected, which has traditionally been the approach with national parks. I would suggest a more integrated approach that at it’s core rests on planning controls. Such controls can govern the extend to which land in employed within existing developed areas, and can actually be used to force rejuvenation of ecologically important areas such as wetlands.
This approach I believe will build robustness into our society in the face of future environmental problems. It will ensure that even if our formal economy suffers as a result resource scarcity, that the quality of life of the people will remain high due to continued supply of a high quality environment. Further, it will ensure space is available for future agricultural opportunities in a world of a new climate.
Even if the economic optimists are right, and resource shortages never pose a serious problem, implementing this type of approach still benefits society greatly by improving environmental conditions at home. And of course in the remaining economic realm of the land, our formal economy can function as it pleases with very little controls.
What do you think of this approach?
For starters, my previous blogs have made clear that without physical constraints resource consumption will continue at the maximum pace allowable by current technology. My ‘solution’ is to apply artificial physical constraints in some way before the true limits of the national or global resources are reached. The effect of such limits will be identical to when true physical limits will be reached – resource prices will rise and labour productivity will wane unless technology proceeds at a pace that more than offsets these price rises. I would expect that a general drop in production, which would appear as an economic recession, but I would also expect changing preferences of society resulting in new consumption habits, and also technology change to ease this burden on the well-being of society. This approach is an example of total supply side constraint, which is the only truly effective way to reduce resource consumption. Demand side constraints we have already seen to be next to useless in decreasing resource consumption (and associated land disturbance, pollution and other environmental woes).
This artificial limit could simply be achieved through traditional conservation – which means ‘fencing off’ some land areas we agree are untouchable. These areas will continue to provide society with those ecosystem services we take for granted but generally overlook since they fall outside the scope of any formal institution. Filtration of air and purification of water through the water cycle does not fall within national borders, nor is ownership of these services likely to exist, but they do have tremendous value to humanity. We should ensure a minimum level of supply of these services to society by taking some land out of the formal economic system, to be designated to the informal supply of ecological services.
In my version of this ‘solution’ (The inverted comma’s are to show that the solution is not without it’s own problems. The social unrest when incomes are going down and resource rich land is lying untouched nearby is one of them) it is not simply a matter of taking some land already untouched an saying this now protected, which has traditionally been the approach with national parks. I would suggest a more integrated approach that at it’s core rests on planning controls. Such controls can govern the extend to which land in employed within existing developed areas, and can actually be used to force rejuvenation of ecologically important areas such as wetlands.
This approach I believe will build robustness into our society in the face of future environmental problems. It will ensure that even if our formal economy suffers as a result resource scarcity, that the quality of life of the people will remain high due to continued supply of a high quality environment. Further, it will ensure space is available for future agricultural opportunities in a world of a new climate.
Even if the economic optimists are right, and resource shortages never pose a serious problem, implementing this type of approach still benefits society greatly by improving environmental conditions at home. And of course in the remaining economic realm of the land, our formal economy can function as it pleases with very little controls.
What do you think of this approach?
Wednesday, August 6, 2008
Recycling part 2
It appears that a little clarification of the effect of recycling is required. First, consumption of the raw resource MAY decrease – but consumption of other resources is likely to increase. This is probably the most important point in the recycling discussion. We can target a particular resource to recycle for what ever reason (it better be a good one), but this necessarily involves the sacrifice of an increased consumption of other resources.
Now to the issues raised by my lovely friends.
The first interesting point raised (thanks Angie) is that we are not recycling goods themselves, simply the packaging or vessel that delivers the good. How can these two things be separated in a physical sense? Without the vessel, the newspaper to deliver the news, or the bottle to deliver the drink, there is no news or drink – since we cannot consume these things without their complementary packaging. Even with the Internet, consuming news requires computing power and a global communications network for the delivery. You can take this to the extreme – cars deliver travel, computers deliver communications and entertainment, food delivers nutrition, clothes deliver warmth and so on. Quite simply, the physical goods we consume to deliver these human desires are the ‘best’ ways we can do it. This type of logic is an extension of Becker’s theory of the household, developed in the 1970’s to explain the way we organise ourselves to maximise the services that generate satisfaction rather than goods themselves (by the way, he won a Nobel prize for his work, and if you want to read some more about it start here).
Moving on.
The graph below shows world aluminium production since 1976, including primary and recycled aluminium, and confirms many of the key principles I espouse. To begin, it appears that the quantity of recycled aluminium is not the major cause of changes in the quantity of primary aluminium production. The fluctuations in the primary production line (pink) are not correlated at all with the recycled production (yellow) line. If we look at the trend between 1983 and 2000, we see that both the quantity of recycled AND the quantity of primary aluminium production is rising.
But of course, you may like to argue that primary production would have risen faster without recycling – and I would argue that recycling actually enabled primary production to be higher than it otherwise would have been. Because time series evidence of one commodity cannot provide evidence either way, we need to resort to some kind of theoretical argument.
The comment was made (again, thanks Angie) that a new equilibrium quantity of new and recycled materials will emerge – this is definitely true. I am not saying that this new equilibrium quantity of new glass is always higher (but it can be). But this new equilibrium almost always mean the total consumption of both new and recycled material be higher than before, and the price of goods made from these materials will be lower. The aluminium graph supports this stance. Total production is higher (and rising very steeply) but unlike this graph, primary production does not need to continue to rise, and this ‘extra’ material can all be sourced by recycling.
Of course there are limits to recycling as well. Not all of this can be sourced from recycling. Many of the goods made from aluminium have quite long lifetimes (think construction materials, car and bike frames and so on), and will not be available to recycle for many years. Thus if we reach this limit, either new production will begin to increase more rapidly, or substitute resources will be found (with their own associated environmental problems).
One point I have tried to make clear is that resources saved are not spared, but only spared from one use to be employed in others. Unless there is some limit (and a physical one will do) the consumption of raw materials will continue to expand. I will save a thorough exposition for another time, but read ‘Jevons paradox and the myth of resource efficiency improvements’ by Polimeni, Mayumi, Giampietro and Alcott, or ‘Why conservation fails’ by Herbert Inhaber.
Many people find this idea hard to grasp. I would like to step through a couple of thought exercises to get this message across. First think back to the movie ‘The Gods must be crazy’. If you don’t know the one, a glass bottle falls from a plane onto the head (if I remember correctly) of an African tribal man. This bottle is found to be quite useful for starting fire, crushing seeds an many other applications, and causes hilarious disruption to the tribe. But the message here is that by reusing the bottle, it enabled the tribe to be more productive, and consume more nuts, berries, and other resources. Without the bottle, their resource consumption would have been lower than what it is with the bottle!
Alternatively you could think of a subsistence farming family in Cambodia. Imagine they have a large harvest and trade some food from a large can of kerosene for their lamps. When it is all used, instead of throwing away the can, they use it to store water for their trip to the local river. So now, because of this reuse of the can, they need to take less trips for their daily water, and have more time to work the land, thus enabling them to produce more, have more surplus, and trade for more kerosene – and the cycle goes on. It is our very innovative and productive uses for materials that cause as increase in consumption of them.
Another comment on the previous post is that a reduction in costs from recycling will not necessarily result in a reduced price of goods, but may be taken as profit. But what then will happen with the profits – they will inevitably be spent on some kind of consumption. This is the rebound effect, and it the reason I believe that recycling will generally lead to increased consumption of other resources. For example, even if recycling resulted in a reduced consumption of a single material/resource, because as a society we are not spending less on that material, we will be spend more on others.
Another thought experiment is probably helpful. Think of two households. One household sees kids in the other household using brand new paper for colouring, and offers some used (on one side) paper for the kids thinking that it will ‘save’ paper. The trade/gift takes place. Now the kids are colouring the back of old tax returns (or something). But has this decreased consumption of paper, or resources as a whole? Each household has the same income as ever, and therefore the ability to consume goods. The money saved by using old paper for the kids colouring is simply going to be spent elsewhere. Not necessarily on paper of course, but on some resource – maybe fuel for the car for a trip to the coast?
This type of flow on effect is why I believe the message that recycling cannot reduce resource consumption in total is so important. When one resource becomes very expensive as natural limits are reached, it stimulates substitution of that resource with another. When many of these limits are reached, total production may begin to fall unless we can use the limited quantity of inputs more efficiently. But if recycling encourages more resource consumption in total, we are simply accelerating our approach to these limits.
What about a ban on recycling then? Would this be more effective? It would drive up the prices of some raw materials, subsequently driving up the price of final consumer goods, which means we would consume less of them. But of course this price rise would encourage substitution towards other cheaper materials. If we banned glass recycling, for example, we might see more plastic bottles and cans.
Maybe we should not get too carried away with our passionate environmental stance until we get to the bottom of things.
Now to the issues raised by my lovely friends.
The first interesting point raised (thanks Angie) is that we are not recycling goods themselves, simply the packaging or vessel that delivers the good. How can these two things be separated in a physical sense? Without the vessel, the newspaper to deliver the news, or the bottle to deliver the drink, there is no news or drink – since we cannot consume these things without their complementary packaging. Even with the Internet, consuming news requires computing power and a global communications network for the delivery. You can take this to the extreme – cars deliver travel, computers deliver communications and entertainment, food delivers nutrition, clothes deliver warmth and so on. Quite simply, the physical goods we consume to deliver these human desires are the ‘best’ ways we can do it. This type of logic is an extension of Becker’s theory of the household, developed in the 1970’s to explain the way we organise ourselves to maximise the services that generate satisfaction rather than goods themselves (by the way, he won a Nobel prize for his work, and if you want to read some more about it start here).
Moving on.
The graph below shows world aluminium production since 1976, including primary and recycled aluminium, and confirms many of the key principles I espouse. To begin, it appears that the quantity of recycled aluminium is not the major cause of changes in the quantity of primary aluminium production. The fluctuations in the primary production line (pink) are not correlated at all with the recycled production (yellow) line. If we look at the trend between 1983 and 2000, we see that both the quantity of recycled AND the quantity of primary aluminium production is rising.
But of course, you may like to argue that primary production would have risen faster without recycling – and I would argue that recycling actually enabled primary production to be higher than it otherwise would have been. Because time series evidence of one commodity cannot provide evidence either way, we need to resort to some kind of theoretical argument.
The comment was made (again, thanks Angie) that a new equilibrium quantity of new and recycled materials will emerge – this is definitely true. I am not saying that this new equilibrium quantity of new glass is always higher (but it can be). But this new equilibrium almost always mean the total consumption of both new and recycled material be higher than before, and the price of goods made from these materials will be lower. The aluminium graph supports this stance. Total production is higher (and rising very steeply) but unlike this graph, primary production does not need to continue to rise, and this ‘extra’ material can all be sourced by recycling.
Of course there are limits to recycling as well. Not all of this can be sourced from recycling. Many of the goods made from aluminium have quite long lifetimes (think construction materials, car and bike frames and so on), and will not be available to recycle for many years. Thus if we reach this limit, either new production will begin to increase more rapidly, or substitute resources will be found (with their own associated environmental problems).
One point I have tried to make clear is that resources saved are not spared, but only spared from one use to be employed in others. Unless there is some limit (and a physical one will do) the consumption of raw materials will continue to expand. I will save a thorough exposition for another time, but read ‘Jevons paradox and the myth of resource efficiency improvements’ by Polimeni, Mayumi, Giampietro and Alcott, or ‘Why conservation fails’ by Herbert Inhaber.
Many people find this idea hard to grasp. I would like to step through a couple of thought exercises to get this message across. First think back to the movie ‘The Gods must be crazy’. If you don’t know the one, a glass bottle falls from a plane onto the head (if I remember correctly) of an African tribal man. This bottle is found to be quite useful for starting fire, crushing seeds an many other applications, and causes hilarious disruption to the tribe. But the message here is that by reusing the bottle, it enabled the tribe to be more productive, and consume more nuts, berries, and other resources. Without the bottle, their resource consumption would have been lower than what it is with the bottle!
Alternatively you could think of a subsistence farming family in Cambodia. Imagine they have a large harvest and trade some food from a large can of kerosene for their lamps. When it is all used, instead of throwing away the can, they use it to store water for their trip to the local river. So now, because of this reuse of the can, they need to take less trips for their daily water, and have more time to work the land, thus enabling them to produce more, have more surplus, and trade for more kerosene – and the cycle goes on. It is our very innovative and productive uses for materials that cause as increase in consumption of them.
Another comment on the previous post is that a reduction in costs from recycling will not necessarily result in a reduced price of goods, but may be taken as profit. But what then will happen with the profits – they will inevitably be spent on some kind of consumption. This is the rebound effect, and it the reason I believe that recycling will generally lead to increased consumption of other resources. For example, even if recycling resulted in a reduced consumption of a single material/resource, because as a society we are not spending less on that material, we will be spend more on others.
Another thought experiment is probably helpful. Think of two households. One household sees kids in the other household using brand new paper for colouring, and offers some used (on one side) paper for the kids thinking that it will ‘save’ paper. The trade/gift takes place. Now the kids are colouring the back of old tax returns (or something). But has this decreased consumption of paper, or resources as a whole? Each household has the same income as ever, and therefore the ability to consume goods. The money saved by using old paper for the kids colouring is simply going to be spent elsewhere. Not necessarily on paper of course, but on some resource – maybe fuel for the car for a trip to the coast?
This type of flow on effect is why I believe the message that recycling cannot reduce resource consumption in total is so important. When one resource becomes very expensive as natural limits are reached, it stimulates substitution of that resource with another. When many of these limits are reached, total production may begin to fall unless we can use the limited quantity of inputs more efficiently. But if recycling encourages more resource consumption in total, we are simply accelerating our approach to these limits.
What about a ban on recycling then? Would this be more effective? It would drive up the prices of some raw materials, subsequently driving up the price of final consumer goods, which means we would consume less of them. But of course this price rise would encourage substitution towards other cheaper materials. If we banned glass recycling, for example, we might see more plastic bottles and cans.
Maybe we should not get too carried away with our passionate environmental stance until we get to the bottom of things.
Recycling not such a great solution
It would be hard to find an environmentalist who does not see recycling as a way to reduce resource consumption, and subsequently improve our natural environment. But there is no clear evidence that the emergence of recycling has reduced resource consumption. In fact, there is a solid theoretical argument that recycling has limited impacts on decreasing consumption of the targeted resource, and is likely to increase consumption of other resources. This alone should not be controversial to economists, but the real question is why we continue to perpetuate the myth. Let’s start digging to the bottom of this mystery.
I’m not really sure how to explain this succinctly, but I will give it a go. It is best to have in mind throughout this explanation a particular material – think glass, paper or aluminium. There are two cases to consider – one in which recycling is subsidised by the government, and one where it begins via market forces.
Imagine that the glass industry realises that it is cheaper to source glass through recycling then from sand mining. If recycling was not an option, glass would be more expensive than what recycling enables it to be. Because glass is cheaper due to recycling, it enables the industry to produce glass products more cheaply, creating a higher demand for these products. Of course, glass is rarely a final product itself, and thinking of bottles here, cheaper glass and products will require more caps, labels, cartons and shipping. Furthermore, because of the access to recycled glass has decreased demand for new glass, the price of new glass may fall, encouraging greater consumption. In all, recycling can reduce the consumption of new resources by a much smaller amount than first thought, and can increase consumption of other resources. In fact Valerie Thomas, in the Journal of Industrial Ecology, shows that second hand goods (the equivalent of recycling) can actually increase the consumption of those goods with large second hand markets.
The second type of recycling, the subsidised variety has similar results. It artificially makes recycled materials cheaper and therefore makes the goods made from both recycled and new materials cheaper – again increasing demand for the resource in question, as well as complementary resources.
So why then, if recycling can at best result is a minor reduction in resource consumption and an increase in consumption of other resources, and at worst result in an increase in consumption of the resource in question as well as others, do we persist in advocating it as an environmental cure all?
I would suggest the reason is simply that environmentalist do not know any better. Also, if you acknowledge that recycling is not effective it leaves very few options remaining that do not involve radical social upheaval. Governments must surely know about the ineffectiveness of recycling, but perpetuate the myth as a way of appearing active on the environmental front.
The most important point to take from this is that recycling may very well be counterproductive. Shouldn’t we at least know if what we are doing is helping or harming the environment?
I’m not really sure how to explain this succinctly, but I will give it a go. It is best to have in mind throughout this explanation a particular material – think glass, paper or aluminium. There are two cases to consider – one in which recycling is subsidised by the government, and one where it begins via market forces.
Imagine that the glass industry realises that it is cheaper to source glass through recycling then from sand mining. If recycling was not an option, glass would be more expensive than what recycling enables it to be. Because glass is cheaper due to recycling, it enables the industry to produce glass products more cheaply, creating a higher demand for these products. Of course, glass is rarely a final product itself, and thinking of bottles here, cheaper glass and products will require more caps, labels, cartons and shipping. Furthermore, because of the access to recycled glass has decreased demand for new glass, the price of new glass may fall, encouraging greater consumption. In all, recycling can reduce the consumption of new resources by a much smaller amount than first thought, and can increase consumption of other resources. In fact Valerie Thomas, in the Journal of Industrial Ecology, shows that second hand goods (the equivalent of recycling) can actually increase the consumption of those goods with large second hand markets.
The second type of recycling, the subsidised variety has similar results. It artificially makes recycled materials cheaper and therefore makes the goods made from both recycled and new materials cheaper – again increasing demand for the resource in question, as well as complementary resources.
So why then, if recycling can at best result is a minor reduction in resource consumption and an increase in consumption of other resources, and at worst result in an increase in consumption of the resource in question as well as others, do we persist in advocating it as an environmental cure all?
I would suggest the reason is simply that environmentalist do not know any better. Also, if you acknowledge that recycling is not effective it leaves very few options remaining that do not involve radical social upheaval. Governments must surely know about the ineffectiveness of recycling, but perpetuate the myth as a way of appearing active on the environmental front.
The most important point to take from this is that recycling may very well be counterproductive. Shouldn’t we at least know if what we are doing is helping or harming the environment?
Monday, August 4, 2008
Is it enough that it just is?
I have always been inquisitive - the one who asks the question ‘but why?’ more times than could be answered to any satisfaction. More recently, my concern for the precarious state of our natural environment lead me to associate with many other concerned individuals and organisations. They all promoted an agenda to suit their specific problem – the old growth forests, the wild rivers, oil depletion, climate change – but forgot to first ask the question ‘but why?’ Many of the so-called solutions were ill conceived and down right counter-productive. So began my search for the root cause of environmental problems as a means to discovering the real potential environmental remedies.
Along the way there were many stumbling blocks, probably the main one being the acceptance of the difference between normative and positive analysis. What most of us see in our daily lives is normative, that is, we seek to tread a path to what should be. Positive analysis on the other hand simply describes the way things are, without prescribing the value judgment necessary to determine the ‘should be’ of normative analysis. It appeared that almost all environmentalists had their own independent versions of what ‘should be’ without first understanding ‘what is’, and therefore where subject to classic mistakes of logic.
The shear impossibility of the task of determining the ‘should be’ on a societal level lead me to a more positivist arena, where through scientific rigour, causal links in the real world could be investigated (for those interested look into Arrow's impossibility theorem).
At this point I have reached an ideological standoff. Quite simply I now believe that ‘what is’ is always exactly what ‘should be’. A Darwinian view proclaims that all causes themselves have a cause, and as such, there is a reason for the present state of the universe. But reason or cause does not imply purpose, which is truly the issue at hand. In the environmental scenarios I have witnessed, the question of purpose is never contested, and often is never even given. ‘Save the old growth forests’ is printed in a banner in my neighbourhood, but I must ask why? At the risk of getting off track, I will follow the logic of a ‘why’ inquiry into the subject of old growth forests.
“Why do you want to save the old growth forests?”
“Because they are a habitat for wild species, they are rare, and they are beautiful”
“Why do you want to save wild species, and why are these things beautiful?”
“Because they are part of the natural ecosystem”
“Why do we need to save the ecosystem?”
“Because it supports life in Earth”
“Why do we want life on Earth?”
“Because….”
And so on.
To truly ask why, you must dig until you reach a point of sum ultimate point, which is – what is the purpose of anything? And now I have come to the realisation that rather than invent some purpose for which I will believe the universe exists, I will accept that there is no point, that it just is. Unless you specify what you believe the ultimate purpose of existence may be, then you cannot advance the opinion that one thing is good, while another is bad.
To bring this discussion back into line with the environmental theme presented earlier, I would say to those in the environmental community to please ask themselves the ‘why’ question. Unless they can clearly express the ultimate purpose of the universe, then they cannot simply announce to the world that what they believe is good, and what others are doing is bad. Also, since it is impossible to determine the preferences of society as a whole, we are still left without a social benchmark upon which to measure whether the progress we make as a society is a step in the right, or the wrong direction.
For those who feel like this is all a bit bleak, that there is no purpose to the universe, be assured that this does not imply you cannot strive towards some purpose in your own lives. By accepting the universe as is, you can have the freedom to determine you own purpose. But if my view is too simple, dull and downright pessimistic I would advise you to take heart that just because there is no purpose to it, does not make the world any less an intriguing, complex and glorious place than it was. To quote Richard Dawkins – “science is the poetry of nature”, although it only seeks to explain ‘what is’ does not make it any less wonderful.
Along the way there were many stumbling blocks, probably the main one being the acceptance of the difference between normative and positive analysis. What most of us see in our daily lives is normative, that is, we seek to tread a path to what should be. Positive analysis on the other hand simply describes the way things are, without prescribing the value judgment necessary to determine the ‘should be’ of normative analysis. It appeared that almost all environmentalists had their own independent versions of what ‘should be’ without first understanding ‘what is’, and therefore where subject to classic mistakes of logic.
The shear impossibility of the task of determining the ‘should be’ on a societal level lead me to a more positivist arena, where through scientific rigour, causal links in the real world could be investigated (for those interested look into Arrow's impossibility theorem).
At this point I have reached an ideological standoff. Quite simply I now believe that ‘what is’ is always exactly what ‘should be’. A Darwinian view proclaims that all causes themselves have a cause, and as such, there is a reason for the present state of the universe. But reason or cause does not imply purpose, which is truly the issue at hand. In the environmental scenarios I have witnessed, the question of purpose is never contested, and often is never even given. ‘Save the old growth forests’ is printed in a banner in my neighbourhood, but I must ask why? At the risk of getting off track, I will follow the logic of a ‘why’ inquiry into the subject of old growth forests.
“Why do you want to save the old growth forests?”
“Because they are a habitat for wild species, they are rare, and they are beautiful”
“Why do you want to save wild species, and why are these things beautiful?”
“Because they are part of the natural ecosystem”
“Why do we need to save the ecosystem?”
“Because it supports life in Earth”
“Why do we want life on Earth?”
“Because….”
And so on.
To truly ask why, you must dig until you reach a point of sum ultimate point, which is – what is the purpose of anything? And now I have come to the realisation that rather than invent some purpose for which I will believe the universe exists, I will accept that there is no point, that it just is. Unless you specify what you believe the ultimate purpose of existence may be, then you cannot advance the opinion that one thing is good, while another is bad.
To bring this discussion back into line with the environmental theme presented earlier, I would say to those in the environmental community to please ask themselves the ‘why’ question. Unless they can clearly express the ultimate purpose of the universe, then they cannot simply announce to the world that what they believe is good, and what others are doing is bad. Also, since it is impossible to determine the preferences of society as a whole, we are still left without a social benchmark upon which to measure whether the progress we make as a society is a step in the right, or the wrong direction.
For those who feel like this is all a bit bleak, that there is no purpose to the universe, be assured that this does not imply you cannot strive towards some purpose in your own lives. By accepting the universe as is, you can have the freedom to determine you own purpose. But if my view is too simple, dull and downright pessimistic I would advise you to take heart that just because there is no purpose to it, does not make the world any less an intriguing, complex and glorious place than it was. To quote Richard Dawkins – “science is the poetry of nature”, although it only seeks to explain ‘what is’ does not make it any less wonderful.
Thursday, July 31, 2008
Illusions of waste – a distraction for the masses
The oft-repeated mantra of the ‘ecological modernist’ is that we are wasteful. They see the rise of disposable cups, packaging, and plastic bags as a sign of that wastefulness. Further, in terms of energy and climate change, they see traffic jams full of cars with only the driver inside, and lights on in buildings with no occupants in the city all night – a society squandering our resources. If only we could stop all this wastefulness and build a utopia.
I will try and persuade you that the opposite is true. We are no more wasteful than we ever have been. In fact I will take it even further, by trying to persuade you that there is no solid principle upon which to even propose a concept of waste. Shall we proceed?
It is probably easier to start with the example of money. Quite regularly I hear people say “don’t waste your money on that.” What do they mean here? If it is something you would like, however silly the reason for that is, and you are willing to sacrifice any other consumption the money would have allowed you, then it cannot be waste. Think about it. Isn’t something wasteful to one person but not another? The relative and opinionated view of waste is highlighted in the caricature below.
First, we can take a look at rubbish. Isn’t rubbish simply something that is past its useful or valuable life? Is rubbish waste? If we adopt the definition that when an object is past its useful life it is rubbish, and also waste, then everything we have ever, and will ever produce as a society is ultimately waste. Nothing lasts forever, so even our houses, buildings and streets are waste. In fact, if it wasn’t for a short period of usefulness to humans at the time, all humanities great historical feats are waste – the pyramids, the Parthenon, all waste. It’s just that what we see daily as waste are those things produced for very short periods of use. Packaging has a use. The type of packing we see from the supermarket preserves food, enables easier transport and informs people of the contents. But there was plenty of other packaging along the way that we don’t see, which equally served a useful purpose. We just happen to see much of it at the end of its useful/valuable life.
Why then does it appear that there is more waste then ever? Simply because there is more production now than ever in the past. This enables many materials to be cheaper, and used for purposes with less value - but these purposes are generally for some positively-valued use.
This leaves three options:
Thoughts anyone?
I will try and persuade you that the opposite is true. We are no more wasteful than we ever have been. In fact I will take it even further, by trying to persuade you that there is no solid principle upon which to even propose a concept of waste. Shall we proceed?
It is probably easier to start with the example of money. Quite regularly I hear people say “don’t waste your money on that.” What do they mean here? If it is something you would like, however silly the reason for that is, and you are willing to sacrifice any other consumption the money would have allowed you, then it cannot be waste. Think about it. Isn’t something wasteful to one person but not another? The relative and opinionated view of waste is highlighted in the caricature below.
“The environmentally conscious Prius driver looks at the large 4WD, with no passengers except the driver, sitting in traffic and thinks “what a waste.” The man behind them both on a motorcycle thinks “what a waste for just one person.” Beside him is a cyclist who looks at them all and thinks “what a waste of petrol when you can ride.” The walker on the footpath looks at the road with the 4WD, Prius, motorcyclist and cyclist and thinks “what a waste when you can just walk.” The quiet and thoughtful introvert looks out the window from the top storey of their house and thinks “what a waste – they’re all going to watch motor-racing anyway.” The neighbour across the street looks from the balcony of their small apartment to the thoughtful introvert in the window and thinks “what a waste – that whole house for one person.” Where does it end!”See the confusion? Waste is a relative concept. What one person thinks is waste is clearly not to another person. You can imagine the most frugal individual today looks like the most wasteful one of a century ago. But surely you say, something must be waste – what about rubbish, and all that excess packaging? (Excess – compared to what I might say?)
First, we can take a look at rubbish. Isn’t rubbish simply something that is past its useful or valuable life? Is rubbish waste? If we adopt the definition that when an object is past its useful life it is rubbish, and also waste, then everything we have ever, and will ever produce as a society is ultimately waste. Nothing lasts forever, so even our houses, buildings and streets are waste. In fact, if it wasn’t for a short period of usefulness to humans at the time, all humanities great historical feats are waste – the pyramids, the Parthenon, all waste. It’s just that what we see daily as waste are those things produced for very short periods of use. Packaging has a use. The type of packing we see from the supermarket preserves food, enables easier transport and informs people of the contents. But there was plenty of other packaging along the way that we don’t see, which equally served a useful purpose. We just happen to see much of it at the end of its useful/valuable life.
Why then does it appear that there is more waste then ever? Simply because there is more production now than ever in the past. This enables many materials to be cheaper, and used for purposes with less value - but these purposes are generally for some positively-valued use.
This leaves three options:
- Believe that waste is a useful concept – to do so you must determine an arbitrary but absolute baseline from which the relative concept of waste is determined.
- Believe waste is a concept but not particularly useful - that it describes a good at the end of its useful life, in which case everything humanity has ever produced is waste, or
- Believe the concept of waste has no underlying foundation and is therefore useless.
Thoughts anyone?
Monday, July 28, 2008
Health care - an economist environmentalist perspective.
There are a number of issues I want to publicise on this blog, all of which challenge the economic and social orthodoxy that so rarely provides causal explanations and the ability to make even simple predictions. Today, I want to explain the predicament of public health care with two simple theories, both of which have somehow escaped much focus from mainstream economists.
It is best to start with what one would expect the health care current situation to be, and where the fingers are currently pointed. With the rapid technological advances in medical treatments, and the rapid reduction in price of almost all medical treatments including preventative measures, one would expect a healthier society and lower costs for running the healthcare system. But instead the system is in a funding crisis (as is the case in many countries), and people are seeking medical treatments more than ever. The finger is being pointed from some corners at the bureaucracy, for inefficiently providing services, and from other corners, simply to a shortage of funding. But would improving the efficiency of the system and the funding relieve the current pressures? I suggest not.
It is probably time to introduce the first theory to explain why I say this. It is known as Baumol’s disease, and describes how costs of production rise due to improvements in labour productivity in other sectors of the economy. In his classic example, William Baumol shows how improvements in labour productivity in other sectors of the economy (for example in farming, mining and manufacturing) lead to increased costs for playing a string quartet. Since individuals have a choice of whether to supply labour in the industries with increasing wages due to productivity improvements, or to the string quartet, the salary of the musicians must rise to attract them away from the other industries. If we replace the musicians with nurses, doctors and hospital administrators, we can see that it is our improved productivity in other areas that is causing this rise is health costs (as well as most other services). One might argue that productivity is improving in health professions as well, but a nurse making their rounds still needs as much time as ever, even if they are checking more medical vital signs.
The second theory that helps to explain the situation in health care is a broad interpretation of Jevons paradox. The theory explains that the efficient use of a resource does not diminish its consumption, but in fact increases it. The theory was developed in response to improvements in the efficiency of the coal fired steam engine, but it nevertheless applies to more broad cases. To begin this intuitive explanation one fact must be made clear – almost half of the medical costs a person incurs in their lifetime are incurred in the last thirty days of their life. With a little thought it is clear to see why this is the case. What has happened is that improvements in medical treatments have enabled us to live longer lives, and because of much of the preventative treatments, we die less suddenly then ever, increasing these 'death postponing' medical costs. Because we can diagnose more problems, we can visit doctor more readily, we treat more medical conditions then ever. Thus, it is because of the very efficiency and effectiveness of medical technology that our demand for it has grown, both during our lives, and in our ‘prolonged death’.
This harsh reality escapes almost every economist looking to improve the health case system. If we continue to improve productivity elsewhere in the economy, health costs will rise, and on top of this, their own technological breakthroughs lead to further demand for medical treatment. An analogy that might be more accessible is the idea of the paperless office. We have had wonderful improvements in the efficient provision of paper, but also elsewhere in the economy to actual produce the documents we wish to print. In all, paper use has risen dramatically, and if not for the reduction in real costs of paper (the opposite case to the labour of medical profesionals) the costs would have also sky-rocketed.
There is no easy way to reduce the health care burden. Actually, burden is not the right word, for health care itself supports much of society. Without it, there would be less of us, less of us in a healthy condition, and less production elsewhere in the economy. Looking in this way, those politicians who believe in productivity and growth might actually want to invest more in health care, due to the flow on benefits. For those who think less growth is the way to go because of environmental concerns, be aware that this goal conflicts with that of improved health spending, and improved health and life expectancy of the people.
What a complex world.
It is best to start with what one would expect the health care current situation to be, and where the fingers are currently pointed. With the rapid technological advances in medical treatments, and the rapid reduction in price of almost all medical treatments including preventative measures, one would expect a healthier society and lower costs for running the healthcare system. But instead the system is in a funding crisis (as is the case in many countries), and people are seeking medical treatments more than ever. The finger is being pointed from some corners at the bureaucracy, for inefficiently providing services, and from other corners, simply to a shortage of funding. But would improving the efficiency of the system and the funding relieve the current pressures? I suggest not.
It is probably time to introduce the first theory to explain why I say this. It is known as Baumol’s disease, and describes how costs of production rise due to improvements in labour productivity in other sectors of the economy. In his classic example, William Baumol shows how improvements in labour productivity in other sectors of the economy (for example in farming, mining and manufacturing) lead to increased costs for playing a string quartet. Since individuals have a choice of whether to supply labour in the industries with increasing wages due to productivity improvements, or to the string quartet, the salary of the musicians must rise to attract them away from the other industries. If we replace the musicians with nurses, doctors and hospital administrators, we can see that it is our improved productivity in other areas that is causing this rise is health costs (as well as most other services). One might argue that productivity is improving in health professions as well, but a nurse making their rounds still needs as much time as ever, even if they are checking more medical vital signs.
The second theory that helps to explain the situation in health care is a broad interpretation of Jevons paradox. The theory explains that the efficient use of a resource does not diminish its consumption, but in fact increases it. The theory was developed in response to improvements in the efficiency of the coal fired steam engine, but it nevertheless applies to more broad cases. To begin this intuitive explanation one fact must be made clear – almost half of the medical costs a person incurs in their lifetime are incurred in the last thirty days of their life. With a little thought it is clear to see why this is the case. What has happened is that improvements in medical treatments have enabled us to live longer lives, and because of much of the preventative treatments, we die less suddenly then ever, increasing these 'death postponing' medical costs. Because we can diagnose more problems, we can visit doctor more readily, we treat more medical conditions then ever. Thus, it is because of the very efficiency and effectiveness of medical technology that our demand for it has grown, both during our lives, and in our ‘prolonged death’.
This harsh reality escapes almost every economist looking to improve the health case system. If we continue to improve productivity elsewhere in the economy, health costs will rise, and on top of this, their own technological breakthroughs lead to further demand for medical treatment. An analogy that might be more accessible is the idea of the paperless office. We have had wonderful improvements in the efficient provision of paper, but also elsewhere in the economy to actual produce the documents we wish to print. In all, paper use has risen dramatically, and if not for the reduction in real costs of paper (the opposite case to the labour of medical profesionals) the costs would have also sky-rocketed.
There is no easy way to reduce the health care burden. Actually, burden is not the right word, for health care itself supports much of society. Without it, there would be less of us, less of us in a healthy condition, and less production elsewhere in the economy. Looking in this way, those politicians who believe in productivity and growth might actually want to invest more in health care, due to the flow on benefits. For those who think less growth is the way to go because of environmental concerns, be aware that this goal conflicts with that of improved health spending, and improved health and life expectancy of the people.
What a complex world.
Wednesday, July 23, 2008
Is energy different from other resources?
In the face of global environmental challenge in the form of climate change, energy generation has become a target for governments and environmentalists alike. If we are not trying to use less of it, we are trying to generate it from other sources. But I often wonder why energy is treated any differently from any other resource. I also worry that a solution to climate change involves other environmental costs that will offset any improvements made. In fact, what scares me most is that we will find a clean and very cheap energy source – what the environmentalist may prize, I view as catastrophe wating to happen. Let me explain.
Quite simply, I see energy as a resource just like any other physical resource such as iron or timber. The reason is simple, use of these resources reduces labour effort required to produce goods. Also, they need to be combined with other resources to have any practical use. For example, a shovel reduces the labour time required to dig a hole. It could be made from timber, iron, steel, or any material. In the same way, a bobcat reduces the time to dig a hole by combining steel, plastic, rubber, and numerous other materials with oil and labour to produce holes. The energy from oil is just another physical requirement.
This leads to my climate change concern. To use less energy for a given purpose, we need to substitute energy for other resources. For example, a more energy efficient light bulb uses much more material and energy in its manufacture to use less during its useful lifetime. My concern then is that is a quest to be energy efficient, our requirements of other materials, and especially highly processed and polluting materials such as aluminium and mercury will drastically rise. The worry is that some materials we develop on our quest for energy efficiency will cause their own environmental disasters.
So what about the cheap and clean energy of the utopian dream? When we picture energy as just another physical resource we can see the problem clearly – this virtually ‘free’ energy is useless alone. It will require combining with other materials to make the machines and gadgets we desire. Furthermore, what is it we actually do with energy? We don’t build friendships and satisfy our spiritual desires. No, we use it for mining, transport, fishing, farming, and all the industrial processes of the economy.
If we are concerned about the environment, one might wish to become less energy efficient, or to have more expensive energy – both have the same effect. But the problem of technological developments is that they are irreversible. Once we know how to do something, we cannot unknow it. However we are finally learning the way our economy and environment interact. If only this knowledge can be put to good use, rather than as an excuse for further economic development.
Quite simply, I see energy as a resource just like any other physical resource such as iron or timber. The reason is simple, use of these resources reduces labour effort required to produce goods. Also, they need to be combined with other resources to have any practical use. For example, a shovel reduces the labour time required to dig a hole. It could be made from timber, iron, steel, or any material. In the same way, a bobcat reduces the time to dig a hole by combining steel, plastic, rubber, and numerous other materials with oil and labour to produce holes. The energy from oil is just another physical requirement.
This leads to my climate change concern. To use less energy for a given purpose, we need to substitute energy for other resources. For example, a more energy efficient light bulb uses much more material and energy in its manufacture to use less during its useful lifetime. My concern then is that is a quest to be energy efficient, our requirements of other materials, and especially highly processed and polluting materials such as aluminium and mercury will drastically rise. The worry is that some materials we develop on our quest for energy efficiency will cause their own environmental disasters.
So what about the cheap and clean energy of the utopian dream? When we picture energy as just another physical resource we can see the problem clearly – this virtually ‘free’ energy is useless alone. It will require combining with other materials to make the machines and gadgets we desire. Furthermore, what is it we actually do with energy? We don’t build friendships and satisfy our spiritual desires. No, we use it for mining, transport, fishing, farming, and all the industrial processes of the economy.
If we are concerned about the environment, one might wish to become less energy efficient, or to have more expensive energy – both have the same effect. But the problem of technological developments is that they are irreversible. Once we know how to do something, we cannot unknow it. However we are finally learning the way our economy and environment interact. If only this knowledge can be put to good use, rather than as an excuse for further economic development.
Wednesday, July 16, 2008
What does the economy produce? Hunger, humans or happiness?
It occurred to me recently that the economic system does not really produce anything. From our individual perspective it appears that many goods and services are produced... but what then? Adam Smith famously said that 'consumption is the sole end and purpose of all production', so everything we produce is subsequently consumed, leaving us with...?
We might think that this makes no sense. We produce goods to consume them - that is the purpose and the point. But what happens then? We consume goods and services and then we supply our labour to produce more goods and services, which are ultimately consumed and so one and so forth.
The economist would say that we produce utility. That is, some kind of happiness or satisfaction in each of us from the act of consumption. But much research suggests that happiness is determined internally once some basic human needs are met. So if all this production and consumption is not producing happiness, what is it producing?
From a physical perspective, some ecological economists have suggested that all the functions within an economy are interdependent. We think the production as a one-way street, but the consumption of food, housing and entertainment is necessary for the supply of labour, which goes back into production. It could be imagined that there is no real production in the economy. It is simply a system that enables humans to fulfil their basic biological desire to reproduce and support a growing population. We could then say the economy produces people, but that again would be arbitrarily confining the system, since as suggested earlier, people are a functional part of the whole.
Maybe this is a strange way to view the world. A system without purpose that produces nothing. But in fact, Darwin would suggest that is a good way to describe it. That is how he described biological systems - a system based on variation, inheritance and selection, with no forethought or purpose. We are just animals after all.
Anyway, for those out there who like to blame the political, economic or banking system for the world's ills, and think there must be some alternative, relax. There isn't. Many of the world's problems, from poverty and human rights issues, to environmental issues stem not from our institutional systems, but from greater biological evolutionary systems that blindly created humanity in the first place. Any political or economic system will suffer the same fate.
So please relax and enjoy yourself - because happiness comes from within.
We might think that this makes no sense. We produce goods to consume them - that is the purpose and the point. But what happens then? We consume goods and services and then we supply our labour to produce more goods and services, which are ultimately consumed and so one and so forth.
The economist would say that we produce utility. That is, some kind of happiness or satisfaction in each of us from the act of consumption. But much research suggests that happiness is determined internally once some basic human needs are met. So if all this production and consumption is not producing happiness, what is it producing?
From a physical perspective, some ecological economists have suggested that all the functions within an economy are interdependent. We think the production as a one-way street, but the consumption of food, housing and entertainment is necessary for the supply of labour, which goes back into production. It could be imagined that there is no real production in the economy. It is simply a system that enables humans to fulfil their basic biological desire to reproduce and support a growing population. We could then say the economy produces people, but that again would be arbitrarily confining the system, since as suggested earlier, people are a functional part of the whole.
Maybe this is a strange way to view the world. A system without purpose that produces nothing. But in fact, Darwin would suggest that is a good way to describe it. That is how he described biological systems - a system based on variation, inheritance and selection, with no forethought or purpose. We are just animals after all.
Anyway, for those out there who like to blame the political, economic or banking system for the world's ills, and think there must be some alternative, relax. There isn't. Many of the world's problems, from poverty and human rights issues, to environmental issues stem not from our institutional systems, but from greater biological evolutionary systems that blindly created humanity in the first place. Any political or economic system will suffer the same fate.
So please relax and enjoy yourself - because happiness comes from within.
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