The Economics of Scarcity

[Ethan D'Onofrio]

Hello all,

I'm new to this group and in all honesty joined as much for the discussion with thoughtful, discerning individuals as the concept itself. I hope to share some ideas and insight and gain some as well. Challenging one another is what makes us grow so I hope you'll both challenge me and welcome the challenges I present. So I'll get right to it. I watched the Rob Hokpins video and spent some time checking out a good portion of this sight. While I completely agree with the fact that we are going to need to change our lifestyles in the face of peak oil I have a concern I'd love to hear responses to. As I understand it, this Transition is proposing we shift our culture as it exists today to one that is not reliant on fossil fuels but instead uses sustainable energy, local food sources, etc. to make for a more "resilient" community. However, as long as we still operate within a profit based monetary system there will always be scarcity, for scarcity (or perceived scarcity) is the single best friend of profit. So what's to motivate any company, be it a clean energy company, a local farm, etc. to actually try to make human basic needs (housing, energy, food, water) abundant? History has shown that the opposite has always been true in a profit system; the bottom line is, no pun intended, the bottom line. Profit ALWAYS comes before social concern in a profit system, ALWAYS. Hence Problems & Scarcity = Profit. It seems that while Transition is working for a great cause, it is actually treating a symptom, not the root problem. Is this acceptable and is every member of this group ok with that? Or am I missing something entirely? I'd love to hear feedback.

- Ethan

[Ethan D'Onofrio]

Walter, thank you for your response, I very much appreciate your thoughts. I'm totally on board with what you've stated. My wife and I have our own organic garden and chickens, get most of our veggies from Dandelion Deliveries and eat almost exclusively organic. But here's the rub - it's WAY more expensive. For you and me that may be acceptable, but what about the people shopping at WalMart because they literally have no choice. This of course brings up a totally different discussion having to do with consumer driven change (I believe WalMart is actually carrying organics now, due to demand) but again, it only works if it's profitable - WalMart isn't providing organics because "they want to do the right thing". Likewise, if your farm were to stop being profitable (one way or another, I understand co-op ideas and the like), it ceases to exist. So we're still back at square one which is, in our current monetary system, the cheapest way of doing things will almost always prevail because many people simply can't afford to "do the right thing". Furthermore, cheap nearly always means inherently unsustainable and wasteful. The problem is, as you kind of touched on regarding subsidies, the monetarily affordable solution is quite often not the REAL affordable solution, at least in terms of health, sustainability, etc. So how do we help the people who can't afford what we seek to provide? Are we simply saying this transition is for those who can financially afford it? I'm being facetious here but you get my point. I'm just weary of providing for "some" but not all. Everyone deserves healthy food, clean water, shelter, energy and the like - EVERYONE. And we most certainly have the technology and resources to provide just that, but as I see it, as long as the abundance of scarcity persists, it will always be profitable to ensure not everyone is provided for adequately. The more there is of something, the less it's worth. Thoughts?

[Heather K]

Hi Ethan! I appreciate the perspective you are coming from, seeing that a lot of what our culture is doing is responding to symptoms, rather than what I would describe as 'the story or culture of oppression' , that is so global/corporately huge, many of us don't see it....although the veils do seem to be becoming more transparent now.

I appreciate your phrase: ““Everyone deserves healthy food, clean water, shelter, energy and the like - EVERYONE. And we most certainly have the technology and resources to provide just that, but as I see it, as long as the abundance of scarcity persists, it will always be profitable to ensure not everyone is provided for adequately.”
Do you have any thoughts on the local systems of alternative currency, that is not based on having to 'have money', before beginning to trade or meet our needs or share our gifts? There is a successful system, called fourthcornerexhange.com in our community & beyond, although it is a privately owned company, not a community or coop owned one. I'm a member, and I have had positive experiences & also learned about maintaining healthy boundaries & choices, in my exchanges.
I'm glad to see your discussion under the 'Economics' category, as for a long time we had only one!

I am blessed to have lived much of my twenties with very little resources, and to experience the abundance of both the earth & human spirit during those times! It is possible to experience the fullness of life's abundance even when one has no cash. Sometimes it seems the current economic system is fun for those who like to 'keep score' and have big numbers in their accounts....There can be the illusion of security with the big numbers, but it does not last a lifetime nor provide for all our needs.

Now that I'm a 'young elder' with higher numbers in my savings, I am more aware of how as I age, the numbers will go down along with my youthful body & mind's ability to gift & serve.
I sometimes long to experience more often the economy of gifting...where I share fully my gifts, and rejoice in receiving what others gift to me.

I'm glad you've signed on to our TW network, and look forward to working together in community!
Ethan D'Onofrio said:

....... I'm just weary of providing for "some" but not all. Everyone deserves healthy food, clean water, shelter, energy and the like - EVERYONE. And we most certainly have the technology and resources to provide just that, but as I see it, as long as the abundance of scarcity persists, it will always be profitable to ensure not everyone is provided for adequately. The more there is of something, the less it's worth. Thoughts?

[Tom Anderson]

Ethan

I love your optimism about being able to provide for "all." I take that "all" to be the 6.7 billion humans on the planet today. In that case I would disagree with you that we have the technology and resources to accomplish this goal. When a species is as far into overshoot of its environmental carrying capacity as humans currently are it is unlikely that "all" will make it. Further our current technology, although vast and very capable, is almost all based on fossil fuels especially oil. From an engineering perspective it might be possible to transition still but it would require a political will that does not exist and is not likely to in the near future. The climate talks in Copenhagen should leave not doubt about changing the current system. Here you, in my humble opinion, have hit the nail on the head in that the current economic system is profit and extraction driven and not interested in changing while there is still exploiting to be done. If it was just one economic system at fault there might be more hope but it is a global problem. The real problem comes from the fact that the politics in the world are controlled by the economic elite who are deep into the profit system for the most part.

The opportunity of Transition Whatcom to change that global system is zero! Our best hope is to work to change the part of the system in our backyard and if we are lucky our "all" could contain all the people in Whatcom County and we could survive the contraction of overshoot in reasonable style. Even to do that we have our work cut out for us and so I am working to make this happen. This will surly eventually involve local currency and changes in the design of the underlying system along the lines that Walter refers to because without changes we will be just in for repeated cycles of exploitation by the profiteers. Keep asking such fun questions I love a good dialog.

[Tris Shirley]

Thanks for posing the question Ethan. I am a relative newcomer to TW myself, and don’t claim to be well informed on the philosophy of the movement. With that disclaimer, I’d like to endorse Tom Anderson’s comment that we are not focused on the various global or national issues, and “Our best hope is to work to change the part of the system in our backyard...”

It is this orientation to practical measures that attracted me to TW. It is cheap and easy to get a bunch of like-minded people to agree on how to save the planet. I suspect it happens in bull sessions regularly. But beyond the entertainment value, this is of little consequence. A few people actually walking the talk would be of great consequence.

And then, just for the sake of discussion, I’d like to suggest that profit might not be at the heart of our challenges as your comments suggest. I believe the economic theory is that whenever a transaction takes place, both parties benefit – there is “profit” on both sides. For example, when I buy a dozen eggs at the store, I’m paying more than what the eggs “cost” the chicken, and the farmer, and the wholesaler, and the retailer. Lots of people are profiting at my expense. Do I care? No.

I don't care because if I want eggs, my option is to get some chickens, chicken feed, a coop, etc., attend them daily, and thus provide my own eggs. As it turns out, I just might do that one of these days, but for now, my cost for a dozen eggs at the store seems like a good deal. Thus, I am getting eggs with less cost than I could produce them myself. The time and effort that I save by buying them is my profit in the transaction. That’s why I’m willing to buy the eggs in the first place. Nobody is forcing me to do it. There is no evil here.

But my ability to profit from this transaction depends on the price of eggs and the marginal value of the money I spend to buy them. If I have to work for a week to raise enough cash to buy the eggs, those couple of bucks are very dear to me and I certainly have a problem. But the problem is my productivity, not the profits of the people on the other side of the transaction.

Alternatively, if some farmer (or egg speculator) is able to create an egg monopoly and reduce supply thus forcing up the price artificially, then there is another problem. But this problem is not with the concept of “profit”, it is with the people creating the monopoly. And for “people” problems we are supposed to have laws that encourage them to act more civilly.

It is quite important, I think, that we don’t toss out useful economic principles that generally serve us very well indeed when there is a problem with people participating in the economy. People problems are supposed to be resolved through artful regulation. If that isn’t happening it is a political problem, not an economic problem.

[Tris Shirley]

Thanks for taking the time to comment, Walter. I value your views on these issues. But when discussing complex topics, it is hard to communicate fully and accurately in a few paragraphs. At least it is for me. So here are some additional thoughts related to your comments...

You said: “If you are buying industrial agriculture eggs at the supermarket, you are probably paying more than their cost to the farmer, but this does not take into account the externals that modern-day economics refuses to admit exist.” I certainly agree with the first part of this, that externals aren’t reflected in the price of industrial eggs. However, I suspect it is the industrial egg producers who are most adamant in refusing to admit the externals exist. The good news is that the eggs so produced are sufficiently inferior that they probably aren’t even worth the lower price.

I’ve read a couple of Herman Daly’s books and am well aware of the shortcomings of mainstream economic theory in dealing with the issue of externalities. But I’m still not willing to toss out the baby with the bath water. I would like to think that consumers are a little bit rational and that markets are not entirely random. Thus, within limits, economic theory can be useful in understanding certain behavior.

You said: “The farmer is not somehow magically more efficient than you are when it comes to taking quality care of his/her flocks.” By profession I was a business analyst and computer programmer, after having been a teacher for a few years. You over-estimate my ability in animal husbandry ; - ).

You said: “Economies of scale work well when you have fixed costs like building and heat.” Exactly. One healthy chicken would supply more eggs than my wife and I would care to consume, yet I would still need to learn about how to care for her, build a place to keep her, heat the place some of the time, probably buy some food or supplements for her (I’m guessing), muck the coop periodically, and be home most of the time to attend to her needs.

I believe (guessing again) that roughly the same effort would be involved for a flock of twelve or twenty chickens, except that with the flock, one could perhaps sell the extra eggs and offset some of the fixed costs - if not actually make a profit. Thus, win, lose, or draw, the flock owner will be operating more efficiently than I would. That would especially be the case if the owner really liked chickens and got some entertainment value out of the experience.

You said: “Per people profiting at your expense, I have the same comment as I had for Ethan. You are actually profiting at other's expense, just by living in the good old USA.” You made a number of points in your paragraph addressed to Ethan and I’m not sure I understood all of them. But the main issue seems to be “Who and what actually contributes to personal and/or community well being and who and what does not?” Clearly, many people who make or grow stuff for themselves or for others are contributing. This is most evident when there is manual labor involved, as you suggest.

Perhaps it is a personal bias, but I would like to think that some service providers are not entirely freeloading – even if they don’t get sweaty and dirty doing it. For example, a good public school classroom teacher is making a considerable contribution to the community’s well being, in my opinion, and deserves every penny they get for the effort. So is the dentist who provides a service I would be hard put to provide for myself. There are lots of others, but I’m sure you get the idea.

Of course there are also a lot of people working to produce goods and services of questionable value to the consumer, yet that “production” consumes resources that might be allocated more beneficially - or simply not consumed. Alas, it would be nice if all shoppers were a little more rational. But if your forecast for economic disaster is accurate, the most irrational consumers will probably just remove themselves from the gene pool, thus contributing to an eventual solution.

You wrote: “...it would seem to me that you might want to start sourcing food locally and actually paying farmers to stay in business.” Good idea. I have some thoughts about that we should discuss.

[Ethan D'Onofrio]

Well I'm very glad to have ignited such excellent discourse - I've very much enjoyed the discussion, thanks to those who have participated. I'll just throw a few of my last thoughts out there before I divest myself of this topic for now. Regarding the technological capability to provide for all 6.7 billion people on this planet, I most certainly believe we have the resources and technology required to do just that, at least at a basic level including housing, feeding, watering, supplying energy and even communications. To say otherwise in my mind shows a naivete of the actual current state of either or both available resources on the planet and/or available modern technology. Most people simply don't understand what the newest technologies are capable of when put to proper use because they can barely imagine the contexts of their uses, let alone how they could manifest themselves due to the fact that everything, yes EVERYTHING, is build as "efficiently" (cheaply) as possible to satisfy its designated need. Yes, a Rolls Royce costs not a penny more than it needs to in order to satisfy the requirements of its customers at its price point. This means that ALL technology that we have been oriented with is essentially incredibly dumbed down to promote cyclical consumption via planned obsolescence. This principle is critical to the perpetuation of our economy (see The Story of Stuff noted by Walter).

That said, I do completely agree with the lack of "political" will power to make this change, particularly on a global scale. However, to think that political will is inherently disconnected from individual will is to give up. The revolution of individual thinking, hence one's own mind, is a necessary precursor to the revolution of the world we live in. Each individual is in essence a determinant in our future. Yes, ACTUALLY, a REAL powerful force. As Gandhi put it: "We must become the change we want to see..." When we allow the idea that we are powerless to bring about change, even unprecedented revolutionary change, we admit defeat. Saying the "political will" doesn't exist is just this in my mind. The fact is, we have unprecedented technologies that allow us to connect on a global level with millions, even hundreds of millions of individuals instantly as never before possible. Therefore, what we are waiting for is the "best" idea to come along that is good enough to capture the majority of those people out there listening, waiting for it to come along. They know something's wrong, they're just leaping at symptom-killers. Right now we are fractured, there are over a million NGOs working around the world on some cause or another. Unifying these NGOs in order to pull the ship back in the SAME "right" direction would be of tremendous power. The Zeitgeist Movement for example has pulled in over 375,000 members in over 200 countries in under 12 months. Think about that for a minute - over a THOUSAND new people a day. This is in large part due to unprecedented use of available technology in areas of organization, communication, media distribution, etc. - all of which were unavailable tools just a few short years ago. And growth like this tends to be exponential - a wonderful thought indeed.

All of this said, I think it's critically important to aim high. While I applaud what Transition stands for (as well as countless other NGOs), and I will continue to contribute in any way I can, I worry that fighting off symptoms for fear of taking on the bigger root cause, tends to leave dealing with the roots to "wild-eyed optimists" and "crazy revolutionaries" because the "realistic" of us refuse to set out on such an enormous journey for fear of failure. I believe there is a place for both however; the local-centric concept meant to spread outward through proof of concept via smaller quantifiable successes, as well as the global joining of hands via today's amazing communications technology for hope of unprecedented, largely unimaginable evolution. I just hope people can find themselves in both camps at the same time, NOW, - favoring one while neglecting the other seems a losing proposition to me - enacting both approaches simultaneously is critical. Thanks again to everyone participating in this excellent discussion, it is much appreciated. With that my rant comes to an end.

-ethan

[David MacLeod]

Excellent discussion here, with much food for thought. Transition certainly recognizes that our economic systems are unsustainable and must transition to something else. What that something else is is for all of us to figure out as we go through this process.

I don't think the problem is 'profit' so much as an obsession with growth. Growth is perfectly natural for young systems in nature, but at a certain point it can become suicidal. I think we all agree that exponential growth at some point is not sustainable on a planet with finite resources (ancient sunlight) and a limited supply of 1 renewable resource (current sunlight).

I'm coming late to the discussion, so I'll just give a few pointers to other items worth reading.

1) Rob Hopkins has posted "An Economics Addition to the Transition Handbook" here:
http://transitionwhatcom.ning.com/forum/topics/the-economics-of-sca...

He concludes his article with the following words:
"...At the macro level, there already are solid ideas to ground such an approach. Work by Peter Victor in Managing Without Growth demonstrates that even now, broad economic policies aimed more specifically at delivering well-being for people in Canada could deliver high employment, healthcare for all and leave the world more intact for the next generation. Victor concludes however that presently this would be politically impossible unless it came from a grass roots movement. Herman Daly’s work on Steady-State Economics aims to maximize equitable qualitative economic development and deliver to real needs of people and planet, rather than the current maximizing quantitative economic growth, simply creating ‘wants’ and ‘stuff’. Transition initiatives can demonstrate how such a society could work and how it would feel on the human scale. This bottom up support and living demonstration for the work of visionaries like Daly show at the local level the power and resilience of the alternatives which we can start creating now."

2) Energy, Ecology and Economics by Howard Odum
http://www.mnforsustain.org/energy_ecology_economics_odum_ht_1973.htm

I like to recommend this 'classic' article whenever possible. Written in 1974, but more relevant now than ever before. Odum shows that "there is a unity of the single system of energy, ecology, and economics." For more recent articles, perhaps a bit easier to digest, check out The Oil-Economy Connection by Michael Lardelli ("our entire economy can be seen as being comprised of the energy used to power activities and the embodied energy used in the production of things. Money is simply a tool that can be used to exchange and allocate these different forms of energy"), and The Slope of Dysfunction by Dimitry Orlov.

[Tris Shirley]

David - I just waded through the Odum piece and WOW, what a zinger. It was sort of tough going until I figured out that it was written in "almost" English. But after that, not too bad. Thanks for providing the link. Is the link to the Hopkins info correct? It didn't work for me.

[David MacLeod]

Tris, Oops, thanks for pointing out that the link to the Hopkins article is wrong. It just links back to this page.
Here's the correct link to the Economics Addition to the Transition Handbook:
http://transitionculture.org/2009/04/27/an-economics-addition-to-th...

Odum's diagrams can appear a bit daunting at first, but when you examine them, they're helpful. I think it's easier to follow in a couple of his books where he sets things up step by step: Energy Basis for Man and Nature, and A Prosperous Way Down. Odum was a big influence on David Holmgren, so you can also get Odum's concepts in Holmgren's "Permaculture: Principles and Pathways Beyond Sustainability."

And here's one more. Marcin Gerwin's "The Flaw of Western Economies." Gerwin underscores Walter's point that we need to think not only about what we're consuming or not consuming, but also about what we are or are not producing for our local economy.
http://www.energybulletin.net/node/47474

[Tris Shirley]

I think you are on to something here Walter. You can’t have much of an economy, sustainable or otherwise, without some primary industry. And if you want sustainable primary industries, there aren’t many beyond farming. I don’t know for sure, but I’d bet that most economies began with agriculture because that is the logical, essential starting point. Unfortunately, most went downhill from there.

But I’m confused by one point. You (an energy efficient, sustainable farmer) are taking land, sunshine, water, and a few other ingredients and adding your labor so that what comes from the land is not just weeds, but a food crop that is of substantially greater value. You are adding value to the output of the land. Why is that different from somebody who buys your cabbage and makes sauerkraut? Aren’t they just creating something of greater economic value from a number of inputs? Isn’t the difference between the values of the cabbage and sauerkraut additional capital in the sense you use that word? Wouldn’t it be sustainable if done properly?

Similarly, the butcher, baker, and candlestick maker can all be seen as people adding value to inputs. The inputs can be created sustainably or unsustainably, and their work can be completed sustainably or unsustainably. If they start with sustainably produced inputs and their work is completed with mostly manual and animal labor and with any additional energy collected efficiently from current sunlight, can they not be creating capital just as sustainably as the farmer?

I hope these other folks can create capital too. Otherwise, if only farmers can create capital, then non-farmers will have nothing of value with which to trade for food. That means that everybody will have to become farmers or farm laborers or share croppers. Productivity is going to crash horribly just from expensive, limited energy supplies. If we have to give up productivity from specialization too, it’s just going to be that much tougher an adjustment for all.

[Ethan D'Onofrio]

I've got to jump in here for a sec. Walter said "A revolution is not going to happen in the USA...". Why not? Certainly not with that attitude it won't. I'm not trying to be confrontational here but I beg to differ - a revolution WILL happen in the USA, in fact it will happen all over the world - simply because I believe it will. Me and the countless others who don't know it yet. No revolution happens without first happening within oneself and by coming right out and dismissing it as even a possibility you basically ensure that it won't happen. Well I say otherwise. To base future possibility on the past is...well, completely ridiculous, irrelevant, irresponsible and unimaginative. That kind of talk gets us nowhere. I'm not saying let's all just get on our knees and pray for a revolution BUT dismissing the possibility is a tremendous error. Perhaps you're dismissing the possibility because you haven't seen reason to believe it could happen. I have...and I have hope.

[David MacLeod]

Walter,
This continues to be very interesting and stimulating. I'll have a reply later, but in the meantime, do you have any links or further references to economic ideas promoted by Franklin, Jefferson, Adams, etc.?