PIMCO - Relevant Thoughts on Debt & Population

From the mind of Bill Gross, head of PIMCO (largest bond fund in world)...

First of all, capitalistic innovation fostered productivity, and an increasing standard of living through technology and innovation. Debts could be paid back via profits and higher wages if only because of rising prosperity itself. Secondly, the 20^th century, which fathered the debt supercycle, was a time of global population growth despite its interruption by tragic world wars and periodic pandemics. Prior debts could be spread over an ever-increasing number of people, lessening the burden and making it possible to assume even more debt in a seemingly endless cycle which brought consumption forward – anticipating that future generations could do the same. 

But while technological innovation – much like Moore’s law – seems to have endless promise, population growth in numerous parts of the developed world is approaching a dead end. Not only will it become more difficult to transfer high existing debt burdens onto the smaller shoulders of future generations, but the overlevered, aging “global boomers” themselves will demand a disproportionate piece of stunted future goods and services – without, it seems, the ability to pay for it. Creditors, sensing the predicament, hold back as they recently have in Greece and other southern European peripherals, or in the U.S. itself, as lenders demand larger down payments on new home mortgages, and other debt extensions. 

Aging and population change of course are just part of the nemesis. We could have “saved” for this moment much like squirrels in wintertime but humanity’s free will is infected with greed, avarice and in a majority of instances, hope as opposed to commonsense. We overdid a good thing and now the financial reaper is at the door, scythe and financial bill in one hand, with the other knocking on door after door of previously unsuspecting households and sovereigns to initiate a “standard of living” death sentence.

Precious Metals - Gold or Silver?

Prices

As the world economy continues to struggle along, more and more people have been turning to gold, as well as silver, as the last safe haven.  Fears of hyperinflation or rapid deterioration in global trade, or worse (social unrest/wars/etc) have led gold to reach levels unseen since the 1970's.

As both charts on the right demonstrate, both gold and silver reached their recent-history zeniths in the 1970's, when fears of inflation were rampant throughout the country (in addition to demonetization of hard currencies in favor of fiat currencies).
I suggest those interested to read about the history of gold/silver as money.  It dates back thousands of years, far longer than any paper money.

Occurrence

The interesting thing about these precious metals is that scientists actually have an excellent idea of the relative abundance of most of them.  The  chart on right shows the relative frequency of occurrence of gold, silver, as well as several other precious, and non-precious metals.

Gold is one of the rarest of precious metals, occurring only 0.004 parts per million.  Silver is approximately 18x more abundant, at 0.073 parts per million.

Several other industrial metals, copper, zinc, and nickel, are listed, and they are far more frequently found than their precious counterparts.

Relative Prices

Here then, we infer some very interesting information.  Assuming that demand for all metals are the same, we can then compare the price of each metal relative to each other (alternatively, relative price discrepancies could also tell us how the demand for each metal differs).

The below table illustrates just such a relative comparison, at spot prices as of 6/25/2010 (click to enlarge):

Rhodium ($2,640): underpriced relative to 6 metals, overpriced to 1
Platinum ($1,575): underpriced relative to 4 metals, overpriced to 3
Gold ($1,256): underpriced relative to 5 metals, overpriced to 2
Silver ($19): underpriced relative to 7 metals, overpriced to 0

All the industrial metals (copper, zinc, nickel) are overpriced relative to the precious metals.  As previously mentioned, this is a function of their increased demand due to industrial applications.  Zinc appears to be cheaper than peers, but this is mainly due to the larger toxicity of that element.

Gold is Pricier than Silver... (But Should it be?)

According to this, gold has a fair value range of $660 (index to Rhodium) to $1446 (index to Palladium) compared to other metals.  Silver has a fair value range of $36 (index to Rhodium) to $79 (index to Palladium).  Gold, at 65x the price of silver, is clearly overvalued relative to silver.  So what is causing this?

Ultimately, prices are determined by the relationship of supply and demand.  In this case, there appears to be a significantly higher demand for silver, perhaps for jewelry.  However, silver has more applications in industrial use, yet does not the command the industrial premium currently seen in other precious metals.

According to research reports, the long-term multiplier of gold to silver since the 1900's has been approximately 50x.  This means that for the past 100 years, gold has been overpriced relative to silver.  However, prior to this period, Gold has traded historically at a ratio of 15x relative to silver - significantly closer to the relative occurrence of the two elements.

It's difficult to say what the future will be.  My personal feeling is that silver is the more undervalued of the two metals, although I have a high suspicion that we may experience a bubble in gold that will blow the ratio of the two metals far past its current ratio of 65x.

"Gold and silver are money.  Everything else is credit." (JP Morgan)

Innovative Solution to Population Growth

Warning - the following has something for everyone, and is sure to satisfy no one...

Seed Exchange...

Kenneth Boulding proposed the idea that when a child (boy or girl) is first borne, they are issued 'rights' to 1.1 children.  Every whole right entitled a couple to 1 future child (average of 2.2 kids per couple).  Each 1/10 right unit would trade as a certificate on an exchange, effectively like the current stock markets.

Those who are particularly wealthy, or particularly virile, could purchase additional rights on the open market.  Those who were perhaps more career-oriented, or perhaps future clergymen, would choose to instead sell their rights on the open market, to the previously mentioned groups.

For the conservatives...

This proposal is a market based solution, and will help maintain the current prosperity of this country.  There is not much need for government mandates, other than instituting and enforcing the initial ratio of 1.1 rights per child, or 2.2 rights per couple.  Prices would be set by market demand - higher when people feel frisky, and lower when people became more abstinent.  Brilliant!

For the liberals...

This would act as a de facto form of income equalizer.  The rich would have many children, and hence become more and more poor.  The poor would still be allowed to have children, but could give up some of those 'rights' in order to escape from the poverty trap.

Alternative...

Kenneth Boulding's original proposal actually differs from the above version, in that he believed only baby girls should be given rights, with 2.2 going to each.  The benefit of this is that it directly empowers women to make economical and rational decisions regarding child-birth.  Particularly in those societies, or pockets of society, where women have less access to economic independence, this 'seed market' would potentially open up options for women to become free from masculine oppression.  Brilliant!

The sheer unfamiliarity of a scheme of this kind makes it seem absurd at the moment.  The fact that it seems absurd, however, is merely a reflection of the total unwillingness of mankind to face up to what is perhaps its most serious long-run problem. (Kenneth Boulding)

Living Within Limits - Chapter 25

Population Control - Why?

As a reminder, the goal of population control is not for its own sake, but to improve (maintain) the prosperity of the living - evolutionarily speaking, to keep a successful species from becoming too successful - consuming itself to its own doom.  More specifically, we wish to replace nature's methods of population control (starvation and disease) with human ones (preferably not nuclear holocaust or biological apocalypse).

Individual Rights or Virtue of Community

Hardin states that it is difficult for us westerners to realize that what we extol as 'Universal Human Rights' are in actuality 'Western Human Rights', which happens to date only three centuries back to John Locke.  The individualism of western society, and the emphasis it places upon the rights of the individual make population control particularly difficult.

In China, 1-child policies were enforced by community groups.  The community groups worked together, through such traditional motivational techniques as shame and morality (items long since out of style here in the West), in order to coerce adherence to law, for the good of all.

Perhaps sometime in the future, China will exhort the West to adopt laws more focused on 'Universal Societal Rights' - and perhaps our own legal system may even one day focus more on greater good, rather than individual rights.

Finally, a good solution...

2.2 kids per couple is approximately the magic number in order to stabilize population growth.  The solution I particularly like was offered by Kenneth Boulding.  The solution is interesting, and important, enough that it will be posted separately.

Deflation or Inflation - Guide to Picking Poisons

America's Greatest Fear - Deflation

Deflation is a decline in the price level of goods and services.  Generally, we cheer when the price of goods (groceries, gas, cars) decline.  As for policy makers, they fear deflation as if it was the great plague.  In fact, no country champions the cause against deflation more strongly than the U.S.

To understand the paradigm of America's decision makers, we must turn to a lesson in history.  The worst recession in recent memory, the Great Depression of the 1930's, was a deflationary period.  During such episodes, the economy could experience deflationary spirals, whereby declining prices induce the expectation of ever-lower prices in the future, hence creating a feedback-loop which results in uncontrolled price declines.

In addition, policy makers may run into what is known as a liquidity trap, whereby their traditional tools of monetary policy become exhausted.  This exact problem was addressed by current Fed Chairman Ben Bernanke, in the now famous speech Deflation: Making Sure "It" Doesn't Happen Here.  Chairman Bernanke reassured congress that through the 'helicopter drop' of money, the Fed would be able to successfully combat deflation.  With regard to this assertion, I am inclined to agree with Chairman Bernanke; I am also deeply concerned about the potential ramifications of such reckless monetary policy.  My fears are echoed by our neighbors across the Atlantic.


Germany's Worst Nightmare - Inflation

Just as America's paradigms were influenced by its history, so too were those of the German people.  Though the inflation in the Weimar Republic, post WWI Germany, was nearly 100 years ago, the people have not forgotten the horror:

Inflation is an increase in the general price level of goods and services.  Hyper-inflation is the runaway effects of such a price increase.  From the years 1918 to 1923, what used to cost 1 Mark increased in price, until the same good could not be purchased for less than 1 Trillion Marks.  To personalize this increase, imagine a 1 liter bottle of Coke costing approximately $1,000,000,000,000 dollars.  It sounds ridiculous, but sadly, it was a part of German history (Germans were not alone in this... hyperinflation dates back to as far as the time of the Romans... likely since the invention of money itself ).

All I'm saying is...

I believe our policy makers are influenced greatly by the events of the country's history.  To that extent, the strong aversion to deflationary periods is understandable.

However, the lack of respect for counterbalancing forces could force us to learn some harsh lessons in the near future.  Perhaps we should turn to our German neighbors to strike a more balanced view.

Living Within Limits - Chapter 24

The Story of Penicillin and DDT

After penicillin was discovered in 1928, it was hailed as the wonder drug.  By the 1930's, it became apparent that its use provoked evolutionary changes in bacteria, eventually leading to penicillin-resistance.

DDT, after its discovery as an insecticide in 1939, was used with great success in combating Malaria, and mosquito-spread diseases.  It was later found that the use of DDT led to the prevalence of DDT-resistant mosquitoes.  (DDT was also the environmental disaster which contributed to Rachel Carson's Silent Spring).

What's the point?  One of Darwin's key insights was the way temporarily successful traits selected for their own eventual failure.  Bactericides such as penicillin selected for progressively stronger mutations of infections; insecticides such as DDT selected for ever-more-resilient strains of mosquitoes.

Birth Control vs Population Control

In celebration of the 100 year anniversary of The Origin of Species, University of Chicago asked Darwin's grandson, physicist Charles Galton Darwin to make a speech.  He shocked the community (the shock now long since forgotten) that purely voluntary birth control will fail as a means of population control.

His reasoning was that, through voluntary birth control, a certain group of people, Homo contracipiens, would elect to exercise this new restraint to exploding population growth.  On the other hand, another group, Homo progenitivus, would be genetically predisposed to exercise high levels of geometric growth.  Over time, Homo contracipiens would be extinct, and Homo progenitivus would see to it that their children would be as the stars in the sky.

Counter Argument - Is it truly genetic (nature)?

What if the propensity to procreate like rabbits was not truly a genetically inherited trait?  This argument is hindered by the evidence in human animal husbandry.  Domesticated animals have long been selectively bred in order to create the 'desired behavior' - dogs which are obedient, dogs which are trackers, dogs which are shepherds... etc.

This type of circumstantial evidence seems to suggest that there's reason to believe that nature will 'select' for the behavior of Homo progenitivus, that is the more virile (and less rational) man.

Counter/Counter Argument - It is also learned (nurture)!

However, research has shown us that even if behavior has absolutely no genetic component, the same results would follow.  Factors such as upbringing, societal pressure, and education will have similar repercussions on voluntary birth control.  Research has shown that 'daughters of mothers who had more children than the norm for their generation have more children than the norm for their - the daughters' - generation'.  Look no further than Africa.

If you agree with the above, then let me present to you this question... when developed nations send aid to 3rd world countries, what are they more concerned with?

1) Giving the man a fish? (food)
2) Teaching the man to fish? (education)

A successful war on poverty must be waged through education, a long-term carrot.  It's the only way to win against an enemies as strong as Nature and Nurture.

Living Within Limits - Chapter 23

Commonized Costs - Privatized Profits

Known as the CC-PP game, Hardin points out the duplicity of society, where 'most men believe in laissez-faire for others, while seeking to escape it themselves'.  In truth, success more often comes to an ingenious man who 'fashions a bifurcation in the accounting system that channels the costs of his enterprise to society, while directing profits to himself.'  Asymetrical capitalism is not to be confused with the real thing.

Externalities (aka Pollution)

Unwanted effects imposed on the environment by industry.  Companies (individuals) are rarely punished or charged for damages, though they reap all benefits.  Even when they pay damages, it is almost always to human victims.  The true damage done (wildlife, ecosystem, etc.) are not accounted for.

Disaster Relief

Think Katrina.  Mammoth rescue projects were undertaken to rebuild the city of New Orleans, paid for courtesy the tax payer.  However, the ecological-economic rule that we are fighting against is this: the flood plain belongs to the river.  Thought it's cheaper to build houses on flood plans than rolling hills, there is the clear risk of flooding.  If home builders, or home owners, were to internalize the costs of repair/rebuild, they would NEVER have built these homes.  Instead, through twisted incentive systems and immense hubris, we continue to fight against the laws of ecology and economics, forever dooming ourselves to repeat our past mistakes.

Farm Subsidies (and other subsidies)

Prices of farm produce is manipulated through subsidies, resulting in higher profits for farmers and higher costs for customers (and taxpayers).  This system is further twisted by subsidies tobacco farmers, which elevates medical needs for smokers, which elevates medical costs for all, which leads us to the next, and biggest topic...

Lawyers Protect Individuals (Not Society)

Hardin believes that the reason medical costs in the U.S. have sky-rocketed is largely due to the legal system - our laws are simply too big a temptation for lawyers.  We have 20 times more lawyers, per capita, than Japan.  However, very few (if any) defend the rights of the general public (social good doesn't pay the mortgage).

Malpractice suits against doctors are common; settlements cost money (not to mention legal fees).  Malpractice insurance costs money.  Insurers insist doctors protect themselves against lawsuit by demanding excessive diagnostic tests... cost money.  The costs are paid for either by a) government, or b) employer - the bulk of costs are socialized.

Saving babies (Warning... Reader Discretion Advised)

'It is impossible to put a price tag on life... particularly the life of innocent newborn babies'.  With the system we have today, social medicine, we don't have to.  Premature babies of even drug-addicted mothers are given every possible resource to nurture.  However, premature babies are notoriously expensive to save, with costs of roughly $1,700 per day (back in late 1980's).

If parents were forced to pay for the cost of saving a child, would they then be more capable of putting a 'price' on the life of a innocent newborn?

Consider China...

Hardin brings up the example of China as a comparison.  First, in China, lawyers have no right to intrude into medical matters.  Second, medical costs for treating babies are borne (no pun intended) by parents.  Third, both Confucian and Marxist values places high-esteem on the well-being of the greater society.  These factors would lead to dramatically different outcomes for neonatal care.

Mortality vs Morbidity

There is also the consideration of mortality vs morbidity.  We abhor the idea of the death of a child.  Yet, we rarely talk about the suffering of this child.  There is probably reason to suspect that the child suffers greatly during the intensive care process.  Not only that, but most 'saved' preemies have medical challenges the rest of their lives, including defects in hearing, sight, intelligence, and cardiovascular systems (causing not only suffering, but further deterioration of the medical commons).

Opportunity Cost

And then, there is the never-mentioned issue of opportunity cost.  Instead of the money being spent on these difficult to tackle problems, what if they money was spent to treat lesser ailments?  Or perhaps education?  Opportunity costs are very real, and (cold as it sounds) return on investment is an important consideration.

If the parents in the previous example had other, healthy, children to consider/raise, how would that effect their decision?  Save the child at any cost?  Is that what you would do?

If a rural hospital in a county with a small tax base were required to do everything humanly possible for all the patients who might come to it, the end result would be bankruptcy, following which the hospital could do nothing for anyone, rich or poor.

Legislative Failure - Pork Barrels & Lawyers

Consider why social costs exist in a democracy.  Senator A wants to protect the farmers in his state, yet wants to vote against the farmers in other states.  Senator B and C are in similar situations.  Together, they agree to vote for each other's subsidies.  Poor senators D and E are outvoted.  Democracy at work, in all its glory.

What about the broken legal liabilities in the medical system.  Here is Hardin's explanation:

...the majority of state legislators are lawyers by training; lawyers constitute something of a tribe, and we should not be surprised to find that here, as in so many instances, the tribal loyalty is given preference over loyalty to the nation as a whole.

Living Within Limits - Chapter 22

Discriminating Altruism

Darwin postulated that the nonexistence of altruism amongst different species is one of the default positions of biology.  Hardin carries the argument even further.  Altruism does not even exist for members of the same species, or even the same family.  Take an example.

A parent sacrifices him/herself for a child.  Noble indeed.  However, this act of individual altruism is actually an act of genetic selfishness... via The Selfish Gene theory (Richard Dawkins).  Genes within the parent have passed on 'urges' which work to maintain the survival of the child (new gene carrier), even at the cost of their (old gene carrier) own lives.  For Hardin, this is just another example of the essential role that discrimination plays in altruism.

Praising Discrimination

Hardin argues that 'discrimination is a necessary part of every persisting altruistic behavior.  Why?  Because without discrimination the good effects of altruism would be commonized over the entire population.'  One alternative to discriminating altruism would be universal altruism - a noble intention indeed.  However, it is pointed out that 'the specific shortcoming of universalism is easy to identify: it promotes a pathology... namely the tragedy of the commons'.

What are we to do?  What about altruism?

To be honest, I'm not sure.  As a follower of Jesus, I still adhere to the belief that a major purpose of life is wholeheartedly serving others, without judgement (universal altruism).  At the same time, rationality cautions that such reckless servitude is folly, and altruism without discretion could be quite damaging (money to the beggar for more drugs).

To me, this is reminiscent of the ESS dilemma between the doves and hawks.  As a Christian, we should be as doves.  Yet, this world is a world of hawks.

Nowhere near a final, universal, conclusion, I have arrived at a locale minima in cognitive dissonance.  I think universal altruism should not be inscribed into law.  Instead, I will exercise discretion, though erring on the side of universal altruism, when serving.  I will hope that God gave us good will, in addition to free will.

Random Thoughts...

Money is a form of reciprocal altruism, aka 'I'll scratch your back if you scratch mine'.  In addition, the phrase 'Money is the root of all evil' is actually distorted from a biblical aphorism:

For the love of money is a root of all kinds of evil. (1 Timothy 6:10) 

Double Dip?

Powerful Predictor of Recessions

One leading indicator that is tracked by some experts, and that I personally have been following, is the ECRI Weekly Leading Index.

This index has been surprisingly powerful at predicting recessions over the past 40 years.  Importantly, economist David Rosenberg first pointed out that WLI Growth of negative ten has always indicated a recession occurring or soon to occur (chart below - shaded regions indicate official recessionary periods).

As you can see by this second chart, ECRI WLI growth has declined dramatically to -5.7%.  Historically, there has been only one reading at/below -5.7% that did not correspond to a recession.

Based upon this data, it seems more likely than not that the economy will fall back into recession (barring government intervention).

But Wait (before you sell your stocks or jump out the window)...

There are several drawbacks to this conclusion:

1. The recent run-up for WLI growth has been the strongest in recorded history.  It's possible that the dramatic whiplash back into negative territory is a function of the elasticity of the index (after a strong rise, maybe a strong drop is normal)... and not necessarily ill-boding for the economy
2. One study has been done that suggests the ECRI WLI may actually be a lagging indicator of stock performance
3. The strong correlation b/w the index and stock performance (suggested in study above) may be due to the fact that stock performance is a component of the index.

Together, these caveats should give considerable pause to the recommendation of preparing for an imminent double-dip for the U.S.

My Opinion (for what it's worth)...

It's hard to say for certain: the evidence is certainly convincing, but a good analyst knows the limitations of the data used.  Based upon what I know, I would say the probability of a double-dip recession is approximately 60% (again, barring government intervention such as quantitative easing - aka money debasing).  Keep in mind, I would classify myself as a pessimist.

Living Within Limits - Chapter 21

The Global Pillage

Hardin introduces the reader to the famous Tragedy of the Commons.  This idea was first suggested by William Forster Lloyd back in the 1800's.  It is partly explained by the classic owner-operator problem:

Give a man the secure possession of a bleak rock and he will turn it into a garden; give him a nine year's lease of a garden and he will convert it into a garden. (Arthur Young)

Donkey's Head

This chapter also mentions the account of a famine in Sweden in 1772.  We who are quick to judge might have blamed the rich at the time for failing to come to the aid of the poor, including one woman who 'cut her child's throat, having had no food to give it, that it might not pine away in hunger and tears.'

However, Hardin points out that 'it would have done no good for the rich to donate money to a community chest because the food for a large population of needy people was simply not available for purchase.  In a world of genuine scarcity a rich minority can offer the too numerous indigent little but sympathy.

There was a great famine in Samaria, as (the Syrians) besieged it, until a donkey's head was sold for eighty shekels of silver, and the fourth part of a kab of dove's dung for five shekels of silver. (2 Kings 6:32)

$600 Billion Challenge (The REAL Trickle Down)

Philanthropy has a place in Capitalism...

Earlier, I submitted data to suggest that traditional economic theory on the trickle-down effect was... discouraging, to say the least.  Greed seemed to be good... but much better for a very few, and mediocre at best for the rest.

It was brought to my attention today, an article which offers a hopeful alternative to traditional economic theory...

The $600 Billion Challenge

Bill Gates, Melinda Gates, and Warren Buffett are asking the nation's billionaires to pledge to give at least half their net worth to charity, in their lifetimes or at death. If their campaign succeeds, it could change the face of philanthropy.

Website: http://www.givingpledge.org/

Patronage has a place in Renaissance...

Pondering about the potential impact that such a campaign would have, led me to one particular historical precedent.  The Renaissance, during 14th century Florence was also funded by the charity of the wealthy; in particular, the Medici Family, one of the first merchant banks in Europe and one of the wealthiest families ever.

Lacking a liquid funding market, artists at the time would often need to find patrons, who would thereby commission works to be done.  The Medici Family was the most lavish of such patrons, directly (or indirectly through control of the Papacy) commissioning many works from the finest artists and inventors of the day, including Donatello, Michelangelo, Brunelleschi, and so many others.

Not being a big believer of coincidences, I believe the extravagant funding of the Medici's were directly responsible for the amazing enlightenment achieved during the Renaissance.  I can only hope that this $600B campaign can act as a similar catalyst for our own times.

Living Within Limits - Chapter 20

Carrying Capacity

Hardin mentions the possibility that as the focus of human society has shifted from rural agriculture to urban industry, our view of the environment has changed as well.  He compares two perceptions of Greece as an example:

Present-day Greece... is what you expect the earth to look like given a fair chance.  It is the subliminal threshold of innocence.  It stands, as it stood from birth ,naked and fully revealed. (Henry Miller, 1941)

In the earlier days, Attica yielded far more abundant produce.  In comparison of what then was, there are remaining only bones of the wasted body... in the primitive state of the country, its mountains were high hills covered with soil, and the plains were full of rich earth, and there was abundance of wood in the mountains... Moreover, the land reaped the benefit of annual rainfall, not as now losing the water which flows off the bare earth into the sea... (Critias, Plato 3rd Century BC)

What to do about Bambi?

Successful (sustainable) practitioners of animal husbandry know that overgrazing the soil leads to deterioration in the wealth and carrying capacity of a piece of land.

In nature, this balance has traditionally been enforced by predators.  However, human culture portrays predators as 'evil', rather than 'good' (in the sense that they maintain the natural balance).  Pop cultural artifacts, such as Bambi, have long worked to solicit goodwill on behalf of prey such as deer, on the grounds of 'sanctity of life'.

As has been previously suggested, to respect life but not death is to display poor wisdom.  The path of foolishness often leads to unpleasantness.

Nite Lite 4 Monitors (aka Tech for Yuppies)

http://www.stereopsis.com/flux/ 

During the day, computer screens look good—they're designed to look like the sun. But, at 9PM, 10PM, or 3AM, you probably shouldn't be looking at the sun.

F.lux fixes this: it makes the color of your computer's display adapt to the time of day, warm at night and like sunlight during the day.

It's even possible that you're staying up too late because of your computer. You could use f.lux because it makes you sleep better, or you could just use it just because it makes your computer look better.

(I have tried it.  After 10 seconds, I can vouch for it...) 

Trickle Down Economics - Debunked?

Trickle down economics (aka Scraps From the Master's Table), in all its glory.  Pictures are worth a thousand words... I'll let my own words be few...

Living Within Limits - Chapter 19

Major Default Positions of Human Biology

1. Our Earth is the Total World for Most of the Human Species - though I'm a fan of science fiction, it is a difficult to refute this truth, and it is unlikely to change in the near future (if ever).  Space 'Hope Operas' which portend otherwise do a disservice to their fellow human beings.

2. Rewards Determine Behavior - the rewards of parenthood are subtle and imperfectly understood.  It may be rewarding to explore this in greater detail if we want to change our behavior.

3. We Can Never Do Merely One Thing (Hardin's Law) - also known as Law of Unintended Consequences.  Curiously, this is similar to the Butterfly Effect found in Chaos Theory.

4. There's No Away to Throw to - the sooner we begin teaching this to our children, the better

5. 'Guilty' as the Default Position of Choice - ancient Anglo-Saxon law set the default position of criminal law as 'innocent until proven guilty'.  While commendable, social laws should be governed by the opposite maxim.  We are beginning to make progress, but there is still much to undo.

6. The Impact Law (I=P*A*T) - the impact (I) on the environment can be viewed as the product of the population size (P) multiplied by per-capita affluence (A), as measured by consumption, multiplied by the damage done by the technologies (T) employed in supplying each unit of consumption.

Living Within Limits - Chapter 18

Making Room for Human Will

In today's heated political arena, despite their dichotomous rhetoric, neither liberals nor conservatives have shown the will necessary to institute real change.  Liberals want perpetual economic growth in order to help the poor (unsaid: most liberals would like to at least preserve their current standard of living).  Conservatives need perpetual growth so that they can continue becoming wealthier (no ulterior motives).

We're Living on Borrowed Time

Much to the chagrin of both sides of society, 'only madmen and economists believe in perpetual exponential growth'.  This truth of natural science was advocated by none other than the white knight of western capitalism, Warren Buffet:

In a finite world, high growth rates must self-destruct.  If the base from which growth is taking place is tiny, this law may not operate for a time.  But when the base balloons, the party ends: A high growth rate eventually forges its own anchor. (1990 Annual Letter)

Side Note - An Exception to 2nd Law of Thermodynamics?

Matter and energy is conserved.  To this there is no exception (cue for natural scientists to breathe a sigh of relief).  However, there is a third entity which does not seem to observe conservation: information.  Music, arts, literature, science, philosophy, spirituality, - these can 'grow without limit, and there is no reason they cannot grow vigorously in a steady-state economy.'  The end of growth is not the end of human civilization. It is simply the end of gluttony and greed, and all the avarice and suffering that come with them.


No Free Burnt Offerings

In the end, we need to make some tough decisions.  We should not 'seek a costless change, for there is none'.  There may be some which appear less painful (for us), but these often impose heavy burdens on others (including our children).  Though some of the sacrifices we need to make will bear a cost, should we expect it any other way?

"I will not offer burnt offerings to the Lord my God that cost me nothing"
2 Samuel 24:24

Living Within Limits - Chapter 17

The Benign Demographic Transition

In 1934, Adolphe Landry advanced the theory that the industrialized world will eventually settle upon a 'new normal'.  More importantly, the route that this will naturally take, is a decrease in birth rates.  This is known as the "Benign Demographic Transition" - benign because it is better to imagine a decline in the birth rate, than the alternative.  (In fact, the theory doesn't even mention the alternative)

Graphically, it can be represented as below.

The Alternative

Affectionately known as the "Malign Demographic Transition", this anti-theory presents the possibility that the new normal will be reached another way - through a dramatic increase in the death rate.  The causes of this are too numerous to list, however they could include such unpleasantness as nuclear war, viral outbreak, mass genocide, natural disaster, etc.

This is a possibility not often mentioned in popular culture... perhaps even a taboo

Question of Choice

The benign demographic transition is only possible through a conscious choice.  Humanity must decide to go down this route, through birth control measurements.

There is no indecision in this case.  Indecision is choosing the alternative.  If we do not make changes to our birth rate, we will have indirectly chosen to make changes to our death rate.  I hope we make the right choice.

Humanity as a Cancer of the Earth

Before reading further, I suggest you do some research on Alan Gregg, renowned doctor and philanthropist.  His life was devoted to others, through his medical practice and research, as well as his charitable donations as VP of the Rockefeller Foundation.  As he neared retirement age, Gregg asked some hard questions of his organization's philanthropic policies.  Hopefully, we will think twice before we vilify him for his thoughts.

Alan Gregg: Humanity as a Cancer of the Earth

I propose to offer only one idea regarding the population problem... It is... the view of one who has had a medical training - a single idea around which subordinate reflections of a rather general sort present themselves...

New growths of any kind... involve an increase in the number of some one kind of cell and, hence, a corresponding increase in the size of the organ or tissue involved... In all but one instance, organs and tissues in their growth seem to 'know' when to stop.  The exception, of course, is... cancer...

What are some of the characteristics of new growths?  One of the simplest is that they commonly exert pressure on adjacent structures and, hence, displace them.  New growth within closed cavities, like the skull, exert pressures that kill, because any considerable displacement is impossible.  Pressure develops, usually destroying first the function and later the substance of the normal cells thus pressed upon.  For a comparison with a closed cavity, think of an island sheltering a unique form of animal life that is hunted to extinction by man.  The limited space of the island resembles the cranial cavity whose normal contents cannot escape the murderous invader.  Border warfare, mass migrations, and those wars that are described as being the result of population pressures resemble the pressures exerted by new growths.  We actually borrow not only the word pressure but also the word invasion to describe the way in which new growths by direct extension preempt the space occupied by other cells or types of life.  The destruction of forests, the annihilation or near extinction of various animals, and the soil erosion consequent to overgrazing illustrate the cancerlike effect that man - in mounting numbers and heedless arrogance - has had on other forms of life on what we call 'our' planet.

Metastasis is the word used to describe another phenomenon of malignant growth in which detached neoplastic cells carried by the lymphatics or the blood vessels lodge at a distance from the primary focus or point of origin and proceed to multiply without direct contact with the tissue or organ from which they came.  It is actually difficult to avoid using the word colony in describing this thing physicians call metastasis.  Conversely, to what degree can colonization of the Western Hemisphere be though of as metastasis of the white race?

Cancerous growths demand food; but so far as I know, they have never been cured by getting it.  Furthermore, although their blood supply is commonly so disordered that persistent bleeding from any body orifice suggests that a new growth is its cause, the organism as a whole often experiences a loss of weight and strength that suggests either poisoning or the existence of an inordinate nutritional demand by neoplastic cells - perhaps both.  The analogies can be found in 'our plundered planet' - in man's effect on other forms of life.  These hardly need elaboration - certainly the ecologists would be prepared to supply examples in plenty of man's inroads upon other forms of life.  Our rivers run silt - although we could better think of them as running the telltale blood of cancer.

At the center of a new growth, and apparently partly as a result of its inadequate circulation, necrosis often sets in - the death and liquidation of the cells that have, as it were, dispensed with order and self-control in their passion to reproduce out of all proportion to their usual number in the organism.  How nearly the slums of our great cities resemble the necrosis of tumors raises the whimsical query: Which is the more offensive to decency and beauty, the slums or the fetid detritus of a growing tumor?

http://www.sciencemag.org/cgi/content/citation/121/3150/681

Living Within Limits - Chapter 16

Trying to Escape Malthus

Observation has revealed a correlation that appears to contradict Malthusian principles: prosperous countries often have a lower fertility rate than poor countries.  This, in turn, has led to alternative theories on population and prosperity.

Sex as Anti-Malthusian?

Thomas Edmonds presented the idea that the poorer a people are, the greater will be their fertility because the only amusement they have is sex.  Among the wealthy, sex must compete with other amusements.

However, this theory is refuted by its inherent positive feedback.  In one scenario, an increase in population will lead to more misery, which leads to more sex and higher fertility, which leads to yet more population and misery, and so on and so forth.  Conversely, a decrease in population will lead to greater felicity, thereby leading to less sex and lower fertility, which feedbacks into yet sharper decreases in population...

Clearly such a theory is misguided, or at best, wholly incomplete.

Gluttony as Feedback?

Thomas Doubleday observed that, in some animals, over-feeding led to infertility.  From this, he deduced the general theory that fecundity is inversely proportional to the richness of the diet.  He used this theory to explain the relationship b/w societal wealth and fertility.

However, his flaw came from choosing examples that were unnatural.  For example, his observations were based upon human-raised swines, or domestic rabbits.  The eating habits of these particular samples have been artificially distorted.  In nature, no swine or rabbit would eat itself to the point of infertility (anti-darwinian).

Child Survival Hypothesis

Lester Brown was the one to present the theory that, by decreasing infant mortality rates, we can decrease a society fertility rates (if more babies survive to adulthood, there is less need by mothers to produce babies).

Though inconclusive, there is plenty of evidence that should give pause to philanthropists subscribing to this theory:

http://www.jstor.org/pss/2173608
http://www.jstor.org/pss/1973552

Perceived child survival chances seem to have little influence on whether or not a woman desires additional children... Reductions in child mortality may have the short-term effect of accelerating population growth, until enough experience with decreased mortality is accumulated to effect a change in fertility desires... (Research in Guatemala)

Essentially, evidence suggests that, in the short-term, lower child mortality rates dramatically increase population growth (for up to two generations).  In the long-term, there does seem to be evidence that population limits and social awareness will lead to lower birth rates.  However, Hardin argues that this is a dangerous policy to pursue, particularly in nations which already suffer from overpopulation.

The Goal

Ultimately, we must not lose sight of the needs of the poor.  The urgent is to bring greater comfort into their lives.  Though infant-mortality reduction is morally commendable, the means should not become the end.  In addition to death-control, priority should also be turned to adequate birth-control, which is what will ultimately lead to decreased birth-rates, and greater prosperity.

Living Within Limits - Chapter 15

Nuclear Power

The most obvious alternative to carbon fuels is nuclear energy.  However, there remain some unresolved issues with peaceful human utilization of the power of atoms.

1) Unforgiving Danger - as is well known, nuclear power can potentially be very dangerous.  Though it is unlikely, aside from direct sabotage, that conventional nuclear power plants would ever experience a full-scale atomic explosion, there is the very real danger of radioactive exposure to human beings.  In fact, once the main reactor is in full operation, 'no one can ever go inside the shield, to repair or lubricate or adjust any of the reloading or control equipment inside... if an important part of it becomes inoperable we shut the reactor down and build another one'

2) Unresolved Disposal - nuclear reactors leave behind far more dangerous material, in the form of radioactive waste, than other conventional power plants.  In addition, the disposal of this material is further convoluted by the long half-life of radioactive material.  Unlike traditional waste, there really is no 'away' to throw radiation into, as dumping radionuclides into the desert may result in unintentional contamination of underground aquifers.

The dangers of nuclear energy are so profound, that attempts to quantify the theoretical costs of a potential nuclear disaster have been abandoned after several attempts.  This has, inturn, led to the creation of the Price-Anderson Act, which provides insurance to, and caps the liability of, nuclear energy providers (akin to FDIC and the Oil Spill Liability Trust Fund which limits the liability of offshore oil explorers, such as Deepwater Horizon, to $75M).  In my mind, this is a form of corporate welfare, and is asking for future disaster.

The New Priesthood

Alving Weinberg, long-time director of Oak Ridge National Laboratory, Tennessee, was one of the most well-known defenders of nuclear power.  Below are his thoughts...

We nuclear people have made a Faustian bargain with society.  On the one hand, we offer an inexhaustible source of energy... But the price we demand of society...

We make two demands.  The first... is that we exercise the very best techniques and that we use people of high expertise and purpose... managing and operating our nuclear power plants with people of higher qualification...  The second... (that) we have relatively little problem dealing with wastes if we can assume always that there will be intelligent people around to cope with eventualities we have not thought of...

 The price we must pay for this great boon... is a cadre or priesthood who understand the nuclear systems and who are prepared to guard the wastes... such speculations about 100,000 year-priesthoods must strike an eerie and unreal sound

 Pessimistic translation?  There is nothing wrong with nuclear technology as a viable source of near-limitless energy.  The problem lies in human nature, and our inability to even mentally conceive (much less actually maintain) the notion of a '100,000 year priesthood'.

Living Within Limits - Chapter 14

Jevons's Coal

William Stanley Jevons (1835-1882) was one of the first to make the observation that, not only was the population of Britain increasing exponentially, but the consumption of energy per capita (person), was also increasing as an exponential function - in other words, real consumption of energy was increasing as an exponential function of an exponential function.

In his time, coal was the energy source of choice.  Based upon his findings, Jevon predicted the eventual doom of perpetual growth in Britain, due to the eventual exhaustion of economically viable coal.  He never tried to determine the approximate amount of available coal (though he did make educated guesses), but simply based his forecast based upon the idea that, sometimes the exact limit of a resource was not as important as the rate of growth of consumption of it (particularly when something is growing as an exponential of an exponential).

Jevon's predictions never came true (pessimism is a tough business to be in).  Partly, this was because because his 'educated guesses' dramatically underestimated the technological limits of detecting mineral wealth underground.  However, more importantly, we were saved from Jevon's prognosis by the "Drake well", and the discovery of petroleum as a source of energy.


Hubbert's Pimple

M King Hubbert (1903-1989) was a petroleum geologist employed by the Shell Oil company.  He pionered the idea of tracking the amount of effort expended per barrel of petroleum extracted.  More importantly, Hubbert noted, in 1948, that 'the barrels of oil produced per unit effort required for the discovery of the reserves had been decreasing regularly for a long time' (law of diminishing returns).

Unconvinced?  The gulf of mexico BP Deepwater Horizon disaster is the news story of today.  Do you know why they call it Deepwater Horizon?  The rig was designed to drill miles below the ocean floor, which itself is miles below the ocean surface.  Why were they doing this?  Because the shallower regions of the Gulf had already been exhausted, for the most part.  Translation?  Economics forced them to expend more effort to discover & extract more petroleum, than was previously required of them.

Hubert's, like all great thinkers, was not afraid to make his own prognosis.  He believed that a graph of the rate of use of each fossil energy source would yield a bell-shaped curve known as Hubbert's Peak, or affectionately Hubbert's pimple.  He made the prediction, in 1956, that by the early 1970's, oil production in the U.S. would peak - see Oil Shock of 1973 (it also explains why we have an 'idiotic' 55MPH speed limit) and the below graph.

US oil production did in fact peak around 1970.  This graph (created in 2004), also seems to suggest that world production will peak around 2010 (maybe a bit later now, due to economic downturn).  Notice that 'deepwater' sources will be one of the last to be produced (due to difficulty of exploration).

The Animated Story of Human Motivation

Living Within Limits - Chapter 13

Limits: A Constrained View

Hardin introduces the idea of ghost acreage.  The is the idea that the average urban dweller, though occupying and otherwise living out his life in a relatively confined space, actually draws upon the resources of a much larger plot of land.  For example, New Yorkers draw upon wheat produce din Kansas, cattle started in Wyoming and fattened in Missouri, water from upper New York State, electricity from Canada, coffee from Colombia, cocoa from Ghana, etc.

Ghost acreage is one argument against the anecdotal claim made by proponents of limitless growth that, 'it's OK because we still have so much land left to settle'.  While perhaps true, it may not really be 'so much' as we would like to believe.

Education Readiness

Science, like education, relies upon the concept of education readiness.  In education, readiness conveys the idea that individual children mature at different rates (just as young animals do).  Some individuals learn to speak, read, write, multiply faster than other children.  They are not smarter, but they were simply 'more ready' (Einstein was a very awkward child).  Forcing a child to learn concepts before he is ready is not particularly effective, and potentially dangerous.

Similarly, science is cumulative.  With the knowledge of certain things, then progress can be made in certain other, potentially unrelated subjects.  For the ancients to develop the model of the universe, what could have been expected but the flawed, Earth-centric one that was created?