Garden Earth - a regenerative society

The coming week I will launch the book Garden Earth at the Biofach fair in Germany. Below you find the final chapter of that book. In the final chapter I talk about Garden Earth which is my metaphor for a regenerative society. A regenerative society is a society that regenerates natural and social capital instead of squandering them. 

The book is already available as a paperback and ebook at Amazon (see how to order here), and within a month or so it will also be in selected bookshops in the UK, Canada, USA, Australia and most internet bookshops around the world. It will also be available in Japanese by Dayosha. 

Chapter 33: Garden Earth

 

You may say that I’m a dreamer

But I’m not the only one

I hope someday you’ll join us

And the world will live as one

(John Lennon,‘Imagine,’ 1971)

The book Garden Earth

Hunters and gatherers lived in a wild nature, although they manipu­lated it more than most are aware. Their values, religion and society were shaped by their environment and ecological niche. A small fraction of the primary production of ecosystems was taken care of by human beings. With agriculture, it all changed. A part of nature, gradu­ally growing, was occupied fully by the human species, cleared from undesired species and put directly, and uniquely, in our service. In this way, we maximized our share of the biological production, and favoured those species that produced what we needed. Because of more intensive use, buffers were smaller and agrarian society was thus vulnerable to disturbances and shocks, such as climatic events, disease of crops and animals as well as of ourselves. Soil erosion was an ever-present threat and a cause of societal collapses or simply slow decline. Our relationship changed not only with nature but also with each other and with the society that was established to manage this new system. Human society changed from a basically egalitarian society of small bands to agglomerations of authoritarian lordships, kingdoms and empires, and from a society with very limited division of labour to a stratified society where each had his or her well-defined role. 

With the Industrial Revolution, based on fossil fuel, human control and reach expanded even more, to almost all nooks and corners of the globe. Humankind went further, climbed and flew higher, dived and dug deeper—all in the effort to find more resources to exploit. More and more parts of the living as well as the dead were put in direct service of humanity. Industrialism also brought new impetus to farm­ing. The first stage brought tools and the power to extend the land under plough, but gradually also more and more machinery to in­crease productivity per labourer. This was stimulated by an in­creased use of fossil fuel so that farming from being a net producer of energy became a net consumer. Chemical fertilizers, extracted, manu­factured and shipped from far away, were a step towards freeing agriculture from the limitations of the site, to manipulate life processes. These changes were also accompanied by increased use of pesticides and medicines. Now, when the rich supply of genes in nature doesn’t suffice, or there are natural barriers for combining them as desired, genetic manipulation is used. 

At the same time as we are dependent on more and more of the bio-geosphere, people live lives increasingly more distanced from it. The warmth doesn’t come from wood that we cut in forests, but from distant power plants, district heating or oil and gas pumped from far away. We rarely touch the soil; the green plants most touch are retarded, tamed and flower-induced pot plants, if they are not plastic. We rarely feel the hot wind on our cheek, the rain in our hair or the bitter cold in our marrow. Still, we are more dependent on nature than ever before. Nature doesn’t care for humankind because it will survive well without it, but humankind has to care about nature.

Modern society has been successful in delivering personal wealth and economic growth, for a few people, that is. It has also broken down old prejudice and expanded human rights, freed people from bonded labour and other oppressive institutions. It has come a long way in ending discrimination of women and other groups often victimized, and been extremely successful in producing more things for the health, comfort and joy of human beings. The system, however, has not been successful in replacing the old system with a new one that gives people a feeling of meaning. Personal wealth and growth have become ends in themselves to such an extent that they remind of cancer. 

The economic system and society have reached a critical limit through population explosion, unscrupulous and reckless exploitation of natural resources and constantly increasing energy use. For some resources, the limits have been passed already, which puts increasing pressure on societies, the global community of human beings and the foundations for human existence. We hunt for more and more things and satisfaction through consumption; the enormous choices haven’t made anyone happier. Unprecedented wealth is created, but it has not spread to most citizens of the world, despite everyone living in the same global economy. The gap between the rich and the poor is widen­ing. Despite constant increased productivity leisure time doesn’t increase; contrarily, one’s leisure time and private sphere are invaded by the capitalist paradigm and behaviour patterns—to consume be­comes a compulsion as strong as to work.

The capitalist system is a system of colonization, bent and suitable for geographical, physical and economic expansion. Society has now reached a stage of saturation; there is nothing left to colonize. The behaviours that were appropriate or at least acceptable for a species in rapid expansion are not the ones suitable for a life in balance. In some ways humanity seems to adapt to it—how else would one explain population ceasing to grow in developed countries? Organic farming, passive heating, electrical bicycles and solar energy represent techno­logical developments better adapted to ‘householding’ societies with regenerative economics. The wild finds new ways of cohabiting with human beings and human beings find new ways of interacting with the wild. Cooperation within civil society has increased tremendously globally and is revived locally. There is a shift in values, where more and more people want to jump off the treadmill and seek that which gives ‘real’ well-being. This maturity is reinforced by the population ageing. The values of older people are adverse to risk and expansion­ism, and are more reflective and caring.

In the discussion about growth and limitations for human use of natu­ral resources, it should not be forgotten that the poorest third of humanity needs to increase its use of natural resources, while the rest of humanity takes a break and enjoys life. This increased use is certainly not decoupled from direct exploitation of resources; it is the development of very real things such as electricity, houses, roads, water and sewage. Still, many old and new technologies can be deployed to make this growth less wasteful than previous moderniza­tion; these technologies include solar energy, distributed power, separation of water toilets from other water use, or buildings made from adobe, etc. 

Most people have not yet realized the extent of the change re­quired; humankind needs a completely new economy, a new society. Another society has to be built on values and conditions other than those of the capitalist society. It is a society oriented to closing gaps—gaps between people, between man and woman, between ruler and ruled, between ‘we’ and ‘them’, between one country and another and between man and nature. It is about unifying the many divisions that currently exist—division of labour, division between production and consumption, between work and leisure, between the individual and society, between economy and society and between beauty and efficiency.

As an alternative vision to the capitalist ideology I offer Garden Earth.

• Where capitalism sees self-interest as the major human driver, Garden Earth is built on human needs satisfied in many ways and with voluntary cooperation.
• Where capitalism is based on private property, the foundation for Garden Earth is stewardship of common resources.
• Where capitalism sees nature as commons free to exploit, to mine and to use as a dumping ground, Garden Earth sees nature as our home.
• Where capitalism sees specialization and division of labour as something very good, Garden Earth sees it as a potential evil, a risk that needs to be limited and its effects on individuals and society mitigated. 
• Where human energy in capitalism is used for salaried labour that a few profit from, in Garden Earth people work for their satisfac­tion and for doing something for the community.
• Where technology in capitalism is developed and chosen to maxi­mize some peoples’ profits, in Garden Earth it is selected to make life more enjoyable or transcend resource limitations.

We need each other and the existing form for our cooperation is what is called society or community. It is ruled by laws of nature, ecological conditions, human laws, norms inherent in our culture and values. The human being is part of society and vice versa. The well-being of humankind and society is intricately intertwined forever. Markets, the state, civil society and the private have roles to play in the future society. It is about expanding liberty and the notion of liberty to include also the capabilities of the individual and to resolve the false contradiction between the freedom of the individual and that of society. 

We simply have to go back to the Garden of Eden. But we can no longer do so as the hunters and gatherers who were driven out. Humankind is no longer equal to the giraffe, the carrot or the sheep, even less to the stone. Man is part of nature; thus, the well-being of human beings and of other species is intertwined. Because of the numbers, intelligence and development of the human species, we have a special responsibility for the survival of other species and for the relative stability and productivity of the earth’s ecosystems. 

Whether or not we like it, the survival of not only the human species but also many other species is in the hands of the human being.

Energy is the substance of the economy

“The compounding mistake, ... was a wide-eyed belief that ‘globalisation’ would make everyone richer, when the reality was that the out-sourcing of production to emerging economies was a self-inflicted disaster with few parallels in economic history. One would have to look back to a Spanish empire awash with bullion from the New World to find a combination of economic idiocy and minority self-interest equal to the folly of globalization.”

 This was not written by Naomi Klein or Vandana Shiva but by Dr. Tim Morgan at Tullet Prebon, one of the largest inter-dealer money brokers in the world, in the report The Perfect Storm. It has a certain extra tang and interest when you get damning opinions about our economic system from those that profit from it and have inside insights, even if they don’t say so much different than the anti-capitalists.

The report is one of the most damning analysis of where the global economic system is headed and in particular where “the West” has gone. For coming from the finance sector it has also good insights in how important (cheap) energy is and has been in the capitalist saga. I probably helps that Dr Morgan studied history and political science.  The four interrelated trends that have brought us where we are, according to Dr Morgan are: 

First, the Western world is still mired in the fall-out from the ‘credit super-cycle’, a financial bubble so vast that it makes Dutch tulips, British south sea stock, the 1840s railway boom and “the roaring twenties” look like “little local difficulties.

Second, globalisation is now being exposed as a disaster which has driven a critical wedge between Western nations’ consumption and their production.

Third, policymakers and the public do not even have access to data reliable enough for an accurate appraisal of the predicament.

Most important – given that the economy is an energy dynamic, not a monetary construct – the critical surplus energy component is now in rapid and seemingly-irreversible decline.

“Reducing production, increasing consumption and taking on escalating debt to fill the gap was never a remotely sustainable course of action. What this in turn means is that no return to the pre-2008 world is either possible or desirable”.

The folly of the ever increasing indebtedness has been explained by many others. The reports states that: “Between 1981 and 2009, debt grew by 390% in real terms, far out-pacing the growth (of 120%) in the American economy. By 2009, the debt ratio had reached 381%, a level unprecedented in history. Even in 1930, when GDP collapsed, the ratio barely topped 300%.” Dr Morgan says that it is not the debt itself that is remarkable but how long this could go on. A main mechanism to have it going and supported by the public was the extended period of ever increasing property prices, reaching its highest level of folly in Japan where one square meter in Ginza in Tokyo fetched up to US$ 215,000, which is what you pay for 100,000 square meters of the best agriculture lands in the world (and those prices are also inflated!). Adding to the illusions was the innovation of new financial instruments, which supported lending also to those who could not afford it. While US economic growth was $4.1. trillion between 2001 and 2007, consumers increased their debt with an enormous $6.7 trillion.

The damning account of the follies of globalization was what surprises me most in the report. Dr Morgan dismisses the talk of Western economies modernizing themselves by moving from production into services as obscuring the fact that “Western consumers sold each other ever greater numbers of hair-cuts, ever  greater quantities of fast food and ever more zero-sum financial services whilst depending more and more on imported goods and, critically, on the debts used to buy them.”

Consumption by Americans increased by $6,500bn between 1981 and 2011, while consumption by their government rose by a further $1,700bn. Meanwhile, the combined output of the manufacturing, construction, agricultural and extractive industries grew by barely $600bn. Net exports of services was worth $200bn in 2011, i.e. far from sufficient in bridge the gap between consumption and production.

Dr Morgan delivers an interesting critique of the theory of competitive advantage (originating from David Ricardo) which has underpinned the globalization “project”. According to the theory, the general wealth will increase if all countries specialize in those activities in which they possess the greatest competitive advantage over others. “This logic is valid if – but only if – the scope for growth is infinite. Unfortunately, an unlimited capability for growth can only exist if the supply of resources is infinite as well.” says Dr Morgan.

I am not able to judge the accuracy of the third major cause of the mess, the distortion of data, but it is certainly remarkable. Dr Morgan claims that inflation figures, GDP figures and several other key economic data are inaccurate. The US GDP is inflated by 15% through various “imputations”, such as the “owner-equivalent rent” which includes the estimated “rent” that a house-owner would have paid for his house were it rented in the commercial market.  

”All goods and services on which money can be spent are the products of energy inputs either past, present or future.”

Many have claimed that our economy is mainly an energy equation. For example, I write in Garden Earth:

”A barrel of oil represents the energy of 25,000 hours of human toil, that is, 14 persons working round the year with normal Western labour standards. The cost for pumping the oil is not more than a few dollars per barrel, and even with an oil price of many hundred dollars per barrel, it is very cheap[...] From this perspective, our current wealth can be easily understood and demystified. Even hundreds of years ago, long before industrial society and capitalism, the person who had hundreds of others working solely for him or her could lead a comfortable life. ”

It is more unusual that persons submerged in the financial system have these insights. But Dr Morgan certainly has. He states that the economy is a physical construct based on energy rather than a financial construct based on money. We have been blinded by the fetish money (read more on this on The business plan of the factory is to produce externalities): “money is the language rather than the substance of the real economy. Ultimately, the economy is – and always has been – a surplus energy equation”.  From there he continues to discuss the huge impact on the economy that a declining Energy Return on Energy Invested (EROEI) will have. I explain EROEI in this recent post. 

Dr Morgan states that the average EROEI has gone down from 40:1 in 1990 to 17:1 in 2010 and might decline to just 11:1 by 2020. This would cause an average increase of energy costs with 50%. In this perspective it is worth noting that the EROEI of the famed US shale oil is somewhere around 4-5:1. With an EROEI the direct energy share of the GDP would go from 6.7% to 9.6%, and perhaps reach 15% by 2030. Notably, increased energy costs cascade through the whole economy, and will cause cumulative effects. 

Clearly, cheap energy has been one of the major drivers not only for our increasing wealth, but also for globalization and for the debt economy, “debt really amounts to ‘a claim on future energy”. Similarly, the end of cheap energy will mark a tectonic shift in our society.
   

I am a strong believer of the huge importance of energy for our society, but perhaps Dr Morgan goes just a bit too far here. The fact that a lot of development has used cheap energy as its main driver is not necessarily a proof that energy itself constitutes the essence of human society. He claims, for instance that it is likely that food production will decline with half if energy becomes scarce. True, energy has a very important role in today’s agriculture system (read for instance Why oil price and grain price follow each other or Agriculture: How cheap energy (and capitalism) increased the gaps between rich and poor), but this is also an effect of that energy is cheap.

Choosing between several options for increasing production and productivity, methods involving high energy use are likely to dominate when energy is cheap. It is cheap fossil energy that has made the widespread use of nitrogen fertilizers a cornerstone in the farming systems, but if chemical fertilizers become uneconomic to use, farmers will use more biological nitrogen fixation, nutrients that are now flushed to the waterways will be recycled etc. Cheap energy has also driven globalization and increasing international trade in foods, but many countries could produce more food if global competition was less, and prices higher. 

I missed an analysis of the effect of the demographic transition. It seems to me be a fifth important trend to consider.I also missed an analysis of which role capital accumulation and capitalism play in the system.

The report is worth while reading, and it has a number of provoking statements and amusing one-liners. 

EROEI for dummies

I meet little Prosper carrying fire wood on his head in Butare, Rwanda. I try to ask him, the mother and the two other children if it is for the household or for sale, but fail to communicate. My assumption in this case is that it is for sale. Most poor people in the work use fire wood for their cooking. When population grows people, mostly women and children, have to go further and further to collect it. This image is a simple way to understand the concept of Energy Return on Energy Invested (EROEI) and why it matters for us and the economy.

There is little work to cut down a tree in your backyard to use for fire wood.  As fewer and fewer trees remain in your courtyard, you have to walk to collect firewood, and you may gradually have to use twigs and bushes instead of logs as trees grow scarcer and scarcer. So you end up spending more and more energy on getting a lower and lower quality of energy for the family supper.   

The first fossil fuels were easily available and there were little efforts needed to bring it up, in a similar way as the first trees in the backyard. The Energy Return on Energy Invested (EROEI) was something like 100. That is it took one liter of oil to extract 100 liters of oil. Many oil sources now yield just 10 or 20 liters for each liter used. The net effect is that we have to increase the total energy use just to keep the net energy delivered to society on the same level.

EROEI is the ratio of the amount of usable energy acquired from a particular energy resource to the amount of energy expended to obtain that energy resource. When the EROEI of a resource is less than or equal to one, that energy source becomes an "energy sink", and can no longer be used as a primary source of energy. (Wikipedia)

EROEI is often showed with a diagram like this[i]:


What we see is that when EROEI approached 5 there is a dramatic increase in the amount of energy that has to be used to produce energy. In its early days, oil frequently yielded an EROEI in excess of 100:1, meaning that 1% or less of the energy contained in a barrel of oil had to be used to deliver that barrel of oil. Not a bad bargain. Oil production today more typically has an EROEI around 20:1, while tar sands and oil shale tend to be about 5:1 and 3:1, respectively. Perhaps the effect is better seen by re-writing the graph assuming that we want a constant supply of energy (set at 100 in the graph).

 Here we see very well the extreme effects of an EROEI going below 5. If we want to get energy corresponding to 100 barrels of oil from a process that has an EROEI at 3, like shale oil, we have to produce 150 barrels as energy corresponding to 50 barrels will be used in the production process. Some of the biofuels are have an EROEI under 2, which is a rather meaningless exercise, especially considering the huge environmental impact of their production. Solar energy from photovoltaic element are in the range of 3:1-10:1. Wind energy perhaps in the range of 15:1

This has big economic effects. As Richard Heinberg writes in End of Growth

“As EROEI declines over time, an ever-larger proportion of society’s energy and resources need to be diverted towards the energy production sector.” 

I will come back to this very soon in another post.

And it also has huge environmental effect. For instance, if the US is going to build its energy supply around shale oil and tar sand the gross energy use will increase tremendously, and also its emissions of green house gases.

EROEI is mostly discussed in the phase of energy production, i.e. at the well or mine head. Another aspect of EROEI is also to consider the whole system. For instance, for solar systems, one can calculate the EROEI directly in the panel, but one should include the storage and distribution systems that are an integral part of the system. Finally, one should look at the EROEI all the way to consumption. So if the EROEI of petrol at the pump is 10:1, the EROEI of the use of petrol in the car is only 3:1, as only a smaller part of the fuel is converted into the movement of the car (Garden Earth).

There are many other aspects of relevance when discussing energy systems, for example, the quality of the source and how it can be used. For solar and wind energy there are also big problems associated with intermittence and storage.

For a rather recent EROEI update, read A Review of the Past and Current State of EROI Data Ajay K. Gupta  and Charles A.S. Hall.

For related post on this blog

Energy squeeze, Is it a trap, a cliff or just a simple adjustment?
Burning food?
It takes more energy to eat than to farm
Energy and Agriculture
There will be no nuclear power without oil
our energy debt

 

 

---

[i] Mearns, E. In The global energy crises and its role in the pending collapse of the global economy, Royal Society of Chemists, Aberdeen, Scotland, October 29th, 2008; Aberdeen, Scotland, 2008

3000 readers

Just wanted to thank the increasing number of people reading my blog. December was the first month exceeding 2,500 page views and January has already beat 3,000. Stíll a blog dwarf, but growing. I expect that my book Garden Earth will drive more traffic in the future.

Is commercialized farming the cure for smallholders' ills?

In the period 1996 to 2011 I worked a lot with various efforts to link smallholder farmers to markets, mainly organic, in developed countries. The biggest engagement was in EPOPA:


"By 2008, 80,000 farmers contracted by EPOPA have sold organic products to exporters for approximately US$ 15 million per year. All farmers received higher prices due to the organic premium, which ranges from 10-25% over the conventional price. Taking into account the size of households, 600,000 people have benefited from the programme."
This is how the Export Promotion of Organic Products from Africa is presented as one of a limited number of case studies of "Evidence of Impact" on the joint donor web site. 

The cost of the programme for the Swedish taxpayers is one cup of coffee per taxpayer. You can read a whole book about this successful project here.

Overall EPOPA was a success. Today, linking farmers to markets is an overarching policy for almost all development agencies as well as governments. It also fits very well with a development model that assumes that more markets and more capitalism is the best path to development. Considering that small-scale farming is a main component of the livelihood of something like a third of the worlds population, and most of the worlds very poor it is only natural that there is a huge interest in how to improve livelihood of them. While I do think it works quite well, it has, unfortunately, been oversold.

A recent report from Hivos, Small Producer Agency in the Globalized Market, looks deeper into if and how smallholders can benefit from globalized markets. In short the answer is that a few of them will - and they will soon not be smallholders as the recipe for success is to grow, mechanize and buy up your neighbours farms. This should be no surprise, this is how the farm sector developed in other parts of the world. The report estimates that linking farmers into modern value chains (be they organic, fair trade or normal) may benefit only about 2-10 percent of the farms - and it will be those with the greatest assets.

The reality is that commercialization of farming is good for the economy and for a few so called progressive farms, but that most of the farms will not benefit from it. Some will become farm labourers at the farms of the more successful, or in huge agri-business plantations, other will only get a better life if there is some place for them to go. 

The report does a good job in demonstrating how diverse the group of small farmers is and therefore also their coping strategies:

"multifaceted livelihoods that use diversity of economic activities to hedge risks and make the most of scarce land, cash and other resources. Farmers may rent various plots and grow multiple crops; move in and out of different informal (and sometimes formal) markets; and combine farm income with off-farm jobs and remittances from migrant family members. With more rural people, especially youth, moving back and forth from farm to city, there are fluid frontiers between urban and rural markets, boosting the vibrancy of local economies."

The report recognise that the informal economy may actually be very important for most farmers and that the army of middlemen, often considered parasites, can play a positive role in markets for small-holders by offering easy market access and intensive competition for supply, rather than tying farmers into integrated value-chains. Those trade links are also the ones that supply the hordes of urban poor. In many parts of the world the informal economy is on the rise according to OECD reports.

The authors, Bill Vorley, Ethel del Pozo-Vergnes and Anna Barnett, concludes that

"we should not continue to expect multiple wins — on poverty reduction, food security, security of supply, ecosystem services and rural development — from the single-minded approach of including farmers and their organisations in value chains and ‘empowering’ them in markets as beneficiaries of external initiatives. to get the future right for the majority of small-scale producers who cannot readily participate in modern value chains, or for the many youth with aspirations out of farming, we must recognise other layers of the picture."

See a video from the launch of  Small Producer Agency in the Globalized Market


Other posts of relevance:
The road to food security: What works and what doesn’t?
Don't buy organic instead of changing the world - do it as part of changing the world
Traditions, Western Union, Churches and Taro
Will there be farmers?

Economy of the Common Good

According to an opinion poll in Germany and Austria, nearly 90 per cent of the population want an “alternative economic order”.  The author and political activist Christian Felber developed the basis for the Economy of the Common Good in his book Neue Werte für die Wirtschaft. Eine Alternative zu Kommunismus und Kapitalismus (New Values for the Economy. An Alternative to Communism and Capitalism) in 2008. In response to this publication, numerous entrepreneurs have come together in order to refine the model together with Christian Felber and have termed it “Economy of the Common Good”.

The Economy of the Common Good (ECG) want to change the driving entrepreneurial motivation shift from the pursuit of profit towards the pursuit of the common good and from competition to cooperation.

You can download a short summary of the 20 most important elements of the ECG.

And listen to an informative lecture by Christian Felber here


Some 200 companies are now busy implementing the concept. Initially they hope to attract consumers to buy the products from the companies voluntarily. However, a market based on profit-seeking and competition will not be able to reward good behaviours fully, so the initiative also promotes incentives and tax benefits for companies that follow the code of the Economy of the Common Good. 

While the proposal sounds reformist and not so radical, they don't fall far from being a "revolution" as they suggest abolishment of financial markets, private profit and want to redistribute wealth and income radically. Christian Felber underlines that any change should take place in a constitutional and democratic way. I appreciate in particular the clear analysis of the combined damage by profit-seeking and competition, which I also state in my book Garden Earth.

As a result of my long experience in the organic market and other sustainability markets I am less optimistic about how useful the various indicators and measurements they propose are in this context. Even more so as it is proposed to tie advantages such as:
‐ Lower taxes
‐ Reduced customs duties (e.g Fair Trade)
‐ Loans on more favorable terms
‐ Priority in public procurement
‐ Research cooperation with public universities
to companies based on their score in the Common Welfare Score. I simply don't believe in those kinds of ranking and scoring systems, and even less to have them as a basis for policies.

Thinking fast and slow about the world

Did you know that if you make people think about old age, they will walk more slowly? Or if you have a poll about more money to the schooling system more people will support that proposal if the poll is in a school than in the municipal building? Those are effects of what is called priming. 

I just read Thinking Fast and Slow by Daniel Kahneman, recipient of the Nobel Prize in Economic Sciences. He shows that if you make people think about ”money”, even by simply having dollar bills in your screen saver, people don’t only become more interested in money they also become more selfish, they are less inclined to help someone in need and show more preference for being alone. In short, the thought of money feeds individualism.

Most of the book is about how we make choices and how we form our views. Kahneman shows how intuition and emotion, stereotypes, often rule our behaviour, also when we believe that we are acting ”rationally”. Here he also deliver a criticism of the idea that people are governed by rational economic assessments, which is a cornerstone of the neo-liberal ideas, in particular those expressed by Milton Friedman at the Chicago School of Economics.

Actually, not even in the very heartland of economics are people very rational. Kahneman cites research that examined 10,000 individual private investors over seven years. On average, the shares that individual traders sold did better than those they bought, by a very substantial margin: 3.2 percentage points per year. “It is clear,” concludes Kahneman, “that for the large majority of individual investors, taking a shower and doing nothing would have been a better policy than implementing the ideas that came to their mind.”

Cabbies in New York work fewer hours in rainy days despite the fact that they earn the most per hour those days, while they sit and sweat in empty cabs in sunny days instead of going to the beach. And even when it comes to simple buying and selling we all have a tendency to value an item we have higher than what we would be willing to offer to buy it.

Kahneman says that the robots of neoliberal economics, Econs he calls them, are not real Humans. I believe that most economists and their study objects are subject to ”priming” which makes them much inclined to see all aspects of society from the perspective of classic economic theory. The bigger tragedy is that by the constant bombardment of economistic messages combined with the commercialism of the market place taking over almost all space and time of our lives, the idea that we all act as Econs is self-fulfilling to some extent.I write about this in Garden Earth:

Simpleton economicists and their popularizers want to explain all human actions by economic drivers. Also, many Marxists tend to see the acts of different groups to be fully dependent on their economic standing in relation to production factors—here the concept of ‘class’ is critical. The reasoning goes from self-evident things to very cumber­some explanatory models. ... The basic error is the perception that economic drivers are superior to all other drivers and that all other drivers can be ‘trans­lated’ into money. The strength in the reasoning is that the economic driver is a forceful paradigm with many self-reinforcing loops. And as a society is built along this paradigm, human beings consciously and subconsciously create a world that rewards exactly this; in such a way it becomes self-fulfilling. But this is not truer than the statement that the most important driver for human development is the ability of an individual to throw a spear farther than anyone else. This ability was most likely very important in a hunter society or a war society, much more important than the ability to amass wealth.

The book

Thinking Fast and Slow is very comprehensive, even though Kahneman, in typical modesty, says the target for the book is to be relevant for the gossip at the water cooler. The largest part of the book is about two sorts of thought processes, which Kahneman calls System 1 and System 2, or “fast” and “slow” in the words of the title of the book. System 1 is intuitive, often unconscious, relying on past association of ideas. System 2 is conscious, reasoning, full of effort but often lazy. For instance, even experts are rarely basing their reasoning of consideration of statistical evidence, and even scientists make a lot of errors. Kahneman readily admits that he himself is also a victim. While we might believe that it would be best to suppress System 1 and let System 2 take command all the time, Kahneman thinks that System 1 is the “hero of the book”; the skilled craftsman or professional certainly couldn’t be what they are if they didn’t work also with intuition.  

We hugely underestimate the role of chance in life. As the example of fund managers above shows you'd do just as well if you entrusted your financial decisions to a monkey throwing darts at a board. And again and again, we are fooled by our low understanding of sampling and statistics. The fact that most of the best performing schools are small is taken as a proof that small schools are better, while in reality, Kahneman says, smaller samples will always produce more variation. Not only are the best schools small, also the worst are small. Bigger schools represent a bigger sample and therefore they tend to move towards the average. The same goes for incidences of a disease; the highest rates will always come from small population groups. There are certainly a lot of interesting facts in the book.

But frankly, the book is hyped. It is described as an ”immediate classic”, ”groundbreaking”, and is compared to the works of Darwin, Smith or Kopernikus etc.  There is not much new in the book for those that have read their behaviour psychology and biology. The discussion about System 1 and System 2 are long-winded while the examples given are predominantly tests in simple game and choice experiments from universities.

The examples from real life situations are just so more interesting. For instance, the fact that Israeli parole judges would grant parole to almost 65 per cent of the cases after the judges had eaten a meal, but almost zero by the time the next meal was due! Or that the only thing that is worse at work than being alone is that your boss is with you. 

While too much text is spent on the two systems, Kahneman takes up very interesting topics towards the end of the book, but here in a too rhapsodic manner. He discusses risk assessment as well as happiness and well-being. In particular the latter deserves a better analysis than the one in Kahneman’s book. Still, the book is worth reading, and Kahneman has a humble and human attitude and sound scepticism towards overconfident science.  And you can always discuss it with your colleagues at the water cooler.  

Some reviews of the book

NYT

The Telegraph

Financial Times

The Guardian

Svenska Dagbladet (Swedish)

Aftonbladet (Swedish)

Who says gaps are closing?

I just wrote about the distribution of wealth in the world. Below you can see the development of agriculture value added per worker. As you can see the gap between the rich countries and the poor countries is increasing a lot. Not even China has kept pace in agriculture productivity with the OECD countries. It has indeed increased value added per worker three times in thirty years, but France increased it 5.5 times in the same period. In Africa it was more or less constant for thirty years.



The development is perhaps better visible in a logarithmic diagram:


Apart from debunking the myth that "business-as-usual" will help the poor, it also puts into question who is benefiting from the increased global competition in agriculture commodities.


Agriculture value added per worker is a measure of agricultural productivity. Value added in agriculture measures the output of the agricultural sector (ISIC divisions 1-5) less the value of intermediate inputs. Agriculture comprises value added from forestry, hunting, and fishing as well as cultivation of crops and livestock production. Data are in constant 2000 U.S. dollars.

Looking at yield per hectare the picture is not as straight-forward. But then again, yield per hectare has never been a strong indicator of development, even if some agronomists are obsessed by it. 
Check here how it looks at Gapminder 

Read also: 

Stop pretending there are only winners in the global market

Agriculture: How cheap energy (and capitalism) increased the gaps between rich and poor

 

We are the world - or?

The richest 10 percent have almost 90 percent of the total assets in the world, while the poorest half of the global population has a mere 1 percent of the assets. The richest percent alone controls 46 percent, almost half of the world.

 This and a lot more can be found in the Credit Suisse Global Wealth Databook 2012*. Their figures show that global household wealth totaled USD 222.7 trillion in mid-2012, equivalent to USD 48,500 for each of the 4.6 billion adults in the world. The corresponding values for the end of the year 2000 are USD 113.4 trillion in aggregate and an average of USD 30,700 for the 3.6 billion adults alive at that time. Thus global household wealth rose by 96% between end-2000 and mid-2012 and wealth per adult climbed 58%.   

"To be among the wealthiest half of the world, an adult needs only USD 3,700 in assets, once debts have been subtracted."

Averages are deceitful, especially when it comes to distribution of wealth. Some are dirt poor while others are stinking rich. 

Credit Suisse estimates that there are 84,500 Ultra High Net Worth (UHNW) individuals worldwide with net assets exceeding USD 50 million each. North America dominates the regional ranking, with 40,000 UHNW residents (47%), while Europe hosts 22,000 individuals (26%), and 12,800 (15%) reside in Asia-Pacific countries, excluding China and India.


The enormous Indian middle class. really? 95% of the population in India have assets below 10,000 dollars.

First, it is even hard to comprehend how such a skewed distribution of wealth is at all possible. Second, it is astounding that there is not more attention to it, Third, I think is is absolutely clear that redistribution of wealth is  the easiest, the quickest and the most morally just approach to global poverty. Not the only approach of course;  over time it is essential that wealth creation is reaching everybody. But even to start that process presupposes that the dirt poor get access to resources, which equals wealth.


Read also:
Growing inequality, between people, between countries, between region, between urban and rural.
Who gave you your property?
The wealth Pyramid - a sign of poverty
And of course, I write a lot about this in Garden Earth. 


*Credit Suisse Global Wealth Databook. – an in-depth project that offers investors the most
comprehensive study of world wealth, and which remains the only study that analyzes the wealth of all the world's 4.6 billion adults.

Read all about it

'This book presents a powerful narrative overview of the human condition in the 21st century. In the decades ahead, our species must navigate the end of fossil fuels and economic growth as we've known it — a tall order by any estimation. The risks are great, but so are the potential rewards if Rundgren's advice is heeded and humanity embraces a post-carbon, post-industrial culture.'
Richard Heinberg, Senior Fellow, Post Carbon Institute, Santa Rosa USA, Author, The End of Growth


If you enjoy my posts, you now have the chance to get whole load by reading my book
Garden Earth - from Hunter and Gatherer to Global Capitalism and Thereafter. 
420 pages of facts, analysis and challenging ideas.

In the first step it is published as a paperback available from
Create Space
Amazon.com

Amazon.de 
Amazon.es  
Amazon.fr
Amazon.it
Amazon.co.uk

It is also available as an e-book for Kindle
Amazon.com
Amazon.ca
Amazon.com.br
Amazon.de
Amazon.es
Amazon.fr
Amazon.it
Amazon.co.jp (also published in Japanese)
Amazon.co.uk

It will be published as a hard cover within a few month.

For the Swedish version look here
For the Japanese version look here

It is particularly rewarding that I managed to get it published still 2012, even if it was the very last days...
Enjoy reading.

Increase happiness productivity

Compare a litre of water in the swimming pool of a rich person with a litre used for drinking or for cooking in the house of a poor person. To make things worse, the cost of a litre of water that one has to carry by hand is often higher in the slums in developing countries than a litre conveniently poured from the tap by the rich, and the quality of the water is also mostly better for the rich. So the poor are discriminated against thrice over. Isn’t this perspective in itself enough to make one argue in favour of global redistribution of resources?

An increase in the absolute income by a certain sum does a lot more good—results in more well-being—for a poor person than for a rich person. One could discuss the ‘happiness productivity’ of a certain resource, that is, how to use a resource to deliver as much happiness or satisfaction or well-being as possible. 

Diener and Seligman 2005

There is no direct correlation between an individual’s or a country’s economic (material) wealth and their sense of happiness, satisfaction or well-being. This is an old observation. The more balanced defendants of capitalism also agree; for example, the economist Joseph A. Schumpeter says that people in industrial societies don’t have to be happier or experience more well-being than people in the Middle Ages. An American study from 2004 states that while economic wealth has increased threefold in 50 years (see figure), people’s feeling of well-being has been constant; in fact, mental health has deteriorated and social networks are weaker. Between 1958 and 1991, the average income of the Japanese increased sixfold; still, in 1991 they were as satisfied (or as little satisfied) as their parents were in 1958.

Material wealth doesn’t lead to more well-being; on the contrary, it appears that the human quest for more things is threatening not only our space on earth but, ultimately, also our own well-being. There is no reason to moralize over this; considering that scarcity has been the norm for millennia, no built-in barriers exist against over-consumption of food or things. But now the damage is evident, for the physical environ­ment, for society as a whole and for individual human beings. Both the values that hail consumption and the economic system that is driven by this consumption and that, at the same time, amplifies consumption have to be changed. And these two are strongly linked, one feeds on the other, therefore they need to be tackled simultaneously. Inequality adds to the equation by leading to people being more frustrated than they would be in a more just society. To compensate for this frustration they consume. Not only that, inequality itself drives comparison and competition, which had growth as its main expression.

(based on Garden Earth -From Hunter and Gatherer to Global Capitalism and Thereafter, my book that will be published next week)

Do you like the cover?

The publication of Garden Earth is now imminent. This is the proposed book cover. Do you like it?

There is a poll on the right side for you to fill in. It is perfectly anonymous.

And you can also make more elaborate comments below.
What the book is about? Read here....

Don't cry for ISO 9001

In 2011, global uptake of ISO 9001 falled. There is just above a million firms certified to ISO 9001 globally. There have been marked drops in the uptake in North America and Europe lately. In Europe almost 40,000 fewer companies were ISO 9001 certified 2011 compared to 2010. In North America the number dropped from a high of 61,000 (ISO 9001 was never that big in North America) in 2006 to just 37,000 in 2011.


Also for the rather new ISO 22000 standard there seems to be little interest.

I will not shed any tears over this as I consider the systems being hyped and sometimes even counterproductive. See my earlier posts on the matter.


Quality management is a management fad elevated to divinity
How quality Management can result in low quality....
What gives value to an eco label

Read the whole ISO 2011 survey here 

And check Dilbert's view here:
Dilbert explanation 1
Dilbert explanation 2

Update: 26 February: It seems like all companies implicated in the horse meat scandal in Europe have had their ISO 9001 certificates...

 

Ten reasons to build another word

     The difference between reality and rhetoric in which all are said to be equal and to have the same opportunities is simply too great. Our use of both mineral resources and living resources, with their origin in photosynthesis, is now at a level that simply cannot be sustained.We have now reached a stage where we need to divert more attention to building a new world than to fixing the old one. 

  

 

1.   Our relationship with nature is characterized by over-exploitation of raw materials and natural resources. Certainly, history shows that we have a remarkable capacity to overcome the limitations of our natural environment. Nevertheless, our use of both mineral resources and living resources, with their origin in photosynthesis, is now at a level that simply cannot be sustained. This can be expressed in different ways such as that we are soon reaching ‘peak oil’; that our ecological footprint is already one and half Earth; that we are already using more than half of the entire biosphere; and that wilderness is now only marginal compared to human-dominated ecosystems.

2.   We know that the release of greenhouse gases, largely the effect of extraction of fossil fuels and degradation of natural resources, will lead to marked changes in climate, resulting in great human suffering and material costs. In addition, we have caused severe reduction of biological diversity, the very web of life on earth. We have manipulated other life processes, such as the nitrogen cycle, to such a scale and in such a way that it will most certainly lead to severe disruptions.

3.   We have unleashed 100,000 chemicals, but we have no idea how they affect us. We take medicines, eat food additives and indirectly consume pesticides we spray on crops. Drinking water and the air we breathe are full of man-made chemicals. We have very little knowledge about the long-term impact on us of the cocktail of chemicals we spread, and we know even less about how it affects our living environment.

4.   The production and productivity revolution, which we explain with entrepreneurship, the superiority of capitalism and an individual’s strive for personal gain can equally be interpreted as the result of one thing: access to external sources of energy, primarily fossil fuel. Use of energy is also the cause of many problems, most obviously the greenhouse effect. At least equally serious is that energy is the engine in almost any other resource depletion and degradation of ecosystem services. But the cheap energy sources are drying up and, more importantly, their efficiency is dwindling.

5.   With the commercialization of farming and the introduction of chemical fertilizers, we no longer have to reproduce our production ability and capacity within the system itself. To replenish natural capital, fertility, labour and genetic resources are bought over the counter, thus separating production and reproduction. This system is commercially efficient, but very inefficient in its use of energy; it is threatening the long-term fertility and capacity of the soil. Despite the emphasis on production, a billion people go to sleep hungry every day.

6.   The system does not have sufficient self-correcting feedback loops to keep in check income inequality; the only thing that can keep it running is a constant economic growth so that those at the bottom, after all, will be a little better off every year. This is not primarily an economic problem but a social and moral problem. The difference between reality and rhetoric (in which all are said to be equal and to have the same opportunities) is simply too great.

7.   The capitalist model of development was most successful in countries that industrialized first, followed by countries that had different comparative advantages in certain development stages. But large parts of humanity are outside of the development, including both the individuals who are left behind in industrialized countries and those whole countries that have no comparative advantages to exploit. Just like not all communities could make the transition from gathering and hunting to farming, many communities today cannot make the transition to a capitalist society because they lack the right conditions.

8.   The values, attitudes and mechanisms that form the foundation of capitalism are obstacles to the harmonious development of society. Competition is promoted at the expense of cooperation, self-interest at the expense of solidarity and commitment to others, private property at the expense of commons and exploitation at the expense of stewardship or nursing.

9.   The combined effects of those values, industrial technology, capital accumulation and market competition drive endless growth and consumption. It is certainly within human nature to be a little dissatisfied, to want more, to explore new opportunities. Without those properties, we would probably never become human beings in the first place. It is in society’s nature to contain these desires so that they continue to benefit us all. With the capitalist takeover of society, these restrictions don’t work any more, and we are all trapped in a treadmill of ever-increasing consumption. This consumption, driven by several of the factors mentioned above, has made us healthier, wiser, more beautiful and perhaps happier to begin with, but it has long crossed a line after which ‘more things’ do not mean more well-being.

10. That things are not a lot worse than they are is a result of the deep and strong properties of humanity and of our larger organism, our society. We do our best to mitigate the ills produced by our economic system. When old social institutions break down, we build new ones; when old values and culture lose their meaning, we develop new ones. Ultimately, we will also build a new world. We have now reached a stage where we need to divert more attention to building a new world than to fixing the old one. 

These ten points are from the introduction  of Garden Earth which is due to be published within a month. I will keep you posted...