Market Efficiency vs Technical Efficiency
Scientific development, while evolving in parallel with traditional economic development over the past 400 years or so, has still been largely ignored and seen as an “externality” to economic theory. The result has been a “decoupling” of the socioeconomic structure from the life support structure to which we are all tied, and upon which we all depend. In most cases today, apart from certain technical assumptions with respect to how a system not based on market dynamics and the “price mechanism” could function, the most common argument in support of market capitalism is that it is a system of “freedom” or “liberty”.
The extent to which this is true very much depends on one's interpretation, even though such generalized terms are often ubiquitous in the rhetoric of proponents of the model. It appears such notions are really reactions to prior attempts at alternative social systems in the past that generated power problems like “totalitarianism”. Hence, ever since, based on this fear, any model conceived outside of the capitalist framework is often impulsively relegated to the supposed historical tendency towards “tyranny” - and then dismissed.
Be that as it may, this underlying gesture of “freedom”, whatever its implication in subjective use, has generated a neurosis or confusion with respect to what it means for a species such as ours to survive and prosper in the habitat – a habitat clearly governed by natural laws. What we find is that on the level of our habitat relationship we are simply not free and to have an overarching value orientation of supposed freedom, which is then applied toward how we should operate our global economy, has become increasingly dangerous to human sustainability on the planet earth.
The difficultly of social relationships aside, humans, regardless of their traditional social customs, are strictly bound by the natural, governing laws of the earth and to stray from alignment with these is to invariably inhibit our sustainability, prosperity and public health. It should be remembered that the core assumptions of our current socioeconomic system developed during periods with substantially less scientific awareness of both our habitat and ourselves. Many of the negative consequences now common to modern societies simply didn't exist in the past and it is now this clash of systems that is further destabilizing our world in many ways.
It will be argued here that the integrity of any economic model is actually best measured by how well aligned it is with the known, governing laws of nature. This natural law concept is not presented here as anything esoteric or metaphysical, but as fundamentally observable. While it is true that the laws of nature are constantly refined and altered in our understandings over time, certain causal realities have stood, and continue to stand, as definitively true.
There is no debate that the human organism has specific needs for survival, such as the need for nutrition, water and air. There is no debate with respect to the fundamental ecological processes that secure the environmental stability of our habitat that must go undisturbed in their symbiotic-synergistic relationships. There is also no debate, as complex as it is, that the human psyche has, on average, basic predictable reactions when it comes to environmental stressors and hence how reactions of violence, depression, abuse and other detrimental behavioral issues can manifest as a result.
This scientific, causal or technical perspective of economic relationships reduces all relevant factors to a frame of reference and train of thought relating to our current understanding of the physical world and its natural, tangible dynamics. This logic takes the science of human study, hence, again, the shared nature of human needs and public health, and combines it with the proven rules of our habitat, to which we are synergistically and symbiotically connected. Put together, a “ground up”, rational model of economic operation can be generalized with very little need, in fact, for the centuries of traditionalized economic theory.
This isn't to say those historical arguments do not possess value with respect to understanding cultural evolution, but rather to say that if a truly scientific worldview is taken with respect to what “works” or “doesn’t work” in the strategy of efficiency demanded by the chess-game of human survival, there is very little need for such historical reference in abstraction. This view sits at the core of TZM's reformist logic and will be reviewed again in part III of this text.
The bottom line is that these points of near-immutable scientific awareness are almost completely without recognition in the economic model dominant today. In fact, it will be argued that the two systems are not only decoupled, they are diametrically opposed in many ways, alluding to the reality that the competitive market economy is actually not “fixable” as a whole, and hence a new system based directly on these “natural law” realties needs to be constructed from the ground up.
This essay will examine and contrast a series of “economic” considerations from both the perspective of the market system (market logic) and this noted mechanistic or “technical” logic. It will express how “efficiency” takes on two very different meanings in each perspective, arguing that “market efficiency” works only to be efficient with respect to itself, using man-made rule-sets related mostly to classical economic dynamics that facilitate profit and growth, while “Technical Efficiency”, referencing the known laws of nature, seeks the most optimized manner of industrial unfolding possible to preserve the habitat, reduce waste and ultimately ensure public health, based on emerging scientific understandings.
Cyclical Consumption & Economic Growth
Market capitalism in basic operation can be generalized as an interaction between owners, laborers and consumers. Consumer demand generates the need to produce via the owners (capitalists), who then employ laborers to perform the act of production. This cycle essentially originates with “demand” and hence the real engine of the market is the interest, ability and act of everyone buying in the market place. All recessions/depressions are a result, on one level or another, of a loss of sales. Therefore the most critical necessity for keeping people employed and hence keeping the economy in a state of “stability“ or “growth” is constant, cyclical consumption.
Economic growth, which is generally defined as “an increase in the capacity of an economy to produce goods and services, compared from one period of time to another” is a constant interest of any national economy today and, consequently, the global economy in general. Many macroeconomic tactics are often used during times of recession to facilitate more loans, production and consumption in order to keep an economy functioning at or ideally beyond its current level. The business cycle, a period of oscillating expansion and contraction, has long been recognized as a characteristic of the market economy due to the nature of “market discipline”, or correction, which, according to theorists, is partly a natural ebb and flow of business successes and failures.
In short, the rate (increase or decrease) of consumption is what generates the business cycle's periods of growth or contraction, with macroeconomic monetary regulation generally increasing and decreasing ease of liquidity (often via interest rates) in order to “manage” the expansions and contractions. While modern, monetary macroeconomic policy is not the subject of this essay, it is worth pointing out here, as an aside, that mutual respect toward both the expansion and contraction periods of the business cycle has not existed historically. Periods of monetary expansion (often via cheaper credit) that usually correlate to periods of economic expansion (as more money is being put to use) are hailed by the citizenry as national successes for society, while all contractions are seen as policy failures.
Therefore, there has always been an interest by the political establishments (who want to look good) and major, influential market institutions (protecting corporate profits) to preserve periods of expansion for as long as possible and fight all forms of contraction. This perspective is natural to the value system inherent to capitalism for “pain” is to be thwarted at all times, often in a shortsighted manner. No company willingly wants to downsize nor does any political party willingly want to “look bad”, even though traditional economic theory tells us that these periods of contraction are “natural” and should be allowed.
The result has been, in short, a constant increase in the money supply (i.e. purchasing power and capital) during times of recession, with the end result being massive global debt, both public and private. The reality is that all money comes into existence through loans and each of those loans is made with interest attached, where the loan must be paid back with the interest fee accrued (bank's profit); meaning that the very nature of money creation automatically entails a negative balance by default. There is always more debt in existence than there is money in circulation.
So, returning to the main point with respect to the need for demand/consumption to keep the economy working, this process of exchange and general focus on growth is at the heart of the market's context of “efficiency”. It doesn’t matter what is being produced or the effect on the state of human or earthly affairs. Those are all, again, “externalities”. As a concentrated example of this logic, the stock market, which is itself nothing more than the trading of money and its now numerous "derivatives", generates enormous GDP and "growth" through resultant sales/profit.
Yet, these acts arguably produce nothing of tangible, life supporting value. The stock market system and the now massively powerful financial institutions are completely auxiliary to the real, producing economy. While many argue that these investment institutions facilitate businesses and jobs with their application of capital, this act is, once again, only systemically relevant in the current system (market efficiency) and utterly irrelevant in terms of real production (technical efficiency).
In short, when it comes to market logic, the more turnover or sales, the better - and that is that - regardless if the item sold is credit, rocks, “hope” or flapjacks. Any pollution, instances of waste or other such detriments are, again, “external”. There is no consideration for the technical role of actual production processes, strategies for efficient distribution, design applications or the like. Such factors are assumed to culminate metaphysically in the best interest of the people and the habitat simply because that is what the “invisible hand” of the market implies.
Yet, the growing “more with less” revolution in the industrial sciences has created a new reality where the advancement of industrial technology has reversed the pattern of “cumulative material effort” with respect to efficiency. The logic that “more labor, more energy and more resources” will produce proportionally more effective results has been challenged. In increasingly more circumstances, the reduction of energy, labor and materials to accomplish certain tasks has been the outcome, given our modern scientific, technical applications.
For instance, satellite-based communication today, while intellectually sophisticated, embodying a great deal of evolved knowledge, is, in physical reality, rather simple and resource efficient in comparison to the prior alternatives for communication, which in global application, involved enormous amounts of cumbersome materials, such as heavy copper wires, along with the difficult, often risky task of laying out such materials by human labor power. What is accomplished today with a set of generally small, global satellites in orbit is truly amazing by comparison. This design revolution, which gets to the heart of what true economic (technical) efficiency means, stands in direct opposition to the cyclical consumption, growth-based economic model.
Again, the intention of the market system is to maintain or elevate rates of turnover, as this is what keeps people employed and increases employment and so-called growth. Hence, at its core, the market's entire premise of efficiency is based around tactics to accomplish this and hence any force that works to reduce the need for labor or turnover is considered “inefficient” from the view of the market, even though it might be very efficient in terms of the true definition of economy itself, which means to conserve, reduce waste and do more with less.
If we hypothetically reduced our global society to a single, small island with a respectively small population, with very limited technology as compared to today, finding that only x number of food/survival items were possible in the natural regeneration of the land, would it be a good idea to employ an economic system that sought to increase the use and turnover of the island's resources as fast as possible for the sake of “growth”? Naturally, the ethic of strategic use and preservation would develop as an ethos in such a condition. The idea would be to reduce waste, not accelerate it, which, again, is what the true definition of “economy” means – to economize.
Unnecessary Obsolescence: Competitive and Planned
When we think of obsolescence, we often might consider the rapid technological changes occurring in the world today. Every few years it seems our communication and processing devices, namely computer technology, undergo rapid development. “Moore's Law”, for example, which essentially denotes how processing power doubles every 18-24 months, has been extended to apply to other, similar technological applications, illuminating the powerful trend of scientific advancement in general.
However, when it comes to goods production, two forms of (eventual) obsolescence occur today which are not based on the natural evolution of technological capacity, but rather result from (a) the contrived, competitive rule structure of the market system, along with (b) the driving urge for market “efficiency” in seeking turnover and reoccurring profit.
The first (a) could be called “competitive (or intrinsic) obsolescence”. This is obsolescence resulting from the consequential nature of a competitive economy, as each producing entity works to maintain differential advantage over another by reducing expenses in production in order to keep the price “competitively” low for consumer purchase. This mechanism is traditionally termed “cost efficiency” and the result is products that are relatively inferior the moment they are made. This competitive need permeates every step of production, with, in effect, a reduction of technical efficiency along the way via using cheaper materials, means and designs.
Imagine, hypothetically, if we took into account all of the material requirements for, say, the creation of a car, seeking to maximize its efficiency, durability and quality in the most strategically optimized way, based on the materials themselves - not the cost of those materials. The life cycle of the car would then be determined only by its natural wear and tear with a very deliberate design focus on upgrading attributes of the car when they have become obsolete or damaged by natural-use circumstances.
The result would be a production designed to last, hence reducing waste and invariably increasing efficacy of utility. It is safe to assume that many in the world today believe this is what actually happens in the design and production of goods but that simply isn't the reality. It is mathematically impossible for any competing company to produce the strategically best good, technically, in a market economy, as the “cost efficiency” mechanism guarantees a less-than-optimal production.
The second form (b) of obsolescence is known as “planned” and this production technique to ensure cyclical consumption gained interest in the early 20th century when industrial development was advancing efficiency at an accelerating rate, producing better goods, faster. In fact, there was not only a need to encourage more purchases by the general public, the problem of resulting increased lifespan and general efficiency of goods was also slowing consumption. Again, the “more with less” phenomenon was surfacing in a rapid way.
Rather than allow for a good's lifespan to be determined by its natural capacity, with the logical natural law intention for it to exist as long as possible, given limited resources on a finite planet and a natural interest to save energy, both material and human, corporations decided it was instead best to create their own “lifespan” for goods, deliberately inhibiting efficiency for the sake of repeat purchases.
In the 1930s, some even wanted to make it mandatory for all industries, legally, where life cycles were decided not by the natural state of technological ability but by the mere ongoing need for labor and increased consumption. In fact, the most notable historical example of this period was the Phoebus light bulb cartel of the 1930s where, in a time where light bulbs were able to last up to about 25,000 hours, the cartel forced each company to restrict light bulb life to less than 1000 hours to assure repeat purchases. Today, every major manufacturer strategizes to limit good life cycles based on marketing models for cyclical consumption and the result is not only the reprehensible waste of finite resources, but a constant waste of human labor and energy as well.
Outside the dynamics of the market economy, it is extremely difficult to argue against the need for optimum design of goods. Sadly, the nature of market efficiency disallows such technical efficiency by default.
Property vs. Access
The tradition of personal property has become a staple of modern culture with little financial incentive in the long run to utilize a system of sharing or access. While a few examples of community sharing of commodities do exist in the modern day, the general ethic of “ownership” and the inherent value/investment characteristics of property itself make such approaches more costly in the long run by the user than to engage in direct purchase.
From the standpoint of market efficiency, this is a good thing, as the more direct purchases of goods, the better. Generally speaking, if 100 people wish to drive a car, having 100 people purchase those cars is more “efficient” for the market than if 100 people shared 20 cars in a system of strategically designed access, enabling utilization based on actual use time.
If we analyze patterns of actual use of any given good on average, many types of products are found to be used intermittently. Transport vehicles, recreational equipment, project equipment and various other genres of goods are commonly accessed at relatively distant intervals, making the task of ownership not only somewhat of an inconvenience given the need to store these items, but also clearly inefficient in the context of true economic integrity, which seeks a reduction of waste at all times.
Every year, countless books are borrowed virtually for free from libraries around the world and returned, not only saving an enormous amount of material resources over time, but also facilitating knowledge access to those who might otherwise have no means to obtain it. Yet, this practice is a rare exception in the market efficiency driven world today as clearly it is to the disadvantage of the market to have anything available without direct purchase on a per-person basis.
However, let's hypothetically extend this idea of the sharing of knowledge to the sharing (enabled access) of material goods. From the standpoint of market efficiency, it would be extremely inhibiting. While profit would still be generated in the capitalist model by the loaning of items to people on the basis of their need, it would be enormously disproportionate when compared to the profit/consumption rates of a society based on separate, personal ownership of each good.
Yet, on the other hand, the technical efficiency would be profound. Not only would fewer resources need to be utilized (along with less labor power) since less of each good would need to be created to meet the use time of citizens, the availability of such goods could very well extend to many who otherwise would not have the ability to afford the purchase to begin with, only the “rental” fee (still assuming a market system). In this regard, the technical efficiency has two levels – environmental and social. From the environmental standpoint, a dramatic reduction of resource use; from the social standpoint (all things being equal), an increase in the access availability of such goods could also occur.
So, from the standpoint of technical efficiency, at the deep expense of market efficiency, a shared access rather than universal property oriented society would be exceptionally more sustainable and beneficial. Of course, such a practice would naturally challenge some deep value identifications common to the “propertied” culture today.
Competition vs. Collaboration
The question of society pursuing a competitive or collaborative culture has been a running debate for centuries, with assumptions of human nature common to the defense of competition. Today, economists mostly discuss competition as an incentive necessary to continue innovation, along with the generally implied assumption that there simply isn’t enough to go around on this planet and hence everyone has no choice but to fight on some level, with inevitable losers. Such assumptions noted, the themed context here of market vs. technical efficiency shall be explored with respect to the competitive benefits and/or consequences.
There are two core angles to consider: the first is (a) how competition affects industrial production itself; the second is (b) how it actually effects innovation or creative development.
(a) If we examine the layout of industrial production today, we see a complex global system of interaction, moving resources, components and goods constantly from one location to another for various production or distribution purposes. Business, in its pursuit of profit and cost efficiency, invariably seeks out inexpensive labor, equipment and facilities at all times to remain competitive in the market. This can take the form of local immigrant labor at minimum wage, a “sweatshop” production facility overseas, a relatively cheap processing factory across the country, etc.
The bottom line is that from the standpoint of market efficiency, the cost-to-profit ratio is all that matters, even if the actual act of this global processing is using disproportionately wasteful amounts of fuel, transport resources, labor power and the like. The notion of “proximal efficiency”, meaning in this case the efficiency derived from the distance between industrial production/distribution points, is not considered and the practice of globalization today engages in a vast amount of wasteful resource movement around the world based almost entirely on the interest of saving money, not optimal, technical efficiency.
This ignoring of the importance of “proximal efficiency” in industrial action, whether domestic or international, is the source of some very wasteful realities. Today, industrial production is almost entirely international, especially in the technological age. The degree to which this is needed, from a technical perspective, is slight, at best.
While agricultural production has historically been regional given the propensity of certain regions to produce certain types of goods, or perhaps facilitate a more conducive environment for other such cultivations, these issues are very few in proportion to the vast majority of industrial goods production, discounting as well various technological possibilities today to overcome such regional requirements.
“Localization”, meaning the deliberate reduction of distance between and around all facets of production and distribution, is the most technically efficient manner for a community to operate, taking into account the obvious exceptions, such as how, for example, mineral extraction clearly must begin at its point of origin in the earth, etc. It is simple to see, especially with respect to modern technical applications which currently go unused, how the vast majority of life-sustaining goods can be generated in close proximity overall to where they are to be utilized.
As will be described in further detail in part III of this text, there is a technically efficient train of thought with respect to the utilization of proximity when it comes to extraction, production, distribution and recycling/waste disposal. The end result would be enormous levels of resource and human energy preservation – preservation of a capacity that, in fact, could be reallocated if need be to further advancing projects, rather than squandered as mere waste via the market model today.
As a final note on this subject of how competition limits the technical efficiency of industrial production, increasing waste - the reality of good “multiplicity” is another issue. While all production by competing companies is typically oriented around historical statistics regarding what their “market share” is and how many goods they can sell on average, per region, the very fact of multiple corporations, working in the same genre of good production, producing nearly identical products with only mild variation, only adds to the sources of unnecessary waste.
As will also be described in the next sub-section, the idea of, for example, multiple cell phone companies competing for market share by mere design variation, generating consequentially relative inefficiencies in design due to different strategies to gain cost efficiency, coupled with the general lack of compatibility of components given the financial benefit of pushing proprietary standards and system compatibilities, creates another complex web of inefficiency.
Clearly, from the standpoint of technical efficiency, one collective cell phone company, working to produce the strategically best, most adaptable, universally compatible design, would not only be more respectful of the environment, it would also create a tremendous ease and use efficiency as well since the problem of seeking proprietary repair parts and overcoming compatibility problems, would be dramatically reduced.
It is often argued, however, that the pursuit of competition and the product variations that arise in the quest for market share by competing businesses is a way to introduce new ideas to the public. However, such a method could also be achieved by systems of direct, mass feedback from the public with respect to what is needed, coupled with an emergent awareness campaign about what is now possible given the empirical evolution of technological advancement.
(b) The second issue here, as noted, has to do with how competition affects innovation or creative development itself. While the assumption still persists today that differential reward for one's contribution motivates other people to seek that reward, which is also a common justification of the existence of “classes”, modern sociological study finds a number of conflicting views. The idea that humans are motivated inherently by a need to “beat” others by, for example, gaining material-financial rewards in excess of others, is without credible vindication, outside of the intuitive view drawn from the existing, highly competitive, scarcity driven market condition in which humanity finds itself today, by design.
However, once again, the sociological debate can be set aside as the context here is how competition relates to market & technical efficiency directly. In short, the competitive system seeks secrecy when it comes to business ideas, often universally against the open flow of knowledge. The use of patents and proprietary rights or “trade secrets” perpetuates not an advance of innovation as many proponents of the competitive market assume – but retardation.
It is very interesting to think about what knowledge means, how it is generated and how odd it is for anyone to rationally claim “ownership” of an idea or invention. At no time in human history has any singular individual culminated an idea that was not serially generated by many before them. The historical culmination of knowledge is a social process and therefore, any claim of ownership of an idea by a person or corporation is intrinsically faulty. The common semi-economic term used today is “usufruct”, which means “the legal right of using and enjoying the fruits or profits of something belonging to another.“ In reality, however, all attributes of every idea in existence today, in the past and forever in the future, has without exception a distinctly social, not personal point of origin.
It becomes obvious that the notion of intellectual property, meaning ownership of mere thoughts and ideas, has manifest out of the vast period of human history where one's creativity has become tied to one's personal survival. In an economic system where people's ideas have the capacity to generate income for them personally, the idea of such ownership becomes relevant. After all, if you “invent” something in the modern system which could generate sales and hence help your personal economic survival, it would be extremely inefficient, in the market sense of the word, to allow that idea to be “open-source”, since others, seeking survival themselves, would likely quickly seize that invention for their own financial exploitation.
It is also easy to see how the phenomenon of “ego” has manifest around the idea of intellectual ownership as well, since the basis of reward in such a system invariably has a psychological tie to one's personal sense of self-worth. If a person “invents” something, files for intellectual ownership, exploits it for profit and then manifests a large house and extensive property, his or her “status” as a human being is traditionally elevated as far as the standards set by culture – he/she is considered a “success”.
Yet, if we were to think about it in general, the sharing of knowledge has no negative recourse outside of the economic premise of ownership for profit exploitation. There is nothing to lose and, indeed, an enormous amount to be gained socially by the sharing of information. Coming back to the prior example in this essay of competing cell phone companies, we will notice that within the confines of boardroom meetings where often marketers, designers and engineers consider how to improve their product in general, the sharing of their ideas is paramount.
However, imagine if that meeting was extended to all competing cell phone companies at once, where not only could they remove their contrived, utility-less “marketing” angles devised to gain the market share of other competitors (such as aesthetic gimmickry), they could work to produce the cumulative “best” in concert. Extending even more so, what if all designs were “public domain” in the sense that anyone in the world who had an interest to help improve an idea was able to?
The schematics of a cell phone design could be posted publicly with a system of technical interaction where people from all around the world could help, if they had the ability, with the technical efficiency and utility of the design. While this is an abstract hypothetical example, it is clear that the result of such an open approach to the sharing of information could facilitate an explosion of creativity and productivity never before witnessed. As will be discussed in part III, the removal of the monetary-market system is critical to the facilitation of this capacity.
Labor for Income
At the core of the market system is the selling of an individual's labor as a commodity. In many ways, the ability of the market to employ the population has become a measure of its integrity. However, the advent of “mechanization”, or the automation of human labor, has become an ever-increasing point of interference over time. Historically, the application of machine technology to labor has been seen as an issue of not only social progress but also “economic” progress, in the market sense, mainly due to the increase in productivity.
The basic assumption is that mechanization (or more broadly technological innovation) facilitates industrial expansion and hence an inevitable reallocation of labor displaced by machine into new, emerging sectors. This is a common defense. Historically speaking, there appears to be some truth to this, where the reduction of the human work force in one sector, such as was the case with the automation of agriculture in the West, has been overcome to a degree by the advancement of other employment sectors, such as the modern service sector. However, this assumption that technological innovation will generate new forms of employment in tandem with those displaced by it, creating an equilibrium, is actually very difficult to defend when the rate of change of innovation, coupled with the cost saving interests of business is taken into account.
As for the latter, the “role” of mechanization from the standpoint of market efficiency exists almost solely to assist “cost-efficiency”. Robotics in the modern day have far exceeded the physical capacity of the average human being, along with rapidly advancing calculation processes which continue to vastly exceed human thought. The result is the ability of industry to employ machines, which invariably have more productive capacity than human labor, coupled with the extremely notable financial incentive of reduced liability for the business owners in many ways. While machines might require maintenance, they do not need health insurance, unemployment insurance, vacations, union protection and many other attributes common to human employment today. Therefore, in the narrow logic inherent to the pursuit of profit, it is only natural for businesses to seek out mechanization at all times, given its long term cost benefits and hence market efficiency.
As far as the suggestion that equilibrium will always be found eventually between new labor roles and displaced labor due to technological innovation, the problem is that the rate of change of technological development far exceeds the rate of new job creation. This problem is unique as it also assumes that human society would always want new employment roles. It is here where subjective cultural values should be considered. Given that our current sociological condition demands human employment as the backbone of market sustainability, hence market efficiency, the ethic of “work” and its identity associations, culturally, have perpetuated a force where the actual function of the labor role - its true utility - becomes less important than the mere act of labor itself.
Just as market efficiency has no consideration for what is actually being bought and sold in general, so long as it keeps cyclical consumption at an acceptable rate, the labor roles taken on today in production are equally as arbitrary in the view of the market. In theory, we could envision a world where people are being paid to do what could be considered “pointless” occupations, when it comes to utility, generating high levels of GDP with virtually no true social contribution. In fact, even today we could step back and ask ourselves what the social role of many institutions really is and perhaps come to the conclusion that they serve only to keep moving money around, not to create or actually contribute anything tangible for the benefit of society.
These are complex philosophical questions as they challenge dominant traditional ethics and the very nature of what “progress” really means in many ways. For instance, the following thought exercise is worth considering. Imagine if we were to revert our social system back to the 16th century, where many modern (21st century) technological realities were simply unheard of. The population of that era would naturally have expectations of what would be technically possible that would be far below what is generally accepted as possible today.
If this society was able to superimpose, overnight, the massive technological capacity of the modern era, there is little doubt that virtually everything related to the core survival of the population could be automated. The question then becomes, what do they now do with their newfound freedom? What becomes the cultural focus of their lives if the basic drudgery of fundamental survival was removed? Do they invent new jobs simply because they can? Do they elevate themselves, preserving and embodying this new freedom by altering their social system itself, removing this previously demanded “labor for income” requirement? These questions get to the root of what progress and personal/social goals and success really are.
Nevertheless, a dominant cultural value today is that of “earning a living”, and the application of mechanization, in the sense of market efficiency is actually a double-edged sword. While cost-efficiency is inherent to mechanization and hence the general improvement of profit by reducing costs for the business owners, the displacement of human workers, known today as “technological unemployment”, actually works against market efficiency to the extent that those unemployed workers are now unable to contribute to the needed cyclical consumption that powers the economy, since they have lost their purchasing power as “consumers”.
This contradiction within the capitalist model is unique. From the stand point of market efficiency, mechanization hence poses both a positive and negative outcome in this sense and when we realize that the rate of technological change will, in all probability, displace people increasingly faster than new sectors of employment can be created, mechanization as an inhibiting factor to capitalism becomes ever more apparent. It is, in total, decreasing market efficiency in this circumstance.
However, on the other hand, from the standpoint of technical efficiency, once again, we see vast improvement and immense possibilities on many levels. The production capacity enabled by this application clearly shows a powerful increase in efficiency regarding not only the effect of industrial production, but also a general increased efficiency of the goods themselves by extension of the accuracy and integrity inherent in production. Also, an implication of this new level of production efficiency is that meeting the needs of the global population was never more possible. It is easy to see that without the interference of market logic on this new technical capacity, which invariably inhibits its full potential, what could be relatively deemed an “abundance” of most life sustaining goods could be facilitated for the global population.
Scarcity vs. Abundance
“Supply and demand” is a common market relationship which expresses, in part, how the value of a resource or good is proportional to how much of it is in existence or accessible. For example, diamonds are considered quantitatively more rare and hence of higher value than water, which can be found in a general abundance on the planet. Likewise, certain human creations, if created in short supply, are also subject to this dynamic, even if the perception of rarity is culturally subjective, such as with a single canvas painting by a renowned artist which might fetch many, many times its actual resource value in a sale.
From the standpoint of market efficiency, general scarcity is a good thing overall. While extreme scarcity is, indeed, destabilizing both for an industry or an economy as a whole (“shortages”), the most optimized state within which the market system can exist is in a sort of balanced scarcity pressure, hence the assurance of sales-producing demand. Again, the life requirements of humans are not recognized in this equation.
Meeting human needs in the form of food, housing, low-stress circumstances for mental health, etc., is utterly “external” here and has no direct relationship to market efficiency. Meeting human needs in a direct sense would, again, be inefficient to the market's logic as it would remove the scarcity pressure that fuels cyclical consumption. Put another way, there is a need for imbalance in order to fuel this demand pressure and this imbalance can come in many forms.
Debt, for example, is a form of imposed scarcity which puts a person in a position to which they must often submit to labor which may be of a more “exploitative” nature – meaning the reward (usually the wage) is grossly disproportionate to what is needed to keep a healthy standard of living in one's circumstance. In this respect, the debt system facilitates a distinct form of market efficiency as it benefits the employer since the ease of lowering wage rates (cost efficiency) naturally increases as private debt levels increase.
The more in debt people are, the more likely they will submit to low wage labor and hence generate more profit for the business owners. In fact, the same logic can be applied to the use of legally unregulated “sweatshop” labor in the third world, which is frequently “exploited” by Western companies. Excessive work hours coupled with notoriously low wages are common - yet these people have literally no choice but to submit as there are no other options for survival in their region, often due to debt resulting from austerity measures.
In fact, the regulation of the money supply in total is based on a general scarcity since, as noted before, all money today is made out of debt and this debt-money is sold into the market as a commodity through “loans”, with the mark-up of interest attached to generate a profit for the banks. Yet, this “interest” profit, which is money itself, is not created in the money supply itself. For instance, if an individual takes out a loan for 100 dollars and pays 5% interest on the loan, that individual is required to pay back 105 dollars. But, in an economy where all money comes into existence through loans, which is the reality, only the “principal” ($100) exists in the money supply with the “interest income” ($5) uncreated.
Therefore, there is always more debt in existence than there is money to pay for it. Furthermore, since the poor are responsible for taking more loans in general for their home/cars/etc. than the wealthy, who maintain a financial surplus, this overall debt pressure tends to fall on the lower classes, compounding the inherently insurmountable problem of being in debt and hence with limited options. In this model, bankruptcy, for example, is not a result of some poor business judgments - it is an inevitable consequence - like a game of “musical chairs”.
So, coming back to the central point, the reality of scarcity in the current economic system is a source of great efficiency in the market sense for if people had their basic needs met, or if they were able to meet those needs without the external pressure of irresolvable debt which keeps the imbalances - cyclical consumption, profit and growth would suffer. As insidious as it may seem to our intuition and humanity, that keeping people deprived is actually a positive precondition for the workings of the market, this is the reality.
Needless to say, from the standpoint of technical efficiency, seeing the human being as a bio-chemical machine in universal need of basic nutrition, stability and other psychosocial requirements which, if unattained, can result in sickness both physical and psychological, we can recognize the decoupled state of human/social well-being with this “market logic”.
As a final point on this issue, the market seeks the servicing of problems at all times. In fact, it could be stated generally that technical inefficiency is the driver of market efficiency. Problem resolution is not sought by the market as it then creates an income void and hence a loss of monetary gain and movement. The result of this, in part, is a perverse reinforcement of incentive to seek or even advance problems in general. A century ago the idea of selling bottled water would have been strange given its general, unpolluted abundance. In the modern day, it is a multimillion-dollar industry annually, derived mostly from the water pollution that has occurred due to irresponsible industrial practices. The profit and jobs now associated with this technically inefficient reality of resource pollution and destruction, has improved, once again, the economic market efficiency needed to keep cyclical consumption going.
Market efficiency, generally speaking, takes on a “macro” and “micro” reality. On the macro scale, anything that can increase sales, growth or consumption, regardless of the originating pressure for demand or what is actually being bought and sold, is deemed efficient in this context. On the micro scale, this efficiency takes the form of enabling conditions that can increase profit and reduce input costs (“cost efficiency”) on the part of business.
This “efficiency” inherent to capitalism operates without any respect for the social or environmental costs of its process to keep cyclical consumption and profit going and the world you see around you - full of ecological disorder, human deprivation and general social and environmental instability - has been the result. On the other hand, technical efficiency, which one could characterize as, in fact, a hindrance to market efficiency, seeks to maintain the environment, maintain human health and essentially keep balance in the natural world. The reduction of waste, resolution of problems and the maintaining of alignment with natural law is the common sense logic embodied.
It is unfortunate to realize that today we have two opposed systems of economy working at once – working against each other, in fact. The market system, embodying its archaic, traditionalized logic, is utterly out of sync with the natural (technical) economy as it exists. The result is vast discord and imbalance with ever-mutating problems and consequences for the human species. It is clear which system will “win” in this battle. Nature will persist with its natural rules regardless of how much we theorize this or that validation of the way we have traditionally organized ourselves on this planet.
Nature doesn’t care about our vast monetary economic ideas, its theories of “value”, sophisticated financial models or detailed equations regarding how we think human behavior manifests and why. The technical reality is simple: learn, adapt and align to the governing laws of nature, or suffer the consequences. It is absurd to think that the human species, given its evolution within the same natural laws to which our economic practice (and values) must align, would be incompatible with such laws. It is merely an issue of maturity and awareness today.
As a final point, as well as a general aside, there has emerged a trend in the 21st century, in the wake of all the growing and persisting ecological problems that claims to seek what is called a “green economy”. Some have even divided this economic view into sectors, including applications for renewable energy, eco-buildings, clean transportation and other categories of focus. It will be noticed that all of those awarenesses and sought applications are generally in line with the technical or scientific awareness perspective discussed in this essay.
Sadly, as positive as the intent of these new organizations and business planners may be, the inefficiency inherent to the capitalist model of economics - with all its need for certain forms of contrived “efficiency” to maintain itself - immediately pollutes and deeply limits all such attempts, which explains why such technical efficiency approaches have still yet to really be applied. The sad reality is that while some improvement can be made, such progress will be inherently limited to an ever-increasing degree since, as described, the very structural basis of the way market capitalism works is actively opposed to the efficiencies inherent in the natural law view. The only logical solution is to rethink the entire structure if any real efficiency, elevated prosperity and problem resolution is to be achieved in the long run.
- Source: Operating Manual for Spaceship Earth, R. Buckminster Fuller, 1968, Chapter 6
- Ludwig von Mises in his famous work Economic Calculation In The Socialist Commonwealth argues that the “price mechanism” is the only possible means to understand how to “efficiently” create and move goods around an economy. This criticism of any kind of “planned” system has been touted as sacrosanct by many today and a vindication of the Capitalist system. This issue will be addressed in part III.
- Reference: An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith, 1776, par. IV.9.51
- A classic text that employed this basic fear was F.A. Hayek's The Road to Serfdom. “Human nature” had a very clear implication, justified fundamentally by historical trends of totalitarianism suggested as linked to collaborative/planned economies.
- Reference: “A Safe Operating Space for Humanity”, Nature, 461, 472-475, 24 September 2009, doi:10.1038/461472a;
- While some historians often place the dawn of the scientific method in ancient Greece, The Renaissance, starting around the 16th century, appears to be a major period of significant discovery and acceleration. Galileo (1564 - 1642) is considered today by some as the “father” of modern science. However, these emerging understandings shared very little interest in the economic realm.
- The disruption of ecosystem processes by human action has shown clear negative consequences. Pollution, deforestation, loss of biodiversity and many other common characteristics of the current state of the world today reveals a deep misalignment with the immutable symbiotic/synergistic realities of our habitat to which we are bound. Reference: http://www.globalchange.umich.edu/globalchange1/current/lectures/kling/ecosystem/ecosystem.html
- See the essay Defining Public Health.
- See the essay History of Economy
- The use of the term “market efficiency” here is not to be confused with other historical meanings. The concept is novel to this essay. Traditional meaning: http://www.investopedia.com/articles/02/101502.asp#axzz2H9lWlQwR
- The term 'economy' in Greek [Oikonomia] means "management of a household - thrift”; Hence to e·con·o·mize, or “increase efficiency”.
- Recessions are typically defined as "a significant decline in economic activity spread across the economy.” (http://www.investopedia.com/ask/answers/08/cause-of-recession.asp#axzz2HzEmQsvq)
- 'Economic growth' defined: http://www.investopedia.com/terms/e/economicgrowth.asp#axzz2H9lWlQwR
- A common reaction of central banks during times of recession is to increase “liquidity” in the economy. Liquidity is simply the amount of capital that is available for investment and spending. The Federal Reserve, the central bank of the United States, typically manages liquidity, by adjusting interest rates.
- The 'business cycle' is often thought about in five stages: growth (expansion), peak, recession (contraction), trough and recovery. (http://www.investopedia.com/terms/b/businesscycle.asp#axzz2IGANj1hr)
- According to a 2010 report by the World Economics Forum, global credit (or in effect, debt) doubled from $57 trillion to $109 trillion from 2000 to 2010. It also forecasts $210 trillion in global credit (debt) by 2020. (http://www.weforum.org/reports/sustainable-credit-report-2011)
- According to the Federal Reserve, as of 2009 total US (Public and Private) debt was about $51 trillion.(https://www.federalreserve.gov/datadownload/Download.aspx?rel=Z1&series=654245a7abac051cc4a9060c911e1fa4&filetype=csv&label=include&layout=seriescolumn&from=01/01/1945&to=12/31/2010) If we compare this to the existing money supply, as measured by M3, which is the broadest measure, we find that as of Dec. 2012 it was about $15 trillion.* (http://www.shadowstats.com/charts/monetary-base-money-supply) *Note: M3 has been discontinued in reporting by the US. However, its numbers can be extrapolated based on component measures.
- For example, in the US, the “venture capital” industry, which essential invests money in new businesses, was 21% of GDP in 2010. (http://www.nvca.org/index.php?option=com_content&view=article&id=255&Itemid=103) According to a 2012 article in The New Republic: “the largest six banks in our (us) economy now have total assets in excess of 63% of GDP” (http://www.tnr.com/article/politics/shooting-banks#)
- See the essay History of Economy where Adam Smith's notion of the “invisible hand” is discussed.
- As an historical note, engineer R. Buckminster Fuller used this phrase (“more with less”) in his discussion of the phenomenon in his work “Operating Manual for Spaceship Earth”, 1968
- The famous ENIAC computer of the 1940s contained 17,468 vacuum tubes, along with 70,000 resistors, 10,000 capacitors, 1,500 relays, 6,000 manual switches and 5 million soldered joints. It covered 1800 square feet of floor space, weighed 30 tons, and consumed 160 kilowatts of electrical power. It cost about $6 Million in modern value. Today, a cheap, pocket size cell phone computes substantially faster than ENIAC. (http://inventors.about.com/od/estartinventions/a/Eniac.htm)
- Reference: The Law of Accelerating Returns, Ray Kurzweil (http://www.kurzweilai.net/the-law-of-accelerating-returns)
- The notion of “strategically optimized” will be addressed in part III but it is worth noting here that the equation which decides what is to be used in the construction of anything, technically, not only involves the properties of the “ideal” materials, but the relative utility of related materials (with similar properties) which may alter the necessary material component for use due to other “efficiency” related factors, such as resource supply.
- Charles Kettering, Director of General Motors in 1929, wrote of the need to 'keep the consumer dissatisfied' (1929) (http://www.wwnorton.com/college/history/archive/resources/documents/ch27_02.htm). Wall Street banker Paul Mazur wrote: "We must shift America from a needs to a desires culture. People must be trained to desire…to want new things even before the old have been entirely consumed. We must shape a new mentality in America." (Harvard Business Review, 1927)
- In 1932, industrialist Bernard London propagated a well-known pamphlet entitled Ending the Depression through Planned Obsolescence, which outlined the need for the model.
- Reference: Planned Obsolescence: The Light Bulb Conspiracy, ESSA, 2012 (http://economicstudents.com/2012/09/planned-obsolescence-the-light-bulb-conspiracy/)
- As a simple example, the sharing of bikes in Europe has become common. (http://www.treehugger.com/cars/bike-sharing-now-in-100-european-cities.html)
- As an aside, the only reason this library exception has persisted is because of a tradition put in place long ago that saw the need for this sharing of knowledge as critical to human development. The tradition of shared libraries goes back 1000s of years.
- In his work, The Age of Access, Jeremy Rifkin poses similar questions, stating, “In a society where virtually everything is accessed, however, what happens to the personal pride, obligation, and commitment that go with ownership? And what of self-sufficiency? Being propertied goes hand in hand with being independent. Property is the means by which we gain a sense of personal autonomy in the world. When we access the means of our existence, we become far more reliant on others. While we become more connected and interdependent, do we risk at the same time becoming less self-sufficient and more vulnerable?” (P. Tarcher/Putnam, 2000, p.130)
- Reference: The Influence of Social Hierarchy on Primate Health, Robert M. Sapolsky, Science 29 April 2005: Vol. 308 no. 5722 pp. 648-652 DOI: 10.1126/science.1106477 (http://www.sciencemag.org/content/308/5722/648.abstract)
- Reference: on traditional defenses of competition as a source of innovation: Competition and Innovation: An Inverted U Relationship (http://www.nber.org/papers/w9269)
- See the prior essay, History of Economy, and its treatment in Thomas Malthus, who viewed the world as unable to support the population and was influential in his view.
- Canadian economist Jeff Rubin made this observation well with respect to oil cost trends: "What we're going to find is it's not going to make sense to produce things on the other side of the world, no matter how cheap labor costs are there, when it's so expensive to transport things." (http://www.npr.org/templates/story/story.php?storyId=104466911)
- This is mentioned in passing to point out the extensive modern breakthroughs in agricultural methods that are not based on traditional arable landmasses. “Vertical farming”, for example, has been shown to have immense possibilities on a global scale, removing the common regional restrictions to agricultural production. Suggested Reading: The Vertical Farm: Feeding the World in the 21st Century, Dickson Despommier, Thomas Dunne Books, 2010
- It is critical to note, as will be discussed in part III, that this notion of turning the inefficiency or wasted resources and energy inherent to the market economy into actual productivity sits at the core of human society's ability not only to transcend the scarcity-ridden environment we have today, but far exceed it with an abundance.
- The closest thing today that attempts to overcome the problems and waste generated by proprietary components, meaning components that can only come from the manufacturer, is the ISO Standard System. However, this system, in reality, does very little to overcome the true problem and is mostly about compliance with basic quality standards, not universal adaptability of components across global industry. (Ref: http://www.iso.org/iso/home.html)
- Reference: No Contest: The Case Against Competition, Alfie Kohn, Boston, Boston: Houghton Mifflin, 1986
- Source: Merriam-Webster.com (http://www.merriam-webster.com/dictionary/usufruct)
- A glance at US historical labor statistics by sector shows the pattern of machine automation replacing human labor definitively. In the agricultural sector, almost all traditional workflow is now done by machine. In 1949, machines did 6% of the cotton picking in the South. By 1972, 100% of the cotton picking was done by machines. [Source: The Cotton Harvester in Retrospect: Labor Displacement or Replacement?, Willis Peterson, St Paul, 1991, pp 1-2] In 1860, 60% of America worked in agriculture, while today it is less than 3%. (Source: Why job growth is Stalled, Fortune, 3/8/93 p.52) In 1950, 33% of US workers worked in Manufacturing, while by 2002 there was only 10%. (Source:http://www.usatoday.com/money/economy/2002-12-12-manufacture_x.htm) The US steel industry, from 1982 to 2002 increased production from 75m tons to 120m tons, while steel workers went from 289,000 to 74,000.(Source: Will ‘Made in the USA’ fade away?, Nelson D. Schwartz, Fortune Nov 24th 2003, p. 102) In 2003, Alliance Capital did a study of the world’s largest 20 economies at that time, ranging from the period of 1995 to 2002, finding that 31 million manufacturing jobs were lost, while production actually rose by 30%. (Source: US Weekly Economic Update: Manufacturing Payrolls Declining Globally: The Untold Story, Alliance Bernstein Oct 2003) This pattern of increasing productivity and profit, coupled with decreasing employment, is a new and powerful phenomenon.
- See the subsection on economist David Ricardo in the essay: History of Economy
- Economist Stephen Roach warned in 1994, ”The service sector has lost its role as America’s unbridled engine of job creation.” (Source: Interview, 3/15/94, noted in book The End of Work by Jeremy Rifkin, Penguin p.143) Examples of this include: From 1983-1993, banks cut 37% of their human tellers, and by the year 2000, 90% of all bank customers used teller machines (ATMs) (Source: “Retooling Lives”, Vision, 2000 p. 43) Business phone operators have almost all been replaced by computerized voice answering systems, post office tellers are being replaced by self-service machines, while cashiers are being replaced by computerized kiosks. McDonalds, for example, has been talking about full automation of its restaurants for many years now, introducing kiosks to replace the front of house staff, while using automated cooking tools, such as burger flippers, for the back of house staff. (Source: http://www.techdirt.com/articles/20030801/1345236_F.shtmls) The fact that they haven’t done so is likely a public relations issue, for they know how many jobs would be cut in the event that such automation should be adopted in the most uninhibited way..
- Reference: The Law of Accelerating Returns, Ray Kurzweil (http://www.kurzweilai.net/the-law-of-accelerating-returns) While the context of this article regarding exponentially advancing technological capacity does not reference mechanization, it is clearly axiomatic to assume its relevance in this way, particularly with respect to what could be called “cybernation”, which is the combination of machines and computers distinctly, creating “intelligence” in machines.
- The link between having a “job” and one's self-worth has become increasingly powerful. Reference: Joblessness And Hopelessness: The Link Between Unemployment And Suicide (http://www.huffingtonpost.com/2011/04/15/unemployment-and-suicide_n_849428.html)
- This is not a utopian concept as very basic statistical extrapolations prove this vast improvement of efficiency and production capacity on many levels. A simple example, while not exhaustive in its variables, is the obsolescence of “work hours” in industrial factory production. The 8-hour day common to human labor could manifest to nearly 24-hour labor via machine automation. This crude example shows how ”abundance” can be created of core life supporting goods.
- Edvard Munch's painting “The Scream” sold for $119 million in 2012. If we were to compare the actual material value of the work in physical form, it was sold for about 10-15,000 times its material value in paint and canvas. (http://www.huffingtonpost.co.uk/2012/05/03/edvard-munchs-the-scream-_n_1473129.html?ref=uk-culture)
- Reference: Economic Chaos, Loans, Greece and Corporatocracy, John Perkins, 2011 (http://www.huffingtonpost.com/john-perkins/economic-chaos-loans-gree_b_901949.html)
- Reference: Web of Debt, Ellen Hodgson Brown, Third Millennium Press, 2008
- Please see the prior essay Defining Public Health
- Reference: Water and Air Pollution, History.com (http://www.history.com/topics/water-and-air-pollution)
- Reference: (regarding the “green economy”) How do you define the 'green' economy?, MNN, 2009 (http://www.mnn.com/green-tech/research-innovations/blogs/how-do-you-define-the-green-economy)
- This essay belong to Zeitgeist Movement Defined: Realizing a New Train of Thought