Economics is a study that is of course concerned with how resources are allocated in a society. There are many different “theories of value”, such as the well-known marginal utility theory, subjective value theory, labor theory of value, and less well-known ones, such as neo-Ricardian theory of value and energy theory of value. The latter two seem to me the most plausible, postulating that energy invested into resources forms a “long-run price”, or “price fulcrum”, around which the price fluctuates in the short term due to factors described by other theories, such as subjective value. These all seek to explain prices, which by most are viewed as the only viable method of economic calculation. In order to compare heterogeneous goods, relate utility to capital, and plan allocation coherently (there are other criteria that I’ve omitted since they are begging the question, e.g. “well functioning financial markets”), we must use prices, because there’s simply no other way to determine who gets what.
I would like you to take note, however, that there is a critical part of this problem that is overlooked: Markets determine what gets produced, by determining who gets what. It does so using the rationing function of money, which weights subjective preferences based on ability to acquire money, and therefore the preferences of those with more wealth are expressed more strongly. This is a receiver system of value (RSV), which controls allocation via the receiver’s perceived value of the resource. RSVs have several critical problems under several current economic conditions, most notably strong inequality, constrained natural resources, an excess of capital, the rise of automation, and the widespread use of electronic networks. It is for this reason that we are currently seeing starvation (in both the literal and computational sense), overexploitation of natural resources, a glut of advertising and unwanted products, un[der]employment, and low sharing of information.
A donor system of value (DSV), on the other hand, determines value by the investment put in to the resource. Emergy analysis (EMA) is a DSV that is more than capable of determining the costs of production. In doing so, the most sensible way to use EMA is to stay within the naturally-defined budget of our planetary boundaries. It would be childish and nonsensical to argue that we, as a species, should threaten our own existence so that a few people can have 20 mansions and 50 luxury cars all to themselves. While an RSV must be based on exchange, or bi-directional flow, a DSV allows for unidirectional flow, which greatly increases the flexibility of the resulting system.
In fact, a DSV is based on the premise that an individual contributes very little to the flow of energy and resources compared to solar, tidal, and geological processes. The idea that we must have a quid pro quo exchange with a person just because they contributed a little to a resource runs up against the fact that we only take from the Earth system, without giving back much of anything. Using durable products as services, rather than exchanging them as commodities, we increase the utilization of each, while reducing the number of copies needed. They can be allocated using queuing theory methods and either hypothesis testing or bayesian methods (I will admit I have not studied bayesian methods enough).
There is still the problem of resolving conflicts for resources when requests exceed the budget. This can be accomplished using a priority queue and a technique I will call “slack ordinal sorting” (SOS), which fits into a more general framework I call priority theory of value (PTV). Slack ordinal sorting quantizes products qualitatively first into classes (e.g. 300mL cup, single-engine turboprop plane, 1MW windmill, etc.), then into bins or priority levels (prios; my definition uses the module [rt,-20,…,-1,0,1,…120]). Some of the products that will be requested, such as food and water, are unequivocally necessary for survival and should be placed in a special prio (rt, realtime) that does not subject the customer to a lead time and automatically creates an emergency stockpile according to supply risk assessment. The capital required to produce these resources should be placed at a proportionally high prio to ensure that needed infrastructure expansions happen quickly. For others, especially luxuries, the customer is subject to preemption, which proceeds in order of the requested resource’s prio. As an example, if the conflict was between a notebook and a pack of cigarettes, it’s likely the notebook will pre-empt the cigarettes, because a notebook is used to create (and thus it has many more forward dependencies) while cigarettes are inherently destructive (and should therefore have a low prio due to their hazard).
The key here is that economizing is done by the donor; We are free to choose the things we want, but we cannot exceed physical, objective constraints that we are free to (albeit temporarily) exceed under a price system. It may be argued that this system is not optimal, but I would respond that there is no optimal system, and if there is, it is certainly not, according to all evidence, capitalism. I hypothesize that a DSV will create a strong personal and social incentive toward conservation, and highly efficient design, in order to stretch our budget further. I also conjecture that long-run growth will look like a singularity for capitalist societies, while DSV-based societies will grow logistically. A society based on NE principles will reach a critical point where it begins to grow very quickly, until it approaches its budget ceiling, where it will then innovate and reallocate in order to continue the slow/no growth trend after the second critical point.
Note, there is no central planner. There are multiple planning agents, and a distributed control system. This is a self-organizing system of different trophic levels of energy metabolism, much like the natural Earth system is. Hardcore capitalists argue their system is the only one that makes sense due to the evolutionary justification of competition; I argue that this system makes more sense due to observation of the actual function of resilient ecological systems. Some may argue that this is a restrictive or controlling system, but it certainly isn’t the case that it’s more restrictive or controlling than one which locks up all resources and demands a return for them. It will surely not be designed such that a starving person is denied food, or a homeless person is denied shelter. Nor will it be designed such that the fruits of our labor go primarily to someone whose name is on the documents but did not necessarily contribute anything.
Isn’t the hard part here sorting the priority queue? Apart from the essentials e.g. food, shelter etc. value judgements are subjective (I exclude suicidal people or else everything is subjective)
In your cigaret example you clearly favor longer life over stimuli. The risk/plesure gradiant goes from one extreme where having ANY added risk is bad and the other end where dying tripping on drugs is worth it. Every person most likely has an acceptable range somewere in the middle of this gradient but we can hardly agree on the exact range. Also I see another problem with objective value judgements and that is uninteted or undefined use. A metal pipe or a diode has no clearly stated use (pipebomb vs plumping) thus it is impossible to assign it a priority value. A notebook could be used to hold scientific observations/models or an artist could build a sulpture out of them(unintented use).
Anyways.. I am currently reading your blog and I find it very interesting if not a bit heavy on the math which slows down my reading (many visits to wiki heh).
First of all, thank you for being the first I don’t personally know to challenge this idea.
“In your cigaret example you clearly favor longer life over stimuli. The risk/plesure gradiant goes from one extreme where having ANY added risk is bad and the other end where dying tripping on drugs is worth it. Every person most likely has an acceptable range somewere in the middle of this gradient but we can hardly agree on the exact range.”
I don’t know if I mentioned it in the article, but I have tried to keep my personal views on that out of the concept. I do smoke, and drink more than I probably should, but I think I would be happier if I didn’t. There was a study that came out recently that found that quitting smoking has a far stronger effect on depression than antidepressant medication does. I think this lends support to the idea that preventing the creation of illth is often far more valuable than encouraging the creation of wealth.
Would everyone be totally accepting of an institution like that? Certainly not. I know a guy who’s so crazily addicted to smoking that he hunts for butts in the parking lot he spends time in, and doesn’t say anything but “cigarette?” He will smoke any amount of cigarettes he can wrap his tarred lips around, with no consideration of the future. The profit motive of a market system, in this case, causes people to be perfectly happy with this sort of behavior, since tobacco companies gain immensely from addiction. So I suppose this leads to the question, is it better to have the “freedom” (I quote that word because it’s so loaded) to do that, while people gain personal wealth from that illth? I think there must be enough people out there that would answer negatively to that question, who would be willing to agree that no, we should establish what we collectively believe are more beneficial and more detrimental uses of our shared heirlooms.
The price system is another attempt to do that, but it begins with the ideas of private utility judgment and total order. PTV takes a different approach, starting from social effect judgment and partial order. Natural economics is much bigger than I can grasp, and so I’m not totally clear on the boundaries myself, but I think that while the price system attempts to merge input costs, opportunity costs, and personal value judgments into one set, PTV is specifically targeted to deal with opportunity costs, while input costs are dealt with through emergy and exergy analysis. I wanted to keep personal value judgments personal, which is why PTV and its associated allocation method use a (comparatively) small scale with partial order (it’s also for computational tractability, but that’s just a nice benefit).
I tried to structure allocation so that disputes over the order don’t cause communities to grind to a halt, because even if your favored thing is on a lower priority than you would like, working to generate a sustainable surplus leaves more room in the collective budget for you to be able to get that thing in at least some of the cycles. I definitely acknowledge that there will be dispute on what the scale should look like, and if we want to consider using something like PTV, we may want to think about how it should act on different trophic levels of civilization. The biggest problem I’ve encountered is that while I don’t think local communities will actually have a huge amount of trouble agreeing on their priority scale, reaching agreement on the regional, continental, and global level will be much more difficult. However, I also think that given the way a natural economy would have to come about (organically from small pockets outward), there will be an iterative generation of priority scales on higher trophic levels.
“Also I see another problem with objective value judgements and that is uninteted or undefined use. A metal pipe or a diode has no clearly stated use (pipebomb vs plumping) thus it is impossible to assign it a priority value.”
One of the most indispensable parts of natural economics is the dependency relationships that will be modeled by structured data on the ecosystem of products. There are backward dependencies, the easier type to understand, where for example, water depends on hydrogen and oxygen; There are also forward dependencies, which describe the reverse relationship, things that depend on it, like how pipe bombds and plumbing both depend on metal pipes. It’s important for priority scales to consider both relationships in assessing how important a resource is to the group. Pipe bombs may be, for lack of a better word, bad, but the chance of their actually being made is far lower than plumbing, especially if the society is healthy. In your other example:
“A notebook could be used to hold scientific observations/models or an artist could build a sulpture out of them(unintented use).”
I think we could agree that both uses are pretty acceptable and doesn’t lead to an exception that should be dealt with.
“Anyways.. I am currently reading your blog and I find it very interesting if not a bit heavy on the math which slows down my reading (many visits to wiki heh).”
To be honest, I’m actually kind of glad that the mathiness turns some people away, because I haven’t yet had to deal with one person that lacks the mental fortitude to offer a serious response. If there’s anything you’re having too much trouble understanding, email me (I think there is a form, I’ll check after this) and I will be happy to clarify things to you. Thanks for reading, and even more for commenting!
Thank you for a very thorough yet quick reply.
When speaking of risk/pleasure I didn’t give much thought to profit and marketing – true it most likely makes things even worse (watching cigarette commercials is great fun in a highly twisted way – “most doctors prefer Camel!”-youtube.com). My point was that drug use is just one variable that varies between cultures – shamanism didn’t arise do to profit and markets.. to me atleast it is a grey area.
On a personal note it is not like I am defending my own rights to smoke or do other substances. Sweets, too many hours infront of the PC and a below average ethanol intake are my worst vices I guess. Diversity within reason is a good thing. Your cycle system do allows for that even if rare. (hopefully this wouldn’t lead to a rare priority cycle slice market – request something you know others need in exchange for something rare you need)
About my examples yes where terrible. They where mainly there to describe my terms: undefined and unintended. It may very well be that priority order error introduced by these factors will be small enough to ignore. However don’t let my limited imagination lead to such conclusions without reflection 🙂
Could you please elaborate on total order vs. partial order and how it relates to an economy? That part went over my head.
Oh and where is this email form?.. not that I need assistance yet but others might also find it useful.
“hopefully this wouldn’t lead to a rare priority cycle slice market – request something you know others need in exchange for something rare you need”
Now that is very interesting, and something I never would have thought of. Do you think people could actually gain from this more than simply trying to request the thing they want normally? This could be a fatal flaw, as it would be subject to the covert channel problem, but it’s impossible to tell what sort of effect this would have on society.
As for undefined/unintended use cases, the unity of data that should exist would hypothetically mean that sort of thing only happens one time, before it’s codified into the resource database. Practically I can’t say, because you know.
Partial order is a concept from discrete mathematics. Total order is the typical kind, where every element in a set has an order relation, like arranging things in a line. Partial order is where not every item is ordered, so you could have five items that are “after” another item, but those five things don’t have a particular order. Maybe Wikipedia’s explanation is better.
I’m on a tablet at the moment and my brother’s band mate is sleeping where my laptop is, so I’ll find the contact form or add it to the site later today.
“Do you think people could actually gain from this more than simply trying to request the thing they want normally?”
I don’t know for sure.. but assuming this kind of speculation is possible then:
People overall no. Individuals maybe yes, but only in the short run.
Institutions tent to be self-reinforcing..
1) The starting market with few user is almost useless from a self gain perspective (low probability of exchange vs. effort)
2) The critical mass market will give the users an edge over non users, leading to inequality (envy adding market growth).
3) The saturated market adds no benefit to personal gain compared to the no market scenario, but at this point everyone is forced to
trade in order not to be worse off.. everybody loses so to speak due to added overhead.
Therefore the process of going from no market to a saturated market is directional left to right unless you are super rational.
Since we are coming from a market system with all the cultural baggage that follows it might not be possible to avoid a hybrid economy with some minor overhead of the saturated market for low priority goods. The good news is that high priority goods/services will have zero market value and available to all.. as we move towards post-scarcity the market shrinks.
Having looked more into Fixed-priority pre-emptive scheduling (haven’t found a good article on it though).. I really really miss an edit button heh. Unless some poorly designed queue flood protection method (request limit for each good/service) made this a viable strategy then it makes little sense.
If I understand what you’re saying correctly, the “flood protection” is built in to the budgeting mechanism. It’ll only allow the number of requests within the emergy/material budget.
Oh, never mind. I get it now.