Tag Archives: Ecological Economics

Colony Collapse Disorder

Californians have been growing almonds for a long time. "The Almond Grove At T. H. Selby's Residence, Fair Oaks, Cal." ca. 1870. NY Public Library

Californians have grown almonds for a long time. “Almond Grove At T. H. Selby’s Residence, Fair Oaks, Cal.” ca. 1870. NY Public Library

2006 was something of a banner year for both beekeepers and growers. A high fraction of beekeepers experienced better than 50% losses. Many growers could not rent bees at any price. Lots of almond groves in California went without pollination that year, and, as with many species of nuts, if the pollen isn’t carried over from an unrelated plant, nuts do not develop. Almonds, like many crops, (and most nuts) do not self-pollinate. Unless pollinated by an agent like a honey bee, they just don’t bear fruit. The price of almonds shot up in 2006 and has not dropped very much since.

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Buggy-Whips, Railroads & Oil: Systems Thinking on Fuel

West Texas PumpjackAt the 6th Annual Babson Energy Conference, “Energy, Environment, & Entrepreneurship: Challenging Assumptions, Changing Perceptions”, here, held March 30, 2012, Cimbria Badenhausen, (LinkedIn), an alum of the Marlboro College MBA in Managing for Sustainability, asked Tahmid Mizan, Senior Planning Advisor of Exxon Mobil, “Are you an ENERGY company or a PETROLEUM company?”

Mr. Mizan, of Exxon, didn’t answer the question.

Henry Ford, when asked why he doesn’t use focus groups, is believed to have said, “If I asked people what they wanted, they’d tell me faster horses.” (HBR) Continue reading →

Worldly Philosophers for Hire

| |Follow LJF97 on Twitter Tweet | In “Wanted: Worldly Philosophers,” Roger Backhouse and Bradley Bateman say:|”IT’S become commonplace to criticize the “Occupy” movement for failing to offer an alternative vision. But the thousands of activists in the streets of New York and London aren’t the only ones lacking perspective: economists, to whom we might expect to turn for such vision, have long since given up thinking in terms of economic systems — and we are all the worse for it. ”

 As these pictures, from here, and here, show, the “Occupy” movement supports labor rights and environmental protection. The “Occupiers” do not, therefore, lack perspective.

Image shows union support at Occupy Wall St.They – we – see my work here at Popular Logistics, here at XBColdFingers, or meet me at Zuccotti – lack influence.

Paul Krugman and Joe Stiglitz are the most famous economists whom Backhouse and Bateman might describe as “Worldly Philosophers with perspective.” Tom Friedman may not have have studied economics; but he too fits the bill of “Worldly Philosopher with Perspective.” There are others.

Sadly, Obama, Biden, Sommers, Geithner, and Chu, like Bush, Cheney, Rice, Rove and Rumsfeld, like Bachmann, Cain, Gingrich, Huntsman, Paul, Perry, Romney, and Santorum, don’t know the answers – and what is worse, they don’t even seem to know which questions to ask.

As noted above, “the ‘Occupiers’ do not lack perspective.  They – we – lack influence.” To correct that I would like to personally extend an invitation to President Obama, Vice President Biden, any members of the cabinet, or the White House or campaign staff and any of the current candidates for the Republican nomination to meet me at Zuccotti Park, or at the time and place of their choosing, for a discussion on the issues.

Decison on Keystone XL Pipeline Delayed Until After Presidential Election

Follow LJF97 on Twitter Tweet Via NPR‘s All Things Considered, from correspondent Richard Harris, Feds Delay Decision On Pipeline Project

The State Department is delaying a decision for at least a year on whether to approve the Keystone pipeline. The $7 billion pipeline would carry oil from the tar sands of Alberta, Canada, through the U.S. to Gulf of Mexico refineries. Nebraska’s state government and environmental groups have put intense pressure on the State Department and White House to reject the pipeline’s proposed route. NPR’s Richard Harris talks with Robert Siegel about the project.

Audio here (available after 1900 hours Eastern time, 10 November 2011).

Wikipedia’s entry Keystone XL Pipeline has a detailed – and, in our view, fair – account of the controversy.  While on balance we do not support the Keystone pipeline, a very well-reasoned argument in favor of the pipeline can be foundon the blog of JEH Land Clearing, from which we’ve taken the following map of the proposed pipeline (route in red; other pipelines indicated are already in existence/operation).

The Texas economy will benefit from the increase in production. The area east of I-35 is consistently in economic hardship (Port Arthur’s unemployment rate is hovering around 15%), and the construction, land clearing, surveying and refinery jobs will help lower the staggering unemployment rate. It is estimated that the Keystone Pipeline will help create over 20,000 jobs. Texas alone will see over $2.3B in new spending and the US will see about $20B in new spending. The increase of personal income in the state will be about $1.6B and the US will see an increase of $6.5BB. Profits will be re-invested in the local economy improving the quality of life and increasing the number of business in the area. Regardless of where you stand on this issue, one fact remains; the only one way to get heavy crude from Canada to the Texas gulf coast is a pipeline.

Excerpted from Oil Pipeline Invigorates Texas Economy

We support public works projects as economic stimulus, particularly those which come with improvements to energy and other infrastructure; in our view a massive wind/solar public works project in Texas might have the same effective economic stimulus with a better energy outcome, with a significantly lower environmental impact

What JEH doesn’t mention are the costs in terms of environmental damage, water, and health effects. These are long term costs, which are, in the parlance of neoclassical economics, “externalized,”or pushed into the future, and pushed off the balance sheets, kind of like CDO’s, or Collatoralized Debt Obligations, made famous by the financial crisis. Ecological economics recognizes that these costs must be considered, just as recent economic history forces us to recognize the real value of mortgages and mortgage backed securities. As we are learning, ignoring risk is unwise. Put bluntly, the Keystone XL pipeline is kind of like a $1.0 Million “McMansion” sold for $25,000 down, with a $1.0 Million mortgage which is, of course, a negatively amortized interest-only note for the first 5 years – at which time the borrowers will have to pay $1.1 Million, plus interest. But in reality, the $5 billion pipeline is like an aggregated set of five thousand negatively amortizing $1.0 Million toxic McMortgages on McMansions built of radioactive materials on toxic waste sites below sea level.

We intend to elaborate on the costs, risks, and benefits of pipelines in future posts; as well as a series on the Bonneville Power Administration, which has been supplying electricity in the Northwest for almost 75 years, and which we think is a model for energy-related public works projects.

The Crash of 2011

US Capitol Follow LJF97 on Twitter  Tweet I thought the market would crash in the wake of the Earthquake / Tsunami / Nuclear Meltdowns at Fukushima. It didn’t. However, something much less serious may be bringing the market – and the economy – to it’s knees. Politics. The Voice of America reported here that Standard & Poors downgraded US debt from AAA to AA+. Click here for the S&P’s Special Report and here for the full report.

S&P’s analysts wrote:

The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.

John BoehnerIt is clear that the emphasis on cutting government spending, eliminating government jobs, eliminating benefits to unemployed citizens, rather than raising revenues and developing infrastructure is not in the long term or short term interests of the United States. As the 512 point drop in the Dow Jones Average, and the downgrade of US debt indicate, Republicans and the Tea Party should be careful for what they wish for – they just might get it.

In the discussions over the debt ceiling, John Boehner said something to the effect that if a family or a business is borrowing too much it simply must tighten it’s belt. Continue reading →

Ask Obama – Internet Town Hall

What would I #AskObama (on Twitter or in person)?

1: #AskObama Economists think in terms of resources. How do we change the conversation to think in terms of processes, systems, interactions?

2: #AskObama Neoclassical Economics: Resources & Wastes. Ecological Economics: Systems: Stocks, Flows, Processes. Burn Coal: Fuel ergo Waste. Solar: No fuel ergo no waste.

3: #AskObama Ecological Economics: “Like neoclassical but a better understanding of time and costs.” Marlboro MBA Managing for Sustainability.

At 2pm EDT, July 6, 2011, President Obama will participate in the first Twitter town hall at the White House to discuss the economy and jobs with Americans across the country. The entire event will be streamed live at WhiteHouse.gov. Right now, thousands of people are talking about the event and asking questions on Twitter, using the #AskObama hashtag.  Take a moment to join the conversation and ask your own question.

Keynes, Reluctance to hire, & 21ST Century Energy

John Maynard Keynes, in black and white, because some ideas are.

in black and white, because some ideas are.

Tweet Follow LJF97 on Twitter   During the Great Depression the Classical Economists said “Unemployment is voluntary. Business owners will not voluntarily keep the means of production idle.”  While he had been a student of classical economics, John Maynard Keynes observed that the data didn’t fit the theory. And, he reasoned, if the observable data don’t fit the theory, the theory must be flawed.   “Business owners are risk averse,” he saw. “A employee needs to be productive, needs to make widgets. But if no one is buying widgets, then contrary to classical theory, factory owners will fire workers and keep capital idle rather than hire workers to create excess inventory. That’s just common sense.”

We see this today.

When unemployment was low, for example in the United States during the tech boom of the 1990’s, people acted on the premise that “There is so much work that we could hire and good people and train them.”  Today hiring managers seem to be acting on the premise that “There are so many people looking for work that they can wait for the perfect candidate.” Perfection being unattainable, jobs go unfilled. This is ok, in this context, because

  • “Budgets are tight.”
  • “The future is uncertain.”
  • “Money not spent on a new hire can be saved or used to pay down debt.”

Keynes also observed that the government is an employer that does not need to worry about going out of business. Building infrastructure is government employment that is investment for the future. These observations are as valid today as they were 80 years ago.

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21 Century Energy or Business As Usual?

NY Times Special (Business As Usual) Energy Section

Clifford Krauss’ “Can We Do Without the Mideast?” sets the tone for the “Special Energy Section” in the NY Times, March 31, 2011. “The path to independence – or at least an end to dependence on the Mideast – could well be dirty, expensive and politically explosive.” Is this an April Fool’s Day joke? The path to sustainable energy requires vision and hard work. a solar array on every roof and insulation in every wall and every attic. It will be better for the economy, better for the environment, and better for ourselves, our children, and our grandchildren. Continue reading →

Earthquake, Tsunami, and Energy Policy

Tokyo Electric Power Co.

First in a series on the systems dynamics of nuclear power in the light of the ongoing catastrophe at Fukushima.

Radioactive waste and melt downs are intrinsic properties of nuclear power. Before / After Gallery.

Current Assessment: 3/27/11 3:00 PM. 10,668 dead, 16,574 missing. Radiation levels spike, drop. (Gather). Silver lining in the cloud – radioactive substances will wind up in the Great Pacific Garbage Patch and trigger mutations in bacteria and plankton, creating “Plasticovores” – critters that chow down on plastic.

Eighth Assessment: 3/24/11 11:30 PM. 10,035 dead. 17,443 missing. Market Watch. Earlier in the day AP, Courtesy of the Star, Bloomberg. reported slightly lower numbers.  We have seen a natural disaster of earthquake, tsunami, and aftershocks. While the the damage is tremendous, it could have been much worse. There are 10,035 tragedies, and 17,443 people are missing. It seems likely that many of them will never be found.  Yet The nuclear plants have not yet undergone a full meltdown. This speaks volumes about American and Japanese engineering. The nuclear plants were built pretty well. Yet it also suggests that it is not prudent to build nuclear power plants in earthquake zones. Radioactive waste and meltdown are not intrinsic properties of solar, wind, geothermal, and conservation.

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Egypt, Wisconsin – It's the Economy, Stupid

Image of the James home

The James home, Knoxville Biz.

Wisconsin Governor Scott Walker is trying to stimulate the economy by eliminating corporate income taxes and regulations on businesses and cutting taxes on wealthy people (click here or here). These kinds of activities do stimulate GDP.  Here’s how.

Wealthy people, like Lindsay Lohan, Brittney Spears, Mel Gibson, and Charlie Sheen have people, including paparazzi and media people following them around.  That costs money. They do things in a spectacular way,  and when they do stupid things in a spectacular way they have lawyers get them out of trouble. Economists call this “multipliers.” The lawyers, paparazzi and media folks need to eat, sleep, rent hotel rooms, etc. And they don’t camp out and chow down on toast, water, and dried fruits and nuts. Celebrities often require high powered consultants from the sex and pharmaceuticals industries.  When they trigger rapid increases in the entropy of hotel rooms, by “trashing” them, carpenters, electricians, decorators, architects and others need be hired to restore the room – all this costs money, and stimulates GDP.

When regulations are lax or eliminated businesses regulate themselves.  This stimulates GDP.  Consider the recent GDP stimulus of Wall Street, when those now-legendary credit default swaps raised real estate values (until they crashed). Similarly, when industries are releived of the burden of environmental regulations, they create products which increase GDP and pollution which is not counted in GDP.  When the pollution is cleaned up, at taxpayer expense, the GDP again increases. We see this dramatically in Tennessee, at the site of the Kingston Steam Plant. When a flood released 1.2 billion gallons of toxic coal ash sludge from the coal-fired power plant, December, 22, 2008, the cleanup costs were added to the bills of the people who buy power from the TVA.
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The Furman Paradox & The Cornick Postulate

The Furman Paradox: “You want to be ahead of the curve, but not too far ahead. When the word on the street is sell, and you understand something others don’t, it may be time to buy. And remember, it’s a systems phenomenon, look for the feedback.”

The Cornick Postulate: “There are things that seem too good to be true, and yet are true – love, a child, sunset. These cannot be bought and sold; these are non-transactional phenomena.”

Drill Baby, Drill – or Drill Baby, Oops

Second in a series  (1, 2) that began on “Earth Day” (0).

“In order to make Policy, you have to be good at Politics.”

– Deborah Stone, “Policy Paradox”

President Obama

President Obama, Official Photo

I like and respect President Obama. I think he’s a well educated lawyer and law school professor, with a good grasp of the Constitution, and the realities of Chicago machine politics and Inside-The-Beltway politics. He understands Stone. He’s also a moderate liberal. However, his economic advisors – Tim Geithner and Larry Sommers – only know what’s good for Wall Street, so every answer is “what’s good for Wall Street.” They don’t appear to know anything about ecological economics.  Obama needs to listen to Herman Daly, Robert Costanza, Paul Krugman, Robin Krugman, Joseph Stiglitz, and others with a long term view and a better understanding of what neoclassical economists call “externalities.”

Perhaps worse, his energy secretary, Steven Chu, is focused on carbon sequestration, nuclear power, and what we might as well call “Drill Baby, Opps.” Continue reading →

Barack Obama, a Systems Thinker in the White House

President Barack Obama.

President Barack Obama.

In his State of the Union Address <video, transcript Englsh, en español>, President Obama said “The best anti-poverty program is a world classeducation

.” He described a positive, or reinforcing, feedback loop. Education enables people to accomplish more, earn more, and better educate their children, who also accomplish more and earn more. It is one of the most important differences between the populations of New Jersey and West Virginia. This is described in detail in Thinking in Systems, by Donella Meadows<link>, (C) 2008, published by Chelsea Green<link>, ISBN 978-1-60358-055-7.

The President also asked for a better health care plan. I can answer that in five words: “Single Payer; Medicare For All” <link>  just approved by the California Senate. Medicare works for my octogenarian father. Health Insurance Care doesn’t work for a 20-something friend of mine. He just graduated from college. He has no job and therefore no medical insurance. If he was a full-time student he’d be covered on his parents’ insurance. A simple reform would cover recent graduates until they find a job that pays a living wage and provides health insurance benefits. Another would be by expanding Medicare to cover all citizens. This is much easier said than done. Our medical care system cannot adequately care for approximately 50 million people – one out of six. This can’t be changed overnight – we need to train more doctors and nurses, and build more hospitals, but it must be changed.

Image showing mountain strip mined for coal.

Mountain strip mined for coal. Chris Dorst, Charleston, WV Gazette.

Energy is another set of systems problems. No one who has seen a once pristine valley after strip mining or “mountain-top removal”  uses the term “Clean Coal.” Countries like Denmark, Ireland, Israel, Japan, and Sweden built their economies with education not extraction of natural resources. As the President alluded to, conservation and clean, renewable energy technologies – solar, wind, geothermal, hydro – can be implemented faster, at a lower cost, and with fewer negative economic externalities than traditional fuel intensive resource based technologies like fossil fuel and nuclear power. This suggests another of the differences between New Jersey and West Virginia – the “Blessings of Education” versus the “Resource Curse” <link> from which economies built on extraction of natural resources suffer.

Arklow at Sunset

Arklow Bank Wind Park, off Arklow Bay, Ireland. Image courtesy Oneworld.net, UK.

The President needs economic advisors who start think in terms of ecological economics <link1 / link2>, of metrics like the Genuine Progress Indicator, GPI <link>, rather than Gross Domestic Product, GDP <link>. Simply put, ecological economics is neoclassical economics with a better understanding of the long term and of costs. Spending one dollar – or one trillion dollars – to clean up a mess is not as good as allocating those resources to build factories, houses, libraries, museums – the infrastructure, culture, and community of a nation.

Utah Refinery Blast

Utah-Woods-Cross-798169Via TheStandard.Net, By Loretta Park (Standard-Examiner Davis Bureau), (click here for article)

South Davis Metro Fire Agency Deputy Chief Jeff Bassett said the explosion occurred because a pipe carrying hydrogen and diesel overfilled and sent some of the product onto the ground, where it pooled. It found an ignition source, a furnace, which caused the explosion.

This is what economists in the Neoclassical school call an “externality.” The costs of the disaster are borne by the citizens, not the oil company or the refinery. These costs actually add to the GDP. Economists in the Ecological school, at for example the Gund Institute at University of Vermont or the students in the Marlboro College MBA in Managing for Sustainability, argue we should use the Genuine Progress Indicator, GPI, not Gross Domestic Product, GDP (defined here and described here.)

From WikiNews: Burst pipe probed in Utah refinery blast as questions asked over safety

See also Damage To Homes From Refinery Blast Larger Than First Thought viamid-Utah Radio News;

OSHA Levies a Record Fine against Oil Giant BP from OMBWatch.

This in the immediate aftermath of OSHA’s record-setting proposed fine of $86.7 USD against BP for for a 2005 explosion which killed 15 workers and injured 170. See Steven Greenhouse, The New York Times, October 30, 2009, Record OSHA Fine Against BP

Over Texas Refinery Explosion.

The Occupational Safety and Health Administrationannounced the largest fine in its history on Friday, $87 million in penalties against the oil giant BP for failing to correct safety problems identified after a 2005 explosion that killed 15 workers at its Texas City, Tex. refinery.

We take the liberty of reproducing Greenhouse’s excellent piece in full:

Record OSHA Fine Against BP Over Texas Refinery Explosion, by Steven Greenhouse, New York Times, October 30, 2009.

The Occupational Safety and Health Administration announced the largest fine in its history on Friday, $87 million in penalties against the oil giant BP for failing to correct safety problems identified after a 2005 explosion that killed 15 workers at its Texas City, Tex. refinery.

A series of investigations attributed the March 23, 2005, explosion to overzealous cost-cutting on safety, undue production pressures, antiquated equipment and fatigued employees — some who worked 12 hours a day for 29 straight days

The fine is more than four times the size of any previous OSHA sanction.

Federal officials said the penalty was the result of BP’s failure to comply in hundreds of instances with a 2005 agreement to fix safety hazards at the refinery, the nation’s third-largest.

According to documents obtained by The New York Times, OSHA issued 271 notifications to BP for failing to correct hazards at the Texas City refinery over the four-year period since the explosion. As a result, OSHA, which is part of the Labor Department, is issuing fines of $56.7 million. In addition, OSHA also identified 439 “willful and egregious” violations of industry-accepted safety controls at the refinery. Those violations will lead to $30.7 million in additional fines.

Contacted Thursday night after federal officials disclosed the OSHA citations to The New York Times, BP said it was disappointed.

“We continue to believe we are in full compliance with the settlement agreement, and we look forward to demonstrating that before the review commission” which has the power to modify OSHA penalties, BP said in a statement.

BP said the penalties related to a previously announced disagreement with OSHA as to whether BP was complying with the 2005 settlement agreement.

“While we strongly disagree with their conclusions, we will continue to work with the agency to resolve our differences,” the company said, voicing dismay that OSHA was announcing the fines before the review commission had given the matter full consideration.

BP added that it takes its “responsibilities extremely seriously and we believe our efforts to improve process safety performance have been among the most strenuous and comprehensive that the refining industry has ever seen.”

BP says that since the explosion it has spent more than $1 billion to upgrade production and improve safety at the refinery.

A series of investigations attributed the March 23, 2005, explosion to overzealous cost-cutting on safety, undue production pressures, antiquated equipment and fatigued employees — some who worked 12 hours a day for 29 straight days.

The explosion was caused by a broken gauge and flammable hydrocarbons that were overflowing from an octane processing tower, which lacked a flare system to burn off volatile vapors. Those escaping vapors were ignited by the backfire of a nearby truck.

In addition to killing 15 people, the explosion injured 170 workers and obliterated 13 employee trailers and damaged 13 others, some as far as 300 yards away. The Texas City facility is capable of refining 475,000 barrels of crude a day and is located on a 1,200-acre site some 35 miles southeast of Houston.

Labor Secretary Hilda Solis has repeatedly said that “there’s a new sheriff in town,” signaling that she would take a more aggressive approach in enforcing wage and labor laws, after what she said was lax enforcement under President George W. Bush.

But one department official said that the record penalties assessed against BP were not an effort to send a signal to industry, but a straightforward move that punished a company with a long record of moving slowly to address safety problems.

In the 30 years before the 2005 explosion, there were 23 deaths at the Texas City refinery.

One Labor Department official said BP was likely to seek to have the fines reduced by appealing them, first to the Occupational Safety and Health Review Commission and then perhaps in federal court.

Federal officials say they expect BP to dispute that the company was required to do all that OSHA said and that it had failed to meet the deadline to remedy problems.

Six months after the explosion, BP entered into a settlement with OSHA in which it agreed to pay a $21.3 million fine, then the largest in OSHA history.

The previously highest fine was an $11.5 million penalty ordered in 1991 against the Angus Chemical Company and IMC Fertilizer Group, operators of a Louisiana fertilizer plant where an explosion killed eight workers and injured 120.

As part of the settlement, BP also promised to commission an independent audit and to take actions to eliminate potential hazards found in the audit, which was conducted by the AcuTech Consulting Group.

One Labor Department official voiced dismay that BP had four years to correct the problems identified after the settlement, yet OSHA still found hundreds of violations.

BP has already pleaded guilty to federal charges related to the explosion and agreed to pay $50 million, the largest criminal fine ever assessed against a company for Clean Air Act violations. Those violations included failing to maintain the safe startup of processing units and the mechanical integrity of the refinery

Since the explosion, BP has settled more than 4,000 civil claims, paid from a $2.1 billion fund it set aside to resolve claims.

Economics: NeoClassical v Ecological

2009 Lamborghini Gallardo LP560 Spyder

2009 Lamborghini Gallardo LP560 Spyder

“All this matters because economists thought, wrote, and prescribed as if nature did not.”

J. R. McNeill, Something New Under the Sun.

“Global Warming is nonsense. Greenhouse gases mean growth, far as I can see. The Earth is one big resource, to exploit and consume, for the grand old party.”

L. J. Furman, Sunbathing In Siberia

Economics, according to Daly and Farley, in Ecological Economics, ISBN 1-55963-312-3, is “the science of allocation of scarce resources among alternative ends,” or  “what we want and what we have to give up to get it.”

Since the Great Depression economics has been about growth. Neo-Classical Economists measure the health of an economy by the growth of Gross Domestic Product, GDP, the sum of the goods an services produced in the market.

Ecological Economists think that the purpose of the economy is not simply to maximize and keep increasing the value of goods and services that are passed around. According to Robert Costanza, Director of the Gund Institute and Professor of Ecological Economics, University of Vermont, “The purpose of the economy should be to provide for the sustainable well-being of people.” Ecological Economics distinguishes growth from development. Growth, an increase in throughput, can waste resources. Development, a qualitative change for the better, results in realization of potential. Ecological Economists distinguish between costs and benefits, and subtract costs.  Rather than the Gross Domestic Product, GDP, Ecological Economists focus on the Genuine Progress Indicator, GPI,and distinguish economic goods from what Donella Meadows calls “economic bads.

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