Sunday, January 21, 2018

The energy of Bitcoin, the information economy and the (possible) decentralization of the world

The near vertical rise and fall in price of the cryptocurrency Bitcoin in recent months has been accompanied by reporting about the energy used to run the Bitcoin network. The amount is enormous, more than enough to supply the entire country of Ireland.

Many other cryptocurrencies operate under less energy-intensive designs. But the more than 1,000 other digital coins beyond Bitcoin certainly use a considerable amount of energy though there is no overall estimate I'm aware of. (For the technically minded, here is a discussion of two popular methods associated with validating transactions, one of which is considerably less energy-intensive.)

We'd like to think that the information economy of which these newfangled currencies are part bears lightly on the broader environment. But as I pointed out in my piece "The Unbearable Lightness of Information," much of what happens in the information economy is simply focused on extracting more resources more quickly to create more goods and services for more customers. The physical economy isn't disappearing. It is merely being exploited more completely using digital information.

And beyond this, "Every person who works in the so-called information sector of the economy must be housed, clothed, schooled, provided transportation, provisioned with household goods, given opportunities for entertainment and recreation, [and] supplied with a wide array of public services."

Having said all this, I find one aspect of the blockchain technology behind the explosion in digital currencies to be promising. This technology offers a possible path for decentralizing banking and finance and myriad other Internet-related services we've come to rely on from big corporations. By creating a highly efficient transparent network with accounts readable by anyone and validation done by anyone who is willing to set up the necessary equipment, these networks make possible much wider use of micropayments to small service providers. That could make centralized Internet-based services obsolete over time in many areas and bring power back to system users.

Conceivably, you could take back control of your personal information instead of trusting someone else to handle it securely (a need reinforced by regular major data breaches such as the Equifax debacle). In the area of data backup and storage, you could choose to deal with many small distributed providers of data storage instead of dealing with one large company. Think Napster (with a small fee) for storage as opposed to large cloud services companies such as Amazon.

Right now the accessibility and security issues related to participating in these incipient networks are formidable for average people. But those pushing blockchain technology are hard at work on these issues.

Perhaps of most interest to me is the application of blockchain to energy markets. Already Rocky Mountain Institute is leading efforts to develop blockchain technology for these markets. Three candidates for the technology are customer billing, renewable energy certificates, and peer-to-peer energy sharing networks.

Saying one understands all the implications of blockchain technology today would be similar to saying one understands all the implications of the Internet in the early 1990s.

Apart from the headline-grabbing fortunes made by early entrants into the blockchain world, there seem to be much more profound implications to this technology. While Bitcoin is getting most of the attention, it is very much a single-purpose vehicle for those who want to store wealth in a currency not controlled by central banks. I'll leave predictions about Bitcoin's future to others.

But the future of blockchain in general seems worthy of attention. The biggest threat it poses to the established order is the possibility of decentralizing wealth and power. Whether it will accomplish that to any degree is unknowable. But it is worth thinking about if you can avert your eyes from the current frenzy in the cryptocurrency marketplace.

Kurt Cobb is a freelance writer and communications consultant who writes frequently about energy and environment. His work has appeared in The Christian Science Monitor, Resilience, Common Dreams, Le Monde Diplomatique, Oilprice.com, OilVoice, TalkMarkets, Investing.com, Business Insider and many other places. He is the author of an oil-themed novel entitled Prelude and has a widely followed blog called Resource Insights. He is currently a fellow of the Arthur Morgan Institute for Community Solutions. He can be contacted at kurtcobb2001@yahoo.com.

Sunday, January 14, 2018

Protagoras and the Anthropocene: Can man still be the measure of all things?

The ancient Greek philosopher Protagoras is famous for his saying that man is the measure of all things. Though we don't know much about Protagoras or his written work except for quotations appearing in other ancient works, the general view is that Protagoras was the father of moral relativism in philosophy.

The Protagoras's complete statement has been translated as follows: "Of all things the measure is man, of the things that are, that [or "how"] they are, and of things that are not, that [or "how"] they are not." It is unlikely that Protagoras believed that physical truths about the natural world such as the freezing point of water depended on one's personal standpoint.

But under Protagoras's tutelage in matters of values, we are left only with the measuring instrument called "man" (or more inclusively "humans"). In the age of the Anthropocene—that still-not-official geologic age in which humans are designated as the most potent geologic force on the planet—those issues thought to relate solely to the lives of humans do NOT, it turns out, relate simply to humans.

While we may choose to celebrate the material progress of humankind, we do so heedless of the wider costs to the stability of the biosphere. Those who focus only on measures that exclusively relate to what we regard as human well-being miss the broader picture and mislead their audience. (They often say "the world" is getting better when they mean certain measures of human well-being are moving in a direction we regard as good.)

But, human civilization thrives under very specific environmental conditions, namely the ones experienced since the end of the last ice age. That age, the Holocene, has been marked by a moderately warm and stable climate which made possible agriculture and the concomitant rise of cities.

General advances for humans such as rising incomes (and thus consumption) and better access to health services are unalloyed positives only if the continuously degrading indices of biospheric stability are ignored. Two concepts, planetary boundaries and tipping points, inform us about the risks.

Planetary boundaries identified by the Stockholm Resilience Centre number nine and include such things as climate change, ocean acidification, ozone depletion, and biodiversity, called "biosphere integrity." The Centre reports that humans have passed four of the nine boundaries: "climate change, loss of biosphere integrity, land-system change, altered biogeochemical cycles (phosphorus and nitrogen)."

The word "boundaries" implies that with the right actions we could cross back over them and thus return to a safe zone. (In practical terms this would mean moving back into a zone of lower risk.)

Tipping points, however, imply a journey to the land of no return. Researchers reporting on the planetary boundaries believe that in the areas of climate and biosphere integrity, the planet is in danger of moving toward a new irreversible state, "a much less hospitable state, damaging efforts to reduce poverty and leading to a deterioration of human well-being in many parts of the world, including wealthy countries."

I am reminded of the man falling from a 100-story building who, when asked at the 50th floor by someone near a window how he's doing, replies, "Fine so far." Tipping points seem unimportant or even nonexistent until you reach them. Conceivably, human well-being could on average continue to increase for many indicators for years to come, only to be dramatically reversed when planetary tipping points kick in.

The mathematical way of talking about this is that tipping points can represent a kind of step function or nonlinear response on a graph. Much of the sanguine talk of continued human progress is premised on the absence of sudden nonlinear turns or step functions in the graphs of the key indicators of planetary health. The data to date give us little reason to expect gradual change for all indicators or to believe that we can adapt successfully to all the changes we face if we don't alter our current course.

It is not surprising that humans look to themselves as arbiters of what's important in the life and processes of the biosphere. Humans, like every other species, seek their own survival and well-being first. But our overreliance on humans as the measure of all things is the very posture which has put us on the road to potentially catastrophic changes in climate and other planetary systems, changes that threaten our very survival.

The time has come to put away man as the measure of all things and look to much broader measures for an assessment of our well-being and the well-being of all those systems upon which ours depends.

Kurt Cobb is a freelance writer and communications consultant who writes frequently about energy and environment. His work has appeared in The Christian Science Monitor, Resilience, Common Dreams, Le Monde Diplomatique, Oilprice.com, OilVoice, TalkMarkets, Investing.com, Business Insider and many other places. He is the author of an oil-themed novel entitled Prelude and has a widely followed blog called Resource Insights. He is currently a fellow of the Arthur Morgan Institute for Community Solutions. He can be contacted at kurtcobb2001@yahoo.com.

Sunday, January 07, 2018

Hawaii's existential choice: Tourism, food and survival

Hawaiians used to feed themselves quite easily on this island paradise. With the arrival of Europeans and Americans came European and American ideas about plantation agriculture. Hawaii became a producer of coffee, sugar, pineapple, papaya, rice and other plantation crops.

While destroying Hawaii's diverse food system, the growers created a prosperous agricultural trading economy with mainland markets as customers. But competition from low-cost producers elsewhere has more recently devastated that economy. The last remaining sugar plantation closed in 2016.

The decline of the previously large sugar and pineapple industries now make Hawaii much more dependent on tourism as a source of income. Tourists are Hawaii's largest industry. They spent $15.6 billion in 2016 on vacations there representing about 18.5 percent of the total economy. That certainly underestimates their importance as many additional support services are needed to maintain the businesses that service the tourists.

As tourism has grown, land used for agriculture has declined by 68 percent since 1980. Some of the former plantation operators have turned themselves into land development companies to take advantage of the tourism and real estate boom.

The result is that Hawaii—a lush, fertile group of islands with the ability to grow crops year round—now imports 90 percent of its food.

Importing food is not a problem in and of itself. It turns out that some of the world's top food importing nations such as China, the United States and Germany are also top food exporters. They choose to specialize in what they grow most efficiently and export some of it, while importing foodstuffs which other countries are more efficient at growing by reason of climate, soil, water availability, labor costs and other factors. For countries such as China, the United States and Germany, disruptions in food imports might represent a mere inconvenience. Americans might feel deprived without bananas at their morning table, but they would have the option  of choosing apples, pears or other fruit instead.

Hawaii could make policy that would encourage more food growing. But such policies are likely to raise the cost of government through agricultural subsidies. If Hawaii were an independent country, it could impose import duties on certain agricultural products in order to encourage local production of them.

But subsidies and other available measures—unless they are focused on building a diverse agriculture—might simply bring Hawaii back toward a plantation economy, not an economy that could actually feed the people of Hawaii. Here Hawaii faces two problems. A census done by Hawaii's still then independent government in 1850 put the population at around 84,000. The 2010 census showed a population of more than 1.3 million according to Hawaiian state census information.

Using current agricultural lands, it would be difficult to feed a population that has grown more than 10 times (let alone the tourists who add another 220,000 people daily to the population)—even if crops were broadly diversified. In all likelihood much more land would have to be put under cultivation and many more people would have to be engaged in growing food in residential vegetable gardens, truck farms and large polyculture farm operations.

The second problem is that so long as the tourists keep coming, there is little impetus to reverse the trend in Hawaiian agriculture. The assumption is that the tourists will simply keep coming and coming forever. The September 11, 2001 terrorist attacks on the United States and the deep recession of 2008 and 2009 taught Hawaiians that there will be significant disruptions in tourist traffic, but that that traffic will always come back. Have they learned the right lesson?

Other importers of food aren't so fortunate as Hawaii which even in the worst situation would receive aid from the U.S. federal government. Countries such as Afghanistan, Myanmar, Niger, and Yemen, in fact, 34 countries in all "are unable to produce their own food due to water and land limitations."

For many in these countries getting their daily sustenance is a life and death struggle. The modern global economy has forced countries to specialize. This works well for those properly positioned with the appropriate infrastructure and skilled workforce. Without these many countries simply become sources of raw commodities for the factories and mills of advanced countries—and that's if those developing countries are lucky enough to have such an endowment.

Some day Hawaii may have to contemplate what it will do without tourism or at least less of it. For that matter, it may have to contemplate what it will do without the heavy U.S. military presence which represents the second largest part of the Hawaiian economy.

Specialization has its advantages. But it can also bring frightening vulnerabilities. A whole city of beautiful hotel rooms means little if few people come to stay in them. Hedging against such a day may just be too painful for Hawaiians to contemplate—which is the very reason they should start thinking about it right now.

Kurt Cobb is a freelance writer and communications consultant who writes frequently about energy and environment. His work has appeared in The Christian Science Monitor, Resilience, Common Dreams, Le Monde Diplomatique, Oilprice.com, OilVoice, TalkMarkets, Investing.com, Business Insider and many other places. He is the author of an oil-themed novel entitled Prelude and has a widely followed blog called Resource Insights. He is currently a fellow of the Arthur Morgan Institute for Community Solutions. He can be contacted at kurtcobb2001@yahoo.com.

Sunday, December 31, 2017

Happy New Year -- Taking a holiday break

I'm taking a short break from posting this week. I expect to post again on Sunday, January 7.

Sunday, December 24, 2017

Is Washington tacitly operating under a new monetary theory?

In 2002 when soon-to-be-dismissed U.S. Treasury Secretary Paul O'Neill warned then Vice President Dick Cheney that the Bush administration's tax cuts would drive up deficits and threaten the health of the economy, Cheney famously answered: "You know, Paul, Reagan proved deficits don’t matter."

In the wake of the recently approved federal tax cut,voices concerned about the damage that deficits will do are rising again.

What's curious is that since Cheney's rebuke of O'Neill, growing federal government deficits seem not of have mattered. In fact, the largest deficits ever boosted the economy after the 2008-09 recession, exceeding $1 trillion annually for four years.

All of this suggests that the federal government has for a long time been operating under an unspoken monetary theory, namely, that government spending does not need to be backed by revenues and that the debt issued to fill the gap between spending and revenues will have little effect now or in the future.

But isn't there some level of federal debt which would cripple the federal government and the U.S. economy?  A common metric for measuring this debt is the ratio of federal debt to annual gross domestic product (GDP). When one looks at a graph of this, the growth in debt seems perilous, rising from a low of around 30 percent of GDP in the early 1980s to more than 100 percent of GDP today.

Seemingly more perilous is the rapid growth in Japanese government debt. That debt has soared from a low of around 40 percent of GDP in 1990 to almost 200 percent of GDP now. Yet, the oft-prophesied demise of Japanese government finance has not occurred.

What the United States and Japan share in this regard is that each issues its own sovereign currency. That means both could theoretically retire their entire government debt in one day by issuing sufficient currency to buy up all the outstanding bonds. (A smarter way would be to do this very gradually without announcing it. In the alternative, the legislature could pass a law requiring government bondholders to sell their bonds back to government at a pre-determined price—something bondholders would certainly dislike since the price is likely to favor the government.)

What this tells us is that any government that issues its own currency will never run out of money to pay back bondholders. That's, in part, why there is no panic among Japanese and American owners of government debt. What the above further tells us is a bit more shocking: Such governments don't even need to issue debt to finance their operations.

And, so long as a government doesn't issue more currency than the economy can produce goods and services for, it won't create price inflation (defined as too much money chasing too few goods).*

The only reason for governments which control their own currency to levy taxes then is to create demand for that currency. If someone has to pay taxes in the government-issued currency, he or she will want to receive at least some payment in that currency. As it turns out, so will everyone else. As a result it becomes simply more convenient if everyone adopts the country's sovereign currency as their unit of account and medium of exchange.

All of what I've just described fits neatly into what is called Modern Monetary Theory (MMT), the premises of which are so deceptively simple that it is hard for people to believe them. But Japan and the United States seem already to be operating under that theory save for one act—the act of issuing copious amounts of government debt, something that is entirely unnecessary under MMT.

The idea that governments which issue their own sovereign currency must rely on private credit—mostly from wealthy citizens—to finance themselves is an illusion. But it's an illusion that the monied class hopes no one will see through. For if the public does see through it, government debt—which is used like a weapon to promote cuts in social spending—would cease to frighten anyone (and may be gradually eliminated). That means spending policy would become much more flexible than previously imagined.

So, it turns out that Dick Cheney was right—but not for reasons which he and the new rentier class would ever be willing to admit, namely, that the government doesn't need loans from rich people or loans of any kind. Bondholders therefore can't really hold the government hostage. Realizing this and acting on it would seriously diminish the influence of the rich in the halls of power and make a realignment of spending priorities possible.

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*This is an important check on the creation of money. A complete discussion of this would require a separate piece covering the physical limits the economy faces with regard to resources (especially energy), climate and infrastructure.

Kurt Cobb is a freelance writer and communications consultant who writes frequently about energy and environment. His work has appeared in The Christian Science Monitor, Resilience, Common Dreams, Le Monde Diplomatique, Oilprice.com, OilVoice, TalkMarkets, Investing.com, Business Insider and many other places. He is the author of an oil-themed novel entitled Prelude and has a widely followed blog called Resource Insights. He is currently a fellow of the Arthur Morgan Institute for Community Solutions. He can be contacted at kurtcobb2001@yahoo.com.

Sunday, December 17, 2017

Do we have the wrong model of human nature?

Are we wrong to believe that competitiveness must and always will be the central animating principle of human action? Media studies scholar Michael Karlberg thinks so. In fact, he believes that another animating principle, mutualism, is both central to human interaction and necessary to aid human society in meeting the myriad challenges it faces regarding climate change, inequality, governance, education and many other issues.

I saw Karlberg speak recently at a private gathering in Washington, D.C. He is measured in his tone, clear in his delivery and compelling in his logic. He poses the following question: If nearly all of our institutions are premised on competition (commerce, politics, education, recreation and many others), is it any wonder that our competitive instincts are honed and expanded while our cooperative ones atrophy?

Karlberg is not naive enough to believe that all this can be changed overnight. But he does make a convincing case that competitiveness is as much a problem emanating from social institutions that inculcate and incentivize competition as it is a problem of human nature.

The way forward, he asserts, is to build new institutions that emphasize cooperation; it's a sizable task, but one which has already begun as he explains at the end of a TEDx talk which he gave in 2012. However utopian this goal may seem, Karlberg reminds us that the current "culture of contest," as he styles it, has given us the existential threat of climate change spawned by endless economic growth and consumption. In fact, the "culture of contest" is creating a series of social and ecological challenges so profound that unless we change that culture we may drive ourselves toward extinction.

Not surprisingly, the competitive view of human nature is dominant in how we conduct international relations. In another presentation I saw recently international lawyer and scholar Sovaida Maani Ewing asserted that international relations based on national self-interest merely results in a world that lurches from crisis to crisis. Ewing, who runs the Center for Peace & Global Governance, suggested that long-term stability in international relations will only come from agreements based on shared principles. That sounds very much like a move away from the "culture of contest."

Karlberg and Ewing clearly have a contrarian and more hopeful view of human nature than we are used to. Is there evidence that they are right?  Is it possible that what makes humans happy isn't consumerism and competition, but sufficiency and cooperative relations?  Quite possibly the answer is yes according to a recent piece in The New Yorker magazine which summarizes the main arguments of scholar James C. Scott's new book, Against the Grain: A Deep History of the Earliest States.

Scott, it seems, doesn't buy into the putative superiority of modern governance and social organization over more "primitive" forms. He is, however, not a mere primitivist for he cites new understandings and evidence of the earliest settlements. According to the New Yorker piece Scott believes the agricultural revolution was "for most of the people living through it, a disaster" resulting in poorer health, rising inequality, slavery and other ills.

The summary continues: "War, slavery, rule by √©lites—all were made easier by another new technology of control: writing."

The same article touches on the Kalahari Bushmen, one of the last large groups of nomadic peoples in the world. What we know of them squares well with Scott's conclusions. The Bushmen do not accumulate surpluses, but live for the day, stopping their foraging when they get what they need to eat. Yet, they are well-fed with stable and felicitous social relations, valuing solidarity over competition and individual achievement.

The piece goes on to quote economist John Maynard Keynes as follows:

When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals. We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues. We shall be able to afford to dare to assess the money-motive at its true value. The love of money as a possession—as distinguished from the love of money as a means to the enjoyments and realities of life—will be recognized for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease.

We are no closer to realizing today such a world than when Keynes wrote the above words. But here is the key point, according the article: "The study of hunter-gatherers, who live for the day and do not accumulate surpluses, shows that humanity can live more or less as Keynes suggests. It’s just that we’re choosing not to."

And, this brings us back to Michael Karlberg. Karlberg claims that the "culture of contest" is not a necessity so much as an artifact of a flawed, one-sided understanding of human nature. The Kalahari Bushmen provide a window into our human past that suggests Karlberg might very well be right.

What that past tells us is that humans are far more complex than we imagined—that is, they are not merely self-maximizing machines—and far more influenced by the incentives of the system in which they are enmeshed. And this conclusion counsels hope for the project championed by Karlberg and for a world that desperately needs the cooperation which would emerge as a result.


Kurt Cobb is a freelance writer and communications consultant who writes frequently about energy and environment. His work has appeared in The Christian Science Monitor, Resilience, Common Dreams, Le Monde Diplomatique, Oilprice.com, OilVoice, TalkMarkets, Investing.com, Business Insider and many other places. He is the author of an oil-themed novel entitled Prelude and has a widely followed blog called Resource Insights. He is currently a fellow of the Arthur Morgan Institute for Community Solutions. He can be contacted at kurtcobb2001@yahoo.com.

Sunday, December 10, 2017

Taking a short break - no post this week

I'm taking a short break from posting this week. I expect to post again on Sunday, December 17.