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Tuesday, June 27, 2017

Money makes the world go …. green?

Posted by steve on August 7, 2012

Just suppose we all decided  – and I mean all of us, politicians, corporates, national economic policy experts, universities, bus drivers, dog owners .. you get the idea… to demand that, apart from everyone doing their level best to live sustainably, that a monetary system would be put in place to drive development in that direction.

Just suppose…. Humour me, this is a post on my new hobby – capitalism. It’s quite a fun hobby, I have been posting for several months and still haven’t come to the core of defining capitalism.  Maybe, as some say, there is no definition. In which case it’s better to get on with the job in hand and look at how this money system could be set up.

One theme  is in the diagram below. Quite simply, the aim of policy would be to drive development into the top left-hand corner. From people not having enough to eat to having sufficient. From environmental services being degraded to eco-systems maturing.

Alternative outcomes for economic policy

Now it might seen like nation economy policy makers have a lot of tools at their disposal. Forgive me if I have this wrong, but I can only count three: economic laws, interest rates and taxes.

That is not a lot to play with, but given the idea of introducing flexible fees to provide a mechanism to control engineer the economy, it might be possible.

Let’s look at each square of the matrix in turn. As the bottom left, worst case, is a combination of the other two we can analyse community challenge and eco-challenge.

Eco-challenge is where the needs of the community are being met, but at a price. Ecosystem services are depleting and so are minerals.

Here flexible fees kick in. Basically it works like this: A point where eco-system services are being degraded is identified. This is done by looking at the supply chain of essential goods and services. The substances that are the main cause are identified and traced back to where they are either imported or extracted. The extraction or import of these substances is subjected to a fee. The fee is raised or lowered at regular intervals at sufficiently large intervals until market behaviour changes.

At the same time, a large part of the fee collected goes back to the population via general tax rebates, for example. The effect is that substances, or practices with these substances, become relatively more expensive. Non-polluting things become cheaper. Investment flows to these now more competitive alternatives.

Read more in the white paper http://avbp.net/wordpress/wp-content/uploads//whitepaperFE_V2.pdf

But it need not stop there, there is plenty more that can be done. Take for example taxes. Every item for sale has a VAT – Value added tax or Sales tax levied on it even if it can be zero. And every item is coded in international systems for classifying what kind of item it is.

However, even though these systems distinguish between books and luxury items, food and alcoholic beverages, they do not distinguish between products and raw materials that are guaranteed organic. A simple twist of accounting could produce this – well maybe not simple but it is not rocket science.

Again, putting, say 25% VAT on industrially grown lettuce and 6% on certified organically grown would increase the competitiveness of the organic products.

The next blog will tackle how the monetary system  can tackle the community challenge.

And maybe the next next I will consider what is stopping the simple development of accounting and taxation that could create the saying “money is making the world go green”.

Is there a cure to stabilize an economy?

Posted by steve on July 24, 2012

The modern economy has undoubtedly given better lives to millions.

However, despite years of experience and development of macroeconomic theory, despite decades of Nobel prizes in Economics, there still doesn’t appear to be a way to run an economy without putting severe hardship on a large percentage of the population.

And this state of affairs is generally accepted.

Especially women, wives and mothers, it is women who end up suffering take from  this hardship.

The other thing that I know that women particularly care about is the environment. Again, it is also generally accepted that pollution is unavoidable and depletion of natural resources the unavoidable price for economic stability. The costs of pollution and depletion are not paid for directly by the producers or consumer, but by society as a whole. They are called externalities. Externalities, it seems, are unavoidable if we want a stable economy. WAIT! There is more to read… read on »

Suppose capitalism mimicked the way nature works.

Posted by steve on June 6, 2012

Article updated June 6 after consideration of all the recent comments

We are stuck. On the one hand you have people who talk about economic growth as being the objective of policy – necessary to be able to pay back debts and achieve prosperity. On the other hand, you have the sustainable camp that claims infinite growth is impossible and therefore the whole economic system is bound to fail as it relies on it. You have people who claim we need GOOD growth as opposed to BAD growth. Bad growth would be the increased economic activity due to storms, break-ins and failures of products. Either way, the term capitalism comes up as if it were a system. Perhaps if we explored the idea of developing our thinking about capital we might find some ways forward.

My aim here is to clarify the idea of using capital as a central social planning approach, using the idea of settlement  maturity. This is the idea that settlements, and the societies in them, like an eco-system, can mature.  If society can mature, then maybe its  capital profile will mature too.To be able to take this analytical line we need to understand first what ecological maturity is.

Let us look, then, at how nature grows and see if we can find some insights into how capital can grow, and what economic growth would look like through the eyes of sustainability.

Growth =net increase in mass

Growth (rapid increase in biomass)is a stage the ecosystems go through on their way to ecological maturity

There is still growth in mature eco-systems. Trees still grow, albeit slower. However, for the system as a whole there is little net increase in biomass.

Ecologists describe how all eco-systems strive to become mature.  You probably have the idea somewhere in the back of your mind, how smaller animals give way to large predators, small plants become forests, rushing water becomes a swamp, etc.

One well-known description of maturity comes from the ecologist Odum,(ref 1)  (table below)

Let’s take it bit by bit:

  • Gross production. This means the total amount of biomass that accumulates in the system. Note that as a system matures, the slower biomass increases. For example, young trees grow very fast, older trees grow much slower.
  • Biomass supported. As the system matures, more biomass is in the system – more trees grow, more animals and plants more in, and they are larger.
  • Total organic matter. As above, the more mature the system, the more in the eco-system.
  • Size of organism. In immature systems, the organisms are small. As the system matures, and there is more for predators to eat, for example, the more and larger the organisms become.
  • Niche specialism. As the system matures so does diversity. More specialized organisms move in.Mineral cycles. Eco systems need minerals to cycle in them in order to function, so to have more biomass they must retain nutrients.
  • Nutrient exchange rate organisms <> environment . Immature systems “leak” both heat and nutrients to other eco-systems.Role of detritus in nutrient cycling. As the system matures, detritus is more and more important as a source of minerals and energy for the organisms in it.Nutrient conservation. Mature systems conserve minerals and do not leak them to other systems.

We now need to explore the idea of capital.

The diagram below breaks down the categories of capital often used.
The categories should be  be self evident. But from the point of view of accounting, human capital and social capital are not normally put on the books.
Financial capital is divided into that owned by the organisation and that borrowed. In English the terms foreign capital is used for  money lent and equity is the money put into the company by its owners.

Now let us apply the idea of maturity using the idea of the built environment; a settlement.

An immature settlement might be a few tents that settlers might bring with them. They have no agriculture, there is no infrastructure, but they are surrounded by the bounty of nature and can begin to convert, for example, trees to buildings.We can envision an immature settlement, but can we envision a mature one? Surely our cities act like immature settlements: nutrients are lost to surrounding environment, metals and minerals end up in tips, and even our building reflect heat rather than gather the energy from the sun. The list below is an attempt to bring together ideas of what a more eco-mimicking city or settlement might look like.

GROSS PRODUCTION. Here we would see the production of buildings and transport infrastructure as complete, only repair and upgrade would be needed. Most production activity would be turned to food and heating and lighting.

BIOMASS SUPPORTED. The mature settlement would have a high level of biomass supported in the form of tree, and food -producing facilities.

TOTAL ORGANIC MATTER Total organic matter would be higher, to provide eco-system services like shade, energy capturing, building and clothing materials etc. A field does not represent this vision, we would expect more organic matter intensive methods, like forest agriculture, food forestry, would be used.

SIZE OF ORGANISM. It can be imagined that in this case, for a society organism means body, like an organization. As society matures, more specialized and larger organizations can provide efficiency of scale and specialization.

NICHE SPECIALIZATION. People could have more specialized jobs as society matures. Early settlers might need to master a broad range of tasks without being able to go too deeply. In the specialized society everyone could master subjects deeper.

MINERAL CYCLES. It makes sense that an immature society digs up iron and other materials to get started. But after a while, the extraction of these substances can become polluting and maybe lead to scarcity. In this case, minerals already extracted should be recycled ad not released in to the biosphere. This approach is being pioneered by the natural step and Cradle to Cradle. The mature settlement is a mineral recycling society

NUTRIENT EXCHANGE RATE WITH ENVIRONMENT. The same here as for minerals. The mature society will retain nutrients for recycling, and do the surrounding environment a favour by not putting this burden onto it, as well as minimizing the work needed to obtain nutrients. These building blocks of life can stay within the settlement. More are only needed for growth.

ROLE OF DETRITUS Early settlers could make waste without it creating a problem or being seen as a loss of valuable resources as there probably were not much of them. Not so for the mature settlement, where the amount of biomass is high. Detritus is a resource and in the mature society there may be much of it. It can also accumulate and be a pollutant. So it needs recycling. This will mean a soil to soil perceptive for food systems – from soil to plate back to soil.

NUTRIENT CONSERVATION. Gathering nutrients requires a lot of work in an immature settlement. Mature settlements recognize the energy and effort needed in obtaining nutrients is far greater than the effort and work required to cycle them.

What we are describing, then, is that the concept of economic growth is not an end in itself but the process by which economic maturity is reached. At this point, capital is accumulated, analogous to the build up of bio-mass in the mature eco-system.

The effect on capital.The diagram below illustrates how capital is converted and increased in the maturing society.

Natural capital to man-made capital (A) : For example, minerals and nutrients would be used to create housing and machines. At the same time, man-made capital should be in place to promote development of natural capital(B).  Man-made capital cannot increase at the expense of natural capital, the two must grow together. Otherwise, the services that natural systems provide (like building materials, food, clean water, etc) will be unavailable.

Conversion of human capital to man-made and natural capital(C): human capital conversion works uniquely. Taking knowledge and applying it to solve the problem of creating man-made capital and natural capital can, if applied right, increase human capital through learning.This knowledge could be institutionalized in social capital in organizations and information systems.

Social capital, the development of organizations (D), would in turn be needed to run, organize, and develop the man-made capital (E) and natural capital(B).

The role of Financial Capital. In this diagram, money represents an accounting system that has significance in that the value of the whole increases over time. (If all forms of capital can be valued using the same system of measurements.)  As the system matures it will accumulate biomass and minerals for recycling and organizations that accumulate knowledge. An accounting system could be developed that calculated in this way. Growth would slow down as the settlements matured-  I leave it to later articles to explore how such an accounting system might work.

REFERENCES

1) Odum, E. P. 1969. The strategy of ecosystem development. Science, 104:262-270.

Debating Capitalism as if it exists

Posted by steve on May 31, 2012

In my earlier post I said that my hobby of analysing capitalism from a sustainable point of view has got me to the point where I see that capitalism is actually a grammar describing the language of money.

I said that there is an intellectual class paid to talk about these issues but, like linguists who have spoken a language but never ever said anything significant, they have no influence over policy-making, law making or even how people use money.

We now see conferences debating “capitalism” is if were a system, as if it existed like something  you could change and even adapt.

It is now the turn of Peter Drucker’s followers to discuss this academic subject as if it were a science.

QUOTE: While the unethical behaviours and self-serving strategies of key players in the financial sector have become quite evident because of the mess, the issue has not stopped there. Many have begun to question the underlying values of the capitalist system as a whole.

Sadly, they make capitalism into a system, and mean that there are values underlying this system. Such un-precise  language is what gets you into trouble in the first place. And they quote unethical behaviors, not the system as part of the problem.  Here is another scientific-sounding quote:

There is not the slightest shadow of evidence that any other known or conceived economic system would have achieved the mind-boggling performance in value creation and innovation in such a short timeframe.

Of course there is no evidence. How can you collect evidence and do experiments and measurements on something that does not exist?

Later on in the abstracts, the debate treats capitalism as if it were more that a system, maybe an ideal? As long as the intellectual class spends its employer’s money talking about things that do not exist in a way that lacks precision or actionabilty, it will be unable to lead the way to any sustainable transition to equitable and ecological practices.

The man in the street could give you the straight answer to the question above: the debt crisis, and the problems in Greece are consequences of mis-management, deliberate and non-deliberate, by people who have enough capital to not be affected by it.  The system as  everyone insists on calling it, does not exist; there are no real definitions of it, and depending on the mood of the debaters expands and contracts in a farcical exchange to win points. And votes.

One interesting time -waster will be the debate:

On a more fundamental level, there is a broader

challenge to the Western capitalist model in the

form of state capitalism as exercised in countries

as different as China and Brazil

Once again, the “system” is now a “model” that can be “challenged” by another model. What kind of challenge is Brazil? Are they going to ridicule other states? Undercut other countries’ products? Is state capitalism capitalism? Is it the same “model” in a different mode? And where does “management” fit in. I am sure Peter Drucker worked with much better things, like getting companies to work properly.

It all sounds so intellectual and high -flying and important. Hope the coffee is good at least.

CAPITALISM HAS FAILED. Remind me; what is it exactly?

Posted by steve on

In the excellent blog, CAPITALISM HAS FAILED, on Bill Totten’s site,  Sara Robinson, MS, APF points out the shortcomings of what she calls “the model”:

The problem, in a nutshell, is this: The old economic model has utterly failed us. It has destroyed our communities, our democracy, our economic security, and the planet we live on. The old industrial-age systems – state communism, fascism, free-market capitalism – have all let us down hard, and growing numbers of us understand that going back there isn’t an option.

I thought her article would help me in my new hobby: capitalism.

Actually, although well-written and drilling down to meaningful details, like most academics Sara misses the point by using unclear language and terminology and looks at the subject from muddled viewpoints.  This is slightly surprising because there are a lot of practitioners out there who will give you presentations and consulting to guide you through the chain from deep values to vision- mission to policy to principles to systems to processes to practices to work routine descriptions when it comes to banks, for example.

Bit maybe her article illustrates the problem: that we live in such a complex world, use language and terminology in a  muddled way, have democratic systems that we cannot participate actively in, that we as Earth citizens have ended up with results we did not want. It illustrates the plight of the intellectual class who wade around in ideas and never get their hands “dirty”  dealing with real organisations, real policy, real board decisions etc. This intellectual class is maybe  duped into thinking that if you could just invent the perfect “model” or “system” and bring “order” into the way we live – maybe a new world order – then failure would not happen. I think many in this class believe if we just monetarise  everything and have government get out of the way we will not see failure.  It’s not their fault, the game is rigged to allow them to say what the hell they like. Nothing changes.

Clarification #1. Models do not fail you.  They may contribute to your success positively or negatively. Look at it this way: I would rather have an excellent teacher using older models to teach my child than a substandard one using modern methods. The moment you start the model discussion you shift responsibility. The last time I looked, the police were still responsible for crime. Could they turn around and say “we didn’t catch the criminals because we used the  model that  failed us”? Maybe it would be more convenient for the criminals to argue in their defense ” We broke the law because the model failed us”.

Clarification #2. Responsibilities are written into the constitutions of nations. Each nation’s constitution is unique. There is no “we” using the same model. If there are starving people in a nation then look to the constitution and division of responsibilities to find where blame lies-

Clarification #3. Economic models and the Industrial-age “systems” (sic) are not the same thing. A system is not a model and anyway, the so-called economic model is again, hard to pin down. Show me the textbook on that one!

I have several comments on this Capitalism thing (which by the way I am STILL researching a clarification on – the joy of a hobby)

All failures of performance need to be analysed on the spot working from the point of failure. If something goes wrong in  a factory, teams rush to “the spot” to investigate. They ask “why” five times – like “why did the machine fail?”. Then if the answer was, “Not maintained” – “why was it not maintained” etc etc until the root cause is found.

One key to all system changes is to analyse behavior first. You can analyse behavior of things, people and even systems depending on the level you take. For example: the daily activities of the citizens of a nation are depleting their resources in an unsustainable way. Why? Because they are set up that way.

Capitalism is not a system, it is a grammar. Grammar is the systematic study and description of a language, but the terms is used more widely in for example, the “grammar of film”. So I would like to say that capitalism is what comes out from a systemic study and description of ….. well, both normal language and films communicate value, so I guess that would make capitalism the language of money.

Capitalism as a grammar is not a set of rules as such, rather a description. The rules of grammar are not like scientific laws, and not like rules of, for example, driving. They are merely descriptive – describing how people who use the language use it and the perceive its uses.  We have the rules of punctuation for example. What makes them rules is that everyone accepts them and the practice has evolved. And it is still evolving. I just started a sentence with”and” – considered bad practice in school.

The law of supply and demand is one such grammatical item. It has actually never been shown to work in practice, and neither in theory. Its is a rough description of how people talk about money.

Let me make this clear: capitalism is not destroying the planet – people are. It is that simple. Capitalism could exist, like some ancient language, and never be used. People could still destroy the planet. Or not. If you never pushed the accelerator, fuel would never get burned and carbon dioxide would never get into the atmosphere. Capitalism has not failed, people have.

If use of grammar creates a problem you change it. Use of language to communicate over radio has evolved to ensure safety, for example. So we could consider making some changes in the grammar of capitalism.

In fact, just as the situation changed for communication when wireless communication between boats and planes appeared, the situation is changing when the parking lot we have made the Earth into is full.

A subject for my next foray into my latest hobby.

Putting a price on emissions using ecological maturity impact

Posted by steve on May 18, 2012

cover-briefingThe price mechanism does not provide perfect information and does not necessarily lead to a perfectly efficient distribution of resources.  Many argue that the low cost of externalizing pollution to the community is leading us to create a fossil-dependent infrastructure that will be obsolete before it has paid for itself.

This briefing from the Swedish Sustainable economy Foundation explores the arguments for and against the price mechanism and looks into the scientific underpinnings of sustainable development, ecological maturity and eco-system services.

Download it here  breifiing-eco-system-services

Sweden’s plans for energy intensity transition look shaky

Posted by steve on May 13, 2012

I promised in my last blog in the series capitalism: a hobby to delve into the status of Sweden using my ideas of capital value. Before I do that, however I need to give readers an idea of the over-riding plans that Sweden has for energy intensity reduction. We saw from previous analyses that oil is a finite natural capital. As this is used, huge sums of natural capital are converted to financial capital and some are converted to man-made capital like buildings.

As you will see from my notes below, the plans seem rather sketchy. I have done my best to summarize what I know from reading official documents.The graph below shows my interpretation of possibilities for fossil energy descent. The Swedish Government has announced that Sweden will be fossil-free by 2050 and that 2030 the dependency on fossil fuel in the transport system will be broken.

The graph above shows the present oil import to Sweden to be about 350 barrels/day, reducing to zero by the year 2050 (horizontal axis).

COLORED LINES SHOW PHASE OUT SCENARIOS

The colored lines each represent a different scenario for phasing out oil. The red line is a fast phase out starting today, with an immediate transition to alternatives.The orange represents the opposite, a slow phase out at first, accelerating as the deadline draws near.The blue is a straight-line phase out and the green somewhere between the orange and the blue.

TWO OF THREE MAJOR SUPPLIERS WILL STOP IN THIS PERIOD To include external events I included two of three of Sweden’s major suppliers of oil: Denmark and Norway. According to several sources (see references below), these countries will not be able to supply their own needs around this time and soon after that their own production will cease.

FROM NOW ON, NEW INVESTMENTS IN TRANSPORT VEHICLES MAY BRING POOR RETURNS

Another interesting aspect of this analysis is financial capital investments in man-made capital. Cars and trucks represent huge investments, and the ones made today should be expected (unless an undue stress is placed on the economy) to be functional for 10 -20 years.This will be quite a challenge: as Denmark as a major suppliers stops supplying during the life-time of vehicles already built, Sweden will have to find alternative supplies of fuel at prices that allow use of this existing infrastructure.In economic terms, the red curve scenario seems unlikely. To make that work, the government would need to stimulate already today the conversion of vehicles to alternative fuels, as a rapid transition will mean rapid increase in alternatives.

BEFORE VEHICLES ARE READY FOR SCRAP THIRD LESS FUEL AVAILABLE

Indeed, following the linear descent (blue line), over a third of all fuel will be unavailable at the end of the lifetime of existing vehicles. Perhaps authorities have considered the notion of using vehicles 30% less than today. This would drastically affect the very life-style of Swedes and probably harm economic growth.

POSSIBILITIES TO BUILD NEW INFRASTRUCTURE

Literature available puts new heavy technology changes at about 20 years to become widely available. If Sweden is to be fossil free by 2050, then at the latest a program of rebuild and retrofit needs to start in 2030. Big projects need big decisions, and these take time, with all the permits, political backing, financing, etc needed. It may well take 5 years to get started, so the planning needs to start at latest 2025. Before that, there should be, say, five years of envisioning and research. That brings us to 2020, so we are eight years away from launching the most radical technical transformation of the industrial age.

POLLUTING TECHNOLOGY IS SO LAST CENTURY Further conclusions can be drawn when you consider the life-time of a building where 90% of costs are from use, not construction. Investments being planned today will be operating in a completely different energy climate and a different regulatory climate. Those who plan for investments to look like those of yesterday are surely planning to lose money.The same should go for public sector functions like schooling, health care, care of the elderly, etc, Today,  these operations are fuel dependent, thanks partly to centralization and increases in efficiency.

FOSSIL FUEL FREE TRANSPORT BY 2030?

What is most surprising from the simple exercise of counting backwards, is the proclamation of a fossil free 2030. Considering that a new vehicle program usually takes many years to commercialize, and considering that building out filling stations takes ten years, and that vehicles last 20 years, it is high time that Sweden went beyond vision and started the assembly lines rolling. According to the analysis from my graph, and if we say that a vehicle fleet not dependant on fossil fuels is where 50 % of vehicles have alternative fuel, and it takes 20 years to replace all vehicles, then it takes 10 years to replace 50%. (illustrated in yellow on my diagram)

So the new range of vehicles need to be rolled out commercially 2020. To do this they need 10 years of research and development, meaning that manufacturers are now, 2012, two years at least into the new generation of fossil-free vehicles.
I hope they are. They say they are, but the massive investment needed seems to be absent.

FOSSIL DEPENDENCY IS PLAIN TO SEE FOR ANYONE WHO LOOKS

The diagram below comes from the Swedish County of Jönköping, in their energy strategy document. On the left are inputs and on the right, uses.

Although it’s in Swedish I think international readers will get the idea. The black “blob” at the bottom shows the county reliance on fossil-fuel for transports, only a small percentage being funneled off to industry, agriculture, household heating etc.

Perhaps another view of how Sweden should invest financial capital and develop infrastructure is needed, but that is for a later blog.

Norway’s production fall
http://www.theoildrum.com/node/9166
Sweden’s policy
http://www.regeringen.se/sb/d/15365
Consumption
http://www.indexmundi.com/g/g.aspx?v=88&v=91&c=da&l=en
Swedish 2030 policy
http://www.dn.se/debatt/vi-behover-en-strategi-for-miljobilar-aven-efter-2013
The Hirsch report
http://www.netl.doe.gov/publications/others/pdf/Oil_Peaking_NETL.pdf

Swedish University studies of Peal Oil in the book “Peeking at Peak Oil”

http://www.springer.com/environment/environmental+management/book/978-1-4614-3423-

Economic growth in the sustainable community: can we or can’t we?

Posted by steve on May 10, 2012

In this next foray into capitalism I want to explore the question of growth. Note that I still have not defined what capitalism is. Instead, I have taken the idea of capital and explored how the concept of capital  works together with sustainability and resilience.

This time I want to consider economic growth.We hear different ideas: economic growth can continue indefinitely as it is just a mirror of human genius and innovativeness. On the other hand, some say economic cannot continue on a finite planet.

Let us look first, then at how nature grows and see if we can find some insights into how capital can grow, and what economic growth would look like through the eyes of sustainability.

Growth = ecological maturity increase

Ecologists describe how all eco-systems strive to become mature.  You probably have the idea somewhere in the back of your mind, how smaller animals give way to large predators, small plants become forests, rushing water becomes a swamp, etc.

WAIT! There is more to read… read on »

The secret to turning capital into something sustainable and useful

Posted by steve on May 9, 2012

This is interesting. I started out to make capitalism my hobby and have got stuck posting about what capital is. My revelation from the last post was if you add up all the debt in the world, and then you add up all the money people possess in the world you get – zero.

This is because money nowadays is created as debt. A plus on someone’s back account becomes a minus in the bank’s account.This is essentially a pyramid scheme, albeit a legal one and if that is capitalism then give me whatever the alternative is. But that’s the problem. It isn’t capitalism. There is no definition of capitalism, rather it is a set of things. Rather like doctors give names to things they say aren’t sicknesses as we know them, but  a collection of symptoms.

I digress. I wanted to stick with the idea of financial capital. Remember, financial capital is backed up by debt – or claims on other kinds of capital; I like to call this real capital. Now, to look at this from a sustainability point of view you need to realize that there are different kinds of substances that are vital to our way of life.

  • Some are non-renewable, finite, and if released into nature degrade the eco-system’s maturity, or affect it functioning to deliver eco-system services. Example: oil and coal.
  • Some are in short supply, hard to get and cause a problem if released into eco-systems by reducing ecological maturity. Example: phosphorous.
  • Some are abundant, but if they accumulate in wrong places affect the performance of eco-systems. Example: nitrogen.

So if you are investing in a sustainable society, that is, spending money to create infrastructure, you will want to invest in one which 1) Uses renewable sources of energy2) Recycles elements that are in short supply3) Ensures abundant, essential elements circulate.

Before we consider this further we should look into how capital is turned into services.

First, using human, natural, social and man-made capital minerals and biomass are extracted. These natural capital elements are converted to man-made capital. Examples could be to make a building . Using the input of human capital and natural capital it can provide a service, like a hotel.

Let us imagine that man-made capital consists of many different connected objects. Any object could be represented usign the diagram below. The social capital is the company, the human capital is supplied by employees, the input is natural capital and the man-made capital is the machines to drive the processes.The prodiuct in the end is a service, as shown above.

Each of these objects will require an input of energy and materials to construct them, and an input of energy and materials to operate and maintain them. Essentially we could construct a matrix representing the four different classes of objects. The horizontal axis represents the energy needed to operate the object, and the verticla represents the energy needed to construct it.Let us examine the four categories. As energy is expensive, much financial capital to be converted to create this man-made capital.

The first category is expensive to run and expensive to make. The best example is the car. Costs a lot to buy, a lot to run and all you have after 12 years is a rusty, broken-down car that is worth very little. This category of object is the “convert to another category type of object”.

One that costs little to construct, but uses a lot of energy in use is like an oil lamp. This category is also a convert category. One example from Bangladesh is where people gave a micro-lending bank what they spent on oil as a part payment on a solar panel. Cleaner and cheaper in the long run. This was a conversion to the “expensive to buy but cheap to run category”. Or I call it build once, use for a generation.

The last category is cheap to make and cheap to use. Baskets are wonderful examples of this category. They are easy to recycle too, just put them in the earth and they help make soil. All products in this category are great if they are soil-builders.

So, this is as far as I can go on how to view the combination of the different types of capital to create services sustainably. Quite simple really. You could use it to expand on the earlier idea of assessing performance of a society. For example, looking at financial capital vs man-made capital.

Top left we have a situation where financial capital is low, but man-made is high. Depending on what objects have been invested in, this is a good situation.  Action: build financial capital, ensure the objects are build once use a generation.

If financial and man-made capital are both high, this is cause for celebration. Action: enjoy whilst ensuring resilience and capability for future generations.If man-made capital is low, and financial capital is low there is a problem situation. In this case, there needs to be a societal pooling of all resources to remedy the situation. Food and water security need to come first, then housing.

If man-made capital is low, but financial capital is high the action is spend wisely. Choose build once – use a generation solutions and find cheap to make and cheap to use solutions as well.

Let’s make an index table like the one in the previous postHere we see three different countries and I think they figures tell a story. I’d love to do this for real countries.

So there is the secret: invest in build once use a generation, and concentrate on having the infrastructure recycle precious elements using renewable energy.

If Mother Nature does most of the work, why is she not paid?

Posted by steve on May 8, 2012

Still on the subject of a sustainability-interested layman’s hobby of delving into Capitalism, and before I define Capitalism, I would like to stay on the subject of what Capital is, or rather not what it is worth but how it is used.

DEFINING NATURAL CAPITAL

Natural Capital is easy to define in terms of ecological maturity.This is the way it works: an ecologically  mature natural area retains nutrients, has a large biomass, keeps  water loss to a minimum and captures sunlight effectively. (A table from one of my eco-heroes, Odum is given below)

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ECOLOGICAL MATURITY = CAPABILITY TO DELIVER ECO SYSTEM SERVICES

It just so happens that an ecologically mature area is one that provides the best ecosystem services.  Eco system services were given prominence in the work done for the Millenium Assessment in their Guide to the Millennium Assessment Reports. What the report elegantly reminds us of is that for our life on Earth, nature does most of the work. As you can see, from the diagram below, eco systems support, provide and regulate giving us what we need to eat, clothe, house and make ourselves secure. That is not forgetting the cultural and aesthetic experience.

If you consider the left hand part carefully you will see that the more mature an eco-system is, the higher its capability to provide the eco system services we need. As I said, natural capital is easy to define in terms of ecological maturity. Firstly, there are plenty of eco-system mathematical models that define the maturity of any given area. From this you get a starting point. Secondly, the models can predict what out-take from the areas is possible without impacting the regenerative ability of the area. (A good example is out-take of wood – in an ecologically mature area wood grows slowly. If you remove wood the young trees that replace it grow fast.)  So it is possible to calculate an out-take that will not affect the capability of the area to remain at a certain level of maturity. On the other hand, it is also possible to speed up the maturation of an eco-system, giving it a helping hand so to speak.

CREATING A STOCK-MARKET INDEX FOR NATURAL CAPITAL

You could take an arbitrary measure of say 100, and give it to each defined eco-system and area. I would leave it to the cartographers and geographers and ecologists to decide on a system, but land ownership boundaries would be a good start.You would then have an index of ecological maturity of the whole country,  each area with 100 points.This might sound random, but at least it is a start. After a while you could analyse the trend. If maturity fell, the index would fall below 100 a percentage that could be calculated by ecologists, and if it rose, ecologists could award percentage points for the increase.Actually, you would get a kind of a stock market report

UK NATURAL CAPITAL REPORT

We could, having created a “stock market index” for natural capital start to contrast it with the performance of the economy. Normally they talk about the stock market but this is a mere distraction. What is more interesting is the performance of the economy in providing services. If nature provides ecosystem services through, let us say natural activity, then the economy should provide societal services through human activity. Again, let us start with a measure of 100

UK ECONOMY SERVICE PROVISION

It does not take much engagement of expertise to work out the percentage of the population that are homeless or without decent food. You could have another sort  of stock market report. What gets really interesting is to see the manufactured base of homes as capital and the food producing capability of the system as well. You could start to produce all kinds of interesting analyses, much more exciting than the business news furnishes us with.

Economic performance evaluation

The matrix below, just one of many possibilities, shows how natural capital can develop compared to societal services development. There are four possibilities based on services being acceptable or not, and capital growing or not. The worst case is where standards are not achieved and natural capital is depleted. I call this the tragedy of management.If standards are achieved but eco system services depleted, this is unsustainable management.If standards are not achieved but natural capital is increased this is eco-sacrifice. Finally, society in harmony is where standards are achieves and natural capital is retained or increased.

I started off asking why Mother Nature was not paid. Of course, you can throw money on the ground but food will not come up. But you CAN pay nature. What humans can do is contribute to the faster maturation of ecosystems. Most biologists and many gardeners will tell you how to do that! I will leave that for a later post.

THE DISCUSSION AND REFLECTION
1) General reflections. I am struck by how simple it is to define a clear, human, effective environmental / management model. If capitalism is so good why can’t it do these simple things?2) I am disappointed that professionals who can create indices for ecological maturity, food security, housing performance have not done that
3) It is so disappointing that the media do not take on a reporting framework along the lines of the one I proposed above. I guess it is because of reflection (2) – no professional organization has produced one.
4) How can nations put a price on nature without considering maturity? This is like putting a price on a car without considering how fast it runs. This point was covered already in the 1800s by economist Henry George who pointed out that owning land was the problem with the modern economic system.THINGS TO LOOK INTO FURTHER

More references:

I recommend you read Henry George – he was really clear about land value and economics!

Odum, E. P. 1969. The strategy of ecosystem development. Science, 104:262-270.