I don't expect anyone reading this journal understands or cares what I'm talking about here, but I have to get this down on some semi-permanent medium, just because it's bugging me so.
I've read several analyses of "zero-sum economics", as well as several rebuttals to it from free-market capitalists. so far, the two best arguments against zero-sum economics are "subjective value" and "improved efficiency of production". the former is intriguing, but the latter doesn't make any sense to me at all.
"improved efficiency of production" is usually described by example. a commonly stated one is the production of food: the switch from hunter-gather existence to agricultural involved improving the ability to produce food in a given place-time. over the millennia, new technologies in agriculture have continuously improved this ability, which in effect increases the amount of arable land for food production. this technology is described as "created wealth", since it improved production with no increase in resources consumed. this, say the free-marketers, shows that know-how (an intangible) can create wealth from nothing, and therefore economics can't be a zero-sum game.
but there's something missing in that analysis. the technology of agriculture isn't a magic spell that somehow makes the same "agricultural inputs" produce more "outputs". the vast majority of agri-tech consists of novel ways of moving resources from one place to another, or from one
time to another (usually from the future to the present). the remainder of the technologies involve waste reduction, or improved recycling. if we restrict our discussion of agriculture (for the moment) to plant cultivation, we find that the only real "input" to the biosystem is sunlight, which arrives at a fairly steady rate. the other materials required for cultivation (water, genetic material and trace nutrients) are available in fixed amounts here, and the manipulation of the reservoirs of these materials constitutes the whole of agri-tech.
we can, therefore, model an "ideal" agricultural environment, in which the frictional inefficiencies of plant cultivation are reduced to insignificance. in that model, we achieve an ideal plant production, based on the most efficient means of recycling "fixed" materials, and the measured fixed input of sunlight. in this model, the only driving force is that daily budget of sunlight, and as that is fixed, there can be no further growth in production efficiency. also, this hypothetical model requires that all terms be balanced, that is, drains on the system (the consumption of food) can not change with time. so in this future end-game, the human population must be fixed, and agricultural
expansion must grind to a halt. while the system can then shift to a new equilibrium, the total amount of energy extracted by the process (that required for the plants to grow, and that consumed by "upstream" consumers) cannot change. in short, while not a true zero-sum game (due to the continuous influx of energy from the sun), it is at least not an infinitely-expanding game.
so what does this mean for wealth creation? if we consider the agricultural model exclusively, it means that "creating" wealth is not an unending process. there is some fixed upper limit to this wealth, and while we can "create" wealth up to that limit (a better term might be "uncover" or "expose" wealth), any expansion beyond that point must be undertaken as "borrowing against the future" (since production can never catch up with the overconsumption). bucky fuller pointed this out as "miniaturisation", his term for maximising efficiency of a technology process. he claimed that miniaturisation was the only means of wealth creation, and that it was driven by an exponential increase in "know-how", or science and technology. he posited that the ultimate goal of miniaturisation was to allow our daily energy budget (solar influx) to drive all our life needs on earth (that is, reach that hypothetical maximum-efficiency steady state).
in short, the "increased efficiency of production" is a
temporary phenomenon, and in fact its ultimate expression will only bring us to a break-even point, where our energy expenditure equals our income. while it's true that our daily energy income is prodigious, we're not particularly good at measuring our energy expenditures, so it's hard to have something to compare it to. for example, what are the energy expenditures for growing an acre of wheat? the obvious measures would be the energy required to cultivate the field, move the irrigation water, and harvest the plants. however, we also have to add in the energy costs of producing, transporting, and applying any soil amendments or crop treatments; the cost of producing, collecting, processing, storing, and redistributing the seed material (most cultivated crops are annuals, and the vast majority of commercial cultivation uses sterile hybrids that cannot seed themselves); the energy costs of water transport (evaporation of runoff, as well as the production of weather systems to move it to wherever the irrigation system picks it up); and the energy costs of dealing with the un-consumable portions of the plants (either in processing for immediate recycling, or in processing and transport for remote recycling).
much of this cost is "opportunity cost": cost incurred due to lost ability to utilize it elsewhere (for example, it takes enormous stretches of land and ocean -- a huge fraction of the planet's surface -- doing nothing but soaking up sunlight and re-radiating the heat to generate sufficient weather to run the planet's water cycle). also, we must consider the cost (in terms of future opportunity cost) of resources "consumed" by waste and damage caused by the normal functioning of technology. for example, the technologies of fertilization and irrigation allow previously "marginal" land to be cultivated, which theoretically increases the availability of arable land. this would seem to imply that for a given fixed area (like the united states), with a mix of arable and non-arable land, one can continuously convert the non-arable land to cultivation through the application of agri-tech. however, fertilization and irrigation don't
create arable land, they simply concentrate resources. those resources usually come from other marginal land, rendering it (usually) unusable for any other purpose.
so we see that in a fixed area of land, there exists a fixed set of resources, and as long as cultivation requires a certain level of resources to work, there exists a fixed "amount" of arable land. "creating" it on marginal land creates an equivalent amount of sacrifice land, which cannot be used. if that sacrifice land were purposed exclusively for non agricultural use, then a certain balance might be achieved, but not an infinite expansion of arable land, or even a complete conversion of all marginal land to usability. in practice, however, naturally arable land is usually considered highly desirable for non-agricultural purposes, further reducing the actual productive area.
this entry was rather long, but I'm trying to work out how the free-market idea of "increased efficiency of production" can possibly work. so far, I'm not seeing it. unfortunately, the concept of "wealth creation" (which relies on increased efficiency of production to operate) is central to almost every economic process on the planet today, which means that the traditional view of "continuously growing economies" is on shaky ground, in my view. if someone can explain where the thermodynamic demon is operating in all this, and where I'm missing some fundamental piece of logic or information, I'd appreciate the help. this is keeping me up nights.
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