Sunday, June 18, 2017

Taking a short break - no post this week or next

An exceptionally heavy workload and travel schedule have conspired to prevent me from writing this week and next. I expect to post again on Sunday, July 2.

Sunday, June 11, 2017

Can we create a durable future?

It is hard to imagine anyone today building something as durable as the Roman Colosseum. Most of the damage we see to the 2,000 year-old stadium comes from two earthquakes and the persistent looting of its marble, stone and brass infrastructure by humans using them for other building projects. Were it not for these unfortunate depredations, the Colosseum might be largely intact today.

We pen fantasies about the durability of our culture in science fiction novels, television programs and movies set hundreds and even thousands of years from now. By then we humans will supposedly be moving with magical ease at speeds greater than light, zipping through the known universe aided by voice-command convenience (or maybe even thought-comand convenience).

But our age seems to be populated by buildings and cultural artifacts that are designed for impermanence. It's not that we are technically incapable of making things that are durable when we want to, especially when it feeds our desire to turn science fiction into fact. NASA's Mars Rovers launched in 2003 were designed for a mission of 90 Martian solar days. The Spirit rover operated until 2010. The Opportunity rover is still operating.

We have even more impressive longevity from the Voyager 1 and Voyager 2 space probes sent in 1977 to study the outer planets, that is, Jupiter, Saturn, Uranus and Neptune. Both spacecraft were designed for 5-year lifetimes and both are still working after almost 40 years. Voyager 1 has reached interstellar space where it continues to send back data. Voyager 2 will join it in two or three years. NASA expects to continue to receive data for another decade or so from both.

On Earth we would consider such durability to be over-engineering, too costly for our purposes. We build computers to be obsolete in less than 2 years. We build shopping malls, office parks and other commercial and industrial buildings with the idea that they will be abandoned or torn down in perhaps two or three decades. I am reminded of a New Yorker cartoon in which a developer looking at a model of his newly commissioned building remarks: "Great design, but when it comes time, a bitch to implode."

Nothing lasts forever. And, a society that has no dynamism, that does not change with changing circumstances, cannot survive. But it is we who are creating the change that we have to adapt to. It is we humans who are causing climate change. It is we humans who are causing rapid depletion of soil, water and energy resources. It is we humans who are increasing our environmental footprint in sheer numbers and in consumption per person.

We've initiated a feedback loop that has no end--except catastrophe. What would more durable arrangements look like? If we turn to those arrangements that have withstood the test of time, we have a starting point:

1. Small units of governance. The city of Rome has been continuously inhabited for more than 2,500 years. The Roman Empire, for all its durability, came and went even as the city lived on.

2. Small-scale agriculture and craft. Agriculturally based villages with craft industry have thousands of years behind them. This way of living is being crushed by modern industrial farming and its need for ever increasing scale. But the local food movement and the desire of many to know where their food comes from have breathed new life into small-scale farming.

3. Trade in luxury goods. Some exotic and valuable items have long been traded across large distances because a particular climate is suitable for certain produce, for example, tea or coffee--or the know-how and infrastructure is well-developed, silk from China, for example. What this point implies is that necessities are better produced closer to home to ensure a continuous and adequate supply.

4. Locations favorable to agriculture and navigation. It should be no surprise that many of the world's most important and long-lived cities are ports. Water has been historically a primary mode of transport. It is also, of course, essential to prosperous agriculture, either from adequate rains or from flowing rivers that can be diverted for irrigation.

All of these will seem obvious to anyone who has thought about the topic, sometimes through the lens of what is called "relocalization." In its simplest form this merely means returning the production of daily necessities closer to where we live. That seems straightforward enough; but the complex webs of trade and logistics we now have that bring us those necessities will be difficult to abandon. For those wanting to build more durable arrangements, this implies building them alongside the global system we have now. (It does NOT, however, mean abandoning the knowledge we have gained in the industrial age, but rather using it more wisely to attain our goals.)

Building a relocalized system may seem unduly duplicative and wasteful. And, it will be until it isn't, that is, until the global system stops serving our needs. In many ways that system already has stopped serving us if you count as one of our needs the desire to build a durable human culture that can thrive far into the future.

The fantasy of a spacefaring society has us fixated on an ever evolving technological future that asks us to abandon one set of gadgets for another almost continuously--all premised on the availability of unlimited resources and a climate crisis that somehow won't turn out to be a crisis. Few people are even contemplating the need to build a durable society because few imagine ever needing one.

We humans like the novelty afforded to us by our rapidly changing society. The world of information and communications technology has brought that novelty to us in addictive oversupply through ever more powerful cellphones and other electronic devices. What strikes me about this supposed novelty is its overwhelming sameness. It seems like novelty largely because new participants appear. But it is actually monotony itself because the stories we are told are as relentlessly interchangeable as they are shallow.

The durable society is not a dull society. It is rather a deeper society. We get to spend more time with the very landscape of our lives--the people, the buildings, the everyday objects, and the activities--than the frantic pace of the electronic message now allows us. The slow food movement is one expression of this desire for deeper engagement.

That deeper engagement is really the foundation of a durable future. It should come as no surprise then that it is difficult to build a durable future in a world that people don't have time to understand...with others they don't really know.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He has been a regular contributor to the Energy Voices section of The Christian Science Monitor and is author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, June 04, 2017

Baumol's cost disease, productivity and the future of growth

William Baumol, one of the most famous economists you've never heard of, died recently. Baumol's fame came out of the observation that there are sectors of the economy in which productivity is rising swiftly, for example, manufacturing, and sectors where it is rising slowly or not at all, for example, string quartet performances.

The conclusion he drew from observing the behavior of wages in these sectors was that wages had to rise in the low-productivity growth sectors even as they do in high-productivity growth sectors. This is because people will over time simply leave the low-productivity growth sectors for the better wages of the other sectors. This theory became known as Baumol's cost disease.

In practice, society still values string quartet performances enough to pay their practitioners sufficiently to keep them playing. Baumol extended his theory to any economic sector in which personal service is essential to that sector. Examples include education, health care, child care, and legal services. As it turns out, nobody (yet) wants a robot lawyer or nanny.

Baumol's theory explains why costs are rising so fast for educational institutions, health care organizations, municipal governments, and performing arts groups. Their productivity increases are limited, but their relative costs for labor continue to rise because of their low-productivity growth compared to other parts of the economy. In more productive sectors, rising wages can be offset by rising productivity which allows costs per hour of labor to remain level or, in some cases, decline.

Baumol realized that even in the mid-1960s when he first formulated his ideas (see here and here), technology was already enabling performing artists to reach larger and larger audiences through television, radio and record players. That certainly increased their productivity by allowing many more people to enjoy a particular performance. But these technologies and their more recent variants do not increase the number of performances that an artist can do.

The broader implication of Baumol is that as societies expand their service sectors, it is inevitable that overall productivity growth will decline. And that can mean that overall economic growth will tend to decline as well. We have certainly seen progressively slower growth in mature world economies over time, particularly since the 2008-2009 recession.

All attempts to reduce overall costs across entire low-productivity sectors (as opposed to small facets of them) have essentially come to naught--unless the sector is simply disappearing. (For example, does anyone remember the typesetting business which was wiped out by the advent of software capable of handling that task on a graphic designer's desktop computer?)

Some attempts have been made to reduce the cost of education. Back in the mid-1990s the University of Michigan proclaimed that it would become a million-person institution with its distance learning program. It took 20 years before the university created what it calls Massive Open Online Courses. They are free (though you can pay a fee to get a nice certificate of completion). Paying customers, however, still want actual live teachers in front of them just as they still crave live performers of music and plays. And, they want the recognized credentials that are included with attendance at the live instruction venue.

Municipalities provide a wide range of services including public safety, fire protection, building code enforcement, and public health. All of these services require people whose productivity is difficult to enhance on par with what is happening in manufacturing, particular high-technology manufacturing.

We have now accepted that maintaining an opera company or a symphony orchestra will cost more than ticket receipts can raise. What Baumol suggests is that we will have to be prepared to pay ever higher prices for those services we want from low-productivity growth sectors such as health care and education so long as productivity continues to grow relatively faster in other sectors.

With exceptionally low overall productivity growth in the United States and the world, it is likely that Baumol's cost disease is catching up with us--even if it isn't the only cause of that low growth.

The fantasy that we can make all services continuously more efficient simply can't get past the human factor in many cases. And, where that factor is being eliminated or reduced--for example, automated bank tellers, self-serve restaurants, and online learning--we are finding increasing bifurcation of the marketplace. The human touch is being reserved more and more for those who can afford it: private banking, high-end sit down restaurants, and ever more expensive college educations (that come with actual personal connections to instructors and with bona fide credentials).

Is our future one in which only the rich are inoculated against Baumol's cost disease? The alternative is increased public subsidies for those services which we deem socially important in order to make them widely available.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He has been a regular contributor to the Energy Voices section of The Christian Science Monitor and is author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.