Isn't that simply a math problem? eg MV = PT?

Friedman would see inflation as a tax more than as debt being repudiated, though, I think. And on that, I'd agree with him, one of the rare things...

The Hun is always either at your throat or at your feet. Winston Churchill

My reaction of 'excellent' was to a new way of looking at things - for me. I am not qualified in any way to compare economic theories, though I am trying to understand, and ET has been a good teacher.

'Debt repudiation' was an insight that I appreciated - it gave me something tactile to hang on to while I try to figure out the other stuff ;-)

You can't be me, I'm taken

Yes, I think very similar, as far as the Monetarist argument goes.  What Soddy & Daly and the perspective of Ecological Econ bring is the thermodynamic explanation; which adds quite a bit, as it leads us in new directions of theoretical explanation and understanding.  In historical terms, Soddy (and Daly and others) using thermodynamics here is more than a bit like Einstein using thermodynamics to explain black-body radiation, and in the course of that bootstrapping himself out of Newtonian physics and  into something new.  Okay, that's an extremely recondite allusion, but the point is:  the new perspective explains phenomena that were only partially visible and partially explainable in the old perspective, AND it goes on to explain other phenomena that the old perspective can't.

In this case, one "other" phenomenon is the recurrent crises in which an economy sheds debt.  "You've let money grow faster than real GDP," the Monetarists can/would/have said.  "Of course you have a problem."  But they don't talk about debt as a claim on real wealth, or how GDP doesn't measure real wealth.  (As a measure of wealth it's grossly overinflated--it counts costs as benefits, decreases in wealth as wealth.  Air pollution leads to increased lung disease; people spend money to get treated; by the measure of GDP, this is all win-win.)  Since the Monetarists are using a basic indicator that is flawed, they can't predict/explain debt repudiation crises as well as the Soddy/Daly EE model.  

If wealth as measured by GDP grows at the same rate as the claims on it (which are also imperfectly measured by increases in the money supply; debt is another kind of claim on future real wealth, a claim whose size has some relation to, but is not totally determined by, the size of the money supply), things look hunky dory.  BUT GDP is not real wealth, money is not the sum total of claims on real wealth, and the inevitable balancing of real wealth and the claims upon it comes as a surprise in the Monetarist paradigm.

I'm just sketching this out as I go along; the Q is a good one, one I haven't thought or read about before.  I don't know that anyone has tackled an answer from within EE.  

The other crucially important thing that the new, EE model makes central (and which the monetarist, or neoclassical economics, or NCE model) doesn't see at all, is the thermodynamic foundation of an economy.  An economy sucks low entropy matter and energy out of its environment, spins it around in the production "cycle" (in quotation marks because it is really a one-way flow) and spews out matter and energy that is degraded (pollution) or which must, with time and use, become degraded:  consumer items, capital.  Food.  Autos.  Solar cells.  All of it. In geologic time, all that stuff ends up thrown "away"--in a landfill or cast upon the planet somewhere.

That is, as Nicholas Georgescu Roegen put it, (I paraphrase from memory):  "considered solely as a thermodynamic system, an economy consists of nothing other than a set of human institutions, practices and conventions dedicated to taking valuable low entropy and turning it into valueless waste."   (He went on to point out that that was of course not the point of the economy, but that it existed to provide us with "an immaterial flux:  the enjoyment of life.")  

The economy has an ecological footprint on both the uptake and output sides.  The size of that footprint determines how much nature is left to go through its cycles, supplying us with ecosystem services, on which civilization crucially depends:  water purification.  Water (rainfall and storm surge) regulation.  Climate moderation (both globally and locally).  Pollination services.  Soil nutrient recycling.  Etc.  etc.  Ecological Economist Robert Costanza led a team that priced out world ecosystem services, and found that by a conservative estimate they are triple the value of world GDP.  

So, this isn't NCE monetarism, by a long shot.  

Great Q.

Industrial society is not sustainable. Unsustainable systems change--or disappear.

I will take your word for that, Jake, and stand corrected.

But I guess what I am getting at is that the equation that applies in the economic era we are now entering is e=mc squared, where e = "economic value" and c relates to connectivity...

"The future is already here -- it's just not very evenly distributed" William Gibson

Eric Zencey:

Land is the  great net by which we capture current solar income, which (eventually, I believe) we will have to learn to live within.  

On living within the means of solar income, see Order of Magnitude Morality: An order of magnitude solar energy / world energy comparison

`The earth receives more energy from the sun in just one hour than the world uses in a whole year'. So, does that mean that we can convert to solar and everything is going to be fine?

No: I show that the current rate of power consumption of the `developed' world is unsustainable. The `developed' world must cut its consumption by at least a factor of 10, and must put all possible resources into developing solar energy technology, which, along with hydroelectricity, is the only^* significant source of sustainable power.

^{* - Some conditions may apply! See below for details}

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris

where I was able to find this: The Lost Tradition of Biblical Debt Cancellations. In my humble opinion, this document has the potential to undo centuries of damage done to Christianity and Judaism by oligarchs and usurers. Especially in the context of economic and financial developments the past year, this is really powerful material:

THE once-glowing core body of law within the Judeo-Christian Bible has become all but ignored - indeed, rejected - by the colder temper of our times. This core provided for periodic restoration of economic order by rituals of social renewal based on freedom from debt-servitude and from the loss of one's access to self-support on the land. So central to Israelite moral values was this tradition that it framed the composition of both the Old and New Testaments.

Radical as the idea of cancelling debts and restoring the population's means of subsistence seems to modern eyes, it had been a conservative tradition in Bronze Age Mesopotamia for some two millennia. What was conserved was self-sufficiency for the rural family-heads who made up the infantry as well as the productive base of Near Eastern economies. Conversely, what was radically disturbing in archaic times was the idea of unrestrained wealth-seeking. It took thousands of years for the idea of progress to become inverted, to connote freedom for the wealthy to deprive the peasantry of their lands and personal liberty.

So far has the modern idea of market efficiency and progress gone that today, although the Bible remains our civilization's defining book, it is perceived largely as a composite of stories, myth and wisdom literature best epitomized perhaps in spirituals and hymns, not economic laws. The Ten Commandments and the Golden Rule have become so dissociated from the economic legislation of Exodus, Leviticus and Deuteronomy that whoever takes these laws in earnest is considered utopian and anachronistic if looking backward nostalgically, or radical if adopting there as a guide for current activism. Yet these laws formed the take-off point for Christ upon his return to Nazareth's synagogue, and for his denunciation of the money-changers who had taken over Jerusalem's temple. As late as medieval Spain the tradition of the Jubilee Year was kept alive by Maimonides and Ibn Adret. To dismiss these laws is thus to remove much of the Bible from the context of its times, above all from its Bronze Age Near Eastern matrix.

SNIP

Bronze Age rulers had pledged themselves to serve their local sun-gods by overseeing the rhythms of nature and society, periodically "proclaiming economic order and equity." But most such rulers were unseated by classical aristocracies which used religion and its priesthoods for increasingly narrow ends. To defend popular welfare against the incursions of these aristocracies, the authors of Judaism formulated the idea of a national covenant, placing moral order in the hands of their congregations at large. This populism was the counterpart to the civil law of Athenian democracy.

Jewish populism inverted the classical hierarchies of worldly power. Although the aristocratic Pharisee element within the temples asserted its own interests throughout the Hellenistic and Roman eras, Christ sought to restore the archaic ethic by overturning the banking tables in Jerusalem's temple and preaching anew the promise of Jeremiah to proclaim equity and liberty (deror) throughout the land. Indeed, it was specifically on this principle of restoring freedom to debt-slaves and unburdening the land that Christianity elaborated its ideas of redemption. In addition to redeeming souls, early Christians redeemed their co-religionists from worldly bondage. When Handel staged the first performance of his Messiah in Dublin in 1742, it was by no coincidence that the proceeds were used to free debtors from prison. For thousands of years, redeeming men and land from debt was the primary and most concrete form of redemption.

How the Axial Age took the Bronze Age proclamations of order out of the hands of kings
As creditor claims and private property spread outside of the public temples and palaces, the policy of regularly restoring economic freedom gave way to private accumulation of wealth at odds with overall social balance. Rather than being welcomed as ushering in an epoch of economic freedom, his privatization of hitherto communal land and public industry meant a loss of freedom for much of the population.

SNIP

. . . The first five books of the Old Testament were given their final form late in the fifth century, contemporary with the high tide of Greek democracy in Athens. In 444 BC, Nehemiah, a Jewish official at Persian-dominated Babylon who had risen to the position of cupbearer under Artaxerxes, was allowed to go to Jerusalem to rebuild it. He won popular support by cancelling the debts and redistributing the lands that had been forfeited to local creditors. Making a second visit to Jerusalem, he solidified the groundwork for Ezra the scribe and his associated compilers, who reworked the Holiness Code of Leviticus into the idea of nothing less than a covenant with the Lord to promote economic justice in the land.

These Biblical redactors collated the stories of Moses recoiling against Egyptian inequity and leading the Exodus, of the conquest of Canaan behind Joshua, of the transition from judges to kings, and of the latters' backslidings which led the Lord finally to throw up his hands and let Israel and Judah be conquered by the Assyrians, Babylonians and Persians. The story of Israel's divine punishment served as a parable of how it would be rewarded for following a regime of economic justice but punished for permitting the wealthy to oppress the poor. The land was to be held in trust for the common weal, not relinquished to let the economically aggressive use it as a lever to achieve patronage over domestic clients and hence secular lordship over their countrymen (as occurred most notoriously in Rome). Unlike the case with the Bronze Age rulers who would be punished by their sun-gods for failing to promote social equity, the entire Israelite nation would suffer. Only in the modern era have these stories been decoupled from the laws concerning debt, land tenure and freedom from debt bondage that they originally were designed to wrap, and their social kernel thrown away.

SNIP

Christ's title of the Redeemer reflects the idea of saving debtors from debt-bondage. If it was their souls that he ultimately was redeeming from worldly shackles, financial power over debtors presented the ultimate test of a creditor's moral goodness. The moral is that charity toward debtors and other poor calls for forgiving their debts. Lending is put forth as the characteristic test for admission to heaven, for it is the most prevalent mode of exerting either coercive power or generosity with regard to one's fellow beings. Luke 6:35 cites Jesus' admonition to "lend, without expecting to be repaid." Centuries of commentary on this passage by medieval Churchmen elaborated how this exhortation meant that a creditor should not demand to be repaid if the debtor cannot do so without injuring himself.

Jesus drove home the conflict he felt to exist between Jewish religious values and the selfish worldliness of creditors in his famous act of overturning the banking tables in Jerusalem's temple. The story is told in all four gospels (Luke 19, Matthew 21, Mark 11 and John 2). Upon entering Jerusalem, Jesus went directly to its temple, where he overturned the benches of the moneychangers and emptied out their moneybags on the floor. He also overturned the tables of merchants selling animals, and made a scourge of cords and "drove them all out of the temple, and the sheep, and the oxen" (John 2:15). Echoing the words of Jeremiah (7:11) some four centuries earlier, he announced that "My house will be a house of prayer, but you have made it `a den of thieves."' This is the only report in the Scriptures of his using violence, and it inspired the city's leaders to plot his death.

Jesus' citation of Jeremiah was deliberately significant, for in this passage the prophet describes the Lord as threatening the Israelites not to make their land and its temples a den of thieves by oppressing aliens, orphans and widows, that is, the most seriously afflicted debtors. To prey on the weak, to monopolize the land and wealth is to seize what belongs to the Lord and his community. The relevant commandment accordingly is the Eighth: Thou shalt not steal. The great absentee landlords were stealing the land and freedom of the Israelites, and thus their destiny. Should the people fail to recall the Lord's spirit and rectify matters, they would suffer national perdition.

The Eighth Commandment in Canon Law, Lutheranism and Calvinism
Neither Hebrew, Greek nor Latin had separate words to disinguish between "interest" and "usury. " The distinction is a product o Canon Law seeking to carve out a form of financial gain (interesse that could be taken by Christians legitimately in the face of the Biblical strictures against neshek (Hebrew), tokos (Greek) and Faenus (Latin).  

Wise advice, askd, and exactly right.  

"The future is already here -- it's just not very evenly distributed" William Gibson

I thought you did finally ina diary...

uups sorry.. then comments..

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

and you know I completely agree with your contention..absolutely..

I was pointing out that if a "value" of some kind or other monetary variables could be linked to a flux , it could quit this aurea of "beauty" style structure/concept.

I am not saying it is generally possible to do it. and I agree with you on that.. but I must say that some close or reductionist definition of those variables in certain conditions could be obtained. Or at least I see it possible. The problem is that no serious analysis is done..  not that I know.. the only thing that only comes close is the general analysis of international trade.. and even there when you have a bunch of possible definitions and a lot of data to construct it, well it turns out it is extremely difficult to quantify its effects on other parts of the economy. But in principle I could see a more fundamental economic theory where variables and fluxes do have to do with some economic realities (though only parcial)...

But the status of economic theory nowadays, except for some counting exception, is that it does not have any relation with Reality (as you like to say it).

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

My contention is that "Value" - whatever it is - lies, like Beauty, in the eye of the Beholder and is definable only in relative terms...

To an extent. I would argue that while you are undoubtedly correct that it is nonsense to assign a universal value to such things as TVs or computers (I have no use for the former, and my grandmother has little use for the latter), there are a few things that have universal value: Shelter, clothes, food, water, air(!), heat, medicine, free time.

It seems a bit cavalier to deny the possibility of an absolute definition of value when millions are still without these very universally valuable goods.

Of course, if we define absolute value as only those items which are universally and indisputably valuable, and then try to maximise value, we would get a rather different notion of the ideal economic order.

- Jake

Friends come and go. Enemies accumulate.

You spell check your diaries. Any chance you also spell check your comments? Seriously, the wya you post makes them really hard to read.

I know that makes them immediately identifiable as your comments, but it's hard-to-read!! Please?

In the long run, we're all dead. John Maynard Keynes

Yes there is positive feedback, and there is negative feedback. They act on different timescales and therefore lead to cycles.

If you remove all the positive feedback all you have is negative feedback and you die off.

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris

Eric Zencey:

I recall that as an undergrad, years and years ago, I had a prof who reported (with a chuckle, as in "could anything be more ridiculous?") that "there is even some evidence that stock market ups and downs correspond to sunspot activity."  Hmm...  Sunspots affect solar output, which affects agriculture, which is still one of the primary ways that valuable low entropy is brought into an economy (despite the fact that there has been an historical decline in the percentage of the workforce engaged in it.  Look for that trend to be reversed as we come off peak oil and are forced to practice sustainable agriculture.)

This reminds me of stochastic resonance. There need be no more than a very small effect of the sunspot cycle on economic activity, but since the sunspot cycle is (quasi)periodic it might be able to resonate with the nonlinear oscillator that is the economic system and get amplified in the response.

Strictly speaking, stochastic resonance occurs in bistable systems, when a small periodic (sinusoidal) force is applied together with a large wide band stochastic force (noise). The system response is driven by the combination of the two forces that compete/cooperate to make the system switch between the two stable states. The degree of order is related to the amount of periodic function that it shows in the system response. When the periodic force is chosen small enough in order to not make the system response switch, the presence of a non-negligible noise is required for it to happen. When the noise is small very few switches occur, mainly at random with no significant periodicity in the system response. When the noise is very strong a large number of switches occur for each period of the sinusoid and the system response does not show remarkable periodicity. Quite surprisingly, between these two conditions, there exists an optimal value of the noise that cooperatively concurs with the periodic forcing in order to make almost exactly one switch per period (a maximum in the signal-to-noise ratio).

Such a favorable condition is quantitatively determined by the matching of two time scales: the period of the sinusoid (the deterministic time scale) and the Kramers rate (i.e. the inverse of the average switch rate induced by the sole noise: the stochastic time scale). Thus the term "stochastic resonance".

Stochastic resonance was discovered and proposed for the first time in 1981 to explain the periodic recurrence of ice ages.^[1] Since then the same principle has been applied in a wide variety of systems. Nowadays stochastic resonance is commonly invoked when noise and nonlinearity concur to determine an increase of order in the system response.

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris

There is some interesting research on Mother Nature forcing social-economic regimes...

African recessions lead to democratic concessions

In Sub-Saharan Africa, periods of low rainfall often lead to economic downturns. And economic downturns, in turn, lead to the toppling of autocracies.

At least, such is the theory put forth in a summary of a new paper by economists Marcus Bruckner and Antonio Ciccone, "Rain and the Democratic Window of Opportunity."

In his synopsis, Ciccone writes that "Four out of five Sub-Saharan African countries were autocracies in 1980, but twenty-five years later there were more democracies than autocracies." He then references the work of economists of Darin Acemoglu and James Robinson:

They show that democratization becomes more likely after transitory, negative shocks. These shocks give rise to a window of opportunity for citizens to contest power, as the cost of fighting ruling autocratic regimes is relatively low. When citizens reject policy changes that are easy to renege upon once the window of opportunity closes, autocratic regimes must make democratic concessions to avoid costly repression.

So what's most likely to cause a transitory negative shock in the agricultural-based economies of sub-Saharan Africa?

Drought.

In our sample, a 50 percent drop in rainfall reduces real income per capita by around 4 percent relative to trend. Putting the two pieces of the puzzle -- the effect of low rainfall on income per capita and its effect on the probability of a transition from autocracy to democracy -- together yields that a drought-driven recession that decreases income by 5 percent relative to trend raises the probability of democratization by around 7 percentage points.

Thus, the recent history of Sub-Saharan Africa provides empirical support for the idea that economic recessions put autocratic regimes in a position where they have no choice but to make democratic concessions.

Eric Zencey:

Imagine if the predator population (representing claims on future population of prey) can grow exponentially, because they are (like debt) incorporeal abstractions.  The boom and bust cycles could then easily become large enough in oscillation to threaten not only the dynamic equilibrium implied by the sinusoidal chart, but the continuation of the system as a whole, through the removal of the prey species entirely.

Being incorporeal debt can just as well be repudiated as created.

I don't see credit as all that different from "other dynamics producing 'boom-bust' cycles in the economy".

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris

I mentioned a specific dynamical system and a specific class of chemical reactions. Maybe you could walk over to the Chemistry department and ask to see an oscillating chemical reaction. (Follow the link to see some pretty pictures of spontaneous structure formation in oscillating chemical reactions).

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris

The unpredictability of earthquakes has no longer anything to do with not knowing the mechanism.

I'm just pointing out the important difference between prediction and expectation. Chaotic systems are deterministic yet unpredictable. That doesn't mean their statistical properties cannot be studied in detail.

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris