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GDP: Gross Domestic Pollution?

by Patrice Ayme Fri May 29th, 2009 at 02:01:40 PM EST

Time to call it quits on traditional economics, and modernize the concept of "product".


TOWARDS A BETTER WAY OF EVALUATING ECONOMIC ACTIVITY.

Paul Krugman observes in his blog that:

"For most of the past decade, China's industrial value-added growth (IVA) -industry output less input costs - has moved broadly in step with movements in electricity consumption. But the relationship's broken down recently: electricity use is still seeing negative growth, while IVA is growing at a decent positive rate again.

Some China analysts are crying foul: If IVA growth figures are being cooked, surely that means China's recent GDP data have been overstated too."

Gross Domestic PRODUCT, GDP, has long been debated. Louis XV's chief surgeon was the first to consider GDP, and he defined it agriculturally. The next generation of "physiocrats" generalized "product" to industry, and Adam Smith went to France to study under them. "Product" was the addition of all the expenditures of all FINAL good and services. If one is ten times more inefficient getting to the same product, one has contributed ten times more to the GDP. GDP, thus, is a polluter's dream. A country that does roughly the same things, but with ten times the pollution will have ten times the GDP, and knowing this no doubt puts the USA and China economic exploits in a new light.

The very concept of GDP is well cooked, in any country, and the recipes vary, from country to country.

At the very least, a notion of EFFICIENT GDP should be introduced: when American cars by the millions hold steady in traffic jams, spewing fumes, they boost U.S. GDP. When comparing health care systems, the one in the USA, with a worse outcome, costs twice, per capita, what the French health care system costs. Still, the contribution to "product" should be the same, or more exactly, the contribution to "product" of the system in the USA, per capita, should be redefined so that it is lower than the French one. The end product of the task should be the production of the task, not the inefficiency polluting the achievement of the task.

I agree that this is not how economists have learned to think, but more as physicists have learn to think, more than two centuries ago (Lagrange, d'Alembert). Grounding all of physics in the concept of energy (and work) allowed to make physics more rigorous, and universal. The idea would be to do the same in economics. Thus economics would switch from the subjectivity of money to the objectivity of work, as defined in physics . That would ground economics with energy, just as physics is (and the lagrangians used in generalized economics would be more general than in physics!).

Only then could we compare exactly the productivity of different economic systems...

Patrice Ayme
http://patriceayme.wordpress.com/

Note: The "physiocrats" ("nature-power") actually called themselves the "economistes" (inventing that word). Their theory was to evaluate the economy in term of WORK, and not according to the ruler's worth, as the preceding theory, mercantilism, had it. I am just suggesting to make the notion of "work" rigorous, and there is only one way to do that, and physicists found it.

Time to forget the "invisible hand", the "shadow banking system", and other conspiracies of the wealthy, by the wealthy, for the wealthy...  

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I posted on the subject of an Energy Standard here

Banking on Energy

and also when it was picked up by Izabella Kaminska on the FT Alphaville blog

A Commodity Anchor

Note that what you are talking about is pretty much what the Technocracy Movement has advocated since the 1930s ie Energy Accounting

Interestingly enough, Hubbert, of "Hubbert's Peak" fame was a Technocrat.

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

by ChrisCook (cojockathotmaildotcom) on Fri May 29th, 2009 at 03:53:14 PM EST
Thank you very much for the references. I was totally unaware of the work of these other authors. I have had a cursory look at their work in the last few hours. It seems it started way back, when thermodynamics was the ultimate in the understanding of energy (late 19C,early 20C). Since then energy a la QFT(rather than old fashion statistics) has become the edge. My approach, advertized on the web for a few years, say as in:

 http://patriceayme.wordpress.com/2008/01/03/energy-is-the-fundamental-unit-of-economics/

is more general... Although, obviously thermoeconomics would be something good to simmer in the front burner of what we are doing to the planet.
Thanks again.

Patrice Ayme Patriceayme.com Patriceayme.wordpress.com http://tyranosopher.blogspot.com/

by Patrice Ayme on Fri May 29th, 2009 at 06:49:52 PM EST
[ Parent ]
The next generation of "physiocrats" generalized "product" to industry, and Adam Smith went to France to study under them.

This presents a distorted picture of Adam Smith's background.  Smith assumed the Chair of Moral Philosophy at Glasgow University in 1752, which he held until 1763.  He published The Theory of the Moral Sentiments, a major work, in 1759 and already had developed the basis of The Wealth of Nations by that time, as has been shown from his student's lecture notes.

In 1763, possibily in conjunction with the end of the Seven Years War, he was hired at 300 pounds/year, (twice his income from the University), as the personal tutor to the young Henry Scott, later 3rd Duke of Buccleuch, on the recommendation of David Hume.  They traveled to Toulouse, where they stayed a year and a half, then to Geneva, where Smith met with Voltaire and then to Paris, where he got to know Benjamin Franklin, Turgot, Helvitius and Quesnay, of whom Smith developed a high opinion.  He was interested in the ideas of the Phisiocrats, but did not accept all of them.  He did acknowledge and give high praise, especially to Quesnay, in Wealth.

My University history studies included French history and the French Enlightenment along with English History.  Neither gave prominence to the Scottish Enlightenment, of which Smith was an important figure, and which, unlike the more Salon based scene in France, was more centered around the Universities, which drew students from around Europe.  Of course the term "Enlightenment" has been criticized for its self congratulatory nature among other things.  

 

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri May 29th, 2009 at 09:00:57 PM EST
I live about a couple of miles from the dukes country house, i'll take a walk and return with pictures tomorrow.

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Fri May 29th, 2009 at 09:51:43 PM EST
[ Parent ]
I guess i am a well known distorter, by now, thanks for pointing that out, nothing like civility to advance knowledge.

True, Smith published The Theory in 1759, but then he kept on modifying it extensively for several decades.

My point was that the movement away from mercatilism was b o .

France had a special attraction for Scottish people, for it was to France they had turned during the course of the wars with those to the south of them, the hated English.5 In the 1760s Smith traveled to France and there met some of the "physocrats." It was in France that he met Voltaire; there, too, Adam Smith started to write his masterpiece, An Inquiry into the Nature and Causes of the Wealth of Nations, a work that was published in 1776. (From the site:    http://www.blupete.com/Literature/Biographies/Philosophy/Smith.ht)

More from the same site:

The Spirit of the Age:-
Adam Smith's approach to his work was first to do a historical study of his subject, and then to advance the area, often building on the work of his contemporaries: he was well aware of the work done by Montesquieu and the French Physiocrats. Adam Smith, indeed was a friend of David Hume and watched over his friend's death in 1776, the same year Adam Smith's classic came out, The Wealth of Nations. After Hume's death Smith edited Hume's noncontroversial papers.

On travelling to Paris with his charge, a young Duke from an influential English family which had chosen him as a tutor, Smith met, among others, Quesnay and the French Ministers, Anne Robert Jacques Turgot (1727-81) and Jacques Necker (1732-1804). In Geneva, Adam Smith met Voltaire. Overall Smith was of the view that the French physiocrats had the best answer up to his time: "[The Physiocratic system] with all its imperfections is, perhaps, the nearest approximation to the truth that has yet been published upon the subject of political economy."

"They [the French Économistes] delighted in proving that the whole structure of the French laws upon industry was utterly wrong; that the prohibitions ought not to be imposed on the import of foreign manufacturers; that bounties ought not to be given to native ones; that the exportation of corn ought to be free; that the whole country ought to be a fiscal unit; that there should be no duty between any province; and so on in other cases. No one could state the abstract doctrines on which they rested everything more clearly. "Acheter, c'est vendre,' said Quesnay, the founder of the school, 'vendre, c'est acheter.' You cannot better express the doctrine of modern political economy that 'trade is barter.' 'Do not attempt,' Quesnay continues, 'to fix the price of your products, goods, or services; they will escape your rules. Competition alone can regulate prices with equity; it alone restricts them to a moderation which varies little; it alone attracts with certainty provisions where they are wanted or labour where it is required.' 'That which we call dearness is the only remedy of dearness: dearness causes plenty.'"8... Turgot's Réflexions sur la formation et la distribution des richesses (1766) which, it is thought, anticipated Adam Smith.9. Thus, Adam Smith, steeped in history and philosophy, is exposed to both the English and French political-economic systems of the day: "And side by side with this museum of economical errors there was a most vigorous political economy which exposed them."13 His experiences were capped as he met, as we have seen, the great French thinkers of the day, such as: Voltaire, Quesnay, Turgot, and Necker. And, so, it was during 1766, in France that Adam Smith began to write his great work, which he continued to write on his return to Kirkcaldy and Edinburgh, and right on to his time in London, when in 1776, he saw it through the press.... "
*

By the way, I did not know of that site. Since I am a distorter, I googled :Smith France", and took the site at the top... I invite you to do the same, Ageezer, and distort too.

My point, that I stand behind, is that the ECONOMY revolution, contrarily to the Anglo-Saxon propaganda has it, did not start in the Anglo-Saxon self admiring society. England learned everything in practice, per force, from the Dutch, after being invaded.

Next VOLTAIRE (yes, the first economiste!) a financial manipulator in England (!) put on the paper the inchoating theory.  
Qesnay, Mirabeau, were totally fundamental. But I tell you what: they did not write in English first, nor were Anglo-saxon, so they are distorters, and way inferior to any Anglo-Saxon, be it just a parrot.

The distorter, happy to have been set right once again!
Thank you ArGeezer!

Patrice Ayme

Patrice Ayme Patriceayme.com Patriceayme.wordpress.com http://tyranosopher.blogspot.com/

by Patrice Ayme on Sat May 30th, 2009 at 04:13:57 PM EST
[ Parent ]
My point was that the movement away from mercatilism was born, on a theoretical basis, even more in France than in AngloSaxonia.

Adam Smith is the end all, be all of the Anglo_saxon, because AngloSaxonia is the end all, be all, with the richest, best and always correct people.

Patrice Ayme Patriceayme.com Patriceayme.wordpress.com http://tyranosopher.blogspot.com/

by Patrice Ayme on Sat May 30th, 2009 at 04:16:56 PM EST
[ Parent ]


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