# The Archdruid Report

Druid perspectives on nature, culture, and the future of industrial society

## Wednesday, November 25, 2009

### Lies and Statistics

Plenty of difficulties stand in the way of making sense of the economic realities we face at the end of the age of cheap abundant energy. Some of those difficulties are inevitable, to be sure. Our methods of producing goods and services are orders of magnitude more complex than those of previous civilizations, for example, and our economy relies on treating borrowing as wealth to an extent no other society has been harebrained enough to try before; these and other differences make the task of tracing the economic dimensions of the long road of decline and fall ahead of us unavoidably more difficult than they otherwise would be.
Still, there are other sources of difficulty that are entirely voluntary, and I want to talk about some of those self-inflicted blind spots just now. An economy is a system for exchanging goods and services, with all the irreducible variability that this involves. How many potatoes are equal in value to one haircut, for example, depends a good deal on the fact that no two potatoes and no two haircuts are exactly the same, and no two people can be counted on to place quite the same value on either one. Economics, however, is mostly about numbers that measure, in abstract terms, the exchange of potatoes and haircuts (and everything else, of course).
Economists rely implicitly on the claim that those numbers have some meaningful relationship with what’s actually going on when potato farmers get their hair cut and hairdressers order potato salad for lunch. As with any abstraction, a lot gets lost in the process, and sometimes what gets left out proves to be important enough to render the abstraction hopelessly misleading. That risk is hardwired into any process of mathematical modeling, of course, but there are at least two factors that can make it much worse.
The first, of course, is that the numbers can be deliberately juggled to support some agenda that has nothing to do with accurate portrayal of the underlying reality. The second, subtler and even more misleading, is that the presuppositions underlying the model can shape the choice of what’s measured in ways that suppress what’s actually going on in the underlying reality. Combine these two and what you get might best be described as speculative fiction mislabeled as useful data – and the combination of these two is exactly what has happened to the statistics on which too many contemporary economic and political decisions are based.
I suspect most people are aware by now that there’s something seriously askew with the economic statistics cited by government officials and media pundits. Recent rhetoric about “green shoots of recovery” is a case in point. In recent months, I’ve checked in with friends across the US, and nobody seems to be seeing even the slightest suggestion of an upturn in their own businesses or regions. Quite the contrary; all the anecdotal evidence suggests that the Great Recession is tightening its grip on the country as autumn closes in.
There’s a reason for the gap between these reports and the statistics. For decades now, the US government has systematically tinkered with economic figures to make unemployment look lower, inflation milder, and the country more prosperous. The tinkerings in question are perhaps the most enthusiastically bipartisan program in recent memory, encouraged by administrations and congresspeople from both sides of the aisle, and for good reason; life is easier for politicians of every stripe if they can claim to have made the economy work better. As Bernard Gross predicted back in the 1970s, economic indicators have been turned into “economic vindicators” that subordinate information content to public relations gimmickry. These manipulations haven’t been particularly secret, either;visit www.shadowstats.com and you can get the details, along with a nice set of statistics calculated the way the same numbers were done before massaging the figures turned into cosmetic surgery on a scale that would have made the late Michael Jackson gulp in disbelief.
These dubious habits have been duly pilloried in the blogosphere. Still, I'm not at all sure they are as misleading as the second set of distortions I want to discuss. When unemployment figures hold steady or sink modestly, but you and everyone you know are out of a job, it's at least obvious that something has gone haywire. Far more subtle, because less noticeable, are the biases that creep in because people are watching the wrong set of numbers entirely.
Consider the fuss made in economic circles about productivity. When productivity goes up, politicians and executives preen themselves; when it goes down, or even when it doesn't increase as fast as current theory says it ought, the cry goes up for more government largesse to get it rising again. Everyone wants the economy to be more productive, right? The devil, though, has his usual residence among the details, because the statistic used to measure productivity doesn't actually measure how productive the economy is.
Check out A Concise Guide to Macroeconomics by Harvard Business School professor David A. Moss: "The word [productivity] is commonly used as a shorthand for labor productivity, defined as output per worker hour (or, in some cases, as output per worker)." Output, here as always, is measured in dollars – usually, though not always, corrected for inflation – so what "productivity" means in practice is dollars of income per worker hour. Are there ways for a business to cut down on the employee hours per dollar of income without actually becoming more productive in any more meaningful sense? Of course, and most of them have been aggressively pursued in the hope of parading the magic number of a productivity increase before stockholders and the public.
Perhaps the simplest way to increase productivity along these lines is to change over from products that require high inputs of labor per dollar of value to those that require less. As a very rough generalization, manufacturing goods requires more labor input overall than providing services, and the biggest payoff per worker hour of all is in financial services – how much labor does it take, for example, to produce a credit swap with a theoretical value of ten million dollars? An economy that produces more credit swaps and fewer potatoes is in almost any real sense less productive, since the only value credit swaps have is that they can, under certain arbitrary conditions, be converted into funds that can buy concrete goods and services, such as potatoes; by the standards of productivity universal in the industrial world these days, however, replacing potato farmers with whatever you call the people who manufacture credit swaps (other than "bunco artists," that is) counts as an increase in productivity. I suspect this is one reason why the US auto industry got so heavily into finance in the run-up to the recent crash; GMAC's soaring productivity, measured in terms of criminally negligent loans per broker hour, probably did a lot to mask the anemic productivity gains available from the old-fashioned business of making cars.
As important as the misinformation generated by such arbitrary statistical constructs is the void that results because other, arguably more important figures are not being collected at all. In an age that will increasingly be constrained by energy limits, for example, a more useful measure of productivity might be energy productivity – that is, output per barrel of oil equivalent (BOE) of energy consumed. An economy that produces more value with less energy input is arguably an economy better suited to the downslope of Hubbert's peak, and the relative position of different nations, to say nothing of the trendline of their energy productivity over time, would provide useful information to governments, investors, and the general public alike. For all I know, somebody already calculates this figure, but I'm still waiting to see a politician or an executive crowing over the fact that the country now produces 2% more output per unit of energy.
Now it's true that a simplistic measurement of energy productivity would still make the production of credit swaps look like a better deal. This is one of the many places where the distinction already made in these essays between primary, secondary, and tertiary economies becomes crucial. To recap, the primary economy is nature itself, or specifically the natural processes that provide the human economy with about 3/4 of its total value; the secondary economy is the application of human labor to the production of goods and services; and the tertiary economy is the exchange of abstract units of value, such as money and credit, which serve to regulate the distribution of the goods and services produced by the secondary economy.
The economic statistics used today ignore the primary economy completely, measure the secondary economy purely in terms of the tertiary – calculating production in dollars, say, rather than potatoes and haircuts – and focus obsessively on the tertiary. This fixation means that if an economic policy boosts the tertiary economy, it looks like a good thing, even if that policy does actual harm to the secondary or the primary economies, as it very often does these days. Thus the choice of statistics to track isn't a neutral factor, or a simple one; if it echoes inaccurate presuppositions – for example, the fantasy that the human economy is independent of nature – it can feed those presuppositions right back in as a distorting factor into every economic decision we make.
How might this be corrected? One useful option, it seems to me, is to divide up several of the most important economic statistics into primary, secondary, and tertiary factors. (Of course the first step is to get honest numbers in the first place; governments aren't going to do this any time soon, for obvious reasons, but there's no reason why people and organizations outside of government can't make a start.) Consider, as a good example, what might be done with the gross domestic product.
To start with, it's probably a good idea to consider going back to the gross national product; this was quietly dropped in favor of the current measure some years back, because it puts a politically uncomfortable spotlight on America's economic dependence on the rest of the world. Whichever way that decision goes, the statisticians of some imaginary Bureau of Honest Figures might sort things out something like this:
The gross primary product or GPP might be the value of all unprocessed natural products at the moment they enter the economy – oil as it reaches the wellhead, coal as it leaves the mine, grain as it tumbles into the silo, and so on – minus all the costs incurred in drilling, mining, growing, and so on. (Those belong to the secondary economy.)
The gross secondary product or GSP might be the value of all goods and services in the economy, except for raw materials from nature and financial goods and services.
The gross tertiary product or GTP might be the value of all financial goods and services, and all money or money equivalents, produced by the economy.
The value of having these three separate numbers, instead of one gross domestic (or national) product, is that they can be compared to one another, and their shifts relative to one another can be tracked. If the GTP balloons and the other two products stay flat or decline, for example, that doesn't mean the country is getting wealthier; it means that the tertiary economy is inflating, and needs to have some air let out of it before it pops. If the GSP increases while the GPP stays flat, and the cost of extracting natural resources isn't soaring out of sight, then the economy is becoming more efficient at using natural resources, in which case the politicians and executives have good reason to preen themselves in public. Other relative shifts have other messages.
The point that has to be grasped, in this as in so many other contexts, is that the three economies, and the three kinds of wealth they produce, are not interchangeable. Trillions of dollars in credit swaps and derivatives will not keep people from starving in the streets if there's no food being grown and no housing being built, or maintained, or offered for sale or rent. The primary economy is fundamental to survival; the secondary economy is the source of real wealth; the tertiary economy is simply a way of measuring wealth and managing its distribution; and treating these three very different things as though they are one and the same makes rank economic folly almost impossible to avoid.
Now it deserves to be said that the chance that any such statistical scheme will be adopted in the United States under current political and social arrangements is effectively nonexistent. Far too many sacred cows would have to be put out to pasture or rounded up for slaughter first. Still, current political and social arrangements may turn out to be a good deal less permanent than they sometimes seem. What might replace them, here and elsewhere, is a topic I plan on exploring in a future essay here.

#### 55 comments:

ariel55 said...

  Dear Mr. Greer,
  I took the two hours and $5.50 to see the movie "2012" this week. It brought me some peace after a meteor landed in my valley, frightening even my beligerant teen-agers. Economics aren't going to be our only problem in 2012...

  11/25/09, 8:35 PM
Yiedyie said...

  Maybe the cognitive dissonance that people feel about the economic realities is ab opportunity for change!
  But as I suspect if they cannot see a simple and working system it's also an opportunity for even more superstition!
  I think two extremes where both valid in Middle Ages both illuminated geniality and extreme superstition. Everybody knows on what side the great majority of the population stood!

  11/25/09, 9:26 PM
john said...

  John Michael Greer Sir,
  Thank you for your insight and intelligence in analysing thesemindbogglingly complex topics.I never had a lecturer at university who did it better.I would wish for you as a teacher in another incarnation,if our ecologically apocalyptic behaviour doesn't deny me that possibility.My most sincere and heartfelt thanks!
  And maybe FIRST!!!!

  11/25/09, 9:34 PM
mistah charley, ph.d. said...

  As you say, current political and social arrangements may turn out to be a good deal less permanent than they sometimes seem.
  Yes indeed. Let's take a brief detour into a mythical past, and bankster crimes that anyone can understand, as a metaphor for the frustration and anger which is building up:
  It's A Wonderful Life - The Final Scene
  Potter's personal health care attendant (the man who pushes his wheelchair) bursts into the party at George and Mary Bailey's house. The mood, which had been festive (we just saw the arrest warrant being torn apart and thrown on the pile of contributions from "so many friends") changes immediately, as the tale of Potter's purloining of the disappeared bank deposit is told. At first incredulous, the people become increasingly angry as the depth of depravity of the twisted, misanthropic millionaire becomes clear.
  Next we see the crowd carrying torches as they approach Potter's mansion. It is the evil twin of the house that George, Mary, and their kids have filled with love, almost all in darkness, and without any sort of holiday decoration, neither Christmas tree, menorah, or solstice wreath. Ernie drives up in his cab, and siphons some gasoline from the tank. We see him and Potter's former health care attendant splashing it at the house entrances, including the wheelchair ramp. Uncle Billy ignites the flammable liquid by throwing his torch into it, and the rest of the crowd follows suit. The volunteer fire department arrives, but Burt the cop keeps them from coming up the long drive.
  Through the windows we see Potter desperately going from room to room in his wheelchair, trying to escape, but it is useless. Uncle Billy watches with grim satisfaction, and as the flames of the house reflect in his glasses he mutters "So long, you old so and so."
  We recognize other members of the crowd - the same men we saw in the "Pottersville bar" scene.
  Clarence the angel, no longer in civilian clothes, but in his magnificent new robe and wings, watches sadly from treetop level. The camera pulls back and we see the house collapsing as the flames leap higher. The final scene pans upward from the burning house to the starry sky, and we see in Gothic letters the following Biblical quote: "I have set before you life and death, blessing and cursing: therefore choose life" (Deut. 30:19).
  ---------
  Returning to our situation here in the 21st century - will there be a mass uprising, analogous to the spontaneous eruption of the people's justice in the preceding never-filmed scene? Not so likely, I guess, but not nearly as unlikely as it seems from inside the Beltway and on Wall Street.
  Let me be clear - I don't want the banksters to be literally incinerated. I would be quite willing for their structures of oppression to be dismantled, however. One could find ways of doing so that could be described in JudeoChristian language with appropriate citations from Scripture.
  Even just giving them fair trials, applying the laws that are already on the books (as was done during the Savings and Loan scandal of the late 20th century), would be a major change of direction from what's happening now.
  Irving Berlin's song expressed the wish that the Creative Forces of the Universe stand beside us, and guide us, through the Night with the Light from Above (metaphorically speaking). Sarah Palin, currently getting a lot of attention in the corporate media, is a polarizing figure - but I can easily imagine someone her fans would find acceptable actually winning the next election. Mike Huckabee, in addition to being a former governor, like Ms. Palin, is a Baptist minister accustomed to appealing for guidance from above. I wonder if Mike Huckabee might be the one leading the torch-carrying crowd.
  As Lawrence Berra said, it's hard to make predictions, especially about the future.

  11/25/09, 10:48 PM
hapibeli said...

  The gross primary product or GPP
  The gross secondary product or GSP
  The gross tertiary product or GTP
  Doesn't get any clearer than that! Thanks JMG.

  11/25/09, 11:31 PM
Llewellyn said...

  Another Great Post JMG!
  I was wondering did you read about the two whistle blowers at the IEA?

  11/26/09, 2:41 AM
disillusioned said...

  Nice idea - I've come across others (which I will briefly mention) - but as a means to measure statistics this looks good.
  The other ideas (which perhaps compliment rather then compete with) were:
  money is condensed freedom
  there is a {basic needs} economy and products vs a {wants} economy and products (e.g. water vs apple-tinted flavour water); so from a user point of view there are at least 2 kinds of money.
  I think though that thatsplit is on the sales side, not the basic economy.

  11/26/09, 3:13 AM
G said...

  Re: energy productivity
  The closest thing I've heard to that is the idea of energy intensity.
  http://en.wikipedia.org/wiki/Energy_intensity
  I have no idea how they calculate it, or what professional economists do with it. I've heard of it because the Canadian government has used it to pretend to do something about global warming. They say "we'll lower the energy intensity of our economy by X%....see, you can't accuse us of doing nothing."
  Their emissions would still grow under that plan, but grow slightly less fast, and the economy would grow faster. So, energy intensity would be improve. But they used the energy intensity idea to pretend they were actually cutting emissions in an absolute sense.
  Still, it's possible some people are doing something useful with it. Maybe it's a start?

  11/26/09, 5:38 AM
William said...

  Thank you, JMG, for another insightful analysis! I have been suffering from increasing cognitive dissonance as I see the media report that the recession is over, the DJIA (reported as THE stock market) rising preposterously, and yet almost everything that I see looks worse. (Home buying is reportedly increasing in some places, and prices are going up, supposedly--again from the media--not sure what that means). We know the consumer price index is nonsense; thank you for the link. What statistics can we observe about our local economy? I might track electric utility rates. Slow moving indicator, though.

  11/26/09, 5:38 AM
Bill Pulliam said...

  Interesting example you chose, as you (like me) seem to place a far higher value on a potato than a haircut.

  11/26/09, 7:08 AM
nutty professor said...

  is economics called the dismal science because it engenders despair? can economics quantify suffering and should it? is there a spiritual or emotional factor to consider with all of these analyses? I have been reading your excellent blog for a year now, and it never fails to move me intellectually, but one yearns for more...hard to put into words, dear archdruid, but thank you

  11/26/09, 7:47 AM
DickLawrence said...

  JMG,
  You consistently demonstrate the clearest vision - and the writing talent to articulate that vision - of just about anybody commenting on the intersection of energy, the economy, and the human condition.
  I am repeatedly (that is, approximately weekly) impressed by what you write. Meaning, I come away thinking about things in a different way; I learn something.
  By the way, have you connected with Charlie Hall and his group of "biophysical economists"? Charlie and his students are on the forefront of EROI analysis. You would have a lot to say to each other I think.
  Yours,
  Dick Lawrence
  ASPO-USA

  11/26/09, 8:30 AM
J Gav said...

  JMG and all,
  This may not seem like the time or place but I will nevertheless bring back the memory of Diogenes with his lantern in broad daylight "searching for an honest man."
  Apparently, this is a misinterpetation of the ancient text, which in fact, corresponded more accurately to "searching for a human being." Ouch!
  I'll stick with the 'wrong' interpretation here for, shall we say, "humanistic" reasons. Honesty and power do not go together, they are antithetical, at loggerheads, can't mix. That's something people have a hard time wrapping their heads around.
  Without lying,and I do mean lying which costs lives and does nothing to dignify politics,finance,economics or social discourse, nobody in power would have any credibility. It's as plain as the nose on your face.
  Thanks to the Archdruid for pointing out this simple though often overlooked fact.

  11/26/09, 2:03 PM
John Michael Greer said...

  Thanks all for your comments, and apologies for the delay in getting them up -- I was on the road again, returning from a speaking gig in Canada. I'll get some responses up after dinner!

  11/26/09, 6:11 PM
Meg said...

  An article I read recently suggested 'common sense economic indicators' people could look for, and three stuck in my mind: what percentage of people at a shopping centre are actually carrying purchases as opposed to loitering; how full or empty factory parking lots are; and how many transport trucks are visible on the highways.

  11/26/09, 7:09 PM
Kevin said...

  The true statistics I'd most like to see are those for shipping in the past few years, worldwide and particularly on the west coast of the USA. I fancy a comparison of stats between now and five or ten years ago would tell us a volumes about the real state of the global economy and what's happening in the west. But I have a funny feeling that a casual web search probably won't turn up this information.
  In theory I suppose I could have done this anecdotally, as I live in a harbor area and there are good vantage points from which to observe shipping activity, but I haven't been counting container ships or oil tankers lately so I have no statistical basis to go on. And who has to time to stand around doing that anyway?

  11/26/09, 7:34 PM
sv koho said...

  Fine essay, JMG. I am writing and thinking about similar ideas and I recognize your primary,secondary, tertiary construct from The Long Descent, but your idea of measuring economic metrics utilizing this model is unique and potentially very useful. You are on to something and I have spent the last half hour trying to imagine how this data could be gathered and collated. It is fascinating to imagine what sort of new theories and conclusions might follow from this new perspective. I hope you stay with this idea for a while

  11/26/09, 8:06 PM
Ricardo Rolo said...

  First, @ Kevin
  You might find the Baltic dry index ( http://en.wikipedia.org/wiki/Baltic_Dry_Index ) reading interesting. A decent chart of this can be found in here
  http://www.investmenttools.com/futures/bdi_baltic_dry_index.htm
  Obviously read this with some salt, given that this value is measured in US dollars and the value of those is not exactly written in stone. But given how today's civilization depends of bulk water transport ( in spite of no one admiting that in public )this is probably one of the most important values to use as gauge of how things are going... as long as it is stripped out of association with a coin, that is
  On topic: In spite of your sugestion being good, it pretty much supposes that you can seal a economy. That never happens ( even in the darkest of the Middle ages it wasn't like that ), so adding the ol' export/import ratings would help. A country, even with all of your G(something)P going well would still be going poor if most of the value ( note, value, not wealth )is being shipped out. In fact we know that the Roman Empire economy was contracting in the late centuries exactly ( but not only ) because of the drainage of noble metals that it suffered, mainly but not only to the East
  On statistics themselfes: I had some training in statistics in my degree and my teacher always said that the biggest sin that a statician could do is to pretend that you only have one hypothesis to test. Due to the nature of things, it is far more easy to conclude " the data seems to point that A is true" than saying " the data says that A is true and B not ", especially when A and B are similar enough. When people are put in a situation where the data is not enough to discern between A and B, but it is enough to suggest that A is true if you had never thinked on B ( and this happens a lot ), the temptation of pretending that B never crossed your mind ( suposing that B actually crossed your mind, of course ) is high. Now look at most of the official statistics and see how much of them are testing two hypothesis compared with the ones that only test one ...
  On productivity: the current number is pretty much a measurement of how much cash they can rip of a worker per hour, to put it bluntly. And in the end, what people really want at best is a efficient economy, not a productive one. The XVIII century East Prussia was highly productive, but only because most of the people there lived in almost-slavery under the hands of the junkers ....

  11/27/09, 8:07 AM
Bruce said...

  Kevin,
  There is a way to track shipping worldwide called the Baltic Dry Index. Wikipedia gives a fairly good explanation of how it works. I'm sure one can find archives of the BDI to determine trends over time.

  11/27/09, 9:05 AM
mirror said...

  I mostly follow economic reports slack-jawed and with glazed eyes. But this latest posting on the Agonist blog is a shocker. The first time I viewed Dubai's first Palm Island-in-progress on TV the biblical admonition about building your house on sand instantly came to mind. How true and more...
  http://tinyurl.com/ygxelau

  11/27/09, 12:51 PM
John Michael Greer said...

  Well, the aftermath of last night's dinner involved quietly dozing off, rather than responding wittily to comments. Apologies for the additional delay!
  G, I'll have to look into "energy intensity." My guess is that it may be handwaving, but we'll see.
  William, you're not alone. Everybody I know who's paying attention is convinced the Great Recession is just beginning, and will get a lot worse in real terms before it improves.
  Bill, granted!
  Gav, as I see it, dishonesty is a sign of weakness, not of power. Your average feudal warlord would curl his lip at the thought of lying, because he didn't have to stoop to lying to maintain his power; that's what his broadsword was for. It's because power is so diffuse and contested in our society that nobody tells the truth.
  Professor, of course there's a spiritual dimension, but it's drattedly hard to talk about it in terms that anybody these days will hear. Do you remember when I brought up the role that narratives play in defining human thought? I got any number of people insisting at the top of their lungs that they didn't think with old outworn myths, no sirree, even as they unknowingly rehashed the Book of Revelations in various forms of secular drag. Imagine what kind of a hash would be made of any attempt to address the realm of ultimate values directly!
  Dick, thank you! That's high praise. I haven't gotten in touch with Hall yet, or anybody else -- no lack of respect there, just an oddity of my own creative process. Once I've got a clearer sense of where these particular notions lead, it'll be time to start a conversation with others who are moving in the same direction.

  11/27/09, 6:52 PM
John Michael Greer said...

  Ariel, er, Hollywood movies are not useful guides to the future, and the whole 2012 hoopla is basically a marketing scheme. How much damage did that meteor do?
  John and Hapibeli, thank you.
  Yiedyie, as I see it, every human society has a minority who think and a majority who simply believe what makes them feel good.
  Charlie, nice. To fit our current situation, though, the deposit would have been stolen with the tacit or overt connivance of half the people in town, who shared in the take, and then blamed and lynched Potter for the crime. Was he guilty? You bet, but so were they. Mind you, a lynch-mob mentality is even more likely when the people in the mob are trying to ignore their own complicity, so you're by no means wrong.
  Llewellyn, I did indeed. More about them in a future post.
  Disillusioned, nah, there are two kinds of wealth but only one kind of money -- you can spend a dollar bill equally well on a glass of water or on a glass of fizzy brown sugar water that rots your teeth. The one's a need, the other's a want; the money's the same.

  11/27/09, 7:06 PM
John Michael Greer said...

  Koho, there's more where this came from. Hang on for future posts.
  Meg, good. There are a lot of clues of this sort that can be used to check the distortion of official statistics.
  Kevin, two commenters mentioned the Baltic Dry Index further down, so I won't belabor it.
  Mirror, the whole Dubai thing is a monumental example of economic unreality taken way past the point of being merely delusional. It would be interesting to see, out of economic schadenfreude, in the brief interval before Dubai goes messily bankrupt.
  Ricardo, granted, you would want to read these statistics alongside figures for import and export of raw materials, goods and services, and money, and there might be good reason to include some correction for each of these in the three statistical measures I've proposed.
  I also took courses in statistics, while considering a psychology degree. The grad student who taught it was a phenomenologist, meaning he didn't believe in the validity of statistical measures; he spent two quarters teaching us the required curriculum, then sat us down on the last day of class and explained a few dozen ways that statistics are used to manufacture bogus meaning -- especially in the sciences, where statistics are one of the foundations of scientific fraud. More on this in an upcoming post.

  11/27/09, 7:15 PM
Vic said...

  JMG,the poplar around my place gets poorer every year spongy rot in the middle.I spoke to an arborist a few miles from me and he mentioned a disease that could threaten the trembling aspen. He named the journal but I can't remember. A small piece of the GPP but very valuable to me and a host of others that go unmentioned: a value I can't well explain.
  Unseasonably warm November (last year in the -20's). Where in Canada was your speaking gig? Good luck.

  11/27/09, 8:04 PM
BrightSpark said...

  Dear JMG
  Thanks again for providing your weekly column which helps keep me sane in a world oscillating wildly between two extreme fantasies. You responded to a previous comment of mine (earlier post) about how common sense often gets a look in when other economic arrangements have failed. Well, I'm currently having some success at getting the concepts of "economic resilience" advanced through a major political party here in New Zealand.
  Early days as yet, but your idea of multiple measures for the three economies might just help to make this a little more concrete.
  So, thanks.

  11/27/09, 8:29 PM
Patz said...

  The best rendition of the BDI, Baltic Dry Index (a very dry topic indeed) is on Bloomberg. Google Bloomberg Baltic Dry Index. A little chart comes up and at the bottom it says "Chart the performance of BDIY:IND" click on that and a real spiffy chart comes up. Along the top you can click on buttons to show the index over various periods from a day to 5 years. Very interesting to look at it long term. It maps very nicely to our bubbles and their bursting.
  One of the salient points about the index is that it is an accurate (at least for now) measure of worldwide "dry bulk" shipping. That means it is an indices of production coming on line--or not. It is used to price shipping space on a supply/demand model and there are no speculators in the market just those with stuff to transport and those with space in their ships for it.

  11/27/09, 8:35 PM
Worldbridger said...

  Seems to me that you can't have inflation without deflation, any more than you can expect to breathe in without breathing out.
  Am I missing something?

  11/27/09, 9:10 PM
ariel55 said...

  Dear JMG,
  Perhaps I have a sensitive nervous system. The media billed our meteor a "rare treat", then suggested that if we found a piece of it in our yard, it could be worth thousands. Primary product, indeed! To me it was an outrage, and I am still recovering. Perhaps a warning to all to be prepared. Nearly anything can happen!

  11/28/09, 8:10 AM
Patz said...

  Apropos of your comment about anecdotal evidence running counter to government stats JM, here is a copy of a post I put up on another blog last week.
  Here in our corner, Vancouver B.C. they’ve been talking up all the good news lately, retail sales up 1.1% car sales up, house sales up etc.
  So Bill Good (radio show) asks callers to call in and tell him if the recession is over for them. This is what he got:
  –dj calls and says his bookings are down about 50%, especially worrying because the holiday season is usually good, not this year.
  —steel company exec says his business is down 80%; infrastructure spending not happening so much.
  —very interesting real estate guy says his sales are up but he figures it’s still just a bubble and that foreclosures are way up too. He’s worried.
  —most interesting: a guy calls and says he works as a trucker hauling containers off the docks–Vancouver is a very big port—he says he’s only working 3–4 days per week now; used to work steady 5 days a week.
  —best call was a woman who says that she lost her job a few months ago and everybody in her family is happier now. Less driving; more time with kids; cut spending way back; whole family better off.

  11/28/09, 11:41 AM
Kevin said...

  My thanks to Bruce, Ricardo and Patz for info on the Baltic Dry Index. I have bookmarked several sites on it and will consult them at whiles henceforth. This seems much less time-consuming than standing on a hilltop counting the ships that come in and out of the local bay.

  11/28/09, 11:54 AM
Theo Tiefwald said...

  Ezra Pound wrote - "The monopoly of money, or the restriction of its circulation, is merely a variation of this simple form of monopoly. That is all. The stupid fall into the trap. Wars are provoked in succession, deliberately, by the great usurers, in order to create debts, to create scarcity, so that they can extort the interest on these debts, so that they can raise the price of money (i.e., the price of the various monetary units controlled by, or in the possession of, the same usurocrats), altering the prices of the various monetary units when it suits them, raising and lowering the prices of the various foodstuffs when it suits them, completely indifferent to the human victim, to the accumulated treasures of civilization, to the cultural heritage." - http://www.yamaguchy.netfirms.com/7897401/pound_ezra/present.html
  And from the same link: "Ethics arise with agriculture. The ethics of the nomad do not go beyond the distinction between my sheep and your sheep. If the study of Aristotle and Demosthenes has not actually been suppressed, it has at least been soft-pedalled for perfectly deliberate and definite reasons. Certain classical authors speak too frankly for the tastes of the Grand Seigneurs of Usury."
  Also read: http://www.yamaguchy.netfirms.com/7897401/pound_ezra/economic.html

  11/28/09, 2:01 PM
RAS said...

  JMG, thanks for another good column. My statistics teacher in college once said that statistics is the art of how to lie using math. I've never forgotten that.
  I like your three indicators, but I think we also need an indicator on how well people are doing -something again to a prosperity index. After all, all those other numbers could be good and people could still be starving in the streets.

  11/29/09, 5:39 AM
John Michael Greer said...

  Ariel, did you check your yard? The media's quite right that a bit of meteor could be worth quite a bit.
  Worldbringer, inflation and deflation don't necessarily have to follow one another, since they simply measure the relationship between money and the goods and services they buy, and money can be created out of thin air. A currency can inflate right out of existence without deflation coming into play -- in fact, quite a few of them have done so over the years.
  Vic, the gig was in London, Ontario. You're not the only one whose trees are in trouble, by the way.
  BrightSpark, good to hear. I'd be delighted to be proved wrong!
  Theo, good heavens. It's been a long time since I heard anybody quoting Pound's economic theories.
  Patz, I've been hearing the same thing from all over. There's a lot of smoke being shoveled about the economy right now!
  RAS, of course the indicators I've mentioned aren't the only ones that are needed. A prosperity index would be challenging -- it would have to be based on primary and secondary goods rather than money -- but it could certainly be done.

  11/29/09, 12:00 PM
J Gav said...

  Well, John, at last we seem to have a point of contention here. I'm usually largely in agreement with your views but in this case I must say I find it difficult to accept your recent comment (in response to my own),starting with this : "Dishonesty is a sign of weakness, not strength." While that may be true, those who bear the brunt of the consequences are much weaker than the perps of the fraud (as in pyramid, Ponzi, scheme on the largest scale in history). And the weakness of the "little people" will only become more apparent as present policies continue.
  Further, you say that "It's because power is so diffuse and contested in our society that nobody tells the truth."
  I believe, on the contrary, that power in our society has never been more concentrated, political/corporate/media/intelligence/military power strutting its stuff at a zenith of power projection unseen in post-WW2 history. Over 700 military bases in over 100 countries around the world.
  As for the "contestation", you certainly are doing some but frankly I don't think your efforts are representative of the American people on the whole in that respect. Most belong to the sheeple category - some of whom may be brought around, granted, because many are merely ignorant, not stupid, but remain sheeple nonetheless.
  Lying for profit when fraud is involved is criminal. White-collar crime goes unpunished. This is a point that I think should be taken on board as a sort of 'initial conditions' reference if, down the road, things are to become smoother as opposed to more vicious in our common transition towards another reality, something more closely approaching social equilibrium.
  Of course one may ask: "Does the truth actually exist, anywhere?" And your warnings against scape-goating are worthy of heed ... up to a point. However, criticism of the massive financial, military, etc scam presently perpetrated on the population of our country does not qualify for a 'scape-goated' defense on the part of those who profit from it. Rather, the situation calls for actions which may involve the sort of political radicalization that we haven't seen for a good while. Wouldn't it be nice if such movements could be shaped without the ideological baggage.
  I guess we both know that is, unfortunately, not very likely.

  11/29/09, 1:46 PM
Vic said...

  Oh, I realize the trees are in a sad state everywhere. I just had to say something,even if was just to mention the weather,it's been that kind of time.The conversation here is stimulating and the tree bit was the best I could do to try and join in.I didn't feel like throwing in a tired old quote from someone else. I've recently picked-up a Spengler (decline) and the first vol. of Toynbee(a study)so I'll have some whiz-bangers shortly.
  Do you give many talks to large audiences and how did you get started? What are their reactions to some of your thought? Do you allow time for Q&A's--they can be the best part of a talk?
  The CBC radio(just a slight glimmer of hope left but fading fast) Massey lecture was by the anthropologist Wade Davis: Why Ancient Wisdom Matters in the Modern World. He's a good story teller. You're a good story teller too.

  11/29/09, 11:24 PM
Dan Olner said...

  A few thoughts: yup, energy intensity is measurable, but you measure enery per unit of GDP, so all the same problems apply. The biggest one, as far as I'm concerned, is that it misses embodied energy: if Moneyland exchanges financial services for ipods with Makestuffland, its energy intensity is incredibly low - despite the fact that its demand for ipods must be considered at least 50% responsible for the energy used to make it. So it seems rather unfair to hold China responsible for its relatively inefficient energy intensity, given that it's mainly rich Westerners demanding its output.
  Also: energy intensity ties to emissions intensity ties to the Kaya Identity, which is used in eg. IPCC to measure global co2 emissions.
  I spoke to someone who'd just got back from Venezuela: it seemed a terribly poor place to them, and they wondered if it had got worse or better. This made me wonder: how do we choose to measure? The state generally has a monopoly on doing this (and, actually, more and more its large corporations via loyalty cards.) But it's worth remembering the example of Seebohm Rowntree:
  http://en.wikipedia.org/wiki/Seebohm_Rowntree
  - before he measured poverty in the UK (in my home town of York, in fact) it was accepted fact that the poor had only themselves to blame. He showed that wasn't true - a family could be working all the hours God sent, and still be in poverty. It's hard to get our heads round what a dramatic societal transformation this was. And, most interestingly, Rowntree and Booth were two researchers, out there by themselves. We're used to thinking of the idea of measurement as somehow synonymous with governments and surveys - it's worth remembering that it can also be a radical, grassroots tool for revealing hidden truths.
  Difficult to do for a whole economy, though! p.s. thanks for taking the time to respond to everyone's commons, you're an uncommonly civil chap.

  11/30/09, 7:27 AM
Dan Olner said...

  Oh - sorry, also meant to say: AFAIK financial flows don't count towards GDP. They come under 'savings', since e.g. the cost of a company's shares may be spent by that company on other goods. It's that spending that GDP wants to pick up, not the share exchange.
  What gets measured in GDP, I believe, is the 'services' part - the commission or charge for carrying out the particular financial deal. These figures can be astronomical, of course, but its important to distinguish the service charge from the 'financial instrument' flow.
  Anyone who knows more about that, I'd love to hear about it.

  11/30/09, 7:39 AM
RudolfC said...

  Perhaps this is too obvious to mention, but isn't maximizing productivity the antithesis of maximizing employment? Pundits half a century ago were wondering what we were going to do with all our free time in the "new age of leisure." What we ended up with was fewer and fewer of us spinning our hamster wheels faster and faster so we could pay the government to pay the people thrown off the hamster wheels to keep them from starving. Ignoring all the complicating factors (of which I realize there are many), what would happen to unemplyment if the standard work week became 32 hours? (I seem to remember the 40 hour work week was imposed in the depths of the (last) Great Depression partially as a solution to this problem.)
  Cordially,
  Rudy

  11/30/09, 8:01 AM
Twilight said...

  I just found the following article - I'm still digesting it but thought you might also find it interesting (if you haven't seen it yet):
  http://unews.utah.edu/p/?r=112009-1
  Garrett says his study's key finding "is that accumulated economic production over the course of history has been tied to the rate of energy consumption at a global level through a constant factor."

  11/30/09, 10:01 AM
Don said...

  It appears that Dubai will be going "messily bankrupt" sooner rather than later.

  11/30/09, 11:59 AM
J Gav said...

  Vic,
  Your first sentence was interesting, but it's not just the weather. It's also voracious logging companies after the remaining tracts of virgin forest around the planet.
  Of course this implies the disappearance of countless species, many of whom have never actually been, euh, counted, or studied, because we don't even know they exist.
  I guess this is the main reason I participate in an off-West-Sumatran island conservation project (the Siberut Island Program, to try and conserve a bit of it (well, yeah, right there where the not-yet-big-one earthquake hit a couple of months ago, killing 5000 people but not yet provoking a tsunami of biblical proportions which the local government defends against by entreating the population to pray for security, whilst moving its headquarters to high ground). All rather frustrating though, isn't it, when one considers the powerful interests firmly implanted behind the scenes and pretty much controlling the game. Lordy mercy, what will we see in Copenhagen?
  Nonetheless, one basic question is the one you initially asked. If we can't keep our trees, what can we keep?

  11/30/09, 3:31 PM
John Michael Greer said...

  Twilight, thanks for the link! It's good to see some documentation for White's Law.
  Rudy, bingo. In practice, that's the way it works out.
  Dan, all good points; I never said working out better statistics would be easy, only that it's necessary. Thank you, btw.
  Gav, the diffuse and contested nature of power in our society is among the reasons why individuals feel so disempowered. I'll get into this in more detail in the upcoming post, as it happened.
  Vic, I don't get a lot of large audiences; the great majority of people don't want to hear what I have to say, to be frank. I do enjoy Q&A sessions, not least because I don't have to write them out in advance, as I do with more structured talks!
  Gav, "our trees"? When did they become ours?
  Don, I've been gathering that. Since they own quite a bit of commercial real estate in the US, and the commercial real estate market here is already approaching rigor mortis, the results could be -- well, colorful.

  11/30/09, 4:32 PM
Jason said...

  JMG: It's good to see some documentation for White's Law.
  See, this is what I like about the Archdruid and about this place -- the little remarks thrown off that can result in an education.
  Looked up Leslie White on Wikipedia and made all sorts of links just reading his entry. If this is some of his view:
  For White, culture was a superorganic entity that was sui generis and could be explained only in terms of itself. It was composed of three levels: the technological, the social organizational, and the ideological.
  ... I can certainly see how it fits in with Spengler in one way, and with someone like Alf Hornborg in another.
  Then a quick look round tells me his book is very out of print indeed. What are the chances of someone with my background ever having heard of him if not for this comments page? Zero. Yet that link of Twilight's is absolute dynamite... and has Garrett even heard of Leslie White?
  So much time, it seems, must be spent recovering what was allowed to die off in the realm of ideas, as anywhere. JMG is a true 'conservative'. :)

  12/1/09, 3:24 AM
bmerson said...

  Your idea, as you point out, makes far too much sense to ever be adopted as long as the current system exists. Still, since I am as willing as anyone to participate in pointless conjecture.... ;-)
  As long as we are changing the system, it is critical that we redefine "value" back to something more meaningful. At the very least, we need to implement some honest form of cost accounting so that negatives actually reduce the "value" being measured.
  No intellectually honest person can argue that prisons, disasters, epidemics, crime, and all other manner of evil doing should contribute positively towards measured value. We need a system that provides the "net" value of each of your economies. Probably the primary economy values should be adjusted downward by the cost of any damage done to extract those primary resources at the "well head". Likewise, activities in the other economies that are generally negative in their impact on society should be subtracted from the total of all the positive (real value-producing) activities.
  The bottom line is that if we are going to honestly look at the three economies, then we need to honestly account for the "value" within each.
  Brian

  12/1/09, 9:32 AM
Evan said...

  "Still, current political and social arrangements may turn out to be a good deal less permanent than they sometimes seem."
  I sometimes wonder whether the average Soviet citizen of the 1980s saw the dissolution of the Soviet Union coming.
  I once met a Russian man practicing Zen in Japan who told me about how much better things were during the days of the Soviets, and how he got by in those first days of the collapse bartering with his rather collection of cigarettes. It makes me wonder whether Americans will soon face a similar situation.
  Granted, Russia seems to have seen a resurgence of late of what I perceive to be the Soviet Machismo, but its bounceback in play in the geopolitical relationships ride on their oil supplies, something the US will not have if it falls.
  But somehow I don't see the dissolution of the US coming anytime in the next five years. Perhaps within twenty. But even though I know the US as empire-state must wane based solely from the standpoint of energetics and complexity, I have no clear sense of how this breakup might occur largely because I find it hard to believe that most Americans would ever give up on their ideas of "America."
  This is all to say that I look forward to your upcoming essays, and also The Ecotechnic Age which I will be reading sometime this month.

  12/1/09, 10:14 AM
Kevin said...

  Vic, I don't get a lot of large audiences; the great majority of people don't want to hear what I have to say, to be frank.
  Whenever I bring up the subject of economic or civilizational collapse due to peak oil, people generally respond in one of two ways: they either declare that nuclear fusion or some other nonexistent technology will save our bacon, or they simply draw a complete blank, as if I had been speaking some unknown language. They just can't wrap their heads around it. And to speak truth it took me quite a while to come to terms with it.

  12/1/09, 11:57 AM
J Gav said...

  Hello again,
  Since when did the trees become ours? Since we got borders and markets.
  Which is, admittedly, not a fitting way to relate to nature but it's ours for the moment. Indeed, the whole question of "stewardship" vis à vis nature usually evades central issues touching more on philosophy and worldview than politics or economics. Science should of course be included in the debate though it will not have all the expected solutions either.
  When you see the official recommendations to "prepare" for natural catastrophes in Indonesia (arguably the most threatened country in the world), a few days ago, no less than the Minister of Communications etc propounding that watching less pornography and praying more often will take care of tsunamis, earthquakes and volcanic eruptions, you realize that there is a long way to go.
  We in the west have our own deep-set problems with nature, which is, if I'm not mistaken, one of the reasons Archdruids still have some street-cred today.

  12/1/09, 1:36 PM
John Michael Greer said...

  Evan, I don't expect the US to break apart in five years, though it could well happen in twenty. What kind of government it has before it breaks up is also an open question.
  Bmerson, good. Just as the gross secondary product would keep track of goods, perhaps another statistic might keep track of "bads" -- those negative outcomes that are produced by economic activity, and aren't factored in to current balance sheets.
  Gav, exactly -- there are core philosophical and spiritual issues that need to be addresses when anybody starts treating trees as "theirs."
  Kevin, I get the same response far more often than not. The thought that humanity might not be omnipotent is utterly unthinkable to most people in the industrial world these days.
  Jason, excellent! Good for you for looking White up. As for being a conservative, well, in a real sense, I am one -- you'll certainly hear me cite Edmund Burke and Oswald Spengler a good deal more often than any of the current doyens of the left. The problem is that the word "conservative" has been hijacked by a bunch of free market Stalinists and evangelical Jacobins who are out to immanentize the eschaton with a level of blind zeal that would make a diehard Marxist blanch.

  12/1/09, 4:40 PM
ariel55 said...

  I passed Brian's comment on "value", and wanted to comment that that is where I am beginning to study and reform my own family life. Well said.

  12/1/09, 7:22 PM
Tony said...

  Dear Mr Greer,
  Re GDP per Total Energy Input by country, Stuart Staniford at
  http://earlywarn.blogspot.com/2009/11/us-competitiveness-in-tight-oil-era.html
  graphs country histories of a related measure, GDP per Barrel of Oil.
  The US would look comparatively worse in Staniford’s plot than in a GDP per Total Energy plot if, as I suspect, a higher fraction of its total energy comes from oil, compared to other countries.
  The UK apparently tops Staniford's chart because a higher proportion of its GDP comes from financial services.

  12/1/09, 9:12 PM
Jason said...

  JMG: As for being a conservative, well, in a real sense, I am one.
  It's taken me a while to see that. :)
  Your own conservatism, like that of Burke and Spengler, seems to see 'tradition' as the ongoing process-wisdom, bound into a hundred often-unconscious human feelings and actions, that we inherit from the natural ongoing process of being in a culture.
  If I'm not mischaracterizing, you see that resource as more precious than anything the feeble wit of man can conjure out of thin air to replace it, because it has a sense of its own that we mostly do not catch.
  So for you, 'conservatism' would be more the heartfelt maintenance of whatever has arisen that enduringly connects us with realities.

  12/2/09, 1:23 PM
John Michael Greer said...

  Ariel, excellent. It's the changes we make in our own lives that are the real foundation for anything on a larger scale.
  Tony, yes, I was delighted to see Stuart return to energy blogging. His stuff is always worth tracking.
  Jason, that's a very romanticized way of putting things. I'd say, rather, that history is an ecological process; the social systems that arise out of history are ecosystems, and like any other ecosystem, they have an organic structure of their own that isn't improved by being forced into some Procrustean bed of abstraction. I'd also argue that progress is an occasional phenomenon, not a law of nature, and the notion that every change is an improvement is thus frankly silly; when somebody insists on change, it's reasonable to expect some evidence that the new system will work at least as well as the old one, and not just on paper.

  12/2/09, 8:16 PM
Jason said...

  Good answer which I just noticed; what it points up particularly is the reasonless desperation for change in itself, unguided by thought, that is an all too common feature of the Faustian.
  Figures you wouldn't like my affect-laden language! Maybe we can split the difference and use Tolkien:
  The old that is strong does not wither
  Deep roots are not reached by the frost

  12/6/09, 4:41 AM
maros.ivanco said...

  @JMG
  The idea of energy as a performance measure in economics is very interesting step. It reminds me, that just few years ago similar step has happened in the computer industry.
  Several years ago, the performance of the computer processors had been measured in the number of operations performed per second (or in MHz, there was a linear dependency between the two at the time). Everything seemed to be o.k., but one day processors started to get close to their physical limits (a logical circuit requires minimum amount of silicon, there are only three dimensions in which the circuits can be connected...). As a result, the processor makers were forced to change the performance criterion and now it is (or is very similar to) the number of operations per input energy consumed by processor. The parallel is obvious.
  I think, the Barrel of oil equivalent (BOE) as an unit of energy is unnecessary - there already is very useful unit: Joule (J).
  It makes me smile, when I try to imagine barrel of oil priced in J (as a difference between energy that can be exploited and energy needed to exploit), potatoes priced in J (energy a human body can gain minus energy needed to grow them), or credit swap (number of J a man burns to sign the contract) :-D. Nevertheless, it is probably the only way to go.
  I finally see in your essay some proposals (energy as price, GPP, GSP, GTP). I will forward your essay to my friend economist. I wonder what his reaction will be. :-)
  Anyway, thank you for such significant essay, and also thank to others for links to alternative measurements of economy performance.

  1/5/10, 5:07 AM
bccarver said...

  Hi John
  thanks for giving me food for thought and ammunition to include in infrequent emails to my govt. rep (will it do any good?)
  jmg "Corporations, under the laws of the United States and most other nations, are legal persons; they have many, though not all, of the same rights that “natural persons” – that is, you and me – have under the law."
  I agree with the entire article but what about the right to vote. Voting doesnt have the value it had in the past and to many it has 0 value.
  I think many of the "rights " corporations abuse should be taken away. ie lobbying, financing political campaigns.
  thanks Brian

  1/8/10, 11:11 AM

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