Re: [Fis] Economic Networks

Re: [Fis] Economic Networks

From: Robert Ulanowicz <[email protected]>
Date: Wed 04 May 2005 - 03:50:30 CEST

Dear All,

I would like to begin with my apologies to all, and especially to Igor
(who had to hold up the dialog on his own) for my absence since the
initiation of this thread. I had missed a major deadline and had to
forsake most other activities to make my tardy submission.

As Igor has done a most admirable job of answering queries and comments, I
will confine myself to several offhand remarks prompted by some of the
postings:

Loet wrote

> ...For example, Holland is one of the largest producers of tomatos while
> tomatos can not be bred in Holland naturally (because of the lack of
> sunshine). The production of these tomatos is completely
> knowledge-based. Indeed, this is energy-costly, but energy is only
> finite at the level of the universe (and not at the level of the earth).

I would have to differ with the last sentence, inasmuch as I see energy
being more of a problem at the global level than at the universal level.
There is enormous energy everywhere, at all levels. The problem is one of
availability, and availability is more of a problem locally. But the
problem of availability, as increasingly difficult as it is becoming here
on earth, remains secondary to the problem of sinks. That is, the second
law tells us that we cannot use energy without creating disorder
(entropy), and it is the transport of said entropy away from the earth
that is becoming even more limiting than dwindling energy sources. When
entropy accumulates faster than it can be disposed of, the result is
generically known as "pollution", but the effects are usually more
widespread than even that term connotes. Global warming and the ozone hole
are two examples of our inability to get rid of produced entropy quickly
enough.

> Thus, one can entertain very different worldviews. The interfaces among
> them can be considered as sources of innovation, for example, when
> market perspectives and research perspectives can be interfaced.
>
> Perhaps, you can easily integrate this into your model?

I understand your last question (advice) to be to incorporate both the
resource-based and the information-based aspects of the economy.

I will remark that Herman Daly, a well-known Ecological Economist bade us
some time ago to differentiate "growth" from "development". By the former
he meant mostly the extensive (in the sense of "size") aspects of
resource- based activities, and by the latter the streamlining of economic
processes that would accrue via more refined (usually information driven)
activities.

A major objective of my first book, "Growth and Development: Ecosystems
Phenomenology" (Springer 1986) was to make exactly that distinction as it
pertains to maturing ecosystems. Toward that end, I constructed the
network measure "ascendency", which consists of two factors -- the first
being the gross level of system activity ("total system throughput"
[TST] in economic jargon) and the second, the coherence between the system
inputs and outputs (both for the system as a whole and, more importantly,
for the internal exchanges.) Any increase in the former I identified with
"growth". (Recall TST is a close relative of GDP.) Increases in the second
term (the "average mutual information" of the flow structure) I identified
with "development. (A flimsy analogy upon which to base a book, I know,
but it has held up under subsequent scrutiny. :)

So, to your point: As resources begin to limit economies, either because
of dwindling supplies OR saturated sinks, extensive growth must slow and
economic activity turns toward information- mediated development. I think
the separation was built into the original model.

Igor wrote:

> "The total energy and fossil fuels used in producing a desktop computer
> with 17-in. CRT monitor are estimated at 6400 megajoules (MJ) and 260
> kg, respectively. This indicates that computer manufacturing is energy
> intensive: the ratio of fossil fuel use to product weight is 11, an
> order of magnitude larger than the factor of 1-2 for many other
> manufactured goods.

As some of you are doubtless already aware, Howard Odum devoted the latter
half of his professional career to formulating a full energy calculus for
human artifacts. He called his energy calculus "emergy" (for "embodied
energy".) The idea was to trace all economic products back through the web
of processes (via input-output type matrix calculations) that created them
to their very original energy sources. It stands to reason what Igor so
nicely illustrated, that items high in the economic chain of process would
have very high embodied energies.

Well before he developed the notion of emergy, Howard was keenly aware of
the enormous fossil fuel subsidies behind agricultural products (like
Loet's tomatoes.:) A chapter in his 1971 book, "Environment, Power and
Society" was entitled "Potatoes from Oil". The meaning is immediately
apparent to us now, but I recall how puzzled I was in 1972 to encounter
the notion for the first time.

Yet another contribution of Howard Odum to the economic dialog was to
emphasize the notion of "net energy yield" for the extraction of energy
resources. Thus oil has something like an 11:1 yield ratio (meaning one
gets 11 joules of useable energy for every joule expended in pumping,
transporting and refining.) Most of the alternative sources are much
lower, and there is debate that some, such as ethanol from grain, could
even be less than 1:1.

Pedro wrote:

> Maybe some clarification in #3 -- "only" autocatalysis leading to growth
> and centripetality?, no "info" domain associated? But in general I get
> along these #3 and #4.

Before he departed on travel, Igor asked that he and I discuss a full
response to Pedro's comments, so I will only mention here in passing that
autocatalysis is usually highly information-mediated.

Stan wrote:

> This "thermodynamic efficiency" I presume, has two aspects brought
> about by increasing bearing information:
>
> (a) recycling of waste products (bottles, plastics) from one activity
> into another
>
> (b) Decreasing energy throughput (per some unit) in each enterprise.
>
> Both of these, however, increase the gross energy throughput in the
> system as a whole (maximizing power).

Yes, all of what Stan says is true. He was nice enough not to mention what
is the primary (and almost only) matter of disagreement between us --
namely, whether "The second law trumps all." We agree that the second law
is inviolate at macroscopic scales. We disagree as to whether or not the
second law is the final cause of all organization. Stan feels it is. I
don't.

My take is that the creation of entropy is "accidental" to all real
processes, not always causative. In particular, I see in autocatalysis a
"self-entailing" aspect that is not derivative of any associated gradient
in energy (or exergy, to be more exact.) Hence, my opinion is that nature
is not all scripted by the second law. There is an opposing tendency,
attributable mostly to the action of autocatalysis (and the partial
autonomy thereof) that acts in almost dialectical fashion against entropy.
The metaphor of the dialectic is important, because the opposing
tendencies are actually mutually obligate at a larger scale. But I won't
bore anyone further with that now.

> >The issue of loss of socioeconomic diversity is closely related to that
> >of scale of dissipative processes: as the number of industrialized
> >economies increases (maximum power efficiency increases)
>
> SS: "efficiency"? What is this efficiency?

This is efficiency in the first law sense of the word, i.e., use of power.
It is to be distinguished from "efficiency" in its second law sense of the
word, which is extent of utilization. I.e., a given amount of energy is
available to a system. The degree to which that energy is utilized is its
efficiency in the second-law sense of the word.

The two senses are not entirely compatible. To utilize power at a high
rate requires a system to export lots of unutilized energy. Conversely,
maximal utilization can be approximated only at very low rates, as Odum
and Pinkerton explained in their 1955 article (Am. Sci. 43: 331-343.) When
resources are very abundant, efficiency in the first law sense seems more
significant, whilst when there are very rare, second law efficiency
becomes the decisive factor. Ascendency was scripted to bridge the
transition from one to the other. When resources are abundant, first law
efficiency prevails and maximal power (in the sense of Alfred Lotka, as
exhibited by an increasing TST) is a decisive advantage. As they become
rare, increasing ascendency is maintained by second law efficiencies
inherent in a high AMI.

Loet wrote:

> What makes the difference between Calcutta and New York? I would say a
> knowledge-based infrastructure like first a sewage system, but then also
> a telephone system, a subway system, etc. In short, a whole set of
> communication networks in New York which does not exist in Calcutta. The
> system is better sustainable because a set of coordination mechanisms is
> in place which proliferates on top of "hardware".

I would have to agree with Igor that Calcutta is more sustainable in the
ecological sense of the word. Notice that this is not a normative
statement. Obviously, most (but not everyone) would prefer living under
the conditions prevailing in New York. That doesn't make it more
persistent or sustainable.

The various coordination mechanisms Loet cites are costly. They abet
efficiency (coherent operation), but contribute to persistence only
insofar as there is functional redundancy (and therefore inefficiencies)
among them. The coordination mechanisms are quite costly to maintain, and
when they fail, so does the system. (Just ask any American who has
witnessed a major power failure in a US city! :)

My own mantra is "high tech = high maintenance." I eschew bells and
whistles on automobiles, mostly because I hate having to maintain such
"conveniences" when they fail (as the inevitably do.)

Maybe the point is better made by switching from economic systems to
warfare systems. (Ugh!) Many weapons systems are extremely high tech these
days (a fact that Tom Clancy [who used to sell insurance to my lab
colleagues] has turned into a large personal fortune.) And so we see TV
footage of missiles passing into the window of a building and showing the
horrified faces of those about to be obliterated. This is meant to be a
message to the world. What we don't hear about is the failure rate on such
weapons, which apparently is considerable. And there is the final irony,
which those who command these weapons of wonder somehow never were able to
contemplate -- that the whole high tech system can be ground to a
standstill by relatively primitive weaponry and the will to use it at any
personal cost.

So electrical outages occur with great frequency in Calcutta, but cause
relatively little disruption.

Basta! I promise no more luddite rantings! :)

Igor wrote to Loet:

> I see your point in resource vs. knowledge based economy and I am aware
> that you researched extensively in this area. We are probably looking
> from quite a different perspectives on these issues. From mine
> perspective, the important questions is how socioeconomic systems evolve
> in one direction or the other (resource vs. knowledge) and how this
> evolution impacts on the environment.

One thing that struck me is that "information-based systems" is used in
two different ways. There is the technological know-how and there are the
market-based speculations. As I believe I mentioned on FIS before, the
latter can completely overwhelm the former. When one compares the amount
of money that is exchanged for goods and services with the amounts that
are exchanged to "follow other money" (investments, speculations, etc.),
it is not surprising that the latter is larger than the former. What
shocked me out of my mind, however, was the revelation that the latter is
almost FORTY TIMES larger than the former!! Now any systems analyst worth
his/her salt will recognize that circulations within the subsystem that is
40X the remaining system can easily come to dominate the entire ensemble.
In the US we have a popular comic strip named "Dilbert". The running joke
in Dilbert is the insane attitudes that prevail in the world of business
and how they are so out- of- synch with the process of designing,
manufacturing and selling a product. In view of the 40:1 ratio, the source
of such crazy attitudes becomes apparent.

Igor (Rojdestvenski) wrote:

> The big problem and the big danger in the knowledge based economy is
> that, unlike other resources, knowledge has much less inertia. The
> conversion from oil to other energy sources will happen eventually, but
> it will take dozens of years. The principal industrial processes (steel
> production, energy production, shipbuilding, etc) also change but at
> quite a slow pace. On the other hands, knowledge paradigms may change
> virtually overnight, as to change them there is no need in moving
> "material" things, applying force and using energy. That is why
> knowledge-based society may cease to be one virtually overnight, missing
> the "right" turn at the development path. The dotcom crisis of recent is
> a good example.

Igor makes a good point here pertaining to persistence. Any system that
changes either too slowly or too quickly risks extermination. While
systems that change too slowly obviously have trouble adapting, it is
often overlooked that systems that adapt too quickly can put themselves
out of existence, too. In this regard, the example of the Catholic Church,
one of the oldest (if not the oldest) *formal* human structures comes to
mind. Looked at over 2 millenia, it has changed and adapted enormously;
but over the short term, it can seem frustratingly rigid. :) It persists.

Well, those are my off-hand comments as of the moment. I certainly hope
they offended no one. I'm looking forward to further discussions.

The best to all,
Bob

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Robert E. Ulanowicz | Tel: (410) 326-7266
Chesapeake Biological Laboratory | FAX: (410) 326-7378
P.O. Box 38 | Email <ulan@cbl.umces.edu>
1 Williams Street | Web <http://www.cbl.umces.edu/~ulan>
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Received on Wed May 4 03:51:02 2005


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