The Chicken/Egg Spiral

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  • Technological progress, in the vernacular, implies inventions and innovation. In economic terms, technological progress refers to increasing output per unit input, or increasing “productive efficiency,” resulting from inventions and innovation.
  • Technological progress, in the vernacular, implies inventions and innovation. In economic terms, technological progress refers to increasing output per unit input, or increasing “productive efficiency,” resulting from inventions and innovation.
  • Technological progress, in the vernacular, implies inventions and innovation. In economic terms, technological progress refers to increasing output per unit input, or increasing “productive efficiency,” resulting from inventions and innovation.
  • The first law of thermodynamics, along with Einstein’s insight on the equivalence of energy and matter, tell us that neither energy nor matter may be created nor destroyed (although they may be transformed). This puts a ceiling on the amount of material and energy available for economic production. The second law, the entropy law, may be reduced to the statement that no production process may achieve 100% efficiency. The first and second laws do not allow for a perpetual increase in the production and consumption of goods and services. That is, they put a cap on economic growth.
  • The Chicken/Egg Spiral

    1. 1. The Chicken/Egg Spiral "Reconciling" the Conflict Between Economic Growth and Environmental Protection with Technological Progress
    2. 2. www.steadystate.org
    3. 3. <ul><ul><ul><li>Increasing production or efficiency resulting from invention and innovation </li></ul></ul></ul><ul><ul><ul><li>Types (Wils 2001) </li></ul></ul></ul><ul><ul><ul><ul><li>Explorative </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Extractive </li></ul></ul></ul></ul><ul><ul><ul><ul><li>End-use </li></ul></ul></ul></ul>Technological Progress
    4. 4. <ul><li>Increase in the production and consumption of goods and services in the aggregate </li></ul><ul><li>Typically expressed in terms of GDP </li></ul><ul><li>Entails increasing population and/or per capita consumption </li></ul>Economic Growth
    5. 5. <ul><li>Solow </li></ul><ul><li>Lucas </li></ul><ul><li>Mankiw </li></ul><ul><li>Romer </li></ul>Y =  (K, L) Economic Growth Models
    6. 6. Y =  (K, L) Production Function Czech, B. 2009. The neoclassical production function as a relic of anti-George politics: implications for ecological economics. Ecological Economics 68:2193-2197.
    7. 7. Business Household $ Neoclassical Economy
    8. 8. Business Household $ With Economic Growth
    9. 9. <ul><li>Ecological economics movement </li></ul><ul><li>Laws of thermodynamics </li></ul><ul><li>Principles of ecology </li></ul>Ecological Economics Herman Daly
    10. 10. Ecological Economy Heat Natural Capital Pollutants Natural Capital
    11. 11. With Economic Growth Heat Natural Capital Pollutants Natural Capital
    12. 12. <ul><li>1956, “A Contribution to the Theory of Economic Growth” </li></ul><ul><li>Technological progress </li></ul><ul><li>“ Manna from heaven” </li></ul><ul><li>Stable capital:labor ratio </li></ul><ul><li>“ Steady-state growth” </li></ul><ul><li>Mankiw et al. </li></ul>Solow Model Robert Solow
    13. 13. <ul><li>1990, “ Endogenous Technological Change ” </li></ul><ul><li>Research and development </li></ul><ul><li>Production of ideas </li></ul><ul><li>Population growth </li></ul><ul><li>Increasing returns </li></ul><ul><li>Patenting </li></ul>Romer Model Paul Romer
    14. 14. Time GDP K Natural capital allocated to human economy Natural capital allocated to economy of nature Economic Growth and Natural Capital
    15. 15. Fisheries Volume 30 Series Logo
    16. 16. K GDP Time ...maintain steady state economy sufficiently below K . To conserve fish and wildlife... Therefore
    17. 17. But what about technological progress?
    18. 18. But what about technological progress? Czech, B. 2008. Prospects for reconciling economic growth and biodiversity conservation with technological progress. Conservation Biology 22(6):1389-1398.
    19. 19. <ul><ul><ul><li>Increasing production or efficiency resulting from invention and innovation </li></ul></ul></ul><ul><ul><ul><li>Types (Wils 2001) </li></ul></ul></ul><ul><ul><ul><ul><li>Explorative </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Extractive </li></ul></ul></ul></ul><ul><ul><ul><ul><li>End-use </li></ul></ul></ul></ul>Technological Progress
    20. 21. <ul><ul><ul><li>Increasing production or efficiency resulting from invention and innovation </li></ul></ul></ul><ul><ul><ul><li>Types (Wils 2001) </li></ul></ul></ul><ul><ul><ul><ul><li>Explorative </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Extractive </li></ul></ul></ul></ul><ul><ul><ul><ul><li>End-use </li></ul></ul></ul></ul>Technological Progress
    21. 22. K T GDP Natural capital allocated to human economy Natural capital allocated to economy of nature X natural capital allocable Time   K U Natural Capital Allocation
    22. 23. Capital-free growth zone   K T 1 K T 2     GDP Time K U Reconciliation Hypothesis Natural capital allocated to human economy Natural capital allocated to economy of nature X natural capital (still) allocable
    23. 24. <ul><li>Fixed amount of energy, matter (E = mc 2 ) </li></ul><ul><li>Entropy; i.e. limits to efficiency in the economic production process </li></ul>Thermodynamics
    24. 25. Consider the Sources of Technological Progress
    25. 26. R&D Sources of Technological Progress
    26. 27. <ul><li>Entirely institutionalized (NSF 2007) </li></ul><ul><ul><li>Corporations </li></ul></ul><ul><ul><li>Government </li></ul></ul><ul><ul><li>Colleges and Universities </li></ul></ul><ul><ul><li>Non-profits </li></ul></ul><ul><li>Requires surplus production in existing economic sectors </li></ul>Relevant Aspects of R&D
    27. 28. Representative Nations (Duga and Stadt 2005) 22% 7% 71% USA 24.1% 8.9% 67.0% UK 19.5% 2.8% 77.6% Sweden 5.6% 24.5% 69.9% Russia 33.8% 44.9% 21.4% Poland 30.6% 39.1% 30.3% Mexico 16.1% 9.5% 74.4% Japan 17.1% 13.8% 69.1% Germany 10.1% 28.7% 61.2% China 29.5% 22.9% 47.5% Australia Acad./Other Government Corporations Nation
    28. 29. Representative Nations 30% global R&D (Duga and Stadt 2005) 22% 7% 71% USA 24.1% 8.9% 67.0% UK 19.5% 2.8% 77.6% Sweden 5.6% 24.5% 69.9% Russia 33.8% 44.9% 21.4% Poland 30.6% 39.1% 30.3% Mexico 16.1% 9.5% 74.4% Japan 17.1% 13.8% 69.1% Germany 10.1% 28.7% 61.2% China 29.5% 22.9% 47.5% Australia Acad./Other Government Corporations Nation
    29. 30. <ul><li>Corporations – profits. But first: </li></ul><ul><ul><li>Factors of production paid for. </li></ul></ul><ul><ul><li>Shareholder dividends distributed. </li></ul></ul><ul><li>Governments – income taxes and social security payments. But first, solvency. </li></ul>Surplus Production Required for R&D
    30. 31. <ul><li>More profits at the corporate level. </li></ul><ul><li>Increasing income at the national level; i.e., economic growth. </li></ul>What would more R&D require?
    31. 32. <ul><li>Chartered for primary purpose of generating profits (Bakan 2005). </li></ul>Corporations
    32. 33. <ul><li>U.S. – defense, economic “objectives” </li></ul><ul><li>China – defense, economic growth </li></ul><ul><li>Russia – defense, economic “objectives” </li></ul><ul><li>Japan – economic “objectives” </li></ul><ul><li>Duga and Stadt (2005), AAAS (2002) </li></ul>Focus of R&D in Bellwether Nations
    33. 34. U.S. R&D, 2006, Billions $ National Research Council (2007) 174 69 55 299 299 Total 3 (1%) Other gov. 3 (2%) 4 (6%) 8 (15%) 15 (5%) 10 (3%) Non-profits 10 (6%) 7 (10%) 4 (7%) 21 (7%) 84 (28%) Fed. gov. 3 (2%) 11 (16%) 35 (64%) 50 (17%) 8 (3%) College/univ. 158 (91%) 47 (68%) 8 (15%) 213 (71%) 194 (65%) Industry Devel. Applied Basic Conducted Funded Entity
    34. 35. U.S. R&D, 2006, Billions $ National Research Council (2007) 174 69 55 299 299 Total 3 (1%) Other gov. 3 (2%) 4 (6%) 8 (15%) 15 (5%) 10 (3%) Non-profits 10 (6%) 7 (10%) 4 (7%) 21 (7%) 84 (28%) Fed. gov. 3 (2%) 11 (16%) 35 (64%) 50 (17%) 8 (3%) College/univ. 158 (91%) 47 (68%) 8 (15%) 213 (71%) 194 (65%) Industry Devel. Applied Basic Conducted Funded Entity
    35. 36. U.S. R&D, 2006, Billions $ National Research Council (2007) 174 69 55 299 299 Total 3 (1%) Other gov. 3 (2%) 4 (6%) 8 (15%) 15 (5%) 10 (3%) Non-profits 10 (6%) 7 (10%) 4 (7%) 21 (7%) 84 (28%) Fed. gov. 3 (2%) 11 (16%) 35 (64%) 50 (17%) 8 (3%) College/univ. 158 (91%) 47 (68%) 8 (15%) 213 (71%) 194 (65%) Industry Devel. Applied Basic Conducted Funded Entity
    36. 37. U.S. R&D, 2006, Billions $ National Research Council (2007) 174 69 55 299 299 Total 3 (1%) Other gov. 3 (2%) 4 (6%) 8 (15%) 15 (5%) 10 (3%) Non-profits 10 (6%) 7 (10%) 4 (7%) 21 (7%) 84 (28%) Fed. gov. 3 (2%) 11 (16%) 35 (64%) 50 (17%) 8 (3%) College/univ. 158 (91%) 47 (68%) 8 (15%) 213 (71%) 194 (65%) Industry Devel. Applied Basic Conducted Funded Entity
    37. 38. U.S. R&D, 2006, Billions $ National Research Council (2007) 174 69 55 299 299 Total 3 (1%) Other gov. 3 (2%) 4 (6%) 8 (15%) 15 (5%) 10 (3%) Non-profits 10 (6%) 7 (10%) 4 (7%) 21 (7%) 84 (28%) Fed. gov. 3 (2%) 11 (16%) 35 (64%) 50 (17%) 8 (3%) College/univ. 158 (91%) 47 (68%) 8 (15%) 213 (71%) 194 (65%) Industry Devel. Applied Basic Conducted Funded Entity
    38. 39. But assume the R&D complex generates technical efficiency gains.
    39. 40. <ul><li>“ annual growth rate in the global footprint of 2.12% per year…requisite technological improvement needs to exceed 2% per year” (Dietz et al., 2007, Frontiers 5:13-18) </li></ul><ul><li>Productivity gains >2% typified “advanced capitalist economies” during third quarter of 20 th century (Madison 1987). </li></ul><ul><li>Gains below 2% have befuddled economists since. </li></ul><ul><li>Most economic growth elsewhere from factor inputs rather than productivity gains (Oguchi 2005). </li></ul>What rate of gain is required?
    40. 41. <ul><li>Redirected toward other activities that increase production and consumption in the aggregate due to: </li></ul><ul><ul><li>profit motive (corporations). </li></ul></ul><ul><ul><li>macroeconomic goal of growth (governments). </li></ul></ul><ul><ul><li>service of academia and NGOs. </li></ul></ul><ul><li>“ Jevons paradox” </li></ul>Natural Capital Savings from Efficiency Gains?
    41. 42. R&D _______ Sources of Technological Progress
    42. 43. R&D Profits Sources of Technological Progress
    43. 44. Profits
    44. 45. R&D Competitive Advantage
    45. 46. R&D Profits Catch-22? Sources of Technological Progress
    46. 47. R&D ________________ Consider the Sources Profits
    47. 48. R&D Profits Economies of scale Consider the Sources
    48. 49. <ul><li>Reductions in average cost of product resulting from increased level of output </li></ul><ul><li>Economies of scale operate: </li></ul><ul><ul><li>Internally (e.g., Weyerhauser) </li></ul></ul><ul><ul><li>Externally (e.g., timber industry) </li></ul></ul><ul><ul><li>Macroeconomically (Denison 1985) </li></ul></ul><ul><li>Increased efficiency but concomitantly with increased production with existing technology </li></ul>Economies of Scale } (Ruttan 2001)
    49. 50. Economies of Scale
    50. 51. X/2 re-allocated K T 1 K T 2     GDP Time K U Natural capital allocated to human economy Natural capital allocated to economy of nature X/2 natural capital allocable Hypothesis Refuted
    51. 52. Biodiversity loss GDP-TP TP1 TP3 K TP2 &quot;Chicken-Egg Spiral&quot;
    52. 53. <ul><li>With R&D focused on end-use efficiency, the rate of biodiversity loss due to economic growth may decrease via technological progress and because there is less biodiversity left to lose, but there are diminishing “less-loss” returns to R&D scale as the low-hanging thermodynamic fruits are picked and we approach ultimate ecological carrying capacity for the economy. </li></ul>Hypothesis
    53. 54. <ul><li>Technological progress is not manna from heaven. </li></ul><ul><li>Technological progress and economic growth are tightly linked. </li></ul><ul><li>Both are limited by natural capital stocks. </li></ul><ul><li>The solution to environmental problems is not perpetually growing R&D budgets. </li></ul><ul><li>The solution to environmental problems sustainable scale. </li></ul><ul><li>Technological progress in a steady state economy would occur at a much slower pace. </li></ul>Conclusions
    54. 55. www.steadystate.org

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