Joseph Tainter

Overly Simple Energy-Economy Models Give Misleading Answers

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Published on the Our Finite World on July 25, 2016

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Discuss this article at the Energy Table inside the Diner

Does it make a difference if our models of energy and the economy are overly simple? I would argue that it depends on what we plan to use the models for. If all we want to do is determine approximately how many years in the future energy supplies will turn down, then a simple model is perfectly sufficient. But if we want to determine how we might change the current economy to make it hold up better against the forces it is facing, we need a more complex model that explains the economy’s real problems as we reach limits. We need a model that tells the correct shape of the curve, as well as the approximate timing. I suggest reading my recent post regarding complexity and its effects as background for this post.

The common lay interpretation of simple models is that running out of energy supplies can be expected to be our overwhelming problem in the future. A more complete model suggests that our problems as we approach limits are likely to be quite different: growing wealth disparity, inability to maintain complex infrastructure, and growing debt problems. Energy supplies that look easy to extract will not, in fact, be available because prices will not rise high enough. These problems can be expected to change the shape of the curve of future energy consumption to one with a fairly fast decline, such as the Seneca Cliff.

Figure 5. Seneca Cliff by Ugo Bardi

 

 

Figure 1. Seneca Cliff by Ugo Bardi. This curve is based on writings in the 1st century C.E. by Lucius Anneaus Seneca, “It would be of some consolation for the feebleness of our selves and our works if all things should perish as slowly as they come into being; but as it is, increases are of sluggish growth, but the way to ruin is rapid.”

It is not intuitive, but complexity-related issues create a situation in which economies need to grow, or they will collapse. See my post, The Physics of Energy and the Economy. The popular idea that we extract 50% of a resource before peak, and 50% after peak will be found not to be true–much of the second 50% will stay in the ground.

Some readers may be interested in a new article that I assisted in writing, relating to the role that price plays in the quantity of oil extracted. The article is called, “An oil production forecast for China considering economic limits.”  This article has been published by the academic journal Energy, and is available as a free download for 50 days.

A Simple Model Works If All We Are Trying to Do Is Make a Rough Estimate of the Date of the Downturn

Are we like the team that Dennis Meadows headed up in the early 1970s, simply trying to make a ballpark estimate of when natural resource limits are going to become a severe problem? (This analysis is the basis of the 1972 book, Limits to Growth.) Or are we like M. King Hubbert, back in 1956, trying to warn citizens about energy problems in the fairly distant future? In the case of Hubbert and Meadows, all that was needed was a fairly simple model, telling roughly when the problem might hit, but not necessarily in what way.

I have criticized Hubbert’s model for being deficient in some major respects: leaving out complexity, leaving out entropy, and assuming a nearly unlimited supply of an alternate fuel. Perhaps these issues were not important, however, if all he was trying to do was warn people of a distant future issue.

Slide 29 from my complexity presentation at the Biophysical Economics Conference. Hubbert's model omitted complexity, entropy.

 

 

Figure 2. Slide 29 from my complexity presentation at the 2016 Biophysical Economics Conference. Hubbert’s model omitted complexity, entropy.

The model underlying the 1972 book, Limits to Growth, was also quite simple. Ugo Bardi has used this image by Magne Myrtveit to represent how the 1972 Limits to Growth model worked. It does not include a financial system or debt.

Figure 2. Image by Magne Myrtveit to summarize the main elements of the world model for Limits to Growth.

 

 

Figure 3. Image by Magne Myrtveit to summarize the main elements of the world model for Limits to Growth.

As such, this model does not reflect the major elements of complexity, which I summarized as follows in a recent post:

Figure 3. Slide 7 from my recent complexity presentation. Basic Elements of Complexity

 

 

Figure 4. Slide 7 from my recent complexity presentation. Basic Elements of Complexity

Thus, the model does not forecast the problems that can be expected to occur with increasingly hierarchical behavior, including the problems that people who are at the bottom of the hierarchy can be expected to have getting enough resources for basic functions of life. These issues are important, because people at the bottom of the hierarchy are very numerous. They need to be fed, clothed, housed, and have transportation to work. All of these things take natural resources, including energy products. If the benefit of available natural resources doesn’t make it all of the way down to the bottom of the hierarchy, death rates spike. This is one of the forces that can be expected to change the shape of the curve.

Slide 17. People at the bottom of a hierarchy are most vulnerable.

 

 

Figure 5. Slide 17 from my complexity presentation. People at the bottom of a hierarchy are most vulnerable.

Dennis Meadows does not claim that the model that his group put together will show anything useful about the “shape” of the collapse. In fact, in an article about a year ago, I cut off part of the well-known Limits to Growth forecast to eliminate the part that is likely not particularly helpful–it just shows what their simple model indicates.

Figure 4. Limits to Growth forecast, truncated shortly after production turns down, since modeled amounts are unreliable after that date.

 

 

Figure 6. Limits to Growth forecast, truncated shortly after production turns down, since modeled amounts are unreliable after that date.

Anthropologist Joseph Tainter’s View of Collapse

If we read what anthropologist Joseph Tainter says in his book, the Collapse of Complex Societies, we find that he doesn’t consider “running out” to be the cause of collapse. Instead, he sees growing complexity to be what leads an economy to collapse. These are two of the points Tainter makes regarding complexity:

  • Increased complexity carries with it increased energy costs per capita. In other words, increased complexity is itself a user of energy, and thus tends to drain away energy availability from other uses. Thus, in my opinion, complexity will make the system fail more quickly than the Hubbert model would suggest–the complexity part of the system will use part of the energy that the Hubbert model assumes will be available to fund the slow down slope of the economy.
  • Increased investment in complexity tends to reach declining marginal returns. For example, the first expressway added to a highway system adds more value than the 1000th one. Eventually, if countries are trying to create economic growth where little exists, governments may use debt to fund the building of expressways with practically no expected users, simply to add job opportunities.

Ugo Bardi quotes Joseph Tainter as saying,

“In ancient societies that I studied, for example the Roman Empire, the great problem that these economies faced was that they eventually would incur very high costs just to maintain the status quo. They would need to invest very high amounts to solve problems that didn’t yield a net positive return; instead these investments simply allowed the economies to maintain the level that they were at. This increasing cost of maintaining the status quo decreased the net benefit of being a complex society.” 

View of Collapse Based on a Modeling Approach 

In the book Secular Cycles, Peter Turchin and Surgey Nefedov approach the problem of what causes civilizations to collapse using a modeling approach. According to their analysis, the kinds of things that caused civilizations to collapse very much corresponded to the symptoms of increasing complexity:

  • Problems tended to develop when the population in an area outgrew its resource base–either the population rose too high, or the resources become degraded, or both. The leaders would adopt a plan, which we might consider adding “complexity,” to solve the problems. Such a plan might include raising taxes to be able to afford a bigger army, and using that army to invade another territory. Or it might involve a plan to build irrigation, so that the current land becomes more productive. A modern approach might be to increase tourism, so that the wealth obtained from tourists can be traded for needed resources such as food.
  • According to Turchin and Nefedov, one problem that arises with the adoption of the new plan is increased wealth disparity. More leaders are needed for the new complex solutions. At the same time, it becomes more difficult for those at the bottom of the hierarchy (such as new workers) to obtain adequate wages. Part of the problem is the underlying problem of too many people for the resources. Thus, for example, there is little need for new farmers, because there are already as many farmers as the land can accommodate. Another part of the problem is that an increasing share of the output of the economy is taken by people in the upper levels of the hierarchy, leaving little for low-ranking workers.
  • Food and other commodity prices may temporarily spike, but there is a limit to what workers can pay. Workers can only afford more, if they take on more debt.
  • Debt levels tend to rise, both because of the failing ability of workers to pay for their basic needs, and because governments need funding for their major projects.
  • Systems tend to collapse because governments cannot tax the workers sufficiently to meet their expanded needs. Also, low-ranking workers become susceptible to epidemics because they cannot obtain adequate nutrition with low wages and high taxes.

How Do We Fix an Overly Simple Model? 

The image shown in Figure 3 in some sense shows only one “layer” of our problem. There is also a financial layer to the system, which includes both debt levels and price levels. There are also some refinements needed to the system regarding who gets the benefit of energy products: Is it the elite of the system, or is it the non-elite workers? If the economy is not growing very quickly, one major problem is that the workers at the bottom of the hierarchy tend to get squeezed out.

Figure 7. Authors' depiction of changes to workers share of output of economy, as costs keep rising for other portions of the economy keep rising.

 

 

Figure 7. Author’s depiction of changes to non-elite workers’ share of the output of economy, as costs for other portions of the economy keep rising. The relative sizes of the various elements may not be correct; the purpose of this chart is to show a general idea, not actual amounts.

Briefly, we have several dynamics at work, pushing the economy toward collapse, rather than the resources simply “running out”:

  1. Debt tends to rise much faster than GDP, especially as increasing quantities of capital goods are added. Added debt tends to reach diminishing returns. As a result, it becomes increasingly difficult to repay debt with interest, creating a major problem for the financial system.
  2. The cost of resource extraction tends to rise because of diminishing returns. Wages, especially of non-elite workers, do not rise nearly as quickly. These workers cannot afford to buy nearly as many homes, cars, motorcycles, and other consumer goods. Without this demand for consumer goods made with natural resources, prices of many commodities are likely to fall below the cost of production. Or prices may rise, and then fall back, causing serious debt default problems for commodity producers.
  3. Because of growing complexity of the system, the “overhead” of the system (including educational costs, medical costs, the wages of managers, the cost of government programs, and the cost of resource extraction) tends to increase, leaving less for wages for the many non-elite workers of the world. With lower wages, the non-elite workers can afford less. This dynamic tends to push the system toward collapse as well.

The following is a list of variables that might be added to the overly simple model.

  • Debt. As capital goods are added to work around resource shortages, debt levels will tend to rise quickly, because workers need to be paid before the benefit of capital goods can be obtained. Debt levels also rise for other reasons, such as government spending without corresponding tax revenue, and funding of purchases deemed to have lasting value, such as college educations and investments in research and development.
  • Interest rates are the major approach that politicians have at their disposal to try to influence debt levels. In general, the lower the interest rate, the cheaper it is to buy cars, homes, and factories on credit. Thus, the amount of debt can be expected to rise as politicians lower interest rates.
  • Wages of non-elite workers. Non-elite workers play a dual role: (a) they are the primary creators of the goods and services of the system, and (b) they are the primary buyers of the goods that are made using commodities, such as food, clothing, homes, and transportation services. Thus, their wages tend to determine whether the economy can grow. In general, we would expect wages of workers to rise, if their wages are being supplemented by more and more fossil fuel energy in the form of bigger and better machinery to help the workers produce more goods and services. If the wages of non-elite workers fall too low, we would expect the economy to slow, and commodity prices to fall. To some extent, rising debt (through manipulation of interest rates, or through government spending in excess of tax revenue) can be used to supplement the wages of non-elite workers to allow the economy to continue to grow, even if wages are stagnating.
  • The affordable price level for commodities in the aggregate depends primarily on the wage level of non-elite workers and debt levels. A particular commodity may increase in price, but in the aggregate, the total “package” of costs represented by commodity prices must remain affordable, considering wage and debt levels of workers. If wage levels of non-elite workers are rising, the overall affordable price level of commodities will tend to rise. But if wage levels of non-elite workers are falling, or if debt levels are falling, affordable price levels are likely to fall.
  • The required price level for commodity production in the aggregate to continue to grow at the previous rate. This required price level will depend on many considerations, including: (a) the rising cost of extraction, considering the impacts of depletion, (b) wage levels, (c) tax requirements, and (d) other needs, including payment of interest and dividends, and required funding for new development. Clearly, if the affordable price level falls below the required price level for very long, we can eventually expect total commodity production to start falling, and the economy to contract.
  • The energy needs of the “overhead” of the system. Increasing complexity tends to make the overhead of the system grow much faster than the system as a whole. Energy products of various kinds are needed to support this growing overhead, leaving less for other purposes, such as to increasingly leverage the labor of human workers. Some examples of growing overhead of the system include energy needed (a) to maintain the electric grid, internet, roads, and pipeline systems; (b) to fight growing pollution problems; (c) to support education, healthcare, and financial systems needed to maintain an increasingly complex society; (d) to meet government promises for pensions and unemployment insurance; and (e) to cover the rising energy cost of extracting energy products, water, and metals.
  • Available energy supply based on momentum and previous price levels. A few examples explain this issue. If a large oil project was started ten years ago, it likely will be completed, whether or not the oil is needed now. Oil exporters will continue to pump oil, as long as the price available in the marketplace is above their cost of production, because their governments need at least some tax revenue to keep their economies from collapsing. Wind turbines and solar panels that have been built will continue to produce electricity at irregular intervals, whether or not the electric grid actually needs this electricity. Renewable energy mandates will continue to add more wind turbines and solar panels to the electric grid, whether or not this electricity is needed.
  • Energy that can actually be added to the system, based on what workers can afford, considering wages and debt levels [demand based energy]. Because matching of supply and demand takes place on a short-term basis (minute by minute for electricity), in theory we need a matrix of quantities of commodities of various types that can be purchased at various price levels for short time-periods, given actual wage and debt levels. For example, if more electricity is dumped on the electric grid than is needed, how much impact will a drop in prices have on the quantity of electricity that consumers are willing to buy? The intersections of supply and demand “curves” will determine both the price and quantity of energy added to the system.

The output of the model would be three different estimates of whether we are reaching collapse:

  1. An analysis of whether repayment of debt with interest is reaching limits.
  2. An analysis of whether affordable commodity prices are falling below the level needed for commodity consumption to grow, likely leading to falling future commodity production.
  3. An analysis of whether net energy per capita is falling. This would reflect a calculation of the following amount over time: Net energy per capita calculationIf net energy per capita is falling, the ability to leverage human labor is falling as well. Thus productivity of human workers is likely to stop growing, or perhaps decline. The total amount of goods and services produced is likely to plateau or fall, leading to stagnating or declining economic growth.

The important thing about the added pieces to this model is that they emphasize the one-way nature of the system. The economy needs to grow, or it collapses. The price of energy products cannot rise much at all, because wages of workers don’t rise correspondingly. This means that any energy substitute must be very cheap. The system needs to keep adding debt, especially when capital goods are added. The benefit of this debt reaches diminishing returns. The combination of these diminishing returns with respect to investments made with debt, and the interest that needs to be paid on debt, means that it is very difficult for energy products based on capital goods to “save” the system.

Complexity Adds Unforeseen Problems

One issue that people working solely in the energy sector may not notice is that our current system for setting market-based electricity prices is not working very well, with the addition of feed-in tariffs and other subsidy programs. There is evidence that subsidizing renewable electricity tends to lead to falling wholesale electricity prices. In a sense, if we subsidize electricity prices for one type of electricity producer, we find it also necessary to subsidize electricity prices for other types of electricity producers. (Also in California.)

Figure 8. Residential Electricity Prices in Europe, together with Germany spot wholesale price, from http://pfbach.dk/firma_pfb/references/pfb_towards_50_pct_wind_in_denmark_2016_03_30.pdf

 

 

Figure 8. Residential Electricity Prices in Europe, together with Germany spot wholesale price, from http://pfbach.dk/firma_pfb/references/pfb_towards_50_pct_wind_in_denmark_2016_03_30.pdf

Inadequate prices for electricity producers and a need for ever-rising subsidies for electricity production could, by themselves, cause the system to fail. In a sense, this pricing problem is a complexity-related outcome that economists have overlooked. Their models are also too simple!

Conclusion

It is easy to rely on too-simple models. Perhaps the biggest issue that is missed is that energy prices can’t rise endlessly. Because of this, a large share of natural resources, including oil and other energy products, will be left in the ground. Furthermore, because prices do not rise very high, energy products that are expensive to produce can’t be expected to work, either, no matter how they are disguised. Substitutes that cannot be inexpensively integrated into the electric grid are not likely to work either.

I talked about low-ranking workers being a vulnerable part of the system. It is clear from Joseph Tainter’s comments that another vulnerable part of our current system is the various “connectors” that allow us to have our modern economy. These include the electric grid, roads and bridges, the pipeline systems, the water and sewer systems, the internet, the financial system, and the international trade system. Even government organizations such as the Eurozone might be considered vulnerable connecting systems. The energy cost of maintaining these systems can be expected to continue to rise. Rising costs for these systems are part of what makes it difficult to maintain our current economic system.

The focus on “running out” has led to a focus on finding ways to extend our energy supply with small quantities of high-priced alternatives. This approach doesn’t really get us very far. What we need to keep the economy from collapsing is a growing supply of cheap-to-produce energy and other natural resources. Ideally, these new resources should require little debt, and not cause pollution problems. These requirements are exceedingly difficult to meet in a finite world.

Peak Complexity?

Off the keyboard of George Mobus

Published on Question Everything on January 10, 2014

Unnecessary-Complexity-Mind-Map

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Joseph Tainter‘s Thesis

In The Collapse of Complex Societies Tainter posits that many historical civilizations have collapsed due to a very subtle phenomenon, one hard to perceive for both those who live through it and those historians who later study the records. There have been a number of “major cause” theories advanced over the years, the poster child being Rome’s collapse due to invasion by barbarians. None of those theories really got down to the root of the matter. Tainter, and a number of other authors have more recently taken a systems approach and discovered a common element, something that, for example, prepared the Roman empire to suffer invasions (among other injuries). That phenomenon can be characterized as the diminishing returns on increasing complexity. The returns have to do with access to adequate resources to support a growing population, especially all forms of energy, including food. The complexity he refers to are all of the cultural approaches to solving the problems associated with that acquisition and with managing an increasingly restless population. This is essentially a biophysical economics explanation. Someone invents a new technology or procedure (including laws) for improving the acquisition and distribution of needed resources. In doing so they increase the complexity of the society. But, ironically, the increased complexity generated ends up having a diminishing marginal gain relative to the costs of maintaining the complexity. We pay more but get less and less over time.

There is a psychological problem herein that is yet more subtle. People, in general, can be negatively affected by increasing complexity in their social milieu. Alvin Toffler, in 1970, wrote about Future Shock or the effects of information overload on people and how that impacts the societies in which they live. Increasing complexity of culture (e.g. technological innovations coming at a rapid rate) is what generates information in the sense that each new detail surprises the observer. Each increment in complexity might not generate a lot of information by itself, but collectively it adds up to bombardment of the brain with more information than can be processed reasonably by the average brain.

Today we know so much more about how the brain processes its daily input of information, throwing out anything it can’t categorize or associate with an affective (meaningful) state and integrating what it can into our knowledge base. This is mostly done while we sleep and dream. The process of integration and deletion, however, takes time. Under the conditions that humans evolved to their current mental capacities the rate of this process, and the time period of normal sleep, matched well with the rate of information accumulation during the day so that the brain was not, on average, overloaded. Overload, when it does occur, results in two conditions. One is a loss of information that should have been retained and integrated during the night. The other is accumulation of short-term memory traces (engrams) that should have been discarded. Our brains have a storage capacity that allows buffering of overload for a short while to allow for variations in sleep periods and daily doses of experiences. Thus the brain can actually retain, for several days, useless traces that simply clog up the works and might even prevent truly useful messages from being stored for processing. But in the human’s natural state such overload situations are temporary and over time information can be processed. When the overload condition becomes chronic, it is another story.

In today’s world the information load from every aspect of our lives in a technological society is overwhelming for most people. The brain executes a self-protection mechanism. It simply starts filtering out a lot of information. We subconsciously switch off our attention to the world around us to keep from being swamped. Additionally, our bodies react to information overload by treating it as stress and if chronic it does damage to our health.

Part of the tuning out of messages in a complex society is that people simply do not pay attention to what is happening. They subconsciously turn to ignorance and lack of attention to protect themselves. In our modern societies I observe that the majority of people tune out the complexities. For a vast number of them, that includes especially education in and subsequent attention to the sciences. But today I see it in all domains. Even in watching or reading news reports, most people will attend to news stories only if the implications fit their pre-conceived beliefs about the world (which are necessarily over simplified). Ergo the rise of media phenomena like Fox News and its followers (same story for progressive/liberal media).

Knowledge (what and how) and understanding (why) of the way the world works provide a kind of inoculation against future shock. The reason is that knowledge is the reciprocal of information. The more you know, the less information you receive with each situation and thus avoid information overload. Being ignorant of the way the world works simply makes you more susceptible to it. And therein lies the conundrum. A positive feedback loop exists that makes people less able to cope with complexity as complexity grows. They become increasingly ignorant while trying to self-protect their brains from overload, but that just means they become more easily overloaded as complexity increases. And because they are ignorant they don’t grasp how to prevent more complexity from emerging — even the perpetrators of complexity, the lawyers, politicians, bankers, and tech gurus, are increasingly ignorant of the overall effects of what they do, so they just keep doing more of it. Meanwhile our “education system” is completely oblivious to this simple fact. Rather than educating people to understand (which is hard to do) we teach them to avoid understanding (teach to the test, which is easy to do).

Thus each new solution to the biophysical problems (or perceived problems) leads to increasing complexity and diminishing returns on investment in development, maintenance, and usage. That, in turn, drives people away from understanding what is happening in their world (the complexity) so that they cannot make rational choices. Increasing complexity then leads to increasing mistakes of judgment and eventually collapse of the system (society). In terms of major transitions in evolution (see: Major Transitions in The Future of Evolution) this crisis situation has led to the emergence of effective hierarchical coordination within some representative systems in a population of such systems that, by virtue of their increased fitness (stability against collapse) survive and differentially “reproduce”. In the case of human societies on a global scale this is more problematic since the current species of human is caught in an in-between state of mental evolution, between just barely sapient and fully sapient. As I have written many times over the years, sapience has all the attributes of a natural integrating mechanism to allow those sapient individuals to form much better governance systems. A collapse of global civilization should result in more isolated, small communities not unlike the unit tribes of early hominids in Africa. All of these communities would then constitute the population of evolvable systems.

http://danieljmitchell.files.wordpress.com/2010/07/obamacare-complexity.jpg

Take a Snapshot — What do You See?

One of the most visible characteristics of peak and post-peak complexity is the way in which subsystems that contribute to overall system complexity have a tendency to break down. Or they will not work properly relative to their intended functions, which means they are not providing the desired service.

As an example, there is a set of “smart” traffic lights on a sequence of corners on my way into work. Smart lights sense the presence of traffic, especially that waiting to get the green light. Most such systems try to measure the load (how many cars are lined up waiting for the light to turn) and calculate from both a time limit and the rate of the cross-traffic flow (how many cars per unit time are sensed crossing the sensors in the road). A fairness policy dictates that when traffic in one of the directions is very heavy, say during the time people are driving to or from work, the light will stay green longer for them, but it will change within a reasonable time to prevent overloading the cross street. Or at least that is the idea. Smart lights are supposed to solve the problem of traffic congestion by smartly (optimally) regulating the flows. But the several lights that I mentioned are anything but smart. I think what happened is that when they put in a light rail line that crosses my street it changed the complexity of the whole system. The light rail needs special handling so that it can maintain a schedule, which changes the light changing program. When that happened the lighting engineers must have made some very wrong assumptions about how to handle the increased complexity of timing the lights because now, with no traffic (including the light rail) crossing we end up sitting much longer than the true smart light would have allowed. Moreover there are many times when there are cars in the left turn lane on my side of the road, but none on the other side, the lanes going the opposite direction. What should happen is that all of our lanes should get the green light, the going-straight and the left-turn lanes, while the go-straight lanes on the opposite side should have to wait while our cars make their left turns. But no, what actually happens is that the left turn signal on both directions is turned on so that those of us who are going straight need to sit and wait — even when there is no one in the left turn lane on the opposite side.

The rest of the light timing is even dumber than this but I don’t have the time to describe all of the idiot ways that traffic gets snarled up by these stupid lights. They would do better to simply have a fixed timer on all directions and let it go at that. But this example shows how things go wrong with complexity and end up doing damage when they were intended to make things better. It also shows the failure of a system, the engineering process that was supposed to handle the new complexity but didn’t do it correctly. It seems a small thing, a little inconvenience, so most people probably don’t even think about the 20 seconds to 2 minutes they lost at those corners. Some might say, “only a systems engineer would notice and worry about such a small thing.” And that is probably right. However, add up all those lost minutes from every car that needs to get through. Add up every day that those minutes are lost. Before long you can actually see a not-insignificant loss of time for society. We all lose. Now consider how many such corners exist in the world, where smart algorithms should be facilitating traffic but actually slow it down. I’ve seen a number of them around here and even in other countries. It does add up.

Then consider all of the little screw-ups in technologies that are the result of poor design of an overly complex system (a certain operating system comes to mind). How much time is lost there? Almost everybody has experience with technologies that are too complicated to operate (features are never used) or break every once in awhile for no apparent reason. I have a wireless router at home that is forever needing reset. Why (a simple answer is that I was too cheap to buy the top of the line!)?

These are all little things that people don’t take much notice of, and never consider the global consequences of. But the really worst cases of things breaking or not working as intended is governments and organizations. We are seeing record numbers of scandals, un-prosecuted crimes (are you listening Mr. Dimon?) and failures to act in accordance with the rules. At least half of this is attributed to the cheating attitudes and greed that seem to be driving so many people in authority or position. But the other half is due to the simple fact that our institutions have gotten too complex for anybody to fully understand. Take a look at the Dodd-Frank bill or the tax code. We’ve gone over the top (the peak) when supposed experts in policy or taxes make horrendous mistakes because they cannot deal with the complexity of those rules and regulations or the procedures involved. But then, what does it matter? The enforcers are overwhelmed too so they don’t really do a proper job of monitoring and enforcing so no one who makes a mistake actually gets caught or pays a penalty. Couple that with the greed half and you now have a pat formula for stealing in plain sight.

And with just about everybody information overloaded, no one notices. Or at least no one who could possibly change things.

Single individuals (even the president of the United States) are powerless. Even if they knew what needs to be fixed they haven’t the influence or tools to do the fixing. Small groups are powerless. In our litigious society no one group can get anything effective done without stepping on someone’s toes and getting pushback for their trouble. Not even congress can move forward without some kind of gridlock.

What Isn’t Broken?

Over complexity that is not mitigated by the introduction of a hierarchical management systems (which actually reduces overall complexity) causes systems to fail in various modes. The failures, even little ones here and there, accumulate. Some can even have multiplicative consequences when positive feedback in included. Societies, even organizations, collapse due to over complexity and the law of diminishing returns applied to it.

Look around you. What institutions/systems do you see that are humming along happily doing their jobs? Me? I see very few, if any. I’ve even recently discussed the failures of the institution of science. Looking at political failures, aside from the incredible stupidity in Washington DC, consider the mess in the MENA region (e.g., Egyptian turmoil).

Can we really find just plain proper working let alone dysfunction? I suspect you will find it hard to point to truly functional systems in this world. What am I watching?

Peak Energy and the Rapid Decline of Supportable Complexity

There is still a lot of conversation and debate over the energy picture, specifically regarding fossil fuels. With the high media visibility of non-conventional extraction techniques (fracking and tar sands) and the over-hyping being done about the long term consequences of slightly increased volumes now from these technologies the public is buying into a belief that the energy problems are over. Remarkably the increases in volumes has not really translated into lower prices (the initial high flows of natural gas flooded the market and drove prices down, but those are starting to creep back up again.) Gasoline, for example, is still high from historic perspectives. Several people have calculated that any price over $90 per barrel of oil produces a damaging drag on the economy. This has been cited frequently in explaining why the US economy (as well as the global economies) have been struggling so badly over the past 4-5 years. Energy costs are at the root of ALL costs for all products and services as well as government — in fact everything. So even small increases in energy costs contribute to the problems.

At least in part this means the costs of maintenance and replacement of capital makes it harder to fix things or make them right in the first place. The decline in available free energy per capita, which is the defining parameter, translates directly into the availability of monetary representations of work and that too declines. We humans have cheated a bit, and continue to try to do so, by using debt instead of a currency that is backed by exergy (free energy). Essentially a few of us have tried to pull the wool over the rest of our eyes and make us think we still have the resources to keep on our consumptive ways. But look at the reality. Everything is breaking down. I will even go so far as to say nothing will really get fixed. Even if the American congress were to miraculously pass an important bill that seemed to have positive benefits for all it would be a short-lived anomaly on the road to perdition. The rule from here on out is decline and decay and all of our complex institutions and technologies will crumble to our feet.

What will likely be the short-term response from governments and financial institutions? Print more money. Go into more debt. Try desperately to make it look like things are OK. They will do this by trying to create yet more complex solutions (e.g. where exactly did quantitative easing or credit default swaps come from?) Depending on any swings in the political arena in the next (mid presidential term) elections, or in the presidential election of 2016 such that one party gains complete control of the white house and both houses of congress will determine how many more complex laws and rules will be created. The current gridlock is actually saving us from total asininity. If one or the other party gains control they will immediately find more complex ways to govern, which, of course, will simply lead us to ruin that much faster.

There is no physical way out of this dilemma. It is strictly thermodynamic business — nothing personal against you Homo sapiens. There is nothing you or I can do about it, except in personal preparation terms.But watch for yourself. You will likely see the degradation continue. You are witness to the peak of complexity every time you fire up your smart phone. Look for those phones to soon become a source of aggravation to you. The next model or operating system will have more glitches because the designers were racing to get it to market. The networks will suffer more outages with increased traffic. Technology will fail to serve. Institutions will break down and collapse. Our global society will collapse into a small number of isolated communities and the beginning of a new dark ages at best.

I am neither a “glass half empty”, nor a “glass half full” person. The glass is rapidly emptying and has or soon will pass the halfway point. Nor is there any way that we can start filling it back up to compensate. On the other hand there is a sort of positive side to this. For those lucky or smart enough to survive, the world will get a lot simpler and, ironically, in the long run, a lot more humane.


References

Diamond, Jared (2005). Collapse: How Societies Choose to Fail or Succeed, Penguin Group, New York.

Homer-Dixon, Thomas (2006). The Upside of Down: Catastrophe, Creativity, and the Renewal of Civilization, Island Press, Washington DC.

Tainter, Joseph A. (1988). The Collapse of Complex Societies, Cambridge University Press, Cambridge UK.

Toffler, Alvin (1984). Future Shock, Bantam Books, New York.

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