Murray Grimwood, aka Power Down Kiwi, delivers a short treatise on unflawed thinking arguing we need a measure of stocks rather than a measure of flows like GDP

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By Murray Grimwood

In my last article, I likened the planet to a paddock which we are over-grazing. If you asked me what was the major shortcoming that has got us to our current impasse, I’d reply: flawed thinking. So here’s a short treatise on unflawed thinking; we’re going to need a lot of it…..

Our world is a collection of intermeshing systems. Some are self-regulating but some are one-way flows, some of which are from a fixed-amount stock or to a limited-capacity sink. Here, I’ll argue that GDP is a measure of flows, but what we need is a measure of stocks. It’s about that simple, with the proviso that we have to be careful defining what constitutes a stock.

To understand why and what to do about it, and to keep our thinking going in the right direction, we need something called ‘systems thinking’ (academically referred-to as ‘systems analysis’). I have long advocated its priority for government and as a part of education at all levels. A great little treatise on this way of thinking, is Donella Meadows (She worked at MIT – still the top university on the planet and I regard her group as the top of the top). I won’t repeat her work here, but you could spend an evening in worse ways than reading it.

One analogy I use is the Titanic. There are myriad on-board systems. The service staff come on and off duty, passing on information about linen inventories, sick passengers, broken crockery. They cover for sick colleagues, wipe up messes, field enquiries. They are a self-regulating circular system, requiring non-physical inputs (instruction, rostering) and physical inputs (food, water, heat). Non-physical outputs might be advice, physical outputs will include dirty laundry and sewage.

But their system can’t survive alone – they need the food/kitchen system to be doing its thing, and the engineering-maintenance crew to be doing theirs. All are attempting to self-regulate; the kitchen trying to anticipate demand to avoid waste, the boiler man trying to anticipate how many people will turn their thermostats up for the night and down during the day. (Attempting to regulate flows is tricky – set a thermostat at 20 degrees, say, and immediately the cut-off happens, your temperature is dropping away. To average 20 degrees, you have to set the cut-off higher.) There are capacitances in these systems – linen may be washed at a slower rate than it gets dirtied, but the stack in the cupboard may take a week to deplete, masking the discrepancy until there is no capacitance left – which is too late.

Then there are the linear systems – the coal from the bunkers, into the boiler, providing heat and work, emitting ash, CO2 and low-grade heat (too low to retrieve – the usual end-game with energy-use). These linear systems reduce efficiency if, say, the fireman has to walk his coal barrow further into the bunker, or if he is down to scooping the dust from the floor. He has to work harder, which makes him hungrier, with knock-on effects in the kitchen. They have to work harder to feed him, taking more coal, which….. You get the picture.

Besides feed-back loops like our hungry stoker, there can be oscillations (where the chef over-then-under-then-over-orders, say) and knock-ons (pantries emptying faster than anticipated, re-ordering too much then too little then too much..). Feed-back loops tend to grow exponentially until checked by some limit, and physical systems always have limits. Understandably, many folk give up trying to track it all and turn to believing in something like an ‘invisible hand’.

But if the coal bunkers are near empty, so many things depend on that linear flow that we can make some pretty accurate assumptions; that when it’s all gone the food will be cold, and that the ship will be at the mercy of wind and current. Whether the first-class system out manoeuvres the steerage system in obtaining the last meals from the kitchen system does not affect those assumptions. Nor does the amount of money held onboard, nor whose pockets it is in, nor how fast it churned. The food it will be cold and the ship it will stop. Those can only be accurately measured in tonnage remaining, and in distance-per-hour.

Solar energy and wind energy will be all they eventually have to work with, but their systems (boilers and pumps shoving water around radiators, say) will mostly be inappropriate and some will not be adaptable at all. Passengers – used to heat on demand, hot food on demand and the idea of arriving somewhere – are going to be somewhat vocal in their annoyance, perhaps threatening to change the management system on the bridge. Which won’t change the systemic predicament one jot; they’re addressing the management system and it’s the coal system that is the problem. Time to adapt infrastructure – built under no such urgency over a longer period – will inevitably be ‘too short’. As we’re about to see – yet people are still buying already-stranded assets like there’s no tomorrow….

 Surveyed, passengers might even indicate pessimism, but their pessimism is not the problem. They might offer more money, but it won’t change the big-system problem either. The linear coal system kills the big ship system, the same way starvation kills a body even though the rest of the bodily systems are fully functional. An important differentiation in systems analysis is between stocks (like the coal) and flows (heat to water, water to stateroom radiator, warm passengers, latent heat away into the night. From a physics point of view, money is not a stock – it may well have represented the ability to bid for a stock while the stock existed, but a stock it is not.

Besides systems thinking, there is thinking-outside-the-square and logic-progression. When I was very young, Dad taught me to think ‘upside down, inside out and back-to front’ before reaching a conclusion. De Bono called it lateral thinking. Nowadays, I’d advise the addition of the word ‘dispassionate’, too.

Like this: You’re on the Titanic half an hour after the iceberg. You note the lack of lifeboat seats, and figure that you (middle-class, male) have little chance of obtaining one. Logic says the goal is to be alive tomorrow and follows by pointing out that to do so, you must be out of the icy water. ‘Above it’ is the only way to be out of it, and atop something that floats is the only way to be ‘above it’. Deckchairs? Bundled-up and tied with stripped-up canvas? Excellent – and ‘Property of the White Star Line’ is shortly going to be irrelevant, even if a few of the staff haven’t cottoned-on yet. When to launch your uncertified upcycled craft? Early, before you get swamped by others or sucked down with the ship. Logic also tells you that you can’t take 1500 others along, but from there logic fails. Who you take – partner, spouse, lover, child, nobody – that’s up to you. One of the best examples of logic-stepping to a result, is Wilbur Wright’s progression to heavier-than-air flight; not a man of genius, just a logical/lateral mind and an adherence to first principles. We can all do it.

In the Titanic example, onboard GDP figures and surveys of optimism may vaguely reflect some unease, but back-cast data projected forwards (3% growth in restaurant patronage tomorrow, based on past trends, say) can tell us precisely nothing. Measuring the coal, preparing to reduce energy-demand and altering systems to catch sunlight at deck-level, are the only games in town. To see how economists get this wrong (even with the best of intentions and with a totally-correct grasp that we need to change things drastically) we need look no further than Kate Raworth’s otherwise-excellent ‘Donut Economics’. It’s a brave effort at defining the big goal, but applies incorrect weight to the driver (energy).

What to do? We need to measure stocks, not flows. We need to ask what we’re trying to achieve societally, too. The Treasury initiatives into wellness and Natural Capital, while a tad hamstrung by econo-speak, are moves in the right direction. When we look back, the idea that we could measure well-being by monitoring a flow of debt-issued tokens will be seen as one of the main causes of our near self-extinction. GDP as a goal, simply has to be abandoned. Collaterally, we’ll also shake our heads at how we measured ‘capital’.

 It’s time our PM formed a systems committee – a meshing device, because until we get our goal-definitions right, we’ll continue to operate systems which produce wrong results. (I suspect she’d only need the one – the current crop are sub-system reporters and reporting on unwashed linen or cold food isn’t solving the ship-system dilemma). Our Universities need to mesh their disciplines too – examples of silo-speak which a generalist like me can rubbish, are all too common. It’s not good enough, coming from institutions purportedly about knowledge above all things. And we all need to think big-picture, systemically and logically. Then be very careful defining our own goals, many of which may be counter-intuitive. If you read nothing else between now and Christmas, read that Meadows PDF linked at the beginning. Then Google what she co-authored in 1972. And weep at the time we’ve wasted in between.

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