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April 27th, 2015

A new sandpit for long side discussions, idees fixes and so on. Unless directly responding to the OP, all discussions of nuclear power, MMT and conspiracy theories should be directed to sandpits (or, if none is open, message boards).

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  1. J-D
    April 27th, 2015 at 08:37 | #1


    I note that you have still not answered the question I asked you.

    I am curious about why you direct a fusillade of questions at me. I’ll answer one of them: deficit spending is based partly on the capacity of governments to borrow money and partly on the capacity of governments to create money.

  2. J-D
    April 27th, 2015 at 08:41 | #2


    You write about your hope that people will admit there are limits to growth.

    Often the expression of a hope or desire that people will admit to something contains by implication an assertion that they are so far not admitting but denying it.

    You have offered no examples of denials that there are limits to growth emanating from capitalists, Keynesians, academic economists, politicians, or indeed anybody.

  3. Ikonoclast
    April 27th, 2015 at 09:15 | #3

    Reposted from the old sandput to this new one.

    Prof. J.Q.,

    I mentioned on another thread I would take the limits to growth argument back to the sandpit. I want to mention an interesting paper by Robert U. Ayres. I say the paper is interesting for the purposes of our debate because Ayres gives rather more support to your side of the argument than mine, though I think he can still be criticised on certain points.

    “Eco-thermodynamics: economics and the second law.” – published in Ecological Economics 26 (1998).

    The scientific part of the basic argument is impeccable so far as I can understand it. My understanding goes most of the way but I cannot scan all the the runes of the formulae. Ayres makes some good points against the arguments of Nicholas Georgescu-Roegen and Herman Daly. In brief, he pulls them up for some inaccurate arguments on their part derived from the consideration of entropy. He highlights their error in neglecting the very large and continuous exergy flow (energy available for useful work) the earth receives from the sun.

    “The entropy law does not imply that order in the form of artifacts and infrastructure is necessarily being produced at the expense of increasing the entropy (disorder) of the biosphere itself.” – Ayres.

    This point is technically true if the exergy can be wholly derived from solar power and its derivatives like wind power, hydro and photosynthesis.

    Combining the above valid point with arguments about economic substitution and dematerialistion of the economy, Ayres holds that potential economic growth is practically limitless.

    He goes on to say, “… a perfectly acceptable neo-classical answer to their (the LTG advocates) critique, I imagine, would be that in the distant future the economic system need not produce significant amounts of material goods at all. In principle, it could produce final services from very long-lived capital goods, with very high information content, and non-scarce renewable sources of energy, such as sunlight.”

    I agree that this argument is acceptable to a considerable degree. However, Ayer’s arguments about substitution possibilities and “dematerialisation” possibilities are taken too far. For example, Ayers does give a nod to the fact that the food and potable water needs for humans cannot be be dematerialised. This fact needs more than a nod. A quite considerable set of production, infrastructure and transportation systems (all material systems) are needed to keep 7 billion or 10 billion (soon to be?) humans in food and water and to deal with their wastes. The same holds true for shelter, power, transport, medical and educational needs (for example). Quite considerable material infrastructures, waste disposal systems and environmental protection and remediation systems are needed for all these functions and their attendent waste stream issues.

    If we can develop a renewable, sustainable economy the limiting issues will be flows rather than stocks. The flow of total exergy from the sun is effectively limitless for human scale purposes but the flow which can be harnessed for human purposes will meet a scalable limit with respect to the total infrastructure size possible globally to harness this flow. As you have commented in the past, the flow of wastes, their treatment and remediation, along with the tolerance levels for disruption of natural cycles like the carbon, nitrogen and phosphorous cycles are quite likely to impose limits before potential material and exergy resource flows impose limits. Even Ayers mentions the relative sensitivity of complex environmental systems and services to disruption by industrial scale human activities. The climate is one such system currently progressing to serious disruption.

    The case may be that the limits to growth are further away than I think. However, the case is that the limits to growth will still finally apply on earth. The current disruptions to the climate system, the carbon, nitrogen and phosphorous cycles and to biological diversity with a major extinction event occuring, are all strong indicators that our current economic system at least (fossil-fueled, late stage capitalism) is very close to its limits to growth.

    Without a rapid transformation both in political economy terms and in technological-industrial terms we are in serious danger of hitting very painful limits very soon. The signs are clear.

  4. Ivor
    April 27th, 2015 at 09:57 | #4



    deficit spending is based partly on the capacity of governments to borrow money and partly on the capacity of governments to create money.

    Deficit spending based on “creating money” has led to 200 trillion of global debt.

    It shows that Keynesians believe that future growth is endless.

    Thank you but this was always clear.

    You are just wasting everyone’s time.

  5. Ikonoclast
    April 27th, 2015 at 09:58 | #5

    Hermit, this is my reply to your post on the previous sandpit.

    Peak fossil fuels is significant but not a game-ender in its own right. I used to believe it was a game-ender in its own right but the arguments of J.Q. and sources I checked to check his arguments inclined me to a new view on this point.

    First, we have to be careful to define what peak fossil fuels is. It has two important sides to it. One, it is peak net energy production for useful work (peak exergy) from fossil fuels and this production is a flow. This is true even though the total amount of fossil fuels is a stock. To provide an example, you might have a coal mine with enormous reserves but which (for some reasons, maybe geological or depth related) is difficult to extract coal from. There would be a peak rate (flow) at which you can extract energy from this reserve stock. For everyday purposes, this would limit how much energy per year you can get from the coal.

    In many ways, peak energy flow obtainable from fossil fuels is becoming the problem. The easy to access and high net energy return stocks are more and more used up and the stocks harder to access, obtain and process are more and more being used. The Alberta tar sands are a case in point. The net energy return is not high, they are highly polluting, getting a high total flow from the project requires an enormous capital investment (money and plant) and a high oil price to make it economically viable.

    Due to decline in quality and accessability of remaining fossil fuel reserves, we may already have reached peak exergy flow from fossil fuels. The other problem of course is that the climate change issue shows that we cannot safely burn much more (if any) of the remaining reserves.

    However, solar energy and its spinoff energy sources like hydro, wind and photosynthesis (all driven by solar energy through weather and chemistry) is likely to prove a more than adequate replacement for all fossil fuels. I know some people (I can think of yourself and Gail Tverberg the Actuary for example) still find it not credible that these renewable energies can provide enough exergy flow at a high enough EROEI (energy return on energy invested) and be scalable to the required size.

    With wind and solar power in particular now becoming very efficient and afforable, a number of major studies from highly reputable scientists in prestigious univeristies (including Stanford, MIT and Melbourne IIRC) have demonstrated getting 100% energy including all transport energy from renewable power is possible and scalable to current. If you take the time to check the literature you will find this is so.

    This is not to say the transition issues will not be immense. They will be immense. We have to reconfigure and retool our entire economy from base to peak in every respect. We have to become a near 100% electrical economy with some fossil fuels or preferably synthesised hydrocarbons (from CO2 and H2O) reserved for civil aviation, military, police and emergency services in the main. I don’t think we will ever see an electric airliner, electric main battle tank or a full size electric helicopter. Small electric helipcopter drones are feasible of course.

    We will have to entirely reconfigure agriculture, our cities and our transport to become compatible with the electric economy. Internal combustion autos (except maybe for police and emergency services) will disappear from our roads. Electric cars and delivery vans will light and less numerous. A great deal of transport and mass transit will have to happen by electric rail, electric trams, not to mention more bicycles and more walking. Homes and buildings will have to designed in an entirely new way. Roofs and windows will generate solar electric power. Passive design will vastly reduce the need for heating and cooling energy requirements.

    The list goes on of course. These changes are so transformational and so urgent that our current system (fossil-fuel powered late stage capitalism) and the people trapped in its mindset cannot envisage nor implement what is required. Oligarchic-corporate capitalism is profoundly systemically incapable of making the necessary changes. The transformation will require all of political-economic, cultural, technological and industrial transformation to proceed together and synergistically. Without all these elements working together we have little to no hope of saving civilization. Once people realise modern civilization itself is at stake, and once they see the old system model is doomed (and them with it) they will finally countenance and indeed demand transformational change. Poltiicians, oligarchs and corporatists who stand in the way of these ablsoutely necessary changes required by 7 billion ordinary people (middle class down to peasants) will begin to find life very uncomfortable.

  6. jt
    April 27th, 2015 at 10:28 | #6

    Sigh. I pointed out weeks ago that the sun is constantly pumping a vast and for practical purposes infinite amount of energy onto earth that we can make available for work and that the technologies for doing so, with shoe-string investment, are making Great Leaps Foward.

    The current disruptions to the climate system, the carbon, nitrogen and phosphorous cycles and to biological diversity with a major extinction event occuring, are all strong indicators that our current economic system at least (fossil-fueled, late stage capitalism) is very close to its limits to growth.

    A jumbled sentence if ever I’ve seen one.

    Yes, of course the age of fossil fuels is in the process of winding down to a loooong tail. So what? Nitrogen and phosphorous are incredibly plentiful, although scare stories have been put about regarding P.

    Climate change can will be dealt with and at minimal cost as the good Professor has noted.

    Climate change will be dealt with eventually because not doing so would be bad for business. It is comical to think that Capital won’t act in its own interests, although the ghosts of the past will/have prevented this from occurring expeditiously. Still, better late than never

    Capitalism for all its faults (and I believe there are many) is still in a broadly progressive phase and probably only now entering its adolescence. Capitalism will be the major mode of production for at least a few more centuries during which it will innovate us forward and civilisation is not about to collapse.

  7. J-D
    April 27th, 2015 at 10:45 | #7


    Deficit spending based on creating money does not produce debt.

    Deficit spending based on borrowing money obviously does produce debt, since all borrowing produces debt by definition, but borrowing money and going into debt does not show a belief that future growth is endless.

  8. Hermit
    April 27th, 2015 at 10:57 | #8

    The signs are clear that most people are not really willing to pay a lot more for energy. The repeal of carbon tax via the electoral mechanism makes that clear. I’d argue that the 20% RET which the public favours is more like 10% since 1970s hydro is a given. The effect on power bills is minor. Several countries (and perhaps our own SA) are showing the excruciating difficulties of cleaning up their energy systems beyond a certain point, well documented here

    The problem with wishful thinking is that reality comes up suddenly when we are not ready for it. If electric road transport is the next big thing why aren’t we seeing it everywhere? If wind 2.9% and solar 1.5% will replace coal 64.5% and gas 20.8% electricity why is it taking so long? I think it all goes downhill after about 2020.

  9. John Quiggin
    April 27th, 2015 at 11:04 | #9


    I think/hope we are in furious agreement here, on the following points

    * The Second Law of Thermodynamics is a red herring because the earth is an open system receiving energy from the sun
    * Constraints on the availability of specific resources are relevant and, in many cases, binding

    Going further, and probably beyond our point of agreement

    * It follows that limitless growth, in the sense of proportional expansion in all economic activities, is impossible; in fact, contraction in some dimensions, such as fossil fuel combustion, is urgently necessary
    * On the other hand, since not all resources are constrained in any relevant way, there is no obvious limit to the extent to which living standards can be improved

  10. Ikonoclast
    April 27th, 2015 at 11:42 | #10

    @John Quiggin

    I think we can find broad agreement there.

    (1) The Second Law of Thermodynamics is a red herring if invoked in a simplistic way as I formerly did and as Georgescu-Roegen and Herman Daly appear to have done according to Ayers’ account. I highly recommend you read Ayers paper if you have not already done so. Exergy analysis (as opposed to entropy analysis) could be highly valuable to economics as Ayers outlines, mainly in the area of increasing efficiencies.

    (2) “Constraints on the availability of specific resources are relevant and, in many cases, binding.” This is the case and the possibilities of substitution and “de-materialisation” (better called leveraged efficiency or something like that) though great are also not limitless.

    (3) “It follows that limitless growth, in the sense of proportional expansion in all economic activities, is impossible; in fact, contraction in some dimensions, such as fossil fuel combustion, is urgently necessary.” Agreed. This does indicate for example that we will need to stabilise population at some level and stabilise total built infrastructure and plant (machines, factories) at some level. There are also ecological, aesthetic, moral and human survival imperatives contained in the need to retain a portion of “wild earth” or “open nature”. We cannot pave the entire world over as it were.

    (4) “… there is no obvious limit to the extent to which living standards can be improved.” Agreed, in practice, though it will take a vastly more enlightened approach than we have taken to date. In theory, there could well still be an ultimate limit on this.

    So it seems you do agree with the limits to growth thesis so far as material growth goes: there must be a limit to population and infrastructure growth.

    It seems you envisage endless economic growth for all practical purposes if it is measured by increasing services to living standards once material growth stabilises. This could conceivably go on for a long time but again not for ever. Quality services (health, education, welfare, education, culture, entertainment and so on will still require a sophisticated and extensive infrastructure and energy system to provide and maintain them. There will always be as I said above a final limit to that infrastructure growth.

    There remains the danger we have done too much damage to the environment and carrying capacity of the earth to successfully and peasefully transition to the (almost but not quite) endless qualitative growth utopia apparently envisaged by orthodox economics. I certainly don’t believe it will happen under current oligarchic-corporatist capitalism which is leading to a marked decline in democracy and democratic processes. Unless we can solve this problem which exists at the political economy level, we have little to no chance of solving our other development and transition problems. Of course, this is in my opinion.

  11. John Quiggin
    April 27th, 2015 at 12:10 | #11

    Not much to disagree with there, Ikon, although of course I remain an optimist.

  12. Florence nee Fed up
    April 27th, 2015 at 13:31 | #12

    Is that really true. We hear Abbott and Co along with MSM that people will not accept power rises. How does that statement fit in with massive rises over last few years. The so called toxic carbon tax led to small increases which we were more than fully compensated for. Power is expect to continue to rise.

    Another, what I believe myth is, that most will not accept tax rises, demand they be lower too.

    I think the truth is more likely that majority expect government to raise revenue for essential services, even if it means increases in tax.

    If it is OK to lower taxes etc. in good times, it must be more so when things are not so good, to raise them again.

  13. Donald Oats
    April 27th, 2015 at 13:54 | #13

    Earth absorbs sunlight in the atmosphere, land and oceans: 3,850,000 EJ per annum (1EJ = 278TWh = 278 billion kilowatt-hours), or 3.85×10^24 Joules per annum. If we stick to the energy we can harvest from the sun while constrained to Earth, then that is the upper limit of what is available. Obviously far less is usable.

    To put this in perspective, in 2010 the world primary energy use was approx 540EJ, or 0.014% of the total absorbed sunlight energy. Even with inefficient use, we clearly have some spare capacity here 🙂

    Sustainability is not energy constrained for the forseeable future: our bigger problem is that we are a force of nature now, driving all many of things to extinction, and extinction is a one way trip.

    Shifting mass from A to B is another thorny problem. We need food and water to survive, and we need to get it from somewhere. The state space for all the different configurations of doing this is pretty big, so there isn’t really an a-priori reason for believing that capitalism has found the most efficient solution among all possible solutions.

    Finally, our population growth rate has declined during the latter half of the 20th century, and is ticking along at 1.1% per annum at the moment. There are good arguments for suggesting that population will peak at 9 billion people around 2050, and then slowly decline. There are good arguments for suggesting that population will continue to grow, reaching 10.1 billion by 2100. The eventual outcome might be something in between.

    For convenience, assume 10 billion souls is the eventual limit, and is an equilibrium, i.e. net growth is zero. If we have that many people, all using the current energy of the first world leaders, which on a per capita basis is 300GJ for USA citizens, 2011 figures. If everyone was like that, then we need 10×10^9 x 300 GJ = 3×10^12GJ = 3×10^21 Joules = 3000EJ. This is 0.08% of the total sunlight energy per annum.

    In other words, so long as we have some ingenuity, even if everyone is living like the USA citizens are in terms of energy consumption per annum, we barely scratch the surface of what is incoming. If we could harness just 1% of the annual sunlight we receive, we’d have 12 times more energy than we would need. Our problems are not energy related, at least not directly.

  14. Ivor
    April 27th, 2015 at 14:17 | #14


    Please do not be such a slow learner.


    but borrowing money and going into debt does not show a belief that future growth is endless.

    Then what is the limit to future growth in debt or money creation (whatever)?

    Obviously previous Keynesians miscalculated, maybe tricking people, and themselves, into thinking there was a limit, and so we have ended up with an unimaginable mountain of growing debt.

    Where is this limit?

  15. J-D
    April 27th, 2015 at 15:13 | #15


    Please do not be such a slow learner.

    The question ‘where is this limit?’ is substantially equivalent to the question I asked you earlier and which you have so far not answered.

  16. Hermit
    April 27th, 2015 at 16:04 | #16

    @ Florence I think the state pricing tribunals rubber stamped gold plating (a mixed metaphor if ever there was) because they were in thrall to the power companies. OTOH greenies who wanted carbon tax were a bit feral and wore dreadlocks not no. 5 haircuts. The power cos got what they wanted ie max gold plating and zero carbon tax.

    @ Donald the solar insolation breathless factoid should be used sparingly. How about banana growing using desalinated ocean water in Sturt’s Stony Desert? There are 1,337,142,184 cubic kilometres of water in the ocean. Surely we should use it to grow bananas. The solar factoid impresses people because they don’t think about the practical or cost issues whereas that’s immediately obvious in other cases.

  17. Troy Prideaux
    April 27th, 2015 at 16:58 | #17

    Hermit :
    @ Florence I think the state pricing tribunals rubber stamped gold plating (a mixed metaphor if ever there was) because they were in thrall to the power companies. OTOH greenies who wanted carbon tax were a bit feral and wore dreadlocks not no. 5 haircuts. The power cos got what they wanted ie max gold plating and zero carbon tax.

    Wasn’t quite that B&W from my (could be naive) understanding. From what I’ve heard from electricity infrastructure experts (in Victoria at least) is the grid wasn’t being properly maintained since being privatized and many experts were predicting lots of bad things to start happening with the grid unless substantial work was done to it. Mind you, that was before the quite widespread take-up of rooftop solar which maybe mitigates the load on key resources during extreme peak events?

  18. Donald Oats
    April 27th, 2015 at 17:01 | #18

    The solar insolation wasn’t a breathless factoid: it is a fact, observed. The point of the comparison (between our energy consumption and incoming energy) is to show that energy of itself is not the constraint which will bite first as a limit to growth. This is not an economic argument, it is a physics argument. The constraints on the global economic system, whatever they might be, energy availability isn’t likely to be one of them.

    Growing bananas in the desert with desalinated water isn’t going to pass the test of economics, especially not in a capitalist system, so I think it somewhat asinine to counter with such an example…and it might give the current government ideas. Best to use the breathless banana analogy sparingly.

    I take your point though.

  19. Ivor
    April 27th, 2015 at 17:07 | #19


    So, there is no limit.

    There is no other issue.

    Any claim, assertion, suggestion, hint or implication that capitalist Keynesians believe in limits is wrong and wrong people will often resort to all sorts of tactics to avoid this fact.

    Such people reduce themselves to laughing stocks.

    If any Keynesian in the past thought they could maintains capitalism without increasing population, empire or debt, history has proven them wrong. But I know of no example.

    If there is any citation in the Collected Works of J M Keynes, then produce it.

    If there is any mention in Samuelson’s (Keynesian) Principles of Economics then produce it.

    Some classical economists understood limits – Malthus.

    If you cannot produce evidence then your entire dispute is nothing but attention seeking trolling.

  20. J-D
    April 27th, 2015 at 19:48 | #20


    You wrote that capitalist Keynesians believe that future growth is endless and you have produced no examples, no citations, and no evidence.

  21. Ikonoclast
    April 27th, 2015 at 20:18 | #21

    Prof J.Q. has a complex and nuanced understanding of what the term “growth” might mean in an economics and resources context. However, we can be sure that most politicians, business leaders and media pundits do NOT have this nuanced understand of the term “growth”. To them it is quite straight forward. Growth means more of everything material; more people, more infrastructure, more material production and more material consumption. They clearly do not comprehend or expect any end to this material growth outlook.

    The problem thus remains the same. Politicians, business leaders and necon economists still posit endless material growth for our system. The decisions which need to be made now to transition in a peaceful, orderly and planned way to a steady, renewable, and sustainable material economy are not being made. This seriously cuts down our space to make saving changes when the global emergency is upon us.

  22. Ivor
    April 27th, 2015 at 21:04 | #22


    As usual you are wrong. You created the dispute. The onus is on you.

    Most post-classical capitalist economists – not just Keynesians think that future growth is endless.

    200 trillion of debt, plus the trend, is the result of this belief.

    If there was a limit – it would be stated.

    Some US members of Congress have tried to limit debt – but without much success.

    The economic system burst through previously legislated supposed limits.

    The lack of a limit demonstrates the lack opf a limit.

  23. Megan
    April 27th, 2015 at 21:13 | #23


    I’m just throwing a thought into the mix, rather than making an argument…

    But, does “financialisation” fit into this “growth” question somewhere?

    For example, there is no reason why there should be any “limit” to the “growth” in house prices – as long as the price is disconnected from physical reality and is measured in bigger and bigger dollar figures (?).

    We could, and probably will, have our first $100 trillion dollar house at some point.

    As long as we measure growth (is that GDP?) in fictional dollars the sky is the limit, no?

    Like I said, just trying to reconcile ideas about “growth” and “limits”.

  24. J-D
    April 27th, 2015 at 21:23 | #24


    As usual you are wrong. You created the dispute. The onus is on you.

  25. Megan
    April 27th, 2015 at 21:31 | #25

    noun: dispute; plural noun: disputes

    1. a disagreement or argument.
    “a territorial dispute between the two countries”

    synonyms: debate, discussion, discourse, disputation, argument, controversy, contention, disagreement, altercation, falling-out, quarrelling, variance, dissension, conflict, friction, strife, discord, antagonism;

    That might help.

  26. Megan
    April 27th, 2015 at 21:37 | #26

    For example:

    Person X: The sky is green.

    Person Y: Can you prove it?

    I would say person Y “created the dispute”, even though it seems obvious that person X is wrong.

  27. Megan
    April 27th, 2015 at 21:51 | #27

    Or, in the present “dispute”:


    However the issue seems to me to be more the belief of capitalist Keynesians that future growth is endless and therefore, it is implied that there is no scarcity in the long run.


    There is no ‘belief of capitalist Keynesians that future growth is endless and therefore, it is implied that there is no scarcity in the long run’.

  28. Ivor
    April 27th, 2015 at 22:21 | #28


    There was no dispute until you said

    J-D :

    There is no ‘belief of capitalist Keynesians that future growth is endless and therefore, it is implied that there is no scarcity in the long run’.

    25 April.

    You have been floundering ever since and cannot even understand how capitalist economics (particularly its countervailing tendencies) is based on endless future growth.

    Perhaps you should just admit that capitalists do expect future growth to be endless.

    You may find that easier.

  29. Ikonoclast
    April 27th, 2015 at 23:07 | #29


    Genuine growth would have to be measured in inflation adjusted dollars. I think they do that. That said, there is a good argument that offical inflation does not measure all inflation, including asset inflation, fully. Financialisation can certainly play a role in making “wealth” and/or GDP appear to grow faster than it is in fact growing. There is certainly a category Marx called “fictitious capital” and which standard accounting calls “capitalisation on property ownership” or “tradeable paper claims to wealth. Shares are a good example.

    Now shares in a company called “Facelift” (a social networking site where people pretend to be prettier, smarter and more interesting than they really are) might have some wonderfully high capitalisation of say $100 a share. They are paying dividends of say $10 a share and all this wonderful new revenue is counted in annual GDP (I would assume).

    However, they have relatively few material tangible assets, they run on servers on contract and their computer programs are their only intellectual property, indeed their only property. While their site is popular and gains advertising the business model works. As soon as anything significantly bad happens (Facelift becomes seriously uncool or the advertising industry slumps in a recession) then suddenly Facelift slumps and is worth didldly-squat and has not even any assets to sell. Facelift shares drop near as dammit to 0 cents (worthless). All that apparent wealth vanishes and it is shown to be truly fictitious.

    In the “old days”, fictitous capital at least in the main was backed by real property, real factories and real machines. For many businesses this is still true. But for many other businesses now (in finance and other areas) this is now far from true IMO. There is plenty of “wealth” out there that is very tenuous now because it is all predicated on future (endless) material growth and many other fictions of finacialisation like the now infamous CDOs (collateral debt obligations).

    “Fictitious capital could be defined as a capitalisation on property ownership. Such ownership is real and legally enforced, as are the profits made from it, but the capital involved is fictitious; it is “money that is thrown into circulation as capital without any material basis in commodities or productive activity”. – Wikipedia.

    The present value of the shares is predicated on expected future income from future production. If these hopes collapse, the money value evaporates. So if the future turns bad, say from like climate change and limits to growth (now why would I mention those?) then massive amounts of fictitious capital and the debt finance that backs it will be written off. Everybody loses their shirts and skirts and takes a crewcut. But gee that will never happen will it? After all, the capitalist pudding is magic isn’t it? 😉

  30. Megan
    April 28th, 2015 at 00:05 | #30

    I wonder if these people think they have contrived a game of “musical chairs” where the music never stops but an ever-increasing number of kids get to join in the dance?

  31. J-D
    April 28th, 2015 at 07:01 | #31


    Perhaps you should just admit that you are unable to produce any evidence to support your disputed assertion. You may find that easier.

  32. Ikonoclast
    April 28th, 2015 at 07:52 | #32

    “We have seen… that marginal efficiency of capital depends, not only on the existing abundance or scarcity of capital-goods and the current cost of production of capital-goods, but also on current expectations as to the future yield of capital-goods. In the case of durable assets it is, therefore, natural and reasonable that expectations of the future should play a dominant part in determining the scale on which new investment is deemed advisable. But, as we have seen, the basis for such expectations is very precarious. Being based on shifting and unreliable evidence, they are subject to sudden and violent changes.” – J.M. Keynes

    This relates to my comments to Megan and also to the debate between Ivor and J-D. It amounts in the first instance to saying “the future is uncertain”. It also amounts to saying more, namely that capitalism does not deal with future uncertainty well. The “basis for expectations is very precarious” precisely because capitalism does not value, rate or assess future dangers or requirements at all well. It totally ignores the costs of long term negative externalities and cannot be dragged kicking and screaming to admit or pay these costs. The story of CO2 emissions is a case in point.

    “In conditions of laissez-faire, the avoidance of wide fluctuations in employment may, therefore, prove impossible without a far-reaching change in the psychology of investment markets such as there is no reason to expect. I conclude that the duty of ordering the current volume of investment cannot safely be left in private hands.” – J.M. Keynes

    Keynes also notes that finance needs tight regulation by the state. It “cannot safely be left in private hands.”

    Keynes, though a bourgeois economist is at least a realistic one in some respects. He is not totally divorced from reality like the neoclassicals.

  33. jungney
    April 28th, 2015 at 08:34 | #33

    Its about nuclear power and therefore automatic sandpit material.

    The Tokyo Electric Power Company (TEPCO), operator of the stricken Fukushima Daiichi nuclear energy complex, has been told to migrate 48,000 internet-connected PCs off Windows XP sooner rather than later.

    TEPCO was recently probed by Japan’s Board of Audit, an organisation that oversees the finances of Japan’s government and government agencies. The Board of Audit is interested in TEPCO because Japan is keen to see the company pay for cleanup of the Fukushima mess.

    The audit released in late March (here, in Japanese) therefore examines TEPCO’s operations in depth, the better to help it reach a state in which it can pay its dues.

    One of the things the Board found was that TEPCO operates about 48,000 PCs running Windows XP, and decided not to upgrade in order to save money. Upgrades may even have been deferred to 2019, according to this TEPCO press release from 2014.

    The Board of Audit has decided the upgrade needs to go to the top of TEPCO’s to-do list, on the grounds that the operating system’s insecurity makes hanging on to it a false economy (on page 101 according to the translation engine we’ve used). TEPCO has reportedly, according to The Japan Times agreed to comply with the Board’s very strong suggestion that an upgrade is a fine idea.

    XP support ended on April 26th last year and the Fukushima disaster took place in 2011. There’s no suggestion that the accident was in any way related to XP.

  34. Ivor
    April 28th, 2015 at 09:01 | #34


    200 trillion of debt, plus the trend, is the result of this belief.

    If there was a limit – it would be stated.

    Some US members of Congress have tried to limit debt – but without much success.

    The economic system burst through previously legislated supposed limits.

    The lack of a limit demonstrates the lack of a limit.

  35. Ivor
    April 28th, 2015 at 09:19 | #35


    Finanancialisation is a form of class struggle. Workers access finance at higher rates than capitalists, so a disproportionate share of social wealth arises.

    Capitalists are able to pass on the costs of obtaining finance to their customers. Workers cannot.

    Financialisation can grow without limit because it is just a form of paper handed out selectively by a Central Bank. As the real economy, ie number of houses, cannot expand at the same rate – the money relationship to houses must increase.

    Eventually we end up with trillion dollar loaves of bread.

  36. Ikonoclast
    April 28th, 2015 at 09:45 | #36


    This a reply to both of Ivor’s posts above. Generally speaking, I am in agreement with Ivor. Debt is issued in the expectation that it will be repaid. This is based on expectations of real production from investment providing an income stream to repay the debt. Thus the issuance of exponentially increasing debt must be based on the expectation (explicit or implicit) of exponentially increasing production for exponentially increasing returns. Ergo, capitalism is based on the expectation of endless growth.

    Now J.Q. and I have argued about the idea of endless growth and limits to growth. The outcome of the argument depends on the nuanced understanding of the term “growth”. But the day of reckoning is only postponed not abolished. If endless growth means endless growth in population and material production then it is clearly impossible on finite earth. That is agreed by all logical parties. If endless growth means endless growth in so-called dematerialised production (improved technology, knowledge, culture and services) then this kind of growth can very conceivably continue a long time after crude material growth ends.

    However, even so-called dematerialised production (along with substitutions) is only partially dematerialised not totally dematerialised (with respect to its contribution to GDP growth or some other measure). Even so-called dematerialised production requires some real basis for production meaning materials and energy. Then there is the issue of waste streams and what they do to the environment.

    So, even so-called dematerialised production does not promise endless growth in the very long run or maybe not even in the mere long run (say 100 years).

    It is true too that financialisation is another facet of class struggle. Workers wages were pushed down and then debt was pushed on them to maintain aggregate demand. This debt incidentally created much asset inflation, especially in the housing sector. These developments lead to the ever greater impoverishment of workers. It is also true that capitalists get finance at much cheaper interest rates. Workers are heavily discriminated against by the government and the capitalist system in all aspects be it interest rates, rights or even welfare. Per capita, the top 10% get far more welfare (government payments, tax breaks, superannuation breaks and other assistance) than the bottom 50%.

  37. Ivor
    April 28th, 2015 at 10:17 | #37


    $100 trillion is an astonishingly high number.

    however houses will sell at $100 trillion when rents are at $5 trillion (pa).

    So if we can rent a small flat in a country town for $10,000 pa

    It will rent for $5 trillion in 537 years time.

    More expensive property will rent for $5 trillion in 518 years.

    If past long-run Scottish city rent movements (3.8% pa) are any guide.

    Unfortunately each house may have to accommodate 1,000 people.

  38. Ivor
    April 28th, 2015 at 10:44 | #38



    Essentially, that is exactly how things are progressing.

  39. Troy Prideaux
    April 28th, 2015 at 11:35 | #39

    Ikonoclast :
    The present value of the shares is predicated on expected future income from future production. If these hopes collapse, the money value evaporates. So if the future turns bad, say from like climate change and limits to growth (now why would I mention those?) then massive amounts of fictitious capital and the debt finance that backs it will be written off. Everybody loses their shirts and skirts and takes a crewcut. But gee that will never happen will it? After all, the capitalist pudding is magic isn’t it?

    I’m assuming they’re rhetorical questions since that’s exactly what happened to provide us with the GFC – billions or trillions of these fictitious dollars disappearing into the cosmic ether. So, yeah, it’ll happen time and time again and I suppose central banks will continue to replace those lost “fictitious” speculative dollars with their own fictitious dollars via (expansionary) monetary policies to keep the fat cats fat (cough)… I mean to avoid economic collapse. It’s a reality I’m willing to accept (for now).

  40. John Quiggin
    April 28th, 2015 at 13:01 | #40

    Ivor and J-D. No more interactions between you please. That is, no replies by one to comments made by the other, and no reference to each other in other context. I’m sure you can find another venue to argue about who started the argument.

  41. David Irving (no relation)
    April 28th, 2015 at 13:12 | #41

    @John Quiggin
    They could take it outside, Prof Q.

  42. Ivor
    April 28th, 2015 at 13:18 | #42

    I would be very interested if any Keynesian or capitalist could indicate how stimulus both resolves whatever problem it was targeted at, and then (more importantly) is removed from the system so that debt does not increase after each boom-bust cycle.

    What happens when a government attempts to legislate for a limit on debt?

  43. Ronald Brak
    April 28th, 2015 at 13:42 | #43

    Ivor, what is a Keynesian stimulus?

  44. Troy Prideaux
    April 28th, 2015 at 14:20 | #44

    Ronald Brak :
    Ivor, what is a Keynesian stimulus?

    In the bad times governments spend and in the good times they save? That’s the general concept of Keynes isn’t it?
    Given the way federal politics seems to be heading in oz (where only populist changes/policies seem to pass both houses) the second part of the question could be something worth asking.

  45. Ikonoclast
    April 28th, 2015 at 14:22 | #45


    Well, I don’t want to carry the torch (or the can) for Keynesians or other capitalists, but…

    Within the extant system of RECD (Really Existing Capitalism and “Democracy”) or the mixed economy, there is a place in macroeconomic policy for government stimulus and government damping of the economy depending on the stage of the business cycle (bust or boom).

    Stimulus (a budget deficit by outlays being greater than taxes) can resolve the problem of inadequate aggregate demand. This is not to say it will always resolve the problem but it can resolve or prevent the recessionary problem in certain circumstances. The Rudd government’s stimulus during/after the GFC was a big element in helping Australia to ride out the GFC better than all or most other nations.

    The stimulus can be removed from the system when strong economic conditions return. This is done by running surplus budgets. However, your questions presuppose a number of things that are not necessarily true.

    (1) A government need not take on debt to deficit spend. It can but it need not in all cases. It can simply “print money” as the saying goes. Today this means simply spending more (electronically) in a budget than the tax receipts for a given year.

    (2) Government debt and private debt are qualitatively different in some important senses. We should not conflate them and assume they are exactly the same or have exactly the same macroeconomic effects.

    (3) Government deficit monies do not have to be “paid back” if they are “printed” rather than borrowed. They can be “paid back” (by a future surplus) but they don’t have to be. Over the long haul, government budgets in a fiat currency are in net deficit. Accumulative deficits outweigh accumulative surpluses. While the economy is growing (that problem again), moderate net deficits can simply increase money supply to keep it on par relative to total economy size due to growth and this should in and of itself have no inflationary effect.

    (4) Private debt does have to be paid back… erm, except in the case and bankruptcies and defaults. So here, too we find that debt does not HAVE to be paid back. Debts can be written off and the lenders (kicking and screaming usually) can take a haircut.

    There is no point in a government legislating a limit on government debt and/or government deficits. A fiat currency budget is a book balancing exercise but it does have real effects on the real economy and these real effects (on unemployment, inflation and general economic activity) are what counts not the mere figures in the national accounts. Neoclassical and monetarist economists fall for the reification fallacy (the fallacy of false concreteness). They reify money and believe it to be a real value in itself rather than just an accounting device for comparing (hopefully) real values of real goods and services and real capital (houses, buildings, factories etc.).

    It should be no surprise to Marxists and Marxian thinkers that some bourgeois economists (not all) fall for the reification fallacy with respect to money and almost anything else to do with political-economic phenomena.

  46. Ivor
    April 28th, 2015 at 14:51 | #46

    @Ronald Brak

    Assuming your question was in good faith….

    This is probably the best explanation.


  47. Ronald Brak
    April 28th, 2015 at 18:24 | #47

    Thanks for that, Ivor. But the link you kindly provided didn’t cover what you mean by, “…how stimulus both resolves whatever problem it was targeted at, and then (more importantly) is removed from the system so that debt does not increase after each boom-bust cycle.”

    What is this debt you mention and where is it coming from?

  48. J-D
    April 29th, 2015 at 08:25 | #48


    The present value of shares in a company is, as you wrote, predicated on expected future income from future production. But the present value of the physical plant owned by the exact same company is also (mostly if not wholly) predicated on expected future income from future production. If people lose interest in buying the goods that a factory produces, the value of shares in a company that owns and operates the factory will drop, but so will the value of the factory itself. There is a distinction between the abstract intangible shares and the concrete material factory, but it may not be as important–in the context of this particular discussion–as some people may think it is.

  49. Ivor
    April 29th, 2015 at 12:39 | #49

    @Ronald Brak

    But this is a different question.

    I do not think that stimulus (or debt) can resolve the problem it was supposed to fix.

    Keynes did not worry about this – quipping – in the long-run we are all dead.

    Unfortunately, we are living in his long-run death after having had stagflation and Thatcherism already imposed on us.

    Once capitalism necessarily destroys its money standard – and money is just paper or numbers – then debt (under a cloak of stimulus) is issued by whoever issues the paper or numbers.

    This is the Reserve Bank.

    Prior to central banking any producer could issue debt in the form of commodity notes (eg US tobacco notes) or Promissory Notes.

    Stimulus debt is not the debt a consumer accepts when they place a item on lay-buy. Stimulus debt expands the money supply, consumer debt just adjusts the timing when payments can be made.

    I am not a Keynesian, so Keynesians should explain what they mean by debt. I just state:

    It ain’t gonna work.

    Australian debt – $5.4 trillion dollars See here

  50. Ivor
    April 29th, 2015 at 13:20 | #50


    Obviously I am opposed to RECD and my considerations are outside this box.

    Assuming there is no expansion in the population then I cannot see how, structurally:

    strong economic conditions return.

    It is easy to see how strong economic conditions return from weather related recessions, or war-imposed recessions etc. but not recessions due to the structure of capitalism.

    The accumulation of capital PLUS fighting-off the declining rate of profit – creates a recession that cannot be relieved by a belief in the return of strong economic conditions.

    I equate “printing money” with “issuing debt”. Every bit of money is an IOU. However there is a form of debt that does not equal more money. This is debt where I undertake to pay a price over a series of instalments (lay-buy). If there is no interest charged for this petty debt – then it is not equated with “printing money”.

    If debt (either public or private) requires servicing, then it imposes on the rest of society. In this sense it should be conflated. Taking value from wages either as taxation or rates (to service public debt) or as a extra increment in retail prices (to service private debt) amounts to the same thing, structurally – feeding capitalism by reducing wages – increasing inequality. Debt just means our capitalists are play a three card trick.

    Increasing money supply to keep it on par relative to total economy size due to growth should in and of itself have no inflationary effect and is not debt. This is socialism.

    There is no reification fallacy once you recognise a concrete theory of Value. This is socialism.

  51. Florence nee Fed up
    April 29th, 2015 at 15:34 | #51

    Ivor what is the problem that you sees is being fixed by stimulus? The one you say will not work. I seem to recall that debt link to the Australian is seen as dubious by some.

  52. Ivor
    April 29th, 2015 at 15:48 | #52

    @Florence nee Fed up

    Whatever Keynesians claim. In general whatever macroeconomic instability is prominent at the time.

    The only thing Keynesians do not include is fixing up low wages. They leave this to the economy once it has supposedly had its magneto restarted.

  53. Ronald Brak
    May 2nd, 2015 at 13:58 | #53

    Tesla, the rather famous US electric car company, is now taking reservations for its 7 kilowatt-hour Powerwall home energy storage system. At current exchange rates it is $3,800 Australian dollars. This is major news for the Australian electricity sector. I am guessing they were hoping this sort of announcment was still a few years off. While it is not year available in Australia, and even Americans can’t get it at the moment, it does indicate what home energy storage will cost in the near future. It has a ten year warranty and apparently an extended warranty for 30 years can be obtained, so it will pay for itself for a very large number of households, even assuming significant extra costs for installation and a compatible inverter. And the killer app in Australia may be a combined solar inverter and energy storage system, which should largely eliminate the extra costs. It is clear that the electricity sector here is due for yet another major shake up as home and business energy storage starts paying for itself.

  54. Ikonoclast
    May 3rd, 2015 at 09:45 | #54

    The ABC reports “Economist John Adams calls for chess to be taught in Australian schools.”

    “Mr Adams has previously worked as an economics advisor to Liberal Senator Arthur Sinodinos.

    He has now been appointed as government relations director with the Australian Chess Federation and over the next year plans to conduct a research project drawing on a large international body of work into the positive impacts of the game on brain development.” – ABC

    Of course, I don’t know exactly what Mr. Adams said as reporters almost never get stories right due to mistakes and omissions.

    However, “Chess should be taught in schools” is a much too narrow concept. I would go wider and say that mental games should be taught in schools along with the mathematical and programming skills to explore how to automate these games. This total package would have a far better educational effect. Key games that should be taught are draughts, chess, go and computer RTS games. Not only human vs human games but AI vs AI games should occur where students write game programs which compete.

    Maths, including for example matrix mathematics, is a key component of game programming. The necessary maths concepts could be introduced along with the games and game programming concepts. The power of mathematics can be seen to come alive in intelligent game programming. I think this would engage some students much better in mathematics.

  55. Megan
    May 3rd, 2015 at 15:44 | #55

    I’d be pretty unhappy if I was in a union that paid millions of dollars in “commissions” – taken from my pay – to my corporate giant employer. It would be naïve in the extreme to imagine that such a union wasn’t fatally conflicted when it came to looking out for my interests.

    Australia’s biggest private-sector union pays major employers including Coles and Woolworths up to $5 million a year in commissions that help maintain its large membership, and influence in the Labor Party.

    The ALP’s largest union affiliate, the Shop, Distributive & Allied Employees Association (SDA) plays a significant role in social policy debates, its influence viewed as pivotal to marriage equality in Australia.

    The “shoppies” are ultra-conservative ultra-right and have huge power in the ALP.

    On the Gallipoli thread I described Australian unions as “fascist operatives”. I have previously said that I generally take “fascism” to be described the way Mussolini did (“fascism should more properly be called corporatism…”). “Operative” in this sense fits the following, Merriam-Webster, definition: “a person who works toward achieving the objectives of a larger interest”.

    Far from a “bizarre” opinion, it is at least arguable based on the evidence.

  56. Ronald Brak
    May 3rd, 2015 at 15:55 | #56

    It wrote 30 years above for some reason with reguards to the Tesla home energy storage system for some reason. It should have been 20 years.

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