THEORY OF POST-INDUSTRIAL ECONOMICS– Revision 4

Keith Hudson

[For those already interested the main revision is that of adding one new section –Hierarchical structure of society — so only this meed to be read.]

Abstract

The world economic system is only capable of running efficiently at one activity level depending on the size of energy inputs no matter what political leaders want or their economic advisors suggest. Whether the ultimate world economic activity will be significantly lower or higher than today’s level is impossible to say.

Contents

Introduction
Hierarchical structure of society
Principle of Least Effort
The accident of the Industrial Revolution
The motivation for consumer goods
Conclusion

Introduction

Beyond — or possibly beneath — man’s instincts for feeding, sexual activity and membership of a social group is his propensity for novel perceptions.  A constant variety is what keeps his brain active.  Without it, the less curious person falls asleep, while the more curous person falls into a meditative mode.  As to distribution, it is severely asymmetrical — a bell curve raked towards the less curious end of the spectrum but with a long tail towards the rarer more curious end. The rarer individuals are those who are more socially ambitious — within their own kind — and may be comprised of adventurers, sports people, artists, business entrepreneurs or scientists — the last formerly known as philosophers.

Hierarchical structure of society

The asymmetry is revealed in the hierarchical structure of all societies ranging from small groups througn to major nation-states or large multinational corporations. some early anthropologists of a more romantic left-wing persuasion a century ago thought they had observed some egalitarian groups but on more extensive familiarisation, or when in emergencies, or when observed by later anthropologists such turned out to be hierachical.

The difference between seemingly egalitarian groups and very competitive ones is only one of cultural style.  The culture is usually the product of many generations and is probably — when more is known about the new scientific subject of epigenetics — built up of emotive balances of behaviours taking time to be inherited more widely in a society.  Thus it is possible for two independent societies living in similar circumstance and with similar skills and mental conceptions to have very different cultures — but hierarchical withall,

In early man, an individual male had no choice but to remain in the society in which he was born whatever his skills or inclinations.  Many a genius would have had an innovative idea which was not taken up by the others of his group and thus died with him. This accounts for the immensely long periods, sometimes of tens of thousands of years, between innovstions, or even what seem to us to be modest improvements to existing innovations.

Man, as a social species, is ‘patrilocal’ in that it is the young females who travel out of her parental group to find a marital partner in order to avoid genetic in-breeding and thus the acquisition of serious mental and physical handicaps in the group. She will tend to choose a male in a similar culture and of a similar class within it, but given a chance to choose a male of higher social level will do so in order to maximise security for her children. This instinct is called sexual selection in distinction to, and additional to, general selection of the fittest. The upwards choice of the females tends to leave inept or handicapped males behind who tend to father no children and thus deleterious genes become extingjuish when they die. This is our form of quality control.

But in today’s post-industrial society, males, born with different genetic proclivities and living in a world bathed in a vast variety of information, will also be adventurous. Every male, from puberty onwards, depending on his particular talents will tend to seek groups of like-minded males and females. Whereas philosophers in older times would frequently walk for days , perhaps for a few hundred miles to be with other philosophers he may have heard about, today, increasingly, young people will travel from one end of the earth to the other to join a particular group.

This usually takes place between the age of puberty and adulthood at around the age of 30 in males, and 25 in females.  This is when the skills acquired in the rear lobes of the brain are developed further in the frontal lobes of the brain. Most individuals have usually found the sort of group they prefer to identify with — if the group accepts him or her, of course! — and most ambitions have largely been played out.  In the case of exceptionally creative individuals then ideas are nowhere near as productive as those before the age of 30.

The groups chosen by individuals vary both in skilfulness and in cultural style.  Groups with exactly the same objectives will still be hierarchical but might vary between those which are easy going and where the gradations in social order are thin and the signs hardly noticeable to the other extreme in which all the members of the group are fiercely competitive — and makes sure that everybody knows it!  Thus we can have groups in which there are only subtle signs of social ranking — the choice of a suitable word in conversation perhaps — or highly ostentatious ones — such as commissioning a luxury yacht that is just a few inches longer that a rival’s yacht! But note, however, that such rivals will be members of their own group. If necessary, when faced with a common challenge, they will act as one.

Principle of Least Effort

[needs revision]     seeking novelty.  novelty-seeking brain which can vary between passively entertained minds and the much rarer cases of those who are constantly theorising or trying out new physical and mechanical skills. Man is not different in this instinct from thousands of other animals species, only that we have creative minds to an extreme degree.  Whereas other animals’ creative activities don’t usually cause environmental destruction, many of ours do and sometimes on an epic scale.

Our economic system probably hasn’t caused too much ecological damage so far.  It’s probably repairable sooner or later either by ourselves or by evolution.  Although, strictly speaking, it must be regarded as part of the total world environment and depends upon it, our economic system can be regarded as a separate system apart from energy inputs from the sun.  Solar radiation sustains all the environment, whereas, particularly since the industrial revolution, it is necessary for only part the modern economy — agriculture.

Our economic system, being a physical system, is subject to all the known laws of physics in that, at any given level of energy inputs to keep the system going, it seeks to shed as much energy as possible.  In thermodynamics this is known as maximising Entropy, or the Principle of Least Effort to keep the system going.  Excess energy, or waste heat, is shed to outer space on cloudless nights. The Principle of Least Effort means that, at any given level of energy inputs to keep it going, the world economic system always tends to one activity level no matter what policies or strategies may be applied

The accident of the Industrial Revolution
No economic historian can give an adequate answer to how the industrial Revolution (IR) actually got started with cotton spinning in Manchester at around 1780 and grew explosively in England in the early 19th century.  By imitation, this was followed almost as explosively by France, Belgium and Germany in northern Europe in the mid-19th century, shortly followed by America.

The reason why IR began in Manchester and nowhere else where they were importing raw cotton (for example, Bristol, London and other ports in Europe) and exactly when it did is difficult to describe because there was a temporary confluence of many different factors which need to be given their relative balance.  All the following seem to be crucially important — but there are probably more I’ve left out.  :

1. A surging population of redundant people in the countryside in the latter half of the 18th century able to fill as many factories as could be built in Manchester and nearby; 2. the availability of a domestic middle-class market for cotton clothes (the woollen, silk and linen interests having persuaded the government to put a high tariff on the import of coloured cotton cloth from India in 1700);

3. the suitability for growing cotton in plantations in southern America and the West Indies  and the availability of millions of slaves from Africa to do the work; 4. the availability of many water mills (to drive factory belts) in northern England (to be followed quickly by early steam engines, already being developed in the coal mines);

5. the availability of  many country banks (not available in other northern European countries due to war-torn history) and the proximity of Scottish banks who advised English bankers to widen their depositor-base; 6. a veritable stream of Scottish inventors (trained scientifically in four Scottish universities) coming south to a more prosperous England.  (At the time, England only had two universities, Oxford and Cambridge, and they were little more theological seminaries little science;

7. the availability of a large and powerful navy (the largest in the world already after recently fighting the French) used to protect foreign markets from other countries’ exports; 8. the availability of large numbers of village-based weavers in the region able to take up increasing quantities of cotton thread from the northern factories (before weaving factories started to be built in the 1830 and ’40s);

The above will do. Accidents continued to be useful in making sure that the IR explosion could be continued.   There were other lucky accidents of access to coal and iron ore from which the railways could be launched and steel ships later in the century.  Railways meant that the coal industry could be vastly extended for export sales. By mid-19th century science started increasingly with the development of electricity and the telephone.

England was ready for industrialisation in the late 18th century but not necessarily in the exponential way it actually happened. There were sufficient numbers of blacksmiths, engineers and carpenters in all the towns and the larger villages of England to have got the ball rolling — albeit at a much slower pace. But once the SR kicked in during the latter half of the 19th century we’d probably have developed all the consumer goods that we have now. And so would several other countries which, today, are economically advanced.  A larger and more even industrial dispersion might well have meant that, financially, the City of London wouldn’t have attained the almost complete monopoly over international finance that it did by the late 19th century.

The motivation for consumer goods

For the first three decades what drove the industrial revolution initially ever faster were (a) the available open markets at home nd abroad and (b) hundreds of thousands of displaced people from the countryside with no other livelihood except the factories.  But cotton spinning was mainly for women and children and they could be exploited for six days a week labour for 12 to 15 hours a day. Yes, they had relatively modern brick-built and slated houses, heating was cheap and they could afford minimum food and clothes but the main motivation was simply survival.

By the 1830s. moves were afoot by Liberal-minded aristocrats and land-owners in the House of Commons and fears of Conservative-minded MPs that they might be smothered in their beds by rioting crowds and a revolutionary situation developing here — as were occurring all over Europe — plus the colossal profits being made by cotton spinning — life began to ease slightly all round. Workers had a little more money to spend. A second set of clothing for Sunday best, and a few pennies every week for the new Monitor Schools (also known as Victorian Schools) could be afforded plus the odd trinket that served as housewives’ first status good, such as a Wedgewood pot.

Status goods and services could only be affordable by the aristocrats and rich.  As far as goods were concerned they could, one by one, be substituted by mass produced equivalents, successively becoming cheaper and reaching lower social levels as production runs became larger. By the mid-19th century, the new middle-class could start to afford domestic servants.  All this meant that most people could aspire to go upwards socially and did so.  This would have been absolutely impossible in the previous agricultural era.

The modern status goods in advanced countries are pretty well fully comprised by a house, car, home furnishings, utility services, entertainment, personal ornaments, hobby activities and travel.  These are all public manifestations of what a person considers his social status to be. There don’t seem to be any more goods or utility services that aristocrats and the rich typically possess — albeit of higher-priced brands — that the average wage- or salary-earner doesn’t possess. Furthermore, the typical aristocrat and the very rich have as busy a working week as the average person.

What puts the tin hat on it, however, is that the large consumer goods manufacturers have no more consumer goods on their drawing boards.  There’s a lot of talk of domestic robots but then there has been for 50 years past/ It would be very surprising if they’ll  yet be found in the home or tending the garden in 50 years’ time.

What will drive the consumer in future years and take up an increasing amount of his income is medical and educational services — existential rather than status. Demand is such already that their price is rising steeply.  As industrial automation continues to make consumer goods and utility services more cheaply,  post-industrial services will become more expensive for two reasons.  The first is that increasingly high-level training for professional providers is necessary. The second is that higher-level services increasingly tend towards one-to-one situations for best results in both training and in delivery to customers.

Although the daily energy required by an advanced  professional doesn’t compare with that of a machine-tool making goods, the many years of training necessarily means that matters of invesment are problematical.  Parents will pay as much as possible for the education and health of their children and themselves.  But who will pay for basic scientific research?  Industries can’t afford to do so — only relatively trivial product development — and, with declining profit margins due to increasingly fierce global competition. the cost of funding research can only be left to governments, which already carry out a great deal in the advanced countries.

Conclusion

Advanced governments will therefore have to become increasingly efficient in order to afford funding for basic scientific research, the sine qua non of tomorrow’s world. This will mean shedding many functions that they now carry out == which will become all the more intentional as the Principle of Least Effort finally starts seeping into the consciousness of government politicians (hopefully more scientifically educated in future years). Apart from territorial security and basic scientific research, advanced governments will be wanting to leave alone anything that impinges on the economy and leave it to business.

What is also implied with this is that government that don’t fund scientific research are not going to do well at whatever optimal level the world economy settles towards in due course. The relationship between the dozen or so advanced nation-state and the 190 undeveloped countries will remain much the same as they have been since about the 1930s.  Their standard of living will remain relatively low until they reduced their populations enormously unless a few of them can discover a niche in which advanced scientific research is not yet carried out and high-value innovations traded with advanced countries.

This is not to say that all those countries that presently call themselves advanced will necessarily remain so.  It’s up to each of them as how much it can dispense with non-governmental activities and devote more taxation towards scientific funding.  Whether  world economic activity, when Least Effort, will be significantly lower or higher than today’s level is impossible to say.

2 thoughts on “THEORY OF POST-INDUSTRIAL ECONOMICS– Revision 4

  1. Keith, you wrote in the introduction to this piece, “Whether the ultimate world economic activity will be significantly lower or higher than today’s level is impossible to say.”

    I think it is safe to say that world economic activity trend will continue to be what it has historically been. For ever since economic activity started (say 50,000 years), it has been on a monotonic increasing trend. It is possible but highly improbable that at some future time the trend will stop or even reverse. Certainly, a global thermo-nuclear war will bring world civilization to pre-stone-age levels of economic activity. But barring such man-made or natural calamity (a 100-mile wide meteorite strike), it is inconceivable that economic activity will not continue to do what it has done for so long.

    1. Atanu,
      Fir any given energy input it is clear that there has to be a limit to its activity. Otherwise it is a perpetual motion machine. In a purely physical system internal friction will rise. In the world economy we not only have physical constraints — e. g. .limits to the exports of mineral resources from a Third World country either because it runs out or because the recipient countries don’t want any more or don’t want higher quantities* — but we also have limits due to Third world counties’ inability to produce, and thus trade, innovations because of lack of basic scientific research. They will have been crowded out of all possible areas that await research.

      (*I can see the last happening significantly in future years once carbon-based materials [synthetic DNA- and synthetic protein-based] start appearing on the scene and replacing metals.}

      I think our subjective judgements about economic growth have been greatly distorted by the extraordinary growth during the industrial revolution from 1785 to 1985 — when the creation of credii started getting way out of hand. The average economic growth during that period was about 2.5% p.a. but there were brief periods of 4%. China was even able to reach about 9%. These are the sorts of figures that economists and financial journalists carry in their heads as being normal. But they’re far from normal. The IR was a fluke, as I try to show in my theory. Before 50,000 years ago successive improvements to existing innovations (e.g. flint axe-heads) took thousands of tears.

      After 50,000 years ago until civilization are still talking of of hiatuses of thousands of years. The transition of the atlatl to the bow-and-arrow took at least 5,000 hears. Since civilisation, the innovation of high-yielding, non explosive grain took two or three thousand years. Altogether , economic growth until global sea trading at around 1500 economic growth would have been unrecordable. Some economist (whose name I can’t remember) calculated that economic growth in this country between 400 (when the Romans left us) until the Renaissance was about 0.5%. In this country it might have reached 1% in the latter part of the 18th century.

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