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Nothing Fails Like Success

"He who predicts (he future is a liar, even if he is right. " —Arab saying

WITH THAT PROVISO FIRMLY IN MIND, here is an updated look at the economy for the next four to five years.   There is widespread bearish sentiment around.  Even Alan Greenspan, economic advisor to several presidents, has said that those who consider a depression likely can "no longer be put into the bizarre or kooky category."   Two years ago, in the Summer 1980 CQ, my article "What's Economical?" said there could be a credit collapse in 1983 or 1987.  Those who now say that we are going into a depression say it will happen as early as 1983.  Others talk about a "Roaring Eighties on Wall Street."  So what is happening?

Overall, the economy is entering more deeply a transitional period in which it is peaking and another type of economy is emerging. To understand the daily epiphenomena of the economy, you need some rough contextual way of perceiving and comprehending events. The reason you almost need a degree in economics to read the newspaper is that there are three schools of economics doing battle on the front and op-ed pages of the dailies as if the economy were a new sport.  And those three schools have liberally introduced their jargon into the language, such that the radio can go from an item on daily mayhem to the Ml-B without batting a transistor.  The three schools — Keynsian (demand-side), monetarist, and supply-side — are vying for your attention as to the context in which you should understand daily economic events, in order to gain your support for their favorite economic nostrum.
To summarize these three in a small space is a disservice to all.  Each economic school has volumes devoted to it.   Monetarism and supply-side have never been fully tried or exercised; they still remain more theory than practice.  Keynsian economics, having had the longest time in practice, is a popular kicking post.  Many ills can be conveniently attributed to it, which explains in part why Ronald Reagan was so successful in winning his "economic" campaign for presidency.   He ran against Keynes.

KEYNSIAN ECONOMICS rests on the will of the government to be arbiter of demand through the manipulation of money and credit.  At the heart of demand-side policies are assumptions about what makes an economy tick.   Keynes asserted that production is ultimately determined by consumer demand, and that in a healthy economy, demand grows, production expands, and wealth increases through reinvestment of savings into new capital, equipment, and factories.

Keynes maintained that this process could become derailed: consumers could cut back too sharply on spending and save "too much"; production could fall, causing further spending cutbacks, and the economy could get into a hole too deep to extract itself.  The role of government would be to raise spending without raising taxes, or to lower taxes without decreasing spending.  Either would create deficits in order to stimulate demand. Keynsians have long taken credit for getting the U.S. out of the Depression by inducing Franklin Roosevelt to undertake large government deficits.  Detractors say World War II was responsible.  On the other side of the coin, to correct the excesses of growth (a too-rapid rise in spending causes inflation) the government forces banks to restrict credit by increasing their reserve requirements, effectively squeezing out the supply of money to cause a cutback in spending and inflation.  As unemployment sets in, the policy is reversed, starting a new cycle of spending, production, and employment.

MONETARISTS take a rather acidulous view of such activities.  Monetarists maintain that manipulation and expansion of the supply of money beyond the actual expansion of the economy itself creates a base of inflation which slowly but inevitably creeps through the economy and drives it to ruin.   They point to dozens of historical hulks to underline their point, and point to American (and worldwide) inflation during the last decade as the result of Keynsian practice.   They maintain that the government should establish steady and consistent monetary policies.   A stable currency would encourage businesses and investors to make long-term capital commitments, ensuring both growth and prosperity.

For years, Keynsian and monetarist schools have fought, their arguments divided neatly along political lines.   Democrats argued for more government, higher taxes, and more economic intervention.   Republicans argued for balanced budgets, a stronger dollar, and fiscal integrity.   Keynsians were accused of being indifferent to inflation, taxes, and enterprise.  Monetarists were accused of indifference to unemployment, poverty, and suffering.   Recently a third argument has entered, that of the supply-siders, who say, with justification, that neither monetarists nor Keynsians seriously considered or understood the very dynamic whereby wealth is created.

The fact is that no economic
school predicts human or social
behavior, and, even more telling,
none provide for motivation
other than self-interest.

The SUPPLY-SIDERS point out that production is not increased unless creativity is allowed to flourish, incentives are commensurate with entrepreneurial risk (the source of new wealth, we are told), and tax policies stimulate technological innovation.  Accordingly, our fundamental economic problem is not inflation or unemployment.  Rather, it is falling productivity, reduced emphasis and funding of research and development, inappropriately speculative investments engendered by inflation, an overweight government sucking our lifeblood dry, an underground economy that produces little and consumes much without contributing to public services, rundown manufacturing facilities, and the like.   In other words, we are producing an insufficiency with inefficiency.  The supply-siders want — through tax cuts, savings, and capital investment — to unleash the latent "creative force" of capitalism to restore growth and prosperity.   In this advocacy of a more laissez-faire capitalism, supply-siders have found a champion in Ronald Reagan. And with his support, they have not only taken over government policy in taxation and regulation (a la James Watt at the Department of Interior) but are trying to take over the language in equating the commonwealth with an "unremitting cultivation of the supply of new goods."  Such unremitting cultivation used to be known as greed and was placed closer to avarice than to generosity.  We owe a special debt to supply-siders for transforming a base act to an uncommon virtue.

In supply-side literature, all criticism is saved for the government, which is treated as an entity divorced from the pattern of our lives. The real thrust of our lives as a society is not questioned or even  doubted.  According to George Gilder,* our lot consists of the "struggle of normal citizens" and it is in fact the world out there,  and the tinkerings of our government in particular,  which are causing you and me to be dispirited, not invest properly, have the lowest savings rate in the western world, speculate, and moonlight in the cash economy.  Supply-siders see economic growth as the means to vanquish the demons of inflation, high debt, unemployment, and high taxation.

Underscoring the supply-siders' rationale for massive tax cuts is the Laffer Curve, which has become a sort of flying buttress of the supply-side cathedral.  The Laffer Curve is a syllogism.   Its major premise is that there are two types of taxation that produce zero revenues — no tax and 100 percent tax.  The latter, by squeezing out all private--sector economic activity, is ultimately as fruitless for government as the former.  Thus, high marginal tax rates (40 to 50 percent for most taxpayers before Reagan's election) depress economic activity and reduce potential government revenues.   The remedy is to reduce taxes and to stimulate savings and investment, which would increase economic activity and in the end raise government revenues and salvage the budget.  Deus ex machina, Mr. Reagan has arrived to hft us via supply-side economics from our own economic muddle just before we step off into the abyss of muddleheaded socialism.

The fact is that no economic school predicts human or social behavior, and, even more telling, none provide for motivation other than self-interest.  Keynsian economics did not predict or have treatment for the inflation and unemployment that occurred in the mid-Seventies.   Monetarism has not worked in the hands of the Iron Lady, England's Prime Minister Margaret Thatcher, and supply-siders cannot adequately explain why corporations are taking their new tax cuts and squirreling them away.   Real capital spending has fallen since the tax incentives were put into place last year.

All three schools see the economy as having a systemic problem.  They claim that what is wrong is within the system, not exogenous to it.  I use the biological term exogenous to precede a metaphor.  Think of the three schools of economic thought as schools of medicine, three doctors who have among them a patient sick and getting sicker.  One doctor is an allopathic practitioner, one a homeopath, the other a naturopath.  The patient has shortness of breath, anemia, a complacent immune system, and is generally rundown.  While there is some agreement about the symptoms, there is none about cure. True to their education, each doctor argues for a different remedy.  And each is "right." What you and I know is one extra fact, that the patient lives near Love Canal and has been exposed to toxic wastes for over a decade.  We need not be doctors to have a contextual knowledge about the patient that far exceeds that of the experts.  Although we could not treat the symptoms, we would urge the patient to move.

The economy can no longer
sustain steady and stable
periods of prosperity, and it will
not until it has made the transition
from the present mass economy
to a new economic order.

Similarly, our economy is not a closed system.  Since the goal of each school is growth, it is important to remember that economics often equates maximization with optimization — that one more dollar is better. What we are seeing in major industrial sectors of the economy is a change from maximization to optimization.   This change is originating largely with consumers and tight money, but it is being opposed by industry and the government.  Unequivocally, I would say that the automobile, housing, and related industries have permanently peaked, that they will never again see the sales, production, or profits of the Sixties and Seventies.   In both homes and cars, people are looking for smaller units that are less energy reliant and more durable.  This means that whether they buy a foreign car or retrofit an existing home, consumers are permanently changing consumption habits.  This pattern will roll through most of the major industries in the United States during the next two decades, even the computer industry.

On the face of it, this is not good news. It is what all three economic schools are trying to reverse.  Maximization means to have more goods produced at a greater rate by fewer people, which allows more people to consume them at a greater rate.  But we, as consumers, are starting to act out of the need to optimize — to buy fewer goods but to buy goods that are made with more intelligence and care than products we formerly purchased.  This is, in fact, good news, because it will mean more people employed at producing goods (and services) which have a more lasting utility.  This is a profoundly more healthy economy.   It does not produce growth according to normal economic indices, but it does produce a vast internal differentiation of American industry, which in turn can produce most of the beneficial effects that growth advocates are striving for.

We are not seeing systems failure, correctable by economic machination or tinkering, but system distortion.  The attempt at over-maximization is in conflict with social and individual adaptation.  Economic machination will not eliminate but only change the nature of the problems that exist.   Federal Reserve Chairman Paul Volcker's efforts to wring inflation out of the system are producing deflation.   Inflation is painful, but deflation can injure, and there is no longer a middle ground left.   We will have either inflation or deflation; the economy can no longer sustain steady and stable periods of prosperity, and it will not until it has made the transition from the present mass economy to a new economic order.

The peaking of the mass economy is a difficult idea for economists to accept.    To the nineteenth-century zealots in the Reagan administration it is laughable.    It is not even mentioned in any conventional literature save for the small school of steady-state economists scattered about.   Part of the reason it is difficult to conceive of is that we are insulated from our own economic impact, from even our own consumption.    As we go from bed to shower to breakfast to car, we do not have the slightest idea of our impact upon the natural systems of the world or its natural resources.  And just as important, we do not realize that more and more embodied energy and resources are required to produce the same piece of toast, the same heat and water, the same cotton shirt, the same tank of gas. When E. F. Schumacher said we eat oil, he wasn't kidding.  A pound of fish requires a pound of oil to catch.  Take away the oil, no fish.  Raise the price of oil, raise the price of fish.  Since fisheries are being depleted, and per capita catches are falling every year, fish will become scarcer, and any marginal increases will be necessarily costly and resource intensive.  A simple story, but one repeated in almost every area of the economy.

A wonderful example of "mass economic" philosophy in advertising was provided by Ingersoll-Rand in the Wall Street Journal in February 1982.  The advertisement showed a ceramic orange-juice squeezer on which one-half of the Earth was impaled.  The copy read "Squeeze a little harder," followed by, "On the surface"it rfta^ appear that our natural resources are running dry, when it's only a matter of applying human inventiveness, knowledge and capabilities to the problem."   Down the fluted indentations of the ceramic squeezer flowed cataracts of coal, minerals, water, and oil.  Whether this indeed reflects Ingersoll-Rand's corporate philosophy or is simply the cute ministrations of their ad agency, it does reflect the nature of the problem with resources.  To obtain more resources will require us to work "harder than ever before" as well as inventiveness, creativity, and intelligence.  Working harder to obtain resources, whether by drilling deeper or farther out to sea, by complex technological recovery systems, or by more thorough methods of resource utilization, will in turn require capital, people, and energy.   In other words it will be expensive.  And though it will ensure on the short term adequate resources, it will also ensure that their cost will rise disproportionately to the actual increase involved.

For example, Wes Jackson at the Land Institute in Kansas has calculated that a pound of feed-lot beef requires 90,000 pounds of water.   Two truckloads.   We are running out of water in the western United States. Aquifers are being emptied, rivers salinized, and dams silted up.  Thus new water is far more expensive than "old" water.   It requires more energy, deeper wells, expensive water projects, maybe even, as is occasionally proposed, the diversion of the Mississippi.   In every area of the economy, real production increases are requiring greater investments of capital and resources, a process which either reverses productivity gains or increases the relative change in values among labor, capital, and resources.  This process means that the cost of money (interest) and resources goes up relative to wages.   While this is not true of all resources, it is particularly true of the one critical resource — oil.

Because real increments in production require greater impact on resources, and secondarily on capital, the demand and growth of debt has far exceeded the growth of the economy overall.   Higher debt has raised operating expenses of corporations, reduced profits and cash flow, depressed their values in the stock market, and in turn required them to borrow more heavily to grow at all.   Individuals have been encouraged to imitate institutional behavior, and they have also taken on considerable amounts of debt since World War II.   For our present debt burden to not exceed manageable levels, we would have to grow at least 4 to 5 percent per year in real terms, a rate that is only consistently achieved by one developed country, Japan.   Whereas Japanese productivity rises year after year, and ours stagnates, remember that the Japanese have not achieved our overall rate of productivity.  America is still the most productive labor force in the world, and while it might be soon eclipsed, the peculiar kind of

A vice-president of Bechtel
Corporation recently said that
Harvard Business School is
bankrupting the United States.
More accurately, we are
bankrupting ourselves.  It is not
our economic system that is
bankrupting us, it is our value
system.  Harvard is just doing
the accounting.

economic anomalies that exist here are showing up partly because we are indeed ahead of the rest of the world.  And that means we have to face the implications of our overall growth sooner.  One of those implications is increased debt and very high interest rates.  The only ways interest rates can go down are through either deflation (read economic collapse) or inflation and hyper-inflation (read delayed economic collapse).  Otherwise they will remain high because the demand for capital grows disproportionately in a mass economy that starts to slow down.  This implosion, the slow reduction of growth into negative rates, has a punitive and difficult side.

Normally an economic slowdown would mean a collapse of interest rates.  As businesses cut back, they place smaller demands on capital markets.  As spending decreases, savings increase, making more money available.  But in this case we are facing not a temporary slowing of overall growth but a permanent one. The underlying structural strength of the mass economy is weakened, its recuperative powers severely hampered by its reliance on excessive resource consumption for marginal growth.

Thus we are in the unusual position of having interest rates stay high while the economy is rapidly declining.  This places an even heavier than normal demand on businesses (forcing many to illiquidity more quickly than otherwise would be the case) and makes any sort of real economic recovery almost impossible.
It is as if our hugely successful growth were a pact with the devil, and that now that our growth is largely over, the devil has come to collect.   The collection is a cycle in which debt has to be monetized either through increasing the money supply, thereby reducing the debt temporarily in real terms (while increasing its rate of growth), or by payment which drains the lifeblood of the mass economy until it is moribund.   This will occur through high interest rates, and the painful irony of high interest rates is that they ensure, almost guarantee, that the larger system resists adaptation from a mass economy to a healthier economy. Given the discount rate of capital, any investment in the future is worth very little in five years.

Using discounted cash flow analysis, a technique promulgated by Harvard Business School to show the "true" return on investment in an environment of high interest rates, long-term capital projects aren't worth building.   Whether the project is a windfarm, reforestation, or a nuclear power plant, it

Individuals will invest in
their own personal health,
an investment which has no
positive rate of return.
Why can't a society do this?

simply isn't a "good" investment.   Using the present discount rate as the rate at which capital is losing its value, assets purchased today have little value in five years.   If it takes five years for an asset to come on line (a very small amount of time in the energy business), then a five-year investment is not prudent.   It is a better investment to loan capital to a corporation at the high interest rates and let the corporation liquidate itself into your account.   A vice-president of Bech-tel Corporation recently said that Harvard Business School is bankrupting the United States.  More accurately, we are bankrupting ourselves.   It is not our economic system that is bankrupting us, it is our value system. Harvard is just doing the accounting.   The extraordinary gap between our wants and our needs has become so great that no economic bridge or system can effectively span it.

The reason a large-scale renewable energy investment is not economical is because of monetary maximization.  Now that high interest rates and a decade of inflationary experience have taken hold, we are all maximizing our money by placing it where it will earn the highest interest rate.  Projects that would make us less reliant on nonrenewable resources are difficult to finance.  No group, pension fund, insurance company, or venture capital group will even consider an investment that does not offer maximal returns when measured against risk.  As individuals we decide to place our money in banks, funds, or pools which offer the highest and safest return. Institutional investments reflect our prudence (indeed, they are guided by the "prudent man" rule), and in a time when money is rapidly declining in value, our anxiety is ever-heightened, reinforcing prudent maximization.

In more normal economic times, the risk/ reward impulse toward maximization has been a fairly effective way to allocate capital in a free market system.   In a peaking economy it is maladaptive and therefore self-defeating. The only place where you see optimization of capital rather than maximization is in individual behavior.   People will spend their money in intelligent ways which ensure their own long-term well-being.   Individuals will invest in their own personal health, an investment which has no positive rate of return. Why can't a society do this?   Again, because we can and do act differently as individuals than as institutions.   The split in our society starts with ourselves.   At the same time, as long as our monetary system is fleeing its un-

The economy no longer proceeds
rationally from event to event but
lurches from theory to theory.

payable debts, money will be "maximized," earn high interest rates, and not be used to create bridges to a sustainable economy of more enduring proportions.
This is important in assessing the economic climate we confront.  What will happen depends as much on politics as on events. The economy no longer proceeds rationally from event to event, but lurches from theory to theory.   At this writing (March 1, 1982), the course of the world economy is heading rapidly toward full deflation.   Reaganomics and the contraction of the world economy have caused prices for almost every commodity to plunge.   The most interesting and by far the most serious price drop is in oil.   It has been conventional wisdom for the past seven years that it was the "tax" of OPEC oil increases that caused western economies to stagger through the latter part of the Seventies.   It was assumed that if oil and energy prices could be reduced, we would once again have a booming economy.   We may have a chance to prove that right or wrong.

Oil prices are dropping, but instead of bringing prosperity, a severe drop could, more than any other single factor, plunge the world economy into a classic deflationary period of financial collapse, high unemployment, illi-quidity, and widespread business failure. Unlike inflation, deflation can gather momentum with startling speed.  At this writing, the OPEC countries are producing more oil than can possibly be consumed by importing nations, and the difference between production and consumption is close to 3 million barrels per day.  The price at which oil is sold is an agreement held together with gossamer.  The Aramco partners (Exxon, Texaco, Mobil, and Standard of California) are required to take 5.6 million barrels of Saudi crude per day, and although they are continuing to do so, this far exceeds their needs for imported oil. Although some of that oil goes to other foreign markets, the excess is not being absorbed.  Meanwhile Iran and Iraq are talking about bringing their production back to higher levels.

The problem with a substantial drop in oil prices is that it could force some of the world's major oil companies into illiquidity and close to bankruptcy.  To stay liquid, many of the oil companies may have to borrow heavily.   Many have already borrowed heavily, pledging their oil as collateral.  With prices dropping, these loans become marginal. Other companies, Hke U.S. Steel and DuPont, have purchased oil companies (Conoco, Marathon) using borrowed capital; the value of these purchases would drop dramatically in oil price deflation.  The cancellation of large-scale capitalization projects would cause contraction of many of the oil companies as well as reduced need for steel, coal, and heavy equipment.   The one major sector of industry which has held up remarkably well during the past decade has been the energy sector, and if prices were to collapse, it could become as sorry as the auto industry.  Concerns about windfall profits would quickly devolve into legislation about how to help the oil companies.   If prices drop too sharply. Congress may very well slap a $10/barrel tariff on imported oil in order to raise revenues and "protect" our domestic oil industry.  This would make American products more expensive in world markets, a perverse sort of protectionism that would damage our chemical, textile, and fertilizer industries.

Cheap oil would make a Chrysler of America. With cheap energy, we would probably abandon long-range planning.   This is what happened to Chrysler after the initial price shock of 1973-4, and it is one of the reasons Chrysler built large cars instead of small and couldn't economically adjust to the second oil price rise* in 1979.  The oil intensity of our economy would rapidly increase.  Even coal would be uncompetitive, and virtually all renewable sources of energy would be "uneconomic."  This would delay or kill many of the alternative energy projects that are presently on the drawing board or in construction, and it would make the United States even more vulnerable to the inevitable reduction of world oil reserves.

Oil-price-caused deflation is not an inevitability but a strong possibility.   If it begins to happen, it could trigger a major financial collapse, either in the savings and loan industry or in money-market funds.  The S&L industry has between two and three years' worth of capital before it is technically illiquid at present interest rates.   Large oil company borrowings would raise interest rates, squeezing them harder and more quickly.  Money-market funds on the other hand are essentially unregulated demand deposits which are rolled over rather routinely.  Comprised primarily of CDs (Certificates of Deposit), corporate lOUs, and government securities, they are vulnerable to a "run" just like any other financial institution.   Although they have short maturities, were one or more money-market funds to show real share losses due to a large-scale corporate default, the ensuing withdrawal of capital by individuals could exceed their ability to rollover their debt, and in turn cause severe liquidity crises at banks and businesses. All of these are possible effects of deflation.

Since the economy is in part a political decision, the other alternative is what I would dub an "eerie boom."  After a gloom-and-doom spring and summer, interest rates might fall, and an economic recovery could begin which might carry us some two, maybe three, years.   It is eerie because, during this period, none of the basic structural problems of the mass economy would be dealt with.   It would be business as usual, though a dispassionate view would indicate that even more serious problems lay at the cycle's end.  Given the resilience of the American economy, as well as the fact that almost everybody is turning bearish these days, the eerie boom scenario seems likely.  Most severe economic downturns are not preceded by bearishness.  They are more surprising and have shades of panic. At this writing, it seems likely that the industrialized economy will have another fling with growth, but it will be a terribly expensive growth in terms of the underlying long-term health of the economy and society.

If this does occur, inflation will start to heat up within one or two years, and we will ex-

It seems likely that the
mdustrialized economy will have
another fling with growth, but it
will be a terribly expensive growth
in terms of the underiying long-term
health of the economy and society.

perience the whiplash effect of a rapidly oscillating economy.   Inflation a second time around will be virulent, partly because of people's by then entrenched cynicism, and partly because there will remain a core rate of inflation the world over from the peaking of the mass economy.  Such an expansion of the economy can only occur given a considerable expansion of debt, an expansion whose rate of growth far exceeds that of the economy itself.   This expansion is already sitting within the 1983 federal budget and is presently reckoned to be at least $700 to $900 billion within the next four years.  The only place this new money can come from without ruining the economy for a decade to come is the government itself.  We have seen Reagan reverse policy on most of his utterances, and it is reasonable to assume that, when push comes to phobia, the view of the economic chasm that lies ahead will cause the executive branch to put extreme pressure on the feds to expand the supply of money — unless Reagan's wistful attitudes about laissez-faire capitalism continue to blind him to the fact that the economy has become a political decision, in which case we could easily fall into deflation while he chops wood and rides horses.

Both deflation and eerie boom point to unavoidable underlying problems of the economy.  Our success may be our failure. The golden age of industrial America that began a few years after World War II and ended in 1973 has deeply ingrained a habitual pattern of existence that absolutely prevents us from economic change and adjustment. As recipients of goods which are transforms of embodied energy and of a system that until recently had consistently produced more stuff with fewer people because of massive substitutions of fossil fuel, we are so cozy that the system's peaking and inflection shake our economic and social systems to their foundations.  The price of oil can go up and down like a yo-yo without changing one basic fact: new oil costs 15 to 30 times as much as old oil.  And even including the recent substantive changes in oil intensity in post-industrial nations, we may see daily energy use double from 1980 by the year 2000 to nearly 140 milUon barrels of oil equivalents.   This energy, wherever and however it is derived, will be decisively more expensive than the actual incremental production.  In other words, raising world oil production 10 percent costs far more than 10 percent in increased capital investment.  Thus in a world where oil is the dominating transform next to labor, the price of goods and most services can only rise

We have tried to sustain

consumptive behavior through debt

rather than encourage productive

behavior through adaptation.

faster than the rate of real income.  We have tried to sustain consumptive behavior through debt rather than encourage productive behavior through adaptation.  To consume more allows the mature industrial society to persist, but it creates the debt to the future which is unpayable monetarily.   Deflation is when the debt is called and we are collectively impoverished.   Inflation is when we pretend the debt is no big deal.  Because of the institutional propensity to act only out of the desire to maximize rather than optimize, economic adaptation resides with individuals and small groups.  They can act in optimal ways.  But in too great an aggregate, even their acts turn to maximization.   Reagan is trying to maximize while nature is trying to optimize.  The erratic and turbulent nature of our economy and world politic is those two impulses meeting like cold and hot air.

Whatever happens, it is important to recognize that all this economic talk has a touch of madness about it.  Our desire for more goods  

Reagan is trying to maximize
while nature is trying to optimize.
The erratic and turbulent nature
of our economy and world politic
is those two impulses meeting
like cold and hot air.

and services has created an all-enveloping skein of perceptions against which all other events are measured.   If talk today is of money, it is because minds dwell in fear or desire.   A common condition perhaps, but more intense and unusually so now than in our recent history.   Zen Abbot Richard Baker-Roshi calls economics a "science of choice sealed with desire" and poses the question as to what it would be if it were sealed differently. What if it were sealed with compassion, or even humor?  Talk of a new depression is not only a fear but a want, a longing for an economy that we can at least understand even if we don't like it.   There is in the prospect of a depression the fantasy of a shared condition in which commonality, can emerge.

Economics may or may not be a science, but if it is a science, it is a behavioral science rather than one of inanimacy.  Economics is about how we behave, and until we have a better grasp of ourselves, what we want, what we are willing to give up for what we want, we will not have a very firm grasp on the economy.  The mass economy is an expression of the desire for more, for a life that is easier, healthier, fuller, richer, and more heavily infused with goods and services.   If we are in fact in an economy that is trying to become more economical, any attempt, whether by central authority or by excessive consumption, to make it less economical will have punitive effects upon us.   Although the economic system is made up of the sum of its individual and institutional parts, its aggregate also consists of the ways in which we act upon our environment as a whole.  And if the environment in which we function is becoming less yielding of its wealth and riches, then the economy will start to act unpredictably and at odds with the intentions of its components.   If the various components start to blame each other for making the economy a mess, they may be right in limited ways, but they will overlook the area in which the greater economy functions.   The mass economy is culminating because we have reached the limits of the system itself to produce the results we want.  We can certainly increase the size of our GNP and have the mass economy grow, but if we do we will end up with less than when we started.   As the purchasers of many nuclear power plants have recently discovered, they are not cost-effective. Similarly, highly artificial and intensive efforts to stimulate economic growth will not be economical.  We do not have idle industrial capacity, we have too much industrial capacity in the wrong areas.   We have not been through a decade of inflation, but through a decade when we refused to deal with the inherent limitations of the mass economy.  We do not have high unemployment, but off-ejnployment, millions of people working at jobs which make no sense, which accomplish little in the way of common good. We do not have high interest rates, but rather a culture that has borrowed too long and cannot pay its bill to itself.   We do not have high federal budget deficits.  We have a body politic that can no longer create an honest dialogue with itself.  We have an economy that is no longer economical because it is part of a living system, and, like any living system, it is bound by growth, development, and decay.

The economic landscape has seemed bleak in its alternatives.   To read the literature, we

What if economics were sealed with
compassion, or even humor? Talk
of a new depression is not only a
fear but a want, a longing for an
economy that we can at least
understand even if we don't like it.

must either take those steps that would produce more houses, cars, steel, boats, and bombs, or face the prospect of a devolving economy that could lead to collapse and worse.   I disagree. The culmination and slow breaking apart of the mass economy will not happen at once, but over a period of decades. Within this pattern of change, there is emerging an informative economy.   The purpose of the mass economy was to supply us with a lot of stuff.   The purpose of the informative economy is to make us more intelligent about how to use this stuff.   We will have less stuff per person simply because our ability to produce more goods is being far outstripped by our ability to produce more people.   But people are not the bane of this world, nor should they be seen as the "cause" of resource limitation.   Rather, the greater ratio of people to mass means that we have entered an entirely new economic landscape.