Energy Network Science

  • Franciscan Economics & Regenerative Capitalism

    October 22nd, 2015 by ewalsh
    Pope Francis delivers his blessing at the end of his weekly general audience in St. Peter's Square at the Vatican, Wednesday, Dec. 11, 2013. (AP Photo/Alessandra Tarantino)

    Image Courtesy of the Associated Press’ Alessandra Tarantino

     

     

     

     

     

     

    We are pleased to share with you this unsolicited guest blog post from Bob E. Ulanowicz, an American theoretical ecologist and philosopher.

    The recent media flurry over Pope Francis’ Encyclical on the environment, Laudato Si’, appears to have missed his major thrust, which happens to connect strongly with Regenerative Capitalism. Most reviews highlight Francis’ concern about global warming or his Integral Ecology – the manifold connections between the natural world, economics, society, and politics. Yet, while attention to such relationships is laudable, this focus has already received considerable notice in the academic and professional literature. Other analysts point to his critique of unfettered capitalism, yet this too is nothing new – Catholic Social Teaching has criticized unrestrained capitalism since Pope Leo XIII’s Rerum Novarum in 1891.

    Instead, the radical thrust of this document relates strongly to Jorge Bergoglio’s choice of name as Bishop of Rome – Francis, as in St. Francis of Assisi, the Saint who championed the poor and outcast, and preached that poverty often was the road to deepest spirituality. Pope Francis channels the Saint in his opening section, citing Francis’ “refusal to turn reality into an object simply to be used and controlled” [paragraph 11] and relates how Francis always made sure that a part of the friary garden was to be left to God’s plants and creatures. He shows his awareness of the complex ties between the health of the natural and human worlds and the workings of finance and monetary policy by noting that “whatever is fragile, like the environment, is defenseless before the interests of a deified market, which becomes the only rule” [56], adding that the “Economic and financial sectors, being transitional, tend to prevail over the political” [175]. He argues that the “undifferentiated and one-dimensional paradigm” [106] of economics in which “the maximization of profits … reflects a misunderstanding of the very concept of the economy” [195]. He regrets that “Finance overwhelms the real economy” [109] – these days by a factor greater than 50:1[1]. Yet, Pope Francis reveals his hand most openly in Chapter 5 when he makes what might be his most counter-cultural statement:

    “In any discussion about a proposed venture, a number of questions need to be asked in order to discern whether or not it will contribute to genuine integral development. What will it accomplish? Why? Where? When? How? For whom? What are the risks? What are the costs? Who will pay those costs and how?” [185].

    Such questions about who benefits and who pays also tie into Regenerative Economics’ concern about externalities, and to ecological economist Herman Daly’s condemnation of “growism.” Nowadays, if a shopping center is proposed, the guiding issue is whether the project will achieve a high return to the developer – i.e., high “growth” – all other matters become secondary. In contrast, Francis states that, “a decrease in the pace of production and consumption can at times give rise to another form of progress and development” [191]. He cautions we must “contain growth by setting some reasonable limits and even retracing our steps before it is too late” [193]. Francis is confident of the need for such slow-down, writing, “the present world system is certainly unsustainable from a number of points of view” [61] and we must “leave behind the myth of unlimited material progress” [78].

    These Franciscan prescriptions also speak to regenerative economics emphasis on balance. For example, studies of energy and currency flows in healthy systems show that pursuit of ever greater efficiency and growth pulls the system away from a healthy balance, and heightens the probability of collapse. In contrast, healthy systems maintain a balance between “throughput efficiency” – akin to the kind that fuels economic size and growth – and a diversity that allows for resilience in the face of perturbation. Translated into economics, processes that decrease market efficiency somewhat in order to permit the survival of slightly less-efficient actors may actually improve the system’s overall sustainability.

    Studying such dynamics might also clarify how, in a world of very finite resources, to reconfigure economics to achieve a more just apportionment among the “universal destination of goods” [93]. For example, studies of natural systems also tell us that balance is improved by shorter, quicker, lower-level feedback loops – the kind found in well-knit “cooperatives,” in a sense. In contrast, today’s massive corporate structures tend to crush smaller, quicker ventures as soon as they begin to succeed, as happened with the Saturn experiment under GM.

    It’s also of note that the balance between efficiency and resilience-enhancing diversity is related to Adam Smith’s balance between self-interest and “sympathy,” the kind produced when we connect to another person’s circumstances as our own. Smith argued that there was a close relationship between moral behavior and the maximization of virtue, and healthy economic behavior which involved the maximization of wealth as a means to a higher end. Self-interest drives wealth; sympathy drives virtue; only a combination of the two drives wealth as a means to a higher end. Regenerative Capitalism also emphasizes the need to balance self-interest and sympathy because the two play important roles in balancing efficiency and resilience. This is also what Rerum Novarum was about.

    It remains for people of good will and organizations like the Capital Institute to elaborate the means for dialing back the overall amplitude of the economy without endangering fundamental human needs and dignity. Meanwhile, Francis consoles us by encouraging that we adopt an attitude of “less is more” and a spirituality marked by “the capacity to be happy with little”. [222]

  • MONEYBALL: Reinventing the Game of Capitalism Using a New Scientific Model

    November 21st, 2014 by Sally Goerner
    Slide1

    Adaptation from Images Courtesy of MyTopFBCover.com & CovertBacon.com

                    We are pleased to introduce this week’s guest blogger, Dr. Sally Goerner, who is joining Capital Institute as a Science Advisor.

    There is an epidemic failure within the game to understand what is really going on. And this leads those who run major league teams to misjudge their players and mismanage their teams… Baseball thinking is medieval. They are asking all the wrong questions.

    People see this new way of thinking as a threat, and not just to a way of doing business, but, in their minds, it’s a threat to the game itself…

    But anybody who is not tearing their team down right now and rebuilding it using your model − they’re dinosaurs.

    – Dialog from the movie Moneyball

    In the movie Moneyball, a new scientific model shows how to reinvent baseball, allowing the Red Sox to overcome the curse of the Bambino and win the pennant for the first time in 86 years.

    Today, a new scientific model – in this case a more rigorous stage of systems science based on the study of energy-flow networks – can show us how to reinvent the game of capitalism in a way that revitalizes the whole system, bottom to top.

    Instead of loose analogies to ecological concepts, this new model provides the predictive theory and precise measures today’s social entrepreneurs and policymakers need to diagnose problems, identify cures, integrate efforts, guide policy, and assess systemic health. Here, the storyline of Moneyball applies as much to the games of economics and finance as it does to baseball:

    A number of thought leaders and entrepreneurs are seeking to reinvent capitalism because it isn’t working for large segments of the system. In our terms, their goal is to create a regenerative form of capitalism that produces lasting social and economic vitality for global civilization as a whole.

    A more rigorous stage of Systems Science can show us how to turn today’s lopsided capitalism into vibrant regenerative economies. Whether it is called complexity, systems or networks, improved insights into our interdependent world are coming from the study of whole systems, the dynamic relationships that bind them, and the conditions under which they thrive. Today, discoveries of how energy drives development are merging with ancient understandings of nature’s designs to produce a rigorous understanding of systemic health and development that applies to living, non-living, and social systems including economies.

    The future will belong to those who have the vision to use this scientific model to build a better world − and who have the chops to make this regenerative reformation happen.

    I call this work Energy Network Science (ENS) because it uses energy networks and nature’s designs to illuminate universal laws and optimal patterns of health and development.

    Energy fuels organization, drives development, and creates pressure for change. Because such principles are universal, they help explain why similar laws apply to systems as diverse as living organisms, ecosystems, and economies. Because they are empirical, they explain why rigorous findings apply across this range as well. Already well-known in ecology and living systems, the result is measurable laws of health and development that work in economies.

    Easy to see and measure, ENS’ patterns focus our economic efforts on making human networks healthy, as well as on making money.

    Because ENS is about networks, its big realization

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    is that the only way to build a vibrant economy is to build healthy human networks. Because it values human networks, it brings a new vision of the relationships and values needed to build vibrant economies. Because it is a (relatively) exact science, it provides a solid foundation for a regenerative economy and the measurement tools we need to build it.Screen Shot 2014-11-21 at 10.14.51 AM

    The result enhances New Economy efforts by:

    ✓ Identifying the optimal network structures, right relationships and peak patterns of development that the cosmos uses to build healthy, self-sustaining, learning systems;

    ✓ Showing the logical connection between whole-system dynamics and the boom-bust cycles seen in human systems, thus providing effective diagnoses of their causes and cures;

    ✓ Providing rigorous measures of systemic health that support practical applications;

    ✓ Validating the dream of free-enterprise democracy and showing us how to achieve it.

    The following examples provide a taste of ENS’ potential.

    Poor circulation creates economic necrosis: The fact that robust, cross-scale circulation is essential to systemic health explains why poor monetary circulation to lower levels of an economy − low wages, few small-scale commercial loans, etc. − results in economic necrosis, the dying off of large swaths of economic tissue. Quantitative measures of internal circulation (such as multiplier effects) help assess systemic health and give teeth to the truism: “beggar-thy-neighbor policies come back to haunt.”

    Fractals as optimal designs & measurable targets: Scientists since the ancient Greeks have studied the universal patterns that fill our world. Today most researchers believe such patterns exist because they support some aspect of systemic health. Lungs, for instance, have a branching structure ─ with a few, highly-efficient, big conduits on top and successively more numerous, less efficient, smaller conduits on the bottom because this particular structure optimizes the diffusion of oxygen into the bloodstream. Nowadays we call this pattern a fractal and use new mathematical methods to measure them precisely. Because fractal patterns help optimize many forms of function and flow, they are found in everything from leaves to river deltas.

    We can use fractal balance to:

    • Quantify the observation that “too big to fail” is deadly and a shrinking middle-class indicates ill health;
    • Confirm that sustainable prosperity is an integrated, cross-scale affair requiring proper balance of localism, globalism and all points in between;
    • Screen Shot 2014-11-21 at 11.26.56 AMRatify the Goldilocks Rule that systems need organizations that are “just right” for catalyzing processes at each scale. So, just as ecosystems need fine-grained wetlands to buffer against floods, so banking systems need small-scale local banks to serve small-scale needs that are uneconomic for big banks to handle.

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    We experience outsourced jobs and decrepit schools as local events, but underneath we know they are symptoms of global economic dysfunction. ENS can provide the tools we need to turn dysfunction into regenerative vitality. Stay tuned for more details.

    Slide2

    Nikos Salingaros (Google “Fractal Cities”) shows that a proper balance of pathways helps catalyze critical city functions at each scale – e.g., footpaths support neighborhood conversations and highways support rapid transit. Supporting the full gamut of processes increases innovation, empowerment and community cohesion.