Here’s a great exchange of ideas, the first from Paul Krugman in the NY Times regarding the failings of economists to foresee the recent implosion:

As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth. Until the Great Depression, most economists clung to a vision of capitalism as a perfect or nearly perfect system. That vision wasn’t sustainable in the face of mass unemployment, but as memories of the Depression faded, economists fell back in love with the old, idealized vision of an economy in which rational individuals interact in perfect markets, this time gussied up with fancy equations. The renewed romance with the idealized market was, to be sure, partly a response to shifting political winds, partly a response to financial incentives. But while sabbaticals at the Hoover Institution and job opportunities on Wall Street are nothing to sneeze at, the central cause of the profession’s failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess.

And then some commentary from Sean Carrol, writing on my favorite physics blog, Cosmic Variance:

Without knowing much of anything about the relevant issues, I nevertheless suspect that this moral might be a bit too pat. Sure, people can fall in love with beautiful theories, to the extent that they overestimate their relationship to reality. But it seems likely to me that the correct way of understanding all this, once it’s properly understood, will look pretty beautiful as well. General relativity is widely held up as an example of a beautiful theory — and it is, when understood in its own language. But if you put the prediction of GR in the Solar System into the language of pre-existing Newtonian physics (which you could certainly do), it would look ugly and ad hoc. Likewise, Newton’s theory itself is quite elegant, when phrased in the language of potentials on a fixed spacetime background; but if you express the theory in terms of differential geometry (which you could certainly do), it looks like a mess. Sometimes the beauty/ugly distinction between theoretical conceptions is more a matter of how well we understand them, and less about their intrinsic qualities.

So my counter-hypothesis would be that it wasn’t beauty that was the problem, it was complacency. If you have a model that is beautiful and works well enough, you’re tempted to take pride in it rather than pushing it to extremes and looking for problems. I suspect that there is a very beautiful theory of economics out there waiting to be developed, one that understands perfectly well that individuals aren’t rational and markets aren’t perfect. One that has even more impressive-looking equations than the current favored models! Beauty isn’t always a cop-out.

Both those links are well worth a full read (the NY Times one is fairly long – schedule a cozy evening for it). In the spirit of dialogue, my feeling is that both Paul and Sean are coming at this from opposite ends of a single phenomena; well defined systems which involve feedback loops quickly become chaotic at larger scales. This is true for weather (we understand the basics of fluid dynamics and thermodynamics, but weather forecasts will never be very accurate), it’s true for the scale shift from quantum to relativistic, and it’s true for enormous economic systems. In other words, beautiful theories can both be true and useless – it’s all a question of scale.

So this seems to be in the news lately; the government is providing subsidies for people to trade in their old cars for newer ones with better fuel efficiency.  Slate just published a helpful article which runs the numbers on both the environmental efficiency of replacing a car and the cost effectiveness of the program:

The environmental rationale behind the Car Allowance Rebate System is pretty straightforward: The government offers a few thousand bucks to any consumer who’s willing to scrap a low-mileage gas guzzler and buy a more fuel-efficient replacement. That’s supposed to help reduce our dependence on nonrenewable petroleum and limit the carbon dioxide emissions associated with driving. At first glance, the numbers look pretty good: Burning a gallon of gasoline produces about 19.4 pounds of CO₂, so if you if you swapped a clunker that got 18 miles per gallon for a new car that got 27.5 mpg (the current average fuel economy standard for passenger cars) and drove it for 12,000 miles (the average distance an American car travels annually), you would personally save a little more than two tons of CO₂ from being emitted in one year. Multiply that by the hundreds of thousands of people who’ve already participated in the program, and the savings look even more impressive.

It’s not quite as simple as that, however. As you point out in your question, it takes a lot of energy—and makes a lot of CO₂—to manufacture a brand-new car. (The same logic applies to replacing your household appliances or switching from a Corolla to a Prius.) According to William Chameides, dean of Duke University’s Nicholas School for the Environment, making a new car produces 3.5 to 12.4 tons of carbon dioxide, with an average of 6.7 tons per vehicle. The average new car would therefore need to save about 700 gallons of gas to offset the carbon costs of its manufacturing.

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According to an early analysis from the Web site Cash for Clunkers Information—which estimated an average fuel-economy increase of 69 percent and total sales of 250,000 cars—the program would cut overall fuel consumption by about 76 million gallons a year and carbon dioxide emissions by about 737,200 tons annually. Using Chameides’ figures, it would produce about 1.7 million tons of CO₂ to manufacture those 250,000 cars, so we won’t really see those savings until a little more than two years from now.

Was spending $1 billion a particularly cost-effective way to achieve those CO₂ reductions? Probably not. Assuming the above calculations are correct and that each consumer keeps his or her car for 10 years, then the total savings should be a little less than 5.7 million tons of carbon dioxide. That means each ton of carbon dioxide would be worth about $175.53 to the U.S. government. As the Washington Policy Center pointed out on its blog in June, a ton of CO₂ currently goes for about $17.50 on the European Climate Exchange.

It’s always nice to have actual numbers to talk about – if this type of analysis interests you I’d highly recommend downloading Sustainable Energy without the Hot Air, a great book that’s available free online and is full of fascinating statistics about energy use and climate change.

From the International Energy Agency, via the Independant:

In an interview with The Independent, Dr Birol said that the public and many governments appeared to be oblivious to the fact that the oil on which modern civilisation depends is running out far faster than previously predicted and that global production is likely to peak in about 10 years – at least a decade earlier than most governments had estimated.

But the first detailed assessment of more than 800 oil fields in the world, covering three quarters of global reserves, has found that most of the biggest fields have already peaked and that the rate of decline in oil production is now running at nearly twice the pace as calculated just two years ago. On top of this, there is a problem of chronic under-investment by oil-producing countries, a feature that is set to result in an “oil crunch” within the next five years which will jeopardise any hope of a recovery from the present global economic recession, he said.

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The IEA estimates that the decline in oil production in existing fields is now running at 6.7 per cent a year compared to the 3.7 per cent decline it had estimated in 2007, which it now acknowledges to be wrong.

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In its first-ever assessment of the world’s major oil fields, the IEA concluded that the global energy system was at a crossroads and that consumption of oil was “patently unsustainable”, with expected demand far outstripping supply.

Oil production has already peaked in non-Opec countries and the era of cheap oil has come to an end, it warned.

In most fields, oil production has now peaked, which means that other sources of supply have to be found to meet existing demand.

Even if demand remained steady, the world would have to find the equivalent of four Saudi Arabias to maintain production, and six Saudi Arabias if it is to keep up with the expected increase in demand between now and 2030, Dr Birol said.

This ties into my earlier post regarding the Net Hubbert Curve; as we use up the easily accessible oil supplies, the amount of energy required to extract energy increases, so not only are we facing the (apparently rapid) decline in reserves, we’re facing decreasing extraction efficiency.

This is not good news…

As a follow-up to yesterday’s post about Riversimple’s Opensource car, here’s a story on an emerging business model in the world of video games; community funded games.

One of the areas that I am super interested in right now is how we can do financing from the community. So right now, what typically happens is you have this budget – it needs to be huge, it has to be $10m – $30m, and it has to be all available at the beginning of the project. There’s a huge amount of risk associated with those dollars and decisions have to be incredibly conservative.

What I think would be much better would be if the community could finance the games. In other words, ‘Hey, I really like this idea you have. I’ll be an early investor in that and, as a result, at a later point I may make a return on that product, but I’ll also get a copy of that game.’

So move financing from something that occurs between a publisher and a developer… Instead have it be something where funding is coming out of community for games and game concepts they really like.

This is an interesting idea, it’s like micro-credit patronage.  Sort of reminds me of Radiohead releasing their most recent album online and asking people to pay whatever they felt the album was worth.  I’ve been thinking about ways in which something similar to this could be used to build architecture, but it doesn’t seem like the ‘installed user base’ would be high enough…

I posted earlier about the development process, trying to express some ideas that have been floating around the office regarding how buildings are financed, designed, and built.  What was lacking from that post was any consideration of what happens once the building has been built.  As builders, architects tend to think of buildings as artifacts, objects to be photographed and admired.  This approach ignores the reality that architecture is an element in the dynamic process of human society.

Stepping back to consider architecture as a process allows us to consider a much wider variety of concerns; the lifetime cost of building maintenance, the environmental impact of powering the building, the cultural flows that the building mediates, etc.  Let me touch on a couple such topics before getting into any ideas about how things might be improved.

One of the biggest shocks I had after graduating from architecture school and working in an office was that architects don’t generally work at the same scale as we’re trained to in school.  My design eduction emphasized creatively approaching a site and considering what mix of uses would be appropriate, investigating demographic trends, exploring how architecture can influence cultural development, and proposing new types of build environments.  It quickly became clear that most architectural firms do little or none of that; they are hired essentially to provide window-dressing for a project which is dictated primarily by either a developer’s market analysis or an institution’s project brief.  While there are plenty of counter-examples, the majority of buildings seem to be built in a system in which the architect is not the primary decision-maker as to what should be built.

The development ecosystem has become defined by a couple primary actors; clients, developers, investors, institutions, builders and regulatory agencies.  Decisions as to what should be built is made by these actors, then architects and engineers are commissioned to implement these decisions.  I see a lot of benefits to this ecosystem, it is good at responding to market forces, partitions risk to appropriate parties, and works well in the free-market economy.  Unfortunately, it doesn’t do a great job of addressing objectives which are not easily monetized; coherent communities, sustainable building practices, innovation and others.  My feeling is that to change the outcomes of development, we must first change the ecosystem in which development occurs.

From worldchanging:

Existence is the ultimate proof of the possible. Every time a bold new project is tried, and works, we advance our sense of the achievable. Given how much transformation we need in order to meet the challenges we face, we need many more attempts at innovation, and we’re not getting them. The achievable is not advancing quickly enough.

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In his recent Long Now talk (MP3 here), economist Paul Romer tells a story. In the early 1970s, China was stuck in a societal inertia after the death of Mao. However, right next door, Hong Kong (administered by the British) was a thriving city-state based on trade and innovative manufacturing. Chinese leaders decided to see if they could copy Hong Kong’s success on a limited scale, and set up four “Special Economic Zones” where foreign investment was encouraged and capitalism was unconstrained. The experiments were so successful economically that their rules soon more or less became the guiding principles of the Chinese miracle. As Romer says, “Hong Kong was the most successful economic development program in history.”

In many ways, the Global North is as hamstrung in the face of bright green challenges as China was in the face of capitalism. What if the answer is a sustainability and social innovation equivalent of China’s answers: a sort of “Special Innovation Zone”?

Imagine a place — perhaps a shrinking city, or a badly savaged brownfield neighborhood — where laws were set up to strip rules and regulations down to a do-no-harm minimum (maintaining criminal laws and protecting health, safety, workers’ rights and civil liberties, but perhaps limiting liability and certainly slashing red tape and delays) allowing for wild deviations from existing patterns for buildings, systems and operations. Imagine a free-fire zone for sustainable innovations, where new approaches could be iterated and tested rapidly, and, when they work, sent to proliferate outside the Zone. Conversely, some of the freedom might paradoxically come from imposing boundary limitations that can’t yet be made practical or survive politically outside the Zone, such as bans on broad classes of chemicals or strict greenhouse gas emissions limits.

There’s also an interesting comment from Sean FitzGerald:

And now I realise why I find WorldChanging so frustrating.

The biggest barriers to social innovation are values, belief systems and world views.

Until you have a transformation of consciousness at all levels of society – individual, community, business and government – those institutional, legal and regulatory barriers will stay in place.

WorldChanging keeps pumping out innovative technologies, processes and systems and all I can think is: “Great, but it will never be implemented in time to save civilisation unless *we* change.”

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I keep hearing from the technological optimists “All we need to do is swap out oil-based transport for electrified transport” or “All we need to do is retrofit our urban environments into paragons of sustainability” or now, “All we need to do is change the regulations that are holding innovation back”.

But it’s not “All we need to do.” You skip right over the very important step of having to change people first (or concurrently, at least). Until we change people’s values the latest, greatest sustainability-enhancing widget, technological breakthrough or grand social plan will stay on the drawing board.

To which ‘Brad’ comments:

True, Sean, the institutional, legal and regulatory barriers Alex describes derive from values, belief systems and world views, and it is those that need to change.However, in order to change those, you need to be able to propose a constructive vision based on differing world views by way of example.

Which gets to the heart of why this seems like an interesting idea to me; it allows the development of new models.  I see a lot of potential pitfalls here, most of the ‘restrictive’ building codes cities adopt are responding to catastrophic failures in the past – throwing these out opens the door to all sorts of unanticipated consequences.  The chinese free zones that are mentioned had one enormous benefit; they were duplicating a model which had already been tried and shown to work.

This sort of speaks for itself (these are inflation-adjusted numbers):

There’s a piece in Portfolio discussing the possibilities ubiquitous computing enables in the realm of complimentary currencies:

Futurist Douglas Rushkoff, famous for correctly predicting the rise of social media, is trying to convince Craigslist’s Craig Newmark to create “craigbucks.” He thinks it’s the obvious next step in the evolution of money. “People could buy and sell things exclusively on Craigslist using craigbucks,” Rushkoff enthuses. “Sure they’ll want to keep their Visas and their MasterCards, but they’ll want a specialized, alternative form of cash too.”

The idea is not as far-fetched as it may seem. Economists already have a term for this kind of community-specific money; they’re called “complimentary currencies” and they naturally take root when conditions are right. For example, in 2006, a Chinese online social network called QQ produced “QQ coins” that became widely traded, used for almost a billion dollars a year in transactions. Even though the currency was designed just to buy things on the QQ network, other websites started accepting QQ coins for payment of even non-virtual goods, and a black market sprung up to convert QQ coins directly to Yuan. The Chinese government cracked down: They feared that QQ could trigger inflation of the Yuan by increasing the total money supply in China.

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When the developed world gets over its bias for “printing press–era cash technology” then complementary currencies will be commonplace here too, Rushkoff predicts. He sees a future that has people literally reprogramming their economic systems, using computer networks and handheld devices to administer new forms of grassroots cash. Those currencies could be almost anything: Cash we can use only at one local restaurant, cash cards for Wal-Mart or other chain stores, babysitting dollars we can trade in our neighborhoods.

There are some small examples of people of this future here now. In Japan, people trade “elder-care units,” which are measured in time spent caring for elders in the community, and they’ve become quite valuable as the population in that country ages. In the United States, hours of service are exchanged via the online Time Bank or locally in Ithaca, New York. Then there are the “Life Dollars,” an electronic currency used in the Pacific Northwest. The experiments have been successful, albeit quite small. The total amount of Ithaca hours in circulation is $100,000, while Life Dollars are used for perhaps $2,000 worth of transactions per month.

There’s some interesting work being done on implementing cryptographic digital ‘coins’, and another interesting project that’s trying to create a payment system by collecting a large network of trust relations between friends which allows people who don’t know each other, but who can be connected by mutual friends to transact.

Here’s an interesting article in The Atlantic essentially predicting what various regions of the country will look like in a decade.  A lot of this has been said before, but it’s still interesting.

Along with the rise of mega-regions, a second phenomenon is also reshaping the economic geography of the United States and the world. The ability of different cities and regions to attract highly educated people—or human capital—has diverged, according to research by the Harvard economists Edward Glaeser and Christopher Berry, among others. Thirty years ago, educational attainment was spread relatively uniformly throughout the country, but that’s no longer the case. Cities like Seattle, San Francisco, Austin, Raleigh, and Boston now have two or three times the concentration of college graduates of Akron or Buffalo. Among people with postgraduate degrees, the disparities are wider still. The geographic sorting of people by ability and educational attainment, on this scale, is unprecedented.

The University of Chicago economist and Nobel laureate Robert Lucas declared that the spillovers in knowledge that result from talent-clustering are the main cause of economic growth. Well-educated professionals and creative workers who live together in dense ecosystems, interacting directly, generate ideas and turn them into products and services faster than talented people in other places can. There is no evidence that globalization or the Internet has changed that. Indeed, as globalization has increased the financial return on innovation by widening the consumer market, the pull of innovative places, already dense with highly talented workers, has only grown stronger, creating a snowball effect. Talent-rich ecosystems are not easy to replicate, and to realize their full economic value, talented and ambitious people increasingly need to live within them.