Wednesday, May 16, 2012

You Cannot Win. You Cannot Break Even. You Cannot Get Out Of The Game.

Lars Syll has recently posted about the lack of intellectual engagement of mainstream economists with the later work of Nicholas Georgescu-Roegen. (I rely on Google Translate.) Here his a quote from an article of which Georgescu-Roegen did not think highly:
"If it is very easy to substitute other factors for natural resources, then there is in principle 'no problem.' The world can, in effect, get along without natural resources, so exhaustion is just an event, not a catastrophe." -- Robert M. Solow (1974)
Not all passages in that article are equally absurd. Who would object to the following:
"There is a limiting case, of course, in which demand goes asymptotically to zero as the price rises to infinity, and the resource is exhausted only asymptotically. But it is neither believable nor important." -- Robert M. Solow (1974)
I think the above is consistent with Solow's later view of new growth theory. Much of such work is about the behavior of models when parameters are just so. If the parameters are shifted just a bit off the knife-edge, the model does not exhibit the behavior being emphasized.

I find Georgescu-Roegen intriguing, but maybe too advanced for me. As far as the economic analysis of finite stocks of a natural resource, I also like Paul Davidson's deployment of Keynes' concept of user cost for such analysis.

I have previously noted Georgescu-Roegen's severe criticism of Brown and Robinson's 1972 paper. I now provide a link below to that paper so you can consider yourself whether or not it is just idle mathematics.

Update: Lars Syll's now has a translation of his post, "Nicholas Georgescu-Roegen and the Nobel Prize in economics".


  • Donald J. Brown and Abraham Robinson (1972). "A Limit Theorem on the Cores of Large Standard Exchange Economies", Proceedings of the National Academy of Sciences, V. 68, N. 5: 1258-1260.
  • Paul Davidson (1979). "Natural Resources", in A Guide to Post-Keynesian Economics. M. E. Sharpe.
  • Robert M. Solow (1974). "The Economics of Resources or the Resources of Economics", American Economic Review, V. 64, Iss. 2: 1-14.


BruceMcF said...

Another useful set of concepts for this is Common's routine and strategic transactions. Each routine transaction has some limiting factor or factors, without which the transaction cannot proceed, and the transaction is routine precisely because there is no binding constraint on the limiting factor.

If a binding constraint does emerge for the limiting factor(s), then there is a potential conflict of interest between all parties engaged in the affected routine transactions, and once those parties come into conflict over the limiting factor, those become strategic transactions, and there will be appeals to sovereign authority from different sides of the conflict to establish rules that favor one party or another in those strategic transactions.

The mainstream premise of general substitutability "solves" the problem by pretending it does not exist, and Georgescu-Roegen was scathing on those models where the assumption is applied between productive equipment and natural resources.

Under Commons perspective, this is tantamount to assuming that obtaining the natural resources required for production is always a routine transaction, which is a foundational assumption that renders the models based on it quite useless when the problem at hand is how to cope with the fact that for many natural resources they have become very high priority strategic transactions.

Lars P Syll said...

Robert, the english version of my article on Georgescu-Roegen is now posted on my blog:

Anonymous said...

In what he wrote about physics, Georgescu-Roegen was a crank. He denied the statistical-mechanics derivation of entropy.

I read his book very carefully, and had problems with his application of entropy to economics too -- but it was more than 30 years ago, and it would take a while to reconstruct what I didn't like.

Ben Ross