The Economic Implications ofThe Maximum Power PrincipleFor a Sustainable Society

ISBPE 2016, 28 JuneBy: Garvin H BoyleEmail: Orrery@rogers.comWebsite: Orrery-software.webs.com

A GOLDILOCKS CURVE

Evolution of Energy Transformation Towards Maximum Power at an Intermediate Level of Efficiency

NeoClassicalEconomic

Theory

Sampling of Theories Why Global Affairs are NASTY, UNJUST, AMORAL AND UNSUSTAINABLE.

By: Garvin H BoyleEmail: Orrery@rogers.comWebsite: Orrery-software.webs.com

NeoClassicalEconomic

Theory

European Colonialism

American Hegemony

Conflict Between The

Great Religions of the Middle

East

Warring Nations, Blocks of Nations, and Empires

Conflict Between The Great 20th Century Political Ideals

– Fascism, Communism, Naziism,

Democracy, CapitalismConflict Over

Resources

Globalization Multi-National Corporations

A MODERN COHORT OF SUSPECTS

The evolution of large dinosaurs, and large mammals

And The evolution of large empires, and large multi-national corporations!

What is the Common Thread?

The explosive emergence of algal blooms, locust swarms, or

contagious epidemics And

The explosive spread of telephones, televisions and, now, iPhones!

Adaptive radiation of species

AndTechnological innovation!

The intense emphasis of all species on growth and

reproductionAnd

John Kenneth Galbraith’s “Theory of the Firm”!

The emergence of life from the seas onto the barren land

And The emergence of our

dependence on fossil fuels!

THESE CANNOT ALL BE MERE COINCIDENTAL ANALOGIES.

---THESIS: THERE MUST BE A COMMON DEEP ENERGY-DRIVEN DYNAMIC THAT

ANIMATES ALL OF THESE PHENOMENA.

A.J. Lotka’s Maximum Flux (1922)

SOURCE: A.J. Lotka (1922) 'Contribution to the Energetics of Evolution', Proceedings of the National Academy of Sciences of the United States of America, Vol. 8, No. 6 (Jun. 15, 1922), pp. 147-151.

… natural selection tends to make the energy flux through the [organic] system a maximum, so far as compatible with the constraints to which the system is subject.

… in evolution two kinds of influences are at work: selecting influences, and generating influences.

The question was raised whether … man has been unconsciously fulfilling a law of nature, according to whichsome physical quantity in the system tends toward a maximum. This is now made to appear probable; and it is found that the physical quantity in question is of the dimensions of power, or energy per unit time … .

Natural Selection Rising energy flux

“Generation” versus

“Selection”

Application to Human Economic Systems

H.T. Odum’s Maximum Power (1955)

SOURCE: Odum, H. T., Pinkerton, R. C., “Time’s speed regulator: The optimum efficiency for maximum power output in physical and biological systems”, American Scientist, Vol. 43, No. 2 (APRIL 1955), pp. 331-343.

Our proposition is that natural systems tend to operate at that [intermediate] efficiency which produces a maximum power output.

Let us make the following postulate: Under the appropriate conditions, maximum power output is the criterion for the survival of many kinds of systems, both living and non-living. In other words, we are taking "survival of the fittest" to mean persistence of those forms which can command the greatest useful energy per unit time (power output).

“Power” versus

“Efficiency”

Application to Human Economic Systems

GOLDILOCKS EFFECTGenerates Variation

Selection Among the

Variants

MPP – At the Nexus of Many Concepts

Hierarchy of Persistent Forms 0 ------------------------------ 1Intermediate Efficiency,

Maximized Power

Pow

er

SPECIES

DARWIN

ENERGY PATHWAYS

SYSTEMS

LOTKA, O

DUM

ODU

M, PIN

KERTON

Natural Selection & Evolution

DARWIN

Hypothesized as Broadly Applicable: physical,

chemical, biochemical, biophysical, social,

ECONOMIC

LOTKA, O

DUM

ISSU

ES O

F AC

CESS

Access to Energy of Suitable Type and

Availability

Access to Matter of Suitable Type and

Availability

BOLTZM

ANN

, LOTKA, O

DUM

Efficiency

Two Definitions of Power(Biophysical Setting – ENERGY TRANSFORMATION AND CONSUMPTION EVENT)

• Useful (or Profitable) Power• Waste (or Operations and Maintenance) Power

ENERGY INPUTS

USEFUL ENERGY FLOWWASTE ENERGY FLOW

Puseful = Euseful / T

Pwaste = Ewaste / TT = time

EFFICIENCY DEFINED AS = Euseful / Etotal

Two Definitions of Power(Economic Setting – COMMERCIAL PRODUCTION AND SALES EVENT)

• Useful (or Profitable) Power• Waste (or Operations and Maintenance) Power

TOTAL INCOME(I)

BENEFITS (B)COSTS (C)

Puseful = B / T

Pwaste = C / TT = time

EFFICIENCY DEFINED AS = B / I

Selection For:• Maximal average Pu

• Minimal average Pw • Minimal average entropy

production per event

LOWER LEVEL- Per event effects

Antithetic Dynamics Of The MPP

Odum and Pinkerton

Lotka

Selection For:• Maximal overall Pw

• Maximal overall entropy production

• Maximized flux of matter and energy

HIGHER LEVEL- Overall process effects

The Goldilocks Hypothesis(A key component of the MPP)

• Assumption: For every flow of benefits, there are inputs which are consumed in the process of producing that flow. (E.g. # of workers)

• Hypothesis: For every such input, there is an optimum rate of consumption for which the rate of production of benefits is optimized, the consumption of all other inputs being held constant.

EXAMPLE:• In a city of 1 million people, crime has a daily cost.• Police officers reduce the crime daily, creating a

daily flow of benefits from reduced crime.• One police officer is not enough. • 10,000 police officers is too many.• There is an optimum number of

police that will optimize the rate of flow of benefits (the USEFUL power).

POLICE BEN

EFIT

S

1 10,000

The Goldilocks Hypothesis(A key component of the MPP)

Goldilocks Curves(Plot of Puseful versus )

INCOMECOSTS

BENEFITS

USEFUL POWER & POWER INDEX

EFFICIENCY

PLOT: POWER INDEX VS EFFICIENCYPLOT: I,C&B VS WORKERS

Goldilocks Curves(Plot of Puseful versus )

Gallery of Goldilocks Curves(Plot of Puseful versus )

Co-Evolution of a Trophic Web

Selection For:• Maximal average Pu

• Minimal average Pw • Minimal average entropy

production per event

LOWER LEVEL- Per event effects

Odum and Pinkerton

POW

ER

CON

SIDE

R 3

ENER

GY

PATH

WAY

SBI

OM

ASS

OF

THRE

E PA

THW

AYS

THE MPP – CO-EVOLUTION AT MANY LEVELS

SYSTEM LEVEL

AGENT LEVEL

PROCESS LEVEL

INTER-SPECIES GOLDILOCKS CURVES

DETERMINE FITNESS OF ENERGY TRANSFER

GENETIC DIVERSITY PROVIDES VARIATION IN

GOLDILOCKS CURVES

MAXIMUM USEFUL POWER

MAXIMUM WASTED POWER

INTER-SPECIES ENERGY TRANSFERS EVOLVE

ORGANISMS EVOLVE

END-TO-END ENERGY PATHWAYS EVOLVE

THE ENTIRE SYSTEM EVOLVES

POWER DETERMINES FITNESS OF ENERGY

PATHWAYS

COMPLEXITY PROVIDES VARIATION IN POWER OF

ENERGY PATHWAYS

Galbraith’s Theory of the Firm(As explained by the MPP)

Excerpted from: http://economistsview.typepad.com/economistsview/2006/04/john_kenneth_ga.html

• The neoclassical theory of the firm concludes that … firms attempt to maximize profits.

• According to Galbraith:• this may be true in the market sector, where owners

of small firms actively manage their enterprises, but • does not describe the far more important planning

sector – the 2000 or so largest firms that produce over half of society's output.

• The central protective purpose of the firm is survival:• to earn a profit sufficient to keep most stockholders

relatively happy, and • to provide sufficient retained earning for investment

and growth.

A

B

Galbraith’s Theory of the Firm(As explained by the MPP)

A)Staffing

level with maximum efficiency

B)Staffing level with maximum flow of returned benefits (Max Power)

Complexity Enhancing Effects of the MPP(Adam Smith’s Invisible Hand Revealed)

• Innovative Variation: sophisticated and innovative business models may enhance the power of an entire supply chain

• Such complex supply chains will persist and grow, increasing the flow of energy and the average complexity of the business milieu.

COMPLEXITY POWERThere seems to be some sort of positive feedback between power and complexity.

E&$

E&$

E&$

E&$

E&$ Barter

Commodity Money

Gold and Silver Coins

Electronic Trading

Bills, Stocks, Bonds

Risks, Futures, CCOs, CDSs

E&$

RISI

NG

CO

MPL

EXIT

Y AN

D CO

ST O

F M

AIN

TEN

ANCE

THE MPP AND RISING COMPLEXITY EXAMPLE – A MONETARY SYSTEM

E&$

E&$

E&$

E&$

E&$ Barter

Commodity Money

Base Metal Coins

Electronic Trading

Bills, Stocks, Bonds

Risks, Futures, CCOs, CDSs

E&$

FA

LLIN

G CO

MPL

EXIT

Y AN

D CO

ST O

F M

AIN

TEN

ANCE

THE MPP AND FALLING COMPLEXITY EXAMPLE – A MONETARY SYSTEM

E&$

E&$

E&$

Teleology and Science• Teleology – The consideration of purpose,

intention or plan as a causative agent.• As part of the Renaissance, at the birth of

science, in the 1500s, it was decided that all exogenous teleological causes would be excluded from consideration.

Teleology, Science and Business• NCE ASSUMPTION: People succeed in

business because they intend to, and make plans to succeed.

• THIS IS CLEARLY A QUASI-RELIGIOUS TELEOLOGICAL, BUT FALSE, ASSUMPTION – Who among us plans to fail?

The old “free will versus predestination” conundrum.

Pruning Effects of the MPP(Adam Smith’s Invisible Hand Revealed)

• Business Model Pruning: those supply chains that consume matter and energy at the greatest rate (at maximum power) will persist, dominating existing markets and expanding the most quickly into new markets, driving others out.

• Teleological Pruning: those purposes, intentions and plans that align with the effects of the MPP will persist, while those that do not so align are pruned away.

TREE

OF

GOO

D IN

TEN

TIO

NS

AND

GREE

N B

USI

NES

S M

ODE

LS

NCE

MY POINT IN ALL OF THIS?• Our global economic system is

NOT REMOTELY CLOSE TO SUSTAINABLE.• We are captured and being dragged

along by a complex, powerful and remorseless dynamic that automatically thwarts all attempts to stop it.

• If we don’t put time and energy into understanding it, we are doomed to go with it, right to the final curtain.

QUESTIONS?