Transition: a rough societal perspective and rant

By Ian Page -

This waffly note identifies some fundamental structural problems with our civilization and suggests some of the principles that might be a guide to sorting it out.

One way of looking at the world is that we have built up a lot of problems that involve considerable future costs to manage and that we need to understand how and whether these costs will be handled.

The fundamental reason for this appears to be buried deep in economic and accounting theory in that capital investment is assumed in the production equation to automatically create growth and thus more capital- ie infinite growth, and that future expenditure is discounted compared with current expenditure on the assumption that we will all be richer in future and more able to pay for it. This in turn is fudged in inflation calculations by allocating not just a cost to items in the basket but discounting them by a quality or value. For example, a light bulb is clearly more expensive than a candle but regarded as cheaper because it provides a better quality of light. This quality factor can be fiddled so that a $1200 iPhone, can be regarded as having a much higher value than a $100 no-name in India that provides basic facilities. Even though most of the difference is simply profit inflation statistics are structurally underestimated.

An additional factor is the creation of the limited liability company. There are some good aspects of this but a nasty side effect is seen in many places particularly mining, oil and gas,  and some aspects of the chemical industry. A mine creates settling ponds with earth dams where unpleasant byproducts are stored in the hope that they will magically vanish .. The mine finishes and the mining company is liquidated. The dam breaks leaving the clean-up activity to the state. In Pennsylvania, a company has bought up the rights to thousands of fracking gas wells. These are depleted and produce very little gas. The original company would have been liable for the cleanup, permanent capping, and removal of all these wells which would have cost a lot. So they sold them to this company ( probably paid the company to take them off their hands), which reports them as still active ( although at a very low level) thus delaying the cleanup costs. When Pennsylvania tried to get them to actually clean up the wells ( many of which have been lost, hidden by undergrowth) the company threatened to go bankrupt resulting in a negotiated settlement with a tiny proportion of the wells each year being cleaned up , far fewer than the wells being added. At some point, the company will go bankrupt, with the wells still uncapped.

The US superfund was a similar example of the state having to pick up unanticipated costs.

The UK North Sea is littered with oil and gas platforms and pipes. and is rapidly running down. We have seen the large oil companies who have ongoing operations elsewhere to cover the costs of decommissioning, selling the properties off to smaller companies who have the opportunity to go bankrupt at the end of productive life transferring the clean-up liabilities cost to the state.

Montana calculated that the ongoing cost of cleaning up the gold mines, tailings dams, and watercourses, already exceeds the value of the gold extracted, relatively little of which ended up as state income.

Another issue is the widespread practice of self-reporting. For example, the US EPA requires oil and gas companies to report their emissions. Satellite maps have shown that most companies underreport by at least 50% and some by 90% which has seriously messed up the climate models.

Self-reporting in the US agriculture industry, also shown by satellite observations, has underestimated the methane emissions of cows by at least 50% putting it well up the priority of climate action. This has been enhanced by the effective ownership of the federal agency by the cattle companies, preventing scientists within the organization from reporting their results.

This demonstrates that self-reporting simply doesn't work and has no effective censure costs to the companies or responsible individuals.

The implication of all these examples is that the structure of the limited liability company and its variants is systematically used to transfer current company costs to future state costs and is used in many creative ways even as far as destroying company pension funds.

Energy economics gives a different view. It's very hard to store energy ( even gas and oil have only limited storage potential compared with consumption and electricity has essentially no storage potential as a proportion of total consumption.)  Its effective value is thus very time and use-dependent at any moment. Thee new production equation contains essentially only energy in various forms  ( as 500 years ago), and as we transition from fossils there is a strong possibility that we will go through a valley of death phase where energy availability actually decreases for a decade before stabilizing or increasing as renewables become the majority of the energy supply, This must also have an effect on depreciating future costs- possibly eliminating this science future cost in energy will be the same as current costs to a first approximation.

Thus our assumptions that we will be richer in the future than now may be false. A reducing finite or too slowly increasing energy supply will be divided amongst an increasing number of people leading to average income and wealth decreasing. There is some evidence that this has already happened in some rich countries such as the US where despite increasing GDP, the average income ( deflated) of most of the population is not greater than it was in 1970, though a tiny proportion of the population is doing very well.

If we now look at the results of this we see why we have built up so many problems.

1. Bridges have been built with an expected life of 30 years, on the basis that in 30 years it will be much cheaper to replace them. Actually what happens is that after 30 years the bridge is essentially rebuilt in place with expensive maintenance and traffic disruption and the resulting costs, as for a variety of reasons the money can't be found to replace it. A UK example is the old Severn suspension bridge that has had most of its cables replaced one at a time and has a lot of welded plates over various parts of the structure where it has rusted through. This compares it with the Clifton Brunel suspension bridge built in 1864, which still has its original second-hand suspension chains from the Menai Straits bridge and is still in operation. It's not clear whether the Brunel Bridge was over-engineered or just well-built, but most of Brunel's structures, tunnels, and pumps are still in use, or only recently replaced by more modern pumps. The US has tens of thousands of bridges that are close to the lowest functional state before closure or collapse.

2. Dams are being built ( particularly in mining)  with a short life ( e.g. just packed earth) with no intention of replacing them. before the company vanished. The US also has tens of thousands of these waiting to collapse.

3. Buildings ( in the UK) have recently been found to have been systematically built for some decades with a reinforced concrete structure with a known life of only 30 years after which they fail catastrophically. This includes houses, schools and hospitals. This saved construction costs but increased future costs. The builders no longer exist in many cases so no liability..The repairs take money from operating the schools and hospitals, or homeowners and businesses.

4. Many buildings are being constructed today without solar panels, proper insulation, and gas boilers. which Within 10 years will need to be replaced by heat pumps or some other nonfossil system. It is much cheaper to incorporate these functions in the design of the building than to change it later, but more profitable for the builder not to.

5. Horizon 1 asset stranding is a major issue in most of the economy. During a transition e.g. from gas power stations or nuclear to wind and solar, from ICEs to EVs,  from Bessemer steel to electric steel, from long-distance transport to local manufacture, huge very long-term fixed assets become redundant. Where these have already achieved their planned life, or where conversion is simple,  this is not a problem as they are already paid for, but as the transition is occurring faster than businesses anticipated, the natural transfer of financial assets from H1 to H2 and H3 doesn't happen if H1 has not paid off the asset.  A recent paper looked at one part of this, the effect of the write-offs on pensions and personal wealth. The basic conclusion was that since in the US most of the wealth is owned by a small proportion of the population, and the rest have very little wealth, the costs are borne by the wealthy losing a small proportion of their wealth. I suspect that the paper ignored the loss of income and disruption of the workers,  assumed that the pension funds were smart enough to get out of the companies that were building up stranded assets, and that the rich are not devious and won't find ways to transfer the cost to society!

6. Maintenance: Governments and companies usually look at the capital costs of large projects, and ignore the maintenance or tail cost of the asset existing. on the grounds that that will be paid out of the increased production as a result of the existence of the asset. A recent report claimed that about 7% of world's GDP is spent on fixing the results of rust. I suspect that an estimate of the costs of maintenance and replacement of assets would be a lot higher. Eg a new fridge in the UK is supposed to live a life of 8-10 years, a gas boiler 10 years, and heat pump 15 years and so on. Just these items would imply a continual figure of 10% for the replacement of the initial asset.

7. Waste: industrial commercial and consumer waste, and nuclear cleanup, are a huge cost, if you include collection sorting recycling and secure disposal.  One must also include sewage, and pollution runoff However the past stock of waste in the form of atmospheric CO2, methane, and chlorinated and fluorinated hydrocarbons, has huge future costs that have not been included in their original creation.

8. The huge hidden costs of unnecessary training and variation. Many years ago when PCs cost about $10K, the Gartner group concluded that the cost of owning a PC was another  $10K per year, beyond the purchase price, in businesses. This was caused by lost productivity -people asking coworkers how to use some feature, bugs, constant changes of the OS and applications, lost time trying to work out where some feature had gone, and so on.  One can observe that say Windows 7 SP2, and the office software that went with it delivered far more than the functions that the vast majority of people needed and could have been frozen forever. Other than security fixes ( generally due to bad design or implementation of Windows or internet protocols,), developments since then have largely been only to the financial advantage of Microsoft and Intel for most users, yet have caused continuous problems on a monthly basis, also requiring larger more powerful machines every few years to do the same jobs.. Similarly, the massive increase in power needed for modern games is largely to make the screen more impressive, rather than improve the gameplay. with large game companies spending around $1B to make triple-A games many of which despite amazing graphics fail because the game itself isn't interesting.This also results in frequent complex crashes of the operating system. As a techy, I'm reluctant to say freeze development, but I think there is a strong case for freezing the user and application interface and just improving the hidden security performance and resilience of Windows since this would remove the most expensive aspect - hidden training and user costs. The only purpose of most of the Windows 8, Vista, 10,11, and now 12 is to allow Microsoft to extract more money from the customer- for the same useful functionality. We can see that Windows  11 has been a failure in the market compared with 10.With few users and business users voluntarily changing.to either.

9. Unnecessary variety in products. Variety is good, yes?. Some of it is- true. But if you want to buy say a kettle there is an amazing variety of shapes, colors, and controls. They all boil water. Because they are all essentially indistinguishable in function, a great deal of unnecessary design, low volume manufacturing, transport, marketing, advertising, customer decision time and stress, and different recycling streams is created. A huge amount of GDP is involved, none of which results in new capacity.  Again I don't want to stop innovation if some valuable function is added ( eg switching off the kettle just before the water boils and using the residual heat flow from the element to bring it to the desired temperature saving energy, or heating the water to a desired temperature below boiling) but 50 different colors and ten different ways of switching it on add no functional value while creating unnecessary consumption of energy in production 

The conclusion of these observations( and many others)  is that the world is constructed legally and financially to invisibly transfer costs to the state, to consumers, and to the future, on the basis that the future will be more wealthy and able to handle it., Meanwhile, it is using energy incredibly inefficiently for unnecessary functions.

I suggest that increasing wealth is a gross assumption that needs validation, and there is some evidence that it is fundamentally wrong and the cause of a wide variety of current problems..

This is the point in a note where I usually like to say how to fix a problem but the situation is too tangled and embedded for ready technical solutions, or minor tweaks!...

There are some starting principles

1. Where technology is fairly stable things should be designed to last, be easily and cheaply repaired, and easily recycled. I've written about it before. Firstly remove the deliberately life-limiting features such as designed in critical but weak components ( very common), and make maintenance accessible without moving the main unit. Don't use steel for structural components- it rusts, standardize everything, use simpler components where the performance is not critical, don't add flourishes that don't improve performance, and so on. Let's call it Roman Engineering- I found a cement culvert in Wales that's still working perfectly well after 2000 years with only a little peripheral concrete recently added). Roads need to be rethought. Having to repair them each year after ice and snow and wear just seems wrong. Again there are still remnants of Roman roads that have survived everything. They wouldn't handle a car or wagon, but they are still walkable if bumpy, and could be used by a "spider cart"

2. Skin in the Game: The agency problem in economics and business, and the ability of individuals and companies to run away from the problems they cause needs fixing. Hammurabi's solution is perhaps a little draconian, but the concept of an individual having a lifetime and unlimited responsibility for the results of decisions that affect the world is an important one. and also the concept that introducing new chemicals into the world in volume needs serious external validation and a long-term review process associated with building up an escrow corresponding to the cost of cleaning up the implications. This is a case where Napoleonic law, providing innocence rather than guilt is appropriate." I didn't know" isn't normally a defense law, but it is for businesses.

The pharma industry has a  process, although it fails because the validation is in the hands of the company wanting to offer the product, but a process, proportionately based on the scale and potential damage and energy cost to the environment and value of the innovation is needed.  

3. Marketing: most marketing is not to make customers aware of radically new valuable functions but to maintain current sales- eg Coca-Cola and Pepsi spend massive amounts of marketing money to maintain their current relative position, selling essentially the same product. Advertising, most of which is wasted, has a huge cost to society. For example 15 minutes of adverts per hour on terrestrial TV wastes 25% of consumer time for no value... Most of the mail I receive isn't even opened.but had to be designed, printed, packed, carried, delivered, and recycled. Marketing has a value, to make people aware of a product or category, when they want it but not otherwise. It also can be amazingly expensive. For example, a blockbuster film release may take nearly a billion dollars to produce, but half a billion dollars in marketing . Marketing funds TV, the internet, streaming, magazines, newspapers, and supermarket shelf space ( brands pay supermarkets for shelf space). I don't know how to disentangle this but it must be a major contributor to nonuseful consumption of energy and nonproductive GDP. So a principle would be to make marketing carry all the costs of the infrastructure it relies on while reducing the variety and value of brands. ( In weak societies branded water has health value, but where state standards exist, there is no value. )

4. Patents/copyright/trademarks/rights: I will assert that most patents have no positive value and major negative value... The original purpose was to stop guilds from hiding their technical innovations so that they could be spread through society and built on by others. In return, the inventor would get a reasonable return on their efforts and the chance to build out the production of their invention. Similarly, copyright was intended to allow an author to achieve a return from their efforts, and trademarks were intended to allow a customer to identify a quality they could assume.  Trademarks still have some value, but from my own experience in two different industries patents have been trivialized ( round corners on-screen windows), created patent-breaking functions ( adding a few redundant atoms to a valuable chemical that makes no functional difference but allowing the company to sell a competing product), and copyright has been extended way beyond its original intent to the benefit mainly of publishers, not authors. It has also created expensive patent wars between companies e.g. Samsung and Apple. I feel that this has all created an entire unnecessary industry ecosystem- making tiny differences in products to avoid patents which are then marketed as meaningful differences, and a legal industry writing,  breaking, and reviewing, patents that make creating a product a minefield. In the film industry, there is a whole industry in rights clearance- basically, any place, person, voice, sound,  or product that appears on a screen has a complex industry of agent negotiations, regional arrangements and so on that can take months to resolve for a film and make it only accessible in some regions and channels..  I feel that most patent applications should simply be rejected unless they hold a significant functional value as well as novelty and significant investment, and then should be held by some state or higher function in trust for a very limited time appropriate to their value and novelty. ( Stevenson, the inventor of the low-pressure inefficient steam engine, claimed that the Newcomen's high-pressure efficient steam engine used for Cornwall mine drainage broke Stevenson's patent ( it didn't). The court cases bankrupted Newcomen and resulted in his suicide. even though his was the better engine. Patents are frequently used to put a rival out of business simply because during a long-running court case, the accused has to carry a large potential liability, in addition to the legal costs. and distraction. This whole area is often said to be very complex. I feel this is because a return to the principle that a patent exists for the good of society has been lost.

I'm sure there are other better principles that could be developed, but I think that taking the overall long-term good of society as the principle guide, with the allocation of benefits to useful innovation according to their social value, and innovation ( not novelty)  would be where I'd start,.and seems to have been lost.

I have no idea how to do it!

Sorry for the long rant. It's an attempt to point out the way the world has gone wrong and some hints as to what might be directions to fix it before it destroys civilization.