Is humanity’s most dangerous technology debt?

If there is a theme running through my diverse interests, it is stability. For those who understand how ecological systems and evolutionary processes work, this should be entirely unsurprising: the living systems that persist today are those that are stable at multiple levels. The interactions between populations in a community must be stable, individual organisms must maintain their stability, and even the organ systems of individual organisms (for those that have organs) must maintain their local stability. Evolution is about maintaining stability in the face of entropy.

Humans are not above the stability requirement: we depend on maintaining the stability of our organ systems, our bodies as a whole, the social systems we inhabit, and the ecological systems with which we interact. But humans have cheated the usual limitations on stability by introducing a new kind of evolving entity to the world: culture. What is remarkable about culture and the technology that it produces is that it can allow us to maintain our biological stability in the face of extremely destabilizing natural forces. Medical technology allows us to survive an infection that would have killed our ancestors (death is terribly destabilizing!). We have mobilized fossil fuels to produce synthetic fertilizers that artificially stabilize agricultural systems that would have long ago collapsed. And a complex and diverse system of economic, legal, and governmental ‘technologies’ allow us to maintain societies that would never have been stable in even our most recent evolutionary history. Cultural technologies keep humanity stable.

This is not to say that every element of culture is stabilizing. Culture itself is a delicate combination of technologies, and the stability of one aspect of culture is contingent on the ‘cultural ecosystem’ that exists in local space and time. As others have pointed out (Blackmore 2000), parts of culture can be destabilizing and yet still persist. These ‘cultural parasites’ are just like biological parasites: they can be quite stable in their persistence so long as they hitch a ride on a very stable host system and do not over-exploit and destabilize that host. The behavior of biological parasites is understood far better than the behavior of cultural parasites, whose ‘infection’ of humans is rarely considered from the perspective of stability.

Of late humanity has seen a lot of instability. In particular, human economic systems have begun to show signs of imminent collapse, as unsustainable levels of debt have massively depressed our economic activity. In Western economies, people are losing their homes because they paid more for them than they were actually worth, many more people who want to work cannot find a job and therefore have no source of income, and because fewer people are working there is a much-reduced tax base with which to pay for the common social services that keep our society stable. Protests (or ‘riots’, depending on your political bent), the first sign of a destabilizing culture, have broken out in response to the paired insults of social austerity and lack of economic opportunity.

For those of us who live inside these cultural systems, the reality of recessions or depressions goes unquestioned. There are economic cycles of boom and bust, and this is just ‘how economies work’. While it is understandable that we will have difficulty seeing our own cultural system through an objective lens, I have to point out that accepting the inevitability of these sorts of destabilizing economic cycles is for most people more an act of faith than an insightful understanding.

I want to shake us out of this faith-based acceptance of our ‘economic realities’ and take a good look at what is actually going on in our social and economic systems. Let us just step back for a second and forget everything we know about our own culture, and pretend for a moment that we are alien ecologists visiting human civilization to understand why it has been a stable and ever-expanding system on the planet earth. We will of course have to consider the inputs and outputs of the system as well as the currencies that flow within this system. Like other ecosystems we have studied in other solar systems, there are material and energetic flows within the human system; in fact, the sheer amount of energy and matter harnessed by human civilization is remarkable. Thanks to its ability to tap into an extraordinary solar energy savings bank (fossil fuels), the human economic system has managed to obtain and manipulate impressive amounts of matter, building complex and very stable cooperative systems. A key adaptation that has allowed humans to create this impressively-stable complexity has been culture, a rapidly-evolving subsystem that enables humans to create novel tools to solve emerging problems that impede further progress and prosperity. While humans still devote a large amount of their active time to working, a culture with the tools to harness cheap energy has allowed many humans to maximize the output of their labor, raising the overall abundance of resources available to humans in general. Cooperation amongst truly staggering numbers of human beings has added to the success of culture, as technologies and skill sets are shared across large social boundaries. Human societies are composed of complex, integrated economies that appear to work like a well-oiled machine. Even to our inter-galactic alien ecologists, the system that is human civilization has some pretty impressive attributes.

But upon closer examination, some very strange features of this system emerge. The first has to do with how human labor functions: there is tremendous heterogeneity in the amount of labor each human expends. Some work almost unceasingly, pausing for little more than sleep and basic sustenance. Some work moderately, spending a lot of their time doing things that do not contribute to the overall functioning of the system. And a surprisingly-large fraction of the population does not devote any labor to the maintenance of the system on which they depend for survival. While some of these non-laborers suffer from various disabilities that explain their lack of contribution, a surprising number actually have substantial skills to contribute. In fact, the skills possessed by these non-laborers represent a substantial investment on the part of human societies, as hours of labor on the part of families and communities were required to build these skills.

Digging a bit deeper to try to understand the presence of these non-laborers, we discover that not all non-laborers are identical: some do not care to work and yet enjoy tremendous access to resources (and thus a very stable existence) while others want to work but cannot because they are unable to find anyone to value their labor. How could this be?

It gets weirder: for those who are working, the rewards provided for an hour of labor are drastically variable. This might make sense if the more highly-valued labor truly was of greater importance to the stability of the system than the less-valued labor, but this does not seem to be the case. The labor of some people is valued at a rate thousands or even millions of times greater than others, and the people who perform this much-valued labor  do not seem to do jobs that are particularly critical to the overall stability of the system.  In fact, the labor that produces the basic necessities of life (food, shelter, and security) is among the least valued labor in the system. How could this be?

It gets weirder still: there is an abundance of housing and an abundance of food, and yet some people have no home and some people do not get enough food to eat. Some people are kicked out of their homes, and then those homes sit vacant. Meanwhile, other people struggle just to pay for their housing costs. Some people own multiple homes, while others have none. While there is plenty of food being produced on the earth, people still go hungry. Many people starve to death, while others suffer from diseases caused by eating too much food. How could this be?

If you are an alien ecologist looking at this system, you have to be saying to yourself “who built this illogical monstrosity, and how is it still functioning?”.

The reality is that our current economic system was not built, but evolved incrementally from earlier and simpler economic systems. Like a lot of systems we see in nature, our economic system is the result of a lot of happenstance and dumb luck. It is a Rube Goldberg-like contraption: it does work, but that does not mean that it is the optimal system or that it will be persistent. Admittedly, people have tried to design this system to be stable, but only through a lot of trial-and-error and frequent failures. It is true that our current economic system has out-competed other economic systems of the past, but this does not mean that it is guaranteed to survive forever. Like so many other large-scale natural systems of the past, our economic system is liable to crash.

And the reality is that our current economic system is not functioning, and unless we majorly alter the complex culture that governs this system, it is doomed to collapse.  Although there are undoubtedly many factors that influence the stability of our  social system, I want to suggest that humanity is only in the current economic crisis because of the way we deal with debt. Based on the resources available to us (in particular just the sheer size and educational wealth of the human labor pool), we ought to be at our most stable (and brilliant) moment in our evolutionary history. If tiny scattered bands of humans could manage to provide for their own stability and persistence 40,000 years ago, it is absurd that our current human population would collapse due to lack of effectively-employed labor. But we have constructed an unsustainable and inherently unstable economic system because of the way we deal with debt.

In theory, there is nothing inherently wrong with loaning money and receiving a little bit of interest in return for that loan. But we have allowed debt to play such a prominent role in our system that debt threatens its stability, producing counter-intuitive and surprising ‘economic realities’. The problem is this: unless properly regulated, debt creates dangerous positive feedback loops. In small amounts that are evenly spread throughout the system, loans can stimulate economic growth. This can be seen in the success of micro-loan programs in the developing world, which often allow poor people to become successful entrepreneurs. But the problem with loans is that they tend to aggregate wealth among those who already have wealth. At some level of wealth, individuals no longer have to work because they can gain all the income they need by simply living off the interest on the loans they have made. This is great for these individuals, but not so great for the system: these wealthy individuals no longer work, and the workers receive a lower net reward for the labor they provide within the overall system. To put it another way, those who do nothing more than loan money are free-riders on the overall system. If we want to consider our own economic system as an ecosystem, non-laborers who derive income from debt-payers are parasites, and only so much parasitism can be present in the system if it is to remain stable. What makes economic systems particularly susceptible to parasite-created instability is that left unchecked, wealth tends to accumulate. This means that wealthy individuals can gain more and more by parasitizing those who work.

There are also strange time-delayed effects on the economic system caused by debt. We see this in present-day Western economies, where societies have promised rewards to previous generations for their labor but are now unable to deliver those rewards despite having plenty of labor. We see really strange phenomena, such as that which exists between the United States and China. For years, the United States received the products of cheap Chinese labor, and the Chinese accumulated a large amount of American debt. One would think that eventually the Chinese would want to call in this debt, exchanging it for American labor. But the problem is, the people who enjoyed all the products of that Chinese labor are no longer around to pay it back, and decades of cheap Chinese labor has so transformed the American economic infrastructure that there isn’t even a mechanism by which Americans could repay Chinese labor. Debt has created an unsustainable system in which Chinese laborers produce and Americans consume, and unhealthy imbalance which is good in the long run for neither country.

Perhaps the least sustainable and most-distressing feature of debt is its ability to create bizarre inter-generational inequities. This can be seen in the United States, where the older generations have burdened future generations with mounting debt. In order to enjoy a high quality of life, these earlier generations have promised the labor of future generations to the those individuals wealthy enough to lend money in the present. The idea that parents would compromise the future prospects of their offspring is so evolutionarily-counter-intuitive that it is hard to believe that this is what has been done. But because our economy is based on allowing large amounts of debt, this is exactly what has happened, and the future of this country’s present generation is threatened by overburdening debt accumulated by the previous generation.

The common economic wisdom is that unsustainable debt will cause mini-collapses that stabilize the system (in other words, the system is self-correcting). Those who invested in unsustainable debt will lose their money, and the equilibrium of the system will be restored. I am very skeptical about this claim. In the most recent economic collapse, the very wealthy have managed to maintain their wealth, while poor people are getting poorer. My worry is that unsustainable debt will continue to spiral until the entire economic system collapses, leading to major destabilization of society.

We have a problem.

To put it in the language of game theorists: our system cannot persist under the weight of so many freeloaders.

To bastardize Cool Hand Luke: what we’ve got here is a failure to innovate.

I think the biggest problem of our economy is that it is not well-designed. I realize in saying this that there are few examples of large-scale systems engineered by human beings that are sustainable (we certainly do not know how to engineer ecosystems, as demonstrated by the failure of the Biosphere 2 experiment). But if we are to survive, we need to make an attempt to engineer social and economic systems that are stable. I would suggest that regulating the way that debt functions in our societies is critical to engineering this stability.

So what can be done?  First of all, I think we should identify what properties a more sustainable system would have. Given the many challenges that humanity faces, the system should utilize the skills and efforts of all of its citizens. This means that no one who is capable of working should not be working. We should try to minimize unemployment caused by insufficient opportunity or overabundant wealth. We should strive for a system in which labor and effort are consistently and evenly rewarded, so that the labor needed to maintain the entire system is incentivized.

Here are a couple of things I can imagine would begin to accomplish these goals in the United States. We need to change the way we tax income. We have this perverse taxation system in which income derived from investment is taxed at a much lower rate than income derived from labor. If you want to incentivize work, this is directly the opposite sort of taxation system you would want to have. The perverse incentives created by a system that taxes investment income at a lower rate may actually have caused our current economic disaster: because there are such rewards for earning money via speculation and  income earned from that speculation is taxed at a much lower rate than actual labor, we have encouraged behavior that destabilized the economic system. I am not suggesting that investment income should never be allowed, but it ought to be taxed at a much higher rate in acknowledgment of the fact that accumulating wealth can destabilize the system.

It would also be helpful to have a radically more progressive taxation system when it comes to overall income (irrespective of where that income came from). On the one hand, there is no doubt that pursuit of higher income is a motivator for some positive social efforts. I do want the doctor who operates on me to be well-rewarded for her excellent work. However, at some level, excessive reward does not incentivize positive social effort. And as outlined above, obtaining enough wealth eventually promotes sloth and parasitism. Fortunately, there is a simple solution to this problem: allow radically-higher taxes on excessive income to prevent the excessive accumulation of wealth. Similarly, allowing large amounts of wealth to be passed on to one’s descendents only propagates the kind of wealth concentration that leads to threatening levels of debt. We ought to have fairly high taxation on inheritance in order to prevent this kind of wealth accumulation.

Another example where our system of taxation might help us avoid unsustainable debt loads can be found by looking at our property tax system. We use property taxes to fund a lot of critical social functions such as education, so maintaining a strong property tax base is critical to stabilizing society. One way to radically increase the level of property tax income we bring in as a society would be to tax property that is owned to generate investment income at a much higher rate than property that is owned for direct use by a homeowner or business owner. Not only would this bring in more tax revenue, but it would also disincentivize the kind of investment in property that makes the cost of housing skyrocket for people who have to rent.

We also need to stabilize the manner in which long-term collectively-held national debt is accumulated. Clearly some forms of national debt are really important, for instance when that debt is used to invest in infrastructure that will last for many years to come. So we cannot simply say that our country, our states, or our local governments should never accumulate debt. But we need to make sure that any debt that is accumulated will benefit future generations as much as it benefits current generations (if not more). This should not be all that difficult to figure out: some loans are clearly aimed at long-term investments, while other loans are simply meant to pay for things now that we cannot afford. Some sort of balanced-budget requirement is needed, but with the provision for prudent future investment.

I know that I am far from an economic expert. But I do understand system stability, and I think it is pretty clear that our current economic system is not sustainable. Above are some thoughts about what we might do about it with basic social policies.  I am curious about how trained economists, political scientists, or other social scientists would have us restore the sustainability of our socioeconomic systems.  I am far from certain that my solutions would work, but I am certain that we have the resources in our system to make it quite sustainable from an economic standpoint. We just need to wake up and recognize the basic assets we have, and perhaps forget some of the dogma that we have been taught.

There is final irony here, and that is that the recent economic downturn has — thus far — been the only substantial cultural event that has slowed our ever-quickening march toward substantial destabilization and perhaps extinction. As outlined above, human civilization is not actually under threat of economic destabilization, but should we continue on our current path we are almost certainly headed for ecological destabilization. News flash: our current economic and social systems are ecologically unsustainable. There are many facets to this story, but the most glaring is the source of energy we currently use to stabilize our remarkable human-made ecosystems: fossil fuels. We used to worry that this remarkable energy source would run out (an event that would leave a substantial proportion of our global population to starve), but now science has made it clear that we will make the temperature of the earth inhospitable to humans and in particular human civilization well before we exhaust the existing supply of fossil fuels (especially coal). While the recent recession does nothing to change the direction of our fossil-fueled march towards self-annihilation, it has slowed that march for the same absurd reasons that it has curtailed the expenditure of human effort.