Dune, Economics and Podcasts!

Loyal Followers!

The Falcon Files made friends this weekend with the great folks over at Geek Progress and the result was some great conversations on Political Economy, the Middle East and Dune. Click here to give it a listen and be sure to visit some of there other works.


Quick edit: It seems some people have had a problem with the links working and I’ll look into that. In the meantime here is a the site: geekprogress.com.



Violence and the State: Protecting and Threatening

Iraq_Military_pic_1One of the fundamental questions in conflict today is simply, “How do we develop a state that is strong enough to deter rebels and attackers while assuring the citizens that its power will not be used for ill?” This problem has reared its head in Iraq, Ukraine and now…the U.S.

The fundamental problem in Iraq is not the government did not have enough coercive power but that the governors were using that power against the Sunnis. The Iraqi government could have assured the Sunni population that force would only be used against those that opposed the government. Instead, promises were broken and the focus was on exerting dominance, which the reduced both the capacity and legitimacy of the army. The Sunnis who had joined with the U.S. in 2007 have now opted with the Islamic State.

The balance of power has shifted in Ukraine conveniently after the Presidential election as the government has begun to do a better job of assuring the people of Ukraine that they will only harm those who are fighting the government. The use of violence is not as selective as it could be but to many people the government has begun to seem like a better option.

The Israel-Gaza is an extremely complicated conflict but one clear aspect is the difficulty of balancing deterrence and assurance. Hamas as shown little interest in promising Israel anything and Israel insists its only trying to deter attacks. Whether or not you believe this to be true one of the factors of deterrence is that status quo must seem attractive. There must be something to go back to. After all deterrence is both a threat and a promise…”If you do nothing bad, nothing bad will happen to you.” Or, “if you stop we can go back to the status quo”…but what if I don’t like that status quo?


Democracy is often touted as a solution to this problem however even democracies struggle with this balance. The situation in Ferguson illustrates this very well where protests and riots have broken out over the killing of a young African-American male. Police need to have the capability to use force but that force needs to be backed with legitimacy. Furthermore the pattern in the U.S. suggests that the wrong kind of discrimination was at work in Ferguson. Rather than being discriminate in their use of force the police seems to be targeting people on the base of race as in New York.

This is why due process is so vital to a legitimate state. Due process is not just about justice…but also about being careful that the targets of state power are deserving. Like Democracy, due process is not perfect…some innocents are convicted and some guilty go free. But it is much better than when the use of violence is applied wholesale and unfairly by the state.

Limits to Growth III: The Steady State

If there are limits to growth and therefore how far our economies can grow what can be done about it? Economist Herman Daly has a possible answer in the Steady State Model.

“An economy with constant stocks of people and artifacts, maintained at some desired, sufficient levels by low rates of maintenance ‘throughput’, that is, by the lowest feasible flows of matter and energy from the first stage of production to the last stage of consumption.”

Daly, Herman. 1991. Steady-State Economics, 2nd edition. Island Press, Washington, DC. p.17.

What Daly is describing is an economy that has reached a stable population level and a low-level of consumption. For most of human history our struggle has been about getting enough resources to survive but now we have surpassed that need. We have more than enough for everyone and are reaching the point where continuing to produce is a danger to us all.

The Steady State would be smaller in size, consumption and environmental impact as it would need less to sustain itself.  It’s as much a new form of economics as it is a new way of evaluating progress and value.  GDP would no longer be an adequate measurement  as production and consumption are not the pillars of progress in the Steady State.

The massive accumulation of wealth needn’t be the focus of a society and in face the Steady State requires that it not be.  Money could exist but massive accumulation tends to promote inequality which breeds an unstable society.

Achieving a steady state economy requires adherence to four basic rules or system principles:

  1. Maintain the health of ecosystems and the life-support services they provide.
  2. Extract renewable resources like fish and timber at a rate no faster than they can be regenerated.
  3. Consume non-renewable resources like fossil fuels and minerals at a rate no faster than they can be replaced by the discovery of renewable substitutes.
  4. Deposit wastes in the environment at a rate no faster than they can be safely assimilated.

The Steady State is a simple concept but politically is extremely difficult.  We’re not just discussing a policy change but instead a changing of principles and values.

Limits to Growth II: The Myth of Infinite Growth

stateofworldMore and more people have begun to question the possibility of human economies ability to grow forever.  The overuse of Earth’s natural resources as well as the destruction regional ecosystems and global ecosystems should tell us that something is wrong.  However many mainstream economists seem to not be concerned with these facts.  They are still claiming that economic growth is not only possible, it’s necessary to improve our well-being.  This maybe true in some cases–no one would argue that Uganda or Pakistan should not work for more economic growth but this distinction should not be generalized.


The problem is that the whole model of macro-economic growth is built on a fatal flaw–we assume that we can grow forever. The theory states that the resources are fungible and substitutable simply put: “Natural resources are not an issue as long as our technology is improving.” This is not only irresponsible, it’s insane.

What will technology use if we run if we run out of the resource which we use to build the resources? Herman Daly put it nicely  “You can not build the same wooden house with half the wood just because you have more or better saws.”

The question now is one of responsibility: do we want to proceed with “business as usual” and naively assume that technology will solve all our problems and run the risk of a catastrophe? Or shall we back pedal and think about the development and balance of Western economies versus those of the developing world?

Limits to Growth Part I: GDP


SONY DSCWith President Obama’s new green policy that seeks to limit carbon emissions there has been and will continue to be heated discussions about the impact this law will have one economic growth in the U.S.

Inspired by these debates the next several posts will discuss the limits of growth, steady state economics, and how we measure growth.

GDP (gross domestic product) is a measure of economic activity which is narrowly understood however this does not stop politicians and policy makers from making welfare decisions and comparisons based on this data.  The basic argument goes like this: GDP is a proxy measurement of how much people can consume and consumption is a proxy measurement of well-being.  We therefore use GDP per capita for comparing welfare between nations and an increase in GDP as an indicator of social progress within a society.  This is a compelling case and we are used to hearing this from figures in authority and the media but it is misleading to think that a higher GDP leads to better social welfare.

GDP is computed as the sum of all end-use goods and services made in an economy during a period of time weighted by their market prices.  Too illustrate if Pakistan began building war drones and hired many people for this skilled manufacturing their GDP would increase. However, would this necessarily make the people of Pakistan better off especially considering that many of those drones will be used on other Pakistanis in the northern region?  Simply put this proxy measure does not measure happiness or well-being it only measures what we can consume. From that definition its GDP is a pretty narrow measure of our daily lives and should be taken to be just that…limited. can-stock-photo_csp10758311

According to Richard Easterlin people do not become happier when they become richer and this has become known as the Easterlin Paradox.  There are many possibilities for why this is true including the idea that a threshold of affluence vs leisure time exists.  If you do not have time to enjoy the fruits of your labor will they truly make you happier? Has this new wealth increased your well-being? Or as Fred Hirsch suggests there could be a correlation between increasing affluence and increasing competition for “positional goods” that can be bought by anyone but not always everyone. This idea creates a consistent need to buy more and more.

Furthermore GDP does not take into account the limits of natural capital.  Since natural ecosystems provide resources like coal and oil and there are limits to them both in quantity and in negative impact these must be considered in the overall measurement.  This is called “greening GDP,” where we subtract the negative impacts from the total GDP. For instance the cost of the BP oil spill in man hours, clean up costs, oil revenues lost and negative effect on wildlife which in turn affects the lives of the locals would all be subtracted from the GDP of the U.S.

Even by measuring some negative outcomes of a consumer based economy as mentioned above GDP does not give us a clear look at well-being.  There have been several experiments that have attempted to tackle that issue such as the Gross National Happiness used in Bhutan. While this one is highly qualitative and has some issues it is a thoughtful approach by a government to measure their people’s well-being. Another is the Genuine Progress Indicator (GPI) which uses a long list of indicators to measure well-being ranging from air quality, crime, leisure time and personal wealth.  GPI also boils all those indicators into one neat number which economists love.

As an economist I’m not saying that we should abandon GDP altogether only that it should be taken as a small part of a larger picture.  A measure of a small piece in a large puzzle that is human well-being.  With that in mind, when politicians threaten to block legislation meant to protect the environment because it could hurt our GDP you should ask whether a high GDP is worth it.  In an economy where we have been taught to consume, GDP not only doesn’t reflect well-being…it could harm it.



Boko Haram & Social Media

m_obama_girls_twWith the recent mass murdering of 310 people and the kidnapping of 276 school girls in Nigeria at the hands of Islamic terrorist group Boko Haram, the world has joined in outrage via social media.  The emergence of the #BringbackOurGirls hashtag may not be offering the help you think and may in fact be harming the people in Nigeria.

Terror is a tactical use of violence by groups or governments to coerce the enemy rather than weaken him militarily. That is, it has little military use but more a strategic use of violence that will “terrorize” an audience by appalling them. When this strategic use of violence is employed by groups like BH the purpose is typically one or more of the following:

1. Incentivize the terrorized audience to pressure a government to change policy

2. Demonstrate a government’s inability to provide security (and therefore govern)

3. Visibility for the org and cause-often for the purpose of recruitment

Terror as a tactic fails then if we “keep a stiffer lip,” as the people of London were said to do during Hitler’s Blitz of WWII, and ignore it. By doing this objectives 1 & 3 are undermined.


The kidnapping of these girls is a dramatic event made for mass consumption. Groups like BH don’t want attention…they require it. The hashtag plays a small but collectively substantial role in aiding the group’s cause.  Are people making demands on government to change its policy? Is BH more visible today than it was prior to the kidnapping? Do possible sympathizers to BH now see them as a force to reckoned and possibly worthy of their support? YES.

So, as a member of BH’s audience what will you do? Will you emote on social media or will you act strategically? If you’d like to take some real action and follow your intent to your impact then sign up for one of the great organizations below.  Send them a check or become active in a human rights campaign, but please do not give stage to any hate group or terrorist organization.

Amnesty International

Global Fund for Women

Human Rights FIRST

Human Rights Watch



Putin’s Long Game

crimea-mapThe onset of sanctions between the West and Russia are like the opening moves of chess–and like any chess game the victor will be decided later in the game.  To predict who will be in checkmate we must examine the wants and desires of the players on either side of the board.  Simply put, what does Putin want 10 moves from Crimea?


Putin faces losing Ukraine to the European Union which threatened his long-term dream of the Eurasian Union.  Set to launch in 2015 the Eurasian Union was never hollow talk, it was meant to be a genuine alternative to the West for countries bordering Russia.   So far only Belarus and Kazakhstan have signed on for the Eurasian Union and this isn’t a strong base on which to build.  Belarus is largely subsidized by Russia and oil rich Kazakhstan needs larger markets to grow–enter Russia’s Gazprom.   However Ukraine is the second largest economy is the post-Soviet region. More than just an economic power house it is also the birth of the Russian state–in medieval “Kevian Rus” and is still apart of the “Russian world.”

Putin’s opening moves in Ukraine have exposed the ambiguity of his Eurasian Union and threatened it’s future before it began.  The Eurasian Union was meant  to be an equal partnership between member states where they could pursue political and economic goals and also act as a buffer against Western style liberalism.  However, Putin’s blitz in Ukraine has opened Russia to a premature check.  Putin has justified his Crimean gambit with a vast but vague “responsibility to protect” doctrine.  No one knows if this doctrine will be backed by military force or whom he he intends to protect: ethnic Russians, Russian speakers, anyone that Russian feels needs protecting?  This aggression calls into question the equality of the Eurasian partnership and has understandably spooked Russia’s neighbors.

Domestically Putin is playing a dangerous game.  Set to leave in 2018 he is attempting to ride on the military paradigm.  By stirring a strong sense of nationalism and “anti-westernism” Putin can ride on the approval of the Russian people. Leaders tend to gain favor in war time but this can fade as it did with George W. Bush after Iraq.

The West also has much lose.  If the Eurasian Union were to be a success…some thing that would require the joining of Ukraine, Georgia, Azerbaijan, Kyrgyzstan to name a few, it would be a powerful buffer against Western ideals.  Spreading democracy, anti-corruption and advocating for LGTBQ rights would become much more difficult if these countries are backed by a larger oppressive union.


In the long game larger military action is unlikely.  By the numbers, Russia spends about 9% of the larger NATO budget on military and much of that goes to kickbacks.  The U.S. alone spends more than any other country on the planet, but Ukraine does expose some of the weaknesses of the western front, namely the lack of other options. Sanctions could work to place Putin in check but but they will take time to come into effect and in the meantime smaller Russian gas dependent countries like Bulgaria and Slovenia will suffer.