Basic Income and Energy Value Theory

by Clayton

A basic income of what? One of the largest problems with the adoption of this type of policy is that the popular conception of a basic income centralizes on money. Instead we should ask ourselves – what is the minimum resources an individual requires to be healthy and be given all of the opportunities to contribute productivity and innovation back into society? This should be an endeavor of scientific inquiry based on empirical evidence.

Why are you a Commie Bastard?

The purpose of this document is to help socialize the idea of basic income. There will be no claims made that basic income is a miracle solution to every problem facing society today. Rather it will explore the concept of basic income in the language of Energy Value Theory. First we will see how basic income as an economic model stands up rationally and scientifically. Afterwards a proposed simple architecture will demonstrate how this may be implemented and some of the pitfalls to avoid. Finally, we will establish a moral and ethical foundation that places this system on much more solid foundation than the one we so clumsily cling to today.

My Bias

My primary motivation for pursuing a system of basic income is one of morale grounds, each of us is entitled to share in the wealth of the rich technological processes that have been developed by great and hardworking men and women of our past. These improvements have yielded exponential and cascading productivity gains over time. Humanity should be the benefactors of their work, not individuals, corporations, or governments.

In 1953 Morgenstern and von Neuman published a paper outlining the mathematical underpinning of how rational agents make decisions while attempting to maximize some utility function, characterizing the Morgenstern von Neuman utility function (MVN). This formulates the cornerstone of the branch of mathematics called game theory and drives many systems in modern day economics and finance. In today’s culture many of us evaluate our MVN utility function as a pure measure of monetary wealth, something that is poignantly demonstrated by the walls that go up whenever a discussion regarding basic income is broached. Perhaps it is time we reevaluate our utility functions and instead attempt to maximize the society in which we live – and through that benefit ourselves.

Technocracy fairly accurately describes my current belief system.  This ideology outlines the necessity of abandoning our price-based system in favor of an abundance system focused on delivering basic goods to everyone, and rewarding producers and innovators with exclusive and expedited commodities and resources.  As a societies productivity increases we would expect to see that prosperity shared across all income groups within a society as was illustrated in the post WWII era. What we observe in the United States as illustrated by the chart below is that the United States GDP per capita is increasing healthily, while the median income is stagnating indicating the additional productivity yields are being funneled to a small set of individuals [26]. There is a name for such a system – it is called indentured serfdom or in more severe circumstances slavery.

What is Basic Income?

In order to begin a conversation about this topic we should first make sure we are standing on the same ground. To facilitate this, it is necessary to first agree on a Basic Income definition and then provide a few examples of what Basic Income is, and what it is not. Wikipedia defines Basic Income in a way in which we will understand it within this scope as:

“…all citizens or residents of a country regularly receive an unconditional sum of money…”

The core concept being rooted in a system first outlined in the 18th century called Georgism, and popularized in the United States with Thomas Paine’s Agarian Justice. Goergism being an economic model that more closely describes a resource based economy. The key difference, is that a basic income should be based on the means to produce i.e. energy ,and not the raw natural resources available to a society. Therefore basic income becomes:

“economic model where the government assures a certain minimum amount of energy is to be distributed evenly to all citizens”

What Basic Income Is Not

Basic income is not communism.  Communism states that all productivity yields should be distributed evenly among the citizens within a society. While I must admit my bias leads me to believe this is the noblest and most egalitarian dream, it is unobtainable with the inherent nature of the human selfishness. The basic income model outlined here insures the spirit of  innovation is kept alive with proper incentives and creates a marriage with the altruistic goals of communism.

Basic income is not guaranteed income. Guaranteed income loosely models what our current welfare and entitlement systems present.  Guaranteed income makes a promise that one’s income or entitlements will meet some minimum bar, in the US this is the poverty line. For example if you are a single parent with two children and you make under $2600 per month the government will give you food stamps (Washington State [27]) and you will likely qualify for medicaid and HUD housing. If that individual exceeds that income some or all of those entitlements are taken away. In such a system it is easy to imagine how guaranteed income removes incentives to work and creates poverty traps. A basic income system would simply implement: in addition to one’s normal earnings they receive an additional $2000 every month, regardless of their income.

Lets Get our Units Straight

NoCash-Energy When you perform a transaction exchanging US dollars for some commodity you are not really consuming those dollar bills – the dollar is a fiat currency, at best representing a future or virtual commodity. Instead, you are exchanging your productivity yields for that commodity you desire. In the event the transaction is for a service you are exchanging productivity yields directly. At the root of the transaction is an energy transfer.  Yes, energy as in a physical, objective, measurable unit.  This is the most fundamental idea we should collectively recognize. On one end of the transaction is the fraction of energy you exerted via labor in delivering commodities and services to others to meet the energy requirement of the commodity you desire an on the other hand is the energy requirement of that desired commodity.  Where the commodity’s total energy requirements is the aggregate energy which is required to produce and deliver that entity through natural and artificial processes.

The preceding discussion should begin to reveal the illusory nature of our fiat dollars. I suspect many of us know money – especially US Dollars have very little utility value, yet we all subscribe to their social contract. It is an ancient arrangement invented  at the end of the iron age. If anyone can demonstrate money’s value I would be happy to change my opinion on the matter. For now we will move forward with this discussion on the premise that our fiat dollars today are insufficient for describing a basic income as they have no objective utility value other than paper or metal coin. Instead we will focus on a natural unit for describing basic income, the Kilowatt-hour (kWh).

For a brief moment lets put all of our negative (and often unfounded) predispositions towards Marxism on hold and discuss one of the basic concepts outlined in Karl Marx’s first volume of Capital, A Critique of Political Economy. In that document Marx describes the use value of commodities and outlines the process of establishing money simply as a unit of conversion of that value. The use value which was defined by the material (matter) and labor (energy) required to produce the good. Marx goes on to describe how this value becomes corrupted by subjective human beliefs, which he describes as Fetishism [11].

Whence, then, arises the enigmatical character of the product of labour, so soon as it assumes the form of commodities? Clearly from this form itself. The equality of all sorts of human labour is expressed objectively by their products all being equally values; the measure of the expenditure of labour power by the duration of that expenditure, takes the form of the quantity of value of the products of labour; and finally the mutual relations of the producers, within which the social character of their labour affirms itself, take the form of a social relation between the products.

A commodity is therefore a mysterious thing, simply because in it the social character of men‘s labour appears to them as an objective character stamped upon the product of that labour; because the relation of the producers to the sum total of their own labour is presented to them as a social relation, existing not between themselves, but between the products of their labour. […] In that world the productions of the human brain appear as independent beings endowed with life, and entering into relation both with one another and the human race. So it is in the world of commodities with the products of men‘s hands. This I call the Fetishism which attaches itself to the products of labour, so soon as they are produced as commodities, and which is therefore inseparable from the production of commodities.

Measuring commodities in energy allows us to circumvent the conundrum of Marx’s Fetishism, and also allows us to divorce ourselves from the other pitfalls of labeling those commodities based on subjective dimensions. Energy is an objective measure, that constructs a layer of transparency between consumers, laborers and businesses safeguarding against corruption and subterfuge by its nature.  Charles Hall’s summary of Energy Value theory goes more in depth in comparing this system with classical and neoclassical models of economics [17].

 

EnergyTransfer3

To illustrate the power of energy as a unit of exchange let’s consider a scenario of delivering a basic good to an individual.This example shows that a commodity is the aggregate of energy from a variety of sources.  First, the sun provides the majority of energy in the form of sunlight to produce a crop of rice.  Second the potential chemical energy stored in the nutrients of the soil help develop the crop, as well as the plant organism as a resource, representing a pattern in nature that can store and process energy effectively.  The third aspect of this system is the human labor that harvests the crop, here we can see energy being fed back into the system via food calories powering the laborers.  The final energy expenditure is delivering the commodity to the end consumer, the train image represents this stage of the process.  Finally the refined commodity is delivered to our bellies to be consumed as precious kilo calories to fuel these biological automatons.

So, this process defines a commodity’s value as a the sum energy of chemical processes required to deliver a product to a consumer. Robert Constanza’s [14] research illustrates this  process in an more rigorous manner. Furthermore that paper contrasts energy based systems against modern day’s marginal utility theory driving our subjective ‘fetish’ economy.

 

Energy Based Economy and Basic Goods

 

replicator-i

 

Lets imagine a society that has developed the ability to convert energy into a consumable form that meets all of an individual’s basic needs.   For simplicity we’ll focus on the nutrition dimension.  As a starting point we will use the current price of energy at $0.10/kWh [10] (note I’m using $ here for cost as an illustration, as it is likely what most people are familiar with, one could just as easily use 1 human daily operational calorie unit)  Converting $.10/kWh  to food calories at 2500/calories day we arrive at 2.9075 kWh [13]  costing $0.29.  The calculation assumes we have the ability to convert energy to the necessary food calories with perfect efficiency.  This is not the case today but we’ve successfully planted a flag in the ground – our goal.

Now we have at least two dimensions by which we can improve the simple system outlined above. First we can improve the ‘cost’ of the kWh, in the event our energy source is a solar panel we can improve the efficiency by which it captures sunlight (current efficiency is around 17% [16]).   Another way of decreasing ‘cost’ is to increase the efficiency in producing the commodity, examples of this could be more efficient transportation, or mechanizing the labor workforce.  The second dimension is the total energy the economic system is capable of processing and delivering to its consumers.  In the solar panel example this is increased by adding new solar panels to the array.

Relative Energy Measures

Energy Measure Energy Value (kWh)
2500 Food Calories 2.91
1 Gallon Gasoline 36.42
1 m² earth surface solar energy peak (noon) [20] 1.00
1 m² earth surface solar energy (average over 24 hours) [20] 0.21
1 Ear of Corn [4] 0.09
1 Acre (4046.9m²) of Corn Harvest [4] 1119.39
Average Daily US Household Energy Consumption [19] 33.07
US Annual 2010 Food Wasted (food calories) [23] 163,983,000,000 (164.0 billion)
Energy to feed 7 billion people for 1 year (2500 cal/day) 7,435,050,000,000 (7.4 trillion)
Approximate World Energy Production 2012 [25] 146,734,000,000,000 (146.7 trillion)

Using the above calculations, if we achieve 100% efficiency of solar panels, and had the ability to convert energy into necessary food calories we would simply need to cover 97,848 square kilometers of the earth with solar panels to provide 7 billion people with a comfortable food supply. This would require 0.02% of the Earth’s surface; that figure becomes 0.1% of the Earth’s surface at 17% solar panel efficiency.  To put this in perspective the current total surface of the earth (including water) that is devoted to farmland is approximately 2.53% [21] or 12,903,000 km² [22].

Clothing our society with this new economic model is not an easy task.  We would likely need to begin to think about wealth in a radically different and transient way.  Individuals in such a system would accumulate wealth not based on luxury goods or personal property but on the energy they had at their disposal at any given time. Such a system would be naturally transparent, and self correcting as one’s discretionary energy would flow towards those individuals or collective groups that produced the best results for society.  With that being said, it is not to say that those luxury goods and low energy value commodities could not exist within a pseudo economy operating on top of the energy based one. In  such a system those goods would not provide the social motility and ability to quickly and effectively liquidate into energy.  I imagine such items would be valued as cultural and artistic touchstones, and eventually installed in public places or shared in personal spaces among the citizenry – but never produced in excess or waste.

We will not digress into a discussion on what defines a basic good in an objective manner.  Instead I will offer my simple and humble opinion on the matter.  I believe a basic good and service would fall under one of four areas: nutrition, shelter, education and medicine. These I accept as inalienable human rights in an abundance society that open the gates of liberty and equality. Equality in the proposed energy based economy provides opportunity to compete.  Equality allows accessibility to choose how energy will be invested which ultimately allows one to influence which projects and policies will be developed.  This makes energy not only a unit of currency but also a unit of democracy.

A Tale of Two Assholes

  I knew it, I’m surrounded by Assholes. [Closes helmet] Keep firing, Assholes!– Dark Helmet, Spaceballs

The dichotomy of the two assholes plays a central role in the class warfare rhetoric of the United States.  On one hand we have the unmotivated, disillusioned welfare drawing bottom feeder.  On the other hand we have the sycophantic, exploitative corrupt pseudo mobster.  Both are constructed, not by individuals, but by a preexisting system of energy distribution in order to maintain the status-quo of that system through an engineered narrative.  Let’s get to know these assholes so that we can understand them within the scope of our new energy based system.

Lazy Stupid Asshole

This icon is typically the soft target of news bits and politicians aiming to reduce entitlement and welfare programs. The stupid asshole sits at home and watches Maury Povich all day slowly degrading their health through a steady diet of Cheetos and Top Ramen paired with a sedentary life until their morbid obesity reaches critical mass and they further burden the rest of society with medical expenses. This asshole is constructed to illustrate that without incentive – namely monetary, people will not be productive and contribute no labor energy back into society.

Greedy Asshole

The greedy asshole on the other hand is a high functioning power addict that goes through whores and cocaine faster than four finger Furby dolls in 1998. He is the often young inheritor of vast wealth or the old decrepit villain that has buried his competition through misdeeds and broken dreams.  This asshole more typically rears his head in left leaning documentaries about corporate corruption and bankers that operate outside the boundaries of the law.  The greedy asshole is constructed to illustrate that individuals are always selfish, and that power and money necessarily corrupt those that have it.

The Problem

One thing I am sensitive to is that many people refuse to recognize these as caricatures of extreme points within the spectrum.  Both are clearly unhealthy behaviors to assume within society, as both represent complete ignorance towards the notion of cooperation.  Apathy, ignorance and indifference are all unhealthy psychological patterns for the individual and society and should be viewed along the same lines as other socially stigmatizing behavior e.g. uncontrollable flatulence, tourettes, general psychopathy etc.  They should be treated clinically with medicine developed through scientific rigor. It is the society’s responsibility to identify these conditions and treat them – a moral precedent in reducing suffering.  I would argue the majority of the risk for these uncooperative behaviors would be mitigated by the free universal education that would be provided as a basic service.

 

What about the Toilet Cleaners?

Surely if no one has to work to have their basic needs met, there would be no one to do any of the undesirable jobs.  Many of these jobs are in the services industries – and many of us (Americans) have worked in at least one sometime during our lives. People willing to do this type of job for your company would be able to set their own energy price, or they may believe in the product/service you are delivering and wish to contribute their volunteer labor to help you succeed.  In the circumstance their wasn’t enough individuals to meet the demands of a particular job e.g. toilet cleaner, then the people using those toilets would have a few options.

1. Clean their own toilets, devoting their personal labor to enjoy a clean environment.

2. Do not clean the toilet, live in squalor.

3. Build an automated toilet cleaner and include the energy requirements of said machine in energy operating costs.

To illustrate I will present the simple scenario.  Jack want’s to help contribute to finding a cure for cancer.  He contacts a local research center that is conducting research on a new cancer drug.  Jack asks if he can help with their research.  The lead scientist tells Jack their research staff is filled at capacity with highly skilled contributors, but if he’d really like to help them he can come clean the toilets so they don’t have to spend additional productive hours out of their day doing that task.  Disappointed, Jack thanks the scientist for his consideration and states he’ll be in the following day to clean the bathroom.  Jack spends an hour each day cleaning the toilets, and begins constructing a autonomous toilet cleaning robot in his spare time.  Two years later the scientist calls Jack to inform him  that a position has opened on his team and to thank him for how thoroughly clean  the restrooms have been.  Jack sadly declines this position, and states that his automated robot has been cleaning their bathroom for the past six months and his robots are saving others around the globe millions of hours in toilet cleaning labor.

How the hell did Jack learn how to build and program a robot?  Well, Jack has access to free education so he spent the majority of his early days as a janitor studying before building the robot (Remember he only worked one hour each day).  His discretionary energy income was enough to acquire the resources to build the prototypes.  After presenting his concept to a manufacturing company they decided to allocate mechanized energy in their plant towards the production of his robots to meet the toilet cleaning demands of several of their partners.  Soon many companies were diverting a portion of their energy towards his robot manufacturing.

Goals of an Energy Value Technocrat

There are four measures we can use to assess progression in development of our energy based society.  Humanity working together can develop a system of maximum power, and continue that trend to unlocking the secrets of nature along the way and ultimately increasing our quality of life.  Individuals will ultimately become free of often tedious tasks such as store attendant, fast food chef, trash disposal etc.  They will be free to contribute to the cultural golden age that would flourish as they abandon the shackles of consumerism and debt to develop their individual talents and pursue their dreams with the certainty that the will have what they need provided for them at the end of the day.

1. Percentage of population with access to the set of basic goods.

2. Total energy produced by the society

3. Percentage of necessary labor that is automated/mechanized.

4. Efficiency of produced energy.

Now that we have a set of measures by which we can objectively improve society and thereby our lives, we will need a set of steps to set us on that path.  First, it is unlikely any of these values are easily accessible or verifiable in our current system.  A first step is opening up the visibility into our energy production systems.  How amazing would it be to pick up a commodity at the store and see the exact energy cost required to deliver that item there – as well as a detailed breakdown of where each individual energy requirement came from?  Additionally these measures allow us to easily measure the success of our leaders.  Their success would be evaluated based on how much they improved those four measures. But before any of that can happen we need to more awareness of this system, and most importantly to push on our governments to deliver these metrics and hold them accountable to them.

Sources

Population Growth

[1] http://en.wikipedia.org/wiki/Projections_of_population_growth

United States Crop Yields Over Time

[2] http://ahundredyearsago.com/2011/10/14/us-crop-yields-and-production-1911-and-2011/

[3] http://www.ers.usda.gov/data-products/feed-grains-database/feed-grains-yearbook-tables.aspx#26761

Sweet Corn Production

[4] http://www.ces.ncsu.edu/hil/hil-13.html

Universal Basic Income: A brief overview of a support for intelligent economies, quality of life and a caring society

[5] http://www.feasta.org/2013/04/17/universal-basic-income-a-support-for-intelligent-economies-quality-of-life-and-a-caring-society/

An Energy Systems View of Karl Marx’s Concepts of Production and Labor Value

[6] http://www.cep.ees.ufl.edu/emergy/documents/conferences/ERC03_2004/ERC03_2004_Chapter_02.pdf Metabolism, energy, and entropy in Marx’s critique of political economy:Beyond the Podolinsky myth

[7] http://sociology.uoregon.edu/faculty/foster/theory%20and%20society-2006-burkett%20and%20foster-metabolism%20energy%20entropy.pdf

Iran Rice Study on Mechanized vs Traditional Farming Productivity Yields

[8] http://maxwellsci.com/print/rjaset/v4-2666-2671.pdf [9] http://cdn.intechopen.com/pdfs-wm/44389.pdf

Price of Electricity Per State

[10] http://www.npr.org/blogs/money/2011/10/27/141766341/the-price-of-electricity-in-your-state

Karl Marx’s Das Kapital

[11] https://www.marxists.org/archive/marx/works/download/pdf/Capital-Volume-I.pdf

How To Liberate America from the poverty trap

[12] http://www.forbes.com/sites/peterferrara/2014/04/13/how-to-liberate-america-from-the-poverty-trap-that-is-enslaving-us/

U.S Energy Conversion

[13] http://www.eia.gov/energyexplained/index.cfm?page=about_energy_conversion_calculator#foodenergy

Slow Death of Democracy

[14] http://www.salon.com/2014/05/17/is_democracy_doomed_and_was_it_ever_real/

Value Theory of Energy. Robert Costanza, University of Vermont

[15] https://www.pdx.edu/sites/www.pdx.edu.sustainability/files/Value_and_Energy.pdf

Solar Panel Efficiency

[16] http://sroeco.com/solar/most-efficient-solar-panels

[17] http://www.eoearth.org/view/article/156825/

Solar Energy from Acre of Land

[18] http://www.energymanagertoday.com/it-takes-2-8-acres-of-land-to-generate-1gwh-of-solar-energy-per-year-says-nrel-094185 Home Electricity Use -1,375 billion KWh in US homes in 2012, 12,069 kWh per home

[19] http://www.epa.gov/cleanenergy/energy-resources/refs.html

Actual Solar Energy at Earth’s Surface

[20] http://ded.mo.gov/division-of-energy/renewables/missouri-s-solar-energy-resource/how-much-solar-energy-is-available- http://www.pmodwrc.ch/pmod.php?topic=tsi/composite/SolarConstant

Percentage of Land used for Crops

[21] https://www-pls.llnl.gov/?url=science_and_technology-earth_sciences-agriculture

[22] http://data.worldbank.org/indicator/AG.LND.AGRI.K2

Food Waste in US 2010 430 billion pounds at approximately 141 trillion calories

[23] http://www.ers.usda.gov/publications/eib-economic-information-bulletin/eib121/report-summary.aspx#.U5hmb_ldV8F

Eurelectric – Efficiency in electricity generation

[24] http://www.eurelectric.org/Download/Download.aspx?DocumentID=13549

World Energy Production

[25] http://data.worldbank.org/indicator/EG.ELC.PROD.KH?order=wbapi_data_value_2011+wbapi_data_value&sort=asc

Economic Distribution

[26] http://www.gpo.gov/fdsys/browse/collection.action?collectionCode=ERP&browsePath=2014&isCollapsed=true&leafLevelBrowse=false&isDocumentResults=true&ycord=0

Washington State Basic Food Program

[27]http://www.dshs.wa.gov/pdf/food/BFQAs.pdf

Median Income United States – US Census

Table H-5 Race and Hispanic Origin of Householder — Households by Median and Mean Income

[28]   https://www.census.gov/hhes/www/income/data/historical/household/2012/H05_2012.xls

Bureau of Economic Analysis

[29] http://www.bea.gov/iTable/iTable.cfm?reqid=70&step=1&isuri=1&acrdn=1#reqid=70&step=10&isuri=1&7003=200&7035=-1&7004=sic&7005=-1&7006=00000&7036=-1&7001=1200&7002=1&7090=70&7007=-1&7093=index

Advertisements