by Val Germann
Not too long ago this writer introduced a term invented in 1971 by computer scientist Eugene S. Schwartz: the “quasi-solution.” For Schwartz, all technological “solutions” were at least partly “quasi,” if not crwazi (or crazee!), because they were always at least incomplete and many times counterproductive. And they were incomplete or counterproductive due to the Second Law of Thermodynamics, the Entropy Law. Yes, even the Gods struggle in vain against Entropy.
Today, of course, the primary technological “fix” revolves around the god “efficiency” — which is directly related to size. Yes, bigger is better, in every way, where production and even marketing is concerned. This idea gained serious traction back in the day of the original Standard Oil and U.S. Steel, when America still had a “horse and buggy” economy in most places. But it’s still the rage today, as the latest wave of mergers and acquisitions goes to show. Yes, indeed, bigger is always better, just ask almost anyone. However, don’t ask them the questions: “Better for whom and in what ways?” No, that would be wrong.
Eons ago, back when I was taking economics courses at the graduate level, I was exposed to a concept that has stuck with me through the years: minimum optimal scale. This idea was a precept of the quasi-discredited (today) school of Institutional Economics, which could be the subject of another article.
No matter, it’s “minimum optimal scale” I’m concerned with today. In a nutshell, the idea is that for any process there are economies of scale up to a point of diminishing returns to that scale, and that’s where the growth in scale should stop. Embedded in this concept is the original idea of economic competition combined with a recognition of the Second Law, and what would become Schwartz’s “Quasi-Solution.”
For Adam Smith “competition” implied many buyers and sellers in the relevant market, which resulted in the non-existance of what is called “monopoly power.” A fine example of this is the position of wheat farmers here in the U.S. — selling into a market in which they have no power over price at all, because there are tens of thousands of wheat farmers and they are not organized. However, the other side of the wheat market consists of exactly five huge and privately-held agri-businesses, an “oligopoly” which IS organized and does in fact have “monopoly power” — and lots of it. Those firms “share the market” under a “rivalry regime” which sees them primarily protecting their share against their rivals while at the same time protecting their group all from outsiders. And they do NOT “compete” with each other on something like the price they give farmers.
I mention the above because my set of quasi-solutions works directly against the interests of giant firms like the ones in the grain markets and so has exactly ZERO chance of ever being put into practice. This is because giant firms have the money and staff to suffocate or co-opt all socio-political phenomena not to their liking. The spectacle of British Petroleum and General Electric both “going green” recently drives the point home, and with a .50-caliber bullet!
But the fact is that our species and bio-sphere have little chance for long-run survival unless something is done to “turn down the volume” of our depredations on “nature” — and soon. For me, one key concept that would allow this “turning down” — without devastating our economic life — is “minimum optimal scale.”
The key is in the efficiency of de-centralization. Yes, you read it right: the EFFICIENCY of DE-CENTRALIZATION, the exact OPPOSITE of today’s business mantra worldwide. The solution to the apparent conundrum is that what “business leaders” call “efficiency” is not actual efficiency at all but rather what is most “efficient” in a monopoly power sense for them and their firms.
The bigger a firm is the more leverage it has over its bankers, over its employees, over the local, state and even national governments. Wal-Mart is the poster child here, laying waste to whole communities of small business and creating sub-minimum wage earners (de-facto) by the tens of thousands. But as bad as Wal-Mart is, it’s nothing compared to my two primary areas of conern: agriculture and electric power generation.
U.S. agriculture desperately needs to be de-centralized. We have a crying need to go back to smaller farms, much smaller, with small operators who will take care of their land because they live on it. The minimum optimal scale for mixed agriculure is much smaller than the zillion-acre operations of the midwest today.
U.S. large-scale agriculture, with its giant machines, is mining our land and has destroyed huge swatches of it, which will become obvious when the petro-chemicals start to get truly expensive. Tests here at MU have shown that without chemical fertilizers most Missouri land will produce about one-fourth what it does now, with that quantity declining a little every year. Do the math on that!
Moving all agriculture to smaller scale, integrated operations, closer to consumers in all respects, will both save energy and maybe the land. Doing neither will kill it for sure, one day.
Electric power generation is in the same boat, with giant coal plants killing the atmosphere and wasting up to HALF of the power they produce in those long transmission lines. People say that nuclear power is “the answer” but it, too, consists of giant plants, using uranium and not coal to boil water, to spin a turbine, and then sending the power down the same long transmission lines, wasting about half of it. No, they’re both long-run losers, I’m afraid.
The technology exists today to almost completely de-centralize electric power generation, to the benefit of almost everyone EXCEPT those very large firms.
Do the math on that, too, while you’re watching atmospheric CO2 levels “head for the sky.”