When Chancellor Rishi Sunak unveiled his mini-budget last week he said, “No nationalist (sic) can ignore the undeniable truth” that the furlough scheme financed by government borrowing “has only been possible because we are a United Kingdom.”
I used to think economics was an esoteric “mistery” only understood by Oxford dons who would tell you why it was economically sensible to pay men to dig holes and then fill them in again. But I’ve changed my mind. I suspect economics to be fundamentally simple. Mind you, that which is simple is not necessarily easy to grasp. Who was it said that the trouble with simple ideas is that they need to be understood very well? Still, it seems to me, if you have fresh air and clean water, if you can grow crops, feed, clothe, shod, and shelter yourself, then you are economically viable. It’s pure thermodynamics. You just need the available energy resources.
The trouble is, economics is a behavioural science. That is why it is so dismal. Greed and chicanery can pose as beneficence and altruism. The art of the scam is the art of smoke and mirrors. A scam is nearly always an attempt to persuade you that economics does not have to obey the laws of thermodynamics. Look at the South Sea Bubble, the 1929 Wall Street Crash and the 2008 banking crisis. It’s okay. The economy is a perpetual motion machine. It can run on empty.
It occurs to me that we could learn a lot about economics by looking at ourselves, that is, Homo sapiens, and specifically our physiology. After all, we have evolved from a unicellular to a multicellular organism over billions of years. In the management of our resources, we must have done something right. Physiology is said to be the study of body function. That is a shorthand for all these billions of years of evolution. Physiology is the study of the way multicellular organisms have developed systems whereby cells removed from their immediate environment can survive. They have had to create a “milieu intérieur”. In order to survive and prosper, cells have had to specialise. That is economically a very sensible thing to do. Adam Smith starts his enquiry into the Wealth of Nations by noting the importance of individual workers specialising in one area, rather than personally undertaking every aspect and stage of a given pursuit.
This idea of looking at the body as a model of community organisation is not particularly original. St Paul compared the early Christian Church to the human body in chapter 12 of the First Letter to the Corinthians
But now are they many members, yet but one body.
And the eye cannot say unto the hand, I have no need of thee: nor again the head to the feet, I have no need of you.
Nay, much more these members of the body, which seem to be more feeble, are necessary.
This idea of interdependency, and respect for that which has heretofore been considered lowly, has become all too relevant during the Covid pandemic. Often the people we have depended on the most to keep the show on the road, have been the low-paid.
What is the currency of the human body? The high energy phosphate bonds of adenosine triphosphate (ATP). There is an equation in thermodynamics, ΔG = ΔH – TΔS, where G stands for the Gibbs’ free energy, H is enthalpy, T is temperature, and S is entropy. It is very beautiful. It was formulated in 1878 by a quiet and retiring physicist at Yale, J. Willard Gibbs. Not exactly a household name, and yet Gibbs is the Newton of thermodynamics. Interestingly, the Scottish physicist James Clark Maxwell knew how important Gibbs’ work was. His equation predicts whether a physical process, say the formation of a compound from two molecules, will occur spontaneously, or whether energy is required to drive the reaction. Spontaneous reactions have negative G values and are said to be exergonic. Non-spontaneous reactions have positive G values and are endergonic. The Gibbs free energy equation is probably the fundamental equation of the biological sciences because it allows us to quantify the energy requirements of all the biochemical processes fundamental to our survival. I haven’t looked at the syllabus for Oxford’s politics, philosophy, and economics (PPE) degree, but I would hazard a guess that the Gibbs free energy equation is not covered.
The human body can lodge currency in the bank, in the form of adipose tissue. It is better to have a cushion, than to subsist at starvation level. But clearly this can be overdone. Obesity becomes extremely counterproductive. It is only recently that we have begun to realise just how self-destructive obesity is. We ought not to hoard.
It is interesting to note that the human body has no mechanism of debt. Briefly, you can run up a so-called “oxygen debt” – I did yesterday, running up a hill. I paused at the top, to “get my breath back”. But that is not the same as running up a fuel debt. You can’t burn fuel if it isn’t there.
Imagine trying to construct an economic system that did not rely on debt. I think the UK national debt has just topped £2,000,000,000,000. Some people think this is a healthy state of affairs.
Smoke and mirrors.