Currency Wars_ The Making of the Next Global Crisis - James Rickards [114]
It is well understood that the sun uses far more energy than a human brain. Yet the sun is vastly more massive than a brain. When these differences in mass are taken into account, it turns out that the brain uses 75,000 times as much energy as the sun, measured in Chaisson’s standard units. Chaisson has also identified one entity vastly more complex than the human brain: society itself in its civilized form. This is not surprising; after all, a society of brainy individuals should produce something more complex than the individuals themselves. This is wholly consistent with complexity theory, civilization being just an emergent property of individual agents with the whole greater than the sum of its parts. Chaisson’s key finding is that civilization, adjusted for density, uses 250,000 times the energy used by the sun and one million times the energy used by the Milky Way.
To see the implications of this for macroeconomics and capital markets, begin with the understanding that money is stored energy. The classic definition of money includes the expression “store of value,” but exactly what value is being stored? Typically value is the output of labor and capital, both of which are energy intensive. In the simplest case, a baker makes a loaf of bread using ingredients, equipment and her own labor, all of which use energy or are the product of other forms of energy. When the baker sells the loaf for money, the money represents the stored energy that went into making the bread. This energy can be unlocked when the baker purchases some goods or services, such as house painting, by paying the painter. The energy in the money is now released in the form of the time, effort, equipment and materials of the painter. Money works exactly like a battery. A battery takes a charge of energy, stores it for a period of time and rereleases the energy when needed. Money stores energy in the same way.
This translation of energy into money is needed to apply Chaisson’s work to the actual operation of markets and society. Chaisson deals at the highest macro level by estimating the total mass, density and energy flow of human society. At the level of individual economic interactions within society, it is necessary to have a unit to measure Chaisson’s free energy flows. Money is the most convenient and quantifiable unit for this purpose.
The anthropologist Joseph A. Tainter picks up this thread by proposing a related yet subtler input-output flow analysis that also utilizes complexity theory. An understanding of Tainter’s theory is also facilitated by the use of the money-as-energy model.
Tainter’s specialty is the collapse of civilizations. That’s been a favorite theme of historians and students since Herodotus documented the rise and fall of ancient Persia in the fifth century BC. In his most ambitious work, The Collapse of Complex Societies, Tainter analyzes the collapse of twenty-seven separate civilizations over a 4,500-year period, from the little-known Kachin civilization of highland Burma to the widely known cases of the Roman Empire and ancient Egypt. He considers an enormous range of possible factors explaining collapse, including resource depletion, natural disaster, invasions, economic distress, social dysfunction, religion and bureaucratic incompetence. His work is a tour de force of the history, supposed causes and processes of civilizational collapse.
Tainter stakes out some of the same ground as Chaisson and complexity theorists in general by demonstrating that civilizations are complex systems. He demonstrates that as the complexity of society increases, the inputs needed to maintain society increase exponentially—exactly what Chaisson would later quantify with regard to complexity in general. By inputs, Tainter refers not specifically to units of energy the way Chaisson does, but to a variety of potentially stored energy values, including