Chapter III, Section B, Item 2.  The “No Disorder” Fallacy

Even if energy resource limitations can be ignored, at least for now, the omission of the continuing cost of disorder is the most flagrant flaw of our economic models. Disorder is readily quantifiable in terms of energy, and thus quantifiable in terms of both money and energy resource limitations. But all of our economic models fail to account fully for disorder, and its exclusion becomes a fallacy of denial: there is no disorder.

Although most economic models recognize and account for the cost of creating order from disorder, they fail to acknowledge the constant universal tug toward disorder of our ordered assets. Though the devaluation of assets within an economic system may be expressed in terms of the depreciation of its basic components, i.e. depreciation of the basic goods and services exchanged, and though operation and maintenance costs can be factored into the “life” of these goods and services, the analysis ends with the end of the “life” of the product, not to a completed “life-cycle.” Any further responsibility for the net output of an "economic asset," including the effects of its disorder onto the rest of the economic system–waste disposal the most salient example–cuts directly into the profit to the asset-originating economic entity:  "the business."  Thus an incentive exists for a single economic entity (a business) to deny the reality of any disorder it creates, or to at least to promote a tacit assumption that the order (its product assets) is worth the cost of the disorder. The cost of dealing with the disorder cuts right into the profit. Thus for example, there is often a backlash from business interests against the costs of environmental regulation.  The true cost of the disorder is eventually assumed by the economy at large.  Environmental cleanups are enforced for matters related to public health, and at times, sustainability.  But for the environment for its own sake, work (energy) is donated:  the Boy Scouts are deployed to clean-up a roadside or waterway, the activity ostensibly designed to engender community service and instill green consciousness. Meanwhile, it is assumed that an investment will grow, profits will be made, and that the value of a corporation will grow, or at least hold its own, as it is assumed the economy will grow.

Nowhere is the “no disorder” fallacy more apparent than in attempts to initiate recycling programs, or rather, the excuses not to. Full life-cycle analysis is leading to activism to impose cradle-to-grave responsibility for any economic output (product) onto the originating economic entities (businesses), but to do so fully and end up with anything other than Rifkin’s “red ledger” is impossible by the second law. Recycling takes energy, and although a company can realize significant cost savings using recycled raw materials, there is still a waste stream, if from nothing else, the carbon footprint, or other environmental impact, of the energy consumed in the recycling process. Some recycling, particularly of metals, is sustainable in the current economic model, at least so long as the cooperation of consumers to “dispose of properly” can be depended upon. Other recycling can hardly work, even with the most urgent cooperation of the most green-conscious consumers, the most egregious example:  plastic recycling.

Plastics have long been the target of environmental concern, enough that most plastics are now categorized so that recycling can at least be initiated, funded or mandated by local governments. The problem with plastics environmentally is precisely what they were designed for economically: they are not biodegradable. In the environment, most substances are broken down into their constituent elements or compounds by micro-organisms; most of the remainder, including plastics and glass, are pulverized to microscopic pieces, leaving their molecular structure intact. Plastics and other human created debris washes up on all of the world’s beaches, including those in remote polar regions. Recent discovery of an accumulation of plastic trash and microscopic plastic particulates in the Pacific, the Garbage Gyre a.k.a. Pacific Trash Vortex, has rekindled concerns over plastic, while exposing the harsh realities of waste management and recycling. A quote from Jared Blumenthal, Director of San Francisco's Department of the Environment, summarizes the problem from our current economic perspective, which disregards the costs of the 2nd law, “There's harsh economics behind bag recycling: It costs $4,000 to process and recycle 1 ton of plastic bags, which can then be sold on the commodities market for $32.” This reflects the economic perspective of the limited return value of the plastic resource itself to the plastic manufacturer, versus the enormous costs of recycling plastic to the solid waste manager. Plastic manufacturing profits not from plastic, rather from the “order” inherent in a plastic bag, but there is no accounting for the cost of the disorder, the degradation to the marine ecosystem ultimately absorbing any non-recycled plastic.

It does not take an environmental example to expose the economic “no disorder” fallacy. The need for maintenance of existing infrastructure in perpetuity, or rather the deterioration of infrastructure lacking in maintenance, is a classic example of the effects of entropy. The Mackinac Bridge, connecting the Lower and Upper Peninsulas of Michigan across the Straits of Mackinac, provides an example of maintenance in perpetuity. Completed in 1957, among other maintenance, it has been continuously painted ever since, with the time required to complete the job equal to the life of the paint. Maintenance or replacement of infrastructure is generally paid with tolls or taxes. But with tax reductions and insufficient budgets comes maintenance reductions, or delays in the replacements of structures deemed “structurally deficient.” The recent (2007) collapse of the I-35W bridge over the Mississippi River near Minneapolis, Minnesota is a reminder of the ASCE estimated $1.6 trillion needed for infrastructure repairs or replacement. Completed in 1967, it was deemed “structurally deficient” in 1990, again in 2005, and was slated for replacement in 2020 before it collapsed on August 1, 2007.

All growth comes from the consumption of energy, but so does mere sustainability. The current economic system rewards growth, but views sustainability as a burden. An economic entity (business) treats energy input, including the meager energy contribution of human work, as a raw material to produce an output. The additional energy inputs to sustain the economic system are needed in perpetuity, and thus can go way beyond the initial energy consumption of GDP, recorded in the creation of its products. With maintenance viewed as a burden to the economy, the human work devoted to sustainability is less rewarded economically. Currently, the whole economic system is supported by a constant influx of energy such that entropy can be overlooked. The basic fallacy of modern economics is the assumption that this energy is always available, and always will be.

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