Polya’s 3 Laws Of Economics Expose Deadly, Dishonest And Terminal Neoliberal Capitalism
Melbourne scientist Dr. Gideon Polya’s 3 Laws of Economics mirror the 3 Laws of Thermodynamics of science and are (1) Price minus COP (Cost of Production) equals profit; (2) Deception about COP strives to a maximum; and (3) No work, price or profit on a dead planet.
These fundamental laws help expose the failure of neoliberal capitalism in relation to wealth inequality, massive tax evasion by multinational corporations, and horrendous avoidable deaths from poverty and pollution culminating in general ecocide, speciescide, climate genocide, omnicide and terracide.
Fundamental to the physical sciences and the explosion of the Industrial Revolution in the 19th century are the 3 Laws of Thermodynamics that can be simply stated as follows.
The First Law of Thermodynamics states that the energy of a closed system is constant i.e. we can have different amounts of energy in different forms in different parts of the system (a human body, the planet, the universe), but the total energy remains a constant.
The Second Law of Thermodynamics states that the entropy (disorder) of the world strives to a maximum i.e. the world inexorably tends to randomness, chaos, disorder and minimum information content. We are familiar with so many examples of this e.g. (a) the drops of ink in a glass of water disperse until the ink particles are uniformly distributed; (b) despite inbuilt cellular biochemical repair and replication systems, we inevitably age and die; and (c) the accelerating expansion of the universe.
The Third Law of Thermodynamics states that the entropy (disorder) of a pure crystal of a pure chemical at the absolute zero temperature of zero (0) degrees Kelvin (minus 273.15 degrees Centigrade) is zero i.e. in a universe full of motion and increasing disorder there is a boundary state of zero disorder.
The discovery of the 3 Laws of Thermodynamics enabled the massive industrialization of the last few centuries and set the world on an increasingly high technology economic path culminating in the present sustainability crisis in which the species extinction rate is 100-1,000 bigger than normal and there is a worsening climate emergency in which a globally politically agreed plus 2 degrees C temperature rise is both catastrophic and inevitable.
Our presently destructive economic system can be described by laws akin to the 3 Laws of Thermodynamics as set out below.
Polya’s First Law of Economics states that the Price (P) minus Cost of Production (COP) equals profit (p). Just as the First Law of Thermodynamics allows one to determine the magnitude in energy units (e.g. joules) of the different components of an energy inventory (e.g. light energy, heat energy, kinetic energy) in a particular physical system, so the First Law of Economics allows one to determine the magnitude in wealth units (e.g. USD, US dollars) of P, COP and p in a particular economic system (e.g. a slave, a worker, a company, a nation, or indeed the global economy).
Polya’s Second Law of Economics states that deception about Cost of Production (COP) strives to a maximum. Just as the Second Law of Thermodynamics states that disorder and hence lack of information inevitably increases, so the Second Law of Economics declares that disinformation and deception strive to a maximum in an economy based on a market of Buyers and Sellers, Winners and Losers. The deception may be mild as with the margin and enthusiasm of a street vendor, or egregious as in the case of multinational corporations avoiding paying tax on their profits. The world is presently dominated by neoliberal capitalism that seeks to maximize the freedom of the rich and advantaged to exploit human and natural resources, with the present consequence that the richest One Percent has about 50% of the wealth and 17 million people die avoidably each year from deprivation.
Polya’s Third Law of Economics simply states that there is no work, price or profit on a dead planet. Just as the Third Law of Thermodynamics describes a boundary condition of zero motion and zero entropy (zero disorder) at Absolute Zero (zero degrees Kelvin), so the Third Law of Economics describes the terminal state of an Earth in which the Biosphere has been destroyed as a result of unconstrained neoliberal capitalist greed. As the Greens put it: “No jobs on a dead planet”.
As well as making a major contribution to physics and thermodynamics, Sir William Thomson (Lord Kelvin, after whom the Kelvin temperature scale is named) famously urged us to express our observations in quantitative terms: “I often say that when you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind; it may be the beginning of knowledge, but you have scarcely, in your thoughts, advanced to the stage of science, whatever the matter may be”.
We can take Lord Kelvin’s advice and apply some important contemporary economic numbers to Polya’s 3 Laws of Economics as outlined below.
1. Multinational corporation tax evasion. In worst case scenario, if the Cost of Production (COP) in a country can be manipulated via a subsidiary in another country such that it equals the Price (P) for Goods and Services, then P = COP and from the First law of Economics, P – COP = p = 0 i.e. the taxable profit (p) is reduced to zero. It has been estimated that $6 trillion of global wealth is unaccounted for and presumed to be deposited in tax havens like the Cayman Islands, Bermuda, Singapore, Switzerland, Liechtenstein, the Netherlands, Ireland and the UK Channel Islands, and that over 50% of US corporate profit made abroad is now made in countries considered to be tax havens [1, 2]. Thomas Piketty in his book “Capital in the Twenty-First Century” (Figure 12.6, page 466) , has estimated that in the 21st century the foreign assets of rich countries held in tax havens has been about 8% of the world output of about $78 trillion i.e. $6.2 trillion.
2. World wealth inequality and 17 million avoidable deaths from deprivation annually. The top One Percent has about 50% of the world’s wealth and the 85 richest individuals own the same wealth as the bottom 50% . Poverty kills – there is a largely ignored Global Avoidable Mortality Holocaust in which currently 17 million people die avoidably each year from deprivation and deprivation-exacerbated disease in the Developing World (minus China) . This is happening on Spaceship Earth with the flight deck under the control of the 10% richest who have about 90% of the wealth of the World and who in turn are controlled by One Percenters who own about half the wealth of the World. An annual global wealth tax of about 4% would yield US$16 trillion annually and enable raising all countries to annual per capita incomes equivalent to the $6,000 per person per year of China and Cuba, countries for which annual avoidable mortality is zero (0) . This is a feasible option for stopping the Global Avoidable Mortality Holocaust. Indeed a progressive annual wealth tax ranging up to 10% for the richest has been proposed for democracy and economic sustainability reasons by French economist Professor Thomas Piketty in his important book “Capital in the Twenty-First Century” [3, 7].
The world annual output (Price, P) is $78 trillion . If we assume that Third Worlders have the same value as Americans (remember the “all men are created equal” of the American Declaration of Independence), and that the US risk-avoidance-based Value of a Statistical Life (VOSL) is about $7 million per person, then the Cost of Production (COP) in terms of avoidable mortality will be 17 million persons x $7 million per person = $119 trillion. According to the First Law of Economics, P – COP = p = $78 trillion – $119 trillion = – $41 trillion i.e. the world “business” is running at a huge loss.
3. World coal burning and 7 million air pollution deaths annually. World production of coal was 7,823 million tonnes in 2013 . Assuming the current price of thermal coal of $63 per tonne, the Price (P) = 7,823 million tonnes x $63 per tonne = $0.49 trillion. The World Health Organization (WHO) states: “After analysing the risk factors and taking into account revisions in methodology, WHO estimates indoor air pollution was linked to 4.3 million deaths in 2012 in households cooking over coal, wood and biomass stoves. The new estimate is explained by better information about pollution exposures among the estimated 2.9 billion people living in homes using wood, coal or dung as their primary cooking fuel, as well as evidence about air pollution’s role in the development of cardiovascular and respiratory diseases, and cancers. In the case of outdoor air pollution, WHO estimates there were 3.7 million deaths in 2012 from urban and rural sources worldwide. Many people are exposed to both indoor and outdoor air pollution. Due to this overlap, mortality attributed to the two sources cannot simply be added together, hence the total estimate of around 7 million deaths in 2012” .
If we assume that coal burning is responsible for 25% of the 7 million annual air pollution deaths , and that the risk -avoidance-based Value of a Statistical Life (VOSL) is about $7 million per person (see example 2 above), then the Cost of Production (COP) = 0.25 x 7 million x $7 million per person = $12.25 trillion. According to the First Law of Economics, P – COP = p = $0.49 trillion – $12.25 trillion = – $11.76 trillion i.e. properly analyzed, the world coal “business” is running at a huge loss.
4. World greenhouse gas (GHG) production and Carbon Debt. The world annual output (Price of goods and services, P) is $78 trillion  and is associated with a greenhouse gas (GHG) production of 64 billion tonnes CO2-e per year (taking the livestock contribution into proper account) . Climate change economist Dr. Chris Hope from 90-Nobel-Laureate University of Cambridge has estimated a damage-related Carbon Price of US$150-$250 per tonne CO2-e (CO2-equivalent) depending on location . Based on a Carbon Price of $200 per tonne CO2-e, the World now has a Carbon Debt from historical CO2 pollution (mostly from European countries) of $540 trillion that is increasing at 64 billion tonnes CO2-e per year x $200 per tonne CO2-e = $12.8 trillion each year . According to the First Law of Economics, P – COP = p = $78 trillion – $12.8 trillion = $65.2 trillion i.e. the world’s carbon-based economy involves an annual subsidy to GHG polluters of about $13 trillion, that adds to an inescapable Carbon Debt for future generations of $540 trillion.
5. Coal burning and the cost of removing CO2 from the atmosphere. It has been estimated that for every $1 for coal it will cost, depending upon location and technology, about $1 to $14 to remove from the atmosphere the CO2 generated from the subsequent burning of the coal . Noting our First Law of Economics, P – COP = p, this means that the profit, p, from every $1 gained from selling coal for combustion will actually be $0 to minus $13 i.e. coal burning is presently still horrendously subsidized at the expense of future generations.
6. Mainstream lying and the Second Law of Economics. The surprising findings outlined above are of course resolutely hidden from public perception in the Western democracies that have become Murdochracies, Plutocracies, Lobbyocracies, Corporatocracies and Dollarocracies in which Big Money buys people, politicians, parties, policies, public perception of reality and political power – testament to the Second Law of Economics that declares that deception about the Cost of Production (COP) strives to a maximum.
7. Terracide and the Third Law of Economics. The World will exceed its Terminal Carbon Budget for a 75% probability of avoiding plus 2 degrees C in about 3 years, and the world’s “goal” of a plus 2 degrees C temperature rise is disastrous for Humanity and the Biosphere, yielding at equilibrium sea levels “at least 6 to 8 metres higher” according Dr. James Hansen of NASA and 101-Nobel-Laureate Columbia University . Both Dr. James Lovelock FRS (Gaia hypothesis) and Professor Kevin Anderson ( Deputy Director, Tyndall Centre for Climate Change Research, University of Manchester, UK) have estimated that only about 0.5 billion people may survive this century due to unaddressed, man-made global warming, this corresponding to a climate genocide involving about 10 billion people dying avoidably this century . The Third Law of Economics states there is no work, price or profit on a dead planet.
Polya’s 3 Laws of Economics mirror the 3 Laws of Thermodynamics and are (1) Price minus COP (Cost of Production) equals profit; (2) Deception about COP strives to a maximum; and (3) No work, price or profit on a dead planet. These 3 Laws of Economics are useful in exposing and assessing massive deceptions in neoliberal capitalism involving the dangerously uncosted exploitation of human and physical resources for private profit.
As exampled above, application of the First Law of Economics enables quantitation of huge hidden subsidies from the remorseless deception described by the Second Law of Economics. The Third Law of Economics presents a terminal boundary condition of the human condition in which irreversible greenhouse gas (GHG) pollution, ecocide, speciescide and climate genocide have led to omnicide and terracide, the destruction of Humanity and the Biosphere.
The Paris Climate Change Conference has failed before it has begun – a plus 2C temperature rise is catastrophic and is now inevitable. Humanity is faced with an urgent new task to do everything we can to make the future “less bad” . Dishonest, destructive and deadly neoliberal capitalism that allows the vastly rich to get even vastly richer at the expense of Humanity and the Biosphere must be urgently replaced by an evolving social humanism involving truthful, science-based risk management and the maximization of human dignity, happiness and opportunity .
Peace is the only way but silence kills and silence is complicity – the worsening deception by the ever-self-enriching One Percenters and complicit Mainstream media, politician and academic presstitutes means that 7 million people die annually from air pollution and 17 million people die avoidably each year from deprivation. Decent people must (a) inform everyone they can, and (b) apply Boycotts, Divestment and Sanctions (BDS) against all people, politicians, parties, countries, companies and corporations disproportionately involved in the terracidal rape of the Earth – armed with the 3 Laws of Economics they must ensure Climate Revolution now .
. Gabriel Zucman, “The Hidden Wealth of Nations. The scourge of tax havens”, University of Chicago Press, 2015.
. Josh Zambrun, “Is wealth inequality hidden in tax havens? Piketty’s co-author thinks so”, Wall Street Journal, 28 September 2015: http://blogs.wsj.com/economics/2015/09/28/is-wealth-inequality-hidden-in-tax-havens-pikettys-co-author-thinks-so/.
. Thomas Piketty, “Capital in the Twenty-First Century”, Belknap, 2014.
. Larry Elliott and Ed Pilkington, “New Oxfam Report says half of global wealth held by the 1% ”, The Guardian, 19 January 2015: http://www.theguardian.com/business/2015/jan/19/global-wealth-oxfam-inequality-davos-economic-summit-switzerland.
. Gideon Polya, “Body Count. Global avoidable mortality since 1950” that includes an avoidable mortality-related history of every country since Neolithic times and is now available for free perusal on the web: http://globalbodycount.blogspot.com/.
. Gideon Polya, “4 % Annual Global Wealth Tax To Stop The 17 Million Deaths Annually”, Countercurrents, 27 June, 2014: http://www.countercurrents.org/polya270614.htm.
. Gideon Polya, “Key Book Review: “Capital In The Twenty-First Century” By Thomas Piketty”, Countercurrents, 01 July, 2014: http://www.countercurrents.org/polya010714.htm.
. World Coal Association, “Coal statistics”: http://www.worldcoal.org/resources/coal-statistics/.
. World Health Organization (WHO), “7 million premature deaths annually linked to air pollution”: http://www.who.int/mediacentre/news/releases/2014/air-pollution/en/.
. “Stop air pollution deaths”: https://sites.google.com/site/300orgsite/stop-air-pollution-deaths.
. Robert Goodland and Jeff Anfang. “Livestock and climate change. What if the key actors in climate change are … cows, pigs and chickens?”, World Watch, November/December 2009: http://www.worldwatch.org/files/pdf/Livestock%20and%20Climate%20Change.pdf.
. Chris Hope, “How high should climate change taxes be?”, Working Paper Series, Judge Business School, University of Cambridge, 9.2011: http://www.jbs.cam.ac.uk/fileadmin/user_upload/research/workingpapers/wp1109.pdf.
. “Carbon Debt Carbon Credit”: https://sites.google.com/site/carbondebtcarboncredit/.
. Gideon Polya, “Intergenerational Theft – For Every $1 For Coal Today Future Generations Will Pay $1-$14 To Sequester CO2”, Countercurrents, 8 April, 2015: http://www.countercurrents.org/polya080415.htm.
. Gideon Polya, “G7 Pledge Of Zero Emissions By 2100 Masks Worsening Climate Emergency And Need For Urgent Action”, Countercurrents, 10 June, 2015: http://www.countercurrents.org/polya100615.htm.
. Dr James Hansen interviewed by ABC RN’s Fran Kelly, “Two degrees of global warming is not “safe”: Hansen”, ABC RN Breakfast, 5 May 2015: http://www.abc.net.au/radionational/programs/breakfast/two-degrees-of-global-warming-is-not-safe/6444698.
. “Climate Genocide”: https://sites.google.com/site/climategenocide/.
. “Too late to avoid global warming catastrophe”: https://sites.google.com/site/300orgsite/too-late-to-avoid-global-warming.
. Gideon Polya, “Book Review: “Social Humanism. A New Metaphysics” By Brian Ellis – Last Chance To Save Planet?”, Countercurrents, 19 August, 2012: http://www.countercurrents.org/polya190812.htm.
. “Climate Revolution Now”: https://sites.google.com/site/300orgsite/climate-revolution.