The Venus Flytrap - About Economics

Appendix A. About Economics

11-01 Someone might have noticed that I did not use a term - Technocracy - that refers to things like The Venus Project. The reason is because first, the term can arouse unnecessary hostility by supporters of The Venus Project who refuse to be included in existing categories. Second, I thought it would be more proper to analyze technocracy through The Venus Project than to analyze The Venus Project through technocracy.

11-02 However, keeping existence of this word as a secret is not a good idea when we are trying to focus on the fact that things like The Venus Project have existed and been refuted since decades ago. Jacque Fresco's idea is as obsolete as himself. What's new in The Venus Project is the pathetic argument that all ground cities should have round shape regardless of location.

11-03 What is technocracy? It is an odd trend that was born in 1930s. It claims that since politicians elected in the complex modern industrial economy are destined to be incompetent, all rights to make decision on production should be delegated to competent engineers who know how to resolve the problems. Since this expression was created by technocracy instead of Jacque Fresco and every aspect of technocracy is identical to Fresco's idea, it would be a waste of time to explain technocracy in greater detail.

11-04 We have already reviewed systematic problems of technocracy. They would be sufficient enough to permanently ostracize it. However, if we cannot criticize technological visions offered by technocrats, it is still incomplete. Even if we assume that all technocrats are as virtuous and wise as they advertise themselves to be, their plan must fail because of the error in their plan. This will be clearly shown through this supplementary discussion.

11-05 Let's first understand the ground on which technocrats argue their plans to be realistic. They offer technology as their ground. To them, the fact that we have all resources and technologies required for a plan means the plan is realistic. They really do not consider anything other than technology and resource.

11-06 What is the problem? We can consider a simple case. We have enough resources and technologies to build 800 aircraft carriers. But does this mean that the plan to build 800 aircraft carriers is realistic? The truth is that we cannot discuss practicality of something without economic consideration. We never think it is realistic to launch 40,000 satellites, but we were never short of resources to do so.

11-07 Economic consideration was the one thing that all technocrats coherently despised. They affirmed that all of their plans can be accomplished, as long as we do not have to be restricted by the logic of profit. They testified that entrepreneurs that must make profit will not attempt their plans because they require extreme cost, but they never correctly understood what it means.

11-08 Unfortunately, such excuse does not seem to resolve our doubt. If manufacture of 800 aircraft carriers is only unrealistic in places where market prices exist, Soviet Union would have easily dominated its arms race against the United States. Even if we assume - though it is uncertain as to what this assumption means - that Soviet Union abolished money in order to realize this plan, there is no doubt that it would not have suddenly become a realistic plan.

11-09 Many technocrats argued that scarcity is something created by money economy because of planned obsolescence - which has already been shown to have no grounds. However, such argument was always about final products purchased by the public. What they actually failed to understand was scarcity of the factors of production, not final products.

11-10 Consider an example of labor. It is self-evident that there is a limit in the amount of labor that the entire society can employ. Labor placed in a field must be reduced in order to put more labor into another field. Even if all entrepreneurs wanted to increase the number of laborers by a factor of 10 and they are willing to pay for corresponding wages, labor cannot be increased by 10 times. The same principle is applied to all production factors.

11-11 Many engineers complain that investment on their field is insufficient. However, what is actually insufficient is not the money itself. It is something we purchase using money. In material sense, it is impossible to invest equally large sum of money in everywhere. Though this is not being understood correctly, but it should be accepted as one of basic truths of economics: We cannot increase the amount of the factors of production put into a place without reducing the amount of production factors in another place.

11-12 The plans of technocrats are unrealistic for the same reason as in 40,000 satellites. They will improve the standard of living. The problem is that they have to draw the factors of production needed to execute such plans out of more valuable areas. Based on consumer evaluation, the fact that something does not return profit means its value is lower than prices of its factors of production. Why do we have to move the factors of production from profitable area to unprofitable area?

11-13 Even among the pathetic plans proposed by technocrats, intercontinental magnetic levitation railroad plan by Jacque Fresco is one of the most pathetic. Let us briefly review this problem. He emphasizes that money-based economy shows its wastefulness by not selecting interoceanic magnetic levitation train as transportation means instead of airplanes. This probably means that intercontinental magnetic levitation train is less wasteful than airplanes, even under current technology and conditions.

11-14 However, how can a magnetic levitation train connecting Sendai and San Francisco help a traveler trying to go from Shanghai to Santiago? He would have to move to Sendai on a ship, go to San Francisco, and then go on a long trip to Santiago. This is even worse than riding a ship to Santiago. If there is only one intercontinental magnetic levitation train, it would not be able to provide the utility of airplanes.

11-15 So, how many trains do we need? At least 30 trains are necessary to make it more economically feasible for everyone to take magnetic levitation train for intercontinental trips. For convenience, let us assume it is possible for trains to change their track at intersections. Total length of track, using the most conservative estimation, will be 10 times longer than a single track crossing the Pacific Ocean.

11-16 I simply provided minimal requirement. Some people will reach their destination after than they would on an airplane. However, still more people have to move long distance on land and sea in order to take nearby magnetic levitation train. As a result, they will reach their destination more slowly. Leaving out the fairness, there is no guarantee that the total utility of earth that uses intercontinental magnetic levitation train will surpass total utility of earth that uses airplanes.

11-17 Our analysis cannot be completed before we discuss the cost of each. This is easy for airplanes. No entrepreneur will operate his business while intentionally experiencing loss. Total sales of the airline will be at least greater than the total cost to be burdened. This includes the cost for everything we need to calculate including price and maintenance expense of passenger planes, price of fuel, airport construction cost, and cost of all in-flight and airport services and labor.

11-18 Is price of a passenger plane really the same as cost of manufacturing the plane? Of course it is. Aircraft manufacturers will not operate their business while suffering loss, too. The advantage of economics is that it reduces time wasted on needless calculations. Anyway, we can easily verify through a bit of research that annual sales of global airline industry are about 500 billion dollars. Cost is slightly lower than that. However, it would be fine to assume that the sales and cost are identical.

11-19 What is the total cost of airline industry in the history? The very first jet liner was built about 70 years ago. Therefore, assume that 500 billion dollars were continuously put into airline industry for 70 years. Total cost is about 35 trillion dollars. This of course is a ridiculous assumption. Size of airline industry today is much larger than its size in the past. However, this at least offers us the maximum value of cost we are trying to find. It would be helpful to use the maximum possible value.

11-20 More difficult calculation remains now. How would we calculate total cost required by a magnetic levitation train crossing the Pacific Ocean? Here, let us briefly speculate the cost required by its railroad. Construction of magnetic levitation railroad requires at least 25 million dollars per km, and width of the Pacific Ocean is about 15,000 km. Since we have to build 10 of such railroads, we will have to prepare for at least 3.75 trillion dollars.

11-21 However, this calculation is even more ridiculous than the previous one. 25 million dollars is the cheapest cost of magnetic levitation railroad, which definitely is not the cost of cutting edge vacuum tube demanded by Jacque Fresco's plan. Furthermore, it is the cost of constructing magnetic levitation railroad on land, not in the middle of the Pacific Ocean. Most conservatively estimating, the actual cost of constructing the railroad will be at least 10 times the value calculated above.

11-22 The conclusion is clear. Quantity of capital required to construct interoceanic magnetic levitation railroads easily surpasses the amount of capital put into airplanes by the mankind until now. We did not even consider time required for construction. It takes at least 50 years to complete Fresco's railroads. If we were to accept Fresco's plan, we would not be able to have any long-distance transportation means except for ships.

11-23 Someone might point out that unlike airplanes, railroads of magnetic levitation trains can be used for long time once they are installed. However, exactly how long can they be used? Let us ask Jacque Fresco who has obsession for new things. What would we do if we develop a new railroad which allows trains to move much faster after 50 years?

11-24 Advantage of airplanes is that quickly advancing technologies can be applied as they are developed. Railroads that demand enormous basic capital investment cannot. After 5 years, current technology becomes old. We will be forced to rebuild the entire railroad in order to apply new technology. If it must happen whether it is 200 years or 300 years from now, utility of existing magnetic levitation railroad may not be sufficient to cover depreciation.

11-25 We still did not include other expenses required by the plan for intercontinental magnetic levitation train, especially maintenance cost of railroads, in our discussion. Railroads are as notorious for astonishingly high maintenance cost as airplanes. While magnetic levitation trains have relatively low maintenance cost compared to existing railroads, it is still about half of existing railroads. No matter how the maintenance work is performed in the middle of the ocean, it clearly is going to require greater cost than ordinary maintenance cost.

11-26 At last, The Venus Project was completely buried with nails down to the coffin top. However, this case is more valuable in that it well represents the unrealistic thoughts of technocrats who claim to they can resolve the problems. Nobody among ancient and modern technocrats was in a better state than Jacque Fresco.

11-27 How did they come to call the most ridiculous things as being realistic and believe in the most wasteful things as being conserving? It is simple. They always talk about efficiency and rationality to be accomplished after enormous capital investment has been already made. They did not realize the fact that this investment is most problematic. They simply presumed the investment as a given factor because they did not understand scarcity of the factors of production.

11-28 The magnetic levitation train advertised by Jacque Fresco is known as Vactrain, and the concept of Vactrain existed since 1940s. However, the cost necessary for installation of vacuum tube was so large that nobody in market economy could dare to attempt it. Now, Jacque Fresco argues that we can always make such things as long as the profit structure does not disrupt our way. Only if he recognized that its cost accurately reflects the amount of labor and resource to be purchased!

11-29 Technocrats really need to learn economics from the beginning. Flash game series called Storm the House would be better fitted for their education level than Monopoly. We start out this game with a technology to make all weapons that exist in the game. However, we do not try to buy gravity cannon or mini-gun from the start. We buy a double gun, SMG or shotgun and slowly save money.

11-30 Technocrats might ask why we would be satisfied with ordinary high-speed railroads when we have the technology to build Vactrain. This is nothing different than asking someone playing Storm the House 3 why he buys a shotgun when he can have a mini-gun. He buys other guns because he cannot play the game with basic pistol until he can purchase mini-gun. Likewise, we cannot get rid of railroads until we have enough capital to build Vactrain.

11-31 Such intermediate goods may not be great compared to the optimal possibility offered by the technology. However, they help improve quality of life, and as a result, help us to more quickly accumulate our capital. Which civilization among civilization that decides not to use any railroad until construction of Vactrain and civilization that decides to use intermediate railroads will reach Vactrain first is clear.

11-32 Vactrain may one day become a marketable transportation. We will have much higher productivity compared to now, and the initial investment required by Vactrain can be not as large of a burden compared to the services it provides at that time. However, such productivity can only be obtained through preceding capital investments - that is, appropriate investments about goods at lower levels than Vactrain. Technocrats neglected this.

11-33 As Mises correctly pointed out, the fact that technology is relatively less important than supply of accumulated capital becomes evident when we simply look back on the past or examine underdeveloped nations. These nations are not lack of technology. An African farmer would not gain much benefit from looking at a tractor design from the United States. What he needs it the money required to make or purchase a tractor.

11-34 Think about a farmer living alone who has to do farming using hands but knows about all modern machineries like tractor which can be applied to farming. Let us assume that he is producing just enough to make a living, but he can use some time he used to spend on farming in producing something else by reducing his food expense to the minimal level.

11-35 Of course, he would not produce tractor first. If he did so, he needs to save only a part of his farming time - finite production factor - for production of tractor. This would take several hundred years to finish. He must first make farming tools like sickle and plow. They will help him produce crops with less labor until tractor is completed. Once they are manufactured, he would be able to spend most of his time on production of tractor.

11-36 This principle is applied better to complex modern economy than the farmer living alone. Savings of individuals in market economy - which means the individual spent less than what he produced - are given out as loans for use as capital for new production. However, we clearly cannot invest more than what was saved by individuals. We need to carefully choose where to invest limited capital. The wisest investment is not solely determined by technology. It is determined by supply of accumulated capital.

11-37 From the perspective of unrealized technology, there is not a great difference between citizens of developed nations and citizens of underdeveloped nations. Many technologies gained an opportunity to be applied to increase quality of life ever since settlement of economic freedom. However, the rate at which technological and scientific knowledge is accumulated always exceeded the rate at which it is applied. The mankind was never able to utilize all opportunities provided by technologies of the era.

11-38 Technocracy started out from such background. They deluded that sufficient supply of money would allow anything to happen because they did not realize scarcity of production factors. They misunderstood all limitations levied on us by the nature as the result of money economy. As a result, the problem of enormous capital investment demanded by their plans was completely ignored.

11-39 Unfortunately, technocrats have never understood economics as well as they claim they do. As knowledge explosively increased and unrealized possibilities were accumulated, their outcry grew larger. They proposed marine cities and undersea tunnels as realistic plans without hesitation based on technology, failing to realize what it means to be realistic. They did not stop this when everything began to appear as unbearably stupid.

11-40 They were the true deformities created by 1930s.