The McAlvany Weekly Commentary
with David McAlvany and Kevin Orrick
Kevin: David, as promised last week, we have Dr. Joseph Tainter on today, talking about The Collapse of Complex Societies.
David: That is the title of his book written in 1988. We gave a brief summary of it by referencing the poem Ozymandias last week. Again, it describes what we have as remnants of greatness, what we have is what, at the time, was considered a power which would never go away, and yet, as you recall from last week:
“My name is Ozymandias, King of Kings;
Look on my works, ye mighty, and despair!”
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare,
The lone and level sands stretch far away.
Kevin: It reminds me: to be a great leader, or to actually manage anything, you have to understand history. Winston Churchill wrote the four-volume set The History of the English-Speaking People. He was talking about the fall of Rome and how you could see it there in England. He talked about, “Here and there the broad Roman gateways of townships were narrowed to half their size with masonry.” I am quoting from his book The Lost Island. He said, a lasting proof of insecurity at the time of the Roman Empire, all over the country, and this is something I don’t think a lot of people realize, but back in the 1930s hundreds of gold coins were found. Here is what he said: “All over the country hordes of coins have been found, hardly any of which are later than the year A.D. 400.”
David: Tremendous stress was already building in the Roman Empire, and obviously, that is one of the things that Tainter talks about in the collapse of complex societies, and ultimately, when Rome could no longer finance its expansion, and was forced to stop expanding, and then could no longer finance just the normal operations and maintenance of the status quo, you began to see major inflation. Diocletian, of course, his edict of 301, was to set prices for commodities. And it was in that timeframe when you saw the value of gold go up considerably. Interestingly, the denarius was made of silver. That coin was easier to diminish in value. It was easier to debase, because having that particular color, you could replace other metals and people would not necessarily know that you had taken silver content out.
Kevin: So, to run the Roman Empire the way they had been running it, they had to debase the currency because they could not tax the people as much as it was costing to run it.
David: That is exactly right. Who paid the ultimate cost? The poor and the middle class paid the ultimate cost because the wealthy keeping most of their resources, a “cash” position in gold, it was not as easy. In fact, it was not debased in the same way that the Roman denarius was. The value of gold following Diocletian’s edict in 301 rose 45 times – 45 times. Just as a point of comparison, in the last 100 years, gold has moved up 62½ times. In the last 100 years, arguably, we have had a greater debasement than that period of Diocletian. What is it an indication of? It is an indication of a system which is bloated. That doesn’t necessarily mean that it is a system which will, tomorrow, collapse. But it does mean that the risks are growing.
Kevin: I think it is really interesting, Dave. We have been taught all of our lives why various societies have collapsed, like Rome, or maybe the Mayan culture, or the Greeks. But Tainter looks at it a little bit differently. He says, you know, it’s not resource depletion, it is not the things you have been taught. It actually is just the high cost of maintaining a status of living, or a type of living, complexity, that really can no longer be maintained.
David: Very simply put, when a body gets larger and larger, any kind of body, it requires greater metabolism, it requires greater resources and energy in the metabolic process.
Kevin: As the book was, the conversation, I am sure, will be very productive. So let’s get to that.
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David: Dr. Tainter, thank you for joining us in our discussion of your book The Collapse of Complex Societies. You start with several observations, and we will, as well, in our conversation today. You point out that civilizations are fragile, that they are impermanent things. You point out that collapse is a common process, and a recurrent feature of human societies. These are some of the building blocks in your argument. Your objective in the book is to develop an explanation of collapse that applies to a variety of contexts, and may have implications for current conditions. And there is often concern, this is one of the things that you point out, with the idea of collapse, in times of distress. Perhaps you have seen a few more copies of your book sold in recent years. The last five years of stress and strain, with the global economy being under a different kind of stress and strain than perhaps we have been in a few decades. Maybe in a nutshell, what is your thesis, and what are the concepts that will help us understand your approach to collapse?
Dr. Tainter: As an archeologist and historian, I was familiar with a number of cases of societies collapsing and the fact that there is fairly significant literature on this topic, but I was never satisfied with that literature. I thought that we had never really come to grips with the essence of what a collapse is. I consider a collapse to be the rapid loss of complexity in a society. We are all aware of the fact that our societies today are much more complex than they were in the past, and complexity consists of more and more different kinds of parts to our society, more kinds of institutions, more kinds of social roles, more kinds of economic activities, more kinds of information that we process, and so forth, combined with the means to organize and integrate these into a functioning system. So, we have cultural norms, we have expectations, we socialize our children to behave in certain ways, and on a more formal level, we have rules, regulations, and laws that provide the organization of the various parts of the society.
What we see in ancient societies is that they would often increase in complexity and then rapidly lose complexity, that is to say they would rapidly collapse. They would revert to a simpler state and do this, seemingly, over a fairly short period of time in historical or archeological terms, what I mean by a short period of time, perhaps a few decades or so. So, I took the question as being, what causes societies to suddenly lose a level of complexity, and that is really just part of the overall question of what causes societies to change in their complexity. One of the things we have to understand about the evolution of human societies, or about the evolution of biological species, is that complexity is not free. It always has a cost.
This is basic thermodynamics. To maintain any kind of system in a complex state requires energy. And the more complex a society becomes, or the more complex a species becomes, the more energy is required. So, for example, the energy that could be produced by hunting and gathering could never have supported state level civilizations. Those required agriculture. To support the kind of society that we have today could never be done on the basis of subsistence agriculture. It requires energy subsidies which we accomplish in the form, primarily, of fossil fuels. So, it always takes more energy to become more complex. So, if it always takes more energy, and in the past this meant that people had to work harder, why ever did societies become more complex in the first place?
The answer I suggest is that we become more complex to solve problems. As we encounter problems, we add new technologies, or we add new institutions, we process new kinds of information, we have new kinds of social roles, perhaps new kinds of businesses, and as an example, if we think about how we have responded to the terrorist attacks of September 11, 2001, you can see that, in fact, we have added complexity. We have established new government agencies, the Department of Homeland Security, Transportation Security Administration, and so forth, and we have also increased organizational controls over behavior that we think might be threatening. So, basically, we have increased complexity and we are all aware of the cost this imposes on us every time we go through an airport. We experience the complexity first hand in those situations.
What I argue is that as societies evolve, they first adopt highly effective and inexpensive solutions to the problems that they face. Simpler societies have given way to societies that are hierarchical, that have many different kinds of parts. Simple technologies have been replaced by more advanced, complicated technologies. We initially try to adopt the solutions that are [least] costly and that solve the problem that we are facing. But over time, the inexpensive solutions get exhausted and we are then faced with is called in economics “the point of diminishing returns,” where we adopt more and more complexity, but the returns to the complexity stop growing as fast as they had before.
Diminishing returns is a significant problem in any kind of system. It means that it becomes no longer worthwhile to pursue the strategy that you are following. In ancient societies, what I see is that they would grow in complexity and ultimately reach a point of diminishing returns on the basis of an energy base that could not expand, on the basis of peasant agriculture, that would be pretty much at its limit and that would be highly taxed, and this is the point where they started to become vulnerable to collapse, when they reached the point of diminishing returns to complexity. At this point, complexity, itself, becomes a less suitable strategy for solving problems, and societies become increasingly vulnerable to collapse.
David: There is this idea that complex societies, because it is the only thing we have experienced, if you look at our direct and limited experience, this is the norm. Complex societies are what we have all around us. If you look at the highlights of history, what we see is social progress, and it implies that this is what we have always had, and yet you argue that, quite to the contrary, it is the exception to the rule to have complexity, and the reversion to non-complexity is a fairly normal and natural process.
Dr. Tainter: Correct. We all, today, have grown up in complex societies. We have never experienced anything else in our lives, so we consider a complex society to be normal, and in fact, we consider it to be the natural state of affairs. The problem with this view is that it is historically inaccurate. We are, in fact, an anomaly of history, that highly complex societies have existed only for about the past 5,000 years or so, and we know that humans have an ancestry extending back at least 4 million years, and for most of that time people lived as simple foragers in very simple societies, small bands of perhaps a handful to a few dozen people. And so, the way we live today is an anomaly, and because of that, we don’t realize that low complexity is, in fact, the normal condition of human affairs, and that the way we live today is so very unusual.
David: Perhaps you could share with us the spectrum of effective choices that can be made in managing a complex society. Alternatively, you have those factors which result in low marginal returns. You have the time, effort, the resources expended, to maintain a complex social structure. What would be some examples of things where you just say, “early on it worked; now it is not paying for itself”?
Dr. Tainter: I am not sure that you can ever truly manage complexity because it tends to sneak up on you. I refer to complexity as insidious. Every time we encounter a problem, we have a tendency to want to solve the problem, and the solution always appears to be simple and affordable. What does the damage is cumulative costs, over time, of being a more and more complex society. We are unaware of this today because we pay for complexity through fossil fuels. In the past, when people had to pay for the complexity of a society through their own labor, they were more aware of the problem of supporting, say, a state superstructure, or large scale religious institutions. The way we live today is, as I say, highly unusual, and it tends to obscure the fact that low complexity is, in fact, a normal state of human affairs.
David: You mentioned fossil fuels, and that is a resource that the modern economy relies on, depends on. You also, in your book, suggest that many things can be solved if you introduce a new source of energy into a complex equation. With fossil fuels, certainly, your argument is not that collapse is related to, or caused by, the resource itself. The complexity is a very different issue. Maybe you could address that. Is it resource depletion? I didn’t get the impression that was really the argument in the book.
Dr. Tainter: No, and that is one of the recurrent theories about why societies collapse, that they depleted their resources. I don’t see that in looking at the historical record. What I see, instead, is that you have a situation where societies grow more complex and more costly. They reach a point of diminishing returns, and it becomes essentially impossible to solve future problems. They become weakened fiscally because the population is taxed beyond its limits, the population of subsistence farmers becomes taxed beyond what they are capable of supporting, and so the society becomes weakened fiscally and the population ultimately loses its loyalty because they pay, for example, very high taxes, and yet don’t see an adequate return to that cost.
David: I think of your bio, and you may be an anthropologist, an archeologist, a historian, there are a number of hats that you wear well, and it is interesting, in your book you take the argument to a decidedly economic and financial place. You start with the idea that we are problem-solving organizations, that is, human societies, and you build on that with the notion that sociopolitical systems require energy for their maintenance, and then add to that the increase in complexity carrying a cost, a very high cost, on a per capital basis, and ultimately, the fourth point that you drive home is this notion of declining marginal returns, where investment in sociopolitical complexity as a problem-solving response reaches this point where it is a financial and economic issue. You give some examples: Educational returns. You mention U.S. health care. You mention Planck’s principle of increasing effort. Let’s discuss why investment in complexity yields declining marginal returns and maybe you can explore and explain the educational, the U.S. health care system, and Planck’s principle.
Dr. Tainter: Certainly. If you look at something like the development of science as we practice it today, science in the 19th century was primarily conducted by lone wolf naturalists like Darwin, or Gregor Mendel. These were individuals who had almost no cost to society, and yet they produced results that revolutionized scientific activity. You can also think of inventors like Henry Ford. These were individuals who worked at a very low cost to society, and yet they produced things, they invented things, that revolutionized the way we live, and in many cases greatly improved the way that we live. But as science evolves, and as science as a whole evolves, what we find is that the institutions grow more and more complex. There are not too many lone wolf naturalists left today making major contributions to science. Instead, science is a highly complex enterprise, mainly conducted in interdisciplinary research teams supported by large institutions with staff and buildings and overhead. Max Planck anticipated this many decades ago when he suggested that as science grows it ultimately reaches a point where it becomes more and more expensive to produce results that are of high levels of significance. And so, as science evolves, we find that it becomes less and less productive.
Since the “collapse” book came out, I have been working on this topic with a couple of colleagues, Jose Lobo at Arizona State University, and Deborah Strumsky at University of North Carolina. We looked at the productivity of innovation in the United States patent system. In the U.S. patent system, about half the patents come from overseas. What we were really looking at was a database of worldwide innovation. We looked at a database of over five million patents over the period from 1974 through 2005. In every field we looked at, the productivity of innovation is declining, and it is declining because innovation becomes more and more complex and more and more costly to achieve. This is Planck’s principle of increasing effort.
David: I realize your Ph.D. was done in 1975, and I hope you don’t take this personally, but the issue, as it has been described to me, getting a Ph.D., is the process of knowing more and more about less and less until you know absolutely everything about absolutely nothing, and I know that is tongue-in-cheek, but there is sort of this broad benefit to primary education, and secondary education, and then you start to specialize in a degree in college, a master’s degree further hones those skills into something even more specialized, until you choose a singular topic and Ph.D. thesis. A handful, only a handful of people, will understand, as they read your thesis. Again, it is the high cost, the actual dollars spent to receive that piece of paper, and then the general benefits. That, I think, is a very good picture of specialization. The high cost, yes there is value added, but it is harder and harder to justify, and it can be justified in many instances, but it is a good demonstration.
You discuss other explanations of collapse, and you make the distinction between what some might call contributory factors, versus causal factors, and you know there are elements which, really, are just sort of backdrop issues, that are a backdrop to the decline, but in and of themselves are not causal. Maybe you can walk us through some the alternative hypotheses: resource depletion, social dysfunction, mismanagement. You kind of call them something else: The dinosaur model, the runaway train model, the house of cards model, things that, again, are helpful, but don’t fully give you that causal explanation.
Dr. Tainter: The two main ones that you see in the literature in recent years are either resource depletion, and this was the theme of Jared Diamond’s book on collapse, or climate change, which Diamond also discussed, although he didn’t really focus on it as much as he should have. The problem with the resource depletion argument is that I just don’t see evidence for it. You can look at cases like the Roman Empire, the Maya, and so forth, and these were societies with highly productive peasant agriculture, and it is just not possible to postulate that they had depleted their resources and therefore collapsed. Instead, what you see in these cases is that the societies grow more and more complex, and more and more costly over time, and as they reach a point of complexity and costliness, that is when they start to become vulnerable to collapse.
As far as climate change goes, there is interesting work being done in the Maya area which suggests that the Maya were at the point where they were utilizing their environment so completely that any problem might have made them vulnerable to collapse, and this is the kind of situation where something like climate change becomes contributory rather than causal. If your society had, say, a fairly low population density, with lots of room to grow and expand and intensify, then something like a long-term drought may not affect you very much because you have options. But if you are a society that is using its landscape fully, and you are using it fully because you have to support a large population and a complex society, and then there is a long-term drought, this is when you become vulnerable.
I am glad you brought this up. It is another aspect of collapse, which is to ask the question, What makes a society vulnerable at some points in time, but not vulnerable at others? You do see this, for example, in the Roman Empire. The Romans faced enormous challenges early in their history, and overcame them, but later in their history they faced comparable challenges and ultimately were not able to overcome them. The reason, I think, is because their society grew more and more complex and costly, and they had lost what I call reserve problem-solving capacity.
David: You illustrate that early on, the expansion of the Roman Empire was paid for with the bounty, the booty, the gold that was captured. But as the empire grew, each new acquisition, compared to the scale of the empire, itself, was smaller and smaller. So, the costs were increasing, the acquisition costs, if you will, alongside the long-term liabilities.
Fast forward to today’s circumstances. Lawrence Kotlikoff, economics professor at Boston University, says that our funding gap is around 200-220 trillion dollars. That is, you fast forward and say, “What is the accumulated income of the United states, and what are our outgoing obligations, Medicare, Medicaid, Social Security?” And they say, “Well, there is a bit of a discrepancy. We don’t have enough money, to the tune of about 200-220 trillion dollars? This is the kind of thing that the Roman Empire wasn’t taking account of as they were making the acquisition, originally. They saw the asset, the bowl of cherries, so to say, not accounting for the pits, and this was the problem. They were actually acquiring, with the asset, a long-term liability. They had to maintain that space. They had to put people in place to manage the land, if you will. And then, of course, those costs started to rise, and they didn’t have the income to support it. So, where did they go? They went to debasement of the currency.
My question is this: When it comes to debasement of currency, or inflation, was inflation symptomatic of the decline, or a cause? And should we be concerned by a similar degree of monetary instability today? 97% of loss of purchasing power over a 100-year period. Again, it is not sort of acute this year, but over a longer stretch of time, the cumulative effect, fairly negative.
Dr. Tainter: Yes, I have a chart showing, year by year, the debasement of the Roman silver currency, which they were forced to do because they simply didn’t have enough money to pay their recurring costs, let alone meet the costs of military crises. And then when I talk to general audiences I juxtapose that with a chart showing the decline in value of the U.S. dollar, and in fact, the two charts show very similar trends. The debasement of the Roman silver currency, of course, caused inflation. It was essentially a strategy of taxing the future to pay for the present, which is the same strategy that we use today with deficit spending. We tax the future to pay for the present. These were analogous strategies and they are one way of coping with complexity, which is that you try to shift the cost somewhere else. Of course, this is a strategy that only works for a while, but we always consider the future less valuable than the present. The economists call it temporal discounting. We discount the value of the future relative to the present, so we consider, say, a dollar of consumption today more valuable than a dollar of consumption, say, 10 or 20 years from now. And this is the strategy that the Romans followed, and I suspect other complex societies have followed as they grew near to collapse, which is to try to solve current problems by essentially shifting the costs onto the future.
David: Today we have debt and derivatives, financial products that add layers of complexity to bank finance, to household finance, and frankly, to systemic stability. These two elements of debt and derivatives have never been more system-critical, nor frankly, less understood, except by a select few specialists. Are these the kinds of complexities you might expect to contribute to collapse, or is bureaucracy, is liability mismanagement – are those the types that concern you most and that you are addressing, really?
Dr. Tainter: The new kinds of financial products, derivatives and so forth, certainly make us vulnerable to loss of confidence in investments and so forth. Whether those can cause a collapse depends on, and I’ll go back to this phrase that I used before, our reserve problem-solving capacity. Now, when the 2008 financial crisis hit, we were able to counteract the financial downturn through heavy government spending which was financed very largely by borrowing, but we have borrowed so much money to meet that crisis, and we are continuing to borrow at very high rates to finance yearly deficits, that you have to ask, if a similar crisis came along next year, would we have the credit to be able to borrow again to counteract it? Or if a similar crisis came ten years from now, and if we were to continue government borrowing at the rate at which we are, would we be able to summon the fiscal resources to counteract it?
This is the sort of thing that I think makes us vulnerable to a collapse, not having some reserve capacity to solve problems. Again, also, this is something that I think I see in ancient societies. And this is what we need to be, I think, very concerned about, and we have to have a long-term perspective on how our society and our economy evolved and what kinds of problems we are likely to face in the future. But the politicians, the political leaders who guide the country generally do not have a long-term perspective. They tend to be concerned, primarily, about the next election. So we don’t prepare for the future. Basically, we lurch from crisis to crisis, trying to solve each as if there were something to isolate it, when in fact, all of these crises are interdependent and as we solve one, that simply sets the stage for the next one down the road.
David: This idea of reserve problem-solving capacity is absolutely perfect. You mentioned, in the context of Rome, that when the treasury was full, bad things could happen and you could absorb them, you could take them in stride, because you had the resources necessary to do so, and the real vulnerability came when the treasury was empty and the only course was the desperate course, whether it was inflation of the currency, or what have you. They didn’t do so much debt financing as we do today. In fact, today, we have a financial economy which is dependent on this sort of growth in debt. Bill Gross, just a few weeks ago, suggested that if our economy does not see an increase in debt by 2½ trillion dollars per year, that we can’t sustain our growth rates. That sounds kinds of backward, that debt is the source of growth in the economy, but it implies that consumers and businesses and governments have the capacity to continue to take on these liabilities. Maybe to the man in the street that sounds a bit ponzi-esque and we hope that the letter that just went out the door is not the last letter, as in a letter scheme. I guess that reserve problem-solving capacity is exactly what you got at, in terms of having a healthy treasury for Rome. And of course, there are other ways to solve the problem than spending money.
Another author, Albert Hirschman, wrote a book many years ago called Exit, Voice and Loyalty, and he considers the breakdown of organizations, both companies and societies, and he lists exit as one possible choice. Exit, as you describe it in your book, is an economic choice. “Not going to participate.” In today’s complex society, that seems nearly impossible. We have coercion, which is made easier by the control of transportation, money flow, and information flows. As you discussed earlier, we now have new complexity in terms of Transportation Safety Administration, Homeland Security, etc. It would seem that complexity has today reached a level where exit is not possible. What are your thoughts?
Dr. Tainter: You are absolutely right. We are trapped. We cannot simplify. We cannot withdraw from the way our system has evolved and the way we have set it up. We are at the point where we really are trapped in, I have to say, a downward spiral that we can’t get out of, or we will someday get out of it when a crisis occurs, but we can’t voluntarily withdraw from it because that would create too many other problems and politicians aren’t willing to create those kinds of problems.
David: This is the classic game theory, or prisoner’s dilemma, where we see the problem in front of us, as we are discussing it today, but to do anything about it would unhinge the system, because an exit is actually what may cause a triggering event for the collapse of the system. And parallel to that, you have the maintenance of legitimacy by a particular political entity. Maybe that was Caesar, today it is the powers that be. This is my question: Is maintaining legitimacy the same political objective as maintaining loyalty, and maybe added to that, what role does coercion play in compliance?
Dr. Tainter: Legitimacy is the most effective way to ensure loyalty, that people are loyal to a nation, a government, a way of life because they consider it legitimate. They consider that it exists with their concurrence and serves their interests and their needs. The alternative is coercion, which is more the default mode for human societies. The problem with coercion, of course, is that you can never let down your guard, you have to continually keep it up, and it can be rather costly, maintaining security forces, maintaining undercover agents to monitor the population, as is done in some countries in the world today. It is much more effective and much less costly to maintain loyalty through being a legitimate government and a legitimate way of life.
David: We talked about seeing time and the inability of politicians to make judgments with long periods of time in mind, looking to the next election or the next public speech, really. In real time, is collapse a gradual process, or is it something that occurs swiftly?
Dr. Tainter: Complexity is a gradual process. Collapse, by definition, happens fairly rapidly. That is why the term collapse is applied to the process. It is a fairly rapid simplification, a fairly rapid loss of a complex way of life. But the thing about collapse is that it tends to be insidious. It creeps up on you. A problem comes along and you solve it, and then the next one comes along and you solve it, and all of these problems come along and they are solved incrementally, one at a time, and in the meantime, the overall cost just kind of sneaks up on you until you reach a point where you can no longer afford to be the kind of society that you have become. This is what happened to some ancient societies and one has to be concerned that we are going down that same path.
David: It sure has an echo of Kuhn’s Structure of Scientific Revolutions, where, yes, you have a problem-solving organization, and the world view, or dominant paradigm continues to solve problems, and there may be anomalies that aren’t fully accounted for, and then one day the accumulation of anomalies is too great, and it is out with the old system, in with the new, in almost a revolutionary form, as he describes it. In the past, complex systems were dependent on people. Now complexity is becoming hindered by the human element. We have a dependence on technology, frankly, that has never been greater, either by individuals or by the state apparatus. And again, perhaps these are different kinds of complexities than you had in mind, but do you care to comment on technology and our dependence on it?
Dr. Tainter: Well, you have spoken rather negatively about complexity, but we have to remember, and I want to make this point explicitly, complexity is not inherently good or bad. Complexity solves problems, and it can solve problems. Complexity is either useful and affordable, or it is not. It is not inherently good or bad. When we talk about the financial crisis, I like to point out that the solution to the financial crisis is, in fact, more complexity. Over the last few years we had this proliferation of new kinds of financial product, various kinds of derivatives and so forth, which is an increase in different kinds of elements in the economic system, but we didn’t have a corresponding increase in the organization of the system to make those elements behave in a way that contributes to the well-being of our economic system in our society as a whole. Subsequently, there has been an attempt to add that organization in the form of regulations that are being imposed on the finance industry, so that, in fact, complexity is a solution to a problem. But of course, the finance industry is complaining that there are going to be very high costs meeting these regulations, and so forth and so on, and this illustrates that complexity is always a trade-off. It is always a benefit/cost calculation.
David: The 848 original pages for Dodd-Frank, now in terms of individual regulations, are stretching to 14,000 pages, and it is not fully implemented yet, so there is that complexity and growth, a ratchet forward in terms of growth in compliance. This brings up another issue. We’ve seen, obviously, as you mention, the benefits of complexity and the benefits of technology, the concept of big data, and the processing of information via algorithms, decision-making in a way that – let’s put it this way: Is complexity moving beyond human ability to control it?
Dr. Tainter: As I think I mentioned, complexity has never been under human control, and the reason is that it sneaks up on you, it grows by one small step at a time, and we are usually unaware of the process. Unless you have a long-term view, it is impossible to understand the growth of complexity. Really, you have to be a historian to understand the growth of complexity. You have to look at the past, and then understand how our societies have changed over the last 200-300 years, to understand how complexity has snuck up on us. The complexity that we experience today is certainly growing beyond the comprehension of most people, but that is just the continuation of an old process.
David: Last question for you, as we look back as a student of history, in parallel with you, Diocletian implemented price controls in 301 A.D. They had an inflation problem. The price controls didn’t exactly fix it. But we had Bernanke implement, in 2009, price controls in the bond market via his zero-interest rate policies, because of course, yield and price are two sides of the same coin, and this takes us back to an earlier observation. Collapse is a concern in times of stress. You have these actions, the FOMC policies, zero-interest rate policies which are indicative of a system under extreme stress. Should we be any more concerned with the idea of collapse today than, say, five years ago?
Dr. Tainter: No, I wouldn’t say more so today than five years ago. Our way of life depends on fossil fuels, and our primary concern has to be renewable sources of energy, preferably sources of energy that are going to be cleaner than what we use today. This has to be our primary concern today just as it was equally five years ago. Another thing that we have to watch out for, and this is a major problem that the Romans faced, is increasing in complexity just to maintain the status quo. That axiomatically yields diminishing returns. In the case of the Romans, they faced a major crisis in the third century A.D. and the empire very nearly came to an end. They responded by increasing the size and complexity of the government and the army, and had to pay for it through increased taxes on the peasant population. The problem was that they were increasing in complexity and costliness just to maintain the status quo, just to keep the empire intact. This, I think, is what we need to watch out for in the future. Are we increasing in complexity and costliness just to maintain the status quo? Just to keep our way of life intact? If that is the case, then we are in a situation of chasing our tail, and ultimately that leads to a collapse.
David: In your book you discuss new energy and the reversal of the rising costs of maintaining the status quo, and how a new energy subsidy, when it becomes apparent that marginal productivity is beginning to drop, is one of the potential solutions, if you bring new energy into the equation, and you have done a masterful job in bringing front and center concerns that we can, reasonably, have today, but don’t necessarily need to live in fear of. Just understand this is a normal process, and we should continue to learn from history. I cannot recommend the book highly enough, The Collapse of Complex Societies (New Studies in Archeology). Joseph Tainter, thank you for your time today, and if people are interested in ordering the book, is it Amazon? Where would you send them to get a copy?
Dr. Tainter: Certainly, Amazon and Barnes and Noble have it available. It is still in print.
David: I have had some fantastic conversations round the dinner table with my wife, and with our kids, relating to this, dealing with ancient civilizations, dealing with the things that we have presumed to be constants in life, and dealing with expanding our timeframes, beginning to think in longer timeframes as we make critical decisions, the kinds of investments which endure through generations. I really appreciate your contribution to that thought process, some very winsome points made, and again, thank you for your time today.
Dr. Tainter: My pleasure.
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Kevin: So many good points, Dave, but I’ll tell you the one I kept writing down while I was listening to you guys talk, was the reserve problem-solving capacity. You can solve a problem many times, but if it is depleting your energy, there is a point where you no longer have that savings in reserve, that energy savings, to get through the next problem.
David: We, of course, are equivocating on the term energy. Energy has two different ideas, here. One, obviously, there was energy required for a complex system long before there was such a thing as fossil fuels, plus we have the notion today that the global economy is dependent on cheap fuel. In a parallel track, and again, I think we are on sort of two separate rails here, you need the renewable sources, as he suggested, or an energy supplement, but there is this other more critical issue of reserves for problem-solving capacity. Reserve problem-solving capacity. In the past, for the State of Rome, it represented gold ounces in the treasury, and they replenished their reserve problem-solving capacity when they took over another country, and it basically represented, from that point forward, the treasury, or the savings of a nation. You are in a very different situation when you don’t have the savings of a nation, and the treasury is not responsible for keeping the wealth of the nation, and in fact, is responsible for the creation of IOUs. Think of what the Treasury does today for us. It is not the repository of national wealth. It is the distributor of national IOUs.
Kevin: So, the new gold is faith in future credit.
David: Which frankly, goes back to a Ponzi scheme which works until it doesn’t work, and is utterly dependent on confidence in the system, on confidence in a complexity which now requires, not only an all-in bet on the part of the Fed, but as we discussed with Joseph today, we are unable to get out of this particular system. We are grinding forward in terms of our progress, until we come to a grinding halt.
Kevin: And just as we began the program, the people in England who were far enough removed from Rome to see the fall started putting away gold coins, Dave. You see what it was that they saved. What was the last ditch effort to create a reserve problem-solving capacity? It was gold.
David: Real money, outside the hands of government.
