The Roman Philosopher Lucius Anneaus Seneca (4 BCE-65 CE) was perhaps the first to note the universal trend that growth is slow but ruin is rapid. I call this tendency the "Seneca Effect."

Friday, February 5, 2016

The financial collapse as an example of a "Seneca Cliff"





The concept of "Seneca Collapse" has been discussed by "Zero Hedge" where Tyler Durden reproduced an article previous appeared on Charles Hugh Smith's site. Smith says:
I propose that the Global Recession of 2016 will trace the Seneca Cliff as described by Ugo Bardi.  ... I think a strong case can be made that the global financial/economic system is primed for a ride down the Seneca Cliff.

This makes a lot of sense. In the hierarchy of complex systems, the financial system is, indeed, one of those most easily prone to collapse. Many biological and social systems have built-in systems to manage emergencies and counter the external perturbations that may send the system off balance. In biological systems, we have, for instance, the immune system; in the social systems we have the army, the firemen, and others. But the financial system has none, at least none that is built in the system. Actually, it may be argued that the world's financial system is purposefully built in order to be unstable, even though external entities - governments - may try to stabilize it.


Of course, the application of the Seneca phenomenon to the financial system is somewhat different from the model I developed. A better model for financial collapse could be developed, probably, starting from the punctuated collapse model of complex networks developed by Bak et al. But, in the end, it is the same phenomenon: the rapid collapse of complex systems is a property of connected networks; where the breakdown of one or more links may generate a cascade of broken links that brings the system down to a lower complexity state. In my model, there are only three nodes in the network, but that's enough to generate a rapid collapse.

But what are these models for? The concept of the Seneca collapse applied to the financial system is not so much a tool for predicting something. We know that financial collapses have already happened in the past and we won't be surprised if they will happen again in the future. Models are, instead, a framework for understanding the reasons of collapse. The main message, in this case, is that most complex systems are fragile and tend to collapse, unless there exists something that operates in order to stabilize them. And a problem of conventional economics, as Smith notes, is that: 


Conventional economists are entirely blind to system fragility. There is no ready Keynesian Cargo Cult econometric formula that measures systemic fragility, so it simply doesn't exist within conventional economics.


Is it a problem? Maybe not so much, at least in the long run. Fragile systems collapse and disappear, resilient ones tend to survive and take over. It has always been like that, it is called natural selection. Eventually, by trial and error we'll learn how to manage complex systems. It won't be painless but, on the other hand, no one ever said life was fair. Just eventful.










Monday, April 20, 2015

Climate change: can the Seneca effect save us?




Nothing we do (or try to do) seems to be able to stop carbon dioxide from accumulating in the atmosphere. And, as a consequence, nothing seems to be able to stop climate change. With the situation getting worse and worse (see here for an example), we are hoping that some kind of international agreement can be reached to limit emissions. But, after many attempts and many failures, can we really expect that next time - miraculously - we could succeed?

Another line of thought, instead, has that depletion will save us. After all, if we run out of oil (and of fossil fuels in general) then we'll have to stop emitting greenhouse gases. Won't that solve the problem? In principle, yes, but is it going to happen?

The gist of the debate on the future of fossil fuel production is that, despite the theoretically abundant resources, the production rate is strongly affected by diminishing economic returns generated by depletion. This factor forces the production curve to follow a "bell shaped", or "Hubbert," curve that peaks and starts declining much before the resource runs out, physically. In practice, most studies that take into account the diminishing economic returns of production arrive to the conclusion that the IPCC scenarios often overestimate the amount of fossil carbon that can be burned (see a recent review by Hook et al.). From this, some have arrived to the optimistic conclusion that peak oil will save us from climate change (see this post of mine). But that's way too simplistic. 

The problem with climate change is not that temperatures will keep smoothly growing from now until the end of the century. The problem is that we will run into big troubles much earlier if we let temperatures rise over a certain limit. Sea level rise, oceanic acidification, and land desertification are just some of the problems, but a worse one could be the "climate tipping point." That is, over a certain point, the rise in temperatures would start to be driven by a series of feedback effects within the ecosystem and climate change would become unstoppable.

We don't know where the climate tipping point could be situated, but there exists a general agreement that we should keep temperatures from rising above 2 deg. C to avoid a major catastrophe. From the 2009 paper by Meinshausen et alwe can estimate that, from now on, we should not release more than about 1x10+12 t of CO2 in the atmosphere. Considering that we have released so far some 1.3x10+12 t of CO2 (sourceglobal carbon project), the grand total should not be more than about 2.3x10+12 t of CO2.

So, what can we expect in terms of total emissions considering a "peaking" scenario? Let me show you some data from Jean Laherrere, who has been among the first to propose the concept of "peak oil."



In this figure, made in 2012, Laherrere lists the quantities of fuels burned, with a "U" ("ultimate") measured in Tboe(Terabarrels of oil equivalent, see below for the conversion factors used). As a first approximation, if all the emissions were from crude oil, we would emit some 4.5x10+12 t of CO2. Things change little if we separate the contributions of the three fossil fuels. Crude oil, alone, would produce 1.3x10+12 t of CO2.  Coal would produce 2.8x10+12 t and natural gas 0.95x10+12 t. The final result is nearly exactly 5x10+12 t of CO2.

In short, even if we follow a "peaking" trajectory in the production of fossil fuels, we are going to emit around twice as much carbon dioxide as what some people (probably optimistically) consider to be the "safe" limit.

Of course, there are plenty of uncertainties in these calculations and the tipping point may be farther away than estimated. But it could also be closer; much closer. And we should take into account the problem of the increasing CO2 emissions per unit of energy as we progressively move toward dirtier and less efficient fuels. So, we are really toying with disaster, with a good chance to run straight into a climate catastrophe.

This conclusion holds in the assumption that the "peaking" scenario is not too optimistic in the amount of fossil fuels that can be produced and burned in the future. But these scenarios are normally termed "pessimistic" in mainstream studies, so that little would change as long as we work with nearly symmetric, bell shaped curves. At best, we can assume that peaking could take place a few years earlier than in Laherrere's estimate; but that still leaves us facing the very real possibility of a climate catastrophe.


Could we, instead, consider a different shape for the production curve? The symmetric "bell shaped" or ("Hubbert") curve is the result of the assumption that extraction is performed in a fully  functioning economy. But, once the economic system starts unraveling, a series of destructive feedbacks accelerates the decline. This is the "Seneca collapse" that generates an asymmetric production curve (the "Seneca cliff").

A Seneca shaped production curve would considerably reduce the amount of fossil carbon that can be burned in the future. Tentatively, if the collapse were to start within the next 10 years and it were to cut off more than half of the potential coal production, then, we could remain within the estimates of the 2 deg. C limit, hoping that it could be enough. Hubbert can't save the ecosystem, but Seneca could (maybe).

But, even if that came to pass, a Seneca collapse is a major disaster in itself for humankind, so there is little to rejoice at the thought that it could save us from runaway climate change. In practice, the only hope to avoid disaster lies in taking a more active role in substituting fossils with renewables. In this way, we can force the production of fossil fuels to go down faster than it would do as an effect of gradual depletion, but without losing the energy supply we need. It is possible - it is a big effort, but we could do it if we were willing to try (see this paper by Sgouridis, Bardi and Csala for a quantitative estimate of the effort needed)




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Unit conversion

One Boe of crude oil = 0.43 t CO2 (http://www.epa.gov/cleanenergy/energy-resources/refs.html)

One Boe of coal = 0.53 t CO2 (calculation from https://www.unitjuggler.com/convert-energy-from-Btu-to-boe.html?val=1000000 and from http://www.epa.gov/cpd/pdf/brochure.pdf 

One Boe of natural gas: 0.31 t CO2 (calculation from https://www.unitjuggler.com/convert-energy-from-Btu-to-boe.html?val=1000000 and from http://www.epa.gov/cpd/pdf/brochure.pdf 



Friday, March 27, 2015

Oil Drilling: another Seneca Cliff

Originally published on Cassandra's legacy on Friday, March 27, 2015
http://www.bloomberg.com/graphics/2015-oil-rigs/




The concept of an impending "Seneca cliff" seems to be making inroads in the debate, even though it may not be given that name. For example, watch the animation above on "Bloomberg.com"


(h/t Joe Smith of the Doomstead Diner)

Sunday, February 22, 2015

Why have newspapers become so bad? There is a reason: it is another case of the "Seneca effect"

Originally Published on "Cassandra's Legacy" on Sunday, February 22, 2015




You probably have noticed the decline in the quality of newspapers. Actually, it is not just a decline, it is a true collapse: news are not verified, legends are published as fact, important issues are neglected in favor of gossip and let's say nothing about the way some crucial problems such as climate change are neglected and mispresented. There is a reason: as you see in the figure above, newspapers have rapidly lost a large fraction of their revenues in the form of advertising. In short, newspapers are a living example of what I called the "Seneca Effect", which states that "ruin is rapid." (Image by Mark J. Perry from the American Enterprise Institute.)


By now, you may think that I am becoming a bit fixated with this idea of the "Seneca Cliff", but the image above is so impressive that I just had to show it here. In previous posts, I described how decline could be much faster than growth (the "Seneca Effect" - see the graph on the left) in several historical cases involving the exploitation of natural resources. In these cases, the rapid collapse is the result of the attempt of operators to keep production constant or increasing, and hence overexploiting the resource.

The case of newspaper advertising looks similar. The decline of newspaper quality during the past few years has been startling and it can be explained by the graph at the beginning of this post. Advertising revenues for newspapers collapsed badly, "Seneca-style,"  starting with the early 2000s. This collapse took place while total advertising revenues actually increased; so, the data have to be interpreted as the result of the diffusion of the Internet. Apparently, Web advertising on social media and other channels provided better performance/cost ratios than newspaper related advertising and it is there that the advertising money went. And, without the money that came from advertising, it is no surprise that the quality of newspapers collapsed as well.

So, we have here a good illustration of the ubiquity of Seneca's observation that "the way to ruin is rapid", but also a different case than that of the exploitation of natural resources as - say - shale oil (which is, by the way, starting to show a very nice "Seneca Cliff"). Nevertheless, all human economic activities have to do with the exploitation of resources of some kind. In this case, the resource being exploited is the capital available for advertising.

We can see the effect of the competition between Social Media and Newspaper advertising as a classic case of the "Gause's law of competitive exclusion", well known in biology. It says that when two species compete for the same resources, one will usually go extinct. This is what's happening with the two "species" which are Newspapers and Social Media - the first is probably going to be extinct soon.

Below, I'll show you a simple model on how we can simulate the competition of  two species for the same resource. But, intuitively, we do expect that the collapse of the less efficient species should be abrupt. We can imagine that the old species (say, foxes) had found some kind of homeostatic equilibrium with its source of food (say, rabbits) and then, suddenly, the new species appears (say, wolves) which catches rabbits much faster and more efficiently. It is disastrous for the foxes, which go extinct quickly.

This is not just theory, think of what happened when the Europeans arrived in the Americas with their firearms. It was a disaster for the local people - less efficient than the Europeans in the art of war. Not a nice story to tell but, unfortunately, this seems to be the way the world works.

_______________________________________________

A simple model of Gause's law applied to advertising.
by Ugo Bardi

Here is the model's representation made using the Vensim software:





The model is built using simple assumptions which make it similar to the well known "Lotka-Volterra" (LV) model. It starts from an "advertising capital" (rabbits in the LV model), which is consumed by capital specifically dedicated to internet advertising (foxes in the LV model), assuming also that growth is quadratically damped, as it is often done in the LV model. There are two species in competition, Web and Newspaper advertising ("foxes" and "wolves") of which one starts with much lower numbers but with a higher efficiency of capital consumption. This second species appears as a "pulse" at about one third of the simulation. The result is that the first species (Newspaper advertising) reaches homeostasis, but collapses rapidly when the second species (Web advertising) enters into play. Here are the results of the investments on newspaper advertising






This is just a stab of a model, put together in an hour or so. Don't take it for more than that, but I think it does capture something of the system being modeled. For details write to me at ugo.bardi(zingything)unifi.it. I can also send to you the complete model. 



Monday, February 2, 2015

Seneca's gamble: why the road to ruin is rapid



Originally published on "Cassandra's Legacy" on Monday, February 2, 2015

Why people can so easily destroy the resources that provide their livelihood? Fishermen, for instance, have destroyed fisheries over and over, and every time they refused to take even the most elementary precautions to avoid disaster. Eventually, I came to think that it is related to a basic miswiring of the human mind: the "gambler's fallacy". Fishermen, it seems, see fishing as it were a lottery and they redouble their efforts thinking that, eventually, they will get lucky and strike it rich. Alas, it doesn't work in this way and all what they obtain is to destroy the fish stocks and create a spectacular collapse of the fishing yields. This way of creating one's own ruin could be termed "Seneca's gamble", from the words of the Roman philosopher Lucius Annaeus Senecawho stated that "the road to ruin is rapid". 



The "Martingale" is a strategy to be played with games which have a 50% chance of winning. It consists in doubling one's bet after every loss, believing that, eventually, a win will pay for the previous losses and provide a gain.

The Martingale is an example of the "gambler's fallacy". Typically, gamblers tend to think that some events - such as the numbers coming out of the wheel in the roulette game - are related to each other. So, they believe that, if the red comes up several times in a row, it is more probable that the black will come out the next spin. That's not true, of course, and the Martingale is a surefire way to ruin oneself, and to do that very rapidly. Nevertheless, many people find the idea fascinating enough that they try to put it into practice. It is the effect of a bad miswiring of the human mind.. 

The gambler's fallacy may explain some aspects of the human behavior that would be otherwise impossible to understand. For instance, in a previous post I was showing this figure, describing the yields of the UK fishing industry (from Thurstan et al.).



Compare the upper and the lower box, and you'll see that the fishing industry was ramping up at an incredible speed their "fishing power," just when fishing yields had started to decline. Note also how they still had a lot of fishing power when the fisheries had all but collapsed. How could it be that they kept fishing so much even when there was little or nothing left to fish?Thinking about this matter, we can only come to the conclusion that fishermen reasoned like gamblers at a betting table. In other words, they were playing a sort of "fishing Martingale", doubling their efforts after every failure.

Gamblers know - or should know - that casino gambling is a negative sum game. Yet, the gambler's fallacy makes them think that a streak of bad results will somehow increase the probability that the next bet will be the good one. So, they keep trying until they ruin themselves.

Now, consider fishermen: they or should know  that, at some point, the overall yield of the fishery has become negative. But, like gamblers playing roulette, they believe that a streak of bad luck will somehow increase the probability that the next fishing trip will be the good one. So, they keep trying until they ruin themselves.

The mental miswiring that gives rise to the behavior of gamblers and fishermen can create even larger disasters. With mineral resources, we are seeing something similar: operators redoubling their efforts in the face of diminishing returns of extraction; the story of "shale gas" and "shale oil" is a typical example. Maybe it is done hoping that - somehow - the destruction of one stock will increase the probability to find a new one (or to create one by some technological miracle). So, instead of trying to make mineral stocks last as long as possible, we are rushing to destroy them at the highest possible rate. But, unlike fish stocks that can replenish themselves, minerals do not reproduce. Once we'll have destroyed the rich ores that created our civilization, there will be nothing left behind. We will have ruined ourselves forever.

In the end, the gambler's fallacy is one of the factors that lead people, companies, and entire civilization to a rapid collapse. It is what I have called the "Seneca Cliff" from the words of the ancient Roman philosopher who first noted how "the way to ruin is rapid". In the case described here, we might call it the "Seneca gamble" but, in all cases, it is a ruin that we create with our own hands.

Saturday, January 24, 2015

The shale oil "miracle": how growth may falsely signal abundance

Originally published on "Cassandra's Legacy" on Tuesday, February 24, 2015


Oil production (all liquids in barrels per day) in the US and Canada. (From Ron Patterson's blog). Does this rapid growth indicate that the resources are abundant and that all the worries about peak oil are misplaced? Maybe not....


Sometimes, we use a simple metric to evaluate complex systems. For instance, a war is a complex affair where millions of people fight, struggle. suffer, and kill each other. However, in the end, the final result is seen in terms of a yes/no question: either you win or you lose. Not for nothing, General McArthur said once that "there is no substitute for victory".

Now, think of the economy: it is an immense and complex system where millions of people work, produce, buy, sell, and make or lose money. In the end, eventually, we think that the final result can be described in terms of a simple yes/no question: either you grow, or you don't. And what McArthur said about war can be applied to the economy, as well: "there is no substitute for growth".

But complex systems have ways to behave and to surprise you that can't be reduced to a simple yes/no judgement. Both victory and growth may well create more problems than they solve. Victory may falsely signal a military might that doesn't really exist (think of the outcome of some recent wars....), while growth may signal an abundance which is just not there.

Take a look at the figure at the beginning of this post (from Ron Patterson's blog). It shows the oil production (barrels/day) in the US and Canada. The data are in thousand barrels per day for "crude oil + condensate" and the rapid growth for the past few years is mostly due to tight oil (also known as "shale oil") and oil from tar sands. If you follow the debate in this field, you know that this growth trend has been hailed as a great result and as the definitive demonstration that all worries about oil depletion and peak oil were misplaced.

Fine. But let me show you another graph, the US landings of North Atlantic Cod, up to 1980 (data from Faostat).

Doesn't it look similar to the data for oil in the US/Canada? We can imagine what was being said at the time; "new fishing technologies dispel all worries about overfishing" and things like that. It is what was said, indeed (see Hamilton et al. (2003)).

Now, look at the cod landings data up to 2012 and see what happened after the great burst of growth.

I don't think this requires more than a couple of comments. The first is to note how overexploitation leads to collapse: people don't realize that by pushing for growth at all costs, they are destroying the very resource that creates growth. This can happen with fisheries just as with oil fields. Then, note also that we have here another case of a "Seneca Cliff," a production curve where the decline is much faster than growth. As the ancient Roman philosopher said, "The road to ruin is rapid". And this is exactly what we could expect to happen with tight oil

Thursday, January 22, 2015

Sandeels: another Seneca cliff


Originally published on Cassandra's Legacy on Thursday, January 22, 2015




Once you start looking for "Seneca Cliffs" in the exploitation of natural resources, you find them all over the scientific literature. This is my latest find of a production curve where decline is much more rapid than growth: the landings ofsandeels. If you don't know what a sandeel is, here is one: 



In the report (2007), where I found the curve shown above, the authors discuss the causes for the collapse of the fishery, especially in view of climate change. They don't seem to arrive to any definitive conclusion and they don't use the dreaded term "overfishing". But from the fact that trawlerwere used in this fishery, I think it is clear that the fish stock was being destroyed in a process similar to the one that led to the collapse of the whole UK fishing industry. The more resources were aggressively thrown at trying to maintain production, the more the fish stock was depleted. The end result was the rapid collapse observed.

So, as in several other cases, we have a classic example of the "Seneca Collapse", that is a production curve where decline is much more rapid than growth. Below, you can see the Seneca curve as shown in a simulation carried out by system dynamics that takes into account the increased capital expenditure in fishing equipment (the model is described here). 



As Seneca said, "the road to ruin is rapid", indeed.

Monday, January 19, 2015

A Seneca cliff in the making: African elephants on the brink of extinction

Originally published on "Cassandra's legacy" on Monday, January 19, 2015

The graph above refers to effects of the illegal hunting of African elephants. It is taken from a recent paper by Wittemyer et al.



Once you have given a name to a phenomenon and understood its causes, you can use it as a guide to understanding many other things. So, the concept of the "Seneca Cliff" tells us that the overexploitation of natural resources often leads to an abrupt decline that, often, takes people by surprise. In the case of biological resources, such as fisheries, the decline may be so fast and uncontrollable that it leads to the extinction or to the near extinction of the species being exploited. It has happened, for instance, for whales in 19th century and for the Atlantic cod.

If you keep in mind these historical examples, you can examine other cases and identify possible Seneca cliffs in the making. One such case is the ivory trade from the hunting of African elephants. If you look at the plots (from a recent paper), above, you see that the seized ivory mass has shown a considerable increase starting around 2008. It peaked in 2011, then declined. We can probably take these numbers as a "proxy" for the number of African elephants being killed - which is also visible as the red line in the upper box. 

This is very worrisome, because if killings decline, it may very well be because there are fewer elephants left to kill - just as the landings of the fishing industry tend to decline when the fish stocks are depleted. Considering how abruptly these things go (the "Seneca effect") then we may well be seeing a similar trend in progress for African elephants: that is, the prelude of an abrupt crash in their numbers. Considering that elephants are big and reproduce slowly, that may very well lead to their extinction.

On this subject, the authors of the paper seem to be very worried, too. The title, by itself, says it all: "Illegal killing for ivory drives global decline in African elephants". In the text, we can read, among other things, that:


The population [of African elephants] was subjected to unsustainable rates of illegal killing between 2009 and 2012, escalating from a mean of 0.6% (SD = 0.4%) between 1998 and 2008 to a high of 8% in 2011 (Fig. 1). Annual illegal killing of elephants in the Samburu population during 2009 to 2012 exceeded those of all previous years of monitoring (1998–2008) with an estimated aggregate of 20.8% of the known elephants illegally killed during that 4-yperiod. ... Illegal killing rates were strongly correlated with black market ivory prices in the Samburu ecosystem. ... As a result of this illegal killing, the population currently suffers from few prime-aged males, strongly skewed sex ratios, and social disruption in the form of some collapsed families and increased numbers of orphans (immature elephants without a parent)

Are we going to lose the elephants forever? Right now, we can't say for sure; but when it will be clear that it is happening, it will probably be too late to do something about it. Doesn't that sound familiar? 



Wednesday, January 14, 2015

Seneca's pyramids: how fast did the Mayan civilization fall?


Originally published on Cassandra's legacy on Wednesday, January 14, 2015



Monument building cycle of the Mayan civilization. From "Sylvanus G. Morley and George W. Brainerd, The Ancient Maya, Third Edition (Stanford University Press, 1956), page 66.". Courtesy of Diego Mantilla.



Once you give a name to a phenomenon, you can focus your attention on it and learn more and more about it. So, the "Seneca Cliff" idea turns out to be a fruitful one. It tells us that, in several cases, the cycle of exploitation of a natural resource follows a forward skewed curve, where decline is much faster than growth. This is consistent with what the Roman philosopher Lucius Annaeus Seneca wrote: "increases are of sluggish growth, but the way to ruin is rapid." With some mathematical tricks, the result is the following curve:


This curve describes the behavior of several complex systems, including entire civilizations which experienced an abrupt collapse after a long period of relatively slow growth. In my first post on the seneca cliff, I already discussed the collapse of the Mayan Civilization (*)



Here, you can see the the Seneca behavior, although the data for the Maya population density seem to be rather qualitative and uncertain. However, the data that I received recently from Diego Mantilla (see at the beginning of this post) are clear: if you take monument building as a proxy for the wealth of the Mayan civilization, then the collapse was abrupt, surely faster than growth.

Something similar can be said for the ancient Egyptians, although the data for pyramid building are more sparse and uncertain than those for the Maya. Finally, also the Roman civilization appears to have collapsed faster than it grew.

So, the Mayans didn't do better than other civilizations in human history. As other civilizations did, they moved toward their demise by dragging their feet, trying to avoid the unavoidable. They didn't succeed and they didn't realize that opposing the collapse in this way is a classic example of "pushing the levers in the wrong direction". It can only postpone collapse, but in the end makes it more rapid.

Will we do any better than the Mayans? One would hope so, but........





(*) Dunning, N., D. Rue, T. Beach, A. Covich, A. Traverse, 1998, "Human - Environment Interactions in a Tropical Watershed: the Paleoecology of Laguna Tamarindito, Guatemala," Journal of Field Archaeology 25 (1998):139-151.

Thursday, January 8, 2015

The Seneca Cliff of Energy Production


Published on Cassandra's Legacy on Thursday, January 8, 2015


The graph above was created by Gail Tverberg on her blog "Our Finite World". It is, clearly, another case of what I called the "Seneca Cliff" (from the Roman philospher who said "the road to ruin is rapid). The Seneca Cliff takes this shape, when generated by a system dynamics model:


Gail's forecast of the future of energy production is not the result of a the same model I developed, but the reasons behind the steep decline are the same. Gail explains it in a post of hers as:



All parts of our economy are interconnected. If parts of the economy is becoming increasingly inefficient, more than the cost of production in these parts of the economy are affected; other parts of the economy are affected as well, including wages, debt levels, and interest rates.

Wages are especially being crowded out, because the total amount of goods and services available for purchase in the world economy is growing more slowly. This is not intuitively obvious, unless a person stops to realize that if the world economy is growing more slowly, or actually shrinking, it is producing less. Each worker gets a share of this shrinking output, so it is reasonable to expect inflation-adjusted wages to be stagnating or declining, since a stagnating or declining collection of goods and services is all a person can expect.

At some point, something has to “give”. 


Which is a good description of the mathematical model at the basis of the Seneca cliff idea. The burden on the economy of increasing costs becomes more and more heavy in times of diminishing returns (or, as Gail says, increasing inefficiency, which is the same). At some point, something "gives" and the whole thing comes down. Seneca rules.

Tuesday, January 6, 2015

Seneca again: the collapse of the UK fishing industry


Originally published on Cassandra's legacy on Jan 6 2015


Image from a 2010 article by Thurstan, Brockington, and Roberts. It describes the cycle of the UK fishing industry, which collapsed because ofoverfishing in the late 1970s.


The two graphs above (from a 2010 article by Thurstan et al.) speak by themselves. We have here a real life example of the overexploitation of natural resources; that is, of the tendency of people of destroying their own sources of wealth. Other classic examples can be found with the 19th century whaling industry and with the Canadian cod fishery.

Overexploitation typically generates the "Hubbert curve," the name given to a bell-shaped production cycle best known for the case of crude oil, but affecting all the resources which can be exploited faster than they can reform by natural processes. This behavior can be explained by means of mathematical models, but, qualitatively, it is the result of the falling profits generated by the diminishing resource stock. In the long run, lower profits discourage investments and the result is a general production decline. A particular case of this mechanism is when the industry initially reacts to diminishing returns by aggressively increasing the amount of capital invested. In this case, the stocks of the resource are depleted very fast and the result is a crash of the production rate; we still have a bell shaped curve, but skewed forward. The rapid decline that occurs after the peak is what I called the "Seneca Cliff." 

There are several historical examples of the Seneca cliff; in the case of fisheries, it is especially evident in the case of the Canadian cod fishery and for the Caspian Sturgeon; but it is evident also in the case of the UK fishing industry. Note, in the figure above, the steep decline of the landings of the late 1970s, it is significantly steeper than the growth of the left side of the curve. This is the essence of the Seneca mechanism. And we can see very well what causes it: the start of the decline in production corresponds to a rapid growth of investments. The result is the increase of what the authors of the paper call "fishing power" - an estimate of the efficiency and size of the fishing fleet.

The results were disastrous; a textbook example of how to "push the levers in the wrong directions", that is, of a case when the attempt to solve a problem worsens it considerably. In this case, the more efficient the fishing fleet was, the more rapidly the fish stock was destroyed. This is a classic mechanism for falling down the Seneca cliff: the more efficient you are at exploiting a non renewable (or slowly renewable) resource, the faster you deplete it. And the faster you get into trouble.

This case, as others, is such a staggering disaster that one wonders how it was possible at all. How could it be that nobody in the fishing industry or in the government realized what was happening? In their article on this subject, Thurstan and his colleagues don't comment on this point, but we can cite an article by Hamilton et al. on the Canadian Atlantic Cod fishery, where they say "Some say they saw trouble coming, but felt powerless to halt it."That seems to be not describing not just the fishing industry, but our entire civilization.