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Considering the World Gross Domestic Product WGDP as a representation of all the production by humankind, is it possible to define a smallest common quantitative measure, an Â«economic quantumÂ» at an individual level, whose aggregate will lead to the word GDP ?

Is this economic quantum the GDP by an individual, produced using his sole physical forces of some 180 kWh/year ? Or is this Â«economic quantumÂ» the GDP of an ancient Roman or Greek democratic citizen with his 100 slaves, with 15 000 kWh/year ? In any case, the average individual today in Europe uses 47 000 kWh per year, which is much higher than expected if each citizen had only 100 Â«virtual slavesÂ» at his disposal.

Written by a non-specialist, a Â«scientific economyÂ» student, this essay is a kind of visit through the arcanes of modern finance. It reviews elements of economic theories, applies a historical perspective, reviews the link between population, economy and ecology, and the question of the ecological balance, discovers systemic Â«economic warsÂ», see why the current institutional and legal setting is inadequate, then derive a few practical aphorisms and a speculative model of a world organisation.

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Econometrics

Economics

Business

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Publié par	eBookIt.com
Date de parution	07 août 2013
Nombre de lectures	0
EAN13	9781456614294
Langue	English

Informations légales : prix de location à la page 0,2422€. Cette information est donnée uniquement à titre indicatif conformément à la législation en vigueur.

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In Search of an Economic Quantum In the World Economy.

by
Aline de Valdomond

Copyright 2013 Aline de Valdomond,
All rights reserved.

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ISBN-13: 978-1-4566-1429-4

No part of this book may be reproduced in any form or by any electronic or mechanical means including information storage and retrieval systems, without permission in writing from the author. The only exception is by a reviewer, who may quote short excerpts in a review.

Cover Photography courtesy of : http://en.wikipedia.org/wiki/Maria_Theresa_Thaler
Authorization:
This photography has been released into the public domain by its author, Carlomorino . This applies worldwide. In some countries this may not be legally possible; if so: Carlomorino grants anyone the right to use this work for any purpose, without any conditions, unless such conditions are required by law.

Abstract
Dictionaries define that “Economy” is the science of, within a community, accumulation and use of richness and goods that are necessary to the well being of the individuals. Textbooks teach us that Micro-economy deals with single actors, companies or individuals, and that macro-economy deals with aggregates at a state or nation level. Finance represents a flow of monetary resources applied to develop the economy.
The idea of this paper comes from the following question: Considering the World Gross Domestic Product WGDP as a representation of all the production by humankind, is it possible to define a smallest common quantitative measure, an «economic quantum» at an individual level, whose aggregate will lead to the word GDP?
Is this «economic quantum» the GDP by an individual, produced using his sole physical forces of some 180 kWh/year? (§5.1.1) Or is this «economic quantum» the GDP by a former Roman citizen with his 100 slaves, using some 15 000 kWh/year/capita? (§5.1.3). In any case, the average individual today in Western Europe uses 47 000 kWh per year, which is much higher than expected if each citizen had only 100 «virtual slaves» at his disposal (§5.6).
Written by a non-specialist, a «scientific economy» student, this essay is a kind of visit through the arcane of modern finance. It will review elements of economic theories, apply a historical perspective, review the link between population, economy and ecology, and the question of the ecological balance, discover systemic «economic wars», see why the current institutional and legal setting is inadequate, then derive a few practical aphorisms and a speculative model of a world organisation.

Foreword
The first version of this essay was written on 30 August 2010; modifications were made since: §2.2, §2.3 raise important questions; figure 13 demonstrates too little R&D spending in Europe; §7.2 has been modified to take account of the distributed nature of Uranium nuggets and of positive entropy; §9.3, §9.5 and §9.6 have been reworked for precision; in §5.6 the basic WGDP per capita has been revised, figure 17 and 18 added; the conclusion was modified to take account of the 2009 financial crisis.
In the mean time, i also discovered a book by Douglass North «Understanding the process of economic change» 1 which already in 2005 developed in detail several aspects of the present paper. Nevertheless several points are believed to remain original: The question of a minimum economic quantum, a price formation proposal, the fact that the confusion of currency as a measurement instrument with currency as a tradable object leads to an improper global economic system. The recent synchronisation of all national «development curves» leads to a globalised economic expansion of the world; moreover, norms can not replace laws.
The last paragraph has been expanded, leading to the conclusion that, not financial services, but spending, not only in R&D, but also in the understanding of physics and nature (Science and Technology), is the adequate tool to lead the world towards a brighter future. The future can not be balanced as long as there is no world government and no single world currency, used as a rational measurement tool, not as a speculative instrument.

Figure 1 : L-curve (basic form, from wikipedia)
Figure 2 : A sequence of L-curves
Figure 3 : Generational learning model
Figure 4 : Lucky and Unlucky generations
Figure 5 : Rate of growth of population per century in Western Europe
Figure 6 : World Average GDP per Capita (WGDPc)
Figure 7 : Population and World GDP (from Maddison Tables 8a and 8b)
Figure 8 : From Unsynchronised & Uncorrelated to Synchronised & Linked L-curves.
Figure 9 : Price of a Jeans, ZDF, 2009
Figure 10 : Peak oil
Figure 11 : M1-M3 velocity
Figure 12 : Atlantic Cod Stocks (source: Wikipedia)
Figure 13 : R & D in the EU
Figure 14 : World Investment Report 2009
Figure 15 : Maddison p.262 Table 8c "WGDP per capita"
Figure 16 : Budget Deficits 2011 in OECD countries
Figure 17 : Economic Quantum Estimates
Figure 18 : GDP per capita in Western Europe = 100 slaves, or more?
1 Introduction
The economist Richard Cantillon (1680-1734) used the concept of force of Gravity from the scientist Isaac Newton's (1643-1727), along with human reason, to argue in “On the Nature of Commerce in General”, that rational self interest in a system of freely adjusting markets would lead to order and mutually compatible prices. Unlike the mercantilist thinkers however, wealth was to be found not in trade but in human labour.
The present essay will start from these premises and investigate the state of the world economy in view of the history of humankind, and lead to the conclusion that the problem of the world today is not “capitalism”, it is a question of ownership of capital and of a wild financial system, of “interest-rate-ism”.
In addition, physics has evolved from Newtonian gravity theory to relativity and quantum theories. Does this evolution also applies to the evolution of economy?
Jean Jaurès, a French parliamentarian, said in a discourse on 21 November 1893 2 in essence that “the People has become king in the political order but slave in the economic order”.
The essay will explore our contemporary reality in 2010, possibly anticipate the 22 nd century, with a world perspective, and investigate if that opinion of Jaurès is still valid, at the world level and across generations.
It will attempt to demonstrate that the world economy is circular, that world finance is elliptic and relate this fact to the observed cyclical crisis. Furthermore, the earth resources are finite and the oppositions between economy, finance and ecology could have negative effect because organised matter is transformed into less organised matter by human activity; multiple garbage together with over-exploitation of natural resources could destroy the basis sustaining human life.
2 The world economy
2.1 Definitions
Creating new theoretical material is outside the scope of this work. Following, at a smaller scale, economists 3 who defined a “scientific economy”, the essay will review elements of economic theories, try to refine some of their results, interpret others in view of the contemporary conditions in the world, apply a historical perspective, see why the current institutional and legal setting is inadequate, derive a few practical conclusions.
Dictionaries define that “Economy” is the science of, within a community, accumulation and use of richness and goods that are necessary to the well being of the individuals. Textbooks teach us that Micro-economy deals with single actors, companies or individuals, and that macro-economy deals with aggregates at a state or nation level.
Finance represents a flow of monetary resources applied to develop the economy. Finance being a flow and mostly dematerialised is often opposed in the press to the real economy. But it has also become a market on its own, the capital market, whether publicly or stately owned, or private.
I call “commonalism” the sense, in a given community, that the common public interest is at least as important, or more, as private interests. It is not communism since communist theory asks for a planned economy and anathematises profits as well as non-work related valuation.
2.2 The ideal of a World Currency Unit WCU
Since the renunciation in 1971 of the Gold Standard (established by the «Bretton Woods» agreements in 1944) by the US president R. Nixon, currencies are not any more linked to a physical item. This has the advantage to enable a neutral measurement for all goods worldwide.
I use the term “World Currency Unit” WCU to describe a theoretical currency, ideally used and valued worldwide. It would represent the same purchasing power parity ppp among all nations or regions and not be linked to any precious metal. The assumptions are that:
- The world GDP is approximately the sum of the GDP of South America, EU, USA, ASIA and the Rest Of the World ROW,
- Each currency represents a proportional portion of Special Drawing Rights (XDR) of the Fonds Monétaire International FMIIMF. A refined weighting system is in use at the FMI but for the sake of simplicity, it is considered here that the major currencies have approximately equal weight, so that
1 US$ppp ≈1 Europpp ≈1 RMBppp ≈1 BRLppp ≈ 5/5 = 1 XDR ≈ 1 WCU.
It is to be noted that the current distribution of currencies in 2010 does not reflect the relative economic weight of the various zones: The US$ accounts for 34% of foreign exchange currency turnover while the Euro accounts for only 18,5%, see [ 4 ], despite their economies being of similar sizes, even slightly larger for the Euro. Therefore, the above formula represents an ideal, that does not hold in view of reality.
Because of the Euro/$ differential in currency turnover, and apart of a few short “temporal windows” to promote exports from the Eurozone, the Euro should be higher valued than the U