Towards the Circular Economy

Towards the Circular Economy

 

 

Circular Economy in reuse of

  • Metals
  • Plastics
  • Paper and Paper Board
  • Glass
  • Rubber
  • Wood/Timber/Construction Composites
  • Textiles
  • Organic Waste/Food/Agricultural/Biological

 

 

CIRCULAR ECONOMY: THE NEW NORMAL?

Key points

  • Keeping materials longer in the economy through reuse, re-purposing or recycling could reduce 33 per cent of the carbon dioxide emissions embedded in products.
  • Circularity requires a significant bridge between trade in goods and trade in services.
  • Increased recycling could reduce demand for primary resources, leading to both risks and opportunities in developing countries dependent on the extraction of natural resources.

 

CIRCULAR ECONOMY: THE NEW NORMAL?

Linear production is a familiar cycle. Resources are extracted and transformed into goods and services, sold and used, after which they are scrapped. This model has underpinned the expansion of the global economy since the industrial revolution.

It has linked material prosperity to the extraction of resources, yet has often overlooked the undue pressures placed on the environment and has rarely considered the cost of handling, scrapping and disposing of used materials, some of which are hazardous to human health. As the global population increases, incomes rise and nations strive to eradicate poverty, demand for goods and services will necessarily grow. The aim of achieving Sustainable Development Goal 12 on responsible consumption and production requires changing the linear production model. The concept of a circular economy and practice therefore merits close attention, as it can open new opportunities for trade and job creation, contribute to climate change mitigation and help reduce the costs of cleaning and scrapping in both developed and developing countries.

A circular economy entails markets that give incentives to reusing products, rather than scrapping them and then extracting new resources. In such an economy, all forms of waste, such as clothes, scrap metal and obsolete electronics, are returned to the economy or used more efficiently. This can provide a way to not only protect the environment, but use natural resources more wisely, develop new sectors, create jobs and develop new capabilities.

Each year, 1.3 billion tons of garbage are produced by 3 billion urban residents.1 This is the end point of a linear economic flow that starts with manufacturing, which uses 54 per cent of the world’s delivered energy, especially in energy-intensive industries such as petrochemicals, cement, metals and paper.2 Each year, 322 million tons of plastic, 240 million tons of paper and 59 million tons of aluminium are produced in the world, much of which goes to export markets and is not recycled.3

A rusty container or an obsolete mobile telephone are only two examples of the many products that end up being discarded, along with their transistors, metal structures and complex plastics. Each component requires a great deal of energy, time, land and capital to be produced and, even as the products become obsolete, their components often do not. The potential value of metals and plastics currently lost in electronic waste may be €55 billion annually.4

As the supply of recycled, reused and re-manufactured products increases, such products are maintained for longer in the economy, avoiding their loss to landfills. Food losses could be halved through food- sharing and discounting models that reduce fresh food waste. Access to efficient home appliances could be increased through leasing instead of sales. Organic waste could be recovered or transformed into high-value protein through the production of insect larvae.

Benefits such as these could be gained by both developed and developing countries; the potential economic gains are estimated at over $1 trillion per year in material cost savings.5 Several economies are already exploring circular strategies, including Brazil, China, India, Kenya, the Lao People’s Democratic Republic, Morocco, South Africa, Turkey, Uruguay, VietNam and the European Union.6 India and the European Union stand to gain savings of $624 billion and €320 billion, respectively.7

The effects of increased recycling on global value chains are an important area for research. For example, a circular model for metals implies an increase in the re-purposing, reuse and recycling of such materials. This can transform end points of the value chain, such as junkyards and dumping sites for metals, into new reprocessing hubs that supply metals to markets. This growth trend in recycling markets may be desirable from an environmental perspective, yet could reduce demand for primary resources, requiring an adjustment in employment, logistics and scal structures in countries dependent on the extraction of natural resources.8 At the same time, growth in the recycling, re-purposing and reuse of materials could support the emergence of regional reprocessing and recycling hubs and open new opportunities for the commodities and manufacturing sectors. Greater circularity could reduce the depreciation of physical capital in the economy, increasing overall wealth in societies. The specific benefits that developing countries could obtain by adopting formal circular economy strategies is a new subject for research, and further studies and data are needed.

 

Circularity can change trade patterns and improve the utilization of idle capacity

Circular models could help countries grow with resources already available in their territories. This may imply a reduction in international trade, yet the 140 million people joining the middle class each year guarantee growth in overall trade.9 Such growth may occur not in goods but in services such as access-over-ownership models.10 In addition, increased circularity can change production patterns, improving asset utilization rates and producing value chains based on recycling and re-manufacturing centres close to where products are used. This could lead to fewer transport-related losses, quicker turnarounds between orders and deliveries, lower levels of carbon dioxide emissions and the creation of jobs that cannot be offshored.

Some countries have trade surpluses in physical goods and others in immaterial services. Trade therefore results in a net transfer of materials from one region to another as seen, for example, in trade patterns between China and the United States. The United States imports many goods from China but does not export nearly as many finished goods in return. However, nearly 3,700 containers of recyclables per day are exported to China; in 2016, such exports amounted to 16.2 million tons of scrap metal, paper and plastics worth $5.2 billion.11

 

Key Terms:

  • Circular Economy
  • Cradle to Cradle
  • Closed Supply Chains
  • Industrial Ecology
  • Reverse Ecology
  • Blue Economy
  • Regenerative Design
  • Performance Economy
  • Natural Capitalism
  • Bio-mimicry
  • Doughnut Economics

 

 

From Input to the European Commission from European EPAs about monitoring progress of the transition towards a circular economy in the European Union

circular3

 

 

Circular Economy System Diagram

https://www.ellenmacarthurfoundation.org/circular-economy/interactive-diagram

System_diagram_cropped

From INTRODUCTION TO THE CIRCULAR ECONOMY Booklet

circular2

From Towards the Circular Economy: Accelerating the scale-up across global supply chains

circular8

 

Comprehensive Concept of Circular Economy

http://bio-based.eu/graphics/

circular1

From Input to the European Commission from European EPAs about monitoring progress of the transition towards a circular economy in the European Union

Circular4

From Taking the Circular Economy to the City Level

cicular5

Please see my related post:

Resource Flows: Material Flow Accounting (MFA), Life Cycle Analysis (LCA), Input Output Networks and other methods

Stock Flow Consistent Input Output Models (SFCIO)

Stock Flow Consistent Models for Ecological Economics

Jay W. Forrester and System Dynamics

 

Key Sources of Research:

Ellen MacArthur Foundation

https://www.ellenmacarthurfoundation.org

 

 

 

 

INTRODUCTION TO THE CIRCULAR ECONOMY

Circular economy booklet

 Ellen MacArthur Foundation

https://pdfs.semanticscholar.org/presentation/e596/5f046f0a12854e0301e8139fce7cddc7f065.pdf

 

 

 

 

 

TOWARDS THE CIRCULAR ECONOMY

Economic and business rationale for an accelerated transition

Ellen MacArthur Foundation

2013

Volume 1

https://www.ellenmacarthurfoundation.org/assets/downloads/publications/Ellen-MacArthur-Foundation-Towards-the-Circular-Economy-vol.1.pdf

 

 

TOWARDS THE CIRCULAR ECONOMY

Opportunities for the consumer goods sector

 

Ellen MacArthur Foundation

2013

Volume 2

https://www.mckinsey.com/~/media/mckinsey/dotcom/client_service/sustainability/pdfs/towards_the_circular_economy.ashx

https://www.ellenmacarthurfoundation.org/publications/towards-the-circular-economy-vol-2-opportunities-for-the-consumer-goods-sector

 

 

 

TOWARDS THE CIRCULAR ECONOMY

Accelerating the scale-up across global supply chains

Volume 3

2014

Ellen MacArthur Foundation

https://www.ellenmacarthurfoundation.org/assets/downloads/publications/Towards-the-circular-economy-volume-3.pdf

 

 

 

 

 

Towards the Circular Economy: Accelerating the scale-up across global supply chains

World Economic Forum

Prepared in collaboration with the Ellen MacArthur Foundation and McKinsey & Company

January 2014

 

rethinking value chains to boost resource productivity

https://environnement.brussels/sites/default/files/user_files/2._zils_v03.pdf

 

 

 

Circular Economy in Cities

Evolving the model for a sustainable urban future

WEF

 

http://www3.weforum.org/docs/White_paper_Circular_Economy_in_Cities_report_2018.pdf

Towards a circular economy: A zero waste programme for Europe

DG Environment

Minsk, 8 October 2014

 

https://www.oecd.org/env/outreach/EC-Circular-econonomy.pdf

 

 

 

 

Transitioning IKEA Towards a Circular Economy: A Backcasting Approach

Claudia Szerakowski

Master’s Thesis in Industrial Ecology

 

http://publications.lib.chalmers.se/records/fulltext/252505/252505.pdf

 

 

 

 

Circular Economy Industry Roundtable:

 

 

 

Sustainable Supply Chain Management and the transition towards a Circular Economy: Evidence and some Applications.

Genovese, Andrea and Acquaye, Adolf and Figueroa, Alejandro and Koh, S.C. Lenny

(2015)

Omega,

https://kar.kent.ac.uk/49202/

 

 

 

Are you ready for the circular economy? The necessity of an integrated approach.

EY

https://www.ey.com/Publication/vwLUAssets/EY-brochure-cas-are-you-ready-for-the-circular-economy/$FILE/EY-brochure-cas-are-you-ready-for-the-circular-economy.pdf

 

 

 

Barriers & Drivers towards a Circular Economy

Literature Review A-140315-R-Final

March 2015

 

https://www.circulairondernemen.nl/uploads/e00e8643951aef8adde612123e824493.pdf

 

The Circular Economy Powered by Cradle to Cradle®

 

http://www.epea.com/wp-content/uploads/2017/10/The-Circular-Economy-powered-by-Cradle-to-Cradle.pdf

 

 

 

 Towards a Circular Economy

Venkatachalam Anbumozhi Jootae Kim

http://www.eria.org/ERIA_RPR_FY2014_44.pdf

 

 

 

Circular Economy

European Commission

https://skl.se/download/18.a581a5614c5137da1e3076d/1427874379367/Presentation-circular-economy-EU-kommissionen.pdf

 

 

 

CIRCULAR ECONOMY IN CHINA

OPPORTUNITIES FOR COMPANIES

Business Sweden

 

https://www.business-sweden.se/contentassets/c5d6f8e5acc041aca5f7187920559930/circular-economy-in-china.-report-v.1.0_final.pdf

 

 

 

SUPPORTING THE CIRCULAR ECONOMY TRANSITION

THE ROLE OF THE FINANCIAL SECTOR IN THE NETHERLANDS

Oliver Wyman

 

http://www.oliverwyman.com/content/dam/oliver-wyman/v2/publications/2017/sep/CircularEconomy_print.pdf

 

 

 

Transition towards a circular economy: The case of the Metropole region Amsterdam

Jacqueline Cramer

Ambassador Circular Economy

 

https://www.surrey.ac.uk/sites/default/files/2018-02/jacqueline-cramer-lecture-2016.pdf

 

 

 

 

The Circular Economy – a new sustainability paradigm?

Geissdoerfer, Martin1,2†; Savaget, Paulo1; Bocken, Nancy M.P.1,2; Hultink, Erik Jan2

 

https://www.repository.cam.ac.uk/bitstream/handle/1810/261957/The%20Circular%20Economy%20-%20a%20new%20sustainability%20paradigm_accepted%20version.pdf?sequence=1&isAllowed=y

 

 

 

A REVIEW OF THE CIRCULAR ECONOMY AND ITS IMPLEMENTATION

 

http://entreprenorskapsforum.se/wp-content/uploads/2015/12/CircularEconomy_webb.pdf

 

SS8: Circular economy and decoupling

https://www.wrforum.org/ss8-circular-economy-and-decoupling/

 

 

 

Input to the European Commission from European EPAs about monitoring progress of the transition towards a circular economy in the European Union

 

May 2017

http://www.pbl.nl/sites/default/files/cms/publicaties/PBL-2017-EPA-network-discussion-paper-monitoring-progress-of-the-circular-economy-in-the-EU_2772.pdf

 

 

 

The European Economy: From a Linear to a Circular Economy

Florin Bonciu

 

http://rjea.ier.ro/sites/rjea.ier.ro/files/articole/RJEA_2014_vol14_no4_art5.pdf

 

 

 

 

THE CIRCULAR ECONOMY AND DEVELOPING COUNTRIES

A DATA ANALYSIS OF THE IMPACT OF A CIRCULAR ECONOMY ON RESOURCE-DEPENDENT DEVELOPING NATIONS

 

https://hcss.nl/sites/default/files/files/reports/CEO_The%20Circular%20Economy.pdf

 

 

 

The opportunities of a circular economy for Finland

October, 2015

 

https://media.sitra.fi/2017/02/28142449/Selvityksia100.pdf

 

 

 

Circular economy

A review of definitions, processes and impacts

 

https://www.ecologic.eu/sites/files/publication/2017/2809-circular-impacts_0.pdf

 

 

 

CIRCULAR ECONOMY IN INDIA: RETHINKING GROWTH FOR LONG-TERM PROSPERITY

http://eco.nomia.pt/contents/documentacao/circular-economy-in-india-2-dec-2016.pdf

 

 

 

 

GROWTH WITHIN: A CIRCULAR ECONOMY VISION FOR A COMPETITIVE EUROPE

 

https://unfccc.int/sites/default/files/resource/Circular%20economy%203.pdf

 

 

 

 

Report on State-of-the-Art Research in the Area of the Circular Economy

 

Sylvie Geisendorf

Felicitas Pietrulla ESCP Europe Campus Berlin

 

http://www.r2piproject.eu/wp-content/uploads/2017/04/report-on-state-of-the-art-research.pdf

 

 

 

A Wider Circle? The Circular Economy in Developing Countries

 

https://www.chathamhouse.org/sites/default/files/publications/research/2017-12-05-circular-economy-preston-lehne.pdf

 

 

 

 

A safe and just space for humanity

CAN WE LIVE WITHIN THE DOUGHNUT?

Kate Raworth

OXFAM

 

https://www.oxfam.org/sites/www.oxfam.org/files/dp-a-safe-and-just-space-for-humanity-130212-en.pdf

https://www.kateraworth.com

 

 

Doughnut Economics: seven ways to think like a 21st century economist

Kate Raworth

http://www.lse.ac.uk/website-archive/newsAndMedia/videoAndAudio/channels/publicLecturesAndEvents/player.aspx?id=3938

 

Taking the Circular Economy to the City Level

https://worldcongress2018.iclei.org/wp-content/uploads/2018/02/ICLEI_Webinar_Circular_Economy_Intro.pdf

 

 

 

 

 

Mapping the Political Economy of Design

Dr. Joanna Boehnert

Research Fellow
Centre for the Evaluation of Complexity Across the Nexus University of Surrey

 

https://systemic-design.net/wp-content/uploads/2017/12/RSD6-Mapping-the-Political-Economy-of-Design-Boehnert-6.12.17-Final2.pdf

 

 

 

A circular Economy

SITRA

https://www.sitra.fi/en/topics/a-circular-economy/

 

 

 

Rethinking Sustainability in Light of the EU’s New Circular Economy Policy

JULY 03, 2018
HBR

https://hbr.org/2018/07/rethinking-sustainability-in-light-of-the-eus-new-circular-economy-policy

 

 

 

 RE-CIRCLE

Resource Efficiency & Circular Economy Project

OECD

 

http://www.oecd.org/environment/indicators-modelling-outlooks/brochure-recircle-resource-efficiency-and-circular-economy.pdf

 

 

ECONOMICS OF THE CIRCULAR ECONOMY TRANSITION: A CRITICAL REVIEW OF MODELLING APPROACHES –

ENVIRONMENT WORKING PAPER No. 130

by Andrew McCarthy, Rob Dellink, and Ruben Bibas

(OECD)

 

https://www.oecd-ilibrary.org/docserver/af983f9a-en.pdf?expires=1531674000&id=id&accname=guest&checksum=1108F9A93394F591184369F48C2F5D4C

 

 

 

 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS

A European Strategy for Plastics in a Circular Economy

EU

 

http://ec.europa.eu/environment/circular-economy/pdf/plastics-strategy.pdf

 

 

 

The New Plastics Economy

Rethinking the future of plastics

WEF

 

http://www3.weforum.org/docs/WEF_The_New_Plastics_Economy.pdf

 

https://www.mckinsey.com/~/media/mckinsey/business%20functions/sustainability%20and%20resource%20productivity/our%20insights/rethinking%20future%20of%20plastics/the%20new%20plastics%20economy.ashx

 

https://www.ellenmacarthurfoundation.org/assets/downloads/publications/NPEC-Hybrid_English_22-11-17_Digital.pdf

 

 

 

SCALING RECYCLED PLASTICS ACROSS INDUSTRIES

MARCH 2017

RESEARCHED BY JOS VLUGTER,
MSC CANDIDATE, STRATEGIC PRODUCT DESIGN, DELFT UNIVERSITY OF TECHNOLOGY

 

https://www.ellenmacarthurfoundation.org/assets/downloads/ce100/Scaling-Recycled-Plastics-across-Industries.pdf

 

 

 

 

CIRCULAR ECONOMY: THE NEW NORMAL?

UNCTAD

May 2018

 

http://unctad.org/en/PublicationsLibrary/presspb2017d10_en.pdf

 

 

 

 

The circular economy: Moving from theory to practice

McKinsey Center for Business and Environment Special edition,

October 2016

https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Sustainability%20and%20Resource%20Productivity/Our%20Insights/The%20circular%20economy%20Moving%20from%20theory%20to%20practice/The%20circular%20economy%20Moving%20from%20theory%20to%20practice.ashx

 

 

 

 

Renewable materials in the Circular Economy

April 2018

 

https://www.ivl.se/download/18.2aa2697816097278807e8a5/1523522038883/C296.pdf

 

 

 

A Review of the Circular Economy and its Implementation

Almas Heshmati

Sogang University and IZA

 

http://ftp.iza.org/dp9611.pdf

 

 

 

Rethinking finance in Rethinking nance in a circular economy

Financial implications of circular business models

ING

 

https://www.ingwb.com/media/1149417/ing-rethinking-finance-in-a-circular-economy-may-2015.pdf

 

 

 

 

 

The Circular Economy in International Trade

UNCTAD

2016

http://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=1400

 

 

 

 

Circular economy:
a commentary from the perspectives of the natural and social sciences

https://www.easac.eu/fileadmin/PDF_s/reports_statements/EASAC_Circular_Economy_Web.pdf

 

 

 

 

Circular by design

Products in the circular economy

https://circulareconomy.europa.eu/platform/sites/default/files/circular_by_design_-_products_in_the_circular_economy.pdf

 

 

 

GROWTH WITHIN:

A CIRCULAR ECONOMY VISION FOR A COMPETITIVE EUROPE

Ellen MacArthur Foundation

 

https://www.ellenmacarthurfoundation.org/assets/downloads/publications/EllenMacArthurFoundation_Growth-Within_July15.pdf

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Resource Flows: Material Flow Accounting (MFA), Life Cycle Analysis (LCA), Input Output Networks and other methods

Resource Flows: Material Flow Accounting (MFA), Life Cycle Analysis (LCA), Input Output Networks and other methods

 

 

 

From Materials Flow and Sustainability

mfa5mfa6

 

Key Terms:

  • MFA (Material Flow Analysis)
  • MFCA (Material Flow Cost Accounting)
  • LCA (Life Cycle Analysis)
  • SFA (Substance Flow Analysis)
  • MF WIO (Material Flow Waste Input Output)
  • IO LCA (Input Output Life Cycle Analysis)
  • KLEM (Capital, Labor, Energy, Materials)
  • PIOT ( Physical Input Output Tables)
  • MIOT (Monetary Input Output Tables)
  • IO MFN (Input Output Material Flow Network)
  • Social Ecology
  • Industrial Ecology
  • Urban Metabolism
  • Industrial Symbiosis
  • Industrial Metabolism
  • M-P Chains (Material Product Chains)
  • Global Value Chains
  • National Footprint Accounts
  • Inter Industry Analysis
  • Input Output Economics
  • End to End Supply Chains
  • Supply and Use Tables
  • Material Balance
  • Mass Balance
  • Biophysical Economics
  • Ecological Economics
  • Environmentally Extended Input Output Analysis (EE-IOA)
  • Stocks and Flows
  • MaTrace
  • Global MaTrace

 

Software for Data Analysis and Visualization:

 

This article lists several other software packages for MFA/SFA

https://www.azavea.com/blog/2017/08/09/six-sankey-diagram-tool/

 

 

Material Flow Analysis

From Practical Handbook of MATERIAL FLOW ANALYSIS

Material flow analysis (MFA) is a systematic assessment of the flows and stocks of materials within a system defined in space and time. It connects the sources, the pathways, and the intermediate and final sinks of a material. Because of the law of the conservation of matter, the results of an MFA can be controlled by a simple material balance comparing all inputs, stocks, and outputs of a process. It is this distinct characteristic of MFA that makes the method attractive as a decision-support tool in resource management, waste management, and environmental management.

An MFA delivers a complete and consistent set of information about all flows and stocks of a particular material within a system. Through balancing inputs and outputs, the flows of wastes and environmental loadings become visible, and their sources can be identified. The depletion or accumulation of material stocks is identified early enough either to take countermeasures or to promote further buildup and future utilization. Moreover, minor changes that are too small to be measured in short time scales but that could slowly lead to long-term damage also become evident.

Anthropogenic systems consist of more than material flows and stocks (Figure 1.1). Energy, space, information, and socioeconomic issues must also be included if the anthroposphere is to be managed in a responsible way. MFA can be performed without considering these aspects, but in most cases, these other factors are needed to interpret and make use of the MFA results. Thus, MFA is frequently coupled with the analysis of energy, economy, urban planning, and the like.

In the 20th century, MFA concepts have emerged in various fields of study at different times. Before the term MFA had been invented, and before its comprehensive methodology had been developed, many researchers used the law of conservation of matter to balance processes. In process and chemical engineering, it was common practice to analyze and balance inputs and outputs of chemical reactions. In the economics field, Leontief introduced input–output tables in the 1930s, thus laying the base for widespread application of input–output methods to solve economic problems. The first studies in the fields of resource conservation and environmental management appeared in the 1970s. The two original areas of application were (1) the metabolism of cities and (2) the analysis of pollutant pathways in regions such as watersheds or urban areas. In the following decades, MFA became a widespread tool in many fields, including process control, waste and wastewater treatment, agricultural nutrient management, water-quality management, resource conservation and recovery, product design, life cycle assessment (LCA), and others.

 

Substance Flow Analysis

From Feasibility assessment of using the substance flow analysis methodology for chemicals information at macro level

SFA is used for tracing the flow of a selected chemical (or group of substances) through a defined system. SFA is a specific type of MFA tool, dealing only with the analysis of flows of chemicals of special interest (Udo de Haes et al., 1997). SFA can be defined as a detailed level application of the basic MFA concept tracing the flow of selected chemical substances or compounds — e.g. heavy metals (mercury (Hg), lead (Pb), etc.), nitrogen (N), phosphorous (P), persistent organic substances, such as PCBs, etc. — through society.

An SFA identifies these entry points and quantifies how much of and where the selected substance is released. Policy measures may address these entry points, e.g. by end‐of‐pipe technologies. Its general aim is to identify the most effective intervention points for policies of pollution prevention. According to Femia and Moll (2005), SFA aims to answer the following questions:

• Where and how much of substance X flows through a given system?

• How much of substance X flows to wastes?
• Where do flows of substance X end up?
• How much of substance X is stored in durable goods?
• Where could substance X be more efficiently utilised in technical processes?
• What are the options for substituting the harmful substance?
• Where do substances end up once they are released into the natural environment?

When an SFA is to be carried out, it involves the identification and collection of data on the one hand, and modelling on the other. According to van der Voet et al. (OECD, 2000), there are three possible ways to ‘model’ the system:

Accounting (or bookkeeping) The input for such a system is the data that can be obtained from trade and production statistics. If necessary, further detailed data can be recovered on the contents of the specific substances in those recorded goods and materials. Emissions and environmental fluxes or concentration monitoring can be used for assessing the environmental flows. The accounting overview may also serve as an identification system for missing or inaccurate data.

Missing amounts can be estimated by applying the mass balance principle. In this way, inflows and outflows are balanced for every node, as well as for the system as a whole, unless accumulation within the system can be proven. This technique is most commonly used in material flow studies, and can be viewed as a form of descriptive statistics. There are, however, some examples of case studies that specifically address societal stocks, and use these as indicator for possible environmental problems in the future (OECD, 2000).

Static modelling is the process whereby the network of flow nodes is translated into a mathematical ‘language’, i.e. a set of linear equations, describing the flows and accumulations as inter‐dependent. Emission factors and distribution factors over the various outputs for the economic processes and partition coefficients for the environmental compartments can be used as variables in the equations. A limited amount of substance flow accounting data is also required for a solution of the linear equations. However, the modelling outcome is determined largely by the substance distribution patterns.

Static modelling can be extended by including a so‐called origin analysis in which the origins of one specific problematic flow can be traced on several levels. Three levels may be distinguished:

• direct causes derived directly from the nodes balance (e.g one of the direct causes of cadmium (Cd) load in soil is atmospheric deposition);

• economic sectors (or environmental policy target groups) directly responsible for the problem. This is identified by following the path back from node to node to the point of emission (e.g. waste incineration is one of the economic sectors responsible for the cadmium load in soil);

• ultimate origins found by following the path back to the system boundaries (e.g. the extraction, transport, processing and trade of zinc (Zn) ore is one of the ultimate origins of the cadmium load in soil).

Furthermore, the effectiveness of abatement measures can be assessed with static modelling by recording timelines on substances (OECD, 2000).

Dynamic modelling is different to the static SFA model, as it includes substance stocks accumulated in society as well as in various materials and products in households and across the built‐up environments.

For SFA, stocks play an important role in the prediction of future emissions and waste flows of products with a long life span. For example, in the case of societal stocks of PVC, policy makers need to be supplied with information about future PVC outflows. Today’s stocks become tomorrow’s emissions and waste flows. Studies have been carried out on the analysis of accumulated stocks of metals and other persistent toxics in the societal system. Such build‐ups can serve as an ‘early warning’ signal for future emissions and their potential effects, as one day these stocks may become obsolete and recognisably dangerous, e.g. as in the case of asbestos, CFCs, PCBs and mercury in chlor‐alkali cells. As the stocks are discarded, they end up as waste, emissions, factors of risks to environment and population. In some cases, this delay between inflow and outflow can be very long indeed.

Stocks of products no longer in use, but not yet discarded, are also important. These stocks could include: old radios, computers and/or other electronic equipment stored in basements or attics, out‐of‐use pipes still in the ground, obsolete stocks of chemicals no longer produced but still stored, such as lead paints and pesticides. These ‘hibernating stocks’ are likely to be very large, according to OECD estimates (2000). Estimating future emissions is a crucial issue if environmental policy makers are to anticipate problems and take timely, effective action. In order to do this, stocks cannot be ignored. Therefore, when using MFA or SFA models for forecasting, stocks should play a vital part. Flows and stocks interact with each other. Stocks grow when the inflows exceed the outflows of a (sub)‐system and certain outflows of a (sub)‐system are disproportional to the stocks.

For this dynamic model, additional information is needed for the time dimension of the variables, e.g. the life span of applications in the economy; the half life of compounds; the retention time in environmental compartments and so forth. Calculations can be made not only on the ‘intrinsic’ effectiveness of packages of measures, but also on their anticipated effects in a specific year in the future. They can also be made on the time
it takes for such measures to become effective. A dynamic model is therefore most suitable for scenario analysis, provided that the required data are available or can be estimated with adequate accuracy (OECD, 2000).

 

Life Cycle Analysis (LCA)

 

What is Life Cycle Assessment (LCA)?

As environmental awareness increases, industries and businesses are assessing how their activities affect the environment. Society has become concerned about the issues of natural resource depletion and environmental degradation. Many businesses have responded to this awareness by providing “greener” products and using “greener” processes. The environmental performance of products and processes has become a key issue, which is why some companies are investigating ways to minimize their effects on the environment. Many companies have found it advantageous to explore ways of moving beyond compliance using pollution prevention strategies and environmental management systems to improve their environmental performance. One such tool is LCA. This concept considers the entire life cycle of a product (Curran 1996).

Life cycle assessment is a “cradle-to-grave” approach for assessing industrial systems. “Cradle-to-grave” begins with the gathering of raw materials from the earth to create the product and ends at the point when all materials are returned to the earth. LCA evaluates all stages of a product’s life from the perspective that they are interdependent, meaning that one operation leads to the next. LCA enables the estimation of the cumulative environmental impacts resulting from all stages in the product life cycle, often including impacts not considered in more traditional analyses (e.g., raw material extraction, material transportation, ultimate product disposal, etc.). By including the impacts throughout the product life cycle, LCA provides a comprehensive view of the environmental aspects of the product or process and a more accurate picture of the true environmental trade-offs in product and process selection.

The term “life cycle” refers to the major activities in the course of the product’s life-span from its manufacture, use, and maintenance, to its final disposal, including the raw material acquisition required to manufacture the product. Exhibit 1-1 illustrates the possible life cycle stages that can be considered in an LCA and the typical inputs/outputs measured.

 

Methods of LCA

  • Process LCA
  • Economic Input Output LCA
  • Hybrid Approach

 

 

From Life cycle analysis (LCA) and sustainability assessment

 

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Material Input Output Network Analysis

  • PIOT (Physical Input Output Tables)
  • MIOT (Monetary Input Output Tables)
  • WIOT (Waste Input Output Tables
  • MRIO (Multi Regional Input Output)
  • SUT (Supply and Use Tables)

 

From Industrial ecology and input-output economics: An introduction

Although it was the pioneering contributions by Duchin (1990, 1992) that explicitly made the link between input–output economics and industrial ecology, developments in input– output economics had previously touched upon the core concept of industrial ecology.

Wassily Leontief himself incorporated key ideas of industrial ecology into an input– output framework. Leontief (1970) and Leontief and Ford (1972) proposed a model where the generation and the abatement of pollution are explicitly dealt with within an extended IO framework. This model, which combines both physical and monetary units in a single coefficient matrix, shows how pollutants generated by industries are treated by so-called ‘pollution abatement sectors.’ Although the model has been a subject of longstanding methodological discussions (Flick, 1974; Leontief, 1974; Lee, 1982), its structure captures the essence of industrial ecology concerns: abatement of environmental problems by exploiting inter-industry interactions. As a general framework, we believe that the model by Leontief (1970) and Leontief and Ford (1972) deserves credit as an archetype of the various models that have become widely referred to in the field of industrial ecology during the last decade, including mixed-unit IO, waste IO and hybrid Life Cycle Assessment (LCA) models (Duchin, 1990; Konijn et al., 1997; Joshi, 1999; Nakamura and Kondo, 2002; Kagawa et al., 2004; Suh, 2004b). Notably, Duchin (1990) deals with the conversion of wastes to useful products, which is precisely the aim of industrial ecology, and subsequently, as part of a study funded by the first AT&T industrial ecology fellowship program, with the recovery of plastic wastes in particular (Duchin and Lange, 1998). Duchin (1992) clarifies the quantity-price relationships in an input–output model (a theme to which she has repeatedly returned) and draws its implications for industrial ecology, which has traditionally been concerned exclusively with physical quantities.

Duchin and Lange (1994) evaluated the feasibility of the recommendations of the Brundtland Report for achieving sustainable development. For that, they developed an input–output model of the global economy with multiple regions and analyzed the consequences of the Brundtland assumptions about economic development and technological change for future material use and waste generation. Despite substantial improvements in material efficiency and pollution reduction, they found that these could not offset the impact of population growth and the improved standards of living endorsed by the authors of the Brundtland Report.

Another pioneering study that greatly influenced current industrial ecology research was described by Ayres and Kneese (1969) and Kneese et al. (1970), who applied the massbalance principle to the basic input–output structure, enabling a quantitative analysis of resource use and material flows of an economic system. The contribution by Ayres and Kneese is considered the first attempt to describe the metabolic structure of an economy in terms of mass flows (see Ayres, 1989; Haberl, 2001).

Since the 1990s, new work in the areas of economy-wide research about material flows, sometimes based on Physical Input–Output Tables (PIOTs), has propelled this line of research forward in at least four distinct directions: (1) systems conceptualization (Duchin, 1992; Duchin, 2005a); (2) development of methodology (Konijn et al., 1997; Nakamura and Kondo, 2002; Hoekstra, 2003; Suh, 2004c; Giljum et al., 2004; Giljum and Hubacek, 2004; Dietzenbacher, 2005; Dietzenbacher et al., 2005; Weisz and Duchin, 2005); (3) compilation of data (Kratterl and Kratena, 1990; Kratena et al., 1992; Pedersen, 1999; Ariyoshi and Moriguchi, 2003; Bringezu et al., 2003; Stahmer et al., 2003); and (4) applications (Duchin, 1990; Duchin and Lange, 1994, 1998; Hubacek and Giljum, 2003; Kagawa et al., 2004). PIOTs generally use a single unit of mass to describe physical flows among industrial sectors of a national economy. In principle, such PIOTs are capable of satisfying both column-wise and row-wise mass balances, providing a basis for locating materials within a national economy.3 A notable variation in this tradition, although it had long been used in input–output economic studies starting with the work of Leontief, is the mixed-unit IO table. Konijn et al. (1997) analyzed a number of metal flows in the Netherlands using a mixed-unit IO table, and Hoekstra (2003) further improved both the accounting framework and data. Unlike the original PIOTs, mixed-unit IOTs do not assure the existence of column-wise mass-balance, but they make it possible to address more complex questions. Lennox et al. (2004) present the Australian Stocks and Flows Framework (ASFF), where a dynamic IO model is implemented on the basis of a hybrid input–output table. These studies constitute an important pillar of industrial ecology that is generally referred to as Material Flow Analysis (MFA).4

Although the emphasis in industrial ecology has arguably been more on the materials side, energy issues are without doubt also among its major concerns. In this regard, energy input–output analysis must be considered another important pillar for the conceptual basis of ‘industrial energy metabolism.’ The oil shock in the 1970s stimulated extensive research on the structure of energy use, and various studies quantifying the energy associated with individual products were carried out (Berry and Fels, 1973; Chapman, 1974). Wright (1974) utilized Input–Output Analysis (IOA) for energy analysis, which previously had been dominated by process-based analysis (see also Hannon, 1974; Bullard and Herendeen, 1975; Bullard et al., 1978). The two schools of energy analysis, namely process analysis and IO energy analysis, were merged by Bullard and Pillarti (1976) into hybrid energy analysis (see also van Engelenburg et al., 1994; Wilting,1996). Another notable contribution to the area of energy analysis was made by Cleveland et al. (1984), who present a comprehensive analysis, using the US input–output tables, quantifying the interconnection of energy and economic activities from a biophysical standpoint (see Cleveland, 1999; Haberl, 2001; Kagawa and Inamura, 2004). These studies shed light on how an economy is structured by means of energy flows and informs certain approaches to studying climate change (see for example Proops et al., 1993; Wier et al., 2001).

What generally escapes attention in both input–output economics and industrial ecology, despite its relevance for both, is the field of Ecological Network Analysis (ENA). Since Lotka (1925) and Lindeman (1942), material flows and energy flows have been among the central issues in ecology. It was Hannon (1973) who first introduced concepts from input–output economics to analyze the structure of energy utilization in an ecosystem. Using an input–output framework, the complex interactions between trophic levels or ecosystem compartments can be modeled, taking all direct and indirect relationships between components into account. Hannon’s approach was adopted, modified and re-introduced by various ecologists. Finn (1976, 1977), among others, developed a set of analytical measures to characterize the structure of an ecosystem using a rather extensive reformulation of the approach proposed by Hannon (1973). Another important development in the tradition of ENA is so-called environ analysis. Patten (1982) proposed the term ‘environ’ to refer to the relative interdependency between ecosystem components in terms of nutrient or energy flows. Results of environ analysis are generally presented as a comprehensive network flow diagram, which shows the relative magnitudes of material or energy flows between the ecosystem components through direct and indirect relationships (Levine, 1980; Patten, 1982). Ulanowicz and colleagues have broadened the scope of materials and energy flow analysis both conceptually and empirically (Szyrmer and Ulanowicz, 1987). Recently Bailey et al. (2004a, b) made use of the ENA tradition to analyze the flows of several metals through the US economy. Suh (2005) discusses the relationship between ENA and IOA and shows that Patten’s environ analysis is similar to Structural Path Analysis (SPA), and that the ENA framework tends to converge toward the Ghoshian framework rather than the Leontief framework although using a different formalism (Defourny and Thorbecke, 1984; Ghosh, 1958).

 

 

From Materials and energy flows in industry and ecosystem netwoks : life cycle assessment, input-output analysis, material flow analysis, ecological network flow analysis, and their combinations for industrial ecology

 

MFA

 

From Regional distribution and losses of end-of-life steel throughout
multiple product life cycles—Insights from the global multiregional
MaTrace model

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From Feasibility assessment of using the substance flow analysis methodology for chemicals information at macro level

 

mfa2MFA3

 

Sankey Diagram

From Hybrid Sankey diagrams: Visual analysis of multidimensional data for understanding resource use

Sankey diagrams are used to visualise flows of energy, materials or other resources in a variety of applications. Schmidt (2008a) reviewed the history and uses of these diagrams. Originally, they were used to show flows of energy, first in steam engines, more recently for modern systems such as power plants (e.g. Giuffrida et al., 2011) and also to give a big-picture view of global energy use (Cullen and Allwood, 2010). As well as energy, Sankey diagrams are widely used to show flows of resources (Schmidt, 2008a). Recent examples in this journal include global flows of tungsten (Leal-Ayala et al., 2015), biomass in Austria (Kalt, 2015), and the life-cycle of car components (Diener and Tillman, 2016). More widely, they have been used to show global production and use of steel and aluminium (Cullen et al., 2012; Cullen and Allwood, 2013), and flows of natural resources such as water (Curmi et al., 2013). In all of these cases, the essential features are: (1) the diagram represents physical flows, related to a given functional unit or period of time; and (2) the magnitude of flows is shown by the link1 widths, which are proportional to an extensive property of the flow such as mass or energy (Schmidt, 2008b). Creating these diagrams is supported by software tools such as e!Sankey (ifu Hamburg, 2017), and several Life Cycle Assessment (LCA) and Material Flow Analysis (MFA) packages include features to create Sankey diagrams.

 

From Hybrid Sankey diagrams: Visual analysis of multidimensional data for understanding resource use

 

mfa7

 

Please see my related posts:

Wassily Leontief and Input Output Analysis in Economics

Shell Oil’s Scenarios: Strategic Foresight and Scenario Planning for the Future

Water | Food | Energy | Nexus: Mega Trends and Scenarios for the Future

Stock Flow Consistent Input Output Models (SFCIO)

Measuring Globalization: Global Multi Region Input Output Data Bases (G-MRIO)

Production and Distribution Planning : Strategic, Global, and Integrated

Intra Industry Trade and International Production and Distribution Networks

Trends in Intra Firm Trade of USA

Development of Global Trade and Production Accounts: UN SEIGA Initiative

Accounting For Global Carbon Emission Chains

Stock Flow Consistent Models for Ecological Economics

Jay W. Forrester and System Dynamics

Classical roots of Interdependence in Economics

Stock-Flow Consistent Modeling

 

 

 

 

Key Sources of Research:

SPECIAL SESSION ON MATERIAL FLOW ACCOUNTING

OECD

Paris, 24 October 2000

https://www.oecd.org/env/indicators-modelling-outlooks/4425421.pdf

An Innovative Accounting Framework for the Food-Energy-Water Nexus
Application of the MuSIASEM approach to three case studies

http://www.fao.org/docrep/019/i3468e/i3468e.pdf

Creating your own online data visualizations: SankeyMatic, OMAT, CartoDB

https://metabolismofcities.org/blog/4-creating-your-own-online-data-visualizations

Hybrid Sankey diagrams: Visual analysis of multidimensional data for understanding resource use

https://www.sciencedirect.com/science/article/pii/S0921344917301167

e!Sankey

Visualization of energy, cash and material flows with a Sankey diagram

https://www.ifu.com/en/e-sankey/sankey-diagrams/

UPIOM: A New Tool of MFA and Its Application to the Flow of Iron and Steel Associated with Car Production

https://pubs.acs.org/doi/pdf/10.1021/es1024299

Material flow analysis

WIKIPEDIA

https://en.wikipedia.org/wiki/Material_flow_analysis

Economy-wide Material Flow Accounting. Introduction and Guide.

Version 1.0

Article · January 2015

Fridolin Krausmann, Helga Weisz, Nina Eisenmenger, Helmut Schütz, Willi Haas
and Anke Schaffartzik

https://www.researchgate.net/publication/272885234_Economy-wide_Material_Flow_Accounting_Introduction_and_Guide_Version_10

Society’s Metabolism The Intellectual History of Materials Flow Analysis,

Part II, 1970-1998

Marina Fischer-Kowalski and Walter Huttler

Institute for Intenliscipiimny
Studies of Austrian Universities
University of Vienna
Vienna, Austria

http://www.esf.edu/cue/documents/Fischer-Kowalski_Huttler_1998.pdf

“Society’s Metabolism. The Intellectual History of Material Flow Analysis,

Part I, 1860 – 1970″.

Fischer-Kowalski, M.

1998.

Journal of Industrial Ecology 2(1): 61-78

https://www.researchgate.net/publication/249481665_Society%27s_Metabolism_The_Intellectual_History_of_Materials_Flow_Analysis_Part_I_1860-_1970

Analysis on energy–water nexus by Sankey diagram: the case of Beijing

https://www.tandfonline.com/doi/abs/10.1080/19443994.2013.768038

Unified Materials Information System (UMIS): An Integrated Material Stocks and Flows Data Structure

First published: 07 February 2018

 

https://onlinelibrary.wiley.com/doi/abs/10.1111/jiec.12730

Material Flow Cost Accounting with Umberto®

Schmidt, A. Hache, B.; Herold, F.; Götze, U.

http://qucosa.de/fileadmin/data/qucosa/documents/10523/2-05_Material_Flow_Cost_Accounting.pdf

https://www.wef.uni-osnabrueck.de/wp-content/uploads/PRESENTATIONS/Plenary/WEF_Richards.pdf

Study on Data for a Raw Material System Analysis: Roadmap and Test of the Fully Operational MSA for Raw Materials

Final Report

BIO by Deloitte

(2015)

Prepared for the European Commission, DG GROW.

https://www.certifico.com/component/attachments/download/2886

Integrated Analysis of Energy, Material and Time Flows in Manufacturing Systems

 

https://ac.els-cdn.com/S2212827116305479/1-s2.0-S2212827116305479-main.pdf?_tid=90701061-86fc-4c11-b078-cb577d8f8bdf&acdnat=1525719999_9dcee960cd6033d950a583cea379539f

e! Sankey

Visualization of energy, cash and material flows with a Sankey diagram

The most popular software for creating Sankey diagrams. Visualize the cash, material & energy flow or value streams in your company or along the supply chain. Share these appealing diagrams in reports or presentations.

 

https://www.ifu.com/en/e-sankey/?gclid=CjwKCAjw8r_XBRBkEiwAjWGLlIcWq2pRigMmJLKAXP4-ndFXR9ik41MUp9ahFZL2M9Ht5CKtwKIvTRoCdbsQAvD_BwE

MATERIAL FLOW ANALYSIS WITH SOFTWARE STAN

Oliver Cencic* and Helmut Rechberger
Institute for Water Quality Resources and Waste Management
Vienna University of Technology
Vienna A-1040, Austria

https://www.sswm.info/sites/default/files/reference_attachments/CENCIC%20and%20RECHBERGER%202008%20Material%20Flow%20Analysis%20with%20Software%20STAN.pdf

Recovery of Key Metals in the Electronics Industry in the
People’s Republic of China: An Opportunity in Circularity
(Initial Findings)

January 2018

Created as Part of the Platform for Accelerating the Circular Economy

http://www3.weforum.org/docs/Environment_Team/39777_Recovery_Key_Metals_Electronics_Industry_China_Opportunity_Circularity_report_2018.pdf

Sankey diagram

WIKIPEDIA

https://en.wikipedia.org/wiki/Sankey_diagram

MATERIAL FLOWS IN THE UNITED STATES
A PHYSICAL ACCOUNTING OF THE U.S. INDUSTRIAL ECONOMY

DONALD ROGICH
AMY CASSARA
IDDO WERNICK
MARTA MIRANDA

WRI

http://pdf.wri.org/material_flows_in_the_united_states.pdf

Industrial ecology and input-output economics: An introduction

Sangwon Suh

2005

https://www.researchgate.net/profile/Sangwon_Suh3/publication/24078824_Industrial_ecology_and_input-output_economics_An_introduction/links/0c960531f1d92f3705000000/Industrial-ecology-and-input-output-economics-An-introduction.pdf

A Handbook of Industrial Ecology

Robert Ayres

Leslie Ayres

http://pustaka.unp.ac.id/file/abstrak_kki/EBOOKS/A%20Handbook%20of%20Industrial%20Ecology.pdf#page=100

Physical and Monetary Input-Output Analysis:
What Makes the Difference?

Helga Weisz
Klagenfurt University
Faye Duchin
Rensselaer Polytechnic Institute

https://pdfs.semanticscholar.org/d946/ab5b067aacafe555acbc1e077b5b42e1fc92.pdf

Theory of materials and energy flow analysis in ecology and economics

Sangwon Suh

2005

https://www.researchgate.net/profile/Sangwon_Suh3/publication/227009838_Materials_and_energy_flows_in_industry_and_ecosystem_networks/links/00b7d53595cb006cbb000000/Materials-and-energy-flows-in-industry-and-ecosystem-networks.pdf

Conceptual Foundations and Applications of Physical Input-Output Tables

Stefan Giljum

Hubacek Klaus

2009

https://www.researchgate.net/profile/Hubacek_Klaus/publication/226286172_Conceptual_Foundations_and_Applications_of_Physical_Input-Output_Tables/links/0912f506c16a7d06af000000/Conceptual-Foundations-and-Applications-of-Physical-Input-Output-Tables.pdf

Alternative Approaches of Physical Input-Output Analysis to Estimate
Primary Material Inputs of Production and Consumption Activities

Stefan Giljum

Hubacek Klaus

2004

https://www.researchgate.net/profile/Hubacek_Klaus/publication/24078801_Alternative_Approaches_of_Physical_Input-Output_Analysis_to_Estimate_Primary_Material_Inputs_of_Production_and_Consumption_Activities/links/00b7d51cc1257aba71000000.pdf

Industrial Ecology: A Critical Review

https://nature.berkeley.edu/orourke/PDF/IE.pdf

EXIOPOL – development and illustrative analyses of a detailed global
multiregional environmentally-extended supply and use table/input output
table

Article in Economic Systems Research · May 2013

https://www.researchgate.net/profile/Jan_Oosterhaven/publication/281305069_EXIOPOL_-_development_and_illustrative_analyses_of_a_detailed_global_multiregional_environmentally-extended_supply_and_use_tableinput-output_table/links/561d652a08aecade1acb3bfc.pdf

Developing the Sectoral Environmental Database for Input- Output Analysis: Comprehensive Environmental Data Archive of the U.S.

Article in Economic Systems Research · December 2005

https://www.researchgate.net/profile/Sangwon_Suh3/publication/24078829_Developing_the_Sectoral_Environmental_Database_for_Input-Output_Analysis_Comprehensive_Environmental_Data_Archive_of_the_US/links/0c960531f1d910cda1000000.pdf

The material basis of the global economy

Worldwide patterns of natural resource extraction and their
implications for sustainable resource use policies

Arno Behrens,⁎, Stefan Giljum, Jan Kovanda, Samuel Niza

https://eden.dei.uc.pt/~camara/files/iTEAM/Material_Basis.pdf

The Sankey Diagram in Energy and Material Flow Management

Part I: History

https://onlinelibrary.wiley.com/doi/full/10.1111/j.1530-9290.2008.00004.x

The Sankey Diagram in Energy and Material Flow Management

Part II: Methodology and Current Applications

First published: 28 April 2008

https://onlinelibrary.wiley.com/doi/pdf/10.1111/j.1530-9290.2008.00015.x

Material and Energy Flow Analysis

First published: 23 March 2010

https://onlinelibrary.wiley.com/doi/pdf/10.1002/ceat.201090015

8. Biophysical economics: from physiocracy to ecological economics and industrial
ecology

Cutler J Cleveland

Article · January 1999

https://www.researchgate.net/profile/Cutler_Cleveland/publication/229055775_8_Biophysical_economics_from_physiocracy_to_ecological_economics_and_industrial_ecology/links/0deec51b7274ca0035000000.pdf

The Use of Input-Output Analysis in REAP to allocate Ecological Footprints and Material Flows to Final Consumption Categories

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.457.7453&rep=rep1&type=pdf

Waste Input–Output Material Flow Analysis of Metals in the Japanese Economy

Shinichiro Nakamura1 and Kenichi Nakajima2

https://www.jim.or.jp/journal/e/pdf3/46/12/2550.pdf

A multi-regional environmental input-output model to quantify embodied material flows

Stefan Giljum a, Christian Lutz b,Ariane Jungnitz

https://www.iioa.org/conferences/16th/files/Papers/Giljum%20et%20al_IIOA.pdf

http://inforumweb.umd.edu/papers/conferences/2007/jungnitzgiljumlutz.pdf

Material Flow Accounting and Analysis (MFA)

A Valuable Tool for Analyses of Society-Nature Interrelationships

Entry prepared for the Internet Encyclopedia of Ecological Economics

Friedrich Hinterberger *, Stefan Giljum, Mark Hammer

Sustainable Europe Research Institute (SERI)

http://isecoeco.org/pdf/material.pdf

Human Ecology: Industrial Ecology

Faye Duchin
Rensselaer Polytechnic Institute

Stephen H. Levine
Tufts University

http://www.economics.rpi.edu/workingpapers/rpi0603.pdf

Development of the Physical Input Monetary Output Model for Understanding Material Flows within Ecological -Economic Systems

XU Ming

2010

http://www.jorae.cn/fileup/PDF/2010010204.pdf

Accounting for raw material equivalents of traded goods

A comparison of input-output approaches in physical, monetary, and mixed units

https://www.aau.at/wp-content/uploads/2016/11/working-paper-87-web.pdf

Material Flow Accounts and Policy. Data for Sweden 2004

by: Annica Carlsson, Anders Wadeskog, Viveka Palm, Fredrik Kanlén Environmental Accounts, Statistics Sweden,

2006.

http://www.scb.se/statistik/_publikationer/mi1301_2004a01_br_mift0701.pdf

Economy-wide Material Flow Accounts with Hidden Flows for Finland: 1945–2008

Jukka Hoffrén (ed.)

http://www.stat.fi/tup/julkaisut/tiedostot/isbn_978-952-244-233-8.pdf

EXIOBASE
Analysing environmental impacts of the global, interlinked economy

Konstantin Stadler, Richard Wood

Industrial Ecology Programme, NTNU, Norway

2014

http://www.syke.fi/download/noname/%7B3C267869-D6AE-447F-A98D-547C1D2B5819%7D/105511

ESSAYS ON INTERNATIONAL TRADE AND ENVIRONMENT
An Input-Output Analysis

http://repositorio.conicyt.cl/bitstream/handle/10533/179687/MUNOZ_PABLO_2868D.pdf?sequence=1

Using Material Flow Analysis for Sustainable Materials Management: Part of the Equation for Priority Setting

Frederick W. Allen

Priscilla A. Halloran

Angela H. Leith

M. Clare Lindsay

https://digitalcommons.unl.edu/cgi/viewcontent.cgi?referer=&httpsredir=1&article=1113&context=usepapapers

“Supply-Extension versus Use-Extension in Environmentally Extended Input-Output Modelling: Analyzing Physical Flows within the Austrian Economy”

Hanspeter Wieland*1, Nina Eisenmenger2, Dominik Wiedenhofer2, Martin Bruckner1

http://www.gws-os.com/downloads/ioworkshop/IO-Workshop-2017_Wieland_abstract.pdf

A Material Flow Analysis of Phosphorus in Japan
The Iron and Steel Industry as a Major Phosphorus Source

Kazuyo Matsubae-Yokoyama, Hironari Kubo, Kenichi Nakajima,
and Tetsuya Nagasaka

http://greenpi.info/files/articles/gpa_101_wa.pdf

Material Flows and Economic Development
Material Flow Analysis of the Hungarian Economy

http://pure.iiasa.ac.at/id/eprint/6729/1/IR-02-057.pdf

The material footprint of nations

Thomas O. Wiedmanna,b,c,1, Heinz Schandlb,d, Manfred Lenzenc, Daniel Moranc,e, Sangwon Suhf, James Westb, and Keiichiro Kanemotoc

http://www.pnas.org/content/pnas/112/20/6271.full.pdf

Calculation of direct and indirect material inputs by type of raw material and economic activities

Paper presented at the London Group Meeting
19 – 21 June 2006

Karl Schoer

Wiesbaden, July 2006

http://mdgs.un.org/unsd/envaccounting/ceea/archive/MFA/Raw_material_Germany.pdf

Waste Input-Output  (WIO) Table

Shinichiro NAKAMURA and Yasushi KONDO,

Waste Input-Output Analysis: Concepts and Application to Industrial Ecology.

In Series: Eco-Efficiency in Industry and Science,

Vol. 26, Springer, February 2009.

http://www.f.waseda.jp/nakashin/WIO.html

Economy Wide Material Flow Accounting (EW-MFA)

http://data.geus.dk/MICASheetsEditor/document/21e5c517-53b9-4b00-b7a3-55939829824b

Material flow analyses in technosphere and biosphere
– metals, natural resources and chemical products

Viveka Palm

http://www.diva-portal.org/smash/get/diva2:9105/FULLTEXT01.pdf

The UK waste input-output table: Linking waste generation to the UK economy.

Salemdeeb, R., Al-Tabbaa, A. and Reynolds, C.

Waste Management & Research, 34 (10). pp. 1089-1094.

http://eprints.whiterose.ac.uk/105894/13/Re_Main_Document.pdf

Multiregion input / output tables and material footprint accounts session

Discussion of aspects of of MRIO / material footprinting work, and considerations for developing and resource based economies.

James West | Senior experimental scientist
25 May 2016

http://www.switch-asia.eu/fileadmin/user_upload/RPSC/event/23-25May16-Mongolia/24-25May/10_MFand_MRIO_CSIRO_English.pdf

Construction of hybrid Input-Output tables for E3 CGE model calibration and consequences on energy policy analysis

COMBET Emmanuel – CIRED
GHERSI Frédéric – CIRED
LEFEVRE Julien – CIRED
LE TREUT Gaëlle – CIRED

https://www.gtap.agecon.purdue.edu/resources/download/6988.pdf

Prospects and Drivers of Future European Resource Requirements
Evidence from a Multi-National Macroeconomic Simulation Study*

Paper prepared for the final WIOD Conference
Groningen, April 2012
by
Martin Distelkamp, Mark Meyer** and Bernd Meyer

GWS mbH Osnabrueck

http://www.wiod.org/conferences/groningen/Paper_Distelkamp_et_al.pdf

Material Flow Analysis to Evaluate Sustainability in Supply Chains

Haroune Zaghdaoui, Anicia Jaegler, Natacha Gondran, Jairo Montoya-Torres

https://hal-emse.ccsd.cnrs.fr/emse-01633801/file/4189.pdf

Physical and monetary input–output analysis: What makes the difference?

Helga Weisz , Faye Duchin

https://www.peakoil.net/files/Physical%20and%20monetary%20input-output.pdf

Recycling and Remanufacturing in Input-Output Models

Randall W Jackson, West Virginia University
Taelim Choi, Georgia Institute of Technology
Nancey Green Leigh, Georgia Institute of Technology

http://rri.wvu.edu/wp-content/uploads/2012/11/WP2008-4.pdf

The Water Footprint Assessment Manual

http://waterfootprint.org/media/downloads/TheWaterFootprintAssessmentManual_2.pdf

The New Plastics Economy
Rethinking the future of plastics

http://www3.weforum.org/docs/WEF_The_New_Plastics_Economy.pdf

A Comparison of Environmental Extended Input-Output (EEIO) and Process Data in Life Cycle Assessment

https://www.climateearth.com/wp-content/uploads/2017/06/Comparing-Input-Output-and-Process-LCA-Data.CE-form2-LM-edits.pdf

Managing Logistics Flows Through Enterprise Input-Output Models

V. Albino1, A. Messeni Petruzzelli1 and O. G. Okogbaa2

http://cdn.intechopen.com/pdfs/6161/InTech-Managing_logistics_flows_through_enterprise_input_output_models.pdf

Social Metabolism and Accounting Approaches

Module:ECOLECON

Ecological economics

https://proxy.eplanete.net/galleries/broceliande7/social-metabolism-and-accounting-approaches

Input-Output Analysis in Laptop Computer Manufacturing

https://waset.org/publications/9998422/input-output-analysis-in-laptop-computer-manufacturing

IRON, STEEL AND ALUMINIUM IN THE UK: MATERIAL FLOWS AND THEIR
ECONOMIC DIMENSIONS

Final Project Report, March 2004

https://www.surrey.ac.uk/ces/files/pdf/0304_WP_Biffaward_Steel_Al-Final.pdf

A Framework for Sustainable Materials Management

Joseph Fiksel

http://www.eco-nomics.com/images/Framework_for_SMM.pdf

Energy and water conservation synergy in China: 2007–2012

Yi Jina, Xu Tanga,⁎, Cuiyang Fenga, Mikael Höökb

https://www.researchgate.net/profile/Yi_Jin51/publication/320073178_Energy_and_water_conservation_synergy_in_China_2007-2012/links/59cc5c13a6fdcc451d5cf2b5/Energy-and-water-conservation-synergy-in-China-2007-2012.pdf

Contributions of Material and Energy Flow Accounting to Urban Ecosystems Analysis: Case Study Singapore

Niels B. Schulz

http://archive.unu.edu/hq/library/Collection/PDF_files/IAS/IAS-WP136.pdf

A review of recent multi-region input–output models used for consumption-based
emission and resource accounting

Thomas Wiedmann

http://wedocs.unep.org/bitstream/handle/20.500.11822/19433/a_review.pdf?sequence=1&isAllowed=y

Physical Input Output (PIOT) Tables:  Developments and Future

http://iioa.org/conferences/18th/papers/files/35_20100427111_Hoekstra-PIOT.pdf

Materials and energy flows in industry and ecosystem netwoks : life cycle assessment, input-output analysis, material flow analysis, ecological network flow analysis, and their combinations for industrial ecology

Suh, S,

2004

https://openaccess.leidenuniv.nl/handle/1887/8399

Applying Ecological Input‐Output Flow Analysis to Material Flows in Industrial Systems: Part I: Tracing Flows

First published: 08 February 2008

Applying Ecological Input‐Output Flow Analysis to Material Flows in Industrial Systems: Part II: Flow Metrics

First published: 08 February 2008

Local systems, global impacts
Using life cycle assessment to analyse the
potential and constraints of industrial symbioses

rising to global challenges

25 Years of Industrial Ecology

 https://is4ie.org/resources/documents/4/download

Literature study on Industrial Ecology

Gerard Fernandez Gonzalez

 

https://upcommons.upc.edu/bitstream/handle/2117/77035/Final%20version%20-%20Document.pdf?sequence=1&isAllowed=y

 

 

 

 

 

Practical Handbook of MATERIAL FLOW ANALYSIS

Paul H. Brunner and Helmut Rechberger

Handbook of Input-Output Economics in Industrial Ecology


 
edited by Sangwon Suh

Taking Stock of Industrial Ecology

edited by Roland Clift, Angela Druckman

Ecological Input-Output Analysis-Based Sustainability Analysis of Industrial Systems

 

Cristina Piluso and Yinlun Huang*

 

Helen H. Lou

An Extended Model for Tracking Accumulation Pathways of Materials Using Input–Output Tables: Application to Copper Flows in Japan

Ryosuke Yokoi * ID , Jun Nakatani ID and Yuichi Moriguchi
2008

TRACING MATERIAL FLOWS ON INDUSTRIAL SITES

Kálmán KÓSI and András TORMA
2005

 

 

 

Metabolism of Cities

 

https://metabolismofcities.org

 

 

 

 

 

Feasibility assessment of using the substance flow analysis methodology for chemicals information at macro level

 

https://www.eea.europa.eu/publications/technical_report_2007_1/file

 

 

 

Structural Investigation of Aluminum in the US Economy using Network Analysis

Philip Nuss, Wei-Qiang Chen Hajime Ohno, and T.E. Graedel

 

http://philip.nuss.me/wp-content/uploads/2016_SA_Network-Analysis-Aluminum_EST.pdf

 

 

 

 

Economy-wide Material Flow Analysis and Indicators

http://www.umweltgesamtrechnung.at/ms/ugr/ugr_en/ugr_physicalaccounts/ugr_materialflowaccounts/

 

 

 

 

Regional distribution and losses of end-of-life steel throughout
multiple product life cycles—Insights from the global multiregional
MaTrace model

 

Stefan Pauliuka,∗, Yasushi Kondob, Shinichiro Nakamurab, Kenichi Nakajimac

 

https://ac.els-cdn.com/S0921344916302774/1-s2.0-S0921344916302774-main.pdf?_tid=838ffb90-95a9-4f3a-a617-f619f32d4558&acdnat=1531385937_3f722f2c2f71337c47a1024b0c841d16

 

 

 

 

MaTrace: Tracing the Fate of Materials over Time and Across Products in Open-Loop Recycling

Shinichiro Nakamura,*,† Yasushi Kondo,† Shigemi Kagawa,‡ Kazuyo Matsubae,§ Kenichi Nakajima,⊥ and Tetsuya Nagasaka§

https://pubs.acs.org/doi/pdf/10.1021/es500820h

 

 

 

 

 

Tracing China’s energy flow and carbon dioxide flow based on Sankey diagrams

 

Feiyin Wang1,2 • Pengtao Wang1,2 • Xiaomeng Xu1,2 • Lihui Dong1,2 • Honglai Xue1,2 • Shuai Fu1,2 • Yingxu Ji

 

https://www.researchgate.net/profile/Xiaomeng_Xu7/publication/318642022_Tracing_China%27s_energy_flow_and_carbon_dioxide_flow_based_on_Sankey_diagrams/links/5a59cd7f458515450270f982/Tracing-Chinas-energy-flow-and-carbon-dioxide-flow-based-on-Sankey-diagrams.pdf

 

 

 

 

Materials Flow and Sustainability

USGS

 

 

 

Life-cycle assessment

https://en.wikipedia.org/wiki/Life-cycle_assessment

 

 

 

 

LIFE CYCLE ASSESSMENT: PRINCIPLES AND PRACTICE

Scientific Applications International Corporation (SAIC) 11251 Roger Bacon Drive
Reston, VA 20190

 

http://www.epa.gov/nrmrl/lcaccess/pdfs/chapter1_frontmatter_lca101.pdf

 

 

 

 

Life cycle analysis (LCA) and sustainability assessment

 

http://www4.ncsu.edu/~richardv/documents/IntroductiontoLCAAU32013.pdf

Shareholder Capitalism: Rising Market Concentration, Slower Productivity Growth, Rising Inequality, Rising Profits, and Rising Equities Markets

Shareholder Capitalism: Rising Market Concentration, Slower Productivity Growth, Rising Inequality, Rising Profits, and Rising Equities Markets

 

Public traded companies are always under pressure to show earnings growth and sales revenue growth to enhance shareholder value.

 

How do they do it when markets have matured and economy has slowed?

  • Lower Costs
  • Increase Market Share

 

How do then companies lower their costs?

  • Vertical Mergers and Acquisitions
  • Outsourcing (Sourcing parts and components / Intermediate Goods / Inputs from cross border)
  • Offshoring (Shifting Production cross border)
  • Vertical Integration

 

How do then companies increase their market share?

  • Horizontal Mergers and Acquisitions
  • Cross Border Markets Share (Sales in other countries)

 

In the last thirty years, this is exactly what has happened in US economy.

Macro Trends of increase in Outsourcing/Offshoring, Increase in Market Concentration, Oncrease in Inequality, Increase in Corporate Profits, Rising Equity Prices, Slower Productivity Growth, Lower Interest Rates, Low Labor Share, and Capital Share.

Please see my other posts expanding on these issues.

Please note that these forces are continuing and trends will remain on current trajectory.

 

Key Terms:

  • Stakeholder vs Shareholder Capitalism
  • Short Termism
  • Slow Productivity Growth
  • Rising Market Concentration
  • Rising Profits
  • Rising Equities Market
  • Rising Inequality
  • Dupont Ratio Analysis
  • Financial Planning (Micro – Firm Level)
  • Economic Planning (Macro- Aggregate Level)
  • Quarterly Capitalism

 

From SHAREHOLDER CAPITALISM: A SYSTEM IN CRISIS

Our current, highly financialised, form of shareholder capitalism is not just failing to provide new capital for investment, it is actively undermining the ability of listed companies to reinvest their own profits. The stock market has become a vehicle for extracting value from companies, not for injecting it.

No wonder that Andy Haldane, Chief Economist of the Bank of England, recently suggested that shareholder capitalism is ‘eating itself.’1 Corporate governance has become dominated by the need to maximise short-term shareholder returns. At the same time, financial markets have grown more complex, highly intermediated, and similarly shorttermist, with shares increasingly seen as paper assets to be traded rather than long term investments in sound businesses.

This kind of trading is a zero-sum game with no new wealth, let alone social value, created. For one person to win, another must lose – and increasingly, the only real winners appear to be the army of financial intermediaries who control and perpetuate the merry-goround. There is nothing natural or inevitable about the shareholder-owned corporation as it currently exists. Like all economic institutions, it is a product of political and economic choices which can and should be remade if they no longer serve our economy, society, or environment.

Here’s the impact this shareholder model is currently having:
• Economy: Shareholder capitalism is holding back productive investment. Even the Chief Executive of BlackRock, the world’s largest asset manager, has admitted that pressure to keep the share price high means corporate leaders are ‘underinvesting in innovation, skilled workforces or essential capital expenditures.’ 2
• Society: Shareholder capitalism is driving inequality. There is growing evidence that attempts to align executive pay with shareholder value are largely responsible for the ballooning of salaries at the top. The prioritisation of shareholder interests has also contributed to a dramatic decline in UK wages relative to profits, helping to explain the failure of ordinary people’s living standards to rise in line with economic growth.
• Environment: Shareholder capitalism helps to drive environmental destruction. It does this by driving risky shortterm behaviour, such as fossil fuel extraction, which ignores long-term environmental risks.

The idea that shareholder capitalism is the most efficient way to mobilise large amounts of capital is no longer tenable.

We need both to create new models of companies, and implement new ways of organising investment that are fit for building an inclusive, equal, and sustainable economy.

Companies should be explicitly accountable to a mission and a set of interests beyond shareholder returns. Equally, investment must provide long-term capital for socially and environmentally useful projects, and damaging forms of speculation must be restricted.

For most people, our economy simply is not working, and the damaging aspects of shareholder capitalism are at least in part responsible. Reforming shareholder capitalism must not be dismissed as too difficult – the crisis is too urgent for that. We can take the first steps towards a better economic model right now. It’s time to act.

 

 

A Crash Course in Dupont Financial Ratio Analysis

 

  • What happens when economic growth slows ?
  • What happens when profit margins decline ?
  • What happens when Sales growth is limited ?
  • What does lead to Mergers and Acquisitions ?
  • What is the impact of Cost of Capital ?
  • What is EVA (Economic Value Added) ?
  • What is impact of Outsourcing/Offshoring on Financial Ratios ?
  • What is impact of Mergers and Acquisitions on Financial Ratios ?
  • What is impact of Stock Buy Backs on Financial Ratios ?
  • What is impact of Dividends on Financial Ratios ?
  • ROS (Return on Sales)
  • ROE (Return on Equities)
  • ROA (Return on Assets)
  • ROIC (Return on Invested Capital)
  • EVA (Economic Value Added)
  • MVA (Market Value Added)

From The DuPont Equation, ROE, ROA, and Growth

The DuPont Equation

The DuPont equation is an expression which breaks return on equity down into three parts: profit margin, asset turnover, and leverage.

Learning Objectives

Explain why splitting the return on equity calculation into its component parts may be helpful to an analyst

Key Takeaways

Key Points

  • By splitting ROE into three parts, companies can more easily understand changes in their returns on equity over time.
  • As profit margin increases, every sale will bring more money to a company’s bottom line, resulting in a higher overall return on equity.
  • As asset turnover increases, a company will generate more sales per asset owned, resulting in a higher overall return on equity.
  • Increased financial leverage will also lead to an increase in return on equity, since using more debt financing brings on higher interest payments, which are tax deductible.

Key Terms

  • competitive advantage: something that places a company or a person above the competition

The DuPont Equation

image

DuPont Model: A flow chart representation of the DuPont Model.

The DuPont equation is an expression which breaks return on equity down into three parts. The name comes from the DuPont Corporation, which created and implemented this formula into their business operations in the 1920s. This formula is known by many other names, including DuPont analysis, DuPont identity, the DuPont model, the DuPont method, or the strategic profit model.

The DuPont Equation: In the DuPont equation, ROE is equal to profit margin multiplied by asset turnover multiplied by financial leverage.

Under DuPont analysis, return on equity is equal to the profit margin multiplied by asset turnover multiplied by financial leverage. By splitting ROE (return on equity) into three parts, companies can more easily understand changes in their ROE over time.

Components of the DuPont Equation: Profit Margin

Profit margin is a measure of profitability. It is an indicator of a company’s pricing strategies and how well the company controls costs. Profit margin is calculated by finding the net profit as a percentage of the total revenue. As one feature of the DuPont equation, if the profit margin of a company increases, every sale will bring more money to a company’s bottom line, resulting in a higher overall return on equity.

Components of the DuPont Equation: Asset Turnover

Asset turnover is a financial ratio that measures how efficiently a company uses its assets to generate sales revenue or sales income for the company. Companies with low profit margins tend to have high asset turnover, while those with high profit margins tend to have low asset turnover. Similar to profit margin, if asset turnover increases, a company will generate more sales per asset owned, once again resulting in a higher overall return on equity.

Components of the DuPont Equation: Financial Leverage

Financial leverage refers to the amount of debt that a company utilizes to finance its operations, as compared with the amount of equity that the company utilizes. As was the case with asset turnover and profit margin, Increased financial leverage will also lead to an increase in return on equity. This is because the increased use of debt as financing will cause a company to have higher interest payments, which are tax deductible. Because dividend payments are not tax deductible, maintaining a high proportion of debt in a company’s capital structure leads to a higher return on equity.

The DuPont Equation in Relation to Industries

The DuPont equation is less useful for some industries, that do not use certain concepts or for which the concepts are less meaningful. On the other hand, some industries may rely on a single factor of the DuPont equation more than others. Thus, the equation allows analysts to determine which of the factors is dominant in relation to a company’s return on equity. For example, certain types of high turnover industries, such as retail stores, may have very low profit margins on sales and relatively low financial leverage. In industries such as these, the measure of asset turnover is much more important.

High margin industries, on the other hand, such as fashion, may derive a substantial portion of their competitive advantage from selling at a higher margin. For high end fashion and other luxury brands, increasing sales without sacrificing margin may be critical. Finally, some industries, such as those in the financial sector, chiefly rely on high leverage to generate an acceptable return on equity. While a high level of leverage could be seen as too risky from some perspectives, DuPont analysis enables third parties to compare that leverage with other financial elements that can determine a company’s return on equity.

ROE and Potential Limitations

Return on equity measures the rate of return on the ownership interest of a business and is irrelevant if earnings are not reinvested or distributed.

Learning Objectives

Calculate a company’s return on equity

Key Takeaways

Key Points

  • Return on equity is an indication of how well a company uses investment funds to generate earnings growth.
  • Returns on equity between 15% and 20% are generally considered to be acceptable.
  • Return on equity is equal to net income (after preferred stock dividends but before common stock dividends) divided by total shareholder equity (excluding preferred shares ).
  • Stock prices are most strongly determined by earnings per share (EPS) as opposed to return on equity.

Key Terms

  • fundamental analysis: An analysis of a business with the goal of financial projections in terms of income statement, financial statements and health, management and competitive advantages, and competitors and markets.

Return On Equity

Return on equity (ROE) measures the rate of return on the ownership interest or shareholders’ equity of the common stock owners. It is a measure of a company’s efficiency at generating profits using the shareholders’ stake of equity in the business. In other words, return on equity is an indication of how well a company uses investment funds to generate earnings growth. It is also commonly used as a target for executive compensation, since ratios such as ROE tend to give management an incentive to perform better. Returns on equity between 15% and 20% are generally considered to be acceptable.

The Formula

Return on equity is equal to net income, after preferred stock dividends but before common stock dividends, divided by total shareholder equity and excluding preferred shares.

Return On Equity: ROE is equal to after-tax net income divided by total shareholder equity.

Expressed as a percentage, return on equity is best used to compare companies in the same industry. The decomposition of return on equity into its various factors presents various ratios useful to companies in fundamental analysis.

ROE Broken Down: This is an expression of return on equity decomposed into its various factors.

The practice of decomposing return on equity is sometimes referred to as the “DuPont System. ”

Potential Limitations of ROE

Just because a high return on equity is calculated does not mean that a company will see immediate benefits. Stock prices are most strongly determined by earnings per share (EPS) as opposed to return on equity. Earnings per share is the amount of earnings per each outstanding share of a company’s stock. EPS is equal to profit divided by the weighted average of common shares.

Earnings Per Share: EPS is equal to profit divided by the weighted average of common shares.

The true benefit of a high return on equity comes from a company’s earnings being reinvested into the business or distributed as a dividend. In fact, return on equity is presumably irrelevant if earnings are not reinvested or distributed.

Assessing Internal Growth and Sustainability

Sustainable– as opposed to internal– growth gives a company a better idea of its growth rate while keeping in line with financial policy.

Learning Objectives

Calculate a company’s internal growth and sustainability ratios

Key Takeaways

Key Points

  • The internal growth rate is a formula for calculating the maximum growth rate a firm can achieve without resorting to external financing.
  • Sustainable growth is defined as the annual percentage of increase in sales that is consistent with a defined financial policy.
  • Another measure of growth, the optimal growth rate, assesses sustainable growth from a total shareholder return creation and profitability perspective, independent of a given financial strategy.

Key Terms

  • retention: The act of retaining; something retained
  • retention ratio: retained earnings divided by net income
  • sustainable growth rate: the optimal growth from a financial perspective assuming a given strategy with clear defined financial frame conditions/ limitations

Internal Growth and Sustainability

The true benefit of a high return on equity arises when retained earnings are reinvested into the company’s operations. Such reinvestment should, in turn, lead to a high rate of growth for the company. The internal growth rate is a formula for calculating maximum growth rate that a firm can achieve without resorting to external financing. It’s essentially the growth that a firm can supply by reinvesting its earnings. This can be described as (retained earnings)/(total assets ), or conceptually as the total amount of internal capital available compared to the current size of the organization.

We find the internal growth rate by dividing net income by the amount of total assets (or finding return on assets ) and subtracting the rate of earnings retention. However, growth is not necessarily favorable. Expansion may strain managers’ capacity to monitor and handle the company’s operations. Therefore, a more commonly used measure is the sustainable growth rate.

Sustainable growth is defined as the annual percentage of increase in sales that is consistent with a defined financial policy, such as target debt to equity ratio, target dividend payout ratio, target profit margin, or target ratio of total assets to net sales.

We find the sustainable growth rate by dividing net income by shareholder equity (or finding return on equity) and subtracting the rate of earnings retention. While the internal growth rate assumes no financing, the sustainable growth rate assumes you will make some use of outside financing that will be consistent with whatever financial policy being followed. In fact, in order to achieve a higher growth rate, the company would have to invest more equity capital, increase its financial leverage, or increase the target profit margin.

Optimal Growth Rate

Another measure of growth, the optimal growth rate, assesses sustainable growth from a total shareholder return creation and profitability perspective, independent of a given financial strategy. The concept of optimal growth rate was originally studied by Martin Handschuh, Hannes Lösch, and Björn Heyden. Their study was based on assessments on the performance of more than 3,500 stock-listed companies with an initial revenue of greater than 250 million Euro globally, across industries, over a period of 12 years from 1997 to 2009.

image

Revenue Growth and Profitability: ROA, ROS and ROE tend to rise with revenue growth to a certain extent.

Due to the span of time included in the study, the authors considered their findings to be, for the most part, independent of specific economic cycles. The study found that return on assets, return on sales and return on equity do in fact rise with increasing revenue growth of between 10% to 25%, and then fall with further increasing revenue growth rates. Furthermore, the authors attributed this profitability increase to the following facts:

  1. Companies with substantial profitability have the opportunity to invest more in additional growth, and
  2. Substantial growth may be a driver for additional profitability, whether by attracting high performing young professionals, providing motivation for current employees, attracting better business partners, or simply leading to more self-confidence.

However, according to the study, growth rates beyond the “profitability maximum” rate could bring about circumstances that reduce overall profitability because of the efforts necessary to handle additional growth (i.e., integrating new staff, controlling quality, etc).

Dividend Payments and Earnings Retention

The dividend payout and retention ratios offer insight into how much of a firm’s profit is distributed to shareholders versus retained.

Learning Objectives

Calculate a company’s dividend payout and retention ratios

Key Takeaways

Key Points

  • Many corporations retain a portion of their earnings and pay the remainder as a dividend.
  • Dividends are usually paid in the form of cash, store credits, or shares in the company.
  • Cash dividends are a form of investment income and are usually taxable to the recipient in the year that they are paid.
  • Dividend payout ratio is the fraction of net income a firm pays to its stockholders in dividends.
  • Retained earnings can be expressed in the retention ratio.

Key Terms

  • stock split: To issue a higher number of new shares to replace old shares. This effectively increases the number of shares outstanding without changing the market capitalization of the company.

Dividend Payments and Earnings Retention

Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. On the other hand, retained earnings refers to the portion of net income which is retained by the corporation rather than distributed to its owners as dividends. Similarly, if the corporation takes a loss, then that loss is retained and called variously retained losses, accumulated losses or accumulated deficit. Retained earnings and losses are cumulative from year to year with losses offsetting earnings. Many corporations retain a portion of their earnings and pay the remainder as a dividend.

A dividend is allocated as a fixed amount per share. Therefore, a shareholder receives a dividend in proportion to their shareholding. Retained earnings are shown in the shareholder equity section in the company’s balance sheet –the same as its issued share capital.

Public companies usually pay dividends on a fixed schedule, but may declare a dividend at any time, sometimes called a “special dividend” to distinguish it from the fixed schedule dividends. Dividends are usually paid in the form of cash, store credits (common among retail consumers’ cooperatives), or shares in the company (either newly created shares or existing shares bought in the market). Further, many public companies offer dividend reinvestment plans, which automatically use the cash dividend to purchase additional shares for the shareholder.

Cash dividends (most common) are those paid out in currency, usually via electronic funds transfer or a printed paper check. Such dividends are a form of investment income and are usually taxable to the recipient in the year they are paid. This is the most common method of sharing corporate profits with the shareholders of the company. For each share owned, a declared amount of money is distributed. Thus, if a person owns 100 shares and the cash dividend is $0.50 per share, the holder of the stock will be paid $50. Dividends paid are not classified as an expense but rather a deduction of retained earnings. Dividends paid do not show up on an income statement but do appear on the balance sheet.

image

Example Balance Sheet: Retained earnings can be found on the balance sheet, under the owners’ (or shareholders’) equity section.

Stock dividends are those paid out in the form of additional stock shares of the issuing corporation or another corporation (such as its subsidiary corporation). They are usually issued in proportion to shares owned (for example, for every 100 shares of stock owned, a 5% stock dividend will yield five extra shares). If the payment involves the issue of new shares, it is similar to a stock split in that it increases the total number of shares while lowering the price of each share without changing the market capitalization, or total value, of the shares held.

Dividend Payout and Retention Ratios

Dividend payout ratio is the fraction of net income a firm pays to its stockholders in dividends:

The part of the earnings not paid to investors is left for investment to provide for future earnings growth. These retained earnings can be expressed in the retention ratio. Retention ratio can be found by subtracting the dividend payout ratio from one, or by dividing retained earnings by net income.

Dividend Payout Ratio: The dividend payout ratio is equal to dividend payments divided by net income for the same period.

Relationships between ROA, ROE, and Growth

Return on assets is a component of return on equity, both of which can be used to calculate a company’s rate of growth.

Learning Objectives

Discuss the different uses of the Return on Assets and Return on Assets ratios

Key Takeaways

Key Points

  • Return on equity measures the rate of return on the shareholders ‘ equity of common stockholders.
  • Return on assets shows how profitable a company’s assets are in generating revenue.
  • In other words, return on assets makes up two-thirds of the DuPont equation measuring return on equity.
  • Capital intensity is the term for the amount of fixed or real capital present in relation to other factors of production. Rising capital intensity pushes up the productivity of labor.

Key Terms

  • return on common stockholders’ equity: a fiscal year’s net income (after preferred stock dividends but before common stock dividends) divided by total equity (excluding preferred shares), expressed as a percentage
  • quantitatively: With respect to quantity rather than quality.

Return On Assets Versus Return On Equity

In review, return on equity measures the rate of return on the ownership interest (shareholders’ equity) of common stockholders. Therefore, it shows how well a company uses investment funds to generate earnings growth. Return on assets shows how profitable a company’s assets are in generating revenue. Return on assets is equal to net income divided by total assets.

Return On Assets: Return on assets is equal to net income divided by total assets.

This percentage shows what the company can do with what it has (i.e., how many dollars of earnings they derive from each dollar of assets they control). This is in contrast to return on equity, which measures a firm’s efficiency at generating profits from every unit of shareholders’ equity. Return on assets is, however, a vital component of return on equity, being an indicator of how profitable a company is before leverage is considered. In other words, return on assets makes up two-thirds of the DuPont equation measuring return on equity.

ROA, ROE, and Growth

In terms of growth rates, we use the value known as return on assets to determine a company’s internal growth rate. This is the maximum growth rate a firm can achieve without resorting to external financing. We use the value for return on equity, however, in determining a company’s sustainable growth rate, which is the maximum growth rate a firm can achieve without issuing new equity or changing its debt-to-equity ratio.

Capital Intensity and Growth

Return on assets gives us an indication of the capital intensity of the company. “Capital intensity” is the term for the amount of fixed or real capital present in relation to other factors of production, especially labor. The underlying concept here is how much output can be procured from a given input (assets!). The formula for capital intensity is below:

Capital Intensity=Total AssetsSales

The use of tools and machinery makes labor more effective, so rising capital intensity pushes up the productivity of labor. While companies that require large initial investments will generally have lower return on assets, it is possible that increased productivity will provide a higher growth rate for the company. Capital intensity can be stated quantitatively as the ratio of the total money value of capital equipment to the total potential output. However, when we adjust capital intensity for real market situations, such as the discounting of future cash flows, we find that it is not independent of the distribution of income. In other words, changes in the retention or dividend payout ratios can lead to changes in measured capital intensity.

 

 

1280px-DuPontModelEng.svg

Please see my related posts:

Rising Market Concentration and Declining Business Investments in the USA – Update June 2018

Why do Firms buyback their Shares? Causes and Consequences.

FDI vs Outsourcing: Extending Boundaries or Extending Network Chains of Firms

Trading Down: NAFTA, TPP, TATIP and Economic Globalization

On Inequality of Wealth and Income – Causes and Consequences

Rising Profits, Rising Inequality, and Rising Industry Concentration in the USA

Low Interest Rates and Business Investments : Update August 2017

Low Interest Rates and Monetary Policy Effectiveness

Low Interest Rates and Banks’ Profitability : Update July 2017

Short term Thinking in Investment Decisions of Businesses and Financial Markets

Mergers and Acquisitions – Long Term Trends and Waves

Business Investments and Low Interest Rates

The Decline in Long Term Real Interest Rates

Low Interest Rates and Banks Profitability: Update – December 2016

 

 Key Sources of Research:

 

 

 

The DuPont Equation, ROE, ROA, and Growth

https://courses.lumenlearning.com/boundless-finance/chapter/the-dupont-equation-roe-roa-and-growth/

 

 

Short-Termism in business: causes, mechanisms and consequences

EY Poland Report

 

https://www.ey.com/Publication/vwLUAssets/EY_Poland_Report/%24FILE/Short-termism_raport_EY.pdf

 

 

Shareholders vs Stakeholders Capitalism

Fabian Brandt

Goethe University

Konstantinos Georgiou

University of Pennsylvania

 

https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1002&context=fisch_2016

 

 

Hedrick Smith Speaks to the Community about Who Stole the American Dream.

 

http://nhlabornews.com/2013/10/hedrick-smith-speaks-to-the-community-about-who-stole-the-american-dream/

 

 

Let’s Talk About “Maximizing Shareholder Value”

https://www.pragcap.com/lets-talk-about-maximizing-shareholder-value/

 

 

SHAREHOLDER CAPITALISM: A SYSTEM IN CRISIS

 

New Economics Foundation

 

https://neweconomics.org/uploads/files/NEF_SHAREHOLDER-CAPITALISM_E_latest.pdf

 

 

 

THE HISTORICAL CONTEXT OF SHAREHOLDER VALUE CAPITALISM

 

Mark S. Mizruchi and Howard Kirneldorf

 

https://pdfs.semanticscholar.org/63d9/191bbc2b82f351633c7379deea7b9ccad0e9.pdf

 

 

Shareholder capitalism on trial

 

By Robert J. Samuelson

 

http://www.law.harvard.edu/programs/corp_gov/MediaMentions/03-19-15_WashingtonPost.pdf

 

 

 

The real business of business

McKinsey

 

https://www.mckinsey.com/~/media/mckinsey/dotcom/client_service/Corporate%20Finance/MoF/Issue%2053/MoF53_The_real_business_of_business.ashx

 

 

 

Managers and Market Capitalism

 

Rebecca Henderson Karthik Ramanna

HBR

 

https://www.hbs.edu/faculty/conferences/2013-sustainability-and-corporation/Documents/Henderson_Ramanna___Managers_and_Market_Capitalism___March_2013.pdf

 

 

The Embedded Firm: Corporate Governance, Labor, and Finance Capitalism

Peer Zumbansen

Cynthia A. Williams

 

http://digitalcommons.osgoode.yorku.ca/cgi/viewcontent.cgi?article=1056&context=clpe

 

 

 

 

Andrew G Haldane: Who owns a company?

Speech by Mr Andrew G Haldane,

Executive Director and Chief Economist of the Bank of England,

at the University of Edinburgh Corporate Finance Conference, Edinburgh,

22 May 2015.

 

https://www.bis.org/review/r150811a.pdf

 

 

 

 

Capitalism for the Long Term

MARCH 2011
HBR

The Short Long

 

Speech by
Andrew G Haldane, Executive Director, Financial Stability, and Richard Davies

29th Societé Universitaire Europeene de Recherches Financieres Colloquium: New Paradigms in Money and Finance?

Brussels

May 2011

 

https://www.bankofengland.co.uk/-/media/boe/files/speech/2011/the-short-long-speech-by-andrew-haldane

 

 

 

 

Is short-termism wrecking the economy?

Redefining capitalism

By Eric Beinhocker and Nick Hanauer

Fast finance and slow growth

 

Andy Haldane

http://progressive-policy.net/2015/09/fast-finance-and-slow-growth/

 

Beyond Shareholder Value

The reasons and choices for corporate governance reform

https://www.tuc.org.uk/sites/default/files/BSV.pdf

 

 

AN ECONOMY FOR THE 99%

It’s time to build a human economy that benefits everyone, not just the privileged few

OXFAM

 

https://www.oxfam.org/sites/www.oxfam.org/files/file_attachments/bp-economy-for-99-percent-160117-en.pdf

 

 

Short-Termism

By Douglas K. Chia

 

https://www.law.columbia.edu/sites/default/files/microsites/millstein-center/files/10Anniversary/01181_millstein_10th_anniversary_essay_2_chia_v2.pdf

 

 

 

The Future of Finance

THE LSE REPORT

 

http://www.lse.ac.uk/fmg/assets/documents/paul-woolley-centre/articles-of-general-interest/future-of-finance-chapter-3.pdf

 

 

 

Is Short-Term Behavior Jeopardizing the Future Prosperity of Business?

 

http://www.wlrk.com/docs/IsShortTermBehaviorJeopardizingTheFutureProsperityOfBusiness_CEOStrategicImplications.pdf

 

 

 

 

How Effective Capital Regulation can Help Reduce the Too‐Big‐To‐Fail Problem

Anat Admati

Stanford University

 

http://bankersnewclothes.com/wp-content/uploads/2016/04/Minn-Fed-combined.pdf

 

 

 

Business School’s Worst Idea: Why the “Maximize Shareholder Value” Theory Is Bogus

Yves Smith

http://evonomics.com/maximize-shareholder-value-theory-yves-smith/

 

 

 

When Shareholder Capitalism Came to Town

The American Prospect

http://prospect.org/article/when-shareholder-capitalism-came-town

 

 

 

Competition Conference 2018

What’s the Evidence for Strengthening Competition Policy?

Boston University

July 2018

http://sites.bu.edu/tpri/competition-conference-2018/

 

 

 

Market Concentration

Issues paper by the Secretariat
6-8 June 2018

This document was prepared by the OECD Secretariat to serve as an issues paper for the hearing on market concentration taking place at the 129th meeting of the OECD Competition Committee on 6-8 June 2018

https://one.oecd.org/document/DAF/COMP/WD(2018)46/en/pdf

 

 

 

 

Monopoly’s New Era

In today’s economy, many industries can’t be analyzed through the lens of competition.

Chazen Global Insights
May 13, 2016

 

https://www8.gsb.columbia.edu/articles/chazen-global-insights/monopoly-s-new-era

 

 

 

Market power in the U.S. economy today

Washington Center for Equitable Growth

http://equitablegrowth.org/research-analysis/market-power-in-the-u-s-economy-today/

 

 

 

Don’t Panic: A Guide to Claims of Increasing Concentration

Gregory J. Werden

Luke Froeb

 

Date Written: April 5, 2018

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3156912

 

 

 

Market concentration

OECD

http://www.oecd.org/daf/competition/market-concentration.htm

 

 

 

 

A Firm-Level Perspective on the Role of Rents in the Rise in Inequality

Jason Furman Peter Orszag1

October 16, 2015

http://gabriel-zucman.eu/files/teaching/FurmanOrszag15.pdf

 

 

 

Do the Productivity Slowdown and the Inequality Increase Have a Common Cause?

Jason Furman (joint work with Peter Orszag)

Peterson Institute for International Economics
Washington, DC
November 9, 2017

https://piie.com/system/files/documents/4-1furman20171109ppt.pdf

 

 

 

Is There a Connection Between Market Concentration and the Rise in Inequality?

https://promarket.org/connection-market-concentration-rise-inequality/

 

 

 

Concentrating on the Fall of the Labor Share

David; Dorn, David; Katz, Lawrence F; Patterson, Christina; Reenen, John Van

https://pdfs.semanticscholar.org/cbc2/b8d7a989cab4b76e7fe795bf4572dbcdd0bc.pdf

 

 

 

 

Business Investment Spending Slowdown

April 9, 2018

FAS Congressional Research Services

Marc Labonte

https://fas.org/sgp/crs/misc/IN10882.pdf

 

 

 

 

Market Power and Inequality: The Antitrust Counterrevolution and Its Discontents

Lina Khan and Sandeep Vaheesan

http://harvardlpr.com/wp-content/uploads/2017/02/HLP110.pdf

 

 

 

Five Myths about Economic Inequality in America

By Michael D. Tanner
September 7, 2016

 

Cato Institiute

https://www.cato.org/publications/policy-analysis/five-myths-about-economic-inequality-america

 

 

 

 

Is the US Public Corporation in Trouble?

Kathleen M. Kahle and René M. Stulz

https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.31.3.67

 

 

 

Declining Labor and Capital Shares

Simcha Barkai

http://www.eco.uc3m.es/~mkredler/ReadGr/FeijooOnBarkai17.pdf

 

 

 

Growing Productivity without Growing Wages: The Micro-Level Anatomy of the Aggregate Labor Share Decline

Kehrig, Matthias; Vincent, Nicolas

(2017)

https://www.econstor.eu/bitstream/10419/161893/1/cesifo1_wp6454.pdf

 

 

 

 

Declining Competition and Investment in the U.S.

Germán Gutiérrez† and Thomas Philippon‡

March 2017

https://www8.gsb.columbia.edu/faculty-research/sites/faculty-research/files/finance/Macro%20Lunch/IK_Comp_v1.pdf

 

 

 

ACCOUNTING FOR RISING CORPORATE PROFITS: INTANGIBLES OR REGULATORY
RENTS?

James Bessen

Boston University School of Law

November 9, 2016

https://www.bu.edu/law/files/2016/11/Accounting-for-Rising-Corporate-Profits.pdf

 

 

 

 

Kaldor and Piketty’s facts: The rise of monopoly power in the United States

Gauti Eggertsson
Jacob A. Robbins
Ella Getz Wold

Feb 2018

https://equitablegrowth.org/wp-content/uploads/2018/02/02052018-WP-kaldor-piketty-monopoly-power.pdf

 

 

 

 

Is There an Investment Gap in Advanced Economies? If So, Why?

Robin Döttling

German Gutierrez Gallardo

Thomas Philippon

 

Date Written: July 2017

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3002796

 

 

 

 

Antitrust in a Time of Populism

Professor Carl Shapiro

CRESSE 2017 Heraklion – Crete, Greece

2 July 2017
http://www.cresse.info/uploadfiles/2017_Key_SHAPIRO.pdf

 

 

 

The Incredible Shrinking Universe of Stocks

The Causes and Consequences of Fewer U.S. Equities

Credit Suisse

March 2917

https://www.cmgwealth.com/wp-content/uploads/2017/03/document_1072753661.pdf

 

 

 

Declining Competition and Investment in the U.S

German Gutierrez Gallardo

Thomas Philippon

 

Date Written: December 2017

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3095586

 

 

 

 

The Fall and Rise of Market Power in Europe

John P. Weche and Achim Wambach

https://ub-madoc.bib.uni-mannheim.de/44598/1/dp18003.pdf

https://www.econstor.eu/bitstream/10419/173383/1/1011811367.pdf

 

 

 

 

On the Formation of Capital and Wealth: IT, Monopoly Power and Rising Inequality

Mordecai Kurz,

Stanford University

2018

https://pdfs.semanticscholar.org/6564/e50bf8be5c75f1cca2e9e3d4afa4b8b8ac84.pdf

 

 

 

 

Appendix for \Investment-less Growth: An Empirical Investigation”

 

German Gutierrez and Thomas Philippony

March 2018

https://www.brookings.edu/wp-content/uploads/2017/09/gutierrezappendixfa17bpea.pdf

 

 

 

 

WP 18-4 Slower Productivity and Higher Inequality: Are They Related?

Jason Furman and Peter Orszag

June 2018

PIIE

https://piie.com/system/files/documents/wp18-4.pdf

 

 

 

 

THE FUTURE OF PRODUCTIVITY

OECD

2015

 

https://www.oecd.org/eco/OECD-2015-The-future-of-productivity-book.pdf

 

 

 

 

OECD Study on the Future of Productivity

Video

PIIE

 

 

 

 

 

A productivity perspective on the future of growth

By James Manyika, Jaana Remes, and Jonathan Woetzel
McKinsey
2014

https://www.mckinsey.com/featured-insights/employment-and-growth/a-productivity-perspective-on-the-future-of-growth

 

 

 

 

The future of productivity in manufacturing

Anne Green, Terence Hogarth, Erika Kispeter, David Owen

Peter Glover

February 2016

https://warwick.ac.uk/fac/soc/ier/research/strategic_lmi/ier_2016_manufacturing_sector_productivity_report.pdf

 

 

 

 

THE PRODUCTIVITY OUTLOOK: PESSIMISTS VERSUS OPTIMISTS

August 2016

Zia Qureshi
at the Brookings Institution
https://www.brookings.edu/wp-content/uploads/2016/08/productivity-outlook.pdf

 

 

 

The Slowdown in Productivity Growth: A View from International Trade

Development Issues No. 11

UN

April 2017

https://www.un.org/development/desa/dped/wp-content/uploads/sites/45/publication/dsp_policy_11.pdf

 

 

 

 

Five Puzzles in the Behavior of Productivity, Investment, and Innovation

Robert J. Gordon

NBER

August 2004

http://www.nber.org/papers/w10660

 

 

 

 

AN OECD AGENDA ON ISSUES IN PRODUCTIVITY MEASUREMENT

Paul Schreyer

OECD Statistics Directorate
2016 World KLEMS Conference
Madrid, May 23-24 2016

http://www.worldklems.net/conferences/worldklems2016/worldklems2016_Schreyer_slides.pdf

 

 

 

THE FUTURE OF PRODUCTIVITY

Chiara Criscuolo
Directorate for Science, Technology and Innovation OECD

Understanding the Great recession: from micro to macro
Bank of England
London | 24 September 2015

https://www.ifs.org.uk/uploads/Presentations/Understanding%20the%20recession_230915/CCriscuolo.pdf

 

 

 

 

 

Industry 4.0

The future of Productivity and Growth in Manufacturing Industries

BCG

https://www.zvw.de/media.media.72e472fb-1698-4a15-8858-344351c8902f.original.pdf

 

 

 

 

The waning of productivity growth

Raymond Van der Putten

http://economic-research.bnpparibas.com/Views/DisplayPublication.aspx?type=document&IdPdf=29178

 

 

The Impact of Robots on Productivity, Employment and Jobs

A positioning paper by the International Federation of Robotics

April 2017

https://ifr.org/img/office/IFR_The_Impact_of_Robots_on_Employment.pdf

 

 

 

 

The fall in productivity growth: causes and implications

Speech given by Silvana Tenreyro, External MPC Member, Bank of England

Peston Lecture Theatre, Queen Mary University of London

15 January 2018

https://www.bankofengland.co.uk/-/media/boe/files/speech/2018/the-fall-in-productivity-growth-causes-and-implications

 

 

 

Artificial Intelligence, Automation, and the Economy

Science and Technology Council

Executive Office of the President

December 2016

https://www.whitehouse.gov/sites/whitehouse.gov/files/images/EMBARGOED%20AI%20Economy%20Report.pdf

 

 

 

 

Long-term growth and productivity projections in advanced countries

Gilbert Cette, Rémy Lecat & Carole Ly-Marin

Working Paper #617

December 2016

Bank of France

http://www.longtermproductivity.com/download/DT617.pdf

 

 

 

ARE WE APPROACHING AN ECONOMIC SINGULARITY?
INFORMATION TECHNOLOGY AND THE FUTURE OF ECONOMIC GROWTH

By
William D. Nordhaus

September 2015

https://cowles.yale.edu/sites/default/files/files/pub/d20/d2021.pdf

 

 

 

Challenges for the Future of Chinese Economic Growth

Jane Haltmaier

Federal Reseve Bank USA

2013

https://www.federalreserve.gov/pubs/ifdp/2013/1072/ifdp1072.pdf

 

 

 

Innovation, research and the UK’s productivity crisis.

Richard Jones

SPERI Paper No. 28

http://speri.dept.shef.ac.uk/wp-content/uploads/2016/04/SPERI-Paper-28-Innovation-research-and-the-UK-productivity-crisis.pdf

 

 

 

Think Like an Enterprise: Why Nations Need Comprehensive Productivity Strategies

BY ROBERT D. ATKINSON

MAY 2016

http://www2.itif.org/2016-think-like-an-enterprise.pdf

 

 

 

Solving the productivity puzzle

By Jaana Remes, James Manyika, Jacques Bughin, Jonathan Woetzel, Jan Mischke, and Mekala Krishnan

McKinsey

Feb 2018

https://www.mckinsey.com/featured-insights/meeting-societys-expectations/solving-the-productivity-puzzle

 

 

 

Solving the productivity puzzle: the role of demand and the promise of digitization

DR. JAN MISCHKE

McKinsey Global Institute

May 2018

http://bruegel.org/wp-content/uploads/2018/05/20180523-MGI_Solving-the-productivity-puzzle_Bruegel.pdf

 

 

Worried about Concentration? Then Worry about Rent-Seeking

By Brink Lindsey and Steven Teles
This article appeared on ProMarket on April 18, 2017.

 

https://www.cato.org/publications/commentary/worried-about-concentration-then-worry-about-rent-seeking

 

 

 

Online platforms, distortion of markets, social impacts and freedom of expression

Oxford Centre for Competition law and policy

22 May 2017

Tim Cowen.

https://www.iicom.org/images/iic/events/regional-local/Europe/20Sep2017/Tim_Cowen_Oxford_Centre_for_Competition_Law_and_Policy_speech_22May2017—updated-21.09.2017.pdf

 

 

 

What’s Behind the Increase in Inequality?

By Eileen Appelbaum*

September 2017

http://cepr.net/images/stories/reports/whats-behind-the-increase-in-inequality-2017-09.pdf

 

 

 

A NATIONAL COMPETITION POLICY: UNPACKING THE PROBLEM OF DECLINING COMPETITION AND SETTING PRIORITIES MOVING FORWARD

American Antitrust Institute

September 28, 2016

http://www.antitrustinstitute.org/sites/default/files/AAINatlCompPolicy.pdf

 

 

 

AI and the Economy

Jason Furman
Harvard Kennedy School
Cambridge, MA

Robert Seamans
NYU Stern School of Business
New York, NY

29 May 2018

http://www.nber.org/chapters/c14099.pdf

 

 

 

The United States and Europe: Short-Run Divergence and Long-Run Challenges

Jason Furman
Chairman, Council of Economic Advisers

Remarks at Bruegel
Brussels, Belgium
May 11, 2016

http://bruegel.org/wp-content/uploads/2016/05/The-United-States-and-Europe-Short-Run-Divergence-and-Long-Run-Challenges-Jason-Furman.pdf

 

 

 

 

Business Investment Spending Slowdown

April 9, 2018

Marc Labonte

CRS Insights

https://fas.org/sgp/crs/misc/IN10882.pdf

 

 

 

 

ECONOMIC REPORT OF THE PRESIDENT

Together With
THE ANNUAL REPORT
of the
COUNCIL OF ECONOMIC ADVISERS

Feb 2016

https://www.gpo.gov/fdsys/pkg/ERP-2016/pdf/ERP-2016.pdf

 

 

Keynote Remarks of Commissioner Terrell McSweeny

Washington Center for Equitable Growth

Making Antitrust Work for the 21st Century

Washington, DC

October 6, 2016
https://www.ftc.gov/system/files/documents/public_statements/988713/mcsweeny_-_keynote_remarks_at_equitable_growth_10-6-16.pdf

 

 

Wal-Mart: A Progressive Success Story

Jason Furman

November 28, 2005

https://www.mackinac.org/archives/2006/walmart.pdf

 

 

“America Without Entrepreneurs: The Consequences of Dwindling Startup Activity”

Testimony before
The Committee on Small Business and Entrepreneurship
United States Senate
June 29, 2016

John W. Lettieri
Cofounder
& Senior Director for Policy and Strategy
Economic Innovation Group

https://www.sbc.senate.gov/public/_cache/files/0/d/0d8d1a51-ee1d-4f83-b740-515e46e861dc/7F75741C1A2E6182E1A5D21B61D278F3.lettieri-testimony.pdf

 

 

 

 

A reading list on market power, superstar firms, and inequality

BLOG

http://www.beyondthetimes.com/2017/08/16/a-partial-reading-list-on-market-power-superstar-firms-and-inequality/

 

 

 

 

 

Productivity Growth in the Advanced Economies:The Past, the Present, and Lessons for the Futures

Jason Furman

Chairman, Council of Economic Advisers

July 2015

https://obamawhitehouse.archives.gov/sites/default/files/docs/20150709_productivity_advanced_economies_piie_slides.pdf

 

 

 

 

 

Forms and sources of inequality in the United States

Jason Furman

17 March 2016

VOXEU

 

https://voxeu.org/article/forms-and-sources-inequality-united-states

 

 

 

 

Business Investment in the United States: Facts, Explanations, Puzzles, and Policies

Jason Furman
Chairman, Council of Economic Advisers
Progressive Policy Ins9tute

September 30, 2015

http://www.progressivepolicy.org/wp-content/uploads/2015/09/2015.09.30-Jason-Furman_Business-Investment-in-US-Facts-Explanations-Puzzles-Policies.pdf

 

 

 

 

Can Tax Reform Get Us to 3 Percent Growth?

Jason Furman
Harvard Kennedy School & Peterson Institute for International Economics

New York, NY
November 3, 2017

https://piie.com/system/files/documents/furman20171103ppt.pdf

 

 

 

 

Structural Challenges and Opportunities in the U.S. Economy

Jason Furman
Chairman, Council of Economic Advisers

London School of Economics
November 5, 2014

http://www.lse.ac.uk/assets/richmedia/channels/publicLecturesAndEvents/transcripts/20141105_1830_structuralOpportunitiesUSEconomy_tr.pdf

 

 

Is This Time Different? The Opportunities and Challenges of Artificial Intelligence

Jason Furman
Chairman, Council of Economic Advisers

Remarks at AI Now: The Social and Economic Implications of Artificial Intelligence Technologies in the Near Term
New York University
New York, NY

July 7, 2016

https://obamawhitehouse.archives.gov/sites/default/files/page/files/20160707_cea_ai_furman.pdf

 

 

 

 

Rebalancing the U.S. Economy

Jason Furman

http://www.international-economy.com/TIE_Sp15_Furman.pdf

 

 

 

 

Should Policymakers Care Whether Inequality Is Helpful or Harmful For Growth?

Jason Furman

Harvard Kennedy School & Peterson Institute for International Economics
Rethinking Macroeconomic Conference, October 11-12 2017

Preliminary Draft: October 5, 2017

https://piie.com/system/files/documents/furman20171012paper.pdf

 

 

 

 

 

A Political Economy of Oligarchy: Winner-take-all ideology, superstar norms, and the rise of the 1%

Yochai Benkler

September, 2017

http://www.benkler.org/Political%20economy%20of%20oligarchy%2001.pdf

 

 

 

 

Can Trump Overcome Secular Stagnation?
Part One: The Demand Side *

James K. Galbraith

http://www.insightweb.it/web/files/can_trump_overcome_secular_stagnation.pdf

 

 

 

 

The macroeconomic effects of the 2017 tax reform

Robert J. Barro, Harvard University
Jason Furman, Harvard University

March 2018

https://www.brookings.edu/wp-content/uploads/2018/03/4_barrofurman.pdf

 

 

 

 

A FUTURE THAT WORKS: AUTOMATION, EMPLOYMENT, AND PRODUCTIVITY

McKinsey Global Institute

January 2017

https://www.mckinsey.com/~/media/mckinsey/featured%20insights/Digital%20Disruption/Harnessing%20automation%20for%20a%20future%20that%20works/A-future-that-works-Executive-summary-MGI-January-2017.ashx

 

 

 

A MISSING LINK: THE ROLE OF ANTITRUST LAW IN RECTIFYING EMPLOYER POWER IN OUR HIGH-PROFIT, LOW-WAGE ECONOMY

ISSUE BRIEF BY MARSHALL STEINBAUM

APRIL 2018

http://rooseveltinstitute.org/wp-content/uploads/2018/04/Monopsony-issue-brief.pdf

 

 

 

Inclusive Growth

For once, some good news

by jason furman

https://assets1b.milkeninstitute.org/assets/Publication/MIReview/PDF/16-29-MR64.pdf

 

 

 

 

The Outlook for the U.S. Economy and the Policies of the New President

Jason Furman
Senior Fellow, PIIE
Peterson Institute for International Economics |

SNS/SHOF Finance Panel

Stockholm

June 12, 2017

https://www.sns.se/wp-content/uploads/2017/06/furman20170612ppt.pdf

 

 

 

 

The Role of Economists in Economic Policymaking

Jason Furman
Senior Fellow, Peterson Institute for International Economics

Arnold C. Harberger Distinguished Lecture on Economic Development
UCLA Burkle Center for International Relations
Los Angeles, CA

April 27, 2017

http://www.washingtonspeakers.com/images/pdfs/furman20170427.pdf

 

 

 

 

Market Concentration – Note by the United States

Hearing on Market Concentration
7 June 2018

OECD

https://www.ftc.gov/system/files/attachments/us-submissions-oecd-other-international-competition-fora/market_concentration_united_states.pdf

http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DAF/COMP/WD(2018)59&docLanguage=En

 

 

 

 

The fringe economic theory that might get traction in the 2016 campaign

 

https://www.washingtonpost.com/news/wonk/wp/2015/03/02/the-fringe-economic-theory-that-might-get-traction-in-the-2016-campaign/?noredirect=on&utm_term=.77c5e3479485

 

 

 

ACHIEVING INCLUSIVE GROWTH IN THE FACE OF DIGITAL TRANSFORMATION AND THE FUTURE OF WORK

OECD

https://www.g20.org/sites/default/files/documentos_producidos/achieving_inclusive_growth_in_the_face_of_digital_transformation_and_the_future_of_work_oecd_0.pdf

Rising Market Concentration and Declining Business Investments in the USA – Update June 2018

Rising Market Concentration and Declining Business Investments in the USA – Update June 2018

 

Since my last posts in August/September 2017 on the subject of

  • Market Concentration
  • Inequality
  • Market Power
  • Reduced Competition
  • Reduced Dynamism
  • Rising Profits
  • Declining Business Investments

several new studies have been published.  In addition, several important hearings and conferences have been organized by OECD, Brookings Institution, Boston University School of Law. Please see my list of references for details of each one of them.

This topic now is getting good attention in media also.

The Peterson Institute for International Economics (PIIE) held a major research conference on the “Policy Implications of Sustained Low Productivity Growth” on November 9, 2017. Jeromin Zettelmeyer, PIIE, moderates panel 4, “Wages and Inequality.” Presenters include Jason Furman, Harvard University and PIIE, and Lawrence H. Summers, Harvard University.  I have given the link to Video of the session 4 in the references.

OECD on June 7-8, 2018 held hearings on Market Concentration at Paris, France.  Several presentations were given by experts in the field.  I have given link to the conference webpage in the references.

The Hamilton Project/Brookings Institution had a Conference on June 13, 2018 in Washington DC on the subject of Market Concentration.  Please see the link to the conference video and papers in the references below.

 

 

From The State of Competition and Dynamism:
Facts about Concentration, Start-Ups, and Related Policies

concentration

From The State of Competition and Dynamism:
Facts about Concentration, Start-Ups, and Related Policies

 

concentration2concentration3concentration4concentration5

Please see my related posts:

Rising Profits, Rising Inequality, and Rising Industry Concentration in the USA

Low Interest Rates and Business Investments : Update August 2017

Increasing Returns, Path Dependence, Circular and Cumulative Causation in Economics

Increasing Returns and Path Dependence in Economics

Business Investments and Low Interest Rates

Mergers and Acquisitions – Long Term Trends and Waves

 

Key Sources of Research:

Building a More Dynamic and Competitive Economy

Hamilton Project

Brookings

June 13, 2018

http://www.hamiltonproject.org/events/building_a_more_dynamic_and_competitive_economy

Video of the Opening Remarks and Fireside Chat – Robert Rubin, Jason Furman, Steve Case

The State of Competition and Dynamism:
Facts about Concentration, Start-Ups, and Related Policies

 

Jay Shambaugh, Ryan Nunn, Audrey Breitwieser, and Patrick Liu

Brookings/Hamilton Project

June 2018

 

https://www.brookings.edu/wp-content/uploads/2018/06/ES_THP_20180611_CompetitionFacts_20180611.pdf

 

 

 

Market Concentration

OECD Hearing on Market Concentration

June 7-8, 2018

http://www.oecd.org/daf/competition/market-concentration.htm

 

 

 

Market Concentration Issues paper by the Secretariat

6-8 June 2018

OECD

 

http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DAF/COMP/WD(2018)46&docLanguage=En

http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DAF/COMP/WD(2018)67&docLanguage=En

 

 

 

Presented by the Business at OECD (BIAC) Competition Committee to the OECD Competition Committee

Market Concentration

June 7, 2018

 

http://biac.org/wp-content/uploads/2018/05/BIAC_CC_Market-Concentration_2018-05-22_FINAL1.pdf

 

 

 

 

 

Chapter VI

MARKET POWER AND INEQUALITY: THE REVENGE OF THE RENTIERS

Trade and Development Report 2017

UNCTAD

 

http://unctad.org/en/PublicationChapters/tdr2017ch6_en.pdf

 

 

The fall and rise of market power in Europe∗

John P. Wechea,b & Achim Wambacha

 

http://ftp.zew.de/pub/zew-docs/dp/dp18003.pdf

 

 

 

A policy at peace with itself: Antitrust remedies for our concentrated, uncompetitive economy

William A. Galston and Clara Hendrickson

2018

https://www.brookings.edu/research/a-policy-at-peace-with-itself-antitrust-remedies-for-our-concentrated-uncompetitive-economy/

 

 

 

 

The Rise of Market Power and the Macroeconomic Implications

Jan De Loecker, Jan Eeckhout

Issued in August 2017

http://www.nber.org/papers/w23687

 

 

 

 

This chart highlights the rise of corporate giants

WEF

2018

https://www.weforum.org/agenda/2018/06/chart-of-the-week-the-rise-of-corporate-giants

 

 

 

Market power in the U.S. economy today

 

https://equitablegrowth.org/market-power-in-the-u-s-economy-today/

 

 

 

Is Lack of Competition Strangling the U.S. Economy?

David Wessel

https://hbr.org/2018/03/is-lack-of-competition-strangling-the-u-s-economy

 

 

 

Competition Conference 2018

What’s the Evidence for Strengthening Competition Policy?

Boston University

July 2018

http://sites.bu.edu/tpri/news-and-events/competition-conference-2018/

 

 

 

Declining Competition and Investment in the U.S.

Germán Gutiérrez† and Thomas Philippon‡

November 2017

https://www.aeaweb.org/conference/2018/preliminary/paper/iDeysKkh

 

 

Should We Really Care About Inequality?

https://www.project-syndicate.org/videos/should-we-really-care-about-inequality

 

 

 

 

Beyond Antitrust: The Role of Competition Policy in Promoting Inclusive Growth

Jason Furman

Chairman, Council of Economic Advisers

Searle Center Conference on Antitrust Economics and Competition Policy Chicago, IL

September 16, 2016

 

https://obamawhitehouse.archives.gov/sites/default/files/page/files/20160916_searle_conference_competition_furman_cea.pdf

 

 

POWERLESS: How Lax Antitrust and Concentrated Market Power
Rig the Economy Against American Workers, Consumers, and Communities

Roosvelt Institute

http://rooseveltinstitute.org/wp-content/uploads/2018/03/Powerless.pdf

 

 

 

Is Government the Problem or the Solution to U.S. Labor Market Challenges?

Jason Furman

2018

 

https://minneapolisfed.org/~/media/files/institute/conferences/2018-05/furman-slides.pdf?la=en

 

 

 

With Competition in Tatters, the Rip of Inequality widens

 

 

 

THE 2018 JOINT ECONOMIC REPORT

REPORT OF THE JOINT ECONOMIC COMMITTEE CONGRESS OF THE UNITED STATES

ON THE 2018 ECONOMIC REPORT OF THE PRESIDENT

 

https://www.congress.gov/115/crpt/hrpt596/CRPT-115hrpt596.pdf

 

 

 

 

Concentration not competition: the state of UK consumer markets

2017

 

http://www.smf.co.uk/wp-content/uploads/2017/10/Concentration-not-competition.pdf

 

 

 

CORPORATE RENT-SEEKING, MARKET POWER AND INEQUALITY:
TIME FOR A MULTILATERAL TRUST BUSTER?

UNCTAD

May 2018

 

http://unctad.org/en/PublicationsLibrary/presspb2018d3_en.pdf

 

 

 

America’s Superstar Companies Are a Drag on Growth

Lack of competition lets them gouge consumers, underpay workers and invest too little.

 

https://www.bloomberg.com/view/articles/2017-09-01/america-s-superstar-companies-are-a-drag-on-growth

 

 

 

Big Companies Are Getting a Chokehold on the Economy

Even Goldman Sachs is worried that they’re stifling competition, holding down wages and weighing on growth.

https://www.bloomberg.com/view/articles/2018-02-22/big-companies-gaining-monopoly-power-pose-risk-to-u-s-economy

 

 

 

Monopolies May Be Worse for Workers Than for Consumers

There isn’t much evidence that they raise prices, but they do seem to hold down wages.

https://www.bloomberg.com/view/articles/2017-12-29/monopolies-may-be-worse-for-workers-than-for-consumers

 

 

 

 

LABOR MARKET CONCENTRATION

José Azar
Ioana Marinescu Marshall I. Steinbaum

2017 December

 

http://www.nber.org/papers/w24147.pdf

 

 

 

 

More and more companies have monopoly power over workers’ wages. That’s killing the economy.

The trend can explain slow growth, “missing” workers, and stagnant salaries.

 

https://www.vox.com/the-big-idea/2018/4/6/17204808/wages-employers-workers-monopsony-growth-stagnation-inequality

 

Antitrust Remedies for Labor Market Power

Suresh Naidu

Eric A. Posner

E. Glen Weyl

 

Date Written: February 23, 2018

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3129221

 

 

Policy Implications of Sustained Low Productivity Growth – Panel 4

Jason Furman / Larry Summers

Peterson Institute for International Economics

November 2017

https://piie.com/events/policy-implications-sustained-low-productivity-growth

Presentation by jason Furman

https://piie.com/system/files/documents/4-1furman20171109ppt.pdf

Paper by Jason Furman – published June 2018

https://piie.com/system/files/documents/wp18-4.pdf

Panel 4 Video:

 

The Hidden Geometry of Trade Networks

The Hidden Geometry of Trade Networks

 

From The hidden hyperbolic geometry of international trade: World Trade Atlas 1870–2013

Tradenetwork

 

Key Terms:

  • Trade Networks
  • Complex Networks
  • Preferential Attachment
  • Positive Feedback
  • Fractals
  • Power Laws
  • Hyperbolic Geometry
  • Economic Geography
  • Regional Trading Blocks
  • Bilateral Trade
  • Multilateral Trade
  • Free Trade Agreements
  • Metabolism of a City
  • Metabolism of a Nation
  • Metabolism of the World
  • Industrial Ecology
  • Social Ecology
  • Growth and Form

 

 

From The hidden hyperbolic geometry of international trade: World Trade Atlas 1870–2013

Here, we present the World Trade Atlas 1870–2013, a collection of annual world trade maps in which distance combines economic size and the different dimensions that affect international trade beyond mere geography. Trade distances, based on a gravity model predicting the existence of significant trade channels, are such that the closer countries are in trade space, the greater their chance of becoming connected. The atlas provides us with information regarding the long-term evolution of the international trade system and demonstrates that, in terms of trade, the world is not flat but hyperbolic, as a reflection of its complex architecture. The departure from flatness has been increasing since World War I, meaning that differences in trade distances are growing and trade networks are becoming more hierarchical. Smaller-scale economies are moving away from other countries except for the largest economies; meanwhile those large economies are increasing their chances of becoming connected worldwide. At the same time, Preferential Trade Agreements do not fit in perfectly with natural communities within the trade space and have not necessarily reduced internal trade barriers. We discuss an interpretation in terms of globalization, hierarchization, and localization; three simultaneous forces that shape the international trade system.

From The hidden hyperbolic geometry of international trade: World Trade Atlas 1870–2013

When it comes to international trade, the evidence suggests that we are far from a distance-free world. Distance still matters1 and in many dimensions: cultural, administrative or political, economic, and geographic. This is widely supported by empirical evidence concerning the magnitude of bilateral trade flows. The gravity model of trade2–4, in analogy to Newton’s law of gravitation, accurately predicts that the volume of trade exchanged between two countries increases with their economic sizes and decreases with their geographical separation. The precision of that model improves when it is supplemented with other factors, such as colony–colonizer relationships, a shared common language, or the effects of political borders and a common currency5–7. Despite the success of the gravity model at replicating trade volumes, it performs very poorly at predicting the existence of a trade connection between a given pair of countries8; an obvious limitation that prevents it from explaining the striking regularities observed in the complex architecture of the world trade web9–13. One of the reasons for this flaw is that the gravity model focuses on detached bilateral relationships and so overlooks multilateral trade resistance and other network effects14.

Another drawback of the classical gravity model is that geography is not the only factor that defines distance in international trade. Here, we use a systems approach based on network science methodologies15,16 to propose a gravity model for the existence of significant trade channels between pairs of countries in the world. The gravity model is based on economic sizes and on an effective distance which incorporates different dimensions that affect international trade, not only geography, implicitly encoded on the complex patterns of trade interactions. Our gravity model is based on the connectivity law proposed for complex networks with underlying metric spaces17,18 and it can be represented in a pure geometric approach using a hyperbolic space, which has been conjectured as the natural geometry underlying complex networks19–22. In the hyperbolic trade space, distance combines economic size and effective distance into a sole distance metric, such that the closer countries are in hyperbolic trade space, the greater their chance of becoming connected. We estimate this trade distance from empirical data using adapted statistical inference techniques23,24, which allow us to represent international trade through World Trade Maps (WTMs). These define a coordinate system in which countries are located in relative positions according to the aggregate trade barriers between them. The maps are annual and cover a time span of fourteen decades. The collection as a whole, referred to as the World Trade Atlas 1870–2013, is presented via spatial projections25, Table S5, and trade distance matrices, Table S6. Beyond the obvious advantages of visualization, the World Trade Atlas 1870–2013 significantly increases our understanding of the long-term evolution of the international trade system and helps us to address a number of important and challenging questions. In particular: How far, in terms of trade, have countries traveled in recent history? What role does each country play in the maps and how have those roles evolved over time? Are Preferential Trade Agreements (PTAs) consistent with natural communities as measured by trade distances? Has the formation of PTAs led to lesser or greater barriers to trade within blocs? Is trade distance becoming increasingly irrelevant?

The answers to these questions can be summarized by asserting that, in terms of trade, the world is not flat; it is hyperbolic. Differences in trade distances are growing and becoming more heterogeneous and hierarchical; at the same time as they define natural trade communities—not fully consistent with PTAs. Countries are becoming more interconnected and clustered into hierarchical trade blocs than ever before.

Please see my related posts:

Networks and Hierarchies

Increasing Returns, Path Dependence, Circular and Cumulative Causation in Economics

Relational Turn in Economic Geography

Boundaries and Networks

Multilevel Approach to Research in Organizations

Regional Trading Blocs and Economic Integration

Increasing Returns and Path Dependence in Economics

Growth and Form in Nature: Power Laws and Fractals

Key Sources of Research:

 

The hidden hyperbolic geometry of international trade: World Trade Atlas 1870–2013

Guillermo García-Pérez  Marián Boguñá, Antoine Allard & M. Ángeles Serrano

2016

https://www.nature.com/articles/srep33441.pdf

 

 

Uncovering the hidden geometry behind metabolic networks

 

Molecular BioSystems · March 2012

 

http://complex.ffn.ub.es/~mbogunya/eotools_files/files/1109.1934.pdf

 

 

The hidden geometry of complex networks

M. ÁNGELES SERRANO

 

http://www.ccs2016.org/uploads/4/8/7/6/48769845/s1_to_pdf.pdf

http://www.crm.cat/en/Activities/Documents/Curs_Intro_networks.pdf

 

 

 

Deciphering the global organization of clustering in real complex networks

Pol Colomer-de-Simo ́n1, M. A ́ ngeles Serrano1, Mariano G. Beiro ́2, J. Ignacio Alvarez-Hamelin2 & Maria ́n Bogun ̃a ́1

 

https://www.nature.com/articles/srep02517.pdf

 

 

 

 

 

Hidden geometric correlations in real multiplex networks

 

Kaj-KoljaKleineberg,1,∗ Mari ́anBogun ̃ ́a,1 M.A ́ngelesSerrano,2,1 andFragkiskosPapadopoulos

https://arxiv.org/pdf/1601.04071.pdf

 

 

 

 

 

Emergent Hyperbolic Network Geometry

Ginestra Bianconi1 & Christoph Rahmede

 

https://www.nature.com/articles/srep41974.pdf

 

 

 

 

The geometric nature of weights in real complex networks

 

Antoine Allard1,2, M. A ́ngeles Serrano1,2,3, Guillermo Garc ́ıa-Pe ́rez1,2 & Maria ́n Bogun ̃a ́

https://www.nature.com/articles/ncomms14103.pdf

 

 

 

Network Geometry and Complexity

Daan Mulder · Ginestra Bianconi

 

https://arxiv.org/pdf/1711.06290.pdf

 

 

 

Multiscale unfolding of real networks by geometric renormalization

 

Guillermo Garc ́ıa-P ́erez,1,2 Mari ́an Bogun ̃ ́a,1,2 and M. A ́ngeles Serrano

 

https://arxiv.org/pdf/1706.00394.pdf

 

 

 

Topology of the World Trade Web

Ma A ́ngeles Serrano and Mari ́an Bogun ̃a ́

 

https://arxiv.org/pdf/cond-mat/0301015.pdf

 

 

Patterns of dominant flows in the world trade web

 

M. A ́ngeles Serrano,1 Mari ́an Bogun ̃ ́a,2 and Alessandro Vespignani3,4

 

https://arxiv.org/pdf/0704.1225.pdf

 

 

 

 

Clustering and the hyperbolic geometry of complex networks

Elisabetta Candellero and Nikolaos Fountoulakis

 

https://warwick.ac.uk/fac/sci/statistics/staff/academic-research/candellero/paper8waw14.pdf

 

 

 

 

Hyperbolic Geometry of Complex Networks

 

Dmitri Krioukov, Fragkiskos Papadopoulos, Maksim Kitsak, Amin Vahdat, and Mari ́an Boguna

https://www.caida.org/publications/papers/2010/hyperbolic_geometry_complex/hyperbolic_geometry_complex.pdf

 

 

 

 

 

On Hyperbolic Geometry Structure of Complex Networks

Wenjie Fang

 

https://pdfs.semanticscholar.org/2f68/531c6644768ad78e86843e297fed442769cb.pdf

 

Indra’s Net: On Interconnectedness

Indra’s Net: On Interconnectedness

 

 

Key Terms

  • Indra’s Net
  • Indrajal
  • Felix Klein
  • Henri Poincare
  • Hyperbolic Geometry
  • Atharva Veda
  • Avatamsaka Sutra of Hua Yen Buddhism
  • Brahmajala Sutra of Mahayana Buddhism
  • Non-Euclidian Geometry
  • Hyperbolic Manifolds
  • Group Theory
  • Fractals
  • Benoit Mandelbrot
  • Mobius Maps
  • David Mumford
  • David Wright
  • Caroline Series
  • Indrajal Comics (a Publishing house in India now defunct)
  • Nicolai Lobachevsky
  • Johann Bolyai
  • Carl F Gauss

 

From The Avatamsaka Sutra Francis H. Cook
Hua-Yen Buddhism: The Jewel Net of Indra 1977

Indra’s Net

Far away in the heavenly abode of the Great God Indra, the protector and nurturer of life, there is a wonderful net which stretches out indefinitely in all directions, in accordance with the extravagant tastes of deities.

At the net’s every node, is hung a single glittering jewel and since the net itself is infinite in dimension, the jewels are infinite in number. There hang the jewels, glittering like stars of the first magnitude, a wonderful sight to behold.

If we now arbitrarily select one of these jewels for inspection and look closely at it, we will discover that in its polished surface there are reflected all the other jewels in the net, which sparkle in the magnificence of its totality.

Not only that, but each of the jewels reflected in this one jewel is also reflecting all the other jewels, so that the process of reflection is infinite. As each gem reflects every other one and everything else in the universe, so are you affected by every other system in the universe.

 

INDRA’S NET

The metaphor of Indra’s Jeweled Net is attributed to an ancient Buddhist named Tu- Shun (557-640 B.C.E.) who asks us to envision a vast net that:

  • At each juncture there lies a jewel
  • Each jewel reflects all the other jewels in this cosmic matrix
  • Every jewel represents an individual life form, atom, cell or unit of consciousness
  • Each jewel, in turn, is intrinsically and intimately connected to all the others
  • A change in one gem is reflected in all the others

The moral of Indra’s net is that the compassionate and the constructive interventions a person makes or does can produce a ripple effect of beneficial action that will reverberate throughout the universe or until it plays out.

By the same token you cannot damage one strand of the web without damaging the others or setting off a cascade effect of destruction.

 

 

From The Indra’s Net

“Far away in the heavenly abode of the great god Indra, there is a wonderful net which has been hung by some cunning artificer in such a manner that it stretches out indefinitely in all directions. In accordance with the extravagant tastes of deities, the artificer has hung a single glittering jewel at the net’s every node, and since the net itself is infinite in dimension, the jewels are infinite in number. There hang the jewels, glittering like stars of the first magnitude, a wonderful sight to behold. If we now arbitrarily select one of these jewels for inspection and look closely at it, we will discover that in its polished surface there are reflected all the other jewels in the net, infinite in number. Not only that, but each of the jewels reflected in this one jewel is also reflecting all the other jewels, so that the process of reflection is infinite. The Hua’yen school [of Buddhism] has been fond of this image, mentioned many times in its literature, because it symbolizes a cosmos in which there is an infinitely repeated interrelationship among all the members of the cosmos. This relationship is said to be one of simultaneous mutual identity and mututal intercausality.”

~ Francis H. Cook, Hua-yen Buddhism: The Jewel Net of Indra

There are several aspects of Indra’s Net, as described in the above quote, that signify it as a crystal clear allegory of reality:

1. The Holographic Nature of the Universe

Long before the existence of the hologram, the jeweled net is an excellent description of the special characteristic of holograms: that every point of the hologram contains information regarding all other points. This reflective nature of the jewels is an obvious reference to this.

This kind of analogy has been suggested by science as a theory for an essential characteristic of the cosmos, as well as as the functioning of the human brain, as beautifully described inThe Holograpic Universe by Michael Talbot.

2. The Interconnectedness of All Thingss

When any jewel in the net is touched, all other jewels in the node are affected. This speaks to the hidden interconnectedness and interdependency of everything and everyone in the universe, and has an indirect reference to the concept of “Dependent Origination” in Buddhism. Additionally, Indra’s Net is a definitive ancient correlate of Bell’s Theorum, or the theory of non-local causes.

3. Lack of a substantive self

Each node, representing an individual, simply reflects the qualities of all other nodes, inferring the notion of ‘not-self’ or a lack of a solid and real inherent self, as seen in the Advaita Vedanta school of Hinduism and Buddhism in general.

4. Non-locality

Indra’s Net shoots holes in the assumption or imputation of a solid and fixed universe ‘out there’. The capacity of one jewel to reflect the light of another jewel from the other edge of infinity is something that is difficult for the linear mind, rational mind to comprehend. The fact that all nodes are simply reflections indicates that there is no particular single source point from where it all arises.

5. Innate Wisdom

The ability to reflect the entirety of all light in the universe attests to the inherent transcendant wisdom that is at the core of all nodes, representing all sentient beings, and to the inherent Buddha Nature.

6. Illusion or Maya

The fact that all nodes are simply a reflection of all others implies the illusory nature of all appearances. Appearances are thus not reality but a reflection of reality.

7. Universal Creativity

A familiar concept in various high dharmas is one of an impersonal creative intelligence that springs forth into reality through the instruments of all living beings.

8. The Mirror-like Nature of Mind

The capacity to reflect all things attests to the mind being a mirror of reality, not its basis. This is a common thesis among various schools and religions.

This article is from: http://www.heartspace.org/

 

The Vedic metaphor of Indra’s Net

The metaphor of Indra’s net, with its poetic description of the indivisibility of the universe, captures the essence of Hinduism’s vibrant and open spirit.

The Vedic metaphor of Indra’s Net

 

Indra’s Net is a metaphor for the profound cosmology and outlook that permeates Hinduism. Indra’s Net symbolizes the universe as a web of connections and inter-dependencies among all its members, wherein every member is both a manifestation of the whole and inseparable from the whole. This concept is the foundation for Vedic cosmology and it later went on to become the central principle of Buddhism, and from there spread into mainstream Western discourse across several disciplines.

The metaphor of Indra’s Net originates from the Atharva Veda (one of the four Vedas), which likens the world to a net woven by the great deity Shakra or Indra. The net is said to be infinite, and to spread in all directions with no beginning or end. At each node of the net is a jewel, so arranged that every jewel reflects all the other jewels. No jewel exists by itself independently of the rest. Everything is related to everything else; nothing is isolated. [i]

Indeed, the fundamental idea of unity-in-diversity underpins all dharmic traditions; even though there are many perspectives from which Indra’s Net may be viewed and appreciated, it is ultimately recognized as one indivisible and infinite unity. From the Hindu viewpoint, the One that manifests as many is named Brahman; even seemingly disparate elements are in fact nothing other than reflections of Brahman, and hence of one another. This notion of an organic unity is a signature of Hinduism, and distinguishes it from all major Western religions, philosophies and cultures.

Each jewel of Indra’s Net includes the reflections of all the other jewels; the significance of this symbolism is that each entity in the universe contains within itself the entire universe. This idea, rather than positing interdependence among separately existing entities, asserts that the whole does not owe its existence to the coming together of individual parts that have independent existence. Indeed, the existence of each individual part is contingent upon, and relative to, the existence of the whole and of all the other parts. Yet, paradoxically, each individual part also ‘contains’ the whole within itself. Put simply, the whole and the parts are inseparable.

Every jewel in Indra’s Net is a microcosm of the whole net; every component is the cause of the whole and also the effect of the whole. Nothing exists outside the net. [ii] In the Hindu worldview, the only essence that ultimately exists is Brahman; Brahman is the foundation for Indra’s Net, and no jewel exists apart from Brahman.

The jewels of Indra’s Net are not meant to symbolize static substances. Each jewel is merely a reflection of other jewels, and individual jewels always remain in flux. Each jewel exists only momentarily, to be continuously replaced by its successor, in mutual causation with other jewels. Just as the interdependent cells of the human body are perpetually changing, so also everything in Indra’s Net is perpetually in flux. Reality is always in the flux of becoming. This concept is different from the notion of real, independently existing entities undergoing modification, or static entities that happen to be woven together.

Swami Vivekananda applied the great Upanishadic saying, ‘tat tvam asi’ (‘that thou art’) as the basis for Hindu ethics. He said, in essence, that we are all jewels in Indra’s Net (even though he did not use this metaphor to say it). Thus, Vivekananda defined a Hindu platform for determining ethical conduct, not only towards all humans but towards animals and all entities in general—because everyone and everything is a jewel in Indra’s Net.

The Sanskrit word bandhu is frequently used to describe the interrelationship between the jewels of Indra’s Net. ‘Bandhu’ defines a corresponding entity; for example, a relationship between x and y can be stated as ‘x is a bandhu of y’. In traditional Indian discourse, this term is often used to explain the unity between the whole and its seemingly diverse parts. For example, ancient thinkers have described specific bandhus which express the paradoxical relationship of the microcosm to the macrocosm. While the microcosm is generally perceived as a map of the macrocosm, it is also the case that both microcosm and macrocosm continuously mirror one another.

Bandhu can also refer to the connections among various facets of our overall unified reality, linking sounds, numbers, colors and ideas together. No object—whether physical, mental, emotional, or conceptual—has any existence by itself and is merely another facet of this unified whole. In addition, bandhu describes how the transcendental worlds correspond with the perceptible world, implying that whatever we perceive through our senses is but a pointer to something beyond.

Kapila Vatsyayan, a scholar of classical Indian art, has cited many examples of bandhu in the form of common metaphors. Significant symbols may be found in the Rig Veda, the Natya-shastra (a seminal text on aesthetics and performing arts) and the Tantrasamuccaya (a text on temple architecture). The seed (bija) is often used to symbolize the beginnings. The tree (vriksha) rises from the bija and represents the vertical pole uniting the realms. The nabhi (navel) or the garbha (womb) brings together the concepts of the un-manifest (avyakta) and the manifest (vyakta). The bindu (point or dot) is the reference point or metaphorical centre around which are drawn geometrical shapes, which in turn facilitate the comprehension of notions of time and space. The sunya (void) is a symbol of fullness and emptiness. From its arupa nature (formless) arises the rupa nature (form) and the parirupa (beyond form). There is equivalence in the relationship between sunya (emptiness) and purna (completeness or wholeness), the paradox being that the void has within it the whole. [iii]

In Hinduism, the concept of unity-in-diversity can also be understood as a manifestation of Brahman, an agency that penetrates, pervades and harmonizes the entire universe. Brahman enters and shapes the mould of every entity giving it form, substance and individuality. It is only human pre-conditioning that causes us to visualize the multiplicity of forms as separate entities, and hence the world appears to be full of contradictions. The Brhadaranyaka Upanishad says:

Brahman is responsible for the interconnectedness of things and has become the living and the non-living; the visible and the invisible; the creatures which are two-footed and those that are four-footed. He became the subtle body and then the gross body by means of a subtle instrument known as the subtle body. This very Being became the vital consciousness of all. This is known as the Madhu¬Vidya, the sense of the ‘honey’ of all beings, the knowledge of the inter-dependence of things and the vital connection of everything, under every condition, at every time, everywhere.  [iv]

Hinduism devotes much thought to exploring the relationships between the jewels of Indra’s Net, and how they are manifestations and reflections of each other. Hindu thought is distinct from Abrahamic religions, which are premised on the existence of one separate God, one absolute event in history, and one inviolable set of injunctions. Hindus, for better or for worse, tend to be natural de-centralists. This is why it is hard to understand Hinduism, and difficult to organize and mobilize Hindus under an overarching corporate institution. It is also why Hinduism has proved, thus far, difficult to destroy. This idea can be referred as ‘integral unity’. The integral unity of the whole manifests itself in the parts, and they, in turn, aspire to unite with the whole; this principle is reflected in every domain of dharmic knowledge, including philosophy, science, religion, ethics, spirituality, art, music, dance, education, literature, oral narratives, politics, marriage rituals, economics, and social structures. Each domain of dharmic knowledge is itself a jewel in Indra’s Net, and reflects all the others. In other words, the same underlying principles are represented in these specialties in different ways.

For example, Hindu dance is not merely an isolated form of cultural expression but a complete and rigorous discipline through which one may learn and experience philosophy. This quality of correspondences across many domains of knowledge is striking. Music and sacred dance have a formal grammar based on Hindu cosmology. The Sanskrit Natya-shastra, a seminal text on performing arts and aesthetics, treats natya as a total art form; its scope includes: representation, poetry, dance, music, make-up, indeed every aspect of life. The Natya-shastra presents an integral view encompassing the Vedic rituals, Shaivite dance and music, and the epics. The eight traditional rasas it describes (love, humour, heroism, wonder, anger, sorrow, disgust, and fear) mirror a complete experience of the real world like the jewels of Indra’s Net, and together facilitate a practitioner’s pursuit of the purusharthas(human goals).

Some other examples across various domains are as follows:

  • The Vedic ritual altar is a representation of the entire cosmos.
  • The architecture of Hindu temples is based on physical dimensions which correspond to various astronomical metrics.
  • The yantra, an important device of sacred geometry, represents the whole universe.
  • Any deity can be conceived of in multiple ways: as a personal manifestation of the divine, as a metaphor for certain cosmic qualities and powers, and as an amalgamation of qualities and energies to be invoked and established in a person through ritual, meditation and yoga. Based on individual preferences, a deity can be approached as another entity in the mode of devotion, or as an object of meditation, or as a means for self-realization within oneself.
  • In Ayurvedic diagnosis, a correspondence is posited between specific points on the tongue and all parts of the entire body; thus, an expert in this field examines the tongue as a means of analysing the patient’s overall condition. The tongue is thus a jewel in which the entire physical and psychic body is reflected. The core principle of integral unity is encoded in the symbolism of Indian art, architecture, literature, ritual, mythology, festivals, and customs, all of which are intended to facilitate access to higher knowledge that goes beyond the conventional scope of any specific domain. Integration between disciplines is built-in and no effort is needed to create unity by bringing separate parts together. Even when certain disciplines and practices were destroyed, other disciplines encoding the same principles survived and helped preserve and re-ignite the overall tradition.

Dharmic cosmology is governed by bandhu interconnections among the astronomical, terrestrial, physiological, and spiritual realms; and each of these realms is itself connected, in the broadest sense, with the arts, healing systems, and culture. As discussed previously, bandhu describes a correspondence between the whole universe and the individual consciousness, which can be explored and developed from many alternative starting points. Thus, dharmic traditions have a common current that impels the individual along a natural quest to discover the reality beneath the appearances and to appreciate relationships among seemingly unrelated phenomena.

Dharmic traditions consider the common experience of reality as merely the transient reflection of a system in flux, interconnected with other realities across the past, present and future. In this flux, which affects all phenomena, repeating patterns may appear as static and independent ‘objects’, but this perception is just an illusory artifact of the limited mind. The individual person, of course, is himself a part of this flux. With the aid of meditation, he is able to witness reality as a detached observer—to see the personal ego, and indeed all fixed objects, as mere reflections of a moment in the flux.

Indra’s Net and Buddhism

Important Buddhist texts use Indra’s Net to describe an infinite universe with no beginning or end, in which every element is mutually related to every other element. Indra’s Net is a quintessential metaphor for Buddhist philosophy, describing how everything exists only in mutual causation with everything else, and nothing can be isolated.

The Avatamsaka Sutra (which means ‘Flower Garland’) of Mahayana Buddhism uses the metaphor of Indra’s Net to explain cosmic interpenetration. This sutra explains everything as both a mirror reflecting all and an image reflected by all. Everything is simultaneously cause and effect, support and supported. This important sutra was translated from Sanskrit, and its logic further developed in China under the name of Hua-yen Buddhism.

The Hua-yen tradition was developed by a series of thinkers, most notably Fa-tsang (cE 643-712). Through him, it passed on to Korea and other East Asian countries, becoming known as ‘Kegon’ in Japan. Hua-yen is praised as the highest development of Chinese Buddhist thought. D.T. Suzuki called Hua-yen the philosophy of Zen, and Zen the meditation practice of Hua-yen. Francis Cook explains the core philosophy of Hua-yen as follows:

Far away in the heavenly abode of the great god Indra, there is a wonderful net that has been hung by some cunning artificer in such a manner that it stretches out infinitely in all directions. In accordance with the extravagant tastes of deities, the artificer has hung a single glittering jewel in each ‘eye’ of the net, and since the net itself is infinite in all dimensions, the jewels are infinite in number. There hang the jewels, glittering like stars of the first magnitude, a wonderful sight to behold. If we now arbitrarily select one of these jewels for inspection and look closely at it, we will discover that in its polished surface there are reflected all the other jewels in the net, infinite in number. Not only that, but each of the jewels reflected in this one jewel is also reflecting all the other jewels, so that there is an infinite reflecting process occurring. [v]

Cook goes on to explain that Indra’s Net ‘symbolizes a cosmos in which there is an infinitely repeated interrelationship among all the members of the cosmos’. He adds that ‘the cosmos is, in short, a self-creating, self-maintaining, and self-defining organism’. Furthermore, there is no theory of a beginning time, and such a universe has no hierarchy. ‘There is no center, or, perhaps if there is one, it is everywhere.’

Hua-yen is built on the primary concern of Indian thought which is about the nature of causation. This is evident in the Sanskrit name for Hua-yen, ‘dharmadhatu pratityasamutpada’ (the interdependent co-arising which is the universe). Key principles of Madhyamika Buddhism, regarding non-substantiality and non-origination, have exact equivalents in Hua-yen. The Avatamsaka philosophy emphasizes the illusory nature of things when they are seen separately. [vi]

David Loy, a Buddhist practitioner and scholar who has spent most of his life in Kyoto, uses the analog of lila (play) to refer to the Buddhist ideal of life. While the ordinary ego is a player struggling, out of anxiety, to ground itself in the net, the liberated player has realized that he is the net. There is no separate ‘me’ to possess anything, nor any separate thing to be possessed. He explains:

Life becomes play; … the issue is whether we suffer our games because they are the means whereby we hope to ground ourselves somewhere in Indra’s Net, or whether we dance freely within the Net because we are it. The dangers of relativism in ethics are vitiated to the extent I realize my interdependence with other beings: I shall indeed love my neighbour as myself when I experience that I am my neighbor.  [vii]

It is interesting to note that over a period of many centuries Buddhist thinkers across East Asia have meticulously preserved the Sanskrit terms originally used to define Buddhist ideas, and fully credited Indian sources. Recently, however, as Buddhist ideas have travelled to the West and spread across many disciplines, the tendency has been to disconnect Hinduism from these ideas. Thankfully, the term ‘Indra’s Net’ has been preserved, and this allows scholars like myself to retrace the Vedic origins of these widely popular ideas.

Influences on modern society

Indra’s Net has inspired thinkers and movements in the West ranging from philosophy to ecology. David Loy has described how the major milestones of Western post-modernist thought resemble the ideas inherent in Indra’s Net. He cites Sigmund Freud’s approach in psychology, Ferdinand Saussure’s work in linguistics, Roland Barthes’s ideas in literary theory, and Jacques Derrida’s approaches to deconstruction as examples of twentieth-century pioneers who have utilized the ideas of Indra’s Net (mostly without explicit acknowledgement). The result of this has been nothing short of a revolution in Western philosophy, shaking the age-old Western premise that entities have separate, absolute, independent existences. Deconstructing the self-existence of things is the very signature principle of post-modern thought, and is a subset of the philosophical ideas contained in Indra’s Net. [viii]

Gregory Fahy has examined John Dewey’s idea of local, contextual and relational metaphysics as a subset of the Hua-yen thinking of Indra’s Net. [ix] Mathematicians studying chaos theory and fractals have described the beauty of structures as ‘Indra’s net’, ‘Indra’s necklace’ and ‘Indra’s pearls’. [x] In physics, the notion of quantum entanglement is a special case of the kind of interconnectivity we are describing. It is not at all surprising that Indra’s Net has been used as a metaphor to explain holograms, wherein, by definition, each part also includes the whole within itself. Indra’s Net has also been cited as the metaphor for the internet.

In the field of environmentalism, Leslie Paul Thiele has explained that Indra’s Net represents the Sanskrit concept of prajna (the wisdom of the interdependency of things), with the key implication that causes and effects are inseparable. He mentions that the word ‘ecology’ was coined in 1873 to mean the interactive relations between plants and animals, and that its meaning has recently expanded to include all of nature’s interrelationships in a wider sense. Sustainability is inherently a matter of interdependence, so the applicability of these ideas to the modern ecology movement is obvious. [xi] Indra’s Net, of course, embodies a far wider scope than just the material aspects of nature.

The basic principle is that each individual is both the cause for the whole and is caused by the whole. Ecological interdependence implies that if any one part of a system is disturbed, the whole system is affected. In this regard, Francis Cook has described Indra’s Net as a kind of ‘cosmic ecology’. [xii] Unlike in Western (disembodied) philosophy, nature is not seen as a backdrop for human existence; rather, humans are seen as inseparable from nature. A special issue of the journal Philosophy East and West was devoted to the applications of Indra’s Net to the field of environmental ethics. [xiii]

Another example of contemporary applications is an NGO called Indra’s Net Community, a South Korean movement that addresses concerns in the daily lives of lay people. Inspired by the interdependency principle of Indra’s Net, it was started by a group of visionary monks. They established grassroots communities to promote an alternative lifestyle in response to contemporary society’s emphasis on mass consumption, commercialism, competition, and the exploitation of natural resources. [xiv]

References

[i] The mantra is: ‘brihaddhi jaalam brihatah shakrasya vaajinivatah’ (8.8.6). ‘Ayam loko jaalamaasit shakrasya mahato mahaan’ (8.8.8).

[ii] However, from the viewpoint within the provisional reality, all jewels are not the same. We must note the Buddhist (and Vedantin) notion of two truths, phenomenal and absolute. There is spiritual progress only from a phenomenal point of view.

[iii] Vatsyayan, 1997.

[iv] Brhadaranyaka Upanishad (2:5.17-18) http://www.swami-krishnananda. org/brdup/brhad_II-05.html

[v] Cook, 1977, p. 2.

[vi] In early Pali texts, there is the notion of ‘paticca samuppada’ (dependent, co-arising or interconnected origination). Nagarjuna established one of the central principles that there are no isolated entities bearing essential natures or existing as themselves. This is referred to as things being empty of their own separate distinct existence, i.e., not having any ultimate sva-bhava or self-nature. This developed into the Avatamsaka tradition’s idea of sunyata along with interdependence comprised all reality. One of the famous chapters of the Avatamsaka Sutra includes the following explanation of interpenetration: ‘All the lion’s organs, the tip of every hair, being of gold, include the whole lion. Each of them permeates the whole lion; the eyes are the ears, the ears are the nose, the nose is the tongue and the tongue is the body. They come into being freely, without difficulty, without impediment.’ Here the gold symbolizes the substance and the lion symbolizes the form.

[vii] Loy, 1993, p. 484.

[viii] Loy, 1993.

[ix] Fahy, 2012.

[x] See, for example, Mumford, 2002 and Debnath, 2006. The metaphor has also been applied to new ideas proposed in library science (Bair-Mundy, 1998).

[xi] Thiele, 2011.

[xii] Cook, 1977.

[xiii] Philosophy East and West, vol. 37, no. 2, April 1987.

[xiv] Park, 2010. Indra’s Net has also been cited by activists who argue against climate change and other environmental concerns (Tam, 2008). There are also co-dependency arguments for helping salmon survive (Allendorf, 1998).

 

 

Please see my related posts:

The Great Chain of Being

On Holons and Holarchy

Consciousness of Cosmos: A Fractal, Recursive, Holographic Universe

Reflexivity, Recursion, and Self Reference

Geometry of Consciousness

Mind, Consciousness and Quantum Entanglement

Systems View of Life: A Synthesis by Fritjof Capra

Shape of the Universe

 

 

Key Sources of Research:

The Indra’s Net

https://www.scienceandnonduality.com/the-indras-net/

 

 

Indra’s Net

https://en.wikipedia.org/wiki/Indra%27s_net

 

 

 

Noneuclidean Symmetry and Indra’s Pearls

Caroline Series

David Wright

 

http://archive.bridgesmathart.org/2006/bridges2006-25.pdf

 

The Vedic metaphor of Indra’s Net

http://www.pragyata.com/mag/the-vedic-metaphor-of-indras-net-234

 

 

INDRA’S PEARLS

THE VISION OF FELIX KLEIN

David Mumford, Caroline Series and David Wright

 

http://assets.cambridge.org/97805213/52536/frontmatter/9780521352536_frontmatter.pdf

 

 

Caroline Mary Series: Pearl of Hyperbolic Manifolds

 

https://homepages.warwick.ac.uk/~masbb/NUS2013.pdf

 

 

 

Benoit B. Mandelbrot

1924–2010

 

http://www.nasonline.org/publications/biographical-memoirs/memoir-pdfs/mandelbrot-benoit.pdf

 

 

 

Hyperbolic Geometry & Kleinian Groups

 

http://www.math.uct.ac.za/sites/default/files/image_tool/images/32/Staff/Permanent_Academic/Dr_Jesse_Ratzkin/Student_Supervision/greg-jackson-thirdyear-project.pdf

 

 

Synchronicity
Nature and Psyche in an Interconnected Universe

Joseph Cambray

TexasA&M University Press 2009

 

https://www.uboeschenstein.ch/texte/Cambray-synchronicity-ed..pdf

 

 

 

Poincare and his disk

Etienne Ghys

 

http://perso.ens-lyon.fr/ghys/articles/Poincarediskenglish.pdf

 

 

Iteration and its Consequences
Indra’s Pearls: The Vision of Felix Klein.

By David Mumford, Caroline Series, and David Wright,

Cambridge University Press,

New York, 2002,

 

http://appliedmathematician.org/pdf/news/468.pdf

 

 

Indra’s Pearls:  Geometry and Symmetry

Caroline Series

University of Cambridge

This is the 2010 joint London Mathematical Society / Gresham College lecture.

https://www.gresham.ac.uk/lectures-and-events/indras-pearls-geometry-and-symmetry

On Holons and Holarchy

On Holons and Holarchy

 

Key Terms

  • Holons
  • Holarchy
  • Hierarchy
  • Fractals
  • Holonomic
  • Holographic
  • Heterarchy
  • Parts and Whole
  • Networks
  • Matryoshka Dolls
  • Recursion
  • Nested Levels
  • Reflective Spheres
  • Hyper Sets
  • Boundaries

 

.

From The Holonic Revolution Holons, Holarchies and Holonic Networks. The Ghost in the Production Machine

 

A minor conceptual revolution has been under way for less than forty years now, beginning in 1967 with the publication of Arthur Koestler’s The Ghost in the Machine – a phantasmagorical book in terms of the breath and variety of its content – which formally introduced the concepts of holon and holarchy (the hierarchical ordering of holons).

Koestler’s idea is clear and simple: in observing the Universe surrounding us (at the physical and biological level and in the real or formal sense) we must take into account the whole/part relationship between observed “entities”. In other words, we must not only consider atoms, molecules, cells, individuals, systems, words or concepts as autonomous and independent units, but we must always be aware that each of these units is at the same time a whole – composed of smaller parts – and part of a larger whole.

In fact, they are holons.

By systematically applying the whole/part observational relationship, or the equivalent one of containing/contained, the Universe appears to us as a hierarchy of holons: that is, as a holarchy where, at each hierarchical level, the holons undergo the effects of the structural or operational variations of the subordinate holons and in turn produce variations in the behaviour of the superordinate ones.

The entire machine of life and of the Universe itself evolves toward ever more complex states, as if a ghost were operating the machine.

The concepts of holon and holarchy have since been used, especially in recent times, by a number of writers in a variety of disciplines and contexts, and these concepts are rapidly spreading to all sectors of research. Physics (Capra 1982), engineering (Babiceanu et al. 2005; Dani et al. 2004)), robotics, biology (Shafaei – Aghaee, 2008), organizational studies, management science (Zhang et al. 2003; Ng et al. 1996), business administration and entrepreneurship (Chirn – McFarlane 2001), production and supply chain systems (McFarlane – Bussmann 2000; Akturk – Turkcan 2000; Amiri 2006). Connected to these ideas are those of holonic networks, holonic and virtual enterprises, virtual organizations, agile manufacturing networks, holonic manufacturing systems, fractal enterprise and bionic manufacturing (Chapter 5)

 

This short essay, written from an economic-business point of view, has four objectives.

The first (covering the first two chapters) provides the reader with a brief but precise theoretical framework for understanding the meaning of the new terms that increasingly come up in business literature (outside Italy as well) and which refer directly or indirectly to the ideas of holon and holarchy. Connected to these terms are those of holonic network, holonic firm and enterprise, holonic manufacturing systems, holonic production, bionic production, fractal enterprise, and virtual enterprise, to name but a few.

Since I have observed that often the term “holon” has been improperly used, without any reference to the original sources, leading to models and conclusions that are absolutely inappropriate, I feel it is useful to provide the theoretical framework within which these terms can be properly used, considering not only Koestler’s definition but also the ideas of Ken Wilber, which are based on this notion.

I also feel it is useful to examine several fundamental classes of holarchies in order to show that the idea of a hierarchical order among classes of holons can be applied to a variety of contexts. In particular I have presented Koestler’s Self-organizing Open Hierarchical Order, Wilber’s Kosmos and Shimizu’s Autonomic Cognitive Computer as applications that illustrate the concept of a holon.

The second objective (presented in Chapter 3) is to extend the notion of holon while respecting its original meaning, in order to apply it to organizations.

Starting from the definition of organizations as systems whose organs are composed of individuals or groups of individuals, I have attempted to demonstrate two interconnected aspects: on the one hand, that organizations are holons that derive from a holarchy of organs (from their functionalities), and on the other that organizations can be formed by other holon-organizations – which I have labelled orgons – that are connected in a holarchy that I have called an orgonization.

When we observe the functionality and the function of its organs we see that an organization can be thought of as a macro system whose purpose is the attainment of a macro objective. It immediately follows that it can be compared to an Holonic Manufacturing System, or to an Autonomic Cognitive Computer; that is, to a holarchy of operators at different levels – each included in the other, so as to form parts of ever smaller size – each capable of pursuing part of the macro objective.

When there is a larger objective to achieve, rather than add levels to the organization we can form an organization of organizations, that is an orgonization with unique characteristics.

The third objective is to show (Chapter 4) how holons can be connected not only in the typical hierarchical structure – the holarchy – but, by stretching somewhat the original meaning, also in a reticular structure in order to form holonic networks in which the vertical ordering (above and below) is replaced by a horizontal one (before and after).

Within the holonic networks the holons maintain their autonomy and their whole/part relationship, which together characterize holarchies. However, for this reason the dominant feature is their horizontal systemic interconnections; each holon becomes a node of input-output interconnections between holons that come before and those that come after in the structure.

I have thus discovered that even holonic networks can be made up of orgons that form orgonic networks.

Since holarchies, orgonizations, holonic networks and orgonic networks are present everywhere – in firms and between firms, as well as in the economic system of which they are a vital part – it is useful to present a general survey.

Among the many types of holonic networks, I have chosen to examine the main sources of inspiration for those production systems referred to as the Holonic Manufacturing Systems, comparing these to those defined as Bionic and Fractal Manufacturing Systems. I have also considered the numerous forms of Inter- organizational Networks as well as the Holonic and Virtual Organizations.

The fourth objective (Chapter 5) is perhaps the most ambitious one, since I have tried to extend the holonic vision to the global production-economic system, or Production Kosmos.

Globally we are witnessing the continual and accelerated economic progress of mankind. There is an increase in the quantity and quality of needs that are satisfied and those still to be satisfied, and in the aspirations achieved and yet to be achieved. The increase in productivity and quality is unstoppable, and appears to guide the other variables in the system.

It is natural to ask who activates and governs such phenomena. The answer is that they are self-generated and self-organized in the context of reticular holarchies and orgonic networks formed by production enterprises – or production organizations – that comprise the integrated process of global production.

On a continental scale, it makes sense to consider production in terms of networks of orgons in which, by choice or not, every firm that produces final consumption goods is linked at several levels to a number of other suppliers of materials, components, machines and other structural factors. We can easily observe that the large continental production networks – in North America, China, Japan, India and Europe – are not yet integrated but are becoming larger and increasingly connected, while other local networks are developing in other countries.

In order to understand how things are evolving in a context where there is a connection between firm and production organization we need a conceptual framework that does not limit our observations to the single production units, searching therein for the laws of survival, but one which, at least in principle, is able to explain how the large orgonic networks internally produce self-organization and self-development.

The theory of systems provides two particularly interesting approaches: one that considers firms as adaptive systems that operate according to local rules and that spontaneously and inevitably generate production networks understood as complex adaptive systems, and that which considers production organizations as holons that, given their arrangement in a multi-level holarchy, generate the production networks in which progress appears as the inevitable consequence of the holarchic ordering of the Economic-Production Kosmos.

This essay considers the second approach, presenting the holarchic model of the analysis of production networks. It assumes that in an economy based on knowledge, where the limits of time and space are tenuous, production must increasingly refer not to a single firm but to a system of firms (a super-organizational network) or to operational units (inter-organizational network) conceived of as an operative, information or cognitive network.

It truly appears there is a Ghost in the Machine, whose invisible hand produces growing levels of productivity and quality, increases the quality and quantity of satisfied needs and aspirations, and reduces the burden of work, thereby continually increasing the level of progress in the entire Kosmos.

It is useful to conclude with a bibliographical note.

The conceptual revolution begun in 1967 has not yet led to a relevant number of monographs. On the other hand, there is a substantial bibliography containing journal articles, papers presented at congresses, and opinions and documents from discussion forums. The Internet has been crucial for gaining access to recent material.

 

 

Note:

You may know of Russian Dolls – Nested Dolls.  They are known as Matryoshka Dolls.  I came across this russian paper investigating roots of dolls.

Eastern Roots of Russia’s most famous Toy

May I suggest that name/concept of these dolls could have originated from SAPTA MATRIKA (7 Divine Mothers) of Indian Hindu Tantra Philosophy.

 

 

A Brief History of Holons

Mark Edwards

This concept has a long and respectable ancestry. So much so that defenders of orthodoxy are inclined to dismiss it as “old hat” – and often in the same breath to deny its validity. Yet I hope to show as we go along that this old hat, handled with some affection, can produce lively rabbits.
(Arthur Koestler, 1967, p.45)

Introduction

The idea of hierarchy and of their constituent part-wholes, or holons, has, as Arthur Koestler points out in the opening quote, a long and distinguished history. There are many philosophers who have proposed abstract systems for explaining natural and social phenomena. In pre-Socratic Greece Leuciddus and Deocritus developed the abstract concept of the atom and used it to develop a philosophy that could explain all observed events. Aristotle used hierarchy as the methodology for accumulating and connecting biological knowledge. Hierachy was perhaps the dominant way of viewing the connection between the natural, the human and the supernatural orders of being through the middles ages. In the 17th century Leibnitz proposed his “monad” as an irreducible unit for explaining not only the material world but the inner world of the soul.

In the early twentieth century there was a flurry of interest in holism and hierarchy that owed its genesis to the impact of Darwin’s evolutionary theory. I think the contribution of Jan Smuts in his publication of “Evolution and Holism” in 1926 is particularly important. Smuts was a soldier, a revolutionist republican, a lawyer, the Premier of the Republic of South Africa for several years (before the instigation of political apartheid), a globalist, and one of the founders of the United nations. writers of the UN founding charter. He also was a philosopher who saw the deep connections between the natural and social worlds and his concept of holism clearly influenced Wilber’s ideas in this area. Wilber quotes Smuts at the very beginning of his first major work that fully utilised the concept of hierarchy – “The Atman Project” – “Everywhere we look in nature we see nothing but wholes” (cited in Wilber, 1980). While all these various threads of ideas included the consideration of hierarchical networks and levels and orders of development it was not until the work of writer-philosopher Arthur Koestler that a fully theory of holarchy and holons was proposed.

Arthur Koestler – The father of Holon theory

 

The Ghost in the Machine

 

Some 35 years ago, in 1967, Arthur Koestler proposed the term “holon” in his book “The Ghost in the Machine”. Arthur Koestler was born in 1905 and died in 1983. During the 1930’s and 1040’s Koestler was a journalist who covered the Spanish civil war and World War II from the perspective of the ordinary people who were swept up in the great social tumult of those times. After the war he turned to turned to writing books in both fiction and non-fiction genres. He was one of the most widely read political novelists of all time. Koestler said that he wrote his novels, “out of my quarrels with the human condition”. His other non-fiction books, including, “The Ghost in the machine” were “attempts to analyse that same condition in scientific terms”.

Like Jan Smuts, Arthur Koestler led an extremely eventful life and he participated fully in some of the most important political and social events of his times. Again, similarly with Smuts, Koestler’s engagement with the events of the day included not only social action and participatory involvement at a personal level but he also lived a life of deep connection with the world of culture and inner experience. In the following quote from his book, “The Act of Creation”, Koestler is referring to the relationship between subjective and objective knowledge quests and it shows the awareness he had of both interior and exterior aspects of life.

Einstein’s space is no closer to reality than Van Gogh’s sky. The glory of science is not in a truth more absolute than the truth of Bach or Tolstoy, but in the act of creation itself. The scientist’s discoveries impose his own order on chaos, as the composer or painter imposes his; an order that always refers to limited aspects of reality, and is based on the observer’s frame of reference, which differs from period to period as a Rembrant nude differs from a nude by Manet.
Arthur Koestler, 1970, p. 253It is interesting to look at Koestler’s life in terms of Wilber’s Quadrants framework. He was a philosopher and held a rich interest in art and cultural concerns. He was active socially and for many years was involved in various social movements and was nominated for the Nobel prize for literature three times. His personal life was one of great behavioural involvement with the great dramas of revolution, war and social dislocation that characterised the early and middle twentieth century. He also explored the inner worlds of subjective experience and imagination and wrote some of the most memorable political novels of his times. Looking at his life it is clear that his great span and depth of involvements and experiences should be reflected in his philosophy and in the specific detail of the holon theory that he largely created.

Koestler’s Holon

The idea of the holon occupies a central position in Koestler’s thinking about the human condition. He developed the construct to deal with three central problems that he saw facing the social sciences of the post-war generation. First he saw the need for some model that could unite and integrate the reductionist and mechanistic worldview of the “scientific” and behavioural psychologies with the holistic and humanistic worldview of the Freudian, Rogerian and Gestalt psychologies. Second, he recognised the importance and relevance of evolutionary processes in the social sciences and wanted to provide some theoretical system that could apply evolutionary conceptualisations to both realms. Third, he wanted to develop a model of human social systems that was equally at home in analysing the micro-level of individuality and the macro-level of collectivity. He wanted to propose some basic model of explanation that was relevant across the great span of human activity and involvement.

Koestler acknowledged that his “holon” construct had, in fact, a very venerable and ancient ancestry in western philosophy. Several important philosophers including Leibniz and Hegel had drawn attention to the importance of such things as hierarchy and developmental levels. Koestler saw himself in a line of such thinkers who wanted to bring together different knowledge quests and schools of scientific endeavour instead of pursuing the ongoing specialisation in scientific knowledge that has characterised modern scientific schools. Holon theory was Koestler’s attempt at an integrative philosophy of science and he expected that the holon theory or something similar would form the basis for any truly holistic future scientific worldview. He approvingly quotes one Needham who said that, “The hierarchy of relations … will perhaps be the leading idea of the future”. So, the holon construct was no small thing for Koestler and it is clear that he regarded his holonic principles as a solid attempt at an integrative philosophy of human existence.

So what is a holon. The word is a combination of the Greek “holos” meaning whole, with the suffix “on” which, as in proton or neutron, suggests a particle or part. The holon, then, is a part-whole. It is a nodal point in a hierarchy that describes the relationship between entities that are self-complete wholes and entities that are seen to be other dependent parts. As one’s point of focus moves up, down, and/or across the nodes of a hierarchical structure so one’s perception of what is a whole and what is a part will also change.

The evolutionary holon

In introducing the idea of the holon Koestler quotes the story told to him by Herbert Simon, a Nobel prize winner, and called the ‘parable of the two watchmakers’. The parable goes like this:

There once were two watchmakers, named Bios and Mekhos, who made very fine watches. The phones in their workshops rang frequently; new customers were constantly calling them. However, Bios prospered while Mekhos became poorer and poorer. In the end, Mekhos lost his shop and worked as a mechanic for Bios. What was the reason behind this?

The watches consisted of about 1000 parts each. The watches that Mekhos made were designed such that, when he had to put down a partly assembled watch (for instance, to answer the phone), it immediately fell into pieces and had to be completely reassembled from the basic elements. On the other hand Bios designed his watches so that he could put together subassemblies of about ten components each. Ten of these subassemblies could be put together to make a larger sub-assembly. Finally, ten of the larger subassemblies constituted the whole watch. When Bios had to put his watches down to attend to some interruption they did not break up into their elemental parts but only into their sub-assemblies.

Now, the watchmakers were each disturbed at the same rate of once per hundred assembly operations. However, due to their different assembly methods, it took Mekhos four thousand times longer than Bios to complete a single watch.Koestler relates this story to show that the hierarchical organisation of systems is an inbuilt feature of life – biological life but also any complex evolving system. not only is the time needed for the development greatly shortened when hierarchical methods are used but there are also inherent benefits in terms of maintenance, regulation and restoration. Koestler sees the hierarchical ordering of life as such a fundamental aspect of development that he says (1967, p. 47),

We do not know what forms of life have evolved on other planets in the universe, but we can safely assume that wherever there is life, it must be hierarchically organised (emphasis in the original)Koestler wants to show two things with this parable. First, that complex systems will evolve from simple systems much more rapidly if there are stable intermediate forms than if there are not, i.e. if they are hierarchically organised. Second, and more importantly, he wants to show that the resulting complex systems will always be hierarchic and that hierarchy is the natural and ubiquitous outcome of the development of structural form. After establishing the universal importance of hierarchy to the development of complex systems Koestler went on to propose that these hierarchies could be analysed in terms of the stable intermediate nodes or forms through which their structure is defined. It was to these intermediate forms that Koestler conferred the new label of “holon”.

Koester was a keen student of psychology and was well aware of the problems besetting the reductionist behavioural approaches to psychological theory. He was also conversant with the European schools such as the more holistic Gestalt psychology and he saw his holon theory as a way to move beyond the inadequacies of these contending models. He saw the great dehumanising effect of atomistic psychologies but also recognised the limitations of the holistic schools. As he puts it (1967, p.49)

in spite of its lasting merits, ‘holism’ as a general attitude to psychology turned out to be as one-sided as atomism was, because both treated ‘whole’ and part’ as absolutes, both failed to take into account the hierarchic scaffolding of intermediate structures of sub-wholes … the Behaviourist never gets higher that the bottom layer of stones, and the holist never gets down from the apex.Koester saw holon theory as a broad philosophy of science that showed a way out of the interminable and centuries-long debate over the relative merits of reductionism and holism.

Holons and holarchies

Koestler noted that in every order of existence, from physical to chemical to biological and social systems, entirely self supporting, non-interacting entities did not exist. And more importantly, that entities can be seen to lie in holarchical relationship with each other. He called systems of such entities Open Hierarchical Systems (OHS) and these have subsequently been called holarchies. Every identifiable unit of organization, such as a single cell in an animal or a family unit in a society, comprises more basic units (mitochondria and nucleus, parents and siblings) while at the same time forming a part of a larger unit of organization (a muscle tissue and organ, community and society). A holon, as Koestler devised the term, is an identifiable part of a system that has a unique identity, yet is made up of sub-ordinate parts and in turn is part of a larger whole.

Koestler’s holons were not thought of as entities or objects but as systematic ways of relating theoretical structures. In other words, holons were arbitrary points of reference for interpreting reality. To quote Koestler (1967, pg. 55), “Whatever the nature of a hierarchic organisation, its constituent holons are defined by fixed rules and flexible strategies” (emphasis in the original). So Koestler’s holons are posited and “fixed” only out of the relational rules and strategies that help us make sense of reality.

Because holons are defined by the structure of a hierarchy each identified holon can itself be regarded as a series of nested sub-hierarchies in the same way that a set of Russian dolls is an inclusive series of dolls contained within each other. Holons are, then, both parts and wholes because they are always parts of larger hierarchies and they always contain sub-hierarchies. Holons simultaneously are self-contained wholes to their subordinated parts, and dependent parts when seen from the inverse direction. Hence, holons can be seen as reference points in hierarchical series or holarchies.

Russian dolls

Koestler also recognised that holons are the representative stages or nodal structures that define the developmental hierarchies. As he says (1967, p. 61),

the different levels represent different stages of development, and the holons … reflect intermediary structures at these stages.It is this crucial stage-like characteristic of holons that Wilber takes up, expands and utilises in his spectrum model of human growth and later in his quadrants framework for describing Kosmic development. It is interesting to note that Koestler also recognised that the stage-like nature of hierarchies that existed in the inorganic world and in “the interplay of cohesive and separative forces in stable inorganic systems, from atoms to galaxies”.

So, we see that Koestler not only introduced the nomenclature of holons but he also described their place in developmental theory and saw how they could be used to overcome many of the philosophical problems that were plagued the social and psychological sciences of the early twentieth century. Even more than this, Koestler developed a very detailed set of holonic principles that actually defined a new theory of social development and general evolutionary theory. These principles are outlined in an appendix to “The Ghost in the Machine” and are titled “General Properties Of Open Hierarchical Systems (O.H.S.)”. Many of these principles have been taken up and expanded on by Ken Wilber in his holonic tenets but there are many that have not. Before comparing Koestler’s OHS properties with the twenty tenets of Wilber I will give a brief overview of how Wilber has adopted the holon and how it fills a central role in his most recent writings on Integral theory.

Ken Wilber’s Holonic Tenets

Sex, Ecology, Spirituality

 

Wilber adopted Koestler’s holon construct during, what Wilber has called, the phase-2 period in the development of his philosophy. This phase, which occurred around the late seventies and early eighties, is characterised by a focus on the spectral transcend-and–include nature of all developmental structures. It is no surprise that Wilber would be drawn to the holon as a construct given his developmental interests and particularly his revolutionary pre/trans theorem which is so useful to unravelling the boundary stages of growth. So, it was quite early on that the holon construct was incorporated into the basic theoretical scheme Wilber’s writings as a way of emphasising the hierarchical/holarchical nature of reality. To my knowledge, the first reference that Wilber makes to the holon construct is in his 1983 book, “Eye to Eye” but he may well have been aware of the term for some time. This was at least 15 years prior to the great expansion of his ideas that culminated in 1995 in the publication of “Sex, Ecology, Spirituality” (SES) which introduced the Four Quadrants of Kosmic evolution (Wilber’s Phase-4). From 1995 the holon and its various defining qualities have held an increasingly important position in Wilber’s writings.

Wilber holonic theory or as he refers to it “the twenty tenets” were first laid out in the opening chapters to SES. They provide the foundation for his mapping out of the All Quadrants, All Levels framework (AQAL). It is clear from the very beginning of SES that Wilber now regards the idea of the holon as the primary explanatory unit in his AQAL framework. This is conveyed in his famous statement that,

“Reality as a whole is not composed of things or processes, but of holons”.

This groundbreaking statement sets the holon construct at the very heart of Wilber’s whole explanatory endeavour. And, I believe, that this marks a major turning point in the history of Western philosophy of science and in our more general attempt to develop scientific explanations of social phenomena. The reason for this is because in clearly identifying the holon as the central unit of explanation Wilber provides a basis for connecting all fields of scientific and cultural knowledge.

Wilber’s AQAL framework and the Holon

As with Koestler, Wilber uses the holon theory to, “undercut the traditional argument between atomism .. and wholism”. For Wilber to incorporate holonic theory into the theoretical structure of the AQAL framework was easy at one level because both theories were founded on the idea of hierarchical inclusion. The difference between them was that Wilber’s AQAL framework was a way of seeing the whole developmental and evolutionary nature of all relative knowledge, experience and activity. Wilber took Koestler’s holon to its logical end and, placing within the AQAL framework, saw the holon as a way of analysing all aspects and domains of reality. The subtitle of SES is “The Spirit of Evolution” and to my mind the book is an attempt to bring evolutionary theory out of its traditional biological home and to apply to all levels of existence – from matter to spirit. Wilber does this through the identification of the holon as his core explanatory device. This is the absolutely crucial part that holons play in his model.

In taking up Koestler’s wonderful theory of holons, Wilber too has stressed the sliding and contextual, yet hierarchical, nature of holons. Wilber has creatively used the holon construct to highlight the holarchical nature of his AQAL framework. The framework is derived from an immense amount of scientific, cultural and experiential knowledge. In adopting the holon construct the AQAL model becomes more than just a new way of connecting existing fields of knowledge in a developmental overview. It is also a new way of looking at the referential “units” of that knowledge – holons. Built into the heart of the model is the concept that all developmental phenomena can be viewed as aspects of dynamic, holonic events that are nested within a holarchy of evolving/involving structural patterns.

The holons construct is so critically important to the utility of the Integral model because it enables the AQAL framework to be focused on any point in the holarchy or, to put it another way, it enables any developmental event to be analysed in terms of an Integral methodology. As such, the concept of the “holon” does away with the endless quest of trying to find the fundamental parts or wholes that constitute reality and it releases us from the basis mythologies inherent in materialistic, mentalistic, animistic, relativistic, or idealistic conceptions of reality. Quantum physics, that most advanced of all natural sciences, now overtly recognises the completely mythological nature of “matter” (Davies & Gribble, 1992), and of ideas that regard reality as simply permutations of solid substance, empty space, and linear time. The AQAL model, when it is used as an interpretive schema, extends this demythologising awareness across all explanatory systems (including itself) and brings to the fore the holarchic and developmental nature of reality. With the idea of a nested holarchy of holons, Wilber has opened a vision of reality that does not fall into the errors associated with various forms of reductionism, elevationism or relativisim. In bringing Koesler’s holon concept into his model, Wilber has not only opened up the possibility of a truly open-ended Theory of Everything but also a systematic theoretical approach towards any thing/process/event.

The holon – Integral theory’s unit of analysis

The development of the human, in both its personal and social forms, is the most complex phenomena that we yet know about in the Kosmos. To understand this process in any sort of detailed and valid fashion is, to put it mildly, a big task. It is my opinion that Ken Wilber’s Integral theory is the only philosophical/epistemological/theoretical framework that attempts to present a comprehensive understanding of the complex and multi-layered reality that we see about us. One of the most attractive central features of Integral theory is that it does not rely on ontological reductionism to simplify that complexity, as do many other branches of science. The neurologist and the medical specialist reduce the human to the biochemical with their unit of study being the chemical compound. The behaviourist reduces the human to physical action with their unit of study being the behavioural stimulus-response cycle. The cognitivist reduces the human to the world of behaviour and thought with their basic unit of explanation being the pattern of thought, belief or feeling. The evolutionist reduces it to reproductive advantage with the locus of explanation being the adaptive interaction between environment and phenotype. The sociologist reduces the human to the world of interpersonal relations and group dynamics with their focus of explanation being the social event. The humanist reduces the human to the world of being and identity with authenticity in word and deed being their centre of interest. The transpersonalist reduces, or more correctly elevates, the human to the world of spirit and finds explanation in the analysis of the mystical event.

All these disciplines simplify human complexity to find something of certainty, something that is true, something that will have lasting validity. And, in their own way, each of the main perspectives on human reality does contribute unique knowledge to the quest for understanding that so occupies us. As Wilber has often pointed out, all these contributions are partially correct. The human can be understood and explained through the study of the physical, the chemical, the animal, the social, the political, the cognitive, the existential, the spiritual, and the historical. Once this partiality is recognised, we are then faced with the problem of truly integrating the valid and the true of each and bringing them into some semblance of coherency. And the very first task that is required for this integrative endeavour to be successful is to identify a unit of analysis or explanation that does not privilege any of the units of analysis or explanation associated with partial views.

In my opinion it is one of Wilber’s greatest insights that he has been able to identity an explanatory reference point that avoids the ontological pitfalls that have so plagued all previous explanatory elements. In so doing Wilber allows Integral theory to transcend (and integrate) all the reductionisms of the partial views to boldly propose that the true locus of explanation does not reside in any particular level of reality and cannot be limited to any single domain of investigation. The basic unit of analysis for Integral theory is not the atom, or the molecule, or the mathematical unit, or the interpretive perspective, or the cognitive pattern, or the historical event, or the spiritual revelation. For Integral theory the unit of analysis, it’s basic point of explanation, analysis, reference and “measurement” is the holon. This is why students of Wilber work, if they are to understand what Integral theory/philosophy, the AQAL framework and IMP’s are truly about, will have to have a good grounding in holon theory.

The reductive research paradigm has been immensely successful for investigating physical and chemical phenomena. More recently holistic approaches like the various systems theories, humanistic disciplines, and developmental theories have been successfully applied to social phenomena. The holon, the “part-whole”, has a built in non-reductive perspective that allows for the simultaneous recognition that anything can be studied holistically and anything can be analysed reductively at the same time. This combination of holistic and reductive methodologies also introduces a new element and immensely important capacity for explanatory methodologies that utilise this part-whole focus of explanation. It now means that the various types of reductive science can now be carried out in relational context. The disciplines of physics, chemistry, biology, psychology, the humanities, sociology, theology, and cultural studies can now be pursued within a cross-disciplinary framework that connects and situates their disparate findings and truths instead of juxtaposing them. By allowing for both holistic and reductive methodologies, the holon framework introduces an integrative dimension of implementing those approaches that no other approach can claim. This new capacity lies at the heart of Wilber’s (2002) recent call for a revolutionary Integral Methodological Pluralism (IMP) – “a project of synthesis”.

Holism, reductionism and pluralism

The holon is the holarchic (i.e. hierarchic plus heterarchic) reference point through which the various principles of the AQAL model can be applied. This is the real point behind Wilber’s first tenet of holons, “Reality as a whole is not composed of things, or processes, but of holons”. He is really pointing out here that holons permit an analytical holism that can evade the reductive errors that result from explanations that rely on some fundamental thing or process. Unfortunately the wording of this tenet suggests that holons themselves are building block composites that in some way fit together to make up Kosmic reality. But this is not at all Wilber’s intended reading for this tenet. The holon construct allows Integral theory and it’s AQAL methodology to step away from and the methodological battles engaged in by other disciplines and to avoid the reductive pitfalls that abound wherever science seeks to understand complex phenomena. The use of the holon as the means for applying Integral theory also allows the many other truths that have been uncovered by human knowledge quests to be honoured and rightfully situated within a non-reductive context. It is not just that the holon in conjunction with the AQAL principles can investigate systemic and elemental aspect of reality but that it can also, as Wilber says, “acknowledge, honor, and include all authentic modes of human inquiry ” (and their valid findings). In short, the full integration of the holon and the AQAL model enables Integral theory to overcome the traditional reductionist propensity to privilege very biased methodologies for gathering observations and experiences and very narrow modes of explanation for understanding them. As Wilber (2002) has recently said:

AQAL, then, is a metatheory that attempts to integrate the most amount of material from an integral methodological pluralism, thus honoring the primary injunction of an integral embrace: Everybody is right.

Everybody, i.e. all major theorists, philosophies and stores of cultural knowledge, are right (within context) and it is the holon construct that allows Integral theory to move without prejudice around these vast domains of human knowledge and pursue its agenda of holistic exploration and analysis. This process of acknowledging the validity and value of established personal and cultural knowledge quests can be viewed from a broader perspective than simply that of Wilber’s integral theory. Wilber has recently termed any such endeavour as Integral Methodological Pluralism (IMP). Integral theory is an example of such an approach to the investigation of events, experiences, and knowledge. But I believe that any such method will need to be based on the holon construct in some form because it is the only explanatory concept that can accommodate the three definitive criteria for an IMP.

Similarities and Differences

I have pointed out that Koestler has proposed a quite detailed set of holonic principles and shown that the holon construct has a very wide application. Wilber, in turn, has placed the holon construct firmly at the centre of his comprehensive integrative framework for connecting knowledge. Wilber has expanded holon theory into a new approach to understanding the relationship of many different knowledge domains. It should, however, be noted that Koestler provided Wilber with much more than just a new term to label the “building blocks” of his Integral theory/AQAL framework. Koestler’s principles of Open Hierarchical Systems (OHS) and Wilber’s twenty tenets are clearly very related and the following table shows the correspondences between the two types of holon theory.

Table 1: Correspondences between Koestler’s OHS principles
and Wilber’s twenty Holonic Tenets
Wilber’s Twenty tenets Koestler’s OHS principles*
1: Reality can be seen in terms of an endless series of holonic relations 1.3 Parts and wholes in an absolute sense do not exist in the domain of life. The concept of the holon is intended to reconcile the atomistic and holistic approaches. “The [holarchy] is open-ended in the downward, as it is in the upward direction”
2a: Holons have agency, individuality, deep autonomy. 4.1 Every holon has the … tendency to preserve and assert its individuality as a quasi-autonomous whole; 9.2 the holon’s agency is that which controls the part from the next higher level.
2b: Holons have communality, mutuality, and collective relationships 4.8 The canon of a social holon represents not only constraints imposed on its actions, but also embodies maxims of conduct, moral imperatives and systems of value.
2c: Holons have a capacity for self-transcendence, and active transformation into greater wholes 5.6 A holon on the n level of an output-hierarchy is represented on the (n+ I) level as a unit, and triggered into action as a unit. A holon, in other words, is a system of relata. which is represented on the next higher level as a relatum.
2d: Holons have a capacity for self-immanence, and the active integration of its parts 4.1 Every holon has the tendency to function as an integrated part of an (existing or evolving) larger whole.
4.1 a holon’s Integrative (INT) tendencies are inherent in the concept of hierarchic order and a universal characteristic of life. The INT tendencies are the dynamic expression of the holon’s partness.
3: Holons emerge creatively and indeterminately 8. Holons on successively higher levels of the hierarchy show increasingly complex, more flexible and less predictable patterns of activity. while on successive lower levels we find increasingly mechanised stereotyped and predictable patterns.
4: Holons emerge holarchically, i.e. through dynamics between hierarchy and heterarchy 6.1 Hierarchies can be regarded as ‘vertically’ arborising structures whose branches interlock with those of other hierarchies at a multiplicity of levels and form ‘horizontal’ networks
5: Each emergent holon transcends but includes its predecessors “A hierarchy of holons should rightly be called a holarchy”
8: Each successive holon level within a holarchy produces greater depth and less span 2.2 The number of levels in a hierarchy is a measure of its “‘depth”, and the number of holons on any given level is called its “span”.
12a: Evolution displays increasing complexity 8.4 Each upward shift is reflected by a more vivid and precise consciousness of the ongoing activity; and, since the variety of alternative choices increases with the increasing complexity on higher levels, each upward shift is accompanied by the subjective experience of freedom of decision. (“We find [holons] in an ascending order of complexity” )
Holarchies possess interiority and consciousness 8.6 Consciousness appears as an emergent quality in phylogeny and ontogeny, which, from primitive beginnings, evolves towards more complex and precise states.

* All direct quotes from “The Ghost in the Machine”

Table 1 shows the clear concordances between Koestler’s OHS principles and Wilber’s twenty tenets. I have pointed out these overlaps to show that Wilber’s extended use of the holon construct clearly builds on Koestler’s quite extensive and detailed explications of holon theory and that therefore the two models should be seen as a single continuum of development in the theory. Wilber has taken the foundational theorems laid down by Koestler and greatly extended their theoretical and practical application. As a whole holon theory needs to be seen as a new and very promising philosophy of knowledge that may well open up an entirely new and genuinely integrative understanding of the natural and social worlds and how they relate to each other.

There are several aspects of Koestler’s theory that have, as yet, not been explored by Wilber or any other Integral theory writers. These include the concept of holonic exchange/input-output systems which looks at the way holonic outputs are triggered and how holons scanners and filter inputs. Koestler’s concepts of “arborisation”, “reticulation” and “regulation channels” also show promise as ways of seeing how holons can relate to each other. There is also the issue of holonic health and how holons change and Koestler’s principles on holonic equilibrium, disorder and regeneration offer fertile ground for further study.

Holons and the Future

I noted earlier that Ken Wilber (2002b) has recently suggested some principles that define, what he calls, an Integral Methodological Pluralism (IMP). This idea refers to the broad characteristics of a discipline that can be considered to be an integral approach to a topic. Wilber maintains that any future over-arching model of knowledge will have posses the main principles that define an IMP. These principles are non-exclusion, enfoldment/unfoldment, and enactment. Wilber defines non-exclusion as follows:

Nonexclusion means that we can accept the valid truth claims (i.e. the truth claims that pass validity tests for their own paradigms in their own fields, whether in hermeneutics, spirituality, science, etc.) insofar as they make statements about the existence of their own enacted and disclosed phenomena, but not when they make statements about the existence of phenomena enacted by other paradigms. (2002b, ¶52)

This principle refers to the acceptance of partial but valid knowledge that has been gleaned by disciplines focusing on particular aspects of holons. Much of this knowledge has been the result of reductionist paradigms (disciplinary matrices/methodologies). The second principle, enfoldment/ unfoldment is defined as:

nonexclusion often discloses an unfoldment that is enfoldment: in any particular developmental stream, successive waves transcend and include their predecessors, and thus each wave is adequate, each succeeding wave is more adequate. (2002b, ¶73)

In short, in healthy unfolding, each wave is holistic, each succeeding wave is more holistic. (2002b, ¶81)

The unfoldment/enfoldment principle refers to the acceptance of the holistic and developmental nature of knowledge and methods. This principle relates to the idea that all knowledge bases and methods are connected and can illuminate each other. Wilber’s third principle, the Enactment principle is explained as follows:

Putting all of these modes of inquiry together, as an enactment and disclosure of turquoise cognition, results in what we are calling integral methodological pluralism, which embodies the more practical side of an Integral Post-Metaphysics (Wilber 2002a, ¶64)

phenomena are enacted, brought forth, and disclosed by practices, then we realize that what appeared to be “conflicting phenomena” or experiences are simply different (and fully compatible) experiences brought forth by different practices. (2002b, ¶89)

So enactment refers to the novel capacity of an IMP to situate and provide a new integrative context for all other partial approaches be they reductionist or holistic. It is precisely these three IMP capacities that are made available when the holon is seen as the unit of analysis for Integral theory. This leads to what Wilber calls Integral indexing or conferencing.

“AQAL indexing” (“integral indexing” or “holonic conferencing” [see below]) allows individual paradigms to be seated next to each other at the integrative table, in such as a way that each individual paradigm is honored and acknowledged. (2002b, ¶75)

Richard Slaughter, in an essay on the possibilities of an Integral Futures discipline, has pointed out that any futures studies practitionsers will not only need to understand the potentials and limitations of their own worldviews but will also need to be “proficient in exploring other perspectives” and the relationships that come out of the meeting of different perspectives. There seems to be an imperative here for scholars who deal with Big Pictures to take on the IMP framework. As part of this move, I would further add that the holon construct and holon theory may well be an essential aspect of any IMP. I say this simply because the holon framework presents a methodological basis for the IMP principles. The holon construct allows for the discriminative analysis of phenomena through non-exclusion, it allows for the inclusion of holistic and developmental through unfoldment/unfoldment, and it allows for the active discovery of insight and connective knowledge through its capacity to generate the enactment of integrative practices. The holon is the core unitary construct that will define any IMP approach to investigating, experiencing and analysing the human encounter with our world.

Conclusions

The holon construct and it associated theory has the potential to play a crucial role in the movement to combine and synthesise scientific and cultural knowledge about psychological and social realities. While there is a long tradition of attempts to derive a comprehensive philosophy for understanding human realities it is only with the 19th and 20th centuries contributions of evolutionary theory and developmental models of human growth that this synthesising project has really come of age. In many ways holon theory is the culmination of this integrative movement and its development comes at a time when such connective knowledge and holistic approaches are most needed. The global systems that threaten the development of healthy and sustainable social development require systemic and integrative modes of imagination and action. Holon theory as an example of an IMP provides the scope and insight that global crises demand.

It is not by accident, I believe, that the two founders of holon theory have both come from outside of academia. One from the world of journalism and real politic and the other from the world of contemporary spirituality and the human potential movement. Out of their visionary thinking these two writers/philosophers have forged a new approach to seeing the breadth and depth of reality and the challenges that are inherent in it. Koestler and Wilber’s lives and writings are very different but also in a deep way very complementary. One comes from the experience of war and revolution in continental Europe while the other comes from a secluded life of inner journeys. One writes fiction as a way of wrestling with the world of human suffering the other writes non-fiction as a way of mapping out the potential for life. One is immerses himself in the psychologies and philosophies of the western tradition and the other follows contemplative paths of Eastern spirituality. Together they bring a new vision to how we and our realities are connected to each other. In the chapter which introduces the neologism “holon” for the first time, Koestler quotes the writer L.L. Whyte who said that, “fertile vistas may open out when commonplace facts are examined from a fresh point of view.” In my view the holon, and its associated theoretical principles, will open up the richest and most crucial fields of scientific and cultural endeavour in the 21st century.

References

Koestler, A. (1967) The ghost in the machine. London: Arkana

Wilber, K. (1995) Sex, ecology and spirituality: The evolution of spirit. New York: Shambhala.

Wilber, K. (2002) Excerpt B: The Many Ways We Touch -Three Principles Helpful for Any Integrative Approach

Please see my related posts:

 

Levels of Human Psychological Development in Integral Spiral Dynamics

Multilevel Approach to Research in Organizations

The Great Chain of Being

Boundaries and Networks

Hierarchy Theory in Biology, Ecology and Evolution

Networks and Hierarchies

Consciousness of Cosmos: A Fractal, Recursive, Holographic Universe

Truth, Beauty, and Goodness: Integral Theory of Ken Wilber

Boundaries and Relational Sociology

Reflexivity, Recursion, and Self Reference

 

Key Sources of Researches:

 

 

 

Holon (philosophy)

WIKIPEDIA

https://en.wikipedia.org/wiki/Holon_(philosophy)

 

 

 

Holons and Holarchy of Arthur Koestler

 

Arthur Koestler

 

http://www.markfoster.net/struc/holarchy-holons-koestler.pdf

 

 

 

 

The Holonic Revolution Holons, Holarchies and Holonic Networks. The Ghost in the Production Machine

Piero Mella

https://www.researchgate.net/publication/270338868_The_Holonic_Revolution_Holons_Holarchies_and_Holonic_Networks_The_Ghost_in_the_Production_Machine

 

 

 

Holons and agents

A. Giret

https://www.researchgate.net/publication/226808580_Holons_and_agents

 

 

 

 

A Brief History of Holons

Mark Edwards

http://spiraldynamicsintegral.nl/wp-content/uploads/2013/09/Edwards-Mark-A-Brief-History-of-Holons.pdf

http://www.integralworld.net/edwards13.html

 

 

 

 

 

The Holonic View of Organizations and Firms

 

Rolf Sattler

 

Eastern Roots of Russia’s most famous Toy