Heterodox Economics Newsletter

Issue 296 May 09, 2022 web pdf Heterodox Economics Directory

I had a conversation with my plumber these days. He is a smart man, who often tells stories that help to sharpen my economic intuition. A few months ago he explained to me how his company began hoarding inputs to confront increased uncertainty about the reliability of provision through global value chains. While they never actually experienced a logistical bottleneck, simply accounting for the possibility of such a bottleneck occurring changed their expectations in a way that led to self-reinforcing effects as increased hoarding obviously puts additional pressure on the demand for such inputs. Similar to Merton's classic example of a bank run, such cases of self-reinforcing expectations in particular (and self-reinforcing effects in general) pervade economic processes and make them complex objects that can easily develop in unexpected, non-linear ways.

These days he told me that his phone is running hot constantly since the war in Ukraine started as people want to switch from gas and oil to alternative heating facilities. This is a big issue in Austria, my home country, as much heating relies on fossil energy and much fossil energy is imported from Russia. And indeed, my plumber's description clearly indicates that this is one of the rather rare cases, where supply cannot accomodate demand or at least cannot do so without significant lags of several months, in some cases even years. While this is an interesting idiosyncracy that informs us a little about how contingent the interplay between supply and demand actually is, the more depressing observation is that fear of Putin's aggression and an escalating conflict with the EU in terms of economic sanctions has accomplished what constant news about how our planet is burning could not do: namely motivate the Austrian population to undergo a large scale shift in preferences for alternative heating systems. While I, of course, appreciate the overall outcome in this case (bettter now than never!), I would have preferred a more enlightened and forward-looking approach by my fellow countrymen as an earlier strive for a shift would obviously have allowed us to more fully exploit the potential associated with such a large-scale reswitching of heating-facilities.

From all this we see that my plumber is somewhat similar to Elon Musk: both are a single persons that help us to sharpen our economic intuition for understanding the inner workings of capitalism. Elon does so very well currently – by simply buying Twitter he illustrates perfectly well how vulnerable private media can be to the private interests of those, who reside at the top of the wealth distribution ;-)

All the best,

Jakob

PS: In this issue I tried to incorporate some items – like information on a new journal on the Circular Economy or some books dedicated to innovation studies – that might be of relevance for getting the much-needed socio-ecological transformation going. In general we try to get a better grip on the expanding discourse of ecological economics, but we somewhat depend on researchers active in this area to submit more info – my feeling is, we currently miss too many nice events, journal-issues and conferences associated to ecological issues in general and ecological economics in particular. So please, if you should take note of something that should also be posted in the Newsletter simply forward it to newsletter@heterodoxnews.com!

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