Commentaries On Cultural Economics: Institutions

Permanence

An organization may be thought of as a group of people whose collective activities have an ordered existence that is intended to fulfill a common purpose. People who belong to the group may have been brought together by a common cause, shared beliefs, or employment. The group's collective activities may have a commercial, spiritual, or cultural purpose. Some form of order is imposed by influential members of the group on the activities of all group members. The rules, procedures, rituals and behavioral norms of individual participation may range from easygoing attitudes, to the imposition of strict responsibilities. The organization confers rights, obligations and liabilities on the individual participant. Participation will range from informal (casual) to formal (conferring implied or specific obligations).

Organizations become institutions when they take on an existence of perceived historical permanence that is separate and distinct from the lives of individual members. For the purposes of this discussion, institutions may include churches and other religious organizations, charitable and fraternal associations, unions, political parties, government agencies, corporations, hospitals, universities and so on. Institutions project a presence and authority that is larger than the influence of individual participants. There is a structure that confers power on selected members, demands obedience from all participants, and preserves the existence of the institution. The Catholic Church, for example, is an institution that is separate and distinct from Catholics as a body of parishioners. The Democratic Party is an institution that projects a presence that is usually more important than the existence of individual democrats. The U. S. Department of Labor represents the activities of thousands of (largely) faceless government employees. General Electric and Harvard University are icons that have a more lasting charisma than any of the individuals who participate in their activities.

Successful Organizations

Organizations tend to be limited by the strengths and weaknesses of their management. Successful organizations - corporations, government agencies, universities, religious institutions, charities, and so on - will normally have a strong and effective management team. The organization's leadership has a clear and informed vision of goals and objectives. It will usually be proactive, rather than reactive. These leaders, including individuals at all levels of the organization, are able to combine a comprehension of the organization's place in the real world with the capability to execute an operating plan that permits the organization to succeed. Participants (employees or members) are focused on a strategy that will lead to accomplishing specific goals and objectives. There is a sense of mission, a sense of urgency and a sense of pride to be involved in the organization's mission. Most of the participants (employees or members) have a sense of belonging. The organization or institution provides a frame of reference for their activities. Tasks and work processes assume meaning because they are related to the success of the organization's mission. For each individual, success is measured in terms of results. Human energy is focused on the completion of assigned tasks. It is not wasted on debilitating internal political power struggles. Instead, the naturally competitive spirit of human endeavor is channeled into constructive activity that benefits the institution. In this environment, the organization's leaders are not preoccupied with finding the most politically acceptable response to the inevitable challenges that occur in the course of an organization's activity. Instead, potential conflicts are resolved through preemptive personnel communication and proactive public relations.

Less Than Successful Organizations

Unfortunately organizations that have morphed into recognized institutions have a tendency to fossilize because bureaucratic rules, processes, privileges and restrictions suppress freedom of action. As this process permeates the institution, the organization invariably deteriorates, ceases to exist, or becomes irrelevant.

In general, institutions are opposed to change because change dislocates the participant's frame of reference and perception of personal status, disrupts the political structure of the organization, may force the reformation of the institution's culture, and impacts the rules, procedures, rituals and behavioral norms of individual participation. The larger the institution, the less flexible it becomes, because increased size demands the incremental imposition of formal behavior. The older the institution, the greater the resistance to change. Organizational aging breeds an increasingly rigid culture. There is a fixation of beliefs. Symbolic exercises become pedantic routine. Traditional rituals are retained even though they no longer serve any useful purpose and may actually be antithetical to what the institution’s members actually believe. Truth is standardized and eventually fossilized. Artificial rituals and mindless rules crowd out innovation. The institution's embedded culture will tend to support the continuation of doctrinaire positions that create artificial social, intellectual, spiritual and emotional boundaries. There is a tendency to venerate the past while ignoring present needs and opportunities. Such traditionalism fosters false and exaggerated ideas of sacredness and fails to make contemporary interpretations of values and practices.

Zealots, in a display of very human behavior, will defend the institution against change because change is viewed as a heresy against established beliefs.

Human Nature

Organizations are the invention of the human mind. They consequently display very human characteristics. Some participants will strive to accumulate power and authority. Others prefer to avoid personal responsibility or chose to maintain a low profile in order to keep from being blown out by internal political struggles. Competitive divisions and numerous cliques will inevitably develop. They encourage discrimination, elitism, and “chosen people” attitudes. These inner circles tend to believe that everyone else is an outsider who cannot be trusted. Participation in the clique confers personal status and a sense of comfort because participants are dealing with familiar relationships. An “us” versus “them” psychology inevitably develops.

All institutions run the risk of evolving into politically active hell holes where everyone is badmouthing everyone else. There is a nasty adversarial elitist struggle for personal position in the hierarchy. When institutions fall into this trap, they inevitably deteriorate because the accumulation and use of political power becomes more important than achieving the objectives or performing the duties of the institution.  Rather than make rational decisions based on a careful evaluation of facts, decisions within this environment are made on the basis of political power. All too often, creative ideas are destroyed simply because one or more factions within the organization chose to oppose the idea merely to demonstrate their ability to dominate the decision making process. (Sound familiar?)

Bureaucracy and Obsolescence

Institutions are afraid to take risks. Risk requires the implementation of the unknown and the results cannot be guaranteed. Failure is not politically acceptable. The retention of power is based on being right and consequently it is better to do nothing (frequently while appearing to do something), than to take an action which fails. If catering to the press is an important requisite of power retention, then it is inevitable that the selected course of action will conjure simplistic images rather than creative change. This is especially true when considering the decisions of government. Badgered by the press and mindless critics, there is no allowance for error. Creative experimentation is not allowed.

Institutions create bureaucracy. Rules, Procedures and Systems are necessary to maintain order. There is the impersonal application of general rules, both to outsiders and to internal staff. Applied rules are likely to be a repetition of what has worked in the past. They are made on a blanket basis, applying to everyone without regard for sanity or common sense. Rules are often part of an overall system, work process, or procedure. Since change can be disruptive, flexibility is to be avoided.

Bureaucratic procedures are usually proposed or written by people who do not have the capacity to understand their impact. They are made by an authorized person (autocratic) or by a committee (the pseudo democratic autocracy of the proletariat). Bureaucratic committees are usually populated by individuals who are ill equipped to make reasonable rules. Individual member motivation is likely to be political, rather than rational. The larger the committee, the more likely it is most of the members will not be able to make a constructive contribution.

There is an inclination of leaders to become administrative bureaucrats or defenders of the institution rather than managers and communicators. Oppressive authority evolves. Rules and regulations replace creative leadership. Red tape and ingrained attitudes smother creative thinking. Traditionalized, dogmatized, and institutionalized organizations fail to hold the interest of adventurous people who could care less about their existence.  As the institution is trivialized (becomes irrelevant), it becomes the target of scorn or is simply ignored.  Although there is a retained façade of historical purpose, its actual activities invariably deviate from its original mission.

What is the lesson?  The creations of human invention inevitably deteriorate.

All institutions are destined to become obsolete. It is a natural process.

Survival

The first obligation of any institution is to ensure its survival. No matter how irrelevant it has become, no matter how uncompetitive its products or services, no matter how wide the gap between internal self-perception and external assessment, an institution will continue to pursue the familiar until such actions are no longer possible.

Management invariably defends a dysfunctional institutional culture. But it will do no good. Institutions fail because they are no longer relevant to the community’s Cultural Ecosystem (as has happened to some service organizations), are no longer competitive within their industry (think GM before 2007), or are have ossified into politically ineffective institutions (think U. S. Congress).  These institutions continue to exist until they eventually fade away into historical oblivion, collapse in a spectacular display of chaotic failure, or undergo a substantial reformation.

Competitive and market driven institutions, such as corporations, can be revived by disruptive management because their continued existence depends on a positive transformation. Change is motivated by the stark realities of economic survival. Institutions that tend to be constrained by internal political squabbling, such as universities, are unlikely to experience an institutional reformation until their economic structure becomes unsustainable. Political, religious, and fraternal institutions typically decline because they become irrelevant to the cultural Ecosystem within which they must function. But government institutions - legislatures, administrations, and agencies - have the unfortunate ability to hide behind the protection of political dispensation and the police power of the state. Because institutional reorganization will disrupt their perceived selfish-best-interest, insiders vociferously defend government institutions against reorganization and reformation.  Disruptive management, which could revitalize the functions of government, is not allowed by the conceit of entrenched political power.

Even if they have become corrupt, irrelevant or dominated by special interest agendas, even if they are no longer needed or have strayed from their original mission, the institutions of government tend to survive. Until there is a revolution.

Organizational self-preservation is instinctive.  It maintains the political power of those in charge (along with various insider cliques), and provides a reassuring frame of reference for other members. Outsiders are still outsiders. Members can make believe everything is OK, even while the institution continues to rot from within. Government becomes a collection of competing political cliques, favored cronies, and dysfunctional institutions. Unyielding conflict replaces compromise. (Note 1)

Cultural Economics

Why is this discussion of institutions important?

Cultural Economists examine institutional behavior and management in order to understand the past (and future) impact they will have on our economy. The results are likely to reveal valuable information to support the associated economic and cultural analysis. For example: Adolf Hitler ascended to power by exploiting the weaknesses of the German government after WW1; Honda, Datsun, Toyota, and Volkswagen were among the companies that took market share from the flawed institutions of the American auto industry after WW2; and the existing world economic crisis can be traced back to deficiencies within the institutions of government and finance. Most large scale economic failure (or success) can be linked to institutional failure (or success), and most institutional failure (or success) can be linked to the internal cultural characteristics of the relevant institutions, and – finally – the cultural characteristics of every institution are driven by the strength and weaknesses of human nature.

The Cultural Economist

Note 1: Sound familiar?  The American people have given their congress an abysmal performance rating, and the administration’s popularity is largely based on the personal appeal of the President. One of the interesting (and disturbing) things about America’s last election cycle is that both candidates for made very personal promises to the electorate. It was as if Congress did not exist, or was – at least – irrelevant.

Water and Food

Read the following two short essays. Then ask yourself two questions.
1. What impact does this reality have on the Cultural Ecosystem of our planet’s human population?
2. What should we do?

Water
     According to the United Nations, the quality of our global fresh water is declining. A serious gap is beginning to appear between the water demands of a growing population and available supplies.  The two regions that are already experiencing the most serious absolute and seasonal water shortages are – unfortunately – two of the geographic areas where population is growing much too fast.
* The population of Africa (excluding North Africa) is growing at an average of 2.2 percent per year. A University of Cape Town study predicted decreased rainfall will lead to reduced river flow and lower lake levels. Serious water shortages will occur before 2100. That means trouble for a growing population.
* In the Middle East and North Africa (MENA), population growth currently exceeds 3 percent per year.  Home to approximately 6.4 percent of the world’s population, MENA has less than 1.5 percent of the world’s fresh water. More cultural trouble.
     Population Action International (PAI) makes projections of national per capita water availability, and forecasts water shortages by 2025. By then, more than 2.8 billion people will live in 48 countries facing water stress or water scarcity. Of these countries, 40 are in the Near East, North Africa or sub-Saharan Africa.
    
     Problems of water quality and availability are evident all over our planet. About 70 percent of our planet’s fresh water supplies are used for irrigation. Depletion means less food. Over 20 cities in India are currently experiencing chronic water shortages and water quality is a national problem. China, which has 22% of the world's population but only 7% of all freshwater, is drawing down on its available water resources faster than they can be re-supplied by nature. Ground water depletion is a problem in Europe and the United States where over-use and contamination has reduced the geographic area of arable land, and threatens the quality of drinking water supplies. Both the South Eastern and South Western states of America are experiencing sporadic drought conditions. We are using the water from our aquifers faster than they are being re-supplied by rainfall. A large area from Iran to Kazakhstan, the North Eastern portions of South America, and the entire continent of Australia (despite excessive regional rainfall in 2010) are vulnerable to severe drought.
    
     If the IPCC is right, we will be challenged by worldwide water problems. By mid-century, annual average river runoff and water availability are projected to increase by 10-40% at high latitudes and in some wet tropical areas, and to decrease by 10-30% over some dry regions at mid-latitudes and in the dry tropics. Some of these areas are already stressed for lack of water. Up to 40 percent of the world’s population relies on snow melt for fresh water and agricultural irrigation. The availability and reliability of these snow falls is questionable. There will be increased algal blooms in both fresh water and sea water resources. Look for a continuing contamination of our water supplies from the use of chemicals, poor control of human waste, and the salinization of irrigation water, estuaries and freshwater systems. Higher sea levels will lead to salt water intrusion that decreases our fresh water resources and reduces the essential elements of our sea life food chain. The existing competition for over-allocated water resources will intensify and lead to regional conflict.
    
     Should we add water resource depletion to our list of challenges that promise to pressure our cultural and economic future?  How will desertification and rising levels of salt compounds affect our production of food?  What is the potential threat from waste and chemical contaminants to our drinking water supplies?
    
     Chronic shortages of fresh water increase the risk of disease, reduce food production, stifle economic development, and create the basis for ugly regional conflict.

Food
     Future food production will be constrained by global climate change, as well as the loss of arable land, declining water quality, and fossil fuel resource depletion.
    
     One of the most immediate results is an increase in malnutrition and hunger. Famines occurred throughout the 20th century: The Allied blockade of Germany from 1915 – 1918; Armenia 1915 – 1917; The Soviet Famine of 1932 – 1934; Poland 1940 – 1942; Leningrad 1941 to 1944; India 1943 – 1944; China 1928, 1942, 1958 - 1962; Biafra in the late 1960s; Cambodia in the 1970s; and more recently the famines in North Korea, Sub-Saharan Africa, South Asia and parts of Latin America. Pockets of starvation and malnutrition happened all over the globe. Two thirds of the nations in Africa face chronic malnutrition (less than 2300 calories per day), and at least 40 percent will experience increasing shortages of food. (UNDP)  We can blame these problems on crop failure, drought, and pestilence. But many were either created or exacerbated by man. Hatred, war, genocide, lousy economic policy. Hunger has been politicized and globalized. Famine is invariably attended by disease, malnutrition, poverty, inflated food prices, declining education, disrupted medical systems, social disintegration, and – bloody senseless conflict. Most of the dead are little children and old people. More men than women. Millions suffer from severe malnutrition – the bride of crippling disease. And things are getting worse. We humans are destroying our arable land. By the end of the 2oth century, the basic infrastructure of food production was breaking down in many parts of the world. In Brazil, for example, the replacement of small farms with vast seas of industrialized sugarcane monoculture has led to a decrease in biodiversity, the conversion of more forests to farmland, increased food prices, and rising social problems from vandalism, unemployment, political unrest and violence. Food production has declined at many subsistence farms in Africa, Asia, Mexico, and elsewhere. Although the demand for corn promises to increase the income of poor farmers in Mexico, they will have to chose between planting crops for food to feed their family, or crops for fuel that bring in cash.
    
     A study of third world cultural economics suggests millions of Third world farmers face increased deprivation. If impoverished farmers are forced to raise fuel crops because they increase the wealth of those in power, the farmers will starve because they did not grow enough food. Sadly. The prerequisite pattern of oppression has already been established in Third World countries. Farmers are finding they can not afford the cost of inorganic fertilizers, herbicides and pesticides which are manufactured from increasingly expensive oil and natural gas. So they plant the land without them until it is exhausted.   Useless.
    
     From the 1960s through 2007, food production actually increased faster than population. Optimists believe this increase can go on forever. What they forget, however, is that past rates of food production (the Green Revolution) have been achieved by applying ever larger increments of fertilizers, herbicides, insecticides and irrigation to impoverished farm land. Year after year. But chemical soil amendments are made from fossil fuel resources – natural gas, oil, and coal. As the availability and cost of these resources became more restrictive, agricultural use declined. Oil depletion will also increase the cost of food production, processing, and distribution because gasoline and diesel fuel are made from increasingly expensive oil. And finally, thanks to thoughtless agricultural land destruction and global warming, over a billion people will be living in areas where there is a critical insufficiency of cultivated land by 2040. (IPCC)
    
     “Just when we need more soil to feed the 10 billion people of the future, we’ll actually have less—only a quarter of an acre of cropland per person in 2050, versus the half-acre we use today on the most efficient farms.” David Montgomery, author of the 2007 book  Dirt: The Erosion of Civilizations
    
     These facts must lead us to the conclusion that food will become less available and more expensive as we move though the 21st century. Increased yields in higher latitudes will be offset by decreased yields in warmer regions because of drought. Increased temperatures have already encouraged expanded migration and rising numbers of plant pests. Look for increased plant disease, and the loss of arable land from soil erosion, salinization, and desertification. And finally, as frequently reported in the media, most of the world’s fisheries are already either fully exploited or are in decline.
    
      Global fossil fuel resource depletion, climate change, urbanization, desertification, and limits to irrigation place an upside limit on food production, creating lifestyle challenges for people in every nation. 
    
The Answers
     And so. What are the answers to the two questions posed at the beginning of this essay?
    
1. What impact does this reality have on the Cultural Ecosystem of our planet’s human population?
We humans will consume our planet’s resources until they are either (for all practical purposes) depleted, unusable, or unaffordable. As accessible resources decline, so will our human population.

2. What should we do?
We could try population management. Reducing our human population would create a more sustainable EchoSystem. But we all know that will not happen.  So this is our fate. Archeologists tell us there have been many civilizations that have flourished and then disappeared. It is a natural process.
    
    
TCE
    
     Definition: “Accessible” resources are those reserves of minerals, water and land that can actually be found, produced, transported, refined, distributed and used without material disruption at a price the consumer can afford to pay.
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What is Cultural Economics?

It Is ...

The study of how human culture interacts with economic events and conditions. Culture, in this sense, includes everything we are: our political systems, religious beliefs, ethnic character, mores, traditions, history, customs, arts, sciences, and education. These all play a role in how we chose to organize the production of goods and services, the values we place on labor and opportunity, how we make purchase and investment decisions, and how we utilize the resources of this earth. The term "Economics" refers to the extent and process of how we employ capital, labor and materials. In the aggregate, these drive the data that is used to measure how our economy is behaving - markets, raw materials, production, finished goods, revenues, costs, profits, inventory, employment, housing, income, savings, stocks, bonds - and so on.

Why is Cultural Economics Important?

Cultural Economists must have a strong sense of the cultural matrix within which economic phenomena occur. However irrational they may appear, values and traditions are non-the-less relevant to economic analysis. Political and religious allegiance influence purchase decisions. Fear and greed are economic motivators. Attitudes about education, individual rights, the accumulation of wealth and the importance of private property drive the adoption of economic systems and political institutions. Collectivist, dictatorial and democratic solutions compete for political power that will determine how labor, capital and material resources are allocated and managed. Culture defines the collective manifestations of who and what we are, including our religious beliefs, political systems, customs, values, intellectual acumen and creative endeavors.

It should be obvious. If we want to make long range economic forecasts, we must understand how culture and cultural change will shape future economic choice.

What sets Cultural Economics apart 
from other methodologies of economic analysis?

Economic research frequently yields inadequate conclusions based on irrelevant or obsolete data that has been interpreted using algorithms of questionable relevance. In other words - we play with the numbers. It's a great academic exercise. Then we project our conclusions into the future on the basic assumption that future reality will be an extension of past reality.

Sometimes it actually works. We can usually make reasonable estimates of near term demand and consumption, Gross Domestic Product (GDP), inflation, employment and so on. We have a reasonable probability of success if we are making a specific forecast for event driven data that will occur within the next three to six months. It helps our accuracy if future events within the forecast period are well understood and relatively static. In other words – our economic environment will not be altered by any surprises such as weather disasters or unanticipated political events.

Unfortunately, the longer the forecast period, the higher the margin of error. Cultural change is a given. Our economic environment is always evolving in reaction to current events. If we only use historical data as the basis of our economic analysis, then forecasts that extend out beyond a year or two will be something of a crap shoot.

Why? Because the future is NEVER an exact duplicate of the past. The technology boom of the 1990s was a one time series of specific events that will never be repeated. It is therefore useless to extrapolate the economic data of that period in making forecasts of future events. When the boom went bust, all of our economic data got reshuffled. Sure. We will have other periods of boom - and bust - but they will be propelled by a different set of circumstances. Data from periods like the Great Depression and the 1990s can be used as a point of comparison, an illustration of what might happen, but not a blueprint of future events.

For example. Various economists have made estimates of how the price of oil impacts GDP, inflation and employment. These forecasts have usually been based on an analysis of historical data and events. They generally conclude that oil consumption only constitutes about four percent of domestic consumption and therefore even radical changes to the price of oil will only have a marginal impact on the economy. The numbers are correct.

But the forecast is not.

Why? Three reasons.

1. Past oil demand occurred in a world where there was excess capacity. Although temporary supply restrictions drove up the price of oil in the early 1970s and 1980s, the supply of oil eventually recovered to a point where there was more than enough oil to satisfy consumer demand. The price of oil then declined. Our cumulative thirst for oil continued to increase. As we look ahead, however, the combined impact of cultural change and declining oil reserves will bring about a continuing decrease in available supply versus a continuing increase in demand. Islamic Jihad, for example, promises to have a negative impact on oil exploration, production and transportation. On the other hand, China and India are scrambling to secure as much oil as they can to satisfy the needs of their growing economies. Since actual consumption will be restricted by available supply, the economic disruption will far exceed a mere change in price. At first, supply disruptions will cause intense shifts in the world’s economy. Oil shortages will drive recession and inflation. Subsequent reductions in economic activity will reduce the demand for oil. When demand falls below available production, excess capacity becomes available and oil is no longer a barrier to economic growth. As economic activity recovers, the demand for oil will again increase until consumption equals production. The cycle will then be repeated. Good times beget bad times beget a resumption of good times. However, as described in “The Report on Oil Depletion”, the cumulative impact of declining reserves and escalating cultural conflict will push the world’s economy into a long term decline.
2.  Generally speaking, relatively short term oil shortages and price increases do not have much of an impact on long term consumer behavior. Despite what happened in the 1970s and 1980s, we Americans continue to favor energy intensive life styles and emerging industrialized powers such as China need a lot more oil in order to continue their economic growth. These life style and economic choices are structural in nature. That means they are embedded in the economic outlook of our respective cultures. The net result? Even though higher prices and widespread oil shortages will unquestionably force a transformation of national cultures, cultural change usually takes a long time to evolve. During the interim, oil depletion will have a long term inflationary impact on the price of oil and a recessionary impact on the world’s economy.
3. The third reason has to do with the uneven impact of price on individual consumers. In 2002, the national average price per gallon for refined oil consumed was just over $1.50 per gallon. By 2008, it appears the average price for the refined oil we consume may exceed $3.00 per gallon. Since fuel shortages can be expected to increase the cost of transportation, warehousing and distribution, net discretionary income will decrease from 2002 to 2008. The greater percentage of this decrease will fall upon lower income groups. Given the patterns of oil product consumption by income group, and factoring in a three percent per annum increase in wages, if you made $25,000 in 2002, refined oil products absorbed over 8 percent of your income. By the end of 2008, refined oil products will cost you over 13 percent of your income. For someone making $100,000 a year, however, the direct and indirect cost of oil increases from a more affordable 2.35% of income in 2002 to 3.94% of annual income in 2008. There will be substantial shifts in the economy as consumers, particularly in lower income groups, scramble to reduce the cost of transportation. Consumers will demand vehicles that can deliver greater fuel efficiency, there will be political pressure to improve the public transportation infrastructure, and we will be forced to adopt less energy intensive life styles. Economic stress will drive a cultural transformation which – in turn – will drive additional economic change.

We must conclude that if we hope to forecast future reality with any accuracy, we must find a way to factor cultural change into our economic analysis. To meet the demands of this challenge, we need the disciplines of Cultural Economics.

What are the Disciplines of Cultural Economics?

Cultural Economics is not some dreary cross between tedious accounting and data necrophilia. It is a science that quantifies the past, present and future of human behavior. If human existence is dynamic, then economics – as a field of study – must be able to characterize the interaction of culture and economics in contemporaneous terms.

• We start with an understanding of human nature and its expression through the institutions and corporations that characterize our existence on this planet. Every organization has a unique personality. The contemporary economic environment influences organizational behavior. Political and social constraints impact business decisions. And finally, we need to understand research, development, production, marketing, distribution and finance as a series of interrelated business processes.
  
• To this we add the sociology and psychology of consumer behavior and the projected evolution of established religious and political institutions. Both will respond to economic, demographic and social trends.
  
• We then add information resources that quantify and describe our economic environment - population, employment, inflation, GDP, production, consumption, finance, commodities, trade, property, geography, and so on.

Research is a process of discovery. Raw information is accumulated and assembled into a series of related data structures that describe economic events, trends and environments. We are not looking for random pieces of information. Every piece of data that we chose to save must relate to the essential issues and questions of our inquiry. Research provides information. Analysis is a process of creation. Starting with validated data structures, we assemble a hypothesis of future reality. Our hypothesis can then tested for logical consistency and intellectual credibility. Analysis yields understanding.

In order to make sense of our economic environment and to forecast future reality, we need to know how to focus our attention on a specific issue. For example, the key issue in our study of oil production and consumption was not - How much oil is left? Or when will we run out of oil? It soon became apparent that the real issue was - How much oil can we (humans) produce? That shifts the burden of research from geology to questions that describe how we find, produce, transport, refine and distribute the products derived from oil. Along the way we need to consider where the remaining oil is located. That leads to questions like: Who actually owns the oil that is left? Under what conditions will they be willing to let us find, extract and transport the remaining oil? Can we find oil elsewhere? What are the production constraints of alternative energy resources? And so on.

All of our questions should be relevant to the key issues we have identified. In doing the research for “The Report on Oil Depletion”, it was unnecessary (however interesting the topic) to become an expert on Islam. It was enough to establish if Islamic Jihad has the resources, intensity, and endurance to disrupt oil production. The next step was to establish a probable timetable and a realistic disruption scenario.

Our Cultural Economics Forecast starts with an examination of industry trends. We must understand existing and projected oil exploration and production by geographic region; the application of technology to enhance the discovery, extraction, refining and distribution of petroleum resources; competition and accommodation among the national governments that actually own most of the oil on this planet; how standards and bureaucratic duplicity impact the veracity of industry data; the role of cultural conflict as a barrier to exploration and production; and how political agendas, government regulation, and environmental challenges impact world oil supplies.

We then build a profile of current and projected consumer demand by examining petroleum market trends, consumer wants and needs, historical and projected demand data, consumer demographics, and purchase criteria. This profile of consumer demand is matched by a corresponding synopsis of suppliers that includes a characterization of their exploration and production capability, market presence, financial strength, strategy, use of technology and business practices.

Assuming we have done a good job of identifying the key issues and developing a relevant set of questions, we can now plunge into a period of intensive primary and secondary research. We methodically collect the data and collateral information needed to answer our questions. Along the way, we will undoubtedly develop additional questions that scream for an answer because they are critical to our analysis and forecast.

After we collect, organize, calibrate, qualify, verify and synthesize a mountain of data that will (hopefully) permit us to accurately describe the contemporary economic environment and to lay down a credible forecast of future trends, we can proceed with our analysis and interpretation. Our oil production and consumption forecast, and the data upon which it is based, can then be substantiated by treating it as a hypothesis. In order for the hypothesis to be true, it must have intellectual consistency and the individual data elements should be verifiable through further research. If our hypothesis survives this rigorous examination, we have a credible forecast of future reality.

Our final step is to document our conclusions and forecasts in a comprehensive report that not only profiles the impact of resource depletion on oil production and consumption, it can also be used as a basis for projecting the effect of depletion on our economy.

So there you have it.

The market or industry research used in Cultural Economics is a process that involves a number of interrelated steps. Research reports are based on facts and opinions which have been compiled, organized, analyzed and interpreted by someone who understands the research process. Cultural Economics is not about static absolutes. It’s about people. Events. Products. Issues. Questions. Change. And their interrelationship.

Why is Economics called "The Dismal Science"?

Economics has been called "The Dismal Science". That phrase was coined in 1849 by Thomas Carlyle in an essay "An Occasional discourse on the Negro Question.". The essay attacked John Stuart Mill for supporting the emancipation of slaves. Mill, along with many other Economists of that era, assumed that people were basically all the same, and thus all entitled to liberty. The paragraph reads: " Truly, my philanthropic friends, Exeter Hall Philanthropy is wonderful; and the Social Science—not a "gay science," but a rueful—which finds the secret of this universe in "supply-and-demand," and reduces the duty of human governors to that of letting men alone, is also wonderful. Not a "gay science," I should say, like some we have heard of; no, a dreary, desolate, and indeed quite abject and distressing one; what we might call, by way of eminence, the dismal science." There are those who believe that Carlyle's label was also, in part, motivated by Mill's support of T. R. Malthus's gloomy prediction that population would always grow faster than food, dooming mankind to unending poverty and hardship.

If my work had been confined to the mind numbing analysis of extinct events described by copious quantities of dubious numerical data; if economics were merely an exercise in abstract analysis based entirely on theory; then my interest would have withered long ago. But I quickly learned that neither number crunching nor theory can predict real world events with consistent accuracy. Because it is people – in their infinite diversity - who interact with economic events and conditions. That undeniable truth makes Cultural Economics a challenging, interesting, and provocative field of study.

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