Smart cities, or rummaging in the waste heap of culture

My editorial

I am trying to put together my four big ideas. I mean, I think they are big. I feel small when I consider them. Anyway, they are: smart cities, Fintech, renewable energies, and collective intelligence. I am putting them together in the framework of a business plan. The business concept I am entertaining, and which, let’s face it, makes a piece of entertaining for my internal curious ape, is the following: investing in the development of a smart city, with a strong component of renewable energies supplanting fossil fuels, and financing this development partly or totally, with FinTech tools, i.e. mostly with something like a cryptocurrency as well as with a local platform for financial transactions. The whole thing is supposed to have collective intelligence, i.e. with time, the efficiency in using resources should increase in time, on the condition that some institutions of collective life emerge in that smart city. Sounds incredible, doesn’t it? It doesn’t? Right, maybe I should explain it a little bit.

A smart city is defined by the extensive use of digital technologies, in order to optimize the local use of resources. Digital technologies age relatively quickly, as compared to technologies that make the ‘hard’ urban infrastructure. If, in a piece of urban infrastructure, we have an amount KH of capital invested in the hard infrastructure, and an amount KS invested in the smart technologies with a strong digital component, the rate of depreciation D(KH) of the capital invested in KH will be much lower than D(KS) invested in KS.


[D(KS)/ KS] > [D(KH)/ KH]

and the ‘>’ in this case really means business.

The rate of depreciation in any technology depends on the pace that new technologies come into the game, thus on the pace of research and development. The ‘depends’, here, works in a self-reinforcing loop: the faster my technologies age, the more research I do to replace them with new ones, and so my next technologies age even faster, and so I put metaphorical ginger in the metaphorical ass of my research lab and I come with even more advanced technologies at even faster a pace, and so the loop spirals up. One day, in the future, as I will be coming back home from work, the technology embodied in my apartment will be one generation more advanced than the one I left there in the morning. I will have a subscription with a technology change company, which, for a monthly lump fee, will assure smooth technological change in my place. Analytically, it means that the residual difference in the rates of depreciation, or [D(KS)/ KS] – [D(KH)/ KH] , will widen.

On the grounds of the research I did in 2017, I can stake three hypotheses as for the development of smart cities. Hypothesis #1 says that the relative infusion of urban infrastructure with advanced and quickly ageing technologies will generate increasing amounts of highly liquid assets, monetary balances included, in the aggregate balance sheets of smart cities  (see Financial Equilibrium in the Presence of Technological Change Journal of Economics Library, Volume 4 (2), June 20, s. 160 – 171 and Technological Change as a Monetary Phenomenon Economics World, May-June 2018, Vol. 6, No. 3, 203-216 ). This, in turn, means that the smarter the city, the more financial assets it will need, kind of around and at hand, in order to function smoothly as a social structure.

On the other hand, in my hypothesis #2, I claim that the relatively fast pace of technological change associated with smart cities will pump up the use of energy per capita, but the reciprocal push, namely from energy-intensity to innovation-intensity will be much weaker, and this particular loop is likely to stabilize itself relatively quickly in some sort of energy-innovation standstill (see Technological change as intelligent, energy-maximizing adaptation Journal of Economic and Social Thought, Volume 4 September 3  ). Mind you, I am a bit less definitive on this one than on hypothesis #1. This is something I found out to exist, in human civilisation, as a statistically significant correlation. Yet, in the precise case of smart cities, I still have to put my finger on the exact phenomena, likely corresponding to the hypothesis. Intuitively, I can see some kind of social change. The very transformation of an ordinary (i.e. dumb) urban infrastructure into a smart one means, initially, lots of construction and engineering work being done, just to put the new infrastructure in place. That means additional consumption of energy. Those advanced technologies embodied in the tissues of the smart cities will tend to be advanced for a consistently shortening amount of time, and as they will be replaced, more and more frequently, with consecutive generations of technological youth. All that process will result in the consumption of energy spiralling up in the particular field of technological change itself. Still, my research suggests some kind of standstill, in that particular respect, coming into place quite quickly. I am thinking about our basic triad in energy consumption. If we imagined our total consumption of energy, I mean as civilisation, as a round cake, one third of that cake would correspond to household consumption, one third to transportation, and the remaining third to the overall industrial activity. With that pattern of technological change, which I have just sketched regarding smart cities, the cake would go somehow more to industrial activity, especially as said activity should, technically, contribute to energy efficiency in households and in transports. I can roughly assume that the spiral of more energy being consumed in the process of changing for more energy-efficient technologies can find some kind of standstill in the proportions between that particular consumption of energy, on the one hand, and the household & transport use. I mean, scrapping the bottom of the energy barrel just in order to install consecutive generations of smart technologies is the kind of strategy, which can quickly turn dumb.

Anyway, the development of smart cities, as I see it, is likely to disrupt the geography of energy consumption in the overall spatial structure of human settlement. Smart cities, although energy-smart, are likely to need, on the long run, more energy to run. Yet, I am focusing on another phenomenon, now. Following in the footsteps of Paul Krugman (see Krugman 1991[1];  Krugman 1998[2]), and on the grounds of my own research ( see Settlement by energy – Can Renewable Energies Sustain Our Civilisation? International Journal of Energy and Environmental Research, Vol.5, No.3, pp.1-18  ) I am formulating hypothesis #3: if the financial loop named in hypothesis #1, and the engineering loop from hypothesis #2 come together, the development of smart cities will create a different geography of human settlement. Places, which will turn into smart (and continuously smarter) cities will attract people at faster a pace than places with relatively weaker a drive towards getting smarter. Still, that change in the geography of our civilisation will be quite idiosyncratic. My own research (the link above) suggests that countries differ strongly in the relative importance of, respectively, access to food and access to energy, in the shaping of social geography. Some of those local idiosyncrasies can come as quite a bit of a surprise. Bulgaria or Estonia, for example, are likely to rebuild their urban tissue on the grounds of local access to energy. People will flock around watermills, solar panels, maybe around cold fusion. On the other hand, in Germany, Iran or Mexico, where my research indicates more importance attached to food, the new geography of smart human settlement is likely to gravitate towards highly efficient farming places.

Now, there is another thing, which I am just putting my finger on, not even enough to call it a hypothesis. Here is the thing: money gets hoarded faster and more easily than fixed assets. We can observe that the growing monetization of the global economy (more money being supplied per unit of real output) is correlated with increasing social inequalities . If, in a smart and ever smarter city, more financial assets are being around, it is likely to create a steeper social hierarchy. In those smart cities, the distance from the bottom to the top of the local social hierarchy is likely to be greater than in other places. I know, I know, it does not exactly sound politically correct. Smart cities are supposed to be egalitarian, and make us live happily ever after. Still, my internal curious ape is what it is, i.e. a nearly pathologically frantic piece of mental activity in me, and it just can’t help rummaging in the waste heap of culture. And you probably know that thing about waste heaps: people tend to throw things, there, which they wouldn’t show to friends who drop by.

I am working on making science fun and fruitful, and I intend to make it a business of mine. I am doing by best to stay consistent in documenting my research in a hopefully interesting form. Right now, I am at the stage of crowdfunding. You can consider going to my Patreon page and become my patron. If you decide so, I will be grateful for suggesting me two things that Patreon suggests me to suggest you. Firstly, what kind of reward would you expect in exchange of supporting me? Secondly, what kind of phases would you like to see in the development of my research, and of the corresponding educational tools?

[1] Krugman, P., 1991, Increasing Returns and Economic Geography, The Journal of Political Economy, Volume 99, Issue 3 (Jun. 1991), pp. 483 – 499

[2] Krugman, P., 1998, What’s New About The New Economic Geography?, Oxford Review of Economic Policy, vol. 14, no. 2, pp. 7 – 17

Quite abundant a walk of life

My editorial

I have just finished writing an article about the link between energy and human settlement. You could have noticed that I have been kind of absent from scientific blogging for a few days. I had my classes starting, at the university, and this was the first reason, but the second one was precisely that article. On Wednesday, I started doing some calculations, well in the lines of that latest line of my research (you can look up ‘Core and periphery’ ). Nothing very serious, just some casual dabbling with numbers. You know, when you are an economist, you start having cold turkey symptoms when you are parted with an Excel spreadsheet. From time to time, you just need to do some calculations, and so I was doing when, suddenly, those numbers started making sense. It is a peculiar feeling when numbers start making sense, because usually, you just kind of feel that sense but you don’t exactly know what it actually is. That was exactly my case, on Wednesday. I started playing with the parameters of that general equilibrium, with population size on the left side of the equation, and energy use, as well as food intake, on the other side. All of a sudden, that theoretical equilibrium started yielding real, robust, local equilibria in individual countries. Then, something just fired off in my mind. My internal happy bulldog, you know, that little beast who just loves biting into big, juicy loafs of data, really bit in. My internal ape, that curious and slightly impolite part of me, went to force the bulldog’s jaws open, but it got fascinated. My internal austere monk, that really-frontal-cortex guy inside of me, who walks around with the Ockham’s razor ready to slash into bullshit, had to settle the matters. He said: ‘Good, folks, as you are, we need to hatch an article, and we do it know’. You don’t discuss with a guy who has a big razor, and so all of me wrote this article. Literally all of me. It was the first time, since I was 22 (bloody long ago), that I spent a night awake, writing. The result, for the moment in the pre-editorial form, is entitled ‘Settlement by energy – can renewable energies sustain our civilisation?’  and you can read it just by clicking this link.

Anyway, now I am in a post-article frame of mind, which means I need to shake it off a bit. What I usually do in terms of shaking off is having conversations with dead people. No, I don’t need candles. One of my favourite and not-quite-alive-anymore interlocutors is Jacques Savary, a merchant and public officer, who, in 1675, two years after both the real and the fictional d’Artagnan had been dead, published, with the privilege of the King, and through the industrious efforts of the publishing house run by Louis Billaine, located at the Second Pillar of the Grand Salle of the Palace, at Grand Cesar, a book entitled, originally, ‘Le Parfait Négociant ou Instruction Générale Pour Ce Qui Regarde Le Commerce’. In English, that would be ‘The Perfect Merchant or General Instructions as Regards Commerce’. And so I am summoning Master Savary from the after world of social sciences, and we start chatting about what he wrote regarding manufactures (Book II, Chapter XLV and XLVI). First, a light stroke of brush to paint the general landscape. Back in the days, in the second half of the 17th century, manufactures meant mostly textile and garments. There was some industrial activity in other goods (glass, tapestry), but the bulk of industry was about cloth, in many forms. People at the time were really inventive as it came to new types of cloth: they experimented with mixing cotton, wool and silk, in various proportions, and they experimented with dyeing (I mean, they experimented with dying, as well, but we do it all the time), and they had fashions. Anyway, textile and garment was THE industry.

As Master Savary starts his exposition about manufactures, he opens up with a warning: manufactures can lead you to ruin. Interesting opening for an instruction. The question is why? Or rather, how? I mean, how could a manufacturing business lead to ruin? Well, back in the day, in 17th century, in Europe, manufacturing activities used to be quite separated institutionally from the circulation of big money. Really big business was being done mostly in trade, and large-scale manufacturing was seen as kind of odd. In trade, merchants of the time devised various legal tools to speed up the circulation of capital. Bills of exchange, maritime insurance, tax farming – it all allowed, with just the right people to know, a really smooth flow of money, even in the presence of many-year-long maritime commercial trips. In manufacturing, many of those clever tricks didn’t work, or at least didn’t work yet. They had to wait, those people, some 200 years before manufacturing would become really smooth a way of circulating capital. Anyway, putting money in manufacturing meant that you could not recover it as quickly as you could in trade. Basically, when you invested in manufactures, you were much more dependent on the actual marketability of your actual products than you were in trade. Thus, many merchants, Master Savary obviously included, perceived manufacturing as terribly risky.

What did he recommend in the presence of such dire risk? First of all, he advised to distinguish between three strategies. One, imitate a foreign manufacture. Second, invent something new and set a new manufacture. Third, invest in ‘an already established Manufacture, whose merchandise has an ordinary course in the Kingdom as well as in foreign Countries, by the general consent of all the people who had recognized its goodness, in the use of fabric which have been manufactured there’. I tried to translate literally the phrasing of the last strategy, in order to highlight the key points of the corresponding business plan. An established manufacture meant, first of all, the one with ‘an ordinary course in the Kingdom as well as in foreign Countries’. Ordinary course meant a predictable final selling price. As a matter of fact, this is my problem with that translation. Master Savary originally used the French expression: ‘cours ordinaire’, which, in English, becomes ambiguous. First, it can mean ‘ordinary course’, i.e. something like an established channel of distribution. Still, it can also mean ‘ordinary rate of exchange’. Why ‘rate of exchange’? We are some 150 years before the development of modern, standardized monetary systems. We are even some 100 years before the appearance of paper money. There were coins, and there was a s***load of other things you could exchange your goods against. At Master Savary’s time, many things were currencies. In business, you traded your goods against various types of coins, you accepted bills of exchange instead of coins, you traded against gold and silver in ingots, as well, and finally, you did barter. Some young, rich, and spoilt marquis had lost some of its estates by playing cards, he signed some papers, and here you are, with the guy who wants to buy your entire stock of woollen garments and who wants to pay you precisely with those papers signed by the young marquis. If you were doing really big business, none of your goods has one price: instead, they all had complex exchange rates against other valuables. Trading goods with what Master Savary originally called ‘cours ordinaire’ meant that the goods in question were kind of predictable as for their exchange rate against anything else in that economic jungle of the late 17th century.

What worked on the selling side, had to work on the supply side as well. You had to buy your raw materials, your transport, your labour etc. at complex exchange rates, and not at those nice, tame, clearly cut prices in one definite currency. Making the right match between exchange rates achieved when purchasing things, and those practiced at the end of the value chain was an art, and frequently a pain in your ass. In other words, business in 17th century was very much like what we would have now if our banking and monetary systems collapsed. Yes, baby, them bankers are mean and abjectly rich, but they keep that wheel spinning smoothly, and you don’t have to deal with Somalian pirates in order to buy from them some drugs, which you are going to exchange against natural oil in Yemen, which, in turn, you will use to back some bills of exchange, which will allow you to buy cotton for your factory.

Now, let’s return to what Master Savary had to say about those three strategies for manufacturing. As he discusses the first one – imitating a foreign factory – he recommends five wise things to do. One, check if you can achieve exactly the same quality of fabric as those bloody foreigners do. If you cannot, there is no point in starting imitation. Two, make sure you can acquire your raw materials, in the necessary bracket of quality, in the place where you locate your manufacture. Three, make sure the place where you locate your operations will allow you to practice prices competitive as compared to those foreign goods you are imitating. Four, create for yourself conditions for experimenting with your product and your business. Launch some kind of test missiles in many directions, present your fabrics to many potential customers. In other words, take your time, bite your ambition, suck ass and make your way into the market step by step. Five, arrange for acquiring the same tools, and even the same people that work in those foreign manufactures. Today, we would say: acquire the technology, both the formal, and the informal one.

As he passes to discussing the second strategy, namely inventing something new, Master Savary recommends even more prudence, and, in the same time, he pulls open a bit the veil of discretion regarding his own life, and confesses that he, in person, had invented three new fabrics during his business career: a thick woollen ribbon made of camel wool, a thick drugget for making simple, coarse, work clothes, and finally a ribbon made of woven gold and silver. Interesting. Here is a guy, who started his professional life as a merchant, then he went into commercial arbitrage for some time, then he went into the service of a rich aristocrat ( see ‘Comes the time, comes the calm duke’ ), then he entered into a panel of experts commissioned by Louis XIV, the Sun King, to prepare new business law, and in the meantime he invented decorative ribbons for rich people, as well as coarse fabrics for poor people. Quite abundant a walk of life. As I am reading the account of his textile inventions, he seems to be the most attached to, and the most vocal about that last one, the gold and silver ribbon. He insists that nobody before him had ever succeeded in weaving gold and silver into something wearable. He describes in detail all the technological nuances, like for example preventing the chipping off of the very thinly pulled, thread size, golden wire. He concludes: ‘I have given my own example, in order to make those young people, who want to invent new Manufactures, understand they should take their precautions, not to engage imprudently and not to let themselves being carried away by the profits they will make on their first fabrics, and to have a great number of them fabricated, before being certain they will be pleasant to the public, as well as for their beauty as for quality; for it is really dangerous, and they will risk their fortune at it’.

Core and periphery

My editorial

And so I am officially starting to prepare a manuscript for my book, which I provisionally give the title ‘Good at Energy’.  I am exploring the same general hypothesis I have already turned and returned many times on this blog, namely that technological change in our human civilisation is functionally oriented on maximising the absorption of energy from the environment. I articulate this general line of thinking into four more specific hypotheses, which are supposed to drive the writing of four distinct sections in my book. One, the spatial structure of the human civilisation adapts and rearranges so as to maximise the absorption of energy. Two, the pace of technological change is functionally connected to the food deficit the given society experiences, and reaches its peak in societies with a food deficit between zero and 90 kilocalories per day per person. Three, technological change follows an evolutionary function of selection and hierarchizing, where social entities specialise, respectively, in the male function of transmission and conception, or in the female function of recombination and reproduction, which creates a hierarchy of male entities according to their capacity of meeting the expectations of the female entities. Four, technological change in the absorption of energy is functionally connected to the development of communication systems, with the supply of money acting as a communication system among others and the velocity of money being inversely proportional to the pace of technological change.

Yesterday, as I formulated those hypotheses in my update in French (see Les implications de ce que je viens d’écrire), I started reviewing the literature regarding the first specific hypothesis, the one about the spatial structure of the human civilisation. Quite naturally, being an economist, I called by Paul Krugman and the so-called ‘new economic geography’ (Krugman 1991[1];  Krugman 1998[2]). The basic logic I could derive from these readings is that of differentiation inside a territory: geographical structures differentiate internally into specialized parts, and this differentiation follows a pattern of core different from periphery. I think I can take on the model proposed by Paul Krugman, and replace the maximisation of utility, in the original version, by the maximisation of energy absorbed. As I think about it, with this precise orientation in my hypothesis, I can take any economic model that implies the maximisation of utility, transform it so as it maximises the absorption of energy, and see what happens.

Now, the tricky part is the ‘I can’. Can I? Let’s see. I take on the equations from the original model by Paul Krugman (Krugman 1991[3]). I start with equation (1). With CM standing, for the consumption of the manufacturing aggregate, and CA corresponding to the consumption of agricultural goods, the former receives always a share µ of the aggregate expenditure, the given society maximizes its aggregate utility ‘U’ so as to satisfy U = CMµ*CA1-µ. Here comes the first big question from my point of view: whilst it is simple to replace aggregate utility by the aggregate absorption of energy – let’s call it ‘AE’ (could also stand for ‘Attractive Expectations’, mind you) – it is more delicate to rephrase the right side of my equation. In economics, utility is a blissful category, as it has no definite unit of measurement. Utility can be cardinal or ordinal, can be expressed in money or in equivalent units of any economic good. Utility is cool and relax, even when it maximizes itself. Now, the absorption of energy is stricter a category: there are always joules under the bottom line. They can gang up into kilojoules or mega joules, or even dress into calories or watts, but at the end of the day, I have to sum my calculations up with a unit of energy. Logically, on the right side of the equation, I have to put aggregates that sum up into joules, watts or related.

We absorb energy in two ways: we eat it in kilocalories and we use it in various units. All that stuff is convertible into watt-hours, fortunately. I assign the symbol ‘F’ to the aggregate absorption of energy through eating (comes from ‘food’, but you have probably guessed this one already), and I designate the aggregate use of energy as ‘W’, or something measured directly in watts. As I am having my first go at transforming the original equation by Paul Krugman, I’m saying AE = Fp*Wq. The next stop is by that ‘p’ and that ‘q’. What are they? They can be anything, but as I look at it, I have to transform this transformation a bit. I mean, if I literally take the absorption of food and the final use of energy, express them both in an aggregate of watts, I get straight to the left side, namely to the aggregate absorption of energy, without any powers. I know, I could make it look like AE = F1*W1, but: a) it looks stupid b) it does not make sense. The final absorption of energy is the sum total of food eaten and energy used in other forms, not their product, whatever power I raise them to. Thus, I should say AE = F + W, but this is an accounting identity, not a functional model. Master Paul, I humbly apologize for having doubted in your insightfulness, when you used that aggregate utility thingy. Now I can see the depth of your wisdom, and I humbly return to the path of enlightenment, and I know it is better to use U(AE), so the utility derived from aggregate absorption of energy, than the plain AE.

Still I have a question: in your initial model, Master Paul, you raised the manufacturing output to the power ‘µ’, and agricultural goods to ‘1 – µ’. I guess it means that first we spend money on manufactures, and only after having done that, we scratch the bottom of our purse and get the last ‘1 – µ’ pennies to buy them pork loins and tomatoes. If you say so, Master… But what should I do? Should I assume that we spend money on food first, and only then we pour fuel into our cars (if we have any), or the opposite way round, namely petrol tank first, stomach next? Master? What? I have to think by myself, as I am a university professor? If you say so, Master… I am giving a try at thinking by myself, and I recollect my earlier research, and I remember that sharp difference between societies with officially recorded food deficit, on the one hand, and the satiate ones, on the other hand. I guess I should assume both options as possible, and say:

Equation (1), Class #1: U(AE) = Fµ*W1-µ        >> these people eat first, and turn their TV on next. Expenditures on energy are residual regarding expenditures on food. Roughly speaking, this class covers all the cases of societies with the food deficit being kind of official.

Equation (1) Class #2: U(AE) = Wµ*F1-µ            >> of course, those people eat, too, and they have to, and probably they eat better and more than Class #1, and yet, as they don’t have any official food deficit displayed on their doorstep, they mostly forget that food can go scarce. They spend most of their revenue on other forms of energy use, and leave a reasonable residual for caviar and Champagne.

According to Paul Krugman, that ‘µ’ parameter is one of the main bearings in his original model. It determines whether regions converge or diverge. Anyway, I am skipping to equation (2) in the original model, which basically details the way we compute the consumption CM of manufactures, and which I can generalize as the way of computing the aggregate endowed raised to power µ in equation (1). Before I go further, an old reminder: I am writing this precise content for my blog, and neither of my blogging environments, namely neither Blogger nor Word Press, is at home with equations. Hence, I do my best to express the original scientific equations as text. So I say {F; W} = [∑(i = 1 -> N; ci(π-1)/π)]π/(π-1) , where ∑(i = 1 -> N) means sum total over the interval from i = 1 to N, ‘ci’is the i-th consumable in the lot, and π > 1 is the elasticity of substitution between those consumables. That ‘π’ parameter is the second anchor of the equilibrium in the model.

As I am quickly wrapping my mind around equation (2), I think that substitution between various foods is an abyssal topic, especially if I want to treat global data, with all the local specificities in alimentary regimes. In class #1, with food coming first, the aggregate F = [∑(i = 1 -> N; ci(π-1)/π)]π/(π-1) would be quite foggy. Conversely, there are sharp distinctions as for the use of energy. I can sharply divide electricity used in houseware from fuel burnt in cars etc. Intuitively, I would go for class #2 when applying this Paul Krugman’s model. I could even invent some kind of intellectual parkour in order to jump over the food deficit. Actually, I don’t even need parkour: common observation comes handy. This summer, in China, I had the occasion to observe people who have s***load of technology to their disposition and still are officially starving, by some 74 kilocalories per day per person, on average. In other words, a paradigm where money is spent on the use of energy first, and only then on the energy consumed via food, is not really confined to the wealthy and satiate societies. After reflection, I go for class #1, and so I state my rephrased model as follows:

Equation (1) U(AE) = Wµ*F1-µ      µ < 1

Equation (2) W = [∑(i = 1 -> N; ci(π-1)/π)]π/(π-1)     π > 1

As I understand the original reasoning by Paul Krugman, the internal, spatial differentiation of a territory into a core and a periphery depends, among others, on those two parameters: µ and π. I guess that the greater are the values of µ and π, the greater the potential for such differentiation. I will slowly drift towards rephrasing that original model so as to show, how does the working of equations (1) and (2) impact the density of population.

[1] Krugman, P., 1991, Increasing Returns and Economic Geography, The Journal of Political Economy, Volume 99, Issue 3 (Jun. 1991), pp. 483 – 499

[2] Krugman, P., 1998, What’s New About The New Economic Geography?, Oxford Review of Economic Policy, vol. 14, no. 2, pp. 7 – 17

[3] Krugman, P., 1991, Increasing Returns and Economic Geography, The Journal of Political Economy, Volume 99, Issue 3 (Jun. 1991), pp. 483 – 499