Slack and Taut

The two ends of the spectrum of connectedness, and one of the three pairings of properties which define the extent of a system’s resilience.

Slack is central to the ability of a system to recover from shock. It enables it to cope with losses, and it makes space for choice. It is also needed in well-defined ways for that special case of resilience—a post-industrial Lean Economy.

By contrast, a price-based economy is taut. For goods to command a price they must be scarce, and a taut market is one in which this scarcity is present. As summarised in one of the defining phrases of economics, attributed to Lionel Robbins: “Economics is the study of scarcity”—a shortened version of what he actually wrote in his Essay on the Nature and Significance of Economics,

Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.S25

A good or service is scarce if its production or consumption incurs an “opportunity cost”—the loss of the benefits that could have been derived if the resources and time used for the chosen task had, instead, been used for something else (like leaving the money in a savings account to earn interest, or buying something else with it). Opportunity cost is a central idea because it is intrinsic to the mechanism by which prices are set.

For example, a person does not have to accept a low wage if there is an alternative which would pay more. But consider the case when there are, say, more apples around than people can eat, or more available labour than job vacancies. There is no scarcity, no tautness—the economy is slack. In such circumstances, apples and labour have no opportunity cost: some (or many) remain unused and command no price.

In the case of labour, this is mitigated by state benefits paid to the unemployed. But when unemployment reaches the point at which the government’s tax revenues are so reduced that it is unable to pay unemployment benefits (the case of hyperunemployment), the possibility of the opportunity cost of labour falling to zero—where jobs pay nothing because the alternative is no job at all—becomes more than theoretical.

Now, slack in economics occurs in two forms:

 

Unintentional slack

This is the case where the economy falls into depression which, at its extreme, matures to hyperunemployment. Reasons why that can be expected after the energy peak are outlined at the end of Lean Economics. At the heart of such a situation there is a paradox, since there is both glut and famine at the same time. There may, for instance, be an abundance of apple orchards, abandoned because no one has the money to pay the farmer for the apples he could produce from them, thus leaving abundant food-growing potential untapped while people starve. Or there may be an abundance of labour, with plenty that needs doing—and yet that “plenty that needs doing” doesn’t happen, owing to there being (for instance) no fuel to supply the energy it needs, and/or no money to pay for it.

In a moderate form, and if the problem is the lack of money, this can be repaired, since governments can redistribute income to those who would otherwise have none; or spend heavily; or “print money”. In an extreme form, there are so many without jobs that there is not enough tax revenue to redistribute or spend, and any government temptation to print money will immediately short-circuit into inflation. Recessions are dark reminders—or precursors—of the failure of urban economics when the large, city-based labour forces can no longer be sustained, since labour commands no price.

 

Intentional slack

This is the case where an economy learns to coexist with slack. It might, for instance, work a standard 2½-day week to reduce the demand for jobs, and/or use uncompetitive and labour-intensive (but eco-efficient) methods of production to increase the supply.

In an obvious sense, this state of creative inefficiency is irrational: why should buyers in the market bear the high costs that this would bring? In a taut market, governed by price, there is no answer to that: such inefficiencies would be wiped out in a moment and, on the large scale, this is a problem to which there is no solution. If some of the (part-time, creative and inefficient) workforce decided instead to work a full week and use the most efficient methods available, others would follow—some would be fully employed and some would not be employed at all; there would be excess labour, and wages would collapse to zero.

However, in an intentionally slack market there is a deliberate decision to build and sustain a locally-based economy with a much lower level of output and consumption than it could produce if it were taut and competitive (Growth).S26 Its maintenance requires that work is shared out; that the inefficient technology is freely chosen; that nature is spared. This settlement, quite fragile—like our planet Gaia herself—is the core principle of lean economics.

SLACK AND EVOLUTION
Making space for trial and error

Freedom from the taut determinism of price competition opens up the space to develop flexible relationships. Instead of the written plans which effectively rule out incremental experiment and advance, there can be evolution in the light of experience. Initiatives can be explored, with risks limited by their small scale.S27

In a slack system, there is the possibility of building elbow-room into contracts. That is, contracts may have sufficient slack to allow for the unforeseen, as in the principle of “relational contracting”, where there are informal agreements, unwritten codes of conduct, and relationships based on long-term loyalties which survive short-term trouble. Though practised since the dawn of cooperation, this network of informal contracts only began to be recognised in economics following the influential work by Oliver Williamson in the 1970s.S28

The reciprocal obligations sustained by local lean communities, based on trust, will depend on flexible agreements if they are to last through periods of profound surprise and change.

On a small scale, intentional slack can be done easily enough (see “Slack and Evolution” sidebar). For example, the informal economy of the domestic household is prodigal with labour, and if it had to compete on price it wouldn’t have a chance. It works because price is nothing to do with it, and it is this kind of essential-yet-slack economy which holds out to us the possibility of a future. But it is protected by having opted-out from the competitive market, and it is not easy to sustain such agreements at the large scale.

Nonetheless, most human societies in the past, outside the taut, tense experience of urban civilisation, have been slack in this sense. Here, for example, is the historian Juliet Schor’s view of the mixture of working life and days off in the Middle Ages:

The medieval calendar was filled with holidays. Official—that is, church—holidays included not only long “vacations” at Christmas, Easter and midsummer but also numerous saints’ and rest days. These were spent both in sober churchgoing and in feasting, drinking and merrymaking. In addition to official celebrations, there were often weeks’ worth of ales—to mark important life events (bride ales or wake ales) as well as less momentous occasions (scot ale, lamb ale and hock ale). All told, holiday leisure time in medieval England took up probably about one third of the year. And the English were apparently working harder than their neighbors. The ancien régime in France is reported to have guaranteed fifty-two Sundays, ninety rest days, and thirty-eight holidays. In Spain, travelers noted that holidays totaled five months per year.S29

It was backed up by a well-established ritual year, and when the rituals came abruptly to an end in the Reformation, the feast day slack was stopped too; in England by the Act of 1536, which allowed itself a rant at those who ought to be at work “being enticed by the licentious vacation and liberty of these holidays”.S30 A strong culture that can support slack has been in retreat ever since. But the inconvenient truth is that, as the economy now begins to decompose, we have to rebuild a slack society to take its place.

The opening up of choice—not least choice in the use of time—allows the economy to be interesting in a way which is impossible if it has to make money with nearly everything it does. And yet, a market that is slack in terms of its relaxed use of labour, capital and land is unstable: it could at any time snap back to taut, full-time competitive employment for some (for a time), along with destitution for the rest.

Stopping that happening calls for things that are anathema to a competitive economy: local loyalties and currencies, collusion and cartel, culture and confidence that it knows what it wants and where it is going—that it can choose how to live (Leisure).S31

 

Related entries:

Introduction > Slack, Resilience > Resilient Systems > Connectedness, Lean Economics.

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David Fleming
Dr David Fleming (2 January 1940 – 29 November 2010) was an economist, historian and writer, based in London. He was among the first to reveal the possibility of peak oil's approach and invented the influential TEQs scheme, designed to address this and climate change. He was also a significant figure in the development of the UK Green Party, the Transition Towns movement and the New Economics Foundation, as well as a Chairman of the Soil Association. His wide-ranging independent analysis culminated in two critically acclaimed books, Lean Logic and Surviving the Future. A film about his perspective and legacy - The Sequel: What Will Follow Our Troubled Civilisation? - was released in 2019, directed by BAFTA-winning director Peter Armstrong. For more information, including on Lean Logic, click the little globe below!

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