Efficiency = Disaster?

I was struck by the observation made by two comments on my last blog, the point that, in the quest for efficiency – and higher profits in the case of corporations – both government and industry are effectively destroying redundancy in industry and infrastructure and in the production of goods and services.  That lack of redundancy, inventory, or reserves results in higher costs, often the destruction of businesses, and unsafe or dangerous conditions for millions of people.

Airlines, for example, strive to fill every seat on the plane and have virtually no back-up aircraft available – and even if they do, airports have no more landing/take-off slots. So… when bad weather or other delays occur, thousands upon thousands of passengers may literally have to wait days or weeks to make a business trip or return home.  Last summer a crane knocked over one power pole here in Cedar City.  One pole on a residential street, and a quarter of the town was without power for the entire day. Again, here in Cedar City, one of the pumps providing water to the town failed, and it took two weeks to get and install a replacement pump – and for two weeks severe water restrictions were in place because the city didn’t have a replacement pump. 

One of the reasons for the financial melt-down of several years ago was another lack of redundancy, if you will – the lack of capital reserves on the part of banks, investment banks, and brokerage firms.  To be “efficient” and squeeze every possible drop of profit from their investments, they leveraged themselves to the hilt… and they had no reserves left when large parts of their portfolios went sour.

State governments are guilty of the same sort of short-term thinking.  They cut taxes or spend more funds when tax revenues are good, never setting aside reserves, and then have to cut services or raise taxes at the very time when such cuts are not only the most painful, but when such cuts have a multiplier effect that makes the economy even worse.

All this so-called efficiency is nothing of the sort.  What the quest for efficiency has become is an on-going pressure to get more work out of fewer people and more profit out of less investment, all of which results in the inability to deal adequately with the inevitable but unpredictable disasters that will always occur, whether caused by weather, human error, or economic collapses of one sort or another.

There’s a point where the pursuit of efficiency becomes, as the old saying goes, “penny wise and pound foolish,” and most businesses and governments passed that point long ago.  What’s even sadder is that those who guide both don’t have either the wisdom or the guts to say, “Enough is enough.”

5 thoughts on “Efficiency = Disaster?”

  1. Robert The Addled says:

    Unfortunately Infrastructure has fallen victim to ‘efficiencies’ – too many things are run in a max profits/minimize expense mode – I probably notice it myself only because of my Military background – EVERYTHING possible has a backup – located in a different area so that the same problem is unlikely to affect it. Prime example of what NOT to do was that cruise liner fire off Mexico a few months ago – other generators were operable – but supporting infrastructure prevented bringing them online – the fire in a single (i know i’ve oversimplified) component – the generator – prevented OTHER working equipment from being used.

  2. Wayne Kernochan says:

    Three comments on recent posts:

    (1) This column appears to echo the conclusions of System Dynamics (Forrester, Meadows, MIT) that the attempt to optimize a system (e.g., for profit) leads to design of processes that trade extra optimization for inability to adapt to changes (in system dynamics, growth in scale). Since (according to SD) all processes can’t scale indefinitely, this merely makes the ultimate collapse more costly, and possibly the ongoing patches as well.

    There is an interesting suggestion about how to avoid this in businesses — a concept called business agility. The idea is that instead of designing a process to minimize costs or maximize profits, you focus on its ability to change in response to the environment. Thus, in new product development, you focus on constant feedback from end users, and the ability to change the product at any stage in the process. Initial results from software development suggest that this produces a long-term 10-25% increase in revenues, decrease in costs, decrease in downward risks, and increase in upward risks (that’s good!) compared to strategies that focus on profits, costs, quality, or risk reduction.

    (2) On the Jevons article: http://www.climateprogress.com has an extensive, and, to my mind, convincing article on the apparent real-world flaws in the “rebound theory” that you are apparently referring to. Macro and micro data appears to indicate that the “rebound effect” of increased use and increased efficiency is only 5-6% of the initial reduction in energy consumption in most cases, and 30% under the most generous assumptions at the macro level. An analysis by an energy economist suggests that the reason past efforts have failed to reduce energy consumption is that they have not been massive enough to overcome the effects of increased population and increased income. Moreover, the organization peddling this conclusion, The Breakthrough Institute, appears to have a vested interest in arguing against attempting to improve efficiency, as part of climate change denial. That said, I strongly agree with your remarks about the inability of both government and business so far to do what should be done.

    (3)Re Empress of Eternity: I am having a great deal of difficulty figuring out how you project an “ice age” scenario on Earth, say, 500,000 years from now. Even assuming a massive “die-off” of species and massive decrease in our carbon emissions, I understand that the baseline temperature of the Earth from solar emissions is increasing by 1 degree Centigrade every billion years, while sequestration of all of the carbon that we have unlocked from the ground may not be possible.

    1. If you read closely, there is a reference to solar meddling… which is attempted in the future for precisely the reasons you mention — nothing else appears politically and technically acceptable on Earth itself. The results are disastrous…

      1. Wayne Kernochan says:

        Thanks very much for the clarification. When I read that, I assumed you were referring to the geo-engineering proposal of “solar shades” around the earth, which would, as I understand it, produce horrible effects but probably not, given political pressure, an actual ice age. My knowledge of physics is way below yours, so I have no idea how you could reduce the sun’s energy emissions that way; I’d love to hear the idea in your copious free time (bad joke, I’m just saying I understand you’re way too busy to explain). – w

  3. Perhaps the human race is just naturally short-sighted? Even the best of us have a hard time looking beyond the end of the day, or the end of the week. Planning that requires years of effort, years of prudence, and won’t reach fruition for years to come, is very rare as a result. Trying to get whole companies or governments to plan in this regard… almost impossible. At least in a democratic republic like ours, with a more or less capitalist economy.

    Which is probably why “alternative” forms of economics and government tended to appeal to the self-styled visionaries of the 20th century, almost all of whom based their visions on Marxist theory. Because democracy and capitalism are chaotic and not easily steered, there had to be a ‘better way.’ Unfortunately, such social and economic controls — once put in place — were so ripe for horrible abuse, we’re stilling adding up the body count.

    So, we’re stuck with the stupidity of representative democracy and a capitalist system, or the stupidity of any number of “strong” models predicated on Great Leaders and their ability to order (and re-order) the world any way they see fit. On the balance, democratic capitalism appears more stable and less lethal. The “strong” models have an unfortunate habit of a) not working long-term and b) killing millions of people.

    Having said this, I think we could help ourselves by writing a few things into U.S. law in the near future. Namely, absolute term limits for Senators and Congressman, such that nobody can go to Washington D.C. and be a lifer political animal. Also, an iron-clad constitutional ammendment that prohibits deficit spending. Balance the damn budget. Heck, require 90% ceilinged spending, and set the 10% aside in a locked-down rainy day reserve against events like 9/11 or other ecnomic catastrophes.

    Alas, one or both of these things will NEVER happen in our two-party gridlock. It’s not in the best interests of either the Democrats or Republicans to allow either of these things — term limits, balanced budget — to become law. So unless there is a literaly citizen revolt, wherein the Republicans and Democrats are slowly pruned out of the system over the course of a few electoral cycles, nothing is going to change. The pols will only be in it for the next cycle, and the super-corporate interests will only be in it for how many pols they can buy on any given economic stimulus issue.

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