A Level Economics 28: The Law of Diminishing Returns and Output in the Long Run

Fixed Costs vs. Variable Costs:

Fixed Costs:Fixed costs are expenses that do not change with the level of production or sales. They remain constant regardless of the quantity produced.
Examples of fixed costs include rent, property taxes, insurance premiums, and salaries of permanent employees.
These costs are incurred even if a company produces nothing or temporarily shuts down its operations.
Fixed costs are typically represented as a lump sum or a fixed amount.

Variable Costs:Variable costs are expenses that vary with the level of production or sales. They change proportionally as the quantity produced or sold changes.
Examples of variable costs include raw materials, direct labor, packaging costs, and sales commissions.
Variable costs increase as production or sales increase and decrease as production or sales decrease.
Variable costs are generally represented on a per-unit basis or as a variable cost per production level.

Short Run vs. Long Run:

Short Run:The short run refers to a period of time in which at least one input is fixed, usually the plant size or capital.
In the short run, a firm can only adjust its variable inputs, such as labor or raw materials, to respond to changes in production or demand.
For example, if a bakery experiences an increase in demand for its bread, it can hire more bakers (variable input) but cannot immediately expand its production facility (fixed input).
In the short run, a firm's ability to adjust production is limited by fixed inputs, leading to a less flexible response to changes in market conditions.

Long Run:

The long run refers to a period of time in which all inputs are variable, and there are no fixed inputs.
In the long run, a firm can adjust all its inputs, including plant size, capital equipment, labor, and raw materials.

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The law of diminishing returns (happens in the short run only) states that as more units of a variable input, such as labor, are added to a fixed input, like land or capital, the marginal product of the variable input will eventually decrease. In simpler terms, it means that adding more of a specific input will lead to smaller increases in output.

For example, let's consider a bakery with a fixed-size oven. Initially, with one baker, the bakery produces 100 loaves of bread per day. When a second baker is added, the production increases to 180 loaves per day, reflecting a substantial increase due to division of labor and coordination. However, as more bakers are added, the production gains become smaller.

With a third baker, the production may increase to 220 loaves per day, and with a fourth baker, it may increase to 240 loaves per day. The additional output gained from each additional baker decreases, indicating diminishing returns. For instance, adding the fifth baker may only result in a small increase to 245 loaves per day.

The law of diminishing returns occurs because the fixed input, such as the oven, becomes a limiting factor. As more bakers are added, they start competing for oven space and other resources, leading to less efficient use of the fixed input. The bakery may reach a point where adding more bakers becomes counterproductive, as the additional workers may create congestion or coordination issues, resulting in lower productivity.

Understanding the law of diminishing returns is essential for businesses to make informed decisions about resource allocation. It helps determine the optimal level of inputs to achieve maximum productivity and avoid inefficient use of resources. By identifying the point of diminishing returns, businesses can optimize their production processes and ensure efficient resource utilization for better cost-effectiveness and output levels.

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In the long run, the output can be adjusted and optimized based on the flexibility of all inputs. The ability to modify all inputs allows firms to fully adapt their production processes and take advantage of economies and diseconomies of scale. Here's what typically happens to output in the long run:

Economies of Scale: Economies of scale refer to cost advantages obtained by increasing the scale of production. As firms expand their output and production levels, they can benefit from economies of scale, which can lead to increased output and lower average costs per unit.
Economies of scale can arise from various factors such as increased specialization, bulk purchasing discounts, improved division of labor, efficient use of resources, and improved utilization of production facilities.
With economies of scale, firms can produce more output at a lower average cost per unit. This can result in increased profitability and competitiveness.


Expansion of Output: In the long run, firms can expand their output by adjusting all inputs and taking advantage of economies of scale. They can invest in additional capital, hire more labor, and increase the use of other resources to meet the higher demand and optimize their production processes.
With increased scale of production, firms can achieve higher levels of output while potentially reducing their average costs. This allows them to meet market demand, increase market share, and potentially generate higher profits.


Diseconomies of Scale: While economies of scale can bring cost advantages, there is a point beyond which further expansion can lead to diseconomies of scale. Diseconomies of scale occur when the cost per unit increases as output increases.
Examples of diseconomies of scale include increased coordination and communication challenges, diminishing managerial control, bottlenecks in production processes, and increased bureaucracy.
When a firm faces diseconomies of scale, its average costs per unit of output start to rise, potentially impacting profitability. This can result from inefficiencies or challenges in managing larger operations.

Optimization of Production: In the long run, firms have the opportunity to optimize their production processes and achieve higher levels of efficiency. They can analyze and adjust the combination of inputs, technologies, and organizational structures to maximize output while minimizing costs.
By optimizing production processes, firms can take advantage of economies of scale and avoid or mitigate diseconomies of scale. This involves streamlining operations, eliminating bottlenecks, improving coordination, and adopting efficient production techniques.
Optimization allows firms to achieve the optimal scale of production that maximizes output while maintaining cost efficiency.

In summary, in the long run, firms can adjust their inputs, expand or contract their operations, optimize production processes, and benefit from economies of scale. This enables them to achieve higher levels of output, improve efficiency, and respond effectively to changes in market conditions and demand while avoiding or managing potential diseconomies of scale.

A Level Economics 16: The Supply Curve

 Why do supply curves normally slope upward from left to right?

Supply curves typically slope upward from left to right due to the law of supply, which states that producers are willing to supply more of a good at higher prices and less at lower prices. Several factors contribute to this upward-sloping pattern:

1. Production Costs: As the price of a good increases, producers have a greater incentive to supply more of it because higher prices often result in higher profits. However, producing additional units may require additional resources and incur higher production costs. For instance, suppliers may need to invest in additional labor, raw materials, or machinery, which can increase their costs. To cover these increased costs and earn higher profits, producers are willing to supply more at higher prices.

2. Opportunity Costs: Opportunity cost refers to the value of the next best alternative forgone when making a choice. When the price of a good rises, suppliers face an opportunity cost of producing alternative goods they could have produced instead. As a result, suppliers allocate more resources and production efforts to the higher-priced good, which leads to an increase in supply.

3. Increasing Marginal Costs: The concept of increasing marginal costs also contributes to the upward slope of the supply curve. As production increases, producers may encounter diminishing returns or face constraints that make it increasingly expensive to produce additional units. This results in higher marginal costs of production, which necessitates higher prices to justify supplying additional units of the good.

4. Technological Constraints: Technological limitations can also influence the upward slope of the supply curve. Suppliers may face constraints in terms of production capacity, available technology, or access to resources. As the quantity supplied increases, producers may need to invest in more advanced technology or incur additional costs to expand production capacity, which can lead to higher prices.

5. Supplier Behavior: Suppliers' expectations and behavior can influence the upward slope of the supply curve. If producers anticipate that prices will rise in the future, they may reduce current supply to take advantage of the expected higher prices. Conversely, if producers anticipate falling prices, they may increase current supply to avoid potential losses. Such behavior aligns with the upward-sloping supply curve.

Overall, the upward slope of the supply curve reflects the positive relationship between price and quantity supplied. Higher prices incentivize producers to allocate more resources, incur higher production costs, and overcome technological constraints to supply larger quantities of a good. This relationship captures the fundamental dynamics of supply in response to price changes.

A Level Economics 7: Production Possibility Frontier

Discuss the connection between long-term economic growth, productivity changes, and shifts in an economy's PPFs. Explain how advancements in technology, increased efficiency, and investments in human capital can contribute to outward or skewed shifts in the PPFs. Provide relevant examples to support your explanation.

Long-term economic growth is closely linked to productivity changes, and these changes can lead to shifts in an economy's production possibility frontiers (PPFs). Advancements in technology, increased efficiency, and investments in human capital play crucial roles in driving productivity growth, which can result in outward or skewed shifts in the PPFs.

1. Advancements in Technology: Technological progress is a key driver of long-term economic growth. Innovations, new inventions, and the adoption of advanced technologies can significantly enhance productivity by improving the efficiency of production processes. For example, the invention of the steam engine during the Industrial Revolution revolutionized manufacturing and transportation, leading to an outward shift in the PPFs of countries that embraced this technology.

2. Increased Efficiency: Improving efficiency in resource allocation and production methods can also drive long-term economic growth and shift the PPFs outward. Efficiency gains can arise from factors such as process improvements, better management practices, and specialization. For instance, if a country implements streamlined supply chains, adopts lean production techniques, or optimizes resource allocation, it can produce more output with the same amount of resources, resulting in an outward shift in the PPFs.

3. Investments in Human Capital: Human capital refers to the skills, knowledge, and capabilities of the workforce. Investments in education, training, and health contribute to the growth of human capital, leading to higher productivity levels. An educated and skilled workforce can employ advanced technologies, adapt to changing market demands, and drive innovation. For example, countries that invest in quality education and provide opportunities for lifelong learning can experience significant productivity growth, which translates into an outward shift in the PPFs.

These factors, advancements in technology, increased efficiency, and investments in human capital, can contribute to both outward and skewed shifts in the PPFs. An outward shift represents an expansion in an economy's production possibilities, allowing for increased output levels of existing goods and services or the production of new goods and services. Skewed shifts occur when there is a disproportionate improvement in the production capabilities of one good relative to another, reflecting changes in comparative advantage due to factors like specialization or resource availability.

For instance, let's consider an economy that heavily invests in renewable energy technology and implements policies to promote clean energy production. As a result, the economy experiences a significant increase in the productivity and efficiency of renewable energy production. This leads to an outward shift in the PPF, enabling the economy to produce more renewable energy while maintaining or even reducing the production of traditional fossil fuel-based energy.

In summary, long-term economic growth is intertwined with productivity changes, and advancements in technology, increased efficiency, and investments in human capital are key drivers of productivity growth. These factors can contribute to outward or skewed shifts in an economy's PPF.

A Level Economics 6: Production Possibility Frontier

Explain with examples the factors which may shift the PPF inwards or outwards.

The PPF (production possibility frontier) can shift inwards or outwards due to various factors that affect an economy's production possibilities. Let's explore examples of factors that can cause shifts in the PPF:

Technological Advancements: Technological progress can lead to an outward shift of the PPF. When new inventions, innovations, or improvements in production techniques occur, the economy becomes more efficient and can produce more goods or services with the same amount of resources. For instance, the development of advanced machinery and automation in manufacturing can increase productivity, resulting in an expansion of the production possibilities.

Changes in Resources: Any changes in the quantity or quality of available resources can impact the PPF. If there is an increase in resources, such as the discovery of new oil reserves or an expansion of a country's workforce through immigration, it can lead to an outward shift in the PPF, allowing for higher levels of production. Conversely, a decrease in resources, like a natural disaster damaging agricultural land or a decline in skilled labor, can cause an inward shift of the PPF, reducing production possibilities.

Changes in Trade: International trade can influence the PPF. Opening up to trade and engaging in imports and exports can expand the variety of goods available to the economy, increasing its production possibilities. Trade allows countries to specialize in producing goods they have a comparative advantage in, resulting in greater efficiency and an outward shift in the PPF. Conversely, trade restrictions or barriers can limit access to foreign markets, reducing the range of goods available and potentially causing an inward shift of the PPF.

Changes in Education and Human Capital: Investments in education and human capital development can impact the PPF. An educated and skilled workforce can enhance productivity and lead to an outward shift in the PPF. For example, if a country invests in improving its education system and provides training programs for workers, it can increase their knowledge and skills, thereby expanding the economy's production capabilities.

Changes in Institutions and Policies: Government policies, regulations, and institutions can influence the PPF. Policies that promote entrepreneurship, innovation, and competition can stimulate economic growth, leading to an outward shift in the PPF. Conversely, if policies hinder business activity, impose excessive regulations, or limit investment, it can result in an inward shift of the PPF, constraining production possibilities.

These examples highlight how factors such as technological advancements, changes in resources, trade, education, and institutional policies can cause shifts in the PPF, either expanding or reducing an economy's production possibilities.

A Level Economics 5: Production Possibility Frontier

Consider an economy that produces two goods, computers and bicycles. Explain why the PPF is typically drawn as a concave curve to the origin when representing the trade-off between these goods. Additionally, discuss what it means when a PPF is depicted as a straight line and how it relates to perfect factor substitutability.

The PPF is usually drawn as a concave curve to the origin when representing the trade-off between two goods, such as computers and bicycles. This concave shape reflects the concept of imperfect factor substitution.

The concave curve of the PPF signifies that resources used in production are not equally efficient in producing both goods. It suggests that as an economy shifts resources from producing one good to the other, there is a diminishing marginal rate of transformation (MRT). In simpler terms, it means that as more resources are allocated to producing one good, the economy must sacrifice increasing amounts of the other good. This diminishing MRT arises due to factors like specialization, different resource requirements, or technological limitations.

On the other hand, a straight-line PPF represents perfect factor substitutability. In this scenario, resources used in production can be easily switched between producing one good and the other without any loss of efficiency or trade-off. The straight-line PPF indicates that the economy can reallocate resources between the two goods without experiencing diminishing returns or increased opportunity costs.

Perfect factor substitutability implies that the production technology used in the economy allows for seamless and efficient switching of resources between goods. For example, if the production process for computers and bicycles is highly flexible, and resources like labor and capital can be effortlessly shifted, the economy can produce any combination of computers and bicycles along the straight-line PPF without facing any loss in productivity.

However, it is essential to note that in reality, perfect factor substitutability is rare. Most production processes involve specialized resources, different skill sets, and specific technologies, leading to diminishing returns and trade-offs between goods, as represented by the concave shape of the PPF.

In summary, the concave shape of the PPF demonstrates imperfect factor substitution, indicating diminishing returns and trade-offs between goods. A straight-line PPF, on the other hand, signifies perfect factor substitutability, suggesting that resources can be interchanged without any loss in productivity or trade-offs between goods.

A Level Economics 4: Production Possibility Frontier

Consider an economy that produces both cars and bicycles, and it is currently operating at point A on its PPF curve, producing 100 cars and 200 bicycles. Explain the difference between a movement along the PPF and a shift in the PPF using this scenario. Additionally, discuss the implications of these changes on the economy's production possibilities.

A movement along the PPF refers to a change in production quantity of one good relative to another caused by reallocating resources within the existing production capabilities. On the other hand, a shift in the PPF represents a change in the overall production capabilities of the economy, resulting from factors such as technological advancements, changes in resources, or improvements in productivity.

In the given scenario, let's explore the implications of both movements along the PPF and shifts in the PPF:

1. Movement along the PPF: Suppose the economy decides to produce 150 cars and reduces bicycle production to 150. This movement along the PPF curve signifies a reallocation of resources from bicycles to cars, leading to a change in the production quantities of both goods. This movement does not expand or contract the overall production possibilities of the economy but reflects a choice to produce more cars at the expense of fewer bicycles.

2. Shift in the PPF: Now, imagine that the economy experiences a technological advancement in automobile manufacturing, leading to increased efficiency and productivity. As a result, the PPF curve shifts outward, indicating an expansion in production possibilities. The new curve would allow the economy to produce more cars and bicycles than before, reflecting an increase in overall production capabilities. For instance, the economy could now produce 120 cars and 250 bicycles at point A on the new PPF curve.

The implications of these changes on the economy's production possibilities are as follows:

• Movement along the PPF: This decision involves a trade-off between cars and bicycles within the existing production capabilities. Producing more of one good means producing less of the other. It demonstrates the concept of opportunity cost, as the economy sacrifices the production of bicycles to increase car production (or vice versa).

• Shift in the PPF: A shift in the PPF curve indicates a change in the economy's ability to produce both goods. It represents economic growth and expanded production possibilities. With the outward shift, the economy can produce more cars and bicycles than before, leading to increased consumption and potential economic benefits.

In summary, a movement along the PPF reflects a reallocation of resources between goods within the existing production capabilities, while a shift in the PPF represents a change in the overall production possibilities of an economy. Both movements along and shifts in the PPF have implications for production quantities, trade-offs, opportunity costs, and the economy's capacity to produce goods and services.

A Level Economics 3: Production Possibility Frontier

 Production Possibility Frontier (PPF) is a graphical representation that shows the maximum combination of goods or services that an economy can produce with its given resources and technology within a specific time frame. It illustrates the concept of choice, opportunity cost, economic growth, and efficiency. Let's explore each of these connections with examples:

1. Choice: The PPF demonstrates the concept of choice by showing different possible production combinations. It represents the trade-offs that an economy must make when allocating its resources. For example, consider an economy that can produce either cars or computers. The PPF would display various points along the curve, indicating different combinations of car and computer production. The economy must decide how many cars and computers to produce, making a choice between the two.

2. Opportunity Cost: The PPF highlights opportunity cost, which refers to the value of the next best alternative foregone when making a choice. As an economy moves along the PPF curve, producing more of one good requires sacrificing the production of another. The slope of the PPF represents the opportunity cost. For instance, if an economy decides to produce more cars, it must decrease computer production. The opportunity cost is the lost output of computers.

3. Short- and Long-term Economic Growth: The PPF relates to both short-term and long-term economic growth. In the short term, if an economy is already operating at its maximum production capacity (on the PPF curve), it can only increase the production of one good by reducing the production of another. However, in the long term, economic growth can shift the entire PPF curve outward, indicating an expansion of the economy's production capacity. This growth can result from technological advancements, increases in resources, or improvements in productivity.

4. Efficiency: The PPF also depicts efficiency. Points on the PPF curve represent productive efficiency, meaning that resources are fully utilized to achieve the maximum possible production combination. Any point inside the curve indicates inefficiency, as resources are underutilized. Conversely, points outside the curve are unattainable given the current resources and technology.

Example: Let's imagine an economy with limited resources that can produce either wheat or steel. The PPF curve would display different combinations of wheat and steel production possibilities. If the economy is operating on the PPF curve, it might produce 100 tons of wheat and 50 tons of steel. To produce more steel, it would have to sacrifice some wheat production due to resource constraints. This trade-off reflects the opportunity cost. If the economy improves its technology or acquires more resources, the PPF curve can shift outward, enabling higher levels of wheat and steel production.

In summary, the PPF illustrates the choices an economy faces, the concept of opportunity cost, the potential for short- and long-term economic growth, and the importance of efficiency in resource allocation. It provides a visual representation of the trade-offs and constraints involved in production decisions.

Carpe Diem! Join the movement, It's never too Late

 

Swamy on Government Subsidies: NPA write-off is the biggest subsidy!

 

A Mistaken Critique of Marx

 

Ha Joon Chang speaks: Economics for the people

Lecture 1.1 - The Nature of Economics

Lecture 2 - What is wrong with Globalisation?

Lecture 1.2 - Why all economics is political

Lecture 7 - Inequality - What is it and why does it matter

Lecture 9 - The role of the state

Lecture 5 - Why are some countries rich and others poor?

Lecture 8 - Understanding Production

Lecture 10 - Finance and financial crises

Lecture 3 - Conceptualising the individual

Lecture 12 - Industrial policy

Lecture 4 - Can economics save the planet?

Lecture 6 - Will robots take your job?

Lecture 11 - Can economics save the planet?

Economic development

Climate Justice Requires A New Paradigm

By Vandana Shiva

02 December, 2011
Newleftproject.org

Twenty Years ago, at the Earth Summit, the world’s Governments signed the UN Framework Convention on Climate Change to create a legally binding framework to address the challenge of climate change.

Today, the Green House Gas emissions that contribute to climate change have increased not reduced.

The Climate Treaty is weaker not stronger.

The failure to reduce green house gases is linked to following the flawed route of carbon trading and emissions trading as the main objective of the Kyoto Protocol to the Climate Convention.

The Kyoto Protocol allows industrialized countries to trade their allocation of carbon emissions among themselves (Article 17). It also allows an “investor” in an industrialized country (industry or government) to invest in an eligible carbon mitigation project in a developing country in exchange for Certified Emission Reduction Units that can be used to meet obligation to reduce greenhouse gas emissions. This is referred to as the Clean Development Mechanism (CDM) under Article 12 of the Kyoto Protocol. The Kyoto Protocol gave 38 industrialized countries that are the worst historical polluter’s emissions rights. The European Union Emissions Trading Scheme (ETS) rewarded 11,428 industrial installations with carbon dioxide emissions rights. Through emissions trading Larry Lohmann observes, “rights to the earth’s carbon cycling capacity are gravitating into the hands of those who have the most power to appropriate them and the most financial interest to do so”. That such schemes are more about privatizing the atmosphere than preventing climate change is made clear by the fact that the rights given away in the Kyoto Protocol were several times higher than the levels needed to prevent a 2°C rise in global temperatures.

Climate activists focused exclusively on getting the Kyoto Protocol implemented in the first phase. They thus, innocently, played along with the polluters.

By the time the Copenhagen Summit took place, the polluters were even better organised and subverted a legally building outcome by having President Obama push the Copenhagen Accord.

Copenhagen and Beyond : The agenda for Earth Democracy

The UN Climate Summit in Copenhagen was probably the largest gathering of citizens and governments [ever? To do with what?]. The numbers were huge because the issue is urgent. Climate chaos is already costing millions of lives and billions of dollars. The world had gathered to get legally binding cuts in emissions by the rich North in the post Kyoto phase i.e. after 2010. Science tells us that to keep temperature rise within 2°C, an 80% cut is needed by 2020. Without a legally binding treaty, emissions of greenhouse gases will not be cut, the polluters will continue to pollute, and life on earth will be increasingly threatened.

There were multiple contests at Copenhagen, reflecting multiple dimensions of climate wars. These contests included those:

>> Between the earth’s ecological limits and limitless growth (with its associated limitless pollution and limitless resource exploitation).

>> Between the need for legally binding commitments and the U.S led initiative to dismantle the international framework of legally binding obligations to reduce greenhouse gas emissions.

>> Between the economically powerful historical polluters of the North and economically weak southern countries who are the victims of climate change, with the BASIC countries (Brazil, South Africa, India, China) negotiating with the South but finally signing the Copenhagen Accord with the U.S.

>> Between corporate rule based on greed and profits and military power, and Earth Democracy based on sustainability, justice and peace.

The hundreds of thousands of people who gathered at Klimaforum and on the streets of Copenhagen came as earth citizens. Danes and Africans, Americans and Latin Americans, Canadians and Indian were one in their care for the earth, for climate justice, for the rights of the poor and the vulnerable, and for the rights of future generations.

Never before has there been such a large presence of citizens at a UN Conference. Never before have climate negotiations seen such a large people’s participation. People came to Copenhagen because they are fully aware of the seriousness of the climate crisis, and deeply committed to taking action to change production and consumption patterns.

Ever since the Earth Summit in 1992 in Rio de Janeiro the U.S has been unwilling to be part of the UN framework of international law. It never signed the Kyoto Protocol. During his trip to China, President Obama with Prime Minster Rasmussen of Denmark had already announced that there would only be a political declaration in Copenhagen, not a legally binding outcome.

And this is exactly what the world got – a non-binding Copenhagen Accord, initially signed by five countries, the US and the Basic Four, and then supported by 26 others – with the rest of the 192 UN member states left out of the process. Most countries came to know that an “accord” had been reached when President Obama announced the accord to the U.S Press Corp. Most excluded countries refused to sign the accord. It remained an agreement between those countries that chose to declare their adherence. But it nevertheless showed the willingness of the US and others to disregard the needs of those in the global South. Arguing against the accord, Sudan’s Ambassador Lumumba Di Aping said the 2°C increase accepted in the document would result in a 3 to 5 degree rise in temperature in Africa. He saw the pact as a suicide pact to maintain the economic dominance of a few countries.

As Jeffrey Sachs noted in his article “Obama undermines UN Climate Process”:

“Obama’s decision to declare a phoney negotiating victory undermines the UN process by signaling that rich countries will do what they want and must no longer listen to the “pesky” concerns of many smaller and poorer countries – International Law, as complicated as it is, has been replaced by the insincere, inconsistent, and unconvincing word of a few powers, notably the U.S. America has insisted that others sign on to its terms – leaving the UN process hanging by a thread.”[1]

Even though the intention of the award was to dismantle the UN process, the reports of the two ad-hoc working groups on the Kyoto Protocol (AWG-KP) and the long term cooperative action (AWG-LCA) which have been negotiating for four years and two years were adopted in the closing plenary.

The Copenhagen Accord will undoubtedly interfere with the official UNFCC process in future negotiations as it did in Copenhagen. Like the earth’s future, the future of the UN now hangs in balance. There has been repeated reference to the emergence of a new world order in Copenhagen. But this is the world order shaped by corporate globalization and the WTO, not by the UN Climate Treaty. It is a world order based on the outsourcing of pollution from the rich industrialized North to countries like China and India. It is a world order based on the rights of polluters.

Climate change today is global in cause and global in effect. Globalisation of the economy has outsourced energy-intensive production to countries like China, which is flooding the shelves of supermarkets with cheap products. The corporations of the North and the consumers of the North thus bear responsibility for the increased emissions in the countries of the South.

In fact, the rural poor in China and India are losing their land and livelihood to make way for an energy-intensive industrialization. To count them as polluters would be doubly criminal; corporations, not nations, are the appropriate basis for regulations atmospheric pollution in a globalised economy.

Twelve years after citizens movements and African governments shut down the WTO Ministerial in Seattle, the same contest between corporate power and citizens power, between limitless profits and growth and the limits of a fragile earth was played out in Copenhagen. The only difference was that in trade negotiations the commercial interests of corporation’s stands naked, whereas in climate negotiations corporate power hides behind corporate states. The Copenhagen Accord is in reality the accord of global corporations to continue to pollute globally by attempting to dismantling the UN Climate Treaty. It should be called the “Right to Pollute Accord”. It has no legally binding emission targets.

The COP 15 talks in Copenhagen and COP 16 in Cancun did not show much promise of an outcome that would reduce Green House Gas Emissions and avoid catastrophic climate change. And the deadlock is caused by an outmoded growth paradigm. There are series of false assumptions driving the negotiations, or rather, blocking them.

>> False assumption No. 1: GNP measures Quality of Life

>> False assumption No. 2: Growth in GNP and improvement in Quality of Life is based on increased use of Fossil Fuel

>> False assumption No. 3: Growth and Fossil Fuel use have no limits

>> False assumption No. 4: Polluters have no responsibility, only rights.

These false assumptions are stated ad nauseum by corporations, governments and the media. As stated in an article in the Times of India, “Emissions are directly related to the quality of life and industrial production, and hence economic growth also has a direct link with it”.

Assumption No. 1 is false because even as India’s GNP has risen, the number of hungry people in India have grown. In fact, India is now the capital of hunger. The growth in GNP has in fact undermined the quality of life of the poor in India. And it has concentrated wealth in the hands of a few 100 billionaires now control 25% of India’s economy.

Assumption No. 2 is false because there are alternatives to fossil fuels such as renewable energy. Further, reduction in fossil fuel use can actually improve the quality of food and quality of life. Industrial agriculture based on fossil fuels uses ten units of energy to produce one unit of food. Ecological systems based on internal inputs produce 2 to 3 units out of every unit of energy used. We can therefore produce more and better quality of food by reducing fossil fuel use.

Assumption No. 3 is false because the financial collapse of 2008 showed that growth is not limitless, and Peak Oil shows that fossil fuels will increasingly become more difficult to access and will become costlier.

Assumption No. 4 formed the basis of carbon trading and emissions trading under the Kyoto Protocol. This allowed polluters to get paid billions of dollars instead of making the polluter pay. Thus ArcelorMittal has walked away with £1 billion in the form of carbon credits. ArcelorMittal was given the right to emit 90m tonnes of CO2 each year from its plants in EU from 2008 to 2012, while the company only emitted 68m tonnes in 2008.

To protect the planet, to prevent climate catastrophe through continued pollution, we will have to continue to work beyond Copenhagen by building Earth Democracy based on principles of justice and sustainability. The struggle for climate justice and trade justice are one struggle, not two. The climate crisis is a result of an economic model based on fossil fuel energy and resource intensive production and consumption systems. The Copenhagen Accord was designed to extend the life of this obsolete model for living on earth. Earth Democracy can help us build another future for the human species – a future in which we recognize we are members of the earth family that protecting the earth and her living processes is part of our species identity and meaning. The polluters of the world united in Copenhagen to prevent a legally binding accord to cut emissions and prevent disastrous climate change. They extended the climate war. Now citizens of the earth must unite to pressurize governments and corporations to obey the laws of the Earth, the laws of Gaia and make climate peace. And for this we will have to be the change we want to see.

As I have written in Soil Not Oil, food is where we can begin. 40% emissions are produced by fossil fuel based chemical, globalised food and agriculture systems which are also pushing our farmers to suicide and destroying our health. 40% reduction in emissions can take place through biodiverse organic farming, which sequesters carbon while enriching our soils and our diets. The polluters ganged up in Copenhagen for a non-solution. We as Earth Citizens can organize where we are for real solutions.

References

[1] Economic Times, 25th December, 2009

Vandana Shiva is a philosopher, environmental activist, and eco feminist. Shiva, currently based in Delhi, has authored more than 20 books and over 500 papers in leading scientific and technical journals. She was trained as a physicist and received her Ph.D. in physics from the University of Western Ontario, Canada. She was awarded the Right Livelihood Award in 1993. She is the founder of Navdanya

Academic publishers make Murdoch look like a socialist

Academic publishers charge vast fees to access research paid for by us. Down with the knowledge monopoly racketeers

• 
• • George Monbiot
  • guardian.co.uk, Monday 29 August 2011 21.08 BST
  • larger | smaller

'Though academic libraries have been frantically cutting subscriptions to make ends meet, journals now consume 65% of their budgets.' Photograph: Peter M Fisher/Corbis
 
Who are the most ruthless capitalists in the western world? Whose monopolistic practices make Walmart look like a corner shop and Rupert Murdoch a socialist? You won't guess the answer in a month of Sundays. While there are plenty of candidates, my vote goes not to the banks, the oil companies or the health insurers, but – wait for it – to academic publishers. Theirs might sound like a fusty and insignificant sector. It is anything but. Of all corporate scams, the racket they run is most urgently in need of referral to the competition authorities. Everyone claims to agree that people should be encouraged to understand science and other academic research. Without current knowledge, we cannot make coherent democratic decisions. But the publishers have slapped a padlock and a "keep out" sign on the gates. You might resent Murdoch's paywall policy, in which he charges £1 for 24 hours of access to the Times and Sunday Times. But at least in that period you can read and download as many articles as you like. Reading a single article published by one of Elsevier's journals will cost you $31.50. Springer charges €34.95, Wiley-Blackwell, $42. Read 10 and you pay 10 times. And the journals retain perpetual copyright. You want to read a letter printed in 1981? That'll be $31.50. Illustration by Daniel Pudles Of course, you could go into the library (if it still exists). But they too have been hit by cosmic fees. The average cost of an annual subscription to a chemistry journal is $3,792. Some journals cost $10,000 a year or more to stock. The most expensive I've seen, Elsevier's Biochimica et Biophysica Acta, is $20,930. Though academic libraries have been frantically cutting subscriptions to make ends meet, journals now consume 65% of their budgets, which means they have had to reduce the number of books they buy. Journal fees account for a significant component of universities' costs, which are being passed to their students. Murdoch pays his journalists and editors, and his companies generate much of the content they use. But the academic publishers get their articles, their peer reviewing (vetting by other researchers) and even much of their editing for free. The material they publish was commissioned and funded not by them but by us, through government research grants and academic stipends. But to see it, we must pay again, and through the nose. The returns are astronomical: in the past financial year, for example, Elsevier's operating profit margin was 36% (£724m on revenues of £2bn). They result from a stranglehold on the market. Elsevier, Springer and Wiley, who have bought up many of their competitors, now publish 42% of journal articles. More importantly, universities are locked into buying their products. Academic papers are published in only one place, and they have to be read by researchers trying to keep up with their subject. Demand is inelastic and competition non-existent, because different journals can't publish the same material. In many cases the publishers oblige the libraries to buy a large package of journals, whether or not they want them all. Perhaps it's not surprising that one of the biggest crooks ever to have preyed upon the people of this country – Robert Maxwell – made much of his money through academic publishing. The publishers claim that they have to charge these fees as a result of the costs of production and distribution, and that they add value (in Springer's words) because they "develop journal brands and maintain and improve the digital infrastructure which has revolutionised scientific communication in the past 15 years". But an analysis by Deutsche Bank reaches different conclusions. "We believe the publisher adds relatively little value to the publishing process … if the process really were as complex, costly and value-added as the publishers protest that it is, 40% margins wouldn't be available." Far from assisting the dissemination of research, the big publishers impede it, as their long turnaround times can delay the release of findings by a year or more. What we see here is pure rentier capitalism: monopolising a public resource then charging exorbitant fees to use it. Another term for it is economic parasitism. To obtain the knowledge for which we have already paid, we must surrender our feu to the lairds of learning. It's bad enough for academics, it's worse for the laity. I refer readers to peer-reviewed papers, on the principle that claims should be followed to their sources. The readers tell me that they can't afford to judge for themselves whether or not I have represented the research fairly. Independent researchers who try to inform themselves about important scientific issues have to fork out thousands. This is a tax on education, a stifling of the public mind. It appears to contravene the universal declaration of human rights, which says that "everyone has the right freely to … share in scientific advancement and its benefits". Open-access publishing, despite its promise, and some excellent resources such as the Public Library of Science and the physics database arxiv.org, has failed to displace the monopolists. In 1998 the Economist, surveying the opportunities offered by electronic publishing, predicted that "the days of 40% profit margins may soon be as dead as Robert Maxwell". But in 2010 Elsevier's operating profit margins were the same (36%) as they were in 1998. The reason is that the big publishers have rounded up the journals with the highest academic impact factors, in which publication is essential for researchers trying to secure grants and advance their careers. You can start reading open-access journals, but you can't stop reading the closed ones. Government bodies, with a few exceptions, have failed to confront them. The National Institutes of Health in the US oblige anyone taking their grants to put their papers in an open-access archive. But Research Councils UK, whose statement on public access is a masterpiece of meaningless waffle, relies on "the assumption that publishers will maintain the spirit of their current policies". You bet they will. In the short term, governments should refer the academic publishers to their competition watchdogs, and insist that all papers arising from publicly funded research are placed in a free public database. In the longer term, they should work with researchers to cut out the middleman altogether, creating – along the lines proposed by Björn Brembs of Berlin's Freie Universität – a single global archive of academic literature and data. Peer-review would be overseen by an independent body. It could be funded by the library budgets which are currently being diverted into the hands of privateers. The knowledge monopoly is as unwarranted and anachronistic as the corn laws. Let's throw off these parasitic overlords and liberate the research that belongs to us. • A fully referenced version of this article can be found on George Monbiot's website. On Twitter, @georgemonbiot

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