Planetary Regeneration Podcast | Episode 6: Delton Chen
This blog is a transcription of the sixth episode of the Planetary Regeneration Podcast, hosted by Regen Network’s Chief Regeneration Officer, Gregory Landua.
In this episode, Gregory interviews Delton Chen, author of The Silver Gun Hypothesis and Australian engineer. Listen on Soundcloud, Apple Podcasts, or Spotify; or read the transcription below.
Gregory: Hello and welcome to the Planetary Regeneration Podcast. I’m your host Gregory Landua.
Hello and welcome to the Planetary Regeneration Podcast. On today’s episode, we have a Dr. Delton Chen, who is an engineer from Australia who has been working on a biophysical model for the global economy and wrote a really interesting essay called The Silver Gun Hypothesis which outlines how a global reward currency for carbon mitigation or drawdown could be a powerful and viable alternative to carbon taxes and other proposed mechanisms for balancing our global current budget. This conversation was really interesting. Again, as always, we dive off of the deep end and get straight into the nitty-gritty of his work in the world and some of the implications and underpinnings of the hypothesis that he’s looking to test around creating a new economic model based on thermodynamics that allows us to understand how to balance the global carbon emissions of our economy with a complementary economy based on inspiration instead of respiration if that makes sense, in-breath and out-breath. We have an out-breath of the global industrial economy with an in-breath of the global regenerative economy based on this reward currency that he’s proposing. It’s a very interesting idea. I think it is deeply aligned with the thinking and work that we’ve been pioneering at Regen Network so there’s a bit of kindred spirits between Delton and I having this conversation. There’s so many questions and such an exciting path forward in testing some of the assumptions and getting a deeper understanding of the hypothesis that underpins his thinking. I’m really looking forward to continuing the conversation with Delton in the future, and we’ll do our best to have some detailed show notes in this show so that folks can link to some of his work. Have fun.
Gregory: Delton, thanks for hopping on the Planetary Regeneration Podcast. I’ll set a few of just rules. I guess rules isn’t the right word but just the way that I’m working to run things. The idea of this podcast is to just take listeners on a deep dive like a torrent of information. I’m not trying to dumb things down or distill it into bullet points at all. You and I get to have our curiosity lead us down whatever rabbit holes, however deep we want to get. That’s sort of in service to how I like my information, which is dense and bewildering.
Delton: That really suits me perfectly because there is a real problem in public conversations and conferences, where they give you ten minutes and people have this idea of a three-minute elevated pitch said about science and it doesn’t really work for these topics. You need this dense, deeper dive. I’m with you on that.
Gregory: Yeah. This is like the anti-TED talk.
Delton: The anti-TED talk, perfect.
Gregory: Let’s think of this as your opportunity, for folks, for listeners, who aren’t familiar with Delton’s work. Delton is the author of The Silver Gun Hypothesis and the living system economy framework. I’m just overjoyed to get to dive into the conversation. The work underpinning those two frameworks is really exciting. I’m going to let you give a quick introduction Delton, to I think maybe “the why” and “the what.” I think of those two frameworks as part of a greater piece of work that’s singular. I’m not sure what you would call it — maybe the living systems economy.
Delton: Yeah, sure. “Why” has the living systems economy, and “what” is the living systems economy. That is a good start because the living systems economy was developed to communicate those two ideas concisely. Why it’s important is that it provides a high-level model to explain how human civilization can find the agency to abate and sequester sufficient carbon to provide a safe climate. Effectively, the reason why we have the living system economy model is to propose a deeper, more holistic biophysical model and theory for how humanity can move towards the ambition of the Paris climate agreement, which effectively is an agreement for climate safety. The details of the Paris agreement, article 2, the 1.5 to 2°C ambition — technically speaking — that isn’t really a safe climate. We would have to get to there before we even consider climate restoration to return to a Holocene-like climate. That’s “the why”. The why is about finding agency to do that. When I say finding agency, I literally mean both defining what that agency is theoretically and how to impellent it. What it is is a high-level biophysical model to explain what I’ve stated, and it comes in two forms, this model. The high-level model is called the living systems economy model and it presents these ideas in a digestible fashion but it doesn’t enter the details too much. There is another model, which is called the Silver Gun Hypothesis, which is a bottom-up model for explaining the details of why the living systems economy works — the multi-agent theory and some thermodynamic principles. That second model called the Silver Gun Hypothesis, that’s probably too detailed for this interview although we could talk about it. My intention is to focus on the living systems economy because it really is the best way to frame this biophysical solution to climate change and sustainability and unsustainable economic growth.
Gregory: Yeah, okay. Essentially, what I’m getting from what you’re speaking about, because for a little while I’m going to keep my question to what I’m hearing so that I can be serving to parse for the listeners. Then, we’ll dive into some of my questions from reading your works. What I’m getting from that is that there’s a need or an imperative for a new approach to economics that takes into consideration biophysical reality. The basic science of thermodynamics, of the carbon cycle, and other things, and that’s what fundamentally the living system economy framework is doing. It’s showing a pathway towards accounting for the realities of planet Earth in an economic system.
Delton: That’s right. Of course, I’m not the first person to propose that biophysics can be used to frame the economy or parts of the economy. However, if you look at the mainstream narrative of climate changing policy, it is really focused around carbon taxes of some kind and other conventional policies. The neoclassical theory that justifies carbon taxes, it is really the only deep theoretical framework that economists have to justify that approach. It’s traced back to Arthur Pigou’s work, which is written in 1920, a hundred years ago, and to Alfred Marshall’s work before that.
[00:10:00]
Delton: Marshall, he put forward the notion of marginal utility and then Arthur Pigou introduced the concept of a market failure and how to resolve the market failure with taxes and subsidence. What I’m saying, I guess, is that those approaches, the classical approaches, they are I believe very rational and they should be used. However, when it comes to carbon, we can’t rely on those classical theories alone because carbon is a very special element in the periodic table that differentiates itself from all the other elements and pollutants in the environment. Because, as we all know, carbon is the building block of life, so carbon stores a lot of energy, it provides structure and it stores information, for example, in DNA. Given that carbon is so fundamental to life and the emergence of life, we can’t really separate carbon from energy like you can other pollutants. Therefore, what I’m claiming is that the market failure in greenhouse gases is not a classical market failure but indeed is a thermodynamic market failure. As a thermodynamic market failure, we can’t really conceptualize the problem adequately with these neoclassical ideas alone. We have to bring in a more generalized model. The only other real approach we can use — that’s let’s call it scientific — would be a framing based on the natural sciences and this would bring in the school of economics known as biophysical economics. Biophysical economics is simply another word or another phrase for the term thermodynamic economics. At some point in time, the people in that field changed the name to biophysical economics. Really, it’s trying to adhere to the laws of thermodynamics and the principles and ideas in that field of physics. That’s a little bit of a background on why the approach could make sense. But I’ll just interject before I hand it back to you Gregory, to point out that the living systems economy is founded on a hypothesis so it’s not proven yet. There is some verification of the theory and the validation of the theory in a working paper but we have to be careful not to assume it’s correct at this point. It does appear to be correct or I think it has a high probability of being correct based on what I understand at the point in time.
Gregory: Right. Thank you for that clarification. I think that that transparency and caution is — I applaud that. I think it’s important to stay sort of unattached to one’s hypothesis because that’s good science. One question I have though, just to push on that a little bit is: what is at risk if we were to believe and implement your hypothesis? What do you think the negative consequences of the hypothesis being proven wrong could be if people were to test it by enacting it?
Delton: That’s a really good question. I suppose one risk would be that it might introduce more inefficiency into the world of economy. Because, in the theory, that is the Silver Gun Hypothesis or is the economic theory here, one of the interpretations is that we need a certain kind of economic inefficiency to manage the risk of climate change. What’s interesting about this model is that we propose two types of efficiency and two types of inefficiency. Let’s consider efficiencies first. Every economist in the world loves the notion of economic efficiency or market efficiency. What we’re saying is that you can have good efficiencies and bad efficiencies. You can also have good inefficiencies and bad inefficiencies. The idea is to offer a global carbon reward to scale up carbon mitigation and that would introduce good inefficiencies. If the theory were to be proven wrong or it wasn’t really needed, then we may introduce what we call good inefficiencies that simply might not be needed because carbon taxes and regular kinds of green [discernments 00:15:30] might be sufficient to manage the climate crisis. As a matter of fact, I would say, if the theory is wrong, the hypothesis is wrong, it would mean that we can rely on the governments to solve these crises. If the theory is correct, then we shouldn’t expect our governments to be able to solve this crisis for us and that we would need to go to the new policy of the global carbon reward which requires central banks to participate with a new currency system and what’s called the carbon exchange standard to manage the world economy.
Gregory: Fantastic. There’s a bunch of things coming into my mind. First though is just a sound quality note. Sometimes I’m hearing a little brushing sound.
Delton: That’s my left hand, brushing across the table. I’ll have to stop doing that. Sorry.
Gregory: Okay, no worries. I can hear you well. There’s a bundle there that I’d like to unpack. I was asking the question, kind of a modified precautionary principle question, which is: what’s at stake? Because I think also I can ask — what’s at stake if we don’t put enough time and effort into testing out hypotheses? I personally have the assumption that in order to test an economic hypothesis, as complex as the Silver Gun Hypothesis, there actually needs to be real-world experimentation. I think we can do a fair amount of computer simulation but at the end of the day, you need the non-rational human element to see how it actually plays out in a community. I’m curious. Does that resonate with you? Is that what the test needs? There’s levels of testing. One might be a simulation and the next might be some sort of limited experimentation in grassroots communities around the world. What’s needed to actually thoroughly test the hypothesis?
Delton: The hypothesis that needs to be tested is called the Silver Gun Hypothesis and it’s a multi-agent theory. One of the ways to test it would be in a computer simulation in the multi-agent model that is designed and structured to replicate or simulate the laws of thermodynamics. It could also possibly, and I’m speculating, but possibly be tested using living cells and/or it can be tested with social experiments like pilot studies of the policy. I’d like to point out too that social scientists have actually tested certain aspects of this theory already, which they call “carrot and stick” incentives. In the literature, in the peer-reviewed literature, there’s at least three studies where scientists have taken groups of people and given them sticks which are penalty-based incentives, and they’ve given them carrots which are rewards of a certain kind, and they’ve given them combinations of the two. What they’ve found consistently is that human cooperation maximizes with carrot and stick incentives together. That’s at a very foundational level, that’s evidence that this reward-based approach, combined with taxes and other penalties, could be used to maximize cooperation. What’s special about the Silver Gun Hypothesis is that we’re looking for much higher fidelity in the way agents interact with each other because we’re specifically wanting to test the idea that agents like cells or human beings will form colonies.
[00:20:00]
Delton: Human beings form economies and living cells form multi-cellular organisms. This hypothesis needs to be tested on the basis of the first and second rules of thermodynamics and with the notion of energy efficiency and entropic safety as two performance metrics that multi-agent systems follow. For the purpose of this interview, I wasn’t going to go into these details. They’re probably too technical for this conversation but if I just leave it at that, noting that all systems that are alive will have a certain amount of energy efficiency and they will also be able to protect themselves entropically from decay. The hypothesis pinpoints two metrics to describe those particular skills or fitnesses of living systems. The model itself or the theory is probabilistic. It doesn’t introduce any new concepts. What’s interesting about it is that the hypothesis only really depends on three concepts. One is the first rule of thermodynamics — the conservation of energy. The second is increasing internal entropy and the second rule. The third concept is that of open systems, which the model doesn’t explain how they’ve come into being but the open system would be the living system. Because all living systems, be they cells, beings, economies, they are all open systems that energy flows through and the matter goes in and out.
Gregory: It strikes me that that’s part of what differentiates your work from, for instance, Herman Daly’s work on steady-state economics. I don’t know if this is an accurate characterization but it always strikes me that steady states or a homeostatic approach to shift evolving our economy is sort of trying to turn the human economy into a closed system, in a way. First off, is that an accurate characterization? Would you also make that discernment? If not, what sort of differentiation would you make around the implications of your thinking versus some of these other attempts at upgrading economic theory?
Delton: That’s a really important question. I’ll have to address this question very carefully because out there in the big world, there are many people, including many ecological economists, who support Herman Daly’s steady-state theory or model. The differentiation is that, I believe, a steady-state model is only really valid for certain kinds of systems where you don’t really need to take account of entropy. The reason that this is the case is probably best explained with an example. A good example of applying Herman Daly’s steady-state model would be managing water. You take, for example, the storage of water — it could be a groundwater aquifer — and the concept of the model is to utilize the resource at a similar rate that the resource’s being replenished. [crosstalk] pump it out and you can achieve the balance over time, in theory. In application, we can definitely do that and it makes sense with water. There are complications however in real life. One of the complications is that human beings, including farmers, they don’t necessarily care that much about the future, relative to the value of water to them in the short term. There are many examples where farmers will overutilize the water, the groundwater, even though they know it’s going to run out in the near future or in the distant future. One example is northern India where farmers are over-extracting groundwater. Another example is Ogallala Aquifer from central United States where the whole region is overutilizing the water resource. Eventually, they will run out of the groundwater. Why do they do that? The short answer is that people time discount. We discount the way the future because we want the resource today, to survive today. The Herman Daly’s steady-state model fails only in that respect, that people time discount. But why do they time discount? The answer to that question, I believe, is because of entropy ultimately. Why can’t we use the steady-state model for climate change? At the beginning of this interview, I talked about the fact that we have a thermodynamic market failure in carbon. The answer ultimately is that carbon, because it is strongly coupled to energy, you can’t ignore the second rule of thermodynamics. If you bring the second rule in, what that tells us is that steady-state systems — I’m talking about perfect steady-state systems — they don’t actually exist. That’s a very major distinction. Let me explain it this way. If we’re going to actually develop a model that is consistent with thermodynamics, we must be consistent with the second rule. Robert Bolton had developed that rule. He pointed out in his notes that, based on the probabilities of particles, classical particles in the explanation of entropy, there’s a zero probability of a perfect steady-state system emerging. The second rule precludes perfect steady-state systems and they don’t actually exist in nature, which is interesting. In quantum mechanics, in classical thermodynamics, in cosmology, there are no perfect steady-state systems. They simply don’t exist in our universe. Once you understand that, then it becomes more clear that Herman Daly’s steady-state model has major limitations when you really have to address the thermodynamic system. When we look at carbon in the environment, we need a more generalized model that can take that into account, the impossibility of a steady state. This is where the living systems economy model comes in. If you would like Gregory, I can now explain that model.
Gregory: Let me ask a couple more questions just to build a mental model because I think that this discernment around the existence or non-existence of the archetype of a steady-state system in people’s mental minds, I think this is the transition from how most of us conceptualize sustainability as a paradigm versus the regeneration or restoration of the living systems economy that is an imperative that we understand and interact with. I want to spend just a moment here and test the mental model that I’m using to see if it matches your mental model. Are the analogies that are coming to my mind rigorous enough to form a mental image of how the world really does work so that we can use that to inform our thinking?
Delton: This is a really interesting and important topic. Let’s do it.
Gregory: The Sun — you can think of it as a giant energy gradient — that’s dispersing energy from a high source to a very low source, way out in the distant universe. At Earth, we are at a particularly sweet spot of that gradient where a certain amount, at least for the near to mid future, we’re constantly receiving. I think of it as there’s like a flywheel and it’s just spinning it. There’s just somebody who’s just spinning it, which is what’s meant by an open system. There is an input that’s constant.
[00:30:00]
Gregory: It’s constantly happening like a river that’s flowing. Now, life is an eddy off of that flow. It’s like another little spinning current that’s moving the opposite direction of that giant energy gradient, which we can call entropy. The Sun is spending energy and pushing it out and there’s this little eddy which is Earth, the biosphere, which is pushing the other direction essentially if you would think of it in like a pattern-level soft focus. Within Earth, there’s many other sub-flows. There’s many other subeddies. There’s this complex eddying flow of what appears to be the reversal of entropy or centropy which is the essence of life somehow. We’re taking advantage of these little energy eddies, and we’re building them and building them. But when we pretend that those eddies will exist forever, instead of being part of a larger, complex system of entropic diffusion of energy, we’re basing our mental model on something that’s fundamentally untrue. Whereas, if we base it on an understanding that these are eddies, and that we need to create systems that increase that flow for the time that it exists, we’re on much more solid theoretical footing. What upgrades would you make to that?
Delton: You’ve hit the nail on the head there with the notion of eddies, which metaphorically represents the fact the universe is increasing in entropy, but there are these eddies or pockets of relative lower entropy, including life itself on Earth. If we look at civilization as one of those eddies or life on Earth as one of these eddies, in our civilization, one of the paradigms that we’re talking about is the circular economy. The circular economy assumes that we can recycle things and they have a symbol of an arrow going around in a circle. You might know that icon. What’s missing in that symbol is actually an arrow that’s going out for the increasing entropy so you can’t really recycle something perfectly. It’s impossible. That concept of the circular economy is a false concept when we take entropy in consideration.
Gregory: Yes, I’m always giving handwavy in saying, “It’s a spiral economy,” because if you take energy out of a circle, it doesn’t connect back at a point. It misses and it keeps going a whirlpool.
Delton: Yes. The perfect recycling is something that doesn’t exist in the universe or in nature and there are dangers for us in believing in that model. For example — I won’t diverge; I’ll come back to the concept of the planetary energy balance as well — but this is an example of recycling. In that circular economy we might assume that plastic can be perfectly recycled, but that would be impossible. Plastics will always break down into microplastics and pollute the environment. You’ve got to question whether a circular economy is really such a good idea for plastic. For something like water or carbon, there aren’t those environmental implications because they are generally benign. Nonetheless, you still can’t recycle things perfectly. Coming back to the planetary scale, you mentioned sunlight coming into the Earth and the Earth is like a giant eddy of life. The reason that this is occurring is because the Sun’s radiation is coming in at a relatively high frequency. Then, it’s warming up the Earth. It’s warmer than its blackbody temperature because of the greenhouse effect. Then, it’s re-emitting the radiation back into space at a lower frequency. The energy coming in and the energy going out from the Earth are approximately balanced but because of the frequency of the radiation leaving these lower — because it’s infrared — there are more photons leaving. Approximately, twenty times more photons are leaving the Earth because of this frequency shift. According to the physicists, photons have about the same entropy so we get about twenty times more entropy loss from the Earth than gained from the Sun. That’s why we get this negentropy that you’ve mentioned. The negentropy or the negative entropy is what allows life to emerge on the Earth in this planetary eddy of low entropy.
Gregory: That’s a really fascinating dive into that as planetary accounting. I want to circle back to this concept of time discounting because this feels key. The interesting thing here is I think that time discounting is very rational in an entropic world. If I’m a farmer, with all the uncertainty that I face, including I think a pretty solid intuitive understanding of the fragility of the opportunity, then I’m most likely to optimize for the present moment even at the expense of the future. What is interesting is, I think, that oftentimes people who are well-meaning, do good oriented, are holding a false ideal of how the world works essentially, and hoping to impose that onto people who actually have a more accurate mental model of how the world works. Intuitively, even if it’s not theoretically robust, there’s just this intuitive understanding of how the world works. That crocks what science really tells us about the world and how we see the behavior playing out in farmers around the world, I think, is really important. That’s one of the reasons why I’m so excited about the Silver Gun Hypothesis, because I think there’s a way in which it potentially can meet the real world and the real people living in the real world in a way that other economic theories have not been able to do, that sustainability upgrades to economic theory have not been able to do yet.
Delton: Yes. This is a very exciting feature of the Silver Gun Hypothesis because it actually provides a biophysical framework and explanation effectively for why we do have time discounting in the first place. To give a bit of a background, economists are very familiar with time discounting as a concept and they use it in the assessment of the social cost of carbon, which is then used to justify the ideal carbon tax. That approach falls under a general framework called cost versus benefit analysis. That’s another whole huge discussion. But at the basis of it, economists acknowledge that even if we do time discount, and so they actually use it formally to adjust social cost of carbon which is the externalized cost of greenhouse gases in their assessments. Now, that work that they do contains paradoxes, unresolved paradoxes in the literature which have not really been resolved. The paradox is that an economist could choose a relatively high discount rate or a relatively low discount rate. If they choose a high discount rate, it reduces the social cost of a carbon tax. If they choose a low discount rate, it increases the social cost of carbon, relatively speaking, and the tax. Some economists who are concerned about climate change, they will intentionally use a lower time discount rate. Then other economists who are more sanguine and more, say, conventional and not so critical of the financial system, they will tend to use a higher time discount rate. The point here is that you could have low taxes or high taxes, depending on your time discount preference. That’s paradoxical, because if you consider what that means, what it means in fact is something that most people simply won’t acknowledge and that is — carbon taxes won’t work whether you use a low discount rate or a high discount rate, because if you use a high discount rate, you end up with a low tax and then you don’t protect the planet from catastrophic climate change.
[00:40:00]
Delton: If you use a low discount rate and a very high tax, it still won’t work because — why? — people don’t like taxes. It would be blocked critically. That’s the key problem that troubles taxes and it has so in 20 or 30 years. The economists are still persisting with this approach because they don’t have any other understanding around carbon pricing. They don’t spend the time to think about how to offer a carrot, a reward, because they only consider typical subsidies. The analysis put forward here is to introduce a policy, which is a global carrot that is debt-free and it doesn’t tax anybody, because it’s structured on the notion that we can reward people with the parallel currency system that is fully funded by monetary policy and currency trading. To explain that and understand that, we’d have to go into the financial mechanism, but at this point in our conversation I’ll simply say this to make it fit together. A way this policy was developed is a kind that we can derive the global carbon reward from the carbon tax using an epistemic method. An epistemic method is where we do this objectively using some sort of law or relationship. The laws and relationships we’re using are in fact the laws of thermodynamics. What I’m really trying to say is that we take the carbon tax and we put it in front of a mirror and we look for its reflection in the mirror, where that mirror is metaphorical for the epistemology. The epistemology is one of taking into account the conservation of energy as a time symmetric relationship, and taking into account intricate changes which are time asymmetric. It’s these relationships — which are quite complex I have to admit — that appear to give us a reflective policy or a reflective image of a carbon tax which is our global carbon reward. By adhering to those relationships, the claim is made that we take care of the time discounting problem. Coming back to time discounting, what do we notice about the time discounting? As I’ve said, it’s paradoxical. What is entropy? Entropy, by one definition, is the arrow of time. When we take into account the arrow of time, it appears we can resolve the temporal paradoxes such as the time discounting paradox, and the other temporal paradoxes — which are also inherent to the climate problem — which include the paradox of unsustainable growth. The growth is paradoxical and that appears to be resolved in Jevons paradox, which is an energy efficiency paradox that also appears to be resolved. There are philosophical and theoretical reasons to consider this approach as possibly being fundamental as a solution. I hope that made some sense.
Gregory: To reiterate the approach, the approach is to use and estimate of the imbalance created by global society — post-industrial, industrial society — and the out-breath, the carbon out-breath of all of that economic activity in order to create a reward currency that is essentially minted and rewarded specifically to an economy dedicated to the carbon in-breath. Is that accurate?
Delton: That’s very accurate. That is the main theme that comes out of the living systems economy. Earlier, I’ve mentioned that the living systems economy model is the high-level model that’s relatively simple. Silver Gun is the bottom-up model, which is more complex. Looking at the living systems economy model — the top-down model — it basically says we need two economic systems. One is the existing system which is the out-breath of carbon dioxide into the atmosphere. We need the parallel economy for the in-breath, which is in fact biophysically similar to photosynthesis that pulls in CO2. I’m just going to unpack that a little bit for the audience because this is really important. Today, and since the beginning of the UNFCCC conferences and discussions around climate change, it’s been assumed by everybody generally that we would solve the climate problem with the existing economy. If we introduce the notion of entropy in living systems, it’s very important to understand that organic life and organic living systems, they do not have the capacity to reverse the carbon balance. If you take, for example, an animal or a fungus, we never see an example of an animal or fungus reversing its carbon balance. They only respire carbon. They don’t do the opposite. This is true right down to the cellular level. If you take mitochondria which is the respiring cellular extraction of animals and plants and fungi, the mitochondria are one-way street chemically. They only work towards respiration. They don’t do photosynthesis. If you want photosynthesis, you have to go to the chloroplasts which are cellular extractions of plants. They photosynthesize. The point I’m making is that it’s well known that these living cellular structures, they are effectively irreversible, even their chemistry. This is the keyword that we need to introduce into our vocabulary. That’s irreversibility. The point is that if we unpack irreversibility as a concept, how do we explain it? The way it’s explained is simply with the concept of entropy because it’s increasing entropy that really underpins the notion of the irreversibility of these processes. In other words, if you get down to the level of the molecular machinery, you simply can’t expect that machinery to go in reverse because the probabilities are too low. It’s a bit like playing the game of billiards. If you hit the white ball, you scatter all the other balls. The probability of everything going in reverse is vanishingly small because of the chaotic nature of particles moving around.
It’s also true for the molecular machinery of cells and other enzymes. The point here is when we scale up to the human economy, it has been assumed for decades now — ever since climate change was discovered as a problem — it’s been assumed that the human economy was reversible; that we’ll simply use the economy, make some adjustments to taxes or new financial policies or regulations, and we’ll simply go into reverse with our carbon, become net carbon neutral or even carbon negative. If we revision these conceptual models to admit that our economy as it stands is a system that has a very low chance of reversing itself with respect to carbon. There’s ample data and modeling evidence to suggest that’s the case. We could look at the mainstream model results or the statistical analysis, the thermodynamic analysis. They all say the same thing that the chance of staying at 2°C is very low. You’re talking less than 5% and that would be generous. Reframing this, I would simply say that there are many reasons to believe that our economy has a quality or property of being irreversible with respect to carbon, meaning that we don’t have the control we need or the agency we need to get the net zero emissions by mid century. We don’t have the agency we need to stay below 1.5 to 2°C. Now, why don’t we have that agency?
[00:50:00]
Delton: What is it about the economy that prevents us from having that level of control and the reversibility we’re looking for? The interesting thing actually Gregory is that one of the major reasons structurally is the monetary system. When you look at the monetary system which is a national fiat system, that money, most of it — more than 90% approximately — is created through commercial bank lending. When banks lend the money into existence, it has to be paid back with interest. Therefore, all market actors generally have a requirement to make a profit in a competitive economy, to pay back their loans with interest. Analyses of this system indicate that it’s unstable when there is no growth. Governments and central banks mandated in effect to maintain a minimum level of economic growth so we have financial stability and they have it. That is very strong evidence that we have a growth-based economy. We have to have a certain amount of growth, otherwise we have financial instability.
When you tie that knowledge to our historical [unintelligible 00:51:22] growth, we’ve never had green growth. Statistically, in terms of the data, there’s no such thing as clean green growth. It’s always been dirty. Hence, we can’t really have the kind of rapid clean growth we would need to stay under 2°C. Remember, maybe about 10, 15 minutes ago, I mentioned that we use this epistemology to derive the global carbon reward from the carbon tax. In that epistemology, what’s special about it is that there’s a kind of step or translation of policies done around the unit of account of the carbon tax policy. When we do that translation, theoretically, we create the parallel currency. This becomes a kind of axiomatic or self-evident solution because we acknowledge that the monetary system is part of this problem. It’s a structural component of the problem of climate change. Then, the epistemology points us to a parallel currency. Hence, we begin to see that the laws of thermodynamics are guiding us towards a structural solution that appears to be natural and fundamental to human economies. A very deep question emerges from this approach, a very deep and philosophical question. The question is this: why does it work? If we do this translation of the carbon tax through this epistemic mirror that we arrive at the global carbon reward. Then, it provides us with the solution which appears to work theoretically in resolving paradoxes and offering us a pathway to a safe climate. Why? Why does it work? This is where we need a more fundamental answer and this is where the multi-agent theory comes in — the Silver Gun Hypothesis which is the bottom-up approach. That’s the model that needs to be experimentally tested to find that final proof.
Gregory: Essentially, what you’re proposing is the need for a complementary economy complete with its own currency, complete with a new financial system that ties the creation of a new currency to a new mechanism, and allows a complementary photosynthesis optimized global economy, essentially.
Delton: Yes. I think what we probably should have spent more time on the living systems economy, because what it tells us is that we need a minimum of two systems to manage the carbon balance. The first system is the existing economy and the second system is this complementary currency and the economy that it creates. It is a complementary currency but I tend to call it a stateless parallel currency. It’s analogous to what we see in nature. It’s analogous to respiration so existing economy has many properties that are similar to respiration in animals and fungi. The parallel economy that we don’t have, but the one that we apparently need with a parallel currency, it has thermodynamic properties that are analogous to photosynthesis in plants. If you look at nature, the food web for life on Earth, you can see very clearly at the base of the food web are plants. The energy for the food web is 99% solar energy obviously. It’s captured by plants through photosynthesis to make sugars. That energy flows up to the herbivores and the carnivores and the primary predators at the top of the food web. That’s the way it works.
When we look at our economy, the human economy, it’s kind of a super-organism that manifests out of us, Homo sapiens, to create a super-organism. If our super-organism or our world economy is analogous to respiration, what would you expect it to do? It consumes, doesn’t it? In a sense like the animal consumes. Our super-organism, our human economy, is consuming plants, animals, and other natural resources such as fossil fuels. That situation currently is very unbalanced because at the level of our economy, we don’t have a balancing system to take care of our carbon emissions like there exists in the natural food web, which is supported at the base by photosynthesis. In this reanalysis of economic systems, the living systems, what it points towards is the fact that the — or the idea I should say — that we need the parallel economy based on the complementary currency that we are discussing that acts as another super-organism at the very top of our planetary food web that will provide the service of additional photosynthesis and carbon sequestration, carbon abatement, and also the regeneration of the biosphere because we’re overconsuming it. For this to make sense, we need a very generalized model. The Silver Gun Hypothesis, which is a multi-agent theory, it is very generalized. It has the capacity to explain, not just the human economy, but it also has the capacity to explain the emergence of all multicellular lifeforms in the tree of life. That’s all the carry-outs, the animals, the fungi, and the plants — the human economy as well and this parallel economy. Just very briefly, what I like about this model is how comprehensive it is. It provides a framing that we can compare our economy to nature and it gives us a place in nature rather than alienating us from nature. This, intentionally, is a quite liberating concept because if you consider what we have on the table at the moment, in the narrative of the sustainability of climate change, we mainly have on the table many different dysfunctional discussions and a lot of blames. We’re pointing the finger at governments and politicians. We’re pointing the finger at fossil fuel companies and ourselves. All of this blaming each other is not getting us to a safer climate. It’s creating more tension and it’s highlighting the dysfunction in the politics of climate change without actually providing a deep solution or biophysical understanding of what’s happening. It’s not offering a pathway to long-term sustainability.
Gregory: Yes, agreed. Fantastic. There’s a lot of layers here and I’m trying to think of which one to focus on.
[01:00:00]
Gregory: First off, there’s a lot of parallels with the way that we’ve been approaching things at Regen Network. Some of our original thinking was centered around this concept that we were calling the “reverse mining” which was essentially a reward currency that is minted and distributed for actions that are ecologically regenerative, mostly focused on the carbon cycle outcomes but with a little bit of a holistic approach around water and biodiversity and other indicators of the ecological health, and an approach that can create climate balance through human activity. I resonate very strongly with this imperative for a deep reinvention of the global economy and financial system. That really resonates. I feel like your explanation of the theoretical underpinnings of what that approach necessitates is very lucid. I’m really appreciating that. Where my mind is going is kind of intuitive in directions. One is: what are the conditions needed? What groups of society need to buy into this as an imperative? That’s sort of the direction where my mind is wandering. I think, to put a fine point on a question that takes us a couple of steps in that direction, it would be — what is the role of the current financial system and the current structure of central banking in the creation of this complementary currency and economy or this living currency and living economy? Do we need them to buy into it or not? Who needs to buy into it? Eventually, everyone in the world needs to believe in the value of this currency so that in turn it has value and can be exchanged on the markets for goods and services or an exchange for currency that allows you to access goods and services. Obviously, we have to achieve, in order for this hypothesis to work, a societal buy-in and faith in the value. What do you see as the chain, the most rational chain to create that societal buy-in and faith in a currency like this?
Delton: There are different levels and layers of buy-in. Perhaps the first people to have influence in the buy-in would be scientists and physicists, because they would be the people who would first consider the living systems economy model and determine for themselves whether it’s plausible. Generally speaking, my assumption is that societies generally do trust physicists whether it’s a theory or not. Society tends to believe that physics and physicists are fully objective and we consider them to be smart people. If they can review and test out all the systems, if they can come up with the information that says it’s a reliable hypothesis, then that would be the first level because they could then begin a new narrative around how humanity could achieve long-term sustainability. That is not necessarily ideal because physicists and scientists are quite a long way away from policy development and central banks. Somehow, we would have to bypass the conventional economic narratives and attract the ease of politicians and central banks’ governance. Because if we try to go through the conventional institutions created by neoclassical economists, they would [unintelligible 01:05:30] in delay it for a very long time. They generally don’t buy into the natural sciences as being a valid framework for understanding or managing the economy. Generally speaking — I’m not speaking for all of them — they tend to consider economics to be a purely social science and some of them consider it not to be a science at all, maybe entirely political and empirical. But at this level, we would need to take a shortcut and bring into a new narrative in the plain sight of everybody and certainly in the radar of central bank governance and policy institutions, the notion that we need to go beyond neoclassical economics and bring into a new era, a new paradigm of our biophysical framing for sustainability and economics. That’s a big ask.
Gregory: That sounds terrifying Delton. That sounds terrifying. It’s sort of like a scenario to have the cool kids in a high school like you. There’s so many social dynamics. Maybe I’m jaded but I don’t have the experience of academia having the capacity to — in any sort of quick way — digest and transform paradigms without an enormous social struggle, without it being about social dynamics. In my experience — and again I’m biased against the ivory tower in my life experience — I’m more of a radical autodidact, not inside the ivory tower persona I suppose, although I have friends in that world. I’m not such a firebrand. Anyway, my bias is it’s’ unlikely to get anything done there. That’s where good ideas go to die. That’s where people spend time giving the right answers to the wrong questions as a living. I’m like, “Oh no, Delton. This is a great idea. We don’t want it to go there to die.”
Delton: Whilst we have living, breathing scientists and economists and instinctually valuing protesters and environmentalists, there is a chance. One hope’s that there would be some people in some institutions, whether it’s in European Union or in United States or a developing country — perhaps in a developing country would be under a much more environmental pressure — and maybe some individuals who are willing to step outside of the box and support a radical approach that can be implemented with a pilot study. Now, when I say a radical approach, we have to be careful here about what it means. What’s radical is not the policy. What’s radical is the theory underpinning the policy, the biophysical revision of perfect modern economies. The financial mechanism itself can be explained by an economist or central bank economist and monetary economist, because it’s really about creating a new unit of account and the exchanging rate mechanism, supply and demand and the administrative infrastructure that you’re familiar with, with the Regen Network. As you know, there are ways of using new technologies, digital technologies, to develop quite comprehensive decentralized administrative systems to manage contracts, data, and analysis, measurable reporting verification, et cetera. We have the technology. We understand the mechanisms. It can be implemented and explained in a conventional way. It’s just that the justification that is radical.
[01:10:00]
Gregory: Do we need central bankers to buy in? Are they the first people? I think that eventually, obviously it needs ubiquity. I think if I understand this theory correctly, that you’re proposing a unified system of essentially carbon accounting as the underpinning for a new global reward currency. I had some questions about that in terms of just the theory of change. Setting that aside, taking that for granted and saying, “Okay, that’s the arena that we’re focused on.” I guess my question is: where is their money to be made in taking a risk on creating this kind of alternative system?
Delton: I’ll answer your question and I’ll come back to central bank mandates, which is also really important. If the policy gains traction in a narrative, then there’s a good chance that corporations, investors, pension funds, currency traders, Wall Street, will realize that if this policy goes through, it creates for everybody a new profit center. Because, the policy will, by its own design, expand the money supply. It’s part of the financial mechanism. All the world central banks will create new fiat currency as they need, and they’ll use this new currency to buy our parallel currency and to create a demand for it. It’s underwriting this new currency. The new currency we introduce which has a unit of account of carbon ms, carbon mitigation services, it will be supplied in proportion to the mitigation rate. A new currency has some qualities that are somewhat similar to commodity currencies. What’s not obvious at first is how this will affect currency markets, because the parallel stateless currency that we’re talking about, it will actually appreciate in value over time as part of the policy. Therefore, if anybody buys it, they can enjoy the benefit of its rising exchange rate which is a paid exchange rate, paid to rise over many decades. Therefore, it’s an investment. It’s a security. Wall Street can buy the currency and enjoy the profits of buying it and owning it and trading it. To cut a long story short, what the policy does is it uses the central banks to underwrite a bull market making this new currency system. Once you create a secular bull market, investors simply follow by buying it as an investment. The kinds of investors that may appreciate this approach would be pension funds and hedge funds and retail investors. Because as you might know, pension funds in particular, they have a dilemma about investing into the future because they are supposed to provide appreciating assets for retirees into the future, and they have a dilemma of seeking out sustainable climate-friendly investments when most of the market is dependent on fossil fuels. If we introduce this currency as an investment, they will probably appreciate that. If we could explain to the pension funds what the policy implies, then I think they might support it. I think the insurance companies would also support it because their entire business model from insuring all kinds of assets from houses to bridges and everything, that model’s going to collapse if we have abrupt climate change. As soon as the insurance model, insurance industry collapses, that’s the end of our civilization. Once we can’t insure anything, everything falls apart. It’s certainly one of the signs we’ll see on the way to collapse of our civilization should we go past 2°C or 3°C of global warming, which at this stage is quite likely.
Gregory: Yes. It sounds like there’s an interesting relationship between the decentralized infrastructure, something like Regen Network, and the role of fiat central banks in this case. Because what I’m not hearing you propose is that the fiat central banks own or run the infrastructure. In fact, that probably wouldn’t work out very well. What I’m hearing you propose is that they underwrite and guarantee the market that a stateless, decentralized infrastructure allows to exist in the upkeep of this new unit of account.
Delton: Maybe Gregory if I try to explain it through the living systems economy model itself, because that was set up to explain this question. In the living systems economy model, we have two open systems. They are analogous to the respiration and photosynthesis. The way these two systems can naturally achieve carbon neutrality used by the respiration cycle, producing the same amount of carbon that is sequestered by the photosynthesis cycle. Now, how do these two systems interact? It’s through the transfer of sugars. The photosynthesis cycle of a plant creates sugars and it sends the sugars to the respiration cycle. The sending of sugars across, in that example, is analogous to the exchange rate in our economies. The exchange rate has to be managed by some institution and that is the central banks. This is why the central banks in the existing economy are needed to transfer purchasing power and resourcing into our new parallel economy. In this solution, we don’t get rid of the existing economy. The existing economy probably can continue on for a long, long time. It’s just that it won’t be alone. It needs to be macroeconomically managed so that enough of the resources are allocated to the new economy, the parallel economy of the carbon mitigation services. The amount of the resources that have to be sent across from the existing economy to the parallel economy is the amount that we need to achieve carbon neutrality and net negative emissions to stay under 2°C or 1.5°C or whatever it’s going to be, for a safe climate.
Gregory: Do you have an idea of the magnitude of that transference?
Delton: I cannot give you numbers in terms of energy but in terms of exchange rate, we can approximate the exchange rate of the new parallel currency based on the price of carbon that has been estimated for carbon taxes. Just as a very rough estimate, preliminary estimate. The preliminary estimate is that we need a price in the range of say $80 to $180 dollars a ton, US dollars per ton. If that is the reward price, apparently that’s the estimate for carbon taxes. If we flip it, then say that’s roughly what we might need for rewarding climate mitigation services. That’s the level of transfer that we would need. That price would rise over time so the reward price would rise through most of the century until the risk of the abrupt climate change is managed and we begin to see a stabilization of carbon emissions and the climate system. I cannot really put figures on it because I don’t do quantitative modeling. I only do the analytical or conceptual modeling.
Gregory: Right. We could think about that really quickly. We need something like — it’s a thousand gigatonnes, if I’m not mistaken, to achieve that on the timeframe that is set out in the Paris climate agreement. We need a thousand gigatonnes of combined drawdown and reduction over the next 20 years let’s say.
Delton: That sounds about right, yes.
[01:20:00]
Gregory: A gigaton or a petagram. That’s of C, not of CO2. The carbon pricing is all in the CO2 equivalency. The number I like is based on the actual cost accounting of a shift in, for instance agriculture, towards a regenerative approach that has net carbon drawdown instead of the net carbon emission, which is estimated by doctor [Yuntao Bao] at the Ohio State University to be $144 per ton of CO2 equivalent. I think that’s right. No, it’s a $144 per ton of C. Then you would extract let-out CO2 equivalent from there. Yes, it’s a lot of money. I’ll write myself a note to do some calculation. I think it’s important for wrapping our head around that.
Delton: These numbers sound about right because there are various estimates from the IEA and the UN about the cost of transitioning out of fossil fuels and the cost of implementing the UN sustainable development goals. These estimates range around one, two, three trillion a year, up to six trillion a year. If we put a rough figure around say three trillion a year over 50 to 100 years, you’re looking around 100 trillion, 300 trillion over the rest of the century. Given that you said we need to abate and sequester around a thousand gigatonnes, that’s a trillion tons.
Gregory: Yes, that’s right. It’s a trillion tons.
Delton: We multiply that by let say $300 dollars a ton, that’s 300 trillion. We’ve got the right numbers. The cost of, just a ballpark for you, it may be 300 trillion roughly for the rest of the century. That’s the level of wealth transfer from the existing economy into a parallel economy.
Gregory: It’s about 3% of the global economy.
Delton: Yes, 3–5%. This is not excluding taxes as well. Taxes still should be used but we won’t need to rely on them so much. We don’t need to experience $180 dollars a ton of tax, imposed on the world when the working class and the poor and peasant farmers, they don’t want this tax. They don’t have the cash for discretionary spending. They are just surviving on a day to day basis, many of them. They can’t afford directly higher taxes on energy and fossil fuels. What’s happening in this new model is that there will be taxes when they are socially degressive but the cost of this policy would be dispersed in two key ways. The first way is through central bank currency trading. When they expand the money supply, what they’re going to do effectively is create a theme uniform inflation across the world economy.
There would be an inflation levy that most people won’t see or notice because it will exist quite across the whole world economy. The other way it’s paid for is through private currency trading. As I’ve said before, the currency becomes an investment and when market actors buy the currency, what they’re doing is saving because they’re buying this asset, financial asset, they save it for the future. When the saving rate increases, there’s less money going into circulation for other things. That will have a certain cost in terms of slowing the economy somewhat.
Gregory: I’m not an economist but if inflation is somewhere around 3% — 3% is like a healthy inflation rate — if what we’re talking about is a global inflation of 3% which is in keeping with the current considerations of what creates a healthy monetary supply and a healthy economy, couldn’t we just assign 100% of that inflation to buying the reward currency and that’s just how it goes? That’s how the new money is, essentially. You may not be able to answer that question but it seems like there may not be a need to be an additional global levy or additional global increase of circulating supply. It could be the existing annual increase that just gets allocated to purchasing this reward currency at a fixed rate essentially.
Delton: I do struggle sometimes with the concept of inflation and I think inflation is a somewhat emotional topic for many people because, for reasons I can’t explain, people tend to have a reflexive fear of inflation. People often talk about hyperinflation as being a risk when central banks produce more money. Another way to look at this question of inflation is to actually forget about inflation for a moment and just think about what’s going on in the real world. The real costs in the real world can be conceptualized in terms of actual resources. What this policy will do is divert our reusable energy and other resources, including labor, to the activities of abating and sequestering carbon. When you think of it in those terms, there will be a cost. Because if we’re not using energy and resources to sequestering carbon, what are we doing with it? We’ll probably be consuming more fun things like holidays to Hawaii and SUVs and big meals out at fancy restaurants. At some point there will have to be some, dare I call it a sacrifice of usable energy and resources, as it shifted into the parallel economy for the purpose of abating and sequestering carbon. There is a benefit to this approach. It’s not just the cost in real terms. There is a real-world benefit when those carbon mitigation actions create new kinds of social and environmental benefits or co-benefits. You would be familiar with the benefits of regenerative farming for example. That could include a more diverse range of food, healthier food, less pesticides, less reliance on herbicides, fertilizers, and chemicals, perhaps a more reliable food source, more diverse, and potentially employing more people in local industries.
Gregory: Could you reduce insurance risk? Reduce costs? Direct costs to insurance, municipalities, and other people who have fairly large annual outlier for the externalized costs of soil erosion and flooding and health? You can also think about it in terms of: what is the shift of the healthcare industry when we’re not paying for the consequences of pesticide herbicide use, and low-nutrient foods and a lack of diversity in diets? All of those things. I think there’s a direct financial benefit to certain industries, although it’s also going to be threatening to other industries; for instance, healthcare. There’s a whole healthcare industrial complex, at least in the United States, that’s built on the sickness essentially. It will be threatening to certain industries. Right?
[01:30:00]
Delton: Yes, I think it will be. I think there is a need to be aware that if the world does transition to food production systems that are sustainable over the long term, would we have to question whether that would involve carbon-intensive chemicals? Would it indeed be possible to transition to a more sustainable, organic-based food production system? If it is possible, and if it requires using much less of the chemical products, then I think a politically feasible pathway would be to involve corporations in that transition and giving them opportunities to participate by maybe creating new goods and services that help the transition. For example, maybe some of the chemical companies that produce, say, nitrogen fertilizer, maybe they could come up with systems and technologies that can reduce the use of fossil fuels. Then, they can earn a reward. They get the financial benefit and they can pass on the new technology to farmers. I just thought of that as an example just at that moment. It might not be a good example. That is one of the hopes of this reward-based scheme that we don’t actually attack directly any corporations or existing business models. We say, “Look, if you participate and you innovate, you can earn a reward by transitioning a business model out of carbon-intensive stocks and flows and provide an alternative, and we’ll reward you based on carbon abatement and the social environment and co-benefits.” That could be a paradigm.
Gregory: I think that’s right on and if you also considered that there may be national and international taxes so that you have the carrot and the stick so it becomes a much more economically attractive to be participating in the new economy that has an ecological commons preservation as its underpinning.
Delton: Exactly. If we have time to really analyze this whole model from the beginning to end — that could take a long time so we probably won’t — what’s fascinating about the model is that when we get through the process of understating that we can abate and sequester carbon, and also reward socially ecological co-benefits, what we’re doing is creating a new paradigm for capitalism, for business models. If it works, we also create a new pathway to long-term sustainability given that climate change has to be addressed for sustainability to be possible. Given that carbon is probably the one element in the periodic table that provides an essential framework for organizing living systems, it does make sense in my mind to bring that into the world economy structurally so we have the stateless parallel currency for the whole world. It’s got a unit of account of say 100 kg of CO2 equivalent and mitigated over 100 years. That’s a unit of account. It’s a biophysical unit; some similarities with the commodity money. If it works, if it does bring about a new paradigm of sustainability, there are philosophical questions which arise with this new model. One of the questions would be — what is it doing in our economy that brings about sustainability? One answer to that question, there are many layers to this answer, but one answer to the question is that it introduces a new context of a value. The context for a value is to a large degree determined by the unit of account of money we use. If you consider national fiat currency as a primary example, it’s well known that our fiat money the unit of account is only legally declared. It has no relationship to the physical world in its definition, because it’s just an informational unit backed by the government, the armies and the police. With the parallel currency we’re discussing, the unit of account of kilograms of carbon dioxide equivalent mitigated over 100 years — that does introduce new context to money. It’s that context which allows us to redefine, in a sense, the value of everything. Because once that money is in circulation, in theory at least, you can discuss the value of anything in the economy — the value of your laptop computer, the value of the McDonald’s hamburger, the value of any consumable item. If you just converted to the parallel currency, it immediately tells us its value in terms of a climate mitigation service, which is an ecosystem service. It’s this new context that explains how sustainability is possible. In a practical sense what it’s saying is that we have a new discipline in the world economy — the discipline that’s provided by the exchange rate mechanism of this particular currency and the way we administer to ensure that the supply of the currency is proportional to the mitigation rate. We have a social agreement that’s international. It would require governments of the world to agree to mandate the central banks coordinate under a common policy to manage the exchange rate of this new currency. That international agreement if it were to take place, it creates a reciprocity that society or humanity would need to coordinate the world economy. This notion of global coordination, I think, is reasonable. It does marry with the idea that we do need a global price of carbon, a global decarbonization. The interesting thing about it — it’s almost an irony — is that in theoretical terms, it could be implemented as a reward. Whereas, for taxes, it’s very difficult to get a global price as a tax because every nation, state has specific sensitivities to carbon taxes based on their phase in economic development and how wealthy they are. The world has many different variables that fit the politics of any country. Take Australia for example. Carbon taxes are certainly not on the table for discussion here in Australia and haven’t been for the last five to seven years.
Gregory: I have a question around: is it possible to have some sort of standard but have it be a multiplicity of different reward currencies that have some sort of standard exchange rate so that you can have a decentralized, bootstrapping period in which there can be multiple focal points? Because the complexity of 100 grams or 100 kilos of carbon over 100 years — it’s wildly complex and different to account for that in, say, agriculture or forestry or oceans, versus direct air capture or emissions reduction, shifting to renewables or something like that.
[01:40:00]
Gregory: I’m curious if you think it’s possible to start more notably with multiple different approaches that eventually turn into a standard unit of account over time or if we need to affix the standard from the beginning. Because it seems to me that at a practical level, the generation of consensus around that standard unit of account and where you place the baseline and all these other things, is likely to be one of the most challenging places where, in the short term, there is will around particular subsets of that. There’s will and clarity in smaller communities that you can aggregate. I’m just curious about your thoughts about that.
Delton: When we drill down into the macroeconomics on how to administer rewards, the unit of account will be universal. That’s by definition 100 kilograms of carbon dioxide equivalent, mitigated over 100 years. That’s the unit. To implement that unit across the whole world is a massive administrative challenge for the reasons you’ve mentioned. What I’d propose as part of the policy is the governance model to deal with that and in combination with two general rules. There is one rule for sequestration projects which is simply estimating the net mass of carbon mitigated, through sequestration and the other is abatement. Abatement is where you reduce existing pollution. Abatement is actually quite tricky compared to sequestration to assess. There is a general rule for both of these two rules that take into account the carbon balances of the entire project. That aspect of the policy is taken care of. Assuming that those rules are reasonable then, the governance model I think could work if we define bioregions or political regions around the world, at the level of states or municipalities or larger regions, maybe even by catchment or something like that. We then involve the people, the communities in those bioregions, to help design the standards for their regions. The local communities and farmers and capitalists and citizens, they may have preferences and standards that I believe apply to them. Then, they can in a sense vote those standards in and vote in reward waiting for co-benefits for society and the environment. Now, if such a model or governance model were implemented, it can work as long as the quantity of reward given is always held proportional to the quantity of carbon that’s abated or sequestered. As long as that general relationship is maintained, then the details can be worked out at a very granular level, in a decentralized system that in a way creates all sorts of standards people want to use. There will be checks and balances where scientists would be employed to go over it and make sure it’s reasonable. As long as there’re other checks and balances, I think, can be crowd-sourced from local communities and farmers and scientists who are familiar with the area. Because you have to admit that there would be different standards and issues for farmers in North America such as in rural areas in New York upstate, compared to what’s going on in the Amazon or compared to what’s happening in rural Australia, because they’re different geographies and different climates, different vegetation of crops and animals and cultural expectations. You don’t want to force on to people standards. You want to allow them to choose standards or develop standards.
Gregory: Yes, I totally agree with that. To paint the picture of what needs to happen in the next couple of years in order to test and then deploy the Silver Gun Hypothesis, what I’m picking up is essentially we need to be able to engage a highly competent modeling institution or group, to be able to run multi-agent simulations of the hypothesis. We need to be able to engage enough of the financial industry especially central bankers with, I think, probably mostly relationship building and creating kind of an invitation to consider what the implications of this are so that they can maybe build some allies and some relationships and some fund champions within that community. We need to build the infrastructure on the rails on which this whole sort of a decentralized stateless reward currency can run. We may need to also have some either in parallel, or after the simulations take place, there needs to be local some local implementations that are underwritten in some way by municipalities or corporate where we can actually see the process of a watershed or bioregional participatory design of the details of the reward currency and then see it working for a little bit so that then it can be uptaken into a more global context. Is that a fair description of the roadmap ahead of us?
Delton: Yes Gregory. You’ve got the job. You’ve got the nail on the head so I think we will finally have to employ you because you’ve summed it up pretty much. In it, there are a number of activities that need to occur in parallel. You mentioned the multi-agent modeling. Ideally, we would attract some physicists and trans-disciplinary multi-agent modelers to set up experiments to verify, validate the theory. It is presented online in a working paper with a semi-formal verification validation, that’s still a few steps away from an actual experimental proof or experimental test. That’s foundational and that’s really for scholars and intellectuals and researchers, but bringing it into a practical application, I agree with you, we need to engage with central banks in that narrative. We’re coming as an outsider so we have to deal with the problem of being a novel idea that’s not actually included in the mandates of central banks. There’s something that’s key that I would like to clarify for the audience and that is — today central banks have very specific mandates and those mandates generally speaking require them to remain market neutral. What that means in practice is that they are not generally allowed to create new money to favor climate mitigation services. Generally speaking, when they buy government bonds or commercial bonds or other securities, they buy right across the market. They don’t favor low carbon projects over the carbon-intensive ones, although that may be changing somewhat in that they’re buying more carbon bonds and green bonds. That’s still this market neutrality concept reigns supreme. That becomes the sensitive point, the nerve center of this whole discussion because if we were to propose a global carbon reward, we’re challenging the belief system that central banks should be market neutral.
[01:50:00]
Delton: That I’m saying is that it has to be revised based on a new standard of carbon pricing for managing the global carbon balance, everything that we’ve discussed in this interview, which is a biophysical basis. That is a very deep, long discussion; whether it happens, we will find out. I don’t know.
Gregory: I have some ideas about that that we can chat about offline. My last question here to end out the interview is: how can our listeners engage and support? What does it look like? Specifically I’m thinking in this case about the community engaged with applied cryptography, distributed ledger technology, blockchain, the intersection of that community and the earth care, regenerative agriculture community that Regen Network represents. How can listeners engage, support your work?
Delton: I’d love to talk about that. A mere initiative of our project is to launch the living systems economy on a website, which has the domain name: livingsystemseconomy.org. We only just started putting a little bit of content up on the domain name but we’re planning in the near future to give the first presentations on the living systems economy, a webinar, podcast, something like that. Then, we’re going to build toward a crowdfund. We’re going to raise some money so that I can keep working on this with my colleagues. Then, we’re going to take it into two directions. We’re going to seek endorsements from everybody interested in the solution. We’re going to take those endorsements as signatures on lenders. We’ll post those out to financial regulators, institutions, and central banks, asking them to consider the new pricing models for carbon. Then, we’ll take the living systems economy project to corporates and we will seek corporate sponsorship to pay for the testing. We need some money to hire some good physicists and mathematicians and scientists to set up some kind of experimental test for the underlying hypothesis called the Silver Gun Hypothesis, the multi-agent theory. With all that, we can strong evidence for the hypothesis and that should support our new narrative with central banks. Because if you think about what we’re proposing, we’re proposing a significant restructuring of the monetary system. That’s such a serious and significant proposal, it would be helpful to have some experimental evidence to back it up. The kind of evidence that we find is through the social experiment. We can then ask the central banks and governments to fund the pilot project. We might find a country, maybe a vulnerable country, Bangladesh, Pacific island nation states that would like to be involved in the pilot studying. Then we can roll our digital currency search. The people who are currency involved in Regen Network, in blockchains, I’d ask them to keep an eye on the living systems economy, to look at the conceptual model, and when we get some traction there, then we will discuss some other ideas we have for commercial vehicle to also raise more money to implement the full application of this stateless parallel currency and the administrative system that could go global. With the kinds of technologies that you’re working on, the administrative system for quantifiable carbon mitigation services and contracts etc.
Gregory: Yes, fantastic. I’m very excited to collaborate, to keep track of progress, and I’ll be thinking of ways to support and these next steps around testing and education and conversation. If there’s any way that we can serve to further the evolution of the concept, please don’t be shy.
Delton: Thanks, Gregory. If anybody has any questions about the living systems economy, just try and contact me through Internet. You probably found my email address somewhere. I’d love to keep you posted Gregory on our development and our first webinar.
Gregory: Yes. Splendid. I’ll be sending out a link to this podcast and we’ll try to include a couple of the resources in the notes. I haven’t been graded bad as a podcaster, I think there’s so many layers to this that I think it would be essential to have for our listeners to have some of these materials at hand. I’m super grateful for your time Delton and I’m looking forward to continuing the conversation.
Delton: Thanks Gregory for a great opportunity to talk and go deep into this topic. We actually went a lot deeper than I anticipated. When we present the living systems economy, we won’t guarantee so much detail. We’ll focus on the biophysical model and thermodynamics at a high level. That should be a bit more fun and a bit more free-flowing because we’ll talk more about biology and systems
Gregory: Yes, great. Okay, cool. I look forward to that. We’ll definitely retweet and share on all the socials when that opportunity to learn a little bit more on a high level about the living systems economy framework comes out.
Delton: Awesome. Thanks, Gregory.
