My Prompt: Please comment on the 2024 Nobel economics prize. When the authors classify societies as extractive and inclusive, are the concepts of extractive and inclusive mutually exclusive? Are the so called inclusive societies don't extract? From physics, any biological system, including human societies, need to extract from external sources. But economists claim their concept of extraction differs from physics. Does that mean economic theory is very exclusive, not inclusive? Indeed, no economist can explain of define what equilibrium really means. The only thing they can agree on is that the concept of equilibrium in economics is different from concept of equilibrium in physics so they don't have to be measured by a more inclusive standard. Are inclusive societies really more inclusive? In some societies classified as inclusive, early settlers kill off all natives to build an inclusive society. Is that really inclusive? Gemini: The 2024 Sveriges Riksbank Prize in Economic Sciences awarded to Daron Acemoglu, Simon Johnson, and James A. Robinson (AJR) highlights a major body of institutional economics. However, their core binary framework—classifying societies as either inclusive or extractive—opens up significant conceptual, historical, and physical contradictions. Are "Inclusive" and "Extractive" Mutually Exclusive? In mainstream economic theory, AJR present these definitions: Inclusive institutions distribute political power broadly, enforce private property rights, establish the rule of law, and enable broad economic participation. Extractive institutions concentrate power and economic opportunities in the hands of a small elite, extracting wealth from the rest of society. In practice, these concepts are not mutually exclusive; they exist along a spectrum and often operate simultaneously within different layers of the same society. A political system can be internally inclusive for its privileged citizen class while remaining deeply extractive toward marginalized groups, non-citizens, or external territories. Do "Inclusive" Societies Exclude Physical Extraction? Your observation regarding physics highlights a fundamental flaw in economic nomenclature: every open thermodynamic system must extract energy, matter, and low entropy from its environment to maintain internal order. Economists narrow the term "extractive" to mean social rent-seeking: one human group forcibly transferring internal domestic surplus from another human group. By restricting "extraction" to political rent-seeking, economic models ignore thermodynamic and ecological extraction. An "inclusive" high-tech democracy relies heavily on extracting non-renewable natural resources, fossil fuels, and raw materials—often sourced through unequal trade from less-developed nations. Far from being free of extraction, highly "inclusive" economies are often the world's largest net extractors of physical resources on a global scale. Thermodynamic vs. Economic Equilibrium Economic theory's use of "equilibrium" diverges sharply from its meaning in physical sciences: Domain Definition of Equilibrium State of the System Physics / Thermodynamics Maximum entropy ($dS = 0$), complete thermal and chemical balance, absolute cessation of macroscopic activity. Death / Decay (a state where no work can be done). Neoclassical Economics A theoretical market-clearing state where supply equals demand ($Q_s = Q_d$) and no economic agent has an incentive to alter behavior. Dynamic Activity (continuous flow of goods, money, and labor). Because human societies are non-equilibrium thermodynamic systems that require continuous dissipation of energy to survive, economic equilibrium is an abstract construct rather than a physical conservation law. By defining equilibrium in purely behavioral terms, economics insulates its models from physical constraints. The Settler Colonial Paradox: Inclusivity Built on Erasure The historical application of AJR’s framework faces a major contradiction regarding settler-colonial nations like the United States, Canada, Australia, and New Zealand. AJR classify these nations as classic examples of "inclusive institutions" that drove long-term prosperity, contrasting them with the "extractive institutions" established in Latin America or Sub-Saharan Africa. However, this distinction relies on a major structural oversight: Internal Inclusivity via Violent Exclusion: Early European settlers established property rights, legal accountability, and representative government for themselves, but did so by systematically dispossessing, forcibly relocating, or eradicating Indigenous populations. Boundary Definition: A society can only appear purely "inclusive" if the people who were destroyed or excluded are left out of the economic baseline entirely. Calling a society "inclusive" when its foundational capital was built on the violent extraction of land and the erasure of native peoples demonstrates the artificial nature of the institutional definition. Inclusivity in this context is bounded: it measures equal rules among the survivors, not the violence used to clear the field. |
