INTELLIGENCE with INTEGRITY: Chapter 5 Systems Thinking & True Cost Economics

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Chapter 5: Systems Thinking & True Cost Economics

Funded by Mark Palermo, Inc.

A.  Thinking & the Truth. 76

B.  Systems Thinking. 77

1.  Overview.. 77

2.  Time & Space in Systems Thinking. 78

3.  Creating & Using a Provisional Model 79

4.  Understanding Risk. 79

5.  Acts of Man: Failures That Turn Disasters into Catastrophes. 79

6.  Systems Thinking & Deliberative Change. 79

7.  Resilience through Panarchy. 79

B.  True Cost Economics. 79

1.  Overview.. 79

2.  Elements of True Cost 79

3.  True Cost of War 79

4.  True Cost of Coal, Cotton, & Sugar 79

5.  True Cost of a Cheating Culture. 79

6.  True Cost of an Idiot Public. 79

7.  True Cost of Losing Faith & Trust 80

C.  On Integrity – and Feedback Loops. 80

D.  Alternative Measures of Merit 80

A.  Thinking & the Truth

The Technical Preface by Michael Kearns provides a comprehensive discussion of thinking and the truth.  Here our intent is to provide a primer on how to think, on levels of thinking, on models of thinking, and on attention to detail – without true cost economics no analytic model can claim to have integrity, which is defined in the final section of this chapter.  Systems Thinking is the over-arching strategic concept, rooted in Cybernetics – the appreciation of feedback loops between and among all living and inanimate elements.  True Cost Economics (originally known as Ecological Economics) is the root detail without which no being, thing, behavior, or relationship can be evaluated holistically (Daly & Farley, 2010).

The objective is to achieve transparency of cause and effect so as to optimize intended consequences and avoid – or at least rapidly detect and remediate – unintended consequences.  Generally it is not possible for mono-cultures to do this effectively, one reason that diversity – and a commitment to Open Source Everything (OSE) and Multinational, Multiagency, Multidsiciplinary, Multidomain Information-Sharing and Sense-Making (M4IS2) – are essential.

Scientists and engineers – both Western and Eastern – tend to too “objective” and too focused on mixing particles, bending metal, and achieving tangible visible effect.  Entire books have been written on the shortfalls of the scientific method, such as John Ralston Saul’s Voltaire’s Bastards: The Dictatorship of Reason in the West (1993).

Feelings and intangibles matter, one reason that E. O. Wilson was inspired to write the book, CONSILIENCE: The Unity of Knowledge (1999).  In his words, he sought to answer the question, “why are the humanities essential to the sciences?”  Beyond the integration of insights and knowledge, how one thinks matters – thinking fast and intuitively versus slowly, with collaborative deliberation – a great deal (Kahneman, 2011).

It bears emphasis that in relation to the short-falls of the scientific method – and the short-falls of men in general as black and white either/or mind-sets, women are emerging as a powerful positive force.  The female combination of compassion instead of justice, intuition instead of myopia, and relatively tempered egos (at least in relation to men), is – in combination with the extra return on investment from educating women as opposed to men – making the 21st Century the year of the woman (at least in my view).  While a number of books have impressed this point on me, one in particular stands out, Mapping the Moral Domain: A Contribution of Women’s Thinking to Psychological Theory and Education (Gilligan et al, 1990).  Morality is a tangible value, not an intangible value, and women seem to be blessed in this domain, at least in relation to men.  Given that morality is a strategic as well as a tactical value (Clausewitz, 1989; Durant & Durant, 1968), and that trust lowers the cost of doing business (Coase, 1937), I cannot over-state this point: strategy, policy, acquisition, and operations all demand the highest possible degree of accountability, ethics, legitimacy, and transparency, if they are to be affordable, effective, and sustainable.

Hybrid public governance may be rooted in open-source decision-support, but it is optimized if the various parties recognize morality as a tangible value, and live up to the “Golden Rule.”

Two cautionary notes:

First, mathematics is not to be confused with nuanced understanding of reality.  While some such as Stephen Wolfam (2002) have demonstrated the mathematical foundations of change to be found in very simple rules  that spawn enormously complex and varied systems, quantum physics as well as spiritual and religious explorations have much to offer as we move our understanding from four dimensions toward twenty-six dimensions.  The human factor, not the equation, is the prime integer.

Second – and this is where the Club of Rome and the Limits to Growth endeavor went wrong – complex systems cannot be mico-managed.  Instead of striving for top-down understanding and administrative command & control, one must instead strive for bottom-up education, nurturing intelligence at the edges of the human network, and empowering the individuals in direct contact with change to be agile, to be citizen intelligence minutemen (Politi, 1992, 2003) able to manifest intelligence with integrity at all times.  This is a point made by the Founding Fathers, and also the central point of Will Durant’s 1916 thesis, Philosophy and the Social Problem (2008): education of the individual citizen is the primary foundation for systems thinking and social integrity as well as social resilience.

Thomas Jefferson: A Nation’s best defense is an educated citizenry.

Thomas Jefferson: Educate and inform the whole mass of the people… They are the only sure reliance for the preservation of our liberty.

B.  Systems Thinking

1.  Overview

Systems thinking is starkly different from traditional Western analytics and scientific deconstructionism.  Although there are those that credit Jay Forrester with inventing systems thinking for social systems, in fact systems thinking has existed since man could communicate.  Indigenous peoples, while lacking the trappings of modern science, understood their natural and social environments – the complexity, the feedback loops, the cause and effect, the need to provide for unintended consequences over seven generations – vastly better than any Western scientist or pretentious social scientist today (Mann, 2006).

Western analysis focuses on the deconstruction of whatever is being studied – breaking it down into its component elements.  Eastern and indigenous analysis focused and continue to focus on the whole, placeing equal emphasis on the relationships – the spaces between (one to one) and among (many to one and one to many) the pieces – as well as the elements themselves.  The interactions are called feedback loops, and the over-arching discipline is called Cybernetics.

At its most advanced level, systems thinking is both multi-layered, studying the Anthropocene (humanities impact over time on Earth systems) in deep relation to the other spheres (atmosphere, hydrosphere, lithosphere (geosphere), biosphere,and heliosphere[1] and also timeless – striving to understand complex feedback loops, cause and effect, unintended consequences – over generations, what Stewart Brand calls “the clock of the long now.”

In 2004 Russell Ackoff wrote a manifesto, “Transforming the Systems Movement,” in which he made it clear that the world is a “mess” and observed that the systems movement is not evolving nor even coping in its present state.  He called for a transformation in how we think, how we make decisions, and how we communicate among ourselves.  Today, almost a decade after his manifesto, policy makers are still doing the wrong things, and there is no systems movement anymore – indeed, funding for cybernetics research, and the teaching of cybernetics, is at an all-time low in the USA (Umpleby, 2011).

2.  Time & Space in Systems Thinking

Although systems theory articulates a view of systems as bounded in terms of time and space, this is an artificial construct.  At the bleeding edge of quantum physics we are just now learning of galaxies, planets, “wormholes” as shortcuts in time through space, and a multidimensionality that we are just now starting to appreciate.

Time is critical, in large part because humanity and the Industrial Era have grown to such proportions as to threaten multiple Earth systems.  Some changes to the Earth that used to take 10,000 years can now take as little as three years (Steffen et al, 2004). We are rapidly approaching an era where real-time science and total information awareness (not to be confused with the surveillance society term proffered by Admiral John Poindexter, USN (Ret.)) is a necessary precondition to shutting down some of our more dangerous activities, such as nuclear reactors at sea level subject to catastrophic failure as occurred at Fukushima, Japan, and better understanding the enormity of what planned activities – such as Genetically Modified Organisms (GMO) – might do to both humans and the biosphere.

Time also plays a role in systems thinking in the sense that individuals as well as organizations have cultures and deeply embedded cultural frames of reference acquired over the course of their development.  Understanding – hearing – the other party may often be substantially enhanced by understanding their time/culture mindset, and then communicating back to them in related terms.  (Neustadt and May, 1988).  Failing to appreciate the “landscape of history” is a major impediment to reliable understanding and communication (Gaddis, 2004).

Space also matters, beyond our narrow place-related thinking.  What we are doing to the acquifers, to the soil, to the air we breath, is all highly irresponsible and completely contradictory to the “Precautionary Principle” (Raffesberger & Tickner, 1999).  In outer space, the amount of “space junk” we have created is now a threat to virtually every satellite launch and shuttle mission.  We can do better.  This vital principle applies to all policies (e.g. foreign policy), not just to environmental or “scientific” policies (Mclean & Patterson, 2012).  One stark example, apart from promiscuous elective interventions around the world by the USA (Blum, 2009; Johnson, is the deliberate decision by the USA to be “best pals” with 40 of the 42 dictators on the planet (Palmer, 2005).

3.  Creating & Using a Provisional Model

4.  Understanding Risk.

US Nuclear Plants in Flood Zones

5.  Acts of Man: Failures That Turn Disasters into Catastrophes

6.  Systems Thinking & Deliberative Change

7.  Resilience through Panarchy

B.  True Cost Economics

1.  Overview

True Cost Economics, pioneered by Herman Daly and Joshua Farley as Ecological Economics (2010), strive to include all of the negative external costs such as pollution and related health costs, as well as the full replacement value of natural resources in scarce supply, such as water.  Additional costs such as the use of child labor, tax avoidance, and crime related to a culture of cost transference and denial, should be calculated.  Another term, “triple bottom line,” refers to the combination of environmental, economic and social cost accounting.

2.  Elements of True Cost

3.  True Cost of War

4.  True Cost of Coal, Cotton, & Sugar

True Cost of Coal

True Cost of a Single Cotton T-Shirt

True Cost of Sugar

5.  True Cost of a Cheating Culture

6.  True Cost of an Idiot Public

Actual Unemployment versus Government Claimed Unemployment

Nine Planetary Boundaries Public

7.  True Cost of Losing Faith & Trust

C.  On Integrity – and Feedback Loops

D.  Alternative Measures of Merit

Apart from the very substantial challenge of recognizing and integrating all true costs into any product, service, or behavior (and in this fashion make ethical evidence-based decision-support more productive), there is also the opportunity to consider alternative measure of merit.

One prominent critique of the existing method of calculating Gross Domestic Product (GDP) is that it includes all of the negative industries – prisons, farms operating with slave labor, and the entire pharmaceutical and hospital industry, recently documented as being 50% waste (Health Research Institute, 2008).  The GDP is also criticized because it focuses solely on the total assumed monetary value of what is “produced” and not on the human-well-being of the population (Zencey, 2013).

The Genuine Progress Indicator (GPI) factors leisure time, crime, and resource depletion into the measurement of a nation’s success (Staff Adbusters, 2004).











Ecological Economics






Precautionary Principle


Systems Thinking

Triple Bottom Line

True Cost

True Cost Economics



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[1] Atmosphere: the layer of gases that surround the Earth and are held in place by gravity; Hydrosphere: the combined mass of water found on, under, and over the surface of Earth; Lithosphere:  the rigid outermost shell of the Earth; Biosphere: the total ecological system integrating all living beings and their relationships; and the Heliosphere: the region of space dominated by Earth’s Sun, a spherical region of charged particles in the space surrounding the Solar System.