Dec 19 2009

The Economics of Ebullience Points to a Sparkling New Global Space Age

Special thanks to Contributing Editor and psychologist Dr. Ken Meehan for helping me think more clearly about this discussion.  (This post is taken from a working paper soon to be submitted to a journal.)

Here at 21stCenturyWaves.com, “ebullience” is a technical term. 

It’s defined as a very positive, somewhat irrational — almost giddy — emotional state,  that’s usually due to widespread affluence during a 1960s-style major economic boom.  In response to affluence-induced ebullience, many people ascend the Maslow hierarchy where their expanded world views make Great Explorations and MEPs seem not just intriguing, but almost irresistible  —  hence the name “Maslow Window.”  

In the 1960s Apollo program and Peace Corps of John F. Kennedy it was the ebullient feeling that we could do almost anything; in the early 20th century it was Theodore Roosevelt’s Panama fever and (north & south) pole mania;  in the mid-19th century is was manifest destiny of James Polk and the central Africa adventures of Dr. Livingstone, I presume; and about 200 years ago it began auspiciously with Jefferson, Napoleon, and Lewis & Clark

However,  even during these rhythmic,  twice-per-century waves of ebullience, some people remain stalled at lower Maslow levels and thus are empowered negatively; i.e., they sometimes trigger conflicts or even major wars (e.g., WW I) that can terminate Maslow Windows. 

SOCIETAL EBULLIENCE DRIVES MASLOW WINDOWS

It appears that ebullience has been the fundamental driving force behind the stunning exploration and engineering activities during Maslow Windows over the last 200 years, and ebullience appears to be similar to the “animal spirits” of behavioral economist John Maynard Keynes and the “irrational exhuberance” of Alan Greenspan.    Historically, widespread ebullience is usually short-lived because it is fundamentally a psychological phenomenon that often responds to feelings and perceptions — both positive or negative —  more than facts.

Societal ebullience is usually triggered by a major economic boom, but it doesn’t necessarily have to be.  For example,  if benevolent extraterrestrials landed at the White House, this would probably trigger at least momentary global ebullience, regardless of our financial state.  Conversely, ebullience is often terminated by bad financial trends (such as the economic boom moving past its peak and declining), but the psychology of ebullience can be eroded by almost anything negative, such as a war or even unfriendly extraterrestrials landing at the White House.

However,  recently we’ve seen again that even the availability of large amounts of funds — e.g.,  the $ 787 B stimulus package — does not guarantee ebullience, as evidenced by negative attitudes and actions of the U.S. public (documented through surveys and opinion polls).  Even a small fraction of the stimulus money would enable the greatest human space program of all time, but it hasn’t happened yet because the public isn’t in the mood. They are simply not ebullient.

THE ECONOMICS OF EBULLIENCE

The issues are:  What specific economic factors trigger ebullience?  And can we create a numerical Ebullience Index composed of economic parameters that will allow us to track and analyze it?

 One possibility is that the public is responding to increases in GDP like those experienced before and during the 1960 Apollo Maslow Window; see plot below.

Figure 1 — The U.S. GDP (in B of 2000 USD) since 1950 shows the 1950s post-WW II boom and the major economic boom of the Apollo Maslow Window between 1961 and 1969.    CLICK   

It’s clear that rapid economic growth occurred until about 1961 when the economy went into even higher gear and produced the greatest economic boom up to that time.  But who really cares about GDP?  Undoubtedly economists and business forecasters do as well as some politicians, but nobody can spend GDP so it’s probably not triggering ebullience in typical American employees.

Better hints are found in Benjamin Friedman’s 2005 book, The Moral Consequences of Economic Growth. The Harvard professor suggests that sustained economic growth is important because these are times when typical workers feel like they are really getting ahead; i.e., their wages are increasing relative to inflation.

But common sense informs us that ebullience will not result from a comfortable increase in real wages if we’re worried about losing our jobs.  So healthy growth in real wages coupled with low unemployment rates may be related to the widespread feeling of ebullience in society.

THE EBULLIENCE RATIO AND THE 1960s APOLLO MASLOW WINDOW

As an experiment, let’s define the Ebullience Ratio (ER) as proportional to real wages divided by the rate of unemployment as percent of workforce.  Keep in mind this is an attempt to express widespread feelings of affluence-induced ebullience in terms of common economic parameters.  Annual values for the ER have been computed for the 1950s and 1960s Apollo Maslow Window; see plot below.

Figure 2 — The Ebullience Ratio from 1950 to 1974 peaks at 1969 (Apollo 11 Moon landing) and clearly displays the Apollo Maslow Window from about 1961 to 1969.  

CLICK   

As unemployment drops, the ER increases, and as unemployment approaches full employment, the ER dramatically increases,  reflecting the presence of a major economic boom during the 1960s Maslow Window (from about 1961 to 1969).  Short business cycles are seen in the 1950s ER data that are superimposed on pre-Maslow Window economic growth.  In 1958 the short business cycles subside as unemployment declines signaling the approach of the Maslow Window.  The highest ER is in 1969 and drops rapidly thereafter as the Maslow Window closes.

The consistency of both the economic (GDP) and ebullience (ER) trends — especially between 1961 and 1969 — suggests that the Apollo Maslow Window is well described by these parameters.

THE EBULLIENCE INDEX

As another experiment,  let’s define the Ebullience Index (EI) for an interval of time as the integral of the ER function (i.e., the fractional ER increase per year as a function of time) over the duration of the interval in question (e.g., the Maslow Window).   This synthesizes the annual rate of change of real wages divided by their rates of unemployment — the two things that matter most to a typical worker — into a single index for any Maslow Window.

Using ER values for the interval between 1961 and 1969, the 1960s Apollo Maslow Window has an Ebullience Index of 4.9.  This number is most meaningful in comparison with other Maslow Windows and/or intervals, so we’ll  look now at the economics and ebullience of the Peary/Panama Maslow WIndow.

WHAT  ABOUT THE EARLY 1900s PEARY/PANAMA MASLOW WINDOW?

It’s interesting to compare the 1960s Maslow Window ebullience values with those of the early 20th century Peary/Panama Maslow Window, because Peary/Panama was preceded by the financial Panic of 1893 and the great recession of the 1890s (like our current panic/recession), while neither existed before the Apollo Window (although WW II did).

Figure 3 —  This U.S. GDP (B in 2000 USD) plot from 1890 to 1914 clearly shows the great 1890s recession that transitions into rapid growth, interrupted by two brief recessions, until 1913 when the Peary/Panama Maslow Window ends abruptly.
CLICK
  

Notice that GDP is flat during the 1890s great recession but perks up — signaling the onset of the Peary/Panama Maslow WIndow — after 1901.

Figure 4 — Ebullience Ratios from 1890 onward clearly convey the psychological dimensions of the 1890s great recession which began with the financial Panic of 1893, and the supersonic Maslow Window recovery beginning in 1898. 

CLICK 

If you compare the 1960s ER trends (Fig. 2) with Fig. 4 you see that Maslow Windows preceded by a financial panic are quite different from those without. Athough GDP data (Fig. 3) suggest the economy was already humming again by 1896, the ER data (Fig. 4)  suggest the psychological impact of the 1890s great recession lingered until about 1898 when the Maslow Window opened.  Although ER peaks in 1906, historical events suggest the Window itself continued until 1913; WW I began in 1914.

Just to give you a little chronology here: Theodore Roosevelt’s presidency ran from 1901 to 1909; U.S. construction of the Panama Canal began in 1904 and was completed in 1914;  the international races to the poles culminated between 1909 (Peary first to N pole) and 1911 (Amundsen first to S. pole).

For  the first 8 years of the Peary/Panama Maslow Window — from 1898 to 1906 — the Ebullience Index is 13.9,  almost 3x the value (4.9) for the Apollo Window.  This supports my impression from reading historical accounts of the era (e.g., America 1908 by Jim Rasenberger) that the Peary/Panama Maslow Window was even more ebullient  — if that’s possible!! —  than the 1960s Apollo Moon decade.

The Peary/Panama Window apparently produced so much affluence and ebullience  that extraordinary exploration and engineering activities  — characteristic of populations at elevated Maslow states —  continued until 1913, well after the 1906 ER peak.  On the other hand, this may suggest our Ebullience Index may not include all psychologically relevant factors.

OUR CURRENT LACK OF EBULLIENCE AND THE COMING GLOBAL SPACE AGE

 Over the last 200 years, Maslow Windows tend to culminate every 55 or 60 years near peaks of the energy cycle; and open about 10 years earlier.  This led to my initial forecast (made in 1996) for another spectacular, 1960s-style Maslow Window  opening near 2015 and culminating by 2025.  Although wildcards can alter this nominal timing,  the economics of ebullience suggests our time is coming soon:  indeed, we appear to be only a few more years from the next Maslow Window.

In particular, the financial Panic of 2008 suggests that our current trajectory might be more similar to the Peary/Panama Maslow Window than the 1960s Apollo Window, which had no financial panic/great recession in the decade just preceding it. 

Figure 5 —  The U.S. GDP (B in 2000 USD) from 1985 to 2009 displays the Panic of 2008 and our current great recession in the 2 points on the right adge. 

CLICK 

The recessions of 1990 and 2001 are seen by flattenings of the GDP curve, and the Panic of 2008 (next to the right edge) preceded the current great recession.  Note that the theoretical trough of the 56-year energy cycle is in 1997.

 Figure 6 — Ebullience Ratios from 1985 to 2009 show the Panic of 2008 and our current great recession, as well as a very interesting boom from 1991 to 2001. 

CLICK 

 The dramatic collapse of ER starting in 2007  just preceded the Panic of 2008 and the great recession continuing to the present.  If you compare Figure 6 to Figure 4 you’ll see that our future could evolve something like the Peary/Panama Maslow Window — a rather exciting prospect once we recover from our current challenges.  We’ll return to this in a minute.

Notice the impressive economic boom in the center of  Figure 6, from 1991 to 2001; it’s the longest expansion in U.S. history.  Although it occurred at the long wave trough (1997), the 1990s boom has many basic economic characteristics of a Maslow Window  — duration of 10 years, rapid real GDP increase, and an amazingly large Ebullience Index of 5.3 (compared to Apollo’s 4.9 and Peary’s 13.9)  —  but, although plans for the International Space Station (to be completed in 2011) began in the early 1990s and construction began in 1998, the next major international thrust into space did not occur then.

The Apollo-size Ebullience Index of the great 1990s boom suggests this parameter, as defined above,  is incomplete.  To make a long story short: the answer is provided by the economics of the 1990s and the nature of ebullience.  To have widespread ebullience, large segments of the population must share in the boom’s affluence, but during the 1990s income inequality grew appreciably;  this continued a long trend that interestingly began in 1968 near the end of the Apollo Window.  Without going into the numbers here, merely inserting an income inequality factor (e.g., the Gini index) into the denominator of the Ebullience Ratio will significantly decrease the Ebullience Index of the 1990s boom and increase Apollo’s EI (when income inequality declined).

The bottomline is that the appearance of the Panic of 2008 was historically monumental.  It signaled that our future trajectory will be more like that of the early 20th century Peary/Panama Maslow Window and less like the 1950s.

This is both good news and bad news:

The Bad News is that the current great recession could last up to 5 years, like the 1890s great recession did (1893 to 1898; See Fig. 4).  Ebullience and a shorter recession will be favored by government policies that stimulate economic growth,  increase real wages, and reduce unemployment for most segments of society.

The Good News is that once we survive the recession, the future’s so bright we’ll all need shades!  The Peary/Panama Maslow Window had a measurable ebullience of nearly 3 times the Apollo Moon decade and suggests that  — if unabridged by wildcards —  global space-related investment between 2015 and 2025 should be at the $ 1 T to 3 T (2007 USD) level.  Empowering the 2015 Maslow Window with Peary/Panama-level ebullience points to  many of our fondest, unprecedented dreams like major space-based solar energy systems, international lunar commercialization, and even the first Mars colonists.

 

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