A Flow of Wealth or a Wealth of Flows?

[KEN WEBSTER,
A Flow of Wealth or a Wealth of Flows?]

The circular economy come from nowhere
in the last 7 years.

You have an EU package
on the circular economy,

you've got the World Economic Forum
working hard on that,

you've got great expectations from cities
and governments.

At the recent Helsinki meeting,
there were 90 countries

and nearly 1700 delegates --

In one hall looking at
the circular economy

over a number of days.

This is very exciting.

♪ (music) ♪

In Academia there are now
hundreds of papers

and many more [inaudible]

And it's entering into the teaching --
particularly in business and engineering.

♪ (music) ♪

I think the question has to be,

what is it about the circular economy
which is so appealing?

♪ (music) ♪

I think we have to go back to the basics
of what an economy is.

It asks three questions, really.

It asks, what to produce?
How to produce it?

And, who get the benefit?

It's not only got three questions,
it's got three main components.

Every economy has flows of material,
flows of energy,

and flows of information --
particularly money.

If you look at the textbook,
they have an image, almost,

of a central heating system.

You got two sectors to it,
households and firms;

capital and labor.

Money flows between the two.

Wages are paid, goods are produced.
income comes back into the firm.

That's fairly simple.

Add to that, the government takes taxes
and pays money out

Add in banks as well --
they're intermediaries

to make sure that savings are productively
put back into the economy as investment.

It's very much a pipe work
and that's how many people understand it.

On top of that, there's a sense of it --
going to be in an equilibrium long term.

Everything is going to be the best
in all possible worlds

if the economy runs efficiently.

And that's almost
the story of the economy.

Make it efficient, let it run,
it'll sort itself out

as long as you don't get in the way.

(dramatic old music)

De Rosnay is an early system thinker.

[Joël de Rosnay]
And de Rosnay wanted to characterize

[Le macroscope Vers une vision globale]
an existing economy

and the problems with it.

And the main problem he identified
was there was no context.

This economy was running
as a sort of machine

sitting on top of stocks
and flows of resources and energy.

It only touched it where it had to.

But what I mean by that is that
it wasn't factored in.

There was no costing resource
in a true sense.

There was no costing of the waste
in a true sense.

It was artificially priced.

Everything had a price,
but they didn't understand the value,

is what he was saying.

So he needed to contextualize the economy
and look at resources and material flows.

Let's pause for a moment and think.

Joël de Rosnay came out with a microscope,
which is the idea of dropping detail.

We have a microscope
to look at the detail,

we have telescope to look at distance.

His idea was if we took a microscope --
if we took a big picture view,

we can get a sense of the patterns
in the economy

without worrying about the detail.

That's really very, very helpful
because if the problem with the economy

was that it hasn't got a context,
a microscope allows you to say,

"Where does an economy sit?"

[] sits within society, obviously.

It sits within an environment.

And all of these things
are intimately interconnected.

Because the part of the system
which isn't mechanical,

it's actually dynamic, interdependent...

it reflects what we now understand
about how the real world works --

through the notion
of complex adaptive systems,

which just means, a very dynamic system --

Where you can't predict the outcome,

but you have lots of patterns
that show up.

And you can use the patterns
to tell you what you might like to do.

But it doesn't offer you an answer
in the way having an economy

as a machine with levers
would give you an answer.

There's no long-run equilibrium
in a complex adaptive economy.

It might be here, it might be there,

it might be doing very well,
it might be poor.

But there's no assumption
that it's going to all work out.

If only you're efficient;
that, to de Rosnay,

would be an incredibly naive view.

And that's been the really big challenge
for a lot of people in economics.

For some, it's been a journey
from a mechanistic view

to a more enlightened complexity
economics view.

But the general view of the economy
is still of a machine.

The process's resources create