MAKING, DISTRIBUTING, CONSUMING

Most economists talk about production and consumption. In between the two, the produce must be delivered to the consumer, and that portion of the economy has exploded in the last fifty years. This has been driven by two changes in the economic world.

First, industrialization increased efficiency of production. But this required centralized production into specific local areas, often far from the consumer. Whether this consists of an expensive factory, or huge corporate farm, production became more and more centralized.

But produce must be delivered to the consumer. So following industrialization the means of delivery and distribution needed to be expanded. This began with railroads and expanded to automobiles and airplanes. Overnight shipping companies and delivery services expanded. But all of this required cheap fuel so that the cost of delivery was reasonable enough to keep the price down.

So the cost of delivery is due to the cost of fuel. The question is, if the cost of delivery (fuel) goes up; will the cost of goods become too expensive for the centralized manufacturing model to work? And if the centralized manufacturing model fails, what will take its place?

It seems to me that there are only really two solutions. Either the cost of fuel must decline, or manufacturing needs to be decentralized so goods are closer to the consumer. Either of these solutions can be fostered by technological changes, but the technology developed will look very different.

A great deal of energy is being spent on the fuel question. Oil has driven the cheap distribution paradigm, and so much attention is paid to finding oil, obtaining oil, extending oil and replacing oil. However, the amount of oil available is finite, even though we don’t agree on how much is there. We will eventually run out of it. Biofuels, in the quantity needed to run the present system, is thermodynamically impossible. Efficient use of present fuels may be increased, but that also has a probably finite set point. The development of hydrogen as a fuel would seem to be a valuable development, but is some time away, if possible at all.

The other solution is to decentralize production. Some would say that this can’t be done. But it has been done before. In fact, throughout of most of human history, production and consumption have been local. Using modern technology which has reduced the amount of labor necessary to run factories and automated much production, could a post-industrial system develop in which factories were small and decentralized, manufacturing close to the consumer to minimize shipping.

Perhaps where there used to be family farms, there could instead be family factories. These could produce goods for, at most, regional consumption. The attention of most technology researchers is directed at continuing the present system and working on extending cheap fuels. Should someone be looking at miniaturizing manufacturing and minimizing distribution costs? If you know of people who are doing this let me know.