As we will find out, there is a real cost to everything we do, which ultimately is energy. This has huge implications, governing society, and the economy. Because of energy losses – (the technical term is exergy) - at every conversion, there is a natural structure and hierarchy to a productively optimal economy. Allocating capital otherwise, in pursuit of different ideologies, corrupts the productive system, destroying capital. With the sole purpose of big government to allocate capital other than how it would naturally and optimally be allocated, it is the corruptor of the system rather than the defender it is supposed to be. 

No matter how powerful government is, it is not free from the laws of physics. By denying that there is a real cost to everything, government is lying to itself and to its people. It presents ideologies such as “social justice” as a fair distribution from the wealthy to the poor, yet by distributing capital other than how it is created, it is at the expense of productivity and society as a whole; it is universally unjust. By moving the economy away from the productively optimal, which could only be achieved by a free market, government imposes the hardship and unfair distribution of wealth on its people that it incorrectly believes it is preventing. In a recent Question Time panel, a couple of U.K. politicians claimed that they were “investing” heavily in renewable wind farms, creating thousands of well-paid jobs. With renewable electricity far more expensive than conventional electricity, far from investing, they were destroying capital, reducing productivity, and lowering system wide wages. By imposing rules and regulations on the economy that do not create the utility to pay for themselves, the government is restructuring society unproductively, away from scientific and engineering truth to its flawed ideology, thereby destroying capital. In recent decades this destruction has been an opportunity cost of underinvestment, slowing GDP growth, but eventually it will turn into an absolute loss, resulting in economic decline. 

Matching the loss of tangible capital is the loss of intangible capital, or knowledge. Just as scientific advancement and increased knowledge take us to a greater “truth” or understanding of the world, so the loss of that capital must take us further away from that truth, overcoming opposition, allowing the unproductive ideology to be implemented. As the American writer and political activist Upton Sinclair said, “it is difficult for a man to understand something when his salary depends upon his not understanding”. This means that political and economic debate are over corrupt, or less productive narratives, with so called “experts” only knowledgeable within that corrupt reality or falsehood, unable to discuss the real world which becomes ever more remote to their debates, and less understood. The loss of intangible capital is often seen through words being reinterpreted to match the new reality. To understand the problem, we must return to the original definitions; we must relearn scientific truths, relinking prices with values. 

There are many words that have been distorted. We have already heard politicians talk of “investing” in renewables when its high price means the spending is consuming rather than creating capital. The economist, legal theorist, and philosopher, Friedrich Hayek, often talked of the word liberalism as having been reinterpreted from the freedom from external influences to freedom from want. The word science has very obviously been reinterpreted over recent years from a system of knowledge or general truths of the natural and physical world to the ideologies and views of a few politicians, moving the system away from reality or truth to “their own truth”. When scientists challenge its views, government labels it as disinformation, and as we saw with COVID, even withdraws licences to operate. We are told we must defend democracy at all costs, yet we have not had democracy in my lifetime. 

Democracy means freedom to choose our leadership, but as soon as government buys votes with welfare payments, specific regulations, or monetary policy sustaining unproductive output, we are anything but free to vote; we are bought and directed. With government now such a large percentage of the economy (see below for the United States), not just through taxation and spending, but through regulations and monetary policy, it defines our lives, thereby controlling what we do, what we believe, and how we think, and who we vote for. While it may sound conspiratorial, this is not the case at all, it is an accounting identity.  By moving the economy away from the productively optimal, government is corrupting the system, and the people and knowledge of that system. If science and economics were not being corrupted by government policy, for example, government would understand that its policies don’t make sense, and not implement them.