Oct 16, 2009

Productive Nanosystems and the 2009 Financial Meltdown

Posted by in categories: economics, nanotechnology

At a fundamental level, real wealth is the ability to fulfill human needs and desires. These ephemeral motivators are responsible for the creation of money, bank ledgers, and financial instruments that drive the world—caveat the fact that the monetary system can’t buy us love (and a few other necessities). Technologies have always provided us with tools that enable us to fulfill more needs and desires for more people with less effort. The exponential nanomanufacturing capabilities of Productive Nanosystems will simply enable us to do it better. Much better.

Productive Nanosystems
The National Nanotechnology Initiative defines nanotechnology as technologies that control matter at dimensions between one and a hundred nanometers, where unique phenomena enable novel applications. For particles and structures, reducing dimensions to the nanoscale primarily affects surface area to volume ratios and surface energies. For active structures and devices, the significant design parameters become exciton distances, quantum effects, and photon interactions. Connecting many different nanodevices into complex systems will multiply their power, leading some experts to predict that a particular kind of nanosystem—Productive Nanosystems that produces atomically precise products—will dramatically change the world.

Productive Nanosystems are programmable mechanoelectrochemical systems that are expected to rearrange bulk quantities numbers of atoms with atomic precision under programmatical control. There are currently four approaches that are expected to lead to Productive Nanosystems: DNA Origami[1], Bis-Peptide Synthesis[2], Patterned Atomic Layer Epitaxy[3], and Diamondoid Mechanosynthesis[4]. The first two are biomimetic bottom-up approaches that struggle to achieve long-range order and to increase complexity despite using chaotic thermodynamic processes. The second two are scanning-probe-based top-down approaches that struggle to increase productivity to a few hundred atoms per hour while reducing error rate.[5]

For the bottom-up approaches, the tipping point will be reached when researchers build the first nanosystem complex enough to do error correction. For the top-down approaches that can do error correction fairly easily, the tipping point will be reached when subsequent generations of tip arrays no longer need to be redesigned for speed and size improvements while using control algorithms that scale well (i.e. they only need generational time, synthesized inputs, and expansion room). When these milestones are reached, nanosystems will grow exponentially—unnoticeably for a few weeks, but suddenly they will become overwhelmingly powerful. There are many significant applications foreseen for mature Productive Nanosystems, ranging from aerospace and transportation to medicine and manufacturing—but what may affect us the hardest may be those applications that we can’t foresee.

Thus far, no scientific reason has been discovered that would prevent any of the four approaches from leading to Productive Nanosystems, much less all of them. So when an early desktop nanofactory prints out the next generation of Intel’s processor (without a $8 Billion microphotolithography fab plant), or a sailboat goes out for a weekend cruise and collects a few kilograms of gold or plutonium from seawater, people will sit up and take notice that the world has changed. Unfortunately, by then it will be a bit late — they will be like Neanderthals staring at a jet fighter that just thundered by overhead, and is already half-way to the horizon.

Combined with sufficient medical knowledge of how the human body should operate at the nanoscale, Productive Nanosystems may also be able to cure all known diseases, and perhaps even reverse the seven mechanisms of aging. For example, replacing red blood cells with microscopic artificial red blood cells (consisting of pressurized tanks and nanocomponents) will enable people to hold their breath for four hours.[6] Such simple nanobots (with less complexity than a microwave oven) may save the lives of many patients with blood and heart disorders. Other nanostructures, such as artificial kidneys with biocompatible nanomembranes, may prevent end-stage renal failure. One important caveat however, is that Productive Nanosystems can only move atoms around—they are useless when we don’t know where the atoms are supposed to go. Discovering the optimal positions of atoms for a particular application is new science, and inherently unpredictable.

In contrast to inventing new science, connecting nanodevices together to form a Productive Nanosystem is an engineering problem. If done correctly, it will make possible nanofactory appliances that can “print” anything (caveat the flexibility of the output envelope, the range and limits of the input molecules, the “printing” process, and the software).[7] These developments should increase our average standard of living to levels that would make Bill Gates look like a pauper, while reducing our carbon footprint to negative numbers, and replacing the energy and transportation infrastructures of the world.

After all, we currently have a technologically-enhanced standard of living that kings and pharaohs of old would envy, but we certainly haven’t reached utopia yet. On the other hand, atomically precise products made by Productive Nanosystems will be able to reduce economic dependency to a square meter of dirt and the sunshine that lands on it, while simultaneously lowering the price to orbit to $5/lb. Those kinds of technological capabilities might buy a significant amount of economic and political freedom.

The collisions between unstoppable juggernauts and immovable obstacles are always fascinating—we just cannot tear our eyes away from the immense conflict, especially if we have a glimmer of the immense consequences it will have for us. So it will be when Productive Nanosystems emerge from the global financial meltdown. To predict what will happen in the next decade or so, we must understand the essential nature of wealth, and we must understand the capabilities of productive nanosystems. Plus we must understand the consequences of their confluence. This is a tall order. Like any new technology, the development of Productive Nanosystems will depend on economics and politics, primarily the Rule of Law and enforceable contracts. But then the formidable power of Productive Nanosystems to do more with less will significantly affect some of the rules that govern economics and politics.

In the past few months, many people have panicked over plummeting retirement accounts, tumbling real estate values, and the loss of jobs by their coworkers (if not themselves). The government’s subsequent response has been equally shocking, as government spending has skyrocketed with brain-numbing strings of zeros being added to the national debt. Historically in both the U.S. and abroad, an expansion of the money supply in excess of the production of real goods and services has invariably produced inflation.

To make some sense of what is happening, and of how we might get out of this mess, it might be useful to re-examine the concept of wealth. Karl Marx’s “labor theory of value” identified human labor as the only source of wealth, but there are at least three major errors with this view. First, valuable material resources are spread unequally over this planet (which is why mining rights are so important). Second, tools can multiply the value of a person’s labor by many magnitudes (and since tools are generated by human labor and other tools, the direction and specific accomplishments of human labor become important). Third, political and social systems that incentivize different types of human behavior (and attitudes) will significantly increase or decrease the amount of real wealth available. Unfortunately, the tax rates of most political systems decrease the incentive to produce real wealth, and few of them provide an incentive to encourage the ultimate source of real wealth: the valuable ideas in the minds of inventors and innovators.

But what is that real wealth? Basically, it is the ability to fulfill human needs and desires. This means that (as subjective value theory claims), one person cannot know the needs and desires of another, and therefore all central planning schemes will fail. Statistics are fallible for a number of reasons, but mostly because reality is too complex: In the chaotic interplay of causal forces in the real world, the injection of a brilliant idea into a situation that is sensitive to initial conditions can change the world in very unpredictable ways. Also, central planning fails because human beings in power (i.e. politicians) are too susceptible to temptation (as in rent-seeking), and because the illogical passions that drive many human decisions cannot be encompassed by bureaucratic rules (or bureaucratic minds, for that matter).

By its very nature, real wealth requires government to uphold the inalienable rights of its citizens (including property rights), to provide for the common good by creating and orderly environment in which free citizens may prosper with their work, and to protect the weak from the strong. So government plays an important role in creating real wealth.

Wealth is often associated with money, but money is simply a counter: it replaced the barter of objects and services because it is an efficient marker that facilitates the exchange and storage of real wealth.[8]

Productive Nanosystems will only rearrange atoms, so they will not change what money and real wealth are. However, because Productive Nanosystems will provide a precise and powerful mechanism for rearranging atoms, they will be able to fulfill more human needs and desires than ever imaginable. But it still won’t be free.

Nanotechnologies and their applications will not be easily bartered, and atoms of different elements will still have relative scarcities (along with energy), so money will still be very useful. Unfortunately, it also means that deficit spending will still be inflationary. But will that be bad?

Early medieval Christian, Jewish, and Islamic societies all denounced usury as immoral, thereby preventing fractional reserve banking and inadvertently reducing the supply of available capital for business expansion. Some people are suspicious of the consequences and ethics of fractional reserve banking, based on an instinctive uneasiness that it seems like a Ponzi-scheme — creating money out of nothing. But while a Ponzi scheme is always based on extravagant promises and fraudulent misrepresentation, fractional reserve banking can serve a beneficial role (i.e. generate real wealth) as long as the fraction that banks choose to lend is commensurate with the velocity of money, risk weighted credit exposure, and the productivity of different forms of real wealth.[9] In today’s non-agricultural post-industrial society, the optimum reserve percentage has been calculated to be around 10%, and that is what the legal limit has been for some time. Unfortunately, greed being what it is, people have found loopholes in that law. In the United States this began occurring most notably in the early 1990s with the repeal of the Glass-Steagall Act of 1933 and the creation of Collateralized Debt Obligations.[10]

In the olden days, monetary expansion occurred when the king called in all the coins, shaved them or diluted the alloy that made them up, and then re-issued them. This was the old-fashioned form of deficit spending. This trick became easier with the invention of paper money, and became even more easy as financial services moved into electronic bits. Other than being a theft from future lenders by present borrowers, deficit spending skews the value decisions of consumers and investors, causing them to spend and invest money differently than they would if they knew how much real money actually existed. Another problem develops when bankers start underwriting government bonds, giving them powerful incentives for pressuring governments to maximize profit for themselves—not to benefit the country or its citizens (this is especially true when those in power build monopolies to reduce competition).

The expenses of running a bank, along with the expansion of the money supply via fractional reserve banking means that lenders must charge a reasonable interest rate to stay in business (at the same time, the exploitation of the poor by charging exorbitant interest is certainly unjust). The expansion of the money supply then maximizes the productivity of human labor as population grows and technology improves. This is why most economists think that the money supply should expand at the same rate as the growth in goods and services. Otherwise deflation occurs as the exchange value of the money increases to meet the expanded demand. At best, deflation only makes it more difficult for businesses get loans for expansion; at worst it signals the beginning of a deflationary spiral, in which falling prices give consumers an incentive to delay purchases until prices fall further, which in turn reduces overall economic activity, etc.

Thus deficit spending skews the economical signal between production and consumption. This is why it is harmful, especially as deficit spending increases, and especially if the spending is politically charged. With respect to nanotechnology, the salient point is that deficit spending incentivizes short-run gains over long term investments. The real problem is that this bias makes the investment necessary for nanotechnology-enabled productivity much more difficult to attain, even though such an investment could ameliorate the negative impact of the current deficit spending.

Nanotechnology can do nothing about correcting distorted economic signals. However, nanotechnology can increase productivity. And if it increases productivity as fast as the money supply grows, then we may not suffer from hyperinflation—though admittedly outracing politicians on a spending binge will be no mean trick. Whether it does or doesn’t depends on some sensitive initial conditions that may or may not trigger a psychological tipping point at which many people realize that more claim-tickets (dollars) to wealth have been printed (or stored as zeros in some computer’s memory) than can ever be redeemed. So they start selling panic- selling—exchanging paper or electronic money for anything with a more solid aspect of reality. The enhanced properties of primitive nanotech-enabled products will certainly have a dramatic effect on reality—this will be even more true with Productive Nanosystems—many of which may seem miraculous. Why worry about whether the numbers in your checking account are “real” as long as they cover the credit card bill next month for medical nanobots we would buy online and download today? The big question is *if* the medical nanobots will really be available or not.

Unfortunately, even in the best case many individuals will suffer because hyper-increased productivity may cause hyper-increased money flows. If the flow of money hyper-accelerate does (and even if it doesn’t), the hyper-acceleration of productivity will undoubtedly cause more economic and social turbulence than most people can handle. This is a matter for concern, because many scenarios predict very significant amounts of turbulence as Productive Nanosystems reach a tipping point. By analogy, the recent financial meltdown is to the nanotech revolution what a kindergarten play dress rehearsal is to the Normandy invasion.

Why is the advent of Productive Nanosystems so significant, why is it bad (if it is), and what are we going to do about it?

First, it seems obvious that a rapid commercialization of Productive Nanosystems will cause turbulent economic fluctuations that hurt people who aren’t fast enough to adjust to them. But how do we know that Productive Nanosystems will cause massive fluctuations?

Briefly, it is because they are so powerful. For example, building nanoelectronic circuits on a desktop “printer” instead of a fab plant will probably bankrupt the many companies needed to build the fab plant (no matter whether it is a mere $2B as it is today, or whether it may top $50B as expected a few Moore’s generations from now). It is difficult to predict what would happen if the desktop “printer”, or nanofactory, could print a copy of itself, but a continuation of “business as usual” would not be possible with such an invension.

Second, why is the quick development of Productive Nanosystems bad? Or is it?

Though many Americans today have adequate material comforts, we do not have some of the freedoms taken for granted by kings of old. Trinkets and baubles are not equivalent to freedom, and nanotech-enabled trinkets are trinkets nonetheless. On the other hand, atomically precise products made by productive nanosystems will be able to reduce economic dependency to a square meter of dirt and the sunshine that lands on it, and lower the price to orbit to $5/lb. Those kinds of abilities will buy a significant amount of economic and political freedom, especially for those with more than a square meter of dirt and sunshine. Just as the settlement of the New World had large effects on the Old, an expansion off-planet would have huge implications for those who stay behind. Given such possibilities and pushing Bill Joy’s overwrought fears of nanotechnology aside,[11] it seems that there is cause for concern, but there is also cause for hope.

Third, what are we going to do about it?

Part of the problem is that the future is not clear. Throwing more smart people at the problem might help reduce the amount of uncertainty, but only if the smart people understand why some events are more likely to occur. Then they need to explain to us and to policy makers the technical possibilities of Productive Nanosystems and their social consequences.

Second, we need to invest in Productive Nanosystems. Historically, we know that companies such as Google and Samsung, who increased their R&D spending after the dotcom bubble of 2001, came out much stronger than their competition did. In 2003, China ranked third in the world in number of nanotechnology patents, but in recent months Tsinghua University has often had more than twice as many nanotechnology patents pending as any other U.S. university or organization. Earlier, the Chinese had duplicated [12] Rothemund’s DNA Origami experiment within months of the publication of his seminal article in Nature. Those who invest more money with more wisdom will do much better than those who do not invest, or who invest foolishly.

The other part of the problem is that we often don’t have the intestinal fortitude to do what is right, even when we know what it is. As human beings, we are easily tempted. Neither increased intelligence nor mature Productive Nanosystems will ever help us get around this problem. About the only thing we can do is practice ethical and moral behavior now, so that we get into the habit now before the consequences become enormous. Then again, judging from the recorded history, legends, and stories from ancient sources, the last six thousand years of practice has not done us much good.

Some of our current financial meltdown occurred because we were soft-hearted and soft-headed, encouraging the making of loans to people who couldn’t pay them back. Other financial problems occurred because of greed—the attempt to make money quickly without creating real wealth. Unfortunately, the enormous productivity promise of Productive Nanosystems may only encourage that type of risky gambling.

There is also the problem that poverty may not only be the lack of money. This means that in a Productive Nanosystem-driven economy, poverty will not be the lack of real wealth, but something else. If that is true, then what is real poverty? Is it ignorance? Self-imposed unhappiness? The suffering of injustice? I don’t know, but I suspect that just as obesity plagues the poor more than the rich, a hyper-abundant society will reveal social dysfunctions that seem counterintuitive to us today. Some characteristic disfunctionalities, such as wealth producing sloth, are obvious. Others are not, and they are the ones that will trap numerous unsuspecting victims.

Eric Drexler has identified a few things that will be valuable in a hyper-abundant society: new scientific knowledge, and land area on Earth (the limit of which has been a cause of wars since humans first left Africa). Given the additional gifts of disease-free and ageless bodies, I would add a few more valuables, listed by increasing importance: the respect of a community, the trust of friends outside the increasingly byzantine labyrinth of law, the admiration of children (especially your own), the total lifelong commitment of a spouse, and the peace of knowing one’s unique destiny in this universe. We should all be as lucky.

1. Paul W. K. Rothemund, Folding DNA to create nanoscale shapes and patterns, Nature, Vol 440, 16 March 2006.
2. Christian Schafmeister, Molecular lego. Scientific American 2007;296(2):64–71.
3. John Randall, et al., Patterned atomic layer epitaxy — Patent 7326293
4. Robert A. Freitas Jr., Ralph C. Merkle, “A Minimal Toolset for Positional Diamond Mechanosynthesis,” J. Comput. Theor. Nanosci. 5(May 2008):760–861;
5. The Zyvex-led Atomically Precise Manufacturing Consortium has recently met their DARPA-funded Tip-Based Nanofabrication project’s Phase I metrics by writing 100 dangling bond wires, half of them 36.6nm x 3.5nm and half 24.5nm x 3.5 nm in 5.66 minutes. That is 1.5 million atoms per hour, but the error rate was ±6.4%, which is unacceptable for Productive Nanosystems (unless they implement error correction, which for Patterned Atomic Layer Epitaxy may or may not be easy because the high mobility of hydrogen at the operating temperature of the process).
6. Tihamer Toth-Fejel. Respirocytes from Patterned Atomic Layer Epitaxy: The Most Conservative Pathway to the. Simplest Medical Nanorobot. 2nd Unither Nanomedical and Telemedicine Technology Conference. Quebec, Canada. February 24–27, 2009.
7. Chris Phoenix and Tihamer Toth-Fejel, Large-Product General-Purpose Design and Manufacturing Using Nanoscale Modules: Final Report, CP-04–01, NASA Institute for Advanced Concepts, May 2005.
8. The Federal Reserve distinguishes value exchange as M1 and the [storage] of value as M2. For a good description of the history and role of money, see Alan Greenspan, Gold and Economic Freedom.
9. Karl Denninger describes the benefits and drawbacks of fractional reserve banking, pointing out that the key determinate is whether or not the debts incurred are productive (e.g. investments in tooling, land, or education) vs. consumptive (e.g. heating a house, buying a bigscreen TV, or going on vacation). See
10. Marc and Nathalie Fleury, The Financial Crisis for Dummies: Securitization.
11. Bill Joy, Why the future doesn’t need us. Wired (Apr 2000) On some issues, Bill Joy was so far off that he wasn’t even wrong. See “Why the Future Needs Bill Joy”
12. Qian Lulu, et al., Analogic China map constructed by DNA. Chinese Science Bulletin. Dec 2006. Vol. 51 No. 24

Thanks to Forrest Bishop, Jim Osborn, and Andrew Balet for many excellent critical comments on earlier drafts.

Tihamer Toth-Fejel, MS
General Dynamics Advanced Information Systems
Michigan Research and Development Center

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