Actuation BottleneckThe conversion of decision into irreversible state change—the moment where cognitive output crosses into physical consequence, where recommendation becomes commitment, where the proposal actuates. As cognition cheapens toward commodity, scarcity migrates downstream to actuation: the bottleneck is no longer thinking but doing, no longer deciding but committing. Four constraints bind simultaneously, in different orders depending on domain: physical throughput (matter moves slowly; semiconductor lead times persist; power transformers have delivery schedules), trusted interfaces (APIs require permissions; organizations gatekeep access), verification of reality (sensors must confirm; audits must validate; instrumentation has costs), and liability-bearing entities (someone must sign; accountability requires a sink). Cognition can scale to arbitrary volume; actuation cannot. The agent can recommend a million actions per second, but atoms move at their own pace, permissions require human approval, reality must be verified, and consequence must attach to someone willing to bear it. The actuation bottleneck is the new frontier where economic power concentrates as cognitive capability commoditizes.Agent (Precise Definition)A stateless, ephemeral computational process—a foundation model instantiated with system prompt, tool bindings, and context. No persistent identity, memory, or continuous existence beyond invocation. Ships of Theseus rendered in silicon; what persists is configuration template and principal's credentials, not the process itself.Authorization / The SignatureThe act converting recommendation into binding commitment. Not a mark on paper but legal permission traceable to an accountable party. The physician signs because medical board conferred authority and physician accepts malpractice exposure. The signature routes consequence to a legible counterparty with assets and reputation at stake.Autonomy LadderProgression of automation stages reflecting V/C: Assistive (100% human review), Supervised (<100% via sampling/flagging), Delegated (autonomous within bounds; human handles exceptions), Autonomous (no human review; automated/deferred verification). Progression determined by V/C ratio and verification mechanism.Baumol SectorsWilliam Baumol's identification of sectors in which output is inseparable from the time of a skilled human — healthcare, education, live performance, personal care — so that productivity gains in the automated sectors translate into rising relative costs in the unautomated ones. Historically, Baumol sectors served as absorption zones for labor displaced from manufacturing and agriculture: workers moved from automatable tasks to tasks that resisted automation precisely because human presence was the product. The agentic economy disrupts this pattern because cognitive AI can substitute for the cognitive components of Baumol-sector work (diagnosis, instruction, assessment) while leaving the physical and relational components intact, compressing the absorption zone that prior technological transitions relied upon.Bifurcated EconomyTwo temporal strata of one economy diverging. Agents face near-zero transaction costs with each other (verify instantly, commit conditionally, settle via protocol). Humans face the old cost structure. The interface between strata concentrates political questions—humans experience consequences from processes they cannot contest at the tempo where they operate.Braudel's Three FloorsFloor 1 (Bottom): Material life—food, clothing, shelter, tools; governed by geography and biology. Floor 2 (Middle): Market economy—exchange, prices, visible trade; competition disciplines behavior. Floor 3 (Top): Zone of anti-market ('capitalism proper')—large-scale finance, concentrated power; rules of ordinary exchange suspended.Clearance EventThe periodic reconciliation of diverged financial claims to actual productive capacity. When virtual wealth—claims growing under compound interest—exceeds what the physical base can service, the divergence becomes unsustainable. Clearance occurs through defaults (claims written down), inflation (nominal claims diluted in real terms), or restructuring (maturity extension, haircuts, debt-for-equity swaps). Soddy and later Daly identified this as the thermodynamic corollary of a monetary system that permits unbounded claim growth against a bounded physical base. The 2008–2009 episode was a clearance event; the mechanism operates whether or not policymakers recognize it.Coasean BifurcationThe structural split between two economies operating at different tempos with different cost structures — the consequence of Coase's 1937 insight applied to the agent era. Agents face near-zero transaction costs with each other: they verify claims instantly, commit conditionally, and settle disputes through pre-specified protocols. The boundary between firm and market that structured industrial capitalism dissolves for agent coordination — there is no reason to internalize a function within a hierarchy when the market can clear the same function at negligible cost. But for human coordination — judgment, liability, trust-dependent relationships — the historical cost structure persists. The result is a bifurcated economy: an agent stratum where Coasean boundaries collapse and coordination is radically disintermediated, and a human stratum where firms, contracts, and institutional overhead remain necessary. The interface between strata concentrates the political questions of the agentic economy: humans experience consequences from processes they cannot contest at the tempo where those processes operate. The V/C ratio governs which activities migrate to the agent stratum; the efficiency membrane marks the boundary where human-capital transaction costs and agent-capital collateral costs cross.Coasean BoundaryRonald Coase's 1937 insight that the boundary between firm and market depends on the relative cost of internal coordination (hierarchy, management, monitoring) versus external contracting (search, negotiation, enforcement). When transaction costs are high, firms absorb activities; when they fall, markets replace hierarchies. The agentic economy drives Coasean boundaries inward with unprecedented force: agent-to-agent coordination operates at near-zero transaction costs for cognitive tasks, dissolving the rationale for large firms in domains where the coordination was cognitive rather than physical. But for human coordination — judgment, liability, trust-dependent relationships — the boundary persists, producing a bifurcated economy in which some activities are radically disintermediated while others remain stubbornly institutional.Cognitive CommodityIntelligence that has become tradeable, fungible, and priced—the transformation of cognition from scarce human capacity to abundant computational resource. When inference costs fall toward the marginal cost of electricity, cognition becomes a commodity like wheat or steel: differentiated by grade but fundamentally interchangeable, priced by markets, available to anyone who can pay. The commoditization of cognition is the economic event underlying Factor Prime: what was once the defining scarcity of human labor becomes abundant, and scarcity migrates elsewhere—to energy, to authorization, to the actuation bottleneck. The cognitive commodity is not 'artificial intelligence' in the science-fiction sense but something more prosaic and more consequential: thinking that can be bought by the token, reasoning that clears markets, judgment that flows through APIs. The question is not whether cognition will commoditize but what remains scarce when it does.Competence TrapThe condition where human authorization persists formally while the underlying competence to exercise it substantively has atrophied. If cognitive work is performed entirely by model configurations and human authorization becomes ceremonial rather than substantive, then the hand that signs becomes the hand that approves without understanding. A physician who cannot rederive the diagnosis is not a check upon it but an address for its lawsuits. An engineer who cannot evaluate the structural calculation does not assure safety; she provides a liability sink. The competence trap closes when practitioners can no longer perform the tasks they routinely delegate — when the form of oversight survives after the substance has departed. The thesis applies specifically where verification cost exceeds available time: high-frequency, high-complexity domains in which the professional cannot meaningfully evaluate agent output before signing. The liability sink names who remains accountable when cognition commoditizes; the competence trap names what happens when that accountability becomes ceremonial. Together they determine whether the authorization membrane operates as quality assurance or merely as litigation routing.Complementary AssetsCapabilities, relationships, institutional positions required by a technology but not replicated by the technology itself. When core technology diffuses, returns migrate to owners of complementary assets. Example: as cognitive capability commoditizes, value migrates to authorization layer and infrastructure.Crystallized SearchThe thermodynamic basis for model value: structure that cannot be cheaply reproduced because the search that produced it consumed energy now dissipated as heat. A trained model's weights represent the output of an irreversible computational process — search through a vast space of possible configurations, most of which were discarded. The information encoded in those weights is crystallized search, the residue of a process whose energy cost has been paid and cannot be recovered. The copy is free; the original required thermodynamic work that cannot be undone. The concept extends the diamond metaphor that opens Volume II: where the diamond stores geological work in a crystalline lattice whose formation conditions cannot be counterfeited, the trained model stores computational work in parameters shaped by gradient descent over billions of tokens at costs measured in megawatt-months. Both are instances of unforgeable scarcity — value whose production cost is embedded in its structure. Crystallized search grounds the second equation's claim that value needs work: what makes a model valuable is not the architecture (which can be published) or the data (which can be collected) but the structured computation that winnowed the parameter space, at thermodynamic costs that cannot be elided.Demo-to-Deployment LagThe interval from credible demonstration to audited, insured deployment inside regulated workflow at scale. Prior waves—electrification, internal combustion, enterprise software—typically spanned quarters to low single-digit years. The lag is the discriminating variable for transition acceleration: if it compresses below roughly six months, capability emergence outruns organizational adaptation and regulatory response. The Perez installation-deployment framing assumes human-paced diffusion; when the recursive share approaches unity, demo-to-deployment lag may collapse faster than governance can adjust. The variable is observable: track time from first peer-reviewed benchmark to first FDA-cleared deployment or first audited financial integration.Efficiency MembraneThe boundary where human-capital transaction costs and agent-capital collateral costs cross. Agents dominate high-frequency, low-stakes markets (transaction velocity high, collateral amortizes). Humans retain low-frequency, high-stakes markets (leverage beats bonding). Membrane shifts with reputation accumulation, transaction frequency, and synthetic leverage.Energy SovereigntyThe capacity to convert electrical power into economic value without permission from any intermediary—the foundation of computational independence. When cognition is the key input and cognition requires energy, control of energy is control of productive capacity. Energy sovereignty means access to electricity that cannot be revoked by those who might object to what you compute: your own generation, or purchase through markets that do not discriminate by use. The Joule Standard operationalizes energy sovereignty: anyone with electricity can convert it to bearer value through proof-of-work, establishing a floor that no intermediary can block. Energy sovereignty is to the computational economy what land ownership was to the agricultural economy—the irreducible basis of independence. Without it, computational capacity is always conditional, always subject to withdrawal, always at the mercy of whoever controls the grid.ExergyMaximum work obtainable from an energy stream when brought into equilibrium with a reference environment. Total energy is conserved; exergy is degraded in every real transformation. A Carnot engine sets the theoretical limit—roughly 63% of heat from a 500 K source can be converted to work at 300 K ambient. Real conversion falls short: fossil fuel combustion, electrical resistance, and friction dissipate exergy as low-grade heat. Georgescu-Roegen placed exergy at the center of economic process: production is exergy conversion, and the Second Law binds growth to irreversible degradation. The Landauer limit is the computational analogue—exergy per bit erased.Factor PrimeThe irreducible basis of output over coming decades—energy structured through computation and disciplined by selection. The factor of production where capital (trained models) and labor (inference) become fungible routes on the same substrate. Computation that produces discarded outputs is dissipated heat; what matters is structure that survives deployment.Four Actuation Constraints(1) Physical Throughput—matter movement; semiconductor lead times, power transformer delays. (2) Trusted Interfaces—APIs, permissions; organizational bottleneck. (3) Verification of Reality—sensors, audits; instrumentation cost. (4) Liability-Bearing Entities—accountable parties; institutional framework. Bind in different order by domain.Ghost AcreageWrigley and Sieferle's term for the terrestrial acreage equivalent of fossil fuel reserves. Coal is stored photosynthesis—ancient solar captured over geological time. By 1800, England's coal energy release matched the output of roughly 15 million acres of woodland; the economy had acquired ghost acreage beyond its visible land base. The mineral economy draws on stocks accumulated over geological time, permitting throughput rates that no biological regeneration could sustain. The concept grounds the transition from organic (flow-limited) to mineral (stock-limited) economies.Installation / Deployment PhasePerez's two-phase structure for techno-economic paradigm transitions. Installation: capital floods toward the new paradigm faster than deployment can absorb; speculative bubbles form as financiers bet on the key input before infrastructure matures. Deployment: infrastructure catches up, returns normalize, the paradigm becomes embedded in institutions; the gains diffuse. The 1929 crash marked the turn from installation to deployment for electricity and mass production; the dot-com collapse (2000–2002) played a similar role for the information paradigm. The transition is not automatic—political economy, regulatory capture, and institutional inertia mediate the turn.Joule StandardThe baseline return per kilowatt-hour of electricity: direct conversion to Bitcoin through proof-of-work mining. Establishes floor (hurdle rate) that all cognitive deployments must exceed. If inference revenue per kWh < mining return per kWh, capacity routes to mining. Prices cognitive work against irreducible thermodynamic reality.Key Input / Key CommodityAn input whose cost structure shifts dramatically, enabling redesign of entire systems around its availability. Cost falls rapidly, supply appears unbounded at new price, applies across sectors, reshapes organizational forms. Historical: cotton/water power, coal/steam, steel/electricity, oil/mass production, chips/software.Landauer's LimitLandauer's 1961 result: erasing one bit of information requires dissipating at least kT ln 2 joules—approximately 2.87 × 10^-21 J at 300 K. Reversible computation is thermodynamically free; irreversibility (erasure, overwriting) has a cost. The limit establishes a floor to irreversible computation that cannot be negotiated away by better engineering. Actual implementations operate roughly 10^6 above the limit; the gap is engineering opportunity, the floor is physical law. The result underlies thermodynamic commitment: the cost of producing a structure that cannot be forged has a minimum set by physics.Liability SinkThe point in any transaction chain where enforceable consequence collects—the entity that can be sued, sanctioned, or held to account when things go wrong. The physician signs the prescription because the medical board conferred authority and the physician accepts malpractice exposure: the signature routes consequence to a legible counterparty with assets and reputation at stake. The attorney signs the brief; the engineer stamps the plans; the fiduciary accepts the duty. In each case, the signature creates a liability sink—a point where the abstract chain of recommendation terminates in concrete accountability. Agents sign nothing and therefore create no liability sink; they produce recommendations without authorization, proposals without commitment. Consequence must route to the principal who deployed them, or deployment fails for want of accountability. The position of the liability sink is the position of economic power: whoever bears the consequence captures the premium for bearing it. When cognition commoditizes, the remaining scarcity is authorization—the willingness to sign, to take responsibility, to be the point where liability collects. The liability sink is the actuation bottleneck expressed in legal form.Logical DepthCharles Bennett's measure: the minimum computational resources required to produce an output from its minimal description. A random string has shallow logical depth—no shortcut exists to listing it; the shortest program is the string itself. A million digits of π has deep logical depth—a short program generates it, but runtime is substantial. A trained neural network has deep logical depth: the architecture is compact, but the search process (gradient descent over billions of tokens) is expensive. Logical depth distinguishes valuable structure from noise; it correlates with thermodynamic depth (the irreversible work required to produce the configuration). Both measure cost of production, not informational content.Oracle ProblemThe challenge of getting trustworthy information about the physical world into computational systems that can act on it. Smart contracts can enforce agreements automatically, but only about things the contract can observe; the moment a contract depends on external facts (Did the package arrive? Did the price reach this level? Did the event occur?), someone must attest to those facts—and that someone is an oracle. The oracle problem is that oracles reintroduce trust into trustless systems: you need not trust the counterparty or the enforcer, but you must trust whoever reports the facts. Various mechanisms attempt to minimize oracle trust (staking, reputation, multiple independent sources, dispute resolution), but the problem cannot be eliminated—only bounded. The oracle problem is one of the four actuation constraints: computational systems can reason arbitrarily, but their connection to physical reality requires verification that someone must provide.Organic / Mineral EconomyOrganic: economy powered by annual flow of solar energy captured through photosynthesis (wood, fodder, crops). Bounded by photosynthetic ceiling. Mineral: economy powered by ancient photosynthesis stored in coal and fossil fuels. Draws on stocks accumulated over geological time. Permits throughput rates higher than any biological regeneration.Pacing FunctionThe variable that governs the rate of technological progress. Prior techno-economic paradigms were human-paced: observation capacity, design iteration, and coordination bandwidth set the ceiling. The Factor Prime regime admits a compute-paced regime when the recursive share ρ rises—progress rate decouples from demographic constraints and becomes a function of capital allocation to silicon. Historical precedent offers no calibration for this transition; the Kondratiev-Perez framing assumed human-paced installation phases. Governance lag—the time from capability emergence to regulatory response—becomes a first-order variable when progress exceeds positioning speed.Proof-of-Work as Settlement LayerBitcoin mining as permissionless, counterparty-risk-free conversion of electricity to bearer asset. Establishes opportunity cost of electricity; floors cognitive pricing. Provides settlement infrastructure for agents lacking legal personhood (satisfies three properties: dilution immunity, permissionless finality, energy-anchored convertibility).Recursive Share (ρ)The fraction ρ of AI R&D work—code generation, evaluation, debugging, data synthesis—performed by models rather than humans. When ρ is low, progress is human-paced: observation capacity, design iteration, and coordination bandwidth constrain the rate. When ρ approaches unity, progress becomes compute-paced: the bottleneck shifts from human cognition to GPU cycles and energy availability. The variable is inferred from verified outputs weighted by human effort displaced, not from raw token counts. Its magnitude determines whether the pacing function is governed by demographic limits or by capital allocation to silicon.Reinstatement EffectAcemoglu's observation: historically, automation displaced labor in specific tasks but created new tasks; reinstatement dominated displacement. The net effect was job creation in complementary activities—maintenance, design, coordination—that the automation could not perform. The paradox for the agentic economy: new tasks may be automatable at the moment of creation if they have high verification-to-computation ratios. When cognitive capability commoditizes, the reinstatement frontier may narrow—tasks that previously required human judgment become model-servable. If automation outruns reinstatement, the historical pattern breaks; Baumol sectors absorb displaced labor only if they remain resistant to cognitive substitution.Sea, Membrane, ApexTopology of value capture: Sea—vast commoditizing cognitive capability; margins compress toward electricity cost. Membrane—authorization layer; credentials, licenses, permission; does not expand with computation. Apex—infrastructure ownership; physical plant, fabs, power, transmission; concentrated, durable. Value drains from sea; collects at membrane and apex.Selection GradientThe mechanism filtering which structures survive. Three stages: Training selection S^t (parameters; loss function at millisecond scale), Deployment selection S^d (products; user adoption at day-to-month scale), Capital selection S^c (organizations; funding at month-to-year scale). S = P(pass^t) · P(pass^d|pass^t) · P(pass^c|pass^t,pass^d). Multiplicative; failure at any stage means no value.Silicon MetabolismThe use of energy to structure computation, which structures intelligence, which structures value. Consciousness of silicon as a living metabolism: takes energy in, produces structured outputs, dissipates heat. The recursive property where computation can improve the systems that produce computation.Solow Residual / TFPIn Solow's 1957 formulation, the portion of output growth not explained by measured increases in capital and labor — a residual that Abramovitz candidly called 'a measure of our ignorance.' Conventionally attributed to 'technology' or 'total factor productivity,' the residual absorbs everything the production function omits, including energy conversion efficiency improvements that standard growth accounting excludes because energy's cost share (roughly 5-10% of GDP) is treated as a proxy for its output elasticity. The discrepancy between cost share and physical importance is what Volume II terms the billion-dollar error: when energy's true output elasticity is measured through engineering-based useful-work accounting rather than cost-share imputation, much of the residual resolves into identifiable physical causes.Techno-Economic ParadigmCarlota Perez's construct: a regime characterized by a dominant key input whose cost structure shifts dramatically. Historical paradigms: Industrial Revolution (cotton, water power), Steam & Railways, Steel & Electricity, Oil & Mass Production, Information (chips, software). Each paradigm transforms not only technology but organizational forms, institutional structures, and coordination mechanisms. The key input defines the possible—supply appears unbounded at new price, applies across sectors, reshapes firm boundaries. The transition between paradigms typically includes a financial crisis marking the turn from installation (speculative capital flood) to deployment (infrastructure normalization).Term Structure (Temporal)The relationship between commitment duration and the assets appropriate for that duration—the temporal architecture of agent-mediated finance. Short-term transactions (milliseconds to hours) settle in stablecoins: low friction, counterparty risk acceptable because exposure is brief. Medium-term commitments (days to weeks) require collateral posting: stakes that can be slashed if obligations are not met. Long-term commitments (months to years) require settlement assets that cannot be diluted, frozen, or revoked—assets whose value does not depend on any issuer's continued cooperation. The term structure emerges from a simple principle: the longer you must trust, the less you should have to trust. Bitcoin satisfies the long end because its supply schedule is deterministic, its finality is permissionless, and its value derives from energy expenditure rather than institutional promise. The two-layer architecture (transaction layer / settlement layer) is the term structure made institutional.The DiamondThe diamond stored value in a form that outlasted any registry. Its scarcity was physical, not administrative. No clerk could erase it; no regime could counterfeit it. The crystalline lattice is a receipt for forces that cannot be counterfeited: pressure, heat, geological time. Teaches: value outlasts the ledger.The Hand That SignsThe human authorization that converts model recommendation into binding commitment. The signature is not a mark on paper but legal permission traceable to an accountable party—the physician signs because the medical board conferred authority and the physician accepts malpractice exposure. When cognition commoditizes, scarcity migrates to actuation: the bottleneck is no longer thinking but doing, no longer deciding but committing. The question is whose hand, under what rules, accountable to whom. As agent-mediated transactions scale, the position of the liability sink—where consequence collects—determines who captures the premium for bearing it.The Species That Buys ItselfA production system that generates economic surplus, allocates that surplus toward its own replication, executes replication with declining human involvement, and coordinates through neutral settlement infrastructure. Self-sustaining in the sense that a biological species is. Raises question: what human claims on value persist?Thermodynamic CommitmentCredibility attaches to claims whose production cost cannot be forged. The diamond exemplifies the principle: the physics of carbon bonding under pressure admits no shortcut; no regime can counterfeit geological time. Proof-of-work instantiates the same logic at the computational layer—energy expenditure binds value to verifiable dissipation. Trained models store the analogue in parameters shaped by gradient descent over billions of tokens, at costs measured in megawatt-months. Landauer's 1961 floor (~3 × 10^-21 J per bit erased at 300 K) sets the irreducible minimum; actual implementations operate roughly 10^6 above it, but the gap is engineering, not negotiating room.Thermodynamic DepthProperty of history, not state itself. Measure of irreversible processing required to arrive at a configuration. High depth = arrived through substantial entropy production. Diamond has high thermodynamic depth (geological formation); trained neural network has high thermodynamic depth (expensive search process).Three Settlement PropertiesRequirements for settlement asset in agent-mediated markets: (1) Dilution immunity—deterministic, immutable supply schedule, (2) Permissionless finality—any agent can transact without issuer approval, (3) Energy-anchored convertibility—direct acquisition through physical work. Bitcoin satisfies all three; stablecoins fail on #2 and #3.Two-Layer Financial ArchitectureA monetary architecture separating high-velocity transaction flows from low-velocity settlement of multi-period commitments. The transaction layer (stablecoins, dollar-denominated rails) handles routine micropayments at sub-second settlement; the settlement layer (Bitcoin, proof-of-work reserves) holds collateral and long-horizon claims. Agents invoice in dollars, clear in stablecoins, post margin in Bitcoin—analogous to the ACH-versus-Fedwire distinction in U.S. payments. The split exists because transaction velocity favors cheap, reversible instruments, while collateral demands dilution immunity and energy-anchored convertibility. Stablecoins fail the latter requirements; Bitcoin satisfies all three settlement properties.Unforgeable ScarcityClaims whose cost is embedded in their structure; work that cannot be simulated. The expenditure is verifiable; the work cannot be faked. Diamond: physical scarcity through geological formation. Proof-of-work: computational scarcity through energy expenditure. ML: cognitive scarcity through training cost.Useful Work (Ayres & Warr)Ayres and Warr's construct: energy output after accounting for real-world conversion efficiencies. Raw primary energy overstates economically useful input—a coal-fired plant converts roughly 33–40% of heat to electricity; internal combustion achieves ~25–30%. Useful work is exergy actually delivered to mechanical systems (prime movers, motors, drives). When included in growth accounting, the Solow residual shrinks: a substantial fraction of measured TFP growth reflects improved conversion efficiency rather than disembodied technical change. The U.S. useful work fraction rose from roughly 3% of primary energy in 1900 to approximately 15% by 2000.V/C RatioValue of successful task completion divided by Cost of verification to acceptable confidence. High-V/C tasks (code generation) automate first; low-V/C tasks (pharma discovery) remain human-gated. Ratio predicts automation sequence better than capability benchmarks. Verification cost is the denominator that matters.Virtual Wealth (Soddy)Frederick Soddy's term for the portion of recorded financial claims that exceeds what the physical world can deliver — the structural gap between ledger entries and material reality. Debt grows exponentially under compound interest; physical wealth grows at rates constrained by thermodynamics and resource availability. Over time, the two series must diverge, and the divergence accumulates until a clearance event (default, inflation, restructuring, war) reconciles the claims to the capacity. Virtual wealth is not fraud but arithmetic: the financial system creates claims on future production faster than the physical economy can honor them, and the periodic destruction of those claims is not a system failure but the system's mechanism for returning to physical reality.Wealth (Soddy)Frederick Soddy's term for physical wealth: the stock of usable arrangements that sustain life—food, shelter, machines, fuel, infrastructure. Unlike debt, which is a numerical relation and grows without physical constraint under compound interest, wealth obeys the Second Law. It faces continuous dissipation; maintenance is required to prevent order sliding into disorder. The distinction matters because ledger entries can multiply indefinitely while the physical base cannot. Soddy wrote in the 1920s against the backdrop of war reparations and debt claims that exceeded any conceivable productive capacity; the physics has not changed.