[An updated treatment of some of this material appears in Chapter 2 of the Energy and Human Ambitions on a Finite Planet (free) textbook, also mirrors a 2022 article in Nature Physics..]
Some while back, I found myself sitting next to an accomplished economics professor at a dinner event. Shortly after pleasantries, I said to him, “economic growth cannot continue indefinitely,” just to see where things would go. It was a lively and informative conversation. I was somewhat alarmed by the disconnect between economic theory and physical constraints—not for the first time, but here it was up-close and personal. Though my memory is not keen enough to recount our conversation verbatim, I thought I would at least try to capture the key points and convey the essence of the tennis match—with some entertainment value thrown in.
Cast of characters: Physicist, played by me; Economist, played by an established economics professor from a prestigious institution. Scene: banquet dinner, played in four acts (courses).
Note: because I have a better retention of my own thoughts than those of my conversational companion, this recreation is lopsided to represent my own points/words. So while it may look like a physicist-dominated conversation, this is more an artifact of my own recall capabilities. I also should say that the other people at our table were not paying attention to our conversation, so I don’t know what makes me think this will be interesting to readers if it wasn’t even interesting enough to others at the table! But here goes…
Act One: Bread and Butter
Physicist: Hi, I’m Tom. I’m a physicist.
Economist: Hi Tom, I’m [ahem..cough]. I’m an economist.
Physicist: Hey, that’s great. I’ve been thinking a bit about growth and want to run an idea by you. I claim that economic growth cannot continue indefinitely.
Economist: [chokes on bread crumb] Did I hear you right? Did you say that growth can not continue forever?
Physicist: That’s right. I think physical limits assert themselves.
Economist: Well sure, nothing truly lasts forever. The sun, for instance, will not burn forever. On the billions-of-years timescale, things come to an end.
Physicist: Granted, but I’m talking about a more immediate timescale, here on Earth. Earth’s physical resources—particularly energy—are limited and may prohibit continued growth within centuries, or possibly much shorter depending on the choices we make. There are thermodynamic issues as well.
Economist: I don’t think energy will ever be a limiting factor to economic growth. Sure, conventional fossil fuels are finite. But we can substitute non-conventional resources like tar sands, oil shale, shale gas, etc. By the time these run out, we’ll likely have built up a renewable infrastructure of wind, solar, and geothermal energy—plus next-generation nuclear fission and potentially nuclear fusion. And there are likely energy technologies we cannot yet fathom in the farther future.
Physicist: Sure, those things could happen, and I hope they do at some non-trivial scale. But let’s look at the physical implications of the energy scale expanding into the future. So what’s a typical rate of annual energy growth over the last few centuries?
Economist: I would guess a few percent. Less than 5%, but at least 2%, I should think.
Physicist: Right, if you plot the U.S. energy consumption in all forms from 1650 until now, you see a phenomenally faithful exponential at about 3% per year over that whole span. The situation for the whole world is similar. So how long do you think we might be able to continue this trend?
Economist: Well, let’s see. A 3% growth rate means a doubling time of something like 23 years. So each century might see something like a 15–20× increase. I see where you’re going. A few more centuries like that would perhaps be absurd. But don’t forget that population was increasing during centuries past—the period on which you base your growth rate. Population will stop growing before more centuries roll by.
Physicist: True enough. So we would likely agree that energy growth will not continue indefinitely. But two points before we continue: First, I’ll just mention that energy growth has far outstripped population growth, so that per-capita energy use has surged dramatically over time—our energy lives today are far richer than those of our great-great-grandparents a century ago [economist nods]. So even if population stabilizes, we are accustomed to per-capita energy growth: total energy would have to continue growing to maintain such a trend [another nod].
Second, thermodynamic limits impose a cap to energy growth lest we cook ourselves. I’m not talking about global warming, CO2 build-up, etc. I’m talking about radiating the spent energy into space. I assume you’re happy to confine our conversation to Earth, foregoing the spectre of an exodus to space, colonizing planets, living the Star Trek life, etc.
Economist: More than happy to keep our discussion grounded to Earth.
Physicist: [sigh of relief: not a space cadet] Alright, the Earth has only one mechanism for releasing heat to space, and that’s via (infrared) radiation. We understand the phenomenon perfectly well, and can predict the surface temperature of the planet as a function of how much energy the human race produces. The upshot is that at a 2.3% growth rate (conveniently chosen to represent a 10× increase every century), we would reach boiling temperature in about 400 years. [Pained expression from economist.] And this statement is independent of technology. Even if we don’t have a name for the energy source yet, as long as it obeys thermodynamics, we cook ourselves with perpetual energy increase.
Economist: That’s a striking result. Could not technology pipe or beam the heat elsewhere, rather than relying on thermal radiation?
Physicist: Well, we could (and do, somewhat) beam non-thermal radiation into space, like light, lasers, radio waves, etc. But the problem is that these “sources” are forms of high-grade, low-entropy energy. Instead, we’re talking about getting rid of the waste heat from all the processes by which we use energy. This energy is thermal in nature. We might be able to scoop up some of this to do useful “work,” but at very low thermodynamic efficiency. If you want to use high-grade energy in the first place, having high-entropy waste heat is pretty inescapable.
Economist: [furrowed brow] Okay, but I still think our path can easily accommodate at least a steady energy profile. We’ll use it more efficiently and for new pursuits that continue to support growth.
Physicist: Before we tackle that, we’re too close to an astounding point for me to leave it unspoken. At that 2.3% growth rate, we would be using energy at a rate corresponding to the total solar input striking Earth in a little over 400 years. We would consume something comparable to the entire sun in 1400 years from now. By 2500 years, we would use energy at the rate of the entire Milky Way galaxy—100 billion stars! I think you can see the absurdity of continued energy growth. 2500 years is not that long, from a historical perspective. We know what we were doing 2500 years ago. I think I know what we’re not going to be doing 2500 years hence.
Economist: That’s really remarkable—I appreciate the detour. You said about 1400 years to reach parity with solar output?
Physicist: Right. And you can see the thermodynamic point in this scenario as well. If we tried to generate energy at a rate commensurate with that of the Sun in 1400 years, and did this on Earth, physics demands that the surface of the Earth must be hotter than the (much larger) surface of the Sun. Just like 100 W from a light bulb results in a much hotter surface than the same 100 W you and I generate via metabolism, spread out across a much larger surface area.
Economist: I see. That does make sense.
Act Two: Salad
Economist: So I’m as convinced as I need to be that growth in raw energy use is a limited proposition—that we must one day at the very least stabilize to a roughly constant yearly expenditure. At least I’m willing to accept that as a starting point for discussing the long term prospects for economic growth. But coming back to your first statement, I don’t see that this threatens the indefinite continuance of economic growth.
For one thing, we can keep energy use fixed and still do more with it in each passing year via efficiency improvements. Innovations bring new ideas to the market, spurring investment, market demand, etc. These are things that will not run dry. We have plenty of examples of fundamentally important resources in decline, only to be substituted or rendered obsolete by innovations in another direction.
Physicist: Yes, all these things happen, and will continue at some level. But I am not convinced that they represent limitless resources.
Economist: Do you think ingenuity has a limit—that the human mind itself is only so capable? That could be true, but we can’t credibly predict how close we might be to such a limit.
Physicist: That’s not really what I have in mind. Let’s take efficiency first. It is true that, over time, cars get better mileage, refrigerators use less energy, buildings are built more smartly to conserve energy, etc. The best examples tend to see factor-of-two improvements on a 35 year timeframe, translating to 2% per year. But many things are already as efficient as we can expect them to be. Electric motors are a good example, at 90% efficiency. It will always take 4184 Joules to heat a liter of water one degree Celsius. In the middle range, we have giant consumers of energy—like power plants—improving much more slowly, at 1% per year or less. And these middling things tend to be something like 30% efficient. How many more “doublings” are possible? If many of our devices were 0.01% efficient, I would be more enthusiastic about centuries of efficiency-based growth ahead of us. But we may only have one more doubling in us, taking less than a century to realize.
Economist: Okay, point taken. But there is more to efficiency than incremental improvement. There are also game-changers. Tele-conferencing instead of air travel. Laptop replaces desktop; iPhone replaces laptop, etc.—each far more energy frugal than the last. The internet is an example of an enabling innovation that changes the way we use energy.
Physicist: These are important examples, and I do expect some continuation along this line, but we still need to eat, and no activity can get away from energy use entirely. [semi-reluctant nod/bobble] Sure, there are lower-intensity activities, but nothing of economic value is completely free of energy.
Economist: Some things can get awfully close. Consider virtualization. Imagine that in the future, we could all own virtual mansions and have our every need satisfied: all by stimulative neurological trickery. We would stil need nutrition, but the energy required to experience a high-energy lifestyle would be relatively minor. This is an example of enabling technology that obviates the need to engage in energy-intensive activities. Want to spend the weekend in Paris? You can do it without getting out of your chair. [More like an IV-drip-equipped toilet than a chair, the physicist thinks.]
Physicist: I see. But this is still a finite expenditure of energy per person. Not only does it take energy to feed the person (today at a rate of 10 kilocalories of energy input per kilocalorie eaten, no less), but the virtual environment probably also requires a supercomputer—by today’s standards—for every virtual voyager. The supercomputer at UCSD consumes something like 5 MW of power. Granted, we can expect improvement on this end, but today’s supercomputer eats 50,000 times as much as a person does, so there is a big gulf to cross. I’ll take some convincing. Plus, not everyone will want to live this virtual existence.
Economist: Really? Who could refuse it? All your needs met and an extravagant lifestyle—what’s not to like? I hope I can live like that myself someday.
Physicist: Not me. I suspect many would prefer the smell of real flowers—complete with aphids and sneezing; the feel of real wind messing up their hair; even real rain, real bee-stings, and all the rest. You might be able to simulate all these things, but not everyone will want to live an artificial life. And as long as there are any holdouts, the plan of squeezing energy requirements to some arbitrarily low level fails. Not to mention meeting fixed bio-energy needs.
Act Three: Main Course
Physicist: But let’s leave the Matrix, and cut to the chase. Let’s imagine a world of steady population and steady energy use. I think we’ve both agreed on these physically-imposed parameters. If the flow of energy is fixed, but we posit continued economic growth, then GDP continues to grow while energy remains at a fixed scale. This means that energy—a physically-constrained resource, mind—must become arbitrarily cheap as GDP continues to grow and leave energy in the dust.
Economist: Yes, I think energy plays a diminishing role in the economy and becomes too cheap to worry about.
Physicist: Wow. Do you really believe that? A physically limited resource (read scarcity) that is fundamental to every economic activity becomes arbitrarily cheap? [turns attention to food on the plate, somewhat stunned]
Economist: [after pause to consider] Yes, I do believe that.
Physicist: Okay, so let’s be clear that we’re talking about the same thing. Energy today is roughly 10% of GDP. Let’s say we cap the physical amount available each year at some level, but allow GDP to keep growing. We need to ignore inflation as a nuisance in this case: if my 10 units of energy this year costs $10,000 out of my $100,000 income; then next year that same amount of energy costs $11,000 and I make $110,000—I want to ignore such an effect as “meaningless” inflation: the GDP “growth” in this sense is not real growth, but just a re-scaling of the value of money.
Physicist: Then in order to have real GDP growth on top of flat energy, the fractional cost of energy goes down relative to the GDP as a whole.
Physicist: How far do you imagine this can go? Will energy get to 1% of GDP? 0.1%? Is there a limit?
Economist: There does not need to be. Energy may become of secondary importance in the economy of the future—like in the virtual world I illustrated.
Physicist: But if energy became arbitrarily cheap, someone could buy all of it, and suddenly the activities that comprise the economy would grind to a halt. Food would stop arriving at the plate without energy for purchase, so people would pay attention to this. Someone would be willing to pay more for it. Everyone would. There will be a floor to how low energy prices can go as a fraction of GDP.
Economist: That floor may be very low: much lower than the 5–10% we pay today.
Physicist: But is there a floor? How low are you willing to take it? 5%? 2%? 1%?
Economist: Let’s say 1%.
Physicist: So once our fixed annual energy costs 1% of GDP, the 99% remaining will find itself stuck. If it tries to grow, energy prices must grow in proportion and we have monetary inflation, but no real growth.
Economist: Well, I wouldn’t go that far. You can still have growth without increasing GDP.
Physicist: But it seems that you are now sold on the notion that the cost of energy would not naturally sink to arbitrarily low levels.
Economist: Yes, I have to retract that statement. If energy is indeed capped at a steady annual amount, then it is important enough to other economic activities that it would not be allowed to slip into economic obscurity.
Physicist: Even early economists like Adam Smith foresaw economic growth as a temporary phase lasting maybe a few hundred years, ultimately limited by land (which is where energy was obtained in that day). If humans are successful in the long term, it is clear that a steady-state economic theory will far outlive the transient growth-based economic frameworks of today. Forget Smith, Keynes, Friedman, and that lot. The economists who devise a functioning steady-state economic system stand to be remembered for a longer eternity than the growth dudes. [Economist stares into the distance as he contemplates this alluring thought.]
Act Four: Dessert
Economist: But I have to object to the statement that growth must stop once energy amount/price saturates. There will always be innovations that people are willing to purchase that do not require additional energy.
Physicist: Things will certainly change. By “steady-state,” I don’t mean static. Fads and fashions will always be part of what we do—we’re not about to stop being human. But I’m thinking more of a zero-sum game here. Fads come and go. Some fraction of GDP will always go toward the fad/innovation/gizmo of the day, but while one fad grows, another fades and withers. Innovation therefore will maintain a certain flow in the economy, but not necessarily growth.
Economist: Ah, but the key question is whether life 400 years from now is undeniably of higher quality than life today. Even if energy is fixed, and GDP is fixed once the cost of energy saturates at the lower bound, will quality of life continue to improve in objectively agreed-upon ways?
Physicist: I don’t know how objective such an assessment can be. Many today yearn for days past. Maybe this is borne of ignorance or romanticism over the past (1950’s often comes up). It may be really exciting to imagine living in Renaissance Europe, until a bucket of nightsoil hurled from a window splatters off the cobblestone and onto your breeches. In any case, what kind of universal, objective improvements might you imagine?
Economist: Well, for instance, look at this dessert, with its decorative syrup swirls on the plate. It is marvelous to behold.
Physicist: And tasty.
Economist: We value such desserts more than plain, unadorned varieties. In fact, we can imagine an equivalent dessert with equivalent ingredients, but the decorative syrup unceremoniously pooled off to one side. We value the decorated version more. And the chefs will continue to innovate. Imagine a preparation/presentation 400 years from now that would blow your mind—you never thought dessert could be made to look so amazing and taste so delectably good. People would line the streets to get hold of such a creation. No more energy, no more ingredients, yet of increased value to society. That’s a form of quality of life improvement, requiring no additional resources, and perhaps costing the same fraction of GDP, or income.
Physicist: I’m smiling because this reminds me of a related story. I was observing at Palomar Observatory with an amazing instrumentation guru named Keith who taught me much. Keith’s night lunch—prepared in the evening by the observatory kitchen and placed in a brown bag—was a tuna-fish sandwich in two parts: bread slices in a plastic baggie, and the tuna salad in a small plastic container (so the tuna would not make the bread soggy after hours in the bag). Keith plopped the tuna onto the bread in an inverted container-shaped lump, then put the other piece of bread on top without first spreading the tuna. It looked like a snake had just eaten a rat. Perplexed, I asked if he intended to spread the tuna before eating it. He looked at me quizzically (like Morpheus in the Matrix: “You think that’s air you’re breathing? Hmm.”), and said—memorably, “It all goes in the same place.”
My point is that the stunning presentation of desserts will not have universal value to society. It all goes in the same place, after all. [I’ll share a little-known secret. It’s hard to beat a Hostess Ding Dong for dessert. At 5% the cost of fancy desserts, it’s not clear how much value the fancy things add.]
The evening’s after-dinner keynote speech began, so we had to shelve the conversation. Reflecting on it, I kept thinking, “This should not have happened. A prominent economist should not have to walk back statements about the fundamental nature of growth when talking to a scientist with no formal economics training.” But as the evening progressed, the original space in which the economist roamed got painted smaller and smaller.
First, he had to acknowledge that energy may see physical limits. I don’t think that was part of his initial virtual mansion.
Next, the efficiency argument had to shift away from straight-up improvements to transformational technologies. Virtual reality played a prominent role in this line of argument.
Finally, even having accepted the limits to energy growth, he initially believed this would prove to be of little consequence to the greater economy. But he had to ultimately admit to a floor on energy price and therefore an end to traditional growth in GDP—against a backdrop fixed energy.
I got the sense that this economist’s view on growth met some serious challenges during the course of the meal. Maybe he was not putting forth the most coherent arguments that he could have made. But he was very sharp and by all measures seemed to be at the top of his game. I choose to interpret the episode as illuminating a blind spot in traditional economic thinking. There is too little acknowledgement of physical limits, and even the non-compliant nature of humans, who may make choices we might think to be irrational—just to remain independent and unencumbered.
I recently was motivated to read a real economics textbook: one written by people who understand and respect physical limitations. The book, called Ecological Economics, by Herman Daly and Joshua Farley, states in its Note to Instructors:
…we do not share the view of many of our economics colleagues that growth will solve the economic problem, that narrow self-interest is the only dependable human motive, that technology will always find a substitute for any depleted resource, that the market can efficiently allocate all types of goods, that free markets always lead to an equilibrium balancing supply and demand, or that the laws of thermodynamics are irrelevant to economics.
This is a book for me!
The conversation recreated here did challenge my own understanding as well. I spent the rest of the evening pondering the question: “Under a model in which GDP is fixed—under conditions of stable energy, stable population, steady-state economy: if we accumulate knowledge, improve the quality of life, and thus create an unambiguously more desirable world within which to live, doesn’t this constitute a form of economic growth?”
I had to concede that yes—it does. This often falls under the title of “development” rather than “growth.” I ran into the economist the next day and we continued the conversation, wrapping up loose ends that were cut short by the keynote speech. I related to him my still-forming position that yes, we can continue tweaking quality of life under a steady regime. I don’t think I ever would have explicitly thought otherwise, but I did not consider this to be a form of economic growth. One way to frame it is by asking if future people living in a steady-state economy—yet separated by 400 years—would always make the same, obvious trades? Would the future life be objectively better, even for the same energy, same GDP, same income, etc.? If the answer is yes, then the far-future person gets more for their money: more for their energy outlay. Can this continue indefinitely (thousands of years)? Perhaps. Will it be at the 2% per year level (factor of ten better every 100 years)? I doubt that.
So I can twist my head into thinking of quality of life development in an otherwise steady-state as being a form of indefinite growth. But it’s not your father’s growth. It’s not growing GDP, growing energy use, interest on bank accounts, loans, fractional reserve money, investment. It’s a whole different ballgame, folks. Of that, I am convinced. Big changes await us. An unrecognizable economy. The main lesson for me is that growth is not a “good quantum number,” as physicists will say: it’s not an invariant of our world. Cling to it at your own peril.
Note: This conversation is my contribution to a series at www.growthbusters.org honoring the 40th anniversary of the Limits to Growth study. You can explore the series here. Also see my previous reflection on the Limits to Growth work. You may also be interested in checking out and signing the Pledge to Think Small and consider organizing an Earth Day weekend house party screening of the GrowthBusters movie.
This is delightful. But I find myself wishing I could read the same conversation from the perspective of the economist. Would he agree with your conclusions, or would he feel that there are economic solutions that he was simply unable to explain to a non-expert in the course of a dinner?
If you are right, then a big part of selling people to your vision will be finding a way to avoid describing it as dystopian. From some perspectives, a steady-state future economy that gives us breathing space to perfect the growth and quality of other dimensions of life – spiritual growth, artistic growth, growth of fairness and justice – could be a very pleasant way to live.
Ideally, I would have had a recording so I would make sure not to miss any major points I did not understand at the time. I can obviously only echo the parts I absorbed and understood. For what it’s worth, I don’t think I left out any key arguments: there were some that were new to me and altered my way of thinking. I contemplated getting his take on the conversation, in a joint effort. But part of what shocked me about the whole episode is how poorly many of the economist’s arguments stood up. I suspect the temptation to revise/deny would be strong, leaving us in disagreement about whether he or I really said such and such. So I tried my best to be accurate, and to portray the the economist as a sharp guy with good points that in some cases exposed deficits in my thinking. It would have been easy to make into a caricature, but not at all realistic.
I’d love a chance to read the economist’s considered thoughts, especially now that he’s had a chance to sleep on it.
Additionally, there are all sorts of things you deal with that I think a thoughtful economist — the type it seems you found — would have some really interesting insights into. You’ve done the math on energy budgets, and basically figured out that solar is the main exit route open to us. But an economist could do the math on the fiscal budgets implied by your energy budgets, and run some projections to compare the rising costs of fossil fuels with the declining costs of solar — and, in turn, give us an idea of the sort of pace we can expect for a transition to solar on market forces alone.
You’ve also driven home the looming liquid fuels crisis. In one extreme, we know that we can produce all the liquid fuels we want, given sufficient electricity…but at a cost. An economist can help figure out what those costs mean for real-world adoption. How cheap does solar PV have to get and how expensive does crude oil have to get before Fischer-Tropsch synthesis becomes an economically viable alternative, and when are those two curves predicted to cross?
I’ll give you a heads-up, Ben. EVs will wipe the floor of ICE powered cars well before synthetic liquid fuels get a look in.
Nice article must I say!
I agree with Chris though, that it would be interesting to have the economist’s perspective, even though both of you revise/deny this particular conversation over dinner. Arguments given by both of you, even rethink and chewed up a little, will still be interesting to see what we can obtain from the overall discussion. It would be similar as the process of revision of an academic paper, where only the condensed and (hopefully) most clearer ideas will come forward.
tmurphy, you said:
“part of what shocked me about the whole episode is how poorly many of the economist’s arguments stood up.”
Many people here wrongly assume that “infinite growth” is a core tenet of economics and one which economists are prepared to defend. In fact, it is not a part of the economics canon at all. It is a doctrine invented by Julian Simon, whom I had never heard about until I read about him on peak energy forums.
I think the economist you spoke to may have considered this argument as a fun diversion, and he was making up arguments as he went along. That may be why his arguments didn’t ultimately stand up, in your opinion.
I’m a student of economics and I’ve never assumed that infinite growth was necessary or possible. In fact, I suspect that worldwide energy consumption may even contract over centuries as demographic transition and population declines start to outrun per-capita increases in energy consumption. Furthermore I think economic growth would asymptotically approach zero (although never cease completely until the end of our solar system) even if the population did not decline.
I like to debate about infinity as much as the next guy, but I consider the issue to be philosophical. As do most economists, I suspect.
Indeed, nor do I have any interest in the concept of infinity, per se. One reaches absurdity long before infinity, and that’s worth discussing.
I will point out that a great number of comments here took up the defense of unlimited growth. So plenty of people appear to be prepared to defend it. I can’t say that all of them are economists, but a few profess as much. I would be delighted to believe that unlimited growth potential is not a standard assumption (even if not explicitly discussed) in economic circles. The reactions here and my conversation (sample size = 1) are not encouraging to me on this front.
I have heard the position of Tom S myself a few times by now, from economics students on my campus.
I guess as a philosophy student I am also entitled to speak about it, and concur with you tmurphy (great post btw): economic growth, specifically exponential economic growth is a necessary part of capitalistic economic systems. It springs directly from the profit motive (or capital accumulation) and is expressed in interest on capital.
There are a few approaches I’ve heard that attempt to remedy the problem. Among them negative-interest money as (re-)proposed recently by Charles Eisenstein (Sacred Economics, 2011).
Personally, I am pretty sure no one has figured out how we could run a global economy based on steady-state economics yet, especially not if we want to ensure a fulfilled and healthy life for all people. The truly scary thing is that the people who should be thinking about it can’t see past their paradigms.
I agree, this conversation reeks of afterwit, even though I do find many of the arguments held by the scientist to be compelling. Although, when he fixed the population of the planet in order to simplify things, then went on to assume that we would consume the energy output of the Milky Way, it seemed to push on the edge of ludicrous. Assuming a population plateau of 50 billion, that is 2 suns per person, per year.
FWIW, I fixed population only after showing the absurdity of a continued 2.3% increase that would ultimately consume the galaxy. All toward the point that our energy growth will stop. I hope folks don’t interpret the whole galaxy thing as any sort of prediction: it’s an anti-prediction.
Also, I should note that the economist has come across this piece, commended me on the representation, and will be joining the conversation in time.
This is where I start to fall out with the rest of my Peak Oil brethren. What is a new Mozart-level symphony worth? How much energy did it take to create it? What is a new Michelangelo-level sculpture worth? How much energy did that take? What is a immune system based cure for cancer worth? How much energy does it take to stimulate the immune system in the right way? Shakespeare? Park to walk in?
Or one closer to home. If I write a software application that advises organic farmers on the next crop in their rotation, what’s that worth? If the application reduces their energy expenditure 5% each year they use it, and allows them to increase their yields 5% each year as well, while sequestering more carbon in their soils and increasing organic matter, what’s its value and how much energy did it take to produce?
More generally, what is the limit on value of intellectual property? If we change our economy to emphasize intellectual property over time, where’s the limit on GDP?
The whole idea that economic growth must end seems much more complicated than the idea that energy use can’t keep increasing. I do agree that we’ll be widget limited, but concert- or theater-limited?
Then the whole point becomes that we can’t continually expand the fraction of our income devoted to enjoyment of the arts. It must saturate, and can’t grow forever. This does not mean that the future is devoid of such marvelous things. I would never say that development must stop, and that life has no improvements. Just that growth the way we experience it now (interest rates, surging investment) will end.
Yes, but we don’t measure GDP in terms of fractions of income. We measure GDP in terms of dollars spent. Part of that is recognizing that “GDP”, which we use as our proxy for “growth”, isn’t tied to energy the way people think it is. If someone spends $1 billion on a Jennifer Bartlett painting, it shows up in GDP as $1 billion in domestic product. That’s real money that she gets to spend on other things. Including financial investments.
If we keep “development” and “improvements”, why must that mean that we stop spending money on those, and investing in the sectors of the economy “developing” and “improving”?
I think part of the problem here is that economists speak of “growth” in terms of mostly measurable economic activity, but most non-economists speak of growth as some nebulous concept that means more and bigger goodies every year. Growth has very little to do with bigger houses and cars, except that people pay for those, creating economic activity. If they spent the same money on expensive paintings and lawn statues, it would have the same “growth” effect.
And to “Big changes await us. An unrecognizable economy.” – Excellent! I’d love to have people spend their money on concerts rather than Escalades, so I can bike to work in peace! But I see no reason to believe that people won’t be using mortgages to finance houses in 20 years. I expect those houses to get smaller again (hopefully with better insulation), and closer to transit lines, but that doesn’t mean they’ll cost less or produce less economic activity (growth).
Let’s be clear: I don’t claim that we would stop spending money on development or improvements, or that it would make no sense to invest in these things. But it’s more a zero-sum game once we reach energy saturation. And people can spend outrageous amounts of real money (that can be used for other things) on frivolous purchases, as in your example. But that sector of the economy will not grow and grow until it dominates spending.
Steady-state does not mean stagnation, does not mean an end to innovative products, does not mean no more frivolity, etc. It just means that tomorrow will not be bigger than today. That change alone transforms how we create money/debt and invest in retirement plans, etc. The type of growth to which we have become accustomed will fade away.
In my original comment, the fields I mentioned are the arts/entertainment, healthcare, software development, and organic farming. We could add education and the sciences, and I implicitly included housebuilding (the Amish manage to build houses small and without a lot of energy), and finance.
You’re saying an awful lot is frivolous. And what’s with the fixation on fraction of the economy? The point remains that “growth” the way the economists define it, is economic activity. And there is a lot of room for economic activity even with energy supply stagnating or falling – just very different activity from driving large motor vehicles around, producing widgets, and building large buildings.
KJMClark: There is a big difference between “small amount of energy” and zero energy. Anything that takes more than zero will have limits. The lowest energy activity right now would be something like buying a song from iTunes – but even that requires a small finite amount of electricity. There is nothing imaginable that can add to GDP without using ANY energy at all. I dare you to name something…
Gee Steve, I could have sworn that we get a great deal of solar energy coming down every day, all over the globe.
Where did you get that “small amount of energy” ‘quote’? I didn’t write that anywhere I can see. Did you mean to quote, “the Amish manage to build houses small and without a lot of energy”, and quote something I didn’t say instead?
KJMClark: Eventually, when the fossil inheritance is spent, we will be living on a fixed daily amount of energy – it will last for a long time, but you can’t use any more per day than you receive. So with a fixed energy budget, and every single thing that could possibly add to GDP requiring energy input, how do we achieve infinite growth? As Tom as pointed out, many people fall into the delusional of thinking that we’ve come a long way through cleverness, when in fact its because of basically free energy in the form of oil – a one time bonanza with no replacement.
Steve, you said:
“As Tom as pointed out, many people fall into the delusional of thinking that we’ve come a long way through cleverness, when in fact its because of basically free energy in the form of oil – a one time bonanza with no replacement.”
This is wrong. It was cleverness and industrialism which allowed us to mine the oil, not oil which produced the cleverness and industrialism. You have it exactly backwards.
Look at it this way. Which came first, the scientific revolution or cars? The industrial revolution, or Chevrolet? Newton, or mule-type oil wells?
If oil directly caused all our industrial advancements, then why didn’t people in Saudi Arabia 10,000 years ago have an industrial civilization, despite having a per-capita allotment of oil which is hundreds of times higher than anyone today? On the other hand, why DID the industrial revolution happen in the UK first, which always had one of the poorest endowments of fossil fuels and practically no oil?
The industrial revolution started with canals and windmills, then progressed to steam engines with coal as fuel, then progressed to oil. The industrial revolution was underway long before any oil usage, and even before any fossil fuel usage. The industrial revolution CAUSED oil usage, not the other way around. If oil hadn’t been available, the economy would have progressed to something else. Oil was exploited because it was the NEXT BEST alternative after coal. That is all.
“[Oil is] a one time bonanza with no replacement.”
Oil has so many replacements that I can’t list them all here. We could even have used electric trolley-buses powered by windmills, waterfalls, and solar thermal plants. We didn’t do this because it was modestly more expensive than oil was, not because it was impossible or because oil “causes” innovation.
“If oil directly caused all our industrial advancements, then why didn’t people in Saudi Arabia 10,000 years ago have an industrial civilization”
Because they didn’t know it existed. We’ve had Uranium in the United States since the Earth formed, why didn’t we have fission reactors in 1776? Oil is concentrated energy in an easily portable and storable form – nothing compares. Where do you store the energy from solar thermal plants and waterfalls? I suppose you think Ethanol or some other bio-fuel will jump in and replace oil – without realizing that the EROEI is about 1:1 and only produced today through massive fossil fuel energy subsidies. Try reading some of the other posts on this site to learn why renewables can’t provide anything close to the *rate* of energy use we have in the US today.
Our industrial advancements have ALL resulted in using more energy because more energy was always available. We can have advancements that dramatically reduce our energy consumption rate, but to achieve them we’ll first need to admit that the future will involve having less energy in our daily budget. [edited]
“Try reading some of the other posts on this site to learn why renewables can’t provide anything close to the *rate* of energy use we have in the US today.”
This is incorrect. There is solar thermal power, which could provide more than 1000x as much power as we use today and sustain that rate (or close to it) for a very long time. And there are other abundant sources of energy (breeder reactors, fusion).
“”Try reading some of the other posts on this site…”
I have read the other articles on this site, and they confirm this point. IIRC the other articles put solar thermal in the “abundant” category.
“Where do you store the energy from solar thermal plants and waterfalls?”
Solar thermal has solved the storage problem. It has cheap and fairly dense energy storage, in the form of molten salt.
“I suppose you think Ethanol or some other bio-fuel will jump in and replace oil – without realizing that the EROEI is about 1:1 and only produced today through massive fossil fuel energy subsidies.”
The subsidy need not come from other fossil fuels. The subsidy could come almost any other energy source, for example, solar thermal or nuclear.
For example, we could build a solar themal plant as a heat source, for biomass gasification and then fisher-tropsch synthesis of liquid hydrocarbons. In this case the artificial hydrocarbons would have an EROEI of about 0.5, but that doesn’t matter. The _combination_ of the solar thermal plant and artificial hydrocarbons would have combined EROEI of 5 (10*0.5).
Bear in mind that oil can be _manufactured_ from carbon and almost any source of energy.
We don’t manufacture hydrocarbons now, because it isn’t the cheapest option. However oil from the ground isn’t the ONLY possible alternative.
Also, don’t assume that the current layout of society is the only possibility. Cheap oil for 50 years led to gradual suburbanization, but expensive oil and cheap electricity for the next 50 years could lead to gradual re-urbanization. Isn’t it possible to have a civilization based around electric trolley-buses etc, rather than personal automobiles? What we require is _transportation_, not oil. The layout of society _adapts_ to the dominant form of transportation.
If you assume in the future we won’t have enough energy to continue with the lifestyle we have now, how can you assume we’ll have the *additional* energy required to make an orderly transformation? Or do you admit its going to be ugly and hard?
“Worry” may be a better term than “assume” for me here. I sense that an implicit assumption on the economists’ part is that energy availability will only increase with time—only because it always has. This extrapolation may ultimately be correct, but there are no guarantees. I think the explosion in energy availability we’ve seen these last few centuries in a super-convenient form may well look like an anomalous period in hindsight. I am simply not content to extrapolate in light of this physical condition.
As for having enough energy to make an orderly transformation, yes, I worry about this too. See the post called The Energy Trap.
“If you assume in the future we won’t have enough energy to continue with the lifestyle we have now, how can you assume we’ll have the *additional* energy required to make an orderly transformation? ”
Because we’ll sacrifice the least important uses of energy at present, in favor of transitioning to the new source of energy in the future. This may require sacrificing a very small portion of present energy consumption to free up the necessary energy to build the infrastructure of the future, but this will be done. In some cases the transition would not require any sacrifice of present consumption; for example, building smaller and lighter cars does not require more energy than building SUVs, and we continuously re-tool auto factories and turn over the auto fleet anyway.
Look at it this way. What would be the expected rate of return for an investment in energy when energy is certain to be more expensive in the future? Bear in mind that investment capital will be redirected to this, as long as the future return on energy investment is higher than alternatives. The greater the anticipated energy scarcity, the more capital will be redirected to the energy transition. If it were rational to redirect 75% of our investment capital to that purpose then it would be done.
“Or do you admit its going to be ugly and hard?”
If by “ugly and hard” you mean there will be a recession and higher gasoline prices then yes. If by “ugly and hard” you mean that driving a massive SUV will be too expensive for middle class families in 25 years, then yes. But there will not be any interruption to industrial civilization, mechanized farming, food transport, etc.
But is it reasonable to expect them to be spending the same amount of money on expensive paintings? Can you extrapolate from the behavior of the utra-rich to the general population?
A majority of the economy is supposedly services. But most households spend a majority of their money on rather concrete goods: housing, transportation, food, medical care (or insurance.) (Or in other countries, taxes to pay for the transportation and health care.) Bigger housing, faster or more feature-filled transport, more meat intensive food.
The US spent a decade enjoying finance-driven growth. In retrospect, that may have been mostly illusionary.
No art at all in your house? Never been to a concert? No one in your family in the arts/entertainment field? Never listen to music? Why is expensive art/entertainment the only kind that counts? My example is that money spent on arts/entertainment is money spent, just like buying a motor vehicle is spending money. Either way, it’s economic activity.
How much energy do you need to expend to attend a play at a venue you can walk to? What’s the limit on number of theaters we can have? Number of people who could be employed producing live entertainment? That’s all economic activity, that could easily contribute to growth, without much energy needed. Put enough money into the system (which, by this point, is just ones and zeros anyway), and do *something* to keep the wealthy from hording it, and you can produce lots of economic activity with or without a lot of energy. Increase the amount of economic activity per year, and you have “growth”.
Now if you can convince people that they should spend more and more time doing these low-energy things, you might keep growth in this sector rolling for some time. Practically speaking, this is not how things will play. And even if these activities do expand, we’ll still find limits. They may double, triple, go up by 10 times, but surely not 1000 times, a million times. Again, this does not mean things stop, that innovation ceases, etc. But someday tomorrow will not be bigger than today. And maybe not inarguably better, even—at least not by a factor of ten per century, as under a modest 2.3% “growth” scheme.
KJMClark: “What’s the limit on number of theaters we can have? Number of people who could be employed producing live entertainment?”
In the extreme case you might have 100% of the population producing live entertainment for each other, while robots produce all the material goods. Hard to grow any more on top of that. The number of theaters will likewise be limited by the number of people to perform in and attend them, and the competition for their attention.
Tom, again you’re speaking in terms of resource use, and I’m speaking in terms of economic growth. I completely agree with you that we can’t keep using the current resource base infinitely. My point is, that’s not what GDP is measuring. GDP is measuring money moving around the economy. So you’ll be right, and the economists will be right, because you’re using two different definitions of growth.
In their definition “bigger” is not important, and “better” isn’t necessarily either. A thousand Ipods are just as valuable as one good-sized house or one nice painting. The rest of it is just value judgements on what’s important or better. In their world, what’s important is that people are willing to pay for those things, and the amount of money moved is greater than before.
“Practically speaking, this is not how things will play.” Maybe you should do a post about how you think things will play? My crystal ball isn’t quite that good, but I bought a small organic farm just in case…
Thing is exactly how good is that Mozart concerto?
Is it that good compared to everything else, or simply that everyone has told you it is that good, and you have internalized that value for it, and feel the appropriate emotion when you listen to it?
I mean if you were a New Guinea tribesman and an anthropologist bribed you to sit and listen to classical music, is there any guarantee that the tribesman would pick Mozart as being superior to any other classical music?
Had a similar, briefer conversation with an economics PhD candidate recently, and he acknowledged the flaw in the continuous-growth paradigm right away. His take was that any transition to a steady-state economy would eventually require a massive redistribution effort (in communist fashion), which is why the growth push remains the political policy of choice.
It was interesting to see the tacit acknowledgement that what really underlies the “need for growth” is a political problem: if the lives of most people don’t improve over time, the regime will be challenged, but the regime won’t relinquish their hold on resources so most peoples’ lives’ will improve over time. As you’ve said before, this framework does not perform well under scarcity.
Redistribution doesn’t necessarily follow steady state as transfer of wealth is not just vertical or one way. Energy use may be limited but how much can be devoted to conquering your neighbors solar farms? How much of your energy allocation would you be willing to give to a feudal lord for security from attack?
Hopefully we will have a wonderful post scarcity socialist future and use our excess energy to start populations in space or something else non violent. But we might not.
“use our excess energy to start populations in space” – you might want to start reading some of the other posts on this site…
The fermi paradox suggests that if there is life on other planets and space travel is possible, then due to a logarithmic growth scale, we should have already found them.
We’ve proven space travel is possible. Out of all the countless planets, we can’t prove, but we can assume there is life out there. I think the problem is the logarithmic growth aspect, which is what this blog is about. Perhaps species either burn themselves up or choose to avoid logarithmic growth.
“We’ve proven space travel is possible.”
We most certainly have not proven that interstellar space travel is possible – I say that as a person with a degree in Aerospace Engineering. We made it to the moon a few times – the equivalent of walking from your house to your mailbox. Getting to Mars and back is a massive challenge. We have no framework for getting to another star, much less returning.
Unless physics is entirely different than we think it is, no FTL travel is possible and the only extraterrestrials we could meet would have been traveling pretty much out of touch with their home planet for generations. A species that insisted on exponential growth would be forced to such expedients, and eventually take over the galaxy, but our experience on Earth suggests that no species can sustain such growth. It’s not a choice, it’s inevitable. Where would the resources for such growth come from on those long interstellar flights?
Have any of the posters here considered human aggression as a factor in limiting growth? As scarcity increases, so does violent competition, and cleverness is not often enough or fast enough to forestall this. I think fresh water, not energy, may be the limiting factor in many areas of the world. Especially since the two come into conflict at times (see fracking). And if we don’t stop putting hormone-disrupting pollutants into our water supplies, we may very quickly reach a point where we cannot effectively reproduce!
Water is as much an essential to every human activity as energy is.
I agree that it is definitely a political problem, but there are also other factors. Any interest-based money system DEMANDS growth, otherwise it collapses. For instance, all money is debt and it is loaned into existence with interest. The money to pay back the loan is out there circulating in the economy, but the interest portion is not there. It doesn’t exist. To hide this pyramid scheme, more people must be added to the base of the pyramid and assume more debt. Another way is for some small percentage to go bankrupt and free up some of the money back into society. In other words, an interest-based economy forces competition.
It isn’t that we want growth just for the heck of it or that some mystery people planted the idea and it took off as a new paradigm. It is an interest-based pyramid scheme that must grow or die. And, of course, infinite growth on a finite planet is impossible. There is a 98% correlation between gdp growth and fossil fuel use. People need to stop playing these mind games and trying to separate the two. It is just a form of “bartering”, one of the phases of grief.
Interesting analysis! Would it be possible to make a dual argument, in terms of credit instead of debt, just to verify that we get the same conclusion? Or does that even make sense? Your “money pyramid” view of Capitalist economics makes intuitive sense to me. Once I’m convinced that it’s correct, I will be happy to spread it like a virus.
“Any interest-based money system DEMANDS growth, otherwise it collapses. For instance, all money is debt and it is loaned into existence with interest. The money to pay back the loan is out there circulating in the economy, but the interest portion is not there. It doesn’t exist.”
This is wrong, in my opinion. An interest-based money system does not demand any growth whatsoever, and is not at risk of collapse from interest.
One common error here is to assume wrongly that _all_ income is devoted to debt servicing. If I loan $100 to Alice, to be repaid in 1 year with 10% interest, does she need a 10% raise in her income to repay the loan in order to avoid bankruptcy?
Take pre-modern societies as an example. Almost all pre-modern societies (like Rome and others) had interest-bearing loans with very high rates of interest (10%+ per year) despite 0% economic growth. Yet none of them collapsed from interest (although Rome eventually collapsed, probably from communicable disease and soil degredation over 500 years).
Bear in mind that the Fed and banks can loan out money at _any_ interest rate, even 0.00001%, if there is less demand for it.
Why do you say economic growth was absent in pre-modern societies?
Slower, maybe, but if the population was growing than so too was the economy.
“Why do you say economic growth was absent in pre-modern societies?”
If you look at estimates of the total economic output of the pre-modern world, it appears that it took more than 2000 years for the world economy to double. Of course that figure is a guess, but it implies a yearly average growth rate of less than 0.05%.
Interest rates in ancient times were 10% by custom.
This exchange while entertaining, is not surprising to me. I believe the anonymous economist shares the same ideas and beliefs as most of the general population.
Unfortunately most people mistakenly believe a few common things about energy and economy:
1. Energy is virtually limitless (you will get comments about solar or nuclear energy)
2. Economic growth/job creation/GDP is virtually limitless (comments about how far the US or other countries have come in the last 100 years)
3. Technology can solve the problem when the limits are reached (here they normally parrot how far computer/electronics have come in the past 20-30 years or increased mpg)
I think steady-state scare most people because of one thing: JOBS
Every politician tries to say they are going to create new jobs. I always want to ask them: Create jobs doing what exactly?
Every technological innovation means less people are needed to make the same amount of product. Look no farther than farming where a single farmer and a large tractor can plant/grow/harvest hundreds if not thousands of acres producing food for thousands/tens of thousands. Or watch the show “How Its Made” and watch how many of the processes are completely automated with only a few people around for quality control or to fix the machines.
That is why people are scared of no-growth. No-growth means 0/few jobs created. And they should be scared of that fact, especially with the modern “expectation” of a 2 person income household at 40 hours a week (not that I necessarily agree with that, but most people expect 2 earners/40+ hours a week).
Reminds me of a book I read a few years ago: “The End of Work” by Jeremy Rifkin.
Rifkin’s thesis was in no way predicated on an end to economic growth, either. He postulated that advancements in technology alone would render such a large percentage of the population redundant that we’d have to rewire what our society thinks about ‘work’.
Most of these labour-saving devices take up quite a lot of energy, however. Giant tractors consume quite a lot of diesel fuel, and a good number of peak-oil theorists think we should or will be going back to a much lower agricultural productivity, in terms of man hours. Or, in other words, a much larger percentage of the population working on the land; some call for 30% of the population to be involved in farming.
No growth in fact requires the population to shrink one way or the other. Either we choose to have fewer children and train them better for the more technological jobs that will still exist, or the jobless underclass will A: starve, B: attack the upper class and destroy quite a lot of the infrastructure in the process. Current economic policy seems geared to letting A happen and keeping it out of sight of the privileged.
It make me think about virtual economy like world of warcraft…
Virtual growth is real, because people feel better with the more that is created. even if it is simply a new flashy sword.
another mistake is something about game change.
in 19th century people imagined that cities will be under few meters of horse shit, and that ther will be no room for grass, or horses…
then came oil.
today people believe in peak oil…
then came shales, and why not LENR.
you can also have an idea about moore law, which is doomed for peak-oil next 5 years since I know what is a planar transistor (micrometer seems unreachable).
first need cause progress, but with processors and other tricky sad laws (that disk channel will be more and more unsufficient compared to disk capacity, same for RAM and CPU bus), i’ve learned that if if cannot progress front way, human find a way to progress sideway…
Oil crisis in Europe, make our cars 5 times more efficient than US, reaching with 80% taxes, the same cost per km. processors today have many cores, and HPC programs many threads…
the stupidity of many Malthusians planners, or similar fear salesmen, is to imagine that we won’t adapt and change, like we already do all the time.
Emerging countries cities moved more quickly than the sea level rise, and comfort/safety regulation will put the building down more quickly than floods.
It is the same with demographic transition, that is not a stall as we imagine, but a change in the kind of investment in next generation, from quantity to quality.
the big error of peak-oilers and ungrowthers, is that they imagine that we have to anticipate and restrict before the oeak, instead of waiting the moment it happens, and use the technology of the moment. It looks immoral, but my engineer experiment is that it is a mistake to plan too much in the future, because the future will be different, and losing cash today for an expensive solution, that will be useless when it happen, is a engineer typical error of OverDesign./..
I admit, I’ve been guilty of painful overdesign.
the bes is to accumulate knowledge, be careful at medium term, and never invest in long term it it does not payback soon…
long term investment (like solar industry, wind industry) will probably go to the bin, if you do them before they are needed.
a game changer like LENR will do, will kill all that nice over-planned solution.
instead, make research, have fun with technology, go to the moon, the abyss, Mars, play with mathematics, or transmutations, and one day, you will have the good tool in the toolbox.
You will note that the article isn’t about peak oil and that the thermodynamic limits will also apply to cold fusion (LENR) if it becomes a net energy producer. If even applies to anti matter/matter reactions. It doesn’t even require waste heat on the generation side: all energy use eventually results in heat generation.
While we live on earth our energy use is limited by heat and that will limit our traditional economic growth. This constraint will not come into play for a while but it is real.
Once you are out in space using antimatter/matter reactions (the most efficient form of generation possible) how many millenia of exponential energy growth until we are regularly annihilating entire solar systems to satisfy those demands?
We live in an enormous but unfortunately finite Universe.
simply when it is not practical we will stop using energy to grow. We will use something else.
look how todays laptop heat less.
the error of peak-oiler, Malthusians, … is not that the growth limit they pretend is false (it is long than they hope, but it will happens), but the fact that it is painful.
the second error is to try to panic before the problem is short-range. because if you wait to be near, you will have more capacity to manage the change.
all that looks to me like theological angel discussion.
I see small version of that pathology in engineering, where people try to anticipate far catastrophe, while in fact the usual change in need, user acceptance, technology, will kill their design before it is challenged by limits.
of course, you need to address mid-term limits, but for long term limits, accept that you have no idea of the future world at that time, and wait to face the new world with new tools.
That’s rather interesting… because in my engineering experience when there is a possibility of a problem ahead, to do nothing is a guaranteed route to failure.
This entire situation takes the form of a control systems problem. Historical data puts the system in an under-damped condition. The question is how do we further dampen or even critically damp the system to avoid a colossal overshoot, leading to a down-turn resulting in famine, unrest, loss of human life, and loss of human knowledge.
Maybe there is something weird going on with the unspecified time scale here? If one was talking about life 1000+ years from now, I don’t find the idea of individuals living virtually, in machines and without bodies quite as ludicrous as the idea at first might seem. Also expansion into nearby space seems a somewhat reasonable possibility on that type of timescale. On the other hand, if one was talking about life 200 years from now, I do not find the idea of traditional innovations driving an increase in quality of life very hard to imagine. There will surely be plenty of stable energy opportunities left to seize, such as inventing new drugs, recreational offers or better ways to organize productive behavior.
Further, your response to his dessert example is not all that strong, is it? Few goods are of the type that everybody value it equally. That does not make those goods non-goods. A new medical treatment will mostly be valued by whoever needs it, but it still might contribute to (the problematic concept of) average quality of life in a society. Same goes with the cool looking dessert.
Finally, that book of yours seem to be involved in some sort of strawman argumentation. What is meant by narrow self-interest? Is that the sort of self-interest that creates cooperation in repeated games? Or the animal spirits mentioned by Keynes? Or the bounded rationality of Simon? Or the loss aversion of Kahneman? And which economists think “the market” (whatever that is in each case) can always efficiently allocate all goods? What about the now-a-days fairly mainstream new institutional economics? And what about the well-established concepts of externalities, opportunistic behavior and public goods? I suppose I must confess I also believe supply and demand do tend to balance, in terms of finding a price where the market clears, but very few economists would claim efficient outcomes for all cases (c.f. monopolies).
Though the book might be somewhat right about the overconfident belief in substitutes and the poor respect for the system conditions for a sustainable society among the economics profession (one way, that I happen to like, to interpret the economic implications of some parts of the physical sciences, including thermodynamics).
Perhaps I should mention that I am not an economist, but an engineer by training. But I do respect the social sciences in general, and often tire of the contempt for the social sciences often voiced by physicists. The phenomena are not easily modeled, or models similar to those in the physical sciences would surely have been developed by someone, including physicists, by now. It’s not like there wouldn’t be plenty of cred to gain for those who did.
My above comments aside, I found your dialogue excellent, witty and most entertaining! And thanks for a good blog in general. 🙂
My main point in the dessert argument is that such fancification will have limited appeal. The key word is limited. Such things can therefore not contribute to unlimited growth, in the sense that they will never come to dominate the economy, leaving the energy-heavy activities in the dust.
This statement, I think, is certainly wrong. Once you and those you love are fed, clothed and sheltered from harm and disease (something that seems doable even on our current energy budget) what else is there to life or economic activity other than endless variations on fancy desserts (arts, pursuit of learning or status, social activities)?
We are already living in an age where a great many (most?) people are happily employed making these fancy desserts for each other, while the material bases for our existence are cheaply cranked out by machines.
The thing is that the eternal improvement of “dessert” is just a metaphor; in reality it of course encompasses all goods produced. Heck, it even includes goods we haven’t invented yet.
We also live in an age where productivity growth is a lot lower than it was in the middle of the 20th century. Fancy dessert economic activity continuing is not the same as fancy dessert *growing*.
This discussion is very much in line with the insights of Arne Naess and George Sessions, who argued that we need to increase our quality of life (having experiences of inherent worth) while decreasing our standard of living (consuming physically limited things). It is nice to see the convergence of ideas here.
Enjoying the presentation of fancy desserts is right in line with Naess’s idea of higher quality of life, as well as appreciating art more generally, creating music, community building, building relationships with each other, experiencing the joy of knowledge, and other activities we find to have value.
The key, which is demonstrated so eloquently here, is that out of physical limitations, we need to increase the quality of our subjective experience of life without also increasing energy use, the accumulation of stuff, and the destruction of the physical places in which we live.
He added that we need to make the switch before destroying physical things of inherent worth, such as wilderness areas, non-human species, and the functioning of ecosystems that support our own lives.
(One irony is that for many people in developed nations today, higher standards of living might even be correlated with a lower quality of life, as people work long hours in stressful jobs that are not personally fulfilling.)
“Fancification” of just desserts, sounds like a new take on “Let them eat cake!”
We are already living the asymptote – our democratic societies are suffering from the impact “something left to loose”. One can argue that mankind’s “progression” – not betterment or progress, necessarily – was fueled by mankind’s misery. Those with nothing left to loose and their offspring dying provided the bodies – alive and dying – for the ambitions of others. There is no revolution as long as everybody has bread, a TV, and a game console. The cake is a lie – most of us are already ruled by diminishing returns, as well as artificial – virtual – pleasures that do not quite live up to the simple pleasures we evolved for.
Worse: There as a recent comment by Hansen comparing climate change to slavery, as in – economically it will make sense much longer than it can be tolerated. Peak Economics is not about how much longer we can sustain the illusion of limitless growth, it is about how urgently we have to drop it, even if the con could go on at no cost to the present.
Here’s the Hansen reference:
The article quotes from
“The Economics of Slavery in the Ante Bellum South,” published in the Journal of Political Economy in 1958.
Expansion into space is irrelevant, in a sense. You’d be expanding the economy with more population elsewhere, but not changing conditions on Earth, which are limited by heat dissipation. (Unless we really do actively cool off the planet.)
And the expansion has its own limits, if higher ones further off. But not far off at all on a long timescale.
I think you are likely right about expansion into space being irrelevant in the long term. (Though in the slightly shorter term, I suppose we could move some people off-planet, thus allowing room for growth on Earth.)
Yeah, but how much energy does it take to move someone off planet? The energy return on energy invested just isn’t there. In other words, it isn’t even worth trying.
Dear professor Murphy,
Being a physicist myself, of course, your arguments resonate much better with your perspective and arguments (yet, I had not seen them as comprehensively presented anywhere else).
Since, I am working in the financial industry now, there is one thing which I find worth adding about inflation (or how the government “measures” inflation and therefore how real growth is measured).
We look at the price of a representative basket of goods and determine what it costs. First, there are mayor challenges of what is representative. But more importantly, adjustments are made so that, e.g., the flat screen TV has not become more expensive but is an improvement to the old fashioned cathode-ray tube TV or the electric windows in your car are improvements even though it is almost impossible to buy one without and all those gadgets make it incredibly heavy and (fuel)-inefficient and much more likely to break down.
This means that much of the “real” growth (calculated using official CPI numbers) in the past actually is the kind of growth your economist is envisioning. If this is wrong or right quickly turns into a philosophical discussion.
I am convinced that our brain is very flexible and adapts to new situations very quickly that the fun and satisfaction we can have is roughly constant (no matter how much energy or dollars we have at our disposal at least at the level most of us enjoy in the developed world). For example, during my student years the satisfaction per dollar (and also per unit energy) was much bigger that it is now. Back then a bunch of friends meet at some persons home cooking and/or bringing some beer and vine from the supermarket at a fraction of the cost in dollar and energy compared to flying to some island over the weekend, staying in a fancy hotel and eating out at fancy restaurants. But I cannot claim that it is more fun or more satisfying …
Sounds similar to economics discussions I’ve had. They mostly just fall back to the idea that we’ve made huge leaps in the last 2,000 years, and therefore we will make huge leaps going forward – “There is no limit to the human mind!” seems to be the mantra. They also seem to be convinced that there are other sources of energy yet to be discovered – never mind the fact that these people don’t understand that oil is just a manifestation of solar power.
But yes, if you define growth as something other than GDP and bringing goods to market, maybe you can make an argument that we have a lot of “growth” potential. I agree with the other comments, growth is the only politically tenable policy – for now.
Fusion; solar and fossil are both transmitted fusion, to keep with the physicist theme (it is just that the fusion core is about 93 million miles away…)
“Sounds similar to economics discussions I’ve had. ‘There is no limit to the human mind!’ seems to be the mantra…. never mind the fact that these people don’t understand that oil is just a manifestation of solar power.”
Steve, do you REALLY have discussions with economists where you hear things like that?
The problem is, the statement “there is no limit to the human mind!” is from Julian Simon, who I had never heard of as an economics student until I read some energy decline forums.
Also, I seriously doubt that economists don’t know where oil comes from.
I wasn’t referring to any specific person regarding “no limit to the human mind”, its a mindset that is displayed often whenever the idea of peak oil is presented, I’ve never heard of Julian Simon.
I didn’t say I was having conversations with “economists”, more like economic discussions with people who have business degrees and no sense of physics beyond what they picked up in middle school.
If economists understood where oil comes from, and the second law of thermodynamics, the “growth” mantra wouldn’t even exist because it can be falsified with simple mathematics.
If you are interested in a critique of economic theory from the ground up, you may want to take a look at “Debunking Economics” by Steve Keen. In it, he goes to the first principles and assumptions underpinning neo-classical economics (the most common variant around today), and shows how they are flawed. (He was also one of the few economists who predicted economic meltdown in print prior to it happening.)
IMO Steve Keen is kind of a crank. He makes major, elementary logical errors which go unrefuted because nobody pays any attention to him.
“(He was also one of the few economists who predicted economic meltdown in print prior to it happening.)”
He always predicts economic meltdown. Even a broken clock is right twice per day.
The thing about economies is that they have bubbles and panics on occasion, and have done so periodically for centuries. Thus, if you want to “prove” some theory, all you need to do, is have it predict a meltdown in the future. Or, if you wish to be seen as a guru, just predict economic meltdown. Then just keep predicting meltdown; eventually you will be correct.
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I haven’t done it in a while, but arguably the Platonic cheap dessert is to mix some sugar into some butter, with a bit of salt, and eat.
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As an economics PhD student, I have to say that it seems to me that both of you were a bit confused about “growth”; I’m a bit surprised he didn’t present the arguments I’m about to make. (Or maybe he did, and as others have speculated, was unable to convey them in an understandable fashion.)
If there are technical terms that seem unclear, I would ask you to check them on Wikipedia, as defining them properly would take more effort on my part than I find reasonable. In any case:
1. Economists (or the economic science) don’t, fundamentally, really care about GDP growth. The thing is that our line of work is in the end about happiness and welfare, not GDP, which is just a proxy. This is something of a “first principles” issue, and when the practical work has for a variety of reasons taken lots of steps away from the starting point, it’s easy to miss the forest for the trees, even when you deal with macro and not something like directed search or whatever. However, I think that at the core of this discussion is a fundamental misunderstanding of GDP. I’ll come back to this point later.
2. Happiness is measured by subjective “utility”. As we assume that utility is monotonic and increasing in consumption and that GDP is a reasonable proxy for consumption, we look at GDP growth as if it were equivalent with utility growth. It’s somewhat important to understand that in many models the utility function has other arguments too. For example, it is often assumed that utility is decreasing in the amount of hours worked.
3. Can utility grow indefinitely even if we hold all arguments of the production function constant? Perhaps. The most crucial limits for utility growth until the heat death of the universe are the limits of innovation, as you two seemed to agree on, when you came to the conclusion of the existence of some kind of steady state.
Let me first make some things a bit more explicit:
i. We assume a certain form of the utility function; for intertemporal comparisons to make any sense, it has to be constant over time.
ii. There is a constant set of factors of production available at each point in time. This may or may not be a rather unreasonable assumption. For example, many things are simply not renewable. On the other hand, as far as I can tell, energy is not among them, though it should be noted that the amount of renewable energy available is probably not that high.
iii. As a consequence of factor constancy, everything produced is “spent” either in consumption or production – there is no accumulation. Alternatively it could be assumed that “production” is actually redesigning of what already exists.
Now, if you also assume infinite innovation you also get infinite utility growth. You don’t even need improvements in “productivity” in the sense of more output per unit of input to get this result, although that will yield the same. This is what the dessert argument was all about: if the dessert of tomorrow is better than the dessert of today, the agent is unambiguously better off.
Or think about this example: you have a house that doesn’t depreciate and a constant daily supply of energy. Furthermore, you can rebuild the house in a new configuration using the energy supply without losing anything in the process. Now, whenever you can think of a new, better way of building the house, you’re better off than you were before. Or in other words, the subjective value of the house increases each time.
The key point is that you don’t necessarily need more “output” for utility to grow – it suffices that what is produced in period t+1 generates more utility when consumed than that what is produced in period t.
4. As a consequence of infinite utility growth, you actually get infinite GDP growth. Why? Because GDP is the market value of all final goods and services produced in some period, and the market value of goods is at the end determined by subjective utility of consuming those goods for some constant utility function. If the dessert of tomorrow is better than the dessert of today, it also has greater value and thus the GDP of tomorrow is greater. It is here that I think that the confusion about the nature of GDP arose. It seems to me that when you made the statement
“Under a model in which GDP is fixed—under conditions of stable energy, stable population, steady-state economy: if we accumulate knowledge, improve the quality of life, and thus create an unambiguously more desirable world within which to live, doesn’t this constitute a form of economic growth?”
you had something like this in mind. The thing is that if you assume the things you do, it is exactly and precisely economic growth by definition. GDP growth is not about producing more cars and plasma TVs, but about producing more value.
5. All of the above is almost certainly meaningless for our current plight. It is certain that recent GDP growth (even per capita) has been based on increased use of non-renewable factors of production, energy in particular, and to a lesser extent on innovation. Furthermore, it is rather likely that the rate of innovation in the steady state is extremely low when compared to what we’ve seen in the last century and almost certain that infinite innovation is not possible.
6. I don’t quite understand why this would require a drastic redistribution as speculated by Max. Quite the opposite: assuming intellectual property, the innovators should earn higher wages than the non-innovators.
7. As to why the professor in question was unable to communicate these ideas: the field of economics is much, much more diverse than most people seem to understand. If you’ve spent the last 20 years on thinking about the existence of Nash equilibria, these issues may seem quite distant and hard to explain, even if you do understand them clearly. Also, I think its rather unfair to think that the (probably slightly drunken) arguments of one professor are representative of modern economic thought.
8. Final point on the nature of GDP: it measures also things that do not increase welfare. Thus GDP growth does not imply utility growth.
Mr Turunan has totally answered this issue. Game,set match.
Economic growth is really about increasing utility. It is about solving more problems better tomorrow than today. This is not fundamentally an issue of how much energy, manpower or material is output.
Utility is about value, and there is no law of conservation of value. There is no law that computer games a century from now cannot be a hundred times more energy efficient and a thousand times more enjoyable.
Economic growth can increase indefinitely despite the laws of physics.
What does it mean to be a hundred times more energy efficient? Think about that.
Do you think utility can increase at 2% per year forever?
I mean simply that it is possible for something to run on one one hundredth of the energy, but this diverts us from the real issue.
In theory there is no reason utility cannot increase forever. Why are you assuming it can’t?
The way to look at it is that economics is about solving problems for consumers. Economic gain is about solving more problems better, and I am totally oblivious to any physical limits to this. The same atoms used to make cars and electronics can be used to make better cars and better electronics and other things never imagined.
Consider how much time, energy and work someone living a hundred years ago in Gila Bend, Arizona spent enjoying a top notch performance of Bethoven’s 4th Symphony. It would have taken weeks of time, massive travel. weeks of labor, and a full symphony of musicians and a hall.
Today he can rent the CD from the library. The efficiency an utility gains can’t be infinite, but they might as well be.
Our world is becoming increasingly virtual, and we must remember virtual heaven does not take any more energy than virtual hell.
Sure, utility improvements can improve indefinitely but with each iteration diminishing returns are experienced. Imagination is unlimited, but the affect it has on the real world is limited.
“it is possible for something to run on one one hundredth of the energy”
That’s the whole point. It ISN’T physically possible for the vast majority of things in our economies to run on a hundredth of the energy. Gasoline powered cars could barely DOUBLE their efficiency before totally maxing out the laws of physics, and there is absolutely nothing that can improve upon that. Burning fuels to produce electricity could maybe see a 5% gain, period (see Carnot’s theorem). It will always take the same amount of energy to hammer a nail into a 2X4, to put shingles on your roof (actually, many activities like this will DECREASE in efficiency because of a future scarcity of high quality resources available to put on your roof).
The only thing that could conceivably see a 100 fold increase in energy efficiency is computational power (and even this seems like a stretch) – i.e. the virtual economy that we’re being told is going to replace our real economy when we run out of food and heating and lights and transportation…
So what will future advancements in I.T. be able to achieve that it can’t right now? An iPhone does pretty much everything you could imagine such a device COULD do. It’s almost TOO small! Play holographic videos? So what? How does this improve peoples’ lives or solve the PHYSICAL shortages in the REAL economy that everyone depends on? No one is going to care about holographic videos when they can’t eat or if they are stuck in the middle of a resource war.
When backed into a corner by the undeniable limits to continued physical growth of our REAL economies, economists then rely on this “virtual” economy to take over their utility functions. Well this seems a pretty clear admission to me that economics is quickly losing its relevance towards addressing problems of genuine scarcity, which I believe is what economics is supposed to be all about… What’s it good for then?
Should economists now be shuffled off into their own private clubs in dusty corners of universities where they can continue fantasizing about Star Trek futures and playing video games, with the burden of the management of our real physical economies that “produce” food and energy necessary for our survival put squarely in the competent hands of scientists and engineers?
I think an important point here is that we don’t know what future generations will value. “computer games” and other such virtual goods mentioned are only used because they are examples that we can think of today.
I’m sure people 100 years ago couldn’t have guessed some of the things we value today. Heck, wasn’t it thought that the telephone would be primarily used for listening to music remotely? Even 20 years ago, who would have ever thought people would pay for virtual goods in online games.
As somebody else succinctly noted, after our basic needs are met, everything else is just a fancy dessert. Think about your own consumption patterns and behavior. You meet your basic needs and then what… isn’t it everything you do a combination of socializing/intellectual development/leisure? If anything we are accelerating down this path. Do any of these activities necessitate significant amounts of energy?
I don’t think anyone is saying we will see economic growth ad infinitum, but it is probably foolish to assume that we will meet any real limit in the next few hundred years. Perhaps ideas become the currency of the future, with menial work being done by robots to meet our basic needs. In that situation, is there any real limit to growth?
Mark and Richard,
Mark you are totally abusing the argument. Tom correctly points out that we cannot continue to increase resource use indefinitely. Nobody is arguing against this.
You are shifting it to an argument that there are not enough resources to meet current world population’s needs for food, shelter, etc. this is not true and is easily refuted.
Once seven billion people have basic food and energy needs, their interests shift to other problems, such as entertainment, knowledge and flourishing. These are what I spend my disposable income on.
Those arguing with the economists are exhibiting their lack of imagination. Of course you can’t imagine a better iPhone. Luckily, others can.
I don’t think we should dismiss the toll we are having on fisheries, forest loss, soil degradation, saltification, desertification, climate change, and so on and so on. We have not demonstrated that we can even maintain this pace indefinitely. The trial time has been too short, and very far from any equilibrium state (given rampant growth). It’s dangerous to assume we’ve got this under control. See my post on sustainability for more thoughts on this. Look for the gerbil.
No, it probably can’t, but that’s not the point. The question was: can GDP (or utility) grow forever. You’re moving the goal posts when you require that 2% rate.
There is a physical limit on utiity. It’s called time. Time to use and enjoy the various delights that you all are suggesting can be created. And that’s one limit that nobody is going to find a way around, IMHO.
In other words: “keep your physics out of my economics.”
Or perhaps: “It messes up my abstractions”
“Economic growth can increase indefinitely despite the laws of physics.”
I find myself astonished.
Reality check: the dominant institutions driven by economic policy – presumably informed by economic models and theory – have failed us spectacularly. This is not really a surprise. The incentive structures of those institutions are not set up to promote the general welfare, “happiness”, or made-up stand-ins like “utility”. Example: The Fed and its “dual mandate”. Happiness != Jobs. Full employment and no wage inflation are mutually exclusive, hence “tractable solutions” collapse around the latter.
Economics might be about “happiness and welfare” much the same way physics is about the innate Faustian urge in all of us to discern what holds the world together. The reality is more complex than that, and less pretty.
Anybody can define some kind of “utility” function and – often with great happiness – set about designing mathematical models that can be reviewed for maximization. Unlike the harmonic oscillator, however, a lot of “micro” does not really translate well into reality. And, whatever one thinks of Keen, his observation – empirically, economics as it exists today, has done tremendous damage around the globe – is spot on. Economics has that much in common with communism – its merits are claimed within an ideal that does not withstand reality.
I am not a fan of the derogatory label – whatever their limitations, Malthus, Smith et.al. were not more fallible, or detestable, than most of us – but by means of illustrating the original and persisting incentives of the “dismal science”, a quote from Patrick Colquhoun:
“Poverty is that state and condition in society where the individual has no surplus labour in store, or, in other words, no property or means of subsistence but what is derived from the constant exercise of industry in the various occupations of life. Poverty is therefore a most necessary and indispensable ingredient in society, without which nations and communities could not exist in a state of civilization. It is the lot of man. It is the source of wealth, since without poverty, there could be no labour; there could be no riches, no refinement, no comfort, and no benefit to those who may be possessed of wealth.”
Hence, natural level of unemployment and misery. Hence, a global economy dependent on population growth to supply discount labor. It is nice that the mathematical abstractions of economics do not outright prohibit alternatives, but so far, those abstractions have been instrumental in maintaining misery and inequality. Happiness has not been doing well.
If poverty is the engine of free enterprise and progress is impossible, then why have incomes risen from a dollar or two a day per person to levels twenty times or higher in free market economies? Why are we able to support 5 times as many people with better health, longer lives, more freedom, more literacy and less violence than ever before?
You should quit reading catastrophists and brush up on history. Our ancestors lived half our life span in constant toil and disease, and were lucky to actually own a pot to pee in ( which they dumped in the street).
Fossil fuels helped. A lot. One time inheritance. This isn’t proof that we can’t get around the problem, but it’s a highly relevant observation.
His argument wasn’t on fossil fuels, it was on misery and poverty being the engine of economic progress. There was absolutely nothing relevant or accurate in the observation.
Note on lifespan: the average life expectancy that historians are so fond of talking about is a statistical artifact. It is mostly determined by early death (infant and childhood mortality loom large, as does infectious disease) but does not show how long the old people lived to be. Solomon wrote “the years of our lives are threescore and ten, and if by reason of strength they be fourscore…” around 1000 BC. His figures haven’t changed very much, maybe a decade. In developed countries, more children live to grow old. That’s been our primary improvement in lifespan.
“It is mostly determined by early death (infant and childhood mortality loom large, as does infectious disease) but does not show how long the old people lived to be.”
I dispute this. I grant that the _maximum_ human lifespan has not changed. However the changes in average human lifespan are not just because of changes in infant mortality.
Two of my grandparents got polio and a third got TB, all in adulthood. This was not uncommon. In their time, if you got pneumonia when you were older (65+), you usually died. My grandparents referred to pneumonia as “the old man’s friend”.
I grant that estimates of life expectancy from pre-modern times are skewed downwards, because of the high infant and childhood mortality then. Nevertheless, life expectancy for adults (starting at age 18) was also much lower.
I enjoy the “dismal science” tag. Here’s a bit of a history lesson about where it came from:
“It was economists’ prominence in the abolition movement that led Thomas Carlyle, in an 1849 essay, to defend slavery and ridicule economists as “rueful” thinkers, each of whom “finds the secret of this universe in ‘supply and demand,’ and reduces the duty of human governors to that of letting men alone.” Economists’ advocacy of freedom, even for slaves, so incensed Carlyle that he gave it, in the same essay, a nickname that — considering its provenance — economists should forever wear proudly: the “dismal science.”
Are you really dismissing the untimely deaths of billions of children as statistical artifacts?
Are you really suggesting that there is a maximum utility per hour limit built in to consciousness? If so, I will concede the argument. Once economic growth leads to a world where nobody can even imagine anything better, progress will indeed stop.
Regarding gains in efficiency, I think you need to allow for a little more than a factor of two or three here. While I don’t expect the efficiency gains in computers to continue apace or indefinitely, this entry indicates that they have been incredible in the past:
Using hard drive technology from the 1950s, the storage cost of a 16G IPod Nano would be comparable to the GDP of Canada.
There will be limits to shrinking storage technology, eventually you’ll be using individual atoms to store your bits – and then what? Maybe it will be cheaper and easier to produce, but the innovation will stagnate eventually. Re-arranging atoms into something useful will never cost *zero* energy. There is a reason the Concorde is not flying, and there will never be another supersonic commercial plane – we will never “innovate” our way around friction.
We live on a finite planet, with a finite number of elements, and there will be a finite way of arranging those atoms – the number is HUGE, but it is still finite.
What you write is certainly true, and I acknowledge as much in my
original post. But this does lead to an interesting tack on the
idea of growing utility.
On a millennial scale, one might consider the “value” of a
civilization to be the sum of all stored and retrievable
knowledge. It’s clear that there are physical limits to the
amount of knowledge we can store, but much like Turunen’s house
and the economists dessert, we are free to improve on the quality
of what is stored, and discard the least valuable.
If we model all the arrangeable atoms as a list, the problem
becomes one of finding increasingly useful permutations of atoms.
The search space for this domain is an amazingly. Given that
there are 10^50 atoms on the earth, we might use only 10^40 for
storage. With that many atoms, there are something like
configurations of human knowledge. That’s an intractable number
of permutations to consider, even on a universal scale.
So while we may live on a finite world, this “stored knowledge
metric” indicates that there will almost certainly be room to
improve for billions and billions of years. That said, it seems
more likely that the improvement will be logistic in nature than
see my comment below on information. any quantities of human knowledge comparable to todays need massive amounts of energy to maintain and even more to improve or increase.
Well “depreciate” got mentioned once. How much do Americans lose on the depreciation of automobiles every year? How about the entire world. Economists don’t mention NET Domestic Product though it gets half a page in Econ 101.
They are not even measuring growth accurately. They are measuring Economic Activity. Keep the dummies running on the treadmill.
He didn’t say there was only a factor for 2 or 3 everywhere. Computation has seen huge improvements, as have lighting. But lighting is running out of room. Computation is running out of room for serial speed, though it still has a lot of room in energy efficiency; the human brain might be a 100 million times more efficient than a desktop computer.
But as long as we’re fleshy human beings, that’s only a small part of the economy. Efficiency on macro stuff like engines and power plants is within 2-3 of physical ideal. Housing and transportation might have more room esp. for Americans, not so much in efficient cars as in switching to more efficient modes of transport. But once you’re living in your zero-energy Passivhaus and taking light rail everywhere, then what?
There’s still room for more efficient use of the engine. That’s not endless, but it’s better than 3x.
Replacing solo autos with light rail is one step; replacing light rail with something else is another. The limit, I assume, is something like a velo-mobile, not necessarily powered by a human, but we know that they CAN be powered by a human-sized engine and attain the equivalent of 600pmpg or better, and that is with current technology.
It’s a little unfair to blindside someone like this when you’ve spent quite a lot of time thinking about this and he hasn’t. Besides, this is really outside the domain of economics- most economics is based on data from the last 100 years, and doesn’t try to extrapolate more than a few years into the future, so extrapolating 400 years into the future is ridiculous.
I did think the “virtual world” response was pretty clever. It raises a question though- even if such a world is possible and desirable, where would you go from there? If everyone has the ability to create their own perfect virtual world with no energy needed, it seems like growth would pretty much stop after that point.
Perhaps it was unfair. I never got the impression he wanted out of the conversation, though. We were both very much engaged. And maybe this is outside the domain of economics, but since our economic institutions are based on growth, it seems relevant that economists should understand factors that may represent fundamental limitations to this scheme.
Be careful about the “no energy needed” fallacy. Search for the supercomputer reference in the post.
I thought the “virtuality” of that “limitless” economy was telling. This is the economy version of the space cadets. Are economists cornucopians without the (claim to literacy regarding) technology? Underpants gnome economics? If I postulate a perpetual machine, or Moore’s Law over infinite durations, or utility as compound interest, then I can mathematically describe a perfect and utterly irrelevant world?
Human beings are limited in their ability to consume. There is only so much consumption – virtual or otherwise – you can squeeze into the day. Happiness does not compound indefinitely.
More of us then? Population growth is limited by resources, even if some contrivance of “utility” or “growth” is not. How about “virtual” human beings then? Transhuman at birth? At infinite clock cycles?
Physicists like to speculate about life in a universe suffering a heat death, with time slowing down in proportion to lack of resources. Economics appears to require such though experiments on timescales of a few decades?
In any case, human beings do experience diminishing returns, at astonishingly low levels – otherwise, current levels of inequality and injustice would not meet such pervasive acquiesence. Infinite growth is a mathematical artifact comparable to infinite recursion, and debating whether we can find a definition of growth that is “limitless” has about all the merits of a discussion of how much utility fits on the head of a pin.
So just to get this straight. The basic beliefs of economists in general are this.
*The human mind can overcome all problems
* We have yet to discover many forms of cheap energy
* The natural world doesn’t matter (only humans do)
* We will all be living in little tubes hooked into a super computer living perfect never ending lives
I think most of these economists missed their callings as pulp science fiction writers. The humorous thing about economists is none of them have the where with all to actually accomplish any technical advances. They simply believe in the myth of never ending scientific advancement. Which lets face it most scientists with their head screwed on don’t believe at all. There were many things done in the past that were way more efficient than what we have today. Our society currently favours rapidity over efficiency, the egyptians favoured stability and efficiency over rapidity (and they lasted a hell of a lot longer than this paradigm will)
Exponential growth is just a fad. It’s funny that this discussion took place around a dinner table, because that’s about the only place worth discussing such a poorly thought out theory for the advancement of human well being. A very good read though, thanks for the post
“So just to get this straight. The basic beliefs of economists in general are this.
*The human mind can overcome all problems
* We have yet to discover many forms of cheap energy
* The natural world doesn’t matter (only humans do)
* We will all be living in little tubes hooked into a super computer living perfect never ending lives”
No, no, no, and no! Economists do not think those things.
Do not get your information about what economists think by reading energy decline forums! Remember that the economist arguing with T Murphy did not claim THOSE things.
That is what is exactly you hear from the economists that parade around on TV.
“Oil prices are high. The Saudis will pump more and price will come down. It’s the LAW OF SUPPLY AND DEMAND!”
“China has a death grip on rare earth metals. No worries, the next Steve Jobs will create Ipads out of human excrement. Could you imagine an Ipad 50 years ago? No you can’t. And in 10 years you’ll be using Ipads made 100% out of soiled diapers.”
“Do we have a fresh water shortage problem? No we don’t. Because if the price of water gets high enough, entrepreneurs will bring new supply of fresh water online. High prices will fix EVERYTHING.”
To be fair, I doubt you actually heard the second thing on the air…
“China has a death grip on rare earth metals. No worries, the next Steve Jobs will create Ipads out of human excrement.”
I doubt the economist really said that. Probably the economist actually thinks that the economy will eventually adjust rationally and find the ideal solution. The reasons are difficult to explain in a soundbite.
Bear in mind that the economic position is not understood by very many people outside of the discipline. In fact the economic argument (or the reasons for it) is usually _misunderstood_. As a result, the economic position is “translated” into something which is more intuitive but is _fundamentally_ different.
Let me give an example of two claims of mine which are frequently mis-translated.
I claim that we can make all the devices necessary for modern civilization (including computers and power plants!) out of iron, carbon, silicon, aluminum, magnesium, calcium, nitrogen, and oxygen. I also claim that precisely these elements constitute about 80% of the Earth’s crust and atmosphere, so we have enough _materials_ to cover the entire terrestrial surface of the Earth in a miles-deep layer of buildings, glass, freeways, cars, computers, and plasticky crap. This is a matter of chemistry, not economics.
Furthermore, I claim that the economy will rationally adjust, and will use _all_ alternatives, in descending order of suitability, _including_ mining the garbage dumps for old iPads and buying older computer equipment for scrap; and it will do this at the appropriate times, _in advance_ of depletion if necessary, until there are _no_ alternatives. Since we have _vast_ alternatives (see claim #1) we will never just “run out of resources” to build stuff; the oceans apparently would boil _long_ beforehand.
The economy is like a big computer algorithm which is always searching _exhaustively_ through _all_ alternatives. It is not a static structure which was “built up” gradually over centuries and will collapse at the slightest change. The economy also _rationally adjusts_, eventually, even though people make mistakes.
This position is not even conceived by the energy decline crowd. They conceive of only two _possible_ opinions: 1) steady state with things fixed as they are; 2) continued exponential growth until collapse. As a result, they _translate_ everything they encounter into one of these two.
Thus when an economist says: “we are not running out of resources for iPads. We can make them out of this, then that, then that…” it is translated into “So you’re saying economics overrides the laws of chemistry and we can just run our cars on sand poured into the gas tank?” (I read this recently). But economists are _not_ saying that, nor are they saying that we can make iPads out of _anything._
“Do we have a fresh water shortage problem? No we don’t. Because if the price of water gets high enough, entrepreneurs will bring new supply of fresh water online. High prices will fix EVERYTHING.”
Ask yourself this question: is it physically possible to make freshwater out of saltwater? This is not a question of economics, but of chemistry and physics.
I already know the answer, because the Saudis and other middle-easterners already have massive desalination plants.
In fact, high prices did fix the fresh water shortage problem, at least in that case.
Are we reaching the limits of desalination? I suspect not.
Note that I’m NOT saying that fresh water is infinite or that we could make anything out of anything, in defiance of chemistry and physics. That is not what I’m saying at all!
We can make freshwater. It takes energy.
Happiness could come from decreased energy expenditure as envisioned in a social structure based on the efficient refining of raw resources into the final product (devoid of planned obsolescence as with today’s concept of “growth”) by machines rather than human labor.
Efficiency (or innovation) and clean energy can fill the gaps for most probably more than a doubling of actual population.
And the elimination of planned obsolescence (to keep people working) must surely account for yet another doubling of population.
I believe that carbon based fuels will heat up the planet fully 100 times faster than the decay heat from useful energy alone (but can’t remember where I got that idea).
We could keep the population at below 20 billion, use more energy (if non carbon) for water distillation, food production, etc, raise the global standard of living to just below western consumption… and heat the planet MUCH less!
With that, there should be plenty of room for economic growth. But “that” is not the the world we live in now, admittedly. I know there is hope within physical limits (due to innovation, efficiency and displacement of fossil fuels) but realize that today’s globalized “corporate frenzy” is not really brainstorming on clean energy solutions (let alone other serious issues).
I assume economic limits arise from lack of innovation, poor government (which do not restrict cheap products that steal jobs) and high priced liquid fuels (thus, a challenge to promote clean energy…again).
The major economic issue I worry about is the coming complete transformation over to a machine automated workforce (and a resulting socialist type form of self government?). I don’t (yet) like the idea of machines taking my job, however, there must be a way to robotically mass produce things that CAN create jobs (for the meantime)… like solar panels and whatever the best energy storage is.
This, then will raise the economic growth needed to overcome overpopulation within a single planet…
[comment shortened in keeping with discussion policy]
USA energy consumption has been declining per capita since the 1970s, and is down more than 51% per dollar of GDP since then. This is the pattern in all developed economies.
Project this for the entire world, and as the developing economies converge on advanced status total world energy consumption is expected to peak at about 4x today’s level in about 120 years, then decline forever after that.
Material consumption is falling even faster. By physical mass the size (“weight”) of the US economy has been declining since the late 1800s.
For instance, mineral consumption per capita in the USA 1965-2005 was down 40% while real GDP was up 125%. For detailed data on the most-consumed minerals see: http://www.scrivener.net/2009/04/save-earth.html
In the 250 years or so since the Industrial Revolution productivity in the leading economies has increased an impressively steady 2% per year. This has produced a per capita income increase of about 140-fold. Of course, that greatly underestimates the gains in welfare via accumulating wealth (computers, blogs, and internet porn!), life expectancy at birth increasing from 20 to near 80 (how much value does one put on a year of life?) and so on.
So if one wants to say “infinite growth is not possible”, that’s fine – but who cares? That’s not an issue to anyone in the economics world. Infinite is a silly word to apply to a very finite process, running over a historically *very short* time period such as a couple hundred years.
Finite growth in a finite period, say 200 years on current trends, to a world with vastly more welfare and wealth, with much less energy and material consumption, doesn’t seem like such a **bad** thing. Is the idea really shockingly disturbing to physicists?
Now if one wants to argue that the finite process of *declining* material and energy consumption that we’ve seen in the USA and other developed nations for several decades can’t continue indefinitely into a finite future, go ahead and argue it. But very powerful economic forces drive those declines. I’d say the declines in material and energy consumption are near certain to continue their present course. What would stop the forces that are driving them?
“I’d say the declines in material and energy consumption are near certain to continue their present course. What would stop the forces that are driving them?”
Death? Per capita material and energy consumption of zero is not healthy. We can argue whether and when we transition from the asymptote into a steady state, but that implies we both agree that Tom is right about steady state economics being the default condition of any long-term survival civilization, and that even economic growth measured in decreases of consumption of energy and material will come to an end.
Maybe there is an answer to Fermi’s question here – add to the Drake equation a new coefficient of percentage of civilizations that are able to transition to steady state economies?
Harri Turunen makes some good points above. But the point about utility has the implication that re-arrangement is just as good as new production. If, to take the example given, I reconfigure the house today, I gain in satisfaction. If I change it back tomorrow, I also gain in satisfaction. And if I change it back again the day after, I also gain (over one day, at least). But it would be odd to describe this as “growth”, still less as perpetual growth.
A second point is that markets (exchanges with prices – not just exchanges) require money. And money is a debt – a marker against a future good. If there is any interest at all, then growth in production is required to cover it. Zero growth in production equals zero interest, equals zero money (in other words, a social rather than a market economy – exchange without explicit price). Entirely possible – indeed the historical norm – but a wrenching change from the way we live now.
No, you misunderstood the house example. Obviously changing it back to a previous state is not beneficial, as it is less satisfying than the current one.
Obviously, you have not met my wife :).
One key problem of economics appears to be – according to you – that it should concern itself with happiness and welfare but somehow has consistently failed to do so. Another might be that, pace Nash, we are still arguing in absolutes, perfection of flawless minds with total information and precognition.
Sometimes you gotta move the damn couch to see whether it works… Welcome to the wasteland of The Real.
“And money is a debt – a marker against a future good. If there is any interest at all, then growth in production is required to cover it. Zero growth in production equals zero interest, equals zero money”
No, no, no!! This is the error which will never die!
Your claim is true only if the expected repayments exceed _total income_, not just if there is interest. Of course, if expected repayments exceed total income then the loan would never be made.
Debt payments are made from future _consumption_, not future _growth_.
Consider a small economy with two people–a lender (“John”) and a debtor (“Alice”). John loans Alice $300 at 10% for one year. Alice does _not_ get an expected $300/yr pay raise and must make do with her current $30,000/yr income. Is she _necessarily_ bankrupt?
Thank you, Harri Turunen, for this «comment» (actually, an essay or review). And thank you, Prof Murphy, for judiciously imposing (or not) your limitation on comment length.
“My point is that the stunning presentation of desserts will not have universal value to society.”
Economic growth is neither the growth of GDP, nor a sustained increase in universal value. It is also not growth in energy use. Cornering the energy market is something that can happen irrespective of how important it is the the economy, and is more of an issue with regulation and market structure.
We had Standard Oil, the Bell monopoly, and many many other examples of entities controlling essential parts of the economy – and in fact, many utilities currently operate without any competition at all, while providing vital services.
Without a lower bound on the proportion of the economy that energy can be, there’s no physical constraint on how large the real economy can become.
Energy utilities these days are usually regulated in the public interest. They’re not monopolies at liberty, but need regulator approval to raise rates.
“Physicist: Okay, so let’s be clear that we’re talking about the same thing. Energy today is roughly 10% of GDP. Let’s say we cap the physical amount available each year at some level, but allow GDP to keep growing.”
Energy was 14% of GDP in 1980, 10% in 1995, is 7% today. As it is steadily declining, what’s the point of capping it?
“Physicist: How far do you imagine this can go? Will energy get to 1% of GDP? 0.1%? Is there a limit?”
Well, it seems unlikely to fall below 0%. But why be greedy? As the cost of resources — food, clothing, housing, blog hosting, all the rest — declines, we all become steadily better off. Is it really a *problem* that we don’t expect them to decline all the way to *zero*?? With zero-cost resources our resource wealth would be infinite.
I mean, how greedy can we be? 🙂
“Physicist: But if energy became arbitrarily cheap, someone could buy all of it, and suddenly the activities that comprise the economy would grind to a halt.”
“Cheap” means supply is large relative to need and demand. “Arbitrarily cheap” means like air and seawater. Are you really afraid someone is going to buy all the air and seawater?
Or put it in real-life GDP% terms: Food production in the USA once counted for 70% of GDP — a heck of a lot more than energy! — just to meet domestic needs. Since then agricultural productivity gains have led to an explosion of food production, so now even exporting to *the whole world* food prices have plunged and agriculture accounts for all of 1.2% of GDP.
Are you afraid someone is going to buy all the food to bring the economy to a stop? Are we really worse off because good food has become so cheap and plentiful? As our hungry, often starving ancestors couldn’t ever have imagined?
C’mon, you can’t refute economics without knowing at least a little about supply and demand.
Now again, food prices probably can’t fall “forever” to truly zero, but why be so greedy as to think falling to only 1.2% (and below) of GDP is somehow “bad”? Some kind of limiting failure? It increases all our welfare immensely!
As it is with food, so it is with energy.
“Energy was 14% of GDP in 1980, 10% in 1995, is 7% today.”
Interesting, because in the 1970’s US oil production peaked, after which the country began importing it at increasing rates, exporting dollar debt in return. More recently, the US has been importing over half of its crude oil. And look at that — 7% is half of 14%!
Just wait until dollar debt is no longer accepted for international payments, then we may see a more realistic representation of energy as a % of GDP.
I think economists are in for a bit of a surprise…
One needn’t wait quite that long, just until most oil sales are no longer denominated in dollars. One should be very skeptical of general economic arguments based on US figures; the US has run a trade deficit every single year since 1976, an option open to no other country.
“Energy was 14% of GDP in 1980, 10% in 1995, is 7% today…. More recently, the US has been importing over half of its crude oil. And look at that — 7% is half of 14%!”
That is just a numerical coincidence.
Energy has been declining as a percentage of GDP because of increasingly efficient turbines and reduced labor requirements for coal mining.
I thought it was because an increasing fraction of GDP is being produced by financial wizardry with no connection to the physical world, and thus very low energy requirements.
T.M. nailed it. aka, the “financialization” of the economy. Or, in layman’s terms, a “ponzi scheme” built on orders of magnitude less underlying real value than is priced into the dollar. It has been enabled by the purchase of western debt by China, Japan, Saudi Arabia, and other “producers” like the Fed. It will end in the greatest financial collapse in history.
“Energy has been declining as a percentage of GDP because of increasingly efficient turbines”
Turbine efficiency isn’t increasing to any significant degree due to the 2nd law. Coal and nuclear are limited to 30-40%. We are designing a biomass plant right now and we expect around that efficiency. Natural gas is amazingly almost at the Carnot limit around 60 something %. There is practically zero opportunity for improving NG conversion efficiency.
“and reduced labor requirements for coal mining.”
You may have a point there because the big equipment used today seems more efficient than historical methods. I wonder how significant this is though.
“Turbine efficiency isn’t increasing to any significant degree due to the 2nd law.”
He was referring to the 1980s. Turbine efficiency has improved modestly since that time. I grant that further improvements will be very slight.
1.2% of US GDP is $140 billion, still beyond the wealth of all about a few multi-billionaires. However, food speculation driving up prices has been a real problem in the world in the past few years.
Air and seawater are not for sale at all, and thus cannot be cornered; your analogy fails. They can be dumped in, which is a real problem as well; instead of being cornered, their clean state is being used up.
Physicist and economist Reiner Kummel, among others, demonstrated that energy’s “economic weight” is far greater than its low cost share in the national account. In other words, it is misleading to minimize the role of energy (or more precisely, exergy) in the economic process on the grounds that it “only” accounts for x% of GDP.
As Kummel et al note, “output elasticity need not be equal to the cost share. It can be much larger (or smaller).” That paper provides a decent overview of the contribution of exergy to economic growth; Kummel’s The Second Law of Economics: Energy, Entropy, and the Origins of Wealth provides a more in-depth and quantitative treatment.
One of the misunderstandings leading economists astray is the confusion between energy and information technology. Just look at iPhones: “Wow, look at all this innovation! This can continue for a long time and will be able to support lots more economic growth, with no additional inputs!”
The problem, of course, is that you can’t eat your iPhone, it won’t heat your house, and it won’t fly you across the Atlantic. It may help to do some of these things slightly more efficiently, but the usefulness of Treknology really boils down to diversionary distractions.
And even these IT developments will slow and reach limits. I read recently that we are not too far off the limits for miniaturizing computer circuitry because of all the entropy being generated with such concentrated decision making. This translates into heat and heat dissipation will become limiting. Moore’s Law will end.
Despite iPhones pervading our societies, cars today are barely more fuel efficient than 40 years ago. We have LESS energy remaining. Energy consumption is WAY UP. Our energy extraction activities are going DOWN in efficiency due to decreasing EROEI. We are MORE dependent on unsustainable fossil fuels. Oil prices are holding near records. We have LESS groundwater for irrigation. Agricultural productivity has hit limits for most plants (rice), with others that still hold promise (maize) being fully dependent on increased fertilizer and irrigation inputs. The oceans have never been so devoid of fish.
Here’s a thought – why don’t economists study ecology, earth science, energy, and engineering – the real world challenges we face, as in the above paragraph? How does ecological cycling produce the food we eat? How do genetic innovations increase this? What are they dependent upon? Can this be expected to continue? How does society capture and use energy?
Then we could move beyond philosophical thought experiments contemplating the utility of frilly desserts and instead focus on more immediate concerns regarding the naked emperor before us – how do we prevent (if it’s even possible now) billions of people from dying over the next few decades in a Malthusian Collapse when we run out of energy and the economy starts shrinking at an increasing rate due to spiraling EROEI? Since, as anyone who has studied ecological population dynamics can see, humanity would be well beyond a massive die-off if it weren’t for external energy inputs.
But, wait! Virtual trips to Paris using supercomputers that violate the laws of physics and use nonexistent energy will save us!
We have the option of advanced nuclear such as LFTR (and it’s somewhat nasty side effects).
And we have the option of using machines to create hundreds of thousands of square kilometers of install jobs via concentrated solar arrays, batteries and others.
Since the EROEI for concentrated solar thermal, concentrated PV, wind power and LFTR is less than a year, these ought to be good enough (and probably the only way) to postpone the energy part of the argument favorably for our grandchildren.
The economic part would most probably require LFTR to power the automated factories…
We have the technology, just not the collective will.
Flip side of this is that we don’t NEED arbitrarily large amounts of food or climate control to be happy. We may consider it wasteful to set the AC to 65F, but there’s nobody pining for the opportunity to set their AC to 45F, if only they could afford the cost. We could eat more, but it would be bad for us. We could eat more (energetically expensive) meat than we do (in the US), but we’re not too far from the “it would be bad for us” level. A good portion of our GDP already goes to counteracting some of “it would be bad for us”.
There’s a fundamental problem with economics and human utility. We have dependent utility functions — people are made happier (generally) by less inequality, and (generally) by belonging to groups. The fact of dependent utility functions invalidates that proof that free-markets are welfare-maximizing (so does our demonstrated overoptimism). The role of (in)equality in human happiness is not captured by simple sums of incomes.
Yes that is the paradox, that above a level of poverty, enjoyment of life is very poorly correlated with consumption of stuff (how GDP is currently measured). The more you get, the more you want. This is a philosophy entrenched by modern capitalist theory. Bhutan instead uses Gross National Happiness.
But when Americans are forced to accept a substantial drop in their standard of living I don’t think it will be a pleasant transition, I don’t think they will see it as an opportunity to improve their quality of life and overall happiness….
Malthus never predicted resource collapse, he predicted income inequality. Resource collapse may happen, but if it does it will be the opposite of what Malthus’s model assumed, which was that the earth’s ability to provide increasing resources was limitless. He predicted the poverty of workers even with such limitless production.
“the naked emperor before us – how do we prevent (if it’s even possible now) billions of people from dying over the next few decades in a Malthusian Collapse when we run out of energy and the economy starts shrinking at an increasing rate due to spiraling EROEI?”
Yikes! None of that follows from what came earlier in your post. First, we are not “running out of energy”. Although there is a limit to the total amount of (say) electricity generation, we are not approaching that limit now. Second, EROEI is NOT spiraling. EROEI will never decline below about 10:1 because there are _vast_ amounts of energy available at that level, and the rate of energy consumption growth is _declining_. Third, we will not have a massive die-off because of energy concerns. Economies sacrifice the _least_ important uses of energy first which implies that there would be as much fertilizer and tractor usage as now, even if energy declined by 80% or more.
Really? Canadian oil sand is already about 5:1, and that 300 billion barrels or so represents 20% of the world’s remaining known oil reserves. There is an energy cliff below which a society cannot be sustained by that energy source, because an EROEI of 1:1 is useless — all it does is power the machines to extract more energy. But those machines have to be manufactured, the workers must be supported, and the entire national economy must also be supported. Surely that cliff isn’t too far off 5:1…
There are vast amounts of energy available below 5:1 but that may be below the energy cliff (for example, US oil shale with EROEI of about 2:1 — useless without an external driver such as cheap natural gas). The remaining high EROEI fuels left are NG and coal. So the question is then, how much of those remain? Estimates vary, but most are about a century. Factor in increased demand as 75% of the world tries to live like a Westerner, and coal’s and NG’s use as a substitution for oil when it runs out, then we’re down to decades. But we are transitioning to difficult and slow energy sources now and these can’t keep up with demand. This is why the rate of energy consumption growth may be declining because oil production hasn’t increased in 7 years! We certainly do not have bountiful energy (unless everyone puts solar panels on their roofs).
Yes, as we run out of energy the most important uses will be given preference (food). The problem is that social order will be falling apart when that happens so the delicate systems we use to produce, distribute and keep food will fall apart. This is, therefore, energy decline. Beyond this, there will be huge demand for biofuels, which is in direct competition with food production. I do not envision America starving due to its vast farmland. But Africa may have problems because it is already a net food importer.
Humanity, in its teenage years, has very hard time accepting the next stage, that of maturity. As a teenager, we certainly did grow 3″ taller last summer, and lacking the wisdom are concluding such growth will continue unabated hence on.
Just as with a maturing person, growth must plateau – the gist of this post. With our daily binging on a foul mix of low grade Alberta booze, among all else, what could’ve been a long and prosperous plateau, may terminate suddenly with a Seneca Cliff all the way at Club 27. The question is now, in our frivolous youth, have we caused enough damage to have a shot at a good life as a grown-up species?
This is dangerously close to being “not even wrong”. I don’t exactly disagree with this analysis as a literal statement, as limited as such a uni-directional, non-feedback model might be.
What I disagree with is the overall point, but I think you are on to something in your epilogue. GDP is just a convenient yardstick peculiar to our current circumstance. I will bet anything that by the time physical / energetic constraints become devastatingly problematic, practitioners will have already moved on from measuring things against the yardstick we currently call “GDP”. Perhaps they’ll land upon a “good quantum number”, or perhaps they’ll find yet another proxy that applies in that new regime.
I really wouldn’t worry about it, unless you think that our failure to appreciate the more fundamental concept is actually holding us back. Personally, I doubt it.
Regarding your epilogue, it might be worth checking out Tim Jackson’s book Prosperity Without Growth which looks at that very theme of improving quality of life without increasing GDP – essentially it’s about other ways of measuring success.
The US declaration of independence is somewhat unique due to its adding “happiness” to life and liberty. But it does never promise actual happiness, it simply states a right to “pursue” it.
It would be an expression of humility to drop the claim that economics can reasonably grant what the US constitution does not – actual happiness – and simply focus on ways to facilitate the pursuit of it, sustainably so. Less inequality, and justice for all would go a long way, with or without “growth”.
Every franchise is limited, in resources and otherwise, but while sufficient prosperity – like the future – might be already here on average and per capita, it is definitely not evenly distributed, neither within the industrial nations nor beyond them. We should have no confidence attempting to plan who we will expand the pie if we still cannot figure out how to make the “best” use of the pie we have. Whatever governs our economies, it seems to be weakly correlated with happiness, or even utility.
“Growth” is the promised paradise of rising tides lifting all yachts, while carrying along those at risk of drowning. What keeps growing, whether energy consumption rises or falls, is the CO2 level. I don’t expect a lot of happiness resulting from that.
Brilliant! There’s just one point in your demonstration that I believe can still be disputed — and I do hope you’re reading these comments, because I’d like to have your thoughts on this:
“But if energy became arbitrarily cheap, someone could buy all of it, and suddenly the activities that comprise the economy would grind to a halt”
It seems to me that this only holds as long as energy remains a commercial commodity. If energy were to be removed from the global economic system — i.e. globally managed by some transnational entity and alloted based on needs –, wouldn’t the limit on economic growth disappear?
“But that’s communism!”
Why, yes, I do believe it is, in a way, and isn’t it ironic that the trick to allow further economic growth would lie in partial communism? Isn’t it, actually, what the so seductive “Chinese model” is about?
I’m not saying that imitating China is a good or desirable solution, mind you; but it doesn’t seem such an unlikely development, especially in the light of your arguments.
I rather call it “Collective self government based on the efficient global distribution of resources”.
No planned obsolescence… no China like communism… no representative government either lest we enjoy
teenagers selling the house to have a party.
An interesting read that highlights some fundamental points about limits.
It might however be useful to complete by thinking about the inequality in current economic development – not everyone lives like a US citizen or those in some other developed countries. Many developing countries are catching up rapidly – including on consumption of energy and raw materials. Others, however, still face real poverty although there is movement that we should welcome. And that highlights both physical and moral challenges ahead: we cannot all live and consume like the richest (especially if they continue to grow – including in energy and waist size), but we cannot argue for the rich to get richer and the poor to remain poor.
So increasingly, the key challenge will be how to ensure essential development for all, whilst navigating within the physical limits of climate change, energy resources and other raw materials, biodiversity, etc. I look forward to a convincing new economic theory that can guide us through the political and social changes we will need. Maybe your conversation will stimulate your economist in that direction – but I suspect we will need new ideas to blow in and to include a true integration of physical limits so as to convince decision makers and public opinion that another definition of growth is possible.
There seems to be a resistance to the idea that life in a steady-state economy – one with no ‘growth’ – could be ‘interesting’. And yet if we look at the example provided by our planet itself – think of it before people arrived, if you wish – it is basically a steady-state system. Energy pours down onto it; the equivalent amount of energy leaves. And yet look at how ‘interesting’ a place it is! Because it’s not a perfect sphere rotating in a perfect orbit at a perfect angle, etc., there are always energy ‘imbalances’. Some places get rich, others get poor. As time goes by (seasons, etc.) those situations change or reverse. The flows of energy back and forth across the face of the globe provide an endless stream of ‘variations’.
One could easily imagine a ‘steady state’ human society (steady in terms of both energy availability, and ‘money’ supply) that still offered plenty of scope for innovation, change, and variation … indefinitely.
Prior to the agricultural revolution, that is exactly what the human species had. Some such models still existed half a century ago (Bushmen for instance) but have been pretty well corrupted by now. It is possible to live a very fulfilling and happy life with lots of friends and family and very little material wealth (but not zero, just what you can produce or gather).
Do we expect to transition to an analogous society in post-modern times? Not without a lot of upheaval, believe me.
Does anyone actually know what money is?
To me, it’s comparable to energy in some ways:
Like energy results of the potential in a field, value results of the potential of the field
of demand. Every financial transaction leads to a state that is more likely (“thermodynamically stable”) than the state before.
What is going to happen when energy runs short, is the part of energy in the value of a product increases, i.e. energy-intense products will become more valuable.
I doubt technology is able to counteract, making low-energy goods more valuable.
Value isn’t effect of subjective preciousness, but of scarcity.
The most beautiful music is, or is nearly, free.
1. Saying there is an upper bound to growth is not the same as saying it can’t continue indefinitely. Growth need not be linear.
2. Economic value is not a physical quantity. It is not a measure of the mass of goods produced. Nor is it a measure of total work done. Ideas–along with other so-called “non-rival” goods like national defense–are not physical commodities. They can be enjoyed without being consumed. And, as we reach the limit of our available energy, ideas and aesthetic goods will presumably become a much larger share of the economy. There need be no limit to this kind of economic value, although it’s true that an economy that was mostly intangible would strain the classical concept economic productivity. Even so, saying there is a thermodynamic limit to the size of the economy seems a little like saying there is a thermodynamic limit to the amount a person can love: I’m not sure you really grasp what the concept means.
The fact that not all activities can fall in the love category—we must eat and participate in a physical world—is enough to sell me on the limits. Sure, other things exist, but those do not, and never will, comprise 100% of the economy. An important point.
If growth slows to a trickle, like 0.0001% per year, do you still think we would call that growth in present-day terms? Seems we freak out if it drops below 2%.
I actually agree that growth would likely be essentially static if we were to ever approach harnessing the available energy of the Earth. But I don’t think that’s because there’s a *physical* upper bound on the size of the economy—which was, I thought, your point. There surely is a physical bound on the amount of physical goods we make (which is not at all the same thing as the value of the stuff we sell). Rather I think that if the economy were ever to get sufficiently large the point of growth would disappear and the classical meaning of economic productivity would start to break down.
I guess I would add that you’re right that in a sense the availability of tangible goods—particular essentials like food, water, energy—might be the real important issue if they were scarce. Of course it’s scarcity that makes us freak if growth drops below 2%. In conditions of real abundance growth would be a non-issue. But the availability of necessities is a slightly different question than the overall size of the economy.
“Even so, saying there is a thermodynamic limit to the size of the economy seems a little like saying there is a thermodynamic limit to the amount a person can love: I’m not sure you really grasp what the concept means.”
The power of the human mind does appear to be limited. Dunbar’s number might or might not be increased by Facebook – depending on your definition of “meaningful” – but for any practical purpose, our abilities to maintain significant relationships with others are not infinite. So what is the definition of “love” here, and how does it relate to “growth”? Love of zeros on bank account statements?
Of course, if economics is actually a religious effort attempting to divine the presence of god in compound interest, then it would be hard for my secular mind to grasp the concept of “love” you refer to.
An innovation that produces more utility for the society than the old industry did would be able to buy the energy used by the old, less efficient industries and use it in the new one. Even though there would be loss from not using products made by the old industry, the net benefit of the society would increase because the utility:energy ratio of the new industry is higher.
I don’t accept the premise that this doesn’t constitute real growth, for the goal of growth is the improvement of the total utility of the society.
It has to be mentioned that steadily increasing energy production/ consumption/ dissipation will lead to overheating in the next 300 or so years only if the energy in question is generated using means other than the sun. Theoretically if all consumed energy is solar there will not be an additional influx of energy into the system and thus no additional heat dissipation. Also it is important to note that the space based energy generation may solve CO2 problem, but not the overheating as it would be the same scale energy influx into the system leading to the same issue.
Therefore it is possible to keep Energy -to-GDP growth relation without getting into the overheat mode you otherwise correctly described in your post.
True. If we use the sunlight presently hitting Earth, we may avoid the overheating problem. But we end up in the same place: a fixed yearly energy budget. By hook or crook, our energy use on Earth is capped. Even if the energy is collected in space and delivered to Earth, it’s the use on Earth that heats us up.
I agree. We’ll run out of the surface pretty quickly. With 2% of the energy growth in about 400 or so years. But at least the overheating issue will be resolved.
“Even if the energy is collected in space and delivered to Earth, it’s the use on Earth that heats us up.” –
I’m not sure I understand you here . Energy collected on Earth and used on Earth won’t heat it up assuming the existing mechanisms of energy dissipation through radiation keep working as they are at the moment.
On the other hand energy collected in space and brought down to the surface will be an equivalent of using fossil fuel minus CO2 emission (again, assuming that a system used to collect energy does not reduce the incoming solar by an equivalent amount)
I want to pull apart that ‘better quality desserts’ view of economic growth. To use some clear quantifyable terminology we could split economic growth into growth of energy use and growth in information on how to use the energy. (The better dessert is only better because better information was used to control the energy used in creating it)
Having information has big energy costs in at least two ways – creation and maintenence.
Commonsense tells us that information creation takes energy. We needs people with free time to build the gizmos or develope new desserts, which is only possible if they don’t have to farm or hunt, which is only possible from the current fossil fuel subsidy to farming.
There is also always an energy cost to maintaining information, and costs scale badly. At hunter gatherer scale oral history and songs do fine, using a fraction of our meagre 100watts. At quantities of information we have in 2012 most information has to be in computer ram all the time (that’s what google does), needing constant energy flow just to exist.
How exactly is our information going to keep increasing from here without more energy use in creation and maintenance? Sure information can edited and compressed – but information compression also has hard limits. The dessert argument is bunk.
>Having information has big energy costs in at least two ways – creation and maintenence.
I completely agree and see this as a very important point. Another way, IMO, to look at it is to note that every human’s as well as the whole humanity’s capacity for dealing with information is finite, but the biology, sociology and technology that creates and maintains that information always costs something.
>The dessert argument is bunk.
IMO it’s not completely bunk. It just won’t take the economy to anywhere near infinity. That would require either infinite resources for creating better “utility” desserts in a finite period of time, or infinite time to create better “utility” dessets with a limited flow of resources. And neither of those things exist – but on the other hand, every kind of (significant) limit has not been met yet. (Also, I imagine that every improvement in the dessert over the last one would tend to produce less additional “utility” for the same amount of energy and time invested in the improvement.)
It seems that one of the debates here is about the meaning of the word growth. (Obviously if an economist can define the word freely, then it’s possible to make the case for infinite growth.)
I’m reminded of what Herman Daly wrote in Steady-State Economics (2nd edition): “What is it precisely that is not growing, or held in a steady state? Two basic physical magnitudes are to be held constant: the population of human bodies and the population of artifacts (stock of physical wealth)…Of equal importance is what is not held constant. The culture, genetic inheritance, knowledge, goodness, ethical codes, and so forth embodied in human beings are not held constant. Likewise, the embodied technology, the design, and the product mix of the aggregate total stock of artifacts are not held constant. Nor is the current distribution of artifacts among the population taken as constant. Not only is quality free to evolve, but its development is positively encouraged in certain directions. If we use “growth” to mean quantitative change, and “development” to refer to qualitative change, then we may say that a steady-state economy develops but does not grow, just as the planet Earth, of which the human economy is a subsystem, develops but does not grow.”
Yes, see, but that is the problem, because the economists got around to defining “economic growth” long before physicists got around to objecting. This blog entry is really an objection to the definition of economic growth that the world is using:
“An increase in the capacity of an economy to produce goods and services, compared from one period of time to another.
It reminds me a lot of the Austrian school of economics constantly arguing that everyone else’s definition of ‘inflation’ is all wrong, wrong, wrong!
– Physical economy cannot grow forever: I agree.
– Real GDP (cleared of inflation) is also limited: also OK.
– Completely new economy is coming: I don’t think so.
I don’t think, that steady state (real) economy means, that we will work less, and spend more time enjoying life, and competition will not stop.
Add some inflation to the system (costs of depleting resources will do it), make some adjustments to the rules and we can continue the nominal GDP growth game, forever. (We will rename our currencies time to time, to get rid of the zeros).
Good points all around..I was going to say that the failure to distinguish between nominal and real GDP growth was one of the biggest flaws of the entire conversation.
I’m very much opposed to the idea humans are absolute in an never-changing environment and have absolute superiority over other species. What we’ve done in the past was not only to produce goods someone was willing to buy, but largely to protect ourselves from nature, building dams, streets and railways that relativated effects of a local bad crop, etc.
I just cannot imagine any society would stick to steady-state economy, when there are threads to deal with, e.g. virusses.
Nature is continuosly changing, so if conditions for a city become hostile, due to desertification in a certain area for example, will it be abandonned?
You seem to have seriously confused “steady-state” with “static and unchanging”. Tom is not saying we will reach a state where nothing changes. He’s saying we’ll reach a state where we don’t use more energy and mass over time, and where we don’t have more GDP/capita either. Changing to deal with a changing virus, or building a new city to replace and old one, are not growth, they’re maintenance.
What makes it even worse:
If someday not even energy required for maintenance is available, civilasation will break down.
Unfortunately, the lot of you have fare more collective time available to comment than I do to reply. So I’m addressing a number of commenters here in one swoop.
Many of the defenses treat energy as another commodity that will never be scarce (comparisons to air and seawater). Oh that this were true. Energy is the lifeblood of our economy, and if it were abundant, cheap and easy, we would not see escalating oil prices, would immediately switch from fossil fuels at the first hint of downsides (global warming), and would not give much of a care in the world to improving efficiency.
We must realize that we stand at a unique moment in history, near the pinnacle of our fossil fuel rate of use. There is a tendency—especially in economic circles, I sense—to think that it is our own cleverness that brought us where we are today, rather than the all-out exploitation of our one-time fossil fuel inheritance. It is this, rather than cleverness, that got the industrial revolution going. We have had the same clever brains for tens of thousands of years. Sure, accumulated knowledge plays a central role as well. But do not discount the specialness of our fossil fuel extravaganza.
Note that no technological advance has delivered energy more abundantly and as cheaply as what fossil fuels provide. If this were so, we would already be looking at fossil fuels in the rear view mirror. It is not certain that we will conjure a superior replacement.
So to act as if energy is not central to the future of our economic state is, I think, dangerously out of touch. Dangerous because a smarter approach would throw more of our effort into the upcoming energy transition than the short-term market focus will likely mandate.
There is also a tendency in the comments to assume that because some forms of growth do not require energy increase, then we have our escape hatch and can continue indefinite growth. This would be true if such things came to dominate our interests/expenditures. If an ever-increasing fraction of our time/attention went to listening to music, going to plays, buying art, tweaking our houses, love, etc., then fine. But these things can never wholly replace eating, heating, transportation, manufacture, etc. As long as our appetite contains any mix of energy-demanding activities, then we have our overall cap.
In short, just because other modes exist does not mean they permit endless growth in the traditional sense. I would never claim they do not exist. And I put in the word “traditional” because we would hopefully always allow for continued development. Yet this model (and the way money, investment, etc. would work in such a scheme) looks wholly different. See the comment by barath for a description of what types of development remain available.
We are getting real close to agreement with your last comments.
I believe economics suggests that as we approach the limits of our energy or other resources, that economic growth shifts to those areas that do not require extra energy use (or that find ways yo do more with less). In other words, the dynamic of free markets responds in exactly the way you suggest it would need to.
You are right that economics and markets would work totally differently. Future growth cannot look like traditional growth forever. The point is that a fixed population of people could have lives that are incomparably better ( though different) than the wealthiest alive today.
I am an active “outdoors” type person who spends all my free time surfing and biking. Yet the vast majority of my time and disposable income now goes to virtual activities such as Internet, online games, music, movies, reading, writing and so forth. We are just starting to see the transition….
I really think that “virtual” and “virtually zero cost/energy” are not the same. The Internet is tremendously expensive to maintain. I agree that very small replication and transportation cost are relevant, but I cannot take for granted that billions of human beings – in decades from now – will retain the leisure to produce and “consume” (i..e pay attention to) artfully arranged patterns of bits.
Energy feeds us. Energy constraints will force us to find different ways of feeding ourselves, or ways to let enough of us starve fast enough. As long as we are confident that we can keep pour bodies alive and have leisure time to spare for science, engineering and art, we can maintain any number of virtual “economies of the mind”, starting with World of Warcraft.
But unless you have the confidence that the physical survival of 7+ billion human beings is not at risk due to the cost of climate change and Peak Resources, those virtual economies are utterly irrelevant. Dead people do not play video games, and farmers do back-breaking labor even with diesel-powered tractors.
The survival of seven billion people is at risk, but the premier threat is political interference with the freedom and creativity of enterprising humans in free markets. Absent freedom, we will quickly drop back to historic levels of prosperity which is about a dollar or two per day per person. This would indeed lead to billions of deaths.
I am not suggesting that economic growth does not create problems, but the belief that we have hit the short term limits of energy capture or that climate change is going to kill us all is pretty absurd.
Nobody is suggesting no resources or energy. We are suggesting substantially more energy and resources per person used more wisely and creatively.
Roger’s comment, without further elaboration, sounds too much like talking point pablum from a certain political perspective. If by freedom, Roger, you mean the sort of lack of regulation and sociopolitical constraint that leads us to add a billion people every decade and a half, and dig up everything we can get our hands on, that sort of freedom will lead quite soon to serious trouble. The only arguments are about exactly when and how.
I am not arguing for no regulation or rules. Free markets and science require rules and protocols against exploitation and coercion. I am arguing against top down central planning and coercion, including coercion against having children.
“There is also a tendency in the comments to assume that because some forms of growth do not require energy increase, then we have our escape hatch and can continue indefinite growth. ”
No, that is completely misunderstanding the argument. You keep saying “growth”, but you’re talking about “economic growth”. You really need to decide which one you’re talking about, because they’re different concepts.
Our present global social structure needs growth (and is thus doomed). Our future needs, (1) the clean energy to sustain whatever (2) economic activity to overcome this addiction. It also NEEDS education and the arts for all (for hope and positive social transition).
This present day system could still employ people to “plant” a whole bunch of mirrors that concentrate sunlight into needed energy. The cool thing about this approach is that some of that light gets reflected back into space, thus at the same time helping to offset the global heating problem caused by the decay of useful energy. Needless to say, this “problem” is still only about 1% of the XSCO2 problem.
Thus, there is still room to grow into the steady state based on mega clean energy tech (now becoming old and unused tech), which if ever achieved will be FAR superior to any governmental system currently imagined, as technology will finally be able to address all of these serious problems that money can not even touch…
Like the desalination of water for 10 billion people achieved by just the waste heat alone from the above CST approach…
Like developing sustaining agriculture…
Like being able to build beautiful 3 dimensional cities out of carbon graphine where electric vehicles move about in all dimensions unimpeded by stop signs…
Like actually being able to colonize Earth and GROW into space in a far less threatening way.
I don’t think your argument is nearly as strong as you think. The key underlying assumption as far as I can tell seems to be that energy consumption per capita must increase at least linearly with real economic consumption per capita. Your entire premise falls apart if this isn’t true, right?
So let’s take a look at the data — I divided total US energy consumption (http://www.eia.gov/totalenergy/data/annual/xls/stb0101.xls) by the ratio between US GDP (http://www.usgovernmentspending.com/us_gdp_history) and the CPI (http://www.inflationdata.com/inflation/consumer_price_index/historicalcpi.aspx) to obtain the energy consumption per real economic consumption (actually not consumption exactly, but for more complicated reasons I think GDP fits this purpose). This number has been falling fairly steadily for the past 60 years.
Now, one could still argue that it’s not falling fast enough to keep up with 2.x% annual increase in economic consumption, but I don’t see you making that case. And that’s a very different argument from “the physical reality of limits on energy growth necessarily implies a proximate limit on economic growth”.
I do not assume any particular relationship between energy consumption and economic consumption other than to say it must saturate at some point. That’s it. It can go exponentially, linearly, logarithmically, whatever. The function sets the timescale. The larger principle is that the ratio of energy/economic will not tend toward zero, but will hit some fundamental limit. Because part of what we will always want to do is eat, make things, use lighting and temperature control, and move things around, energy will not be relegated to some dustbin relative to all the other marvelous things we might do. It will always play a key role, and therefore its physical limit imprints a limit on economic activity.
There will be loads of examples of things that do not require much energy, but these are distractions to the larger point. And a 60, or even 200 year trend does not contain the larger answer either. Our recent past has been absolutely atypical in the history of humankind in relation to energy use.
It does seem that the key assumption is that the ratio of energy/economic value cannot asymptote to zero, and this is the assumption I’m not convinced of. Certainly actual energy usage per *person* cannot asymptote to zero, but I don’t see a strong argument against the alternative hypothesis many others have presented where energy is a very small component of the future marginal increases in economic value. If a person thinks of a solution to a particular problem, it doesn’t really require measurably more energy than daydreaming but it still produces economic value. And, his thought allows others to solve even more difficult problems which also require essentially no additional energy — this is how exponential growth can occur without increasing energy requirements. Building this pyramid of knowledge has been key to achieving the level of economic growth we have achieved, and I don’t see why I should accept this fundamental way that the economy now works as a “distraction”.
Your second paragraph confuses what we’re talking about. You’ve presented a graph of total energy use over time that increases exponentially, but that conflates the two variables of population growth (which you agree will stop, but has historically increased exponentially) and energy/economic value. Presenting the effects of the combination of those two variables does not prove that the variable at issue has an established track record of doing what you say it does.
Ben: You have to remember that the very act of someone thinking of a better solution – requires energy. Electrons moving around in your brain are fueled by food (which is produced using fossil fuels currently). At some point in the future, let’s say 10,000 years, we’ll have a fixed daily budget of energy – what the Sun gives us. The Sun may power 10^99 human thoughts per day (making that up) – but that’s still a finite number, and pales in comparison to infinity.
Plus, the implementation, or even communication, of that marvelous thought will inevitably involve making things and moving things around. Infrastructure won’t evaporate, or stop decaying. BTW, that applies to brains or disembodied gizmos sitting around having a wonderful life plugged in to the Matrix, should you want or believe in such things. (I don’t.)
The relationship between energy and economical growth is very well explained by so called Kaya identity: http://en.m.wikipedia.org/wiki/Kaya_identity
The following article emplanes the identity dynamics: http://www.pnas.org/content/104/24/10288.short
Energy consumption can be stabilised by stabilising a relationship between Energy/GDP and GDP/cap rates. However, as it has been said already elsewhere in the comments here, it is a question of time as there are fundamental limits how much the above ratios can change.
I’m not sure how the Kaya identity addresses the issue I’m raising. I’m questioning whether the product of g and e (in the Kaya identity) must necessarily increase. Tom claims it must because e asymptotes to a value greater than 0. I’m unconvinced that a strong argument has been presented showing e cannot asymptote to 0.
Here’s a stylized example of why I’m not convinced. Suppose there is a race of beings who derive economic value solely from the configuration of 10,000 binary levers and a fixed amount of energy expenditure per being. Parents tell their children a good configuration for the levers and the children start with that. But, some of them decide to spend a little of their fixed energy allotment on investigating how the levers work. They make a discovery that doing some particular thing to one set of levers causes other levers to behave in a way that allows overall economic value to increase, so they’ve exchanged energy for economic value. Now that generation tells their children not only the new lever combination, but also the discoveries they made about the nature of the levers. The third generation is then able, due to the knowledge gained by the second generation, expand their knowledge further to come up with an even better lever combination. Each new generation uses the same fixed amount of energy, but economic value increases exponentially because knowledge builds on knowledge. In this society, the ratio of the change in economic value to the energy consumption asymptotically approaches 0. My argument is that the human economy will shift towards this knowledge paradigm (we’ll get better and better at efficiently rearranging matter and information to provide the most human utility), and that will allow that ratio to asymptotically approach 0, at least in the medium term (much longer than 200 years). Tom is saying this is not possible/plausible. I don’t see the argument for why it isn’t possible/plausible.
I think you have been missing a fundamental point that storing information (generation memory) and manipulating stored information (experience transfer to a new generation) requires energy.
Yes, information requires energy to store.
But you’re overlooking the fact that the value of information isn’t necessarily tied to quantity. How many years of growth could we get if we kept the total amount of information constant at today’s level and merely increased the value of the content? Instead of using our storage on “haha! lolol!!!!! pwnd!!!!”, what if we upgraded the information to something more like “E=mc^2” or “I have a dream”?
Is there a limit to the amount of value that can be crammed into a chunk of data?
What yop said (one formula can replace a huge amount of data information, and an elegant formula can replace a huge number of formulas).
Also, try running a few numbers to determine a bound on the amount of information that would have to be amassed before energy growth in information handling would overtake our current energy usage; I’m going to venture a guess that that point is much farther in the future than Tom’s <1000 year horizon.
Ben, you said above:
“My argument is that the human economy will shift towards this knowledge paradigm (we’ll get better and better at efficiently rearranging matter and information to provide the most human utility)”
Information is a state opposite to entropy and energy is required to convert the existing entropy into information. As any physical phenomena the process is reversible, meaning if you forget something, information is turned back into entropy again.
When you are talking in your example about one generation gaining experience and passing it over to the next generation assuming that by doing this some energy could be saved, you do not take into account the fact that preserving information requires energy. Experience of previous generations has some value for next generations only in relation to information that experience (which is information in itself) stems from.
For example information about a chemical composition of a drag is irrelevant to me if I do not know what effect that drag had on other people before me. That historical knowledge is a must for my understanding of the drag value. If the historical knowledge is lost, the information has no value in the future. In other words entropy increases, which in turn means energy will be required to turn it into information again.
Fascinating discussion and even more fascinating comments!
I happened to be reading Herman Daly’s “Beyond Growth” when I stumbled across this post (thanks to The Browser for the link on Twitter), and it seems that Daly speaks directly to the issues that are being raised here (as the author himself noted, when he explicitly referred to Daly and his delineation between “growth” and “development” economics).
I believe this cuts right to the heart of important discussions taking place in many fields and within economics as well, such as multiple measures of value and well-being beyond simple GDP, and the sustainability of current modes of existence.
Thanks to the author for taking the time to put this together.
In 1968 Robert Kennedy said
Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman’s rifle and Speck’s knife, and the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans.
Likewise the discussions above touch on GDP, but shy away from the central issue and the reason GDP growth is such a fundamental concept. Our economic standing is based on GDP growth. It enables us to save for retirement and is the only economic answer to inflation. But it hides an important factor, which only shows up in a world of zero growth and stable population. The world is a zero sum game, when one gains, another loses. This perception has a profound impact on all our economic outlook. Economists prefer thinking how technology and innovation would maintain their profession and advocate GDP growth rather than recognizing the catastrophe looming in a few years when national debt erases pensions.
I am not sure why people keep making this logical error. The world is not zero sum, and if you approach economics with this fallacy, it will never make sense.
The explanation of how we can jump from a world with conservation of energy to one without conservation of value requires the understanding that only living things experience value. 3.8 billion years ago there was no value on Earth, as there was no life. Today, the globe is filled with living value. Energy and resources have shifted from the non living, non valuing to life.
Economics deals with creating solutions (value) for consumers in a positive sum way. I specialize in solving problems for others and am rewarded in response to my success. It is win win by definition.
Brilliant dialogue! I need to throw my bit on the fire here. WHY OH WHY does everything have to be monetised? You will get more economic growth if people buy more. And then they need to go out and work more. The economist did not point out that there is something called the backward bending employment demand curve. That you can get to a point where you do not demand any more work. You do not want any more money.
if you think about it: what’s the point? I have worked as a consultant helping companies become more effective. But if everyone used my services they would all get to a point where the gains in competitiveness were not worth the investment.
And if we de humanise the workplace and get rid of all the jobs then there is no corporate ladder to climb, workers might as well just all go on a go-slow. (In reality corporate bosses have understood this and make life easy for themselves by forming cartels with industry buddies – complain about competition publicly but go all chummy and scratch my back I scratch yours with branch colleagues.)
Unless you have people jiggering the system so that you HAVE to go out to work. And those people (if they exist) are the only ones to benefit from the go-out-to-work paradigm as percentages fall their way from loans and payment fees.
Personally I see the economist as more an expert not in a scientific branch but in one like grammar. The study of grammar is the study of rules accepted by the majority but often flouted by the brilliant in the practice of their art. Rules of grammar are imprecise descriptions of practice, there is nothing deeply scientific about them and, well, subjected to scientific reasoning defy logic. Sounds like economics, huh?
Tom, thank you for your work — I read each new piece avidly. I don’t know how to get economists to address it directly, but it seems to me you have done such a good job on making your points that the low-hanging fruit for improvement might be getting them in front of more (and especially more influential) people.
WRT Harri’s rejoinder — it seems to me he’s simply moving the core disagreement to a higher level of abstraction. Your dinner companion used “growth” as a semi-abstract term of art, and you used the concrete parts as a lever. Harri is retreating to the more defensible ground of “assumed utility functions”, etc., but a castle that can’t be seen or touched will always be better defended than one that can’t. Doesn’t make it a better refuge for anything we should care about.
Excellent perspective. Yes, I am too rooted by physics to put much stock in these virtual castles.
I think this economist has it wrong when he says the price of energy will go down compared to incomes. The key concept here is “economic rents” which are payments in excess of marginal cost that accrue to the owners of property that is valuable, scarce, and in demand. Rents can accrue to patent holders, land owners, members of size-restricted professional associations like doctors, etc. (Talk to an economist about rents and David Recardo to learn more).
What I think will happen once we reach the limit of how much energy we can make use of is this: the owners of the means of this energy’s production will start extracting economic rents from the rest of us. The energy lords will be the people who own the rights to the last of the oil wells and uranium mines, permits to emit carbon or heat (or whatever limits we have in place), landowners in solar-panel-friendly and windy locations, and the like. The price they can charge for the use of their property (the ability or rights to extract, the ability or right erect a wind farm, etc.) will go up and up and up as society gets richer since no one can compete with them. As we run out of efficiency options and substitutes for energy (as you described), the rents will go higher and higher.
We may reach a steady-state economy size if we come to the point where any increase in production requires an increase in rents paid to the energy-production property of equal amount. At that point we’re done making the economy bigger. We are back to the economy that Thomas Malthus described with respect to land and food production (before we solved that problem for a few centuries with technology).
This can only end in serfdom (where the energy production property owners are the lords) or socialism (where governments seize or buy this property from the lords and distribute the rents to the people). I predict socialist revolutions.
“Physicist: Before we tackle that, we’re too close to an astounding point for me to leave it unspoken. At that 2.3% growth rate, we would be using energy at a rate corresponding to the total solar input striking Earth in a little over 400 years. We would consume something comparable to the entire sun in 1400 years from now. By 2500 years, we would use energy at the rate of the entire Milky Way galaxy—100 billion stars! I think you can see the absurdity of continued energy growth.”
Total energy consumption per capita in the USA is down down more than 10% since circa 1980 (million btus: 1979, 359; 2009, 308; change -14%) as energy use per real dollar of GDP has declined by more than 45%. See EIA.gov.
In the 27 nations of the EU, per capita consumptions change is about 0% since 1990.
Where do these projections of exponential increase of consumption far into the future, until the earth burns and/or all the energy in the solar system is consumed, come from?
They appear entirely anti-empirical and anti-scientific.
My empirical baseline was 400 years long rather than 30. Net energy has increased for the U.S. in the period you choose. When net energy rolls over and the economy is expanding at the same time, you’ll have an empirical basis to claim that energy growth and economic growth are unrelated.
Really? Didn’t this (“net energy rolls over and the economy is expanding at the same time”) already happen 40 years ago in the US on a per-capita basis? If your argument is that 40 years is too short of a sample period to establish asymptoting of per-capita energy usage while maintaining economic growth, how long exactly will we need to wait before we can declare your theory contradicted by the evidence?
When I say net energy, I mean the total amount, not per capita. We have not seen long-term total energy decline accompanied by economic growth. And I will worry about transient effects. Growth is so important to our economic framework that we’ll stimulate and borrow our way into growth, which could lead to decade-timescale distortions of the underlying truth.
If population growth suddenly stopped right now, doesn’t the fact that per-capita GDP has been growing while per-capita energy usage has remained constant imply that, in that new static-population world, we would expect total GDP to grow while total energy usage would remain constant? If so, doesn’t the same reasoning apply when population ultimately stops growing as you have indicated you agree it will?
If population stopped growing today (and it won’t even if we adopt strict replacement birth rate due to demographic inertia), and if energy per capita also locked down to a no-growth value (which isn’t the case now globally), then I would not say GDP must stop simultaneously. The types of development so many have spoken of in these comments can allow further economic grow for some time after. But I would say not indefinitely. Some fixed fraction of peoples’ income will be spent on the energy-intensive, tangible things. We won’t become 99.999% service/art/virtual.
The experience of a few decades isn’t enough for me: especially when those decades involve unprecedented debt, leveraging, abandonment of a gold standard, etc. I won’t be sold so quickly—especially when absorbing the perspective that this time is special in our history owing to the one-time fossil fuel bonanza. I will reserve endless optimism until after a successful transition away from this fossil regime. Here’s hoping we can pull it off!
The argument in the article is that economic growth *cannot* continue due to physical limits of energy. Your argument here seems to be that economic growth *will not* continue due to a combination of population growth and growth in energy per capita, which leads to physically-impossible energy growth. So it seems to me that the original article fails to address your two implicit, and critically important, fundamental assumptions.
I don’t think very many people who disagree with you (including the economist) would disagree that exponentially increasing energy usage is impossible. The fundamental disagreement is whether continuing economic growth necessarily requires continuing energy usage. And the defense for your stance on that seems to simply be the statement that intangibles won’t ever become the overwhelming bulk of economic value, but I don’t see any numbers or estimates to support that claim.
Surely it’s true that there is some actual limit on what fraction of value ideas can provide. But by the same token, there is some actual limit on the energy the sun can provide. I haven’t seen why either should be relevant to a claim of what will happen in just a few centuries.
World growth rate of energy use per capita is 0.79% annually, 1971-2009. That’s a lot less than 2.3%.
E.g, after 100 years consumption just doubles, and after 400 years consumption is still, well, a heck of a lot less than the output of the sun.
It seems your argument really is against *population growth* of 1.5% annually going forward forever. Yes, with 1.5% annual population growth (added to 0.8% per capita energy use increase, for 2.3% total) then in 400 years a population on earth of 2.3 trillion people would require an implausible amount of energy consumption.
But does anyone take population mega-bomb analysis seriously anymore? After hitting the demographic transition that comes with economic advancement, population *declines* — see today’s Japan, Italy, Germany, Russia, etc., soon China…
Your empirical baseline of the 400 past years seems overwhelmingly population driven too.
I am often caught off guard by the tendency of people to take my insane boil-ourselves scenario as some sort of prediction. It actually functions in the opposite sense. It illustrates the absurdity of the assumption that the energy scale will continue growing. If you want to shorten the time until energy fails to grow any more—by population saturation, or whatever mechanism—then fine: that’s the whole point. We just get to flat or declining energy sooner.
Then flat/declining energy will start dragging on economic growth all that much sooner, by the other mechanisms I describe (see early growth post).
Not that it matters, but I had 1400 years to match solar output, not 400. Your 100 year doubling time would result in 16,000 times today’s energy over that time at steady population, but continued per capita growth. Not that any such thing will happen (again, not a prediction!).
“I am often caught off guard by the tendency of people to take my insane boil-ourselves scenario as some sort of prediction. It actually functions in the opposite sense. It illustrates the absurdity of the assumption that the energy scale will continue growing.”
But who believes that absurd assumption? Can you name one economist who has predicted energy consumption will grow anything like 2.3% for 400 years? I mean, a real name?
If you are demonstrating the impossibility of something nobody believes will happen, what’s the point? I could say that if Godzilla and Mothra emerged from the Sea of Japan tomorrow Tokyo would be doomed, and the statement would be equally true — and equally pointless.
The fact is USA energy consumption per capita declined 14% 1979-2009. That’s what happens in advanced economies … And we know energy consumption per capita for the last 40 years has increased only at only 0.8% rate world-wide — which will decline as economies advance (and will eventually turn negative) … and the population growth you use to produce your 2.3% number is already negative in advanced countries around the world, and soon will be in China.
Why would anyone who knows these basic facts “assume” anything like your exponential energy growth?
One the data above, world energy consumption over the next 100 years will grow from 2x to 3x, depending on the population peak.
Are you really using your the “earth will boil” argument to show the “absurdity” of the idea that energy consumption may grow to merely double or triple today’s amount?
If so, it seems you are an exponential physicist arguing against very finite economics.
The average person likely does not know either way how long we can continue our growth trajectory. It would be interesting to do a sidewalk sample (may get much different answers today than 5 years ago). Nor would I say that it’s common knowledge in the economics profession that a continued 2% track leads to severe thermodynamic consequences on the timescale of 400 years. It doesn’t matter that no economist has published a claim otherwise. The ethos of the economics field is that there are no limits, and that physics is irrelevant (somehow) to our endeavors.
The great comment above about ‘utility’ is circling towards what ‘wealth’ really is — sufficient utility, the absence of human wants and needs.
The per-worker GDP in the US is over $100,000 currently. We have an amazingly productive economy, even if its output is distributed too unevenly.
One other dynamic that people are missing is economic rents in the current system.
Housing is most people’s dominant life expense and most of this housing expense is not paying for the physical wealth of the housing good, it is actually paying the economic value of the abstract perpetual tenancy rights to exclusively use (and in the case of ownership, profit) from the property.
Same thing with our #2 life expense, medical care. Per-capita medical costs in the US are 2-3x the OECD average, there are immense economic rents also to be found here.
Low energy costs have allowed these rents to grow and grow over the past decades, and should energy costs go up thanks to supply failure, my thesis says housing and other rents will go down in response.
Our human experience is not as mechanistic as the physicist believes. The economy is a means, not an end, and economics — how the wealth pie is divided — is really ‘political economy’, not the abstract science of scarcity some practitioners prefer to the limit discussion to, either.
Fascinating ideas, but the argument’s flaw is in assuming that energy usage must have some floor as a proportion of the economy.
First, Tom’s point that energy cannot become arbitrarily cheap due to the possibility of a speculator cornering the market. 100 trillion units at 1 cent each still costs $1 trillion – but yes I guess it would eventually approach a point where all energy can be purchased by speculators. The solution is that this would become more of a basic right than commodity. The government would need to step in and regulate/provide energy for it’s citizens. At the point where this becomes necessary, it would also have become cheap enough for the government to provide for free.
OK, so assuming that it is possible for energy costs to approach zero. Tom’s point is that there will also be a level of activity that is energy dependent (food, clothing, housing, etc), and thus keeps referencing the idea that there is a floor to the percentage of energy consuming activities that make up the economy. While it is true there must always be a component of energy consuming activities, it is not true that there must be a floor.
Take the example of a given individual. He must have his basic needs met at an energy cost of X. Let’s say that X is currently 90% of this individual’s entire economic activity. To make a point, let’s assume zero efficiency improvements. Now, we imagine that all future growth derives from innovation that requires no new energy usage (Is this possible? Maybe not realistic today, but in a virtual world, why not? Once a server is running, what you do on that server shouldn’t impact energy usage). These new innovations are the fancy desserts, virtual worlds or re-arranged house mentioned by other posters. X remains constant while economic activity continues to grow.
Extrapolate this to the population at large and while energy usage remains fixed at X times the population, economic growth through non-energy innovation grows. Thus energy usage as a proportion of the economy approaches zero. In short, if the population remains fixed, energy use is also fixed at a sustainable rate and all growth comes through non-energy related activities.
Is this scenario possible today? Ofcourse not. But we also still have large reserves of energy and efficiency increases available to us. In 50-100 years time it is more than possible that this kind of growth will drive the economy.
I think the reason most non-economists have problems with this is that it is difficult to grasp that value and growth doesn’t need to be tied to physical resources. We are wired to think of crops and shiny things, but as you all know the majority of our modern economy is service driven. The individuals who grow our food, mine our ore and make our gadgets do so because they are willing to receive services in return. As long as people value whatever new dessert designs are being made, there can be an ever growing economy built on some fixed based of physical energy and resources.
I have a hard time buying the notion that just because service is a major portion of our present-day economy, we could expect it to become 90% then 99%, then 99.9%, then 99.99%, etc. We’ll be fed up servicing each other, and want something real to show for our efforts/energy. This is why I’m stuck on some saturation ratio: my model for people does not accommodate beings satisfied with all service, no tangibles. That’s what continued growth against flat energy would ultimately require.
That’s fair enough. I guess at the end of the day that is where the proponents and critics of your argument disagree.
In my opinion we are moving to a world where consumers may buy the iPhone59 for $500, but will spend $100,000 on apps. Yes, we will always need energy for some activity, but this will be a fixed energy budget that we re-balance as the situation arises. Efficiency gains will drive down the energy requirement for existing goods and that gain will be used to support new innovations. As the old products become obsolete, we will have even better and greater products. For example, 1G cellphones vs today’s phones. I don’t think there is any argument about that today’s phones are at least one magnitude of order better than the first ones, yet use considerably less energy (to build and run).
How many apps can you run in parallel? iPhones with thousands of cores to run thousands of copies of FoldIT or SETI@Home? At zero power consumption?
I mean, I get that it makes us happy to conjure fictional worlds in which we can find some definition of “growth” will somehow work, but seriously, how does any of that disprove the key point?
Tom’s major concern was that by and large, we do not seem to take the potential threat to our and our children’s well-being seriously enough to act while we have time and resources left to avoid worst case scenarios. Ultimately, we are discussing “extinction level events” – Easter Island on a global scale. Plus, it is not like the present is very satisfying, or even sustainable, for the vast majority of us 7 billion, and it appears to be likely to get worse once those resource limits begin to dominate our economies.
As a civilization we discuss whether there is climate change to avoid discussing whether something has to change, Right Now. In this thread, we discuss whether there is some scenario or set of assumptions in which our dominant economical models might “make sense”, to avoid discussing what world we want our children to live in, and what we do to get there.
That includes finding economical models that are relevant to the here-and-now, that, based on past data, explain what caused the current recession, and that inform policy to avoid a repetition. The fix is not to find a way – at all cost – to bring back the oil consumption and housing price increases of the past decade, the fix is to find a better – more just and equal – way to do business.
Phil on 2012-04-11 at 16:06 said:
>Efficiency gains will drive down the energy requirement for existing goods and that gain will be used to support new innovations. As the old products become obsolete, we will have even better and greater products. For example, 1G cellphones vs today’s phones. I don’t think there is any argument about that today’s phones are at least one magnitude of order better than the first ones, yet use considerably less energy (to build and run).
Here is an argument about that: I remember having read on the internet that today’s more advanced electronics (such as mobile phones) consume much more energy and other resources in their production than older electronics. Advanced “smart phones” do also consume more energy in use than older phones. (As another related comparison, I think a laptop computer consumes like a tenth of the electricity than a tabletop PC during their lifetime of use, but on the other hand, I wouldn’t be surprised if a laptop still had a higher lifetime energy and other resource cost due to requiring more sophisticated and complex materials and manufacturing processes.)
Really, why would advanced phones cost significantly more than basic phones (as they do) if they did not equire significantly more effort, meaning all kinds of resources, to create?
actually,there is no saturation because human wants are infinite.people’s need for physical things like food is quite limited.but they can have a huge and infinite demand for services.economic value is result of what human beings accord value to.the trend is clearly towards services because they require less physical substances and more human creativity.what is frivolous or not is not for you and me to conclude.many years back the idea of drinking water was considered unhealthy.people’s idea of what is valuable changes.no model can predict what it will be.so while your numbers prove that 400 years from now we will NOT be living a lifr that represents status quo of today,it cannot say anything about growth.as long as human beings and their ideas mate and multiply(ie human resources dont start diminishing),growth potential is infinite
“human wants are infinite”
Are they, now? How many movies can you watch? How many phones do you need? How much sex, then? How many tons of jewelry? Maybe we will need surrogates to keep up with the legally mandated consumption? Do we have to throw away our goods in the future?
I dimly remember a short story in which robots were needed to consume the goods that the robot factories churned out, because the people could not keep up.
Man’s gotta know his limitations.
But maybe this – not sentience, consciousness, language, alphabets, tools – is what really sets us apart from all other species? Or are the wants of chimps and bonobos also infinite? The wants of yeast and the E. coli in our guts?
And what does it matter? Our wants might be infinite, but who is in charge? Life is suffering, suffering results from wanting – which can be overcome?
There is the anecdote about the ape getting stuck because he did not want to let go of the treat to extract his hand. It reminds me of the Pain Box in Frank Herbert’s “Dune”, in reverse. Who cares whether human wants are infinite? It’d be the problem, not the solution. The question is, what are we going to do about it?
Thus your argument reduces down to being that you cannot imagine it.
Let me try to help. Assuming we have the same seven billion people, we never argued that they won’t have resources per person that far exceed what is true today. Today resources are relatively cheap and abundent, so it is reasonable to expect utility gains to use more energy. Why not? We are also agreeing with you though that eventually growth in physical resources per person cannot grow infinitely.
As resource constraints become more important (read costly), economics shifts the creativity of the market to solving problems of efficiency or into solutions which do not require additional energy or resources (they just use this huge amount more creatively).
This isn’t magic or wishful thinking. It is how markets work. It is what they do. Markets are search algorithms for problem solving of the needs of humans (called consumers). For value growth to be impossible absent energy growth, you would have to prove that there is a fundamental law which prohibits better solutions at the same energy level. If you can prove this you will be making a momentous contribution to science and economics.
As usual, our situation tends to be complex. If we could boil the problem down to just energy and markets, I would certainly have more optimism. But declining fisheries, soil loss, forest destruction, coral destruction, acidification of the ocean, saltification and desertification of croplands, depletion of aquifers, and many other failing natural services represent other aspects of the physical world that may easily thwart even the best imaginations about the future.
Yes, solutions lead inevitably to new problems. All these areas need to be addressed. In free markets, externalities and resource depletion can often be solved via better defined property rights. Indeed, with properly defined property rights, the problems you list above are probably not even all that difficult. The real issue is actually a political one — how do we establish said property rights across multiple nations? This is NOT an easy problem.
“He must have his basic needs met at an energy cost of X. Let’s say that X is currently 90% of this individual’s entire economic activity. To make a point, let’s assume zero efficiency improvements. Now, we imagine that all future growth derives from innovation that requires no new energy usage”
I want to exactly follow your line of reasoning. You are saying that 90% of the time he spends at work is done to acquire things to meet his basic energy needs. And that the remaining 10% of his income is devoted to non-essentials like virtual vacations, fancy desserts or going to movies – things that supposedly make him happy and increase utility, correct?
So I think you are saying that even if X doesn’t decrease because energy efficiency doesn’t improve, the remaining 10%, which is based only on computers or fancy niceties that have very little energy requirements, could instead power the brunt of future economic growth, as measured by total utility. Theoretically, if supercomputing improvements increased 11 fold, this 10% could then DOUBLE the total amount of economic activity as previously (0.9 + 1.1 = 2), with no additional energy or resource requirements.
So then, let’s get this clear. We aren’t talking about economic growth as is currently measured by GDP. We are talking about economic “progress”, or “development”, not GDP growth. And in this sense, I don’t think Tom disagrees with you.
But I want to address the assertion that this virtual 10% that’s supposedly based on almost no energy input is going to be able to grow 11 times.
I actually see little room for increasing “happiness” or “utility” from this 10% virtual, or frilly, portion of the economy. Satisfaction does not come from spending more time in front of a computer; in fact I am quite certain that sociological studies confirm the opposite. I contend that the utility advancements that have been achieved by I.T. are finished. There is now nothing more for supercomputers to do that will improve people’s level of happiness or well being.
And contrary to what you might believe, dressing up a frilly dessert does indeed require more energy … because someone has to do it! How do you think movies are made? Does a digitally HD filmed movie of today provide more enjoyment than a 1920’s silent movie did to its viewers? I think not. And I’d be willing to bet that just as much, if not more, energy and human labour is needed to make a film today than was needed in 1920.
And here’s the catch — the people that make movies or frilly desserts must be supported by the real world of energy and food, and each one of those people will also devote 90% of their economic activity to do so. So if this 10% of the economy then grows 11 times to double total economic activity, then overall resource consumption has indeed doubled!
If you guys had an environmental ecologist at the table, the epilogue might have gone a different direction.
I think it’s fair to say that a lot of energy transformations that are made today result in messes from an environmental standpoint, messes that eventually cause serious problems in ecosystem services, and thus need to be cleaned up lest they affect human society.
Some of those messes have a lot of momentum behind them. Consider recent studies that show 1,000 years of additional temperature increase if emissions went to 0 tomorrow. We rely on the environment for clean air, clean water, food, etc, etc… To maintain those in the future requires more energy put towards clean-up (carbon sequestration, water filtration, etc…) and/or less energy put towards everything else (to let natural processes sort it out on their own and to deal with the effect of limited ecosystem services).
It’s hard to imagine a better per capita world with a lot of the effects that are already baked into the cake.
This made me think of how strange some people’s image of growth is…. They say that in 100 years, the population will be stable (plausible) everyone (including very poor) will be superrich and have standards of life way better than the current American SOL. But they admit that the earth is gonna be [screwed], they just think we’ll deal with it and no one will care, because they won’t have been alive to experience earth the way it is now (or was, as we haven’t). Seems to be denying objective value to nature. Which may seem legit based on modern society trends and seemingly eventual eventual virtual reality/singularity technologies. But for the near future, I think there’s a pretty great utility benefit to experiencing nature and getting away from other people, and it is an experience that is hard to replace. Virtual technologies will at some point need to deceive us into believing in them (at least temporarily) to give the same experience (this seems the same for many such experiences). But even temporarily, the entry/exit will still make many experiences qualitatively different. Can culture shift to make us enjoy virtual reality more? Probably. But at some levels for some things, it requires denying or ignoring a very obvious fact, something very hard for people to do, it would seem.
I totally reject that prosperity includes a “screwed earth”. History and understanding of economics would actually lead to the opposite conclusion.
As we become wealthier and solve the immediate problems of food, shelter and transportation we move on to higher values, one of which is the preservation and sanctity of our environment. The data reveals that environmental preservation is a luxury good and that as a people gets richer they invest more into preserving it. The wealthier we get, he easier and better we get at preserving the environment.
I very much enjoyed reading your conversation with the economist. The best book I’ve read by far that challenges the endless growth, classical economics point of view is Charles A. Hall’s “Energy and the Wealth of Nations”. The following is the start of a review of this book:
For the first time ever, economics is put on a sound scientific basis with testable theories in a brilliant melding of ecology and economics, each field providing insights into the other. It is the best book I know of, the only book, that explains the role of energy and natural resources in the economy from a scientific perspective.
Hall and Klitgaard were unable to find any economic textbook with oil, energy, or natural resources in the index, and yet the whole point of economics is to explain the origin of wealth and how to increase it. Hall asks how this is possible when 70 million barrels of oil a day are burned up and any time oil goes up in price a recession follows.
And how could energy be ignored when it is so powerful? If you worked really hard for 1 day, you’d use 3 million joules of energy. 7 gallons of gasoline have 1 billion joules. It would take you 639 years of working every day to equal that. In the past, wealthy people got and stayed that way by making others do their work with low wages, serfdom, or slavery.
Economics ignores the flow of energy and materials, and lives in its own strange world, chanting abstractions and ignoring the laws of physics and thermodynamics.
Look at history — wars are usually won by the side with the most ammunition and well-supplied front lines. Do economists ever read history books?
energy ‘resources’ are mere products of nature.they have zero use or economic value until human ‘resources’ are combined with it.that is why natural resources dont occupy the time of economists.the idea of natural resources is a misnomer.there was enough oil many centuries back,but it had no economic value because it remained useless to us
It is possible to grow economically within a constrained energy budget, as the lever metaphor suggests. With efficiency, it is even possible to double the population…
But I find it very hard to believe in a continued economic growth simultaneously with a declining energy budget, especially when the economic aspect is facing a cliff of massive debt.
The only way out is good ole industrialism on a massive scale in such a scientific way to keep cooking dinner and not spoil the garden.
I think the lesson here may be that energy is scarce and economics is about allocating what’s scarce, not what’s abundant. For example, it’s undeniable that we have more and better recorded music available today than ever, and this will only increase. (It can’t decrease unless we start losing a lot of old recordings.) And yet, recorded music is unlikely to grow as part of the economy – it’s already abundant, after all, and no matter how good some future music is, we won’t prefer it to having enough food to eat.
Another take on it: when human ingenuity is effective for improving efficiency in a particular economic sector, it’s likely to make it a *smaller* part of GDP. (For example, agriculture became a much smaller part of the economy as efficiency increased.) If we can show that at some point, ingenuity applied to energy use will become ineffective for improving efficiency, then shouldn’t we expect other sectors where it is effective to decrease in size, in comparison?
As far as the short term is concerned (I.e 21st and part of 22nd century), I am entirely agreeing with you. The “relay” energy technology for carbon fossils should already have been invented with industrial implementation well on the way. Failure to have do so will certainly bring difficult and frugal times.
As far as the long term is concerned, I think you are waving too fast virtualization and the fact that humanity could reinvent itself through artificial intelligence (I.e. the fact that sufficiently advanced AI would deserve as much the qualification of “human children” than our conventional one). I believe it is linked for the following reason :
Energy is Work per Time. All the discussion above is about the impossibility to increase the numerator. AI on an appropriate physical substrate could enable to decrease the denominator instead : If an AI “internal clock” is slowed down, the subjective use of energy can increase. Subjective growth can go on for far longer or even indefinitely if one slows the clock by a constant factor at every period (The series converges).
It would also solve the problem of the vastness of space. An AI for which a year feels like a second can travel quite far during its/her lifetime…
I know it sounds more than a bit crackpotty, but for previsions on an millenium timeframe, it is difficult to avoid 🙂
Work per time is power, not energy.
To mitigate my confusion, I can’t help to notice that your graph labelled “United States Total Energy” is expressed in … Watts !
In a sense, it is a meaningful lapse for both of us : Energy for the purpose of economical discourse is very often expressed in Power*Time units (kW.h for instance). This is natural because GDP itself is a measure of economic output per unit of time.
I still stand by my opinion that fiddling with our internal clock is a good way to increase our “utility growth” indefinitely as Harri Turunen suggested.
I see your points, but I am not convinced of the steady state argument. If you invoke thermodynamics, invoke the whole thing. You can’t grow forever, but you also can’t have a steady state forever (that at least is the point of thermodynamics as I understand it).
Also the argument that a speculator will buy all the energy isn’t that strong. If that were ture someone would have bought all the world’s water long ago.
Either way, right now, I see no alternative to growth. If we ever reach a steady state, it can only be done through scientific advancement (because with current technological means it is absolutely impossible). And for this advancement we will continue to need investment, a financial system to ration it and growth to facilitate it. When it comes to attacks to economics I hate that it always is this double-sided attack, which becomes slighlty incoherent. On one hand everyone is saying that economics is too unrealistic, on the other hand everyone seems to want a much more hypothetical view of economics, completely speculative and decoupled from what we are seeing right now. Both demands are legitimate, but raising them both makes it hard to adjust.Yes, thinking about a hypthetical steady-state in 400 years is nice and should be done. But applied economics should still champion growth, combined with concerns about externality, because an attempt to impose some hypothetical steady state now (Chinese style population control? Completely abolishing the financial and industrila system to instal some “sustainable industry” which someone thought up on some drawing board? Nationalizing energy? Declaring war on countries that don’ meet climate goals? Fine or even imprison people who use too much energy?) bears its own huge costs.
Science and technology is already an enabler of the steady state economy…
Explain me how you would prevent growth wile still promoting technologies we need to replace fossil fuels, for example. Explain me a political regime which prevents people from translating scientific into economic progress, without abandoning basic liberties. Our recycling, renewable energy and other technologies are not even close to allowing a steady state without a major genocide
I’d love to expand on this conversation with you. I am an economists who believes that there are limits to growth but not of the type you are discussing here.
On a per capita basis I doubt that energy consumption or the management of waste energy will become a serious constraint on long term growth. Its of course true that it limits total population growth, especially if we are restricted to remaining on earth.
However, just to preview the potential conversation, economic growth is fundamentally about rearranging atoms into configurations that are more pleasing to human beings. Industrialization made a big splash in that we found ways to use enormous force to reconfigure compounds en masse.
Yet, this is obviously a stop gap. What we really want is to be able to configure on a small scale more precisely. This is the future of economic growth. We can debate how it happens but at this point I imagine that the future entails manipulating both our own biology and the biology of synthetic organisms to create a living environment most suitable to us.
As many people have pointed out, there is no reason to reinvent the wheel on molecular manipulation. We just need to learn how reprogram the systems we already have.
“I will reserve endless optimism until after a successful transition away from this fossil regime. Here’s hoping we can pull it off!” Reading this quote above, I thought to myself, “This should not happen. A physicist should not need to walk back statements and resort to speculative agnosticism in response to commentators with no formal training in physics.”
I have not read all of the comments, so my apologies if this has been addressed.
With respect to the getting rid of the waste heat that, at a certain point the Physicist states that “We might be able to scoop up some of this to do useful “work,” but at very low thermodynamic efficiency.”
I am not sure this is correct. I think that, as the planet approaches its limit in energy use, getting rid of this heat will become a very valuable service. This means that there will be great incentive to device a technology to scoop more than “some” of such heat for useful work, even at very low thermodynamic efficiency.
Economic efficiency and thermodynamic efficiency are not the same. Economic efficiency from the use of such heat will not be measured only as the work being produced from such energy, but will be measured as the value created to society for such use. And the value created to society will be very great since it means continuous survival and growth.
As long as there is a technology that gets rid of such heat by using energy that generates less heat that the heat being disposed, and such system is scalable, a future society will be able to get rid of such heat and energy growth can continue. Who knows what technology that may be? It may very well be something completely unexpected, like giant catapults launching buckets of lava into space or the heating of parallel world s through a multi-dimensional portal.
Physics and thermodynamics get in the way of these dreams. We might be able to economically dream of getting rid of more than “some” of the waste heat, but physics will not let you. The full explanation, unfortunately, requires more time than I have at this point. In short, it’s an entropy limitation, resulting in maximum thermodynamic efficiency given by the ratio of temperature differences to absolute temperature. As the delta-T becomes small (thermalized) relative to the surrounding environment, efficiency goes to zero.
Of course, Thermodynamics gets in the way of everything. The problem with all of these suggestions based in economics is that “Utility” is just a word without a referent; as soon as it has one, you discover that that referent is governed by the same limitations and rules as everything else. What a shock.
The statement that “If the flow of energy is fixed, but we posit continued economic growth, then GDP continues to grow while energy remains at a fixed scale. This means that energy—a physically-constrained resource, mind—must become arbitrarily cheap as GDP continues to grow and leave energy in the dust.” is not true.
I’ve outlined why at http://dcomerf.blogspot.co.uk/2012/04/economists-need-taught-about-physical.html
I appreciate you’ve now got hundreds of comments but it would be good to know what you think of my critique of your post (and I am an economist before you ask!)
Two things to consider:
1) At some point we’ll be on fixed energy budget per day (after fossils run out). Sure, maybe we can conquer fusion, but since we live on a finite planet (and we’re not leaving), we cannot build infinite fusion reactors. No matter what, we’ll end up with a fixed budget.
2) Everything we do, or even think about doing requires energy. Yes, you reading this sentence required energy. An economist would never consider the idea of measuring the energy required for a human thought. So, everything we can possibly do or even think about doing requires energy.
Let’s do the math: fixed energy budget (finite number) / amount of energy required for the smallest action you can imagine (finite number) = X (finite number). You may imagine scenarios where X is an unimaginably large number, but ANY finite number is much, much smaller than infinity.
Not sure this is a reply to my post? I’m talking about prices in a world of exponential growth with fixed energy inputs, because I think Tom’s wrong on the price implications.
I agree that exponential growth with fixed energy inputs won’t happen. But if it did what is the energy price? Tom says it goes to zero, I say it grows exponentially.
I don’t quite understand what you mean by a model “with labour (fixed), energy (fixed) and capital subject to some exponentially growing productivity”. If you mean by “productivity” anything physical (material or work), than the second law of thermodynamics prevents you from having infinitely growing productivity out of fixed energy input.
Energy efficiency of computation has been improving exponentially and has 6 or 7 more orders of magnitude to go. Lots of potential utility to be found there.
“How long can this trend continue? In 1985, the physicist Richard Feynman calculated that the energy efficiency of computers could improve over then-current levels by a factor of at least a hundred billion (10^11), and our data indicate that the efficiency of computing devices progressed by only about a factor of 40,000 from 1985 to 2009. In other words, we’ve hardly begun to tap the full potential.”
I’m pretty sure that Maxwell’s Demon is available for this shovel-ready job!
Another fantastic book that dovetails into your outlook is “Small Is Beautiful: A Study of Economics as if People Mattered” by E F Schumacher (Keynes former protege). He too took a similar view to yourself. Its a short read too.
I couldn’t read all the comments so I don’t know if it has been mentioned yet, but in the original conversation, it seems that the possibility of targeting the (post)human mind was missing.
If we can alter the human brain so that it is free from suffering and experiences its perceptions much more pleasurably as current humans, this is an improvement of subjective quality of life that does not depend on energy increases or even idiosyncratic improvements of art and customs. But even on that dimension, I wouldn’t be surprised if there were eventual diminishing returns and finite limits. That, of course, would be at a stage unimaginably better than current life.
Thanks for doing a great job!
Just wanted to add one more thing.
Science and technology is already an enabler of the steady state… It is “we” who are stuck in a mentality which causes us, through habit, to think “we will have to force the steady state upon the world” in order to deal with all the global constraints.
AI and IT, and now, good ole industrialism converted over for clean energy production is NEEDED (lest we go the route of the peak oil dieoff).
Everybody may WANT to jump into the steady state social structure as it doesn’t have to be full of congested freeways and stop signs…
If AI, IT and industrial actions are employed, then can we hope to raise economic growth to a level that can sustain the complete transformation of our infrastructure into three dimensional cities and three dimensional “product” printing machines (AI can be much more handy than just being used for the “holodeck”).
Near, in the future, the very concept of exchanging money need not even apply. This, and jobs depletion through automation is probably the most important economics debate for which I HAVE NO CLUE how we will deal with such transitional implications!
The entire Industrial revolution is only some 200 years old: Predicting what we will be doing 400 years from now, much less 2,500 years from now, strikes me as a bit ambitious.
For example, see this and note the scale is logarithmic:http://www.technologyreview.com/business/40016/
Would you (or anyone) have foreseen that trend?
I have a similarly jarring plot in the sustainability post showing fossil fuel use over a many-thousands of years timeframe. It’s a blip. Ruthless extrapolation based on our industrial revolution should really be considered in the context that that very revolution is really a story of cheap and abundant energy, in convenient (self-storing) form at high energy density. Makes me a bit queasy about hubris. I can hope the hubris is justified, but want to caution people that we should not be so blithely optimistic that the future is guaranteed to be more amazing than our puny brains can imagine. Are our brains big enough to imagine a reversal of fortunes and take that possibility seriously? Many of these dreamy comments make me wonder…
Tom, I think there are many examples in human history were human beings encountered abundant resources. This is a dynamics not restricted to fossil fuel. Megafauna, local abundance encountered by migrating tribal hunter-gatherer societies, etc. often illustrate rapid depletion – quite possibly at maximum feasible rate – by a population increasing at maximum feasible rate. On the other hand, there are examples of “steady state” economies. In both cases, I think the record supports your concerns and your position.
Now, these historical examples are not global, and the record – the waste middens – does not tell us how much awareness there was of the brutal long-term cost of short-term gains, i.e. how many Cassandras had to be ignored or exiled or stoned to death.
But the “blip” has happened on many scales, in spaces that were confined by a less-than-global mobility and reach of the various human “empires” that established themselves in transient abundance. Many a polynesian island could be considered an experiment in which the human brain was pitted against “abundant” resources.
Hubris, by definition, is not justified. Confidence is closely related to “con”. Our brains have always been big enough to ignore reality – we acknowledge it only when it collides with our bodies – but our ability to work with reality has been shown to be much more limited.
We can even try to measure it:
Enlightenment – at its most enlightened – was about using the scientific method in an attempt to transcend our cognitive limitations, ultimately by turning the lens of science on ourselves. These are not enlightened times – science provides findings about the real world, and ourselves, that we do not find acceptable. That is where science leaves the stage, and evolution begins its act. Enlightenment might not be teachable, but it could still evolve.
It’s less about predicting what we will do and more about predicting what we won’t.
But yeah, creating a ‘smart’ environment saturated with low-energy computing seems one way to maintain growth of some sort. “flops per kilogram”.
OTOH, doubling flops/Watt every 2 years will run out in a few decades too.
‘Richard Feynman calculated that the energy efficiency of computers could improve over then-current levels by a factor of at least a hundred billion (10^11), and our data indicate that the efficiency of computing devices progressed by only about a factor of 40,000 from 1985 to 2009.’
So, 24 years per 40,000. Another 24 years, to 2033, gives 1.6 billion. By 2040 we’d hit the 100 billion level, and that avenue of growth would be closed off as well. What’s left? Actually deploying the computation, perhaps to make a configurable infrastructure that responds to our every whim.
If “economic growth” means doing more of something and doing the exact same amount of everything else, then growth is seriously constrained. But that’s not how a dynamic economy works.
Of course, there are limits. But people are constantly “substituting away from” things that become more expensive or that seem less useful. In the usual example, the production of buggy whips declined substantially between 1900 and 1920.
…and was what replaced it equally or less numerous or energy/resource intesive?
The author is dismissing rising cost of energy as inflation, not real growth. In essence then, the author measures all value in units of energy. Since that is finite, value is finite, and the absence of growth is a tautology.
That is not how we measure growth, however (and the reason we don’t measure money in units of gold).
If finite energy becomes very valuable, engineers may earn a lot by coming up with new ways of conserving energy, which already is, and will be more so, a growth economy.
Beyond that, there are and will be many embodiments of value that are independent of energy (such as a good book, or a song, a movie, a manufacturing process, an economic method) that can grow independently of energy, and whose inventors may reap the benefit of their efforts independently of energy cost.
One might wish to divorce from energy, but it’s a challenge our imaginations are not equal to.
>there are and will be many embodiments of value that are independent of energy (such as a good book, or a song, a movie, a manufacturing process, an economic method) that can grow independently of energy, and whose inventors may reap the benefit of their efforts independently of energy cost.
I don’t think those things you list inside the parentheses are actually “independent of energy”. As far as I know, making as well as distributing a movie (for example) actually takes quite a bit of energy. Varies a lot depending on specific methods, though.
Obviously since energy intensive growth can’t go on forever, it won’t. I’m not sure any thoughtful person believes otherwise. But the economist’s whole point is that growth need not be energy intensive growth, as you admit.
There’s nothing in mainstream economics which requires that more GDP must mean more joules consumed. If you though otherwise, this speaks to your understanding of economics, rather than to economics itself.
Actually, I’m fairly certain it speaks to the general populace’s inability to grasp that all activity requires energy. Everything. Unless you can present something that doesn’t? I’m not asking for much…just an example of something that can “expand” in some fashion to allow for continued growth of GDP, Utility, or whatever measure you choose to use. Either those words have referents, and we can decide whether those referents can grow, or they don’t.
I’m convinced that the economically minded have no idea that the act of reading this sentence requires energy. They’ll wave their hands and say it’s effectively zero, its fantastically small, but its not zero. And they don’t seem to understand what infinity means. To an economist 1,000,000,000 years is infinity, when of course its not even a grain of sand in the desert compared to infinity.
Steve, you do not understand what economists think.
The main problem with people on energy decline forums is: they get their knowledge of what economists think from _each other_. Thus I routinely read on energy decline forums things like “economists think demand will cause more oil to appear in the ground magically” and so on.
However, the people on energy decline forums do not know what economists think, and so are not in a position to inform each other about it.
“To an economist 1,000,000,000 years is infinity, when of course its not even a grain of sand in the desert compared to infinity.”
Where did you get this from?
Where did I get it from? I made it up. Any number you can think of is smaller than infinity. All the electrons in all the atoms in all the stars in all the galaxies in the Universe < infinity. Infinity is a mathematical term that people carelessly throw around, and they shouldn't.
It's clear what "growth" economists think – human beings have unlimited potential, therefore everything we do is unlimited. The second law of thermodynamics begs to differ.
I caution against taking the argument strictly to infinity, because you won’t find any takers. The more interesting question is where things become absurd (well short of infinity).
If your point is that a lot of us regulars don’t read the professional economic literature, point easily granted. But economists, after all, are constantly spouting off in Op Eds, talk shows, and various opinion pieces readily available to the lay public. Many of them have high status and recognition, and a lot of choice about what they want to discuss. They are quite conscious of how their pronouncements are interpreted and used in everyday political discourse. If they saw some amateur spouting off about cornucopian futures, and had an objection, there is little barrier to their deciding to publish a corrective. Yet, I mostly (or entirely?) cannot recall such correctives coming from economists. Why is that??
If you can cite prominent public communications from high-status economists that attempt to enlighten the public about such matters, while not being naive about the present discussion, please, please, do so. If not, please holler at your mates until we get some.
Of course any action requires energy. It’s a tautology. But the entire idea of technology-driven growth is that technology can reduce our consumption of energy – even below a pre-industrial level. Of course there’s still some energy that’s used, and in an “infinite” time period that’s unsustainable, but whats the alternative? Not even a return to a Neolithic society can change that. I don’t see the relevance of tautological statements like these.
Rick, Steve and Boblo,
Economics is a complex adaptive system that has you all flummoxed.
As Joe and others clarified, of course action requires energy. Earlier I provided an example of the time, resources and energy required for a person in the 19th C living in rural Arizona to enjoy a top notch rendition of Bethoven’s 6th symphony. Today, he can download a better version for infinitesimally less time, materials and effort and energy.
People only need so much basic goods and food and energy, then they shift to better quality. As the cost and scarcity of raw resources become more of an issue this transition is actually accelerated. This does not require more, it just requires better.
Its the growth minded who have painted themselves into a corner. If you believe in growth, than you have to embrace the idea of infinite growth. Otherwise, you’d have to admit that we’re headed for a period of negative growth followed (hopefully) be a steady state. That would require central planning and an abandonment of capitalistic ideals – two things a growth believer cannot stomach.
It shouldn’t be necessary to go to extremes to prove that infinite growth is impossible on a finite planet, but apparently it is.
So, lets imagine every human on earth is involved in a economic transaction with every other human on earth every Planck time. Now what? 🙂
Something I find interesting is this unshakable faith in technology, when the people who are actually involved in the design and conception of technology (engineers and physicists) are much more cautious about the potential of their own realm. I wonder, where does this faith come from? Technology could in principle reduce our energy use (up to a certain point, as the second law of thermodynamics prevents never ending improvements in efficiency), but it has NEVER happened on a global scale, as the total energy use has been exponentially raising notwithstanding continuous, and sometimes exceptional, efficiency improvements. Given this historical track record, and the fundamental limitations on achievable efficiency, how can you justify, if not by faith, the statement that “technology can reduce our consumption of energy to pre-industrial level”?
The reason that those of us that understand and support a complex adaptive system called free enterprise reject centralized planning is that it destroys the problem solving algorithm and that it will lead to massive death and impoverishment.
You are right that I cannot stomach billions dieing due to the ignorance of those that do not take the time and effort to understand complex adaptive systems.
Your plank time argument is actually perceptive though…
If you work through the ramifications, there are two elements that relate to utility growth. One is the maximum rate of exchange, which would hit a limit. The other is the marginal value of each exchange. If you are to assume a maximum here a couple million years in the future, you are basically arguing that in a world where humans are incapable of experiencing additional utility, that utility increases will peter out. In other words, in a world indistinguishable from perfection for every conscious being, that progress comes to an end.
Note that I am not arguing this position, but if you are correct, then you just did.
Roger: I see no reason why central planning = billions of deaths. Is that what’s happening in China? They see the writing on the wall regarding fossil fuels, they’re pursuing renewables and nuclear on a massive scale. They’re planning on building 300 pebble bed nuclear reactors. They’re producing more wind turbines and solar panels than anyone. Capitalism has worked well on a back drop of every increasing energy supplies – what will it look like on the down side? My guess is you won’t have to wait to long to find out. If you take out energy and food, GDP has been in negative growth since 2005 in the US. What a coincidence that its the same year conventional oil and global net exports peaked…
I agree that the future does not demand that we use more energy for higher utility. But even that has limits. Utility exists in the human mind, powered by food (and implicitly fossil fuels today). At some point we’ll live on a daily fixed budget of energy – what the Sun gives us (this includes hydro and wind), and what we can generate from nuclear or geothermal. So if the amount of energy available to us is fixed (we can’t build infinite nuclear reactors), and utility means energy consumption (electrical signals in my brain at the very least), we have a finite number divided by a finite number. The result is a finite number. Maybe that number HUGE, but it is still finite.
Thanks for the comments. We are all in agreement that energy usage cannot continue forever at a constant rate. This does not prove growth in human utility cannot grow forever. Yes living takes energy, but beyond a reasonable level, increased satisfaction doesn’t imply more resources it implies better use of resources.
A better car does not necessarily take more energy or other resources than a worse car. A great meal does not necessarily involve more calories than a bad meal. A beautiful performance does not take more musicians than a bad one. For the life of me I cannot understand how the physicist side of the argument can’t see this.
As energy becomes more scarce, the search algorithm of free enterprise incentivizes substitution and efficiency and it does so in a self amplifying way.
The reason centralized planning does not work as an adaptive problem solving system would take more space than we are allowed. I suggest you read Hayek’s Use of Knowledge in Society.
What centralized systems can do is copy or import solutions that are created by free markets. Acemoglu’s most recent book on why societies fail addresses the long term potential of centrally managed economic systems.
As to your limits to growth since 2005 argument, you are aware that the decade of 2000 to 2010 was the greatest decade in the history of the universe for worldwide economic growth, right? That more people emerged out of poverty in the last decade than ever before in history?
It’s not that I have not seen and understood this argument. It’s just that I think this form of improvement dwindles into the future as we reach diminishing returns. How many rearrangements of atoms can we make before we start shrugging at the marginal improvements, or disagree about their universal, unambiguous merits? If you are content to say that even slowing to less than 0.1% rate of value-growth per year is still growth, and that this can continue forever, then I would concede. But I’m more interested in making the point that growth as we have known it (> 3% per year) will end.
“As energy becomes more scarce, the search algorithm of free enterprise incentivizes substitution and efficiency and it does so in a self amplifying way.”
You should read the Energy Trap post on this site. We’ve built a society on cheap, abundant energy. What happens when you don’t have enough energy to move to a new lower energy version of society? How do you rearrange suburbs built on the idea of commuting 50 miles to work each way?
“As to your limits to growth since 2005 argument, you are aware that the decade of 2000 to 2010 was the greatest decade in the history of the universe for worldwide economic growth, right? That more people emerged out of poverty in the last decade than ever before in history?”
Going forward we’re going to live on a fixed energy budget. Bringing someone out of poverty necessarily increases that person’s energy use – at the expense of someone else. One out of work American can fund the energy use of a lot of people, which may be what is already happening.
Roger, I’m a musician. I can’t agree with your example about Beethoven’s 6th. The idea that a recorded version is better than a live one is repugnant. Better than nothing, sure. But a high school ensemble will learn more from wrestling with a score at their own level than from any amount of consumption of Simon Rattle’s rendition at a recorded remove.
As your original post claimed, growth as we currently know it cannot continue forever. I agree. Growth will need to be more qualitative and less dependent upon using more resources such as energy.
I have no idea if qualitative growth will actually be faster, slower or the same as growth was in the past. It is even quite likely that there will be no growth at all, even collapse.
My only point is that qualitative growth does not require a constant growth rate of energy. We can rearrange the current atoms enough ways to keep us busy for the next few trillion years if need be.
And yes I care as much as you about the environment. That is part of the utility or qualitative improvement I am referring to. I want our descendants to have more prosperity, better and healthier lives, more freedom, more knowledge, more peace and a better environment than we can imagine. It is not inevitable or impossible. It is simply possible.
Also relevant: http://www.technologyreview.com/business/40016/
It looks like this blog post got some attention from Forbes.com:
Oy. The Forbes article is almost pitch perfect – resources are “abstracted”, and we get gems like “I know that’s almost entirely ignorant of theology, philosophy, logic and physics. Which is rather my point……I know pretty much nothing about the basic underlying definitions of those sciences. But I do know what the definition of GDP is….” combined with “steady state economy” [not being] actually steady state in the way that a physicist would use the phrase. Well, yes, because while material and energy will be conserved, even an economy based on just re-arranging the furniture is subject to the second law of thermodynamics.
But none of that adds to the debate. The true advancement provided by Tim Worstall is that he distills the essence of the “virtual” economy that Tom’s drunken economist proposed:
“It really is true that as value increases we have economic growth. And how are we determining that value? Through the market prices that people are willing to pay for them. And what is the determinant of that? Well, actually, it’s us. Our own often arbitrary and always subjective estimations of what something is worth to us. Which isn’t, as I hope can be seen, something that is bounded by any physical limit at all.”
Or bounded by reason.
This is Green Lantern Economics – value is all in our power to *will* it. Or, in the words of Ronald Reagan: “There are no such things as limits to growth, because there are no limits to the human capacity for intelligence, imagination, and wonder.”
But then we already live in a virtual economy – of leverage and bailout funds – and maybe our only problem is that the fiction we call currency is spilling over into the real world of people, resources and machines? Maybe focusing our financial industry and economics research exclusively on Second Life, Farmville and World of Warcraft could bring about some real advances in our understanding of value and utility?
I think the problem in this debate is that the two sides are not really discussing the same issue. The economists are discussing economic models and definitions. Tom is concerned with survival. If contemporary monetary policy is any indication, we could call ourselves luck if the latter was not influenced by the former, because the reverse appears to be falsified – like math, economics will survive even if humanity passes.
In wonder whether we can find a definition of GDP and value that will asymptotically approach infinity as population count approaches zero?
For those interested, here is a rejoinder to the Forbes piece from Brian Czech at the Center for the Advancement of the Steady State Economy:
[edited out some of the bite]
A rejoinder? I see there a  formulaic, [isolationist] manifesto.
1. Start with some over the top glorification in the bio (“He is a true hero for sustainability at a time when we badly need one.”)
2. Before engaging any argument, immediately dismiss the proposal at hand and the proponent (“achilles heel of the human brain”, “munchkins”, “Whac-a-mole”, “homo polyannas before him”). It is best to do this by simultaneously creating imagery of prior crusades and heroic deeds (“smash one and up come two”)
3. Make various declarations about the ‘real’ nature of reality from which the proponent is clearly disconnected.
4. Toss out a Borg like resistance-is-futile declaration, i.e., I-don’t-care-what-*you*-say, just-think-the-way-*I*-think (“Why can’t Worstall and the perpetual growthers just face it with the rest of us”)
I don’t agree with the argument about thermodynamic constraints on energy usage: “We understand the phenomenon perfectly well, and can predict the surface temperature of the planet as a function of how much energy the human race produces. The upshot is that at a 2.3% growth rate (conveniently chosen to represent a 10× increase every century), we would reach boiling temperature in about 400 years.” We need to keep in mind that not all of our energy usage results in waste heat. A large fraction remains as “embedded energy” in physical products. For example, a hugely energy-intensive industry is smelting bauxite into aluminum. You would get a lot of this energy back if you burned the aluminum, but provided no one ever does that, this energy is part of our consumption but will not contribute to heating the planet.
My hunch is that you’re talking about less than 5% of our energy production. All the transportation energy, all the residential energy, even most industrial energy ends as waste heat. I may be tempted to even go as low as 1% being locked up.
See Appendix B, Energy Intensity of Materials Produced in the United States, in http://www1.eere.energy.gov/manufacturing/industries_technologies/aluminum/pdfs/al_theoretical.pdf
It is a few percent of the 100 quads of US energy usage per year. At any rate, my point is that the thermodynamics argument is not an absolute constraint: over the ages, the fraction of our energy usage that goes to transforming materials might change significantly.
I see a number of people have complained about this, and well they might, because it’s a nonsequitur. Perhaps this can be illustrated by substituting “salt” for “energy”. The activities that comprise the economy all depend on its members being alive, and without dietary salt, they soon wouldn’t be; no doubt you are aware of the etymology of the word “salary”.
To hold the world to ransom by buying all its salt, you would have to not just have title to all of it, but physical possession. Otherwise, you would find your property rights unenforceable. And how would you reassure yourself that cheaper supplies than the ones you had bought would not become available?
This argument becomes problematic well before you get to the point of having to enforce property rights on the entire supply.
The biggest issue with this claim is that, while the market price for salt may *currently* be arbitrarily cheap, it would be impossible to execute the transaction of the entire global supply at this price.
When you start hitting significant quantities (relative to the total global supply) then supply and demand will kick in and increase the price.
Suppose the current market price for salt is 1c per million kilograms. Suppose further that McDonalds conveniently uses a million kilos of salt per year across the planet, and that it happens to know that if it was forced to sell its food unsalted then some customers wouldn’t like it and it would cost them $1 billion in revenue.
Why would the salt supplier who owns the last million available kilograms of salt on earth sell it to this ransom-er for $0.01 when, if push comes to shove, McDonalds would be willing to pay up to $1,000,000,000 for it?
There are numerous papers that examine the relationship between energy and economic growth. To provide a recent example: this 2011 paper by Davidson et al. Figure 3, a collection of log-log plots that show correlations between watts per capita and socioeconomic variables such as national poverty and resource consumption, is particularly interesting. Another tidbit:
“The exponent for the scaling of energy use as a function of GDP, 0.76, is reminiscent of the three-quarter-power scaling of metabolic rate with body mass in animals … In a very real sense, both animals and economies have “metabolisms.” Both consume, transform, and allocate energy to maintain complex adaptive systems far from thermodynamic equilibrium.” [I would argue that since energy is a conserved quantity, it is not consumed per se. Exergy, however, is consumed.]
My chief criticism of the paper is that the authors only briefly mention efficiency in their suggestions for how to maintain economic growth as global population increases and fossil fuel extraction rates and quality declines. They argue that reducing BTUs/capita automatically entails making sacrifices, but as Ayres shows,increasing the efficiency by which primary energy is converted into useful work is one of the main drivers of economic growth. Put another way, process improvements that provide more useful work per unit input can permit economic growth to continue — to a point — even if primary energy supply is held constant or even declines. When you consider the enormous waste involved in current processes (e.g., routinely using high-quality fuels to produce low-grade heat instead of high-quality electricity [pure exergy], dissipating waste heat into the atmosphere instead of putting it to productive use), it is clear that we’ve hardly scraped the surface when it comes to efficiency. That being said, the Davidson paper is a useful reminder that the human economy takes place in physical reality, and work is required to keep it running.
And if you’re interested, this paper by Ayres and Warr reviews other papers that have tackled the growth-energy causality question. They also look at what happens when exergy is included in the models.
[shortened by moderator]
“Growth” is not a good word to use in this discussion because so many different parts of the economy can grow or shrink at the same time. As for growth in economic “utility”, such is intimately tied up with human emotion and feelings. For example, an increase in economic utility could result from spiritual insight or a simple change of mind. As gasoline prices go up, one takes up XC skiing rather than snow mobiling and gets greater economic utility from the former pursuit at less energy and $ cost, going to the snow at 40mpg rather than 15. Cost is down, utility is up.
I think that considering any time frame for the future longer than about 40 years is ridiculous. No one can predict economic trends for more than six months. Even 40 years is probably ridiculous, but by then the world might be settling into an approach to steady state or be trying to recover from nuclear armageddon, with the attendant opportunities.
Concerning energy, an analogy from ecology is suggestive: when there has been almost total destruction in an area by fire or other catastrophe, the first colonizers are rapidly growing plants (weeds) which crowd out their competitors, but which are energy inefficient. Later, the eco-system, necessarily uses the same amount of incoming energy, but becomes both more complex and more energy efficient, the two things going together. In our current human economy we have abundant cheap energy in fossil fuels. In the future it is hard to predict whether total energy use will rise or fall, but one could easily assume it remains about the same, but that as the cost of high intensity energy climbs, there could then be an incentive towards even more complexity in our economy than at present. Clearly, there are tremendous opportunities for energy efficiency improvement. Economic change is also driven by fads. Around 1980 many of us became excited by PCs. They were only a fad, but what fun! In short order they started making money. Nowadays several of my retired engineering friends are taken with the idea of zero net energy in their households. Such is certainly not cost effective, but the fun and challenge is worth the money. Later, such might become practical. The whole idea of living a happy, low consumption life is one whose time could come. Low consumption of materials and energy, but not entertainment.
Of course, ecosystems are also marked by climax communities, and slowdown in the rate of change or growth…
I’m glad this is coming up more and more in discussions of macroeconomics. When I studied economics in the 80s at Berkeley, I asked three different professors how growth could continue forever. I never got a real answer. The replies were along the lines of “that’s a big question but not relevant”, “we always find a way” and so on.
By contrast, when scientists issue a warning, backed by data, it tends to be something civilization ignores at its peril. Thank goodness we did not ignore the warning about CFLs and the ozone layer, that was a case where we acted and it appears we really did prevent a catastrophe. If only the same will existed for transition to a steady state economy.
Well, well, well! This has generated a lot of conversation. I think many comments here reveal just how stuck we are in love with growth. We are desperate to have more of something next year, even if it’s concerts and the flow of money to purchase them. I think it’s really quite simple. Using GDP or other measures of dollars flowing as a metric may have some uses. But it’s less useful than we think, and in fact it is dangerous to assume it is measuring something good. Our assumption that more more dollars flying about the economy is somehow intrinsically good is just ludicrous. It’s small-minded.
I challenge all the commenters to step outside the box of 20th century thinking that confines them. Let’s be more concerned with fulfilled and meaningful lives. And let’s be really radical and imagine our lives might not even have to be MORE meaningful or fulfilling next year than they were this year. Satisfaction can be a very satisfying feeling. Can we come to fall in love with being satisfied?????
Director of the documentary,
GrowthBusters: Hooked on Growth
Doesn’t the definition of a “steady-state” economy mean that there will be no real GDP growth, but only nominal growth? I don’t understand the assertion that GDP can grow indefinitely just because the arbitary “utility” can. There will still be physical limits inside a steady-state which would be subjected to price, which will affect GDP.
“But if energy became arbitrarily cheap, someone could buy all of it, and suddenly the activities that comprise the economy would grind to a halt”
This sentence is completely full of fail. By “trying to buy all of it” he raises the price so its no longer arbitrarily cheap. Energy has a /very/ inelastic demand curve (the reason it does is because so much depends on it), which means that its extremely sensitive to changes in demand, and attempts to corner the market in energy fail comically and quickly.
One neat thing about the price system is the items that are most important for other things, also are the hardest to corner, even if their price is currently very low.
Only reinforcing my point that energy will not sink to arbitrarily low price. Again, the whole cornering thing is not a prediction, but a tool to demonstrate the absurdity of the economist’s view that energy prices would sink to irrelevance. Physics doesn’t matter—such a notion seems to say.
But I don’t think that the economists’ view is that energy prices would sink to irrelevance. Exponential growth with fixed energy inputs implies exponential growth of energy prices in first order models of economic growth (elasticity of substitution = 1 => constant share of income paid to energy; elasticity of substitution > 1 => share of income paid to energy tends to 100%).
The scenario you paint is more in line with my intuition. But the economist I spoke to initially treated energy as a basically abundant, and of secondary importance, so that the economy would grow to the point that energy was a trivial expense: as it is for the very wealthy today.
But you used this falling price subject to a floor to conclude “a floor on energy price and therefore an end to traditional growth in GDP—against a backdrop fixed energy.” With a rising energy price we can easily conceptualise economic growth (due to rising “productivity”) with fixed factor inputs. I don’t believe or propose this, but you’ve lost some of your argument’s “QED”.
I certainly think that technology very soon will hugely reduce our energy and resource use by virtualisation.
Augmented Reality, as depicted in fictions like “Dennou Coil” and “Halting State” is easy too see happening in the next few decades.
It would allow us to have virtual items, but treat them more or less like real ones. It wouldnt be so far as to plug us into a virtual world – but by adding to the real world it still saves us a lot. Probably 1/4 or even 1/2 of all non-food products could be replaced by a simulation. Sure, the glass’s and the energy are a extra resource, but they would save a lot more – especially when you factor in essentially no energy is used to ship virtual products.
That all said though, I think theres another limit preventing unlimited economic growth: human spare time.
That will always be finite no matter what we do. Even if we live forever and somehow get rid of the need for sleep.
Finite human time means finite amount of time to spend doing things – a finite need for entertainment, a finite need for cloths etc.
We can become more and more wasteful in the day and (stupidly) this would help the economy, but we cant do that forever.
So really continued growth is impossible even if energy is removed from the equation. At best we can push the need for change back by increasing spare time (possibly put a max cap on the number of working hours each year once you earn over a certain amount? that way rich people are forced to take longer hollidays and thus spend more during them?). But this would only be a short term fix.
I welcome this fresh breeze of air: sadly enough the so-called economic science is mostly dogma and certainly has no fundamental theory of how it meets physics, i.e. the real world. Each time the economist character (or even some of the commentators) mentioned virtual products or intellectual property (same thing) I laughed heartedly and remembered that faculty joke about the engineer, the physicist and the economist lost in the desert with a can of beans that ended with the economist proclaiming “let’s suppose we have a can opener”.
The scholasticism and pseudo-scientific dogmatism of Economics was eventually met by Ecology, which tries to do what Economics should from a realistic viewpoint: manage (nomia) the environment (oikos) according to science (physics, biology, etc.) But Economics is trapped by illusory thought, as it measures everything in virtual units (money: in the end money is just tokens) and fails to offer comprehensive analysis and efficient planning for Humankind.
This is very dangerous for Humankind, because economists, most of which are not aware of the feebleness of their imaginary constructs, are too influential, while ecologists are disdained as some sort of good hearted morons who somehow (how?) fail to see the facts of life (really?)
Thanks for this great criticism of Economics. Much more is needed but every bit helps.
I characterize many of the arguments made on this forum by economist-types as starting: “One could imagine that in the future…”
That indeed makes for interesting intellectual exercises. And I have much respect for the intelligence and creative imaginations of economists. And the models they use have been reasonably successful at explaining our present (growth) world. But there is still a general reluctance to accept that physics and limits have any place in the conversation. It’s not monolithic: some are more willing to entertain these ideas than others. In the end, I know for a near-certainty that if physics does have anything to say on the matter, it will.
The study of economics, so called, has been limited to times with expanding energy consumption. Asking an economist how a world with necessarily shrinking energy consumption would be is like asking a physicist how the universe would be if it were not expanding.
I’m sure the answers would be interesting, but they would sorely lack the grounding effect of actual experience.
Parallels reasonably well with Newton’s model, when compared to speed of a horse drawn cart. Now, with economics traveling at ever higher speeds, one must allow for relativistic effects of _finity_ of our world.
I enjoyed this a lot, and as an ecologist I have also been frustrated by the inability of mainstream economics to consider objectives other than continuous growth. But I echo others in feeling that this conversation would go much further if we could hear the views of the economist expressed in more detail and in his own words. Please consider asking him (or another friendly economist interested in a challenge) to write rebuttals to your arguments. Otherwise we’re just talking among ourselves.
“Titanic” is also one of my favorites movies, a true work of American prophecy. The sense of denial in the comments here is just like that in the movie. The inability to grasp the implications of even the simplest physical constraints does not speak well of our scientific literacy. And speaking as an economist in industry, I see the same sense of denial in the financial world today, signaling to me an imminent financial collapse (at most in the “intermediate term”). I hope “Avatar” isn’t prophetic of resource wars to come. It would be so much nicer if we solve these issues peacefully.
Two related posts you might enjoy: first, I explore the metaphor of the super-nova with respect to the recent credit explosion and resulting debt implosion and expected final blow-off at http://animalspiritspage.blogspot.com/2012/03/debt-supernova-metaphor.html . The basic idea is that after the debt deflation the central banks will not know how to do anything other than hyper-inflate.
Second, there is an emerging literature on just how much the distribution of income and wealth affects our heath as a species; see http://blog.ted.com/2011/10/24/how-economic-inequality-harms-societies-richard-wilkinson-on-ted-com/ .
We could experience exponential gains in welfare simply by changing the distribution, according to Wilkinson. The current distribution is literally pathological.
Physicists create theoretical models and then test their models with real world experiments. To be right, their models must be proven to work in the real world.
Economists create models and deliberately take out every “real life” component. Ever seen David Ricardo’s comparative advantage model in the real world? China can grow apples and produce apple juice more cheaply than the US. US can grow corn more cheaply than China. So China should stick to apples and US stick to corn?
Does that “work” in 2012 and in 2062? A model that is right is one that is right NOW and one that is right in 50 years or 1000 years. What are the effects of growing a single crop like corn on the same piece of land over and over again? Do we have enough oil to continue transporting corn to China at cheap prices? And vice versa? In 50 years, will China have enough fresh water to grow apples for the US consumer? Do economists even think about the severity of the fresh water shortage problem in China?
Economists will take all those variables out and say that their model “works”. Those are external variables that should not pollute their models. That’s not how real life works.
Be careful of economists and their models. Most of the time their models are based on fantasy worlds with infinitely supply of oil, fresh water, and top soil.
“China can grow apples and produce apple juice more cheaply than the US. US can grow corn more cheaply than China. So China should stick to apples and US stick to corn?”
As long as the initial conditions remain true. Of course, if it were cheaper 50 years from now from China to grow corn and the US to grow apples, then they should reverse positions.
Comparative advantage does not assume that a given advantage is _permanent_.
“Do we have enough oil to continue transporting corn to China at cheap prices?”
This is taken into account by economists. They think it would be worthwhile for China to export apples only if those apples were cheaper _including_ transportation costs. This point is not included in intro textbooks because those textbooks have simplified models. If transportation costs became a large part of the total cost of a product then the simple textbook model would have to be modified to incorporate transportation costs, or it would approximate reality less well.
Bear in mind that models usually start with simplifying assumptions and then _add_ complications until they reasonably approximate reality.
“In 50 years, will China have enough fresh water to grow apples for the US consumer?”
If not, would China still have a comparative advantage at growing apples?
In 50 years, China’s fresh water supply will become so polluted that everything they grow will be toxic. And oil prices will be so high that the cost of transporting the food to the US will be prohibitive. China will no longer have a cost advantage.
Why did the model not take that into account? Shouldn’t the PV (present value) of the future cost of clean fresh water be in the model? How about the PV of the cost of replacing the top soil that they are losing? And that of the future cost of oil?
Economic models that are correct today but its continued use will result in environmental waste land are being touted as correct.
You experience a little bit of the PV of future clean up every day when you buy bottles. One pays a bottle deposit that is redeemable when the bottle is returned. How many economic models take into account the “bottle deposit fee” of replacing fresh water, top soil, or oil?
Show me one because I would love to see it.
Interesting, but I seriously think that the whole discussion is misguided. The terms used are pointless.
Instead of yapping on about “economic growth”, we have to start talking about available resources, resource use by humans and how we can maximize our efficiency (ie use the minimum of resources while still achieving maximum progress and comfort for mankind in an indefinitely sustainable and dynamically balanced world.)
“Economic growth” has no role in that discussion; “economic growth” is a discussion about our current societal model that only slightly touches on the things I mention and we can scrap the entire current societal form – and should, in favor of one that’s focused on and based in the notion of resource use rather than money. We just don’t need to broken abstraction layer, especially since the broken abstraction layer is what’s killing mankind.
The economist treated your ideas with absolute respect by refusing to dismiss them without having thought carefully about them. It does not reflect well on your character that instead of reciprocating the respect with which he gave you, you chose to write an insulting post in the public without having consulted his opinion, all the while admitting that you have 1. a poor recollection of what actually happened, and 2. a very scarce understanding of whether the economist’s arguments are really essential or even relevant to current economics research.
I was careful to keep insult out of my recount—I have genuine respect for the guy, and the conversation was perfectly respectful, I thought. I also made my best effort to be true to the actual conversation. It isn’t verbatim, but the core arguments are well-represented. To your other point, I would have expected an economist to have thought carefully about these issues before—just as I would expect any physicist to be able to hold an impromptu discussion about the conservation of energy.
Why? You’re a physicist who specialized in matters of energy and have wrote extensively about limits of energy growth. You certainly can’t expect an economist -who might not even specialize in growth theory, a small discipline in macroeconomics which in turn is a very small part of economics – to be able to digest all your arguments about heat radiation, energy efficiency etc. at ease and then come up with persuasive counterarguments. The fact that he considered and thought about your arguments nonetheless demonstrate an intellectual sophistication and humbleness that you, unfortunately, does not seem to possess.
And the fact that you believe you won the argument – on your territory – certainly does not mean that most or all economists do not have valid counterarguments. If you’re up for an intellectual challenge, find a few economists who specialize in areas of growth and technology rather than a random economist you meet in a dinner.
Truth be told, the economist was probably humoring you and taking the opportunity to learn something anew. To take the discussion so seriously and claim that you have discredited all of mainstream economics is as pretentious and delusional a claim as you can possibly make.
If you can point out where I “claim that [I] have discredited all of mainstream economics,” then I deserve your labels. As it is, I find your reaction to be a bit extreme. All I do say is that I was surprised that the concept of growth—which I perceive to be of fundamental importance in economics as practiced today—was not as well fleshed out with regard to physical limitations as I would have hoped/wanted. And for what it is worth, prior to my personally meeting this particular economist, I heard him using the grains of rice on a chessboard story to illustrate the counter-intuitive nature of exponential growth. So it seems I wasn’t straying too far from things he has thought about.
Growth theory might be of central importance to policy-makers who are drawing from economics to achieve economic growth. But even if all of growth theory turns out to be completely worthless for some reason, that would barely affect the remaining 95% of “traditional economic thought” – which you don’t seem to have encountered yet.
As an example, political science as it exists today is almost entirely dependent on methods of analyzing human interactions – game theory and social choice theory – that are developed in economics. Without these methods, much of the understanding we’ve recently gained about how countries interact with one another, or how voters behave, would be impossible.
As another example, psychology and behavioral economics have been heavily borrowing insights learned from each other for the past decade. Much if not all of such collaboration has nothing to do with growth, or even the “economy” per se. Rather, these studies lead to more sophisticated understanding of human decision-making and behavior under different circumstances.
If you find an economist who works in these disciplines, he almost certainly will have little understanding of how energy limits economic growth. In fact, he might not even have a good idea of how economic growth works. You might find it strange that the vast majority of the people in the discipline ‘economics’ do not really study the economy – but that is what the discipline is about today. To expect all economists to be able to discuss about economic growth and its connections to energy conservation would be ridiculous, just as you would not expect any biologist to have a sophisticated understanding of quantum mechanics. Your interest in issues of growth is a testimony to your intellectual diversity (which I encourage you to expand further), but you cannot expect any academic to intelligently discuss a topic which has no relation to their own field of study.
As for your first point – one reason I find this post extremely frustrating is the anti-intellectualism that it encourages. If you’re truly trying to foster intellectual debate, you would explicitly declare your limited understanding of how current economics research is being conducted (rather than saying that there is no “real” economics textbook besides a ecological one), and that a dinner-table conversation with an economist certainly does not generalize into a debate with all of economics, and that you look forward to a better understanding about the issue and encourage your readers to do so. But look at the disparaging comments and your equally condescending replies – sweeping statements about the research of economists without any attempt to read beyond your N=1 sample. If an economist criticized the entire discipline of ecology in this manner, based on his own recollection of a dinner-table discussion with one particular ecologist, you probably would not view it as a fruitful intellectual exercise.
You’re certainly welcome to write what you wish; and your readers are free to make whatever generalization they wish. But I believe it’d be much better for the sake of intellectual discourse if you were to follow up with a guest post in which an economist who actually works in related topics can prepare an argument on the topic. As it stands nowadays, this post is nothing more than an extremely narrow diatribe. It might make you or the readers feel better or superior, but it’ll not make you any more knowledgeable.
Indeed I want to learn. The post reflects some of the (evolving) modifications to my thinking that the conversation fostered. Many of the comments and back-and forth in the pursuant discussion are about the substance of the argument, rather than simple posturing. Is there some of the latter? Yes. Do I have some bias when it comes to physics-type thinking rather than economics-type thinking? Yes.
But consider that I (or sometimes another moderator) approve or reject every comment that comes in. If I simply wanted to run a victory lap, I would expunge these counter points, or only take the ones that make the contributor look foolish in some way. But I find them valuable—especially the ones with thoughtful points of substance (like those from Harri Turunen, Tom S). I don’t happen to agree with the philosophy/assumptions behind a number of these statements, and would like to better understand the fundamental disconnect. I think you are being too harsh in your perturbitude, dwelling on the “culture war” aspect of the spectacle.
I do wish I had more time to devote to absorbing and responding to comments, but 259 comments in, and a demanding job: it’s impossible.
I do respect the fact that you have continued to post my comments despite their overly harsh tone, which I apologize for. Thank you for taking the time out to respond to my criticism. I hope you seriously consider my suggestion to have a guest post from an economist who works in this area.
“To expect all economists to be able to discuss about economic growth and its connections to energy conservation would be ridiculous”
Can you point to just one example over the history of mainstream economics where the laws of thermodynamics have been incorporated into the analysis? Since energy drives absolutely everything, it is not unreasonable to expect that someone in the field should have at least a rudimentary understanding of how energy works and how it moves through economies to “produce” the goods and services that economists are supposedly modelling and studying.
But pick up the book “Economic Growth” by Barro and Sala-i-Martin, and you will not find a single reference to the words “energy” or “oil”.
I’ll say it now clearly: just as Joe has speculated, I have absolutely no interest in continuing this discussion, and that is precisely because of the reasons he suggested. It’s an insult to say that I’ve retreated to an “invisible castle” when what happened was the exact opposite; I’ve no idea how I could have made things more explicit. I’d even go as far as to say that that whole comment (and also almost all of this discussion) springs up from a fundamental lack of understanding the economic science or economic concepts. Seriously, if you can’t be bothered to figure out what something as elementary as “utility” means (this has been disparaged out of ignorance several times), at least have the sense not to reveal your foolishness.
Fascination and humorous read. You have a talent for this type of exposition.
I linked to your post at Mike Norman Economics, where I am a contributor. I am an amateur economist but a professional philosopher specializing in the area of consciousness studies, specifically in philosophy of spirituality. Since prehistoric times humans have been exploring inner space. This, I believe, is the frontier of the future and the “space” is unlimited. This will present a new dimension of “economics” that will solve the problem. The economist was on the right track in suggesting virtual reality but wrong, as you pointed out, in that it is an ersatz reality that unlikely to satisfy basic human needs and desires.
Inner “space” is entirely real, however, although it constitutes a different dimension of reality that transcends ordinary awareness. This is the area in which sages report that the only abiding happiness and satisfaction is to be found, for the apex of this exploratory journey to which each is called is complete fulfillment. This is the dimension pointed at symbolically by normative religions and elaborated in their mystical traditions. The core spirituality taught by sages from time immemorial and across the globe show how to transcend ordinary awareness and access higher cognition. For a summary of perennial wisdom in contemporary terms, see Meher Baba, God Speaks.
The conversation falls apart exactly the same way all futurist conversations fail: With the belief basic definitions and cases will remain the same. For instance, what will economic “growth” mean 100 years from now?
Today, growth is defined by GDP, or rather by dollars of GDP. But what will “Product” mean in the future. Will economic growth mean we all will have more clothing, bigger houses, more food, and more toys? Or will it mean we are happier and healthier and more intellectually satisfied — and how will that growth be measured.
I don’t really know what the physicist’s suggestion is. Shall we all adopt more austere life styles — a world of Amish? And if we did, would that solve the problem? Even a no-growth population of Amish eventually will run afoul of entropy.
So really, what is the suggested alternative?
Lately, it has become oh-so-fashionable to predict the end of the world based on our selfish profligacy, but when I comes to solutions — where are they?
Rodger Malcolm Mitchell
Based on the problem as you state it, I do see potential hope for the future. You correctly point out that we will have to make do with less physical stuff, but that this does not necessarily have to mean a drop in quality of life or happiness, because consuming more stuff actually has virtually no correlation with happiness. This means that economic “production” will have to be measured differently than now — more like Bhutan’s Gross National Happiness.
You ask — what is the suggested alternative? Well this site has already done a rough order of magnitude critique for the various renewable energy options available, with solar coming out at the top of the list, arguably closely followed by nuclear, then wind. Most of the others are merely niche players.
I envision that “once” the economic leadership can be convinced of the urgency of the problem (“if” seems more likely based on the comments from economists here), we could (hopefully) use our remaining fossil fuels to build out such renewable infrastructure. You’d have solar panels on your roof, drive an EV (admittedly, many fewer cars would be around than today), take more mass transit, ride a bike, design your house to incorporate passive heating, maybe use a heat pump to heat or cool it, use a wood stove. Overall energy use would go down, but it would be used more intelligently. This would result in a dramatic reduction in GDP as measured today. But it would increase overall life satisfaction IMO.
I agree, except for the point that GDP is the problem. Basic microeconomic theory says that consumers try to maximise their utility (i.e. satisfaction). Let us say that current GDP per capita is 50.000, which gives a satisfaction per capita (assuming you could quantify it, it is of course ordinal but that isn’t important) of 50.000. So 1 dollar gives you one unit of satisfaction. Now you’re saying that the changes you propose would drop GDP per capita, let us say to 30.000. But you would say that satisfaction would increase, let us say to 60.000. Notice something? The fall in GDP is nominal not real since the value of the currency has improved. One dollar now gives you two units of satisfaction. Since the value of the currency has increased more than GDP has fallen, there was growth, real GDP is higher than before. Now, you would be right in saying that we couldn’t easily measure this. But this error derives not from GDP. It derives from our measure of inflation, the Consumer Price Index, which cannot easily account for quality changes (as opposed to quantity changes). The increase in satisfaction one could get with spending far less money would not be registered by CPI, unless we augment it with other measures.
It’s important to note, whether or not economists think about these questions from time to time, every economic model ever made is consistent with every possible collection of laws of physics (even ones where energy isn’t conserved)
Structurally, the approach to modelling the economists use prohibit one from reaching any conclusions about the effect of energy on the economy.
I’m only a layperson, but I think you’ve glossed over a few things. Strictly speaking what Keynes stated was independent of economic growth. He primarily spoke about macro-economic inefficiency of the private sector. For instance an economy getting stuck at below average unemployment levels and needing some sort of government stimulus to get back to where it should be. That can happen in a growing, steady-state, or even shrinking economy. The basic idea is just that if unemployment should be at N%, and it’s stubbornly at (N-M)%, then a sort of economic boost may be needed to get it out of that rut. I imagine there are plenty of other examples.
Having said that, those ideas are used politically to bolster support for deficit spending even if we aren’t in a recession, which is where Keynesian ideas get portrayed as expansionist, even if they aren’t. People will co-opt the idea for their own interests, but that doesn’t change what Keynes referred to. I can’t speak to the other two economists, but I imagine there’s more hyperbole than fact in painting them as individuals who believe in indefinite (as in infinite) growth.
While one super-good desert may not be universal in it’s utility, I’m fairly sure there are a basket of goods that are (fresh water, housing, transportation, etc), so there is something to be said for expanding human understanding/skill. GDP is also independent of resource inputs within realistic bounds. If all auto manufacturers started building cars that used half the resources to make, but were priced the same, GDP would remain the same. Economic growth in terms of GDP only relates to the amount of regulated economic activity being done, not strictly to how much energy/other resources we use.
The economy is certainly roughly bounded on both ends in terms of both resources and energy use, and ultimately GDP growth is bounded by those restraints, but there’s a lot of wiggle room in there. You can have one economy where everyone races around in monster trucks between work and their McMansion five times a day, and one where people go from their earthships to work once every five days on velomobiles. They can both have the same GDP. Someone could reasonably argue that excessive energy use now can handicap future economic activity, but that (an externalized cost) isn’t exactly something new.
I think that what I see here is something closer to a difference in context with respect to academic fields than a genuine belief that economic growth can continue indefinitely in a system. That said, maybe I’m wrong. The only way to tell would be to get an established economist to speak with and flush out all the details/meaning. You could ask someone like Matthew Kahn to do a guest interview.
Thanks for sharing an enthralling idea–which has now been pestering me for 24 hours. A more lengthy response is at the post linked to my name. I share some of the other commenters’ concerns about the economic hypothesis. But what’s most interesting to me is this methodological conflict between the hard and social sciences. How often do the findings of one so directly challenge the assumptions of the other? Tom, I wonder if you’ve thought of other examples yourself.
Very telling conversation. I’ve seen numerous similar examples from both economists and politicians.
First off, the terms do need better definitions. Growth and all its related terms can be put into many contexts so hard definitions across contexts is tricky.
Assuming human prosperity to be the general infinite term definition, it’s still subjective. However, in the context of equating it to energy use, we should assume it’s relevant to the next half century.
In that context, the question comes down to “can we sustain what makes us prosperous, raise the global standard to that point and do so all without running out of energy?” Sure. It’s not really as hard as it sounds but it takes some investigative thought to accept.
Energy use in the US is wasteful by my guess of about 90%. We take unnecessary trips, to buy unnecessary things and then spend even more energy disposing of them unnecessarily. Up to 95% of our goods are in the landfill in 6 months. We even create unneeded industries just to pay people for doing nothing productive.
In a world where we had cheap mass personal transit like http://www.skytran.net, our entire auto industry and dozens of other related ones would be the size of the golf cart industry. (Or REPLACED by it!) When we get truly efficient CHP solar with built-in, non-battery, energy storage down to a 5 year payoff, the entire energy industry will morph into specialized blends for those who couldn’t convert easily to electric. When we finally figure out how unfair the banking, finance and insurance world it, we’ll see people retain enough personal wealth to substitute cheap products with generations-lasting, high quality ones that allow wealth (i.e. prosperity and embodied energy) to be passed to later generations. When we accept that permaculture and aquaculture can both (choose your geography) sustain a family on 1/10th of the land currently allotted to feeding them (including all the meats), we’ll replace consumerism food industries with healthy, sustainable, localized ones. And lastly, when we finally get all our computing wants figured out and get ubiquitous home automation, “glass” computers, mobile phone computers and have them all ran from a few milliwatts, we’ll see new product cycles being replaced with the next ‘service pack 117’ upgrade.
When we get to this point, we’ll also see people trending toward lower and lower retirement ages, which further supports the “prosperity per kilowatt ratio” to soar. At this point, we’ll have abundant energy coming from the sun, by machines made from that same energy and recycled materials and we’ll be able to increase it at will. Does this mean perpetual growth?
No. Even though we can reduce the denominator (fossil fueled) and by ‘services’ increase the numerator (ala choosing to hire my neighbor to mow my yard instead of doing it myself increases GDP), there’s a saturation point of what people will want. Enter the bell curve and you can easily see that ‘always wanting more’ just won’t happen forever.
The only problem is choosing this path over profit scares because all the solutions already exist and are waiting to be adopted.
This is a great post, thanks again. I work in IT and the maybe playful banter about virtual reality giving an ‘out’ to constrained energy supplies made me think a bit more about this. My thoughts are essentially that virtualization, and information technologies more generally can’t be exempt at all from energy bounds.
While we have Moore’s law (which also can’t continue forever), we also have an increasing fraction of the economy fully invested in delivering and maintaining IT to the rest of the economy. Just as there is some price for oil that implies 9/10 people are working on delivering oil to the 10th person not directly involved in producing, delivering and refining oil, there is some complexity of IT that I think implies the same thing. We likely can only build and maintain IT complexity at some fraction of the wider economy.
Gail Tverberg would be the sort of person to put numbers on this. In any case, my wider point is that even energy consumption of the servers aside, the complexity of the system will directly mean a minimum N people involved in delivering IT as a service to themselves and the rest. All of those people have to clothe and feed themselves…so there is this bound, and I suspect it is harder, faster than the plain electrical power required to deliver so many instructions per second or Gb/s.
I haven’t seen it mentioned on this thread yet, so I thought it might be fun to see this post mentioned on an economics blog:
When your assumptions lead you to an absurdity, challenge your assumptions.
The simplest way to see which of your assumptions is leading you astray in this case comes from a physicist:
“There’s plenty of room at the bottom.” — Richard Feynmann
Great post! The discussion was very interesting and exciting to follow!
But let me point out:
“But if energy became arbitrarily cheap, someone could buy all of it, and suddenly the activities that comprise the economy would grind to a halt.”
The Economist here does mention that at this point one could ration energy and distribute it equally to people while the economy could continue to grow with art, culture or whatever. No one could then ‘buy it all’.
Additionally, related to what others have said: In many ways economics is politics. Economic growth is not contrary to using any of our resources more efficiently and if you simply keep on internalising externalities…or as the Austrians claim, let the market violently reset itself (dubious in my opinion)…growth can be both economic and sustainable.
That being said, I think a higher level of science understanding at the top levels is vital. But stopping reckless consumption of limited resources and stopping economic growth are two separate things. And besides, limiting the discussion to earth and talking about time frames longer than the end of the century is not the calculations the market should have made (should, because the actors in the market are not as rational as you physicists).
Tom, a critique was posted in the thread to the link I provided to your post. It was divided into four parts due to the character limit per comment in Blogger. I thought you might like to take a look. It’s beyond my ability to assess, but it seems pretty specific.
Computer power comes with a price:
How Much Electricity Does Google Consume Each Year?
How much energy does the internet really use?
So, Just How Much Energy Does Google Need to Power its Massive Empire?
wow, that post has stirred up a hornets nest! There seem to be a lot more (and stronger opinion) posts than to “galactic scale energy”, but I guess the readership of your blog has also gone up. If you could you plot something like hits/day, I’d be curious to see that graph.
I can see how your post could be interpreted as unfair towards the economist, but the way I understand it you are quite aware that your sample size of one isn’t really representative.
After reading through most but not all of the comments, I believe the basic misunderstanding lies in your expectation of what someone in a certain field should know: As an engineer or physicist one expects every other engineer and physicist to have a reasonable understanding of the basic underpinnings of physical science: concepts like energy, power, voltage, current, atoms, electrons, mass, weight etc…
In my experience even most advanced subjects in physics and engineering can be understood in those basic terms fairly quickly. That is what physics is all about after all: Understanding the basic principles underlying all natural phenomena, thus all natural phenomena should be understandable and explainable using exactly those principles.
Economics on the other hand is very beast: It is at least as much philosophy as science. There are different schools of thought which completely disagree with each other. Any attempt at quantitative economics suffers from a limited sample size since it is not possible to perform a few million experiments and get meaningful statistics as a result.
As such I am not surprised that a given economist of unspecified specialization has not thought about the thermodynamic implications of “his” field of study.
Thus I would very much welcome a guest post by an economist who actually has thought about those wider implications. Because regardless of whether your post was fair or biased or who ended up “winning”, your dinner conversation illustrates a large disconnect between economics and the natural sciences which urgently requires mending if we want the people and policymakers to make sensible decisions about the future.
As to traffic, indeed this post has generated a higher-than usual level of interest. DtM averages about 4k human pageviews per day now (up factor of 4 last four days), which is certainly more than the early days when the Galactic and Growth posts first arrived (July 2011). As for a graph, I’ll do you one worse: numbers. Human pageviews by month:
Jul 11: 6k
Aug 11: 81k
Sep 11: 53k
Oct 11: 103k
Nov 11: 118k
Dec 11: 116k
Jan 12: 171k
Feb 11: 132k
Mar 11: 133k
Apr 11: 103k (so far)
Fairly steady these past months, but definitely a surge these past few days (taxing for me).
The traffic comes from a fascinating and well written post on a topic of massive importance. You are touching upon the most important topic imaginable, the future progress of the human race.
This is a topic that deserves our attention. It certainly deserves mine. After reading every comment, I continue to believe that those arguing against the economists do not grasp the concepts of their opponents. The economists get that a resource cannot grow forever. The physicists side and their cheering squad do not get the concepts of utility and how free markets work as complex adaptive systems.
I think it would be fascinating if you continued the dialogue online with a worthy blog opponent. I’d suggest Don Budreaux from Cafe Hayek, or Wintercow from The Unbroken Window blog. Or perhaps the guy at Forbes that responded.
Long way of saying great job, Tom! Thanks.
>The economists get that a resource cannot grow forever. The physicists side and their cheering squad do not get the concepts of utility and how free markets work as complex adaptive systems.
I personally think that markets are very useful and important in many ways, but I have a problem with the concept of “free market”. Isn’t a “free market” actually just some kind of a utopian ideal? Seems to me like it is, but please correct me if I’m wrong. However, if a real world “free market” doesn’t actually exist (and I personally don’t really see how a truly “free market” could be achieved, since many aspects of it seem politically undesirable), believing that it will solve things like energy availability issues would seem… unwise, maybe.
Freedom is quite a problematic concept anyway, IMO.
To the extent that markets are free and functioning they act as search algorithms.
No, many growth-skeptics understand the concept of “utility”, as measured by the GDP proxy, but they question that even this can grow forever. On the experimental side, there is no historical example of any major country which experienced sustained economic growth without a corresponding growth in the use of energy and natural resources. On the theoretical side, every attempt at imagining how such a society could actually work ends up in almost religious visions (we will be all living in a Matrix), or in a sort of “service economy” where every conceivable activity, with an objectively measurable “utility” associated, is still, in the end, happily married with energy and very material resources.
The reason recent economies have grown using energy is because it has been so cheap and plentiful. When it becomes more scarce and expensive, the system shifts to finding substitutes and efficiency. That is the brilliance of markets, not a limitation.
As for living in the matrix, silly rabbit, I already do. I spend the day in a house that is too big with two cars we hardly ever drive, but my time and attention is captured by the matrix. I surf the net, watch virtual performances on the tv, listen to virtual performances on the stereo and then play virtual battles on the planets of Tattoine and Bespin.
Sure I spend countless hours talking with my family, I surf ( ocean) 300 hours a year, and swim or bike every other day. But the matrix isn’t just coming. It is here, and that is where most of my time, energy and experience come from nowadays. Yours will too in the future.
I do not need more stuff. Most Americans don’t. I just seek better quality. Better performances, better graphics, better games, better environment, more freedom, and access to more knowledge.
To get these things, I serve others by creating them and then exchanging. I spent years designing products without ever building anything tangible. It was all service.
We all need to stop thinking bigger and start thinking better. You all laugh at the virtual castles, but never stop to think that you are in the virtual world right now as you read this.
as long as there is no major country in the world that can demonstrate a sustained economic growth with flat or declining energy use, I think we should be very cautious about this possibility. As for your service economy, I think you probably don’t realize how energy-hungry is the infrastructure that makes it possible. Big Telco operators are among the most energy-intensive infrastructures on earth. In Italy, Telecom Italia is the second largest consumer of electricity, just behind the entire, country-wide railway network. Add to this ever increasing data centers, production and distribution of billions of electronic devices that people change every 6 months, and there you have it: energy use keeps increasing even in your service economy.
Wow, I’ve read all the other comments and no one else disagrees with the physics behind “Bread and Butter”: you claim that it is thermodynamically impossible to cool the planet. All the other commenters are focusing on how to produce the energy, but your key point is that energy consumption is the limit. But it doesn’t have to be!
You say that “the Earth has only one mechanism for releasing heat to space, and that’s via (infrared) radiation” and that other means of cooling are ruled out by thermodynamics. Consider a household A/C unit. It uses electricity to cool the inside system at the expense of heating the external environment. Sure, there’s an overall increase in entropy, but the system is still cooled.
Let’s now define our system to include the entire Earth. Imagine a planetary A/C that uses a tremendous energy input to create a cold-air zone inside our atmosphere and a hot-air zone in outer space. Practical? Not a chance. Theoretically allowed by thermodynamics? Yup.
I’m not sure I understand what you mean by “hot-air zone in outer space.” Are you talking about exporting our atmosphere to space? Heat pumps work by moving heat from one fluid medium to another, but are not applicable when space (lack of fluid) is involved. Radiation or nothing (unless physically transporting hot goods to space).
I wasn’t thinking about a literal heat pump as much as the theoretical idea of one. As you suggest, for example, transferring our heat into goods which we then ship into space does increase our overall rate of heat loss. I am mainly just suggesting that cooling the planet is indeed theoretically possible, so it should not be considered an upper bound on growth.
Incidentally, your point about us using as much energy as the Milky Way is definitely harder to overcome.
Perhaps this will be a more useful through-out:
There is no reason to think that economic growth would cause energy usage to grow without bound because there is no reason to suspect that economic growth needs to be associated with doing more things or doing things at a faster rate.
That is an easy way to produce growth but it by no means necessary.
The ultimate limit to growth is not energy usage but simply that we run-out out of ways of making things better. Not simply that we lack imagination, but that given human preferences there is some mental state that simply cannot be improved upon.
This is more or less why future oriented economist think that growth will stop.
Ahh – Actually I think I just realized where the disconnect is. You say:
“My point is that the stunning presentation of desserts will not have universal value to society. It all goes in the same place, after all. ”
Right, but this is irrelevant for the concept of growth. Stunning presentations of desert represent higher economic growth if some people would swap their stunning desert for a plain one.
And, this is true all the way down. Cars are not universally valued of course. Neither is jet travel or any of the conveyances of our modern age. Industrial production in general is not universally valued.
We call this things growth not because of their universal value but because the choice set expands and/or shifts in a way that is preferable to most people.
The larger point, I think, is that holding energy use flat, population flat, and recognizing that energy will constitute a finite fraction of people’s expenditure will fix expenditure on all other things. Then the mechanism for continued growth is unambiguous improvements in life quality, so that people 400 years apart would not disagree about what is better. Fads don’t fit this mold. This is what I was trying to get at by “not universally valued.” If it isn’t objectively better, then it’s not part of what I would be willing to call growth.
But what you are willing to call growth and growth in economic theory are two different things. If the only thing one can spend money on is art, desserts and such things then one could still have economic growth purely with such things. Money is fiat money, they aren’t really worth anything, as long as even a select few would be willing to pay for these type of things, the monetary system could in theory continue and growth could continue.
What you would call growth 400 years from now would likely be expansion outside of earth, which is not unlikely at all in that time frame (but also outside of this discussion).
Your statement on universal value and objectively better is the core to this entire disagreement. Those of us arguing for no inherent limits on qualitative growth believe that value (utility) is subjective and personal.
Yes, this makes measurement difficult, and GDP is really imperfect. My best guess is that utility is increasing substantially faster than GDP. Utility, though immeasurable, can be observed via preference and choice.
I doubt if what you mean by “utility” is the same as the way the word is commonly used. But my understanding is that the “genuine progress indicators” people believe that quality of life tracked parallel to GNP up until the 1970’s and then started to decline. What does that say about growth in utility?
Roger on 2012-04-17 at 09:06 said:
>Those of us arguing for no inherent limits on qualitative growth believe that value (utility) is subjective and personal.
I, for one, highly doubt that “utility” is 100% subjective. I definitely believe that it’s very much subjective (in socioeconomics, at least – probably a lot less so in physics, I would say)… but completely? Even though fundamental laws of nature seem to exist and set the playing field for everything everywhere?
I haven’t read all the comments so this may have been already discussed but there seems to be some flawed economic reasoning in here.
In particular this part: “But if energy became arbitrarily cheap, someone could buy all of it, and suddenly the activities that comprise the economy would grind to a halt.”
No, the market price is is the cost of the marginal unit and needn’t say anything of the cost of acquiring the entire stock. You can easily have the fraction of income spent on energy get as close as you like to zero even as nobody can buy the whole stock. You just have the price elasticity rise as the price itself falls.
Cornering aside, I am trying to get at the notion that a fixed, limited, finite resource that is necessary for any economic action will likely not slip in price to be a trivial fraction of our expenditure. Energy is more than another commodity. There is no substitute for energy. There may be a variety of ways to get at energy, but no substitute for energy itself. So I find the notion that (limited) energy could become effectively free to go against supply/demand. Limited supply, finite demand –> finite price. You could also say it is fairly inelastic.
Tom, there are a couple of assertions you’re making that are not so clearly true.
1) ‘So I find the notion that (limited) energy could become effectively free to go against supply/demand.”
No, this is exactly what supply/demand *usually* predicts. We would reasonably expect food to be a declining fraction of expenditure with growth in income simply because after you’ve consumed a certain amount you don’t value the marginal unit very much.
The “usually” that I stressed above goes to your other big assertion, that energy is “necessary for any economic action”. You’d expect food, or any other good, to be a declining fraction of total expenditure in a growing economy because food, or any other good, is not necessary for any economic action in the sense that most economic actions don’t require extra food at the margin once you’ve eaten enough to sustain yourself. I’d think the same is true of energy, just because we need some energy for most of what we do is not the same thing as saying that every marginal action requires a marginal increase in energy consumption.
I’m not sure I agree, though I see the point. The food limit is a different sort of animal than the energy limit. In the food case, it is our own bellies that limits the consumption: not the scarcity of food. In the energy case, I am looking at it from the scarcity sort of limit. Demand is higher than supply. Price does not sink arbitrarily low in this sort of limit. If energy is abundant, then you are probably right.
I wonder if we could force energy to be like the food case. If we could implement some sort of progressive energy tax, we could ensure that people can get a modest amount of energy at a cheap price, but if they wanted to use more, the price would go higher and higher.
I’ve held off commenting on this post to try and spare the person moderating. But I thought I’d add some observations gleaned from a lifetime of trying to make the same points.
First of all, it isn’t an argument in favour of Growth to be terrified of the implications of ending it, but it does motivate a lot of politicians and professional economists to live their lives in denial. And end to economic growth would destroy out fractional reserve banking system. It would also destroy the concept of retirement, because it would end the “miracle of compound interest”. It would also destroy growth of the welfare state because of the end of growth in the tax base. It would also unleash class warfare, because there would no longer be a “rising tide that raises all boats”. This in turn would probably spell the end of liberal democracy.
Another observation. I remember being asked to talk at an environmental conference and having dinner next to an economist. I mentioned Herman Daly to her, she dismissed him as a “very marginal character”. I mentioned this to another fellow I know, who is a retired economics professor who does “get it”. He said that when all the good economics is being done nowadays by sociologists. This is because sociologists doe primary, ie “field”, research whereas economists only play with models.
One last point, economic growth numbers can be twisted by how one collects the data. For example, when I was a child most people I knew raised their own food and cooked it themselves. Now almost no one has a garden and almost no one cooks from “scratch” anymore—-they either heat convenience food or eat out. This is measured as a dramatic increase in economic activity because what was once not paid for with money is now. But I hardly see this as a great improvement in life. Indeed, I would suggest that a very large fraction of people’s income goes to pay for convenience that is now required because of dual income families. This situation reminds me of a hamster running in a cage.
It might be nice for professionals to run in a gold plated cage, but a lot of working poor people are running an ugly, galvanized one. (Read “Nickled and Dimed” by Barbara Ehrenriech to see how time pressed even the poorest workers can be.)
You don’t need compound interest for retirement. Saving enough for retirement would work. So would be being supported by your children. Or by everyone’s children in a social security system; this is how US Social Security actually works.
Lacking growth would do away with the politically easy welfare state growth. The end point could be either high inequality and oppression, a la much of history, or nearly socialist equality, as the “incentive to growth and innovation” justification for inequality goes away.
This made me think of how strange some people’s image of growth is…. They say that in 100 years, the population will be stable (plausible) everyone (including very poor) will be superrich and have standards of life way better than the current American SOL. But they admit that the earth is gonna be [screwed], they just think we’ll deal with it and no one will care, because they won’t have been alive to experience earth the way it is now (or was, as we haven’t). Seems to be denying objective value to nature. Which may seem legit based on modern society trends and seemingly eventual eventual virtual reality/singularity technologies. But for the near future, I think there’s a pretty great utility benefit to experiencing nature and getting away from other people, and it is an experience that is hard to replace. Virtual technologies will at some point need to deceive us into believing in them (at least temporarily) to give the same experience (this seems the same for many such experiences). But even temporarily, the entry/exit will still make many experiences qualitatively different. Can culture shift to make us enjoy virtual reality more? Probably. But at some levels for some things, it requires denying or ignoring a very obvious fact, something very hard for people to do, it would seem.
Ultimately, this is a problem of semantics. Physics describes one objective reality that interacts with billions of subjective realities. Economics describes how billions of subjective realities interact to form one objective reality.
The article has a few places where the physicist attempts to ascribe an intrinsic value to an item (say dessert types) independent of the supply and demand curves for that item. The whole concept of a demand curve is that everyone has their own value that they give to an item. The fact that some people do NOT value some particular lifestyle improvements does not affect econ in the slightest.
One efficiency that we have not yet discussed: the improvements in innovation resulting from more equitable human capital development.
Let’s assume that intellectual and information goods will dominate productivity and growth over time. How might we maximize productivity under fixed energy consumption?
At present, consumption is driven not just by inventors and innovators (who in principle are contributing to the information economy at high levels of efficiency) but also by the unemployed, underemployed, and disabled– whose productivity is limited in some cases by missing labor markets and, in other cases, by missed opportunities for personal development in early life.
To maintain growth, we will need to promote efficiencies not just in widgets and institutions, but also in the process of innovation– by investing in human capital. This means investing in young peoples’ education, nutrition and cognitive development, social stimulation, etc.
Indeed, there is a natural pool of potential growth if we simply adopt more equitable strategies for human development.
I’ll admit that I haven’t read through every post here– so perhaps someone has already mentioned that in an information/innovation economy, we can maintain significant growth simply by allocating resources toward human capital development.
Of course there is a limit to growth based on human capital alone, as intellectual capacity (which changes on an evolutionary time scale) is not infinite over more meaningful time intervals. And there are issues of mood/behavior that influence the efficiency of brain power (and frankly we don’t have the tools required to address laziness, dysthymia, puppy love, and the other “inefficiencies” in human innovation!)
Regardless, I think we could do a [heck] of a lot of growing with a focus on human capital development.
[shortened by moderator]
I agree with Tom that “physical” growth (growth in material and energy use) can’t go on forever in a limited world, and, between the laws of thermodynamics and the laws of economics, I have no doubt who’s going to have the last laugh. As for the timeframe, there is some evidence that we will begin to bump against hard physical and ecological constraints in this very century, probably during the second half.
But I would like to examine one of the most interesting arguments put forward by those who believe in the possibility of endless economic growth, such as Harri Turunen and Tom S. The argument goes like this: we agree that there are limits to the material growth, but here we are talking about a different thing. We talk about “economic growth”, defined as “utility” growth. “Utility” is just the value that we subjectively give to something (product, service, artwork, whatever). And this value is completely decoupled from the amount of material or energy that was necessary to create that something.
So, we can imagine an endless growth in value with fixed input of energy and materials in the economy. It is a growth in quality, not quantity. I find this view intriguing, although in my opinion it is not the most widespread understanding of the term “economic growth”. […] Moreover, I understand that different economics schools define the economic value in different ways. But let us stick with this definition of economic growth.
I find a few problems with this approach. First, it is very hard to completely decouple economic value, even defined in this way, from its physical reference. Let’s follow the example of Harri Turunen. If I change the arrangement of my house in such a way that the new arrangement is more valuable for me, then I have created economic value, without building any new house. Let us disregard for the moment the fact that even changing the arrangement requires energy. In order to say that the total value of the economy has increased, we need to objectively measure this increment in value, it can’t be completely subjective. Harri Turunen in fact says that, in order to have economic growth (at macro-economic level), the new arrangement must be “unambiguously better”. It can’t be matter of subjective taste. The 18th century houses were arranged according to the taste of that time. Today, we value more different arrangements. But it would be hard to say that, since we value more a new design or architecture, there has been economic growth with respect to the 18th century. There HAS BEEN economic growth because our houses can be said to be “unambiguously better” for very objective reasons: they are generally larger, less humid, with central heating, sanitation, air conditioning, running water and electricity. And these improvements require a lot more of resources than in the 18th century. We can say that our leisure time is “unambiguously better” than it was for the 18th century people not because we value more different activities (say, going to Disneyland as respect to going hunting), but because we enjoy far more options to spend our free time, and this choice is available to far more people.
I live in Milan, and without being the king of Italy, I can decide to spend my weekend in Paris flying low cost, go skiing, relax on a beach in South America for vacation, go to the cinema, etc. But this widespread improvement comes with staggering energy costs. It would be hard to find any objectively measurable growth in economic value that is not, in the end, linked to some sort of physical growth.
However, why should we call this type of progress “economic growth”? I would be more confortable with the definition of “human development”.
I think there is a logic flaw to the physicists arguments – would be curious if you guys agree. The flaw goes something like this: because a unit of energy is used by humans, it is therefore “added” to the system that is earth and therefore warms the earth.
I think this logic makes some sense in a fossil-fuel or nuclear power dominated world – that energy was trapped in chemical or atomic bonds that, when broken or change, release the energy in the form of heat. I don’t agree when we take into account solar energy, which would have struck the earth anyways, even had it not been used, wind, which would have blown and dissipated to heat if not been captured, waves, which would have done the same, etc. In short, if we can move to capture energy from processes that were occurring anyways stimulated by external bodies (the moon for waves, the sun for solar) then we aren’t adding energy to the system (earth), so it isn’t getting warmer. Even these sources are finite, but I imagine there are enough of them and in such quantity that growth could sustain for a very long time.
All that said, the idea that our economy can grow forever doesn’t make sense to me at a fundamental level – something will act to constrain the growth eventually, but even this I feel is way too utopian. Human society has been ravaged by massive wars, plagues, etc. with great regularity over the past few thousand years – I see no reason we wouldn’t expect an equal calamity to occur, relatively soon, to lower the “denominator” for growth again.
You are correct that an implicit assumption was released energy. If we avoid that altogether, we find that a few-percent growth rate consumes the solar resource reaching Earth in a similar timescale: a few hundred years. Wind, waves, biomass, etc. all derive from this. Tidal capture is physically constrained to stay below our current level of use.
So the net effect is the same either way. I only use the heating tack to argue that no matter what our technological choices, energy growth on Earth is capped, and on the centuries, not millennial time scale. Either way, we confront a physically-constrained situation.
As to your last point, I agree. Both sides of the argument here invoke some fantasy view that the future would be a steady progression of one sort or the other. I think it is more likely that the human race copes with limits to growth not by establishing a “smart” steady-state strategy, but rather will have wars destroy capital and allow re-growth until a similar fate meets us. Rinse and repeat. That said, I would prefer that we try for the steady approach.
A very good exercise in making us realize how much alert we should be in dealing with Earth’s resources. I am tempted to side with the Economist. As Keynes had mentioned, “In the long run, we are all dead.” I was hoping the Economist would come to such an argument somewhere.
What I am surprised at though is the physicist’s closed approach on how much can science progress.
A great fan of your posts.This is my first comment here and probably the last, I see that there’s an awful lot of discussion going on about a service economy and how arts, music and software can replace the ‘real’ economy.
I did not want to wade into that discussion but would suggest that this be tackled as the ‘I do your laundry, you do mine and we both prosper to eternity’ fallacy.
It really sounds nice when one says that the ‘service’ economy can replace the real economy but the problem is that ‘service’ is a function of complexity and complexity is a function of energy usage. You know all about it of course. When energy usage declines so will complexity, suddenly people will have a lot less free time on their hands to write software or create music. We’d all be tending to our gardens probably in the time that we watch TV or have gossip. So that ‘service’ economy model goes right out of the window.
Econ Ph.D. Here…
Here’s my two cents.
0. Agreed energy growth can’t continue exponentially. That is, barring that the future holds no technologies that are hard to envision right now. (But, that’s actually quite an assumption, isn’t it?)
1. GDP per unit of energy use is already growing exponentially. And we aren’t even really trying yet. (By which I mean, neither government or the private market has given us prices which would force changes in behavior.) And some countries GDP/energy ratios, such as Switzerland, are already double the US’s. And in some sense, Switzerland isn’t really “trying” yet either. We haven’t reached the age of sky-high energy prices. Color me skeptical that GDP/energy is bounded. I have no idea, of course, but neither does anyone else.
2. I’ll go ahead and forecast that eventually population growth will stop and then shrink. This is a side argument, of course, because obviously the population can’t shrink at a rate which will add much to per capita energy usage forever without also doing damage to the overall rate of technological growth.
3. I doubt that GDP/Energy growth will ever be bounded. Sure, most individual technologies follow a logistic pattern, slow technological growth at first, then rapid, and then slow again. But then 10 entirely new technologies are created. The increase in efficiency leads to price declines. And so we forgot that a Smart Phone could have sold for $5 million in 1980 and today anyone can have one. Growth rates in manufacturing efficiency have themselves increased throughout history over the past 200 years.
4. If GDP/Energy is bounded, and energy is bounded, then we’re back to a Malthusian-ish world, where population declines lead to higher GDP per capita. Only difference would be that fertility would not depend on birth and death rates, but would likely be controlled by government.
This would be, however, at very high levels of GDP compared to today. So I’m not going to cry for my ancestors — if I choose to have kids. [last point edited from .edu site]
I reply here: http://www.overcomingbias.com/2012/04/murphy-on-growth.html
I love it when someone responds in a blog post elsewhere, instead of writing a blog-length post in comments. Thank you!
This has been an impressive series of comments to an impressive essay! My thanks to one and all!
I have a humble observation. On my beloved 5″ K&E Log Log Duplex Decitrig slide rule’s LL3 scale, exponential growth tops out at e¹⁰ ≅ 20,000, not much beyond Prof Murphy’s (1.023)⁴⁰⁰ for human energy consumption to reach the level of total insolation. The «precision» of the big number, in significant figures, is nothing to kick out the windows for. It’s kinda like a message from the generations who brought us our material growth culture, telling us that modeling any growth that we express exponentially is gonna be increasingly meaningless the farther it is projected. In non-numerate lingo, it has been pithily stated (by Lewis Mumford) as “Trend is not destiny.”
It seems to me that the wisdom and insight of Economist in the essay, in which his wisdom and insight did not shine so brightly, have had to do with far smaller changes that so many orders of magnitude. Behold the difficulties in managing growth, like of a village into a town, or of a city into a metropolis. And I suspect that managing large-scale shrinkage is a bucket of vipers, too. (One thing I really appreciate about the Economist is that he never questioned the mathematics of exponential change! An amazing fraction of otherwise educated & intelligent adults do.) Looking at change rations of an order of magnitude or two should be adequate for «do-the-math» estimations of possible futures.
I suggest that «do-the-math» folks concentrate on getting humankind from a culture based on ever-increasing energy consumption to one developing along a slope of opposite sign.
Lewis Mumford: “Trend is not destiny.”
You can read that either way, optimistically or apocalypticly. I think there is an addition: Trend is not agency either.
I am confused by the “economist” role claiming energy prices will fall to zero and usage will stabilize. The standard economic story is we can expect energy use will remain limited as GDP rises (that is, energy efficiency will rise steadily) due to RISING energy prices. The high energy price will be due to scarcity, as you emphasize. (Alternatively perhaps a tax on heat waste from energy, if waste heat is a major constraint on growth.) You should let your economist review and revise statements such as low energy use at near-zero prices.
Based on the comments offered in response to this post, it is clear that there is a great disconnect between the fields of economics and the natural sciences. I find this quite disconcerting because the principles being developed by economists are in numerous cases in direct violation of physical laws developed by scientists.
But laws of physics are laws because they can’t be broken. If it can ever be demonstrated that a law of physics can be broken, then it is no longer a law and it must be discarded or revised.
If certain theories developed by economists violate the natural laws, then the onus is on them to reconcile this, not for physicists to imagine how the laws of nature will somehow be violated or modified in the future (hint: they won’t be; that’s why they’re called “laws”).
Many seem to believe that future scientific advancements will discover new laws of physics that supersede the old ones, and that this will unlock grand new sources of energy and enable us to do so many more fantastic things. They believe that this is how technology has advanced historically. But that is not the case. We have always been limited by the laws of physics and we always will be. Technology advances by using the laws of physics in clever new ways, not by violating them!
I don’t think that a meaningful discussion going forward will be possible until these differences in fundamental beliefs about how the world works are addressed. Just like a doctor must learn all about how blood functions in order to be a good doctor, so too must economists learn about how energy works to gain a clear understanding of how economies function. There is really no way around this.
I suspect that Tom has been steering clear of an explicit discussion of thermodynamics in his blog since it can get technical and may repel many readers; it isn’t an easy topic to wrap one’s head around. No doubt that a post of this nature would receive little attention from economists, with participation from only a few of the regular fans of this blog like myself.
You do realize that most mathematical tools used in economic theory and analysis (the famous comparative statics) were stolen by Paul Samuelson directly from… Thermodynamics. So, nice straw-man you got going on there.
As to your point about laws. No economist I know of argues that growth is a law. No one says it will inevitably happen. They are only saying that it is possible. It might still be wrong, but it is very different to the straw man you have constructed here.
“Many seem to believe that future scientific advancements will discover new laws of physics that supersede the old ones, and that this will unlock grand new sources of energy and enable us to do so many more fantastic things. They believe that this is how technology has advanced historically. But that is not the case”
Are you telling me nuclear energy was just a new and clever way to use Newtonian physics or was it based on newly-discovered lawsm like relativity, which… kind of superseded mechanistic Newton?
Your reference to Paul Samuelson is interesting, I will investigate further. I am sceptical, however, because increasing energy use (or, alternatively, perpetually increasing “utility” while keeping energy use constant) is just not consistent with a world of finite energy sources. I suspect that he was applying thermo principles in different contexts, not in relation to overall energy use by an economy.
While I never said that economists argue that growth is a “law”, I’ve indeed seen a disturbing number of them argue for growth as both desirable and inevitable. What I’ve said is that growth is baked into most economic theories in one way or another (although these should correctly be called “hypotheses” because they haven’t been through a scientific review process). I said that if economists’ hypotheses are in contradiction with the natural laws (i.e., theories that have stood the test of time), then it is the economic hypotheses that are in error.
Relativity doesn’t supersede Newtonian physics; it expands it. Classical mechanics is what relativistic mechanics simplifies down to at our scale of size and velocity, and seen from the other direction, from the microscopic scale up, it is what quantum mechanics averages out to at the macroscopic scale. No nuclear reactor will ever violate Newton’s laws. Relativity has been around for a century, and as I believe Tom has explained in previous posts, further clever applications of nuclear physics may lead to possible alternative sources of energy through the breeder process, although admittedly my understanding of this is limited.
Humanity’s current problem is energy scarcity (immediately, liquid fuels), and any newly discovered laws of physics beyond relativity or quantum mechanics aren’t going to help us there. Quantum physics does have increasing applications in IT, but again, this isn’t from discovering new laws of physics; this is application of already known laws. And of course, IT doesn’t address the energy problem.
“What I’ve said is that growth is baked into most economic theories”
Not really. Firstly, that is mostly macro, micro doesnt really care. Many economists (although these are much less vocal) only study growth for two courses at gruaduate level and never again.
Secondly, a lot of macro theories are general equilibrium theories. They include growth they are dynamic, but don’t need it to function. An ned to growth won’t disprove them.
Thirdly, one can do the same “we are just tweaking the laws” argument about economics. Including climate change, finite resources, the Hubbard curve etc… into modern DSGE models is possible and has been done before.
Fourthly, the things which really need infinite growth, like the dreaded fractional reserve banking are actually pretty marginal to most economic models (its only the heterodoxy (Austrians and MMT) that really cares about that). Again, most theories are General equilibrium and equilibrium is well… kind of static.
“perpetually increasing “utility” while keeping energy use constant is just not consistent with a world of finite energy sources”
Utility is subjective. This seems to be one of the main confusions of this blog. Economists have discarded inherent utility and define it on the margins. It depends on the actor (this is also why I think the argument that the “dessert is not growth” is wrong, simply because, as long as you have fads for everyone you have growth). Depending on your view of psychology, you could increase utility almost indefinetely with minimal energy use. Not saying tht this proves anything, but its not so clear cut as you present it that physics simply says its impossible.
The thing is: I agree with a lot on this blog and a lot of people. Growth cant continue forever. We have to change energy use. We have to adress global warming. But many economists think this way. Bashing the entire […] practice is just a generalization.
“Utility is subjective. This seems to be one of the main confusions of this blog.”
Agree with you there! Confusion / ambiguity about what this idea of “utility” is seems to be the biggest hangup in this thread.
“Fourthly, the things which really need infinite growth, like the dreaded fractional reserve banking are actually pretty marginal to most economic models”
Hmm, interesting. But our current economic / monetary system requires perpetual growth, and any economic or financial commentator you hear on TV or in a magazine / mainstream blog will argue for growth as a desirable thing as automatically as they will argue that humans need to eat. And they are referring not just to utility growth, but growth in the physical size of the economy as measured by GDP. So there is a disconnect there.
Relativity and quantum supersede the assumptions of Newtonian mechanics, like independent space and time; Einstein’s universe is very different from Newton’s. The later math can be approximated by Newton’s math in the domains Newton was used to.
“current problem is energy scarcity (immediately, liquid fuels), and any newly discovered laws of physics beyond relativity or quantum mechanics aren’t going to help us there”
Well, if we found a way to easily induce proton decay, we’d have near total matter-energy conversion, and oodles of cheap energy. Not very likely, though it provides a nice endpoint for SF.
Reading your other articles, I’m guessing you consider the energy trap as the biggest challenge; you don’t believe our current economic system able to handle such an event. I think that’s a reasonable worry, but I think you are wrong. As others have pointed out, energy will increase in price at a higher rate than inflation. It will be a roughly constant part of GDP even if it doesn’t physically increase as the price of everything else will go down.
I think your fear that society will not invest in renewable capacity and just consume the easily available energy is wrong. You are implicitly assuming that prices do not change. They will. And they will change long before there is a physical constraint, simply when the likelihood of a physical constraint is high enough. You seem to be assuming that markets will put zero value to the future. Aggregating expectation about the future is the market’s main function. There will be people who will voluntarily give up consumption/work longer in hope of a good return.
I think I read a science fiction story once in which humans decide to breed themselves to be smaller and smaller every generation in order to consume less and less energy. I guess you would argue it would only buy us another 50-100 years, but it’s still an idea…
I have no doubt that energy prices are poised to soar in response to a decline in available oil, for instance. This will happen on a far faster timescale than a new infrastructure can offer relief. The recessionary/depressionary impacts could be pretty serious, so that the good folk can’t afford to pay the price of the replacements, even if cheaper than the soaring conventional costs. In short, market forces tend to “see” the future on shorter timescales than an energy transition will take, leaving room for me to worry. I would never claim that prices are static through this roller coaster ride.
Frankly I disagree you your assessment about how far market extrapolate. The market is just a voting system based on 1$-one vote. You might disagree with the weighting, but it’s not just blind.
Personally your concern reminds me about the “tragedy of the commons”. This is a situation where the lack of property rights leads to the over-consumption/under-investment of a specific resource (think fishing rights). The standard solution to this is to impose property rights, so that the owner will start valuing future production (which is valued at zero, or very low, in a common as someone else might get it).
Given that oil and coal reserves are already mostly privately owned, I find it difficult to believe it applies. We have already encountered similar economic problems. It’s true that the privatization of the commons was very disruptive, but we survived and prospered after that…
I believe you are right that the tragedy of the commons doesn’t apply to dwindling oil supply so much. Rising oil prices will cause a surge in the adoption of renewables. The more interesting question is: will it be fast enough? I am somewhat more optimistic than Tom and believe that the market will likely optimize its way toward the new minimum fast enough (= decline of fossil fuels will be slow enough) to avoid the zombie apocalypse.
My bigger concern is that markets fail whenever there are significant externalities, and the mother of all externalities is also associated with energy use – climate change. Not only is it unlikely to affect the people making the decisions now, it also won’t affect most of the generation that these people belong to! If that isn’t the saddest act in the tragedy of the commons then i don’t know what is.
i did a BA and MSc in Physics, and later did and MSc and a PhD in economics, so i’m totally comfortable here. and i must say that the physicist is constantly redefining economical concepts, for instance when he suddenly says “ah no, that’s development, it’s not growth”. that’s what economists call growth, if he feels like calling something else, then the economist should be allowed to violate the 2nd law of thermodynamics 🙂
i got to say that the physics does not understand what’s at stake here. period.
I think the economist in you might be blinded to what’s at stake as well…
I think we could all benefit by taking a second to step back from this, and look at the situation objectively.
The question of “in a closed system, one where, space, resources and population have reach their limits and there is a hard upper limit to the annual energy consumption of this system, can annual value consumption, as measured by whatever means, increase indefinitely?” is a purely academic one.
But that question is of lesser value then the more immediate concerns. We currently live in a society where energy consumption and a large chunk of annual value consumption, as measured by GDP, ARE linked. We are faced with the possibility that energy production may not meet our needs in the near-middle term. So how do we proceed? Can we reduce individual energy demand? What effect will this have on GDP? Can we shift energy focus to long lasting energy sources? What benefits and costs are associated with this move?
We live in a small box, no action is without consequence.
“Well, thanks very much!” (he said with mock indignation). I find myself, once again, absorbed in yet another fascinating post and even more fascinating responses.
It has been interesting (and sometimes frustrating) watching the twists and turns and tangential musings of the growing community in this blog and some of the related comments in others. There will be some who remain unconvinced, some who perform syntactical gymnastics to try and refute others assertions and those who will smugly bathe in the glow of their own self assuredness.
Hopefully, this very important discussion will continue grow and engage more and more people so that, at the very least, the issue will treated with the seriousness it derserves. Well done!
” However, the study also noted that unlimited economic growth was possible, if governments forged policies and invested in technologies to regulate the expansion of humanity’s ecological footprint.”
From their comments: “No – the study said the exact opposite. Infinite econmoic growth is not possible in a finite world. unless people no longer need to consume anything at all, then unlimited growth is not possible.”
The unsustainable might not go on forever, but it won’t be for lack of trying!
Search algorithms get trapped in local maxima, and no algorithm works optimally on all problems. They also don’t work if there’s no answer to be found within the constraints.
Saying “central planning”, not that anyone else brought that up, can’t be a complex adaptive system is like saying brains aren’t.
Worldwide economic growth has been strong, yes. So has worldwide energy use growth…
>Search algorithms get trapped in local maxima, and no algorithm works optimally on all problems. They also don’t work if there’s no answer to be found within the constraints.
Well this is, IMO, a pretty good-sounding counter point to the idea that the “free market” (which I personally doubt has ever existed as anything else than an idea – specifically the “free” part) will automatically solve things in a desirable way.
I don’t really have anything great to add, but I just wanted to quote for emphasis, as well as contextualize this good sounding piece of insight a little.
I knew you’d opened a can of worms when I first saw that you’d published this post. To question the assumptions of the neoclassical economic ideology is a modern day heresy.
Ugo Bardi had a recent post at his blog where he wrote:
The Scientist (extra paragraph by Ugo Bardi): “We have clear proof that climate change is occurring and that it will cause immense damage if we don’t do something to stop it.” The Audience: “We like you scientists when you bring us solutions. We despise you when you bring us problems.”
This quote reminds me of some of what I have read here in the comments to your blog. More specifically, popular economics claims to offer solutions if only people have faith – while, (in this case) physics is only offering evidence of the mother of all human predicaments, regardless of what people believe.
Mainstream thinking in economics (among other fields) seems to suffer severely from the problem of inductive reasoning which lulls people into a false sense of security. Everything works great until suddenly (surprise!) it doesn’t work at all any more. Like the turkey that believes it has a secure relationship with the human that feeds it every day leading up to Thanksgiving dinner. In the turkey’s entire life experience it is hand-fed every day, with every feeding firming up its perception of its relationship with the feeder until one day (surprise!) it gets its neck wrung.
Linear or logarithmic growth is theoretically possible indefinitely until the sun goes out which I assumed was always accepted as a limit. As long as the population stabilizes at level where the energy needed to provide shelter, and other basic necessitates is less than the sun provides, then the surplus energy can be used to produce new material goods with the tons of extraterrestrial material that falls on the earth each day.
When I took economics one of its definitions was the allocation of resources and thus the implication of limited resources. It was pointed out that you have energy matter converters such as on Star Trek you really didn’t have limits and that economics didn’t apply. One of the elementary lessons I remembered was POWs in a prisoner war camp trading different parts of their red cross packages thus increasing their utility and income even if the materials that the POW’s received hadn’t increased. So it is perfectly natural for economists to talk about utility increasing without an increase of material goods.
Of course since we have an increasing population and energy use way above what we can currently obtain in a steady state matter we are heading a massive upheaval, but the when the economist was engaged with a theoretical discussion about the limits of growth given fixed amount of energy he is not addressing those concerns.
Trade of allocated goods does increase utility without creating more goods, definitely. But can that go on indefinitely? The prisoners could keep trading because they kept getting the same packets, but once patterns were set, was that growth?
Traditionally the first value added activity is fermenting the sugar containing goods into alcohol. And metal food containers are fashioned into other implements. Also trade could be established with the guards. Possibly cloth is obtained to fashion civilian clothing and parts to make a mimeograph for reproducing escape maps. I am quite serious about this as it is described in a book The Great Escape http://en.wikipedia.org/wiki/The_Great_Escape_%28book%29
By the way there is a poster with a poster with a chemical engineering background who posts on an economics blog that claims in the real world we could have growth almost indefinitely with diminishing energy input. He is aware of peak oil, says his contacts report the Bakken oil is relatively low grade and needs a lot of processing to be used. But there is enough waste in energy right now that its usage could be reduced without great effect. Also points out there wasn’t enough copper for everyone in the world to get a telephone line to their residence, but everybody can get a cell phone.
After posting my earlier comment, I happened upon this commentary by Tad Patzek that seems to dovetail nicely with what I was thinking:
The much beloved GDP is only a measure of activity, not of worth. Cleaning up the Gulf oil spill, treating a baby’s birth defect, racing 400hp race cars in circles, or publishing 1000 gigs of porn – they all count equally (is that why its called gross?). Economists live in an ecological vacuum where miracles can (and now must) happen on a regular basis. The general trust in the future being an improved version of the present (they’ll think of something) is the equivalent of a cargo cult. The idea of limits of any kind is anethma despite the clear evidence that our one time bounty of cheap oil has peaked and the photographs of Earth that reveal a closed system with no handy sister planets in sight.
Even if something like cold fusion was real and available soon we would still have to confront the thermodynamic limit of the planet. (A nuclear power aside: What proportion of the heat released by nuclear fission is actually transformed into high grade useful power at the point of use versus the huge amount of low grade heat pollution represented by the enormous cooling towers, sea water intakes and multi decade active cooling of those thousands of tons of spent fuel?)
Meanwhile I suspect that the near term impact of climate change/drought on our food supply will render discussion of sea level rise, exotic power plants or life in an energy efficient virtual reality quite irrelevant.
“The much beloved GDP is only a measure of activity, not of worth.”
No, just no. It is simply not true. GDP is based on an implict measure of worth, namely what people are willing and able to pay for goods. If the gov’t or consumers were to decide that they value cleaning oil spills more than Nascar racing, they will invest a lot in cleaning up oil spills and scale down their consumption of Nascar races. The price mechanism would react and the weighting of these goods within GDP would change.
Now, of course, you could say that you don’t like how it is currently weighted. You could say that you want consumers and the gov’t to spend more on oil spills and, guess what, I and many economists would agree. But these weightings are the result of democracy and people’s preferences. Not of GDP
But it’s also true that GDP is measuring monetized activity, trades. Two people cooking dinner separately and cutting their own hair don’t contribute to GDP; if one cooks for the other in exchange for haircuts, they do. Same activity, different GDP. Housewives raising kids aren’t measured by GDP; working wives who pay for day care are
(Not exactly the same; likely, though not necessary, that they’re specializing in what they’re good at. But the actual increase in product is the difference between expert and do it yourself activity, so still less than the apparent increase due to monetization.)
So GDP can increase for a while without energy increase, as the economy gets monetized, but one can dispute whether that’s real growth, and anyway there seems to be saturation there too, once everything and everybody is monetized and mutualized via shares.
This cyclical conundrum is evidence of overly-broad (and self-imposed) constraints. Your lack of imagination is showing.
I posted an article a few months ago on this issue of limited growth (which argues against the author’s contentions), here it is, reproduced:
[moderator note: comment is longer than ideal, and would normally be shortened via crude editing. Since this was written elsewhere, could you provide a link and summarize the point in a paragraph (as a teaser to motivate people to follow the link?]
I decided to write a blog post as a general retort to some of the commenters here. Some might find it interesting. http://procrastinationembodied.wordpress.com/2012/04/17/capitalism-money-cant-buy/
Probably one of the best posts I’ve read on this topic, in the past 5 years. Mainly, the narrative technique you employ–a conversation–allows the reader to digest the material at a pace that’s conducive to the subject at hand. As we know, humans are not naturally set up to incorporate longer timeline problems into their focus, having a deep preference instead for shorter timeframes. Also, the conversation structure capture the organic nature of these debates, and, how the debate itself needs to extend over a longer timeframe. I wish every economist would read it. If only to help themselves understand better that, now more than ever, it’s going to be more crucial to distinguish between industrial growth in quantitative terms and some other kind of growth that will be more qualitative. I still think the latter will require a recycling of the built environment, to capture its embedded energy. So, the notion that progress can take place laterally is still a hard concept to admit into my own thinking. Consumption of energy, whether from a suite of other BTU sources or through stripping embedded energy, will still tend towards consumption growth. That said, the real gem of the post was the moment when you suggested that modern economics, as a profession, unconsciously finds itself completely dependent on and trapped within a growth paradigm. The profession has become almost singularly narrow in this regard, and appears to be unaware of other slow growth to no growth eras. But I am biased: I now view the economics profession has mainly in service of the political class. They are all too happy to supply the theories that the political economy demands. In other words, their project is little than the creation of a dream factory: and accounts for the intellectual alergy to energy. Because energy limits smash the cultural dream to measure everything in nominal terms, rather than in real terms. And modern economics thrives on nominal, not real, units of account. Anyway, extremely well done Tom. Best, G
I have one more observation I’d like to make.
Slowing growth rates are pretty common. You could easily argue that long dated inflation-linked bonds (TIPS) are the best market predictions of longer term economic growth. Such yields have declined in at a steady pace for the last 30 years, going from 4% to about 1% now, in all developed countries. Even before the current crisis they were extremely low (~2%) by historical standards.
I sometimes work with the pension industry, and it’s a common issue in the industry to wonder whenever zero is really a bound on long term rates. Most people believed it was, but this is slowly being eroded. Many are now trying to hedge such risk. While there are some reasons to believe the market is somewhat distorted, UK long-dated real yields (all the way to 50 years) have been negative for the last few years.
While it’s true that lower average growth rates dull the incentive to invest, it doesn’t completely remove it. A positive inflation rate protects such incentive, by eroding the value of money. But you could argue that the greater and greater resources devoted to keep the value of money highly predictable is as big an impediment to the energy transition as the technical issues…
Unfortunately I don’t have time to read all of these interesting comments so this point may have been covered. I suggest it is better to couch this discussion in terms of entropy rather than energy. We consume low entropy and produce high entropy in order to generate wealth. Unfortunately, all of our wealth is far from thermodynamic equilibrium so it rusts, rots, corrodes and wears out like your car in the drive and that banana sitting on the counter. Our civilization requires copious quantities of low entropy just to tread water let alone grow. Also rather unfortunately, our high entropy wastes further consumes our wealth. For example fossil fuels have extremely low entropy which we convert to waste heat and carbon dioxide, both having high entropy. An Eemian climate is now unavoidable which means that Florida will be underwater (in perhaps 200 years) even if we stop burning fossil fuels today. That’s a lot of wealth destruction. We may no longer have enough energy to maintain our wealth and keep up with our destructive behavior. As a physicist I know you know all this but it may help economists understand. I can recommend two good books: Frederick Soddy, Wealth, Virtual Wealth and Debt, 1926 and Nicholas Georgescu-Roegen, The Entropy Law and the Economic Process, 1971
And I leave you with this great quote of which I’m sure you are aware:
“The law that entropy always increases holds, I think, the supreme position among the laws of Nature. If someone points out to you that your pet theory of the universe is in disagreement with Maxwell’s equations — then so much the worse for Maxwell’s equations. If it is found to be contradicted by observation — well, these experimentalists do bungle things sometimes. But if your theory is found to be against the second law of thermodynamics I can give you no hope; there is nothing for it but to collapse in deepest humiliation.” — Sir Arthur Stanley Eddington, The Nature of the Physical World (1927)
Human intellect isn’t going to overcome that! :+)
Cheers and regards
Economists are trained in math, but need have NO physical science education; the result is the profession-wide naivety that the economist above demonstrates. Economists woud not therefore notice that there is no physical, scientific basis of the so-called Law of Supply and Demand. Newton’s were the only laws in town when Adam Smith wrote; the best one can say for S-D is that it misapplies the action-reaction law. There is no model of physical growth and no irreversible energy use either in Newton or in S-D, free market “thinking”. In fact, in free market ideology, profit is “inefficiency” that prevents perfect S-D balance. Inefficiency is a thermodynamic idea; entropy was described almost a century after Smith.
To cut to the heart: A profitable transaction is a non-zero-sum interaction. The only non-zero-sum interactions in nature are thermodynamic; profit must therefore have some relation to increasing entropy. The economic growth/steady state problems discussed above arise from the necessarily expanding (and therefore diluting) economic universe driven by the profit motive. For an economic steady state to exist, physical entropy (waste heat, etc.) production must be in some stable relation to free energy arriving each day from the sun. Visit our (copyrighted) website.
You sound like Thomas Malthus. Malthus was right, but he could not forecast the impact of the technology in the factors of the world at that time.
I would say it was energy resources, much more than technology, that pushed the limits further out in time.
Here’s where it broke down for me: “This means that energy—a physically-constrained resource, mind—must become arbitrarily cheap as GDP continues to grow and leave energy in the dust.”
I really don’t follow that (and I’m surprised the economist agreed). If the economy can grow lots with energy use also growing lots, that would presumably happen largely through high prices on energy.
Argh! Meaningful typo above, I meant to say, “If the economy can grow lots withOUT energy use also growing lots, that would presumably happen largely through high prices on energy.”
In developed countries, energy consumption per capita is stable/slightly decreasing.
It is going up in developing countries only (mostly China).
No comment on US per capita energy consumption….. but basically a current developed country that doesn’t waste its energy for the fun has been stable for the past 30 years at about 3500-4500 ktoe per capita.
Therefore the statement “we are accustomed to per-capita energy growth” is wrong and the implied consequence “total energy would have to continue growing to maintain such a trend” is still to be proven if you want the rest of the reasoning to be valid as the growth of total energy consumption is central to it
I’m not saying it’s wrong (i actually think you are right about the limits to growth/ unsustainability of any exponential dynamic in a finite system), but the reasoning shown here is based on a false premise.
The funny thing coming to this from computing is I see the same kind of ‘discipline defined’ blinkers in both of the participants (and equally in myself having not realised the energy issue either I guess)
You can’t simply make everything virtual and keep expanding because every data storage system we have has an error rate per bit and those rates rise rapidly the more densely you pack information. Some organisations with vast data sets are already spending a measurable percentage of their resources recopying and regenerating data sets to avoid loss.
So storing data takes energy, keeping it stored takes energy, it eventually decays. We have bounds on the smallest space/energy you can store a bit of data, bounds we may be surprisingly close to at this point.
And yes – everything will one day decay. Someone will be the last intelligent being to read Shakespeare.
As an ecologist I think we face ecological limits much sooner than we face physical limits. Some of those limits are evident every day. Yet of course we have spent so little effort trying to be efficient with anything other than labor and capital inputs that there is great room for improvement–if we would only focus on efficient use of the things that really matter. So we can still do a lot with technical fixes, if we only concentrate in the right arenas (something we have not done in the past). But of course it depends on what is really the limiting factor (water? land? soil? nutrients? recycling capacity? ecological resilience/robustness? absorption of GHGs? primary productivity? energy? low entropy?… clearly the entropy limit is a long way off yet…)
1) I do not care only for what is important to Homo sapiens, but also to other species with which we “share” the planet–many of which are going extinct every day on account of the status quo in human society. There must be room for others as well. Furthermore, we have evolved in a world with other species around us, this is what we are used to and we have been evolutionarily adapted to it over millions of years and they are part of what we like and love about this planet (even if Homo sapiens has only been around for a little over 100,000 years). That would have to be a mind-numbingly good virtual reality machine… Be that as it may, many of the good things in life already don’t cost any money–unfortunately they are being destroyed by other people´s pursuit of money, experiences, family, etc. In the immortal words of Paul Simon, “one man’s ceiling is another man’s floor”.
2) Even if the economy shifts into the non-material world and focus of the economy shifts to quality of life (“insubstantial” aspects such as art, virtual reality, decorative desserts, etc.) that do not require a lot of material inputs, there must be a limit to how much people will or can pay for the massive house of cards that is built on top of the real inputs in the economy (food, nutrients, etc.)… If food production is the ultimate “real input” into the economy, how big a house of cards can we build on top of that before people are saturated with that immaterial part and will not be interested in paying more and/or the necessary part of the economy is not able to bear any increase in the weight of the “superstructure”?
Cessation of growth seems inevitable also in the economic sense.