Tag Archives: economics

relating to the soft “science” we call economics

The Energy Trap

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[This topic also appears in Chapter 18 of the Energy and Human Ambitions on a Finite Planet (free) textbook.]

Many Do the Math posts have touched on the inevitable cessation of growth and on the challenge we will face in developing a replacement energy infrastructure once our fossil fuel inheritance is spent. The focus has been on long-term physical constraints, and not on the messy details of our response in the short-term. But our reaction to a diminishing flow of fossil fuel energy in the short-term will determine whether we transition to a sustainable but technological existence or allow ourselves to collapse. One stumbling block in particular has me worried. I call it The Energy Trap.

In brief, the idea is that once we enter a decline phase in fossil fuel availability—first in petroleum—our growth-based economic system will struggle to cope with a contraction of its very lifeblood. Fuel prices will skyrocket, some individuals and exporting nations will react by hoarding, and energy scarcity will quickly become the new norm. The invisible hand of the market will slap us silly demanding a new energy infrastructure based on non-fossil solutions. But here’s the rub. The construction of that shiny new infrastructure requires not just money, but…energy. And that’s the very commodity in short supply. Will we really be willing to sacrifice additional energy in the short term—effectively steepening the decline—for a long-term energy plan? It’s a trap!

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Can Economic Growth Last?

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[An updated treatment of this material appears in Chapter 2 of the Energy and Human Ambitions on a Finite Planet (free) textbook, and also forms the basis for a 2022 article in Nature Physics.]

As we saw in the previous post, the U.S. has expanded its use of energy at a typical rate of 2.9% per year since 1650. We learned that continuation of this energy growth rate in any form of technology leads to a thermal reckoning in just a few hundred years (not the tepid global warming, but boiling skin!). What does this say about the long-term prospects for economic growth, if anything?

Gross World Product

World economic growth for the previous century, expressed in constant 1990 dollars. For the first half of the century, the economy tracked the 2.9% energy growth rate very well, but has since increased to a 5% growth rate, outstripping the energy growth rate.

The figure at left shows the rate of global economic growth over the last century, as reconstructed by J. Bradford DeLong. Initially, the economy grew at a rate consistent with that of energy growth. Since 1950, the economy has outpaced energy, growing at a 5% annual rate. This might be taken as great news: we do not necessarily require physical growth to maintain growth in the economy. But we need to understand the sources of the additional growth before we can be confident that this condition will survive the long haul. After all, fifty years does not imply everlasting permanence.

The difference between economic and energy growth can be split into efficiency gains—we extract more activity per unit of energy—and “everything else.” The latter category includes sectors of economic activity not directly tied to energy use. Loosely, this could be thought of as non-manufacturing activity: finance, real estate, innovation, and other aspects of the “service” economy. My focus, as a physicist, is to understand whether the impossibility of indefinite physical growth (i.e., in energy, food, manufacturing) means that economic growth in general is also fated to end or reverse. We’ll start with a close look at efficiency, then move on to talk about more spritely economic factors. Continue reading →

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