From time to time I’ve mentioned my belief that a policy that encouraged the production of more energy would be better for the economy than one that discouraged energy production. There’s a post at OilPrice.com that presents an energy-centric interpretation of the economy:
In order to produce economic growth, it is necessary to produce goods in such a way that goods become cheaper and cheaper over time, relative to wages. Clearly this has not been happening recently.
The temptation businesses face in trying to produce this effect is to eliminate workers completely–just automate the process. This doesn’t work, because it is workers who need to be able to buy the products. Governments need to become huge, to manage transfer payments to all of the unemployed workers. And who will pay all of these taxes?
The popular answer to our diminishing returns problem is more efficiency, but efficiency rarely adds more than 1% to 2% to economic growth. We have been working hard on efficiency in recent years, but overall economic growth results have not been very good in the US, Europe, and Japan.
We know that dissipative systems operate by using more and more energy until they reach a point where diminishing returns finally push them into collapse. Thus, another solution might be to keep adding as much cheap energy as we can to the system. This approach doesn’t work very well either. Coal tends to be polluting, both from an air pollution point of view (in China) and from a carbon dioxide perspective. Nuclear has also been suggested, but it has different pollution issues and can be high-priced as well. Substituting a more expensive source of electricity production for an existing source of energy production works in the wrong direction–in the direction of higher cost of goods relative to wages, and thus more diminishing returns.
Getting along without economic growth doesn’t really work, either. This tends to bring down the debt system, which is an integral part of the whole system. But this is a topic for a different post.
If you’re convinced that the future of life on earth depends on producing less energy, it probably won’t convince you otherwise but I might give you something to think about.
In a certain way, it sounds like textbook Marxism to me. Capitalism will ultimately eat itself because the need to turn a profit makes it impossible to pay workers enough to buy the products they make. Unless, that is, you use every means at your disposal to keep costs low.
By the way, you and the rest of the bunch are probably not familiar with Adam Curtis. (Or maybe you are.) He does documentaries for the BBC. He’s just released a new one on BBC iplayer, which of course is not available in America. But it’s on Youtube, until they take it down. It’s called Bitter Lake and it’s about the Saudi-US alliance, Wahhabism, and Afghanistan.
Thanks. One of the first things I did when I arrived in the UK was to install a copy of iPlayer on my Kindle.
You might be interested in reading about the very first meeting between a president of the United States and a Saudi king which I wrote about a number of years ago. My feelings about the U. S. relationship with KSA could be summed up in an old saying: who sups with the devil must use a long spoon.
I was interested. Thanks. You mention honor, sense of duty, and plain decency–I would add one thing: optimism. Not the type that craves credulity or the explanations system, but the kind which to me goes back to the men who served under the first Roosevelt. We have honor, duty, and decency. But the question is why isn’t there optimism?
I meant: explanations of a system.
Manufacturing follows cheap energy. Robots do not demand minimum wage increases, maternity/paternity leave, workplace safety, Social Security, Medicare, etc. There is nothing new here, but his use of a physics model is interesting. I usually think of biological models.
He mentions debt, but leaves it for another discussion. He also touches upon human’s intellectual ability and their communication skills. These should provide the jobs for the workers replaced by automation, but the automation has not occurred.
Robots are cheap skilled and efficient labor, but instead, cheap unskilled and inefficient labor has been used. The widespread use of use of robots for manufacturing would be a second wave of the industrial revolution, and this revolution would eventually be exported. The first generation robot manufacturing production would exit the US.
None of this has happened, and my contention is that it is due to the financial industry replacing the robot industry. The financial industry creates credit products whereas the robot industry would create automation products. Human intellectual and communication skills have gone into the financial industry, and with the housing bust, much has gone into the higher education industry.
There is another physics about conservation of energy. An analogy would be conservation of value. At some point the dollars will be so devalued that there will be no tax rate high enough to support all the under & unemployed workers.
One problem with this analysis and most others is that it is a static linear projection. The world is dynamic, and any number of things can affect it. Not only the things we do not imagine, but more importantly, the things we cannot imagine.
I do not remember if I predicted this here or not. Many of my comments are 2X or 3X longer, and I forget what I chop.
New Report Urges Western Governments to Reconsider Reliance on Biofuels
Note this is a NYT article, and the report is “from a prominent environmental think tank.”