New World Model based on "Limits to Growth" model

[Quinny]

and how would you measure price - in dollars?

That is correct, but it doesn't explain which energy source will be chosen to substitute when one of them starts being a problem because supply can't meet demand. My model uses EROEI to explain allocation.

We can't ignore price in terms of resource use because that's what drives it, not just EROEI. EROEI drives price to an extent, depending on the energy source, but it's just part of the costs that determine what energy source we use.

If we cranked out oil platforms like cars, cost per ton given the material inputs would probably be comparable, but since we don't, specialized oil equipment is expensive and commonly used stuff is relatively cheap. Compare the cost of a custom build car to a mass produced car, and you'll see how much more people pay for specialized equipment.

As long as specialized equipment remains specialized, I don't see that is a problem. I think there is still a correlation between energy needed to produce it and cost.

I don't think a correlation between energy and cost would be easy or accurate for low volume industrial equipment. The additional cost tends to be associated with more specialized man hours, not more energy per say. I have a cousin who is a mud engineer, and he doesn't make six figures a year because he uses an order of magnitude or two more energy than other workers do, but because his specialized experience commands a premium. If anything, adding the embodied energy in the materials to the industry average for energy costs during construction would be the way to go.

[yesplease]

Dollars, Euros, Yen, whatever. We have currency indexes so we can see how a currency is doing against a weighted basket of other currencies as well as direct exchange rates.

[Quinny]

It seems to me that SOS an YP jsut don't accept the concept of EROEI and keep harping back to what is IMO a discredited financial system.

I first called for Energy based accounting back in the 70's when efficient pit's were being closed because of a fall of the Polish currency against the pound. (This was despite much worse productivity and environmental degradation in the Polish pits.)

When someone puts forward a model which then gets criticised because of the lack of a link (or clarity) between EROEI and fiat money I can only assume that those doing the crticism just don't accept any of the fundamentals of PO.

The thing is I'd love it if they could disprove PO theory because I'd feel much happier for my kids future. Unfortunately they just try to 'nit-pick' holes in other peoples contributions. I suppose they should be given credit for the volume they write, unfortunately I find much of it based on worship of a failed system. After a while it starts to get on your nerves.

[yesplease]

I think you should reread my posts Quinny. I've talked about EROEI in a fair bit of detail on the previous page. That said, EROEI is not the only factor in terms of cost. We have energy inputs and their costs, human inputs and their costs, material inputs and their costs, as well as taxes, subsidies, and so on, all of which work together to determine cost. I don't think we should ignore EROEI, but it's clearly not the only thing considered when we choose what energy sources we use, and a model IMO should reflect this reality. Whether or not you consider the structure of our costs fair, for instance should there be more taxation to account for externalized costs and so on, is valid, but if we're trying to accurately model something we need to look at cost, of which EROEI is just one part, not just EROEI, in terms of energy usage.

[Quinny]

I don't agree. IMO the problem with using any currency in a global model is that the basic flaws in a debt based money creation system are carried into the model. Doly is correct in trying to eliminate cost factors and focus on EROEI.

[yesplease]

The world uses money as a basis economic decisions, including energy use. Regardless of whether or not you agree personally with our monetary system, ignoring it when trying to accurately model a system won't result in an accurate model. Should EROEI be included in an accurate model? Sure, it's part of costs. Should it be the only thing we use? No way. We need material costs, labor costs, and energy costs, which includes EROEI, but are not completely dependent on EROEI.

[Quinny]

You obviously see Energy as just another resource. We have to agree to disagree, I think it's the trump card that underpins all other inputs.

I'd accept that there could be other extremely scarce resources who's cost is not reflected by the energy used to get them, and hence they could be used as constraining factors. They are however IMO not on the critical path as it were.

There is no point in using 'material or labour costs' when they can fluctuate with no recognition of the effort required to extraxt, or the amount of labour required. Like the highly efficient English pits being closed (and to all intents and purposes sealed in perpetuity) in favour of inefficient Polish pits because of 'costs' that had nothing to do with effectiveness or best use of resources.

[yesplease]

So where's that leave matter?

Anyway, regardless of what you believe, people don't behave based solely on what nets the most energy, and as such any attempt to model behavior on that probably won't work well. The point of using market costs of labor, materials, and energy used to get other energy is that it's accurate because that's what we base energy extraction on. EROEI is a part of it, but it's not the end all be all. People and materials are still involved and the amount of time/scarcity of ability also determines cost and what energy sources we use.

[Quinny]

Although you've tried hard to pick holes in Doly's model, I am confident that any model that tries to introduce more financial costs into it would be much easier to criticise.

Real wealth is represented by goods that people can utilise in some way and food they can eat etc. produced by the application of energy to raw materials. You don't seem to accept this and assume that wealth can be measured by abstract concepts such as GDP. Following the collapse in value of major industrial concerns and financial institutions can you really not see the danger of introducing 'funny money' into a model?

[yesplease]

The only problem with doly's addition to the world3 model was using EROEI solely for energy use when that isn't case in practice. As for whether or not a model based on what energy used is based on, cost, with it's components including EROEI, is easier to criticize, that depends on the changes in the model. It would certainly be more complex, but that doesn't mean it would be more or less accurate than the previous iteration. It depends. The only way to find out would be to try then wait.

Real wealth is represented by goods that people can utilise in some way and food they can eat etc. produced by the application of energy to raw materials. You don't seem to accept this and assume that wealth can be measured by abstract concepts such as GDP.

GDP includes goods that people can utilize as well as food they can eat and raw materials used in their production. It also includes services, what people do and how much they get paid to do them, because without those, we can't utilize raw materials to make goods and foods.

Following the collapse in value of major industrial concerns and financial institutions can you really not see the danger of introducing 'funny money' into a model?

The collapse of the different financial institutions has nothing to do with funny money and everything to do with fraud. Lenders made incredibly risky loans, which were labeled as totally safe investments, and the value of these institutions went up until it became obvious that they were sitting on a pile of lead rather than a pile of gold, at which point they fell like dominoes.

[Quinny]

So you can just ignore the print our own money to buy our own bonds as legitimate means of bailing out the system. That's not fraudulent or funny money then?

[yesplease]

Given the alternative I can't say that loans seem all that bad. If we had all the major banks and automakers go bankrupt at once, the situation would've made the GD look like a cakewalk. As it stands, even though the government is losing money on the interest, loaning those companies enough to stay on their feet and letting them pay it back over time isn't too bad. Granted, there were the straight up give aways to AIG and co under BushCo, but just like the no-bid contracts that's more about cronyism than anything else.