Economic growth with declining energy?

sparky · Heavy Crude Joined: Apr 09, 2007 Posts: 119

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The financial times is a pretty good read ,
they are of course establishment but far more intellectually nimble that the free trade zealots at the economist .
martin Wolf is no Bolshevik but you can feel the man hasn't poured concrete in his brain yet and can add two plus two

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Revi · Fusion Joined: Apr 25, 2005 Posts: 3098 Location: Maine

Depends on what you mean by economy. It looks like the export land model shows us declining much faster than we thought it would. No economy could survive that. Here's Westexas's original post in the oil drum:

http://www.theoildrum.com/story/2006/1/27/14471/5832

We are beginning to prepare for it. Economy, eshmonomy!

We are going to have to change our economy. It will hurt, but what choice do we have?
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MSimon · Coal Joined: Jan 11, 2008 Posts: 10

This changes everything.

WB-7 First Plasma

Iaato

I came at that same Wolf-FT article from another blog online at Financial Sense. Did you see this graph in the Wolf article? It puts paid to the entire question of growth with declining resources.

Wolf also mentions this book: "Contours of the World Economy 1-2030 AD." Anyone read it? Is it worth getting?
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LoneSnark · Intermediate Crude Joined: Nov 15, 2007 Posts: 505

Iaato, if you look at your graph close enough you can see growth taking place with declining fossil fuels. Here, I will help you out with a graph that better shows the event by concentrating just on oil and zooming in on the time scale:

mrobert

Economic growth is possible with declining energy.
Honestly, we are wasting how much energy? At least 50% of what we use? We can cut back on that, reduce energy usage, and spend the money on not so energy intensive products and services, and still ensure economic growth.

Let's make an example. I start turning off the lights that I don't use. I use the saved money to go to the cinema. The cinema is less energy intensive then keeping the lights on. I still input the same amount of money in the economy, to *avoid* recession, except less energy is used for the services/products that I use.

Or, I can spend $3 on something else then a gallon of gas, which doesn't require the same energy to produce then what's in 1 gallon of gas.

We have a lot of *lights* that we can put off people. It's why we won't have doomsday scenarios anytime soon.
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TonyPrep

The "waste" in energy or resources also represents some GDP and so a reduction in waste could see a reduction in GDP unless compensated for.

Overall, economic growth, long term, requires increasing resources (since economic growth - GDP increase over inflation - means more stuff produced, more stuff used, more services provides). Another poster suggested that energy use is a proxy, to some degree, for resource use. If that's true, then energy decline must mean economic contraction, at least in the long term (given that there could well be efficiencies that might compensate in the short term).

yesplease · Fission Joined: Oct 03, 2006 Posts: 2034

The thing with GDP, is that it isn't a measure of, as some have said, "good" or "bad" wealth creation, just wealth creation. How much we work...
GDP = consumption + gross investment + government spending + (exports − imports)
So... We could, say, destroy every single structure in the country, then rebuild it all, within a year, and GDP would be through the roof since we worked/consumed so much. That doesn't mean what we did was useful or worthwhile in any quantifiable way, just that we did lotsa stuff. GDP seems like a great indicator of profitability if you're someone who makes money off of economic activity for the sake of activity, but not for most in that they may not gain much in the way of "good" wealth from an increase in GDP.

An example could be if we all switched to hybrid (human/electric) velomobiles for personal transport. We would be consuming far less, and along those lines have to do far less to maintain our mobility, as opposed to paying out the nose and spending a significant portion of our personal income to move tons of steel as well as the externalities from these such as pollution, climate change, military involvement in a politically unstable portion of the world, etc...
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criticalmass

We occasionally forget about food. In as much as people are made of food, shouldn't we also recognize that economic growth also depends upon our ability to grow more food in order to make more people? These same people in turn, being the ones that consume more and provide the drive for future economic growth. This food is grown with petrol and cultivated with petrol and sprayed with petrol based products and harvested with petrol run machines. Even if everyone grows a good portion of their own how do you feed 8 or 9 billion?

This sort of leads to the question "Would there be any real growth if not for additional population?" Maybe. The bigger question is wether or not we want any more consumers.

Let's also recognize that giant efficiency gains like those seen in the 80's across developed nations aren't quick or easy to come by unless major technology gains are made. Furtherore, the gains made in the 80-90's have been realized with current technologies. What new technologies do we see on the horizon that spur such optomism?

MrBill · Expert Joined: Sep 15, 2005 Posts: 5214 Location: Eurasia

I do not think that we have forgotten about food. There are already several threads in Depletion Economics dealing with this issue at the moment.

criticalmass

I tend to agree... we could see a doubling in yield through genetics, but the foundation to realize this yield (depleted soils, salinization, petrolium based fertilizers and petrol-fueled equipment and of course, water supply) will realistically not be there- even with savvy farming methods.

Studying modern econoics at one time lead me to believe that a true free market will always yeild higher efficiencies. This is still true however, what you're not necessarily taught is that you can only do the best you can with WHAT YOU HAVE. The awesome power contained in a barrel of oil could move mountains. Without it, alternative energies, new technologies, and new minds need one key ingredient to "catch up" -time. Question on this thread is: "Will we have enough time to close the energy gap before the market fails?" Whew. I certainly hope so. Economic growth seems like quite a pipe dream until then.

TonyPrep

MrBill · Expert Joined: Sep 15, 2005 Posts: 5214 Location: Eurasia

We may not have enough time to switch to alternative energy to run our existing infrastructure before petroluem goes into irreversible decline. It is quite possible that our existing infrastructure is simply unsustainable. Period. That is not a market failure. That is piss poor planning! ; - )
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yesplease · Fission Joined: Oct 03, 2006 Posts: 2034

Fortunately IMO, to minimize most use we only have to switch to alternative infrastructure that runs on existing energy. Wink

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MrBill · Expert Joined: Sep 15, 2005 Posts: 5214 Location: Eurasia