Huh. I was browsing a free forum thread called "Have We Reached the End of Economic Growth" which quoted a very interesting article in the Washington Post:
I wrote up a comment about it, for which I spent a good hour relocating links I'd read in the past. And then during the time I was writing my reply, the thread got shifted from the "Free" section to the "Paid" section somehow. I didn't realize somebody could do that. At this point I can't even remember who posted the original thread.
[Yeah, yeah, I know, I've been a forum member for years now, I really should have a paid subscription by now. Someday I may yet get one. The thing is, I don't have any real investments to speak of, so it's hard to justify the expense. I just come here for the articles, not the stock tips!]
Anyway, here is my comment on the other thread, (I always copy and save before posting!!) So I hope people can benefit from the research I've gathered.
Thanks to everyone for commenting on this great thread because each point you raise could be a whole thread in itself.
I have some links for people who are interested in analyzing economics from this viewpoint, which I think has a lot of truth and relevance to our situation. In my opinion this basically turns our entire understanding of economics upside-down. I'm an Engineer, not an Economist, so maybe I'm in over my head. But in my current job I have to deal with economists and produce numbers to support economic analysis every single day, so I do have some understanding of this. This is a brief summary in my own words of some articles and discussions I have been following:
When economists analyze the economic growth of a country, the concrete inputs they tend to measure are capital and labor. When we separate out those components from the economic growth of an advanced country like the US, the dollar value of capital and labor inputs explain just under 50% of the dollar value of the economic growth. More than 50% of economic growth seemingly just appears from nowhere. If you ask a classical or neo-classical economist to explain this, they say that wealth is created through technology and human innovation. Those general terms seem to have the power to create measurable wealth out of thin air (plus a small supply of labor and capital).
However, some economists are not satisfied with that explanation. A few (links below) have tried to bring energy, specifically energy consumption, into the equation. According to Reiner Kummel and other economists, if you assign a realistic dollar value to the burning of energy -- not just the value of the fuel as it comes out of the ground, but the actual use of the energy itself after it is produced -- in fact you get a very close fit to the curve of economic growth, and it causes the economic growth curve to track such events as the 1970s Oil Embargo very, very precisely. This suggests that most of modern economics itself is based on a mis-perception -- economics is not actually tracking money per se as an independent measure of wealth, but at least in part (the majority part) economics is tracking energy _use_. The more energy we burn, the faster we burn it, the more the economy grows. The past century and a half of rapid economic growth has actually tracked with growing energy use, as we burn more and more concentrated sources of energy (i.e., as we moved away from wood to coal then to oil and nuclear, etc.)
Now here at iTulip we have all discussed the idea of "peak cheap energy". Even though the world is a long way away from "running out" of fossil fuels and other energy sources, we have picked off most all the low-hanging fruit, so energy extraction is basically just going to get less and less economical, more and more costly from here. Combined with the above, this tells us a few things.
The idea, or maybe more accurately the "hope" or "belief", that in the long-term future, technology and innovation can maintain our economies and our standard of living at present levels in the face of diminishing energy supplies is probably false. In this analysis, it does not appear that technology creates wealth out of thin air -- except insofar as it helps us extract and burn energy faster. When the energy dries up, so does economic growth, and despite much talk we haven't seen real concrete evidence that any new energy source can replace fossil fuels on the worldwide, general-purpose scale that fossil fuels are used.
Nor can we make up the energy shortfall and maintain our present lifestyles simply by working harder (despite what our managers and bosses may believe). Labor and capital are not the majority components of econmic growth of an advanced country, they are less than 50%.
Therefore, the concept of "peak cheap energy" implies that economic growth will indeed come to an end (possibly already has).
(Side tangent, on the other hand, this also helps explain why human happiness and satisfaction don't track well with economic gain. After a certain point, if you are simply burning more energy for the sake of burning energy, it doesn't really make you happier. You're just running in circles and wasting energy.)
(Another side tangent, we first-worlders tend to assume that 2nd- or 3rd-world countries like Mexico or some African nations have primitive economies because they are somehow "backwards" in terms of technology, or education, or they just plain aren't as "innovative" as Americans. Once again this analysis would belie that conclusion. Technology is everywhere; even people in 3rd world countries often have access to cell phones, and they can be clever about using them. We look on their economies as primitive because their infrastructure isn't set up for the majority of the population to burn heaps of concentrated energy on a nationwide scale, like first-world countries are.)
I first heard this analysis from a guy named Charles Hall from SUNY: (video)
He's not an economist, but he was quoting some foreign economists such as Reiner Kummel:
The video with Charles Hall was an interview for a podcast called The Extra-Environmentalist, which I have come to respect quite a lot. These are two relatively young journalists who investigate such issues and I think they have a great, relaxed, yet penetrating interview style. Despite discussing these weighty matters, they maintain optimism -- their motto is "All The Doom Without The Gloom"! They have often done episodes about Growth, energy, alternative Economics, the creation of money, and resource depletion. The following are links to the episode pages of some relevant podcast episodes, which of course are MP3 audio files you would need to download (from the page) then listen to on a computer or MP3 player. Check 'em out!