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A new theory of energy and the economy
  • Vitaliy_KiselevVitaliy_Kiselev

    How does the economy really work? In my view, there are many erroneous theories in published literature. I have been investigating this topic and have come to the conclusion that both energy and debt play an extremely important role in an economic system. Once energy supply and other aspects of the economy start hitting diminishing returns, there is a serious chance that a debt implosion will bring the whole system down. In this post, I will look at the first piece of this story, relating to how the economy is tied to energy, and how the leveraging impact of cheap energy creates economic growth.

    Trying to tackle this topic is a daunting task. The subject crosses many fields of study, including anthropology, ecology, systems analysis, economics, and physics of a thermodynamically open system. It also involves reaching limits in a finite world. Most researchers have tackled the subject without understanding the many issues involved. I hope my analysis can shed some light on the subject.

    Systems analysts would call a system such as the economy a complex adaptive system, because of its tendency to grow and evolve in a self-organizing manner. The fact that this system grows and self-organizes comes from the fact the economy operates in a thermodynamically open system–that is, the economy receives energy from outside sources, and because of this energy, can grow and become more complex. The name of such a system from a physics perspective is a dissipative structure. Human beings, and in fact all plants and animals, are dissipative structures. So are hurricanes, galaxies, and star formation regions. All of these dissipative systems start from small beginnings, grow, and eventually collapse and die. Often they are replaced by new similar structures that are better adapted to the changing environment.

    If the economy is a dissipative system, it is clear that energy must be central to its operation.

    http://ourfiniteworld.com/2015/01/21/a-new-theory-of-energy-and-the-economy-part-1-generating-economic-growth/

    Very good post by Gail Tverberg. Only Part I for now.

  • 9 Replies sorted by
  • brianlbrianl

    I haven't read it yet. I'm wondering though, if Gail is correct, when energy supplies diminish and the debt implosion and collapse happen, what system emerges from that once the smoke clears?

  • Vitaliy_KiselevVitaliy_Kiselev

    Read it and her early posts :-)

    if Gail is correct, when energy supplies diminish and the debt implosion and collapse happen, what system emerges from that once the smoke clears?

    She is correct, mostly. No one knows. Nature really does not care. May be only small amount of people will survive and will be living at the standard common to thousands years ago.

  • MirrorManMirrorMan

    Thanks Vitaliy. Definitely worth reading and "grounding". As for what happens after the "collapse" its hard to say if we don't even know what the collapse will look like. There is of course the hollywood image which is fun if you're only watching it and not actually in it. There are plenty of models of pre-industrial civilizations to draw from to potentially "evolve" but we have either mostly doctored or fragmented records of our own past or severely crippled versions of contemporary ones (thanks to the legacy of colonial power), making the knowledge of what to do, rather scarce (despite the belief that all information is googleable). So like with most things, humans will probably have to learn the hard way, by sacrificing most of what they value and depend on for the sake of an ideal... that is, if the planet itself deems us worthy of keeping.

  • Vitaliy_KiselevVitaliy_Kiselev

    There are plenty of models of pre-industrial civilizations to draw from to potentially "evolve" but we have either mostly doctored or fragmented records of our own past or severely crippled versions of contemporary ones

    Huge problem is complete instability of society. Most countries depend on each other, including things absolute necessary for living. Same is true for regions. Even in 1980s system was quite stable, in 1930s it was very stable.

  • GeoffreyKennerGeoffreyKenner

    Very interesting article, thanks for sharing. I don't think our generation will see the collapse, but I'm pretty sure we are the last generation who can do something about it to prevent or "minimize" the "dark age". Kinda sounds like Asimov's Foundation series. Should humanity live for several thousands years at the stone age again or can we work it out to make a transition that could see a bright future after a couple of centuries. My greatest fear is that humanity will consume everything and realize they don't have enough energy anymore to make it to space. That would be a big condemnation. It's both amazing and scary, when I see the technology that is developed to harvest and transfer energy:

    and what ideology choose to do with it. It's like no one give a damn about the aftermath. Yet all the tools are in our hands, the only thing that need to be used is the brain now.

  • Vitaliy_KiselevVitaliy_Kiselev

    @GeoffreyKenner

    I don't think our generation will see the collapse

    Gail is not so optimistic as you :

    image

    I also suggest to go back into my blog and check many charts that just prove you wrong.

    My greatest fear is that humanity will consume everything and realize they don't have enough energy anymore to make it to space.

    I suggest to read any serious article containing calculations of energy and work required to build real spaceship that could reach nearest stars. Calculations will put you into deep depression

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  • v10tdiv10tdi

    all the tools are in our hands, the only thing that need to be used is the brain now.

    Maybe having a brain isn't necessarily a good, long-term survival mechanism for a species.

    I would imagine that bacteria colonies can suffer a similar collapse if they proliferate beyond the capacity of their environment and their ability to adapt to changes in the environment caused by their proliferation.

    Perhaps the problem is that the human brains just are more adept at coping with individual survival problems and aren't programmed for long-term survival of the species. Inadequate social constructs. If that's true (seems so), then human brains are probably an evolutionary dead-end - less chance for long-term viability than bacteria brains because working together, human brains create more problems than they can solve.

    May not be just a human brain problem. Perhaps that helps to explain why we don't see ET. Maybe most "advanced civilizations" only last 10,000 years before they decline. With that kind of limit and given the distances and time between stars there is very low chance for encounter between 2 advanced civilizations. Might be possible if they evolved within same star system (different ecology or else one cannibalize the other)...but even then probably still rare.

  • matt_gh2matt_gh2

    Perhaps just as we saw advances in computing processing power, we may see advances in the efficiency of methods used to get energy from solar, wind, hydro-electric etc. Right now they may not be efficient, but imagine if the efficiency increases over time become like the efficiency increases seen in computing power over time.

    @Vitaliy_Kiselev Why is countries or regions being dependent on each other bad? I ask because it seems like from a "specialization of labor" perspective, the world increases efficiency/production when we have specialization, so I'm curious to hear your thoughts on this.

  • Vitaliy_KiselevVitaliy_Kiselev

    Perhaps just as we saw advances in computing processing power, we may see advances in the efficiency of methods used to get energy from solar, wind, hydro-electric etc.

    Gail had good post on this, you can check her early blog post.

    Actually your position is quite common one and it arise from something like science religion - people believe in progress and advancements even they have no logical reason to do so.

    Computer power already has big issues, and despite marketing publications, progress slowed down.

    Why is countries or regions being dependent on each other bad?

    Because it makes whole system unstable. Problems in one area or with some specific things (like fuel, tankers, etc) can trigger collapse. My point was that system never was so fragile as it is today.

    the world increases efficiency/production when we have specialization, so I'm curious to hear your thoughts on this.

    Actually idea to export work to countries with cheaper cost is indication of first problems, business starts optimizations. Mergers are also from same set.

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