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Author Archives: Eric Britton
The Bubble Economy: Is there a way out?
The United States may not be the most admired country in the world today, as once it was. 
But the economic decline of the US is still capable of doing much harm outside its borders as well as internally. Part of the underlying problem is an extremely unrepresentative government system of the US. Congress is currently dominated by entrenched special interests – “big money” — that want to preserve the status quo. This reality makes it very difficult for the executive branch to function day-to-day, still less respond creatively to new challenges.
There is a weak economic recovery under way. It is weak because most OECD governments have been persuaded by conservative economists that government debt is now much too high and that government deficits have to be cut by cutting welfare spending. As a direct consequence of austerity policies, unemployment is still too high, especially when under-employment and…
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The Economic Growth Enigma: Capital, Labour & Useful Energy*
ABSTRACT: In this article we show that the application of flexible semi-parametric statistical techniques enables significant improvements in model fitting of macroeconomic models. As applied to the explanation of the past economic growth (since 1900) in US, UK and Japan, the new results demonstrate quite conclusively the non-linear relationships between capital, labour and useful energy with economic growth. They also indicate that output elasticities of capital, labour and useful energy are extremely variable over time. We suggest that these results confirm the economic intuition that growth since the industrial revolution has been driven largely by declining energy costs due to the discovery and exploitation of relatively inexpensive fossil fuel resources. Implications for the 21st century, which are also discussed briefly by exploring the implications of an ACEGES-based scenario of oil production, are as follows: (a) the provision of adequate and affordable quantities of useful energy as a pre-condition for economic growth and (b) the design of energy systems as `technology incubators’ for a prosperous 21st century.
* From Energy Policy, Elsevier. 13 July 2013. Vlasios Voudouris, Robert Ayres
Ayres on: How to Energise Economic Recovery
Ayres on: Powering the Economic Growth Engine
A 15 minute interview of Robert Ayres and Benjamin Warr appearing in the INSEAD Knowledge series posted on 16 September 2009, in which the authors are quizzed on the key findings of their then just published book, ‘The Economic Growth Engine: How Energy and Work Drive Material Prosperity’ (Edward Elgar Publishing).
Click HERE for 15 minute video
Toward a more rational distribution of electrical generation
The best way to maximize overall national energy efficiency is to decentralize the electric power production and locate it very close to heat users. Since quite a lot of our electric power is actually used to generate heat (e.g. in electric furnaces, or electrically heated buildings) it is entirely possible that a more rational distribution of electrical generation would actually cut electric power demand, while simultaneously cutting energy (exergy) use and carbon dioxide emissions.
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IPCC: Fossil fuels should be phased out by 2100
– BBC Science & Environment News reports on 2 Nov. 2014
The Intergovernmental Panel on Climate Change says in a stark report that most of the world’s electricity can – and must – be produced from low-carbon sources by 2050.If not, the world faces “severe, pervasive and irreversible” damage. The UN said inaction would cost “much more” than taking the necessary action.
The IPCC’s Synthesis Report was published on Sunday in Copenhagen, after a week of intense debate between scientists and government officials. It is intended to inform politicians engaged in attempts to deliver a new global treaty on climate by the end of 2015.
The report suggests renewables will have to grow from their current 30% share to 80% of the power sector by 2050. In the longer term, the report states that fossil fuel power generation without carbon capture and storage (CCS) technology would need to be “phased out almost entirely by 2100”.
– – – > Full article at http://www.bbc.com/news/science-environment-29855884
– – – > IPCC longer report here.
Part III. The Future of Energy: The future price of renewables
The future of energy will be driven by a combination of price and availability, as it always has. But in today’s uncertain world one thing is very sure, and that is that this combination is already in rapid transformation, meaning that we are now looking at a very different energy future indeed. In this four part series, we are looking out into the near term future of a battle already well underway, the unfolding market contest between non-renewables and renewables. In Part II of this series we are looking for price trends in the economically significant renewables, today, are firewood, hydroelectricity (large or small scale), storage batteries, wind power and solar power. Firewood is not a commercial fuel except in some of the poorest and remote countries. The two most dynamic renewable technologies for electricity generation today are wind turbines (either on-shore or offshore) and solar power. The number of installations of wind turbines and solar panels is large enough so that both can be treated analytically as aggregates, which we shall now look at here.
Cross-Current: On the Productive Link between Energy and a Robust Economy
John A. “Skip” Laitner is the first guest contributor whom we are proud to welcome to the important Cross-Currents section of Exernomics. Cross-Currents is intended to serve as a tribune for readers and colleagues who are working to develop new ideas and perspectives on the important topics focused on here — Energy, Growth and Democracy — to share their work and ideas with our growing network of international readers. We welcome critical discussion and creative disagreement.
Energy and Equity, Ivan Illich
– Introductory note by Eric Britton
As the first entry in our new xRx Library corner, we thought it would get us off to a vigorous start if we open with the long essay that Ivan Illich famously wrote in 1973 under the title of “Energy and Equity”, which in many ways is close to the concerns set out here. His approach is of course not scientific, but it is informed and in many ways relevant to the concerns of this collaborative investigation: Energy, Growth and Democracy. When Illich wrote this back in the early seventies, the “running out of resources” and anti-growth notions of the time were deeply colored by the publicity surrounding the Oil Crisis, Club of Rome, The Limits of Growth, etc.
However, Illich’s anti-growth positions were not entirely without nuance. His main target was our unrelenting refusal at the time to “discount any social limit on the growth of energy consumption”. And when he speaks of energy restraint, he is basically addressing the dominant energy technology and practices of that time, namely grossly inefficient use of fossil-based fuels. Not all that far from Ayres’ stated position here. Likewise when he writes: “Participatory democracy postulates low-energy technology. Only participatory democracy creates the conditions for rational technology” he is close to the concerns that bring us here.
Now let’s listen to Illich.
Part II. The Future of Energy: Why the price of oil and gas should increase (but will it?)
The future of energy will be driven by a combination of price and availability, as it always has. But in today’s uncertain world one thing is very sure, and that is that this combination is already in rapid transformation, meaning that we are now looking at a very different future indeed. In this four part series, we are looking out into the near term future of a battle which is already well underway, the unfolding market contest between non-renewables and renewables. The rising price of oil, in particular (because of its unique role as a fuel for mobile applications) together with declining prices of “renewables” is creating new opportunities for long-term investors, as well as requiring that government policy take into consideration the considerable implications of this transformative shift. In Part II, we are looking first at the unfolding and very different picture emerging for oil and gas.
Part I. The Future of Energy (and the Planet)
– For Exernomics. Robert Ayres, Paris. 24 October, 2014
The future of energy will be driven by a combination of price and availability, as it always has. But in an uncertain world one thing is very sure, and that is that this combination is already in rapid transformation, so we are looking at a very different future indeed.
In my recent book (“The Bubble Economy”) , I have argued that the rising price of oil, in particular (because of its unique role as a fuel for mobile applications) together with the declining price of “renewables” creates an opportunity for long-term investors. It is estimated that $2 trillion/year must be invested in renewable energy to meet future energy demand without increasing carbon dioxide emissions. Surprisingly, perhaps, current trends suggest that – contrary to widespread assumptions – such investments can be very profitable.
New York City skyline during power outage
Exernomics: opening date
This site is still in Beta form and under construction. The planned “official opening date” is 1 November. Hopefully however the reader will find that it is already worth a visit as its contents and organization improve.
Exernomics, it’s useful work.
Who, where in the world is looking at Exernomics this morning?
This map reports the last 200 visitors to check in to https://exernomics.wordpress.com
On Measures of “decoupling”
– Robert U. Ayres. Paris. 232 October 2014
The term “decoupling” is commonly used among ecological economists to express the notion that somehow economic activity can proceed without (or with much less) material resource consumption e.g. {Fischer-Kowalski, 2011 #7235}. The reasons for worrying about “decoupling” are three interconnected twin concerns: (1) environmental damages, (2) potential material scarcity problems, and (3) linkages to economic growth (or the lack of it). These three concerns are usually addressed separately, because different categories of material resources are involved in different ways. I will comment briefly on #2 and #3 later, but threats of environmental harm (especially climate change and bio-diversity loss)are the primary motivator of the “decoupling” proponents while #2 is somewhat supportive of #1 but #3 is, so to speak, “the elephant in the room”.
Permanent address for Exernomics
As part of the Beta test phase, we have been looking at different ways to house the Exernomics site, and yesterday we decided to establish it at https://exernomics.wordpress.com. (It can also be reached via http://exernomics.org.)
The site is still undergoing testing and work to complete and improve, but is useable in its present form. We intend to have it fully ready to go by early November. In the meantime your comments and suggestions on what you see here are most welcome. Enjoy Exernomics, it’s useful work.
The Bubble Economy: Energy, Finance and Growth
– R. U. Ayres. Support for public presentations in Cambridge, Carnegie Mellon, Washington DC, November 2014
I want to present four theses of possible interest. First, that economic theory today has not caught up with the changes in the world since Adam Smith and David Ricardo. Then externalities were comparatively rare and unusual. Today they are pervasive, thanks to urbanization, networking and globalization. The financial externalities associated with bubbles now far exceed in damage the profits to the bubble-makers.
Second, economic growth since that time has been demand driven because energy prices kept falling,– on average — until the beginning of this century. Future growth is not guaranteed in a world of “peak oil”, and oil price bubbles. It is not certain that our grandchildren will be much richer than we are. Secular stagnation May be caused by energy constraints.
Third, the policy response by central banks – low and lower interest rates, creates the condition for the next bubble. This cannot continue.
Fourth, there is a profit opportunity approaching with a huge payoff If grasped it will kickstart growth, reduce unemployment, ameliorate the Greenhouse effect and help solve the problems of the pension funds.
Renewable Energy Portfolios: New avenues for pension funds
The problem of providing pensions for retirees is becoming acute. Dependency ratios are climbing in all western countries. By 2050 they will double in most western countries. In Japan, the number of retirees, now 35 percent of active workers, will reach 80 percent. Most European countries will have dependency ratios greater than 50 percent. The US, now about 20 percent, lags a little, because of continued immigration (mainly from Latin America), but the ratio will rise to 40 percent by 2050.
What is Exernomics?
Exergy is a word from engineering that refers to the part of energy, which is the part that can do work. Not all energy, like the heat energy in water, or air at room temperature, can perform work. So when we speak of “energy” in the sense of something (like fuel) being “consumed” or “used up”, it is really exergy that we mean. The link between exergy and economics is usefulness.
How this site works
Work in progress: Please find here a first rough guide to the Exernomics website and its extensions. This section will be improved and completed as the project moves ahead. If you are web savvy you may not wish to take your time reading this. Still, perhaps a quick glance . . .
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Will our grand-children be poorer than we are?
The standard theory of economic growth, which is the basis of every economic forecasting model used by governments, business or international agencies, says that economic growth is automatic and will, therefore continue at historical rates indefinitely. Both liberals and conservatives believe this, though conservatives influenced by the “Austrian School’ (von Mises, Hayek, et al) warn that growth may be adversely affected if governments interfere with the magic of the Market by excessive regulation or in other ways. The problem is that they are both chugging along the wrong track. Their mistake is so fundamental that it has become invisible. But, as I say, the problem is really simple: virtually all modern economists neglect the role of energy. Or, more accurately, they regard energy as an intermediate output of capital and labor. The idea underlying the standard theory is that capital and labor, in some combination, “produces” coal, some other combination “produces” oil, and so forth.
The Exergy-Efficiency Connection
The standard neoclassical theory taught in the economic departments of major universities and accepted by most of the economists who advise governments (and business leaders) attributes economic output (GDP) and economic growth to cumulation of only two so-called `factors of production’ namely capital and labor. These two factors are assumed to be freely substitutable for each other but not complementary.
The reasons for this assumption are more historical than logical. Natural resources or `gifts of nature’ were originally attributed to `land’ which later in the 19th century was absorbed into the larger category `capital’. Of course sunlight — needed by plants – can be thought of as proportional to the area of the land on which it falls, hence as a kind of indirect attribute of the land itself. The same can be said of natural rainfall and benign climate.
In any case, standard economic theory, as it evolved in the two centuries up to the first “energy crisis” in 1972, did not treat energy per se as a ‘factor of production’. In standard economic growth theory useful energy was (and still is) treated, instead, as an intermediate product of labor and capital. Somehow, a combination of labor and capital are supposed to produce energy. This makes a certain sense if we think of a coal mine or an oil well as an energy producer. Of course, mines and wells are no such thing. The useable energy was there in the ground – a gift of nature, in fact – and what the capital and input did (does) is merely to extract it. A well is useless junk when the oil is gone, and an exhausted mine is likely to be a blot on the landscape if not actually hazardous.
Exernomics: On Energy, Economy and Growth 