Hi Steve. What is the belief you hold? What do you mean by “growth on a finite planet”?
Jay Forrester was asked to analyse “growth. He came back and said “growth” was the solution. More growth. In the negative.
I am dirtier now. I don’t now wash clothes as often, don’t have a fridge, freezer nor washing machine. I preserve food in other ways - canning veg etc. I don’t drive a car. So I would instinctively not want to read Susskind’s book. I thought I was left of centre with my politics.
But HOW do systems and indigenous thinkers think about other words? … ‘energy’ ’coal’ and even ‘growth’ (or ‘mushrooms’). Are they really nouns? Use of language matters even in English. They ARE nouns in English, while in indigenous thinking they are verbs. A mushroom is a verb as are 70% of words. Puhpowee translates, according to Robin WK as “the force which causes mushrooms to push up from the earth overnight.” It is a particular internal earthly force/ movement that creates…. the mushroom. “The makers of this word understood a world of being, full of unseen energies that animate everything. I’ve cherished it for many years, as a talisman, and longed for the people who gave a name to the life force of mushrooms. The language that holds Puhpowee is one that I wanted to speak. So when I learned that the word for rising, for emergence, belonged to the language of my ancestors, it became a signpost for me.”
The “energy” in your graphs, it’s not black and hard is it? It is more literally the movement of one energy source into another. You describe it as if it’s an object though, and that surprises me.
I think the word “belief” is actually the driving force behind increased consumption. Figure 3 proves to you that an object called “coal” drove the Industrial Revolution. I disagree. Figure 3 top left simply strengthens my belief that it’s NOT an object which drove the Industrial Revolution and perhaps Capitalism itself. The top left graph shows to me that the belief in efficiency of the system is at an all time high. Towards the end of a system’s life (now) it is more true to say that belief is the object demanding use of the system than when Jevons wrote about the paradox of belief.
In 2024 millions of people believe more strongly than ever in the (supposed) efficiency of productive forces. The NEW productive forces they believe in are NOT new beliefs in services (like a welfare service to educate children) so much as a belief in making ‘green’ products force the climate crisis to go away.
The belief in efficiency and economy drives people to consume more now than when Jevons was around. It is an overwhelming urge - the urge to do good. My partner drives an electric car and has solar panels on his roof to heat his water and power his fridge, thinking that this will save the world. But his consumption of the earth’s resources has risen, not fallen.
As Jevons said “It is a confusion of ideas to suppose that the economical use of a resource is equivalent to diminished consumption. The very contrary is true”.
It’s a paradox! So I forgive you the argument that coal is driving our overuse of resources, then and now! Perhaps I mistook your argument. I genuinely don’t think that though.
My glimmer of hope is that you, Jevons, Forrester and Kimmerer and even Susskind agree to very precise use of language. Surely all of you would believe in the growth of a new belief in a gift economy? A degrowth economy? It would be properly monetised (by multi millionaires) just as jewellery and earnings are (not as labour and land are), this service CAN be created by those who actually have the need, generating the money.
It would fulfill emergency human needs like shelter, care for elderly, love of children - as a way to produce “growth”. (Ie”degrowth”)
Why is it that economic theory cannot account for the cause of economic growth? Why is it that the portion of an economy's output growth cannot be accounted for by the accumulation of capital and labor, the factors of production?
The answer to these questions lies outside economic theory. To answer them, we must understand history and the role scientific discoveries played in inspiring technology revolutions through unique inventions caused by the discovery of new materials and new knowledge used to exploit them.
The typical answer to the dramatic rise in living standards over the last 200 years or so is the Industrial Revolution, but this characterization obfuscates the cause. Over this period, seven technology revolutions were all science-inspired and had to do with unique discoveries of how the natural world works. These discoveries were openly available to the world where human imagination could exploit them and build on the body of knowledge to advance that exploitation. Each was caused by discovering unique materials and new knowledge used to exploit them.
How would economic theory explain the following historical facts? In 1 AD, there were nine known substances, but no one understood how many others existed, how they were related, or how they could be potentially exploited. By 1800, about 50 substances were known, but today, there are 10 million. How do you account for this? Capitalism and free enterprise? Also, in 1800, there was no chemical industry worth mentioning. Today, the worldwide chemical industry generates $5 trillion per year.
All of this followed from the discovery that fire is a chemical reaction involving oxygen as a fundamental element through the process of combustion. Antoine Lavoisier, a lawyer and government tax collection, made this discovery along with many others that gave birth to modern chemistry, which led to the discovery of many other elements, their fundamental properties, how they are related, how they could be exploited, and evidence that supported atomic theory. Lavoisier’s discoveries caused the chemical revolution, and those discoveries had no commercial value!
The other six revolutions resulted from the discovery of Newton’s Laws, the theory of heat, the theory of electromagnetism, the creation of radio waves, the discovery of semiconductors and the theory of the atom, and the discovery of the chemical structure of DNA and how it worked.
- I certainly agree that the first industrial revolution is about energy, and that energy was the engine of growth. But just because energy was tightly correlated with growth in the past doesn't mean that this will be true going forward. Sometimes growth means a lower-energy way of doing something that used to consume lots of it - logging on to a teleconference from home is more efficient than sitting in traffic jams in your gas-guzzler on your way to the office, changes like this can reduce energy consumption *and* promote growth (because the time and money that we save from working from home can be spent on other growth-y things).
In general, I would argue that we are currently going through another industrial revolution, except this one is about *information*, not energy. Already it appears that the global growth in energy consumption is about 2% per year, where as the economic growth rate is closer to 5%, so these previously closely-related measures are beginning to come apart.
- Moreover, and I think this is the more obvious point you have glossed over: governments and private companies all of the world are *heavily* investing in renewables. And there is a lot of renewable potential out there. More solar energy reaches the earth in an hour, than is required to fulfil humanity's current energy demands for a whole year. So even if energy and growth remained in lockstep, there would be a lot of room for growth still. It really is a technical challenge - an enormous one, for sure, but doable - rather than an indictment on the human desire to be better-off tomorrow than today.
I agree that growth in the standard of living of "ordinary" people need not depend upon growth in energy consumption, and I support a market-based transition from fossil fuels to a mix of (a) improved energy efficiency, (b) renewables with appropriate energy storage, and (c) nuclear production of electrical energy.
This transition must indeed rely on advances in technology, a.k.a., "information." But "information" (other than for entertainment) is more critically a tool for increasing the supply of those physical goods and services (such as food, water, housing, transportation, medical care, etc.) that are fundamentally essential for people to enjoy a high quality of life.
I am particularly aware of this from having had a career in civil engineering in which I utilized so-called "tech" to provide more cost-effective physical facilities that are essential to all citizens of any advanced modern society.
Thanks for the post. However, I'm stuck with a question regarding the link of climate change (CC), energy and economic growth. You say that mainstream economist underestimate the (negative) impact of CC on growth* because they ignore the role of energy. But isn't it the case that CC affects growth mainly by destroying capital i.e. assets like productive land, infrastructure, human capital ( through extreme weather, heat, storms, sea level rise, etc.) and not so much by limiting energy supply? When focusing solely on energy as growth driver, I would actually come to the conclusion that the transformation of the economy, i.e. from fossil fuel based to carbon free economy, is the most important drag on growth as we limit our energy supply. However, in case of CC, I suspect it's the other forms of natural capital that one should not neglect, i.e. a stable and human friendly planet/ environment. If CC destroys this environment then it puts a large drag on growth, way larger than the reduction in energy supply by abandoning fossil fuels would have done.
* Which is, btw, not necessarily the case anymore, see e.g. 'The Macroeconomic Impact of Climate Change: Global vs. Local Temperature', Bilal & Känzig, 2024, NBER Working paper, DOI 10.3386/w32450. But of course, early estimates à la Nordhaus with an optimal path of 3-4°C of global warming are not credible.
"In PAGE-ICE, however, we use a more conservative assumption that all the climate
driven losses (gains) are fully repaired (spent on consumption) in the end of each year,
which corresponds to the level effects. This implies that ... the impacts do not propagate beyond the year during which they occur."
The issue with ignoring energy is that it led to assumptions like Nordhaus's in 1991 that 87% of the economy would be unaffected by climate change: "for the bulk of the economy - manufacturing, mining, utilities, finance, trade, and most service industries - it is difficult to find major direct impacts of the projected climate changes over the next 50 to 75 years." (http://www.jstor.org/stable/2233864) Since all industries require energy inputs, and our primary sources of energy are fossil fuels, then all industries will be affected.
"Since all industries require energy inputs, and our primary sources of energy are fossil fuels, then all industries will be affected."
Affected by what? By the transformation of the economy? Yes! By CC itself (not talking about the transformation efforts here!)? Yes, they are. BUT NOT because they all require energy (!), but rather bc. the "natural capital stock" gets destroyed (well, I have to admit this may also affect energy production, e.g. by CC destroying power plants. But that's not the main channel why CC damages the economy).
My whole point is just that the relevance of energy in production (which I don't deny) may be fundamental for the effects of the transformation but not for the "pure" effect of CC (i.e. assuming no transformation takes place) on the economy.
Thus, including the critical role of energy in IAMs (as suggested by you) even increases the optimal degrees of warming as abating becomes more expensive. While including tipping points, exponential instead of quadratic damages, etc. (i.e. natural capital destruction) reduces the optimal degree of warming.
Not explicitly. But what else does he mean when commenting Nordhaus quote ("For most economic sectors, the impact of climate change will be small relative to the impacts of other drivers") with: "These sanguine assertions by Neoclassical economists are wildly at variance with reality, in large measure because they ignore the role of energy in production."?
I interpret it as "CC will deal more damage on the economy than economists usually think because it limits the available energy". Why else would it matter that economist "ignore the role of energy in production" when analysing the effect of CC on the economy?
The critique is about the impact of energy consumption on climate, not about the impact of CC on the energy availability. The argument is that in order to continue to grow we will continue to consume more energy which still is to a very large degree fossil fuel based and this will destroy the planet. So the text is about growth causing CC, not about CC hindering growth.
Hi Steve. What is the belief you hold? What do you mean by “growth on a finite planet”?
Jay Forrester was asked to analyse “growth. He came back and said “growth” was the solution. More growth. In the negative.
I am dirtier now. I don’t now wash clothes as often, don’t have a fridge, freezer nor washing machine. I preserve food in other ways - canning veg etc. I don’t drive a car. So I would instinctively not want to read Susskind’s book. I thought I was left of centre with my politics.
But HOW do systems and indigenous thinkers think about other words? … ‘energy’ ’coal’ and even ‘growth’ (or ‘mushrooms’). Are they really nouns? Use of language matters even in English. They ARE nouns in English, while in indigenous thinking they are verbs. A mushroom is a verb as are 70% of words. Puhpowee translates, according to Robin WK as “the force which causes mushrooms to push up from the earth overnight.” It is a particular internal earthly force/ movement that creates…. the mushroom. “The makers of this word understood a world of being, full of unseen energies that animate everything. I’ve cherished it for many years, as a talisman, and longed for the people who gave a name to the life force of mushrooms. The language that holds Puhpowee is one that I wanted to speak. So when I learned that the word for rising, for emergence, belonged to the language of my ancestors, it became a signpost for me.”
The “energy” in your graphs, it’s not black and hard is it? It is more literally the movement of one energy source into another. You describe it as if it’s an object though, and that surprises me.
I think the word “belief” is actually the driving force behind increased consumption. Figure 3 proves to you that an object called “coal” drove the Industrial Revolution. I disagree. Figure 3 top left simply strengthens my belief that it’s NOT an object which drove the Industrial Revolution and perhaps Capitalism itself. The top left graph shows to me that the belief in efficiency of the system is at an all time high. Towards the end of a system’s life (now) it is more true to say that belief is the object demanding use of the system than when Jevons wrote about the paradox of belief.
In 2024 millions of people believe more strongly than ever in the (supposed) efficiency of productive forces. The NEW productive forces they believe in are NOT new beliefs in services (like a welfare service to educate children) so much as a belief in making ‘green’ products force the climate crisis to go away.
The belief in efficiency and economy drives people to consume more now than when Jevons was around. It is an overwhelming urge - the urge to do good. My partner drives an electric car and has solar panels on his roof to heat his water and power his fridge, thinking that this will save the world. But his consumption of the earth’s resources has risen, not fallen.
As Jevons said “It is a confusion of ideas to suppose that the economical use of a resource is equivalent to diminished consumption. The very contrary is true”.
It’s a paradox! So I forgive you the argument that coal is driving our overuse of resources, then and now! Perhaps I mistook your argument. I genuinely don’t think that though.
My glimmer of hope is that you, Jevons, Forrester and Kimmerer and even Susskind agree to very precise use of language. Surely all of you would believe in the growth of a new belief in a gift economy? A degrowth economy? It would be properly monetised (by multi millionaires) just as jewellery and earnings are (not as labour and land are), this service CAN be created by those who actually have the need, generating the money.
It would fulfill emergency human needs like shelter, care for elderly, love of children - as a way to produce “growth”. (Ie”degrowth”)
Why is it that economic theory cannot account for the cause of economic growth? Why is it that the portion of an economy's output growth cannot be accounted for by the accumulation of capital and labor, the factors of production?
The answer to these questions lies outside economic theory. To answer them, we must understand history and the role scientific discoveries played in inspiring technology revolutions through unique inventions caused by the discovery of new materials and new knowledge used to exploit them.
The typical answer to the dramatic rise in living standards over the last 200 years or so is the Industrial Revolution, but this characterization obfuscates the cause. Over this period, seven technology revolutions were all science-inspired and had to do with unique discoveries of how the natural world works. These discoveries were openly available to the world where human imagination could exploit them and build on the body of knowledge to advance that exploitation. Each was caused by discovering unique materials and new knowledge used to exploit them.
How would economic theory explain the following historical facts? In 1 AD, there were nine known substances, but no one understood how many others existed, how they were related, or how they could be potentially exploited. By 1800, about 50 substances were known, but today, there are 10 million. How do you account for this? Capitalism and free enterprise? Also, in 1800, there was no chemical industry worth mentioning. Today, the worldwide chemical industry generates $5 trillion per year.
All of this followed from the discovery that fire is a chemical reaction involving oxygen as a fundamental element through the process of combustion. Antoine Lavoisier, a lawyer and government tax collection, made this discovery along with many others that gave birth to modern chemistry, which led to the discovery of many other elements, their fundamental properties, how they are related, how they could be exploited, and evidence that supported atomic theory. Lavoisier’s discoveries caused the chemical revolution, and those discoveries had no commercial value!
The other six revolutions resulted from the discovery of Newton’s Laws, the theory of heat, the theory of electromagnetism, the creation of radio waves, the discovery of semiconductors and the theory of the atom, and the discovery of the chemical structure of DNA and how it worked.
These and other issues associated with the mystery of economic growth are discussed here:https://johnparmentola.com/the-great-mystery-of-economic-growth/.
A couple of rebuttal points:
- I certainly agree that the first industrial revolution is about energy, and that energy was the engine of growth. But just because energy was tightly correlated with growth in the past doesn't mean that this will be true going forward. Sometimes growth means a lower-energy way of doing something that used to consume lots of it - logging on to a teleconference from home is more efficient than sitting in traffic jams in your gas-guzzler on your way to the office, changes like this can reduce energy consumption *and* promote growth (because the time and money that we save from working from home can be spent on other growth-y things).
In general, I would argue that we are currently going through another industrial revolution, except this one is about *information*, not energy. Already it appears that the global growth in energy consumption is about 2% per year, where as the economic growth rate is closer to 5%, so these previously closely-related measures are beginning to come apart.
- Moreover, and I think this is the more obvious point you have glossed over: governments and private companies all of the world are *heavily* investing in renewables. And there is a lot of renewable potential out there. More solar energy reaches the earth in an hour, than is required to fulfil humanity's current energy demands for a whole year. So even if energy and growth remained in lockstep, there would be a lot of room for growth still. It really is a technical challenge - an enormous one, for sure, but doable - rather than an indictment on the human desire to be better-off tomorrow than today.
I agree that growth in the standard of living of "ordinary" people need not depend upon growth in energy consumption, and I support a market-based transition from fossil fuels to a mix of (a) improved energy efficiency, (b) renewables with appropriate energy storage, and (c) nuclear production of electrical energy.
This transition must indeed rely on advances in technology, a.k.a., "information." But "information" (other than for entertainment) is more critically a tool for increasing the supply of those physical goods and services (such as food, water, housing, transportation, medical care, etc.) that are fundamentally essential for people to enjoy a high quality of life.
I am particularly aware of this from having had a career in civil engineering in which I utilized so-called "tech" to provide more cost-effective physical facilities that are essential to all citizens of any advanced modern society.
Thanks for the post. However, I'm stuck with a question regarding the link of climate change (CC), energy and economic growth. You say that mainstream economist underestimate the (negative) impact of CC on growth* because they ignore the role of energy. But isn't it the case that CC affects growth mainly by destroying capital i.e. assets like productive land, infrastructure, human capital ( through extreme weather, heat, storms, sea level rise, etc.) and not so much by limiting energy supply? When focusing solely on energy as growth driver, I would actually come to the conclusion that the transformation of the economy, i.e. from fossil fuel based to carbon free economy, is the most important drag on growth as we limit our energy supply. However, in case of CC, I suspect it's the other forms of natural capital that one should not neglect, i.e. a stable and human friendly planet/ environment. If CC destroys this environment then it puts a large drag on growth, way larger than the reduction in energy supply by abandoning fossil fuels would have done.
* Which is, btw, not necessarily the case anymore, see e.g. 'The Macroeconomic Impact of Climate Change: Global vs. Local Temperature', Bilal & Känzig, 2024, NBER Working paper, DOI 10.3386/w32450. But of course, early estimates à la Nordhaus with an optimal path of 3-4°C of global warming are not credible.
In fact the Neoclassical literature and IAMs assume that climate change does not damage capital at all. See this exposition of the PAGE IAM for example (https://www.researchgate.net/publication/342396462_PAGE-ICE_Integrated_Assessment_Model)
"In PAGE-ICE, however, we use a more conservative assumption that all the climate
driven losses (gains) are fully repaired (spent on consumption) in the end of each year,
which corresponds to the level effects. This implies that ... the impacts do not propagate beyond the year during which they occur."
The issue with ignoring energy is that it led to assumptions like Nordhaus's in 1991 that 87% of the economy would be unaffected by climate change: "for the bulk of the economy - manufacturing, mining, utilities, finance, trade, and most service industries - it is difficult to find major direct impacts of the projected climate changes over the next 50 to 75 years." (http://www.jstor.org/stable/2233864) Since all industries require energy inputs, and our primary sources of energy are fossil fuels, then all industries will be affected.
"Since all industries require energy inputs, and our primary sources of energy are fossil fuels, then all industries will be affected."
Affected by what? By the transformation of the economy? Yes! By CC itself (not talking about the transformation efforts here!)? Yes, they are. BUT NOT because they all require energy (!), but rather bc. the "natural capital stock" gets destroyed (well, I have to admit this may also affect energy production, e.g. by CC destroying power plants. But that's not the main channel why CC damages the economy).
My whole point is just that the relevance of energy in production (which I don't deny) may be fundamental for the effects of the transformation but not for the "pure" effect of CC (i.e. assuming no transformation takes place) on the economy.
Thus, including the critical role of energy in IAMs (as suggested by you) even increases the optimal degrees of warming as abating becomes more expensive. While including tipping points, exponential instead of quadratic damages, etc. (i.e. natural capital destruction) reduces the optimal degree of warming.
"by limiting energy supply", I've never heard Steve say that.
Not explicitly. But what else does he mean when commenting Nordhaus quote ("For most economic sectors, the impact of climate change will be small relative to the impacts of other drivers") with: "These sanguine assertions by Neoclassical economists are wildly at variance with reality, in large measure because they ignore the role of energy in production."?
I interpret it as "CC will deal more damage on the economy than economists usually think because it limits the available energy". Why else would it matter that economist "ignore the role of energy in production" when analysing the effect of CC on the economy?
The critique is about the impact of energy consumption on climate, not about the impact of CC on the energy availability. The argument is that in order to continue to grow we will continue to consume more energy which still is to a very large degree fossil fuel based and this will destroy the planet. So the text is about growth causing CC, not about CC hindering growth.
Uncertanity loves surplus labour. What better way to sow doubt than to have government experts peddle economic fantasy.