Here’s a new sandpit for lengthy side discussion, rants on idees fixes and so on.
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Here’s a new sandpit for lengthy side discussion, rants on idees fixes and so on.
John Quiggin 
Energy Collapse of the World Economy
Recapping the Bet
I have bet Professor John Quiggin that world gross product of 2020 will be less than world gross product of 2010. Prof. J.Q. has suggested that world income be used as the measure. I am happy with this amendment. The bet IIRC is for $100 Australian, inflation adjusted, payable to the winner when the official figures are known. The bet is only valid if both parties are alive when the bet is determined by the release of official figures and if Australian currency is still legal tender. Payment should be made within 30 days of proof of a winning bet. The bet is not cancelled by any form(s) of force majeure* provided the above conditions are met.
*In other words, the black swans are on my team.
Summary of My Argument
The collapse of the global world economy is now inevitable and probably imminent. This conclusion is based on the following considerations. There are limits to growth in any finite system. Energy (as total energy available for economic work) is the ubiquitous and near limit of the global economic system. A positive feedback system (the global economy in this case) with large stocks and low replenishment rates demonstrates a marked tendency to go into overshoot followed by collapse.
To demonstrate the argument, I would need to establish the following;
1. There are physical limits to growth in any finite closed system.
2. The earth functions as a finite closed system with respect to the economy.
3. The economy depends on and is limited by the availability of physical resources.
4. Energy is the ubiquitous master resource. All economic processes and the utilisation of all other resources depend on the availability of energy for useful economic work.
5. The world economic production in terms of growth (and negative growth) shows a close correlation historically with trends in energy utilisation.
6. Peak Energy (meaning peak energy “production” in economic terms) will attain a physical limit and then decline.
7. The Peak Energy limit and subsequent decline will be a complex function of the exhaustion of non-renewable energy sources (stocks) and the introduction (and re-introduction) of renewable energy sources (flows) .
8. The peaks of all current major non-renewable energy sources (oil, coal, gas, uranium occurred in 2010 plus or minus 5 years in each case.
9. Introduction of renewable energy, to the levels required to compensate for the decline of non-renewable energy, is not physically feasible in growth terms nor in peak limit terms. The Sustainable Energy peak will prove to be much less than the overall Peak Energy limit.
10. A decline in energy available for useful work will cause negative economic growth and the decade 2011 to 2020 will exemplify this.
At the moment, the above can stand as assertions. To be honest, I pretty well know I’ll be proven right sooner or later. Whether I’ll be proven right by 2020 is the moot point. I’m willing to argue any of the above 10 assertions but will only do each one if specifically requested by debate. I’m kinda sadly tired of the argument because it’s so depressing and if I convince anyone else my only “reward” is depressing them too.
I do suggest though, that Prof J.Q. could publish annual updates on the bet when the official World Income figures are published after each calendar year. (I assume somebody does publish “official” figures?)
I agree with you as regards Peak Oil, but you’re way off on coal – there is much more than we can burn given the CO2 contraint. Point 5 is also problematic. The link between energy and output is much weaker in an economy that predominantly produces services rather than goods.
Most importantly the earth is not a closed system as regards energy, so points 1-3 are irrelant. Your argument relies critically on point 9 which is far from obvious.
I suppose all of this means that the price for a packet of smokes will go up again.
(sigh)
@jquiggin
I will answer (as best I can) these objections over a few posts. This post will deal with your objection to points 1, 2 and 3.
We are both right on the “closed” system argument at first glance because it is a definitional issue. I was following a basic definition from thermodynamics. I am not qualified in that field but I have felt it better to follow basic thermodynamic definitions as the energy (or exergy) argument is basic to the whole line of reasoning.
By definition, a system is separated from its surroundings by a boundary. More on boundaries later (perhaps).
There are three main types of system in thermodynamics:
• Open – exchange of both Heat and Mass with Surroundings
• Closed – exchange of Heat but not Mass with Surroundings
• Isolated – exchange of neither Heat nor Mass with Surroundings
Earth (or the biosphere very broadly defined as the global ecological system integrating all living things and their relationships and also including all non-biological elements of the lithosphere, hydrosphere and atmosphere as environment) is a “closed system” by this definition provided we ignore phenomena like meteors, comets, gaseous escape to space and volcanic eruptions.
You are correct that insolation and infra-red radiation back to space mean that the earth is not a closed system with respect to energy. However, the fact that the earth (or the biosphere) is a finite materially closed system (apart from those exceptions relatively minor compared to the overall mass involved) means that the growth of highly physically ordered masses like human bodies or extended economic infrastructurer must have a real limit.
So points 1,2 and 3 whilst pedantic do establish the basic limits to growth principle from which Meadows et al could say;
“Limits to growth include both the material and energy that are extracted from the Earth, and the capacity of the planet to absorb the pollutants that are generated as those materials and energy are used.” – Donella Meadows, Jorgen Randers, Dennis Meadows.
Whether these are near limits or not is another question. Points 5 and points 9 are critical as you point out as is the issue of exogenous energy (insolation) and its energy density for energy harvesting purposes. I’ll post again on this.
@paul walter
Paul – what should be taxed even more is the price of Dom Perignon.
Fancy taxing horse piss?
btw, Alice, some thing up your ally. If you want a geck at a really good cartoon, catch Martin Rowson, from the Guardian at “Public Opinion”, where Sauer Thompson uses it for a thread starter on Libya.
@Ikonoclast
The usual thermodynamic definition of a closed system is that neither energy nor mass can be exchanged with surroundings.
The second law of thermodynamics:-“That the entropy of a closed system must always increase, and never decrease” would be false if your definition of “closed” was used.
@Ikonoclast
I imagine we could transform the earth, physically into a cylindrical shaped object keeping gravity at the surface at about 1g, and then we could get material from elsewhere and keep extending the cylinder forever, keeping the 1g surface gravity. That would get around the apparent physical limitation. Material density and other things might pose problems but I imagine we or our ancestors could solve them. If there are limits to the size of the cylinder we just build some more.
When the sun gets bigger we just move to higher orbits. And if it loses its puff or is expected to explode we just move the earth elsewhere and find a more hospitable sun.
All fairly surmountable problems I think?
We might then, be able to keep growing until the more serious problems befall the universe.
By that time who knows what we might be able to do?
@paul walter
Id like to tax the hell out of polo horse p*** and sticks Paul. Thats exactly where they horse around.
I have written at some length on some of these issues in a working paper that I posted to QUT eprints on 13 March 2011. It is available at http://eprints.qut.edu.au/40727/
I bet that Quiggin will close this blog soon.
Quiggin will do an Andrew Leigh if he is elevated to the Reserve Bank Board vacancies.
But who really understands the money-debt capitalist system anyway – certainly not the RBA.
Its ok Alice, nod’s as good as a wink…
@Sam
I stand by the definitions I gave. What is often colloqially or loosely called a “closed system” (intending the meaning that no transfers of matter or energy occur) is more precisely called an “isolated system”.
“The second law of thermodynamics states that the entropy of an isolated macroscopic system never decreases, or, equivalently, that perpetual motion machines are impossible.” – Wikipedia.
The definitional difference between “closed systems” and “isolated” is significant. Justification for the category “isolated system” is given as follows;
“An isolated system is more restrictive than a closed system as it does not interact with its surroundings in any way. Mass and energy remains constant within the system, and no energy or mass transfer takes place across the boundary. As time passes in an isolated system, internal differences in the system tend to even out and pressures and temperatures tend to equalize, as do density differences. A system in which all equalizing processes have gone practically to completion is considered to be in a state of thermodynamic equilibrium.
Truly isolated physical systems do not exist in reality (except perhaps for the universe as a whole), because, for example, there is always gravity between a system with mass and masses elsewhere. However, real systems may behave nearly as an isolated system for finite (possibly very long) times. The concept of an isolated system can serve as a useful model approximating many real-world situations. It is an acceptable idealization used in constructing mathematical models of certain natural phenomena.”
http://en.wikipedia.org/wiki/Thermodynamic_system
and scroll down through article.
@paul walter
a nod is as good as a wink to a blind horse Paul?
Its all been under wrapps but I think more than a few big shots have given us a backshot backhand swing in the last chukkah. Id say we have been made ponies of.
chukker that is – well you can tell I dont hang out with the mallet heads…
@Chris Warren
Whhhat ? the only reason Prof would be / could be elevated to the RBA board is to shut him up..but for gods sake Prof if they do… take the money and tell them what idiots they are about inflation.
Bleeding obvious economic problem is staring them in the face (jobs for the kids and jobs for more hours and hogh household debt while they ramble on about inflation which doesnt exist and if it does – give it a short sharp wahck and be done and stop moaning year in and year out about it, when we havent seen it for damn near two decades).
The RBA are supposed to be taking care of full employment (its in the RBA rules), not lying to us that we are already there (for the last twenty years or so).
I know the oil shock was a shock but its really time to move on.
Alice we’ve made a mares nest of a nightmare. But we havent done as badly as the shockjocks bagging climate change, en masse.
As
I type, Jones is in the process of calling Garnaut a “dunce” whilst others eulogise the likes of Plimer, to the rafters. Mercifully, at least Holmes has included some comment from legit scientists to leaven the lies.
@Ikonoclast
Ok. It’s more semantics I guess. When I did thermodynamics a few years ago my textbook (Callen) used “closed” to refer to both energy and matter. What you call “closed,” Callen called “impermeable.”
@jquiggin
With reference to my point 5, I’ll make some general points and then get more specific.
The general consensus among those making a scientific analysis of peak production theory is that claimed, estimated or stated reserves are a poor guide to actual recoverable reserves. The reserves issue is an open ended problem as we do not have perfect geological assay knowledge of the entire accessible crust of the earth. Estimates of remaining reserves based on assay sampling and some (but not all) statistical models are subject to all kinds of errors and biases. In many cases, nations and corporations have an incentive to overstate reserves so reserve estimates are often doubtful. For example, the IAEA Red Book estimates of Uranium desposits are highly dubious as I posted and linked in recent nuclear blogs. Cornucopian and optimism biases seem common to corporate propaganda and layperson boosters alike. In short, speculative reserve estimates should simply be ignored.
The only real determination of any resource production peak will be an after-the-event assessment (significantly after) based on the empirical production data series. Before the event, one of the best guides is the graph of the historical discovery rate of proven reserves. Reserves can be accepted as “proven” in retrospect once each field is adequately assayed, tapped and producing (or even exhausted). As JQ will be aware, the discovery rate (initial discovery date) of subsequently proven reserves for oil shows a pretty typical Hubbert curve dipping to alarmingly low levels. This indicates a high likelihood that few reserves of note are still to be discovered. A statistical assessment placing the likely production peak can be made. The scientific consensus (where science is not distorted by corporate agendas) is that oil has peaked and JQ accepts this. Uranium has also likely peaked. Discussion and links in the recent nuclear threads.
A recent paper also indicates that coal has peaked. The current issue of the scientific journal Energy contains “A global coal production forecast with multi-Hubbert cycle analysis,” by Tad Patzek and Gregory Croft. This report states;
“The global peak of coal production from existing coalfields is predicted to occur close to the year 2011. … After 2011, the production rates of coal and CO2 decline, reaching 1990 levels by the year 2037, and reaching 50% of the peak value in the year 2047. It is unlikely that future mines will reverse the trend predicted in this BAU scenario.”
One thing to remember with thermal coal production is that peak coal tonnage is not peak net energy from coal due to the falling EROEI for coal. This is due to disproportionate depletion of high grade anthracite early on and subsequent exploitation of lower grades right down to brown coal.
Gas is likely to follow the oil and coal story very quickly but verification of that in this blog must wait due to my time constraints.
In a sense, we should not be surprised that all these peaks will come close together about in the band 2005 to 2015. The phenomenon of first exploiting the “low hanging fruits” probably explains it, especially where energy sources are substitutable (for example in electrical generation).
Addendum to above post;
http://www.countercurrents.org/roberts190810.htm
Four Corners on Fukushima
http://www.abc.net.au/4corners/content/2011/s3169729.htm
@jquiggin
“The link between energy and output is much weaker in an economy that predominantly produces services rather than goods.”
This is not obvious to me for the world economy.
For example, the term ‘output’ is not well defined for the purpose of aggregating across a huge number of different physical things that are produced from physical things and this production is not possible without services (eg scientific knowledge, technical knowhow embodied in humans).
There are only two primitives in ‘the economy’ (ie the world economy), namely the number of people and total ‘resources’, ie resources is the name of the natural environment that may be sub-classified such that various measurements of quantities can be applied.
@Ernestine Gross
When it comes to one of those ‘primitives’, people, some are more primitive than others. Same might be said for natural resources. This can make aggregation more of a problem.
@Freelander
O.K., Freelander. I admit, even the proverbial Robinson Crusoe may have an aggregation problem.
George Monbiot has decided he supports nuclear power.
http://m.guardian.co.uk/commentisfree/2011/mar/21/pro-nuclear-japan-fukushima?cat=commentisfree&type=article
@TerjeP
It’s especially impressive that he has chosen this of all moments to do so. That shows not merely insight, but courage.
Well done him.
Or being close to retirement.
I would bet against Ikonoklast – not because I think the basic reasoning is incorrect, but because 2020 is too soon. As Adam Smith is reputed to have said, there is a good deal of ruin in a country, and people display an amazing ingenuity in keeping things going. Also, world income in money terms is only a proxy for welfare. If I had to guess, I would put the point where decline is undeniable and advancing somewhere between 2030 and 2050. But I suppose neither participant is confident of their ability to collect their winnings in 2030.
And by the way, would it not be more sensible to make the stake a crate of baked beans?
I posted this in the other thread but what the heck. Andrew Bolt does a good job showing why Kerry OBrien is a shock jock who interviews unqualified cranks. Quite amusing really:-
http://blogs.news.com.au/heraldsun/andrewbolt/index.php/heraldsun/comments/four_corners_gets_a_bad_case_of_nuclear_hysterics
@Fran Barlow
I once saw a doco about an apocalypse cult. All the usual stuff, a big charismatic leader taking sexual liberties with his young nubile followers. An isolated ranch far from civilisation and dissenting ideas. Elaborate preparations for the End of Days. Anyway, the appointed date and time for the world’s end came and went without incident (of course).
The next morning, cult followers were being interviewed by the BBC. They all said “After what happened last night I am even more sure that we are right. We just got the days wrong, that’s all.” Not one of them could learn from an experience, and update their beliefs in the light of new evidence.
Well done them.
@TerjeP
Oops … there’s your problem. Here’s a tip: never start a proposal with an obviously absurd claim.
Blot has never done a good job, even at trolling, because just as you have here, he nearly always starts with an absurd claim.
@Ikonoclast
Discussion of whole thermodynamics and closed systems is a bit blah blah when you are comparing the solar energy budget of the earth 174,000 TW with the current 15 TW used by humans. (Ratio like 1:12,000.) It’s a question of cost and ability to convert and store the solar energy, not it’s availability.
A fairly large area would be needed to produce 15 TW but it’s completely achievable: I think it’s area is something like the available roof area. It would be a massive project, perhaps similar in scale and cost to the provision of paved roads, ie, a big transformation but doable. It’s the matter of getting the drivers and technology right that’s the problem, not thermodynamics.
@sam
Amusing analogy. Now all you need to show is that Monbiot has been a longstanding member of a cult based around the promotion of nuclear power.
I’ll be fascinated with your citations.
@Fran Barlow
The first paragraph was setup. It’s this phenomenon of saying “I’m more sure nuclear is safe now after Fukashima,” that I draw parallels to.
@sam
Doubtless … but the necessary data to sustain the analogy was missing. The article shows that Monbiot’s position is reasoned rather than an expression of faith. You may wish to dispute his data or modelling, but it is not cult-like, unless one is borrowing from the Crichton school of argumentation.
@Peter T
Agree with you entirely, humans are resourceful and adaptive under the worst of conditions. By 2030 baked beans may be far more valuable than the bet currently stands and anyway by then strictly for the nobs.
I cringed at Monbiot’s conflation of acute radiation exposure with safer cumulative long term acquired dose. This is similar to ignoring the difference in biological response to receiving your annual UV does in [a year as distinct to a lump sum in one day.
http://scienceblogs.com/deltoid/2011/03/andrew_bolt_says_that_radiatio.php#comment-3492844
Monbiot’s second gaff was to say that:
>*[50 mSv] is half of the lowest one-year dose clearly linked to an increased cancer risk*
This is 5 times higher than the level of utero exposure clearly linked to an increased risk of childhood cancer.
http://www.nap.edu/openbook.php?record_id=11340&page=6
“In the case of in utero exposure (exposure of the fetus during pregnancy), excess cancers can be detected at doses as low as 10 mSv.15 For the radiation doses at which excess cancers occur in the Hiroshima and Nagasaki studies, solid cancers16 show an increasing rate with increasing dose that is consistent with a linear association. In other words, as the level of exposure to radiation increased, so did the occurrence of solid cancers.”
@jquiggin
Can renewables take up the slack?
http://www.inference.phy.cam.ac.uk/withouthotair/c30/page_236.shtml
The above graphic shows the area of desert (in one yellow block) required to solar power 300 million USA residents at the rate of 250 kWh/d per person. This area is a little larger than the entire state of Arizona. This assumes solar power supersedes all other power needs including all fossil fuel power. It is an area 600km by 600 km. This gives an idea of the size of the renewables problem and the amount of area and infrastructure that needs to be given over to renewable energy needs. I have my doubts that we can convert to this in time and that we will not have enough structural materials from ever scarcer minerals to build this massive infrastructure.
The whole article views the renewables problem from a UK perspective.
http://www.inference.phy.cam.ac.uk/withouthotair/sewthacontents.shtml
Given that non-renewables have peaked about now (my contention), we have an enormous conversion program and problems ahead of us. So we have possibly;
1. a rate of conversion problem (can we convert fast enough?);
2. a feasibility of conversion problem (do we have all the energy and materials to fully convert?)
3. a new energy limit problem (will there be a sustainable plateau above, equal to, or lower than the non-renewables peak?)
4. a stabilisation and steady state problem (can our economy stablise and run steady state in terms of sustainble plateau energy use?).
@jquiggin
This paper “Accounting for growth – the role of physical work” (physical work in the physics sense not the manual labour sense) illustrates the close connection between useful work from energy and total economic production. The de-coupling referred to by JQ is partial and minor. Any large scale reduction in energy sources for physical work will send the world economy into recession or depression. Really, you only have to think of the effects of a major oil shortage or of persistent brownouts to convince yourself of this fact.
But for those who want full graphs and formulas here ya go! 🙂
Click to access Ayres-paper1.pdf
@Ikonoclast
Correction, 600×600 is the size to provide 500 million (not 300) people with 250kWh/day.
Its import to recognise the economy can grow (via intellectual value adding) while efficincey dereases the kWh/ per person consumed. Mackay suggest 80 kWh/day per person provides a European level of consumption.
Considering the often wheeled out lament that our emissions are small compared to other countrys, other than doing our bit to play a leadership role bring forward a global mitigation agreement, is this suggestion a way we could have an even greater impact?
http://www.abc.net.au/rn/nationalinterest/stories/2011/3155753.htm
Its another argument for upping the MRRT.
Some suggest that production – by living things including humans – depends on three ‘primitives’ or basic factors of production:
* code, information, recipe,
* energy
* physical things
This leads to the idea that ‘land’, ‘labour’ and ‘capital’ are social constructs capable of being invented and reinvented. They owe their origins to the kind of measuring and accounting that has evolved around things that can be counted and measured.
Somewhere, people got the idea that ‘money’ works and that unemployed money is a bad thing. But the compounding and the paying of interest on interest contains the roots of instability. The idea of money to facilitate exchange can tend to stabilise a system; but the idea of money compounding and being regarded at the same time as a store of wealth is inherently destabilising. Instability increases as the rate of interest increases.
@jakerman
Thank you, correction noted. An area 600km × 600km is the size to provide 500 million (not 300) people with 250kWh/day. Perhaps we could survive well on say 50 kWh/day per person (and I suspect we will have to within ten or twenty years). This would be a very different world but still very liveable IF we make the transition successfully.
I think one transition problem (of many) will be the shortage of hydrocarbon fuels for transport. Oil provides 90% of our energy for transport. The collapse of the automobile industry (in terms of providing personal vehicles for the masses) is a given in this scenario. The amount of unemployment and recessionary pressure caused by this change will be very significant.
Overall, people are saying we can transition but nobody has come up with a concrete transition plan. It is being left to the market and the market will fail in this task. Markets do not plan long term, they simply flow to the easiest near term pickings. The path to easiest near term profits is not necessarily the path to long term sustainability. In fact, it has a very low probability of being the path to long term sustainability.
You say, “Its important to recognise the economy can grow (via intellectual value adding) while efficiency decreases the kWh/ per person consumed.”
This is true to a point but this process also has limits. Intellectual value adding entails an increase in complexity, ie an increase in complexity of information in material media (including the human brain) if not a great increase in the order of infrastructure on the gross material scale. Any increase of complexity or order and maintenance of that increase takes energy. Efficiency gains also have limits.
I guess my overall argument is that we are responding badly to the looming transition crisis. We are squandering current stocks (non-renewables) on excess masses of consumable “junk” (all automobiles rapidly become junk for example) while failing to build the massive renewables infrastructure we need.
@John S Cook
I couldn’t agree more. This approach (biophysical economics) holds real promise for making economics a genuine science at the basic level. Of course, it will still be political economy (which is a form of moral philosophy) as you go further up the ladder so to speak.
@Ikonoclast
I agree with most of your points, and don’t disagree with any. Your bet date of 2020 for economic demise seems plausible, if radically soon.
In the crazy world of dominant narratives, its seems impossibly soon, but we have made our economy so hungry and fragile I think it possible even if I can’t yet say likely.
Ikonoklast, taking jakerman’s 80kWh/ for European consumption “Perhaps we could survive well on say 50 kWh/day per person” is an understatement. Let’s break it into two parts
(i) Clearly we can survive well on European energy consumption levels, since the Europeans do so
(ii) Clearly there’s room for a 30 per cent efficiency improvement in energy efficiency in Europe
So, we could reduce your calculated area by a factor of 10, at which point the intended reductio ad absurdam becomes a demonstration of practicality – all the energy needs of the US could be met by sensible energy conservation and an area of solar equivalent to 10 per cent of Arizona.
@jquiggin
That may well be so, though as Sheldon Cooper* might say: I’d like to do the math
We aren’t counting embedded energy in imports, and the configuration of cities in Europe and Australia. Iceland uses enormous energy per capita, largely because it exports lots of (low CO2) aluminium. If this energy was attributed to the jurisdictions importing it and removed from Iceland, the picture would be different.
* The Big Bang Theory — one of the more amusing sitcoms I’ve seen
Fran Iceland can contine to use enormous energy per capita, largely because it exports lots of (low CO2) aluminium.
Australia could do likewise if we harness out huge renewables capacity.
@jquiggin
I’m not sure where jakerman got the 80kWh/day per person from in that large document. Perhaps it’s the average for all of Europe though I doubt even that. My 50 units was a concession which I don’t retract. However, we should note that Romania appears to use about 50 units a day, UK 125 units a day and Australia 190 units a day. This is from the scatter graph on;
http://www.inference.phy.cam.ac.uk/withouthotair/c18/page_105.shtml
I think we can infer that 50 units a day would be a modest but still comfortable existence with the energy savings and efficiencies JQ mentions. Perhaps my ideas diverge from JQ’s not on this point per se but on how we get there, can we get there and can we get there without massive economic disruption?
It’s pretty clear from the energy hunger of personal transport (automobiles) that said automobiles are out of the question for the average person at 50 units a day. I would be happy with this. I hate automobiles and the automobile culture. However, how do we take automobiles out of our economy without massive unemployment in the auto industry from manufacturing through to selling and servicing? How do we fund the construction of mass transit and mass renewables collection infrastructure if we keep making autos for too long and thus exhaust those resources which should be underwriting the changeover?
I am not an economist so I am not expressing this well. But I see that the transition will be a great challenge at all levels; socially, economically and energetically. Further we have to achieve it while the population continues to grow and the current economic system demands growth in all sectors even in sectors like coal and automobiles (to take two examples) which should be being wound down and replaced. With all of these bounding conditions (is that the right term?) aren’t we in danger of botching the transition?
I think we are particularly in danger of botching the transition if we leave it to the undirected free market. We are at the point now (I believe) where we need a dirigisme style planned and directed transition. I could be wrong but JQ seems if not blase, at least very sanguine, that a purely market directed transition (albeit assisted by cap and trade systems for negative externalities) will do the job on its own. JQ does not seem to anticipate any major problems like a transition squeeze, a lower plateaued-out renweable economy or an oil shortage induced extended depression for example.