Sunday, July 31, 2011

Economics and Energy

MMT recognizes that the only real constraints involve availability of real resources. But MMT does not say much about this since it is not a matter of economics but other disciplines.

The chief real constraint is energy. Professionals outside of economics are thinking about the economic consequences of energy resources on growth, and therefore on the current credit-based economic system, which presupposes constant growth, as Michael Hudson has demonstrated in his work. The following links question this presumption on physical grounds.

Gail the Actuary is an expert on energy and her work is often posted at the the Oil Drum. She blogs at Our Finite World. Tom Murphy is an associate professor of physics at the University of California, San Diego. His articles were reposted at the Oil Drum.

Prof. Tom Murphy: Galactic-scale energy: Part 1: [Appreciating the genuine limits to indefinite growth]


GLH said...

"To force the economy back into this reliance on Wall Street rather than on government, the government needs to stop running budget deficits. The economy will then have a choice: to shrink sharply, or to turn almost all the economic surplus over to banks as economic rent on their credit-creation privilege."
Prof. Hudson answered my question. No wonder I never hear of him in the mainstream media.

Leverage said...

The article 'Galactic Scale Energy', I don't see why energy use had to continue exponentially. It's not true, at some point the small percentage won't mean much change in material gains.

In fact I think that western nations HAVE already got to that point, specially in places like Japan and the US. So what we have to be worried now is: be able to sustain these levels of energy consumption, and have a fair distribution of them so we can have stable societies.

Cultural memes, consumption trends, political regimes, employment trends, etc. will change to accommodate to the new situation.

P.S: I think that economics may have a lot to do with all this, if it doesn't is a failure of the discipline. Economy after all it's the science of stocks and flows, and flows of energy are of much important matter.

Also the flow of energy means a lot to the production process, what we can or can't do is a matter of the available energy and the waste generated in the process.

Biggest problem right now is not even energy, but waste. Our current industrial model is too inefficient and produces an huge quantity of irretrievable waste. Even recycling is very inefficient in thermodynamic sense.

That's the first thing we will have to solve as energy prices increase from a technological point of view. And believe me, it won't be an easy task at all. The second one will be the availability of energy itself we can extract from ambient (what the initial post is about).

Socially (and politically) we will have to solve how the price impacts are shared. It looks like USA social darwinism trend will pick up (right 'libertarianism'), at some point it could lead to a clash between factions. I think in plenty of places the other trend will rise (command economies and rationalization).

Anonymous said...

Gregor MacDonald has also done excellent work in this area.

Anonymous said...

The rate of consumption will adjust, provided that energy prices rise to reflect supply and demand.
If economic growth = resource consumption, then it follows that growth will follow the same path, but there are better ways to measure 'growth'.

Ryan Harris said...
This comment has been removed by the author.
selise said...

James K. Galbraith and Jin Chen.
The Implications of Rising Resource Costs for Economic Systems