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Archive for Dezembro, 2019

New Year’s Revolutions?

Tim Morgan

 

THE SURPLUS ENERGY ECONOMY – CONTEXT AND CHOICE

One of the things that used to puzzle me, as a very small boy, was why the day after Christmas was called “Boxing Day”.

Did people in the classic “Dickensian Christmas” – in the era evoked by traditional festive icons like snow, holly and robins – really set aside a day for pugilism? It seemed even less likely that a day of fist-fighting contests formed any part of the first Christmas.

All became clear, of course, when it was explained to the very young me that this was the day on which Christmas “boxes” (gifts) were exchanged. In those times, people drew a distinction between the Christian celebration, on 25th December, and the giving and receiving of presents, on the following day.

This distinction is even more pronounced here in Spain, where the exchange of gifts is deferred to the “Night of the Kings”, two weeks after Christmas itself. The festive season is thus more protracted here than in, say, Britain or America, but it’s also markedly less frenetic, and culminates, in most towns and cities, with a thoroughly enjoyable Night of the Kings carnival.

Depending on where you are and how you look at it, the Christmas holidays end, and something like “normality” resumes, at some point between the 2nd and the 7th of January. My view is that the word “normal”, whose definition has, in economic and broader terms, already been stretched a very long way indeed, might soon lose any realistic meaning. A situation in which the Fed is in the process of injecting at least $1 trillion of newly-created money into the system typifies the extent to which abnormality has already become the norm.

In these circumstances, my immediate aim is to produce a guide, comprehensive but succinct, to the surplus energy interpretation of the economy.

This will cover the energy basis of all economic activity, the critical role played by ECoE (the Energy Cost of Energy), and the true nature of money and credit as an aggregate claim on the output of the ‘real’ (energy) economy.

It will move on to discuss how SEEDS models, interprets and anticipates economic trends, and to set out an overview of where we are in energy-interpreted terms. It might also – if space permits – touch on what this tells us about the false dichotomy between environmental challenges and the customarily-misstated concept of “growth”.

What I aim to do here is to close out the year with some observations about where we are as we head into the 2020s.

The best place to start is with the deterioration in prosperity, and the simultaneous increase in debt, that have already destroyed the credibility of any ‘business as usual’ narrative in the Advanced Economies (AEs).

Starting with Japan back in 1997, and finally reaching Germany in 2018, the prosperity of the average Western person has hit a peak and turned downwards, not in a temporary way, but as part of a secular process which conventional economics cannot recognise, much less explain.

This process is now spreading to the emerging market (EM) economies, most of which can expect to see prior growth in prosperity per person go into reverse within the next three years. The signs of deceleration are already becoming apparent in big EM countries such as China and India.

Thus far, global average prosperity has been on a long plateau, with continuing progress in the EM economies largely offsetting deterioration in the West. Once decline starts in the EM group, though, the pace at which the average person Worldwide becomes poorer can be expected to accelerate.

If deteriorating prosperity is the first point worthy of emphasis, the second is that a relentlessly increasing Energy Cost of Energy (ECoE) is the fundamental cause of this impoverishment process. ECoE reflects that fact that, within any given quantity of energy accessed for use, a proportion is always consumed in the access process.

ECoE is a direct deduction from the aggregate quantity of energy available, which means that surplus (ex-ECoE) energy is the source of all economic activity other than the supply of energy itself.

In other words, prosperity is a function of surplus energy.

In the past, widening geographic reach, economies of scale and technological advance drove ECoEs downwards, to a low-point (of between 1% and 2%) in the immediate post-1945 decades. The subsequent rise in trend ECoEs has been driven by the fact that, with the benefits of reach and scale exhausted, depletion has now become the primary driver of ECoEs in the mature fossil fuels industries which continue to provide four-fifths of global energy supply. The role of technology has been re-cast as a process which can do no more than blunt the rate at which ECoEs are rising.

By 2000, when World trend ECoE had reached 4.5%, Advanced Economies were already starting to face an insurmountable obstacle to further growth. Prosperity turned down in Japan from 1997 (when ECoE there was 4.4%), and has been declining in America since 2000 (4.5%).

SEEDS studies demonstrate that prosperity in advanced Western countries turns down once ECoE enters a band between 3.5% and 5%. EM economies, by virtue of their lesser complexity, are less ECoE-sensitive, with prosperity going into reverse once ECoEs enter a range between 8% and 10%. Ominously, ECoE has now reached 8.2% in China, 10.0% in India and 8.1% in the EM countries as a group.

The key point about rising ECoEs is that there is nothing we can do about it. This in turn means that global prosperity has entered de-growth. The idea that we can somehow “decouple” economic activity from the use of energy is utter wishful thinking – not surprisingly, because the economy, after all, is an energy system.

This presents us with a clear choice between obfuscation and denial, on the one hand, and acceptance and accommodation, on the other. Our present position is one of ‘denial by default’, in that the decision-making process continues to be based on the false paradigm that ‘the economy is money’, and that energy is “just another input”.

This leads us to the third salient point, which is financial unsustainability.

Properly understood, money functions as a claim on the output of the ‘real’, energy-driven economy. Creating more monetary claims, without a corresponding increase in the goods and services against which these claims can be exercised, creates a gap which, in SEEDS terminology, is called “excess claims”.

Since these “excess” claims cannot, by definition, be honoured, then they must be destroyed. There are various ways in which this “claims destruction” can happen, but these mechanisms can loosely be divided into “hard” default (the repudiation of claims) or “soft” default (where claims are met, but in greatly devalued money).

These processes mean that “value destruction” has become an inevitability. This may involve waves of asset market crashes and defaults, or the creation (through reckless monetary behaviour) of hyperinflation.

The likelihood is that it’s going to involve a combination of both.

These issues take us to the fourth critical point, which is the threat to the environment. Let’s be clear that this threat extends far beyond the issue of climate change, into many other areas, which range from pollution and ecological damage to the dwindling availability of essentials such as water and food.

Conversion to renewable energy (RE) isn’t the solution to these problems, if by “solution” we mean “an alternative which can sustain our current level of prosperity”. RE, despite its many merits, isn’t going to replace the surplus energy that we’ve derived hitherto from fossil fuels. RE might well be part of the solution, but only if we take on board the inevitability of degrowth.

This brings me to my final point, which is choice. For well over two centuries we’ve been accustomed to an energy context which has been so favourable that it has given us the ability both to improve personal prosperity and to extend those benefits across a rapidly increasing population.

With this favourable context fading into the past, we have to find answers to questions that we’ve never had to ask ourselves until now.

The faculty of choice requires knowledge of the options, and this we cannot have whilst we persist in the delusion that “the economy is a financial system”. It isn’t, it never has been, and it never can be – but our ignorance about this fundamental point has been one of the many luxuries afforded to us by the largesse of fossil fuels.

This seems pretty depressing fare to put before readers at the start of the festive season. The compensating thought has to be that the connection between prosperity and happiness has always been a falsehood.

A lack of sufficiency can, and does, cause misery – but an excess of it has never been a guarantee of contentment.

In the coming days, Christians will recall with renewed force that Jesus was born in a humble stable. He went on to throw the money-changers out of the Temple, and to instruct people to lay up their treasure, not on Earth, but in Heaven. I hope it will be taken in the right spirit if I add that He never earned an MBA, or ran a hedge fund.

The single most important challenge that we face isn’t deteriorating prosperity, or the looming probability of a financial catastrophe. Rather, the great challenge is that of how to jettison the false notion that material wealth and happiness are coterminous.

‘Value’ may indeed be heading for mass destruction.

But values are indestructible.

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Gail Tverberg

Most people seem to think, “The difference between models and myths is that models are scientific, and myths are the conjectures of primitive people who do not have access to scientific thinking and computers. With scientific models, we have moved far beyond myths.” It seems to me that the truth is quite different from this.

History shows a repeated pattern of overshoot and collapse. William Catton wrote about this issue in his highly acclaimed 1980 book, Overshoot.

Figure 1. Depiction of Overshoot and Collapse by Paul Chefurka

What politicians, economists, and academic book publishers would like us to believe is that the world is full of limitless possibilities. World population can continue to rise. World leaders are in charge. Our big problem, if we believe today’s models, is that humans are consuming fossil fuel at too high a rate. If we cannot quickly transition to a low carbon economy, perhaps based on wind, solar and hydroelectric, the climate will change uncontrollably. The problem will then be all our fault. The story, supposedly based on scientific models, has almost become a new religion.

Recent Attempted Shifts to Wind, Solar and Hydroelectric Are Working Poorly

Of course, if we check to see what has happened when economies have actually attempted to switch to wind, water and hydroelectric, we see one bad outcome after another.

[1] Australia’s attempt to put renewable electricity on the grid has sent electricity prices skyrocketing and resulted in increased blackouts. It has been said that intermittent electricity has “wrecked the grid” in Australia.

[2] California, with all of its renewables, has badly neglected its grid, leading to many damaging wildfires. Renewables need disproportionately more long distance transmission, partly because they tend to be located away from population centers and partly because transmission must be scaled for peak use. It is evident that California has not been collecting a high enough price for electricity to cover the full cost of grid maintenance and upgrades.

Figure 2. California electricity consumption including amounts imported from out of state, based on EIA data. Amounts shown are average daily amounts, by month.

[3] The International Rivers Organization writes that Large Dams Just Aren’t Worth the Cost. Part of the problem is the huge number of people who must be moved from their ancestral homeland and their inability to adapt well to their new location. Part of the problem is the environmental damage caused by the dams. To make matters worse, a study of 245 large dams built between 1934 and 2007 showed that without even taking into account social and environmental impacts, the actual construction costs were too high to yield a positive return.

Developed economies have made hydroelectric power work adequately in areas with significant snow melt. At this point, evidence is lacking that large hydroelectric dams work well elsewhere. Significant variation in rainfall (year-to-year or seasonally) seems to be particularly problematic, because without fossil fuel backup, businesses cannot rely on year-around electricity supply.

The Pattern of Overshoot and Collapse Is Well-Established

Back in 1974, Henry Kissinger said in an interview:

I think of myself as a historian more than as a statesman. As a historian, you have to be conscious of the fact that every civilization that has ever existed has ultimately collapsed. [Emphasis added.]

History is a tale of efforts that failed, of aspirations that weren’t realized, of wishes that were fulfilled and then turned out to be different from what one expected. So, as a historian, one has to live with a sense of the inevitability of tragedy. As a statesman, one has to act on the assumption that problems must be solved.

Historians tend to define collapse more broadly than “the top level of government disappearing.” Collapse includes many ways of an economy failing. It includes losing at war, population decline because of epidemics, governments overthrown by internal dissent, and governments that cannot repay debt with interest, and failing for this reason.

A basic issue that often underlies collapse is falling average resources per person. These falling average resources per person can take several forms:

  • Population rises, but land available for farming doesn’t rise.
  • Mines and wells deplete, requiring more effort for extraction.
  • Soil erodes or becomes polluted with salt, reducing crop yields.

One of the other issues is that as resources per capita become stretched, it becomes harder and harder to set aside a margin for a “rainy day” or a drought. Thus, weather or climate variations may push an economy over the edge, as resources per person become more stretched.

Scientific Models Too Often Prove Whatever the Grant Provider Wants Proven

It is incredibly difficult to figure out what the future will hold. Our experience is almost entirely with a growing economy. It is easy to accidentally build this past experience into a model of the future, even when we are trying to make realistic assumptions. For example, when making pension models in the early 1980s, actuaries would see interest rates of 10% and assume that interest rates could remain this high indefinitely.

The question of whether prices will rise to allow future energy extraction is another problematic area. If we believe standard economic theory, prices can be expected to rise when resources are in short supply. But if we look at Revelation 18: 11-17, we find that when Babylon collapsed, the problem was low prices and lack of demand. There were not even buyers for slaves, and these were the energy product of the day. The Great Depression of the 1930s showed a similar low-price pattern. Today’s economic model seems to need refinement, if it is to account for how prices really seem to behave in collapses.

If there is an issue that is difficult to evaluate in making a forecast, the easiest approach for researchers to take is to omit it. For example, the intermittency of wind and solar can effectively be left out by assuming that (a) the different types of intermittency will cancel out, or (b) intermittency will be inexpensive to fix or (c) intermittency will be handled by a different part of the research project.

To further complicate matters, researchers often find that their compensation is tied to their ability to get grants to fund their research. These research grants have been put together by organizations that are concerned about the future. These organizations are looking for research that will match their understanding of today’s problems and their proposed solutions for the future.

A person can guess how this arrangement tends to work out. Any researcher who points out endless problems, or says that the proposed solution is impossible, won’t get funding. To get funding, at least some partial solution must be provided along the lines outlined in the Request for Proposal, regardless of how unlikely the proposed solution is. Research showing that the grant-writer’s view of the future is not really correct is left to retired researchers and others willing to work for little compensation. All too often, published research tends to say whatever the groups funding the research studies want the studies to say.

Myths Are of Many Types; Many Are Aimed at Giving Good Advice

The fact that myths have survived through the ages lets us know that at least some people found the insights that they provided were worthwhile.

If an ancient people did not know how the earth and the people on it came into being, they would likely come up with a myth explaining the situation. Most of us today would not believe myths about Thor, for example, but (as far as we know), no one was being paid to put together stories about Thor and how powerful he was. The myths were stories that people found sufficiently useful and entertaining to pass along. In some sense, this background gives these stories more value than a paper written in order to obtain funds provided by a research grant.

Some myths relate to what types of activities by humans were desirable or undesirable. For example, the people in Uganda have traditional folklore about a moral monster that is used to teach children the dangers of craftiness and deceit. My sister who visited Uganda reported that where she visited, people believed that people who stole someone else’s crops were likely to get sick. Most of us wouldn’t think that this story was really right, but it has a moral purpose behind it. There are no doubt many myths of this type. They have been passed on because passing them on seemed to serve a purpose.

(mais…)

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Original Sin

Megacancer
(Can you recognize the real culprit in this painting, the one responsible for original sin against God?
I’ll give you a hint, it’s not the snake or humans.)

I’m not sure any organism, if capable of pondering the question, could give an adequate reason for staying alive. It’s never a choice, being alive, but is simply the tail-end of a long autocatalytic, self-organizing process. This question is only entertained occasionally in the human mind and the typical answer might include the recall of rewarding dopamine-intensive activities that somehow make life worth living. Most animals get along fine without any reason for existence, they’re simply prewired to behave in such a way that results in another life cycle, no questions asked. Humans are mostly like that too, although they sometimes wonder about the purpose of life as if it is a tool that needs to be applied to a substrate, and indeed it is. The entire human brain and psyche is a homeostasis enabler. Behaviors and activities that enhance personal and/or multi-generational homeostasis are the brain’s reason d’etre. Overall, maintaining homeostasis is the process of maintaining “comfort” and distance from any dangers or threats that could result in equilibrium with the environment. Moving from cold to warm, hot to cool, enough food, enough shelter, enough sex, children thriving, a large savings that can be converted into “homeostasis” when necessary.

It’s all automatic, let comfort and safety be your guide. But there is and always has been an intense competition for the energy and resource means to “comfort”. Humans hoard resources and wealth as a means to insure continued homeostasis and to allay their insecurity. One current strategy is in accumulating shares in a technological system that seems to deliver cornucopia-like comfort but with each passing day it consumes a little more of its irreplaceable elixir of life – fossil fuels. Recently most members of society have found it difficult or impossible to achieve their comfort goals. It has become impossible due to wages inadequate to maintain the dissipative needs of a vehicle, home and ones’ own body after contributing taxes and interest to the maintenance of dissipative structures like government in its many manifestations, the financial system and the education and medical systems. In other words, most citizens of the world are being pushed farther and farther out of their comfort zones (if they ever had one) towards equilibrium (insolvency, starvation and death) and they’ve begun to protest. Having a long string of dopamine wins, like trips to Disney World, is no longer the issue. The issue is simply continued existence. The vacations and consumption that provided the dopamine hits and memories of yesterday are replaced with the less costly numbing agents of alcohol and heroine as life becomes an exercise in hanging-on to a bleak and hopeless future with regular beatings provided by more powerful entities that demand their tithes.

Unfortunately the infrastructure of the existing technological metabolism (homes and businesses separated and accessible only by car), is perfect for rapidly eliminating the fossil fuel gradient, and is thermodynamically sanctioned, but does not lend itself to a “Plan B” that uses significantly less energy. Moving large masses (cars/people/resources) around the metabolic circuit (flow) will simply cease in many instances as the energy budget is cut.

“We are swimming upstream against a great torrent of disorganization, which tends to reduce everything to the heat death of equilibrium and sameness described in the second law of thermodynamics. What Maxwell, Bolzmann and Gibbs meant by this heat death in physics has a counterpart in the ethic of Kierkegaard, who pointed out that we live in a chaotic moral universe. In this, our main obligation is to establish arbitrary enclaves of order and system. These enclaves will not remain there indefinitely by any momentum of their own after we have once established them … We are not fighting for a definitive victory in the indefinite future. It is the greatest possible victory to be, to continue to be, and to have been .. . This is no defeatism, it is rather a sense of tragedy in a world in which necessity is represented by an inevitable disappearance of differentiation. The declaration of our own nature and the attempt to build an enclave of organization in the face of nature’s overwhelming tendency to disorder is an insolence against the gods and the iron necessity that they impose. Here lies tragedy, but here lies glory too.” – Norbert Wiener – The Human Use of Human Beings

In other words it’s the plant’s fault (that we be). Humans in their present form are here to undo what the plants have done. The earth intercepts a tiny fraction of the sun’s energy which is meant for the great void of space and the plants use the energy to convert carbon dioxide and water into glucose and oxygen. Glucose is the food for the ATP energy system and keeps the plant metabolism humming. Plant-eating animals evolved to consume the plants and burn them with oxygen to once again release carbon dioxide, water and heat which is released back into space, the same place the sunshine should have gone in the first place. Humans can either eat the plants directly or they can eat the animals that eat plants. Did plants commit the original sin? Not likely. Chemotrophic sinners existed before the plants and used other gradients (sub-sea vents?) to temporarily thwart the natural order. So what is the purpose of life? To eat the plants and the assorted animals that also eat the plants. Anything else is extra and indeed we have extra in the form of fossil fuels. We’ve also found a way (civilization/technology) to burn plant tissues sequestered millions of years ago – fossil fuels. Of course we do this at our own peril as carbon dioxide builds in the atmosphere and oceans.

The original sinner (or similar chemotrophic metabolism).

The Universe doesn’t really want us around but uses us to undo what the plants have done. And we’ve found so many things to do to get rid of plants and fossil fuels. Just look around at the kaleidoscope of wonders the humans have made. We even take over plant territory and grow our own edible plants to satisfy the human RNA that are busy using their technological tools to excavate old plant remains to burn. We even use old plant remains to fertilize new edible plant growth as we burn-up the Amazon Rainforest. We also use edible plants(ethanol) to feed our cars. It’s incredible, this frenzy of activity. But what to do when all of the old sequestered plant material is nothing more than heat on its way to a distant galaxy and the soils are depleted and ecosystem wrecked? We will no longer have a purpose for living but rather a reason to die.

And in additional news:

I’ve posted a link to Francois Roddier’s paper, “The Thermodynamics of Evolution: An Essay of Thermo-Bio-Sociology” previously and it’s well worth reading several times.

Here are a few interesting passages:

“ The chemist Frederick Soddy (36) seems to have been the first to link the laws of thermodynamics with economy. In his book ” Wealth, Virtual Wealth and Debt, “written in 1926, he explains that money is only a virtual wealth. True wealth is the daily amount of energy which is available to us, that is the power one can dissipate. He proposes to get rid of the gold standard and to link money to energy dissipation by calculating an index of consumer prices. He explains that as long as investments are profitable, energy dissipation increases and society becomes richer. When they cease to be profitable, society becomes endebted. This is how Soddy predicted the crisis of 1929.”

And indeed the gold standard was eliminated and money was linked to energy dissipation (oil) allowing unfettered growth and debt creation into the future – until now. Investments have ceased to be profitable and society is certainly becoming more and more indebted. The anchor of the gold standard was eliminated so we could hit the wall of limits at full speed in a car stuffed with debt instruments. What year should we consider for our collapse? Not until everyone is sucked into the illusion of continued profitability and those in the know having left the stage, then the trapdoor will be sprung.

Roddier sums-up organic – technological analogs as follows:

• DNA : culture. All the information stored in books and transmitted through generations.

• RNA : knowledge. Cultural information stored in brains (42).

• Messenger RNA : General education. Knowledge transmitted through education.

• Ribosomal RNA : Know-how. Allows to apply knowledge to specific needs.

• Transfer RNA : Technical instruction. Transmission of know-how.

• Hormone: Media. Information disseminated to the whole society.

• Enzyme: Invested money. It catalyzes production. Like any catalyst, it is given back to the lender at the end of the contract. An autocatalytic structure generates its own funding.

• ATP: standard currency. Biologists themselves compare ATP to a currency. In each cell ATP is generated by mitochondria who play the role of banks.”

I think the above points are basically correct. My blog has only expounded upon a few of them, especially how humans from the ecological system were transformed into the new RNA of the technological system.

“It is unrealistic to try to predict exactly what will happen. What is clear, is that major crises will affect the whole mankind. Because they are the most developed, the United States and Europe will be the first to be affected. The more advanced is their economy, the more rapidly other countries will be affected. Still asleep and little aware of the realities, the global brain of mankind will inevitably go through a period of nightmares. The depletion of our mineral and oil resources imply that it will be increasingly difficult to maintain the complex structures of our societies. The ruling classes will do anything they can to maintain their standard of living. In many countries, an increasingly restricted number of ever richer people will monopolize all power, impoverishing the population. Social upheaval will multiply. They will be repressed by ever less democratic, possibly totalitarian governments. The heads of State will be increasingly discredited. Countries that are rich, or in the way towards enrichment, will help each other and form coalitions, creating multiple conflicts. New wars as short as they may be devastating may arise. On the one hand, U.S. and the European Union talk about forming an atlantic alliance. On the other hand, Brazil, Russia, India, China and even South Africa (BRICS) are planning joint agreements. Will both sides come into conflict? Assuming wars are avoided, a plausible scenario could be the following. Let us assume that an atlantic alliance is formed. Faced with a stagnant economy and an increasing debt, the alliance decides to adopt a single currency, the Euro-dollar. After a brief respite, given the absence of any other measure, the situation continues to deteriorate. Some States of the alliance then decide to resume independence, causing a series of scissions both in Europe and in the USA. A return to protectionism reduces air and road traffic, even faster as the cost of oil continues to increase. Automotive and aerospace industries go bankrupt. The economy is in freefall. It is the collapse. Being economically dependent of the alliance, the BRICS countries, including China are, in turn, in trouble. The Heads of State meet. Liberal economy is questioned. A single world organization is given the responsability for creating and controlling money. It attempts to solve a crisis that has become global.

Two opposite tendencies come into conflict: the globalization of the economy with the creation of a single world currency and its regionalization with the creation of regional currencies. From a global economy, one return to a multitude of local economies, each seeking its independence. One recognize here the characteristic of collapse processes. Large structures are replaced by small ones: large trees are replaced by low vegetation, dinosaurs by small mammals. This is the melting phase of the simulated annealing algorithm that is looking for a new optimum that will dissipate energy, still more efficiently.”

Francois Roddier

It seems the attempt at superorganism status has already failed with Brexit and the permanent interruption of the trade occurring between China and the United States (it will be permanent because there won’t be enough energy to feed it). It remains to be seen how much energy there will be for dissipation in the future as things begin to unravel. It seems likely that personal vehicles will be cut-off from fuel first and this will make many of the technological cells obsolete (too isolated to make adequate metabolic connections). It will likely be a problem maintaining enough cells (homes) as dissipators to justify economically the large centralized utilities that depend upon economies of scale to operate. Many humans will eventually be cut-off from the energy they need to maintain their own bodies and they will starve to death or at least undergo a substantial trimming. Maintaining homeostasis by whatever means possible will be a full time job. You’ve probably heard that there’s plenty of food for everyone but the only reason some people are hungry is because of a distribution problem. The distribution problem will get worse.

Will it end with a bang or will we simply run out of fuel on a lonely stretch of track.

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