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[00:00:00] Well, as we look at global trends, we look at population growth, living standards. There's a strong correlation with energy and as the world's population grows, they will need more and more energy. Our view is oil and gas will continue to play a material role in it and to do that we need to be safe, affordable, reliable, responsible and with that in mind we think we will have a future for decades to come.
[00:00:23] This is the Debunking Economics podcast with Steve Keen and Phil Dobbie.
[00:00:32] Well, that is the CEO of Imperial Oil a few years ago saying that he thinks oil is going to be around for a lot longer and he is right about one thing. There is a strong correlation between economic growth and energy. Yet most economic models ignore energy. Why is that and how different would it be if we started seeing energy as the dominant factor in economic output, not merely a contributory factor to it all? That's this week on the Debunking Economics podcast with me and Steve Keen. Welcome along.
[00:01:04] So if economics is all about the allocation of scarce resources isn't energy the most scarce resource of them all and yet it's not really included in any economic models. We look at labor and capital as the drivers of growth but energy is just a contributor to those factors, not a key factor in itself. Which is curious, isn't it really? Because energy is well finite. Well, I mean there's quite large, we include the power of the sun, but largely finite.
[00:01:30] And you could argue the more efficiently we can harness energy, the greater the influence on productivity which enhances economic output. So it's a key factor. But more importantly, if we are ignoring energy and economic models, then we ignore the downside impacts as well.
[00:01:45] And isn't that why we've experienced massive growth in the economy since the Industrial Revolution without any concern on the consequences of the planet. So this is one of Steve's pet tropics. So stand by for this. The need to include energy and economic models. He's been doing a bit of work on it recently as well.
[00:02:02] So Steve, the factors of production, we can argue what they are. Labor, land and capital. Some add entrepreneurship, some take land out of it. But if we did have land in it, I mean many would say resources like oil or gas fall into that land category. So it's factored in if we include land. Often, of course, we just look at labor and capital. But even then, you know, it's sort of energy contributes to capital. Capital is the determining factor. Energy is a contributing factor. What's wrong with that?
[00:02:32] Well, nothing except that economists have ignored it and got themselves in a mindset where they don't even think about energy. And this is what I'm busy saying has been a hobby horse of mine for quite some time. And I finally managed to solve the hobby horse working with the great and recently departed physicist Bob Ayres, who was attempting to bring energy into economic theory for decades.
[00:02:55] And the reason it's not there. We're going to go back to a lot of history. But if I go to the most recent manifestation of how economists model production, they say that production is the product of technology, which they call total factor productivity, multiplied by capital, multiplied by labor, where capital and labor are both raised to powers, which sum to one.
[00:03:18] And the idea there is that if you double all capital and double all labor, then you double output.
[00:03:26] And therefore, if you're going to do that doubling, the only way you get that doubling the inputs gives you doubling the outputs is if you have them both raised to an exponent, like X squared, X cubed, the two and three of the exponents there.
[00:03:41] The sum of the exponents has to be one. And then they say, OK, you have alpha as one of the exponents.
[00:03:48] The other must be one minus alpha. So what they actually put is what's called the Cobb-Douglas production function has technology, which they show as A, and that's assumed to grow exponentially over time,
[00:03:59] multiplied by capital to the power of alpha times labor to the power of one minus alpha.
[00:04:04] Right. Let's try and avoid. Yeah, OK. And we need to keep trying to keep this as simple as possible without getting too complicated,
[00:04:10] because equations don't work terribly well on a podcast and make my eyes glides when I read them in a report.
[00:04:16] But I mean, the I mean, but the Cobb-Douglas, I mean, you know, and correct me if I'm wrong,
[00:04:22] but the whole idea behind that is you look at labor and capital and then it's determining the efficiency of each of those.
[00:04:27] So if you increase the efficiency of labor, then you get more output.
[00:04:31] If you increase the efficiency of capital, you get more output.
[00:04:32] But you increase the efficiency of both of them.
[00:04:34] Then you get even more output.
[00:04:36] And what is driving the efficiency very often is energy, isn't it?
[00:04:40] You can't you can't get more efficient labor if people aren't eating.
[00:04:44] And you can't get more efficient capital if you're not putting money into into machines which are more productive.
[00:04:49] Exactly. But the way that economists cope with the way they try to cope.
[00:04:52] And I've got to talk. I'm sorry.
[00:04:53] I've got to talk about a bit of the mathematics.
[00:04:55] This idea of exponents summing to one is in the way the Cobb-Douglas production function is put forward.
[00:05:01] That's that is essential because if you, for example, said you have twice as many factories with twice as many workers,
[00:05:08] like the number of workers per factory remaining the same, but you've got twice as many factories.
[00:05:12] Unless you have to say let's see it.
[00:05:14] The exponents sum to two, for example, you'd say with twice as many factories, you get four times as much output, which is simply wrong.
[00:05:22] So that's why the exponents have to sum to one.
[00:05:25] So what they've said is we've got capital, we've got labor.
[00:05:27] And let's just add energy on as an extra factor.
[00:05:29] So we have capital times labor times energy where the exponents, the powers they're raised to sum to one.
[00:05:36] And that's our model.
[00:05:37] And the real question is, what numbers do you provide for the exponents?
[00:05:40] So let's say we start with saying that workers get 65 percent of GDP, capitalists get 30 percent of GDP and the fossil fuel sector gets 5 percent of GDP.
[00:05:51] And they say, well, those exponents are therefore 0.65 plus 0.3 plus 0.05, which sums to one.
[00:05:58] So labor's raised to 0.65, capital's raised to 0.3, energy's raised to 0.05.
[00:06:04] Now, what that implies is, and this is...
[00:06:06] Energy is just not important at all, basically.
[00:06:08] That's right.
[00:06:09] That's right.
[00:06:10] If you double, that's the real problem.
[00:06:12] But the reason for that is because the energy sector might be taking very little money proportional to the total GDP, but the contribution they're making to GDP is that much greater than the money that they're making.
[00:06:21] I mean, it's like they're...
[00:06:22] Because they are providing energy, which is powering machines and feeding people.
[00:06:27] And that's the dilemma that I faced when I was looking at how people had tried to bring this in, because it just didn't make sense to say energy's contribution to an increase in GDP is about 0.05.
[00:06:37] 0.05, you know, your W energy, you're going to get 0.05 more output out of it.
[00:06:42] It just didn't make any sense.
[00:06:44] And working with Bob Ayres, who was a physicist who also saw the same thing, was trying to build mathematical models that enable us to properly account for energy.
[00:06:55] He had a model he called the Linux model, and that had a very complicated way of deriving a much higher role for energy.
[00:07:03] But it's had in part of it.
[00:07:04] It's still assumed that you'd scale it down to output being labor times capital times energy.
[00:07:10] And I just thought this didn't make sense.
[00:07:12] I mean, two reasons doesn't make sense.
[00:07:13] One, it implies if you put workers inside a factory and hit it with a bolt of lightning, goods will come out the other side.
[00:07:19] No, you'll have a destroyed factory and dead workers.
[00:07:21] You know, so that didn't make sense.
[00:07:23] And then the one that really solved it for me, and it mathematically ends up being ridiculously simple, walking through Bob's house one night, it's full of statues.
[00:07:33] And this thought popped into my brain, labor without energy is a corpse.
[00:07:37] Capital without energy is a sculpture.
[00:07:38] Yeah.
[00:07:39] Now, what that means, and you've been saying the same thing pretty much in the prelude here.
[00:07:43] What that means is rather than K times L times E, it's K with E as an input times labor with E as an input.
[00:07:51] Well, you've got to explain what the Ks and E's are so that we…
[00:07:54] K is capital, the machinery.
[00:07:56] So you've got to provide machines with energy, otherwise they just sit there like a sculpture.
[00:08:00] And labor, you've got to provide them with energy in the form of food.
[00:08:03] Yeah, if there's no energy, nothing happens.
[00:08:04] Absolutely.
[00:08:05] Exactly.
[00:08:06] Which was my original point, isn't it?
[00:08:08] Yeah.
[00:08:08] For both of those, at the moment you start to say, well, we've got labor, capital and energy, then you're separating out energy.
[00:08:15] Surely you're saying you've got labor and capital, and they both go down to zero without any energy.
[00:08:21] Exactly.
[00:08:22] So energy is a contributor to labor and capital.
[00:08:24] The question is, how efficiently is energy helping labor, and how efficiently is energy helping capital?
[00:08:31] That's the question, isn't it?
[00:08:32] If you treat them as equal or similar…
[00:08:36] Yeah, as independent, then you're ignoring that, or even worse, you're double counting, or, you know, it just doesn't work.
[00:08:41] Yeah, it just doesn't work.
[00:08:42] And that's the trouble.
[00:08:43] Neoclassicals have become so used to saying output is a product of labor and capital that they simply continue with exactly the same mindset of tech energy on the end there.
[00:08:52] And because they use these exponents based on the income share, they end up saying that energy contributes only 5% to GDP, capital 30%, and workers 65%.
[00:09:04] And it's just complete distortion of what actually happens in production.
[00:09:08] Because take away that 5% and see what happens.
[00:09:10] Yeah.
[00:09:10] Exactly.
[00:09:10] You lose 100%.
[00:09:11] They go to zero, yeah.
[00:09:13] So, but, look, I wonder whether it's as bad as you say it is.
[00:09:16] An economist, you know, and I work with, you know, spreadsheet jockeys who are trying to forecast the future of the economy.
[00:09:25] And they may look at, for example, greater investment being made.
[00:09:29] You know, they may have macro models that relate that to GDP.
[00:09:34] But an analyst is going to dig deeper than that.
[00:09:37] Okay, they might not.
[00:09:38] I mean, they're going to look at everything on a cost basis.
[00:09:40] But they'll factor in the cost of energy to see how effective that investment might be.
[00:09:46] So, if energy is very expensive, they'll go, okay, that investment is not going to be as effective as it was perhaps 20 or 30 years ago.
[00:09:52] You know, when oil was a lot cheaper and a lot more easy to produce.
[00:09:55] So, it is – so, the return will be lower if energy costs are higher.
[00:10:00] So, that's sort of – I mean, they are looking at it to that extent.
[00:10:04] To some extent, but they're not putting it in the right framework.
[00:10:06] And this is the problem.
[00:10:07] When you say energy is just, you know, contributes of 5% total output.
[00:10:13] And actually, with the equations, you could actually set the exponent of energy to zero and say you'll still get output with no energy, which is nonsense.
[00:10:20] So, as you said, no energy in, no output out the other side.
[00:10:24] So, when you revise it, you get that argument.
[00:10:26] Even if you're going to use the idea that the exponents for capital and labour sum to one, you're going to have capital with an energy input, one power, labour to another – do it with an energy input to another power, obviously different forms of energy.
[00:10:40] And then you can get output.
[00:10:42] But if your E falls to zero for either labour or capital, bang, you've got no output.
[00:10:46] And that's the centrality of energy to producing GDP.
[00:10:52] So, actually, isn't the equation a little bit easier than that?
[00:10:56] Isn't it just that output equals energy?
[00:10:59] And then the question is how efficient are you using that energy?
[00:11:01] And then that is all – mate, you're going to get a couple of cigars out of me for Christmas sake for this one because you've done exactly the right thing, which is what I ended up doing by putting this in proper mathematical form.
[00:11:11] So, when you look at what the neoclassicals argue, and there's a paper of one of my favourite irritating neoclassicals, Rudy Bergman, a German academic who argued that if – using neoclassical theory, he said that if you have – if energy falls by 10%, then output will fall by 0.4%.
[00:11:36] And he said this is the only way to make this consistent with neoclassical theory.
[00:11:40] I said, well, that's – if it is, it shows neoclassical theory is wrong because when you take a look at the global data – and this is what actually matters because we have so much shifting of production in various countries.
[00:11:50] It clouds how much you can rely upon national statistics.
[00:11:53] When you look at the global statistics, energy and capital – sorry, the growth to GDP and energy.
[00:12:01] We can plot GDP and US dollars on one axis and plot energy and megajoules on the other.
[00:12:07] They're virtually straight lines.
[00:12:09] When you look at the change in one and the change in the other, they are almost identical.
[00:12:14] So, if GDP goes up by 0.08%, you'll find energy goes up by between 0.06% and 0.09%.
[00:12:21] And when you look at the correlation of the change in energy and the change in GDP between 1960, I think it is, and 2020 in the most recent economic data, correlation is 0.83.
[00:12:36] So, what they're saying – when you, again, go through the logic that I've worked on, which uses a different equation for relating output to inputs, you get basically that to a first approximation, GDP is energy transformed into useful work.
[00:12:53] But then the factor is, how easy is it to get that energy, which is a – you know, and there's how you actually get it out of the ground or transfer it or whatever, but there's also the price of energy.
[00:13:05] So, I mean, if you were just looking at this as an economic model, surely the cost of energy becomes vitally important to GDP growth then?
[00:13:13] Absolutely critical.
[00:13:14] And that's actually – it's not so much the cost of energy in terms of dollars.
[00:13:17] This is a concept from Charlie Hall, the non-orthodox economist and physicist who's been pushing this line for, you know, as long as Bob Ayers is doing and Charlie is still alive and kicking.
[00:13:28] And he would develop the term called energy return on energy invested because the basic story is to get energy out of the ground, if you say you're doing fossil fuels or oil, then you've got to dig a hole.
[00:13:40] And digging the hole takes energy.
[00:13:42] So, you've got a certain amount of energy in, often which will actually involve fossil fuels to actually generate the energy.
[00:13:48] If you're using a drill rig, you're most likely powering it using oil or electric power maybe, but electric power generated by coal.
[00:13:55] So, you've got energy going in.
[00:13:57] And then the question is, how much energy do you get out as a result of that?
[00:14:00] And if you go right back to the early days of – what's that movie there, Will Be Blood, about the first discovery of oil in Philadelphia?
[00:14:08] I don't know.
[00:14:10] The amount of energy you put in was trivial because oil is under pressure.
[00:14:14] Because, of course, on that basis – because, yeah, it just shoots out the ground.
[00:14:17] So, on that basis then, following the logic we talked about today, oil-rich nations are always going to have a better GDP because they can create energy more efficiently.
[00:14:30] That's partly it.
[00:14:31] I mean, the other thing is it's – over time, as we deplete those oil reserves, then it takes –
[00:14:36] you've got to drill further, which takes more energy, and then it spouts out of the ground.
[00:14:41] And then when you get to the stage where you've exhausted the reservoir quite dramatically, so it's not under the same pressure it was beforehand,
[00:14:47] you've got to pump gases down to –
[00:14:49] Yeah.
[00:14:50] – juice that come out, and then you've got energy.
[00:14:52] So, the energy return and energy invested, way back on the There Will Be Blood days, was about 120 to 1.
[00:14:58] Put one kilojoule of energy in, get 120 kilojoules of energy out.
[00:15:03] So, it was a hugely profitable business.
[00:15:05] Now, when you're getting to the stage where you've got a drill, you know, in the Gulf of Mexico in three kilometres of water down to a reservoir one and a half kilometres below the ocean bedrock,
[00:15:17] you're getting to the point where the amount of energy you're putting in is approximating the amount of energy you get out.
[00:15:22] When you get to that point, it's game over.
[00:15:24] And I've seen plenty of analysts arguing the North Sea oil is actually approaching that point.
[00:15:29] Right. We're drifting off a little bit, because in the second part, I want to talk about, you know, the limits.
[00:15:35] Well, almost there. I was going to say the limits to growth. Now, there's a catchy title for a book, isn't there?
[00:15:38] That might work, yeah.
[00:15:40] But just look –
[00:15:41] I think economists would like it, though.
[00:15:42] Just looking at this relationship between energy and, you know, trying to get it into economic modelling.
[00:15:49] I mean, we were just talking a second ago about that relationship between output and energy.
[00:15:53] So, I'd imagine if you were to look on a country-by-country basis, you'd find a pretty strong correlation as well.
[00:15:59] In other words, the countries in the world that are not doing very well are the ones which allow on energy.
[00:16:03] So, in Africa, for example, if they had more energy, which they might do with, you know, solar technology, for example, could African countries, by this argument, that have struggled, now actually begin to prosper?
[00:16:16] To some extent.
[00:16:17] But you've got to have energy to produce your air pay.
[00:16:20] And like I've got friends in Africa who live in huts that don't have electric power, teaching in schools that don't have electric power.
[00:16:27] But give them energy.
[00:16:29] Doesn't the whole situation change?
[00:16:30] And if you look at what actually has happened to give us the wealth that most of us take for granted these days, it's really been an increase in our exploitation of fossil fuels.
[00:16:38] And if you don't exploit the fossil fuels, then you have a GDP based on pre-1750 capabilities rather than the stuff we're used to in the 21st century.
[00:16:51] So, if we started with an economic model that said output is energy.
[00:16:54] You know, economic output is entirely related to energy use.
[00:16:59] And then factors within that are how efficiently you're using that energy.
[00:17:04] I guess it's the efficient use of energy, isn't it?
[00:17:08] And how that energy is used efficiently is a combination of how people are using it, the people factor, and how much land you've got as well if you want to throw that in.
[00:17:18] And then the capital that you're investing to create that efficient use of energy.
[00:17:25] That would be sort of like, you know, turning the economic model on its head.
[00:17:28] And that sort of seems sensible, doesn't it?
[00:17:31] Because then it turns the thinking on its head.
[00:17:34] It's exactly sensible, and that's what I'm trying to do.
[00:17:36] Because when you look at it, GDP comes out of energy.
[00:17:41] And GDP is fundamentally the energy we find in the universe, whether that's solar energy or wind energy or the energy in fossil fuels or nuclear ores, turning that energy into a useful form of energy.
[00:17:54] That is fundamentally what GDP is.
[00:17:56] And then, of course, to enable that to happen, there's a feedback loop because you've got to use some of that GDP, which is energy that can be used for work, to actually get the stuff out of the ground, out of the sun, et cetera, et cetera.
[00:18:08] And if you get to the point where the amount of energy used to get the oil, access the energy in the first place, it's 100% of GDP.
[00:18:18] There's nothing left for people to consume.
[00:18:20] Yeah.
[00:18:20] Okay.
[00:18:21] Good point.
[00:18:21] When we come back, we'll expand on that then because what are the limits to growth?
[00:18:27] How much – if now we accept that energy is the overriding influence when it comes to economic growth, just how far can you push economic growth if energy is being inhibited?
[00:18:38] And also, more importantly, it's having an impact on the planet, which we haven't really – strangely, haven't really talked about, Steve.
[00:18:44] I can't believe we've spoken for 20 minutes.
[00:18:45] You haven't mentioned that one yet.
[00:18:46] So, look, you can spend the whole of the second half talking about it.
[00:18:49] It's the Debunking Economics Podcast.
[00:18:51] It's me and Steve Keen back in a second.
[00:18:53] This is the Debunking Economics Podcast with Steve Keen and Phil Dobby.
[00:19:05] Now, we've been looking at how economics fails because by and large it doesn't give enough credence to the influence of energy because, as we said in the first half, without it, nothing happens.
[00:19:16] We look at labour and capital as the drivers of output, but they are each dependent on energy, and we just assume that energy is a consistent input to those factors, but it has its own variability.
[00:19:25] And the question is, how efficient is that?
[00:19:27] And it has a ceiling.
[00:19:29] It's not infinite.
[00:19:30] So, Steve, in this second part, let's look at that ceiling to the use of energy.
[00:19:35] Now, some would say there is no ceiling.
[00:19:38] Or it is, you know, if there is, it's so huge.
[00:19:40] Why worry about it?
[00:19:41] Because the sun emits 385 septillion watts per second.
[00:19:47] Steve, we just need to capture more of that.
[00:19:50] So, we've got this heat source that we can use for energy.
[00:19:53] Why worry?
[00:19:55] Energy is endless.
[00:19:56] Are they right?
[00:19:58] Well, they are.
[00:19:59] And one of the greatest, best ways you could actually test that out is by setting yourself a light.
[00:20:04] Well, no, that's not endless.
[00:20:06] No, if you use the endless energy, you'll blow up the planet in no time at all.
[00:20:11] Because one reason the temperature of the planet is at the order of about 300 degrees, and I'm taking absolutes from absolutes rather than Celsius,
[00:20:20] but in Celsius terms, the average temperature of the planet is about 16 degrees above the Celsius era.
[00:20:27] If you actually absorbed all the energy from the sun, then what would happen is ultimately you've got to transmit that back into outer space again as infrared heat.
[00:20:37] Right.
[00:20:37] Because we take it in light, it goes back out in infrared.
[00:20:40] The amount of energy would blow up.
[00:20:43] So, you simply cannot access all that energy within the environment of the planet.
[00:20:49] Because energy doesn't go away.
[00:20:50] That's the law of thermodynamics.
[00:20:52] That's right.
[00:20:53] It's conserved.
[00:20:54] Energy does not disappear.
[00:20:56] So, if you want to have a stable temperature on the planet, the amount of energy coming in has to be identical amount of energy coming out.
[00:21:03] The trouble is, so the energy coming in is going to be in the form of light, which is the high end of the frequency spectrum.
[00:21:12] It goes out as infrared, which is the low end.
[00:21:14] And that much energy coming in from the sun would cook us because we'd need to be transmitting that back into outer space again.
[00:21:20] Right.
[00:21:20] Could we do that, I guess, is the question.
[00:21:22] But just on this whole idea then that energy can't be transferred, just so we're all on the same page on this, and I'm not a physicist, but I sort of half understand it.
[00:21:32] So, we've got energy in the ground, which is sort of old energy in the form of oil.
[00:21:38] Yeah.
[00:21:38] I dig it up.
[00:21:39] I burn that to drive my car.
[00:21:41] It creates movement in my car.
[00:21:43] It creates heat as well.
[00:21:45] But largely, you know, that energy is being used to move my car.
[00:21:50] Where does the energy go then?
[00:21:51] It goes into the general atmosphere, and then it just heats up air molecules by, you know, largely radiation.
[00:22:02] So, it's infrared.
[00:22:03] It's convection applies as well.
[00:22:05] But all this stuff, the heat gets distributed into the atmosphere.
[00:22:07] And that therefore means you want to get out of the atmosphere fairly easily.
[00:22:14] Otherwise, you're in trouble because the more it gets bounced around inside the atmosphere, the more it heats the atmosphere.
[00:22:21] And that does two things.
[00:22:22] First of all, it makes the atmosphere, it makes the temperature of the planet higher.
[00:22:26] And secondly, it is not a major factor, given the numbers we're talking about.
[00:22:30] But it also reduces the efficiency of your exploitation of that energy, because there's a classic equation coming from a 19th century polymath called Carnot.
[00:22:40] And Carnot calculated that the energy you can get is like the temperature the energy engine operates at minus the temperature of the surrounding environment divided by the temperature of the surrounding environment.
[00:22:52] And so long as, you know, the temperature of the surrounding environment in terms of different from absolute zero is roughly 300 degrees, 300 degrees Celsius difference.
[00:23:06] So, you want to be, you know, if an engine is off at 600 degrees and you're minus 300, then you get a 50% efficiency.
[00:23:12] The higher you operate the temperature of the engine and the deeper the sink into which you dump that energy, the more efficiency you have.
[00:23:21] But as we increase the temperature of the planet, we're actually increasing the temperature of the place you dump the waste heat into, and that reduces your efficiency.
[00:23:31] Right.
[00:23:31] So, an operating machine at room temperature in England, it'll operate a lot more efficiently than trying to operate the same machine in the open air in the North Pole, because it's going to be…
[00:23:41] Well, the machine at the North Pole will be more efficient, because the air you're dumping in, it was lower.
[00:23:46] The cheapest way to have the stuff in outer space.
[00:23:49] But then the impact of that on the environment is going to be…
[00:23:52] That's the problem.
[00:23:53] That's the problem.
[00:23:54] Yeah.
[00:23:54] Right.
[00:23:55] So, rather than creating something good, you're…
[00:23:58] Okay.
[00:23:58] All right.
[00:23:59] Sort of makes sense.
[00:24:00] So, then, if the issue is we capture more energy from outside the planet, this is what you're saying, we're capturing more of the sun's energy, for example, then that is a problem, because it stays in the planet.
[00:24:12] So, in a way, solar energy could be a bad thing, because it could encourage us to use more energy that we are, in effect, importing from outside the planet.
[00:24:24] So, we're creating more heat as a result of it, unless we ship it out again.
[00:24:28] Yeah.
[00:24:28] That is going to be a problem.
[00:24:30] That particular issue, which is the waste heat that we produce on the planet, raising the temperature of the planet, that will be an issue in about one or two centuries.
[00:24:39] Okay.
[00:24:40] Because the amount we're dumping out now is quite tiny, compared to the real problem we have, is that if we were simply accessing energy from the sun, so we weren't actually using fossil fuels at all, then we would be able to continue on as we are now for quite some substantial time, before the waste heat we generated actually raised the temperature of the planet and made it unlivable for humans.
[00:25:01] What we're doing is said that, because we're using fossil fuels, fossil fuels have carbon, carbon becomes carbon dioxide, and carbon dioxide as a molecule reflects a particular subset of the frequency of infrared radiation.
[00:25:16] And what that means is, when a photon of infrared goes up, it hits a carbon dioxide molecule, it makes the molecule wobble.
[00:25:25] This is stuff I know from talking to my physicist friends, not that I have been trained in this area myself, by the way, but it actually is a sort of a wobble of the carbon dioxide molecule.
[00:25:36] You think about the carbon dioxide molecule being like a weightlifting with two dumbbells at the end of a bar.
[00:25:41] Okay.
[00:25:41] That wobbles.
[00:25:42] If you think about oxygen, it doesn't absorb it.
[00:25:46] Water also operates the same way.
[00:25:48] So water is actually a more potent absorber of infrared molecules than carbon dioxide.
[00:25:57] But, of course, water falls out of the atmosphere if the temperature drops very rapidly.
[00:26:01] Carbon dioxide stays there.
[00:26:03] So that's the main issue.
[00:26:04] What we've got is we're putting molecules into the planet, which when they get hit by an infrared molecule, rather than it's going straight through it, which is what happens with oxygen going into outer space, or straight through nitrogen as well,
[00:26:17] hits a carbon dioxide molecule, and it then can go in any 360 degrees when it comes out of it.
[00:26:22] The photon that emerges from that whole process, the infrared, can either go up and to outer space, which is what you want, or back down to Earth again, which is what you don't want.
[00:26:31] And as we increase the amount of carbon dioxide, we increase the absorption of that re-reflection of energy, and therefore we raise the temperature of the planet much, much more so than we do by our own waste activities at the moment.
[00:26:42] Right.
[00:26:43] So that is a bigger factor then than energy itself.
[00:26:47] So the idea that if we use more energy but we're not creating carbon.
[00:26:52] So the issue about using more energy is that we are using more fossil fuels.
[00:26:56] But the fossil fuels are also sort of stored energy, aren't they, in a way?
[00:27:00] They are.
[00:27:01] So they're dormant.
[00:27:03] They're not creating any heat.
[00:27:04] The moment we start burning them, then that is putting more energy into the environment, energy that won't go away unless we manage to store it back away again.
[00:27:14] It's more the waste energy that's the problem.
[00:27:18] It's not the waste energy, it's the waste carbon dioxide.
[00:27:21] If they generated oxygen, it was like plants generating oxygen, because they're taking in carbon dioxide, generating oxygen.
[00:27:32] It wouldn't be a problem.
[00:27:33] But they generate carbon dioxide.
[00:27:34] And then that ups as a blanket over the planet, which means the amount of solar radiation coming in also gets reflected around.
[00:27:42] So solar comes in, hits the ground, gets reflected back up as infrared.
[00:27:47] Then when it hits the carbon CO2 molecule, it bounces in one of 360 degrees and takes much, much longer to get out of the atmosphere.
[00:27:55] And therefore, that warms the atmosphere over time.
[00:27:58] The only way that that's going to work, it's just like if you and people living in summer in Europe will know what I'm talking about right now.
[00:28:04] Now, if you, given the temperature right now, if you hop under a typical winter doona, you're going to cook in no time at all.
[00:28:12] So you're going to find a light doona to avoid getting too hot, because the light doona lets more of your body heat radiate out into outer space rather than cooking you under the doona.
[00:28:22] So what we're doing is basically like throwing a doona over the planet.
[00:28:25] So in part one, we said, you know, the output is related to energy use by and large.
[00:28:32] If we're looking at one factor, if you're only going to measure one factor, the correlation is huge between the economic output and the amount of energy that you use.
[00:28:40] So it wouldn't be right to say, but too much use of energy, particularly importing too much energy from outer space to try and fuel that growth is a bad thing.
[00:28:54] Therefore, we need to curtail the use of energy.
[00:28:57] That is not the case, because you're saying the impact of that is not great.
[00:29:00] The real impact is carbon.
[00:29:02] So we can continue to have greater energy use and therefore greater economic output, provided we're not creating that carbon.
[00:29:11] That's the fundamental issue about global warming.
[00:29:14] And of course, if that was the and that that itself, we, yes, we could.
[00:29:19] That's one where people talk about moving from a carbon based or non carbon based energy system.
[00:29:24] That removes the side effect of using fossil fuels to generate the energy.
[00:29:28] And if that was the only thing we're doing wrong with the planet, then if we solve that particular problem, then we could go on, you know, for quite some time, about two or three hundred years before we'd reach the problem where the waste energy we're generating is so great that that itself cooks the planet.
[00:29:42] To give people an idea of this, this is where exponential growth is such an important concept that economists have virtually no understanding of them, I've got to say.
[00:29:50] But if you have a rate of growth of the economy running at about two and a half percent per annum, that means that every hundred years, roughly speaking, the economy becomes ten times as big.
[00:30:03] So one century, ten times, two centuries, a hundred, three centuries, a thousand, four centuries, ten thousand times.
[00:30:11] At the same time, the waste that you're generating out of using energy to.
[00:30:16] That's assuming population growth continues at the same rate.
[00:30:18] No, it could be.
[00:30:18] I mean, if you look at the fantasy stories that economists tell themselves about the future, they assume they take one thing they do.
[00:30:26] They assume population will stabilize at about 10 billion people.
[00:30:29] And that's relying upon demographics, which at least that's one case where economists have accepted advice from some people who know what they're talking about.
[00:30:36] Yeah, because that seems very likely, doesn't it?
[00:30:38] Yeah.
[00:30:39] Because, you know, in the Western world, we are procreating less.
[00:30:44] Yeah.
[00:30:44] So you reach 10 billion, but you then have 10,000 times the GDP.
[00:30:49] Well, at that level, the level of waste, and this is straight thermodynamics, and this is quoting my colleagues who work in thermodynamic research.
[00:30:56] If you have 10,000 times the GDP we have now, then in 400 years, the waste heat from that process alone will raise the average temperature of the planet to the boiling point of water.
[00:31:10] Right.
[00:31:10] So it is an issue then.
[00:31:11] It is an issue.
[00:31:11] Aside from carbon, it is an issue.
[00:31:13] In 400 years, yeah.
[00:31:14] Right.
[00:31:14] Therefore, you've got to have a – you've got to be a – economists talk about in the long run, okay?
[00:31:19] Well, the long run is, I mean, I'd say 100 years.
[00:31:21] In four times that, if we continue doing everything on this planet and have perfectly smooth growth at that stage, we'll be at the stage where the water evaporates off the planet.
[00:31:32] That is, you know, boils off the planet.
[00:31:34] Obviously, that's not sustainable.
[00:31:36] There is a limit to growth simply in terms of the use of energy, let alone the waste products from using energy when we're getting energy out of fossil fuels.
[00:31:44] Right.
[00:31:44] But if every government in the world said, okay, well, we are very concerned about getting GDP growth because GDP obviously creates jobs, improves the standard of living for everybody.
[00:31:52] So it's very important that we have that and we want to see it grow.
[00:31:55] And we – but our equation that we're working to says that the fundamental driver of that is energy.
[00:32:02] So then the next question is, what's the impact of that energy use?
[00:32:05] So what is the latent heat argument?
[00:32:07] Maybe not very important now, but will become increasingly so.
[00:32:10] And how much of that is creating carbon?
[00:32:13] If that was the focus of governments, we'd be in a much healthier place, wouldn't we?
[00:32:18] Much healthier.
[00:32:19] And the real issue is the carbon dioxide, putting the doona around the planet.
[00:32:23] That's the main issue.
[00:32:24] And climate scientists who know what they're talking about when it comes to the impact of this temperature on how survivable the biosphere is for the species which have evolved over the last 50 or 60 million years since the evolution of the – since the destruction of the dinosaurs.
[00:32:40] And particularly in the last, say, 5 or 10 million years, that temperature increase would potentially eliminate the life measures that 85% of the species on the planet occupy, including humans.
[00:32:57] And this is the real danger.
[00:32:59] But if we used energy more efficiently, are you still got even – so even the – because energy doesn't go away, does it?
[00:33:06] So even if you're using it more –
[00:33:07] It goes into outer space.
[00:33:08] Ultimately, the thing is, yeah, you get radiates away from the planet ultimately because the planet's not a – you know, the planet's not a slant.
[00:33:14] Totally closed system, for sure.
[00:33:15] But if we are using a lot – if we're bringing more in, though, as well, and we are using it – but if we use – even if we said, well, okay, we're getting it in, we're using it very, very efficiently.
[00:33:26] If we are still doing more and more and more, we're still creating more heat as a result of that.
[00:33:31] Yeah.
[00:33:32] If we're using it faster than it's emitting out of the planet.
[00:33:37] So that becomes a ceiling that, again, we'd need to be concerned about.
[00:33:41] Yep.
[00:33:41] That's right.
[00:33:42] So the ultimate ceiling is the waste heat from production.
[00:33:45] And that gives us about 400 – well, actually, say 350 years that we can continue growing as we've done in the past if we had no carbon issue.
[00:33:54] Right.
[00:33:54] But the carbon issue is the big one, obviously.
[00:33:55] The carbon issue is the big one.
[00:33:56] So you've been in Montreux.
[00:33:58] You've been talking to a bunch of like-minded economists about how to incorporate energy into economic models and also money as well, which we know is also ignored.
[00:34:09] So how's that been going?
[00:34:11] Are you making headway?
[00:34:11] It was good.
[00:34:12] Yeah.
[00:34:13] I mean, I've read most of the research of most of the people who are at that conference before I went there.
[00:34:18] But, of course, research pays up to a five-year time lag.
[00:34:22] So I wasn't aware how far they'd moved on.
[00:34:24] And there actually is quite a bit of progress, particularly, I've got to say, from the Agent France Dévelopment, the French Development Agency,
[00:34:31] which when my Kingston University had been downsized badly because of the reduction in first-year intakes across the entire humanities there,
[00:34:42] two of my staff, Antoine Godin and Devrim Yulmaz, were at a loose end.
[00:34:48] And as it happened, I was approached by Gail Girard, Gail being, at the time, the economic director of the AFD.
[00:34:54] And he wanted people to build nonlinear, large-scale, differential occasion systems, energy-based models of production for developing countries the AFD was working as.
[00:35:05] And I have to say that Antoine and Devrim and the two other colleagues they're working with done a brilliant job.
[00:35:12] So they're now getting to the stage where they're modelling up to enormous models of the economy in terms of large-scale mathematical systems.
[00:35:24] It doesn't sound like a lot.
[00:35:25] Well, it'll sound like a lot and not to people who don't know and not much to those who do.
[00:35:30] But up to 50 differential equations.
[00:35:32] Now, most economists think 50 equations, what's that?
[00:35:35] That's a toy.
[00:35:35] No, when you're working in continuous time with nonlinear relationships, 50 is huge.
[00:35:40] And they're now using that to model developing economies that the AFD is working with and talk about what their economic policy should be.
[00:35:46] And also, of course, the need for energy.
[00:35:48] So there's an enormous – and they're only one of about half a dozen groups there that are doing different forms of energy modelling.
[00:35:54] So we have a critical mass of people who've done a critical step towards realistic models, unlike neoclassical models of the economy and its reliance upon energy.
[00:36:04] And we think if we can get collectively together for like the order of a month or so, we could actually produce a really substantially valid alternative to the neoclassical nonsense that currently dominates both economic policy and global warming policy.
[00:36:20] Yeah.
[00:36:20] And I think most people are open to this, aren't they?
[00:36:22] I don't feel as though –
[00:36:24] Except neoclassical economists.
[00:36:26] Well, yeah.
[00:36:26] Okay.
[00:36:26] But most people don't like them either.
[00:36:28] So, you know, so – and actually, you know, it's not – I mean, okay, you can make it complicated with lots of equations.
[00:36:36] But the fundamental principle, as we talked about in the first half, is very simple, isn't it?
[00:36:42] Yep.
[00:36:42] It's not hard to trust.
[00:36:43] GDP is energy.
[00:36:45] A very simple equation.
[00:36:46] Even I can get that one.
[00:36:47] You just need a feedback.
[00:36:48] GDP is energy.
[00:36:49] So they've got an energy source to get GDP.
[00:36:52] And then part of GDP has to be used to get the energy.
[00:36:54] And what you want to do is have that particular part as small as possible so as much of GDP is available for consumption, for lifestyles and so on.
[00:37:02] And the danger is as we reduce the –
[00:37:04] Brilliant.
[00:37:04] And that energy we've got left and we have to take more energy out of it, we're getting to the point where there's not much left over for people who live.
[00:37:12] And that's the dilemma we wish to avoid.
[00:37:14] We won't avoid it when listening to neoclassical economists.
[00:37:17] There we are.
[00:37:18] Fantastic.
[00:37:19] There's a 30-second life soundbite that tells everything.
[00:37:22] Good to talk.
[00:37:23] So we will leave.
[00:37:23] Steve will go away now because we're winning, Steve.
[00:37:25] Before we run.
[00:37:25] Let's go.
[00:37:26] Yeah.
[00:37:27] Good to talk.
[00:37:28] We'll catch you again next week.
[00:37:29] Thanks.
[00:37:30] Okay, man.
[00:37:30] Thank you.
[00:37:30] The Debunking Economics Podcast.
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