Professional Documents
Culture Documents
(Download PDF) Energy and The Wealth of Nations An Introduction To Biophysical Economics Charles A S Hall Online Ebook All Chapter PDF
(Download PDF) Energy and The Wealth of Nations An Introduction To Biophysical Economics Charles A S Hall Online Ebook All Chapter PDF
https://textbookfull.com/product/markets-games-and-strategic-
behavior-an-introduction-to-experimental-economics-2nd-edition-
charles-a-holt/
https://textbookfull.com/product/a-little-bit-of-reiki-an-
introduction-to-energy-medicine-valerie-oula/
https://textbookfull.com/product/law-and-the-wealth-of-nations-
finance-prosperity-and-democracy-tamara-lothian/
https://textbookfull.com/product/charles-dickens-an-introduction-
hartley/
The Wealth of Some Nations Imperialism and the
Mechanics of Value Transfer Zak Cope
https://textbookfull.com/product/the-wealth-of-some-nations-
imperialism-and-the-mechanics-of-value-transfer-zak-cope/
https://textbookfull.com/product/the-police-in-america-an-
introduction-charles-katz/
https://textbookfull.com/product/economics-of-social-
issues-21e-charles-a-register/
https://textbookfull.com/product/the-wealth-of-virtual-nations-
videogame-currencies-1st-edition-adam-crowley-auth/
https://textbookfull.com/product/law-among-nations-an-
introduction-to-public-international-law-gerhard-von-glahn/
Charles A.S. Hall
Kent Klitgaard
Second Edition
Charles A.S. Hall Kent Klitgaard
College of Environmental Science & Forestry Wells College
State University of New York Aurora, New York, USA
Syracuse, New York, USA
To my children, Justin and Juliana Klitgaard Ellis, who have grown from wonderful
children into fine adults, and to Deborah York who continues to make me a better
person.
Kent A. Klitgaard
Preface
There are four books on our shelf that have of income between producers and con-
the words, more or less, “wealth of nations” sumers where the most important ques-
in their titles. They are Adam Smith’s 1776 tions pertain to consumer choice. In this
pioneering work, An Inquiry into the “perpetual motion” of interactions
Nature and Causes of the Wealth of Nations, between firms that produce and house-
and three of recent vintage, David Landes’ holds that consume, little or no accounting
The Wealth and Poverty of Nations, David is given of the necessity for the flow of
Warsh’s Knowledge and the Wealth of energy and materials from the environ-
Nations, and Eric Beinhocker’s The Origin ment and back again. In the standard eco-
of Wealth. Warsh’s book is rather support- nomic model, energy and matter are
ive of current approaches to economics ignored or, at best, completely subsumed
while Beinhocker’s is critical, but all of under the term “land,” or more recently
these titles attempt to explain, in various “capital,” without any explicit treatment
ways, the origin of wealth and propose other than, occasionally, their price. In
how it might be increased. Curiously, none reality economics is about stuff, and the
have the word “energy” or “oil” in their supplying of services, all of which are very
glossary (one trivial exception), and none much of the biophysical world, the world
even have the words “natural resources.” best understood from the perspective of
Adam Smith might be excused given that, natural, not social, sciences. But, within
in 1776, there was essentially no science the discipline of economics, economic
developed about what energy was or how activity is seemingly exempt from the need
it affected other things. In an age when for energy and matter to make economies
some 80 million barrels of oil are used happen, as well as the second law of ther-
daily on a global basis, however, and when modynamics.
any time the price of oil goes up a reces-
sion follows, how can someone write a Instead we hear of “substitutes” and “tech-
book about economics without mention- nological innovation,” as if there were
ing energy? How can economists ignore indefinite substitutes for matter, energy,
what might be the most important issue in and the environment. As we enter the sec-
economics? In a 1982 letter to Science ond half of the age of oil, and as energy
magazine, Nobel Prize economist Wassily supplies and the social, political, and envi-
Leontief asked, “How long will researchers ronmental impacts of energy production
working in adjoining fields ... abstain from and consumption become increasingly the
expressing serious concern about the major issues on the world stage, this
splendid isolation within which academic exemption appears illusory at best. All
economics now finds itself?” We think forms of economic production and
Leontief ’s question points to the heart of exchange involve the transformation of
the matter. Economics, as a discipline, lives materials, which in turn requires energy.
in a contrived world of its own, one con- When students are exposed to this simple
nected only tangentially to what occurs in truth, they ask why are economics and
real economic systems. This book is a energy still studied and taught separately?
response to Leontief ’s question and builds Indeed, why is economics construed and
a completely different, and we think much taught only as a social science, since in
more defensible, approach to economics. reality economies are as much, and per-
haps even principally, about the transfor-
For the past 130 years or so, economics has mation and movement of all manner of
been treated as a social science in which biophysical stuff in a world governed by
economies are modeled as a circular flow physical laws?
VII
Preface
Part of the answer lies in the recent era of peak oil theorists Colin Campbell and Jean
cheap and seemingly limitless fossil energy Laherrere, energy has become a game
which has allowed a large proportion of changer for economics and anyone trying
humans to basically ignore the biophysical to balance a budget.
world. Without significant energy or other
resource constraints, economists have In brief, this book:
believed the rate-determining step in any 5 Provides a fresh perspective on eco-
economic transaction to be the choice of nomics for those wondering “what’s
insatiable humans attempting to get maxi- next” after the crash of 2008 and the
mum psychological satisfaction from the near cessation of economic growth for
money at their disposal, and markets much of the Western world since then
seemed to have an infinite capacity to 5 Summarizes the most important infor-
serve these needs and wants. Indeed the mation needed to understand energy
abundance of cheap energy has allowed and our potential energy futures
essentially any economic theory to “work”
and economic growth to be a way of life. In summary, this is an economics text like
For the last century, all we had to do was to no other, and it introduces ideas that are
pump more and more oil out of the ground. extremely powerful and are likely to trans-
However, as we enter a new era of “the end form how you look at economics and your
of cheap oil,” in the words of geologists and own life.
Charles Hall
Polson, MT, USA
Kent Klitgaard
Aurora, NY, USA
July 2017
Acknowledgments
We thank the Santa Barbara Family systems thinking and the importance of
Foundation, Roger C. Baker Jr., the UK energy in everything, and John Hardesty
Department for International Develop- and Norris Clement, who introduced Kent
ment, the Endeavor Foundation, and sev- to the limits to economic growth. We
eral anonymous donors for financial thank our colleagues economists Lisi Krall
support; Steven Bartell, Garvin Boyle, and and John Gowdy for providing valuable
Jim Gray for excellent editing of words and advice and critique for this and other proj-
ideas; Michelle Arnold for assistance in ects. Their continued collaboration makes
getting the first edition together; Rebecca our work stronger. We also thank David
Chambers, Ana Diaz, Michael Sciotti and Packer, Executive Editor at Springer, for
Heather Hiltbrand for their able assistance believing in us and Myrna Hall and
with the data analysis, editing, and graph- Deborah York for the loving support and
ics for the first edition, and to Tyler Lewis, infinite patience. We owe a special debt of
Sarah Halstead, and Bellina Mushala for appreciation to Tina Evans, who provided
assistance with the second edition; and our excellent and valuable suggestions for
students over the years for helping us think revising the first edition into what we
about these issues. We thank the late, fan- believe is a much stronger and clearer
tastic Howard Odum, who taught us about second edition.
IX
Contents
8 The Petroleum Revolution and the First Half of the Age of Oil ............................... 183
19 Peak Oil, EROI, Investments, and Our Financial Future ............................................... 405
23 Fossil Fuels, Planetary Boundaries, and the Earth System ........................................ 475
24 Is Living the Good Life Possible in a Lower EROI Future? ........................................... 487
Supplementary Information
Index ...................................................................................................................................................... 507
XI
Authors’ Biographies
Charles Hall
is a systems ecologist who received his PhD under Howard
T. Odum at the University of North Carolina at Chapel Hill.
Charles Hall is the author or editor of 14 books and 300 arti-
cles. He is best known for his development of the concept of
EROI, or energy return on investment, which is an examina-
tion of how organisms, including humans, invest energy into
obtaining additional energy to improve biotic or social fit-
ness. He has applied these approaches to fish migrations,
carbon balance, tropical land use change, and the extraction
of petroleum and other fuels in both natural and human-
dominated ecosystems. Presently he is developing a new
field, biophysical economics, as a supplement or alternative
to conventional neoclassical economics, while applying sys-
tems and EROI thinking to a broad series of resource and eco-
nomic issues.
Kent Klitgaard
is professor of economics and the past Patti McGill Peterson
professor of social sciences at Wells College in Aurora,
New York, where he has taught since 1991. Kent received his
bachelor’s degree at San Diego State University and his mas-
ter’s degree and PhD at the University of New Hampshire. At
Wells, he teaches a diverse array of courses including the His-
tory of Economic Thought, Political Economy, Ecological Eco-
nomics, The Economics of Energy, Technology and the Labor
Process, and Microeconomic Theory and is a cofounder of the
Environmental Studies Program. Kent is active in the Interna-
tional Society for Ecological Economics and is a founding
member of the International Society for BioPhysical Econom-
ics. Recently, his interests have turned toward the degrowth
movement, and he has published multiple papers on the sub-
ject for Research and Degrowth. He has two children and is
interested in the outdoors in general: from hiking to beach
walking to the occasional round of golf (despite the high
energy use of golf courses). Kent is a Californian who still surfs
the frigid waters of New England when he gets a chance.
1 I
Economies and
Economics
Economies exist independently of how we study them.
Consequently, there may be significant differences between how
an actual economy operates and how we study it. In this section,
we will assess how we perceived and taught economics at
various times. We begin with the dominance perspective of
today, neoclassical economics, in chapter one. In the second
chapter, we examine various perspectives from the history of
economic analysis from the 18th to the 20th centuries, focusing
on the diverse theoretical viewpoints from the past, most of
which have little to do with the dominant view of the present.
7 Chapter 3 examines the present approach more closely from
the perspective of how well that view is related to actual econo-
mies. It frequently finds the present view severely wanting,
particularly in that it pays little attention to, and indeed is often
inconsistent with, the biological and physical world upon which
it is necessarily based. 7 Chapter 4 introduces a new, different,
way in which we can examine economies, one that is in fact
based on a proper biophysical underpinning. This approach is
called biophysical economics. We emphasize the critical impor-
tance of energy here. 7 Chapter 5 adds a social perspective that
is part of, and consistent with, the essential biophysical frame-
work of this innovative approach.
This book is written by an ecologist and an economist, and part of our objective is to
assess where insights and principles from these two disciplines can be combined to
understand economies and nature, and their interactions, better. While the two disci-
plines may appear very different, we believe instead that the phenomena they study
are very similar in many ways. From a biological perspective, the economies of cities,
regions, and nations can be viewed as ecosystems, with their own structures and
functions, their own flows of materials and of energy, and with diversity and stability.
Human-dominated systems can exhibit many of the characteristics of natural systems.
At the same time, ecology is often referred to as “the economy of nature.” There are
similarities and differences between organisms in nature and people in modern econo-
mies: lions eat gazelles and gazelles eat grasses, trout subsist on insects, and plants
exploit nutrients in soils and space in which to intercept sunlight. Individuals and
groups find themselves in a relentless struggle to increase their energy gains and
decrease energy costs, for their ability to pass on its genes is possible only if it has
managed to acquire a large net energy balance. This is also true for humans, but
humans are different in that we consciously order the labor process and produce for
surplus, rather than for immediate use alone. Producing for surplus dates to the
Neolithic transition from hunting and gathering to settled agriculture.
When first encountering the words “biophysical economics,” most readers probably
asked, “what do those words mean?” The answer is deceptively simple: The word
“biophysical” refers to the material world, that which is usually, but not completely,
covered by courses in physics, chemistry, geology, biology, hydrology, meteorology,
and so on. This can be compared with a “social” or “anthropocentric” (i.e., human-
centered) perspective that characterizes modern economics. In this second perspec-
tive, which is dominant in our society, humans believe that they can make any world,
or set of decisions, or economic systems that they wish – if they can just get the
policies right and enough time has passed for new technologies to come on line. The
subsequent world becomes our new reality and truth.
But we must ask: How do the powerful, governing physical laws, which we are all
prepared to accept in physics, chemistry, and biology classes, operate outside of the
scientist’s laboratory and the “natural” world? Scientists often think of these laws as
imposing constraints on a system. Do these constraints really disappear when human
ingenuity is applied to economics and markets? Most economics textbooks would lead
3 I
you to this conclusion, as growth is just a matter of human actions, technologies,
policies, and a healthy dose of ambition. Western culture and its leading commenta-
tors (with a few exceptions such as Joseph Tainter and Jared Diamond) do tend to
elevate personal and social aspects of a problem, specifically, human actors and their
ideas, above any biophysical considerations. Thus, we learn about history as the action
of great leaders; wars, if not always battles, are usually won or lost due to the biophysi-
cal resources that generals can bring to bear. Napoleon once quipped that “God fights
on the side with the best artillery.” There is little debate that the South had the better
generals in the Civil War, but the North had the industrial might. The North won
because of biophysical, not leadership, issues.
Most readers would not argue with the idea that we live in a world that is completely
beholden to the basic laws and principles of science. These basic laws include New-
ton’s laws of motion, the laws of thermodynamics, the law of the conservation of
matter, the best first principle, the principles of evolution, and the fact that natural
ecosystems tend to make soil and clean water while human-modulated systems tend
to destroy both. Do economic systems operate outside of these laws? Did the seem-
ingly unconstrained technological and economic expansion of the twentieth century
show that these laws were irrelevant or at least insignificant when applied to econom-
ics and the satisfaction of human needs and wants?
How We Do
Economics Today
1.1 Introduction – 6
1.8 Macroeconomics – 15
References – 21
A more conservative approach began to thing is certain, however. “Making America great
1 emerge. Monetarist economists argued that infla- again” will entail a doubling-down on fossil fuels.
tion “always was and always will be a monetary What we have presented so far is an introduc-
phenomenon.” Too much aggregate demand was tion to basic micro- and macroeconomics for those
not the problem, too much money was. Fiscal who have not studied economics formally and a
policy was seen as ineffective, and monetary pol- brief review for those who have. However, the total
icy (money supply and interest rates) began to discipline of economics does not confine itself to
rule the policy roost. Wall Street banker Jude these limited sets of questions. Over the course of
Waninsky devised the idea of “supply-side” eco- history, economics has focused on other questions
nomics and convinced the newly elected presi- not usually covered in introductory textbooks. We
dent, Ronald Reagan, to change policy. According will end this chapter by posing these questions and
to supply-side economics, inflation and unem- answer them in an historical context in 7 Chap. 2.
ployment could be solved by increasing aggregate
supply. To do this the cost of regulation and wages Question #1 : What Are the Origins of Wealth
needed to fall. The policy also got a boost from the and Value?
decline in world energy prices. Since then, poli- We begin our discussion of the main questions
cies have become more conservative. As we show of economics by distinguishing between income
in 7 Chap. 7, supposedly liberal Bill Clinton and and wealth; throughout the ages, the distinction
Al Gore reinvented government by reducing its has not always been clear. Wealth has long been
funding and “ended welfare as we know it.” After seen as an abundance of goods that are available to
the 2001 attacks on the World Trade Centers and a society or to an individual. In preindustrial soci-
the Pentagon, President George W. Bush told the eties, wealth was the stocks of what nature
Americans to “go out and shop” while increasing bequeathed us. But as the economy began to grow
military spending and fomenting perpetual war. and develop, wealth began to be defined as the sum
In 2008, young Americans came within a of what humans produced, in other words an accu-
hair’s breadth of experiencing the same type of mulation of the flows of value extracted from
depression that their grandparents and great nature. The question as to whether wealth is a stock
grandparents did. The response of the Obama or a flow has been debated ever since economic
administration was to implement the equivalent theory developed, and the resolution has never
of Herbert Hoover’s plan for the economy at the been conclusive. The distinction is also compli-
beginning of the Great Depression. The Troubled cated by the level of analysis. Most individuals see
Assets Relief Program (TARP), patterned after wealth as a stock of assets that produce a flow called
Hoover’s Reconstruction Finance Corporation income. Economists of the neoclassical era defined
(RFC), poured billions of dollars into the rescue wealth as a stock called capital, while “capital” has
of banks, while leaving millions of everyday work- been extended to describe all factors of production.
ing Americans dispossessed from their homes. Ecological economists regularly refer to the stocks
Government spending for infrastructure projects of nature as natural capital. Mainstream labor
was part of an overall stimulus program, and economists see their discipline as the study of
military spending continued to grow with active human capital. In the end, questions of capital and
wars in Afghanistan and Iraq. President Obama income resolve to a discussion of wealth and value.
actively championed a return to Keynesian eco-
nomics. Efforts at decarbonization were progres- Question #2 : How Are Wealth and Value
sive in rhetoric yet small in outcome, as the Distributed?
administration did not see fit to challenge its Some schools of thought find the question of
commitment to economic growth for environ- distribution of the rewards of production to be
mental purposes. Its sustainability program fairly uninteresting. Some find it the focal point of
depended largely upon technological change in their analyses. In general, classical political econ-
electrical generation (wind and solar subsidiza- omists found questions of production and ques-
tion) coupled with an expansion of hydraulic tions of distribution to be interrelated but
fracturing of shale gas and tight oil. What lies in analytically separable. Neoclassical economists,
store for the United States after the election of however, found them analytically identical. The
Donald Trump remains an open question. One neoclassical theory of production, known as
Another random document with
no related content on Scribd:
Toisten maiden kuninkaat ja päälliköt tekivät vierailumatkoja ja
toivat lahjoja. Näistä ei Ochorin Bosambo ollut merkityksettömin.
— Herra Bosambo, sanoi hän, — jos jätät minut nyt, niin tulee
pimeä eikä ole aurinkoa. Sillä usein olen neuvonantajilleni puhunut
sinusta ja sinun teoistasi. Viivy sen vuoksi kanssani hetki, jotta voin
juoda sinun ymmärryksestäsi.
Tämä täytyi tehdä pimeässä, sillä jos sattumalta ovi tai ikkuna on
auki valon aikana, niin varmasti hytti on täynnä pieniä metsän veljiä,
satalajisia kärpäsiä, siivekkäitä koppakuoriaisia ja aivan varmaan
moskiitteja — jotka levittävät kuumetta. Pitkän harjaannuksen
totuttamana Sandersin käsi kosketti kolmea ikkunaa, tapasi salvat
paikallaan ja lukittuina.
— Mene takaisin samaa tietä, jota tulit, sanoi hän ja seurasi varjoa
laivalle.
Sanders huomasi yökulkijan hieman poikaa suuremmaksi ja
kävelevän tavalla, joka antoi aihetta luuloon, että hän oli tyttö.
Tyttö hymyili.
Sanders nyökkäsi.
— Vien sinut pois, sanoi hän, — koska olet yrittänyt tappaa minut
asettamalla myrkytettyjä okaita vuoteeseeni.
— Medini, minun naiseni, teki sen rakkaudesta minuun, sanoi
kuningatar, — ja jos hän sanoo minun häntä siihen käskeneen, niin
hän valehtelee.
Sellaisiksi ne osoittautuivat.
— Sillä niin kuin tiedät, herra, minun isäni ja hänen isänsä olivat
tämän alueen päällikköjä, ja minun suonissani virtaa kuninkaallinen
veri.