Sunday, 23 November 2008


Wake Up Call
Last Thursday morning I woke up at 5.30am, well before my alarm. Immediately I was thinking about something that I’d been thinking about the previous day, but in the early morning the thought was clearer in my mind (I’ll come back to what the thought was at the end of the post). This is quite an odd thing to happen (to think anything at all that early in the morning, let alone clearly, is not a normal thing!), but it’s happened lots of times to me over the last 18 months. It’s as if something has clicked into place inside my head. I think that what has happened is that yet another part of the belief system that I’ve grown up with has been chipped away and replaced by a more realistic mental model of the world. Whether I’m right about that or not you can judge.

This post was going to be all about energy, but I’m coming back to worldview again, it’s such an important subject. We all carry a mental model of the world inside our heads – our “worldview”. Of course, no-one can know any more than a tiny fraction of what there is to know about the world. We learn enough so that we can get by and make our way in the world.

It may not be immediately obvious, but our worldview acts not only as our window on the world but also as a filter. We tend to take in only information that agrees with our pre-existing worldview, so reinforcing it, and we ignore information that disagrees with it. This has been studied and proved by psychologists, they call it assimilation bias. The particular time in which we live just happens to be a time when the world is changing more quickly than it has ever done before. This means that worldviews that were useful a short time ago are no longer so realistic or helpful. It also means that now is an incredibly exciting time to be alive, a unique time in human history.

You canna change the laws of physics

Now I come on to the main subject of this post; Energy. I’ll start at the very beginning. The universe is made from matter and energy. In fact thanks to Einstein and E=mc^2 we know that matter and energy are different forms of the same thing.

The way energy behaves is governed by the laws of thermodynamics. The first law of thermodynamics states that energy can not be created or destroyed. The second law of thermodynamics states that entropy (disorder) must always increase. Or in other words, heat always flows from hot to cold, not the other way around.

Sometimes the first and second laws of thermodynamics are summarised by saying, the first law says “You can never win.” and the second law says “You can never break even.” The second law of thermodynamics is one of the very few ways (maybe the only way, I would have to read up on physics to be sure) that we can see the arrow of time.

The other laws of physics such as the laws of motion are symmetrical in time. If you played a film of the solar system backwards it would look exactly the same as forwards, except the direction of travel would be reversed. However, if you put milk in a cup of tea it spreads out until the liquid is fully mixed, tea and milk together. Play that film in reverse and it looks completely different. The second law of thermodynamics is the reason why there is a theoretical limit to the efficiency of power stations. You will never be able to convert all the heat from burning coal into electricity, because the electricity is more ordered than the heat energy. Total entropy must increase, so a lot of heat energy must be wasted to the outside world in order to generate the power. That heat is vented to the outside world in those giant cooling towers.

What I’m trying to say in a long winded way is that the laws of thermodynamics are fundamental laws of our universe. In the history of science no one has ever found any way to break these laws. No one has ever built a perpetual motion machine and they never will because perpetual motion violates the second law of thermodynamics. To quote a famous Scottish engineer, shortly to be played by Simon Pegg “You canna change the laws of physics Captain.”

I wanted to say all this first to put some context before you read the posts about energy supply that I put here.

How could economics go so wrong?

There is a good post here which gives a nice summary in a nutshell of Charles Hall’s work. To me, the biophysical economics which Hall offers as an alternative to the conventional sort has the ring of truth, because it is explicitly based on the physical laws. To say Charles Hall doesn’t like conventional economics is an understatement. There is a presentation on his home page which gives his life story – I showed some of it to you the other week. In one of his slides there is a picture of a guy trying to push a boulder off a hillside. The boulder represents neo-classical (conventional) economics. After everything I’ve read over the last year or so I can fully understand the sentiment.

It’s a fair question to ask, how can conventional economics be so wrong if so much of our politics and decision making seems to depend on it? How could this happen?

It’s interesting to look at other examples from history where a branch of science got things wrong. Look at chemistry in the 17th century, everyone was trying to convert lead into gold using alchemy. Even Isaac Newton was an alchemist, apparently he made himself slightly batty late in life by using too much mercury trying to transmute “base” metal into gold. Being a genius is never a guarantee that you won’t get things wrong. The beauty of science is that it always tests ideas against the real world and throws away the ideas that don’t match up. There is a more recent example from geology. Right up until the 1960’s geologists used to think that the position of the continents was fixed. Now, thanks to plate tectonics we know that they zoom all over the Earth and this explains many things that before were difficult to explain.

It’s not controversial any more to say that conventional economics does not represent the world particularly well. There is an excellent book called “The Origin of Wealth”, written by an economist, Eric Beinhocker, which explains why and how this could have happened. This is certainly not a book with an agenda to trash traditional economics. Beinhocker is a practicing economist himself, so he bends over backwards not to alienate his economist colleagues. His take on this story is that earlier economic theory gave us very valuable insights into how to run real world economies (that part I wouldn’t necessarily agree with). The new economics – “complexity economics” – gives us a more accurate picture of the world. But complexity economics doesn’t so much build on the foundation of earlier economic theory, it actually shows how the early foundations were completely mistaken. A new generation of economists are working with modern physicists and are producing economic models that represent the real world far better. Unfortunately, complexity economics has only been around since the 1990’s, so the current generation of politicians and many of today’s top economists will have been schooled only in the traditional varieties of economics.

To cut a long story short, when economics was developing in the 19th century a decision was made to try to put it on a sound mathematical footing. The economists of the time, particularly a guy called Leon Walras, borrowed from the mathematics produced by the physicists of the time. Unfortunately, physics of the 1870's was not very well developed. Physicists had not yet discovered the second law of thermodynamics. So the economists left it out of their models. In their desire to be mathematically rigorous the economists made assumptions about how people behave which they used as axioms. From those axioms they built a consistent mathematical framework. For example, one axiom is that people are rational and they always take the decision which will maximise their “utility”, i.e. their satisfaction. There are several of these axioms and none of them are realistic.

The fact that economists made simplifying assumptions about how people behave wouldn’t matter if the models the economists produced gave a reasonably realistic representation of the real world. After all the definition of a model is that it is a simplified representation of reality. Unfortunately the economists’ models are not realistic. The early economists assumed that the economy is an equilibrium system. Real world economies aren’t in equilibrium, they are quite far from it. In fact they are systems of flow with constant inputs and outputs of matter and energy. They might look like they are in equilibrium in the same way that the pattern of a whirlpool in a bubbling stream looks stable. The whirlpool may stay the same for a while, and then it may suddenly change, for no apparent reason, just from a random fluctuation in the current.

It is the flow of energy that keeps an economy moving, in a similar way that the energy in the flowing stream creates the whirlpool pattern. If you turn off the energy supply, in this case stop the stream from flowing, then the pattern disappears. In the days before fossil fuels the energy to run our economy all came from growing plants and trees, from the sun via photosynthesis. Energy for human labour came from food. We also used animals, horses, oxen and so on. By grazing meadowland the animals could convert the grass into useful energy for us, pulling carts and so on. Burning wood gave us more energy, again of course that energy comes from the sun via photosynthesis.

Energy Slaves

Then at the start of the industrial revolution humanity discovered the wonders of fossil fuels. Fossil fuels are very concentrated stores of energy. That energy was stored by photosynthesis millions of years ago. Coal was created from trees growing in swampy land, then dying and being buried underground before rotting away. The carbon was trapped before it could be oxidised. Oil was formed in shallow seas, by countless billions of algae, again dying and being buried in sediment before they could rot away. Fossil fuels have been called stored sunlight. We use the fossil fuel energy to create our fantastic lifestyle. The concept of “energy slaves” is a useful way of thinking about this. I’ve just looked this up and found this post.

This is a speech from 1957! No need to read it all, the first part gives the gist about the benefits that we get from the massive energy input from fossil fuel.

So to sum up, about 200 years ago we found that we had apparently unlimited amounts of relatively easily available energy. Maybe it’s not so surprising that humanity went bananas in creating a society based on consuming as much as possible as quickly as possible. The history of the last 200 years has been the story of how to exploit natural resources as quickly and effectively as possible. This brings me to another one of Hall’s bugbears. He argues that the argument about the relative importance of capital and labour that economists have engaged in for over 150 years is largely missing the point. The main source of wealth is the natural world. Conventional economics looks at the human systems and treats the inputs from and outputs to the natural world as of secondary importance, if it considers them at all. In reality the economy of course the economy sits in the natural world and the inputs and outputs are the most important consideration. See this article by Herman Daly, one of the few economists who deals with the limitations of the physical world.

It may be useful to think of the world economy as being in a 200 year cycle. Of course this is a blink of an eye in comparison to the history of the Earth or even the 5,000 years of human history during which we managed without fossil fuels. We’ve had the up-phase, with increasing energy use year after year. Now we’ve reached the peak and are about to slide down the other side, with declining energy use. This decline is inevitable, at least over the next few decades.

In principle, renewable energy sources can give us effectively unlimited amounts of energy. There are many possibilities that we’ve only just begun to exploit: wind, wave, tidal, solar, geothermal and others. There is vastly more renewable energy available than we’ll ever need. But in order to use it we have to develop the infrastructure to capture and store that energy. This is not easy and will take a massive investment programme. In his report from 2005 Robert Hirsch looked at how much time would be needed to make the transition from fossil fuels. He concluded that if we wait until the peak of oil production before adapting then the world will have a deficit of liquid fuels for 2 decades. It is likely that we are very close to the peak of oil production now.

Saying that a decline is inevitable is not the same as saying that our society has to collapse or fail. Collapse only becomes likely if we don’t adapt to the new conditions and get used to the reality of decreasing energy use and smaller, shrinking economies. There can be a lot of positives to come out of this if we learn the right lessons. We can preserve what’s important and get rid of the dross and learn to live in a more natural healthier way. I’m not talking about going back to farming or living in villages. I’m talking about preserving our comfortable lifestyles while getting rid of the crazy treadmill of working harder and harder to consume more and more which so many people are caught up in. So our standard of living must inevitably decline, but our quality of life can improve.

Technology can soften the pill considerably. We may not be able to travel as much, but cheap communication – mobile phones, texts, internet, social networking - allow us to keep in touch with people more easily than every before. In fact if selling this view to the general population it’s probably better to avoid the word decline and just call it change. We must get used to the idea of this change and learn how to deal with it and make society work throughout these changes. Because if we carry on as before, there is a very real danger of sudden and uncontrolled collapse.

What will happen if the last of the fossil fuel energy is not used to develop alternative renewable energy sources? If economic activity drops too far then maybe there is a danger that large scale building of renewable energy infrastructure becomes impossible? I’m not saying this is likely, just that this is a possible outcome.

See this post about the recent International Energy Agency report on the world energy supply The IEA report is a big step forward as it addresses the issues of climate change and declining fossil fuels head on. But, and it’s a big but, it does not focus on the EROI and net energy output of the remaining fossil fuels, which is what really matters. Isn’t it time to get real and start focusing not on what will make our economies start growing again but on what will make them survive for more than another couple of decades? At the moment we’re being told that black is white. Faster economic growth does not make a developed economy stronger. As long as economic growth causes increased energy use, the growth makes us weaker and more vulnerable!

“I found a flaw”

On 23rd October Alan Greenspan, the former chairman of the Federal Reserve, testified to a congressional committee. Unsurprisingly he got a grilling. When he was pressed to answer whether his ideology pushed him to make decisions that with hindsight he wished he hadn’t made he conceded that he had “found a flaw”. In this case the flaw which he was referring to was the belief that bankers’ self-interest would cause them to protect their employers’ interests.

So I finally come to the thought that popped into my head first thing last Thursday morning. Most government policies are set largely based on the principles of conventional economics. In several ways the belief system that underpins conventional economics does not conform to modern science. It does not allow for limits to economic activity caused by limits of materials or energy. It characterises economies as equilibrium systems when they are not. It does not respect the second law of thermodynamics. Fundamentally it starts from axioms and builds models of the world from that starting point rather than attempting to falsify a theory based on data from the real world. The nature of conventional economics gives rise to unrealistic models that do not explain the real world very well. For evidence of that just look at how well the government forecasters performed over the last year, look at their growth and inflation forecasts and how they’ve changed so much in a short space of time.

So our society is being run on unscientific principles. Is it fair to say that in a way our society is being run as a kind of theocracy, governed by a system of false beliefs? That was thought that popped into my head early on Thursday morning. There is a difference only in degree between us and say the ancient Egyptians. You might think I’m going too far, or on the other hand say, yeah, hold the front page, and by the way the Pope's catholic. Since when have civilizations ever been run on scientific principles? But the difference is that our civilization has the benefit of modern science to give us a fantastic standard of living and an unparalleled ability to exploit the Earth’s natural resources – and ability to damage the Earth as a result.

If we do really balls things up and someone is around in a few decades to look back over the smoking wreckage of our civilization to ask what went wrong, maybe they will look back and say “I found a flaw – our beliefs were wrong”. According to this study we're currently heading in the wrong direction.

Time to grow up?

Ok, final thoughts here. Fundamentally I think that this is the point where humanity must grow up and learn its place in the universe. Compared to the power of nature we are puny, that’s a bit of a cliché but it is very true. We will learn that we can’t dominate nature, and we have to learn to live within it and respect it. I think that pretty soon climate change will teach us this, but that is a subject for another day. We can try to learn our place in the universe and the limits of what is possible now, and work to save ourselves. Or we can learn the hard way by ignoring the natural scientists and listening to the siren voices of the economists telling us it’s ok to keep our consumption levels up. Sooner or later reality is going to teach us who is right.

No comments: