JEREMY WARNER VERSUS MORAYMINT – AGAIN


JeremyWarner460Jeremy Warner is an excellent business and economics journalist who works for the Daily Telegraph; I always read what he has to say.  Generally I concur with his analyses and conclusions.  However, there is one fundamental issue on which I profoundly disagree with Mr Warner.  Take his article in today’s Daily TelegraphJ M Keynes’ prophecy of prosperity after the gloom of recession” (link below).  In 1930, J M Keynes (a hugely influential economist and father of ‘Keynsian’ economics) predicted that 100 years hence, living standards would be between 4 and 8 times as high as they were then.

Mr Warner points out that the statistics don’t go back to 1930, but since records of household expenditure began in 1948, the living standards of the British people have grown nearly six-fold in real terms.  Not bad.  Not bad at all.

So, in the article, Mr Warner decides to reiterate J M Keynes’ prediction of the 1930s and declares that over the next 100 years our living standards will turn out to be between 4 and 8 times higher than they are now.  Now, I beg to differ – primarily because Mr Warner chooses not to consider the economy as an energy construct.  Whether he fully comprehended the implications, or not, Keynes’ prediction in 1930 was underpinned by the subsequent availability of (almost) 100 years of cheap, fossil-fuelled energy with a relatively high (relative to today) energy-return-on-energy-invested (ERoEI).  In other words for the past 100 years or so, it didn’t take much energy to extract enough energy for our everyday use; enough energy, indeed, to facilitate the six-fold growth in our living standards over 60 years or so.  Today the ERoEI story is much, much different.

Have you noticed the costs of energy (of all forms) today, and the proportion of your budget (and your business’s budget) that energy consumes?  Do you experience and/or foresee this situation improving or deteriorating?  If you’re not sure, keep reading.

The posts in the links below (written earlier for this blog by me) suggest that, on balance, in 100 years from now our living standards could – in all probability – be defined by a prior century of low or no economic growth (relative to the growth trend of the past 100 – 200 years).  That is a shocking prospect.  On this basis, Mr Warner is correct to observe “how societies choose to manage change on such an awesome scale, are of course much harder questions to answer.”  The changes we face over the next 100 years are indeed truly awesome and, moreover, unprecedented if one studies the rise and fall of civilisations throughout the history of mankind.  Few folk seem to realise this yet, Mr Warner included if I may say.

So here are those earlier posts, the contents of which I acknowledge represent heresy to the orthodox economics community:

Energy – Reality Intrudes‘ (if you have neither the time nor inclination to read this post, then do at least spend 5 minutes watching the video at the end): http://tinyurl.com/b4r45sc

UK Economic Growth Forecast Halved‘: http://tinyurl.com/d3fe38f

Here is another analysis in similar vein:

Perfect Storm – Energy Finance and the End of Growth‘: http://tinyurl.com/bout93t

Finally to all those who cry “We’ll all be saved by shale gas and shale oil!”, you should read this: http://tinyurl.com/aqj6kqg.

And to those who wonder how seriously the oil producers themselves take ‘peak oil’ then here’s the final link for today: http://tinyurl.com/cbpz9aq.

For what it’s worth guys, I think we’re sleepwalking …

——-

J M Keynes’ prophecy of prosperity after the gloom of recession”http://tinyurl.com/bp4kk2t

7 comments

  1. Kropotkin · ·

    E. F. Schumacher was Keynes’ “green” mucker, check him out. Bit of a faith-head but well ahead of his time as an enviro energy doomer circa 1970s. Fusion is our only hope either way boom (or boom) so to speak. No models for steady state or degrowth. All ecologies are energy equations. We know this at an instinctive level but cognitive dissonance roolz cos we don’t want to face it. Get an allotment. 300 years of “progress” aaannd…it’s gone…(.Google “South Park and its gone”)

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  2. gordon · ·

    Million years bc. Omg we’re runnin oot o flint. Wha gives ahoot. Btw whats this shiny coppery stuff in the fireplace. Dont like the look o that says the flint dealer. Stick to what u know dont want any cognitive dissonance aroun here. Somethin always turns up

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  3. Xabier · ·

    It may well be that the very high cost of energy in Britain and the EU will precipitate a financial catastrophe in the near-term, well before the clever scientists upon whom so many pin their hopes have had a chance to cook up something new…..the signs are there already.

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  4. Bickers · ·

    MM, whilst I don’t buy into your version of doom & gloom I believe you’re right to point out that obtaining/generating energy will possibly be more difficult/expensive in the next 100 years. However as Bjorn Lomborg has pointed out we’ve wasted hundred of billions (and in the future potentially trillions) on attempting to mitigate Climate Change (which many scientists don’t believe is happening/will happen to the extent the IPCC claim it will).

    That money would be better invested in research to significantly improve renewables ROI, thorium reactors and fusion.

    I’m a half full sort of guy and if we allow entrepreneurs and scientists their heads they will solve problems within 100 years that we thought unsolvable and invent technologies not yet dreamed off. At the turn of the last century before the car became ubiquitous the clever people were trying to work out where to put all the horse shit!

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    1. moraymint · ·

      Bickers

      Thanks for this. Surprisingly, perhaps, I don’t in fact believe that the future need be doomy and gloomy at all. I acknowledge and accept that we human beings are a clever lot and we shall no doubt research, discover and develop oil and other fossil fuel alternatives over the next 100 years. As a physicist by university education it would be strange if I didn’t have some ‘faith’ (if that’s the right word) in man’s technological genius.

      My concerns on this particular matter have always been twofold. My first concern is that we (in the developed world, anyway) have yet even to acknowledge that we’re at the leading edge of a global energy crisis: recognising that you have a problem at all is half the battle of solving it. My second concern relates to the implications of moving mankind – and, again, particularly those of us in the developed world – from the Oil Age to the Post-Oil Age. The transition away from oil (especially) and to ‘something else’ represents an almost unimaginable challenge. Again, since we’re reluctant even to recognise that we have to wean ourselves off oil (we won’t have any choice soon; it’s cost will be prohibitive), the challenge of making the transition is even greater.

      I promise that fairly soon now I shall be introducing themes in to my blog which look at life beyond ‘peak oil’ and, moreover, at those things that we should be thinking about and doing to cope with the transition to the Post-Oil Age. However, for now, the task is to raise awareness of, and interest in our predicament; and to try to adjust entrenched views of the orthodox economics community in particular. The orthodox economics cohort contends that, by and large, the ‘laws’ (they’re not really) of economics will readily drive up the supply of energy to meet mankind’s demands. That ‘law’ is, in my opinion, fundamentally flawed in the context of our 21st century, complex societies situated as we are at the fag end of a one-off, 250-year fossil-fuelled energy boom. In that sense, our understanding of economics is, at worst, completely warped and, at best, almost entirely influenced by and predicated on an extraordinarily high energy return on energy invested (aka the release of 2 billion years’ worth of accumulated energy reserves over just 250 years).

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      1. Kropotkin · ·

        The philosophical basis underpinning our anthropocentrism and culture of individualism and reductionism is claimed to be one of the roots of our currently unsustainable societies. Western Cartesian thinking, regarding an assumed division between, between man and nature, developed out of the Enlightenment and was the basis for positivistic science that delivered a utilitarian industrial legacy born out of the subsequent Industrial Revolution. Additionally, Baconian progressive teleology also makes us always look to technological ‘solutions’ or rely on technological optimism as a means of addressing problems, confirming our Cartesian position as outside nature and nature as a consumable resource. Such technological optimism concerning the achievement of sustainability solutions through technological innovation, is thus the prevailing scientific culture that is cautious towards making progress in the direction of more holistic approaches to enquiry. Present approaches have been likened to a modernist technocratic approach to the environment that suggests that there is a techno-institutional fix for present problems. …and that’s all I’m gonna say about that…

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      2. Bickers · ·

        Fair points MM. Maybe within the next 100 years we’ll develop the tech to penetrate deep enough into the Earths crust to tap into an almost unlimited energy source, heat from the Earth’s core (which I believe is the size of the moon)

        Like

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