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Tag Archives: dissipative structure
When the Economy Gets Squeezed by Too Little Energy
When people forecast ever-rising energy prices, they miss the fact that market fossil fuel prices consider both oil producers and consumers. From the producer’s point of view, the price for oil needs to be high enough that new oil fields can be profitably developed. From the consumer’s point of view, the price of oil needs to be sufficiently low that food and other goods manufactured using oil products are affordable. In practice, oil prices tend to rise and fall, and rise again. On average, they don’t satisfy either the oil producers or the consumers. This dynamic tends to push the economy downward. Continue reading
Posted in Financial Implications, oil shortages
Tagged collapse, complexity, dissipative structure, high oil prices
4,563 Comments
The world’s self-organizing economy can be expected to act strangely, as energy supplies deplete
It is my view that when energy supply falls, it falls not because reserves “run out.” It falls because economies around the world cannot afford to purchase goods and services made with energy products and using energy products in their operation. It is really a price problem. . .
It is my expectation that these and other issues will lead to a very strangely behaving world economy in the months and years ahead. The world economy we know today is, in fact, a self-organizing system operating under the laws of physics. With less energy, it will start “coming apart.” World trade will increasingly falter. Fossil fuel prices will be volatile, but not necessarily very high.
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Why Energy-Economy Models Produce Overly Optimistic Indications
I was asked to give a talk to a committee of actuaries who are concerned about modeling the financial future of programs, such as pension plans, given the energy problems that are often discussed. They (and the consultants that they … Continue reading
Posted in Financial Implications
Tagged Debt, dissipative structure, energy-economy modeling, pensions
2,065 Comments
Oops! The economy is like a self-driving car
Back in 1776, Adam Smith talked about the “invisible hand” of the economy. Investopedia explains how the invisible hand works as, “In a free market economy, self-interested individuals operate through a system of mutual interdependence to promote the general benefit … Continue reading
Posted in Financial Implications
Tagged dissipative structure, economic growth, oil price, open system
2,573 Comments
The Physics of Energy and the Economy
I approach the subject of the physics of energy and the economy with some trepidation. An economy seems to be a dissipative system, but what does this really mean? There are not many people who understand dissipative systems, and very … Continue reading
