I have been telling a fairly different energy story from most energy researchers. How could I possibly be correct? What have other researchers been missing?

The “standard” approach is to start from the amount of resources that we have of a particular type, for example, oil in the ground, and see how far these resources will go. Growing development of technology seems to allow increasing amounts of these resources to be extracted. Thus, limits seem to be farther and farther in the distance, especially if a person starts out with an optimistic bias. It is easy to get this optimistic bias, with all research funds going in the direction of, “What can we do to solve our energy problems?”

Approaches for forecasting future supply problems that start from the amount of resources in the ground suffer from the problem that it is hard to draw a sharp line regarding when we will run into difficulties. It is clear that at some point, there will be a problem–EROEI (Energy Return on Energy Investment) will be too low–but exactly when is hard to pinpoint. If a person starts from an optimistic viewpoint, it is easy to assume that as long as Energy Output is greater than Energy Input for a given process, that process must be helpful for solving our energy problem.

In fact, in my opinion, the story is very different. The very thing that should be saving us–technology–has side effects that bring the whole system down. 

The only way we can keep adding technology is by adding more capital goods, more specialization, and more advanced education for selected members of society. The problem, as we should know from research regarding historical economies that have collapsed, is that more complexity ultimately leads to collapse because it leads to huge wage disparity. (See Tainter; Turchin and Nefedov.) Ultimately, the people at the bottom of the hierarchy cannot afford the output of the economy. Added debt at lower interest rates can only partially offset this problem. Governments cannot collect enough taxes from the large number of people at the bottom of the hierarchy, even though the top 1% may flourish. The economy tends to collapse because of the side effects of greater complexity.

Our economy is a networked system, so it should not be surprising that there is more than one way for the system to reach its end.

Figure 1

I have described the problem that really brings down the economy as “too low return on human labor,” at least for those at the bottom of the hierarchy. The wages of the non-elite are too low to provide an adequate standard of living. In a sense, this is a situation of too low EROEI: too low return on human energy. Most energy researchers have been looking at a very different kind of EROEI: a calculation based on the investment of fossil fuel energy. The two kinds of EROEI are related, but not very closely. Many economies have collapsed, without ever using fossil fuel energy,

While what I call “fossil fuel EROEI” was a reasonable starting place for an analysis of our energy problems back in the 1970s, the calculation now gets more emphasis than it truly deserves. The limit we are reaching is a different one: falling return on human labor EROEI, at least for those who are not among the elite. Increasing wage disparity is becoming a severe problem now; it is the reason we have very divisive candidates running for political office, and many people in favor of reduced globalization.

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