What Would it Take to Get to a Steady State Economy?

Humans live in equilibrium with other species in a finite world. In such a world, there is never really a Steady State. Instead, there is a constant ebb and flow.  For a while, one species may be dominant in an area, and then another. If populations are closely matched in “ability,” then the ups and downs aren’t too severe. If a predator depends on a particular type of prey for its dinner, it can’t eat all of the prey, or it will go hungry.

When the populations of various species are graphed, they rise and fall.  We usually think of a close match, such as depicted in this graph:

Figure 1. Volterra_Lotka equations used to illustrate situation where population of predators and prey do not vary over too wide a range.

Figure 1. Volterra_Lotka equations used to illustrate situation where population of predators and prey do not vary over too wide a range.Source: Wikipedia.

In fact, the variability of the many species over time tends to be greater than this, as illustrated by the following model that started with 80 baboons and 40 cheetahs:

Figure 2. Lotka-Volterra equations used to illustrate situation that begins with 80 baboons and 40 cheetahs. Source: Wikipedia

Figure 2. Lotka-Volterra equations used to illustrate situation that begins with 80 baboons and 40 cheetahs. Source: Wikipedia

If species evolve together, a natural balance tends to remain in place. Continue reading

The Long-Term Tie Between Energy Supply, Population, and the Economy

The tie between energy supply, population, and the economy goes back to the hunter-gatherer period. Hunter-gatherers managed to multiply their population at least 4-fold, and perhaps by as much as 25-fold, by using energy techniques which allowed them to expand their territory from central Africa to virtually the whole world, including the Americas and Australia.

The agricultural revolution starting about 7,000 or 8,000 BCE was next big change, multiplying population more than 50-fold. The big breakthrough here was the domestication of grains, which allowed food to be stored for winter, and transported more easily.

The next major breakthrough was the industrial revolution using coal. Even before this, there were major energy advances, particularly using peat in Netherlands and early use of coal in England. These advances allowed the world’s population to grow more than four-fold between the year 1 CE and 1820 CE. Between 1820 and the present, population has grown approximately seven-fold.

Table 1. Population growth rate prior to the year 1 C. E. based on McEvedy & Jones, “Atlas of World Population History”, 1978; later population as well as GDP based on Angus Madison estimates; energy growth estimates are based on estimates by Vaclav Smil in Energy Transitions: HIstory Requirements, and Prospects, adjusted by recent information from BP’s 2012 Statistical Review of World Energy.

When we look at the situation on a year-by-year basis (Table 1), we see that on a yearly average basis, growth has been by far the greatest since 1820, which is the time since the widespread use of fossil fuels. We also see that economic growth seems to proceed only slightly faster than population growth up until 1820. After 1820, there is a much wider “gap” between energy growth and GDP growth, suggesting that the widespread use of fossil fuels has allowed a rising standard of living.

The rise in population growth and GDP growth is significantly higher in the period since World War II than it was in the period prior to that time. This is the period during which growth in which oil consumption had a significant impact on the economy. Oil greatly improved transportation and also enabled much greater agricultural output. An indirect result was more world trade, which enabled production of goods needing inputs around the world, such as computers.

When a person looks back over history, the impression one gets is that the economy is a system that transforms resources, especially energy, into food and other goods that people need. As these goods become available, population grows. The more energy is consumed, the more the economy grows, and the faster world population grows. When little energy is added, economic growth proceeds slowly, and population growth is low.

Economists seem to be of the view that GDP growth gives rise to growth in energy products, and not the other way around. This is a rather strange view, in light of the long tie between energy and the economy, and in light of the apparent causal relationship. With a sufficiently narrow, short-term view, perhaps the view of economists can be supported, but over the longer run it is hard to see how this view can be maintained. Continue reading

An Energy/GDP Forecast to 2050

We talk about the possibility of reducing fossil fuel use by 80% by 2050 and ramping up renewables at the same time, to help prevent climate change. If we did this, what would such a change mean for GDP, based on historical Energy and GDP relationships back to 1820?

Back in March, I showed you this graph in my post, World Energy Consumption since 1820 in Charts.

Figure 1. World Energy Consumption by Source, Based on Vaclav Smil estimates from Energy Transitions: History, Requirements and Prospects and together with BP Statistical Data on 1965 and subsequent. The biofuel category also includes wind, solar, and other new renewables.

Graphically, what an 80% reduction in fossil fuels would mean is shown in Figure 2, below. I have also assumed that  non-fossil fuels (some combination of wind, solar, geothermal, biofuels, nuclear, and hydro) could be ramped up by 72%, so that total energy consumption “only” decreases by 50%.

Figure 2. Forecast of world energy consumption, assuming fossil fuel consumption decreases by 80% by 2050, and non fossil fuels increase so that total fuel consumption decreases by “only” 50%. Amounts before black line are actual; amounts after black lines are forecast in this scenario.

We can use actual historical population amounts plus the UN’s forecast of population growth to 2050 to convert these amounts to per capita energy equivalents, shown in Figure 3, below.

Figure 3. Forecast of per capita energy consumption, using the energy estimates in Figure 2 divided by world population estimates by the UN. Amounts before the black line are actual; after the black line are estimates.

In Figure 3, we see that per capita energy use has historically risen, or at least not declined. You may have heard about recent declines in energy consumption in Europe and the US, but these declines have been more than offset by increases in energy consumption in China, India, and the rest of the “developing” world.

With the assumptions chosen, the world per capita energy consumption in 2050 is about equal to the world per capita energy consumption in 1905.

I applied regression analysis to create what I would consider a best-case estimate of future GDP if a decrease in energy supply of the magnitude shown were to take place. The reason I consider it a best-case scenario is because it assumes that the patterns we saw on the up-slope will continue on the down-slope. For example, it assumes that financial systems will continue to operate as today, international trade will continue as in the past, and that there will not be major problems with overthrown governments or interruptions to electrical power. It also assumes that we will continue to transition to a service economy, and that there will be continued growth in energy efficiency.

Based on the regression analysis:

  • World economic growth would average a negative 0.59% per year between now and 2050, meaning that the world would be more or less in perpetual recession between now and 2050. Given past relationships, this would be especially the case for Europe and the United States.
  • Per capita GDP would drop by 42% for the world between 2010 and 2050, on average. The decrease would likely be greater in higher income countries, such as the United States and Europe, because a more equitable sharing of resources between rich and poor nations would be needed, if the poor nations are to have enough of the basics.

I personally think a voluntary worldwide reduction in fossil fuels is very unlikely, partly because voluntary changes of this sort are virtually impossible to achieve, and partly because I think we are headed toward a near-term financial crash, which is largely the result of high oil prices causing recession in oil importers (like the PIIGS).

The reason I am looking at this scenario is two-fold:

(1) Many people are talking about voluntary reduction of fossil fuels and ramping up renewables, so looking at a best case scenario (that is, major systems hold together and energy efficiency growth continues) for this plan is useful, and

(2) If  we encounter a financial crash in the near term, I expect that one result will be at least a 50% reduction in energy consumption by 2050 because of financial and trade difficulties, so this scenario in some ways gives an “upper bound” regarding the outcome of such a financial crash.

Continue reading

Human population overshoot–what went wrong?

There are seven billion people on earth now. I originally thought that the primary reason for the recent human population explosion was that fossil fuels enabled a larger food supply and better medicine, and thus a higher population.

Figure 1. World population from US Census Bureau, overlaid with fossil fuel use (red) by Vaclav Smil from Energy Transitions: History, Requirements, Prospects.

While the addition of fossil fuels is part of the story, after reading Craig Dilworth’s Too Smart for Our Own Good: The Ecological Predicament of Mankind, I realized that there might be another contributing factor. Animals of all types (presumably including humans) have instincts and learned behaviors that prevent population from rising without limit.

Dilworth talks about an experiment in which a few Norway rats were put into a cage of 1,000 square meters and provided plenty of food and water for 28 months. If they had produced as many offspring as theoretically possible, there would have been 50,000 of them at the end of experiment. If they had maxed out at the 0.2 m2 allowed for caged rates in laboratories, there would have been 5,000 of them. What actually happened is that the population stabilized at less than 200.

As I read about the mechanisms for keeping the population of most animals down, it struck me that there seem to be parallels in humans. Dilworth talks about many species being “territorial,” and how aggression among groups is one of the first approaches to keeping population down. When that fails (as with humans’ globalization), social power structures and hierarchies become more important. This seems to happen with humans also:

Paul Buchheit, from DePaul University, revealed, “From 1980 to 2006 the richest 1% of America tripled their after-tax percentage of our nation’s total income, while the bottom 90% have seen their share drop over 20%.” Robert Freeman added, “Between 2002 and 2006, it was even worse: an astounding three-quarters of all the economy’s growth was captured by the top 1%.”

This sounds exactly like the kind of hierarchical behavior observed in the animal kingdom when social species get stressed. If there is not enough to go around, resources that are available are concentrated in the hands of those at the top of the pyramid, marginalizing those at the bottom of the pyramid. If total resources are inadequate,  population at the bottom of the pyramid is reduced, leaving those at the top untouched.

In this post, I discuss some of the issues raised by Dilworth  and the parallels I see with humans. I also add a perspective of hope. Continue reading

Should We Take United Nations’ Projections Seriously?

This is a guest post by Dr. Gary Peters, author of Population Geography.

The United Nations warned recently that the global consumption of natural resources could almost triple to 140 billion tons a year by 2050 unless nations take drastic steps to decouple economic growth from an ever-expanding use of natural resources.  The United Nations also recently projected that the world’s population would exceed 9 billion by 2050.  Neither of these projections makes sense and neither will happen.

The world’s population reached 2 billion in 1927; it is expected to reach 7 billion later in 2011.  Much of what neoclassical economists consider “normal,” mainly sustained economic and demographic growth, has actually occurred during a period unprecedented in economic and demographic history.  Both their models and underlying assumptions evolved during an era that cannot be duplicated, leaving us with numerous and serious questions about how good their models will be in a very different demographic future, especially if that future is constrained by flat or declining crude oil production, rising energy costs, and spiking food costs.  The era of cheap fossil fuels has ended, but the kind of thinking that accompanied it has not, which bodes poorly for our ability to deal with the future.

It is easy to see why economists suffer from “physics envy.”  After all, that proverbial apple that fell on Isaac Newton’s head in the 17th century, supposedly prompting his discovery of the law of gravity, would have fallen at the same rate then that it would today.  The acceleration of gravity has not changed.  On the other hand economics as a field of study didn’t even exist then; if it had it would have created “laws” that would probably be of little or no value today because economic laws exist within a much broader world of social and cultural conditions, which are always subject to change.

Consider the notion of tripling our use of natural resources over the next forty years, starting with one example:  crude oil.  According to the EIA, total oil production in January, 2011, averaged 88.2 million barrels per day (mbd).  There are still “experts” who believe that total oil production can be pushed to perhaps 100 mbd, but I know of no one who believes it could approximate three times that, or 244.6 mbd. Continue reading