How Energy Shapes the Economy

In the beginning, the Master Economist created the Economy.  He created businesses large and small, consumers, governments with their regulation, and financial institutions of all types. And the Master Economist declared that the economy should grow. And it did grow, but only for a while. Then it stalled. Then He declared that stimulus of various types should fix it, and it did, for a while. Then He declared that if humans would just wait for a while, it would fix itself, but it wouldn’t.

We all know that the foregoing isn’t the real story about the economy, but what is the real story?

I think if we dig deeper, we discover that energy plays an all-powerful role, just as it does in the natural world in general.

Population: How Inadequate Energy Acts as a Limiting Factor 

Human population is of course an important part of the economy. If population keeps growing, it helps the economy grow, because more consumers mean more demand.  Can human population keep growing?

Figure 1. World Population Growth, based on summary data provided by US Census. Population growth became much more rapid after fossil fuels began adding to food supply, in the 1800s. Coal enabled much greater use of metal and glass, allowing changes which permitted horses to do more work on farms, and innovations such as electric light bulbs.

The answer seems to be no. Here we find that researchers have found an extremely important role for energy. The relationship they have found relates to any species, not just to homo sapiens. Continue reading