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

Reaching financial limits–What kinds of solutions are available?

We live in a finite world. At this point, we seem to be reaching limits in several different areas:

  • Cheap oil. Our economy runs on cheap oil, but there is a limit to the amount of cheap oil that can be pulled out of the ground. There is still a lot of expensive-to-produce oil left, but this is not a substitute for cheap oil.
  • Fresh water. Fresh water is used for drinking, for growing food, for producing oil and gas, and for creating electricity, among other things. In many parts of the world, we are using fresh water faster than aquifers can replenish.
  • Climate Change. Our agricultural system depends on relatively constant climate. Changes to climate, whether caused by humans or not, are a problem. It is possible that this year’s hot summer is caused by climate change.
  • Soil fertility. Soil fertility depends on adequate depth of top soil, adequate humus content, suitable bacteria in the soil, and proper mineral balance. We have been able to hide soil fertility problems through greater use fertilizers, pesticides, and irrigation, but these are not permanent “fixes”.
  • Pollution. There are many types of pollution that are problems, from excessive carbon dioxide, to mercury in food sources, to endocrine disruptors, to algal blooms.
  • Human population. The number of humans on earth is out of balance with world ecosystems and keeps growing, year after year.
  • Financial system. Our financial system depends on growth, but growth in a finite world system cannot continue forever. High oil prices tend to lead to recession, and reduced economic growth–hence the need for cheap oil, rather than expensive oil.

The question then becomes, “What can we do?”  Are there any solutions available, even if they are only partial solutions, as high oil prices and other limits squeeze the economy?

Many of us sense that we likely are not too far away from a contraction imposed by nature–something that looks like a severe recession that will help bring the world back into balance. While we probably cannot completely “fix” the situation, there seem to  be several things we can do, in the way of mitigation. Continue reading