Energy Quality and Economic Value

This is a guest post by Roger Brown, known as Roger K, whose graduate work was in physics. In reading about net energy and EROEI, he realized that energy balance alone is insufficient for characterizing the economics of energy production. In this post, he develops a multi-variable approach to account for the cost of other production resources. This post is the first publication of his innovative ideas. A summary is available at the end of the post.

Labor Cost of Energy

In order to produce an economic output, you have to invest production resources. At a minimum some amount of human labor must be invested. There is no such thing as a labor-free production process. Even if you lived in a sparsely inhabited tropical paradise filled with streams jumping with large tasty fish and heavily laden fruit trees growing profusely in the natural forests, you would still have to spend some amount of time gathering fruit and fish.

If you could gather all the food you needed for a single day in a half hour of work, then your food would be very cheap. If you lived in a less productive natural environment and had to spend eight hours a day gathering all of the food you needed, then your food would be very expensive.

Notice that a natural scale for labor costs exists due to the fact that, on average, the labor of one human being supports one human being. The smaller the percentage of total time that is spent gathering food, the lower the cost.

This natural scale may be inapplicable to a subset of individuals within a society if income inequality exists. To take an extreme case, suppose that an absolute monarch is served by an army of slaves. The slaves support themselves at a subsistence level by means of their work, and the king appropriates all of their excess productivity. The king's wealth depends upon the sum of all the excess output that he appropriates from his slaves.

If the army of slaves is large enough, the king could still be rich even if the excess wealth provided by each slave is small. That is the king could be wealthy even if the labor cost of production was high in the sense described above. However, for society as a whole the natural scale of labor cost still applies. Insofar as economic production depends primarily on labor, average income is high or low depending on the labor cost of producing economic output.

Of course other inputs besides labor may be important, but in many cases the cost of these inputs can be reduced to labor costs. Continuing the relatively simple example of a hunter-gatherer society, if wood is used for cooking, then the cost of that wood is the labor required to gather it. If wood is abundant in the locations where you are doing your hunting and gathering, then the labor cost will be low. If wood is relatively scarce then the labor costs will be high. If clay pots are used for cooking and eating, then the cost of production can be reduced to the labor cost of gathering clay, forming pots, and firing them. And so forth.

Special considerations arise when the input to the production process is the same as the output of the process. Consider gathering food. You have to burn calories in the process of obtaining calories. If the amount of calories burned exceeds some background rate of energy consumption, then the excess calories reduce the net benefit of the food gathering process.

To take a specific example suppose that, on average, one particular food gathering technique produces 1000 calories and burns 200 excess calories in an hours worth of effort. Then the net energy production per hour is 800 calories. Now suppose that a second food gathering process exists which burns only 100 calories per hour and produces 500 calories. In this case the net energy production per hour is only 400 calories. In spite of the fact that the second food gathering process has the same ratio of output energy to input energy as the first process it is more labor intensive, and therefore economically inferior to the first if labor is a limiting factor of production.

Of course energy balance plays a role in determining the labor efficiency of energy production. In order to quantitatively analyze this labor efficiency I introduce the following notation:

O = Output energy
P = Energy input to the production process
N = O - P = Net output energy
R = Non energy resource input to the energy production process (in this case labor hours)

The labor efficiency of energy production is the net energy produced divided by the labor hours expended:

Labor Efficiency = N/R.

This equation can be rewritten as:

[1] Labor Efficiency = (N/O)/(R/O) = µ/r

Where µ = N/O and r = R/O. The variable µ is the fraction of the output energy which is left over after the input energy has been subtracted out. I call this number the energy utilization rate. It is the fraction of the output energy which is available to produce goods and services other than energy. The rest of the output energy must be diverted to producing a new batch of energy or the economy will come crashing down into ruins.

The variable r is the resource intensity (or resource cost) of gross energy production. It is the amount of resource (in the case given above, labor hours) that has to be expended to produce 1 unit of output energy. In the example given above both food gathering processes have µ=0.8 but have different values of r (0.001 hours/calorie and 0.0005 hours/calorie respectively).

So far I have been talking about the case where labor is a limiting factor of production. If labor were not a limiting factor of production, might it not be true that energy balance is the only relevant factor in energy production? The answer to this question is no. Some non-energy resource is always relevant to the economics of energy production. Of course it is possible for other non-energy related factors of production such as supplies of fresh water or of arable land to be limiting factors of production, but the only case in which some non-energy related factor of production is not relevant to the economic quality of energy production is the case of energy production by magic.

For example, to return to the case of a sparsely populated tropical paradise, suppose than when you wake up in paradise each morning, manna from heaven sufficient for your day's nutritional needs has appeared on the ground beside you. This is truly free energy production and, as such, negates the need for economic analysis. If all that you need is provided without effort, then economics, defined as the practice of apportioning the use of scarce resources, does not exist. Even if you had to clap your hands once before the manna appeared, the difference between this process and absolutely free energy is too small of be of any practical importance.

If, on the other hand, every time you clap your hands a small amount of energy appears, and you need to clap your hands for several hours a day to produce a useful amount of energy, then economic analysis can be applied to this process. The net energy produced per hour of labor is an important parameter in analyzing the economics of this process. Yes, the energy balance matters. If clapping your hands burns up a significant amount of excess energy, then this energy must be accounted for in determining the productivity of this process, and it is accounted for by the factor µ in the above expression for the labor efficiency of energy production.

Energy and Labor Optimization of Economic Output

Now I wish to discuss the optimization of the apportionment of a scarce resource in economic production, and in particular, the apportionment of labor. Therefore I will consider an economic system in which the only limiting factor of production apart from energy is labor. One might object that this is not a realistic case since raw materials are always required in addition to energy and labor. However, labor is always limited since, on average, the labor of one human being supports one human being, whereas the supply of raw materials could be effectively infinite.

Even if you had an endless copper mine, the amount of time it takes to extract and smelt a given amount of ore limits how much copper you can produce in a given period of time. So my assumption is that raw materials are available in large abundance relative to any short to intermediate term use we might have for them and the amount we produce is limited by how much labor we choose to expend in extracting them.

I will also assume that energy production is only limited by the amount of labor dedicated to the energy extraction process. If we dedicate a larger fraction of our labor hours to extracting energy our net energy increases, but the number of labor hours available for utilizing this energy in the manufacture of useful products and services decreases. In some sense labor is the only real cost in this system. We do not give economic output to coal deposits or to deposits of metal ore. We give economic output to people who extract useful outputs from these deposits.

Of course in the real world we do give economic output to the 'owners' of natural resources in the form of economic rent, and we give money to the providers of capital in the form of interest. Such costs are not labor costs. However, I would argue that rent and interest are political costs and not real physical costs. That is to say that no physical reason exists why rent and interest have to be paid in order produce economic output. Of course, I have been assured over and over again by a variety of people that any attempt to eliminate rent and interest will inevitably result in the creation of a monstrous, inefficient, socialist bureaucracy. This claim may or may not be correct, but at present I am inquiring into the physical basis of wealth so that I will ignore these non-physical costs of producing wealth.

To be concrete suppose that you are alone on an island and are therefore producing all of your own economic output. In this case no one exists to receive payments of rent and interest. A fuel source is available that provides µ/r units of energy per hour of labor with no limit on how much energy can be obtained other than the number of hours worked. The question which I wish to enquire into is what fraction of total labor time should be dedicated to producing energy and what fraction should be dedicated to using that energy to produce useful goods and services.

In order to answer this question we must consider the use of technology in the process of economic production. The primary function of technology is to improve the productivity of labor. A hunter armed with bows and arrow will gather more meat per hour of hunting than one armed with a spear. A root gatherer armed with a digging stick will collect more kilograms of roots per hour than one using only his or her hands. Wheeled carts will allow a human being to transport a larger amount of mass per hour than ordinary human locomotion. And so forth.

Adding external energy sources to the mix further improves labor productivity. If a horse is used to transport the hunter, he can cover more ground in a given period of time and take more game. If an ox is attached to a wheeled cart then the amount of human effort required to transport a given mass of material drops dramatically. The use of fossil fuels did not qualitatively change the direction technological improvement to economic production. Their use merely accelerated the rate of improvement in productivity.

In my view it is impossible to separate productivity into separate contributions made by labor, tools, and energy. There is no such thing as a labor free process. No matter how automated the machinery used, someone has to build and maintain the machines, extract and deliver the energy which runs the machines, and so forth. Energy does not 'replace' labor; It creates a more productive synergy of labor and tools. Properly speaking one can only speak of the productivity of a given economic synergy and not the productivity of the individual components of that synergy. Labor productivity can be used as a metric, but labor productivity cannot really be separated from the overall productivity of all inputs to the production process.

In order to discuss this productive synergy I will introduce a concept which I call the average productivity function P. I define P as the average productivity per hour of labor in the non-energy producing sector of the economy. I will assume that P=P[E] where E is the energy per worker hour available in the non-energy producing sector of the economy. What form might the function P[E] take? One possibility is that it is a linear function of E. In this case, if I double the energy per worker hour I double my productivity. If I triple the energy per worker hour I triple my productivity, and so forth. It is easy to show, however, that if productivity increases linearly with E forever, then an absurd conclusion will be reached.

Suppose that I work a total of H hours and I spend a fraction f of those hours obtaining energy and fraction 1-f using that energy to provide useful goods and services. The net energy available for the production of useful goods and services is:

Net Energy = H×f×µ/r

Since the hours worked in the non-energy producing portion of the economy are H×(1-f) the energy per worker hour is given by:

[2] Energy/Hour = E = (µ/r)×f/(1-f)

If the average productivity is linearly proportional to C×E (where C is a constant), then the total production will be proportional to H×(1-f) times this number:

Total Production = C×H×(µ/r)×f

From this equation we see that total production increases with f without having a maximum. That is, if I worked at harvesting fuel all year along until one hour before I knocked off for my New Year's Eve celebration, I would be more productive in the remaining hour than if I had stopped gathering fuel at any earlier time. This conclusion is obviously absurd. One can reach the same conclusion by considering a factory that employs 1000 people. If 999 people are fired the remaining employee has 1000 times as much energy available per hour as he or she did before the layoff, so that under the assumption of a linear relation between energy per hour and productivity one employee could match the output of 1000 employees. Therefore a strictly linear relation between energy/hour and productivity is not possible. As energy use per hour increases, the marginal return on additional energy use per worker hour must decrease. The graph below depicts qualitatively the general form that P[E] must take:

I have depicted P[E] going to zero as E goes to zero. One could also have P intersect the E=0 axis at a positive value corresponding to some background level of productivity obtainable with human muscle power only.

The E axis has the same units as µ/r, the net energy produced per hour of labor in the fuel producing process. The units of this axis are not important as one can define a new energy/hour scale by setting E’=k×E where k is a constant. Any point on the P[E] curve can be reached for any energy source with a positive value of µ/r by simply making the hours spent in the non-energy producing part of the economy arbitrarily small. However, at each point on the P[E] curve, only one value of µ/r makes the total productivity a maximum at that point. That is to say that for a given function P[E] of the form shown, there is an optimum operating point for an energy source of a given quality as measured by µ/r.

The total production will equal P times the hours spent in the non-energy producing portion of the economy. That is the total production is given by:

Production =H×(1-f)×P

From the expression for E given above (equation [2]) we can solve for f in terms of µ/r:

f = E/(E+µ/r)

Therefore P[E]×(1-f) can be expressed as a function of E. The particular function given is P[E]=ln(E+1). On the following graph I show the P[E]×(1-f) vs. E for three different values of µ/r. I have chosen the values of µ/r so that the maxima correspond the E=24, 130, and 800 (The same values marked in the previous figure).

Note how slowly the maximum total production drops off compared to the energy per worker hour E. This slow drop-off is a consequence of the shape of the productivity curve P[E]. Of course the function P[E]=ln(E+1) is just an arbitrary function that has the right qualitative behavior, so that no quantitative conclusion can be reached from this particular example. However, a more general result can be derived from the differential geometry of the P[E] curve without knowledge of the complete function P[E]. In order to derive this result it is convenient to regard P[E] as a function of f via the equation E = (µ/r)×f/(1-f). In figure 3 I show P×(1-f) as a function of f for the same three values of µ/r.

It can be seen that the three values of E chosen correspond to f=0.15, 0.20, and 0.30 respectively. That is as the quality of the energy source (as measured by µ/r) decreases then the fraction of labor dedicated to extracting fuel increases.

Again this example depends on the specific properties of the function ln(E+1). A general result for the values of µ/r and f which maximize the total productivity = P×H×(1-f) can be derived by taking the derivative with respect to f and setting it equal to zero. The total hours worked is constant, so that maximizing P×(1-f) is sufficient to solve the problem. I give the proof in an appendix and here I merely state the results making reference to the following figure:

At a given point on the P[E] curve the value of µ/r which maximizes the total production is given by:

µ/r = [P/(dP/dE)]-E

This equation can be rewritten as:

(dP/dE)×[ (µ/r)+E] = P

Inspection of the figure shows that µ/r is equal to minus the intersection of the tangent line with the E axis:

µ/r = E0

The fraction of labor dedicated to fuel extraction which, combined with the value of µ/r given above, maximizes production at the given point on the P[E] curve is given by:

f = (dP/dE)/(P/E)

This number is the ratio of the slope of the tangent line to the slope of the chord from the origin. The chord from the origin corresponds to a linear increase in productivity/hour with energy/hour. As I showed previously, with such a linear dependence labor productivity can be increased without bound so that f would have no maximum. The above result shows that the maximum occurs when f is equal to the ratio of the marginal increase in productivity with increasing E to the average increase in productivity with respect to E.

The equation for f can be rewritten as follows:

f = [E×(dP/dE)]/P

Inspection of the figure shows that E×(dP/dE) is equal to P-P0 where P0 is the intersection of the tangent line with the P axis. Thus f is given by:

f = (P-P0)/P = 1-(P0/P)

The total production achieved at this operating point is:

Production = H×P×(1-f) = H×P0

H×P is the total production that would be achieved at the given value of E if free energy were available so that all labor effort could be dedicated to producing useful goods and services. Therefore P0 is the effective productivity per hour achieved for all labor hours including those dedicated to producing fuel.

The following figure shows the tangent line and chord to the P[E] curve for the case that f=0.15.

The above results make it clear that within the parameters of this simplified economic model, the characteristic of a high quality energy source is that a small amount of effort spent gathering fuel drives the economy to a point where the marginal return on further energy use is small. Without such a small marginal return on additional use of energy, total production could be further increased by dedicating more resources to further energy extraction. This conclusion is independent of knowing the explicit form of the P[E] function. Thus the idea that that we could substantially back off our energy use while maintaining reasonable levels of productivity is supported by this model.

Up to now I have been talking as if the labor efficiency of energy production were an unchanging constant, and as if the productivity function P[E] was a fixed and eternal mathematical form. Neither of these statements is correct. In the early days of fossil fuel use the labor efficiency of fuel production was being increased steadily both through the discovery of newer higher quality reservoirs of fuel and through advancing extraction technology. The productivity function P[E] also depends on the quality of non-energy resources available (ore grades, etc.) as well as on the general advancement of technological knowledge, on the quantity and variety of the existing set of physical tools, and on the built up infrastructure of society generally.

The economic problem that we are faced with now is a potentially large degradation in the quality (e.g. higher labor and other resource intensities and lower energy balance) of the energy sources available to us and potentially a degradation in the quality of other resources as well (e.g. the necessity of using lower grade metallic ores). These changes will put a large burden on our technological prowess to maintain increasing levels of productivity. Some people claim that in the era of cheap energy, we were careless about energy use, so that a lot of low hanging fruit exists with respect to improvements in energy efficiency. If our economic goal is to produce physically and psychologically healthy human beings with a minimum consumption of resources, this claim may well be true. But if our goal is to produce growth in the traditional economic sense, this conclusion is questionable.

The above analysis suggests that even in the days of cheap energy, energy use was limited by the marginal utility of energy, so that a high motivation for increasing the efficiency with which energy is converted into economic value has always existed. If oil is such a unique, valuable, possibly irreplaceable resource, then why have we been using it to tool down the freeway at high speed encased in tons of metal? If that same energy could have produced a lot more value in some other part of the economy, why didn’t it naturally flow there? The answer to this question may well be that in a culture in which the lawn, jet airplane tourism, home theater systems, etc. have become part of normal life, SUVs and luxury cars are the highest value marginal use of that form of energy that we could come up with. Yes, as energy prices rise, the most marginal uses will disappear first. It is far from clear, however, that we will necessarily be able to produce equal or larger value elsewhere in the economy.

In any event, it is clear that in a growth oriented economy we will always push out along the curve of marginal utility as swiftly as we can. No matter how clever we are at increasing our manufacturing efficiency, the tendency of the economy will be to push up against the limits of available energy resources as fast as possible.

If on the other hand, if we were to decommit from the goal of continuous growth and instead try to maintain a given quality of life with a minimum consumption of resources, then the combination of backing off on total per capita energy use along with efficiency improvements might allow us to maintain a decent quality of life even in the face of decreasing energy quality.

Multiple Resource Costs of Energy Production

I will now consider the role of other resources than labor used in the production of energy. I now suppose that multiple non-energy resources R0, R1,R2 ..., Rn are input to an energy production process that outputs a total amount of energy O. As before I will assume that the energy input is P so that the net energy output is N=O-P. I will assume that R0 is labor since no such thing as a labor free production process exists. If the other non-energy inputs have labor and energy embedded in their production, I assume that these inputs are included in P and in R0.

You might ask if the embedded labor and energy have been subtracted from the input of a given resource is there any cost left over? In some cases the answer is no, while in other cases opportunity costs exist that are not captured in the embedded energy and labor. For example we cannot create high quality soil and arable land merely by the application of energy and labor, and since the supply of land and soil are finite there are opportunity costs associated with using these resources to produce energy rather than food.

As another example, consider the water required to process oil shale in the relatively arid American west. There are opportunity costs associated with using the available supply of water to produce fuel that cannot be captured by the labor and energy costs of delivering the water to the shale processing site.

I mentioned embedded energy above, and before proceeding with an analysis of the benefit to cost ratio of energy production in the case of multiple input resources, I want to introduce a concept which I have found helpful in clarifying the role of embedded energy. I call this concept the working reserve of energy. In order to run our economy effectively we need piles of coal, pipelines full of natural gas, tanks of refined petroleum fuel, stockpiles of uranium fuel rods, etc sitting around available for use by various economic producers. Energy producers pull fuel out of these stockpiles, but unlike other producers they also put fuel back into these same stockpiles, which I call the working reserves of energy.

In order for the economy to keep running on an ongoing basis the energy producers must keep the reserve full. That is they must not only replace the fuel that they themselves remove but also the fuel removed by all other economic producers. Withdrawals of fuel by energy producers can be direct or indirect. That is they can directly purchase fuel to run their machinery, or other producers can draw out fuel and create output which they sell to the energy producers for use in the fuel extraction process. This indirect withdrawal of fuel from the working reserves is embedded energy.

So now let us consider the benefit to cost ratio of producing energy under the simple assumption of the economic equivalence of all forms of energy which is generally (though incorrectly) used for energy balance calculations. Since multiple input resources are involved we need some method of converting resource quantities into units of a universal scale of value. Whether it is truly possible to objectively define such a scale in the real world may be doubted, but we cannot make progress in economic analysis without assuming that it exists. Therefore I will assume that the value of a unit of energy is Ve and the opportunity cost of dedicating one unit of a non-production resource Ri to the energy production process is Ci.

The benefit of energy production in our universal scale is then given by:

Benefit = Ve×(O-P) = Ve×N

Where O is the gross output energy, P is the energy consumed in the production process (both directly and indirectly) and N=O-P is the net energy produced. You might try to argue that Ve×O is the benefit of the energy production process, but this claim is false. The very last time you run an energy production process you can claim the whole output as a benefit, since you do not have to reinvest any of the energy to produce more energy. But the extra energy P that you get from this last batch is balanced by the energy P that you had to beg, borrow, or steal to process your first batch. In between, the production energy used in processing any particular batch of energy is not available to the rest of the economy.

The cost of producing the net energy N is given by:

Cost = C0×R0 + C1×R1 + ...+Cn×Rn

The opportunity costs Ci are not the same as market prices. For one thing embedded labor and energy cost have been subtracted out (except for C0 which is the opportunity cost of dedicating a unit of labor to the energy production process). As I pointed out previously, a finite resource such as land or fresh water may have opportunity costs associated with their use which are not captured in the embedded labor and energy.

Note that input energy is not included as part of the cost. It subtracts from the benefit but does not add to the cost. This claim may require some further explanation. As I mentioned previously, when the first batch of energy is produced from a new energy production process the input energy P must obtained from somewhere. Either some energy producer must process some extra energy, or the use of energy elsewhere in the economy must be curtailed. This initial input of energy is a cost. However, after the first batch of energy is processed and the output is placed in the working reserves, the energy producer has effectively provided the input for his or her next batch of energy. (I am assuming a positive energy balance.) For succeeding batches of energy no other energy producer has to provide extra energy. No other economic process has to forego the use of energy. Finally, when the last batch of energy is processed the initial input energy is recovered. Therefore society has incurred no net energy cost from the existence of this process.

The benefit to cost ratio is given by:

Benefit/Cost = (Ve×N)/(C0×R0 + C1×R1 + ...+Cn×Rn)

Dividing the numerator and denominator of this expression by the gross output energy O gives an interesting expression for the benefit to cost ratio:

Benefit/Cost = (Ve×N/O)/(C0×R0/O + C1×R1/O + ...+Cn×Rn/O)

I rewrite this equation as:

Benefit/Cost = (Ve×µ)/(C0×r0 + C1×r1 + ...+Cn×rn)

Where µ=N/O and ri=Ri/O. Clearly µ is the energy utilization rate discussed earlier. The values ri=Ri/O I call the resource intensities or resource costs of gross energy production. The value ri represents the amount of resource required to produce 1 output unit of energy. The values µ and r0, r1, ...,rn are physical parameters that depend on the nature of the energy producing process. In particular r0 is the labor intensity of energy production which I discussed previously. The parameters Ve, C0, C1, ...,Cn are not physical parameters and are not constants. They are complex functions of the operation of the entire economy, among other things depending on the total scale of the economy and on the quality of natural resources available. Nevertheless if one takes a snapshot of the economy at a particular instant of time Ve, C0, C1, ...Cn may be regarded as approximately constant with respect to the extraction of a marginal unit of net energy and may therefore be used (assuming one really knew how calculate them) to estimate the benefit to cost ratio.

Note that with respect the physical parameters of energy production, two different (though often related) effects can lower the benefit/cost ratio. The energy balance as represented by the energy utilization rate µ rate can go down, or the resource intensities of energy production can go up. Often times both effects occur at the same time. Oil produced from oil shale has a lower energy balance than conventional oil and the labor and fresh water intensity of producing a barrel of oil from this source is much higher than for conventional oil.

In order for an energy production process to provide any economic benefit the benefit/cost ratio must be greater than 1, which implies that:

(C0×r0 + C1×r1 + ...+Cn×rn)/Ve < µ

The left side of this equation is the ratio of the non-energy cost of producing a unit of energy to the value of the unit of energy so produced. Since not all of the energy produced is available for the production of useful goods and services the upper limit on this cost ratio is µ rather than 1. If this ratio is much smaller than 1.0, then very small values of µ can be economically justified. I call this limit the magic wand limit of energy production. If large quantities of energy could be harvested with trivial expenditures of labor and other non-energy related resources, then net economic value could be produced even with very small energy balances.

On the other hand, if this ratio is >=1 then the energy production process in question is economically useless no matter how good the energy balance may be, since the value of the non-energy resources consumed is equal to or greater than the value of the energy produced. For example, suppose you found a magical energy crop which grew and harvested itself without human intervention. The energy rich sap of some species of tree flowed out of the trees through underground channels and filled a natural reservoir. You go to the reservoir once a year and find that it is full of fuel. If dedicating that land to energy production meant that you would starve to death, then you would not give a damn about the perfect energy balance (or the infinite EROEI if you prefer).

Remember that the opportunity costs Ci are not constants. For example, if you use currently fallow land to produce fuel the opportunity cost of dedicating that land to energy production could be close to zero. On the other hand, if biofuel production is ramped up to the level where a large fraction of farm land is being dedicated to the production of fuel, then the opportunity cost of dedicating additional land to producing fuel could become quite high, so that even if the physical aspects of energy production as measured by the energy utilization rate µ and the land intensity of energy production remain constant, the benefit to cost ratio may drop significantly.

As another example, consider the labor cost of producing oil from tar sands. I have read that in Canada general labor costs are rising as tar sands production rises, so that people trying to hire retail clerks or food service personal are having to pay higher wages because of the competition from energy production. On average the labor of one human being supports one human being so, that if the fraction of total labor dedicated to energy extraction becomes significant, it can affect overall economic production.

Resource Costs of Energy Production and the Overall Scale of the Economy

Finally I want to discuss in more detail the relation of energy balance to the overall scale of the economy mentioned at the end of the last section. In this discussion I will make use of the concept of the working reserve of energy which I introduced earlier. The figure below shows hypothetical working reserves of energy for two economies run off of two different fuel sources with different energy balances (µ=0.5 and µ=0.9 respectively). I have represented the size of the reserves by the total area of a series of squares. The energy to the left of the vertical bar is used in the energy extraction process (directly or indirectly). The energy to the right of the vertical bar is used to produce useful goods and services. Energy producers naturally put energy into the reserves as well as taking it out. At the end of the effective lifetime of the reserves they are still full because the energy producers have put back all of the energy that was taken about by all varieties of producers.

If we assume the that working reserves of both fuels are intended to represent energy available for the same time period, then the second energy source provides nine times the net energy of the first energy source in the same time period. Can we therefore conclude that the relative economic value of these energy sources is in a ratio of nine to one? The answer to this question is not straightforward. The next figure shows the working reserves for the same two energy sources for the case where they are both providing the same amount of net energy. In order to get from case 1 to case 2 the size of the working reserves and the total rate of fuel production for the energy source with µ=0.5 has been expanded by a factor of 9.

Naturally this large expansion in energy production could not take place over night. It would take a substantial period of time to grow energy production by this amount. In order to achieve such growth one would have to dedicate to energy production a fraction of the total energy larger than the energy utilization rate µ (=0.5). So if growth is referred to a yearly time period, then dedicating 54% of the total available energy to the production of more energy would result in an energy production growth rate of 4% per year. As energy production grew the total non-energy resource cost of energy production would also grow. That is, if labor, land, and water are being used to produce energy, we would have to continuously expand the amount of these resources being dedicated to this process.

If there are negative externalities associated with energy production and consumption these are also growing as energy production grows. These resource costs and the negative externalities determine the economics of a given fuel source and not the disappearance of energy during the production process per se. Of course, the energy balance does affect these resource costs since, all other things being equal, a smaller energy balance implies a larger total energy extraction and a larger resource cost to produce the same amount of net energy.

The resource cost multiplication factor can be derived as follows. Recall that the cost of producing energy is given by:

Cost = C0×R0 + C1×R1 + ... + Cn×Rn

Where R0 is the labor input and Ri are other resources whose costs cannot be reduced to the embedded labor and energy. We are interested in the cost per unit of net energy produced so we divide by N and do a bit of algebra:

Cost/N = (O/N) × {C0×R0/O + C1×R1/O + ... + Cn×Rn/O}

Recalling that Ri/O=ri (the resource intensity of energy production) we find:

Cost/N = (O/N)× {C0×r0 + C1×r1 + ... + Cn×rn}

The quantity in curly brackets is the cost of production of 1 unit of gross output energy, so that the required cost multiplication factor due to the energy balance is (O/N) = 1/µ. For the two energy sources depicted in the above figure the values of (O/N) are 2.0 and 1.11 respectively. The ratio of these two numbers is the same as the ratio of the size of the required working reserves.

In general, a fuel source with a low energy balance will be more likely to run into problems of scale than one with a high energy balance as energy production is ramped up to produce a given amount of net energy. The real problem with biofuels is not low energy balance per se, but the large requirements of land, water, and soil as production is ramped up to high levels. Of course, the real cost of the scaling up a given energy source cannot be determined in any simple way from the energy balance. This cost depends on many complex interactions in the total economic system. Economics cannot be reduced to calculating energy ratios.

Appendix: Derivation of the values of labor efficiency of energy production (=µ/r) and of the fraction of labor dedicated to energy production (=f) which maximize the total productivity

We wish to maximize the following function:

Taking the derivative with respect to f and setting it equal to zero we find:

We rewrite this equation as:


I have shown previously that the energy per worker hour E is given by:


Taking the derivative with respect to f we find:


From equation [2] we see that:


Substituting this expression for µ/r into equation [3] we find:


If we substitute equation [5] into equation [1] and multiply by f we find:

Solving for f we find:


Referring to the figure below we see that the fraction of labor dedicated to energy production which will maximize the total production (= P×H×[1-f]) is given by the ratio of the slope of the tangent line to the slope of the chord drawn from the origin.

To find the corresponding value of µ/r we substitute the above expression for f into equation [4]. For notational simplicity we set dP/dE = S. We then find:

This equation can be rewritten as follows:


Equation [7] can be rewritten as follows:

Inspection of the figure makes it clear that


To prove that these values of f and µ/r correspond to a maximum of the function P×(1-f) it is necessary to show that the second derivative of this function with respect to f is less than zero. The algebra involved is fairly tedious so I will just state the result:

when f and µ/r take on the values given by equations [6] and [7] above. Since f and 1-f are both greater than zero and the second derivative of P with respect to E is negative for a curve of the shape shown in the figure, we can conclude that P×(1-f) is a maximum at the values of f and µ/r given above.


  1. The cost of finite non-energy production resources such as labor, land, fresh water, etc must be accounted for in determining the economic benefits of energy production in addition to calculating the energy balance.
  2. Energy sources with low net energy balance will tend to have higher non-energy resource costs at a given level of net energy production compared to high net energy balance sources.
  3. If the opportunity cost of the non-energy resources required to produce 1 net unit of energy are equal to the value of the unit of energy, then the energy production process has no economic benefit no matter how good energy balance may be.
  4. In scaling up energy production to large levels the opportunity cost of using non-energy related production resources can rise dramatically. So if producing large amounts of oil shale involves obtaining 40% of the water rights in some large area of the American west then the opportunity cost of this expansion may be far larger than would be computed from the current market price of water in those areas.
  5. Use of cheap abundant energy is limited by marginal utility. That is as we extract more and more energy it becomes more difficult to produce of sufficient economic value to justify the extraction of a marginal unit of energy. This claim implies that a strong motivation has always existed to increase the efficiency with which energy is converted into economic value. Therefore the assertion of some people that as energy becomes more expensive we can easily maintain economic growth via greater efficiency is doubtful.

I want to thank Roger for starting a discussion on this important topic. It seems like there must have been work done by others regarding this subject, but I am not sufficiently a student of this topic to know what it is. If others are aware of other studies in this area, and can post links, that would be helpful.

What do readers think of this approach? Are there modifications that would make it better?

I will re-read in detail when I have more time. I believe this work nicely quantifies some of the concepts we've qualitatively observed, in terms of how much of our effort is spent on energy production. It is obvious that all "higher activities" including science, art, invention, etc. must be funded from the excess energy, which suggests that cheap energy may have been largely responsible for most (or all?) periods of enlightenment and learning in history, including the massive explosion of technology this century.

Absolutely right. Excess energy--or excess labor--(whichever way you want to put it)--makes possible art, much of science (not all, I suspect). Serendipity might play a role in some important jumps. It certainly does for some of the lower primates. Why not us?

I think it's important at that point to remember that while our growth in the sciences and tech. does derive FROM our ancestors' excess derived value, that it also frequently contributes back INTO our production and access to energy. We don't need to reinvest the energy that it once took to concieve, devise and testout, prototype a steam engine, waterwheel or a cotton-gin, but those creations and their many offspring will continue to offer us ways to get more work done than we could have in simpler agrarian conditions. Many of these tools still require energy to forge and build.. but our technical developments are nonetheless cumulative, and are recorded.

As long as we have access to those records, then we have access to the 'interest earned' on the surplus energy, long since spent, that created them. We have also added that to the now-prodigious canon of human technological development over the last 30 to 50 centuries, and from which we can find other combinations that will be possible with a good bit less initial energy than if we had to earn those advances all over again from our current store of excess energy.

DISCLAIMER: I know.. 'Technology can't save us', and I don't think that this canon of human technical achievement is any kind of a guarantee of Safety, Happiness or BAU. But I also think that our tools and our tool-making history is effectively an organ of our species at this point, and that it is viral (self-replicating), it regrows when it gets cut off (see; Dark Ages, and then what happened AFTER them..) and seems to be subject to the laws of Survival and Development of the fittest, and so grows, regrows, branches and mutates freely. Like DNA and mRNA, it has widely dispersed copies of itself, AND Blueprints and verbal descriptions of itself that can be read, translated, reverse-engineered and modified by sufficiently aware humans with a pinch of literacy, training or time. (Pick any two).. oh yeah, and enough chutzpah at the end of a hard day just surviving in which to work on this.


I'm happy to be challenged, here, -1.

That response was very succinct.. mind elaborating?

No challenge here I quite agree with you on that 'intrest earned' on on the surplus energy, long since spent. and will negate that -1 as soon as I post this.

YES we WILL with that latent expertise and knowledge be able to bridge the coming - Couch Potato Gap!!

Thanks, Ignatz.

For what it's worth, I'd expect we've now probably seen peak 'couch-potatoe' (wah..) not that there aren't scads of folks out there that still try to play the part. ie, It's not always really easy to tell when a sloth has turned a corner in his life, and whether it was witting or otherwise.. 'you have to examine these things in great -detail.' (Ben Knox, in Local Hero)

I agree with Paleocon's assertion that "cheap energy may have been largely responsible for ... periods of enlightenment and learning in history."

As one example, it seems to me that the many separate innovations we call "the Renaissance" were enabled by the earliest intensive mining and use of coal, around 1200 C.E. in Britain. Before coal appeared in Europe, only wood, peat and plant or animal oils were available as fuel.

As a second example, the production of high-energy liquid fuel from early oil wells allowed development of the internal combustion engine, the automobile and the airplane.

As a third example (involving new energy distribution technology rather than a new source of energy) the availability of cheap electricity on demand made possible the explosion of knowledge and technology typified by communication satellites, computers and the internet.

Without having read the main text of the key post I would make this salient point based on the economics of food.

It is of great importance the type of soil you reside on and produce food on. Again...the ability to grow means you MUST have good soil.

Much of the US is very poor soil. Also sufficient rainfall is next.

So for those who are sitting in cities? Adios......amigo!

Yes light rail and all that..bicycles and so forth ..yet we are starting to see how bad it will get as 'service' companies go under and therefore take down the big corporations. So much is outsourced. So much is contracted. Without the small companies how do the large ones continue?

We would have zero chances of getting this harvest in here in my area if we had no infrastructure of other assests to rely on. Machinery breaks. Each day a piece of equipment falters. The combine has done this three times since we started. A belt blew, a chain broke, and now some bearings are going out. A very small circuit breaker causes the lights to fail and we need those at night...days are getting shorter you see. All the trucks are constantly under repair.

Without maintenance all this equipment would stop very very fast. Good soil or not.

Yet with handtools one can grow a garden. One can run pigs over it in the winter to enrich the soil or put chickens in it to eat the insects.

Yet without the basic good soil you are fighting a losing battle.\At my son's house in N.Carolina the soil was a total loss. Rocks and clay. Good thing he sold and got out.


Dmitry Orlov makes the point that post-collapse, most large farms become relatively useless, and that small ( ~< 10 acre) farms that rely mostly on human labor will be the most productive...

Because our industrialized Mega farms require, as you explain, high maintenance, energy-intensive equipment/infrastructure, their land becomes a "stranded asset" ...

And, as you note, the cities will be full of "stranded assets" - human labor with nothing to do ... and very little to eat.

Rural areas will suffer too, but I think you are correct when you say, " So for those who are sitting in cities? Adios......amigo!"

I've actually though a lot about this. It seems that automating farming on the small scale can have a really positive effect. In fact we might be able to automate to the point that the amount of human labor used in farming is reduced to the one of task and ones you enjoy.

I posted in the past about the idea of a small robot with sensors managing a small intensive plot. I think its readily doable with modern technology and using say solar wind energy to power a multitasking robot for food production seems to be a pretty good investment.

Its high on my todo list to explore these ideas further.

The point is that by reducing the amount of human labor needed on the farm and using intensive methods with robots we can achieve a nice food surplus to allow other activities.

I think this is better than going all the way back to pure manual labor or even using small tractors.

I have been likewise thinking (and trying small-scale cultivation) in spare time for 25 or more years in northern England.
Is it worth, however, now backing up a bit, and looking at possible different scenarios? I wonder about North America where there is vastly more land.
Having previously regarded growing biofuels as useless for substituting for current total transport fuel usage (biofuels are a really ludicrous idea in the UK as soon as one checks the numbers), I wonder nevertheless about farms in mostly rural communities growing fuel mostly just for the farm. (The trend round here has been to use ever larger more efficient machines - economies of scale.) If a large farm needs 2 guys (which is normal where I live), how much home-grown fuel could they need to service the farm? The fuel growing would not export soil nutrients away from the farm. (edit. Not 'draining' the soil fertility from farms is critical if NPK imports are limited. There are historical analogies with large estates served by vast human labor having a small per capita food surplus for 'export' or 'tax', or similarly with present 2000 year old Chinese villages served by a high density of persons who are sustained by and renew their high-yielding presently 12t/ha/yr grain systems using these days some supplementary synthetic N input.)
In an alternative 'post-modern' scenario, non-farming populations local to large farms could grow their own vegetables and fruit of very high nutritional value very efficiently in gardens that were sustainably manured by compost toilets, collecting particularly the high NK urine fraction. Their main calories needs, however, would be served by the mechanized big farms. The big farms would need to retrieve (with machinery) a proportional fraction of the composted humanure to balance the farm's soil nutrients budget.
One problem is to figure out what total non-farming population might be carried by a region supported in this way. It is hard to imagine the region supporting large urban populations.
[ So far I (we), in our very large garden have been able to maintain or enhance easily cultivated soil and maintain (just) soil fertility for garden produce, but we still need to 'parasitise' the local large scale farm. (He does not need up to now too many 'symbionts'). So far though, on prime garden soil, I cannot improve on moving swiftly with timely cultivations using a large '3rd-world' hoe, coupled with straw mulches ex my large farm neighbour!]

Well first you probably should rethink how you farm. For example plowing do you need a mechanical plow or can you use a different method. And idea I got from the oil drum is to use hydrostatic pressure to break up soil. In this case you simply need to be able to drill a hole or cut a narrow trench to insert a high pressure balloon deep in the soil then fill it with water or air.
The pressure will lift up the overburden breaking up the soil better than plowing.
This idea comes from the hydrfracturing of NG wells :)

Next for energy on the farm a return to the lowly steam engine makes a lot of sense if your using biofuels. External combustion beats internal in this case since the fuel need not be processed.
Another possibility thats higher tech is solid oxide fuel cells. And one I'm interested in is liquid nitrogen powered equipment. Thus on the farm there seems to be no intrinsic reason to use internal combustion.

Fluidics also represent a wonderful opportunity to build simple logic circuits that are robust and can handle a lot of the control needs for a automated farm.

Finally and surprisingly it seems no one is looking at smell on the farm. By smell I mean identifying the situation by using volatiles. Weeds smell diferrently from crop plants ripe fruit is obvious by its smell. I laugh when I see these picking machines developed using advanced vision algorithms when a simple visual algo coupled with a good nose can pick the perfect fruit any day of the week.

So much is possible its astounding all you have to do is think outside the box just a bit and focus on the problems that need to be solved in farming. For whatever reason it seems farming has been neglected it seems we have chosen to assume that every farm problem is best solved with a tractor. I actually don't see the need for tractors at all with a bit of thought. Various hydraulic methods using water or air seem to be capable of solving most farming problems.

Hi memmel, I like the idea of robot assisted farming. A unit similar to the roomba robot vacuum cleaner
could happily wander a small area, destroy weeds and pests.

Perhaps a robotic worm/snake made up of many rotating sections which could help break up the soil and deliver fertilizers/biochar directly into the ground rather than the surface.

Possibly some type of light electric assisted exoskeleton powered from an overhead PV panel to provide shade to the operator would allow a single human to do the work of many labourers or fossil fuel powered tractors.

I think the snake is a fantastic idea seem my above post about hydraulics a snake powered by hydraulic pressure with a lot of fluidic controls with electronic isolated to the sensors makes a ton of sense. Depending on the design the hydraulic pressure can be done internally or externally or both depending on the need.

Nice work Roger.
This is in the same vein as some of recent work:

Energy Return on Investment: Towards a Consistent Framework
(AMBIO - Journal of the Human Environment 3/08)


A Framework for Energy Alternatives: Net Energy, Liebigs Law, and Multicriteria Analysis in the recently published Biofuels, Solar and Wind as Renewable Energy Systems: Benefits and Risks (Robert Rapier also has a chapter on Renewable Diesel in that book)

Basically, you point out that both energy quality, and externalities are variables that need to be considered alongside energy surplus. For this to ever happen, social leaders will have to accept that our current 'ends' may not be the most holistic. If we don't reassess the ends and the inner workings of our social structure, we will continue to just access the most profitable energy in dollar terms that we can, quality and environment be damned....


I agree that discussion of ends is vital. The spell of cultural 'normality' is powerful, and even people who are deeply discontented with their lives under the current order of things are mostly incapable of imagining any alternative organizing principle for economic activity. Our economic activity needs to be governed by long term ecological intelligence rather than by short term acquisitiveness. I personally do not regard such a transition in the light of a mere negative loss of comfort and convenience. It is a challenge that we need to step up to. It is strange how we admire tales of dangerous heroic quests, but cannot bear the thought of any interruption to our middle class safety and security.

This was precisely the gaping whole at the recent ASPO-USA conference. For the most part the presenters were stupefied by this question or actually assumed BAU-lite.

Well, I think there may be a BUA-lite for a few years. That's what everyone will be trying to support anyway. We'll see.    I think it depends on how far out you can see. The longer forward, temporally, you can envision, the less comparable to current norms / expectations you're likely to see (baring cold-fusion or some other techno-fix of course).

That is to say that no physical reason exists why rent and interest have to be paid in order produce economic output. Of course, I have been assured over and over again by a variety of people that any attempt to eliminate rent and interest will inevitably result in the creation of a monstrous, inefficient, socialist bureaucracy.

You're not trying to say that, (in your opinion), the recently passed 700 billion dollar economic bailout package was not based on any solidly quantifiable physical reality, are you? ;-)

Thank you for a great post BTW! I just wish that every politician, economist and legislator were asked to study this post and then were quizzed to verify their comprehension of the implications and only if they scored at least a B+ would they be allowed to continue in their current positions. Especially because it seems that current system is already a monstrous, inefficient socialist bureaucracy, then again maybe that has always been the intention all along...

This article is very nice, but it ignores the human factor.

Free labour is a necessary condition for scientific progress, but it is not a sufficient condition. There are many situations where there can be free labour but little or no scientific progress.

A powerful anti-science religion or establishment can stop scientific progress no matter how much labour is available. Europe during the Middle Ages is an example of this, as was Japan before the arrival of the Western Powers.

Likewise, if the culture pushes most of that spare labour and time into golf courses, beauty salons, and other diversions, scientific progress will be slower than if more of that labour went into science. The USA today is a perfect example of this. Despite having obscene amounts of wealth, the US produces precious little science.

The legal and political system can boost or hinder science. Restrictions, such as those imposed by censorship, patents, copyright, monopolies, and the likes can cause a lot of science (mostly applied engineering, but sometimes primary science too) to not take place. Corruption and graft (often overlapping with the above restriction) can also retard scientific progress by diverting resources.

A cultural emphasis on information, knowledge, or some forms of wisdom can boost science, while an emphasis on money, pleasure, or religion can be a great hindrance.

I've focused on science, but this can be said of any human endeavour. It's hard to maintain infrastructure if graft causes the average government project to be 4x as expensive as it would be in a perfectly honest society.

Your post brings to mind the thought also, that there must be a considerable amount of scientific progress that has come about to RESPOND to energy challenges, to improve our energy efficiency for a given system.

There is a theme that comes with this topic that suggests that Technological growth is somehow 'Extracurricular' to the art of survival, and only develops with the existence of a well-endowed academic class. In fact, a great deal of technical achievement, of materials sciences, transportation, communications and navigation seems to make it greatest strides as an outgrowth of war, when the furiousness of the purpose allows for the most 'Liberal' of experiments to be put forth.. not some kind of Roddenberry ideal society that achieves its highest arts and sciences once the wealth and energy surpluses assures everyone has the cushiest lounge chairs set out for them to do their 'real thinking' in..

This article is very nice, but it ignores the human factor.

My article is not an attempt describe (or prescribe) how technological progress is (or should be) made. I am just trying to explore potential limitations to our ability to continuously expand our productivity in a finite world. I think that we are fast approaching a point where no matter how good a job we do of fostering technological innovation we will not be able to engineer our way out of our problems if we hang on to the goal of everlasting growth in material wealth. If we can collectively embrace more intelligent goals then we may be able to leverage our scientific and technological cleverness to produce a high quality of life in a way that is not destructive to the long term basis for our physical well being.

I guess I did get sidetracked on the science issue.

Still, the human factor must be taken into account when you look at EROEI and energy quality. A resource that has an EROEI of 2 might work in a corruption-free society; however, a society with a 4x corruption factor (ie., 75% of any resources dedicated to a project are diverted or lost) would collapse, as 75% of the country's resources are lost and the remaining 25% are not enough to replenish the energy needed, no less the other necessities of life.

This corruption/waste aspect could go a long way to explaining why any EROEI under about 5 will fail to sustain our society whereas in theory only about 1.1 is needed as a bare minimum (ie., 90% of labour invested in energy and 10% in other areas).

PS: In this context waste and corruption are broadly defined and include or accrue from militaries, interest, economic rents, unemployment, corporate dividends, lawyers, police + crime, cronyism, inefficiencies or poor priorities (ie., just in time delivery), moral hazard (where you collect the benefits but don't pay the costs, such as with pollution and the limitation on liability in a LLC), and many other sources.

I agree that social organization and the human factor is very important. The productivity function I talked about depends not just on technology and physical infrastructure, but also on social infrastructure. You are right, I did neglect to mention this very important factor.

Starting back on March 25th I have been posting a series of 'explorations' regarding the deep relationship between economics and energy flow in general. With that blog I suggested that we consider an energy standard for money that would, like the gold standard, establish a quantitative value on the currency. The valuation I suggest is not embedded energy, as Smil has pointed out there are problems with this approach, but rather the net energy available to do useful work, or in your terms, working reserves of fuels. The concept might be thought of as the social equivalent of free energy in physics.

There are qualifications on the definition of useful work, however, that allow one to see an economy as using its energy wisely. To whit work that constructs machinery (levers) to acquire additional net energy during a growth phase (which I think we are past), work that improves efficiency in other work processes such that the net available is effectively increased, and work in maintenance of infrastructure and basic needs such as agriculture and shelter, are all forms of work that improve or maintain our energy flow. Even work that produces some entertainments (toys, operas, etc.) are useful in the sense that the human psyche needs relaxation and recreation to work maximally well.

Subsequent blogs continue to explore the implications of the economic significance of energy flow including the issues of governance as hierarchical control systems and the role of markets in coordination of work processes at the operational level.

The money definition blog starts here.

The current issues regarding the financial crisis and the effects of peak oil on the financial markets can be read by going to:
Question Everything

Good work Roger.


The valuation I suggest is not embedded energy, as Smil has pointed out there are problems with this approach, but rather the net energy available to do useful work, or in your terms, working reserves of fuels. The concept might be thought of as the social equivalent of free energy in physics.

Economic value is use value. Of course with zero energy no use value can be created. However, the amount of use value that can be obtained from a given energy flow depends on the over all organization of society and the development of technology. So, if houses use passive solar designs and are super insulated, then the amount fuel required to produce the use value of comfortable interior space is smaller. If food is grown relatively close to where people live, if nutrients are recycled, if drip irrigation used, etc., then the use value of nutritious food can be provided with less energy consumption. I agree that "man does not live by bread alone" and that we need rest, recreation and entertainment, but it is far from clear to me that we need expensive, energy intensive entertainment systems in order to achieve psychological health. Wealth is undoubtedly related to energy flow, but it is also related to the technology and infrastructure which utilizes that energy flow, as well as being related to human subjective perceptions of what constitutes a high quality life. is far from clear to me that we need expensive, energy intensive entertainment systems in order to achieve psychological health.

One of the similar things I discuss in my blog.


I agree that "man does not live by bread alone" and that we need rest, recreation and entertainment, but it is far from clear to me that we need expensive, energy intensive entertainment systems in order to achieve psychological health.

One can take a different angle on this as well.

The fraction of light that enters your eyes from a tv screen or fraction of sound energy that enters your ear from surround sound speakers is almost infinitesimal and can in principle be faithfully replicated using a few tens of milliwatts of light and sound. Virtual Retinal Displays using efficient diode lasers and high quality head phones(with binaural recording for spatial localisation in recorded sound and high quality HRTF for computer generated sound) can begin to approach these limits with insignificant loss of quality. Decoding high definition TV already takes on the order of a couple of watts and it's a safe bet it's going to fall over the life of that standard. People don't seem to be all that more happy with the PS3 or xbox 360 that consume ~100 W versus the wii that consumes ~10 W.

Outside of the server space there's not much of an incentive to try to reduce power consumption so we won't necessarily go towards lower power devices unless electrical energy becomes very expensive; but there's certainly nothing preventing us from building expensive, energy efficient entertainment systems. The power is roughly proportional to the cube of clock frequency for CMOS(because you have to increase the voltage to attain a higher frequency), but only proportional to the number of transistors; it is quite trivial to make processors much more energy efficient at a small cost of speed(as is done in notebook processors) or by going much wider and at lower clocks(at a cost to the mental health of programmers everywhere and potentially chip yields; massive amounts of die area are dedicated to huge caches, register renaming, out of order execution, speculative execution and other tricks to slightly improve single threaded performance).

I talk about the mistake we make in thinking the effects of Moore's law applies to everything in technology in my blog. Moore's law doesn't apply to heat engines and prime movers that are required to make stuff. What you point out, about the reduction in power consumption of devices may be true, but it leaves out what energy is consumed in making those devices. Is it really a worthy endeavor to divert so much energy toward the support of an entertainment industry when we might be directing it toward building concentrated solar power generators? In light of peak oil it seems to me that we had better choose our energy consumption activities very carefully.

Thanks for a rigorous and transparent argument. This could one hopes seriously help in areas where otherwise we only bandy opinion.
Could for example biofuel farming in the USA be better quantified? I have held the opinion on grounds of EROEI alone that biofuel production is a desperately bad choice, and that farmers in US conditions would likely not be able to grow even their own fuel to do the farming, let alone be able to generate enough surplus to pay for NPK, machinery, and the wages needed to maintain their own and workers consumption levels.
However, perhaps with even a small positive margin of EROEI (and perhaps renting out land for a TB Pickens wind turbine :)) the farm could at least fuel the use of its own machinery. Additionally, soil nutrients need not be exported from the farm (as happens in the case of food production) as only the carbon and sunlight need be sent away. Such a 'positive' scenario might work for the farms but obviously would not support urban America! Is it possible using Roger's approach to help frame debates with some figures for different scenarios?

The most efficient way to get food is through tree crops that don't require plowing, seeding, or mechanized harvest, and which can be preserved for future use by drying or canning. Growing a quart ton of fruit in the front yard over a span of several months each year is a reasonable goal for any homeowner. On a national scale, this would make a significant difference.

What a puzzle! Why do we spend so much on so much that could be got far easier, and that isn't worth anything anyhow?

I think for example, tree produce- I remember picking up sacks and sacks of nuts as a kid in the mountains of Tennessee, and now, never buying any meat since I can pick off 2 or 3 deer every fall with almost no effort at all- yes, the freezer does take some energy, yes, I know.

But much more than that, why not recognize the most obvious fact- a huge hunk of "economic" activity should never be done at all. Examples- the 25 different varieties of peanut butter; almost all children's toys, esp. the ones with batteries; and every single one of the items in that gadget catalog I just got and have tossed into the recycle bin. And almost all the long trips my frinds make so often- I am thinking they are hopelessly trying to away from empty lives, and could far better just go down to the pub and get drunk with some other cypher - if there were a pup, and some down to go to instead of their slumping into a coma before the telly or skooting off to Tokyo.

And all this worthless activity makes the planet a poorer place for our grandkids. KRAZY!

And, getting personal, just let guys like me die at the time nature intended instead of propping us for a couple of decades with damn expensive drugs and attention.

And, what the hell are we talking about energy shortage for when we all know full well that there is more -more more than enough for all and every one of us- and we know how to get it and distribute it- from Arizona to my little house in the woods. Costs too much? Balony, pay for it by quitting doing all that worthless but expensive stuff we are doing now.

You are right the much of our current economic activity is useless. Unfortunately the way our society is now organized one person's useless purchase is somebody else's "savings". This form of economic organization is completely insane. The only store of value possible is a healthy economic community supported by a healthy ecosystem and an adequate resource base. Manufacturing more HDTVs and SUVs in the present is damaging our collective long term security rather than enhancing it. The scene in Orwell's 1984 where Winston is led momentarily to believe that 2+2=5 is nothing compared to the achievements of the propaganda machine of modern capitalism.

What a puzzle indeed. As soon as farming become even slightly industrial, the demand was for crops that could be harvested mechanically, because seasonal labor has always been scarce. This led to an emphasis on grains like wheat. And when people went to the cities, they had to buy all their food. Most people have never grown a significant part of their own food, and they completely draw a blank on fruits, berries, and nuts.

Using the land near our houses to grow food rather than pumping huge amounts of treated drinking water on to it, dumping nitrogen fertilizer and herbicides onto it, and burning gasoline to run lawn mowers and weed whackers, in order to grow mono-cultural plantations of grass would certainly be a huge improvement in resource use.

Thanks, Roger, for reminding me of the great american lawn as a really good really bad example. I quit mowing our lawn quite a while ago since the fumes made me dizzy, even tho I sort of liked keeping that old Briggs engine going as a slightly challenging hobby. My ever-industrious wife has now converted the grass to shrubs, nooks, paths, pools and flowers, and we are both happier for it. Her hugely productive garden is across the road on the sunny side of the hill, and has never had a gram of store-bought fertilizer- or gasoline.

That's an impressive analysis.

I'm wondering if there is any actual historical data which plots factors like µ, r, and f over time as compared to actual economic output.

Another possible plot is the employment of the energy industry vs. total employment, perhaps weighted by salary. That should be a good indicator of resources dedicated to energy extraction in the modern era (but would probably not be meaningful in the horse and ox era).

A small scale example of optimum extraction effort would be a farm in which the machinery is powered by biofuel grown onsite. Some suggest 10% of the acreage is needed but I think it is more like 40-50% in which case the other outputs (=food) are severely constrained. Yet this is where we are heading. As pointed out tree crops require less machine effort compared to soft stemmed annual plants. When you feel like pizza have a nut burger instead.

Another issue is that more physical work may lessen the need for recreation. The homesteaders spent their days milking the cow and churning butter, not surfing the internet. They didn't need to buy gym memberships to keep fit or get laid since the human race still exists.

Off thread but believe all soils can be improved over time by mixing fractions (sand, clay, humus etc) helped by aeration and earthworms.

I did a detailed analysis of possible energy return for ethanol that I haven't published yet. It is hard to come up with an exact number since as the process becomes more efficient you have to consider energy costs that are negligible in the analyses that have been published to date. But the results are well over 10:1, without sacrificing yield, when you use sensible methods of production. And this was with corn, which isn't the most efficient.

Henry Ford was closer to the mark:

There is fuel in every bit of vegetable matter that can be fermented. There's enough alcohol in one year's yield of an acre of potatoes to drive the machinery necessary to cultivate the fields for a hundred years. -- Henry Ford

The aspect of technological progress that makes high yields possible today is largely the tractor/plow/harvestor. That mechanization requires only a very tiny percentage of the fuel produced. It only takes about 5 gallons of ethanol to run the tractor to produce several hundred gallons of ethanol. Then, we get monumentally stupid by doing things like using fertilizer (the biggest energy input) instead of using winter cover crops to fix nitrogen. To make matters worse, we ship the corn off to be processed elsewhere and lose the nitrogen in the corn. Look at the formula for ethanol. C2H5OH. How many nitrogens are in that? Zero. Yet we are adding massive amounts of nitrogen derived from natural gas to the soil to replace nitrogen we are wasting - and much of that runs off and pollutes streams. Likewise for other fertilizer nutrients. Everything you need to make ethanol molecules is in CO2 and H20. And it turns out you can harvest the corn crop, crimp/mulch the residue, and plant the cover crop at the same time and do the same going in the other direction. The use of biochar can help the soil retain nutrients.

Petrochemical pesticides are another significant energy input with dubious benefits (they kill beneficial insects, for example) even for food production and even less for fuel production. You can't sell corn on the cob, for example, if pests have eaten part of the ear but your still is less fussy about using the kernels that haven't been eaten. And biological pesticides like BT can easily be fermented on the farm.

Distilling the ethanol, another significant energy input, can be done with energy from solar concentrators. And even less energy is required if you don't distill to anhydrous so you can mix it with gasoline.

Planting three sisters, corn, beans, and squash, gives higher yield per acre, even if you don't use the beans and squash, which we don't do because our harvesters can only process one crop at a time. But the fermenter doesn't care if a few beans get mixed in with the corn and will even extract a small amount of fuel from them.

And all of this can be done without a significant change in the amount of human labor, and the farmer gets more profit. The tremendous amount of waste in current ethanol production is pure waste that serves no purpose other than to enrich the petrochemical companies. And where do farmers get their education? Effectively from the petrochemical companies, monsanto, etc. Most agricultural research money is devoted to results that benefit those companies, not farmers and society.

Is any farmer actually driving a tractor exclusively on hooch? Maybe there are some but they are keeping their heads down from the tax authorities. A canola grower in Australia boasted that he made all his diesel and then had to pay 38c a litre fuel duty. He shoulda kept quiet. Still a 100hp tractor does the work of 100 horses and half a day's fuel fits into a jerry can.

Re NPK cycling I think humanure, composting and companion planting must be part of the future. Once the cities and suburbs are reconfigured that is. In the Wall St victory gardens there will be a sign 'use your pee wisely'. A smidgin of external NPK could be used as a booster if the system has some spare energy to do that. Spare energy will also needed for welding and repairing machinery. When we know all that for sure, perhaps in a decade, it will be clearer how many people such a system can support.

What are the main points of the article?

The article would be accessible to a much larger audience if there were a Summary or Overview at the beginning and a Conclusion at the end, written in layman's language.

For all you mathematicians, physicists and engineers, there is a high Return on Investment for making your work understandable to the 99% of the rest of us.

Bart Anderson
Energy Bulletin

Sometimes summaries do not work very well, if you want one I will give it a try:

  1. The cost of finite non-energy production resources such as labor, land, fresh water, etc must be accounted for in determining the economic benefits of energy production in addition to calculating the energy balance.
  2. Energy sources with low net energy balance will tend to have higher non-energy resource costs at a given level of net energy production compared to high net energy balance sources.
  3. If the opportunity cost of the non-energy resources required to produce 1 net unit of energy are equal to the value of the unit of energy, then the energy production process has no economic benefit no matter how good energy balance may be.
  4. In scaling up energy production to large levels the opportunity cost of using non-energy related production resources can rise dramatically. So if producing large amounts of oil shale involves obtaining 40% of the water rights in some large area of the American west then the opportunity cost of this expansion may be far larger than would be computed from the current market price of water in those areas.
  5. Use of cheap abundant energy is limited by marginal utility. That is as we extract more and more energy it becomes more difficult to produce of sufficient economic value to justify the extraction of a marginal unit of energy. This claim implies that a strong motivation has always existed to increase the efficiency with which energy is converted into economic value. Therefore the assertion of some people that as energy becomes more expensive we can easily maintain economic growth via greater efficiency is doubtful.


I added your summary to the end of the post. I also mentioned it in my introduction.



Thanks for the summary. I do not follow the logic of the second part of point 5;

"This claim implies that a strong motivation has always existed to increase the efficiency with which energy is converted into economic value. Therefore the assertion of some people that as energy becomes more expensive we can easily maintain economic growth via greater efficiency is doubtful".
In developed countries economic growth has been about 1.3% higher than energy growth for a long period, showing that the first sentence is true, BUT I do not understand the logic of your questioning the assertion that we can maintain economic growth via greater efficiency. Is there any reason to think that the declining energy intensity of world GDP cannot continue indefinitely?

Also, some energy sources such as wind and solar have a higher EROEI as the technology improves.

My comment about the difficulty of maintaining economic growth was meant address the case where energy costs rise significantly as fossil fuel supplies decline. If such a cost rise occurs (I personally believe that it will.) then a substantial extra burden will be placed on our technological cleverness with respect to maintaining economic growth. Coal is still the fastest growing energy source in the world so it looks like wind and solar have not yet arrived as cheap fossil fuel replacements.

By the way what do you mean by "indefinitely"? Three percent growth for 1000 years would imply growth of the economy by a factor of 6.9 trillion. If human beings are going to be around on this planet for the long haul we are going to have get past the growth thing. When you consider things like global warming, the rate of species extinctions, soil erosion, etc. it seems like now might be a good time to get started, at least in the OECD countries.

Thanks for clarifying the assumption is that energy is going to become relatively more expensive. I would agree that oil is going to become relatively more expensive, but the trends for solar and wind are declining and the relative cost of electricity relative to other energy sources has also declined over the last 100 years as the technology of electricity production and distribution has improved. The 25% per year growth rate in wind capacity doesn't have to continue for very long for wind to be a dominant part of the energy supply.
What I mean by the energy intensity will continue to decline indefinitely is that as peoples basic needs for food, shelter are met, they use more of the GDP on services, intellectual property entertainment. None of these are very resource rich. We could have food, shelter only 0.1% of GDP but use much more of GDP on beauty treatments, live plays, movies, internet, (finance?)etc . One can only eat a limited amount and sleep in one bed and drive one vehicle at a time but information and entertainment has no limits. This is not a new trend and I don't see how it is related to the price or availability of energy. Who uses more energy, a hunter sitting in front of an open fire or a person sitting in front of a plasma TV ?. Growth is sustainable if it occurs without using more resources.

The idea that we should provide for our material needs as efficiently as possible (i.e. with smallest possible amount of resource consumption) and concentrating the rest of our efforts on recreation, intellectual and artistic development, etc. is a good one, but I am skeptical that such a way of life can be achieved in the context of growth oriented capital markets.

You say that there are no limits on information and entertainment markets, but a limit does exist: Time. The average human being is only awake for sixteen hours a day. There is only so much information and entertainment that one person can take in (not to mention the time required to take care of old fashioned material needs like the provision of food, clothing, shelter, sanitation etc.). Therefore long term growth in the information/entertainment market must be a growth in quality rather than quantity.

So one group of people is sitting around in a room figuring out ways to produce superior entertainment in a purely dematerialized way that does not consume physical resources which they are going to trade for some dematerialized entertainment produced by another group sitting around in another room. Explain to me exactly how providers of capital are going make money by financing this kind of activity?

If you look a real world entertainment industry like the movies their profitability is tied things like selling lots over packaged food produced in centralized manufacturing facilities, co-marketing of useless merchandise, and to the home market where, the last I checked, the size and performance of home theater systems was still rapidly increasing.

If we want to use resources in a sustainable manner we have to adopt the explicit intention doing so rather than trusting that capital markets are going to become 'green' just because resources become expensive.

As economies reach a higher GDP per capita, there is a shift from manufacturing and consumption of goods to am expansion of the service industry.This trend has been going on for at least 100 years. If everyone has X10 the present "wealth" some would go out and buy X10 the number of "things" but there are limits for most people. A more expensive car won't use X10 the fuel or have X10 the resources, but it will have more labor, more post-sale service. People may move to up-market restaurants but won't eat X10 as much food, but will get more service. In the US economy almost everyone is providing services to others. Only 2% of the population grows food, and while food only accounts for <15% of a family budget, most of that is the processing, distribution and preparation costs.
If energy becomes relatively more expensive, this will decrease the energy intensity even more( as occurs in Europe and Japan now because energy is more expensive). The failure of the capital markets in the US to become 'green' is probably because energy has been so inexpensive and even at $4 a gallon gasoline is still ridiculously inexpensive.
Thus the slope of: Average productivity/worked hour// energy/worked hour will become steeper as energy intensity decreases.
Its my observation that many college towns in US derive most of their income from "education", and the rest of the town providing services for students, academics and each other. If energy became X10 more expensive these activities would continue, perhaps using energy for transport, heating, lighting more efficiently but these are not big inputs and are not going to change the average productivity/worked hour. If only 10% of the energy/worked hour was available to this town, most would have to walk, street lighting would be reduced, less energy would be available for heating and cooling but the number of graduates/year would be the same, assuming that all other towns had to also reduce energy use.
Entertainment charges show that there is no upper limit to what people will pay, if they have the wealth, premium seats at theater, concert, sports events have no relationship to cost often being X10 more expensive than economy seating. The expensive seats don't use X10 as much energy.
Why do you think that growth has to be only in quantity not quality? The up-marketing of coffee, foods , wine shows how much grater value can be placed on a very similar product.

Don't talk silly bart, if they made it easily understandable they would immediately cut in half the positive energy balance deposited in their bank accounts and would risk starvation. I am mad as hell at my son for that very reason, he is a physics major but has taken courses in journalism as well. No security for me in my dotage now.

I can normally skim the more technical articles and still see the context and implications. This has one me totally lost!

My take on the article is that it tries to quantify worker productivity (i.e. GDP/#Workers) by excluding the productivity that goes into generating the source of energy itself.

In other words, there is a "sweet spot" for maximizing the non-energy-related productivity by adjusting the labor efficiency (µ/r).

In the end, if we can get labor efficiency to an exceedingly high number, then all the productivity goes asymptotically to good effect, i.e. non-energy-related. But this won't happen because we will spend more and more of our time trying to get energy.

Overall, I would classify it as an EROEI type argument but instead applying it to worker productivity instead of energy itself. I always thought that worker productivity is the same whatever it is applied to, as long as people are working, they stay out of trouble. It may become more and more menial over time, and we may convert to an agrarian society, but so be it.


The other piece of the argument is how best to apply energy. If we apply it wisely to improving productivity instead of wasting it on non-productive areas, then we can still improve our standard-of-living and R&R time. It thus becomes an optimization exercise on standard of living. This part of it has everything to do with how P[E] is chosen. For illustrative purposes, he chose ln(E+1) which then generates an optimum of how much labor efficiency we need to reach a maximum.

At a given point on the P[E] curve the value of µ/r which maximizes the total production

At this point I would like to see some numbers plugged in to make it concrete. I will not try to do it, and wait for Roger, because I will likely waste a lot of time getting the dimensional units correct.

This discussion sounds comic when you talk about cases where food is freely available, but it has an uncanny attachment to a real-world case. I was a Peace Corps volunteer in 1969-1971. Around that time, I believe, I read an account of another volunteer in a tropical environment, where he worked in the fields each day with the people of the village. The work may have been something like cutting sugar cane.

They had no money to spend and not much they could buy anyway, but they could easily walk to the edges of the fields and find bananas, ready to eat. This volunteer, as he did the mind-numbing work, tried to determine what the level of energy (e.g., calories) it took to do the job, equated to in bananas. I believe you could go from early morning to about noon on about 12 bananas, after which it simply became too hot to work at all.

7 Large bananas contain 3532 calories, 1g of protein, 1/3g of fat, and 116g of sugar and an assortment of nutrients. Provides the energy, but would be pretty dangerous diet to live off of for an extended period of time.

cost of that wood is the labor required to gather it.


sparsely populated tropical paradise


Use of cheap abundant energy is limited by marginal utility.

This analysis seems to start from the point of view that there are no limits. Then here and there a few things are noted as being finite. [Not the slaves though.] The part of the "curve" that's interesting is the endpoint, the limit, not the frontier where everything is wide open. I'm not willing to extrapolate from wide open to behavior around discontinuities and systemic limits. Not only the limit of a resource, but perhaps the overall life support required by all those slaves.

cfm in Gray, ME

From my quick scan of the theory I could not see an allowance for a, human contentment, and b, human imagination.

As an example of how imagination can vastly change human work loads. At one time in my life I was a supervisor in a plastics factory making PET Coca Cola bottles. The production line put out 6 bottles every 20 seconds. At the end of the conveyor was a packer who had to pick up 2 bottles at a time sandwiching a 3rd in between, and transfer them to the pallet stack which was 12 bottles by 12 bottles 12 layers high. This was barely manageable and required 2 people to change the pallets. Management absolutely refused to spend any money on handling equipment, which made the night shift very difficult to manage with all of the other processes required to done during the shift. In frustration one night I took a broom handle, drove into it 13 nails, covered the nails with plastic sleeves, and produced the first (for New Zealand anyway) "pick up stick". The packer was now able to pick up 4 times as many bottles with each movement. He could there after handle the full work load of 2 production lines, do the pallet changes unaided, and get in some rest and reading time as well. Development time?..1/2 an hour. Cost?..$5.00. Time saving?... 1.2 man years per year. Thanks?...None.

Small innovations can make a huge difference. How does the good student cope with this in his formula?

Can Sustainable Cities Save The Planet?

By Walter Libby

Can sustainable save the planet? This is a good question and it deserves a good answer. But a more relevant question is, can sustainable cities save the United States? Our rising unemployment rate in the global economy has finally caught up with us—we are out of bubbles and are now a nation at risk. With nine straight months of job losses and a looming financial crisis, our prospects look grim—despite the efforts being made to prop up our financial system.

The problem is we are in liquidity trap. Here, despite low interest rates, the infusion of new blood, the cash that is being pumped into banks will just sit in their vaults as recession forces consumers to cut back on spending forcing firms to cut back on production, investments and workers perpetuating the cycle pushing the economy ever deeper into crisis.

The question now becomes, how do we get out the trap? We can’t look to a turn around in residential construction. But we can look to a turn around in our thinking as we shift from urban sprawl to the development of new cities designed along sustainable lines. So together with their development and the investments in renewable energy they will begin to pull us out of the trap.
The advent of peak oil has convinced venture capitalists to get busy in saving the planet. Now we have to sell the idea of new cities to investors, developers, and the people, and that requires a model that captures their imagination and investment dollars. So following in the footsteps of Ebenezer Howard, here’s how I see cities of tomorrow: clusters of neighborhoods (linked by elevated transportation arteries shared by electric vehicles, bikes, pedestrians and rapid transit systems) will form the city. These neighborhoods are large terraced multi-storied structures sheltering thousands. Here their terraces are reserved for greenhouses and homes and their centers for factories and fully controlled-environment farms.
So, as you walk out into your neighborhood you encounter not hallways but wide walkways, allies and breezeways lined with trees and plants, schools, hospitals, libraries, theaters, businesses, shops, and restaurants—all within walking distance, or a short elevator ride. And when you go to the first floor, at ground level you find barns (for pigs, beef and dairy cows, and chickens that are harvested next door) opening onto natural habitant mixed with organic farms, orchards, parks, playgrounds, and golf courses. Here, instead of sending our table and produce straps, our unwanted leftovers, dry bread, spoiled fruit to landfills, we recycle them to neighborhood barnyards or to community organic orchards and gardens.
Once there is a sufficient population, a larger central city is built. This is the cultural center of the whole. Here you have universities, the larger hospitals, museums, aquariums, zoos, sports stadiums, theaters for the performing arts, large central parks, plazas, street performers, and so on.
New cities are going to play a significant part in our economic recovery. And they are not going to be connected by super highways but by railroads carrying passengers, cars, trucks, commodities, construction equipment and freight.
New cities, as an alternative to unsustainable urban sprawl, by itself is a strong selling point. Add to that greater efficiency, lower taxes, and a mix of town and country. But its best pitch to the captains of industry is that they are necessary for our national security and confidence in general—for Wall Street and Main Street, and for those in the world who doubt that America can resolve its economic crisis, our ability to bootstrap our economy.
Yet, while the development of new cities will rev up our economy structural problems still plague the global economy—it’s unbalanced and so unsustainable as witnessed by our mounting trade deficits. And given that the financial crisis was brought on by our loss of jobs to the global economy (the housing bubble was the result of the Fed lowering interest rates to rock bottom in a desperate and vain attempt to avoid recession following the collapse of the bubble), we have to ponder the question, is capitalism collapsing? And this poses challenges not only for America and democracy in general, but for communist China, Russia and Venezuela as well.
China, having taken the capitalist road, has pretty much captured the means production as multinationals, in a race to the bottom, in a race to China to beat their competitors, have left in their wake socioeconomic crisis in their respective countries—notably in the U.S. In the process China has pretty much become the factory to the world. And in doing so have created a contradiction in the global economy—who are going to buy its products? This is a contradiction that threatens China.
And Russia and Venezuela, as oil prices plummet with a global collapse, face economic ruin—along with the rest of the oil producing countries. We need a new global order, a new world agenda.
Mikhail Gorbachev has stated such in The Search For A New Beginning: Developing A New Civilization.
Essentially, Gorbachev is touting sustainable development. Yet, he says “It has been the fond hope of many that the end of the Cold War would liberate the international community to work together to avert threats and work in a spirit of cooperation in addressing the dangerous problems that affect the world as a whole. But, despite the numerous summit meetings, conferences, congresses, negotiations, and agreements, there does not appear to have been any tangible progress… Between the old order and the one lies a period of transition that we must go through—moving toward a new structure of international relations marked by cooperating, interacting, and taking advantage of new opportunities. What we are seeing today, however, looks rather like a world disorder.
It is my belief that today’s policy makers lack a necessary sense of perspective and the ability to evaluate the consequences of their actions. What is absolutely necessary is a critical reassessment of the views and approaches that currently lie at the basis of political thinking and a new combination of player to envision and carry us through to the next phase of human development.”
The next phase of human development is the development of new sustainable cities throughout the world. As a start we should also pursue the moral equivalent of war. The industrialized nations should form an economic coalition to assist the Palestinians, the nations of Afghanistan and Pakistan, and other nations in turmoil, in the development of new cities. Peace through prosperity.
The idea of cooperation didn’t begin with Gorbachev, it began with the atom bomb—war was out and cooperation was in. So after World War II, The World Bank and the IMF (International Monetary Fund) came into existence. Their combined mission is to foster economic growth, high levels of employment, while providing temporary loans and financial assistance to relieve debt.
While that mission remains the same its focus should now be on the development of sustainable cities. The world faces an energy crisis as the production of oil peaks and then declines, as well a looming water crisis exacerbated by the increasing threat of droughts. Their mission should be now to focus on the development of renewable energy to power control-environment farms. And then add on the neighborhoods.
The thing is it may well beyond the scope of the World Bank and the IMF to implement. Therefore we need a summit meeting of the industrialized nations to forge a consensus along with working out just how this is to be accomplished.
That said, however, the first condition of the summit should be that loans or direct investments tied to the development of natural resources in the developing countries require that their leaders will channel their revenues into the development of sustainable projects while ensuring the workers receive wages sufficient for the necessities of life along with low interest loans to purchase their new homes —this means that the enlightened nations will only support democracies and work together to convince dictators and corrupt officials to rethink their positions.
There is also something that all nations should consider: that it is in their best interest that they shift to a global economy where trade is no longer a zero-sum game, but a sustainable end game where everyone wins--it's about cooperation and balancing trade
There is a huge amount of work (enough to keep us all busy) to make the transition to would-be sustainable cities throughout the world, and that requires that nations with a trade surplus, who are shifting their economies (their workers) to the development of new cities, turn to those nations with a trade imbalance--an imbalance in employment--take their foreign reserves and invest in or directly trade for whatever is necessary to facilitate and expedite the building of their cities.
Thinking that pressuring China to revaluate its currency as a solution is wrong-headed. It will only create unemployment for China and inflation for others.
And for those who think that the conflict Marxism and liberal democracy as inevitable, they should think again—think about where sustainable are heading.
Sustainable cities are on built on three legs: they have a source of renewable energy, produce their own food, and have the ability to manufacture their own necessary consumer goods. Today we have the technology for the first two and eventually tomorrow’s technology will replace low-wage workers with robots as the final assemblers in fully automated factories--automated factories that can be scaled to provide the necessary consumer goods on a local level—eliminating middlemen and transportation costs.
When that day comes their will no be longer a struggle over the means of production and we’ll find ourselves at the end of history—the end of the historical ideological battle between liberal democracy and Marxism. And when that day comes we’ll also see the world’s population stabilizing just as in the industrial nations populations have stabilized (the U.S. the notable exception—but that works as it allows us build new cities) as they modernized and urbanized.
Here, Marxism finds its final resting place in the dustbin of history. Seeing history as written in stone—seeing conflict as the final solution—is a bad idea.
On other hand it is democracy, freewill, that puts forward the ideas to meet the challenges that a fast changing presents. But here too we have an ideology based on self-interest that is false and cowardly. Self-interest rightly understood is a collective-free-market-will that puts aside the issues that divides us and focuses on the ideas that insure the integrity of whole. The “invisible hand” as it guides ”the butcher, the baker, the brewer” has to be replaced with the hand of reason—hopefully enlightening those who subsist on corruption and greed
Humanity was conceived ignorance. As such Gorbachev reflecting on the past tells us ”Conflicts and wars have been an organic part of history.” Another way of saying it is that “there will be trials and tribulations.”
So we have choice, on both sides, continued conflict, continuing ignorance, or emerging cooperation. If conflict remains in place there’s another determinism to be considered—the historical determinism of weapons—best expressed by the dialectics of Marxism. The United States (the thesis) was followed by the rise of the Soviet Union (the antithesis) who together cannot exist without constantly revolutionizing the means destruction and exchange—nuclear weapons and ICBM’s. Eventually their numbers will reach a critical mass, and a great leap occurs, leading not to a synthesis, but the victory of matter over mind, the end of all history. This was “the backbone of perestroika.” It is why the Soviet Union was allowed to collapse. It is why Gorbachev posits a new world order. As I see it, a new world order where sustainable cities mark the beginning of a new epoch that not only saves the planet, but also saves us our from ourselves.
Controlled-environment farming: In a world facing the challenges of severe droughts and extreme weather, looming worldwide water shortages, along with rising oil costs and rising food prices controlled-environment farms are being touted as the answer. While there are variations of indoor farming, they all are pretty much based on hydroponics and tout the same economic efficiencies. They all can be located within cities or neighborhoods. They all run on electricity, require no pesticides, herbicides nor fertilizers (all derived from fossil fuels). They produce crops year around, and depending on the technology, use from one-tenth to one-twentieth the water of conventional farms. They not only use less water, they can use recycled water from the surrounding communities.
One up and running venture was the Phytofarm (re: Discover magazine December 1988, The Green Machine: Indoor Farming). This is a fully enclosed farm fed by artificial lighting where one acre can produce 100 times the yield of conventional farms (day or night). And while it was geared to produce leafy greens and herbs, there is practically nothing that cannot be grown indoors—albeit it would require a shift to growing some food in composted earth pots. Yet, while the project had a successful run, producing sought-after high quality crops, for a number of years, in the end it lost out due to high-energy costs and closed its doors in the early 1990s.
Today, vertical farms are being touted along the same sustainable lines. Essentially these are high rises with greenhouses stacked on one another. Yet, they have not attracted any investors and so their technology remains in doubt. But phytofarms are a proven technology and they too can be stacked on one another. And they can start producing with the completion of the first floor. As such, the investment here can play its role in a sustainable economic recovery.