Where does money get its value? What physically is economic wealth, and what conditions allow for economic innovation and growth? What if our global economy is fundamentally supported by a consumption of raw materials and energy? And if most of our energy comes from burning finite resources of fossil fuels, what does this imply for future global economic growth and climate change?

The following pages address these questions through the lens of a new model for economic growth that is based on intuitive thermodynamic reasoning rather than traditional macroeconomics. The core hypothesis of the model is that civilization’s total economic wealth has been tied to our global capacity to power ourselves through the consumption of primary energy reserves. Globally aggregated physical and human capital requires sustenance to maintain all of its activities, and this requires a proportionate dissipation of our energy resources.

Observations support this hypothesis. In fact, in each of the past 40 years for which records are available a continuous 7.1 Watts has been required to maintain every one thousand inflation-adjusted 2005 dollars of historically accumulated economic wealth (not yearly economic output or GDP). Today, civilization is currently powered by about 16 trillion Watts of power, and this supports about 2300 trillion dollars of collective global wealth. In 1970, both quantities were less than half this. Both quantities have grown nearly equally rapidly in the interim.

In physics, constants are very, very useful. They provide a foundation for describing the world around us. Here, the finding of a constant link between economic and physical quantities may offer similar power. It dramatically simplifies what is required in order to make long-term estimates of where the global economy might be headed.

Among the implications of the constant are the following conclusions: 

1. •We can continue to grow our collective global wealth provided we continue to grow our global power production capacity.
   

2. •Sustaining global GDP growth requires that we not only increase global energy consumption every year, but at an ever faster rate.
   

3. •Improving energy efficiency can help to grow our wealth but...
   

4. •Improving energy efficiency ultimately leads to greater consumption of energy and raw materials at global scales.
   

5. •In a fossil fuel economy, we cannot become more prosperous and reduce our carbon dioxide emissions too.
   

For more on this approach and its implications see the following pages:

1. An overview of the foundations of the model
   

2. A description of the underlying physics with comparisons to traditional models
   

3. Jevons’ Paradox: Increasing energy efficiency accelerates energy consumption
   

4. Implications for future climate change
   

5. Published criticisms of this work, and why they misrepresent it
   

This work was initially developed under a NASA New Investigator Program award aimed at studying the non-equilibrium thermodynamic evolution of another extremely complex system -- clouds. More recently the work is being supported by grants from the Ewing Marion Kauffman Foundation and the Retirement Income Industry Association for their interest in the physical forces underlying economic innovation and growth (and whose views this work does not claim to represent).

Questions, comments, reprints?

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