The physics of long-run global economic growth

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 can be extremely useful as they provide a foundation for linking what initially seem to be two independent quantities (e.g. energy and frequency in quantum mechanics or energy and mass in relativity). Here, the finding of a constant link between economic and physical quantities may dramatically simplify 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. Our collective global wealth grows in lockstep with our global power production capacity.

  2. Sustaining long-run global GDP growth requires us to accelerate growth of global power capacity

  3. Civilization wealth grows because of improving energy efficiency but...

  4. Improving global energy efficiency leads to greater not lower global consumption of energy and raw materials.

  5. Increased global prosperity is strictly incompatible with reduced carbon dioxide emissions, unless...

  6. The world switches away from fossil fuel power faster than the equivalent of about one new nuclear reactor per day (approximately1 Gigawatt).

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. The work was 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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