The physics of long-run

global economic growth

 


What is wealth? What conditions allow for innovation and growth? To what extent does our global economy rely on raw materials and energy? Can we decouple global economic growth from climate change?


The coming century is guaranteed to be one of immense change. At current exponential growth rates we will double our energy demands in just 30 years, adding as much to our consumption capacity in our working lifetimes as we have in the entire history of civilization.


My work describes a model for global economic growth based on physics rather than traditional macroeconomics. Looking at how energy and matter are transformed by the economy taken as a whole, it accounts for the past with a minimum of bells and whistles and provides guidance for what we can expect from the future. Instead of focusing on what should be done, it asks rather what will happen given the very general thermodynamic constraints that govern how systems emerge, survive, and grow.


The core finding is that simply maintaining our current economic wealth requires continual energy sustenance. Like a living organism, civilization requires energy not just to grow but also to maintain its current size or wealth.  All components of civilization, whether human or physical, have no innate value; instead they acquire economic value through mutual connections since these enable the circulations that define humanity. These circulations between and among us and our stuff require a consumption of energy. Viewed very generally, our total civilization wealth is directly tied to this energetic power through a constant.




Expressed quantitatively: summing over all the world’s nations, 7.1 Watts is required to maintain every one thousand inflation-adjusted 2005 dollars of a very general representation of historically accumulated economic wealth. 


To be clear, this relationship does not apply to yearly economic output or GDP, nor to the more restrictive view of wealth as physical capital found in traditional economic models. It is independent of the year that is considered. As of 2010, civilization was powered by about 17 trillion Watts of power which supported about 2352 trillion dollars of collective global wealth. In 1970, both quantities were smaller by more than half. In the interim, energy consumption and wealth grew equally rapidly, but at variable rates that increased slowly from 1.4% per year to 2.2% per year.


Expressed in terms of the GDP, the relationship is much noisier, but on average every 1000 dollars of year 2005 inflation-adjusted gross world product requires 7.1 additional Watts of global power capacity to be added that year, independent of the year that is considered.


Constants of proportionality are what 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). Constants form the basis for all that follows. All other physical results are just math.


The constant  of proportionality λ that relates civilization’s economic wealth to its rate of energy consumption tells us not just where we are today but it dramatically simplifies and constrains long-term estimates of where the global economy is headed. Because the constant ties economics to physics, robust economic forecasts become possible.


The most easily appreciated implication of the constant value λ is that sustaining the GDP will require constantly growing the global power production capacity; or, sustaining long-run global GDP growth will require constantly accelerating growth of global power capacity, i.e. that the rate of increase must itself increase. The question of growing wealth shifts from the traditional approach of looking to economic policy to one that is largely a matter of assessing the geological availability of fossil reserves: will we uncover new reserves faster than we deplete them or switch to renewables? If we can’t, what then? And if we can, what does growing fossil fuel consumption imply for our climate?


Many have pointed to energy efficiency as an escape from resource constraints, arguing that we can get more economic output with less consumption. This is true, but only locally. What arises from the constant λ is a seeming paradox: improving global energy efficiency benefits prosperity so that through a positive feedback, efficiency promotes faster global growth into the reserves that sustain us. With higher accessibility of these reserves, what follows is faster consumption of energy and raw materials.


The problem with accelerating economic growth is that carbon dioxide emissions also accelerate with their associated negative feedbacks on economic growth through climate change...unless the world switches away from fossil fuel power as fast as it grows: the equivalent of about one new nuclear reactor per day (approximately1 Gigawatt).


Ultimately, the goal of this work is to develop a robust model for the trajectory of civilization that is based to the greatest extent possible on the fundamentals of thermodynamics rather than the just-so stories of economic opinion. Only with testable principles can we eventually understand where we are headed.


What do you think an economic model should look like? Here’s my contact and a list of publications.