The physics of long-run

global economic growth

 


Where does money get its value? What is the physics of economic wealth? What conditions allow for economic innovation and growth? Is 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?


Perhaps a model for economic growth can be devised that is based on intuitive thermodynamic reasoning rather than traditional macroeconomics. Globally aggregated physical and human capital requires sustenance to maintain all of its associated activities, and this might be expected to require a proportionate dissipation of our energy resources.


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). 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 less than half this. In the interim, energy consumption and wealth grew equally rapidly in the interim at an average rate of 1.9% per year.


In physics, constants of proportionality 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  value λ that relates civilization’s economic wealth to its rate of energy consumption dramatically simplifies what is required in order to make robust long-term estimates of where the global economy might be headed.


The question shifts from the traditional approach of looking to economic policy to one of assessing the geological availability of fossil reserves: will we uncover new reserves faster than we deplete them?


Sustaining long-run global GDP growth requires us to constantly accelerate growth of global power capacity. Where will this power capacity come from? Can we sustain continued growth by discovering energy reserves faster than they are depleted? And if we can, what does this imply for our climate?


Many point to energy efficiency as an escape, where we get more economic output for less consumption. The seeming paradox is that improving global energy efficiency does not offer a solution. Efficiency benefits prosperity. Through positive feedbacks this leads to faster global growth into the reserves that sustain us, and then faster consumption of energy and raw materials. Carbon dioxide emissions also accelerate with their associated negative feedbacks on economic growth. Stabilization of emissions is only possible if 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).


These conclusions are naturally a bit depressing, and perhaps unpopular. Hopefully though, a robust model for the trajectory of civilization can help us to understand where we are headed.



Questions, comments, reprints?

What do you think an economic model should look like? Here’s my contact.