Part of a post by John Quiggin, at Crooked Timber (a blog I usually consider of high quality!)
“Energy is important, but it is no more ‘essential’ or ‘special’ than many other goods and services in a modern economy. If the supply is reduced, the market will respond to bring demand into line, especially if this response is facilitated by sensible government policy.”
I’m struggling to find a suitable over-the-top analogy. Let’s go with: “Things made out of ‘atoms’ are important, but they are no more ‘essential’ or ‘special’ than all the other things not made of atoms in a modern economy.”
Seriously, this is one of those things that make me wonder–am I fundamentally stupid or insane? Because this seems so fantastically wrong-headed that it boggles my mind that someone thoughtful could say it in all seriousness. Seriously–either Quiggin or I have Failed Physics Forever. I mean, the market fetishism here is almost totally forgivable in the face of what is a major misunderstanding of How Anything Works by either JQ or I.
Energy–part of the basis of fundamental physical laws? Entropy? Anyone? Bueller? Bueller? Bueller?
Pertinent reading list (just to get you started):
- Tainter, J. 1988. The collapse of complex societies. Cambridge: Cambride University Press.
- Daly, H.E. and J. Farley. 2011. Ecological Economics: Principles and applications (2nd ed.). Washington, D.C.: Island Press.
- Norgaard, R. 2010. Ecosystem services: From eye-opening metaphor to complexity blinder. Ecological Economics 69(6): 1219-1227.
- Wikipedia, “Energy Economics“
- Ecological Sociology [blog], “Integrating economic gain in biosocial systems“
Tainter (whom I don’t totally agree with on several points, mostly to do with the possibility of “solving” the problems he points out) has an excellent lecture available on youtube.
Writings by Daly and Farley and discussion thereof can be found, among other places, at EcoTrust‘s People and Place.
(And if you’re curious about solving the pressing environmental problems of our times, why not check out The Solutions Journal?)
Isn’t limiting supply a tactic of monopolies to drive prices up?! Especially when it comes to a product where reductions are extremely difficult…but then again when gas prices sky rocketed a few years ago there were reductions in driving. I’m much more for the Ironman approach and coming up with an all powerful energy source that wont require reductions in use ^.^
Technology will solve all our problems!!! *cough* >.>
As a general thought, when someone you generally think of as smart says something that strikes you as unbelievably stupid, it’s worth considering you may have missed the point
Taking your atoms analogy seriously, do you think that the number of atoms used in the production of a good or service is an important indicator of its economic value? Are diamonds valuable because of their high atomic density? Should the US worry that it has an atom deficit? Analogies of these claims, and many equally silly ones, are made in relation to energy all the time.
The fact that energy is used in everything bears no more relation to the economic value of energy products than does the fact that atoms are used in everything. It’s an empirical question whether energy sources such as oil are economically important. I present evidence that they are not and your response, while relevant to understanding why people get this wrong so consistently, is irrelevant to the point at issue.
John — thanks for your comment. I am still missing your point, however. Energy is one of the most basic “costs” in the universe. It is non-recoverable, for all intents and purposes. While it cannot be destroyed, it can be lost for useful purposes forever. Further, it is one of a number goods and services that cannot be wholly substituted. Even information has an energy cost (cf. Leo Szilard’s solution to the problem of “Maxwell’s Demon”, covered nicely by Melanie Mitchell in “Complexity: A guided tour”–http://www.amazon.com/Complexity-Guided-Tour-Melanie-Mitchell/dp/0195124413). An “immaterial economy” would still need energy.
Perhaps I should be more precise–all this might be moot if all energy sources were “high-gain” energy sources. But, quite arguably, they are not — that is, even the best utilization of solar would be hard-pressed to keep up with an economy predicated on consuming what is essentially stored solar energy processed for millions of years (oil). I would be interested in your take on the Ecological Sociology link I posted above: http://ecologicalsociology.blogspot.com/2011/01/integrating-economic-gain-in-biosocial.html. As the logic of the post implies, energy is one of the most fundamental coins of biology and evolution (and arguably socioeconomic systems)–and the amount and kind of energy available often provides one of the most important constraints on a system and is one of the most important impetuses for system change.
Food and water are not a fundamentally different commodity from all others in a number of economic terms, but in real terms they are far more *essential* than practically all other goods and services. For these reasons, food and water are often judged to deserve special consideration by society–e.g., they ARE more “special” and “essential”. Perhaps I am hung up on the context of “modern economy” — I’m not just thinking in terms of prices, exchange, trade, costs, etc. but also in terms of well-being and sustainability, governance and morality. Or as commenter Omri said on your blog: “[JQ]“The idea that demand responds to prices and market structures seems entirely foreign to this discussion.”
Price of food goes up -> some people go hungry.
Price of heating oil goes up -> some people suffer in the cold.
The set of demand responses includes lots of things that involve lots of people suffering.”
In all earnestness, as a non-economist what am I missing about how an item that the economy cannot do without is no more essential or special than other goods and services?
It also occurs to me that your response regarding the atoms analogy itself seems to miss the point. Saying atoms are more essential or special than other factors does not necessarily imply that atoms should be only price-setting mechanism. The structures the atoms form are important, as the kind of energy is important. But unlike, say, iPads, the complete absence of atoms or energy makes a market (and existence) impossible. And unlike, say, iron, the complete absence of atoms or energy could not be replaced with other items or methods.
Price-setting mechanisms don’t necessarily set amounts or distribution at socially just (or sometimes even socially desirable) levels. In the case of diamonds, this may be relatively immaterial (some people don’t have diamonds? perhaps not fair, but not overly worrisome); in the case of food, water, atoms, or energy, if some people don’t have them, then those people are ex-people. (In the short run, they are all dead.) Perhaps we are foundering on the shoals of normative vs. positive, splitting the little body of water here between us?