Steve Keen: "On the Origins of Energy Blindness" | The Great Simplification
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- เผยแพร่เมื่อ 6 มิ.ย. 2024
- (Conversation recorded on December 14th, 2023)
Show Summary:
On this episode, economist Steve Keen offers a deep forensic history of why modern economic theory has neglected the role of energy in productivity - and why this “Energy Blindness” is now a major blindspot in how our culture views the present - and the future. The massive, temporary carbon surplus we’ve extracted over the last few centuries has resulted in an exponential increase in the standard of living for many. This explosion of global economic growth also happened to coincide with the development of all modern economic theories and formulas, leading to a core misunderstanding in the way our economies are powered. How have technology and innovation been used to cover up the role of a growing energy supply in the last century of rising prosperity? In the midst of discussions between value and labor, where does energy really fit into the equation? Where do we go once we understand the true role of energy in our economy - and will we have the ability to reshape economic policies to be in line with our energy realities?
About Steve Keen:
Steve Keen is an economist, author of Debunking Economics and The New Economics: A Manifesto. His new book, Rebuilding Economics from the Top Down, will be released in 2024. He is a Research Fellow at the Institute for Strategy, Resilience, and Security at University College in London. Steve was one of the handful of economists to realize that a serious economic crisis was imminent, and to publicly warn of it from as early as December 2005. This, and his pioneering work on modeling debt-deflation, resulted in him winning the Revere Award from the Real World Economics Review.
Listen to Steve Keen's previous episode here: • Steve Keen: "Mythonomi...
Watch Steve Keen on Reality Roundtable #3 here: • Unlearning Economics: ...
For Show Notes and More: www.thegreatsimplification.co...
0:00 - Intro
3:52 - The Physiocrats
9:33 - Adam Smith
15:09 - Karl Marx
19:09 - Proto-Neoclassical Economists
22:53 - The Neoclassical Takeover
27:50 - The Introduction of Math
36:46 - New Classical Economists
38:43 - Robert Solow
50:50 - Ayres, Kummel, and Energy
56:28 - The Neoclassical Defense
1:02:53 - The Truth About Energy
1:06:21 - A Message to Young Economists
1:14:07 - A Message to All Grad Students
1:16:44 - The Flame and The Machine
1:22:29 - Big Picture Implications
1:29:49 - Steve’s New Book
1:30:25 - Closing Thoughts
#thegreatsimplification #natehagens #oil #carbon
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This video should be watched by everyone, everywhere. How Keen is able to explain in (mostly) plain language how the human race got here to the verge of collapse is absolutely incredible. Thank you Nate and Prof. Keen for this enlightening discussion.
What do you mean plain language bro. Academia is so disconnected to the reality of the common people. You gotta have a degree in economics to follow what he is saying for more than 5 minutes. BTW I like Keen.
Yeah, this isn't the most accessible content. No disrespect to anyone involved, but it isn't for "everyone, everywhere".
Keen is very good at talking fast and pass it on through different and difficulty concept so the narrative is becoming difficult to digest
@@Santi-rd7jfI can’t believe that it takes such an academic argument to state the obvious.
Nate, I've watched many of your podcasts and they're so intellectually energizing, pun intended. But this one, it was like being in graduate school again, and I'm 70. Thank you.
This is a story of how self-serving rationale, rather than truly objective analysis, creeped and seeped into what we now call neoliberal economics. Human beings themselves became merely an "input" - rather than the focus - of human endeavor. The collective well-being of the whole human "enterprise" has been relegated to the interests of the monied few. Greed overwhelms common sense, justice, and fair play. We have created the source of our own demise by ignoring the lessons we were all taught in our schools and churches. Welcome to the 21st Century!
Your psyche is the victim of the broken system, your perceived understanding is base delusion, LOL!
You nailed it.
Yes. But burning fossil fuels increase life on earth by restoring the CO2 levels. CO2 is life.
These guys believe in global warming, the most nonsensical and easily debunked idea ever. And he talks like James Hansen knows what he's talking about. Hansen predicted in 1989 that the worlds coastal cities would be under water by year 2000. Know everything and understand nothing.
This is one of the main problems with big brains. They know intuitively that they aren't allowed to question the gospel of other disciplines. So debunk your own field but fall for what is obviously idiotic. 1.5 degrees warmer next summer? I hope so. It's getting bloody cold the last 10 years.
@@LittleOrlaa😊
Wow!. Awesome interview. Keen has moved so far ahead that doesn't even stoop to address the obvious fallacies of conventional economics - the fictions of infinite growth and the neutrality of money - as he ratchets our understanding to an entirely new level. Many Thanks!
@@GhostOnTheHalfShellthanks!
He wrote a brilliant book called Debunking Economics around 15 years ago, and supplementary information from his course lectures has been posted to his TH-cam channel called ProfSteveKeen or something like that (if you Google his name it should come up).
@@GhostOnTheHalfShell thanks so much. I was just about to search. Kudos.
I am just blown away. This was one of the most eye opening conversations I ever had the pleasure to listen to. And this is definitely not another daft conspiracy theory, it is stone cold natural science.
I hope that I am still alive when Steve Keen receives the Nobel Prize for economics. He will be the most deserving candidate in the history of this somewhat gloomy award.
In Italy you can find plenty who explain it better...
Keen has ridiculed the so called "Noble Prize" in Economics. The whole thing is highly politicized for the benefit of big bankers.
This person deserves the Nobel prize in economics.
This is not even Nobel Prize, it's Bank of Sweden Memorial Prize, with the name being hijacked from Nobel. Original Nobel Prize was awarded in 5 categories and economics was not one of them.
But Keen will never win this prize, because he works outside of mainstream and constantly berates both the prize and its' recipients and also mainstream economic ideas. It would be them shooting themselves in the foot to award it to him.
Steve Keen is brilliant, thanks Nate.
Hi, Jed!
@@AlanDavidDoane hello Alan!
I discovered Steve Keen via the anti estab Max Keiser and his mercurial Keiser Report. The episodes always went way to fast when Steve was on. He gets it and lays it out like very few can and he's got solid evidence to back this work.
Thanks for this long form interview Nate!
Awesome, awesome, awesome! The plain truth about energy has finally reached TH-cam in plain(-ish) English! Alleluyah!
Being an engineer I can relate to energy based economics. The problem as I see it is how to factor future fossil fuel depletion into present day economic decisions. The 1956 Frank Capra movie " Our Mr Sun" forecasted our future as fossil fuels become scarce and more expensive, a middle ages based economy. An energy based economic view is outlined in Georgescu-Roegens book The entropy law and the economic process, 1971, Harvard university Press.
Good info, thanks.
Thank you Nate and Steve for this discussion / lesson on the history of nonsense economics. I'm not surprised that previous economists have been awarded Nobel Prizes for imagining fantasy formula that enshrine the ideals of those with power and control.
Useful idiots like Greenspan, Bernanke, Geitner springs to mind.
I clicked on this expecting full "wu", but instead learnt about a school of thought as far from wu as possible. "Energy blindness" sounds like a very esoteric phenomenon, which probably says something about the extent to which the role of energy is neglected in the current economic paradigm. Thanks for the eye-opening conversation!
When I was a kid, we had a red Corvair, but were not well off enough to ever fly anywhere. And it never even crossed my mind that driving a car caused a problem. I used to brag that I've driven in 46 states, from my home state, Delaware, to Mt Champlain in Maine, to the south flank of Mt Rainier, with many stops in Yellowstone, to San Francisco, San Diego, Austin, and Key West and etc.. Never crossed my mind how energy blind I was. No one ever talked about it. I knew I was burning gas, but in all my life, I had no idea that a gallon of gas weighing 6 pounds, making 20 pounds of CO2, would have any consequence. But did I get this right? .. I've learned that all in all, that's more CO2 in the air from all of us burning gas (and other hydrocarbons) than the physical objects, including cars, that we have made. That just blows my mind. If it wasn't colorless, we can only guess how dark the atmosphere would be. I was blind, but now I see. I've cut my carbon footprint to the bone. But what's done is done. Thanks for helping me understand my (albeit) small part in our world's predicament. I am humbled and changed.
Your journey proved two things.. That Ralph Nader was wrong about the reliability of Corvairs. And that CO2, which today accounts for 4/10th's of 1% our atmosphere, hasn't killed us yet.
And in fact, there are a lot more people alive today than there were then precisely because of it..
I am the typical colloquial layman Australian male, the information Steve provides makes so much sense. The academics who argue have cognitive dissonance. Colloquially in Australia these academics would be called F$&kwits.
No typical Australian male use the term colloquial or layman.
Or cognitive dissonance :)@@antonyjh1234
@@antonyjh1234haha too right!
I will have to rewatch this episode to comprehend some of the 90% I did not absorb from the first listening.
Economists throwing shade is my favorite 😂 I wish there was still a safe place for them to say what they actually think anonymously outside of politics in the job market. People are waking up to the reality of capital choosing scientists post hoc like big tobacco. This is especially true in economics.
This is the pinnacle of all your podcasts Nate. Truly brilliant!!!!!
Great interview. Steve Keen is awesome. I first read about the Physiocrats in "The Value of Everything," by Mariana Mazzucato - another insightful economics historian. Beyond economics and biology, physics points to everything being energy. We need electrons to keep spinning.
Good afternoon Nate and Steve
Again truly grateful for you two people, certainly from my very own professional perspective. This platform over the past turbulent few years, in which the same crazy situation remains. Saddening really, however your shared work remains a source for learning, of aspiration and knowing.
So much sensemaking, incredible.
Sanity brain gym, indeed.
Thankyou.
Etc, etc etc.😀
💜
Inputs from engineers would be nice, but ecologists should be drafting the requirements documents.
This needs to be underscored multifold 👍👍👍
It’s not just the engineers who need to accelerate the production of alternative energy to alleviate the effects of climate change. It’s humanity, particularly those of us living in the developing countries, who need to seriously curtail our consumption of all non necessary stuff (and hence fossil fuels) and conserve our precious natural resources. We must move to a degrowth economy and invest in the resilience of local communities in the things that truly matter - clean water, good food and shelter.
Amazing podcast. Been a student of this stuff for some 20 years and this is the sort of premium meat my cranial potato craves. Thanks.
Excellent stuff - I had to keep reminding myself to breathe!
My takeaway is Steve's profound academic observation on the traditional economist's view of energy, ie that it has almost no role in production, which he says is "complete bollocks".👏👏👏
Have been watching Keen for a number of years now partly because as a kiwi I like his Aussie no bullshit approach and cos the layman's parts resonate so well. And as well he has a certain predictive ability!
Wow, mind blown! I recently have been writing to anyone who will listen about saving the salmon population in the lower 48. Breaching dams are such a "micdrop" even a willingness to see the problem differently to save the sockeye is considered "taboo" . All the waste needs to be optimized. Thanks!
Good on you. Derrick Jensen will definitely be approving of your efforts!
@Lyra0966 lol, no I am a Randell Carlson girl. I just love listening to both sides of the argument. I recognize I am a ancient artifact who cares about truth, that is why wisdom is my grail.
Brilliant! Brilliant! "Output is fundamentally NRG transformed into a useful form." That is, NRG is the input into L and K. I got my PhD in Econ nearly 30 yrs ago - It was all about factors of production receiving their Marginal Product = a complete absence of NRG in describing wealth and productivity. Keen's clear thinking insight, in combination with Kate Raworth's Doughnut Economics, forms the foundation of an awakened Ecological Economics. Thank you for this fantastic conversation!!
Thank you Nate for excellent videos. My poor pup has bone cancer and to get my mind off it with good videos helps me. Thanks
You would think social media and technology would've solved this by now. I have been saying this since 1996, coming from the Peak Oil perspective. Thank you, Professor, for putting this into an academic context.
{I miss Michael Ruppert.}
Social media is a destructive force.
I work in microbiology, and if there's one thing I can tell you from my time in the field, it's that the microbial communities that support cooperation and interesting structure have spatial structure where individuals interact more strongly with their neighbors. The way you destroy cooperation and structure is creating a well-mixed system where every individual interacts equally strongly with every other individual.
Such systems become overwhelmed with parasites and antagonistic interactions and viruses. That describes all social media to a T.
incredibly valuable interview and explanation of how this whole flawed understanding came about of how Labor, capital, Energy, technology interact!!! When will this insight ever get in to the brains of the knuckleheads in academia and government???
Hi Nate, wouldn’t claim to have understood much of the first half of your discussion with Steve Keen. Was formally a Power and Controls Engineer, I’ve always understood the situation described in the second half of the conversation regarding energy inputs, outputs (and entropy). Always said: engineers can do miracles, but the impossible might take a little longer, and that there is no such thing as a problem, only opportunities. But then who wants to listen to engineers, we do as we’re told, limited only by accountants and economists. The future for those that will live long enough isn’t looking good with signs of “ The Great Simplification. Keep these discussions coming Nate🤔
Energy in the economy for an economist is equivalent to water in the ocean for a fish. “ what’s water?” says the fish.
Yep, that's my main rake-away from the interview as well, Yvonne. It's short enough for me to remember, and cogent enough (I hope) to make most people think when they hear it. :-)
Okay, second comment now that I have finished listening to the podcast - which was great by the way.
In Keen's ballpark example of manual labor producing 100 watts from an input of 200 watts for a 50% return AND a machine producing a lower percentage than a human, a big insight was glossed over. This is the intrinsic efficiency of the human organism. As an example, in 2023 I grew a substantial amount of food (2425 pounds = 633,286 kilocalories) with a small amount of labor (683 hours = 136,600 kilocalories) and 247,034 kilocalories of fuel. This is an EROI of 1.65:1. Note that this includes fuel for weed-whacking and planting cover crops and green manures. Compare this to industrial agriculture which uses 10-12 kilocalories of fuel to produce 1 kilocalorie of food. Also consider that I am now retired and am just keeping my hand in. I used to get an EROI of 3.5:1 when I was a market gardener.
Another point that was just glossed over is Keen's recognition that we have changed the game by throwing cheap oil energy at any and all problems for the last 150 years. Instead of solving our problems culturally, we substituted cheap oil energy for culture. Now we have lost the ability to adapt culturally and so we are increasingly subject to the laws of physics WITHOUT the buffer of culture. The cultural buffer that not only defines us as humans but has constituted our social environment for over two million years. The buffer is still there in part, but it as if our baby blanket of culture has become threadbare.
“This is the reason that neoclassical economics has gone, so totally off the rails: they don’t even know their own history.“
Epic convo. Very insightful and revealing. Thank you Steve and Nate. Activists are DIALING IT UP! Lets do this friends.
As an Engineer involved in Energy for 40-odd years and with a family background in manufacturing, I have always pushed to the point that Energy is the key, to progress and prosperity. It is clear that the UK had access to unlimited quality coal in /during the Industrial Revolution and that economics is driven by this energy source - the rest is just math.
Absolutely awesome gentleman. Thank-you. Steve should be advising presidents and politicians. Energy bindness IS the problem that underlies the confusion at the root of so much angst, from the worker all the way up to international politics. Like the three legs of a stool energy, capital, and labor lift up the human condition. Using the leverage of tech, resources, and financial dicipline, the world could be made a much richer place for all.
Loved this. I’m now poring over my high school memories of physics and economics. Economics never sat quite right and now I know why.
Looking forward to throwing Optimus bot and 100% solar into the discussion. The end of fossils is possible. Lucky, because also essential.
Now we only need to drag Nate onto SteveKeenAndFriends podcast.
It’s more like “the great edufication” Another great lecture Nate. Cheers
Finally one Economist who understand and develop further the Economy on all complexities, including and energy on different forms. Happy to hear that Steve Keen as economist of 20 century and 21 century advance further the science of economy by considering evolution from Adam Smith to Karl Marks and others. Modern economy without Karl Marks lead on misunderstanding.
The energy certainly play a key role on economy, but all resources have importance, without all resources, from land and water, to minerals including energy resources, and on addition to all these and Human Resources and human energy and intelligence, the developed society does not exist.
Happy to hear for the NEW MANIFESTO about economy.
It’s hard to stay colloquial or layman when you go down the rabbit hole. When you peel all the layers off, it comes down to how we want to live and what is important. To say we have lost our way in some cultures is an understatement, a layman can transcend consciousness.
I'm totally in agreement with Keen's conclusions about the nefarious role classical and neo-classical economics has played in our predicament. I think the origins of the wrong turn could be explained more simply by noting the distinction between use-value and exchange-value, which Smith, Ricardo, and Marx all emphasize. The physiocrats can be seen as interested in use value, i.e., the actual usefulness of what gets produced and sent to market. Here soil and sunlight (i.e., energy) play a tremendously significant role. But Smith was mainly interested in exchange value, i.e., how much power a product has to purchase other goods and services on the market. The exchange-value of a product can be way out of line with its use-value. The study of political economy after Smith became devoted to how the former rather than the latter is created. In that study energy just appears as one of the costs of production and its value is just what it takes to purchase it on the market. Its importance to production varies directly with the quantity of it required and its purchase price per unit volume. The cheaper energy becomes the less important it is for an economist solely interested in exchange-value. Hence in the age of cheap energy (which we are now leaving) economists did not see it as of much importance. Of course, someone who is interested in the use-value of what the economy produces would see it as completely fundamental. (On the history of the ideological of the roots of our predicament, including neoclassical economics, I've written a book: Making Wonderful: Ideological Roots of Our Eco-Catastrophe, published by the University of Alberta Press, which you might want to take a look at.)
Farmers once again proven the peak of humanity!
The „Dark Satanic Mills“ are an expression from William Blake‘s 1808 poem „And did those feet in ancient times“, today best known as the hymn „Jerusalem“.
I rarely share these topics on my LinkedIn, but this one is the most important one, and I just shared it. If we don't make this the central theme of the next decade, we can commence (continue) partying like it's 1999 with the theme, "That's all she wrote"!
Agree..
But did you also once listen to the great interview with prof. William Rees? It's on the same level but rees even can explain his sience better I think. Well maybe that's only true for me ( I am German). But they both are complementary views of the same issues, and together even much stronger.
And both would deserve a Nobel price
Years ago I saw paper or presentation on the internet that showed the correlation between national GDP and national energy consumption. And it did tend to show a strong possibility that the two were strongly related. Of course it should at a base economic level that a principle should be stated that energy expended is connected to product created. There hasn't been a systematic analysis by economists on why that is so. Until now, finally. I have thought this was so since I saw that correlation way back into the early 1990s
Old wine in new bottle!
Ohh happy day!! Loved the last one. Thank you in advance for helping me understand so many things.
Difficult to follow on english. But once again its mezmerizing. Your work Nath Haeagens and your interview partner in my opinion are the pinacle of th best science we have and we should listen to..
Another great interview! Thanks Nate and Steve! I will look at your previous segments with Steve.
Fantastic. .. but we still need boundary conditions ( both physical [planetary] and intellectual, [wisdom] ) in all economic models. Steve Keen ... Keep on going. Your job is not yet done. I have worked as an "Energy Engineer" .. and I have been discomforted for many years at economists bizzare lack of understanding of physics. .
Truely amazing interview! I am floored!
So, I guess scifi strategy games had economics right the whole time, maybe we should get some game designers to redesign the economy, to turn it into a game that makes sense. Great intereview, Steve Keen might be the most important economic thinker right now.
I went to James Watt College for 3 years and used to look at watts engine in the foyer of the college. The importance of this engine is very much planted in my brain now and how things could have been different.
Another stellar discussion, thank you
I've been following Steve on Substack for a while and it's been great to have this opportunity to hear the whole piece. I'm no economist but I do understand the value of economic theory and how it influences decision making. I have to agree, too, that the poly crisis we now face probably has its roots in the economy so promoting an accurate economic model that acknowledges the reach of its effects is critical to an effective, if hopelessly late, response. Thanks. both.
Good book. The second law of economics.
Good interview.
The most important statement in 1:20:00
I heard the saying " quality of a nation's topsoil is it's wealth".
Fertility has to be managed also.
The theoretical, statistical "explanation" of our contemporary world defies the empirical reality that surrounds us all. Incessant warfare, egregious income disparities, environmental degradation everywhere defies all the things we might SAY about it. We are surrounded by the failure of our presumptions and calculations. A simple look out your window should be sufficient.
A story of staggering ignorance. As a retired atmospheric scientist I have always been deeply sceptical of economic modelling and this reinforces my position. The words of the physicist, C.P. Snow, spring to mind -
“A good many times I have been present at gatherings of people who, by the standards of the traditional culture, are thought highly educated and who have with considerable gusto been expressing their incredulity at the illiteracy of scientists. Once or twice I have been provoked and have asked the company how many of them could describe the Second Law of Thermodynamics. The response was cold: it was also negative. Yet I was asking something which is about the scientific equivalent of: 'Have you read a work of Shakespeare's?'
I now believe that if I had asked an even simpler question - such as, What do you mean by mass, or acceleration, which is the scientific equivalent of saying, 'Can you read?' - not more than one in ten of the highly educated would have felt that I was speaking the same language. So the great edifice of modern physics goes up, and the majority of the cleverest people in the western world have about as much insight into it as their Neolithic ancestors would have had.”
My God what an Intense let alone Awake up call for All Wonderful in-depth info Thank you dearly Steve and Nate
Will Facebook share this Publicly 🕊🌏🙏🏼
It seems like another story of the anchoring effect, on a gigantic scale this time. I'm talking about minute 69.
Nate,
Please have a look at behavioral economy for this. But you probably did that already.
I'm amazed. This for me is indeed Nobel price stuff. Note that it takes decades for such publications to get this price... Great work, thank you very much!
I understand now why you took a 5 week break!
Consider that the problem is we have a single “economy “. That economy has certain systemic characteristics. Among them are dirty consumption and pollution. The resolution may be a parallel restorative economy that systemically rewards the energetic and clean opposite. That is the reduction of dirty energy consumption, the reward of clean energy, and removal of pollution. Check out Delton Chen’s climate policy proposal. Before we run out of time…
Great podcast and great guest! Now I really want to see you talking with Michael Hudson and afterwards a conversation with Michael and Steve keen, like they did on demystify sci channel, that conversation was golden!
As a very poor mathematician I nevertheless have long believed that most modern economic theory constitutes a bogus discipline masquerading as a science: a formulaic con trick that functions in a similar way to the way in which sophistry functions within the philosophical sphere. That function is a pseudo-scientific sleight of hand, the purpose of which has always been to justify an inequitable division of the spoils.
For me, neo-classical economics and its grubby offspring, neo-conservatism, amounts to little more than an argument in favour of unrestrained greed.
This is a welcome history of economics and where+why we mis-measure and chart poor courses. I’ve been arguing wealth rises and falls exactly in-line with energy consumption and any discussion that does not bring this fact to audience is green-painted Austerity Politics.
Sadly, your chemistry reduces to a paranoid fixation with fizzy-pop drink CO2 & ignores such basics as how sea magma vents spew more CO2/sulfurics/methane than all of mankind - and they do so every decade or so across millennia. Here we live through a Second Year of record ice fall in Antarctica and in North America every reservoir topped-off after endless dire drought bleating.
I will definitely read Steve's book. Sharper insights into economy will be hard to find, I guess.
Interesting discussion of the history of economics. I am just a citizen with an above average knowledge of environmental issues and an interest in economics. In my opinion, governments and businesses do recognize the importance of energy in the economy in terms of price. People demand their governments take action to keep prices of energy low. Energy price shocks have led to change in government leadership and to the desire to avoid shocks. This results in policies like the strategic oil reserve, and pushes to reduce taxes on fuels when prices increase rapidly. Arguments that shortages of oil will result in resource substitution are very compelling to me because there are so many examples of it occurring in history. The belief that efficiency in energy use will help keep GDP from declining is also compelling. It seems that a 20 percent decrease in energy availability will result in no change in production if matched by a 20 percent increase in energy efficiency. I recognize from watching previous episodes that efficiency gains to date have been offset by increased overall energy use, but I wonder if that link can be broken at least at a state or national level. Policies like carbon taxes with refunds to low income populations seem like a possible solution to include the costs of environmental impacts while softening the economic impacts on some consumers.
Yours is the logic of the greatest number of hope filled buyers of the belief in the status quo. These folks can't imagine the shrinkage of the human enterprise. Somehow economics and monetary policy can come up with plans to keep things chugging along. It is taboo, unthinkable, to imagine a world without progress, security and ease that technology has wrought.
A 20 % reduction in energy availability would probably mean, in the short run, a 20% reduction in income, but over time, as alternatives are developed and energy use become more efficient, the reduction will be something between 0% and 20%. In general, non-fossil fuel-based sources of energy require more capital than fossil-fuel-based sources, and even increasing energy efficiency requires capital. In the end less energy may mean we need to reduce consumption and increase investment in order to end up with that reduction of consumption that is somewhere between 0% and 20% (my gut instinct is it will be closer to 20% than 0%).
Energy always fundamental, Capital (machines) necessary and now AI makes machines function autonomously. So Labour goes to near zero (not required). How does that change economic theory with no labour required. Who gets all the profit ?
Great conversation by the way, thanks Nate.
Very interesting. I'm in total agreement with Steven Keen about blind spots of neoclassical economists, but feel obliged to point out that economists' predictions actually did come true for Germany. In 2023 total primary energy consumption dropped by 7% while their GDP dropped by just 0.3%.
What does it mean? Probably the their models work for the time being, as long as we have abundance of energy and functional global markets. Obviously a time will come when those assumptions no longer hold...
Their GDP would probably have dropped by far more than 0.3% if the whole world's primary energy consumption had dropped by 7%.
And how does it correlate with debt? Maybe Germany increased their debt to wade through.
Debt allows you to bring energy from the future by ways of buying someone else's work (energy), with the caveat that you need to pay back later, but of course, economy being as it is, the amount of energy returned may differ.
My guess would be that the energy drop was primarily absorbed in uses that were less economically productive, such as non-essential transportation, home heating turned down a couple of degrees etc. Most likely energy was directed by pricing policy towards the economically productive sectors of the economy. The capacity to do this would however soon reach its limits.
@@drillerdev4624 Public debt increased, continuing a trajectory that started during COVID.
Germany is still running a very high trade surplus though, but that's the problem in these measures: money or GDP are not a good proxy for energy.
@@briskyoungploughboy I didn't have a chance to dig into statistics what sectors shrank and which expanded during this time. One data point I know is that energy-intensive production dropped 11%. That's pretty significant and means some other sectors picked up the slack.
Thank you!
Thank you Nate and Steve. This is so important and needs to be heard and understood globally. Steve, when you say the next Northern summer, do you mean this year, and by Northern do you mean Canada, the US, Europe? Nate I hope your colonoscopy went well and all is well.
The idea that GDP and energy is correlated is not new. We have been using such a graph to teach our students for the last few years. Thanks to Dr. Chris Martnson at Peak Prosperity whose book should truly be read by everyone.
I was missing a mention to intellectual work and how it can increase efficiency and as such alter the calculations.
It was mentioned near the end, but I think it deserves more time, probably an episode by itself. Specially if you factor in phenomenons as the paradoxical increase in waste when a higher efficiency is reached.
I'm so glad to have found what seems like a english speaking equivalent to all the similar podcast/channels I listen to a lot in French.
Does anyone have any similar english channels to recommend please ? Thanks !
Brilliant. ❤
When I found out about thermodynamics and entropy through a book by Jeremy Rifkin my mind was opened to this very reality: the speed which one travels, consumes, verily burns through life, hurries the disintegration of surroundings and the source of life itself. It makes a fucking mess that is left to others to muck through but never ever remedy. The greatest sin in the world is hubris and the race ( and the planet) is being humbled as we twiddle.
It’s staggering that our social systems have been built and wars fought on these flawed views. If all physicists were this wrong for that long, we’d still be agrarian but we shouldn’t forget that they also gave us String Theory.
One seed to a hundred is a perfect explanation of a real return on investment.
I love the professors research on the agricultural economy of France. There is something special to learn about the "free tenant peasant".
Marx was not interested in communal living. Hahaha! Marxism is fascism is socialism is communism, ect ect. All dependent on labor which is the reason the peasant economy, which was by & large sustainable, were smashed apart for larger institutional labor, cheap or otherwise, to capture the results for those in charge, no matter the political flavor.
Also, the term payback was derived from the industrialists to justify the purchase of machines. Now we even apply this term to house hold purchases of solar equipment.
Of course, the capitalists don't deserve anything let alone .25 (a free energy thing).
Interesting the rising data reference. I'll have to think on this.
I refer you to Dr. Tim Morgan's book "Life after Growth" published 2013 .
Keen my beloved ❤️
excellent, expected no less.
52:52 Brilliant. Workers and Shareholders need to eat, they need energy. That is so simple and so genius.
Someone will attempt to throw them under the bus when the push comes to shove.
Note for the young economist who might want to replicate what Steve is talking about in terms of the relationship between GDP and energy. You will need to factor in the impacts due to import substitution.
For example, in Australia we used to make Clinker (a very energy intensive ingredient for the production of cement) but now import a fair amount from Asia. So it may look like that the energy productivity for cement has undergone massive improvements in the last couple of decades but that is a false interpretation but that is only because the outsourced a part of cement manufacturing overseas.
So its important to look at global energy use and global GDP in thefirst instance before delving into individual countries. the MEDEAS model is probably the closest I have seen that attempts to correlate primary energy production by industries along with their $Gross Value Added (GVA). Many economists would never look at this.,,,but its so obvious once you remove all biases. I'm very lucky I studied physics before looking at economics.
Also Nate please get on Dr Tim Morgan!!! Seriously you both need to talk
Energy is a mesure of change. Makes sense to use it to mesure economic growth.
The way I see it the economy is limited by multiple factors, and available energy is one of them. Right now available energy is the limiting factor, but if we had unlimited energy maybe the number of workers.hours would be the limiting factor. Or maybe it will be the size of the planet regarding pollution.
Availability of resources is another limiting factor I can think of, like steel, copper, lithium, etc.
The fact that GDP and energy production are correlated is proof for me that energy is the biggest actual limiting factor.
Nate at the 1:16 point you tackle the idea of what is the controlling factor of where that energy is directed ? Well energy can be either productive (e.g. build a house, create and fire off a rocket etc ) or destructive (a bomb, wild fire, etc) It is the control or applied use of that energy by humans. The human thought process factors in. And man oh man, humans have expended a considerable amount of energy in destructive directions (Eisenhower on MIC for example states this fact)
He completely lost me at the math part, not going to lie - but the second half of the podcast was so powerful, it blows the mind.
Nate and Steve, thanks for the brilliant conversation!! As a followup, what are your thoughts on this? Labour is expressed in money equivalent in economic models. But labour can also expressed itself through work of the mind (genius, creativity etc) or body/hands (actual manual labour). In Physics work is the quantity that defines the energy needed to displace an object on a distance (expressed in Joule). So actually human labour can be expressed in Joules, the same way the energy of a machine using some kind of energy is expressed in joules. Very naive question: Could Labour of a machine be added to the actual labour term in the economic equation given they are of the same nature?
Energy and Ecology have been left out of the equation of economy. Ecology systems also provide "free services", for our economic systems, the limits of these systems are now apparent now that they are failing. (Concrete examples: fisheries they are just there until they are not, estuaries for cleaning up water and pollution, stable climate allows for snow and glaciers so rivers don't run dry in summer etc..).
I would award the Dumbell Prize!
Three thoughts:
1. Garbage in, garbage out. The reason economic formulas are weak is because there are too many variables coming in. You need to tame the variables.
2. The second thought deals with that problem via acute detailed customization to each scenario (if not each business, then similar business models), whether by data collection or pure calculation (though the former may, by necessity, precede the latter).
3. You may not be seeing what really matters - how human fashion and fickleness affects consumer economics (when people weary of one fashion (that has been milked to death by a mercenary unimaginative industry), they quit purchasing until the next fickle fashion hits (hence economic slumps). This will continue until humans are enlightened (they still suffer from Continued Universal Human Cluelessness) (the problem is philosophical, and it has been solved, but it is not out there yet, being too new).
What happened to the transcript after 49.23 i really wanted to screenshot one part as no pen and paper on me. Guess i will have to review later. Thanks though
Two thoughts:
first nations observation: white man makes huge fire to cook a hot dog. a regular person makes a small campfire to cook a buffalo.
we don’t drive because stuff is far away, stuff is far away because we drive.
the most dangerous thinking in times of change is not not leap the paradigm gap.
This was another great interview. But I am very surprised that he did not come to the degrowth conclusion
I would appreciate if someone tells me, what would be different if we took into account the value of energy in our economic system. Thank you.
No mention of; 1- War and 2-Environment ... 1-"Compared to war, all other forms of human endeavor shrink to insignificance. God help me, I do love it so." George S. Patton Jr. ... and 2-Greenhouse effect (side effect of Fossil Fuel energy production) in which the CO2 emissions are in the process of slowly destroying the environment that we humans live within on earth.
Good to hear the focus on the physiocrats. They have been undervalued for some time. As for the ascendance of the neo-classicists over the classicists, I suggest more attention should be paid to the failed Revolutions of 1848.
Another angle is that - in the US at least - slavery was SO important for growing the US economy that the federal government would have had to re-instate slavery after the Civil War. The only reason they did not was because of the growth of oil energy. Yes, the first part of the Industrial Revolution had been around since 1790 in the US and was powered by coal. But the second part of the Industrial Revolution needed both coal AND oil. By the 1880s oil was producing a hell of a lot of energy - the energy capture of the US in 1800 was 38 kcal/person/day and rose to 92 kcal/person/day in 1900. See Morris, Ian. Why the West Rules - for Now (2010:628). The only reason the US could keep the slaves freed (disregarding Jim Crow laws and institutional/social racism for the moment) was because oil produced dense, mobile energy slaves. I go into more detail on this in my book, The Laws of Physics Are On My Side, 2013. (And no, I haven't forgotten the role of immigrants and streamlined production processes, but I regard the energy bump from oil as determinative.)
These ideas are not new to me being a trained economist. However, we about to go through the greatest transformation of humanity in the next decade. Please ignore all two handed economists and focus on price curves. If don’t understand, please try to understand Tony Seba. The implications are serious and make this video silly. There is an old saying that the empty can makes the most noise.
Did he finish his comparison to the 10% reduction in energy to the German economy hypothetical? The modern economic equation said a reduction in the economy by .4% but I don’t think he ever said what his new equation would make a 10% reduction in energy be? Was it the full 10%? And if so how long would it take for the entire 10% reduction in the economy it looks like it lags behind the reduction in energy by a bit
….. and if we move to renewable energy systems the cost of energy moves close to zero - marginal cost of an additional electron is close to zero - then energy becomes close to free. Who does that help and who does that hinder?
Just on a sidenote: The is NO Nobelprize in economics! There is just the Swedish National Banks prize to the memory of Alfred Nobel. Nobel himself didn't think economics was worthy of a prize since it did not contribute to the development of mans finer characteristics.