Friday, October 10, 2014

Slow steaming is still dreaming -- a response to Paul Krugman


I've just published a response to Paul Krugman's criticism of my recent Bloomberg article on limits to growth. It's over at Medium.com in the new collection Bull Market. I don't think Krugman's arguments carried a lot of weight, as you'll see. First paragraphs below....

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A few days ago I wrote a column in Bloomberg exploring some ideas about possible physical (and biological/ecological) limits to economic growth. I pointed out that total global energy consumption continues to grow even as we learn to use energy ever more efficiently. And I suggested — based on empirical data from the recent past — that there’s little reason to believe, as many economists quite confidently do, that our energy use will soon “decouple” from economic expansion, enabling us to fly off into a future of unlimited betterment through increasing economic output, even as we come to use less and less energy. I also examined a few reasons why continuing to use ever more energy is a certain path to ever worsening ecological problems; it’s really not a wise option.

Economist and prolific New York Times columnist Paul Krugman was irritated, even exasperated, and fired off an “acerbic rebuttal” (to use Noah Smith’s elegant description). He was aggravated that I, as a physicist, was weighing in on topics he thinks should be left to economists. He also suggested that I was just recycling an old argument originally put forth by other physical scientists, which his fellow economist William Nordhaus had completely demolished long ago. Now Krugman had to rise up to do it again! How tiring!

But Krugman’s actual argument was surprisingly weak, and I think grossly misleading, so here’s an attempt to bring a little more clarity to the discussion. I do think Krugman is a brilliant columnist, and I agree with him on lots of things, maybe even most things. But he very much has the wrong end of the stick on this one.      Read more here.

41 comments:

  1. What is sad about this episode is that this is a typical reaction of the economic tribe - to defend their turf before succumbing to logic and evidence.

    Krugman's slow steamers actually make the limits to growth case, which is essentially that there are limits to substitution. Sure, we can slow ships and substitute fuel for more ships to sustain the same rate of trade, but who builds the new ships, and doesn't that take production, trade and energy to produce?

    Don't worry though. In a couple of years Krugman will switch side and be arguing your side of the story as 'something that economists have known all along"! At least that's what he did with the whole debt crisis business and his debates/arguments with Steve Keen.

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    Replies
    1. "Don't worry though. In a couple of years Krugman will switch side and be arguing your side of the story as 'something that economists have known all along'! "

      I doubt Paul Krugman will do that, since Mark Buchanan is clearly wrong. Many of the comments Mr. Buchanan made are easily refuted by an Internet search of applicable data.

      In his original comments he wrote:

      "Bigger organisms as a rule use energy more efficiently than small ones do, yet they use more energy overall. The same goes for cities. Efficiencies of scale are never powerful enough to make bigger things use less energy."

      He now writes, “I intended the sentence in the spirit of ‘this has never happened yet and we have no decent reason to expect it will in the future’ rather than ‘and I have a theorem to prove it never can.’”

      However, the U.S. economy consumed slightly *less* energy in the year 2000 than in the year 2013, even though the economy was larger (the GDP increased).

      A similar situation has occurred in Japan, where the energy use in 2009 was actually *less* than the energy use in 1995, even though the GDP (adjusted for inflation) increased:

      http://upload.wikimedia.org/wikipedia/commons/c/c6/Japan_energy_%26_GDP.png

      Mark Buchanan continues to make the mistake of not understanding that GDP is the total *value* of goods and services. Thus, there is no limit to real GDP (i.e., GDP adjusted for inflation) because GDP is not a physical thing.

      Delete
    2. Hi,

      D-oh! That statement about U.S. energy use was wrong. It should have been:

      However, the U.S. economy consumed slightly *less* energy in the year 2013 than in the year 2000, even though the economy was larger in 2013 (i.e., the GDP increased).

      Delete
    3. There is a good inverse correlation between gasoline use and the total unemployed population ( which has grown very significantly over the past decade).

      Delete
    4. We also need to consider the possibility that real GDP growth which is derived from nominal GDP by means of a GDP Deflator is "artficially" higher than it was in 2000. The deflator incorporates items like "hedonics" - effectively giving credit for improvements in design and technology ( which are energy neutral). So - I suppose it depends on what we mean by "real GDP". It is a matter of accounting and philosophy whether we consider better designed high school textbooks to be "GDP growth" ( via hedonics).

      Delete
    5. There are two economies . The "Old" economy - energy, water, food, housing - that is quite correlated to energy use. And the "New" economy - a Good Joke on the internet that changes the lives of a billion people. hedonically adjusted this Good Joke may well account for a significant fraction of GDP growth - and who can deny that giving momentary pleasure to a billion people does not add to net global hedonic pleasure - eh? However, that Good Joke did not require any oil or gas.

      Delete
    6. So - in conclusion - it is quite possible that energy use has gone down because the economy has shrunk. The vast army of unemployed and under-employed are evidence, as is the decline in real wages over the past couple of decades.
      The official GDP numbers show a slowly growing economy - but then , the official GDP number is an accounting artifact.

      Delete
  2. "If energy consumption follows the historical trend, by 2150 or so the waste heat alone will warm the Earth as much as carbon dioxide is doing now."

    This is precisely why I don't worry about the energy limit to growth. Sure, continuing energy growth while switching to non-greenhouse-gas-emitting forms of energy could be called kicking the can down the road, but sometimes "kicking the can down the road" is just another way of saying "solving the problem for the foreseeable future." Today's problems are not a result of the lack of foresight of those living a century ago. If our great-grandchildren will need to act or they will cause a serious problem for their grandchildren, then our duty is...to solve one of today's more pressing problems, like greenhouse gases.

    This applies to many other questions, like how will we make Social Security sustainable when life expectancy is 150 years or what do we do when we run out of uranium for nuclear power plants?

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