Saturday, 17 March 2012

Up The Garden Path With Economists

This is another easy post and one that returns to basic energy issues and the implications of change.  It has been picked up at the Oil Drum site from Our Finite World.

The original article is quite long and with a lot of charts etc. to support the thesis.  This is that predicting the way things may go and why is far from easy.  One reason is that economists necessarily draw from the past when the future might be quite different.

The conclusions have been copied below for a quick read.


How an Economist Might Be Misled

If an economist views the period between World War II and 1970 as “normal” in terms of what to expect in the future, he/she is likely to be misled. The period of rapid energy growth following World War II is not likely to be repeated. The rapid energy growth allowed much manual work to be performed by machine (for example, using a back hoe instead of digging ditches by hand).

Thus, there appeared to be considerable growth in human efficiency, but such growth is not likely to be repeated in the future. Also, the rate of GDP growth was likely higher than could be expected in the future.

Even the period between 1980 and 2000 may be misleading for predicting future patterns because this period occurred before the huge increase in international trade. Once international trade with less developed nations increases, we can expect these nations will want to increase their energy consumption in any way that is possible, including using more coal.

Another false inference might be that per capita oil consumption has declined in the past (Figure 6), so future declines should not be a problem. For one thing, the past drop in oil availability may very well have contributed to the employment issues noted above during the 2000 to 2010 period in the United States.

For another, oil issues may very well have contributed to the Iraq War and even to World War II. Furthermore, there may be Liebig’s Law of the Minimum issues, because most vehicles use gasoline or diesel for fuel and cannot run without it.

Figure 2 also illustrates that a transition from one fuel to another takes many, many years–we have not at this point transitioned from away coal, and nuclear is still only a small percentage of world energy consumption.

The small amounts of new renewables to date should be of concern to economists if they are counting on these for the future. For one thing, ramping up new renewables to amounts which can be expected to make a significant contribution is likely to take many years. For another, new renewables require fossil fuels for their creation, so they are very much tied to the current system.

The fact that things haven’t fallen apart so far doesn’t give the assurance that things never will fall apart. Individual countries behave very differently. While some countries may continue to grow using coal, other countries will flounder when hit by high oil and natural gas prices.

It is quite possible that some countries will encounter major difficulties in the years ahead, even though they have so far been untouched. The precarious debt situations of a number of countries leave them vulnerable to disruptions.


So economists might be easily misled?  Many of us have realised that.  It is a pity most of the main stream media have not quite cottoned on to the idea.

1 comment:

  1. Economist seem to be misled by the idea that they can predict.

    Finding reasons afterwards is easy because many confounding possibilities didn't happen. The past is far less complex than the future.