re: Economics: Heinberg and “Peak Oil” (Istvan Simon, US)

Istvan Simon writes:

I think that the proponents of the Peak Oil theory are very likely to be wrong. I would like to quote from the WAIS ‘09 conference, where one of our speakers said: “The Stone Age did not end because of lack of stone.” This is a wise observation, which applies to the oil age as well. It is quite likely that our Oil Age also will not end because of lack of oil, but because newer and better technologies will replace oil as our main source of energy.

Alain de Benoist (2 November) read the analysis of Richard Heinberg that he forwarded to WAIS with sympathy because like him, Alain also thinks that economic growth is unsustainable. But we have talked about this subject before and the logical mistakes of those that advocate these ideas.

Fact: exponential economic growth does not imply that we must have exponential growth of physical resources to achieve it. A large part of economic growth is in services, and these can grow exponentially without needing any exponential increase in physical resources consumed. In addition, technological advances allow frequently the exponential growth in the power of physical devices, for example electronic devices like computers, calculators, MP3 players, TV sets, etc., while actually reducing the physical resources consumed in their making. Much of the vertiginous increase of computing power that occurred in the last 50 years is based on this fact. 25 years ago a microprocessor consisted of about 5000 transistors. Today it consists of 5 million. This is a 1000-fold increase but the amount of physical resources involved in the manufacturing of the 1000 times more powerful microprocessor is less than in the earlier model. Thus computing power has been growing exponentially for the last 50 years, but the amount of physical resources necessary to make these devices has not. That is why computer prices continually fall while their computing power continually grows.

Clearly, more powerful computers allow us to have large increases in productivity in a wide variety of economic activities. This in turn reduces costs while increasing economic output. It is obvious that this will result in large economic growth and yet does not imply corresponding growth in the consumption of physical resources. In other words, tying economic growth to growth in consumption of physical resources is a fallacy. Since Richard Heinberg’s analysis is ultimately based on this fallacy, it follows that his analysis is wrong, and therefore his predictions are very likely to be wrong as well.