re: Economics: Heinberg and “Peak Oil” (Tor Guimaraes, Brazil/US)

Tor Guimaraes writes:

Istvan Simon (3 November) makes some good counter arguments regarding Alain de Benoist’s (2 November) analysis of Richard Heinberg’s opinion that economic growth is unsustainable. Istvan wrote, “…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…” which “… 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.” “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.”

It is true that Moore’s law has remained operational for the last decades and continues to surprise even some ardent supporters. However, Istvan failed to consider some important factors:

Economic growth may be constrained not by great productivity increases in specific areas such as computers but by simpler factors such as drinkable water, clean air, favorable climates, etc. Another critical issue to me is that great capitalist nations such as ours seem to have a strong tendency to revert back to aristocracy, as capital achieves dominance over labor and government, socializing costs and privatizing profits, weakening the middle class which provides the basis for democracy and economic growth. Indeed, even Moore’s law will be useless if people are not buying the damned computers.

JE comments: Don’t damn our computers! Outside of a conference every two-three years, they’re the only thing that glue us together, WAISly speaking. (I’m in my Adrian office right now, looking at the old Macintosh SE/30 on the shelf…it’s rather like contemplating Yorick’s skull.)

re: Economics: “Peak Oil” and Computing Technology (Randy Black, US)

Randy Black writes:

I read with great interest and nodding agreement Istvan Simon’s comments (3 November) about the ability to produce economic growth with the same effort and in some cases less effort and resources than in the past.

Istvan said, “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.”

I say, bravo and pravda. It’s more evident to me than ever that Istvan speaks the truth about as I recall my first laptop and the subsequent six since 1984. Three sit in the top of my home office closet and one is a door stop on windy days like today when I like to open the windows and doors.

From my Tandy-Radio Shack TRS-80 with which I covered the 1984 Republican National Convention for a wire service, to my most recent laptop, purchased this week, I am amazed at the improvements and the less expensive nature of these “necessities.”

By 1991, for about $1,400, I purchased a pre-Windows, black and white Toshiba 1200 XT laptop with a built-in modem! It had a 30mg (30 megabytes!) hard drive and I thought I was rocking. 18 months later, I tried to give it to a Russian acquaintance in Siberia and he refused it because the technology had advanced so far in so short a time.

This week, for only $500, I purchased the HP 64-bit laptop, wireless of course, built-in web cam, 320GB hard drive, 3GB RAM of some sort, high definition 16 inch screen, dual core 2.10GHz processor, whatever the heck that means, running Windows 7. One third of the cost of a clearly inferior 1991 laptop. As I type on this very sharp machine, I recall the long ago efforts on the little “Trash-80” as the TRS-80 was called, with its tiny micro-tape drive and all the rest. How far we’ve come. When I was shopping for my new tool, I tried out the new, large touch screen PC monitors with their “large” prices. Maybe next year when the prices retreat yet again.

On the topic of micro processors, Texas Instruments announced about seven weeks ago that it was going to open its new 1.1 million square foot silicon wafer chip factory in Richardson, a Dallas suburb. The $1.2 billion factory was completed in 2007 but was kept in mothballs for the past two years as the economy floundered along with demand for chips. By beginning to hire up to 1,000 new, highly paid employees and by moving equipment into the facility that will produce the 300-milimeter wafers, TI is sending its own message that these products can be competitively produced in the USA.

TI is renowned for its high-quality employee benefits package. I may be mistaken, but I sort of recall that the TI facility may be the first opened in the US since 1996. While TI owns chip factories around the world, TI’s new Dallas facility is a significant statement of support for TI’s position to open manufacturing plants “near their customers.” TI believes that they’ll produce up to $1 billion worth of chips annually by the time they’re up to speed at the end of 2010.

JE comments: TI’s new factory is certainly good news for US manufacturing. A question for the floor: what is the most innovative/creative use you’ve found for an obsolete computer? “Dust collector” doesn’t count. Randy Black has found a high-tech door stop. I have an ancient, tiny-screen Macintosh (c. 1991) sitting in my Adrian College office, where it does double duty as a bookend and conversation starter. It still works, although it takes about 30 minutes to boot up.

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.