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: 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.

re: Economics: Heinberg’s “Temporary Recession or End of Growth?” (David Gress, Denmark)

David Gress comments on the Richard Heinberg essay forwarded by Alain de Benoist on 2 November:

First impression: diagnosis correct, assumptions false. Because if the US, just for one, allowed full drilling in all discovered fields, particularly off the West Coast, in Alaska, and in the huge shale oil areas of the High Plains, the notion of peak oil would disappear. The Earth is a very large place even now, and there is lots, lots of oil to be had, if the politicians will allow.

But those in power don’t want all that oil, because that would diminish their control over our behavior. This is the reason that no drilling permits are granted.

I remember the arguments of the 1970s about finite resources. These arguments were made by people who simply did not understand the enormous size of the Earth, if you really want to extract resources from it. We have coal, iron, oil for millennia or more if we want to get them. The point is, our rulers don’t want us to get them, because that would reduce their power over us.

re: Economics: Heinberg’s “Temporary Recession or End of Growth?” (Jordi Molins i Coronado, Catalonia)

Jordi Molins i Coronado comments on the Richard Heinberg essay forwarded by Alain de Benoist on 2 November:

I do not see the causal link that led the “peak oil” hypothesis to create the subprime crisis. One could imagine that higher oil prices would overstretch the pockets of poor Americans (those which overwhelmingly represent the subprime mortgages). However, Western economies have been decoupled more and more from oil, and currently we need less oil to produce the same, compared to the 1970s-’80s.

Additionally, if “peak oil” were true, oil would now be worth, say $300 or $1,000. I do not see why, apart from a short-term spike to $160, in a “peak oil” environment, oil should trade constantly below $100.

My answer to the current financial crisis is much more simple, and it provides an obvious causal link: big financial institutions were able to leverage themselves massively (Bear Stearns routinely had a 1 to 30 leverage before its demise). Regulators are guilty of having allowed financial institutions, which now we have discovered are “too big to fail,” to leverage themselves to crazy levels. An individual can leverage himself 1 to 2 for stock investments, and very often investors do not leverage themselves at all. The maximum leverage a family can get is when they buy a home: possibly 1 to 5, or even 1 to 10.

Is it surprising that the sectors where leverage was allowed (banking sector and housing) were the sectors most crudely hit by the financial crisis?

Peak oil will not represent the demise of our civilization. Other sources of energy will substitute it when oil becomes too expensive. Or maybe we will be so advanced that we will not need much energy in the future. But entrepreneurship for sure will find ways to overcome the lack of oil: price signals are always strong signals.

Economics: Heinberg’s “Temporary Recession or End of Growth?” (Alain de Benoist, France)

Alain de Benoist writes:

I have read with interest, and sympathy, Richard Heinberg’s essay in the document linked below. I suspect, however, that some other well-informed WAISers would disagree with him. This could open a useful discussion.

JE comments: Indeed it will. I am certain the decriers of WAISly “gloom and doom” will have a good deal to say in response. Heinberg’s essay can be accessed at:

http://heinberg.wordpress.com/2009/08/06/208-the-end-of-growth/