We presume as given that the energy consumption of the world must reach a finite limit, and consider whether the economy can maintain the imperative for growth. Prominent blogger Matt Yglesias comes up with some feeble handwaving that says it can. Yglesias is wrong.
Physics Prof Tom Murphy puts the endless growth conundrum through its paces and ends up in familiar places.
I’d like to quote this part. (If you don’t fully understand it, go read it in context. In fact, go read it anyway. Murphy has had the patience and courage to work through several aspects fo the problem.)
The important result is that trying to maintain a growth economy in a world of tapering raw energy growth (perhaps accompanied by leveling population) and diminishing gains from efficiency improvements would require the “other” category of activity to eventually dominate the economy. This would mean that an increasingly small fraction of economic activity would depend heavily on energy, so that food production, manufacturing, transportation, etc. would be relegated to economic insignificance. Activities like selling and buying existing houses, financial transactions, innovations (including new ways to move money around), fashion, and psychotherapy will be effectively all that’s left. Consequently, the price of food, energy, and manufacturing would drop to negligible levels relative to the fluffy stuff. And is this realistic—that a vital resource at its physical limit gets arbitrarily cheap? Bizarre.
This scenario has many problems. For instance, if food production shrinks to 1% of our economy, while staying at a comparable absolute scale as it is today (we must eat, after all), then food is effectively very cheap relative to the paychecks that let us enjoy the fruits of the broader economy. This would mean that farmers’ wages would sink far lower than they are today relative to other members of society, so they could not enjoy the innovations and improvements the rest of us can pay for. Subsidies, donations, or any other mechanism to compensate farmers more handsomely would simply undercut the “other” economy, preventing it from swelling to arbitrary size—and thus limiting growth.
Another way to put it is that since we all must eat, and a certain, finite fraction of our population must be engaged in the production of food, the price of food cannot sink to arbitrarily low levels. The economy is rooted in a physical world that has historically been joined at the hip to energy use (through food production, manufacturing, transport of goods in the global economy). It is fantastical to think that an economy can unmoor itself from its physical underpinnings and become dominated by activities unrelated to energy, food, and manufacturing constraints.
I think we are already facing the problems of the real economy (especially food and water) becoming too small a fraction of the symbolic economy. I think Murphy is making the case that this can’t possibly work.
How it will fail remains to be seen. An example would be some people starving while farmland is used to make gasoline.
Less obviously, emissions leading to massive climate change might thoroughly dominate over sustainability. That is, so much more “wealth” is tied up in energy than in the environment that we are willing to sacrifice the environment to such an extent that it will actually start to kill us.
Now consider the fact the speculative economy (banking and finance) is also many time larger than the symbolic economy. That is, banking and finance exchanges dominate symbolic exchanges (movies, real estate, fashion, personal computing gadgets) which in turn dominate over food and water. At some point, the decisions of the marketplace become stupid. The food goes away, driving the prices up, pulling the energy-intensive portion of the economy back into play.
What Murphy adds to the analysis is to close the loop. This is not just possible, somethinbg to worry about. On the presumption that the growth imperative can be maintained, it is inevitable, as the growth imperative keeps driving monetary value toward items disconnected from energy.
The real questions are first whether the time of the transition is already at hand, and second, whether we will have the social capacity to transition smoothly to non-growth, or whether disaster will force it upon us.