#219. The unravelling begins


In nineteenth-century England, pictures of great events and famous personages could be purchased “penny-plain or tuppence-coloured”.

Where the world economy is concerned, the price of flattering colouration has soared into the trillions, but the value of a “penny-plain” view has never been higher.

The penny-plain picture now, of course, is that a vast gap has opened up between the consensus expectation of continuity and the hard reality of a post-growth economy. This gap is the counterpart of the chasm that exists between the ‘real’ economy of goods and services and the ‘financial’ economy of money and credit.

Our understanding of these dissonances sets an outline programme for ongoing analysis. The best routes to effective interpretation are those which (a) compare reality with perception, and (b) calibrate the relationships between the ‘two economies’ of money and energy. In the coming months, the aim here will be to add interpretive and statistical detail to the picture that is emerging as the aquatint wash of delusion fades away.

The divergence between expectation and reality isn’t – in itself – a new development. Many of us have long known that, over a very extended period, most economic “growth” has been a cosmetic product of breakneck and hazardous monetary expansion, that the underlying economy has been faltering, and that the confidence placed in ‘continuity’ lacks a basis in fact.

We can go further, recognizing that even the simulacrum of “growth” can’t last much longer, that the real prices of assets are destined to fall sharply in a context of broader financial distress, and that the balance of political power might be poised to shift, perhaps in a direction that, once upon a time, used to be called “left”.

What IS different now is that a process of fundamental change is already underway. The consensus case for continuity is crumbling, and is being exposed as a product of self-deception, wishful-thinking and economic incomprehension, spiced with absurd amounts of techno-utopianism.

The outcome mightn’t – and needn’t – be the wholesale “collapse” predicted by doomsayers.

But the game is up for what we might call the ‘continuity consensus’.

Of price and value

The single most obvious symptom of change is inflation. The Fed might – belatedly – have stopped calling this “transitory”, but the consensus view remains that this isn’t the start of a “stagflationary” trauma of the kind last experienced in the 1970s.

It’s widely argued that the take-off in inflation is a short-term product of the shortages and supply-chain fractures created by the coronavirus pandemic and, perhaps, of the gargantuan amounts of money injected to cope with the crisis. It’s further contended that labour lacks the pricing power to create a price and wage inflationary spiral. 

Before buying this comforting narrative, it makes sense to look at the fundamentals. Prices are the point at which monetary demand meets material supply. Put another way, prices are where the ‘financial’ economy of money and credit intersects with the ‘real’ economy of goods and services.

Conventional theory states that the price mechanism enables strong financial demand to prompt corresponding rises in physical supply, because rising prices give producers an incentive to increase supply to the market.

This logic, though, holds true only under conditions of infinite capability. No rise in prices, or increase in financial demand, can prompt the delivery of products which do not exist in nature. If physical constraints exist, the theory that ‘demand creates supply under all circumstances’ is exposed as a fallacy.

This is particularly pertinent to the supply of energy. Surging European natural gas prices are a case in point. Conventional theory dictates that spectacular rises in prices ought to have brought new supply gushing into the market for gas. The reality is that no such new supply exists. To be sure, price differentials can divert supplies between competing markets, but they cannot increase the aggregate availability of gas. The same applies to other forms of traded energy, including oil and coal.

This brings us to the fundamental point about scarcity. Conventional economics, with its insistence that ‘demand creates supply’, dismisses the very concept of material constraint. Hard fact, on the other hand, decrees that the supply of fossil fuel energy at an affordable cost is constrained by the limits of resources.

Two observations are necessary here. The first is that the process of depletion has created sharp rises in the ECoEs – the Energy Costs of Energy – of oil, gas and coal. The second is that nothing that has any economic utility at all can be supplied without the use of energy.

Accordingly, rises in the ECoE-costs of energy must force up the cost of everything else, imposing changes in allocations, priorities and distribution. This is particularly applicable to resources such as food, water, minerals, metals and plastics, all of which are supplied through energy-intensive processes.

We can’t conjure them out of the ether by pouring money into the system.

Supply constraint and the implications for demand

Of course, conventional economic theory doesn’t limit its concept of the price mechanism to the assertion that rising prices must increase supply.

It states, also, that rising prices depress demand.

If we superimpose resource constraint onto this ‘equilibrium-through-price’ equation, what we’re left with is a process whereby supply isn’t increased – but demand IS depressed – by rising prices.

Put another way, the introduction of material scarcity into the pricing equation tells us that supply constraints will, through the mechanism of rising prices, reduce demand.

This is the point at which two realities have to be factored in. The first is that consumer purchases are divided, in order of priority, between essentials (things that the consumer must have) and discretionaries (things that he or she may want, but doesn’t need).

The second is that there is extraordinary sectoral and popular resistance to the idea that discretionary consumption might be trending downwards.

We can see these factors in operation right now. Because of resource scarcity in general – and energy scarcity in particular – the cost of essentials is rising markedly. We can see this, most obviously, in the rising costs of food, fuel and domestic energy, but we can be sure that this process is going to extend into other necessities.

It’s noteworthy that the Resolution Foundation, a British think-tank, is forecasting that 2022 will be a “year of the squeeze”. This description can be applied globally, differing only in pace and magnitude between countries and regions. The cost of everything from gas and electricity to fuel, travel fares, food, clothing and even water is going to rise.

The brunt of this pressure is felt initially by the poorest households, who spend the largest proportion of their incomes on necessities. But there need be no doubt that the rising tide of costs will move steadily up the gradient of household incomes.

For suppliers of discretionary goods and services, this is a double-edged sword. On the one hand, consumers whose living costs are rising have less to spend on non-essential purchases. On the other, the costs of supplying discretionaries are rising. Credit-funded discretionary spending, long the prop of non-essential sectors, is in the process of being undermined by inflation or, more specifically, by the monetary implications of the rising cost of necessities.

Behind the brittle optimism presented by every sector from travel and hospitality to ‘tech’ and the supply of consumer goods lies a reality shaped by rising costs, decreasing consumer resources, and an eroding capability to bridge the gap using cheap and abundant credit.      

Prices as interface           

In order to interpret the role of inflation correctly, we need to understand the conceptual distinction between the ‘two economies’ – the ‘financial’ or proxy economy of money and credit, and the ‘real’ or material economy of energy and resources.

What this distinction tells us is that money has no intrinsic worth, but commands value only as a ‘claim’ on the goods and services supplied by the real economy. If we wanted to be high-falutin’ about it, we could say that money is an artefact ‘validated only by exchange’.

What this really means is that inflation is a process governed by changes in the relationship between the availability of money and the supply of goods and services.

Over an extended period, we’ve been pouring enormous quantities of financial demand into the system, at the same time that material supply has become ever more constrained.

In this sense, inflation isn’t even a new phenomenon. Rather, price escalation has, hitherto, been channelled into asset prices, whose movements are – conventionally, but mistakenly – excluded from the measurement of inflation.

If we had, all along, been using a comprehensive, RRCI-type measure of inflation, we would have been far better prepared for, and much less surprised by, what is happening now.  

Since there are no ‘fixes’ for material constraints, the only way in which inflation can be tamed is by pushing monetary demand back downwards into alignment with material capability.

This understanding re-frames what we know about monetary policy. As things stand, the real (ex-inflation) cost of money has fallen to unprecedentedly negative levels. Since we can’t create physical resources out of nothing, the only policy fix for the gap between the real and the financial economies is the elimination of the subsidy of deeply negative real rates. The scale of past recklessness has ensured that any such process would be extraordinarily disruptive. 

This means that raising rates by enough to tame inflation would have two effects, not one. The first would be to temper the rate at which the supply of credit expands. The second would be to start unwinding past expansion in the quantity of credit.

It would be futile to suppose that we can have one of these effects without the other. We cannot restrain inflation simply by raising rates by just enough to deter new borrowing, without affecting either the servicing cost or the collateral backing of existing credit.

In any case, the current system depends on a continuity of increasing credit. 

To be effective, then, rate rises would have to be big enough to trigger credit defaults, asset price slumps and a re-pricing of the financial system back into equilibrium with the constrained character of the underlying economy.

The paralysis of predicament

In practical terms, this means that positive real rates won’t be reinstated voluntarily, and this leaves us looking for pressures that might force us to act realistically.

The most obvious such pressure will come from households, which might accept the impairment of the scope for discretionary consumption, but won’t – and can’t – tolerate relentless increases in the cost of essentials.

This is where forecasting processes need to be reinvented, meaning rebased away from the fallacious assumption of ‘growth in perpetuity’.

By calibrating both prosperity and the trend in the real cost of essentials, we can make sense of a dynamic whose consequences will include widespread defaults, sharp falls in real asset prices and a fundamental shift in the political climate.

At the same time, our recognition of the relationship between the ‘real’ and the ‘financial’ economies should give us steadily-improving visibility on the economic, financial and broader outlook.

None of this necessarily spells “collapse”, but it does establish a relationship between systemic risk and the prevalence of self-deception.

In this sense, our best hopes for a manageable future rest on an orderly assertion of reality, and the retreat of delusion.

284 thoughts on “#219. The unravelling begins

  1. Just finished listening to Rachel Douglas’s latest interview with Tim Garrett. He mentioned a correltation of GDP with the reate of increase of energy consumption – this (if correct) has a very different implication for the possibility of gentle degrowth vs. collapse. Would be interested to know how this fitswith your SEEDS modelling Dr. Tim.

    • At about minute :32 Dr Garrett explains that he has a paper in the peer review process that shows that:

      1. Energy consumption growth must be a positive number or the modeled system (i.e. society) will collapse as a thermodynamic necessity. Not only must the society grow, it must grow at an increasing rate, or it collapses.
      2. Stagnation in the rate of increase of energy consumption is a precursor – and therefore a predictor – of collapse.

      This has profound implications for any concept of de-growth. Dr. Garrett is saying, in no uncertain terms, that this civilization will either continue to grow or it must as a physical necessity collapse.

      Can someone (Steve?) get ahold of that paper and share it with Dr. Morgan and the community? This is without a doubt the most interesting thing I have seen in a while. Quite a while.

    • I don’t know Garrett. And it is unlikely he’d share it with anyone outside his inner circle while its in peer review.


    • I would say given that adequate energy supply is a necessary condition of any level of GDP, the ability to de-grow vs collapse is bounded by a hard limit of our availability to maintain energy supplies. I assume this will lead Tim down the path he has already advocated – the need to maintain access to essentials.

      The Kazak unrest this week may lean toward some sober understanding of what is essential. Perhaps there is some possibility of a zeitgeist of shared sacrifice. If left up to the price mechanism I doubt it will work out.

    • “I assume this will lead Tim down the path he has already advocated – the need to maintain access to essentials”.

      Certainly, though I would add a couple of points here.

      First, my reference number is prosperity rather than hugely-inflated GDP (a measure of activity rather than material supply).

      Second, I see simplification as a critical part of the process – as the economy gets smaller, it will also get less complex.

      If you look at any economic process – for example, making a car and supplying it to the consumer – you’ll see an enormous level of complexity. A great deal of this can be de-layered out of the system without changing the basics of (a) the making of the car, and (b) its purchase by the motorist. This is true of the supply of goods, and much more so where services are concerned.

      This decomplexification process is likely to be driven by deteriorating prosperity.

      Let’s say I make non-essential goods. My customers’ prosperity is decreasing, and their cost of essentials is rising. To stay viable, I need to simplify my offering (fewer choices of product making for greater efficiency), simplify my production processes (reducing costs whilst also making operations more resilient) and de-layer my operation (using fewer middle-men).

      If I don’t do these things, my competitors will.

      Whilst prioritizing essentials, there are huge gains to be made by de-complexifying the system. Whole sectors are likely to disappear, but with a particular emphasis on sub-sectors.

      This is where technology may help – not by giving us ever more ways of using energy, or of generating ‘activity’, but by improving efficiency.

    • Tim, I suppose my concern is that by stating that GDP is “hugely-inflated” you allow it to be dismissed as a useless measure. Of course it is very important to consider (as you do) prosperity. But if Tim Garrett is right about the relationship of GDP to energy use, this implies that GDP is not merely arbitrarily inflated, but has a strong connection to and constraint on possible future scenarios. If he is right!

    • Thanks Simon.

      GDP has been artifically inflated, enormously, over a lengthy period. Even excluding non-debt liabilities, and also excluding the creation of enormous pension gaps, we’ve been taking on around $3 of new debt for each dollar of “growth”. A great deal of ‘activity’ has been injected using ‘promises to pay’.

      We can calculate underlying or ‘clean’ output, and deduct ECoE to identify prosperity. But what I’d rather mention here is the nature of the inflation of GDP which, as you’ll know, is really a measure of activity rather than ouput, stricto senso*.

      We’ve used credit/money creation to turn the economy into something not unlike a gigantic souffle. Any form of supply you care to think of has developed ancillary activities, not really essential to the simple supply of the product or service involved. These ancillary activities provide incomes, and therefore spending, without really adding value to the supply of the product or service. These non-essential activities have popped up, like mushrooms, throughout the economy, though far more in services than in production.

      Then there’s the enormous inflation of asset values. Asset markets have been one of the main conduits for pouring liquidity into the system. A lot of activities, most obviously dealing commissions, insurance premia and so on, are asset price-related. This is even before we start asking ourselves how much value is actually created by numerous sectors and sub-sectors. (Say you sell a house that’s twice the price it was ten years ago. You probably pay twice as much commission to the real estate agent. The work done by him or her hasn’t increased, but his or her income has doubled. You include that in the price, and the buyer probably pays it out of the increased mortgage now required).

      What this means is that we can reduce apparent ‘activity’ very much without seeing much of a fall in the real utility of products and services. That’s even before we start reducing the supply of things that people might want, but don’t need.

      *In case that’s wrong, I dropped Latin for engineering drawing at age 12……….

    • I think an important point here, supported by Tim Garrett’s analysis, is that GDP still has a very real physical meaning because it is directly correlated with energy consumption, i.e. a direct and measurable environmental footprint. And all the “inflated” money reflected by GDP can be used to carry out acttivities that have direct environmental impacts such as habitat destruction by development etc. In economic terms, it may well be “inflated”, but it still corresponds in a nearly 1:1 relationship to a huge environmental footprint. This footprint is proportional to GDP, not to prosperity (unfortunately).

    • I’d say GDP is immensely flattering in relation to what’s really happening. If we believe GDP, we’re getting steadily more economic value per unit of energy consumed. We’re also reducing CO2 emissions for each unit of GDP.

      I would remind you that, if a government hires 100,000 people to dig holes in roads, and another 100,000 to fill in those holes – and pays all of them using borrowed money – GDP increases by the sum of those salaries, and debt isn’t offset against that “growth” in GDP.

      In other words, where GDP is concerned, we ‘get something for nothing’.

    • Yes, I agree. The problem in terms of environmental damage is still that this “something” is physically real. I guess this may change only when the currency loses its credibility and debt – “nothing” – is not sufficient anymore for creating “something”. Would you agree?

    • Dr. Morgan, et al;
      With all due respect to Dr. Garrett, I doubt that he (like me) knows what GDP is exactly. I suspect that when he says “GDP” that he is referring to the 6th grade definition of GDP which is closer to production, or even C-GDP. I suspect that his calculations are in energy units (certainly not money units) anyway.

      Sorry, of course i was asking too much. On the other hand, you, as a socially sophisticated extrovert, would be better suited for getting the paper than a long time committed hermit. In any event, the paper will be out soon, certainly this year.

      I’m trying to be very careful with terminology here:
      It is my understanding that the rate of increase in energy usage rate (i.e. the first derivative of the energy usage rate) is still positive or flat. That is, global society is using energy at an increasing rate. Am I wrong?

    • Pintada,

      Since human population is still growing at ~ 80 million per year, it is hard to imagine energy usage not growing as well. Burning wood for cooking and heating is energy usage, but not always included in statistics. See:


      “We see that global energy consumption has increased nearly every year for more than half a century. The exceptions to this are in the early 1980s, and 2009 following the financial crisis.

      Global energy consumption continues to grow, but it does seem to be slowing – averaging around 1% to 2% per year.”

    • It seems as soon as quantity overrules quality things turn bad.

      Keeping up quality is easy in the beginning, healthy in progress, and deadly at last.

  2. I pulled this article out of one of the above comments:


    I liked the article and thought that this paragraph was particularly apt:

    “However, this only feeds into the illusion of human control. Unfortunately, our capacity for pre-emptive measures is undermined for reasons both structural and behavioural. Structurally, we did not design our civilisation. It is self-organised. Its dynamic, complex, globalized and integrated structure is both beyond our understanding and our control as it emerged as a response to external resource availability, always expanding to maximize its ability to continue.”

    Even just the first sentence tells us all we really need to know:

    We had no control over the formation of industrial civilization. It formed us. We are its products.

    We have no control over industrial civilization. We will process energy and resource inputs and throughputs in accordance with its dictates (MPP, maximium power principle).

    We will have no control over its eventual (ongoing) dissipation. We are its products and will dissappear along with it, the “fossil fuel system”.

    • Hi Dave, good article. Those that most profitably grab the energy and turn it into copies of themselves, whether a human or a Starbucks, will push aside those less capable. Greed permeates our societies. The most psychologically defenseless, without early warning radar, may be lining-up at the gallows at this moment to unwittingly contribute their share of future energy consumption. Dissipative structures that evolved to produce tools to release energy from many gradients will do just that until the ECoE bites. Social human behavior of dominance hierarchy does not support satiety of most individuals and therefore the competition will continue. Even with the best efforts of our highly responsible geneticists, biotechnologists and Pandora’s CRISPR, I doubt they can alter our nature. Perhaps the robots will do better, but I doubt it.

  3. Bjorn Lomborg on Green energy
    “Today’s Soaring Energy Prices Are Only the Beginning
    Current ‘net zero’ plans will cost many trillions while doing little to slow global warming.”

    It is slowly dawning on important people that we really do face a crisis. However, very few are willing to consider DeGrowth….which would likely require a complete restructuring of the economy and politics and money and probably land reform.
    Don Stewart

  4. This Might Be Tim Garrett’s Paper

    He has maintained for some time that simply maintaining what we have accounts for most of our energy usage. Therefore, if energy declines, then maintenance of what we have inevitably declines. When enough of the spokes break, the wheel collapses.

    As a parallel, the human body uses about three quarters of calories we eat just to maintain the basic functions of the body. Actually moving the body (analogous to transportation using oil) accounts for one quarter.

    Therefore, it is a mistake to think that humans could cut calories by 50 percent and just move 50 percent less or increase the efficiency of moving. The analogue is that the energy intensive system we have built cannot survive a deep cut in energy production. A secondary question might be whether a system built on uninterruptible power can survive if power is not always available.
    Don Stewart

    • Oh, good grief …

      I remember Tim Garrett now. Years ago he started working on this idea, and I read one of his papers. I couldn’t get past this phrase then, and may have problems with it now.

      “… one Exajoule of world energy was consumed to sustain each 5.50 ± 0.21 trillion constant 2019 US dollars, not of yearly production or physical capital, but of running cumulative production summed over human history.”

      What? “… cumulative production summed over human history.” What does that even mean?

      Anyway, I will dig through the paper. It will take several days.

      Thanks Don!!

    • What he says in the interview has nothing to do with what is in the paper. The paper may show a correlation between GDP and energy usage. What a waste of time. I hope I don’t again forget to associate Tim Garrett with drivel.

    • @Pintada
      I disagree with you re: Tim Garrett and his co-authors. The difference, as outlined in the paper, is that it is the cumulative that is more important than the current consumption. As they points out, almost everyone has assumed that just manipulating current consumption of energy is the hugely important element. If it is the cumulative which has constructed the economic and social environment we currently live in, then the only way to cut our energy needs is to take a wrecking ball to our current economic and social environment. In other words: collapse. So we might characterize the future as a Seneca Cliff.

      These are sobering conclusions, IMHO.
      Don Stewart

    • You are entitled to your opinion! Absolute truth is the deluded province of religion. Which is flakier: volumes of credit based fiat or calories as an indicator of economic throughput?

    • “If it is the cumulative which has constructed the economic and social environment we currently live in, then the only way to cut our energy needs is to take a wrecking ball to our current economic and social environment.“


    • @Pintada
      Because the current economic, political, social, and legal environment was constructed by the forces operating in the now obsolete environment (constantly increasing energy availability). When energy plateaus or begins to decline inexorably, then there is small likelihood that the forces operating will construct the same environment. As one example, there will doubtless still be private enterprise, but likely no capitalism in the sense that money is disconnected from real products. And, in my opinion, it is likely that land will be redistributed as more people choose self-sufficiency. Exactly what form that will take is anyone’s guess, and it probably won’t be the same all over the globe.
      Don Stewart

    • I’m not all that familiar with the cumulative interpretation, though I assume the idea involves working out how much energy we had in the first place, how much has been consumed and, therefore, how much remains.

      My preferred approach looks at how much energy is available in a given year, how much of that remains as surplus energy after ECoE has been deducted, and how this surplus energy translates into prosperity. One can use this approach to evaluate past prosperity, and extend the key parameters forwards to project the future. With the economy of energy prosperity thus established, we have a benchmark for assessing both reported economic activity and the sustainability of forward commitments.

      On this basis, and using the US as an example, the underlying (‘real’) economy is currently about 35% smaller than the ‘financial’ economy of money and credit. It’s an over-simplification – but a useful starting-point – to suggest that ‘everything financial must contract by 35% in real terms’.

    • @Dr. Morgan
      Please note that Joseph Tainter is now working with Dr. Garrett. Since they have no funding, don’t expect miracles. They do have the advantage of being physically close together. Tainter, of course, is famous for his work on the collapse of complex societies.

      As one example. Institutions of learning arose when a few people had the luxury of time and the ability to meet and talk freely, notably in Athens and China and I am sure in lots of other places. There was a teacher and a bevy of students and they either met in a public place or walked around and talked. By the time of the founding of the United States, particular places with collections of buildings and a specialized faculty emerged. By the time I went to college, the specialization and the scope of instruction had increased and the democratization had allowed even students from poor families (like me) to attend a college at minimal cost. But half or more of the students flunked out. It was very common for a professor to arrive for the first lesson, and say…”look to the left, look to the right, look at yourself…only one of you will make it to graduation”.

      60 years later the university has become a bloated place with an enormous increase in non-faculty and enormous amounts of money devoted to making sure that very few students fail. In the elite universities, the amount of hand-holding is ridiculous. Whereas I graduated with zero debt (by working 30 hours per week in addition to college), today’s students are powered by an enormous amount of debt.

      What Garrett’s cumulative approach says is that to keep the university alive, as it exists today, has an enormous energy cost. That cost is a function of all the energy that has been spent since the time of Socrates, which energy has allowed the current structure to be built…but the bulk of that expenditure has happened in the last few decades. The energy expended has allowed this complex creation to function. Tainter’s work and Garrett’s speculation is that a significant reduction in energy available will require structural changes. What those changes will be is speculative, but, if a societal reduction of 35 percent is called for, we can imagine that a bloated institution might be forced to shrink 75 percent as non-essential functions are simply destroyed. It might, for example, resemble the institution I attended in 1960. In a worse case, it might revert to what the university looked like at the American Revolution, which was a place for males in patrician families. Catastrophists might imagine going back to Athens…a place for the sons of the very rich, attended by slaves.

      Whether we call that a collapse or just a diet is a matter of word selection, but the point is that a 2 percent reduction in budget won’t cut it.

      Don Stewart
      PS. This is my interpretation from listening to Garrett and Keen and Tainter. I don’t know much about Grasselli. They shouldn’t be charged with my crimes.

    • Tim Garrett has illustrated the cumulative interpretation with the growth of an organism: the past growth determines how much the organism has to eat at any given point in time. A big person – e.g., an athlet with a lot of body mass – has to eat more than a skinny person. If the big person eats less than what would be needed, the person will have to starve and lose weight (= degrowth). In other words, current energy consumption depends to a considerable extent on the history of the organism or the energy system, the economy, etc. The point of this interpretation is that it explains current energy use in terms of the history of the system. If we want to reduce our global energy consumption, we have to get rid of some “tissue” of the economic super-organism. The inertia of the system implies that there are fewer degrees of freedom than we may think.

    • I’m more with Tim on this one.

      Energy productivity contraction or global energy supply contraction will initiate processes of delayering and simplification which will translate as the economic system restructuring to weed out unnecessary technological gimmickry, weed out resource misallocations, weed out waste, weed out unproductive economic activity, rebalance the private sector and the public sector, weed out idealistic consumption expectations, etc etc. In other words, reduce, reuse and recycle will take on a special meaning as production systems learn to cope with less of everything. I do not think this will lead to collapse purely on the basis of the maximum power principle.

      From this point of view, the economic system will be reconfigured to remain competitive within the scope of affordability and availability.

      Garrett’s work is interesting, but from what I can tell his work is in relation to climate change and inertia (along with debunking absolute decoupling) within the context of an energy based understanding of GDP growth (since even debt and QE requires energy when translated into economic activity). Therefore his conclusion is that climate change mitigation is not compatible with GDP growth.

      In this respect, his hypothesis is very different to Tim’s in that Tim is specifically focused on energy based prosperity and the effects of reducing energy productivity, especially the entropic, maintenance and depletion dimensions, on material (not financial) prosperity.

      These dimensions are however similarly used by Garrett to explain his constant K.

    • this has been a good theoretical discussion.

      how does the built infrastructure of the world change in relation to declining net (surplus) energy?

      in the real world over the past decade or so, the actual mechanism has been for the bigger stronger countries to retain some prosperity as a Core while the smaller weaker countries are a Periphery where some of the member countries are swiftly losing much of their former prosperity.

      the infrastructure destruction in the Periphery is the first phase of the world economy wrestling with declining net (surplus) energy.

      I think it is very likely that this pattern will continue, devastating peripheral countries mostly, and slowly creeping deeper into the Core.

  5. A Short Note on Cumulative Energy Consumption and the Prospects for DeGrowth
    I believe it is an accurate statement that cumulative production is an important indicator of the current need for energy expenditure for the purpose of maintaining the status quo. I draw analogy to humans…an adult human should not grow, but instead burn all of the calories ingested to maintain a stable body weight. Excess weight creates inflammatory particles which results in disease and early death. A healthy human adult metabolizes some of their body every day, extracts useful amino acids from that process of autophagy (eating oneself), reuses them, and excretes the rest. Let’s see if that model applies also to a potentially negative growth for the economy.

    Much of the current store of real assets has been built using designs which are supposed to be rapidly obsolete. The most valuable company in the world, Apple, is notorious for designing machines which are hard to maintain using off the shelf parts. So I suggest that we have been living in a “throw away” society for some decades now. If the energy required to replace the current crop of machines is not available, then we can expect a surprisingly fast decline in the capacity of the economy to produce current real goods.

    Services are a different matter. We seem to be stuck in a circular pattern where various pundits tell us what to do and what is about to happen and interpret for us what happened yesterday, and it isn’t clear how they ever become obsolete. A friend of mine said “It is amazing that people will pay other people to tell them what they already know”. However, the extent to which it is advertisements which pay their salaries, and advertisements only work (if at all) when people have a certain measure of prosperity, it is easy to see how a decline in real production can trigger a decline in services.

    Looking more closely at production, we can see that very few people could survive if parachuted into an untracked wilderness. But put a troop of Boy Scouts into the wilderness and the chances of survival increase because people learn to specialize and cooperate. Thus, cooperation increases production. The global monetary system has increased global cooperation so that it is now the norm that one has no idea which actual persons were involved in producing whatever one is consuming. If the global monetary system loses the confidence of producers and consumers, then that cooperation will fail and a precipitous fall in production will follow. It is my experience that, in a crisis, people quickly figure out that they need to cooperate.

    A simple example of a group of people only loosely connected who developed a cooperative relationship. A group of people living in a town in North Carolina lost their electricity during a hurricane. It became evident that the electricity was going to be absent for a number of days. A leader emerged who called a meeting and pointed out that refrigerators and freezers would not work without the electricity, and that every time a door was opened, cool air was lost. So the solution was for one refrigerator and freezer to be opened each day, and the contents shared among all the parties to the agreement. It worked. Nobody starved, and the day that the last refrigerator and freezer were opened, the electricity was restored. One of my daughters spent some time in an indigenous community in Mexico, and she observed that such informal cooperation was the usual course of behavior. Whether hard-bitten individualists in the wealthier parts of society can adjust I have no idea.

    Where this puts me is to see more flexibility in the direction of DeGrowth than Dr. Garrett seems to anticipate. I don’t have any reaction, as yet, to what Dr. Morgan will propose. The probability that people CAN adjust doesn’t mean that they won’t be dragged kicking and screaming into cooperative behavior.

    Don Stewart

  6. Even the sober minded no longer believe what the FED says:

    “I doubt QT ever gets off the ground. If it does, expect grounding in short order. The odds favor a larger Fed balance sheet by year-end – perhaps much bigger. But today’s backdrop is unique in the “whatever it takes” open-ended QE era: inflation presents a clear and present danger. In a major problem for such highly inflated manic markets, the Fed will have to think twice before restarting the electronic printing press. Markets will have to be in some serious trouble before securing the tranquilizing effects of QE announcements. Expect liquidity injections to come, though perhaps too late for the equities Bubble.”


  7. Tim Garrett, Steve Keen, and Grasselii Article
    When I posted the link to the Preprint earlier, I thought people would read it if they are interested. But you do have to click through to the full article. So here is the link to the full article:

    Click to access esd-2021-21.pdf

    One conceptual highlight: “energy is required not just to sustain that which we believe available to be sold, but also the unspoken utility of that which has previously been produced. Civilization was not built in a day.” This is reminiscent of the Howard Odum argument that a college professor with chalk and a blackboard is a highly energy intensive occupation.

    And here is the full conclusion:
    “We have identified a nearly constant relationship between world historically cumulative inflation-adjusted economic production and current energy demands that has held for the past half-century, a period during which resource consumptive demands nearly tripled. Whatever its explanation, its persistence would appear to place substantial bounds on humanity’s future interactions with its environment. For one, it implies that present sustenance cannot be decoupled from past growth, implying a much greater role for inertia than has been broadly assumed, for example, in the integrated assessment models used to evaluate the coupling between humanity and climate (Nordhaus, 2017). Even if world GDP growth falls to zero from its recent levels close to 3% per year, long-term decadal-scale resource demands and waste production would continue. More worryingly, the result suggests that it is only by way of collapse of the previous growth that led to the wealth we enjoy today, effectively by shrinking Lotka’s wheel, will our resource demands and waste production decline. Eq. 1 offers no direct mathematical approach for such an event to occur, except perhaps through hyper-inflation, as this would lead to high values of the GDP deflator that in economic accounting yield values of the inflation-adjusted GDP much lower than the nominal GDP. Historically, hyper-inflation has been associated with periods of societal contraction (Zhang et al., 2007) suggesting a possible link to decay.

    On the topic of climate policy, a constant value of w implies that economic production can be decoupled from carbon dioxide emissions, but only provided a rapid switch to renewables or nuclear energy. All newly added energy production would need to be emissions free, which based on recent consumption growth rates works out to about 1 Gigawatt per day. Alternatively, or concurrently, some means would need to be devised for decoupling W from E by increasing the value of w. Given the value of w has varied little while society has changed tremendously over the last 50 years, it is difficult to conceive how this would be managed. That said, adjusting w could be seen as new target for mitigating future climate damages.”

    Don Stewart

    • Yes indeed, or in sciencie/mathematical terms:

      Let G be the economic theories and analysis of Tim Garrett, while D is drivel including rubbish data collection, the use of philosophy to substantiate math, and a lack of integrity that allows someone to do interviews to hype findings that do not exist in reality. And we see that:

      G = D

    • That all seems to make sense.

      Our civilization was built on a ECoE of less than 1%. To maintain the level of complexity, then the ECoE must stay at <1%.

      I'm interested in the role of money in a de-growth situation.

      As far as I can tell (please tell me otherwise, if I have it wrong) there are two ways money is created.

      1. Central Banks creating reserves. (I'm of the MMT persuasion, and think that Governments spend first and tax later, not the other way round. The rate of taxation never reaches the amount that the Central Bank has created, so money is left in the economy. Inflation is kept at bay by a growing economy that can absorb the untaxed (un-destroyed) money

      2. Banks create money on license by creating deposits in customer accounts as loans/debt. The interest on the loans being paid by an increase in economic activity. Growth.

      Both systems require for there to be growth in the economy for it all to work.

      In a de-growth situation, the whole banking system will collapse. This will not be a gradual process. It just can't function without growth.

      How will money function in a de-growth world?

  8. I read Garrets work for years now and as I understand his point it’s that entropy is the idea being left out of a lot of equations. Example: the amount of energy required to build a generator will not be reproduced by said generator due to entropy. In order to get more energy out of said generator maintenance has to be preformed on a regular basis. So that means that more energy is invested in said machine. All of the human worlds mechanical infrastructure requires at least as much energy applied to it over its life time as maintenance, as went into creating it. Anything that doesn’t fall under this would be a perpetual motion machine. I don’t know of any! So a lot of the natural resources left will have to go to maintenance not growth.

  9. Alice Friedemann on Entropy
    Methods to preserve knowledge for Wood world (Life After Fossil Fuels)
    You can find it on energ skeptic.com

    Don Stewart

  10. Why I cant respect Tim Garrett:

    In the interview, he said:
    “What my work has shown … a better relationship is between GDP and the rate of change of energy consumption … Robust imperial result … what it means is that GDP is a manifestation of the rate of change of energy consumption … only by increasing our demands on energy can we sustain and economy. I have a paper that shows that …”. (Sorry if I have some words out of place, I’m not a stenographer)

    Don Stewart found a paper in peer review (thanks again Don), by Garrett that does none of the things he says that it does. The paper shows a strong correlation between energy use and GDP, but that is all. (Gail Tvergerg does a much better job of showing that correlation.) But then, at the end of the paper he says:

    “If it is the cumulative which has constructed the economic and social environment we currently live in, then the only way to cut our energy needs is to take a wrecking ball to our current economic and social environment.“

    Why? The paper doesn’t show this conclusion. It’s just his opinion.

    What really gets my goat is that I agree at some level. This society will continue to grow, or it will collapse down a Seneca Cliff. Unfortunately I have no robust proof, just rhetoric. Garrett promised a mathematical proof, and provided drivel. Maybe, we have the wrong paper, but I doubt it.

  11. Dr. Morgan says, “I’m not all that familiar with the cumulative interpretation, though I assume the idea involves working out how much energy we had in the first place, how much has been consumed and, therefore, how much remains.”

    No. He first sums all of the GDP for the planet from the beginning of time. The GDP from 1970 to the present is obtained from the UN. The previous “GDP’s” come from other sources, but he argues, I think, compellingly that the error introduced by prior years GDP do not skew his results overmuch. His energy data comes from BP and the EIA.

    The concept of what he terms a “world historically cumulative production, W” is very counter intuitive, but the rest of his arguments come from that number. W for 2019 is 3547 trillion US $.

  12. Joseph Tainter and Tim Garrett and Art Berman and Thermodynamics
    Art Berman said:
    “Tainter is excellent but doesn’t understand energy. His approach is economic. Societies don’t collapse b/c of complexity but b/c of the energy required to maintain the complexity. Society is a dissipative structure. Thermodynamics prevents a return to a simpler state.”

    The comments appears on Garrett’s twitter page. I suppose it is in response to Garrett and Tainter agreeing to work together. I don’t understand what Berman is saying. If he means a ‘controlled degrowth’ is impossible, I’d like to have an explanation.

    Don Stewart

    • In terms of controlled de-growth, it’s useful to think about how we’d react in various roles as the reality of deteriorating prosperity beomes clear.

      As a voter, do we accept the status quo, as the cost of essentials rises relentlessly, or do we switch our vote to alternatives offering to do something about this? (essentially, cross-subsidy)

      As a business leader, do we carry on as consumers’ discretionary prosperity falls, our own costs rise and input vulnerability worsens – or do we simplify products and processes, eliminate unnecessary activities and de-layer our operations?

      As an investor, do we stick with companies with weak financials but offering ‘growth’, or do we switch to solid, profitable, strong-cash-flow, low-debt alternatives selling things that consumers need, rather than ‘want now’, or ‘will want in the bigger economy of the future’?

      As a banker, do we lend to borrowers whose only chance of repaying debts depends on (a) growth in their incomes or profits, and (b) rates not rising?

      As an entrepreneur, do we stick with the tried and trusted models of the past, or look at the foregoing and see very different opportunities?

  13. @Dr. Morgan
    The apparent difference between your assessment of the probability that humans can select managed DeGrowth and Art Berman’s opinion may turn on the phrase “Dissipative Structure”. A hurricane is a dissipative structure with no common sense…it just follows certain physical laws rather blindly. Should we characterize humans as belonging to the same class as hurricanes?

    A lot of climate scientists have become pretty despondent on the subject, as evidenced by the current movie Don’t Look Up. However, there is an opposing viewpoint. Here is a book jacket blurb about a textbook written by a distinguished British scientist:

    “Dance to the Tune of Life: Biological Relativity 1st Edition

    by Denis Noble

    In this thought-provoking book, Denis Noble formulates the theory of biological relativity, emphasising that living organisms operate at multiple levels of complexity and must therefore be analysed from a multi-scale, relativistic perspective. Noble explains that all biological processes operate by means of molecular, cellular and organismal networks. The interactive nature of these fundamental processes is at the core of biological relativity and, as such, challenges simplified molecular reductionism. Noble shows that such an integrative view emerges as the necessary consequence of the rigorous application of mathematics to biology. Drawing on his pioneering work in the mathematical physics of biology, he shows that what emerges is a deeply humane picture of the role of the organism in CONSTRAINING ITS CHEMISTRY, including its genes,TO SERVE THE ORGANISM AS A WHOLE, especially in the interaction with its social environment. This humanistic, holistic approach challenges the common gene-centred view held by many in modern biology and culture. ”

    If we adopt Noble’s viewpoint, we can be more optiimistic about human prospects than reductionist approaches such as the Maximum Power Principle, or statements that human purpose is to turn energy into children, or that humans are merely Dissipative Structures, or that we have only Selfish Genes. I guess each of us have to look at the evidence we see to decide whether society as a whole is behaving reductionistically or with the sort of relativistic perspective that Noble’s model presents. One of Rachel Donald’s interviewees told her that the more years an Economist spends in school, the more reductionist they become (I think it was Steve Keen).

    You may remember the children who were subjected to the Oreo Cookie experiment. The children were left in a room alone with a cookie. They were told that if they waited 10 minutes without eating the cookie, they would get 2 cookies instead of 1. The hidden camera captures the intense process as the kids struggle with themselves. Some ate the 1 cookie and some waited and got 2. Later life follow up showed that the patient children were more successful in life. Perhaps God recollected that amusing experiment and decided to play it out with humanity as a group.
    Don Stewart

    • Thanks for this reference, Don. As one with philosopher of science focus, I’ll definitely have a look.


  14. I’ve been reading and following various threads and I stumbled upon another historical economic model that sounds worth rehabilitating and incorporating into a new order,
    it’s an idea from the late 19th, early 20th century, a world we’ve left behind but due to declining surplus energy may well find ourselves returning to,
    it’s worth a read through the wikipedia entry because it hits on a lot of the things that people here talk about.

  15. @Dr. Morgan
    Alternatively, as someone at the grassroots, who is none of these things (yet!) I expect the future to be uncontrolled de-growth, evolving from the bottom up. With an open mindset.

  16. Dr Tim.

    If the ECoE is correct and energy constraints will cause a contraction of energy use/ de-growth, then financial collapse seems inevitable to me.

    The banking system and government spending will not be possible in a de-growth situation.
    Interest bearing loans can not be repaid in a “steady state” economy, never mind an economy in de-growth.
    Money will need to disappear from the economy to prevent inflation or else there will be too much money chasing a shrinking “market”. There will be no “extra” money to pay back the loans (with interest)

    Government spending would also falter. In a “steady state” economy, a government would have to tax out exactly the amount it spends into the economy (or else inflation pressure would build up).
    In a de-growth scenario, a government would need to tax out MORE than it spends into the economy.

    I’m not sure the economics profession has ever existed in s period of de-growth?
    In fact, can “economics” be defined only a study of “growth”?
    A new word may need to be coined to refer to the process of de-growth?

    • John:

      i’m quite convinced that we are correct here in two principles. The first is that prosperity is a function of surplus (ex-ECoE) energy availability, and the second is that the financial economy is a ‘proxy of claims’ on the real economy of energy and prosperity. This convinces me that prior growth in prosperity has gone into reverse. I would contend that we’re seeing these effects right now.

      I’m not denying the inevitability of drastic change as the financial economy is forced downwards, back into alignment with the real economy. For instance, asset prices will tumble, corporate profitability will slump, and defaults will cascade through the system.

      But are we saying that we can’t adapt to this situation?

      Voters will elect different parties, and different leaders, with different priorities and different agendas. Competitive pressures will compel businesses to adapt. We’ll need to reinvent much of the financial system.

      Very little that’s helpful is happening yet, but that’s because (a) the nature of the situation isn’t yet understood, and (b) it’s in human nature to put off responding to unpalatable realities until we’re compelled to face them.

    • Dr Tim.

      I’m in total agreement with your assessment of where we are.

      I guess I’m just trying to figure out what a de-growth economy would look like.

      Will it look like a pre-industrial economy. Neo-feudal? Will most transactions be without money and be forms of credit/debt arrangements? Tally Sticks?

      How will resources be allocated/distributed? Will this involve money? Will the “State” ration energy, food etc or will the “Centre” collapse and it become a free for all?

      What I can’t see happening is for a de-growth economy being a scaled back version of what we have now. Money is not going to maintain its value on those ever shrinking commodities/resources.

    • Thanks John.

      I have to say I’m having some problems with my next article (the working title is “contraction or collapse?”).

      We get new leadership, because popular priorities switch to the essentials. Discretionary sectors contract, whilst businesses across the piste simplify and de-layer their operations. Unemployment rises, but there are ways of coping with this. Efficiency and equity are capable of improvement under the stimulus of de-growth. There are new opportunities for innovation.

      But the big problem is finance. The ‘financial’ economy has to shrink by 35-40% – asset prices, debt, other liabilities, forward expectations – and I admit I’m struggling with how we can make this happen in an orderly way.

    • Dr. Morgan:

      I today gave a lecture on the newer conservation psychology approach to behavior change that builds on Marty Seligman’s “prospection” approach (Seligman. Railton, Baumeister & Sripada (2013) Navigating into the future or driven by the past. Perspectives on Psychological Science, 8(2): 119-141). My seminar has been combining it with Dana Meadows work on envisioning sustainability (Meadows, Donella (1994) Envisioning a sustainable world. Presented at the Third Biennial Meeting of the International Society for Ecological Economics, October 24-28, 1994, San Jose, Costa Rica). We’re fighting the narrow thinking of the current response to climate crisis (i.e., mitigation versus adaptation). Briefly, we need a better version of adaptation than “do whatever we need to in order to keep the current system going as long as we can.” Early on (e.g., William James 1890s), psychology had such a notion: Change ourselves (e.g., behaviors, expectations, skill-sets) to better fit the new reality.

      When I think about the question “can we adapt” I often think that it’s the wrong framing of that concern. I’d ask “what are the conditions under which we would adapt.” The growing awareness as a result of your work (here at least) on the decline in surplus energy is one, major, such condition.

      To distinguish the older version of adaptation from its current false-front version, I’ve started using “everyday adaptation” and suggest the following start at a definition:

      (A) Psychological and behavioral changes that rely on common sense. Occurring repeatedly, without external incentives or expert assistance.

      (B) A form of adapting-in-place: Involving many local, neighborhood-scaled small experiments at creating (resurrecting) a provisioning economy. At the scale and scope of the lived experience of people.

      (C) They are decentralized: Independent of centralized, top-down, large-scale, growth-centric efforts. They do not await permission from centralized systems nor the failure of centralized adaptation efforts to begin the process of transitioning to a resource-constrained existence(see Sales, K. (2017) Human Scale Revisited).

      (D) A “third way” to respond to the climate crisis and energy descent: (1) Everyday adaptations are not mitigation efforts (e.g., not about reducing of emissions, finding new energy sources). (2) They are not climate adaptation efforts (e.g. not just the altering of existing systems so that those systems can survive the climate crisis). (3) They are the classic psychological form of adaptation = changing ourselves so as to live within the limits of nearby natural systems, where useful responses do not alter but rather accommodates new reality.

    • Steve Gwynne.

      I’m not sure that QT is going to work. (I’m guessing it uses interest rates to squeeze demand?).

      That only works if the issue is too much (cheap) money sloshing around the economy. The problem that ECoE is going to create is that there isn’t enough of oil, that people want/need, sloshing around the economy. This won’t change whatever the central bank sets interest rates at. As the price of a barrel soars, as supply can’t keep up with demand, the resulting inflation can not be controlled by interest rates.

    • @John Adams
      Please note that Art Berman joins Gail Tverberg and the exiled BW Hill in predicting that there is a cap on the oil price based on the economy’s ability to pay.
      Don Stewart

    • Why can’t demand side inflation be controlled by interest rate rises John?

      I would have thought the supply of money (future claims) needs to be contracted under conditions of energy supply constraints otherwise there will be rampant inflation. This means deflationary fiscal policy whether tax increases (actual or in real terms) or interest rate rises to squeeze discretionary demand and dissuade taking on debt. Destimulating the economy will contract asset prices and contract the financial economy.

      The only difference with hard resource constraints is that there won’t be sufficient growth to pull the economy out of recession and then delayering and simplification will become the new business model with democratic or autocratic politics mediating market failures and essential resource allocations.

      That’s my take anyway.

    • Can price controls tackle inflation?

      Political economist Isabella Weber argues that strategic price controls are an option for tackling inflation when it is being driven by increase in the price of specific goods such as energy. Price controls would avoid the risk of causing a recession, unlike conventional inflation control policies such as raising interest rates and fiscal constraint. “Price controls would buy time to deal with bottlenecks that will continue as long as the pandemic prevails. Strategic price controls could also contribute to the monetary stability needed to mobilize public investments towards economic resilience, climate change mitigation and carbon-neutrality.” Weber’s article sparked a sharp response on Twitter (since deleted) from the Keynesian Nobel prize winner Paul Krugman, which in turn provoked a strong defence by fellow economists Stephanie Kelton and James Galbraith. Noah Smith outlined the argument against price controls to fight inflation on his blog.

      Price controls in US history. The Roosevelt Institute’s J.W. Mason and Lauren Melodia identify price controls as a useful tool for controlling inflation in periods of economic recovery. The Harvard Law Review has published a useful note on the legal history and economic theory of price controls, arguing that “price controls, whatever their merits as policy, represent an unusually direct challenge to neoliberalism’s central economic and political premises”.

      UK price controls. Positive Money’s Simon Youel explored the value of price controls to ease the drivers of UK inflation in specific goods: “Dealing with inflation isn’t a costless exercise, but price controls put the burden on corporate profiteers rather than ordinary workers and households.”

      The energy price cap. Ofgem’s energy price cap is a form of price control. It limits the unit rate which suppliers can charge consumers for their energy bills in their ‘default’ or basic tariffs. It is revised annually to take account of wholesale energy costs. Ofgem sets out how it works.


    • Don Stewart.

      Yes. There will be a limited to how high the price of oil can go before it becomes too expensive for the economy.

      But the same could be said for a loaf of bread. A maximum price doesn’t stop lots of people starving though.

      There are plenty of the middle class that can cope with price hikes. But those on lower incomes will be hit hard. For those people, discretionary spending will stop.

      It’s already happening in the UK with the 50% energy cost increase coming in April. Will it be left to “the market” or will government step in?

      If a big chunk of the population can’t afford to get to work or keep the lights on at home, then this will cascade through the economy.

      During the 2008 GFC, what percentage of the US population were defaulting on mortgages? Oil prices maxing out will effect far more people. The effects are going to be felt by far more people.

    • @John Adams
      I am not sure whether we agree or disagree. The background for my statement is that conventional Peak Oilers assumed that the laws of supply and demand implied that the price of oil would go higher and higher. But the first model which predicted otherwise (to my knowledge), was BW Hill’s thermodynamic model which indicated that there was a maximum price beyond which the economy could not work. So the economy would collapse. Hill’s model said nothing about what would happen after collapse…would the economy re-form at a lower level of complexity?, would we all go extinct?, etc. Gail Tverberg thought she was rejecting Hill’s model, but came up with an explanation which came to the same conclusion. In Gail’s words, the price of oil would be too low for producers and too high for consumers, resulting in collapse. Gail came up with a stick house model which showed that collapse was the only possibility…that DeGrowth was not possible. Gail added some religious overtones, and draws parallels to The End Times predicted in the Biblical book of Revelations. I think that Art Berman’s mental model holds that humans won’t do anything meaningful until our backs are to the wall, which will result in decades of crisis which will hold down the price of oil below what is required for exploration and production of increasingly expensive resources.

      One way to look at Dr. Morgan’s work is that he is attempting to chart a course of DeGrowth in response to the phenomenon predicted by Hill’s model and also showing that Gail is too pessimistic about human agency in terms of the process of DeGrowth. If we factor in a feasible DeGrowth scenario from Dr. Morgan, then it may be possible for the price of oil to continue to increase, as society becomes less prosperous???

      Rachel Donald has just posted her conversation with Alice Friedemann (which I haven’t been able to read as yet.) Alice is a polymath who has tackled numerous aspects of our likely future. Rachel studied philosophy at university, and asks a lot of intelligent questions, so listening to that discussion is probably worthwhile.
      Don Stewart
      PS. BTW, a study led by the former head of Production at Exxon looked closely at the prospects for rationing and concluded that the economy is currently far more complex than it was in WWII, and that rationing simply wouldn’t work.

    • Sorry Don.

      I misread your thread. I thought the implication of a limit to oil price inflation was that things weren’t going to get too bad.

      But on a reread I realize that what you are saying is that peak price happens when the economy can’t afford higher prices. At that point the whole thing collapses. I totally agree.

    • Hi Steve.

      The reason that I don’t think interest rate increases will help to rein in inflation is that the inflation will be coming from the price of energy going up, due to a rising ECoE, not because there has been too much money creation through QE.

      A rising ECoE will cause an increase in the price of pretty much everything.
      Discretionary spending will be the first thing to go.
      Mass unemployment will follow. People’s ability to pay for the essentials will keep rising.
      The ECoE will keep on rising.
      Non of this can be stopped by interest rates.
      In fact an increase in interest rates will just make things worse and speed up the process of de-growth. People will have even less money to spend on the essentials that will keep on rising.

      Energy price caps are a first step. (Lots of talk of the UK government “stepping in” to help out the public with increased energy prices. Not sure what that would look like? If the government does intervene in “the market”, then maybe the energy market should be “nationalised”?)

      A rising number of unemployed will need a means of access to essentials. A UBI would not help as landlords will just put up rents an drain off any money solution.

      I can see a coupon/rationing system for essentials distribution. Everyone will need access to 2,000 calories a day.

      As ECoE really bites, then there will have to be a discussion on what jobs, activities are essential and prioritized. What sectors need the shrinking available energy.

      This will all continue until de-growth bottoms out. Once it has bottomed out, the economy will not grow again.

      I see that all this will need the population to be on board and a centralised system of oversight.

    • Let me start with the SEEDS number which is that the underlying or ‘real’ economy of energy, goods and services is between 35% and 40% smaller than the ‘financial’ economy of money and credit.

      Unless we can downsize the financial economy back into line with the underlying economy, forces pushing us towards realignment will include rising inflation, because prices are where the financial and the energy economy meet. But the ‘soft default’ of inflation will be accompanied by ‘hard’ (actual) defaults as well.

      The reality of inflation isn’t so much what happens to prices generally, and we’re already ignoring asset price inflation. Rather, it’s the cost of essentials that is critical. As these costs rise, we can either prop up discretionary sectors with yet more credit expansion and QE, or face the reality of energy constraint. People can cope with fewer foreign holidays, or an inability to afford the latest gadget, but they can’t cope with having to choose ‘between heating and eating’.

      We’ve created most of this ‘disequibrium gap’ since the GFC, through the adoption of negative real rates (as “temporary” and “emergency” measures) and continuing with them for far longer than any “emergency”, or any definition of “temporary”, can justify. An important point about this is that it creates a lot of low/minimal value ‘activity’, at the price of worsening financial risk.

      China is at least addressing this issue, in real estate debt and “tech”, but Western countries are not. The US prioritizes propping up financial markets, the UK has somehow persuaded itself that over-inflated property prices are ‘a good thing’, and the main factor driving NIRP in the EU is the dysfunctional structure of the Euro.

    • John.

      I’m referring to quantatitive tightening and the current global supply side inflation as demand hits constrained supply.

      Interest rate rises will take the heat out of a hot global economy, especially in America.

      Aggregate ECoE of different energy sources will no doubt be reflected in the market price, but at source, different wells have different ECoE. Saudi oil is around $20 to break even. Venezuela and North Sea oil is around $80 to break even.

      The market price seems to reflect the affordable cost of the most expensive well.

      Contraction does not imply collapse, just a reconfiguration of systems through delayering and simplification as the division of labour and resources and economies of scale recede.

    • Dr Tim.

      As I see it, there are two ways that the financial system can realine with the real economy.
      Financial crash of asset prices or erosion through inflation.

      As you say, there is a 35%-40% mismatch at the moment. That’s a whole lot of pain before things level out. As the economy shrinks the financial economy will keep dropping to catch up with a receding real economy of “stuff”.

      Whilst all this readjustment is going on, maybe money will become too volatile as a reliable means of procuring the essentials of life for a good many people. The precent system of selling ones labour in exchange for money, will not be an option for a ever growing number of people.

      That’s why a system of “coupons” handed out by a centralised system, will be required to smooth out some of the volatility.

      Politically, there will be charlatans who will claim that they will be able to “Make American Great Again” or “Take Back Control” or “Build Back Better”. I think there will be an initial period when people will want to believe that there is a way of keeping the status quo. There will be a regular turnover of leaders as they promise the earth but fail to deliver. Then a real dialogue with the public will be required, with a frank explanation of the situation and what is possible.

      It’s going to be a bump ride!

    • I agree.

      Asset price aggregates are notional – at no time can we monetize, say, the supposed value of global stock markets, or a nation’s entire housing stock. The bursting of a bubble doesn’t, of itself, destroy value – rather, it reveals value already destroyed by preceding malinvestment.

      Asset prices might fall by more than the 35-40% SEEDS indicator.

      On your coupon point, I too have reached the conclusion that rationing by price may not be enough, implying rationing by mandate.

    • Declining surplus energy will contract the material economy at the same rate surplus energy declines. This will be mitigated by resource distribution efficiencies and energy, material, labour and cognitive productivity growth.

      With hard resource constraints, a financial economy with excess material claims will contract through hard and soft defaults and quantitative tightening.

      Losses of jobs in the financial economy will be absorbed in the reconfigured material economy including back to the land low impact living with more emphasis on community organised services to replace any contraction in the public sector as tax receipts contract.

      Some parts of the material economy will grow as competitive resource allocations reconfigure and some parts of the material economy will collapse as discretionary consumption contracts.

      Thus any future political economy will reformulate around the essentials in a Back to Basics economic environment with reduced private sector consumption expectations and reduced public sector consumption expectations. This will put unprecedented sociopolitical pressure on the hierarchical stratifications of different societies leading to polarisation between rival factions of elites.

      This process has already begun starting with large territory federalised States with States lacking material sustainability, resilience and sufficiency being the hardest hit. This is resulting in a great realignment in Western politics and a resurgence of Nation First populism. Thus one of the primary political economy fault lines is the perceived dichotomy between the indigenous and the nonindigenous in an increasingly insecure world.

      Other fault lines will be levels of private sector consumption and public sector consumption and the balance between the two within a global inflationary economic environment since the primary purpose of economic growth is to expand production and therefore prosperity in relation to essential and discretionary consumption expectations.

      It is perfectly possible to live peacefully within a simple life economy of contracted production.

      The political questions will be whether the squeezed middle class can sufficiently align with economic realities and sufficiently downshift their status expectations which will connect with the metric of the Gini Coefficient. Both factors will be important in order to maximise societal mutual trust.

      This will require impeccable deep reality based governmental leadership especially within democratic societies. The Chosen One is called forth!

    • Steve G.

      Re: “It is perfectly possible to live peacefully within a simple life economy of contracted production.”

      That of course doesn’t make it likely! In a greatly overshot species, competition for necessities will get intense. And the psychology of personal downsizing will not be pleasant for many accustomed to their opposite quest for the past few decades. Sparsely populated areas will likely be more peaceful…unless they are food producers and within reach of many thousands of hungry urbanites.

    • Yes Steven, that is indeed the worst case scenario whereby people en masse default to amygdala thinking and as a result reject their prefrontal cortex.

    • Steve.

      I guess I’m just more pessimistic than you.

      I can see that an increasing ECoE will eventually impact on the ability to maintain critical infrastructure. (e.g National grid infrastructure) At that point things will get “interesting”!

      I’m not convinced that there will any kind of growth in any sector of the economy as de-growth bites and I’m not convinced that there will be a smooth transition for all those people who become unemployed as the discretionary economy contracts.

      I also think that money no longer functions in a de-growth economy which would be a major disrupter. Rationing/tokens distribution may be required for the precurement of essentials.

      Also, I think that what we now think of as discretionary will change in the future as more and more sectors of the economy are added to the list. (Eventually domestic heating will be added for example).

      I do think the we humans have “agency” though. That we aren’t prisoners of our biology and are capable of adapting to the challenges. But there needs to be a reality check from our politicians and an honest discussion with the general public.

    • Thanks John.

      If prices and wages increase in one part of the world (ie the West) does this offset rising ECoE in another part of the world.

      I certainly think global inequalities will be a compensatory mechanism and that economic convergence will reverse into economic divergence. This is why I assume pockets of growth.

      This is from Politico morning newsletter ..

      NOT JUST A BRITAIN PROBLEM: Governments and the media are fueling a cycle of distrust across the world, according to consultancy Edelman’s annual Trust Barometer which launches today. Among the striking findings from the annual mass global survey are stats showing nearly one out of every two respondents view government (48 percent) and media (46 percent) as divisive forces in society, and that people in democracies are generally fearful about the next few years.

      Plenty more where that came from to look through here. Edelman CEO Richard Edelman tells POLITICO’s Ryan Heath in a podcast out tomorrow that people’s fears about the future are partially coming from the pandemic:

      “The base emotion is ‘I’m scared I’m going to be downwardly economically mobile,’ and that is a different kind of world than the entire sort of postwar consensus.”


    • John A. Just a point of clarification. Re:

      J.A.: “I do think the we humans have “agency” though. That we aren’t prisoners of our biology and are capable of adapting to the challenges.”

      Of course we have agency as do many life forms. I wrote that in a very short post to Steve G:

      Steven B Kurtz
      on January 16, 2022 at 10:43 pm said:

      Steve G

      Our will is no different than other life firms. Our awareness of our will may be unique, but we don’t know that for certain.


    • Steve B. K

      I think our “agency” is different to other organisms.

      We can change our behaviour on a whim, to adapt to our environment. We can also change our “culture” as a group to help adapt to shifts in our circumstances.

      I can choose to stop eating meat but a tiger can not. For a tiger to stop eating meat, it needs generations of slight genetic changes and the resulting “tiger” would probably not be a tiger any more. I can do it overnight.

      I can choose to live in the artic or the tropics and adapt to either environment, but a polar bear could not adapt to living in the tropics or a sloth to the artic.

      A snow leopards can’t suddenly decide to hunt in packs like lions do, but we can choose to hunt alone or as a group.

      We have choices not open to there organisms, and the skills to be successful with those choices.

    • John A.

      Of course different species have different parameters for behavioral potential. Studies have shown that humans are not alone in intentional agency. Even dogs are considered.


      Agency recognition in non-human animals[edit]
      The ability to represent the efficiency of goal-directed actions of an instrumental agent may be a phylogenetically ancient core cognitive mechanism[34] that can be found in non-human primates as well. Previous research provided evidence for this assumption showing that this sensitivity affects the expectations of cotton-top tamarins, rhesus macaques, and chimpanzees.[28][29][30] Non-human apes are able to make inferences about the goal of an instrumental agent by taking the environmental constraints that can guide the agents’ actions into account. Moreover, it seems that non-human species like dogs can recognize contingent reactivity as an abstract of cue of agency, and respond to contingent agent significantly different in contrast to inanimate objects.[35][36]

    • Steve B K.

      Thanks for that.

      Lots to get my head round. Not familiar with a lot of the terminology or underlying concepts.

      I’m sure that other organisms, especially the primates have certain adaptabilities and decision making processes that are simplified versions of our own.

      But our ability to change our behaviour at will, is a great survival tool and probably unique in its complexity.

      A panda could really do itself a favour and broaden it’s diet to eat things other than bamboo shoots. But it can’t. It can’t make the conscious decision to eat something else. Humans can.

      I also think that we have an “agency” that other living things don’t share.
      We can choose a time, place and means to end our lives if we choose to. I’m m not aware of any other creatures that commit suicide?
      The primary biological basis for all life is to maximise the time alive and to reproduce.
      We humans have the ability to override this most basic of behaviours/impulses.

      Regarding our ability to change our culture to adapt to the reduction in available energy. I think we have the cognitive tools and “agency” to do it. That doesn’t mean we will.
      If we fail, it won’t be because we were trapped within biological constraints. It will be because we couldn’t get our shit together.

  17. @Steven Kurtz
    There was a study published in the last couple of months (which I can’t find) which described some biology around two different kinds of problems which requires two different kinds of brain mechanisms. There had long been a mystery about metabolic measures in the brain in scans. In many studies, the more complicated the problem, the more energy the brain consumes. But there were a few studies where metabolic measures actually showed less energy consumed. Nobody knew why.

    It turns out that there is a tradeoff between speed and complexity. One can select a speedy mechanism (think of a batter hitting a fast ball) which has small bandwidth (e.g., the crowd at the stadium disappears from consciousness), or one can select a slow mechanism with a broad bandwidth (e.g., a leader trying to assess the mood of a group of people and think about what to do to solve some problem by making trade-offs among multiple goals). The broad bandwidth uses less energy because of the different electrical conductors involved.

    So there are scan signatures of the mechanism chosen by the subject’s brain and body. Since most of the problems we talk about here are of the slow and broad persuasion, it is comforting to know that humans are equipped with the capacity to deal with the problems. Just having a mechanism certainly doesn’t guarantee that there will always be a satisfactory solution. And the political process and the social media practices and so forth certainly do not encourage behavior based on slow and broad. But the very existence of the long ago evolved mechanisms indicates more flexibility than the “dissipative structure” language would suggest.

    Don Stewart

  18. Ugo Bardi: Lessons from the Italian bombing of Britain

    “In short, the tradition of bombing one’s suppliers of fuels remains alive and well. Whether it can accomplish anything better than the disastrous attempt of Italy in 1941 is debatable, to say the least. After all, it is equivalent to blasting away your neighborhood gas station in order to get the gas you need, but this is the way the human mind seems to work.”

    My comment: Just because we HAVE a slow and broad way of being conscious doesn’t require us to actually USE it.

    Don Stewart
    PS. But Ugo’s putting the bits and pieces of history together to create plausible scenarios is very much a slow and broad method.

    • “One conclusion of this story is that humans always tend to worsen whatever major problem they happen to face.” Ugo Bardi

      I concur with this conclusion. Kinda reminds me of money printing, QE, uncontrolled deficit spending and such, bound to end bably.

    • Another conclusion would be that the humans that lead or govern their tribes are unfailingly morons, completely incapable of systemic thinking, with one tool in their toolbox: smash and grab.

    • “…with one tool in their toolbox: smash and grab.”

      I’d say it’s all driven by circumstance, and not at all confined to “leaders”. “Leaders” who “bring home the bacon” are, by definition, good “leaders”. “leaders” and “follwers” are simply parts of a system. I’d say.

  19. Nate Hagens and Art Berman in conversation:

    Art thinks that we have perhaps 10 years of relative prosperity left in terms of oil. He thinks that pretending that we can stop using gasoline, which accounts for 40 percent of the average barrel of oil, and thus stop producing oil altogether, is a huge disconnect. The gasoline WILL be produced so long as we want the thousands of other products we want from oil. The last minute or two is advice on staying calm while anticipating hard times ahead.

    As a side note, the New York Times and the Washington Post have recently pointed out that a huge source of CO2 is dogs and cats…larger than the petroleum industry, fertilizer, chemicals, and cement. (I don’t know if that is just US or world).

    Don Stewart

    • BTW. Art says that as a student of history he knows that people only change in response to a crisis. Perhaps explains his labeling us as a Dissipative System.

    • Art really does check all the right boxes as his work really cuts to the core of the issues and neither side of the argument likes his analysis. He is correct that Oil is the Economy, but the oil people in Wyoming and Texas dislike his accurate take on fracking as it made zero money for investors and the renewable people are disappointed to find that oil is really the economy.

      He recently linked to an interesting energy investing blog with an ironic tweet, which if you study Art indicates that oil price will not exceed the economy’s ability to afford it. Worth a read for its claim that demand will exceed pumping capacity for the first time in 160 years but when I got to the sunspot analysis I was over my head.


  20. Systems Change
    I’ll admit to being confused about what, if anything, can be done to make the systems change we are about to experience be less painful. But I will point to two items of interest. The first is an article by Nora Bateson:
    Nora believes that getting an audience with the President or the Prime Minister would do no good. Somehow, as in Straight Out of Compton, the messaging channel needs to change.

    The second is very much “in channel”, but there is despair about the collapse of communications channels in the US. Nate Hagen’s interviews Richard Gephardt, a Representative from St. Louis who was the leader of the House Democrats for many years:
    In view of Gephardt’s despair about the breakdown of communication, which was never easy, it would be interesting to ask him to read Nora’s essay and react to it. Gephardt comes across, to me, as a really nice, intelligent guy from a long ago world…whose methods simply won’t work any more.

    Don Stewart

  21. This might be insightful.

    What does a post-growth lifestyle and culture look like? What needs to change and how can we be part of these needed changes? Those are just two of the questions to be addressed when Crystal Arnold presents “Cultivating a Post Growth Culture” Jan. 21 at 4 p.m. as part of the nonprofit Praxis Peace Institute’s next live Zoom discussion.


  22. Don 😀

    I think you were talking about the amygdala and the prefrontal cortex.

    I imagine the prefrontal cortex allows us to respond rather than react like the histrionics of the media.

    The media has unfortunately got politicised so now need to be treated with political substance.

    Western Civilization is polarising because bi-polarism is less complex to negotiate solutions. The drawback of course is the histrionics but luckily democracies and digital communication platforms seem to at least channel the histrionics into nonphysical violence. So that is a human evolution plus in my book.

    I think alot of everything is going binary for good reason. 2 is simpler to deal with than 3.

    Human agency has a lot to do with it and providing good faith knowledge through our media channels will help humans to use their prefrontal cortex to more freely choose for themselves.

    I say this because I think Truth, Love, Power, Mystery is the only moral compass we have that will get us through this juncture of human evolution.

    Myself I think it is all quite simple. We need a global energy pact that enshrines the energy principles of our future prosperity.

    On a different note, I think free will is the ability to choose and reformulate past experiences and that process of choosing and reformulating is our will. I don’t think there is any question of the will existing otherwise we wouldn’t have a sense of ourselves as individuals so the only contention is whether that will is free or not.

    In my experience I create thoughts and nothing stops me from doing that unless I am severely stressed. So creating thoughts and solutions is a free will activity which is I guess is called subjectivity. What hard determinists are saying is that thought is created from past experiences but free will is more than that because it chooses past experiences and reformulates them. So is a present activity utilising the past. So what is determining us, our present of choosing past experiences and reformulating them or our past experiences. It must be both because you can’t have the present without the past or the past without the present otherwise there’d be no such thing as time.

    Does hard determinism reject time?

    I don’t think so!

    So if we are determining ourselves from the present then that means we need to place special importance on our external/ecological circumstances rather than internal/human circumstances like what is happening in Downing Street as Remainer civil servants sacrifice themselves for the cause in order to try and bring down Boris lol!

    Interestingly today I was chatting with a ground worker and he simply accepted that the current global inflation storm needs simply to be ridden out and that in my opinion is the true framing. It is a storm, not a collapse or a crisis but something that will pass.

    Meanwhile, the media are trying to stimulate the amygdala with their histrionic framing which doesn’t really help us to connect free wills across large territories and in a way is the downside of the division of resources and the utilisation of economies of scale that facilitated the upside of US growth. Now we have materially peaked, we probably need to reverse the division of resources and the economies of scale so that resources aren’t centralised so much so the economies of scale can be contracted. Obviously this is already happening as reshoring etc as nations think more about their own sustainability, resilience and sufficiency in our supply disrupted world as a result of sars2.

    Along with individuals utilising their free will and choosing past experiences and reformulating them in order to adapt to soft and hard resource constraints which will require a free society and a media that educates rather than manipulates, I think we will together come up with the solutions as the problems arise with or without competent governments.

    At the moment the battle is between sustaining national oil energy resilience and reducing national oil energy resilience during the net zero transition and between riding the global inflation storm and the associated cost of living crunch with minimal interventions except of course the struggling so simply utilisation the price mechanism to deflate our global economy or holding back from tax increases and taxing national oil to help the poor which will be inflationary so may make the cost of living crisis worse as prices continue to go up.

    For me it is sustaining the strategic asset of national oil including the labour skills and riding the storm and let the price mechanism reduce inflation. This in my opinion will be less painful in the long term rather than experiencing a future oil energy crunch along with a carbon entanglement crunch.

    So I think the Left is wrong in terms of their past experience choices and their reformulations.

    I think we need to let ecology do its work and so create solutions as they arise rather than impose grand central solutions for problems that are yet to exist.

    Behaviour does seem to be changing but yes the reactionaries are currently controlling the narrative with their Big State Big Blocism solutions rather than informing us of the options to invoke possibly more but this just means we need to politically take on the media and reformulate their codes of conduct so that they inform rather than opinionate.

    Whether that can be done is another matter especially in an elite/common society but certainly in the UK they are out of control and are now acting as if they are the judge and the jury with no democratic accountability at all. Quite an odd situation but the media are heavily remainerised into a Big State Big Blocism mentality and seem to think they are more intelligent than us. The evolution of arrogance!

    Anyway, the popular fightback against the media has now started in the UK so it will be interesting to see what happens next. I guess in the US, the same battlelines of federacy and confederacy may become prominent as the great binarism/simplification process continues as we go on the downside of the sine curve in terms of peak per capita resources.

    So overall, I don’t think there will be a grand solution just a diversity of solutions at different scales. This is more resilient because it is more free and so more adaptable in the long term.

    Goodnight 😊

    P s didn’t check the grammar etc 😴

    • Hi Steve G,

      It may be semantics, but the encounter of the organism (heredity and cumulative experiences which are both physical and embodied) with the present circumstances **together** determine the actions/reformulations/outcomes. Will is present in life forms as perpetuation of itself among other things. It is defining “free” as you wrote, that is in question. No gun to head can mean free. But the history, memories, thoughts, and present circumstances are all physical (energy-matter-information) So the reformulation isn’t free from all that in my view.


    • Thanks Steven.

      I had been wondering how hard determinists define free will since it is never defined in the articles I have read.

      Are you saying hard determinists define free will as the will of the organism entirely detached from the fabric of the known universe 🤔

      Please don’t tell me that this scientific debate hinges on the negation of our embedded interconnected existence and that our embedded interconnected existence is therefore an example of unfree will and so is actually a metaphysical debate.

      Thus the only thing that has pure free will is any organism that doesn’t exist within our physical conceptions of the spacetime continuum!

    • My understanding interspersed:

      I had been wondering how hard determinists define free will since it is never defined in the articles I have read.

      SK: A ghost in the machine is assumed. As none has been evidenced, they dismiss it. I do too.

      Are you saying hard determinists define free will as the will of the organism entirely detached from the fabric of the known universe 🤔

      SK: Just the opposite. You seem to have missed my detail of the present circumstances being part of the causation along with heredity and experience.

      Please don’t tell me that this scientific debate hinges on the negation of our embedded interconnected existence and that our embedded interconnected existence is therefore an example of unfree will and so is actually a metaphysical debate.

      SK Go back and reread what I wrote. Determinism is not solipsistic.

      Thus the only thing that has pure free will is any organism that doesn’t exist within our physical conceptions of the spacetime continuum!

      SK: We have as much free will as any other life form! Zero. Most people define it as making conscious decisions and believing that those are detached/separate/unaffected from our cumulative history and the present circumstances. (all of which are best explained as physical until evidence to the contrary is presented)

      A great synopsis of main points in book I reviewed 22 years ago:

      Click to access gambler.pdf

    • Interesting Steven thanks.

      Regarding the Ghost in the Machine, does that mean you reject your conscious sense of yourself as an individual organism that is able to choose and reformulate past experiences (whether as historical events, DNA, RNA, memories or memetics) in order to choose/will/determine past, present and future decisions based on amygdala and prefrontal cortex thoughts?

      Or put simply, do you reject your conscious sense of individual will as an organism?

      Or is your notion of a Ghost in the Machine entirely different to your sense of I?

      If you define free will as making conscious decisions and believing that these decisions are detached/separate/unaffected from our cumulative history and the present circumstances.

      Do you then define unfree will as making conscious decisions and believing that these decisions are intimately connected to our cumulative history and the present circumstances?

      If so, what if someone believes that free will is the ability to make decisions that are intimately connected to our cumulative history and the present circumstances?

      Since it seems to me the philosophical and scientific basis of rejecting free will is to argue that if we are deeply interwoven with the past, present and future, we are not free from the past, present and future so are therefore unfree.

      On the face of it, this does indeed seem like semantics since not only is it an example of circular thinking (the tautology of – we are not free because we are not free) but much of the scientific debate is actually about our physical ecological embededness and not about the freedom of our will to freely think and freely select out particular experiences and reformulate them?

      For me this is more a psychological question rather than an embedded environment question although the two interrelate in terms of habitual emotional-psychological patterning.

      Perhaps you need to define your notion of free will definitively including the context. What is your physical object to which you are assessing free will?

      Our Will and its ability to detach from and transform environmental/genetic conditioning in terms of adaptation or our Mind and whether it can detach from and exist freely from our physical environment?


    • Steve G

      Our will is no different than all other life firms. Our awareness of our will may be unique, but we don’t know that for certain.

      I’ll return to my laptop and send a link.


    • Steve G. I already posted this link. If you want to grasp this topic, you’ll need to spend a half hour on it. http://www.zo.utexas.edu/courses/THOC/gambler.pdf

      I also believe I posted this at another time:


      Nothing is certain in complex systems except mortality and entropy in my view. The onus is on claimants for any non-physical self (or anything) to provide evidence for it. The Negative Fallacy precludes asking that skeptics prove non-existence as it’s logically impossible.

    • Thanks Steven.

      “Benjamin Libet, a Californian neurophysiologist, demonstrated in the 1990s that the brain
      starts responding to an external command about 500m/sec before a person makes a conscious
      decision, suggesting that free will is a rationalization produced by the mind after the fact to
      explain its actions.”

      No definition of free will is stated.
      Is the Will associated with a particular function of the mind/brain or is the Will the entirety of the mind/brain?

      If the former what mind/brain function?

      If the latter, the Will is free to respond to internal and external stimuli, process information and make a decision.

      The second doesn’t locate the source of the Will either and simply defines free as having moral responsibility for our actions. With no notion of cause and effect effectively displacing responsibility from the effect to the cause. Obviously there is an element of truth in this since we are shaped by our genetics and circumstances.

      But this is an argument about being a free moral agent, not whether the will/mind/brain is free to sense, process and make decisions.

      Ultimately in my mind, the notion of free will rests on the production of thoughts and to what extent the physical mechanism that produces thought is constrained in some way and if so, to what extent and why.

      However I now appreciate that your notion of free will is the assessment of the extent to which an individual is culpable for their actions.

      In effect, according to hard determinists, a person can do what they like with no moral responsibility because they are a biological automaton and do not need to take responsibility for their DNA/genetics, RNA/epigenetics or their thoughts/memetics.

      It is an interesting line of argument but discounts adaptation and evolution as a result of the creation of thought. So denies that Will/mind/brain acts as an interface between external and internal stimuli.

      Without defining Will much of the free will debate seems to be about contested definitions about what it means to be free and is more semantic driven rather than being driven by what the Will actually is in its physical dimension and whether this physical function is free and if so, in what sense it is free.

    • Steve G.

      I think you are making this more complex than it merits. Conscious intentionality which is independent of prior internal physical states and/or events is assumed in free will. As far as science knows, no such disembodied mental act has ever occurred. If people call the action ”free” that is their definition. It is not free of historical baggage in the view of most scientists and philosophers.

    • It is you that is stating that conscious intentionality is independent of prior internal physical states and/or events and as such is assumed to be free will.

      This is your a priori premise, much like a hypothesis. You create a false statement and then prove it is false. This is semantics.

      Your statement obviously doesn’t stop conscious intentionality from being interwoven with prior internal physical states and/or events and still being assumed to be free will.

      It depends on your definition of free in this context, which again is semantics.

      As such, hard determinists need to identify the physical functions by which external causes are automatically processed into internal effects without the mediation of conscious intentionality.

      They therefore need to also identify the physical function of conscious intentionality in order to evidence that this physical function is being bypassed.


    • Steve G. Please quote the words that you choose to paraphrase!
      “It is you that is stating that conscious intentionality is independent of prior internal physical states and/or events and as such is assumed to be free will.”

      I wrote what my understanding is of the concept as understood by those who hold that free will exists. That is my report, not semantics.

      “This is your a priori premise, much like a hypothesis. You create a false statement and then prove it is false. This is semantics.”

      SK: I humbly suggest that you revisit philosophy 101.

      Your statement obviously doesn’t stop conscious intentionality from being interwoven with prior internal physical states and/or events and still being assumed to be free will.

      SK: How could my understanding of a position held by free will proponents stop anything? If *you* think free will can include prior physical causative states and/or events, bully for you!

      “It depends on your definition of free in this context, which again is semantics.”

      SK: Physical determinists including nearly all scientists and analytic philosophers hold that nothing exists which is not physical(energy-matter-information). Sorry that you don’t like that position. I’m only the messenger!

      “As such, hard determinists need to identify the physical functions by which external causes are automatically processed into internal effects without the mediation of conscious intentionality.”

      SK: False claim. Unknowns are infinite. You are asking the impossible!

      “They therefore need to also identify the physical function of conscious intentionality in order to evidence that this physical function is being bypassed.”

      SK: Now you are internally inconsistent. Their position is that conscious intentionality is post event rationalization, an illusion. It has no causative function itself. It is solely the result of physical events.


      SK: This site is amateur pop psychology. I will debate the author anytime for charity.

      “The determinist approach proposes that all behavior has a cause and is thus predictable.”

      SK: That is false. In theory, if 100% of all variables are known, including internal and external conditions, *then* it would be predictable. But that is rarely possible in complex systems which include humans and their circumstances.

    • I certainly won’t drag this on any longer Steven because I know you are entrenched in your position but hard determinists need to identify the exact human physical functions by which cause is automatically processed into effect otherwise they too are in the nonphysical camp.

      So which brain functions are automatically processing causality and how are these functions deciding which thought, word and action we manifest without any conscious intentionality?

      This burden of proof is entirely on hard determinists to prove their theory that conscious intentionally (as a physical based function) does not exist.

      So how are these functions processing causal variables into discreet thoughts, words and deeds and where are they located in the human body?

      To say it is impossible to identify the causal variables is just another variation of the ghost in the machine since how do you prove causality otherwise!

    • Steve G

      I’ll take you to Oxford, Cambridge, or any other top University in UK and you will eat humble pie.

      You know squat about epistemology and ontology, plus logic. I realize you are a voluntary simplicity practitioner, so you needn’t put up any money. You should be embarrassed.

    • Hi Steve G.,

      The amygdala and prefrontal cortex contrast may help explain how we’ve come to be in this mess. Clearly the coming transition will sorely test our ability to maintain emotional stability, clearheadedness, prosocial inclinations, and behavioral continuity despite numerous distractions. What at first glance seems like a list of independent abilities likely share an
      underlying resource, the capacity to direct attention.

      This form of attention is mediated in the prefrontal cortex. Unfortunately it fatigues with normal use (a condition called directed attention fatigue by Stephen Kaplan and his colleagues). What fatigues this attention is akin to what Postman wrote about in “Amusing ourselves to death” as well as all the wonders brought to us by the miniaturization and networking of telecommunications. Short version is that our brains are not well evolved to handle the onslaught of information we now have (info that is sometimes relevant, often distracting).

      Restoration of directed attention is possible but to keep up with the current speed of its fatigue requires planning and willful behavior (which of course requires the investment of directed attention, hence a sort of death spiral if allowed to get out of control). Key to attention restoration is understanding that it is not the same as stress, and stress reduction techniques have little positive effect.

      Kaplan’s written extensively about this, as have others using slightly different concept names and methodologies. Unfortunately, many studies of attention fail to understand its fatigue or means of restoration. Two short introductions are at:
      (1) Kaplan & De Young (2002) Toward a better understanding of pro-social behavior. Behavioral and Brain Sciences, 25, 263-264.
      (2) De Young (2010) Restoring mental vitality in an endangered world. EcoPsychology, 2, 1, 13-22.
      (Glad to share these and others if there was a means of exchange).

      My short take on all this is that modernity fatigues directed attention. This reduced ability to contemplate, plan, and carry out plans results in a tipping toward impulsive action over thoughtful behavior. The inability to self-regulate thought and action makes pro-social/civil behavior and environmental stewardship extremely difficult. Restoration helps, and there are specific techniques suggested, but people often classify the time taken for mental restoration as self-indulgent.

    • Thanks Raymond.

      I’d agree with this analysis. Burnout is probably driven by a compulsion to be right and is probably more associated with political activism which I’d argue probably deploys amygdala thinking compared to prefrontal cortex thinking.

      I presume in a nonvirtual environment, the scope of heavy discussions is limited compared to the virtual environment and so becomes more a matter of online time management and allowing ourselves to process.

      I think this idea of directed attention is fundamental to free will in that we can train ourselves to choose between reacting and responding.

  23. Dr Morgan said, “ I have to say I’m having some problems with my next article (the working title is “contraction or collapse?”).”

    Several months ago, you (Dr. Morgan) shared some of the assumptions that you use for the economic projections that readers have seen in the past. I cant find those assumptions again, but back then, I questioned those assumptions, and you did not respond.

    If memory serves, your assumption for degrowth included roughly a 1% increase in our societies energy usage over the next couple decades. As I pointed out then – that is hardly degrowth.

    Since you have not responded, my imagination has been free to wander, and at this point my working theory is that if you plug in an assumed actual degrowth of energy usage of – say 1% per year – SEEDS projects a society in full-on, nasty, emotionally wrenching, people-starving-in-the-cold, COLLAPSE.

    Am I wrong? (Please share your assumptions!)


    • The SEEDS energy supply assumption was (and is) that the total in 2040 will be almost the same as in 2019, within which there will be less supply from fossil fuels, offset by a significant increase in REs and smaller increases in nuclear and hydro. Global population is likely to rise by 19%, meaning that energy supply per capita will be lower.

      Economic output (C-GDP) will also be roughly the same, meaning that conversion efficiency (of energy into economic value) is expected to remain flat (as it already has been over a very long period). Again, C-GDP per capita is therefore projected to decline.

      Both of these numbers – gross energy supply and C-GDP output – are stated pre-ECoE.

      Overall trend ECoE is projected to rise from 8.8% in 2019 to 18.1% in 2040.

      Aggregate prosperity – C-GDP output minus ECoE – is projected to be 4% lower in 2040. Prosperity per capita is projected to fall by 20%.

      Against this, essentials per capita are projected to rise by 77%.

      This might be moderated if (a) we re-define what we mean by ‘essential’, and (b) spending on government services declines in real terms. Both are likely.

      Even so, PXE – prosperity ex-essentials – is set to decline, significantly in aggregate terms and very sharply per-capita.

    • Hi Dr Tim, this is in reply to your post about the assumptions in the seeds model.

      My take is that all types of energy will get vastly more expensive as we get past peak oil production, as they are all reliant on oil, diesel in particular. Solar and wind are not replacements for diesel, though they might be replacements for ICE passenger cars for those that are wealthy.
      Are you going off EIA or IEA numbers for the oil available in your seeds model or some other source?

      Even with EVs using solar and wind power, the amount of diesel needed will be larger than present, because of all the mining of lower grade materials for solar, wind, EV minerals etc. A barrel of oil can’t just be turned into diesel with less (or no) gasoline, so more barrels of oil overall will be needed. Where do they come from in your seeds model??

      At some point we get to the stage where all the old legacy super giant oil fields have declining production in unison, so oil availability will decline at an increasing rate, making other fossil fuels increasingly difficult to produce. Like everything, we have used the easy to get stuff first, so rely increasingly upon the diminishing resource of oil to get these others resources, with increasing energy cost.

      We can’t drill for gas without enough diesel, nor can we mine deep underground coal without diesel machines. The drilling for gas in particular is happening in more and more remote locations, so even if electric machines to drill were available, the remote locations don’t have grid power. It currently all happens with diesel.

      Unless there is a lot more easily available oil than most experts think, then net energy use in 2040 being anywhere near the net energy use of 2019 is a very, very optimistic assumption. Is using overly rosy assumptions in the modelling, the only way to avoid collapse, in the modelling??

      In the real world, if we have plenty of oil, then it will remain cheap, and no limits will be reached until it is scarce, just like in the last 50 years since the warnings of “Limits to Growth”. When we get to depletion of oil production, with increasing rates of decline every year, the ability to build any type of alternative will be past, unless an exceedingly, and increasingly large proportion of net available energy gets directed to energy production, which would mean collapsing other parts of the economy, as all other parts have an accelerating decrease in energy available.

      If the discretionary economy is the largest part of the economy, and this part has to have an accelerating decline as more energy from a falling supply goes to energy production, then surely collapse of the discretionary part of the economy means collapse of the overall economy.

    • Let me get this straight. You are predicting that growth (the change of C-GDP and energy usage) will be flat for the next 20 years. You are saying that there will be no de-growth. Didn’t someone here predict, and advocate controlled de-growth? Didn’t someone here predict that if there was no controlled de-growth that the de-growth would occur regardless? You titled two of your previous posts, “It’s now” and “No soft landing”: What is now, flat growth?; and flat growth is not a soft landing?

      It very much looks like you are manipulating the data, to maintain the appearance of a rosy future, while at the same time predicting that the future will not be so rosy. What do I not understand?

      What happens if there is some sort of actual reduction of energy use? All due respect sir, but i’m beginning to think that you know that as soon as the change in energy use goes negative we get collapse and are trying to hide the fact.

    • I think you’re missing three important points.

      First, the difference between output (C-GDP) and prosperity. This difference is ECoE, and is widening. This is why prosperity is trending lower even though C-GDP is flat.

      Second, the difference between aggregate and per capita.

      This can be summarised as ‘C-GDP flat, prosperity down, prosperity per capita down sharply’.

      Third, the difference between claimed ‘activity’ (GDP) and prosperity. Prosperity is already 35%-40% below reported GDP. GDP is inflated by using continuing credit expansion to fund low-value activity. This artificially-inflated level of activity can only be supported by carrying on pouring ever more liquidity into the system. This has already started to trigger inflation, meaning ‘the game is up’ for the illusion of high and growing GDP.

      My projections haven’t changed since October, and even then the changes were very small. They are certainly not altered to suit either a ‘continuity’ or a ‘collapse’ scenario.

      The average person is already far worse off than GDP numbers imply. He or she will continue to get poorer, even if energy supply is flat, because ECoE and population numbers are both rising. The real cost of essentials is rising, reducing the scope for discretionary consumption and capital investment.

      This might be contraction, or it might be collapse, but it certainly isn’t continuity.

      None of this is understood by governments, businesses or the public. Governments think they’re still managing growing economies, meaning the assumptions informing policy are fallacious. This might have a lot to do with why so much Western government is shambolic, and why few opposition parties offer credible alternatives.

    • And why “Each media tribe has its own journalism and its own preferred set of narratives. Each rejects the journalism of the other as misinformation, fake news, lies, or hate speech. McLuhan’s search for perfection did not turn out quite the way he envisaged. What grew out of the rubble of the old journalism was not a garden of beautiful flowers, but a tangle of thorny weeds bearing a harvest of bitter fruit.


      Well worth a read. Old impartial journalism was ousted by subjective emancipatory journalism which has resulted in this …

      Nearly 1 out of 2 respondents view government and media as divisive forces in society
      48% Government
      46% Media


      The double feedback mechanism between governments and the media is turning the rational into the irrational.

  24. In de-growth, you have to scroll down to post something new. That is my summary for tonight, dear reader.

  25. I have been reading this blog for a couple of years by way of RSS, but it has stopped working?

    • I think wordpress has been changing a few things lately, it’s quite irritating isn’t it, I rather suspect using a PC is considered old hat these days, everything is being tailored to suit smartphone users and functionality for PC users suffers as a consequence.
      you need to be part developer, part psychic, to figure out what the hell is going on these days!

  26. Regarding continung population growth, my own guess is that we are probably now also at peak food production:

    In addition, China banned the export of urea and phosphates in July 2021. China is (was) the world’s largest exporter of phosphates.

    And cheap and plentiful artificial nitrogen fertiliser – ultimately largely derived from natural gas via the energy intensive Haber Bosch process – is said to be responsible for the continued existence of half the world’s population:

    Unfortunately – as a result of increased costs of natural gas – the cost of artficial nitrogen fertiliser tripled in price during 2021.

    • @Gavin
      My prediction is that the “Green Revolution” plants which are dependent on Haber-Bosch nitrogen will be replaced with heirlooms which were feasible with historical methods of adding nitrogen to the soil (e.g., manures, green manures, better exploitation of soil microbes). Such a development likely means a smaller population…but the percentage of the nitrogen in humans which was produced by Haber-Bosch is not an accurate way to project the magnitude of the reduction. We currently use a very tiny percentage of the earth to grow plants for human consumption. We use way more land to grow animals and biofuels. So I also expect a shift in human diets.
      Don Stewart

    • That article does not seem to account for the ball of wax that makes up industrial agriculture as we know it. I don’t think the HB process can be separated, in any meaningful way, from other aspects of the system, such as mechanization, refrigeration, transportation, packaging, water pumping and aquifer depletion, topsoil loss, pesticide use, etc.

      Without all vital constituents being in place, in the correct proportions, the world population must be dramatically reduced, Liebig’s Law.

  27. Decadal Forecasts
    Please check out this very down to earth discussion with David Sinclair, a longevity and health span researcher at Harvard. David confidently expects that we now know how to extend health span by very significant amounts. One of the by-products that he anticipates is a big reduction in the expense of maintaining the elderly in care homes.

    The “cures” are not necessarily expensive. They are probably what your great-grandmother would have recommended. We will also be able to produce health measurements for a dollar or so, done at home. If these tests become public information, then the field of health insurance will be turned upside down.

    The program David is talking about would have the effect of transforming huge sectors of the economy, such as food and medical care. Since food and medical care are both enormous drains on our available energy, we should not simply assume that declines in energy will, of necessity, mean collapse of the overall economy. It is just as plausible that humans will learn to live with less. For example, listen to the talk on hormesis…our health depends on some discomfort. And think about the MTOR and protein connection, and how our dedication of so much land to cattle may change.

    While we can expect fierce opposition from industries which depend on the current dysfunction, if the one dollar home tests become a reality, then there will be enormous demand push from an enlightened public. We still need the intelligence to remove obstacles, but there will be light at the end of the tunnel enticing us forward.

    Don Stewart

  28. Complexity or Energy or the Synergy Between Them?
    Kurt Cobb on Complexity as the root cause of our distress:

    I will note that Kurt has also written extensively about energy, particularly oil. I suggest that fossil energy and nuclear energy in particular have enabled us to push complexity well beyond the point of positive returns. Nuclear has, for example, resulted in the proliferation of weapons which threaten the existence of humans and the rest of the ecosystem in a much more dire way than climate change. Fossil fuels have allowed us to build complex urban structures which will likely have no place in the future, and which are subject to collapse as delicately balanced supply chains fail.

    Don Stewart

    • Thanks, Don. Good to be reminded of this theme. Recall Ronald Wright’s progress traps in A Short History of Progress, vicious circles in Craig Dilworth’s Too Smart for our Own Good, and others.

  29. Tim, Thanks for another great article.

    Regarding inflation

    I’ve recently switched to the small hydroelectric sector and it’s currently ‘crazy’. Experienced colleagues cannot remember a time like this.

    Inflation is rampant in the supply of: machined items (pipes, cases, turbine) electrical components (generators, transformers), and we cannot get the digital electronic components which all modern plants use for control and protection of the system.

    With supplier quotes only having validity of 30 days due to inflation in their input prices, and lead time in excess of 50 weeks for some electronic components it makes it impossible to estimate the cost of proposed hydroelectric developments, refurbishment, or to contractually agree to meet deadlines.

    Small hydroplants are waiting for critical components. Customers are wanting to order ‘strategic spares’ to insulate from long component lead times and reduce the risk of downtime, but this just increases demand on the supply chain.

    No doubt other industries are being affected in the same way.

    I have already left one job in the electronics sector due to lack of supply of components, and hence no requirement for my work, but it appears I’m running into the same issue again. I mention this because it illustrates the affect these issues have on people’s income security.

    Anecdotes, but I wonder if these observations fit with your current thesis? “Unravelling”?

  30. As all known reality is physical (barring evidence of non-physical independent anything), and some known events precede the conscious experience, the conscious experience is scientifically and philosophically explained as caused by the cumulative past. As I wrote, that is determined, but *not* predictable. With exactly which point(s) are you disagreeing?

    If you are calling conscious experience “free will”, are you saying t is uncaused?

    • Steven.

      I am saying conscious levels of brain function is caused by the past, present and future in terms of accumulated knowledge, the reformulation of accumulated knowledge and the projected imagination of accumulated knowledge. The latter might include intuitions, insights, eureka moments and fantasy.

      The free will component of conscious levels of brain function allows the self to determine, experiment with and choose adaptive pathways.

    • Steve G
      Thanks for elaborating. Consciousness is an experience. Brain activity is a large part of the organic drivers of it according to scientific studies. Intuition, imagination, fantasy, etc are conscious experiences too. So far, they too are dependent upon cumulative prior experiences and heredity. They are all electro-chemical and caloric as far as science knows. Thus none can be said to be independent of the physical. So, call the conscious experiences “free” if you like, but they are not free if the baggage science holds via best current evidence.

    • Steve G.
      typo “if” should be “of” near the end of my last post. Also I forgot to ask, what you think the “self” is? Is it disembodied? Can it be reincarnated?

      Many including me hold that the body and all its history is the self. Memories are physical as are all experiences, thoughts, even hallucinations!

    • Steven

      I’m with with hard and soft determinists in that the self has a physical basis as part of conscious levels of brain function.

      I think the role of the quantum dimension within brain/organism function will demystify these sorts of metaphysical debates.

  31. For a number of years, I regularly bought 2.5 oz. packages of pre-cooked bacon for $4.99, sometimes on sale at $3.99. A few days ago, the same package was priced at $6.99. Looking at the price this morning, $7.49.

    I guess I’ll switch back to cooking my own bacon (16oz. uncooked @ $7.59, store brand). Maybe I’ll weigh it after cooking.

    Bacon, the only true measure of inflation.

    • @Davelysak
      When Charles Hugh Smith lived in Berkeley, CA, he used a burrito scale…how much did he have to pay for a burrito at the food truck. Let’s be generous and say that it diverged from the officially sanctioned cost of living.
      Don Stewart

  32. Steve G.

    I’m struggling to think of any sector of the economy that will grow as the effects of a rising ECoE start to bite? It will have to be something that doesn’t have big energy inputs. If there is any growth it will be dwarfed by massive contraction in the rest of the economy and will have little effect in mitigating against the collapse of other markets.

    I think the “Western” economies are particularly vulnerable to rising energy costs. Energy is embedded in our economies far more than the “developing world”. We have further to fall.

    Can’t see wage increases being a thing of the future. Feels like we are at the top of the rollercoaster ride and haven’t quite started the downward slope yet. When we do, then wages may rise for a while but they won’t keep up with price rises. People are going to get poorer in real terms.

    Also, I think that the point at which the ECoE becomes a reality will come up on us real fast. The beginning of the link below has a good example of how exponential growth and the point of depletion comes up real fast. (The bacteria in a cup example)

    My pessimism isn’t from the MSM or government. It’s from becoming aware of the ECoE and blogs like this. I was happily expecting renewables to save the day, but am now aware that they won’t. The article linked above is the most comprehensive assessment of where we are that I have read.
    I think Governments just haven’t woken up to the reality and if they have they are keeping quiet. The economy of the last 50 years is no longer an option. Politics and the media just haven’t caught up yet. Doing the same old trick just aren’t going to work any more. QE was a desperate throw of the dice but there is nothing government can do to prevent people’s standard of living from sliding away. This will cause a lot of distrust with government as they promise the earth but fail to deliver. Political turmoil will continue for a while yet until the obvious is there for all to see.

    • John,
      Thanks for the link. I’ve heard about his work, but not gotten to it yet.

    • John, I agree with your assessment. I have shifted from guarded optimism to increasing pessimism.
      I like to think that my grasp of the energy situation is rather better informed and grounded closer to reality than it once was.
      Last week in the UK the MSM and national commentariat was championing the news that GDP had reached pre-pandemic level, yet they seemed oblivious to the fact that in the intervening period both the population of the country and national debt has risen. In other words, per capita GDP has probably fallen.
      I think that we’re going to experience some pretty serious political ructions, as politicians continue promising ‘rainbows and unicorns’ while delivering ‘storms and donkeys’.
      I keep coming back to an observation some years ago by our host that politics used to be about sharing the bounty of economic growth, but it’s now about allocating the pain of de-growth.

    • A potential growth area that might be able to overcome rising ECoEs.

      The Metaverse.

      Microsoft has made clear with its planned $68.7bn (£50.6bn) acquisition of Activision Blizzard that it expects gaming to be a key feature of this new world, with Satya Nadella, Microsoft’s chair and chief executive, saying on Tuesday that gaming “will play a key role in the development of metaverse platforms”. If the metaverse is an immersive world, then gaming – as exemplified by titles such as Roblox and (Microsoft-owned) Minecraft – already offers that experience to its participants.


    • In a worsening energy situation, gaming from home might be a useful substitute for more energy-intensive traditional activities.

      More generally, though, I’m more than skeptical, both about “tech” in the investment sense and “technology” in its everyday meaning.

    • Steve B K

      It’s well worth a read if you can find the time. 400 pages!!!!

      Lots of tricky maths stuff and homework that I skipped over.

      Be interested to hear your thoughts on it.

    • I cannot find the article now, but about a week ago I read an economist’s article stating that we should push for more and more solar panels on existing farmland as agriculture was such a small proportion of GDP that losing it does not matter!

    • Steve G.

      The metaverse.
      Sounds energy intensive to me (and discretionary).

      At what point in a rising ECoE does the internet flip from an essential to a discretionary? At some point it will.

    • As Tim points out it is about the relative difference between energy productivity in terms of producing economic value. A theatre production will incur much greater per capita energy costs than gaming for example especially when rehearsal, advertising and other capital costs are factored in as well as the reuse potential.

    • So do I as well as being a potential growth sector as ECoE continues to rise.

      Uk population for example is set to decline by 2030 which will mitigate against per capita energy availability depending on the diversity of energy solutions at that time.

  33. France’s nuclear meltdown has big implications for Britain

    By Ambrose Evans-Pritchard,

    France’s nuclear industry is in slow-motion meltdown. A fifth of the country’s 56 reactors are currently shut, mostly because of corrosion and welding problems in the safety injection system.

    The scale of outages this winter has reached the point where it is tightening Europe’s interlinked energy market, adding to the extreme pressure on electricity, gas and coal prices.

    It comes at the moment of peak seasonal demand, during the worst global gas shock since the Second World War. The French power network is firing up its old coal plants. These emit 62 times as much CO2.

    French nuclear output has fallen by 28pc since 2015 and is now at the lowest level in 30 years. The state-owned nuclear company EDF has just cut its target for this year by 10pc to 300-330 terawatt hours (TWh). It will have to buy back the deficit at nose-bleed market prices. The energy minister has warned of possible power rationing for industrial users.


    Are we heading for $300 a barrel oil?

    By Jeremy Warner,

    Today’s energy crisis has been many years in the making, yet we have failed to take evasive action and carried on regardless.

    What we are seeing is a massive, politically destabilising failure in energy policy, for which the bottom half of the economic ladder will pay a heavy price in lost disposable income.

    • Steve asks, “Are we heading for $300 a barrel oil?”. No. LOL

      Our “leaders”, “We have inflation!??!? Oh nooooo! What do we do?”
      Anybody actually looking, “Well, the inflation is largely caused by the cost of energy, and food. Maybe it would be good public policy to figure out how to get more energy and food so that they would be less expensive. Maybe low interest loans to farmers and subsidies to solar or efficient power transmission from places with lots of sun or wind.”
      Our “leaders”, “OK, lets raise interest rates.”
      Anybody actually looking, “Wont that cause a recession?”
      Our “leaders”, “So, everyone is agreed. Lets raise interest rates.”

      Have you seen Futurama, “The Day the Earth Stood Stupid”?
      Male announcer, “There has been a terrible train wreck. All of the tracks at the main train terminal are blocked.”
      Femaie announcer, “There wont be any delays though cause Mayor Lady said, “Send in more trains!” “

    • Rates were slashed to negative real levels as a “temporary” response to the “emergency” conditions of the GFC. One mistake was leaving ZIRP in place for far too long, allowing it to turn into a trap. The other was not introducing fiscal and/or regulatory safeguards to limit the creation of an asset price bubble.

      Raising rates would start to realign the financial economy of money and credit with the real economy of energy, labour, goods and services. It would also reduce the use of energy in discretionary activities.

  34. UK data …

    The number of registered company insolvencies in December 2021 was 1,486:

    20% higher than the number registered in the same month in the previous year (1,237 in December 2020), and
    33% higher than the number registered two years previously (pre-pandemic; 1,120 in December 2019).

    In December 2021 there were 1,365 Creditors’ Voluntary Liquidations (CVLs), which is 37% higher than in December 2020, and 73% higher than in December 2019. Other types of company insolvencies, such as compulsory liquidations, remained lower than before the pandemic.

    For individuals, 434 bankruptcies were registered, which was 47% lower than December 2020 and 60% lower than December 2019.


  35. Millionaires call on governments worldwide to ‘tax us now’
    Group of 102 wealthy people say tax would help tackle gulf between rich and poor.

    Taxing the UK’s wealthiest 119,000 people at these rates would raise an estimated £43.7bn, a year, according to an analysis by campaign groups Fight Inequality Alliance, Institute for Policy Studies, Oxfam and the Patriotic Millionaires.

    The signatories said this would be enough to:

    Pay for the Health and Social Care Levy twice over every year – eliminating the need to raise national insurance on working people.

    Cover the salaries of an additional 50,000 new nurses.

    Pay for the permanent increase of universal credit.

    Build 35,000 affordable houses and retrofit the UK’s draughtiest homes to reduce the cost of energy bills and help fight the climate crisis.

    • I’ve mulled over these sums for ages, e.g. some questions

      1 Why do well-off people on £500,000 or 1,000,000/y pay less marginal tax (47%, i.e. 45% tax plus 2% NI) than newly-qualified students on £32,000/y (~50%)?
      2 Why is UK private pension tax relief (£50-60 bn/y) not totally dissimilar to the cost of the state pension?
      3 Why is the UK state pension (£7,000 to £9,000/y) lower than the sum earned by a person on minimum wage?
      4 Why is NI so regressive? It could logically start at the same threshold as income tax does and continue on up the income scale, with no reduction in the marginal rate for the ultra-rich.
      5 Why do pensioners pay no NI? Rich pensioners on gold-plated final salary plans – that ‘perk’ of the late 20th.C – are better off than most people of working age.
      6 Why don’t the ‘idle rich’ living on dividends (marginal rate 32%) pay as much tax as ‘working people’ (possibly >40%)?
      7 Apparently Amazon pays an overall tax of about 7.5% on its UK profits. I rest my case.
      (No wonder respected UK companies like John Lewis are struggling.)
      8 Why is Universal Credit (£5,000/y) now too low to live on? One effect of this is that parents have to visit food banks, apply for free school meals, even send children to school without proper breakfasts, etc.

      I looked back >45 years. In 1975, UK benefits seemed to be about one-third of average incomes. Sounds fairer. It would mean raising UC to nearly £10,000 and presumably the state pension to nearer £12,000-13,000, similar to the Irish state pension.

      Such questions could go on for pages more. The UK operates not so much a flat tax system as a regressive one.

      I’ve been re-reading ‘Capital in the 21st.C’. Piketty’s figures seem to suggest that to pay for public services, tackling capital inequality is even more important than taxing higher incomes (in the way we did before the 1980s.)

      Anyone who is serious about such reforms is welcome to approach me. Bizarrely, I tend to carry such numbers in my head; it’s not that I spend a massive time reading the relevant documents. Sadly I’m not holding my breath.

    • Though by no means alone in its predicament, the UK is in grave economic trouble. The economy relies, first, on continuous credit expansion, much of it secured against over-inflated property prices. Housing affordability, already over-stretched, will be worsened further by tax increases, by the rising cost of essentials, and by the surely-inevitable rises in rates.

      I know the current focus is on Mr Johnson’s reinvention of the term “‘party’ politics”, but this misses the point. The current opposition shows no better grasp of the economic and broader realities.

      Energy-based interpretation of the underlying economic situation shows severe downside risk in an economy that has been mismanaged for decades. The ‘political class’ seems completely out of touch. Perhaps worst of all, a sizeable proportion of the electorate seems to ‘like things the way they are’.

  36. For you folks in the US and elsewhere, there is an interesting phenomenon about to play out in the household energy market in the UK.

    In April, the average household bill is going to go up by 50%!!!!
    It is predicted that 1 in 4 households will be tipped into “fuel poverty”. I’m not sure what the definition of “fuel poverty” is. Whether it means that people can’t have the heating on as much as they would like or if it is the difference between eating and heating? Either way, a whole lotta pain is heading our way.

    There is talk of the government stepping in to help out household with their bills. It’s not clear what this help might be but must involve the government paying the energy companies to keep household bills down.

    Politically things look difficult for the government. It was the Conservatives who privatised the energy sector in the 1980s. If they then fix the price, it begs the question whether the sector should be brought under state control again. The competition in the energy market is failing so effectively paying shareholder dividends makes no sense (economically).

    Will political dogma win the day (privatisation/free markets) or the economic realities of global energy inflation.

    It’s a taste of things to come when the ECoE really starts to bite and be interesting to see which way the government goes.

    • John & all,

      Here in the US each state has rules-regulations for electricity. Some have them for n.gas too, as there are underground pipelines for home delivery(like water-sewer). Massachusetts has a review every 6 months on electricity rates, and our vendor was given a 50% increase in the kw rate beginning Jan.1. This was due to n.gas (main fuel for regional generation) price rise from around $2.50 to $6. Of course it is back around $4 now! Our bill will rise around 25% as delivery charges are about half, and they didn’t change. We’ll see if the rate declines in June. I doubt it.

    • Steve. B. K.

      Does that mean that in the US the price of energy is set be a regulator rather than the supplier?

      Here in the UK, the government introduced a “cap” on prices that a supplier can charge.

      This is being increased in April as the wholesale price is causing suppliers to go out of business as they are prevented by the “cap” from passing on the wholesale price increases to the customers.
      Hence the 50% increase coming down the line.

      This is going to have a huge impact on household finances and will bite into people’s discretionary spending.

      If the government steps in to keep the household prices down, then the energy companies will need government handouts to stay in business. The government will in effect, be paying out the dividends to shareholders.

      Politically, a 50% rise in household bills is dangerous for the government. But so is State intervention. It’s not in the government’s nature.

      This is a taste of things to come. Or the beginning of things to come, if the increases are here to stay.

    • John A.
      Re: “Does that mean that in the US the price of energy is set be a regulator rather than the supplier?”

      I tried to carefully delineate that things are different in various states of the US and also for different forms of energy. Electricity delivery is a monopoly geographically, and many companies have options for third party kw suppliers besides their own. I think that is mandated(or not) by each state govt. The kw price of the primary supplier (the deliverer) can be set/capped by a state.(or not) The secondary suppliers are competing, and can offer a fixed rate to consumers for 1-2 years. They may be ‘green’ suppliers at higher prices.

      N. gas depends on states and cities as I wrote. Pipelines to homes are buried, and towns/cities have oversight if not ownership. (like water& sewer) Not only prices are regulated. When new construction or renovations occur, strict rules control whether or not gas heating can be included as volume in pipelines is limited.

      Fuel oil for heating isn’t controlled as far as I know. But taxes on it vary. It is substantially the same as diesel oil used in trucks and some cars, but the latter are heavily taxed, supposedly for road maintenance.

      I’m not arguing with you at all, just giving you the US view.

    • Steve B. K

      I’m not arguing with you either🙂. Just curious of how things are done your side of the pond.

      Here in the UK, most suppliers offer both gas and electricity. If you go for a “dual” tariff, then the bills are (supposed to be) cheaper.

  37. The Fountain of Youth

    Earlier in this discussion I pointed to the very real possibility that we humans might figure out new ways to increase the average health span and possibly life span. Now a huge bet has been placed on that possibility.

    Discussing the numerous possibilities for how that might play out, and the best government responses, would take us far afield from the subjects that Dr. Morgan wants to get into. But we can simply observe that governments and laws and court decisions make a difference. I will observe that there has been very little interest on the part of government…perhaps because there is the distinct potential for finding that there are no magic drugs, and that comprehensive change in lifestyle is necessary. The US government has little interest in disrupting huge existing businesses such as health care (really “sick care”) and food (really “fake food”). Government would love to see patented medicines sold for high prices to the gullible (it increases GDP and thus taxable income). Individual politicians look forward to “photo ops” (e.g., Trump visiting a Covid vaccine factory).

    The main intersection with this blog is, I suppose, the question of how long our society will be able to pretend that we have enough actual resources to put all our money on superficial “solutions”.

    Don Stewart

  38. https://www.oftwominds.com/blog.html

    So, I agree with CHS. The Fed must raise rates. It must stop printing money to the benefit of some small group, billionaires and such. But part of that small group also happens to be the US Government. So, as interest rates rise, it will no longer be able to spend at a deficit, at zero, or very low, interest rates. This is particularly true if the Fed stops buying US Bonds. The US Gov will be forced into paying market rates, and/or dramatically curtail its spending. The “Herd” (Which, of course, we all are part of.) will be traumatized, one way or the other.

    Lurking in the background of all this are physical shortages of all sorts.

    Quite a corner to be painted into. What way out? Panic, war, famine, depression and desperation seem to be the traditional ways back to some sort of temporary equilibrium.

    • drtimmorgan on January 20, 2022 at 3:41 am said: That rates have to go up agreeing with CHS 100%

      The funny thing is (if you are into the blackest of humor) reducing investment by raising rates is the exactly wrong thing to do when, “Lurking in the background of all this are physical shortages of all sorts.”.

      It’s times like these that I am really happy that I have no money, no stocks, and no bonds.

    • Your description is correct.

      Whether chaos can be avoided with managed contraction happening instead is what I’m working on now.

      I think it’s fair to say that most of us here understand this predicament. Using SEEDS, we can indeed quantity it.

      But it’s probably equally fair to say that governments, businesses, investors and, for sure, the general public, do not.

      That is a disturbing thought.

  39. John A.

    Most parts of the US and Canada aren’t served by gas pipelines to homes. We have two refillable 120 gallon propane tanks for cooking gas and for our whole house emergency generator. Some people heat with propane which is delivered by truck like heating oil.

    We (rural)do half our heating with hardwood, burned in a large cast iron stove with a catalytic converter which burns the gasses in the smoke. We have several air source heat pumps for air conditioning/dehumidification, which heat well in the 40s -50s, and will work down to -5F. Around 1/3 of our heat and all hot water is from an oil furnace. If oil gets too pricey/scarce, I’ll put in an electric water heater and we have another wood stove at the other end of the house to supplement the heat pumps.

  40. I just noticed something, and I think its pretty useful for our purposes here. Apologies to everyone for whom this is boring old information. The following is very, very rough, back of the napkin math with equally rough data.

    If society has a growth rate of 3.6% per year as we enjoyed in 2000, the rule of 72 says that in 20 years, energy usage, and GDP will double. Since the population is growing at about that rate, in 20 years nothing much will have changed (ignoring the environment). Sure enough, ~20 years ago in 2000 the global GDP was 34 trillion, and now it is ~80 trillion and we barely noticed the change. Using the rule of 72, we could project a GDP of 160 trillion in 2040. (Happy days!). But …

    If you change the sign on the rate the rule of 72 still is valid, but at a de-growth rate of 3.6%, in 20 years, energy usage and the C-GDP falls in half. Meanwhile, population goes up or stays the same? (Uh, No.) And …

    That is the reason that any negative growth tends to cause catastrophic collapse. On the way down, the exponential function, in a given length of time, removes half of the power, half of the food, half of the things that make the society function. It’s mathematically inevitable, and obviously true.

    Population isn’t directly tied to GDP/energy usage, but there is a very tight and well documented correlation. From 2000 to 2020 world population grew from ~6 billion to ~8 billion while the GDP doubled. (Indicating, that everyone is now better off! Or not. LOL). But on the way down (and to fill up the napkin), lets assume that population and GDP move in lockstep.

    For -3.6% growth the population in 2040 will be ~4 billion so that is ~200,000,000 excess deaths per year. (No, impossible! Let me check that number, i must have the decimal in the wrong place. … Oh, shit.)
    -1% implies 56,000,000 excess deaths per year
    -2% implies 111,000,000 excess deaths per year
    -3% implies 169,000,000 excess deaths per year
    -3% implies 222,000,000 excess deaths per year
    -10% implies 556,000,000 excess deaths per year

    • How to make everything alright?
      1. Assume the exponential function is invalid. Well, ok, but not in this universe, you might as well assume that everyone will be fed with magical flying pigs.
      2. Decouple GDP from energy usage. Some economists do that every day …
      3. Decouple GDP/energy usage from population.
      4. ??

    • 1. We can’t decouple prosperity from energy use.

      2. But we can de-couple GDP from prosperity, and have been doing so for a long time. Pour liquidity into the system, and count the use of that liquidity as ‘activity’.

      3. This involves also de-coupling liabilities (forward commitments) from prosperity.

      4. The cpmbination of 2+ 3 involves degrading the relationship between money and prosperity, which is where we’re at.

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