#235. The affordability crisis


What might be called the ‘consensus narrative of the moment’ is that our near-term economic prospects depend on the ability of central banks to tame inflation without tipping the economy into a severe recession. There are numerous complications, of course, but this is the gist of the story.

What these officials need to find, we’re told, are Goldilocks interest rates (‘not too hot, not too cold’), and all will be well if they succeed. If they err too far in one direction, inflation will run higher, and for longer, than is comfortable. If they lean too far the other way, a serious (though, by definition, a time-limited) recession will ensue.

Inflation itself, the narrative runs, has been the product of bad luck. First came the pandemic crisis, which impaired production capacity and severed supply-chains. Before we’d finished dealing with this, along came the war in Ukraine, disrupting supplies of energy, food and other commodities. There are some who add, sotto voce, that we might have overdone pandemic-era stimulus somewhat.

Our hardships, then, can be put down to a run of bad luck. Those in charge know what they’re doing.

It’s conceded, in some quarters, that we might face some sort of crisis if these challenges aren’t managed adroitly. This, though, shouldn’t be as bad as the GFC of 2008-09, and certainly won’t be existential.

We’re navigating choppy waters, then – not going over Niagara in a barrel.

The affordability reality

There is some truth in each of these propositions, but explanation in none.

What we’re really encountering now is an affordability crisis. The aim here is to explain this, without going into too much detail, and with data confined to two sets of SEEDS-derived charts at the end of this discussion.

The economy, as regular readers know, is an energy system. Nothing that has any economic value at all can be produced without the use of energy. Take away the energy and everything stops. Decrease the supply of energy, or put up its cost, and systems start to fail.

Energy isn’t free. Whenever energy is accessed for our use, some of that energy is always consumed in the access process.

This ‘consumed in access’ component – known here as the Energy Cost of Energy, or ECoE – has been rising relentlessly, mainly because depletion is forcing up the costs of oil, natural gas and coal.

This rise in ECoEs reduces the surplus (ex-cost) energy that is coterminous with prosperity. This equation reflects the fact that surplus energy determines the availability of all products and services other than energy itself.

Because ECoEs are rising, prosperity is decreasing.

At the same time that surplus energy prosperity is deteriorating, the costs of essentials are rising. This is happening because most necessities – including food, the supply of water, housing, infrastructure, the transport of people and products, and, of course, energy used in the home – are energy-intensive.

The material components of this equation – energy itself, supply costs, prosperity and the essentials – are translated, using the SEEDS economic model, into the financial language that, by convention, is used in economic debate.

We need to be absolutely clear, though, that money has no intrinsic worth, but commands value only as a ‘claim’ on the material products and services made available by the energy economy.

Money is an artefact validated by exchange. A million dollars would be of no use at all to a person adrift in a lifeboat, or stranded in a desert. A million euros would be worthless to someone who travelled to a distant planet where the euro is unknown.  

We are at liberty to create monetary ‘claims’ to an almost unlimited extent, but we can’t similarly create the material goods and services that are required if those claims are to be honoured ‘for value’.

Central banks can ‘print’ money (digitally), but they can’t similarly print low-cost energy. The banking system can lend money into existence, but we can’t lend resources into existence.

We can’t, for that matter, fix our environmental problems by writing a cheque to the atmosphere.

The meaning of compression

Whether we think in energy or in financial terms, what’s happening now is that the economic resources of households, and of the economy itself, have ceased to expand, and have started to contract, whilst the costs of essentials are rising.

This is what is meant by an affordability crisis.

An affordability crisis does what it says on the tin, and has two main effects.

First, consumers who have to spend more on necessities have to cut back on purchases of discretionary (non-essential) goods and services.

Second, households suffering from affordability compression struggle to “keep up the payments”.

Traditionally, these payments were largely confined to mortgages or rents, plus, perhaps, insurance premia collected door-to-door.

Now, though, these outgoings include credit servicing, car loans, student loans, subscriptions, purchase instalments and the plethora of other income streams created by an increasingly financialized economy.

Though they can’t be expected to like doing so, it’s possible for households to cope with affordability compression. Discretionary purchases are, after all, things that people want, but don’t actually need. People can cancel subscriptions, cut back on instalment purchasing, and cease using – and, in extremis, default on – various forms of credit.

To say this isn’t to minimize, in any way, the very real hardships being experienced by millions of households. The ‘cost of living crisis’ is the biggest challenge that has confronted households, and governments, in decades. As these problems worsen, the public are likely to get increasingly angry, and to demand redress, part of it through various forms of redistribution.

But an affordability crisis is much more serious for the system than it is for the individual.

Customers can decide to holiday at home rather than abroad, but the outlook for airlines, cruise operators and travel companies is grim if they do. Households can get by without entertainment subscriptions, but the providers of these services cannot survive if this happens. Motorists can hang on to their current vehicles for longer, and put off buying a new car, but the automotive industry is at grave risk if this happens.

These are what we might call the ‘industrial’ effects of affordability compression. Serious though these are, the financial effects are much worse.

The financial system depends on people “keeping up the payments” and, to a significant extent, increasing those payments over time.

The ability of the system to cope with defaults – or even with payment contraction – is severely circumscribed.

Perhaps the biggest single risk of the lot would be a wave of ‘can’t pay, won’t pay’ reaction by the public.

Getting to grips

When trying to navigate our way through the coming crisis we need, first, to understand what it is. Inflation, whether in prices or in wage demands, is a symptom, not the disease itself, and the root of the problem is an affordability crisis.

Second, we can’t borrow or print our way through an affordability crunch. Any attempt to do so just makes the problem worse.

Third, none of this is going away. An outbreak of peace and conciliation between Russia and its opponents, welcome though this would be, wouldn’t alter the fundamentals, which are that the ECoEs of energy supply are rising, reducing the affordability, not just of energy itself, but of all energy-intensive resources and products.

Fourthly, there’s no “tech fix” for structural affordability compression. As we’ve discussed in previous articles, renewables are vital, but they aren’t going to stem, still less reverse, rises in overall ECoEs. The ability of technology to somehow over-rule the laws of physics is one of the foundation myths of the age.

There’s no merit in finding new ways to use energy when the supply and the affordability of energy itself are getting worse. Electricity doesn’t come out of a socket in the wall, in unlimited quantities and at an ever-decreasing price. The expansion of renewables is imperative, but they are even less likely than nuclear to produce power “too cheap to meter”.   

It’s worth remembering, in this context, that energy sources must precede applications. The Wright Brothers didn’t invent the aeroplane first, and then sit around waiting for someone to discover petroleum. Cars weren’t invented until after gasoline had become available. Our ancestors didn’t build carts until they’d tamed their first horses.

Technologies are optimised to the energy sources available, not the other way around.

The big question now isn’t whether an affordability crisis is going to happen – because it already is – but when this reality is going to gain recognition as a feature of the system, not a glitch.

Hype springs eternal, and nobody is yet prepared to recognize that economic growth, previously powered by fossil fuels, has gone into reverse, because fossil fuels are becoming costlier to supply, and no alternative of equal economic value is available.

There are limits, though, to the capability for self-delusion. Risk will reach its apogee when investors, lenders and the public tumble to the reality that discretionary consumption has entered an irreversible decline, and that the economy, just like millions of households, is struggling to ‘keep up the payments’ required by an increasingly financialized system.

136 thoughts on “#235. The affordability crisis

    • @John Boxall.

      I’m banned from commenting on Richard Murphy’s site.

      Got into a debate about the issues discussed here. He said that he doesn’t “do” de-growth!!!!

      It made me laugh. Like any of us have a choice in the matter.

      It’s not just the MSM who have a massive blind spot.

  1. Dr Tim, whether one should say ‘thank you’ is rather a moot point, but thank you! I think Sri Lanka must be the ‘canary in the coalmine’ and will likely prove the catalyst for a global sovereign debt crisis over the next few weeks. What with the Germans looking to designating ‘warm spaces’ in every community (nothing being said about this by our politicians, as far as I can see) to look after the shivering population in the forthcoming winter, Macron issuing dire warnings, too, it seems that your prediction for a crisis building in the Autumn is spot on.

    • Thanks Mark

      There are parts of this that I don’t enjoy, but this is more than cancelled out by frustration that things are not properly understood by decision-makers or those who influence them.

      I’m watching the Tory bun-fight with incredulity – “tax cuts”!

    • Yes indeed. As somebody said earlier in the week, the Tory candidates are spending too long locked in rooms arguing about toilet signs and making fantasy ‘promises’ about tax cuts. Meanwhile, the 300-year old charity I’m involved with is having to fund struggling, hard-working, parents with enough cash to purchase school uniform for the first time in its history. There was an interesting focus group discussion undertaken by BBC ‘Newsnight’ earlier in the week https://twitter.com/BBCNewsnight/status/1547610916379693057 which reinforces views that you and I share.

    • @Mark Meldon

      The schools angle is an interesting one.

      I can forsee a raft of private school closures as people can no longer afford the fees to send their kids there.

  2. The figures on the decreasing cost of renewables are not realistic. See the detailed and objective work done by Professor Gordon Hughes of Edinburgh University. There is no downward trend. The Capex is concrete and steel and this will rise with inflation, the Opex comprises wages, maintenance supplies and interest. All of these are going to rise. The “levelised cost” that the renewables industry uses is deeply flawed.

    • Quite so.

      Developing REs to replace FFs requires vast amounts of steel, concrete, copper, lithium, cobalt, etc.. None of these resources can be extracted or processed without using FFs. We’ve looked at this here in previous articles.

      I’ve read that that the raw material costs for building an EV have increased from $3,500 to $8,500 so far this year, and selling prices have risen by $6000. Costs of charging EVs seem to be rising a lot faster than the cost of gasoline or diesel.

  3. For what it is worth, I have just been notified of our revised domestic combined energy bill. We happen to be on an uncapped ‘green tariff’ and purchase gas and electricity from the same supplier. Today the annual cost is £4,320. It’s now rising to £4,956, with the promise of further increases to come. A good example of discretionary expenditure being reduced!

  4. Dr Morgan. Thanks once again. I have held onto the belief that we can adjust, it is obvious is that will adjust, over and over again.
    I’m on a local roads advisory committee. The cost of fuel and part shortages for road repair machines came up. Our county is loaning a chip seal spreader to another county who cannot gets parts.
    In this ECoC>X process we are experiencing I believe there will be forced simplification. Complex machines where parts cannot be found will get repaired by local shops with common parts if possible. I believe business will streamline down to what they know they can sell and make a profit. There simply must be less and fewer choices going forwards. I admit to avoiding grocery stores since covid but can vividly remember a bewildering array of most any item, say 20+ brands of bottled water, even more in the candy and snack chip isle.
    We must be at or near peak complexity.

    • Thank you.

      You might remember the “taxonomy of de-growth” we’ve discussed here in the past. Simplification figures in that, actually twice – simplification of products and simplification of processes.

      This might be something we should revisit. In addition to those simplifications, one issue will be adverse utilization effects, where falling customer numbers means that the share of fixed costs apportioned to each customer will rise – passing this on increases prices, causing a further fall in customer numbers. Simplification of product lines can help reduce overheads.

      Another is loss of critical mass – some of the inputs or parts you need either can’t be sourced at all, or become prohibitively expensive. There are work-arounds for some deficiencies, but usually these are inferior, or things would have been done that way in the first place. This forces simplification of process as a response.

      A significant part of this is going to be de-layering – taking out whole layers, including outside service providers.

    • @Dr Tim.

      To add to “simplification” , things will also need to be made to last. That will involve easily repaired as well as well built/designed.

      I have a toaster that was a wedding present to my parents in 1957. It’s still popping up toast 65 years later.

  5. Excellent post, Dr. Tim. While understanding the various nuances of energy sources and costs may be difficult for the average person to grasp, being aware of dwindling discretionary funds and running into a wall just getting essentials is blatantly obvious to everyone. Most people are still under the delusion that we’re heading into just a “recession”, and the economy will bounce back soon.

    But each day more people are waking up to the idea that this affordability crisis is different. A lot different. Thank you for your work.

  6. Regarding energy costs: in the US, states can regulate utility prices.
    “The Department of Public Utilities (DPU) regulates investor-owned electric and gas companies in Massachusetts, along with some privately-owned water companies. The DPU also has limited oversight of municipal light plants (MLPs), which provide electric and/or gas service in some locations in Massachusetts.”

    Needless to say, rates rarely decline! Electric rates increased sharply (50%) early spring after natural gas rates doubled. That is a major fuel here in power generation.

    • @Steven B Kurtz

      “in the US, states can regulate utility prices.”

      How does this go down with the general public? If that was a Federal dictate, I can imagine it being unpopular. Do people not see it as interference by “the state” in their affair’s?

    • No. In general it is perceived as consumer protection against gouging. Heating oil isn’t regulated, and it more than doubled in one year. People on n.gas pipeline with gas furnaces were hurt far less. Ditto those using electric air or ground sourced heat pumps. Resistance electric has always been the most costly, and few are left relying on that as their main heat source.

    • @Steven B Kurtz

      It’s not seen as the slippery slope to “socialism” then?

      Government interference with the smooth flowing of the “market”.

    • The US is like Canadian Provinces in having sections; both are large countries. Attitudes are quite different geographically. New England is more like Canada than the rest of the US. Also, utilities here are often monopolies, with governments (state and local) granting time limited franchises. The worst gougers are cable TV in my view.

      It is more economical if infrastructure isn’t duplicated for distribution of elec & n.gas. There are choices in some states/areas among supply sources even if one supplier has the distribution franchise. The State caps prices, but permits lower ones via competition.

    • @Steven B Kurtz

      I’ve always viewed the utilities as natural monopolies and any attempt to create a “market” as ideological rather than practical.

      Seems the approach in the US/Canada is more practical than here. Though, I still think that removing shareholder dividends from the business model would provide the cheapest bills to the consumer. Bill prices being something that is going to be more and more pressing as the ECoE keeps rising. If the “State” is dictating price the facade of a free market is gone.

      Monopoly franchises are a recognition of this.

      I think the first sector to be (re)nationalised here in the UK will be energy. (Followed by water, sewage, internet).
      (The National Grid, the distribution network, is already State run)

  7. I have just left a job as a Buyer for a ‘Community Supported Agriculture’ (a.k.a. box scheme, in England) with a side hustle in wholesale fruit and veg and have seen the ‘critical mass’ issue Tim’s referred to up close (grateful for you giving me the concept to perceive it with). Sales have been falling for months and we were getting to the point where low sales across several channels meant I couldn’t cover the risk of wasting a given amount and had to stop buying various lines, even when they might be ‘loss leaders’. But our pricelist, thus shorterning, possibly works like a physical shopfront which has to be full-to-bursting with produce to get the footfall (vs ‘clicks’). At a given point when customers can’t get x% of what they want from you (and covering transport etc costs), they go elsewhere and you’re in a death spiral. In terms of essentials vs discretionaries you have to eat, and eat at least some fruit and veg, but does it need to be organic and do you have to get it delivered?; re-positioning the offer along that continuum will be a challenge for my colleagues, as well as going after the shrinking pool of affluent ‘foodies’ who are more quality-focussed and less forgiving the ‘variability’ inherent in such a scheme, giving the guys headaches as to what ‘acceptable’ quality is vs it going to the landlord’s pigs. And yet…having a resilient ‘foodshed’ would seem more imperative that ever, with the govt now apparently willing to consider domestic production targets in its next food strategy?

  8. “We can’t fix our environmental problems by writing a cheque to the atmosphere.”
    Brilliant line! Hoping your next post will dissect the positions (stated or implied) of the Tory leadership candidates…

    • Thanks – must admit I was pleased with that one…..

      The Tory leadership thing has a sort of morbid fascination for me.

      The UK economy is falling to bits – quite seriously, it really is – and these people are discussing how many angels can sit on the point of a Brexit pin. The public finances are in a dreadful mess – n.b. a timely reminder from the OBR – and these clowns are offering “tax cuts” (I should add that some households need tax cuts, but either services need to be cut, or others need to pay more).

      Rishi Sunak seems to be the only realist amongst them, though Mr Tugendhat might merit that label. Liz Truss seems to be attracting the loonies.

    • @Steven B Kurtz

      “in the US, states can regulate utility prices.”

      How does this go down with the general public? If that was a Federal dictate, I can imagine it being unpopular. Do people not see it as interference by “the state” in their affair’s?

    • @Dr Tim.

      Sorry, posted comment above in wrong place. D’oh!

      Regarding the Tory leadership debates. It kinda sums up the state of British politics.

      It’s like some reality TV, Big Brother game show, where each day another contestant is eliminated. It compelling viewing but ultimately meaningless. Non of the contestants are going to solve the coming multiple crisis and will probably be out of office even quicker than Boris.

  9. omens from Sri Lanka?
    Reading the comments, especially from the UK, I see a reflection of the comments from Sri Lanka:

    IF the US is able to maintain Petrodollar dominance, then Britain is arguably caught in the same trap. It will be interesting to see what Biden says to MBS in Saudi. You may remember how he boasted of forcing the Ukrainians to do his bidding when he was Vice President.

    Don Stewart

    • I hope, for the sake of humanity, he doesn’t offer to help them in a war against Iran.
      Don Stewart

  10. Dr Tim. I am bending towards on the positive side of our collective prospects for this post and ask for your thoughts.

    What about the two following strategies for mid-, and long-term timelines for dispatchable base-load power:

    1) Distributed nuclear from relatively small manufactured units that are built in a contained manufacturing plant(s) (seemingly much less energy during the building phase) and drop-shipped across the country. Once the fuel has been spent these units are shipped back to a dump designed to handle this process where they are buried in clay. A small waste footprint relative to our current waste streams.

    Hopefully, the business model’s goal would be a stable KWH with a built in profit, say 15% Return on Net Assets (RONA), which would attract institutional capital along with a % $ amount carve giving local citizens the ability to invest, thereby distributing capital locally to various degrees and potentially easier implementations.

    2) Geothermal power for base-load and from green hydrogen creation (should work for distributed nuclear too). We do need to crack the drill bit technology first. ARPA-E is working on this (more government programs like this please) and if cracked the number of applications for local geothermal is massive across the US and many other countries I imagine.

    Replacing the gas powered car with an electric car is just too much for me to take seriously. We would have to roughly double the current grid. How the heck are we going to do that when we cannot get high-powered transmission lines built to support renewables, underlying dynamics of renewables, no more large scale hydro resources that don’t screw our environment, coal plants (tough row to hoe) but maybe a case can be made that shoots the sulfurous soot into the Stratosphere where it can hang out for longer reflecting heat back to space, and natural gas that equals high EROEIs right out of the gate. A distributed Hydrogen strategy that fits into our current model would be cheaper and have better outcomes for suburban and rural customers at least. Urban dwellers should be designing their cities to optimize biking, walking and public transport anyways.

    Similar business model as distributive nuclear.

    Short-term we can enhance renewable models by designing financial models that: 1) layer revenues – Not a solar model that just takes raw land, flattens it, dumps herbicides all over it, gates it to keep animals out, then puts up a solar field. Ridiculous. How about a solar model that bundles revenues such as agro-solar models, to name one of numerous ideas. Maybe even married to regenerative farming strategies that sink carbon and enhance our soils.

    The business model would be designed for farmer-owned systems supported by local investors .

    Times are tough, but perhaps this shift to a multi-polar world will help us get our act together. GDP might shrink, this could be a good thing, especially in certain sectors in of our economy. Example, EROEIs rise making take-out and highly processed foods more expensive. People have to eat closer to what actually is produced by free solar energy. Ideally, this would make people healthier and drastically shrink the $4 trillion-a-year we currently spend on disease care. I believe that 85% of the $4 trillion we spend is on avoidable lifestyle diseases? Could be awesome in so many ways.

    For people who proclaim that people do not have the time to cook ( a whole chicken, with salad and sweet potatoes takes 10 mins to prep and 80 mins of non-active cooking) I do not buy it. People seem to have time to read mindless crap on their phones all day long followed by a nightly does of Netflix.

    A couple of songs to support a gradual shift to a somewhat positive mindset. Not perfect allegories of course.

    “I Love It” (feat. Charli XCX) by Icona Pop and Charli XCX
    – We need to build things and break things at a faster and faster pace.

    “Titanium” (feat. Sia) by David Guetta and Sia version
    – the type of individual fortitude we need. Possibly matched with stoic philosophies

    Thanks. Brett

    • I think that we are going to find that a shrinking economy is going to result in prioritizing keeping the best of what we already have in capital assets over new capital investment. If energy is tight, do we risk losing the functionality of an existing factory by diverting energy away from it to build a new one?

      It will always be a temptation to protect what we can of the status quo rather than let it fall apart to strike off in a new direction, even if that new direction might be far better over the long term. This eleven-year-old post by Tom Murphy describes the difficulties involved in charting a new (energy) course while the ship barely afloat:


      (By the way, be careful of the difference between EROEI and ECOE).

  11. No saying it is going to be easy and I agree, a part of our unfortunate history fights change and resists risk. But, by not diverting our energies and remaining assets away from existing capital assets we risk concentrating these assets into fewer owners. This will eventually translate to more and more state control whether by gradual means or by immediate ones and I do not think more than 15% of the population thinks we are or attracting high quality politicians, that are thinkers, that are curious, what to debate the idea not have you bite off the ideology, have values, and let their values drive them through the corrupting money gauntlet.

    I agree, a Post Growth is the most probable outcome for quite frankly, our terrified, hyper individualize and heretic hunting populations. And, thank God, Mother Earth, and the Stars for entrepreneurs and the people that are willing to risk capital to move us forward. Once we get deliverable alternatives, and are capable to implement them at the project level, we need to widen the ownership. A much needed selling point for the times.

    (Thanks for the catch. My writing was behind my mind on that mistake.)

  12. Tim, I struggle to see Rishi Sunak as a realist. His mission in life is looking after the Swish Family Sunak. He presided over a massive money-printing scheme during Covid which led to inordinate waste and corruption as well as igniting inflation. The Treasury on his watch have largely given up trying to recover billions obtained by fraud. He then imposed a highly regressive National Insurance hike to claw back some of this waste. Meanwhile his staggeringly wealthy wife was deliberately (albeit legally) avoiding very large amounts of UK tax. If he becomes PM, the Labour Party need only draw attention to this as they campaign in the deprived constituencies of the Red Wall. They may also want to mention that Rishi’s cronies in the funds industry trouser huge sums at artificially low tax rates because of loopholes which the Conservative Party has never tackled…..not least because of who its donors are.

    • Michael, I think I ought to say that I try to avoid party politics here, and the politics of personality even more so, and what’s happening in the UK reminds me of why I do so!

      The UK economy is in the late stages of falling to bits. Millions are suffering worsening hardship, and what Britain needs is some kind of recognition of the realities, and a plan for making the best of it.

      Instead, the public are treated to a squabble between muppets, most of whom think “tax cuts”, a “smaller state” and “even more Brexit” are the answers. They’re competing, first, for the votes of MPs who are terrified of an election where they’d be held to account for what happened under Mr Johnson. After that, it’s a one-on-one competition for the favour of 160,000 or so of the terminally deluded.

      I’m not a fan of Mr Sunak. QE during the pandemic was indeed excessive, and there seems to have been inadequate control over where the newly-created money ended up. But at least he’s not offering tax cuts that the economy can’t afford.

    • Elaborating a bit on this, the UK seems to be in the hands of extremists – extreme economic ‘liberalism’, and extreme ‘Brexit’, are the obvious planks of their platform.

      These people made life difficult for John Major, Theresa May and David Cameron. The latter gambled on the referendum and miscalculated, not reckoning on the same kind of protest vote that also worked for Mr Trump later that same year. Mrs May was trying to negotiate a constructive agreement with Europe, but these extremists stopped her from doing so. Mr Johnson was backed by this same extremist wing. It seems that Liz Truss is their new standard-bearer.

      I’m not sure how, or if, Britain escapes from this extremism. The public did give Mr Johnson a very big majority, so perhaps they like things this way.

    • @Dr Tim

      “The public did give Mr Johnson a very big majority, so perhaps they like things this way.”

      Sorry to keep banging on about this particular point, but I hear it a lot in the MSM.

      Boris didn’t get a big majority from the British public.

      He got a big parliamentary majority on 42% of the vote on a turnout of 65%ish.

      I’m not sure about the maths, but roughly, only one third of the electorate voted for him (and his policies).

      Two thirds didn’t approve.

    • True. But we’d have to assume that those who didn’t vote didn’t much care whether they got Mr Johnson or Mr Corbyn – if they’d cared, they’d have voted – so they don’t count as opponents of Mr J. On the 42%, not even Clement Attlee got above 50% (just a fraction below it in 1945).

      What I take from this is that there is comparatively little active opposition to the neoliberal economics promoted, not just by Mr J, but by his would-be successors.

      Even after what’s just happened, would an anti-neoliberal leader – a Jeremy Corbyn, a John McDonnell or a UK version of Bernie Sanders – win a general election? I rather doubt it.

      In short, a large proportion of the electorate still falls for neoliberalism – despite past experience!

    • @Dr Tim.

      “if they’d cared, they’d have voted”.

      Well, that is probably true but the choices on offer are pretty limited due to FPTP.

      The saying a decade ago was “they are all the same”, which they were/are. What is Stamer actually offering that is radically different?

      I can see the futility of voting in a GE and am contemplating whether to vote next time. Something that I have never considered before. Always felt that it was my civic duty and all that.

      No-one but no-one is really talking about de-growth. Not even Corbyn or McDonnell. It’s all about creating growth either through the “free market” or “State intervention”.

      What is the point of voting if these are the only options in town and you know that they are doomed to fail?

    • My next article here is likely to address one question, albeit with a supplementary.

      The question is: do we believe that we can replace the energy value currently derived from fossil fuels? The supplementary is: when?

      I’m not setting the bar too high, by postulating a collapse in fossil fuel supplies. I assume that these are 19% lower in 2040. We can look for some help, but not much, from nuclear and hydro.

      To keep energy supplies the same in 2040 as they were in 2019, combined output from wind and solar has to be multiplied by 5.5 – and that, remember, keeps energy supply where it is, but doesn’t increase it.

      Whatever our answer is to the question, the assumed answer – not just in government, but in markets and business as well – is that we can. You need only look at investment in, and lending to, discretionary sectors to see the confidence placed in assured transition.

    • There will likely be 1.5 billion or so more humans in 2040. P/capita energy almost certainly drops no matter what technologies are developed barring cold fusion or some other ‘miracle.’

  13. Tim,
    I would be curious to read your thoughts on the sharp increase in prices seemed to start just after the Russian intervention in Ukraine. Is it solely Surplus Energy and the timing just a coincidence, or was the Russian action a catalyst, or is there some other explanation?

  14. Dear doc, adding debt based fiat currencies on top of easy acces fossil fuels gives a meteor hitting the planet.

    A hamster on steroids is funny for some privilaged species to watch, but in the end, this species will have to deal with its disrespect for the hospitality.

    It really is that easy.

    In my personal opinion; a beautiful deleveraging.

  15. Thank You, Tim, Dr. Morgan, for another timely perspective on what is curently happening in our world, from the viewpoint of thermo-economic fundamentals.
    Two complimentary articles today are about globalism, firstly by Maajid Nawaz, pointing out how the lies, er “control-narratives” of COVID and Ukraine-War make ore sense from the perspectiveof globalists creating a crisis a little ahead of it’s happening spontaneously, so as to control and direct it towards their maintenence of primacy. As with your work, this leads rapidly to clarity.
    (Beware of Rishi Sunak, I’ll add. He’s somewhat of a bargain Barack Obama.)

    The second globalism piece is from The Consciousness of Sheep blog, and looks at specific breaking crisis-points (and visits by Bill Gates at critical moments), with some focus on the UK and on Sri Lanka. To “build back better”, there has to be some real crisis and desperation, and somebody has to dangle some food and oil with the solution which they offer.

    The WEF are not the only players at this game. Though they have positions in many governments, and at the levers of finance and industry, they are mainly G-7 based, and their many acolytes in national governments are like Sunak, Trudeau and Macron. They are not like DeGaulle, Stalin, Roosevelt, Hitler, Franco, or even Churchill. Vladimir Putin attended WEF classes at one point, but they had to take him off their list because he’s not going along with the plan.
    Putin & Lavrove are like those leaders of yore.
    The WEF is hampered by not being able to trust leaders with talent in critical times. They are also hampered by the cost of hierarchy in the globalist system, which makes it more inefficient/wasteful than a distributed system of nations trading and ground-level initiatives. “Complex Systems” can exploit more resourceswith more complexity until the point that the resources decline and the costs (like inefficiency) of all that complexity rise and cross over each other. “We passed that point long ago”, as Jackson Browne sang.

    What the new opposition team (BRICS+++) is offering is a distributed trade system with distributed risk, not all risk born bythe borrower, but with lenders having “skin in the game”, too.
    The big bonus is that a country joining this system can repudiate $US debt and start with a clean slate. You just said that’s the worst thing for the system. Iran and Argentina have applied for membership. Saudi Arabia, Pakistan, Turkey and somebody else now want to apply. The ship of global trade is just past a tipping point. It does not look like it will tip the WEFs way.

    The army at the gates always promises freedom to the slaves of the rich in the city. I don’t particularly trust Xi Jinping more than I trust the WEF, but they have different constraints, different constituencies and will take things in different initial directions. The BRICS plan will go to more egalitarian, less extractive and more distributed economy, with commodity-based trade-currency, not to remotely controlled brain implants with little drippers for pleasure and pain, so that the very rich can get slightly richer in a declining system. That’s doomed to failure so let’s not try and just start stepping back down as energy and mineral wealth declines. We’ve got a lot to re-learn about “victory gardens”, “allotments” and “dachas”.
    John Day MD, fired for non-vaccination last fall, after treating COVID with antivirals grows vegetables in Texas and blogs at drjohnsblog.substack.com and (sometimes censored) http://www.johndayblog.com

  16. A Broad Look at Our Current Situation
    “We invite you to join the Opening Session of Thermodynamics 2.0 | 2022 Conference at Appalachian State. Zoom Link to attend

    Meeting ID: 917 3370 6511, Passcode: T2022P

    Thermodynamics 2.0 is a platform where the natural sciences meet the social sciences. We utilize three languages: energy, entropy, and information as well as their proxies in the social sciences toward a more unified system of human knowledge. More information: https://iaisae.org/index.php/about-ict20/

    This meeting features many of the usual suspects in terms of thermodynamics, but also ventures into the intersection of thermodynamics, finance, and the social sciences. One panel will feature Carey King, whose model we have briefly discussed here. It’s 3 long days, but you can pick and choose what you might want to participate in. It’s free…just costs you some time. Starts on the 18th, early morning in the US east coast.

    Don Stewart

  17. Latest from Nate Hagens. He interviews Joe Tainter.
    Subject : Surplus, complexity, and simplification.

  18. Thanks Dr. Tim. The attempts by our governments to “manage” the energy predicament seem to be creating short term “improvement” at the cost of long term misery. Worse yet, the costs of these “improvements” are borne by heaviest by those least able to bear those changes. The consequence is more unrest and distrust in authority at precisely that time when we need social cohesion to truly weather the energy problem.

    One example of bad decisions was the long term low interest policy. By discouraging savings, the policy essentially discouraged savings, i.e. capital accumulation. For advocates of capitalism, our central banks have shown themselves singularly incompetent at actually encouraging it.

    Where I live, Canada, our government seems to be hell bent on collective impoverishment to meet unattainable goals. Oh well, the wellbeing of the little people is of little concern. If they protest, we’ll just declare an emergency and take away their bank accounts.

    • The ultra-low rates adopted in the GFC and kept in place thereafter sent a signal – ‘borrow and consume, don’t save and invest’.

      The Western economies were becoming too poor to afford much in the way of capital investment. Implementing ZIRP/NIRP was a desperate throw of the dice, to keep things ticking over by cannibalizing the future. Time has been called on that gambit by inflation. There’s no ‘next gimmick’, which is why an economic and financial crisis looks increasingly likely.

      I was shocked by your government’s actions against the protestors. Without getting involved in the merits of their cause, people have the right to peaceful protest. If or when some protestors turn violent, the authorities have to intervene, but not in a way that limits the rights of peaceful protestors. I can’t get over the description of Mr T as a “Liberal”………….

  19. Supply Chain Issues
    I wrote previously about the boom in air travel and the stress on supply in, first, the US and now Europe and Asia. If there is a connection between the SNAFUs in airline travel and restriction of discretionary spending, it is certainly not evident at this point. The inflation rate in airline tickets from last summer is 30 percent.

    My granddaughter was supposed to fly from Denver to Dallas yesterday to attend a wedding. Hot and clear weather in both cities. She was due to arrive in Dallas about 5pm. She actually got there at 1AM. The original airline kept her waiting for hours waiting for the pilot. The pilot got there and the plane had mechanical difficulties. So she switched airlines (whether she had to buy a new ticket and just abandon the old one, I’m not sure. That happened to my sister about 3 months ago). She gets on the plane and that plane has mechanical difficulties. Taxi back and fix the problem and finally take off and get to Dallas at1am.

    And this, in a nutshell is a description of current air travel: passengers at capacity; paying a lot more dollars; and a severely disrupted supply chain. The loss of discretionary income to pay for the higher priced tickets may “solve” the problem by suppressing demand, but it hasn’t done so yet.

    Since the Federal Government officials believe more consumer spending is a good thing, they see no indications of a slide into recession.

    Don Stewart

    • There have been notable tendencies, particularly in the US and the UK, of people carrying on spending even though they don’t have the money. Research in Britain found that 25% of the public are “stretched, but reluctant to stop spending”. They are funding this using “credit cards and buy-now-pay-later companies”.

      This seems to be a late-stage credit bubble, and this won’t end well, because they never do.

      What interests me is why credit suppliers aren’t turning a lot more cautious.

  20. Can’t pay won’t pay is here big time. Well not here exactly but in China.

    July 13 – Bloomberg: “A rapidly increasing number of disgruntled Chinese homebuyers are refusing to pay mortgages for unfinished construction projects, exacerbating the country’s real estate woes and stoking fears that the crisis will spread to the wider financial system. Homebuyers have stopped mortgage payments on at least 100 projects in more than 50 cities as of Wednesday, according to… China Real Estate Information Corp. That’s up from 58 projects on Tuesday and only 28 on Monday, according to Jefferies… analysts including Shujin Chen. ‘The names on the list doubled every day in the past three days,’ Chen wrote… ‘The incident would dampen buyer sentiment, especially for presold products offered by private developers given the higher risk on delivery, and weigh on the gradual sales recovery.’”

    Eventually voluntary individual debt defaults will become a political weapon here, as a last resort. It’s the one thing the ‘conservatives’ in suits don’t foresee.

  21. Supply Chain Collapse?
    Besides all the other problems in the supply chains, we have the resurgence of Covid. In the UK, right now, there are half a million new cases every day. One in 15 people in the UK currently have Covid. It is now 1 in 10 among young people:

    If one in 15 of the people involved in the airline business just don’t show up for work, what will be the impact on the ability of the supply chain to continue to function? Military organizations at least used to be designed to survive despite the loss of a significant number of troops and equipment. But civilian supply chains have been built to optimize efficiency…not survivability.
    Don Stewart

  22. Tim, I am assuming that the credit card providers, etc are expecting to be bailed out with more money-printing when the bubble bursts. Strikes me as a fairly safely assumption based on past precedents? And I’m sure there is already a lot of lobbying going on far from the prying eyes of the public.

    • I’m sure you’re right, but conditions are quite different now from the GFC.

      From a policy perspective, economies now are credit-dependent – turn off the flow of new credit and a slump ensues. Obviously, though, excessive money creation risks driving inflation up. If governments moved to restrain lending, by imposing more cautious regulation, they could induce recession. I think they’d rather rely on gradual rate rises.

      The question then becomes one of fragility. Some economies couldn’t cope with meaningfully higher rates. The EA and the UK are examples.

      There’s one thing that governments and central bankers need to prioritize, which is that no customer must lose money in a country’s retail banking system. If that happens, the credibility of that country’s banking system is shot.

      This doesn’t necessarily apply to savings products sold as bonds – though, even there, caution is necessary – but current accounts and deposit accounts need to be sacrosanct. Of course, customers lose value through inflation, and through rates that are below inflation (and, despite that, are taxable). But loss of actual (nominal) money would destroy credibility. These people are customers, not investors.

    • “There’s one thing that governments and central bankers need to prioritize, which is that no customer must lose money in a country’s retail banking system. If that happens, the credibility of that country’s banking system is shot.”

      Like in Canada when the .gov seized the accounts of trucker convoy supporters. Faith is fading, I know of several that have removed their monies from the big banks, myself included. I wonder how many nationally have done the same? Has it had an effect that is being covered up? I know that fraudulent activity with online accounts isn’t reported and usually the client is reimbursed by the bank quietly. The entire system is on shaky ground with more assaults coming at it from many sides.

    • I was shocked by the extremes that the Canadian authorities went to in order to stifle dissent. What I don’t know is how Canadians have reacted to those extremes.

    • In the US, there are laws in many jurisdictions where protests are legal, but blocking traffic is a crime. There is a rationale for this, as ambulances, EMTs, Police, Firetrucks, pharmaceutical deliveries, infrastructure repair workers,…are impeded from doing necessary and beneficial work. I support clearing protesters doing such stuff. The Common Good takes priority over individual grievances.

  23. This is well worth a read in order to get an appreciation of the ontological and epistemological basis of the affordability crisis.

    It specifically deals with ecocide and the failures to address it but can also be read as the history of the evolution of the maximum power principle within human societies.


    It makes many references to high entropy to low entropy processes in the earlier sections of low cultural failures (ecological) with the middle cultural failures (economic) concerned more with the political economy. These are particularly relevant to discussions here because it clearly highlights how governability and society itself are embedded in the market economy as lower order functions. As such, it is the self regulating market that informs politics not the other way round. This in turn makes the millions of producers, investors and consumers the higher order governance level with politicians, lobbyists and the media alike representing their interests.

    Thus, unless politicians reverse this relationship (socialism) then entropy becomes the most significant principle by which the market society is arranged and organised, especially in terms of the relationship between low entropy and high entropy, which of course Surplus Energy Economics is specifically focused on to varying degrees.

    Interestingly, SEE analysis seems closely aligned with the Marxist perspective that capital will seek to restructure the ‘conditions of production’ to maximise exchange-value whether through simplification or delayering via loss of critical mass and adverse utilization effects in order to avoid both financial and ecological crisis. I’d obviously add here quantitative easing and negative/zero interest rates.

    Of course this is yet to happen to any significant degree regarding declining surplus energy, but my point is that our current human system is currently dominated or governed by the high cultural artefact of The Market and so it isn’t the State or the government in power, it is the market logic of exchange-value with the policy making structures of the State and the government as middle cultural artefacts, simply subservient to it.

    As such, politically, SEE is trying to deal with a high cultural failure from a low cultural perspective with criticisms levelled at middle cultural failures without properly understanding the ontological and epistemological basis of these failures in order to affect a regime change at the high cultural level.

    Possibly one may not be needed, since the irony is that declining surplus energy is in effect stimulating a regime change anyway within the scope of the high cultural artefact of The Market in that producers, investors and consumers are changing/adapting their behaviour in line with entropic effects.

    In this respect, the middle cultural governance body of politicians, policymakers, lobbyists and the media are secondary to the high cultural governance body of producers, investors and consumers. To suggest otherwise, at least in accordance with the evolution of the maximum power principle as eludidated by this essay, is to misunderstand the significance of the high cultural Market system we live within and the role of the ‘Invisible Hand’.

    Of course, if the ‘Invisible Hand’ of producer, investor and consumer behaviour is to be rejected or criticised then either high cultural alternatives or high cultural Market reforms need to be politically elucidated.

    At present this isn’t occuring at the middle cultural level with ‘sustainable growth’ being used as the rhetorical tool to sustain the status quo of current maximum power principle social relations. Presumably because a low growth Market environment is preferable to an ostensible policy shift towards a steady state Market environment which would require deep systemic ontological and epistemological transformations.

    Overall, presumably the rhetoric of sustainable growth is being motivated by the maximum power principle as historically embedded in the operation of the Market and therefore it is the high cultural preferences of producers, investors and consumers that is governing our Market Society.

    And presumably the only way to change this is a societal recognition of the maximum power principle and how historically it has created the high cultural system that we currently have. This is largely beyond the scope of middle cultural politicians, lobbyists and the media who are conditioned to follow the logic of the current high cultural system we have and so any evolutionary change will require the intervention of high cultural ideas and philosophies; presumably at the Natural Science level which makes Don’s advertised event particularly pertinent.

    • I think I’d like to pick up on one point here, which is ‘Marxist’. At university, it took me a long time to work out that it has two, quite different meanings.

      First, of course, there is Marxist politics, meaning advocacy of a communist, socialist or collectivist society.

      Second, though, is Marxist interpretation of social movements, both historical and contemporary. This states that what happens is determined, within economic possibilities, by way of relationships between classes, interests or groups.

      The point is that one can be, say, a ‘Marxist historian’ – explaining history as the interplay and competition of classes or groups – even if one’s own politics are High Tory.

      It took me, as an undergrad, quite a long time to understand this distinction. Until I’d worked this out, I didn’t see how a ‘Marxist historian’ could hold anything other than left-wing political opinions!

    • “And presumably the only way to change this is a societal recognition of the maximum power principle and how historically it has created the high cultural system that we currently have.”

      and there is a near zero chance of this societal recognition ever happening.

      too bad, so sad.

      it is what it is.

      que sera sera.

    • Whilst I’m still trying to work out how the MPP works, as a (proposed) thermodynamic principle, it seems to facilitate succession but I could be entirely wrong.

      What seems to define the MPP is the relationship between the rate, route and efficiency of energy transfers with maximum power situated at the mid rate mid efficiency intersection. This I think is the maximum flow so I don’t think it includes the route unless route is embedded in the rate and the efficiency curve.


      Thus, as far as I can understand, energy takes the necessary routes to maximise flow which equates to a mid rate and a mid efficiency.

      This perhaps explains why systems use up (high entropic) energy beyond natural replenishment rates but not so quickly as to limit long term flow (hence negative feedback mechanisms).

      This means the optimum sustainability rate (in terms of generational longevity) is below the maximum power/flow point and so ideally rates need to be constrained with increased efficiencies.

      However, endeavours to increase efficiency and limit rates is counter to the system’s thermodynamics hence the tension between the decentralised nature of the ecosystem (the Market) and the centralised nature of the State. The former is seeking mid rates and mid efficiencies to achieve maximum flow and the latter, in theory, is seeking low rates (restrictions in the system – regulations etc) and high efficiencies to reduce flow.

      Interestingly this could also apply to the tension between public sector Unions and the State for example with the former seeking mid rates and mid efficiencies and the latter seeking low rates and high efficiencies although this is probably an oversimplification.

      These examples clarify why there needs to be a systematic understanding of the MMP because decentralised systems reduces sustainability whilst centralised ones, in theory, are trying to optimise it with the former aligned with thermodynamic laws and the latter not.

      This of course reveals the tension between capitalism and socialism as well as the tensions between libertarian (laissez faire) capitalism and social democratic capitalism and libertarian socialism and state socialism.

      It also of course reveals the tension between the Market and the State and probably explains why human evolution has effectively embedded prime governance in the mechanisms of the Market.

    • @Steve Gwynne.

      I’ve always been sceptical of social theorists who that claim that human behaviour can be “crystallized” down to a simple formula.

      Whether that be Marxism, Maximum Power Principal, The Selfish Gene or Optimal Foraging Theory.

      David Wengrow/ Graeber give examples that defy the theories in The Dawn of Everything.
      Page 195-209. They suggest that contrary to the rules of Optimal Foraging Theory, there is evidence that people don’t necessarily behave in these ways. That “culture” comes into play. Choices are made using other criteria/values. That humans are not automaton. We have “agency” and are far more complex and I guess irrational.

    • John A

      Google Maximum Power Principles, with the s and quite a few scientific studies come up which validate MPP

      Any problems locating these studies, get back to me.

  24. From Bloomberg’s Javier Blas:
    “The French government offered this morning to pay $9.9 billion to fully nationalize Electricite de France.”

  25. According to Richard Murphy, there are now c.200,000 Covid loans in arrears. I’m not surprised as, according to my accountant, SME cashflow has been crushed by rising input costs, i.e. inflation. Insolvencies looking likely to rise, unfortunately.

  26. Signs of Economic, Political, and Social Collapse
    The New York Times has an article entitled “The War Against Democracy”. I wrote a fairly long analysis of the weaknesses of the US Constitution and the way that “conservatives” on the Supreme Court are using it to dismantle much of what the US Government actually does. The Constitution was NOT a democracy manifesto, but instead n unstable pact between sovereign states.

    So, at least in the US, the legal basis for everything we do is unravelling. And the political basis for prosperity seems to be threatened in Europe:
    If one combines the perspective of Tim Watkins with that of Indi writing on the ground in Sri Lanka, we can see a lot of fantasies unravelling. I want to look ar one in particular, but I think it is characteristic of lots of other pieces of the puzzle. Banning the import of synthetic nitrogen into Sri Lanka and just ASSUMING that organic tea for export could easily be grown is just plain stupid. Our dependence on synthetic nitrogen began a hundred years ago and is deeply woven into the fabric of agriculture. A very high percentage of the nitrogen, which is a component of the proteins that make your body, is likely a product of the Haber Bosch process…which uses natural gas as a fuel. Agriculture did exist before Haber Bosch, but it fed about 2 billion people. It also involved more land per unit of output, as well as more human labor. We may get back to it again out of necessity, but anyone who assumes it will be easy is deluded.

    In terms of social collapse, I recommend taking a quick look at Rachel Donald interviewing a fresh-water biologist in New Zealand. He makes the point that the ‘green’ agriculture in New Zealand produces huge amounts of powdered milk for export, which is used as a very cheap filler in millions of tons of junk food. To think that the New Zealand model will survive the downslope of fossil fuels is equally as delusional as anything in Sri Lanka. The biologist suggests that the sustainable population is going to be smaller and a lot more people will be producing food. Rachel, a liberal arts graduate, says “I don’t really want to be a farmer”, and thinks she will find some other way to contribute to a local community. The biologist doesn’t want to argue the point, but suggests that a very high percentage of the people will be producing food. This is not to take a short at Rachel, just to use her as an example of smart young woman who does not grasp the enormity of the challenge.

    Don Stewart

    • I remember reading in an “alternative” economics book how poor a marker of economic vitality, GDP can be.

      The example being that if an oil tanker runs aground off the coast of Cornwall, GDP goes up due to all the materials consumed in the “clean-up”!!!!!!!?

    • The example I use is that government pays 100,000 people to dig holes in the ground, and another 100,000 to fill them in again. No value is added. But GDP is increased by the wages paid to these workers.

    • The way that GDP is measured is a nonsense. Apparently, GP appointments were the reason the UK economy grew in June. I can only assume that face to face appointments result in a higher increase in GDP while the telephone consultations count for less. Who knows why? There was certainly not a 15% increase in appointments as there isn’t the additional capacity in the system for that. Indeed, there is no additional capacity at all as I think most people realise. It’s another example of massaging figures and creating a nonsensical conclusion as far as I can tell.
      I really enjoy CHS’s blog too and Tim Watkin’s is also excellent.

  27. Pingback: Those who the gods wish to destroy…

  28. The last part of the article below, I found interesting.

    “Involuntary as the process will likely turn out to be, the growing energy crisis means that a decade from now central government will have been forced to shrink back to something equivalent to its nineteenth century size, with the most important day-today decisions having to be taken by local councils as the largest governing units our declining surplus energy can sustain.”

    In a way, maybe this is no bad thing if it means more direct democracy in the decision making processes.


    • I read the piece to be about an innovative (and low energy) way of storing hydrogen (and other gases). But when they mentioned that the substance had to be subsequently heated to then release the gas, it got me wondering about the EROEI/ECoE of the process.

    • As I read it Raymond, heating the powder was included in their estimate of energy usage reducing to around 10% of current energy usage. Regarding EROI/ECoE, this is more to do with final energy availability for the wider economy as I understand it. So any processes which makes more efficient use of final energy availability will mean more energy for other sectors of the wider economy.

    • Thanks for that clarification Steve. This seems like an innovative gas storage technique. It will be interesting to see if it can be adapted to mobile platforms (e.g., trains, container ships, buses) in addition to the immobile factory floor.

      I recall Smil’s 2019 take-down of the notion of electrifying ships (“Electric Container Ships Are Stuck on the Horizon” at https://spectrum.ieee.org/electric-container-ships-are-stuck-on-the-horizon) which came down mainly to the massive volume and weight the batteries would require. Hard to match the energy density of coal and oil. But maybe this hydrogen gas storage technology will allow for some longer-distance transport in an energy descended future?

  29. UK Energy Usage – What Fuel or Energy Source Do We Use for Industry, Heating, Transport Etc.?

    Chart below details energy input and final energy consumption in the UK.

    Click to access Energy_flow_chart_2020.pdf

    Original source

    However the first chart in the link above is wrong and is for hydrogen not the different levelised costs of different energy sources.

    The levelised information is sourced from here.

    Relative costs of nuclear, wind gas etc: https://www.lazard.com/media/451419/lazards-levelized-cost-of-energy-version-140.pdf

    Lastly, I notice Rishi Sunak wants to re-establish a separate Department of Energy and create a new Energy Security Committee tasked with reforming the market to cut future bills (Daily Telegraph 19/07). Also he wants to introduce a legal target to make Britain energy self-sufficient by 2045 (Daily Telegraph 19/07).


    • Thanks Tim. As it happens, Claverton got back to me regarding their hydrogen chart and so I asked them if their work includes assessing EROI or ECoE with links to explain. Pointing out that energy costs are an entirely different type of valuation compared to levelised costs.

      I’m still getting my head around how they might relate. If your next article can help clarify the difference and their respective impacts on the wider economy, that would be much appreciated.

  30. Manias and Balance and the Maximum Power Principle
    Those who are addicted to:
    *Finding some physical way to keep the mania going
    *Those who are convinced that self-interest is the only feasible way to operate a complex society
    *Those who believe that the Maximum Power Principle explains everything
    might do well to read the initial chapter in Peter Whybrow, M.D.’s book from back in 2005 titled American Mania: When More is Not Enough.

    Now Whybrow is a physician, so he thinks that any behavior which is destructive of biological flourishing is a dead end regardless of how much money one has.
    *Technology is a two-edged sword. While it extends human power on the planet, it also magnifies our instinctual craving.
    *From the standpoint of neurobiology…the damaging frenzy that now engulfs our nation was predictable and is treatable.
    *The strain of unbridled manic pursuit, whether we enjoy it or not, is damaging to both health and happiness

    Whybrow goes on to analyze in some detail the thinking of Adam Smith, who thought (in 1776 in Scotland) that local private enterprise coupled with the restraints of living in a relatively small community was a prescription for both material wealth and also social flourishing. Of course, nowadays, the enterprise is instant and global (at least for the information based services which have become the royal road to riches…think Tik Tok.

    What we may be seeing unfold is either:
    *Global destruction as the have-not nations attack the have-some nations for control of natural resources.
    *A devolution back to a more localized economy of the type Adam Smith was familiar with.
    In either case, we are are likely to see
    *A devolution of the climate to one less hospitable to our way of life, creating anew the scarcity that Whybrow believes we evolved to deal with.

    Don Stewart

    • Don.

      Social utopianism as the corollary to techno utopianism is simply the denial of ecological grief and the denial that the human species is bound by thermodynamic laws.

      The maximum power principle has empirical validation. Utopianism does not.

    • @Steve Gwynne
      Who said anything about utopianism. Many indigenous societies use social approval and disapproval to maintain behavioral norms. Sometimes the norms are what we regard as “good” and sometimes as “bad”. I well remember escaping from the social norms in an inbred society to the “anything goes” of a certain segment of New York City in 1965. But what the social norms usually do is maintain some sort of stability which allows our social species to survive. That is perhaps the biggest challenge my grandchildren will face in the reality of energy and mineral and soil and water depletion coupled with adverse climate changes.
      Don Stewart

    • Don.

      Not really sure what social norms you are referring to. The ones that say self interest (life), competition (liberty) and greed (pursuit of happiness) are ‘good’.

      Why should sociology suddenly become more deterministic than biology when the human species has had millennia to develop social norms in much the same, if not worse, energetic and material conditions of scarcity.

      In my opinion, like much else in history, imposing constraints on self interest will be done by the hierarchical State since the tyranny of micro decisions will never result in an overarching mutual consensus.

    • Steve and Don,

      Socio-political philosophizing is at least as old as Plato. Social contracts are much older than that, as groups of early humans had to have rules. Dominant individuals (alphas) likely impacted clans/tribes as is the case with many social mammals. I suspect most were males, as most top deities were invented as males.

      Re S.G.:
      “In my opinion, like much else in history, imposing constraints on self interest will be done by the hierarchical State since the tyranny of micro decisions will never result in an overarching mutual consensus.”

      Mutual consensus is not always a permanent condition. Even fundamentalist religious groups with written dogmas squabble over interpretations. Theocracies and dictatorships try to control dissent. Books like the Bible and Koran are full of rules on “micro decisions” such as who not to covet, not to steal, etc. Corrupt elites in supposedly more democratic states do the best they can to retain their status. Hierarchy is…biological!

      If anyone thinks that this will change, I suspect they’re idealistic and wrong. When a species is in plague phase, order sequentially breaks down. I suspect that’s what we’re witnessing this century.

    • The underworld fraternity is a much missed aspect of social philosophising. Ignore them and hope their lack of mutuality goes away.

  31. Hello Dr Morgan, I have been a long time reader of your work and want to express my appreciation. Also, as a Canadian, I am wondering if the UK dataset and situation is similar to those of Canada?

    Thank you

  32. This is very interesting but got cut short because I’m not a subscriber.


    In particular, the description of how the democratic values of freedom and equality eventually collapses the distinction between necessary desires and unnecessary desires, which to me sounds like the maximum power principle in action.

    Does anyone have a subscription so they can post the full article here. Cheers.

  33. Last one from me.

    I’ve been dialoguing with Claverton and they sent me an article with harmonised EROI figures.

    There are also substantial sections about Net Energy which might be interesting. They are quoting EROI figures for hydrocarbons which better align with SEEDs assessments.


    They don’t seem to get the implications of ECoE just yet but I think they are getting there. We are still at the stage where there is infinite critical materials to create a zero carbon economy!

  34. Re: decline of discretionary spending – the handwriting is beginning to appear on the wall for the smart phone industry. Maybe we’ll see a return to the “dumb” flip phones that were just for making calls, as people can’t afford data plans, and then, maybe no cell phones!

    “Shares of AT&T fell on Thursday after CEO John Stankey said that customers are starting to put off paying their phone bills – which resulted in the wireless carrier cutting this year’s forecast for free cash flow by $2 billion, Bloomberg reports.”


  35. More on Adam Smith Economics

    This essay by the well-known economist Jeffrey Sachs echoes my previous post (if it gets published) on the necessity for social constraints on individual (and corporate) actions, which was recognized by Adam Smith. Sachs remembers his introduction to The Limits to Growth, and how his professor in economics dismissed it as rubbish…because a market system self-corrects. But 50 years of experience show us that market systems do NOT self correct (and you will spot a missing word in the third paragraph). Sachs ends by appealing to the Pope’s suggestion of a regulatory system based on St. Francis. I’m more persuaded by the localism which Adam Smith relied upon than a call to religion. The Pope, after all, represents what he claims is a universal system of religion. And I suggest that large size is a barrier to any regulation based on common humanity.

    Don Stewart

    • @postkey – that was an interesting read thanks. I think he has some worthwhile points – especially about the difference between reserves and ultimate resources, and how it doesn’t make sense to prove a large reserve of a mineral that would last for decades or centuries, since financially that will cost money now but not be worth anything for a long time into the future.

      However, he is clearly in the “if we need it we will invent it” camp, that technology will solve every constraint in an affordable way.

      I think he makes too much of developed countries reducing their demand on mineral resources – that is IMO because they are outsourcing so much of their production to, especially China, but a true accounting would mean they really are demanding those mineral resources, just indirectly.

      Another interesting point was about the fact that we haven’t explored the whole world so haven’t necessarily found all the richest ores yet. Although his point about why old mines were being shutdown rather than new ones, if the old mines were on the richer ores and therefore should be easier to profit from, I think can be partly answered by sunk costs. If you have just spent millions or billions on a new mine, then you are motivated to keep it going, even if it is costing more per unit to extract the minerals than a bunch of slaves with shovels.

      As to his Club of Rome criticism – well of course, they explicitly didn’t make predictions.

      He makes the point on energy of how silicon (for solar panels) is substituting fossil fuels – however of course, fossil fuels are used to make the solar panels and there is, I believe, no current solar panel factory purely supplied (including the mining and transport of silicon, etc) and powered by solar panels. If that can’t happen because of physics, then substitution (which he has defined very widely – he suggested substituting starving for food as an example) will not happen in a useful way for us. I think most of us would take the economic definition of substitution as of improving the situation, not just some technical term with no real meaning.

  36. And filling out the concept of an ethical governor on the engine of private enterprise…
    The book by Batja Mesquita, a Dutch psychologist now working in Belgium, titled Between: How Cultures Create Emotions, just arrived thanks to Amazon.

    She makes the point that while emotions sometimes arrive from deep within our own self, they also frequently arise in a cultural context. To cut to the chase, if we expect corporations and billionaires to behave differently, we are either going to have to come up with more cleverly restrictive laws, probably published in large volumes and also enforced by legions of bureaucrats and the courts….or else depend on the sorts of emotions created when the entrepreneur is subjected to the emotions created in a closely knit community. Most corporations and billionaires are only restrained by other corporations and billionaires. The respect of 95 percent of the people is not important at all.

    So our situation is a long way from what Adam Smith thought was the ideal framework for private enterprise. Please note that I do not say “free enterprise”…because if there is a culture to restrain bad behavior, then one is not free to behave however one privately wants to behave. If cutting down the rainforest antagonizes ones neighbors, that is a lot more of a regulatory pressure than anything the abstraction called the Stock Market is likely to come up with.

    So how might we get back to 1776 and localism. I think that is where we are headed as surplus energy declines. But it will certainly help if we have some understanding of how the reduction in surplus energy may have a good side as well as a bad side.

    Don Stewart

  37. Readers of Do the Math will be familiar with my line of argument that economic growth as we know it is destined to end. It was the second post of the whole series, and the basis for one of the more popular posts recounting a conversation I had with an economist. I also adapted the same reasoning into Chapter 2 of my recent textbook. Already, I sound like a broken record. Yet I write this update to announce the publication of this idea in a “real” article in Nature Physics. If the link does not work (to get you past the usual pay wall: despite my intentions, Comments are not able to be open access in Nature Physics), here is a link to the PDF. Anyway, that’s all. Please share with anyone you think may be interested.

    Click to access limits-econ-final.pdf

    • Well done, but the fact that you feel such a paper is necessary is a sorry comment on longstanding political realities. The danger from failing to prepare for the end of economic growth has been obvious for many decades, at least, but the default policy virtually everywhere is that growth must be encouraged to continue indefinitely. When growth does end, as it must, it won’t end well.

  38. “Brillouin Energy will demonstrate its breakthrough boiler to produce low-cost heat with no combustion or pollution, paving the way to a clean energy future.

    Our technology has been independently tested or validated by several of the world’s leading nuclear physicists and laboratories and is ready to enter into the next phase: commercialization.” — David Firshein, CFO of Brillouin EnergyBERKELEY, CA, USA, July 21, 2022 /EINPresswire.com / — Brillouin Energy Corp , whose mission is to create the“New Era of Energy” to address energy security and climate change, will demonstrate publicly for the first time at ICCF24 a revolutionary new high-tech boiler system that can help the world transition from fossil fuel energy to a non-carbon, completely pollution-free and sustainable energy with vast environmental benefits for both the planet and humanity.” ?

    • I see they’ve been working on this for 13 years. I guess the cold fusion example applies here. When it has been demonstrated and repeated, it might be believed. A brief search found that they’re turning hydrogen into helium. Producing hydrogen itself is energy intensive….

  39. Pingback: #235. The affordability crisis – Olduvai.ca

    • Basil Fawlty famously said that he couldn’t make a Waldorf salad because he was “fresh out of Waldorfs”. In the same spirit, Britain is “fresh out of leadership”.

      Political parties always run the risk of being captured by extremists. This has happened to the Conservatives, many of whose members still seem to regret the overthrow of Mr Johnson. The choice now is between a poor option (RS) and a much worse one (LT).

      Normally, this is where a party – in this case, the Tories – would be put out to grass until extremists have been replaced by realists. But Labour doesn’t offer much of an alternative and, even if it did, might not be electable.

      The UK economy is a basket case. Dreams of “Singapore-on-Thames” have turned into ‘Sri Lanka-on-Thames’. Britain has spent decades selling off assets so it can carry on living beyond its means, to the point where there’s precious little left to sell, and the current account deficit has become structural. Politicians offer ludicrous routes to Nirvana – neoliberalism, “Brexit” and, now, “tax cuts” and tearing up all laws with an EU origin.

      The worst part of all this is that a sizeable proportion of the electorate seems to like it this way. As the old saying goes, ‘buy in haste, repent at leisure’.

    • Post truth societal thinking is emerging everywhere.

      In Canada, post truth journalists and politicians have been conspiring for well over a year to avoid their post truths to be fact checked.


      Regarding Claverton, finite material availability and affordability has now been acknowledged. We are now just entering the realm of surplus energy economics.

  40. The Discontents of the Middle Class
    The New York Times sets out to parse the uprising in Sri Lanka:

    “In Sri Lanka, there’s a sizable middle class. People are not used to scarcity, so they noticed immediately when things started disappearing from shelves. “

    Indi’s periodic reports depict a downtrodden lower class near starvation and a middle class which is very angry indeed. The upper classes have access to planes which get them out of the country, while the middle class waits in lines for visas to leave.

    The descriptions reminded me of Peter Whybrow, M.D., dissecting American society in the post-dot.com era. His data in American Mania is now two decades old, but the dynamics of middle class discontent that he describes are still appropriate…it’s just that most of the harmful trends he describes have gone further into dysfunctional territory. He notes the amount of GDP, but basically said it is irrelevant:

    “We guide our lives not by reason, but by immediate comparison: by the exemplar rather than by the rule.” And “For those not fortunate enough to live on he lip of the champagne glass, the accumulation of debt fills the financial gap between reality and these dreams of material opulence.” He points out that in 1960 seventy percent of American families had at least one adult who stayed at home. But in 1992, 62 percent of all American women with children under six were in the workforce, two thirds of whom were working 40 hours per week or more. And “It is often with gifts and material reward that the parent strives uncomfortably to ease that sense of neglect (of children)”.

    I will just add my own footnote that the right wing discovery that there is a mental health problem (not, ahem, a gun problem) is an attempt to gloss over the real problem…which is that parents and children evolved to establish close bonds…it’s not a hooker and John relationship.

    Whybrow, I think, correctly diagnoses the pivotal role not only of comparisons to role models but also the deadly effects of debt on the middle class.

    Increasing ECoE and the limits to and increasing cost of debt deliver the coup de grace.

    Don Stewart

    • Steve G:

      Posting metaphysical speculations and proposed moral absolutes strikes me as off topic. Science can explain(fairly well, subject to ongoing revision) the behavioral tendencies of many species including ours. There is no solution to overshoot that doesn’t include reducing human throughput; and humans are, on average, wired to increase it. INvoluntary simplicity is practiced by billions. Voluntary? take a guess. .01% of 8B is as good as any in my view. Peak humans is coming, and it won’t be a pretty decline. My opinion, of course.

    • @Steve Gwynne
      I live in a blessed little backwater of the insane public sphere in the US. I have the great benefit of eating lunch at my food co-op where little people and their parents come to play on the lawn and learn to:
      *master their own bodies
      *get along with other people without surrendering to bullies
      *have a great time while spending little money
      This is not terribly unlike what the upbringing of a hunter gatherer child might experience, except that the children don’t then graduate to going out with their parents and learning to hunt and gather. So the very early childhood events are not, I think, conducive to producing school shooters. I doubt that spending more money on treating adults for their mental problems is going ro help very much. There was a young PhD working here a number of years ago who had studied the environment of children, from pre-conception up to school age. In a word, it is, on average, terrible. She had strong evidence that this toxic environment means a heavy burden later in life. We were just beginning, at that time, to understand the epigenetic effects of a toxic environment. So the case is stronger today than it was a decade ago.

      One of my points is that simply increasing GDP (through mechanisms which create more toxic environments) or putting more “liberal” bandages on the wound, or “deregulating everything” will not likely work in any way we can afford.

      As a parallel argument, some now suggest that modern diseases result from an evolutionary mismatch. Our basic bodily processes evolve over thousands of years. But our gut microbes evolve over days. And our environment evolves over decades. The rapid evolution of the environment has changed the microbes. And the microbes, which contain 90 percent of the cells within our human body, are no longer compatible with our physiology. And so we get chronic disease and government bankruptcy trying to deal with the fallout.

      Don Stewart

    • Don.

      I thought the article was pertinent because it continued on with your good-evil nexus as the basis of social norm formation.

      Obviously the article went into a Nietzschean direction with the religious void being filled with the new god of a highly centralised hierarchical State that would be controlling for memetics, epigenetics and genetics.


      I thought the article also held the key of how populations will democratically decide how to manage decline between enabling decentralised hierarchical individuals to defend themselves (the frontier option) versus enabling a centralised hierarchical State controlling every aspect of our lives (the authoritarian option).

      Obviously that decision has already been made by authoritarian states.

      I no longer see sharing as an option but the deepening of self interest. Even if that means escaping to another country and amassing private armies.


      So I agree, like days of old, the new currency will be weapons and ammunition and the ability to both defend and capture land and private property.

  41. Steve G,
    I wonder if you might elaborate on your choice of the word, “diagnosing”. Do you mean that people ple will increasingly conceive of adaptation to a declining ECoE economy as a struggle between defense of local hierarchies and local prerogatives vs centralized control by centralizing oligarchies? I initially read your message in haste as saying that would be the form of the actual struggle, with which I agree, but then noticed your exact choice of words

    Steve K,
    The scientific fact that everything is caused and there is no free will is of zero help to a creature whose finite sensory organs and brain cannot “see” the consequences but has to act in ignorance. Humans act based on the feeling that they have choice and that how they choose matters because they cannot know that their decision was always preordained and inevitable. Politics and morality is what they have and the realm they operate in.

    • “The scientific fact that everything is caused and there is no free will is of zero help to a creature whose finite sensory organs and brain cannot “see” the consequences but has to act in ignorance. Humans act based on the feeling that they have choice and that how they choose matters because they cannot know that their decision was always preordained and inevitable. Politics and morality is what they have and the realm they operate in.”

      Good points, Tagio. The morality believed is based largely on the culture one was raised in. Note that Jihad and Sharia Law are firmly held by tens of millions of the 1.7B Muslims. Politics is based on that and economics. My position is that no socio-economic and/or monetary changes are sufficient to reverse the decline of well-being without massive reduction in total human throughput and numbers.

      My response to a private post today from a senior socio-cybernetician in Edinburg with a link to a Michael Hudson and Steve Keen dialogue (anti-capitalism, pro MMT) applies here too.

      I disagree with Hudson and Keen to the extent that I know their positions. They are primarily concerned about how the pie is divided. The global pie is shrinking now. Peak energy, topsoil, biodiversity, potable water in aquifers/rivers/lakes, minerals like phosphorus, etc., and increasing toxicity in the biosphere mean that well-being for humans is in decline. With growing population, p/capita decline is even more rapid. The easiest resources were mined first. Money can’t change that!

      Creating money (MMT) does nothing to reverse those trends. In fact it speeds them up to the extent the currency involved holds its buying power. At some point there is a risk of rapid depreciation of its value from excessive supply.

      Hierarchy is biological. The Bell Curve has greed/power mongers at one small tail, and voluntary simplicity folks at the other. The vast majority are INvoluntarily simple, and seek more energy-matter throughput. Money cannot create the well-being they seek. If the saved wealth of the rich were confiscated and distributed to average people, conserved lands would be developed, and prices for things would rise from immediate demand increases.

      Socialism is pie in the sky for 8 billion. It can barely work in small villages with adequate local resources. I will make charitable wagers on actual outcomes on my points at longbets.org (part of The Long Now Fdn. started by Stewart Brand (Whole Earth Catalog) and Kevin Kelly (Wired Mag.)

    • @ Steven B Kurtz, thank you for that piece, one of the better written ones with full understanding of the situation I’ve ever read.

      This bit needs to be understood, but is often overlooked with a hand wave, “The global pie is shrinking now. Peak energy, topsoil, biodiversity, potable water in aquifers/rivers/lakes, minerals like phosphorus, etc., and increasing toxicity in the biosphere mean that well-being for humans is in decline.”

      What’s not understood even by most in the ‘doomsphere’ is that the exact same reasons why infinite growth is not possible on a finite planet, also mean that any type of sustainable circular economy (with a modern lifestyle) is also not possible for anything other than a limited time.

      It is physically and mathematically impossible to have sustainable civilization when we need to mine metals and minerals that come from declining ore grades and deeper depths, to replace that which is lost due to entropy and dissipation, despite the maximum possible recycling. Mining lower grades of everything means more energy needed, to produce the same amount of ‘stuff’. More energy needed means more production of energy, which means ‘growth’, so full catch 22.

      All we do is buy time to avoid the inevitable, by getting rid of growth. Yet no-one anywhere has demonstrated that a circular economy without growth is even close to possible. No-where is there any evidence that we could replace ‘renewables’ (or nuclear) with just the electricity created by these devices to replicate themselves. All EROEI type calculations, that glibly show it’s possible, are based on fossil fuel inputs, when the calculations are totally different, when turning electricity into synthetic fuels or hydrogen, or new (so far not discovered) processes using just electricity.

      Even the civilization we had prior to the industrial revolution and use of fossil fuels was not possible to maintain indefinitely as those societies still used metals mined to replace that which was lost to entropy and dissipation. Eventually they would have spent an increasing amount of available energy mining ever lower grades of ores until their way of existence was no longer possible.

    • @Hideaway,

      You noted that “even the civilization we had prior to the industrial revolution and use of fossil fuels was not possible to maintain indefinitely as those societies still used metals mined to replace that which was lost to entropy and dissipation”. This assertion is basically correct, but the finer point is that non-biological resources can only be used at a rate that is replenished by volcanic and geologic (including plate tectonic) processes. This means that we can use many things as much as we want, within sustainable energy constraints (stone, sand and gravel, etc), but metals are only replenished over millions of years, augmented perhaps by metallic meteorites, so we have to be very careful with them. We must recycle everything possible, but, as you point out, no recycling method is 100% efficient.

      On the energy side of indefinite sustainability, the only sources of energy that won’t deplete are derived from solar radiation (wind, hydro, biomass). The upper bound on our use of these energy sources is determined by ecological constraints.

      The combined energy and metals constraints suggest to me that a stone age style civilization is sustainable indefinitely, but once metals are included it may not be possible to manage their use in a manner that could last for a really long time (more than a few tens of thousands of years).

  42. Whither Discretionary?
    Delta Flies 1000 Lost Bags Back to the U.S. After Heathrow Passenger Cap Cancels Flights

    The chaos in the travel industry is certainly increasing the cost of flying, but the cost increase is likely not yet reflected in the prices. On top of that, I am sure that fuel costs have increased. The straightforward explanation, in my mind, is that there is still a great deal of central bank fostered credit floating around begging to be spent. Until the central banks substantially shrink credit, I expect more chaos. Raising interest rates by a quarter of a percent when interest rates are deeply negative won’t likely resolve the issues anytime soon.

    Don Stewart

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