Galactic-Scale Energy (2011)
The role of energy and technology in economics has been grossly misunderstood and&#x2F;or misstated for decades -- it&#x27;s largely a product of post-WWII economics, though there are of course older precursors.<p>A contemporary economist who&#x27;s demostrated the role of energy in economic production, and whose work would (and IMO should) revolutionise the study, is Steve Keen.  His 25 minute presentation &quot;The Role of Energy in Production&quot; adds an additional term, energy, to the standard Cobb-Douglas function, and explains virtually all of the residual.<p><a href="https:&#x2F;&#x2F;invidio.us&#x2F;watch?v=BAjN6bG7XzM" rel="nofollow">https:&#x2F;&#x2F;invidio.us&#x2F;watch?v=BAjN6bG7XzM</a><p>Audio quality is poor, but I cannot recommend this video highly enough.<p>For those who prefer text, much of the material is in this post:<p><a href="http:&#x2F;&#x2F;www.debtdeflation.com&#x2F;blogs&#x2F;2016&#x2F;08&#x2F;19&#x2F;incorporating-energy-into-production-functions&#x2F;" rel="nofollow">http:&#x2F;&#x2F;www.debtdeflation.com&#x2F;blogs&#x2F;2016&#x2F;08&#x2F;19&#x2F;incorporating-...</a><p>The idea that &quot;technology&quot; is responsible for &quot;efficiency gains&quot; comes from the work of Robert Solow, and is called the &quot;Solow Residual&quot;.  It is quite literally a mathematical (or statistical) artefact:  if you study the behaviour of a dependent variable on the basis of one or more independent (or <i>explanatory</i>) variables, whatever change is <i>not</i> explained is the &quot;residual&quot;, or residual variance.<p>The residual is real.  Its attribution to &quot;technology&quot; is wholly arbitrary.  Solow&#x27;s independent variables were Capital and Labour, using what&#x27;s called the Cobb-Douglas production function.  They collectively explain only about TK% of all increase in net productivity.<p>Solow himself has more modestly described the residual as &quot;the measure of our ignorance&quot;.<p><a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Solow_residual" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Solow_residual</a><p>The soundness of the Cobb-Douglas function has been questioned by numerous other economists, though their views have remained outside the mainstream.  A particular challenge has been meeting the economic fashion of the past 75 years or so of &quot;mathiness&quot; -- being able to express relationships in a concise mathematical function, which is what Keen&#x27;s work above does.<p>This is strongly bolstered by other work, e.g., in Robert J. Gordon&#x27;s <i>The Rise and Fall of American Growth</i>[1], US economic output per worker from 1920 - 1970 (and possibly beyond) grew linearaly with additional horsepower or kilowatts per worker.  Growth <i>since</i> roughly 1970 has slowed.<p>Keen isn&#x27;t the first to come up with this understanding.  If one reads Adam Smith with the understanding that in his time, labour <i>was</i> power, then Smith&#x27;s measure of wealth, &quot;the annual produce and labour of the nation&quot;, is in large part based on energy input.[2]  Leslie White formulated an eponymous law that the level of a civilisation is proportional to its net power throughput, similar to the Lotka-Darwin power law, that the evolutionary advantage goes to organisms which maximise energy flow.[3]<p>Others include Henry Adams[4], Kenneth Boulding[5], Nicholas Georgescu-Roegen,[6], Herman Daly[7], R.U. Ayres[8], and Charles A.H. Hall[9], as well as ecologists Howard T. Odum and Eugene Odum[10].<p>There are also several histories seen through the lens of energy, most especially Vaclav Smil&#x27;s <i>Energy and Civilization</i> (2017) and <i>Energy and World History</i> (1994)[11], and Manfred Weisenbacher&#x27;s two-volume epic <i>Sources of Power</i>[12].  Both Smil and Weissenbacher divide human history into the eras of hunter-gatherer, agriculture, coal, oil, and post-oil.  It&#x27;s a novel and highly illuminating historical framework.<p>________________________________<p>Notes:<p>1. <a href="https:&#x2F;&#x2F;www.worldcat.org&#x2F;title&#x2F;rise-and-fall-of-american-growth-the-us-standard-of-living-since-the-civil-war&#x2F;oclc&#x2F;1026312328" rel="nofollow">https:&#x2F;&#x2F;www.worldcat.org&#x2F;title&#x2F;rise-and-fall-of-american-gro...</a> 
 Gordon&#x27;s book divides American economic history since 1870 into roughly three fifty-year periods:  1870-1919, 1920-1969, and 1970-2015, the book&#x27;s publication year.  These are roughly accelerating growth, peak growth, and decelerating growth.  It&#x27;s a remarkable history and marshalling of facts.<p>2. White&#x27;s Law, more precisely:  &quot;culture evolves as the amount of energy harnessed per capita per year is increased, or as the efficiency of the instrumental means of putting the energy to work is increased.&quot;  <a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;White's_law" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;White's_law</a><p>3. 
<a href="http:&#x2F;&#x2F;www.eoht.info&#x2F;page&#x2F;Darwin-Lotka+energy+law" rel="nofollow">http:&#x2F;&#x2F;www.eoht.info&#x2F;page&#x2F;Darwin-Lotka+energy+law</a><p>4. See especially <i>The Education of Henry Adams</i>, considered one of the most important books of the 20th century.<p>5. Formulator of the maxim, &quot;anyone who believes in infinite growth on a finite planet is either mad or an economist&quot;.<p>6. Georgescu-Roegen&#x27;s <i>The Entropy Law and the Economic Process</i> is excellent, but also famously impenetrable.  Still recommended.  The work is in many ways similar to Frederick Soddy&#x27;s, though G-R doesn&#x27;t cite this, see: <i>Wealth, Virtual Wealth, and Debt</i> <a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Wealth,_Virtual_Wealth_and_Debt" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Wealth,_Virtual_Wealth_and_Deb...</a> and <i>The Role of Money</i> <a href="https:&#x2F;&#x2F;archive.org&#x2F;details&#x2F;roleofmoney032861mbp" rel="nofollow">https:&#x2F;&#x2F;archive.org&#x2F;details&#x2F;roleofmoney032861mbp</a><p>7. Daly has a number of less-technical essays included in <i>Ecological Economics:  Principles and Applications</i> (<a href="https:&#x2F;&#x2F;www.worldcat.org&#x2F;title&#x2F;ecological-economics-principles-and-applications&#x2F;oclc&#x2F;729975896" rel="nofollow">https:&#x2F;&#x2F;www.worldcat.org&#x2F;title&#x2F;ecological-economics-principl...</a>) and <i>Ecological Economics and Sustainable Development: 
 Selected Essays</i> (<a href="https:&#x2F;&#x2F;www.worldcat.org&#x2F;title&#x2F;ecological-economics-and-sustainable-development-selected-essays-of-herman-daly&#x2F;oclc&#x2F;195733505" rel="nofollow">https:&#x2F;&#x2F;www.worldcat.org&#x2F;title&#x2F;ecological-economics-and-sust...</a>).<p>8. R.U. Ayres has published multiple papers and books on this topic.  I&#x27;d recommend his bibliography generally:  <a href="https:&#x2F;&#x2F;www.worldcat.org&#x2F;search?q=au:ayres,+r.u.&amp;&amp;dblist=638&amp;fq=" rel="nofollow">https:&#x2F;&#x2F;www.worldcat.org&#x2F;search?q=au:ayres,+r.u.&amp;&amp;dblist...</a>   Keen has been working directly with Ayres in recent years.<p>9. See <i>Energy and the Wealth of Nations</i> <a href="https:&#x2F;&#x2F;www.worldcat.org&#x2F;title&#x2F;energy-and-the-wealth-of-nations-an-introduction-to-biophysical-economics&#x2F;oclc&#x2F;1088315973" rel="nofollow">https:&#x2F;&#x2F;www.worldcat.org&#x2F;title&#x2F;energy-and-the-wealth-of-nati...</a>.  Hall is also the origin of the concept of EROEI, energy returned on energy invested.<p>10. The Odum brothers, both ecologists, have written or co-written the leading textbook on ecology, <i>Fundamentals of Ecology</i>.  Howard came up with an &quot;energy circuit language&quot; that&#x27;s remarkably similar to a similar concept of Aldo Leopold&#x27;s (<i>Sand County Almanac</i>), though both Odum and Leopold sources claim no mutual awareness at the time.<p>11.  Smil&#x27;s books, <i>Energy and Civilization</i> (<a href="https:&#x2F;&#x2F;www.worldcat.org&#x2F;title&#x2F;energy-and-civilization-a-history&#x2F;oclc&#x2F;1029804020" rel="nofollow">https:&#x2F;&#x2F;www.worldcat.org&#x2F;title&#x2F;energy-and-civilization-a-his...</a>), an update to <i>Energy in World History</i> (<a href="https:&#x2F;&#x2F;www.worldcat.org&#x2F;title&#x2F;energy-in-world-history&#x2F;oclc&#x2F;4436805471" rel="nofollow">https:&#x2F;&#x2F;www.worldcat.org&#x2F;title&#x2F;energy-in-world-history&#x2F;oclc&#x2F;...</a>).  The recent book has been reviewed and recommended by Bill Gates: <a href="https:&#x2F;&#x2F;www.gatesnotes.com&#x2F;Books&#x2F;Energy-and-Civilization" rel="nofollow">https:&#x2F;&#x2F;www.gatesnotes.com&#x2F;Books&#x2F;Energy-and-Civilization</a><p>12. Weissenbacher:  <a href="https:&#x2F;&#x2F;www.worldcat.org&#x2F;title&#x2F;sources-of-power-how-energy-forges-human-history-volume-1-and-volume-2&#x2F;oclc&#x2F;712986243" rel="nofollow">https:&#x2F;&#x2F;www.worldcat.org&#x2F;title&#x2F;sources-of-power-how-energy-f...</a>  Somewhat unevenly written, but comprehensive.