Ebook: Energy and the Wealth of Nations: Understanding the Biophysical Economy

For the past 150 years, economics has been treated as a social science in which economies are modeled as a circular flow of income between producers and consumers. In this “perpetual motion” of interactions between firms that produce and households that consume, little or no accounting is given of the flow of energy and materials from the environment and back again. In the standard economic model, energy and matter are completely recycled in these transactions, and economic activity is seemingly exempt from the Second Law of Thermodynamics. As we enter the second half of the age of oil, and as energy supplies and the environmental impacts of energy production and consumption become major issues on the world stage, this exemption appears illusory at best.

In Energy and the Wealth of Nations, concepts such as energy return on investment (EROI) provide powerful insights into the real balance sheets that drive our “petroleum economy.” Hall and Klitgaard explore the relation between energy and the wealth explosion of the 20th century, the failure of markets to recognize or efficiently allocate diminishing resources, the economic consequences of peak oil, the EROI for finding and exploiting new oil fields, and whether alternative energy technologies such as wind and solar power meet the minimum EROI requirements needed to run our society as we know it. This book is an essential read for all scientists and economists who have recognized the urgent need for a more scientific, unified approach to economics in an energy-constrained world, and serves as an ideal teaching text for the growing number of courses, such as the authors’ own, on the role of energy in society.

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For the past 150 years, economics has been treated as a social science in which economies are modeled as a circular flow of income between producers and consumers. In this “perpetual motion” of interactions between firms that produce and households that consume, little or no accounting is given of the flow of energy and materials from the environment and back again. In the standard economic model, energy and matter are completely recycled in these transactions, and economic activity is seemingly exempt from the Second Law of Thermodynamics. As we enter the second half of the age of oil, and as energy supplies and the environmental impacts of energy production and consumption become major issues on the world stage, this exemption appears illusory at best.

In Energy and the Wealth of Nations, concepts such as energy return on investment (EROI) provide powerful insights into the real balance sheets that drive our “petroleum economy.” Hall and Klitgaard explore the relation between energy and the wealth explosion of the 20th century, the failure of markets to recognize or efficiently allocate diminishing resources, the economic consequences of peak oil, the EROI for finding and exploiting new oil fields, and whether alternative energy technologies such as wind and solar power meet the minimum EROI requirements needed to run our society as we know it. This book is an essential read for all scientists and economists who have recognized the urgent need for a more scientific, unified approach to economics in an energy-constrained world, and serves as an ideal teaching text for the growing number of courses, such as the authors’ own, on the role of energy in society.

• Integrates energy and economics
• Uses predictive tools and measures, such as EROI, to show how the economy is embedded in a biophysical world subject to scientific rules and constraints
• Provides a fresh approach to economics for those wondering “What’s next?“ after the Great Recession and the recent increases in oil prices
• Assesses energy sources from the perspective of peak oil, the role of alternatives, and potential impacts such as climate change

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For the past 150 years, economics has been treated as a social science in which economies are modeled as a circular flow of income between producers and consumers. In this “perpetual motion” of interactions between firms that produce and households that consume, little or no accounting is given of the flow of energy and materials from the environment and back again. In the standard economic model, energy and matter are completely recycled in these transactions, and economic activity is seemingly exempt from the Second Law of Thermodynamics. As we enter the second half of the age of oil, and as energy supplies and the environmental impacts of energy production and consumption become major issues on the world stage, this exemption appears illusory at best.

In Energy and the Wealth of Nations, concepts such as energy return on investment (EROI) provide powerful insights into the real balance sheets that drive our “petroleum economy.” Hall and Klitgaard explore the relation between energy and the wealth explosion of the 20th century, the failure of markets to recognize or efficiently allocate diminishing resources, the economic consequences of peak oil, the EROI for finding and exploiting new oil fields, and whether alternative energy technologies such as wind and solar power meet the minimum EROI requirements needed to run our society as we know it. This book is an essential read for all scientists and economists who have recognized the urgent need for a more scientific, unified approach to economics in an energy-constrained world, and serves as an ideal teaching text for the growing number of courses, such as the authors’ own, on the role of energy in society.

• Integrates energy and economics
• Uses predictive tools and measures, such as EROI, to show how the economy is embedded in a biophysical world subject to scientific rules and constraints
• Provides a fresh approach to economics for those wondering “What’s next?“ after the Great Recession and the recent increases in oil prices
• Assesses energy sources from the perspective of peak oil, the role of alternatives, and potential impacts such as climate change

Content:
Front Matter....Pages i-xiv
Front Matter....Pages 1-2
Poverty, Wealth, and Human Aspirations....Pages 3-39
Energy and Wealth Production: An Historical Perspective....Pages 41-69
The Petroleum Revolution....Pages 71-91
Front Matter....Pages 93-93
Explaining Economics from an Energy Perspective....Pages 95-130
The Limits of Conventional Economics....Pages 131-143
The Petroleum Revolution II: Concentrated Power and Concentrated Industries....Pages 145-160
The Postwar Economic Order, Growth, and the Hydrocarbon Economy....Pages 161-190
Globalization, Neoliberalism and Energy....Pages 191-206
Are There Limits to Growth? Examining the Evidence....Pages 207-220
Front Matter....Pages 221-221
What Is Energy and How Is It Related to Wealth Production?....Pages 223-249
The Basic Science Needed to Understand the Relation of Energy to Economics....Pages 251-283
The Required Quantitative Skills....Pages 285-300
Economics as Science: Physical or Biophysical?....Pages 301-306
Front Matter....Pages 307-307
Energy Return on Investment....Pages 309-320
Peak Oil, EROI, Investments, and Our Financial Future1 ....Pages 321-338
The Role of Models for Good and Evil....Pages 339-349
How to Do Biophysical Economics....Pages 351-365
Front Matter....Pages 367-367
Peak Oil, Market Crash, and the Quest for Sustainability: Economic Consequences of Declining EROI....Pages 369-384
Environmental Considerations....Pages 385-392
Living the Good Life in a Lower EROI Future....Pages 393-402
Back Matter....Pages 403-407

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For the past 150 years, economics has been treated as a social science in which economies are modeled as a circular flow of income between producers and consumers. In this “perpetual motion” of interactions between firms that produce and households that consume, little or no accounting is given of the flow of energy and materials from the environment and back again. In the standard economic model, energy and matter are completely recycled in these transactions, and economic activity is seemingly exempt from the Second Law of Thermodynamics. As we enter the second half of the age of oil, and as energy supplies and the environmental impacts of energy production and consumption become major issues on the world stage, this exemption appears illusory at best.

In Energy and the Wealth of Nations, concepts such as energy return on investment (EROI) provide powerful insights into the real balance sheets that drive our “petroleum economy.” Hall and Klitgaard explore the relation between energy and the wealth explosion of the 20th century, the failure of markets to recognize or efficiently allocate diminishing resources, the economic consequences of peak oil, the EROI for finding and exploiting new oil fields, and whether alternative energy technologies such as wind and solar power meet the minimum EROI requirements needed to run our society as we know it. This book is an essential read for all scientists and economists who have recognized the urgent need for a more scientific, unified approach to economics in an energy-constrained world, and serves as an ideal teaching text for the growing number of courses, such as the authors’ own, on the role of energy in society.

• Integrates energy and economics
• Uses predictive tools and measures, such as EROI, to show how the economy is embedded in a biophysical world subject to scientific rules and constraints
• Provides a fresh approach to economics for those wondering “What’s next?“ after the Great Recession and the recent increases in oil prices
• Assesses energy sources from the perspective of peak oil, the role of alternatives, and potential impacts such as climate change

Content:
Front Matter....Pages i-xiv
Front Matter....Pages 1-2
Poverty, Wealth, and Human Aspirations....Pages 3-39
Energy and Wealth Production: An Historical Perspective....Pages 41-69
The Petroleum Revolution....Pages 71-91
Front Matter....Pages 93-93
Explaining Economics from an Energy Perspective....Pages 95-130
The Limits of Conventional Economics....Pages 131-143
The Petroleum Revolution II: Concentrated Power and Concentrated Industries....Pages 145-160
The Postwar Economic Order, Growth, and the Hydrocarbon Economy....Pages 161-190
Globalization, Neoliberalism and Energy....Pages 191-206
Are There Limits to Growth? Examining the Evidence....Pages 207-220
Front Matter....Pages 221-221
What Is Energy and How Is It Related to Wealth Production?....Pages 223-249
The Basic Science Needed to Understand the Relation of Energy to Economics....Pages 251-283
The Required Quantitative Skills....Pages 285-300
Economics as Science: Physical or Biophysical?....Pages 301-306
Front Matter....Pages 307-307
Energy Return on Investment....Pages 309-320
Peak Oil, EROI, Investments, and Our Financial Future1 ....Pages 321-338
The Role of Models for Good and Evil....Pages 339-349
How to Do Biophysical Economics....Pages 351-365
Front Matter....Pages 367-367
Peak Oil, Market Crash, and the Quest for Sustainability: Economic Consequences of Declining EROI....Pages 369-384
Environmental Considerations....Pages 385-392
Living the Good Life in a Lower EROI Future....Pages 393-402
Back Matter....Pages 403-407
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