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June 30, 2010 6:33 AM   Subscribe

Approximately how much of the productivity gains of the past 125 years has been a result of using fossil fuels?

Sorry, this is going to be a messy question, but it's something that I've been wondering for a while. I hope I can articulate it well enough. Please be patient and critical.

My background in economics is limited, but I perceive wealth as being excess human production through use of material, labor (energy), and innovation. In this context, the 'value' of a thing would be the cost of replacing it, and wealth would be what's left over after use. Therefore, the 'value' of a good or service would be different than its 'utility' or 'price'. Utility and price would be the psychological or social representations of the good or service. For example, I could go outside and gather some rocks and build a rock pile. The value of the pile would be the cost of the rocks (material), the labor used in gathering and building (energy), and the time it took to think of how to gather and build it (innovation). The value of the rock pile would be the cost to recreate it. However, its utility and price would probably be close to zero, obviously. Furthermore, as long as the pile remains (opposed to entropy) it would add to wealth.

OK! - first of all, I'm obviously redefining some economic terms here. But, economics to me is very abstract, and I'm trying to grapple it in an understandable way. So, first, is my model even a good way of thinking about it?

So, assuming my premise even makes sense, I look out upon the cosmopolitan western world around me, and I see lots of wealth in terms of goods and services. But, almost everything that I see is directly a result or has been augmented by fossil fuel use: transportation, food, clothing, housing, heating, entertainment, health, technology, etc.. It seems that most everything (to my possibly biased perception) is largely a result of fossil fuel (energy and material).

So, I wonder to myself: if we could rewind 125 years, how much of the immense wealth that exists today could have been produced without the use of fossil fuels? (How would someone even go about quantifying this?) And, my following question then becomes: when the fossil fuel is gone (the battery of wealth runs out), what kind progress (or collapse) would be expected?
posted by TheOtherSide to Grab Bag (11 answers total) 4 users marked this as a favorite
I think that trying to understand economics by "redefining some economic terms" is kind of a nonstarter. If you want to understand economics, you have to understand economists' writings, and therefore their language, so you shouldn't go making up your own definitions of value, utility, and price.

To answer your question about what kind of growth would have been possible without any fossil fuels: very, very little.

This question reminds me a little of this awesome projects thread.
posted by Aizkolari at 7:23 AM on June 30, 2010 [1 favorite]

Yeah, the assumptions underlying your question (that you can define economic terms to mean what you want them to mean) make it pretty much impossible to answer.

I'd recommend reading an introductory Macroeconomics textbook, frankly. The one written by N Gregory Mankiw seems to be the standard these days.
posted by dfriedman at 7:29 AM on June 30, 2010

But if you're going to read Mankiw, you should definitely watch "Mankiw's Ten Principles of Economics, Translated" by Yoram Bauman (the stand-up economist).
posted by clerestory at 7:36 AM on June 30, 2010

Response by poster: I'm not trying to be controversial in redefining terms, just trying to build an argument from the ground up, rather than on a potentially fragile existing structure. And, to be more clear, I've read Mankiw, and I think I understand classical macroeconomics, well enough. I obviously don't presume to know better than Mankiw, or others. However, I think classical economics merges concepts that make my thought experiment muddy; particularly it doesn't separate out behavioral economics, well. So, again, please don't just say, 'read macroeconomics'. Or, at least, point to some particular part of macroeconomics that is relevant.
posted by TheOtherSide at 7:42 AM on June 30, 2010

It's something I've been wondering about too. Not to get all peak oil or collapsionist, it's kind of obvious that our wealth or standard of living (in developed countries) runs parallel with the ever faster and more efficient plundering of natural resources, roughly from beginning nineteenth century onwards.

Transportation & population growth seem to be the key to our continuing ability to divide labor (philosopher & scientist > scientist > physicist > nuclear physicist > ... ).

I guess one aspect of the question the OP wants to ask is:

"Is (long term!) growth in our standard of living possible if we change from a plunder economy to a sustainable one"?

Long term because obviously short term you can get competitive advantages from being more efficient.
posted by NekulturnY at 8:21 AM on June 30, 2010

I'll let others get into the economic discussions. And Aizkolari is right - without fossil fuels, we'd be at a standstill technologically. Keep in mind, humans have been mining & using coal for thousands of years.

But if you want to get a sense of just how much fossil fuels (specifically, oil) have played a role in the last 150 years, you should read The Prize: The Epic Quest for Oil, Money & Power by Daniel Yergin. It touches on the macro at a high level, but is really much more about power & geopolitics. It'll give you a new appreciation for just how massive the dynamics at play really are.

Yes, it's a massive book, but if you really want to understand what's at play here, read it. It won the Pulitzer for a reason.
posted by swngnmonk at 8:47 AM on June 30, 2010 [1 favorite]

I'm more inclined to approach this from a science-fiction point of view. Mostly because MacroEcon was never my thing. :) For the sake of simplicity, let's just assume that coal and oil worked up until your special point and then either stopped working or just ran out.

Roughly 125 years ago, you had James Clerk Maxwell working on electromagnetic theory. For the most part, his work did not depend on the existence of fossil fuels. And to the extent that it did, it probably could have been accomplished with wood. I'm going to grossly oversimplify, but you can draw a line from Maxwell through Einstein and Fermi to nuclear energy. Drop-in nuke power as a replacement for fossil fuels. Either many, many large-scale nuke plants providing cheap, plentiful electricity, or smaller nuke plants (maybe as the engine of your car?) doing the same sort of thing.

(This puts aside a _lot_ of history. And ignores the fact that without fossil fuels, most countries would have interacted with each other in a vastly different manner.)

The upshot is that, sooner or later, you get back to the idea of the need for cheap, plentiful energy. In our time, it's fossil fuels. In another time, it's nuclear energy. Yet another? Solar, wind, thermodynamic, geothermic, etc. etc. Because the demand is so great, humanity will bend its will towards getting needed energy sources.

Where would we be? Hard to say. Nuclear energy was pushed along by two world wars. It might not have shown up as quickly. But it would have been pushed by a need to get more energy to do more things. So it might have shown up earlier. Then you have to ask if widespread nuclear energy means a greater or lesser likelihood of nuclear accidents/war/terrorism.

TL;DR Version: Humanity figures out other energy sources. Most likely nuclear on a wide scale with better development of other, non-fossil-fuel forms as well (though on a smaller scale). At least a 50% shot that humanity is where it is today.
posted by aureliobuendia at 9:03 AM on June 30, 2010

aureliobuendia, that point about nuclear energy is interesting, but you still have to think about what a total lack of fossil fuels would mean. I'm no blacksmith, but I'm pretty sure that you can't get large-scale industrial steel without coal. Without that, how are you going to mine the materials needed for atomic energy?
posted by Aizkolari at 9:39 AM on June 30, 2010 [1 favorite]

First, I second the recommendation for reading The Prize. To get a real idea of how fossil fuels have affected just about everything, read that book: Countries built, fortunes made, wars fought, industries changed, tremendous progress made. The book is big, but it is well-written and very engaging.

But that leads me to this:

when the fossil fuel is gone (the battery of wealth runs out), what kind progress (or collapse) would be expected?

I think it will be exactly the same, but just a shade better. There is just so much money and industry and way-of-life tied into fossil fuels that nobody is going to let that just go away. We won't pump out the last drop of oil. Instead what will happen is the price of fossil fuels will continue to rise. This will force people to adopt alternative energy sources. As more people move to alternative sources, the price for it will go down and the quality will go up.

It will be a gradual shift. Already, we are trying to rebuild our grids. We are working out methods similar to what we have in place now for trading and transportation of energy. People with wells on their property are now also placing wind mills next to them. Heck, even WalMart opened a few stores that run completely on solar panels. Heck, even BP (pdf, page 4) built their newest building in Houston -- the one in which energy traders work -- to LEED certification. You're living in the transition time, right now, and nothing's fallen apart and only a marginal number of people are hording bullets and seeds for an impending End-Time.
posted by Houstonian at 4:59 PM on June 30, 2010

I'm not actually competent to discuss this myself, except to say that I think the productivity line went up like the slope of the Matterhorn with the use of oil power. I believe your question is discussed in pretty good detail in the movie A Crude Awakening.
posted by toodleydoodley at 5:54 PM on June 30, 2010

Years ago I remember reading a book on ancient (mostly Roman) engineering and all of the things they did to make the most of the very limited sources of energy they had available to them - basically: human, animal, water and wind. It was reading that book that really woke me up to the problems we'll face as fossil fuels run out (or move asymptotically towards an infinite price, or whatever).

I think the most striking thing about the book was the number of farmers they needed to support each person living in a city. I can't remember how many, but it was a lot. And the agricultural surplus of a civilisation was often the single most important factor in its success or failure. Nowadays the agricultural surplus is great enough to allow, in industrialised nations, a small rural population to support a large urban population.

This surplus is possible only because of: oil used to run farming machines, oil used to transport food, natural gas used in the production of fertiliser, other fossil fuels used in the synthesis of chemicals, and other things like phosphorus mined on a vast scale.

As all of these things run out, the agricultural surplus will drop very, very quickly. It might disappear altogether (meaning starvation). This means that huge numbers of people will need to go back to agricultural work - if there's enough productive land for them to work on.

Anyway, my point is that the increased productivity from using fossil fuels has not just been a matter of people being able to do more work with less effort. It's also been about really basic changes in our society that will start to unravel once the wells run dry.
posted by A Thousand Baited Hooks at 3:32 AM on July 1, 2010

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