Why my interest in denial?

why1

I’ve been aware of our overshoot predicament for a decade and have moved on from studying specific aspects of human overshoot. 

What fascinates me now is our collective denial and inability to discuss or act on overshoot, despite some threats being imminent.

I used to believe denial was caused by a lack of awareness and understanding, but having made an effort to educate many people, and observing that they almost always aggressively choose not to understand, I began to look for a different explanation.

I concluded that denial must be an inherited behavior because every country, culture, political party, and religion is in denial. And denial must be central to who we are as a species because of its depth, breadth, and aggressiveness.

A few years ago I stumbled on Varki’s Mind Over Reality Transition (MORT) theory and a light went on. Varki’s theory provides the most simple, logical, plausible, and probable answer to the big questions that demand an answer:

  1. Why has no other species achieved our brain power despite common evolutionary forces and fitness advantages? Other advantageous inventions, like the eye, evolved several times, yet our brain, which is so advantageous it enabled us to take over the planet, has evolved only once.
  2. Why did the technology and culture of hominids stall for over a million years until something happened in one small tribe in Africa about 100,000 years ago?
  3. Why did all 7 billion of us emerge from one small tribe in Africa? And why did that tribe replace the many other similar hominid species?
  4. What genetic change occurred about 100,000 years ago that must be both modest in complexity and extreme in effect to explain the explosive emergence and dominance of behaviorally modern humans?
  5. Sapiens successfully bred with both Neanderthals and Denisovans at different times and locations. Sapiens retained a few of the other’s useful genes, mainly for disease immunity, but there is no evidence of full hybrids as you would expect. Why?
  6. Why do most people deny the many obvious dimensions of human overshoot like over-population, climate change, sea level rise, peak oil, resource depletion, soil loss, aquifer depletion, nitrogen imbalance, species extinction, fisheries collapse, and ocean acidification?
  7. Why do many people deny personal health realities like smoking, poor diet, lack of exercise, and obesity?
  8. Why do many people deny scientific realities like evolution, climate change, thermodynamics, vaccine utility, and the improbability of UFOs?
  9. Why do most people deny economic realities like the impossibility of infinite growth on a finite planet, unsustainable debt, and asset bubbles?
  10. Why do many people choose to believe fake news, like the Russians are to blame?
  11. Why do many people seek to avoid all forms of reality with mind altering drugs?
  12. Why do democratic elections never discuss, or debate, or even whisper about, the issues associated with overshoot? What could be more important to vote on?
  13. Why don’t environmental political parties, like the Green party, have overshoot policies in their platforms?
  14. Why do experts commonly and aggressively ignore or deny the most important (and unpleasant) facts associated with their domain? Economics, climate change, renewable energy, and nutrition being notorious examples.
  15. Why do people who understand climate change rarely modify their lifestyles to reduce CO2 emissions?
  16. Why are humans the only species with religions?
  17. Why did religions emerge simultaneous with the behaviorally modern human brain?
  18. Why has every human group everywhere through all history had some form of religion?
  19. Why does every one of the thousands of religions think it is the only (or most) true religion?
  20. Why does every religion, including new religions like Scientology, have a life after death story? Many aspects of religion can be easily explained by their positive effect on group survival, but it is not easy to explain why every religion denies death with a life after death story. A few random religions with life after death stories might be reasonable, but not every religion, unless the need for a life after death story has a genetic basis.
  21. Why do many atheists retain some form of spirituality which usually includes a belief in some form of life after death?

A good place to go next is On Burning Carbon

By Alice Friedemann: Big Fight: 21 top scientists show why Jacobson and Delucchi’s renewable scheme is a delusional fantasy

This summary by Alice Friedemann of a dispute in the scientific community over the viability of renewable energy is excellent and worth reading in its entirety.

What really stands out for me is that the 21 scientists that criticized the absurdly optimistic renewable energy plan of Jacobson and Delucchi completely missed the most important points that require criticism.

It is amazing that otherwise intelligent experts frequently ignore THE most important things they should understand.

Other examples include:

  • economists who ignore debt and the relationship between energy and wealth;
  • climate scientists who ignore the relationship between CO2 and wealth;
  • dietary health experts who ignore the link between sugar and obesity;
  • environmentalists who ignore over-population;
  • citizens who believe in life after death and deny other unpleasant facts.

This denial behavior is so common and so powerful that it requires an explanation like Varki’s Mind Over Reality theory.

http://energyskeptic.com/2017/big-fight-21-top-scientists-show-why-jacobson-and-delucchis-renewable-scheme-is-a-delusional-fantasy/

Many authors have been writing for years about why Jacobson and Delucchi’s (J & D) plans for a 100% low-cost renewable energy is a cloud cuckoo-land fantasy (references below).  But never so many, so loudly, and in such a prestigious journal (Clack 2017).

The 21 authors of the PNAS article felt compelled to write this because J & D’s irresponsible fairy tales are starting to influence actual policy and waste money.  If cities and states set renewable goals of 100% and try to achieve them with the J & D plan, their spending will be wasted because the J & D plan leaves out biofuels, grid-scale battery storage, nuclear, and coal energy with CCS.

The most important problems with achieving a 100% renewable system are not even mentioned (Friedemann 2015c).

Renewable contraptions cannot outlast finite fossil fuels, because they are utterly dependent on fossil fuels from birth to death to mine, crush, and smelt the ore, deliver the ore to a blast furnace, fabricate 8,000 wind turbine parts at hundreds of manufacturing plants all over the world, and deliver the parts to the assembly plant.  For each turbine, dozens of trucks are needed to prepare the wind turbine site so that dozens of cement trucks can pour tons of concrete and steel rebar for the platform, deliver pieces of the huge parts of the turbine, and diesel powered cranes to lift the parts hundreds of feet into the air.

In their 2011 paper, the J & D 100% renewable system would be accomplished with 3.8 million 5-MW wind turbines (50% of power), 49,000 solar thermal plants (20%), 40,000 solar PV plants (14%), 1.7 billion rooftop PV systems (6%), 5350 geothermal plants (4%), 900 hydroelectric power plants (4%), and marine hydrokinetic devices (2%).   Their 2015 paper has somewhat different but equally unrealistic numbers.

It is questionable whether there’s enough material on earth to build all these contraptions and continue to do so every 20 years (wind) to 30 years (solar).  Fossil fuels will grow more and more scarce, which means cement, steel, rare (earth) metals, and so on will decline as well.  Keep in mind that a 2 MW turbine uses 900 tons of material: 1300 tons concrete, 295 tons steel, 48 tons iron, 24 tons fiberglass, 4 tons copper, .4 tons neodymium, .065 tons dysprosium (Guezuraga, USGS).  The enormous demand for materials would likely drive prices up, and the use of recycled metals cannot be assumed, since downcycling degrades steel, perhaps to less strength than required.

The PNAS authors propose grid-scale batteries, but the only kind of battery for which there are enough materials on earth are Sodium-sulfur NaS batteries (Barnhart 2013).  To store just one day of U.S. electricity generation (and at least 6 to 8 weeks would be needed to cope with the seasonal nature of wind and solar), you would need a 923 square mile, 450 million ton, $40.77 trillion dollar NaS battery that needs replacement every 15 years (DOE/EPRI 2013).  Lead-acid: $8.3 trillion, 271.5 square miles, 15.8 million tons.  Li-ion $11.9 trillion, 345 square miles, 74 million tons.

There are dozens of reasons why wind power will not outlast fossil fuels (Friedemann 2015b), including the scale required, the need to increase installation rates 37-fold in 13 years (Radford 2016), population increasing faster than wind turbines to provide for their needs can be built, wind is seasonal – very little in the entire U.S. in the summer, no commercial wind year round in the South East, a national grid, no commercial energy storage at utility scale in sight, plus a financial crisis or war will likely break the supply chains as companies go out of business.

Okay, drum roll.  The biggest problem is that electricity does not matter. This is a liquid transportation fuels crisis. Trucks can’t run on electricity ( http://energyskeptic.com/category/fastcrash/electric-trucks-impossible/  ).

The Achilles heel of civilization is our dependency on trucks that run on diesel because it is so energy dense. This is why diesel engines are far more powerful than steam, gasoline, electric, battery-driven or any other motive power on earth (Smil 2010).  Billions of trucks and equipment worth trillions of dollars are required to keep the supply chains going over tens of millions of miles of roads, rail, and waterways that every person and business on earth depends on.  Equally if not more important are off-road mining, agriculture, construction, logging, and other trucks.  They not only need to travel on rough ground, but meanwhile push, lift, dig and perform other tasks far from the electric grid or non-oil distribution system.

Trucks must eventually be electrified, because biomass doesn’t scale up and has negative or break-even energy return, coal and natural gas are finite, and hydrogen /hydrogen fuel cells are dependent on a non-existent distribution system and far from commercial. In my book, I show why trucks can’t run on electricity, as well as why a 100% renewable grid is impossible. 

The authors briefly point out that one way to counter wind and solar intermittency is an energy source that can be dispatched when needed.  But they neglected to mention that natural gas plays most of this role now.  But natural gas is finite, and has equally important uses of making fertilizer, feedstock and energy source to make hundreds of millions of chemicals, heating homes and buildings, and so on.  All of these roles will have to be taken on by biomass after fossils are gone, yet another reason why biomass doesn’t scale up.

J & D propose a month of hydrogen storage to power transportation.  But hydrogen boils off within a week since it is the smallest element and can escape through atomic scale imperfections. It is not an energy source, it’s an energy sink from start to finish.  First it takes a tremendous amount of energy to split hydrogen from oxygen.  That’s why 96% of hydrogen comes from finite natural gas.  And a tremendous amount more energy to compress or liquefy it to -423 F and keep it chilled.  It is so destructive of metal that expensive alloys are needed for the steel pipelines and storage containers, making a distribution system too expensive.  A $1.3 million dollar hydrogen fuel cell truck would require a very heavy and inefficient fuel cell with an overall efficiency of just 24.7%: 84% NG upstream and liquefaction * 67% H2 on-board reforming * 54% fuel cell efficiency * 84% electric motor and drivetrain efficiency * 97% aero & rolling resistance efficiency, and even less than that without an expensive 25 kWh li-ion battery to capture regenerative braking (DOE 2011, Friedemann 2016). And far less than 24.7% efficient if the hydrogen were made from water with electrolysis.

J & D propose thermal energy storage in the ground.  The only renewable that has storage are concentrated solar plants, but CSP plants provide just 0.06% of U.S. energy because each plant costs about a billion dollars each, and scaled up, would need to use stone, which is much cheaper than molten salt. A 100 MW facility would need 5.1 million tons of rock taking up 2 million cubic meters (Welle 2010). Since stone is a poor heat conductor, the thick insulating walls required might make this unaffordable (IEA 2011b). J & D never mention insulating walls, let alone the energy and cost of building them.  The PNAS paper also says that phase-change material energy storage is far from commercial and still has serious problems to solve such as poor thermal conductivity, corrosion, material degradation, thermal stress durability, and cost-effective mass production methods.

The authors suggest bioenergy, but this is not feasible. Trucks can’t burn ethanol, diesohol, or even gasoline.  Biofuels (and industrial agriculture) destroy topsoil, which in the past was a major or main reason why all past civilizations failed.  It also depletes aquifers that won’t be recharged until after the next ice age.   And biomass simply doesn’t scale up.  Burning it is far more energy efficient than the dozens of steps needed to make biofuels, each step taking energy. Yet even if we burned every plant plus and their roots in America, the energy produced would be less than the fossil fuel energy consumed that year, and we’d all have to pretend we liked living on Mars for many years after our little experiment. Friedemann (2015a) has many other examples of the scaling up issues, ecological, energy, and other issues with biofuels.

Nuclear is not an option due to peak uranium, and the findings of the National Academy of Sciences about lessons learned from Fukushima. It’s also too expensive, with 37 plants likely to shut down (Cooper 2013).  And leaving thousands of sites with nuclear waste lasting hundreds of thousands of years for our descendants to deal with after fossil fuels are gone in an industrially poisoned world is simply the most evil of all the horrible things we’re doing to the planet (Alley 2013).

The book “Our renewable future” (Heinberg & Fridley 2016) was written to show those who believe in Jacobson and Delucchi’s fairy tales how difficult, if not impossible it would be to make this happen. Though I fear many of their major points were probably ignored or forgotten, with readers deciding that 100% renewables were possible, even if difficult, since the book was too gentle and abstract. For example, they mention that there are no ways to make cement and steel with electricity, because these industries depend on huge blast furnaces that run for 4 to 10 years non-stop because any interruption would cause the brick lining to cool down and damage it.  It is not likely a 100% wind and solar electricity system to be up 24 x 7 x 365.  That’s a real  showstopper.  But the average person believes in infinite human ingenuity that can overcome the laws of physics and doesn’t worry…

J & D include wave and tidal devices, but these are far from being commercial and unlikely to ever be due to salt corrosion, storm waves, and dozens of other problems (NRC 2013).

I’m not as concerned about the incorrect J & D calculations for GHG emissions, because we are at or near peak oil and coal, and natural gas.  Many scientists have published peer-reviewed papers that based on realistic reserves of fossil fuels, rather than the unlimited amounts of fossils the IPCC assumes, there is a consensus that the worst case scenario likely to be reached is RPC 4.5 (Brecha 2008, Capellan-Perez 2016, Chiari 2011, Dale 2012, Doose 2004, Hook 2010, Hook 2013, and 10+ more).  Also, coal is finite, and carbon capture and storage technology so far from being commercial, and uses up 30 to 40% of the energy contained in the coal, that it’s unlikely to be used when blackouts start to happen more and more often (http://energyskeptic.com/category/energy/coal/carbonstorage/).

We’re running out of time.  Conventional oil peaked in 2005. That’s where 90% of our oil comes from at a Niagra Falls rate.  Tar sands and other non-conventional oil simply can’t be produced at such a high rate.  So it doesn’t matter how much there is, Niagra Falls will slow to a trickle, far less than what we use today.  And since energy is the basis of growth, not money, it is questionable if our credit/debit system can survive, since once peak oil is acknowledged, creditors will know they can’t be repaid.

Also, oil is the master resource that makes all other resources available. We don’t have enough time to  replace billions of diesel engines with something else.  There is nothing else. And 12 years after peak the public is still buying gas guzzlers.

By Ajit Varki: Mind Over Reality Transition: The Evolution of Human Mortality Denial

Dr. Ajit Varki, one of the originators of the most important idea since Darwin, gave this talk on March 3, 2017 in which he explains the Mind Over Reality Transition (MORT) theory that he and Danny Brower developed and discussed in their book and which underpins this blog.

Dr. Varki, being a humble and cautious scientist, does not amplify the implications of his theory so I will do it for him here.

The Mind Over Reality theory explains the:

After reflecting on this list, and assuming that in time Varki’s theory is proven to be correct, you may begin to appreciate why I think Varki’s MORT theory is THE most important idea for understanding our origin, our special place in the universe, and our destructive behaviors that threaten our existence. 

A pleasant fact I learned from the talk is that despite having a solemn demeanor Dr. Varki has a killer sense of humor.

Here is the abstract for the talk:

Some aspects of human cognition and behavior appear unusual or exaggerated relative to those of other intelligent, warm-blooded, long-lived social species––including certain mammals (cetaceans, elephants and great apes) and birds (corvids and passerines). One such collection of related features is our facile ability for reality denial in the face of clear facts, a high capacity for self-deception and false beliefs, overarching optimism bias and irrational risk-taking behavior––traits that should be maladaptive when they first appear as hard-wired features in individuals of any species. Meanwhile, available data suggest that self-awareness (knowledge of one’s own personhood) and basic theory of mind (ToM, also termed mind-reading, intentionality etc.) have independently emerged several times, particularly in the same kinds of species mentioned above.  Despite a long-standing opportunity spanning tens of millions of years, only humans appear to have then evolved an extended ToM (multilevel intentionality), a trait required for optimal expression of many other unusual cognitive attributes of our species, such as advanced linguistic communication and cumulative cooperative culture. The conventional view is that extended ToM emerged gradually in human ancestors, via stepwise positive selection of multiple traits that were each beneficial. A counterintuitive alternate possibility is that establishment of extended ToM has been repeatedly obstructed in all other species with the potential to achieve it, due to a “psychological evolutionary barrier“.  This barrier is claimed to arise in isolated individuals of a given species that develop the genetic ability for extended ToM.  Such individuals would then observe deaths of others whose minds they fully understood, become aware of mortality, and translate that knowledge into an understanding of personal mortality.  The conscious realization and exaggeration of an already existing intrinsic fear of death risk would have then reduced the reproductive fitness of such isolated individuals (by favoring personal survival over reproduction).  The barrier would have persisted until hominin ancestors broke through via a rare and unlikely combination of cognitive changes, in which two intrinsically maladaptive traits (Reality Denial and Extended ToM) combined in the same individuals, to allow a “Mind over Reality Transition”. Once the barrier was broken, conventional natural selection could take over, with further evolution of beneficial aspects of the initial changes. This theory also provides a unifying evolutionary explanation for other unusual features of humans, including recent emergence as the dominant species on the planet, and replacement of all other closely related evolutionary cousins, with limited interbreeding and no hybrids. While not directly falsifiable by experiment, the theory fits with numerous facts about humans and human origins, and no known fact appears to strongly militate against it. It is also consistent with most other currently viable theories on the subject including Terror Management Theory.  Importantly, it has major implications for the human condition, as well as for many serious issues, ranging all the way from personal health responsibility to global climate change.

Varki, A. Human uniqueness and the denial of death. Nature. 460:684. 2009.

Varki, A., and Brower, D. Denial: Self-Deception, False Beliefs, and the Origins of the Human Mind. Twelve Books, New York. 2013.

Varki, A.: Thought Experiment: Dating the Origin of Us. The Scientist 27:28-29, 2013.

Varki, A.: Why are there no persisting hybrids of humans with Denisovans, Neanderthals, or anyone else? Proc Natl Acad Sci U.S.A. 113: E2354, 2016.

Gigadenial

It takes gigadenial to believe gigafactories will save us.

Isn’t it interesting that the only scenario that might keep us below an extinction threatening 4-6 degrees C, and the only scenario that is probable, namely economic collapse, is the only scenario that climate scientists have not studied?

Economic collapse is an important scenario to study because most people in the developed world consume far more of everything than is required to subsist and therefore could survive some level of economic collapse.

On the other hand, most people will not survive if economic growth continues as desired (or even if growth slows) because the size of our economy is creating a climate incompatible with civilization.

Economic collapse will cut CO2 emissions (good) but also sun blocking pollution (bad). It’s not clear which force is the most powerful. This means economic collapse could save us, or it could make things worse.

It would be useful to know if economic collapse is on balance good or bad when we are asked to vote for candidates that promise to continue to print money to avoid collapse.

In case you are not aware, the amount of money printed by central banks to prop up assets recently increased to about $300,000,000,000 per month worldwide. That’s about $1.50 per day for every person on the planet conjured out of thin air, and is the only reason things seem to be sort of ok, and why real estate and stocks continue to rise despite poor fundamentals.

Unfortunately the printed money is not increasing the incomes of the poor and middle class because we’ve used up the inexpensive fossil energy needed to increase productivity.

Rising asset prices and stagnant incomes means the wealth gap between the rich and poor is widening which is causing social unrest to build as demonstrated by recent unexpected election and referendum outcomes around the world.

It’s an open question rooted in emotions and herd behavior as to how much longer money printing will stave off economic collapse.

By Erik Lindberg: Economic Growth – A Primer

growth6

Erik Lindberg thinks and writes about many of the issues I think and write about. Two differences between us are that Erik is more intelligent and is a much better writer.

Here is the impressive catalog of Lindberg’s work.

His most recent essay is a primer on economic growth and discusses:

  • relationships between the economy, energy, and environment
  • why we like and want economic growth
  • why economic growth is the greatest threat to humanity
  • the magnitude of human overshoot
  • why improvements in efficiency won’t help
  • how and why money is created
  • why the design of our system is brilliant (on an infinite planet)
  • why the design of our system requires economic growth
  • why economic growth must end
  • why the end of economic growth will be very painful
  • why the next economic depression will be different
  • why it is difficult to switch to a new economic system
  • why no one is to blame

I wrote a similar essay here, but I think Erik’s essay is the most accurate, complete, concise, unbiased, and well written treatment of the topic I’ve seen.

For anyone seeking to understand the most important issue we face, this is one of the best places to start:

http://www.resilience.org/stories/2017-02-22/economic-growth-a-primer/

The only topic that Lindberg does not discuss to my satisfaction is why, despite overwhelming evidence, do we not acknowledge or discuss, let alone attempt to act on, our predicament?

Lindberg acknowledges that denial is the reason we ignore facts, but does not explain the ubiquity and strength of denial in an otherwise intelligent species.

I remain the only person I know of that thinks Varki provides the best explanation for our collective denial of reality.

By Art Berman: Oil Prices Lower Forever? Hard Times In a Failing Global Economy

Art Berman is an oil industry expert worth listening to. I missed this Forbes article he published in July 2016. Thanks to Alice Friedemann for reviving it.

This is one of the better summaries I’ve read on the history of, and relationship between, energy and the economy.

Economic growth, without unsustainable and dangerous debt, is no longer possible. I explored the implications of no growth in this essay.

Berman wisely concludes by saying our best course of action is to face the beast.

Facing the beast would require us to break through our inherited denial of reality.

I wish but I do not expect.

http://energyskeptic.com/2017/art-berman-oil-prices-lower-forever-hard-times-in-a-failing-global-economy/

oil-prices-in-2016-dollars-1950-2016-1024x694

Energy is the economy. Energy resources are the reserve account behind currency. The economy can grow as long as there is surplus affordable energy in that account. The economy stops growing when the cost of energy production becomes unaffordable. It is irrelevant that oil companies can make a profit at unaffordable prices.

Energy underlies and connects everything. We need energy to make things, transport and sell things and to transport ourselves so that we can work and spend. We need it to run our computers, our homes and our businesses. It takes energy to heat, cool, cook and communicate. In fact, it is impossible to think of anything in our lives that does not rely on energy.

When energy costs are low, the costs of doing business are correspondingly low. When energy prices are high, it is difficult to make a profit because the underlying costs of manufacture and distribution are high. This is particularly true in a global economy that requires substantial transport of raw materials, goods and services.

And this is precisely the problem with the almost universally held belief that technology will make all things possible, including making a finite resource like oil infinite. Technology has a cost that its evangelists forget to mention.

The reality is that technology allows us to extract tight oil from non-reservoir rock at almost 3 times the cost of high-quality reservoirs in the past. The truth is that we have no high-quality reservoirs left with sufficient reserves to move the needle on the high global appetite for oil. The consequence is that to keep consuming and producing as we always have will inevitably cost a lot more money. This is basic thermodynamics and not a pessimistic opinion about technology.

Renewable energy will be increasingly part of the landscape but its enthusiasts are also magical thinkers.

In 2015, renewables accounted for only 3% of U.S. primary energy consumption. No matter the costs nor determination to convert from fossil to renewable energy, a transition of this magnitude is unlikely in less than decades.

Solar PV and wind provide much lower net energy than fossil fuels and have limited application for transport–the primary use of energy– without lengthy and costly equipment replacement. The daunting investment cost becomes critically problematic in a deteriorating economy.  Although proponents of renewable energy point to falling costs, more than half of all solar panels used in the U.S. are from China where cheap manufacturing is financed by unsustainable debt.

The future for oil prices and the global economy is frightening. I don’t know what beast slouches toward Bethlehem but I am willing to bet that it does not include growth.The best path forward is to face the beast. Acknowledge the problem, stop looking for improbable solutions that allow us live like energy is still cheap, and find ways to live better with less.

By Gail Tverberg: Why Energy-Economy Models Produce Overly Optimistic Indications

Gail Tverberg’s essay today provides an excellent summary of why collapse of civilization is inevitable and not too far in the future.

I remain fascinated by how almost all experts, leaders, and citizens deny what is going on.

https://ourfiniteworld.com/2017/03/29/why-energy-economy-models-produce-overly-optimistic-indications

Here are a few key ideas from the essay:

Producers and consumers of energy products are both important

  • Energy prices can be too high for consumers
  • Energy prices can be too low for producers

Both problems are equally important

  • World economy cannot operate without both being satisfied
  • Either a too low or a too high price is a problem

4-price-problem-only-appears-near-limit

We often hear about “Supply and Demand.” A better name for “demand” might be “amount affordable.”

The situation we have now is very much like a Ponzi Scheme. We need to keep adding more debt to keep wages and commodity prices high enough. At the same time, interest rates need to stay very low, to keep payments manageable, and keep the whole system from collapsing.

The balance sheets of insurance companies, banks, and pension plans include much debt. If these institutions are to make good on their promises to those with bank accounts, insurance policies, and pension plans, it is necessary for this debt to be repaid with interest. Back many years ago, debt jubilees were often given to selected debtors. These are out of the question now, because banks, insurance companies, and pension plans depend upon the future payments that this debt represents.

Growing debt is one of the waste outputs. Since we voluntarily seek out debt, we think of debt as an input. But if we think about the situation, debt is really is an adverse output. Required interest payments tend to pull funds out of the system that could otherwise be used to pay workers. Also, the rising use of debt tends to concentrate the ownership of “tools” among the already wealthy. Debt can grow for a while, but it has limits, because of the adverse impacts it creates for the economy.

Growing wage disparity occurs because of the increased specialization required by ever-rising use of tools and technology. Some people receive the benefit of advanced education and learning to use tools such as computers; others receive much less benefit. As a result, their wages lag behind. Wage disparity is another limit of the system. If a large share of the workers cannot afford to buy the output of the economy, “demand” falls too low, and commodity prices tend to fall.

Trying to run the economy on solar electricity alone (or solar plus wind plus water) is a futile exercise. One reason is that it would require massive changes to allow long-haul trucks and airplanes to operate on electricity.

Also, electricity is a high-cost energy product. Today, our economy operates on a mix of high and low cost energy products, with low cost energy products keeping the average cost down. Trying to run the economy on electricity alone is a bit like trying to run the economy using only PhDs. In theory it could be done, but it would be expensive to have PhDs waiting on tables in restaurants and delivering mail.

There is a different kind of EROEI that seems to me to be at least as likely, or more likely, to be the first limit that we will reach. That is the return that workers who are selling their labor simply as labor (without advanced education or supervisory responsibility) obtain. If these workers find that their wages drop too low, this will be a limit on the operation of the economy. Low wages will prevent these workers from buying houses and cars. If the wages of the large number of non-elite workers fall too low, commodity prices will tend to fall, and the system will tend to collapse because producers cannot make a profit at such a low price.

Biologists have been studying the return on the labor of animals for many years, because their populations tend to collapse, when animals are forced to expend too much labor in finding food. EROEI based on wages of non-elite workers would seem to be a closer parallel to the animal return on labor than fossil fuel EROEI.

We have multiple problems:

Problem 1. No dissipative structure can last forever.

Problem 2. As a dissipative structure, our economy seems to be reaching its end.

  • Partly because of slowing growth in energy consumption
  • Partly because of growing wage disparity.

Problem 3. We have ramped up recycling of debt as assets to an amazing level.

  • This debt recycling prevents debt jubilees
  • Leads to the likelihood that insurance companies, banks, and pension plans will fail, if the economy fails

Problems appear to be not far in the future:

Financial system is likely to be center of the storm

  • Most EROEI analysts miss this point

Economy cannot shrink without debt defaults

Economy doesn’t have the ability to go backward

  • Transition to using horses for transportation would be difficult

Theory says that new somewhat similar dissipative structures are likely to eventually form

  • Depends on how many can survive the coming contraction
  • Also, how depleted resources are
  • If contraction too severe, no new economy may be possible

On the Tragedy of Trends

Tim Garrett, the world’s most under appreciated scientist, makes a persuasive case that wealth is proportional to energy consumption. More specifically, US$1 (1990) = 10 mW. This makes intuitive sense because energy is required to make and/or maintain everything that we assign a monetary value to.

Yesterday the Visual Capitalist published some charts showing energy consumption trends for the US.

http://www.visualcapitalist.com/visualizing-americas-changing-energy-mix-1970-2030/

chart-energy-mix-usa-2030

In the following discussion I deliberately ignore the chart’s forecast for the future because it comes from the deeply in denial Energy Information Administration (EIA), which bases its forecasts on expected demand rather than geologic and thermodynamic reality. In other words, the EIA makes forecasts based on what we will likely desire, rather than what is likely to be available, or what we will likely be able to afford.

I also ignore changes in energy efficiency because I think we have already harvested all of the low hanging fruit and recent efficiency gains are in the noise.

By applying Garrett’s theory we can draw some illuminating conclusions:

  1. The total wealth of the US peaked around 2000 and has been in slow decline since.
  2. The wealth of individuals peaked around 2000 after 3 decades of little growth, has been in steep decline since, and today is about 15% lower on average than 1970.
  3. The contribution of renewable energy to our wealth has been and remains insignificant. Doubly so if you consider the fossil energy required to manufacture, install, and maintain renewable energy equipment.

The actual decline in wealth for the majority of citizens will be larger than these charts suggest because of the widening wealth gap, which has resulted from the low interest rates employed to offset declining net energy. Low interest rates increase the opportunity for the rich to profit from the bubbles created by low interest rates.

I expect trends in other industrialized countries will mirror those of the US, and in many cases will be worse because the US is so well-endowed with natural resources and its reserve currency.

It is clear why social unrest is increasing in most countries.

No one is to blame for these trends. They are simply a consequence of the scientific laws of geology and thermodynamics. It is true however that low and middle income citizens are carrying a disproportionate share of the impact because governments did not implement tax policies to prevent a predictable wealth gap increase caused by low interest rates.

Our inherited denial of reality prevents most people from understanding what is going on, and thus most people seek someone to blame.

Awareness and understanding could lead to cooperation and voluntary lifestyle changes.

Denial and blame will likely lead to tragedy.

By Tim Morgan: A World Economy Snapshot

Another brilliant must read essay by Tim Morgan. There is not one economist in a thousand that understands the relationship between energy and wealth, and yet it’s the most important thing required to understand our economy today.

Think about it. How can it be that well-educated intelligent experts understand everything except obvious facts that imply bad news?  Nothing other than inherited denial can explain this powerful and destructive human behavior.

https://surplusenergyeconomics.wordpress.com/2017/02/16/87-a-world-economy-snapshot/

World trend ECoE is estimated at 7.8% in 2015 – up from 6.4% in 2010 – and is projected to rise to 10.0% by 2021. The latter corresponds to an EROEI of just 9:1 which, if you understand EROEI, spells very big trouble. ECoEs are already high enough to help explain why the world economy is now stuck in “secular stagnation”.

ECoE is best understood as an economic rent. It is a “cost”, but not in the conventional sense of that word because, of course, no money actually leaves the system. Rather, a rising ECoE compels us to spend more on energy and, therefore, less on everything else.

This shows up most obviously in household budgets as a rise in the cost of essentials, which leaves the individual or household less to spend on everything else. Again taking Britain as an example, the cost of household essentials rose by 48% between 2006 and 2016, far outstripping much smaller increases in wages (+21%) and general CPI inflation (+25%). At the level of national economies, much the same occurs, with the cost of essentials outpacing both income and broad inflation as ECoE increases.

This is one reason why seemingly-positive data on the economy as a whole increasingly clashes with individual experience – the data says the economy is growing, but the individual feels poorer, not wealthier. An increasing ECoE – and its transmission through the cost of essentials – helps explain this apparent contradiction. As neither conventional economics nor governments understand this mechanism, policymakers find themselves baffled by trends which do not seem to accord with the data available to them.

So global GDP increased by an aggregate of $20.1tn in the ten years culminating in 2015. But, as you will also see, world debt increased by far more – $76.5tn – over the same period. This means that, aggregated over a trailing ten-year (T10Y) period, $3.81 was borrowed for each $1 of reported growth in GDP.

Obviously, this trajectory is not sustainable – over ten years, economic growth of 22% was far exceeded by an increase of 45% in debt. If the projected increase of $23tn in GDP between 2015 and 2021 happens, and is accompanied by borrowing at the same ratio as the T10Y number (of $3.81 per growth dollar), debt would increase by $87tn, or 36%, over that period.

Ominously, the T10Y measure has been rising steadily – back in 2010, the T10Y ratio was only $2.84 of borrowing for each growth dollar. Even at the $3.81 multiple, however, the ratio of world debt-to-GDP would rise from 216% to 244% – and even this number requires acceptance that reported GDP numbers are an accurate reflection of underlying output.

It seems pretty clear that the enormous rate of borrowing in recent years has flattered GDP by creating “growth” that is really no more than the spending of borrowed money. This, of course, brings forward consumption at the cost of increased liabilities in the future.

On this basis, underlying world GDP in 2015 was $95tn, 17% below the reported $114tn. Just as important, trend growth is far lower when measured on an underlying basis, where world economic output is growing at about 1.2% annually.

This figure is nowhere near a consensus in the range 3-4%. That consensus rate of growth may be deliverable – but only if we carry on spending borrowed money.

A world in denial

Logically, the practice of inflating GDP by spending borrowed money cannot continue indefinitely. This is not a “new normal”, but a “new abnormal”. Most obviously, the aggregate amount of debt is rising much more rapidly than economic output, making the debt burden ever harder to support. Since the global financial crisis (GFC) of 2008, the economy has only managed to co-exist with this debt mountain at all thanks to the slashing of interest rates to near-zero levels.

ZIRP (meaning “zero interest rate policy”) has its own costs, some of which are only now gaining recognition. Savers have suffered very seriously from monetary policies designed to keep borrowers afloat, which, perhaps, is why the concept of “moral hazard” seems to have fallen out of the vocabulary. Last summer, after the most recent cut in interest rates, the deficit in British pension funds rose to £945bn, more than 50% of GDP, and evidence of pension value destruction has emerged on a worldwide basis. Ultra-cheap money keeps afloat businesses which in normal times would have gone under, creating space for new, vibrant enterprises – so the necessary process of “creative destruction” has been stymied by monetary manipulation.

In short, we are living in an unsustainable “never-never-land”, in which cheap debt both misrepresents and undermines real economic performance.