Download The Macro-Macro View – Fundamental Principles

The Macro-Macro View – Fundamental
Principles
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Energy flow in systems
Work and products
Energy laws and consequences
The economy as a systemlow potential sink
boundary and geometry
raw energy
raw material
high potential/concentration
source(s)
system
work
waste heat
product (low
entropy material)
waste material
diffuse/degraded
A More Refined View
• The Economy: Energy, work, and
goods/services
raw energy
waste heat
physical
assets
energy capture &
conversion
usable
energy
work
processes
services
tools
equipment,
maintenance, &
improvements
raw material
users
entropic decay
consumption
stocks
value added
A Biological Analog
• Cell metabolism and structural component
synthesis
heat losses
food
enzymes
metabolites
digestion
oxidation
ribosome –
protein
synthesis
all other
synthesis
investment!
mitochondria
ATP
replacement of above structures
from stocks of complex structures
not shown
raw components
complex
organelles,
membranes, etc.
Information Flows
material sources
energy source
waste heat
message
Proc. A
Exchange
Proc. B
message
waste material sinks
Information is transmitted between ‘entities’ to coordinate flows of matter and energy
Information is encoded in ‘messages’ using very little energy and matter
Processes contain mechanisms, ‘receivers’ that can amplify the information into work
responses
Agriculture as an Economic System
An agricultural society
solar energy
waste heat
discretionary goods
labor
food plants
food
Human
population
Labor
physical
assets
services
labor
tools
farming
equipment,
maintenance, &
improvements
raw material
hand tools,
houses, etc.
waste matter
Principles of Agriculture
• Clear land area for single crop (monoculture)
– maximize the area of sunlight capture
– plant crops close together, leave room to work
(cultivation)
– when necessary, bring water to the field
• Choose plants that grow best in given climate
• Choose seeds from best yielding plants
(horticulture)
• Focus on grains and legumes for long-term
storage
Types of Agricultural Practices
• Haphazard – throw the seed out there and
hope
• Slash & burn – move on
• Cultivate and renew soils – a systems approach
– crop rotation with legumes to renew nitrogen
– tilling residues back into the soils after harvest
– adding manures to revitalize organic content
• Permaculture (new) – whole systems/intensive
cultivation
Solar Input to Agriculture
Average insolation ~ 250
W/m2 in sunny locations
Photosynthesis efficiency ~ 0.5 - 3%
Roughly requires about 0.75 – 1
hectare per person (vegetarian)
Trophic Levels
Humans
Warming
Domestic
Animals
Photosynthesis
Plant Life –
Primary Producers
Warming
& some PS
nutrient release
Microbial life
Our Energy Cocoon
Sun
fossil fuels
infrastructure
agriculture
person
Petroleum
• Whale oil for lighting to kerosene (Gesner,
1853) a distillate of oil
• Drake, 1859, went looking for and found oil
• Otto, 1876, first four-stroke internal
combustion engine
• Diesel engines, turbines – burn fuels in the
cylinder for maximum power transfer
• The prime movers using oil and natural gas
Transportation
• Liquid fuels (stable and themselves
transportable) served best
• Kerosene, gasoline (petrol), and even diesel
fuels are relatively light (compared with water)
• Modes of use of ICEs
– Land: automobiles, trucks, and buses (trains
remained coal-fired until the early 20th century)
– Water: large ships of all kinds
– Air: airplanes of all kinds
Petroleum Composition
• Oil types
– Kerogen (shale oil) to bitumen (oil sands)
– Extra heavy (sour)
– Heavy
– Light, sweet or regular
• Components
– Long chain molecules – oils
– Medium chains – lighter liquid fuels
– Short chains – gasses such from methane to
butane
Electricity
• Electro-magnetic force
– Dynamos – producing electricity
– Lighting and heating – using electricity
– Motors – using electricity
• Conduction of current over long distances
• Flexibility
• Production from
– Heat engines (coal-fired boilers and steam
turbines
– Hydroelectric plants
Energy and the Economy
Energy Return on Energy
Invested
• The energy content of the fuel varies by grade, so
simple barrel counts are insufficient.
• Energy must be expended to invest in energy
extraction and conversion infrastructure, e.g.
derricks, platforms, ships, pipelines, refineries, tanker
trucks, etc.
• Energy must be expended to search for new oil
deposits
• Energy must be expended to drill and pump the oil
• EROI (also called EROEI) is the ratio of energy
returned for the energy invested – energy returned is
the net energy available
Bursting All Kinds of Bubbles
Why is our economic reality one of many bubbles
bursting?
The housing bubble
The credit bubble
The stock market bubble
The political bubble
The understanding of economics bubble!
George Mobus
University of Washington Tacoma
The Neoclassical View
The Economy As A Closed System
Resources
Products & Services
?
Purchases
8
Firms
Households
Externalities
Wages & Profits
Wastes
The Economy
Land, Labor, & Capital
8
?
George Mobus
University of Washington Tacoma
Growth in a Closed System
Assumptions in Neoclassical Economics
• Technology will always provide more efficient
means of production
• Money supplies can be expanded through
acceleration (higher rate of throughput)
• Debt can be used to finance expansion
• Resources are essentially infinite (esp. with
substitution)
George Mobus
University of Washington Tacoma
Obvious Fallacies
• Infinite resources
– Renewable (only if rate of renewal is sufficient)
– Non-renewable (always depleting)
• Technology cannot be guaranteed to increase
efficiency indefinitely
– Carnot limit: Every machine has an upper limit
– Moore’s Law not applicable to non-digital
machines
• Growth of natural (physical) systems is always
constrained by negative feedbacks (covered
Georgelater)
Mobus
University of Washington Tacoma
Ecological Economics – First
Approximation of Reality
• Embedding the human economy in the global
ecology
• Ecology, economy – same root: ECOS Greek for
HOME
Ecological System
Solar energy
Organics, water, & gasses
Solar energy
Purification
Photosynthesis
Products & services
Economic System
Purchase
Purchases
s
Resources
Fossil fuel
Firms
Wages & Profits
Households
Waste
recycling
formation
Geothermal
energy
Land, labor, & capital
Recycling
Processes
Deposits
Minerals
Biophysical Economics
• The Economy: Energy, work, and
goods/services
raw energy
waste heat
physical
assets
energy capture &
conversion
usable
energy
work
processes
services
tools
equipment,
maintenance, &
improvements
raw material
users
entropic decay
consumption
stocks
value added
The Concept of Assets
Anything and Everything Created
by Human Endeavor
• Tangible
– Appropriated natural resources - land, cut timber, ores
– Fixed (long-term) – plant, equipment, houses, etc.
•
•
life expectancies in decades
wear down with age (entropy) and use, require maintenance
– Fixed (intermediate-term) – automobiles, appliances
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•
life expectancies in fractions of decades (e.g. 1 ½ ~ 15 years)
wear out with use and need repair and replacement
– Supplies (short-term) – clothing, paper
– Consumables (very short-term) – food, plastic packaging
• Intangible
• Biomass
George Mobus
University of Washington Tacoma
The Concept of Assets (cont)
• Tangible
• Intangible
– Has value but limited physical extent
– Knowledge – human memories, documents, patents
– Social relationships – organizations, institutions,
communities; process frameworks
• Biomass – non-food related
– People
– Pets
– Ornamental plants
George Mobus
University of Washington Tacoma
The Concept of Assets (cont)
• Possession – exclusive right to use
– control over how and when used
– may require on-going work to maintain
• Obtained through effort expended
– created by work process
– either directly produced or obtained via a value
transaction – traded for something of equal value
• Presumed to have a future benefit
– can be used to accomplish a valued end
– special case – tools, or capital, allow more work to be
done (increase income)
George Mobus
University of Washington Tacoma
The Concept of Assets (cont)
• Capital assets – Needed to produce more assets in the
future; Investment
– Physical plants, equipment, and tools
– Land
– Buildings
• Consumables – Objects that are degraded to waste as a
result of use (various time scales, but generally short-term)
• Discretionary – Objects that are not ‘needed’ but desired
(esthetics beyond functionality, e.g. luxury cars, artwork)
• Mixed purposes assets – Objects that may be used as either
capital or discretionary (esp. in households), e.g.
automobiles, computers
George Mobus
University of Washington Tacoma
Assets and Work Processes
• All assets derive from work processes
– All work processes consume energy (from the
definition of energy in physics)
– Energy inputs must be of a high potential able to drive
the process
– All work processes take time
– Energy consumed over time = power
• Intangible assets are just as much a result of work
processes, but generally represented by symbolic
forms (e.g. contracts, patents, customer files,
computer programs) or embodied in human
memories as a result of discovery and education
George Mobus
University of Washington Tacoma
Money is NOT an Asset!
• Money is a representation of asset value
• Money is a claim on embodied energy
• Money flows in a direction opposite to the flow of
work/energy, acting as a message to control that
flow
• Money is a convenient means of conducting
transactions where assets are exchanged
• Accumulated money (savings) is a virtual asset as
long as the representation form maintains its relation
to the underlying value in embodied energy – no
inflation or deflation
Debt As Money
• Borrowing from past savings
– Profit – creating excess assets through efficiency
– Saving excess assets for future use and insurance
– Banking and fractional reserves – short term debt
• Virtual money
• Borrowing from future earnings
– Promises to pay back debt with interest from profits
to be made in the future
– Longer-term investments, it will take time to recoup
the principal with interest
– Creative paper instruments to represent future money
George Mobus
University of Washington Tacoma
Debt Financing as Betting
• Risks in borrowing from the past or the future
– Past savings exist as a form of insurance against future
disasters – borrowing diminishes resources and puts
people at risk
– Borrowing from the future is betting that the future
will turn out as expected – what happens if it doesn’t?
• Both are risky in terms of future contingencies
• If ‘rational’ agents have had the experience of the
present being better than the past, they will
assume that the future will be better still
• This worked for most of human history but the
reason wasn’t obvious
George Mobus
University of Washington Tacoma
The Reason Debt Worked
• For all of human history we have always
(generally) experienced increasing access to
greater power sources
• Through clever observation of nature and trial
and error (later science and technology) we have
discovered and exploited better energy sources
– Clothing and shelters decreased energy loss (effectively
increasing energy available), domestication of fire ,
agriculture and domestication of animals, waterwheels
and windmills, coal, petroleum, hydroelectric and nuclear
power
• The growth of energy resources led to expansion
of work processes and accumulation of assets –
economic growth – meaning profits
George Mobus
University of Washington Tacoma
Limits to Growth
• Appropriation of non-renewable (or slowly
renewable) natural resources from finite stocks takes
increasing energy to accomplish – Best-First Principle
• Fossil fuels, which now supply more than 80% of
global energy, are a non-renewable, finite resource
• Renewable energy sources can only be exploited by
building an infrastructure that requires using high
power energy (from fossil fuels!)
• Renewable energy sources are based on real-time
solar insolation which is diffuse (you can walk around
in it)
Now for a Real Inconvenient Truth –
Limits on Energy Flow
Hubbert’s Peak – Fossil Fuels
diminishing
marginal gain
exponential rise
rapid exploitation
declining oil
extraction
1970
today
rates for lower 48
states, USA
?
The Extraction of Finite
Resources
• The positive reinforcement of acquisitiveness
coupled with increasing population drives
increased efforts at extraction - Demand
• Eventually the Best-First principle catches up and
the Law of Diminishing Returns takes over
causing deceleration in extraction rates
• At some point it is no longer economical to start
new extraction efforts (new wells or mines) and
production is based on existing facilities that
continue to deplete the resource
• There will be an exponential decline in extraction
George Mobus
University of Washington Tacoma
Inevitable!
• The only real question has been: when?
• The answer is looking like NOW.
• Hubbert’s prediction for the peak of production for the
lower 48 states in the US for early in the 1970’s (made
in 1956) turned out to be right on in terms of timing
(actual volume was a bit higher than expected).
• His prediction for global oil peak was for in the early
2000’s. Current models and empirical data suggest
strongly that world conventional oil production peaked
between 2005 and 2008.
• Because of Best-First we are now turning to
nonconventional sources like tar sands and shale oil.
George Mobus
University of Washington Tacoma
36
Gross and Net Energy Peaks
• Net energy peaks in production before gross energy
peaks
• The down-side of the curve is steeper than Hubbert’s
Effect on Asset Accumulation
• Asset accumulation follows energy availability
(flow)
decline
growth feasible
Fossil fuels only - BAU
growth
decelerating
Adding in Alternative Sources
Assumes a WWII-Style Marshalling of Resources