Will growth end? Economics for our physical reality

By Srinath Kailasabp_graph_400x600

Growth has become the sine qua non for policy makers: without it business is constrained and the ranks of the unemployed swell, while more pressure is put on government coffers through a loss in tax revenue, burdening governments with their debts.

However, it’s all a bit confusing for a finite physicist. Setting aside Malthusian fears of a drastic population collapse, are there real physical limits to continued economic growth?

Pondering this question one evening, long after the bars had all closed, I decided that it was best to start by considering the situation thermodynamically – after all, the growth in our energy consumption has transformed our lives beyond recognition, and is directly linked to growth in our economy.

Firstly let’s constrain ourselves to Earth for the foreseeable future, a mass migration to the galactic colonies seeming unlikely anytime soon.

Estimating conservatively our increase in energy consumption since 1700 is somewhere between 2 and 5 % per year – this is roughly a reflection of the economic growth rate since then, at least in the industrialised West.

Where does all this energy go? The only way energy really gets off Earth is via infrared radiation. This is really useful, as it lets us estimate the surface temperature of things like stars.

More worryingly however if we were to continue at the current rate of growth in our of consumption we’d reach boiling point in 400 years and reach parity with that of the Sun in 1400 years, or more drastically, the entire Milky Way in just 2500 years!

Even more astoundingly you have to remember that the Earth is about a million times smaller than the Sun, therefore has to be about a million times hotter to be able to radiate heat at the same rate as the star (never mind the Milky Way). Remember this is regardless of the greenhouse effect, or even new technology being invented (read fusion power) – this is just due to increased consumption.

2500 years isn’t a particularly long time; we know a lot about the world of 2500 years ago. Note that even if the global population stabilises, we are used to a per capita energy increase in energy consumption growth. So clearly there is at least a cap on possible energy growth.

Finding a steady state economic system is likely to be crucial to our survival

Can Science not solve this you ask? Well sure we could invent some amazing laser beam that emits all this waste heat straight into space, but the waste we produce is thermal in nature and of high entropy – trying to remove it would be like trying to empty a lake using a bucket with holes in it.

Seriously though, considering the technological achievements of the past century can’t science take one for the team and pull something out of the bag? There are plenty of examples where innovation has seen us back from the brink in terms of running out of scarce resources, agricultural innovation being just one.

However I’m not completely convinced that this represents a viable plan B; when we consider efficiency alone, we realise that most of our devices are already pretty efficient.

For example, electric motors are around 90% efficient and even other things like car engines have seen an approximate improvement in efficiency in the past 40 years or so of around 2% a year. These are our success stories; more middling (and enormous) consumers of energy such as power plants have improved their efficiency far slower (about 1% per year) and are already fairly efficient in physics terms (around 30%).

We’re reaching the end of the line in terms of efficiency. I’d be far more hopeful if our devices were only around 1% efficient.

Ah, you say, what about the game changers? The lightbulbs, the steam engines and iPhones of tomorrow! Well certainly, each of these is more frugal with energy than the last, and we still have a long way to go down this line – but many processes are fundamentally the same in terms of energy, and nothing of economic value is ‘energy free’, no matter how ‘green’ it is.

What has all this got to do with economic growth though? Well let’s say that the population eventually levels off, and energy use is stable. This would mean that as GDP grows the cost of energy will become arbitrarily small, perhaps eventually so cheap that someone could potentially just buy all of it.

This is clearly ridiculous, so say we accept that we have to fix some floor to the cost of energy to some set fraction of GDP to set things straight – why not 1%.

In this case however, if the 99% of the economy remaining tries to grow, we’d just get monetary inflation and no real growth in GDP, as it’s constrained by energy. We reach the conclusion that the economy must continue in some steady state form.

Obviously innovation and fashions etc will still continue, but our economic system is fundamentally limited.

Both Adam Smith and John Maynard Keynes predicted economic growth to be a temporary phase in our history. Finding a steady state economic system is likely to be crucial to our survival.

 

Graph: BP Statistical Review of World Energy 2014

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