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Is the global economy a superorganism?

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1 Is the global economy a superorganism?
November 4, 2019 Is the global economy a superorganism? USAEE North American Conference, Denver CO, November 3-6, 2019 Carey w. king Research Scientist & Assistant Director, Energy Institute, The University of Texas at Austin Andrew Jarvis Lancaster Environment Centre, Lancaster University, UK

2 Animal metabolism (B) (Kleiber’s Rule)
Metabolism (kcal/day) Basal Metabolism (energy consumption) scales sublinearly with mass (M) B ~ M3/4 Body Mass (kg) Kleiber, M. (1947), Physiological Reviews.

3 Animal metabolism (B) (Kleiber’s Rule)
No: B ~ M Yes: B ~ M3/4 Basal Metabolism (kcal/day) Basal Metabolism (energy consumption) scales sublinearly with mass (M) B ~ M3/4 Body Mass (kg) Kleiber, M. (1947), Physiological Reviews.

4 Ant Colonies scaling changed with evolution
Scaling exponent 0.86 0.85 0.58 Metabolism (energy consumption) scales sublinearly with mass (M) Mass = ants + fungus garden B ~ Mb, b < 1 Shik et al. (2014), The American Naturalist.

5 Ant Colonies scaling changed with evolution
Scaling exponent 0.86 0.85 0.58 Metabolism (energy consumption) scales sublinearly with mass (M) Mass = ants + fungus garden B ~ Mb, b < 1 fungus farmers (e.g., leaf cutters), Split 20 MYA fungus farmers; split ~50 MYA Shik et al. (2014), The American Naturalist.

6 Ant Colonies scaling changed with evolution
Scaling exponent 0.86 0.85 0.58 In some cases, scaling occurs because a higher fraction of ants become stationary with more M! B ~ Mb, b < 1 Waters et al. (2017), Proceedings of the Royal Society B. Shik et al. (2014), The American Naturalist.

7 Metabolism (energy consumption) scales sublinearly with mass (M)
Animal and ant colony metabolism (B) and mass (M) relation B ~ M Observed range Metabolism (energy consumption) scales sublinearly with mass (M) B ~ Mβ, 0.5 < β < 1 B ~ M1/2 or 2/3 Metabolism (B) Mass (M)

8 Global Economy PEU ~ GDP1 PEU ~ GDP2/3
Before 1970, primary energy use scales linearly with GDP PEU ~ GDP1 After 1970, primary energy use scales sublinearly with GDP PEU ~ GDP2/3 (real $) Global data (IEA, IIASA, BP, World Bank) compiled by Jarvis

9 The global economy: “scales” like an animal and ant colony It is a superorganism
1970

10 The global economy: “scales” like an animal and ant colony It is a superorganism : 1 unit of GDP requires 1 unit of primary energy 1970

11 The global economy: “scales” like an animal and ant colony It is a superorganism : 1 unit of GDP requires 1 unit of primary energy E ~ GDP2/3 After 1970s: 1 unit of GDP requires < 1 unit of primary energy 1970 E ~ GDP2/3

12 Biology and energy-economic data are telling us the same thing
E ~ GDP2/3 B ~ M0.6 to 0.85 (typically)

13 Biology and energy-economic data are telling us the same thing!
For an animal or ant colony to grow, each additional unit of mass must consume energy at a slower rate and/or existing mass consumes less. For the economy to grow (after 1970), each additional unit of GDP (likely capital) must consume energy at a slower rate. E ~ GDP2/3

14 Biology and energy-economic data are telling us the same thing!
For an animal or ant colony to grow, each additional unit of mass must consume energy at a slower rate and/or existing mass consumes less. For the economy to grow (after 1970), each existing/additional unit of GDP (and likely capital) must consume energy at a slower rate. E ~ GDP2/3

15 Biology and energy-economic data are telling us the same thing!
For an animal or ant colony to grow, each additional unit of mass must consume energy at a slower rate and/or existing mass consumes less. E ~ GDP2/3

16 Biology and energy-economic data are telling us the same thing!
For an animal or ant colony to grow, each additional unit of mass must consume energy at a slower rate and/or existing mass consumes less. E ~ GDP2/3 Animals add low-metabolism skeletal muscle and bone faster than high-metabolism brain and heart. Ant colonies add lower-metabolic workers and garden mass; a higher % of ants are stationary.

17 Biology and energy-economic data are telling us the same thing!
For the economy to grow (after 1970), each existing/additional unit of GDP (and likely capital) must consume energy at a slower rate. E ~ GDP2/3

18 Biology and energy-economic data are telling us the same thing!
Economy adds cars, homes, machines, etc. that consume less fuel; higher proportion of stationary capital & humans? For the economy to grow (after 1970), each existing/additional unit of GDP (and likely capital) must consume energy at a slower rate. E ~ GDP2/3

19 The economy in a physical and evolutionary context

20 Joseph A. Schumpeter (1942, Capitalism, Socialism, and Democracy)
“The essential point to grasp is that in dealing with capitalism we are dealing with an evolutionary process. It may seem strange that anyone can fail to see so obvious a fact which moreover was long ago emphasized by Karl Marx.” “The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory illustrate the same process of industrial mutation–if I may use that biological term …”

21 Joseph A. Schumpeter (1942, Capitalism, Socialism, and Democracy)
“The essential point to grasp is that in dealing with capitalism we are dealing with an evolutionary process. It may seem strange that anyone can fail to see so obvious a fact which moreover was long ago emphasized by Karl Marx.” “The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory illustrate the same process of industrial mutation–if I may use that biological term …”

22 Biological View genes organisms ecosystems Earth

23 Economic View Biological View tech., genes companies organisms
economies, countries ecosystems Earth Earth

24 Holistic View tech., genes companies organisms economies, countries
ecosystems Earth

25 A physical way to think of the energy-to-GDP relationship
GDP ∝ η·PEU η: an energy conversion efficiency PEU: primary energy use (or consumption) η· PEU = useful work Mechanical drive, electricity, process heat, animate power, etc. For example: Ayres, R. 2005, Structural Change and Econ. Dynam. Ayres, R. 2008, Ecological Economics Warr, B. and Ayres, R. (2010) Ecological Economics,

26 GDP ∝ η·PEU This relationship can be viewed as either demand for, or supply of, energy services This views GDP and PEU as co-evolutionary, rather than one being causal on the other. This framing does not negate other more orthodox representations of value production Labor, capital, or technology, could each be viewed as determinants of this energy efficiency, η. This relationship can be viewed as either demand for, or supply of, energy services, and hence we initially view GDP and PEU as coevolutionary, rather than one being causal on the other. Therefore, this framing does not negate other more orthodox representations of value production given e.g. labour, capital, or technology, could each be viewed as determinants of this energy efficiency (Keen, 2019).

27 means that the rate of change, or growth rate r,
GDP ∝ η·PEU GDP∝𝜂∙PEU means that the rate of change, or growth rate r, of each is as follows: 𝑟 𝐺𝐷𝑃 = 𝑟 𝜂 + 𝑟 PEU

28 Global Economy (real $)
Global data (IEA, IIASA, BP, World Bank) compiled by Jarvis

29 Global Economy (real $)
Global data (IEA, IIASA, BP, World Bank) compiled by Jarvis

30 Global Economy (real $)
Global data (IEA, IIASA, BP, World Bank) compiled by Jarvis

31 Interpretation of efficiency on plot of rPEU vs. rGDP
If: 𝑟 𝐺𝐷𝑃 = 𝑟 𝜂 + 𝑟 PEU Then (on average): 𝑟 𝜂 = 𝑟 𝐺𝐷𝑃 −𝑟 𝑃𝐸𝑈 (real $)

32 Interpretation of efficiency on plot of rPEU vs. rGDP
If: 𝑟 𝐺𝐷𝑃 = 𝑟 𝜂 + 𝑟 PEU Then (on average): 𝑟 𝜂 = 𝑟 𝐺𝐷𝑃 −𝑟 𝑃𝐸𝑈 (real $) Distance of curve from 1:1 line can be viewed as efficiency, η, of energy conversion to useful work, U.

33 Average Rate of change (%/yr)
Global Economy Years Average Rate of change (%/yr) rPEU rGDP 4.4 0.0 2.1 3.1 1.0 If: 𝑟 𝐺𝐷𝑃 = 𝑟 𝜂 + 𝑟 PEU Then (on average): 𝑟 𝜂 = 𝑟 𝐺𝐷𝑃 −𝑟 𝑃𝐸𝑈 (real $) Global data (IEA, IIASA, BP, World Bank) compiled by Jarvis

34 Average Rate of change (%/yr)
Global Economy Years Average Rate of change (%/yr) rPEU rGDP 4.4 0.0 2.1 3.1 1.0 If: 𝑟 𝐺𝐷𝑃 = 𝑟 𝜂 + 𝑟 PEU Then (on average): 𝑟 𝜂 = 𝑟 𝐺𝐷𝑃 −𝑟 𝑃𝐸𝑈 (real $) Global data (IEA, IIASA, BP, World Bank) compiled by Jarvis

35 Average Rate of change (%/yr)
Global Economy Years Average Rate of change (%/yr) rPEU rGDP 4.4 0.0 2.1 3.1 1.0 If: 𝑟 𝐺𝐷𝑃 = 𝑟 𝜂 + 𝑟 PEU Then (on average): 𝑟 𝜂 = 𝑟 𝐺𝐷𝑃 −𝑟 𝑃𝐸𝑈 (real $) Global data (IEA, IIASA, BP, World Bank) compiled by Jarvis

36 Looking closer at the trend of GDP and PEU growth rates
𝑟 𝑃𝐸𝑈 =(0.19) 𝑟 𝐺𝐷𝑃 2.1

37 Curve fit is determined using logarithm of rates:
𝑟 𝑃𝐸𝑈 =(0.19) 𝑟 𝐺𝐷𝑃 2.1

38 We can think of a maximum rate of efficiency
Trend: 𝑟 𝑃𝐸𝑈 =𝑐 𝑟 𝐺𝐷𝑃 2.1 (1) 𝑟 𝜂 = 𝑟 𝐺𝐷𝑃 −𝑟 𝑃𝐸𝑈 (2)

39 We can think of a maximum rate of efficiency
Trend: 𝑟 𝑃𝐸𝑈 =𝑐 𝑟 𝐺𝐷𝑃 2.1 (1) 𝑟 𝜂 = 𝑟 𝐺𝐷𝑃 −𝑟 𝑃𝐸𝑈 (2) Insert (1)(2): 𝑟 𝜂 = 𝑟 𝐺𝐷𝑃 −𝑐 𝑟 𝐺𝐷𝑃 (3)

40 We can think of a maximum rate of efficiency
Trend: 𝑟 𝑃𝐸𝑈 =𝑐 𝑟 𝐺𝐷𝑃 2.1 (1) 𝑟 𝜂 = 𝑟 𝐺𝐷𝑃 −𝑟 𝑃𝐸𝑈 (2) Insert (1)(2): 𝑟 𝜂 = 𝑟 𝐺𝐷𝑃 −𝑐 𝑟 𝐺𝐷𝑃 (3) 𝑟 𝜂,𝑚𝑎𝑥 =1.2 %/yr @ 𝑟 𝐺𝐷𝑃 =2.4 %/yr

41 It is not clear GPD can decouple from PEU
𝑟 𝑃𝐸𝑈 =𝑐 ∙𝑟 𝐺𝐷𝑃 2.1 (1) This suggests growth in PEU only decouples from growth in GDP when growth in GDP tends to zero. Post-1970s: Relative decoupling (consistent with Jevons Paradox & backfire effect)

42 Consider efficiency in decarbonization scenarios

43 Decarbonization scenarios (e. g
Decarbonization scenarios (e.g. in IPCC) lack feedbacks from efficiency IPCC scenarios to 2100: SSP = shared socio-economic pathway SSP2-BAU Assume exogenous increase in “productivity” without any link to efficiency. But … research suggests ∆productivity = ∆efficiency (Warr and Ayres, 2010, Ecol. Econ.)

44 Decarbonization scenarios (e. g
Decarbonization scenarios (e.g. in IPCC) lack feedbacks from efficiency IPCC scenarios to 2100: SSP = shared socio-economic pathway SSP2-RCP2.6 Assume decades of energy efficiency with ~ constant PEU.

45 Three issues with standard, non-evolutionary frameworks for decarbonization by efficiency
First, As long as the average growth rate of efficiency > 0 (rη ~ 1.0%/yr since 1970s), … … the rate of energy consumption will likely be > 0, as observed from the data.

46 Three issues with standard, non-evolutionary frameworks for decarbonization by efficiency
Second, Time to “optimally” turnover infrastructure is ~80 years. Faster increase in efficiency might decrease rGDP. If … 𝑟 𝜂 = 𝑟 𝐺𝐷𝑃 −𝑐 𝑟 𝐺𝐷𝑃 (3) 𝑟 𝜂,𝑚𝑎𝑥 =1.2 %/yr

47 Three issues with standard, non-evolutionary frameworks for decarbonization by efficiency
Third, Energy efficiency to useful work is limited by the second law of thermodynamics. Scenario % increase in η History (since 1950) 60% SSP2-BAU ( ): % SSP2-RCP2.6 ( ): %

48 Summary: The economy as a superorganism is consistent with the data
Energy consumption ∝ sizeβ, β<1 Pervasive in biological and economic data Many underlying explanations physical structure (networks) resource constraints, fraction of “agents” or infrastructure that is stationary The role of energy efficiency needs more holistic integration into economic growth models Better understanding of the coupling among growth of GDP, energy, and efficiency

49 Summary: The economy as a superorganism is consistent with the data
Energy consumption ∝ sizeβ, β<1 Pervasive in biological and economic data Many underlying explanations physical structure (networks) resource constraints, fraction of “agents” or infrastructure that is stationary The role of energy efficiency needs more holistic integration into economic growth models Better understanding of the coupling among growth of GDP, energy, and efficiency

50 careyking@mail.utexas.edu careyking.com | @CareyWKing
Carey W. King, Ph.D. Research Scientist & Assistant Director, Energy Institute Lecturer, McCombs School of Business careyking.com | @CareyWKing energy.utexas.edu

51 extra

52 Problem: Standard (neoclassical) growth theory can’t effectively explain this curve GDP = KαLβE1-α-β

53 Problem with elasticity from data:
Global Data: Problem with elasticity from data: Neoclassical theory assumes the elasticity of an input factor equals its cost share GDP = KαLβE1- α-β (1-α-β) = 0.05 to 0.10 Data ( ) show elasticity w.r.t. energy is near 0.6

54 Problem with elasticity from data:
Global Data: Problem with elasticity from data: Neoclassical theory assumes the elasticity of an input factor equals its cost share GDP = KαLβE1- α-β (1-α-β) = 0.05 to 0.10 Data ( ) show elasticity w.r.t. energy is near 0.7

55 It is not clear GPD can decouple from PEU
: Energy is so abundant and cheap, no need for efficiency Post-1970s: Energy efficiency increases were a necessary response to maintain growth in GDP Relative decoupling (consistent with Jevons Paradox & backfire effect)

56 Ant Colonies Metabolism (energy consumption) scales sublinearly with mass (M) 1 reason: As colony grows, a higher fraction of ants are stationary B ~ M0.8 Waters et al. (2017), Proceedings of the Royal Society B.

57 The scaling remains even when you remove ½ of the ants!
Ant Colonies 100% of ants The scaling remains even when you remove ½ of the ants! B ~ M0.8 After removing 50% of ants “Across all colony measures, there was no significant effect of colony size on mean walking speed (linear regression, F1,14 = 0.44, p = 0.52), however, median walking speed did show a negative relationship with increasing colony size among the pre-manipulation colonies measured before experimental size reduction (F1,6 ¼ 6.74, p ¼ 0.04, R2 ¼ 0.45).” The average mean and median walking speeds were mm s21 and mm s21 for the pre-manipulation colonies (n ¼ 8), and mm s21 and mm s21 for the size-reduced colonies (n ¼ 8).” “Consistent with the hypothesis that the hypometric metabolic scaling exponent reflects the effects of variation in locomotory activity with colony size, the proportion of ants that were inactive (defined as average speed less than 1.0 mm s21) increased with colony size for both the pre-manipulated and size-reduced colonies, considered separately (figure 3).” Waters et al. (2017), Proceedings of the Royal Society B.

58 Looking closer at the trend of GDP and PEU growth rates
1:1

59 Looking closer at the trend of GDP and PEU growth rates
hypercoupled Coupled: 1:1 Relative decoupling Absolute decoupling

60 Problem with elasticity from data:
Global Data: Problem with elasticity from data: Neoclassical theory assumes the elasticity of an input factor equals its cost share GDP = KαLβE1- α-β (1-α-β) = 0.05 to 0.10 Data ( ) show elasticity is closer to 0.7

61 BLAH ON DECARBONIZATION … !!!!

62 BLAH ON DECARBONIZATION … !!!!

63 Three issues with standard, non-evolutionary frameworks for decarbonization by efficiency
Second, Standard frameworks interpret efficiency as “exogenous technology”, but economy evolves (unless otherwise restricted) to changes in efficiency by increasing PEU.

64 It is not clear GPD can decouple from PEU
Data indicate more global GDP is associated with: more energy consumption more energy efficiency Relative decoupling since 1970s This is consistent with: Jevons Paradox (backfire effect) Ecosystems (evolution, maximum power principle)

65 It is not clear GPD can decouple from PEU
Data indicate more global GDP is associated with: more energy consumption more energy efficiency Relative decoupling since 1970s This is consistent with: Jevons Paradox (backfire effect) Ecosystems (evolution, maximum power principle) Post-1970s Average

66 Two issues with standard, non-evolutionary frameworks for decarbonization by efficiency

67 Biological View Joseph A. Schumpeter
(1942, Capitalism, Socialism, and Democracy) “The essential point to grasp is that in dealing with capitalism we are dealing with an evolutionary process. It may seem strange that anyone can fail to see so obvious a fact which moreover was long ago emphasized by Karl Marx.” “The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory illustrate the same process of industrial mutation–if I may use that biological term …” Biological View genes organisms ecosystems Earth

68 “The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory illustrate the same process of industrial mutation–if I may use that biological term–that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in.” --- Joseph A. Schumpeter, 1942, Capitalism, Socialism, and Democracy (p. 82 of 2003 edition) tech., companies economies, countries Earth

69 Economic theory is important
Theory should translate what is happening in the world to what we think causes what is happening in the world

70 Physical laws and resource constraints describe how we can use and access energy.
Energy drives and defines our economy. Economics informs policy. Policy affects social outcomes.

71 Physical laws and resource constraints describe how we can use and access energy.
Energy drives and defines our economy. Economics informs policy. Policy affects social outcomes.

72 Physical laws and resource constraints describe how we can use and access energy.
Energy drives and defines our economy. Economics informs policy. Policy affects social outcomes.

73 Physical laws and resource constraints describe how we can use and access energy.
Energy drives and defines our economy. Economics informs policy. Policy affects social outcomes.

74 Energy Economics Policy Social outcomes

75 Energy Economics Policy Social outcomes

76 High-carbon energy Energy Economics Low-carbon energy Policy Social outcomes

77 The standard economic growth model is wholly insufficient to understand:
Energy Economics Policy Social outcomes

78 WWaSD? What would a scientist do?

79 Come up with models both physically and economically consistent
Biophysical Models Economic Models Population Natural Resources Capital (stuff) Population Capital ($) Wages Employment Debt (sometimes)

80 Come up with models both physically and economically consistent
Biophysical Models Economic Models Population Natural Resources Capital (stuff) Population Capital ($) Wages Employment Debt (sometimes) Combine Concepts Link resource consumption to debt, employment, and output

81 U.S. Data Wages & Energy Energy/person stops ↑ in 1970s & the % of GDP going to wages starts ↓ at the same time Energy/Person Year

82 U.S. Data Wages & Energy Energy/person stops ↑ in 1970s & the % of GDP going to wages starts ↓ at the same time Wage Share Energy/Person Year

83 King, C. W. (in press), Ecological Economics
U.S. Data “HARMONEY” Model Wage Share Energy/Person Year King, C. W. (in press), Ecological Economics

84 King, C. W. (in press), Ecological Economics
U.S. Data “HARMONEY” Model Wage Share Energy/Person Year King, C. W. (in press), Ecological Economics

85 King, C. W. (in press), Ecological Economics
U.S. Data “HARMONEY” Model Wage Share Energy/Person Year King, C. W. (in press), Ecological Economics

86 Looking closer at the trend of GDP and PEU growth rates
Trend line: 𝑟 𝑃𝐸𝑈 = 𝑟 𝐺𝐷𝑃 2.1 𝑟 𝑃𝐸𝑈 ∝ 𝑟 𝐺𝐷𝑃 2 𝑟 𝑃𝐸𝑈 𝑟 𝐺𝐷𝑃 ∝ 𝑟 𝐺𝐷𝑃

87 Average Rate of change (%/yr)
Global Economy Years Average Rate of change (%/yr) rPEU rGDP 4.4 0.0 2.1 3.1 1.0 If: 𝑟 𝐺𝐷𝑃 = 𝑟 𝜂 + 𝑟 PEU Then (on average): 𝑟 𝜂 = 𝑟 𝐺𝐷𝑃 −𝑟 𝑃𝐸𝑈 (real $) Global data (IEA, IIASA, BP, World Bank) compiled by Jarvis

88 Average Rate of change (%/yr)
Global Economy Years Average Rate of change (%/yr) rPEU rGDP 4.4 0.0 2.1 3.1 1.0 If: 𝑟 𝐺𝐷𝑃 = 𝑟 𝜂 + 𝑟 PEU Then (on average): 𝑟 𝜂 = 𝑟 𝐺𝐷𝑃 −𝑟 𝑃𝐸𝑈 (real $) Global data (IEA, IIASA, BP, World Bank) compiled by Jarvis


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