The Relationship Between The Economy, The Energy and The Environment
An economy is a social system that converts resources into goods, material commodities manufactured for and bought by individuals and businesses and serves, work done for others a s a form of business
All human economies exist within the natural environment and depend on it in vital ways. Economies receive inputs (such as natural resources) from the environment, process these inputs in complex ways that enable human society to function and then discharge outputs (such as waste) into the environment. The material inputs and the waste-absorbing capacity that the earth can provide to economics are ultimately finite.
Modern economist belonging to the fast-growing field of environmental economies and ecological economics explicitly recognize that human economies are subsets of the environment and depend crucially upon it for natural resources and ecosystem services.
Economic activity uses resources from the environment. Natural resources derived from the environment and are what we need to focus on in order to survive, and this brings in the topic of energy. (1)
PhD, is an American scientist, who studies at Duke University in 1994. Martenson also holds an MBA degree from Cornell University (1998) and is a fellow of the Post Carbon Institute.However, over the past couple of years, Martenson has stepped away from biological sciences and management to develop an educational video seminar series called The Crash Course based on Neo-Malthusian concepts. The course investigates the ways in which the economy, the environment and energy are interlinked and interact. (2)
The Crash course is basically the lens through which he looks at the world. He starts off by talking about the Deep Water Horizon, a drilling rig incident which took place on April 21st 2010 and was the source of the largest environmental disaster and was also connected to the global financial meltdown, the riots in Greece and the unrest in Spain.
In order to explain the relation between them, he goes on to explain the three E’s- The Economy, The Environment and Energy. He starts off with The Economy, and mentions the Stock Market peak in 2007 and the following plunge in 2009. The Economy, he says, is the way in which we organize ourselves, and is needed to preserve our standard of living and quality of life. It is also excellent in terms of feedback as it provides rapid feedback through the economy. But without Energy, the economy has no meaning and is nothing without it.
The environment on the other hand has rapidly depleting resources and the next 20 years with be nothing like the last 20 years. Therefore a change is needed as modelling what we think is about to happen based on the past is not good enough.
An Economist’s View of the World
An economist views the world in terms of growth, and the equation is for exponential growth from the Federal Reserve website.
In order to fully understand exponential growth, however, he believes we need to look into the concept of money. All money is loaned into existence and the main implication of this is that there is always more debt than money. For example if a person has no money and needs $1000 and a banker agrees to loan the person $1000, the person now has a thousand dollars because the money is loaned into existence. In a month, the loan is due plus the interest and the person then loans that interest money and the cycle continues. Therefore there is always more debt than money in the system.
Currently, the US DEBT is $52 trillion, and the total money is $14 trillion. Therefore, they can’t take all the money and pay back the debts because it’s not possible as there is just not enough. The implication of this is the fact that perpetual growth is a requirement of modern banking.
The Economy doesn’t need to grow, it likes to, and so there is a constantly growing debt and there are no historical examples of countries at these levels of growth and were able to get out without printing or entering default- this is a brand new territory.
An economy must grow and this is usually through Exponential Growth. The green is the population in all of human history and the red is the UN’s projections of future population growth. The physical cap forces there to be a difference between being on the flat/steep part due to earth capacity
The issue is that we don’t live in a linear world, we are in fact are dominated by the curves but we think linearly and not exponentially.
It took all of human history till 1960 to reach a 3 billion people population on the planet and only 40 more years to put the next 3 billion people on this planet- clearly not linear growth. And where you are on the curve makes all the difference.
We could go two ways; we could make this a problem or a predicament. Problems have solutions but predicaments only have outcomes.
Moving onto the last E-Energy.
The UK became import dependant again in 2005, this situation suggested that they permanently turned into an energy importer and energy declines in terms of return and quality becomes an issue.
So basically, this can all be summer by the statement that the economy must grow but it is connected to an energy system that can’t grow. We constantly read about the quantity of energy and resources but never about the quality and therefore it is becoming an issue. (3)
I agree with Martenson and enjoyed watching this, because I do agree with the fact that we do need different solutions to enter this different world and what I really loved about this course was the fact that he ended by saying that he now Felt that he has a higher quality of life living on less things and this is not scary, it is actually hopeful and a message of true empowerment from him and others to the audience and the world.
1. Environment, the Science behind the Stories, Fourth Edition, Withgott, Brennan.
3. All images and information taken from: http://www.youtube.com/user/ChrisMartensondotcom