Epidemiology and economics

It is increasingly clear that neither of these assumptions is correct. Despite the claims of epidemiologists, our best efforts have never been able to reduce the number of newly reported COVID-19 cases for the world as a whole for any significant period of time. In fact, the latest week seems to be the highest week so far.

~ Gail Tverberg from, https://ourfiniteworld.com/2020/09/23/reaching-the-end-of-early-stimulus-whats-ahead/

It’s not meant as a doom-and-gloom quote. The article goes on to talk about how our economies really work and what’s really going on.

I’ve a tag for Tverberg for a reason. You should read everything she’s ever written—which would be hard because you’d have to also wade through the amazing, museum-piece that is The Oil Drum. I use that site as a litmus test for anyone who ever mentions “energy”—”Have you heard of The Oil Drum site?” If they have, then I’m really listening.

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Barely noticeable

The authors note that a core resource of the digital economy is the data produced by users of services like Facebook and Google, which can then be used to train machine learning algorithms to do valuable things like precisely targeting advertisements or more accurately processing natural language. The current market treats data as capital: the “natural exhaust from consumption to be collected by firms” for use in training their AI-driven golden gooses. Lanier and company suggest an alternative: data as labor. Put simply, if a major platform monopoly wants your data to help build a multi-billion dollar empire, they must pay you for it. Offering a free service in return is not enough.

~ Cal Newport from, https://www.calnewport.com/blog/2018/01/17/on-seriously-rethinking-the-digital-economy/

Well, that would change everything.

Imagine I changed the sidewalk in front of my house to have plates that moved slightly as one walks across it. I’ve rigged the plates to absorb some of the motion created during walking to generate electricity to offset my electric bill. Let’s assume further that the movement of the plates is barely noticeable. Perhaps something seems a bit “off” when you walk past my house, but nothing bad happens to you; you don’t fall and you don’t get tired, but you do work just a little harder when walking past my house.

What happens when we scale up that “harmless” little modification to include everyone, walking everywhere?

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A global, self-organizing what now?

https://ourfiniteworld.com/2018/07/11/the-worlds-weird-self-organizing-economy/

Today’s indications seem to suggest that an even more major recession than the Great Recession may strike in the not too distant future. Why should this be the case? Am I imagining problems where none exist? The next ten sections provide an introduction to how the world’s self-organizing economy seems to operate.

~ Gail Tverberg

“Ten sections.” “Introduction.” Some thinking and integration of ideas will be required.

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Supply-and-demand is a model

https://ourfiniteworld.com/2018/05/11/how-the-economy-works-as-it-reaches-energy-limits-an-introduction-for-actuaries-and-others/

The reason for the strange behavior of energy prices near limits is because the system is very interconnected. It is a self-organized system that gradually changes over time. New customers are added over time. These customers are often also wage-earners. They decide what to buy based on their own wages, and based on other considerations, such as the prices of competing products and whether inexpensive financing is available.

~ Gail Tverberg

Supply-and-demand is a model. There’s nothing wrong with the model. Does the model still fit reality as we approach the limits of how much energy our economy can consume? (tl;dr: it does not.)

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Chain reaction

The catch is that we are too close to the “edge” to be testing an increase in interest rates. Economies, below a certain “stall speed,” cannot repay debt with interest, and cannot hope to provide entrepreneurs with an adequate return on investment. Our low rate of growth is already close to this stall speed.

~ Gail Tverberg from, https://ourfiniteworld.com/2018/02/21/raising-interest-rates-is-like-starting-a-fission-chain-reaction/

There’s a graph early on in this article that is, frankly, alarming.

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The Great Depression was an energy crisis

When I put together a chart of per capita energy consumption since 1820 for a post back in 2012, there was a strange “flat spot” in the period between 1920 and 1940. When we look at the underlying data, we see that coal production was starting to decline in some of the major coal producing parts of the world at that time. From the point of view of people living at the time, the situation might have looked very much like peak energy consumption, at least on a per capita basis.

~ Gail Tverberg from, https://ourfiniteworld.com/2017/12/19/the-depression-of-the-1930s-was-an-energy-crisis/

One of my rules-of-thumb is to thoroughly read everything written my Gail Tverberg.

Years ago, I found a web site called The Oil Drum which was a collecton of superlative thinkers all writing about things related to petroleum. Actually, it still IS a superlative collection, because they’ve left it up as-is to be an archive.

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The “Wind and Solar Will Save Us” Delusion

ourfiniteworld.com/2017/01/30/the-wind-and-solar-will-save-us-delusion/

There has been a misunderstanding regarding the nature of our energy problem. Many people believe that we will “run out” of fossil fuels, or that the price of oil and other fuels will rise very high. In fact, our problem seems to be one of affordability: energy prices don’t rise high enough to cover the rising cost of producing electricity and other energy products. Adding wind and solar tends to make the problem of low commodity prices worse.

~ Gail Tverberg

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Overly Simple Energy-Economy Models Give Misleading Answers

https://ourfiniteworld.com/2016/07/25/overly-simple-energy-economy-models-give-misleading-answers/

It is not intuitive, but complexity-related issues create a situation in which economies need to grow, or they will collapse. See my post, The Physics of Energy and the Economy. The popular idea that we extract 50% of a resource before peak, and 50% after peak will be found not to be true–much of the second 50% will stay in the ground.

~ Gail Tverberg

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Today, the situation is different

http://ourfiniteworld.com/2015/02/11/the-problem-of-debt-as-we-reach-oil-limits/

There has been much written about past debt bubbles and collapses. The situation we are facing today is different. In the past, the world economy was growing, even if a particular area was reaching limits, such as too much population relative to agricultural land. Even if a local area collapsed, the rest of the world could go on without them. Now, the world economy is much more networked, so a collapse in one area affects other areas as well. There is much more danger of a widespread collapse.

~ Gail Tverberg

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Oil price slide

http://ourfiniteworld.com/2014/11/05/oil-price-slide-no-good-way-out/

… demand doesn’t pick up quickly as prices drop. We are dealing with a world that has a huge amount of debt. China in particular has been on a debt binge that cannot continue at the same pace. A reduction in China’s debt, or even slower growth in its debt, reduces growth in the demand for oil, and thus its price. The same situation holds for other countries that are now saturated with debt, and trying to come closer to balancing their budgets.

~ Gail Tverberg

I have now discussed this a few times, and a common objection raised is that she is over-complicating a simple case of supply-and-demand. To which I say: What part of our enormous, intertwined, legacy, critical to everything from food to medicine to transportation to energy production, global dependency on petroleum is simple?

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