Energetics vs Economics

by Solarevolution June 18, 2011 12:36

Now here's something to think about…

I don't know that we can "throw out" money as a metric in a world where the economy is the main narrative and is likely to be for a long-time.

Obviously we aren't going to do away with money -- or economics, for that matter. It's the direction of the connection that matters. Economics is an instrument of policy; it is a consequence of policy, not a precursor; therefore economics cannot determine policy. Policy, based on whatever metrics, is carried out by economic instruments -- subsidies, grants, taxes, lending rates, etc. -- once the underlying premises are understood and desired outcomes are determined.

Whenever this relationship is reversed -- with economics determining policy -- then policy is built upon a circular argument: for example, a portion of the premium rewarded to special interests can be recycled back into the system in the form of lobbying power. Otherwise, how could energetically bankrupt ethanol become economical? Those who have already been successful at gaming the system can readily use ethanol [take soil; add sunshine, water, oil and coal] to continue successfully gaming the system. It doesn't have to meet the test of good energetics.

It's easy for the economically powerful to pull this off. As Jeremy Grantham wrote in his April GMO letter, "The problems of compounding growth ... are not easily understood by optimistic, short-term-oriented, and relatively innumerate [can't do math] humans (especially the political variety)."

We are unlikely to persuade the world to do away with money. But on the subject of energy, we will use kW-hours, BTUs, EROEI, etc., as metrics to point us toward sane policy. Then we have at least a fighting chance of creating economic instruments that discourage depletion (e.g, fuels recovered at low EROEI) and encourage energetically attractive alternatives (e.g., with high EROEI).

Taking it one step further, if we care about our children and our neighbors, then we will also factor equity into the equation and save a little for them. That's just sound energetic policy.

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