Energy and GDP: You have to consume to grow ScrgruppEn

This piece continues from “The World’s Most Ridiculous: The Politicization of Energy” from yesteryear.

Adult feeding and growth

Stern, Burke and Bruns (2016)7 Their analysis concluded that Access To electricity is not enough for economic growth but electricity Uses and GDP have a positive relationship. Mere provision of a resource does not mean progress, it is the use that leads to progress. Common sense.

“As a result, energy is an essential factor for continuous energy production and supply Necessary to maintain current levels of economic activity as well as for growth and development Economics (Stern, 1997). There may also be macroeconomic limits to replace others Power input. Construction, operation and maintenance of tools, machines and Factories require a flow of materials and energy. Likewise, the humans who guide Factory capital consumes energy and materials. Thus producing more alternatives Because energy requires more than it is supposed to replace. This is limiting again Substitutability (Cleveland et al., 1984).”

– The impact of electricity on economic development: a macroeconomic perspective (2017)

The problem is that this fascinating mix of ESG about abundance, the demonization of oil and gas, and climate catastrophe has created a debate about energy ethics and social pressures to focus specifically on power generation emissions. While ignoring discussions about the reliability of electricity provision and the capacity of supporting infrastructure. However, we also ignore the true substitutability of oil and gas (rather than non-substitutability), from our current state. All of this comes within the framework of setting limits on energy and energy consumption. Strict mission against growth. As mentioned before, being anti-ecosystem growth is clearly pro-disaster.

Focusing solely on emissions without also considering the need to maintain availability, reliability, capacity and cheapness will only dismantle the infrastructure already in place – weakening provisions for developing and providing innovative new ways to further improve efficiency (including reducing waste generation). . and pollution). These increasing inefficiencies will then also lead to inefficiencies in power generation and electricity provision, leading to increases in production and living costs. Increasingly declining standards of living across the board, increasing the problem(s) of inefficiency.

This brings us back to the absurdity of over-tribalism and politicization of our power generation and infrastructure projects. The combined smear campaigns of hydrocarbons (oil and gas), nuclear power, and the deployment of renewables (wind and solar), with the complete exclusion of hydropower from these discussions, invite significant fragility in already developed economies.

“Although solar energy is abundant and inexhaustible, it is diffuse compared to fossil fuels Plants only capture about 1% of the energy in sunlight. Hence maximum power Supply is low in a biomass-based economy, as is the “energy return on investment.” Energy directed by humans and expended to extract energy. This is the reason for the shift to fossil fuels The Industrial Revolution was very important in deregulating energy supplies. hence, on production and economic growth (Wrigley 2010).

However, the prevailing basic economic growth models ignore energy and other economic growthResources (Aghion and Howitt, 2009), and energy do not feature strongly in research on them Economic development (Toman and Jemlkova, 2003).

– The impact of electricity on economic development: a macroeconomic perspective (2017)

Ultimately, suggesting that trying to “phase out” already established energy and energy resources by force (eg through legislation), rather than through free market dynamics, is a fool’s errand and a further waste of time and resources. Making lawmakers like those in the clip presented at the beginning of this article involving Jamie Dimon is patently comical. Not only would such methods almost certainly break the system itself if successful, but such activity would be met with such aggressive resistance due to increased energy costs that the most likely reaction would be a successful defense of the system itself anyway. It ultimately only leads to failure, regardless of which of these outcomes occurs.

In general, a well-functioning society continues to use established energy sources while using more efficient and reliable energies in greater proportions to further improve the efficiency of these methods, while also constantly developing more innovative and rewarding energy sources. Improving the economy and return on investment in power generation itself, ultimately raising living standards. Positive feedback loop.

Figure 2. Source: Our world in data

Let’s take a look at the investment relationship in relation to power generation, capacity and the infrastructure itself.

Energy and return on investment

Stern and Kander (2012) concluded that increasing population without increasing energy supply also leads to a decline in production8 – shock. Stern and Kander produced their own version of the Solow model to include a low-replacement energy source (such as oil and gas) as well as employment in economic projections, as they believed that existing economic models did not adequately incorporate the economic importance of energy in the world. The health of the economy, especially when looking at developed countries that have greater access to energy and reliable energy. Doing so has led to the additional conclusion that increasing energy supplies, coupled with population, and the use of technological advances that increase energy generation, lead to improved production. Again, shock. But more importantly, this suggests that increased power generation, with increased access to energy (as well as supply), improves use and production, thus boosting GDP, even for already developed countries.

Solow model and steady state

For those who don’t know what the Solow Model is (and didn’t watch the YouTube tutorial I did Kindly mentioned above to help you understand), let’s take a quick look.

Solo model

The law of diminishing returns, when set against consumption (which is constant), and combining investment and the rate of return on those investments, leads to a path approaching the break-even point over time. Which subsequently results in negative returns on investment over a sufficiently long time period. This dynamic is particularly true in energy infrastructure and the outcome debate in relation to urban development and economic health. What this shows is that underdeveloped countries that incorporate modern technologies in power generation and distribution obtain greater returns in the early stages with diminishing returns as power becomes available and used throughout the country. Leading countries with saturated access to reliable energy (such as the United States and Europe) experience a slower return on investment compared to lagging countries that are trying to catch up by deploying modern strategies. makes sense.

Figure 3. Source: Solow model and stationary statisticse, University of Marginal Revolution

What this also indicates is that failure to successfully deploy continually improving methodologies and technologies for energy production, capture, distribution, storage and use leads to costs of mere maintenance that will begin to erode the investment. This means that you are wasting more and more time, effort and resources just treading water when you can only slow down your decline and gain zero ground. The necessity of constantly searching to improve our capabilities in everything related to energy; We can’t stop. Stopping looking for greater sources, methods of capture, distribution, use and consumption strategies will literally lead to expiration.

Solo and energy model

What Stern and Kander show is that when advances in technological enhancement of power generation are combined with a growing population base, along with improved energy use, economies can extend the Solow model’s lifetime to avoid crossing the break-even point. Effectively allowing GDP to expand steadily, as the United States has experienced over the past two centuries.

Figure 4. Source: Solow model and stationary statisticse, University of Marginal Revolution

By innovating power generation with enhanced technologies and methodologies, increasing energy access and capacity, and increasing the population base, we get effective energy prices that continue to trend toward zero. We get greater and greater returns on the amount of energy consumed by getting more work done. Even though we continue to consume more energy than ever before.

Figure 5. Source:

Figure 6. Source:

Tomorrow we’ll look at the ways in which Bitcoin mining integrates with these dynamics.

This is a guest post by Mike Hobart. The opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.

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