Will’s theorem

by on August 4, 2008 at 9:27 pm in Economics | Permalink

(a) energy is not scarce; the historically most efficient sources (oil, coal, etc.) are;

(b) a well-functioning price system will shift energy consumption to
(cleaner) alternative energy sources as prices for historical extracted
sources of energy rise;

(c) the initial high price of alternative energy will temporarily
slow growth, but competition and technological progress will eventually
push prices below the historical trend and even asymptotically approach
zero, increasing average rates of growth;

(d) environmental quality is a global public good, but;

(e) this is most likely to be secured as a consequence of growth –
as a consequence of the technological innovation that both creates and
is created by growth – together with the rising scarcity and prices of
the most environmentally degrading energy sources.

So,

(f) there are no meaningful limits to growth from either the
scarcity of energy, or from negative environmental externalities from
economic production, since in the medium run, those externalities are
positive.

Here is the link.  I’m willing to buy that theorem with reasonably high probability.  What worries me is that first sentence: "energy is not scarce" — it also could have been written "destructive energy is not scarce."  A world where we solve our energy and environmental problems is also a world where small groups or lone individuals have great power to destroy.

In Cleveland I posed a variant of the following question: let’s say that you can blow up the world if a) you can exceed 1550 on your two main SATs, b) you are willing to spend $50,000, and c) you sincerely wish for world destruction for one month straight.

How long would the world last?

We may someday envy the problems we have now.

1 Bob Murphy August 4, 2008 at 9:41 pm

I got hung up on step one (or a):

(a) energy is not scarce; the historically most efficient sources (oil, coal, etc.) are;

I assume he means that oil and coal are scarce because of their relatively high prices. But they are still cheaper than alternative forms; that’s why politicians keep promising to throw billions at these “solutions.”

As I explained in my Congressional testimony a couple of weeks ago (9-page pdf), proved reserves of crude oil are at an all-time high. Even in terms of years’ worth of supply, we are much better now than in 1980. Back then, there were 28 years’ worth of oil, while at the start of 2008 we had 43 years’ worth of proven reserves, based on 1980 and 2007 consumption rates.

Incidentally, the “peak oil” theorists were looking pretty smart from 2005 – 2007, but first quarter 2008 was a record breaker for world crude output.

If we include not just conventional petroleum sources, but also things like shale oil, there are literally centuries worth of fossil fuel energy available. Humans will almost certainly be able to profitably develop them decades from now, if conventional sources become too costly.

So again, I don’t understand in what sense WW claims that oil and coal are scarce, while biofuels (or whatever) are abundant. The former are still cheaper, and are available in enormous quantities.

2 Steve Sailer August 4, 2008 at 10:14 pm

Will Wilkinson opines:

“energy is not scarce”

They used to teach you on the first day of Econ 101 that economics is about scarcity, but I guess that’s so 20th Century. Just as it’s hard to imagine that they used to make you put money down to buy a house and prove that you weren’t just making up your income on the mortgage application, someday, we’ll all look back and laugh at how we used to have to pay money for energy.

3 mark August 4, 2008 at 10:47 pm

Hmm…I’m reminded of Neal Stephenson’s The Diamond Age. Free energy = dissolution of nation-states?

4 Anonymous August 4, 2008 at 10:54 pm

It’s not clear how you make planet-shattering bombs out of solar panels and wind turbines. The central point of your reasoning seems to be a nonsequitur. Maybe some new energy storage technology? Can you make bombs out of supercapacitors? Surely not the kind that blow up the entire world. Or am I missing something that you dare not say out loud for fear of giving terrorists ideas?

The end of the world (for humans) will probably not involve energy at all, but biotech.

We are probably heading for a surveillance society though, with the proverbial tradeoff of freedom for security. We’ll have DNA sniffers on every street corner identifying every passerby from the cloud of dead skin cells that they trail behind them (like the Pig-Pen character in Peanuts), and we’ll have reliable lie detection from analysis of facial expressions or scans of bloodflow patterns in the brain. “Planning to blow up the planet, citizen?”

5 Bernard Yomtov August 4, 2008 at 11:36 pm

Part (e) is a pretty heroic example of begging the question

I’d say.

Let’s see:

[environmental quality} is most likely to be secured as a consequence of growth…

So,

(f) there are no meaningful limits to growth from … negative environmental externalities from economic production, since in the medium run, those externalities are positive.

Yup. X is true, therefore X is true. Can’t argue with the logic.

6 DCF Anlaysis August 4, 2008 at 11:49 pm

I suspect (but am not certain) that the source of energy Tyler is referencing is nuclear power. If this is the case, I agree with both the assertion of Will’s theorem and this post.

7 Jason Armstrong August 5, 2008 at 12:31 am

To paraphrase Mark Twain, “The death of fossil fuels has been greatly exaggerated.”
Alternative fuels are a fad, and the energy that they produce(save nuclear power) costs 2-3 times more than fossil fuels, when the accompanying decline in conventional power generation’s economies of scale are taken into consideration. Once people(Americans, particularly) experience the decline in their quality of life that bureacratic control of power generation(for that is the only way alternative fuels can possibly gain eminence, due to the fact that they are currently uneconomical) will inevitably have, biofuels and the like will fall by the wayside, quicker than a Paris Hilton undergarment on a Saturday night.

8 Ian August 5, 2008 at 12:46 am

“costs 2-3 times more than fossil fuels…”

Clarification: alternative energy costs 2-3 times more than oil power now, or 2-3 times more than oil did six months ago? Rising costs make technologies which were previously prohibitively expensive viable. (though corn ethanol really should fall by the wayside, seeing as it requires more fuel input than it provides fuel output)

9 Ian Tindale August 5, 2008 at 2:16 am

I don’t regard your inferred logical equivalence of ‘cheaper energy’ equating with ‘greater risk of damage inflicted by different parts of the world upon each other’ as either valid, or generative. In other words, even if it’s true, I don’t think it’s useful of you to promote this aspect, as it will hold back the eventual gain of any true advantage despite the risks. But essentially, I don’t think it’s even true. If party X wanted to cause damage to party Y (or the ‘rest of the world’ as the americans might inherently imagine the structure to be) then making energy more affordable or available isn’t going to be the criteria.

The decision to cause destructive damage isn’t solely governed by whether a society or sub-group can afford it this week: “Look, perhaps it’s a bit too close to the end of the month – electricity bills to be paid, the rent is due, etc, so let’s all hold off on deploying this devastating plan until we can all afford to chip in and buy enough energy”. “No, let’s do it now – let’s just push our credit cards to the max, get it done, then we can go back to tending to our home lives, families, households and career prospects, same as everyone else on this planet”. “But you don’t understand, look how expensive energy is – can’t we just wait until a cheaper form of energy is developed? At these prices, the wife will kill me”. Etc.

Is there a particular price-point you had in mind?

If party X wants to aggravate party Y in a particularly destructive manner, the requisite variety isn’t restricted to energy-derived methods (although that’s the sort of fast action-film superhero car-chase context that consumers of american-sourced media might habitually expect, due to their position as prime exporters of storytelling and media conduits that facilitate storytelling). There are more damaging biological and psychological techniques that aren’t coupled to availability or affordability of energy. It doesn’t always have to go ‘bang’.

10 katie August 5, 2008 at 2:26 am

In Cleveland I posed a variant of the following question: let’s say that you can blow up the world if a) you can exceed 1550 on your two main SATs, b) you are willing to spend $50,000, and c) you sincerely wish for world destruction for one month straight.

How long would the world last?
Tyler, why would the $50,000 matter in the first place? Is this assuming no ability to get credit so you’d have to put up your own money? I assume that if you blew up the world either your own $50,000 or someone else’s $50,000 would not matter.

My understanding is that the biggest source of energy that becomes profitable as oil prices rise is not solar, geothermal, or wind, but Canadian oil shale. It is easy for a well-functioning price system to shift energy to dirtier, not cleaner, sources.
I think the feeling is to shift to a broader portfolio of energy- more oil from Alberta’s oil sands, but also increase funding for renewables. Of course it’s also profitable to drill offshore- which even Obama is willing to take into consideration.

11 Joseph Logan August 5, 2008 at 2:37 am

It does seem that (e) is heavy on question-begging, but (a) seems–protestations aside–intuitively true if modified to read “energy is not relatively scarce”. That is, relative to our lifetimes, the lifespans of species, and nonreplenishable sources that without question exist in finite quantities on a finite planet. Nuclear, solar, and wind power are not scarce relative to the lifespan of homo sapiens, but I will likely outlive 43 years of reserves at current levels of consumption. It’s a good point about the sources of concentrated energy, but also about technological advances in harvesting any form of energy.

As for the power to destroy, malevolent players have always had access to tools of destruction but have rarely used them. There may be an argument to be made for crowdsourcing nuclear terrorism, but it doesn’t seem like a particularly straightforward one. Our reach often extends our grasp, but our grasp tends to catch up pretty quickly.

12 themightypuck August 5, 2008 at 3:43 am

TheophileEscargot,

The Breatharians disagree with you.

13 Sol August 5, 2008 at 4:27 am

Katie, I think the $50,000 figure matters because that’s the lowest threshold where putting world destruction on your credit card is feasible. That is, it probably makes very little practical difference whether it costs $5,000 or $50,000 to destroy the world. It makes a huge difference whether it costs $50,000 or $5,000,000.

14 odograph August 5, 2008 at 8:04 am

All of Will’s points can be true, and there can still be “pinches” when one resource expires but a follow-on is not ready for prime-time. Optimists think of short pinches and fast transitions and pessimists … well, real pessimists think of low-energy centuries.

I think we might possibly have the tech to do a happy and low fossil fuel world now, but I’m not sure we could, if too many in the market still think Hummers are the growth path (and some still do).

Right now, it would take more bicycles than most people can take …

15 Andrew August 5, 2008 at 10:18 am

To loan you the money to destroy the planet, the creditors would require a steep interest rate, a steady income and proof of extraterrestrial property. That’s where I’ll be.

16 sidereal August 5, 2008 at 12:19 pm

It’d be more convincing if e) weren’t a cross between religion and handwaving.

17 Floccina August 5, 2008 at 12:47 pm

BTW I think Tyler is referring to fact that all matter contains an enormous amount of energy so that if knowledge became available so that any the run of mill evil genus could learn how to unleash it with $50,000 worth of equipment, well…. Again my belief is that it is just as likely that with such knowledge would come the knowledge needed to prevent him with, say $100,000 worth of equipment.

18 odograph August 5, 2008 at 4:20 pm

I was getting more nuclear-neutral, but up popped a series of unfortunate events …

‘It feels like a sci-fi film’ – accidents tarnish nuclear dream

19 mpowell August 5, 2008 at 4:44 pm

Rhino,
The nuclear debate is not that simple. If nuclear was economically competitive, you’d see more of it. But the up front investment is huge and the payoff is a long way off. Now, many argue that this is do to political costs/risks of building a plant. You can’t make money if your project is delayed for 10 years. But is this an undue cost we impose on nuclear or is it merely asking the plant to bear the cost of the risk? I don’t think that’s an easy one to answer.

20 Lee A. Arnold August 5, 2008 at 9:46 pm

Will’s theorem is the same argument that several of us have been making on various websites for years now. Of course, the price of carbon energy is scarcity-based, not environmental-damage-based, and so there is no a priori reason that scarcity will forestall the worst damage.

But the thing that really needs to be added to the argument is an education in ecology. There is an irreparable, irreversible negative environmental externality going on right now: Fragmentation by human habitat has engendered a “species extinction debt.” We are starting to lose components, both living and non-living components, of wildlife ecosystems. It has nothing primarily to do with the type of energy used, although that makes it worse: both chemical pollution and especially climate change accelerate this process.

Economic growth is NOT solving the disappearance of wildlands; in fact most of the disappearance over the past half-century or so is directly related to economic growth in the advanced and developing countries. Population growth in poorer countries has been a secondary cause, not the primary cause. So most destruction of wildlands should be unnecessary, but most people have been too uneducated or too wrapped-up in themselves to understand what is going on. It is an intellectual scandal and a spiritual disaster.

21 Captain Quirk August 5, 2008 at 10:58 pm
22 lxm August 6, 2008 at 5:02 pm

Why does Will’s argument remind me of Candide?

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