If an incremental increase of wealth can be spent on less resource intensive goods -say rich people spend disproportionately on DVDs, instead of buying lots of cars

Robert Frank, in his book Richistan, points out that the super wealthy, those worth between $100 million to $1 billion, spent an average of $182,000 on wrist watches; $311,000 on automobiles; $397,000 on jewelry; and $169,000 on spa services last year alone.

That's a big if....

(p.s. one has to wonder on the 'spa services' figure.....)

Hi Nate,

I am reading "Energy & Resource Quality" by Hall & Cleveland, 1986. One of the main points they make is that GNP and Fuel are directly linked. Fuel use and fuel quality (plus smaller factors) can predict GNP to 97% over the enormous range of 1890 to 1980. That leaves 3% for efficiency at best. They seem to explain it by showing that trying to replace fuel use you use more capital and that capital has high embodied energy and outweighs the fuel use.

Do you know if they have done similar studies since the mid 1980's that might show that fuel and GNP have decoupled in any way? Or even show that it has remained just as tightly coupled. I have to admit, I found the news a bit depressing. ...

Forbes keeps featuring economists who say that fuel and GNP have decoupled to a greater degree in recent years in the U.S. But when you really look at the figures, it looks to me like the economic decoupling was based on increased debt, and is not sustainable. I expect we are reverting to the Hall & Cleveland model you cite.

They cite some efficiency improvements:
1. The switch from coal to oil gives a BTU to GNP boost (not good news for a future switch from oil back to coal).
2. The switch from coal or oil to electricity gives a BTU to GNP boost (great news for wind, nuke, solar PV).

But the main differences are explained away by looking at embodied energy in goods, which economists don't care to track, and household uses of energy, which don't impact GNP as much as industrial/commercial energy use.

So it is part hopeful (the future is electric!) and part not (GNP will decline with lower energy). But it would be very nice to have updated papers. I wish there was a 2007 version of the book!

"The switch from coal or oil to electricity gives a BTU to GNP boost"

This defies logic and is not true for coal. In switching from a primary fuel source, such as coal or oil, to a converted form of energy always results in energy losses. For example using electricty for boiler heat requires twice as much base energy (turning coal's btu's into electricity is only 35% efficient considering steam cycle losses, line losses and transformation losses) as compared with burning the coal for that same process heat. Home heating with electric heat pump using ground source would be about same efficiency as burning coal if heat pump has COP of at least 3.

Always? Surely it depends on the end use. Consider a train hauled by a coal fired steam locomotive, a diesel locomotive and an electric locomotive.

If the power station has a higher eficiency than an internal combustion engine or an open coal fire...

Most important.

Electricity is a carrier.

Like Hydrogen.

""The switch from coal or oil to electricity gives a BTU to GNP boost"
To which mbnewtrain replied,
"This defies logic and is not true for coal. In switching from a primary fuel source, such as coal or oil, to a converted form of energy always results in energy losses."

Correct. The primary fuel switch was the one to attribute the gain in BTU to GNP boost, i.e., natural gas.

RC

Fuel use and fuel quality (plus smaller factors) can predict GNP to 97% over the enormous range of 1890 to 1980.

More recent work by Ayres (1,2) suggests the link is 70% with exergy, which is the amount of useful work derived from the input energy source (meaning 10btu of coal can provide 0-10btu of exergy, depending on how efficiently you use it). It's similar to "fuel quality", in some sense.

He also notes that the exergy-based analysis explains much more of GDP growth than energy-based analyses, so it's likely that the "smaller factors" you mention were pretty significant.

Do you know if they have done similar studies since the mid 1980's that might show that fuel and GNP have decoupled in any way?

You can see it for yourself in the EIA's data on energy intensity of the economy. The amount of energy required to produce a dollar of GDP fell only 20% from 1949 to 1980, but has fallen by about 45% since then -- nearly triple the previous rate.

You can see it for yourself in the EIA's data on energy intensity of the economy. The amount of energy required to produce a dollar of GDP fell only 20% from 1949 to 1980, but has fallen by about 45% since then -- nearly triple the previous rate.

You think that might have something to do with the offshoring of US industry?

You think that might have something to do with the offshoring of US industry?

That's certainly a factor, but far from the only one. Indeed, the tales of US manufacturing's demise are greatly exaggerated.

See also here or here. US manufacturing is still 20% of the world's manufacturing, commensurate to the US economy's 20% share of the world economy.

Of course, it's worth noting that the world's energy intensity (btu/$ of GDP, inflation-adjusted) has fallen 7-15% in the last 10 years (same EIA data, 15% based on PPP, 7% based on market exchange rates), so it's not like the energy consumption has simply been pushed elsewhere.

Thanks! Good links. I had meant to read that paper by Ayres. He does not quote Hall, Cleveland, Odum, or Constanza in any of his references. It seems he discovered the relationship independently. He found the link between quality and GNp but does not have the two other correction factors that they discovered: product mix and household use. I need to read the longer paper. Thanks again!

It's an interesting paper, but obviously it's only one look at the situation. I imagine that both his "exergy" approach and the earlier "quality, product mix, and use" are attempts to quantify the fact that a fixed amount of energy can be used in very different ways to produce very different amounts of things. It's a key thing to examine, but I'm not sure how best to do so.

At any rate, you're more than welcome - finding, exchanging, and disseminating information is, IMHO, the most important (and bestest) function of the internet.

(p.s. one has to wonder on the 'spa services' figure.....)

Indeed! Spa services can run quite a spectrum! I think the quoted figure may be too low.

Seriously though, where in hell do these figures come from? I suspect a deep reach into somebody's behind. When I go in to buy my Rolex the salesman doesn't ask my income and I assure you all that if I had that kind of income I wouldn't be wasting my time filling out surveys. And I'd instruct my personal administrative assistants not to do it for me.

I wish we would all ask the simple question, "From what I know of the world, how would these numbers be generated?" There's a lot of BS out there.

There are 57 communists in Congress.

I call it the "Heinz effect."

well Robert Frank is a respected economist (I know, oxymoron..;), that has written about luxury and the rising GINI coefficient and happiness, not linked to money etc for decades - if it was some random journalist I might agree with you, but he, if anyone could get this data. Your greater point of accuracy is valid, but the even greater point that when people have billions, its like water - they don't 'reduce' their expenditures, in energy or dollar terms, on average. I will have a post on Monday on this precise topic which Ive been working on for weeks so will be happy to have it finished so I can move on to the next....! (will have spa services in between tho)

If an incremental increase of wealth can be spent on less resource intensive goods

Robert Frank, in his book Richistan, points out that the super wealthy, those worth between $100 million to $1 billion, spent an average of $182,000 on wrist watches; $311,000 on automobiles; $397,000 on jewelry; and $169,000 on spa services last year alone.

That's a big if....

Er - your data supports his hypothesis.

Luxury items consume very few resources per dollar of cost - a $5,000 wristwatch has no more metal than a $50 one - making them in very large part services. And services are the least resource-intensive goods of all - a $500 massage and mani/pedi from Jenni consumes little more than time. Compare that to the resources required to build a $400 lawnmower and its $100 of gas.

Indeed, the broad trajectory of almost every rich country's economy supports his hypothesis - they've all shifted heavily into services, with the large majority of economic activity representing these low-resource activities. That's likely to be one big reason why the energy consumption per dollar of GDP has been falling for years in the rich nations.

would you hypothesize then that if everyone was worth 100 million that energy use would go down?

also there is the ripple effect of all that money down the line. $200,000 on spa services has a hell of an energy multiplier...

I never meant to imply, that higher wealth means decreasing energy use. I meant to imply that higher wealth probably implies a lower ratio of energy use to wealth (or income). I also meant that a strategy we should be using to change things, is not to try to end economic growth, but rather to steer it towards less resource intensive things. I think the relevant examples are not so much the super-rich, but people not too far from the median in their societies, and how does their energy (or insert favorite other resource) use scale as their income increases. If we can steer them away from say hummers, speedboats, racing-cars, etc. and towards less energy consuming lifestyles, it could start to make a big difference. That is the sort of directional change we need to start making. Trying to sell zero growth will be nearly impossible, but growth with change of lifestyle emphasis might be doable.

www.siam.org/news/news.php?id=377

"Trying to sell zero growth will be nearly impossible, but growth with change of lifestyle emphasis might be doable."

By the time the sale's completed, the product sold
will be obsolete.

The idea of "collapse as economizing" is the model
to be "sold."

SA is instrumental in this. How many times have you seen SA
in the MSM lately?

Zero.

Or Kenya. Or Pakistan. All with the same problem.

Load Shedding.

Is there a price that gold/platinum/diamonds rise to that
will make their mines more economically competitive to
coal mines?

would you hypothesize then that if everyone was worth 100 million that energy use would go down?

Resources per dollar and total resources are different measures.

also there is the ripple effect of all that money down the line. $200,000 on spa services has a hell of an energy multiplier.

Yes, obviously; however, if the original product's cost is 50% for production of raw materials and 50% for social costs (labour, advertising, etc.), then there's a great deal more money being spent directly on highly resource-intensive activities (production of raw materials) than if it's a 5/95 split.

I think you may be getting carried away with the large numbers involved. Consider spending $200,000 on "spa services" - massages, saunas, mudpacks, trainers, etc. Certainly some of that money will be spent on resources (to heat the rooms and saunas, to drive the trainers and masseuses to work, to build the spas in the first place), but only a little - maybe 5%.

Now consider spending that $200,000 on 10 new cars and a year's gas for each. Enormous amounts of that money go directly to pay for production of new resources (steel, aluminum, plastic, rubber, oil, etc.), although some will be social costs (like wages). Is it not obvious that the cars would be a much more resource-intensive purchase than the spa services?

If it's not obvious, well, it's still apparently true nonetheless - the EIA cites expanding service sector as one of the reasons for decreasing energy intensiveness in modern economies.

Problem is you're not looking at the bigger picture.

The $5000 watch supports a large but different industry. It may support precious metals and stone extraction. High cost marketing and media relations. The $5 watch might support an equally large industry but hundreds of low paid labor with no marketing.

It would be interesting to see which item on a dollar basis would consume more energy.

I'd bet the $5000 watch and associated inputs. Say you need Tiger Woods, Brad Pitt or some other high profile individual to place your product these guys are not energy frugal.

I think you are right Pitt. It is necessary to compartmentalise stages of economic growth. Once all the roads and houses and offices and airports are built and most folks own a car and a flat screen and population growth wanes and recycling takes hold then the amount of energy required per unit time to replace and maintain these items must be substantially lower than during the initial construction and stuff accumulation phase.

Folks then may be satisfied with service based consumption - of which tourism is one that does consume / waste energy.

Problem is that we have billions in the developing world that have just got their foot on rung one of the consumption ladder and who have high hopes of climbing higher.

$500 - wow!

Once all the roads and houses and offices and airports are built and most folks own a car and a flat screen and population growth wanes and recycling takes hold then the amount of energy required per unit time to replace and maintain these items must be substantially lower than during the initial construction and stuff accumulation phase.

The idea of achieving a state of economic maturity in which we strive to provide ourselves with a constant material standard of living with the most efficient possible use of resources is a good one. Personally, however, I do not see much sign that we are converging toward such maturity. In the U.S., at least, the tendency is toward bigger houses, bigger higher performing automobiles, a larger variety and sophistication of electronic toys, more automobile miles, jet plane miles etc. Furthermore, there is the minor problem that if a true state of economic maintenance were achieved the stock market would go belly up.

Also, as you point out there are many billions of people living in relative poverty today, and if we are unwilling to give up any wealth, then no reason exists why they should desire a standard of living less than what we have, thus guaranteeing continued pressure on the earth's resources for many decades to come.

Trusting that private finance capitalism is going to evolve toward some natural endpoint of stable self-sufficiency strikes me a highly questionable strategy. I make no categorical statements about what standard of living can be achieved in a post fossil fuel economy, but if we hope to create a sustainable economic system which can support the entire population of the earth in reasonable comfort, then we must create economic institutions that can tolerate constant or even contracting output if necessary, rather than ones which create suffering and misery the minute growth start to slow down.

Once all the roads and houses and offices and airports are built and most folks own a car and a flat screen and population growth wanes and recycling takes hold then the amount of energy required per unit time to replace and maintain these items must be substantially lower than during the initial construction and stuff accumulation phase.

There would be a race between reaching the relative end of stuff accumulation and the increasingly throw-away quality of the stuff we are accumulating. Another case of receding horizons?

Pitt,

The service industry itself may be low energy consuming, as is retail. The problem is that it relies on extensive use of a transport infrastructure to support it, which is energy intensive. Most people I know will drive to the gym,shops etc plus lorries to deliver goods. In the uk we now have several "out of town" shopping complexes that people drive miles to visit. Meadowhall, near Sheffield is one example where 1000's of cars travel every day to visit and nothing material is gained, just money changing hands.
You will probably ask me for data to prove the vehicle numbers, I don't have any, just observation and extrapolating on my own activities. If you pull me up, I may motivate and search for some data!
The service economy relies on people having disposable income. The cost of fuel is straight off the bottom line of spare cash.
In terms of lower energy consumption per GDP, this is another area that the books can be cooked. The four tyres I have just bought for my car are made in China. Does the "embedded" energy go onto China's books rather than the uk's? The same applies to all imported manufactured goods purchased by rich countries.

and $169,000 on spa services last year alone.

That's a big if....

(p.s. one has to wonder on the 'spa services' figure.....)

Ha! My wife would consider that amount 'just about right'.

(grumble)