Lucky Economists, Unlucky Scientists?

For decades, economists (Cornucopians or optimists) have been at odds with natural scientists (Malthusians or pessimists) when it comes to the scarcity of natural resources. The economist’s argument, summarized here by Julian Simon, is as follows:

More people, and increased income, cause resources to become more scarce in the short run. Heightened scarcity causes prices to rise. The higher prices present opportunity, and prompt inventors and entrepreneurs to search for solutions. Many fail in the search, at cost to themselves. But in a free society, solutions are eventually found. And in the long run the new developments leave us better off than if the problems had not arisen. That is, prices eventually become lower than before the increased scarcity occurred. (Simon 1996)

The viewpoint of natural scientists seems to be a bit simpler; the more scarce something is the higher the price, leading to increasing prices as resources deplete over time. These opposing views have led to some famous wagers in the past. The most famous occurred in 1980 between economist Julian Simon and natural scientist Paul Ehrlich. The wager was whether the price of five metals would increase in ten years time. Simon won the bet. Another bet was made more recently. In 2005, John Tierney of the New York Times wagered with Matt Simmons over the price of oil. Simmons bet $5,000 that the price of oil would be $200 per barrel in 2010. Tierney won the bet.

As a result, Tierney has publicly applauded himself and the economists’ view in a recent article in the New York Times. He states: “Maybe something unexpected will change these happy trends, but for now I’d say that Julian Simon’s advice remains as good as ever. You can always make news with doomsday predictions, but you can usually make money betting against them.”

But what is the real message (if any) to be gleaned from these bets? Is it that economists are always right and natural scientists always wrong? Is it that prices decline for commodities over time?

I argue that there is very little (if anything) to be learned from these bets, and I explain why below the fold.

First, as Paul Kedrosky and Dave Summers have indicated in their articles, the outcome of the Simon-Ehrlich wager depends almost entirely on the date in which the wager termed, not scarcity or technology or anything meaningful like that.

Let's examine oil prices as an example. Let’s say that I wagered in 1864, when the price of oil was $110 per barrel (2009$), that the price of oil will decrease over time. I would have been correct regardless of whether the wager termed in 1865 after one or in 1964 after one hundred years. However, if I bet in 1892 when the price of oil was $13 per barrel, that oil prices will increase in the future, I would have been correct in every year henceforth except 1931, 1933, 1945, and from 1963-1973. Neither of these bets would have indicated anything about the scarcity of oil.

Knowing this, how could anyone claim that either Simon or Ehrlich was correct? Simon was lucky, Ehrlich unlucky. The point is that scarcity is only one of many factors that can influence prices.

In fact, Ehrlich and Simmons both made the same mistake—they assumed that all other variables that effect price, such as demand, would either be held constant or only help their bets. But this was clearly not the case. In the fall of 2008 after the global economy imploded, oil demand declined all over the globe, and the price of oil fell accordingly from a peak of over $140 per barrel to just over $30. Energy prices are another influential factor. It is easy to counteract the effects of depletion (e.g. declining ore grade) by applying more energy (i.e. effort) in extraction, and as long as energy prices are low, this will not have a large impact on the cost of production. But as oil itself depletes and becomes more expensive, applying more energy in extraction to counteract the effects of depletion becomes less tenable.

Clearly, Ehrlich and Simmons made bad bets and lost, but Simon and Tierney made bad bets as well, they just happened to win. As a result, I would caution against believing Tierney’s optimism. He writes:

“It’s true that the real price of oil is slightly higher now than it was in 2005, and it’s always possible that oil prices will spike again in the future. But the overall energy situation today looks a lot like a Cornucopian feast, as my colleagues Matt Wald and Cliff Krauss have recently reported. Giant new oil fields have been discovered off the coasts of Africa and Brazil. The new oil sands projects in Canada now supply more oil to the United States than Saudi Arabia does. Oil production in the United States increased last year, and the Department of Energy projects further increases over the next two decades.”

But is this really reason for optimism? This is how I read the previous paragraph: 1) the future of our oil supply resides 30,000 feet below the ocean surface, requiring more deep sea drilling exactly like that that led to the tragic accident on Deepwater Horizon, 2) we have substituted our oil imports from Saudi Arabia where oil production is roughly $10 per barrel, to Alberta where production costs are upwards of $80 per barrel, not to mention increased greenhouse gas emissions, and 3) oil production in the U.S. is still roughly 1.5 billion barrels per year (4 mbpd) below the peak level in 1970, and the U.S. still imports most of its oil.

The bets made by Ehrlich and Simon as well as Simmons and Tierney were faulty because they assumed ceteris paribus conditions; that all other conditions aside from the one on which the bet is made (depletion in these cases) will not influence prices. In the real world, however, there are a number of factors that influence price. As a result, it is incorrect for Tierney to claim that his victory, or that of Simon, is a validation of the economists’ viewpoint on the price of commodities. The economists were lucky, and the scientists unlucky.

In other words, what did Tierney think about his prospects winning the bet in the Summer of 2008 when the price of oil went up to USD 140?

The wager was about the average oil price at the end of 2010, for 2010 only.
And despite the spike in july 2008 the average oil price 2008 was slightly below $100.

These particular bets don't, of course, show anything.

But I think we have to conclude that sometimes economists do have some insights into one very narrow part of the picture: price.

As the quip goes for cynics as well as economists, they know "the price of everything and the value of nothing."

Most here overlooked or underestimated the power of 'demand destruction' on price.

Of course, for the dismal science, the price is the most important thing. The fact that 'demand destruction' meant that vast swaths of people could no longer afford even the reduced price, is less important.

As a result, it is incorrect for Tierney to claim that his victory, or that of Simon, is a validation of the economists’ viewpoint on the price of commodities. The economists were lucky, and the scientists unlucky.

Bah!

No, the scientists were unlucky and should have known better, any one who gambles can lose. As for the Economists, of the Julian Simon school, they are delusional, have no understanding of thermodynamics or the laws of nature in general and base their conclusions on magical thinking. They are no better than astrologers or voodoo priests studying goat entrails.

Photobucket

Figure 1. The relationship between per capita energy use and per capita gross
domestic product (GDP; in US dollars) of countries, plotted on logarithmic axes,
from 1980 to 2003. Note that the slope or exponent, 0.76 (95% confidence interval 5
0.69–0.82), is close to three-quarters, which is the canonical value of the exponent for
the scaling of metabolic rate with body mass in animals. If per capita GDP is taken
as the size of an average individual’s economy and per capita energy use as the rate of
energy consumption required to support that economy, this relationship may not be
coincidental. Total per capita energy consumption is calculated as the caloric intake
of humans (about 130 watts) plus the energy derived from all other sources, including
fossil fuels and renewables. The thin colored lines show trends for individual
countries from 1980 to 2003. The thick black line is a regression model fit to the mean
values for each nation during this period. GDP data are from the World Resources
Institute (http://earthtrends.wri.org/index.php). Total energy consumption data are
calculated from the sum of energy consumption from eating (data from the World
Resources Institute) plus all other sources of energy consumed for other purposes
such as utilities, manufacturing, and transportation. Source: Data are from the
International Energy Agency at www.iea.org/stats/index.asp.

Source:Energetic Limits to Economic Growth
James H. Brown, William R. Burnside, Ana D. Davidson, John P. DeLong, William C. Dunn,
Marcus J. Hamilton, Norman Mercado-Silva, Jeffrey C. Nekola, Jordan G. Okie, William H.
Woodruff, and Wenyun Zuo

Note to Julian Simon type economists: The economy is a subsystem of the ecosystem. There are natural laws and limits that no amount of human ingenuity can outwit. Either we start living within our means or we are FUBAR!

"There are natural laws and limits that no amount of human ingenuity can outwit."

Whether or not said economist accepts 'natural laws and limits' has little bearing on their economic thinking. They know one thing: we humans are damn good at kicking the can, and we'll keep doing it until we can't. Once that happens, all bets are off anyway. The 'good' economists may not know much about physical limits, but they understand human nature and herd mentality pretty well.

The 'good' economists may not know much about physical limits, but they understand human nature and herd mentality pretty well.

Correct, which is precisely why those particular economists are more like astrologers and shamans than scientists.

Their theories and prognostications cease to work, once the system within which they operate comes up against physical limits. Basically they do not accept that any such limits actually exist and hence their entire world view is profoundly and fundamentally flawed. Their understanding of human nature is only pertinent in a world where resources are still abundant. They haven't considered how humans behave when they are faced with extreme scarcity because they argue that we as a species are now too smart. They are convinced that we will *ALWAYS* be able to find substitutes or better ways of producing what we need to sustain us. They are *WRONG*!

We must educate people to see the need to examine carefully the allegations of the technological optimists who assure us that science and technology will always be able to solve all of our problems of population growth, food, energy, and resources.

Chief amongst these optimists was the late Dr Julian Simon, formerly professor of economics and business administration at the University of Illinois, and later at the University of Maryland. With regard to copper, Simon has written that we will never run out of copper because “copper can be made from other metals.” The letters to the editor jumped all over him, told him about chemistry. He just brushed it off: “Don’t worry,” he said, “if it’s ever important, we can make copper out of other metals.”
From: Dr. Albert Bartlett: Arithmetic, Population and Energy (transcript)

This is something that both DanBrown and westexas touch on down thread.

Have you heard about the recent experiment with cold fusion being undertaken by a pair of scientists at the University of Bologna in Italy. The pair claim to have reliably created large scale energy production from the fusion of hydrogen and nickel nuclei. The by-product of the nuclear reaction is ................you guessed it, copper.

All of our problems are solved by one neat little discovery. The economists were right after all ;-0.

Sorry, I could not resist that one.

This bet is just another example of how, in the words of another economist, John Maynard Keynes, "The market can remain irrational longer than you can remain solvent."

Thanks Bronx; I still love that quote!

energy vs. power.....

Either we start living within our means or we are FUBAR!

We are living within our means. There has been, and still is, a lot of available fossil fuel, and we are using it.

As time goes by, means change, and we will have to live within some new means.

Human society has essentially no ability to either predict the future or to modify its trajectory to achieve a longer-term optimum. So yes, we are mostly FUBAR in the long run.

We are living within our means. There has been, and still is, a lot of available fossil fuel, and we are using it.

No, Merrill we are no longer living within our means we are in ecological overshoot.

http://www.footprintnetwork.org/en/index.php/GFN/page/earth_overshoot_day/

Human society has essentially no ability to either predict the future or to modify its trajectory to achieve a longer-term optimum.

While I think it is highly unlikely that we will achieve it I disagree that we have no ability to do so.

We are living beyond our means in the sense that the son inheiriting $1 million and that spends $100 K/annum is living beyond his means, since the son is dipping into inheirited assets and not limiting his spending to expected long term income of about $35 K/annum.

But there is no reason not to spend ecological capital now in order to improve the welfare and enjoyment of those currently living, even if that limits the prospects of future generations. In fact, not to do so would require a capacity for collective rational thought, planning, governance, and discipline that it completely beyond the human species as a whole.

The passengers will always move towards the higher part of the sinking ship, even when it might be better to get closer to the water, jump in, and swim for some flotsam or a nearby ship.

But there is no reason not to spend ecological capital now in order to improve the welfare and enjoyment of those currently living, even if that limits the prospects of future generations. In fact, not to do so would require a capacity for collective rational thought, planning, governance, and discipline that it completely beyond the human species as a whole.

That bolded part is so sad and so true.

...well enough said, but I would rather think that if BAU means wasting the planet to provide feasts, fun and games until we hit the wall, because that the way it is, because the theory is we are basically yeast and can inevitably do nothing better, then I would nevertheless still prefer to attempt rational thought, planning, governance, and discipline.

As I am human (and apparently not yeast) perhaps that means the choice is one that humans can make, and worthwhile. Enough individuals abandoning the contemporary masturbathon may be able to make a difference?

The way that works out is usually as follows:

One family doesn't water their lawn, rarely washes the car, makes sure the diswasher and clothes washer have a full load, and generally conserves water. Another family waters their bright green lawn, washes the car weekly and generally makes no effort to conserve water.

When the water supply gets low, the state puts out an edict that all families are required to cut back on water usage by 25%.

You can always propose a scale whereby the effects of an individual are nullified; you can also propose a scale where they are effective. I would suggest you read Ostrom and the like for community-size efforts which have been successful in managing scarce resources. It can and has been done in many areas, and it has been effective.

If the trends of history hold through our period of "accelerated change" (as it might be called), those who preach individual powerlessness and the pointlessness of sustainable community efforts are likely to be replaced by those who practice individual responsibility and become a part of sustainable community efforts. Darwin rules, after all, in the long term.

No, Merril is not interested in sensible planning. He has said that such planning is impossible (in spite of reams of evidence to the contrary). The main impediment to such planning is exactly his ideology. He would rather see the whole world go completely to hell than to ever question his own narrow ideology.

"Rather" has nothing to do with formulating a rationale expectation about the future. It would be a symptom of wishful thinking.

dupe

You miss out :- The family that waters their home grown crops, during the water shortage, with used waste water get fined by the courts. This is UK policy. Note too that this can mean a criminal record that will prevent entry to the USA and will block the guilty party from visiting on business hence destroying that business.

NAOM

Easy-peasy -- build a gray-water drainfield under your garden. Out of sight, out of mind. Since it's gray water, no biggie about sanitation, you can use cheap PVC with holes drilled in it, if you bang it up by accident, just fix it, or even leave it busted. Once your plants grow roots down to the drain field, you're golden.

Yair...dr2chase. Have you ever done it mate? I didn't find it that easy and it didn't work that well exept for bananas.

Some of these things are okay in theory but it doesn't always work out in practice...not that we shouldn't continue to try them and reach our own conclusions. Just don't expect them all to be answers to the problem.

We did actually, but it was Florida soil, very sandy and permeable, might have made a difference. Grew watermelons for a while over our (sewage) drainfield, and after that, just grew grass, really insanely healthy, green grass. Seemed like easy as falling off a log. I guess not, in general.

Not that easy :( People were being caught by the water boards flying over, in a helicopter, and looking for green gardens. If your garden was green then you must be watering illegally - guilty.

NAOM

EDIT: It meant that you HAD to throw out perfectly good, usable water.

People were being caught by the water boards flying over, in a helicopter

How ironic and ridiculous was THAT, using choppers, which presumably burned diesel, to fly around looking for folks who might have been using a few gallons of water to keep their gardens from withering during a drought. I guess they couldn't be bothered to send a few inspectors around the neighborhoods on foot.

That's one of the best (or worst) examples of how the availability of seemingly endless supplies of inexpensive oil has completely skewed the way we've done things over the past decades.

The idea that a municipality would choose - and could afford - to have its water supervisory board spend $$ on diesel fuel to hunt down water-using scofflaws from aerial flyovers is an idea that should have never made it out of the conference room. Instead, it'll just be yet another footnoted anecdote that will serve as an example to future generations who wonder how we squandered our petroleum resources on so many frivolous pursuits in the Age of Oil.

In the UK the water companies are completely separate from the municipalities.

NAOM

I agree with the notion that our civilisation has painted itself into a corner that, as a civilisation we will not likely find a way out of, and that it is now very likely beyond the capabilities of our species to do so.

However, I see it as a failure of our civilisation, because there have been populations of our species that have managed to live in relative balance with their environment very well for many thousands of years. Australian Aborigines come to mind. A hotly debated topic is that 20k years ago they may have played a role in the extinction of the Australian mega-fauna (http://www.abc.net.au/science/features/megafauna/), but otherwise perhaps their success could be taken as proof that our species can live in balance with the world.

As our civilisation wreaks a mass extinction event on the planet and hurtles itself towards its own destruction, I am not sure we could honestly call ourselves 'advanced'.

Good points. The Aborigines are particularly apt, since one has to imagine that they came to their sustainable lifestyle and world view after recoiling from the devastation they saw they were wreaking on their environment. We need a similar awakening, I would say, whether it is otherwise too late or not. This impossible hope is about the only one I have left.

you are both wrong, actually. first, civilization seems to have been born in peace rather than war, so there is that. second, sustainable societies do exist, and without centralized leadership. third, Steve Keen has developed a model demonstrating a steady state-ish economy can exist within the current basic structure. fourth, we have the means to draw down carbon with simple, effective, natural methods.

there are solutions. for now. time window won't be open forever.

I appreciate this point of a view because it is the realist one.

IMO true economists appreciate this more than scientists. However, the free market has to be allowed to operate, even if that means allowing large industries to fail and millions to go jobless and perhaps even some to starve.

This clearing out process is natural, evolutionary, and has allowed human development to proceed.

We simply cannot live in a world in which every last 7 billionth human and their dog is supported and gets everything forever, in which big banks get unlimited money forever. This is insanity.

On the other hand, I think most of the evidence points to a big, big crash to occur within the lifetime of our children or grandchildren. This is no longer esoteric, or something that can be debated. Our grandchildren will starve.

So it's natural but it's also devastating, and we won't be able to do anything about it, and whatever we do will make the problem worse.

"I appreciate this point of a view because it is the realist one."

Presumably by 'this point' you meant:

"But there is no reason not to spend ecological capital now in order to improve the welfare and enjoyment of those currently living, even if that limits the prospects of future generations. In fact, not to do so would require a capacity for collective rational thought, planning, governance, and discipline that it completely beyond the human species as a whole."

But, of course, this is total self fulfilling prophecy.

The free marketers wage hot and cold wars for decades on all planned economies, then turn around and say--see, humans can't plan.

The logic is totally pathetic and totally pervasive.

The total absence of morality in a statement that says basically "it is the best thing to totally screw our children out of a livable planet if it improves anyone's life now, even completely marginally' would be breathtaking to most societies.

That it passes here with silence or plaudits, points more to our share in that utter immorality than to our ability to think our way out of a paper bag.

The Montreal Accord, among many other examples, shows that:

"a capacity for collective rational thought, governance and discipline" to improve the

"prospects of future generations" is exactly

NOT

"completely beyond the human species as a whole,"

even though it limited the "welfare and enjoyment of [some of] those currently living."

It is indeed a grim irony that those whose fundamental philosophy is that it is a deep moral wrong to ever try to plan or control human economic activity are the ones who then turn around and point at the results of their own 'free market' political systems as proof that humans cannot plan or control their own economic activity.

But this is how they want to spin it, so that is how it will be spun--conveniently in such a way that removes any blame from their shameful ideology.

Even though conservatives have long claimed that responsibility is of central importance, but that never seems to apply to themselves.

I tend to agree, though, with Chomsky that the victory of a particularly rabid mutation of this toxic ideology in the last US election finally and utterly seals our doom--we, along with most complex life on the planet, will go extinct in the not too distant future (or at best, in Sir David King's prediction, be limited it enormously reduced numbers, to the Antarctic).

You seem to understand the situation, at least partly. And after all, this is a discussion about economics, the "dismal science".

You have put your finger on the problem. Staving off the dire effects of Peak Oil would require the government management of business activity. Most US politicians regard this as anathema. Others believe that the management of the nations economic affairs is one appropriate activity of government, but that it is generally to be done through fiscal, monetary, and other very high level means, such as funding basic research.

Since the "fall of communism" the triumphal view is that most countries now adopt the free market, democratic system similar to that of the US. Whether that is true or not, it is true that most are engaged in a global economic competition that requires rapid exploitation of resources and populations to stay ahead in the economic race. Most countries do not have the luxury of pursuing economically inefficient systems.

Secondarily, most of the world's religions have an eschatological viewpoint that envisions an end time. Some religions eagerly await the end of the world. Others are simply fatalistic.

I'm not pessimistic about the ability of scientists, economists, and historians to predict within some fairly wide error bars how the world and human society will evolve over the next few decades. What I'm pessimistic about is the ability of the world's political leaders to manage an economic transition to a sustainable human society of several billion people.

The Montreal Protocol and the limitations on refrigerants to protect the ozone layer were possible because there were other refrigerants that could be developed. Companies could actually make some money selling new, more expensive refrigeration systems. If the situation had been that people had to give up air conditioning, the Montreal Protocol would not have been agreed to.

There's a fundamental difference between giving up freon and giving up fossil fuels.

"I'd go ahead and pay my carbon taxes IF AND ONLY IF the developing world cut back emissions by the same percentage we do"

Obviously true, and a point I make constantly to people that think that one is exactly the same as the other. But would you admit that this is, in fact, a counter example to your earlier broad claim?

What I see is (especially neo-classical) economists jumping back and forth between advocating for a very particular (and very damaging) economic system, to saying--oh, we're just constructing academic models.

But, in sum, I am equally pessimistic about world leaders, especially after the last elections. But usually 'leaders' are just trying to see where the bulk of "followers" is going and then trying to get a bit in front of them. If, in our more-than-ever interconnected world, the great mass of 'followers' start going in a profoundly new direction--something perhaps like transition towns--eventually the 'leaders' will follow. But anything at this point is almost surely going to be far too little far too late.

I am not sure what's left to discuss, except perhaps, how each of us chooses to proceed (or not) given these (near) certainties.

The son should be able to expect a real long term rate of return significantly above 3.5%.

At an expected rate of return of say 5-6%, which is still fairly conservative, the son is only irrational if he expects to live longer than 12 or 13 years, or has no other assets or sources of income.

At 8%, a common assumption underlying US pension schemes but probably too high for purposes of this example, he could go over 14 years.

This is nitpicking and your point stands. But just wanted to play with the numbers a bit.

Your numbers are right for limited-time annuities.

I was using 3.5% as an estimate for an inflation-adjusted, perpetual annuity.

The GDP is not know to any certainty by anyone. I could change the GDP and change the graph which is what economist have done for years.

I could change the GDP and change the graph

Which would make no difference to my main point which is that technological innovation will not continually allow us to grow the economy once we hit physical limits. And that sometimes there are no viable substitutes for the resources that we have come to depend on. This is about energy and energy flows. Lots of cheap energy you get growth. Cut off the energy, growth stops and the economy contracts.

But if that was the main point, and the graph doesn't really teach it, why bother with the graph?

Right. The example I'd like to give is: Can one afford to buy a (reasonably livable) house with merely $1000 assured income every month indefinitely? Sure, but only if one saved, budgeted and planned it well. Otherwise, it is highly unlikely that one would be able to obtain a loan towards the house, however assuring the $1000 income may be. Afterall, what would be one's priorities if all they had went into meeting basic needs? However, it is much easier to buy a house if one had $50000 assured income every month even for only 5 years.

Fossil fuels and its extremely compact and dense form is comparable to a huge pay check. Albeit, only for a limited period. Solar and other renewables' flows are like living on a $1000 assured income every month. Sure, it is possible to live. But not at this scale - both in complexity and volume. Basic needs, today, may be wired to work over this energy guzzling infrastructure, but this horror too shall pass.

According to this article in the Business Insider, economists have no better idea of what the economy is going to do than 'normal' people. Consequently, they simply follow the herd as published in the media. The consensus opinion is GDP growth of approximately 4%. (click on chart for a sharper image.)


Notice a few things about this chart: the first is that real GDP is extremely choppy. Except for a five year period beginning in 1995, economic activity swings dramatically from year to year. Another thing to notice is the long- term downtrend in GDP from the dramatic +8% explosion in 1984. Even with a big increase in productivity over this period with cheap computers and means of communication and the widespread introduction of robotics/automation in all areas of production from retail self- checkouts to PC- controlled CNC machines, the overall output has been steadily declining. Notable in this regard is the period from 2003 to 2008 where real GDP growth was diminishing even as the country was recovering from the 'Dot- Com' recession.

This period was known as a 'Jobless Recovery', what will economists label the current 'recovery'? Notice too, that every period of negative growth has been accompanied an energy 'shock' of some kind or other. These crude oil prices @ or above $90 per barrel are something to pay attention to.

Predicting prices over a longer term is silly because both the money and the oil take on different values as times change. Almost every assumption about prices can be challenged including basic supply/demand relationships. Oil deliveries can be constrained while Foreign Exchange swings can make the scarce oil cheaper in a particular currency.

No matter how hard you try, you cannot predict accurately which makes price predictions a matter of dumb luck. Accurately describing what is taking place during the present is difficult enough!

The thing to keep in mind is that high crude prices inevitably lead to lower crude prices. This demand- destruction cycle has repeated itself over and over. The lower prices indicate crude users cannot profit @ higher prices. The low prices do not mean a large increase in absolute supply. There is less crude available relative to constantly increasing world consumption, this is where Simon, Tierney and their apologists are wrong. There have been no discoveries anywhere in the last ten years that contain conventional petroleum in recoverable amounts comparable to Cantarell or Ghawar.

And that leaves us all with this problem: (click on chart for a sharper image)


According to that chart, across a broad range of energy values, GDP seems to vary by a factor of 100 for the same energy consumption. This suggests that the relationship between GDP and energy consumption is multicausational, not simply a naive power-law relationship between GDP and energy consumption. Alternatively, the GDP numbers might be highly suspect, or the energy numbers might be highly suspect, or some combination of all three. (The logarithmic scaling hides this to some extent by making a factor of, say, 10 look like a factor of not-very-much.) So the chart may teach us something, but possibly not nearly as much more than "goat entrails" as we might like?

This suggests that the relationship between GDP and energy consumption is multicausational, not simply a naive power-law relationship between GDP and energy consumption.

I don't think that should be surprising and the authors specifically address that in the paper.(emphasis mine)

Figure 1 shows the relationship between energy use and GDP plotted on logarithmic axes,with each colored line indicating the trajectory for a single countryover the period 1980–2003. A regression through the mean GDP, G for mean energy consumption and E for each countryover the 24-year period, accounts
for 76% of the variation.

The fitted regression describes the scaling of per capita energy use with per capita GDP as a power law: E = 4.13G 0.76 (figure 1; see also figure S1c in supplemental online materials at www.jstor.org/stable/10.1525/bio.2011.61.1.7).

The sublinear slope, 0.76, indicates that the rate of per capita energy consumption associated with greater economic activity increases less rapidly than GDP itself. Countries with larger economies take advantage of economies of scale and new technologies to use energy more efficiently on a per capita basis (Hoffert et al. 1998). For example, there is both a positive relationship and an economy of scale between economic growth and the amount of infrastructure, such as roads, pipelines, and power lines, that distributes energy resources (Easterly and Rebelo 1993).

The relationship between energy use and GDP holds across countries spanning the entire range of economic development from poorest to richest, encompassing two orders of magnitude in both energy use (100 to 10,000 watts) and wealth ($500 to $50,000).

A similar trend occurs within countries over time. The vast majority of nations we analyzed (74%) increased both energy use and GDP from 1980 to 2003 and exhibited positive correlations across the 24 years (mean slope = 0.59; 95% confidence interval = 0.45–0.72;

Are you saying you doubt there is a correlation between increased energy use and increased GDP? And yes, I do know that correlation is not causation. However from a purely biophysical perspective, you can not have an increase in growth without an increase in energy inputs.

Thanks for posting that graph Fred. We had a discussion here 3 days ago on whether you could assign a rough proportionality constant, K, to the relationship between energy and something akin to GDP.
http://www.theoildrum.com/node/7359/758178

The graph shows that it does exist (0.76 is splitting hairs) amongst a lot of disorder. And of course the disorder is perfectly acceptable if you account for it in a stochastic formulation, like you would by assuming dispersion.


This suggests that the relationship between GDP and energy consumption is multicausational, not simply a naive power-law relationship between GDP and energy consumption.


No. The only reason energy consumption and GDP would not perfectly correlate is due to accounting differences. They are exactly the same thing. Money is only a medium of exchange. The thing that is being exchanged is only energy. We never paid anything for anything else other than energy. The thing we paid to get the energy is energy.

Oh yes the basic limits of physics aren't going anywhere, but... There is at least a factor of two difference between Japan's data and the US's (which is close to being on the fitted line). If we say Japan is near physical limits for kWh/GDP, the US could double it's GDP for the same energy consumption without hitting those limits.

The US could certainly make substantial improvements, but Japan does have some geographic advantages. Higher population density, greater prevalence of seaports, overall more moderate climate. I have argued in the past that the shape of their country (long and thin) contributes to overall transportation efficiency.

They've also outsourced some high-energy low-value parts of their economy. For example, Japan is a large net importer of food calories, where the US is a large net exporter. In 2008, roughly 15% of Japan's total consumed calories came from the US. If Japan were to attempt to be self-sufficient in food, they would have to expend large amounts of energy to make marginal land productive.

The real point that economists neglect is EROEI. As the high EROEI fossil fuels deplete we are going to enter a whole new ball game, and it is not far away.

Going from an average of 18:1 EROEI to 5:1 EROEI will be the game changer. Suddenly the tide is going to be very strong to swim against. The OECD countries will be badly impacted as producing nations continue to expand the consumption of their own oil at the expense of exports. Watch Saudi oil exports carefully. They have probably peaked.

You are correct that the timing of both bets was the factor. Resource depletion was not an influence - YET.

Watch Saudi oil exports carefully. They have probably peaked.

31/7/2010
Saudi Aramco's crude oil exports peaked in 2005
http://www.crudeoilpeak.com/?p=1738

Matt,

I know but they might just have some spare capacity, but I would not bet on it.

Matt Simmons had some Saudi production projections which were really low. I think that was the reason for his $200 bet. He also assumed that no one else would be able to replace Saudi production losses. But Russia and other FSU countries ramped up production:

13/8/2010
Saudi Arabia lost production share to Russia
http://www.crudeoilpeak.com/?p=1800

Correct again. But for how long can Russia keep this level of production. The only thing going for the Russians is that their population is not exploding like the ME.

What is the betting that Putin will be president again and then watch out. The oil tap will be turned off mighty quick if he feels like it.

Meanwhile the debt mountain of the west continues to balloon, robbing Peter to pay Paul. Our western socities have simply become too complex.

IMO it was pretty stupid of Simmons to have bet that oil prices would be $200. He should have taken the bet that Ehrlich took i.e. oil prices would be higher- after all isn't that the essence of economist view? Had he done so he would have won and then what would Tierney's argument have been?

Correct. Under the terms of the original Julian Simon bet, Tierney would have lost. And Mr. Tierney did not address the fact that annual global crude oil production has been at or below the 2005 rate for four years and for 2010 through October, despite the fact that annual oil prices have exceeded the $57 level that we saw in 2005 for five straight years, with four of the five years showing year over year increases in oil prices.

if the bet was on the accuracy of IEA production forecasts?

Ah yes, the Evil Empire of Economists. I know I can always count on some posters on The Oil Drum to give in to the madness of crowds that infects so much of the online world and broad brush all economists, including me by implication, as some sort of bizarro-world fool who can't understand something as simple as "finite". I've been running a site on energy and climate issues (The Cost of Energy -- get the double meaning?) for almost eight years now, and I've said for years that 2011 would be the year when peak oil really started to bite in terms of sustained higher oil prices. So I can say with 100% certainty that at least some economists do "get it".

Speaking of which, I notice that FMagyar got it right, and left the broad brush in the paint can. Thank you. I agree with what he/she said, especially about such bets. We see these all the time in the energy and climate change worlds, and I think they're stupid because they don't prove anything other than someone made a lucky guess, the Simon bet being just the latest example.

Speaking of which, I notice that FMagyar got it right, and left the broad brush in the paint can. Thank you.

No, thank you Lou, and all other rational reality based people everywhere. We all need to give credit wherever it is due and stand up and shout loudly from the hilltops and point out the naked emperors and snake oil salesmen whenever and wherever we encounter them.

I would like to add my thanks to Lou for being resolute enough to go against the flow of his profession.

It seems to me that scientifically and technically trained people all too often have a tendency to religiously insist on adherence to the technically correct standards of evidence and experiment based reasoning, and refuse to allow a bit of ordinary common sense to play a part in their thinking.

The crowd is often wrong, but if only one kid is marching to the music, it behooves his parents to consider the slight possibility that the rest of the kids parents have instructed THEIR kids in that old saw about the hammer falling on the nail that sticks out .

This is otherwise often expressed as "the boss may not always be right, but he is always the boss"-if an economist wants to work, he must please the bau establishment with his public persona.

It can be expressed even more bluntly as "you must go along to get along".

I don't know any economists personally, but I would be willing to place a large bet that thousands of them do get it, and are arranging their own affairs in a prudent fashion-as well as giving appropriate advice in private to their friends and families and any long term clients smart enough to appreciate such advice.

In terms of human behavior, these observationally derived laws of folk wisdom are quite as helpful to understanding reality as Einstien's observation about the power of compound interest.

It's a pity most of the world is so ignorant of both the basic sciences and basic human nature that anybody should have to bother to point these things out.

But it does reinforce a point I keep trying to get across-our technically literate peers are all too often filled with contempt for those who are to in their opinions "driving(living) under the influence of alcohol(religion, bau economic theory, etc)"

Then they add a second generous measure of contempt of the unwashed because they refuse to accept on faith the new religion of science.The fact that science happens to be based on facts and free inquiry has nothing to do with it, insofar as the masses are concerned, because they know nothing about science, and never will.Hence they are being asked to exchange their old and comfortable world view, which has served them well(witness the fact that all of them are alive, that most of them are better off than at any time in the historical past, and many are VERY well off;there is another layer of irony buried here in the onion of reality of course, as science is due the credit but the bau camp gets that credit) for a new one-a scary proposition at best, and one likely to result in loss of social position, power, wealth, and professional prestige to many high ranking members of society as it is currently organized.

It does not surprise me in the least that even graduates of Ivy League law and business schools cling like leeches to the bau paradigm.Why should we expect Joe and Susy Sixpack to be any different?

I'm afraid I'm sometimes guilty of applying the broad brush. In any comments here critical of economist, please add "neo-classical" as a prefix.

We desperately need reality based economists, especially those who go beyond 'steady state' to give us some idea of what a powerdown economy might entail. Apologies to any such economists that waft across these pages if I have ever given any offense.

and I think they're stupid because they don't prove anything

Not at all, such bets prove ego clouded the judgement of at least one and probably both of the bettors, and that one got lucky.

Of course the market betting about the future is the biggest card game going so I guess we will keep getting more of these stupid high profile side bets.

I do know that when a bright professor I had during my last go round at a U proposed a stupid and tasteless bet about the fast approaching Gulf War her stock plummeted in my eyes.

moral of the story is never bet on price.

if the bet was on global C+C production maintaining a range rather than increasing production out of that range who would have won?

Price is a proxy measure, as price is apparently fixed to some other measure, which gives the definition of a proxy. The fact that price or money has to be inflation-adjusted (so to speak) over the years proves that it is tracking something else. So we need to figure out what money actually tracks -- Ehrlich and Simon should have bet on that instead of price. Seems kind of obvious in retrospect.

Inflation serves other purposes -- if you buy into the Keynesian view of the world, you need some inflation to give central banks some wiggle room to help kick us out of recessions. Paul Krugman had another example dealing with a (hypothetical? real?) baby-sitting co-op that suffered a market failure for lack of inflation; inflation is a way of persuading people to spend.

So it doesn't necessarily index anything.

The first part I agree with.

Yet, if it doesn't necessarily index anything, we are really at our wits end as to effectively understand it and thus to control it. I still think that it means something at any any moment, especially as a comparative measure; the difficult part is to extend that to work as an indicator over time. So you may in fact be right that it doesn't index anything, over an extended period of time.

"moral of the story is never bet on price."

uh, that is all you can bet on. The stock market bets on price. The real estate market bets on price. The commodities markets, the bond markets, all bet on price. So why am I stating the obvious? Because to dismiss the power of economics leaves nothing to bet on. Economics is a social science. If there are people, there is economics. This constant battle against the power of the money (the only thing you can bet with, other than your life or your freedom) is money, so the value of money is essentially everything. Go to your local coffee shop or your hooker and try to get what you want with a theory...forget, bring cash. (aside: I am embarrassed by how late in life I learned the above the hard way)

RC

, that is all you can bet

:-) lol

seriously thou if i go down to ladbrooks i could wager on the C+C numbers in a IEA forecast... so who is being more theoretical?

My gripe with the economic argument is the assumption that all things have a direct replacement who's utilization is merely on the other side of entrepreneurial effort. Furthermore, they also operate on the assumption that pricing will remain more or less constant. While solutions might exist to lower prices, there's no guarantee that they'll be as low as they once were for a given commodity, or it's techno-fix, relative to other prices and incomes.

Markets are fundamentally reactive: all decisions of free agents within a market are based on a combination of perceived (subjective) value and relative wealth (inflation-adjusted income relative to past earnings, with debts figured as a negative value). If my relative wealth is eroded, as has been the case with the American middle class over the past few decades, and my debt load is high, again, as has been the case, then my willingness to invest some high risk next-big-thing will be low. My low relative wealth, and the perception that a safe investment is better than a risky one, that it is more valuable, will conspire against finding new solutions. Entrepreneurs require financial resources, they need investment. This investment won't materialize if purse strings are tight.

The assumption is that there will be both the resources and the willingness to pursue techno-fixes, but this may not be the case. Besides there being no guarantee that all things can be replaced, or that the replacement will be just as valuable as the commodity it replaced, there's no guarantee that society will have the entrepreneurial, financial, or technical wherewithal to find a timely solution.

I'll add that the reactive nature of markets lends itself to poor planning. Since the market relies on price signals, there's usually no incentive to undertake large investments unless there's certainty that prices will increase substantially and stay there, insuring a large infrastructural investment will turn a long-term profit. Commodity traders lend a certain element of prediction to markets, but they can also succumb to irrational exuberance over the value of a commodity (as in, I believe, the current price of gold) and create volatility in the market. Such volatility may actually serve to delay further needed investment, as investors and entrepreneurs may be wary of betting on a highly volatile commodity, until long-term trends show a general price increase.

It amazes me how many economists never read Smith's critiques of capitalism. In his case, he saw land as being the fundamental limiting factor; the ultimate irreplaceable commodity. His land argument still holds weight today, but now it's applicable to those other resources our modern economy requires to function: reasonably priced energy (an admittedly relative term), financial resources, and reasonably priced or replaceable commodities, such as metals or hydrocarbon feedstocks for chemicals, medicines, and so forth.

In short, solutions may exist, but there's no guarantee we'll find them in time, or that they'll be equally valuable to the commodities they replace.

There is also the question as to what degree that substitutes can offset the declines in conventional energy sources, i.e., will substitutes make an incremental or material difference?

For example, BP shows that Canadian net oil exports increased, because of rising tar sands production, by 339,000 bpd from 1999 to 2009. Over the same time frame, North Sea crude oil production fell by about 2.3 mbpd. In net export terms, Venezuelan net exports fell by 1.2 mbpd from 1998 to 2009. We would have basically needed four Canadas just to offset the observed decline in Venezuelan net oil exports.

And that's a really good point. Another issue with energy concerns is relative efficiencies as measured in terms of EROEI. I don't think I need to go into too much detail here, but the economic ramifications of spending ever-more BTUs to get BTUs are magnified to a degree greater than the EROEI ration as you factor in the necessary infrastructure investments. Oil sands are a great point: it's taking a lot of infrastructure investment to bring this resource on-line in terms of steam plants, mining equipment, natural gas lines, and pipelines to transport the synthetic crude to market. All of these costs must be factored into the total financial burden, driving up costs. In addition, the more infrastructure you have, the more maintenance, depreciation, and long-term loss of investment value, especially as you deplete that resource. Once the Athabasca sands are gone, none of that infrastructure can be reused in the same way that a traditional oil refinery can be upgraded or modified to handle different crudes (there are refineries here in Louisiana that have been in operation since the 1930s). If there are other resources, new investment will be required.

Conversely, we may be able to make up the efficiency loss in production by increasing efficiency in consumption, but now we're requiring investment on both ends of the equation, production and consumption, just to maintain a parity of relative value. The constant need to develop and deploy new, often times unproven, technologies creates further burden on society's financial resources. Look at hybrids: they've been on the market for over a decade, and still have yet to fall enough in prices to gain mass acceptance. Meanwhile, the stock of traditional fuels is ever-depleting and our solutions require ever more investments of finances and energy to unlock.

This has an affect of crowding out investment in more sustainable solutions. Case in point, it would make sense for the US to replace it's highway, air transportation and freight system with high-speed rails and electrified services. We know shared, electrified transit, with it's high efficiency and variety of fuel sources (lots of ways to make electrons flow) is the solution to our transportation fuels problem, but it would take trillions of dollars and decades to build. Meanwhile, I will argue that the need to development fuels that are compatible with the existing structure, albeit more costly than an electric transit alternative, for example, saps resources away from building a more permanent solution. It's always an infrastructural issue. Just because a solution exists doesn't mean you have the financial ability to bring it market and the market may not provide the most optimal long-term solution.

"Case in point, it would make sense for the US to replace it's highway, air transportation and freight system with high-speed rails and electrified services. We know shared, electrified transit, with it's high efficiency and variety of fuel sources (lots of ways to make electrons flow) is the solution to our transportation fuels problem, but it would take trillions of dollars and decades to build."

Some years ago, while working with a planner at GDOT, we were discussing all of the problems with MARTA (Metro Atlanta Rapid Transit). We were riding the HOV lane on an Atlanta interstate and I commented that the HOV lanes were barely utilized. I suggested that it may make more sense to retask these lanes to electrified buses. The lanes are along the center median, have their own entrances and exits, and adding overhead electrification could utilize existing infrastucture. We even discussed CNG/electric hybrid busses (a new concept at the time). His answer was that the funding structure to accomplish the change would be in direct conflict with the mandates of funding the interstate system. Retasking the infrastucture and money would be difficult under current law. Powerful lobbies would oppose any such plans and even proposing such a plan would open an expensive political can of worms. These are the limits the scientist/engineer/dreamer in me failed to recognize. We are deeply invested in the status quo, locked in it seems.

A neccessary first step would be the elimination of the many barriers to adapting and retasking existing infrastructure since building out all new infrastructure is clearly going to be too expensive; financially, environmentally and politically. Considering the results of the mid-term elections, the political will isn't there to accomplish these things, IMO.

Cliff, dead ahead.

Powerful lobbies would oppose any such plans and even proposing such a plan would open an expensive political can of worms. These are the limits the scientist/engineer/dreamer in me failed to recognize. We are deeply invested in the status quo, locked in it seems.

TPTB, the ones most invested in the status quo, and hell bent on opposing any change, do so in large measure because most of them actually have swallowed, hook line and sinker, what the high priests of voodoo economics, such as Julian Simon have fed them. It's not just that they have vested interests and wish to stay in power, they truly seem to believe that what was, will always be, and that therefore there is no need to re-plot our current course.

First Mate: "Captain, "we have hit the iceberg!"
Captain: "...Not to worry, this ship is unsinkable! Full speed ahead!"

"End of the Ship" by Roy Zimmerman
http://www.youtube.com/watch?v=qNi1sevKNd0

Politics is invariably the Devil in the details. The established order will always seek to maintain it's privileged position in society, and thus will never adapt to change, regardless of how potentially catastrophic such change may be.

Fred,

I don't disagree with you however none of us, including politicians, have expertise in every conceivable area. So, we listen to "experts".

Suppose you are sick and "go to the doctor". He says, "Y'all gonna die!" Well, you naturally seek a second opinion. Are you going to ask someone who has a CV that reads like something out of reform school (but says he reads a lot) or are you going to go the doc with the long list of specialties and years of practice? He may have killed half his patients but he has the CV and "proven" expertise.

So, the politician, aside from being beholden to his financial backers, looks to those who are recognized as "experts" and it doesn't matter whether they really are experts so long as a bunch of other "experts" say so and they get on TV. Seriously, do you think any of them would listen to Fred and Todd on what to do? My guess is that they would be better off listening to us; but that's never going to happen.

I've reached the point where I recognize that nothing is going to be done to "solve" any of the multitude of problems we face. I find this sad but I'm not going to waste my time fighting their reality. I say "their reality" because I have the choice of sticking my head in the sand and believing or moving along with my life. I don't remember seeing this posted but people should take a look at http://www.declineoftheempire.com/2011/01/thinking-outside-the-box.html

Todd

I've reached the point where I recognize that nothing is going to be done to "solve" any of the multitude of problems we face.

In other words you have given up. So have I.

Though I remain pessimistic that TPTB will ever talk publicly about compounding growth / finite resources, I remain hopeful that "communities" will adapt and survive pretty well (for the most part).

We Aussies are a fairly laid back (apathetic?) kind of people, but when the chips are down, the community spirit explodes to the surface. Our most recent floods in Queensland / fires in Victoria show this.

Regards, Matt B

Hi Matt/Joe - I am an Aussie too - our politicians are both individually and collectively too stupid to recognise what is happening. Added to that none of them have any charisma and there is an absolute dearth of leadership ability. Only one commentator in all the hours of TV devoted to the floods has mentioned AGW, when clearly the highest temperatures on record in all of the seas (West Indian Ocean, Timor and Coral Seas) north of Australia must have at least had some role to play. There is great community spirit here, it will no doubt be sorely tested as unemployment begins to climb.

I've reached the point where I recognize that nothing is going to be done to "solve" any of the multitude of problems we face.

Amen.

So I am seeking the largest circle of real-world friends that I can manage, to do what amounts to "chopping up the lounge furniture of the Titanic to make life-rafts". If the image suggests something a little desperate and not likely to work really smoothly--I think that, too.

(Don't do it in the main ballroom: They will definitely try to stop you.)

So I am thinking about food, thinking about water, organic gardening for starters (finished my fourth season with encouraging success)--and noticing that time really is running out. Most people do not wish to lift a single finger to save their own lives. I am not optimistic about them at all.

Thanks for your link. Very good.

@Todd:

...however none of us, including politicians, have expertise in every conceivable area. So, we listen to "experts".

Todd, I don't think it is necessary to have expertise in every conceivable area. What leaders need is deep knowledge of systems science so that they know how to incorporate the specific knowledge supplied by experts. Sufficient knowledge of systems science, which, by the way includes a healthy dose of human nature, gives a leader the ability to know what specific knowledge is needed and often who really is the expert.

A great example of this is how Obama hasn't a clue about biophysical economics (or, seemingly any systems thinking) so hires advisers who were actually complicit in causing the financial crisis, at least creating the bubble that caused the rapidity of the crisis. Had he had any basic knowledge at all he would have turned to people like Herman Daly or Robert Costanza for advice on the economy.

But, while it might be feasible for a leader to do this, the real problem is that no one who would be competent will ever be elected as the leader. The reason is simple. The people don't want the reality, they want someone who will tell them things will be fine.

Question Everything
George

Systems thinking, yes.

But, as your byline suggest, people need to be willing to examine and question many of their own presuppositions.

Chomsky once said that simple honesty is needed more than great intelligence.

Unfortunately, of all resources, and even though it should be one resource that is infinitely renewable, honesty seems to be in extremely short supply (except occasionally here and at a few other sites).

"Economic geology" = word salad.

What flavor of economics are we today?

You enter the casino at your own risk......

Which brings me to this, which needs a punch line:

"A Geologist walks into a casino...."

(and walks out with all the... )

A geologist walks into a casino and they ask him what are the odds of a coin toss being heads. Simple he says: somewhere between 30% and 70%...probably

It's hard to find fault with that, though I guess it shouldn't be taken for granite...

I am trying to make geology more quantitative and if that includes the concepts of probability, that is OK. I finished a post last week describing the probability distribution of terrain slopes across the USA.

Get a load of this. I can from first principles of thermodynamics give the best probability-based estimate that you will land on a 100 meter square of a given slope if you treated the USA map like a dart-board.

http://mobjectivist.blogspot.com/2010/12/terrain-slopes.html

Many people may not find this interesting or intriguing, yet this same distribution occurs in long-term stock return on investment, a "slope" function in its own right. What will become apparent in the future is that what we are trying to control is garden-variety entropy that doesn't take a genius to figure out. All the actors are filling up the available state space, which leads to the characteristic definition of entropy.

BTW, geophysicists have been trying to find the general terrain distribution for some time. Curious if ReserveGrowthRulz will get upset again.

Sorry, no puns.

Sorry, no puns.

Oh no?...

Get a load of this.

Good work WHT!

Now can you can provide a possible explanation for the relationship?

The explanation is a two-parter.

The first part has to do with energy and how likely high-energy structures will occur. A steep slope or grade is a high-energy structure, and more of the earth's forces were required to generate steep slopes (or more erosion for valleys as well).

The best model of energy distribution is a Boltzmann or Maximum Entropy distribution where the likelihood goes as exp(-S/U), where S is the slope and U is an energy scaling factor within an area.

If you only take this it works reasonably well for certain pockets of topography across the USA, but not the entire area. So what you need to do is create a distribution for U across the entire meta-region, say the USA. When you do the averaging, again using maximum entropy to smear U out, you get what is called a BesselK distribution. This is a bit of a bizarre function and is obscure enough that it explains why no one ever developed a model for terrain slope distribution.

So the general idea is that two levels of entropic dispersion get applied and that is the outcome. A deeper explanation is on the blog.

so your point is it's a deterministic universe after all ?- )

More people, and increased income, cause resources to become more scarce in the short run. Heightened scarcity causes prices to rise. The higher prices present opportunity, and prompt inventors and entrepreneurs to search for solutions. Many fail in the search, at cost to themselves. But in a free society, solutions are eventually found. And in the long run the new developments leave us better off than if the problems had not arisen. That is, prices eventually become lower than before the increased scarcity occurred. (Simon 1996)

This actually IS true. But it seems to me very dangerous to stake the entire future on what MIGHT happen. A few decades may have suggested repeated substitution as a way to overcome limitations, but there is absolutely no guarantee that this trend will continue. Repeated substitution has its limits TOO: eventually, there will be nothing left to substitute with, because all alternatives will have been thoroughly exhausted.

Furthermore, there are many records of primitive tribes who have exhausted their resources, such as wood and wildlife, but because they had no advanced knowledge of physics or the properties of materials, they couldn't possibly be expected to make AN IMMEDIATE transition from say wood to petroleum, or wildlife to advanced high-yield agriculture, and so they perished. They perished because their knowledge did not advance as fast as they were burning all their bridges. This is what will soon happen: Man will bump against the limits to his conceptual knowledge of the physical world.

I state the problem thus: Humankind will alleviate the coming bottleneck if it manages to do the following:
1. Find a way to transmute metals from other baser types of raw materials eg Gold from Copper, or Indium from Silver. In so doing man will be forever independent of anything which occurs naturally, sparsely, randomly and in scarcity.
2. Discover what energy actually IS, so that it too can be manufactured, in unlimited quantities and with as high a density and rate of discharge as man could wish.
3. Manufacture and consume only synthetic foods, and do away with fish, livestock, and anything else occurring naturally, so that man need not rely on the low replenishment rate in the natural world.

These are tremendous feats to accomplish, and they no doubt imply such an expansion to conceptual knowledge as is far outside the reach of the mind of man at the current moment in time. Engineers, doctors and lawyers may be churned out in batches, but no such thing is possible with the highest order of genius such as Einstein or Newton. MAN ONLY EVER STUMBLES INTO THE FUNDAMENTAL LAWS OF PHYSICS BY ACCIDENT, AND THAT TOO EVERY FEW DECADES OR CENTURIES. HE DOES NOT PRODUCE THEM ON SHORT ORDER AND UNDER THE STIMULUS OF MARKET FORCES. (Let us remember that many generations of naturalists, philosophers and scientists, including Newton, once spent many futile centuries trying to discover alchemy: how to make gold out of lead.) But even if, by some spectacular miracle, all the above 3 challenged can be accomplished, it means the population will further explode to 10 billion, 20 billion, 30, 40. If the individual is already devalued, alienated and fragmented in a world of 7 billion, I wonder what will happen in a world of tens of billions.

This actually IS true. But it seems to me very dangerous to stake the entire future on what MIGHT happen. A few decades may have suggested repeated substitution as a way to overcome limitations, but there is absolutely no guarantee that this trend will continue. Repeated substitution has its limits TOO: eventually, there will be nothing left to substitute with, because all alternatives will have been thoroughly exhausted.

And thus it is NOT true. It is only true most of the time and that is what makes it such a dangerously deceptive ideology. You'll be completely correct 98% of the time . . . until you hit an exception.

But the good news for the exceptions is that at least you hit them gradually and with some warning . . . the prices of the resource will begin climb that cannot be stopped. If you are wise enough to recognize this situation when it occurs then you can make alternate plans. But our problem right now is that people are still in denial about it occurring.

But in a free society, solutions are eventually found. (Simon 1996)

This is the leap of faith Simon asks us to take. This is a statement of religion, not science. And natural scientists and engineers have every reason to be skeptical. For a simple example: There was an attempt to convert from scarce copper wire to aluminum. After many homes burned down cities realized that was not a simple substitution and now it is illegal.

http://www.nytimes.com/2006/02/19/realestate/19home.html

Oil, refined into fuel, has such wonderful properties (high energy density, liquid, low toxicity, etc) that trying to substitute any competitors will be very difficult.

Check out this graph of fuels:


from Energy Transitions Past and Future

Just trace for a moment the human economic history: Energy density of wood replaced by coal. Energy density of coal replaced by diesel. Now trace down to the energy density of batteries. 200 years of transportation innovation largely undone. Thus we reach the end of jumbo jet air craft and high speed cargo freighters.

George already did a great job of talking about EROeI in his post. Our society has tried, but not yet produced energy sources that are lower in cost than fossil fuels. And the net energy of our energy sources determines the size, growth rate, and complexity of our society. Yet among many, the faith continues. Any day now, an energy source will be invented that is better than anything that has gone before. Any day now....

The faith proves... false.

Right, but: what has the greatest need for compact, dense, fuel? Very much, vehicles. Our cars, in particular our very large single-occupancy American cars, are not essential. We could make them far smaller and lighter -- we could obtain "safety" by making the cars themselves "smarter" -- or we could simply choose to get around most of the time on scooters, e-bikes, or bikes. Or maybe, the smart cars will be publicly owned, and behave like robotically dispatched minibusses, so that everyone is de facto carpooling from door to door. There's probably more innovation possible on the consumption side than on the use side, partly because fossil fuels have been so cheap for so long.

There will be vehicles that do require high-quality liquid fuel, and they'll get it, at a high price.

People, especially in the US, are convinced that cars are necessary for the vast majority of transportation, and that is simply not true. They'll piss and moan when gasoline this $10 or $20 per gallon, but pissing and moaning is not the end of civilization.

ah, but the point that many here on TOD have brought up again and again - is what will all the people whose jobs rely on dense, high-quality fuel, do for a living? On the downslope of the fossil fuel era (outside some Deus ex machinca like solving the overwhelming engineering problems with fusion), there are an awful lot of people doing jobs that are going to go away - most likely for ever. Our present economic system (esp in the US), is just not prepared to keep "unproductive" members of society alive for not building cars, insuring them, fixing them, working on the roads the cars drive on, drive-through windows etc etc. - I just don't see a US with everybody walking to work having enough jobs to keep everybody busy and alive....

In the US most buildings are sited such that private autos and tractor trailer trucks are necessary. Very few suburbs or shopping malls are viable if mass transit is the only option. The average car travels more than 10k miles per year in the US (27 miles per day) and that kind of energy and time expenditure won't be possible.

The only other option is to rebuild to a walkable landuse pattern. That will be tremendously expensive and very destructive to the current built infrastructure. The US will go through a land use change that will be similar to Europe reconstructing from the WWII bombings, and yet will have to cope with a shrinking resource base.

I am not arguing civilization will end. But I think if the average US citizen maintains even a 1930's standard of living (low wages, long hours, poor living conditions, walking or train transit), it will be a remarkable achievement. I think there will be a long period where a large percentage of the population is living in temporary housing. Where people are jammed India style on trucks (no time to build the number of busses needed to replace cars), etc. Bankrupt governments and roads with potholes large enough to swallow a scooter. Gated communities and oppressive security to keep safe the 10% remaining "wealthy".

And I think my point is that saying "only option" is a mistake, and I also think that your "most buildings" assertion is a mistake, or nearly so. I think it is a common US mistake to focus on size, instead of actual count. So we have large areas of the country with buildings that would be expensive to access -- but NYC (and other dense cities) have a whole lot of buildings in them. I don't know the proportion, but I am familiar with the size-vs-count mistake.

If I imagine how things might change, I would expect -- better utilization and maintenance of rail lines (given improved technology, both for inspection and scheduling), containerized cargo for long-haul transit. Barges too. Trucks for short haul. Trucks are probably some combo of E or hybrid -- there's a haul distance and unloading dwell time where this begins to make sense. Trucks could be overhead-electrified, like "trackless trolleys" in SF and Boston.

I would expect bicycles, electric assist bicycles, shelled bicycles (look what happens when you give people a safe smooth place to ride bikes), and electric scooters.

One thing I would definitely not expect is the sort of one-size-fits-all use of one vehicle type that we have now. That's what gasoline allows. The huge advantage of bicycles is that little is impossible, instead it is merely (very) inconvenient. A long-haul bike (e.g, a Mango, see link above, plus electric assist) might be cumbersome in an urban area. An urban-friendly bike (small, light, easy to haul up stairs) might be a little slow and tiring for a 40-mile ride. A folder won't carry much cargo, but will fit conveniently on a train or bus. Cargo bikes are wonderful, but don't fit in all elevators, or easily on the front of a bus. (and that's just diversity in the world of bikes, never mind scooters, robot bus-cars, or whatever else we come up with).

I don't want to say that bikes are the "only option" -- I natter on about them, because I ride one often, and I know from personal experience that what many people claim is "impossible", a 50-year-old fat man does all the time. But if we're overlooking a technically feasible option that is right in front of our faces, who knows what we'd find if we actually went looking? And again -- the point that there's a huge opportunity on the demand side.

I think MacDuff is more nearly right, and that is the cause of some of our overlooking. Whatever more-efficient choice we make, is likely to leave some of the current economy high and dry. Don't expect GM to develop products that would put GM out of business. Bikes are worst-case for this -- they reduce auto and oil consumption, but they should also have a non-trivial effect on the demand for weight loss products, gyms, and several chronic-condition medications (that much exercise makes a real difference). Big Pharma would not be happy to see a 15% cut in diabetes or cholesterol meds. On the other hand, bikes need maintenance, and the beer industry ought to do well. I wear a lot more wool nowadays, too (good in the cold, even if you get sweaty, doesn't stink much).

Bikes are great. But they are not so hot in the snow and in the rain. So you need some type of fall-back whether it be car, bus, train, telecommute, etc.

I think the US will just migrate from big cars & SUVs to Euro style smaller cars, hybrids, and EVs. The big cars & trucks are very wasteful . . . we could cut a LOT of oil use out by just switching from big cars & SUVs to small cars, hybrids, and EVs. The exact same A to B individual enclosed transport is achieved but with gasoline savings from 20% to 100%. Yeah, EVs have range issues and are expensive. But when push comes to shove, Joe Six pack is far more likely to trade in his SUV for a Nissan Leaf than for a bicycle.

But again, Bikes are great. I biked to a previous job a lot. I currently work at home. And our Secretary of Energy, Dr. Steven Chu, is a HUGE fan of bikes.

I bike all year around here in Norway. Ive never had a day here where it was so much snow that it was impossible to get to work. The thing that stops a bike is slightly compacted/transformed snow a few inches thick. With studded tires ice is not a big problem.
Last winter i used my car mostly to charge its batteries and see if it was still working, and i sold it in August last year. What a blessing.
And if its so much snow that its impossibel to get anywhere in a timely fashion with the bike, you can use crosscountry ski's. Old, proven technology that predates fossil fueles. It beats walking in deep snow.

I am doing the biking in snow thing as well, but not so much this month because its been a bit less convenient. Now the question is how do you transport the XC skis on bike? I always end up taking the car to get to the trails.

My answer is probably kinda expensive for you, but it is canned, and an option for me, because I spent the money, and I have not regretted it at all. Get an XtraCycle FreeRadical or a Surly Big Dummy.

Here's a picture of a guy carrying pole-vault poles:
http://www.xtracyclegallery.com/2010/08/516-vaultbrad-xtracycle.html

And this guy, who probably has the most embarrassed daughter on the planet:
http://www.xtracyclegallery.com/2010/05/485-larry-xtracycle.html

And many more. This is the bike you get, if you don't want to be the guy who says, "I can't..."

This is one potential low-oil future. It doesn't suck.

I only need to walk about 5 minutes to get to the trails, so ive never had any need to transport my XC skis on a bike.
My commuter bike right now is just a old MTB, and when i need to transport something i use a 85 liter backback. Its not the best solution, so now im building a Big Dummy cargo bike.
http://surlybikes.com/bikes/big_dummy_complete/

Both you guys think alike, and they look like workable solutions. Whenever I am riding I think of minimizing my cross-section and trying to keep as small a target as possible to motorists. I can't get over that hump of carrying something large around.

Man, we're way off topic, but I'd love to evangelize. (You've been warned now...) I can offer several suggestions that seem to help. Number one, you want to be visible, not so tiny a target that they don't see you (that said, I excel at putting my giant bike into tiny places -- it has special skinny handlebars, no wider than my hips). Number two, that huge bike, seems to get your more attention, and more room, than a "normal" bike. Number three, you know how there's cars and motorcycles with headlights-on-always? Same for my bike, off a dynamo hub. (Sadly, this is also expensive, unless you are handy with a soldering iron). This really helps. Oh yeah, fat slick tires. Immunizes you against all sorts of road hazards, lower rolling resistance (I measured, the video of the experiment is on the web), less vulnerable to puncture, slower to go flat, comfier.

And yeah, I know that this is a hard sell for adults who didn't get comfy in traffic when they were young and stupid. I used to be an effective cyclist, I gave it up, because it doesn't work for anybody else I know. We should copy the Dutch, wherever we are demographically/topographically like them.

The big bike is almost bizarrely stable, or else I've become bizarrely stable. I've clipped immovable objects with cargo or the cargo frame a couple of time, and the bike just hops to the side and keeps on going. I can balance it at a walking speed on rumpled snow-ice junk while chatting with a friend. It's tough as hell, I've gone off curbs with three kids riding on the back (a Big Dummy prototype traveled from Anchorage to Tierra Del Fuego, so did an xtracycle).

Load limit is 200lbs cargo (I have carried this). Wiggly (human) cargo is a little harder, till it learns not to wiggle. 100lbs cargo is comfortable, and I have often carried 100lbs of live (daughter) cargo uphill. 50lbs cargo, I'm still riding no-hands (except snow tires are squirrelly and I cannot get comfy no-hands). For serious hills, there is an electric assist specially designed for these cargo bikes (StokeMonkey, feeds through the gearing), people have hauled 200lbs cargo up 30% grades in SF).

Other big-bike advantages include: you can fix it with hand tools, by the side of the road. If the road is impassable, you can hop off your bike, and push/carry/drag it around. If you are delivering a load, you can deliver it to a door. If you are delivering a kid to a soccer field, you can deliver the kid to the edge of the field. Parking, easy. Traffic jams, you filter through. Hauls bikes behind it, too, pretty easy.

I log about 50 miles/week, winters are tough to make it, but I try pretty hard. The health benefits are substantial, especially when you reach an age that you'd appreciate some substantial health benefits. For example, I made my knees sore snow-shoveling earlier this week, and I fixed them today biking (I've only been doing this trick for 25 years -- said the knee doc, "I can cut you open, or you can ride your bike....") I'm down 20 pounds from when I re-started riding. So you see, anyone driving, who never biked seriously, only thinks about the rain, and the snow, and how do I do this, and how do I do that, and they don't think, "my f**king car is making me fat, messing up my blood chemistry, and making my joints all achy". You look at all the crazy sh*t people buy in random attempts to get healthy, and you wonder, guys, do you listen to your doctors, EVER?

(And seriously, to most people, what's more important, peak oil and global warming, or losing 20lbs and de-aching all their tired bones?)

AND, I get to drink lots of beer. How cool is that?

To attempt to drag this vaguely back on topic -- we have more room to innovate on the consumption side, than we do on the production side. I own the "technology" to be a 3000 fossil-fuel-to-food-to-passenger-mpg vehicle. My bike is sitting outside. It's cold, I can cook a batch of oatmeal (ERoEI, 5:1 !) on my wood stove (we need the heat, hence heat to cook is not counted, ha-ha, otherwise 2000 pmpg). 3000 pmpg, today, I own all the technology. And ANYONE else with oatmeal and a bike can do the same. Can you say that about anything else on the production side? Not "we're researching" or "looks promising", but essentially already deployed, merely waiting for people to pick up free efficiency from the sidewalk. 3000 pmpg? How long till we can do that with "cars"?

Apologies for the rave/rant, but seriously, if we drove cars 80% less, I'd be just fine. And I think a lot of people would discover that it doesn't suck, once they tried it. And the oil, auto, pharma, and who knows what other industries, would lose a ton of business.

Hi dr2,

Sounds good.

re: "(I measured, the video of the experiment is on the web)"

Link?

I thought Google could find it pretty easily, but it takes a little digging.
Blog entry, explains protocol, links to video. Note the distinct lack of lab-safe footwear. Note also that these are thin tires, without much tread or lugs.

The reason people race with thin tires, is wind resistance, which increases with the square of the speed (and since the speed is linear in speed, the power requirements are cubic).

A sufficiently large and potentially car damaging object can cause drivers to give you a wide berth. It doesn't actually have to be dangerous to cars but to give the psychological effect. I am thinking about looking for a couple of rubber toy knives to fit in the ends of my handlebars ;)

NAOM

Not nice, I prefer the psychowar approach. Scaring them into giving you space is better than revenge.

NAOM

Fun to think about, but not productive in the long term. If you want to get more people on bikes, people who aren't already on bikes need to perceive biking as something that normal, civilized, people do.

Besides, I'd probably just stab myself with the key by accident, and it makes my bike permanently wider than it needs to be.

And today, I am probably driving to work (roads narrowed by snowbanks, and cars take up the whole road, leaving nothing for me), so I will be Part of the Problem.

Trailers work well. I pull my 18-foot-long kayak to my local lake in a trailer I made myself from some wheels I found in the trash and a couple of 2x3s.

I was going to wait to see if someone else said something, and they did :-). I also ride a bike in the snow -- apparently if you try, it isn't nearly as impossible as it seems.

I agree that there will be social pressure to match our existing stuff feature for feature (because we weigh losses higher than we do gains), but sticking to the (mostly-single-occupancy) car model is just another way to limit our options. Preserving the one-vehicle-does-all model is also less likely to give you the efficiency you'd get from two "vehicles", specialized for different purposes (*). I know this is a social thing, and social problems can be stickier than technical problems, but one way to attack social problems is to quit treating these social constraints as if they were legitimate and necessary for the preservation of civilization. Cars have only been in wide use for about 100 years; my grandmother never learned to drive.

(*) Except that in the winter, my cargo bike is the one-bike-fits-all -- best lights, snow tires, most stable, most visible.

A Nissan Leaf is not (yet) nearly enough. My understanding is that we're supposed to be aiming for an 80% overall reduction in GHG emissions, and do it ASAP. Charging your Leaf from an NG-burning power plant is not getting you to 80%. Social win, technical fail. Getting to an 80% reduction depends on a lot of things that could happen, but have not happened yet (in particular, we have got to get to a green grid, for some definition of green that might including glowing with radiation). In particular, it could turn out to be really expensive, and then what?

Edit: which is to say, I see things like the Leaf, as the auto industry marking time, looking for one more generation of expensive "stuff" to sell us, before the clock runs out on them.

I've been riding year-round for 3 years now, and commute in snow and ice for two or three months of each winter. Last year it was on a mountain bike with big knobby tires, which worked well enough that I never saw a cause to switch to studded tires. This year I'm on a light single-speed commuter, with skinny tires. Its a little skittish on ice, but works well enough that I'll probably run it through the winter (a long cold snowy one so far).

People always ask me how I could possibly go out and ride in the weather we get, a good all-purpose response is that everything looks harder from a cozy chair in a warm house. Once you're actually out covering ground its almost always pretty enjoyable, and the weather is never as bad as it looks from inside.

I usually use a single-speed road bike in the winter as well. Derailleurs are a no-no because they self-destruct with the snow and grit and salt unless you clean them everyday.

Yet among many, the faith continues. Any day now, an energy source will be invented that is better than anything that has gone before. Any day now....

The faith proves... false.

It's true, it's a faith. I would like to add that it is in particular a faith that knowledge of the physical sciences and thereafter the applied sciences will be extended just in time to avoid catastrophe. It is a faith in the idea that revolutionary insights will pour into the canon of pure science when there is adequate stimulus. This may be true for trifle additions to already well established theories, but how often does man discover something as fundamental as F=ma or E=mc2? The gap between these two discoveries was 300 years. That's how long it took for the most supremely gifted geniuses to advance the cause of pure science by modest steps. Indeed, pure science and the pure philosophy which nurtures it before it bears fruit only make advances in modest steps with each generation.

I believe, almost without doubt, that a few hundred years from now, man will have discovered how to create and store unlimited energy. I believe he will free himself permanently from all material scarcity and no longer be dependent on nature for paltry provisions. I believe economics as a science which meets unlimited desires with limited resources will be done away with permanently and in its place will exist a world of advancing man-made material forms made from an unlimited supply of raw materials. But I believe this is several hundred years from now, after centuries spent making inroads into the mysterious world of energy and matter, and after several profound discoveries have been made and finalized into mathematical language.

For now, we only have a few years, not centuries. Therefore, in all likelihood, the inevitable must follow.

Here's a few hypotheses, that, I believe (faith) will support your vision of the future, once we determine a way to mathematically formulate and test the following:

1) Shared Belief creates Shared Reality

2) When in conflict, Simple Beliefs outlive/outlast/outcompete Complex Beliefs.
In other words, thermodynamics, F=MA, and basic physics trumps any complex economics which depends on the aggregate behavior (statistics) of billions of humans (i.e. GDP)
Or, peak oil occurred in 2008, and the simplicity of this outweighs any complex obfuscated analysis that includes biofuel and NGL.

Finally, in regards to your 'the inevitable must follow'... I must respectfully disagree with your belief, and offer what I hope is a simpler one that will prevail over gloom and doom:
"Be the change you wish to see in the world"

No drastic new physics, or science, or invention is needed to head off doom. Only the acceptance of responsibility of each of us to live within our own means, and cease trying to tell others what constitutes their means. Some of use will build wind turbines on the plains and solar in the desert, and have net average energy consumption of hundreds of kilowatts, or even Megawatts per person. Some will push the limits of human endurance and biological synergy, and thrive on 100 watts per person and 20 square meters.

And then there'll be some who would go for the middle between those two.

"This is a statement of religion, not science. And natural scientists and engineers have every reason to be skeptical."

That Carnot guy was a real downer. Economics is full of laws that are at best guidelines. Economists have a conceptual grasp on laws that mean it. Always. A solid wall of no further shall you go.

In its latest International Petroleum Monthly for October 2010 (crude oil production 74,080 kb/d against 74,686 in July 2008 and 74,190 in May 2005) the EIA advises they discontinue the current format of the IPM and refer to "International Energy Statistics" as a replacement:

http://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm

The tables there contain all countries hitherto grouped into "Others" but the current version goes only up to August 2010.

If that were to continue, we would now have a 5 month delay in getting monthly crude oil data.

The October 2010 graphs are here:
http://www.crudeoilpeak.com/?page_id=51

including a new graph showing minor oil producers of that "Other" category.

I suppose the somber insight to be gained here is to recognize our inability to understand the economic feedbacks.

The economy, no one understands it in its entirety only with in certain predefined limits or definitions.

defining it as a subset of the ecosphere is fair enough but the lack of definition is unhelpful in everyday discourse....

Try to apply physics and chemistry to "economics" - pretty easy.

try to apply "economics" to physics and chemistry - HAHAhahahaha~!

Which makes me wonder what "science" the current incantations of economics applies. Is it "social science"? Which is what? Is it based on human rationality and predictability??? Are the results of these economic "experiments"(1) reproducible, are they predictable and explainable?

(1) QE1, QE2, TARP TALF etc etc etc are in essence "experiments". The whole thing is an "experiment"; and how often do you hear that the "analysts" were "off"?

Take a short, unrepresentive section of a natural curve -- an exponential growth curve, say. By picking the right place on the curve, you can kid yourself that you will always have a particular set of relationships, because you always have had them roughly constant -- within your chosen fragment.

Then pull back and look at the whole curve. Better still, don't just look at the graph plot of the classic exponential equation, but at the commonly-observed behaviour of exponential functions IN NATURE; that's to say: grow slowly for a long time; begin to speed up; begin to shoot up; stall; crash way below the original starting level; roughly mirror, in reverse, the whole first half of the curve, to get back eventually to the original start level.

The delusional cornucopians select the (recent) bits of these cruel curves, which please them, and don't frighten them, and then assume, magically, that it will always be like this.

I applaud any real-world-attached economist who frees him/herself from such idiocy, and describes things as they really work, over a sufficiently long time-frame. On the strength of that realistic view, the cornucopians are comprehensively dead. As time will show, soon enough.

The Single Giant Pulse Event hypothesis of industrial civilisation accords much more convincingly with how things seem to work, really, on this planet. And since we seem increasingly likely never to get off the Earth -- without outside help -- SGPE looks evermore likely to be the final death knell of cornucopian thinking.

The delusional cornucopians select the (recent) bits of these cruel curves

and are the delusional foamy at the mouths(rabid doomers) different ?

and are the delusional foamy at the mouths(rabid doomers) different ?

Actually that might be true in a very real, physical sense.

Cornucopians may have many of the traits of pathological liars,(I have a link somewhere to back that up)they tend to delude themselves about reality. Unfortunately they also believe themselves. Consequently they seem to be happy and optimistic as a result of this peculiar wiring of their brains. You can check out this link about "First Evidence Of Brain Abnormalities Found In Pathological Liars" http://www.sciencedaily.com/releases/2005/10/051002115557.htm

Specifically, liars had a 25.7 percent increase in prefrontal white matter compared to the antisocial controls and a 22 percent increase compared to the normal controls. Liars had a 14.2 percent decrease in prefrontal gray matter compared to normal controls.

More white matter – the wiring in the brain – may provide liars with the tools necessary to master the complex art of deceit, Raine said.

Methinks that probably the most the complex art of deceit of all, is the one involved with fooling onself...

Now doomers on the other hand probably have more in common with depressive realists. This wikipedia link on what that means will have to do for now:

Depressive realism is the proposition that people with depression actually have a more accurate perception of reality, specifically that they are less affected by positive illusions of illusory superiority, the illusion of control and optimism bias. The concept refers to people with borderline or moderate depression, suggesting that while non-depressed people see things in an overly positive light and severely depressed people see things in overly negative light, the mildly discontented grey area in between in fact reflects the most accurate perception of reality.

To be sure there are many shades of gray and connections to be made in this story >;^)

We need people on both sides of the aisles to donate their brains to science so we can gather the necessary data and put this to rest once and for all. Go to www.brainbank.mclean.org and click Brain Donation

For the last few years I have been working to fill in the gap between engineers and economist by researching and writing about the history of productivity and technology.

Economists incessantly refer to innovation and creative destruction, but only a handful of them have the technical knowledge to understand the phenomenon, and those who do are usually scientific types rather than economists. The best works in the field of integrated economics and technology include the International Institute of Applied Systems Analysis (IIASA), Ayres-Warr, Cesare Marchetti and the works by Vaclav Smil.

Economists do have terms for the phenomena we discuss on TOD: declining marginal returns, saturation and exhaustion. Important economists who anticipated today’s problems were Malthus and Jevons.

Economists also point to substitution as an alternative to exhaustion. In some cases this will be possible, but most substitutions are inferior and will be higher costs, which will have negative economic consequences. And while substitutions may increase employment in some areas, the resulting reduction in productivity will relult in economic contraction.

What I have been finding is that there is either a conspiracy of silence or a great deal of ignorance and denial among the economic community about two things: resource depletion and the declining marginal productivity of technology to produce economic growth, the latter being the more immediate problem and the former being the problem of the next generation. See: http://en.wikipedia.org/wiki/Productivity_improving_technologies_(historical)

The great gains in productivity occurred with railroads, steamships, mass production, electrification and mechanization of agriculture in developed countries and the green revolution in the less developed regions. World economic growth peaked in the 1960s and has been reaching lower cyclical highs since.

The unwinding of the energy rebound effect will be the death of the economic growth. Increases in energy conversion efficiency by a factor of 40 since Newcomen’s 1711 steam engine drove the entire economy, but we are now at thermodynamic limits.

To see how the economy will collapse consider that the cost of fuel for your car may be 25% of the total costs including depreciation, insurance, repairs, etc., so the multiplier effect of reducing miles drive is four times the cost of fuel only.

Economists also point to substitution as an alternative to exhaustion. In some cases this will be possible, but most substitutions are inferior and will be higher costs, which will have negative economic consequences. And while substitutions may increase employment in some areas, the resulting reduction in productivity will relult in economic contraction.

I actually see a silver lining in this cloud. Yes, some substitutions for energy will be inferior, higher cost, and less efficient. However, they are also higher labor intensive. And I think that is true to some degree with some alternative energy systems. And if we eventually start using them, that will help with the current massive unemployment problem.

The problem right now is that the alternatives are still more expensive than the traditional FF energy. So instead of moving on the alternatives, we are just contracting the economy and continuing to rely on the cheaper FF energy. Perhaps we will have to continue a long slog until FF prices are finally higher than alternative energy prices . . . and at that point we'll higher lots of people to install alternative energy systems. But I think it will be a long slog until that is true because it is just damn hard to compete with cheap energy-dense FF that you just dig out of the ground.

The 'Green Energy' revolution will be real . . . it just ain't happening until we become really desperate. It is just a tiny subsidized slice of the economy right now. (And those subsidies are good since they help develop the technology and get the prices down.)

Consider the electric street railway system that was largely built between 1900 and 1914, the later date being the beginning of Ford's assembly line, meaning that there were practically no automobiles. The amount of capital and labor used to build the streetcar system were orders of magnitude lower than suplying the U.S., Europe and Australia with automobiles and highways, yet streetcars were a tremendous advantage over horses and wagons.

There is no reason we could not build a complete new streetcar system in two decades with today's machinery. The costs could be offset by the massive savings on imported oil. However, we would leave a gigantic hole in the economy that is presently filled by the auto sector. That is why we have postponed the day of reckoning.

In the meantime we are being saddled with increasingly higher real costs, reflected in higher trade deficits, to pay for oil.

The most practical alternative energy is nuclear, with advanced technology designed to more efficiently use the nuclear fuel. We can do this now, not at any great savings, but with job creation. Whether we use electric railways or electric vehicles, we will have to have the electricity.

"And those subsidies are good since they help develop the technology and get the prices down.)"

Taxing fuels and raw materials in general should be the prefered way of pushing alternatives, not subsidies. Subsidies are good for research and development, but I think they are almost always bad when related directly to production and OPEX (and one shouldn't forget that subsidies require some tax revenue (or tax rebate) to be used to be set up).

Subsidies require to define what are "good solutions" to be set up, but it is very easy to be wrong in these decisions, biofuel would be a key example here (when their EROEI is barely above 1), but even subsidies (or feed in tariff) on solar for instance, could very well be the case that overall the corresponding investment woud be better placed in insulation.

Overall subsidies push to consume more, taxes on raw material push to adapt through better solution or consuming less without having to define any solutions, or label what are the "good" solutions, they are "solutions agnostic" in a way, and this is what is needed (besides the fact that taxes on raw material for net importers also lower the trade deficit).

Taxing fuels and raw materials in general should be the prefered way of pushing alternatives, not subsidies. Subsidies are good for research and development, but I think they are almost always bad when related directly to production and OPEX (and one shouldn't forget that subsidies require some tax revenue (or tax rebate) to be used to be set up).

I'm not going to argue with that at all. A stiff gas tax is the best way to go. But since a gas tax is political suicide in the USA, the politicians have to go with the tax-rebate route. And even doing that gets them a lot of flack.

Alternatives are still more expensive than the traditional FF energy

The "price" of things is a farce,
and so is the notion of a "free" market.

Economic theory is just a subterfuge for determining by way of politics, who among us is more "deserving" and who is less deserving.

I was just reading (but forget exactly where) that employment agencies and employers are using code words to signal to each other how they intend to discriminate and not hire blacks, hispanics, older people, etc. Apparently they use phrases like "must be currently employed" or "3-5 years experience preferred" as a coded way to get around laws that prohibit discrimination. But in the end they do discriminate. The market is anything but "free". It is well controlled by TPTB.

If the TPTB wanted FFs to be more expensive, they can easily make it so.
Don't believe that? Just go out there and try to buy any illegal drug at "free" market prices. If TPTB chose to call the FFs we are "addicted to" an illegal substance, "prices" for it would go up. It's a simple law of restricted-supply and large demand. [ i.mage.+]

____________________
p.s. edit: found it: How Employers Weed Out Unemployed Job Applicants, Others, Behind The Scenes

See also this law article Code Words Equal Discrimination

"Economic theory is just a subterfuge for determining by way of politics, who among us is more "deserving" and who is less deserving."

Nicely put.

I lived in the central GA for a while there, and the banks and businesses had a subtle way of continuing discrimination. Many businesses said that they did not accept check below the number 1000. This struck me as odd, since I was under the impression that you start your check numbers at any number you want. It turns out that the banks (as one clerk told me) reserve the low numbered checks for their "minority customers." Redlining and other similar measures are also widely practiced.

Pricing is rationing, period. It ensures that those without continue to fall behind, while those with the most continue to get ever more.

Bank branches are provided with checks having unassigned account numbers preprinted on the bottom, typically numbered from 100-110 or so, which they give to customers when a new account is opened. These are called "starter checks", and they are for the convenience of the customer before the customer's checks arrive from the check printer with the customers name and address.

A common fraud is for someone to open a new account, write a bunch of bad checks, and then skip town. Therefore, businesses will avoid taking checks numbered below 1000, and they will prefer to wait until the check clears before providing the goods. Actually, a careful businessman will be very cautious in accepting any check near 1000 either, in order to avoid account opening fraud.

There is somewhat less account opening fraud since the federal anti-terrorist "know the customer" rules have been put into place and more identification is required for account opening.

Well, that provides a nice cover for the businesses.

But just to re-iterate, the bank teller said, verbatim, about lower check numbers, "We reserve those for our minority customers" with a wink and a smile.

I had a beard and must have looked like a good old boy to him.

I reported the incident to various authorities, but I doubt the practice has ended.

Whoa, people still write checks ?- )

Actually what I did find interesting was that on the north side of the Big Island many businesses were not accepting credit cards this last fall. Betting a lot of people played the dispute purchase game as they stretched their credit past the max when the downturn deepened and a lot of small business got burned or at least had serious delays in getting paid. First time I've seen so many US businesses not accepting credit cards in decades.

Hello Paul,

Could you post a link to your writings? I didn't see anything on your profile page. If you don't have anything available online can you email them to me team10tim with service through yahoo mail or click on my profile.

I have read a lot of Ayres and Warr, Marchetti, and Jevons. I have't started in on Smil or Malthus yet but it amazes my the Jevons addressed most of the important points 145 years ago and economists are still broadly ignorant of his work. Even though his work on political economy is sometimes referenced as the starting point of neoclassical economics. (Curiously, Ayres and Warr don't cite him on the rebound effect AKA Jevons Paradox)

Thanks,
Tim

I have posted a lot of information on Wikipedia:

Productivity improving technologies (historical)
Second Industrial Revolution
Kondratiev wave
Mass production
Assembly line

These articles are rich with references to high quality works, too many to list here. I have posted reviews of some of the more important books on Amazon.com.

In the next few days I will create a new Wikipedia article that I am planning to call Useful work growth theory (Ayres-Warr model) that will be the explanation for a sub-topic under Economic growth: Useful work theory

I wrote Productivity improving technologies to fill in the gap between abstract theory (Solow) and what actually happened.

Another work I recommend is Grubler's The Rise and Fall of Transportation Infrastructures:... which you can download from the links I posted on the Wikipedia articles. I also recommend David Ames Wells Recent Economic Changes and Their Effect..... for 19th century economic history. Again, see links to view on line.

Marchetti never did say that he saw the end of economic growth coming because of the exhaustion of opportunities to improve productivity. Ayres-Warr (2009) finally did say so. Going through the science timeline, the great experiments, the great innovations and the history of technology, I can only agree. Every truly great advance happened a long time ago.

A very excellent template indeed.
As far as labor productivity, I have my own model based on learning curve theory that may be a good addition at some point. I am putting the finishing touches on the compendium of all my blog posts and this will be in a chapter on econophysics. My current plans are that it will go up on Google Docs as a PDF within the next week or so.

I have to really seriously start thinking about how to work the Wikipedia angle. I haven't done too much with that approach and I really find the entries lacking much of the analysis that gets talked about here. Recently I have seen a few people here on TOD that put some effort into it, you included, and it gets me motivated to work on it as well. Thanks.

Wikipedia articles are lacking because of quality editors, meaning subject matter experts. Much of it is amateurish, and there are a lot of vandals who think it’s cute to make crude comments. Fortunately people who have articles on their watch list hit the undo link and clean this up.

I wish more people with subject matter expertise (SME) would volunteer. Anyone who is a SME can write or improve an article in a surprisingly short time.

Oil Drum readers can improve the Ecological economics, EROEI and other related articles.

Wikipedia’s strength is in the variety of current topics covered. Another strength is that it is easy to create an article from links to existing articles and on line books, such as I did for Electrification. Most of my articles have so many links that they are actually on-line subject libraries. This is a powerful, easy and fast way to present information. The combined articles that I wrote major parts of have annual readership of over one million.

Wikipedia has strict guidelines against publishing original research and unreferenced content can be removed.

To see how the economy will collapse consider that the cost of fuel for your car may be 25% of the total costs including depreciation, insurance, repairs, etc., so the multiplier effect of reducing miles drive is four times the cost of fuel only.

That isn't exactly true. Insurance will only drop slightly at least at first. Lower miles should reduce rates but vehicle repair and medical costs resulting per accident accident will not drop much. As the vast majority of accidents are within a couple miles of home the accident rate per mile driven might actually go up. That is all conjecture.

When I got my first car tires were lucky to last 10,000 miles, points and plugs had to be changed every couple oil changes and oil had to be changed every 2000 miles. Tires now last 50000-80000 miles, points have disappeared, plugs last 100000 miles and oil 5000 miles or more. But when vehicles need repair the components much more are expensive.

So making predictions about what reduced miles and crossing over to electric vehicles will do the economic picture is a murky business at best.

There is no reason we could not build a complete new streetcar system in two decades with today's machinery. The costs could be offset by the massive savings on imported oil. However, we would leave a gigantic hole in the economy that is presently filled by the auto sector. That is why we have postponed the day of reckoning.

A very good point to raise, and one which economists bring up as horses were in use in significant numbers for freight wagon and personal vehicle power the entire time the street car system was being built. Economists always bring up the demise of the buggy whip, harness and saddle making industries and the near end of the line for street sweepers and of the farrier and horse breaking trades, ...and how that work force and more were eventually absorbed by the new auto industry.

It is very difficult to say what will step up and take the place of heavy manufacturing though. We have had a shift away from making things in this country already though we use ship loads of overseas manufactured goods daily. Don't look for answers to be that cut and dried. We have counted on larger, wealthier populations to drive growth of the cheap power world for a while now--steady state is not something we have worked on...yet.

I also highly recommend reading Jevons' "The Coal Question" (the link goes to the complete work).

Seeing how badly he misjudged the future significance of that novelty of his day, the control of electric power, can give hope to the gloomiest of doomers

Good article, touching on what is maybe the biggest current challenge, that is how to bring Economics and its publications back to reason ?

(although in fact, the challenge of surviving current natural ressources depletion is still probably much higher than the above one)

Plus somehow, if you consider that the objective of Economics is : "To describe how to destroy the world as fast as possible", then the laws and theories defined, for most of them, are perfectly sound.

Remember a quote from Friedman that was really characteristic of the "classical" (or how are they called again ?) economists views on natural ressources, but cannot find it back right now.

Also, maybe due to myself not being a native English speaker, but the word "commodities" always sounds to me somehow as a "cover up" or euphemism, compared to "raw materials", in the sense that contrary to "commodities", "raw material" also has the "limited stock" or at least the "down to earth" aspect of things embeded in it. But true that commodities is also used for grain for instance, that can also be seen as renewable or flow materials (to a certain extend).

Would be interested to know if for other people this use of "commodities" also sounds a bit like an euphemism, or not ?

Note : there is no equivalent in French for the "commodities" word (although commodities sounds like coming from the word "commode", meaning useful, handy, or practical), it is either "matières premières" for "raw materials" or "denrées alimentaires" for food material for instance, how about in Spanish, German, Other ?

really characteristic of the "classical" (or how are they called again ?) economists views

----> there ya' go.

Looking a bit more at the ethymology of commodity, wikipedia says :

"The word commodity came into use in English in the 15th century, from the French commodité, to a benefit or profit. Going further back, the French word derived from the Latin commoditatem (nominative commoditas) meaning "fitness, adaptation". The Latin root commod- meant variously "appropriate", "proper measure, time or condition" and "advantage, benefit".

Recently, many industry individuals have begun to identify workers compensation insurance as a commodity."

So it means that "commodité" was used in French in the 15th to mean "benefit, profit" ? In that case this meaning is not used anymore, on the other hand "commodité" is still used as a noun meaning "practical things" like an appartment having all the "commodités" meaning the appartment having electricity, gas, bathrooms, parking, etc (but it sounds a bit dated), the adjective "commode" meaning practical, is still more used (for instance saying a device machine or software is "pas commode" meaning it isn't easy to use), although maybe also a bit dated ("pas commode" is also used to characterize a person, with a meaning like "serious", "stern" or "not to fuck around with").

And wikipedia Fr also lists "commodité" as being used in French in the same sense as "commodity" in English (and coming from English), but it isn't really the case (maybe it is in Economics circles), main dictionnaries do not list that meaning for "commodité".

Strange that a word meaning profit ended up meaning raw material or undifferenciated product, or not so strange ...

Jeez! I learn something every day. I always thought commodity was derived from commode, meaning we use it up and flush it down the toilet :-0

Yes clearly the toilets are a "commodité" in the (a bit dated) French sense :-), and "commode" is also used as a noun to designate a piece of furniture, but not as a piece of furniture used to put a chamber pot (as I get it is used in English), more to designate a waist high piece of furniture with drawers, like below for instance :

Is "commode" sometimes used for these type of furniture in the US ?

Yes, but I think it is becoming archaic. People are more familiar with the word used to mean toilet (WC).

I think the most common usage of the word "commodities" is more like something that is traded without differentiation. For example, a given category of oil, wheat or cotton may command the same price regardless of its origin, or its cost to produce.

'objective of Economics is : "To describe how to destroy the world as fast as possible"'

Nice--deserves a permanent place at the top of the page.

It seems to me that the assumptions that form the base of the dominant current form of economic thought were arrived at during an unprecedented time in human history and will not hold true past peak oil. I think it was only the energy provided by fossil fuels that made the industrial revolution possible and that the belief that technology will always make things less costly misses the point. Technology requires energy, it dosen't create it.
The economics of scale only worked because of increasing supplies of cheap energy were available to drive technology and without a constantly increasing supply of energy to drive the economic engine, costs will return to their natural level.

It isn't possible to find new solutions to problems no matter the demand or ingenuity applied if there is insufficent energy available to drive the new technology.

Fossil fuels are not simply commodities that can be replaced. The quality and volume of energy we derive from them is absolutely neccessary to the economic paradigm we currently observe. That paradigm will fail with the decline of oil.

Good points except that every place you use the word "energy" I would substitute "cheap energy".

Heh, rightly so, I dashed that off before I had to go out. The energy we've derived from Fossil Fuels this last 150 years or so has been all but free. The economy we built on it, world wide, requires that that energy base constantly grows and remains low cost. That isn't going to happen.
People expect that things will forever get cheaper and more available, but FF energy has essentially subsidized all costs,everywhere,for the last century and a half.

This level of energy input that we've come to expect as normal, that made the industrial revolution,and the green revolution possible, and drove down all costs, has been a one time blip in history.

Here is a way to mock Simon's faith-based thesis by simply applying it to another subject.

More people, and increased income, cause death to occur more frequently in the short run. Heightened death rates causes healthcare costs to rise. The higher prices present opportunity, and prompt inventors and entrepreneurs to search for solutions to death. Many fail in the search, at cost to themselves. But in a free society, solutions are eventually found NOT. And in the long run the new developments leave us better off than if the problems had not arisen NOT. That is, prices eventually become lower than before the increased scarcity occurred NOT. (Simon 1996)

It is pretty interesting to use death in an analogy. What else would people pay more to prevent? And it is something that has had prices spiral out of control upward . . . though it has not been a 'short run'. But at least with current technology, there is no solution to death . . . or peak oil, so his theory ultimately fails.

And don't get me wrong . . . markets generally do work to solve problems the vast majority of the time. But they cannot violate the laws of thermodynamics, physics, chemistry, biology, etc. His theory falls apart in the faith-based statement: "But in a free society, solutions are eventually found." There is nothing but faith backing that up. And like Alan Greenspan's complete faith in markets got shattered, this faith in markets will also be shattered.

"But in a free society, solutions are eventually found."

Or as Bill Clinton might say:

It all depends on what your definition of "solution" is is.

Mathematically speaking, if the curves intersect at the dieoff point, that is a "solution".

Moreover, an energy singularity might be found as a solution in the imaginary plane.

Look at it from the Jared Diamond "Collapse" or Joseph Tainter "Collapse of Complex Societies" perspective. Civilizations are often fairly long-lasting things. Over their timespans, they face many challenges and some of these are often resource/environmental challenges. For most of the civilization's existence, the economists will be right. One way or another the problems will be dealt with in a way that doesn't bring down the civilization. They may switch resources (if there are alternatives), use resources more efficiently (if they have technology to do that), or do without the resource (if it's possible). The economists' argument is just that; people will find a way to deal with these problems if it's possible.

On the other hand, all past civilizations have eventually collapsed, either in Tainter's sense of becoming less complex, or in Diamond's sense of massive simplification and shrinking populations, sometimes to zero. So in all past cases, the Malthusian version has eventually won. The cornucopians (not all economists are, BTW), have gotten lucky so far with this civilization, and may continue to get lucky. Replacing oil will be one of the larger resource challenges civilizations have faced, however.

I wouldn't say the economists were lucky and the scientists unlucky, I'd say the scientists were way too bold from their side, and didn't account for demand destruction's effect on prices. Simmons should have bet that Americans would use less oil (liquids) per capita because they can't afford it. Tierney might have then taken the side that they'd use at least as much. Simmons would have won the bet, and it still would have said something about oil supply and their philosophies. Knowing what price will be requires that you know what both supply and demand will be. That's a much harder problem that a lot of people think.

Being an investment banker one would have thought that Matt Simmons would have been more cognizant of the negative impacts of high gasoline prices on consumer spending. But Matt frequently spoke on his website about how cheap oil was in relation to all sorts of other unrelated things like; laundry detergent, Coca Cola, etc. He honestly believed that even at $100/brl. oil was fairly "cheap". He thought the economy could tolerate much higher oil prices than it turned out that it could. This was a blind spot in his otherwise excellent analysis.

I think it was a big blind-spot for him. He was a very wealthy man. If gas cost $20/gallon, it would not have affected him at all. So I don't think he was able to appreciate what would happen to Joe Six-pack when gasoline started costing more than $4/gallon. That and he always had the tendency to exaggerate things. If you go back and look at his old powerpoint presentations, he had a tendency to be negative on almost everything . . . rust! Oil workers all retiring! Refineries are ancient!

In general, I'm on with everyone here, and have no time for "economist think" regarding resources. They can be roundly criticised for having a faith-based belief in the power of markets even in the face of contrary evidence.

However, I also am developing an extreme distaste for that "$4.00 / gal = apocalypse" thinking from our US friends. That is merely a prediction, based on nothing but hope, and flying in the face of clear evidence to the contrary in every other OECD country in the world (all of whom are presently accustomed to paying more than that for gasoline, many double that. Some, like Canada, with very comparable living situations. None with as high a GDP per capita.) You rail against economists for saying that the future will work just as the past, and correctly say that that is simply a flawed prediction based on no facts, and then go on to make your own prediction ("$4.00 / gal = apocalypse") also based on nothing but wishful thinking. Agreed an abrupt 40% increase in gasoline prices MAY contribute significantly to onset of a short recession, but I see evidence at now for nothing more.

Don't twist my words. I do NOT think $4/gallon = apocalypse. But I do think $4/gallon is painful to the little guy in the USA and forces changes to the economy that Matt Simmons did not appreciate and hence caused him to place a bad bet. $4/gallon does cause demand destruction. $4/gallon does cause people to buy different cars and use public transportation. If you've ever been to the USA and seen our big cars and lack of public transportation, then you should be able appreciate that $4/gallon causes disruptive change here. I fully agree that we can and will adjust . . . it is NOT an apocalypse . . . but I can't see how you can dispute that GIVEN OUR CURRENT INFRASTRUCTURE, $4/gallon hits the USA in a painful manner.

Agreed an abrupt 40% increase in gasoline prices MAY contribute significantly to onset of a short recession

I'd call that an understatement. In our history a recession has ALWAYS followed sharp oil price increase. It certainly is possible that a recession will not occur and I'd love that to be case.

And therein lies the difference . . . I'll admit it is possible that a gas price rise may not have much of an effect. There are no physical laws that say otherwise. But the problem with the economists is assuming that solution will ALWAYS come along . . . but that cannot be true since sometimes a solution may violate physical laws.

Yup. I gotta back you up on that one, speculawyer.
Credible analysis seems to indicate that here in the U.S. demand destruction starts at about $3.30.
It's very possible that it's a just a little bit higher, but the U.S. economy is very, very heavily dependent upon discretionary spending. No other country serves as a good proxy for our economy in any analysis.

And right on cue, here comes an AP story written with this obvious idea:

Pump prices eyed as reason Americans driving less

Sandy Shore, AP Business Writer, On Friday January 14, 2011, 1:41 pm EST
More motorists are sticking closer to home this month but that hasn't stopped pump prices from climbing.

At the moment, there are a number of reasons for Americans to drive less. They could be huddling in front of fireplaces against icy winter blasts that have blanketed much of the country. They could be diverting money to pay off holiday bills. Or, they could be restricting non-essential driving and purchases because of rising pump prices.

Analysts are closely watching economic news and consumer sentiment to determine if it's the latter. If gas prices are influencing consumer habits, that could affect the pace of the economy in the months ahead.

Here is the difference between the USA and Europe/Canada. You guys, VERY WISELY, put huge taxes on gasoline. So you have high gas prices (in large part due to those taxes) and bought efficient cars. Our gas tax is a joke. So when the price of oil goes up sharply, the price of gas goes up sharply in the USA too. Since taxes make up a large part of your gasoline cost, when the price of oil goes up sharply, the price of gas does not go up as sharply. Thus, oil price hikes hit you guys less than the hit us . . . gas goes up by a smaller % for Europe/Canada.

It may seem counter-intuitive but higher oil prices affect us MORE where we have lower gas prices. Why? Because we foolishly built our entire infrastructure to be dependent on very low gasoline prices.

Canadian gas taxes are much closer to US than European. Wikipedia has a tabulation for Canada and USA, but as a summary, US taxes oscillate around 50 cents a gallon, depending on the state, Canadian taxes are around $1.40 per gallon when federal, provincial excises and two sales taxes are added. Dollars are at parity now. There was an outcry when gas went above $1 per litre a few years ago, and calls to lower taxes, but prices dropped. Now complacent Canadians take $1.05 and $1.20 gas prices without much grumbling.

Exactly, add to that that the US consumes as much oil as China, Germany, Japan, India, and Russia combined, and that due to that an increase in oil price affects their commercial deficit by so much, and you really start wondering why they keep their ridiculous gas tax level as well as keep on buying their gross cars, they don't care that much about their future, do they ?

They care very much about their future . . . they are just too stupid to do the right things and are filled with all sorts of misinformation fed to them 24/7. They think oil prices are just high because of speculators and dirty-hippie tree-hugger that won't let them drill. They think cutting taxes will magically solve all problems. They think scientists are atheists that make up hoax theories because they want government grants or it is wealth-transfer conspiracy theory. I think Patton Oswalt captured the situation well with the statement "American is like a retarded trust-fund baby with nuclear weapons."

...the US consumes as much oil as China, Germany, Japan, India, and Russia combined...

That may have been true as recently as 2007, but according to the CIA World Factbook in 2009 their total exceeded US consumption.

United States 18,690,000
China 8,200,000
Japan 4,363,000
India 2,980,000
Russia 2,740,000
Germany 2,437,000
Other 5 Total 20,720,000

Also, Brazilian consumption exceeded that of Germany at 2,460,000 bpd and Saudi Arabia was close to Germany at 2,430,000 bpd. I'm sure that in 2010 SA consumption exceeded Germany's.

Now in Japan gasoline (regular) is about 133 yen/liter. That is about $5/gallon! (Glad I don't have a car!)

Actually it is having a big impact, but the situation just continues, nothing new. It was 125 yen/l last month...

Convenience stores are the latest thing to suddenly shut down. Empty storefronts and office buildings are everywhere.

But the traffic levels are still moderately high, not so different from 3 years ago. (But down from 8-9 years ago).

People are sacrificing everything to keep their cars running.

No one talks about this very much....economists just say that the government will have to help with more asset purchases...empty buildings are written off by banks and the govt funds the losses.

I guess the economy is in a state of liquidation here. But no one will admit it yet.

spec - perhaps it was his wealth that made him blind to the reality of demand destruction. But I'm probably a bit overly sensitive to it as it's easy to recall the days in the 80's when I was driving a Yellow cab around Houston thanks to $10 oil brought on by the oil spike of the late 70's. I'm doing great right now. But $90+ oil makes me rather uncomfortable. Maybe even paranoid might be a better word.

I'm not sure which concerns me more--the possibility of a plunge in oil prices like some deflationists have been predicting for quite some time, or angry rioting soccer moms who can no longer afford to fill up the family minivan.

Well, I just filled up my car last night with regular unleaded at Cdn$1.14 / litre, = about US$ (1.14 x 1.01 x 3.82) = US$4.40 / gal. The price still fluctuates quite dramatically with the price of oil, eg. was at Cdn$0.84 / litre in November.

I think that case is way overstated, and am personally much more concerned with the dropping value of the $US exchange rate. Not a serious problem so far, but IMHO solely supported by the fact that the $US is the de facto world reserve currency, which makes it react strangely counter-cyclically, eg. improves in value when anything happens which might cause a downturn in world economy even if that something is a problem in the US economy.

There's enough fodder in there for anyone wanting to sort out real issues rather than "$4.00 = armageddon"

If Rachel Madow's piece about the recent Tuscon massacre contains accurate data, the US is the most highly armed population in the entire world, with 90 guns per every 100 adults. It would probably be prudent, therefore, to be more concerned with the angry rioting soccer moms who can no longer afford to fill up the family minivan.

Rachel Maddow- Do we know how to stop the next one-
http://www.youtube.com/watch?v=B1MrT3O-TBg

The liberals might be right here, but they are too late.

I mean, what, do you want to ban guns so every last 300 millionth American and every last 7 billionth human can live forever?

Sorry but this just has to be said. I cannot tell you the contempt I have for the media in this country, who treat every last death or injury (whether forgotten celebrity or second rate politician) as if it's cause for 2 weeks of national mourning.

"angry rioting soccer moms"

Depends on how they're dressed. What a way to go.

http://www.youtube.com/watch?v=0FEL4nfSscU

Thoughts on the substitution puzzle:

An insight connecting science, technology, and innovation lies in economist Robert Solow's 1974 paper. He said (paraphrased): If we can easily substitute other factors for natural resources, then we can “…get along without natural resources, and exhaustion is just an event, not a catastrophe.” But, if no substitute is found, catastrophe is unavoidable. In between are the interesting cases where the outcome is unknown.

I personally find his first statement offensive, his second obvious, and his third stimulating. If substitution needs disciplined thinking, puzzling out Solow’s uncertain outcomes by focusing on innovation may be the only hope we can have for preventing catastrophes.

So a search for such discipline may be fruitful. One example in the energy realm is at khoslaventures.com. I'd be interested to learn of others.

One big problem with Solow and other mainstream economists is the assumption of rationality: Producers are rational profit maximizers; Consumers are rational utility maximizers; Governments officials are rational in pursuing the greatest good for the greatest number.

Now, if this assumption of rationality were to hold in the U.S. we would be building nuclear power generating utilities to provide abundant electricity at reasonable cost, and we would be implementing Alan Drake's proposals to expand and electrify the rail network. But rationality does not rule, either at the producer, consumer, or government level. Instead we have the power of special interests (such as the auto companies) to keep business as usual and even to create an auto-centered BAU by tearing up the streetcar tracks in U.S. towns and cities after World War II. Instead of profit maximization and consumer utility maximization we are frozen into an infrastructure that depends on cheap fossil fuels. And, as has been noted above, there are no good substitutes for cheap and abundant fossil fuels.

Few economists appreciate the unique chemical and physical properties of fossil fuels. According to standard economic theory, satisfactory substitutes will be found for cheap fossil fuels. But in this respect, the standard mainstream economic theory is flat-out wrong.

Agreed. I'm simply trying to figure out how to help the rising generation. Somehow, "prepare to die" doesn't seem very helpful.

"Now, if this assumption of rationality were to hold in the U.S. we would be building nuclear power generating utilities to provide abundant electricity at reasonable cost,"

.....and building a fleet of low cost rocketships to send the highly radioactive and terrorist friendly nuclear waste ito outer space.

Sorry Don but,as an engineer having worked in the nuclear industry I just can't get past that waste issue. Burying stuff in the ground that is going to be dangerous for 10,000 years just bothers the hell out of me.

The waste issue is definitely a problem. But we will just figure out how much risk we will accept and then move forward with regulations/systems/plans at that level of risk. Coal plants kill trees, kill coal miners, spew mercury, etc. Oil rigs blow up & sink, oil refineries blow up, we import oil from enemies and people that support terrorism, etc. Windmills are expensive and kill (a few) birds. Etc.

Like every other energy system, nukes have some serious issues. But we will go ahead regardless. That is our nature. When the price of coal and natural gas gets high enough such that electricity rates go up, people will be voting for whoever approves nuclear plants. And when the price of oil gets high enough, people will vote for whoever says "Drill ANWR now!".

That is our nature, like it or not.

Saying other sources have problems is not an answer to the very severe problems of nuclear waste.

Claiming that windmills are expensive in a conversation about nukes is surreal.

And bringing up bird death (even with the parenthetical 'a few') in respect to windmills, when (as you presumably know) sky scrapers and cats kill orders of magnitude more, puts you at risk of being considered a troll.

It is equivalent to saying "Anything I ingest involves risk--I could choke on a carrot, after all--so I might as well live on crack cocaine."

"Our nature" as the most adaptable creature on earth has very much to do with what we do with our language--what we convince ourselves is 'our nature.'

Japan and France both get most of their electricity from nuclear power generation. Are the engineers in these two countries reckless when it comes to disposing of nuclear waste? Or perhaps have these two countries made an accurate cost/benefit analysis of nuclear energy including the cost of safely dealing with nuclear waste?

Nothing is 100% safe: Look at mining coal and the ills created by burning coal. Nuclear does not have to be perfect to be a lot better than coal when it comes to generating electricity. In the real world we have real choices: We can burn all the coal--or we can substitute nuclear energy (and some wind and solar energy) for coal. I say thumbs down to more burning of coal and thumbs up to nuclear generation of electricity.

Well, the waste isn't THAT big a problem. For example, coal ash typically contains significant amounts of radioactives, to the point where a coal-fired generating station will typically send up its stack about 1/10th the amount of radioactives per unit energy produced as a nuclear reactor will use to produce the same amount of energy. At that point the question becomes "Why don't the operators of nuclear reactors simply grind their radioactive spent fuel into a fine powder and blow it up tall smokestacks, just like the dirt-burners do? Nobody seems to mind the dirt-burners spreading radioactives around."

Precisely. Coal is a horrible "solution" to the problem of generating electricity. Nuclear energy has its own problems, but it is a far far better "solution" than is coal.

I am not so much pro-Nuke as I am anti-coal.

Its hard to guess which one puts a worse burden on future generations. I suspect most people underestimate the amount of "low level" waste that is also generated. Years ago we just put the stuff in steel 55-gallon drums mixed 50-50 with concrete and threw them in the ocean. Thousands of them every year. I don't know what they do now.

I'm not impressed with the French view of responsible behavior but they certainly took a much more thoughtful view of their nuclear programs than the US did.

Here's a paper on France's waste delimma:
http://www.citizen.org/documents/Burnie%20paper%20on%20French%20reproces...

and some excerpts:
"Even with a less than projected MOX program, more than 10 tons of separated plutonium in highly vulnerable powder oxide form is transported across France on an annual basis. Major
security issues remain dangerously unresolved."

"In 2003, Greenpeace tracked and blocked one such transport in the small French town of Chalon. The transports in
lightly armed trucks remain predictable, regular and easily identified. It is fare(sic) to say that it is possible to set your
watch by observing the movement of weapons-usable plutonium across France."

Plutonium recovered from fuel rods that have been used in power reactors is generally not "weapons-usable", since there is too much Pu240 in it. Weapons grade plutonium is produced in specialized reactors that produce mostly Pu239.

Depends on what is meant by "low level waste". You will find products on your supermarket shelves that are more radioactive than materials that are handled with all the precautions and fear of "radioactive waste". The whole system is a mess created by fearmongering and politics.

NAOM

Highly concentrated sources of ionizing radiation with half-lives of centuries/millennia? Nothing to worry about here folks. Better to cut your intake of sugar, salt and saturated fat.

You're deliberately conflating "low-level waste" (coveralls, tools, gloves) with spent fuel. No agenda folks.

According to most Internet sources (like the Thorium Wikipedia article), nuclear waste is not a problem if you use Thorium. Because of it's advantages, I expect that it will be the nuclear technology of the future.

I don't think that's true. Thorium converts to U233 in the reactor. The fission components that become waste then aren't much different from U235. The good news is only that there is no real generation of Plutonium, which is easier to separate chemically from the non-fissionable Uranium 238.

"not a problem" overstates it, but "a much smaller problem" is right on the money. The fission components are much reduced in volume, have a much shorter half-life, yet are still nasty enough for amateurs to handle that diversion by standard-issue terrorists is less likely (in particular, the possibility of F or HF being produced if you are careless).

Eventually you get to the "compared-to-what" level. I've got small amounts of radon seeping up through my basement. There's radioactive waste in coal, quite a lot of it, and we don't raise near the fuss about that. The thorium reactors sound like they take a huge step towards "compared to what".

What scientist find difficult to wrap their heads around is the fact that money isn't real.

Right. It's a proxy for another measure. In my mind it makes most analytic sense when used as an exchange mechanism for something like worker productivity. Then everything becomes a relative measure and the currency serves as a measure of that productivity. The most incredible models of economic productivity are coming from the econophysics departments in Japan, where they have access to scads of interesting data. The models cover orders of magnitude and they make a lot of sense.

Not so sure of your choice of the word "productivity" there. In observing business news over the past many years I've certainly learned to equate the terms "increased worker productivity" with "reduced worker wages". The first is always used, but the second is always what's meant.

Have to go with the model of Japan to explain this. All workers go through a learning curve to achieve current productiviy levels; for each individual worker this goes close to sqrt(time). The workers each have their own proportionality constant which clamps their skill level rate of increase and this rate constant is distributed according to maximum entropy across the entire population. The proxy for productivity is something close to gross profit. When you put these together, you get very good agreement with the data which is something like 15 million data points in Japan.

That is the main region of agreement. If you look at the tails the agreement continues.

This model says that the engine of economy, which is the labor pool, approximates almost exactly the same statistical physics as a ensemble of particles. The key distinction is that the particles go through a learning curve.

The theory makes a huge amount of sense and has only been missed over the years because eonomists hate to include dispersion or disorder in their models. They essentially don't want to admit to fat-tail behavior, which is what this model does, ala Taleb's Black Swan.

Now on to your point. This model uses relative measures and so it only looks at productivity of workers' relative to each other, with currency as the "measure" of a worker's relative work in productivity. In this model, if worker's wages decrease, big deal, as it affects the whole ensemble to first order. Yet, the data will change from year-to-year, so you can look at these changes as a perturbation.

The entire analysis falls under the umbrella of econophysics and will eventually be the best way of understanding how to create a sustainable economy.
http://mobjectivist.blogspot.com/2010/04/extracting-learning-curve-in-la...

Fascinating. Very interesting. Re-direct acknowledged. Thanks.

http://en.wikipedia.org/wiki/Supply_and_demand

http://en.wikipedia.org/wiki/Elasticity_%28economics%29

I am not an economist but I suspect that there are many individuals in that field who understand that the price mechanism may result in producing more or consuming less. During the late 1950's I owned a large Ford station wagon which got 10 mpg. Since that time my vehicles have become smaller and more efficient. My joy riding has also become less frivolous. The successive energy crisis during the 70's did effect demand, at least temporarily.

--Will the future bring supply demand equilibria at reduced population levels

http://www.scribd.com/doc/405285/The-Next-Million-Years-by-Charles-Galto...

The bets central to this article actually show how short human beings' time frames are, and how complex the set of variables being dealt with. 'Predicting' almost anything in the short to medium term is a bit of a guessing game, such that we call it 'chance', meaning we don't know why it happens when.

Western civilization is not known for long term planning, although some other cultures are- China, for one. It has been interesting to watch the Chinese going around the world to buy up various fossil fuel supplies, even in smallish increments by world standards, for some years. The US, on the other hand, is continuing to try to strong-arm supplies by various wars in oil rich areas, or where pipelines would naturally run. Americans, as Patton pointed out, love to fight, and view it as a preferred solution.

The US' short planning time frame is partly an outcome of the huge amounts of land still available until recently in our history. It is very hard for Americans to understand large but finite amounts, as well as the idea that something that happens far away would actually influence them personally. this national blindspot contributes to the climate change deniers and other types of deniers, who fail to understand that things far away are going to come back to bite them.

In one way, the surge of denial that has infected the common discourse, plus the amount of anger so many are expressing these days (especially on the internet), shows that the grieving process is in full swing for 'life as we have known and liked it'. I note some bargaining, and some depression, too (#3 and #4 of the Five Stages of Grief). Not so much acceptance, yet, except for those who have really immersed themselves in Peak Oil and coming changes - which is why one starts to see people who have been prominent in these kinds of discussions dropping out or moving on to other subjects. Matt Savinar, for example.)

Ehrlich had terrible timing with the booming middle eastern & north sea oil production of the 80s. He & his 'limits to growth' milieu of the 70s did not foresee how the last hurrah of easy oil from 1981 to 2005 would drive down the price of other commodities particularly those that are the most energy intensive to extract, purify (metals) or grow (crops). Of course that last hurrah of easy living has produced massive negative social externalities like overpopulation, water table depletion, and deforestation. As for Simmons, he just overreached in his prediction. He should have simply have taken Ehrlich's terms, as others have noted. Tierney can also be grateful that Portugal, Ireland & Greece are so reckless in their public spending - the relative weakness of the Euro has given temporary strength to the US dollar. It was not long ago that the US dollar was on the verge of freefall - a situation that would have made $200 oil inevitable.

Nice letter.

But then again; Cornucopians don't read, they just feast.

(As of course, also do our friends the yeast.)

One of the biggest problem in understanding how the peak oil situation will play out is how oil scarcity will affect macroeconomic conditions. For instance crude production is at 2005ish levels at the beginning of 2011. Gas prices are around $3/gal and were lower in 2010. How was this accomplished? Mostly by making a significant number of people in industrialized nations unemployed. The US has 9+% unemployment. Globally we don't have enough oil for everyone to be employed. We may never see $10-20/gal prices, at least not in 2011 dollars. The high prices could push down employment which pushes down price. Most of the transition/substitution are based on high oil prices. A back of the envelope calculation for the Nissan Leaf puts the break even point at $8-10/gal. Can we sustain BAU at $10+/gal long enough to get enough people into Leafs.

Nobody knows how peak oil will interact with global macroeconomics. I think I have a decent grasp of the likely production path we will take. I have no idea about the price path we will take.

"The point is that scarcity is only one of many factors that can influence prices."

When I first began posting on The Oil Drum some 4 years ago, I said "price is no indicator of peak". I was pretty much carved up for that view. It's nice to see at least some of you guys stumbling blindly into the truth. :-)

RC

Perhaps we are looking at different prices. The annual oil prices that I am looking at show that we have exceeded the $57 level that we saw in 2005 for five straight years, with four of the five years showing year over year increases--while it appears like that annual crude oil production has failed to exceed the 2005 annual level for five straight years.

Well, there's clearly more in the issue than simple raw production. I know everyone here "knows" that intellectually, but it often gets lost when the topic of "global peak production" gets raised. For example, if the global production curve makes a (straight line) upward at slope 0.25 while the global demand "at a price someone is willing to pay" curve makes a (straight line) upward at slope 0.50, then obviously former heavy consumers are in for a shock even as production increases. Whether or not global production has peaked, it is blindingly obvious (IMHO) that demand has overtaken supply at present, else the price couldn't sustain itself at the current levels for as long as it has. Whether in future this price level will incent greater levels of production for a short time until physical constraints kick in is simply a matter of chance, eg. no-one knows. At now the $80-$90 price range hasn't been in place long enough to have its effect on flows, so the answer is simply un-knowable. See the bet discussed in the article.

It is clearly open to possibility given Wikipedia - Proven reserves by country which indicates 46 years at 80 mmbpd [perhaps 40 given suspicions of S. Arabia etc] and a reasonable expectation that the actual economic reserves "may be" much larger at a price at least SOMEONE is willing and able to pay.

Regardless of ultimate, however, its rational to assume we're presently very near peak rate.

Interesting that by general consensus here, the US with 7.5 mmbpd production and only 8 years proven reserves at that rate, should have been due for a production total collapse calamity "any day now" at least ten years ago. Anyone want to make a bet on how much longer the US can sustain production anywhere near that level? What is the significance of that when applied across the world?

US crude oil production is about 5.5 mbpd, versus about 9.6 mbpd at peak in 1970. Regarding the Lower 48 component, the post-1970 Lower 48 cumulative production has been quite close to what the HL model predicted it would be, using only production data through 1970 to generate the model.

Global Crude Oil Production Versus US Oil Annual Spot Crude Prices
(EIA, crude + condensate)

2002: 67.16 mbpd & $26
2003: 69.43 mbpd & $31
2004: 72.48 mbpd & $42
2005: 73.72 mbpd & $57
2006: 73.46 mbpd & $66
2007: 73.00 mbpd & $72
2008: 73.71 mbpd & $100
2009: 72.31 mbpd & $62
2010: 73.50* mbpd & $79

*Through 10/10 and subject to revision

There was a clear price signal from 2002 to 2005, as oil prices rose from $26 to $57. In response, global crude oil production increased by 6.56 mbpd.

Annual oil prices from 2006 to 2010 inclusive have all exceeded the $57 level, and four of the five years have shown year over year increases in annual oil prices. In response, global annual crude oil production has so far not exceeded the 2005 level, and in fact we have seen a cumulative shortfall--on the order of a billion barrels of oil--between what we would have produced at the 2005 rate and what was actually produced.

But of course the real battle is in the global net export market, and a plausible scenario is that the global supply of Available Net Exports, i.e., the volume of global net exports not consumed by Chindia, is in the process of falling from 41 mbpd 2005 to about 27 mbpd in 2015. In effect, our works suggests that the US is well on its way to becoming "free" of our dependence on foreign sources of oil.

Actually I find that something is missed in the discussion.

It is obviously true that Ehrlich, Simmons and others lost the bet.
However, what is more important
they got trend totally right.

And so did the "limits of growth" plot
for example here:

http://www.theoildrum.com/node/7282#comment-755703

In my view and comparing predictions based on natural science laws with all the other predictions from the past
for the future (EIA or IEA, IAEA (on nuclear power) or alike),
dominated by the economists and crazy futurologists the winner of the such modified (trend) bets
are obvious.

However, what is a remarkable fact is what I found explained here:

http://en.wikipedia.org/wiki/Impact_bias

and

http://en.wikipedia.org/wiki/Affective_forecasting
and http://en.wikipedia.org/wiki/Planning_fallacy

and perhaps a way out to do better

http://en.wikipedia.org/wiki/Reference_class_forecasting

``Using distributional information from previous ventures similar to the one being forecast is called taking an "outside view". Reference class forecasting is a method for taking an outside view on planned actions.
Reference class forecasting for a specific project involves the following three steps:
Identify a reference class of past, similar projects.
Establish a probability distribution for the selected reference class for the parameter that is being forecast.
Compare the specific project with the reference class distribution, in order to establish the most likely outcome for the specific project."

Obviously, there is much more about personal biases. No one is free of it. But knowing about it can perhaps improve judgments.

http://en.wikipedia.org/wiki/List_of_cognitive_biases

I wanted to add a reference that I feel should be included.

'Natural resource scarcity and economic growth revisisted: economic and biophysical perspectives' by CJ Cleveland 1991

It is a analysis of a previous paper by Barnett and Morse (1985 I think). Barnett and Morse found that the cost of resourse production was continously falling over the period they looked at (4+ decades if memory serves). Cleveland recast their analysis in terms of energy and found that resource production was becoming more energy intensive over time but that energy costs were falling faster than the use increased.

I think this has been cover here on TOD before, but I am internet constrained at the moment, sending from my phone. Please forgive spelling and lack of links and details.

More like "Clever Economists, Foolish Scientists".

These bets were really about bubbles and merely proved that a couple of economists had a better idea of what was a bubble and how to make money from betting against bubbles, than a couple of scientists did.

The scientists really should have thought more carefully about how a bet on their position should be structured.

Perhaps the scientists should have added "error bars" for the "peak" year,

But neither the economists nor the "public" would have understood that.

For what concerns me, yes one is loosing on "bubbles" but not on the hard facts of nature.

The trends were correctly described after all.

Now almost everybody admits that "cheap oil" is over. When the scientific american article appeared in 1997
the authors were considered as fools and so was scientific american publishing such an article
(for curiosity this article was not translated into the german edition but into the french one)

As a frequent lurker, I am impressed as always by the ingenuity and quality of the discussion. However, in this case I think all the care given to technical arguments is in vain because Tierneys article is just another piece of simple manipulation, just like Jonathan Fahey's elaboration on ‘peak demand’. It does not matter if these authors really believe what they write. The point is they write what they and their ordinary readers want to believe.
Nobody should be so naïve as to believe that, for example, Tierney didn’t know that last year was in fact the only year when US production went up a little. The average reader does not know it, and that’s how manipulation has to be done.
I agree that we cannnot learn a lot from that bet. But one thing we can learn is we have to factor in volatility. Another thing is that lost bets will gratefully and efficiently be exploited for anti PO propaganda.

I feel a little late to this party, but I'll go ahead and throw my hat into the ring anyway:

I appreciate David's analysis and find it interesting and insightful (as his work is in general), but in this case, I think the problem with the Tierney-Simmons bet is even simpler: where is the burden of proof? For Tierney to "win" the bet, all he has to show is that the oil price didn't rise to $200. But does that mean his position would be validated if the price were $199? Technically he'd still "win" the bet. But try the bet in reverse, and it becomes clearer whose viewpoint is more validated by recent events. I'd imagine, if pressed to do so at the time, Tierney might have said he didn't expect the price to exceed $20, or maybe something even lower than that. Problem is, it seemed nobody pressed him on it. But if he had said he expected the price would be $80 or $90, most observers at the time would have considered that a high price, not a low one. The moral of the story is, be careful when accepting bets, and recognize where the burden of proof lies. Parlor games are a poor way of measuring economic trends, especially where they allow us to draw conclusions that are incorrect. Unfortunately, it looks like Simmons took the bait, and now the Cornucopians are gloating even though there's no actual evidence in the outcome of the bet to support their positions, or the ideology undergirding them.