I guess this is discourse...? (or Levitt of Freakonomics on today's Maass piece)
Posted by Prof. Goose on August 21, 2005 - 1:08pm
Stephen Levitt, author of Freakonomics, is already not very pleased with today's Maass NYT piece (see post below for discussion of the Maass piece). At all. In fact the title of his post today is, "'Peak Oil:' Welcome to the media's new version of shark attacks" (thanks to Jeff B. for bringing this to our attention...)
Here's a snippet:
The cover story of the New York Times Sunday Magazine written by Peter Maass is about "Peak Oil." The idea behind "peak oil" is that the world has been on a path of increasing oil production for many years, and now we are about to peak and go into a situation where there are dwindling reserves, leading to triple-digit prices for a barrel of oil, an unparalleled worldwide depression, and as one web page puts it, "Civilization as we know it is coming to an end soon." One might think that doomsday proponents would be chastened by the long history of people of their ilk being wrong: Nostradamus, Malthus, Paul Ehrlich, etc. Clearly they are not. What most of these doomsday scenarios have gotten wrong is the fundamental idea of economics: people respond to incentives.Verrrry interesting. I imagine this is the beginning of hearing about this more and more from folks/the MSM/etc. The question then becomes how the story is framed, and how good of a job we do at using the discourse to promote the changes necessary to come in for a softer landing. I hope you'll all go over there and tell him why he's wrong (SB, odo, and I have already been there). Update [2005-8-21 14:2:20 by Prof. Goose]: I was just noticing that this discussion sounds like a minor-league version of the discussion between HO and JDH of Econbrowser last week. At least their discourse was much more informed (on both sides...).
I guess this is discourse...? (or Levitt of Freakonomics on today's Maass piece)
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53 comments
I guess this is discourse...? (or Levitt of Freakonomics on today's Maass piece)
PDF version
53 comments
“It takes as much energy to wish as it does to plan.”
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Some of the abandoned coal mines can be reopened but the they cannot never again reach their highest production levels.
The real transition will be a transition to lower energy consumption.
Life will be a lot more fun if he's right.
Most economic analyses assume that there is perfect information about supply and demand available to both buyers and sellers. We know this assumption is untrue, and that alone creates a market failure. The fact that 77% of reserves are owned by governments with their own agendas doesn't offer a lot of hope for unfettered markets either.
1- demand destruction: people are reducing their consumption
2- alternatives: alternatives are ramping up in a significant way
3- new oil supply
The first mechanism will trigger a recession because it will slow down the economic activity and will not alter demand in a significant way (demand is inelastic for oil). What worries me the most about alternatives is that a energy switch on a massive scale (ex: Hydrogen, even Tar sands) requires plenty of cheap energy available to implement the new energy infrastucture! I you wait post peak oil to make the necessary changes you don't have cheap energy anymore. That's why the Hirsh report recommended a switch to alternatives ten years prior to peak oil. The third option is Michael Lynch's argument about the dynamic URR through technology improvements and that three is plenty of oil available (URR > 4,000 Gb).
Of course, this means that the price of oil will go up till you cut your driving miles and speed, and the capital now being loaned out to build houses and finance the national debt will instead be invested in coal mines and synfuel plants to make methanol and dimethylether, and lead and zinc mines will be opened to make battery powered cars and load leveling flow batteries, and oh thank god, my solar polder invention to replace natural gas peak power for airconditioning demand on summer days.
It's and ill wind that blows no good.
But, the means of sustaining global industrial capitalism have, at tehir root been fueled these 200 year or so by one main energy source: sun-light that as been processed and stored by carbon-based life over the millenia (yes??). First wood, then coal, then oil were disovered to be great energy storage materials that could be processed and converted into the energy that has fueled unparalleled human growth and technological imporvements.
Well folks, what large reservoir of energy is there after oil? Short answer: none, nada, nim, nunca, nothing! You can dream all you want about solar powered hovercraft and matter-energy transporters that run on pig shit and corn cobs. Ain't gonna happen. There simply isn't enough energy (BTU for BTU) to replace all that that has been stored over the millenia by quadrillions of life forms living, taking in the sun, and leaving behind their remains.
So, happy sunshine people. How about we think about a world of less. And figure out ways to prepare people for declining fortunes and increased hardships. Sorry Ianqui, it'd be great if you or the next generation just had to suffer a few years before a new even better energy age came about. But unless you can figure out a way to replace all those lost BTU's RIGHT NOW, the future ain't so bright. Preparing the kids to deal with that possibility might be better then promising heaven on earth after a few years in purgatory.
Those who think we can endlessly improve efficiency on a global scale, please: It hasn't happened yet in 200 years (in terms of total BTU's consumed). It's not going to happen ever...
I can get frustrated with "no problem" economists, the ones who only want to talk about the invisible hand, and end their essays before they have to say what fills that hand. I am frustrated by "solutions to be named later."
At the same time, I do think we have existing technologies to carry world populations through to a slightly different life. I don't see the need to call that life "less" or "lower" in any sense. Happiness is not indexed to energy consumption anyway.
Use as much geothermal, wind, and solar power as you can. Pick up the rest with coal and nukes. Use coal-to-liquids to power trucks and heavy equipment, and let the people drive little electric cars. Mass transit gets a lease on life. It all works. It isn't the same as freezing in a cold house or bicycling in the rain.
I just (as I say) get frustrated with those who imply the "invisible hand" will be holding a mystery fuel for our SUVs.
They claim that observations within the real world validate their model.
This is the point, however; where I see their "invisible hand" playing dirty tricks. It covers up the fantasy third, all seeing eye on top of the foreheads of econmists and pretends that well documented failures of "the market" never happened. In other words, see no evil and the evil does not exist.
By contrast, for a true scientist, even a single lab experiment that proves the model to be in error, trumps the model. Not so in the wonderful world of economics. Every failure can be erased through "rationalization". The tulips never happened. Easter Island never happened. The dot.com bust never happened. Economists proclaiming how the internet will single handidly carry the world in to the next paradise, that did not happen either. It is an infallible science because all its fallibles are conveniently marked down in price and ultimately erased with the faded memories of each new, gullible generation. (Yes you 20 year olds out there, who have no real life memory of the 1973 oil shock. It happened. People shot each other at gas stations. Anything it takes, is done to get the fluid of our addiction.)
Let's start with the most fundamental feature of micro-economics: a willing, able, and knowledgeable seller (S) meets with a willing, able, and knowledgeable buyer (B) in a pool of similarly situated actors, S2, B2, S3, B3, etc.
The buyer (B) and seller (s) negotiate, each in his own interest (using the aid of the invisible hand covering up the invisible 3rd eye), and they ultimately settle on a fair "price".
This microscopic act is repeated many times. Zoom the microscope back to a macroscopic view of the Petri dish, and suddenly you are face to face with this fuzzy wuzzy thing called "the market". With all the germ like actors digging away down there (S1 thru Sn AND B1 thru Bs), each in their own best interest, a magical force takes hold of the Petri dish and miraculously the Petri dish is levitated to a higher plane of consciousness, of intelligent design consciousness. We call this magical force that lifts the Petri dish, "the invisible hand". We call its intelligently created consciousness, "the wisdom of the markets".
No one sees the "invisible hand". But just like the Emperor's clothes, trust us, it's there. And if you can not see it, surely you are neither as wise nor as patriotic as the degree carrying professors that do see it. Ditto for "the wisdom of the markets".
OK. So remember we said it all starts with:
(1) a willing, able, and knowledgeable seller (S), and
(2) a willing, able, and knowledgeable buyer (B)
Well what if one of those 6 assumptions is not true?
What if the seller is not able to provide the oil?
What if the buyer (Joe Public) has no knowledge of the impending Peak Oil (PO) situation?
Does the seller of an SUV tell the buyer about PO? Duh, NO.
Does the buyer buy the SUV? Duh, Yeh.
Are the markets wise?
We just report ... YOU decide.
An Alabama gas station owner was killed while trying to stop a driver from leaving without paying for 52 dollars worth of gas.
Witnesses told police that the owner of Fort Payne Texaco "grabbed onto a vehicle" Friday as it drove off.
http://www.kbcitv.com/x5154.xml?ParentPageID=x5155&ContentID=x51828&Layout=KBCI.xsl&AdGr oupID=x5154&URL=http://localhost/apwirefeed/d8c4chm00.xml&NewsSection=NationalHeadlines
In a real energy shortage the investments will collapse. The energy efficiency will not increase but deteriorate. Old vehicles and machines will be used longer. Maintenenace will suffer. Lots of energy "stored" in the infrastructure will be lost. There will not be enough resources available for transition to the alternatives. Technology doesn't help without investments. The world will see a long period of negative growth.
The world will not end. The world "we" in the developed world know will end, but not the world "they", the rest of the world population, know. "We" will only learn to know "their" world better. My point is that there is a lot of experience in the world about living with less energy. If we want to know what happens after the Peak Oil and how to cope with it, we should look at that.
That's electric, not thermal.
There are some things you need chemical stuff for, but with enough electric or thermal energy you can make it from other things. I fail to see why we have to get used to "a world of less" instead of a world of "more from that other thing".
We didn't run out of light when depletion of whales led to "peak spermaceti", either.
$300 per peak watt? No, it's somewhat better than that: ^_^;
WindPower.org places it at " 1,000 Dollars per Kilowatt Average" That's about $1 per watt
Either the present world equates cost to value or it does not.
Either the present world has a lower cost associated with oil in the near past or not.
If the world equates money to value, and oil has been priced cheap VS other power sources, then are not consumer goods set at a lower price when oil is abnormally cheap?
Your "vision" (wishfull thinking really) is that economic growth and more goods will exist with MORE economically expensive energy.
So, please explain how, when long-long-term renewables like oil/coal become priced like short term renewables (wind,solar,hydro,1 growing season or less crop mass) how consumer goods are going to be the same or less priced than when oil was abnormally cheap?
I'm sure everyone is awaiting your wis-dum.
Some thoughts.
I agree with most of your post. Especially about economists being confident (to the point of religeous) that the markets will adapt and correct for peak oil. I also agree that the human race has been over utilizing stored energy for hundreds of years.
I had a long and useful discussion with a good friend recently who happens to be a financial whiz. He firmly believes that the markets will balance supply and demand but that it will be painful for some individuals at first and maybe all of us eventually. His statements were that people will begin to do everything they can to reduce and eventually stop using oil, especially for transportation. I left him pondering if capitalism can survive without growth.
My questions to all at this site are this. Is it possible to reduce demand on fossil fuels enormously by taking all the luxury uses out of the equation? I am not that old but my father grew up with horse power and no electricity. People did things at a slower pace and they were extremely ingenious in using mechanical advantage. He lived through the depression, is still alive today and very frugal in his use of internal combustion power.
My perspective today is that most people waste energy doing almost everything. Most of our gasoline and diesel is burned for LUXURY WANTS not true NEEDS. Even farming is not energy use optimized. It is TIME optimized so that fewer people can farm the most acres.
Can we as a society figure out what the true needs are for burning oil? Can we ratchet back our luxury consumption to such a point that we might be able to substitute something else which has less energy density than oil? Can we get so efficient with mass transportation that we can move large weights of material using a small amout of energy?
A few generations ago people were using wind to move goods and pump water. But they had no storage devices for excess wind or solar. It was a use it or lose it on a daily basis. Do we have greater knowledge now to capture a bit more energy daily for later uses?
I completely agree that modern society can not exist much longer. The question I can't answer is can the majority of us survive at all after peak oil to transition to something else? Because the economists might be right on a time span of 100 years if the population crashes. But I'd rather my family not be part of that crash.
I lived through the 70's energy crunch so I know what lack of supply does to people. But will peak oil kill supply quick or slowly starve us for energy allowing us to choose between wants and needs when it comes to fossil fuel use?
These are the questions I can't answer about peak oil because I don't know how steep the back side of the curve will be.
Comments anyone?
As far as who survives, I think Asians, Europeans and even Africans should worry about China and/or India. Maybe they could threaten Australia, too. They could assemble very large land armies, but I can't see them putting together enough of a navy to get past ours to the Americas.
Americans should worry about each other. Many of us are armed, and many feel entitled to take what they want.
Of course if nuclear weapons are used, we're all hosed.
I think that people will survive, even thrive. But I cannot see population continuing to increase at the same pace without the support of cheap oil. I don't think metropolitan cities will look the same - maybe mutated into some form using electricity but resembling the early 1930's in terms of transportation. I cannot see how jet airlines will survive the transition at current people-moving levels - trains are the logical replacement.
But your point about massive energy use actually replacing TIME - that is very valid. I think the time issue can be dealt with via internet and telephone for communications, but that we will have to accept increased travel time and other such "time expense" due to the future expense of oil.
I'm going to think about the time issue some more.
This is not necessarily bad - slowing the clock down a little makes people nicer and less harried. IMO, it provides a better quality of life.
I am tired of MSM responses that are not based in reality -- that is, the best numbers we can come up with based on the (admittedly) non-transparent data we have to figure with regarding peak oil.
People respond to incentives? Does a bear shit in the woods?
We're talking about real demand versus real supply here with depletion figured in. Levitt is talking about free-market economy religion. It's not bad enough that a lot of people talk about the Rapture and re-introducing Creationism in the schoolhouse [intelligent design] and that our government is editing Climate Change reports to reflect their own agendas.
No, we have to put up with this faith-based energy future. Here I am, fool that I am, looking at current oil production numbers in West Africa now and trying to discern the future there given that everybody is at war with everybody else there based on oil revenues. And I've got to put up with this nonsense from a fucking idiot like Levitt? Sorry, this just too much for me.
EOR is going on (H20, C02 injection, horizontal drilling etc.) but what has yet to be determined is how this will play out in the end. In each case, it will depend on the peculiar geology of the fields in question. Short term gains may be offset by long term losses of recoverable oil. This is the equivalent of corporate thinking that next quarter's gains are more important than where the company will be the next year or in subsequent years after that.
Enhanced URR numbers are a happy thought based on guesswork most of the time. In this case, we're dealing with technology-based religion with respect to new supply. You know, there are only two arguments against peak oil, one based on magical markets and the other based on whiz-bang technology. Otherwise, without either route to salvation, the numbers look pretty clear that we're up against a shortfall of supply versus demand sometime in the next few years. Time, as always, is a factor.
Studying peak oil problems, I have never been more impressed with the seemingly infinite capacity of people to deceive themselves about reality. This makes sense, of course, but this human capacity is doing us no good now....
Give people an idea of how they can change them, and look out....
Is it a kind of mantra?
Markets don't solve the rioting, looting and the killings that happen when you can't feed your children.
Maybe this link could show him an example:
http://www.junglerunner.com/RTW01/RTW_Jeff20.htm
Peak oil-like scenario.
read my reply at
http://www.theoildrum.com/story/2005/8/21/13643/8236#38
The bottom line in that reply is the following:
When an "economist" starts talking to you in his/her language and throws the word "market" at you for the first time, you say:
"Excuse me sir, I do not accept brain wash language like that.
By "market" you mean the franchises where gullible emotional buyers are worked over by artfully deceiptful sellers. From now on we must use the correct "framing" language to correctly frame the concept.
So you were uttering this mantra, if I understnd correctly:
The [begin strikeout] Markets [end] "Deceptive Brain-washing Outlets Run by profit-seeking skilled sellers to fool gullible emotional buyers" will provide a solution.
I see.
Yes that convinces me totally now sir. Thank you."
[end of reply to frame-happy economist]
So I have finally determined that this guy is basically a charlatan. He has been able to get airtime on many of the right-wing nutjob radio stations to sell his book by saying to the effect, "Hey look, see how fair-and-balanced I am, I go after faulty progressive issues." Well, this is one area he made a huge mistake. The guy basically just wants to sell books and if he doesn't do a John Stoessel impersonation, he knows he will lose half his book-buying audience.
or maybe you can if you have a big hit book and you think people pay attention to you.
Of course, if what you have going for you is innuendo and childish name-calling, well, it's your site. Wallow in it, but guess who then sounds like a "fucking idiot".
But, maybe Dave was just irritated that someone like Levitt who has such a megaphone writes such a polemic of his own without knowing the hard facts about something we regard as terribly important.
(what was the quote: "I don't know anything about other countries' oil reserves."? That's the one of the most important parts of the puzzle...and it's something we've been talking about here for a long time.)
This is an idea-oriented site. We don't have the answers yet, but in order to get to them, ideas will have to be exchanged openly and critically.
I have yet to delete a comment, except for one of Step Back's, and that was accidental through Haloscan.
I hope that I never have to.
A fundamental axiom of "free market" economics is that humans are rational creatures who respond to situations in rational ways and ergo: "the markets" behave rationally and always provide the appropriate response to any threatening situation.
But as you can see from these very posts, all humans are f
__g m__ns who can't find their _ss using both sides of their brains and all they do is curse and rant all day. Given that economists are "human" (although, of course this corollary to the axiom is questionable), clearly the theories espoused by such humans about market behavior come from those who are f_g m___ns who can't find their _ss using both sides of their brains. The proof lies not in the pudding my dear Watson, but in the cesspool from which it bubbles.If it doesn't, the model is wrong. Period.
That was the whole point of the Michelson-Morley experiment in physics. It proved that the "ether model" of the Universe was wrong. Period. Scientists (true ones) had no choice but to discard the model. Einstein came up with a new one.
In the economist's "standard" model of the universe, you have "RATIONAL" human beings negotiating a price (the market price, you know the one where RATIONAL demand meets with rational supply). With all the emotional rants and raves on both this site and the freakonomist's site, one observes that humans are NOT "rational". They can be easily instigated into becoming emotional and irrational.
If economist were the scientists they claim to be, they would instantly drop their unsustainable model and come up with a new one. You know; one where an artfully deceptive Seller (S) works over a clueless, emotional and gullible buyer (B) to get the buyer (and the markets) to act in a totally irrational way.
So what I'm asking you to do, sometimes with less than polite language, is to step back and smell the stench of the economist's brain rot. This whole thing about "free markets" and rational actors is witless bovine browning. We are the gullible buyers and "they" are selling us this horse crap because there is very little else they can do with their eco degrees. And of course they will be the first to lay out that siren song about re-training unemployed factory workers to become unemployed computer programmmers when they themselves cannot be retrained to abandon their unsustainable worship of Adam Smith; blessed be his name, and take up a research job in coming up with economically and physically viable alternatives to oil.
Sorry, I let my emotional brain take over in the paragraph above. Return to rational thinking routine by re-reading the paragraphs above it. Don't let them "frame" you into talking economic Smith-worshiping talk. It is pre-loaded with manipulation and irrationality.
See my follow on post higher up at:
http://www.theoildrum.com/story/2005/8/21/13643/8236#41
I was angry that Levitt dismisses peak oil and apparently knows nothing about it. Unfortunately, few people managed to read the rest of what I said since they were so fixated by some of my language. I'll bear that in mind in the future.
There is no point in trying to "rationally" refute someone like Levitt who has made up his mind ahead of time in the absence of any evidence. That is why I called his point of view a "faith-based energy future". I regard his point of view as essentially religious in tone and this faith is in the all-ecompassing power of "free markets". We are not talking about computers here, we are talking about oil. By the way, try making a computer without petroleum products.
My allusion to West Africa regards some research I am doing for a post here at The Oil Drum to see what's happening there. This region is in a constant state of political turmoil but is supposed to supply 4 mbd by 2010, much of which will be going to the US. In what sense then, are we at The Oil Drum like Nostradamus since Levitt compares us peak oil wingnuts to this fraudulent forecaster?
I don't think there is any fundemental shortage yet (yet being key, of course at some point in the future there will be). The main thing is OPEC got its act together, as did the Russians, and they stopped overproducing.
Right now were not dealing with an actual shortage. What were dealing with is none of the oil produces want to ramp up production and send prices back to where they were in the late 90s.
It is the battle for mind control.
The neo con boys have skilled think tanks (psych op centers) that do nothing all day but figure out how to manipulate the minds of the masses. The Democrats do not even have a clue they are being played. That's cause them Dem's are "intellectuals".
Do you want to understand how we get played? Check out my reply to Fernando at:
http://www.theoildrum.com/story/2005/8/21/13643/8236#41
Do you want to see an ongoing, real world psych op in progress? Start reading up on Cindy of Crawford Shee-hen. Rove must have blown ten gaskets when by dumb luck she landed in "Crawford". Luckily, he is now succeeding with launching an "intelligent design" counter offensive.
A flood victim is passed three times by rescuers: two boats, and a helicopter, and refuses help, saying "god will provide". He is killed by the flood, and complains to God that he got no help. God says " what about the two boats, and the helicopter?".
In this case, the Peak Oil community is part of "the market", trying to provide the information that decision makers need, which they don't have right now. Levitt, and people like him, is rejecting this information, saying "the market will provide.". Well, it is providing....
Crude oil and all fossil fuels are a finite resources that we are using faster than the earth can replenish. Furthermore, as economics such as China and India boom, the rate of fossil fuel consumption will rise.
Americans no longer have the satisfaction of being the primary market for crude. We now have competition for each barrel, thus regardless of the supply outlook, Americans will pay higher prices.
It is prudent to proceed as if we knew Peak Oil was imminent. Energy policy should never be set on the conditions prevalent today but a worst-case analysis of the market dynamics tomorrow. U.S. energy policy and the commercial behaviors that it engenders are reactive. GM and Ford aren't doing more on hybrids, higher consumption standards, et cetera because their internal economists are calling current oil prices an aberration.
To the American consumer, what is more valuable: shaving 1/4 second off of their car's 0-60 time or saving hundreds of dollars per year by raising fuel standards by 1-5 mpg? Informed by Wall Street analysts, Detroit is playing for fat margins not volume. Their financial strategy must change before Detroit can credibly engage the Japanese in building fuel efficient vehicles.
My Mamma always told me about the TWO something-something WRONGS
and the ONE RIGHT.
What was it again?
Oh. Now I remember.
Two thousand WRONGS behind ya don't unright the next RIGHT in your path.
Do ya wanna know what mamma said about chalk lits?
{This is something-something to think about when economists tell you pessimists were ALWAYS wrong in the past. P.S. There was this guy in Pompei, but his book about Peak Volcano got incinerated.}
I think that means moving from denial to argument, and we are on the way to aceptance, and all of this seems to be happening very quickly.