Global GDP has grown steadily and continuously since WWII, in step with a growing global population and primary energy consumption (see below). Oil shocks have caused recessions compensated by higher energy prices that have bolstered global GDP at time of recession in the non-energy economy.

This is a guest post by Philip Henshaw, known on The Oil Drum as pfhenshaw. Phil has a BS in physics and an MFA in architecture. He has been studying the physics of how natural systems change form for 40 years, first interested in the subject by college physics experiments in how all experiments misbehave. Phil's website is www.synapse9.com.

Economic theory is based on the observed regularities of the past. Some are considered as general principles, or “natural laws” that are expected to never change. From a systems view, though, such laws are emergent properties of the complex system they are regularities of, and prone to change as the system changes form.

Growth systems, for example, invariably change form when they climax, but the present laws of economics describe a complex system that has perpetual growth that never changes form. The question is partly how to tell when such changes might be appearing. Complex systems may vary a great deal without indicating a change in the form of the whole system. What would raise the question is finding events of kinds that are not supposed to occur at all. Present evidence points to depletion of necessary resources as the possible cause of the combined food and fuel price spiral of the past decade.

An example of one such economic law is that scarcities are temporary. In theory, self-interest drives people to either find substitutes, added supplies, or to reduce demand as prices rise, and in those ways scarcity is expected to resolve smoothly.

When none of those three things occurs, though, the economy experiences a continuing price spiral with no substitutes or added supplies being found for an extended period. It’s a primary indication that the physical system is at a point of inelasticity, and changing design in some way. Then the old “laws” become misinformation about regularities that no longer exist. This is a brief research note on one example, to raise questions.

A few days ago, Pedro Prieto wrote a popular guest post called Financial Collapse and Energy - Something Other than a NINJA Problem. In it, he provides an analogy to the current financial situation.

Afterwords, some of us in a follow-up post raised questions whether the parameters (shown as 8.5% and 3% in the model) could be refined a bit.

Pedro has put together a response, which I think shows great insight. It shows that there is more than one way of looking at this question, and perhaps the way we are looking at things is too steeped in our current perspective. Pedro's response is found below the fold.

Pedro Prieto's post yesterday called "Financial Collapse and Energy - Something Other than a NINJA Problem" was an analogy. As I think about it a little more, there are probably a few refinements that could be made, that don't change the result, but may make the parameters a little different.