Posts Tagged ‘energy crisis’

Energy and Economics

11 January 2018

I wanted to get started on this topic. I may go back and amplify this later.

Balance Sheet for Planet Earth
Years ago I read an article about a man who was attempting to create a “balance sheet” for the planet. I should have kept a copy of this article, but so far have not found it. As I recall, he felt he needed to use some sort of energy unit, or perhaps arbitrary unit, to express values in this balance sheet, as there is no agreed-upon planet-wide currency. I was intrigued. I believe I was doing bookkeeping work when I ran into this, so I found it an interesting concept.

Systems
In science and engineering, we have the concept of a “system.” Scientists and engineers have long dealt primarily with mechanical or only-physical systems. Sociologists, on the other hand, have been interested mostly in human (or animal) systems. It eventually became clearer that these two fields actually overlap, often extensively. The problem was really one of analysis. Our primary way to model a system for analysis is through using mathematics. However, the mathematics involved for a complex system (where there may be hundreds of interrelated actions) were too cumbersome until the advent of computer-based modeling.

Economics
The word “economics” shares its root with “ecology” and similar words, where “eco” comes from a Greek word meaning “house” or “household.” Obviously the sense of the original meaning has been broadened, so that these subjects can be applied to almost any system, but still somewhat using the analogy of a system to a house. Obviously, it is people who run an economy. So that places economics in the social sciences. “Natural” systems, even if living, are seen as self-governing, and – by most researchers – as self-created for that matter, but research in other directions has demonstrated that this is not totally true. Even in purely physical systems, the fact that someone (the researcher) is observing the system seems to have a subtle influence on how the system behaves. This opens the door to treating systems formerly thought of as merely physical to something a little closer to alive.

Permaculture
As I have been looking into the subject called “permaculture” for a while now, it is worth mentioning that this is a good example of an attempt to create a design philosophy – if not a rigorous mathematical model – for a human-built “natural” system. Because the creators of permaculture sought to keep the subject simple and teachable, this is one good way to get a feel for how to approach the problem of applying both physics and economics to a system.

Money is Energy
However, before I was introduced to permaculture, I was introduced by L. Ron Hubbard to the idea that money can be thought of as a type of energy, or as a way to measure energy flows.

When I was trying to re-locate the article I had seen about a planetary balance sheet I ran across several school lessons (an interesting resource that often appears in searches) with the name “Earth’s Energy Budget” or similar terms. These lessons were mainly written to help students wrap their heads around the “greenhouse effect” climate theories. The fact is that without an atmosphere around Earth – including a portion of CO2 – surface temperatures would be much more crazy than they are now, and the planet would be barely livable.

In these lessons, we have an example of a living system that is relatively stable, or in balance. So I thought I’d go through it briefly as an example. The system (as modeled for analysis) has just one input, sunlight. Though this may not be strictly speaking totally accurate, that one input dominates by many orders of magnitude any other physical input into this system. Most of these lessons start with 100 “units” of energy into the Earth system. Basic theory of a balanced system predicts that 100 units of energy should exit the system (be measurable as outputs). Again, this might not be strictly accurate, but in this system, that’s what we see. The measured outputs are:

  • 30 units reflected light.
  • 49 units atmospheric heat lost to space.
  • 9 units water vapor heat lost to space.
  • 12 units surface heat lost to space.

You will see that these numbers add up to 100, confirming that the system is in balance.

The atmosphere and the planet surface convert 70 percent of incoming sunlight to heat. After that the interaction between surface and atmosphere becomes extremely important, with about 100 energy units constantly cycling through that part of the system.

In the lesson I took these figures from, the students are asked to stack pennies on a diagram illustrating these various energy exchanges in order to visualize the size of these different flows. I have not yet come up with an adequate visualization for the system I am more interested in.

A Model for the Economy of Earth

The amount of energy used by the humans of Earth – or even the entire biosphere – is only a fraction of a “penny” in the energy system illustrated above. Yet we humans are quite sensitive to relatively small fluctuations in the flows of our systems. Beyond that, there is no doubt that we, as the most sentient beings on the planet, must take responsibility for the natural systems we interact with. But we have only been able to really monitor those systems for the last 100 years or so. We are babies in the game of managing planets; and our lack of experience is obvious!

Balance sheets concentrate on reporting assets versus liabilities. An imbalance in favor of assets suggests the enterprise being reported on is doing well. An imbalance in favor of liabilities suggests it is in trouble. In business, these reports are made every year, or sometimes even every three months. While it would be good to keep track of the entire planet on a similar time frame, that might not be practical. But the way things are currently playing out, we should know where we stand at least every five years. And we could probably figure out how to reduce the reporting period down to a year or less once a working system was established.

In physical systems, assets – or pools of potential energy – are relatively unimportant. In the above example, the heat generated by the Earth itself can be totally ignored. Similarly, “liabilities” is basically a human concept. So physical systems are mostly about flows, or only look at the energy storage structures that could directly influence those flows.

In fact, even in human systems, “assets” and “liabilities” are actually not that easy to evaluate. Many things counted as assets loose value over time due to wear and tear, etc., but that’s usually only roughly accounted for. The most important long-term asset is land. Probably the least important is cash. Yet both of these have volatile prices. In business – as in physical systems – the more important measures of health are its flows; is it making more than it’s spending?

The daily flow of energy received from the sun is estimated to be about 11,000 exajoules, an enormous number. Humanity needs only about 2 exajoules a day. It takes most of this energy from “fossil fuels” as well as other carbon sources. It is hard to imagine at this point how things would change if we got all the energy we needed by converting solar radiation. Plants perform this conversion every day, yet that mechanism is insufficient to do the job, as we need to leave most of the plants where they are to perform other functions. In any case, energy input is really not the problem for our world balance sheet. It seems to be more a problem of human behavior, which is classically thought of to be governed by “policy” but more often governed by other factors that most managers seem confused about.

How limited are resources?

What ecologists call “resources” is what economists might call “assets.” Yet planetary resources do not appear on the balance sheets of most businesses unless they have direct control over them and are actively exploiting them, such as in mining. Even then, the land might be valued by its cost of purchase, and that purchase might be seen by the company as little more than one of the costs of production.

Yet, obviously, planetary resources are limited. The most obvious example of this is land area. The only way to get around that is to build skyscrapers and huge basements. The air and its quality is also a limiting factor, as are sources of fresh water. With sufficient energy inputs most limits listed so far could possibly be overcome. This might well be true of all important resources.

Thus, we are looking at a “balance sheet” where “assets” could be valued near infinity. Why, then, do so many people feel so “poor?”

Our ability to handle energy flows

It appears, then, that our basic problem must have something to do with our ability to handle large energy flows. Indeed, people who have the ability to handle energy flows sufficient to operate an organization that does billions of dollars of business a year are considered so rare and valuable that they can garner huge wages all out of proportion the the economic needs of even a large and wealthy household.

The ability to arrange for the energy flows that would be necessary to make this planet work well for all life forms currently using it as their home is probably a key limiting factor to our economic progress. Even given all the criminal enterprises that drain energy out of the system, or waste it, or use it to damage people or property, we could probably do well anyway if there were enough of us that could conceive of and implement systems that could handle energy (and money) flows sufficient to do the job.

And so we see the situation focusing down to a psychological (and behind that, spiritual) problem that too many people share. L. Ron Hubbard once expressed it as an inability to “think big” enough to solve the problem at hand. One benefit of his technology is that it helps people improve greatly in this ability. I think we need more people like that!

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Oak Park Sacramento

7 January 2018

Taking a visit to the Sacramento neighborhoods of Oak Park seemed like a good way to spend a sunny Saturday afternoon. Guided by listings sent to me by a local realtor, I visited some houses in this area that have recently been for sale. I was on my bicycle, and took my time, seeing what these neighborhoods are like.

oak park sign

Palm trees grace a median strip housing a sign welcoming us to Oak Park.

From what I’ve been told, there is a definite push in this area to find new young buyers for houses in this older suburb just a little south of downtown.

And I’ve seen two main ways houses in this area are marketed: 1) Appeal directly to the end user, in which case the house will usually be totally cleaned up inside and remodeled (and cost more); 2) Sell to investors (also known as “flippers”) in which case the house will usually be sold as-is, and for less.

I saw some real dumps (not pictured). But most of the houses, though well-used, seemed to be proudly owned.

3343 32nd Ave

Typical small house in Oak Park.

This typical home was built in 1936. It is less than 1,000 square feet on a lot less than .1 acre. It has 3 bedrooms and one bathroom. The “garage” is detached and towards the rear. There are thousands of houses like this in Sacramento. Even those built in the 1950s or later follow this basic pattern. They were quite commonly built with no particular attention to heating and cooling, and were typically retrofitted with some sort of system later in their lifespans. It is also typical for there to be no basement; the house built on a slab or with some sort of crawl space underneath.

A house like this in those days might have cost $2,500 to build and $5,000 to purchase. Per inflation data online, it should cost $50-100,000 today, but other factors have made housing (mostly land) prices increase more than the average.

3629 9th

Orange tree graces one of the more attractive Oak Park homes.

I have seen many fruit trees in Sacramento gardens and parks. Today I even saw a tree with quite large fruit that could have been a pomelo or breadfruit. I have never seen any of these trees harvested (which is why they were planted). Why is that? Perhaps people don’t want to be bothered with picking fruit from a real tree. Seems a shame.

3839 13th

This house sits sideways on its lot.

I usually only see sideways houses on corner lots, but here’s an example. I can only imagine it was done on the builder’s whim.

3615 23rd

Charm of old-style long front porch marred by chain link fence.

One can tell by wandering around this area that security is a concern to many residents. And if you can’t afford a nice “permanent” fence you might go for chain-link. I would be embarrassed, though, to have this on my property. I would at least try to hide it behind shrubbery.

3531 24th

Front-facing brick fireplace is unusual for this neighborhood.

As a sort of test or experiment, I looked up this last home in Sacramento County’s Parcel Viewer application online. It tells me this house was built in 1941 and the land and house together are valued at $100,000. Asking price is more that two times that.

Issues

This little trip through Oak Park brings up several issues that I have become aware of over the years.

What is happening in our cities?

The most obvious answer to this is that someone decided they didn’t want to pay organized labor their negotiated wages any more, so found ways to get their products built in other places where labor costs are lower.

Even if a blue-collar worker retrains to run automated equipment in a yogurt plant (or something), the automation is likewise serving to keep labor costs down, which basically means fewer people employed. So we find people unable to keep their homes or forced to move to cheaper homes. And the land that working-class people used to live on is being recycled into business uses, retiree apartments, and “cool” housing for those who have survived the various crashes and work in banking, government, marketing, or tech jobs located close to that housing. The new residents can then feel good about saving energy on their commute, while the less fortunate serve them food, cut their hair, or take away their garbage, but drive to work from more distant locations.

This could be solved, but not by using the same assumptions and social structures that created the problem. The problem almost certainly has to do with our basic sense of competence. When workers organized, and the manufacturing managers of the modern world were forced to pay them better, things actually got better for everybody. But we didn’t change the fact that the managers preferred to deal with workers who were totally predictable, never talked back, and would do whatever they were told to do. Robots. So they busily set about creating such robots, and they are beginning to succeed. If you told them that they were selling out the human race, they’d tell you they didn’t care. They know how to manage workers who are totally obedient and just need oil and electricity. They don’t really know how to manage real people. People who do know how to manage real people – especially those who enjoy it – are the more successful (and happier) people on this planet. But, unless they know Scientology, they don’t know how to train other managers to operate the way they do.

The fact is, to be successful today requires a level of confront and creativity that fewer and fewer people can easily attain. And that is, as far as I can tell, the more basic technical reason why things are falling apart. There is also an ethics reason for our problems, but if we could handle this technical factor with enough people, the ethics problem would diminish if not vanish entirely.

What is going on with housing prices?

People like Catherine Austin Fitts can tell you more about the details of this than I can. While the basic problem is discussed above, what sees to be happening in the case of housing is that some people saw the decline coming and indulged in unethical actions to benefit from it at the expense of others.

This trend was already rolling forward after the crash of the early 1900s that resulted in the various “New Deal” arrangements to encourage lenders to let more “ordinary” people into the mortgage market. This was basically done using government guarantees to protect the lenders from too many losses. The creation of a “secondary market” also freed up more cash to make loans with.

The market, however, responded to this cash infusion by increasing housing prices (the same thing that has happened to college tuitions as a result of student loans). This gave lenders more income and borrowers more risk. The big problem, of course, comes back to reduced employment. If people can’t keep working, they can’t pay off their loans.

While working at HUD, Catherine spotted operations designed to deliberately trash neighborhoods (by injecting crime like meth labs into them), lowering property values and forcing good people to leave. The operators (criminals) could then buy up the land more cheaply. Revelations like this is what give Mankind such a bad name in this universe. I don’t think most people are involved in operations like this. Just enough to make it hurt.

Sustainability

I have listened to various people tell us that according to certain computer models, society can’t continue with its “usual” economic behavior much longer. It will become impossible to increase prices to keep pace with the costs of producing certain materials, especially fuel. They say we have just lived through a period where the profit margins were pretty good, but that can’t continue indefinitely. Production won’t crash because we run out of resources, but because the cost of production will rise too high.

I hadn’t heard this argument before. But it and related arguments are leading some to attempt to “exit the system.” Most people I know are not taking this approach. They think we can make it through by increasing competences and creative ability. They may be right. Meanwhile, others are learning to live in “houses” that measure maybe 20 by 20 feet, are made from soil (adobe) and other recycled materials for something like $500, and require almost no energy to heat and cool. On top of this, systems are being developed to sequester water in soil so that little or no irrigation of gardens or even grazing fields is needed. That harkens back to an earlier way of living, but the people who are choosing it could survive in relative comfort while others are starving or freezing. Maybe.

I know that the kind of houses Sacramento is full of would not be livable in the winter months without heating. You could get by in the summer without cooling, but not without a refrigerator. However, there is enough land in Sacramento to probably sustain everyone living here now if they just practiced permaculture and stopped driving to work. Of course, the banks would not be able to make money on home loans, government as we know it would probably stop operating, and so might industry as we know it.

So one fear is that the cities would become lawless. They already are, but most of us are protected from the worst of it. I’m not sure how this would actually work out. Certainly there will still be beings who are unwilling to be honest and contribute real help to their community. Beings that know only fear of others and thus feel compelled to lie continuously. Would an economic collapse empower them more or shut them out? I’d rather not find out!

Will there really be radical changes in the near future?

Many people are operating on the assumption that things the way they are now can hold together indefinitely. They aren’t preparing for the future in any way, unless they have an extra money flow that they can save or invest. And that money may not be enough to protect them.

But it’s really hard for me to say. There are a lot of people alive who don’t want it to get worse and are very actively working on various strategies to prevent that. Most of them aren’t saying much or promising much. I don’t think they are sure their ideas will work. But I know they are out there trying. I sometimes wish I could be working with them more closely.