Innovation v. Entropy

Energy consumption and economic growth are very highly correlated. This may be common sense, but you will be surprised how many people (professionals included) take energy for granted, dealing with it as just another input factor. The chart below starts in 1980, but the correlation goes back centuries.

Data: IMF, BP

Humanity exploded in numbers and achievement after the Steam Age. Was it because we suddenly became smarter? Of course not - all that happened was coal. A bit later the rate accelerated further because of crude oil. Dense energy subsidies freed us from the drudgery of localized subsistence farming and improved hygeine. Free time and longer lifespans allowed humanity to innovate at a record pace: means and need came together in a virtuous cycle. Boom. That's all; the rest is commentary.

The corollary: We need to find more oil and gas plus the ability to neutralize the greenhouse gas emissions. If we don't, we need to come up with other dense forms of energy. If we don't, we will necessarily slow down our activity (i.e. economy) to the rate at which we can transform dilute solar energy into useful work. The limits of this process are bound by the Second Law of Thermodynamics, a law that is so universal and basic in nature that it even defines the arrow of time. Without dense energy, we can't innovate our way out of entropy.

They should teach Thermodynamics to all economists. Actually, they should make Thermodynamics mandatory for all college degrees. Too bad Adam Smith died a century before Clausius and Carnot discovered entropy. He was a brilliant man and would have sharply constrained the Invisible Hand in his writings.