Monday, November 8, 2021

The Great Green PermaGrowth Fallacy

Faced with accelerating climate change and species extinction caused by our own activity, we now race to prevent a catastrophe. And how do we propose to run the race? By changing our running shoes, instead of our pacing. Replace coal with natural gas and then replace that with solar energy. Sounds ok - but it really isn’t.

Anyone with even a passing knowledge of the most basic law of the Universe - it being the Second Law of Thermodynamics - understands that creating and maintaining order requires the constant input of energy. The higher the order, the complexity of the system being created and maintained, the higher the amount of energy required. 

The easiest way to express this is that a hot object will always cool unless it is heated by an external source of energy.  There is no such thing as a free lunch.

Most economists, bankers and politicians are unfamiliar with Thermodynamics. I don’t blame them - after all, by the time Rudolf Clausius introduced the concept of entropy in 1865, Adam Smith was already dead for 75 years.  (I wonder what economics/banking would be today if the two had met.) 

So, what we are proposing today  is to grow and maintain ever more complex socioeconomic  systems (Permagrowth), while switching our energy inputs to less “dense” forms like solar, wind and geothermal.  Simplistically put, to go from frying eggs over a gas flame to using a lens to concentrate the sun’s rays. Sure, it can be done, but much more slowly and for fewer eggs. Oh, and don’t forget that we also need to manufacture a lens, which also requires energy. 

Entropy is a bitch: Clausius always trumps Smith - or, more accurately and fairly, Clausius trumps the Fed/Treasury every time. Bankers confuse fiat money with energy, they suppose all it takes to keep Permagrowth going is money.  The current twist is Green Permagrowth vs Black, but the faith in pixelated money remains the same. Once we set a hard physical limit on the use of “cheap” fossil energy,  it does not matter how much money is printed, PermaGrowth is impossible - Green or otherwise. 

(Well… there is an exception, see below 😆😆)

Who Says Money Can’t Be An Energy Source?
Weimar Germany Woman Burns Money For Heat 

The conclusion is that the only way to effectively deal with global warming, climate crisis, species and habitat destruction is to reject the current  PermaGrowth socioeconomic model and move to a cyclical, steady state one.

Such a development will necessarily produce radical changes in fiscal and monetary policies and completely change the way we evaluate stocks, bonds, commodities and derivatives.

Over the next few days I will try to examine and post my views on the the impact of blockchain and cryptocurrencies on a possible transition from the PermaGrowth to a Steady State world.

1 comment:


    btw; if you have never watched it, do watch the first fifteen minutes (I never watched either, may not have the time)... but the intro is truly worth watching...