Steaming slowly toward the limits of growth

A rebuttal of the “acerbic rebuttal” of Paul Krugman

Mark Buchanan
Oct 10, 2014 · 9 min read

A few days ago I wrote a column in Bloomberg exploring some ideas about possible physical (and biological/ecological) limits to economic growth. I pointed out that total global energy consumption continues to grow even as we learn to use energy ever more efficiently. And I suggested — based on empirical data from the recent past — that there’s little reason to believe, as many economists quite confidently do, that our energy use will soon “decouple” from economic expansion, enabling us to fly off into a future of unlimited betterment through increasing economic output, even as we come to use less and less energy. I also examined a few reasons why continuing to use ever more energy is a certain path to ever worsening ecological problems; it’s really not a wise option.

Economist and prolific New York Times columnist Paul Krugman was irritated, even exasperated, and fired off an “acerbic rebuttal” (to use Noah Smith’s elegant description). He was aggravated that I, as a physicist, was weighing in on topics he thinks should be left to economists. He also suggested that I was just recycling an old argument originally put forth by other physical scientists, which his fellow economist William Nordhaus had completely demolished long ago. Now Krugman had to rise up to do it again! How tiring!

But Krugman’s actual argument was surprisingly weak, and I think grossly misleading, so here’s an attempt to bring a little more clarity to the discussion. I do think Krugman is a brilliant columnist, and I agree with him on lots of things, maybe even most things. But he very much has the wrong end of the stick on this one.

The core of his argument is that I (and other natural scientists) are wrong in suggesting that making anything (a boat, an organism, an economy) bigger or making it do more always means using more energy. Let me be clear that I didn’t actually say that; but more on that point shortly. Krugman, to crush this initial idea, turned to the story of “slow steaming”:

So, let’s talk about slow steaming.

After 2008, when oil prices rose sharply, shipping companies — which send massive container ships on regular “pendulum routes”, taking stuff (say) from Rotterdam to China and back again — responded by reducing the speed of their ships. It turns out that steaming more slowly reduces fuel consumption more than proportionately to the reduction in speed:

see article for the figure

So what happens when you switch to slow steaming? Any one ship will carry less freight over the course of a year, because it can do fewer swings of the pendulum (although the number of trips won’t fall as much as the reduction in speed, because the time spent loading and unloading doesn’t change.) But you can still carry as much freight as before, simply by using more ships — that is, by supplying more labor and capital. If you do that, output — the number of tons shipped — hasn’t changed; but fuel consumption has fallen.

And of course by using still more ships, you can combine higher output with less fuel consumption. There is, despite what some people who think they’re being sophisticated somehow believe, no reason at all that you can’t produce more while using less energy. It’s not a free lunch — it requires more of other inputs — but that’s just ordinary economics. Energy is just an input like other inputs.

Which is fine. And obvious. No sane person would argue against this. History is full of technological advances or just clever ways of using things differently which let us do more with less energy; there are many more to come in the future. We now have better light bulbs and LEDs, more fuel-efficient engines, etc. We could, conceivably, produce more of lots of things while actually reducing our use of energy. Could.

But what “could, conceivably” happen in an ideal theoretical world isn’t the issue. When we look at our world, and the way economic growth has always worked in the past, we find that increases in energy efficiency don’t ultimately lead to less energy being used, but to more. The main point of my article was about what has happened, and what is continuing to happen in the real world, not what might happen in the nirvana of abstract economic theory. We’re getting ever more efficient in using energy, but we’re still using more and more of it. As I wrote:

Data from more than 200 nations from 1980 to 2003 fit a consistent pattern: On average, energy use increases about 70 percent every time economic output doubles. This is consistent with other things we know from biology. Bigger organisms as a rule use energy more efficiently than small ones do, yet they use more energy overall. The same goes for cities. Efficiencies of scale are never powerful enough to make bigger things use less energy.

In retrospect, I now see that the final sentence is the thing Krugman jumped on to make his (misleading) point. I intended the sentence in the spirit of “this has never happened yet and we have no decent reason to expect it will in the future” rather than “and I have a theorem to prove it never can.”

In my Bloomberg piece I also mentioned, very briefly, that there are reasons to think this trend might be quite difficult to break out of, as it arises from basic natural processes. There’s a well known relationship in biology known as Kleiber’s Law which describes an empirical (and now theoretically understood) relationship between an organism’s metabolic rate and total mass. It turns out that for a huge number of organisms, total energy use scales as mass raised to the ¾ power — virtually identical to the pattern noted above for total energy use and GDP for nations. A fluke? Maybe.

But something like this pattern doesn’t hold only for nations of various sizes, it extends down to individual cities as well. You can look at how various quantities scale with city size — length of transport networks, speed of individual movement, total energy use, etc.—and the results are quite regular across a huge range of scales and cities in different geographical settings and nations. From this (now somewhat old) talk by Luis Bettencourt, a leader in this field, you find that Metropolitan GDP grows as city population to about the 1.1–1.3 power, while total use of electrical energy and petroleum grows more slowly, roughly in direct proportion to population. Put them together and you get — very crudely, I admit—a similar trend: as cities grow they get ever more efficient at generating GDP, but also increase their use of energy (more slowly).

So, I can’t PROVE that higher GDP will always necessarily mean more energy used, but that’s the way it’s been so far, and even in the very recent past. Of course, I’d be surprised if a determined search through history couldn’t dig up a few special cases, especially over short periods of time, where GDP up and yet energy consumption went down. The point is that this doesn’t typically happen, especially for economic activity on national or global scales. Make things more energy efficient and we end up using them to consume more energy overall. That’s a broad empirical reality. One of the people commenting on Krugman’s New York Times piece put it quite well:

… if you look at Krugman’s own graph, you can see that there is a LIMIT to slow steaming. Marginal fuel savings decrease at slower speeds — the curve flattens out at low speeds. And of course there is a zero lower bound of zero knots. Ships can’t go negative speeds and magically produce fuel while doing so. So we can play these games for a while, until the LIMIT is reached.

And don’t forget, this all assumes we are moving the same amount of stuff around year in and year out. But Krugman wants growth, so we will be moving ever more stuff around as the years pass. More stuff means more ships means more fuel. This is why economic growth has always lead to greater energy and resource consumption despite efficiency gains.

Krugman says it can be different. He might be right, but it seems to me the burden of proof is on those claiming the future will be different from the past, and if Krugman has made such a case, I missed it.

So did I.

I’ll end with one more thought — and an irony. Yesterday the New York Times happened to run an essay by Michael Shellenberger and Ted Nordhaus (where have I heard that surname?) examining the potential for the rapid global spread of energy-efficient LED technologies to lead to vast energy savings. This year’s physics Nobel Prize went to three physicists who helped develop this wonderful technology, and, as the Institute of Physics noted, “With 20 percent of the world’s electricity used for lighting, it’s been calculated that optimal use of LED lighting could reduce this to 4 percent.”

Schellenberger and Nordhaus aren’t so hopeful:

… it would be a mistake to assume that LEDs will significantly reduce overall energy consumption.

LED’s are but the latest breakthrough in lighting efficiency. Consider the series of accelerated lighting revolutions ushered in by the Industrial Revolution. In the early and mid-1800s, for instance, “town gas” made from coal was developed and used to illuminate streetlights. Whale oil became the preferred indoor lighting fuel for upper-income Americans until it was replaced by more efficient kerosene lamps. And then, finally, in the late 19th century, the electric light bulb emerged.

Along the way, demand would rise for these new technologies and increase as new ways were found to use them. This led to more overall energy consumption.

From outer space, you can see the results of this long progression of illumination. More and more of the planet is dotted with clusters of lights.

There is no reason to think that the trend lines for demand for LED lighting will be any different, especially as incomes rise and the desire for this cheaper technology takes hold in huge, emerging economies like China, India and Nigeria, where the sheer volume of the demand will be likely to trump the efficiency gains.

… The growing evidence that low-cost efficiency often leads to faster energy growth was recently considered by both the Intergovernmental Panel on Climate Change and the International Energy Agency. They concluded that energy savings associated with new, more energy efficient technologies were likely to result in significant “rebounds,” or increases, in energy consumption….

The I.E.A. and I.P.C.C. estimate that the rebound could be over 50 percent globally. … lower energy costs because of higher efficiency may in fact result in higher energy consumption than there would have been without those technologies.

In fact, it wouldn’t be surprising; just a continuation of past trends.

Again, this is from Michael Shellenberger and Ted Nordhaus, the latter being the nephew of the noted economist William Nordhaus, the very man who, in Krugman’s words, “so effectively demolished” concerns over limits to growth over 40 years ago (by the way, I don’t really think this is significant; just a weird coincidence!).

But let me end more positively. I still agree with Paul Krugman on most other things — on the urgency of responding to the risks of climate change, for example, in part by pursuing technologies for energy efficiency. I really do hope he’s right that some profound and radical change lies in our near future that will lead to a complete and utter break with our past, and to humanity as a whole using less and less energy. But I don’t think we’ll manage it just by choosing the right technology, with growth continuing unabated as in the past.

One key may well be developing a deeper understanding of the relationship between energy and growth, and learning why advances in energy efficiency always seem to lead to more growth and still more energy use. If the economic theory says “it shouldn’t be that way,” and yet reality continues to be that way, then perhaps we’ll have to change the economic theory. In the end, I suspect, we will find that energy is not “an input just like any other.”

In the meantime, we’ll be “slow steaming” our way toward the limits to growth.

Photo credit: U.S. Navy

A collection of finance and business writing by…

Thanks to Kate Lee and Alexis Goldstein

Mark Buchanan

Written by

Physicist and author, former editor with Nature and New Scientist. Columnist for Bloomberg Views and Nature Physics. New book is Forecast (Bloomsbury Press)

Bull Market

A collection of finance and business writing by @alexisgoldstein, @delong, @dsquareddigest, @DuncanWeldon, @felixsalmon, @jamesykwak, @Mark__Buchanan, @WhelanKarl

Mark Buchanan

Written by

Physicist and author, former editor with Nature and New Scientist. Columnist for Bloomberg Views and Nature Physics. New book is Forecast (Bloomsbury Press)

Bull Market

A collection of finance and business writing by @alexisgoldstein, @delong, @dsquareddigest, @DuncanWeldon, @felixsalmon, @jamesykwak, @Mark__Buchanan, @WhelanKarl

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