Energy, The Real Currency of An Economy
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I recently read the book Fossil Future by Alex Epstein, a follow-up his earlier work, The Moral Case for Fossil Fuels. Taken together, these books explain the essential role of energy to an economy, and how fossil fuels today make the difference between an empowered world and an un-empowered world.
Epstein points out that we are typically only given the positives about wind and solar, and we only hear the (putative) negatives about fossil fuels and nuclear energy. Yet Epstein explains that in order to objectively assess different sources of energy, we need to assess all of the positives and the negatives for every source of energy that is available to us. In other words, we need a cost-benefit analysis to look at both the good and the bad for solar panels as well as fossil fuels.
As a whole, Epstein’s work is some of the best I’ve seen in terms of critical thinking, on any issue, during my scientific career.
Here in 2022, under the Biden Administration, and after the draconian Covid lockdowns, we are seeing a lot of problems in the economy. Gas and chicken cost twice as much as they did just a few years ago. And is any of this any surprise, given the current cultural and political hostility to fossil fuels?
Making Connections
After reading Fossil Future and looking at the current economic problems, I started to make connections in my mind.
A few years ago I wrote an article explaining what I view as the biggest economic fallacy of all, the confusion between wealth and money. In this article, I explained that money itself has no value, it is merely a representation of value. I can use a dollar bill to purchase an apple, and I can eat the apple, but the only value a dollar bill would have for me on a deserted island would be to act as kindling. The apple is actual wealth, while the dollar bill is not.
To paraphrase the famous economist, Dr. Thomas Sowell, wealth is not created by printing green paper with big numbers on it.
It is also a well-established fact that those places in the world with the most economic freedom tend to become the most prosperous. Those nations where people can freely start a business, and are protected by the rule of law, tend to rise out of poverty, while those with excessive government regulations and wealth redistribution tend to either remain poor or become poor.
While playing this information out in my mind, it finally occurred to me that the real currency of an economy is not money, but energy. (No pun intended.) Energy is literally the fuel that allows the wheels of an economy to turn. It’s what allows farming machines to operate, and what allows a train to transport potatoes from the Midwest to New York City.
Energy is the lifeblood, the currency, that flows through the economy powering everything else, especially in an industrialized world. It means the difference between a civilization with factories and universities, versus one in which over 90 percent of the population are relegated to the role of peasants scraping in the dirt.
The power plant creates electricity, something even more powerful than a fairy godmother’s magic, and from that electricity, lights come on in a city, computers process medical data, and wastewater treatment facilities clean our environment. Power plants and oil fields become sources for this technological magic that we call energy, and our level of access to these various forms of energy is what makes our modern, clean, industrial world possible.
Without cheap, efficient, machine-compatible energy, we return to subsistence farmers scraping in the dirt with sticks, and we return to this state overnight.
At the end of the day, an economy is not powered by the flow of money. Money is just used to make the accounting of trade easier. Instead, it is the flow of energy, and our access to cheap, reliable sources of energy, that make everything in our world possible.
As we’ve seen, there is a huge difference between a world where gasoline costs less than $2 per gallon and one where gasoline costs over $4 per gallon.
Closing Thoughts
At the end of the day, one may disagree with my assessment here, and that’s okay. But I ask readers to think it over. Imagine if, tomorrow, you woke up to a world where energy cost ten times less than it does right now. Perhaps some brilliant scientists and engineers perfect fusion technology. On the other hand, imagine a world where some “green” bill passes in Congress, and energy ends up costing ten times more than it does right now.
In one scenario, the lifeblood of an economy is increased and our civilization is allowed to advance, grow, and flourish. In the other scenario, human beings are disempowered and reduced to trying to survive to the next day.
