Comment by manholio | Hacker News Reader

Comment by manholio | Hacker News Reader

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You are of course correct that energy is a master resource that powers all physical transformations that drive economic development. You are in fact so correct that the claim is almost meaningless: we are awash with potential sources of energy, vast amounts of solar energy bathe the planet while huge reserves of fissile nuclear material lay in the crust, at the limit all matter can be converted into gargantuan amounts of energy - if only humanity learns how.

So the story of "access to energy" is in fact the story of economic development itself, the story of how packs of primates structure themselves to shape the world using knowledge in the form a transmissible and inheritable culture. Focusing on energy, a loosely correlated intermediate output of this process, is missing the finer details of that structure. As you observe, energy efficiency is just another way a well structured society can improve their well-being despite relative scarcity of raw energy inputs - the welfare effects are primarily the results of structural reasons, not energy reasons.

The well known "resource curse", which I hinted at in my top level comment and which downvoted me to "-1", is a perfect illustration of this principle:

-> We are given an advanced technological frontier AND given a large, free resource that is relatively valuable within that frontier (which we can loosely equate with energy, since you can trade any resource on the world market for oil, gas, uranium etc. or the implements necessary to transform them into energy).

-> There is strong empirical precedent to suggest that, on the long run, the inhabitants of that particular political unit risk decreasing welfare, lower real wages, and curtailed individual freedoms, unless their society is well structured (say, like Norway)

This is why I abhor explanations like "energy poverty": if energy was the real reason, then how can getting more energy make you worse off? Why should we abstract away the very essence of the problem staring us in the face - the political system in the most general sense, culture, social relations etc. - and pick some loosely correlated variable that's neat and makes us sound insightful?

I suspect you'll miss this and our commenting window will close soon, but...

Thanks for noting points of agreement. That's rare and appreciated.

I'm pretty familiar with the energy-lens-of-history model --- see Vaclav Smil (Energy in World History and Energy and Civilization and Manfred Weissenbacher Sources of Power, among others which are ... slipping my mind at the moment). I do agree that it explains much.

Energy, in the form of either flows (solar, wind, hydro, geothermal) or stocks (wood, fossil fuels, nuclear fissibles or fuseables) must be accessible and convertible. The ancient inhabitants of Appalachia, Great Britain, the Arabian peninsula, the Permian Basin, China, and Australia ... were living on top of the fossil fuels we've tapped over the past 200 years or so. But even where they were aware of them, they couldn't access and utilise them effectively. Much as we're presently not fully able to do with the solar and geothermal potential of the Earth, or with potential nuclear fuels. The pieces that have to come together are ... complicated, and the question of why the Industrial Revolution did occur where and when it did, and not at some other time or place is a popular one amongst academics and others. I suspect it's a bit like several of the biological milestones, say, emergence of eukaryotic (mitochondria-bearing) life, etc., in that the advantage conveyed and the spread of the pattern are both so overwhelming that the transition can only occur once. Contrast, say, the agricultural revolution which, though massively significant did not spread within a century or so around the globe as industrialisation did, but rather took many thousands of years.

The resource curse / Dutch Disease ... is another complex issue. My sense is that it's closely linked to Gresham's Law, in that the mechanism is one of how exchange values differ amongst goods, markets, places, or times. In the case of fossil fuels, there's a profound difference in the cost, price, and value of fuels. Humans do not immediately pay the full costs of either provisioning or utilising fossil fuels. The provisioning being the hundreds of millions of years and massive amounts of primordial plant matter which go into their creation (see Jeffrey S. Dukes, "Burning Buried Sunshine" (2003) <https://link.springer.com/article/10.1023/A:1026391317686>). If we did, the market price would be higher by a factor of millions. Utilisation costs include both short-term/local and long-term/global pollution effects, including but not limited to greenhouse gas emissions and global warming.

Oil extractors, even if undercompensated as I've noted, receive far more than enough to cover their own immediate costs, however, so they drill for and pump oil. And those of us who use it gain access to cheap, convenient energy useful for heat as well as motive and electrical power, amongst other uses. In a market, low price dominates most other factors, and such products tend (usually) to drive out others. (Geffen and Veblen goods being exceptions.) The resource curse is that easy riches drive out honest efforts elsewhere. That, combined with the long-term provisioning and utilisation costs, as well as other systemic risks, are among the reasons why more energy can in fact make you worse off. Not immediately, but over the long term. Which may come sooner than you expect.

> The resource curse is that easy riches drive out honest efforts elsewhere.

Thank you for the response, I believe this is an oversimplification. The resource curse is not your typical creative destruction typical of free markets.

If, say, a large part of the population was employed with collecting dung and firewood as energy sources, an abundance of energetic resources will surely collapse output and employment in those sectors. So yes, those people will be worse off in the short run, but the economy as a whole will drastically benefit from access to more energy per unit of labor, produce more, grow and improve real wages across the board, which in turn will create opportunities for the former dung collectors. They stopped collecting dung because that's exactly what should happen as the economy develops, a honest effort (or even an extreme one) in a low productivity role is a waste if more efficient - and possibly less "honest" - alternative exits, such as stock brokers or lawyers.

To unfold this entire cycle we need to assume some type of competent government that will exploit the resource and either distribute it to the citizens (protectionism), or, much more effectively, sell it on the world market and reinvest the proceeds in high growth opportunities. Yes, even in that scenario you can see some exchange rate distortions (Dutch disease) that harm other sectors in the economy, so care must be exercised, but overall we see net welfare increases in the long run, at least if we discount the ecological and provisioning costs you bring up.

But those effects are not a substantive part of the "resource curse" in my view. The real issue is the dramatic effects easy accessible cash resources have on the political structure. An easily extracted rent once you gain power means you are no longer dependent on tax revenue or a functional economy to maintain your grip on power, see for example conflict minerals. There is a strong and well known correlation between oil reserves and authoritarianism. This can place countries in bad equilibria where the oil revenue is funding their own economic stagnation.

To unlink growth from a political structure interested and capable of promoting growth is a gross western-centric bias. It reminds me of the "Washington consensus" economic approach promoted by the IMF in the 90s, that encouraged eastern European countries to adopt market reforms that they weren't institutionally capable to implement, such as privatization of state-owned enterprises lacking a well consolidated stock/capital market and strong regulators. The ensuing economic collapse and widespread fraud has political consequences to this day, there are people dying in Ukraine as we speak due to the democratic backsliding induced in Russia by failed economic reforms that ignored the social and institutional realities.

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