Slow steaming is still dreaming -- a response to Paul Krugman

I've just published a response to Paul Krugman's criticism of my recent Bloomberg article on limits to growth. It's over at Medium.com in the new collection Bull Market. I don't think Krugman's arguments carried a lot of weight, as you'll see. First paragraphs below....

**********

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.      Read more here.

Economic numerology

A few days ago, Paul Krugman made reference in one of his columns to some data compiled by the US Energy Information Administration on trends in energy use over the past few decades. The data touch on the question of how much energy different nations use to generate $1 of GDP. Are we getting more or less efficient in our use of energy? The numbers, as Krugman argued, show we’re generally getting more efficient. Below I’ve listed the numbers for US energy usage from the year’s 2001 through 2011, in sequential order, from left to right, separated by commas, the units being BTUs per dollar of GDP:

8,482.307, 8,459.179, 8,274.763, 8,178.463, 7,944.349, 7,688.294, 7,671.837, 7,543.901, 7,414.716, 7,503.361, 7,328.424

So you see, the amount of energy used to generate each bit of GDP is going down. Same is generally true for other nations. Fair enough. I’m not going to question that.

But isn’t there something fishy about these numbers? The energy units are BTUs, and the final entry says we used precisely 7,328.424 BTUs per dollar of GDP in 2011. There are 7 specific digits reported in this number, implying that we know our energy/GDP figure to an accuracy of 1 part in 10 million. It’s incredibly impressive. Think about that “.424" at the end. It’s not “.425" or “.423" but exactly “.424".

Is this at all meaningful? Of course not. It’s ridiculous. Unfortunately, this kind of illusory accuracy infects economics and finance quite widely. It may not be the most important issue in the world — even writing about it makes me feel like a grumpy old man — but we’d all think more clearly if we paid more attention to the numbers. So, what’s wrong here?    Read the rest in the new collection Bull Market at Medium.com