Oct 4 2010

Physics Trumps Money

Kal @ 10:31

George Mobus  writing in Question Everything - When what is happening in your world doesn't make sense, when it doesn't conform to your beliefs about how things should work, it's time to ask hard questions.

Work, Exergy, the Economy, Money, and Wealth -- A Sort-Of Tutorial

This is something of a tutorial on the relationship between energy and the economy. I have been dismayed by how often people express their lack of knowledge about that relationship. Such expressions come in the form of beliefs that money is what drives the economy. Or the belief that human desire to accumulate monetary wealth is the motive force for economic growth. Indeed I doubt that most people ever think of physics when they think of the economy. But the reality is that the economy is very much a physical process that requires energy to continue operating. All of the money in the world will not suffice to maintain the motivation of the wheels of industry unless it can be used to exchange for energy flow. Here is a guide to how the real wealth of nations is created and a more concise look at the nature of energy flow needed to do so.

As things currently stand the economists, politicians, talking heads, and pundits all believe that the problem with the economy is that we are simply not spending enough money, thereby increasing the GDP and causing jobs to be created. They are universally calling for a return to growth. The politicos scrambled to save the financial system because they knew it was the ‘engine’ of creating new money. And the new money always made it look like GDP was growing. By inference, then, the economy must be healthy when the GDP is growing. Except, of course, it isn't. Only the growth of exergy can support a growth of real wealth. Money has no causative power whatever, except perhaps to drive men mad. It certainly seems to be doing so today.

Read the whole article.


Category: Accounting | Conventional Economics | Economics | Resource Depletion | Steady-State Economics | Sustainability
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