Home » Insights » Understand Global Economics for What It Is

Understand Global Economics for What It Is

understand global economics

If you understand global economics, you will realize the profound restructuring required by moving to fuels with lower power density.

According to Investopedia, “Economics is the study of how people allocate scarce resources for production, distribution, and consumption, both individually and collectively.” We normally associate economics with wealth, trade and money.

But at the planetary level, we understand global economics differently. Viewing the Earth from outer space, you don’t see wealth, trade or money. From this perspective, you understand global economics simply as the imaginative use of resources by humans doing things they consider important.

Resources are another way of describing our environment. Merriam Webster defines environment as “the circumstances, objects, or conditions by which one is surrounded”. So, basically, we live in a complex support structure provided by physics, chemistry and biology.

Hence, at the global level, economics is simply our use of resources from the universe, solar system and planet to do stuff, what economists call meeting our needs and wants. Economics is human action or purposeful behavior to create order. By order, we mean a regular, purposeful arrangement of things that we find useful.

Humans create order by importing energy from our environment.

Understand Global Economics as Human Action Using Energy

We have built a civilization based on heating and cooling our places of work and residence, extensive travel, and transporting goods around the planet. All of these actions require energy from fuel with high power density. All of these behaviors emerged when we made the transition to fossil fuels some 150 years ago.

As we try a reverse transition back to lower density fuels, our global economy must undergo large scale conversions and profound restructuring. Our current efforts to improve energy efficiency and switch to renewables may appear heroic. But really, our forecasts of near term success are delusional. Since 2002, Germany’s ambitious “Energiewende” initiative set the gold standard for going green. Yet Germany remains 80% dependent on fossil fuels, mainly from Russia.

In the meantime, our energy use continues to grow. And because of the nature of our civilization, most of that energy still comes from fossil fuels because of relative power density. Eventually, extraction and use of fossil fuels will decline substantially and eventually, all but cease. But we are talking about at least a century forwards in time.

Science and policy must focus on more effective and efficient uses of fossil fuels, and the many orders of magnitude civilization change needed in the long run. When you understand global economics, you realize that the certain disruptions of transitioning to fuels with lower power density are more daunting than the possible impact of rising temperature based on climate science models that cannot be verified or validated.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.