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Tag Archives: complexity

The US government needs to understand marginal returns on complexity and the role of energy

A few weeks ago on This Week (ABC, of the said the United States is now too complex for there to be very large sweeping bills to pass that will be good for the country. The reasoning is that the bills are now so long that there are too many unintended consequences and surprises embedded in them. He thus pushed for more incremental bills to make continuous progress. On the other hand, President Obama says the health care system is so complex that you can’t overhaul it in a piecemeal fashion. So which is it?

What does these conflicting statements from the US elected officials say about the state of governing the United States, or perhaps generally the industrialized world, regarding the reaching a point of diminished marginal returns on the complexity of how we are organized? And in the reasoning of Joseph Tainter ( are energy resources, or the lack of the abundance per capita of the past, have something to do with our inability to solve new problems?
I’ll quote from an article in Slate’s website (

“Over the last several decades, the number of bills passed by Congress has declined: In 1948, Congress passed 906 bills. In 2006, it passed only 482. At the same time, the total number of pages of legislation has gone up from slightly more than 2,000 pages in 1948 to more than 7,000 pages in 2006. (The average bill length increased over the same period from 2.5 pages to 15.2 pages.)

Bills are getting longer because they’re getting harder to pass. Increased partisanship over the years has meant that the minority party is willing to do anything it can to block legislation–adding amendments, filibustering, or otherwise stalling the lawmaking process. As a result, the majority party feels the need to pack as much meat into a bill as it can–otherwise, the provisions might never get through. … And as new legislation is introduced, past laws need to be updated. The result: more pages.”

So governing the country is becoming more and more difficult to increasing size and complexity. Theoretically, this requires more and more money and energy to operate the government and distribute services among the citizens. Given that US energy consumption has been effectively flat at between 99 and 101 quadrillion (1 quad = 1 x 10^15) BTUs since 2004, perhaps this has finally caught up to us in the form of the mortgage and financial crisis causing the current recession. The economists are stating that they don’t see jobs recovering much at all this year even if the overall economy does grow by any percentage.

It is disappointing to hear, or rather not hear, more of a discussion among politicians of how energy resource quality (measured by energy return on energy invested (EROI), net energy, etc.) is not brought more into the general discussion as an indicator of the future path of our society. I hosted a panel session at the American Association for the Advancement of Science Annual Meeting on “The Consequences of Changes on Energy Return on Energy Invested” (see: that the fossil fuels we have used in the past and are still consuming today. Thus, energy systems must inherently get simpler not more complex. It is not clear whether the “smart grid” is more simple or more complex. In some instances, it allows decisions to be made more locally and that sounds simpler. On the other hand, there are more decision-making nodes or locations, and that sounds more complex. I’m inclined at the moment to think that the smart grid is an increase in complexity, but this is a ripe area for future research.

I send out a call to the energy community to call for a more integrated approach to thinking about how critical energy quality is to economic production and societal organization. Instead of blaming the current politician in office for running up the budget or spending too many tax dollars, we need to show that our future options for private and public services are fundamentally limited by the quantity and quality of the energy resources we consume. Thus, we should not be surprised when our politicians are having extreme difficulty in solving the current challenges. The lesser amount of excess energy floating in the economy simply demands that actions be performed much more precisely with less and less room for error. When there is excess energy available, you can simply more easily afford to mess up, and for that matter, clean up your mess.

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Energy for complexity: big government vs big business – it doesn’t really matter which you hate

The economic struggles since mid-2008 are bringing out factions that highlight both the uncertainty of the future together with ignorance of how the past has led us to where we are today. In the US, we have the conservative “Tea Party” movement of the right that is complaining about excessive government spending and the liberal “anti-banking” faction on the left that is fed up with the fat cats on Wall Street skimming too much off the top. Both sides are correct in coming to grips with the fact that large organizations and bureaucracies (e.g. government and banks) are having a harder time coping with the current economic and social problems of today.

What has unfortunately been quite absent from most of the political discussions about how to get the economy “back on track” is the true role of energy resources and technologies. With all of the talk in the United States about the need to “connect the dots” for the “War on Terrorism”, what we really need to do is accept the way the energy and economic dots are connected in our modern industrial society.

By taking the following factors into account and enhancing our knowledge of how we can and cannot affect these indicators, we will “connect the dots” on our future as well as possible:

  • (1) Jevon’s Paradox states that increased efficiency in the use of resources (in this case energy resources) through the use of technology and structural change increases total resource consumption.
  • (a) Policy point: if we target increasing efficiency, we can expect to only delay environmental problems.
  • (2) The energy return on energy invested (EROI) for the combination of energy resources, renewable and fossil, together with technology that converts those resources into services dictates the level of complexity attainable by society.
  • (a) Policy point: society seems to have reached a level of complexity in the last 1–3 decades such that:
  • (3) The EROI of energy services has been extremely high with the use of fossil fuels, and EROI will eventually come to a value such that it is equal for fossil and renewable resources. That time of EROI equality will mark a turning point in human civilization.
  • (4) The human species has now grown in size that it is capable of affecting the environment on a global scale as opposed to only very localized impacts before the industrial revolution.

The connecting of the dots goes as follows:

  • (1) Humans organized into agrarian societies, and this was beneficial because it raised the EROI from farming, where the energy produced in this case was that energy embodied in food, not primary energy for operating machinery. The invention of tools and use of beasts of burden (horses, oxen, etc.) also enhanced human EROI (i.e. the amount of human energy required to grow food for human consumption).
  • (2) The discovery of fossil fuels and subsequent technological change to enable further exploitation of fossil fuels led to the industrial revolution and the capabilities of production and economy in our present industrialized society.
  • (3) Resource constraints via any combination of technical, physical, economic, and political factors act as a driver to increase efficiency in the use of energy resources, but there are thermodynamic limits.
  • (a) For example, the Arab oil embargoes of the 1970s drove up the price of oil which in turn drove the US and Europe to increase fuel efficiency of vehicles to get the same service (move passenger and cargo from point A to point B) with less fuel, or energy. Subsequently, energy efficiency increased since the 1970s but the rate of consumption of energy changed from exponential growth to linear growth, and economic growth also slowed compared to the previous post World War II rates for the US.
  • (4) Today the rate of technological change in terms of increased energy efficiency and high EROI has not increased at the same rate as needed to enable economic growth equal to the pre-2000 years and subsequently the top of the economic food chain has decided to hoard recent profits at the expense of distributing those profits to the middle and lower classes. This is evidenced by the increased income gap between the top and the bottom.
  • (5) The inherently lower EROI of renewable resources will not enable the same level of economic production and societal complexity as provided by higher EROI fossil fuels. This is because renewable technologies are based upon current flows of energy (e.g. sunlight, wind, waves), as compared to fossil fuels which are based upon stocks of energy stored over hundreds of millions of years.

To contemplate the final point above, consider that Earth stored the renewable energy of the Sun (in the form of biomass) on the order of 100 million years, and now we are consuming this energy on the order of hundreds of years. What humans learn and choose to practice during this century will dictate the type of societies that are even possible after peak fossil-fuel production.

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Complexity, energy return on energy invested, and employment

The discussion continues in the US about economic recovery (it was somehow reported this past week at 3.5% for the last quarter). People keep asking typical and often meaningless questions. “Is this growth sustainable?” “But employment is still rising, when will unemployment go down?” To many in the research community that study society from a “whole systems” mentality, the answers to these questions are obvious in the long run even if few short term solutions exist to alleviate any real or perceived economic pain or loss of lifestyle. Oh, and the answers to the two questions are “no”, and “when we (the US) accept lower lifestyles”.

This weekend, Timothy Geithner, the US Treasury Secretary appeared on the popular Sunday talk show Meet the Press. Geithner was asked when employment (unemployment is US is measured at 9.8%) would start to rise, and when the budget deficit and national debt would stop growing. His answer was the mainstream view. This view is essentially that the economic stimulus funds are providing the base investments for growth in the future, and they will “take a while.” Another way of looking at this statement is, that because private businesses spent years, if not the past couple of decades, making the wrong types of investments and/or expecting the wrongly high returns, the government is now making the right kind of investments that will make those same high returns. Oh, and create jobs.

Unfortunately, the research on energy and economics is showing us that the trends are not indicating that these future expectations will come to fruition. I present two areas of research to think about together.

(1) Work on economic production functions by Robert Ayres of INSEAD indicates that investments in increased labor no longer produce economic gains for the US. Work by Ayres and his colleagues (often Ben Warr) on how energy, or rather “energy services” (which they term more precisely “exergy services” or “useful work”) relate to economic growth shows that investments in energy services and capital are practically the only drivers of economic growth at this stage of development in the US. If we consider, as many economic production functions do, that the “factors of production” are of three main categories, (i) capital, (ii) labor, and (iii) energy (or energy services), then Ayres’ work shows that every dollar invested in capital or energy is each responsible for half of economic growth, and investments in labor are responsible for well less than 5% of economic growth.

See: an interview and/or journal paper from Ayres and Warr
Journal paper: Ayres, RU, Sustainability economics: Where do we stand? Ecological Economics 2008 67(2) 281–310.

(2) Research on the trends in energy return on energy invested (EROI) for fossil fuels undergoing the inevitable decline. This does not necessarily have anything to do with whether or not there are large fossil resources, but can have something to do with describing fossil reserves (those that are economically recoverable). What this declining EROI means is that even though we have continually produced and consumed more energy (worldwide) and have large coal and natural gas resources, they will still not provide for the economic growth of the past.

One example of conceptualizing pionts (1) and (2) above is natural gas. The natural gas (NG) inudstry is now on a public relations campaign to explain the resource base increased by technologies to extract natural gas from shale rocks. So yes, we now have a greatly (2–3X) expanded resource base of NG, but at what EROI? These resources cannot be economically produced at the $2/MMBtu of the year 2000, and need closer to $6/MMBtu for a price. Thus, the EROI of unconventional NG could be 3X less than conventional NG. So the conculsion is, we may have 100 years of domestic NG in the US based upon current consumption, and these resources are valueable, just not as valuable as past resources.

What all this means is that economic growth, as defined since the industrial revolution, cannot happen as fast as the past. The conversion of energy resources, including both renewables (dependent upon current solar income) and fossils (benefitting from hundreds of millions of years of solar income) for productive uses simply requires more energy and resources than in the past. Thus, there is less excess available for other economic sectors, and most economists, businesses, and governments have not accepted this position. There is little incentive for them to do so, except for energy companies themselves since their livelihood is dependent upon making proper judgments of how EROI relates to their monetary return.

Furthermore, investments in energy technologies, capital, and resources that increase labor in the energy sector relative to past investments, inherently go against the trends of the last 100 years. This is not a result of bad public policy, bad tax incentives, overtaxation or even bad business practices. This is a result of increasing complexity of our society such that investments just no longer provide the larger marginal return as they used to, and perhaps they are no longer providing a marginal return at all anymore (think bank bailouts, two wars: Afghanistan and Iraq, health care reform).

We think more energy equals more capabilities, but that equation is incorrect. EROI is a necessary and important factor to understand. When EROI is high, there is a large margin for error and a high degree of discretion when making investment decisions. As EROI decreases, there is less margin for error, and each error can become more influential for a system that has been built upon higher EROI and still expects it. The pay of investment bankers and automaker executives together with health care technologies are results enabled by high EROI that enabled their existence to begin with. They are only causes of budget deficits and debt when we refuse to adjust. This point of adjustment, or lack thereof, is where we reside today.

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