Episode 177 – Economic Superorganism with Carey King

Macro N Cheese – Episode 177
Economic Superorganism with Carey King
June 18, 2022

 

[00:00:03.970] – Carey King [intro/music]

What’s really the difference between the oil well in Texas in the 1930s, right? Spindle top gusher, you drill 100 or 200 ft. in the ground, and then it’s just gushing out of the ground for days and doesn’t take a lot of energy to drill that deep and you’re getting a lot of power out, a lot of energy out quickly. Now you got to drill a mile deep and 2 miles horizontally to get less oil than that.

[00:00:26.830] – Carey King [intro/music]

Is anybody trying to make and sell less energy efficient devices? The energy community and companies that I meet and I haven’t had anybody that says, yeah, we’re trying to sell less energy efficient device here, and it’s going great. And that’s because efficiency is a way to grow. It’s a way to do more work.

[00:01:42.090] – Geoff Ginter [intro/music]

Now, let’s see if we can avoid the apocalypse altogether. Here’s another episode of Macro N Cheese with your host, Steve Grumbine.

[00:01:43.080] – Steve Grumbine

All right. And this is Steve with Macro N Cheese. You’ve often heard me talking about the economy of real resources. All of our guests focus on real resources versus just money. Money is usually the least important thing. We try to make it the most important thing. And I have the opportunity to speak to a gentleman today named Dr. Carey King, and he’s a research scientist at the Energy Institute, the University of Texas at Austin.

He’s also the author of a book; The Economic Superorganism. He’s researching the role of energy in our past and future. I went out, I bought it. I tried to read as much of it as I could, but I got to read a lot of the abstracts from the chapters to be able to pull together a coherent view of his positions. It’s just fantastic. And so without further ado, I want to bring on my guest, Dr. Carey King. Thank you so much for joining me today, sir.

[00:02:42.290] – Carey King

Yeah, it’s a pleasure to be here, Steve. Thanks for having me.

[00:02:45.770] – Grumbine

The pleasure really is all mine. As you heard in my introduction, one of the things that really jumps out at me is, quote, unquote, “real resources.” And I’m very heavily focused on the environment. Folks like Jason Heckler, Steve Keen, they’re very much focused on this ecological, environmental energy understanding of how the world works and how this all pulls together so that we can survive and we can build an economy that not only serves the global north and the global south, but also allows us to have a planet that’s able to sustain life.

And so it’s easy to talk about what should be and what shouldn’t be. But I think the thing that made me so excited about getting to talk to you is this is a systems approach to addressing energy within the global economy. And I found that to be a fascinating approach. So tell us a little bit about your book, The Super Organism and what drove you to write it.

[00:03:50.510] – King

Right. Thanks. So my initial driver for writing it is because I’ve been doing a lot of research on what we’d call the net energy space or net energy analysis. So a lot of people think about metrics such as energy return on investment, which is you have to sort of consume energy and convert it in order to extract energy, which is to say it takes energy to make a solar panel. And how much energy do you get out of the solar panel? It takes energy to drill an oil well.

And how much energy do you get out of the oil well? And that this is a really fundamental notion of what goes on in the economy. So my history of doing research is based on understanding this basic idea and then trying to translate it into economic modeling or economic metrics that people might normally focus on with units of money.

So fundamentally, I’m interested in understanding marrying units of energy and mass with units of money. And I’ve been doing some research just looking at the history of the cost of energy and food. So if you think about preindustrial food as a basic energy input to the prime movers of the world of the economy, so humans eating food and performing work on the land and also feeding biomass to animals who are doing work on the land, that was pre-industrial, that’s the big component.

And so when you look at this data and the longest data series exist for England and the United Kingdom since 1300 from Roger Fouquet at London School of Economics. And when you look at that, you say, oh, well, if you add all of the estimated costs of energy and food essentially to run the economy and compare it to estimates of GDP at the time, it’s 50, 60%.

And then if we look at whatever it is today and we do the same kind of metrics, it’s much lower. It’s 10% to 20%. And if we look at energy only, it’s less than 10%. So there’s this amazing metric that describes the transformation into the modern economy as we think about it today or industrialized economy. Tracking this metric of the cost of energy and food relative to GDP, declining from a relatively high fraction to a relatively low fraction, is one way to look at this transformation of the economy.

[00:06:03.530] – Grumbine

How did that happen? Is this just technological advances? Is it diversification of the economy, things that don’t require as much energy being part of the GDP metric of modern society? What do you think drove that?

[00:06:17.570] – King

Yeah, it’s primarily use of fossil fuel machinery to replace labor effectively. So for combustion engines and steam turbines and steam engines, there was essentially muscles doing the work. So as soon as you have another way to perform this work, like physical work, in an engineering or thermodynamic sense, it was cheaper and required less other traditional inputs of labor, if you will, or other materials to get the same amount of work out.

So imagine a steam engine running on coal, pumping water out of a coal mine so that you can then get the coal out of the coal mine faster. This is the original idea of the Jevens paradox or William Stanley Jevens, indicating that more efficiency begets more extraction or higher extraction rates rather than the opposite. So sort of the paradoxical thinking. So that’s effectively what happened, or the main description for this is you replace all the needs of physical power or practically all the needs of physical power in the economy with machines instead of muscles.

And this is fundamentally cheaper just due to the energy content and energy density and power density of these machines relative to biological animals and humans. And when looking at this data, I noticed for the United States, UK, and then estimates for the world overall that the lowest quantity of this metric, energy and food costs divided by GDP, seemed to be around the year 2000.

Then it went up to 2008, to the financial crisis, and then it bounced around a little bit, went down in the early 2010s and now it’s kind of coming up again with coal, oil and gas prices kind of globally going up. So my fundamental reason I was like, well, “I’m going to write a book that highlights this” and starts to talk about the importance of this very long term trend.

If decreasing the relative cost of food and energy is a metric of technological advancement in some degree or the ability of the economy to grow, then if the economy is no longer decreasing in this metric, then what does that say about the state of the economy? Are we hitting some limits to growth, if you will? Is this a metric? Is this an indicator that we’re hitting them? What are the implications of hitting them?

Because at some level you can think, well, we’ll just keep decreasing this value. But at another level you think, well, you can’t probably decrease it to zero. Energy and food spending relative to output of the economy probably can’t be zero. If it’s zero, that means you think GDP is going to Infinity. That’s one way, another way you would think, well, energy and food are literally free or take no effort to extract and convert them to useful forms.

So that’s also not very likely. So it makes sense to think, well, there’s only perhaps a certain level at which this can reach, has something to do with the fundamental quality of resources and our ability to extract them, and how we convert them to useful things in the economy. So that became the starting point for writing the book. And chapter two essentially goes over these data.

And the rest of the book is here’s some other data that are important to look at. Here’s kind of a systems-level viewpoint of how you think about the use of energy, the extraction of energy by organisms like biological organisms. And if you use these concepts of looking at the patterns of energy consumption and size and biology, and you do the same thing with the economy as people have done, you’ll find some similar patterns.

And so you think, oh, well, the economy is like an organism, and it’s the title of the book; takes in resources from the environment. The economy is embedded within the environment. That’s a fundamental notion of ecological economics and biophysical economics, tracking mass and energy flows. So it extracts energy from the environment and materials, uses this to organize itself, distribute materials within itself, uses this to grow, which is like capital investment.

It’s kind of the same thing as adding more mass to an animal. And most animals tend not to grow forever to infinite size. So it starts to make you think, all right, well, there are similar reasons why we would not grow to infinite size. The larger you are, the more capital, if you will, and people that you have to maintain. And if you don’t have enough extra energy from the energy system to grow the next bit or maintain the next bit of population, then you’re in some sense reaching the limits to your ability to extract resources and perform that activity.

So the book is along the lines of most people aren’t thinking about this concept at all. So here’s this concept for people who aren’t thinking about it. Then I discuss, okay, how does the normal mode of economic growth or the normal kind of models or ideas of neoclassical economic growth theory: how do they deal with this? And then the answer is they don’t.

There’s essentially no real feedback to understanding the role of energy as a physical notion within the economy, and that guides my research. How can I link these ideas? How can I link the flow of mass and energy to the flow of money in a fully coherent way? And the book goes into how far I am along that notion already and highlights work of other people that have been pretty important in this space.

[00:11:20.150] – Grumbine

Fantastic. I really appreciate…We talked offline before we started this. And the systems thinking is really key to me, being in the space that I’m in, in information technology, I focus a lot on process development and understanding systems as a whole and develop some sort of a coherent understanding of not just the specific area, but all the ancillary and related areas.

Your approach speaks to that very core thing in my being, if you will. I want to jump to that first chapter that we talked about as well, offline. This really struck me. You talk about a small town in Texas. I’ll let you tell the story, but you made some decisions. And hierarchically speaking, those decisions weren’t respected by the state. This is a frequent issue with a lot of the various things that are going on in our society, from healthcare to education and a host of other things.

We’re kind of stuck in this perpetual race to the bottom where powers that be have different interests that they’re advancing than the people that bear the weight of those decisions. And you ask the question, who should be setting energy policy? Should this come from scientists or national governments or should local communities be able to make decisions for themselves? And I found that to be a great starting point. Tell us a little bit about the story and how that plays into the whole.

[00:12:53.120] – King

Right. So this is the story of the town of Denton, Texas. And in 2014, I believe, they essentially voted on a city referendum to ban hydraulic fracturing within the city limits. City of Denton resides over the Barnett Shale formation, which is the first place where commercial hydraulic fracturing for natural gas occurred in the United States, really starting in the late 2000s. That’s kind of where it got pioneered.

And the citizens voted on this. It’s a relatively small town, has a College in it, University of North Texas. Some people say the vote was dominated by students who don’t live there versus people who live there. So you have these kinds of narratives as well. But as you say, I put the story in there in chapter one because the subtitle is “beyond the competing narratives on energy, growth and policy.”

I was going to put narratives in the main title, but one of the main notions in this book is I wanted to highlight “here are the things people say about energy and how it relates to the economy.” And you hear opposite types of things discussed about hydraulic fracturing or wind turbines or solar panels or whatever-it-is technologies. And why do people contradict themselves?

Or why do they say information that seems contradictory if they’re all looking at the same data and we all live in the same world and we basically use electricity from the same grid. And so this story highlights it. So in 2014, Denton made this vote. In 2015, the Texas legislature comes into session. They are in the session every other year.

And they created a law that essentially took away the ability of cities to make this kind of decision on whether natural resources could be extracted within their city boundaries. So that gets up to this other level of government. It’s left to the state. The state legislature said, no, I’m not going to allow cities to do this. Texas is obviously a big state for oil and gas extraction.

So that created this ability to say, well, what are elected officials in the state of Texas saying about this, and I quote the chairperson of the Texas Railroad Commission, which is the body that regulates oil and gas in Texas, and the things they were saying, which is pretty much trying to convince Denton not to vote the way that ended up going, they weren’t responsible for changing the law.

Of course, the legislature wasn’t responsible for changing that. So you have these different levels of influence. And this is a rare case in which citizens actually vote on anything related to energy policy. This is fairly uncommon. There’s not many cases that would happen. There could be some local rules about, “can I put my solar panels here or there and A or B,” and it’s like, no, you should probably put them in location B or something like that.

But this one is at a bigger scale and highlights the idea that people are disagreeing on what’s safe, what’s useful, what’s economic, what’s good for society, the broad sense of the word. But it highlights an example where there were decisions made on different levels. So it essentially is a good set up to the book, because I couldn’t think of a better story than that one to highlight competing narratives on energy, if you will.

[00:15:56.130] – Grumbine

Let me ask you, though, what do you suppose leads to… I have my own ideas on why there’s differing perspectives, but we’ve seen through the pandemic how competing narratives of masks and opening or closing the economy—it’s like a disinformation campaign. Or maybe it is information from a dialectic perspective where you’ve got different contradictions. I’m just not sure I fully understand. Is this propaganda? Is this just competing interests coming to loggerheads? Where does this difference stem from?

[00:16:33.770] – King

That’s a great question. I’ll give some answer, but of course not the entire answer, which is to a degree psychological. But in the book, I didn’t think about addressing this question at all, but I ended up thinking about it in the way you said a little bit and investigating how people think about it. And I took a presentation idea from Daniel Dennett, a philosopher at Tufts University, and he shows like reverse color image of the American flag.

And then when you take it away in a white screen, you see the actual color of the American flag, red, white and blue. And it’s kind of an interesting way to say, here is something that I’m showing you, which is not what you would call color, red, white and blue. And when I take it away, you actually have another image in your head. It’s actually in your head. A red stripe is in your head.

But there’s actually not a red stripe in front of you, right. It’s not actually there. And it becomes obvious to people that, “wait a minute, I can perceive something that’s not actually present.” And, well, that’s pretty brilliant. I’ll use that. I’ll steal that. So when we think about the economy, it’s a thing that people perceive and they’re like, well, I go to work and I buy gasoline and I buy electricity and we say the economy.

I think I’m part of this economy, but nobody actually experiences the same exact set of activities. So every person’s impression of what the economy is, is different. They actually experience different things. So in that sense, it makes sense that people would look at one set of data and then have a whole different set of experiences on a personal level and memories and then come to different conclusions about what it means.

I have an educational background in engineering and physical Sciences. And so when I think about the economy, I think, well, stuff is flowing around. Mass and energy are flowing around. That’s pretty much what the economy is. Nothing in the economy happens unless you convert energy from a high entropy state of being into a lower entropy state of being.

That’s the description of what energy is. That’s the fundamental arrow of time, if you will. On the other hand, a lot of people think about energy and they’re trained as economists and they think about money flowing around and they don’t think about energy and mass flowing around in a physical sense.

So when you try to have a conversation with, say, me with an engineering background, with somebody who doesn’t as an economics background, you could spend a lot of time just trying to describe what you’re talking about. Even if you agree or disagree, you’re just trying to understand each other. So from a general citizen standpoint who maybe doesn’t have a PhD or study engineering or physical Sciences or economics, you’re there, in the case of Denton, thrust into making some decision that is fundamental to how the economy operates.

Which is to say extracting energy from the environment and converting it into other useful forms. Do they have a notion of what that means? What’s the difference between natural gas and electricity from a solar panel that starts to get out of someone’s expertise in general? Just like I wouldn’t want to make decisions about medicine, as you were kind of hinting with mass.

I’m kind of thinking, well, people who study this a lot, I should probably listen to them or at least read what they say and try to learn from it. So I don’t know if that fully answered your question, but that’s the idea I do highlight in the book some experiments in the past that were done on cats, like kittens, in terms of only showing them certain shapes or certain patterns.

And your brain essentially forms networks between its neurons based upon what it observes in the environment. And so if you limit what you observe in the environment, then you sort of lose the ability to observe other things happening in the environment. And they would show this with kittens and cats, they could kind of restrict what they see and show them patterns of stripes moving from left to right.

And then after they do this for long enough. If there’s a stripe of a pattern going from right to left, the kittens don’t recognize that it’s happening. That’s a physical kind of notion. But if someone’s not trained to think, “here’s the economy and here’s how it relates to mass and energy flows,” then you just don’t have a perception of what that means.

[00:20:28.610] – Grumbine

The second chapter of your book, you talk about energy and food, the megatrend of mega trends. And this particular time we’re in, we’ve got energy shortages. I think they’re mostly market driven. I think there’s a little bit of gouging. But you’ve got a lot of focus, though, on the supply chains and the lack of understanding of why we don’t have certain things: gas, food.

As I was thinking about the approach, it’s clear that there’s a lot of cross-pollination between stocking shelves, having fuel to get from A to B, powering your home, all the things that go into your life. But as it comes to food, though, food doesn’t just show up on the table prepared. There’s a lot of energy that goes into harvesting it or growing it.

And each step along the way from getting that food from a seed in the ground to your dinner table requires different levels of energy at different points in that process. And you can probably measure each segment of that system. You can kind of gauge the energy that it took to do each section of that. And I don’t think we consider that at all.

And I know Steve Keen talked to me a little bit about this as well, saying that at times Adam Smith and beyond, where energy and soil were part of the process, they understood it in some way, seems to be a lost art. Talk to me a little bit about what your concept is of the energy and food and the megatrend of megatrends.

[00:22:09.110] – King

Right. So essentially, at least in the book, I highlight this long term cost trend compared to the output of the economy, are we spending on energy and food? And if you’re planting some seeds, as you say, and if you have to do this by your own muscles or an animal muscle, then the energy input into me or into the animal, that’s the fuel that would maybe go into a tractor.

And the salary, if you will, for a person is higher than the equivalent salary you pay to the machine today to plow the same amount of soil. There’s a certain amount of work that has to move the soil, plant the seed, and it’s effectively cheaper in an energy sense and in a money/economic sense to do it by tractor today than by person.

So that fundamental notion gets translated into this decrease in energy and food costs over a couple of centuries of industrialization that I highlight in the book. And I just became fascinated with this kind of trend and why it seemed to have stopped in the 2000s and what the fundamental changes were, let’s just say since the 1970s, people look at ’73 and 1974.

Opec raised the price in 1974, the Iranian revolution, which took a lot of oil off the market in 1979. So it’s kind of recognizable. Okay. There were some shocks then and some things that happened and then there was a lot of interest in the academic space at the time. I was thinking about it as a small child, of course, but doing this kind of net energy analysis and trying to compare energy alternatives and the Limits of Growth book came out 1971, I think.

And so this idea that, oh, well, maybe you can’t grow forever kind of became and maybe there are resource constraints became mainstream and people started seriously thinking about it, and then we kind of forgot about it after the mid-eightys, I guess, when OPEC opened up the floodgates on the oil Wells again because we had found some more oil in the Western world, got more efficient in cars and these kinds of things.

And so people thought, okay, well, we went through that and then I guess we got through that and then you get to the two-thousands. And I’m like, “well, did you really get through it?” And were there some changes that happened after the 1970s that are related to energy constraints? So that’s kind of where we are today. There’s a lot of, maybe we could call it, the economic narratives in the book.

Wage/Income inequalities come a lot more into the discussion of the last two decades, certainly since Obama was elected. And political polarization is higher. And when you look at some of these other metrics, a lot of them change around the 1970s. Energy consumption per year growth in the world in the United States, say was 4% a year up until 1970s, since World War II.

Then it was much slower after that. And then in 2000, or since about 2005, the United States isn’t consuming any more energy today than it was then. It’s about the same amount. So I started looking at this and I think, well, maybe that’s not a coincidence that we had so many changes in economic structure of unions, getting off the gold standard, going to Fiat currencies, increasing debt levels, private primarily.

And why did these changes happen after the 70s, and after the oil crisis, and not before? Were people not trying to do it before and they just couldn’t pull it off? And then this gave them the opportunity. So I started thinking about that. And the book touches on these kinds of ideas, not necessarily the full answer, but essentially I think it’s more than a coincidence that some of these things occurred.

So we start to be able from a systems view, as you say, the idea is to try to link the rate of energy consumption to essentially growth and distribution. You might have some trade-off between growing an economy and distributing things equally. And that’s not a physical, biological, growth kind of question for us.

You realize there may be some choices there, at least at the high level; taxes in terms of redistributing how money flows around, and how does that influence how energy flows around different kinds of investments? If I invest in solar and wind power, that will be different than if I invest in oil and gas. So that can create different structural changes in the economy as well.

[00:26:32.690] – Grumbine

You point to the 70s; I’m really glad you brought that up. Nixon pulled us off of Bretton Woods and they moved to this free-floating Fiat system. And we’re no longer constrained to a commodity in terms of gold. However, we are constrained to the productive capacity of the world, the real resources and availability. So we learned how to use a free-floating Fiat currency to maximize wealth extraction.

But like you said, animals don’t just grow to Infinity. We didn’t learn how to measure the limits of growth with this Fiat currency. We didn’t marry the two. We kept them separate. And so we look at money, often completely disconnected from those limits of growth. What you’ve done here is effectively tried to find a way to bring the two together so that we can have a better analytical view, based on modeling, of how that might look. Can you talk a little bit about your approach to your systems analysis?

[00:27:39.350] – King

Right. So I’ll start with a simple notion. In my research, I was saying, what is the simplest model of, what I would call it, biophysical economy that I can find? It’s got people and the people need resources to survive, such as to eat, conceptually and survive. And you can write the equations for this. So I found a paper for that.

And then I asked another question, okay, if I wanted to put a concept of money into this model with the idea of debt, because in discussions with people, they were saying the financial crisis was debt-related. Certainly household debt went way up to people getting fraudulent mortgages and all those kinds of things. And some people would say, no, it was energy. And energy got expensive.

Energy got to about 8% relative to GDP in terms of all the money we spent on energy. And that only happened in the 1970s, and it happened in 2008. Both had large recessions. You’re like, “no, energy was a big role.” And I was thinking, well, it’s probably both, but could I tell the difference? How would I know the difference? Does increasing energy cost always lead to increasing debt levels?

Because you end up not being able to pay back your loans or vice versa. So I thought, okay, well, I need a simple model of an economy with a bank. And that’s when I found Steve Keen’s work. And I met him at the apartment of a guy named Robert Ayers in Paris just by chance. I didn’t know him before that, but I wanted to visit Robert Ayers.

When I was going to Europe for a conference, and I’d never met him, but he had done work with his former student Benjamin More, on essentially what we would call useful work. Or if you’re a nerdy, he would say useful exergy, which is a kind of more specific term of energy with the second law of thermodynamics embedded into it.

But essentially you’re saying, “well, how much actual physical work are the machines and the muscles of the economy performing?” Instead of counting the energy input into all the machines, count the work output of all the machines. And if they count the work output of all the machines, they found that you get close to a pretty much one-to-one relationship with GDP.

More work equals more GDP, whereas most people look at it and they’re looking at all of the energy that goes into the machines. We’d call it primary energy consumption. And since the 1970s, we have, let’s just say globally, about 3% GDP growth a year and 2% growth in primary energy consumption. So people look at this and maybe Jason Hickel might have discussed this.

People look at this as, call it, decoupling or relative decoupling. Grow the economy faster then you have to grow the resource inputs. And so people think we’re getting more efficient and using less resources, but we use more resources year after year. So you have to think about it a little bit in a more clever way. So I had this notion of, hey, there’s the idea of the economy as a machine or a set of machines that are doing work.

I’m going to model an economy like that. I’m going to try to model an economy with machines that take energy as a fuel, and then they do work, and I’m going to calculate the work. That’s my goal. I haven’t exactly calculated the work, but anyway, I’m going to calculate the work done, compare it to the metric of GDP from the model, and have the idea of debt and interest payments, because that seems really important.

And I got that from Steve Keen. So that became the core of the beginnings of my core research area now, in macroeconomic modeling and of course, introduction to Keen’s work led me to understand the stock and flow-consistent framework to do the monetary accounting. And so I said, okay, well, this is pretty similar to the way I would do energy accounting.

There’s energy input, some energy output, and if those don’t balance, there’s some energy stored somewhere. And that’s the same thing as money. Money comes into an account, money leaves an account. And if the money leaving isn’t the same, there might be some money stored in that account. So I was like, okay, I get that.

Let’s go forward and blending the flows of energy and mass with the flows of money in a coherent way. And that’s where my modeling work is. Or I have a paper and the model is called “Harmony for Human and Resources with Money” model, so it’s blending these things together.

[00:32:38.150] – Intermission

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[00:32:38.150] – Grumbine

So as we walk through this modeling, and we typically look at consumption and waste, where does waste come into your model? That’s one of the key things, nuclear energy, for an example. One of the big trade offs is that the waste that goes with it, how do you dispose of it? What do you do with it? Each thing that we use for these machines has a waste component to it. How does that fit into the model?

[00:33:09.350] – King

Well, for my particular modeling work right now, the answer is simple and that I don’t directly do it yet because it’s focused so far on this other fundamental notions of just “can I make the model in a correct way?”

[00:33:21.400] – Grumbine

Sure.

[00:33:21.740] – King

But fundamentally, you want to include dealing with waste, you include another cost. You have to spend a little bit more energy to do some process to deal with the waste. You need maybe a little bit more materials to deal with the waste in a certain way. So it’s essentially going to increase the cost of production, if you will, to be able to deal with the waste in a traditional economic sense and internalize that externality.

It would be relatively simple. Well, conceptually simple. But one of the projects I’m working on now that is helping advance the modeling is related to the petrochemical sector and trying to understand lowering greenhouse gases in the petrochemical sector and recycling. The sponsor was thinking, well, there’s maybe not enough known about petrochemicals.

And as oil and gas companies think about climate constraints and CO2 emissions reductions, there’s a lot of thought, well, hey, maybe we can still extract hydrocarbons and make more plastic products. And then there’s plastic pollution. And so they’re thinking, well, how do we really deal with this plastic? How much greenhouse gases are really associated with the plastic supply chain and life cycle?

So the project centered on that, and I’m trying to put that into the context of my economic modeling. So hopefully by the end of the project, I’ll have something better to say, which is here’s the idea of modeling the circular economy, if you will, of recycling plastics within the model and to indicate what the implications are, at least in a structured manner, good or bad or cheap or expensive, whatever the answer is, at least have that concept integrated. So definitely want to get there, but not there yet in terms of my actual research.

[00:34:55.170] – Grumbine

Sure. Fair. I appreciate that. So one of the final points before we leave out of energy and food is, you state that right around the year 2000, it was the cheapest that’s ever been to produce food and energy cost. What do you think was different about the year 2000 than it is today? What changed?

[00:35:18.590] – King

There’s a couple of things, I guess. One is you probably guess, talk more about this and know more than me. China joined the World Trade Organization in 2001, I believe. So the ramping up of energy consumption, which is to say the demand for energy from China started to really ramp up starting at that time. And this put a lot of pressure on commodity prices in general or just materials in general.

So across the board, there was a new pressure by a billion people, if you will, on food and energy, more consumption for their manufacturing. Another thing with this, people debate this, obviously a lot, but nearing coming to the end of what people might call cheap conventional oil, conventional reservoirs, where you don’t have to stimulate the extraction, you don’t have to do hydraulic fracturing.

This is before that time, these kind of access to resources or reservoirs might have started to get a little bit tougher. So those are my general notions. The natural gas prices started to rise in the United States a little bit during this time. So they were maybe about as cheap as they ever were. Russia, I think there were still some impacts from restructuring of the Russian economy, if you will.

So that 1998, I think something was like the cheapest real oil price, I think maybe in history. So it was just kind of a low point in oil prices, natural gas prices, coal prices in general, and then when they start going up, it feeds into the food system a little bit, as you indicated before, just because we use fertilizers derived from natural gas and this kind of thing, and to enter food costs.

So for coincidence or just how things have panned out, that just seemed to be the point where before a lot of demand from China came up, there was particularly soft demand from Russia, and I guess times looked good. So it was kind of a time to just happen to be the cheapest then and then the party can’t go on forever. I don’t know. It just keeps getting cheaper and cheaper.

This is one of the areas of people doing that energy analysis and studying oils to try to understand what’s really the difference between the oil well and Texas 1930s, right. Spindle top gusher, you drill 100 or 200 feet in the ground, and then it’s just gushing out of the ground for days and doesn’t take a lot of energy to drill that deep and you’re getting a lot of power out, a lot of energy out quickly.

Now you got to drill a mile deep and 2 miles horizontally to get less oil than that over a few years. So the notion that you’re going after the lower quality resources now is obvious. But of course, we have a lot more technology to do it, but it still fundamentally makes the price cheaper. The oil price before 1970s averaged somewhere around $20 a barrel for almost a century.

And after the 70s, it’s been closer to $50 a barrel average. So, that’s a fundamental step change in the cost of oil, which is still the most relevant energy commodity for the whole economy. So that’s kind of this pre-70’s and post-70’s one stark example, right? We haven’t gone back to $20 barrel real oil, and that’s why we’re not going to.

[00:38:23.890] – Grumbine

Right. Most of the focus I put on is on the currency-issuing-nation mindset, where you tend to focus on Macroeconomics through that lens. And one of the key things about the real resources that we frequently talk about being the threshold for what we can and can’t do, energy in general is required for everything.

And so a business is going to take the costs of production and add that to whatever it is that they’re selling and bake that into what they put out as a price. And it is one of the very few things that is going to impact everything. And so looking at existential climate crisis, we must end our dependence on fossil fuels.

The competing narratives about fracking have really brought us to this point where the system can’t sustain itself and a lot of debate over what renewables could replace the standard we use today of petroleum products. And in talking to Steve Keen and Fadhel Kaboub and Jason, “use Thorium for nuclear,” well, it’s not really efficient. We can’t really build it up quickly enough.

The crisis that we’re facing requires something that we can do massive amount of change in a relatively short amount of time. So it comes back to wind and solar. And you address the competing narratives between fossil fuels and renewables in chapter three of your book. I’m very interested in your perspective not only on the competing technologies, but also how that plays into your overall model.

[00:40:13.790] – King

Right. So I’ll say something about the actual mathematical and computational modeling work and then get to your question to relate it. So in my model, I think, yeah, there is capital. The notion of capital is a machine. It requires material and energy inputs to operate. If it doesn’t, it doesn’t produce an output. Therefore, that dictates essentially the fundamentals of the economy.

So I don’t input prices and costs and then say, well, if I assume this price and cost for this process, I’ll spit out model what happened to the economy. I say, no, here’s the physical notion of the process. And then I’ll spit out the cost and monetary units and prices based on markups and these kinds of assumptions. So I’m trying to see how far you can take the physical model of the economy to explain real trends of the economy.

In my last paper, I’m making the case that I really can replicate some long-term, say, almost 100-year changes in trends in the global and US economy by taking this approach, even with a toy model, that I can replicate some really interesting and important trends to your notion of the narrative. So just to try to summarize, the fossil energy narrative would be something like fossil energy and machines that consume it are the reason why we have the prosperity we have today.

The decline in food and energy costs from 200 years ago to very low cost today is essentially exactly indicative of that, mechanizing agriculture for the most part. So why would you want to change that? Are you crazy? Look at all this prosperity and you want to not use fossil fuels? So this would be the fossil narrative.

The renewable narrative would be: Well, yeah, I think maybe I agree or I may or may not agree that fossil fuels got us here today, but we have a new solution: wind, solar and perhaps other things. And since we have these now, we can use these, and these are cheaper cost for all kinds of various reasons and there’s no reason not to try to use them.

So let’s go forward and try to use it. And if you want me to throw the climate change lens on there, I can do that. But if you don’t want me to, maybe I don’t even have to do that. So that’s the short answer of these two, in some sense, straw-man narratives. And in the book I tried to explain, well, why would someone say this? Are they just trying to lie and try to confuse you?

No, this is what they think. It’s not a lie. It’s a representation of actual data. But are they selectively showing some data and not the whole picture? So I basically go through these different arguments for and against renewables or fossil fuels, such things like prices, reliability. How do you even think about the concept of reliability? Is there some moral obligation to use one versus another?

Is one better for economic development? What’s the material impact or life cycle impact of each technology? So I’d go back and forth and compare these. And once I get into the middle of the book and a little bit more of the systems approach, that’s kind of where the book title comes from is the notion that, well, if you think about the economy as an organism, it doesn’t care about the narratives, maybe.

If you think about what animals and living creatures we have and plants and animals today, they don’t have a model of the economy. They’re just trying to access resources. And there’s a process of natural selection and we go through evolution and here’s what we have. So how would you think about that for the economy?

The notion from the 1920s, from Alfred Lockov who was an ecologist, and then continued on by Howard Odom afterwards, was also one of the great ecologists of the United States. They posited this idea that’s called the maximum power principle, which is the organisms that have survived in nature that we observe now have done so because they extract resources more efficiently than their competitors, than the other organisms.

And if you evolve in some way or have mutations to extract resources at a higher rate and you can make the whole ecosystem, like a forest or something, absorb more sunlight than it used to be able to absorb and accumulate biomass, then those are the ones that are going to be more fit from an evolutionary perspective, and those are the ones that will survive.

And in the economic sense, you can say, well, is that what’s happening in the economy is that each economy that consumes more energy resources is able to grow more. And if you have a larger economy, you have more capabilities, which means you can have more capabilities relative to the other economies on the planet and potentially impose your more social will because you actually have physical capabilities, like producing energy in food or military strength, something like this, physical notions of being able to extract energy and do work on the environment.

And the conclusion from my standpoint is that seems to be what’s happening. So marginal-cost pricing is like marginal changes in genetic codes that are getting selected for natural selection. And an economy that’s more fit, maybe one that can do more work. That’s why there’s an emphasis on making devices more energy efficient. I often ask people, is anybody trying to make and sell less energy efficient devices?

The energy community and companies that I meet and haven’t had anybody that says, yeah, we’re trying to sell a less energy-efficient device here, and it’s going great. And that’s because efficiency is a way to grow. It’s a way to do more work. Work output is essentially energy input, times efficiency, into work. So you can either increase the energy input, you can increase the efficiency, or both potentially.

So there’s both ways to do more work. And if you can do more work efficiently, then you can reinvest the profits, if you will, to make more machines that do more work. And that effectively is what seems to be happening. What do you do with the profits? You get into a lot of these discussions. So that’s the idea of the superorganism, it’s taking in resources, trying to grow itself.

And it doesn’t compare in some sense. If you set up these economic rules that are sort of agnostic, search for marginal prices, or people have prices based on marginal costs, and it doesn’t care if it’s renewable or fossil. It’s just like, well, is this combination going to enable me to do more work? And if it does, then, okay, well, maybe that combination is good.

I don’t need 100% renewables or 100% fossil fuels. Some mix is perfectly fine. It’s like being an omnivore. Am I going to eat only carrots and not eat any mice if I’m a predator or something? You’re like, no, maybe I’ll eat both. I can have a little variety, spice of life, right?

[00:46:36.410] – Grumbine

In terms of our well-being, we’ve lived and died off this GDP metric forever. And most economists, especially ecological, are suggesting that maybe it’s not the greatest metric for determining the health and well being of an economy. Some of them are more of a dashboard approach with multiple key metrics that make up an overall EQ of the system.

Others are looking at a genuine prosperity metric, and each of them probably has its own shortcomings. But ultimately, it’s not really a morality thing, so much as “is the country better, is the environment better, is your life better?” So I guess my question to you, ultimately, within this system’s thinking towards incorporating energy consumption, is there a well-being indicator? What would be a relative way of assessing the limits of growth in terms of leveraging your model? How does that all play in to the whole?

[00:47:45.790] – King

Right. That’s a great question. I have some thoughts on it, certainly not the full answer, but doing this work has made me hopefully, at least, I think I understand a little bit more of how to think about this answer. So let’s just say in my modeling work, copying from Steve Keen’s approach, there’s a parameter in there that relates to wage-bargaining to power, or something, whether wages go up with inflation or not.

And in my model, I can say, well, let’s assume wages go up with inflation. I push go, it comes to some steady-state economy, and when it stops extracting resources and resource consumption is now a constant and population is constant, people have high wage share, there’s a high wage share, and the profits in this example go to zero.

So I’m like, okay, that’s kind of interesting. How should I think about that? Okay, let me change the little parameter for wage bargaining power and say, now wages do not go up with inflation anymore, and I’ll change it when resource consumption peaks out. So I do that and I say, oh, well, here’s a little trade-off. Now, profits are actually above zero, and wage share’s declining.

And I look at that and I say, okay, well, I hear people talk about this. This seems to be what they’re talking about. But this wage-share decline doesn’t really seem to happen unless I do it when resource consumption starts to peak out. If I do it a little earlier, it doesn’t really seem to appear yet. So it must be something fundamentally about growth and wage marketing power and this trade off.

When you look at the US data, for example, energy consumption per person goes up until the early 1970s, and then it’s basically flat until mid 2000s. That’s roughly the same time when the wage share started declining in the United States. It starts declining in the mid 1970s. And I’m thinking, well, is this a coincidence?

And my model kind of replicates this idea, or it’s one way to try to think about this potential tradeoff. So it kind of just brings up the question, loss of targeting power and Reagan and Thatcher and union-busting. Is this evolutionarily or somehow became a solution, if you will, to try to keep the economy growing, but the trade off of less wellbeing, in the sense of wages and income inequality.

And the comparison to biological growth is as animals get bigger, each unit of mass, they’re growing more muscle and bone and these kinds of things, as they’re growing overall, mass is increasing, but the metabolism is increasing more slowly. So the bigger you are, the slower is your metabolism in general. And the less each unit of mass in your body is consuming.

So literally, if you accumulate more mass, the next mass you accumulate is sort of consuming less energy than the previous sets of mass. And when I think about the economy, I’m like, oh, this is actually data that show a similar kind of thing since the 1970s. Each house that was built in the United States consumes less energy than the previous set of houses.

Each car in the United States consumes less energy per year than the previous sets of cars in the United States. And so it makes you think, are we just, without even thinking about it, creating rules that lead us to the same type of growth pattern of biological organisms? Because in some sense, if you’re resource-constrained, resources just aren’t fully abundant and you can just get as much as you want, then you may not necessarily have to have this kind of a tradeoff.

What might be unique about us humans thinking about the economy is that you and I are having this conversation so we can at least think of this. And so what I hope to come from the book is here’s this physical way to view how the economy works. If you think it’s incorrect, then yes, let’s discuss if we think it’s correct or incorrect. And in what way? Let’s just say it’s the correct way to view it.

Then you can say, well, I think it’s the correct way to do it, but not sure I like the outcomes. Okay. Well, how would we change the outcomes in terms of wellbeing, notion, as you’re talking about, if that’s not clearly a goal of the economy, if the economy is just trying to grow like a biological organism for some evolution imperative type of framework, then how do we not grow the economy?

If we didn’t grow the economy, can we have better wellbeing? This gets into these notions of some of your other guests and the de-growth framework. So I think they’re onto something. I think they’re probably correct that if you want to increase well being, you sort of necessarily have to perhaps trade off growth and say, we’re not just trying to grow, we’re trying to stay the same or shrink our consumption, but have a better well-being for the people living at the time.

So I do think there’s something I simplify in the book. After World War II until the 1970s, you might think of the US economy as a circle, and the circle is getting bigger and it looks kind of uniform. And then after the 1970s, it starts to form into a triangle. And the area of the triangle in 2020 is bigger than the area of the circle in 1970. But it’s a triangle now. It’s a different shape, it’s a different structure.

It’s not the same thing. It’s bigger, but it’s not the same structure. So the tradeoff between size and structure—and to me, structure is anything that describes the distribution of the economy–it could be distribution of energy, distribution of money, and that you can have a little bit of a trade off. We could maybe have a smaller triangle and morph it a little bit more back to the circle.

[00:53:04.070] – Grumbine

Great concept. I want to go into the final phase of your book, because I think this is where people can derive some thoughts about what might look like in the future, and you talk about trends of the future, break down your concept.

[00:53:19.370] – King

Right. The final chapter of the book, I really summarize a few ideas of different, very broad concepts of future scenarios from David Holmwood, the father of Permaculture. So I didn’t invent the wheel here, there’s these notions of a super, techno optimistic future, which would be kind of like Star Trek or something. We’re going around the Galaxy or Elon Musk or Populating Mars, and our economy is Earth and Mars.

So that’s kind of like “technology solves problems,” and we just go to Mars, if you will. There’s the energy stasis scenario we don’t really solve. We don’t grow and go to the moon or go to Mars but we solve most of the problems we’re trying to solve here on Earth and maybe come to a steady state economy.

We don’t really lose lifestyles much, but we’re not particularly advancing much, but we’re not really losing much either in terms of, say, technology. Then there’s the energy descent look, which says, well, we’re going to have a hard time maintaining what we have. It’s not going to be a rapid collapse, but we’re going to slowly lose capabilities.

Maybe we slowly decline in population and productive capacity. And depending on your perspective, this is bad or good, but this is one way to think about it. And then the final one is just to collapse. Something happens. We can’t even maintain things on a very short term basis, which would be like decades. You rapidly lose capabilities and decreased population and this kind of thing.

So these are his four frameworks, and they’re very broad, but they’re different enough for you to think about. Okay, what do I know or what do I think I know about how the economy operates and what would I think might happen? And so I set it up there and I talk about political will and what people think they’re going to do and just common notions out there in the investment community now, ESG, environmental, social governance, investing, divestment of fossil fuels.

These are the ideas floating around, and you can start to think about (them); it’s up to anybody, all of us, to try to think about how these ideas play into any one of these scenarios. I think if I had to put my highest probability would be on the probably energy-descent type idea that will slowly peak out and then lose some capabilities, nuclear power, you kind of brought up a little bit.

We’re less capable of building nuclear power plants today than we were three or four decades ago in terms of expertise and manufacturing capability. Maybe the new technologies will be easier and don’t have to use the current technology. So those are some examples of how to think about the future. I certainly don’t tell people the answer of the future, but hopefully the book gives people a view of here’s what I view as the—constraining may be the wrong word, but the view of the economy as a superorganism that says if you’re not thinking about this idea, then you might not be constraining your scenario or your future enough.

And most policies and research that, let’s just say, informs the Intergovernmental Panel on Climate Change, is governed by economic models with the neoclassical growth assumptions. So they don’t have any of this notion of these kinds of physical requirements and feedbacks. And so the answer is, you can always grow the answer from the model. You want to go 100% renewable and low carbon. Okay. It’s going to cost a little bit more, but we’ll still grow a lot.

[00:56:29.740] – Grumbine

Let’s grow.

[00:56:30.510] – King

You want to stake fossil fuels all the way? Okay, well, then you’re still going to grow a lot. Well, those are really different futures. To me, that energy system is totally different. And I know all these technological details. So I’m thinking this can’t possibly be a good way to model the economy again. It leads me to my research program.

[00:56:51.170] – Grumbine

First of all, I really appreciate the candor and I like the concept of a supeorganism, because when you put something in and you take something out, you’re going to impact the organism. You can’t look at things in isolation. So I really appreciate you taking that holistic view. And I’m definitely very interested in completing the rest of this book.

So, folks, if you have not picked up Carey’s book, by all means go out and get The Economic Superorganism. It’s out there under Springer.com. You can get an ebook for about $19.99. I strongly recommend picking it up. The Economic Superorganism is the book. Carey King is the author and my guest. And what else can we do to find more of your work?

[00:57:40.910] – King

So I have a website where I highlight my publications and some blogs and commentaries, that’s just CareyKing.com, and then my Twitter is @CareyWKing. You can find me from there.

[00:57:56.310] – Grumbine

Very good, Carey, it was amazing to have you on. I really appreciate you joining me today and look forward to talking to you in the future. I really loved this conversation.

[00:58:06.490] – King

It’s a pleasure to be here. I love talking with you and I like listening to your other shows. So, yeah, it’s been a pleasure.

[00:58:11.302] – Grumbine

Absolutely. All right. So this is Steve Grumbine with Carey King from Macro and Cheese. We’re out of here.

[00:58:41.980] – End credits

Macro N Cheese is produced by Andy Kennedy, descriptive writing by Virginia Cotts, and promotional artwork by Andy Kennedy. Macro N Cheese is publicly funded by our Real Progressives Patreon account. If you would like to donate to Macro N Cheese, please visit patreon.com/realprogressives.