The Economic Growth Engine
How Energy and Work Drive Material Prosperity
The historic link between output (GDP) growth and employment has weakened.
Since there is no quantitively verifiable economic theory to explain past growth, this
unique book explores the fundamental relationship between thermodynamics (physical work)
and economics.
The authors take a realistic approach to explaining the relationship between
technological progress, thermodynamic efficiency and economic growth. Their findings are a
step toward the integration of neo-classical and evolutionary perspectives on endogenous
economic growth, concluding in a fundamental explanation of endogenous growth that is both
quantifiable and consistent with the laws of thermodynamics. For two centuries fossil and
other sources of energy (work) have been replacing human and animal muscles. Now our
civilization is truly addicted to fossil energy availability at ever low prices. Can
increasing efficiency compensate for coming scarcity? This is the crucial question. The
most important implication of this is that future economic growth is not guaranteed
because the efficiency gains that have driven growth in the past may not continue in the
future.
Exploring the theory of growth with an emphasis on the role of energy, useful work and
technological change, this book will be of great interest to academics and students
focussing on growth theory, energy and ecological economics. It will also prove insightful
to those concerned with policy making or responding to changes in policy related to the
energy-growth nexus.
‘Would you want your great-children in 2100AD to have a 22nd-century industrial
economy? If so, read this book to grasp how strongly wealth depends on energy and its
efficient use. Start treating fossil energy, not as continuing income, but as one-time
energy capital to spend on efficiency and long-term sustainable energy production.
Otherwise, your descendants will inherit a broken 20th-century economy that only worked
with cheap fossil fuels. They will not be rich and they will wonder what their ancestors
were thinking.’
– John R. Mashey, PhD, Silicon Graphics
‘Current economic theory attributes most income growth to technical progress. However,
since technical progress can neither be defined nor measured, no one really knows what
policies will encourage income growth. Ayres and Warr show that access to useful work,
which can be defined and measured, explain the bulk of post-1900 income changes in Japan,
Britain and the USA. They see rising real prices for fossil fuel and stagnating
efficiencies of converting raw energy into useful work as a threat to continued income
growth. This brilliant and original work has profound policy implications for future
income growth without significant improvements in energy conversion efficiency.’
– Thomas Casten, Recycled Energy Development LLC
‘Following the up-and-down energy shock of 2008, Ayres and Warr offer a unique analysis
critical to our economic future. They argue that “useful work” produced by energy and
energy services is far more important to overall GDP growth than conventional economic
theory assumes. Their new theory, based on extensive empirical and theoretical analysis,
has important implications for economists, businessmen and policymakers – for anybody
concerned with our economic future. Ayres and Warr argue persuasively that economic growth
is not only endogenous but has been driven for the past two centuries largely by the
declining effective cost of energy. If their new theory is correct, the inevitable future
rise of the real cost of energy (beyond the $147 oil price peak in July 2008), could halt
economic growth in the US and other advanced countries unless we dramatically improve
energy with technology.’
– J. Paul Horne, independent international market economist
‘This book addresses a very important topic, namely economic growth analysis from the
angle of energy and material flows. The treatment is well balanced in terms of research
and interpretation of the broader literature. The book not only contains a variety of
empirical indicators, statistical analyses and insights, but also offers an unusually
complete and pluralistic view on theorizing about economic growth and technological
change. This results in a number of refreshing perspectives on known ideas and
literatures. The text is so attractively written that I found it very difficult to stop
reading. All in all, this is a very original and important contribution to the everlasting
debate on growth versus environment.’
– Jeroen C.J.M. van den Bergh, University of Barcelona, Spain and Free University,
Amsterdam, The Netherlands
Robert U. Ayres, Novartis Professor (Emeritus) of Management and the
Environment, INSEAD, France and Institute Scholar, International Institute for Applied
Systems Analysis (IIASA), Austria and Benjamin Warr, Social Innovation
Centre, INSEAD, France
Table of Contents
1 Background 1
2 Technical progress 30
3 Industrial metabolism : mass/energy flows 62
4 Exergy conversion to useful work 89
5 Economic growth theories 134
6 The production function approach 175
7 Numerical results for the US and Japan 197
8 Growth forecasting 222
9 Economic growth and development : towards a catch-up model (simplified REXSF
model) 252
10 Conclusions, implications and caveats 295
Appendices 311
References 353
Index 393
432 pages, Hradcover
