For the past 150 years, economics has been treated as a social science in which economies are modeled as a circular flow of income between producers and consumers. In this 'perpetual motion' of interactions between firms that produce and households that consume, little or no accounting is given of the flow of energy and materials from the environment and back again. In the standard economic model, energy and matter are completely recycled in these transactions, and economic activity is seemingly exempt from the Second Law of Thermodynamics. As we enter the second half of the age of oil, and as energy supplies and the environmental impacts of energy production and consumption become major issues on the world stage, this exemption appears illusory at best.
In Energy and the Wealth of Nations, concepts such as energy return on investment (EROI) provide powerful insights into the real balance sheets that drive our 'petroleum economy.' Hall and Klitgaard explore the relation between energy and the wealth explosion of the 20th century, the failure of markets to recognize or efficiently allocate diminishing resources, the economic consequences of peak oil, the EROI for finding and exploiting new oil fields, and whether alternative energy technologies such as wind and solar power meet the minimum EROI requirements needed to run our society as we know it. This book is an essential read for all scientists and economists who have recognized the urgent need for a more scientific, unified approach to economics in an energy-constrained world, and serves as an ideal teaching text for the growing number of courses, such as the authors own, on the role of energy in society.
Integrates energy and economics
Uses predictive tools and measures, such as EROI, to show how the economy is embedded in a biophysical world subject to scientific rules and constraints
Provides a fresh approach to economics for those wondering 'Whats next?' after the Great Recession and the recent increases in oil prices
Assesses energy sources from the perspective of peak oil, the role of alternatives, and potential impacts such as climate change
Part I. Energy and the Origins of Wealth
Chapter 1. Poverty, Wealth, and Human Ambition
Chapter 2. Energy and Wealth Production: An historical perspective
Chapter 3. The Petroleum Revolution I: The first half of the age of oil
Part II. Energy, Economics and the Structure of Society
Chapter 4. Explaining Economics from an Energy Perspective
Chapter 5. The Limits of Conventional Economics
Chapter 6. The Petroleum Revolution II: Concentrated Power and Concentrated Industries
Chapter 7. The Postwar Economic Order, Growth and the Hydrocarbon Economy
Chapter 8. Globalization and Efficiency
Chapter 9. Are there Limits to Growth? Examining the Evidence
Part III. Energy and Economics'the Basics
Chapter 10. What is Energy and How is it Related to Wealth Production?
Chapter 11. The Basic Science Needed to Understand the Relation of Energy to Economics
Chapter 12. The Required Quantitative Skills
Chapter 13. Economics as Science: Social or Biophysical?
Part IV. The Science Behind How Economies Work
Chapter 14. Energy Return on Investment
Chapter 15. Peak Oil, EROI, Investments and Our Financial Future
Chapter 16. The Role of Economic Models for Good and Evil
Chapter 17. How to do Biophysical Economics
Part V. Understanding How Real World Economies Work
Chapter 18. Peak Oil, the Great Recession and the Quest for Sustainability
Chapter 19. Environmental Considerations: Beyond Externalities
Chapter 20. Living the Good Life in a Lower EROI World
