If we want to maximize our ability to achieve future energy, climate, and economic goals, we must start to use improved economic modeling concepts. There is a very real tradeoff of the rate at which we address climate change and the amount of economic growth we experience during the transition to a low-carbon economy.
If we ignore this tradeoff, as do most of the economic models, then we risk politicians and citizens revolting against the energy transition midway through.
Economic models are coupled to models of the Earth’s natural systems as Integrated Assessment Models (IAMs) that are used to inform climate change policy. Most IAM results presented in the Intergovernmental Panel on Climate Change (IPCC) reports show climate mitigation costs as trivial compared to gains in economic growth.
The referred to “elephant in the room” (from part one of this series) is the fact that economic growth is usually simply assumed to occur.
This, my most recent publication, has been accepted to Biophysical Economics and Resource Quality
, a new journal from Springer.
Download paper at this link or see my publications page.
This paper describes the changing structure of the United States’ (U.S.) domestic economy by applying information theory-based metrics to the U.S. input-output (I-O) tables from 1947 to 2012. The findings of this paper have important implications for economic modeling in that the paper helps explain how fundamental shifts in resources costs relate to economic structure and economic growth.
The results of this paper show that increasing gross power consumption, as well as a decreasing share of intermediate expenditures of the food and energy sectors, correlate to increased distribution of money among economic sectors, and vice versa.
The information theory metrics indicate two time periods at which major structural shifts occurred. The first was between 1967 and 1972, and the second was around the turn of the 21st Century when food and energy expenditures no longer continued to decrease after 2002. In response to the the latter, it is clear that the U.S. economy did trade off structural reserves (e.g., decreasing metrics of conditional entropy, redundancy, and equality) for structural efficiency (e.g., increasing metrics of efficiency, mutual constraint, and hierarchy) after food and energy expenditures increased post-2002.
After 2002, when energy, food, and water sector costs increased after reaching their low point, the direction of structural change of the U.S. economy reversed trends indicating that money became increasingly concentrated in fewer types of transactions.