Sunday, January 31, 2010

The bottleneck century

In his documentary What a Way to Go: Life at the End of Empire filmmaker Tim Bennett notes that many of the book authors now writing about peak oil, climate change, species extinction and myriad other urgent environmental and resource topics usually end their otherwise grim analyses with what he calls "the happy chapter," a chapter with solutions and responses which will supposedly help us to avert catastrophe.

In a new book, Bottleneck: Humanity's Impending Impasse, William Catton, Jr. dispenses with "the happy chapter" altogether and simply gives us the grim prognosis. Human society is now on an unstoppable trajectory for a significant die-off. Catton, author of the well-known classic of human ecology, Overshoot, expects that by 2100 the world population will be smaller, perhaps much smaller, than it is today. We are in what he calls "the bottleneck century." He likens our situation to that of an airplane taking off at nighttime with a crew that is unaware that the runway is too short. The pilot will accelerate the plane as usual expecting a normal takeoff. Unless the pilot somehow receives and believes a warning to brake and reverse the engines quickly, by the time he or she actually sees the end of the runway, it will be too late and the plane will crash.

Well, the warnings have been issued, Catton explains. And, few people believe them. Catton spends much of the book explaining why this is so. As you read his explanation, it becomes clear why there will be no "happy chapter" at the end.

The main culprit, according to Catton, is the division of labor into ever smaller occupational niches. The marvel of such a system is that people who know nothing about one another's occupation can cooperate through the miracle of the marketplace to increase society's overall productivity and wealth. And, they can exchange every kind of good or service through the medium of money. The downside of such a complex and finely differentiated system is that no one can really understand it.

That might not matter so much except that fossil fuels have enabled humans to increase both their numbers and per capita consumption enormously in the last 200 years. The impact of that vast increase on the world's renewable and nonrenewable resources has been profound. It has lead to all the effects mentioned above and many others including deforestation, heavy erosion of farmland, toxic pollution of air and water, and overharvesting of fisheries.

But how does our complex division of labor make it more difficult to respond to these problems? First, we cannot make an independent appraisal of these problems because of our limited knowledge, mostly confined to our occupational niches. As a result we must rely on experts.

This leads to the second difficulty. We are often faced with competing opinions among experts. Never mind that some of these experts are merely paid spokespersons for the fossil fuel industry or for big agribusiness or for the forestry industry. Without careful discernment, most of the public has difficulty differentiating scientifically-based statements from mere polemic and outright falsehood. The mass media thus becomes a conduit for propagating bad or at least inconclusive information. In short, the feedback we humans need to in order to run our society in a sustainable way is dangerously lacking.

Because language is the way humans coordinate much of their activity--especially in our complex society of highly differentiated occupations--when that language becomes corrupted or is used to deceive, it works against the survivability of the species. One problem is that we have outdated wordmaps which tell us, for instance, that natural resource extraction is really "production" and can therefore be expanded as necessary whenever we like. And, we believe we can throw things "away," when there really never has been any "away." We "throw away" our carbon emissions into the atmosphere and produce global warming. We "throw away" our toxic chemicals into landfills which then leak into our waterways.

Third, since nearly all humans now labor in exceedingly narrow occupational niches, they seek to maintain those niches by competing with others. The famed sociologist Emile Durkheim hypothesized that division of labor would create solidarity among humans through interdependence. Instead, it has created the alienation and competition that go hand-in-hand with the dominance of the market system in nearly every economic transaction. Most humans now believe their lives are about acquiring money rather than resources since for so many money is the only gateway to the resources they need. This financializes their thinking and makes it difficult to talk about Earth systems in some other context than the market.

Fourth, human beings evolve in response to current conditions, not future ones. Humans are known to discount possible future events greatly. This puts their focus on what they are experiencing right now and makes them vulnerable to large, abrupt changes since their inclination to prepare for future changes is exceedingly limited.

The competitive and impersonal nature of modern society, the corruption of language and control of mass communication by vested interests, and the focus of humans on the here and now combine to make it all but impossible to coordinate human efforts worldwide in the thoroughgoing way that would be required to avoid the bottleneck. Those efforts would have to include an immediate drop in fertility rates below replacement, a vast reduction in the consumption of natural resources, and the complete abandonment of the burning of fossil fuels. You can see why Catton thinks such developments must be placed in the "impossible" category.

None of these main points are dealt with systematically in the book, but appear and reappear in various contexts. Catton could have used an editor to help him organize his message and make it more succinct and focused. For example, the many personal anecdotes sprinkled throughout the text seem as if they could have been eliminated or at least been more sharply written. The failure of style in this book may result from it being self-published. But I can understand Catton's urgency. At 84 he may have felt that he didn't want to wait to line up a regular publisher.

Still, despite Catton's discursive style, the reader will be rewarded with his subtle insights into the nexus between nature and human society. Rather than giving us a catalogue of our depleted resources; our poisoned water, food and air; or the data behind our endangered climate, he assumes all of this and tells us why human beings are unlikely to respond to these problems and therefore seem almost certain to face a bottleneck in this century. For those who have read his marvelous book Overshoot, this new book will not seem as challenging as it otherwise might be.

"Bottleneck" ends with a disheartening message for it suggests that there is no alternative but to prepare for the bottleneck. Catton is nevertheless explicit about the advantages of knowing the worst rather than living in any temporary blissful ignorance. He does not believe humans will be wiped out, but rather that their numbers will be considerably reduced and their societies simplified. If his book contributes to some form of ecological awareness that can be transmitted beyond the bottleneck, then he says he will consider it a success. It's an oddly humble objective for a book so sweeping in its conclusions.

Sunday, January 24, 2010

Days of world consumption: A warning label for oil and gas discoveries

A few years ago I was speaking before a group shortly after a local oil company discovered what was characterized as the biggest find of oil on land in the United States in 30 years. The president of the company refused to speculate about the size of the find other than to say that it was "significant." The media suggested that it might amount to one billion barrels.

I mentioned this find to my audience and asked them how long they thought one billion barrels would last the world at the current rate of consumption. Guesses ranged from six months to three or four years. The correct answer was 12 days. Naturally, people were astonished and dismayed.

That is why I think it would prove useful for a warning label to come with each public announcement of a large oil or natural gas discovery. I understand that the companies that make these large finds are anxious to emphasize the size of the reservoir since this tends to goose the stock price. And, it is reserves that investors seem to react to, though, as it turns out, reserves are probably the least important factor in deciding whether a find is worth producing. (See my recent piece, "Reserves are bunk" for more on this.)

Now, I don't expect any government agency to issue a regulation requiring a warning label on oil and natural gas discoveries. But the next best thing would be for journalists reporting such finds to put them into perspective using a days of world consumption figure, or if the find is natural gas that will only be marketed domestically, days of domestic consumption. Journalists would also do well to explain that depletion rates for existing oil wells run between 6 and 9 percent and that this depletion must be overcome before any growth in supplies takes place. Providing this context would serve to alert policymakers and the public to the true significance (or insignificance) of each find.

Let's look at how some recent large finds might have appeared with the warning label I suggest:

Date
Description
Type
Recoverable Resource Claimed
Days of World Consumption*
July 2000KashaganOil9 to 16 billion bbls119 to 211
Sept. 2006Gulf of Mexico Lower TertiaryOil3 to 15 billion bbls36 to 178
Nov. 2007Tupi (Brazil Offshore)Oil8 billion bbls94
Sept. 2009Ngassa-2 (Uganda)Oil310 to 710 million bbls4 to 8
Jan. 2010Davy Jones (Gulf of Mexico)Natural Gas2 to 6 tcf32 to 95**
Year End 2008Proven U. S. Shale Gas ReservesNatural Gas32.8 tcf517**
*Based on previous year's consumption   **Days of U.S. domestic consumption, 2008

Keep in mind that I am not quibbling with the recoverable resource estimates. Nevertheless, we should remember that things don't always work out as oil and natural gas production companies would like. Some will say I should include industry estimates of how much shale gas is likely to become available in North America over time. I say that we should wait and see if the industry projections actually work out. Caution should be our watchword when it comes to making public policy based on industry hype that is largely designed to make a company's stock price go up.

This kind of table, though not a perfect tool, would tend to temper the enthusiasm of the public and policymakers for a course that assumes that oil and natural gas will remain abundant for decades to come. If we want to create a robust society that will weather the inevitable energy transition away from fossil fuels, we might start by looking squarely at what recent large discoveries actually amount to. And, we should proceed, as I suggested in a recent piece, to make our society forecast-proof insofar as fossil fuels are concerned. In short, to paraphrase the current chief economist of the International Energy Agency, we should leave fossil fuels before they leave us.

Wednesday, January 20, 2010

Biophysical economics: Putting energy at the center

My latest column on Scitizen entitled "Biophysical Economics: Putting Energy at the Center" has now been posted. Here is the teaser:

Many scientists have long complained that standard economics fails to account for the biological and physical systems that form the basis of the economy. In short, the economy is a subset of the environment and governed by the same biological and physical laws as every other system on the planet....Read more

Sunday, January 17, 2010

Useful work versus useless toil revisited

It was the contention of William Morris, the great progenitor of the modern arts and crafts movement and the historic preservation movement, that the signal qualities of industrial society are waste and useless toil. One hundred and twenty-six years after Morris gave a lecture entitled "Useful work versus useless toil" to a group of workingmen in London, little has changed except perhaps that the amount of waste and useless toil has grown exponentially.

The waste, of course, is obvious: wasteful consumption (tied neither to survival nor beauty but rather status); planned obsolescence as an industrial principle (which helps create repeat sales as well as ever higher mountains in our landfills); and profligate energy use which exhausts finite sources of energy such as fossil fuels.

Useless toil refers to all those tasks which either produce nothing of value for society (even if they enrich some individuals) or which actually detract from the overall public good. Morris had a nascent environmental awareness and decried the destruction of the landscape caused by industrialism in England.

Today, some of Morris's themes may seem passé. He champions shorter working hours so that people can not only rest but also have adequate leisure to enjoy their lives. He thinks work ought to be on the whole pleasurable, that human beings want to work and make things of value and beauty. And, he wants working conditions to be not merely tolerable, but actually pleasant and enticing.

Some of the world's leading companies have striven to make work as Morris had envisioned it a reality. But perhaps the most questionable aspect of modern work is what it produces. Craft was at the core of Morris's philosophy, and so the mass consumerism made possible by industrial production has created a world that is an anathema to Morris's notions of usefulness and beauty. And, it has condemned countless millions of industrial workers in so-called developing countries to live in conditions not far removed from those suffered by the English working class in the 19th century. Think Charles Dickens' Oliver Twist and Friedrich Engels' The Condition of the Working Class in England in 1844, the latter a truly grim accounting.

Another important indictment would be that against the so-called FIRE economy, that is finance, insurance and real estate. Morris would consider these functions parasitic on the true productive output of the economy. He might have advised keeping such functions to a minimum, more like public utilities than central players in the economy. And, the great mass of jobs involving sales, marketing, advertising, public relations, consulting, legal work, accounting and the broad array of desk jobs necessary for any large industrial concern--the jobs we tell college students to prepare for--would also be considered parasitic on the system. Morris would consider practically all the work in these occupations useless toil, no matter how pleasant the working conditions or how good the pay.

How then to run a complex, modern industrial society along principles conceived by Morris? The simple answer is you can't. But in a society beset by the problems of peaking fossil fuels, climate change, deforestation, depletion of water, destruction of fisheries, and erosion of farmland, Morris sounds like a person in the vanguard of the sustainability movement. Even more famous during his life for his novels than for his tapestries and stained glass work, Morris described the kind of society he deemed consistent with his principles in a utopian novel entitled News from Nowhere.

News from Nowhere describes a highly decentralized craft- and agricultural-based society of small towns and villages, one with democratic governance and equality of the sexes. Using the trope of a man visiting the future--200 years into the future to be precise--we get not only a description of the current conditions, but also a history of how the world evolved to that point.

News from Nowhere is not a literary masterpiece. But it offers a useful look into the mind of a man who thought deeply about the relationship between the way we organize the economy and the way we structure society. And, he offered a radical vision that sounds very much like the radical vision of those now proposing the relocalization of human society in response to the myriad challenges we face to our very survival as a species.

For Morris two guiding principles undergirded his social thinking: 1) Nature ought to be the aesthetic guide for society, and 2) pleasure in labor is a necessary condition for the creation of beauty. These principles are not a bad place to start if you are trying to remake all of society. They focus us on nature as we must, and they provide the basis for an appealing vision of a low-energy society that provides high satisfaction for its members.

Sunday, January 10, 2010

Making society forecast-proof

The trouble with forecasts is that they are almost always wrong. That's in part because the accuracy of forecasts deteriorates rapidly with time. I might predict quite well what I will be doing tomorrow. But predicting accurately what I will be doing exactly one year from today or exactly 10 years from today is exceedingly difficult if not impossible, even if I already have something planned.

How much harder it is then to predict the state of complex systems such as the world's energy delivery systems 10, 20 or 30 years hence. There are many factors that make such predictions hard including:

  • the inaccessibility of audited data such as oil and natural gas reserves for many of the largest producing countries in the world
  • the uncertainties about future discoveries
  • the uncertainties over the rate of depletion for fossil fuels
  • the uncertainties concerning future technological advances in extraction and energy efficiency
  • the growth and viability of alternative fuels
  • and the future course of energy prices and the world economy just to name a few.

And yet, we have premised our entire future on business-as-usual forecasts made by leading energy consulting firms and government agencies. Strangely, some of these forecasts come without even the slightest hint about how unreliable they may be. A forecast from the highly influential energy consulting firm Cambridge Energy Research Associates tells us we have precisely 3.74 trillion barrels of remaining recoverable oil in the world. It concludes that a peak in world oil production is still at least 20 years off and is to be followed by an "undulating plateau that may well last for decades." Neither a range nor an error bar can be found in this forecast.

Because such forecasts have been embedded in public policy and business planning worldwide, we have made our entire global society dependent on getting these forecasts right. If they turn out to be too optimistic, then we could all be in for serious trouble. Since long-term energy forecasts--and really any long-term forecasts--are difficult if not impossible to get right, perhaps we should consider making society forecast-proof insofar as that is possible.

When it comes to energy supply, the surest way to make that happen would be to power society with 1) solar energy and its derivatives including wind, waves, and biomass, 2) energy derived from gravity such as tidal power and 3) hydroelectricity which is made possible by gravity and the water cycle. These sources fall under the heading of renewable energy, of course, and it more a scientific fact than a forecast that the sun will burn for a few more billion years and that the force of gravity will be with us indefinitely.

A global society powered in this manner would be immune to any forecasts about future supplies of fossil fuels, be they pronouncements of plenty or warnings of imminent supply shocks. Yes, the future of the petrochemical industry might be at stake, and given the current nexus between agriculture, oil and natural gas, this is no small issue. But if food production were also made independent of fossil fuels, then we would create an even more resilient society. (Such a move might mean many more people would be involved in growing food in such places as their yards, community gardens, and unused urban, suburban, and rural lands. But again, the upside would be an agriculture freed from the dangers inherent in fossil fuel supply forecasts.)

Naturally, the industries and interests which benefit from the world's addiction to fossil fuels would not be in favor of such a society. And, that is why they entertain us with their frequent forecasts of fossil fuel abundance far into the mists of the distant future.

If we were to attempt to make all major activities in global society less exposed to forecasting errors, many of those who currently make their living producing essentially defective forecasts would lose their jobs. No doubt they would forecast a tremendous cataclysm if this were to occur.

Forecasts may, in fact, be desirable in many parts of our lives. We like to know what the weather will be today and tomorrow and perhaps for the week. We seem to have an appetite for the weather report regardless of how many times it is in error. Companies need to project what their prospects will be before they attempt a new venture, release a new product or enter a new market. In each case the forecast a company makes may be right or wrong, but a wrong forecast won't bring down all of society!

And, that is my central point. I am not suggesting that we somehow eliminate forecasting. Rather I am proposing that we structure our lives and society so as to make forecasts largely irrelevant. A resilient, robust society would be one that is not dependent on finite, nonrenewable energy sources. It should be highly decentralized, diverse, redundant and mostly small in scale in its critical functions such as the procurement of energy and food.

Under these conditions forecasting would be far less critical, and errors in forecasting would be far less likely to lead to a civilization-wide catastrophe. This is true for two reasons. First, the energy sources for such a society could not suffer depletion. Second, due to the highly decentralized nature of such a society, parts of it could fail without bringing down the entirety of global civilization. Naturally, there should be arrangements for mutual aid when catastrophes occur. But that aid would be much more assured in a system where most of the parts of the system survive and thrive even in the face of a localized tragedy.

Making society forecast-proof doesn't assure us that no problems will arise. It only helps us to keep those problems smaller, more localized and therefore much more manageable when they do arise. This may one day be seen as a virtue in a world experiencing ongoing global financial turmoil borne of the excessive size of financial institutions and the excessive concentration of risk in them, risk that was poorly understood and therefore poorly forecast.

A simpler, more robust world is possible, and we would be wise to choose it before that simplification is forced upon us by circumstances that we may find exceedingly unpleasant.
_____________________________________________________________

The inspiration for this piece was a presentation featuring Nassim Nicholas Taleb, author of The Black Swan, who now seems to be on a mission to make the world safe from forecasters. He discusses his views alongside Daniel Kahneman, a Princeton psychologist who has studied economic behavior and found it to be far different from what neoclassical economics predicts. Kahneman received the Nobel Prize in economics for his work.

The discussion between these two men focuses primarily on the fragility of the current global financial system and how to make it more robust. It is a stimulating hour of listening.

Listeners might want to consider one obvious implication of Taleb's conclusions. The value of one's investment and/or retirement portfolio is entirely dependent on frequent accurate forecasts from today up to the date of planned liquidation. Should nonprofessionals be risking their savings in this way?

                                                                                               --KC

Sunday, January 03, 2010

The problem of induction and the blindness of fools

The problem with the future is that it's not always like the past. In fact, were this statement not true, history would indeed be "bunk" just as Henry Ford once said. But, of course, history is a chronicle of what changed and therefore led to a future that was different from the past.

So, it is puzzling that such an obvious truism is so easily dismissed when it comes to the future of oil and energy in general. Enter one Porter Stansberry, an investment newsletter writer, who knows that "peak oil is an economic impossibility." In the linked interview he likens oil to copper. We have found substitutes for copper, namely optical fiber, so we will certainly find substitutes for oil in the quantities we need at the time we need them. He insists though that we won't need them for a very long time.

Stansberry is correct when he states that "[i]t does not naturally follow that a limited supply of oil would limit our production of energy." There are certainly many other known ways to extract energy from the environment. Perhaps some of them such as widespread deployment of thorium-based molten salt reactors might validate Stansberry's observation. But then he states:

The idea that we would lose the ability to create energy in an economic way, in my mind, is absurd. The entire history of the human population is nothing but falling prices for valuable commodities-not measured in dollars, but measured in real terms. I have no doubt in my mind that by the time I'm dead the price of energy in real terms will be far less than it is today.

Here he makes sweeping general statements about the past. It is not true that commodity prices have been falling in real terms for all of human history. There have been sustained bouts of rising prices. It is true that real prices for many commodities have been on a roughly downward trajectory from the beginning of the industrial revolution. This is in part due to the rising availability of cheap fossil fuel energy used to obtain those commodities, whether it is metal from ever lower grades of ore or rising farm productivity largely abetted by fossil fuel inputs such as nitrogen fertilizer from natural gas and pesticides and herbicides from petrochemicals.

So, in one respect Stansberry's analysis suffers from failing to distinguish between sources of energy such as fossil fuels and materials which do not provide energy such as copper. Fossil fuels, our main sources of energy, are the prime movers in the industrial economy. We cannot simply substitute some other materials for them without careful discernment. There are many factors to consider such as energy density, portability, energy return on investment, the requirements of the existing infrastructure and so on.

Still, Stansberry may be right in what he asserts about the future or he may be wrong. But one thing he cannot be is certain. It is a truism that no one can prove anything about the future. So, we often choose to extrapolate current trends. This is what Stansberry does, and it is where he moves from logic to mere supposition. Stansberry, like so many of us, falls into the trap of the problem of induction.

The problem of induction is simple to illustrate. Whenever we notice a recurring pattern in events, we often assume that that pattern will persist, and we sometimes make unwarranted claims usually in the form of a general rule:

Karl Popper (1902- 94) was critical of the inductive methods used by science. The empiricist David Hume (1711-76) had argued that there were serious logical problems with induction. All inductive evidence is limited: we do not observe the universe at all times and in all places. We are not justified therefore in making a general rule from this observation of particulars. Popper gives the following example. Europeans for thousands of years had observed millions of white swans. Using inductive evidence, we could come up with the theory that all swans are white. However exploration of Australasia introduced Europeans to black swans. Poppers' point is this: no matter how many observations are made which confirm a theory there is always the possibility that a future observation could refute it. Induction cannot yield certainty.

And, yet on something as important as energy policy, people with the views exemplified by Stansberry hold sway. They do not accept that their view could be in error. To do so would imply a much different energy policy than the one which most countries are now following. Most policymakers stick to Stansberry's view even though there is considerable evidence that fossil fuel production, particularly oil, may begin to decline soon. And, they seem not to understand that existing alternatives suffer from problems of scalability and energy density and face the all important rate-of-conversion problem.

But, one does not have to know anything with certainty in order to decide on policy. In fact, policy is always based on incomplete information about the past and guesses about the future. What policymaking requires, especially in critical areas such as future energy supply, is humility and therefore caution. The amount of caution required depends on the plausible dangers we face. The range of possible outcomes for oil production five, 10, even 20 years hence is so wide as to require excessive caution when planning the world's collective energy policies.

If the optimists such as Stansberry are correct, then policies suggested by that excessive caution will have put global society on a sound road to an alternative energy economy. That would reserve much of the remaining hydrocarbons for high-value uses such as fertilizers, plastics and pharmaceuticals rather than mere burning. If the optimists are wrong, then such policies will be the difference between stability and chaos, between life and death, for the billions that inhabit the Earth.

These are the consequences that might result from the blindness of fools who do not understand basic logic. And, we cannot count on nature to suffer such fools gladly.