Turning Point – Robert Ayres (1998)

Turning Point - Ayres

Robert Ayres‘s 1998 book Turning Point covers a whole lot of ground, but focuses on the idea of economic growth; what drives it, where it takes us, etc.  What I found particularly interesting was that he places a pretty strong emphasis on the availability of cheap energy (fossil fuel) as an important factor in growth (and I definitely agree), which goes counter to most economic lore that somehow imagines energy as a product of capital and labor.

While I don’t have time to cover all the interesting bits of the book, and I’m not quite sure how the ‘economics establishment’ reacts to all of it, I’ll point out one argument that I think is excellent:

As I have noted earlier, mainstream economics tends to adopt an extremely optimistic stance in regard to questions of resource availability.  That is, it is an article of faith that, if any one material becomes scarce, another can be found to take its place at little if any increase in cost.  But, surprisingly and inconsistently, many of the same people who are optimistic about resource availability and cost become pessimists when it comes to whether there are technological opportunities to grow the economy and reduce environmental stress at the same time.  The standard argument is phrased like this: ‘If such opportunities really did exist, some entrepreneur would soon come along and take advantage of the opportunity to make money.’ (p. 159)

I think this is a great point.  We have to remember that every new idea, while it make look obvious in hindsight, takes time and effort and commitment and vision to implement, and the possibilities out there are virtually endless.

Ayres has a background in physics, which gives him a different view than standard economics.  Another line from the book: “The possibility of de-linking economic activity from energy and materials (“dematerialization”) has been one of the major themes of my professional career.”

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Comments

  • Jim  On September 17, 2007 at 2:00 pm

    Hope you keep blogging while away!

    Re: your quote above:

    1. The first two sentences are MACRO-economic statements, it seems to me. It is easy to be optomistic at this level – and often correct.

    2. The balance of the paragraph is a MICRO-economic statement, and there are many reasons to be pessimistic at this level.

    I would suggest nuclear power plants as an example of why economists are pessimists: I suggest that “entrepreneurs” were ready to pursue this technology and make a lot of money but were interfered with by false visions of environmentalists and a pandering government. Why doesn’t the U.S. have as high a percentage of their power coming from nuclear power plants as France does?

    Finally, your quote in the last paragraph makes no sense to me: economic activity primarily involves “material”, which requires “energy”! I think he is wasting his time to have his major theme as “de-materialization”. Or do I not understand what he means by this?

  • Curt  On September 18, 2007 at 2:56 am

    It’s true that he moves from a macro description to the micro, but then again what is the macro if not an agglomeration of all the micro events?

    In the case of materials substitution, I think it has been correct to be optimistic because in most areas entrepreneurs have been able to make independent efforts to (1) shift to alternate materials in their products or (2) search out and produce new raw materials for use, based on price signals. So the micro events enable the macro view.

    I’d say it’s likewise for the second part. I am optimistic that independent efforts by entrepreneurs can go into all sorts of previously uncharted territory – and some will be successful at creating new production methods, etc. that are less demanding on the environment. It’s already happening on a small scale in many areas. I don’t see why anyone, particularly an economist, would be pessimistic about what is potentially possible through human creativity).

    While nuclear energy is an interesting case study, I’m not sure it’s very appropriate in this context of entrepreneurialism, since the field was created and funded through massive government spending, and has always had big subsidies and big barriers to entry.

    On dematerialization, of course some economic things are always about materials and energy. But his point is that for many things we buy, especially in the more developed countries, we may be able to think of the thing in terms of the underlying service rather than the material. As examples – is it the physical newspaper we care about, or the news? do we really want to buy computers or do we just want the services they offer? Thinking about online news and software companies like Salesforce.com, we see that it’s possible to buy the service without the material (obviously energy is still needed). Another example is a carpet company that shifted to leasing the ‘carpet services’ rather than selling the carpet, and they then take the material back after it’s used for some time. It’s interesting to think about how far this concept extends, and into what areas…

  • Jim  On September 19, 2007 at 1:15 pm

    Your first paragraph is true, but a non sequitur re my comments.

    I agree with your second paragraph and this is what causes optimism among economists.

    On your third paragraph, these entrepreneurs are doing these things to make money – certainly they would not do them if they lose money. As with you, economists are not pessimistic because it can’t happen, just that the level of entrepreneurs may not have a significant effect, or they may be intefered with. Reasonable pessimism is sometimes a positive thing.

    My illustration was to show how Government interference can stifle a environmental activity. I was not commenting on the development of the source of positive environmental activity. Perhps there is a better example. I hope you agree that our Government could interfere with any entrepreneurial acivity.

    Your final paragraph appears to me to be the “ostrich” approach to material. Does it not take material at some level to acquire news if you dispose of your newspaper (computer, pda, phone)? Did the carpet company not purchase the carpet? I think you are talking about shifting the material, not eliminating it.

    I stand by my comment: dematerialization is a waste of Mr. Ayres time!

  • Curt  On September 19, 2007 at 6:29 pm

    Yes, surely it’s true that some areas of activity may be (or will be) restricted by government action or other reasons (sometimes warranted, sometimes not), which prevents some benefits from ever occuring.

    But what I was objecting to was a pessimism based on the idea that ‘if it was a good idea, it would have already been done’ which seems to still be alive among some economists, I think due a reliance on the idea of equilibrium (useful in economic math, but not a very good model of reality in my opinion). It’s like the joke about the economist who says to the person who finds $20, “Nonsense. If there were a twenty dollar bill on the street, someone would have picked it up already.”

    Let’s remember that many new ideas do strike many people as a bit outlandish (and many of them no doubt are!), but it’s out of those ideas that startling changes are borne. So of course you are free to find the idea of ‘dematerialization’ to be a waste of time, and I understand your point, that frequently materials use is shifted rather than eliminated. But I know that some entrepreneurs are coming up with new business models based on the ideas of selling the service rather than selling ‘stuff’.

    In any case, I think it’s worth thinking about the use of materials in the economy, where they come from and where they end up, and no doubt rising commodity prices will force economic changes.

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