Useful work growth theory
Encyclopedia
The Useful work growth theory, also called the Ayres-Warr model, states that physical and chemical work
performed by energy, or more correctly exergy
, has historically been the most important driver of economic growth. See: Robert Ayres
Support for this theory is a mathematical model showing that the efficiency of conversion of primary energy (exergy) into useful work (for example, mechanical drive, heat and light) is a good proxy for the Solow residual
, or technological progress, that is, the portion of productivity growth that is not attributable to measurable inputs such as capital or labor and materials.
Useful work is an extension of neo-classical models that use a production function with output a expressed as a factor capital, labor and technological progress. Importantly the theory predicts slowing of and the eventual end to economic growth as energy conversion efficiency approaches thermodynamic limits while at the same time resource depletion requires more useful work for extraction and processing of resources.
Ayres-Warr (2009) compares the workings of the economy to a process for extracting, processing and transporting large quantities of materials. The authors also criticize orthodox economics for neglecting the role non renewable natural resources.
in the development of the useful work theory. See also: Thermoeconomics
The importance of power to the economy motivated James Watt
, but it was famously stated by his business partner Matthew Boulton
, who in a reply made in 1776 to James Boswell said:
The first serious economic treatment of energy was by William Stanley Jevons
was presented in The Coal Question
(1865), the premier work on non renewable resource depletion, in which he says:
Jevons observed that improvements in steam engine efficiency increased the usage of coal as cheaper power resulted in more power being used. This is known as the Jevons paradox
.
In 1891 David Ames Wells
, an authority on manufacturing in the late 19th century, commented on the several fold increase in the number of steam engines from 1850 to 1870 that resulted from improvements in efficiency. Wells also remarked that compound steam engines allowed ocean going ships to carry less coal than freight, greatly increasing the volume of shipping.
that "energy efficiency improvements that, on the broadest considerations, are economically justified at the microlevel, lead to higher levels of energy consumption at the macrolevel."
Mathematically, the Khazzoom-Brookes postulate treats economic output as a function of capital, labor and energy.
A slowdown in productivity growth occurred in the 1970s. In addition to thermodynamic limits previously mentioned, this can be attributed to the saturation of the great labor saving innovations, such as agricultural mechanization and mass production, whose greatest gains are in the past. The amount of labor remaining in processes is a small fraction of what has already been saved.
Application of the logistic function
to economic processes, such as substitution, was popularized by the Institute of Applied Systems Analysis (IIASA)
most notably by Cesare Marchetti.
Work (thermodynamics)
In thermodynamics, work performed by a system is the energy transferred to another system that is measured by the external generalized mechanical constraints on the system. As such, thermodynamic work is a generalization of the concept of mechanical work in mechanics. Thermodynamic work encompasses...
performed by energy, or more correctly exergy
Exergy
In thermodynamics, the exergy of a system is the maximum useful work possible during a process that brings the system into equilibrium with a heat reservoir. When the surroundings are the reservoir, exergy is the potential of a system to cause a change as it achieves equilibrium with its...
, has historically been the most important driver of economic growth. See: Robert Ayres
Support for this theory is a mathematical model showing that the efficiency of conversion of primary energy (exergy) into useful work (for example, mechanical drive, heat and light) is a good proxy for the Solow residual
Solow residual
The Solow residual is a number describing empirical productivity growth in an economy from year to year and decade to decade. Robert Solow defined rising productivity as rising output with constant capital and labor input...
, or technological progress, that is, the portion of productivity growth that is not attributable to measurable inputs such as capital or labor and materials.
Useful work is an extension of neo-classical models that use a production function with output a expressed as a factor capital, labor and technological progress. Importantly the theory predicts slowing of and the eventual end to economic growth as energy conversion efficiency approaches thermodynamic limits while at the same time resource depletion requires more useful work for extraction and processing of resources.
Ayres-Warr (2009) compares the workings of the economy to a process for extracting, processing and transporting large quantities of materials. The authors also criticize orthodox economics for neglecting the role non renewable natural resources.
Origins of the useful work theory
In Accounting for Growth:The Role of Physical Work Ayres and Warr refer to the work of Nicholas Georgescu-RoegenNicholas Georgescu-Roegen
Nicholas Georgescu-Roegen, born Nicolae Georgescu was a Romanian mathematician, statistician and economist, best known for his 1971 magnum opus The Entropy Law and the Economic Process, which situated the view that the second law of thermodynamics, i.e., that usable "free energy" tends to disperse...
in the development of the useful work theory. See also: Thermoeconomics
Thermoeconomics
Thermoeconomics, also referred to as biophysical economics, is a school of heterodox economics that applies the laws of thermodynamics to economic theory. The term "thermoeconomics" was coined in 1962 by American engineer Myron Tribus, and developed by the statistician and economist Nicholas...
The importance of power to the economy motivated James Watt
James Watt
James Watt, FRS, FRSE was a Scottish inventor and mechanical engineer whose improvements to the Newcomen steam engine were fundamental to the changes brought by the Industrial Revolution in both his native Great Britain and the rest of the world.While working as an instrument maker at the...
, but it was famously stated by his business partner Matthew Boulton
Matthew Boulton
Matthew Boulton, FRS was an English manufacturer and business partner of Scottish engineer James Watt. In the final quarter of the 18th century the partnership installed hundreds of Boulton & Watt steam engines, which were a great advance on the state of the art, making possible the...
, who in a reply made in 1776 to James Boswell said:
“I sell here Sir, what the world desires to have, power!”
The first serious economic treatment of energy was by William Stanley Jevons
William Stanley Jevons
William Stanley Jevons was a British economist and logician.Irving Fisher described his book The Theory of Political Economy as beginning the mathematical method in economics. It made the case that economics as a science concerned with quantities is necessarily mathematical...
was presented in The Coal Question
The Coal Question
The Coal Question; An Inquiry Concerning the Progress of the Nation, and the Probable Exhaustion of Our Coal Mines was a book by economist William Stanley Jevons that explored the implications of Britain's reliance on coal. Given that coal was a finite, non-renewable energy resource, Jevons raised...
(1865), the premier work on non renewable resource depletion, in which he says:
"Coal in truth stands not beside but entirely above all other commodities. It is the material energy of the country — the universal aid — the factor in everything we do. With coal almost any feat is possible or easy; without it we are thrown back into the laborious poverty of early times. With such facts familiarly before us, it can be no matter of surprise that year by year we make larger draughts upon a material of such myriad qualities — of such miraculous powers."
"...new applications of coal are of an unlimited character. In the command of force, molecular and mechanical, we have the key to all the infinite varieties of change in place or kind of which nature is capable. No chemical or mechanical operation, perhaps, is quite impossible to us, and invention consists in discovering those which are useful and commercially practicable...."
Jevons observed that improvements in steam engine efficiency increased the usage of coal as cheaper power resulted in more power being used. This is known as the Jevons paradox
Jevons paradox
In economics, the Jevons paradox is the proposition that technological progress that increases the efficiency with which a resource is used, tends to increase the rate of consumption of that resource...
.
In 1891 David Ames Wells
David Ames Wells
David Ames Wells was an American engineer, textbook author, economist and advocate of low tariffs.-Biography:...
, an authority on manufacturing in the late 19th century, commented on the several fold increase in the number of steam engines from 1850 to 1870 that resulted from improvements in efficiency. Wells also remarked that compound steam engines allowed ocean going ships to carry less coal than freight, greatly increasing the volume of shipping.
Khazzoom-Brookes postulate
A modern reformulation of the Jevons paradox is the Khazzoom-Brookes postulate, which statesthat "energy efficiency improvements that, on the broadest considerations, are economically justified at the microlevel, lead to higher levels of energy consumption at the macrolevel."
Mathematically, the Khazzoom-Brookes postulate treats economic output as a function of capital, labor and energy.
Useful work improves model
Useful work is an improvement over earlier mathematical treatments in that in addition to output being deterimied by capital, labor, materials and energy, useful work, that is, energy times conversion efficiency, is used instead of energy. This greatly improves the model and is more consistent with Jevons paradox and the historical economy.The logistic function and the exhaustion of growth opportunities
Ayres-Warr and separately Vaclav Smil have presented several examples of important processes that have been continuously improved to the point they are approaching thermodynamic limits.A slowdown in productivity growth occurred in the 1970s. In addition to thermodynamic limits previously mentioned, this can be attributed to the saturation of the great labor saving innovations, such as agricultural mechanization and mass production, whose greatest gains are in the past. The amount of labor remaining in processes is a small fraction of what has already been saved.
Application of the logistic function
Logistic function
A logistic function or logistic curve is a common sigmoid curve, given its name in 1844 or 1845 by Pierre François Verhulst who studied it in relation to population growth. It can model the "S-shaped" curve of growth of some population P...
to economic processes, such as substitution, was popularized by the Institute of Applied Systems Analysis (IIASA)
IIASA
The International Institute for Applied Systems Analysis is an international research organization located in Laxenburg, near Vienna, in Austria. IIASA conducts interdisciplinary scientific studies on environmental, economic, technological and social issues in the context of human dimensions of...
most notably by Cesare Marchetti.
See also
- Productivity improving technologies (historical)Productivity improving technologies (historical)Productivity improving technologies date back to antiquity, with rather slow progress until the late Middle Ages. Technological progress was aided by literacy and the diffusion of knowledge that accelerated after the spinning wheel spread to Western Europe in the 13th century...
- Energy returned on energy invested