The Role of Energy in Economic Growth
Posted by nate hagens on October 19 2011 – 10:58am
Topic: Economics/Finance
Tags: economic growth energy use gdp [list all tags]
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Ecological economist David Stern recently wrote a paper on the importance of energy for economic growth aptly titled ‘The Role of Energy in Economic Growth’. His overview paper follows a long chain of biophysical research on this topic from Schumpeter in the 50s to Georgescu-Roegen in the 70s to Herman Daly Charles Hall Cutler Cleveland etc. in the present day. This type of thinking – that energy is its own special input to the production function and is non-substitutable (we can’t make stuff without energy) is still outside of mainstream economic discourse who follow the classic exogenous growth model (Solow) where labor and capital are all that matter. But if energy is special and has declining marginal returns (i.e. fossil fuel depletion) that has enormous implications for future growth prospects and the modus operandi for our institutions. Yet it is still widely assumed in economic/financial circles that energy is just the same as other commodity inputs and that a high enough price will create its own energy supply in perpetuity.