ourfiniteworld | How does the economy really work? In my view, there are many
erroneous theories in published literature. I have been investigating
this topic and have come to the conclusion that both energy and debt
play an extremely important role in an economic system. Once energy
supply and other aspects of the economy start hitting diminishing
returns, there is a serious chance that a debt implosion will bring the
whole system down.
In this post, I will look at the first piece of this story, relating
to how the economy is tied to energy, and how the leveraging impact of
cheap energy creates economic growth. In order for economic growth to
occur, the wages of workers need to go farther and farther in buying
goods and services. Low-priced energy products are far more effective in
producing this situation than high-priced energy products. Substituting
high-priced energy products for low-priced energy products can be
expected to lead to lower economic growth.
Trying to tackle this topic is a daunting task. The subject crosses
many fields of study, including anthropology, ecology, systems analysis,
economics, and physics of a thermodynamically open system. It also
involves reaching limits in a finite world. Most researchers have
tackled the subject without understanding the many issues involved. I
hope my analysis can shed some light on the subject.
