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02/11/2013

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Alexander Ač

Dave,

I think your observation is correct. It is also 100% given that "efficiency happy story" will be pushed be all kinds of propaganda for a long time... just as Germany is touted as "green-hero (follow-US) economy" in Europe these days by few confused environmentalists and politicians alike...

Alex

Oliver

Dave, many thanks for the explication. I am ill-equipped to fully understand the true vs. fictional functionality of these graphs, mostly because I have managed at long last to cleanse my mind of the filthy pollution I ingested studying Economics several eons ago. So I can only make a general observation regarding the proclamation of fantasy GDP figures by so-called officials.

Here goes. When a prostitute passes her prime, she can only hang on to her profession by ladling on more and more make-up.

I sincerely apologize to prostitutes for conflating them with government officials.

Alexander Ač

Also small comment - apart from declining energy consumption, there was also increasing shale oil/gas production with relatively low EROEI, so the NET energy picture is a bit worse than shown... but I think everybody here understands that,

Alex

Jim

Hi Dave,

Firstly, thank you. This is stuff you just can't find these days. You correctly inferred that I am new to your blog, but I also believe sources like this should be supported. I'll be donating this week.

I do think the recent divergence can be largely explained by governmental spending, but I also suspect we've greatly exceeded what we normally would have achieved in GDP since 1980 because of the combination of public and private debt. On the IER chart, look at the growth rate from WWII to 1985, look at the rise from 1985 to now, and compare it to charts of public and private debt during those periods. It is literally stealing from the future.

I'm looking forward to the energy efficiency debunk. Thanks again.

xavier durant

There is a simple and obvious explanation IMO. All energy consumption is not related to GDP. Some energy consumption is frivolous and produces nothing. I'm thinking of recreational driving, heating homes warmer than needed and driving a gas guzzler SUV or empty pickup.

Evidently the U.S. has reduced some of this kind of nonsense. The result is entirely consistent with the chart. Some of the saved energy went to increase GDP and the remainder reduced overall energy consumption.

Simple really.

Dave Cohen

@xavier

You simply made that nonsense up off the top of your head, just before and as you were typing your comment, right?

And you don't have a shred of evidence to back it up. And there's 165 years of data which shows you are wrong. But you don't need any evidence, do you?

And you didn't really care what I wrote, am I right?

I am issuing a Monkey With A Keyboard alert.

-- Dave

Alexander Ač

Xavier,

"All energy consumption is not related to GDP." - yes, it is, since GDP by definition *IS* consumption (spending of money). *Saved* energy cannot go into GDP, precisely because it is saved. If you have money on your account, and do not spend them, they are not contributing to GDP... (if your money in bank is not used for some kind of ponzi-scheme, of course...)

Alex

Jim

Oof. There is something wrong, though. Compare the dates on on the Bloomberg chart to the IER chart. The IER chart only goes to 2001 - why does it show the same divergence as 2010 on the Bloomberg chart?

Jim

I see it. It's a combination of things. The IER chart counts wood, but shows it dropping to zero in 2001 - that explains a large part of the energy drop. It's possible the just stopped counting it as an energy source that year. The two charts look so much the same because the Bloomberg chart compresses the GDP (both measured a real instead of nominal) scale - it goes to 14 instead of 10. And 2001, even though it had a recession in the middle of the year, technically grew in GDP by a tiny fraction for the year as a whole. Sorry for the multiple comments, will try to avoid.

JohnWDB

@Xavier,
A couple of points.

1) While certain complex things may seem conceptually simple once they are understood, never mistake your perceived simplicity as evidence you understand them. It doesn't work both ways. One can't solve a problem simply by declaring it to be facile. Be especially wary of this when you have done minimal research. Also look up "The Dunning Kruger Effect" to understand why we tend to think we understand things that we don't.

2) We can see from your comment that you don't understand what GDP is. It isn't "productivity"; it is spending. Do some background reading. GDP doesn't care whether spending is wasteful or not, it only measures spending, and the more spending, the higher the GDP. Frugality/prudence/saving will always lower GDP, all things equal. That doesn't mean frugality is bad; quite the opposite--it is essential. What it does mean is that your explanation, though hopeful, cannot be correct.

Mike Roberts

The disconnect has certainly been marked in the last few years, for the reasons you mention, but I think the divergence started in the early to mid-eighties, from looking at how the correlation shifted then. If I recall correctly, that's roughly the time that you think the empire's decline started. Seems about right. It would be interesting to see a time line of when various fiddles were added to both the inflation calculation and the GDP calculation, and perhaps an adjusted GDP line. I don't know if ShadowStats has it right, but their chart of GDP growth (GDP data requires subscription) since 1980 seems to gel with the divergence.

Makati1

GDP is increased when you get divorced, die, have a child, pay a prostitute, get married, total your car, buy a gun, etc. If money is involved, it increases GDP. (No, your house being underwater does not decrease GDP. That was money already spent and the sale will only incur more money changing hands.)

Cab

I don't see that 165 years of prior history is 'proof' that energy consumption is, and always will be, tied to GDP. We live in strange times where software is replacing real hardware and young people would rather spend their evenings typing at keyboards than 'cruising in T Birds' (or whatever they used to do in the US - I'm from the UK). If the entire population gradually shifts to eschewing travel in favour of Skyping, and spends its entire existence in small apartments living off vitamin pills (who says it can't happen?), I would expect energy consumption to drop, but I would also expect to see a re-definition of money and what it can buy. In nominal terms GDP could well grow, but what the tokens were being spent on would be different from the old days. As an example, I understand that these days, real money is actually spent on virtual goods by people 'living' in virtual worlds, eating only processed food cooked in microwave ovens. Anything is possible.

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