For the past 150 years, economics has been treated as a social science in which economies are modeled as a circular flow of income between producers and consumers. In this “perpetual motion” of interactions between firms that produce and households that consume, little or no accounting is given of the flow of energy and materials from the environment and back again. In the standard economic model, energy and matter are completely recycled in these transactions, and economic activity is seemingly exempt from the Second Law of Thermodynamics. As we enter the second half of the age of oil, and as energy supplies and the environmental impacts of energy production and consumption become major issues on the world stage, this exemption appears illusory at best. In Energy and the Wealth of Nations, concepts such as energy return on investment (EROI) provide powerful insights into the real balance sheets that drive our “petroleum economy.” Hall and Klitgaard explore the relation between energy and the wealth explosion of the 20th century, the failure of markets to recognize or efficiently allocate diminishing resources, the economic consequences of peak oil, the EROI for finding and exploiting new oil fields, and whether alternative energy technologies such as wind and solar power meet the minimum EROI requirements needed to run our society as we know it. This book is an essential read for all scientists and economists who have recognized the urgent need for a more scientific, unified approach to economics in an energy-constrained world, and serves as an ideal teaching text for the growing number of courses, such as the authors’ own, on the role of energy in society.
Energy and the Wealth of Nations
and over one million other books are available for Amazon Kindle. Learn more
 |
| |||||||||||||||
Are you a finance, investing, economics or accounting professional? Find books, read blog posts, and discover new authors and thought-leaders in Money & Markets, a new home for finance industry professionals on Amazon.com. > Shop now |
Book Description
Frequently Bought Together
Editorial Reviews
Review
From the reviews: “This is an important book. It should also prove of use to many involved with energy-related issues, and to students … . main strength and argument of the book is indicated by its sub-title. … the importance of energy as a factor of production, its relevance to the rise and fall of past cultures, and the stresses that the provision and use of energy will place upon the world in future are well argued in this book and for that reason it can be recommended.” (Michael Jefferson, Energy Policy, Vol. 42, 2012) “A centrally important book for sustainability educators, upper division and graduate students, and members of the general public who are interested in understanding and addressing some of the fundamental challenges to socio-ecological sustainability. … Faculty and students from multiple disciplinary and interdisciplinary backgrounds will find Energy and the Wealth of Nations to be a highly accessible, informative, well-argued, well-supported, insightful, and important read. … I highly recommend this book principally as a course text but also as a relevant book for anyone interested in sustainability.” (Tina Lynn Evans, Journal of Sustainability Education, March, 2012) “This book should be brought - free of charge - to the attention of NGOs and political leaders worldwide. It is certainly recommended for college students taking courses in sustainability, the environmental sciences, and sustainable engineering. In particular, it is highly recommended for all leaders involved in Earth Day 2012, the International Year of Sustainable Energy for All, and the Rio+20 Conference on Sustainable Development.” (Luis T. Gutiérrez, Mother Pelican – A Journal of Sustainable Human Development, Vol. 8 (3), March, 2012) “It offers such a compelling story about how our world economy is so completely empowered by the ability to find, extract and consume energy. … Energy and the Wealth of Nations is worthwhile read for anyone who is interested in gaining a deeper understanding of the ‘science’ behind economic growth and the critical yet often misunderstood role that energy plays in our world economy. Engineers involved in the electric power industry may be especially interested in the influence of biophysical economic principles … .” (Jim MacInnes, Today's Engineer, June, 2012) “This book on economics is quite readable, addressing many difficulties that the energy world (including renewable energy) faces … . This book is about the economic facts of life, in renewable energy and in the rest of the energy world. The facts presented are quite revealing, and reading the book is a must if you want to understand the past, current and future problems in energy.” (Francis de Winter, Solar Today, March/April, 2012) “This book is focused on energy and economics. This book seems to be aimed as a text book, or at an audience who is already familiar with some of the issues, and wants to dig deeper. … Readers will find that the Energy and the Wealth of Nations contains a wealth of information and a lot of useful references. There is also an extensive index. … Many sections are more historical in nature, or more narrative, and are easy for anyone to understand.” (Our Finite World, April, 2012)
From the Back Cover
For the past 150 years, economics has been treated as a social science in which economies are modeled as a circular flow of income between producers and consumers. In this “perpetual motion” of interactions between firms that produce and households that consume, little or no accounting is given of the flow of energy and materials from the environment and back again. In the standard economic model, energy and matter are completely recycled in these transactions, and economic activity is seemingly exempt from the Second Law of Thermodynamics. As we enter the second half of the age of oil, and as energy supplies and the environmental impacts of energy production and consumption become major issues on the world stage, this exemption appears illusory at best. In Energy and the Wealth of Nations, concepts such as energy return on investment (EROI) provide powerful insights into the real balance sheets that drive our “petroleum economy.” Hall and Klitgaard explore the relation between energy and the wealth explosion of the 20th century, the failure of markets to recognize or efficiently allocate diminishing resources, the economic consequences of peak oil, the EROI for finding and exploiting new oil fields, and whether alternative energy technologies such as wind and solar power meet the minimum EROI requirements needed to run our society as we know it. This book is an essential read for all scientists and economists who have recognized the urgent need for a more scientific, unified approach to economics in an energy-constrained world, and serves as an ideal teaching text for the growing number of courses, such as the authors’ own, on the role of energy in society. Integrates energy and economicsUses predictive tools and measures, such as EROI, to show how the economy is embedded in a biophysical world subject to scientific rules and constraintsProvides a fresh approach to economics for those wondering “What’s next?“ after the Great Recession and the recent increases in oil pricesAssesses energy sources from the perspective of peak oil, the role of alternatives, and potential impacts such as climate change
Product Details
Would you like to update product info or give feedback on images? |
Customer Reviews
Share your thoughts with other customers
Most Helpful Customer Reviews
26 of 26 people found the following review helpful
Format:Hardcover
disclaimer:I am currently a student of Professor Klitgaard. adjust for that bias as needed
Energy and the Wealth of Nations is quite a unique book that analyzes past and current economic history and history of economic thought from the perspective of energy. That is, by analyzing how and what work is preformed in a society. At a center of their analysis is the concept of the Energy Return on Investment. This is defined as "the ratio of energy returned from an energy gathering activity compared to the energy invested in that process" (pg 310). they express this as an equation: EROI=Energy returned to society/energy required to get that energy. although, as they note, "the devil is in the details". This book contains all those details
The strength of this book is the ability of the authors to wrap a very thorough understanding of past economic theory (neoclassical and otherwise) with a very deep understanding of past scientific theory and the science behind the natural world. They explain quite a lot of science and are able to do so in relatively simple terms. Indeed, I learned more science from this book then I've learned from pure Science textbooks, let alone economics textbooks.
More importantly, the authors are able to convincingly show why all this science is relevant. For example in chapter five, "The limits of conventional economics" the authors argue that economic theory, as it is currently constructed, ignores the biophysical laws. the circular flow between consumers and producers that is presented in all economics textbooks makes absolutely no reference to the second law of thermodynamics. it is a model of perpetual motion, where no value is lost to entropy and no input of energy is required. the authors painstakingly go through various scientific disciplines and point out what is ignored by economic theory and reinterpret history on an energy basis.
The authors think that we are entering the "second half of the age of oil" which will be marked my a much lower EROI in oil that may not be able to support continuous economic growth like we've had for the last century or two. The evidence for this position seems overwhelming and hard to deny. what is striking is just how accurate the predictions of earlier natural scientists and natural limit theorists have been (such as M. King Hubbert and the much-maligned limits to growth authors).
The most inspired chapter is chapter 8: "Globalization, Neoliberalism and Energy". Here they analyze the term "efficiency" (and all it's neoclassical implications) and decide to analyze Neoliberal adjustment policies based on the engineering definition of efficiency: energy input/ divided by output. on this basis they do a statistical study of countries where Neoliberal policies are implemented and find no evidence that those policies led to greater efficiency.
The weakest sections are those discussing debt. They make little to no distinction between public, private debt, foreign currency-denominated debt and their explanation that all debt is a "lien on future energy use" is unconvincing to say the least.The authors seem especially interested dollar financial assets accumulated by foreigners but provide no analysis of balance of payments deficits or dynamics. Their explanation of hyperinflation also ignores the balance of payments dynamics involved.
Overall this is a tremendous contribution to economic theory that economics, and the world, ignores at it's peril.
Energy and the Wealth of Nations is quite a unique book that analyzes past and current economic history and history of economic thought from the perspective of energy. That is, by analyzing how and what work is preformed in a society. At a center of their analysis is the concept of the Energy Return on Investment. This is defined as "the ratio of energy returned from an energy gathering activity compared to the energy invested in that process" (pg 310). they express this as an equation: EROI=Energy returned to society/energy required to get that energy. although, as they note, "the devil is in the details". This book contains all those details
The strength of this book is the ability of the authors to wrap a very thorough understanding of past economic theory (neoclassical and otherwise) with a very deep understanding of past scientific theory and the science behind the natural world. They explain quite a lot of science and are able to do so in relatively simple terms. Indeed, I learned more science from this book then I've learned from pure Science textbooks, let alone economics textbooks.
More importantly, the authors are able to convincingly show why all this science is relevant. For example in chapter five, "The limits of conventional economics" the authors argue that economic theory, as it is currently constructed, ignores the biophysical laws. the circular flow between consumers and producers that is presented in all economics textbooks makes absolutely no reference to the second law of thermodynamics. it is a model of perpetual motion, where no value is lost to entropy and no input of energy is required. the authors painstakingly go through various scientific disciplines and point out what is ignored by economic theory and reinterpret history on an energy basis.
The authors think that we are entering the "second half of the age of oil" which will be marked my a much lower EROI in oil that may not be able to support continuous economic growth like we've had for the last century or two. The evidence for this position seems overwhelming and hard to deny. what is striking is just how accurate the predictions of earlier natural scientists and natural limit theorists have been (such as M. King Hubbert and the much-maligned limits to growth authors).
The most inspired chapter is chapter 8: "Globalization, Neoliberalism and Energy". Here they analyze the term "efficiency" (and all it's neoclassical implications) and decide to analyze Neoliberal adjustment policies based on the engineering definition of efficiency: energy input/ divided by output. on this basis they do a statistical study of countries where Neoliberal policies are implemented and find no evidence that those policies led to greater efficiency.
The weakest sections are those discussing debt. They make little to no distinction between public, private debt, foreign currency-denominated debt and their explanation that all debt is a "lien on future energy use" is unconvincing to say the least.The authors seem especially interested dollar financial assets accumulated by foreigners but provide no analysis of balance of payments deficits or dynamics. Their explanation of hyperinflation also ignores the balance of payments dynamics involved.
Overall this is a tremendous contribution to economic theory that economics, and the world, ignores at it's peril.
13 of 13 people found the following review helpful
By K. Stech
Format:Hardcover|Amazon Verified Purchase
I am mainly writing this review to warn everyone that this is probably the most poorly edited book they'll ever read. There are loads of typos, misspellings, sentence fragments, run-ons, awkward phrasing, and other errors that the editor should have caught. It seriously impacts the reader's ability to absorb what is otherwise a great book. Another mistake the editor, proof readers and authors all make is citing things like "sustainablemiddleclass.com" for US Census and BEA data. That is pretty embarrassing. Somebody should have known to go to the source for this data, not some random web site that apparently doesn't even exist anymore.
All that said, I still gave the book four stars. The authors are on to something, and the ideas they express are important. They should get this work republished by a publisher who will give them a proper edit.
All that said, I still gave the book four stars. The authors are on to something, and the ideas they express are important. They should get this work republished by a publisher who will give them a proper edit.
11 of 11 people found the following review helpful
Format:Hardcover|Amazon Verified Purchase
This very readable advanced college text by Hall and Klitgaard lays out a scientific approach to economics. This is truly a breath of fresh air for a profession mired in simplistic concepts and models that often defy common sense and that sometimes lead to equally wrong-headed predictions and policies. A prime example would be the financial crash of 2008, unforeseen by mainstream economists, and in defiance of Alan Greenspan's belief in the magic of markets. Yet the crash itself and the current anemic recovery were no mystery at all to biophysical economists.
In fact, their dictum is that the best way to understand any geological or biological process, including the human ecosystems known as economies, is to first analyze the sources and flows of energy for that process. Markets are secondary. Since the current global economy is driven mostly by fossil fuels (around 85% of all energy), and since oil is by far the most critical of these, any good oil resource geologist is in a far better position to forecast the overall performance of the economy the coming decades than all the Nobel Prize winning economists put together.
The most prescient of these geologists, such as Colin Campbell, understand that the first half of the "Age of Oil" (cheap oil, growing production) is now over and that we are entering the second half (expensive oil, stagnant then declining production). And that the global economy will decline in tandem. Thus the financial crash of 2008 was due in part by the failure of world oil supply to meet the demand caused by financial inflation (oil reached $147 a barrel in July, 2008), radically decreasing the discretionary income available to the public. And now there is no more cheap oil to fuel the recovery. In fact a stronger recovery would be self-limiting, with demand once again overshooting supply. Indeed the CEO of Shell recently suggested that gasoline in the US could reach $7 to $8 a gallon by 2015, enough to cause severe recession.
This text looks not only at the current global economy but at historical economies and re-analyzes them from an energy point of view. For example, land was the primary source of wealth in agricultural economies because it was the primary way to capture solar energy, via photosynthesis. Long distance trade added to wealth because the primary energy for wind-driven water transport was free. But major industry awaited the development of the ability to exploit fossil fuels (ancient sunlight). Studies of modern economies show that economic growth closely tracks energy usage, though sometimes you must include embodied energy, such as all the consumer imports from China to the US.
Looked at from the point of view of energy, the short comings of traditional theories of economics are also made clear. For example, the Cobb-Douglass production function of traditional macro-economics has far more validity if the arbitrary productivity factor is replaced by energy. But Hall and Klitgaard also point out that the neo-classical way to do economics, based on a paradigm derived from 19th century physics, is severely outdated. The simulations and scenarios of the limits to growth studies, incorporating non-linear feedback loops, need to be brought into the mainstream.
In this book, faith in markets is replaced by analysis of net energy, or "energy returned on energy invested" (EROI). This is simply the ratio of the useful energy obtained from a resource to the energy required for its production. This may be analyzed further in several ways. For example, the energy produced could be the energy if burned at the mine-mouth or well-head, or after processing (such as oil to gasoline), or conversion (such as coal to electricity). The energy of production could include the embodied energy of materials used in the production, as well as the direct energy. It could also include the energy required for transportation to the point of usage and other "downstream" energy costs of usage, such as infrastructure, insurance, and depreciation, yielding an "extended EROI". Several studies lead the authors to conclude that modern civilization may require an "extended EROI" of around 10 to 1 or more. Renewables and unconventional fossil fuels typically aren't up to the task.
Turmoil ahead is a foregone conclusion. Yet the authors hold out hope from the knowledge that people can react in creative and positive ways to crises if they understand what is happening. This book is in itself a sign of hope - that the fortress of neo-classical economics is starting to crumble from the escalating bombardment by real world economists and their allies. Let's hope that Hall and Klitgaard now set their sights on a totally new Econ 101 text that will tell students how real world economies actually function (descriptive economics) and how they could function better (prescriptive economics), especially as economic growth turns toward contraction.
In fact, their dictum is that the best way to understand any geological or biological process, including the human ecosystems known as economies, is to first analyze the sources and flows of energy for that process. Markets are secondary. Since the current global economy is driven mostly by fossil fuels (around 85% of all energy), and since oil is by far the most critical of these, any good oil resource geologist is in a far better position to forecast the overall performance of the economy the coming decades than all the Nobel Prize winning economists put together.
The most prescient of these geologists, such as Colin Campbell, understand that the first half of the "Age of Oil" (cheap oil, growing production) is now over and that we are entering the second half (expensive oil, stagnant then declining production). And that the global economy will decline in tandem. Thus the financial crash of 2008 was due in part by the failure of world oil supply to meet the demand caused by financial inflation (oil reached $147 a barrel in July, 2008), radically decreasing the discretionary income available to the public. And now there is no more cheap oil to fuel the recovery. In fact a stronger recovery would be self-limiting, with demand once again overshooting supply. Indeed the CEO of Shell recently suggested that gasoline in the US could reach $7 to $8 a gallon by 2015, enough to cause severe recession.
This text looks not only at the current global economy but at historical economies and re-analyzes them from an energy point of view. For example, land was the primary source of wealth in agricultural economies because it was the primary way to capture solar energy, via photosynthesis. Long distance trade added to wealth because the primary energy for wind-driven water transport was free. But major industry awaited the development of the ability to exploit fossil fuels (ancient sunlight). Studies of modern economies show that economic growth closely tracks energy usage, though sometimes you must include embodied energy, such as all the consumer imports from China to the US.
Looked at from the point of view of energy, the short comings of traditional theories of economics are also made clear. For example, the Cobb-Douglass production function of traditional macro-economics has far more validity if the arbitrary productivity factor is replaced by energy. But Hall and Klitgaard also point out that the neo-classical way to do economics, based on a paradigm derived from 19th century physics, is severely outdated. The simulations and scenarios of the limits to growth studies, incorporating non-linear feedback loops, need to be brought into the mainstream.
In this book, faith in markets is replaced by analysis of net energy, or "energy returned on energy invested" (EROI). This is simply the ratio of the useful energy obtained from a resource to the energy required for its production. This may be analyzed further in several ways. For example, the energy produced could be the energy if burned at the mine-mouth or well-head, or after processing (such as oil to gasoline), or conversion (such as coal to electricity). The energy of production could include the embodied energy of materials used in the production, as well as the direct energy. It could also include the energy required for transportation to the point of usage and other "downstream" energy costs of usage, such as infrastructure, insurance, and depreciation, yielding an "extended EROI". Several studies lead the authors to conclude that modern civilization may require an "extended EROI" of around 10 to 1 or more. Renewables and unconventional fossil fuels typically aren't up to the task.
Turmoil ahead is a foregone conclusion. Yet the authors hold out hope from the knowledge that people can react in creative and positive ways to crises if they understand what is happening. This book is in itself a sign of hope - that the fortress of neo-classical economics is starting to crumble from the escalating bombardment by real world economists and their allies. Let's hope that Hall and Klitgaard now set their sights on a totally new Econ 101 text that will tell students how real world economies actually function (descriptive economics) and how they could function better (prescriptive economics), especially as economic growth turns toward contraction.
Most Recent Customer Reviews
5.0 out of 5 stars
Society Changing Logic!
author broke down all life,affluence and civilization to its fundamental form....the flow of energy. Should force mainstream economics to alter its approach.
Published 10 days ago by jon jerome montague
5.0 out of 5 stars
a must read
integrated approach to economic analysis. the role of energy and the decline of it for the society as a whole is described
Published 14 days ago by Fiorito Giancarlo
3.0 out of 5 stars
Interesting Facts.
The authors' lack of understanding of economics and ecology leads them to write a polemic demolishing a straw man. Much of what they write is both interesting and important. Read more
Published 12 months ago by W. James D. Easton
What Other Items Do Customers Buy After Viewing This Item?
Listmania!
So You'd Like to...
Look for Similar Items by Category
- Books > Business & Investing > Economics > Environmental Economics
- Books > Business & Investing > Industries & Professions > Oil & Energy
- Books > Business & Investing > Popular Economics
- Books > New, Used & Rental Textbooks > Business & Finance > Business Development
- Books > New, Used & Rental Textbooks > Business & Finance > Economics
- Books > New, Used & Rental Textbooks > Science & Mathematics > Earth Sciences
- Books > New, Used & Rental Textbooks > Science & Mathematics > Environmental Studies
- Books > New, Used & Rental Textbooks > Science & Mathematics > Mechanics
- Books > Professional & Technical > Engineering > Energy
- Books > Professional & Technical > Engineering > Industrial, Manufacturing & Operational Systems
- Books > Science & Math > Earth Sciences > Environmental Science
- Books > Science & Math > Earth Sciences > Geography
- Books > Science & Math > Physics > Dynamics > Thermodynamics
- Books > Science & Math > Physics > System Theory
