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Principles of Ecology: Resources and economic growth. Lecture II November 11, 2010 Karl Seeley, PhD Hartwick College, Oneonta NY. Processes of economics Markets link distribution, allocation, and production Modern growth Investment, innovation, and resources Industrial revolution.

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principles of ecology resources and economic growth

Principles of Ecology:Resources and economic growth

Lecture II

November 11, 2010

Karl Seeley, PhD

Hartwick College, Oneonta NY

slide2

Processes of economics

    • Markets link distribution, allocation, and production
  • Modern growth
    • Investment, innovation, and resources
  • Industrial revolution
review of lessons from ecosystems
Review of lessons from ecosystems
  • 1st and 2nd Laws of Thermodynamics
  • Species play different functions
    • Competition, but also co-dependence
  • Less energy means less activity
  • Physical conditions shape networks and distribution of energy stores
  • Ecosystems can be “subsidized” from elsewhere

 Their productivity can’t be replicated everywhere

  • Some dependencies may not be obvious to the “participants”
summary summary
Summary summary

Potential biomass and species abundance depend on inorganic conditions

Insolation, temperature, water availability, soil/weathering

Ability to realize that potential depends on the functioning of the system that arises there

purpose of ecosystems
“Purpose” of ecosystems?

Schneider & Sagan, Into the Cool (2005)

Nature abhors a (thermodynamic) gradient

The “purpose” of ecosystems (and other structures) is to degrade gradients

Left to themselves, systems will tend to evolve in the direction of greater utilization of gradients

Systems that do a better job will displace others

processes of economics in blue

Grain

Trees, labor, tools

Labor, land, tools

Land, labor, tools, trees

Grain, (meat)

Palace, meat,

grain

Processes of economics(in blue)

Abroad

Investment

Allocation

Distribution

Trees

Palace

Trade

Luxuries

Nobles

Labor

Meat

Consumption

Land

Peasants

Grain

Tools

Final users

Outputs

Inputs

Production

processes
Processes
  • Allocation
    • Directing inputs toward production of different things
  • Production
    • Determines what people are able to use, for all sorts of purposes
  • Distribution
    • Consumption, Investment, Government
distribution i
Distribution I
  • Consumption
    • Who gets to consume how much?
    • Of what?
  • Investment
    • Car factory? Chip factory?
    • Power plant? Home insulation? Wind turbines?
    • A factory to make wind turbines
distribution ii
Distribution II
  • What will government do?
    • More police? More soldiers?
    • Roads? Schools?
    • R&D
  • Govt. activities are a mix of consumption (public safety, schools, regulation) and investment (roads, weapons)
simple agriculture with manufacturing
Simple agriculture, with manufacturing

Hum.

Sun

Plants

Animals

Tools, etc.

Manufacturing

Better human ability to capture, control, and apply energy

    • Modifying materials
    • Controlling flows of energy
    • Using those controlled flows to modify materials
    • Using modified materials and controlled energy to express and disseminate ideas (culture)
  • Economics focuses on the control gates …

… but neglects what it is that’s being controlled

All economic activity is about using human energy for a combination of

processes of economics in blue1
Processes of economics(in blue)

Grain

Grain

Trees, labor, tools

Land, labor, tools, trees

Labor, land, tools

Labor, land, tools

Trees, labor, tools

Land, labor, tools, trees

Land, labor, tools, trees

Trees, labor, tools

Land, labor, tools, trees

Trees, labor, tools

Labor, land, tools

Grain, (meat)

Palace, meat,

grain

Grain, (meat)

Palace, meat,

grain

Abroad

Investment

Allocation

Distribution

Trees

Palace

Trees

Trade

Luxuries

Nobles

Labor

Labor

Meat

Meat

Consumption

Land

Peasants

Grain

Grain

Tools

Tools

Final users

Outputs

Inputs

Production

processes of economics in blue2
Processes of economics(in blue)

Grain

Grain

Grain

Grain

Abroad

Abroad

Investment

Investment

Allocation

Allocation

Distribution

Distribution

Trees

Trees

Palace

Palace

Trees

Trees

Trade

Trade

Luxuries

Luxuries

Nobles

Nobles

Labor

Labor

Labor

Labor

Meat

Meat

Meat

Meat

Consumption

Land

Land

Trees, labor, tools

Labor, land, tools

Land, labor, tools, trees

Trees, labor, tools

Land, labor, tools, trees

Labor, land, tools

Trees, labor, tools

Land, labor, tools, trees

Trees, labor, tools

Labor, land, tools

Land, labor, tools, trees

Land, labor, tools, trees

Trees, labor, tools

Trees, labor, tools

Trees, labor, tools

Labor, land, tools

Land, labor, tools, trees

Labor, land, tools

Land, labor, tools, trees

Labor, land, tools

Trees, labor, tools

Land, labor, tools, trees

Peasants

Peasants

Grain

Grain

Grain

Grain

Tools

Tools

Tools

Tools

Final users

Final users

Outputs

Outputs

Inputs

Inputs

Grain, (meat)

Palace, meat,

grain

Palace, meat,

grain

Grain, (meat)

Grain, (meat)

Palace, meat,

grain

Palace, meat,

grain

Grain, (meat)

Production

Production

The processes of economics are supported by the processes of ecology

The economic process is constrained by the functioning of the ecosystem

connecting the parts
Connecting the parts
  • The economy chooses what to produce by allocating available inputs and applying existing technology
  • You can only allocate what’s available
    • Availability is from interaction among nature, exploration, research, discovery, innovation, and investment
  • Markets are our default way of determining allocation, distribution, and investment
    • Politics shape government’s role in those
reallocation
Reallocation

Capital to make Super-Priuses

Production of Super-Priuses

Consumption of Super-Priuses

Production of machinery for Super-Prius

Steel, computer chips, etc.

Production of machinery for Hummer

Capital to make Hummers

Consumption of Hummers

Production of Hummers

Inputs

Allocation

Production

Consumption

Distribution

interconnected markets
Interconnected Markets
  • Changes in demands for final products drive changes in demands for inputs

Markets tend to connect changes in distribution back to changes in allocation

    • Other systems also have to have ways of making those connections
  • What if changed conditions make production cheaper?
cheaper production
Cheaper production

P

If you build the necessary machines,

Supply curve for stuff in general moves to the right

Price may fall somewhat,

but definitely sell a lot more

 Make more money

Q

Output in general

  • What makes for cheaper production?
  • Cheap resources
  • Technological innovation
the growth of capital
The growth of capital

P

Cheaper production methods mean that new capital will be highly profitable

So demand for capital …

… increases

Cheaper production methods also mean that the supply of capital …

… increases

Q

Capital

the virtuous circle of growth
The virtuous circle of growth
  • More capital is produced;
  • at stable or falling prices;
  • leading to more demand for raw materials;
  • so more incentive to increase production of inputs to capital:
    • Coal mines, ore mines, foundries, machine works, canals, …
capital and allocation
Capital and allocation
  • Profitability of investment:
    • Shapes distribution, toward investment
      • Displacing consumption
    • Increases capital
    • Increases availability of resources
  • Allows more production
  • Both consumption and future investment can increase
  • Investment is a physical process tied to growth
allocation and resources
Allocation and resources
  • Allocation is done out of what’s available
  • Availability is interaction among:
    • Nature
    • Exploration
    • Resource discovery
    • Innovation
    • Investment
growth the standard list
Growth: the standard list
  • Saving and investment
    • More capital makes workers more productive
  • Innovation
    • Better capital makes workers more productive
  • Trade
    • Each side concentrates on its relative strength
  • Resource boom

Jeffrey Sachs, The End of Poverty: Economic Possibilities For Our Time (2006)

the growth cycle
The growth cycle

Consumption

Saving

Increased output

Investment

Output

B. Innovation

A. Innovation

Increased, improved capital

the growth cycle with resources
The growth cycle, with resources

Consumption

Saving

Increased output

Investment

Output

B. Innovation

A. Innovation

Increased, improved capital

Capital

Available resources

Potential resources

stages of industrial growth
Stages of industrial growth
  • For each of the following developments, identify:
    • How it contributes to growth
    • How it depends on human action
    • How it depends on resources
    • How it depends on previous stages
spread of mechanization
Spread of mechanization
  • Allows each worker to produce a greater quantity of things
  • Allows more uniformity (easier substitutability), often higher quality
  • Innovation to design it, investment to implement it
  • Requires appropriate water situation
canals
Canals
  • Reduced costs of transport
    • Increased benefits of trade
  • Cheaper access to additional resources (e.g., coal)
    • But can be accomplished using horses and human labor
      • Not yet machinery that can accomplish the work
  • Large investment (building canals, plus boats)
  • Landscape and water courses only partially surmountable
    • Water still has to come from somewhere to fill them
slide30

http://www.archives.nysed.gov/projects/eriecanal/essays/ec_larkin4.shtmlhttp://www.archives.nysed.gov/projects/eriecanal/essays/ec_larkin4.shtml

slide31

The Erie Canal and the Little Falls on the Mohawk River

http://www.norwayheritage.com/gallery/gallery.asp?action=viewimage&imageid=1562&text=&categoryid=16&box=&shownew=

slide32

http://news.bbc.co.uk/media/images/39285000/jpg/_39285689_canal300245.jpghttp://news.bbc.co.uk/media/images/39285000/jpg/_39285689_canal300245.jpg

http://en.structurae.de/files/photos/64/lgv_est_europeenne/p1100439.jpg

erie canal trade 1825
Erie Canal trade, 1825
  • Eastbound:
    • 562,000 bushels of wheat
    • 221,000 barrels of flour
    • 435,000 gallons of whiskey
    • 32 million board feet of lumber
    • 185,000 tons of eastbound cargo
  • Westbound:
    • 32,000 tons
      • Mostly manufactured goods

http://www.archives.nysed.gov/projects/eriecanal/essays/ec_larkin4.shtml:

later erie canal trade
Later Erie Canal trade
  • 1845: 1,000,000 tons
  • 1852: 2,000,000 tons
  • 1860: 1,896,975 eastbound

379,000 westbound

  • 1862: 3,000,000 + (Civil War)
  • 1880: 4,608,651 (largest amount)

http://www.archives.nysed.gov/projects/eriecanal/essays/ec_larkin4.shtml:

cost savings
Cost savings
  • Before the opening of the Erie Canal, Genesee Valley wheat took 20 days to reach Albany by wagon.
  • The cost to move a ton of wheat was $100.
  • With the completion of the canal, a ton of wheat could make the trip all the way to New York City in just 10 days

for only $5 in transportation charges.

http://www.archives.nysed.gov/projects/eriecanal/essays/ec_larkin4.shtml:

direct costs and benefits
Direct costs and benefits
  • Cost $7,500,000 to build, over about 15 years
  • 1862 alone: $4,500,000 in state tolls collected
  • 1820-1882 (toll collection ceased): $121,000,000 collected
indirect benefits
Indirect benefits
  • Stimulus to agriculture in Great Lakes basin
  • Cheap food for New York City
    • And anywhere reachable from NYC by water
  • Expanded market for NYC manufacturing
    • And anywhere that could reach NYC by water
  • Cheaper manufactured goods for Great Lakes basin
slide38

Draft animals can pull ~10x more in a canal boat than in a cart

Simple canals can be built with relatively low energy use

- Early industrial ones built with animal and human labor

Both pictures from http://campfire.theoildrum.com/node/6103

coal in ferrous industry
Coal in ferrous industry
  • Increases the supply of metal
    • Lower cost, greater quantity
    • Can be used more widely—better mechanization
  • Figuring out how to access and use it, building the foundries that use it
  • Coal needs to be accessible, found, extracted
  • Canals make coal more widely available
improved metal working
Improved metal working
  • Machines get bigger, stronger, more efficient, more reliable
  • New techniques allow for improved metal working
  • Cheap and abundant metal makes it worth inventing and implementing those techniques
  • That requires coal, the application of coal to metal production, and the cheap transport of coal in canals
further steps
Further steps
  • Contribution to growth
  • How it depends on human action
  • How it depends on resources
  • How it depends on previous stages
  • Group I: Increased use of metal
  • Group II: Increased scale of manufacturing
  • Group III: Coal for stationary power
  • Group IV: Coal for transportation
  • Group V: Oil
  • Group VI: Electricity

Plastics

  • Group VII: Communications, electronics
reading for nov 12 16
Reading for Nov. 12, 16
  • Hall, C.A.S., Day, J.W. Jr. 2009. “Revisiting the limits to growth after peak oil,” American Scientist 97:230-237
    • http://www.esf.edu/efb/hall/2009-05Hall0327.pdf
    • Identify an important argument against the idea of limits to growth
    • Provide Hall & Day’s response to that argument
    • What is the relationship between technological innovation and resource use?
  • Write a paragraph with your general reaction to the article