September 13, 2011
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A Winning Endgame, Robert Huebscher’s review of John Mauldin’s book Endgame, made some highly problematic claims about our energy usage. Moreover, Huebscher’s claim is unfounded that an energy policy, such as the cap-and-trade policy he recommended, is the right step toward solving our economic crisis.
Efficiencies increase, and thus as time goes by, we are requiring less and less energy to do what we as humans do. This is generally true with respect to energy from any and all sources. It's a function of inexorable Schumpeterian technological advancement, not some hoped-for futuristic thing that awaits the spur of government policy.
Note the marked and persistent convergence to the deep south shown in the graph below. If you contemplate the veritable onslaught of virtuality opening up all around us, you will think the downward slope of the curve will, at some future point, steepen considerably, as virtual activity (and for that matter, nano-activity) requires only a minute fraction of the energy traditional physical activity requires.
To be clear, economics is not only the dismal science, but it also is sometimes a very counterintuitive-to-the-point-of-nearly-perverse one. Our increased energy efficiency, or as energy economists refer to it in the converse, decreased energy intensity, is not a simple function of the regulatory apparatus run amok ala CAFE standards. In fact, despite continued and typically shamelessly ideologically motivated attempts (most of which are by non-economists who don't understand the analytical value of mathematically isolating variables) to "debunk" the very-real world and empirically observable impact of Jevons Paradox, the phenomenon persists as a near-perfect poster child for the concept of face validity. This is one of the classic examples of the seeming perversity of economic efficiency mandates.
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