Energy & Money

Integrating Social Metabolism into Economic Analysis

Blair Fix

Canadian Society for Ecological EconomicsToronto

November 2, 2013

Real GDP:

A measure of our ignorance?

A Quantity Measure of Output

GDP Nominal = Quantity×Price

= GDP Real× GDP Deflator

GDP Real=GDP Nominal

GDP Deflator

Quantity of What?

Quantification Requires Units

3 apples + 3 oranges = ?

The Seven SI Base Units

Defining 1 second:

The duration of 9,192,631,770 periods of the radiation corresponding to the transition

between the two hyperfine levels of the ground state of the cesium 133 atom.

The Choice of Unity Affects Aggregate Quantity

Apple : Orange

Mass (kg) 1 : 2

Energy (J) 3 : 4

Price ($) 5 : 7

The fundamental problem with using price as a unit...

Relative prices change all the time, meaning our unit ($) has no single definition!

A Historical Example

Measuring Changes in Quality?

Hedonic Quality Adjustment

“The practice of decomposing an item into its constituent characteristics, obtaining estimates of the value of the

utility derived from each characteristic, and using those value estimates to adjust prices when the quality of a good

changes.”

US Bureau of Labour Statistics

A Completely Different Approach to Output

Dissipative Structures

Society as a Dissipative Structure

Social Metabolism

Useful Work:

A physically meaningful quantity measure of output.

A Pecuniary Feedback

GDP Nominal

U Price

=Dissipative Pressure

Most Types of Useful Work Have No Price

1. Mechanical Drive

2. Heat (Low, Mid, High)

3. Light

4. Muscle Work

5. Electricity

The Price of Electricity as a Proxy for the Price of Useful Work

KWH Deflated GDP

Dissipative Pressure = GDP Nominal /U Price

= GDP Nominal /PKWH

Dissipative Pressure = GDP Nominal /U Price

GDP KWH = GDP Nominal /PKWH

Japan

United Kingdom

United States

Conclusions

Rethinking Labour Productivity