principles of ecology: resources and economic growth lecture ii november 11, 2010 karl seeley, phd...
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Principles of Ecology:Resources and economic growth
Lecture IINovember 11, 2010
Karl Seeley, PhDHartwick College, Oneonta NY
• Processes of economics– Markets link distribution, allocation, and
production• Modern growth
– Investment, innovation, and resources• Industrial revolution
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
• 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?
• 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
Trees
Labor
Land
Tools
Palace
Meat
Grain
Trees, labor, tools
Labor, land, tools
Land, labor, tools, trees
Nobles
Peasants
Abroad
Grain
Palace, meat,grain
Grain, (meat)
Luxuries
Investment
Production
Allo
catio
n
Dist
ributi
on
Trade
Processes of economics(in blue)
OutputsInputs Final users
Consumption
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
• 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
• 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
Sun AnimalsPlants
• All economic activity is about using human energy for a combination of
Hum.
Manufacturing
– 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
Tools, etc.
Better human ability to capture, control, and apply energy
Trees
Labor
Land
Tools
Palace
Meat
Grain
Trees, labor, tools
Labor, land, tools
Land, labor, tools, trees
Nobles
Peasants
Abroad
Grain
Palace, meat,grain
Grain, (meat)
Luxuries
Investment
Production
Allo
catio
n
Dist
ributi
on
Trade
Processes of economics(in blue)
OutputsInputs Final users
Trees
Meat
Grain
Trees, labor, tools
Labor, land, tools
Land, labor, tools, trees
Labor
Grain, (meat)
Tools
Palace, meat,grain
Grain
Labor, land, tools
Land, labor, tools, trees
Trees, labor, tools
Land, labor, tools, trees
Trees, labor, tools
Consumption
Processes of economics(in blue)
Trees
Labor
Land
Tools
Palace
Meat
Grain
Trees, labor, tools
Labor, land, tools
Land, labor, tools, trees
Nobles
Peasants
Abroad
Grain
Palace, meat,grain
Grain, (meat)
Luxuries
Investment
Production
Allo
catio
n
Dis
trib
ution
Trade
OutputsInputs Final users
Trees
Meat
Grain
Trees, labor, tools
Labor, land, tools
Land, labor, tools, trees
Labor
Grain, (meat)
Tools
Palace, meat,grain
Grain
Labor, land, tools
Land, labor, tools, trees
Trees, labor, tools
Land, labor, tools, trees
Trees, labor, tools
The processes of economics are supported by the processes of ecology
The economic process is constrained by the functioning of the ecosystem
Trees
Labor
Land
Tools
Palace
Meat
Grain
Trees, labor, tools
Labor, land, tools
Land, labor, tools, trees
Nobles
Peasants
Abroad
Grain
Palace, meat,grain
Grain, (meat)
Luxuries
Investment
Production
Allo
catio
n
Dist
ributi
on
Trade
OutputsInputs Final users
Trees
Meat
Grain
Trees, labor, tools
Labor, land, tools
Land, labor, tools, trees
Labor
Grain, (meat)
Tools
Palace, meat,grain
Grain
Labor, land, tools
Land, labor, tools, trees
Trees, labor, tools
Land, labor, tools, trees
Trees, labor, tools
Consumption
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
Steel, computer chips, etc.
Production of machinery for Hummer
Production of machinery for Super-Prius
Capital to make Hummers
Production of Hummers
Capital to make Super-Priuses
Production of Super-Priuses
Consumption of Super-Priuses
Consumption of Hummers
AllocationInputs Production Distribution Consumption
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 productionP
Q
If you build the necessary machines,Supply curve for stuff in general moves to the rightPrice may fall somewhat, but definitely sell a lot more
Make more moneyWhat makes for cheaper production?- Cheap resources- Technological innovation
Output in general
The growth of capitalCheaper production methods mean that new capital will be highly profitableSo demand for capital …… increasesCheaper production methods also mean that the supply of capital …… increases
P
QCapital
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
• Profitability of investment:– Shapes distribution, toward investment
• Displacing consumption
– Increases capital– Increases availability of resources
Allows more productionBoth consumption and future investment can
increase• Investment is a physical process tied to growth
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
• 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 boomJeffrey Sachs, The End of Poverty: Economic Possibilities For Our Time
(2006)
The growth cycleSaving
Investment
Increased, improved
capital
Increased outputOutput
Consumption
B. InnovationA. Innovation
The growth cycle, with resourcesSaving
Investment
Increased, improved
capital
Increased outputOutput
Potential resourcesAvailable resources
Capital
Consumption
B. InnovationA. Innovation
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
• 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
• 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
http://www.eriecanal.org/maps.html
http://www.eriecanal.org/maps.html
http://www.eriecanal.org/locks.html
http://www.archives.nysed.gov/projects/eriecanal/essays/ec_larkin4.shtml
http://www.norwayheritage.com/gallery/gallery.asp?action=viewimage&imageid=1562&text=&categoryid=16&box=&shownew=
The Erie Canal and the Little Falls on the Mohawk River
http://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
• 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
• 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
– 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
• 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
• 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
Both pictures from http://campfire.theoildrum.com/node/6103
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
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
• 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
• 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
•Contribution to growth•How it depends on human action
•How it depends on resources
•How it depends on previous stages
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