We seem to be having a moment in which three groups with very different agendas – anti-environmentalist conservatives, anti-capitalist people on the left and hard scientists who think they are smarter than economists – have formed an unholy alliance on behalf of the proposition that reducing greenhouse gas emissions is incompatible with growing real gross domestic product.
The right likes this argument because it wants to block any action on climate. Some on the left like it because they think it can be the basis for an attack on our profit-oriented, materialistic society. The scientists like it because it lets them engage in some intellectual imperialism and invade another field (just to be clear, economists do this all the time, often with equally bad results).
A few days ago, Mark Buchanan at Bloomberg published a piece titled “Economists Are Blind to the Limits of Growth” making the standard hard-science argument. Mr. Buchanan wrote that it’s not possible to have something bigger – which is apparently what he thinks economic growth has to mean – without using more energy, and declares that “I have yet to see an economist present a coherent argument as to how humans will somehow break free from such physical constraints.”
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Of course, he’s never seen such a thing because he’s never looked. But anyway, let me offer an example that I ran across when working on other issues. It is by no means the most important example of how to get by with less energy, and in no sense enough by itself to make that much difference. But it is, I think, a useful corrective to the rigorous-sounding but actually silly notion that you can’t produce more without using more energy.
So, let’s talk about slow steaming.
After 2008, when oil prices rose sharply, shipping companies – which send massive container ships on regular “pendulum routes,” taking stuff, say, from Rotterdam to China and back again – responded by reducing the speed of their ships. It turns out that steaming more slowly reduces fuel consumption more than proportionately to the reduction in speed.
So what happens when you switch to slow steaming? Any one ship will carry less freight over the course of a year, because it can do fewer swings of the pendulum (although the number of trips won’t fall as much as the reduction in speed, because the time spent loading and unloading doesn’t change). But you can still carry as much freight as before, simply by using more ships – that is, by supplying more labor and capital. If you do that, output – the number of tons shipped – doesn’t change, but fuel consumption falls.
And, of course, by using still more ships, you can combine higher output with less fuel consumption. Despite what some people who think they’re being sophisticated somehow believe, there is no reason at all that you can’t produce more while using less energy.
It’s not a free lunch – it requires more of other inputs – but that’s just ordinary economics. Energy is just an input like other inputs.
Some other points here: Notice that we aren’t talking about having to develop new technologies; slow steaming is just a choice, not a technological advance, and in fact it doesn’t even require that you change the equipment – you just have to use the same ships differently.
Given time to redesign ships for fuel efficiency, and maybe develop new technologies, it would presumably be possible to ship the same amount of cargo with even less energy – but that’s not necessary to make the case that growth and less energy can go together.
So where does the notion that energy is somehow special come from? Mainly, I’d say, from not thinking about concrete examples. When you read columns like Mr. Buchanan’s you see lots of metaphors about bacteria or whatever, nothing about shipping or manufacturing – because if you think about actual economic activities even briefly, it becomes obvious that there are trade-offs that could let you produce more while using less energy.
And greenhouse gas emissions aren’t the same thing as energy consumption, either; there’s a lot of room to reduce emissions without killing economic growth. If you think you’ve found a good argument showing that this isn’t possible, all you’ve done is get confused by your own word games.