Postscript: Critical Comments on Werner’s How to Achieve Long-Term Sustainability
Chapter 17 from my forthcoming book Rebuilding Economics from the Top Down
Richard Werner is, like me, a critic of Neoclassical economics, and a developer of an alternative monetary approach to economics. He was also, like me, invited to undertake a research project at BC4LS, which resulted in his book How to Achieve Long-Term Sustainability (Werner 2023) being published by BC4LS in February 2023.
This is Chapter 17 from my forthcoming book Rebuilding Economics from the Top Down, which will be published by the Budapest Centre for Long-Term Sustainability and the Pallas Athéné Domus Meriti Foundation. I am serialising the book chapters here. A watermarked PDF of the manuscript is available to supporters.
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I respect Werner's work on the dynamics of money and banking enormously, and I have frequently referenced him in my own work on these topics. His contributions on money and banking, both in this book and previous works (Werner 1997, 2011; Werner 2014, 2016; Mkhaiber and Werner 2021), are original and important, and his work and mine on money and banking are both compatible and complementary—especially on the role of credit in aggregate demand for both goods and services and asset price speculation.
There is also much else in his book with which I agree, such as the need to ensure an equitable distribution of income, the need for credit guidance so that money is directed towards investment rather than speculation, the importance of other forms of environmental damage apart from global warming—especially biodiversity loss—and the capacity of innovation to reduce the damage we do to the environment.
However, there are two critical points where he makes unscientific claims that cannot go unchallenged. These are his claims about the role of CO2 in global warming (Werner 2023, p. 22) and the relevance of the laws of thermodynamics to service sector output (Werner 2023, p. 31).
Taking the second first, he claims that "the virtual world … is not … subject to the laws of thermodynamics":
the transformation from manufacturing to services has been more pronounced than predicted in the 1970s. This also contributes to a diminishing pressure on finite resources: the services sector, including IT, is increasingly expanding in the virtual world that is not limited by the parameters of this planet nor subject to the laws of thermodynamics. (Werner 2023, p. 31. Emphasis added)
This is as scientifically valid a statement as saying that a mouse, because its mass is tiny, is not subject to the Law of Gravity. Any entity with mass is subject to the Law of Gravity, and any process that uses energy is subject to the Laws of Thermodynamics. Though "the virtual world"—say, a virtual reality tour of Angkor Wat experienced by someone in New York—may consume less energy than flying that individual from New York to Cambodia, it still requires energy to create the virtual reality simulation. The question is how much energy the virtual world requires to create the simulated outcome, compared to using energy in the real world to achieve the real outcome.
Werner subsequently does not consider the questions of energy or resource availability in his book, so that this scientifically false proposition becomes an extreme form of the "decoupling" hypothesis, that an increase in services output relative to manufacturing will mean that economic growth is "decoupled" from both energy and raw material inputs.
Individual countries—such as the UK—have apparently "decoupled" their GDP from energy, but this is only because they have outsourced production to "Third World" countries. The evidence I presented in Chapter 13 shows that, at the global level, though the ratio of GDP to energy has risen over time (from 3.4 billion 2015 US$ per MTOE in 1971 to 5.8 billion in 2019), producing more output still requires more energy.
Chapter 4 of Decoupling debunked: Evidence and arguments against green growth as a sole strategy for sustainability (T. et al. 2019) also compiles the evidence that the increase in the service sector relative to manufacturing has had only a muted impact on resource usage. Growth in output will require growth in energy and raw materials inputs, but Werner ignores these issues in his advocacy of a high-growth strategy for sustainability.
Werner's claims on the role of CO2 in causing global warming are also unscientific. He states that "by far the most important greenhouse gas is water vapour", claims that it accounts "for over 90% of the warming … while carbon dioxide causes less than 4%" and that "the evidence remains limited that man-made CO2 emissions are intrinsically the cause of the extinction of species and the destruction of nature":
The United Nations' Intergovernmental Panel on Climate Change (IPCC) has emphasized the role of man-made factors and especially CO2 emissions. However, by far the most important greenhouse gas is water vapour (see, e.g., Rakoczi and Ivanyi, 1999-2000), accounting for over 90% of the warming produced by all atmospheric greenhouse gases, while carbon dioxide causes less than 4%.(Carter, 2008). Other researchers have pointed out the role of particulate pollution in affecting global temperatures (Herndon, 2019; Herndon and Whiteside, 2019).
More research efforts are needed to examine the various research hypotheses scientifically. Meanwhile it can be said that the evidence remains limited that man-made CO2 emissions are intrinsically the cause of the extinction of species and the destruction of nature. (Werner 2023, p. 22)
While the first claim is true, this mechanism is well-known by scientists: CO2 matters not because it is the major greenhouse gas, but because it is the most abundant long-lived greenhouse gas. The average duration of a water molecule in the atmosphere as water vapour is of the order of a week, whereas a CO2 molecule stays in the atmosphere for of the order of centuries. Because of the unique properties of H20, an increase in CO2 in the atmosphere causes an increase in water vapour; this amplifies the impact of an increase in CO2. As the Professor of Atmospheric Sciences Andrew Dessler states:
As humans add carbon dioxide to the atmosphere, small changes in climate are amplified by changes in water vapor. This makes carbon dioxide a much more potent greenhouse gas than it would be on a planet without water vapor.
Finally, the relative proportions that Werner asserts—that over 90% of warming is from water vapour and less than 4% is from CO2—are also false: the proportions are closer to 50% and 33%.
These scientifically false claims by Werner lead him to advocate a high economic growth strategy as the means by which to achieve economic and ecological sustainability, without considering global warming, and without considering resource availability. This is untenable advice.
Though other forms of environmental degradation, which Werner discusses at length, are vitally important and underemphasised (given the policy emphasis upon global warming) global warming is likely to be the first form of environmental degradation that makes our civilisation unsustainable.
It is also probable that energy and mineral resources needed to sustain economic growth for even the next century do not exist in the Earth's crust: see the mining engineer Simon Michaux's work on this topic (Michaux 2021b; Michaux 2021a). His conclusions are disputed (Breyer et al. 2022; Hoekstra, Steinbuch, and Verbong 2017), but the issue of resource availability is real, and cannot be blithely dismissed as Werner has done.
Finally, there is an inescapable consequence of the Second Law of Thermodynamics that was well-captured by the physicist Tom Murphy in his blog post "Exponential Economist Meets Finite Physicist", and subsequent open-source book Energy and Human Ambitions on a Finite Planet: Assessing and Adapting to Planetary Limits (Murphy 2021). The waste heat that is necessarily generated by using energy to produce output on the planet puts a finite limit on how much energy can be consumed here by our industrial civilisation. At the moment, this waste heat is a trivial component of current human-induced warming. But if our energy usage grows by 2.3% per year in the future—and it has grown by 2.9% per year on average since 1650 (Murphy 2021, Figure 1.3, p. 8)—then in just 4 centuries' time, the temperature of the surface of the planet would exceed the boiling point of water:
At a constant energy growth rate of 2.3% per year, the temperature climb from waste heat (not CO2 emissions) is slow at first, but becomes preposterous within a few-hundred years. Water boils in just over 400 years, and by 900 years Earth is hotter than the sun! The scenario of continued growth is obviously absurd. (Murphy 2021, p. 12. Emphasis added)
These real and unavoidable consequences of continued growth on our finite planet have been ignored by Neoclassical economists, to the peril of our civilisation, and of life on Earth. They should not be ignored by non-Neoclassical economists, who should above all strive to bring realism into economic theory.
On that note, I can think of no better way to finish this addendum to my book than to quote Tom Murphy's dedication in his:
This book is dedicated to Earth,
whose value is beyond measure.
May we learn to live within its bounds,
to the enduring benefit of all life.
(Murphy 2021, Dedication Page)
Along with every rational and effective means of reducing and eliminating the systemic energy and entropy problems the ultimate solution is a kind of reflective Copernican cosmological paradigm change from geo-centric resource discovery and production to cosmic resource discovery and production. The way to make that effort possible is to end inflation forever with a new monetary paradigm of a 50% reduction of price at retail sale and point of loan signing which would enable the kind of fiscal deficits necessary to fund the R & D for such projects.