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How Can We Avoid the Apocalypse? A Little Economic Sanity

07/09/2012 03:57 EDT | Updated 09/08/2012 05:12 EDT

Recently Marc de Villiers, a normally sensible non-fiction author, published the latest addition to the "library of apocalypses" entitled Our Way Out: First Principles for a Post-Apocalyptic World. In it, he blames the massive reduction in our standard of life on climate change and too many people. Conversely, I recently heard about the legislature in North Carolina considering a law requiring that changes in sea level be forecast only in terms of history, and not using scientific methods. Is this all-too-common clash of minds coincidental or could one easily anticipate it? Well, I think there is a correlation. The more gloomy the predictive science, the easier to anticipate catastrophe, and the closer the potential demise, those who fear for their near-term economic well-being will turn to increasingly far-fetched "solutions" for comfort. Little else seems to work and traditional economics theory has little to say.

De Villiers, even if described by one reviewer as "not a radical," has got the answers wrong. Legislators in North Carolina have the answers wrong. Well, at least that's one thing they have in common! And they have a lot of company. Too many of the apocalyptic adherents preach that government has to act in ways which are politically incoherent and basically impossible. And the absence of reasonable solutions encourages those who see real disasters for them in the nearer term to act in ways that seem barely rational. I have a hunch that economic theory thinks of climate change as some kind of environmental imposition attributable to medieval problems of the commons, and aren't relating fixes to important economic realities we should be looking at.

Here's a better view: Our prosperity rests on how human ingenuity has used the surplus of really cheap, liquid, high-density energy to produce a standard of living in the last 100 years or so that would have been beyond belief to my Granddad when he was a teenager. We have lived at what I like to call "Peak Life." People could borrow money, whether as you and me or as countries, and count on that prosperity to deliver surpluses which enabled the repayment of the debt. So, guess what happened? Borrowing became endemic and we've now run into two massive, surprising physical barriers.

To understand this better, I like to think of three vises with our "standard of life in the centre" and two screws on either side and one on the top. The left-hand screw is called "Harder to Keep Producing Those Cheap Fuels" and it's gradually, but obviously, squeezing the heck out of that cheap fuel prosperity.

The right-hand screw is labeled "Result of Increased Greenhouse Gas Emissions (GHGs)," and the resulting climate change is more slowly, but more implacably, going to squeeze the heck out of whatever of that old prosperity is left.

The top vise is called "Debt Ceiling" and limits growth, or causes the "Greek disease" of high unemployment by way of austerity needed to keep debt levels just within the boundary of insolvency. Even today's living standard is threatened by having to use a lot of what little is left of cheap energy productivity to repay those loans, something much harder to do now. So like de Villiers, it's not hard to think that the apocalypse is coming.

Clearly it would be a good idea to reverse those screws. We go looking for cheap fracked gas, or promote energy efficiency, or renewables. We subsidize fuels. Of course, that only works if there's enough money in the kitty, and there's probably not. We reschedule debt loads, or introduce inflation so they get paid off in cheap dollars. And we talk of carbon capture and geoengineering but nobody seems to get around to working out the math of just how enormous the cost is to reverse the growth in GHGs. No wonder there's a temptation to make the climate change vise handle stop rotating by denying it's happening at all. But everywhere we go, we have picked off the low-hanging fruit.

De Villiers' recipe is to do things such as make the electrical grid smarter, or to reduce the number of people (wars anyone?), or many similar solutions that need strong political action, and which cost a lot, or which by themselves cause alarm (carbon taxes?). But almost without exception, there's no elected politician anywhere ready to stand up and lose an election by espousing them. What the politicians are apparently ready to do is rewrite the rules. North Carolina isn't alone. In my own backyard, the government of British Columbia has just decided, in order to meet legal requirements to source a minimum percentage of energy from "clean" sources, that natural gas should be considered "green," as in "renewable."

Pen strokes count if you want to be in power (and that is not a pun). Coming to a neighbourhood near you -- more unreality shows. But are these really any more destructive than well-meaning authors like de Villiers prescribing expensive solutions that are destined to fail?

So folks, these recipes aren't going anywhere unless they are completely justified by the "market." Is there anything on the horizon which can actually replace that cheap, high-density liquid fuel, and not produce more GHGs?

So many of these well-meaning improvements are just incremental, and they're simply not going to result in GHG reductions anything like the specious targets which politicians are enamored with. There aren't enough people doing good math: the targets if met might do the job, but there is simply no chance of meeting the targets. It's true. All those unrealistic answers coming from either side just can't get it done. We need MIRACLES: a.k.a. breakthrough inventions.

But they're of no use without access to the early risk capital that just isn't going to come from governments. (Remember the top-down vise!) And from there to being widely applicable, this requires massive changes in the way that large, cash-rich corporations interface with conceptual geniuses at the heart of innovative little companies building the solutions we need for tomorrow. And that's where current economic practice just doesn't deliver.

And to Mr. de Villiers and those North Carolina legislators here's my prescription: face the reality of science, face the reality of permanent political inaction, detect the leaders in the private sector, trust markets, and don't be scared of breaking new ground. I'm tired of my standard of life getting "screwed."