Friday, February 4, 2011
Last night I was tired after work and took myself out to dinner with a copy of Samuelson's economics textbook (I have the 18th edition with coauthor Nordhaus). I've been meaning to read this for a while (because Krugman was strongly recommending it) and finally got the chance to read the first few chapters.
I don't have it in front of me to give verbatim quotes, but I was intrigued to discover that Samuelson and Nordhaus appear to believe that the main differences between pre-industrial economies and industrial economies were institutional improvements: medieval craft guilds that had prevented technological innovation were done away with, and people discovered the principle of division of labor, which improved productivity.
To me, this is nuts. The core difference between the pre-industrial era and the industrial era is the development of the steam engine, which allowed the economy to run at much higher EROEI, generating much larger surpluses, which in turn enabled all manner of other developments because most of the population could be freed up from directly working the land. The first commercially successful engine (Newcomen) was in 1712 which was mainly a water pump in mines. The Watt engine (which first made it possible to apply steam power in factories) came along in the mid 1700s, and Trevithick's engine - the first efficient enough for practical transport applications - was introduced in 1800.
I note that the Romans understood the principle of specialization and division of labor. For example, in his book The Decline of Rome, Bryan Perkins traces how pottery was made in large workshops by specialized artisans and exported all over the empire. What the Romans didn't have was viable steam engines.
Then look at the figure above, which shows Brad Delong's numbers for GDP/capita over time. I have selected the period from -1000 on, and used a linear scale, rather than a log scale as Delong did, which in my view suppresses the most important point about this data. Note how the ups and downs of empires and dark ages before 1800 are barely visible, compared to what happened once you could power vehicles with fossil fuels.
It's also striking how from the outset the book sets up a division into the major factors of production: "Labor", "Land", and "Capital". Then they explain hastily that these days, the "Land" factor is taken to include energy, minerals, etc. Energy is a form of Land!
Economics is a very useful discipline and has developed many invaluable insights, but it has a blind spot a mile wide when it comes to energy.
Posted by Stuart Staniford at 6:04 AM