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The Emergy of Money Ratio of the United States from 1990 to 2007
Citation:
CAMPBELL, D. E. AND H. F. Lu. The Emergy of Money Ratio of the United States from 1990 to 2007. In Proceedings, EMERGY SYNTHESIS 5, Theory and Applications of the Emergy Methodology: Proceedings of the 5th Biennial Emergy Research Conference, Gainesville, FL, January 31 - February 02, 2007. Center for Environmental Policy, University of Florida, Gainsville, FL, 413-448, (2009).
Impact/Purpose:
This examines the emergy basis for economic activity in the U.S. from 1900 to 2007. It investigates the causes of the recent U.S. economic decline and shows that residual inflation is present in the real GDP measure. A table of emergy to money ratios is provided, which should be of use in future emergy analyses.
Description:
The emergy to money ratio of a system is a key index used in emergy evaluations, because it represents the buying power of money and it can be used as an estimator of the average value of human service. Since both the material and energy inputs to societies and the money circulating in economies are constantly changing from one year to the next, the emergy to money ratio for all systems needs to be constantly updated. In addition, refinement and updating of the emergy per unit values used to convert raw energy and mass estimates to emergy require the reevaluation of emergy to money ratios. The emergy to money ratio of the United States from 1900 to 2007 was calculated by summing the emergy contributed to the Nation by the annual inflows from renewable energy sources, soil erosion, energy consumption, mineral consumption, imported goods other than fuels and minerals, imported services in goods, fuels and minerals, imported services, and immigrants and dividing this sum by various measures of economic activity, i.e., the GDP in nominal and in real dollars and the M1, M2, and M3 money supplies. The results showed a general decreasing trend of the emergy to money ratio measured in nominal $ from 1.09E+14sej/$ in 1902 to 1.95E+12sej/$ in 2007, with fluctuations in the value of this index corresponding to the great events of the last century, e.g., WWI, the Great Depression, WWII, the oil embargo of 1974-75, the recession of 1982-1983, and the Gulf War and recession of 1991-1992; as well as the bursting of the internet speculative “bubble” from (2000-2003) and the credit and construction “bubble” (2007-). A conceptual Energy Systems Model of environment and society was used to demonstrate that emergy use must contribute to the economic production function to result in high correlations of this indicator with measures of market-based economic activity. The emergy of the energy consumed was shown to be almost the same as quality adjusted energy consumption, and all measures of energy consumption were shown to have an apparent limiting factor relationship with U.S. economic activity. Our analyses revealed a near linear relationship between the real GDP of the U.S and total emergy use, and also a near linear decline in the ratio of total emergy use to real GDP from 1900 to 2007, indicating that residual inflation exists in the real GDP measure. Although both total emergy and energy use could explain most of the variance in real GDP using a power law relationship, the plots of all energy measures vs. real GDP deviated from this relationship after 1997, whereas those of total emergy use did not. We concluded that total emergy use captured more of the factors (e.g., materials and information) responsible for the overall increase in GDP in recent times than did energy measures alone, and as a result, it is more suitable for describing the base of social and economic activity in the information age.