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Relationships Among the Energy, Emergy, and Money Flows of the United States From 1900 to 2011
Citation:
Campbell, Daniel Elliot, H. Lu, AND Henry Allen Walker. Relationships Among the Energy, Emergy, and Money Flows of the United States From 1900 to 2011. Frontiers in Energy Research. Frontiers, Lausanne, Switzerland, 2(41):1-31, (2014).
Impact/Purpose:
This research was originally performed as part of a critical path toward developing a consistent system of environmental accounting using emergy. Once the emergy to money ratio of the U.S. was defined from 1900 to 2007, many interesting questions about the relationship between energy consumption, emergy use and money flows came into focus. Later, completion of the study in 2011 allowed us to obtain considerable insight on the magnitude and causes of the Great Recession of 2008 and on the relationships and implications of emergy use and monetary policy in the United States. The potential impact of these insights in the right hands is large.
Description:
In this paper, we examine the relationships among the energy, emergy, and money flows of the United States from 1900 to 2011. To establish a theoretical basis for understanding these relationships, Energy Systems Language models of the resource base for the World System and of economic exchange were used, respectively, to show how the energy consumed and emergy used in different categories contributes to economic production and to demonstrate the causal relationships that explain high correlations of these inputs with measures of market-based economic activity. The Emergy to Money Ratio (EMR) is the fundamental index linking economic activity to its basis in energy, material and information flows, which are quantified on an equivalent basis using solar emergy; therefore, we examined the significance of several EMRs for the United States over various time periods depending on availability of the data. EMRs were calculated by dividing total emergy use by various measures of economic activity, i.e., the Gross Domestic Product (GDP) in nominal and in real 2000 dollars, as well as, measures of money supply. The EMR measured in nominal $ exhibited a decreasing trend from a high of 1.02E+14 semj/$ in 1902 to 1.60E+12 semj/$ in 2011, with fluctuations in the value of this index corresponding to periods of inflation and deflation over the past 112 years. The emergy of the energy consumed was shown to be equivalent to quality adjusted (QA) energy consumption. We found evidence that a 3rd power law has governed U.S. economic growth in the 20th century, i.e., nominal GDP was best explained by a power function of total emergy use with exponent 2.8. The relationship between real GDP and total emergy use was close to linear indicating a correspondence between the economic and emergy measures of real wealth. However, a near linear decline in the ratio of total emergy use to real GDP indicates that residual inflation may exist in the real GDP measure. All measures of quality-adjusted (QA) energy consumption were shown to have a relationship with nominal GDP that was best described by a hyperbolic function plus a constant. In addition, the relationship between all measures of energy consumption and real GDP was best described by a 2nd order polynomial. The fact that energy use declined for high levels of real GDP indicates that since 1997 energy conservation has resulted in reduced CO2 production from fossil fuel use, while still maintaining growth in real GDP. Since all energy consumption measures vs. real GDP deviated from a power law relationship after 1997; whereas, 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, emergy may be the best measure for quantifying the biophysical basis for social and economic activity in the information age.
