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Economics of the Anthropocene

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Economics of the
Anthropocene
Principles and consequences for policy
design

Carsten Herrmann-Pillath
Professor and Permanent Fellow
Max Weber Centre for Advanced Cultural and Social
Studies, Erfurt University, Germany
Email: carsten.herrmann-pillath@uni-erfurt.de
Personal website: www.cahepil.net
November 2017
1
INTRODUCTION

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MY BACKGROUND
 Carsten Herrmann-Pillath, *February 24, 1959
 Economist, philosopher, sinologist
 Permanent Fellow and Professor at the Max Weber Centre for
Advanced Cultural and Social Studies at Erfurt University, Germany

 Three decades of research in evolutionary, institutional and

ecological economics (www.cahepil.net)
 Need for innovation in the conceptual foundations of economics
 Consequences for policies and practical action

 Magnum Opus: Foundations of Economic Evolution: A

Treatise on the Natural Philosophy of Economics, 2013
 One central issue: Energy, growth and evolving information

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MY BACKGROUND
 Can economics ground in the physics of energy:
Thermodynamics?
 Building on Georgescu-Roegen’s essential contributions to establishing
the discipline of Ecological Economics
 Combining economics with the natural science: “Energy, Growth, and
Evolution: Towards a Naturalistic Ontology of Economics.” Ecological
Economics 119 (November 2015): 432–42.

 Thesis of my lecture: This approach must stay at the core of

research into the ‘Anthropocene’
 Distinction between ‘environmental and resource economics’ and
‘ecological economics’: The former strictly builds on a neoclassical
economics framework, the latter is multi-disciplinary

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E COLOGICAL VS.
ENVIRONMENTAL ECONOMICS

Source: Costanza, Robert, John H. Cumberland,

Herman Daly, Robert Goodland, Richard B.
Norgaard, Ina Kubiszewski, and Franco, Carol.
An Introduction to Ecological Economics. Boca
Raton, London, New York: CRC Press, 2014,
58f.
MY CLAIMS
 Humankind has entered a new geological age, the
Anthropocene, in which the technosphere (created, but not
controlled by human action) evolves autonomously
 The evolution of the technosphere obeys general principles
of evolutionary theory, which are ultimately grounded in
principles of thermodynamics
 Economic growth and energy throughput are
manifestations of these principles, and urbanization is the
material embodiment
 Policy design must heed attention to these facts and must
aim at switching to a new growth regime, the stationary
state

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BASICS

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WHAT IS THE ‘ANTHROPOCENE’?

 Human impact on Earth system is so pervasive that

geologists have diagnosed a new geological age (transition
from Holocene)
 Narrow criterion: ubiquity of anthropogenic objects and chemical
traces in the most recent geological stratum
 Broader criterion: Human impact on biosphere (e.g. mass extinctions)
 Thermodynamic impact – anthropogenic energetic transformations

 While the geological term is not yet officially recognized,

the concept has been widely received
 In economics, almost no reception, beyond Ecological Economics

 Central phenomenon: Emergence of the ‘technosphere’

 Extension of ‘biosphere’

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 Source: Zalasiewicz, Jan, Mark Williams, Colin N Waters, Anthony D Barnosky, John
Palmesino, Ann-Sofi Rönnskog, Matt Edgeworth, et al. “Scale and Diversity of the Physical
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Technosphere: A Geological Perspective.” The Anthropocene Review 4, no. 1 (April 2017): 9–

22. doi:10.1177/2053019616677743.
WHAT IS THE ‘ANTHROPOCENE’?
WHAT IS THE ‘ANTHROPOCENE’?

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 WHAT IS THE ‘ANTHROPOCENE’?
 Human thermo-
dynamic impact
comparable to
geological forces
 HANPP about 30-40
percent of NPP (Net
Primary Production)
 Attention: space counts
here!

 Source (incl. previous diagram):

Kleidon, Axel (2011): Life,
Hierarchy, and the
Thermodynamic Machinery of
Planet Earth, Physics of Life
Reviews 7: 424-460.

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THE ‘TECHNOSPHERE’

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 THE ‘TECHNOSPHERE’

Source: Zalasiewicz, Jan, Mark Williams, Colin N Waters, Anthony D Barnosky, John Palmesino, Ann-Sofi Rönnskog, Matt
Edgeworth, et al. “Scale and Diversity of the Physical Technosphere: A Geological Perspective.” The Anthropocene Review 4, no. 1
(April 2017): 9–22. doi:10.1177/2053019616677743.

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 A NEW COPERNICAN TURN
 Conceptual tension between the notions of ‘Anthropocene’
and ‘technosphere’

 Human action caused the emergence of the technosphere,

but human design cannot control its evolution
 Technology is a global network of humans and artefacts that evolves
autonomously

 Peter Haff’s ‘six rules’ for analysing the technosphere

 (1) the rule of inaccessibility; (2) the rule of impotence; (3) the rule of
control; (4) the rule of reciprocity; (5) the rule of performance; and (6)
the rule of provision.
 Source: Haff, P. “Humans and Technology in the Anthropocene: Six Rules.” The Anthropocene Review 1, no. 2 (August 1,
2014): 126–36.

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 LIMITS OF ECONOMICS
 Economics is anthropocentric
 Human welfare as goal of economic activity
 All analytical categories are derived from socially constructed categories
 Central example: Theory of growth refers to ‘labour’ and ‘capital’, and
ignores energy

 Our dilemma: We cannot take effective actions regarding

technosphere evolution as long as we employ anthropocentric
theories
 A most significant example: The role of the discount rate in
dealing with climate change
 Impossible to fix an discount rate based on objective non-ethical criteria
 Accordingly, ‘Integrated Assessment Models’ must fail
 Source: Pyndick, Robert S. (2013): Climate Change Policy: What Do the Models Tell Us? Journal of Economic Literature
LI(3), 860-872.

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THE CHALLENGE
 The economy stands at the centre of technosphere evolution
 Technological innovation is driven by economic decisions (apart from
military)
 The technosphere is productive, and production processes are mainly
controlled in the human economy
 We need an evolutionary economic theory that combines with
evolutionary analysis of the technosphere

 The technosphere encompasses the biosphere, but the

biosphere keeps autonomous evolutionary processes
 We need an integrated evolutionary theory of both biosphere and
technosphere
 In sum, economics would emerge as a subdiscipline of a universal
evolutionary theory that encompasses the economy, the biosphere and
the technosphere
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THERMODYNAMICS
AND GROWTH

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THERMODYNAMICS AND EVOLUTION
 Many researchers have argued that a theory of evolution
must build on and extend thermodynamic principles
 Basic idea: Life is a phenomenon of evolving information that
harnesses energy for reproduction
 ‘Fourth Laws’…?
 Lotka (1922): Evolution proceeds in such direction as to make the total energy
flux through the system a maximum compatible with constraints
 Swenson (1989): A system will select the path or assemblage of paths out of
available paths that minimizes the potential or maximizes the entropy at the
fastest rate given the constraints
 Bejan (1996) (‘Constructal Law’): For a finite-size system to persist in time (to
live), it must evolve in such a way that it provides easier access to the imposed
currents that flow through it
 Kauffman (2000): the biosphere maximizes the average secular construction of
the diversity of autonomous agents and the ways how these agents make a
living and propagate further
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 THERMODYNAMICS AND EVOLUTION
Source: Williams, Mark, Jan Zalasiewicz, Colin N. Waters, Matt Edgeworth, Carys Bennett, Anthony D. Barnosky, Erle C. Ellis,
u. a. „The Anthropocene: A Conspicuous Stratigraphical Signal of Anthropogenic Changes in Production and Consumption
across the Biosphere: ANTHROPOCENE BIOSPHERE EVOLUTION“. Earth’s Future 4, Nr. 3 (März 2016): 34–53.

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 ‘BIG HISTORY’
 Chaisson (2001): In a unified evolutionary theory, the central
fact is that of increasing free energy rate density
of Complexity in Nature. Cambridge and London: Harvard
Source: Chaisson, Eric J. (2001): Cosmic Evolution. The Rise

University Press.


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‘BIG HISTORY’

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  Smil, Vaclav. Power density: a key to understanding energy
sources and uses. Cambridge, Massachusetts: The MIT
Press, 2015.
‘ B IG HISTORY’

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BACKGROUND: DECLINE OF WTO

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 U NIFIED FRAMEWORK : M AXIMUM POWER
AND MAXIMUM ENTROPY
 Conceptual framework: Technosphere as ‘heat engine’ in
which the human economy drives its own expansion:
growth
 Sources: (left) Kleidon, A. Thermodynamic Foundations of the Earth System; Cambridge University Press: Cambridge, UK, 2016.
(right) Garrett, T. J. (2011), ‘Are There Basic Physical Constraints on Future Anthropogenic Emissions of Carbon Dioxide?’ Climatic
Change, 3, 437–455.

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 U NIFIED FRAMEWORK : M AXIMUM POWER
AND MAXIMUM ENTROPY
 Unified and parsimonious framework: All open, non-linear
and non-equilibrium systems manifest the Maximum
Entropy Production Principle, mediated via the Maximum
Power Principle governing evolution
Source: Bejan, A. and S. Lorente (2010), ‘The Constructal Law of
Design and Evolution in Nature’, Philosophical Transactions of
the Royal Society B, 365, 1335–1347.


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 THE ROLE OF SCALING
 Universal problem in biological and technological
evolution: mobilizing, channelling and putting energy into
use through mediation of networks
 Network evolution proceeds under (natural) selection
 Selection favours minimizing energetic costs while maximizing
energetic outputs

 For biological networks, universal scaling laws hold that

impose physical constraints on growth
 Networks must be space-filling
 Terminal units must be invariant
 Principle of least action

 Network design follows a cube-root scaling law for lengths

and a square root scaling law for radii: Resulting in a
universal three quarter scaling law for metabolism (fractals)
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 THE ROLE OF SCALING
 Metabolic theory of ecology: Universal patterns of growth
 Larger organisms need to invest proportionally more energy into transport than
smaller organisms, so natural selection favours maximization of endpoint
dissipation
 ‘organisms’ include communities: ‘supraorganisms’

 Source: West, Geoffrey B. Scale: the universal laws of growth,

innovation, sustainability, and the pace of life in organisms,
cities, economies, and companies. New York: Penguin Press,页码 |27
2017.
ENERGY AND GROWTH
 Foundational hypothesis of Ecological and Evolutionary
Economics (Odum 1998): Economic growth manifests
Maximum Power
 Energy throughputs drive economic growth
 Structural and institutional change enable maximization of
energetic throughputs
 Natural experiment: China versus Europe during industrialization
– comparative advantage in harnessing coal as an energetic source
drives divergent patterns of growth (population growth versus per
capita growth)

 Ayres and Warr (2009 etc.) show that the flow of ‘useful
work’ explains economic growth driven by endogenous
dynamics (‘Salter cycle’)

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ENERGY AND GROWTH

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ENERGY AND GROWTH

Warr, Benjamin, und Robert U. Ayres. „Useful Work and Information as Drivers of Economic
Growth“. Ecological Economics 73 (Januar 2012): 93–102. doi:10.1016/j.ecolecon.2011.09.006. 页码 |30
 MECHANISMS OF MAXIMUM POWER
 The core type of mechanism linking energy and growth
is ‘rebound effects’: Increasing efficiency in energy usage
causes growing absolute throughputs

 Rebound effects
tend to be larger
than one for
general purpose
technologies
 General
equilibrium effects
essential! Global
economy ultimate
reference point

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 Azevedo, Inês M.L. “Consumer End-Use Energy Efficiency and
Rebound Effects.” Annual Review of Environment and Resources 39,
no. 1 (October 17, 2014): 393–418. doi:10.1146/annurev-environ-
021913-153558.

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 MECHANISMS OF MAXIMUM POWER

Tsao, Jeffrey Y., and Paul Waide. “The World’s Appetite for Light: Empirical Data and Trends Spanning Three Centuries and
Six Continents.” LEUKOS 6, no. 4 (2010): 259–81. 页码 |33
 Night-time lighting is
a robust and reliable
indicator of GDP
growth
 This is mostly generated
from cities
 Therefore, we can
approach lighting as
implicit indicator of
rebounds in
urbanization!
 Source: Henderson, J.V.; Storeygard,
A.; Weil, D.N. Measuring Economic
Growth from Outer Space. Am.
Econ. Rev. 2012, 102, 994–1028

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 URBAN METABOLISM
 The most important general purpose technology that
humans ever developed: the city as a complex socio-
technological system and central artefact of the technosphere
- The city is a supraorganism (‘human beehive’)
 Yet, growth of cities does not match with biological scaling laws for
organisms: exponential and even superexponential growth!
 Economists tend to emphasize only agglomeration benefits in the
economic domain

 Physicists view: Cities are complex networks with multiple

dimensions:
 Networks that channel energy flows
 Networks that transport materials
 Networks that connect people etc.

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 URBAN METABOLISM
 For these networks, different scaling laws hold than for
common biological organisms:
 Sublinear scaling for many inputs
 Superlinear scaling for many outputs
 Therefore, different from biological organisms, cities as supraorganisms
can grow super-exponentially! Extrasomatic socio-technological
artefacts overcome constraints of biological networks!
 So far, mixed empirical results about energetic efficiency of cities
 Difficulties in theoretically distinguishing inputs from outputs

 Hypothesis: Technosphere evolution breaks through

constraints of biosphere evolution in realizing maximum
power and maximum entropy
 Key: Cities as information-processing systems – fundamental
evolutionary approach applies
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 Creutzig, Felix, Giovanni Baiocchi, Robert Bierkandt, Peter-Paul
Pichler, und Karen C. Seto. „Global Typology of Urban Energy Use
and Potentials for an Urbanization Mitigation Wedge“. Proceedings
of the National Academy of Sciences 112, Nr. 20 (19. Mai 2015):
6283–88.
URBAN METABOLISM

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 URBAN METABOLISM
 From the network perspective, an essential indicator for
analyzing energetic flows is power density: Flow of energy
per time through area that dissipates the energy flow
 Corresponding to ‘big history’ view, urbanization goes hand
in hand with increasing power densities
 In particular, the economic forces that drive the concentration of cities
and favour high-rise buildings also increase power densities
 Therefore, we can explain this pattern of urbanization as expression of
Maximum Power and Maximum Entropy principles

 However, this creates a dilemma for further growth (Smil):

The power densities of renewables and of urban settlements
do not match! (fundamental network incompatibility)

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Source: Smil,
Vaclav.
Energy in
Nature and
Society:
General
Energetics of
Complex
Systems.
Cambridge,
Mass.: MIT
Press, 2008.

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 Smil, Vaclav. Power density: a key to understanding energy sources and uses.
Cambridge, Massachusetts: The MIT Press, 2015.
POWER DENSITY AND SUSTAINABILITY

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 Smil, Vaclav. Power density: a key to understanding energy
sources and uses. Cambridge, Massachusetts: The MIT Press,
2015.
POWER DENSITY AND SUSTAINABILITY

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 Smil, Vaclav. Power density: a key to understanding energy
sources and uses. Cambridge, Massachusetts: The MIT Press,
2015.
ENERGY RETURN ON INVESTMENT

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 页码 |43

Source: Kleidon, A. Thermodynamic foundations of the

Earth system. New York, NY: Cambridge University
Press, 2016.
THE ‘GRAND VIEW’
THE ‘GRAND VIEW’
 From the viewpoint of the theory proposed here, only
solar energy can resolve the energy dilemma of the
future
 First reason: only solar energy is thermodynamically neutral, in
the sense of, firstly, not feeding additional energy into the Earth
system (like nuclear energy), and secondly, in harnessing the most
abundant supply of energy in the least intrusive way (compare
wind energy)
 Second reason: The use of solar energy strictly follows Maximum
Power, because it transforms radiation into usable energy, which
otherwise would dissipate as heat, thus enhancing the free energy
of the Earth system

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 页码 |45

Source: Kleidon, A. Thermodynamic foundations of the

Earth system. New York, NY: Cambridge University
Press, 2016.
THE ‘GRAND VIEW’
THE ‘GRAND VIEW’
 Given the power density mismatch, however, this requires
a fundamental rethinking of current patterns of
urbanization
 Basic approach: Decentralizing the energy system, and containing
further urban concentration

 Back to China’s traditional pattern of urbanization – Fei

Xiaotong’s vision!
 Clash between the common economics view and my one:
 Economists think that urbanization is efficient, because of
agglomeration economies
 I interpret this as rebound effects under the condition of under-
priced energy, given externalities through time

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 Source: Covert, Thomas, Michael Greenstone, and Christopher R. Knittel. 2016.
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"Will We Ever Stop Using Fossil Fuels?" Journal of Economic Perspectives,

ECONOMIC SUSTAINABILITY OF FOSSIL USE

30(1): 117-38.
 Given the
 Source: Covert, Thomas, Michael Greenstone, and Christopher R. Knittel. 2016.
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"Will We Ever Stop Using Fossil Fuels?" Journal of Economic Perspectives,

ECONOMIC SUSTAINABILITY OF FOSSIL USE

30(1): 117-38.
 Given the
 AND ICT?
 Will ICT innovation ‘green growth’? Another error about
the energetics of growth
 Fundamental physical fact: There is no information processing
without energetic costs

 Landauer’s principle: Deleting information dissipates

energy (hence we need to cool computers)
 The faster the stock of knowledge aka information grows, the more
energetic throughput will be necessary

 ICT is a general purpose technology and will presumably

manifest rebound effects larger than 1
 From the thermodynamic point of view, energy and
information are two sides of one coin!
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 IMPLICATIONS FOR POLICIES
 The focus on CO2 is necessary, but not sufficient
 We need to include energetic throughputs generated from any source!
 Only solar energy is compatible with Earth System thermodynamics!

 However, even if we rely on solar energy, we need to put

constraints on Maximum Power; two main reasons:
 The global heat barrier (operational within 2-3 centuries)
 Local warming effects that impact on non-linear climate dynamics

 Accordingly, the central policy measure must be to increase

the costs of energy: The energy tax
 Energy tax drives innovation towards energy savings
 Revenue can be used for redistribution to ‘energy poor’ groups
 Solar energy for own use tax-free?
 Dilemma: Majority of interest groups against it…

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 THE STATIONARY STATE
 The long term vision is to combine a stationary
thermodynamic state of the Earth system with a growing
economy in terms of anthropocentric values
 This is John Stuart Mill’s ‘stationary state’, though based on decoupling
economy and Earth system

 Matches with recent scenario developed by economists

(Llavador, Roemer, Silvestre 2015):
 ‘sustainabilitarian’ approach: inter-generational equality of
opportunity, compatible with modest economic growth
 Central role of education as an input in production AND as a source of
welfare in consumption: ‘De-materializing’ consumption
 Required: International consensus of constraining growth while
maintaining the ‘date of convergence’ across countries

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T HE ‘G RAND V IEW’ - ECONOMICS

Llavador, Humberto, John E. Roemer, und Joaquim Silvestre. Sustainability for a warming planet.
Cambridge, Massachusetts: Harvard University Press, 2015. 页码 |52
THE STATIONARY STATE
 With stationary population growth and an energy tax, ,
combined with modern technology, a fundamental
structural shift of the economy becomes possible
 Towards the production of cultural goods in the broadest sense
(cultural artefacts and human interaction)
 Cultural production is labor-intensive, while capital and energy are
complementary
 Cultural production favors diversity, hence fosters local communities
and small-scale business
 Central role of education incentivizes and sustains low rate of
population growth
 Structural shift must be combined with fundamental institutional
changes (e.g. intellectual property, corporate law etc.): The design is
the task of economics in the disciplinary sense!

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THANK YOU FOR YOUR ATTENTION!

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 BACKGROUND READINGS

For additional material, see sources cited on the slides

Azevedo, Inês M.L. (2014), ‘Consumer End-Use Energy Efficiency and Rebound Effects’, Annual Review of Environment and Resources 39(1), 393–418.

Batty, Michael (2012), ‘Building a Science of Cities’, Cities 29: 9–16.

Haff, Peter (2014), ‘Humans and Technology in the Anthropocene: Six Rules’, The Anthropocene Review 1, no. 2, 126–36.
Herrmann-Pillath, Carsten (2014), ‘Energy, Growth and Evolution: Towards a Naturalistic Ontology of Economics’, Ecological Economics, 119, 432-442.

Herrmann-Pillath, Carsten (2017), ‘Economics of the Anthropocene: An Exploratory Essay’, Working Paper, DOI: 10.13140/RG.2.2.24812.05761
Kallis, G., Kerschner, C., Martinez-Alier, J. (2012), ‘The Economics of Degrowth’, Ecological Economics 2012, 84, 172–80.

Kleidon, Axel (2011), ‘Life, Hierarchy, and the Thermodynamic Machinery of Planet Earth’, Physics of Life Reviews 7: 424-460.

Monastersky, Richard (2015), ‘Anthropocene: The Human Age’, Nature 519, no. 7542, 144–47.
Pyndick, Robert S. (2013), ‘Climate change policy: what do the models tell us?’ Journal of Economic Literature LI(3), 860-872.

Sorrell, Steve (2015), ‘Reducing Energy Demand: A Review of Issues, Challenges and Approaches’, Renewable and Sustainable Energy Reviews 47, 74–
82.

Zalasiewicz, Jan, Waters, Colin N., Summerhayes, Colin P., Wolfe, Alexander P., Barnosky, Anthony D., Cearreta, Alejandro, Crutzen, Paul, Ellis, Erle,
Fairchild, Ian J., Gałuszka, Agnieszka, Haff, Peter, Hajdas, Irka, Head, Martin J., Assunc¸˜ao Ivar do Sul, Juliana A., Jeandel, Catherine, Leinfelder,
Reinhold, McNeill, John R., Neal, Cath, Odada, Eric, Oreskes, Naomi, Steffen, Will, Syvitski, James, Vidas, Davor, Wagreich, Michael, Williams, Mark,
The Working Group on the Anthropocene: Summary of evidence and interim recommendations. Anthropocene,
http://dx.doi.org/10.1016/j.ancene.2017.09.001

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