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Exergy, power and work in the US economy

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Conventional economic growth theory assumes that technological progress is exogenous and that resource consumption is a consequence, not a cause, of growth. The reality is different and more complex. A ‘growth engine’ is a positive feedback loop involving declining costs of inputs and increasing demand for lower priced outputs, which then drives costs down further, thanks to economies of scale and learning effects. In a competitive environment prices follow. The most important ‘growth engine’ of the first industrial revolution was dependent on coal and steam power. The feedback operated through rapidly declining fossil fuel and mechanical power costs. The growth impetus due to fossil fuel discoveries – oil followed coal – and new applications continued through the 19th century and into the 20th, with internal combustion engines, and — most potent of all — electrification. The advent of ever cheaper electricity in unlimited quantities has triggered the development of a whole range of new products and industries, including electric light, radio and television, moving pictures, and the whole modern information sector. The electrification of the US economy constitutes an extreme case of the ‘rebound effect’. The authors argue that the ‘rebound effect’ in this case (and others) has been, in fact, the main driver of economic growth during the 19th and 20th centuries. It follows that dematerialization is unlikely to be compatible with growth. This poses important questions for the future of the world economy.

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