A theory that links the value of an object to energy, and which argues that money can only be a measure of value if it is linked to energy.
Emergy = embodied energy.
Key argument of emergy theory: Value is a function of energy and time.
"Relying upon money as the basis for economics is an error of catastrophic proportions. Money, however, is extremely useful as a secondary unit of measure provided it can be linked to energy." (http://dematerialism.net/CwC.html )
Odum’s Theory of Emergy
Explained by Thomas L. Wayburn at http://dematerialism.net/CwC.html
"The emergy theory of Howard T. Odum (http://dieoff.org/page170.htm) is perhaps the swiftest route to a reasonable alternative to flat-earth economics. Money is the central object in flat-earth economics, however, money is a poor measure of value:
1. Money does not satisfy readily tractable balance equations. The methods by which it is created are not widely published generally and may occur secretly from time to time.
2. Different quantities of money are associated with identical economic transactions at the same time due to inequities in the market and at different times due to monetary inflation.
3. Prof. Howard T. Odum has given a number of additional reasons why money is a poor measure of wealth that are included here in Odum’s own words for completeness: Real wealth is food, fuel, water, wood for houses, fiber for clothes, raw minerals, electricity, information.
• A country is wealthy that has more of this real stuff used per person.
• Money is only paid to people and is not proportional to real wealth.
• Prices and costs are inverse to real wealth.
• When resources are abundant, standard of living is high, but prices low.
• When resources are scarce, prices are high, more money goes to bring resources, a few people get rich, but the net contribution to prosperity is small.
• Real wealth is mostly the work of nature and has to be evaluated with a scientific ... measure, emergy.
Odum’s theory, as modified by Wayburn in Emergy and Economics, Chapter 2 of On the Preservation of Species, is based upon energy corrected for entropy, which satisfies the availability balance equation, obtained by combining the First and Second Laws of Thermodynamics. [The entropy balance is closed with a lost work term. It (the entropy balance) is multiplied by the temperature of the coldest heat sink to which we can dump exhaust energy (in keeping with the Second Law) and subtracted from the energy balance.] The value of every economic object is measured by its emergy, with an m, whose units are the same as energy – except that, in this essay, in keeping with the practice of Odum, the unit is prefaced with the letters em, e.g., emquad instead of quad or emjoule instead of joule.
The embodied energy or emergy of a primary fuel is the Gibbs availability of the fuel in quads multiplied by the transformity defined below. The emergy of manufactured objects is the sum total of all of the emergy that went into their production whether it be primary emergy, the emergy of other manufactured items, or some pro-rata share of the living expenses of the people involved in the manufacturing process directly and indirectly. That is, some portion of the emergy consumed by the man (or woman) who irons the shirt of the man who serves the lunch of the man who does the income tax of the man who drives the bus that takes the man who services the copy machine of the man who does the payroll for the personnel department of the company where the man works who assembles the widget must be charged to the emergy of the widget. (One rarely sees the costs of hiring and firing personnel, or, for that matter, the energetic costs of promoting solar energy, say, discussed in so-called Energy Returned on/over Energy Invested (ERoEI) calculations.)"
Energy quality and economics
"Odum’s energy economics begins with an understanding that energy provides the foundation for all life processes, but that all energy is not equal. As energy is transformed through an ecosystem, quantity decreases as concentration increases. Odum coined “Emergy” to account for the variations of energy quality.
In Environmental Accounting: Emergy and Environmental Decision Making (1996), he explains how energy provides for “real work” and “real wealth” in any biophysical system including a human economy:
-Understanding the economy requires that both money circulation and the pathways of real wealth be represented together but separately. Money is only paid to people and never to the environment for its work… Therefore, money and market values cannot be used to evaluate the real wealth from the environment. When the resources from the environment are abundant, little work is required from the economy. (1996, p. 55)
Real wealth has no money flow until humans impose one. All non-human societies and human societies for most of human history consumed Nature’s real wealth without money. Modern human societies, for example, pay loggers and fishermen to harvest Nature’s embodied energy. Inside the human system, money can expand exponentially, but “real wealth” remains limited by energy, materials, and biophysical processes.
Free services from the environment – trees, fish, fresh water, nutrient recycling, and so forth – require a higher energy-cost once we commercialize them, such as bottled water and processed food. Most North American and European food is “negative net energy.” We invest more calories (hydrocarbons, fertilizers, labour, transport) than the calories in the food we consume. In a natural system, this is not remotely sustainable.
- The great conceit of Industrial man imagined that his progress in agricultural yields was due to new know-how... A whole generation … thought that the carrying capacity of the earth was proportional to the amount of land under cultivation and that higher efficiencies in using the energy of the sun had arrived. This is a sad hoax, for industrial man no longer eats potatoes made from solar energy; now he eats potatoes partly made of oil (1971, p. 115)
- When the resources are scarce, obtaining costs are higher… and the market puts a high value on the product. … Market values are inverse to real wealth … and cannot be used to evaluate environmental contributions or environmental impact (1996, p. 60).”
Fossil fuel represents stored solar energy, concentrated over a billion years, which is why we can eat negative-net-energy food, for a while. Any plan to replace that hydrocarbon flow with, say, solar panels and windmills, should examine Odum’s “emergy” analysis.
- Energy is measured by calories, BTUs, kilowatt-hours ... but energy has a scale of quality which is not indicated by these measures. The ability to do work ... depends on the energy quality … measurable by the amount of energy of a lower quality grade required to develop the higher grade. [Odum, 1973, Energy, ecology and economics].
Leaves transform disperse (low grade) sunlight into high grade wood; time and pressure transform that into coal or oil. Energy is lost at every stage. We use hydrocarbon subsidies – mining, manufacture, transport – for solar panels or nuclear plants. Solar cells and windmills require iron and copper, but try mining copper with solar power and you’d soon get the idea." (http://www.energybulletin.net/stories/2011-12-18/real-wealth-howard-t-odum%E2%80%99s-energy-economics)
"Odum redefined certain economic concepts based on these energy fundamentals:
Energy economics: “The science of economics may profit by restating more of its theorems to include power principles. Studies of money alone are just as incomplete as studies of mineral cycles alone. (1971, p. 182).”
Recycling: “Any compatible combinations of plants and animals are self-rewarding... [If] there is no loopback of minerals from wastes to the plants, a necessary function for both animals and plants is interrupted and these species drop out (1971, p. 175).”
Odum is being diplomatic here, but issuing a grave warning to humans. His energy economics principles are not just metaphors. Society itself represents embodied energy.
Energy and social justice: “As fossil fuels are injected, the role of machines increases, outcompeting man in simple, mechanical work. The increased total work done increases the standard of living but only to those who can plug into the economy with a service that has an amplification value greater than the machines. (1971, p. 185).”
Only a privileged few have access to the education, capital, and plundered resources that “amplify” their value enough to accrue monetary wealth in a world of limited energy and resources. Everyone else, most of humanity – and all of nature – is degraded in this energy hierarchy that lacks the necessary feedback loops.
Unemployment “Circuits of a system that have to be maintained but are not being used for system work can be described as unemployment. A certain part of any population needs to … provide reserve capacity to perform full-time maintenance functions and information-increasing actions such as sleep, education, and relaxation. However, too much unemployment means a system with too much maintenance cost. (1971, p. 188).”
Unemployment is a system dysfunction, not just a personal failure of the unemployed. This principle is the inverse of the previous one regarding individual social value. The fossil energy subsidy in human society becomes concentrated among the wealthy as billions of people starve or remain under employed. Social injustice is directly linked to ecologically unsustainable consumption among the wealthy.
Debt: “Credit is the flow of work for which the money loopback is delayed... ecological systems operate mainly on credit... plants in spring produce for the animals from their reserves of mineral currency, whereas the payment by animals and microbes of minerals loops back to the plants... long after the harvest but in time to start a new cycle (1971, p. 188).”
In human economics, rising debt is fake energy. In Nature, all debts are paid and no one is “too big to fail.”
Inflation: “Inflation is an acceleration of the rate of money circulated in relation to the energy flow.” (1971, p. 195).
-In the 1930s, a badly functioning economic system and a transition from a rural solar economy to an urban fossil-fuel economy created lower productivity… Adding money will stimulate the flow of energy only when supplies of energy are large. Adding money when sources of energy are limited merely creates inflation. (Odum & Odum, 1976, p. 55, 58).
Real wealth – fresh water, arable soil, wildlife – is not created by money, nor destroyed when money is gone. If money is produced faster than real wealth, the system collapses. Witness the economic crash of 2008: World energy flow peaked in 2005 and remained flat, but the economy (money) continued to grow. With flat energy and growing economy, oil prices soared from $30 to $147. The world’s annual energy bill quintupled, and the economy collapsed, exposing the toxic bank assets (fake energy).
Limits: Odum’s “Maximum Power Principle” helps explain why consumption has limits and why complex societies hit the wall even as technologies and efficiencies improve. Self-organizing systems and the species within them maximize energy harvesting and use it to create feedback loops to bring in more energy. However, there is a tradeoff between efficiency and power. A more efficient system may go slower, delivering less productivity. A system arranged to go faster may waste energy.
Enduring natural systems typically alternate energy storage with consumption. This pulsation uses more energy, but produces stability by allowing flexibility and creativity within the system. Resilient systems allow change. Thus, system control itself is limited. Witness the social cost of political systems that seek to control change and punish the very self-organization principles that furnish resiliency.
Odum describes how Energy flows anywhere in the universe are organized in an “energy transformation hierarchy.” Many joules of sunlight, for example, are required to make one joule of organic matter. Energy is lost at each transition, but the embodied energy is more concentrated.
A tree provides an example of energy hierarchy. The leaves and tiny roots collect and concentrate dilute sunlight and disperse resources. Larger branches and roots chemically transform the energy in higher concentrations – spending energy to do so. Finally, the tree trunk represents high quality energy, useful as fuel, building, and so forth. A human society – even at the level of burning wood – represents extremely concentrated energy, at considerable cost to the organic system.
However – and here is the catch that humanity needs to understand – each hierarchical level of concentrated energy has to lend support to the energy collection structure as a whole, or it cannot endure!
The tree trunk cannot just be an energy and material consumer; it has to help leaves (from which it grew) do a better job of collecting energy. This is a living system. The tree cannot “waste” its photosynthesis on wood investment that does not serve the system to maximize system energy processing.
Ecological food webs are complex examples of energy hierarchies. Predators “pay” for the energy captured from prey by providing services to the ecosystem – concentrating nutrients back to soil and limiting prey – otherwise, as Odum explains, predators would be a net energy drain and would perish. These energy accounts remain perfect in Nature, debts are paid, imbalance is resolved, and wastes are recycled." (http://www.energybulletin.net/stories/2011-12-18/real-wealth-howard-t-odum%E2%80%99s-energy-economics)
Key Books to Read
- Book: A Prosperous Way Down: Principles and Policies. By Howard T. Odum and Elisabeth C. Odum. University Press of Colorado, 2001.
"Consider the future with less fossil fuel and no new natural or technological energy sources. How can it be peaceful and prosperous? More and more leaders concerned with the global future are warning of the impending crisis as the surge of unsustainable growth exceeds the capability of the earth's resources to support our civilisation. But while history records the collapse of countless civilisations, some societies and ecosystems have managed to descend in orderly stages, reducing demands and selecting and saving what is most important. Although some scientists predict disaster, this book shows how our world can still thrive and prosper in a future where we live with less and charts a way for our modern civilisation to descend to sustainable levels. The authors make recommendations for a more equitable and co-operative world society, with specific suggestions based upon their evaluations of trends in global population, wealth distribution, energy sources, conservation, urban development, capitalism and international trade, information technology, and education. This thoughtful and provocative book will force us to confront our assumptions and beliefs about our world's future, which is all too often taken for granted." (publisher)
- Book: Environment, Power, and Society for the Twenty-First Century: The Hierarchy of Energy. By Howard Odum. Columbia University Press, 2007.
"Howard T. Odum possessed one of the most innovative minds of the twentieth century. He pioneered the fields of ecological engineering, ecological economics, and environmental accounting, working throughout his life to better understand the interrelationships of energy, environment, and society and their importance to the well-being of humanity and the planet.
This volume is a major modernization of Odum's classic work on the significance of power and its role in society, bringing his approach and insight to a whole new generation of students and scholars. For this edition Odum refines his original theories and introduces two new measures: emergy and transformity. These concepts can be used to evaluate and compare systems and their transformation and use of resources by accounting for all the energies and materials that flow in and out and expressing them in equivalent ability to do work. Natural energies such as solar radiation and the cycling of water, carbon, nitrogen, and oxygen are diagrammed in terms of energy and emergy flow. Through this method Odum reveals the similarities between human economic and social systems and the ecosystems of the natural world. In the process, we discover that our survival and prosperity are regulated as much by the laws of energetics as are systems of the physical and chemical world." (publisher)
- Emergy methodology is explained in more depth at http://dematerialism.net/POS.html
- Energy, Ecology, & Economics: http://www.mnforsustain.org/energy_ecology_economics_odum_ht_1973.htm