Turns out prices matter in oil production

[Simon_Jester]

The criticisms of economics in this thread are not very fair. Homo economicus is just a mathematical assumption to make the equations tractable, and not a wholly unrealistic one by any means. It is just the same as in physics first solving a problem in a vacuum or with convenient symmetries, etc.

The problem is that when people ask "well, what about air resistance?" physicists don't shake their heads sadly and proclaim that we should have more faith in Newtonian mechanics. They have a backup plan, they don't propose to design expensive systems based on oversimplified models.

While many professional economists are just as good as this, some are not, and the proportion is even worse among the sorts of people we see here. You aren't making a very good showing on that account either.

This is done because it is easier and, while one cannot learn everything from these, nor can one learn nothing. Economics isn't high school physics, but remember the physics taught in high schools is carefully selected for a reason. Applying those simple equations to realistic situations quickly leads into messy numerical approximations, and mechanics and E&M are simpler and easier to measure systems than the economy.

Yes, and physicists and engineers already take into account their lack of knowledge, or of the uncomputables. Buildings and machines are designed with factors of safety because engineers know that unforeseen forces and stresses will be applied to a building that in theory "ought to" stand up just fine.

The uncomputables in economics aren't large enough to invalidate economics as such, but... it staggers me sometimes, how arrogantly people can pronounce that the high school version of an economic model is good enough to base state policy on. I would think at a minimum that the uncomputables force a competent student of the field to be conscious of complex side effects- what Surlethe was calling second-order and third-order processes.

That yes, rapid changes in the ease of extraction of oil CAN occur and should at least be studied in an informed way. That yes, it's not smart to enact a legal 'reform' which lends itself to abuse of power by private actors that treat it as a license to seek rent.

[Simon_Jester]

Also, an interesting (if silly) example, from the comments on a blog post that discusses the "Friedman's thermostat" concept referenced on the last page:

There is another thermostat analogy, as it pertains to monetary policy, that is rather tongue in cheek.

This is the analogy where a central bank is like an engineer dealing with a sealed boiler, with the caveat that the engineer doesn't know why the temperature inside the boiler rises to make the boiler explode. He can't pinpoint the cause of it because he's ideologically predisposed to never blaming his own actions. In his mind, he can only ever err on the side of "not doing enough" to prevent the boiler from overheating. He considers the overheating as an inexplicable phenomena somehow inherent in the nature of the boiler itself. Maybe the boiler has too many water molecules possessed by an evil animal spirit, or maybe the boiler itself has imperfections.

So when the boiler starts to overheat inexplicably, the engineer believes he can solve the problem by locally moving the thermostat needle to a lower temperature. As long as the thermostat needle rests within a stable range, then supposedly the boiler's pressure can be reduced and "stabilized."

All the while the engineer is using a flamethrower to move the thermostat needle, which heats up the boiler from without...

This, I think, is where the non-socialist left gets distrust of economics from. There are too many people out there who cite economic theory as justification for actions that make very real problems worse, or would make them worse, in obvious ways. Because they are predisposed to ignore any consequences of their actions that don't fit into their mental model of the system.

[energiewende]

Why?

Because his model assumed that agricultural production was relative to available land area rather than workforce * labour productivity. Aside from being wrong, which may be understandable given limited data, this was certainly knowable in 1800 even if it was not as obviously wrong as it is today. The last famine in England for instance had been in the 17th century despite continually rising population and declining labour involvement in agriculture.

The criticisms of economics in this thread are not very fair. Homo economicus is just a mathematical assumption to make the equations tractable, and not a wholly unrealistic one by any means. It is just the same as in physics first solving a problem in a vacuum or with convenient symmetries, etc. This is done because it is easier and, while one cannot learn everything from these, nor can one learn nothing.

Sure but my point is it is not a science if it deals with very little proof.

I think we can agree that economic evidence is much blurrier than high school physics evidence but I don't think this makes it not a science. Economics has made a number of non-trivial predictions that turned out to be broadly correct.

The problem is that when people ask "well, what about air resistance?" physicists don't shake their heads sadly and proclaim that we should have more faith in Newtonian mechanics.

Economists don't do that either - the problem is that criticisms of economics made by laymen and politicians tend to be more like arguing Aristolean mechanics and demanding we design aircraft on the assumption that heavier objects fall faster than lighter ones, etc. These people rarely even understand the high school arguments themselves, which is the prerequisite to be able to disagree with them. Then we have the marginal but still very much living Marxist movement, which is the literal equivalent of a side-branch of physics that still believes in the luminiferous aether and declaims any new developments since 1880 somehow not only surviving to the present day, but continuing to win research grants and prestigious chairs.

[Thanas]

Why?

Because his model assumed that agricultural production was relative to available land area rather than workforce * labour productivity. Aside from being wrong, which may be understandable given limited data, this was certainly knowable in 1800 even if it was not as obviously wrong as it is today. The last famine in England for instance had been in the 17th century despite continually rising population and declining labour involvement in agriculture.

I doubt it was being wrong, considering that in every age beforehand available land area was the main indicator for production considering proudctivity remained the same for up to centuries. His model is certainly correct in that time at least for the Roman Empire where I see it most used.

Did he flat out say productivity does not matter?

[energiewende]

Why?

Because his model assumed that agricultural production was relative to available land area rather than workforce * labour productivity. Aside from being wrong, which may be understandable given limited data, this was certainly knowable in 1800 even if it was not as obviously wrong as it is today. The last famine in England for instance had been in the 17th century despite continually rising population and declining labour involvement in agriculture.

I doubt it was being wrong, considering that in every age beforehand available land area was the main indicator for production considering proudctivity remained the same for up to centuries. His model is certainly correct in that time at least for the Roman Empire where I see it most used.

Did he flat out say productivity does not matter?

He was concerned primarily with the politics of his day and he was remarkably influential - a particular bete noir of his was poor relief (it subsidises the creation of more unproductive mouths to feed). There can be no doubt he made predictions for the future, not merely a theory to explain the distant past.

He considered developments in agricultural productivity but concluded that they were not ultimately important; in fact productivity has substantially out-stripped growth in population.

I agree that prior to the industrial revolution his ideas are a much better approximation because the growth in productivity was so low, although I do not think it was actually zero.

[Simon_Jester]

Why?

Because his model assumed that agricultural production was relative to available land area rather than workforce * labour productivity. Aside from being wrong, which may be understandable given limited data, this was certainly knowable in 1800 even if it was not as obviously wrong as it is today. The last famine in England for instance had been in the 17th century despite continually rising population and declining labour involvement in agriculture.

Then the only problem with Malthus's argument is that you need to add an extra term for "how much food can be grown per acre." If that amount has any constant value, and people don't stop breeding more of themselves, then the finite area of arable land guarantees that sooner or later population will outgrow food supply.

It doesn't have to happen as soon as expected. So far we've been able to keep production of food up above demand, at least on a global scale. But if it hadn't been for the Green Revolution we wouldn't be able to do that now. Treating a second Green Revolution as guaranteed is idiotic, especially when the plants from the first one are so productive that they're essentially strip-mining the world's topsoil for nutrients.

The planet has a finite carrying capacity; we can't get around it unless we figure out how to synthesize sugars out of rocks by magic.

So while a specific prediction of Malthus "famines by 1850" was surely wrong, the theoretical argument he makes is sound if you allow for technological developments which he ignored.

[Admiral Valdemar]

That was pretty much the point, and that of the Club of Rome, too, only with various possible scenarios played out depending on how we adapt or don't. Interestingly, there was someone on Radio 4's Today programme this morning talking about the need to have GM crops become more abundant to offset increasing costs in fertiliser costs, pesticide resistance, climate shifts, and declining water tables.

[His Divine Shadow]

I believe most farming methods are contributing to issues like salinization and erosion and other environmental damage, so I guess farming on the scale currently done isn't just a matter of having enough fertilizer. I am not entirely sure that we can keep up current food production outputs like this without some new green revolutions. I would read the book Collapse by Jared Diamond, I should infact read it again.

I think we're just too many people on this globe as it is, the ideal would probably be 1-2 billion.

[energiewende]

Then the only problem with Malthus's argument is that you need to add an extra term for "how much food can be grown per acre."

Which kills the theory, because now there's no problem at all if food production capacity grows faster than population as it has done.

If that amount has any constant value, and people don't stop breeding more of themselves,

Which is another huge problem for this theory: having attained this huge overcapacity, people seem to have done just that. Malthus doesn't have a get-out that this only happens if we assume high birth rate, since he believed that birth rate was naturally high and population growth was ultimately only constrained by starvation.

But if it hadn't been for the Green Revolution

That's a somewhat separate issue. The Green Revolution made food so cheap that even poor countries could afford it. If India had simply been an industrialised country like the West it wouldn't need super-cheap food to be able to feed itself.

Treating a second Green Revolution as guaranteed is idiotic...

The planet has a finite carrying capacity; we can't get around it unless we figure out how to synthesize sugars out of rocks by magic.

There is an escape velocity: the point at which the average productivity of a person is greater than the cost to produce 2000kcal/day of food in purely artificial conditions, ie. grown inside buildings, all energy from baseload nuclear fission/fusion, or solar generation. At this point any number of people can be supported.

Having crunched the numbers, this is actually not possible with conventional foods because photosynthesis is so inefficient. The energy bill for the hydroponic lights bankrupts you. But 2000kcal is only 2kWh, 10c worth of electricity at wholesale rates, or just enough to run a kettle for 1 hour. The only question is converting more directly from bulk heating to carbohydrates, fats and proteins, and this is certainly possible, there's just no point when much more appetising foods are still cheap.

[Sea Skimmer]

I'm a bit confused by what you are calculating: re heat? Are you accounting for the costs of fertilizer production in that or just lighting? In principle we have an effectively unlimited supply because we can boil nitrogen out of the air and water if need be, for an immense amount of energy, but conventional fertilizer sources are limited. Though limited is still pretty huge since we can convert natural gas into ammonia based stuff, but when talking about centuries of time that would be exhausted.

[madd0ct0r]

I was arguing Malthus this morning with someone else. His assumption that food production/land unit is constant is wrong, but doesn't necessarily mean his overall theory is false - people will continue to breed and increase in popualtion until everyone is at subsistance level and the next person born will starve -

What does falsify it are condoms. We can choose not to breed at an exponential rate. There's a certain minimum quality of life (well above subsistance) that implies a long term future for you (and born children) at which point you are better off investing heavily in a small number of children than just breeding. If we can get enough people to that point before population overshooting drives more below that point - that's the key challenge of this century. I'm optimistic.

[energiewende]

I'm a bit confused by what you are calculating: re heat? Are you accounting for the costs of fertilizer production in that or just lighting?

For growing conventional crops, it is killed by the cost of powering hydroponic lighting alone.

The theoretical ideal (well, actually it's worse, but as a first approximation) is being able to convert bulk heating from fission generation to carbohydrates &c. This costs about 10c/person/day, so it shows that the idea is at least plausible.

In principle we have an effectively unlimited supply because we can boil nitrogen out of the air and water if need be, for an immense amount of energy, but conventional fertilizer sources are limited. Though limited is still pretty huge since we can convert natural gas into ammonia based stuff, but when talking about centuries of time that would be exhausted.

Fertiliser supply is not a fundamental issue. Nitrogren is already sourced from the air (air is 80% nitrogen), the limit is hydrogen which comes from natural gas current but could come from water. I doubt an energy efficient convertion method would even use conventional fertilisers.

[Admiral Valdemar]

Phosphate is a limiting factor, not nitrogen. It's easy to grab N2 from the atmosphere (a couple of labs at my work do it to run LC-MS/MS suites), or recycle it from run off, but phosphate is a trickier thing and we tend to just mine phosphate rock continually.

[Simon_Jester]

Then the only problem with Malthus's argument is that you need to add an extra term for "how much food can be grown per acre."

Which kills the theory, because now there's no problem at all if food production capacity grows faster than population as it has done.

There's no problem at all if food production capacity grows until it reaches infinity calories per acre.

There's no problem right this minute if food production capacity has grown faster than population so far.

Do you understand the difference? And why you might need to listen to a biologist or an ecologist before blindly assuming that food production capacity can keep growing indefinitely?

Which is another huge problem for this theory: having attained this huge overcapacity, people seem to have done just that. Malthus doesn't have a get-out that this only happens if we assume high birth rate, since he believed that birth rate was naturally high and population growth was ultimately only constrained by starvation.

Birth rate does level off after a few generations of development- but by the time that happens in the developing world we could easily be hitting ten billion or more. And sustaining a universally developed globe would require even more resources, not just food but other things as well, so the issue remains problematic.

But if it hadn't been for the Green Revolution

That's a somewhat separate issue. The Green Revolution made food so cheap that even poor countries could afford it. If India had simply been an industrialised country like the West it wouldn't need super-cheap food to be able to feed itself.

And if wishes were horses, everyone would ride. We live in a world where not everyone industrialized at the same time; such is life. The Green Revolution still managed to vastly increase total world food output, which is the point of the exercise here, since we're comparing planetary population to planetary carrying capacity.

Treating a second Green Revolution as guaranteed is idiotic...

The planet has a finite carrying capacity; we can't get around it unless we figure out how to synthesize sugars out of rocks by magic.

There is an escape velocity: the point at which the average productivity of a person is greater than the cost to produce 2000kcal/day of food in purely artificial conditions, ie. grown inside buildings, all energy from baseload nuclear fission/fusion, or solar generation. At this point any number of people can be supported.

Having crunched the numbers, this is actually not possible with conventional foods because photosynthesis is so inefficient. The energy bill for the hydroponic lights bankrupts you. But 2000kcal is only 2kWh, 10c worth of electricity at wholesale rates, or just enough to run a kettle for 1 hour. The only question is converting more directly from bulk heating to carbohydrates, fats and proteins, and this is certainly possible, there's just no point when much more appetising foods are still cheap.

Point.

The question then becomes: can we achieve this 'escape velocity' condition in a realistic timeframe, before planetary ecosystems collapse and we start to overshoot?

[energiewende]

I haven't put together the whole production chain, but I suspect it is achieveable now, there's just no commercial reason to try. We're not of course looking at reproducing current agriculture, more like using GM bacteria to produce a sugar-protein-lipid nutrient paste. But it'll keep you alive. It would have perhaps 10% system efficiency (order $1/day wholesale food costs)

I suspect the first stage (when or if this might ever become necessary) would result in a sort of inverse of what current environmentalists predict: since animals could be fed on the paste just as well as on regular food, humans (at least the global middle class) would probably subsist mostly on milk, cheese and meat farmed in high rise battery pens, avoiding the taste of the feedstock at an acceptable additional cost. Vegetables, on the other hand, would become a rare and expensive luxury, since they could only be grown very inefficiently. Eventually, substitutes could probably be produced that taste very similar to appetising foods but without photosynthesis.

But, the population increase required for this is vast. We're getting rid of the sun, so the land area is the problem, and that would require much more than just going from 7bn to 10bn. More like 50 or 100bn.

[SMJB]

Oh, that stuff would come into play much sooner than that--as soon as real food starts getting expensive, someone'll produce this as a cheaper alternative. Hell, we already have Spirulina algae, with which you only need six liters per person to form a closed ecological system (though it'll give you gout). We're looking into that for use on extended space missions.

Even then we don't escape Malthus, though--just replace "land" with "total usable biomass".

Anyway, as to the original topic, oil will continued to be drilled for, simply, for so long as the profit in doing so is greater than the cost (or until it's all gone, of course), while people will continue buying it for as long as one it's either cheaper than other forms of energy or there is a niche market that only oil can serve. Considering the amount of energy we're putting into green energy and high-capacity batteries, I'm confident that both of these thresholds will collapse long before we've extracted the last drop of oil from the planet.