Energy—The Critical Resource - Economics and Ecology: United for a Sustainable World - page 19

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Energy—Th eCriticalResource
The Flow of Energy Is the Only Real Economy
Economists are accustomed to thinking it is all about money. Our entire
training is focused on measuring all real flows in terms of the dollar flows
that represent them. In short, dollars are merely symbols of the “stuff of real
value” circulating in the economy—they are not the actual wealth. The
wealth (goods, services, energy, and human labor) moves in one direction
while the money to compensate for the transfer of the wealth moves in the
other. Economics, as it is structured, often induces us to misplace our atten-
tion on the money rather than on the item of real value.
Examples are available anywhere we care to look. If labor is hired to grow
food, we note the wage rate or the total cost of that human input in produc-
ing the final product. If a good is transported, the shipping cost in dollars is
of concern. If a resource, such as a mineral, is extracted for use in production,
the question asked will be, “How much did it cost to mine it?” If a product
is purchased at Walmart, the important number is supposedly the (dollar
measured) price tag. In each case, economic analysis tends to ignore the real
effort of humans, the real energy expended, and the real material substances
extracted, converted, transferred, or used.
This dollar myopia can lead us to tragically miss the point of what is really
happening in the economy. All economic activity is a conversion of energy.
Without some type of energy flow, no economic activity can occur. In think-
ing about business and economic activity, we have become accustomed to a
money-centered definition of what is occurring, and this is certainly true for
the concept of economic efficiency. Something is eficient if it is provided at
minimum dollar cost. It is termed inefficient if the dollar cost is higher than
economists think it should or could be. As we face the challenge of moving
toward socioeconomic sustainability, an alternative interpretation of efficiency, ,
based on the flow of energy, will serve us much better. The entire concept of
efficiency, steeped as it has become in the notion of minimizing dollar costs,
should appropriately give way to effectiveness. Nature is not efficient—it is
effective. To understand what is meant by efficiency, , versus effectiveness , let's
consider two examples: pine trees and the water supply of a small hometown.
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