AN ENERGY MESSAGE FOR THE 21st CENTURY
by Ferdinand Banks in Energy Politics Archives, Winter 2007.
In this latest contribution to our working history series, Fred Banks reminds us of the importance of rationality and information in the construction of Energy Policy.
On every ship there is somebody who doesn’t get the message – U.S. Navy adage. The following is the last chapter of Fred Banks new energy economics textbook THE POLITICAL ECONOMY OF WORLD ENERGY.
Many years ago I had the opportunity to ask the late Sir John Hicks – who had recently received the ‘Nobel Prize’ in economics – why he had such a great faith in neoclassical economics, when it was clear to me that certain assumptions which were ubiquitous in mainstream academic economics were questionable. The principal items that I was thinking about were rationality and information – that is, the unspoken assumption that there was always enough information available to make the kind of rational choices that would maximize the profits of producers and the utility (i.e. satisfaction) of consumers, given the resources at their disposal. Despite his obvious offence at being accosted with my question, Sir John informed me that without this premise, a systematic economic theory could not be constructed. I waited until I was outside to shake my head and laugh, because it was clear that his concept of economic theory had little or nothing to do with the world in which both he and I had to make our way.
Someone has called the present century the energy century, and on the surface this designation may well be correct. I don’t believe that I have used that expression in this textbook however, because saying ‘The Energy Century’ makes it sound as if we are facing an energy future that we will have a difficult time comprehending, and which will give rise to problems that are excruciatingly difficult to solve employing traditional means. In reality, if the decision-makers and their foot soldiers make a greater effort to be more rational, were less inclined to welcome with open arms the questionable information and expertise coming their way, and did not hesitate to reject the neoclassical fairytales fabricated by Professor Hicks and his devotees, the energy challenge could be met in style.
MORE ASPECTS OF WORLD ENERGY AND THE 21ST CENTURY
Seek truth from facts
– Deng Xiaoping
Most of us know something about what is going to happen on the world energy scene during the 21st century. Conventional oil and probably conventional natural gas will eventually become very scarce, although we do not know exactly when, while the transition to renewables and unconventional energy sources will intensify. In addition, nuclear energy will see a new dawn. In a world which may contain 10 million people before the New Year’s Eve parties begin in 2099, the energy in uranium is going to be invaluable. On this point I suggest examining an article by John Sutherland in Energy Pulse (2006), and equally as important, the many comments that followed his contribution, to include those with another point of view…
In this book, and elsewhere, considerable attention has been paid to the Kyoto conference on global warming – or COP 3, to give it its official title (which means the Third Conference of Parties to the UN Framework Convention on Climate Change.) Although I realize that they could be mistaken, I have decided to accept both the research and gut feelings of the more than 90% of legitimate climatologists who say that trouble is ahead if something is not done about anthropocentric (i.e. man-made) sources of carbon dioxide. And it is probably well over 90%, because an overwhelming percentage of those who work the other side of the street, and put their name on this-or-that petition disclaiming global warming, have no authentic scientific background, by which I mean that they would hardly qualify to teach introductory courses in physics and chemistry at Boston Public. However I want to emphasize that it doesn’t make the slightest difference if the more-than-90% are completely wrong, while the other group is completely right.
Confronting an increase in global warming of any extent with a more environmentally friendly energy economy is the correct strategy, regardless of the actual outcome, although here two things should be kept in mind. The first is that energy is the driving force of the global economy – the medium that puts the world’s industries in motion. Despite what some people believe, they would not want to inhabit an energy constrained society if they knew what that really entailed. In addition, as we learned in elementary game theory, whenever there are elements of common interest in potential conflict situations, and cooperation is feasible, then attempts at cooperation should be resorted to as soon as possible, and not after the alarm bells start ringing. As a result, voters should give some thought to excluding from the decision-making process those players who are uninterested in cooperation having to do with matters of this nature. Here some advice of Aristotle might be relevant: it is impossible to be ethically good in the most comprehensive sense without being in possession of what he called “practical wisdom”, which is the ability to see things as they really are.
Read the full Chapter here.
About the Author:
Ferdinand E. Banks, Uppsala University (Sweden), performed his undergraduate studies at Illinois Institute of Technology (electrical engineering) and Roosevelt University (Chicago), graduating with honors in economics. He also attended the University of Maryland and UCLA. He has the MSc from Stockholm University and the PhD from Uppsala University. He has been visiting professor at 5 universities in Australia, 2 universities in France, The Czech University (Prague), Stockholm University, Nanyang Technical University in Singapore, and has held energy economics professorships in France, Hongkong, and the Asian Institute of Technology (Bangkok). The main portion of his military service was in Japan (infantry) and Germany (artillery), and he was employed for one year in the engineering department of the U.S. Navy at Great Lakes Naval Training Station (Illinois). He has also been a lecturer in mathematical economics in Dakar (Senegal) and Lisbon (Portugal). He was an econometrician for UNCTAD in Geneva, Switzerland for 3 years, and fellow of the Reserve Bank of Australia when he was visiting professor of mathematical economics at the University of New South Wales (Sydney). He has been a consultant for the Hudson Institute in Paris. He has published 12 books, to include 2 energy economics textbooks and one book on international finance, and more than 200 articles of various lengths.