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The Crash Course

The Unsustainable Future of our Economy, Energy and Environment
Chris Martenson

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A Well-told Story

Any book is a Story, of course, whether it's fiction or not. This story is quite clearly written. For example, the explanation of how bank lending effectively increases the money supply is clear, and yet does not seem over-simplified. The book also seems reasonably careful about facts, using real economic figures and resource estimates, trying to make only factual claims that have mainstream support.

And yet… Consider this review on Amazon:

Basically, The Crash Course (book or DVD), in a very compelling way, makes two fundamental points. First, that our present rate of consumption of oil, when correlated against an increasing world population and increasing demand from the industrialization of third world countries, is simply not sustainable. In fact, it appears that we are currently at the precipice of there not being enough oil to meet the demand. And, when we go over the cliff, our standard of living will be diminished overnight. (Imagine having to spend 50 to 70% of your income on food and gasoline.)

I think those are indeed things the author wanted to communicate, and yet he didn't exactly say that, because if he did he could easily be criticized on the basis of factual errors, or at least unwarranted certainty. The author is up-front about saying that: “The next twenty years will be completely unlike the last twenty years.” That is, they will be much worse, a reversal of all the apparent growth over that time.

The book makes great use of unspecified timescales to create a sense of urgency. Of course, the author never said that our standard of living would decline dramatically in less than 24 hours, and the reviewer presumably knows this too. However the reviewer hasn't so carefully refrained from using breathless language as the author has. The reader got it, the sense of looming dramatic catastrophe.

The author does say things like:

There's a very high risk that a system that expands exponentially will also contract exponentially As the old saying goes, what goes up must come down. The worry is that once energy supports are knocked out, the economy will collapse at the same speed it expanded–fast.

On one hand, he says that the 20-teens is when things are going to go dramatically bad. So less than 8 years, then. On the other hand, he also emphasizes various other time scales as being short or long as serves the narrative purpose. For example, he refers to the 150 year history of industrial development as short (and so reversible), and then also emphasizes the length of the period from 1985 to about now during which total debt has been increasing (and so the corresponding length of time it will take to unwind.)

He also doesn't exactly say that “there won't be enough oil to meet demand”, which is economically incoherent. Instead he says that that oil consumption is “sticky”, which I assume is a nod to the standard theory of price elasticity that price will adjust to match consumption to supply, but implies that oil consumption is highly inelastic.

Or perhaps we could go further and say that oil is a nonnegotiable element of our lives. While most of us can fairly rapidly and easily cut back on dining out or buying a new house or importing clothing, we cannot simply or quickly do the same thing with gasoline.

Time scale is a crucial issue in his arguments about the likelyhood of a dramatic crisis, because it affects how much time the economy has to respond to price incentives. As he says, oil consumption is somewhat inelastic, and that means prices are likely to be volatile. It's interesting that he doesn't include a figure like this:  oil prices 1947 to 2011

This the inflation adjusted price of oil, which is clearly volatile, and doesn't obviously correspond to a simple narrative of resource exhaustion. However it is inevitable that prices will go up as easily obtained oil is exhausted (so that recovery becomes more expensive), and one can certainly read that sort of trend off of this graph.

I'm sure that the author had seen graphs like this, and chose not to use them. Legitimately, one might argue that it introduces complexity which is (perhaps) unimportant. And yet a more subjective problem is that this messy graph doesn't look like the simple-story graphs he has chosen.

Prosperity vs. growth.

Primary wealth (natural resources), Secondary wealth (tangible goods: crops and manufactured products) Tertiary wealth (currency, financial instruments)

Total debt vs. GDP plot

Fuzzy numbers: substitution, hedonic adjustments

Peak Oil

Energy: Energy_returned_on_energy_invested

He somehow turns evidence for decoupling of GDP from oil consumption into bad news:

[…] The period from 2003 to to 2007 was marked by an astonishing rate of global growth at slightly more than 10 percent. This astonishing rate would lead to a full doubling of total GDP in less than seven years. […] knowing the strong link between oil use and economic growth, you might want to ask yourself how likely this seems. […] Unfortunately for their plans, it seems that the oil required to support that growth won't be there.

A greater reliance on local food sources may affect the average food miles associated with annual household food expenditures; however, findings suggest that energy flows associated with the commercial transportation of food represent less than 5 percent of total energy use by the overall food system. This share is considerably higher for some food categories, such as fresh fruits and vegetables. To maximize net energy savings through reliance on local food production, the local farm, agribusiness, and processing industries would need to be at least as energy efficient as the distant industry alternatives that they replace.

(USDA Economic Research Report Number 94 March 2010)

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books/crash_course.txt · Last modified: 2013/10/29 10:15 by ram